U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION
12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
TANGIBLE ASSET GALLERIES, INC.
(Name of small business issuer in its charter)
NEVADA 88-0396772
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
1550 S. PACIFIC COAST HIGHWAY, SUITE 103
LAGUNA BEACH, CALIFORNIA 92651
(Address of Principal Executive Offices) (Zip Code)
(949) 376-2660
(Registrant's Telephone Number, Including Area Code)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.001
Title of Class
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TABLE OF CONTENTS
PART I
Item 1 Description of Business.
Item 2 Management's Discussion and Analysis or Plan of
Operation.
Item 3 Description of Property.
Item 4 Security Ownership of Certain Beneficial Owners
and Management.
Item 5 Directors, Executive Officers, Promoters and
Control Persons.
Item 6 Executive Compensation.
Item 7 Certain Relationships and Related Transactions.
Item 8 Description of Securities.
PART II
Item 1 Market Price of and Dividends on the
Registrant's Common Equity and Other Shareholder
Matters.
Item 2 Legal Proceedings.
Item 3 Changes In and Disagreements With Accountants.
Item 4 Recent Sales of Unregistered Securities.
Item 5 Indemnification of Directors and Officers.
PART F/S
Financial Statements.
PART III
Item 1 Index to Exhibits.
Item 2 Description of Exhibits.
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PART I
This Registration Statement includes forward-looking statements
within the meaning of the Securities Exchange Act of 1934 (the
"Exchange Act"). These statements are based on management's beliefs
and assumptions, and on information currently available to
management. Forward-looking statements include the information
concerning possible or assumed future results of operations of the
Company set forth under the heading "Financial
Information-Management's Discussion and Analysis of Financial
Condition and Results of Operations." Forward-looking statements
also include statements in which words such as "expect,"
"anticipate," "intend," "plan," "believe," "estimate," "consider" or
similar expressions are used.
Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties and assumptions. The Company's
future results and shareholder values may differ materially from
those expressed in these forward-looking statements. Readers are
cautioned not to put undue reliance on any forward-looking
statements. In addition, the Company does not have any intention or
obligation to update forward-looking statements after the
effectiveness of this Registration Statement, even if new
information, future events or other circumstances have made them
incorrect or misleading.
ITEM 1 - DESCRIPTION OF BUSINESS
Tangible Asset Galleries, Inc. ("Tangible" or the "Company") is a
retailer and wholesaler of rare coins, fine art, and antique
collectibles. The Company was organized as a Nevada corporation on
August 30, 1995 and is currently based in Laguna Beach, California.
On April 28, 1999, Tangible Asset Galleries, Inc. (which at the time
was designated Austin Land & Resources, Inc., a Nevada corporation
("Austin")) acquired all of the outstanding common stock of Tangible
Investments of America, a Pennsylvania corporation ("TIA") in a
business combination described as a "reverse acquisition." For
accounting purposes, the acquisition has been treated as the
acquisition of Austin (the Registrant) by TIA. TIA was originally
incorporated in Pennsylvania in 1984. At the time of its
acquisition by Austin, TIA operated as retailer and wholesaler of
rare coins, fine art, and antique collectibles. Prior to the
acquisition by Austin, management of TIA had no relationship with
the Company.
Immediately prior to the acquisition, Austin had 1,650,000 shares of
Common Stock outstanding. As part of Austin's reorganization with
TIA, Austin issued 16,000,000 shares of its Common Stock to the
shareholders of TIA in exchange for 490 (100%) shares of TIA Common
Stock. Immediately following the merger, TIA changed its name to
"Tangible Asset Galleries, Inc." Austin had no revenues and no
significant operations prior to the merger. Subsequent to the
acquisition, the former shareholders of TIA constituted 88.40% of
the total outstanding shares of the Common Stock of the Company and
the original shareholders of Austin constituted 9.12% of the total
outstanding shares of the Common Stock of the Company. The
Company's common stock currently trades on the NASD OTC Bulletin
Board under the symbol "TAGZ."
BUSINESS OF THE ISSUER
The Company's principal line of business is the sale of rare coins,
fine art and collectibles on a retail and wholesale basis. The
Company's primary storefront is located in Laguna Beach, California.
This location serves as the Company's headquarters and primary
retail outlet. The Company's services are also marketed nationwide
through broadcasting and print media and independent sales agents.
The Company is also currently planning to initiate and operate an
Internet auction Web site which the Company anticipates starting in
the third quarter of 1999. This auction site will deal exclusively
in fine collectibles specializing in the rare coin and art fields,
but will offer something which the Company believes is not found on
any other site. The Company's intended auction site will offer
graded and certified coins and guarantees as to authenticity and
condition of all items offered for sale. The Company will act as
principals in these transactions. The Company is not aware of any
other auction Web site which offers guarantees to the same level.
The Company also currently publishes a monthly newsletter,
distributed to its existing customers detailing and describing
current events in the numismatic and collectibles world. The
Company's newsletter also provides
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customers with the opportunity to view the Company's current rare
coin and collectibles offerings as
well as order such offerings via telephone.
On May 28, 1999, the Company expanded its operations by opening a
retail outlet in the Las Vegas area. The Company believes that the
Las Vegas area is viewed as a prime location for development in the
coin and art investment arena and the Company is working on
strategies to significantly expand that marketplace. The Company
also recently opened a Tustin California customer service center,
staffed by trained professionals who are tasked with answering
customer inquiries regarding the Company's monthly newsletter as
well responding to customer requests regarding availability of
certain collectibles.
HISTORY OF THE COMPANY
TIA, the Company's predecessor, was originally founded by the
Company's current president, Silvano DiGenova in 1977 when Mr.
DiGenova first exhibited his coins at a national coin dealer's
convention. That same year, Mr. DiGenova first became involved in
other collectibles such as fine arts and antiques. Mr. DiGenova has
collected rare coins since 1971 (when he was nine years old) and by
age 13 was trading coins among his peers. While attending the
Wharton School of Business in the early 1980s, Mr. DiGenova
continued to develop TIA, and in May 1984, Mr. DiGenova took a leave
of absence from Wharton and incorporated TIA in Pennsylvania.
In 1991, Mr. DiGenova relocated TIA to Laguna Beach, California and
continued to develop TIA's rare coin and collectibles retail and
wholesale business, continuing to expand it on a national level.
The Company currently provides coins and collectibles on a wholesale
level to many retail outlets across the nation and conducts retail
sales via telephone to virtually every state in the United States
and several countries around the world.
As previously discussed above, TIA was acquired by the Company on
April 28,1999.
BACKGROUND OF THE COIN AND COLLECTIBLES INDUSTRY
Throughout history, from ancient time to the present day, coins have
been highly prized and universally regarded as a store of value,
particularly those struck in precious metals. Coins have been
highly esteemed for their beauty and appeal as a solid store of
wealth. Over the past three hundred years, coin collecting for
enjoyment and profit has gained increasing prominence. The coin
industry has been actively traded since the 17th century.
The legendary House of Rothschild (famed European Banking Family)
actually got its start dealing in rare coins and medals at
Frankfurt's great spring and summer fairs. Meyer Rothschild, the
founder of the banking empire, began by selling coins at the fairs
as well as running a mail-order coin business. Starting in 1771, he
published the first of many printed coin catalogs which he sent out
during the next 20 years at regular intervals to potential customers
all over Germany. To this day, many prestigious European banks still
maintain active numismatic departments.
THE REVOLUTION IN THE COIN BUSINESS
Determining the market value of a given coin plays a vital role.
Rare coins are graded on a numerical scale from 0 to 70. Zero
represents the basal state and 70 represents an uncirculated (or
mint state) specimen that is perfect in every aspect. The higher its
numerical grade, the more valuable a coin is to collectors or
dealers. A one-point difference, not even discernible to a layman's
eye, can mean literally thousands of dollars difference in value.
Therefore, the importance of consistent grading, according to a
universally accepted standard by the marketplace cannot be
overemphasized. In 1986, the first uniform grading system was
implemented by the Professional Coin Grading Service (the "PCGS").
Silvano DiGenova, the Company's president, was a key instrumental
individual in its creation. A year after the founding of the PCGS,
the Numismatic Guaranty Corporation ("NGC") was formed. These two
firms established a uniform coin-grading standard, which has gained
almost universal acceptance throughout the world. Once a coin has
been graded and certified, both firms encapsulate the coin in
tamper-proof acrylic holders, register them by number, grade, date
and mintmark. If applicable, they identify variety and pedigree as
well. Rare coins graded and certified by either one of these
services can now be traded with confidence, much like stocks or
commodities. The advent of certified grading has led to another
revolution of sorts, the formation of the Certified Coin Exchange
(CCE). CCE is a nationwide computerized trading network for rare
coins. Its functions much like the over-the-counter stock markets
do today, assuring liquidity among market makers. CCE is also the
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number one source of instantaneous price information. Coins can be
bought and sold sight unseen because of the certification and
confidence instilled in the market place by CCE, PCGS and NGC.
COMPETITION
The business of selling rare coins and other collectibles is highly
competitive. The Company competes with a number of smaller,
comparably-sized, and larger firms throughout the United States.
These include: Heritage Rare Coin, a large scale coin firm in
Dallas, Texas; National Gold, a large wholesale coin and bullion
seller located in Tampa, Florida; Spectrum, a medium coin wholesaler
located in Newport Beach, California; and U.S. Coins, a medium size
coin wholesaler located in Houston, Texas. These competitors are
generally larger and better capitalized. However, the Company
believes that it is able to compete with these competitors due to
its generally higher quality inventory, staff expertise, and
anticipated Web presence. However, there can be no assurances that
the Company can continue to compete successfully with other
established companies with greater financial resources, experience
and market share.
In an effort to remain competitive in the marketplace, the Company
has implemented the following policies so its customers can be
confident in their purchases:
-Certified Coins: All coins purchased through the Company are
independently graded and certified by either the Professional Coin
Grading Service or the Numismatic Guaranty Corporation. These are
nationally recognized unbiased third-party grading services that
render an expert consensus opinion by the industry's foremost
numismatic experts. The coins, along with their grade designations,
are sonically sealed in a tamper proof acrylic holder designed to
protect the coin's condition from environmental damage. The coin
cannot be removed from its holder, or the grade change, without
destroying the holder.
-Guaranteed Authenticity: the Company unconditionally
guarantees the authenticity of every coin it sells. This guarantee
is limited to a full refund of the original purchase price plus ten
(10) percent per annum simple interest on the original purchase
price from the date purchased from the Company to the date returned
because of lack of authenticity, provided that the coin is returned
in its original unbroken holder.
-Guaranteed Liquidity and Buy Back at Grade: the Company
guarantees to repurchase any coin originally sold by the Company to
the original purchaser at the same numerical grade level at which
the coin was originally purchased from the Company. The repurchase
would be at the Company's current "Bid" price for the grade level
indicated on the holder. The Company guarantees a margin of between
5% to 17.5%, and will never exceed 17.5%. The Company further
guarantees to provide an immediate cash offer (or at the client's
discretion) a consignment sale estimate on any coin which was
originally purchased from the Company. The Company's pledge is to
provide our clientele with a liquid marketplace at any and all times.
-Unconditional Fifteen-Day Refund: Every coin purchased
through the Company carries an unconditional 15-day full money back
guarantee. If, after inspecting the purchase, the customer wishes
to return any coin for a full refund under this guarantee, the coin
must be received by the Company no later than fifteen-days after
postmark (or air bill date) of said coin. The purchaser is,
therefore, encouraged to carefully inspect and evaluate all coins
during this period. Fine art returns privilege is 30 days.
-Thirty-Day Same as Cash Exchange: Any item(s) sold by the
Company may be exchanged for other item(s) of equal or greater value
(at the full original purchase price) within 30-days of the sale.
Bullion and generic coins, however, are excluded.
-Approval Service: The Company will send coins and fine art
on an approval basis to qualified buyers subject to credit
verification and approval.
-Low Price Guarantee: If any item purchased from The Company
(excluding bullion and selected common generic issues) is advertised
by a legitimate dealer for less than the Company's selling price
(within 30 days), The Company will refund the difference, plus 10%
of the difference.
-Statements of Value: A thorough and complete evaluation of
the coins and fine art purchased from The Company
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will be provided to all clients upon request. These reports provide current
liquidation values as well as accurate data concerning profit and/or
loss position.
-Complete Database for Client: The Company maintains a
state-of-the-art computer system to monitor all client acquisitions
and liquidations. This system allows the Company to inform clients
in a timely fashion, of any and all profit opportunities that should
arise in the marketplace.
-Commission Free Selling Service: The Company will liquidate
gold and silver bullion or generic U.S. coins for top market prices,
free of commissions or selling fees, provided that the proceeds are
used to purchase coins from the Company. Otherwise, a service
charge of 2.5% (for bullion and/or common generic: issues) or 10%
(for rare U.S. coinage) will be assessed.
-Appraisals of Currently Owned Materials: The Company will
evaluate grade, performance potential and identify liquidation or
hold strategy for its customers. This service is free of charge if
the proceeds from the coins that are liquidated are used to acquire
coins through the Company. Otherwise, a service charge of 2.5% of
the total appraised value will be assessed.
-Auction Representation: The Company attends every major
numismatic auction, and will act as an agent on customers' behalf,
for the purpose of acquisition, for a nominal fee of 2.5% to 10%,
depending upon the amount purchased.
-Full service PCGS and NGC Submission Center: The Company
will examine customer's uncertified coins to determine suitability
for grading (there is no charge for this service). The Company will
then submit the coins on the customers' behalf (at our dealer cost)
to PCGS or NGC for grading.
-Rare Coin Strategy Planning Sessions: The Company provides
personal one-on-one consultations with an experienced, knowledgeable
numismatic professional to assist with portfolio planning, rare coin
acquisitions and/or liquidations. This is a free service provided to
qualified individuals.
-Research Services: The Company will provide a free complete
historical, providence, price history and current population data
for any coin(s) and fine art purchased from the Company.
REGULATION
The rare coin and collectibles markets are not currently subject to
direct federal, state or local regulation, although the sales of
certain artwork and autographed sports memorabilia is regulated in
some states. However, the Federal Trade Commission and many state
attorneys general have shown an interest in regulating the sales of
rare coins and other tangible assets as investments, and the State
of New York has determined that under certain circumstances rare
coins may be treated as securities under state law, thereby
requiring rare coin dealers to register as broker-dealers and
permitting investors all legal and equitable remedies otherwise
available to buyers of securities. The Company relies upon the
February 1998 ruling of U. S. District Court judge Kimba Wood in the
case of Llewellyn v. North American Trading that the ordinary retail
sale of rare coins to investors is not a security under the federal
securities laws, and believes that its operations are not subject to
regulation as the sale of securities. There is no assurance,
however, that at some time in the future the sale of rare coins will
so regulated, and that the Company's business will not be materially
adversely affected thereby.
Over the past 15 years, the FTC has filed suits against numerous
rare coin dealers alleging that the dealers' representations about
coins were false or misleading to a person of average intellect, or
that the dealers' retail markups were so high that their
representations about investment risk and appreciation potential
became misleading or untrue. These cases have not, however, created
any clear rules by which dealers such as the Company can assure
themselves of compliance. On January 1, 1996, the FTC's
Telemarketing Sales Rule, authorized by the 1994 Telemarketing and
Consumer Fraud and Abuse Prevention Act, took effect.
"Telemarketing" is defined as any plan, program, or campaign which
is conducted to induce payment for goods and services by ue of more
than one interstate telephone call. The Rule applies to all sales of
"investment opportunities", which is defined by whether the seller's
marketing materials generally promote items. On the basis of
representations about "income, profit, or appreciation." The Company
believes that all of its retail sales are covered by the Rule, even
those to collectors.
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The Telemarketing Sales Rule requires the Company to inform
customers of the following before accepting payment: the number of
items being sold, the purchase price, and the Company's refund /
exchange / buyback policy. The Rule also prohibits the Company from
misrepresenting the "risk, liquidity, earnings potential, and
profitability" of the items it sells. This in itself did not
materially change prior law. However, during debates on the
Telemarketing Sales Rule in 1995, FTC staff attorneys tried to
impose additional specific requirements that dealers in "tangible
assets" disclose to retail customers their actual cost for the items
they sell, and also disclose "all material facts" about their goods
before accepting any money from the customer. This would have
required the Company to disclose its actual margins to its retail
customers, as well as impose on the Company a near impossible burden
of determining what facts were material to the purchase of coins or
other collectibles. Although the FTC ultimately removed these
additional requirements from the final version of the Rule, the FTC
staff''s behavior demonstrated its particular concern for
telemarketing of coins as investments. There is no assurance that
the FTC will not amend the Rule in the future to impose these or
other additional regulations, or that individual states will not
impose such regulations, and that the Company's business will not be
materially adversely affected thereby.
In addition, rare coins are favored by many investors because they
can be bought, owned and sold privately, i.e., without registering
with or notifying any Government agency. However, the Internal
Revenue Service now requires dealers such as the Company to report
on Form 8300 all sales of coins in which more than $10,000 in cash
or cash-like instruments is used as payment. The private nature of
rare coin ownership has occasionally resulted in rare coins being
purchased by taxpayers for the purpose of concealing unreported
income, or used to "launder" income derived from unlawful
activities. This has caused local authorities to consider imposing
registration and/or reporting requirements upon rare coin dealers,
although the only such regulation enacted to date (in the City of
Chicago) has not been enforced against full-time dealers in rare
coins. There is no assurance that additional regulations will not
be imposed upon the Company in the future, and that the Company's
business will not be materially adversely affected thereby.
Taxation of Mail Order Sales.
The Company does not collect California sales tax on mail order
sales to out-of-state customers, because interstate sales generally
are tax-exempt. Nor does the Company collect use tax on its
interstate mail order sales. Most states impose a use tax on
"retailer(s) engaged in business in this state" on sales of
"tangible personal property for storage, use, or other consumption
in this state" (language from Section 6203 of the California Sales
and Use Tax Law). Use tax is usually set at the same rate as sales
tax, and its purpose is to level the playing field between local
retailers who pay sales tax and out-of-state mail order companies
who do not. Some states exempt rare coin sales over $1,000 from
sales or use tax, but most do not. Although the federal
Constitution restricts the right of states to tax interstate
commerce, states can assess use tax-on any transaction where the
out-of-state mail order firm has a "nexus", i.e., any physical
presence, in the state, regardless of whether the sales themselves
arise from that local presence. "Nexus" includes attending
conventions, although at least one state (California) provides a
seven-day "safe harbor" for out-of-state dealers attending
conventions and whose sales are less than a certain dollar
threshold. It also would include attending auctions or making buying
or selling trips. On that basis, the Company may be deemed to have
"nexus" in many states.
Use tax is the buyer's obligation, but states require retailers to
collect the tax and remit it to the state along with a use tax
return. There is no statute of limitations for use tax if no return
has been filed by the dealer. To date, the Company has not been
assessed for use tax by the taxing authority of any other state, nor
has it received any inquiry indicating that it was being audited
for purposes of such an assessment. However, there is no assurance
that the Company will not be audited by taxing authorities of the
states and be assessed for unpaid use taxes (plus interest and
penalties) for a period of many years.
In addition to use tax, many states impose income and franchise
taxes on out-of-state companies that derive net income from business
with their residents. For example, California applies an
income-based franchise tax to out-of-state corporations operating in
California for the privilege of using the corporate form. The
maximum tax rate is 11%, with a minimum tax of $800 per year.
Income derived outside California is not taxed, and in-state income
of taxpayers liable for tax in more than one state is calculated
using a formula contained in the Uniform Division of Income for
Taxation Purposes Act, a statute in effect in Alabama, Alaska,
Arizona, Arkansas, California, Colorado,
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Hawaii, Idaho, Kansas, Kentucky, Maine, Michigan, Missouri,
Montana, Nebraska, Nevada, New Mexico, North Dakota, Oregon, South Carolina,
South Dakota, Texas, Utah, and Washington. As with use tax, nexus principles
apply, and the U.S. Supreme Court requires "a minimal connection between the
interstate activities and the taxing state, and a rational
relationship between the income attributed to the State and the
intrastate values of the enterprise."
Assuming the existence of nexus, the Company could be subject to
income-based taxes in each of the states in which it has had a
physical presence at conventions, auctions or otherwise. The only
exceptions would be in states where the Company is protected by a
federal law, 15 U.S.C. Section 381, which immunizes companies from
state income taxes if the company's only business activities in the
taxing state consist of "solicitation of orders for interstate
sales." There is no statute of limitations for income or franchise
tax if no return has been filed by the dealer. To date, the Company
has not been assessed for income tax or franchise tax by the taxing
authority of any other state, nor has it received any inquiry
indicating that it was being audited for purposes of such an
assessment. However, there is no assurance that the Company will not
be audited by taxing authorities of the states and be assessed for
unpaid income or franchise taxes (plus interest and penalties) for a
period of many years.
MAJOR SUPPLIERS
The Company obtains its coins and collectibles from many
different individuals and entities and is not dependent on any major
suppliers.
DEPENDENCE ON KEY CUSTOMERS
The Company is not dependent on any key customers but rather sells
to a large variety of individual retail purchasers as well as
several wholesale purchasers throughout the nation and world.
However, during 1997 and 1998, one wholesale purchaser, Mike's Coin
Gallery, located in Redondo Beach, California represented 16% and
12% of the Company's sales, respectively. The Company
anticipates that Mike's Coin Gallery will represent less than 10%
of the Company's sales through 1999.
PATENTS, TRADEMARKS, LICENSES
The Company does not depend upon any patents, trademarks, or
licenses to conduct its business; nor does the Company hold any such
patents or trademarks.
COST OF COMPLIANCE WITH ENVIRONMENTAL REGULATIONS
The Company currently has no costs associated with compliance with
environmental regulations. However, there can be no assurances that
the Company will not incur such costs in the future.
NUMBER OF EMPLOYEES
As of June 30, 1999, the Company employed 22 people on a full time
basis.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion contains certain forward-looking statements
that are subject to business and economic risks and uncertainties,
and the Company's actual results could differ materially from those
forward-looking statements. The following discussion regarding the
financial statements of the company should be read in conjunction
with the financial statements and notes thereto.
Prior to the acquisition of TIA by the Company, the Company had no
revenues or expenses for the fiscal years ended December 31, 1997
and December 31, 1998, or for the three-month period ended March 31,
1999. Following the acquisition, management of the Company resigned
and was replaced by TIA's officers and directors. The Company then
adopted TIA's business plan. The following discussion assumes that
the acquisition of TIA by the Company
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occurred as of December 31, 1996 and reflects the combined operations
of the two entities.
GENERAL OVERVIEW
Beginning in 1998, the Company began shifting its focus away from
the wholesale marketing of coins and began focusing its efforts on
the retail coin as well as the fine arts market. Coupled with an
overall heathy economy, the Company began realizing increased sales
in fiscal year 1998.
Commencing in early 1999, Tangible Investments of America began to
shift its resources and adjust its conceptual philosophy with the
goal of developing the Company into a public company as well as
developing an Internet presence. As a result, a large supplementary
capital expenditure was required to implement the new
infrastructure. Expansion of management and sales personnel, as
well as considerable expense in computer hardware, software and
extensive programming for the Company's anticipated E-Commerce
Web-site (which will include two state-of-the-art auction sites),
were all direct costs incurred as a result of this effort. Senior
management was enhanced with the addition of a Chief Financial
Officer along with a Sales Manager who will be responsible for the
development and implementation of our new Tustin, California service
facility. As a result, the Company dramatically increased its
sales staff, which required extensive training of new personnel.
Moreover, the Company instituted a very aggressive marketing
campaign, which includes national TV advertising on CNBC and MSNBC.
Although an expensive endeavor, Management of the Company believes
that such media campaigns are effective and that such campaigns have
begun to attract new customers to the Company's products.
The Company's efforts and expenditures in the first half of 1999
will allow it to implement its new goal to assume a strong market
position as an electronic-commerce company ("E-Commerce"), a goal
which the Company expects to realize in the third or fourth quarter
of this year. Management believes that the Company's shift away
from the wholesale market, to the retail and E-Commerce market
would temporarily lower sales volume, but over the long term, would
result in increased profit margins as well as increase sales
volume. Sales for the first quarter 1999 decreased by approximately
13% while gross profit increased by 56%. The expanded emphasis upon
retail trade has essentially offset a significant decrease in sales.
The Company's mark-up on products has effectively risen from 17%
to 25%, an overall increase in profit margins of approximately 47%.
Considerable expenses will be incurred during the Company's
transition phase, part of which has already been expensed by the
Company. As a result, operating expenses for the three-month period
ending March 31 increased from $474,805 in 1998 to $675,009 in 1999,
largely due in part to one time expenditures.
NET SALES
Net Sales increased from $15,767,928 for the fiscal year ended
December 31, 1997 to $19,535,978 for the fiscal year ended December
31, 1998. This 24% increase in net sales was due primarily to the
Company's increased focus on marketing and an increased
concentration on the retail market as opposed to the wholesale
market. Retail sales typically have higher margins with gross
markups of 15%-25% above the Company's wholesale prices.
Additionally, during fiscal year 1998, the Company decided to place
greater emphasis on its fine arts sales, and began to realize
increased revenue in this area. Net sales for the three-month
period ended March 31, 1999, however, decreased 13% from $5,425,701
for the three-month period ended March 31, 1998 to $4,745,407 for
the three-month period ended March 31, 1999.
COST OF SALES
Cost of sales increased from $13,363,844 for the fiscal year ended
December 31, 1997 to $16,146,584 for the fiscal year ended December
31, 1998. This 21% increase was primarily due to the Company's
increased sales and focus on the retail market as previously
discussed. Cost of sales for the three month period ended March 31,
1999 are $3,544,055 as compared to $4,656,156 for the three month
period ended March 31, 1998.
GROSS PROFIT
Gross Profit increased 41% from $2,404,084 for the fiscal year ended
December 31, 1997 to $3,389,394 for the fiscal year ended December
31, 1998. This increase in gross profit was primarily due to the
higher mark-ups associated
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with retail sales and greater sales. For the three-month period
ended March 31, 1999, gross profit increased
to $1,201,352 as compared to $769,545 for the three-month period
ended March 31, 1998.
TOTAL OPERATING EXPENSES
Total Operating Expenses increased from $1,659,560 for the fiscal
year ended December 31, 1997 to $1,971,521 for the fiscal year ended
December 31, 1998. This 19% increase in Total Operating Expenses
was primarily due to the increased cost associated with the
Company's greater focus on retail sales. Total Operating Expenses
increased from $474,805 for the three months ended March 31, 1998 to
$697,382 for the three-month period ended March 31, 1999 (a 47%
increase), due largely in part to the Company's expansion efforts as
described above.
NET INCOME
Net Income for the fiscal year ended December 31, 1997 of 740,897
rose 89% to $1,397,865 for the fiscal year ended December 31, 1998.
This increase was primarily a result of the increase in Net Sales
resulting from the Company's focus on retail sales. Net income for
the three-month period ending March 31, 1999, rose to $505,650, as
compared to $294,990 for the three-month period ending March 31, 1998.
This 71% was also primarily due to the increase in Net Sales.
ASSETS AND LIABILITIES
Total Assets as of December 31, 1998 were $5,773,074 as compared to
$4,584,972 as of December 31, 1997. This 26% increase was primarily
due to an increase in inventory as a result of the Company's
decision to increase its focus on retail and fine art sales. Total
Assets as of March 31, 1999 were $6,478,187 as compared to
$5,829,380 (a 11% increase) as of March 31, 1998.
STOCKHOLDERS' EQUITY
Stockholders' Equity increased from $2,639,598 as of December 31,
1997 to $3,412,616 as of December 31, 1998. This 29% increase was
primarily due to the Company's increased earnings as a result of
increased net income over fiscal 1997. Stockholders' Equity as of
March 31, 1999 was $2,421,251, as compared to $2,969,940 as of
March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased 72% from $24,545 as of December 31, 1997 to $42,285
as of December 31, 1998. This increase was primarily due to the
Company's increased Sales and Net Income as previously discussed.
Cash as of March 31, 1999 was $9,620 as compared to $31,560 as of
March 31, 1998, a decrease of 70%, due primarily to the increased
expenses incurred as a result of the Company's expansion efforts.
On December 1, 1998, Tangible Investments of America, Inc., the
Company's predecessor, entered into a line of credit of up to
$600,000 with interest at prime (prime was 7.75% as of December 31,
1998) plus 2.625%, collateralized by the contents of the building
(inventory and furniture and fixtures) plus the personal guarantee
of Silvano DiGenova. The outstanding balance as of December 31,
1998 was $600,000.
On March 31, 1999 Tangible Investments of America, Inc., the
Company's predecessor, in consideration of funds advanced by the
sole shareholder to the Company in the amount of $1,400,000,
executed a convertible note in favor of Silvano DiGenova of the same
amount. Interest is payable quarterly at an annual rate of 9%. The
note, including any unpaid accrued interest thereon will become due
and payable on March 31, 2004. The note contains certain
acceleration, extension and conversion provisions. The conversion
provision allows Mr. DiGenova the right to convert the principal
amount on this note, or any portion of the principal amount into
shares of the common stock of the Company at a conversion price for
each share equal to $1.00. It is management's intent, upon
availability of cash flow, to repay $600,000 of this note during
1999.
The company has been able to maintain profitability in spite of
significant expenditures for the auction site development and
additional computer hardware. Management feels that its efforts are
in line with the business plan
<PAGE>
and cautiously will grow as cash constraints allow. Negotiations are
currently under way with several financial institutions to increase
the company's borrowing level and future growth will be controlled
by the amount of working capital available to meet the company's
needs. However, there can be no assurances that the Company will be
able to secure such financing.
CAPITAL EXPENDITURES
In the first quarter of 1999, the Company incurred a $17,058 expenditure
for hardware associated with the computer system and related software
development costs for the auction site. A new fully integrated accounting
software program has also been added which brought with it, the
costs related to its conversion and implementation. Marketing and
promotional expenses have been incurred and will continue to be incurred
in order to maintain the level of awareness achieved by the
Company and its services. A special market-tracking program has
been installed for the sales group to utilize in its customer
service efforts. A professional marketing and public relations firm
has also been hired to assist the company to this end.
INFLATION
Management believes that inflation has not had a material effect on
the Company's results of operations.
YEAR 2000 DISCLOSURE
The Company has completed a review of its computer systems and
non-information technology ("non-IT") systems to identify all
systems that could be affected by the inability of many existing
computer and microcontroller systems to process time-sensitive data
accurately beyond the year 1999, referred to as the Year 2000 or Y2K
issue. The Company is dependent on third-party applications,
particularly with respect to such critical tasks as accounting,
billing, and inventory control. The Company also relies on its own
computer and non-IT systems (which consists of personal computers,
internal telephone systems, internal network server, and operating
systems). In conducting the Company's review of its internal
systems, the Company performed operational tests of its systems
which revealed no Y2K problems. As a result of its review, the
Company has discovered no problems with its systems relating to the
Y2K issue and believes that such systems are Y2K compliant. Costs
associated with the Company's review were not material to its
results of operations.
While the Company believes that its procedures have been designed to
be successful, because of the complexity of the Year 2000 issue and
the interdependence of organizations using computer systems, there
can be no assurances that the Company's efforts, or those of third
parties with whom the Company interacts, have fully resolved all
possible Year 2000 issues. Failure to satisfactorily address the
Year 2000 issue could have a material adverse effect on the Company.
The most likely worst case Y2K scenario which management has
identified to date is that, due to unanticipated Y2K compliance
problems, the Company may be unable to bill its customers, in full
or in part, for product sold. Should this occur, it would result in
a material loss of some or all gross revenue to the Company for an
indeterminable amount of time, which could cause the Company to
cease operations. Although the Company has received written
assurances from its major suppliers that they are, or will be, Year
2000 compliant, should any such supplier fail to adequately address
the Year 2000 problem, the Company's only recourse for any damages
suffered as a result would be through litigation. The Company has
not yet developed a contingency plan to address this worst case Y2K
scenario, and does not intend to develop such a plan in the future.
ITEM 3 - DESCRIPTION OF PROPERTY
Effective June 15, 1996, the Company began leasing approximately
4,092 square feet of administrative and retail space in Laguna
Beach, California at a monthly rental rate of $5,000 per month
beginning on September 1, 1996. This facility serves as the
Company's headquarters and primary retail location. The monthly
rental rate is scheduled to increase in accordance with the Consumer
Price Index on an annual basis, up to a limit of 6% per year but
subject to a 3% minimum increase. The lease is scheduled to
terminate on June 30, 2001. However, the Company has an
<PAGE>
option to extend the lease for an additional five year term.
Effective March 31, 1999, the Company began leasing approximately
1,722 square feet of administrative space in Tustin, California at a
monthly rental rate of $2,066.40. This facility serves as the
Company's customer service site. The lease is scheduled to
terminate on April 30, 2000.
Beginning on May 1, 1999, the Company began leasing approximately
2,350 square feet of retail space in Las Vegas, Nevada pursuant to
an oral month-to-month lease with Commercial West Property
Management at a rate of $2,000 per month. The Company is currently
investigating alternative retail locations for its Las Vegas
operations.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 30, 1999, certain
information with respect to the Company's equity securities owned of
record or beneficially by (i) each Officer and Director of the
Company; (ii) each person who owns beneficially more than 5% of each
class of the Company's outstanding equity securities; and (iii) all
Directors and Executive Officers as a group.
<TABLE>
<S> <C> <C> <C>
Name and Address of Common Stock Percent of
Title of Class Benefical Owner Outstanding Outstanding
Common Stock Silvano A. DiGenova 15,492,000 79.65%
1550 S. Pacific Coast Highway, Ste 10
Laguna Beach, California
Common Stock Ken Walczy(1) 0 0%
1550 S. Pacific Coast Highway, Ste 10
Laguna Beach, California
Common Stock Mike Bonham(2) 0 0%
1550 S. Pacific Coast Highway, Ste 10
Laguna Beach, California
All Directors and 15,492,000 79.65%
Officers as a Group
(3 Persons)
</TABLE>
(1) Does not include 100,000 options to acquire shares of the
Company's common stock which vest in 25% increments each year
over a four year period beginning on May 21, 1999 at an
exercise price of $4.46 per share.
(2) Does not include 75,000 options to acquire shares of the
Company's common stock which vest in 20% increments each year
over a five year period beginning on April 1, 1999 at an
exercise price of $1.00 per share.
The Company believes that the beneficial owners of securities listed
above, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to
community property laws where applicable. Beneficial ownership is
determined in accordance with the rules of the Commission and
generally includes voting or investment power with respect to
securities. Shares of stock subject to options or warrants
currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage of the person
holding such options or warrants, but are not deemed outstanding for
purposes of computing the percentage of any other person.
<PAGE>
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the names and ages of the current
directors and executive officers of the Company, the principal
offices and positions with the Company held by each person and the
date such person became a director or executive officer of the
Company. The executive officers of the Company are elected annually
by the Board of Directors. The directors serve one year terms until
their successors are elected. The executive officers serve terms of
one year or until their death, resignation or removal by the Board
of Directors. There are no family relationships between any of the
directors and executive officers. In addition, there was no
arrangement or understanding between any executive officer and any
other person pursuant to which any person was selected as an
executive officer.
The directors and executive officers of the Company are as follows:
<TABLE>
<S> <C> <C>
Name Age Positions
Silvano A. DiGenova 37 Chief Executive Officer, President,
Secretary,
and Chairman of the Board
Ken Walczy 59 Vice President of Finance,Treasurer,
and Director
Michael Bonham 41 Vice President of Sales & Marketing, and Director
</TABLE>
SILVANO A. DIGENOVA is currently the Company's Chief Executive
Officer, President, Secretary, and Chairman of the Company's Board
of Directors. Mr. DiGenova founded Tangible Investments of America,
what would later become the Company, in 1977. Mr. DiGenova is a
recognized leader in the numismatic and fine arts field. In 1986,
Mr. DiGenova helped form the Professional Coin Grading Service, the
first widely accepted uniform grading system for rare coins.
KEN WALCZY is currently the Company's Vice President of Finance,
Treasurer, and a member of the Company's Board of Directors. Mr.
Walczy has over twenty years experience in the field of finance.
Prior to joining the Company in May 1999, Mr. Walczy worked as an
independent consultant. Between February 1983 to March 1998, Mr.
Walczy was the CFO and Controller for Arnco, Inc., a privately held
manufacturer of high technology electronic circuits. While at
Arnco, Mr. Walczy was responsible for all aspects of financial
reporting, job costing, budgeting, and inventory computations. From
March 1981 to February 1983, Mr. Walczy was the Manager for
Management Information Systems for Rainbird Sprinkler, Inc., a
privately held manufacturer of irrigation components and systems.
While at Rainbird, Mr. Walczy was responsible for overseeing the
System Analysis Department in designing and implementing cost
accounting system for Rainbird. From November 1978 to march 1981,
Mr. Walczy was a Management Consultant for Coopers & Lybrand LLP., a
Big Eight CPA firm. Mr. Walczy has a Bachelor of Science Degree in
Accounting from the California State University, Fullerton and a
Master of Business Administration from Pepperdine University.
MICHAEL BONHAM is currently the Company's Vice President of Sales &
Marketing and a member of the Company's Board of Directors. From
March 1991 to May 1999, Mr. Bonham assisted Tangible Investments
of America, Inc. as an independent contractor responsible for sales and
marketing. Mr. Bonham has extensive experience in the bullion
markets. Between January 1987 through March 1991, Mr. Bonham worked
with International Rare Coin & Bullion.
ITEM 6 - EXECUTIVE COMPENSATION
On May 1,1999 the Company entered into an oral employment Agreement
with Silvano DiGenova, the Company's President, CEO, Secretary, and
Chairman of the Board of Directors, whereby the Company will pay Mr.
DiGenova an annual salary of $250,000.00. This agreement may be
canceled at any time by either the Company or Mr. DiGenova.
Additionally, the Company has agreed to provide Mr. DiGenova with an
automobile at a cost of up to $10,000 per year.
<PAGE>
On May 1,1999 the Company entered into an oral employment Agreement
with Kenneth Walczy, the Company's Vice President-Finance and CFO,
whereby the Company will pay Mr. Walczy an annual salary of
$80,000.00. In addition to his annual salary, the Company also
agreed to grant Mr. Walczy options to purchase 100,000
shares of the Company's common stock at an exercise price of $4.46
per share, vesting over a period of four years.
On May 1,1999 the Company entered into an oral employment Agreement
with Michael Bonham, the Company's Vice President-Sales and
Marketing , whereby the Company will pay Mr. Bonham an annual salary
of $50,000.00 plus commissions on sales attributable to Mr. Bonham.
In addition to his annual salary, the Agreement confirmed the prior
issuance of options to purchase 75,000 shares of the Company's
common stock at an exercise price of $1.00 per share which vest
over a period of five years.
<PAGE>
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information for
services rendered in all capacities for the three months ending March 31,
1999, the fiscal year ended December 31, 1998, and the fiscal year ended
December 31, 1997. Other than as set forth herein, no executive officer's
salary and bonus exceeded $100,000 in any of the applicable years. The
following information includes the dollar value of base salaries, bonus
awards, the number of stock options granted and certain other compensation,
if any, whether paid or deferred.
SUMMARY COMPENSATION TABLE
<TABLE>
Annual Compensation Long Term Compensation
Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compensation Awards ($) Options Payouts Compensation
Principal Year ($) ($) ($) SARs (#) ($) ($)
Position
Silvano 1999 39,500 -0- -0- -0- -0- -0- -0-
DiGenova (3/31)
(President,
CEO)
1998 250,000 -0- -0- -0- -0- -0- -0-
1997 150,000 -0- -0- -0- -0- -0- -0-
Kenneth Walczy 1999 n/a -0- -0- -0- -0- -0- -0-
(V.P. Finance, (3/31)
Secretary, &
Treasurer) 1998 n/a -0- -0- -0- -0- -0- -0-
1997 n/a -0- -0- -0- -0- -0- -0-
Michael Bonham 1999 n/a -0- -0- -0- -0- -0- -0-
(V.P. Sales & (3/31)
Marketing
1998 n/a -0- -0- -0- -0- -0- -0-
1997 n/a -0- -0- -0- -0- -0- -0-
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SAR'S
OPTIONS/SAR'S GRANTED TO EMPLOYEES EXERCISE OF BASE EXPIRATION
NAME GRANTED (#) IN FISCAL YEAR PRICE ($/SH) DATE
Silvano DiGenova -0- n/a n/a n/a
Kenneth Walczy(1) -0- n/a n/a n/a
Michael Bonham(2) -0- n/a n/a n/a
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of Unexercised Value of
Securities Underlying Unexercised In-
Shares Acquired Options/SARs At FY-End The-Money Option/SARs
On Exercise Value (#) At FY-End ($)
Name (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
Silvano DiGenova -0- n/a n/a n/a
Kenneth Walczy -0- n/a n/a n/a
Michael Bonhyam -0- n/a n/a n/a
</TABLE>
(1) Does not include 100,000 options to acquire shares of the Company's
common stock which vest in 25% increments each year over
a four year period beginning on May 21, 1999 at an exercise price
of $4.46 per share granted to Mr. Walczy on May 21, 1999.
(2) Does not include 75,000 options to acquire shares of the Company's
common stock which vest in 20% increments each year over a five
year period beginning on April 1, 1999 at an exercise price of
$1.00 per share granted to Mr. Bonham on April 1, 1999.
COMPENSATION OF DIRECTORS
Currently, Directors of the Company receive no compensation.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On February 5, 1999, Tangible Investments of America, the Company's
predecessor, entered into a Corporate Development Agreement with the
Michelson Group, Inc. ("Michelson"). As part of the Agreement, Michelson
has agreed to provide consultation and corporate development services on
behalf of the Company. In return, the Company has agreed to compensate
Michelson in the amount of $6,500 per month in addition to warrants to
purchase up to 4.9% of the outstanding shares of the Common Stock of the
Company (as calculated following the completion of a private placement by
the Company (the "Offering")) at an exercise price of $0.01. Pursuant to
the Agreement, Michelson has agreed that the exercise of the warrants adhere
to the following schedule: one fourth of the warrants can be exercised upon
execution of the Agreement; an additional one fourth when the Company breaks
escrow on a bridge financing; an additional one fourth once the Company's
market capitalization reaches $50,000,000; and the remaining one fourth upon
the Company breaking escrow on an equity financing of $3,000,000 or more.
As of June 30, 1999, 432,854 options have been exercised, resulting in net
proceeds of approximately $4,321 to Company.
