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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
(Mark One)
|X| Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required] for the fiscal year ended December 31, 1995; or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required] for the transition period from ______ to ______
Commission File Number 0-6106
UNITED LEISURE CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Delaware 13-2652243
- - ------------------------------- ------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
8800 Irvine Center Drive
Irvin, California 92718
- - ------------------------------- ------------------------------------
(Address of Principal Executive (Zip Code)
Offices)
Registrant Telephone Number, Including Area Code: (714) 837-1200
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Securities Registered Pursuant to Section 12(b) of the Act:
NONE
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Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of Class)
Class A Common Stock Purchase Warrants
--------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all Reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such Reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of March 29, 1996:
Common Stock, par value $.01 per share -- $19,473,183
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
Class Outstanding at March 29, 1996
- - -------------------------------------- ------------------------------
Common Stock, par value $.01
per share 12,452,849
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference into this
Annual Report on Form 10-KSB.
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PART I
Item 1. Description of Business.
General
The primary business of United Leisure Corporation (the "Company") for
a number of years has been to develop its major asset, a Ground Lease covering
approximately 300 acres of real estate in Irvine, California, through sub-lease,
so as to convert the leased asset into a revenue producing property. Pursuant to
its terms, the Ground Lease terminates on Feburary 28, 1997, thus leaving the
Company less than one year of operations remaining on the leased property. The
basic terms and provisions of the Ground Lease are described in more detail
under "Properties" in Item 2 of this Annual Report on Form 10-KSB. In carrying
out its historical business, the Company has preferred to act primarily as a
developer and manager of the property, rather than as an operator. In the past
several years, the Company's ability to operate its business has been severely
hampered by the actions of, and continuing litigation with, its landlord, The
Irvine Company ("Irvine"). In addition to its subleasing activities, the Company
carries out day camp operations on a portion of its leased property. See this
Item, "Description of Business -- Property Development" and "Description of
Business -- Frasier Day Camp" in this Item 1 of this Annual Report on Form
10-KSB. See also "Management's Discussion and Analysis or Plan of Operation" and
"Legal Proceedings" in Items 6 and 3, respectively.
The Company has been engaged in protracted and expensive litigation
("The Irvine Company Litigation") with its landlord, Irvine. The initial trial
of The Irvine Company litigation described herein resulted in a jury verdict of
approximately $42,000,000 in favor of the Company's subsidiary, however, on
post-trial motion by Irvine, the Court ordered a new trial. The Company has
appealed this Order. The Company hopes that the appeal will be heard and a
decision rendered sometime before the end of 1996. See Item 3, "Legal
Proceedings" and Item 6, "Management's Discussion and Analysis or Plan of
Operation".
In view of the short-term remaining on the Ground Lease and the
uncertainties created by the order of the Court for a new trial in The Irvine
Company Litigation, the Board of Directors of the Company determined that the
Company prepare itself for the future by the development of its business into
new fields of endeavor so as to enable the Company to continue its operations
after the completion of The Irvine Company Litigation, regardless of its
ultimate outcome, and also to enable the Company to prosecute The Irvine Company
Litigation to conclusion. Accordingly, in 1994, the Board of Directors initiated
several new programs for the expansion of the Company's business. Utilizing its
experience in the children's entertainment and education fields, the Company has
engaged in the creation, development and operation of children's play-learning
centers and has embarked on an expansion of its successful Camp Frasier
operation. The Company has also developed certain proprietary interactive
multimedia products which it has conceived and is actively searching for
complementary acquisitions and/or mergers. In order to finance these activities,
the Company carried out an underwritten public offering in 1994, raising net
proceeds of approximately $14,855,187.
The Company was originally organized for the primary purpose of
developing and operating a chain of African wildlife preserve and theme
amusement parks known as LION COUNTRY SAFARI. The Company's last park operation,
located in Irvine, California, was closed in November, 1984. United Leisure
Corporation is the successor by change of name to Lion Country Safari, Inc., a
Delaware
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corporation which was originally organized in May 1969. United Leisure
Corporation has operated and plans to continue to operate primarily as a holding
company for its operating subsidiaries. The term "the Company", as used in this
Annual Report on Form 10-KSB, includes United Leisure Corporation, its
predecessor companies and its subsidiaries, unless the context otherwise
requires.
1995 Developments
1995 was a transition year for the Company, during which management
took such action as it deemed necessary and appropriate in order to prepare for
the continuation of the Company's operations after the termination of the Irvine
Ground Lease. In that connection, the Company is developing, through an
independent software developer, certain proprietary software. See this Item,
"Description of Business--United Leisure Interactive". In addition, the Company
acquired and commenced operation during the summer season of two new sites for
its Camp Frasier operations, one located in San Diego and one located in Yorba
Linda, California. See this Item, "Description of Business--Camp Frasier". In
addition, the Company bought out its Planet Kids joint venture partner, Master
Glazier's Karate International, Inc. ("MGK"), in exchange for the return of
MGK's money plus interest and the grant of options to acquire up to 150,000
shares of the Company's Common Stock and has two children's play learning
centers in operation, one in Laguna Hills, California and one in Orange,
California. A third center is under construction. See this Item, "Description of
Business--Planet Kids, Inc.".
Property Development
General
After closing the operation of the Company's African wildlife preserve
and theme amusement park in 1984, Management of the Company turned its attention
to the development of the Company's most valuable asset, the Ground Lease
covering the 300-acre tract located in Irvine, California. It had been the
Company's desire to develop this property, with emphasis on leisure-time use and
attractions, primarily through subleases, although joint ventures and direct
development by the Company as its resources permit, were also considered.
Management's concept was that the Company not act as an operator of any of the
attractions at the property, but would act solely as a developer and sublessor
of the property. In view of the difficulties presented by Irvine, the Company's
landlord, as discussed in Item 3, "Legal Proceedings", however, these efforts
were not successful.
The Company has subleased certain portions of its California park
property as described briefly below in the next three Sections of this Item 1 of
this Annual Report on Form 10-KSB.
Amphitheater Sublease
The Company, through its primary operating subsidiary, Lion Country
Safari, Inc.--California (the "Subsidiary"), is a party to a Sublease Agreement,
entered into in 1980 (the "Amphitheater Sublease"), with Irvine Meadows
Amphitheater, a partnership ("Irvine Meadows") pursuant to which the Subsidiary
subleases approximately 20 acres of the park property, plus the right to use the
4,000-vehicle parking lot on the park property to Irvine Meadows for a term
which was co-extensive with the Ground Lease with Irvine described under
"Description of Property" in Item 2 (approximately 10 months). Irvine
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Meadows operates a 15,000-seat amphitheater, where concerts and other
entertainment and cultural events are presented, with attractions such as Jimmy
Buffett, Reba McIntyre, Alabama, Clint Black, the Eagles, Janet Jackson, Bette
Midler and Elton John, among others. Under the Amphitheater Sublease, Irvine
Meadows pays the Subsidiary a basic annual rental of $150,000, against a
percentage rental equal to 10% of all gross receipts from ticket sales. In
addition, rental equal to the sum of 2% of all gross receipts from food sales,
5% of all gross receipts from the sale of beverages, and any additional rental
obligation that may be incurred by the Subsidiary as a result of any activities
of the Sublessee or others on the subleased premises other than those set forth
above is paid. All revenues received under the categories described in the
preceding sentence are paid over directly to Irvine under the Ground Lease
covering the Company's property. One-half of all the Company's revenues received
from ticket sales is paid to Irvine as rent and the other half is paid directly
to the Subsidiary.
During the 1994 season, when it held 37 concerts, the Amphitheater
Sublease generated revenues of $441,773 for the Company's account and during
1995, it generated revenues of $355,119 for the Company's account. Irvine
Meadows booked 35 concerts for the 1995 season. During the three years preceding
1994, the revenues for the Company's account generated by the Amphitheater
Sublease had decreased each year because the Irvine Meadows Amphitheater had
less concerts during that period and experienced significant competition from a
competing concert location in nearby Costa Mesa, California. This competitive
facility was closed in 1994. See "Description of Business -- Competition" in
this Item 1 of this Annual Report on Form 10-KSB, "Description of Property" in
Item 2, Item 3, "Legal Proceedings -- The Irvine Company Litigation" and Notes 4
and 9 of "Notes to Consolidated Financial Statements" in Item 7.
For the complete terms of the Amphitheater Sublease, reference is
hereby made to Exhibit 10-2 attached to and made a part of this Annual Report on
Form 10-KSB. See also "Management's Discussion and Analysis of Financial
Condition or Plan of Operation" in Item 6 and Note 9 of "Notes to Consolidated
Financial Statements" in Item 7.
Wild Rivers Water Park
The Company is a party to a Water Park Sublease between the Subsidiary
and The Splash, a California limited partnership ("The Splash"), pursuant to
which the Subsidiary subleases approximately 15 acres of its leased California
property on which The Splash operates a theme family Water Park (the "Water
Park"). The term of the Water Park Sublease is co-extensive with the Company's
Ground Lease (approximately 10 months). The Water Park Sublease also grants The
Splash the right to use the parking area, subject to certain rights previously
granted Irvine Meadows. The Water Park is known as Wild Rivers, offering a
tropical setting with an African theme. There are four main activity areas on
the 15- acre parcel which comprises the Water Park, featuring a 50-foot tall
mountain which provides 18 different water rides. The Company has a 3.12%
limited partnership interest in The Splash. See Note 5 of "Notes to Consolidated
Financial Statements" in Item 7.
Under the terms of the Water Park Sublease, The Splash pays a minimum
annual rent of $475,000, payable $39,583 per month, against a percentage rent
equal to 10% of annual Gross Revenues (as defined). In addition, The Splash has
agreed to pay additional rent to cover various increased expenses with respect
to the subleased property during the term of the Water Park Sublease, as well as
all taxes related to such property. The basis on which rental under this
sublease is calculated is part of the rent dispute with Irvine in The Irvine
Company Litigation. In 1994, The Splash paid the Company
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rentals of $597,089 and a limited partner distribution of $584,011 and in 1995,
The Splash paid the Company rentals of $50,000 and a limited partner
distribution of $45,000.
For the complete terms of the Water Park Sublease and related
documents, see Exhibit 10-17 attached to and made a part of this Annual Report
on Form 10-KSB.
From the original opening of its California park, the Company had an
exclusive concession arrangement with Africa Arts of California, Inc. ("Africa
Arts") related to the sale of souvenirs, gifts and similar merchandise on the
California park property. In order to terminate this arrangement by reason of
the closing of the animal park operations in 1984, the parties entered into a
new arrangement pursuant to which Africa Arts receives 10% of the gross revenues
received by The Splash or any other party from the sale of such merchandise at
the Water Park, plus 15% of all gross revenues received by the Company from the
sale of such merchandise on the remainder of the California property. In
connection with this agreement, the Company granted Africa Arts an option to
purchase up to 35,000 shares of the Company's Common Stock at an exercise of
$1.00 per share. This option expires on February 28, 1997. See Exhibits 10-18
and 10-19 attached to and made a part of this Annual Report on Form 10-KSB for
the terms of this arrangement.
