UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] Annual report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission File No. 0-27121
ILIVE, INC.
(Name of Small Business Issuer in Its Charter)
NEVADA 95-4783826
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
242 N. CANON DRIVE, 3RD FLOOR
BEVERLY HILLS, CALIFORNIA 90210
(Address of Principal Executive Offices) (Zip Code)
(310) 285-5200
(Issuer's Telephone Number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.001
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports); and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ] No
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $862,614
State the aggregate market value of voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked prices of such common equity, as
of a specified date within the past 60 days. (See definition of affiliate in
rule 12b-2 of the Exchange Act.) $3,933,878
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date. 15,398,334
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the form 10-KSB (e.g., Part I, Part II, etc. )
into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The listed documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24,
1990).
None.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
<PAGE>
PART I
This Annual Report 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.
ITEM 1 - DESCRIPTION OF BUSINESS
COMPANY OVERVIEW
iLive, Inc. ("iLive" or "the Company"), is a Nevada Corporation headquartered in
Beverly Hills, California. The Company is an Internet based online
entertainment media company that produces its own branded shows, music and other
original and sponsored entertainment.
HISTORY OF THE COMPANY
The Company was originally incorporated under the laws of the State of Nevada in
April 1987 as Sandalwood Corporation. In 1988, Sandalwood sold its existing
operations and became inactive. In November 1994, Sandalwood acquired Spaceplex
One., Inc., a New York corporation and changed its name to Spaceplex Amusement
Centers International, Ltd. ("Spaceplex"). Spaceplex, through its
subsidiaries, engaged in the business of operating family amusement centers. In
April 1996, Spaceplex filed for Chapter 11 bankruptcy proceedings. As a result
of those proceedings, Spaceplex satisfied all outstanding debts and claims
utilizing all of its remaining assets and discontinued all obligations.
Spaceplex was discharged from bankruptcy in April 1996. In May 1996 the Company
changed its name to Air Energy, Inc., and in December 1997, the Company changed
its name to Powerhouse International, Inc. From May 1996 until October 1999,
the Company was inactive. On September 30, 1999, the Company acquired all of
the outstanding common stock of Asia Pacific Co, Ltd., a Nuie corporation
("Asia-Pacific") in exchange for 690,000 shares of the Company's Common Stock.
Asia-Pacific's principal asset consists of a 64% ownership interest in 246 LLC,
a California limited liability corporation d.b.a Chasen's ("Chasen's"), a
restaurant located in Beverly Hills, California. On October 21, 1999, the
Company changed its name to iLive, Inc. to better reflect its current business
plan.
BUSINESS OF THE ISSUER
iLive, Inc. ("iLive" or the "Company") is an Internet based online entertainment
media company. The Company operates a broadcast entertainment Internet
destination located at www.iLive.com. The Company plans to offer a wide array
of entertainment and musical content through its website which will consist of
the following:
- iLive Shows: iLive produces, directs and films many of its own shows
for broadcast live and on-demand over the Internet. These shows are filmed in
broadcast quality so that as an audience following grows the company maintains
the ability to support, repackage, license, sell and deliver this entertainment
to the consumer via all forms of media:
- Beauty Pageants: Currently, iLive owns the domain name and trademark
rights to Miss Beverly Hills.com. iLive also owns Mrs. Beverly Hills, Miss Teen
Beverly Hills, Mr. Beverly Hills, and Miss Black Beverly Hills.com. The beauty
pageant winners will be determined by the most combined Internet and Club votes.
With the winner receiving a modeling contract, each contestant will be highly
motivated to market herself and have everyone she knows vote for her at
iLive.com. Miss Beverly hills will also lend itself to the licensing of name
products to potentially include: beauty, bath, hair products, calendars and
clothing among others.
<PAGE>
- Paul Ryan Show: The Paul Ryan Show is a talk/variety dinner show held
upstairs in the Jockey Club at Chasen's. Mr. Ryan has hosted over 506 episodes
with guest including Robin Williams, Regis Philbin, Brooke Shields, Jay Leno,
Jerry Seinfeld, Ted Danson and others.
- Ballers: Ballers is a sports talk show that will take the viewer behind
the scenes into the life of a professional athlete. The show will include
interactive audience participation and the ability to auction sports
memorabilia.
- Beverly Hills Lifestyles: The Company's take on Lifestyles of the Rich
and Famous. This show will allow the viewer to participate in one of the most
desirable lifestyles in the world. The viewer will attend charity functions,
private parties, film debuts and wrap parties. The Company's Beverly Hills
Lifestyles show will allow everyone to see the world through celebrities' eyes.
Other shows currently under development include: "Miss World United States," "A
day in the Life of ," "Behind the Scenes," and "iLive Undercover."
- iLive Music: iLive music will offer musicians the opportunity to promote
themselves over the Internet as well as the opportunity to market their products
through the Company's Web site. Artists will also have the opportunity to have
video their performances played over iLive's Web site
CHASEN'S / THE JOCKEY CLUB
Currently, the Company's "hard asset" traditional business is comprised of
Chasen's / The Jockey Club, a restaurant located in the heart of Beverly Hills.
The Company, through its wholly-owned subsidiary, Asia Pacific, a Niue company,
owns a 64% interest in 246 LLC, a California limited liability company d.b.a.
Chasen's. Since completing this acquisition of 246 LLC, the Company has decided
to divest itself of its restaurant operations either in the form of a
restructuring or an outright sale. The Company intends to focus all of its
efforts towards the development of its Internet operations.
ILIVE.COM
The Company plans for its website to encompass the following features:
- - MP3/video archive and live online events
- - A comprehensive entertainment destination focusing on broadband and
e-commerce
- - Original and sponsored entertainment, television style interactive
interviews, concerts and high-end products available for purchase and
auction.
- - Membership influenced artist development
- - Character driven content
- - Extensive customer loyalty programs to attract and keep user attention
- - Monthly CD-Rom magazine with music and videos featuring iLive entertainment
- - E-commerce, CD sales, artist paraphernalia, concert tickets and auction
items
- - "Vortal" (vertically integrated portal) style reporting on the entertainment
industry
- - Partnerships or acquisitions of other like-minded entertainment properties.
<PAGE>
The Company intends to launch in two phases. Phase I (which is currently
operational in test form) offers a full featured record label package. The
Company views this initiative as a means to quickly build an audience which it
will usher and introduce to the iLive Network (Phase I).
Phase I: iLive Music and Online Launch:
During this phase, the Company plans to launched iLive.com as a music site. The
site is intended to be a place where independent and signed bands can
upload/self-publish (with iLive editorial approval) bios, music and fan
information. The consumer is able to download the bands music in MP3 format
and/or Real Media format, vote on their favorite properties, get music and
entertainment news, see live or VOD (video-on-demand, similar to a video
jukebox) concerts and interviews.
Music is a well recognized Internet business strategy that the Company intends
to use to aggregate content and market share in one of the most accessible
Internet entertainment spaces, music. During this phase the Company also plans
to negotiate the acquisition of and begin production on proprietary video
entities, presented in Internet television and movie format. The intent is to
leverage this media and market foothold and move into phase two.
Phase Two: The iLive Network:
Building on the efforts of phase one, the Company should be in a position to
develop iLive.com TM into an entertainment incubator, directing any and all
demographics into selected iLive properties. Using the television model, the
Company plans to develop/script iLive characters that produce music, movies, and
television. The properties that the characters are associated with, thus
creating a character driven network and an entertaining delivery of Internet
entertainment.
To technically develop this concept, iLive plans to research and most likely
partner with and/or hire writers, and cross-media producers. The Company
believes that this approach has the ability to revolutionize the way people are
entertained via interactive media. The Company is currently developing a
complete revenue model based on the impact that a character driven Internet
entertainment network will have on the interactive industry.
MARKET DESCRIPTION
The Internet has grown rapidly in recent years, spurred by simple, low-cost
Internet access, inexpensive multimedia computers and easy-to-use web browsers.
The user experience has been enhanced by several technological innovation,
yielding multimedia capabilities such as streaming audio and video, and creative
text animations.
The development of streaming media products by Microsoft and RealNetworks has
made simultaneous transmission and playback a reality. Continuous streams of
audio and video can be delivered over widely-used 28.8 kb narrow bandwidth
modems, and will take advantage of higher bandwidth access ("broadband") to
produce audio and video as faster modems (56 kb) and cable and ISDN delivery
systems become more widely accepted.
Traditional television and radio broadcasters are limited in their ability to
identify real-time listeners. The Company, as an Internet broadcaster, expects
to be able to target a geographically dispersed audience at a relatively low
cost. In addition, Internet broadcasters can provide highly specific
information about a program's audience to content providers, advertisers, and
users of Internet business services.
The desire of many users to communicate and interact with others having similar
tastes and interests has spurred the growth of virtual Internet communities.
Communities serve an important function because they create a virtual "town
square" where users can meet and exchange ideas. Communities also play a key
role in the development of online commerce by providing advertisers and
businesses with a means to identify and target groups of users with desired
traits
The Internet has the potential to replace certain categories of retail stores
and distribution methods by linking consumers directly to wholesale distribution
channels that provide selection, convenience and competitive pricing. Online
retailers typically offer products and services that can be described and
shipped easily and do not require the consumer's physical presence. These
products include CDs, books, videocassettes and computer software. The Internet
offers the opportunity for a retailer with a single location or web site to
inexpensively develop one-to-one relationships with customers worldwide.
<PAGE>
The development of streaming media, a technology that permits the simultaneous
transmission and playback of digitized audio and video, allows the Internet to
broadcast music, information, advertising and other content to Internet users
worldwide. Because audio streams are transmitted in digitized form over
telephone lines, they are unaffected by atmospheric or structural barriers. As
bandwidth increases, Internet audio quality is expected to improve and become
even better than, traditional broadcast radio. Advertisers who buy time or space
on Internet audio broadcasts can typically expect a more targeted audience with
the potential for immediate, impulse purchases.
By launching as a 24-hour live Internet entertainment site, the Company hopes to
position itself to capitalize on the audio and video capabilities of this
growing broadcast medium.
The Company is focusing its efforts and resources on music content that is
compelling to the 11-34 age bracket. According to the RIAA, approximately 40%
of all recorded music sales over the last four years were to customers who are
under 25 years of age. The Company believes that those who are most likely to
be early adopters of purchasing music through the Internet are in the 11 - 34
age bracket. For example, according to Jupiter Communications, a media research
firm, college students represent 34% of all Internet users. Strategic Marketing
Communications states that there are approximately 15.0 million college students
in the United States, 83% of who use the Internet regularly.
In addition, 90% of universities in the United States provide free high-speed
Internet access to their students and faculty community in dormitories, study
areas, computer labs, and offices; this means there is no barrier to market
entry for the remaining 17%. Management believes that the Internet presents a
significant opportunity for the rapid and cost-effective distribution of
recorded music.
Due to the emerging technologies of MP3 and SDMI (the "Secure digital Music
Initiative"), consumers are now using their computers to play music. Dataquest
estimates that in 1998, 30% of U.S. households had multimedia PCs with a sound
card, speakers and either a CD or DVD drive. Consumers can now play CDs on
their computers with the ease and fidelity formerly associated only with stereo
systems.
SDMI intends to bring together the worldwide recording industry and technology
companies to develop an open, interpretable architecture and specification for
digital music security. The hope is to answer demand for convenient
accessibility to quality digital music, enable copyright protection for artists'
work, and enable technology and music companies to build successful businesses.
The Company believes that new technological advances will continue to drive
growth of the market for downloadable music. Advances in compression
techniques, for example, have greatly reduced the size of digitally stored
recordings. The MP3 open standard can compress music files to one-tenth their
original size while maintaining their audio integrity at near-CD quality levels.
MP3 playback software is currently available on most operating environments such
as Microsoft Windows 95/98, Windows NT and Mac OS, most major versions of UNIX
and other operating environments. Forrester Research estimates that there are
already more than 50 million MP3-capable users today.
Consumer electronics companies and technology companies have capitalized on the
growing popularity of digital music by introducing portable music devices. The
Rio, introduced in November 1998 by Diamond Multimedia Systems, has already sold
over 300,000 units. Other manufacturers, including Creative Labs, Sensory
Sciences, RCA/Thomson, Samsung, Toshiba and LG Electronics have released or
announced plans to release portable MP3 players. In addition, other
manufacturers have produced or announced plans to produce, other devices for
playing and storing MP3 recordings. These include the Empeg Car (a removable,
automotive audio system capable of holding over 5,000 titles), Clarion's AutoPC
(an auto MP3 audio player) and Lydstrom's Songbank (a home stereo component that
stores and supports MP3 files).
As a result, the Company believes that Internet demand for downloadable music
will continue to grow and that technologies will continue to develop to support
its growth.
<PAGE>
COMPETITION
The market for delivery of entertainment content over the Internet is new,
rapidly evolving and intensely competitive, and the Company expects competition
to intensify further in the future. Barriers to entry are relatively low, and
current and new competitors can launch new sites at a relatively low cost using
commercially available software. The Company anticipates that it will compete
with a number of other companies. The Company's direct competitors include
various online audio and video streaming sites such as the House of Blues,
through their Web site at hob.com; Vidnet; Garage Band through their Web site at
garageband.com; MP3 through their Web site at MP3.com; Farmclub; POP.com; and
others.
The Company believes that its business model focused on the promotion and
distribution of music by putting the power back into the hands of the artists:
The Company's proposed operations:
- - Gives new artists the opportunity to perform their music live before a
worldwide audience.
- - Creates an easy and convenient way for consumers to listen to, download
and purchase music.
- - Lowers the costs of artist promotion and distribution.
- - Enables artists to reach a large number of consumers.
- - Enables consumers to discover new artists they might not be made aware of
through traditional music retailers.
- - Facilitates direct communication between fans (consumers) and artists.
- - Allows users (consumers) to listen to high quality artists pre-screened by
the Company.
- - Gives both consumers and artists the ability to view and judge the
competition.
Management of the Company believes that these features will allow the Company
to effectively compete with its anticipated competitors. However, there can be
no assurances that the Company will be able to successfully complete the
development of its Web site or that it will be able to effectively compete with
its anticipated competitors. Most of the Company's current and potential
competitors have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial, marketing and other
resources. Competitive pressures created by any one of these companies, or by
the Company's competitors collectively, could have a material adverse effect on
the Company's business, results of operations and financial condition.
REGULATION
The Company is not currently subject to direct federal, state or local
regulation, and laws or regulations applicable to access to or commerce on the
Internet, other than regulations applicable to businesses generally. However,
there can be no assurances that the Company will not be subject to such
regulation in the future.
EMPLOYEES
As of December 31, 1999, the Company employed 5 people on a full time basis.
Additionally, Chasen's Restaurant, of which the Company, through its
wholly-owned subsidiary Asia-Pacific, holds a 64% interests, has employed up to
80 people on a full time basis. However, due to recent decisions to divest the
Company's restaurant operations, the Company has terminated the majority of its
full time restaurant staff and has elected to retain contract employees on an as
needed basis. See Management's Discussion and Results of Operations.
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
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.
<PAGE>
RISK FACTORS
FUTURE CAPITAL NEEDS. To date the Company's only source of revenue is derived
from its restaurant operations. However, since closing its restaurant
operations, as previously discussed, the Company has no current source of income
and will require additional financing in order to develop its planned Internet
operations. The Company has extremely limited cash liquidity and capital
resources. Consequently, the Company's business plan requires additional
funding. Any equity financings would result in dilution to the Company's
then-existing stockholders. Sources of debt financing may result in higher
interest expense. Any financing, if available, may be on terms unfavorable to
the Company. If adequate funds are not obtained, the Company may be required to
reduce or curtail operations.
COMPETITION. The market for capital and financing resources for emerging
growth companies is marked by numerous small, as well as large, competitors.
Additionally, the market for delivery of entertainment content over the Internet
is new, rapidly evolving and intensely competitive, and the Company expects
competition to intensify further in the future. Most of the Company's current
and potential competitors have longer operating histories, larger customer
bases, greater brand recognition and significantly greater financial, marketing
and other resources. Competitive pressures created by any one of these
companies, or by the Company's competitors collectively, could have a material
adverse effect on the Company's business, results of operations and financial
condition. We may not be able to successfully complete the launch of its Web
site or that it will be able to effectively compete with its anticipated
competitors.
INTERNET RELATED RISKS. The Company may be subject to federal, state, and local
laws concerning the conduct of business on the Internet. Today, there are
relatively few laws specifically directed towards online services. However, due
to the increasing popularity and use of the Internet and online services, it is
possible that laws and regulations will be adopted with respect to the Internet
or online services.
DEPENDENCE ON MANAGEMENT. The Company's success depends, to a significant
extent, upon certain key employees and directors, including Albert Aimers, Scott
Hendricks, Anastasia Cronin, Jerry Nieto, Hirsh Wilck and Mary Moriarty. The
loss of services of one or more of these employees could have a material adverse
effect on the business of the Company.
DEPENDENCE ON ADVISORY BOARD. The Company intends to engage the services of an
advisory board consisting of individuals experienced in the music and
entertainment industry to assist it in developing and promoting its music and
entertainment offerings. Currently, the Company has contracted with Arthur
("Artie") Mogul to chair the Advisory Board and to assist in recruiting
additional members of the music and entertainment industry to join the board.
Failure to retain the services of Mr. Mogul or to recruit additional persons
experienced in the music and entertainment industry may have a material adverse
effect on the Company's results of operations
PROTECTION OF PROPRIETARY INFORMATION. The Company has applied to the U.S.
Patent and Trademarks Office for the registration of the Company's trade name,
iLive, and its logo. The Company's application is currently undergoing review.
No assurances, however, can be given as to successfulness of the Company's
application.
DEPENDENCE ON MAJOR SUPPLIERS. The Company does not intend to host its intended
Web site through its own facilities but is dependent on a third-party Internet
Service Provider. On November 5, 1999, the Company entered into a
month-to-month Internet Colocation Service Contract with SoftAware, Inc.,
whereby SoftAware has agreed to host the Company's anticipated Web site. Under
the terms of the Agreement, the Company has agreed to pay SoftAware a $995.00
installation fee and a $3,000 per month Internet Service fee for each computer
server installed. The Company has options to purchase space for additional
computer servers at $2,000 per month for each server. Although the Company
believes that its relations with SoftAware are strong and should remain so with
continued contract compliance, the termination of the Company's contract with
SoftAware, the loss of Internet services provided by SoftAware, or a reduction
in the quality of service the Company receives from SoftAware could have a
material adverse effect on the Company's results of operations. In the event
that SoftAware were to discontinue its service to the Company, the Company
believes that it would be able to locate alternative suppliers to host its
intended Web site at comparable rates. However, there can be no assurances that
the Company will be successful in locating alternative suppliers.
<PAGE>
DIFFICULTY OF PLANNED EXPANSION; MANAGEMENT OF GROWTH. The Company plans to
expand its level of operations. The Company's operating results will be
adversely affected if net sales do not increase sufficiently to compensate for
the increase in operating expenses caused by this expansion. In addition, the
Company's planned expansion of operations may cause significant strain on the
Company's management, technical, financial and other resources. To manage its
growth effectively, the Company must continue to improve and expand its existing
resources and management information systems and must attract, train and
motivate qualified managers and employees. There can be no assurance, however,
that the Company will successfully be able to achieve these goals. If the
Company is unable to manage growth effectively, its operating results will be
adversely affected.
ITEM 2 - DESCRIPTION OF PROPERTY
iLive, Inc. currently operates at 242 N. Canon Drive, 3rd Floor, Beverly Hills,
CA, 90210. On October 1, 1999, the Company entered into an oral month-to-month
lease with the Company's majority shareholder, Street Capital, Inc., for
approximately 4,400 square feet in Beverly Hills, CA. This facility serves as
the Company's headquarters and administrative facility. Under the terms of the
oral lease, the monthly rent is currently scheduled to increase to $14,500 on
January 1, 2000 and will increase to $15,000 per month beginning on July 1,
2000. The monthly rent will increase according to the Consumer Price Index
beginning on July1, 2001. The lease is currently scheduled to terminate on July
1, 2004.