On March 15, 1999 the Tangible Investments of America, the Company's
predecessor, pursuant to the unanimous consent of the Board of Directors,
declared a distribution of $1,400,000 to Silvano DiGenova, it's sole
shareholder. On March 31, 1999 the Directors of the Company, in
consideration of funds advanced by the sole shareholder to the Company in
the amount of $1,400,000, executed a convertible note in favor of Silvano
DiGenova of the same amount. Interest is payable quarterly at an annual
rate of 9%. The note, including any unpaid accrued interest
<PAGE>
thereon will become due and payable on March 31, 2004. The note contains
certain acceleration, extension and conversion provisions. The conversion
provision allows Mr. DiGenova the right to convert the principal amount on
this note, or any portion of the principal amount into shares of the common
stock of the Company at a conversion price for each share equal to $1.00.
It is management's intent, upon availability of cash flow, to repay $600,000
of this note during 1999.
On April 28, 1999, the Company (which at the time was designated Austin Land
& Resources, Inc., acquired all of the outstanding common stock of Tangible
Investments of America, Inc., a Pennsylvania corporation ("TIA") in a
business combination described as a "reverse acquisition." As part of the
reorganization, the Company issued 16,000,000 shares of its Common Stock to
the shareholders of TIA in exchange for all of the outstanding shares of
Common Stock of TIA. Such shares include the shares owned by officers and
directors of the Company as set forth in the Section "Security Ownership of
Certain Beneficial Owners and Management" hereunder.
ITEM 8 - DESCRIPTION OF SECURITIES
COMMON STOCK
The Company's Articles of Incorporation authorize the issuance of 50,000,000
shares of Common Stock, $0.001 par value per share, of which 19,450,354 were
outstanding as of June 30, 1999. Pursuant to the Agreement and Plan of
Reorganization dated April 28, 1999, the Company approved a 2-for-1 reverse
stock split of its Common Stock. All references to the numbers of shares of
the Company's Common Stock are adjusted to reflect the 2-for-1 reverse split
of the Company's Common Stock. Holders of shares of Common Stock are
entitled to one vote for each share on all matters to be voted on by the
stockholders. Holders of Common Stock have no cumulative voting rights.
Holders of shares of Common Stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time by the Board of
Directors in its discretion, from funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, the
holders of shares of Common Stock are entitled to share pro rata all assets
remaining after payment in full of all liabilities. Holders of Common Stock
have no preemptive rights to purchase the Company's common stock. There are
no conversion rights or redemption or sinking fund provisions with respect
to the common stock. All of the outstanding shares of Common Stock are
fully paid and non-assessable.
TRANSFER AGENT
The transfer agent for the Common Stock is Alpha Tech Stock Transfer, 4505
South Wasatch Blvd., Suite 205, Salt Lake City, UT 84124.
<PAGE>
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
MARKET INFORMATION
The following table sets forth the high and low bid prices for shares of the
Company Common Stock for the periods noted, as reported by the National
Daily Quotation Service and the NASDAQ Bulletin Board. Quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may
not represent actual transactions. The Company's Common Stock was listed on
the NASDAQ Over-the-Counter Bulletin Board on August 10, 1998 under the
trading symbol ASLR. However, the Company's Common Stock did not begin
trading until subsequent to its acquisition of Tangible; whereas on May 18,
1999, the Company's Common Stock was changed to TAGZ. As the Company has
not yet complied with the NASD's Eligibility Rule 6530 (as further discussed
below), the Company's trading symbol was changed to TAGZE on August 6, 1999.
<TABLE>
<S> <C> <C> <C>
Bid Prices
Year Period High Low
1999 First Quarter. . . . . . . . . . . n/a n/a
Second Quarter (3/18/1999 to 6/30/1999). 6.05 5.74
Pursuant to NASD Eligibility Rule 6530 (the "Rule") issued on January 4,
1999, issuers who do not make current filings pursuant to Sections 13 and
15(d) of the Securities Act of 1934 are ineligible for listing on the NASDAQ
Over-the-Counter Bulletin Board. Pursuant to the Rule, issuers who are not
current with such filings are subject to de-listing pursuant to a phase-in
schedule depending on each issuer's trading symbol as reported on January 4,
1999. As previously discussed, the Company's trading symbol on January 4,
1999 was ASLR. Therefore, pursuant to the phase-in schedule, the Company is
subject to de-listing on September 1, 1999. One month prior to an issuer's
de-listing date, non complying issuers will have their trading symbol
appended with an "E". As a result the Company's trading symbol was changed
to TAGZE on August 6, 1999.
The Company is not currently in compliance with the Rule, and in the past,
has not made filings pursuant to Sections 13 and 15(d) of the Securities Act
of 1934. The Company has filed this Registration Statement on Form 10-SB in
order to become a "reporting" company and therefore comply with the Rule.
However, the Company will remain subject to de-listing on September 1, 1999
until such time as the Securities and Exchange Commission has reviewed the
Company's Form 10-SB and has stated that it has no further comments. Once
the Company has complied with the Rule, it will once again become eligible
for listing on the NASDAQ Over-the-Counter Bulletin Board and will seek to
be reinstated on the NASDAQ Over-the-Counter Bulletin Board.
NUMBER OF SHAREHOLDERS
The number of beneficial holders of record of the Common Stock of the
company as of the close of business on June 30, 1999 was 45. Many of the
shares of the Company's Common Stock are held in "street name" and
consequently reflect numerous additional beneficial owners.
DIVIDEND POLICY
To date, the Company has declared no cash dividends on its Common Stock, and
does not expect to pay cash dividends in the next term. The Company intends
to retain future earnings, if any, to provide funds for operation of its
business.
ITEM 2 - LEGAL PROCEEDINGS
The Company may from time to time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of
discrimination, or breach of contract actions incidental to the operation of
its business. The
<PAGE>
Company is not currently involved in any such litigation
which it believes could have a materially adverse effect on its financial
condition or results of operations.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Prior to the acquisition of TIA by Austin, as previously described, the
Company engaged Barry L. Friedman, P.C., Certified Public Accountants, to
audit the Company' s financial statements for the fiscal years ended
December 31, 1997, and December 31, 1998. TAI's Certified Public
Accountants were Goldenberg Rosenthal LLP.
The Company is currently in the process of locating and engaging a national
certified accounting firm to audit its Fiscal year 1999 financial
statements, and anticipates to engage such firm within 30 to 60 days.
There have been no disagreements between management and its accountants of
the type required to be reported under this Item 3 since their date of
engagement.
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
On April 28, 1999, Tangible Asset Galleries, Inc. (which at the time was
designated Austin Land & Resources, Inc., a Nevada corporation ("Austin")
acquired all of the outstanding common stock of Tangible Investments of
America, a Pennsylvania corporation ("TIA") in a business combination
described as a "reverse acquisition." As part of the reorganization, the
Company issued 16,000,000 shares of its "restricted" (as that term is
defined under Rule 144 of the Securities Act of 1933) Common Stock to the
shareholders of Austin in exchange for all of the outstanding shares of TIA.
Such shares include the shares owned by officers and directors of the
Company as set forth in the Section "Security Ownership of Certain
Beneficial Owners and Management" hereunder. This issuance was conducted
under an exemption under Section 4(2) of the Securities Act of 1933.
On April 28, 1999, the Company issued 17,500 shares of "restricted" (as that
term is defined under Rule 144 of the Securities Act of 1933) Common Stock
to MRC Legal Services Corp., the Company's securities counsel, in
consideration for legal services rendered. The issuance was exempt under
Section 4(2) of the Securities Act of 1933.
On April 28, 1999, the Company issued 432,854 shares of "restricted" (as
that term is defined under Rule 144 of the Securities Act of 1933) Common
Stock to the Michelson Group, pursuant to a Corporate Development Agreement
entered into between the Company and the Michelson Group. This issuance was
conducted under an exemption under Section 4(2) of the Securities Act of 1933.
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Corporation Laws of the State of Nevada and the Company's Bylaws provide
for indemnification of the Company's Directors for liabilities and expenses
that they may incur in such capacities. In general, Directors and Officers
are indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of the
Company, and with respect to any criminal action or proceeding, actions that
the indemnitee had no reasonable cause to believe were unlawful.
Furthermore, the personal liability of the Directors is limited as provided
in the Company's Articles of Incorporation.
The Company does not currently maintain any Directors and Officers Liability
Insurance policy.
<PAGE>
PART F/S
FINANCIAL STATEMENTS
The Financial Statements required by this Item are included at the end of
this report beginning on Page F-1 as follows:
Tangible Investments of America, Inc. Financial Statements for the
Fiscal Years ended December 31, 1998 and December 31, 1997 F-1
Austin Land & Resources, Inc., Financial Statements for the Fiscal
Years ended December 31, 1998, December 31, 1997 and December
31, 1996 F-13
Interim Financial Statements of Tangible Asset Galeries, Inc.
for the Period Ending March 31, 1999 F-27
Interim Financial Statements of Austin Land & Resources, Inc.
for the Period Ending March 31, 1999 F-32
Tangible Asset Galleries, Inc. Pro Forma Combined Financial
Statements F-37
The above financial statements are presented pursuant to an Acquisition
Agreement dated April 28, 1999 by which Tangible Investments of America,
Inc. ("Tangible") was acquired by Austin Land & Resources, Inc. ("Austin").
For financial reporting purposes, Tangible is considered the acquiror and
therefore the predecessor, and Austin is considered the acquiree, and
therefore, its financial statements are included pursuant to Item 310(c) of
Regulation S-B.
<PAGE>
PART III
ITEM 1 - INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
(1) Acquisition Agreement dated April 28, 1999 by and between
Austin Land & Resources, Inc. and Tangible Investments of
America, Inc.
(3.1) Articles of Incorporation of Austin Land &
Resources, Inc. filed on August 30, 1995.
(3.2) Amendments to the Articles of Incorporation
of Austin Land & Resources, Inc., changing
the name of the Company to Tangible Asset
Galleries, Inc.
(3.3) Bylaws of the Company
(10.1) Lease dated June 15, 1996 by and between Tangible
Investments of America and LBP Enterprises for the
lease of real property located at 1550 South Coast
Highway, Laguna Beach, California.
(10.2) Lease dated March 31, 1999 by and between Tangible
Investments of America and Tustin Business Center,
L.P. for the lease of real property located at 17842
Irvine, Boulevard, Tustin, California.
(10.3) Line of Credit between Tangible Investments of
America, Inc. and Wells Fargo Bank, dated December
1, 1999.
ITEM 2 - DESCRIPTION OF EXHIBITS
Not applicable
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
TANGIBLE ASSET GALLERIES, INC.
Date: August 20, 1999 By: /s/ Silvano DiGenova
Silvano DiGenova
President & Chief Executive Officer
<PAGE>
TANGIBLE INVESTMENTS
OF AMERICA, INC.
______________________________
Financial Statements and
Supplementary Information
Years Ended December 31, 1998 and 1997
F-1
<PAGE>
TANGIBLE INVESTMENTS
OF AMERICA, INC.
TABLE OF CONTENTS
Page
Independent Auditor's Report 1-2
Financial Statements
Balance Sheets 3
Statements of Income
and Retained Earnings 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-11
Supplementary Information
Selling, General and
Administrative Expense 12
F-2
<PAGE>
[Goldenberg Rosenthal, LLP letterhead]
INDEPENDENT AUDITOR'S REPORT
January 23, 1999
May 14, 1999 as to Note 6
August 17, 1999
Board of Directors
Tangible Investments of America, Inc.
Laguna Beach, California
We have audited the accompanying balance sheets of TANGIBLE
INVESTMENTS OF AMERICA, INC. as of December 31, 1998 and 1997, and
the related statements of income and retained earnings, and of cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
The 1997 financial statements of TANGIBLE INVESTMENTS OF
AMERICA, INC. were audited by Schmeltzer * Master Group, PC, whose
report dated February 6, 1998 expressed an unqualified opinion on
the balance sheet and disclaimed an opinion on the statements of
income and retained earnings and of cash flows. Their report
expressed a disclaimer of opinion on the statements of income and
retained earnings and of cash flows because they did not observe the
physical inventory taken as of December 31, 1996, since that date
was prior to their initial engagement as auditors for the Company.
Goldenberg Rosenthal, LLP has performed the necessary procedures to
satisfy ourselves as to the balances of inventory and other assets
and liabilities as of December 31, 1996.
In addition, Goldenberg Rosenthal, LLP has performed the
necessary procedures to enable us to express an opinion on the 1997
financial statements. Accordingly, our opinion on the 1997
financial statements, as presented herein, is different from that
expressed in the Schmeltzer * Master Group, PC report.
Our procedures related to the 1997 financial statements
were completed as of August 17, 1999 and our opinion is as of that
date only as it relates to the 1997 financial statements.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
TANGIBLE INVESTMENTS OF AMERICA, INC. as of December 31, 1998 and
1997 and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole. The
information included in the accompanying schedule of selling,
general and administrative expenses is presented for supplementary
analysis purposes. Such information has not been subjected to the
auditing procedures applied in the audits of the basic financial
statements, and, accordingly, we express no opinion or any other
form of assurance on that supplementary information.
/s/ Goldenberg Rosenthal, LLP
Jenkintown, Pennsylvania
2
(F-3)
<PAGE>
TANGIBLE INVESTMENTS OF AMERICA, INC.
BALANCE SHEETS
</TABLE>
<TABLE>
<S> <C> <C>
December 31
----------------------
1998 1997
--------- ---------
ASSETS
Current assets
Cash 42,285 $ 24,545
Accounts receivable 684,498 1,367,099
Other receivables 49,650 3,400
Inventory 4,856,277 3,051,508
Prepaid expenses 12,431 4,899
Total current assets 5,645,141 4,451,451
Property and equipment
Furniture and equipment 119,572 101,049
Automotive equipment - 13,823
Leasehold improvements 41,601 41,601
161,173 156,473
Less accumulated depreciation 68,187 55,017
92,986 101,456
Other assets
Investment 4,550 -
Customer list (net of accumulated amort
of $3,753 in 1998 and $2,085 in 1997) 21,247 22,915
Security deposits 9,150 9,150
34,947 32,065
Total Assets 5,773,074 $4,584,972
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Line of credit 600,000 $ 200,637
Current obligation under capital lease 4,445 -
Accounts payable 1,626,259 1,663,747
Accrued expenses 37,269 74,872
Shareholder loan payable 80,000 -
Taxes payable 4,843 6,118
Total current liabilities 2,352,816 1,945,374
Commitments
Long-Term Debt
Obligation under capital lease net
of current portion 7,642 -
Stockholder's Equity
Common stock, no par value,
Authorized 1,000 shares
Issued and outstanding 490 shares 10 10
Additional paid in capital 1,850,579 1,850,579
Retained earnings 1,562,027 789,009
3,412,616 2,639,598
Total Liabilities and Stockholder's
Equity 5,773,074 $4,584,972
</TABLE>
See notes to financial statements
3
(F-4)
<PAGE>
TANGIBLE INVESTMENTS OF AMERICA, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
Year Ended December 31
----------------------
1998 1999
--------- ----------
Net sales 19,535,978 15,767,928
Cost of sales 16,146,584 13,363,844
Gross profit 3,389,394 2,404,084
Operating expenses
Selling 936,026 912,070
General and administrative 1,035,495 747,490
Total operating expenses 1,971,521 1,659,560
Income from operations 1,417,873 744,524
Other income (losses)
Interest 1,979 3,569
Gain on sale of property
and equipment 775 804
Loss on investment (8,062) -
Total other income (losses) (5,308) 4,373
Income before income taxes 1,412,565 748,897
Income taxes 14,700 8,000
Net income 1,397,865 740,897
Retained earnings - beginning of year 789,009 518,328
Stockholder distributions (624,847) (470,216)
Retained earnings - end of year 1,562,027 789,009
See notes to financial statements
4
(F-5)
<PAGE>
TANGIBLE INVESTMENTS OF AMERICA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C> <C>
Year Ended December 31
1998 1997
Cash flows from operating activities
Net income $1,397,865 $ 740,897
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 25,436 25,090
Gain on sale of property and
equipment (775) (804)
Loss on investment 8,062 -
Interest on investment (112) -
(Increase) decrease in assets
Accounts receivables 682,601 (1,019,266)
Other receivables (46,250) 115,779
Inventory (1,804,769) (173,861)
Prepaid expenses (7,532) (4,392)
Security deposits - (650)
Increase (decrease) in liabilities
Cash overdraft (735,945)
Accounts payable 698,456 579,072
Accrued expenses (37,604) 45,496
Taxes payable (1,275) 713
Net cash provided by operating activities 178,158 308,074
Cash flows from investing activities
Proceeds from sale of automobile 4,000 11,435
Purchases of property and equipment (4,074) (34,088)
Purchase of investment (12,500) -
Sale of investment - 20,000
Net cash used in investing activities (12,574) (2,653)
(continued)
See notes to financial statements
5
(F-6)
<PAGE>
TANGIBLE INVESTMENTS OF AMERICA, INC.
STATEMENTS OF CASH FLOWS
(continued)
Cash flows from financing activities
Loan payable - shareholder 80,000 -
Repayments on obligations under
capital lease (2,360) -
Net proceeds from lines of credit 399,363 91,506
Stockholder distributions (624,847) (449,888)
Net cash used in financing activities (147,844) (358,382)
Net increase (decrease) in cash 17,740 (52,961)
Cash - beginning of year 24,545 77,506
Cash - end of year $42,285 $24,545
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for
Interest $85,683 $44,794
Income taxes $13,872 $ 2,080
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Fair value of assets acquired for debt $14,449 $ -
</TABLE>
See notes to financial statements
6
(F-7)
<PAGE>
NOTE 1
Summary of
Significant
Accounting
Policies
Business Activity
Tangible Investments of America, Inc. (the "Company") was incorporated
May 3, 1984 under the laws of the Commonwealth of Pennsylvania. The
principal business activity is that of selling numismatic coins, antiques
and artwork to dealers and collectors.
Use of Estimates
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses. Actual results could vary from
estimates that were used.
Cash and Cash Equivalents
The Company maintains cash at various financial institutions, which may
exceed federally insured amounts at times and which may exceed balance
sheet amounts due to outstanding checks.
For purposes of preparing the statement of cash flows, the Company
considers all highly liquid investments available for current use
with an initial maturity of three months or less to be cash and cash
equivalents.
Accounts Receivable
The company grants credit to customers, substantially all of whom are
numismatic coin dealers. No allowance for doubtful accounts has been
recorded.
Inventory
Inventories consisting of coins, artwork and antiques are stated at
the lower of cost (specific identification) or market. Cost value as
of December 31, 1998 and 1997 was $4,993,969 and $3,128,298, respectively.
7
(F-8)
<PAGE>
TANGIBLE INVESTMENTS
OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1
Summary of
Significant
Accounting
Policies
(continued)
Property and Equipment
Property and equipment (including major renewals, replacements, and
betterments) are capitalized and stated at cost. Expenditures for
ordinary maintenance and repairs are charged to operations as incurred.
Upon the sale or other disposition of property, the cost and related
accumulated depreciation or amortization are eliminated from the accounts
and any resulting gain or loss is reflected in the results or operations.
Depreciation is computed using both straight-line and accelerated methods
over the estimated useful lives of the related assets.
Depreciation amounted to $23,768 and $23,422 in 1998 and 1997, respectively
Customer List
The cost of the customer list purchased in 1996 is being amortized on the
straight-line method over 15 years. Amortization expense in 1998 and 1997
was $1,668 and $1,668, respectively.
Advertising
Advertising costs are expensed as incurred. Advertising expenses for 1998 and
1997 were $115,317 and $185,376, respectively.
Income Taxes
The Company, with the consent of its sole shareholder has elected to be
taxed under the provisions of subchapter S of the Internal Revenue Code and
Pennsylvania and California state codes. Under these provisions, the Company
does not pay federal or Pennsylvania taxes on its taxable income and pays
reduced California franchise taxes on its taxable income. As a result, the
Company's income, losses and credits are included in the individual tax returns
of the Company's stockholder.
Profit Sharing Plan
The Company's profit sharing plan covers all employees who have met certain
service requirements. Contributions to the plan are at the discretion of
the board of directors each year, however, contributions can not exceed 15%
of each covered employee's salary. Contributions made to the plan for the
years ended 1998 and 1997 were $47,501 and $29,328, respectively.
8
(F-9)
<PAGE>
TANGIBLE INVESTMENTS
OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1
Summary of
Significant
Accounting
Policies
(continued)
Reclassifications
Certain reclassifications have been made to the 1997 financial statements
to conform with the 1998 financial statement presentation. Such
reclassification had no effect on net income as previously reported.
NOTE 2
Investment
The investment represents a 5% ownership interest in Numismatic
Interactive Network, L.L.C. which is a company that trades in coins
over the internet.
NOTE 3
Lines-of-Credit
7
The Company maintains a line-of-credit at a bank headquartered in
California which provides short-term borrowings with interest payable
monthly as follows:
A $600,000 line of credit with interest at prime (prime was 7.75% as of
December 31, 1998) plus 2.625%, collateralized by the contents of the
building (inventory and furniture and fixtures) plus the personal
guarantee of the sole shareholder. The outstanding balance as of December
31, 1998 was $600,000.
NOTE 4
Commitments
The Company conducts its California operations from facilities that are
leased under a five-year non-cancelable operating lease expiring in June,
2001. There is an option to renew the lease for an additional five years.
Future minimum rental payments required under the above lease as of
December 31, 1998 are as follows:
<TABLE>
<S> <C>
Year Ending December 31
1999 $ 60,000
2000 60,000
2001 30,000
--------
$150,000
</TABLE>
9
(F-10)
<PAGE>
TANGIBLE INVESTMENTS
OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4
Commitments
(continued)
Rent expense for 1998 and 1997 was $63,503 and $63,040, respectively.
The Company began leasing three vehicles in 1997. Future minimum
lease payments required under the leases as of December 31, 1998 are
as follows:
<TABLE>
<S> <C>
Year Ending December 31
1999 $20,442
2000 13,504
2001 10,128
-------
$44,074
</TABLE>
Lease expense for 1998 and 1997 was $24,488 and $13,067, respectively.
During 1998, the Company acquired equipment totaling $14,449 under a
three-year capital lease agreement. Amortization of the capital lease
included in depreciation amounted to $2,890 for the year ended December
31, 1998. Future principal payments under this lease is as follows:
<TABLE>
<S> <C>
Year Ending December 31
1999 $ 5,657
2000 5,657
2001 2,722
Total minimum lease payments $14,036
Amount representing interest 1,949
Present value of future
minimum capital lease payments $12,087
</TABLE>
NOTE 5
Related Party
Transactions
Shareholder loan payable represents a short-term, non-interest
bearing advance to the Company from its sole stockholder. There
are no stated repayment terms; however, the Company expects to repay
the loan during 1999.
10
(F-11)
<PAGE>
TANGIBLE INVESTMENTS
OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 6
SUBSEQUENT EVENTS
On March 15, 1999 the Company, pursuant to the unanimous consent of
the Board of Directors, declared a distribution of $1,400,000 to
it's sole shareholder.
On March 31, 1999 the Directors of the Company, in consideration of
funds advanced by the sole shareholder to the Company in the amount
of $1,400,000, executed a convertible note in favor of Silvano
DiGenova of the same amount. Interest is payable quarterly at an
annual rate of 9%. The note, including any unpaid accrued interest
thereon will become due and payable on March 31, 2004. The note
contains certain acceleration, extension and conversion provisions.
The conversion provision allows Mr. DiGenova the right to convert
the principal amount on this note, or any portion of the principal
amount into shares of the common stock of the Company at a
conversion price for each share equal to $1.00.
It is management's intent, upon availability of cash flow, to repay
$600,000 of this note during 1999.
NOTE 7
MAJOR CUSTOMERS
One customer accounted for 12% of net sales for the year ended
December 31, 1998 and 62% of accounts receivable as of December 31,
1998. Another customer accounted for 12% of accounts receivable as
of December 31, 1998.
One customer accounted for 16% of net sales for the year ended
December 31, 1997 and 53% of accounts receivable as of December 31,
1997.
11
(F-12)
<PAGE>
SUPPLEMENTARY INFORMATION
TANGIBLE INVESTMENTS OF AMERICA, INC.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Year Ended December 31
-------------------
1998 1997
------- -------
Selling expenses
Advertising 115,317 185,376
Commissions 650,239 485,911
Grading 170,470 240,783
Total selling expenses 936,026 912,070
General and administrative expenses
Auto 28,248 26,092
Bad debt 971 -
Bank charges 9,318 38
Business gifts 2,523 2,426
Buyback fees - 1,316
Consulting 20,182 3,044
Contributions 4,293 2,685
Depreciation and amortization 25,436 25,090
Dues and subscriptions 8,909 9,973
Employee Benefits 1,926 -
Entertainment 26,557 23,217
Equipment rental 7,359 -
Insurance 27,544 25,294
Interest 88,428 45,869
Legal and accounting 35,209 19,012
Miscellaneous 897 -
Miscellaneous taxes and licenses 686 5,442
Office supplies and expense 30,510 61,722
Payroll taxes 20,747 9,227
Penalties 108 -
Postage and freight 60,727 51,394
Profit sharing plan 47,501 29,328
Rent 63,503 63,040
Repairs & maintenance 10,092 -
Salary - office 141,321 91,403
Salary - officer 257,955 150,000
Security 9,155 6,233
Storage - 269
Telephone 24,268 31,169
Trade shows 28,984 20,467
Travel 44,490 37,851
Utilities 7,648 5,889
Total general and administrative expens 1,035,495 747,490
12
(F-13)
<PAGE>
Austin Land & Resources, Inc.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1998
December 31, 1997
December 31, 1996
(F-14)
<PAGE>
TABLE OF CONTENTS
PAGE #
INDEPENDENT AUDITORS REPORT 1
ASSETS 2
LIABILITIES AND STOCKHOLDERS' EQUITY 3
STATEMENT OF OPERATIONS 4
STATEMENT OF STOCKHOLDERS' EQUITY 5
STATEMENT OF CASH FLOWS 6
NOTES TO FINANCIAL STATEMENTS 7-11
(F-15)
<PAGE>
BARRY L. FRIEDMAN, RC.
Certified Public Accountant
1582 TULITA DRIVE OFFICE(702) 361-8414
LAS VEGAS, NEVADA 89123 FAX NO.(702) 896-0278
INDEPENDENT AUDITORS' REPORT
Board of Directors July 2, 1999
Austin Land & Resources, Inc.
Las Vegas, Nevada
I have audited the accompanying Balance Sheets of Austin Land & Resources,
Inc. (A Development Stage Company), as of December 31, 1998, December 31,
1997, and December 31, 1996, and the related statements of operations,
stockholders' equity and cash flows for the three years ended December 31,
1998, December 31, 1997, and December 31, 1996. These financial statements
are the responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Austin Land & Resources,
Inc. (A Development Stage Company), as of December 31, 1998, December 31,
1997, and December 31, 1996, and the results of its operations and cash
flows for the three years ended December 31, 1998, December 31, 1997, and
December 31, 1996, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 45 to the
financial statements, the Company has suffered recurring losses from
operations and has no established source of revenue. This raises substantial
doubt about its ability to continue as a going concern. Management's plan in
regard to these matters is described in Note #5. These financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Barry L. F iedman
Certified Public Accountant
(F-16)
<PAGE>
Austin Land & Resources, Inc.
(A Resources Stage Company)
BALANCE SHEET
ASSETS
<TABLE>
<S> <C> <C> <C>
December December December
31, 1998 31, 1997 31, 1996
CURRENT ASSETS $ 0 $ 0 $ 0
TOTAL CURRENT ASSETS $ 0 $ 0 $ 0
OTHER ASSETS
Organization Costs (Net) $ 120 $ 192 $ 264
TOTAL OTHER ASSETS $ 120 $ 192 $ 264
TOTAL ASSETS $ 120 $ 192 $ 264
</TABLE>
See accompanying notes to financial statements & audit report
(F-17)
<PAGE>
Austin Land & Resources, Inc.
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C>
December December December
31, 1998 31, 1997 31, 1996
CURRENT LIABILITIES
Officer's Advances (Note #5) $ 910 $ 85 $ 85
TOTAL CURRENT LIABILITIES $ 910 $ 85 $ 85
STOCKHOLDERS' EQUITY (Note #4)
Common stock
Par value $0.001
Authorized 50,000,000 shares
Issued and outstanding at
December 31, 1996 -
6,000,000 shares $ 6,000
December 31, 1997 -
6,000,000 shares $ 6,000
December 31, 1998 -
6,000,000 shares $ 6,000
Additional Paid-In Capital 0 0 0
ACCUMULATED LOSS -6,790 -5,893 -5,821
TOTAL STOCKHOLDERS' EQUITY $ -790 $ 107 $ 179
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 120 $ 192 $ 264
</TABLE>
See accompanying notes to financial statements & audit report
(F-18)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
Year Year Year Aug. 30,1995
Ended Ended Ended (Inception)
Dec. 31, Dec. 31, Dec. 31, to Dec. 31,
1998 1997 1996 1998
INCOME
Revenue $ 0 $ 0 $ 0 $ 0
EXPENSES
General, Selling and
Administrative $ 825 $ 0 $ 85 $ 6,550
Amortization 72 72 72 240
TOTAL EXPENSES $ 897 $ 72 $ 157 $ 6,790
NET PROFIT/LOSS (-) $ -897 $ -72 $ -157 $ -6,790
Net Profit/Loss(-)
per weighted share
(Note 1) $ -.0001 $ NIL $ NIL $ -.0011
Weighted average
Number of common
shares outstanding 6,000,000 6,000,000 6,000,000 6,000,000
</TABLE>
See accompanying notes to financial statements & audit report
(F-19)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C>
Additional Accumu-
Common Stock paid-in lated
Shares Amount Capital Deficit
Balance,
December 31, 1995 6,000,000 $6,000 $ 0 $-5,664
Net loss year ended
December 31, 1996 _________ ______ _________ -157
Balance,
December 31, 1996 6,000,000 $6,000 $ 0 $-5,821
Net loss year ended
December 31, 1997 _________ ______ __________ -72
Balance,
December 31, 1997 6,000,000 $6,000 $ 0 $-5,893
Net loss year ended
December 31, 1998 _________ ______ __________ -897
Balance,
December 31, 1998 6,000,000 $6,000 $ 0 $-6,790
</TABLE>
See accompanying notes to financial statements & audit report
(F-20)
<PAGE>
Austin Land & Resources, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<S> <C> <C> <C> <C>
Year Year Year Aug. 30,1995
Ended Ended Ended (Inception)
Dec. 31, Dec. 31, Dec. 31, to Dec. 31,
1998 1997 1996 1998
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Loss $ -897 $ -72 $ -157 $-6,790
Adjustment to
Reconcile net loss
To net cash provided
by operating
Activities
Amortization +72 +72 +72 +240
Changes in assets and
Liabilities
Organization Costs 0 0 0 -360
Increase in current
Liabilities
Advances Payable +825 0 +85 +910
NET CASH USED IN
OPERATING ACTIVITIES $ 0 $ 0 $ 0 $-6,000
CASH FLOWS FROM
INVESTING ACTIVITIES 0 0 0 0
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of Common
Stock for Cash 0 0 0 +6,000
Net Increase (decrease) $ 0 $ 0 $ 0 $ 0
Cash,
Beginning of period 0 0 0 0
Cash, End of period $ 0 $ 0 $ 0 $ 0
</TABLE>
See accompanying notes to financial statements & audit report
(F-21)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, December 31, 1997, and December 31, 1996
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized August 30, 1995, under the laws of the State of
Nevada as Austin Land & Resources, Inc. The Company currently has no
operations and in accordance with SFAS #7, is considered a development company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company records income and expenses on the accrual method.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and equivalents
The Company maintains a cash balance in a noninterest -bearing bank that
currently does not exceed federally insured limits. For the purpose of the
statements of cash flows, all highly liquid investments with the maturity of
three months or less are considered to be cash equivalents. There are no
cash equivalents as of December 31, 1998.
(F-22)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, December 31, 1997, and December 31, 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
Income taxes are provided for using the liability method of accounting in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS
#109) "Accounting for Income Taxes". A deferred tax asset or liability is
recorded for all temporary difference between financial and tax reporting.
Deferred tax expense (benefit) results from the net change during the year
of deferred tax assets and liabilities.
Organization Costs
Costs incurred to organize the Company are being amortized on a
straight-line basis over a sixty-month period.
Loss Per Share
Net loss per share is provided in accordance with Statement of Financial
Accounting Standards No. 128 (SFAS #128) "Earnings Per Share". Basic loss
per share is computed by dividing losses available to common stockholders by
the weighted average number of common shares outstanding during the period.
Diluted loss per share reflects per share amounts that would have resulted
if dilative common stock equivalents had been converted to common stock. As
of December 31, 1998, the Company had no dilative common stock equivalents
such as stock options.
Year End
The Company has selected December 31st as its year-end.
(F-23)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, December 31, 1997, and December 31, 1996
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Year 2000 Disclosure
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Computer programs
that have time sensitive software may recognize a date using 110011 as the
year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruption of normal business activities. Since
the Company currently has no operating business and does not use any
computers, and since it has no customers, suppliers or other constituents,
there are no material Year 2000 concerns.
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period ended December 31,
1998, due to the net loss and no state income tax in Nevada, the state of
the Company's domicile and operations. The Company's total deferred tax
asset as of December 31, 1998 is as follows:
Net operation loss carry forward $ 6,790
Valuation allowance $ 6,790
Net deferred tax asset $ 0
The federal net operation loss carry forward will expire in various amounts
from 2015 to 2018.
This carry forward may be limited upon the consummation of a business
combination under IRC Section 381.
(F-24)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, December 31, 1997, and December 31, 1996
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock
The authorized common stock of the corporation consists of 50,000,000 shares
with a par value of $0.001 per share.
Preferred Stock
The corporation has no preferred stock.
On September 1, 1995, the Company issued 6,000,000 shares of its $0.001 par
value common stock in consideration of $6,000 in cash.
NOTE 5 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other
material assets, nor does it have an established source of revenues
sufficient to cover its operating costs and to allow it to continue as a
going concern. It is the intent of the Company to seek a merger with an
existing, operating company. Until that time, the stockholders /officers and
or directors have committed to advancing the operating costs of the Company
interest free.
(F-25)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998, December 31, 1997, and December 31, 1996
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. An
officer of the corporation provides office services without charge. Such
costs are immaterial to the financial statements and accordingly, have not
been reflected therein. The officers and directors of the Company are
involved in other business activities and may, in the future, become
involved in other business opportunities. If a specific business opportunity
becomes available, such persons may face a conflict in selecting between the
Company and their other business interests. The Company has not formulated a
policy for the resolution of such conflicts.
NOTE 7 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional share
of common or preferred stock.
(F-26)
<PAGE>
TANGIBLE ASSET GALLERIES, INC.
BALANCE SHEET
(UNAUDITED)
MARCH 31, 1999
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash $ 9,620
Accounts receivable 566,035
Inventory 5,754,049
Other current assets 24,078
Total current assets 6,353,782
Property and equipment, net of accumulated depreciation 89,875
Other assets 34,530
Total assets $6,478,187
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Line of credit $ 600,000
Stockholder loan payable 80,000
Accounts payable 1,887,579
Deferred income and other liabilities 80,983
Total current liabilities 2,648,562
Convertible stockholder note payable 1,400,000
Obligations under capital lease 8,374
Total liabilities 4,056,936
Stockholders' equity
Common stock 10
Additional paid in capital 1,878,019
Retained earnings 543,222
Total stockholders' equity 2,421,251
Total liabilities and stockholders' equity $6,478,187
</TABLE>
(F-27)
<PAGE>
TANGIBLE ASSET GALLERIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C>
THREE MONTHS ENDED
MARCH 31
1999 1998
Net revenues $4,745,407 $5,425,7010
Cost of sales 3,544,055 4,656,156
Gross profit 1,201,352 769,545
Selling, general and administrative expense (697,382) (474,805)
Other income (expense) 1,680 250
Net income $ 505,650 $ 294,990
</TABLE>
(F-28)
<PAGE>
TANGIBLE ASSET GALLERIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C> <C>
THREE MONTHS ENDED
MARCH 31
1999 1998
Cash flows from operating activities:
Net income $ 505,650 $ 294,900
Adjustments to reconcile net income to net cash used
in operating activities
Depreciation and amortization 6,190 3,726
Consulting expense 27,440 -
Changes in operating assets and liabilities
Accounts receivable 118,463 129,364
Inventories (897,772) (1,363,600)
Other current assets 37,587 (10,203)
Other assets 417 -
Accounts payable 261,320 649,202
Deferred income and other liabilities 34,426 (22,842)
Net cash used in operating activities 93,721 (319,453)
Cash flows from investing activities
Acquisition of property and equipment (2,662) -
(2,662) -
Cash flows from financing activities
Repayments of obligation under capital lease 732 -
Proceeds from issuance of convertible stockholder note 1,400,000 -
Stockholder distributions (1,524,456) (48,663)
Short term loan - 266,000
Net proceeds - line of credit - 109,131
(123,724) 326,468
Net increase/decrease in cash (32,665) 7,015
Cash at beginning of period 42,285 24,545
CASH AT END OF PERIOD $ 9,620 $ 31,560
</TABLE>
(F-29)
<PAGE>
TANGIBLE ASSET GALLERIES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1999
NOTE 1 MANAGEMENT REPRESENTATION
The management of Tangible Asset Galleries,
Inc. ("Tangible" or the "Company"),
formerly known as Tangible Investments of
America, Inc. ("TIA"), has prepared the financial
statements included herein without audit or
review by Goldenberg Rosenthall LLP or any
other independant auditor.
Such financial statements have been
prepared pursuant to the rules and
regulations of the Securities and Exchange
Commission. The unaudited condensed
financial statements include all
adjustments, consisting of all normal
recurring adjustments, which are in the
opinion of management necessary to fairly
state the financial position of the Company
as of March 31, 1999, and the results of
its operations and cash flows for the three
month interim periods ended March 31, 1999
and 1998. Certain information and footnote
disclosures normally included in financial
statements prepared in accordance with
generally accepted accounting principles
have been condensed or omitted pursuant to
such rules and regulations, although the
Company believes that the disclosures
included herein are adequate to make the
information presented not misleading.
Operating results for the three month
interim period ended March 31, 1999 are not
necessarily indicative of the results that
may be expected for the year ending
December 31, 1999, or for any other period.
The Company is the successor to Austin
Land and Resources, Inc. ("ALR"), which was
merged with the Company in the second
quarter of fiscal 1999 (see discussion below).
It is suggested that these unaudited
financial statements be read in conjunction
with the annual 1998 and 1997 audited
financial statements and the notes related
thereto of Tangible Investments of America
included elsewhere in this Registration
Statement on Form 10-SB. Such financial
statements and the notes related thereto
contain the accounting policies and other
relevant information with respect to the
Company.
NOTE 2 DESCRIPTION OF BUSINESS AND MERGER
The Company is the successor to ALR, which
was originally incorporated in Nevada. On
April 28, 1999, ALR acquired all of the
outstanding common stock of TIA and merged
the operations of TIA into ALR in a reverse
merger acquisition. Effective with the
merger, TIA became the successor company and
changed its name to Tangible Asset
Galleries, Inc. The Company's stock is
traded on the NASD OTC Bulletin Board under
the symbol "TAGZ."
(F-30)
<PAGE>
TANGIBLE ASSET GALLERIES, INC.
NOTES TO FINANCIAL STATEMENTS CONTINUED
(UNAUDITED)
MARCH 31, 1999
NOTE 2 DESCRIPTION OF BUSINESS AND MERGER, CONTINUED
Prior to the merger, ALR had 1,650,000
shares of common stock outstanding. As part
of the merger, ALR issued 16,000,000 shares
of its common stock to the shareholders of
TIA in exchange for 490 (100%) shares of
TIA's common stock. ALR had no revenues and
no significant operations prior to the
merger. Subsequent to the merger, the former
shareholders of TIA constituted 88.40% of
the total outstanding shares of common stock
of the Company and the former shareholders
of ALR constituted 9.12% of the total
outstanding shares of common stock of the
Company.
The Company is a retailer and wholesaler of
rare coins and antique collectibles based in
Laguna Beach, California. The Company also
has a satellite office in Las Vegas, Nevada.
NOTE 3 SUBSEQUENT EVENTS
On May 1,1999, the Company entered into an
agreement with Numismatic On-line to utilize
their auction site platform for ninety days.
Lease cost of the platform will be $7,500
per month from Aug. 1,1999 to Nov. 1, 1999.
On May 28,1999, the Company opened an office
in Las Vegas. In conjunction with the
opening of this new office, the Company
hired two employees. The employees were
issued options to acquire 210,000 shares of
common stock at an exercise price of $4.46
per share. Such options vest over a period
of three years, and expire three years after
the commencement of the vesting period.
On May 25, 1999, the Company issued 730,002
options to certain of its officers,
directors and employees with exercise prices
ranging from $1 to $4.46 which vest pro rata
over a period of five years and expire in
three years from the commencement of the
vesting period.
On May 31, 1999, the Company opened a
Customer Service Center in Tustin
California. The office is currently staffed
by eight salesman who provided information
and assist customers in their purchasing
needs. The office is on a one year lease at
$2,500 per month with an additional two year
option.
On July 25,1999, the Company entered into an
agreement to purchase a 50% ownership of
"Metalsman"(TM) software. This software
will also be used in the auction site
activities and expanded bullion trading
areas. Cost of the purchase was $5,000 with
a cancelable $2000 per month retainer for
the programmer to support the platform for
six months.
(F-31)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
BALANCE SHEET
(UNAUDITED)
MARCH 31, 1999
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash $ -
Accounts receivable -
Other current assets 120
Property and equipment, net of accumulated depreciation -
Other assets -
Total assets $ 120
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ -
Deferred income and other liabilities 910
Total current liabilities 910
Stockholders' equity
Common stock 6,000
Additional paid in capital -
Retained earnings (6,790)
Total stockholders' equity (790)
Total liabilities and stockholders' equity $ 120
</TABLE>
(F-32)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C>
MARCH 31
1999 1998
Net revenues $ - $ -
Cost of sales - -
Gross profit - -
Selling, general and administrative expense - -
Other income - -
Income before provision for income tax - -
Provision for income tax - -
Net profit/loss $ - $ -
Basic and diluted net profit/loss per common share $ - $ -
Basic and diluted weighted average common shares
outstanding 1,650,000 1,650,000
</TABLE>
(F-33)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
MARCH 31, 1999
<TABLE>
<S> <C> <C>
THREE MONTHS ENDED
MARCH 31
1999 1998
Cash flows from operating activities:
Net income $ - $ -
Adjustments to reconcile net income to net cash used
in operating activities
Depreciation and amortization - -
Consulting expense - -
Changes in operating assets and liabilities
Accounts receivable - -
Other current assets - -
Other assets - -
Accounts payable - -
Deferred income and other liabilities - -
Net cash used in operating activities - -
Cash flows from investing activities
Acquisition of property and equipment - -
- -
Net increase/decrease in cash - -
Cash at beginning of period -
Cash at end of period $ - $ -
</TABLE>
(F-34)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1999
NOTE 1 MANAGEMENT REPRESENTATION
The management of Austin Land & Resources,
Inc. ("ALR" or the "Company") has prepared
the financial statements included herein
without audit. Such financial statements
have been prepared pursuant to the rules
and regulations of the Securities and
Exchange Commission. The unaudited
condensed financial statements include all
adjustments, consisting of all normal
recurring adjustments, which are in the
opinion of management necessary to fairly
state the financial position of the Company
as of March 31, 1999, and the results of
its operations and cash flows for the three
month interim periods ended March 31, 1999
and 1998. Certain information and footnote
disclosures normally included in financial
statements prepared in accordance with
generally accepted accounting principles
have been condensed or omitted pursuant to
such rules and regulations, although the
Company believes that the disclosures
included herein are adequate to make the
information presented not misleading.