Picnics and Other Subleases
In 1982, the Company converted a portion of its park property formerly
used as part of the African wildlife preserve into a large park area which
provides two exclusive-use picnic areas for use by companies for their company
picnics and by other groups and organizations. These areas include a softball
field, volleyball courts, basketball courts, large open spaces, picnic tables, a
snack bar and other usual park amenities. The Company ran picnics for a number
of large companies. Since 1990, the Subsidiary has had a sublease arrangement
with James Productions, Inc. ("James"), pursuant to which James has the right to
conduct picnics and other Special Events (as defined) on the picnic areas of the
Company's California park. The Agreement provides a minimum rental for 1990 of
$150,000, increasing by 5% for each additional year during the term of the
sublease, against 15% of gross revenues from the Special Events, payable on a
monthly basis each year commencing in March and ending in October. The monthly
payments are in differing amounts to correspond to the timing of the corporate
picnic season in Southern California. The Company received revenues of $182,326
during 1994 and $191,442 during 1995 under this arrangement.
For the complete terms of the above sublease arrangement, reference is
hereby made to Exhibit 10-27 attached to and made a part of this Annual Report
on Form 10-KSB.
In 1986, the Company entered into a sublease with the Orange County
Transit District, an agency of Orange County, California, of the garage and
vehicle maintenance facility located on the Company's property for an initial
term of three years which has been extended to the expiration of the Company's
Ground Lease at a current monthly rental of $5,850. The tenant pays for all
tenant improvements required for its operations and is responsible for its own
utility expenses. The tenant no longer operates the facility on the property,
but still utilizes a portion of it for storage. For the complete terms of the
lease, see Exhibit 10-24 attached to and made a part of this Annual Report on
Form 10-KSB. From time-to-time the Company enters into other short-term sublease
or utilization arrangements related to its leased property in order to enhance
revenues.
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United Leisure Interactive
Management of the Company, in exploring new avenues for the expansion
of the Company's business as described above, has conceived several ideas for
proprietary interactive multimedia products. Some of these ideas relate to games
and interactive educational products that could be utilized at the children's
play-learning centers, by other users, or marketed to specific end users and/or
to the general public. The Company received prototypes of the first conceptual
products in 1995.
In pursuing these new products, the Company has utilized a portion of
the proceeds received from the public offering completed in 1994, developing new
products for the World Wide Web (WWW) via the Internet. The first such product,
now on-line, is called Netcruise and allows for booking cruises through the
Internet. The service allows viewing video clips from CD-ROM with the proper
hardware. Other services currently offered include WWW site development oriented
toward product marketing, specialized database connectivity to the Internet and
custom software development. Additionally, the Company is hosting WWW pages for
a number of United Leisure divisions as well as clients outside the firm.
Planet Kids, Inc.
In June 1994, the Company entered into a joint venture with MGK, a
publicly traded company engaged in the operation of karate centers in New Jersey
and Pennsylvania. The parties formed a new company, Planet Kids, Inc., which
initially was equally owned, to create and operate state-of-the-art children's
play-learning centers. Planet Kids, Inc.'s new centers will operate out of
leased premises and target children ages 1 through 13. Each center provides
children with interactive multimedia educational games, exercise playgrounds,
educational computers, party facilities and other indoor activities. Management
believes that the development of children's play-learning centers, a relatively
new industry, is a good vehicle to exploit the Company's experience.
As of June 20, 1995, the Company bought out MGK's interest in the joint
venture, thus becoming the sole stockholder in exchange for the return of MGK's
initial investment of $500,000, plus accrued interest of approximately $40,500.
In addition, for the risk undertaken by MGK, the Board of the Directors granted
to MGK an option to acquire up to 150,000 shares of the Common Stock of United
Leisure Corporation at an exercise price of $.01 per share. This option has been
exercised.
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Planet Kids opened its first play-learning center in Laguna Hills,
California in July 1995 and its second in Orange, California in December 1995. A
third center is currently under construction in Fountain Valley, California and
is expected to be operational within the next six months. In addition, Planet
Kids has granted a license to PT Planet Kidsindo, Jakarta, Indonesia, to
construct and operate a Planet Kids center in the Orient in return for a
development fee in the amount of $100,000, $10,000 of which has been paid. See
Exhibit 10-35 for the full terms of this Territory Rights Agreement. See also,
Item 7, "Management's Discussion and Analysis or Plan of Operation".
Frasier Day Camp
The Company opened Camp Frasier at the California park during the
summer of 1982, when the Company had on its property all of the facilities
described above for utilization in connection with picnics, which were also
available for use in connection with a day camp. During its twelve years of
operation, Camp Frasier has experienced steadily increasing camper census and
revenues and has operated at a capacity level for the last several years. The
Company has gradually improved its program, which enjoys popular parental
approval in the area. The camp program is offered to area children between the
ages of 3 and 13 and is designed to provide significant flexibility in
attendance requirements, with a minimum of ten days per camper during the
summer. Campers are provided with planned activity programs which include
educational activities, horseback riding, swimming, arts and crafts, fishing,
four-wheeled Hondas and other standard day camp fare. In recent years, the
Company has added a rope challenge course, go-carts and karate to the
curriculum. Campers at Frasier Day Camp utilize the facilities of the Water Park
described above under "Description of Business -- Water Park" in this Item 1 of
this Annual Report on Form 10-KSB.
During 1994, the Company served approximately 725 campers daily and
realized revenues of $860,426 and during 1995 the Company served approximately
850 campers daily and realized revenues of $999,047. In 1994 and 1995, the
Company operated for nine weeks to correspond with the area school schedules.
The Irvine facility is operating at capacity and the Company has
believed that the opening of new Camp Frasier facilities within a 100 mile
radius of the current facility will not only provide the Company with a new
facility or facilities once the Irvine Ground Lease has been terminated, but
will also capitalize on the Company's reputation in the area. During 1995, the
Company acquired an amusement park located in San Diego, California and obtained
the rights to operate a day camp on an Orange County park located in Yorba
Linda, California. In April 1995, the Company acquired real and personal
property relating to Marshall Scotty's Amusement Park located in San Diego
County, California, for a total purchase price of $1,650,000. The Company paid
$800,000 in cash, assumed an existing note payable secured by the property in
the amount of $120,000 and executed a purchase money note in the amount of
$730,000. The Amusement Park was subsequently renovated and reopened as
"Frasier's Frontier", operating as a day camp, in mid-summer. In Yorba Linda,
the Company has obtained the right to operate a portion of Featherly Regional
Park as a day camp. The park is located in Yorba Linda in Orange County,
California. Under the agreement, which has a term of 30 years, the Company is to
pay a daily rate per camper which starts out at $.50 per day for each camper for
the first five years of the agreement and escalates to the greater of $1.50 per
camper per day or 5% of the Company's gross receipts, commencing in the eleventh
year of the agreement. In addition, the Company has agreed to pay certain
percentage rentals based on gross receipts. See Item 6, "Management's Discussion
and Analysis or Plan of Operations". See also Exhibits 10-30 and 10-31. These
transactions occurred late in the season and the two new camps only operated for
the latter portion of the season. Results indicated, however, that the Company
can look to successful camp seasons at these locations in 1996, when the Company
expects to have four Camp Frasier locations. The Company expects to operate five
Camp Frasier locations in Southern California in the 1997 season. Expansion to
other areas across the United States is also contemplated. See this Item,
"Description of Business -- Camp Frasier" and "Management's Discussion and
Analysis of Financial Condition or Plan of Operation".
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Business Segment Information
The Company's current operations consist of two business segments,
facility rentals, pursuant to which the Company subleases or otherwise allows
others to use its California property as so to cause its property to be a
revenue producing property, and children's recreation activities, which include
the operation of Camp Frasier, a day camp which it operates on the property
during the summer months and Planet Kids, the Company's play-learning center
operations. See Note 16 of "Notes to Consolidated Financial Statements" in Item
7 for a summary of selected consolidated information for such business segments
for the years ended December 31, 1995 and 1994.
Competition
Southern California is an area of the country which emphasizes tourism
and is a major leisure time center. The leisure time attractions carried out on
the Company's property are subject to competition from other leisure time,
entertainment and recreation attractions, including theme and other amusement
parks and spectator sports events, many of which are located near the California
property. Pacific Amphitheater in Costa Mesa, California, was located
approximately 15 miles from the Company's park and competed with the Irvine
Meadows Amphitheater until 1994 when it closed. However, the Arrowhead Pond in
Anaheim is actively conducting concerts. There is also another water park,
"Raging Waters", located approximately 30 miles from the Company's park
property. The Water Park also competes directly with area Southern California
beaches.
In its efforts to develop the California park property, the Company has
in the past been in direct competition with real estate developers of all kinds
in its efforts to develop, including Irvine, its lessor. For all of the reasons
discussed elsewhere in this Annual Report on 10-KSB, management of the Company
believes that it will not be possible to carry out any viable development of its
property during the remaining term (10 months) of the Ground Lease.
The Company also expects to encounter significant competition in
connection with the expansion of the Camp Frasier operations and in the
development of the business of Planet Kids. While Camp Frasier is the single
largest day camp in Southern California, there are a number of day camp
operations throughout the Southern California area. The most important
competitive factors are location and the reputation of the particular camp
operation. In the children's play-center business, there are already several
large companies participating, including Discovery Zone, an affiliate of
Blockbuster Video, as well as many small, local entrants. Planet Kids'
management believes that the most important competitive elements are location
and the imagination applied to the activities provided for the centers'
customers. The Company believes that its emphasis on high-tech interactive
activities will allow it to compete effectively in this market. See this Item,
"Business--Planet Kids, Inc.".
See "Management's Discussion and Analysis of Financial Condition or
Plan of Operation" in Item 6 of this Annual Report on Form 10-KSB.
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Employees
At March 1, 1996, the Company had 33 full-time employees. Of these,
three were management employees and the remainder were administrative and
maintenance employees of the park property. The Company also hires a significant
number of part-time employees during the summer months. In addition, Harry
Shuster, Chairman of the Board, President and Chief Executive Officer, is
employed by the Company as an independent consultant. See Item 9, Directors,
Executive Officers, Promoters and Control Persons; Compliance With Section 16(a)
of the Exchange Act" and Item 10, "Executive Compensation--Consulting and
Employment Agreements".
Item 2. Description of Property.
The Company holds a 300-acre tract of real estate located near the
intersection of the San Diego and Laguna Freeways south of Los Angeles,
California under a Ground Lease with Irvine. This Lease expires on February 28,
1997. Until November 11, 1984, the Company operated an African wildlife preserve
and theme amusement park on a portion of the property. At that date, these park
operations were closed.
The Ground Lease provides for a percentage rental of 5% of gross
admissions (with a minimum set at the $292,500 basic rental plus a percentage of
the gross receipts to the Company from all new concessions and subleases on the
property of 15%, plus 2% to 5% of gross receipts of any food and beverage served
on the property, all of which amounts are part of the disputed rental issues in
The Irvine Company Litigation. The Company also remains responsible for certain
other expenses with respect to the property, including taxes, maintenance and
insurance, which are generally assumed on a pro rata basis by the Company's
sublessees. See Note 9 of "Notes to Consolidated Financial Statements" in Item
7. For the complete terms and provisions of the Ground Lease, reference is made
to Exhibit 10-1 attached to and made a part of this Annual Report on Form
10-KSB.