ITEM 3 - 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
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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders for a vote during the period
covered by this report
<PAGE>
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER 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 Over-the-Counter Bulletin Board. Quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions. Prior to December 30, 1997, the Company's Common
Stock was quoted under the symbol ARNG. Prior to October 26, 1999, the
Company's Common Stock quoted under the symbol PHIC. On October 26, 1999, in
conjunction with the change of the Company's name to iLive., Inc., the
Company's Common Stock began quoted on the Over-the-Counter Bulletin Board under
the trading symbol LIVE.
BID PRICES
YEAR PERIOD HIGH LOW
1997 First Quarter 0.2813 0.0313
Second Quarter 0.3125 0.1250
Third Quarter 0.1250 0.0625
Fourth Quarter 0.0725 0.0725
1998 First Quarter 0.1563 0.0725
Second Quarter 0.1875 0.0825
Third Quarter 0.0625 0.0200
Fourth Quarter 0.0200 0.0200
1999 First Quarter 0.0200 0.0200
Second Quarter 0.0200 0.0200
Third Quarter 2.7500 0.6250
Fourth Quarter 2.2500 1.3800
2000 First Quarter 2.7500 1.2500
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. The Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
Such exceptions include any equity security listed on Nasdaq and any equity
security issued by an issuer that has (i) net tangible assets of at least
$2,000,000, if such issuer has been in continuous operation for three years,
(ii) net tangible assets of at least $5,000,000, if such issuer has been in
continuous operation for less than three years, or (iii) average annual revenue
of at least $6,000,000, if such issuer has been in continuous operation for less
than three years. Unless an exception is available, the regulations require the
delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
NUMBER OF SHAREHOLDERS
The number of beneficial holders of record of the Common Stock of the Company as
of the close of business on December 31, 1999 was approximately 187. Many of
the shares of the Company's Common Stock are held in a "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 near term. The Company intends to
retain future earnings, if any, to provide funds for operation of its business.
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
On September 7, 1999, the Company issued 8,500,000 shares of its "restricted"
Common Stock to Street Capital, Inc., an "accredited" corporation, at a price of
$0.05 per share, resulting in net proceeds to the Company of approximately
$425,000. Scott Hendricks, the Company's President & CEO, is also the
President and sole director of Street Capital, Inc. Albert Aimers, the
Company's Chairman of the Board is a majority shareholder of Street Capital,
Inc. The issuance was an isolated transaction not involving a public offering
pursuant to Section 4(2) of the Securities Act of 1933.
On September 7, 1999, the Company issued 1,500,000 shares of its "restricted"
Common Stock to Marcia Allen (the Company's former President, CEO, and a
director), an "accredited" individual, at a price of $0.05 per share, resulting
in net proceeds of the Company of $75,000. The issuance was an isolated
transaction not involving a public offering pursuant to Section 4(2) of the
Securities Act of 1933.
On September 30, 1999 the Company issued 690,000 shares of its "restricted"
Common Stock in exchange for all of the outstanding common stock of Asia
Pacific. The issuance was an isolated transaction not involving a public
offering pursuant to Section 4(2) of the Securities Act of 1933.
On February 22, 2000, the Company issued an aggregate of 45,000 shares of its
"restricted" Common Stock to four accredited individuals in exchange for the
exclusive rights to the Miss Beverly Hills, Miss Teen Beverly Hills, Mrs.
Beverly Hills, and Mr. Beverly Hills beauty pageants. The issuance was an
isolated transaction not involving a public offering pursuant to Section 4(2) of
the Securities Act of 1933.
On February 29, 2000, the Company entered into a Stock Exchange Agreement with
the shareholders of Society of Economic Assurance, Inc., a Nevada corporation
("SEA") to acquire 100,000 shares (100%) of SEA, in exchange for 200,000 shares
of its restricted common stock. The issuance was an isolated transaction not
involving a public offering pursuant to section 4(2) of the Securities Act of
1933.
In February 2000, the Company initiated a private offering of up to $5,000,000
worth of the Company's "restricted" Common Stock including warrants to purchase
additional shares of the Company's Common Stock (a "Unit"). As of May 15, 2000,
the Company has sold 5,000 Units shares resulting in net proceeds of $25,000.
The issuance were offered without general solicitation or advertising to
unrelated accredited investors under Rule 506 of Regulation D and Section 4(2)
of the Securities Act of 1933.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS OR PLAN OF OPERATIONS
CAUTIONARY STATEMENTS:
This Annual Report on Form 10-KSB contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. The Company intends that such
forward-looking statements be subject to the safe harbors created by such
statutes. The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. Accordingly, to
the extent that this Annual Report contains forward-looking statements regarding
the financial condition, operating results, business prospects or any other
aspect of the Company, please be advised that the Company actual financial
condition, operating results and business performance may differ materially from
that projected or estimated by the Company in forward-looking statements. The
differences may be caused by a variety of factors, including but not limited to
adverse economic conditions, intense competition, including intensification of
price competition and entry of new competitors and products, adverse federal,
state and local government regulation, inadequate capital, unexpected costs and
operating deficits, increases in general and administrative costs, lower sales
and revenues than forecast, loss of customers, customer returns of products sold
to them by the Company, termination of contracts, loss of supplies,
<PAGE>
technological obsolescence of the Company's products, technical problems with
the Company's products, price increases for supplies and components, inability
to raise prices, failure to obtain new customers, litigation and administrative
proceedings involving the Company, the possible acquisition of new businesses
that result in operating losses or that do not perform as anticipated, resulting
in unanticipated losses, the possible fluctuation and volatility of the
Company's operating results, financial condition and stock price, inability of
the Company to continue as a going concern, losses incurred in litigating and
settling cases, adverse publicity and news coverage, inability to carry out
marketing and sales plans, loss or retirement of key executives, changes in
interest rates, inflationary factors and other specific risks that may be
alluded to in this Annual Report or in other reports issued by the Company. In
addition, the business and operations of the Company are subject to substantial
risks that increase the uncertainty inherent in the forward-looking statements.
The inclusion of forward looking statements in this Annual Report should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.
The following discussion should be read in conjunction with, and is qualified in
its entirety by, the Consolidated Financial Statements and related notes thereto
included elsewhere herein. Historical results of operation, percentage margin
fluctuations and any trends that may be inferred from the discussion below are
not necessarily indicative of the operating results for any future period.
GENERAL OVERVIEW
The Company's prior full fiscal year ending December 31, 1998 is not indicative
of the Company's current business plan and operations. During the year ended
December 31, 1998, the Company was inactive and had no revenues. In September
1999, the Company acquired Asia Pacific, as previously discussed. Asia
Pacific's principal asset consisted of a 64% interest in 246 LLC dba Chasen's
Restaurant. The Company had intended to utilize Chasen's as a forum for its
Internet related entertainment operations.
However, losses from the Company's Chasen's restaurant operations exceeded the
Company's expectation. Due to Chasen's negative cash flow and increased net
loss, Management has decided to discontinue any further investment into 246 LLC
and to either reorganize or divest its restaurant operations. As a result, the
Company incurred a one time charge of $1,603,622 representing the impairment of
long-lived assets associated with the closing of Chasen's. The Company has
decided to focus its efforts on development its Internet operations.
PLAN OF OPERATIONS FOR THE COMPANY'S WEB SITE ILIVE.COM.
The Company's goal for its Internet operations is to build and operate an
entertainment Web site featuring new musical artists and to market those
artists' music and related items on its proposed Web site. The Company's Web
site was launched in a Beta (test) format on January 15, 2000. The Company
anticipates that the site will open for full operations in June 2000. As of
December 31, 1999, the Company has not yet realized any material revenues from
its Web Site operations.
As of December 31, 1999, the Company has expended approximately $520,000 towards
development of its Internet based business and $40,000 towards the acquisition
of its Internet related computer hardware.
The Company has contracted with SoftAware, Inc. to host its intended Web site
and to provide Internet access to its Web site. On November 5, 1999, the
Company entered into a month-to-month Internet Colocation Service Contract with
SoftAware, Inc., whereby SoftAware has agreed to host the Company's anticipated
Web site. Under the terms of the Agreement, the Company has agreed to pay
SoftAware a $995.00 installation fee and a $3,000 per month Internet Service fee
for each computer server installed. The Company has options to purchase space
for additional computer servers at $2,000 per month for each server.
Liquidity & Capital Resources
On September 7, 1999, the Company raised $500,000 through the sale of 10,000,000
shares of the Company's "restricted" Common Stock at a price of $0.05 per share
and $1,500,000 through debt financing in the form of a $1,500,000 convertible
note (the "Note"). Pursuant to the terms of the Note, the Company is required
to repay the principal amount of $1,500,000 with 12% interest on or before March
7, 2001. The note is convertible, at anytime given 15 day's notice at the
holder's election, into a maximum of 6,000,000 shares of the Company's Common
Stock at $0.25 per share. As of May 15, 2000, the Company has expended
<PAGE>
approximately $2,000,000 towards development of its business plan and continued
operations, with none of its original financing remaining. The Company
currently does not have sufficient funds to fund ongoing operations and is
currently in negotiations for additional debt financing to fund its immediate
needs. No assurances can be given however, that the Company will be successful
in securing such additional debt financing. Failure to secure such funds will
have a material adverse effect on the Company's results of operations.
The Company intends to obtain additional financing through the sale of its
Common Stock and plans on raising up to $5,000,000 through a Private Placement
of its restricted Common Stock. However, there can be no assurances
that the Company will be able to complete the Private Offering. Failure to
complete the Private Offering may have a material adverse effect on the
Company's results of operations.
Additionally, a slower than expected rate of acceptance of the Company's Web
site, or lower than expected revenues generated from the Company's Web site,
would materially adversely affect the Company's liquidity. The Company may need
additional capital sooner than anticipated. The Company has no commitments for
additional financing, and there can be no assurances that any such additional
financing would be available in a timely manner or, if available, would be on
terms acceptable to the Company. Furthermore, any additional equity financing
could be dilutive to our then-existing shareholders and any debt financing could
involve restrictive covenants with respect to future capital raising activities
and other financial and operational matters.
Capital Expenditures
The Company's anticipated capital expenditures for the period ended December 31,
2000 is expected to consist of development costs for the Company's Web site.
The Company expects to expend approximately an additional $1,500,000 towards
ongoing development of its Web site. The Company also expects to expend
approximately $75,000 towards purchase of additional computer equipment needed
for the planned expansion of its intended Web site.
ITEM 7 - FINANCIAL STATEMENTS
The consolidated financial statements and corresponding notes to the financial
statements called for by this Item appear under the caption Index to Financial
Statements (Page F-1 hereof).
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Prior to the acquisition of Asia-Pacific as previously described, the Company
engaged David M. Raskin, ("Mr. Raskin"), to audit the Company' s financial
statements for the fiscal years ended December 31, 1998, 1997, 1996, 1995, and
1994.
Subsequent to the acquisition of Asia-Pacific by the Company, the Company's
newly appointed Board of Directors elected to retain the Cacciamatta Accountancy
Corporation, as their principal accountant to audit the financial statements of
the Company and its wholly owned subsidiary, Asia-Pacific. There have been no
disagreements between Mr. Raskin or the Cacciamatta Accountancy Corporation and
Management of the type required to be reported under this Item 3 since the date
of their engagement.
<PAGE>
PART III
ITEMS 9 - DIRECTORS, EXECUTIVE OFFCIERS, PROMOTERS AND CONTROL PERSON;
COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT
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.
Name Age Positions
Albert Aimers 37 Chairman of the Board and Director
Scott Hendricks 28 President, CEO, Director
Anastasia Cronin 39 Chief Financial Officer, Controller,
Corporate Secretary,
Treasurer, and a Director
Mary Moriarty 37 Vice-President, Director
KEY EMPLOYEES:
Hirsch Wilck 36 Director of Programming
EXECUTIVE OFFICERS:
ALBERT AIMERS, is currently the Company's Chairman of the Board and a Director.
Between February 1998 and December 1999, Mr. Aimers functioned as a private
venture capitalist in Southern California. His investments were primarily
focused on small to mid-size private and public companies. Prior to entering
the U.S. investment market, Mr. Aimers was an investment professional in the
Canadian markets between 1995 and February 1998. Mr. Aimers' business
background began with product sales and marketing and moved into investments and
investor relations in the early 1990's.
SCOTT HENDRICKS, is currently the Company's President, CEO, and a Director and
was one of the founders of the Company. From 1996 to 1999 Mr. Hendricks owned
Wall Street, Inc. an Investment Banking company. His company focused on helping
build strategic relationships, and business development for emerging companies.
He was a stockbroker from 1994-1995 for Chatfield Dean. As Director of Business
Development, Mr. Hendricks is responsible for forming strategic alliances with
other Internet, streaming media, and entertainment content entities.
ANASTASIA CRONIN, is currently the Company's Chief Financial Offer, Controller,
Corporate Secretary, Treasurer, and a Director. In addition to fulfilling her
duties to the Company, Ms. Cronin is the CFO, Controller, and Manager for
Chasen's Restaurant. Ms. Cronin has served as the Chief Financial Officer,
Controller, and Manager for Chasen's Restaurant since June 1997. Prior to her
service with Chasen's, Ms. Cronin was an Office Manager and Accountant from
February 1996 to June 1997, for the Hard Rock Caf in Universal City,
California. Ms. Cronin has a Bachelor of Science degree in International
Business from the American College in Laysin, Switzerland.
MARY MORIARTY, is currently a Vice-President and Director of the Company.
Between November 1994 to the present, Mr. Moriarty has been an Executive
Vice-President for Chasen's Restaurant, of which the Company owns a 64%
interest.
KEY EMPLOYEES:
HIRSH WILCK, is currently the Company's Director of Programming for Miss World.
From 1985-1989 he was Vice President of Eastwest Talent Management, a leading
modeling agency in Los Angeles, California. He was responsible for managing and
directing the talent at Eastwest Talent Management. In 1989 Eastwest Talent
merged with Prima Talent agency, he coordinated the transition of the two
companies and headed up the celebrity PR and endorsement division. Among some of
the talent he has represented are, Uma Thurman, Chynna Phillips, Milla Jovovich,
Billy Baldwin, Hilary Swank, David James Elliot, Sherilyn Fenn, Tia Carrere,
Tatjana Patitz, Jennifer Rubin and Angie Everhardt. In 1994 he became the
Executive Director of the U.S. Export Council, which in conjuction with the
Department of Commerce, promoted and marketed American products and companies
around the world. In 1998 he returned to Los Angeles to head up the Miss World
USA organization.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely on the review of copies of such reports furnished to the Company
and written representations that no other reports were required, the Company has
been informed that some of the Company's officers and directors and greater than
ten percent shareholders did not timely file their Initial Statement of
Beneficial Ownership on Form 3.
ITEM 10 - EXECUTIVE COMPENSATION
On January 1, 2000, the Company entered into an oral, at-will, employment
agreement with Albert Aimers, the Company's Chairman of the Board and a
Director, whereby the Company will pay Mr. Aimers an annual salary of $120,000
beginning in June, 2000. The agreement also requires the Company to provide
health benefits to Mr. Aimers and his family and to allow Mr. Aimers the
opportunity to participate in the Company's retirement, stock option and bonus
plans as they may be established
On April 1, 2000, the Company entered into an oral, at-will, employment
agreement with Scott Hendricks, the Company's current President, CEO, and a
Director, whereby the Company will pay Mr. Hendricks an annual salary of $60,000
beginning in May, 2000. The agreement also requires the Company to provide
health benefits to Mr. Hendricks and his family and to allow Mr. Hendricks the
opportunity to participate in the Company's retirement, stock option and bonus
plans as they may be established.
On September 1, 1999, the Company entered into an oral, at-will, employment
agreement with Anatasia Cronin, the Company's Chief Financial Officer,
Controller, Corporate Secretary, Treasurer, and a Director, whereby the Company
will pay Ms. Cronin an annual salary of $50,000. The agreement also requires
the Company to provide health benefits to Ms. Cronin and her family and to allow
Ms. Cronin the opportunity to participate in the Company's retirement, stock
option and bonus plans as they may be established.
On September 1, 1999, the Company entered into an oral, at-will, employment
agreement with Mary Moriarty, the Company's Vice-President and a Director,
whereby the Company will pay Ms. Moriarty an annual salary of $60,000. The
agreement also requires the Company to provide health benefits to Ms. Moriarty
and her family and to allow Ms. Moriarty the opportunity to participate in the
Company's retirement, stock option and bonus plans as they may be established.
On April 1, 2000, the Company entered into an oral, at-will, employment
agreement with Hirsh Wilck, the Company's Director of Programming for Miss
World, whereby the Company will pay Mr. Wilck an annual salary of $90,000
beginning in May, 2000. The agreement also requires the Company to provide
health benefits to Mr. Wilck and his family and to allow Mr. Wilck the
opportunity to participate in the Company's retirement, stock option and bonus
plans as they may be established.
<PAGE>
SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows certain compensation information for
services rendered in all capacities for the years ended December 31, 1999, 1998
and 1997. Other than as set forth herein, no executive officer's salary and
bonus exceeded $100,000 in any of the applicable years. The following
information includes the dollar value of base salaries, bonus awards, the number
of stock options granted and certain other compensation, if any, whether paid or
deferred.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- -----------------------
Awards Payouts
------ -------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ----------------- ------------ ----------- ------------- -------- ---------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Scott Hendricks
(President &
CEO) 1999 0 -0- -0- -0- -0- -0- -0-
1998 0 -0- -0- -0- -0- -0- -0-
1997 0 -0- -0- -0- -0- -0- -0-
Marcia Allen
(Former President
& CEO) 1999 46,223 -0- -0- -0- -0- -0- -0-
1998 0 -0- -0- -0- -0- -0- -0-
1997 0 -0- -0- -0- -0- -0- -0-
</TABLE>
<TABLE>
<CAPTION>
OPTION GRANTS IN YEAR
ENDED DECEMBER 31, 1999
(INDIVIDUAL GRANTS)
NUMBER OF PERCENT
SECURITIES OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED EXERCISE
GRANTED TO ALL PRICE EXPIRATION
NAME (#) EMPLOYEES ($/SH) DATE
<S> <C> <C> <C> <C>
Scott Hendricks 0 n/a n/a n/a
Marcia Allen 0 n/a n/a n/a
</TABLE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN YEAR
ENDED DECEMBER 31, 1999
AND DECEMBER 31, 1999 OPTIONS/SAR VALUES
AND OPTION VALUES AS OF DECEMBER 31, 1999
SHARES NUMBER OF UNEXERCISED SECURITIES VALUE OF UNEXERCISED
ACQUIRED ON UNDERLYING OPTIONS IN-THE-MONEY OPTIONS
EXERCISE VALUE REALIZED AT DECEMBER 31, 1999 AT DECEMBER 31, 1999 ($)
NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------- ------------ --------------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
Scott Hendricks 0 n/a n/a n/a
Marcia Allen 0 n/a n/a n/a
</TABLE>
COMPENSATION OF DIRECTORS
Currently, Directors do not receive any compensation for their services.
ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of May 15, 2000, 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>
<CAPTION>
<S> <C> <C> <C>
Percent of
Title of Class Beneficial Owner Number of Shares Outstanding
- ----------------- -------------------------- ----------------- ------------
Albert Aimers (1)
242 N. Canon Drive, 3rd Floor
Common Stock Beverly Hills, California 6,500,000 42%
Scott Hendricks
242 N. Canon Drive, 3rd Floor
Common Stock Beverly Hills, California 1,000,000 6.5%
Anastasia Cronin
242 N. Canon Drive, 3rd Floor
Common Stock Beverly Hills, California 0 0%
Mary Moriarty
242 N. Canon Drive, 3rd Floor
Common Stock Beverly Hills, California 30,578 <1%
Marcia Allen 1,500,000 9.7%
128 South Palm Drive
Common Stock Beverly Hills, CA 90210
All Directors and Officers as a Group 7,530,578 48.91%
Common Stock (4 persons)
</TABLE>
(1) Denotes shares held in the name of Street Capital, Inc., a Nevada
corporation. Mr. Aimers is the majority shareholder of Street Capital, Inc.