Operating results for the three month
interim period ended March 31, 1999 are not
necessarily indicative of the results that
may be expected for the year ending
December 31, 1999, or for any other period.
It is suggested that these unaudited
financial statements be read in conjunction
with the annual 1998 and 1997 audited
financial statements and the notes related
thereto of Tangible Investments of America
included elsewhere in this Registration
Statement on Form 10-SB. Such financial
statements and the notes related thereto
contain the accounting policies and other
relevant information with respect to the
Company.
NOTE 2 DESCRIPTION OF BUSINESS AND MERGER
The Company was originally incorporated in
Nevada. On April 28, 1999, the Company
acquired all of the outstanding common stock
of Tangible Investments of America ("TIA")
and merged the operations of TIA into the
Company in a reverse merger acquisition.
Effective with the merger, TIA became the
successor company and changed its name to
Tangible Asset Galleries, Inc. The
Company's stock is traded on the NASD OTC
Bulletin Board under the symbol "TAGZ."
(F-35)
<PAGE>
AUSTIN LAND & RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS CONTINUED
(UNAUDITED)
MARCH 31, 1999
NOTE 2 DESCRIPTION OF BUSINESS AND MERGER,
CONTINUED
Prior to the merger, the Company had
1,650,000 shares of common stock
outstanding. As part of the merger, the
Company issued 16,000,000 shares of its
common stock to the shareholders of TIA in
exchange for 490 (100%) shares of TIA's
common stock. The Company had no revenues
and no significant operations prior to the
merger. Subsequent to the merger, the former
shareholders of TIA constituted 88.40% of
the total outstanding shares of common stock
of the Company and the former shareholders
of ALR constituted 9.12% of the total
outstanding shares of common stock of the
Company.
The Company is a retailer and wholesaler of
rare coins and antique collectibles based in
Laguna Beach, California. The Company also
has a satellite office in Las Vegas, Nevada.
(F-36)
<PAGE>
Tangible Asset Galleries. Inc.
Pro Forma Combined Balance Sheet
As of March 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Tangible
Investments Austin Land Combined Pro Forma Pro Forma
of America & Resources Totals Adjustments Totals
Assets
Current assets
Cash $ 9,620 $ - $ 9,620 $ - $ 9,620
Accounts receivable 566,034 - 566,034 - 566,034
Inventory 5,754,048 - 5,754,048 - 5,754,048
Prepaid & other 24,080 120 24,200 - 24,200
6,353,782 120 6,353,902 - 6,353,902
Long-term assets
Property and equipment 89,894 - 89,894 - 89,894
Other assets 34,510 - 34,510 - 34,510
$6,478,186 120 $6,478,306 $ - $6,478,306
Liabilities & Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $1,887,579 $ - $1,887,579 $ 747,607 $2,635,186
Deferred income and other liabilities 2,157,017 910 2,157,927 - 2,157,927
4,044,956 910 4,045,506 747,607 4,793,113
Long-term debt - - - - -
Total liabilities 4,044,596 910 4,045,506 747,607 4,793,113
Stockholders' equity
Common stock 010 6,000 6,010 9,500 15,510
Additional paid-in capital 1,878,019 - 1,878,019 (9,500) 1,868,519
Retained earnings (accumulated deficit 555,561 (6,790) 548,771 (747,607) (198,836)
2,433,590 (790) 2,432,800 (747,607) 1,685,193
$6,478,186 $ 120 $6,478,306 $ - $6,478,306
</TABLE>
(F-37)
<PAGE>
Tangible Asset Galleries, Inc.
Pro Forma Combined Statement of Income
For The Three-months Ended March 31,1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Tangible
Investments Austin Land Combined Pro Forma Pro Forma
of America & Resources Totals Adjustments Totals
Net Revenue $4,745,407 $ - $4,745,407 $ - $ 4,745,407
Cost of Goods Sold 3,544,055 - 3,544,055 - 3,544,055
Gross Profit 1,201,352 - 1,201,352 - 1,201,352
Expenses
Selling Expenses 419,836 - 419,836 - 419,836
Administrative Expenses 269,846 - 269,846 - 269,846
689,682 - 689,682 - 689,682
Income From Operations 511,670 - 511,670 - 511,670
Other Income (Expense) 1,680 - 1,680 - 1,680
Income before Taxes 513,350 - 513,350 - 513,350
Income Tax Provision 7,700 - 7,700 197,640 205,340
Net Income $ 505,650 $ - $ 505,650 $(197,640) $ 308,010
Earnings per Share
Basic 0.03 0.02
Diluted 0.03 0.02
Weighted average shares outstanding
Basic 18,720,352 18,720,352
Stock options 730,002 730,002
Diluted 19,450,354 19,450,354
</TABLE>
(F-38)
<PAGE>
Tangible Asset Galleries. Inc.
Pro Forma Combined Statement of Income
For The Year Ended December 31,1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Tangible
Investments Austin Land Combined Pro Forma Pro Forma
of America & Resources Totals Adjustments Totals
Net Revenue $19,535,978 $ - $19,535,978 $ - $19,535,978
Cost of Goods Sold 16,146,584 - 16,146,584 - 16,146,584
Gross Profit 3,389,394 - 3,389,394 - 3,389,394
Expenses
Selling Expenses 936,026 - 936,026 - 936,026
Administrative Expenses 1,035,495 897 1,036,392 - 1,036,392
1,971,521 897 1,972,418 - 1,972,418
Income From Operations 1,417,873 (897) 1,416,976 - 1,416,976
Other Income (Expense) (5,308) - 1,411,668 - 1,411,668
Income before Taxes 1,412,565 (897) 1,411,668 - 1,411,668
Income Tax Provision 14,700 - 14,700 549,967 564,667
Net Income $ 1,397,865 $ - $ 1,396,968 $(549,967 $ 847,001
Earnings per Share
Basic 0.07 0.05
Diluted 0.07 0.04
Weighted average shares outstanding
Basic 18,720,352 18,720,352
Stock options 730,002 730,002
Diluted 19,450,354 19,450,354
</TABLE>
(F-39)
<PAGE>
Tangible Asset Galleries, Inc.
Notes to Pro Forma B/S & I/S
Tangible Asset Galleries, Inc. "Tangible" or the "Company"), formerly
known as Tangible Investments of America ("TIA"), is the successor to
Austin Land & Resources, Inc. ("ALR"). ALR was originally incorporated
in Nevada. On April 28, 1999, ALR acquired all of the outstanding
common stock of TIA and merged the operations of TIA into ALR in a
reverse merger acquisition. Effective with the merger, TIA became
the successor company and changed its name to Tangible Asset
Galleries, Inc. The Company's stock is traded on the NASD OTC
Bulletin Board under the symbol "TAGZE."
Prior to the merger, ALR had 1,650,000 shares of common stock outstanding.
As part of the merger, ALR issued 16,000,000 shares of its common stock
to the shareholders of TIA in exchange for 490 (100%) shares of TIA's
common stock. ALR had no revenues and no significant operations
prior to the merger. Subsequent to the merger, the former shareholders
of TIA constituted 88.40% of the total outstanding shares of common
stock of the Company and the former shareholders of ALR constituted
9.12% of the total outstanding shares of common stock of the Company.
The accompanying pro forma financial information has been presented
as of December 31, 1998 and March 31, 1999 and for the twelve months
and three months then ended, respectively. The accompanying pro
forma financial information shows the effects of the reverse merger
as though the transaction took place at the beginning of the fiscal
year presented.
Effective with the reverse merger, the Company changed its tax
status from an S-Corporation to a C-Corporation and changed
its tax method of accounting from a cash basis to an accrual
basis. The tax pro forma adjustment is based on 40% of pretax
book income as a C-Corporation less amounts already recorded for
taxes when the Company was taxed as an S-Corporation. No other
pro forma adjustments (except for minor reclassification adjustments)
were made to the accompanying pro forma financial information.
(F-40)
<PAGE>
ACQUISITION AGREEMENT
Agreement dated as of April 28, 1999 between Austin Land &
Resources, Inc., a Nevada corporation ("ALRI"), and Tangible
Investments of America, Inc., a Pennsylvania corporation ("TIAI").
The parties agree as follows:
1. The Acquisition
1.1 Purchase and Sale Subject to the terms and conditions
of this Agreement. At the Closing to be held as provided in Section
2, ALRI shall sell the ALRI Shares (defined below) to the
shareholders of TIAI, and the shareholders of TIAI shall purchase
the ALRI Shares from ALRI, free and clear of all Encumbrances other
than restrictions imposed by Federal and State securities laws.
ALRI shall change it's name to Tangible Asset Galleries, Inc.
1.2 Purchase Price. ALRI will exchange 16,000,000 shares of
its restricted common stock (the "ALRI Shares") for all of the
outstanding capital stock of TIAI (the "TIAI Shares"). The ALRI
Shares shall be issued and delivered to the Shareholders of TIAI as
set forth in Exhibit "A" hereto.
2. The Closing.
2.1 Place and Time. The closing of the sale and exchange of
the ALRI Shares for the TIAI Shares (the "Closing") shall take place
at the Law Offices of M. Richard Cutler, 610 Newport Center Drive,
Suite 800, Newport Beach, CA 92660 no later than the close of
business (Orange County California time) on April 30, 1999, or at
such other place, date and time as the parties may agree in writing.
2.2 Deliveries by TIAI. At the Closing, TIAI shall deliver the
following to ALRI:
a. Certificates representing the TIAI Shares, duly
endorsed for transfer to ALRI and accompanied by any applicable
stock transfer tax stamps; TIAI shall cause immediately change those
certificates for, and to deliver to ALRI at the Closing, a
certificate representing the TIAI Shares registered in the name of
ALRI (without any legend or other reference to any Encumbrance).
b. The documents contemplated by Section 3.
<PAGE>
c. All other documents, instruments and writings
required by this Agreement to be delivered by TIAI at the Closing
and any other documents or records relating to TIAI's business
reasonably requested by ALRI in connection with this Agreement.
2.3 Deliveries by ALRI. At the Closing, ALRI shall deliver the
following to TIAI:
a. The ALRI Shares for further delivery to the TIAI
shareholders as contemplated by section 1.
b. The documents contemplated by Section 4.
c. All other documents, instruments and writings
required by this Agreement to be delivered by ALRI at the Closing.
3. Conditions to ALRI's Obligations.
The obligations of ALRI to effect the Closing shall be subject to
the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by ALRI:
3.1 No Injunction. There shall not be in effect any
injunction, order or decree of a court of competent jurisdiction
that prevents the consummation of the transactions contemplated by
this Agreement, that prohibits ALRI's acquisition of the TIAI Shares
or the ALRI Shares or that will require any divestiture as a result
of ALRI's acquisition of the TIAI Shares or that will require all or
any part of the business of Austin Land & Resources, Inc. to be held
separate and no litigation or proceedings seeking the issuance of
such an injunction, order or decree or seeking to impose substantial
penalties on ALRI or TIAI if this Agreement is consummated shall be
pending.
3.2 Representations, Warranties and Agreements. The
representations and warranties of TIAI set forth in this Agreement
shall be true and complete in all material respects as of the
Closing Date as though made at such time, (b) TIAI shall have
performed and complied in all material respects with the agreements
contained in this Agreement required to be performed and complied
with by it at or prior to the Closing and (c) ALRI shall have
received a certificate to that effect signed by an authorized
representative of TIAI.
<PAGE>
3.3 Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental Bodies
necessary for the consummation of ALRI's acquisition of the TIAI
Shares shall have been obtained and shall be in full force and effect.
4. Conditions to TIAI's Obligations.
The obligations of TIAI to effect the Closing shall be subject to
the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by TIAI:
4.1 No Injunction. There shall not be in effect any
injunction, order or decree of a court of competent jurisdiction
that prevents the consummation of the transactions contemplated by
this Agreement, that prohibits ALRI's acquisition of the TIAI Shares
or TIAI's acquisition of the ALRI Shares or that will require any
divestiture as a result of ALRI's acquisition of the Shares or
TIAI's acquisition of the ALRI Shares or that will require all or
any part of the business of Austin Land & Resources, Inc. or
Tangible Assets of America, Inc. to be held separate and no
litigation or proceedings seeking the issuance of such an
injunction, order or decree or seeking to impose substantial
penalties on ALRI or TIAI if this Agreement is consummated shall be
pending.
4.2 Representations, Warranties and Agreements. The
representations and warranties of ALRI set forth in this Agreement
shall be true and complete in all material respects as of the
Closing Date as though made at such time, (b) ALRI shall have
performed and complied in all material respects with the agreements
contained in this Agreement required to be performed and complied
with by it at or prior to the Closing and (c) TIAI shall have
received a certificate to that effect signed by an authorized
representative of ALRI.
4.3 Legal Opinion. TIAI shall have received an opinion from
appropriate counsel to ALRI dated the Closing Date, to the effect
that ALRI is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has the
requisite power and authority to own, lease and operate its
properties and corporate power to carry on its business as now being
conducted; all of the outstanding shares of ALRI are duly and
validly issued, fully paid and non-assessable and the issuance of
such shares has complied with the applicable Federal and State
securities laws and the regulations promulgated thereunder; ALRI is
duly qualified and in good standing as a domestic corporation and is
authorized to do business in all states or other jurisdictions in
which such qualification or authorization is necessary and there has
not been any claim by any other state of jurisdiction to the effect
that ALRI is required
<PAGE>
to qualify or otherwise be authorized to do
business as a foreign corporation therein; all persons who have
executed or will execute this Agreement on behalf of ALRI or its
Shareholders have been duly authorized to do so; to the best
knowledge of such counsel there is no action, suit or proceeding and
no investigation by any governmental agency pending or threatened
against ALRI or the assets or business of ALRI that could have a
materially adverse effect on the financial condition of ALRI or
TIAI. Such counsel shall also opine as to the tradeability of all
free trade Shares of ALRI.
4.4 Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of Governmental Bodies
necessary for the consummation of ALRI's acquisition of the TIAI
Shares and TIAI's acquisition of the ALRI Shares shall have been
obtained and shall be in full force and effect.
4.5 Resignations of Director. All directors of Austin Land &
Resources, Inc. whose resignations shall have been requested by TIAI
not less than ten Business Days before the Closing Date shall have
submitted their resignations or been removed effective as of the
Closing Date.
5. Representations and Warranties of TIAI.
TIAI represents and warrants to ALRI that, to the Knowledge of TIAI
(which limitation shall not apply to Section 5.3), and except as set
forth in the TIAI Disclosure Letter:
5.1 Organization of TIAI; Authorization. TIAI is a
corporation duly organized, validly existing and in good standing
under the laws of Pennsylvania with full corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate
action of TIAI and this Agreement constitutes a valid and binding
obligation of TIAI; enforceable against it in accordance with its
terms.
5.2 Capitalization. The authorized capital stock of TIAI
consists of 1,000 shares of common stock, no par value, and no
shares of preferred stock. As of the date hereof 490 of such common
shares of TIAI were issued and outstanding. No shares have been
registered under state or federal securities laws. As of the
Closing Date, all of the issued and outstanding shares of common
stock of TIAI are validly issued, fully paid and non-assessable.
Except with respect to warrants to purchase up to 350,000 shares
subsequent to completion of the Closing (reflecting the issuance of
the ALRI Shares) at $1.00 per share, vesting over five years, as of
the
<PAGE>
Closing Date there will not be outstanding any warrants, options
or other agreements on the part of TIAI obligating TIAI to issue any
additional shares of common or preferred stock or any of its
securities of any kind. TIAI will not issue any shares of capital
stock from the date of this Agreement through the Closing Date.
5.3 No Conflict as to TIAI. Neither the execution and delivery
of this Agreement nor the consummation of the sale of the TIAI
Shares to ALRI will (a) violate any provision of the certificate of
incorporation or by-laws of TIAI or (b) violate, be in conflict
with, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under any
agreement to which TIAI is a party or (c) violate any statute or law
or any judgment, decree, order, regulation or rule of any court or
other Governmental Body applicable to TIAI.
5.4 Ownership of TIAI Shares. The delivery of certificates to
ALRI provided in Section 2.2 and the payment to TIAI provided in
Section 2.3 will result in ALRI's immediate acquisition of record
and beneficial ownership of the TIAI Shares, free and clear of all
Encumbrances subject to applicable State and Federal securities
laws. There are no outstanding options, rights, conversion rights,
agreements or commitments of any kind relating to the issuance, sale
or transfer of any Equity Securities or other securities of
Tangible Investments of America, Inc.
5.5 No Conflict as to TIAI and Subsidiaries. Neither the
execution and delivery of this Agreement nor the consummation of the
sale of the TIAI Shares to ALRI will (a) violate any provision of
the certificate of incorporation or by-laws (or other governing
instrument) of TIAI or any of its Subsidiaries or (b) violate, or
be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the
performance required by, or excuse performance by any Person of any
of its obligations under, or cause the acceleration of the maturity
of any debt or obligation pursuant to, or result in the creation or
imposition of any Encumbrance upon any property or assets of TIAI
or any of its Subsidiaries under, any material agreement or
commitment to which TIAI or any of its Subsidiaries is a party or by
which any of their respective property or assets is bound, or to
which any of the property or assets of TIAI or any of its
Subsidiaries is subject, or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or other
Governmental Body applicable to TIAI or any of its Subsidiaries
except, in the case of violations, conflicts, defaults,
terminations, accelerations or Encumbrances described in clause (b)
of this Section 5.5, for such matters which are not likely to have a
material adverse effect on the business or financial condition of
TIAI and its
<PAGE>
Subsidiaries, taken as a whole.
5.6 Consents and Approvals of Governmental Authorities. Except
with respect to applicable State and Federal securities laws, no
consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Body is required to be made or
obtained by TIAI or ALRI or any of its Subsidiaries in connection
with the execution, delivery and performance of this Agreement by
TIAI or the consummation of the sale of the TIAI Shares to ALRI.
5.7 Other Consents. No consent of any Person is required to be
obtained by TIAI or ALRI to the execution, delivery and performance
of this Agreement or the consummation of the sale of the TIAI Shares
to ALRI, including, but not limited to, consents from parties to
leases or other agreements or commitments, except for any consent
which the failure to obtain would not be likely to have a material
adverse effect on the business and financial condition of TIAI or ALRI.
5.8 Financial Statements. TIAI has delivered to ALRI
consolidated balance sheets of TIAI and its Subsidiaries as at
December 31, 1998, and statements of income and changes in financial
position for each of the years in the two-year period then ended,
together with the report thereon of TIAI's independent accountant
(the "TIAI Financial Statements"). Such TIAI Financial Statements
and notes fairly present the consolidated financial condition and
results of operations of TIAI and its Subsidiaries as at the
respective dates thereof and for the periods therein referred to,
all in accordance with generally accepted United States accounting
principles consistently applied throughout the periods involved,
except as set forth in the notes thereto.
5.9 Title to Properties. Either TIAI or one of its
Subsidiaries owns all the material properties and assets that they
purport to own (real, personal and mixed, tangible and intangible),
including, without limitation, all the material properties and
assets reflected in the TIAI Financial Statements (except for
property sold since the date of the TIAI Financial Statements in the
ordinary course of business or leased under capitalized leases), and
all the material properties and assets purchased or otherwise
acquired by TIAI or any of its Subsidiaries since the date of the
TIAI Financial Statements. All properties and assets reflected in
the TIAI Financial Statements are free and clear of all material
Encumbrances and are not, in the case of real property, subject to
any material rights of way, building use restrictions, exceptions,
variances, reservations or limitations of any nature whatsoever
except, with respect to all such properties and assets, (a)
mortgages or security interests shown on the TIAI Financial
Statements as securing specified liabilities or obligations, with
respect to
<PAGE>
which no default (or event which, with notice or lapse of
time or both, would constitute a default) exists, and all of which
are listed in the TIAI Disclosure Letter, (b) mortgages or security
interests incurred in connection with the purchase of property or
assets after the date of the TIAI Financial Statements (such
mortgages and security interests being limited to the property or
assets so acquired), with respect to which no default (or event
which, with notice or lapse of time or both, would constitute a
default) exists, (c) as to real property, (i) imperfections of
title, if any, none of which materially detracts from the value or
impairs the use of the property subject thereto, or impairs the
operations of TIAI or any of its Subsidiaries and (ii) zoning laws
that do not impair the present or anticipated use of the property
subject thereto, and (d) liens for current taxes not yet due. The
properties and assets of TIAI and its Subsidiaries include all
rights, properties and other assets necessary to permit TIAI and
its Subsidiaries to conduct TIAI's business in all material
respects in the same manner as it is conducted on the date of this
Agreement.
5.10 Buildings, Plants and Equipment. The buildings, plants,
structures and material items of equipment and other personal
property owned or leased by TIAI or its Subsidiaries are, in all
respects material to the business or financial condition of TIAI
and its Subsidiaries, taken as a whole, in good operating condition
and repair (ordinary wear and tear excepted) and are adequate in all
such respects for the purposes for which they are being used. TIAI
has not received notification that it or any of its Subsidiaries is
in violation of any applicable building, zoning, anti-pollution,
health, safety or other law, ordinance or regulation in respect of
its buildings, plants or structures or their operations, which
violation is likely to have a material adverse effect on the
business or financial condition of TIAI and its Subsidiaries, taken
as a whole or which would require a payment by TIAI or ALRI or any
of their subsidiaries in excess of $2,000 in the aggregate, and
which has not been cured.
5.11 No Condemnation or Expropriation. Neither the whole nor
any portion of the property or leaseholds owned or held by TIAI or
any of its Subsidiaries is subject to any governmental decree or
order to be sold or is being condemned, expropriated or otherwise
taken by any Governmental Body or other Person with or without
payment of compensation therefor, which action is likely to have a
material adverse effect on the business or financial condition of
ALRI and its Subsidiaries, taken as a whole.
5.12 Litigation. There is no action, suit, inquiry, proceeding
or investigation by or before any court or Governmental Body pending
or threatened in writing against or involving TIAI or any of its
Subsidiaries which is
<PAGE>
likely to have a material adverse effect on
the business or financial condition of TIAI, ALRI and any of their
Subsidiaries, taken as whole, or which would require a payment by
TIAI or its subsidiaries in excess of $2,000 in the aggregate or
which questions or challenges the validity of this Agreement.
Neither TIAI nor any or its Subsidiaries is subject to any
judgment, order or decree that is likely to have a material adverse
effect on the business or financial condition of TIAI, ALRI or any
of their Subsidiaries, taken as a whole, or which would require a
payment by TIAI or its subsidiaries in excess of $2,000 in the
aggregate.
5.13 Absence of Certain Changes. Except as set forth in Section
5.13 of the TIAI Disclosure Letter, since the date of the TIAI
Financial Statements, neither TIAI nor any of its Subsidiaries has:
a. suffered the damage or destruction of any of its
properties or assets (whether or not covered by insurance) which is
materially adverse to the business or financial condition of TIAI
and its Subsidiaries, taken as a whole, or made any disposition of
any of its material properties or assets other than in the ordinary
course of business;
b. made any change or amendment in its certificate of
incorporation or by-laws, or other governing instruments;
c. issued or sold any Equity Securities or other
securities, acquired, directly or indirectly, by redemption or
otherwise, any such Equity Securities, reclassified, split-up or
otherwise changed any such Equity Security, or granted or entered
into any options, warrants, calls or commitments of any kind with
respect thereto;
d. organized any new Subsidiary or acquired any Equity
Securities of any Person or any equity or ownership interest in any
business;
e. borrowed any funds or incurred, or assumed or become
subject to, whether directly or by way of guarantee or otherwise,
any obligation or liability with respect to any such indebtedness
for borrowed money;
f. paid, discharged or satisfied any material claim,
liability or obligation (absolute, accrued, contingent or
otherwise), other than in the ordinary course of business;
g. prepaid any material obligation having a maturity of
more than 90 days from the date such obligation was issued or
incurred;
<PAGE>
h. canceled any material debts or waived any material
claims or rights, except in the ordinary course of business;
i. disposed of or permitted to lapse any rights to the
use of any material patent or registered trademark or copyright or
other intellectual property owned or used by it;
j. granted any general increase in the compensation of
officers or employees (including any such increase pursuant to any
employee benefit plan);
k. purchased or entered into any contract or commitment
to purchase any material quantity of raw materials or supplies, or
sold or entered into any contract or commitment to sell any material
quantity of property or assets, except (i) normal contracts or
commitments for the purchase of, and normal purchases of, raw
materials or supplies, made in the ordinary course business, (ii)
normal contracts or commitments for the sale of, and normal sales
of, inventory in the ordinary course of business, and (iii) other
contracts, commitments, purchases or sales in the ordinary course of
business;
l. made any capital expenditures or additions to
property, plant or equipment or acquired any other property or
assets (other than raw materials and supplies) at a cost in excess
of $25,000 in the aggregate;
m. written off or been required to write off any notes
or accounts receivable in an aggregate amount in excess of $2,000;
n. written down or been required to write down any
inventory in an aggregate amount in excess of $ 2,000;
o. entered into any collective bargaining or union
contract or agreement; or
p. other than the ordinary course of business, incurred
any liability required by generally accepted accounting principles
to be reflected on a balance sheet and material to the business or
financial condition of TIAI and its subsidiaries taken as a whole.
<PAGE>
5.14 No Material Adverse Change. Since the date of the TIAI
Financial Statements, there has not been any material adverse change
in the business or financial condition of TIAI and its Subsidiaries
taken as a whole, other than changes resulting from economic
conditions prevailing in the United States precious coins,
collectibles and metals industry.
5.15 Contracts and Commitments. Except as set forth in Section
5.15 of the TIAI Disclosure Letter, neither TIAI nor any of its
Subsidiaries is a party to any:
a. Ccontract or agreement (other than purchase or sales
orders entered into in the ordinary course of business) involving
any liability on the part of TIAI or one of its Subsidiaries of
more than $25,000 and not cancelable by TIAI or the relevant
Subsidiary (without liability to TIAI or such Subsidiary) within 60
days;
b. Except with respect to the lease on its business
location, lease of personal property involving annual rental
payments in excess of $25,000 and not cancelable by TIAI or the
relevant Subsidiary (without liability to TIAI or such Subsidiary)
within 90 days;
c. Except with respect to the options referenced above,
Employee bonus, stock option or stock purchase, performance unit,
profit-sharing, pension, savings, retirement, health, deferred or
incentive compensation, insurance or other material employee benefit
plan (as defined in Section 2(3) of ERISA) or program for any of the
employees, former employees or retired employees of TIAI or any of
its Subsidiaries;
d. Commitment, contract or agreement that is currently
expected by the management of TIAI to result in any material loss
upon completion or performance thereof;
e. Contract, agreement or commitment that is material to
the business of TIAI and its Subsidiaries, taken as a whole, with
any officer, employee, agent, consultant, advisor, salesman, sales
representative, value added reseller, distributor or dealer; or
f. Employment agreement or other similar agreement that
contains any severance or termination pay, liabilities or
obligations.
All such contracts and agreements are in full force and effect.
Neither TIAI nor any or its Subsidiaries is in breach of, in
violation of or in default under, any agreement, instrument,
indenture, deed of trust, commitment, contract or other obligation
of any type to which TIAI or any of its Subsidiaries is a party or
is
<PAGE>
or may be bound that relates to the business of TIAI or any of
its Subsidiaries or to which any of the assets or properties of TIAI
or any of its Subsidiaries is subject, the effect of which breach,
violation or default is likely to materially and adversely affect
the business or financial condition of TIAI and its Subsidiaries,
taken as a whole. ALRI has not guaranteed or assumed and
specifically does not guarantee or assume any obligations of TIAI
or any of its Subsidiaries.
5.16 Labor Relations. Neither TIAI nor any of its Subsidiaries
is a party to any collective bargaining agreement. Except for any
matter which is not likely to have a material adverse effect on the
business or financial condition of TIAI and its Subsidiaries, taken
as a whole, (a) TIAI and each of its Subsidiaries is in compliance
with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice, (b) there is no
unfair labor practice complaint against TIAI or any of its
Subsidiaries pending before the National Labor Relations Board, (c)
there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against TIAI or any of its Subsidiaries, (d)
no representation question exists respecting the employees of TIAI
or any of its Subsidiaries, (e) neither TIAI nor any of its
Subsidiaries has experienced any strike, work stoppage or other
labor difficulty, and (f) no collective bargaining agreement
relating to employees of TIAI or any of its Subsidiaries is
currently being negotiated.
5.17 Employee Benefit Plans. Section 5.16 of the TIAI
Disclosure Letter contains a list of all material employee pension
and welfare benefit plans covering employees of TIAI and its
Subsidiaries. No listed plan is (1) a multi-employer plan as defined
in Section 3(37) of ERISA, or (2) a defined benefit plan as defined
in Section 3(35) of ERISA, any listed individual account pension
plan is duly qualified as tax exempt under the applicable sections
of the Code, each listed benefit plan and related funding
arrangement, if any, has been maintained in all material respects in
compliance with its terms and the provisions of ERISA and the Code,
and the TIAI Disclosure Letter also lists all material management
incentive plans and all material employment contracts or severance
arrangements pertaining to one or more specific employees.
5.18 Compliance with Law. The operations of TIAI and its
Subsidiaries have been conducted in accordance with all applicable
laws and regulations of all Governmental Bodies having jurisdiction
over them, except for violations thereof which are not likely to
have a material adverse effect on the business or financial
condition of TIAI and its Subsidiaries, taken as a whole, or which
would not require a payment by TIAI or its Subsidiaries in excess
of $2,000 in the aggregate, or which have been cured. Neither
<PAGE>
TIAI nor any of its Subsidiaries has received any notification of any
asserted present or past failure by it to comply with any such
applicable laws or regulations. TIAI and its Subsidiaries have all
material licenses, permits, orders or approvals from the
Governmental Bodies required for the conduct of their businesses,
and are not in material violation of any such licenses, permits,
orders and approvals. All such licenses, permits, orders and
approvals are in full force and effect, and no suspension or
cancellation of any thereof has been threatened.
5.19 Tax Matters.
a. TIAI and each of its Subsidiaries (1) (except with
respect to its 1998 tax return, as to which an extension has been
appropriately filed) has filed all nonconsolidated and noncombined
Tax Returns and all consolidated or combined Tax Returns that
include only TIAI and/or its Subsidiaries and not Seller or its
other Affiliates (for the purposes of this Section 5.18, such tax
Returns shall be considered nonconsolidated and noncombined Tax
Returns) required to be filed through the date hereof and has paid
any Tax due through the date hereof with respect to the time periods
covered by such nonconsolidated and noncombined Tax Returns and
shall timely pay any such Taxes required to be paid by it after the
date hereof with respect to such Tax Returns and (2) shall prepare
and timely file all such nonconsolidated and noncombined Tax Returns
required to be filed after the date hereof and through the Closing
Date and pay all Taxes required to be paid by it with respect to the
periods covered by such Tax Returns; (B) all such Tax Returns filed
pursuant to clause (A) after the date hereof shall, in each case, be
prepared and filed in a manner consistent in all material respects
(including elections and accounting methods and conventions) with
such Tax Return most recently filed in the relevant jurisdiction
prior to the date hereof, except as otherwise required by law or
regulation. Any such Tax Return filed or required to be filed after
the date hereof shall not reflect any new elections or the adoption
of any new accounting methods or conventions or other similar items,
except to the extent such particular reflection or adoption is
required to comply with any law or regulation.
b. All consolidated or combined Tax Returns (except
those described in subparagraph (a) above) required to be filed by
any person through the date hereof that are required or permitted to
include the income, or reflect the activities, operations and
transactions, of TIAI or any of its Subsidiaries for any taxable
period have been timely filed, and the income, activities,
operations and transactions
<PAGE>
of TIAI and Subsidiaries have been
properly included and reflected thereon. TIAI shall prepare and
file, or cause to be prepared and filed, all such consolidated or
combined Tax Returns that are required or permitted to include the
income, or reflect the activities, operations and transactions, of
TIAI or any Subsidiary, with respect to any taxable year or the
portion thereof ending on or prior to the Closing Date, including,
without limitation, TIAI's consolidated federal income tax return
for such taxable years. TIAI will timely file a consolidated federal
income tax return for the taxable year ended December 31, 1998 and
such return shall include and reflect the income, activities,
operations and transactions of TIAI and Subsidiaries for the
taxable period then ended, and hereby expressly covenants and agrees
to file a consolidated federal income tax return, and to include and
reflect thereon the income, activities, operations and transactions
of TIAI and Subsidiaries for the taxable period through the Closing
Date. All Tax Returns filed pursuant to this subparagraph (b) after
the date hereof shall, in each case, to the extent that such Tax
Returns specifically relate to TIAI or any of its Subsidiaries and
do not generally relate to matters affecting other members of TIAI's
consolidated group, be prepared and filed in a manner consistent in
all material respects (including elections and accounting methods
and conventions) with the Tax Return most recently filed in the
relevant jurisdictions prior to the date hereof, except as otherwise
required by law or regulation. TIAI has paid or will pay all Taxes
that may now or hereafter be due with respect to the taxable periods
covered by such consolidated or combined Tax Returns.
c. Neither TIAI nor any of its Subsidiaries has agreed,
or is required, to make any adjustment (x) under Section 481(a) of
the Code by reason of a change in accounting method or otherwise or
(y) pursuant to any provision of the Tax Reform Act of 1986, the
Revenue Act of 1987 or the Technical and Miscellaneous Revenue Act
of 1988.
d. Neither TIAI nor any of its Subsidiaries or any
predecessor or Affiliate of the foregoing has, at any time, filed a
consent under Section 341(f)(1) of the Code, or agreed under Section
341(f)(3) of the Code, to have the provisions of Section 341(f)(2)
of the Code apply to any sale of its stock.
e. There is no (nor has there been any request for an)
agreement, waiver or consent providing for an extension of time with
respect to the assessment of any Taxes attributable to TIAI or its
<PAGE>
Subsidiaries, or their assets or operations and no power of attorney
granted by TIAI or any of its Subsidiaries with respect to any Tax
matter is currently in force.
f. There is no action, suit, proceeding, investigation,
audit, claim, demand, deficiency or additional assessment in
progress, pending or threatened against or with respect to any Tax
attributable to TIAI, its Subsidiaries or their assets or operations.
g. Except as set forth in the TIAI Disclosure Letter,
all amounts required to be withheld as of the Closing Date for Taxes
or otherwise have been withheld and paid when due to the appropriate
agency or authority.
h. No property of TIAI is "tax-exempt use property "
within the meaning of Section 168(h) of the Code nor property that
TIAI and/or its Subsidiaries will be required to treat as being
owned by another person pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately
prior to the enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available to ALRI
true and complete copies of all income Tax Returns (or with respect
to consolidated or combined returns, the portion thereof) and any
other Tax Returns requested by ALRI as may be relevant to TIAI, its
Subsidiaries, or their assets or operations for any and all periods
ending after December 31, 1998, or for any Tax years which are
subject to audit or investigation by any taxing authority or entity.
j. There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement,
covering any employee or former employee of TIAI or its Subsidiaries
that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to Section 280G
or 162 of the Code.
5.20 Environmental Matters.
a. At all times prior to the date hereof, TIAI and its
Subsidiaries have complied in all material respects with applicable
environmental laws, orders, regulations, rules and ordinances
relating to the Properties (as hereinafter defined), the violation
of which would have a material adverse effect on the business or
financial condition of TIAI and its Subsidiaries, taken as a whole,
or which would require a payment by TIAI or its Subsidiaries in
excess of
<PAGE>
$2,000 in the aggregate, and which have been duly
adopted, imposed or promulgated by any legislative, executive,
administrative or judicial body or officer of any Governmental Body.
b. The environmental licenses, permits and
authorizations that are material to the operations of TIAI and its
Subsidiaries, taken as a whole, are in full force and effect.
c. Neither TIAI nor any of its Subsidiaries has
released or caused to be released on or about the properties
currently owned or leased by TIAI or any of its Subsidiaries (the
"Properties") any (i) pollutants, (ii) contaminants, (iii)
"Hazardous Substances," as that term is defined in Section 101(14)
of the Comprehensive Environmental Response Act, as amended or (iv)
"Regulated Substances," as that term in defined in Section 9001 of
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., as amended, which would be required to be remediated by any
governmental agency with jurisdiction over the Properties under the
authority of laws, regulations and ordinances as in effect and
currently interpreted on the date hereof, which remediation would
have a material adverse effect on the business or financial
condition of TIAI and its Subsidiaries, taken as a whole.
5.21 Brokers or Finders. TIAI has not employed any broker or
finder or incurred any liability for any brokerage or finder's fees
or commissions or similar payments in connection with the sale of
the TIAI Shares to ALRI.
5.22 Absence of Certain Commercial Practices. Neither TIAI nor
any of its Subsidiaries has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of
property, however characterized, to any finder, agent, government
official or other party, in the United States or any other country,
which is in any manner related to the business or operations of
TIAI or its Subsidiaries, which TIAI or one of its Subsidiaries
knows or has reason to believe to have been illegal under any
federal, state or local laws of the United States or any other
country having jurisdiction; and neither TIAI nor any of its
Subsidiaries has participated, directly or indirectly, in any
boycotts or other similar practices affecting any of its actual or
potential customers in violation of any applicable law or regulation.
5.23 Transactions with Directors and Officers. Except as set
forth in Section 5.23 of the TIAI Disclosure Letter, TIAI and its
Subsidiaries do not engage in business with any Person in which any
of TIAI's directors or officers has a material equity interest. No
director or officer of TIAI owns any
<PAGE>
property, asset or right which
is material to the business of TIAI and its Subsidiaries, taken as a
whole.
5.24 Borrowing and Guarantees. Except as set forth in Section
5.24 of the TIAI Disclosure Letter, TIAI and its Subsidiaries (a) do
not have any indebtedness for borrowed money, (b) are not lending or
committed to lend any money (except for advances to employees in the
ordinary course of business), and (c) are not guarantors or sureties
with respect to the obligations of any Person.
6. Representations and Warranties of ALRI.
ALRI represents and warrants to TIAI that, to the Knowledge of ALRI
(which limitation shall not apply to Section 6.3), and except as set
forth in the ALRI Disclosure Letter:
6.1 Organization of TIAI; Authorization. ALRI is a
corporation duly organized, validly existing and in good standing
under the laws of Nevada with full corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder. The execution, delivery and performance of this Agreement
have been duly authorized by all necessary corporate action of ALRI
and this Agreement constitutes a valid and binding obligation of
ALRI; enforceable against it in accordance with its terms.
6.2 Capitalization. The authorized capital stock of ALRI
consists of 50,000,000 shares of common stock, par value $.001 per
share, and no shares of preferred stock. As of the date of this
Agreement, ALRI has 6,000,000 shares of common stock issued and
outstanding. Prior to the Closing, ALRI will (i) amend its Articles
of Incorporation to authorize up to 10,000,000 shares of preferred
stock (the "Amendment"), par value $.001 per share; (ii) cause the
cancellation of 2,700,000 shares of "restricted" common stock held
by affiliates of ALRI (the "Cancellation"); and (iii) subsequently
complete a one for two reverse stock split of its issued and
outstanding shares (the "Reverse Split"). Upon completion of the
Amendment, the Cancellation and Reverse Split, (a) the authorized
capital stock of ALRI will consist of 50,000,000 shares of common
stock, par value $.001 per share and 10,000,000 shares of preferred
stock, par value $.001 per share; and (b) an aggregate of 1,650,000
common shares of ALRI will be issued and outstanding, of which
1,500,000 will be "free trade" shares. No shares have otherwise
been registered under state or federal securities laws. As of the
Closing Date, all of the issued and outstanding shares of common
stock of ALRI are validly issued, fully paid and non-assessable and
they are not and as of the Closing Date there will not be
outstanding any other warrants, options or other agreements on the
<PAGE>
part of ALRI obligating ALRI to issue any additional shares of
common or preferred stock or any of its securities of any kind.
ALRI will not issue any shares of capital stock from the date of
this Agreement through the Closing Date.
6.3 No Conflict as to TAIA. Neither the execution and delivery
of this Agreement nor the consummation of the sale of the ALRI
Shares to TIAI will (a) violate any provision of the certificate of
incorporation or by-laws of ALRI, or (b) violate, be in conflict
with, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under any
agreement to which ALRI is a party or (c) violate any statute or law
or any judgment, decree, order, regulation or rule of any court or
other Governmental Body applicable to ALRI.
6.4 Ownership of ALRI Shares. The delivery of certificates to
TIAI provided in Section 2.3 will result in the Shareholders' of
TIAI immediate acquisition of record and beneficial ownership of the
ALRI Shares, free and clear of all Encumbrances other than as
required by Federal and State securities laws. There are no
outstanding options, rights, conversion rights, agreements or
commitments of any kind relating to the issuance, sale or transfer
of any Equity Securities or other securities of ALRI.
6.5 No Conflict as to ALRI and Subsidiaries. Neither the
execution and delivery of this Agreement nor the consummation of the
sale of the ALRI Shares to TIAI will (a) violate any provision of
the certificate of incorporation or by-laws (or other governing
instrument) of ALRI or any of its Subsidiaries or (b) violate, or
be in conflict with, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default)
under, or result in the termination of, or accelerate the
performance required by, or excuse performance by any Person of any
of its obligations under, or cause the acceleration of the maturity
of any debt or obligation pursuant to, or result in the creation or
imposition of any Encumbrance upon any property or assets of ALRI
or any of its Subsidiaries under, any material agreement or
commitment to which ALRI or any of its Subsidiaries is a party or by
which any of their respective property or assets is bound, or to
which any of the property or assets of ALRI or any of its
Subsidiaries is subject, or (c) violate any statute or law or any
judgment, decree, order, regulation or rule of any court or other
Governmental Body applicable to ALRI or any of its Subsidiaries
except, in the case of violations, conflicts, defaults,
terminations, accelerations or Encumbrances described in clause (b)
of this Section 6.5, for such matters which are not likely to have a
material adverse effect on the business or financial condition of
ALRI and its Subsidiaries, taken as a whole.