In The Irvine Company Litigation, it is Irvine's position that the rent
was not paid for a period prior to and through 1990, while the Company's
position is that it owes no rent at all because of Irvine's many unexcused
material breaches of the Ground Lease. The Company also contends that, if the
proper formulas are applied, the Company has overpaid the rent and is due a
refund of several hundred thousand dollars. This dispute will be decided as part
of The Irvine Company Litigation with other lease and rental issues. In its
financial statements the Company has treated this rent issue on a conservative
basis, showing a liability "Provision For Disputed Contingent Claim" on its
Consolidated Balance Sheet in the amount of $1,128,973. This is the amount the
Company believes it would owe if all its arguments in the litigation are
rejected. However, as anticipated by the Company, the jury found for the
Subsidiary on all rent issues in the initial trial of The Irvine Company
Litigation and, if the same result is obtained by the Company in the second
trial, this liability will be extinguished and the Company could possibly have a
rent credit in an amount in excess of $1,000,000. There can be no assurance,
however, that the Subsidiary will be successful on these same rent issues in a
second trial, if the Company's appeal of the Court's Order is not granted and a
second trial is required. See "Legal Proceedings" in Item 3 of this Annual
Report on Form 10-KSB for a description of the pending lawsuits between the
Company and Irvine.
The Company believes that the office space and other facilities
provided at the California park location are adequate for the Company's
operations through the end of the term of the Company's
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Ground Lease. Additional facilities will be required for the development of its
expansion plans described in this Annual Report on Form 10-KSB.
Item 3. Legal Proceedings.
At March 31, 1996, except as set forth below, the Company was not
involved in any material pending legal proceedings to which the Company is a
party or of which any of its property is the subject, which were not covered by
insurance.
The Irvine Company Litigation
In June, 1986, The Splash, the sublessee of the Company on the
Company's leased premises which operates a Water Park on the subleased premises,
filed a Complaint against Irvine in Orange County Superior Court (Case No.
49-12-02). The case is styled The Splash v. The Irvine Company and Marsh &
McLennan; The Irvine Company v. The Splash and Lion Country Safari,
Inc.-California; Lion Country Safari, Inc. - California v. The Irvine Company.
The lawsuit initially involved Irvine's imposition of an unreasonably high
liability insurance requirement on The Splash in an effort to keep the water
park from operating. In its Complaint, The Splash sued Irvine for declaratory
relief, interference with contract, intentional misrepresentation, negligent
misrepresentation, bad faith repudiation of contract, breach of the implied
covenant of good faith and fair dealing and breach of third-party beneficiary
contract. The portion of the lawsuit between The Splash and The Irvine Company
and Marsh & McLennan has been settled. The Company has been informed by the
parties to the settlement that its terms are subject to a confidentiality
agreement among them so that the Company has no knowledge of such terms.
In January, 1987, Irvine filed a Cross-Complaint (amended on April,
1987) against The Splash and also against the Subsidiary, which Cross-Complaint
was subsequently amended several times. In its Third Amended Cross-Complaint,
Irvine sued The Splash for breach of contract, intentional misrepresentation,
negligent misrepresentation, declaratory relief, indemnity and bad faith denial
of contract, and the Subsidiary for breach of lease, indemnity, declaratory
relief. and bad faith denial of contract. The Subsidiary answered Irvine's
Cross-Complaint (also amended several times) and filed a Cross-Complaint against
Irvine for a range of wrongful conduct against the Subsidiary over the past
years. In general, the Subsidiary alleges that Irvine has wrongfully attempted
to frustrate the Company in its efforts over the years to establish new uses on
its leasehold and to derive profit from its Ground Lease. The Subsidiary's
Cross-Complaint includes causes of action for breach of lease, interference with
prospective economic advantage, declaratory relief and restitution after
rescission.
During the pendency of this proceeding, Irvine has made every effort to
utilize its superior financial resources in an effort to force the Company out
of business and thus off of the leased premises, and to destroy the Company's
ability to carry on this litigation effectively. Such actions included
unnecessary and lengthy depositions, unnecessary technical and dilatory motions
and ancillary proceedings and attachments of substantially all of the Company's
revenues and the delivery of a Notice of Default under the Ground Lease,
apparently in a final effort to force the Company off of its leased property.
These actions have forced the Company to expend substantial funds to carry out
The Irvine Company Litigation.
A trial of The Irvine Company Litigation was commenced in early October
1993, and in November 1993, the Company was awarded a jury verdict in the total
approximate amount of $42 million.
10
<PAGE>
The jury found that Irvine had breached the covenant of good faith and fair
dealing in the Ground Lease and awarded the Subsidiary approximately $37 million
in compensatory damages for those breaches. The jury also found that Irvine
acted with "fraud and malice" in interfering with the Subsidiary's relationship
with the Water Park and therefore awarded an additional $5 million to the
Subsidiary in punitive damages. In the rent dispute between Irvine and the
Subsidiary, the jury found that the Subsidiary owed no rent whatsoever because
of Irvine's own unexcused material breaches of the lease. The jury also found
that Amendment No. 9 to the Ground lease had been entered into by the Subsidiary
under duress and without consideration.
On April 15, 1994, after a hearing on post-verdict motions brought by
Irvine for a new trial and/or judgment notwithstanding the verdict, the court
granted a new trial on all issues and denied Irvine's motion for a judgment
notwithstanding the verdict on the basis that the evidence was not sufficient to
justify the verdict reached by the jury. The Company has appealed this Order and
intends to vigorously continue its prosecution of The Irvine Company Litigation.
It is anticipated that the ruling on this appeal may take until near the end of
1996. In The Irvine Company Litigation, the primary claim against the Subsidiary
is a claim for rent due in the approximate amount of $1,128,973. In addition,
Irvine raised certain other issues as to the calculation of rent and claims
legal costs. These claims are disputed by the Company and the Company's
Management believes that if all these issues were decided against the Company,
probably the most unfavorable result which might be incurred by the Company from
The Irvine Company Litigation would be a judgment against the Subsidiary of
approximately $2,000,000. There can be no assurance as to the ultimate outcome
of The Irvine Company Litigation.
On March 3, 1995, the Subsidiary filed a Complaint in the Superior
Court of the State of California against The Irvine Company praying for
declaratory relief and damages and for unjust enrichment. The case is styled
Lion Country Safari, Inc.--California v. The Irvine Company, (Case No. 743669).
The Irvine Ground Lease contains a provision which gives the Subsidiary the
right to remove all improvements at the termination of the Lease on February 28,
1997, and return the property to its original unimproved condition; however,
Irvine has unilaterally granted extensions to the Subsidiary's sublessees,
Irvine Meadows Amphitheater and Wild Rivers, without any participation or
obtaining the consent to such extensions by the Subsidiary. The Subsidiary has
requested from the Court a declaration that it has the right to remove all
improvements on the premises at the termination of the Ground Lease in
accordance with its terms or, in the alternative, that the Subsidiary be
compensated for the value of these improvements. The Subsidiary also contends
that Irvine has been unjustly enriched by its actions, including the unilateral
extensions in derogation of the Subsidiary's rights, and requests that the Court
order the disgorgement of Irvine's unjust enrichment.
On October 31, 1995, the Court dismissed the Subsidiary's cause of
action for unjust enrichment on the grounds that the cause of action was
premature. As for the cause of action for declaratory relief, on March 5, 1996,
the Court ruled that the Subsidiary had the right to remove all improvements
from the leasehold at the termination of the Ground Lease if the Subsidiary was
not in default at that time. The Court stated that it would issue no further
declarations. It is expected that a formal judgment embodying the rulings made
on March 5, 1995 will soon be issued by the Court.
11
<PAGE>
Subsidiary Bankruptcy
In August 1989 and June, 1990, respectively, Irvine obtained the right
to attach the Company's revenues in the total amount of $1,097,786, giving it
the legal ability to cut off virtually all sources of revenues available to the
Company so that it would be unable to continue its operations during its 1990
summer season. In response to this move by Irvine, the Company's Board of
Directors determined that it would be necessary for the Subsidiary to seek
protection under Chapter 11 of the United States Bankruptcy Code. On July 23,
1990, the Subsidiary filed a Petition for Reorganization under Chapter 11 in the
United States Bankruptcy Court (Case No. SA 90-04968JB) in Santa Ana,
California, in order to preserve the assets of the Subsidiary for the benefit of
the stockholders and creditors of the Company, to enable the Company to continue
its operations and to enable the Company to proceed with the effective
prosecution of The Irvine Company Litigation. The Subsidiary operated under the
aegis of the Bankruptcy Court for almost four years. As a result of the jury
verdict obtained by the Company in the initial trial of The Irvine Company
Litigation, the parties, by stipulation, agreed that the Subsidiary's petition
under Chapter 11 be dismissed on December 9, 1993.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year
ended December 31, 1995, to a vote of security holders of United Leisure
Corporation, through the solicitation of proxies, or otherwise.
12
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Common Stock, par value $.01 per share, of the Company has been
traded on The Nasdaq Stock Market's Small Cap Market ("Nasdaq") under the symbol
UDTL since November 10, 1994. Prior to that date, the Company's Common Stock was
thinly traded in the over-the-counter market. In its 1994 public offering, the
Company sold a total of 4,945,000 Units, each Unit consisting of one share of
Common Stock and one Class A Warrant. Each of the Class A Warrants entitles the
holder thereof to purchase one share of the Company's Common Stock at an
exercise price of $4.00 per share. In addition to the market for the Company's
Common Stock, as to which certain information is provided below, the Company's
Class A Warrants are also traded on Nasdaq. See Item 11, "Security Ownership of
Certain Beneficial Owners and Management".
The table below sets forth, for the periods indicated, the high and low
bid prices of the Common Stock, for the period November 10, 1994, and
subsequent, through December 31, 1995, on Nasdaq, as reported to the Company in
monthly reports from Nasdaq, and for the period prior to November 10, 1994, as
reported to the Company by a market maker in the Company's Common Stock.
<TABLE>
<CAPTION>
1995 1994
-------------------------- ---------------------------
High Low High Low
Bid Bid Bid Bid
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Quarter $ 5-7/8 $ 2-5/16 $ 3-3/4 $ 2
2nd Quarter 2-11/16 7/8 3-3/4 1-1/2
3rd Quarter 3-1/4 2 3-7/8 2-3/8
4th Quarter 3-7/8 2-1/16 5 1-1/8
</TABLE>
On March 29, 1996, the closing bid price of the Common Stock on Nasdaq was
$2-3/4.
The above quotations represent prices between market makers, do not
include retail mark-up, mark-down or commission and do not necessarily represent
actual transactions.
There were approximately 2,433 record holders of the Common Stock, par
value $.01 per share, of United Leisure Corporation as of March 1, 1996.
The Company has never declared or paid any cash dividends and does not
intend to pay cash dividends in the foreseeable future on the shares of Common
Stock. Cash dividends, if any, that may be paid in the future to holders of
Common Stock will be payable when, as and if declared by the Board of Directors
of the Company, based upon the Board's assessment of the financial condition of
the Company, its earnings, need for funds, capital requirements, and prior
claims, if any, of Preferred Stock to the extent issued, and other factors,
including any applicable laws. The Company is not currently a party to any
agreement restricting the payment of dividends.
