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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 28, 1998
COMMISSION FILE NUMBER: 0-11552
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TELEVIDEO, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-2383795
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2345 HARRIS WAY, SAN JOSE, CALIFORNIA 95131
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (408) 954-8333
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N/A
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 28, 1998 (escrow closing date), pursuant to a Real Estate Purchase
Agreement, Televideo, Inc. sold its 69,630 sq. ft. real estate, including land
and improvements, located at 2345 Harris Way, San Jose, California 95131
("Harris Building") to TVCA, LLC., an unaffiliated Delaware limited liability
company ("TVCA") for $ 11.0 million. The nature of the consideration is $ 8.25
million in cash and a $ 2.75 million Promissory Note. The note bears interest
at 7.25% per annum. Principal and accrued interest shall be payable in equal
monthly installments of $ 21,735 each on the first day of each month
commencing on January 1, 1999. If not earlier paid in full, any unpaid
principal and all accrued interest shall be due and payable to TeleVideo, Inc.
on December 1, 2013. The purchase price was determined by negotiations between
the parties based on an independent third party real estate appraisal.
In connection with the sale of Harris Building, TeleVideo, Inc. entered into a
Lease and Agreement of Lease with TVCA ("Lease Agreement") for the period of 15
years commencing on December 28, 1998 through December 31, 2013. Pursuant to a
Lease Agreement, an initial monthly payment of $ 109,973 is required. Monthly
lease payment increases during the lease term as stipulated in a Lease
Agreement.
The accounting for this Sale-Leaseback transaction involving real estate will
result in a deferred gain to be amortized over the lease term. Additionally,
the leaseback accounting will require recording a real estate asset and a
lease obligation liability to TVCA as of the transaction date.
ITEM 5. OTHER EVENTS.
TeleVideo, Inc. has made a strategic move into emerging "thin-client" network
terminal market.
Recently, TeleVideo, Inc. introduced a new product series of
TeleCLIENT-TM- network terminals: TeleCLIENT-TM- TC7000, TeleCLIENT-TM- TC7150
and TeleCLIENT-TM- TC7170.
Integrated TeleCLIENT-TM- TC7150 and TeleCLIENT-TM- TC7170 network terminals
provide a solution for existing mainframe and network applications as
TeleVideo CRT monitors are integrated into advanced and powerful
"thin-client" network terminals. TeleVideo, Inc. believes that its
TeleCLIENT-TM- TC7150 and TC7170 network terminals provide a cost-effective
solution for replacing both traditional network PCs and conventional
character terminals. The Company believes that these low-cost, state-of-art
TeleCLIENT-TM- network terminals can provide the small terminal footprint
solution for vast applications, including retail, help desk, financial and
manufacturing applications.
In addition to Integrated TeleCLIENT-TM- TC7150 and TeleCLIENT-TM- TC7170
network terminals, TeleVideo, Inc. has also introduced TeleCLIENT-TM-
TC7000, which is designed specifically for server-based network computing
environments. This modular, compact, "thin-client" network terminal offers a
powerful but money-saving alternative to current networked PCs and dumb
terminals. TeleCLIENT-TM- TC7000, which requires no desktop configuration nor
hardware/software installation, is compatible with Microsoft Remote Desktop
Protocol (RDP) as well as Citrix Intelligent Computing Architecture (ICA).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
c) Exhibits
2.1 Real Estate Purchase Agreement
2.2 Lease and Agreement of Lease
2.3 Escrow Agreement
2.4 Pledge and Security Agreement
2.5 Assignment
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Exhibit 2.1
REAL ESTATE PURCHASE AGREEMENT
BY AND BETWEEN
TELEVIDEO, INC.
a Delaware corporation
AND
2345 Harris Way Associates, LLC.
a Delaware limited liability company
Dated as of December 21, 1998
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
Section 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2 Sale of Properties and Assignment of Rights . . . . . . . . 3
2.1 The Land . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 The Improvements . . . . . . . . . . . . . . . . . . . 4
2.3 Appurtenances . . . . . . . . . . . . . . . . . . . . 4
2.4 Equipment . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Intangible Property . .. . . . . . . . . . . . . . . . 5
2.6 Awards . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3 Purchase Price. . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Escrowed Funds . . . . . . . . . . . . . . . . . . . . 5
3.2 Balance. . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Apportionments and Adjustments . . . . . . . . . . . . 6
Section 4 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Time and Place of Closing . . . . . . . . . . . . . . 6
4.2 Escrow . . . . . . . . . . . . . . . . . . . . . . . . 7
4.3 Deliveries by Seller at or Prior to Closing . . . . . 7
4.4 Deliveries By Purchaser at or Prior to Closing . . . . 8
4.5 Purchaser's Review of Closing Deliveries . . . . . . . 8
4.6 Possession of the Properties . . . . . . . . . . . . . 9
4.7 Closing Costs . . . . . . . . . . . . . . . . . . . . 9
Section 5 Warranties and Representations of Seller .. . . . . . . . . 9
5.1 Title to the Property. . . . . . . . . . . . . . . . . 9
5.2 No Space Leases. . . . . . . . . . . . . . . . . . . . 9
5.3 Litigation . . . . . . . . . . . . . . . . . . . . . . 9
5.4 No Pending Takings . . . . . . . . . . . . . . . . . . 10
5.5 No Violations. . . . . . . . . . . . . . . . . . . . . 10
5.6 Environmental Matters. . . . . . . . . . . . . . . . . 11
5.7 Condition of Property. . . . . . . . . . . . . . . . . 12
5.8 Disputes with Neighbors. . . . . . . . . . . . . . . . 12
5.9 Wells. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 13
5.11 Brokers. . . . . . . . . . . . . . . . . . . . . . . . 13
5.12 Books and Records. . . . . . . . . . . . . . . . . . . 13
5.13 Disclosure . . . . . . . . . . . . . . . . . . . . . . 13
(i)
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5.14 Space Leases . . . . . . . . . . . . . . . . . . . . . 13
5.15 Absence of Undisclosed Liabilities . . . . . . . . . . 13
5.16 Utilities; Access. . . . . . . . . . . . . . . . . . . 14
5.17 Plans. . . . . . . . . . . . . . . . . . . . . . . . . 14
5.18 Consents . . . . . . . . . . . . . . . . . . . . . . . 14
5.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . 14
5.20 Flood Plain; Wetlands. . . . . . . . . . . . . . . . . 14
5.21 Historic District. . . . . . . . . . . . . . . . . . . 14
5.22 Dimensions . . . . . . . . . . . . . . . . . . . . . . 14
5.23 Seller Not an Alien. . . . . . . . . . . . . . . . . . 15
5.26 Existence and Authority of Seller. . . . . . . . . . . 15
Section 6 Warranties and Representations of Purchaser . . . . . . . . 15
6.1 Brokers . . . . . . . . . . . . . . . . . . . . . . . 15
6.2 Existence and Authority of Purchaser . . . . . . . . . 15
Section 7 Certain Pre-Closing Covenants of Seller . . . . . . . . . . 16
7.1 Operation Pending Closing. . . . . . . . . . . . . . . 16
7.2 Access and Information . . . . . . . . . . . . . . . . 17
7.3 Pre-Closing Deliveries . . . . . . . . . . . . . . . . 17
7.4 Continuing Accuracy of Representations . . . . . . . . 19
7.5 Satisfaction of Conditions . . . . . . . . . . . . . . 19
Section 8 Purchaser's Due Diligence and Financing . . . . . . . . . . 20
8.1 Approval by Purchaser. . . . . . . . . . . . . . . . . 20
Section 9 Conditions to Obligations of Purchaser. . . . . . . . . . . 21
9.1 Litigation . . . . . . . . . . . . . . . . . . . . . . 21
9.2 Seller Representations and Performance . . . . . . . . 21
9.3 Insurability of Title to Property. . . . . . . . . . . 21
9.4 Zoning . . . . . . . . . . . . . . . . . . . . . . . . 21
9.5 Approval by Purchaser. . . . . . . . . . . . . . . . . 21
Section 10 Conditions to Obligations of Seller . . . . . . . . . . . . 21
10.1 Litigation . . . . . . . . . . . . . . . . . . . . . . 21
10.2 Representations and Performance of Purchaser . . . . . 21
Section 11 Additional Covenants. . . . . . . . . . . . . . . . . . . . 22
11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . 22
11.2 Satisfaction of Liens. . . . . . . . . . . . . . . . . 22
(ii)
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11.3 Survival of Representations and Warranties . . . . . . 22
11.4 Indemnity by Seller. . . . . . . . . . . . . . . . . . 22
11.5 Further Assurances . . . . . . . . . . . . . . . . . . 23
11.6 Delivery of Documents and Other Items. . . . . . . . . 23
11.7 Recordation. . . . . . . . . . . . . . . . . . . . . . 23
11.8 Damage and Destruction . . . . . . . . . . . . . . . . 24
11.9 Eminent Domain . . . . . . . . . . . . . . . . . . . . 24
11.10 No Assumption of Seller's Liabilities . . . . . . . . 25
11.11 Confidentiality . . . . . . . . . . . . . . . . . . . 25
Section 12 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 13 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 25
Section 14 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14.1 Method of Notice . . . . . . . . . . . . . . . . . . . 26
14.2 Notices Affecting the Property . . . . . . . . . . . . 26
Section 15 Assignment by Purchaser . . . . . . . . . . . . . . . . . . 26
Section 16 Default . . . . . . . . . . . . . . . . . . . . . . . . . . 26
16.1 Default by Purchaser . . . . . . . . . . . . . . . . . 26
16.2 Default by Seller. . . . . . . . . . . . . . . . . . . 27
Section 17 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Exhibit "A": Legal description of the Land
Exhibit "B" Televideo Lease
Exhibit "C" Seller's Certification of Representations and Warranties
Exhibit "D": Bill of Sale
Exhibit "E": Assignment of Intangible Property
Exhibit "T": Form of Promissory Note
Schedule: 1 Seller's Retained Property
Schedule: 5.2 Space Leases
Schedule: 5.5.1 Litigation
Schedule: 5.6.2 Environmental Matters
Schedule: 5.6.3 Environmental Matters
Schedule: 5.6.4 Environmental Matters
Schedule: 5.7 Condition of Property
</TABLE>
(iii)
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REAL ESTATE PURCHASE AGREEMENT
THIS REAL ESTATE PURCHASE AGREEMENT ("Agreement") is made the
21st day of December, 1998, by and between TELEVIDEO, INC., a Delaware
corporation ("Seller") as the seller hereunder and 2345 Harris Way
Associates, LLC., a Delaware limited liability company, or its designee
("Purchaser"), as the purchaser hereunder. Seller acknowledges that Purchaser
intends to immediately assign its interest in this sale-leaseback transaction
to TVCA, LLC, a Delaware limited liability company ("TVCA").
W I T N E S S E T H:
In consideration of the warranties, representations, agreements and
covenants herein contained, Seller and Purchaser, intending to be legally bound,
hereby mutually covenant and agree as follows:
SECTION 1 DEFINITIONS. Certain words and terms as used in this Agreement
shall have the meanings given to them by the definitions and descriptions in
this Section, and such definitions shall be equally applicable to both the
singular and plural forms of any of the words and terms herein defined. All
accounting terms not specifically defined in this Agreement will be construed in
accordance with generally accepted accounting principals.
"Agreement" means this Real Estate Purchase Agreement.
"Appurtenances" shall have the meaning set forth in Section 2.3.
"Awards" shall have the meaning set forth in Section 2.6.
"Building" shall have the meaning set forth in Section 2.2.
"Building Plans" shall have the meaning set forth in Section 7.3.9.
"Closing" shall have the meaning set forth in Section 4.1.
"Closing Date" means the day on which the Closing actually occurs, as of
12:01 A.M., Pacific Time, at San Jose, California, which date shall be on or
before December 31, 1998, unless the parties hereto otherwise agree upon another
date.
"Contract" means any agreement, undertaking, covenant, liability,
restriction, instrument or guaranty, whether written or oral, to which Seller is
a party, or by which Seller is bound, affecting the Property.
"Earnest Money" shall have the meaning set forth in Section 3.1.
"Equipment" shall have the meaning set forth in Section 2.4.
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"Escrow Agent" means the Title Company.
"Government" means the government of the United States of America, any
political subdivision of, or any subdivision of any such subdivision of, the
United States of America (including, without limitation, the State of
California, the City of San Jose, and any state, county, commonwealth,
territory, federal district, municipality or possession) and any department,
agency, board or instrumentality thereof.
"Governmental" means of, by, or pertaining to, any Government.
"Improvements" shall have the meaning set forth in Section 2.2.
"Indebtedness" means, at any date, for any Person, all items which, in
accordance with generally accepted accounting principles, would be shown as
indebtedness on a balance sheet of such Person, as of the date on which
indebtedness is to be determined, including, without limitation, (a)
indebtedness secured by any lien, whether or not the indebtedness secured
thereby shall have been assumed, (b) obligations in respect of all capital
leases, (c) obligations in connection with letters of credit and bankers'
acceptances, and (d) all guaranties in the amounts of the indebtedness,
leases, dividends or other obligations of primary obligors to which they
relate.
"Intangible Property" shall have the meaning set forth in Section 2.5.
"Land" shall have the meaning set forth in Section 2.1.
"Lien" means any mortgage, lien, charge, security interest or encumbrance
of any kind upon, or pledge of, any property or asset, whether now owned or
hereafter acquired, and includes the acquisition of, or agreement to acquire any
property or asset subject to any conditional sale agreement or other title
retention agreement, including a lease on terms tantamount thereto or on terms
otherwise substantially equivalent to a purchase.
"Permitted Encumbrances" means (a) liens for current real estate taxes
which by law are a lien on the Property but are not yet due and payable; and (b)
those matters shown on the Title Commitment and the Survey which have been
accepted and approved by Purchaser pursuant to Section 8.1.2 hereof.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or Government.
"Property" shall have the meaning set forth in Section 2.
"Purchase Price" shall have the meaning set forth in Section 3.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser's Lender" shall mean Finova Realty Capital, Inc., a Delaware
corporation, the lender selected by Purchaser to fund the acquisition of the
Property by Purchaser, or its designee.
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"Requirements of Law" means any law, statute, ordinance, code, rule,
regulation, guideline, judgment, order, writ, injunction or decree of any court
or Government and any decision or ruling of any arbitrator, which is applicable
to, binding upon, affects or pertains to the Property and/or the use, occupation
and/or operation of the Property, or any Person, and any of the foregoing to
which such Person is a party or by which such Person or any of its assets or
property is bound or affected or from which such Person derives benefits.
"Requirements of Law" shall also include the charter documents and code of
regulations or bylaws of any Person that is a corporation, the charter documents
and articles or agreement of partnership of any Person that is a partnership,
and the charter documents and operating agreement of any Person that is a
limited liability company.
"Seller" shall have the meaning set forth in the Preamble.
"Seller's Financial Statements" shall have the meaning set forth in
Section 7.3.14.
"Seller's Retained Property" shall mean all of Seller's trade fixtures and
related tenant improvements in the Building, as set forth on the attached
SCHEDULE 1.
"Space Leases" shall mean all leases, licenses, concessions and other
agreements, written or oral, for any use or possession of any portion of the
Property.
"Survey" shall have the meaning set forth in Section 7.3.3.
"Taking" shall have the meaning set forth in Section 11.9.1.
"Televideo Lease" means that certain Triple Net Bond Lease by and between
TVCA, as landlord, and Seller, as tenant, with respect to the Property
referenced in Section 4.3.2.
"Tenant" means the occupant or holder of the interest of lessee under the
Televideo Lease.
"Title Commitment" shall have the meaning set forth in Section 7.3.2.
"Title Company" means Old Republic Title Insurance Company.
"Title Policy" shall have the meaning set forth in Section 4.3.3.
SECTION 2 SALE OF PROPERTY AND ASSIGNMENT OF RIGHTS. Seller agrees to sell
and convey to Purchaser, and Purchaser agrees to purchase, pursuant to the terms
of this Agreement and subject only to the Permitted Encumbrances, the following
property and interests in property (all collectively herein called the
"Property"):
2.1 THE LAND. All that certain parcel or those certain parcels of
land, consisting of approximately 2.51 acres, located in San Jose, California,
as more particularly described in EXHIBIT "A" annexed hereto and made a part
hereof (collectively, the "Land").
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2.2 THE IMPROVEMENTS. All buildings, improvements, fixtures
and structures located on the Land, including the approximately 69,630 square
foot office/warehouse/distribution facility, having a street address of 2345
Harris Way, San Jose, CA ("Building") (collectively, the "Improvements");
provided, however, that the Improvements shall not include any of Seller's
Retained Property.
2.3 APPURTENANCES. All and singular the easements, rights of
way, tenements, hereditaments and appurtenances belonging or in any wise
appertaining unto the Land, the Improvements, any other appurtenance, the
Equipment, the Intangible Property, the Awards, or the operation, use, or
enjoyment of any of the foregoing, and also all the estate, right, title,
interest, property, claim and demand whatsoever of Seller in and to the
Property and in and to the streets, ways, sidewalks, alleys, driveways,
parking areas and areas adjacent thereto or used in connection therewith, and
to any land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land, to the center line thereof
(collectively, the "Appurtenances");
2.4 EQUIPMENT. All fixtures, fittings, appliances, apparatus,
equipment, supplies, machinery, carpeting and other materials installed,
located or stored on the Property, and other personal property and any
replacements thereof, or additions thereto, actually or constructively
affixed, or attached to the Property, or placed upon, under or used in any
way in connection with the complete and comfortable use, enjoyment, occupancy
and/or operation of the Property, including, but without limiting the
generality of the foregoing, all parts of the plumbing, heating, ventilating,
air-conditioning, electrical and mechanical systems of the Improvements,
elevators, incinerators, trash compactors, all equipment, materials and
supplies used or usable in connection with the maintenance, repair and
cleaning of the Property and the interior and exterior of all Improvements;
all racks or similar apparatus necessary for the placement and/or retention
of broadcasting antennae or other telecommunication equipment and property on
the roof of or otherwise within or about the Improvements (all of which
Seller warrants is owned by Seller and no other Person has the right to
remove or claim ownership to same except as set forth in the Space Leases),
all keys and master keys, all built-in equipment, all heating,
air-conditioning, freezing, lighting, incinerating and power equipment,
lampposts, all electrical equipment, transformers, wiring, conduit, meters,
fixtures and apparatus, engines, pipes, pumps, tanks, motors, hydraulic
equipment, conduits, lifting, cleaning, fire prevention, fire extinguishing,
smoke detection, refrigerating, ventilating and communications apparatus,
boilers, furnaces, oil burners or units thereof and any firing and control
apparatus used in connection therewith, appliances, air-cooling and
air-conditioning apparatus, vacuum cleaning systems, storage systems,
built-in or attached shelving, shades, awnings, windows, attached cabinets,
partitions, ducts and compressors, rugs and carpets, draperies, landscaping,
sod, arbors, shrubs, plants, trees, planters and planting beds or boxes,
retaining walls and enclosures, directories, mailboxes, signs, television or
radio antennae, together with all building materials and equipment now or
hereafter delivered to the Property and intended to be installed therein,
thereon or thereunder, including but not limited to, lumber, plaster, cement,
plumbing, fixtures, pipe, lath, wallboard, cabinets, nails, sinks, toilets,
furnaces, heaters, brick, tile, water heaters, glass, doors, flooring, paint,
lighting fixtures, heating and ventilating appliances and equipment, locks
and locksets; together with all additions, accessions, proceeds, products,
replacements, renewals and substitutions of and for all of the foregoing (all
of which is herein collectively called the
4
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"Equipment"); provided, however, that the Equipment shall not include any of
Seller's Retained Property, as set forth on Schedule 1.
2.5 INTANGIBLE PROPERTY. All warranties, guaranties, and all
benefits of the foregoing, to which Seller is a party or as to which Seller has
the benefit, relating to the Property, to the extent assignable (all of which is
herein collectively called the "Intangible Property"); and
2.6 AWARDS. All estate, right, title and interest of Seller in
and to any awards heretofore or hereafter made with respect to any part of or
interest in the Property and the Appurtenances as the result of the exercise of
the power of eminent domain (or a sale in lieu of a taking by eminent domain),
including any awards for changes of the grades of streets, or as the result of
any damage to the Property for which compensation shall be given by any
Governmental authority (collectively, the "Awards"); provided, however, that the
Awards shall not be deemed to include any awards payable separately to Seller
solely with respect to damage to Seller's business conducted at the Property, or
Seller's moving expenses, due to an exercise of the power of eminent domain,
provided further, however, that any such award otherwise payable to Seller does
not reduce the amount of Awards. Seller shall execute and deliver to Purchaser
on demand all proper instruments for the conveyance of such title and the
assignment and collection of any such Award.
SECTION 3 PURCHASE PRICE. Subject to adjustment as hereinafter provided,
the price to be paid by Purchaser for the purchase of the Property is the sum of
Eleven Million Dollars ($11,000,000) (the "Purchase Price"). Purchaser shall
deposit the Purchase Price, including the Note (hereinafter defined), with
Escrow Agent at Closing, net of any holdbacks, adjustments, prorations, and
costs charged to Seller under this Agreement.
3.1 ESCROWED FUNDS. Upon the expiration of the Due Diligence
Period (hereinafter defined), Purchaser shall deposit with Escrow Agent a
check in the amount of Two Hundred Thousand Dollars ($200,000) (said sum,
together with all interest earned thereon as hereinafter provided, "Earnest
Money") to be held and applied pursuant to this Section 3.1.
3.1.1 The Earnest Money shall be cashed by Escrow Agent
pursuant to the terms of this Agreement. After Escrow Agent has cashed the
Earnest Money check, Escrow Agent shall invest the Earnest Money pursuant to
Purchaser's instructions in either (a) special, segregated interest-bearing
accounts, repurchase agreements or certificates of deposit with any financial
institution insured by the Federal Deposit Insurance Corporation, or (b) bonds,
notes or other obligations which as to principal and interest constitute debt
obligations of or are unconditionally guaranteed by the United States of
America. All interest accruing on the Earnest Money shall accrue for the benefit
of Purchaser.
3.1.2 If, for any reason other than default by Purchaser,
this Agreement shall be terminated prior to the Closing, Escrow Agent shall
refund to Purchaser the entire amount of the Earnest Money. If this Agreement is
terminated through no fault of either Purchaser or Seller, the parties shall
bear their own costs and expenses and shall be relieved of any further liability
hereunder. A termination of this Agreement resulting from a default by one of
the parties shall be governed by the provisions of Section 16.
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3.2 BALANCE. Purchaser shall deposit with Escrow Agent at
Closing a promissory note in the form attached as Exhibit "F" for Two Million
Seven Hundred Fifty Thousand Dollars ($2,750,000) and good funds in the
amount of Eight Million Fifty Thousand Dollars ($8,050,000), net of any
holdbacks, adjustments, prorations and costs charged to Seller under Section
3.3 of this Agreement.
3.3 APPORTIONMENTS AND ADJUSTMENTS. In addition to any other
adjustments or prorations provided for in this Agreement, which are incorporated
at this place, the following adjustments shall be made for each of the costs,
expenses and charges listed below, and the net aggregate amount of such
adjustments shall be credited to the account of Seller or Purchaser upon the
Purchase Price, as the case may be:
3.3.1 Seller shall receive a credit for the prorated
portion, adjusted on a per diem basis, of any advance payments under any
Contracts which Purchaser elects to continue.
3.3.2 Seller shall pay and discharge, or credit on the
Purchase Price, any sales tax, rental receipts tax, real estate transfer taxes
or charges and any stamp or documentary taxes or other transfer fees or taxes
arising out of this transaction, and shall forever indemnify and hold Purchaser
free and harmless therefrom, except that, per local custom and practice,
Purchaser shall pay one-half of the City of San Jose transfer tax, in an amount
not to exceed Fifteen Thousand Dollars ($15,000).
SECTION 4 CLOSING.
4.1 TIME AND PLACE OF CLOSING.
4.1.1 Provided that all conditions precedent to Closing have
been satisfied or waived, the parties agree to cause the closing of title under
this Agreement and the consummation of the transactions provided for herein (the
"Closing") to take place, and the balance of the Purchase Price required to be
paid at the Closing to be paid, at the offices of the Title Company, on the
Closing Date.
4.1.2 Notwithstanding the provisions of Section 4.1.1
hereof, if any of the conditions precedent to Closing set forth in this
Agreement have not been satisfied or waived as of the date(s) agreed for those
events, then Purchaser shall have the right to terminate this Agreement, in
which event the provisions of Section 3.1.2 shall apply, and except in the event
of a default governed by the provisions of Section 16, both parties shall be
released and relieved of all liability hereunder.
4.1.3 Notwithstanding the provisions of Section 4.1.1
hereof, if Purchaser fails to perform any term or condition precedent to
Closing as set forth in this Agreement, or cause the executed Note and the
balance of the Purchase Price to be paid at Closing to be delivered to the
Escrow Agent, Seller shall have the right to terminate this Agreement and the
provisions of Section 3.1.2 shall apply.
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4.2 ESCROW. The Closing shall be conducted in escrow and all
documents, instruments, sums of money or other matters to be delivered or
attended to at the Closing shall be delivered to the Title Company and held
in escrow, pursuant to the terms of an escrow agreement satisfactory to
Purchaser's counsel and Seller's counsel, and the same shall be released upon
the recording of the Deed and any other instruments required to be recorded
pursuant to this Agreement and the delivery of the Title Policy.
4.3 DELIVERIES BY SELLER AT OR PRIOR TO CLOSING. At or prior
to the Closing, Seller shall deliver, or cause to be delivered, to Purchaser
or its designee:
4.3.1 The grant deed of Seller ( the "Deed") in usual
and customary form for Santa Clara County, acceptable to Purchaser, duly
executed by Seller in such manner as will qualify the Deed for recording, and
conveying fee simple to the Property subject only to Permitted Encumbrances.
Not later than five (5) days prior to Closing, Seller shall deliver a copy of
the form of Deed to Purchaser for review and approval by Purchaser's
attorney. Seller shall be solely responsible for obtaining any Governmental
approvals of the Deed prior to Closing.
4.3.2 Four (4) original counterparts of the Televideo Lease,
in the form of EXHIBIT "B" attached hereto and made a part hereof, duly executed
in recordable form.
4.3.3 Paid fee owner's Policy of title insurance (the "Title
Policy") with respect to the Land and Improvements, in form and substance
acceptable to Purchaser, issued by the Title Company in the aggregate amount of
the Purchase Price and listing as exceptions only the Permitted Encumbrances.
The Title Policy shall be on the 1970 form of owner's Policies, form "B", as
amended in 1987, if available in the state where the Property is located. All
appurtenant easements benefiting the Property shall be included as part of the
insured parcel described in the Title Policy.
4.3.4 A certificate, in the form attached hereto as EXHIBIT
"C." duly executed by Seller, dated as of the Closing Date, certifying that all
of Seller's warranties and representations contained herein or otherwise made in
writing by Seller or on Seller's behalf are true as of the Closing Date as if
then made.
4.3.5 A bill of sale for the Equipment, in the form attached
hereto as EXHIBIT " D" duly executed by Seller and containing warranties of
title and of good right to convey ("Bill of Sale").
4.3.6 An assignment, in the form attached hereto as EXHIBIT
"E." duly executed by Seller assigning and transferring to Purchaser the
Intangible Property and containing warranties of title and of good right to
convey. If desired by Purchaser, Seller shall execute separate assignments for
individual items comprising the intangible property.
4.3.7 Originals of all certificates (or letters if
certificates are not utilized by the pertinent Governmental authorities),
licenses, permits, authorizations, licenses and approvals issued for or with
respect to the Property by any Governmental authority having jurisdiction,
including without limitation, all certificates of occupancy, issued with respect
to the
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Improvements; provided, however, that if Seller does not have the original
document for any of the foregoing, then Seller shall deliver a copy of such
document in lieu of the original.
4.3.8 A certificate of the Governmental authority having
jurisdiction with respect to the use of the Property, dated as of a date no
earlier than ninety (90) days prior to the Closing Date, certifying to
Purchaser as of such date the zoning classification of the Property and that
said authority has no record of outstanding violations of building codes and
zoning and land use laws and regulations applicable to the Property.
4.3.9 Any certificates, documents or instruments reasonably
and customarily required by Purchaser or by the Title Company in like purchases,
including without limitation, a so-called "FIRPTA" affidavit meeting the
requirements of the United States Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder, stating that Seller is not a foreigner, and
the Title Company's usual and customary owner's affidavit and mechanic's lien
affidavit and indemnity so as to enable the Title Company to issue the Title
Policy required by this Agreement.
4.3.10 An updated version of the Survey, which may be a
recertification of a previous version of the Survey, which updated version shall
be dated not more than ten (10) days prior to the Closing Date, and shall in all
respects meet the survey requirements set forth in this Agreement.
4.4 DELIVERIES BY PURCHASER AT OR PRIOR TO CLOSING. At or prior
to the Closing, Purchaser shall:
4.4.1 Deliver any certificates, documents or instruments
reasonably required by the Title Company.
4.4.2 Cause the executed Note and the balance of the
Purchase Price required to be paid at Closing to be delivered to Escrow Agent.
4.5 PURCHASER'S REVIEW OF CLOSING DELIVERIES. Except for the
Title Policy, and except as otherwise provided in Section 4.3, Seller shall
deliver to Purchaser at least ten (10) days prior to the Closing Date, true,
complete and accurate copies of all documents listed in Section 4.3, and
certified by Seller as being true, complete and accurate, for Purchaser's
approval as to form and content. At least ten (10) days prior to the Closing
Date, Seller shall cause the Title Company to deliver to Purchaser a "marked-
up"' Title Commitment or pro forma copy of the Title Policy, evidencing the
Title Policy to be issued at Closing.
4.6 POSSESSION OF THE PROPERTY. Seller shall grant and deliver
to Purchaser exclusive possession of the Property, in the condition required
by this Agreement, subject only to the Permitted Encumbrances and the
Televideo Lease, no later than the Closing Date.
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4.7 CLOSING COSTS.
4.7.1 At Closing, Seller shall pay, and Escrow Agent
shall charge to Seller, the following costs related to the Closing: (a) the
cost of examination of title to the Property, the cost of issuing the Title
Commitment, the premium for issuing the Title Policy; (b) that portion of the
City of San Jose real estate transfer tax or conveyance fee not paid by
Purchaser pursuant to Section 4.7.2; (c) the real estate transfer tax or
conveyance fee charged by the County of Santa Clara; (d) Escrow Agent's fee;
(e) the cost of third party reports (the environmental report, engineering
report and the appraisal), not to exceed $4,500.00; (f) the recording fee for
the Deed; (g) the cost of the Survey; and (h) any sums due Purchaser by
reason of prorations as provided for herein.
4.7.2 At Closing, Escrow Agent shall charge Purchaser the
following costs related to the Closing: (a) the cost of the third party reports
exceeding $4,500.00; (b) one-half of the City of San Jose transfer tax or
conveyance fee, not to exceed $15,000; (c) the cost of any third party reports
exceeding $4,500 (environmental report, engineering report, and appraisal); (d)
any title endorsements requested by Purchaser; and (e) any sums due Seller by
reason of prorations provided for herein.
SECTION 5 WARRANTIES AND REPRESENTATIONS OF SELLER. Seller hereby
warrants and represents to Purchaser as follows:
5.1 TITLE TO THE PROPERTY. Except for Permitted Encumbrances
and any encumbrances to be removed by Seller at or prior to Closing, Seller
has the full and sole right, power and authority to sell, assign and convey
the Property pursuant to this Agreement. Seller has not sublet, mortgaged,
hypothecated, pledged or assigned all or any portion of Seller's estate,
right, title and interest in and to the Property to any Person, except for
Permitted Encumbrances and any encumbrances to be removed by Seller at or
prior to Closing.
5.2 NO SPACE LEASES. There are no leases, subleases, license
agreements, concession agreements or other agreements, oral or written, for
the use or possession of any portion of the Property, except as disclosed on
SCHEDULE 5.2.