Scott Hendricks is the President and sole director of Street Capital, Inc.
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 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 1, 1999, the Company entered into an oral month-to-month lease for
approximately 4,700 square feet of administrative space with Street Capital,
Inc. This facility serves as the Company's headquarters and administrative
facility. Mr. Hendricks, the Company's President, CEO, & a director is the
President and a director of Street Capital, Inc. Mr. Aimers, the Company's
Chairman of the Board, is a majority shareholder of Street Capital, Inc.
On September 7, 1999, the Company entered into a $1,500,000 through convertible
note (the "Note") with Street Capital, Inc. Pursuant to the terms of the Note,
the Company is required to repay the principal amount of $1,500,000 with 12%
interest on or before March 7, 2001. The note is convertible, at anytime given
15 day's notice at the holder's election, into a maximum of 6,000,000 shares of
the Company's Common Stock at $0.25 per share. Mr. Hendricks, the Company's
President, CEO, & a director is the President and a director of Street Capital,
Inc. Mr. Aimers, the Company's Chairman of the Board, is a majority shareholder
of Street Capital, Inc.
On September 7, 1999, the Company issued 8,500,000 shares of its "restricted"
Common Stock to Street Capital, Inc., an "accredited" corporation, at a price of
$0.05 per share, resulting in net proceeds to the Company of approximately
$425,000. Scott Hendricks, the Company's Chief Development Officer, is the
President and sole director of Street Capital, Inc. The issuance was an
isolated transaction not involving a public offering pursuant to Section 4(2) of
the Securities Act of 1933.
On September 7, 1999, the Company issued 1,500,000 shares of its "restricted"
Common Stock to Marcia Allen (the Company's former President, CEO, and a
director), an "accredited" individual, at a price of $0.05 per share, resulting
in net proceeds of the Company of $75,000. The issuance was an isolated
transaction not involving a public offering pursuant to Section 4(2) of the
Securities Act of 1933.
The Company, through its wholly-owned subsidiary, Asia-Pacific owns a 64%
controlling interest in 246 LLC, d.b.a. Chasen's Restaurant. Pursuant to a
Management Agreement entered into between 246 LLC and the Company's wholly-owned
subsidiary Asia-Pacific, the Company has contracted to manage Chasen's.
Pursuant to the terms of the management contract, 246 LLC will pay the Company a
monthly management fee of $12,500 per month.
<PAGE>
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT NO. DESCRIPTION
2.1 Reorganization and Stock Purchase Agreement dated September 30,
1999 by and between Powerhouse International and Asia Pacific, Inc.
2.2* Stock Exchange Agreement between iLive, Inc. and the shareholders
of Society of Economic
Assurance, Inc., dated February 29, 2000.
3.1* Restated Articles of Incorporation of iLive, Inc. filed on
December 29, 1999.
3.2* Bylaws of the Company
4.1 Convertible Note issued to Street Capital, Inc.
10.1 Lease by and between Asia Pacific, Inc. and Eddia Family Trust for
the lease of real property located at 242 N. Canon Dr.,
Beverly Hills, California.
27 Financial Data Schedule
(B) REPORTS ON FROM 8-K
On March 6, 2000, the Company filed a Current Report on Form 8-K dated February
29, 2000 reporting its acquisition of Society of Economic Assurance, a Nevada
corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934. The
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ILIVE, INC.
/s/ Scott Hendricks
-------------------------
By Scott Hendricks
President, CEO, and Director
Dated: May 26, 2000
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated
Dated: May 26, 2000 By: /s/ Anastasia Cronin
Chief Financial Officer & Director
Dated: May 26, 2000 By: /s/ Mary Moriarty
Director
Dated: May 26, 2000 By: /s/ Albert Aimers
Director
<PAGE>
ILIVE, INC. AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1999
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Shareholders
iLive, Inc.
We have audited the accompanying consolidated balance sheet of iLive, Inc. and
subsidiaries (the "Company") as of December 31, 1999, and the related
consolidated statements of operations, shareholders' deficit and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes, on a test basis, examination of 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 consolidated financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of iLive, Inc. and
subsidiaries as of December 31, 1999, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 7 to
the consolidated financial statements, the Company's restaurant operations were
shutdown in April 2000 after producing significant losses since they were
acquired in September 1999. In addition, the Company's liabilities exceed its
assets. These conditions raise substantial doubt about its ability to continue
as a going concern. Management's plans regarding those matters are also
described in Note 7. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California
May 17, 2000
<PAGE>
DAVID M. RASKIN
Certified Public Accountant
530 South Federal Highway
Suite 160
Deerfield Reach, Florida 33441
(954) 421-5055 Fax (954) 426-4611
Independent Auditor's Report
To the Board of Directors
Powerhouse International Corporation
Boca Raton, Florida
I have audited the accompanying consolidated balance sheet of Powerhouse
International Corporation as of December 31, 1998 and the related consolidated
statements of operations and retained earnings (accumulated deficit),
consolidated statements of stockholders' equity (deficit), and consolidated
statements of cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. My responsibility is to
express and opinion on these financial statements based on my audit.
I conducted any audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain treasonable
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 audits provide a reasonable basis for my opinion.
In my opinion, the accompanying financial statements present fairly, in all
material respects, the financial position of Powerhouse International
Corporation as of December 31, 1998 the results of operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
David M. Raskin
Certified Public Accountant
May 24, 2000
<PAGE>
<TABLE>
<CAPTION>
ILIVE, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
<S> <C>
DECEMBER 31, 1999
-------------------
ASSETS
CURRENT ASSETS:
Cash $ 26,034
Inventories 102,567
Advances to related parties 86,416
Other 17,650
-------------------
TOTAL CURRENT ASSETS 232,667
PROPERTY AND EQUIPMENT, NET 208,700
OTHER 67,370
-------------------
$ 508,737
===================
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable $ 397,607
Accounts payable 912,929
Payroll taxes payable 237,816
Accrued interest 118,856
Sales taxes 51,602
Other accrued expenses 36,494
-------------------
TOTAL CURRENT LIABILITIES 1,755,304
LONG-TERM DEBT 685,952
-------------------
TOTAL LIABILITIES 2,441,256
-------------------
COMMITMENTS AND CONTINGENCIES -
SHAREHOLDERS' DEFICIT:
Common stock, $.001 par value, 100,000,000 shares authorized,
15,053,147 shares issued and outstanding 15,053
Additional paid-in capital 1,705,657
Accumulated deficit (3,653,229)
-------------------
TOTAL SHAREHOLDERS' DEFICIT (1,932,519)
-------------------
$ 508,737
===================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
ILIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<S> <C> <C>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998
------------ ----------
REVENUES:
Food and beverage $ 824,823 $ -
Club membership 37,791 -
------------ ----------
862,614 -
------------ ----------
EXPENSES:
Cost of food and beverage 251,204 -
Labor 429,506 -
Rent 91,539 -
Other restaurant operating 227,863 -
Impairment of long-lived assets 1,603,622 -
General and administrative 651,845 -
Depreciation and amortization 114,456 -
------------ ----------
3,370,035 -
------------ ----------
LOSS FROM OPERATIONS (2,507,421) -
INTEREST EXPENSE 18,487 -
------------ ----------
LOSS BEFORE MINORITY INTERESTS (2,525,908) -
MINORITY INTERESTS 18,780 -
------------ ----------
NET LOSS $(2,507,128) $ -
============ ==========
BASIC AND DILUTED NET LOSS PER SHARE $ (0.31) $ -
============ ==========
BASIC AND DILUTED WEIGHTED AVERAGE SHARES 8,093,008 4,363,147
============ ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
ILIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<S> <C> <C>
1999 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,507,128) $ -
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 114,456 -
Impairment of long-lived assets 1,603,622
Minority interest (18,780) -
Changes in assets and liabilities:
Inventories (24,850) -
Other current assets 4,219 -
Other assets (986) -
Accounts payable 379,266 -
Payroll taxes payable 237,816 -
Accrued interest 12,647 -
Sales taxes (5,429) -
Other accrued expenses (147,928) -
------------ ------------
Net cash used by operating activities (353,075) -
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired in purchase of Asia Pacific Co., LTD 75,180 -
Advances to related parties (86,416)
Purchases of property and equipment (83,399) -
------------ ------------
Net cash used by investing activities (94,635) -
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 500,000 -
Payments on notes payable (26,256) -
------------ ------------
Net cash provided by financing activities 473,744 -
------------ ------------
Net increase in cash 26,034 -
CASH, BEGINNING OF PERIOD - -
------------ ------------
CASH, END OF PERIOD $ 26,034 $ -
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 25,712 $ -
Franchise taxes $ 800 $ -
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquistion of Asia Pacific Co., LTD for 690,000 shares
of common stock valued at $74,609:
Fair value of assets acquired, including $75,180 in cash $ 2,084,559 $ -
Fair value of liabilities assumed (1,934,770) -
Common stock issued (74,609) -
------------ ------------
$ 75,180 $ -
============ ============
Refinancing of debt $ 455,000 $ -
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
ILIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Deficit
Years Ended December 31, 1999 and 1998
COMMON STOCK ADDITIONAL TOTAL
NUMBER AMOUNT PAID-IN ACCUMULATED SHAREHOLDERS'
OF SHARES PER SHARE TOTAL CAPITAL DEFICIT DEFICIT
------------ ----------- ---------- ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 AND 1997 4,363,147 $ 4,363 $ 1,141,738 $ (1,146,101) $ -
Common stock issued for cash 10,000,000 $ 0.050 10,000 490,000 - 500,000
Acquisition of Asia Pacific Co., LTD 690,000 $ 0.108 690 73,919 - 74,609
Net loss - - - (2,507,128) (2,507,128)
------------ ---------- ------------- --------------- ------------
BALANCE, DECEMBER 31, 1999 15,053,147 $ 15,053 $ 1,705,657 $ (3,653,229) $(1,932,519)
============ ========== ============= =============== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
iLive, Inc., ("iLive"), its wholly owned subsidiary, Asia Pacific Co., LTD
("Asia Pacific") and Asia Pacific's majority owned subsidiary, 246 LLC,
(collectively, the "Company"). All material intercompany transactions and
accounts have been eliminated in consolidation.
iLive (formerly Powerhouse International Corporation) was incorporated in 1987
in Nevada, became inactive in 1996, and had no assets or liabilities at August
31, 1999. On September 7, 1999, iLive sold 10,000,000 shares of common stock for
$500,000 cash and on September 30, 1999, it acquired Asia Pacific for 690,000 of
its common shares valued at $74,609. This acquisition was accounted for as a
purchase; accordingly, the results of operations of Asia Pacific are included in
the accompanying consolidated financial statements since the date of
acquisition.
Asia Pacific, incorporated in October 1995 in Niue (a foreign country), acquired
a controlling 64% interest in 246 LLC, a limited liability company organized in
March 1996, to construct and operate a full-service restaurant, bar and
membership club in Beverly Hills, California. The restaurant, known as
Chasen's, commenced operations in April 1997.
The following summarized pro forma information (unaudited) assumes iLive's
purchase of Asia Pacific as of January 1, 1998:
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31,
-------------------------
1999 1998
------------ -----------
Revenue $ 3,297,200 $3,611,508
------------ -----------
Expenses:
Restaurant operating costs 3,563,381 3,368,505
Impairment of long-lived assets 1,603,622 --
General and administrative 1,153,101 381,909
Depreciation and amortization 873,780 428,810
Interest 62,161 36,942
------------ -----------
7,256,045 4,216,166
------------ -----------
Loss before minority interests (3,958,845) (604,658)
Minority interests 608,338 287,386
------------ -----------
Net loss $(3,350,457) $ (317,272)
============ ===========
Basic and diluted net loss per share $ (0.41) $ (0.06)
============ ===========
</TABLE>
<PAGE>
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and equivalents
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents.
Inventories
Inventories, consisting of food, liquor, wine and cigars and cigarettes, are
stated at the lower of cost (first-in, first-out) or market.
Property and equipment
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation is provided over the assets' estimated useful lives of 3-7 years
using accelerated methods. Amortization of leasehold improvements is provided
over the lease term using the straight line method.
Long-lived assets are reviewed annually for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Impairment is necessary when the undiscounted cash flows
estimated to be generated by the asset are less than the carrying amount of the
asset.
Revenue recognition
Food and beverage revenues are recognized as the products are sold to the
customer. Proceeds from sales of club memberships are billed and recognized
monthly.
Advertising and promotional costs
Costs of advertising and promotion are expensed as incurred. Such costs were
$14,810 in 1999 and $0 in 1998.
Income taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standards (SFAS) 109. Under the asset and liability method of SFAS 109,
deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory rates applicable to future years to
the difference between the financial statement carrying amounts and the tax
bases of existing assets and liabilities.
<PAGE>
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Minority interests
Minority interests represent the minorities' 36% of 246 LLC not owned by the
Company. Losses were charged to the minority interests only up to their initial
capital contributions as these investors have no obligation to provide
additional capital.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with Statement of Financial
Accounting Standards 128, Earnings Per Share ("SFAS 128"). Basic net loss per
share is based upon the weighted average number of common shares outstanding.
Diluted net loss per share is based on the assumption that all dilutive
convertible shares and stock options were converted or exercised. Dilution is
computed by applying the treasury stock method. Under this method, options and
warrants are assumed to be exercised at the beginning of the period (or at the
time of issuance, if later), and as if funds obtained thereby were used to
purchase common stock at the average market price during the period.
The effect of the potentially dilutive convertible debt (2,743,808 shares) were
not included in the computation of diluted loss per share, since to do so would
have been anti-dilutive. Therefore, basic and diluted net loss per share are
the same.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Fair value of financial instruments
The fair value of financial instruments, consisting primarily of notes payable,
is based on interest rates available to the Company and comparison to quoted
prices. The fair value of these financial instruments approximates carrying
values.
Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist of cash. The Company's policy is to maintain cash at high
credit quality financial institutions to minimize risk. There were no uninsured
balances at December 31, 1999.
Segment disclosure
The Financial Accounting Standards Board has issued Statement No 131
"Disclosures about Segments of an Enterprise and Related Information" which
modifies the disclosure requirements for reportable segments. The Company
currently has only one operating segment.
<PAGE>
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
2. PROPERTY AND EQUIPMENT
ESTIMATED
USEFUL LIVES AMOUNT
-------------- --------
Leasehold improvements Life of lease $ 52,800
Kitchen equipment 5 years 26,300
Furnishings and fixtures 7 years 78,100
Sound system equipment 5 years 5,300
Office and computer equipment 5 years 48,700
--------
211,200
Accumulated depreciation (2,500)
--------
$208,700
========
Chasen's has experienced losses since its inception and projections at December
31, 1999 did not show positive future cash flows, which is an indication of
asset impairment. In April 2000, management closed Chasen's, but has yet to
decide whether to reorganize or sell the restaurant. Because of the uncertainty
of any future cash flows from restaurant operations, the Company has written the
assets down to fair value, determined to be net selling price to a liquidator.
Accordingly, an impairment of $1,403,622, which represents the excess of the
carrying value of $1,573,622 for the restaurant fixed assets over the fair value
of $170,000, has been charged to operations in 1999. Also included in the
impairment charge is the write off of long-term prepaid rent of $200,000 on the
restaurant lease, since it is not certain that the Company will continue to
operate the restaurant and get the benefit of this prepayment. The restaurant
accounts for all revenues and all but $520,000 of the expenses for 1999.
Office and computer equipment of $41,200, net of accumulated depreciation of
$2,500 relates to the Company's new internet business plan and were not subject
to impairment. All other property and equipment are stated at their fair values
at December 31, 1999 and will be depreciated over their remaining useful lives
at this new basis.
<PAGE>
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
3. NOTES PAYABLE
1,500,000 convertible note payable to shareholder, principal
and 12% interest due on or before March 7, 2001. The note is
convertible at the holder's election into a maximum of 6,000,000
shares of common stock at $0.25 per share. $ 685,952
Unsecured demand notes payable to minority interests,
with interest rates at 10% and 19.99% 364,450
Other 33,157
-----------
1,083,559
Less current maturities (397,607)
-----------
$ 685,952
===========
4. INCOME TAXES
The Company recognizes deferred tax assets and liabilities for temporary
differences between the financial reporting and tax bases of its assets and
liabilities. Deferred tax assets are reduced by a valuation allowance when
deemed appropriate.
The provision for income tax benefit of $321,000 has been offset by a valuation
allowance of equal amount. At December 31, 1999 the Company has federal net
operating loss carryforwards of $930,000 that can be utilized to offset future
taxable income. These carryforwards expire in 2019.
As of December 31, 1999, no federal or state income tax returns have ever been
filed for Asia Pacific. Management does not expect any unpaid tax liability to
be material.
5. COMMITMENTS AND CONTINGENCIES
Lease obligations
The Company's restaurant and office facilities' operating lease expires February
28, 2006, with two 5-year renewal options. The lease calls for payment of the
Company's share of the common area expenses in addition to minimum monthly lease
payments. The minimum monthly lease payment of $23,680 is adjusted annually
based on the Consumer Price Index. In addition the Company is obligated to pay
percentage rent equal to 7.5% of monthly gross sales in excess of $250,000 plus
$10,000 annually of unrestricted credit towards purchases of food, beverage, or
other restaurant services.
<PAGE>
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
5. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Lease obligations (continued)
The Company leases additional office space for $13,950 per month with a lease
that expires June 30, 2004. The monthly base rent increases to $14,500 on July
1, 2000 and $15,000 on July 1, 2001 and is adjusted annually thereafter based on
the Consumer Price Index.
The Company leases point-of-sale computer equipment and related software for
$1,940 per month under an operating lease expiring February 2000.
Future minimum annual lease payments under all non-cancelable operating leases
are:
2000 $456,000
2001 461,000
2002 464,000
2003 464,000
2004 374,000
Thereafter 332,000
-----------
$2,551,000
===========
License agreement
The Company has entered into an agreement to use the name "Chasen's" through
February 1, 2007 with an option to renew for two successive 5-year periods,
followed by successive periods of 1 year each up to 99 years. The agreement
grants the Company exclusive license of the name for the operation of a
restaurant in the city of Beverly Hills and other exclusive and non-exclusive
licenses relating to the sale of certain products at the restaurant bearing the
"Chasen's" name. The Company has agreed to pay a royalty of 1-1/2% of the
restaurant gross receipts for the first 18 months and 2% for each year
thereafter, an 8% royalty on the sale of licensed products sold for $75 or less
and 6% on licensed products sold for more than $75. The royalty payments are
subject to an $80,000 annual minimum after the first 18 months of the agreement.
The Company may terminate the agreement upon 120 days written notice to
licensor. The licensor can only terminate the agreement for cause, as defined.
<PAGE>
ILIVE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
6. ACQUISITION
On February 17, 2000 the Company acquired 100% of the outstanding shares of
Society of Economic Assurance, Inc. ("SEA"), a Nevada corporation in exchange
for 200,000 shares of the Company's common stock. The Company elected successor
issuer status pursuant to Rule 12g-3(a) of the general Rules and Regulations of
the Securities and Exchange Commission and became a reporting issuer under the
Securities Exchange Act of 1934. For accounting purposes, the SEA acquisition
was treated as a purchase. Prior to its acquisition by the Company, SEA had no
material operations.
7. GOING CONCERN
The Company's restaurant operations were shut down in April 2000 after producing
significant losses since they were acquired in September 1999. In addition, the
Company's liabilities exceed its assets.