13
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
Development Activities
The Company's Ground Lease terminates on February 28, 1997, thus
limiting any material developmental uses that may be made of the property during
the remaining 10-month period. The Company's efforts to develop its leasehold
interest have encountered significant and difficult obstacles. Over the past
several years, the Company has received proposals for a number of different
projects and/or subleases for the development of its property. Irvine, as the
Company's landlord, has taken the position that its consent is required for
these additional projects and in connection with discussions related thereto has
consistently presented the Company with significant obstacles to the development
of new projects and/or unreasonable financial demands related thereto. As a
result, the Company is unable to proceed with any projects or subleases. Thus,
the Company's ability to realize the full value of its major asset has been and
is materially limited. See this Item 6 and Item 3, "Legal Proceedings" for
descriptions of the continuing litigation with Irvine.
Current Projects
Set forth below is a summary of each of the current projects which the
Company is carrying out on its leased property.
The Company is a party to an Amphitheater Sublease, pursuant to which
the Company subleases approximately 20 acres of its 300-acre property to Irvine
Meadows Amphitheater. In 1995 and 1994, the Company has received towards its
account rentals of $355,119 and $438,920, respectively, from this Sublease
Agreement. In 1994, Irvine Meadows booked over 37 concerts for the 1994 season
and 35 for the 1995 season.
Since 1990, the Subsidiary has had a sublease arrangement with James
Productions, Inc. ("James"), pursuant to which James has the right to conduct
picnics and other Special Events (as defined) on the 27-acre picnic areas of the
Company's California park. The Agreement had an initial term of four years with
the right to renew it for an additional three years, which renewal right has
been exercised. The Agreement provides a minimum rental for 1990 of $150,000,
increasing by 5% for each additional year during the term of the sublease,
against 15% of gross revenues from the Special Events, payable on a monthly
basis each year commencing in March and ending in October. The monthly payments
are in differing amounts to fit the timing of the corporate picnic season in
Southern California. The Company received rentals under this arrangement of
$191,442 in 1995 and $182,326 in 1994.
14
<PAGE>
The Company offers a summer day camp for a nine-week period during the
summer for children ages 3-13. Campers are provided with a planned program of
activities, including softball, swimming, horseback riding, arts and crafts and
other usual day camp fare. Camp Frasier had an average daily camper count of 850
in 1995 and 725 in 1994. The day camp generated revenues of $999,047 in 1995 and
$860,426 in 1994. Campers are able to use the Water Park facility during the
camp season. Due to the success of Camp Frasier and the fine reputation enjoyed
by it in the area where the Company operates, the Company has embarked on an
expansion plan. In April 1995, the Company acquired real and personal property
relating to Marshall Scotty's Amusement Park located in San Diego County,
California, for a total purchase price of $1,650,000. The Company paid $800,000
in cash, assumed an existing note payable secured by the property in the amount
of $120,000 and executed a purchase money note in the amount of $730,000. The
Amusement Park was subsequently renovated and reopened as "Frasier's Frontier",
operating as a day camp, in mid-summer. In Yorba Linda, the Company has obtained
the right to operate a portion of Featherly Regional Park as a day camp. The
park is located in Yorba Linda in Orange County, California. Under the
agreement, which has a term of 30 years, the Company is to pay a daily rate per
camper which starts our at $.50 per day for each camper for the first five years
of the agreement and escalates to the greater of $1.50 per camper per day or 5%
of the Company's gross receipts, commencing in the eleventh year of the
agreement. In addition, the Company has agreed to pay certain percentage rentals
based on gross receipts.
The Company is a party to a sublease entered into in 1984 with American
Sportsworld, Inc. covering The Splash, a water park on 15 acres of the Company's
property opened to the public in July, 1986. The Water Park is known as Wild
Rivers, offering a tropical setting with an African theme. The Company has a
3.12% limited partnership interest in The Splash. Under the terms of the Water
Park Sublease, The Splash pays a minimum annual rent of $475,000, payable
$39,583 per month, against a percentage rent equal to 10% of annual Gross
Revenues (as defined). In addition, The Splash has agreed to pay additional rent
to cover various increased expenses with respect to the subleased property
during the term of the Water Park Sublease, as well as all taxes related to such
property. In 1995 and 1994, American Sportsworld, Inc. paid the Company $584,011
and $597,089, respectively, in rentals. In addition, in 1995 and 1994, the
Company received capital distributions in the respective amounts of $45,000 and
$50,000 from the Water Park.
Since 1987, the Company has from time-to-time entered into several
subleases for portions of its park property and certain of the vacant space in
the Company's Administrative Building. The leases presently in effect generate
approximately $10,000 per month in rental revenues for the Company.
It is the Company's present intention to continue all of the above
leases and programs during its 1996 season. In addition, the Company is
currently reviewing proposals for short-term subleases of portions of its
property for various uses since there will be only one more season on the Irvine
Park property.
The Irvine Company Litigation
Since 1987, the Company's wholly-owned subsidiary, Lion Country Safari,
Inc.--California (the "Subsidiary") has been engaged in protracted and expensive
litigation with its landlord, Irvine, in Orange County Superior Court (Case No.
49-12-02). The case is styled The Splash v. The Irvine Company and Marsh &
McLennan; The Irvine Company v. The Splash and Lion Country Safari,
Inc.--California; Lion Country Safari, Inc.--California v. The Irvine Company.
In the action, Irvine sued the Subsidiary for breach of lease, indemnity,
declaratory relief and bad faith denial of contract. The Subsidiary answered
Irvine's Cross-Complaint (amended several times) and filed a Cross-Complaint
against Irvine for a range of wrongful conduct against the Subsidiary over the
past years. In general, the Subsidiary alleges that
15
<PAGE>
Irvine has wrongfully attempted to frustrate the Company in its efforts over the
years to establish new uses on its leasehold and to derive profit from its
Ground Lease. The Subsidiary's Cross-Complaint includes causes of action for
breach of lease, interference with prospective economic advantage, declaratory
relief and restitution after rescission.
A trial of The Irvine Company Litigation was commenced in early October
1993, and in November 1993, the Company was awarded a jury verdict in the total
approximate amount of $42 million. The jury found that Irvine had breached the
covenant of good faith and fair dealing in the Ground Lease and awarded the
Subsidiary approximately $37 million in compensatory damages for those breaches.
The jury also found that Irvine acted with "fraud and malice" in interfering
with the Subsidiary's relationship with the Water Park and therefore awarded an
additional $5 million to the Subsidiary in punitive damages. In the rent dispute
between Irvine and the Subsidiary, the jury found that the Subsidiary owed no
rent whatsoever because of Irvine's own unexcused material breaches of the
lease. The jury also found that Amendment No. 9 to the Ground Lease had been
entered into by the Subsidiary under duress and without consideration.
On April 15, 1994, after a hearing on post-verdict motions brought by
Irvine for a new trial and/or judgment notwithstanding the verdict, the court
granted a new trial on all issues and denied Irvine's motion for a judgment
notwithstanding the verdict on the basis that the evidence was not sufficient to
justify the verdict reached by the jury. The Company has appealed this Order and
intends to vigorously continue its prosecution of The Irvine Company Litigation.
It is anticipated that the ruling on this appeal may take until near the end of
1996. In The Irvine Company Litigation, the primary claim against the Subsidiary
is a claim for rent due in the approximate amount of $1,128,973. In addition,
Irvine raised certain other issues as to the calculation of rent and claims
legal costs. These claims are disputed by the Company and the Company's
Management believes that if all these issues were decided against the Company,
probably the most unfavorable result which might be incurred by the Company from
The Irvine Company Litigation would be a judgment against the Subsidiary of
approximately $2,000,000. In March 1995, the Subsidiary filed a Complaint in the
California courts of equity praying for declaratory relief and damages for
unjust enrichment. The Court has dismissed the Subsidiary's cause of action for
unjust enrichment on the grounds that the cause of action was premature, but has
ruled that the Subsidiary has the right to remove all improvements from the
Irvine leasehold at the termination of the Ground Lease if the Subsidiary is not
in default at that time. There can be no assurance as to the ultimate outcome of
The Irvine Company Litigation. See Item 3, "Legal Proceedings".
Business Segment Information
The Company's current operations consist of two business segments,
facility rentals, pursuant to which the Company subleases or otherwise allows
others to use its California property so as to cause its property to be a
revenue producing property, and children's recreational activities, which
includes the operation of Camp Frasier, a day camp which it operates on the
property during the summer months and the management of the children's
play-learning center joint venture, Planet Kids. See Note 16 of "Notes to
Consolidated Financial Statements" in Item 7 for a summary of selected
consolidated information for such business segments for the years ended December
31, 1995 and 1994.
16
<PAGE>
Results of Operations
1995 Compared to 1994
The Company had total revenues during the year ended December 31, 1995,
in the amount of $3,176,867 as compared to $2,527,972 for 1994. The increase
resulted from increased revenues from the children's recreational activities
segment of the Company's business constituting increased revenues from the
Company's Camp Frasier operations, from three locations for at least a portion
of the summer season compared to only one location in 1994, and revenues from
the Company's initial two play-learning centers. At the same time, rentals from
the Irvine Meadows Amphitheater and the Wild Rivers Water Park, were decreased
by approximately $175,534.
In view of the expanded operations of Camp Frasier and the new play-
learning centers, the Company's occupancy and all other expenses increased
significantly, generating total operating expenses of $4,235,066 for 1995, as
compared to $1,861,653 for 1994. Legal expenses incurred in connection with The
Irvine Company litigation remained approximately the same, while interest income
on the invested net proceeds of the 1994 public offering produced interest
income of $699,204, as compared to $115,721 in 1994 when the funds were only
invested for approximately six weeks.
The above results of operations resulted in a net loss for the year of
$(644,183) as compared to net income for 1994 of $533,080.
The Company's management views 1995 as a transition year during which
the Company concentrated on expanding its operations so that it could continue
its operations following the termination of The Irvine Company Ground Lease in
February 1997. During the year, it opened two additional Camp Frasier day camp
sites, two children's play-learning centers commenced operations, construction
of a third center and worked on the developing of certain other proprietary
software. No revenues were derived from United Leisure Interactive during 1995.
While the new play-learning centers and Camp Frasier locations operated for only
a portion of the year, indications are that these operations will contribute
significant revenues in future years.
Most of the activities carried out on the Company's property are
seasonal in nature, thus likely to cause most of the Company's revenues to be
received during the period April through September. Inflation in recent years
has not been an important factor in the Company's operations.
Liquidity and Financial Condition
As a result of continued operating losses experienced by the Company
over a number of years prior to 1994, and as a result of the significant
expenses incurred by the Company in carrying on the pending litigation with its
landlord, Irvine, described below, the Company operated for a number of years
with a severe cash flow deficit. For the most part, the Company was unable to
borrow on its own credit during this period. Accordingly, in addition to cash
flow received from operations, the Company's cash needs were provided by loans
and other credit accommodations made to the Company by Harry Shuster, Chairman
of the Board, President and Chief Executive Officer, and from certain other out
of the ordinary course of business transactions. At December 31, 1995, the
Company owed Mr. Shuster a total of $1,003,265. See Note 11 of "Notes to
Consolidated Financial Statements" in Item 7 and Item 12, "Certain Relationships
and Related Transactions".