5.3 LITIGATION. There is no action, suit or proceeding either at
law or in equity, or any arbitration proceeding or investigation, inquiry or
other proceeding by or before any court or Governmental instrumentality, board,
agency or the like now pending or, to the best of Seller's knowledge,
threatened, affecting the Property or materially affecting Seller or any
property or rights of Seller, nor is there any basis therefor. No judgment,
decree or order of any court or Government has been issued against or binds
Seller which has, or is likely to have, any material adverse effect on the
ability of Seller to perform the transactions contemplated hereby.
5.4 NO PENDING TAKINGS. Other than Permitted Encumbrances,
there is no pending or threatened condemnation, eminent domain or similar
proceeding or assessment affecting the Property or any part thereof, nor to
the best of Seller's knowledge and belief is any such proceeding or
assessment contemplated by any Governmental authority.
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5.5 NO VIOLATIONS.
5.5.1 Except as set forth on Schedule 5.5.1, to the best
of Seller's knowledge there are no existing, alleged or threatened violations
of laws, statutes, municipal ordinances, building codes, rules or regulations
of any Government or any Governmental administrative or regulatory body, or
of any fire regulations or insurance regulations, or any Requirements of Law,
which affect the Property, including without limitation, the United States
Occupational Health and Safety Act, as amended. The use and operation of the
Property now are, and at the time of Closing will be, in full compliance with
all Requirements of Law, including without limitation, all applicable point
of sale laws, building codes, environmental, zoning, and land use laws and
regulations. All expenses and costs relating to such compliance and all costs
and expenses necessary to cure any violations of any of the aforesaid,
whether such violations are revealed by inspection or otherwise, shall be
borne solely by Seller. The Property and the present operation, use, location
and configuration of the Improvements on the Land (including without
limitation, the side lots, set backs and any parking requirements and other
occupancy ratios) (a) do not constitute a non-conforming use under any zoning
or land use law or regulation, and (b) are not the subject of any variance or
permit pursuant to any zoning or land use law or regulation.
5.5.2 Certificates of occupancy for the Improvements have
been issued by the appropriate Governmental authority, and prior to the Closing
the existing use and occupancy of the Improvements will be in compliance with
the certificates of occupancy so issued.
5.5.3 Seller has no knowledge of any pending or contemplated
proceedings to modify or amend any building code or zoning or land use law or
regulation which affects the use of the Property.
5.5.4 To the best of Seller's knowledge, no zoning or
subdivision approval, use or occupancy permits, or any other approval of any
Government or Governmental authority relating to the Property is based or
conditioned upon any ownership of, or any possession of any rights in, any
real property, easements or rights appurtenant to any real property, other
than the Land.
5.5.5 Seller has not received any notice of any kind from
any Government or Governmental official alleging that Seller has failed to
comply with any Requirements of Law.
5.6 ENVIRONMENTAL MATTERS.
5.6.1 DEFINITIONS. For purposes of this Section 5.6:
(a) "Contaminant" shall mean any substance which
degrades into, contains or releases hazardous substances, pollutants or
contaminants, hazardous chemicals or any other substance defined, listed or
identified by any Governmental authority, or in any federal, state or local
laws, rules or regulations governing the manufacture, import, use,
generation, handling, storage, processing, release or disposal of chemicals,
substances or wastes
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deemed thereby to be potentially hazardous, toxic, dangerous or injurious to
human health or to the environment. This definition includes, without
limitation, material which is or may become radioactive, asbestos-containing
material and petroleum or petroleum-based products (including used oil).
(b) "Environmental Laws" shall mean any applicable
federal, state or local law, statute, ordinance, code, rule, regulation,
guidelines, permit, agreement, order or other binding determination of any
Government or Governmental authority relating to the environment or public or
human health and safety, including without limitation, the Clean Water Act 42
U.S.C. Section 7401 ET SEQ. the Clean Air Act 33 U.S.C. Section 1251 ET SEQ.,
and each statute specifically referred to in this Section 5.6.1.
(c) "Hazardous Substances", "Pollutants or
Contaminants" and "Release" each have the same meaning as in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. Section 9601 ET SEQ.
(d) "Hazardous Waste" has the same meaning as in the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 ET SEQ.
(e) "Hazardous Chemical" has the same meaning as in the
Occupational Safety and Health Administration ("OSHA") Hazard Communication
Standard, 29 C.F.R. Section 1910.1200 ET SEQ.
(f) "Infectious Waste" has the same meaning as in
OSHA's Bloodborne Pathogens Rule, 29 C.F.R. 1910-1030 ET SEQ.
5.6.2 To the best of Seller's knowledge, except as set
forth on SCHEDULE 5.6.2 hereof. (a) Seller has not caused or allowed and, to
Seller's actual knowledge, no lessee, sublessee, occupant or prior owner of
the Property, or any third party (including, without limitation, trespassers,
licensees, guests and the like) has caused or allowed any Contaminants to be
used, generated, processed, manufactured, stored, placed, processed, disposed
or released on or off-site of any of the Property, (b) the Property is not
subject to any contingent liability in connection with the release,
threatened release, or presence of any Contaminants on or off site of the
Property; (c) Seller has obtained all environmental, health and safety
permits, licenses and other authorizations necessary, and made all
notifications and filings necessary, for the current use of, and sale of, the
Property (collectively, "Environmental Permits"); (d) all Environmental
Permits are in good standing and Seller has made timely application for
renewal of Environmental Permits where necessary; and (e) the Property is in
compliance with all terms and conditions of all Environmental Permits and all
Environmental Laws.
5.6.3 To the best of Seller's knowledge, except as set
forth on SCHEDULE 5.6.3 or the phase 1 environmental report obtained by
Purchaser, there is not now on or in the Property: (a) any generation,
processing, treatment, storage, recycling, disposal or arrangement for
disposal of any Hazardous Waste or Infectious Waste; (b) any manufacture,
application or disposal of pesticides registered currently or formerly with
the United States Environmental Protection Agency or any Governmental
authority, (c) any underground storage tanks, in use or abandoned; (d) any
asbestos-containing material; (e) any urea formaldehyde
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foam insulating materials; or (f) any polychlorinated biphenyls (PCBs),
including, without limitation, any PCBs in any hydraulic oils, transformers,
capacitors or other electrical equipment specifically known to Seller without
independent investigation.
5.6.4 Except as set forth on SCHEDULE 5.6.4, to Seller's
actual knowledge, there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
give rise to any material common law or legal liability or otherwise form the
basis of any material claim, suit, action, demand, proceeding, hearing or
notice of violation, study or investigation relating to the environment or to
human health and safety, which would relate to or affect the Property or any
Person as a result of such Person holding title to, possessing, occupying or
operating the Property or any portion thereof at any time, whether past,
present or future.
5.6.5 Seller has made available to Purchaser copies of
all reports, studies, analyses, tests and/or monitoring results in the
possession or control of the Seller pertaining to any environmental or human
health and safety matters or concerns related to or affecting the Property.
5.7 CONDITION OF PROPERTY. To the best of Seller's knowledge
and except as set forth in SCHEDULE 5.7. the Improvements have been and are
in good condition and repair (subject to reasonable wear and tear), properly
functioning, fully completed substantially in accordance with the Building
Plans. The Equipment is in good operating condition and repair, subject to
reasonable wear and tear. Seller has no knowledge of the necessity of any
material repairs or renovations to the Property or Improvements thereon.
Except as otherwise expressly provided in this Agreement, Purchaser
acknowledges and agrees that it is acquiring the Property in an "AS IS"
condition, in reliance on its own inspection and examination. Purchaser
further acknowledges that and agrees that, except as otherwise expressly
provided in this Agreement, neither Seller nor any agents, representatives or
employees of Seller have made any representations or warranties of any nature
or kind, direct or indirect, express or implied, verbal or written, with
respect to the condition of the Property.
5.8 DISPUTES WITH NEIGHBORS. Seller has had no boundary disputes
or water drainage disputes with the owners of any premises adjacent to the
Property and has no knowledge of any such dispute involving any former owners of
the Property.
5.9 WELLS. Except as may otherwise be disclosed in the phase 1
environmental report obtained by Purchaser, there are no gas wells, oil wells or
other wells, whether capped or uncapped, on or about the Property. If any such
wells are discovered, whether before or after the Closing Date, then Seller, at
Seller's sole cost and expense, shall cause the same to be capped in accordance
with all Requirements of Law and shall repair all damage to the Property in
connection with such capping.
5.10 TAXES. All taxes, assessments and other Governmental charges
imposed by law upon the Property or upon Seller, including, without limitation,
any personal Property taxes applicable to the Property, which are due and
payable, the failure of which to pay would result in a Lien on the Property or
prevent any deed or other document required to be delivered hereunder from being
either delivered or recorded or accepted for recording by the
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applicable public officers (collectively, "Taxes and Assessments"), have been
paid. The Property are not subject to any special or reassessed assessments and
Seller has no knowledge of any proposed or pending special assessments that
would affect the Property, except as may otherwise be shown on the Title
Commitment or the tax bills delivered by Seller to Purchaser pursuant to this
Agreement. No improvements (site or area) have been installed by or on behalf of
any Governmental authority the costs of which may be assessed against the
Property.
5.11 BROKERS. No agent, broker, investment banker or other
Person acting on behalf of Seller or under the authority of Seller is or will
be entitled to any broker's commission or finder's fee or any other
commission or similar fee directly or indirectly from any of the parties
hereto in connection with any of the transactions contemplated herein, other
than TRI Commercial Real Estate Services and Terrace Associates by separate
agreement, and Seller agrees to pay all amounts due or becoming due to said
brokers. Seller shall indemnify, protect, defend and hold harmless Purchaser
against or from all commissions or fees or claims for same, due to or claimed
by any other broker or Person engaged by Seller or claiming to have dealt
with Seller in connection with the Property. Purchaser shall indemnify,
protect, defend and hold harmless Seller against or from all commissions or
fees or claims for same, due to or claimed by any broker or Person engaged by
Purchaser or claiming to have dealt with Purchaser in connection with the
Property.
5.12 BOOKS AND RECORDS. The books of account and other financial
and business records of Seller with respect to the Property are in all material
respects complete and correct and are maintained in accordance with generally
accepted accounting principles, consistently applied.
5.13 DISCLOSURE. There are no facts known to Seller which
materially adversely affects the Property and the condition (financial or
otherwise), liabilities, operations or prospects of the Property except for such
facts set forth herein or in any schedule or exhibit attached hereto.
5.14 SPACE LEASES. There are no Space Leases except as set forth
on Schedule 5.2.
5.15 ABSENCE OF UNDISCLOSED LIABILITIES. At Closing, Seller will
have no liability, whether absolute, accrued, contingent or otherwise, whether
due or to become due, arising out of any transaction relating to the Property,
except as may arise under this Agreement or otherwise be disclosed herein.
5.16 UTILITIES; ACCESS.
5.16.1 The Property has and will have as of the Closing
Date adequate water supply, storm and sanitary sewage facilities, telephone,
gas, electricity, and any other public utilities, fire protection and means
of ingress and egress to and from public highways, necessary or desirable for
the full development, use and enjoyment of the Property as an
office/warehouse/distribution facility. All streets and roads necessary for
access to or full utilization of the Property or any part thereof are duly
dedicated public roads maintained by the Government having jurisdiction
thereof. No easements are or will be required as of the Closing for such
access and full utilization of the Property or in connection with any
utilities.
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5.16.2 All utility lines serving the Property enter the
Property from adjoining lands dedicated to public use for such uses. The
sewer and water lines serving the Property connect directly from the Property
to public sewer and water systems maintained by the Government having
jurisdiction thereof. The sewer and water lines serving the Property are to
the best of Seller's knowledge of adequate size and capacity to meet the
requirements of the Property as presently operated.
5.17 PLANS. Except as shown on the Building Plans and/or in
the Survey or phase I environmental report obtained by Purchaser, Seller has
no knowledge of any Improvements located underground or otherwise not
ascertainable by a visible inspection, including, without limitation, any
vaults, tanks, pipes or waterlines.
5.18 CONSENTS. No consent of any Person not heretofore
obtained is necessary to effectuate or perform this Agreement and the
transactions herein contemplated. All permits, authorizations, licenses and
approvals necessary for the operation of the Property have been duly obtained
and are in full force and effect, and there are no proceedings pending or,
to the best of Seller's knowledge, threatened which may result in the
revocation, cancellation or suspension, or any material modification of, any
of the foregoing.
5.19 INSURANCE. Seller has now in force adequate and
sufficient fire, casualty, theft, vandalism, and public liability insurance
coverage with respect to the Property.
5.20 FLOOD PLAIN; WETLANDS. Except as may otherwise be stated
on the Survey, the Improvements are not located in a designated flood plain
or flood way. No part of the Property constitutes so-called "wetlands" under
any Requirements of Law, including without limitation, 33 C.F.R. Section
328.3.
5.21 HISTORIC DISTRICT. The Property is not located in any
area designated by any Government as an historical or similar area wherein
such designation would restrict the ability to rehabilitate, construct or
otherwise make changes to the interior or exterior of the Property nor do any
Governmental restrictions exist with respect to the Property other than
normal zoning regulations or codes of a general nature applicable to all
property within the purview of such general regulations and codes.
5.22 DIMENSIONS. The dimensional descriptions contained in
Sections 2.1 and 2.2 relating to the Land and Improvements are true and
complete.
5.23 SELLER NOT AN ALIEN. Seller is not a "nonresident alien,"
"foreign corporation," "foreign partnership," "foreign trust" or "foreign
estate" within the meaning of the United States Internal Revenue Code of
1986, as amended, and the regulations and rulings promulgated thereunder.
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5.24 EXISTENCE AND AUTHORITY OF SELLER.
5.24.1 Seller is, and will be on the Closing Date, a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Seller has, and will have on the Closing Date, all
necessary power and authority to (a) carry on the business for which Seller has
been organized, (b) own and operate the Property, and (c) enter into this
Agreement and perform Seller's obligations hereunder.
5.24.2 All actions required to be taken under Delaware law
and Seller's Articles of Incorporation and By-Laws to approve or authorize the
execution of this Agreement and consummation of the transactions contemplated
hereby have been taken.
5.24.3 The execution of this Agreement and the consummation
of the transactions contemplated hereby constitute the valid and binding
obligation of Seller, enforceable in accordance with its terms.
5.24.4 Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a violation
of or be in conflict with or constitute a default under (or with the passage of
time or delivery of notice, or both, would constitute a default under) any term
or provision of any agreement, lease, or other instrument to which Seller is a
party or by which the Property is bound.
SECTION 6 WARRANTIES AND REPRESENTATIONS OF PURCHASER. Purchaser warrants
and represents to Seller as follows:
6.1 BROKERS. Except as set forth in Section 5.11, no agent,
broker, investment banker or other Person acting on behalf of Purchaser or
under the authority of Purchaser is or will be entitled to any broker's
commission or finder's fee or any other commission or similar fee directly or
indirectly from any of the parties hereto in connection with any of the
transactions contemplated herein. Purchaser shall indemnify, protect, defend
and hold harmless Seller against or from all commissions or fees or claims
for same, due to or claimed by any broker or Person engaged by Purchaser or
claiming to have dealt with Purchaser in connection with the Property.
6.2 EXISTENCE AND AUTHORITY OF PURCHASER.
6.2.1 Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware and will either be qualified as a foreign limited liability to do
business in California, or will have assigned its interest hereunder pursuant to
Section 15 to an entity that is so qualified.
6.2.2 The execution of this Agreement and the consummation
of the transactions contemplated hereby constitute the valid and binding
obligation of Purchaser, enforceable in accordance with its terms. Each person
signing this Agreement on behalf of Purchaser is duly and validly authorized to
do so.
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6.2.3 No authorization, consent, or approval of any
Governmental authority (including courts) is required for the execution and
delivery by Purchaser of this Agreement or the performance of its obligations
hereunder.
6.2.4 Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will constitute a violation
of or be in conflict with or constitute a default under (or with the passage of
time or delivery of notice, or both, would constitute a default under) any term
or provision of Purchaser's operating agreement or any other agreement, lease,
or other instrument to which Purchaser or any of Purchaser's members is a party.
SECTION 7 CERTAIN PRE-CLOSING COVENANTS OF SELLER.
7.1 OPERATION PENDING CLOSING. From the date hereof to the
Closing, Seller shall:
7.1.1 Continue to operate the Property in the ordinary
course of business in accordance with sound real estate management practices,
including the performance of all ordinary and necessary maintenance, repairs and
replacements, and ordinary and necessary replacement of supplies, in the
ordinary course of business;
7.1.2 Except in the ordinary course of Seller's business,
execute no Contract, lease, license agreement, concession or other agreement, in
respect of the Property or any part thereof, nor any renewal, extension,
amendment or modification of any Contract, nor waive any rights of Seller
thereunder or any prior defaults of the other contracting party thereunder, nor
incur any expense in respect of the Property other than ordinary and necessary
expenses, without the prior written consent in each instance of Purchaser;
7.1.3 Maintain the Improvements and Equipment in good
repair, order and condition except for depletion, depreciation, and damage by
unavoidable casualty (subject, however, to the provisions of Section 11.8
hereof);
7.1.4 Keep in full force and effect insurance comparable
in amount and scope of coverage to insurance now carried;
7.1.5 Perform in all material respects all of Seller's
obligations under the Contracts;
7.1.6 Maintain the books of account and records relating to
the Property in the usual, regular and ordinary manner and in compliance in all
material respects with all Requirements of Law;
7.1.7 Comply in all material respects with all Requirements
of Law applicable to the Property; and
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7.1.8 Not sell, assign or transfer the Property or any
interest therein, nor enter into any mortgages, leases, encumbrances or other
matters affecting title to or possession of the Property without Purchaser's
prior written consent, not unreasonably to be withheld.
7.2 ACCESS AND INFORMATION. On and after the date hereof, upon
reasonable prior notice, Seller shall give to Purchaser and its counsel, agents,
representatives and designees full access to the Property and the right to enter
upon the Property upon reasonable prior notice and make or conduct soil tests,
engineering studies, inspections and examinations of the Property and all
components thereof, including but not limited to, all utility and mechanical
systems serving or in any way related to the Property, environmental,
architectural, space planning, and landscaping studies, surveys, plans,
drawings, or investigations and such other inspections or surveys thereof as
Purchaser may desire, and full access to all books, records, contracts and
commitments directly related to the Property, including but not limited to
present and past financial, income and expense data relating to the Property,
and will furnish all such information and documents (certified, if requested)
relating to the Property and the business related thereto as the Purchaser and
its counsel, agents, other representatives and designees may reasonably request
including, but not limited to the right to inspect invoices and other data
necessary to verify matters contained in the Income Statement and all other
financial statements of Seller relating to the Property, and will cause Seller's
accountants, and any management company that is acting or has acted at any time
on Seller's behalf with respect to the Property to do the same. Seller's
representatives for this purpose shall be (W. Stephen Wilson,)* Kathy Cleveland
and Stanley Kim. Seller shall, upon request of Purchaser, furnish Purchaser with
copies of all such items and material. In conducting the foregoing
investigations, Seller and its agents and representatives shall use reasonable
good faith efforts to not unreasonably disrupt Seller's business operations at
the Property. Purchaser will not disclose any confidential information obtained
from Seller to others (except for Purchaser's counsel, agents and other
representatives involved in this transaction, each of which shall be bound by an
agreement to keep such information strictly confidential and to return such
information to Purchaser in the event this Agreement is terminated). In the
event this Agreement is terminated, Purchaser will use reasonable efforts in
good faith to keep confidential any information (unless readily ascertainable
from public information or sources or otherwise required by law to be disclosed)
obtained from Seller in connection with the transactions contemplated by this
Agreement and will return to Seller all documents, work papers and other written
material obtained by Purchaser from Seller which were marked confidential.
7.3 PRE-CLOSING DELIVERIES. To the extent that the following
exist, and are within the actual or constructive control of Seller or its
agents, Seller shall deliver, or cause to be delivered, each of the following
items to Purchaser at Seller's sole cost and expense, each of which shall be
delivered immediately upon the full execution of this Agreement:
7.3.1 Complete and correct copies of all insurance policies
maintained by Seller currently in effect together with all riders and amendments
thereto with respect to the Property.
* This text was deleted by (illegible) in revisions to this document.
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7.3.2 ALTA preliminary commitment or binder for title
insurance ("Title Commitment") from the Title Company with current date,
containing the commitment of the Title Company to issue the Title Policy
required to be delivered pursuant to Section 4.3 hereof. The Title Commitment
shall set forth the results of a so-called special tax search showing all
pending assessments on the Property. The Title Commitment shall have attached
thereto complete and legible copies of all documents relating to any matter
or exception shown on Schedule B of the Title Commitment. The Title
Commitment shall include the results of a search of all uniform commercial
code financing statements and chattel mortgages filed with the appropriate
county recorders/state official. Seller shall deliver, or cause to be
delivered, the Title Commitment to Purchaser within five (5) business days
after the date of this Agreement.
7.3.3 A current survey ("Survey"), prepared by a land
surveyor certified and licensed in California, and approved by Purchaser,
covering the Property and meeting the requirements set forth in this Section.
The Survey shall contain an appropriate certificate signed by the Surveyor,
certifying to Purchaser, the Title Company and any other parties designated
by Purchaser, that the Survey is an accurate representation of the Land,
Improvements and Appurtenances and that the Survey complies with the 1992
"Minimum Standard Detail Requirements of ALTA/ACSM Land Title Surveys" for an
Urban Class Surveys. The certificate of the surveyor shall specifically
certify that each of the parcels comprising a separate locale of the Land are
contiguous each to the other without any strips, gores or other parcels of
land intervening. The perimeter survey description contained in the Survey
shall be used in the preparation of legal descriptions for the Title Policy,
any binders of insurance for the Title Policy, the Deed and any other
documents requiring legal descriptions of the Property to be delivered
pursuant to this Agreement. The Survey shall be in such sufficient detail and
reveal such state of facts as to permit the Title Company to issue the Title
Policy without any survey, boundary or encroachment exceptions. The Survey
shall be in form and substance acceptable to Purchaser and shall (a) show the
location of all structures and Improvements on the Property; (b) identify or
otherwise designate all (i) utility lines serving the Property, (ii) set
back, rear yard and side yard requirements, (iii) easements and
rights-of-way, either of record or visible on the ground, which either
benefit or burden the Property, (iv) conditions, restrictions and other
matters affecting title to the Property that are capable of being located on
the Survey, (v) perimeter lines of the Property with monuments either set or
found at each corner thereof, (vi) curb cuts, driveways and fences, and (vii)
all matters affecting title to the Property which are shown in the Title
Commitment and capable of being shown on or located by a survey; (c) contain
a computation of the acreage of the Property to the nearest one-thousandth of
an acre (specifically identifying the portion of the Property and the acreage
thereof in any public highway, right-of-way, dedicated street or exclusive
easement area) and a computation of the gross square footage of the Building;
(d) contain a legal description of the Property; (e) show any encroachment on
the Property or of any building or improvement constituting a part of the
Property encroaching on any other property or an affirmative statement that
no encroachment exists; (f) certify the zoning of the Property; (g) include
the names of the owners of any real property adjoining the Property; (h)
certify that no portion of the Property is located within a flood plain or
flood way area or specifically identifying which portions of the Property are
located within such flood plain or flood way area (i) have the seal and
registration number of the surveyor affixed; and (j) bear the date on which
the actual field survey has concluded.
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7.3.4 A complete inventory of all Equipment, described in
reasonable detail, and stating which items are owned by Seller and which, if
any, are leased from another Person pursuant to any Contract, to be delivered
not more than ten (10) calendar days after execution hereof.
7.3.5 Two (2) complete and correct sets of "as built"
architectural, mechanical, electrical, structural landscape, site and
drainage plans and specifications for all Improvements (collectively,
"Building Plans").
7.3.6 All policies of title insurance with respect to the
Property received by Seller when Seller acquired the Property or otherwise
within Seller's possession or control.
7.3.7 Originals of, or complete and accurate copies of,
the following (a) all engineering and/or architectural studies, surveys,
assessments or reports with respect to the Property, (b) all studies,
surveys, assessments or reports relating to any environmental matter
concerning the Property, and (c) all surveys and site plans of the Land,
Improvements and Appurtenances.
7.3.8 Complete and correct copies of all certificates,
licenses, permits, authorizations and approvals issued for or with respect to
the Property by any Governmental authority having jurisdiction, including,
without limitation, all certificates of occupancy issued with respect to the
Improvements.
7.3.9 Complete and correct copies of all site plan
approvals, zoning approvals, zoning variances, if any, issued by the
Governmental authorities having jurisdiction over zoning and land use
requirements applicable to the Property, to the extent that the foregoing are
within Seller's possession or control.
7.3.10 Complete and correct copies of all warranties and
guarantees applicable to the Building, Equipment or Improvements.
7.3.11 Complete and correct copies of all tax bills and
utility bills relating to the Property for the three (3) year period immediately
preceding the date of this Agreement.
7.4 CONTINUING ACCURACY OF REPRESENTATIONS. The
representations and warranties contained herein, or otherwise made in writing
by or on Seller's behalf, shall be true and correct as of the Closing, except
for such changes contemplated and permitted by this Agreement, as though
Seller had made such representations and warranties in exactly the same form
or language on the Closing Date. Seller shall immediately notify Purchaser in
the event that any representation or warranty made by Seller herein shall
cease to be true and correct at or prior to the Closing. The representations
and warranties contained herein shall survive the Closing for a period of
twelve (12) months.
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7.5 SATISFACTION OF CONDITIONS. Seller shall cause each of the
conditions set forth in Section 9 hereof to be satisfied at or prior to the
Closing.
SECTION 8 PURCHASER'S DUE DILIGENCE AND FINANCING.
8.1 APPROVAL BY PURCHASER. Purchaser shall have a period of
seven (7) business days after the later of (a) the date of this Agreement, or
(b) the date that Purchaser receives the last of the reports, surveys,
documents and other items set forth in Section 7.3 hereof (collectively, "Due
Diligence Items") in which to review and approve, in Purchaser's sole and
absolute discretion, the Due Diligence Items (the aforesaid period being the
"Due Diligence Period").
8.1.1 In the event that Purchaser notifies Seller that any
one or more of the Due Diligence Items is not acceptable, or in the event that
Purchaser disapproves of the condition of the Property or any other matters
relating to the Property which have been inspected by or revealed to Purchaser
subsequent to the date of this Agreement, then Seller shall have a period of
five (5) business days after each such notice in which Seller shall notify
Purchaser in writing whether or not Seller intends to attempt to cure, satisfy
or otherwise remedy to Purchaser's satisfaction ("Cure") such conditions or
matters set forth in Purchaser's notice (such conditions or matters,
collectively, "Purchaser's Objections"). If Seller elects to Cure Purchaser's
Objections, then Seller shall have a period of thirty (30) days after Seller's
receipt of the notice setting forth such Purchaser's Objections in which to Cure
the same. If Seller has timely notified Purchaser that Seller does not intend to
attempt to Cure the Purchaser's Objections, or if Seller elects to Cure the
Purchaser's Objections and thereafter fails to Cure the same within the time
period provided for herein, then, in either such event, Purchaser may, by
written notice to Seller, elect to cancel this Agreement, in which event all
parties shall be released and discharged of any further liability hereunder,
except as set forth in Section 3.1.2 hereof.
8.1.2 If any matter shown in the Title Commitment and/or
the Survey is not acceptable to Purchaser, then Purchaser (or Purchaser's
attorneys) shall notify Seller of those matters that are not acceptable.
Seller shall have a period of five (5) business days after receipt of
Purchaser's notice in which Seller shall notify Purchaser in writing whether
or not Seller intends to attempt to Cure such conditions or matters set forth
in Purchaser's notice (such conditions or matters, collectively,
"Title/Survey Objections"). If Seller elects to Cure the Title/Survey
Objections, then Seller shall have a period of thirty (30) days after receipt
of Purchaser's notice in which to Cure the Title/Survey Objections. If Seller
has timely notified Purchaser that Seller does not intend to attempt to Cure
the Title/Survey Objections, or if Seller elects to Cure the Title/Survey
Objections and thereafter fails to Cure the same within the time period
provided for herein, then in either such event, Purchaser may, by written
notice to Seller, elect to cancel this Agreement, in which event all parties
shall be released and discharged of any further liability hereunder, except
any liability under Section 11.4 hereof. Notwithstanding the foregoing,
Purchaser shall not be required to object to any Lien or similar matter which
Seller is otherwise required to remove or cure pursuant to this Agreement and
which can be removed or cured by the payment of money out of funds otherwise
payable to Seller at Closing.
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SECTION 9 CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser shall not be
obligated to close title hereunder nor have any obligation under this
Agreement if any of the following conditions shall exist or shall occur,
except to the extent that any such condition may have been waived by
Purchaser pursuant to Section 12:
9.1 LITIGATION. An action or proceeding brought by any Person
(other than a party hereto) shall be pending before any court or administrative
body to restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated by this Agreement or to recover any damages or obtain
other relief as a result of the consummation of the transactions contemplated by
this Agreement.
9.2 SELLER REPRESENTATIONS AND PERFORMANCE. The representations
and warranties of Seller contained herein or otherwise made in writing by or on
Seller's behalf in connection with the transactions contemplated hereby shall
not be true and correct in all material respects as of the Closing, except for
changes contemplated and permitted by this Agreement, as though such
representations and warranties were made as of the Closing in exactly the same
form or language; or Seller shall not have duly performed and complied with all
of the agreements, conditions and deliveries required by this Agreement to be
performed, complied with, or delivered by Seller prior to or at the Closing.
9.3 INSURABILITY OF TITLE TO PROPERTY. Any policy of title
insurance which is to be issued by the Title Company with respect to the
Property contains exceptions for matters other than the Permitted Encumbrances.
9.4 ZONING. Any building code or zoning or land use law or
regulation to which the Property is subject shall be modified or amended in
any manner whatsoever which adversely affects Purchaser's intended use and
development of the Property, including without limitation, in such manner as
to result in a change of the zoning classification of the Property.
9.5 APPROVAL BY PURCHASER. Purchaser has not previously
terminated this Agreement pursuant to Section 8.1 hereof.
SECTION 10 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller
hereunder are subject to the fulfillment at or prior to the Closing of the
following conditions except to the extent that any of such conditions may
have been waived by Seller pursuant to Section 12:
10.1 LITIGATION. No action or proceeding brought by any Person
(other than a party hereto) shall be pending before any court or administrative
body to restrain, enjoin or otherwise prevent the consummation of the
transactions contemplated by this Agreement or to recover any damages or obtain
other relief as a result of the consummation of the transactions contemplated by
this Agreement.
10.2 REPRESENTATIONS AND PERFORMANCE OF PURCHASER. The
representations and warranties of Purchaser contained herein and otherwise made
in writing by or on its behalf in connection with the transactions contemplated
hereby shall be true and correct in all material respects as of the Closing,
except for changes contemplated and permitted by this Agreement, as though such
representations and warranties were then made in exactly the same
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form and language; and Purchaser shall have duly performed and complied with
all agreements and conditions required by this Agreement to be performed or
complied with by Purchaser prior to or at the Closing.
SECTION 11 ADDITIONAL COVENANTS.
11.1 EXPENSES. Except as otherwise provided herein or limited by
the terms hereof, Seller and Purchaser each agree to pay their own costs and
expenses incurred in connection with the transactions contemplated hereby.
Seller shall be responsible for the costs of producing the reports, surveys,
documents and other items required by Section 4 and Section 7 to be obtained and
delivered by Seller.
11.2 SATISFACTION OF LIENS. In the event that there are any
Liens, encumbrances or defects to the marketability or insurability of the title
to the Property on the date of Closing, other than for Permitted Encumbrances,
by reason of any mortgage, Lien, unpaid tax, conditional sales contract or
chattel mortgage, mechanic's lien, judgment or any encumbrance which is
susceptible of being cured or discharged upon payment of a fixed or
ascertainable amount, Seller shall pay, satisfy and discharge such Lien,
encumbrance or defect by procuring and recording at Seller's expense a good and
sufficient release, satisfaction or discharge, discharging each of said Liens,
encumbrances or defects of record. If at the date of Closing there shall be any
such Liens, encumbrances or defects, Seller may use the portion of the balance
of the Purchase Price which is payable in immediately available funds to satisfy
the same, provided that Seller shall simultaneously either deliver to Purchaser
at the Closing instruments in recordable form and sufficient to satisfy and
discharge such Liens, encumbrances or defects of record together with the cost
of recording or filing said instruments, or, provided that the Seller has made
arrangements with the Title Company in advance of the Closing, Seller will
deposit with the Title Company sufficient monies acceptable to and required by
the Title Company to insure the obtaining and the recording of such instruments
and satisfactions and to induce the Title Company to issue the Title Policy to
Purchaser free of any such Liens, encumbrances or defects.