The Company intends to raise $5,000,000 by selling its common stock in a private
offering to meet its current obligations and to finance its new internet based
business plan. However, there can be no assurances that the Company will be
able to complete the private offering.
<PAGE>
REORGANIZATION AND STOCKPURCHASE AGREEMENT ("Agreement"), dated August 30, 1999
(the "Effective Date"), by and among Powerhouse International Corporation, a
Nevada corporation (hereinafter called "Powerhouse")) and Asia Pacific Co., LTD,
a Niue corporation (hereinafter "APC")
WITNESSETH
WHEREAS, the Shareholders Asia Pacific Co., LTD ("the Shareholders") desire
to sell 100% of the Shares of the ownership interests of APC (the "APC Shares"),
on the terms and conditions set forth in this Reorganization and stock Purchase
Agreement (hereinafter called "Agreement")
WHEREAS, Powerhouse desires to issue and sell up to an aggregate of 690,000
of its Common Stock (the "Powerhouse Shares") to the Shareholders for the
transfer of the APC Shares to Powerhouse on the terms and conditions set forth
in the Agreement.
NOW THEREFORE, in consideration of the premises and respective mutual
agreements, convenants, representations and warranties herein contained, it is
agreed between the parties hereto as follows:
ARTICLE 1
SALE AND PURCHASE OF THE SHARES
1.1 Sale of the APC Shares.
At the Closing, subject to the terms and conditions herein set fort, and on the
basis of the representations, warranties and agreements herein contained, the
Shareholders shall sell Powerhouse, and Powerhouse shall purchase from the
Shareholders, the APC Shares.
1.2 Sale of the Powerhouse Common Stock.
At the Closing, subject to the terms and conditions herein set forth, and on the
basis of the representations, warranties and agreements herein contained,
Powerhouse shall sell to the Shareholders and the Shareholders shall purchase
from Powerhouse the Powerhouse Shares.
1.3 Instruments of Conveyance and Transfer.
At the Closing, the Shareholders shall deliver certificates representing the APC
Shares to and registered in the Shareholder's name, in form and substance
satisfactory to Powerhouse as shall be effective to vest in Powerhouse all
right, title and interest in and to all of the APC Shares. At the Closing,
Powerhouse shall deliver certificates representing an aggregate of at least
690,000 shares of common stock of Powerhouse, a public Company.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties
To induce Powerhouse to enter into this Agreement and to consummate the
transactions contemplated hereby, the Shareholders represent and warrant, as of
the date hereof and as of the Closing, as follows:
2.1.1 Authority of APC
The Directors of APC have the full right, power and authority to enter into
this Agreement and to carry out and consummate the transaction contemplated
herein. This Agreement constitutes the legal, valid and binding obligation of
the Shareholders.
2.1.2 Existence of APC
APC is a Niue Corporation duly organized, validly existing and in good standing
under the laws of the Country of Niue. It has all requisite corporate power,
franchises, licenses, permits and authority to own its properties and assets and
to carry on its business as it has been and is being conducted. It is in good
standing in each state, nation or other jurisdiction in each state, nation or
other jurisdiction wherein the character of the business transacted by it makes
such qualification necessary.
2.1.3 Capitalization of APC.
The authorized owner interest of APC consists of 10,000,000 Shares of Common
Stock of which 6,900,000 are issued and outstanding. No other shares of PAC are
issued and outstanding. All of the issued and outstanding Shares have been duly
and validly issued in accordance and compliance with all applicable laws, rules
and regulations and are fully paid and on assessable. There are no options,
warrants, rights, calls, commitments, plans, contracts or other agreements of
any character granted or issued by APC which provide for the purchase, issuance
or transfer of any Shares of the ownership interest of APC nor are there any
outstanding securities granted or issued by APC that are convertible into any
Shares of the ownership securities of APC, and none is authorized. APC is not
obligated or committed to purchase, redeem or otherwise acquire any of its
equity. All presently exercisable voting rights in APC are vested exclusively
in its outstanding Shareholders interests, each share of which is entitled to
one vote on every matter to come before it's shareholders, and other than as may
be contemplated by this Agreement, there are no voting trusts or other voting
arrangements with respect to any of APC's Shareholders interests.
2.1.4 Subsidiaries
"Subsidiary" or "Subsidiaries" means all corporations, trusts, partnerships,
associations, joint ventures or other Persons, as defined below, of which a
corporation or any other Subsidiary of such corporation owns not less than
twenty percent (20%) of the voting securities or other equity or of which such
corporation or any other Subsidiary of such corporation possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies, whether through ownership of voting Shares, management contracts or
otherwise. "Person" means any individual, corporation, trust, association,
partnership, proprietorship, joint venture or other entity. There are no
Subsidiaries of APC.
2.1.5 Execution of Agreement
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby will not: (a) violate, conflict with,
modify or cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage of time or
both), in whole or in part, any charter, bylaw, mortgage, lien, deed of trust,
indenture, lease, agreement, instrument, order, injunction, decree, judgment,
law3 or any other restriction of any kind to which either the Shareholders or
APC are a party or by which either of them or any of their properties are bound;
(b) result in the creation of any security interest, lien, encumbrance, adverse
claim, proscription or restriction on any property asset (whether real,
personal, mixed, tangible or intangible), right, contract, agreement or business
of the Shareholders or APC; (c) violate any law, rule or regulation of any
federal or state regulatory agency; or (d) permit any federal or state
regulatory agency to impose any restrictions or limitations of any nature on the
Shareholders or APC or any of their respective actions.
2.1.6 Taxes. Except as specifically set forth in Attachment "A":
2.1.6.1
All taxes, assessments, fees, penalties, interest and other governmental charges
with respect to APC which have become due and payable on the date hereof have
been paid in full or adequately reserved against by APC, (including without
limitation, income, property, sales, use, franchise, capital stock, excise,
added value, employees' income withholding, social security and unemployment
taxes), and all interest and penalties there on with respect to the periods then
ended and for all periods thereto;
2.1.6.2
The consummation of the transactions contemplated by this Agreement will not
result in the imposition of any additional taxes on or assessments against APC.
2.1.6.3
The consummation of the transactions contemplated by this Agreement will not
result in the imposition of any additional taxes on or assessments against APC.
2.1.7 Disputes and Litigation.
Except as specifically set forth in attachment "B", attached hereto, there is no
suit, action, litigation, proceeding, investigation, claim, complaint, or
accusation pending, threatened against or affecting APC or any of its
properties, assets or business or to which APC is a party, in any court or
before any arbitrator of any kind or before or by any governmental agency
(including, without limitation, any federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality),
and there is no basis for such suit, action, litigation, proceeding
investigation, claim, complaint, or accusation; 9b) there is no pending or
threatened change in any environmental, zoning or building laws, regulations or
ordinances which affect or could affect APC or any of its properties, assets or
businesses; and there is no outstanding order, writ, injunction, decree,
judgment or award by any court, arbitrator or governmental body against or
affecting APC or any of its properties, assets or business. There is no
litigation, proceeding, investigation, claim, complaint or accusation, formal or
informal, or arbitration pending, or any of the aforesaid threatened, or any
contingent liability which would give rise to any right of indemnification or
similar right on the part of any director or officer of APC or any such person's
heirs, executors or administrators as against APC.
2.1.8 Compliance with laws.
Except as specifically set forth in Attachment "C", APC has at all times been,
and presently is, in full compliance with, and has not received notice of any
claimed violation of, any applicable federal, state, local, foreign and other
laws, rules and regulations. APC has filed all returns, reports and other
documents and furnished all information required or requested by any federal,
state, local or foreign governmental agency and all such returns, reports
documents and information are true and complete in all respects. All permits,
licenses, orders, franchises and approvals of all federal, state, local or
foreign governmental or regulatory bodies required of APC for the conduct of its
business have been obtained, no violations are or have been recorded in respect
of any such permits, licenses, orders, franchises and approvals, and there is no
litigation, proceeding, investigation, arbitration, claim, complaint or
accusation, formal or informal, pending or threatened, which may revoke, limit,
or question the validity, sufficiency or continuance of any such permit,
license, order franchise or approval. Such permits, licenses, orders,
franchises and approvals are valid and sufficient for all activities presently
carried on by APC.
2.1.9 Guaranties
Except as specifically set forth in Attachment "D" APC has not guaranteed any
dividend, obligation or indebtedness of any Person; nor has any Person
guaranteed any dividend, obligation or indebtedness of APC.
2.1.9 Books and Records
APC keeps its books, records and accounts (including, without limitation, those
kept for financial reporting purposes and for tax purposes) in accordance with
good business practice and in sufficient detail to reflect the transactions and
dispositions of its assets, liabilities and equities. The minute books of the
APC contain records of its Shareholders' and directors' meetings and of action
taken by Shareholders and directors. The meeting of directors and Shareholders
referred to in such minute books were duly called and held, and the resolutions
appearing in such minute books were duly adopted. The signatures appearing on
all documents contained in such minute books are the true signatures of the
persons purporting to have signed the same.
2.2 Representations and Warranties of Powerhouse
To induce the Shareholders to enter into this Agreement and to consummate the
transactions contemplated hereby, Powerhouse represents and warrants, as of the
date hereof and as of the Closing, as follows:
2.2.1 Corporate Existence and Authority of Powerhouse
Powerhouse is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada. It has all requisite corporate
power, franchises, licenses, permits and authority to own its properties and
assets and to carry on its business as it has been and is being conducted. It
is in good standing in each state, nation or other jurisdiction in each state,
nation or other jurisdiction wherein the character of the business transacted by
it makes such qualification necessary.
2.2.2 Capitalization of Powerhouse
The authorized equity securities of Powerhouse consists of 100,000,000 shares of
common stock, of which 14,363,334 shares are issued. No other shares of capital
stock of Powerhouse are issued and outstanding. All of the issued and
outstanding shares have been duly and validly issued in accordance and
compliance with all applicable laws, rules and regulations and are fully paid
and non-assessable. Except as set forth herein, there are no options, warrants,
rights, calls, commitments, plans, contracts or other agreements of any
character granted or issued by Powerhouse which provide for the purchase,
issuance or transfer of any shares of the capital stock of Powerhouse nor are
there any outstanding securities granted or issued by Powerhouse that are
convertible into any shares of the Equity securities of Powerhouse, and non is
authorized. Except as set forth herein, Powerhouse is not obligated or
committed to purchase, redeem or otherwise acquire any of its equity. All
presently exercisable voting rights in Powerhouse are vested exclusively in its
outstanding shares of common stock, each share of which is entitled to one vote
on every matter to come before it's Shareholders, and other than as may be
contemplated by this Agreement, there are no voting trusts or other voting
arrangements with respect to any of Powerhouse's equity securities.
2.2.3 Subsidiaries
Powerhouse does not have any wholly owned subsidiaries. Powerhouse will hold,
Asia Pacific Co., LTD as a subsidiary.
2.2.4 Execution of Agreement
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby will not: (a) violate, conflict with,
modify or cause any default under or acceleration of (or give any party any
right to declare any default or acceleration upon notice or passage of time or
both), in whole or in part, any charter, article of incorporation, bylaw,
mortgage, lien, deed of trust, indenture, lease, agreement, instrument, order,
injunction, decree, judgment, law or any other restriction of any kind to which
Powerhouse is a party or by which it or any of its properties are bound; (b)
result in the creation of any security interest, lien, encumbrance, adverse
claim, proscription or restriction on any property or asset (whether real,
personal, mixed, tangible or intangible), right, contract, agreement or business
of Powerhouse; (c) violate any law, rule or regulation of any federal or state
regulatory agency; or (d) permit any federal or state regulatory agency to
impose any restrictions or limitations of any nature on Powerhouse or any of its
actions.
2.2.5 Taxes
2.2.5.1
All taxes, assessments, fees, penalties, interest and other governmental charges
with respect to Powerhouse which have become due and payable on the date hereof
have been paid in full or adequately reserved against by Powerhouse, 9 including
without limitation, income, property, sales, use, franchise, capital stock,
excise, added value, employees' income withholding, social security and
unemployment taxes), and all interest and penalties thereon with respect to the
periods then ended and for all periods thereto;
2.2.5.2
There are no agreements, waivers or other arrangements providing for an
extension of time with respect to the assessment of any tax or deficiency
against Powerhouse, nor are there any actions, suits, proceedings,
investigations or claims now pending against Powerhouse, nor are there any
actions, suits, proceedings, investigations or claims now pending against
Powerhouse, nor are there any actions, suits, proceedings, investigations or
claims now pending against Powerhouse in respect to any tax or assessment, or
any matters under discussion with any federal, state, local or foreign authority
relating to any taxes or assessments, or any claims for additional taxes or
assessments asserted by any such authority, and there is no basis for the
assertion of any additional taxes or assessments against Powerhouse, and
2.2.5.3
The consummation of the transactions contemplated by this Agreement will not
result in the imposition of any additional taxes on or assessments against
Powerhouse.
2.2.6 Disputes and Litigation
There is no suit, action, litigation, proceeding, investigation, claim,
compliant, or accusation pending, threatened against or affecting Powerhouse or
any of its properties, assets or business or to which or to which Powerhouse is
a party, in any court or before any arbitrator of any kind or before or by any
governmental agency (including, without limitation, any federal, state, local,
foreign or other governmental department, commission, board, bureau, agency or
instrumentality), and there is no basis for such suit, action, litigation,
proceeding, investigation, claim, complaint, or accusation; (b) there is no
pending or threatened change in any environmental, zoning or building laws,
regulations or ordinances which affect or could affect Powerhouse or any of its
properties, assets or businesses; and (c) there is no outstanding order, writ,
injunction, decree, judgment or award by any court, arbitrator or governmental
body against or affecting Powerhouse or any of its properties, assets or
business. There is no litigation, proceeding, investigation, claim, complaint
or accusation, formal or informal, or arbitration pending, or any of the
aforesaid threatened, or any contingent liability which would give rise to any
right of indemnification or similar right on the part of any director or officer
of Powerhouse or any such person's heirs, executors or administrators as against
Powerhouse.
2.2.7 Compliance with laws
Powerhouse has at all times been, and presently is, in full compliance with, and
has not received notice of any claimed violation of, any applicable federal,
state, local, foreign and other law, rules and regulations. Powerhouse has
filed all returns, reports and other documents and furnished all information
required or requested by federal, state, local or foreign governmental agency
and all such returns, reports, documents and information are true and complete
in all respects. All permits, licenses, orders, franchises and approvals of all
federal, state, local or foreign governmental or regulatory bodies required of
Powerhouse for the conduct of its business have been obtained, no violations are
or have been recorded in respect of any such permits, licenses, orders,
franchises and approvals, and there is no litigation, proceeding, investigation,
arbitration, claim, complaint or accusation, formal or informal, pending or
threatened, which may revoke, limit, or question the validity, sufficiency or
continuance of any such permit, license, order, franchise or approval. Such
permits, licenses, orders, franchises and approvals are valid and sufficient for
all activities presently carried on by Powerhouse.
2.2.8 Guaranties
Powerhouse has not guaranteed any dividend, obligation or indebtedness of any
Person; nor has any Person guaranteed any dividend, obligation or indebtedness
of Powerhouse.
2.2.9 Books and Records.
Powerhouse keeps its books, records and accounts (including, without limitation,
those kept for financial reporting purposes and for tax purposes) in accordance
with good business practice and in sufficient detail to reflect the transactions
and dispositions of its assets, liabilities and equities. The minute books of
the Powerhouse contain records of its Shareholders' and directors' meetings and
of action taken by Shareholders and directors. The meeting of directors and
Shareholders referred to in such minute books were duly called and held, and the
resolutions appearing in such minute books were duly adopted. The signatures
appearing on all documents contained in such minute books are the true
signatures of the persons purporting to have signed the same.
ARTICLE 3
CLOSING AND DELIVERY OF DOCUMENTS
3.1 Closing
This is a binding Agreement. Closing shall be deemed to have occurred upon
delivery of documents within a reasonable time period but no later than
September 30, 1999.
3.2 Delivery by the Shareholders:
(a) the Shareholders shall deliver to Powerhouse the member certificates and
all instruments of conveyance and transfer required by Section 1.1.
(b) the shareholders shall deliver, or cause to be delivered, to Powerhouse
such instruments, documents and certificates as are required to be delivered by
the Shareholders or its representatives pursuant to the provisions of this
Agreement.
3.3 Delivery by Powerhouse:
(a) Powerhouse shall deliver to the Shareholders the stock certificates and
all instruments of conveyance and transfer required by section 1.2.
(b) Powerhouse shall deliver, or cause to be delivered, to the Shareholders
such instruments, documents and certificates as are required to be delivered by
Powerhouse or its representatives pursuant to the provisions of this Agreement.
ARTICLE 4
TERMINATION, AMENDMENT AND WAIVER
4.1 Termination
Notwithstanding anything to the contrary contained in the Agreement, this
Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time prior to the Closing by the mutual consent of all of the
parties;
4.2 Waiver and Amendment
Any term, provision, covenant, representation, warranty or condition of this
Agreement may be waived, but only by a written instrument signed by the party
entitled to the benefits thereof. The failure or delay of any party at any time
or times to require performance of any provision hereof or to exercise its
rights with respect to any provision hereof shall in no manner operate as a
waiver of or affect such party's right at a later time to enforce the same. No
waiver by any party of any condition, or of the breach of any term, provision,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall be deemed to be or construed as a further or continuing
waiver of any such condition or breach or waiver of any other condition or of
the breach of any other term, provision, representation or warranty. No
modification or amendment to this Agreement shall be valid and binding unless it
be in writing and signed by all parties hereto.
ARTICLE 5
COVENANTS
5.1
To induce Powerhouse to enter into this Agreement and to consummate the
transactions contemplated hereby, and without limiting any covenant, agreement,
representation or warranty made the shareholders covenants and agrees as
follows:
5.1.1 Notices and Approvals
The Shareholders agree: (a) to give and to cause APC to give all notices to
third parties which may be necessary or deemed desirable by Powerhouse in
connection with this Agreement and the consummation of the transactions
contemplated hereby; 9b) to use its bet efforts to obtain and to cause APC to
obtain, all federal and state governmental regulatory agency approvals,
consents, permits, authorizations, and orders necessary or deemed desirable by
Powerhouse in connection with this Agreement and the consummation of the
transaction contemplated hereby; and (c) to use its best efforts to obtain, and
to cause APC to obtain, all consents and authorizations of any third parties
necessary or deemed desirable by Powerhouse in connection with this Agreement
and the consummation of the transactions contemplated hereby.
5.1.2 Information for Powerhouse's Statements and Applications
The Shareholders and APC and their employees, accountants and attorneys shall
cooperate fully with Powerhouse in preparation of any statements or applications
made by Powerhouse to any federal or state governmental regulatory agency in
connection with this Agreement and the transactions contemplated hereby and to
furnish Powerhouse with all information concerning the Shareholders and APC
necessary or deemed desirable by Powerhouse for inclusion in such statements and
applications, including, without limitation, all requisite financial statements
and schedule.
5.1.3 Access to Information
Powerhouse, together with its appropriate attorneys, agents and representatives,
shall be permitted to make the full and complete investigation of the
Shareholders and P\APC and have full access to all of the books and records of
the other during reasonable business hours. Notwithstanding the foregoing, such
parties shall treat all such information as confidential and shall not disclose
such information without the prior consent of the other.
5.2
To induce the Shareholders to enter into this Agreement and to consummate the
transactions contemplated hereby, and without limiting any covenant, agreement,
representation for warranty made Powerhouse covenants and agrees as follows:
5.2.1 Access to Information
The Shareholders, together with its appropriate attorneys, agents and
representatives, shall be permitted to make the full and complete investigation
of Powerhouse and have full access to all of the books and records of the other
during reasonable business hours. Notwithstanding the foregoing, such parties
shall treat all such information as confidential and shall not disclose such
information without the prior consent of the other.