In June 1994, the Company's outstanding Series A Preferred Stock held
by Harry Shuster was converted into 3,200,000 shares of Common Stock. The
Company's balance sheet was cleaned up by the improvement of the position of the
Company's common stockholders by the removal of the Series A Preferred Stock.
The Company paid Mr. Shuster a $75,000 financing fee in connection with this
transaction. Three other 1994 transactions strengthened the Company's balance
sheet. First, the Company entered into an agreement with Bank of America
(formerly Security Pacific National Bank)
17
<PAGE>
pursuant to which the Company purchased, for $145,000, the $225,000 Promissory
Note owed to such Bank. As part of the purchase, Bank of America returned to the
Company a total of 37,500 shares of Common Stock and Common Stock Purchase
Warrants to purchase a total of 334,825 shares of the Company's Common Stock at
exercise prices ranging from $.25 to $.75 issued to it in connection with the
issuance of the Promissory Note. See Notes 10 and 15 of "Notes to Consolidated
Financial Statements". Additionally, on June 9, 1994, Harry Shuster, Chairman of
the Board, President and Chief Executive Officer of the Company, utilized
$649,800 of the indebtedness owed him by the Company to exercise outstanding
non-qualified stock options to purchase 755,550 shares of Common Stock of the
Company at exercise prices ranging from $.30 to $1.00. In connection with the
establishment of the Company's children's play-learning centers business
described in Item 1, "Description of Business--Planet Kids, Inc.", in order to
raise its initial $500,000 capital contribution, the Company privately placed a
total of 571,430 shares of its Common Stock with Plus One Finance, Ltd., which
is unaffiliated with the Company, at a purchase price of $.875 per share. At
June 1, 1994, the time such transaction was agreed upon, the closing bid and
asked prices for the Common Stock on the over-the-counter market were $1-1/8 and
$1-3/4, respectively. The effect of these three transactions was to reduce the
Company stockholders' deficit by approximately $1,250,000. See Note 15 of "Notes
to Consolidated Financial Statements" in Item 7 and Item 12, "Certain
Relationships and Related Transactions".
In view of the short term remaining under the Ground Lease covering its
California property and the uncertainties created by the Court's actions in
ordering a new trial in The Irvine Company Litigation, the Board of Directors
determined that the Company should explore new avenues for the future
development of its business. In this connection, the Company entered into a
joint venture for the creation of a 50%-owned company to construct and operate
children's play-learning centers, made plans for the expansion of its Camp
Frasier operations, the creation of an interactive multimedia division and
fashioned a complementary merger and acquisition program.
In order to be able to carry out the above plans, in November 1994, the
Company completed a public offering of 4,945,000 Units, each Unit consisting of
one share of Common Stock, par value $.01 per share, of the Company and one
redeemable Class A Common Stock Purchase Warrants ("Class A Warrant") to
purchase one share of Common Stock of the Company at an exercise price of $4.00
per share (subject to adjustment in certain events). The Class A Warrants are
exercisable during the period November 10, 1996 through November 10, 1999,
unless previously redeemed. The Class A Warrants are subject to redemption by
the Company in certain events. After payment of the expenses of the offering,
the Company received net proceeds of approximately $14,855,187, all of which
were credited to the Common Stock and Paid-In Capital Accounts of the Company.
Such proceeds are being used in developing the Company's business as described
in this Annual Report on Form 10-KSB. See Item 7, Note 15 of "Notes of
Consolidated Financial Statements" and this Item, "Management's Discussion and
Analysis or Plan of Operation".
The Company has enjoyed a fairly stable operating revenue base from its
sublease rentals in recent years, Camp Frasier operations and other
miscellaneous sources of revenues from the operation of its leased property.
These operations have generally produced a small positive cash flow from
operating activities, generating gains of $286,728 for 1994, after giving effect
to the payment approximately $900,000 of accrued liabilities related to prior
periods in 1994. In 1995, however, the Company experienced negative cash flow in
the amount of $195,601.
18
<PAGE>
In 1993, the Company received the release of $945,044 of restricted
cash and another $407,055 in 1994, all of which funds were immediately utilized
to extinguish various obligations. Thus, none of these activities improved the
Company's liquidity. During the first six months of 1994, the Company made
certain necessary repairs to its park property. Apart from these repairs, the
Company made no significant commitments for expenditures until the completion of
the above-described public offering. With the proceeds of the public offering,
the Company made an initial loan of $500,000 to Planet Kids, commenced the
expansion of its Camp Frasier operations and the development of certain
interactive multimedia concepts. During 1995, the Company made a number of
investments, including the expenditure of $545,500 in buying out MGK, its
original partner in the children's play-learning centers venture, and a total of
$4,140,189 in acquiring an amusement park in San Diego, California, certain
computer equipment for United Leisure Interactive and in connection with the
development of its two new Camp Frasier locations and its three initial
children's play-learning centers. There is no assurance that any of these new
activities will be successful. See Note 2 of "Notes to Consolidated Financial
Statements" in Item 7.
Given the stability of the revenues from its current operations, the
Company expects that its 1996 operations will generate sufficient cash flow to
continue its current operations through the end of the term of The Irvine
Company Ground Lease (February 28, 1997). In the meantime, the Company intends
to expend the funds raised in the 1994 public offering in the following
directions in order to expand its business and prepare the Company for
operations after the expiration of the Irvine Ground Lease: Planet Kids Learning
Centers Joint Venture -- $3,000,000, Camp Frasier expansion -- $500,000,
interactive multimedia development -- $1,000,000, and mergers and acquisitions
program -- $3,500,000. See "Management's Discussion and Analysis or Plan of
Operation" in this Item.
Item 7. Financial Statements.
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
<S> <C>
Report of Independent Auditors............................................................................ 20
Consolidated Balance Sheets at December 31, 1995 and 1994................................................. 21
For the years ended December 31, 1995 and 1994:
Consolidated Statements of Operations.................................................................. 22
Consolidated Statement of Changes in Stockholders' Equity (Deficiency)................................. 23
Consolidated Statements of Cash Flows.................................................................. 24
Notes to Consolidated Financial Statements................................................................ 26
</TABLE>
19
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
United Leisure Corporation
We have audited the accompanying consolidated balance sheets of United Leisure
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity (deficiency) and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of United Leisure
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of operations, stockholders' equity (deficiency) and cash
flows for the years then ended in conformity with generally accepted accounting
principles.
HOLLANDER, GILBERT & CO.
Los Angeles, California
March 8, 1996
20
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 and 1994
ASSETS
1995 1994
--------------- ---------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 9,929,785 $ 15,955,140
Receivables 417,368 299,628
Inventory 80,301
Prepaid expenses 178,009 29,423
--------------- ---------------
TOTAL CURRENT ASSETS 10,605,463 16,284,191
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization (Notes 2 and 6) 4,845,406 56,246
OTHER ASSETS
Due from related parties (Note 11) 110,000 10,000
Investment in limited partnership (Note 5) 15,000 60,000
Pre-opening costs 405 66,931
Intangible assets, net of accumulated
amortization (Note 7) 68,440 97,461
Deposits 237,538 249,726
--------------- ---------------
$ 15,882,252 $ 16,824,555
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses (Note 8) $ 509,259 $ 499,381
Provision for disputed contingent claim (Note 9) 1,128,973 1,128,973
Due to related party (Note 11) 1,003,265 1,246,571
Deferred revenue 31,320 23,810
Deposits and other 124,275 124,275
--------------- ---------------
TOTAL CURRENT LIABILITIES 2,797,092 3,023,010
LONG-TERM DEBT (Note 10) 842,000 500,000
--------------- ---------------
TOTAL LIABILITIES 3,639,092 3,523,010
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2 and 13)
MINORITY INTEREST (Note 14) 500,017
---------------
STOCKHOLDERS' EQUITY (Notes 10 and 15)
Preferred stock, $100 par value
Authorized 100,000 shares, none outstanding
Common stock, $.01 par value
Authorized 30,000,000 shares, Issued
and outstanding 12,368,849 shares
in 1995 and 12,203,428 shares in 1994 123,688 122,034
Capital in excess of par value 24,326,458 24,242,297
Accumulated deficit (12,206,986) (11,562,803)
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 12,243,160 12,801,528
--------------- ---------------
$ 15,882,252 $ 16,824,555
=============== ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
21
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 and 1994
1995 1994
------------------ ------------------
<S> <C> <C>
REVENUES
Rentals $ 1,494,012 $ 1,669,546
Children's recreational activities 1,702,857 860,426
----------------- -----------------
TOTAL REVENUES 3,196,869 2,529,972
----------------- -----------------
OPERATING EXPENSES
Occupancy (Notes 4 and 9) 3,144,238 1,560,457
Selling, general and administrative 862,678 189,212
Depreciation and amortization 228,150 111,984
----------------- -----------------
TOTAL OPERATING EXPENSES 4,235,066 1,861,653
----------------- -----------------
OPERATING INCOME (LOSS) (1,038,197) 668,319
----------------- -----------------
OTHER INCOME (EXPENSE)
Interest income 699,204 115,721
Interest expense (84,237) (52,094)
Legal costs (Notes 3 and 4) (365,207) (340,679)
Adjustment for over-provided liabilities 154,759
Other, net 8,495
-----------------
TOTAL OTHER INCOME (EXPENSE) 413,014 (277,052)
----------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (625,183) 391,267
INCOME TAXES (BENEFIT) (NOTE 12) 19,000 (43,200)
----------------- ------------------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM (644,183) 434,467
EXTRAORDINARY ITEM--Gain from
settlement of debt, net of income
tax effect of $66,200 (Note 10) 98,613
----------------- -----------------
NET INCOME (LOSS) $ (644,183) $ 533,080
================= =================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 12,224,708 6,355,207
================= =================
EARNINGS (LOSS) PER COMMON SHARE Primary and assuming full dilution:
Income (loss) before extraordinary item $ (.05) $ .07
Extraordinary item .01
----------------- -----------------
Net income (loss) $ (.05) $ .08
================= =================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
22
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1995 and 1994
Preferred Stock Common Stock
Capital in
Excess of Accumulated
Shares Par Value Shares Par Value Par Value Deficit Total
---------- ----------- ---------- ----------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE-- DECEMBER 31, 1993 16,000 $ 1,600,000 2,768,948 $ 27,689 $ 6,806,600 $ (12,095,883) $ (3,661,594)
Shares issued in private
placement 571,430 5,714 494,286 500,000
Preferred shares converted
into common shares (16,000) (1,600,000) 3,200,000 32,000 1,493,000 (75,000)
Exercise of stock options
(Note 11) 755,550 7,556 642,244 649,800
Shares retired (Note 10) (37,500) (375) (375)
Shares issued in public
offering 4,945,000 49,450 14,805,737 14,855,187
Underwriter's purchase
option 430 430
Net income for the year 533,080 533,080
------- ------------ ----------- --------- ------------ ------------- ------------
BALANCE-- DECEMBER 31, 1994 12,203,428 122,034 24,242,297 (11,562,803) 12,801,528
Exercise of stock options 156,421 1,564 6,001 7,565
Options granted for services
(Note 14) 67,500 67,500
Exercise of warrants 9,000 90 15,660 15,750
Options redeemed (5,000) (5,000)
Net loss for the year (644,183) (644,183)
------- ------------ ----------- --------- ------------ ------------- ------------
BALANCE-- DECEMBER 31, 1995 12,368,849 $ 123,688 $ 24,326,458 $ (12,206,986) $ 12,243,160
======= ============ =========== ========= ============ ============= ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
23
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 and 1994
1995 1994
----------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) before extraordinary item $ (644,183) $ 434,467
Adjustments to reconcile net income (loss) before
extraordinary item to net cash provided (used)
by operating activities:
Depreciation and amortization of property and equipment 193,029 68,569
Amortization of intangibles 35,043 43,415
Options granted for services 67,500
Adjustment for over-provided liabilities (154,759)
Other (17) 818
Changes in operating assets and liabilities:
Receivables (117,740) (75,114)
Inventory (80,301)
Prepaid expenses (148,586) (22,042)
Pre-opening costs 66,526 (66,931)
Deposits 12,188 (248,245)
Amounts payable and accrued expenses 164,637 (1,115,148)
Accrued expenses due to related party (243,306) 50,221
Deferred revenue and other 7,510 (21,848)
-------------- -------------
NET CASH USED BY OPERATING ACTIVITIES (842,459) (951,838)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (4,140,189) (5,100)
Payment of organization costs (494) (17,252)
Purchase of minority interest (500,000)
Payment of lease acquisition costs (5,528) (15,603)
Release of restricted cash 407,055
Capital distribution from limited partnership 45,000 50,000
-------------- -------------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (4,601,211) 419,100
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from private placement 500,000
Advances to related parties (100,000) (10,000)
Proceeds from public offering 14,855,187
Exercise of stock options and warrants 23,315 430
Capital invested by minority interest 1,000,000
Preferred stock conversion fee (75,000)
Repayments of related party advances (200,000)
Options redeemed (5,000)
Principal payments under short-term and long-term obligations (500,000) (265,000)
-------------- -------------
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES (581,685) 15,805,617
-------------- -------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (6,025,355) 15,272,879
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 15,955,140 682,261
-------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,929,785 $ 15,955,140
============== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 97,219 $ 251,097
Income taxes paid $ 48,419 $ 3,200
Interest received $ 749,953 $ 64,972
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Property and equipment acquired for
long-term debt $ 842,000
Preferred stock converted into common stock $ 1,600,000
Related party advances converted into equity
by the exercise of common stock options $ 649,800
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
25
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 and 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Description of Business -- The primary business of the Company has been
to develop its major asset, a ground lease and related improvements and
equipment, covering approximately 300 acres of real estate in Irvine,
California, through sublease, so as to convert the leased asset into a
revenue producing property. In carrying out its business, the Company
prefers to act primarily as a developer and manager at the property,
rather than as an operator. The Company's ground lease interest expires
February 28, 1997. The Company also operates a summer day camp on its
leased property, an amusement park in San Diego County, California, two
state-of-the-art children's play-learning centers in Southern
California and is in the process of developing additional summer day
camps and children's play-learning centers.