11.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
respective representations, warranties and covenants of Purchaser and Seller
contained herein or in any schedule, exhibit, certificate or document
delivered herewith or in pursuance hereof and their respective agreements
contained herein shall survive the Closing for a period of three (3) years.
All warranties and representations shall be effective regardless of any
investigations which have been or will have been made.
11.4 INDEMNITY BY SELLER.
11.4.1 Seller shall indemnify, protect, defend and hold
harmless Purchaser from and against any and all actions, suits, claims,
liabilities, damages, losses, costs and expenses, including attorneys' fees,
resulting from (a) any representations made by Seller in this Agreement or made
in any document or certificate delivered pursuant to this Agreement which are
materially inaccurate or misleading, (b) any material breach of any of Seller's
warranties made in this Agreement or any document or certificate delivered
pursuant to this Agreement, (c) any liability of the Seller imposed upon
Purchaser as a transferee of the Property, except to the extent expressly
assumed by Purchaser under this Agreement, (d) any breach or
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default in the performance or observance by Seller of any of the covenants or
other obligations which Seller is to perform or observe under this Agreement, or
(e) any obligations or liabilities related to or arising under any Contract
prior to the Closing (collectively, "Indemnified Matters").
11.4.2 Should any claim be made by a person not a party
to this Agreement with respect to any matter to which the indemnity set forth
in this Section 11.4 relates, Purchaser shall promptly give Seller written
notice of any such claim, and Seller shall thereafter defend or settle any
such claim, at its sole expense, on its own behalf and with counsel of its
selection; provided, however, that Seller's counsel shall be competent
counsel experienced in the type of litigation or claim at issue and shall be
acceptable to Purchaser, acting reasonably. Upon Seller's assumption of the
defense of any claim against Purchaser pursuant to Seller's indemnity,
Purchaser shall have the right to participate in the defense or settlement of
the claim with counsel retained and paid by it, and Seller shall cause the
attorneys retained by it to consult and cooperate fully with counsel for
Purchaser. In such defense or settlement of any claims, Purchaser shall
provide Seller with originals or copies of all relevant documents and provide
its utmost cooperation with and assistance to Seller, at no expense to
Purchaser. Notwithstanding any provision of this Section 11.4 to the
contrary, Seller shall not enter into any settlement or agreement in
connection with any Indemnified Matters binding upon or adversely affecting
Purchaser, or admit any liability or fact in controversy binding upon or
adversely affecting Purchaser, without Purchaser's prior written consent in
Purchaser's sole discretion.
11.4.3 For purposes of this Section 11.4, the term
"material," which is used in Section 11.4.1 (a) and (b), shall mean one or more
events having, in the aggregate, an objective value of at least Twenty Five
Hundred Dollars ($2,500.00) (the "Indemnification Threshold"). Until the
Indemnification Threshold is met, Seller shall not be obligated to indemnify
Purchaser for an event or series of events described in Section 11.4.1 (a) or
(b). Once an event or series of events described in Section 11.4.1 (a) and (b)
exceeds the Indemnification Threshold, Seller shall promptly undertake its
indemnification obligations and, further, shall reimburse Purchaser for any and
all losses, costs and expenses suffered by Purchaser prior to the time that the
Indemnification Threshold was met.
11.5 FURTHER ASSURANCES. If at any time either of the parties
hereto shall consider or be advised that any further assignments, conveyances or
assurances are necessary or desirable to carry out the provisions hereof and the
transactions contemplated herein, the appropriate parties hereto shall execute
and deliver, or cause to be executed and delivered, any and all proper deeds,
assignments and assurances, and do or cause to be done all things necessary or
proper to carry out fully the provisions hereof.
11.6 DELIVERY OF DOCUMENTS AND OTHER ITEMS. No document shall be
deemed executed and delivered for purposes of this Agreement unless such
document shall have been duly executed with all blanks appropriate filled in
pursuant to the terms hereof or thereof.
11.7 RECORDATION. Neither party shall record this Agreement.
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11.8 DAMAGE AND DESTRUCTION.
11.8.1 If any part of the Property which is subject to
transfer to Purchaser pursuant to this Agreement shall, prior to the filing of
the Deed for record, be damaged or destroyed by fire or any other cause, then
Seller shall immediately give written notice to Purchaser of such event and
Purchaser may, at Purchaser's option (a) receive the proceeds of any insurance
payable in connection therewith plus a cash payment by Seller of the deductible
amount, if any, under the insurance Policies or policies covering the Property
and thereupon remain obligated to perform this Agreement; or (b) terminate this
Agreement. Upon termination of this Agreement by Purchaser pursuant to this
Section 11.8, all funds and documents previously paid, deposited or advanced by
Purchaser shall be immediately returned to Purchaser, Seller shall pay all
costs of the applicable title examination and Commitment, and any escrow fees,
and neither party shall thereafter have any further obligation to the other
party.
11.8.2 Simultaneously with the execution of this Agreement,
Seller shall deliver to Purchaser true and complete copies of all policies for
the present insurance coverage upon the Property. Seller shall keep such
policies in full force and effect through the Closing Date and immediately
advise Purchaser in writing of any damage to the Property. Seller shall execute
and deliver such instruments as may be necessary to assign to Purchaser on the
Closing Date any insurance policies presently in effect upon the Property which
Purchaser elects to assume.
11.9 EMINENT DOMAIN.
11.9.1 If, prior to Closing, all or any portion of the
Property is taken or affected by eminent domain proceedings, or under a threat
of eminent domain, for any public or quasi-public use or purpose (a "Taking",
then in any such event, Seller shall immediately give Purchaser written notice
of the occurrence of such event, and Purchaser may, at Purchaser's option (a)
receive the proceeds of any Awards payable in connection therewith and thereupon
remain obligated to perform this Agreement; or (b) terminate this Agreement.
Upon termination of this Agreement by Purchaser pursuant to this Section 11.9,
all funds and documents previously paid, deposited or advanced by Purchaser
shall be immediately returned Purchaser, Seller shall pay all costs of the
applicable title examination and Commitment, and any escrow fees, and neither
party shall thereafter have any further obligation to the other party.
11.9.2 If the Closing shall occur following a Taking, and
if Purchaser does not elect to terminate this Agreement, then Seller shall
deliver or cause to be delivered to Purchaser (at Closing, if possible) all
Awards, less any sums theretofore reasonably utilized by Seller for
restoration or repair of the Property, to the extent the same was properly
performed at Purchaser's direction pursuant to Section 11.9.1 and Seller
shall execute and deliver to Purchaser at Closing all proper instruments for
assignment and collection of any Awards not paid at Closing and shall also
pay to Purchaser such additional amounts, if any, in excess of the Awards as
may be reasonably required to complete any restoration or repair of the
Property.
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11.10 NO ASSUMPTION OF SELLER'S LIABILITIES. Purchaser shall
not, by the execution or performance of this Agreement or otherwise, assume,
become responsible for, or incur any liability or obligation of any nature of
Seller. Without limiting the generality of the foregoing, Purchaser shall not
assume any liability or obligation of Seller under any Contract.
11.11 CONFIDENTIALITY. Purchaser and Seller shall keep the
contents of this Agreement and the terms for the acquisition of the Property
confidential and shall not disclose the contents of this Agreement or the
terms for the acquisition of the Property in any manner whatsoever to any
party without the other party's prior written consent, except that each party
may disclose such terms to such party's professional advisors, agents and
employees and Purchaser may disclose such terms to Purchaser's Lender,
potential joint ventures, partners or members, provided that each party
agrees to keep such terms confidential.
SECTION 12 WAIVER. Any condition to the performance by any party hereto,
which may legally be waived at or prior to the Closing may be waived at any time
by the party entitled to the benefit thereof by action duly taken by the waiving
party. Except as herein expressly provided, no waiver by a party of any breach
of this Agreement or of any warranty or representation hereunder by the other
party shall be deemed to be a waiver of any other breach by such other party
(whether preceding or succeeding and whether or not of the same or similar
nature) and no acceptance or payment or performance by a party after any breach
by the other party shall be deemed to be a waiver of any breach of this
Agreement or of any representation or warranty hereunder by such other party
whether or not the first party knows of such breach at the time it accepts such
payment or performance. No failure or delay by a party to exercise any right it
may have by reason of the default of the other party shall operate as a waiver
of default or modification of this Agreement or shall prevent the exercise of
any right by the first party while the other party continues to be so in
default. No purported waiver by either party of any default by the other of any
term or provision contained herein shall be effective unless the waiver is in
writing and signed by the waiving party.
SECTION 13 MISCELLANEOUS. The captions or headings contained in this
Agreement are for reference purposes only and shall not effect in any way the
meaning or interpretation of this Agreement. This Agreement constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof. No representation, promise, inducement or statement of intent has
been made by any party to this Agreement to any other party to this Agreement
or any director, officer, stockholder, partner, agent, attorney or employee
thereof which is not embodied in this Agreement, and no party or director,
officer, stockholder, partner, agent, attorney or employee shall be bound by
or liable for any alleged representation, promise, inducement or statement of
intention not embodied herein. This Agreement may be executed in several
counterparts each of which shall be deemed an original and all of which shall
constitute one and the same instrument. This Agreement shall be governed in
all respects, including validity, interpretation and effect, by the laws of
the situs of the Property, notwithstanding the application of any principles
of conflicts of laws. Seller and Purchaser shall execute such modifications
or amendments to this agreement as may be necessary or desirable in order to
conform the intentions of the parties as set forth or as reasonably intended
hereunder to the laws of the situs of the Property. This Agreement may not be
amended except by an instrument in writing duly executed and delivered on
behalf of each of the parties hereto. This Agreement shall be binding upon
and inure to the benefit of any
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successor to Seller or Purchaser subject to the restrictions contained herein
with respect to assignment of this Agreement. Wherever provision is made herein
for the execution and delivery of any document or instrument by Seller, such
document or instrument shall be executed and delivered by the duly authorized
officers of Seller.
SECTION 14 NOTICES.
14.1 METHOD OF NOTICE. All notices and other communications
required or permitted to be given hereunder shall be in writing and shall be
delivered personally or shall be mailed by certified or registered mail,
postage prepaid, return receipt requested, or deposited with a
nationally-recognized over-night courier addressed to the parties at the
following addresses, or such other or further addresses as either of the
parties shall request by further written notice given in the manner herein
required:
If to Seller: TELEVIDEO, INC.
2345 Harris Way
San Jose, CA 95131
Attn: K. Philip Hwang or Kathy Cleveland
with a copy to _________________________________________
_________________________________________
_________________________________________
If to Purchaser: 2345 Harris Way Associates, LLC
c/o The Bentley Forbes Group, LLC
1900 Avenue of the Stars, Suite 2840
Los Angeles, California 90067 - 4509
Attn: Brian Morrison, Manager
with a copy to: TVCA, LLC
c/o The Bentley Forbes Group, L.L.C.
1900 Avenue of the Stars, Suite 2840
Los Angeles, California 90067 - 4509
Attn: Sharon Nader Sloan, Esq.
14.2 NOTICES AFFECTING THE PROPERTY. Seller shall promptly
provide Purchaser with an exact copy of any notice, communication or other
instrument or document received or given by Seller in any way to or affecting
the Property.
SECTION 15 ASSIGNMENT BY PURCHASER. Purchaser may assign or transfer this
Agreement to any Person or Persons effectively controlled by Purchaser.
SECTION 16 DEFAULT.
16.1 DEFAULT BY PURCHASER. In the event title shall fail to close
hereunder through no default of Seller and by reason of a default by Purchaser,
the parties agree that it would be impracticable or extremely difficult to fix
Seller's actual damages. Therefore, the
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parties agree that Seller's sole and exclusive remedy against Purchaser, in lieu
of all other rights or remedies otherwise provided at law or in equity against
Purchaser or against any officer, director, official or employee of Purchaser,
shall be to retain the Earnest Money, as liquidated and agreed damages, and not
as a penalty or forfeiture. For purposes of this Agreement, any one of the
following shall be deemed a "default by Purchaser" under this Agreement: (a)
Purchaser's failure to deliver any documents or other items required to be so
delivered under the provisions of this Agreement; (b) the willful refusal of
Purchaser to either consummate the sale of the Property provided for herein or
perform all material obligations required of Purchaser pursuant to the
provisions of this Agreement; or (c) a material breach of this Agreement by
Purchaser.
/s/ BM /s/ KPH
------------------------ ---------------------
Purchaser's Initials Seller's Initials
16.2 DEFAULT BY SELLER. In the event title shall fail to close
hereunder through no default of Purchaser and by reason of a default by
Seller, Purchaser shall retain all rights and remedies provided at law or in
equity against Seller, its successors or assigns including, without
limitation, the specific performance of this Agreement. Purchaser shall have
the right to elect to receive, in lieu of all other rights or remedies
otherwise provided by law or in equity against Seller or against any officer,
director, official or employee of Seller, all verified out-of-pocket expenses
incurred in connection with this transaction, including but not limited to,
(a) Purchaser's internal costs and expenses, (b) the fees of Purchaser's
outside attorneys, (c) the legal fees of Lender's counsel, (d) the
nonrefundable portion of Lender's commitment fee, (e) the cost of Lender's
due diligence and environmental reviews, (f) all of the verified cost of
Lender's rate lock instrument, and (g) the cost of the engineering report,
the environmental report, the appraisal, the Survey, and any fees and charges
associated with the Title Policy and Escrow Agent, in an amount not to exceed
the sum of One Hundred Fifty Thousand Dollars ($150,000.00), as liquidated
and agreed damages. For purposes of this Agreement, any one of the following
shall be deemed a "default by Seller" under this Agreement: (a) Seller's
failure to deliver any reports, surveys, documents or other items required to
be so delivered under the provisions of this Agreement; (b) the willful
refusal of Seller to either consummate the sale of the Property provided for
herein or perform all material obligations required of Seller pursuant to the
provisions of this Agreement; or (c) a material breach of this Agreement by
Seller.
/s/ BM /s/ KPH
------------------------ ---------------------
Purchaser's Initials Seller's Initials
SECTION 17 DISPUTE RESOLUTION.
17.1 MEDIATION. Seller and Purchaser agree that any claim or
dispute arising out of or related to this Agreement, its interpretation or
enforcement, including any Exhibits or Schedules hereto, shall be exclusively
determined under the provisions of this Section 17. In the event of such claim
or dispute, the aggrieved party shall forthwith demand mediation under the
auspices of JAMS/Endispute, San Francisco, CA. If the parties cannot mutually
agree on a mediator within ten (10) days after demand, either party may have one
appointed by application to the Executive Director of JAMS/Endispute.
27
<PAGE>
17.2 ARBITRATION. If and to the extent that the issues are not
settled within the context of mediation, such issues shall be subject to
arbitration under the auspices of JAMS/Endispute, San Francisco. Such unresolved
issues shall be defined by the mediator and referred to the arbitrator, who
shall be a different hearing officer mutually agreeable to the parties, or if
the parties cannot agree, chosen by the Executive Director of JAMS/Endispute at
the request of the mediator. The arbitration shall be conducted under
JAMS/Endispute Rules, and the award of the arbitrator shall be final and
binding. The prevailing party shall be entitled to an award of its reasonable
attorneys fees incurred in the arbitration phase, its JAMS/Endispute filing fees
applicable to both the mediation and arbitration phases, costs of the
arbitrator, expert witness fees, court reporters costs and any other outlay
normally considered costs of suit in a court of law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
SELLER:
TELEVIDEO, INC.,
a Delaware corporation
By: /s/ K. Philip Hwang
-------------------------------
K. Philip Hwang, CEO
PURCHASER:
2345 Harris Way Associates, LLC,
a Delaware limited liability company
By: /s/ Brian Morrison
--------------------------------
Brian Morrison, Manager
28
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF THE LAND
REAL PROPERTY in the City of San Jose, County of Santa Clara, State of
California, described as follows:
Parcel A, as shown on that certain Parcel Map filed for record in the office
of the Recorder of the County of Santa Clara, State of California on March 2,
1981, in Book 480 of Maps page(s) 28.
APN: 237-01-043
APN: 237-01-021
29
<PAGE>
EXHIBIT "B"
LEASE AGREEMENT
30
<PAGE>
EXHIBIT "C"
CERTIFICATION OF WARRANTIES AND REPRESENTATIONS
TELEVIDEO, INC., a Delaware corporation, ("Seller") hereby certifies to
2345 Harris Way Associates, LLC, a Delaware limited liability company
("Purchaser") that all of Seller's warranties and representations set forth in
that certain Real Estate Purchase Agreement ("Purchase Agreement") dated as of
December 21st, 1998, by and between Seller and Purchaser, are true and correct
as of the date of this Certification as if all warranties and representations of
Seller set forth in the Purchase Agreement were made by Seller as of the date of
this Certification.
IN WITNESS WHEREOF, Seller has caused this Certification to be executed by
its duly authorized officer as of the 21st day of December, 1998.
TELEVIDEO, INC.
a Delaware corporation
By: /s/ K. Philip Hwang
--------------------------------
K. Philip Hwang, CEO
31
<PAGE>
EXHIBIT "D"
BILL OF SALE
[Equipment]
KNOW ALL MEN BY THESE PRESENTS THAT, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
TELEVIDEO, INC., a Delaware corporation ("Seller") does hereby grant,
bargain, sell, deliver, carry, transfer, set over and assign (or cause to be
granted, bargained, sold, delivered, carried, transferred, set over and
assigned) unto 2345 Harris Way Associates, LLC, a Delaware limited liability
company ("Purchaser"), its successors and assigns, all of the "Equipment", as
that term is defined in that certain Real Estate Purchase Agreement
("Purchase Agreement") dated as of December 21, 1998 by and between Seller
and Purchaser for the purchase and sale of certain real property and
improvements and related property located in San Jose, CA and as more
particularly described on Exhibit A attached hereto and made a part hereof.
It is the intention of this instrument to convey, transfer and assign to
Purchaser, and Seller represents and warrants to Purchaser that this instrument
does convey, transfer and assign to Purchaser, all right, title and interest in
and to the Equipment. Seller, for itself and its successors and assigns, further
represents and warrants that Seller has good and valid title in and to the
Equipment, that Seller has the right, power and capacity to sell the Equipment,
and that the Equipment is free and clear of covenants, conditions, liens,
charges, security interests, adverse claims, encumbrances, demands or other
title defects or restrictions of any kind, including, without limitation, any
restrictions on the ability of Purchaser to transfer the Equipment.
Seller agrees to execute and deliver, or cause to be executed and
delivered, all such further assignments, endorsements or other documents as
Purchaser may reasonably request for the purpose of effecting transfer of all
right, title and interest in and to the Equipment.
TO HAVE AND TO HOLD the Equipment unto Purchaser, its successors and
assigns, to and for its and their own use forever.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed
by its duly authorized officer as of the 21st day of December, 1998.
TELEVIDEO, INC.
a Delaware corporation
By: /s/ K. Philip Hwang
-----------------------------
K. Philip Hwang, CEO
32
<PAGE>
EXHIBIT "E"
GENERAL ASSIGNMENT, CONVEYANCE AND BILL OF SALE
[Intangible Property]
KNOW ALL MEN BY THESE PRESENTS THAT, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, TELEVIDEO, INC., a
Delaware corporation ("Seller") does hereby grant, bargain, sell, deliver,
carry, transfer, set over and assign (or cause to be granted, bargained, sold,
delivered, carried, transferred, set over and assigned) unto 2345 Harris WAY
ASSOCIATES, LLC, a Delaware limited liability company ("Purchaser"), its
successors and assigns, all of the "Intangible Property," if any, as that term
is defined in that certain Real Estate Purchase Agreement ("Purchase Agreement")
dated as of December 21, 1998 by and between Seller and Purchaser for the
purchase and sale of certain real property and improvements, and related
property, located in San Jose, CA, as more particularly described on EXHIBIT "A"
attached hereto and made a part hereof.
It is the intention of this instrument to convey, transfer and assign to
Purchaser, and Seller represents and warrants to Purchaser that this instrument
does convey, transfer and assign to Purchaser, all right, title and interest in
and to the Intangible Property. Seller, for itself and its successors and
assigns, further represents and warrants that Seller has good and valid title in
and to the Intangible Property, that Seller has the right, power and capacity to
sell the Intangible Property, and that the Intangible Property is free and clear
of covenants, conditions, liens, charges, security interests, adverse claims,
encumbrances, demands or other title defects or restrictions of any kind,
including, without limitation, any restrictions on the ability of Purchaser to
transfer the Intangible Property.
Seller agrees to execute and deliver, or cause to be executed and
delivered, all such further assignments, endorsements or other documents as
Purchaser may reasonably request for the purpose of effecting transfer of all
right, title and interest in and to the Intangible Property.
TO HAVE AND TO HOLD the Intangible Property unto Purchaser, its successors
and assigns, to and for its and their own use forever.
IN WITNESS WHEREOF, Seller has caused this General Assignment, Conveyance
and Bill of Sale to be executed by its duly authorized officer as of the 21st
day of December, 1998.
TELEVIDEO, INC.,
a Delaware corporation
BY: /s/ K. Philip Hwang
-------------------------------
K. Philip Hwang, CEO
33
<PAGE>
EXHIBIT "F"
PROMISSORY NOTE
$2,750,000.00 December __, 1998
1. For value received, the undersigned, TVCA HOLDING LLC, a Delaware limited
liability company ("Maker"), promises to pay to the order of TELEVIDEO,
INC., a Delaware corporation ("Payee"), or order, at 2345 Harris Way, San
Jose, CA 95131, or other address directed by Payee, the principal sum of Two
Million Seven Hundred Fifty Thousand Dollars ($2,750,000) with interest at
the rate of seven and one-quarter percent (7.25%) per annum from the date
hereof with monthly payments based on an amortization period of twenty (20)
years. If not earlier paid in full, any unpaid principal and all accrued
interest shall be due and payable on December 1, 2013.
2. Principal and accrued interest shall be payable in equal monthly
installments of Twenty One Thousand Seven Hundred Thirty Five and 34/100
Dollars ($21,735.34) each on the first day of each month commencing on
January 1, 1999. On December 1, 2013, the outstanding principal balance and
any and all accrued interest then due and payable shall be paid in full to
Payee by Maker.
(3. Notwithstanding the provisions of paragraph 2 of this Promissory Note
("Note"), in the event that Finova Realty Capital, Inc., a Delaware
corporation ("Lender") fails to release funds to Subsidiary pursuant to
the terms of the Lock Box Agreement (hereinafter, a "Cash Sweep") in
connection with that certain loan of even date herewith ("Loan") by
Lender to Subsidiary, solely as a result of Payee's failure to comply
with the provisions attached and incorporated hereto as Exhibit "A," then
all monthly payments of principal and interest due under this Note shall
be suspended during the time the Cash Sweep is in effect. No additional
interest will accrue on the principal outstanding balance of the Note
during the time Note payments are suspended, however, if Lender pays
Subsidiary interest on the cash swept. Maker shall pay to Payee an amount
equal to the interest allocable to Note payments otherwise due hereunder.
Upon Payee's compliance with the provisions of Exhibit "A" and Lender's
resumption of disbursement of funds, Maker shall resume monthly Note
payments as set forth in paragraph 2 of this Note. Upon attainment of the
total Tenant Improvement and Leasing Commissions Reserve required by
Lender under the provisions of the Lock Box Agreement set forth in
Exhibit "A", Maker shall commence making additional monthly payments to
Payee of Four Thousand Six Hundred Forty Two and no/100 Dollars ($4,642)
until such time as the amount of suspended Note payments have been paid
in full. The provisions of this paragraph 3 shall not apply, and Note
payments shall not be suspended, in the event of a Cash Sweep resulting
from subsidiary's failure to comply with any of the provisions of Exhibit
"A".)*
4. Both principal and interest shall be payable to Payee, or at any other place
hereafter designated in writing by the holder(s) and delivered to Maker. All
sums shall be deemed paid upon receipt of same by the holder(s) hereof.
* This text was deleted by P.H. in revisions to this document.
34
<PAGE>
5. This Promissory Note is secured by that certain Pledge and Security
Agreement ("Pledge Agreement") of even date herewith executed by all of the
members of Maker and that certain Escrow Agreement ("Escrow Agreement") of
even date herewith executed by Maker, Payee, and Wilmington Trust Company, a
Delaware banking corporation.
6. Payments on this Promissory Note shall be applied first to payment of any
late charges, second to payment of accrued interest and third to the
outstanding principal.
7. Maker shall have the right to prepay all or any portion of the indebtedness
evidenced by this Promissory Note at any time without premium or penalty.
8. Subject in all events to the provisions of Section 8 hereof, (i) if
Maker fails to pay in full any monthly installment of principal and interest
or any other sums required to be paid pursuant to this Promissory Note in
the manner set forth in the Escrow Agreement, within ten (10) days after the
due date, or (ii) if Maker defaults in the performance or observance of any
covenant or condition contained in the Pledge Agreement and the Escrow
Agreement and such default is not cured within thirty (30) days after
receipt of written notice of such default, or (iii) if, pursuant to that
certain lease ("Lease") dated as of December __, 1998 between TVCA, LLC, a
Delaware limited liability company, as landlord, and Payee, as tenant, with
respect to certain real property and improvements located in San Jose, CA,
particularly described in the Lease ("Premises"), Payee is required to
purchase the Premises from TVCA, LLC in accordance with the terms of the
Lease, then and in any of such events, the holder of this Promissory Note
may, without further notice, immediately declare to be due and payable the
entire outstanding, indebtedness evidenced by this Promissory Note.
9. Notwithstanding any provisions of this Promissory Note to the contrary,
the performance of Maker's obligations pursuant to this Promissory Note are
conditioned upon Payee, as tenant under the Lease, timely tendering to
TVCA, LLC all rent, charges and monetary obligations under the Lease
("Lease Payments") as and when the same become due and payable in accordance
with the terms of the Lease. In the event that Payee is late in tendering
any Lease Payment to TVCA, LLC, then the applicable due date for Maker's
performance of any of Maker's obligations under this Promissory Note shall
automatically be extended for the same period of time that Payee was
delinquent in the payment of such Lease Payment. Further, in the event that
the Lease is terminated pursuant to Section 10 of the Lease due to a
default on the part of Payee as tenant thereunder, then, in such event,
this Promissory Note shall be deemed to be immediately satisfied in full
and Maker shall have no further obligation to Payee hereunder.
10. This Promissory Note shall be binding Maker and its successors and assigns.
TVCA HOLDING LLC,
a Delaware limited liability company
By:
----------------------------------
C. Frederick Wehba II, Manager
35
<PAGE>
SCHEDULE "I"
SELLER'S RETAINED PROPERTY
1. Telephone System (PBX and Paging Equipment including phone sets): 2nd floor
2. Cubicles and Partitions: 2nd floor
3. Whiteboards in conference room: 2nd floor-Sales/Marketing conference room
walls.
4. Movie projector screens: 2nd floor - Sales/Marketing conference room walls.
5. Octel System: 2nd floor - PBX room (telephone voice mailbox system)
6. Air compressor, ground floor: 1st floor- Electrical room
7. Chargers for forklifts: 1st floor - Shipping area
8. Racks in closets downstairs: 1st floor - Manufacturing area/Stockroom area
9. Shrink wrap machines downstairs: 1st floor - Manufacturing area
10. Lobby counter: 1st floor
11. Safes downstairs: 1st floor- Stock room
12. Any manufacturing equipment: 1st floor - Manufacturing area
STAYS WITH THE BUILDING
1. Window blinds: 1st and 2nd floors
2. Fire extinguisher - 55 each: 1st and 2nd floors
3. First aid kit - 3 each
4. Aquarium in executive office
5. Security camera system: 1st and 2nd floors
36
<PAGE>
SCHEDULE "5.2"
SPACE LEASES
<TABLE>
<CAPTION>
TENANT TERM MONTHLY RENT
<S> <C> <C>
Sprint Spectrum 2002 plus permitted exceptions $1,000/mo.
</TABLE>
37
<PAGE>
SCHEDULE "5.5.1"
LITIGATION
NONE
38
<PAGE>
SCHEDULE "5.6.2"
ENVIRONMENTAL MATTERS
NONE
39
<PAGE>
SCHEDULE "5.6.3"
ENVIRONMENTAL MATTERS
NONE
40
<PAGE>
SCHEDULE "5.6.4"
ENVIRONMENTAL MATTERS
NONE
41
<PAGE>
SCHEDULE "5.7"
CONDITION OF PROPERTY
Seller hereby discloses the fact that there have been minor roof leaks in the
flat portion of the roof, particularly during last year's "El Nino" rains,
and advises Purchaser that all such leaks were properly and professionally
repaired.
42
<PAGE>
Exhibit 2.2
LEASE AND AGREEMENT OF LEASE
Between
TVCA, LLC
a Delaware limited liability company
as Landlord
and
TELEVIDEO, INC.,
a Delaware corporation
as Tenant
Dated: As of December __, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
I. LEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1. Demise of Premises . . . . . . . . . . . . . . . . . . . . . . . 3
1.2. Title and Condition . . . . . . . . . . . . . . . . . . . . . . . 3
1.3. Use of Leased Premises . . . . . . . . . . . . . . . . . . . . . 3
1.4. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . 4
II. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.1. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
III. BASIC RENT; ADDITIONAL RENT; SECURITY DEPOSIT . . . . . . . . . . . . . 4
3.1. Basic Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.2. Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3. Late Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5. True Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6. Net Lease; Non-Terminability . . . . . . . . . . . . . . . . . . 7
IV. PAYMENT OF IMPOSITIONS, TAXES AND ASSESSMENTS; COMPLIANCE
WITH LAW; ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . 8
4.1. Payment of Impositions . . . . . . . . . . . . . . . . . . . . . 8
4.2. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 8
4.3. Permitted Contests . . . . . . . . . . . . . . . . . . . . . . . 8
4.4. Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . 9
V. MAINTENANCE AND REPAIR; ALTERATIONS . . . . . . . . . . . . . . . . . .11
5.1. Maintenance and Repair . . . . . . . . . . . . . . . . . . . . .11
5.2. Encroachments . . . . . . . . . . . . . . . . . . . . . . . . . .12
5.3. Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.4. No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
VI. INSURANCE; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . .13
6.1. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
6.2. Permitted Insurers . . . . . . . . . . . . . . . . . . . . . . .15
6.3. Insurance Claims . . . . . . . . . . . . . . . . . . . . . . . .16
6.4. Insured Parties . . . . . . . . . . . . . . . . . . . . . . . . .16
6.5. Delivery of Policies . . . . . . . . . . . . . . . . . . . . . .16
6.6. No Double Coverage . . . . . . . . . . . . . . . . . . . . . . .16
6.7. Blanket Insurance . . . . . . . . . . . . . . . . . . . . . . . .16
6.8. Damages for Tenant's Failure to Properly Insure . . . . . . . . .16
6.9. Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
6.10. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . .17
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C> <C>
VII. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
7.1. Assignment of Award . . . . . . . . . . . . . . . . . . . . . . .18
7.2. Definitions for Article VII . . . . . . . . . . . . . . . . . . .18
7.3. Complete Taking . . . . . . . . . . . . . . . . . . . . . . . . .19
7.4. Partial Taking. . . . . . . . . . . . . . . . . . . . . . . . . .19
7.5. Temporary Taking. . . . . . . . . . . . . . . . . . . . . . . . .20
7.6. Procedure After Purchase Offer; Procedure on
Event of Purchase . . . . . . . . . . . . . . . . . . . . . . . .20
7.7. Compensation for Personal Property and Relocation Expenses . . .21
VIII. ASSIGNMENT AND SUBLETTING . . . . . . . . . . . . . . . . . . . . . . .21
8.1. Power to Assign and Sublet . . . . . . . . . . . . . . . . . . .21
8.2. Assumption by Assignee or Transferee; Tenant Remains Liable . . .22
8.3. Other Transfers Void . . . . . . . . . . . . . . . . . . . . . .22
IX. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . .23
9.1. Financial Statements . . . . . . . . . . . . . . . . . . . . . .23
X. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
10.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . .23
10.2. Landlord's Remedies . . . . . . . . . . . . . . . . . . . . . . .24
10.3. Additional Rights of Landlord . . . . . . . . . . . . . . . . . .26
10.4. Waivers by Tenant . . . . . . . . . . . . . . . . . . . . . . . .26
10.5. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . .26
XI. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
11.1. Notices, Demands and Other Instruments . . . . . . . . . . . . .26
11.2. Estoppel Certificates and Consents . . . . . . . . . . . . . . .27
11.3. Determination of Fair Rental Value . . . . . . . . . . . . . . .27
11.4. No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.5. Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.6. Separability . . . . . . . . . . . . . . . . . . . . . . . . . .28
11.7. Merger, Consolidation or Sale of Assets . . . . . . . . . . . . .29
11.8. Savings Clause. . . . . . . . . . . . . . . . . . . . . . . . . .29
11.9. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . .29
11.10. Table of Contents and Headings. . . . . . . . . . . . . . . . . .29
11.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .29
11.12. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . .30
11.13. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
11.14. Integration . . . . . . . . . . . . . . . . . . . . . . . . . . .32
11.15. Lease Memorandum. . . . . . . . . . . . . . . . . . . . . . . . .32
11.16. Subordination to Financing. . . . . . . . . . . . . . . . . . . .32
Exhibit A Legal Description
Exhibit B Permitted Encumbrances
Exhibit C Tenant Estoppel Certificate
Exhibit D Subordination, Non-Disturbance, and Attornment Agreement
</TABLE>
(ii)
<PAGE>
LEASE
AND
AGREEMENT OF LEASE
THIS LEASE AND AGREEMENT OF LEASE (the "Lease") is made, entered into
and effective this ______ day of December, 1998 (the "Commencement Date"), by
and between TVCA, LLC, a Delaware limited liability company, and its
successors or assigns (the "Landlord"), whose address for purposes of notice
hereunder is 1900 Avenue of the Stars, Suite 2840, Los Angeles, CA 90067,
Fax: (310) 282-8585 and Televideo, Inc., a Delaware corporation (the
"Tenant"), whose address for purposes of notice hereunder is 2345 Harris Way,
San Jose, CA 95131 Fax: (408) 954-0622.