<PAGE>
6.6 Consents and Approvals of Governmental Authorities. No
consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Body is required to be made or
obtained by ALRI or TAIA or any of either of their Subsidiaries in
connection with the execution, delivery and performance of this
Agreement by ALRI or the consummation of the sale of the ALRI Shares
to TIAI.
6.7 Other Consents. No consent of any Person is required to be
obtained by TIAI or ALRI to the execution, delivery and performance
of this Agreement or the consummation of the sale of the ALRI Shares
to TIAI, including, but not limited to, consents from parties to
leases or other agreements or commitments, except for any consent
which the failure to obtain would not be likely to have a material
adverse effect on the business and financial condition of TIAI or ALRI.
6.8 Financial Statements. ALRI has delivered to TIAI
consolidated balance sheets of ALRI and its Subsidiaries as at
December 31, 1997 and December 31, 1998, and statements of income
and changes in financial position for each of the years in the
two-year period then ended, together with the report thereon of
ALRI's independent accountant (the "ALRI Financial Statements").
Such ALRI Financial Statements and notes fairly present the
consolidated financial condition and results of operations of ALRI
and its Subsidiaries as at the respective dates thereof and for the
periods therein referred to, all in accordance with generally
accepted United States accounting principles consistently applied
throughout the periods involved, except as set forth in the notes
thereto.
6.9 Title to Properties. Either ALRI or one of its
Subsidiaries owns all the material properties and assets that they
purport to own (real, personal and mixed, tangible and intangible),
including, without limitation, all the material properties and
assets reflected in the ALRI Financial Statements and all the
material properties and assets purchased or otherwise acquired by
ALRI or any of its Subsidiaries since the date of the ALRI Financial
Statements. All properties and assets reflected in the ALRI
Financial Statements are free and clear of all material Encumbrances
and are not, in the case of real property, subject to any material
rights of way, building use restrictions, exceptions, variances,
reservations or limitations of any nature whatsoever except, with
respect to all such properties and assets, (a) mortgages or security
interests shown on the ALRI Financial Statements as securing
specified liabilities or obligations, with respect to which no
default (or event which, with notice or lapse of time or both, would
constitute a default) exists, and all of which are listed in the
ALRI Disclosure Letter, (b) mortgages or security interests incurred
in connection with the purchase of property or assets after the date
of the
<PAGE>
ALRI Financial Statements (such mortgages and security
interests being limited to the property or assets so acquired), with
respect to which no default (or event which, with notice or lapse of
time or both, would constitute a default) exists, (c) as to real
property, (i) imperfections of title, if any, none of which
materially detracts from the value or impairs the use of the
property subject thereto, or impairs the operations of ALRI or any
of its Subsidiaries and (ii) zoning laws that do not impair the
present or anticipated use of the property subject thereto, and (d)
liens for current taxes not yet due. The properties and assets of
ALRI and its Subsidiaries include all rights, properties and other
assets necessary to permit ALRI and its Subsidiaries to conduct
ALRI's business in all material respects in the same manner as it is
conducted on the date of this Agreement.
6.10 Buildings, Plants and Equipment. The buildings, plants,
structures and material items of equipment and other personal
property owned or leased by ALRI or its Subsidiaries are, in all
respects material to the business or financial condition of ALRI
and its Subsidiaries, taken as a whole, in good operating condition
and repair (ordinary wear and tear excepted) and are adequate in all
such respects for the purposes for which they are being used. ALRI
has not received notification that it or any of its Subsidiaries is
in violation of any applicable building, zoning, anti-pollution,
health, safety or other law, ordinance or regulation in respect of
its buildings, plants or structures or their operations, which
violation is likely to have a material adverse effect on the
business or financial condition of ALRI and its Subsidiaries, taken
as a whole or which would require a payment by TIAI or ALRI or any
of their subsidiaries in excess of $2,000 in the aggregate, and
which has not been cured.
6.11 No Condemnation or Expropriation. Neither the whole nor
any portion of the property or leaseholds owned or held by ALRI or
any of its Subsidiaries is subject to any governmental decree or
order to be sold or is being condemned, expropriated or otherwise
taken by any Governmental Body or other Person with or without
payment of compensation therefor, which action is likely to have a
material adverse effect on the business or financial condition of
TIAI and its Subsidiaries, taken as a whole.
6.12 Litigation. There is no action, suit, inquiry, proceeding
or investigation by or before any court or Governmental Body pending
or threatened in writing against or involving ALRI or any of its
Subsidiaries which is likely to have a material adverse effect on
the business or financial condition of TIAI, ALRI and any of their
Subsidiaries, taken as whole, or which would require a payment by
ALRI or its subsidiaries in excess of $2,000 in the aggregate or
which questions or challenges the validity of this Agreement.
Neither ALRI nor any or its Subsidiaries is subject to any
judgment, order or decree that is likely to have a material adverse
effect on
<PAGE>
the business or financial condition of TIAI, ALRI or any
of their Subsidiaries, taken as a whole, or which would require a
payment by ALRI or its subsidiaries in excess of $2,000 in the
aggregate.
6.13 Absence of Certain Changes. Since the date of the ALRI
Financial Statements, neither ALRI nor any of its Subsidiaries has:
a. suffered the damage or destruction of any of its
properties or assets (whether or not covered by insurance) which is
materially adverse to the business or financial condition of ALRI
and its Subsidiaries, taken as a whole, or made any disposition of
any of its material properties or assets other than in the ordinary
course of business;
b. made any change or amendment in its certificate of
incorporation or by-laws, or other governing instruments;
c. issued or sold any Equity Securities or other
securities, acquired, directly or indirectly, by redemption or
otherwise, any such Equity Securities, reclassified, split-up or
otherwise changed any such Equity Security, or granted or entered
into any options, warrants, calls or commitments of any kind with
respect thereto;
d. organized any new Subsidiary or acquired any Equity
Securities of any Person or any equity or ownership interest in any
business;
e. borrowed any funds or incurred, or assumed or become
subject to, whether directly or by way of guarantee or otherwise,
any obligation or liability with respect to any such indebtedness
for borrowed money;
f. paid, discharged or satisfied any material claim,
liability or obligation (absolute, accrued, contingent or
otherwise), other than in the ordinary course of business;
g. prepaid any material obligation having a maturity of
more than 90 days from the date such obligation was issued or
incurred;
h. canceled any material debts or waived any material
claims or rights, except in the ordinary course of business;
<PAGE>
i. disposed of or permitted to lapse any rights to the
use of any material patent or registered trademark or copyright or
other intellectual property owned or used by it;
j. granted any general increase in the compensation of
officers or employees (including any such increase pursuant to any
employee benefit plan);
k. purchased or entered into any contract or commitment
to purchase any material quantity of raw materials or supplies, or
sold or entered into any contract or commitment to sell any material
quantity of property or assets, except (i) normal contracts or
commitments for the purchase of, and normal purchases of, raw
materials or supplies, made in the ordinary course business, (ii)
normal contracts or commitments for the sale of, and normal sales
of, inventory in the ordinary course of business, and (iii) other
contracts, commitments, purchases or sales in the ordinary course of
business;
l. made any capital expenditures or additions to
property, plant or equipment or acquired any other property or
assets (other than raw materials and supplies) at a cost in excess
of $2,000 in the aggregate;
m. written off or been required to write off any notes
or accounts receivable in an aggregate amount in excess of $2,000;
n. written down or been required to write down any
inventory in an aggregate amount in excess of $ 2,000;
o. entered into any collective bargaining or union
contract or agreement; or
p. other than the ordinary course of business, incurred
any liability required by generally accepted accounting principles
to be reflected on a balance sheet and material to the business or
financial condition of ALRI and its subsidiaries taken as a whole.
6.14 No Material Adverse Change. Since the date of the ALRI
Financial Statements, there has not been any material adverse change
in the business or financial condition of ALRI and its Subsidiaries
taken as a whole, other than changes resulting from economic
conditions prevailing in the United States precious coins,
collectibles and metals industry.
<PAGE>
6.15 Contracts and Commitments. Neither ALRI nor any of its
Subsidiaries is a party to any:
a. Contract or agreement (other than purchase or sales
orders entered into in the ordinary course of business) involving
any liability on the part of ALRI or one of its Subsidiaries of
more than $2,000 and not cancelable by ALRI or the relevant
Subsidiary (without liability to ALRI or such Subsidiary) within 60
days;
b. Lease of personal property involving annual rental
payments in excess of $2,000 and not cancelable by ALRI or the
relevant Subsidiary (without liability to ALRI or such Subsidiary)
within 90 days;
c. Employee bonus, stock option or stock purchase,
performance unit, profit-sharing, pension, savings, retirement,
health, deferred or incentive compensation, insurance or other
material employee benefit plan (as defined in Section 2(3) of ERISA)
or program for any of the employees, former employees or retired
employees of ALRI or any of its Subsidiaries;
d. Commitment, contract or agreement that is currently
expected by the management of ALRI to result in any material loss
upon completion or performance thereof;
e. Contract, agreement or commitment that is material to
the business of ALRI and its Subsidiaries, taken as a whole, with
any officer, employee, agent, consultant, advisor, salesman, sales
representative, value added reseller, distributor or dealer; or
f. Employment agreement or other similar agreement that
contains any severance or termination pay, liabilities or
obligations.
All such contracts and agreements are in full force and effect.
Neither ALRI nor any or its Subsidiaries is in breach of, in
violation of or in default under, any agreement, instrument,
indenture, deed of trust, commitment, contract or other obligation
of any type to which ALRI or any of its Subsidiaries is a party or
is or may be bound that relates to the business of ALRI or any of
its Subsidiaries or to which any of the assets or properties of ALRI
or any of its Subsidiaries is subject, the effect of which breach,
violation or default is likely to materially and adversely affect
the business or financial condition of ALRI and its Subsidiaries,
taken as a whole.
<PAGE>
6.16 Labor Relations. Neither ALRI nor any of its Subsidiaries
is a party to any collective bargaining agreement. Except for any
matter which is not likely to have a material adverse effect on the
business or financial condition of ALRI and its Subsidiaries, taken
as a whole, (a) ALRI and each of its Subsidiaries is in compliance
with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours,
and is not engaged in any unfair labor practice, (b) there is no
unfair labor practice complaint against ALRI or any of its
Subsidiaries pending before the National Labor Relations Board, (c)
there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against ALRI or any of its Subsidiaries, (d)
no representation question exists respecting the employees of ALRI
or any of its Subsidiaries, (e) neither ALRI nor any of its
Subsidiaries has experienced any strike, work stoppage or other
labor difficulty, and (f) no collective bargaining agreement
relating to employees of ALRI or any of its Subsidiaries is
currently being negotiated.
6.17 Employee Benefit Plans. Section 6.16 of the ALRI
Disclosure Letter contains a list of all material employee pension
and welfare benefit plans covering employees of ALRI and its
Subsidiaries. No listed plan is (1) a multi-employer plan as defined
in Section 3(37) of ERISA, or (2) a defined benefit plan as defined
in Section 3(35) of ERISA, any listed individual account pension
plan is duly qualified as tax exempt under the applicable sections
of the Code, each listed benefit plan and related funding
arrangement, if any, has been maintained in all material respects in
compliance with its terms and the provisions of ERISA and the Code,
and the ALRI Disclosure Letter also lists all material management
incentive plans and all material employment contracts or severance
arrangements pertaining to one or more specific employees.
6.18 Compliance with Law. The operations of ALRI and its
Subsidiaries have been conducted in accordance with all applicable
laws and regulations of all Governmental Bodies having jurisdiction
over them, except for violations thereof which are not likely to
have a material adverse effect on the business or financial
condition of ALRI and its Subsidiaries, taken as a whole, or which
would not require a payment by ALRI or its Subsidiaries in excess of
$2,000 in the aggregate, or which have been cured. Neither ALRI nor
any of its Subsidiaries has received any notification of any
asserted present or past failure by it to comply with any such
applicable laws or regulations. ALRI and its Subsidiaries have all
material licenses, permits, orders or approvals from the
Governmental Bodies required for the conduct of their businesses,
and are not in material violation of any such licenses, permits,
orders and approvals. All such licenses, permits, orders and
approvals are in full force and effect, and no
<PAGE>
suspension or cancellation of any thereof has been threatened.
6.19 Tax Matters.
a. ALRI and each of its Subsidiaries (1) has filed all
nonconsolidated and noncombined Tax Returns and all consolidated or
combined Tax Returns that include only ALRI and/or its Subsidiaries
and not Seller or its other Affiliates (for the purposes of this
Section 6.18, such tax Returns shall be considered nonconsolidated
and noncombined Tax Returns) required to be filed through the date
hereof and has paid any Tax due through the date hereof with respect
to the time periods covered by such nonconsolidated and noncombined
Tax Returns and shall timely pay any such Taxes required to be paid
by it after the date hereof with respect to such Tax Returns and (2)
shall prepare and timely file all such nonconsolidated and
noncombined Tax Returns required to be filed after the date hereof
and through the Closing Date and pay all Taxes required to be paid
by it with respect to the periods covered by such Tax Returns; (B)
all such Tax Returns filed pursuant to clause (A) after the date
hereof shall, in each case, be prepared and filed in a manner
consistent in all material respects (including elections and
accounting methods and conventions) with such Tax Return most
recently filed in the relevant jurisdiction prior to the date
hereof, except as otherwise required by law or regulation. Any such
Tax Return filed or required to be filed after the date hereof shall
not reflect any new elections or the adoption of any new accounting
methods or conventions or other similar items, except to the extent
such particular reflection or adoption is required to comply with
any law or regulation.
b. All consolidated or combined Tax Returns (except
those described in subparagraph (a) above) required to be filed by
any person through the date hereof that are required or permitted to
include the income, or reflect the activities, operations and
transactions, of ALRI or any of its Subsidiaries for any taxable
period have been timely filed, and the income, activities,
operations and transactions of ALRI and Subsidiaries have been
properly included and reflected thereon. ALRI shall prepare and
file, or cause to be prepared and filed, all such consolidated or
combined Tax Returns that are required or permitted to include the
income, or reflect the activities, operations and transactions, of
ALRI or any Subsidiary, with respect to any taxable year or the
portion thereof ending on or prior to the Closing Date, including,
without limitation, ALRI's consolidated federal income tax return
for such taxable years. ALRI will timely file a consolidated federal
income tax return for
<PAGE>
the taxable year ended December 31, 1998 and
such return shall include and reflect the income, activities,
operations and transactions of ALRI and Subsidiaries for the taxable
period then ended, and hereby expressly covenants and agrees to file
a consolidated federal income tax return, and to include and reflect
thereon the income, activities, operations and transactions of ALRI
and Subsidiaries for the taxable period through the Closing Date.
All Tax Returns filed pursuant to this subparagraph (b) after the
date hereof shall, in each case, to the extent that such Tax Returns
specifically relate to ALRI or any of its Subsidiaries and do not
generally relate to matters affecting other members of ALRI's
consolidated group, be prepared and filed in a manner consistent in
all material respects (including elections and accounting methods
and conventions) with the Tax Return most recently filed in the
relevant jurisdictions prior to the date hereof, except as otherwise
required by law or regulation. ALRI has paid or will pay all Taxes
that may now or hereafter be due with respect to the taxable periods
covered by such consolidated or combined Tax Returns.
c. Neither ALRI nor any of its Subsidiaries has agreed,
or is required, to make any adjustment (x) under Section 481(a) of
the Code by reason of a change in accounting method or otherwise or
(y) pursuant to any provision of the Tax Reform Act of 1986, the
Revenue Act of 1987 or the Technical and Miscellaneous Revenue Act
of 1988.
d. Neither ALRI nor any of its Subsidiaries or any
predecessor or Affiliate of the foregoing has, at any time, filed a
consent under Section 341(f)(1) of the Code, or agreed under Section
341(f)(3) of the Code, to have the provisions of Section 341(f)(2)
of the Code apply to any sale of its stock.
e. There is no (nor has there been any request for an)
agreement, waiver or consent providing for an extension of time with
respect to the assessment of any Taxes attributable to ALRI or its
Subsidiaries, or their assets or operations and no power of attorney
granted by ALRI or any of its Subsidiaries with respect to any Tax
matter is currently in force.
f. There is no action, suit, proceeding, investigation,
audit, claim, demand, deficiency or additional assessment in
progress, pending or threatened against or with respect to any Tax
attributable to ALRI, its Subsidiaries or their assets or operations.
<PAGE>
g. All amounts required to be withheld as of the Closing
Date for Taxes or otherwise have been withheld and paid when due to
the appropriate agency or authority.
h. No property of ALRI is "tax-exempt use property "
within the meaning of Section 168(h) of the Code nor property that
ALRI and/or its Subsidiaries will be required to treat as being
owned by another person pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately
prior to the enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available to TIAI
true and complete copies of all income Tax Returns (or with respect
to consolidated or combined returns, the portion thereof) and any
other Tax Returns requested by TIAI as may be relevant to ALRI, its
Subsidiaries, or their assets or operations for any and all periods
ending after December 31, 1998, or for any Tax years which are
subject to audit or investigation by any taxing authority or entity.
j. There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement,
covering any employee or former employee of ALRI or its Subsidiaries
that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to Section 280G
or 162 of the Code.
6.20 Environmental Matters.
a. At all times prior to the date hereof, ALRI and its
Subsidiaries have complied in all material respects with applicable
environmental laws, orders, regulations, rules and ordinances
relating to the Properties (as hereinafter defined), the violation
of which would have a material adverse effect on the business or
financial condition of ALRI and its Subsidiaries, taken as a whole,
or which would require a payment by ALRI or its Subsidiaries in
excess of $2,000 in the aggregate, and which have been duly
adopted, imposed or promulgated by any legislative, executive,
administrative or judicial body or officer of any Governmental Body.
<PAGE>
b. The environmental licenses, permits and
authorizations that are material to the operations of ALRI and its
Subsidiaries, taken as a whole, are in full force and effect.
c. Neither ALRI nor any of its Subsidiaries has
released or caused to be released on or about the properties
currently owned or leased by ALRI or any of its Subsidiaries (the
"Properties") any (i) pollutants, (ii) contaminants, (iii)
"Hazardous Substances," as that term is defined in Section 101(14)
of the Comprehensive Environmental Response Act, as amended or (iv)
"Regulated Substances," as that term in defined in Section 9001 of
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901,
et seq., as amended, which would be required to be remediated by any
governmental agency with jurisdiction over the Properties under the
authority of laws, regulations and ordinances as in effect and
currently interpreted on the date hereof, which remediation would
have a material adverse effect on the business or financial
condition of ALRI and its Subsidiaries, taken as a whole.
6.21 Brokers or Finders. ALRI has not employed any broker or
finder or incurred any liability for any brokerage or finder's fees
or commissions or similar payments in connection with the sale of
the ALRI Shares to TIAI.
6.22 Absence of Certain Commercial Practices. Neither ALRI nor
any of its Subsidiaries has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or item of
property, however characterized, to any finder, agent, government
official or other party, in the United States or any other country,
which is in any manner related to the business or operations of
ALRI or its Subsidiaries, which ALRI or one of its Subsidiaries
knows or has reason to believe to have been illegal under any
federal, state or local laws of the United States or any other
country having jurisdiction; and neither ALRI nor any of its
Subsidiaries has participated, directly or indirectly, in any
boycotts or other similar practices affecting any of its actual or
potential customers in violation of any applicable law or regulation.
6.23 Transactions with Directors and Officers. ALRI and its
Subsidiaries do not engage in business with any Person in which any
of ALRI's directors or officers has a material equity interest. No
director or officer of ALRI owns any property, asset or right which
is material to the business of ALRI and its Subsidiaries, taken as a
whole.
6.24 Borrowing and Guarantees. ALRI and its Subsidiaries (a) do
not have any indebtedness for borrowed money, (b) are not lending or
committed to
<PAGE>
lend any money (except for advances to employees in the
ordinary course of business), and (c) are not guarantors or sureties
with respect to the obligations of any Person.
6.25 Purchase for Investment. ALRI is purchasing the TIAI
Shares solely for its own account for the purpose of investment and
not with a view to, or for sale in connection with, any distribution
of any portion thereof in violation of any applicable securities
law.
7. Access and Reporting; Filings With Governmental Authorities;
Other Covenants.
7.1 Access Between the date of this Agreement and the Closing
Date. Each of TIAI and ALRI shall (a) give to the other and its
authorized representatives reasonable access to all plants, offices,
warehouse and other facilities and properties of TIAI or ALRI, as
the case may be, and to its books and records, (b) permit the other
to make inspections thereof, and (c) cause its officers and its
advisors to furnish the other with such financial and operating data
and other information with respect to the business and properties of
such party and its Subsidiaries and to discuss with such and its
authorized representatives its affairs and those of its
Subsidiaries, all as the other may from time to time reasonably
request.
7.3 Exclusivity. From the date hereof until the earlier of
the Closing or the termination of this Agreement, ALRI shall not
solicit or negotiate or enter into any agreement with any other
Person with respect to or in furtherance of any proposal for a
merger or business combination involving, or acquisition of any
interest in, or (except in the ordinary course of business) sale of
assets by, ALRI, except for the exchange of the ALRI Shares for the
TIAI Shares from TIAI's shareholders.
7.4 Publicity. Between the date of this Agreement and the
Closing Date, ALRI and TIAI shall discuss and coordinate with
respect to any public filing or announcement or any internal or
private announcement (including any general announcement to
employees) concerning the contemplated transaction.
7.5 Regulatory Matters. TIAI and ALRI shall (a) file with
applicable regulatory authorities any applications and related
documents required to be filed by them in order to consummate the
contemplated transaction and (b) cooperate with each other as they
may reasonably request in connection with the foregoing.
7.6 Confidentiality. Prior to the Closing Date (or at any
time if the Closing does not occur) each of TIAI and ALRI shall keep
confidential and not disclose to any Person (other than its
employees, attorneys, accountants
<PAGE>
and advisors) or use (except in
connection with the transactions contemplated hereby) all non-public
information obtained pursuant to Section 7.1. Following the Closing,
each of TIAI and ALRI shall keep confidential and not disclose to
any Person (other than its employees, attorneys, accountants and
advisors) or use (except in connection with preparing Tax Returns
and conducting proceeds relating to Taxes) any nonpublic information
relating to the other. This Section 7.6 shall not be violated by
disclosure pursuant to court order or as otherwise required by law,
on condition that notice of the requirement for such disclosure is
given the other party prior to making any disclosure and the party
subject to such requirement cooperates as the other may reasonably
request in resisting it. If the Closing does not occur, each of TIAI
and ALRI shall return to the other, or destroy, all information it
shall have received from the other in connection with this Agreement
and the transactions contemplated hereby, together with any copies
or summaries thereof or extracts therefrom. Each of TIAI and ALRI
shall use their best efforts to cause their respective
representatives, employees, attorneys, accountants and advisors to
whom information is disclosed pursuant to Section 7.1 to comply with
the provisions of this Section 7.6.
7.7 Reverse Mergers; Antidilution. TIAI and its officers and
directors hereby agree that for a period of 12 months from the date
hereof the merged company shall not engage in any reverse stock
splits or other stock combinations or change any other attributes of
any of the Company's stock. TIAI and its officers and directors
hereby agree that except with respect to the proposed $1,000,000
private placement at a price of $1.00 per share, the issuance of
shares upon the exercise of options granted to the Michelson Group,
the issuance of shares in exchange for legal services (up to 27,500
restricted shares of stock) and the issuance of shares upon the
exercise of employee options at $1.00 per share for up to 700,000
shares (vesting over five years), for a period of 12 months the
Company shall not issue any new series of stock at a purchase price
of less than $1.00 per share without the consent of a majority of
the initial ALRI shareholders.
7.8 Rule 504 Sales. TIAI agrees not to make any sales of
securities in accordance with Rule 504 promulgated under Regulation
D of the Securities Act.
8. Conduct of ALRI's Business Prior to the Closing.
8.1 Operation in Ordinary Course. Between the date of this
Agreement and the Closing Date. ALRI shall cause conduct its
businesses in all material respects in the ordinary course.
8.2 Business Organization. Between the date of this Agreement
and the Closing Date, ALRI shall (a) preserve substantially intact
the business organization of ALRI; and (b) preserve in all material
respects the present business relationships and good will of ALRI
and each of its Subsidiaries.
8.3 Corporate Organization. Between the date of this Agreement
and the Closing Date, ALRI shall not cause or permit any amendment
of its certificate of incorporation or by-laws (or other governing
instrument) and shall not:
a. issue, sell or otherwise dispose of any of its Equity
Securities, or create, sell or otherwise dispose of any options,
rights, conversion rights or other agreements or commitments of any
kind relating to the issuance, sale or disposition of any of its
Equity Securities;
<PAGE>
b. create or suffer to be created any Encumbrance
thereon, or create, sell or otherwise dispose of any options,
rights, conversion rights or other agreements or commitments of any
kind relating to the sale or disposition of any Equity Securities;
c. reclassify, split up or otherwise change any of its
Equity Securities;
d. be party to any merger, consolidation or other
business combination;
e. sell, lease, license or otherwise dispose of any of
its properties or assets (including, but not limited to rights with
respect to patents and registered trademarks and copyrights or other
proprietary rights), in an amount which is material to the business
or financial condition of ALRI and its Subsidiaries, taken as a
whole, except in the ordinary course of business; or
f. organize any new Subsidiary or acquire any Equity
Securities of any Person or any equity or ownership interest in any
business.
8.4 Other Restrictions. Between the date of this Agreement and
the Closing Date, ALRI shall not:
a. borrow any funds or otherwise become subject to,
whether directly or by way of guarantee or otherwise, any
indebtedness for borrowed money;
b. create any material Encumbrance on any of its
material properties or assets;
c. except in the ordinary course of business, increase
in any manner the compensation of any director or officer or
increase in any manner the compensation of any class of employees;
d. create or materially modify any material bonus,
deferred compensation, pension, profit sharing, retirement,
insurance, stock purchase, stock option, or other fringe benefit
plan, arrangement or practice or any other employee benefit plan (as
defined in section 3(3) of ERISA);
e. make any capital expenditure or acquire any property
or assets;
f. enter into any agreement that materially restricts
ALRI, TIAI or any of their Subsidiaries from carrying on business;
<PAGE>
g. pay, discharge or satisfy any material claim,
liability or obligation, absolute, accrued, contingent or otherwise,
other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities or obligations reflected in the
ALRI Financial Statements or incurred in the ordinary course of
business and consistent with past practice since the date of the
ALRI Financial Statements; or
h. cancel any material debts or waive any material
claims or rights.
9. Definitions.
As used in this Agreement, the following terms have the meanings
specified or referred to in this Section 9.
9.1 "Business Day" Any day that is not a Saturday or Sunday
or a day on which banks located in the City of New York are
authorized or required to be closed.
9.2 "Code" The Internal Revenue Code of 1986, as amended.
9.3 "Disclosure Letter" A letter dated the date of this
Agreement, executed by either TIAI and ALRI, addressed and delivered
to the other and containing information required by this Agreement
and exceptions to the representations and warranties under this
Agreement.
9.4 "Encumbrances" Any security interest, mortgage, lien,
charge, adverse claim or restriction of any kind, including, but not
limited to, any restriction on the use, voting, transfer, receipt of
income or other exercise of any attributes of ownership, other than
a restriction on transfer arising under Federal or state securities
laws.
9.5 "Equity Securities" See Rule 3a 11 1 under the
Securities Exchange Act of 1934.
9.6 "ERISA" The Employee Retirement Income Security Act of
1974, as amended.
9.7 "Governmental Body" Any domestic or foreign national,
state or municipal or other local government or multi-national body
(including, but not limited to, the European Economic Community),
any subdivision, agency, commission or authority thereof.
9.8 "Knowledge" Actual knowledge, after reasonable
investigation.
9.9 "Person" Any individual, corporation, partnership, joint
venture, trust, association, unincorporated organization, other
entity, or Governmental Body.
9.10 "Subsidiary" With respect to any Person, any corporation
of which securities having the power to elect a majority of that
corporation's Board of Directors (other than securities having that
power only upon the happening of a contingency that has not
occurred) are held by such
<PAGE>
Person or one or more of its Subsidiaries.
10. Termination.
10.1 Termination. This Agreement may be terminated before the
Closing occurs only as follows:
a. By written agreement of TIAI and ALRI at any time.
b. By ALRI, by notice to TIAI at any time, if one or
more of the conditions specified in Section 4 is not satisfied at
the time at which the Closing (as it may be deferred pursuant to
Section 2.1) would otherwise occur or if satisfaction of such a
condition is or becomes impossible.
c. By TIAI, by notice to ALRI at any time, if one or
more of the conditions specified in Section 3 is not satisfied at
the time at which the Closing (as it may be deferred pursuant to
Section 2.1), would otherwise occur of if satisfaction of such a
condition is or becomes impossible.
d. By TIAI ro ALRI, by notice to the other at any time
after June 30, 1999.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall terminate without any
liability or further obligation of any party to another.
13. Notices. All notices, consents, assignments and other
communications under this Agreement shall be in writing and shall be
deemed to have been duly given when (a) delivered by hand, (b) sent
by telex or facsimile (with receipt confirmed), provided that a copy
is mailed by registered mail, return receipt requested, or (c)
received by the delivery service (receipt requested), in each case
to the appropriate addresses, telex numbers and facsimile numbers
set forth below (or to such other addresses, telex numbers and
facsimile numbers as a party may designate as to itself by notice to
the other parties).
(a) If to ALRI:
c/o Law Offices of Shawn F. Hackman, Esq.
1600 E. Desert Inn Rd. #206-A
Las Vegas, NV 89109
Facsimile No.: (702) 732-2253
Attention: Sean Flanagan
<PAGE>
(b) If to TIAI:
Tangible Investments of America, Inc.
1550 S. Pacific Coast Highway, Suite 103
Laguna Beach, CA 92651
Facsimile No.: (949) 376-2663
Attention: Silvano A. DiGenova
with a copy to:
Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Facsimile No.: (949) 719-1988
14. Miscellaneous.
14.2 Expenses. Each party shall bear its own expenses incident
to the preparation, negotiation, execution and delivery of this
Agreement and the performance of its obligations hereunder.
14.3 Captions. The captions in this Agreement are for
convenience of reference only and shall not be given any effect in
the interpretation of this agreement.
14.4 No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement. Any waiver must be in writing.
14.5 Exclusive Agreement; Amendment. This Agreement supersedes
all prior agreements among the parties with respect to its subject
matter with respect thereto and cannot be changed or terminated orally.
14.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be considered an original,
but all of which together shall constitute the same instrument.
14.7 Governing Law. This Agreement and (unless otherwise
provided) all amendments hereof and waivers and consents hereunder
shall be governed by the internal law of the State of California,
without regard to the conflicts of law principles thereof.
14.8 Binding Effect. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective
successors and
<PAGE>
assigns, provided that neither party may assign its
rights hereunder without the consent of the other, provided that,
after the Closing, no consent of TIAI shall be needed in connection
with any merger or consolidation of ARLI with or into another entity.
<PAGE>
IN WITNESS WHEREOF, the corporate parties hereto have caused
this Agreement to be executed by their respective officers, hereunto
duly authorized, and entered into as of the date first above written.
ATTEST: AUSTIN LAND & RESOURCES, INC.
By: __ /s/ Andrew Berney____
Secretary President
ATTEST: TANGIBLE INVESTMENTS OF AMERICA, INC.
By: _/s/ Silvano DiGenova___
Secretary President
<PAGE>
EXHIBIT A
TIAI SHAREHOLDERS
Name ALRI Shares to be Issued
Silvano A. DiGenova 15,544,500
Gene Sherman 208,000
Gehringer & Kellar, Inc. 160,000
Mike Carson 40,000
Bruce Dubin 40,000
MRC Legal Services Corporation 7,500
[FILED [C06367]
THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
AUG 30, 1995
14984-95]
ARTICLES OF INCORPORATION
of
Austin Land & Resources, Inc.
Know all men by these present;
That the undersigned, have this day voluntarily associated ourselves
together for the purpose of forming a corporation under and pursuant
to the provisions of Nevada Revised Statutes 78.010. to Nevada Revised
Statues 78.090 inclusive, as amended, and certify that;
1. The name of this corporation is:
Austin Land & Resources, Inc.
2. Offices for the transaction of any business of the Corporation,
and where meetings of the Board of Directors and of Stockholders may
be held may be established and maintained in any part of the State of
Nevada, or in any other state, territory, or possession of the
United States.
3. The nature of the business is to engage in any lawful activity.
4. The Capital Stock shall consist of 50,000,000 shares of common stock,
$0.001 par value.
5. The members of the governing board of the corporation shall
be styled directors, of which there shall be no less than 1. The
Directors of this corporation need not be stockholders. The first
Board of Directors is: Raymond M. Girard, whose address is 1700 E.
Desert Inn Rd., Suite 100, Las Vegas, NV 89109.
6. This corporation shall have perpetual existence.
7. The name and address of each of the incorporators signing
these Articles of Incorporation are as follows: Raymond M. Girard,
whose address is 1700 E. Desert Inn Road., Suite 100, Las Vegas, NV 89109.
<PAGE>
8. This Corporation shall have a president, a secretary, a treasurer,
and a resident agent, to be chosen by the Board of Directors,
any person may hold two or more offices.
9. The resident agent of this Corporation shall be Raymond M. Girard,
1700 E. Desert Inn Road, Suite 100, Las Vegas, NV 89109.
10. The Capital Stock of the corporation, after the fixed consideration
thereof has been paid or performed, shall not be subject to assessment, and
the individual liable for the debts mid liabilities of the Corporation, and
the Articles of Incorporation shall never be amended as the aforesaid
provisions.
11. No director or officer of the corporation shall be personally liable
to the corporation of any of its stockholders for damages for breach of
fiduciary duty as a director or officer involving any act or omission of
any such director or officer provided, however, that the foregoing
provision shall not eliminate or limit the liability of a director or
officer for acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law, or the payment or dividends in
violation of Section 78.300 of the Nevada Revised Statutes. Any repeal or
modification of this Article of the Stockholders of the Corporation shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of officer of the Corporation for acts or
omissions prior to such repeal or modification
<PAGE>
I, the undersigned being the incorporator herein above named for the purpose
of forming a corporation pursuant to the general corporation law of the
State of Nevada, do make and file these Articles of Incorporation, hereby
declaring and certifying that the facts within stated are true, and
accordingly have hereunto set my hand this 30th day of August 1995.
/s/Raymond M. Girard
Raymond M. Girard
1700 E. Desert Inn Rd., Suite 100
Las Vegas, NV 99109
State of NEVADA )
)ss
County of CLARK )
On August 30, 1995, personally appeared before me, a notary public,
personally known to me to be the person whose name is subscribed to the
above instrument who acknowledged that he/she executed the instrument.
/s/Kristin D. Payne
Signature
[KRISTIN D. PAYNE
Notary Public
State of Nevada
Clerk County
My Appointment Expires June 6, 1999]
[Received
Aug 30, 1995
Secretary of State]
[FILED #C 14984-95
MAY 04, 1999]
Certificate of Amendment To Articles of Incorporation
Of
Austin Land & Resources, Inc.
I, ANDREW W. BERNEY, certify that:
1. The original articles were filed with the Office of the Secretary
of State on August 30, 1995.
2. As of the date of this certificate 6,000,000 shares of stock of
the corporation have been issued.
3. Pursuant to a shareholder's meeting at which a majority voted in
favor of the following amendment, the company hereby adopts the following
amendment to the Articles of Incorporation of this Corporation.
First: Name of Corporation
The name of the corporation is Tangible Asset Galleries, Inc.
(the corporation)
/s/Andrew W. Berney
Andrew W. Berney
President/Director
/s/Douglas Ansell
Douglas Ansell
Secretary/Director
State of Nevada
County of Clark
[NOTARY PUBLIC
STATE OF NEVADA
County of Clark
BRIDGET E RICHARDS
No: 96-4099-1
My Appointment Expires Sept. 5, 2000]
On May 3, 1999, personally appeared before me, a Notary Public, Andrew W.
Berney and Douglas Ansell, who acknowledged that they executed the above
instrument.
/s/Bridget E. Richards
Bridget Richards
Notary in and for said State and County
BYLAWS
OF
Austin Land & Resources, Inc.
(THE "CORPORATION")
ARTICLE I
OFFICE
The Board of Directors shall designate and the Corporation shall maintain a
principal office. The location of the principal office may be changed by the
Board of Directors. The Corporation also may have offices in such other
places as the Board may from time to time designate. The location of the
initial principal office of the Corporation shall be designated by resolution.
ARTICLE II
SHAREHOLDERS MEETINGS
1. Annual Meetings
The annual meeting of the shareholders of the Corporation shall be held at
such place within or without the State of Nevada as shall be set forth in
compliance with these Bylaws. The meeting shall be held on the First Friday
of September of each year. If such day is a legal holiday, the meeting shall
be on the next business day. This meeting shall be for the election of
Directors and for the transaction of such other business as may properly
come before it.
2. Special Meetings
Special meetings of shareholders, other than those regulated by statute, may
be called by the President upon written request of the holders of 50% or
more of the outstanding shares entitled to vote at such special meeting.
Written notice of such meeting stating the place, the date and hour of the
meeting, the purpose or purposes for which it is called, and the name of the
person by whom or at whose direction the meeting is called shall be given.
3. Notice of Shareholders Meeting
The Secretary shall give 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, which shall be delivered not less than ten
or more than fifty days before the date of the meeting, either personally or
by mail to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at their address as it
appears on the books of the Corporation, with postage thereon prepaid.
Attendance at the meeting shall constitute a waiver of notice thereof.
<PAGE>
4. Place of Meeting
The Board of Directors may designate any place, either within or without the
State of Nevada, as the place of meeting for any annual meeting or for any
special meeting called by the Board of Directors. A waiver of notice signed
by all shareholders entitled to vote at a meeting may designate any place,
either within or without the State of Nevada, as the place for the holding
of such meeting. If no designation is made, or if a special meeting is
otherwise called, the place of meeting shall be the principal office of the
Corporation.
5. Record Date
The Board of Directors may fix a date not less than ten nor more than fifty
days prior to any meeting as the record date for the purpose of determining
shareholders entitled to notice of and to vote at such meetings of the
shareholders. The transfer books may be closed by the Board of Directors for
a stated period not to exceed fifty days for the purpose of determining
shareholders entitled to receive payment of and dividend, or in order to
make a determination of shareholders for any other purpose.
6. Quorum
A majority of the outstanding shares of the Corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At a meeting
resumed after any such adjournment at which a quorum shall be present or
represented, any business may be transacted, which might have been
transacted at the meeting as originally noticed.
7. Voting
A holder of outstanding shares, entitled to vote at a meeting, may vote at
such meeting in person or by proxy. Except as may otherwise be provided in
the currently filed Articles of Incorporation, every shareholder shall be
entitled to one vote for each share standing their name on the record of
shareholders. Except as herein or in the currently filed Articles of
Incorporation otherwise provided, all corporate action shall be determined
by a majority of the votes cast at a meeting of shareholders by the holders
of shares entitled to vote thereon.
8. Proxies
At all meeting of shareholders, a shareholder may vote in person or by proxy
executed in writing by the shareholder or by their duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid
after six months from the date of its execution.
9. Informal Action by Shareholders
Any action required to be taken at a meeting of the shareholders, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by a majority of the shareholders entitled to vote
with respect to the subject matter thereof.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
1 . General Powers
The business and affairs of the Corporation shall be managed by its Board of
Directors. The Board if Directors may adopt such rules and regulations for
the conduct of their meetings and the management of the Corporation as they
appropriate under the circumstances. The Board shall have authority to
authorize changes in the Corporation's capital structure.
2. Number, Tenure and Qualification
The number of Directors of the Corporation shall be a number between one and
five, as the Directors may by resolution determine from time to time. Each
of the Directors shall hold office until the next annual meeting of
shareholders and until their successor shall have been elected and qualified.
3. Regular Meetings
A regular meeting of the Board of Directors shall be held without other
notice than by this Bylaw, immediately after and, at the same place as the
annual meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular
meetings without other notice than this resolution.
4. Special Meetings
Special meetings of the Board of Directors may be called by order of the
Chairman of the Board or the President. The Secretary shall give notice of
the time, place and purpose or purposes of each special meeting by mailing
the same at least two days before the meeting or by telephone, telegraphing
or telecopying the same at least one day before the meeting to each
Director. Meeting of the Board of Directors may be held by telephone
conference call.
5. Quorum
A majority of the members of the Board of Directors shall constitute a
quorum for the transaction of business, but less than a quorum may adjourn
any meeting from time to time until a quorum shall be present whereupon the
meeting may be held, as adjourned, without further notice. At any meeting at
which every Director shall be present, even though without any formal notice
any business may be transacted
6. Manner of Acting
At all meetings of the Board of Directors, each Director shall have one
vote. The act of a majority of Directors present at a meeting shall be the
act of the full Board of Directors, provided that a quorum is present.
<PAGE>
7. Vacancies
A vacancy in the Board of Directors shall be deemed to exist in the case of
death, resignation, or removal of any Director, or if the authorized number
of Directors is increased, or if the shareholders fail, at any meeting of
the shareholders, at which any Director is to be elected, to elect the full
authorized number of Directors to be elected at that meeting.
8. Removals
Directors may be removed, at any time, by a vote of the shareholders holding
a majority of the shares outstanding and entitled to vote. Such vacancy
shall be filled by the Directors entitled to vote. Such vacancy shall be
filled by the Directors then in office, though less than a quorum, to hold
office until the next annual meeting or until their successor is duly
elected and qualified, except that any directorship to be filled by election
by the shareholders at the meeting at which the Director is removed. No
reduction of the authorized number of Directors shall have the effect of
removing any Director prior to the expiration of their term of office.
9. Resignation
A director may resign at any time by delivering written notification thereof
to the President or Secretary of the Corporation. A resignation shall become
effective upon its acceptance by the Board of Directors; provided, however,
that if the Board of Directors has not acted thereon within ten days from
the date of its delivery, the resignation shall be deemed accepted.
10. Presumption of Assent
A Director of the Corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed
to have assented to the action(s) taken unless their dissent shall be placed
in the minutes of the meeting or unless he or she shall file their written
dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
11. Compensation
By resolution of the Board of Directors, the Directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors or
a stated salary as Director. No such payment shall preclude any Director
from serving the Corporation in any other capacity and receiving
compensation therefor.
12. Emergency Power
When, due to a national disaster or death, a majority of the Directors are
incapacitated or otherwise unable to attend the meetings and function as
Directors, the remaining members of the Board of Directors shall have all
the powers necessary to function as a complete Board, and for the purpose of
doing business and filling vacancies shall constitute a quorum, until such
time as all Directors can attend or vacancies can be filled pursuant to
these Bylaws.