ARTICLE 6
MISCELLANEOUS
6.1 Expenses
Except as otherwise specifically provided for herein, whether or not the
transactions contemplated hereby are consummated, each of the parties hereto
shall bear all taxes of any nature (including, without limitation, income,
franchise, transfer and sales taxes) and all fees and expenses relating to or
arising from its compliance with the various provisions of this Agreement and
such party's covenants to be performed hereunder, and except as otherwise
specifically provided for herein, each of the parties hereto agrees to pay all
of its own expenses (including, without limitation, attorneys and accountants'
fees and printing expenses) incurred in connection with this Agreement, the
transactions contemplated hereby, the negotiations leading to the same and the
preparations made to carrying the same into effect, and all such taxes, fees and
expense of the parties hereto shall be paid prior to Closing.
6.2 Notices
Any notice, request, instruction or other document required by the terms of this
Agreement, or deemed by any of the parties hereto to be desirable, to be given
to any other party hereto shall be in writing and shall be given by prepaid
telegram or delivered or mailed by registered or certified mail, postage
prepaid, with return receipt requested, to the following addresses:
To Powerhouse
Powerhouse, Inc.
242 N. Canon Drive
3rd Floor
Beverly Hills, CA 90210
With a copy to:
M. Richard Cutler
The Law Offices of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
To the Shareholders of Asia Pacific Co., Ltd., Inc.:
Mr. Grady Sanders
246 North Canon Drive
Beverly Hills, CA 90210
The persons and addresses set forth above may be changed from time to tie by a
notice sent as aforesaid. If notice is given by delivery in accordance with the
provisions of this Section, said notice shall be conclusively deemed given at
the time of such deliver. If notice is given by mail in accordance with the
provisions of this Section, such notice shall be conclusively deemed given
forty-eight (48) hours after deposit thereof in the United States mail. If
notice is given by telegraph in accordance with the provisions of this Section,
such notice shall be conclusively deemed given at the time that the telegraphic
agency shall confirm delivery thereof to addressee.
6.3 Entire Agreement
This Agreement, together with the Schedule and exhibits hereto, sets forth the
entire agreement and understanding of the parties hereto with respect to the
transactions contemplated hereby, and supersedes all prior agreements,
arrangements and understandings related to the subject matter hereof. No
understanding, promise, inducement, statement of intention, representation,
warranty, covenant or condition, written or oral, express or implied, whether by
statute or otherwise, has been made by any party hereto which is not embodied in
this Agreement, or exhibits hereto or the written statements, certificates, or
other documents delivered pursuant hereto or in connection with the transactions
contemplated hereby, and no party hereto shall be bound by or liable for any
alleged understanding, promise, inducement, statement, representation, warranty,
covenant or condition not so set forth.
6.4 Survival of Representation
All statements of fact (including financial statements) contained in the
Schedule, the exhibits, the certificates or any other instrument delivered by or
on behalf of the parties hereto, or in connection with the transaction
contemplated hereby, shall be deemed representations and warranties by the
respective party hereunder. All representation, warranties agreements and
covenants hereunder shall survive the Closing and remain effective regardless of
any investigation or audit or any time made by or on behalf of the parties or of
any information a party may have in respect thereto. Consummation of the
transactions contemplated hereby shall not be deemed or construed to be a waiver
of any right or remedy possessed by any party hereto, notwithstanding that such
party knew or should have known at the time of closing that such right or remedy
existed.
6.5 Incorporated by Reference
All documents (including, without limitation, all financial statements)
delivered as part hereof or incident hereto are incorporated as part of this
Agreement by reference.
6.6 Remedies Cumulative
No remedy herein conferred upon Purchaser is intended to be exclusive of any
other remedy and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or otherwise.
6.7 Execution of Additional Documents
Each party hereto shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions as may be reasonably
required in order to effectuate the purposes of this Agreement and to consummate
the transactions contemplated hereby.
6.8 Finder's and Related Fees
Each of the parties hereto is responsible for, and shall indemnify the other
against, any claim by any third party to a fee, commission, bonus or other
remuneration arising by reason of any services alleged to have been rendered to
or at the instance of said party to this Agreement with respect to this
Agreement or to any of the transactions contemplated hereby.
6.9 Governing Law
This Agreement has been negotiated and executed in the State of California and
shall be construed and enforced in accordance with the laws of such state.
6.1
<PAGE>
6.10 Forum
Each of the parties hereto agrees that any action or suit which may be brought
by any party hereto against any other party hereto in connection with this
Agreement or the transactions contemplated hereby may be brought only in a
federal or state court in Orange County, California.
6.11 Binding Effect and Assignment
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, legal
representatives and assigns.
6.12 Counterparts
This Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. In making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the
date first written herein above.
Powerhouse, Inc., a
Nevada corporation ("Powerhouse")
By: /s/ Marcia Allen
Its: President
Asia Pacific Co., Ltd., A Niue Corporation ("APC")
By: /s/ Grady Sanders
Its: President
7
THIS NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE CONVERSION HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE
TRANSFERRED UNLESS (I) THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR SUCH APPLICABLE SECURITIES LAWS, OR (II) IN THE OPINION OF
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE SECURITIES
ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH
SUCH TRANSFER.
ILIVE, INC
CONVERTIBLE NOTE
$1,500,000 Newport Beach, California
September 7, 1999
FOR VALUE RECEIVED, the undersigned, iLive, Inc. (formerly Powerhouse
International Corporation), its assigns, and successors (the "Company"), hereby
promises to pay to the order of Street Capital, Inc., or its assigns
(the"Purchaser"), in lawful money of the United States of America, and in
immediately available funds, the principal sum of ONE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($1,500,000). The principal hereof and any unpaid accrued
interest thereon shall be due and payable on or before 5:00 p.m., Pacific
Standard Time, on March 7, 2001 (unless such payment date is accelerated as
provided in Section 5 hereof, extended as provided in Section 2 hereof, or
unless this Note is converted as set forth in paragraph 1 hereof) ("Maturity").
Payment of all amounts due hereunder shall be made at the address of the
Purchaser provided for in Section 6 hereof. The Company further promises to pay
interest at the rate of twelve percent (12%) per annum on the outstanding
principal balance hereof, such interest to be payable upon Maturity.
1. CONVERSION. The Purchaser of this Note is en-titled, at its option,
at any time, upon fifteen (15) day's notice, and in whole or in part, until
maturity hereof (as extended by Purchaser) to convert the principal amount of
this Note or any portion of the principal amount hereof --into Shares of the
Com-mon Stock of the Company at a conversion price for each share of Common
Stock equal to $0.25. Such conversion shall be effectuated by surrendering the
Note to be converted to the Company, with the form of Conversion Notice attached
hereto as Exhibit A, executed by the Purchaser of this Note evidencing such
Purchaser's intention to convert this Note -or a specified portion hereof (as
above provided). The date on which such Conversion Notice is given shall be
deemed to be the date on which the Purchaser has delivered this Note, with the
Conversion Notice duly executed, to the Company or, if earlier, the date set
forth in such Conversion Notice if this Note and such Conversion Notice is
received by the Company within five business days' after the date set forth in
the Conversion Notice.
<PAGE>
The Company agrees to take whatever steps are necessary to authorize and
reserve, free of preemptive rights and other similar contractual rights of
stockholders, a sufficient number of its authorized but unissued shares of its
Common Stock to satisfy the rights of conversion of the holder of this Note.
Any certificates representing Conversion Shares transferred to Purchaser
which are not registered for resale without restriction under the Securities Act
or applicable state securities laws shall be endorsed with the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED UNLESS (1)
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR SUCH
APPLICABLE SECURITIES LAWS, OR (II) IN THE OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY REGISTRATION UNDER THE SECURITIES ACT OR SUCH
APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
TRANSFER.
2. EXTENSION OF MATURITY DATE. Purchaser shall have the right, in its
sole discretion, to extend the maturity of this Note for up to five one-year
periods, each such extension exercisable only by the Purchaser by delivering to
the Company written notice of such extension at any time prior to the maturity
date then in effect.
3. PREPAYMENT. The Company may, at its option, at any time and from
time to time, prepay all or any part of the principal balance of this Note,
without penalty or premium, provided that concurrently with each such prepayment
the Company shall pay accrued interest on the principal so prepaid to the date
of such prepayment.
4. TRANSFERABILITY. This Note shall not be transferred, pledged,
hypothecated, or assigned by the Holder without the express written consent of
the Company.
5. DEFAULT. The occurrence of any one of the following events shall
constitute an Event of Default:
(a) The non-payment, when due, of any principal or interest pursuant to
this Note;
(b) The material breach of any representation or warranty in this Note.
In the event the Purchaser becomes aware of a breach of this Section 7(b), the
Purchaser shall notify the Company in writing of such breach and the Company
shall have five business days after notice to cure such breach;
(c) The breach of any covenant or undertaking, not otherwise provided
for in this Section 7;
<PAGE>
(d) A default shall occur in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise, of any
indebtedness of the Company or an event of default or similar event shall occur
with respect to such indebtedness, if the effect of such default or event
(subject to any required notice and any applicable grace period) would be to
accelerate the maturity of any such indebtedness or to permit the holder or
holders of such indebtedness to cause such indebtedness to become due and
payable prior to its express maturity;
(e) The commencement by the Company of any voluntary proceeding under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
receivership, dissolution, or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or the adjudication of the Company as
insolvent or bankrupt by a decree of a court of competent jurisdiction; or the
petition or application by the Company for , acquiescence in, or consent by the
Company to, the appointment of any receiver or trustee for the Company or for
all or a substantial part of the property of the Company; or the assignment by
the Company for the benefit of creditors; or the written admission of the
Company of its inability to pay its debts as they mature; or
(f) The commencement against the Company of any proceeding relating to
the Company under any bankruptcy, reorganization, arrangement, insolvency,
adjustment of debt, receivership, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect, provided, however, that
the commencement of such a proceeding shall not constitute an Event of Default
unless the Company consents to the same or admits in writing the material
allegations of same, or said proceeding shall remain undismissed for 20 days; or
the issuance of any order, judgment or decree for the appointment of a receiver
or trustee for the Company or for all or a substantial part of the property of
the Company, which order, judgment or decree remains undismissed for 20 days; or
a warrant of attachment, execution, or similar process shall be issued against
any substantial part of the property of the Company.
Upon the occurrence of any Default or Event of Default, the Purchaser, may,
by written notice to the Company, declare all or any portion of the unpaid
principal amount due to Purchaser, together with all accrued interest thereon,
immediately due and payable, in which event it shall immediately be and become
due and payable, provided that upon the occurrence of an Event of Default as set
forth in paragraph (e) or paragraph (f) hereof, all or any portion of the unpaid
principal amount due to Purchaser, together with all accrued interest thereon,
shall immediately become due and payable without any such notice.
<PAGE>
6. NOTICES. Notices to be given hereunder shall be in writing and
shall be deemed to have been sufficiently given if delivered personally or sent
by overnight courier or messenger or sent by registered or certified mail (air
mail if overseas), return receipt requested, or by telex, facsimile
transmission, telegram or similar means of communication. Notice shall be
deemed to have been received on the date and time of personal delivery, telex,
facsimile transmission, telegram or similar means of communication, or if sent
by overnight courier or messenger, shall be deemed to have been received on the
next delivery day after deposit with the courier or messenger, or if sent by
certified or registered mail, return receipt requested, shall be deemed to have
been received on the third business day after the date of mailing. Notices
shall be given to the following addresses:
<PAGE>
If to the Company:
iLive, Inc.
242 N. Canon Dr., 3rd Floor
Beverly Hills, CA 90210
Facsimile No.: 310-285-0966
With a copy to:
Law Office of M. Richard Cutler
610 Newport Center Drive, Suite 800
Newport Beach, CA 92660
Attn: M. Richard Cutler, Esq.
Facsimile No.: 949-719-1988
If to the Purchaser:
Street Capital, Inc.
___________________________
___________________________
Facsimile No.: ______________
7. REPRESENTATIONS AND WARRANTIES. The Company hereby makes the following
representations and warranties to the Purchaser:
a. Organization, Good Standing and Power. The Company is a
corporation duly incorporated, validly exiting and in good standing under the
laws of the State of Pennsylvania and has the requisite corporate power to own,
lease and operate its properties and assets and to conduct its business as it is
now being conducted.
b. Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and perform this Note and to issue
and sell this Note, and the Conversion Shares in accordance with the terms
hereof. The execution, delivery and performance of this Note, by the Company
and the consummation by it of the Transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action, and
that the Company hereby warrants that it will take whatever action is necessary
to authorize and reserve, free of preemptive rights and other similar
contractual rights of stockholders, a sufficient number of its authorized but
unissued shares of its Common Stock to satisfy the rights of conversion of the
holder of this note. This Note when executed and delivered, will constitute a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.
<PAGE>
c. Issuance of Note. The Note issued hereunder and the Conversion
Shares to be issued upon conversion of the Note have been duly authorized by all
necessary corporate action and, when paid for or issued in accordance with the
terms hereof, will be validly issued and outstanding, fully paid and
non-assessable and entitled to the rights and preferences set forth herein.
d. Disclosure. Neither this Note nor any other document,
certificate or instrument furnished to the Purchaser by or on behalf of the
Company in connection with the transactions contemplated by this Note contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements made herein or therein, in the light
of the circumstances under which they were made herein or therein, not
misleading.
Purchaser hereby makes the following representations and warranties to the
Company:
i. Acquisition for Investment. Purchaser is purchasing the Note
solely for its own account for the purpose of investment and not with a view to
or for sale in connection with a distribution. Purchaser does not have a
present intention to sell the Note, or the Conversion Shares nor a present
arrangement (whether or not legally binding) or intention to effect any
distribution of the Note or the Conversion Shares to or through any person or
entity; provided. however. that by making the representations herein, such
Purchaser does not agree to hold the Note or the Conversion Shares for any
minimum or other specific term and reserves the right to dispose of the Note or
the Conversion Shares at any time in accordance with Federal securities laws
applicable to such disposition. Such Purchaser acknowledges that it is able to
bear the financial risks associated with an investment in the Note or Conversion
Shares and that it has been given full access to such records of the Company and
the subsidiaries and to the officers of the Company and the subsidiaries as it
has deemed necessary and appropriate to conduct its due diligence investigation.
ii. Accredited Purchasers. Such Purchaser is an "accredited investor"
as defined in Regulation D promulgated under the Securities Act.
8. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The Company
consents to the jurisdiction of any court of the State of California and of any
federal court located in California.
9. GOVERNING LAW. THIS NOTE HAS BEEN DELIVERED IN NEWPORT BEACH,
CALIFORNIA AND SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED ENTIRELY THEREIN, WITHOUT GIVING EFFECT TO THE RULES OR PRINCIPLES OF
CONFLICTS OF LAW.
<PAGE>
10. ATTORNEYS FEES. In the event the Purchaser or any holder hereof
shall refer this Note to an attorney for collection, the Company agrees to pay
all the costs and expenses incurred in attempting or effecting collection
hereunder or enforcement of the terms of this Note, including reasonable
attorney's fees, whether or not suit is instituted.
11. CONFORMITY WITH LAW. It is the intention of the Company and of the
Purchaser to conform strictly to applicable usury and similar laws.
Accordingly, notwithstanding anything to the contrary in this Note, it is agreed
that the aggregate of all charges which constitute interest under applicable
usury and similar laws that are contracted for, chargeable or receivable under
or in respect of this Note, shall under no circumstances exceed the maximum
amount of interest permitted by such laws, and any excess, whether occasioned by
acceleration or maturity of this Note or otherwise, shall be canceled
automatically, and if theretofore paid, shall be either refunded to the Company
or credited on the principal amount of this Note.
IN WITNESS WHEREOF, the Company has signed and sealed this Note and
delivered it in Newport Beach, California as of September 7, 1999.
ATTEST: ILIVE, INC.
By:
/s/ Anastasia Cronin /s/ Marcia Allen
Secretary Marcia Allen
President
STREET CAPITAL, INC.
[Corporate Seal]
By:_/s/ Scott Henricks_____________
Scott Henricks
President
<PAGE>
A-1
EXHIBIT A
CONVERSION NOTICE
(To be executed upon Conversion of Note)
To: iLive, Inc. (the "Company")
The undersigned hereby irrevocably elects to exercise the right,
represented by that certain Convertible Note dated September 7, 1999 (the
"Note"), attached hereto, to convert $____________ in outstanding principal
amount of the Note and/or accrued but unpaid interest on the Note into ________
shares (the "Shares") of Common Stock of the Company a price equal to $0.25 per
share and herewith authorizes the Company to reduce the principal amount of the
Note and/or accrued but unpaid interest on such Note in such amount. The
undersigned requests that certificates for such Shares be registered in the name
of _____________________ whose address is
_________________________________________ and that such certificates be
delivered to _________________________________________________ whose address is
_______________________________________________. If said number of Shares is
less than all of the Shares issuable upon conversion in full of the Note, the
undersigned requests that a new Convertible Note reduced by the conversion price
hereof be registered in the name of ________________________ whose address is
_________________ and that such replacement Convertible Note be delivered to
_______________________________ whose address is
_________________________________________________.
Dated: Signature:________________________
(Signature must conform in all respects to name of holder as specified on a the
face of the Note)
LEASE
1. BASIC PROVISIONS.
1.1 This Lease ("Lease"), is hereby entered into by and between EDDIA
TRUST ("Lessor") and ASIA PACIFIC CORPORATION and GRADY A SANDERS(collectively
"Lessee"), all of whom are sometimes referred to collectively as the "Parties,"
or individually as a "Party".
1.2 (a) PREMISES. That certain portion of the Building, commonly known
by the street address of 246 NORTH CANON DRIVE, located in the City of Beverly
Hills, County of Los Angeles, State of California, with zip code of 90210
("Building"), described as the former Bistro Restaurant with an approximate size
of 12,000 square feet ("Premises"). 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 2.4 below) as hereinafter
specified, but shall not have any rights to the roof, exterior walls or utility
raceways, except for the right to approve any changes by Lessor to the exterior
of the Premises. 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 "Project." (Also see Paragraph 2.)
1.2 (b) PARKING. From 9:00 am. to 6:00 p.m. each day during the term of
this lease, Lessee shall be entitled to the exclusive use of six (6) parking
spaces at the Building, and from 6:00 p.m. until closing shall be entitled to
the use of fifteen (15) parking spaces at the Building. Lessee shall be entitled
to install signage reflecting its rights to parking at the Premises as set forth
herein. As the adherence by third parties to the terms mentioned herein is
dependent on parties other than the Lessor and as Lessor is normally not present
at the Premises to monitor third-party parking, Lessor does not take
responsibility for the enforcement of this provision as against third parties.
(Also see Paragraph 2.3.) However, Lessee shall have the right to enforce this
provision as against third parties.
1.3 LEASE TERM. The initial term of the Lease shall be ten (10) years
("Original Term") commencing on March 1, 1996 ("Commencement Date") and ending
on February 28, 2006 ("Expiration Date"). Notwithstanding anything to the
contrary in this Lease, but provided that Lessee is not in default of any of its
obligations under the within Lease at the time for exercise of any option by
Lessee , Lessee shall have options to extend the term of the Lease for two (2)
additional terms of five (5) years each. (Also see Paragraph 3).
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1.4 MONTHLY BASE RENT. During the first two years of this Lease, the
Monthly Base Rent shall be $18,000.00 per month, payable upon the termination of
the Free Rent Period described below, and thereafter upon the first day of each
calendar month through and including February 1, 1998. For the third year of the
Lease Term, the Monthly Base Rent shall be $20,000.00 per month, payable upon
the first day of each calendar month through and including February 1, 1999.