R E C I T A L S
This Lease is made with reference to the following facts and objectives,
and may be entered as admissions against either party by the other in any action
arising from or related to this Lease.
Landlord is the owner of the following: (i) certain tract(s) or
parcel(s) of land located in San Jose, California, and more particularly
described on the attached and incorporated Exhibit "A" (the land described
above, together with all rights, interests, easements, rights of way and
appurtenances related thereto, shall hereinafter be referred to as the
"Land"); and (ii) a building or buildings located or to be located on the
Land at 2345 Harris Way, San Jose, CA, and all other structures and
improvements existing or to be constructed on the Land, together with all
fixtures and equipment therein owned by Landlord and used in the operation of
the same (collectively, the "Improvements"). The Land and Improvements are
hereinafter collectively referred to as the "Premises." No easement for
light, air or view is included with or appurtenant to the Premises.
In connection with the financing of the Premises, Landlord has executed
and delivered a promissory note (the "Note") to Finova Realty Capital Inc., a
Delaware corporation (together with its successors and assigns, the "Lender").
To secure the payment of such Note, the Landlord has granted a mortgage lien on
the Premises pursuant to a Deed of Trust and Security Agreement of even date
herewith (the "Mortgage") and an Assignment of Rents and Leases of even date
herewith (the "Assignment") on the Premises to the Lender, and entered into that
certain loan commitment with Lender dated November 17, 1998, 1998 (the "Loan
Commitment"). The aforesaid Note, Loan Commitment, Mortgage and Assignment and
all related instruments and documents are hereinafter referred to as the "Loan
Documents" and the transaction to which the these instruments and documents
relate is hereinafter referred to as the "Loan." Reference herein to "Default
Rate" and "Default Rate Interest" shall have the meaning set forth in Article 5
the Note.
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Pursuant to all of the terms, conditions, covenants and provisions of
this Lease, Tenant desires to lease the Premises from Landlord, and Landlord
desires to lease the Premises to Tenant, for the rents and during the terms
hereinafter set forth.
Landlord acquired the Premises on the date that the initial term of this
Lease commenced and for the period of four (4) years prior to said commencement
date, Tenant owned, occupied and operated the Premises.
Tenant is currently operating its executive offices and a
warehouse/distribution facility in the Premises and intends to continue to do so
during the term of this Lease. Tenant has examined the title of the Premises,
the physical condition of the premises, environmental studies and reports of the
Premises, and the economic feasibility of conducting Tenant's manufacturing
operation in and from the Premises. Tenant has determined that the same are
satisfactory to Tenant, and Tenant accepts the Premises on an "AS IS - WHERE IS"
basis. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER
OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE
DEEMED TO HAVE MADE, ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY OF THE PREMISES, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OR
REPRESENTATION AS TO ITS FITNESS FOR USE OR PURPOSE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP
THEREIN, LATENT OR PATENT, AS TO LANDLORD'S TITLE THERETO, OR AS TO VALUE,
COMPLIANCE WITH APPLICABLE LAWS, SPECIFICATIONS, LOCATION, USE, CONDITION,
MERCHANTABILITY, QUALITY, DESCRIPTION, DURABILITY OR OPERATION, IT BEING AGREED
THAT ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT. Tenant acknowledges
that the Premises are of its selection and to its specifications, and that the
Premises have been inspected by Tenant and are satisfactory to it. In the event
of any defect or deficiency in any of the Premises of any nature, whether patent
or latent, Landlord shall not have any responsibility or liability with respect
thereto or for any incidental or consequential damages (including strict
liability in tort).
The Premises are Landlord's sole asset. The rents to be paid by Tenant
to Landlord hereunder will be used by Landlord to, among other things,
satisfy Landlord's obligations under the Loan Documents. It is, therefore,
the parties' objective to provide for an absolute "Bond Type" net net net
lease to Landlord; the Basic Rent (as hereinafter defined) payable by Tenant
hereunder shall be an absolute "Bond Type" net net net return to Landlord and
Tenant shall pay all costs and expenses relating to the Premises and Tenant's
manufacturing operation carried on therein.
NOW, THEREFORE, IN CONSIDERATION of the aforesaid Recitals, and in
consideration of the Premises leased by Landlord to Tenant hereby, and in
consideration of the rents and covenants to be paid and performed by Tenant
hereunder, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties covenant and agree as
follows:
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I. LEASE.
1.1. DEMISE OF PREMISES. In consideration of the rents and covenants
herein stipulated to be paid and performed, Landlord hereby demises the Premises
to Tenant, and Tenant hereby lets and accepts the Premises from Landlord, for
the term herein described.
1.2. TITLE AND CONDITION. The Premises are demised and let "as is"
subject to (a) the rights of any parties in possession and the existing state of
the title as of the commencement of the term of this Lease, (b) any state of
facts which an accurate survey or physical inspection thereof might show, (c)
all zoning regulations, restrictions, rules and ordinances, building
restrictions and other laws and regulations now in effect or hereafter adopted
by any governmental authority having jurisdiction over the condition of any
buildings, structures and other improvements located thereon, as of the
commencement of the term of this Lease, without representation or warranty by
Landlord. Tenant represents that it has examined the title to and the condition
of the Premises and has found the same to be satisfactory to it.
1.3. USE OF LEASED PREMISES.
(a) Tenant may occupy and use the Premises for a
office/warehouse/distribution facility and related uses, or for any other lawful
purpose, (except that the Premises may not be used for or associated with a
pornographic shop, adult book store, or massage parlor) so long as such other
lawful purpose would not (i) have an adverse effect on the value of the
Premises, (ii) increase (when compared to use as a manufacturing facility) the
likelihood that Tenant, Landlord or Lender would incur liability under any
provisions of any Environmental Laws, or (iii) result in or give rise to any
material environmental deterioration or degradation of the Premises, including
without limitation, mining or the removal of oil, gas or minerals, or (iv)
violate any covenants, easement agreements, deed restrictions, agreements of
record affecting the Premises or Applicable Laws. Tenant shall not create or
suffer to exist any public or private nuisance, hazardous or illegal condition
or waste on or with respect to the Premises. Tenant shall not use, occupy or
permit any of the Premises to be used or occupied, nor do or permit anything to
be done in or on any of the Premises, in a manner which would (A) make void or
voidable any insurance which Tenant is required hereunder to maintain then in
force with respect to any of the Premises, or (B) affect the ability of Tenant
to obtain any insurance which Tenant is required to furnish hereunder, or (C)
impair Landlord's title to the Premises, or in such manner as might reasonably
make possible a claim or claims of adverse usage or adverse possession by the
public, as such, or third Persons, or of implied dedication of the Premises or
any portion thereof. Nothing contained in this Lease and no action by Landlord
shall be construed to mean that Landlord has granted to Tenant any authority to
do any act or make any agreement that may create any such third party or public
right, title, interest, lien, charge or other encumbrance upon the estate of the
Landlord in the Premises. The preceding sentence does not limit Tenant's right
to assign or sublet its interest hereunder, as provided in Section 8.
(b) Tenant shall not conduct its business operation in the
Premises unless and until (and only during such time as) all necessary
certificates of occupancy, permits, licenses and consents from any and all
appropriate governmental authorities have been obtained by Tenant and are in
full force and effect.
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1.4. QUIET ENJOYMENT. For so long as no Event of Default (as
hereinafter defined) has occurred and is continuing hereunder, Landlord warrants
peaceful and quiet enjoyment of the Premises by Tenant against acts of Landlord
or anyone claiming through Landlord, provided that Landlord and its agents may
enter upon and examine the Premises at reasonable times. Exercise by Landlord of
its rights to come upon the Premises as set forth in this Lease shall not
constitute a violation of this Section 1.4.
II. TERM.
2.1. TERM. Subject to the terms and conditions hereof, Tenant shall
have and hold the Premises for a primary term (herein called the "Primary Term")
commencing on the date hereof, and ending at midnight on December 31, 2013.
Thereafter, Tenant shall have the rights and options to extend this Lease for
two (2) consecutive extended terms of five (5) years each (herein called the
"Extended Terms" and individually, an "Extended Term," and together with the
Primary Term, called the "Terms") upon the expiration of the Primary Term or the
preceding Extended Term unless this Lease shall be sooner terminated pursuant to
Article VII of this Lease. If no default or Event of Default shall exist and be
continuing hereunder beyond any applicable cure period, each Extended Term shall
commence on the day immediately succeeding the expiration date of the Primary
Term or the preceding Extended Term and shall end at midnight on the day
immediately preceding the fifth anniversary of the first day of such Term.
Provided no Event of Default shall exist and be continuing at the time of
exercise of such option, Tenant may exercise each said option to extend this
Lease for an Extended Term by giving written notice to that effect at least
eighteen (18) months prior to the expiration of the then existing term.
Notwithstanding the foregoing, if Tenant fails to give notice to Landlord to
extend the Term of the Lease within said eighteen (18) month period, Landlord
shall give written notice to Tenant of said failure to give notice and Tenant
shall have an additional thirty (30) days after said notice is given to exercise
said Extended Term. If Tenant does not exercise any such option in a timely
manner after such notice, then Landlord shall have the right during the
remainder of the Term of this Lease to advertise the availability of the
Premises for sale or reletting and to erect upon the Premises signs appropriate
for the purpose of indicating such availability. The phrase "term of this Lease"
or "term hereof" means the Primary Term, plus any Extended Terms with respect to
which the right has been exercised. The term "Lease Year" shall mean such
successive period of twelve (12) consecutive calendar months commencing on the
"Commencement Date" (hereinafter defined). Except as otherwise expressly
provided herein, all of the provisions of this Lease shall be applicable during
each Extended Term.
III. BASIC RENT; ADDITIONAL RENT; SECURITY DEPOSIT.
3.1. BASIC RENT. Tenant covenants to pay to Landlord as and for
the rental of the Premises the amounts set forth below (the "Basic Rent"):
(a) For and with respect to the first twelve (12) calendar
months of the Primary Term, including the partial month, if any, immediately
following the Commencement Date (hereinafter defined), at the rate of One
Million One Hundred Eighty Two Thousand Five Hundred Dollars ($1,182,500.00) per
annum, payable in equal monthly installments of Ninety Eight Thousand Five
Hundred Forty One and 67/100 Dollars ($98,541.67);
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(b) For and with respect to the next thirty six (36) calendar
months of the Primary Term, at the rate of One Million Two Hundred Forty One
Thousand Six Hundred Twenty Five Dollars ($1,241,625.00) per annum, payable in
equal monthly installments of One Hundred Three Thousand Four Hundred Sixty
Eight and 75/100 Dollars ($103,468.75);
(c) For and with respect to the next thirty six (36) calendar
months of the Primary Term, at the rate of One Million Three Hundred Three
Thousand Seven Hundred Six and 25/100 Dollars ($1,303,706.25) per annum, payable
in equal monthly installments of One Hundred Eight Thousand Six Hundred Forty
Two and 18/100 Dollars ($108,642.18);
(d) For and with respect to the next thirty six (36) calendar
months of the Primary Term, at the rate of One Million Three Hundred Sixty Eight
Thousand Eight Hundred Ninety One and 56/100 Dollars ($1,368,891.56) per annum,
payable in equal monthly installments of One Hundred Fourteen Thousand Seventy
Four and 29/100 Dollars ($114,074.29);
(e) For and with respect to the next thirty six (36) calendar
months of the Primary Term, at the rate of One Million Four Hundred Thirty Seven
Thousand Three Hundred Thirty Six and 14/100 Dollars ($1,437,336.14) per annum,
payable in equal monthly installments of One Hundred Nineteen Thousand Seven
Hundred Seventy Eight Dollars ($119,778.00);
(f) For and with respect to the last twenty four (24)
calendar months of the Primary Term, at the rate of One Million Five Hundred
Nine Thousand Two Hundred Two and 95/100 Dollars ($1,509,202.95) per annum,
payable in equal monthly installments of One Hundred Twenty Five Thousand Seven
Hundred Sixty Six and 90/100 Dollars ($125,766.90);
(g) If Tenant's first or second option to extend the Term
of this Lease is exercised, for and with respect to such Extended Term, at a
rate equal to one hundred percent (100%) of fair market value determined as
of September 1 of the year immediately preceding the year in which such
extended term is to commence on the basis set forth in Section 11.3. Basic
Rent payments are due on the first of each calendar month ("Basic Rent
Payment Date") and are payable monthly in advance. Tenant unconditionally and
irrevocably agrees to make the Basic Rent payments directly to Lender for so
long as the Note is outstanding. Thereafter, Tenant shall make Basic Rent
payments to Landlord or Landlord's designee. Tenant shall pay the same by
immediately available funds on the Basic Rent Payment Date; provided,
however, that on the Commencement Date Tenant shall pay to Landlord the first
installment of Basic Rent in an amount equal to the aggregate per diem Basic
Rent for each day between the Commencement Date and the first day of the
second full calendar month after the month on which the Commencement Date
falls. All payments of Basic Rent shall be accompanied by the following
advice:
____________________ Bond Lease
Rent for (month/year)
to:
______________________________
ABA No. ______________________
Account No. __________________
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3.2. ADDITIONAL RENT.
3.2.1 Tenant shall pay and discharge before the imposition of
any fine, lien, interest or penalty may be added thereto for late payment
thereof, as Additional Rent, all other amounts and obligations which Tenant
assumes or agrees to pay or discharge pursuant to this Lease, together with
every fine, penalty, interest and cost which may be added by the party to whom
such payment is due for nonpayment or late payment thereof. In the event of any
failure by Tenant to pay or discharge any of the foregoing, Landlord shall have
all rights, powers and remedies provided herein, by law or otherwise, in the
event of nonpayment of Basic Rent.
3.2.2 Notwithstanding the provisions of Section 3.2.1 and 4.1
herein, in respect of the payment of real estate taxes as Additional Rent,
Tenant shall pay to Landlord on the first day of each calendar month (i)
one-twelfth of the amount which would sufficient to pay real estate taxes
payable or estimated by Landlord to be payable, during the next ensuing twelve
(12) months.
3.3. LATE CHARGE. If any installment of Basic Rent is not paid when
the same is due, Tenant shall pay to Landlord or Lender, as the case may be, on
demand, as Additional Rent, an amount equal to five percent (5%) of such overdue
installment of Basic Rent plus interest at the Default Rate (which amounts are
together called the "Late Charge").
3.4. SECURITY DEPOSIT. To secure the faithful performance by Tenant
of the covenants, conditions and agreements set forth in this Lease to be
performed by it, Tenant shall deposit with Landlord, within ten (10) days
following Tenant's execution of this Lease, and thereafter at all times during
the continuance of this Lease shall maintain on deposit with Landlord, a
security deposit in an amount equal to two (2) months Basic Rent under the
Primary Term ("Security Deposit"). Tenant shall pay the Security Deposit on the
understanding (a) that the Security Deposit or any portion thereof may be
applied to the curing of any default that may exist, without prejudice to any
other remedy or remedies that Landlord may have on account thereof, and upon
such application Tenant shall pay Landlord on demand the amount so applied which
shall be added to the Security Deposit so that the same will be restored to the
required amount; (b) that should the Premises be transferred by Landlord, the
Security Deposit or any balance thereof may be turned over to Landlord's
successor or transferee, and Tenant agrees to look solely to such successor or
transferee for such application or return; (c) that Landlord or its successors
shall hold the Security Deposit as a separate fund and shall not commingle it
with other funds; (d) that the Security Deposit shall not be deemed prepaid
rent; and (e) that if Tenant shall faithfully perform all of the covenants and
agreements in this Lease contained on the part of Tenant to be performed, the
Security Deposit, or any then remaining balance thereof, shall be returned to
Tenant, without interest, within thirty (30) days after the expiration of the
Terms.
3.5. TRUE LEASE. Landlord and Tenant agree that this Lease is a true
lease and does not represent a financing arrangement. Each party shall reflect
the transactions represented by this Lease in all applicable books, records and
reports (including, without limitation, income tax filings) in a manner
consistent with "true lease" treatment rather than "financing" treatment.
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3.6. NET LEASE, NON-TERMINABILITY.
(a) This is an absolutely net lease to Landlord. It is the
intent of the parties hereto that the Basic Rent payable under this Lease
shall be an absolutely net return to Landlord and that Tenant shall pay all
costs and expenses relating to the Premises and all operations carried on
therein, unless otherwise expressly provided in this Lease. Any amount or
obligation herein relating to the Premises which is not expressly declared to
be that of Landlord shall be deemed to be an obligation of Tenant to be
timely performed by Tenant at Tenant's expense. Basic Rent, Additional Rent
and all other sums payable hereunder by Tenant, shall be paid without notice
(except as expressly provided as described in Article VII of this Lease),
demand, set-off, counterclaim, abatement, suspension, deduction or defense.
(b) This Lease shall not terminate nor shall Tenant have any
right to terminate this Lease (except as otherwise expressly provided in Article
VII), nor shall Tenant be entitled to any abatement or reduction of rent
hereunder (except as expressly provided in Article VII of this Lease), nor shall
the obligations of Tenant under this Lease be affected by reason of: (i) any
damage to or destruction of all or any part of the Premises from whatever cause;
(ii) the taking in whole or in part of the Premises or any portion thereof by
condemnation, requisition or otherwise except as provided in Article VII; (iii)
the prohibition, limitation or restriction of Tenant's use of all or any part of
the Premises, or any interference with such use; (iv) any eviction by paramount
title or otherwise or any other defect in title or breach of the right of Tenant
to quiet enjoyment of the Premises; (v) Tenant's acquisition or ownership of all
or any of the Premises otherwise than as expressly provided herein; (vi) any
default on the part of Landlord under this Lease, or under any other agreement
to which Landlord and Tenant may be parties; (vii) any abandonment of the
Premises by Tenant or (viii) an invalidity, unenforceability, rejection or
disaffirmance of the Lease by operation of law or otherwise; or (ix) any other
cause whether similar or dissimilar to the foregoing, any present or future law
to the contrary notwithstanding. It is the intention of the parties hereto that
the obligations of Tenant hereunder shall be separate and independent covenants
and agreements, that the Basic Rent, the Additional Rent and all other sums
payable by Tenant hereunder shall continue to be payable in all events and that
the obligations of Tenant hereunder shall continue unaffected, unless the
requirement to pay or perform the same shall have been terminated pursuant to
Article VII of this Lease.
(c) Tenant agrees that it will remain obligated under this
Lease in accordance with its terms, and it will not take any action to
terminate, rescind or avoid this Lease because of: (i) any readjustment,
liquidation, dissolution, or winding-up or other proceeding affecting Landlord
or its successors-in-interest or (ii) any action with respect to this Lease
which may be taken by any trustee or receiver of Landlord or its
successors-in-interest or by any court in any such proceeding; provided,
however, that nothing in this Section 3.6 shall diminish the legal or equitable
rights of Tenant in the event that Tenant is not in default under this Lease.
(d) Tenant waives all rights which may now or hereafter be
conferred by law or otherwise (i) to quit, terminate or surrender this Lease or
the Premises or any part thereof, or (ii) to any abatement, suspension,
deferment or reduction of the Basic Rent, Additional Rent or any other sums
payable under this Lease, except as otherwise provided in Article VII of this
Lease.
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(e) Under no circumstances shall Landlord be required to make
any payment of any kind hereunder or to have any obligation with respect to the
use, possession, control, maintenance, alteration, rebuilding, replacing,
repairing, restoration or operation of all or any part of the Premises.
IV. PAYMENT OF IMPOSITIONS, TAXES AND ASSESSMENTS; COMPLIANCE WITH LAW;
ENVIRONMENTAL MATTERS.
4.1. PAYMENT OF IMPOSITIONS. Tenant shall pay or discharge all
Impositions (as hereinafter defined) when due. Notwithstanding the foregoing
provision of this Section 4.1, Tenant shall not be required to pay any
franchise, corporate, estate, inheritance, succession, transfer (other than
transfer taxes, recording fees, or similar charges payable in connection with a
conveyance hereunder to Tenant), income, excess profits or revenue taxes of
Landlord hereunder. Tenant agrees to furnish to Landlord and Lender, evidence of
the payment of the taxes and other Impositions described in Section 11.12(a)
within fifteen (15) days after payment thereof. In the event that any Imposition
levied or assessed against the Premises becomes due and payable during the term
hereof and may be legally paid in installments, Tenant shall have the option to
pay such Imposition in installments. In such event, Tenant shall be liable only
for those installments which become due and payable during the term hereof.
4.2. COMPLIANCE WITH LAWS. Tenant shall, at its expense, comply with
and shall cause the Premises to comply with all governmental statutes, laws,
rules, orders, regulations and ordinances, including without limitation, the
Americans with Disabilities Act of 1990, as the same may be amended from time to
time, all fire regulations, occupational health and safety laws, applicable
point of sale laws, building codes, Environmental Laws (hereafter defined),
zoning and land use laws and regulations ("Applicable Laws"), and any other law
the failure to comply with which at any time would materially or adversely
affect the income producing capacity of the Premises or any part thereof, or the
appraised value of the Premises or any part thereof, including those which
require the making of any structural, unforeseen or extraordinary changes,
whether or not any of the same involve a change of policy on the part of the
body enacting the same. Tenant shall, at its expense, comply with all changes
required in order to obtain the Required Insurance (as hereinafter defined), and
with the provisions of all contracts, agreements, instruments, easements,
restrictions, reservations or covenants existing at the commencement of this
Lease or thereafter suffered or permitted by Tenant affecting the Premises or
any part thereof or the ownership, occupancy or use thereof.
4.3. PERMITTED CONTESTS. Tenant shall not be required to: (i) pay
any Imposition; (ii) comply with any statute, law, rule, order, regulation or
ordinance; (iii) discharge or remove any lien, encumbrance or charge; or (iv)
obtain any waivers or settlements or make any changes or take any action with
respect to any encroachment, hindrance, obstruction, violation or impairment
referred to in Section 5.2, so long as Tenant shall contest, in good faith
and at its expense, the existence, the amount or the validity thereof, the
amount of the damages caused thereby, or the extent of its liability
therefor, by appropriate proceedings. While any such proceedings are pending,
Landlord shall not have the right to pay, remove or cause to be discharged
the tax, assessment, levy, fee, rent or charge or lien, encumbrance or charge
thereby being contested. Tenant shall deposit in escrow a sum no less than
125% of the amount being contested as security for the payment of Impositions
which Tenant may ultimately be held
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responsible for. For so long as the Note is outstanding, the escrow account for
permitted contests shall be established with any licensed escrow holder or law
firm reasonably approved by Landlord, Tenant and Lender, and the cost of such
escrow shall be borne by Tenant. No such contest or proceedings shall in any way
eliminate or otherwise interfere with Tenant's obligation to make timely
payments of Basic Rent and additional rent under this Lease. Tenant further
agrees that each such contest shall be promptly prosecuted to a final
conclusion. Tenant shall pay, indemnify and save Landlord and Lender harmless
against, any and all losses, judgments, decrees and costs (including all
attorneys' fees, appearance costs and expenses) in connection with any such
contest and shall, promptly after the final settlement, compromise or
determination of such contest, fully pay and discharge the amounts which shall
be levied, assessed, charged or imposed or be determined to be payable therein
or in connection therewith, together with all penalties, fines, interests, costs
and expenses thereof or in connection therewith, and perform all acts, the
performance of which shall be ordered or decreed as a result thereof; provided,
however, that nothing herein contained shall be construed to require Tenant to
pay or discharge any lien, encumbrance or other charge created by any act or
failure to act of Landlord or the payment of which Tenant is not otherwise
required to perform hereunder. No such contest shall subject Landlord or Lender
to the risk of any criminal or punitive civil liability.
4.4. HAZARDOUS MATERIALS. Tenant shall:
(a) not cause, except for items sold or used in the ordinary
course of Tenant's business in compliance with Applicable Laws and for which
appropriate licenses and permits are issued (if required), or permit any
Hazardous Material (as defined below) to exist on or discharge from the
Premises, and shall promptly: (i) pay any claim against Tenant, Landlord, Lender
or the Premises; (ii) remove any charge or lien upon any of the Premises; and
(iii) defend, indemnify and hold Landlord and Lender harmless from any and all
claims, expenses, liability, loss or damage, in any case resulting from any
Hazardous Material that at any time exists on or is discharged from the
Premises;
(b) not cause or permit any Hazardous Material to exist on or
to discharge from any property owned or used by Tenant which is not in
compliance with Applicable Laws or which would result in any charge or lien upon
the Premises and shall promptly: (i) pay any claim against Tenant, Landlord,
Lender or the Premises; (ii) remove any charge or lien upon the Premises; and
(iii) defend, indemnify and hold Landlord and Lender harmless from any and all
claims, expenses, liability, loss or damage, in any case resulting from the
existence or discharge of any such Hazardous Material on, under or off the
Premises;
(c) notify Landlord and Lender within ten (10) days after
Tenant first has knowledge of any of the following:
(i) that Hazardous Material exists on or has been
discharged from or onto the Premises (whether originating thereon or
migrating to the Premises from other property);
(ii) that Tenant is subject to investigation by any
governmental authority evaluating whether any remedial action is needed to
respond to the release or threatened release of any Hazardous Material into
the environment from the Premises;
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(iii) notice or claim to the effect that Tenant is or may
be liable to any person as a result of the release or threatened release of
any Hazardous Material into the environment from the Premises;
(iv) notice that the Premises are subject to an
environmental lien;
(v) notice of violation to Tenant or awareness by Lessee
of a condition which might reasonably result in a notice of violation of
any applicable Environmental Law that could have a material adverse effect
upon the Premises.
(d) comply, and cause the Premises to comply, with all
statutes, laws, ordinances, rules and regulations of all local, state or federal
authorities having authority over the Premises or any portion thereof or their
use, including without limitation, relative to any Hazardous Material, petroleum
products, asbestos containing materials or PCB's.
(e) cause any construction or alterations of the Premises to
be done in a way so as to not expose in an unsafe manner the persons working on
or visiting the Premises to Hazardous Materials present upon the Premises and in
connection with such construction or alterations shall remove any Hazardous
Materials present upon the Premises which are not in compliance with
Environmental Laws or Applicable Laws or which present a danger to persons
working on or visiting the Premises.
(f) If there exists a threat of an immediate release of
Hazardous Materials from, on, at, to or under the Premises in violation of
any Environmental Laws, and Tenant fails to take steps necessary to prevent
such immediate release, Landlord shall have the right, but not the
obligation, to take any action which is required to prevent such immediate
release. Landlord make take such emergency action with only such notice (if
any) as is practical, in Landlord's judgment. Tenant shall, pay and reimburse
Landlord as Additional Rent, forthwith upon being billed for same by
Landlord, the cost of such emergency action. Such amount shall bear interest
at the Lease Default Rate from the date of billing until paid.
(g) "HAZARDOUS MATERIAL" means any hazardous or toxic
material, substance or waste which is defined by those or similar terms or is
regulated as such under any Environmental Laws. "ENVIRONMENTAL LAWS" means any
statute, law, ordinance, rule or regulation of any local, county, state or
federal authority having jurisdiction over the Property or any portion thereof
or its use as the same may be amended from time to time, including but not
limited to: (i) the Federal Water Pollution Control Act (33 U.S.C. Section 1317)
as amended; (ii) the Federal Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.) as amended; (iii) the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) as amended; (iv)
the Toxic Substance Control Act (15 U.S.C. Section 2601) as amended; (v) the
Clean Air Act (42 U.S.C. Section 7401) as amended; and (vi) the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section 1336 et seq.).
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(h) Except to the extent of liability resulting from or arising out of
the gross negligent or willful act of Landlord or Lender or their agents or
their successors and assigns on or about the Premises, Tenant agrees to protect,
defend, indemnify and hold harmless Landlord, its members, directors, officers,
employees and agents, and any successors to Landlord's interest in the chain of
title to the Premises, their direct or indirect partners, members, directors,
officers, employees, and agents, from and against any and all liability,
including all foreseeable and all unforeseeable damages including but not
limited to attorneys' and consultants' fees, fines, penalties and civil or
criminal damages, directly or indirectly arising out of the use, generation,
storage, treatment, release, threatened release, discharge, spill, presence or
disposal of Hazardous Materials from, on, at, to or under the Premises prior to
or during the Term of this Lease, and including, without limitation, the cost of
any required or necessary repair, response action, remediation, investigation,
cleanup or detoxification and the preparation of any closure or other required
plans, whether such action is required or necessary prior to or following a
transfer of title to the Premises. This agreement to indemnify and hold harmless
shall be in addition to any other obligations or liabilities Tenant may have to
Landlord at common law under all statutes and ordinances or otherwise, and shall
survive following the date of expiration or earlier termination of this Lease
without limit of time. Tenant expressly agrees that the representations,
warranties and covenants made and the indemnities stated in this Lease are not
personal to Landlord, and the benefits under this Lease may be assigned to
subsequent parties in interest to the chain of title to the Premises, which
subsequent parties in interest may proceed directly against Tenant to recover
pursuant to this Lease. Tenant, at its expense, may institute appropriate legal
proceedings with respect to environmental matters of the type specified in this
paragraph 4.4 (h) or any lien for such environmental matters, not involving
Landlord or Lender as a defendant (unless Landlord or Lender is the alleged
cause of the damage), conducted in good faith and with due diligence, provided
that such proceedings shall not in any way impair the interests of Landlord or
lenders under this Lease or contravene the provisions of any first mortgage.
Counsel to Tenant in such proceedings shall be reasonably approved by Landlord
if Landlord is a defendant in the same proceeding. Landlord shall have the right
to appoint co-counsel, which co-counsel will cooperate with Tenant's counsel in
such proceedings. The fees and expenses of such co-counsel shall be paid by
Landlord, unless such co-counsel are appointed because the interests of Landlord
and Tenant in such proceedings, in such counsel's opinion, are or have become
adverse, or Tenant or Tenant's counsel is not conducting such proceedings in
good faith or with due diligence. Notwithstanding any other provision of this
Lease, Landlord and Lender shall have the right to participate in the defense or
settlement of any cause of action, suit, claim, or demand alleging the violation
of any Environmental Laws, whether or not Landlord or Lender have been named or
joined as parties to such cause of action, suit, claim or demand.