<PAGE>
13. Chairman
The Board of Directors may elect from its own number a Chairman of the
Board, who shall preside at all meetings of the Board of Directors, and
shall perform such other duties as may be prescribed from time to time by
the Board of Directors'. The Chairman may by appointment fill any vacancies
on the Board of Directors.
ARTICLE IV
Officers
1. Number
The officers of the Corporation shall be a President, one or more Vice
Presidents, a Secretary, and a Treasurer, each of whom shall be elected by a
majority of the Board of Directors. Such other Officers and assistant
Officers as may be deemed necessary may be elected or appointed by the Board
of Directors. In its discretion, the Board of Directors may leave unfilled
for any such period as it may determine any office except those of President
and Secretary. Any two or more offices may be held by the same person.
Officers may or may not be Directors or shareholders of the Corporation.
2. Election and Term of Office
The Officers of the Corporation to be elected by the Board of Directors
shall be elected annually by the Board of Directors at the first meeting of
the Board of Directors held after each annual meeting of the shareholders.
If the election of Officers shall not be held at such meeting, such election
shall be held as soon thereafter as convenient. Each Officer shall hold
office until their successor shall have been duly elected and shall have
qualified or until their death or until they shall resign or shall have been
removed in the manner hereinafter provided.
3. Resignations
Any Officer may resign at any time by delivering a written resignation
either to the President or to the Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery.
4. Removal
Any Officer or agent may be removed by the Board of Directors whenever in
its judgment the best interests Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an Officer or agent shall not
of itself create contract rights. Any such removal shall require a majority
vote of the Board of Directors, exclusive of the Officer in question if he
or she is also a Director.
<PAGE>
5. Vacancies
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, or is a new office shall be created, may be
filled by the Board of Directors for the un-expired portion of the term.
6. President
The president shall be the chief executive and administrative Officer of the
Corporation. He or she shall preside at all meetings of the stockholders
and, in the absence of the Chairman of the Board, at meetings of the Board
of Directors. He or she shall exercise such duties as customarily pertain to
the office of President and shall have general and active supervision over
the property, business, and affairs of the Corporation and over its several
Officers, agents, or employees other than those appointed by the Board of
Directors. He or she may sign, execute and deliver in the name of the
Corporation powers of attorney, contracts, bonds and other obligations, and
shall perform such other duties as may be prescribed from time to time by
the Board of Directors or by the Bylaws.
7. Vice President
The Vice President shall have such powers and perform such duties as may be
assigned to him by the Board of Directors or the President. In the absence
or disability of the President, the Vice President designated by the Board
or the President shall perform the duties and exercise the powers of the
President. A Vice President may sign and execute contracts any other
obligations pertaining to the regular course of their duties.
8. Secretary
The Secretary shall keep the minutes of all meetings of the stockholders and
of the Board of Directors and, to the extent ordered by the Board of
Directors or the President, the minutes of meeting of all committees. He or
she shall cause notice to be given of meetings of stockholders, of the Board
of Directors, and of any committee appointed by the Board. He or she shall
have custody of the corporate seal and general charge of the records,
documents and papers of the Corporation not pertaining to the performance of
the duties vested in other Officers, which shall at all reasonable times be
open to the examination of any Directors. He or she may sign or execute
contracts with the President or a Vice President thereunto authorized in the
name of the Corporation and affix the seal of the Corporation thereto. He or
she shall perform such other duties as may be prescribed from time to time
by the Board of Directors or by the Bylaws.
9. Treasurer
The Treasurer shall have general custody of the collection and disbursement
of funds of the Corporation. He or she shall endorse on behalf of the
Corporation for collection check, notes and other obligations, and shall
deposit the same to the credit of the Corporation in such bank or banks or
depositories as the Board of Directors may designate. He or she may sign,
with the President or such other persons as may be designated for the
purpose of the Board of Directors, all bills of exchange or promissory notes
of the Corporation. He or she shall enter or cause to be entered regularly
in the books of the Corporation full and accurate account of all monies
received and paid by him on account of the Corporation; shall at all
reasonable times exhibit his (or her) books and accounts to any Director of
the Corporation upon
<PAGE>
application at the office of the Corporation during business hours; and,
whenever required by the Board of Directors or the President shall render a
statement of his (or her) accounts. The Treasurer shall perform such other
duties as may be prescribed from time to time by the Board of Directors or
by the Bylaws.
10. Other Officers
Other Officers shall perform such duties and shall have such powers as may
be assigned to them by the Board of Directors.
11. Salaries
Salaries or other compensation of the Officers of the Corporation shall be
fixed from time to time by the Board of Directors, except that the Board of
Directors may delegate to any person or group of persons the power to fix
the salaries or other compensation of any subordinate Officers or agents. No
Officer shall be prevented from receiving any such salary or compensation by
reason of the fact the he or she is also a Director of the Corporation
12. Surety Bonds
In case the Board of Directors shall so require, any Officer or agent of the
Corporation shall execute to the Corporation a bond in such sums and with
such surety or sureties as the Board of Directors may direct, conditioned
upon the faithful performance of his (or her) duties to the Corporation,
including responsibility for negligence and for the accounting for all
property, monies or securities of the Corporation, which may come into his
(or her) hands.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
1 . Contracts
The Board of Directors may authorize any Officer or Officers, agent or
agents, to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation and such authority may be
general or confined to specific instances.
2. Loans
No loan or advance shall be contracted on behalf of the Corporation, no
negotiable paper or other evidence of its obligation under any loan or
advance shall be issued in its name, and no property of the Corporation
shall be mortgaged, pledged, hypothecated or transferred as security for the
payment of any loan, advance, indebtedness or liability of the Corporation
unless and except as authorized by the Board of Directors. Any such
authorization may be general or confined to specific instances.
3. Deposits
All funds of the Corporation not otherwise employed shall be deposited from
tithe to time to the credit of the Corporation in such banks, trust
companies or other depositories as the Board of Directors may select, or as
may be selected by an Officer or agent of the Corporation authorized to do
so by the Board of Directors.
4. Checks and Drafts
All notes, drafts, acceptances, checks, endorsements and evidence of
indebtedness of the Corporation shall be signed by such Officer or Officers
or such agent or agents of the Corporation and in such manner as the Board
of Directors from timer to time may determine. Endorsements for deposits to
the credit of the Corporation in any of its duly authorized depositories
shall be made in such manner as the Board of Directors may from time to time
determine.
5. Bonds and Debentures
Every bond or debenture issued by the Corporation shall be in the form of an
appropriate legal writing, which shall be signed by the President or Vice
President and by the Treasurer or by the Secretary, and sealed with the seal
of the Corporation. The seal may be facsimile, engraved or printed. Where
such bond or debenture is authenticated with the manual signature of an
authorized Officer of the Corporation or other trustee designated by the
indenture of trust or other agreement under which such security is issued,
the signature of any of the Corporation's Officers named thereon may be
facsimile. In case any Officer who signed, or whose facsimile signature has
been used on any such bond or debenture, shall cease to be an Officer of the
Corporation for any reason before the same has been delivered by the
Corporation, such bond or debenture may nevertheless by adopted by the
Corporation and issued and delivered as though the person who signed it or
whose facsimile signature has been used thereon had not ceased to be such
Officer.
ARTICLE VI
CAPITAL STOCK
1. Certificate of Share
The shares of the Corporation shall be represented by certificates prepared
by the Board of Directors and signed by the President. The signatures of
such Officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than
the Corporation itself or one of its employees. All certificates for shares
shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued,
with the number of shares and date of issue, shall be entered on the stock
transfer books of the Corporation. All certificates surrendered to the
Corporation for transfer shall be canceled except that in case of a lost,
destroyed or mutilated certificate, a new one may be issued therefor upon
such terms and indemnity to the Corporation as the Board of Directors may
prescribe.
<PAGE>
2. Transfer of Shares
Transfer of shares of the Corporation shall be made only on the stock
transfer books of the Corporation by the holder of record thereof or by his
(or her) legal representative, who shall furnish proper evidence of
authority to transfer, or by his (or her) attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the
Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the
Corporation shall be deemed by the Corporation to be the owner thereof for
all purposes.
3. Transfer Agent and Registrar
The Board of Directors of the Corporation shall have the power to appoint
one or more transfer agents and registrars for the transfer and registration
of certificates of stock of any class, and may require that stock
certificates shall be countersigned and registered by one or more of such
transfer agents and registrars.
4. Lost or Destroyed Certificates
The Corporation may issue a new certificate to replace any certificate
theretofore issued by it alleged to have been lost or destroyed. The Board
of Directors may require the owner of such a certificate or his (or her)
legal representative to give the Corporation a bond in such sum and with
such sureties as the Board of Directors may direct to indemnify the
Corporation as transfer agents and registrars, if any, against claims that
may be made on account of the issuance of such new certificates. A new
certificate may be issued without requiring any bond.
5. Registered Shareholders
The Corporation shaH be entitled to treat the holder of record of any share
or shares of stock as the holder thereof, in fact and shall not be bound to
recognize any equitable or other claim to or on behalf of this Corporation
to any and all of the rights and powers incident to the ownership of such
stock at any such meeting, and shall have power and authority to execute and
deliver proxies and consents on behalf of this Corporation in connection
with the exercise by this Corporation of the rights and powers incident to
the ownership of such stock. The Board of Directors, from time to time, may
confer like powers upon any other person or persons.
ARTICLE VII
INDEMNIFICATION
No Officer or Director shall be personally liable for any obligations of the
Corporation or for any duties or obligations arising out of any acts or
conduct-of said Officer or Director performed for or on behalf of the
Corporation. The Corporation shall and does hereby indemnify and hold
harmless each person and their heirs and administrators who shall serve at
any time hereafter as a Director or Officer of the Corporation from and
against any and all claims, judgments and liabilities to which such persons
shall become sub ect by reason of their having heretofore or j hereafter
been a Director or Officer of the Corporation, or by reason of any action
alleged to have heretofore or hereafter taken or omitted to have been taken
by him as such Director or Officer,
<PAGE>
and shall reimburse each such person for all legal and other expenses
reasonably incurred by him in connection with any such claim or liability,
including power to defend such persons from all suits or claims as provided
for under the provisions of the Nevada Revised Statutes; provided, however,
that no such persons shall be indemnified against, or be reimbursed for, any
expense incurred in connection with any claim or liability arising out of
his (or her) own negligence or willful misconduct. The rights accruing to
any person under the foregoing provisions of this section shall not exclude
any other right to which he or she may lawfully be entitled, nor shall
anything herein contained restrict the right of the Corporation to indemnify
or reimburse such person in any proper case, even though not specifically
herein provided for. The Corporation, its Directors, Officers, employees and
agents shall be fully protected in taking any action or making any payment,
or in refusing so to do in reliance upon the advice of counsel.
ARTICLE VIII
NOTICE
Whenever any notice is required to be given to any shareholder or Director
of the Corporation under the provisions of the Articles of Incorporation, or
under the provisions of the Nevada Statutes, a waiver thereof in writing
signed by the person or persons entitled to such notice, whether before or
after the time stated therein, shall be deemed equivalent to the giving of
such notice. Attendance at any meeting shall constitute a waiver of notice
of such meetings, except where attendance is for the express purpose of
objecting to the holding of that meeting.
ARTICLE IX
AMENDMENTS
These Bylaws may be altered, amended, repealed, or new Bylaws adopted by a
majority of the entire Board of Directors at any regular or special meeting.
Any Bylaw adopted by the Board may be repealed or changed by the action of
the shareholders.
ARTICLE X
FISCAL YEAR
The fiscal year of the Corporation shall be fixed and may be varied by
resolution of the Board of Directors.
ARTICLE XI
DIVIDENDS
The Board of Directors may at any regular or special meeting, as they deem
advisable, declare dividends payable out of the surplus of the Corporation.
<PAGE>
ARTICLE XII
CORPORATE SEAL
The seal of the Corporation shall be in the form of a circle and shall bear
the name of the Corporation and the year of incorporation per sample affixed
hereto.
Dated Friday, September 1, 1995 Austin Land & Resources, Inc.
/s/Douglas Ansell
Douglas Ansell
Secretary
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Provisions ("Basic Provisions").
1.1 Parties: This Lease ("Lease"), dated for reference purposes
only, June 15, 1996 is made by and between LBP Enterprises, A California
Limited Partnership ("Lessor") and Silvano DiGenova and Tangible
Investments of America "Lessee"), (collectively the "Parties," or
individually a "Party").
1.2(a) Premises: That certain portion of the Building, including
all improvements therein or to be provided by Lessor under the terms of
this Lease, commonly known by the street address of 1550 So. Coast Hwy,
located in the City of Laguna Bch, County of Orange, state of California,
with zip code 92651, as outlined on Exhibit A attached hereto ("Premises").
The "Building" is that certain building containing the Premises and
generally described as (describe briefly the nature of the Building): The
"Granada" Building, an Office and Retail Multi-Tenant Building. In addition
to Lessee's rights to use and occupy the Premises as hereinafter specified,
Lessee shall have non-exclusive rights to the Common Areas (as defined in
Paragraph 2.7 below) as hereinafter specified, but shall not have any rights
to the roof, exterior walls or utility raceways of the Building or to any
other buildings In the Industrial Center. The Premises, the Building, the
Common Areas, the land upon which they are located, along with all other
buildings and improvements thereon, are herein collectively referred to as the
"Industrial Center." (Also see Paragraph 2.)
1.2(b) Parking: Six unreserved vehicle parking spaces ("Unreserved
Parking Spaces"); and 0 reserved vehicle parking spaces ("Reserved
Parking Spaces"). (Also see Paragraph 2.6.)
1.3 Term: Five years and 0 months ("Original Term") commencing
July 1, 1996 ("Commencement Date") and ending June 30, 2001 ("Expiration
Date"). (Also see Paragraph 3.)
1.4 Early Possession: Upon Execution ("Early Possession Date").
(Also see Paragraphs 3.2 and 3.3.)
1.5 Base Rent: $5,000.00 per month ("Base Rent"), payable on
the First day of each month commencing September 1, 1996 (Also see Paragraph
4.)
[X] If this box is checked, this Lease provides for the Base Rent to
be adjusted per Addendum EX "B", attached hereto.
1.6(a) Base Rent Paid Upon Execution: $5,000 as Base Rent for
the period September, 1996.
1.6(b) Lessee's Share of Common Area Operating Expenses: thirty
(30%) percent (30%) ("Lessee's Share") as determined by approximate
prorata square footage of the Premises as compared to the total square
footage of the Building or [ ] other criteria as described in Addendum __.
1.7 Security Deposit: $7,500.00 ("Security Deposit"). (Also see
Paragraph 5.)
1.8 Permitted Use: Retail sales of Collectible Coins, Antiques
and Art ("Permitted Use") (Also see Paragraph 6.)
1.9 Insuring Party Lessor is the "Insuring Party." (Also see
Paragraph 8.)
1.10(a) Real Estate Brokers. The following real estate broker(s)
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable
boxes):
[X] Laguna Pacific/M. Christy represents Lessor exclusively
("Lessor's Broker");
[X] Grubb & Ellis/R. Dornin represents Lessee exclusively ("Lessee's
Broker");
or
________________ represents both Lessor and Lessee ("Dual Agency").
(Also see Paragraph 15.)
1.10(b) Payment to Brokers. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or in such
separate shares as they may mutually designate in writing, a fee as set forth
in a separate written agreement between Lessor and said Broker(s) (or in the
event there is no separate written agreement between Lessor and said
Broker(s), the sum of $______) for brokerage services rendered by
said Broker(s) in connection with this transaction.
1.11 Guarantor. The obligations of the Lessee under this Lease are
to be guaranteed Silvano DiGenova ("Guarantor"). (Also see Paragraph 37.)
1.12 Addenda and Exhibits. Attached hereto is an Addendum or
Addenda consisting of Paragraphs __ through __, and Exhibits A through C
all of which constitute a part of this Lease.
2. Promises, Parking and Common Areas.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Promises, for the term, at the rental, and upon all
of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of square footage set forth In this
Lease, or that may have been used in calculating rental and/or Common Area
Operating Expenses, is an approximation which Lessor and Lessee agree is
reasonable and the rental and Lessee's Share (as defined In Paragraph 1.6(b))
based thereon is not subject to revision whether or not the actual square
footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee on the
Commencement Date and warrants to Lessee that the existing
plumbing, air conditioning and heating systems and loading doors, If
any, in the Premises, other than those constructed by Lessee, shall be In
good operating condition on the Commencement Date. If a non-compliance with
said warranty exists as of the Commencement Date, Lessor shall, except as
otherwise provided In this Lease, promptly after receipt of written
notice from Lessee setting forth with specificity the nature and extent of
such non-compliance, rectify same at Lessor's expense. If Lessee
does not give Lessor written notice of a non-compliance with this
warranty within thirty (30) days after the Commencement Date, correction of
that non-compliance shall be the obligation of Lessee at Lessee's sole
cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants that any Improvements (other than those constructed by
Lessee or at Lessee's direction) on or in the Premises which have been
constructed or installed by Lessor or with Lessor's consent or at Lessor's
direction shall comply with all applicable covenants or restrictions of
record and applicable building codes; re3gulations and ordinances in effect
on the Commencement Date. Lessor further warrants to Lessee that Lessor has no
knowledge of any claim having been made by any governmental agency that
a violation or violations of applicable building codes, regulations, or
ordinances exist with regard to the Premises as of the Commencement Date.
Said warranties shall not apply to any Alterations or Utility Installations
(defined in Paragraph 7.3(la)) made or to be made by Lessee. If the Premises
do not comply with said warranties, Lessor shall, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
given within six (6) months following the Commencement Date and setting
forth with specificity the nature and extent of such non-compliance, take
such action, at Lessor's expense, as may be reasonable or appropriate to
rectify the non-compliance. Lessor makes no warranty that the Permitted Use
in Paragraph 1.8 is permitted for the Premises under Applicable Laws
(as defined in Paragraph 2.4).
2.4 ACCEPTANCE OF PROMISES. Lessee hereby acknowledges: (a) that it
has been advised by the Broker(s) to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical and fire
sprinkler systems, security, environmental aspects. seismic and earthquake
requirements, and compliance with the Americans with Disabilities
Act and applicable zoning, municipal, county. state and federal laws,
ordinances and regulations and any covenants or restrictions of record
(collectively, "Applicable Laws") and the present and future suitability
of the Premises for Lessee's Intended use; (b) that Lessee has made such
investigation as it deems necessary with reference to such matters, is
satisfied with reference thereto, and assumes all responsibility therefore
as the same relate to Lessee's occupancy of the Premises and/or the terms of
this Lease; and (C) that neither Lessor, nor any of Lessor's agents, has made
any oral or written representations or warranties with respect to said matters
other than as set forth in this Lease.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor In
this Paragraph 2 shall be of no force or effect if immediately prior to
the date set forth in Paragraph 1.1 Lessee was the owner or occupant of the
Premises. In such event, Lessee shall, at Lessee's sole cost and expense,
correct any non-compliance of the Premises with said warranties.
<PAGE>
2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified In
Paragraph 1.2(b) on those portions of the Common Areas designated from time to
time by Lessor for parking. Lessee shall not use more parking spaces than said
number. Said parking spaces shall be used for parking by vehicles no
larger than full-size passenger automobiles or pick-up trucks, herein called
"Permitted Size Vehicles." Vehicles other than Permitted Size Vehicles
shall be parked and loaded or unloaded as directed by Lessor in the
Rules and Regulations (as defined In Paragraph 40) issued by Lessor. (Also
see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, contractors or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that It may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be Immediately payable upon demand by Lessor.
(C) Lessor shall at the Commencement Date of this Lease, provide the
parking facilities required by Applicable Law.
2.7 Common Areas--Definition. The term "Common Areas" is defined as all
areas and facilities outside the Promises and within the exterior
boundary line of the Industrial Center and Interior utility raceways within the
Premises that are provided and designated by the Lessor from time to
time for the general nonexclusive use of Lessor, Lessee and other lessees
of the Industrial Center and their respective employees, suppliers, shippers,
customers, contractors and invitees, including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways and landscaped areas.
2.8 Common Areas-Lessee's Rights. Lessor hereby grants to Lessee,
for the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive
right to use, in common with others entitled to such use, the Common
Areas as they exist from time to time, subject to any rights, powers, and
privileges reserved by Lessor under the terms hereof or under the terms of any
rules and regulations or restrictions governing the use of the Industrial
Center. Under no circumstances shall the right herein granted to use the
Common Areas be deemed to include the right to store any property, temporarily
or permanently, in the Common Areas. Any such storage shall be
permitted only by the prior written consent of Lessor or Lessor's designated
agent, which consent may be revoked at any time. In the event that any
unauthorized storage shall occur then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 Common Areas-Rules and Regulations. Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable Rules and Regulations with respect
thereto in accordance with Paragraph 40. Lessee agrees to abide by and
conform to all such Rules and Regulations, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform. Lessor shall not be responsible to Lessee for the non-compliance
with said rules and regulations by other lessees of the Industrial
Center.
2.10 Common Areas--Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances,
parking spaces, parking areas, loading and unloading areas, ingress, egress,
direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance purposes so
long as reasonable access to the Premises remains available;
(C) To designate other land outside the boundaries of the Industrial Center
to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional improvements,
repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes in, to or
with respect to the Common Areas and Industrial Center as Lessor may, in the
exercise of sound business judgment, deem to be appropriate.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If an Early Possession Date is specified in Paragraph
1.4 and if Lessee totally or partially occupies the Premises after the Early
Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy.
All other terms of this Lease, however, (including but not limited to the
obligations to pay Lessee's Share of Common Area Operating Expenses and
to carry the insurance required by Paragraph 8) shall be in effect during
such period. Any such early possession shall not affect nor advance the
Expiration Date of the Original Term.
3.3 Delay In Possession. If for any reason Lessor cannot deliver possession
of the Premises to Lessee by the Early Possession Date, if one is specified
in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease, or the obligations
of Lessee hereunder, or extend the term hereof, but in such case, Lessee
shall not, except as otherwise provided herein, be obligated to pay rent or
perform any other obligation of Lessee under the terms of this Lease until
Lessor delivers possession of the Premises to Lessee. If possession of the
Premises is not delivered to Lessee within sixty (60) days after the
Commencement Date, Lessee may, at its option, by notice in writing to Lessor
within ton (10) days after the end of said sixty (60) day period, cancel
this Lease, in which event the parties shall be discharged from all
obligations hereunder; provided further, however, that if such written
notice of Lessee is not received by Lessor within said ten (10) day period,
Lessee's right to cancel this Lease hereunder shall terminate and be of no
further force or effect. Except as may be otherwise provided, and regardless
of when the Original Term actually commences, if possession is not tendered
to Lessee when required by this Lease and Lessee does not terminate this
Lease, as aforesaid, the period free of the obligation to pay Base Rent, if
any, that Lessee would otherwise have enjoyed shall, on from the date of
delivery of possession and continue for a period equal to the period during
which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.
4. Pent.
4.1 Base Rent. Lessee shall pay Base Rent and other rent or charges, as the
same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, on or before the day onwhich it
is due under the terms of this Lease. Base Rent and all other rent and
charges for any period during the term hereof which is for less than one
full month shall be prorated based upon the actual number of days of the
month involved. Payment of Base Rent and other charges shall be made to
Lessor at its address stated herein or to such other persons or at such
other addresses as Lessor may from time to time designate in writing
to Lessee.
4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter
defined, during each calendar year of the term of this Lease, in accordance
with the following provisions:
(a) "Common Area Operating Expenses" are defined, for purposes of this
Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:
(i) The operation, repair and maintenance, in neat, clean, good order and
condition, of the following:
(aa) The Common Areas, including parking areas, loading and unloading areas,
trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped
areas, striping, bumpers, irrigation systems, Common Area lighting
facilities, fences and gates, elevators and roof.
bb) Exterior signs and any tenant directories.
(ii) The cost of water, gas, electricity and telephone to service the
Common Areas.
(iii) Trash disposal, property management and security services and the
costs of any environmental inspections.
(iv) Reserves set aside for maintenance and repair of Common Areas.
(v) Any Increase above the Base Real Property Taxes (as defined in
Paragraph 10.2(b)) for the Building and the Common Areas.
(vi) Any "Insurance Cost Increase" (as defined in Paragraph 8.1).
(vii) The cost of Insurance carried by Lessor with respect to the Common
Areas.
(viii) Any deductible portion of an insured loss concerning
the Building or the Common Areas,
(ix) Any other services to be provided by Lessor that are stated
elsewhere in this Lease to be a Common Area Operating Expense.
(b) [OMITTED]
(C) The inclusion of the improvements, facilities and services set forth in
Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor
to either have said improvements or facilities or to provide those services
unless the Industrial Center already has the same, Lessor already provides
the Services, or Lessor has agreed elsewhere in this Lease to provide the
same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be payable by
Lessee within ton (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor, At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of
annual Common Area Operating Expenses and the same shall be payable monthly
or quarterly, as Lessor shall designate. during each 12-month period of the
Lease term, on the same day as the Base Rent is due hereunder. Lessor shall
deliver to Lessee within sixty (60) days after the expiration of each
calendar year a reasonably detailed statement showing Lessee's Share of the
actual Common Area Operating Expenses incurred during the preceding year. If
Lessee's payments under this Paragraph 4.2(d) during said preceding year
exceed Lessee's Share as Indicated on said statement, Lessee shall be
credited the amount of such over-
<PAGE>
payment against Lessee's Share of Common
Area Operating Expenses next becoming due. It Lessee's payments under
this Paragraph 4.2(d) during said preceding year were less than Lessee's
Share as Indicated on said statement, Lessee shall pay to Lessor the amount
of the deficiency within ten (10) days after delivery by Lessor to Lessee
of said statement.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's
execution hereof the Security Deposit set forth In Paragraph 1.7 as security
for Lessee's faithful performance of Lessee's obligations under this Lease.
If Lessee falls to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor
may use, apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor or to reimburse or compensate Lessor for
any liability, cost, expense, loss or damage (including attorneys' fees)
which Lessor may suffer or Incur by reason thereof. If Lessor uses or
applies all or any portion of said Security Deposit, Lessee shall within ten
(10) days after written request therefore deposit monies with Lessor
sufficient to restore said Security Deposit to the full amount required by
this Lease. Any time the Base Rent increases during the term of this Lease,
Lessee shall, upon written request from Lessor, deposit additional monies
with Lessor as an addition to the Security Deposit so that the total amount
of the Security Deposit shall at all times bear the same proportion to the
then current Base Rent as the Initial Security Deposit bears to the Initial
Base Rent set forth In Paragraph 1.6. Lessor shall not be required to keep
all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's
option, to the last assignee, If any, of Lessee's Interest herein), that
portion of the Security Deposit not used or applied by Lessor. Unless
otherwise expressly agreed In writing by Lessor, no part of the Security
Deposit shall be considered to be held in trust, to bear interest or other
increment for its use, or to be prepayment for any monies to be paid by
Lessee under this Lease.
6. Use.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Promises only for the Permitted Use
set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose Lessee shall not use or permit
the use of the Premises in a manner that is unlawful, creates waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage to
the Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its consent
to any written request by Lessee, Lessee's assignees or subtenants, and by
prospective assignees and subtenants-of Lessee, Its assignees and
subtenants, for a modification of said Permitted Use, so long as the same
will not impair the structural integrity of the improvements on the Premises
or in the Building or the mechanical or electrical systems therein, does not
conflict with uses by other lessees, is not significantly more burdensome to
the Premises or the Building and the improvements thereon, and is otherwise
permissible pursuant to this Paragraph 6. If Lessor elects to withhold such
consent, Lessor shall within five (5) business days after such request give
a written notification of same, which notice shall include an explanation of
Lessor's reasonable objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous Substance" as used
in this Lease shall mean any product, substance, chemical, material or waste
whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the
Premises, is either: (1) potentially injurious to the public health, safety
or welfare, the environment, or the Premises; (11) regulated or monitored by
any governmental authority; or (ill) a basis for potential liability of
Lessor to any governmental agency or third party under any applicable
statute or common law theory. Hazardous Substance shall include, but not be
limited to, hydrocarbons, petroleum, gasoline, crude oil or any products or
by-products thereof. Lessee shall not engage in any activity in or about the
Premises which constitutes a Reportable Use (as hereinafter defined) of
Hazardous Substances without the Opress prior written consent of and
compliance in a timely manner (at Lessee's sole cost and expense) with all
Applicable Requirements (as defined in Paragraph 6.3). "REPORTABLE USE"
shall mean (I) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or
disposal of a Hazardous Substance that requires a permit from, or with
respect to which a report, notice, registration or business plan is required
to be filed with, any governmental authority, and (ill) the presence in, on
or about the Promises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or
occupying the Premises or neighboring properties. Notwithstanding the
foregoing, Lessee may, without Lessor's prior consent, but upon notice to
Lessor and In compliance with all applicable requirements, use any ordinary
and Customary materials reasonably required to be used by Lessee in the
normal course of the Permitted Use, so long as such use is not a reportable
USE and does not expose the Promises or neighboring properties to any
meaningful risk of contamination or damage or expose lessor to any liability
therefor. In addition, lessor may (but without any obligation to do so)
condition its consent to any Reportable Use of any Hazardous Substance by
lessee upon lessee's giving lessor such additional assurances as Lessor, in
its reasonable discretion, deems necessary to protect itself, the public,
the promises and the environment against damage, contamination or injury
and/or liability therefor, including but not limited to the installation
(and, at Lessor's option, removal on or before Lease expiration or earlier
termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on,under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof,
together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding
given to, or received from, any governmental authority or private party
concerning the presence, spill, release, discharge of, or exposure to, such
Hazardous Substance including but not limited to all such documents as may
be involved In any Reportable Use involving the Promises. Lessee shall not
cause or permit any Hazardous Substance to be spilled or released in, on,
under or about the Promises (including, without limitation, through the
plumbing or sanitary sewer system).
(c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises' harmless from and against any and all damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, loss of permits and
attorneys' and consultants' ises arising out of or Involving any Hazardous
Substance brought onto the Premises by or for Lessee or by anyone under
Lessee's control. Lessee's obligations under this Paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination or injury
to person, property or the environment created or suffered by Lessee, and
the cost of investigation (including consultants' and attorneys' fees and
testing), removal, remediation, restoration and/or abatement thereof, or of
any contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or release
agreement entered Into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.
6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with all
"Applicable Requirements," which term is used in this Lease to mean all
laws, rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises
(including but not limited to matters pertaining to (i) industrial hygiene,
(ii) environmental conditions on, in, under or about the Premises, including
soil and groundwater conditions, and (iii) the use, generation, manufacture,
production, installation, maintenance, removal, transportation, storage,
spill, or release of any Hazardous Substance), now in effect or which may
hereafter come into effect. Lessee shall, within five (5) days after receipt
of Lessor's written request, provide Lessor with copies of all documents and
information, including but not limited to permits, registrations, manifests,
applications, reports and certificates, evidencing Lessee's compliance with
any Applicable Requirements specified by Lessor, and shall immediately upon
receipt, notify Lessor in writing (with copies of any documents involved) of
any threatened or actual claim, notice, citation, warning, complaint or
report pertaining to or involving failure by Lessee or the Promises to
comply with any Applicable Requirements.
6.4 Inspection; Compliance With Law, Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises ("Lenders") shall
have the right to enter the Premises at any time in the case of an
emergency, and otherwise at reasonable times, for the purpose of inspecting
the condition of the Premises and for verifying compliance by Lessee with
this Lease and all Applicable Requirements (as defined in Paragraph 6.3),
and Lessor shall be entitled to employ experts and/or consultants in
connection therewith to advise Lessor with respect to Lessee's activities,
including but not limited to Lessee's installation, operation, use,
monitoring, maintenance, or removal of any Hazardous Substance on or from
the Premises. The costs and expenses of any such inspections shall be paid
by the party requesting same, unless a Default or Breach of this Lease by
Lessee or a violation of Applicable Requirements or a contamination, caused
or materially contributed to by Lessee, is found to exist or to be imminent,
or unless the inspection is requested or ordered by a governmental authority
as the result of any such existing or imminent violation or contamination.
In such case, Lessee shall upon request reimburse Lessor or Lessor's Lender,
as the case may be, for the costs and expenses of such inspections.
7. Maintenance, Repairs, Utility Installations, Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance
with Covenants, Restrictions and Building Code), 7.2 (Lessor's Obligations),
9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee's
sole cost and expense and at all times, keep the Premises and every part
thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for
such repairs occurs as a result of Lessee's use, any Prior use, the elements
or the age of such portion of the Promises), including, without limiting the
generality of the foregoing, all equipment or facilities specifically
serving the Premises, such as plumbing, heating, air conditioning,
ventilating, electrical, lighting facilities, boilers, fired or unfired
pressure vessels, fire hose connections it within the Premises, fixtures,
interior walls, interior surfaces of exterior walls, ceilings, floors,
windows, doors, plate glass, and skylights, but excluding any items which
are the responsibility of Lessor to Paragraph 7.2 below. Lessee, in keeping
the Promises in good order, condition and repair, shall exercise and perform
good maintenance practices. obligations shall include restorations,
replacements or renewals when necessary to keep the Promises and all
improvements thereon or a part thereof in good order, condition and state of
repair.
(b) Lessee shall, at Lessee's sole cost and expense, procure and maintain a
contract, with copies to Lessor, in customary form and substance for and
with a contractor specializing and experienced in the inspection,
maintenance and service of the heating, air conditioning and ventilation
system for the Premises. However, Lessor reserves the right, upon notice to
Lessee, to procure and maintain the contract for the heating, air
conditioning and ventilating systems, and if Lessor so elects, Lessee shall
reimburse Lessor, upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this Paragraph
7.1, Lessor may enter upon the Premises after ton (10) days' prior written
notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and
put the Premises in good order, condition and repair, in accordance with
Paragraph 13.2 below.
7.2 Lessors Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building
Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's
Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor,
subject to reimbursement pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, structural
condition of Interior bearing walls, exterior roof, fire sprinkler and/or
standpipe and hose (if located in the Common Areas) or other automatic fire
extinguishing system including fire alarm and/or smoke detection
<PAGE>
systems and equipment, fire hydrants, parking lots, walkways, parkways,
driveways, landscaping, fences, signs and utility systems serving the Common
Areas and all parts thereof, as wall as providing the services for which
there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor
shall not be obligated to paint the exterior or interior surfaces of
exterior walls nor shall Lessor be obligated to maintain, repair or replace
windows, doors or plate glass of the Premises. Lessee expressly waives the
benefit of any statute now or hereafter in effect which would otherwise
afford Lessee the right to make repairs at Lessor's expense or to terminate
this Lease because of Lessor's failure to keep the Building, Industrial
Center or Common Areas in good order, condition and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS" is used
in this Lease to refer to all air lines, power panels, electrical
distribution, security, fire protection systems, communications systems,
lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "TRADE
FIXTURES" shall mean Lessee's machinery and equipment which can be
removed without doing material damage to the Premises. The term
"ALTERATIONS" shall mean any modification of the improvements on the
Promises which are provided by Lessor under the terms OF this lease, other
than Utility Installations or 'Trade Fixtures. "Lessee-Owned Alterations
and/or Utility Installations" are defined as Alterations and/or Utility
Installations made by Lessee that are not yet owned by Lessor pursuant to
Paragraph 7.4(a). Lessee shall not make nor cause to be made any Alterations
or Utility Installations in, on, under or about the Premises without
Lessor's prior written consent. Lessee may, however, make non-structural
Utility Installations to the interior of the Premises (excluding the roof)
without Lessor's consent but upon notice to Lessor, so long as they are not
visible train the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the
cumulative cost thereof during the term of this Lease as extended does not
exceed $2,500.00.
(b) Consent. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given
by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (I) Lessee's acquiring all
applicable permits required by governmental authorities; (ii) the furnishing
of copies of such permits together with a copy of the plans and
specifications for the Alteration or Utility Installation to Lessor prior to
commencement of the work thereon; and (iii) the compliance by Lessee with
all conditions of said permits in a prompt and expeditious manner. Any
Alterations or Utility Installations, by Lessee during the term of this
Lease shall be done in a good and workmanlike manner, with good and
sufficient materials, and be in compliance with all Applicable Requirements.
Lessee shall promptly upon completion thereof furnish Lessor with as-built
plans and specifications therefor. Lessor may, (but without obligation to do
so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor
with a lien and completion bond in an amount equal to one and one-half times
the estimated cost of such Alteration or Utility Installation.
(c) Lien Protection. Lessee shall pay when due all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at
or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days' notice prior
to the commencement of any work in, on, or about the Premises, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense, defend and protect itself, Lessor and the Premises against the same
and shall pay and satisfy any such adverse Judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises.
If Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to one and one-half times the
amount of such contested lien claim or demand, indemnifying Lessor against
liability for the same, as required by law for the holding of the Promises
free from the effect of such lien or claim. In addition, Lessor may require
Lessee to pay Lessor's attorneys' fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal and to
cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the
Premises by Lessee shall be the property of and owned by Lessee, but
considered a part of the Premises. Lessor may, at any time and at its option,
elect in writing to Lessee to be the owner of all or any specified part of
the Lessee-Owned Alterations and Utility Installations. Unless otherwise
instructed per Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and
Utility Installations shall, at the expiration or earlier termination of
this Lease, become the property of Lessor and remain upon the Premises and
be surrendered with tile Premises by Lessee.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require that any
or all Lessee-Owned Alterations or Utility Installations be removed by the
expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(C) SURRENDER/RESTORATION. Lessee shall surrender the Premises by end of
the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease.
Except as otherwise agreed or specified herein, the Premises, as
surrendered, shall include the Alterations and Utility Installations. The
obligation of Lessee shall Include the repair of any damage occasioned by
the installation, maintenance or removal of Lessee's Trade Fixtures,
furnishings, equipment, and Lessee-Owned Alterations and Utility
Installations, as well as the removal of any storage tank installed by at
for Lessee, and the removal, replacement, or remediation of any soil,
material or ground water contaminated by Lessee, all as may then be required
by Applicable Requirements and/or good practice. Lessee's Trade Fixtures
shall remain the property of Lessee and shall be removed by Lessee subject
to its obligation to repair and restore the Premises per this Lease.
8. Insurance; Indemnity.
8.1 PAYMENT OF PREMIUM INCREASES.
(a) As used herein, the term "Insurance Cost Increase" is defined as any
increase in the actual cost of the insurance applicable to the Building and
required to be carried by Lessor pursuant to Paragraphs 8.2(b), 83(a) and
8.3(b), ("REQUIRED INSURANCE"), over and above the Base Premium, as
hereinafter defined, calculated on an annual basis. "Insurance Cost
Increase" shall include, but not be limited to, requirements of the holder
of a mortgage or deed of trust covering the Premises, increased valuation of
the Premises, and/o, a general premium rate increase. The term "Insurance
Cost Increase" shall not, however, include any premium increases resulting
from the nature of the occupancy of any other lessee of the Building. If the
parties insert a dollar amount in Paragraph 1.9, such amount shall be
considered the "Base Premium." If a dollar amount has not been inserted in
Paragraph 1 .9 ana if the Building has been previously occupied during the
twelve (12) month period immediately preceding the Commencement Date, the
"Base Premium" shall be the annual premium applicable to such twelve (12)
month period, If the Building was not fully occupied during such twelve (12)
month period, the "Base Premium" shall be the lowest annual premium
reasonably obtainable for the Required insurance as of the Commencement
Date, assuming the most nominal use possible of the Building. In no event,
however, shall Lessee be responsible for any portion of the premium cost
attributable to liability insurance coverage in excess of $1,000,000
procured under Paragraph 8.2(b).
(b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant to
Paragraph 4.2. Premiums for policy periods commencing prior to, or extending
beyond, the term of this Lease shall be prorated to coincide with the
corresponding Commencement Date or Expiration Date.
8.2 Liability insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during the term
of this Lease a Commercial General Liability policy of insurance protecting
Lessee, Lessor and any Lender(s) whose narries have been provided to Lessee
in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving or arising out of
the ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an arnount not less than $1,000,000 per
occurrence with an "Additional Insured-Managers or Lessors at Premises"
endorsement and contain the "Amendment of the Pollution Exclusion"
endorsement for damage caused by heat, smoke or furnace from a hostile fire.
The policy shall not contain any intra-insured exclusions as between insured
parsons or organizations, but shall include coverage for liability assumed
under this Lease as an "Insured contract" for the performance at Lessee's
indemnity obligations under this Lease. The limits of said insurance
required by this Lease a, as carried by Lessee shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance to be carried by Lessee shall be primary to and not contributory
with any similar insurance carried by Lessor, whose insurance shall be
considered excess insurance only.
(b) Carried by Lessor. Lessor shall also maintain liability insurance
described in Paragraph 6.2(a) above, in addition to and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as
an additional insured therein.
8.3 Property Insurance -Building, Improvements and Rental Value.
(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and Keep in force during
the term of this Lease a policy or policies in the name of Lessor, with loss
payable to Lessor and to any Lender(s), insuring against loss or damage to
the Premises. Such insurance shall be for full replacement cost, as the same
shall exist from time to time, or the amount required by any Lender(s), but
in no event more than the commercially reasonable and available insurable
value thereof if, by reason of the unique nature or age of the improvements
involved, such latter amount is less than full replacement cost.
Lessee-Owned Alterations and Utility Installations, Trade Fixtures and
Lessee's personal property shall be insured by Lessee pursuant to Paragraph
8.4. If the coverage is available commercially appropriate, Lessor's
policy or policies shall insure against all risks of direct physical loss or
damage (except the perils of flood and/or earthquake unless required by a
Lender or included in the Base Premium), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Building
required to be demolished or removed by reason of the enforcement of any
building, zoning, safety or land use laws as the result of a covered loss,
but not including plate glass insurance. Said policy or policies shall also
contain an agreed valuation provision in lieu of any co-insurance clause,
waiver of subrogation, and inflation guard protection causing an increase in
the annual property insurance coverage amount by a factor of riot less than
the adjusted U.S. Department of Labor Consumer Price Index for All Urban
Consumers for the city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep in force during the term
of this Lease a policy or policies in the name of Lessor, with loss payable
to Lessor and any Lender(s), insuring the loss of the full rental and other
charges payable by all lessees of the Building to Lessor for one year
(including all Real Property Taxes, insurance costs, all Common Area
Operating Expenses and any scheduled rental increases). Said insurance may
provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide
for one full year's loss of rental revenues from the date of any such loss.
Said insurance shall contain an agreed valuation Provision in lieu of any
co-insurance clause, and the amount of coverage shall be adjusted annually
to reflect the projected rental income, Real Property Taxes, insurance
premium costs and other expenses, if any, otherwise payable, for the next
12-month period. Common Area Operating Expenses shall include any deductible
amount in the event of such loss.