Thereafter for the fourth through tenth years of the Lease term, the Monthly
Base Rent of $20,000.00 shall be increased annually by an amount equal to the
annual percentage increase for the prior calendar year in the Consumer Price
Index of the Bureau of Labor Statistics of the US. Department of Labor for the
Los Angeles Metropolitan Area ("CPI"). In the event the compilation and/or
publication of the CPI shall be transferred to any other governmental departure
or bureau or agency or shall be discontinued, then the Index most nearly the
same as the CPI shall be used to nuke such calculation. In the event that Lessor
and Lessee cannot agree on such alternative Index, then the matter shall be
submitted for decision to the American Arbitration Association in accordance
with the then current rules of said Association, and the
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decision of the arbitrator(s) shall be binding upon the Parties. The cost of
said arbitration shall be paid equally by Lessor and Lessee. (Also see Paragraph
4.) Monthly Base Rent during any option period exercised by Lessee following the
Original Term shall be determined pursuant to the terms of any Option to Extend
this Lease, which Option(s) to Extend are attached to this lease as
attachment(s) hereto.
1.5 MONTHLY PERCENTAGE RENT.
(a) MONTHLY PERCENTAGE RENT. During the Original Term (excluding the Free
Rent Period discussed below) and any option period exercised by Lessee, Lessee
shall pay to Lessor on the first day of each calendar month as additional rent
under this Lease a Monthly Percentage Rent in an amount equal to seven and
one-half percent (7 2 %) of Monthly Gross Sales (as defined in this Paragraph
1.5) of Lessee in excess of $250,000.00 from the business operated from the
Premises ("Monthly Percentage Rent").
(b) GROSS SALES DEFINED. For purposes of this Lease, the term "Monthly Gross
Sales" shall mean the total selling price of all merchandise, products or
services sold or rendered in, on, or from the Premises by Lessee, its
Sublessees, licensees, or concessionaires, whether for cash or on credit and if
on credit whether or not paid, but
excluding sales taxes and credit card commissions payable upon such sales, and
shall include, without limitation:
(i) Proceeds from all automatic vending, weighing, and other machines
owned and operated by Lessee in or on the Premises;
(ii) Commissions received by Lessee from any automatic vending, weighing,
and other machines not owned by Lessee but operated in or on the Premises;
(iii) Commissions received by Lessee from the operation of public
telephones in or on the Premises; and
(iv) Proceeds from sales based on orders solicited or taken from, in, or
on the Premises for merchandise, products or services to be delivered or
rendered off, or from sources outside, the Premises, including but not limited
to catering proceeds.
(c) BOOKS AND RECORDS. Lessee shall at all times keep or cause to be kept on
the Premises complete and accurate records and books of account showing the
total amount of Monthly Gross Sales made
in, on, or from the Premises. Lessee covenants that it shall cause to be
installed accurate cash registers, which shall show and record each and every
sale made on and within the Premises and which also shall show the
total of all daily sales. Lessee agrees to maintain on the Premises for a period
of one year following the close
of each calendar month all records and books of account and all cash register
tapes showing or in any way pertaining to the Monthly Gross Sales made in, on,
or from the Premises during that calendar month.
(d) STATEMENT OF GROSS SALES. Lessee agrees to submit the following to Lessor:
monthly statements of Monthly Gross Sales received from the business operated on
the Premises, due within 15 days following the last day of each successive
calendar month of the lease term (or of any option renewal term of the Lease
following the conclusion of the Free Rent Period; a statement of yearly gross
sales, due within 60 days immediately
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following the end of the first and each succeeding full year of the term of the
Lease; and a statement of Monthly Gross Sales made since the last monthly
statement, due within 30 days following the expiration or earlier termination of
the Lease. The first yearly statement shall include gross sales for the first 12
whole months and any partial months immediately following the Free Rent Period
of this Lease. All such statements shall be signed by a responsible and
authorized financial officer of Lessee certifying the amount of Monthly Gross
Sales (as defined in the Lease ) defined for the period to be accounted for. If
by any such monthly or yearly statement it appears that any Monthly Percentage
Rent is due and payable to Lessor for the preceding monthly or yearly period,
such Monthly Percentage Rent shall be paid to Lessor on the next first day of a
calendar month following the date said monthly or yearly statement is rendered.
All Monthly Base Rent and Monthly Percentage Rent shall be paid to Lessor
without deduction or offset.
(e) AUDIT. Lessor may at any time within one year after receiving a statement
from Lessee, at Lessor's own cost and expense, cause all books, records, and
cash register tapes described in Paragraph 1.58 of this Lease for the calendar
month purportedly covered by the statement to be audited by a public accountant
selected by Lessor. On receiving written notice of Lessor's election for such an
audit, Lessee shall deliver and make available all such books, records, and cash
register tapes to the public or certified public accountant selected by Lessor.
Upon conclusion of such audit, Lessee shall be responsible for payment to Lessor
within 30 days of any Monthly Percentage Rent for the time period reflected by
the questioned statement which remains unpaid to Lessor at the conclusion of the
audit. Furthermore, Lessee shall promptly on demand reimburse Lessor for the
fill cost and expense of the audit if the audit discloses that the questioned
statement understated Monthly Gross Sales or the Monthly Percentage Rent payable
because of Monthly Gross Sales by three percent (3%) or more.
1.5-1. ANNUAL ADDITIONAL RENT. In addition to rental obligations stated in
paragraph 1.4 and 1.5 of the herein lease and during the Original Term as stated
in paragraph 1.3 and any and all Option Periods Lessee undertakes and Lessor
approves, including but not limited to the Option period term stated in
paragraph 1.3 of the herein lease, Lessee shall pay to Lessor an amount of
$10,000.00 every year or fraction thereof, in the form of unrestricted credit
towards any purchases of food, beverage, or other services at Lessee's
restaurant facilities and Lessee's catering facilities.
1.6 LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES. During the
Original Term and any option period exercised by Lessee, Lessee shall pay to
Lessor as additional rent Sixty -Three percent (63%) of the Common Area
Operating Expenses ("Lessee's Share") in accordance with Paragraph 4.2. Lessee's
Share shall be that percentage of the Common Area Operating Expenses as is
directly proportionate to the square footage of the Premises as compared to the
total square footage of the Building.
1.7 FREE RENT PERIOD. Provided that Lessee is not is default of any
obligations under this Lease, and provided that Lessee keeps current with
Lessee's Share of Common Area Operating Expenses and applicable taxes,
utilities, insurance, and all other financial obligations of Lessee called for
under this Lease, Lessor will provide $90,000.00 (Ninety Thousand Dollars) of
"Free Rent" which must be applied in five in equal installments of $18,000.00
(Eighteen Thousand Dollars) each towards the first, second, thirteenth,
twenty-fifth, and thirty-seventh months of the herein Lease.
1.8 SECURITY DEPOSIT AND ADVANCE PAYMENT OF RENT. The Security Deposit
shall be Thirty Thousand Dollars ($30,000.00) ("Security Deposit"). (Also see
Paragraph 5). The Advance Rent shall be Eighteen Thousand Dollars ($18,000.00),
which will be credited towards
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Lessee's first-month rental obligation. Five years from commencement of the
Original Term, Lessor shall refund any and all remaining portions of said
Security Deposit.
1.9 PERMITTED USE: Lessee shall use the Premises only for the operation
of a first-class restaurant and catering business ("Permitted Use"). (Also see
Paragraph 6.)
1.10 GUARANTOR. The obligations of the Lessee under this Lease are also
to be personally guaranteed for a period of five (5) years by means of Guaranty
of Lease attached hereto as Exhibit ________ by Jerry Weiner or another natural
person acceptable to Lessor ("Guarantor") as pertaining to all of Lessee's
duties and obligations set forth in the herein Lease or as allowed under law, up
to and including, but not in excess of, the sum of Two Hundred Thousand Dollars
($200,000.00). (Also see Paragraph 37 and Exhibit _________ hereto.)
{NOTE: Paragraph 1.10 and 1.11 were illegible.}
1.11 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs___ through___, and Exhibits Athrough B, all of which
constitute a part of this Lease.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, 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) based thereon is not
subject to revision whether or not the actual square footage is more or less.
2.2 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it has
been advised by the Lessor 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 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. Lessee has had full opportunity
to inspect the condition of the Premises, and has fully inspected the condition
of the Premises. Lessee hereby acknowledges and agrees that Lessee is leasing
the Premises "AS IS, WHERE IS, WITH ALL FAULTS, WHETHER KNOWN OR UNKNOWN,"and
that Lessor has not and is not making representations or warranties of any kind,
nature or description with respect to the Premises, the Building, the Common
Areas, or any other aspect of this transaction.
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2.3 VEHICLE PARKING. Lessee shall be entitled to use the parking
allotment 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 allotted. 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
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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 2.6.)
(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 2.3, then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.4 COMMON AREAS - DEFINITION. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Project and interior utility raceways within the Premises that are
provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other lessees of the Project 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.
2.5 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 Project, and subject to Lessor's rights
to make changes to the Common Areas (including but not limited to such rights as
are described in Paragraph 2.7 of
this Lease). 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. Lessee shall not obstruct, or use fort storage, or for any purpose other
than ingress and egress, the sidewalks, entrances, passages, courts, corridors,
vestibules, halls, elevators or stairways of the Building.
2.6 COMMON AREAS - RATES 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 Project. However, Lessor shall exercise diligent efforts to
obtain compliance with said Rules and Regulations by other tenants of the
Project.
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2.7 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, but only so long as
such changes do not, individually or collectively, interfere with access to the
Premises, and so long as Lessor has obtained Lessee's prior written consent (not
to be unreasonably withheld or delayed) to any changes to the exterior of the
Premises;
(b) To close temporarily any of the Common Areas for maintenance purposes
so long as reasonable access to the Premises remains available;
(c) To add additional buildings and improvements to the Common Areas;
(d) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project, or any portion thereof; and
(e) To do and perform such other acts and make such other changes in, to or
with respect to the Common Areas and Project as Lessor may, in the exercise of
sound business judgment, deem to be appropriate, but only so long as such acts
or changes do not unreasonably interfere with and are not otherwise unreasonably
inconsistent with Lessee's Permitted Use of the Premises.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
4. RENT.
4.1 PAYMENT. Lessee shall pay Monthly Base Rent and other rent or
charges, as the same may be adjusted from time to time as provided in this
Lease, to Lessor in lawful money of the United States, without offset or
deduction on or before the day on which it is due under the terms of this Lease.
Monthly 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 Monthly base Rent and
all other rent and 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 Monthly Base Rent and all other rental payments
and charges called for under this Lease, Lessee's Share (as specified in
Paragraph 1.6) 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 bar Lessor relating to the ownership and operation
of the Project, including, but not limited to, the following:
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(i) To the extent not paid from the reserves described in Paragraph 4.2 (a) (iv)
below,
the costs associated with 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.
(cc) Fire detection and sprinkler systems.
(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, in accordance with market rates for such
services.
(iv) Reasonable reserves set aside for maintenance and repair of Common
Areas.
(v) Real Property Taxes (as defined in Paragraph 10.2) to be paid by Lessor for
the
Building and the Common Areas under Paragraph 10 hereof.
(vi) The cost of the premiums for the insurance policies maintained by Lessor
under Paragraph 8 hereof.
(vii) Any deductible portion of an insured loss concerning the Building or the
Common
Areas.
(viii) Any other services to be provided by Lessor that are stated
elsewhere in this Lease
to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Building or to any other building in the
Project or to the operation, repair and maintenance thereof, shall be allocated
entirely to the Building or to such other building. However, any Common Area
Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Project.
(c) The inclusion of the improvements, facilities and services set forth
in Subparagraph 4.2(a) shall not be deemed to impose an obligation unless the
Project already has the same, Lessor already provides the or to provide the
services, or Lessor has agreed elsewhere in this Lease to provide the same or
some of them.
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(d) Lessee's Share of Common Area Expenses shall be payable by Lessee
within ten (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
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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 overpayment against Lessee's Share
of Common Area Operating Expenses next becoming due. If 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.
(e) Common Area Operating Expenses shall not include legal fees incurred by
Lessor for any purpose whatsoever.
(f) If any reserves described in Paragraph 4.2 (a)(iv) above remain unused
at the end of the Original Term of this Lease and any renewal term of this
Lease, and as long as Lessee is not in default of this Lease at the end of the
Original Term and any renewal term of this Lease, Lessor shall refund to Lessee
within thirty (30) days following the end of the term of this Lease or renewal
term thereof, whichever is later, an amount equal to Sixty Three percent (63%)
of the balance remaining in such reserves as of the end of the Original Term or
any renewal term of this Lease, whichever is later.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's
execution hereof the Security Deposit set forth in Paragraph 1.8 as security for
Lessee's faithful performance of Lessee's obligations under each and every term,
provision, covenant and condition of this Lease. If Lessee fails 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. 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.
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(a) Lessee shall use and occupy the Premises only for the Permitted Use set
forth in Paragraph 1.9, 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. No noise, odor or litter, whether caused by
Lessee, Lessee's customers, clients, invitees or guests, which is objectionable
to Lessor or other occupants of the Building, shall emanate from the
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Premises. Lessee shall not: (1) create or maintain a nuisance on the premises,
(2) disturb, solicit or canvass any occupant of the building, or (3) do any act
of tending to inure the reputation of the Building or of Lessor.
(b) Lessee covenants and agrees that it shall operate and conduct within
the Premises, continuously and uninterruptedly during the entire Lease term, the
Permitted Use, excepting legal holidays, and except while the Premises are
untenantable by reason of fire of other unavoidable casualty, and that it shall
at all times keep and maintain within and upon the Premises an adequate stock of
merchandise and trade fixtures and have sufficient personnel to service and
supply the demands and requirements of its customers. If Lessee shall fail to
continuously and uninterruptedly operate the Premises for the Permitted Use
under the terms of this Lease at any time during the Lease Term as required
herein, Lessor shall, in addition to Lessor's other rights and remedies, be
entitled to either terminate the Lease or require Lessee to pay to Lessor, in
addition to Base Rent, on the first day of the calendar month following said
failure to remain in continuous operation, an additional amount equal to 1/30th
of the then monthly Base Rent for each day that Lessee fails to continuously and
uninterruptedly operate its business in the Premises as required herein.
(c) Lessee agrees that it shall keep the Premises in a neat, clean and
orderly condition and that all trash and rubbish generated by it shall be
deposited at least once a day within prescribed receptacles in designated
service areas within the building. Lessee further agrees to cause such
receptacles to be emptied and trash removed at its own cost and expense so as,
on its part, to keep such service areas in a clean and orderly condition.
(d) 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
(e) Lessor shall not lease any other portion of the Building to any tenant
for the operation of a restaurant and/or catering business, or for the operation
of any other business activity that would unreasonably interfere or be
unreasonably inconsistent with the operation of the Premises as a first-class
restaurant and catering business. Operation of other premises in the Building
for general office use shall not be deemed to violate the provisions of this
Paragraph 6(e) .
(f) Lessee assumes full responsibility for. (1) protecting the Premises
from theft, robbery and pilferage, (2) keeping the Premises secure, and (3)
locking the doors in and to the Premises. Any damages from Lessee's negligent
failure to so protect, secure, and/or lock the Premises shall-be paid for by
Lessee. All property belonging to Lessee, or to any other person, within the
Building or the Premises, shall be there at the risk of
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Lessee or such other person, and Lessor and its agents and employees shall not
be liable for damage thereto or theft or misappropriation thereof Lessee hereby
indemnifies and holds Lessor and its agents and employees harmless from say
claims arising out of the above, including subrogation claims by Lessee's
insurance carrier.
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(g) During the Original Term and any extension thereof pursuant to exercise by
Lessee of any option to extend this Lease, Lessee shall have the right to use
any or all of the furnishings, fixtures and equipment in existence on the
Premises as of the date of execution of this Lease, and shall further be
entitled to use up any existing supplies located on the Premises as of the date
of execution of this Lease, in the ordinary course of business; provided,
however, that Lessee shall not be permitted to commit unreasonable waste of said
furnishings, fixtures, equipment, and supplies. In the event that Lessee shall
desire to dispose of any or all of the existing furnishings, fixtures,
equipment, or supplies located on the Premises as of the date of .execution of
this Lease, Lessee shall first offer to Lessor in writing the right to take
possession of the same. If Lessor elects to take possession, Lessor shall be
responsible for any cost of removing said furnishings, fixtures, equipment
and/or supplies as Lessor elects to take possession of from the Premises. If,
however, Lessor declines to take possession of said furnishings, fixtures,
equipment or supplies, removal of the same from the Premises shall be at the
sole cost of Lessee. Furthermore, any acceptance by Lessor of possession of any
such furniture, fixtures, equipment, and/or supplies which Lessee desires to
dispose of shall not entitle Lessee to any credit or offset against rent or
other financial obligations to Lessor or any other person under this Lease, nor
relieve Lessee from the obligation to fully perform each and every term,
covenant, condition, provision, and promise of Lessee set forth in this Lease
or any attachment hereto.
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: (i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) 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
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Requirements (as defined m
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 fled with, any governmental authority, and (iii) the
presence in, on or about the Premises 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 Premises or neighboring properties to any meaningful risk of contamination
or damage or expose Lessor to any pity therefor. In addition, Lessor may (but
without any obligation to do so) condition its consent to any
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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 Premises 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, inquiry or proceeding given to, or
received from, any governmental authority (including but not limited to the
California State Department of Health Services, the State or any Regional Water
Quality Control Board, the Air Quality Management District or any local
government entity) 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
Premises. Lessee shall not cause or permit any Hazardous Substance to be spilled
or released in, on, under or about the Premises (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' fees 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 6.28 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, redemption, 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, a requirements of any applicable fire insurance
underwriter or rating bureau, and the recommendations of Lessor's engineers
and/or consultants, relating in 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
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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 Premises to comply with any Applicable Requirements.
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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, upon prior written notice to Lessee, 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. Notwithstanding any
language to the contrary in the foregoing, except in the case of a bona fide
emergency, Lessor shall have no right to enter the Premises for any purpose
whatsoever during the hours of 11:00 a.m. to 3:00 p.m. and the hours of 6:00
p.m. to 11:00 p.m.
7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND ALTERATIONS.
7.1. LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 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 Premises), including, without limiting the generality of the foregoing,
all equipment or facilities specifically serving the Premises, such as plumbing,
heating, air condoning, ventilating, electrical, lighting facilities, boilers,
HVAC system, fired or unfired pressure vessels, fire hose connections if within
the Premises, fixtures, interior walls, interior suffices of exterior walls,
ceilings, floors, windows, doors, plate glass, and skylights, but excluding any
items which are the responsibility of Lessor pursuant to Paragraph 7.2 below.
Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. Lessee's obligations shall
include restorations, replacements or renewals when necessary to keep the
Premises 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 m the inspection, maintenance and
service of the heating, air conditioning and ventilation system for the
Premises.
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(c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (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.
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(d) In the event the elevator for the building shall become inoperable, and
Lessor shall fail to initiate efforts to repair the same after receipt of two
written 24-hour notices to repair the elevator from Lessee, Lessee shall have
the right, exercisable at Lessee's option, of procuring the services of a
contractor specializing and experienced in the inspection, maintenance and
service of elevators to effect repairs upon said elevator, whose services shall
be billable directly to Lessor. Notwithstanding the foregoing, Lessee shall have
no right to deduct or offset the cost of such repair from any rental payment or
any other sums which Lessee shall be responsible to pay to Lessor under the
terms of this Lease.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of 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 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 well as providing the services for which
there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall
further be responsible for keeping in good order, condition and repair any
mechanical systems servicing the Building as a whole and not merely the
Premises, the expenses of such upkeep and repair to be treated as a Common Area
Operating Expense pursuant to Paragraph 4.2 of this Lease. Lessor shall further
be responsible to deliver to the Premises as soon as reasonably possible
following the commencement of Lessee's occupancy of the Premises under this
Lease a working and functional HVAC system; however, following such delivery,
Lessor shall have no responsibility whatsoever for the repair, upkeep,
maintenance or replacement of said HVAC system or any component part thereof,
and all such repair, upkeep, maintenance and repair shall be the sole
responsibility of Lessee and at Lessee's sole cost and expense under Paragraph
7.1 of this Lease. 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,
Project 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 "Alterations" shall
mean any modification of the improvements on the Premises, other than Utility
Installations or Trade Fixtures. 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.