V. MAINTENANCE AND REPAIR; ALTERATIONS.
5.1. MAINTENANCE AND REPAIR. Tenant acknowledges that it has
received the Premises in such good condition, repair and appearance as is
absolutely acceptable to Tenant and without the existence of conditions which
would detract from the quiet enjoyment of the Premises. Tenant agrees that, at
its expense, it will keep and maintain the Premises, including any altered,
rebuilt, additional or substituted buildings, structures and other improvements
thereto, in substantially the same good condition and repair as at the date of
execution hereof. It
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will make promptly, all structural and nonstructural, foreseen and unforeseen,
ordinary and extraordinary changes and repairs or replacements of every kind
which may be required to be made to keep and maintain the Premises in such good
condition, repair and appearance and it will keep the Premises orderly and free
and clear of rubbish. Tenant shall maintain on the Premises, and turn over to
Landlord upon expiration or termination of this Lease, current operating manuals
for the equipment now or hereafter located on the Premises. Tenant covenants not
to install any underground storage tanks on the Premises. Tenant agrees that its
obligation to maintain and repair the Premises as set forth in this Section 5.1
benefit both Landlord and Tenant, are the sole responsibility of Tenant, and may
not be delegated. Tenant further covenants to perform or observe all terms,
covenants or conditions of any reciprocal easement, deed covenant running with
the land or maintenance agreement to which it may at any time be a party or to
which the Premises are currently subject. Tenant shall, at its expense, use its
best efforts to enforce compliance with any reciprocal easement or maintenance
agreement benefiting the Premises by any other person subject to such agreement.
Tenant shall maintain the Premises in compliance with all Applicable Laws and in
accordance with the requirements of all insurance policies required to be
maintained by Tenant hereunder. Landlord shall not be required to maintain,
repair or rebuild, or to make any alterations, replacements or renewals of any
nature to the Premises, or any part thereof, whether ordinary or extraordinary,
structural or nonstructural, foreseen or not foreseen to maintain the Premises
or any part thereof in any way. Tenant hereby expressly waives the right to make
repairs at the expense of Landlord which may be provided for in any law in
effect at the time of the commencement of the term of this Lease or which may
thereafter be enacted. If Tenant shall abandon the Premises, it shall give
Landlord and Lender immediate notice thereof. The obligations of the Tenant to
pay Basic Rent and Additional Rent shall not be eliminated, reduced, suspended,
or otherwise impaired by reason of such abandonment of the Premises. In the
event that the Premises shall violate any law and as a result of such violation
an enforcement action is threatened or commenced against Tenant or with respect
to the Premises, then Tenant shall either (i) obtain valid and effective waivers
or settlements of all claims, liabilities and damages resulting from each such
violation, whether the same shall affect Landlord, Tenant or both, or (ii) take
such action as shall be necessary to remove such violation, including, if
necessary, making any necessary repairs or replacements, structural or
otherwise.
5.2. ENCROACHMENTS. If any Improvements situated on the Premises at
any time during the Terms of this Lease shall encroach upon any property,
street or right-of-way adjoining or adjacent to the Premises, or shall violate
the agreements or conditions contained in any restrictive covenant affecting the
Premises or any part thereof, or shall impair the rights of others under or
hinder or obstruct any easement or right-of-way to which the Premises are
subject, then, promptly after the written request of Landlord or any person
affected by any such encroachment, violation, impairment, hindrance or
obstruction, Tenant shall, at its expense, either (i) obtain effective waivers,
or settlements of all claims, liabilities and damages resulting from each such
encroachment, violation, impairment, hindrance or obstruction whether the same
shall affect Landlord, Tenant or both, or (ii) make such changes in the
improvements on the Premises and take such other action as shall be necessary to
remove such encroachments, hindrances or obstructions and to end such violations
or impairments, including, if necessary, the alteration or removal of any
improvement on the Premises. Any such alteration or removal shall be made in
conformity with the requirements of Section 5.3 hereof.
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5.3. ALTERATIONS.
(a) Tenant may, at its expense, make additions to and
alterations of the Improvements to the Premises, and make substitutions and
replacements therefore, provided that: (i) Landlord approves any addition to or
structural alteration to the Premises, after having received from Tenant a
complete plans and specification for the proposed work, which consent shall not
be unreasonably withheld, (ii) the market value of the Premises shall not
thereby be lessened; (iii) such addition or alteration is architecturally
consistent with existing Improvements; (iv) such actions shall be performed in a
good and workmanlike manner; (v) such work shall not violate any term of any
restriction to which the Premises are subject or the requirements of any
insurance policy required to be maintained by Tenant hereunder, and shall be
expeditiously completed in compliance with all Applicable Laws; and (vi) no
Improvements shall be demolished unless Tenant shall have first furnished
Landlord with such surety bonds or other security acceptable to Landlord as
shall be necessary to assure rebuilding of such Improvements. Tenant shall
promptly pay all costs and expenses of each such addition, alteration,
additional Improvement, substitution or replacement, discharge all liens arising
therefrom and procure and pay for all permits and licenses required in
connection therewith. All such additions, alterations, additional Improvements
substitutions and replacements shall be and remain part of the realty and the
property of Landlord and shall be subject to this Lease. Tenant may place upon
the Premises any inventory, trade fixtures, machinery or equipment belonging to
Tenant or third parties and may remove the same at any time during the Terms.
Tenant shall repair any damage to the Premises caused by such removal.
5.4. NO LIENS. Tenant will not, directly or indirectly, create or
permit to be created or to remain, and shall within thirty (30) days of filing
of any, mechanics, contractors or other liens, discharge or bond, at its
expense, any liens with respect to, the Premises or any part thereof or Tenant's
interest therein or the Basic Rent, Additional Rent or other sums payable by
Tenant under this Lease, other than any encumbrances permitted by a Permitted
Encumbrance described in Section 11.12. Nothing contained in this Lease shall be
construed as constituting the consent or request, expressed or implied, by
Landlord to the performance of any labor or services or of the furnishing of any
materials for any construction, alteration, addition, repair or demolition of or
to the Premises or any part thereof by any contractor, subcontractor, laborer,
materialman or vendor. Notice is hereby given that Landlord will not be liable
for any labor, services or materials furnished or to be furnished to Tenant, or
to anyone holding the Premises or any part thereof, and that no mechanic's or
other liens for any such labor services or materials shall attach to or affect
the interest of Landlord in and to the Premises.
VI. INSURANCE: INDEMNIFICATION
6.1. INSURANCE. Tenant shall maintain, or cause to be maintained, at
its sole expense, the following insurance on the Premises (herein called the
"Required Insurance"):
(a) Insurance against loss or damage to the Improvements (the
"Improvements Insurance") under a fire and broad form of all risk extended
coverage insurance policy (which shall include flood insurance if the Premises
is located within a flood hazard area, and earthquake insurance if the Premises
is located within an earthquake zone) together with an agreed value endorsement.
Such insurance shall be in amounts equal to the full insurable value
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of the Improvements and not be less than the full replacement cost of the
Improvements as determined from time to time by Landlord but not more frequently
than once in any 12-month period. Such insurance policies shall contain a
replacement cost endorsement and a waiver of depreciation, and may contain
reasonable exclusions and deductible amounts as may be approved by Landlord.
(b) Comprehensive general public liability insurance,
including contractual injury, bodily injury, broad form death and property
damage liability, and umbrella liability insurance against any and all claims,
including legal liability to the extent insurable, and all court costs and
attorneys' fees and expenses, for the benefit of Landlord, Tenant and Lender
against claims for damages to person or property arising out of or connected
with the possession, use, leasing, operation, maintenance or condition of the
Premises, occurring on, in or about the Premises and the adjoining streets,
sidewalks, gutters, curbs, passageways and other areas adjacent thereto, if any,
of at least Two Million Dollars ($2,000,000) single limit with respect to bodily
injury or death to any one person, at least Three Million Dollars ($3,000,000)
with respect to any one incident, and at least One Million Dollars ($1,000,000)
with respect to property damage or such greater amounts as may reasonably be
required by Landlord, consistent with coverage on properties similarly
constructed, occupied and maintained, such insurance to include full coverage of
the indemnity set forth in Section 6.10. Policies for such insurance shall be
for the mutual benefit of Landlord, Tenant and Lender, as their respective
interests may appear, and shall name Lender as an additional insured.
(c) Workers' compensation insurance to the extent necessary
to protect Landlord and the Premises against workers' compensation claims,
covering all persons employed in connection with any work done on or about the
Premises with respect to which claims for death or bodily injury could be
asserted against Landlord, Tenant or the Premises. Such policy of workers'
compensation insurance shall comply with all of the requirements of applicable
state law. Without limiting the foregoing, Tenant may, at its option, maintain a
program of workers' compensation self-insurance which complies in all respects
to the rules and regulations of the State of California.
(d) At any time when any portion of the Premises is being
constructed, altered or replaced, builder's "all-risk" insurance (in completed
value non-reporting form) insuring the Premises in an amount no less than the
actual replacement value of the Improvements, exclusive of foundations and
excavations.
(e) Such other insurance on the Premises, including, but not
limited to, insurance against loss or damage from (i) leakage of sprinkler
systems, and (ii) explosion of steam boilers, air conditioning equipment,
pressure vessels or similar apparatus now or hereinafter installed in the
Premises, in such amounts and against such other hazards which may be required
by Landlord or Lender, including twelve (12) months of rental interruption
insurance, and insurance to cover the cost of complying with any governmental
statutes, laws, rules, orders, regulations and ordinances enacted after the
execution of this Lease.
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(f) All insurance policies shall be in such form and with
such endorsements and in such amounts as shall be reasonably satisfactory to
Landlord (and Landlord shall be entitled to approve amounts, form, risk
coverage, deductibles, loss payees and insureds). The policy referred to in
Section 6.1(a) shall contain a replacement cost endorsement and a waiver of
depreciation. All of the above referenced policies shall name Lender as an
additional insured/loss payee, shall provide that all insurance proceeds be
payable to Lender, and shall contain: (i) "Non Contributory Standard Beneficiary
Clause" and a Lender's Loss Payable Endorsement (Form 438 BFUNS) or their
equivalents naming Lender as the person to which all payments shall be paid and
a provision that payment of insurance proceeds in excess of One Hundred Thousand
Dollars ($100,000.00) shall be made by a check payable only to Lender; (ii) a
waiver of subrogation endorsement as to Lender and its assigns providing that no
policy shall be impaired or invalidated by virtue of any act, failure to act,
negligence of, or violation of declarations, warranties or conditions contained
in such policy by Lender, Landlord or any other named insured, additional
insured or loss payee, except for the willful misconduct of Lender knowingly in
violation of the conditions of such policy; (iii) an endorsement indicating that
neither Lender nor the Landlord shall be or be deemed to be a co-insurer with
respect to any risk insured by such policies and shall provide for an aggregate
deductible per loss for all policies of an amount not more than that which is
customarily maintained by prudent owners of property of the same type and
quality as the Premises, but in no event in excess of five percent (5%) of the
replacement cost of the Improvements (or, in the case of earthquake insurance,
the smallest deductible which is commercially available, which deductible as of
the date here is deemed to be ten percent (10%); (iv) a provision that such
policies shall not be canceled or amended, including, without limitation, any
amendment reducing the scope or limits of coverage, without at least thirty (30)
days' prior written notice to Lender in each instance; and (v) effective waivers
by the insurer of all claims for insurance premiums against any loss payees,
additional insureds and named insureds (other than the Tenant). Certificates of
insurance with respect to all renewal and replacement policies shall be
delivered to the Landlord not less than ten (10) days prior to the expiration
date of any of the insurance policies required to be maintained hereunder which
certificates shall bear notations evidencing payment of applicable premiums. If
Tenant fails to maintain and deliver to the Landlord the certificates of
insurance required by this Lease, Landlord may, at its option, after written
notice to Tenant, procure such insurance, and the Tenant shall reimburse
Landlord for the amount of all premiums paid by Landlord thereon promptly, after
demand by Landlord, with interest thereon at the Default Rate from the date paid
by Landlord to the date of repayment.
6.2. PERMITTED INSURERS. The insurance required hereunder shall be
written by companies of recognized financial standing authorized to do insurance
business in the state in which the Premises are located and have Standard and
Poor's claims paying ability rating of AA or better and a financial class of IX
or better by A.M. Best Co., and shall name as the insured parties thereunder
Landlord and Tenant, as their interests may appear, and Lender as an additional
insured under a standard "mortgagee" endorsement or its equivalent satisfactory
to Landlord. Landlord shall not be required to prosecute any claim against, or
to contest any settlement proposed by, an insurer. Tenant may, at its expense,
prosecute any such claim or contest any such settlement in the name of Landlord,
Tenant or both with the consent of Landlord, and Landlord will join therein at
Tenant's written request upon the receipt by Landlord of an indemnity from
Tenant against all costs, liabilities and expenses in connection therewith.
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6.3. INSURANCE CLAIMS. Insurance claims by reason of damage to or
destruction of any portion of the Premises shall be adjusted by Tenant, both
Landlord and Lender shall have the right to join with Tenant in adjusting any
such loss.
6.4. INSURED PARTIES. Every policy referred to herein shall bear a
first mortgage endorsement in favor of Lender; and any loss under any such
policy shall be made payable to Lender, provided that any recovery under any
such policy shall be applied by Lender in the manner provided in Section 6.3.
Every policy of required insurance shall contain an agreement that the insurer
will not cancel such policy except after thirty (30) days' prior written notice
to Landlord and Lender and that any loss otherwise payable thereunder shall be
payable notwithstanding any act or negligence of Landlord, Tenant or Lender
which might, absent such agreement, result in a forfeiture of all or a part of
such insurance payment and notwithstanding (i) any foreclosure or other action
taken by a creditor pursuant to any provision of any Permitted Encumbrance upon
the happening of a default or Event of Default thereunder or (ii) any change in
ownership of the Premises.
6.5. DELIVERY OF POLICIES. Tenant shall deliver to Landlord promptly
after the delivery of this Lease, the original or certified duplicate policies
or Acord-27 and Acord-25 form certificates of insurers, satisfactory to Lender,
evidencing all of the Required Insurance. Tenant shall, at least fifteen (15)
days prior to the expiration of any such policy, deliver to Landlord other
original or duplicate of such policy or certificates evidencing the renewal of
any such policy. If Tenant fails to maintain or renew any required insurance, or
to pay the premium therefor, or to deliver such certificate, then Landlord, at
its option, but without obligation to do so, may procure such insurance. Any
sums so expended by Landlord shall be Additional Rent hereunder and shall be
repaid by Tenant within five (5) days after notice to Tenant of such expenditure
and the amount thereof.
6.6. NO DOUBLE COVERAGE. Neither Tenant nor Landlord shall obtain or
carry separate insurance covering the same risks as any Required Insurance
unless Tenant, Landlord and Lender are included therein as named insured, with
loss payable as provided in this Lease and the policy contains a first mortgagee
endorsement in favor of the Lender. Tenant and Landlord shall immediately notify
each other whenever any such separate insurance is obtained and shall deliver to
each other the policies or certificates evidencing the same.
6.7. BLANKET INSURANCE. Anything contained in this Article VI to the
contrary notwithstanding, all Required Insurance may be carried under a
"blanket" or "umbrella" policy or policies covering other property or
liabilities of Tenant, provided that such policies otherwise comply with the
provisions of this Lease and specify the coverage and amounts thereof with
respect to the Premises.
6.8. DAMAGES FOR TENANT'S FAILURE TO PROPERLY INSURE. Landlord or
Lender shall not be limited in the proof of any damages which Landlord or Lender
may claim against Tenant arising out of or by reason of Tenant's failure to
provide and keep in force insurance, as provided above, to the amount of the
insurance premium or premiums not paid or incurred by Tenant and which would
have been payable under such insurance; but Landlord and Lender shall also be
entitled to recover as damages for such breach, the uninsured amount of any
loss, to the extent of any deficiency in the Required Insurance and damages,
costs and expenses of suit suffered or
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incurred by reason of or damage to, or destruction of, the Premises, occurring
during any period when Tenant shall have failed to provide the Required
Insurance. Tenant shall indemnify and hold harmless Landlord and Lender for any
liability incurred by Landlord or Lender arising out of any deductibles for
Required Insurance.
6.9. CASUALTY. If all or any part of the Premises shall be damaged
or destroyed by casualty, Tenant shall promptly notify Landlord and Lender
thereof within five (5) Business Days, and shall, with reasonable promptness and
diligence, rebuild, replace and repair any damage or destruction to the
Premises, at its expense, in conformity with the requirements of Section 5.3(a)
hereof, in such manner as to restore the same to the same or better condition as
existed prior to such casualty, using materials of the same or better grade than
that of the materials being replaced, and there shall be no abatement of Basic
Rent or Additional Rent. Proceeds of casualty insurance of $100,000.00 or less
shall be paid to Tenant. Proceeds in excess of $100,000.00 shall be held by
Landlord or a proceeds trustee (which shall be Lender or Lender's designee for
so long as the Note is outstanding, or an escrow or title company, or a bank or
trust company designated by Landlord thereafter) and paid to Tenant, but only
against certificates of Tenant and appropriate lien waivers delivered to
Landlord from time to time, but not more frequently than once per calendar
month, as such work or repair progresses. Each such certificate shall describe
the work or repair for which Tenant is requesting payment and the cost incurred
by Tenant in connection therewith and stating that Tenant has not theretofore
received payment for such work and has sufficient funds remaining to complete
the work free of liens or claims. Any proceeds remaining after Tenant has
repaired the Premises shall be delivered to Landlord.
6.10. INDEMNIFICATION.
(a) Tenant agrees to pay, and to protect, defend, indemnify
and save harmless Landlord, Lender and their agents from and against any and all
liabilities, losses, damages, costs, expenses (including all reasonable
attorneys' fees and expenses of Landlord and Lender), causes of action, suits,
claims, demands or judgments of any nature whatsoever that may be suffered or
imposed on or asserted against any of them (i) arising from any injury to, or
the death of, any person or damage to property (including property of employees
and invitees of Tenant) on the Premises or upon adjoining sidewalks, streets or
ways or elsewhere, in any manner growing out of or connected with the use,
non-use, condition or occupation of the Premises or any part thereof, so long as
not occasioned by the gross negligence or willful misconduct of Landlord,
Lender, their agents, servants, employees or assigns, and/or (ii) arising from
violation by Tenant of any agreement or condition of this Lease, or any contract
or agreement to which Tenant is a party or any restriction, law, ordinance or
regulation, including without limitation, the Americans With Disabilities Act of
1990 and all regulations issued thereunder, in each case affecting the Premises
or any part thereof or the ownership, occupancy or use thereof, so long as not
occasioned by the gross negligence or willful misconduct of Landlord, Lender,
their agents, servants, employees or assigns; (iii) arising out of any permitted
contest referred to in Section 4.3 (collectively, "Indemnified Matters"). If
Landlord, Lender or any agent of Landlord or Lender shall be made a party to any
such litigation commenced against Tenant, and if Tenant, at its expense, shall
fail to provide Landlord, Lender or their agents with counsel (upon Landlord's
request) reasonably approved by Landlord, Tenant shall pay all costs and
attorneys' fees and expenses incurred or paid by Landlord, Lender or their
agents in
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connection with such litigation. Tenant's obligations and liabilities under this
Section 6.10 shall survive the expiration of this Lease. Tenant waives all
claims against Landlord arising form any liability described in this Section
6.10 (a), except to the extent caused by the sole negligence, gross negligence
or willful misconduct of Landlord, Lender, their agents, servants, employees or
assigns. The waiver and indemnity provisions in this paragraph are intended to
exculpate and indemnify each of Landlord and Lender (i) from and against the
consequences of its own negligence or fault when Landlord or Lender are solely
negligent or contributorily, partially, jointly, comparatively or concurrently
negligent with Tenant or any other person (but is not solely or grossly
negligent, has not committed an intentional act or made an intentional omission)
and (ii) from and against any liability of Landlord or Lender based on any
applicable doctrine of strict liability.
(b) Should any claim be made against Landlord by a person not
a party to this Lease with respect to any Indemnified Matter, Landlord shall
promptly give Tenant written notice of any such claim, and Tenant shall
thereafter defend or settle any such claim, at its sole expense, on its own
behalf and with counsel of its selection; provided, however, that Tenant's
counsel shall be competent counsel experienced in the type of litigation or
claim at issue and shall be acceptable to Landlord, acting reasonably. Upon
Tenant's assumption of the defense of any claim against Landlord pursuant to
Tenant's indemnity, Landlord shall have the right to participate in the defense
or settlement of the claim with counsel retained and paid by it, and Tenant
shall cause the attorneys retained by it to consult and cooperate fully with
counsel for Landlord. In such defense or settlement of any claims, Landlord
shall provide Tenant with originals or copies of all relevant documents and
shall cooperate with and assist Tenant, at no expense to Landlord.
Notwithstanding any provision of this Section 6.10 to the contrary, Tenant shall
not enter into any settlement or agreement in connection with any Indemnified
Matters binding upon or adversely affecting either Landlord or Lender, or admit
any liability or fact in controversy binding upon or adversely affecting either
Landlord or Lender, without the prior written consent of Landlord or Lender, as
the case may be, in such party's sole discretion.
VII. CONDEMNATION.
7.1. ASSIGNMENT OF AWARD. Subject to the rights of Tenant set
forth in this Article VII, Tenant hereby irrevocably assigns to Landlord any
award or payment to which Tenant may be or become entitled with respect to
Complete, Partial or Temporary Taking (all as hereinafter defined) of the
Premises or any part thereof, by condemnation or other eminent domain
proceedings pursuant to any law, general or special, by any governmental
authority, whether the same shall be paid or payable in respect of Tenant's
leasehold interest hereunder or otherwise. Landlord and Tenant agree that as
long as the Note is outstanding, Lender shall hold all proceeds until
disbursed pursuant to the terms hereof. Landlord and Lender shall be entitled
to participate in any such proceeding and the expenses thereof (including
counsel fees and expenses) shall be paid by Tenant.
7.2. DEFINITIONS FOR ARTICLE VII.
(a) "Complete Taking" shall mean the occurrence of any actual
or threatened condemnation or other eminent domain proceeding pursuant to any
general or special law, or any agreement with an authority having the power of
eminent domain, which results in
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the taking or conveyance of (i) the entire Premises or (ii) such a significant
portion of the Premises that, in the good faith judgment of Tenant, it is
uneconomic to rebuild or restore the remaining portion of the Premises for the
continued operation of the Premises.
(b) "Partial Taking" shall mean the occurrence of any taking
of a portion of the Premises by condemnation or other eminent domain
proceedings, or any agreement with an authority having the power of eminent
domain, which does not result in a Complete Taking.
(c) "Temporary Taking" shall mean the occurrence of a
temporary taking of the use or occupancy of the Premises or any part thereof by
any governmental authority.
(d) "Net Award" shall mean all amounts payable as a result of
any condemnation or other eminent domain proceeding and all amounts payable
pursuant to any agreement with any condemning authority (which agreement shall
be deemed to be a taking) which has been made in settlement of or under threat
of any condemnation or other eminent domain proceeding affecting the Premises,
less all expenses incurred as a result thereof not otherwise paid by Tenant and
the collection of such amounts.
(e) "Purchase Offer" shall mean a purchase offer as described
in this Article VII with a Purchase Price (hereafter defined).
7.3. COMPLETE TAKING. Upon the occurrence of a Complete Taking,
Tenant shall deliver a Purchase Offer to Landlord, with a copy to Lender,
specifying a Termination Date occurring not less than thirty (30) nor more
than one hundred eighty (180) days after the delivery of such Purchase Offer
and this Lease shall continue in full force and effect without any abatement
of rent, notwithstanding any taking, until the Termination Date as defined
herein. The Purchase Offer shall contain a purchase price ("Purchase Price")
equal to Landlord's acquisition cost of the Premises, together with (i) all
unpaid Basic Rent and Additional Rent accruing but unpaid through the
Termination Date, and (ii) reasonable out-of-pocket expenses of Landlord and
Lender relating to the purchase, and shall be accompanied by a Tenant's
Certificate stating that a "Complete Taking" has occurred within the meaning
of clause (a) of Section 7.2. Notwithstanding anything contained herein to
the contrary, in no event shall the Purchase Price be less than the full
amount due Lender under the Loan Documents. If Tenant shall fail to deliver a
Purchase Offer as required above, Tenant shall be conclusively presumed to
have made a Purchase Offer on a date which is one hundred twenty (120) days
after any such taking (or such later date as is agreed to in writing by
Landlord), and in the event Tenant is so presumed to have made a Purchase
Offer, the Termination Date shall be deemed to be one hundred fifty (150)
days after such Purchase Offer is presumed to have been made; but nothing in
this sentence shall relieve Tenant of its obligation actually to deliver such
Purchase Offer. No Basic Rent or Additional Rent shall abate through the
Termination Date.
7.4. PARTIAL TAKING. Upon the occurrence of any Partial Taking, this
Lease shall continue in full effect without abatement or reduction of Basic
Rent, Additional Rent or other sums payable by Tenant. In the event Landlord
receives a Net Award in connection with any such Partial Taking, Landlord shall
make the Net Award available to Tenant to make any repairs required by Section
5.3 hereof so that, thereafter, the Premises shall be, as nearly as
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possible, in a condition as good as the condition thereof immediately prior to
such Partial Taking, but, if such Net Award shall be in excess of One Hundred
Thousand Dollars ($100,000), only if there is no default or Event of Default and
Tenant delivers to Landlord of (i) certificates of Tenant identifying the repair
work for which Tenant is requesting payment and the cost incurred by Tenant in
connection therewith and stating that Tenant has not theretofore received
payment for such work; and (ii) appropriate lien waivers. Any Net Award
remaining after such repairs have been made shall be delivered to Tenant; but
only to the extent that the aggregate amount of such Net Award so remaining and
all amounts theretofore paid to Tenant pursuant to this sentence do not exceed
One Hundred Thousand Dollars ($100,000). If such amounts exceed One Hundred
Thousand Dollars ($100,000), the excess may be retained by Landlord and applied
in reduction of the outstanding principal amount of the Note, in accordance with
the terms of the Loan Documents, at Landlord's sole option.
7.5. TEMPORARY TAKING. Upon the occurrence of any Temporary Taking,
Tenant shall, promptly after any such Temporary Taking ceases, at its expense,
repair any damage caused thereby in conformity with the requirements of Section
5.3 hereof so that, thereafter, the Premises shall be, as nearly as possible, in
a condition as good as the condition thereof immediately prior to such Temporary
Taking. In the event of such Temporary Taking, Tenant shall be entitled to
receive the entire Net Award payable by reason of such Temporary Taking, less
any costs incurred by the Landlord in connection therewith. If the cost of any
repairs required to be made by Tenant pursuant to this Section 7.5 shall exceed
the amount of the Net Award, the deficiency shall be paid by Tenant. No payments
shall be made to Tenant pursuant to this Section 7.5, if any default or Event of
Default shall have happened and shall be continuing under this Lease. No Basic
Rent or Additional Rent shall abate through the duration of such Temporary
Taking.
7.6. PROCEDURE AFTER PURCHASE OFFER; PROCEDURE ON EVENT OF PURCHASE.
(a) If Landlord shall have accepted the Purchase Offer in
writing, Landlord shall convey the Premises to Tenant for the Purchase Price
contained therein, giving due credit, if any, against such Purchase Price to
Tenant for any Net Award received and retained by Landlord.
(b) If the Premises or any part thereof shall be purchased by
Tenant under Article VII of this Lease, Landlord need not transfer and convey to
Tenant or its designee any better title thereto than existed on the date of the
commencement of this Lease, and Tenant shall accept such title, subject,
however, to such liens, encumbrances, charges, exceptions and restrictions,
against or relating to the Premises, (i) including those arising pursuant to the
terms of this Lease and (ii) subject to all applicable laws, regulations and
ordinances, but free of the Mortgage and all other mortgages, liens,
encumbrances, charges, exceptions and restrictions which shall have been created
by or resulted from acts or failures to act of Landlord.
(c) On the date fixed for any such purchase, which shall be
the next Payment Date as defined in the Loan Commitment, Tenant shall pay to
Landlord, at any place within the United States of America designated by
Landlord before 2:00 P.M. Pacific Time, the Purchase Price therefor, in
immediately available funds, together with all installments of Basic
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Rent and all other sums then due under this Lease and unpaid to and including
the purchase date without offset or deduction for any reason, and Landlord shall
deliver to Tenant: (i) a special warranty deed conveying title to the Premises
and describing the Premises or portion thereof being sold and conveying the
title thereto; (ii) such instruments as shall be necessary to transfer to Tenant
or its designee any other property then required to be transferred by Landlord
pursuant to this Lease; and (iii) an assignment of condemnation awards due in
connection with the Property, but not yet paid to the Landlord or Lender. Tenant
shall pay all charges incident to such conveyance and transfer, including
Landlord and Lender's reasonable counsel fees, escrow fees, recording fees,
title insurance premiums and all applicable federal, state and local taxes
(other than any income or franchise taxes levied upon or assessed against
Landlord) which may be incurred or imposed by reason of such conveyance and
transfer.
(d) Upon the completion of such purchase, but not prior
thereto, this Lease and all obligations hereunder (including the obligations to
pay Basic Rent and Additional Rent) shall terminate, except with respect to any
obligations and liabilities of Tenant, actual or contingent, under this Lease
which arose on or prior to such date of purchase, and with respect to such
obligations and liabilities they shall survive the Termination of the Lease.
(e) If Landlord (with the written consent of Lender) shall
have tendered a written rejection of the Purchase Offer not later than the tenth
(10th) day prior to the Termination Date specified in such Purchase Offer, this
Lease shall terminate on such Termination Date (except with respect to
obligations and liabilities of Tenant under this Lease, actual or contingent,
which have arisen on or prior to such Termination Date), upon payment by Tenant
of all of the Basic Rent, Additional Rent and all other sums due and payable
hereunder to and including the Termination Date without offset or deduction for
any reason. If Landlord shall fail to accept or reject the Purchase Offer within
the times allotted, Landlord shall be conclusively presumed to have accepted the
Purchase Offer.
7.7. COMPENSATION FOR PERSONAL PROPERTY AND RELOCATION EXPENSES.
Tenant shall have the right to claim and recover from the condemning authority
any such compensation as may be awarded to Tenant for the value of furniture,
fixtures, equipment and leasehold improvements owned by Tenant, removal of
merchandise, moving and relocation expenses, or damage to Tenant's business
operations conducted at the Premises, however, in the event of a Complete
Taking, Tenant shall not receive any benefits of this Section 7.7 until the
Purchase Price has been received in full by Lender and the Lease has terminated
as set forth in Section 7.6(e) hereof.
VIII. ASSIGNMENT AND SUBLETTING.
8.1. POWER TO ASSIGN AND SUBLET. Provided that no Event of Default
shall be continuing and Landlord shall have first given its reasonable consent
thereto, Tenant may assign all its rights and interests under this Lease or
sublet all or any part of the Premises (provided that each such assignment or
sublease is expressly made subject to all of the provisions, including the use
provisions of Section 1.3 of this Lease) and may assign all its rights and
interests under this Lease. Notwithstanding the foregoing, Tenant may assign all
of its rights and interests under this Lease without Landlord's consent in the
following situations:
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(a) Landlord's consent shall not be required to an assignment
to any Affiliate of Tenant, but Landlord shall be given prior written notice of
any such assignment and Tenant shall remain primarily liable for the performance
of all lease obligations, including payment of Basic Rent and Additional Rent.
(b) Landlord's consent shall not be required to an assignment
to a proposed assignee which is, immediately prior to such assignment, rated B+
or higher by Standard and Poor's and has a net worth equal or greater than
Tenant. Tenant shall give Landlord prior written notice of such assignment. In
the event the assignee agrees to assume the full performance of all lease
obligations, and the form of assumption is reasonably acceptable to Landlord,
then Tenant may be relieved of all further liability under the Lease.