(c) ADJACENT PREMISES. Lessee shall pay for any increase in the premiums for
the property insurance of the Building and for the Common Areas or other
buildings in the Industrial Center if said Increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
<PAGE>
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party, Lessor shall
not be required to insure Lessee-Owned Alterations and Utility Installations
unless the item in question has become the property of Lessor under the
terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of Paragraph
8.5, Lessee at its cost shall either by separate policy or, at Lessor's
option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures and
Lessee-Owned Alterations and Utility Installations in, on, or about the
Premises similar in coverage to that carried by Lessor as the Insuring Party
under Paragraph 8.3(a). Such insurance shall be full replacement cost
coverage with a deductible not to exceed $1,000 per occurrence. The proceeds
from any such Insurance shall be used by Lessee for the replacement of
personal property and the restoration of Trade Fixtures and Lessee-Owned
Alterations and Utility Installations. Upon request from Lessor, Lessee
shall provide Lessor with written evidence that such insurance is in
force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, or such other rating as may be required by a
Lender, as set forth In the most current Issue of "Best's Insurance Guide."
Lessee shall not do or permit to be done anything which shall invalidate the
insurance policies referred to In this Paragraph 8. Lessee shall cause to be
delivered to Lessor, within seven (7) days after the earlier of the Early
Possession Date or the Commencement Date, certified copies of, or certificates
evidencing the existence and amounts of, the insurance required under
Paragraph 8.2(a) and 8.4. No such policy shall be cancellable or subject to
modification except after thirty (30) days' prior written notice to Lessor,
Lessee shall at least thirty (30) days prior to the expiration of such
policies, furnish Lessor with evidence of renewals or "Insurance binders"
evidencing renewal thereof, or Lessor may order such insurance and charge
the cost thereof to Lessee, which amount shall be payable by Lessee to
Lessor upon demand.
8.6 WAIVER OF subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages (whether in contract or in tort) against the
other, for loss or damage to their property arising out of or incident to
the perils required to be insured against under Paragraph 8. The effect of
such releases and waivers of the right to recover damages shall not be
limited by the amount of insurance carried or required, or by any
deductibles applicable thereto. Lessor and Lessee agree to have their
respective insurance companies issuing property damage insurance waive any
right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners
and Lenders, from and against any and all claims, loss of rents and/or
damages, costs, liens, judgments, penalties, loss of permits, attorneys' and
consultants' fees, expenses and/or liabilities arising out of, involving, or
in connection with, the occupancy of the Premises by Lessee, the conduct of
Lessee's business, any act, omission or neglect of Lessee, its agents,
contractors, employees or invitees, and out of any Default or Breach by
Lessee in the performance in a timely manner of any obligation on Lessee's
part to be performed under this Lease. The foregoing shall include, but not
be limited to, the defense or pursuit of any claim or any action or
proceeding involved therein, and whether or not (in the case of claims made
against Lessor) litigated and/or reduced to judgment. In case any action or
proceeding be brought against Lessor by reason of any of the foregoing
matters, Lessee upon notice from Lessor shall defend the same at Lessee's
expense by counsel reasonably satisfactory to Lessor and Lessor shall
cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or
any other person in or about the Premises, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or
from the breakage, leakage, obstruction or other defects of pipes, fire
sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether said injury or damage results
from conditions arising upon the Premises or upon other portions of the
Building of which the Premises are a part, from other sources or places, and
regardless of whether the cause of such damage or injury or the means of
repairing the same is accessible or not. Lessor shall not be liable for any
damages arising from any act or neglect of any other lessee of Lessor nor
from the failure by Lessor to enforce the provisions of any other lease in
the Industrial Center. Notwithstanding Lessor's negligence or breach of this
Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%)
of the then Replacement Cost (as defined in Paragraph 9.1 (d)) of the
Premises (excluding Lessee-Owned Alterations and Utility and
Trade Fixtures) immediately prior to such damage or destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of
the then Replacement Cost of the Promises (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures) immediately prior
to such damage or destruction. In addition, damage or destruction to the
Building, other than Lessee owned Alterations and Utility Installations and
Trade Fixtures of any lessees of the Building, the cost of which damage or
destruction Is fifty percent (50%) or more of the then Replacement Cost
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures of any lessees of the Building) of the Building shall, at the
option of Lessor, be deemed to be Premises Total Destruction.
(C) "INSURED LOSS" shall mean damage or destruction to the Premises, other
than Lessee-Owned Alterations and Utility Installations and Trade Fixtures,
which was caused by an event required to be covered by the insurance
described in Paragraph 8.3(a) Irrespective of any deductible amounts or
coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances
or laws, and without deduction for depreciation.
(a) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or discovery
of a condition involving the presence of, or a contamination by, a Hazardous
Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.
9.2 PREMISES PARTIAL DAMAGE-INSURED LOSS. If Premises Partial Damage that is
an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there is a
shortage of insurance proceeds and such shortage is due to the fact that,
by reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonableand
available, Lessor shall have no obligation to pay for the shortage in
insurance proceeds or to fully restore the unique aspects of the Premises
unless Lessee provides Lessor with the funds to cover same, or adequate
assurance thereof, within ton (10) days following receipt of written notice
of such shortage and request therefor. If Lessor receives said funds or
adequate assurance thereof within said ten (10) day period, Lessor shall
complete them as soon as reasonably possible and this Lease shall remain in
full force and effect. If Lessor does not receive such funds or assurance
within said period, Lessor may nevertheless elect by written notice to
Lessee within ton (10) days thereafter to make such restoration and repair as
is commercially reasonable with Lessor paying any shortage in proceeds, in
which case this Lease shall remain in full force and effect. If Lessor does
not receive such funds or assurance within such ten (10) day period, and if
Lessor does not so elect to restore and repair, then this Lease shall
terminate sixty (60) days following the occurrence of the damage or
destruction. Unless otherwise agreed, Lessee shall in no event have right
to reimbursement from Lessor for any funds contributed by Lessee to repair
any such damage or destruction. Promises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some Insurance coverage, but the net
proceeds of any such insurance shall be made available for the repairs if
made by either Party.
9.3 PARTIAL DAMAGE-UNINSURED LOSS. If Premises Partial Damage that is not an
insured Loss occurs, unless caused by a negligent or willful act of Lessee (in
which event Lessee shall make the repairs at Lessee's expense and this
Lease shall continue in full force and effect), Lessor may at Lessor's option,
either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect,
or (ii) give written notice to Lessee within thirty (30) days after receipt
by Lessor of knowledge of the occurrence of such damage of Lessor's
desire to terminate this Lease as of the date sixty (60) days
following the date of such notice. In the event Lessor elects
to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the eight within tan (10) days after the receipt of such notice to
give written notice to Lessor of Lessee's commitment to pay for the
repair of such damage totally at Lessee's expense and without reimbursement
from Lessor. Lessee shall provide Lessor with the required funds or
satisfactory assurance thereof within thirty (30) days following such
commitment from Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon
as reasonably possible after the required funds are available. If
Lessee does not give such notice and provide the funds or assurance
thereof within the times specified above, this
Lease shall terminate as of the date specified in Lessor's notice of
termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if
Promises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the
damage or destruction is an insured loss or was caused by a negligent or
willful act of Lessee. In the event, however, that the damage or destruction
was caused by Lessee, Lessor shall have the right to recover Lessor's
damages from Lessee except as released and waived In Paragraph 9.7.
9.5 Damage Near End of Term. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair
exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may,
at Lessor's option, terminate this Lease effective sixty (60) days following
the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within thirty (30) days after the date of
occurrence of such damage. Provided. however, if Lessee at that time has an
exercisable option to extend this Lease or to purchase the Promises, then
Lessee may preserve this Lease by (a) exercising such option, and (b)
providing Lessor with any shortage In insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of
(i) the date which is ten (10) days after Lessee's receipt of Lessor's
written notice purporting to terminate this Lease, or (ii) the day prior to
the date upon which such option expires. If Lessee duly exercises such
option during such period and provides Lessor with funds (or adequate
assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's expense repair such damage as soon as reasonably possible
and this Lease shall continue in full force and effect. If Lessee fails to
exercise such option and provide such funds or assurance during such period,
then this Lease shall terminate as of the date set forth in the first
sentence of this Paragraph 9.5.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous Substance
Condition for which Lessee is not legally responsible, the Base Rent, Common
Area Operating Expenses and other charges, if any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated in proportion to the
degree to which Lessee's use of the Premises is impaired, but not in excess
of proceeds from Insurance required to be carried under Paragraph 8.3(b).
Except for abatement of Base Rent, Common Area Operating Expenses and other
charges, if any. as aforesaid, all other obligations of Lessee hereunder
shall be performed by Lessee, and Lessee shall have no claim against Lessor
for any damage suffered by reason of any such damage, destruction, repair,
remediation or restoration.
<PAGE>
(b) If Lessor shall be obligated to repair o, restore the Premises under
the provisions of this Paragraph 9 and shall not commence, in a substantial
and meaningful way, the repair or restoration of the Premises within ninety
(90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written
notice to Lessor and to any Lenders of which Lessee has actual notice of
Lessee's election to terminate this Lease on a date not less than
sixty (60) days following the giving of such notice. If Lessee gives such
notice to Lessor and such lenders and such repair or restoration is not
commenced within thirty (30) days after receipt of such notice, this Lease
shall terminate as of the date specified i0n said notice. If Lessor or a
Lender commences the repair or restoration of the Premises within thirty
(30) days after the receipt of such notice, this Lease shall continue in
full force and effect. "Commence" as used in this Paragraph 9.6 shall
mean either the unconditional authorization of the preparation of the
required plans, or the beginning of the actual work on the Premises,
whichever occurs first.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefore (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but
subject to Lessor's rights under Paragraph 6.2(C) and Paragraph 13), Lessor
may at Lessor's option either (I) investigate and remediate such Hazardous
Substance Condition, if required, as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue In full force and effect, or
(ii) if the estimated cost to investigate and remediate such condition
exceeds twelve (12) times the then monthly Base Rent or $100,000 whichever
is greater, give written notice to Lessee within thirty (30) days after
receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition of Lessor's desire to terminate this lease as of the
date sixty (60) days following the date of such notice. In the event
Lessor elects to give such notice of Lessor's intention to terminate
this Lease, Lessee shall have the right within ten (10) days after
the receipt of such notice to give written notice to Lessor of Lessee's
commitment to pay for the excess costs of (a) investigation and remediation
of such Hazardous Substance Condition to the extent required by Applicable
Requirements, over (b) an amount equal to twelve (12) times the then
monthly Base Rent or $100,000, whichever is greater. Lessee shall provide
Lessor with the funds required of Lessee or satisfactory assurance thereof
within thirty (30) days following said commitment by Lessee. In such event
this Lease shall continue in full force and effect, and Lessor shall proceed
to make such investigation and remediation as soon as reasonably
possible after the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof
within the time period specified above, this Lease shall terminate as of
the date specified in Lessor's notice of termination.
9.8 Termination-Advance Payments. Upon termination of this Lease pursuant
this Paragraph 9, Lessor shall return to Lessee any advance payment made
by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of
this Lease.
9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the
Premises and the Building with respect to the termination of this Lease and
hereby waive the provisions of any present or future statute to the
extent it is Inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined
in Paragraph 10.2(a), applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any increases in such amounts over the
Base Real Property Taxes shall be included in the calculation of Common Area
Operating Expenses in accordance with the provisions of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITIONS.
(a) As used herein, the term "Real Property Taxes" shall include any form of
real estate tax or assessment, general, special, ordinary or extraordinary,
and any license fee, commercial rental tax, improvement bond or bonds, levy
or tax (other than inheritance, personal income or estate taxes) imposed
upon the Industrial Center by any authority having the direct or indirect
power to tax, including any city, state or federal government, or any
school, agricultural, sanitary, fire, street, drainage, or other improvement
district thereof, levied against any legal or equitable interest of Lessor
in the Industrial Center or any portion thereof, Lessor's right to rent or
other income therefrom, and/or Lessor's business of leasing the Premlses.
The term "REAL PROPERTY TAXES" shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of events
occurring, or changes In Applicable Law taking effect, during the term of
this Lease, including but not limited to a change in the ownership of the
Industrial Center or in the improvements thereon, the execution of this
Lease, or any modification, amendment or transfer thereof, and whether or
not contemplated by the Parties.
(b) As used herein, the term "Base Real Property Taxes" shall be the
amount of Real Property Taxes, which are assessed against the Premises,
Building or Common Areas in the calendar year during which the Lease is
executed. In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the
calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such
other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however,
pay to Lessor at the time Common Area Operating Expenses are payable under
Paragraph 4.2, the entirety of any increase in Real Property Taxes if
assessed solely by reason of Alterations, Trade Fixtures or Utility
Installations placed upon the Promises by Lessee or at Lessee's
request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of
the Real Property Taxes for all of the land and improvements included within
the tax parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable determination
thereof, In good faith, shall be conclusive.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal
property of Lessee contained in the Premises or stored within the Industrial
Center. When possible,. Lessee shall cause its Lessee-Owned Alterations and
Utility Installations, Trade Fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real
property of Lessor. If any of Lessee's said property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to
Lessee's property within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity,
telephone, security, gas and cleaning of the Promises, together with any
taxes thereon. If any such utilities or services are not separately metered
to the Premises or separately billed to the Premises, Lessee shall pay to
Lessor a reasonable proportion to be determined by Lessor of all such
charges jointly metered or billed with other premises in the Building, in
the manner and within the time periods set forth in Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(A) LESSEE SHALL NOT VOLUNTARILY OR BY OPERATION OF LAW assign, TRANSFER,
MORTGAGE OR OTHERWISE TRANSFER OR ENCUMBER (COLLECTIVELY, "ASSIGN") OR
SUBLET ALL OR ANY PART OF LESSEE'S INTEREST IN THIS LEASE OR IN THE PREMISES
WITHOUT LESSOR'S PRIOR WRITTEN CONSENT GIVEN UNDER AND SUBJECT TO THE TERMS
OF PARAGRAPH 38.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or Its assets in any transaction, or series of
transactions (by way of merger, sale, acquisition, financing, refinancing,
transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as
hereinafter defined, by an amount equal to or greater than twenty-five
percent (25%) of such Net Worth of Lessee as it was represented to Lessor at
the time of full execution and delivery of this Lease or at the time of the
most recent assignment to which Lessor has consented, or as it exists
immediately prior to said transaction or transactions constituting such
reduction, at whichever time said Net Worth of Lessee was or is greater,
shall be considered an assignment of this Lease by Lessee to which Lessor
may reasonably withhold its consent. "NOT WORTH OF LOSSES" for purposes of
this Lease shall be the not worth of Lessee (excluding any Guarantors)
established under generally accepted accounting principles consistently
applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1, or a non-curable
Breach without the necessity of any notice and grace period. If Lessor
elects to treat such unconsented to assignment or subletting as a non-
curable Breach, Lessor shall have the right to either: (i) terminate this
Lease, or (ii) upon thirty (30) days' written notice ("Lessor's Notice"),
increase the monthly Base Rent for the Premises to the greater of the then
fair market rental value of the Promises, as reasonably determined by Lessor,
or one hundred ten percent (110%) of the Base Rent then in effect. Pending
determination of the new fair market rental value, If disputed by Lessee,
Lessee shall pay the amount set forth in Lessor's Notice, with any overpayment
credited against the next Installment(s) of Base Rent coming due, and any
underpayment for the period retroactively to the effective date of the
adjustment being due and payable immediately upon the determination thereof.
Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall
be subject to similar adjustment to the then fair market value as reasonably
determined by Lessor (without the Lease being considered an encumbrance or
any deduction for depredation or obsolescence, and considering the Promises
at its highest and best use and in good condition) or one hundred ten
percent (110%) of the price previously in effect, (ii) any index-oriented
rental or price adjustment formulas contained in this Lease shall be
adjusted to require that the base index be determined with reference to the
Index applicable to the time of such adjustment, and (iii) any fixed rental
adjustments scheduled during the remainder of the Lease term shall be
increased in the same way as the now rental bears to the Base Rent in
effect immediately prior to the adjustment specified In Lessor's
Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor shall be
limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting shall not
(I) be effective without the express written assumption by such assignee or
sublease of the obligations of Lessee under this Lease, (ii) release Lessee
of any obligations hereunder, nor (iii) alter the primary liability of
Lessee for the payment of Base Rent and other sums due Lessor hereunder or
for the performance of any other obligations to be performed by Lessee under
this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations from
any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay In the approval or disapproval of such
assignment nor the acceptance of any rent for performance shall constitute
waiver or estoppel of Lessor's right to exercise its remedies for the
Default or Breach by Lessee of any of the terms, covenants or conditions of
this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the assignee or
sublease. However, Lessor may consent to subsequent subletting and
assignments of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else liable under this Lease or the
sublease and without obtaining their consent, and such action shall not
relieve such persons from liability under this Lease or the sublease.
<PAGE>
(d) In the event of any Default or Breach of Lessee's obligation under
this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's obligations under
this Lease, including any sublease, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor's determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sublease, Including but not limited to the intended use
and/or required modification of the Premises, if any, together with a
non-refundable deposit of $1,000 or ton percent (10%) of the monthly Base Rent
applicable to the portion of the Premises which is the subject of the proposed
assignment or sublease, whichever is greater, as reasonable consideration for
Lessor's considering and processing the request for consent. Lessee agrees to
provide Lessor with such other or additional information and/or documentation
as may be reasonably requested by Lessor.
(f) Any assignee of, or sublease under, this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed, for
the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be
observed or performed by Lessee during the term of said assignment or sublease,
other than such obligations as are contrary to or inconsistent with provisions
of an assignment or sublease to which Lessor has specifically consented in
writing.
(g) The occurrence of a transaction described in Paragraph 12.2(c) shall give
Lessor the right (but not the obligation) to require that the Security Deposit
be increased by an amount equal to six (6) times the then monthly Base Rent,
and Lessor may make the actual receipt by Lessor of the Security Deposit
Increase a condition to Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or
subletting, may require that the amount and adjustment schedule of
the rent payable under this Lease be adjusted to what is then the market value
and/or adjustment schedule for property similar to the Premises as then
constituted, as determined by Lessor.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The following
terms and conditions shall apply to any subletting by Lessee of all or any
part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or
a portion of the Premises heretofore or hereafter made by Lessee, and
Lessor may collect such rent and income and apply same toward
Lessee's obligations under this Lease; provided, however, that until a
Breach (as defined In Paragraph 13.1) shall occur in the performance of
Lessee's obligations under this Lease, Lessee may, except as otherwise
provided In this Lease, receive, collect and enjoy the rents accruing
under such sublease. Lessor shall not, by reason of the foregoing provision
or any other assignment of such sublease to Lessor, nor by reason of the
collection of the rents from a sublease, be deemed liable to the
sublease for any failure of Lessee to perform and comply with any of
Lessee's obligations to such sublease under such Sublease. Losses hereby
irrevocably authorizes and directs any such sublease, upon receipt of a
written notice from Lessor stating that a Breach exists in the performance
of Lessee's obligations under this Lease, to pay to Lessor the rents and
other charges due and to become due under the sublease. Sublease shall
rely upon any such statement and request from Lessor and shall pay such
rents and other charges to Lessor without any obligation or right to
inquire as to whether such Breach exists and notwithstanding any
notice from or claim from Lessee to the contrary. Lessee shall have no right
or claim against such sublease, or, until the Breach has been cured,
against Lessor, for any such rents and other charges so paid by said
sublease to Lessor.
(b) In the event of a Breach by Lessee in the performance of its obligations
under this Lease, Lessor, at its option and without any obligation to do so,
may require any sublease to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from the time
of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublease to such sublessor or for any other
prior defaults or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.
(d) No sublease under a sublease approved by Lessor shall further assign
or sublet all or any part of the Premises without Lessors prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee
to the sublease, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublease
shall have a right of reimbursement and offset from and against Lessee for
any such Defaults cured by the sublease.
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that it an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such
occurrence for legal services and costs in the preparation and service of a
notice of Default, and that Lessor may include the cost of such services and
costs in said notice as rent due and payable to cure said default. A
"Default" by Lessee is defined as a failure by Lessee to observe, comply
with or perform any of the terms, covenants, conditions or rules applicable
to Lessee under this Lease. A "Breach" by Lessee is defined as the
occurrence of any one or more of the following Defaults, and, where a grace
period for cure after notice is specified herein, the failure by Lessee to
cure such Default prior to the expiration of the applicable grace period,
and shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2
and/or 13.3:
(a) The vacating of the Premises without the Intention to reoccupy same, or
the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure by
Lessee to make any payment of Base Rent, Lessee's Share of Common Area
Operating Expenses, or any other monetary payment required to be made by
Lessee hereunder as and when due, the failure by Lessee to provide Lessor
with reasonable evidence of Insurance or surety bond required under this
Lease, or the failure of Lessee to fulfill any obligation under this Lease
which endangers or threatens life or property, where such failure continues
for a period of three (3) days following written notice thereof by or on
behalf of Lessor to Lessee.
(C) Except as expressly otherwise provided in this Lease, the failure by
Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (I) compliance with Applicable Requirements
per Paragraph 6.3, (ii) the inspection, maintenance and service contracts
required under Paragraph 7.1(b), (iii) the rescission of an unauthorized
assignment or subletting per Paragraph 12.1, (iv) a Tenancy Statement per
Paragraphs 16 or 37, (v) the subordination or non-subordination of this
Lease per Paragraph 30, (vi) the guaranty of the performance of Lessee's
obligations under this Lease if required under Paragraphs 1.11 and 37, (vii)
the execution of any document requested under Paragraph 42 (easements), or
(viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this lease, where any such failure
continues for a period of ten (10) days following written notice by or on
behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or provisions
of this Lease, or of the rules adopted under Paragraph 40 hereof that are to
be observed, compiled with or performed by Lessee, other than those
described in Subparagraphs 13.1 (a), (b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by
or on behalf of Lessor to Lessee; provided, however, that if the nature of
Lessee's Default is such that more than thirty (30) days are reasonably
required for its cure, then it shall not be deemed to be a Breach of this
Lease by LESSEE IF LESSEE COMMENCES such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making by Lessee
of any general arrangement or assignment for the benefit of creditors; (ii)
Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, In the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment
of a trustee or receiver to take possession of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease, where
possession is not restored to Lessee within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this
Lease, where such seizure is not discharged within thirty (30) days;
provided, however, in the event that any provision of this Subparagraph 13,
1 (a) is contrary to any applicable law, such provision shall be of no force
or effect, and shall not affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee or of any
Guarantor, given to Lessor by Lessee or any Guarantor, was materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance
with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or
the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the
guaranty, or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure, within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such
event, to provide Lessor with written alternative assurances of security,
which, when coupled with the then existing resources of Lessee,equals or
exceeds the combined financial resources of Lessee and the Guarantors that
existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or obligation
of Lessee under this Lease, within ten (10) days after written notice to
Lessee (or in case of an emergency, without notice), Lessor may at its
option (but without obligation to do so), perform such duty or obligation on
Lessee's behalf, Including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee to Lessor upon Invoice therefor. If any check
given to Lessor by Lessee shall not be honored by the bank upon which it is
drawn, Lessor, at its own option, may require all future payments to be made
under this Lease by Lessee to be made only by cashier's check. In the event
of a Breach of this Lease by Lessee (as defined In Paragraph 13.1), with or
without further notice or demand, and without limiting Lessor in the
exercise of any right or remedy which Lessor may have by reason of such
Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease and the term hereof shall terminate and
Lessee shall Immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee: (i) the worth
at the time of the award of the unpaid rent which had been earned at the
time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that the Lessee
proves could have been reasonably avoided; (iii) the worth at the time of
award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that the
Lessee proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by
the Lessee's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, including
but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys, fees, and that portion of any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall
be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco or the Federal Reserve Bank District in which
the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach
of this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the
provisional remedy of unlawful detainer, Lessor shall have the right to
recover in such pro-
<PAGE>
ceeding the unpaid rent and damages as are recoverable therein, or Lessor
may reserve the right to recover all or any part
in a separate suit for such rent and/or damages. If a notice and grace period
required under Subparagraph 13.1 (b), (c) or (d) was not previously given,
a notice to pay rent or quit, or to perform or quit, as the case may be,
given to Lessee under any statute authorizing the forfeiture of leases for
unlawful detainer shall also constitute the applicable notice for grace period
purposes required by Subparagraph 13.1 (b),(c) or (d). In such case, the
applicable grace period under the unlawful detainer statue shall run
concurrently after the one such statutory notice, and the failure of Lessee
to cure the Default within the greater of the two (2) such grace periods shall
constitute both an unlawful detainer and a Breach of this Lease entitling
Lessor to the remedies provided for In this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach
and recover the rent as it becomes due, provided Lessee has the right to
sublet or assign, subject only to reasonable limitations. Lessor and Lessee
agree that the limitations on assignment and subletting in this Lease are
reasonable. Acts of maintenance or preservation, efforts to relet the
Premises, or the appointment of a receiver to protect the Lessor's interest
under this Lease, shall not constitute a termination of the Lessee's right
to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the state wherein the Premises are located.
(d) The expiration or termination of this Lease and/or the termination of
Lessee's right to possession shall not relieve Lessee from liability under
any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture In Event of Breach0. Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of
which concessions are hereinafter referred to as "Inducement Provisions"
shall be deemed conditioned upon Lessee's full and faithful performance of
all of the terms, covenants and conditions of this Lease to be performed or
observed by Lessee during the term hereof as the same may be extended. Upon
the occurrence of a Breach (as defined in Paragraph 13.1) of this Lease by
Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other
charge, bonus, inducement or consideration theretofore abated, given or paid
by Lessor under such an Inducement Provision shall be immediately due and
payable by Lessee to Lessor, and recoverable by Lessor, as additional rent
due under this Lease, notwithstanding any subsequent cure of said Breach by
Lessee. The acceptance by Lessor of rent or the cure of the Breach which
initiated the operation of this Paragraph 13.3 shall not be deemed a waiver
by Lessor of the provisions of this Paragraph 13.3 unless specifically so
stated in writing by Lessor at the time of such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee to
Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed
upon Lessor by the terms of any ground lease, mortgage or deed of
trust covering the Premises. Accordingly, if any installment of rent or other
sum due from Lessee shall not be received by Lessor or Lessor's designee
within ten (10) days after such amount shall be due, then, without any
requirement for notice to Lessee, Lessee shall pay to Lessor a late charge
equal to six percent (6%) of such overdue amount. The parties hereby agree
that such late charge represents a fair and reasonable estimate of the costs
Lessor will incur by reason of late payment by Lessee. Acceptance of such
late charge by Lessor shall in no event constitute a waiver of Lessee's
Default or Breach with respect to such overdue amount, nor prevent Lessor
from exercising any of the other rights and remedies granted hereunder. In
the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Rent, then notwithstanding
Paragraph 4.1 or any other provision of this Lease to the contrary, Base
Rent shall, at Lessor's option, become due and payable quarterly in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after
receipt by Lessor, and by any Lender(s) whose name and address shall have
been furnished to Lessee in writing for such purpose, of written notice
specifying wherein such obligation of Lessor has not been performed;
provided, however, that if the nature of Lessor's obligation is such that
more than thirty (30) days after such notice are reasonably required for its
performance, then Lessor shall not be in breach of this Lease if performance
is commenced within such thirty (30) day period and thereafter diligently
pursued to completion.
14. Condemnation. It the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the plart so taken as of the date the condemning authority
takes title or possession, whichever first occurs. If more than ten percent
(10%) of the floor area of the Premises, or more than twenty-five percent
(25%) of the portion of the Common Areas designated for Lessee's parking, is
taken by condemnation, Lessee may, at Lessee's option, to be exercised in
writing within ten (10) days after Lessor shall have given Lessee written
notice of such taking (or in the absence of such notice, within ten (10)
days after the condemning authority shall have taken possession) terminate
this Lease as of the date the condemning authority takes such possession. If
Lessee does not terminate this Lease in accordance with the foregoing, this
Lease shall remain in full force and effect as to the portion of the
Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the
total rentable floor area of the Promises. No reduction of Base Rent shall
occur if the condemnation does not apply to any portion of the Premises. Any
award for the taking of all or any part of the Premises under the power of
eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of
the fee, or as severance damages; provided, however, that Lessee shall be
entitled to any compensation, separately awarded to Lessee for Lessee's
relocation expenses and/or loss of Lessee's Trade Fixtures. In the event
that this Lease is not terminated by reason of such condemnation, Lessor
shall to the extent of its net severance damages received, over and above
Lessee's Share of the legal and other expenses incurred by Lessor in the
condemnation matter, repair any damage to the Premises caused by such
condemnation authority. Lessee shall be responsible for the payment of any
amount in excess of such not severance damages required to complete such
repair.
15. Brokers' Fees.
15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are
the procuring cause of this Lease.
15.2 Additional Terms. Unless Lessor and Broker(s) have otherwise agreed in
writing, Lessor agrees that: (a) [OMITTED] (b) if Lessee acquires any rights
to the Premises or other premises in which Lessor has an interest, or
(c) [OMITTED](d) if said Brokers are the procuring cause of any lease
or sale entered into between the Parties pertaining to the Premises then as
to any of said transactions, Lessor shall pay said Broker(s) a fee in
accordance with the schedule of said Broker(s) in effect at the time of
the execution of this Lease.
15.3 Assumption of Obligations. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by
operation of law, shall be deemed to have assumed Lessor's
obligation under this Paragraph 15. Each Broker shall be an intended
third party beneficiary of the provisions of Paragraph 1.10 and of
this Paragraph 15 to the extent of its interest in any commission
arising from this Lease and may enforce that right directly against
Lessor and its successors.
15.4 Representations and Warranties. Lessee and Lessor each
represent and warrant to the other that It has had no dealings with
any person, firm, broker or finder other than as named in Paragraph
1.10(a) in connection with the negotiation of this Lease and/or the
consummation of the transaction contemplated hereby, and that no
broker or other person, firm or entity other than said named
Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby
agree to indemnify, protect, defend and hold the other harmless from
and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying Party,
including any costs, expenses, and/or attorneys' fees reasonably
incurred with respect thereto.
16. Tenancy and Financial Statements.
16.1 Tenancy Statement. Each Party (as "Responding Party") shall within ten
(10) days after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in
writing in a form similar to the then most current "Tenancy Statement" form
published by the American Industrial Real Estate Association, plus such
additional information, confirmation and/or statements as may be reasonably
requested by the Requesting Party.
16.2 Financial Statement. If Lessor desires to finance, refinance, or sell
tho Premises or the Building, or any part thereof, Lessee and all Guarantors
shall deliver to any potential lender or purchaser designated by Lessor such
financial statements of Lessee and such Guarantors as may be reasonably
required by such lender or purchaser, including but not limited to Lessee's
financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises. In
the event of a transfer of Lessor's title or interest in the Promises or in
this Lease, Lessor shall deliver to the transferee or assignee (in cash or
by credit) any unused Security Deposit held by Lessor at the time of such
transfer or assignment. Except as provided in Paragraph 15.3, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid,
the prior Lessor shall be relieved of all liability with respect to the
obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in
this Lease to be performed by the Lessor shall be binding only upon the
Lessor as hereinabove defined.
18. Severability. The Invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. Interest on Past-Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10)
days following the date on which it was due. shall bear interest from the
date due at the prime rate charged by the largest state chartered bank in
the state in which the Premises are located plus four percent (4%) per
annum, but not exceeding the maximum rate allowed by law, in addition to the
potential late charge provided for In Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers
that it has made, and is relying solely upon, its own investigation as to the
nature, quality, character and financial responsibility of the other Party
to this Lease and as to the nature, quality and character of the Premises.
Brokers have no responsibility with respect thereto or with respect to any
default or breach hereof by either Party. Each Broker shall be an intended
third party beneficiary of the provisions this Paragraph 22.
<PAGE>
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by messenger
or courier service) or may be sent by regular, certified or registered mail
or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours, and shall be deemed sufficiently
given if served In a manner specified in this Paragraph 23. The addresses
noted adjacent to a Party's signature on this Lease shall be that Party's
address for delivery or mailing of notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the Premises
shall constitute Lessee's address for the purpose of mailing or delivering
notices to Lessee. A copy of all notices required or permitted to be
given to Lessor hereunder shall be concurrently transmitted to such party
or parties at such addresses as Lessor may from time to time hereafter
designate by written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon. If sent by regular mail, the notice shall be deemed given
forty-eight (48) hours after the same is addressed as required herein
and mailed with postage prepaid, Notices delivered by United States Express
Mail or overnight courier that guarantees next day delivery shall be
deemed given twenty-four (24) hours after delivery of the same to the
United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed
served or delivered upon telephone or facsimile confirmation
of receipt of the transmission there of, provided a copy is also delivered
via delivery or mail. It notice Is received on a Saturday or a Sunday or
a legal holiday, It shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any
other term, covenant or condition hereof, or of any subsequent Default or
Breach by Lessee of the same or any other term, covenant or condition hereof,
Lessor's consent to, or approval of, any such act shall not be deemed to
render unnecessary the obtaining of Lessor's consent to, or approval of,
any subsequent or similar act by Lessee, or be construed as the basis of an
estoppel to enforce the provision or provisions of this Lease requiring such
consent. Regardless of Lessor's knowledge of a Default or Breach at the
time of accepting rent, the acceptance of rent by Lessor shall not be a
waiver of any Default or Breach by Lessee of any provision hereof.
Any payment given Lessor by Lessee may be accepted by Lessor on account of
moneys or dame as due Lessor, notwithstanding any qualifying statements or
conditions made by Lessee in connection therewith, which such statements
and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to in writing by Lessor at or before the time of
deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of
this Lease for recording purposes. The Party requesting recordation shall
be responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination
of this Lease. In the event that Lessee holds over In violation of this
Paragraph 26 then the Base Rent payable from and after the time of the
expiration or earlier termination of this Lease shall be increased to two
hundred percent (200%) of the Base Rent applicable during the month
immediately preceding such expiration or earlier termination. Nothing
contained herein shall be construed as a consent by Lessor to any holding
over by Lessee.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located.
Any litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "SECURITY DEVICE"),
now or hereafter placed by Lessor upon the real property of which the
Premises are a part, to any and all advances made on the security
thereof, and to all renewals, modifications, consolidations, replacements
and extensions thereof. Lessee agrees that the Lenders holding any such
Security Device shall have no duty, liability or obligation to perform
any of the obligations of Lessor under this Lease, but that in the event of
Lessor's default with respect to any such obligation, Lessee will give
any Lender whose name and address have been furnished Lessee in writing
for such purpose notice of Lessor's default pursuant to Paragraph 13.5.
If any Lender shall elect to have this Lease and/or any Option granted
hereby superior to the lien of its Security Device and shall give written
notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph 30.3,
Lessee agrees to afforn to a Lender or any other party who acquires ownership
of the Premises by reason of a foreclosure of a Security Device, and that
in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership, (ii) be subject to any offsets
or defenses which Lessee might have against any prior lessor, or (iii) be
bound by prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by Lessor
after the execution of this lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement")
from the Lender that Lessee's possession and this Lease, including any options
to extend the term hereof, will not be disturbed so long as Lessee is not
in Breach hereof and attorns to the record owner of the Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided,
however, that upon written request from Lessor or a Lender in connection with
a sale, financing or refinancing of Premises, Lessee and Lessor shall
execute such further writings as may be reasonably required to
separately document any such subordination or non-subordination, attornment
and/or non-disturbance agreements is provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action
or proceeding to enforce the terms hereof or declare rights
hereunder, the Prevailing Party (as hereafter defined) in any
such proceeding, action, or appeal thereon, shall be entitled
to reasonable attorneys' fees, Such fees may be awarded in the
same suit or recovered in a separate suit, whether or not such
action or proceeding is pursued to decision or judgment. The
term "Prevailing Party" shall Include, without limitation, a
Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or
Broker of its claim or defense. The attorneys' fee award shall
not be computed in accordance with any court fee schedule, but
shall be such as to fully reimburse all attorneys' fees
reasonably incurred. Lessor shall be entitled to attorneys'
fees, costs and expenses incurred in preparation and service
of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently
commenced in connection with such Default or resulting Breach.
Broker(s) shall be intended third party beneficiaries of this
Paragraph 31.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and
Lessor's agents shall have the right to enter the Premises at
any time, in the case of an emergency, and otherwise at
reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the
Premises or to the Building, as Lessor may reasonably deem
necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor
may at any time during the last one hundred eighty (180) days
of the term hereof place on or about the Premises any ordinary
"For Lease" signs. All such activities of Lessor shall be
without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be
conducted, either voluntarily or involuntarily, any auction
upon the Premises without first having obtained Lessor's prior
written consent. Notwithstanding anything to the contrary in
this Lease, Lessor shall not be obligated to exercise any
standard of reasonableness in determining whether to grant
such consent.
34. SIGNS. Lessee shall not place any sign upon the exterior
of the Promises or the Building, except that Lessee may, with
Lessor's prior written consent, install (but not on the roof)
such signs as are reasonably required to advertise Lessee's
own business so long as such signs are in a location
designated by Lessor and comply with Applicable Requirements
and the signage criteria established for the Industrial Center
by Lessor. The installation of any sign on the Premises by or
for Lessee shall be subject to the provisions of Paragraph 7
(Maintenance, Repairs, Utility Installations, Trade Fixtures
and Alterations). Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof of the
Building, and the right to install advertising signs on the
Building, including the roof, which do not unreasonably
interfere with the conduct of Lessee's business; Lessor shall
be entitled to all revenues from such advertising signs.
35. Termination; Merger. Unless specifically stated otherwise
in writing by Lessor, the voluntary or other surrender of this
Lease by Lessee, the mutual termination or cancellation
hereof, or a termination hereof by Lessor for Breach by
Lessee, shall automatically terminate any sublease or lesser
estate in the Premises; provided, however, Lessor shall, in
the event of any such surrender, termination or cancellation,
have the option to continue any one or all of any existing
subtenants. Lessor's failure within ten (10) days following
any such event to make a written election to the contrary by
written notice to the holder of any such lesser Interest,
shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party Is required to an act
by or for the other Party, such consent shall not be unreasonably withhold
or delayed. Lessor's actual reasonable costs and expenses (including but
not limited to architects', attorneys', engineers' and other consultants'
fees) incurred in the consideration of, or response to, a request by Lessee
for any Lessor consent pertaining to this Lease or the Promises, including
but not limited to consents to an assignment a subletting or the presence or
use of a Hazardous Substance, shall be paid by Lessee to Lessor upon receipt
of an Invoice and supporting documentation therefor. In addition to the
deposit describe" Paragraph 12.2(o), Lessor may, as a condition to
considering any such request by Lessee, require that Lessee deposit with
Lessor an amount of money (in addition to the Security Deposit hold under
Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor
will incur in considering and responding to Lessee's request. Any unused
portion of said deposit shall be refunded to Lessee without interest.
Lessor's consent to any act, assignment of this Lease or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a
waiver of any then existing Default or Breach, except as may be otherwise
specifically stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein
any particular condition to Lessor's consent shall not preclude the
Impositions by Lessor at the time of consent of such further or other
conditions as are then reasonable with reference to the particular matter
for which consent is being given.
37. GUARANTOR.
37. 1 FORM OF GUARANTY. If there are to be any Guarantors of this Lease per
Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be In the form most recently published by the American
Industrial Real Estate Association. and each such Guarantor shall have the
same obligations as Lessee under this lease, including but not limited to
the obligation to provide the Tenancy Statement and Information required in
Paragraph 16.
<PAGE>
37.2 Additional Obligations of Guarantor. It shall constitute a Default of
the Lessee under this Lease It any such Guarantor falls or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of
the guaranty called for by this Lease, including the authority of the
Guarantor (and of the party signing on Guarantor's behalf) to obligate such
Guarantor on said guaranty, and resolution of its board of directors
authorizing the making of such guaranty, together with a certificate of
incumbency showing the signatures of the persons authorized to sign on its
behalf, (b) current financial statements of Guarantor as may from time to
time be requested by Lessor, (C) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect,
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the performance of all of the covenants, conditions and provisions on
Lessee's part to be observed and performed under this Lease, Lessee shall
have quiet possession of the Premises for the entire term hereof subject to
all of the provisions of this Lease.
39. OPTIONS.
39.1 Definition. As used in this Lease, the word "Option" has the following
meaning: (a) the right to extend the term of this Lease or to renew this
Lease or to extend or renew any lease that Lessee has on other property of
Lessor;
39.2 Options Personal to Original Lessee. Each Option granted to Lessee in
this Lease is personal to the original Lessee named In Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any
person or entity other than said original Lessee while the original Lessee
is in full and actual possession of the Premises and without the intention
of thereafter assigning or subletting. The Options, if any, herein granted
to Lessee are not assignable, either as a part of an assignment of this Lease
or separately or apart therefrom, and no Option may be separated from this
Lease in any manner, by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple Options to
extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly
exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option, notwithstanding any
provision in the grant of Option to the contrary: (I) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (11) during the period of
time any monetary obligation due Lessor from Lessee Is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee Is in Breach of this Lease, or (iv) in the event that Lessor has given
to Lessee three (3) or more notices of separate Defaults under Paragraph
13.1 during the twelve (12) month period Immediately preceding the exercise
of the Option, whether or not the Defaults are cured.
(b) The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee's inability to exercise an Option
because of the provisions of Paragraph 39.4(a)
(c) All rights of Lessee under the provisions of an Option shall terminate
and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, If, after such exercise and during the term
of this Lease, (i) Lessee falls to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (if)
Lessor gives to Lessee three (3) or more notices of separate Defaults under
Paragraph 13.1 during any twelve (12) month period, whether or not the
Defaults are cured, or (111) if Lessee commits a Breach of this Lease.
40. RULES END REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles the
preservation of good order, as well as for the convenience of other
occupants or tenants of the Building and the Industrial Center and their
invitees.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to
provide same. Lessee assumes all responsibility for the protection of the
Promises, Lessee, Its agents and invitees and their property from the acts
of third parties.
42. RESERVATIONS. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way,
utility raceways, and dedications that Lessor deems necessary, and to cause
the recordation of parcel maps and restrictions, so long as such easements.
rights of way, utility raceways, dedications, maps and restrictions do not
reasonably Interfere with the use of the Premises by Lessee. Lessee agrees
to sign any documents reasonably requested by Lessor to effectuate any such
easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive
the right on the part of said Party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal obligation on the part
of said Party to pay such sum or any part thereof, said Party shall be
entitled to recover such sum or so much thereof as it was not legally
required to pay under the provisions of this Lease.
44. AUTHORITY. It either Party hereto is a corporation, trust, or general or
limited partnership, each Individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute
and deliver this Lease on Its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not
be deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties in interest at the time of the modification. The Parties shall amend
this Lease from time, to time to reflect any adjustments that are made to
the Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee.