Principles of Consolidation -- The consolidated financial statements
include the accounts of United Leisure Corporation (the Company) and
its subsidiary companies, all of which are wholly-owned except for
Planet Kids Learning Centers, Inc. (Note 14). All significant
intercompany transactions and balances have been eliminated.
Use of Estimate -- The preparation of financial statements in
conformity with generally accepted accounting principles management to
make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
Cash and Cash Equivalents -- The Company considers all highly liquid
investments purchased with an original maturity of three months or less
to be cash equivalents.
Concentration of Risk -- The Company invests its excess cash in
certificates of deposit and money market funds, which, at times, may
exceed federally insured limits. The Company maintains its accounts
with financial institutions with high credit ratings.
Inventory -- Inventory consists primarily of merchandise held for sale
at the Company's play- learning centers. Inventory is stated at the
lower of cost (first-in-, first-out) or market.
Property and Equipment -- Property and equipment is recorded at cost
and depreciation is computed on the straight-line method based upon the
estimated useful life of the related asset as follows:
Buildings and improvements 3-27 years
Machinery, equipment and vehicles 4-10 years
Furniture, fixtures and office equipment 5-10 years
Computers 6 years
Signs 10 years
Investment in Limited Partnership -- Investment in limited partnership
is carried at initial cost less capital distributions.
26
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Pre-Opening Costs -- Pre-opening costs represent direct costs of a
non-capital nature incurred prior to commencement of operations at a
new play-learning center. Such costs are deferred and expensed upon
commencement of operations at the center. If plans to open a new center
are abandoned, any deferred costs related to such location are expended
during the year.
Intangible Assets -- Intangible assets are recorded at cost and are
amortized on a straight-line basis over their estimated useful lives as
follows:
Repurchased income stream Term of sublease
Organization costs 5 years
Lease acquisition costs Term of lease
Earnings (Loss) per Common Share -- Earnings (loss) per common share is
based upon the weighted average number of common shares, including
common share equivalents, outstanding during the periods. Common share
equivalents, when anti-dilutive, are excluded from weighted average
number of shares outstanding for all periods presented.
Reclassifications -- Certain 1994 balances have been reclassified to
conform with current years presentation.
2. DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
---------------------------------------------------------
Termination of Ground Lease -- The ground lease relating to the
Company's major asset is set to expire in February 1997. Additionally,
the Company has been engaged in protracted and expensive litigation
with its landlord. Accordingly, the Company must prepare itself for the
future by the development of its business into new fields of endeavor
(Note 4).
Uncertainty of Success of Play-Learning Centers -- In June 1994, the
Company entered into a joint venture for the development and operation
of children's play-learning centers. This new business may take some
time to develop, and there can be no assurance that the new business
will be a success (Note 13).
Merger/Acquisition Plans -- The Company plans to engage in a mergers
and acquisition program in order to merge with or acquire companies
engaged in similar or complementary businesses. The Company is not
engaged in any negotiations to merge with or acquire any such target
companies, but the Company is in the process of endeavoring to identify
potential acquisition or merger candidates. The Company can make no
assurances that it will be able to merge with or acquire any companies.
Segment Information -- During the year ended December 31, 1995, two
subleases, Wild Rivers Water Park and Irvine Meadows Amphitheater
accounted for 18% and 11%, respectively, of total operating revenue.
During the year ended December 31, 1994, Wild Rivers Water Park and
27
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Irvine Meadows Amphitheater accounted for 22% and 17%, respectively, of
total operating revenue.
3. ACQUISITIONS
------------
On April 5, 1995, the Company acquired real and personal property
relating to an amusement park in San Diego County, California for a
total purchase price of $1,650,000. The Company paid $800,000 in cash,
assumed an existing note payable secured by the property in the amount
of $120,000 and executed a purchase money note in the amount of
$730,000 (Note 10). The amusement park was subsequently renovated and
re-opened as Frasier's Frontier later in the year.
4. LEGAL PROCEEDINGS
-----------------
The Company's primary operating subsidiary, Lion Country Safari, Inc.
-- California, has been engaged in protracted litigation with the
landlord of the Company's park property since 1986. After a six-week
trial in October and November 1993, the Company was awarded a jury
verdict in the total approximate amount of $42,000,000. The jury found
that the landlord had breached the covenant of good faith and fair
dealing in the ground lease with the subsidiary and awarded the
subsidiary approximately $37,000,000 in compensatory damages for such
breaches. The jury also found that the landlord acted with "fraud and
malice" in interfering with the subsidiary's relationship with the
operator of the water park on the premises and awarded an additional
$5,000,000 in punitive damages. In the rent dispute between the
landlord and the subsidiary, the jury found that the subsidiary owed no
rent whatsoever because of the landlord's own unexcused material
breaches of the ground lease. The jury also found that one of the key
amendments to the ground lease had been entered into by the subsidiary
under duress and without consideration.
In April 1994, after hearing a post-verdict motions brought by the
landlord for a new trial and/or judgment notwithstanding the verdict,
the Court granted a new trial on all issues and denied the landlord's
motion for judgment notwithstanding the verdict, on the basis that the
evidence was not sufficient to justify the verdict brought by the jury.
The Company has appealed this order and intends to vigorously continue
its prosecution of the litigation. There can be no assurance as to the
outcome of this litigation. The Company incurred legal costs in
connection with this litigation during the years ended December 31,
1995 and 1994, of $365,207 and $340,679, respectively.
5. INVESTMENT IN LIMITED PARTNERSHIP
---------------------------------
Investment in limited partnership consists of a 3.12% interest in The
Splash, a California limited partnership organized for the purpose of
developing and operating a water park on a parcel of property subleased
from the Company. The Company acquired its interest in The Splash in
1985 through a transaction wherein the Company conveyed to the limited
partnership leasehold
28
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
improvements to a certain portion of the Company's amusement area,
comprising approximately one-third of the Company's total amusement
area, for $150,000 cash and the partnership interest then valued at
$200,000. In 1995 and 1994, the Company received capital distributions
of $45,000 and $50,000, respectively.
6. PROPERTY AND EQUIPMENT
-----------------------
Property and equipment consisted of the following at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Land $ 1,247,003 $
Buildings and improvements 5,635,401 3,308,916
Machinery, equipment and vehicles 1,004,348 250,316
Furniture, fixtures and office equipment 324,034 68,144
Computers 288,104
Signs and other 60,220
Construction in progress 50,456
-------------
8,609,566 3,627,376
Less accumulated depreciation and amortization (3,764,160) (3,571,130)
------------- -------------
$ 4,845,406 $ 56,246
============= =============
</TABLE>
7. INTANGIBLE ASSETS
-----------------
Intangible assets consisted of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
Repurchased income stream (Note 9) $ 294,802 $ 294,802
Organization costs 17,746 17,252
Lease acquisition costs 21,132 15,603
---------- -----------
333,680 327,657
Less accumulated amortization (265,240) (230,196)
---------- -----------
$ 68,440 $ 97,461
========== ===========
</TABLE>
29
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
-------------------------------------
Accounts payable and accrued expenses consisted of the following at
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------- ------------
<S> <C> <C>
Trade accounts payable $ 302,713 $ 7,188
Accrued legal fees (Note 4) 120,418 63,597
Accrued royalties 222,792
Accrued interest 7,018 54,759
Accrued interest due former joint venture
partner (Note 14) 20,000
Income taxes payable (Note 12) 19,000 19,800
Other accrued liabilities 60,110 111,245
---------- -----------
$ 509,259 $ 499,381
========== ===========
</TABLE>
9. LEASE AND SUBLEASE ARRANGEMENTS
-------------------------------
Lease Arrangements -- At December 31, 1995, minimum annual rentals
under noncancellable leases relating to the Company's leased
facilities, including the initial Planet Kids play-learning center,
were as follows:
Year Ending
December 31,
1996 $ 345,223
1997 372,321
1998 372,321
1999 372,321
2000 372,321
Thereafter 1,776,598
-------------
Total $ 3,611,105
=============
The agreement relating to the Company's Irvine ground lease provides
for rent based on a percentage of gross receipts with a $292,500
minimum. Rent paid directly to the Company's lessor by a sublessee
pursuant to a sublease for the amphitheater on the Company's leased
property is such that it covers the minimum rent called for in the
master lease. Consequently, the only rent required to be paid by the
Company is computed on a percentage of gross receipts or what the
Company actually received basis. This latter rent provision is in
dispute (Note 4).