Tenant shall, within ten (10) days after the execution and delivery of any such
assignment or the sublease of all or substantially all of the Premises, deliver
a conformed copy thereof to Landlord. Within ten (10) days after the execution
and delivery of any sublease of a portion of the Premises, Tenant shall give
notice to Landlord of the existence and term thereof, and of the same name and
address of the sublessee thereunder. Tenant shall sublease only by a sublease
document attaching and incorporating the terms of this Lease and such sublease
shall not relieve Tenant of any responsibilities or obligations of the Lease.
Tenant shall comply with all the terms and provisions of any sublease.
8.2. ASSUMPTION BY ASSIGNEE OR TRANSFEREE; TENANT REMAINS LIABLE. If
Tenant assigns all its rights and interests under this Lease, or sells or
otherwise transfers all or substantially all of its assets as set forth in
Section 11.7, the transferee or the assignee under such assignment shall
expressly assume all the obligations of Tenant hereunder in an instrument
delivered to Landlord at the time of such assignment. No assignment or sublease
made as permitted by this Article VIII or merger, consolidation, sale or
transfer of assets made as set forth in Section 11.7 shall affect or reduce any
of the obligations of Tenant hereunder, except as otherwise provided herein, and
all such obligations shall continue in full force and effect as obligations of a
principal and not as obligations of a guarantor or surety, to the same extent as
though no assignment, subletting, merger, consolidation, sale or transfer of
assets had been made, provided that performance by any such assignee, sublessee,
surviving Person or transferee of any of the obligations of Tenant under this
Lease shall be deemed to be performance by Tenant. No sublease or assignment
made as permitted by this Article VIII or merger, consolidation, or sale or
transfer of assets made as permitted by Section 11.7 shall impose any
obligations on Landlord or otherwise affect any of the rights of Landlord under
this Lease. At Landlord's option, the assignee, sublessee, surviving Person or
transferee, as applicable, shall have direct responsibility to Landlord and
shall have the same obligations of Tenant as required under this Lease.
8.3. OTHER TRANSFERS VOID. Neither this Lease nor the Term hereby
demised shall be mortgaged by Tenant, nor shall Tenant mortgage or pledge the
interest of Tenant in and to any sublease of the Premises or the rentals payable
thereunder. Any mortgage, pledge, sublease or assignment made in violation of
this Article VIII shall be void.
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IX. FINANCIAL INFORMATION.
9.1. FINANCIAL STATEMENTS. Tenant will furnish to Landlord and
Lender (i) Tenant's annual audited financial statements within ninety (90) days
after the end of Tenant's fiscal year, and (ii) Tenant's quarterly financial
statements within thirty (30) days following the end of the first three quarters
of the fiscal year. Audited financial statements shall be accompanied by an
unqualified opinion from Grant Thorton or other certified public accounting firm
acceptable to Lender and Landlord. Landlord is aware that Tenant is a public
company, and that Tenant files required 10-K and 10-Q forms.
X. DEFAULT.
10.1. EVENTS OF DEFAULT. Any of the following occurrences or acts
shall constitute an event of default (herein called an "Event of Default") under
this Lease:
(a) If Tenant, at any time during the continuance of this
Lease (and regardless of the pendency of any bankruptcy, reorganization,
receivership, insolvency or other proceedings at law, in equity, or before any
administrative tribunal, which have or might have the effect of preventing
Tenant from complying with the terms of this Lease), shall (i) fail to make any
payment of Basic Rent or Additional Rent when due, or (ii) fail to make any
payment of any other sum herein required to be paid by Tenant hereunder or (iii)
fail to provide and keep in force the insurance required by Section 6 hereunder,
or (iv) fail to observe or perform any other provision hereof (with the
exception of any payment or insurance provisions which failure shall constitute
an Event of Default under (a)(i), (ii) and (iii) hereof) for thirty (30) days
after written notice (provided, that in the case of any default referred to in
this Lease which cannot with diligence be cured within such thirty (30) day
period, if Tenant shall proceed promptly to cure the same and thereafter shall
prosecute the curing of such default with diligence, then upon receipt by
Landlord of a Tenant's Certificate stating the reason such default cannot be
cured within thirty (30) days and stating that Tenant is proceeding with due
diligence to cure such default, the time within which such failure may be cured
shall be extended for such period as may be necessary to complete the curing of
the same with diligence but in no event longer than ninety (90) days); or
(b) If any representation or warranty of Tenant set forth in
any notice, certificate, demand, request or other instrument delivered pursuant
to, or in connection with this Lease or the Assignment, shall either prove to be
false or misleading in any material respect as of the time when the same shall
have been made; or
(c) If Tenant shall file a petition commencing a voluntary
case under the Federal Bankruptcy Code or any federal or state law (as now or
hereafter in effect) relating bankruptcy, insolvency, reorganization, winding-up
or adjustment of debts (hereinafter collectively called "Bankruptcy Law") or if
Tenant shall: (i) apply for or consent to the appointment of, or the taking of
possession by, any receiver, custodian, trustee, United States Trustee or
liquidator (or other similar official) of the Premises or any part thereof or of
any substantial portion of Tenant's property; or (ii) generally not pay its
debts as they become due, or admit in writing its inability to pay its debts
generally as they become due; or (iii) make a general assignment for the benefit
of its creditors; or (iv) file a petition commencing a voluntary case under or
seeking to take advantage of any Bankruptcy Law; or (v) fail to controvert in
timely and
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appropriate manner, or in writing acquiesce to, any petition commencing an
involuntary case against Tenant or otherwise filed against Tenant pursuant to
any Bankruptcy Law; or (vi) take any action in furtherance of any of the
foregoing; or
(d) If an order for relief against Tenant shall be entered in
any involuntary case under the Federal Bankruptcy Code or any similar order
against Tenant shall be entered pursuant to any other Bankruptcy Law, or if a
petition commencing an involuntary case against Tenant or proposing the
reorganization of Tenant under any Bankruptcy Law shall be filed and not be
discharged or denied within sixty (60) days after such filing, or if a
proceeding or case shall be commenced in any court of competent jurisdiction
seeking: (i) the liquidation, reorganization, dissolution, winding-up or
adjustment of debts of Tenant; or (ii) the appointment of a receiver, custodian,
trustee, United States Trustee or liquidator (or any similar official) of the
Premises or any part thereof or of Tenant or of any substantial portion of
Tenant's property; or (iii) any similar relief as to Tenant pursuant to any
Bankruptcy Law, and any such proceeding or case shall continue undismissed, or
an order, judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect for sixty (60) days; or
(e) If the Premises shall be left both unattended and without
maintenance as provided herein, for a period of ten (10) days or more.
10.2. LANDLORD'S REMEDIES.
(a) If an Event of Default shall have happened and be
continuing, Landlord shall have the right at its election to give Tenant twenty
(20) days written notice of Landlord's intention to terminate the term of this
Lease on a date specified in such notice. Thereupon, the term of this Lease and
the estate hereby granted shall terminate on such date as completely and with
the same effect as if such date were the date fixed herein for the expiration of
the term of this Lease, and all rights of Tenant hereunder shall terminate, but
Tenant shall remain liable as provided herein.
(b) If an Event of Default shall have happened and be
continuing Landlord shall have the immediate right, whether or not the term of
this Lease shall have been terminated pursuant to Section 10.2(a), to (i)
re-enter and repossess the Premises or any part thereof by any means permissible
under California law, (ii) remove all persons and property therefrom; and (iii)
collect from Tenant all sums due hereunder, plus interest at the Default Rate.
Landlord shall be under no liability by reason of any such re-entry,
repossession or removal conducted in accordance with California law. No such
re-entry or taking of possession of the Premises by Landlord shall be construed
as an election on Landlord's part to terminate the term of this Lease unless a
written notice of such intention to be given to Tenant pursuant to Section
10.2(a).
(c) At any time or from time to time after the repossession
of the Premises or any part thereof pursuant to Section 10.2(b), whether or not
the term of this Lease shall have been terminated pursuant to Section 10.2(a),
Landlord may (but shall be under no obligation to) relet the Premises or any
part thereof for the account of Tenant, in the name of Tenant or Landlord or
otherwise, without notice to Tenant, for such term or terms (which may be
greater or less than the period which would otherwise have constituted the
balance of the term of
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this Lease) and on such conditions (which may include concessions or free rent)
and for such uses Landlord, in its absolute discretion, may determine, and
Landlord may collect and receive any rents payable by reason of such reletting.
Landlord shall not be responsible or liable for any failure to relet the
Premises or any part thereof or for any failure to collect any rent due upon any
such reletting.
(d) No termination of the term of this Lease pursuant to
Section 10.2(a), by operation of law or otherwise, and no repossession of the
Premises or any part thereof pursuant to Section 10.2(b) or otherwise, and no
reletting of the Premises or any part thereof pursuant to Section 10.2(c), shall
relieve Tenant of its liabilities and obligations hereunder, all of which shall
survive such expiration, termination, repossession or reletting.
(e) At any time after such termination or repossession by
reason of the occurrence of any Event of Default, whether or not Landlord shall
have collected any current damages pursuant to this Section 10.2(e), Landlord
shall be entitled to recover from Tenant, and Tenant will pay to Landlord on
demand, as and for liquidated and agreed final damages for Tenant's default and
in lieu of all current damages beyond the date of such demand (it being agreed
that it would be impracticable or extremely difficult to fix the actual
damages), an amount equal to the present value of all rent payable under the
Lease beyond the date of such demand over the then present value of the then
fair market rental for the Premises, at the date of such demand for what would
be the unexpired term of the Lease, which present value shall in each case be
determined by the application of a discount factor of five percent (5%) per
annum, applied monthly; however, this amount shall not be less than any "make
whole provision" in favor of the Lender, including without limitation, any
default interest and late charges specified in the Loan Documents in connection
with the indebtedness encumbered by the Premises. If any applicable law,
including without limitation, California Civil Code Section 1951.2 or its
successor, shall be construed to limit the amount of such liquidated final
damages to less than the amount above agreed upon, Landlord shall be entitled to
the maximum amount allowable under such statute or rule of law. Landlord retains
all remedies described in California Civil Code Section 1951.4.
(f) Notwithstanding anything to the contrary stated herein,
if an Event of Default shall have happened and be continuing, whether or not
Tenant shall have abandoned the Premises, Landlord may elect to continue this
Lease in effect for so long as Landlord does not terminate Tenant's right to
possession of the Premises and Landlord may enforce all of its rights and
remedies hereunder including, without limitation, the right to recover all Basic
Rent, Additional Rent and other sums payable hereunder as the same become due.
(g) Notwithstanding anything to the contrary stated herein,
if an Event of Default shall have happened and be continuing, whether or not
Tenant shall have abandoned the Premises, Landlord may elect to continue this
Lease in effect for so long as the Landlord does not terminate Tenant's right to
possession of the Premises and Landlord may enforce all of its rights and
remedies hereunder including, without limitation, the right to recover all Basic
Rent, Additional Rent and other sums payable hereunder as the same become due.
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10.3. ADDITIONAL RIGHTS OF LANDLORD. No right or remedy herein
conferred upon or reserved to Landlord is intended to be exclusive of any other
right or remedy, and each and every right and remedy shall be cumulative and in
addition to any other right or remedy given hereunder or now or hereafter
existing at law or in equity or by statute. The failure of Landlord to insist at
any time upon the strict performance of any covenant or agreement or to exercise
any option, right, power or remedy contained in this Lease shall not be
construed as waiver or a relinquishment thereof for the future. A receipt by
Landlord of any Basic Rent, any Additional Rent or any other sum payable
hereunder with knowledge of the breach of any covenant or agreement contained in
this Lease shall not be deemed a waiver of such breach, and no waiver by
Landlord of any provision of this Lease shall be deemed to have been made unless
expressed in writing and signed by Landlord. In addition to other remedies
provided in this Lease, Landlord shall be entitled, to the extent permitted by
applicable law, to injunctive relief in case of the violation, or attempted or
threatened violation, of any of the covenants, agreements, conditions or
provisions of this Lease, or to a decree compelling performance of any of the
covenants, agreements, conditions or provisions of this Lease, or to any other
remedy allowed to Landlord at law or in equity.
10.4. WAIVERS BY TENANT. Tenant hereby waives and surrenders for
itself and all those claiming under it, including creditors of all kinds, (i)
any right or privilege which it or any of them may have under any present or
future construction, statute or rule of law to redeem the Premises or to have
a continuance of this Lease for the term hereby demised after termination of
Tenant's right of occupancy by order or judgment of any court or by any legal
process or writ, or under the terms of this Lease or after the termination of
the term of this Lease as herein provided, and (ii) the benefits of any
present or future constitution, statute or rule of law which exempts property
from liability for debt or for distress for rent.
10.5. ATTORNEYS' FEES. In the event an action shall be brought for
the enforcement of any right set forth herein in connection with, and subject
to, the indemnification provisions contained in Section 6.10 hereof, the
non-prevailing party shall be liable for all of the expenses incurred in
connection therewith, including without limitation, reasonable attorneys'
fees.
XI. MISCELLANEOUS.
11.1. NOTICES, DEMANDS AND OTHER INSTRUMENTS. All notices, demands,
requests, consents, approvals and other instruments required or permitted to be
given pursuant to the terms of this Lease shall be in writing and shall be
deemed to have been properly given if (a) with respect to Tenant, sent by
registered or certified mail with a return receipt requested, postage prepaid,
or sent by facsimile, nationally recognized overnight express carrier or
delivered by hand, in each case addressed to Tenant at its notice address first
above set forth, and (b) with respect to Landlord, sent by registered or
certified mail with a return receipt request, postage prepaid, or sent by
facsimile, nationally recognized overnight express courier or delivered by hand
in each case, addressed to the Landlord at its address first above set forth
along with a copy to Lender: Finova Realty Capital Inc., 19900 MacArthur
Boulevard, Suite 1100, Irvine, CA 92612, Fax (949) 476-0580, Attn: Craig
Johnson, and Lender's Legal Counsel: Paul, Hastings, Janofsky & Walker, LLP,
555 South Flower Street, 23rd Floor, Los Angeles, CA 90071-2371,
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Fax (213) 627-0705, Attn: Margo E. Freedman, Esq. Landlord and Tenant shall each
have the right from time to time to specify as its address for purposes of this
Lease any other address in the United States of America upon giving fifteen (15)
days written notice thereof, similarly given, to the other party. Notices shall
be deemed communicated upon the earlier of receipt, or seventy-two (72) hours
from the time of mailing if mailed as provided in this Section 11.1 and on the
Business Day or first Business Day following transmission if given by facsimile.
11.2. ESTOPPEL CERTIFICATES AND CONSENTS.
(a) Tenant and Landlord will, from time to time, upon not
less than twenty (20) days prior request by Landlord or by Lender, execute,
acknowledge and deliver to the other party a Certificate in the form of Exhibit
"C" attached hereto certifying: (i) that this Lease is unmodified and in full
effect (or setting forth any modifications along with the statement that this
Lease as modified is in full effect); (ii) that the Basic Rent and Additional
Rent payable and the dates to which the Basic Rent, Additional Rent and other
sums payable hereunder have been paid and the most recent dates on which the
Basic Rent, Additional Rent and other sums payable hereunder have been paid;
(iii) that to the knowledge of Tenant, Landlord is not in any default of the
Lease which Tenant may have knowledge (or specifying such defaults in reasonable
detail); (iv) the commencement and expiration dates of the Lease; (v) the amount
of any security or other deposits; (vi) that either Tenant is in possession of
the Premises or who is in possession; (vii) any concessions or other rights that
Tenant (including first refusal, option or other occupancy claims) or Landlord
may have; and (viii) such other matters as may reasonably be required by the
requesting party. Any such certificate may be relied upon by any mortgagee,
prospective purchaser, or prospective mortgagee of the Premises. Tenant further
agrees to reasonably cooperate with Lender and its affiliates in the preparation
and review of disclosure documents which may be issued in connection with a
secondary market transaction involving a sale or securitization of the Loan.
(b) From time to time during the term of this Lease, Landlord
expects to secure financing of its interest in the Premises by assigning
Landlord's interest in this Lease and the sums payable hereunder. In the event
of any such assignment to Lender, Tenant will, upon not less than ten (10) days
prior request by Landlord, execute, acknowledge and deliver to Landlord a
consent clearly indicating (i) that Tenant is to make Basic Rent payments or
portions thereof directly to Lender or Lender's designee if required by Lender,
and (ii) consent to such assignment addressed to such lender in a form
satisfactory to Lender; and Tenant will produce, at Tenant's expense, such
certificates, opinions of counsel and other documents as may be reasonably
requested by Lender. Tenant acknowledges that, by execution hereof, it has
agreed to make payments of Basic Rent or portions thereof directly to Lender or
Lender's designee, without further notice or direction if required by Lender.
11.3. DETERMINATION OF FAIR MARKET VALUE. Fair market value for
purposes of Sections 3.1(f) and 11.7.1 hereof shall be equal to one hundred
percent (100%) of the then fair market value for comparable space in the
surrounding five (5) mile radius from the intersection of Montague Expressway
and 880 Freeway in San Jose, California. In the event the parties are unable to
agree on the then fair market value for comparable space in such area, each
party shall designate an M.A.I. appraiser within thirty (30) days after demand
by the other. The two M.A.I. appraisers selected by the parties shall determine
fair market value within thirty (30) days after
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their selection. If the two appraisers are unable to agree on fair market value,
they will in turn select a third M.A.I. appraiser, who together shall constitute
the "Appraisal Panel." In the event either of the failure of either party to
name an appraiser, or of the two appraisers to select a third appraiser, the
selection shall be made by the then presiding judge of the Santa Clara Superior
Court. All appraisers so selected shall have qualifications that include a
minimum of five (5) years of experience in the appraisal of commercial real
estate in Santa Clara County. Landlord shall be responsible for payment of the
appraiser it selects and Tenant shall pay the cost of the remaining
appraiser(s). The opinion of the Appraisal Panel shall be delivered to both
Landlord and Tenant within forty five (45) days after selection. In the event
either Landlord or Tenant disputes the appraised fair market value determined by
the Appraisal Panel, the disputing party shall so notify the other party within
five (5) days after receipt of such written determination by the Appraisal
Panel, and the matter shall be submitted to binding arbitration under the
auspices of JAMS/Endispute, San Francisco, CA. If the parties cannot agree on
the selection of an arbitrator, the arbitrator shall be chosen by the Executive
Director of JAMS/Endispute. The prevailing party shall be entitled to an award
of its reasonable attorneys fees incurred in the arbitration phase, its
JAMS/Endispute filing fees applicable to both the mediation and arbitration
phases, costs of the arbitrator, expert witness fees, court reporters costs and
any other outlay normally considered costs of suit in a court of law.
11.4. NO MERGER. There shall be no merger of this Lease or the
leasehold estate hereby created with the fee estate in the Premises or any part
thereof by reason of the same person acquiring or holding, directly or
indirectly, this Lease or the leasehold estate hereby created or any interest in
this Lease or in such leasehold estate as well as the fee estate in the Premises
or any portion thereof.
11.5. SURRENDER. Upon the termination of this Lease, Tenant shall
peaceably surrender the Premises to Landlord in the same condition in which they
were received from Landlord at the commencement of this Lease, except as altered
as permitted or required by this Lease. Tenant shall remove from the Premises
prior to or within a reasonable time after such termination (not to exceed
thirty (30) days) all its property that is capable of removal without causing
damage to the Premises, and, at Tenant's expense, shall at such times of
removal, repair any damage caused by such removal. Property not so removed shall
become the property of Landlord. Landlord may thereafter cause such property to
be removed and disposition of and the cost of repairing any damage caused by
such removal shall be borne by Tenant. Notwithstanding anything to the contrary
contained herein, upon termination of this Lease pursuant to a default by
Tenant, the heating, ventilation and air conditioning systems shall remain on
the Premises and shall become the property of Landlord. Any holding over by
Tenant of the Premises after the expiration or earlier termination of the term
of this Lease or any extensions thereof, with the consent of Landlord, shall
operate and be construed as a tenancy from month to month only, at one hundred
twenty-five percent (125%) of the Basic Rent reserved herein and upon the same
terms and conditions as contained in this Lease. Notwithstanding the foregoing,
any holding over without Landlord's consent shall entitle Landlord, in addition
to collecting Basic Rent at a rate of one hundred twenty-five percent (125%)
thereof, to exercise all rights and remedies provided by law or in equity.
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11.6. SEPARABILITY. Each and every covenant and agreement contained
in this Lease is separate and independent, and the breach of any thereof by
Landlord shall not discharge or relieve Tenant from any obligation hereunder. If
any term or provision of this Lease or the application thereof to any person or
circumstances or at any time to any extent be invalid and unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances or at any time other than those to which it is invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and shall be enforced to the extent permitted by law.
11.7. MERGER, CONSOLIDATION OR SALE OF ASSETS.
11.7.1 A merger or consolidation of Tenant with another
unaffiliated entity or the sale of substantially all of the assets of Tenant to
another entity shall be subject to the terms of this Section 11.7. Tenant may,
without Landlord's consent, merge with or convey its assets to another entity or
engage in a leveraged buyout or recapitalization; provided that, if the
transaction is done without Landlord's consent and results in a downgrading of
Tenant's current net worth and net income, then such transaction shall, at the
option of Landlord, constitute an Event of Default that entitles Landlord to
terminate this Lease unless Tenant makes an offer to purchase the Premises for
an amount which is equal to the fair market value of the Premises (including the
value of the Lease) determined in the manner set forth in Section 11.3, plus any
prepayment costs of the Loan, which such offer may be accepted or rejected by
Landlord. If Landlord falls to accept Tenant's purchase offer, it will be deemed
to have consented to the merger, consolidation or sale of assets.
11.7.2. In addition to foregoing, if Landlord consents to a
merger, consolidation or sale of assets as set forth in Section 11.7.1, or if
Tenant has become a subsidiary of a corporation whose senior unsecured and
unenhanced debt has an investment grade rating by Standard and Poor's
Corporation, Tenant shall cause such assignee or parent corporation to deliver
to Landlord an unconditional guaranty of payment and performance (and not merely
collectability) of all of Tenant's obligations under the Lease, containing
customary waivers and in form reasonably satisfactory to Landlord.
11.8. SAVINGS CLAUSE. No provision contained in this Lease which
purports to obligate Tenant to pay any amount of interest or any fees, costs or
expenses which are in excess of the maximum permitted by applicable law, shall
be effective to the extent that it calls for payment of any interest or other
sums in excess of such maximum.
11.9. BINDING EFFECT. All of the covenants, conditions and
obligations contained in this Lease shall be binding upon and inure to the
benefit of the respective successors and assigns of Landlord and Tenant to the
same extent as if each successor and assign were in each case named.
11.10. TABLE OF CONTENTS AND HEADINGS. The table of contents and
headings used in this Lease are for convenience of reference only and shall not
to any extent have the effect of modifying, amending or changing the provisions
of this Lease.
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11.11. GOVERNING LAW. This Lease shall be governed by and interpreted
under the laws of the state of California.
11.12. CERTAIN DEFINITIONS.
(a) The term "Affiliate" of a person or entity means any
other person or entity which, directly or indirectly, controls or is controlled
by or is under common control with such person or entity (excluding any trustee
under, or any committee with responsibility for administering, any employee
benefit plan under which such person, or any wholly-owned subsidiary of such
person, may have liability). A person or entity shall be deemed to be
"controlled by" any other person or entity if such other person or entity
possesses, directly or indirectly, power to direct or cause the direction of the
management and policies of such person or entity whether through the ownership
of voting securities, by contract or otherwise.
(b) The term "Business Day" shall mean any day other than a
Saturday, a Sunday, or a day on which federally insured depository institutions
in Los Angeles, California, New York, New York, or Chicago, Illinois are
authorized or obligated by law, regulation, governmental decree or executive
order to be closed.
(c) The term "Imposition" shall have the following meaning
and include all surcharges, interest and penalties thereto:
(i) All real estate taxes, including without
limitation, any special taxing districts taxes or levies, imposed by
governmental authorities or special taxing districts of any kind;
(ii) Any single business, transaction privilege, rent,
gross receipts or similar taxes imposed or levied upon, assessed against or
measured by the Basic Rent, Additional Rent or any other sums payable by Tenant
hereunder or levied upon or assessed against the Premises (but excluding
Landlord's state and federal income taxes or business license tax);
(iii) All ad valorem, sales and use taxes which may be
levied or assessed against or payable by Landlord and Tenant on account of the
acquisition, leasing or use of the Premises or any portion thereof, including
without limitation, any taxes levied on the rental payable hereunder (but
excluding transfer taxes at close of escrow);
(iv) All payments due on all covenants and obligations
running with the land;
(v) All charges for water, gas, light, heat, telephone,
electricity, and other utilities and communication services rendered or used on
or about the Premises; and
(vi) All other taxes and any payments in lieu thereof,
assessments (including assessments for benefits from public works or
improvements, whether or not begun or completed prior to the commencement of the
term of this Lease and whether or not to be completed within said term), levies,
fees, water and sewer rents and charges, and all other governmental charges of
every kind, general and special, ordinary and extraordinary, whether or
30
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not the same shall have been within the express contemplation of the parties
hereto, imposed or levied upon or assessed against: (A) the Premises or any part
thereof; (B) any Basic Rent or Additional Rent reserved or payable hereunder;
and/or (C) this Lease or the leasehold estate created hereby or which arise in
respect of the operation, possession, occupancy or use of the Premises (but
excluding Landlord's state and federal income taxes or business license tax).
(d) The term "Landlord" means the owner, for the time being,
of the rights of the lessor under this Lease, and its successors and assigns,
and upon any assignment or transfer of such rights, except an assignment or
transfer made as security for an obligation, the assignor or transferor shall be
relieved of all future duties and obligations under this Lease, subject to the
consent of Lender, and if and only if the assignee or the transferee shall
expressly agree in writing to be bound by and to assume all the covenants of
Landlord hereunder.
(e) The term "Lease" means this Lease and Agreement of Lease
as amended and modified from time to time together with any memorandum or short
form of lease entered into for the purpose of recording.
(f) The term "Lender" means Finova Realty Capital Inc., a
Delaware corporation, and its successors and assigns and any other subsequent
holder of a first mortgage encumbering the Premises.
(g) The term "Permitted Encumbrance" means:
(i) The Mortgage, the Assignment and any other security
instrument relating to the Premises and this Lease, subject to the rights
of Tenant under this Lease, and securing the borrowing by Landlord from
Lender;
(ii) Any liens for taxes, assessments and other
governmental charges and any liens of mechanics, materialmen and laborers
for work or services performed or materials furnished in connection with
the Premises, which are not due and payable;
(iii) The easements, rights-of-way, encroachments,
encumbrances, restrictive covenants or other matters affecting the title to
the Premises or any part thereof set forth in Schedule B to the policy of
owners title insurance (or commitment therefor) delivered to and accepted
by Landlord with respect to the Premises in connection with the delivery of
this Lease as shown on Exhibit "B" attached hereto; and
(iv) This Lease and the rights of Tenant hereunder;
(h) The term "Person" means any individual, corporation,
limited liability company, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government.
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(i) The term "Tenant's Certificate" means a written
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the President or any Vice President of Tenant.
(j) The term "Tenant's Trade Fixtures" means all personal
property of Tenant in or on the Premises which is not necessary for the
operation of the Improvements.
(k) The term "Termination Date" means the date on which this
Lease terminates in accordance with its terms, and shall be a Payment Date (as
defined in the Loan Commitment).
11.13. EXHIBITS. The following are Exhibits "A," "B," "C" and "D"
referred to in this Lease, which are hereby incorporated by reference herein and
made a part hereof
<TABLE>
<S> <C>
(a) Exhibit "A" to Lease: Legal Description.
(b) Exhibit "B" to Lease: Permitted Encumbrances.
(c) Exhibit "C" to Lease: Tenant Estoppel Certificate
(d) Exhibit "D" to Lease: Subordination, Non-Disturbance, and
Attornment Agreement
</TABLE>
11.14. INTEGRATION. This Lease, the exhibits hereto and the
memorandum, if any, hereof, constitute the entire agreement between the parties
hereto with regard to the subject matter hereof, and supersede any prior
understandings, agreements or negotiations. This Lease may not be amended or
modified except by a writing executed by Tenant and Landlord, with the written
consent of Lender.
11.15. LEASE MEMORANDUM. Each of Landlord and Tenant shall execute,
acknowledge and deliver to the other a written memorandum of this Lease
("Memorandum") to be recorded at Tenant's sole cost and expense in the
appropriate land records of the jurisdiction in which the Premises is located,
in order to give public notice and protect the validity of this Lease. In the
event of any discrepancy between the provisions of the recorded Memorandum and
the provisions of this Lease, the provisions of this Lease shall prevail.
11.16. SUBORDINATION TO FINANCING.
(a) (i) Subject to the provisions of Section 11.16(a)(ii)
below, Tenant agrees that this Lease shall at all times be subject and
subordinate to the lien of any Mortgage, and Tenant agrees, upon demand, without
cost, to execute instruments as may be required to further effectuate or confirm
such subordination and the lender's agreement to the terms of Section
11.16(a)(ii) below.
(ii) Except as expressly provided in this Lease by reason
of the occurrence of an Event of Default, Tenant's tenancy and Tenant's rights
under this Lease shall not be disturbed, terminated or otherwise adversely
affected, nor shall this Lease be affected, by any default under any Mortgage,
and in the event of a foreclosure or other enforcement of any Mortgage, or sale
in lieu thereof, the purchaser at such foreclosure sale shall be bound to Tenant
for the Terms of this Lease, the rights of Tenant under this Lease shall
expressly survive, and this
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Lease shall in all respects continue in full force and effect so long as no
Event of Default has occurred and is continuing. Tenant shall not be named as a
party defendant in any such foreclosure suit, except as may be required by law.
Any Mortgage to which this Lease is now or hereafter subordinate shall provide,
in effect, that during the time this Lease is in force insurance and
condemnation proceeds shall be permitted to be used in accordance with the
provisions of this Lease. At Tenant's request, Landlord shall request any lender
to execute a separate non-disturbance agreement in form and substance consistent
with the foregoing.
(b) Notwithstanding the provisions of Section 11.16(a), the
holder of any Mortgage to which this Lease is subject and subordinate shall have
the right, at its sole option, at any time, to subordinate and subject the
Mortgage, in whole or in part, to this Lease by recording a unilateral
declaration to such effect, provided that such holder shall have agreed that
during the time this Lease is in force insurance proceeds and Net Award shall be
permitted to be used for restoration in accordance with the provisions of this
Lease.
(c) At any time prior to the expiration of the Term, Tenant
agrees, at the election and upon demand of any owner of the Leased Premises, or
of a lender who has granted non-disturbance to Tenant pursuant to Section
11.16(a) above, to attorn, from time to time, to any such owner or lender, upon
the terms and conditions of this Lease, for the remainder of the Term. The
provisions of this Section 11.16(c) shall inure to the benefit of any such
owner or lender, shall apply notwithstanding that, as a matter of law, this
Lease may terminate upon the foreclosure of the Mortgage, shall be
self-operative upon any such demand, and no further instrument shall be required
to give effect to said provisions.
(d) Each of Tenant, any owner and lender, however, upon
demand of the other, hereby agrees to execute, from time to time, instruments in
confirmation of the foregoing provisions of Sections 11.16(a) and 11.16(c),
reasonably satisfactory to the requesting party acknowledging such
subordination, non-disturbance and attornment as are provided in such
subsections and setting forth the terms and conditions of its tenancy.