<PAGE>
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW
THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT,
AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE
CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE
POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR
HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY
THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR
EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEOUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR
OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN
ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE
CONSULTED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Laguna Beach, CA Executed at: Laguna Beach, CA
on: on:
BY LESSOR: BY LESSEE:
LBP ENTERPRISES Silvano DiGenova
TANGIBLE INVESTMENTS OF
AMERICA
By: By:
Name Printed: Richard Rosenblum Name Printed: Silvano
DiGenova
Title: General Partner Title:
By: By:
Name Printed: Name Printed:
Title: Title:
Address: c/o Laguna Pacific: Address:
350 Broadway, Laguna Beach, CA-92651
Telephone:( 714 497-5494 Telephone:
Facsimile: (714) 497-1154 Facsimile:
BROKER: BROKER:
Executed at: Laguna Beach, CA Executed at: Laguna Beach, CA
on: on:
By: By:
Name Printed: Mark Christy Name Printed: Robert Dornin
Title: Title:
Address: 350 Broadway Address: 1110 Glenneyre
Laguna Beach, CA 92651 Laguna Beach, CA
92651
Telephone: (714) 497-5494 Telephone: (714) 497-3331
Facsimile: Facsimile:
NOTE: These forms are often modified to meet changing requirements
of law and needs of the industry. Always write or call to make sure
you are utilizing the most current form: AMERICAN INDUSTRIAL REAL
ESTATE ASSOCIATION, 700 South Flower Street, Suite 600, Los Angeles,
CA 90017. (213) 687-8777.
<PAGE>
DIAGRAM - EXHIBIT A
STANDARD OFFICE LEASE, FLOOR PLAN
<PAGE>
EXHIBIT "B"
1.2(a.1) PREMISES: The premises leased herein shall consist of
suite 103 along with exclusive use of the rest rooms servicing that
suite.
1.5.1 BASE RENT INCREASE: The base rent payable under paragraph 1.5
of this lease shall be increased annually in accordance with
increase, if any, in the Consumer Price Index of the Bureau of Labor
Statistics of the Department of Labor for All Urban Consumers,
(1967=100), "All Items for the Los Angeles - All Urban area, herein
referred to as "C.P.I.", since the date of this lease. However, the
annual rent increase shall in no event be less than 3% nor greater
than 6% despite CPI fluctuations outside of this range.
1.5.1.A. ALTERNATIVE INDEX: In the event the compilation and/or
publication of the C.P.I., shall be transferred to any other
governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the C.P.I.
shall be used to calculate the applicable increase. In the event
the Lessor and Lessee cannot agree on such alternative index, then
the matter shall be submitted for decision to the American
Arbitration Association in Orange County and the decision of the
arbitrators shall be binding upon the parties. The cost of said
Arbitrators shall be paid equally by Lessor and Lessee.
1.5.1.B BRINGING BASE RENT INCREASE CURRENT: Lessee shall continue
to pay the rent at the rate previously in effect until the increase
is determined. Within 5 days following the date on which the
increase is determined, Lessee shall make such payment to Lessor as
will bring the increased rental current, commencing with the
effective date of such increase through the date of any rental
installments then due. Thereafter the rental shall be paid at the
increased rate. At such time as the amount of any change in rental
required by this Lease is known or determined, Lessor and Lessee
shall execute and amendment to this Lease setting forth such change.
1.6(b.1) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: Lessee's
share shall be 30% of common area expenses as defined under the
terms of the lease but shall in no event exceed $300 (Three Hundred
Dollars) monthly during the term of this lease. Said $300 maximum
shall be adjusted annually in accordance with the percentage rent
increase to the Base rent as defined under 1.5.1 above.
4.1.1 BASE RENT COMMENCEMENT: The Base Rental payments for the
Premises shall commence as of October 1, 1996 with the balance of
July, August and September of 1996, in addition to August of 1997,
being rent free. In return for this consideration, the Lessee
herein agrees to accept the Premises in it's current "AS IS"
condition and understands that there will be to Tenant Improvement
Allowance (T.I. Allowance). Lessor shall be responsible for the
repair and/or replacement of the existing air conditioning system.
Lessee herein has inspected the electrical system of the premises
and has found various deficiencies. Lessee specifically agrees to
accept these deficiencies in their current condition in return for a
portion of this rent moratorium. There will be no financial
participation in the Improvements, Repairs or Upgrading of the
Premises by Lessor. Lessor or his agent makes no representation,
express or implied as to the amounts Lessee will need to expend to
finish the Premises in completing Lessee's desired improvements.
All improvements made by Lessee shall become the property of Lessor
and shall be completed pursuant to Section 7.3, Items A through F of
the Lease Agreement.
39.5 OPTION TO EXTEND: The Lessee herein shall have the option to
extend this lease agreement for one additional five (5) year period
provided that Lessee is in good standing and fully compliant with
the terms
<PAGE>
of the lease pursuant to Sections 39.1, 39.2, 39.3 and
39.4 of the Lease Agreement. Lessee's written notice to exercise
said option shall be delivered by Certified Mail to Lessor not less
than 180 days prior to the termination of the initial term of the
Lease Agreement. During the term of the Option, as during the
initial term of the lease, the Base Rent shall be increased annually
pursuant to Sections 1.5.1, 1.5.1.A and 1.5.1.B (above) of the Lease
Agreement.
49. WATER INTRUSION FROM ADJACENT PROPERTY: Lessor and Lessee are
aware that there appears to be a source of water intrusion from the
adjacent property to the North. Lessor is taking steps to ensure
that the source of the water in remedie3d by the adjacent properties
ownership. Any action taken by Lessee to remove odors, etc. caused
by prior moisture intrusion shall be at Lessee's sole cost and
expense. In the event the problem is not remedied to the
satisfaction of Lessee herein, then Lessee shall pursue remedies
entitled to it under 13.5 of the Lease. If after required notice,
the situation is still not remedied to Lessee's satisfaction after a
90 day period, then Lessee shall be able to terminate their
agreement by giving Lessor a 60 days notice of his intent to
terminate. In this situation, Lessor shall be under no further
financial obligation to Lessee for any costs or loss incurred as a
result of said decision to terminate, nor shall Lessor reimburse
Lessee for any costs incurred by Lessee with respect to the loss of
tenant improvements, repairs, etc.
50. DIVISION OF LOWER FLOOR. In return for a portion of the rent
moratorium outlined above. Lessee herein agrees to construct and
finish an interior, non-bearing dividing wall as previously
discussed. Said wall shall be in place no later than August 30,
1996 and shall be constructed by a licensed, insured contractor who
shall have obtained all required City permits and completion sign
offs. The wall shall be completed in accordance with the sketch
which has been initialed by both parties herein entitled "Partition
Wall".
LESSOR: LESSEE:
LBP ENTERPRISES SILVANO DIGENOVA &
TANGIBLE INVESTMENTS OF AMERICA
By:/s/Signature Unknown /s/Silvano DiGenova
Its: By:
Its: President
LEASE AGREEMENT
THIS Lease is made and entered into at Newport Beach, California,
this 31st. day of March 1999 by and between TUSTIN BUSINESS
CENTER, L.P., a California Limited Partnership hereinafter
referred to as "Lessor" and TANGIBLE INVESTMENTS OF AMERICA, INC.,
a Pennsylvania Corporation hereinafter referred to as "Lessee",
without regard to number or gender.
1. Leased Premises:
A. Premises: In consideration of the rents herein provided, and on
the terms, provisions and covenants hereof, Lessor hereby leases,
lets and demises to Lessee the following described premises
(referred to in this lease as the "leased promises") more
particularly described in Exhibit "A", attached hereto, located at
17842 Irvine Blvd., Suite # 204 (approx.1,722 rsf) in the City of
Tustin, County of Orange, California (referred to in this lease as
"the Building").
B. Parking: Throughout the term hereof, Lessee shall have the
right to use for Its employees 5 as available parking spaces in
the parking areas in and about the Building, or in the event the
Building is located in a larder Office Complex (the land,
buildings, common areas and parking areas of which shall be
referred to collectively in this lease as the "Office Complex" then
in and about such Office Complex on the terms and conditions as
may be established by Lessor from time to time during the term of
this lease. Lessor shall have the right, but shall not be under
any obligation, to designate where such parking spaces shall be
located. The parking area(s) referred to herein shall be used on a
non-exclusive basis with other tenants Of the Building, or where
applicable, other tenants of the Office Complex. Parking for
Lessee's invitees shall be available in said parking area(s) on a
non-exclusive, first-come, first-serve basis with invitees of
other tenants of the Building, or where applicable, other tenants
of the Office Complex upon such conditions as Lessor may from time
to time establish during the term hereof.
2. Term: Subject to and upon the conditions set forth herein, the
term of this lease shall commence on the 1st day of May, 1999 and
shall end on the 30th day of April, 2000, unless sooner terminated
as hereinafter provided. Taking of possession by Lessee shall be
conclusively deemed to establish that the leased premises have
been accepted and that the leased premises are in good and
satisfactory condition as of the date possession was so taken by
Lessee.
3. Possession: If Lessor, for any reason whatsoever, cannot
deliver possession of the leased premises to Lessee at the
commencement of the term hereof, this lease shall not be void or
voidable, nor shall Lessor be liable to Lessee for any loss or
damage resulting therefrom, nor shall the expiration date of the
above term be in any way extended, but in that event, all rent
shall be abated during the period between the commencement of the
term as provided for in Paragraph 2 hereinabove and the time when
Lessor delivers possession. In the event that Lessor shall permit
Lessee to occupy the leased premises prior to the commencement
date of the term, such occupancy shall be subject to all the
provisions of this lease. Such early possession shall not advance
the termination date hereinabove provided.
4. Lease Year: A lease year shall be considered to begin on the
first day of the first full calendar month following commencement
of the term hereof, or if the term shall commence on the first day
of the month, on such date and on each subsequent anniversary date
of the beginning of the first lease year.
5. Rent:
A. Base Rent: Lessee agrees to pay a base rental for the
leased premises during the lease term in the amount of Twenty Four
Thousand, Seven Hundred Ninety Six & 80/100 ($24,796.80), payable
in monthly installments of $ 2,066,40, without deduction, offset,
prior notice or demand, in advance on the first day of the month
to Lessor at the address shown in Paragraph 30 below. Such base
rental shall be subject to annual adjustment as hereinafter
provided in Paragraph 6 below. The first monthly Installment shall
be due and payable on or before the first day of each calendar
month during the term hereof. If the commencement date of the term
hereof is not the first day of a month, a prorated monthly
installment shall be paid for the tractional month during which
the lease commences and/or terminates. In addition to any rental
payable hereunder, Lessee shall pay to Lessor his prorated share
of real property taxes as set forth in Paragraph 8 below, and any
adjustments to the base rental as set forth in Paragraph 6 below.
B. Prepaid Rent: Concurrently with Lessee's execution of
this lease. Lessee shall pay to Lessor the sum of $2,066.40 to be
applied against rent for the first months of the lease term.
C. Late Charges: Lessee hereby acknowledges that late
payment by Lessee to Lessor of rent or other sums due hereunder
will cause Lessor to incur costs not contemplated by this lease,
the exact amount of which will be extremely difficult to
ascertain. Such costs include, but are not limited to, loss of
discounts offered by vendors for prompt payment of bills,
processing and accounting charges, and late charges which may be
imposed upon Lessor by terms of any ground lease (wherein the
Lessor has leased the land on which the Building is situated) or
mortgage or trust deed covering the leased premises and the
Building. Accordingly, if any installment of rent or any sum due
from Lessee shall not be received by Lessor or Lessor's designee
within five (5) days after said amount is due, then Lessee shall
pay to Lessor a late charge equal to the maximum amount permitted
by law (or in the absence of any governing law, ten percent (10%)
of such overdue amount), plus any attorneys' fees incurred by
Lessor by reason of Lessee's failure to pay rent and/or other
charges when due hereunder. The parties hereby agree that such
late charges represent a fair and reasonable estimate of the cost
that Lessor will incur by reason of the late payment by Lessee.
Acceptance of such late charges by the Lessor shall in no event
constitute a waiver of Lessee's default with respect to such
overdue amount, nor prevent Lessor from exercising any of the
other rights and remedies granted hereunder.
6. Rent Adjustment: Consumer Price Index: The minimum monthly rent
and any other fixed charges shall be adjusted during the term of
this lease effective with the first day of the second (2nd) lease
year and on the first day of each lease year thereafter throughout
the lease term (any lease year other than the first lease year
being referred to herein as a "succeeding lease year" and being
defined as hereinafter provided). Any adjustment shall reflect the
percentage increase, If any, in the cost of living as shown in the
Consumer Price Index For Urban Wage Earners and Clerical Workers.
Los Angeles-Long Beach-Anaheim, California, all items (1967=100),
as published by the U.S. Department of Labor, Bureau of Labor
Statistics, on a bi-monthly basis, from the month closes to the
month preceding the commencement of the first lease year ("the
base index month") to the month closest to the month immediately
preceding commencement of a succeeding lease year. By way of
example only, if the Consumer Price Index for a given month is 110
and the Consumer Price Index for such month in the succeeding
lease year is 132, then there would be a 20% increase in the cost
of living and the rental would be adjusted to reflect such
increase in calculating the rental commencing on the first day of
such succeeding lease year. If the Index referred to above is
changed such that the base year (e.g. 1967=100) differs from that
used as of the month closest to the base index month, the Index
shall be converted in accordance with the conversion factor
published by the U.S. Department of Labor, Bureau of Labor
Statistics. If the described Index shall no longer be published,
another Index generally recognized as authoritative shall be
substituted by agreement of the parties. If the parties are
unable to agree within ten (10) days after demand by either party,
the substitute Index shall, in application of either party, be
selected by the Chief Officer of the Los Angeles regional office
of the Bureau of Labor Statistics or its successor.
B. Operating Costs: Lessor and Lessee recognize that during
the term of this lease the operating costs incurred in the
management, operation and maintenance of the Building may increase
in the years following the bas period hereinafter specified.
Accordingly, Lessor and Lessee agree as herein below set forth to
a rent adjustment to accommodate the increases in operating costs
so that any such increases will be borne by lessees of the
Building. The above statement of principle is set forth as a
general guide for the future and particularly as a general guide
to the accountants who may annually audit the increases in
operating costs.
Lessee shall pay to Lessor at the times set forth in this
paragraph Lessee's share of the increases in Lessor's operating
costs for the Building in which the leased premises are located
over the operating costs for calendar year 1999 ('base cost
year'). Lessee's proportionate share of the increase in operating
costs shall be 3.8% percent of the total increase in Lessor's
operating costs. The operating costs for both the base cost year
and succeeding years shall be adjusted to equal Lessor's
<PAGE>
reasonable estimate of operating costs had the rentable area of
the Building been occupied.
Lessor's operating costs include, without limitation,
all costs of any kind paid or incurred by Lessor in operating,
cleaning, equipping, protecting, lighting, repairing, replacing,
heating, air conditioning and maintaining the areas of the
Building not leased or available for lease to lessees. The costs
shall include without limitation: (a) utilities, supplies and
janitorial services: maintenance, repair and service contracts:
watchmen, guards and personnel engaged in the management,
operation, maintenance, repair and protection of the Building
together with wages, salaries, payroll burden, taxes, unemployment
and workmen's compensation insurance contributions, social
security contributions and employee and union benefits applicable
thereto. (d) rubbish removal; (e) maintenance and replacement of
landscaping; (f) premiums for public liability and property damage
and fire and extended coverage insurance; (g) all costs and
expenses of contesting by appropriate legal proceedings any matter
concerning operating or managing the Building or the amount or
validity of any property taxes levied against the Building (except
that such costs and expenses shall in no event be included in the
base cost year): (h) depreciation on all personal property,
fixtures and equipment used in the management, operation,
maintenance and repair of the Building; (i) the costs and expenses
(amortized over such reasonable period as Lessor shall determine
together with interest at the rate of 12% per annum on the
unamortized balance of acquisition and installation by Lessor of
any capital improvements after the base cost year that reduce
other operating cost provided however that operating costs shall
not include taxes covered under Paragraph 8 hereinbelow,
depreciation on the Building (except as specified above), costs of
Lessee's improvements, real estate brokers commissions, interest
and capital item (except as specified above). The determination of
operating costs and their allocation shall be in accordance with
generally ccepted accounting principles applied on a consistent basis.
Within ninety (90) days after the close of each calendar year, or
as soon after such ninety (90) day period as practical, Lessor
shall deliver to Lessee a statement of additional rent (the
"Statement") payable under this section for such calendar year
showing the total operating costs for the calendar year just
ended. and Lessee's share of any increase. The failure of Lessor
to deliver the Statement to Lessee during the lime period
hereinabove set forth shall not constitute a waiver by Lessor of
its right to require an increase in rent. Losses shall pay to
Lessor the amount of Lessee's share of the increases within thirty
(30) days after receipt of the Statement. Even though the term has
expired and Lessee has vacated the leased Premises, when the final
determination is made of Lessee's share of such increases for the
calendar year in which this lease terminates, Lessee shall
immediately pay its share of such increases upon demand by Lessor.
Alternatively, in such event, Lessor shall have the right, in its
sole option, to estimate Lessee's share of any increases in
operating costs for the calendar year in which this lease
terminates and the deduct said amount from Lessee's security
deposit at the expiration of the lease term, Lessee hereby waiving
any contrary statutory provisions. Should Lessor's estimate of
such increase in operating costs be greater than Lessee's actual
share as later determined by Lessor, Lessor shall refund to Lessee
such excess, without interest, within sixty (60) days of the final
determination of Lessee's actual share of such increase in
operating costs; however, should Lessee's actual share of such
increase in operating costs be in excess of the amount estimated
by Lessor and deducted from Lessee's security deposit. Lessee
shall pay such excess upon receipt of the Statement in accordance
with the provisions of this paragraph.
Lessor shall keep at the Building where the leased premises are
located full, accurate and separate books of account covering
Lessor's operating Costs and the Statement to Lessee shall
accurately reflect the total of operating costs and Lessee's share
thereof. The books of account shall be retained by Lessor at the
Building in which the leased premises are located for a period of
at least twelve (12) months after the expiration of each calendar
year. Lessee shall be entitled once during each calendar year to
an independent audit of Lessor's books of account to determine
Lessor's operating costs by a certified public accountant to be
designated by Lessee. such audit to take place within sixty (60)
days of Lessee's receipt of the Statement. The audit shall be
limited to the determination of operating costs and shall be
conducted during usual business hours at the Building. The costs
of the audit shall be paid by Lessee unless the audit shows that
Lessor overstated operating costs by more than live percent (5%)
in which case Lessor shall pay all Lessee's costs of the audit. In
no event shall Lessee have the right to withhold payment of such
additional rent as set forth in the Statement pending the results
of such audit or the right to interest on such amounts should such
audit indicate that Lessor overstated operating Costs in any amount.
7. Security Deposit: Concurrently with Lessee's execution of this
lease. Lessee shall deposit with Lessor $2,066.40 to be hold by
Lessor as a security deposit for the faithful performance of all
of the terms, covenants and conditions of this lease to be kept
and performed by Lessee during the term hereof. If Lessee defaults
with respect to any provisions of this lease, including but not
limited to provisions relating to the payment of rent, operating
cost increases and other monetary sums due herewith. Lessor may
use, apply or retain all or any part of the security deposit for
the payment of rent or any other amount which Lessor may spend or
become obligated to spend by reason of Lessee's default or to
compensate Lessor for any other loss or damage which Lessor may
suffer by reason of Lessee's default. It any portion of said
security deposit is so used or applied. Lessee shall, within ten
(10) days after written demand therefor, deposit cash with Lessor
in an amount sufficient to restore the security deposit to its
original amount; Lessee's failure to do so shall be a material
breach of this lease. Lessor shall not be required to keep this
security deposit separate from its general funds and Lessee shall
not be entitled to interest thereon. Lessor's obligations with
respect to the security deposit are those of a debtor and not a
trustee. If Lessee shall fully and faithfully perform every
provision of this lease to be kept by it, the security deposit or
any balance thereof shall be returned to Lessee (or, at Lessor's
demand, to the last assignee of Lessee's interest hereunder)
within the following time periods after expiration or earlier
termination of the lease term: (a) when Lessor has no claims
against the security deposit or where the claim is only for
defaults by Lessee in the payment of rent. then the security
deposit or the balance thereof, if any, shall be returned no later
than two (2) weeks after the date Lessor receives possession of
the leased promises, or (b) where Lessor's claim against the
security deposit includes amounts reasonably necessary to repair
or clean the leased premises, then the remaining balance thereof,
if any, shall be returned on or before thirty (30) days from the
date Lessor receives possession of the leased promises. In the
event of a termination of Lessor's interest in this lease, Lessor
shall transfer said deposit to Lessor's successor in interest,
whereupon Lessee agrees to release Lessor from all liability for
there turn of such deposit or the accounting thereof. In no event
shall said security deposit be applied to the rent due for the
last month of the lease term except as required by law.
8. Taxes:
A. Personal Property Taxes: Lessee shall pay prior to
delinquency all taxes assessed against and levied upon trade
fixtures, furnishings, equipment and all other personal property
of Lessee contained in the leased premises or elsewhere. When
possible, Lessee shall cause said trade fixtures, furnishings.
equipment and all other personal property to be assessed and
billed separately from the real or personal property of Lessor.
B. (i) Real Estate Tax Defined: As used herein, the term
'real estate taxes' shall include any form of assessment, levy
penalty or tax (other than estate, inheritance, net income, or
franchise taxes) imposed on the land and improvements on which the
leased premises are situated by any authority having the direct or
indirect power to tax, including without limitation, the
Environmental Protection Agency, any city, county, state or
federal government, or any improvement or other district or
division thereof, whether or not such tax is (a) determined by the
net rentable area or the rent or other sums payable hereunder, or
(b)upon or with respect to any legal or equitable interest of
Lessor in the leased premises, the Building, or any part thereof,
or now customary or within the contemplation of the parties.
(ii) Real Estate Tax: Lessor shall pay, as they become due,
all real estate taxes which accrue against the Building during the
term of this lease. If the real property taxes levied against the
Building increases at any time for any reason over the taxes
payable for 1998/1999 ('base year'), Lessee shall pay his
proportionate share of any such increase. In computing Lessee's
share of any increase in property taxes, Lessee's share thereof is
fixed at 3.8%. It is understood and agreed that Lessor will not
know in advance the amount of additional property taxes to be paid
and that on determination of such amount a lump sum will be paid
by Lessee to Lessor and a pro rata share thereof shall be added to
the rental due each month for the succeeding years as hereinbelow
provided. The calculation of the additional rental due from
Lessee under the terms of this paragraph shall be made by Lessor
as soon as possible after Lessor is informed of said increase.
Lessor shall then five notice to Lessee of (a) the additional
rental due each month and (b) the lump sum amount due from Lessee
or any prior months as to which
<PAGE>
Lessor has an obligation for increased real property taxes, Lessee
shall within ten (10) days of the date of said notice, pay to
Lessor the full amount of additional rental due for prior months
(including the pro rata share of any increased real property taxes
which would be payable in addition to the rental payments made in
the calendar year prior to the date of receipt of the notice
referred to hereinabove by Lessee from Lessor and shall pay on the
first day of each following month in addition to the rent
described in Paragraph 5 above, the additional monthly amount due
under this paragraph.
9. Lessor Services: Lessor will pay for the electricity, gas and
water utilized in operating any and all facilities serving the
leased premises, and, in addition, Lessor will furnish Lessee,
while occupying the leased premises:
A. Hot and cold water at those points of supply provided for
general use of other tenants in the Building, central heating and
air conditioning, during normal business hours on business days,
and at such temperatures and in such amounts as are considered by
Lessor to be standard, janitor service on a five (5) day week
basis, electric current, routine maintenance and electric lighting
service for all public areas and special service areas, including
elevators, of the Building in the manner and to the extent deemed
by Lessor to be standard. Failure by Lessor to any extent to
furnish these defined services, or any cessation thereof,
resulting from causes beyond the control of Lessor, shall not
render Lessor liable in any respect for damages to either person
or property, nor shall such event be construed as an eviction of
Lessee, nor work an abatement of rent, or relieve Lessee from
fulfillment of any covenant or agreement hereof. Should any of the
equipment or machinery break down, or for any cause cease to
function properly Lessor shall use reasonable diligence to repair
the same promptly, but Lessee shall have no claim for rebate of
rent or damages or account of any interruptions in service
occasioned thereby or resulting therefrom so long as Lessee shall
have reasonable access to and use of the leased promises.
B. Adequate electrical facilities to furnish power for
typewriters, voice writers, calculating machines and other
machines of similar low electrical consumption; provided, however,
that Lessee shall bear any utility costs occasioned by
electro-data processing machines, including air conditioning costs
therefor and similar machines of high electrical consumption.
10.Quiet Enjoyment: Lessor warrants that it has full right to
execute and to perform this lease and to grant the estate demised
herein and that Lessee. upon payment of the rents herein required,
and performing the terms, conditions, covenants and agreements
herein contained, shall peaceably and quietly have, hold and enjoy
the leased premises during the full term at this lease and any
extension or renewal thereof.
11. Repairs and Maintenance: Except as provided in Paragraph 9
above, Lessee shall, at all times during the term hereof at its
sole cost and expense, keep the premises and every part thereof in
good condition and repair, except damage thereto by fire,
earthquake, act of God or the elements, Lessee hereby waiving the
right to make repairs at Lessor's expense under any law, statute
or ordinance with respect thereto now or hereafter in effect.
Unless otherwise expressly provided herein, Lessor shall not be
required to make any improvements or repairs of any kind or
character on the leased premises during the term of this lease.
Lessee shall, at its own cost and expense, repair or replace any
damage or injury to the leased premises, or any part thereof,
caused by Lessee or Lessee's agents, employees, invitees,
licensees or visitors: provided, however, if Lessee fails to make
such repairs or replacements promptly, Lessor may, at its option,
make such repairs or replacements, and Lessee shall reimburse the
cost thereof to Lessor on demand, together with interest at the
maximum annual rate permitted by law from the date of such work.
Lessee shall not commit or allow any waste or damage to be
committed on any portion of the leased premises.
12. Assignment, Sublease, Mortgage, Changes in Corporate
Ownership, Right of First Refusal: Lessee shall not, and shall
not have the power to, transfer, assign, sublet, enter into
license or concession agreements, change ownership, mortgage or
hypothecate this lease or the Lessee's interest in and to the
leased premises without first procuring the written consent of the
Lessor. Any attempted or purported transfer, assignment,
subletting, license or concession agreement, change of ownership,
mortgage or hypothecation without the Lessor's written consent
shall be void and confer no rights upon any third person. Without
in any way limiting Lessor's right to refuse to give such consent
for any other reason or reasons. Lessor reserves the right to
refuse to give such consent if, in Lessor's reasonable business
judgment, the quality of the Building's operation or tenant mix is
or may be in any way adversely affected during the term of the
lease and/or the financial worth of the proposed new tenant Is
less than that of the Lessee executing this lease or of Lessee and
Lessee's guarantor as the case may be. As a condition for granting
its consent to any subletting, Lessor may require that Lessee pay
to Lessor, as additional rent, all rents or other economic
consideration received by Lessee from its Sublessees in excess of
the rents payable by Lessee to Lessor hereunder. Nothing herein
contained shall relieve Lessee or any guarantor from its covenants
and obligations for the term of this lease. Lessee agrees to
reimburse Lessor for Lessor's reasonable attorneys fees incurred
in conjunction with the processing and documentation of any such
requested transfer, assignment, subletting, license or concession
agreement, change of ownership, mortgage or hypothecation of this
lease or Lessee's interest in and to the leased premises.
Each transfer, assignment, subletting, license, concession
agreement, mortgage or hypothecation to which there has been
consent shall be by an instrument in writing in form satisfactory
to Lessor, and shall be executed by the transferor, assignor,
sublessor, licensor, concessionaire or mortgagee in each instance.
as the case may be: and each transferee, assignee, sublessee,
licensee, concessionaire or mortgagee shall agree in writing for
the benefit of the Lessor herein to assume, to be bound by, and to
perform the terms, covenants and conditions of this lease to be
done, kept and performed by the Lessee, including the payment of
all amounts due or to become due under this lease directly to the
Lessor. One executed copy of such written Instrument shall be
delivered to the Lessor. Failure to first obtain in writing
Lessor's consent or failure to comply with the provisions of this
Paragraph, shall operate to prevent any such transfer. assignment,
subletting, license, concession agreement or hypothecation from
becoming effective. No Assignee or Sublessee shall have a right
further to assign or sublet or a right to exercise any option
hereunder to extend the term of this lease.
If the Lessee hereunder is a corporation which is not deemed a
public corporation, or is an unincorporated association or
partnership, the transfer, assignment or hypothecation of any
stock or interest in such corporation, association or partnership
in the aggregate in excess of twenty-five percent (25%) shall be
deemed an assignment within the meaning of provisions of this
Paragraph 12.
Notwithstanding anything to the contrary contained herein, it at
any time during the term of this lease Lessee shall receive a bona
fide offer from any third party seeking an assignment, sublet or
other transfer of Lessee's interest In this lease. Lessee shall
serve on Lessor a written notice of the terms of such offer from
such third party and of Lessee's intention to accept the same.
Lessor shall have the right for a period of thirty (30) days from
the date of delivery of such notice to assume said assignment.
sublease or other such transfer of Lessee's Interest in this lease
on the same terms and conditions specified in the notice. In the
event that Lessor shall not within said thirty (30) day period
elect to assume said assignment. sublease or other such transfer
of Lessee's interest in this lease, then Lessee may, subject to
obtaining Lessor's prior written approval in accordance with this
Paragraph 12, assign, sublet or transfer Lessee's interest in this
lease on the same terms and conditions and to the third party
specified in the notice, provided that if Lessee does not assign,
sublet or otherwise transfer Lessee's interest in this lease to
said third party within sixty (60) days of the date of the
delivery of Lessee's notice to Lessor, any further transaction
shall be deemed to be a new determination by Lessee to assign,
sublet or otherwise transfer Lessee's interest in this lease and
the provisions of this paragraph shall apply.
13. Alterations and Improvements: Lessee shall not make or allow
to be made any alterations, physical additions in or to the leased
premises without first obtaining the written consent of Lessor.
Any and all such alterations, physical additions or improvements
to the leased premises shall be surrendered to Lessor upon the
termination of this lease, by lapse of time or otherwise and shall
become Lessor's property without compensation, allowance or credit
to Lessee; provided, however, this clause shall not apply to
moveable equipment, trade fixtures or furniture of Lessee, which
may be removed by Lessee at the end of the term of the lease if
Lessee is not then in default. If prior to such termination or
within ten (10) days thereafter, Lessor so directs by notice,
Lessee shall promptly remove the installations, additions,
hardware, non-trade fixtures and improvements placed in the leased
premises by Lessee and designated in the notice, failing which
Lessor may store or remove the same for Lessee's account and
Lessee shall pay the costs of such removal and storage and of any
necessary restoration of the leased premises.
14. Use: Lessee shall use and occupy the leased premises for
business offices and for no other purpose. Lessee shall not
occupy or use, or permit any portion of the leased premises to be
occupied or used for any business or purpose which is unlawful or
extra
<PAGE>
hazardous, or permit anything to be done which would in any way
increase the rate of fire insurance coverage in said leased
premises and/or the contents of the Building, and in the event
that, by reason of such acts of Lessee, there shall be any
increase in the insurance rates of the Building or contents above
normal rates. or cancellation of the insurance, Lessee agrees to
pay to Lessor as additional rental, an amount equal to all such
increases.
15. Compliance with Laws and Flutes of Building: Lessee shall
comply with all laws, ordinances, orders, rules and regulations
(state, federal, municipal and other agencies or bodies having any
jurisdiction thereof) relating to the use, condition or occupancy
of the leased premises, Lessee will comply with the rules of the
Building adopted by Lessor which are set forth on a schedule
attached hereto and made a part hereof as fully as though set
forth herein. Lessor shall have the right if necessary to change
such rules and regulations or to amend them in any reasonable
manner for reasons including, without limitation. maintaining the
safety, care and cleanliness of [tie leased premises, energy
conservation. compliance with any and all regulatory orders, and
the preservation of good order therein, all of which changes and
amendments will be sent by Lessor to Lessee in writing and shall
be thereafter carried out and observed by Lessee.
16. Lessor's Right of Entry: Lessee shall permit Lessor or its
agents or representatives to enter into and upon any part of the
premises at all reasonable hours upon reasonable prior notice
(except in the case of emergencies), to inspect some. clean or
make repairs, alterations or additions thereto, as Lessor may deem
necessary or desirable, or for the purpose at determining Lessee's
thereof or whether an act of default under this lease has
occurred. Lessee shall not be entitled to any abatement or
reduction of rent to any damages for any injury or inconvenience
to or interference with Lessee's business. any loss at occupancy
or quiet enjoyment of the leased premises by reason of any such
repairs, alterations or additions reasonably required to be made
by Lessor hereunder.
17. Nuisance: Lessee shall conduct its business and control its
agents, employees, invitees and visitors in such a manner as not
to create any nuisance or interfere with, annoy, or disturb any
other tenant or Lessor in its management of the Building.
18. Condemnation: Should the whole or any part of the leased
premises be condemned and taken by any competent authority lot any
public or quasi-public use or purpose, all awards payable on
account of such condemnation and taking shall be payable to
Lessor, and Lessee hereby waives all interest in or claim to said
awards, or any part thereof. If the whole of the leased premises
shall be so condemned and taken, then this lease shall terminate.
If a part only at the leased promises is condemned and taken and
the remaining portion thereof is not suitable for the purposes for
which Lessee had leased said premises, Lessee shall have the right
to terminate this lease. If by such condemnation and taking part
only of the leased premises is taken, and the remaining part
thereof is suitable for the purposes for which Lessee has leased
said premises, this lease shall continue, but the rental shall be
reduced in an amount proportionate to the value of the portion
taken as it related to the total value of the leased premises.
19. Destruction: If, during the term, the leased premises or the
Building and other improvements in which the leased premises are
located are totally or partially destroyed from any cause,
rendering the leased promises totally or partially inaccessible or
unusable, Lessor shall restore the leased premises or the Building
and other improvements in which the leased premises are located to
substantially the same condition as they were in immediately
before destruction, if the restoration can be made under the
existing laws and can be completed within 90 working days after
the date of the destruction. Such destruction shall not terminate
this lease. The provisions of Section 1933, subparagraph 4, of the
Civil Code of California are hereby waived by Lessee.
If the restoration cannot be made in the lime stated in this
paragraph, then within 21 working days after the parties determine
that the restoration cannot be made in the lime stated in this
paragraph, Lessee can terminate this lease immediately by giving
notice to Lessor. If Lessee fails to terminate this lease and if
restoration is permitted under the existing laws, Lessor. at its
election, can either terminate this lease or restore the leased
premises or the Building and other improvements in which the
leased premises are located within a reasonable time and this
lease shall continue in full force and effect. If the existing
laws do not permit the restoration, either party can terminate
this lease immediately by giving notice to the other party.
In the event of restoration as herein provided, Lessee shall be
entitled to a proportionate reduction of the rent while such
restoration is being made, such proportionate reduction to be
based upon the extent to which the making of such restoration
shall materially interfere with the business carried on by the
Lessee in the leased premises. If the damage is due to the fault
of neglect of Lessee or its employees, there shall be no abatement
of rent.
Notwithstanding anything to the contrary contained in this
paragraph, Lessor shall not have any obligation whatsoever to
repair, reconstruct or restore the leased premises when the damage
resulting from any casualty covered under this paragraph occurs
during the last twelve (12) months at the term of this lease or
any extension thereof.
Lessor shall not be required to repair any injury or damage by
fire or other cause, or to make any repairs or replacements of any
panels, decoration, office fixtures, railings, floor covering,
partitions, or any other property installed in the leased premises
by Lessee.
20.Insurance: From and after the date that Lessee enters into
possession of the leased premises as permitted by the terms hereof
and throughout the form of this lease, Lessee shall at its sole
cost and expense provide and keep in full force and effect the
following insurance:
A. General liability insurance in standard form insuring
Lessee and Lessor as insureds against any liability whatsoever
occasioned by accident or disaster on, in or about the leased
premises with limits of not less than $500,000 for one person in
one accident and $ 1,000,000 with respect to one occurrence.
B. Properly damage insurance in an amount not less than
$100,000
C. Fire and extended coverage insurance in all risk form
insuring the interest of the Lessee in the Lessee's improvements
in the leased premises and its interest in its office furniture,
equipment and supplies. Lessee hereby waives any rights of action
against Lessor, including rights of subrogation. for loss or
damage covered by such insurance.
Insurance required hereunder shall be in companies rated A+, AAA
or better in 'Best's Insurance Guide". In addition, the insurance
required hereunder shall be primary insurance and shall provide
that the insurer shall be liable for the full amount of the loss
up to and including the total amount of liability set forth above
without the right of contribution from any other Insurance
coverage at Lessor.
All premiums on all policies referred to in this section shall be
paid by Lessee. Duplicate originals or certificates of such
policies shall be delivered to Lessor and any others named
pursuant to this section, immediately upon receipt thereof from
the insurance company or companies, but in no event later than the
commencement date of this lease. Duplicate originals or
certificates of renewal policies or new policies replacing any
policies expiring during the term hereof shall be delivered to
Lessor at least twenty (20) days, before the date of expiration of
the old or replaced policies, together with proof satisfactory to
Lessor that the full premiums have been paid by Lessee on the new
policies. Premiums on policies shall not be financed in any manner
whereby the lender, on default or otherwise, shall have the right
or privilege of surrendering or canceling the policies. Each
insurance policy required hereunder shall by its terms provide
that it shall not be modified without prior written consent of
Lessor and shall not be canceled unless ten (10) days notice
thereof is given by the insurer to Lessor.
On default by Lessee in obtaining any insurance required hereunder
or delivering any policies or paying the premiums or other charges
hereon as aforesaid, it shall be the privilege, though not the
obligation, of Lessor to effect fully such insurance and likewise
to pay any premiums or charges thereon. All sums so paid by
Lessor and all costs and expenses incurred by Lessor in connection
therewith, together with interest thereon at the maximum annual
rate permitted under Section 1(2) of Article XV of the California
Constitution, from the respective dates of Lessor's making of each
such payment, shall constitute additional rent payable by Lessee
under this lease and shall be paid by Lessee to Lessor on demand,
and Lessor shall not be limited in the proof of any damages which
Lessor may claim against Lessee arising out of or by reason of
Lessee's failure to provide and keep in force insurance as
aforesaid, to the amount of the insurance premium or premiums not
paid or incurred by Lessee and which would have been payable.
21. Surrender of Leased Premises: Lessee shall, at least ninety
(90) days before the last day of the term hereof, give to Lessor a
written notice of intention to surrender the leased premises on
that date, but nothing contained herein shall be construed as an
extension of the term hereof or as consent of Lessor to any
holding over by Lessee.
At the end of the term or any renewal thereof or other
sooner termination of this lease, Lessee will peaceably deliver up
to the Lessor possession of the leased premises, together with all
improvements or additions upon or belonging to the same, by
whomsoever made, in the same condition as received, or first
installed, ordinary wear and tear and damage by fire, earthquake,
act of God or the elements alone excepted. Lessee may, upon the
termination of this lease, remove, at Lessee's sole cost, all
trade fixtures installed by
<PAGE>
Lessee, title to which shall be in Lessee until such termination,
repairing any damage to the leased premises caused by such removal
Any of Lessee s personal property and trade fixtures not removed
by Lessee at the end of the term or other sooner termination of
this lease shall be deemed abandoned by the Lessee if Lessor so
elects, and Lessor shall remove, store and dispose of such
personal property and trade fixtures in accordance with law,
Lessee shall be liable to Lessor for Lessor's costs incurred in
removing, storing arid disposing of Lessee's abandoned personal
property and trade fixtures. Lessee shall indemnity Lessor against
any loss or liability resulting from delay by Lessee in so
surrendering the leased premises. including without limitation.
any claims made by any succeeding lessee founded on such delay.
The voluntary or other surrender of this lease by Lessee, or a
mutual cancellation thereof, shall not work a merger, and shall,
at the option of Lessor, terminate all or any existing subleases
or subtenancies. or may, at the option of Lessor, operate as an
assignment to it of any or all such subleases or subtenancies.
22. Holding Over: Lessee hereby acknowledges that any holding
over after the expiration of the lease term by Lessee will cause
Lessor to incur damages not contemplated by this lease, the exact
amount of which will be extremely difficult to ascertain. Such
damages include but are not limited to, loss of rental income and
claims for damages from a future tenant to whom the Lessor
obligated to deliver possession during the holdover period. and
costs incurred in locating prospective new tenants. Accordingly,
the event of holding over by Lessee, Lessee shall pay Lessor as
rental for the period of such holdover an amount equal to three
hundred percent (300%) of the rent which would have been payable
by Lessee had such holdover period been a part of the original
term of this lease.
23. Default: Lessor's Remedies:
A. Default: The occurrence of any of the following shall
constitute a material breach of this lease by Lessee:
(i) Any failure by Lessee to pay rent or any other monetary
sum required to be paid hereunder (where such failure continues
for three (3) days after written notice thereof from Lessor to
Lessee).
(ii) The abandonment or vacation of the leased premises by
Lessee.
(iii) The failure by Lessee to observe and perform any other
provision of this lease to be observed or performed by Lessee,
where such failure continues for twenty (20) days after written
notice thereof by Lessor to Lessee. Provided, however, that if
the nature of such default is such that it cannot reasonably be
cured within such twenty (20) day period, Lessee shall not be
deemed to be in default if Lessee shall within such period
commence such cure and thereafter diligently prosecute the same to
completion.
B. Remedies: In the event of any such material default or breach
by Lessee, Lessor may at any time thereafter without limiting
Lessor in the exercise of any right or remedy at law or in equity
which Lessor may have by reason of such default or breach
(i) Maintain this lease in full force and effect and recover the
rent and other monetary charges as they become due without
terminating Lessee's right to possession, irrespective of whether
Lessee shall have abandoned the leased premises. In the event
Lessor elects not to terminate the lease, Lessor shall have the
right to attempt to relet the leased premises at such rent and
upon such conditions and for such a term, and to do all acts
necessary to maintain or preserve the leased premises as Lessor
deems reasonable and necessary without being deemed, to have
elected to terminate this lease, including removal of all persons
and property in the leased premises, such property may be removed
and stored in a public warehouse or elsewhere at the cost of and
for the account of Lessee. In the event any such retelling occurs.
this lease shall terminate automatically upon the new Lessee
taking possession of the leased premises. Notwithstanding that
Lessor fails to elect to terminate this lease initially, Lessor at
any time during the term of this lease may elect to terminate this
lease by virtue of such previous default by Lessee.