The Company is also responsible for all property taxes.
30
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
During the years ended December 31, 1995 and 1994, rent expense was
$170,807 and $21,151, respectively (Note 4). Included in rent expense
for the year ended December 31, 1995 is $32,100 paid to the Company's
President and Chief Executive Officer, Mr. Harry Shuster (Note 11).
The provision for disputed contingent claim on the accompanying
financial statements is the subject of litigation between the Company
and its landlord (Note 4). In the initial trial related to such
litigation, the jury found that the Company did not owe such rent and,
in its order for a new trial, the court did not indicate that it
disagreed with that conclusion.
In 1983, the Company entered in to an unconditional agreement with its
lessor whereby the Company sold $1,100,000 of the future revenues due
it from a sublease for the amphitheater located on its leased property
for an amount equal to certain accrued obligations due its lessor in
the approximate amount of $735,000. Pursuant to the agreement, sublease
proceeds were to revert to the Company when and if the lessor received
$1,100,000 plus any sums expended by the lessor to maintain its
position in the income stream. In 1987, the Company repurchased the
balance then still outstanding pursuant to the agreement for $294,802.
Sublease Arrangements -- The Company is the sublessor of certain
portions of its above described ground lease under sublease
arrangements expiring in various years through 1997.
Minimum future rentals to be received on non-cancelable subleases as of
December 31, 1995 are:
Year Ending
December 31,
------------
1996 $ 923,514
1997 155,595
-------------
Total $ 1,079,109
=============
Minimum future rentals do not include contingent rentals that may be
received because of percentage rentals in excess of minimum rental
amounts.
31
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
10. NOTES PAYABLE AND LONG-TERM DEBT
--------------------------------
Long-term debt consisted of the following at December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
----------- --------
<S> <C> <C>
Notepayable secured by first deed of trust, payable interest only at
12%, principal due April 1, 2000, secured by real property located
in San Diego
County, California $ 120,000 $
Purchase money loan, payable interest only at 9.67%, principal due
March 1, 2000, secured by a second deed of trust on real property
located in
San Diego County, California 722,000
Notepayable to former joint venture partner, interest payable annually
at 8%, secured by substantially all of the assets of Planet Kids,
principal due January 1,
1998 (Note 14) 500,000
----------- ----------
$ 842,000 $ 500,000
=========== ==========
</TABLE>
In June 1994, the Company entered into an agreement relative to a
$225,000 note payable to bank wherein the Company purchased the
$225,000 principal amount promissory note, 37,500 shares of the
Company's common stock and common stock purchase warrants to purchase
334,825 shares of the Company's common stock at exercise prices ranging
from $.25 to $.75 for $150,000. The agreement reached and the
subsequent early payoff of $145,000 resulted in a gain of $164,813.
Such extraordinary gain, net of income tax effect of $66,200, is
reflected on the accompanying Consolidated Statement of Operations for
1994.
11. RELATED PARTY TRANSACTIONS
--------------------------
Due From Related Parties -- Due from related parties at December 31,
1994 consists of a note receivable from a Company director. The note,
in the amount of $10,000, is dated November 29, 1994 and bears interest
at the prime rate. The note is secured by 23,000 shares of the
Company's common stock which the maker may purchase pursuant to stock
option agreements with the Company. The note is due and payable on
November 30, 1995; however, it requires reduction in the amount
outstanding should any of the shares referred to above be sold by the
maker.
Due from related parties at December 31, 1995 consists of the above
described $10,000 note receivable which was extended to June 30, 1996,
plus a $100,000 advance made by the Company to the Company's President
and Chief Executive Officer, Mr. Harry Shuster.
32
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Due to Related Party -- In prior years, the Company's President and
Chief Executive Officer, Mr. Harry Shuster, advanced working capital to
the Company at the prime rate plus 3%. Such advances were secured by
the Company's rights under its sublease arrangements. In June 1994,
advances of $649,800 were converted into equity by the exercise of
options to purchase 755,550 shares of the Company's common stock.
At December 31, 1995 and 1994, due to related party consists of the
following amounts owed to Mr. Shuster:
1995 1994
------------- -----------
Accrued interest $ 789,649 $ 789,649
Accrued consulting fee (Note 12) 213,616 456,922
------------- -----------
$ 1,003,265 $ 1,246,571
============= ===========
Leased Facilities -- The Company leases certain of its office space
from a partnership of which the Company's President and Executive
Officer, Mr. Harry Shuster, is a partner on a month-to-month basis. The
Company also pays Mr. Shuster for the use of overnight accommodations
on the East Coast. The Company is advised that the rental and other
terms of the agreed-upon arrangements are no more favorable to Mr.
Shuster than could have been obtained in a similar location from an
independent, unrelated provider.
12. INCOME TAXES
------------
The components of income tax expense, all of which is current, are as
follows for the years ended December 31, 1995 and 1994:
1995 1994
--------- ---------
Federal $ $ 5,000
State 19,000 18,000
--------- ---------
$ 19,000 $ 23,000
========= =========
33
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
At December 31, 1995, the Company had net operating loss (NOL)
carryforwards for federal tax purposes expiring as follows:
Year
Expires Amount
------- ------
1996 $ 2,589.795
1997 379,960
1998 135,776
1999 1,738,569
2000 1,434,703
2001 781,145
2002 140,196
2008 523,345
2009 946,127
--------------
TOTAL $ 8,669,616
==============
The components of deferred taxes were as follows at December 31, 1995
and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 2,989,764 $ 2,637,300
Accrued expenses to a related party 434,414 539,800
State income taxes 6,460 6,000
Partnership interest 29,684
Depreciation 3,100
Valuation allowance (3,431,770) (3,186,200)
-------------- -------------
Total deferred tax assets 28,552 -0-
Deferred tax liability:
Depreciation 28,552
Net deferred taxes $ -0- $ -0-
============== =============
</TABLE>
34
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Income tax expense amounted to $19,000 and $23,000 in 1995 and 1994,
respectively. The actual tax expense differs from the expected tax
expense (computed by applying the federal corporate tax rate of 34%
earnings before income taxes) as follows:
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
Expected statutory tax $ (212,562) $ 189,067
State income tax, net of federal tax benefit 12,540 11,633
Loss producing no current tax benefit 219,022
Alternative minimum tax 4,866
Benefit of operating loss carry forwards (183,075)
Other 509
-------------- -------------
Actual tax $ 19,000 $ 23,000
============== =============
</TABLE>
13. COMMITMENTS AND CONTINGENCIES
-----------------------------
Royalty Agreement -- Pursuant to a termination agreement with a former
concessionaire dated February 1, 1986, the Company is obligated to pay
the former concessionaire a percentage of the gross revenues, ranging
from 5% to 15%, from the sale of gifts and souvenirs sold within the
boundaries of the water park located on the Company's leased land.
Contingent Financing Fees -- The Company is obligated to the payment of
a contingent financing fee based on any recovery obtained from the
litigation described in Note 4 relating to notes payable in the amount
of $900,000 and $120,000 repaid in December 1993 and April 1994,
respectively. The contingent financing fee is determined as an amount
equal to 10% of the gross proceeds received by the Company, either as a
settlement of, or as damages from, The Irvine Company Litigation not to
exceed the amount of the loans made to the Company by such lenders.
Such amount is to be prorated among the lenders based on the amount of
their loans and thus the total liability of the Company for this
contingent financing fee is the total amount of the loans ($1,020,000)
made to the Company pursuant to these transactions. Such contingent
financing fee is only payable in the event that the Company receives
payments in settlement or, or damages from, The Irvine Company
Litigation and is not payable unless the Company is successful.
Consulting Agreement -- As of June 1, 1994, the Company and Mr. Shuster
entered into an amended and restated consulting agreement updating an
arrangement originally effective as of September 1, 1984. The
consulting agreement provides that Mr. Shuster will act as the
President and Chief Executive Officer and a Director of the Company
throughout the rolling five-year term of the agreement for annual
compensation set at $208,984 per annum for 1994, to be increased 10%
during each successive year of the agreement. Mr. Shuster is also to be
provided with either the use of a company car in carrying out his
duties for the Company or $300 per month car allowance. The consulting
agreement provides for certain disability benefits for a period of up
to three years. The consulting agreement provides that, so long as Mr.
Shuster spends as much
35
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
time as is necessary to properly carry out his duties as President and
Chief Executive Officer of the Company, he will be otherwise permitted
to spend a reasonable amount of time pursuing his own outside
interests. The consulting agreement provides for automatic one year
renewals for each contract year that ends without termination of the
consulting agreement by either party. During 1995 and 1994, $221,171
and $202,446, respectively, were accrued and partially paid pursuant to
this agreement (Note 11).
Employment Agreement -- The Company and Renate Graf are parties to a
rolling three-year amended and restated consulting agreement, dated as
of June 1, 1994, updating an arrangement that originally became
effective September 1, 1984. The employment agreement provides that
Mrs. Graf shall be employed as Vice President-Controller and a Director
of the Company for the term of the employment agreement at an annual
base salary of $110,664 for 1994, which increases by 10% each year of
the employment agreement. The employment agreement provides for
automatic one-year renewals for each contract year that ends without
termination of the employment agreement by either party.
14. JOINT VENTURE
In June, 1994, the Company entered into a joint venture with Master
Glazier's Karate International, Inc. ("MGK"), a publicly traded company
engaged in the operation of karate centers in New Jersey and
Pennsylvania. The parties formed a new company, Planet Kids Learning
Centers, Inc. ("Planet Kids"), which is equally owned, to create and
operate state-of-the-art children's play-learning centers. The new
centers will operate out of leased premises and will service children
ages 3 through 13. Each center will provide children with interactive
multimedia educational games, exercise playgrounds, educational
computers, party facilities and other activities.
The terms and provisions of the joint venture are contained in a
Subscription and Stockholders' Agreement, dated as of June 20, 1994,
among the Company, MGK and Planet Kids (the "S&S Agreement"). The joint
venture is to have an initial term of ten years. Each of the parties
has contributed $500,000 to the joint venture as equity and has loaned
Planet Kids an additional $500,000 (Note 10).
Minority interest at December 31, 1994 represents MGK's proportionate
share of the equity of the Company's Planet Kids Learning Centers, Inc.
subsidiary, which was 50% owned at December 31, 1994.
As of June 20, 1995, the Company bought out MGK's interest in the joint
venture, thus becoming the sole stockholder in exchange for the return
of MGK's initial equity investment of $500,000, plus repaid MGK's loan
in the amount of $500,000 with accrued interest of $40,500. In
addition, for the risk undertaken by MGK, the Board of Directors
granted to MGK an option to acquire up to 150,000 shares of the Common
Stock of United Leisure Corporation at an exercise price of $.01 per
share. This option has been exercised.
36
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
15. CAPITAL STOCK
--------------
Preferred and Common Stock -- In 1984, the Company converted cash
advances of $1,600,000 for 16,000 shares of Series A Preferred Stock.