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<PAGE>
(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 $20,000.00 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 seared 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 Premises free from the effect of such lien or
claim.
(d) Upon execution of this Lease, Lessee shall make improvements to the
Premises to ready the same for its operation for the Permitted Use described
above, such improvements subject to the consent of Lessor as provided in this
Paragraph 7.3. Lessee shall expend not less than Five Hundred Thousand Dollars
($500,000.00) on such improvements, but in no event shall be required to expend
in excess of One Million Dollars ($1,000,000.00) on such improvements. Prior to
any construction to and/or alteration of Premises, Lessee will provide to Lessor
a completion bond in an amount equal to 1 2 times the estimated amount of said
construction and/ or alteration.
7.4 OWNERSHIP, REMOVAL, SURRENDER, RESTORATION, AND SECURITY INTEREST.
(a) OWNERSHIP. All Alterations and Utility installations made to the
Premises by Lessee shall be the property of and owned by Lessor, and considered
a part of the Premises. Upon expiration of the Original Term and any renewal tam
of this Lease, or upon any eerier termination of this Lease, all Trade Fixtures
installed in the Premises at any time shall be the property of and owned by
Lessor, and considered a part of the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require that
any or all Alterations or Utility Installations be removed by the expiration or
earlier termination
<PAGE>
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.
<PAGE>
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by the 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, Utility Installations, and all Trade Fixtures. The
obligation of Lessee shall include the repair of any damage to the Premises,
Trade Fixtures, Alterations and Utility Installations, and the removal,
replacement or remediation of any soil, material or ground water contamination
by Lessee, all as may then be required by Applicable Requirements and/or good
practice.
(d) SECURITY AGREEMENT. Lessee hereby grants to Lessor a lien and security
interest on all property of Lessee now or hereafter placed in or upon the
Premises including, but not limited to, all fixtures, machinery, equipment,
furnishings and other articles of personal property, and all proceeds of the
sale or other disposition of such property (collectively, the "Collateral") to
secure the payment of all rent to be paid by Lessee pursuant to this lease. Such
lien and security interest shall be in addition to any landlord's lien provided
by the law. This Lease shall constitute a security agreement under the
California Commercial Code so that Lessor shall have and many enforce a security
interest in the Collateral. Lessee agrees to execute as debtor and deliver such
financing statement or statements and any further documents as Lessor may now or
hereafter reasonably request to protect such security interest pursuant to such
Code. Lessor may also at any time file a copy of this lease as financing
statement. Lessor, as secured party, shall be entitled to all rights and
remedies afforded a secured party under such Code, which rights and remedies
shall be inn addition to Lessor's liens and rights provided by law or by the
other terms and provisions of this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUMS. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 or which will be maintained
during the term of this Lease or any option renewal period thereof shall be a
Common Area Operating Expense pursuant to Paragraph 4.2 hereof. 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
terra of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names 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 amount not less than Two Million Dollars
($2,000,000.00) per occurrence with an "Additional Insured - Managers or Lessors
of Premises" endorsement and contain the "Amendment of the Pollution Exclusion"
<PAGE>
<PAGE>
endorsement for damage caused by heat, smoke or fumes from fire. The policy
shall not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease (including but not limited to Paragraph 8.7 below). The limits
of said insurance required by this Lease or 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. Both Lessor and Lessee shall be named as
additional insureds, and the policies shall contain cross-liability
endorsements. Upon request from Lessor, Lessee shall provide Lessor with written
evidence that such insurance is in force. If Lessee shall fail to procure and
maintain such insurance the Lessor may, but shall not be required to, procure
and maintain same at the expense of Lessee and the cost thereof, together with
interest thereon at the rate of ten (10%) percent per annum, shall become due
and payable as additional rental to Lessor together with Lessee's next rental
installment.
(b) CARRIED BY LESSOR. Lessor shall also maintain liability insurance
described in Paragraph 8.2(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 has obtained or 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 Building. 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. The costs of
such insurance shall be treated as a Common Area Operating Expense under
Paragraph 4.2 of this Lease, with Lessee required to pay to Lessor Lessee's
Share thereof as defined in Paragraph 1.6 of this Lease. 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 and commercially
appropriate, Lessor's policy or policies shall insure against all risks of
direct physical loss or damage (including coverage for the perils of flood
and/or earthquake), 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 repent 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 not
less than the adjusted US. 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
<PAGE>
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. The costs of such insurance shall be treated as a Common Area Operating
Expense under Paragraph 4.2 of this Lease, with Lessee required to pay to Lessor
Lessee's Share thereof as defined by Paragraph 1.6 of this Lease. Common Area
Operating Expenses shall further include any deductible amount in the event of
such loss.
<PAGE>
(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 Project if said increase is caused by Lessee's acts, omissions,
use or occupancy of the Premises.
8.4 LESSEE'S PROPERTY DAMAGE INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its sole cost and expense shall, either by separate
policy or, at Lessor's option, by endorsement to a policy already carried,
maintain during the term of this Lease (and any extension of the term thereof by
exercise of option) property damage insurance coverage on all personal property
in, on or about the Premises (whether that of Lessee, Lessor, or any other
person), Trade Fixtures and Alterations and Utility Installations in, on, or
about the Premises, with property damage limits of not less than One Million
Dollars ($1,000,000.00), Property damage insurance under such policy shall be
similar in scope of coverage to that carved by Lessor as the Insuring Party
under Paragraph 8.3(a), excepting that: (a) such insurance shall be full
replacement cost coverage with a deductible not to exceed $5,000 per occurrence
; and (b) such insurance shall specifically provide coverage for the perils of
flood and earthquake if commercially available and appropriate, and shall
include plate glass insurance. The proceeds from any such insurance shall be
used by Lessee for the replacement of personal property and the restoration of
Trade Fixtures and Alterations and Utility Installations. Said insurance shall
further insure performance by Lessee of the indemnity provisions in Paragraph
8.7 below, but the limits of such insurance shall not, however, limit the
liability of Lessee hereunder. Both Lessor and Lessee shall be named as
additional insureds, and the policies shall contain cross-liability
endorsements. Upon request from Lessor, Lessee shall provide Lessor with written
evidence that such insurance is in force. If Lessee shall fail to procure and
maintain such insurance the Lessor may, but shall not be required to, procure
and maintain same at the expense of Lessee and the cost thereof, together with
interest thereon at the rate often (10%) percent per annum, shall become due and
payable as additional rental to Lessor together with Lessee's next rental
installment.
8.5 INSURANCE POLICIES. Insurance required her 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+, A, 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 a after 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 cancelable 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"
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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.
<PAGE>
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 situations arising proximately from or out of
Lessor's willful misconduct and/or breach of this Lease, 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. Except for situations arising
proximately from or out of Lessor's willful misconduct and/or breach of this
Lease, Lessor shall not be liable for injury or damage to the person or goods,
wares, merchandise or other property of Lessee, of Lessor in Lessee's Premises ,
or of Lessee's employees, contractors, invitees, customers, or any other person
in or about the Premises, whether such damage or injury is caused bar 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 Project. 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 Trade Fixtures, Alterations and Utility Installations , the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement
<PAGE>
Cost (as defined in Paragraph 9.1(d)) of the Premises (excluding Trade Fixtures,
Alterations and Utility Installations) immediately prior to such damage or
destruction.
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(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to the
Premises, excluding Trade Fixtures, 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 Premises (excluding Trade Fixtures, Alterations and
Utility Installations) immediately prior to such damage or destruction. In
addition, damage or destruction to the Building (excluding Trade Fixtures,
Alterations and Utility Installations), the cost of which damage or destruction
is fifty percent (50%) or more of the then Replacement Cost of the Building
(excluding Trade Fixtures, Alterations and Utility Installations) shall, at the
option of Lessor, be deemed to be Premises Total Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the Premises (excluding
Trade Fixtures, Alterations and Utility Installations), 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.
(e) "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 Trade Fixtures, 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 reasonable and 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 text (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 ten (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 text (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 any right to reimbursement from Lessor for any funds
contributed by Lessee to repair any such damage or destruction. Premises 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.
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<PAGE>
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 the 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
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 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 m 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. If Premises Total Destruction occurs at any time
during the first three (3) years of the Original Term of this Lease, Lessor
shall be required to rebuild the Premises in the same manner, and subject to the
same terms, conditions, and limitations as set forth in Paragraphs 9.2 above, as
if Premises Partial Damage had occurred, provided, however, that notwithstanding
any other language to the contrary or other provision of this Lease, Lessor
shall not be required to perform any rebuilding of the Premises as the result of
Premises Total Destruction which exceeds in amount the total of any insurance
proceeds actually received by Lessor for such Premises Total Destruction plus
any additional funds actually provided by Lessee to Lessor to cover repair of
Premises Total Destruction. Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority) at any time following the first three (3) years of
the Original Term of this Lease, 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 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 Premises, then Lessee mar 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 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.
<PAGE>
<PAGE>
9.6 ABATEMENT OF RENT. 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.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (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 6.28 and Paragraph 13), Lessor may at
Lessor's option either (J) 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 ton.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to 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, applicable to the Project, and except as otherwise
provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Operating Expenses in accordance with the provisions of
Paragraph 4.2.
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<PAGE>
10.2 REAL PROPERTY TAX DEFINITION. 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 Project 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 Project or any portion thereof; Lessor's right to rent
or other income therefrom, and/or Lessor's business of leasing the Premises. The
term "Real Property Taxes" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, unposed 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 Project 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.
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 Project 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 Premises 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 rive
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 Alterations and Utility Installations,
Trade Fixtures, furnishings, equipment and all personal property of Lessee
contained in the Premises or stored within the Project. When possible, Lessee
shall cause 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 property shall be assessed
with Lessor's real property, Lessee shall pay Lessor the taxes applicable to
Lessee's property within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Lessees property.
11. UTILITIES. Lessor shall not provide any utility service (including but not
limited to telephone, gas, electricity, etc.) to Lessee or the Premises. All
utilities required by Lessee and for the Premises shall (if available) be
obtained by Lessee and installed by the appropriate utility company, and Lessee
shall cause all such utilities to be separately metered to Lessee. All charges
for such utility services, including installation, shall be billed directly to
Lessee by such utility. Lessee shall pay directly for all utilities and services
supplied to the Premises, together with any taxes thereon, and shall make all
payments to said utility providers when the same are due.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
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<PAGE>
(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
36. Notwithstanding any language to the contrary in this Paragraph 12 or in this
Lease, Lessor shall be deemed to have given its written consent by the execution
of this Lease to the assignment, transfer, or subletting by Lessee of this
Lease, or any portion of Lessee's rights in and to the occupancy and use of the
Premises under this Lease, to any subsidiary or affiliate of Lessee, provided
that Lessee shall remain fully liable to Lessor for the full performance of all
terms: provisions, covenants, conditions, and promises set forth in this Lease
following said assignment, transfer, or subletting. For purposes of this
Paragraph 12, an "affiliate" of Lessee shall mean any entity in which Lessee
owns more than fifty percent (50%) of the outstanding ownership interests or any
entity that is under common control with Lessee.
(b) A change in over fifty percent (50%) of the control of Lessee shall
constitute an assignment requiring Lessor's consent. The transfer, on a
cumulative basis, of over fifty percent (50%) 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. "Net Worth of
Lessee" for purposes of this Lease shall be the net 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 Lessors option, be a Default
arable 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 noncurable 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 Premises, as
reasonably determined by Lessor, or one hundred ten percent (110%) of the
Monthly 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 Monthly Base Rant 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 depreciation or obsolescence, and
considering the Premises 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
<PAGE>
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 ratio as the new
rental bears to the Monthly 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.
<PAGE>
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
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, nor (iii) alter the primary liability of 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 a waiver or estopped 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
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable 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.
(d) In the event of any Default or Breach of Lessee's obligation under this
Lease, Lessor may proceed directly against Lessee, am Guarantors or anyone else
responsible for the performance of the Lessee's obligations under this Lease,
including any subleases, 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 sublessee, 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, 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 sublessee 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
<PAGE>
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.
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:
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(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 onion of the
Premises heretofore or hereafter made by Lessee, up to, but not in excess of,
amounts due from Lessee to Lessor under this Lease, 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 sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, 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, up to, but not in excess of, amounts due from Lessee to Lessor under
this Lease. Sublessee 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 sublessee, or, until the Breach has been cured, against Lessor,
for. any such rents and other charges so paid by said sublessee 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 sublessee 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 sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiting the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further assign
or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice.
13. DEFAULT; BREACH; REMEDIES.
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13.1 DEFAULT - BREACH. Lessor and Lessee agree that if 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 care 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 care such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraph 13.2:
(a) The vacating of the Premises without the intention to reoccupy same, or
the abandonment of the Premises.
<PAGE>
(b) Except as expressly otherwise provided in this Lease, the failure by
Lessee to make any payment of Monthly Base Rent, Monthly Percentage 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, complied 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,(i)
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 1 (60) days); (iii) the appointment of a
trustee or receiver to take possession of substantially of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where
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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 (e) 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.
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(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 bass,
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 per form 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
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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 proceeding the unpaid rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof 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.
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(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 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 Monthly Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Monthly Base Rent shall, at Lessors option, become due and payable
quarterly in advance.
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13.4 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 13.4, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by any Lenders) 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.
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14. CONDEMNATION. If 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 part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If less than ten percent (10%) of
the floor area of the Premises is taken by condemnation, 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
Premises. If more than ten percent (10%) of the floor area of the Premises is
taken by condemnation, Lessee shall have the right, exercisable at Lessee's
option, to terminate the Lease. If Lessee does not elect to terminate the Lease,
the Monthly Base Rent shall be reduced in the same proportion as the rentable
area of the Premises taken bears to the total rentable area of the Premises
prior to the taking . No reduction of Base Rent shall occur if the condemnation
does not apply to any portion of the Premises, and does not reduce Lessee's
parking or unreasonably adversely impact access to 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.
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 m 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 net severance damages required to complete such repair.
15. BUSINESS LICENSES. Lessee shall be responsible, at its sole cost and
expense, for obtaining and continuing in valid and active status any and all
licenses and permits required from any applicable governmental authority for the
operation of a first class restaurant and catering business within the Premises.
Lessor agrees to cooperate with and assist Lessee to such extent as is
reasonably necessary in the application process for obtaining such licenses and
permits, but shall not be required to expend any sums whatsoever in connection
therewith.
16. TENANCY STATEMENTS, FINANCIAL STATEMENTS, ESTOPPEL CERTIFICATES, AND
CORPORATE DOCUMENTS.
16.1 TENANCY STATEMENT. Each Party (as "Responding Party") shall within
ten (10) business 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.
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16.2 FINANCIAL STATEMENT. Lessee shall provide to Lessor copies of
Lessee's current financial statements no later than March 15, 1996. Lessor
expressly reserves the right to terminate this Lease without any further
obligation if the financial statements of Lessee are deemed unacceptable by
Lessor. In addition, if Lessor desires to finance, refinance, or sell the
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.
16.3 ESTOPPEL CERTIFICATES. Lessee within ten (10) business days after
notice from the Lessor, shall execute and deliver to Lessor a certificate
stating that this Lease is unmodified and in fill force and effect, or in full
force and effect as modified, and stating the modification. The certificate
shall also state the amount of minimum monthly rent, the dates to which rent has
been paid in advance, and the amount of any security deposit or prepaid rent,
if any, as well as acknowledging that there are not, to that party's knowledge,
any uncured defaults on the part of the other party, or specifying such
defaults, it any, which are claimed. Failure to deliver such a certificate
within the ten (10 business day period shall be conclusive upon Lessee that this
Lease is in full force and effect, that there are no uncured defaults hereunder,
and that the Lease has not been modified except as may be represented by Lessor.
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16.4 CORPORATE DOCUMENTS. Lessee, if a corporation, covenants and agrees,
promptly upon the execution of this Lease, to provide to Lessor: (a) a copy of
its authority from the Secretary of State of California authorizing Lessee to do
business in California; and (b) the location of its registered office and
registered agent in California.
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 m the Premises 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. 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 (4%) per annum, but not exceeding the maximum
rate allowed by law, in addition to the potential late charge provided for in
Paragraph 13.3.
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.
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22. NO PRIOR OR OTHER AGREEMENTS. 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 represent and warrant to each other 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.
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 US.
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 of delivered upon telephone or facsimile confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If 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 estopped 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 damages 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 recent of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The
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<PAGE>
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 Monthly Base Rent payable from and after the time of the expiration
or earlier termination of this Lease shall be increased to one hundred fifty
percent (150%) of the Monthly 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. All rights and remedies of Lessor herein shall be cumulative,
and none shall exclude any other right or remedy allowed by 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 and construed in accordance with the laws of the State of California. 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"), 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 13.4. 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. Lessor hereby represents and warrants to
Lessee that the Project is not presently subject to or encumbered by any ground
lease, mortgage, deed of trust or other hypothecation or security device, and
further hereby agrees to indemnify Lessee against any loss or damage Lessee may
incur as a result of any breach of such representation and warranty.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device
(including but not limited to the exercise of a power of sale under any
instrument) , 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. Furthermore, if Lessor's
interest in the Premises is transferred (except in a sale-leaseback financing
transaction), or if any lease in a sale-leaseback transaction wherein Lessor is
the lessee is
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<PAGE>
terminated, Lessee shall attorn to and recognize such purchaser, assignee,
mortgagee or trustee as Lessor under this Lease. If Lessor transfers its
interest in the Premises, Lessor's Building or Lessor's Site (except a
sale-leaseback financing transaction), Lessor thereupon and without further act
by either party shall be released from all liability and obligations derived
under this Lease arising out of any act, occurrence or omission relating to the
Premises or its Lease occurring after the consummation of such transfer. Lessee
shall have no right to terminate this Lease, abate rent or deduct from or
set-off or counterclaim against Rent because of any such transfer (including any
sale-leaseback) by Lessor, its successors or assigns.
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 agreement
as is provided for herein.
31. ATTORNEYS' FEES. If any Party 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 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 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 insured. Lessor shall
be entitled to attorneys' fees, costs and expenses insured m 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.
32. LESSOR'S ACCESS - SHOWING PREMISES; REPAIRS. Lessor and Lessor's
agents shall have the right to ester the Premises at any time, in the case of an
emergency, and otherwise at reasonable times upon prior written notice to Lessee
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 Premises any ordinary "For Lease" signs.
All such activities of Lessor shall be without abatement of rent or liability to
Lessee. Anything in the foregoing to the contrary notwithstanding, except in the
case of a bona fide emergency, Lessor shall have no right to enter the Premises
for any purpose whatsoever during the hours of 11:00 a.m. to 3:00 p.m. and the
hours of 6:00 p.m. to 11:00 p.m.
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.
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34. SIGNS. Lessee shall not place any sign upon the exterior of the
Premises or the Building, except that Lessee may, with Lessor's prior written
consent, install on the exterior of the Building (but not on the roof) signage
indicating the name of Lessee's business so long as such signs are in a location
designated by Lessor, approved by Lessor, and comply with Applicable
Requirements and the signage criteria established for the Project by Lessor.
Lessor's consent to the installation of any such sign shall not be unreasonably
withheld or delayed. 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), and Lessee shall be
solely responsible for the maintenance and upkeep of said signage. 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 root 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 subtenancies. 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 withheld or
delayed. Lessor's actual reasonable costs and expenses ('including but not
limited to architects', attorneys', engineers' and other consultants' fees)
insured in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, ding but not limited to
consents to an assignment or 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 described in
Paragraph 12.2(e), 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 held 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 Lesson'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.
<PAGE>
<PAGE>
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a Default
of the Lessee under this Lease if any such Guarantor fails 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, 8 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, (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor, 8 the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 ASSIGNMENT OF OPTIONS. The Options herein granted to Lessee are
assignable only as a part of an assignment of this Lease, 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 (ii) 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.