(e) Each of Tenant, Landlord and Lender agrees that, if
requested by any of the others, each shall, without charge, enter into a
Subordination, Non-Disturbance and Attornment Agreement in the form attached
hereto as Exhibit "D" and Tenant hereby agrees for the benefit of Lender that
Tenant will not: (i) without in each case the prior written consent of Lender,
which shall not be unreasonably withheld, conditioned or delayed, amend or
modify the Lease (provided, however, Lender, in Lender's sole discretion may
withhold or condition its consent to any amendment or modification which would
or could (A) alter in any way the amount or time for payment of any Basic Rent,
Additional Rent or other sum payable hereunder, (B) alter in any way the
absolute and unconditional nature of Tenant's obligations hereunder or
materially diminish any such obligations, (C) result in any termination hereof
prior to the end of the Primary Term, or (D) otherwise, in Lender's reasonable
judgment, affect the rights or obligations of Landlord or Tenant hereunder), or
enter into any agreement with Landlord so to do; (ii) without the prior written
consent of Lender which may be withheld in Lender's sole discretion, cancel or
surrender or seek to cancel or surrender the Term hereof, or enter into any
agreement with Landlord to do so (the parties agreeing that the foregoing shall
not be construed to affect the rights or obligations of Tenant, Landlord or
Lender with respect to any termination permitted under the express terms hereof
in connection with an offer to purchase the property
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following certain events of condemnation; or (iii) pay any installment of Basic
Rent more than one (1) month in advance of the due date thereof or otherwise
than in the manner provided for in this Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the
day and year first above set forth.
"LANDLORD"
TVCA, LLC
a Delaware limited liability company
By: TVCA Inc., a Delaware corporation,
Its Manager
By: /s/ C. Frederick Wehba II
---------------------------------
C. Frederick Wehba II, President
"TENANT"
TELEVIDEO, Inc.,
a Delaware corporation
By: /s/ K. Philip Hwang
-----------------------------------
Name: K. Philip Hwang
-----------------------------------
Title: CEO
----------------------------------
34
<PAGE>
State of California )
) SS
County of Los Angeles )
The foregoing instrument was acknowledged before me this 16th day of
December, 1998, by C. Frederick Wehba II, as president of TVCA, Inc., a Delaware
corporation and the manager of TVCA, LLC, a Delaware limited liability company,
on behalf of the company.
WITNESS my hand and official seal.
My commission expires: 7-14-2000
GLORIA E. CUEVA
Comm. # 1105597
[SEAL] NOTARY PUBLIC - CALIFORNIA
Los Angeles County
My Comm. Expires July 14, 2000
/s/ Gloria E. Cueva
------------------------------
NOTARY PUBLIC
State of California )
) SS
County of Santa Clara )
The foregoing instrument was acknowledged before me this 21st day of
December, 1998, by K. Philip Hwang as CEO of Televideo, Inc., a Delaware
corporation, on behalf of the corporation.
WITNESS my hand and official seal.
My commission expires: March 17, 2002
--------------
/s/ Kathy Cleveland
------------------------------
NOTARY PUBLIC
KATHY CLEVELAND
Commission # 1173980
[SEAL] Notary Public - California
Santa Clara County
My Comm. Expires Mar 17, 2002
35
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EXHIBIT A
LEGAL DESCRIPTION
REAL PROPERTY in the City of San Jose, County of Santa Clara, State of
California, described as follows:
Parcel A, as shown on that certain Parcel Map filed for record in the office of
the Recorder of the County of Santa Clara, State of California on March 2, 1981,
in Book 480 of Maps page(s) 28.
APN: 237-01-043
APN: 237-01-021
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EXHIBIT B
PERMITTED ENCUMBRANCES
37
<PAGE>
EXHIBIT "C"
TENANT ESTOPPEL CERTIFICATE
To: FINOVA Realty Capital Inc., a Delaware corporation, its successors and
assigns (collectively "LENDER")
The undersigned hereby certifies and agrees as follows:
1. The undersigned is the tenant (the "TENANT") under that certain Lease
(the "LEASE") by and between Tenant and TVCA (such party, together with its
successors and assigns hereinafter collectively referred to as the "LANDLORD")
dated as of _____________, 1998 affecting space in the building located at 2345
Harris Way, San Jose, California 95131 (the "BUILDING").
2. The Lease commenced on December __, 1998.
3. The Lease expires on December 31, 2013. Tenant has no option or other
right to extend the term of the Lease beyond December 31, 2023.
4. Tenant has accepted and is occupying the entire premises demised to it
under the Lease (the "PREMISES") and all improvements to the Premises required
by the Lease have been completed by Landlord in accordance with the Lease.
5. Tenant has not paid rent or additional rent beyond the current month
and agrees not to pay rent or additional rent more than one month in advance at
any time.
6. Rent payable in the amount of $98,541.67 per month has been paid
through February 1, 1999.
7. There are no defenses to or offsets against the enforcement of the
Lease or any provision thereof by the Landlord.
8. Tenant has deposited $197,083.34 as a security deposit with Landlord
pursuant to the terms of the Lease.
9. Landlord has not agreed to grant Tenant any free rent or rent rebate
or to make any contribution to tenant improvements. Landlord has not agreed to
reimburse Tenant for or to pay Tenant's rent obligation under any other lease.
10. Tenant has not advanced any funds for or on behalf of Landlord for
which Tenant has a right to deduct from or offset against future rent payments.
11. The Lease is in full force and effect without default thereunder by
Tenant or, to the best knowledge of Tenant, Landlord.
12. The Lease is the entire agreement between the Landlord and Tenant
pertaining to the Premises.
13. The Lease has not been amended, modified or supplemented except as set
forth in Paragraph 1 above.
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14. Tenant agrees that no future amendment of the Lease shall be
enforceable unless such amendment has been consented to in writing by Lender.
15. Except as set forth in the Lease, Tenant does not have any purchase
option or first refusal right with respect to the Building. Tenant does not have
any right or option for additional space in the Building.
16. Since the date of the Lease, there has been no material adverse change
in the financial condition of Tenant, and there are no actions, whether
voluntary or otherwise, pending against Tenant under the bankruptcy,
reorganization, arrangement, moratorium or similar laws of the United States,
any state thereof or any other jurisdiction.
17. Tenant will not seek to terminate the Lease or seek or assert any
set-off or counterclaim against the rent or additional rent by reason of any act
or omission of the Landlord, until Tenant shall have given written notice of
such act or omission to Lender.
18. Tenant agrees to provide earthquake insurance, if required by Lender,
in addition to the other insurance required under the Lease, in an amount
reasonably determined by Lender in its sole discretion.
19. If Tenant shall make a Purchase Offer (as defined in the Lease)
pursuant to Section 7 of the Lease and purchases the Property in connection
therewith, Tenant acknowledges that all proceeds shall be applied first to the
amount due Lender under the Loan Documents, including any prepayment penalties,
plus reasonable out-of-pocket expenses of Lender relating to such purchase.
Tenant acknowledges that Lender will rely on this Certificate in making a
loan or otherwise extending credit to Borrower.
TELEVIDEO, INC.,
a Delaware corporation
By: /s/ K. Philip Hwang
-----------------------------------
Name: K. Philip Hwang
-----------------------------------
Title: CEO
----------------------------------
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<PAGE>
EXHIBIT "D"
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT (the
"Agreement") is made as of the ____ day of December, 1998 by and between
FINOVA Realty Capital Inc., a Delaware corporation, having an address at
19900 MacArthur Boulevard, Suite 1100, Irvine, California 92612 ("Lender")
and TELEVIDEO, INC., a Delaware corporation, having an address at 2345 Harris
Way San Jose, California 95131 ("Tenant").
RECITALS:
A. Lender is the present owner and holder of a certain mortgage
and security agreement (the "Security Instrument") dated December ____, 1998,
given by Landlord (defined below) to Lender which encumbers the fee estate of
Landlord in certain premises described in Exhibit A attached hereto (the
"Property") and which secures the payment of certain indebtedness owed by
Landlord to Lender evidenced by a certain promissory note dated December
____, 1998, given by Landlord to Lender (the "Note");
B. Tenant is the holder of a leasehold estate in a portion of the
Property under and pursuant to the provisions of a certain lease dated as of
December ___, 1998 between TVCA, LLC, a Delaware limited liability company,
as landlord ("Landlord") and Tenant, as tenant (the "Lease"); and
C. Tenant has agreed to subordinate the Lease to the Security
Instrument and to the lien thereof and Lender has agreed to grant
non-disturbance to Tenant under the Lease on the terms and conditions
hereinafter set forth.
AGREEMENT:
For good and valuable consideration, Tenant and Lender agree as
follows:
1. SUBORDINATION. The Lease and all of the terms, covenants and
provisions thereof and all rights, remedies and options of Tenant thereunder
are and shall at all times continue to be subject and subordinate in all
respects to the terms, covenants and provisions of the Security Instrument
and to the lien thereof, including without limitation, all renewals,
increases, modifications, spreaders, consolidations, replacements and
extensions thereof and to all sums secured thereby and advances made
thereunder with the same force and effect as if the Security Instrument had
been executed, delivered and recorded prior to the execution and delivery of
the Lease.
2. NON-DISTURBANCE. If any action or proceeding is commenced by
Lender for the foreclosure of the Security Instrument or the sale of the
Property, Tenant shall not be named as a party therein unless such joinder
shall be required by law, provided, however, such joinder shall not result in
the termination of the Lease or disturb the Tenant's possession or use of the
premises demised thereunder, and the sale of the Property in any such action
or proceeding and the exercise by Lender of any of its other rights under the
Note or the Security Instrument shall be made subject to all rights of Tenant
under the Lease, provided that at the time of the commencement of any such
action or proceeding or at the time of any such sale or exercise of any such
other rights (a) the term of the Lease shall have commenced pursuant to the
provisions thereof, (b) Tenant shall be in possession of the premises demised
under the Lease, (c) the Lease shall be in full force and effect and (d)
Tenant shall not be in material default under any of the
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<PAGE>
terms, covenants or conditions of the Lease as determined by Lender in its
reasonable discretion or of this Agreement on Tenant's part to be observed or
performed.
3. ATTORNMENT. If Lender or any other subsequent purchaser of the
Property shall become the owner of the Property by reason of the foreclosure
of the Security Instrument or the acceptance of a deed or assignment in lieu
of foreclosure or by reason of any other enforcement of the Security
Instrument (Lender or such other purchaser being hereinafter referred as
"Purchaser"), and the conditions set forth in Section 2 above have been met
at the time Purchaser becomes owner of the Property, the Lease shall not be
terminated or affected thereby but shall continue in full force and effect as
a direct lease between Purchaser and Tenant upon all of the terms, covenants
and conditions set forth in the Lease and in that event, Tenant agrees to
attorn to Purchaser and Purchaser by virtue of such acquisition of the
Property shall be deemed to have agreed to accept such attornment, provided,
however, that Purchaser shall not be (a) liable for the failure of any prior
landlord (any such prior landlord, including Landlord and any successor
landlord, being hereinafter referred to as a "Prior Landlord") to perform any
of its obligations under the Lease which have accrued prior to the date on
which Purchaser shall become the owner of the Property, provided that the
foregoing shall not limit Purchaser's obligations under the Lease to correct
any conditions that (i) existed as of the date Purchaser shall become the
owner of the Property and (ii) violate Purchaser's obligations as landlord
under the Lease; provided further, however, that Purchaser shall have
received written notice of such omissions, conditions or violations and has
had a reasonable opportunity to cure the same, all pursuant to the terms and
conditions of the Lease, (b) subject to any offsets, defenses, abatements or
counterclaims which shall have accrued in favor of Tenant against any Prior
Landlord prior to the date upon which Purchaser shall become the owner of the
Property, (c) liable for the return of rental security deposits, if any, paid
by Tenant to any Prior Landlord in accordance with the Lease unless such sums
are actually received by Purchaser, (d) bound by any payment of rents,
additional rents or other sums which Tenant may have paid more than one (1)
month in advance to any Prior Landlord unless (i) such sums are actually
received by Purchaser or (ii) such prepayment shall have been expressly
approved of by Purchaser or (e) bound by any agreement terminating or
amending or modifying the rent, term, commencement date or other material
term of the Lease, or any voluntary surrender of the premises demised under
the Lease, made without Lender's or Purchaser's prior written consent prior
to the time Purchaser succeeded to Landlord's interest. In the event that any
liability of Purchaser does arise pursuant to this Agreement, such liability
shall be limited and restricted to Purchaser's interest in the Property and
shall in no event exceed such interest.
4. NOTICE TO TENANT. After notice is given to Tenant by Lender that
the Landlord is in default under the Note and the Security Instrument and that
the rentals under the Lease should be paid to Lender pursuant to the terms of
the assignment of leases and rents executed and delivered by Landlord to Lender
in connection therewith, Tenant shall thereafter pay to Lender or as directed by
the Lender, all rentals and all other monies due or to become due to Landlord
under the Lease and Landlord hereby expressly authorizes Tenant to make such
payments to Lender and hereby releases and discharges Tenant from any liability
to Landlord on account of any such payments.
5. NOTICE TO LENDER AND RIGHT TO CURE. Tenant shall notify Lender
of any default by Landlord under the Lease and agrees that, notwithstanding
any provisions of the Lease to the contrary, no notice of cancellation
thereof or of an abatement shall be effective unless Lender shall have
received notice of default giving rise to such cancellation or abatement and
shall have failed within sixty (60) days after receipt of such notice to cure
such default, or if such default cannot be cured within sixty (60) days,
shall have failed within sixty (60) days after receipt of such notice to
commence and thereafter diligently pursue any action necessary to cure
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<PAGE>
such default. Notwithstanding the foregoing, Lender shall have no obligation to
cure any such default.
6. NOTICES. All notices or other written communications hereunder
shall be deemed to have been properly given (i) upon delivery, if delivered in
person or by facsimile transmission with receipt acknowledged by the recipient
thereof and confirmed by telephone by sender, (ii) one (1) Business Day
(hereinafter defined) after having been deposited for overnight delivery with
any reputable overnight courier service, or (iii) three (3) Business Days after
having been deposited in any post office or mail depository regularly maintained
by the U.S. Postal Service and sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to Tenant: TELEVIDEO, INC.
2345 Harris Way
San Jose, CA 95131
Attention: Philip Hwang or Kathy Cleveland
Phone No. (408) 955-7702
Facsimile No. (408) 955-7790
If to Lender: FINOVA REALTY CAPITAL INC.
c/o Midland Loan Services, L.P.
Commercial Mortgage Servicing
210 West 10th Street, 5th Floor
Kansas City, MO 64105
Attention: Dennis Siefers
Phone No. (816) 435-5061
Facsimile No. (816) 435-2327
or addressed as such party may from time to time designate by written notice to
the other parties. For purposes of this Section 6, the term "Business Day" shall
mean a day on which commercial banks are not authorized or required by law to
close in the state where the Property is located. Either party by notice to the
other may designate additional or different addresses for subsequent notices or
communications.
7. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of Lender, Tenant and Purchaser and their respective
successors and assigns.
8. GOVERNING LAW. This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the State where the Property is located and
shall in all respects be governed, construed, applied and enforced in accordance
with the laws of the State where the Property is located.
9. MISCELLANEOUS. This Agreement may not be modified in any manner
or terminated except by an instrument in writing executed by the parties hereto.
If any term, covenant or condition of this Agreement is held to be invalid,
illegal or unenforceable in any respect, this Agreement shall be construed
without such provision. This Agreement may be executed in any number of
duplicate originals and each duplicate original shall be deemed to be an
original. This Agreement may be executed in several counterparts, each of which
counterparts shall be deemed an original instrument and all of which together
shall constitute a single Agreement. The failure of any party hereto to execute
this Agreement, or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder. Whenever the context may require,
any pronouns used herein shall include the corresponding masculine, feminine or
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<PAGE>
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
IN WITNESS WHEREOF, Lender and Tenant have duly executed this
Agreement as of the date first above written.
LENDER:
FINOVA REALTY CAPITAL INC.
a Delaware corporation
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
TENANT:
TELEVIDEO, INC.
a Delaware corporation
By: /s/ K. Philip Hwang
-------------------------------
Name: K. Philip Hwang
-------------------------------
Title: CEO
-------------------------------
The undersigned accepts and agrees
to the provisions of Section 4 hereof:
LANDLORD:
TVCA, LLC,
a Delaware corporation
By: TVCA, INC.
a Delaware corporation
Manager
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
(ALL SIGNATURES MUST BE NOTARIZED)
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State of California )
) ss.
County of Los Angeles )
On ______________, before me, the undersigned, personally appeared C.
Frederick Wehba II, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
- ---------------------------------
Notary Public in and for said
County and State
(SEAL)
State of California )
) ss.
County of Santa Clara )
On 12/21/98, before me, the undersigned, personally appeared K. Philip Hwang,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity(ies), and that by his signature(s) on the instrument the person(s),
or the entity upon behalf of which the person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Kathy Cleveland
- -------------------------------
Notary Public in and for said
County and State
(SEAL)
Kathy Cleveland
Commission #1173980
Notary Public--California
Santa Clara County
My Comm. Expires Mar 17, 2002
44
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State of California )
) ss.
County of Orange )
On _________, before me, the undersigned, personally appeared _____________,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
- ---------------------------------
Notary Public in and for said
County and State
(SEAL)
45
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Record and Return to:
- -------------------------------
- -------------------------------
- -------------------------------
- -------------------------------
Attn:
--------------------------
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Exhibit 2.3
ESCROW AGREEMENT
THIS AGREEMENT is made this 21st day of December 1998, by and among, TVCA,
LLC a Delaware limited liability company as "Purchaser," TELEVIDEO, INC., a
Delaware corporation, as "Seller", and WILMINGTON TRUST COMPANY, a Delaware
banking corporation, as "Escrow Agent".
WHEREAS, Purchaser is acquiring certain real property from Seller located
at 2345 Harris Way, San Jose, California (the "Property"); and
WHEREAS, Purchaser has delivered to Seller a promissory note ("Note") in
the amount of Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) in
connection with its acquisition of the Property, a true and correct copy of
which is attached hereto as Exhibit "1."
WHEREAS, the monthly amount due Seller on the Note is Twenty One Thousand
Seven Hundred Thirty Five and 34/100 Dollars ($21,735.34).
NOW, THEREFORE, in consideration of the premises, and further consideration
of the covenants set forth hereafter, it is hereby agreed mutually as follows:
I. DESIGNATION AS ESCROW AGENT.
Subject to the terms and conditions hereof, Purchaser and Seller hereby
appoint Wilmington Trust Company as Escrow Agent and Wilmington Trust Company
hereby accepts such appointment.
II. DEPOSIT OF ESCROW FUNDS.
(a) Upon execution of this Escrow Agreement, Purchaser shall deposit the
sum of One Hundred Dollars ($100.00) into an account (the "Escrow Account")
established with Escrow Agent. In addition to such initial deposit, Escrow Agent
shall receive a monthly amount from Finova Realty Capital, Inc., a Delaware
corporation ("FRC") for immediate deposit into the Escrow Account. At all times
from and effect the date of this Agreement, Purchaser shall be the sole owner of
the Escrow Account.
(b) Escrow Agent will hold the initial deposit and all subsequent deposits
from FRC in the Escrow Account, together with all investments thereof and all
interest accumulated thereon and proceeds therefrom, in escrow upon the terms
and conditions set forth in this Escrow Agreement and shall not disburse funds
from the Escrow Account except as provided herein.
(c) Unless otherwise directed by Purchaser, Escrow Agent shall invest the
Escrow Account solely in securities issued or guaranteed by the United States or
an agency thereof, or in securities of mutual funds the assets of which are
invested in securities issued or guaranteed by the United States or an agency
thereof, or in repurchase agreements involving securities issued or guaranteed
by the United States or an agency thereof, or in certificates of deposit issued
by banks.
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III. DISBURSEMENT OF ESCROW ACCOUNT. Escrow Agent will make the following
disbursements to Purchaser and Seller on the first day of each month.
(a) To Seller, the sum of Twenty One Thousand Seven Hundred Thirty Five
and 34/100 Dollars ($21,735.34).
(b) To Purchaser, the amount remaining in the Escrow Account after the
payment to Seller as set forth above; provided, however, that Escrow Agent
may retain a sufficient amount in the Escrow Account in order to keep the
account open.
IV. AUTHORITY OF ESCROW AGENT AND LIMITATION OF LIABILITY.
(a) In acting hereunder, Escrow Agent shall have only such duties as
are specified herein and no implied duties shall be read into this Agreement,
and Escrow Agent shall not be liable for any act done or omitted to be done,
by it in the absence of its gross negligence or willful misconduct.
(b) Escrow Agent may act in reliance upon any writing or instrument or
signature which it, in good faith, believes to be genuine, and may assume the
validity and accuracy of any statement or assertion contained in such a
writing or instrument and may assume that any person purporting to give any
writing, notice, advice or instruction in connection with the provisions
hereof has been duly authorized so to do.
(c) Escrow Agent shall be entitled to consult with legal counsel in the
event that a question or dispute arises with regard to the construction of
any of the provisions hereof, and shall incur no liability and shall be fully
protected in acting in accordance with the advice or opinion of such counsel.
(d) Escrow Agent shall not be required to use its own funds in the
performance of any of its obligations or duties or the exercise of any of its
rights or powers, and shall not be required to take any action which, in
Escrow Agent's sole and absolute judgment, could involve it in expense or
liability unless furnished with security and indemnity which it deems, in its
sole and absolute discretion, to be satisfactory.
(e) Seller shall pay to Escrow Agent compensation for its services
hereunder to be determined from time to time by the application of the
current rates than charged by Escrow Agent for accounts of similar size and
character, with a minimum rate of Twenty Five Hundred Dollars ($2,500.00) per
annum. Seller shall also pay to Escrow Agent an initial set up fee of Three
Thousand Dollars ($3,000.00). In the event Escrow Agent renders any
extraordinary services in connection with the escrow account at the request
of the parties, Escrow Agent shall be entitled to additional compensation
therefor. Escrow Agent shall have a first lien against the Escrow Account to
secure the obligations or Purchaser and Seller hereunder. The terms of this
paragraph shall survive termination of this Agreement.
(f) Purchaser and Seller hereby agree, jointly and severally, to
indemnify Escrow Agent and hold it harmless from any and against all
liabilities, loses, actions, suits or proceedings at law or in equity, and
any other expenses, fees or charges of any character or nature, including,
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without limitation, attorney's fees and expenses, which Escrow Agent may incur
or with which it may be threatened by reason of its acting as Escrow Agent under
this Agreement or arising out of the existence of the Escrow Account, except to
the extent the same shall be caused by Escrow Agent's gross negligence or
willful misconduct. Escrow Agent shall have a first lien against the Escrow
Account to secure the obligations of the parties hereunder. The terms of this
paragraph shall survive termination of this Agreement.
(g) In the event Escrow Agent receives conflicting instructions hereunder,
Escrow Agent shall be fully protected in refraining from acting until such
conflict is resolved to the satisfaction of Escrow Agent. In addition, Escrow
Agent shall have the right to institute a bill of interpleader in any court of
competent jurisdiction to determine the rights of the parties, and the parties
shall pay all costs, expenses and disbursements in connection therewith,
including attorney's fees. For purposes of this Escrow Agreement, the parties
hereto agree to submit to the jurisdiction of the courts of the State of
Delaware.
(h) Escrow Agent may resign as Escrow Agent, and, upon its resignation,
shall thereupon be discharged from any and shall further duties and obligations
under this Agreement by giving notice in writing of such resignation to
Purchaser and Seller, which notice shall specify a date upon which such
resignation shall take effect. Upon the resignation of Escrow Agent, Purchaser
and Seller shall, within sixty (60) business days after receiving the foregoing
notice from Escrow Agent, designate a substitute escrow agent (the "Substitute
Escrow Agent"), which Substitute Escrow Agent shall, upon its designation and
notice of such designation to Escrow Agent, succeed to all of the rights, duties
and obligations of Escrow Agent hereunder.
IV. NOTICES.
Except as otherwise provided herein, any notices, instruction or instrument
to be delivered hereunder shall be in writing and shall be sent by certified or
registered mail, postage prepaid, return receipt requested, or sent by
facsimile, nationally-recognized overnight courier addressed to the parties or
delivered by hand to the addresses forth on the signature page hereof or at such
other address specified in writing by the addressee. Notices shall be deemed
communicated upon the earlier of receipt or seventy-two (72) hours from the time
of mailing as provided in this Article IV, and on the business day or first
business day following transmission if given by facsimile.
V. AMENDMENT.
This Escrow Agreement may not be amended, modified, supplemented or
otherwise altered except by an instrument in writing signed by the parties
hereto.
VI. TERMINATION.
This Agreement will terminate upon the disbursement of all funds in the
Escrow Account, as provided above, by the Escrow Agent.
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VII. GOVERNING LAW.
This is a Delaware contract and shall be governed by Delaware law in all
respects.
VIII. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original, and such counterparts
together shall consitute and be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused their names to be hereto
subscribed by their respective authorized representatives as of the day and year
first above written.
TVCA, LLC WILMINGTON TRUST COMPANY,
as Purchaser Escrow Agent
By: /s/ C. Frederick Wehba II By:
-------------------------- ------------------------
C. Frederick Wehba II, President Title:
TVCA, INC./ Manager
Address: Address:
1900 Avenue of the Stars, Suite 2840 Rodney Square North
Los Angeles, CA 90067 1100 North Market Street
Fax No.: (310) 282-8585 Wilmington, Delaware 19890
Tel No.: (310) 282-8000 Fax No.: (302) 651 - 1576
Attention: C. Frederick Wehba II Tel No.: (302) 651 - 1834
Attention: W. Chris Sponenberg
TELEVIDEO, INC.
as Seller
BY: /s/ K. Philip Hwang
---------------------------
K. Philip Hwang, CEO
Address:
2345 Harris Way
San Jose, CA 95131
Fax No.: (408) 954-0622
Tel No.: (408) 954-8333
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<PAGE>
EXHIBIT "1"
PROMISSORY NOTE
$2,750,000.00 December ___, 1998
1. For value received, the undersigned, TVCA HOLDING LLC, a Delaware limited
liability company ("Maker"), promises to pay to the order of TELEVIDEO,
INC., a Delaware corporation ("Payee"), or order, at 2345 Harris Way, San
Jose, CA 95131, or other address directed by Payee, the principal sum of
Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) with interest
at the rate of seven and one-quarter percent (7.25%) per annum from the
date hereof with monthly payments based on an amortization period of twenty
(20) years. If not earlier paid in full, any unpaid principal and all
accrued interest shall be due and payable on December 1, 2013.
2. Principal and accrued interest shall be payable in equal monthly
installments of Twenty One Thousand Seven Hundred Thirty Five and 34/100
Dollars ($21,735.34) each on the first day of each month commencing on
January 1, 1999. On December 1, 2013, the outstanding principal balance
and any and all accrued interest then due and payable shall be paid in
full to Payee by Maker.
3. Both principal and interest shall be payable to Payee, or at any other
place hereafter designated in writing by the holder(s) and delivered to
Maker. All sums shall be deemed paid upon receipt of same by the holder(s)
hereof.
4. This Promissory Note is secured by that certain Pledge and Security
Agreement ("Pledge Agreement") of even date herewith executed by all of
the members of Maker and that certain Escrow Agreement ("Escrow Agreement")
of even date herewith executed by Maker, Payee, and Wilmington Trust
Company, a Delaware banking corporation.
5. Payments on this Promissory Note shall be applied first to payment of any
late charges, second to payment of accrued interest and third to the
outstanding principal.
6. Maker shall have the right to prepay all or any portion of the indebtedness
evidenced by this Promissory Note at any time without premium or penalty.
7. Subject in all events to the provisions of Section 8 hereof, (i) if Maker
fails to pay in full any monthly installment of principal and interest or
any other sums required to be paid pursuant to this Promissory Note in the
manner set forth in the Escrow Agreement, within ten (10) days after the
due date, or (ii) if Maker defaults in the performance or observance of any
covenant or condition contained in the Pledge Agreement and the Escrow
Agreement and such default is not cured within thirty (30) days after
receipt of written notice of such default, or (iii) if, pursuant to that
certain lease ("Lease") dated as of December __, 1998 between TVCA, LLC, a
Delaware limited liability company, as landlord, and Payee, as tenant, with
respect to certain real property and improvements located in San Jose, CA,
particularly described in the Lease ("Premises"), Payee is
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<PAGE>
required to purchase the Premises from TVCA, LLC in accordance with the
terms of the Lease, then and in any of such events, the holder of this
Promissory Note may, without further notice, immediately declare to be due
and payable the entire outstanding indebtedness evidenced by this
Promissory Note.
8. Notwithstanding any provisions of this Promissory Note to the contrary, the
performance of Maker's obligations pursuant to this Promissory Note are
conditioned upon Payee, as tenant under the Lease, timely tendering to
TVCA, LLC all rent, charges and monetary obligations under the Lease
("Lease Payments") as and when the same become due and payable in
accordance with the terms of the Lease. In the event that Payee is late in
tendering any Lease Payment to TVCA, LLC, then the applicable due date for
Maker's performance of any of Maker's obligations under this Promissory
Note shall automatically be extended for the same period of time that Payee
was delinquent in the payment of such Lease Payment. Further, in the event
that the Lease is terminated pursuant to Section 10 of the Lease due to a
default on the part of Payee as tenant thereunder, then, in such event,
this Promissory Note shall be deemed to be immediately satisfied in full
and Maker shall have no further obligation to Payee hereunder.
9. This Promissory Note shall be binding Maker and its successors and assigns.
TVCA HOLDING LLC,
a Delaware limited liability company
By:
-------------------------------
C. Frederick Wehba II, Manager
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BILL OF SALE
[Equipment]
KNOW ALL MEN BY THESE PRESENTS THAT, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, TELEVIDEO, INC., a
Delaware corporation ("Seller") does hereby grant, bargain, sell, deliver,
carry, transfer, set over and assign (or cause to be granted, bargained, sold,
delivered, carried, transferred, set over and assigned) unto TVCA, LLC, a
Delaware limited liability company ("Purchaser"), its successors and assigns,
all of the "Equipment", as that term is defined in that certain Real Estate
Purchase Agreement ("Purchase Agreement") dated December 21, 1998 by and between
Seller and Purchaser for the purchase and sale of certain real property and
improvements and related property located in San Jose, CA and as more
particularly described on EXHIBIT A attached hereto and made a part hereof.
It is the intention of this instrument to convey, transfer and assign to
Purchaser, and Seller represents and warrants to Purchaser that this instrument
does convey, transfer and assign to Purchaser, all right, title and interest in
and to the Equipment. Seller, for itself and its successors and assigns, further
represents and warrants that Seller has good and valid title in and to the
Equipment, that Seller has the right, power and capacity to sell the Equipment,
and that the Equipment is free and clear of covenants, conditions, liens,
charges, security interests, adverse claims, encumbrances, demands or other
title defects or restrictions of any kind, including, without limitation, any
restrictions on the ability of Purchaser to transfer the Equipment.
Seller agrees to execute and deliver, or cause to be executed and
delivered, all such further assignments, endorsements or other documents as
Purchaser may reasonably request for the purpose of effecting transfer of all
right, title and interest in and to the Equipment.
TO HAVE AND TO HOLD the Equipment unto Purchaser, its successors and
assigns, to and for its and their own use forever.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed by
its duly authorized officer as of the 21st day of December, 1998.
TELEVIDEO, INC.,
a Delaware corporation
By: /s/ K. Philip Hwang
-------------------------
K. Philip Hwang, CEO
<PAGE>
Exhibit 2.4
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT ("Agreement") dated as of December ___,
1998 is between C. FREDERICK WEHBA II, CHAD W. WEHBA, CHRISTIAN F. WEHBA, GFW
TRUST, CYLE F. WEHBA 1998 TRUST, AND TPF TRUST III (each, a "Grantor", and
collectively, "Grantors"), and TELEVIDEO, INC., a Delaware corporation ("Secured
Party").
WITNESSETH:
A. TVCA Holding, LLC, a Delaware limited liability company ("Debtor") is
the maker of that certain Promissory Note dated December __, 1998 in the
original principal amount of Two Million Seven Hundred Fifty Thousand Dollars
($2,750,000) made payable to Secured Party ("Note"). A true and correct copy of
the Note is attached hereto as Exhibit "A".
B. Grantors are all of the members of Debtor and are the owners of all of
the membership interests in Debtor ("Membership Interests").
C. Debtor is the sole member of TVCA, LLC, a Delaware limited liability
company ("Subsidiary"), and the holder of all membership interests in the
Subsidiary.
D. Grantors desire to pledge and assign their respective Membership
Interests to Secured Party and grant to Secured Party a first priority lien and
security interest in and to said Membership Interests to secure the payment of
the Note.