(ii) Terminate Lessee's right to possession by any lawful means.
in which case this lease shall terminate and Lessee shall
immediately surrender possession of the leased premises to Lessor.
In such event. Lessor shall be entitled to recover from Lessee all
damages incurred by Lessor by reason of Lessee's default,
including without limitation thereto, the following: (a) the worth
at the time of award of any unpaid rent which had been earned at
the lime of such termination. plus (b) the worth at the time of
award of the amount by which the unpaid rent which would have been
earned after termination until the lime of the award exceeds the
amount of such rental loss that is proved could have been
reasonably avoided: plus (c) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after
the time of award exceeds the amount of such rental loss that is
proved could be reasonably avoided: plus (d) any other amount
necessary to compensate Lessor for all the detriment proximately
caused by Lessee's failure to perform his obligations under this
lease or which in the ordinary course of events would be likely to
result therefrom: plus (e) at Lessor's election, such other
amounts in addition to or in lieu of the foregoing as may be
permitted from time to lime by applicable slate law. Upon such
re-entry, Lessor shall have the right to make any reasonable
repairs, alterations, or modifications to the leased premises,
which Lessor, in its sole discretion, deems reasonable and
necessary. As used in subparagraph (a) above, the "worth at the
time of award " is computed by allowing interest at the maximum
annual rate permitted by law from the date of default. As used in
subparagraphs (b) and (c) above, the "worth at the time of award"
is computed by discounting such amount at [he discount rate of the
U.S. Federal Reserve Bank at the time of award plus one percent
(1%). The term "rent". as used if this Paragraph 23, shall be
deemed to be and to mean the rent to be paid pursuant to
Paragraphs 5. 6 and 8 and all other monetary sums required to be
paid by Lessee pursuant to the terms of this lease.
24. Waiver of Breach: Failure of Lessor to declare any default
immediately upon occurrence thereof, or delay in taking any action
in connection therewith, shall not waive such default at any lime
and take such action as might be lawful or authorized hereunder,
either in law or in equity.
25. Attorney's Fees: In the event of any action or proceeding
brought by either party against the other under this lease, the
prevailing party shall be entitled to recover all costs and
expenses, including the fees of its attorneys in such action or
proceeding in such amount as the court may adjudge reasonable as
attorneys' fees.
26. Waiver of Subrogation: Anything In this lease to the contrary
notwithstanding each party hereby waives any and all rights of
recovery, claim, action or cause of action against the other, its
agents, officers and employees, for any loss or damages that may
occur to the leased premises or any improvements thereto or the
Building of which the leased premises are a part, or any
improvements thereto, by reason of fire, the elements or any other
cause which could be Insured against under the terms standard fire
and extended coverage Insurance policies, regardless of cause or
origin, including negligence of the parties hereto, their agents,
officers and employees.
27. Signs: Lessor has not conveyed to the Lessee any rights in or
to the outer side of the outside wells of the Building of which
the leased premises forms a part. The Lessee shall not display or
erect any lettering, sign, advertisement, awning, or other
projection in or on the leased premises or in or on the Building,
or make any alteration, decoration, addition, or improvement in or
to the leased premises, or in or to the Building, without the
prior written consent of the Lessor. If such consent is granted,
the Lessee, at its sole expense, shall carry such workmen's
compensation and general liability insurance as the Lessor may
require.
28. Hold Harmless: Lessee shall hold Lessor harmless from all
damages arising out of any damage to any person or property
occurring in, on, or about the leased premises and the Building in
which the leased premises are located, except that Lessor shall be
liable to Lessee for damage resulting from the acts or omissions
of Lessor or its authorized representatives. Lessor shall hold
Lessee harmless from all damages arising out of any such damage.
A party's obligation under this paragraph to indemnify and hold
the other party harmless shall be limited to the sum that exceeds
the amount of insurance proceeds, if any, received by the party
being indemnified.
29. Liens: Lessee shall keep the leased premises and the Building
of which the leased premises are a part free from any liens
arising out of work performed, materials furnished, or obligations
incurred by Lessee and shall indemnify, hold harmless and defend
Lessor from any liens and encumbrances arising out of any work
performed or materials furnished by or at the direction of Lessee.
In the event that Lessee shall not, within twenty (20) days
following the imposition of any such lien, cause such lien to be
released of record by payment or posting of a proper bond, Lessor
shall have, in addition to all other remedies provided herein and
by law the
<PAGE>
right, but no obligation, to cause the same to be released by such means as
it shall deem proper. Including payment of the claim, giving also to such
lien. All such sums paid by Lessor and all expenses incurred by t in
connection therewith, including attorneys' fees and costs, shall be payable
to Lessor by Lessee on demand with interest of the maximum annual rate
permitted by law. Lessor shall have the right at all times to post and keep
posted on the leased premises any notices permitted or required by law, or
which Lessor shall deem proper, for the protection of Lessor and the leased
premises, and any other party having an interest therein, for mechanics and
materialmen's liens, and Lessee shall give to Lessor at least ten (10)
business days prior written notice of the expected date of commencement of
any work relating to alterations or additions to the leased premises.
30. Notices: In every Instance where It shall be necessary or desirable for
the Lessee to serve any notice or demand upon the Lessor, such notice or
demand shall be sent by United States Registered or Certified Mail, Postage
prepaid, addressed to the Lessor at see Paragraph number 39 or at such other
address of Lessor as may appear on the records of Lessee. Any notice or
demand to be given by the Lessor to
the Lessee shall be effective if mailed or delivered to the office of the
Lessee in the leased premises or at such other address as may appear on the
records of the Lessor. Notice mailed as aforesaid shall be deemed to have
been served a the time the same is posted.
31. Subordination: Attornment: At Lessor's option, this lease shall be
subject and subordinate to all ground and underlying leases which now exist
or may hereinafter be executed affecting the Building or the land upon which
the Building is situated or both, and to the lien of any mortgages or deeds
of trust in any amount or amounts whatsoever now or hereafter placed on or
against the land or improvements of which the leased premises are a part, on
or against Lessor's interest or estate herein, or on or against any ground
or underlying lease, without the necessity of the execution and delivery of
any further instruments on the part of Lessee to effectuate such
subordination. If any mortgages, trustee or ground lessor shall elect to
have this lease prior to the lien of its mortgage, deed of trust or ground
lease, and shall give written notice thereof to Lessee, this lease shall be
deemed prior to such mortgage, dead of trust or ground lease, whether this
lease is dated prior or subsequent to the date of said mortgage, dead of
trust or ground lease or the date of the recording thereof. Lessee covenants
and agrees to execute and deliver upon demand without charge therefor, such
further instruments evidencing such subordination of this lease to such
ground or underlying leases and to the lien of any such mortgages or deeds
of trust as may be required by Lessor. Lessee hereby appoints Lessor as
Lessee's attorney-in-fact, irrevocably, to execute and deliver any such
agreements, instruments, releases or other documents.
In the event any proceedings are brought for default under any ground
or any underlying lease or in the event of foreclosure or the exercise of
the power of sale under any mortgage or dead of trust made by Lessor
covering the Building of which the leased premises are a part, Lessee shall
attorn to the purchaser upon any such foreclosure or sale and recognize such
purchaser as Lessor under this lease, provided such purchaser expressly
agrees in writing to be bound by the forms of the lease.
32. Estoppel Certificate: Lessee shall within ten (10) days after receipt
of a request therefor from Lessor, executer, acknowledge and deliver to
Lessor a statement in writing (a) certifying that this lease is unmodified
and In full force and effect (or, if modified, is in full force and effect)
and the date to which rent and other charges are paid in advance, if any and
(b) acknowledging that there are not, to Lessee's knowledge, any uncured
defaults on the part of Lessor hereunder, or specifying such defaults if any
are claimed. Any such statement may be conclusively relied upon by a
prospective purchaser or encumbrancer of the Building of which the leased
premises are a part. Lessee's failure to execute such statement within such
time shall be conclusive upon Lessee (i) that this lease is in full force
and effect without modification except as may be represented by Lessor. (ii)
that there are no uncured defaults in Lessor's performance, and (iii) that
not more than one month's rent has been paid in advance. If Lessor desires
to finance or refinance said Building in which the leased premises are a
part, Lessee hereby agrees to deliver to any lender designated by Lessor
such financial statements of Lessee as may be reasonably required by such
lender. All such statements shall be received by Lessor in confidence and
shall be used only for the purpose herein set forth.
33. Transfer of Lessor's Interest: In the event of a sale or conveyance by
Lessor of Lessor's interest in the Building of which the leased promises
form a part other than a transfer for security purposes only, Lessor shall
be relieved, from and after the date specified in such notice of transfer,
of all obligations and liabilities accruing thereafter on the part of
Lessor, provided that any funds in the hands of Lessor at the time of
transfer in which Lessee has an interest, shall be delivered to the
successor of Lessor. This lease shall not be affected by any such sale and
Lessee agrees to attorn to the purchaser or assignee provided all Lessor's
obligations hereunder are assumed in writing by the transferee.
34. Insolvency or Bankruptcy of Lessee: The insolvency of Lessee pursuant to
California law with respect to the appointment of a receiver to Inks
possession of all or substantially all of the property of Lessee, or the
making of a general assignment for the benefit of creditors by Lessee shall
terminate this lease and entitle Lessor to re-enter and regain possession of
the leased premises. In the event that there shall be filed by or against
Lessee a petition in bankruptcy or for reorganization pursuant to any
statute of the United States the rights of Lessor and Lessee shall be
determined, if applicable, by the provisions of the Bankruptcy Reform Act of
1978 or any successor statute hereafter in effect.
35. General:
A. This lease shall be binding and inure to the benefit of the
parties hereto and their respective heirs, personal representatives,
successors and assigns.
B. This agreement may not be altered, changed or amended, except by
an instrument in writing signed by both parties.
C. This instrument along with any exhibits and attachments hereto
constitutes the entire agreement between Lessor and Lessee relative to the
leased premises. Lessor and Lessee agree hereby that all prior
contemporaneous oral agreements between and among themselves and their
agents or representatives relative to the leasing of the leased premises are
merged in or revoked by this agreement.
D. If any term or provision of this lease shall, to any extent, be
determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this lease shall not be affected thereby,
and each term and provision of this lease shall be valid and enforceable to
the fullest extent permitted by law.
E. The captions of the paragraphs of this lease are for convenience
only and shall not be deemed to be relevant in resolving any question of
interpretation or construction of any paragraphs of this lease. Exhibits
attached hereto, and addendums and schedules initialed by the by the
parties, are deemed by attachment to constitute part of this lease and are
incorporated herein.
F. The words 'Lessor' and 'Lessee', as used herein, shall include the
plural as well as the singular. Words used in neuter gender include the
masculine and feminine and words in the masculine or feminine gender include
the neuter. If there be more than one Lessor or Lessee, the obligations
hereunder imposed upon Lessor or Lessee shall be joint and several. If the
Lessees are husband and wife, the obligations shall extend individually to
their sole and separate property as well as to their community property.
G. The word 'rent' as used herein, shall include minimum monthly rent,
prepaid rent, percentage rent, if any, adjustments to rent, security
deposit, real property taxes and assessments, common area charges, operating
costs and any other similar charges payable by Lessee to Lessor.
H. Time is of the essence of this lease and each and every provision
hereof. All the terms, covenants, and conditions contained in this lease to
be performed by either party, if such party shall consist of more than one
person or organization, shall be deemed to be joint and several, and all
rights and remedies of the parties shall be cumulative and non-exclusive of
any other remedy at law or in equity.
I. No covenant, term or condition or the breach thereof shall be deemed
waived, except by written consent of the party against whom the waiver is
claimed, and any waiver or the breach of any covenant, term or condition
shall no be deemed to be a
<PAGE>
waiver of any proceeding or succeeding breach of the same or any other
covenant, term or condition. Acceptance by Lessor of any performance by
Lessee after the time the same shall have become due shall not constitute a
waiver by Lessor of the breach or default of any covenant, term or condition
or otherwise expressly agreed to by Lessor in writing.
J. Except as limited elsewhere in this lease, wherever in this lease Lessor
or Lessee is required to give its consent or approval to any action on the
part of the other. such consent or approval shall not be unreasonably
withheld. In the event of failure to give any such consent, the other party
shall be entitled to specific performance at law and shall have other
remedies as are reserved to it under this lease, but in no event shall
Lessor or Lessee be responsible in monetary damages for failure to give
consent unless said consent is withheld maliciously or in bad faith.
K. If Lessee is a corporation, each individual executing this lease on
behalf of said corporation represents and warrants that he/she is duly
authorized to execute and deliver this lease on behalf of said corporation
in accordance with a duly adopted resolution of the Board of Directors of
said corporation or in accordance with the Bylaws of said corporation, and
that this lease is binding upon said corporation in accordance with its
terms. If Lessee is a corporation, Lessee shall, within thirty (30) days all
execution of this lease, deliver to Lessor a certified copy of the
resolution of the Board of Directors of said corporation authorization, or
ratifying the execution of this lease.
L. All reference to the lease term shall include any extensions of such term.
36. Rights Reserved to Lessor: Lessor shall have the following rights
exercisable without notice, unless otherwise herein provided, and without
liability to Lessor for damage or injury to property, person or business
(all claims for damage being hereby released), and without effecting an
eviction or disturbance of Lessee's use or possession or giving rise to any
claim for setoffs, or abatement of rent:
A. Lessor shall have the right to relocate the leased premises to another
part of the Office Complex in which the leased premises are located in
accordance with the following:
(i) The new premises shall be substantially the same in size, dimensions,
configuration, decor and nature as the leased premises described in this
lease and shall be placed in that condition by Lessor at its cost.
(ii) The physical relocation of the premises shall be accomplished by
Lessor at its cost.
(iii) Lessor shall give Lessee at least thirty (30) days notice of
Lessor's intention to relocate the leased premises.
(iv) The physical relocation of the leased premises shall take place
during evenings, weekends, or otherwise so as to incur the least
inconvenience to Lessee.
(v) All reasonable costs incurred by Losses as a result of the
relocation shall be paid by Lessor.
(vi) If the relocated premises are smaller than the leased premises as
they existed before the relocation, rent shall be reduced to a sum computed
by multiplying the rent specified in Paragraphs 5 and 6 hereof by a
fraction, the numerator of which shall be the total number of net rentable
square feet in the relocated premises, and the denominator of which shall be
the total number of net rentable square feet in the leased premises before
relocation.
(vii) The parties immediately shall execute an amendment to this lease
stating the relocation of the leased premises and the reduction of rent, if
any.
(viii) Should Lessee refuse to permit Lessor to relocate Lessee to
such new premises at the end of the said thirty (30) day period, such
refusal shall constitute a default by Lessee pursuant to paragraph 23A (iii)
of this lease.
B. To change the name or street address of the Building in which the
leased premises are located.
C. To install and maintain signs on the exterior and interior of the
Building in which the leased premises are located.
D. To designate all sources furnishing sign painting and lettering, ice,
mineral or drinking water, beverages, foods, towels, vending machines or
toilet supplies used or consumed on the leased premises.
E. To have pass keys to the leased premises.
F. To decorate, remodel, repair, alter or otherwise prepare the leased
premises for occupancy during the last six months of the term hereof, if
during or prior to such time Lessee vacates the leased premises, or at any
time after Lessee abandons the leased premises.
G. To enter the leased premises at reasonable hours to make inspections,
or to exhibit the leased premises to prospective tenants, purchasers or
others, or for other reasonable purposes.
H. To approve the weight, size and location of sates, computers, and
other heavy articles in and about the leased premises and the Building and
to require all such items and other office furniture and equipment to be
moved in and out of the Building and leased premises only at such times and
in such manner as Lessor shall direct and in all events at Lessee's sole
risk all responsibility.
I. At any time or times, to decorate and to make, at its own expense,
repairs, alterations, additions and improvements, structural or otherwise,
in or to the leased promises, the Building or part thereof, and to perform
any acts related to the safety, protection or preservation thereof, and
during such operations to take into and through the leased premises or any
part of the Building all material and equipment required to close or
temporarily suspend operation of entrances, doors, corridors, elevators or
other facilities, provided that Lessor shall cause as little inconvenience
or annoyance to Lessee as is reasonably necessary in the circumstances.
Lessor may do any such work during ordinary business hours and Lessee shall
pay Lessor for overtime and for any other expenses incurred if such work is
done during other hours at Lessee's request.
J. To do or permit to be done any work in or about the leased premises or
the Building or any adjacent or nearby building, land, street or alley.
K. To grant to anyone the exclusive right to conduct any business or
render any service in the Building, provided such exclusive right shall not
operate to exclude Lessee from the use expressly permitted by Paragraph 14
of this lease.
<PAGE>
Lease Dated March 31, 1999 (Tangible Investments of America, Inc.- 17842
Irvine Blvd.-
Suite # 204, Tustin, Ca.) - (Approximately 1,
722 sq.ft.)
37. NO OPTION: The submission of this Lease by Lessor, its agent or
representative for examination or execution by Lessee does not
constitute an option or offer to lease the Premises upon terms
and conditions contained herein or a reservation of the
Premises in favor of Lessee, it being intended hereby that this
Lease and delivery of a fully executed counterpart hereof to
Lessee.
38. BASE RENT: The rental rate shall be as follows:
May 1, 1999 - April 30, 2000 $ 2,066.40 / month.
1
39. NOTICES: All notices or demands under this Lease shall be by
Certified Mail, postage prepaid.
If sent to Lessor and its managing agent, at the
address below:
TUSTIN BUSINESS CENTER, LP.
c/o OPTIMA ASSET MANAGEMENT SERVICES, INC.
1600 Dove Street, Suite #480
Newport Beach, CA 92660
If sent to Lessee, at the address below:
TANGIBLE INVESTMENTS OF AMERICA, INC.
Attn: Silvano DiGenova - President
1550 So. Pacific Coast Highway - # 103
Laguna Beach, Ca. 92651
[and / or]
17842 Irvine Blvd. - Suite # 204
Tustin, California 92780
40. TENANT IMPROVEMENTS: Lessee accepts the space in as-is condition; except
A. Lessor to replace ceiling tiles and ligh t diffusers throughout
so that they are uniform in pattern and color.
B. Lessor to repaint the suite with building standard paint, color
to be chosen by the Lessee.
C. Lessor to install If expand the existing interior window (marked
in Exhibit "A") to a dimension which is approximately one (1)
foot wider and one (1) foot lower in size.
D. Lessor will close off the opening to the adjacent space which
will be known as Suite # 208, which is not apart of this lease.
41. INSURANCE: In addition to the provisions of Paragraph 20, Lessor and
any mortgagee of Lessor, are to be insured under all insurance policies as
their respective interests may appear; and shall be added as additional
insured on any liability policy. Any mortgagee of Lessor of which Lessee has
been provided with written notice shall be named as loss payee on all fire
and property damage policies.
42. DESTRUCTION: In addition to the provisions of Paragraph 19, Lessor's
obligation to restore shall also be based upon the availability of
sufficient insurance proceeds. If the casualty is not covered by Lessor's
insurance, and Lessor has carried insurance of the type customarily carried
by Owners of similar office building in the area, then Lessor reserves the
right to terminate the Lease by written notice to Lessee.
43. DEFAULT; LESSOR'S REMEDIES: In addition to the provisions of
Paragraph 23, Lessor has the remedy described in California Civil Code
Section 1951.4 - Lessor may continue Lease in effect after Lessee's breach
and abandonment and recover the rent as it becomes due, since Lessee had the
right to sublet or assign subject only to reasonable limitations.
<PAGE>
44. INDEMNIFICATION: Paragraph 28 is substituted with the following:
Lessee shall indemnify, defend and hold harmless Lessor against and from any
and all claims arising from Lessees's uses of the Premises or the conduct
of its business or from activity, work or thing done, permitted or suffered
by Lessee in or about the Premises. Lessee shall further indemnify, defend
and hold harmless Lessor against and from any and all claims
arising from many breach or default in the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from
any negligence or misconduct of Lessee or of its agents or employees, and from
and against all costs, attorneys fees, expenses and liabilities incurred
in connection with any such claim or any action or proceeding brought with
respect thereto. Notwithstanding the foregoing, Lessee shall have no obligation
to indemnify Lessor against, and Lessor shall not be released from, any and
all claims arising from Lessor's own gross negligence or willful misconduct,
or that of its agents employees or contractors, Lessor's violation of law, or
a material breach of its obligations under this lease. In case any action or
proceeding shall be brought against Lessor by reason of any such claim, upon
notice from Lessor, Lessee shall defend the same at Lessee's expense by counsel
approved in writing by Lessor. Notwithstanding the foregoing, Lessor shall be
responsible for all risk and damage associated with Lessor's use of the
Premises and the use of the Premises by any of Lessor's agents, employees or
invitee's.
45. HAZARDOUS WASTE: Lessee agrees to comply with local and federal
ordinances with respect to hazardous waste.
46. AMERICAN DISABILITIES ACT: Lessee acknowledges that it is aware of
the fact that the American Disabilities Act (ADA) became effective in July
of 1992. Lessee acknowledges that it is responsible for compliance with this
legislation to the extent that compliance requires changes to the Premises
rented by Lessee. To the extent that the ADA requires changes to the common
areas, then Lessor shall be responsible for making any such changes and
shall charge for and include such costs and expenses as operating costs in
the manner provided in Paragraph 6.13 above.
47. WAIVER OF SUBROGATION: Notwithstanding anything to the contrary in
this Lease, the parties hereto release each other and their respective
agents, employees, successors, assigns and subtenants for all liability for
injury to any person or damage to any property that is caused by or results
from a risk which is actually insured against by such party, without regard
to the negligence or wilfully misconduct of the entity so released. Each
party shall use its best efforts to cause each insurance policy it obtains
to provide that the insured thereunder waives all right of recovery by way
of subrogation as required herein in connection with any injury or damage
covered by the policy.
If such insurance policy cannot be obtained with such waiver of subrogation
or if such waiver of subrogation is only available at additional cost, and
the party for whose benefit the waiver is not obtained does not pay such
additional cost, then the party obtaining such insurance shall notify the
other party of that fact.
48. ATTORNEY'S FEES: If either Lessor or Lessee shall bring any action or
legal proceeding to enforce, protect or establish a term or covenant of this
Lease, the prevailing party shall be entitled to recover its reasonable
attorneys' fees, court costs and experts' fees as may be fixed by the court.
49. LESSOR'S LIABILITY: The term 'Lessor' as used herein shall mean only
the Owner or Owners, at the time in questions, the fee title or a Lessee's
interest in a ground lease of the Building, and in the event of any transfer
of such title or interest, Lessor herein named (and in case of subsequent
transfer then the grantor) shall be relieved from and after the date of such
transfer of all liability as respects Lessor's obligations hereafter to be
performed, provided that any funds in the hands of Lessor or the then
grantor at the time of such transfer, in which Lessee has an interest, shall
be delivered to the grantee. The obligations contained in this Lease to be
performed by Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods of ownership,
provided that Lessor shall enter into an assignment and assumption agreement
with any successor landlord prior to being relieved of its liability hereunder.
<PAGE>
50. ASSIGNMENT AND SUBLETTING: With respect to any assignment, subletting
or transfer, Lessee shall provide Lessor with financial statements of the
proposed assignee or sublessee, the details of the proposed transfer and any
other information reasonably required by Lessor. Lessor shall not
unreasonably withhold its consent based upon its review of foregoing items,
and shall deliver its consent (or its denial of consent) within
fourteen (14) days after delivery of the written request for consent and all
the information required hereunder. Notwithstanding any consent given by
Lessor, no assignment or subletting shall, without the further written
approval of Lessor, which may be withheld in Lessor's sole discretion, shall
release Lessee of Lessee's obligation hereunder, and Lessee will remain
liable for the payment and performance of this Lease. Landlord shall not
unreasonably withhold its' approval allowing tenant to assign or sublet all
or part of its leasehold interest during the term of this Lease. In the
event Tenant subleases the space for an amount in excess of current rent,
Landlord shall be entitled to fifty percent (50%) of the additional amount.
51. BROKER: Lessee warrants to Lessor that it has worked with no Brokers
or representatives on their behalf.
52. OPTION TO RENEW: Provided that the Lessee is not then in default of this
Lease, Lessor grants to Lessee an Option to Renew this Lease for an
additional one (1) year period at the then prevailing rate and terms for
space in the building. In order to retain this granted option Lessee must
notify the Lessor in writing, of its intention to renew the lease no later
than 90 days prior to the termination of this lease.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
have duly executed this Lease with the Exhibits attached hereto.
LESSOR: TUSTIN BUSINESS CENTER, LIP
a California Limited Partnership
By: Optima Asset Management/Services, Inc.
Its Managing Agent
By: /s/Douglas C. Morehead Date: 4/9/99
Its: President
LESSEE: TANGIBILE INVESTMENTS OF AMERICA, INC.
A Pennsylvania Corporation
By: /s/Silvano Di Genova Date: 4/8/99
Name: Silvano Di Genova
Title: President
AND
By: /s/Silvano Di Genova
Name: Silvano Di Genova
Title: Secretary/Treasurer
NOTICE TO PERSON(S) OBTAINING SIGNATURES OF LESSEE/TENANT
If Lessee is a corporation, the authorized officers must sign on
behalf of the corporation, and indicate the capacity in which they
are signing. The Lease must be executed by the president or
vice-president and the secretary or assistant secretary, unless the
bylaws or a resolution of the board of directors shall otherwise
provide, in which event, the bylaws or a certified copy of the
resolution as the case may be, must be attached to the this Lease.
<PAGE>
EXHIBIT A - FLOOR PLAN, SUITE 204
<PAGE>
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be
inscribed displayed, or printed or affixed on or to any part of the
outside or inside of the Building/Office Complex or the leased
premises without the prior written consent of Lessor and Lessor shall
have the right to remove any such sign, placard, picture,
advertisement, name or notice without notice to and at the expense of
Lessee. All approved signs or lettering on doors shall be printed,
painted, affixed or inscribed at the expense of Lessee by a person
approved of by Lessor. Lessee shall not place anything or allow
anything to be placed near the glass or any window, door, partition or
wall which may appear unsightly from outside the leased premises,
provided however, that Lessor may furnish and install a Building
standard window covering at all exterior windows. Lessee shall not
without prior written consent of Lessor cover or otherwise sunscreen
any window.
2. Lessor shall approve in writing prior to installation the method of
attachment of any objects affixed to walls, ceilings, or doors.
3. The bulletin board or directory of the Building/office Complex will be
provided exclusively for the display of the name and location of
Lessee only and Lessor reserves the right to exclude any other names
therefrom.
4. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by Lessee or used by Lessee for any
purpose other than ingress to and egress from the leased premises. The
halls passages, exits, entrances, elevators, stairways, balconies and
roof are not for the use of the general public and the Lessor shall in
all cases retain the right to control and prevent access thereto by
all persons whose presence in the judgement of the Lessor shall be
prejudicial to the safety character, reputation and interests of the
Building/office Complex and its Lessees, provided that nothing herein
contained shall be construed to prevent ouch access to persons with
whom the Lessee normally deals in the ordinary course of Lessees
business unless such persons are engaged in illegal activities. No
Lessee and no employees or invitees of any Lessee shall go upon the
roof of the Building/office Complex.
5. Locks - No additional locks or bolts of any kind shall be placed upon
any of the doors or windows by Lessee, not shall any changes be made
in existing locks or the mechanisms thereof without the prior written
consent of the Lessor. Lessee must, upon the termination of Lessees
tenancy restore to Lessor all keys of storage, offices and toilet
rooms either furnished to or otherwise procured by Lessee and in the
event of the loss of any keys so furnished Lessee shall pay to Lessor
the cost thereof or of changing the lock or locks opened by lost keys
if Lessor deems it necessary to make a change.
6. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed
and no foreign substance of any kind whatsoever shall be thrown
therein and the expense of any breakage, stoppage or damage resulting
from the violation of this rule shall be borne by the Lessee who or
whose employees or invitees shall have caused it.
7. Lessee shall not overload the floor of the leased premises or mark,
drive nails, screw or drill Into the partitions, woodwork or plaster
or in any way deface the leased premises or any part thereof. No
boring cutting or stringing of wires shall be permitted except with
the prior written consent of the Lessor and an'the Lessor may direct.
8. No furniture, freight or equipment of any kind shall be brought into
the Building/Office Complex without the consent of Lessor and all
moving of the same into or out of the Building/Office Complex shall be
done at such time and in such manner as Lessor shall designate.
Lessor shall have the right to prescribe the weight, size and position
of all safes and other heavy equipment brought into the
Building/Office Complex and also the times and manner of moving the
same in and out of the Building/Office Complex. Safes or other heavy
objects shall, if considered necessary by Lessor, stand on wood strips
of such thickness as is necessary to properly distribute the weight.
Lessor will not be responsible for loss of or damage to any such safe
or property from any cause and all damage done to Building/Office
Complex by moving or maintaining any such safe or other property shall be
<PAGE>
repaired at the expense of Lessee. There shall not be used in any
space or in the public halls of the Building/office Complex either by
any Lessee or others any hand trucks except those equipped with rubber
tires and side guards.
9. Janitorial Service - Lessee shall not employ any person or persons for
the purpose of cleaning the leased premises without the consent of
Lessor. Lessor shall be in nowise responsible to Lessee for any loss
of property from the leased premises, however occurring or for any
damage done to the effects of Lessee by the Janitorial Service or any
of Lessors employees or by any other person. Janitorial service will
not include the cleaning of carpets and rugs other than vacuuming.
Lessee shall not cause unnecessary labor by reason of Lessees
carelessness and indifference in the preservation of good order and
cleanliness.
10. Lessee shall not use, keep or permit to be used any foul or noxious
gas or substance in the leased premises, or permit or suffer the leased
premises to be occupied or used in a manner offensive or objectionable to
the Lessor or other occupants of the Building/Office Complex. No Lessee
shall make or permit to be made any unseemly or disturbing noises or
disturb or interfere with occupant of this or neighboring buildings or
leased premises or those having business with them whether by the use of
any musical instruments, radio, phonograph, unusual noise, or in any other
way. No Lessee shall throw anything out of doors or down the passageways.
No trash shall be put in the common areas before 5:00 p.m.
11. Lessee shall not use or keep in the leased premises or the
Building/Office Complex any kerosene, gasoline or inflammable or
combustible fluid or material, or use any method of heating or air
conditioning other than that supplied by Landlord without prior consent
of Landlord.
12. No cooking shall be done or permitted by any Tenant on the Premises
nor shall the Premises be used for the storage of merchandise for
washing clothes, for lodging or for any improper, objectionable or
immoral purposes.
13. Lessor will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires will
be allowed without the consent of Lessor. The location of telephones, call
boxes and other office equipment affixed to the leaned premises shall be
subject to the approval of Lessor.
14. Installation of Floor coverings - No Lessee shall lay linoleum or
other similar floor covering so that the same shall be affixed to the
floor of the leased premises in any manner except by a paste or other
material which may easily be removed with water, the use of cement or
other similar adhesive materials being expressly prohibited. The method
of affixing any such linoleum or other similar floor covering to the
floor shall be subject to approval by Lessor. The expense of repairing
any damage resulting from a violation of this rule shall be borne by
Lessee by whom or by whose agents, employees or visitors the damage
shall have been caused.
15. Carpet/Floor Protection - Lessee shall provide and use chair pads and
carpet protectors at all desk and furniture locations.
16. No furniture, packages, supplies; equipment or merchandise will be
received in the Building/Office Complex or carried up or down in the
elevators except between such hours and in such elevators as shall be
designated by Lessor.
17. On Saturdays, Sundays and legal holidays and on other days between
the hours of 6:OO p.m. and 8:00 a.m. the following day. Access to the
Building/Office Complex or to the halls, corridors, elevators or
stairways in the Building/Office Complex or to the leased premises
may be refused unless the person seeking access in known to the
person or employee identified. The Lessor shall in no case be liable
for damages for any error with regard to the admission to or
exclusion from the Building/Office Complex of any person. In case of
invasion, mob, riot, public excitement or other commotion, the Lessor
reserves the right to prevent access to the Building/Office Complex
during the continuance of the same by closing the doors or otherwise
for the safety of the Lessees and protection of property in the
Building/Office Complex. The Lessor reserves the right to close and
keep locked all entrance and exit doors of the Building/Office
Complex on Saturdays, Sundays and legal holidays and on other days
between the hours of 6:00 p.m. and 8:00 a.m. and during such further
hours as Lessor may deem advisable for the adequate protection of
said Building/Office Complex and the property of its Lessees.
<PAGE>
18. All entrance doors to the leased premises shall be left locked when
the leased premises are not in use and all doors opening to public
corridors shall be kept closed for normal ingress and egress from the
leased premises.
19. Lessor reserves the right to exclude or expel from the Building/
office Complex any person who in the judgement of Lessor is
Intoxicated or under the influence of liquor or drugs, or who shall
in any manner do any act in violation of any of the rules and
regulations of the Building/office Complex.
20. Employees of Lessor shall not perform any work or do anything outside
of their regular duties unless under special instructions from the Lessor
and no employee will admit any person (Lessee or otherwise) to any office
without specific instructions from the Lessor.
21. No vending machines of any description shall be installed, maintained
or operated upon the leased premises without the prior written consent of
the Lessor.
22. Lessor shall have the right exercisable without notice and without
liability of Lessee to change the name and street address of the
Building/office complex of which the leased premises are a part.
23. Lessee agrees that it shall comply with all fire and security
regulations that may be issued from time to time by Lessor and
Lessee also shall provide Lessor with the name of a designated
responsible employee to represent Lessee in all matters pertaining
to such fire or security regulations.
24. Lessor reserves the right by written notice to Lessee to rescind
alter or waive any rule or regulation at any time prescribed for the
Building/Office Complex when in the Lessors judgement it is
necessary, desirable or proper for the beat interest
of the Building/Office Complex and its Lessees.
25. Lessee shall not disturb - solicit or canvass any occupant of the
Building/Office Complex and shall cooperate to prevent same.
26. Without the prior written consent of Lessor, Lessee shall not use
the name of the Building/Office Complex in connection with in
promoting or advertising the business of Lessee except as Lessees
address.
27. Lessor shall furnish reasonable amounts of heating and air
conditioning during the hours of 7:00 a.m. to 5:00 p.m. Monday
through Friday. In the event Lessee requires heating and air
conditioning during off hours, Saturdays, Sundays or holidays,
Lessor shall on notice, provide such services at the rate determined
by the Lessor.
28. Energy Conservation Measures - Lessee shall abide by all energy
conservation measures employed by Lessor, including but not limited
to requirements that lights be extinguished upon leaving the leased
premises and that draperies be closed at times specified by Lessor.
Lessee shall not use any method of heating or air conditioning other
than that supplied by Lessor.
29. Equipment Defects - Lessee shall give Lessor prompt notice of any
accidents to or defects in the water pipes, gas pipes, electric lights
and fixtures heating apparatus, or any other service equipment.
30. Parking - Cars are to park in properly marked spaces only. Under no
circumstances are cars to (a) back in, (b) park in spaces reserved for
other Lessees and/or building management, (c) park in driveways, (d) park
in front of entrances to the Building/Office Complex, (e) park in
unmarked areas, (f) park in loading zones, (g) park in two or more
spaces or (h) park in areas, reserved for the handicapped. Lessor shall
have the right to cause improperly parked cars to be towed at the car
owners expense. Lessor shall have from time to time the right to
review Lessees allotment of parking spaces and assess a fee for any
excessive usage thereof.
WELLS FARGO BANK
BUSINESS LENDING DIVISION
CONFIRMATION LETTER
DECEMBER 01, 1998
TANGIBLE INVESTMENTS OF AMERICA, INC.
1550 S. PACIFIC COAST HWY.,
SUITE 103
LAGUNA BEACH, CA 92651-3649
RE, $600,000.00 PRIMELINE
WELLS FARGO BANK N.A. ("Bank") agrees to make available to TANGIBLE
INVESTMENTS OF AMERICA, INC. ("BORROWER") a PrimeLine ("Credit"). The Credit
shall bear interest and be repayable in accordance with the terms and
conditions of the Agreement. The Agreement consists of (1) this Confirmation
Letter (this "Letter"), (2) the Business Lending Disclosure dated August 01,
1997 (the "Disclosure") and (3) any Related Documents. All terms and
conditions of the Disclosure and Related Documents are incorporated herein
by reference for all purposes, all capitalized terms not defined in this
letter are defined in the Disclosure.
Promise To Pay. Borrower promises to pay to Bank, or order, the principal
amount of $600,000.00 or so much as may be advanced and outstanding from
time to time, together with interest on the unpaid outstanding principal
balance of each Advance. Interest shall be calculated from the date of each
Advance until repayment of each Advance, Borrower will pay Bank at Bank's
address shown in this letter or at such other place as Bank may designate in
writing.
Availability Period. The Availability Period ends the 10th day of the 12th
month following the first payment due date as described below. During the
Availability Period Borrower may borrow, repay, and borrow again from time to
time under this revolving line of credit up to the Credit Limit.
Interest. The interest rate applicable to this Credit is subject to change
from time to time based on changes in the Prime Rate. The Prime Rate
currently is 7,760% per annum. the interest rate to be applied to the unpaid
principal balance of credit will be 2.625% above the prime rate resulting in
an initial rate of 10.375% per annum.
Interest Accrual Basis. Interest shall be computed on a 3651360 simple
interest basis; that Is, by multiplying the ratio of the annual interest
rate over a year of 260 days, times the outstanding principal balance, limes
the actual number of days Me principal is outstanding.
Payments. Borrower shall pay regular monthly payments of accrued
unpaid interest. If the Availability Period begins on or before the
24th day of any month, the first payment due date shall be the 10th
day of the next month; if the Availability Period begins after the
24th day of any month, the first
payment due date shall be the 10th day of the second month following the
beginning of the Availability Period. Payments shall be due on the same day
of each month thereafter until maturity of the Credit, which is the last day
of the Availability Period, at which time all remaining unpaid principal,
accrued interest and any other amounts owed in connection with this Credit
shall become due and payable in full.
Automatic Debit of Payments. Bank is authorized to automatically debit
payments and other amounts owed in connection with this Credit from
Borrower's Wells Fargo account number 0754-6O7463.
Disbursement Information. The estimated proceeds of the Credit shall be
disbursed as follows:
<PAGE>
Collateral. Subject to the terms and conditions of the Disclosure, as
security for the obligations set forth in Section 2.1 of the Disclosure,
TANGIBLE INVESTMENTS OF AMERICA, INC., as Grantor, pledges and grants to
Bank a first priority security interest in the following personal property,
whether existing or hereafter arising, now owned of hereafter acquired, and
wherever located, and all Proceeds of the foregoing (including insurance):
All accounts, inventory, equipment, instruments, general intangibles and
contract rights.
Commitment Fees. Borrower shall pay a commitment fee of $3,000.00 for the
availability of the Credit through the maturity date.
Third Party Fees. Borrower shall pay estimated fee(s) as follows:
$60.00 UCC Filing Fee
Payment of Fees. Estimated fees will be paid as follows:
UCC Filing Fee From Account 0754607463
Commitment Fee From Account 0754607463
Overdraft Protection for Lines of Credit. During the Availability Period
Bank shall automatically transfer from Borrower's Credit sufficient funds to
cover overdrafts in 0764607463. Bank may in its sole discretion decline to
transfer funds if a Default has occurred and is continuing, or if Bank
believes that the transfer results from a payment an the Credit or if the
transfer would cause the outstanding balance of the Credit to exceed the
maximum amount available under the Credit.
Trade Finance Subfeature. During the Availability Period Borrower shall have
available a S600,000.00 Trade Finance Subfeature subject to the terms
described in the Appendix of the Disclosure.
Prepayment Terms. Borrower may prepay principal of the Credit at any time,
in any amount, without penalty.
Extensions, Renewals and Increases. The Credit may be extended, renewed or
increased at Bank's sole discretion. Bank will notify Borrower in writing of
any modification and the terms of any such modification will be deemed to
have been accepted if Borrower does met deliver to Sank a written rejection
within. 10 days from the date of notification or draws additional funds at
any time following the date of notification.
Other Indebtedness. Borrower shall not obtain a working capital line of
credit from another lender without the prior written consent of Bank.
Counterpart. This document may be signed in any number of separate copies,
each of which shall be effective as an original, but all of which taken
together shall constitute a single document.
Facsimile. An electronic transmission or other facsimile of this Letter or
any signed document shall be deemed an original and shall be admissible as
evidence of the document and the signers execution.
Purpose. The proceeds of the Credit &hall be used primarily for
business or commercial purposes.
Related Documents. The Credit also is conditioned upon execution and
delivery of this Confirmation Letter and the following Related Documents
described below.
*Authorization to Payoff and Close
<PAGE>
At the time the Agreement is signed and delivered to Bank, the persons
signing below, including without limitation the Borrower(s), any Grantors(s)
and any Guarantor(s), acknowledge receipt of the Agreement, including the
Disclosure and Related Documents, and accept all terms and conditions
contained in them. Unless a fully signed copy of this Letter and all Related
Documents is received by Bank within 30 days, this offer to extend credit will
expire. This offer is not transferable or assignable and may be withdrawn or
modified at any time prior to Bank's receipt of the above fully signed
documents.
All States (except Oregon). This Letter, the Disclosure, and any Related
Documents represent the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties relating to this Credit.
Oregon only. Statutory disclosure to Oregon residents: Under Oregon law,
most agreements, promises and comitments made by a lender after October 3,
1989, concerning loans and other credit extensions which are not for
personal, family or household purposes or secured solely by the borrower's
residence must be in writing, express consideration and be signed by the
lender to be enforceable.
if you have any questions, please contact me at (714) 251-4995, For future
reference, please send all correspondence to the Bank to the following
address: Business Lending Division, 177 Park Center Plaza, MAC #0614-011,
San Jose, CA 95113.
WELLS FARGO BANK N.A. ("Bank")
Name: Adam Griamar
Title: Vice-President
Dated: December 01, 1998
Guarantor Acknowledgment:
By signing below, Guarantor acknowledges receipt of a copy of the
Disclosure, guarantees the Credit, and agrees to the terms and
provisions of this Letter and Chapter 3 of the Disclosure. The
guaranty amount is $600,000.00. The Guarantor's address is:
32001 PACIFIC COAST HIGHWAY, LAGUNA BEACH, CA 92660
SILVANO DIGENOVA
By:/s/Silvano Digenova
Name: SILVANO DIGENOVA
Title: Individual
<PAGE>
Borrower and Grantor Acknowledgment and Acceptance:
By signing below, Borrower and Grantor acknowledge receipt of the Agreement,
including the Disclosure and Related Documents, and agree to the terms and
provisions contained in them.
TANGIBLE INVESTMENTS OF AMERICA, INC., a S-Corp
By:/s/Silvano Digenova
Name: SILVANO DIGENOVA
Title: President