<PAGE>
(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)
<PAGE>
(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 fails to pay to Lessor a monetary obligation of Lessee for a
period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) 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
(iii) if Lessee commits a Breach of this Lease.
40. RULES AND 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 and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Project 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 seer
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, 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, amt 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 unreasonably
interfere with parking as explicitly stated in this Lease, or 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 par 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. If 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
ail the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
<PAGE>
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.
<PAGE>
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 make 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.
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 LESSOR
OR ITS CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES 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.
<PAGE>
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Los Angeles Executed at : Los Angeles CA
on: 02/29/96 on: 02/29/96
BY LESSOR: BY LESSEE:
EDDIA TRUST ("Lessor") ASIA PACIFIC CORPORATION ("Lessee")
By: ______________________ By:________________________
Unknown Signature Signature of Grady
Sanders
Name: Eddie Mirharooni Name: Grady Sanders
Title: Trustee Title: President
Address: 236 N. Canon Address: 8193 Beverly Blvd. #
(illegible)
B.H. 90210 Los Angeles, CA 90048
<PAGE>
Telephone: (213) 413-3333 Telephone: (310) 858-6902
Facsimile: (213) 413-0828 Facsimile: (310) 858-8803
Executed at: Los Angeles CA
on: 02/29/96
BY LESSEE:
GRADY A. SANDERS ("Lessee")
_________________________
Signature (illegible)
Address: 8193 Beverly Blvd. #329
Los Angeles, CA 90048
Telephone: (310) 858-6900
Facsimile: (310) 858- (illegible)
<PAGE>
ADDENDUM TO THE LEASE DATED FEBRUARY 29,1996
IN ORDER TO SECURE FUNDS FOR IMPROVEMENT TO THE PREMISES PURSUANT TO
SECTION
7.3 (D) OF THE LEASE, PRIOR TO COMMENCEMENT OF ANY CONSTRUCTION AND AFTER
ALL NECESSARY
GOVERNMENTAL APPROVALS HAVE BEEN OBTAINED AND CONSTRUCTION BIDS FOR PROJECT
HAVE
BEEN ACCEPTED, LESSEE SHALL OBTAIN FOR THE BENEFIT OF SECURING PAYMENT TO THE
CONTRACTORS A LETTER OF CREDIT FROM A MAJOR BANK OR OTHER ACCREDITED FINANCIAL
INSTITUTION, OR DEPOSIT CASH THEREIN, IN A AMOUNT SUFFICIENT TO COVER THE
CONSTRUCTION
COSTS OF ANY CONSTRUCTION DONE TO THE PREMISES TO WHICH ANY CONTRACTOR'S OR
MECHANIC'S LIENS COULD ATTACH.
Executed at: Los Angeles Executed at: Los Angeles CA
on: 4/19/96 on: 4/19/96 LESSEE BY
LESSOR: BY LESSEE:
EDDIA TRUST ("Lessor") ASIA PACIFIC CORPORATION
("Lessee")
By: ______________________ By:________________________
Unknown Signature
Signature of Grady Sanders
<PAGE>
Name: Eddie (Last name illegible) Name: Grady Sanders
Title: Trustee Title: President
Address: 236 N. Canon Dr. Address: 8193
Beverly Blvd.
B.H. 90210 #329
Los Angeles, CA 90048
Telephone: (310) 246-0887 Telephone:
(310) 858-6900
Facsimile: (213) 413-0828 Facsimile:
(310) 858-8803
Executed at: Los Angeles CA
on: 4/19/96
BY LESSEE:
GRADY A. SANDERS ("Lessee")
_________________________
Signature (illegible)
Address: 8193 Beverly Blvd. #329
Los Angeles, CA 90048
Telephone: (310) 858-6900
Facsimile: (310) 858- (illegible)
<PAGE>
OPTIONS TO EXTEND
(Addendum to Lease)
OPTIONS TO EXTEND entered into by and between EDDIA TRUST ("Lessor") and ASIA
PACIFICCORPORATION and GRADY A SANDERS (collectively "Lessee"), all of whom
shall be sometimes collectively referred to as the "Parties", or individually as
a "Party", with relation to that certain portion of the Building, commonly known
by the street address of 246 NORTH CANON DRIVE, located in the City of Beverly
Hills, County of Los Angeles, State of California, with zip code of 90210
("Building") described as the former Bistro Restaurant with an approximate size
of 12,000 square feet ("Premises").
A. OPTIONS TO EXTEND. Lessor hereby grants to Lessee the options to extend the
term of this Lease for two additional sixty (60) month periods commencing when
the prior term expires, upon each and all of the following terms and conditions:
(i) Lessee gives to Lessor, and Lessor actually receives on 'a date which
is prior to the
date that the option period would commence (if exercised) by at least six (6)
and not more than
nine (9) months, a written notice of the exercise of the option(s) to extend
this Lease for said
<PAGE>
additional term(s), time being of essence. If said notification of the exercise
of said option(s) is
not so given and received, the option(s) shall automatically expire; said
option(s) may only be
exercised consecutively;
(ii) The provisions of paragraph 39, including the provision relating to
default of Lessee set forth in paragraph 39.4 of this Lease are conditions of
these options;
(iii) All of the terms and conditions of this Lease except where
specifically modified by these options shall apply during any option period;
(iv) The Monthly Base Rent for each month of the option period shall be
calculated as follows, using the method indicated below:
I. MARKET RENTAL VALUE ADJUSTMENTS (MRV).
(a) On March 1, 2006 and March 1, 2011 ("MRV Adjustment Dates"), the
Monthly Base Rent payable under paragraph 1.4 of the attached Lease shall
be adjusted to
ninety percent (90%) of the Market Rental Value of the Premises ("MRV"). The MRV
shall be established by the following method:
(1) Four months prior to each MRV Adjustment Date, Lessor and Lessee
shall meet to establish an agreed upon new MRV for the Premises for the
upcoming MRV Adjustment Date. If agreement cannot be reached, then:
<PAGE>
<PAGE>
(i) Lessor and Lessee shall immediately appoint a mutually
acceptable appraiser or broker to establish the new MRV for the Premises
within the next 30 days, with any associated costs to be split equally
between Lessor and Lessee; or
(ii) Both Lessor and Lessee shall each immediately select and pay
the appraiser or broker of their choice to establish a MRV for the
Premises
within the next 30 days. If, for any reason, either one of said appraisals is
not completed within the next 30 days, then the appraisal that is completed
within said 30 day period shall automatically become the new MRV for the
Premises. If both appraisals are completed within said 30 day period and
the two appraisers cannot agree on a reasonable average MRV, then said
appraisers shall immediately select a third mutually acceptable
appraiser/broker to establish a third MRV within the next 30 days. The
average of the two appraisals closest in value shall then become the new
MRV for the Premises. The costs of the third appraisal shall be split
equally between Lessor and Lessee.
(b) Upon the establishment of the new MRV by the method above, the new
Monthly Base Rent for purposes of paragraph 1.4 of the attached Lease shall be
ninety
percent (90%) of said new MRV.
II. CONSUMER PRICE INDEX ADJUSTMENTS.
(a) Commencing with the second year of each option period through the fifth
year
of each option period, the Monthly Base Rent established by the methods above
shall be
increased annually by a percentage equal to the annual percentage increase for
the prior
calendar year in the Consumer Price Index of the Bureau of Labor Statistics of
the US.
Department of Labor for the Los Angeles Metropolitan Area ("CPI"). In the event
the
compilation and/or publication of the CPI 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 CPI shall be used to make such calculation. In the event that Lessor
and
Lessee cannot agree on such alternative Index, then the matter shall be
submitted for
decision to the American Arbitration Association in accordance with the then
current rules
of said Association, and the decision of the arbitrator(s) shall be binding upon
the Parties.
The cost of said arbitration shall be paid equally by Lessor and Lessee.
B. NOTICES. All notices to be given by the Parties with relation to these
Options shall be given in
the manner prescribed in paragraph 23 of the attached Lease.
<PAGE>
<PAGE>
The parties hereto have executed these Options at the place and on the
dates specified above their respective signatures.
Executed at: Los Angeles Executed at : Los Angeles CA
on: 02/29/96 on: 02/29/96
BY LESSOR: BY LESSEE:
EDDIA TRUST ("Lessor") ASIA PACIFIC CORPORATION ("Lessee")
By: ______________________ By:________________________
Unknown Signature Signature of Grady
Sanders
Name: Eddie Mirharooni Name: Grady Sanders
Title: Trustee Title: President
Address: 236 N. Canon Address: 8193 Beverly Blvd. # 329
B.H. 90210 Los Angeles, CA 90048
Telephone: (213) 413-3333 Telephone: (310) 858-6902
Facsimile: (213) 413-0828 Facsimile: (310) 858-8803
Executed at: Los Angeles CA
on: 02/29/96
BY LESSEE:
GRADY A. SANDERS ("Lessee")
_________________________
Signature (illegible)
Address: 8193 Beverly Blvd. #329
Los Angeles, CA 90048
Telephone: (310) 858-6900
Facsimile: (310) 858- 8803
<PAGE>
<PAGE>
AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION AND INDUCEMENT FOR EDDIA TRUST
TO ENTER INTO LEASE DATED FEBRUARY 26, 1996, (HEREINAFTER REFERRED TO AS "LEASE"
WITH ASIA PACIFIC
CORPORATION AND GRADY A. SANDERS, AS PERTAINING TO PROPERTY WITHIN 246 NORTH
CANON DRIVE,
NORTH ATLANTIC INVESTMENTS, LTD., AND GRADY A. SANDERS, AS AN INDIVIDUAL, HEREBY
PROMISE TO PAY
EDDIA TRUST THE SUM OF $200,000.00, WITHOUT INTEREST, ON SEPTEMBER 1, 1996. IN
FURTHERANCE OF
THE SATISFACTION OF SAID OBLIGATION, NORTH ATLANTIC INVESTMENTS, LTD., UNDER
PROPER AUTHORITY,
PLEDGES AS SECURITY TO EDDIA TRUST 500,000 SHARES OF ADVANCES GAMING TECHNOLOGY,
INC. STOCK,
REPRESENTED BY SHARE CERTIFICATES #1499, #1500, #1501, #1502, AND #1503, WITH
THE UNDERSTANDING
THAT EDDIA TRUST WILL NOT SELL SAID 500,000 SHARES UNLESS THE ABOVE-STATED
$200,000.00 OBLIGATION
IS NOT TENDERED BY NORTH ATLANTIC INVESTMENTS, LTD. AND/OR GRADY A. SANDERS ON
OR BEFORE
SEPTEMBER 1, 1996. SUBSEQUENT TO SEPTEMBER 1, 1996, EDDIA TRUST, AT ITS SOLE AND
EXCLUSIVE
OPTION MAY EITHER KEEP 200,000 SHARES OF ADVANCED GAMING TECHNOLOGY , INC. STOCK
AND RETURN TO
NORTH ATLANTIC INVESTMENTS, LTD. THE REMAINING 300,000 SHARES, AS FULL PAYMENT
OF THE ABOVE-STATED
$200,000.00 OBLIGATION, OR MAY SELL AS MANY AS SAID SHARES, AT THE RATE OF NOT
MORE THAN
$25,000.00 WORTH OF SAID SHARES PER WEEK, AS MAY BE NECESSARY TO SATISFY THE
OBLIGATIONS OF NORTH
ATLANTIC INVESTMENTS, LTD. AND/OR GRADY A. SANDERS AS STATED HEREIN.
IN RETURN, UPON RECEIPT OF THE ABOVE-STATED $200,000.00, EDDIA TRUST WILL ENTER
INTO LEASE
AND ADDITIONALLY APPLY THE $200,000.00 PROCEEDS TO THE SATISFACTION OF RENTAL
LIABILITY OF ASIA
PACIFIC CORPORATION AND GRADY A. SANDERS TO EDDIA TRUST, BEGINNING ON THE 61ST
MONTH OF THE
LEASE AND CONTINUING UNTIL THE $200,000 IS DEPLETED.
<PAGE>
<PAGE>
THIS AGREEMENT SHALL BE BINDING ON ALL PARTIES HERETO, THEIR HEIRS,
SUCCESSORS AND ASSIGNS.
THIS AGREEMENT CAN ONLY BE MODIFIED OR AMENDED BY A WRITING EXECUTED BY ALL OF
THE PARTIES
HERETO. IN THE EVENT THAT IT SHOULD BECOME NECESSARY FOR ANY PARTY HERETO TO
INITIATE ANY LEGAL
ACTION TO ENFORCE ANY OF THE PROVISIONS OF THIS AGREEMENT, THE PREVAILING PARTY
SHALL BE ENTITLED TO REASONABLE ATTORNEY'S FEES. THIS AGREEMENT WAS NEGOTIATED
BY THE PARTIES HERETO AT ARM'S LENGTH,
WITH EACH PARTY RECEIVING THE ADVICE OF INDEPENDENT LEGAL COUNSEL. IT IS THE
INTENT OF THE PARTIES
HEREIN THAT NO PART OF THIS AGREEMENT BE CONSTRUED AGAINST ANY OF THE PARTIES
HERETO BECAUSE OF THE IDENTITY OF THE DRAFTER.
Executed at: Los Angeles Executed at : Los Angeles CA
on: 02/29/96 on: 03 April 1996
BY: EDDIA TRUST FOR AND ON BEHALF OF:
NORTH ATLANTIC INVESTMENTS, LTD.
By: ______________________ By:_____________________ - Director
Name Printed: Eddie Mirharooni Name Printed: Timothy
C.A.-Solomon
Title: Trustee Title: Trust Officer
Address: 236 N. Canon Address: P.O. Box 1790
B.H. 90210 G/T, C+CM, BW.I.
Executed at: Los Angeles CA
on: 02/29/96
BY GRADY A. SANDERS
_________________________
Signature (illegible)
Address: 8193 Beverly Blvd. #329
Los Angeles, CA 90048
<PAGE>
<PAGE>
{Advertising}
REPRESENTING
The Bistro Restaurant
242 N. Canon Drive, Beverly Hills
Approx. 12,000 square feet in the Golden Triangle
{PICTURE OF THE EXTERIOR OF THE PROPERTY}
Rent: $2.00 per square foot Triple Net
Term: 5 years minimum
Parking: 19 spaces on-site, 90 spaces off-site
COMMENTS: -Famous "Bistro" Restaurant
-Two fully-equipped kitchens and bars upstairs and downstairs
- -Dancing and Live Entertainment Potential- Call listing agents for details
For Further Information, Please Contact:
Phil Seymour or Lee Maen (310) 271-4040
ELITE PROPERTIES REALTY
Commercial/Investment Services
148 South Beverly Hills Drive, Suite 200, Beverly Hills, California, 90212
Tel (310) 271-4040 Fax (310) 271-1463
<PAGE>
<PAGE>
{FLOOR PLAN}
SECOND FLOOR
{DRAFT OF FLOOR PLAN}
CANON DRIVE
Scale 1 7/16" = 19'9"
<PAGE>
<PAGE>
ELITE PROPERTIES
REALTY____________________________________________________________
Commercial /Investment Services
The Bistro Restaurant
See Attached Floor Plan
All square footages are approximate
First Floor
A = 67 sq. ft.
B = 150 sq. ft.
C = 3,073 sq. ft.
D = 184 sq. ft.
E = 1,747 sq. ft
--------
Sub-total 5,221 sq. ft.
Second Floor
* Excluding office &
elevator & adjacent
stairwell & storage 5,309 sq. ft.
Office, adjacent hall
& stairwell 726 sq. ft.
Basement approx. 22 x 35 = 770 sq. ft.
------
Grand Total 12,026
<PAGE>
AMENDMENT TO LEASE
- -EXPANSION
THIS AMENDMENT TO LEASE ("Amendment") is dated as of July
31, 1997, by and
between EDDIA TRUST ("Lessor") and ASIA PACIFIC CORPORATION and GRADY A. SANDERS
(together, the "Lessee"), with reference to the following facts:
A. Lessor and Lessee have heretofore entered into that
certain Lease executed on
February 29, 1996 (the "Lease") for the leasing of premises located at 246 North
Canon Drive, Beverly Hills, California 90210 (the "Premises"); and
B. Lessor and Lessee desire to amend the Lease to expand
the Premises to include
another portion of the building known by the street address of 240 North Canon
Drive, Beverly
Hills, California 90210, upon the same terms and conditions of the Lease.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other valuable consideration, receipt of which is hereby
acknowledged, the parties hereby agree that the Lease is hereby amended as
follows:
1. Premises. The first sentence of Section 1.2(a) of the
Lease entitled "Premises" is
hereby replaced with the following:
"Premises" consists of (i) that certain portion of the
Building commonly
known by the street address of 246 North Canon
Drive, Beverly Hills,
California 90210, described as the former Bistro
Restaurant with an
approximate size of 12,000 square feet ("Original
Space"), and (ii) that
certain portion of the Building commonly known by
the street address of
240 North Canon Drive, Beverly Hills, California
90210, described as the
former Financial Triangle office space with an
approximate size of 1,200
square feet ("New Space").
2. Rent. Section 1.4 of the Lease entitled "Monthly
Base Rent" is hereby amended by adding the following language with respect to
the New Space to the end of Section 1.4:
During the first twelve months following the date
Lessee takes occupancy
of the New Space ("New Space Commencement Date"),
the Monthly Base
<PAGE>
Rent for the New Space shall be Three Thousand Four Hundred
Dollars
($3,400.00) per month, payable upon the first day
of each calendar month
commencing September 1,1997, and continuing through
and including
June 30, 1998. The rent will be prorated for any
partial month.
Thereafter, for the remainder of the Original Term,
the Monthly Base Rent
of Three Thousand Four Hundred Dollars ($3,400.00)
for the New Space s
shall be increased annually by an amount equal to
the annual percentage
increase for the prior calendar year in the CPI in
accordance with terms
of the Lease. All the monthly gross sales of the
New Space will be added
to the gross receipts of the Original Space in
accordance with the Lease
<PAGE>
terms Lessee shall pay 7.5% of said total gross
receipts as provided in
the Lease each month . The Rent payable for the New
Space shall be in
addition to the Rent payable for the Original Space
as provided elsewhere
in this Lease.
3. Proportions Share. The first sentence of Section 1.6
of the Lease entitled
"Lessee's Share of Common Area Operating Expenses" is
hereby replaced with following:
During the Original Term and any option period
exercised by Lessee,
Lessee shall pay to Lessor as additional rent Seventy
percent (70%) of the
Common Area Operating Expenses ("Lessee's Share") in
accordance with Paragraph 4.2.
[NOTE: Sections 4 & 5 (a) are omitted on the
original.]
<PAGE>
(b) Bathroom. Lessee agrees that the existing
bathroom in the New Space
shall not be removed. The existing bathroom may be renovated or improved, or
relocated to
another area in the New Space with the prior written consent of Lessor, which
consent shall not
be unreasonably withheld.
6. Incorporation. Except as modified herein, all
other terms and conditions of the Lease shall continue in full force and effect.
LESSOR:
EDDIA TRUST Address: 236 North Canon Drive
Beverly Hills, CA 90210
By: /s/ Eddie Mirharooni
Eddie Mirharooni Telephone: (310) 246-0887
Trustee Facsimile: (213) 413-0828
Date: July 31,1997
LESSEE:
ASIA PACIFIC COMPANY LTD.
Address: 8193 Beverly Blvd., #329
Los Angeles,CA 90048
By: /s/ Grady A. Sanders
Grady A. Sanders Telephone: (310) 858-6900
Chairman Facsimile: (310) 858-8803
Date: July 31,1997
By: /s/ Grady A. Sanders Address: 8193 Beverly Blvd., #329
Grady A. Sanders Los Angeles,CA 90048
Date : July 31, 1997 Telephone: (310) 858-6900
Facsimile: (310) 858-8803
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