E. To evidence the pledge, assignment and grant of a security interest in
the Membership Interests to Secured Party, Grantors have agreed to execute this
Agreement and the financing statements in connection herewith.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Grantors and Secured
Party agree as follows:
1. COLLATERAL AND SECURITY INTEREST. Each Grantor hereby pledges and
assigns such Grantor's respective Membership Interest to Secured Party, together
with all income, profits, distributions, capital surplus, return of capital,
management rights, if any, or other tangible or intangible property related to
or derived from such Membership Interest, and grants to Secured Party a first
priority lien and security interest therein and such other rights and remedies
as may be granted to a secured party under the laws of the State of California
("Security Interest") in and to all of such Grantor's right, title and interest
in such Grantor's Membership Interest and all proceeds thereof ("Collateral").
2. SECURITY INTEREST. The Security Interest is a pledge and security
interest in and to the Collateral pursuant to the provisions of Article 9 of the
California Commercial Code. The Collateral secures the payment of the Note in
accordance with its terms. Grantors shall execute any and all documents,
instruments and financing statements as deemed necessary by Secured
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Party, acting reasonably, to effectuate this Agreement. Any certificates
representing the Membership Interests shall be delivered to and held by Secured
Party pursuant to this Agreement and shall be accompanied by duly executed
instruments of transfer or assignments in blank, all in form and substance
satisfactory to Secured Party.
3. IRREVOCABLE INSTRUCTIONS TO LENDER AND ESCROW AGENT. Grantors, who
hold all of the membership interests in Subsidiary, will cause Subsidiary to
irrevocably instruct Finova Realty Capital, Inc., a Delaware corporation
("FRC") to apply all payments of basic rent received from Secured Party under
that certain lease dated as of December ___, 1998 between Subsidiary, as
landlord, and Secured Party, as Tenant, in the following manner: (a) first,
to FRC's mortgage loan on the leased premises, and (b) then to an escrow
account ("Escrow Account") at Wilmington Trust Company, a Delaware banking
corporation ("Escrow Agent"), in Subsidiary's name. A true and correct copy
of such irrevocable instructions to FRC is attached and incorporated hereto
as Exhibit "B." Grantors will further cause Subsidiary to irrevocably
instruct Escrow Agent to apply all Escrow Account proceeds to monthly
payments due Secured Party under the Note. Any excess remaining in the
account after all monthly Note payments have been made in full may be
released as directed by Subsidiary. A true and correct copy of such
irrevocable instructions to Escrow Agent is attached and incorporated hereto
as Exhibit "C."
4. REPRESENTATIONS AND WARRANTIES. Grantors represent and warrant that
(a) the Membership Interests represent all of the Grantors' respective right,
title and interest in the Debtor; (b) this Agreement constitutes the valid and
binding obligation of Grantors, enforceable in accordance with its terms; (c)
Grantors will receive a material direct financial benefit as a result of Secured
Party's acceptance of the Note for the obligation evidenced therein and Grantors
have received good and sufficient consideration for the granting of the Security
Interest; (d) the execution, delivery and performance of this Agreement by
Grantors and does not constitute a breach of any agreement of Grantors as
members of the Debtor; (e) the Collateral and Grantors' principal place of
business are located at 1900 Avenue of the Stars, Suite 2840, Los Angeles,
California 90067; (f) Grantors are the lawful owners of the Membership Interests
free and clear of any pledge, assignment, lien or security interest (other than
those in favor of Secured Party), and Grantors shall defend the same against the
claims and demands of all persons; and (g) Grantors have not signed any
financing statement, pledge or security agreement which is currently in effect
and covers any of the Collateral. Grantors covenant that Grantors will not do
any of the following without the prior written consent of Secured Party; (w)
pledge, assign, grant or otherwise transfer the Membership Interests in any
manner whatsoever, by operation of law or otherwise; (x) cause or permit the
Debtor to issue additional membership interests in Debtor; (y) cause or permit
the Subsidiary to amend the Subsidiary's Operating Agreement in a manner that
will impair the Debtor's rights as a Class B member of the Subsidiary; or (z)
cause or permit the Subsidiary to issue additional Class B membership interests
in the Subsidiary.
5. DEFAULT AND REMEDIES UPON DEFAULT.
(a) Any one or more of the following shall be deemed an "Event of
Default" under this Agreement: (i) a default occurs under the Note; (ii)
Grantors default under this Agreement; (iii) the Debtor distributes any of its
assets by reason of sale, reorganization, liquidation or dissolution without the
written consent of Secured Party; (iv) the Debtor sells a substantial portion or
a bulk sale of its assets without the written consent of Secured Party; (v) an
execution is issued upon the Collateral or any of the assets of the Debtor, (vi)
a receiver is
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appointed to take charge of any of the Grantors' or the Debtor's property; (vii)
Debtor ceases to exist or becomes a party to any merger or consolidation without
the written consent of Secured Party; or (viii) any of the representations or
warranties made herein are, in any manner, false or misleading in any material
respect as and when made.
(b) Upon the occurrence of an Event of Default, Secured Party shall be
entitled to exercise all of the rights and remedies available to a secured party
under the California Commercial Code and all of the rights and remedies
available to it under the Note, including, without limitation, the right (i)
without notice, demand or legal process to vote the Membership Interests and
receive any distributions of cash or other property made by the Debtor and
otherwise take any action permitted to be taken as a result of owning the
Membership Interest, (ii) to enter upon the premises of Debtor and take
possession of the Collateral and the books and records of Debtor relating to the
Collateral and the Debtor, (iii) to require Debtor to make the Collateral
available to Secured Party and/or (iv) to sell, transfer, endorse, assign and/or
deliver the whole or, from time to time, any part of the Collateral at public or
private sale, for cash, upon credit or for other property, for immediate or
future delivery, for such prices and on such terms as Secured Party in its sole
discretion shall deem appropriate.
(c) Secured Party shall give Grantors written notice, within the
meaning of Article 9 of the California Commercial Code, of Secured Party's
intention to sell the Collateral at a public or private sale. Secured Party
shall not be obligated to sell the Collateral even if notice of the sale of the
Collateral has been given. At any sale made pursuant to this Section 4, Secured
Party may bid for or purchase, free from any right of redemption after any such
sale, stay and appraisal on the part of Grantors (to the extent permitted by
law), all said rights being hereby waived and released to the extent permitted
by law, all or any portion of the Collateral offered for sale and may make
payment on account thereof by using the obligations under the Note, or any
portion thereof, then due and payable as a credit against the purchase price,
and Secured Party may, upon compliance with the terms of the sale, hold, retain
and dispose of the Collateral without further accountability to Grantors
therefor.
(d) Upon the occurrence of an Event of Default, or in the event that
a petition is filed by or against Grantors or the Debtor under any provision of
Title II of the United States Code (the "Bankruptcy Code"), or in the event
there is any entry of an order for relief respecting either Grantors or the
Debtor, or in the event of the appointment of a receiver, trustee or custodian
for either Grantors or the Debtor, or in the event either Grantors or the Debtor
becomes a debtor in possession, which actions in and of themselves do not
constitute a default pursuant to the provisions of the Bankruptcy Code,
Grantor's successors in interest, or any other party succeeding to Grantor's
interest, shall not under any circumstances sell or in any way dispose of the
Collateral without the prior written consent of Secured Party which may demand
(i) the immediate return of the Collateral in the possession of Grantors or
their successors in interest or (ii) an immediate cash payment of all of the
unpaid obligations under the Note. The option to accept the return of the
Collateral and proceeds shall in no way relieve Debtor or its successors in
interest of any deficiency respecting the obligations under the Note. Grantors
agree to pay to Secured Party and be liable for all reasonable costs, expenses,
charges and attorneys' fees (if and to the extent permitted by law) incurred by
Secured Party to enforce this Agreement.
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6. CUMULATIVE REMEDIES; POWER OF ATTORNEY. All of Secured Party's rights
and remedies with respect to the Collateral, whether established pursuant to
this Agreement, the Note or at law or in equity, shall be cumulative and may be
exercised singularly or concurrently. Grantors hereby authorize Secured Party to
make, constitute and appoint any officer or agent of Secured Party as Grantor's
true and lawful attorney-in-fact, with power, upon the occurrence of an Event of
Default, to (a) endorse Grantor's name on all documents, papers and instruments
necessary or desirable for Secured Party to vote the Membership Interests or use
the Collateral, (b) take any other actions with respect to the Collateral that
Secured Party deems appropriate, (c) assign, pledge, convey or otherwise
transfer title to or dispose of any of the Collateral, and (d) execute and file
appropriate UCC financing statements with respect to the Membership Interests,
and renewals of such financing statements. This power of attorney is coupled
with an interest and shall be irrevocable unless and until the obligations under
the Note have been paid in full.
7. APPLICABLE LAWS. This Agreement shall be governed by the laws of the
State of California. Any provision in this Agreement prohibited, in whole or in
part, by any applicable law shall be enforced to the fullest extent permitted by
applicable law, without modifying or affecting the remaining provisions of this
Agreement; provided, however, that if the conflicting provisions of any
applicable law may be waived, they are hereby waived by Grantors to the fullest
extent permitted by applicable law. Except as otherwise provided herein,
Grantors waives (a) all statutory or other requirements for any notice of any
kind, (b) requirements as to the time, place and terms of any sale of the
Collateral, (c) requirements with respect to the enforcement of Secured Party's
rights and/or remedies hereunder and (d) all rights of redemption respecting the
Collateral or otherwise.
8. TERM OF AGREEMENT. This Agreement shall become effective upon the date
hereof and shall continue in full force and effect until all of the obligations
under the Note are fully paid, satisfied and performed, in which event Secured
Party shall, upon request of Grantors, return the certificates, if any,
evidencing the Membership Interests and execute and deliver termination
statements to Grantors for filing in each office in which a financing statement
has been filed by Secured Party with respect to the Security Interest or as may
be necessary or required to release the Security Interest, all at the cost and
expense of Grantors.
9. NOTICES. Any notices pursuant to this Agreement shall be given in
writing and delivered personally or sent by United States certified mail, return
receipt requested, with postage prepaid, and such notices shall be effective on
the date personally delivered or, if mailed, two (2) postal delivery days after
deposit in the United States mail addressed to Grantors at 1900 Avenue of the
Stars, Suite 2840, Los Angeles, California 90067, and to Secured Party at
Televideo, Inc., 2345 Harris Way, San Jose, CA 95131. Each party hereto may
change such party's notice address by providing written notice to the other in
compliance with this Section 8.
10. MISCELLANEOUS. This Agreement shall be binding upon Grantors, their
respective successors and assigns, and shall inure to the benefit of Secured
Party, its successors and assigns. Any amendments to this Agreement must be in
writing and executed by authorized representatives of each party hereto. Unless
the context of this Agreement otherwise requires, references to the plural
include the singular and the singular the plural.
4
<PAGE>
IN WITNESS WHEREOF, Grantors and Secured Party have caused this Agreement
to be executed as of the date set forth above.
GRANTORS:
/s/ Chad W. Wehba
-----------------------------------------------
Chad W. Wehba
/s/ C. Frederick Wehba II
-----------------------------------------------
C. Frederick Wehba II
/s/ Christian F. Wehba
-----------------------------------------------
Christian F. Wehba
GFW TRUST
By: /s/ C. Frederick Wehba II, Trustee
--------------------------------------------
C. Frederick Wehba II, Trustee
CYLE F. WEHBA 1998 TRUST
By: /s/ C. Frederick Wehba II, Trustee
--------------------------------------------
C. Frederick Wehba II, Trustee
TPF TRUST III
By:
--------------------------------------------
Robert P. O'Leary, Trustee
SECURED PARTY:
TELEVIDEO, Inc.,
a Delaware corporation
By: /s/ K. Philip Hwang, CEO
--------------------------------------------
K. Philip Hwang, CEO
5
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
$2,750,000.00 December __, 1998
1. For value received, the undersigned, TVCA HOLDING LLC, a Delaware limited
liability company ("Maker"), promises to pay to the order of TELEVIDEO,
INC., a Delaware corporation ("Payee"), or order, at 2345 Harris Way, San
Jose, CA 95131, or other address directed by Payee, the principal sum of
Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) with interest
at the rate of seven and one-quarter percent (7.25%) per annum from the
date hereof with monthly payments based on an amortization period of twenty
(20) years. If not earlier paid in full, any unpaid principal and all
accrued interest shall be due and payable on December 1, 2013.
2. Principal and accrued interest shall be payable in equal monthly
installments of Twenty One Thousand Seven Hundred Thirty Five and 34/100
Dollars ($21,735.34) each on the first day of each month commencing on
January 1, 1999. On December 1, 2013, the outstanding principal balance and
any and all accrued interest then due and payable shall be paid in full to
Payee by Maker.
3. Both principal and interest shall be payable to Payee, or at any other
place hereafter designated in writing by the holder(s) and delivered to
Maker. All sums shall be deemed paid upon receipt of same by the holder(s)
hereof.
4. This Promissory Note is secured by that certain Pledge and Security
Agreement ("Pledge Agreement") of even date herewith executed by all of the
members of Maker and that certain Escrow Agreement ("Escrow Agreement") of
even date herewith executed by Maker, Payee, and Wilmington Trust Company,
a Delaware banking corporation.
5. Payments on this Promissory Note shall be applied first to payment of any
late charges, second to payment of accrued interest and third to the
outstanding principal.
6. Maker shall have the right to prepay all or any portion of the indebtedness
evidenced by this Promissory Note at any time without premium or penalty.
7. Subject in all events to the provisions of Section 8 hereof, (i) if
Maker fails to pay in full any monthly installment of principal and
interest or any other sums required to be paid pursuant to this
Promissory Note in the manner set forth in the escrow agreement, within
ten (10) days after the due date, or (ii) if Maker defaults in the
performance or observance of any covenant or condition contained in the
Pledge Agreement and the Escrow Agreement and such default is not cured
within thirty (30) days after receipt of written notice of such default,
or (iii) if, pursuant to that certain lease ("Lease") dated as of
December __, 1998 between TVCA, LLC, a Delaware limited liability
company, as landlord, and Payee, as tenant, with respect to certain real
property and improvements located in San Jose, CA, particularly
described in the Lease ("Premises"), Payee is
6
<PAGE>
required to purchase the Premises from TVCA, LLC in accordance with the
terms of the Lease, then and in any of such events, the holder of this
Promissory Note may, without further notice, immediately declare to be due
and payable the entire outstanding indebtedness evidenced by this
Promissory Note.
8. Notwithstanding any provisions of this Promissory Note to the contrary, the
performance of Maker's obligations pursuant to this Promissory Note are
conditioned upon Payee, as tenant under the Lease, timely tendering to
TVCA, LLC all rent, charges and monetary obligations under the Lease
("Lease Payments") as and when the same become due and payable in
accordance with the terms of the Lease. In the event that Payee is late in
tendering any Lease Payment to TVCA, LLC, then the applicable due date for
Maker's performance of any of Maker's obligations under this Promissory
Note shall automatically be extended for the same period of time that Payee
was delinquent in the payment of such Lease Payment. Further, in the event
that the Lease is terminated pursuant to Section 10 of the Lease due to a
default on the part of Payee as tenant thereunder, then, in such event,
this Promissory Note shall be deemed to be immediately satisfied in full
and Maker shall have no further obligation to Payee hereunder.
9. This Promissory Note shall be binding Maker and its successors and assigns.
TVCA HOLDING LLC,
a Delaware limited liability company
By:
-----------------------------------------
C. Frederick Wehba II, Manager
<PAGE>
EXHIBIT "B"
LENDER INSTRUCTIONS
TVCA, LLC,
a Delaware limited liability company
1900 Avenue of the Stars, Suite 2840
Los Angeles, CA 90067
C. FREDERICK WEHBA II
PRESIDENT
Via Facsimile and UPS Next Day Air
December __ 1998
Finova Realty Capital, Inc.
19900 MacArthur Boulevard
Suite 1100
Irvine, CA 92612
RE: 2345 HARRIS WAY, SAN JOSE, CA
Ladies and Gentlemen:
Finova Realty Capital, Inc. is hereby irrevocably instructed to apply all
monies received from or on behalf of TeleVideo, Inc., a Delaware corporation
("TeleVideo"), in respect of Basic Rent due under that certain Lease and
Agreement of Lease dated as of December __, 1998 between TeleVideo, as Tenant,
and TVCA, LLC, a Delaware limited liability company ("TVCA"), as Landlord, in
the following and in no other manner:
(1) First, to the monthly loan amount due from TVCA under the Promissory
Note, the Real Estate Tax Escrow Fund, the Tenant Improvement and Leasing
Commissions Reserve, and the Replacement Reserve dated December __, 1998 by and
between TVCA, as Borrower, and Finova Realty Capital, Inc., as Lender, executed
in connection with TVCA's acquisition of the above referenced property.
(2) Next, to the escrow account established in TVCA's name at Wilmington
Trust Company, a Delaware banking corporation, 1100 N. Market Street,
Wilmington, DE 19890 (ABA No. 031100092, Account No. TVCA Escrow Account
46912-0).
Sincerely,
C. Frederick Wehba II
President, TVCA, Inc.
Manager
8
<PAGE>
ACCEPTED AND AGREED:
FINOVA REALTY CAPITAL, INC.
By:
-----------------------------
Name/Title
9
<PAGE>
EXHIBIT "C"
ESCROW INSTRUCTIONS
THIS AGREEMENT is made this 21st day of December 1998, by and among, TVCA,
LLC a Delaware limited liability company as "Purchaser," TELEVIDEO, INC., a
Delaware corporation, as "Seller", and WILMINGTON TRUST COMPANY, a Delaware
banking corporation, as "Escrow Agent".
WHEREAS, Purchaser is acquiring certain real property from Seller located
at 2345 Harris Way, San Jose, California (the "Property"); and
WHEREAS, Purchaser has delivered to Seller a promissory note ("Note") in
the amount of Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) in
connection with its acquisition of the Property, a true and correct copy of
which is attached hereto as Exhibit "1."
WHEREAS, the monthly amount due Seller on the Note is Twenty One Thousand
Seven Hundred Thirty Five and 34/100 Dollars ($21,735.34).
NOW, THEREFORE, in consideration of the premises, and further consideration
of the covenants set forth hereafter, it is hereby agreed mutually as follows:
I. DESIGNATION AS ESCROW AGENT.
Subject to the terms and conditions hereof, Purchaser and Seller hereby
appoint Wilmington Trust Company as Escrow Agent and Wilmington Trust Company
hereby accepts such appointment.
II. DEPOSIT OF ESCROW FUNDS.
(a) Upon execution of this Escrow Agreement, Purchaser shall deposit the
sum of One Hundred Dollars ($100.00) into an account (the "Escrow Account")
established with Escrow Agent. In addition to such initial deposit, Escrow Agent
shall receive a monthly amount from Finova Realty Capital, Inc., a Delaware
corporation ("FRC") for immediate deposit into the Escrow Account. At all times
from and effect the date of this Agreement, Purchaser shall be the sole owner of
the Escrow Account.
(b) Escrow Agent will hold the initial deposit and all subsequent deposits
from FRC in the Escrow Account, together with all investments thereof and all
interest accumulated thereon and proceeds therefrom, in escrow upon the terms
and conditions set forth in this Escrow Agreement and shall not disburse funds
from the Escrow Account except as provided herein.
(c) Unless otherwise directed by Purchaser, Escrow Agent shall invest the
Escrow Account solely in securities issued or guaranteed by the United States or
an agency thereof, or in securities of mutual funds the assets of which are
invested in securities issued or guaranteed by the United States or an agency
thereof, or in repurchase agreements involving securities issued or
10
<PAGE>
guaranteed by the United States or an agency thereof, or in certificates of
deposit issued by banks.
III. DISBURSEMENT OF ESCROW ACCOUNT. Escrow Agent will make the following
disbursements to Purchaser and Seller on the first day of each month.
(a) To Seller, the sum of Twenty One Thousand Seven Hundred Thirty Five
and 34/100 Dollars ($21,735.34).
(b) To Purchaser, the amount remaining in the Escrow Account after the
payment to Seller as set forth above; provided, however, that Escrow Agent may
retain a sufficient amount in the Escrow Account in order to keep the account
open.
IV. AUTHORITY OF ESCROW AGENT AND LIMITATION OF LIABILITY.
(a) In acting hereunder, Escrow Agent shall have only such duties as are
specified herein and no implied duties shall be read into this Agreement, and
Escrow Agent shall not be liable for any act done or omitted to be done, by it
in the absence of its gross negligence or willful misconduct.
(b) Escrow Agent may act in reliance upon any writing or instrument or
signature which it, in good faith, believes to be genuine, and may assume the
validity and accuracy of any statement or assertion contained in such a writing
or instrument and may assume that any person purporting to give any writing,
notice, advice or instruction in connection with the provisions hereof has been
duly authorized so to do.
(c) Escrow Agent shall be entitled to consult with legal counsel in the
event that a question or dispute arises with regard to the construction of any
of the provisions hereof, and shall incur no liability and shall be fully
protected in acting in accordance with the advice or opinion of such counsel.
(d) Escrow Agent shall not be required to use its own funds in the
performance of any of its obligations or duties or the exercise of any of its
rights or powers, and shall not be required to take any action which, in Escrow
Agent's sole and absolute judgment, could involve it in expense or liability
unless furnished with security and indemnity which it deems, in its sole and
absolute discretion, to be satisfactory.
(e) Seller shall pay to Escrow Agent compensation for its services
hereunder to be determined from time to time by the application of the current
rates than charged by Escrow Agent for accounts of similar size and character,
with a minimum rate of Twenty Five Hundred Dollars ($2,500.00) per annum. Seller
shall also pay to Escrow Agent an initial set up fee of Three Thousand Dollars
($3,000.00). In the event Escrow Agent renders any extraordinary services in
connection with the escrow account at the request of the parties, Escrow Agent
shall be entitled to additional compensation therefor. Escrow Agent shall have a
first lien against the Escrow Account to secure the obligations or Purchaser and
Seller hereunder. The terms of this paragraph shall survive termination of this
Agreement.
11
<PAGE>
(f) Purchaser and Seller hereby agree, jointly and severally, to indemnify
Escrow Agent and hold it harmless from any and against all liabilities, loses,
actions, suits or proceedings at law or in equity, and any other expenses, fees
or charges of any character or nature, including, without limitation, attorney's
fees and expenses, which Escrow Agent may incur or with which it may be
threatened by reason of its acting as Escrow Agent under this Agreement or
arising out of the existence of the Escrow Account, except to the extent the
same shall be caused by Escrow Agent's gross negligence or willful misconduct.
Escrow Agent shall have a first lien against the Escrow Account to secure the
obligations of the parties hereunder. The terms of this paragraph shall survive
termination of this Agreement.
(g) In the event Escrow Agent receives conflicting instructions hereunder,
Escrow Agent shall be fully protected in refraining from acting until such
conflict is resolved to the satisfaction of Escrow Agent. In addition, Escrow
Agent shall have the right to institute a bill of interpleader in any court of
competent jurisdiction to determine the rights of the parties, and the parties
shall pay all costs, expenses and disbursements in connection therewith,
including attorney's fees. For purposes of this Escrow Agreement, the parties
hereto agree to submit to the jurisdiction of the courts of the State of
Delaware.
(h) Escrow Agent may resign as Escrow Agent, and, upon its resignation,
shall thereupon be discharged from any and shall further duties and obligations
under this Agreement by giving notice in writing of such resignation to
Purchaser and Seller, which notice shall specify a date upon which such
resignation shall take effect. Upon the resignation of Escrow Agent, Purchaser
and Seller shall, within sixty (60) business days after receiving the foregoing
notice from Escrow Agent, designate a substitute escrow agent (the "Substitute
Escrow Agent"), which Substitute Escrow Agent shall, upon its designation and
notice of such designation to Escrow Agent, succeed to all of the rights, duties
and obligations of Escrow Agent hereunder.
IV. NOTICES.
Except as otherwise provided herein, any notices, instruction or instrument
to be delivered hereunder shall be in writing and shall be sent by certified or
registered mail, postage prepaid, return receipt requested, or sent by
facsimile, nationally-recognized overnight courier addressed to the parties or
delivered by hand to the addresses forth on the signature page hereof or at such
other address specified in writing by the addressee. Notices shall be deemed
communicated upon the earlier of receipt or seventy-two (72) hours from the time
of mailing as provided in this Article IV, and on the business day or first
business day following transmission if given by facsimile.
V. AMENDMENT.
This Escrow Agreement may not be amended, modified, supplemented or
otherwise altered except by an instrument in writing signed by the parties
hereto.
VI. TERMINATION.
This Agreement will terminate upon the disbursement of all funds in the
Escrow Account, as provided above, by the Escrow Agent.
12
<PAGE>
VII. GOVERNING LAW.
This is a Delaware contract and shall be governed by Delaware law in all
respects.
VIII. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original, and such counterparts
together shall consitute and be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused their names to be hereto
subscribed by their respective authorized representatives as of the day and year
first above written.
TVCA, LLC WILMINGTON TRUST COMPANY,
as Purchaser Escrow Agent
By: By:
-------------------------------- ---------------------------
C. Frederick Wehba II, President Title:
TVCA, INC./ Manager
Address: Address:
1900 Avenue of the Stars, Suite 2840 Rodney Square North
Los Angeles, CA 90067 1100 North Market Street
Fax No.: (310) 282-8585 Wilmington, Delaware 19890
Tel No.: (310) 282-8000 Fax No.: (302) 651 - 1576
Attention: C. Frederick Wehba II Tel No.: (302) 651 - 1834
Attention: W. Chris Sponenberg
TELEVIDEO, INC.
as Seller
By: /s/ K. Philip Hwang
-----------------------------
K. Philip Hwang, CEO
Address:
2345 Harris Way
San Jose, CA 95131
Fax No.: (408) 954-0622
Tel No.: (408) 954-8333
13
<PAGE>
EXHIBIT "1"
PROMISSORY NOTE
$2,750,000.00 December__, 1998
1. For value received, the undersigned, TVCA HOLDING LLC, a Delaware limited
liability company ("Maker"), promises to pay to the order of TELEVIDEO,
INC., a Delaware corporation ("Payee"), or order, at 2345 Harris Way, San
Jose, CA 95131, or other address directed by Payee, the principal sum of
Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000) with interest
at the rate of seven and one-quarter percent (7.25%) per annum from the
date hereof with monthly payments based on an amortization period of twenty
(20) years. If not earlier paid in full, any unpaid principal and all
accrued interest shall be due and payable on December 1, 2013.
2. Principal and accrued interest shall be payable in equal monthly
installments of Twenty One Thousand Seven Hundred Thirty Five and 34/100
Dollars ($21,735.34) each on the first day of each month commencing on
January 1, 1999. On December 1, 2013, the outstanding principal balance and
any and all accrued interest then due and payable shall be paid in full to
Payee by Maker.
3. Both principal and interest shall be payable to Payee, or at any other
place hereafter designated in writing by the holder(s) and delivered to
Maker. All sums shall be deemed paid upon receipt of same by the holder(s)
hereof.
4. This Promissory Note is secured by that certain Pledge and Security
Agreement ("Pledge Agreement") of even date herewith executed by all of the
members of Maker and that certain Escrow Agreement ("Escrow Agreement") of
even date herewith executed by Maker, Payee, and Wilmington Trust Company,
a Delaware banking corporation.
5. Payments on this Promissory Note shall be applied first to payment of any
late charges, second to payment of accrued interest and third to the
outstanding principal.
6. Maker shall have the right to prepay all or any portion of the indebtedness
evidenced by this Promissory Note at any time without premium or penalty.
7. Subject in all events to the provisions of Section 8 hereof, (i) if Maker
fails to pay in full any monthly installment of principal and interest or
any other sums required to be paid pursuant to this Promissory Note in the
manner set forth in the Escrow Agreement, within ten (10) days after the
due date, or (ii) if Maker defaults in the performance or observance of any
covenant or condition contained in the Pledge Agreement and the Escrow
Agreement and such default is not cured within thirty (30) days after
receipt of written notice of such default, or (iii) if, pursuant to that
certain lease ("Lease") dated as of December __, 1998 between TVCA, LLC, a
Delaware limited liability company, as landlord, and Payee, as tenant, with
respect to certain real property and improvements located in San Jose, CA,
particularly described in the Lease ("Premises"), Payee is required to
purchase the Premises from TVCA, LLC in accordance with the terms of the
14
<PAGE>
Lease, then and in any of such events, the holder of this Promissory Note
may, without further notice, immediately declare to be due and payable the
entire outstanding indebtedness evidenced by this Promissory Note.
8. Notwithstanding any provisions of this Promissory Note to the contrary,
the performance of Maker's obligations pursuant to this Promissory Note
are conditioned upon Payee, as tenant under the Lease, timely tendering
to TVCA, LLC all rent, charges and monetary obligations under the Lease
("Lease Payments") as and when the same become due and payable in
accordance with the terms of the Lease. In the event that Payee is late
in tendering any Lease Payment to TVCA, LLC, then the applicable due
date for Maker's performance of any of Maker's obligations under this
Promissory Note shall automatically be extended for the same period of
time that Payee was delinquent in the payment of such Lease Payment.
Further, in the event that the Lease is terminated pursuant to Section
10 of the Lease due to a default on the part of Payee as tenant
thereunder, then, in such event, this Promissory Note shall be deemed to
be immediately satisfied in full and Maker shall have no further
obligation to Payee hereunder.
9. This Promissory Note shall be binding Maker and its successors and assigns.
TVCA HOLDING LLC,
a Delaware limited liability company
By:
--------------------------------
C. Frederick Wehba II, Manager
15
<PAGE>
Exhibit 2.5
ASSIGNMENT
THIS ASSIGNMENT ("Assignment"), dated as of December 21, 1998, is by and
among 2345 Harris Way Associates, a Delaware limited liability company
("Assignor"), TVCA, LLC, a Delaware limited liability company ("Assignee"), and
TeleVideo, Inc., a Delaware corporation ("Seller").
WHEREAS, Assignor has the contractual right to acquire certain real
property in San Jose, California ("Property") from Seller under that certain
Real Estate Purchase Agreement ("Purchase Agreement") dated December 21, 1998.
WHEREAS, Assignee has agreed to purchase and Assignor has agreed to sell
all of its right, title and interest in the Property and in the Purchase
Agreement.
WHEREAS, Assignee has agreed to assume, undertake and fulfill all of duties
and obligations of the Purchaser under the Purchase Agreement for the benefit of
Seller and to certify the representations and warranties made by Assignor to
Seller.
WHEREAS, The closing of the purchase and sale transaction between Seller
and Assignor is to occur on or before December 31, 1998. Immediately prior to
the closing of that transaction, the terms of this Assignment will take effect
and the Property will be transferred to Assignee.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor does hereby assign and transfer all of Assignor's right, title,
interest, duties and obligations under the Purchase Agreement unto Assignee.
Assignee does hereby assume, undertake and fulfill all of Assignor's obligations
under the Purchase Agreement for the benefit of Seller and to certify the
representations and warranties made by Assignor to Seller and hereby agrees to
indemnify and hold Assignor harmless from all claims or causes of action arising
under the Purchase Agreement.
This Assignment shall become effective on the dated as contemplated above,
shall be governed by the laws of the State of California, and shall be binding
on the parties hereto and their successors and assigns.
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the date and year first above written.
ASSIGNOR:
2345 HARRIS WAY ASSOCIATES, LLC,
a Delaware limited liability company
By: /s/ Brian Morrison
--------------------------------
Brian Morrison, Manager
ASSIGNEE:
TVCA, LLC, a Delaware limited liability company
By: TVCA, Inc., a Delaware corporation
its manager
By: /s/ C. Frederick Wehba
-----------------------------------
C. Frederick Wehba II, President
SELLER:
TELEVIDEO, INC.,
a Delaware corporation
By: /s/ K. Philip Hwang
-----------------------------------
K. Philip Hwang, CEO
<PAGE>
FINOVA REALTY CAPITAL, INC.
a Delaware corporation
(Lender)
- and -
TELEVIDEO, INC.
a Delaware corporation
(Tenant)
-------------------------------
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
-------------------------------
Dated: December __, 1998
Location: 2345 Harris Way
San Jose, California
Section:
Block:
Lot:
County:
PREPARED BY AND UPON
RECORDATION RETURN TO:
1