In January 1989, Mr. Harry Shuster, the Company's President and Chief
Executive Officer, entered into an agreement to acquire 100% of the
issued and outstanding preferred stock of the Company. The terms of the
agreement were as follows: Purchase price $250,000, payable $25,000 in
cash and a promissory note of $225,000. Issuance by the Company of
37,500 shares of common stock, par value $.01 per share, and
non-qualified stock options to purchase up to an aggregate of 75,000
shares of such common stock at an initial exercise price of $.75 per
share. In consideration for the Company granting the common stock
options and issuance of common stock, Mr. Shuster waived certain
substantial rights granted the holders of preferred stock. On June 1,
1994, by agreement with the Company, Mr. Shuster converted all of the
issued and outstanding shares of preferred stock into a total of
3,200,000 shares of the Company's common stock.
On June 1, 1994, the Company issued a total of 571,430 shares of its
common stock in a private placement for an aggregate purchase price of
$500,000. The purpose of the placement was to provide the Company with
the required funds for its initial investment in the children's play-
learning center venture.
In order to carry out the Company's expansion plans, the Company
completed a public offering in November 1994, receiving net proceeds
from the offering of $14,855,187. The offering consisted of the sale of
4,945,000 units. Each unit consisted of one share of the Company's
common stock and one Class A warrant exercisable for one share of the
Company's common stock at $4.00 per share. The Class A warrants are
each redeemable by the Company for $.05, per warrant at any time after
two years, upon 30 days' prior written notice, if the average closing
price or bid price of the common stock, as reported by the principal
exchange on which the common stock is traded, Nasdaq or the National
Quotation Bureau Incorporation, as the case may be, equals or exceeds
$9.00 per share for 20 consecutive trading days ending within 10 days
prior to the date of the notice of redemption.
In connection with the public offering, the underwriter purchased an
option to purchase up to 430,000 units being offered to the public at
an exercise price equal to 165% of the public offering price for $430.
The Class A warrants included in these units will be exercisable at
$6.60 per share of common stock. These options will be exercisable for
a term of four years commencing one year from the effective date of the
registration statement utilized in the public offering, November 10,
1994, and provide certain registration rights to the underwriter.
37
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Stock Options -- The following non-qualified stock options granted by
the Company were outstanding at December 31, 1995:
<TABLE>
<CAPTION>
Exercise
Number of Price Per Date of Date of
Shares Share Grant Expiration
------ ----- ----- ----------
<S> <C> <C> <C> <C>
35,000 $ 1.00 February 1, 1986 February 28, 1997
15,000 .68 January 20, 1987 December 31, 1997
356,950 1.00 July 24, 1987 December 31, 1997
95,000 .30 April 22, 1988 December 31, 1997
37,500 1.33 October 7, 1988 December 31, 1997
75,000 1.25 November 17, 1988 December 31, 1997
37,500 1.38 December 5, 1988 December 31, 1997
75,000 .75 February 22, 1989 February 28, 1997
70,000 .75 December 7, 1990 December 31, 1997
55,000 1.00 September 23, 1993 December 31, 1997
---------
851,950
=========
</TABLE>
The Board of Directors have adopted a resolution extending all of the
options listed above to December 31, 1997 as of their respective
expiration dates.
The following table summarizes the activity of common shares under
stock options for the years ended December 31, 1995 and 1994:
1995 1994
---- ----
Balance--beginning of year 864,950 1,620,500
Options granted 150,000
Options exercised (156,421) (755,550)
Option redeemed (6,579)
-----------
Balance--end of year 851,950 864,950
=========== ===========
38
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
Warrants -- At December 31, 1995, the following warrants were
outstanding:
<TABLE>
<CAPTION>
Exercise
Number of Price Per Date of Date of
Shares Share Grant Expiration
------ ----- ----- ----------
<S> <C> <C> <C> <C>
4,945,000 $ 4.00 November 10, 1994 November 10, 1995
430,000 6.60 November 10, 1994 November 10, 1996
81,000 1.75 May 20, 1992 May 20, 1992
13,200 1.75 November 20, 1992 November 20, 1992
-----------
5,469,200
===========
</TABLE>
The above-described warrants issued on November 10, 1994 expire on
November 10, 1999. The warrants issued on May 20, 1992, and November
20, 1992, expire on the first to occur of December 31, 1996, or within
90 days after the final and unconditional receipt by the Company of any
settlement amount or damages resulting from the litigation referred to
in Note 4.
16. SEGMENT INFORMATION
The Company's two business segments are facility rentals and children's
recreational activities. The following is a summary of selected
consolidated information for the industry segments for the years ended
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Operating revenues:
Facility rentals......................................................$ 1,494,012 $ 1,669,546
Children's recreational activities.................................... 1,702,857 860,246
------------- -------------
Total...............................................................$ 3,196,869 $ 2,529,972
============= =============
Operating income (loss):
Facility rentals......................................................$ 1,111,653 $ 1,036,464
Children's recreational activities.................................... (1,253,232) 139,173
Unallocated corporate overhead:
Compensation........................................................ (408,690) (374,333)
General legal fees.................................................. (116,503) (57,288)
Other............................................................... (371,425) (75,697)
------------- -------------
Total operating income (loss)..................................... (1,038,197) 668,319
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
<S> <C> <C>
Other income (expense):
Interest income....................................................... 699,204 115,721
Interest expense...................................................... (84,237) (52,094)
Legal costs (Notes 3 and 4)........................................... (365,207) (340,679)
Adjustment for over-provided liabilities.............................. 154,759
Other, net............................................................ 8,495
-------------
Income (loss) before income taxes and extraordinary item............$ (625,183) $ 391,267
============= =============
Depreciation and amortization:
Facility rentals......................................................$ 53,847 $ 90,900
Children's recreational activities.................................... 168,246 6,639
General corporate..................................................... 6,057 14,445
------------- -------------
Total...............................................................$ 228,150 $ 111,984
============= =============
Capital expenditures:
Facility rentals......................................................$ $
Children's recreational activities.................................... 4,940,322
General Corporate..................................................... 41,867 5,100
------------- -------------
Total...............................................................$ 4,982,189 $ 5,100
============= =============
Identifiable assets:
Facility rentals......................................................$ 381,042 $ 408,085
Children's recreational activities.................................... 5,330,440 346,365
General Corporate..................................................... 10,170,770 16,070,105
------------- -------------
Total...............................................................$ 15,882,252 $ 16,824,555
============= =============
</TABLE>
40
<PAGE>
Item 8. Disagreements on Accounting and Financial Disclosure.
The Company has not changed accountants within the two fiscal years
ended December 31, 1995.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Directors and Executive Officers
The following table sets forth certain information concerning the
Directors and executive officers of the Company:
<TABLE>
<CAPTION>
Principal Occupation
and All Positions A Director
Name Age With the Company Since
---- --- ---------------- -----
<S> <C> <C> <C>
Harry Shuster 61 Chairman of the Board, President 1969
and Chief Executive Officer
and a Director of the Company;
Chairman of the Board, President and
Chief Executive Officer of
United Restaurants, Inc.
Alvin Cassel 82 Of Counsel to law firm of 1969
Broad and Cassel, Miami, Florida;
Secretary-Treasurer and a
Director of the Company
Alvin Alexander 68 President, 1975
Skip Alexander Productions;
Director of the Company
Renate Graf 55 Vice President-- Controller and a 1978
Director of the Company
</TABLE>
Harry Shuster has been engaged in managing the affairs of the Company
since 1967, serving in the capacity of Chairman of the Board, President and
Chief Executive Officer since April, 1975. Mr. Shuster also acts as an
independent consultant, as chairman of the board, president and chief executive
officer of United Restaurants, Inc., a publicly-traded restaurant owner-operator
company whose offices are located in Los Angeles, California. Under his
agreement with that company, Mr. Shuster has agreed to devote at least 30 hours
per week carrying out his duties in connection with that company's business. Mr.
Shuster also devotes a portion of his time pursuing various other personal
matters unrelated to the Company's business. Mr. Shuster devotes approximately
30 hours per week working on the Com-
41
<PAGE>
pany's business. Mr. Shuster is a "control" person of the Company. See Item 3,
"Legal Proceedings" for a discussion of bankruptcy proceedings involving the
Company's primary operating subsidiary, of which Mr. Shuster is an officer and
director.
Alvin Cassel is of counsel to the law firm of Broad and Cassel, Miami,
Florida. He has been engaged in a general civil law practice for more than 50
years. Mr. Cassel is also Managing Director of Koorn N.V. See "Security
Ownership of Certain Beneficial Owners and Management" in Item 11 of this Annual
Report on Form 10-KSB. See Item 3, "Legal Proceedings" for a discussion of
bankruptcy proceedings involving the Company's primary operating subsidiary, of
which Mr. Cassel is an officer and director.
Mr. Alexander is and has been for more than five years President of
Skip Alexander Productions, a game show development company located in Los
Angeles, California.
Renate Graf has been with the Company for over ten years in various
capacities. She was elected Vice President-Controller in July, 1975 and a
Director in July, 1978. See Item 3, "Legal Proceedings" for a discussion of
bankruptcy proceedings involving the Company's primary operating subsidiary.
The above persons are also all of the executive officers of United
Leisure Corporation, as indicated. The present term of each Director will expire
at the time of the next Annual Meeting of Stockholders of United Leisure
Corporation. Executive officers are elected at the Annual Meeting of the Board
of Directors held immediately following the Annual Meeting of Stockholders and
hold office until the next Annual Meeting of the Board of Directors or until
their successors are duly elected and qualified.
There are no arrangements or understandings known to the Company
between any of the Directors or executive officers of the Company and any other
person, pursuant to which any of such persons was or is to be selected as a
Director or an executive officer, except (a) the Amended and Restated Consulting
Agreement between the Company and Harry Shuster and the Amended and Restated
Employment Agreement between the Company and Renate Graf, which agreements are
described below under "Executive Compensation -- Consulting and Employment
Agreements" in Item 10 of this Annual Report on Form 10-KSB, and (b) the
Underwriting Agreement executed and delivered by the Company in connection with
the public offering of the Company's securities completed in November 1994,
which provides that the underwriter of such offering, Stratton Oakmont, Inc.,
has the right to appoint one member of the Company's Board of Directors for a
three-year period. Stratton Oakmont, Inc. has not exercised its right to elect a
Director of the Company, and the Company understands that it does not intend to
exercise such right in 1996. There are no family relationships between any
Director or executive officer of the Company.
Compliance With Section 16(a) of the
Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who beneficially own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, Directors and beneficial owners of more than 10% of the Company's
Common Stock are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms that they file. Based solely on review of the
copies of such forms furnished to the Company, or
42
<PAGE>
written representations that no reports on Form 5 were required, the Company
believes that for the period from January 1, 1995 through December 31, 1995, all
officers, Directors and greater-than-10% beneficial owners complied with all
Section 16(a) filing requirements applicable to them, except that Alvin
Alexander, a Director of the Company, filed two Form 4's late, due to the
Company's counsel not being able to contact him on a timely basis because of
address changes.
Item 10. Executive Compensation.
Cash Compensation
The following table sets forth compensation paid or awarded to the
Chief Executive Officer and the only other executive officer of the Company
whose compensation exceeded $100,000 for all services rendered to the Company in
1995, 1994 and 1993:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
----------------------------- -------------------------
Securities Long-Term All
Underlying Incentive Other Com-
Name and Principal Position Year Salary Bonus Options Payouts pensation (2)
- - --------------------------- ---- ------ ----- ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harry Shuster 1995 $196,790(1)(3) $ --- --- --- $ 3,600
Chairman of the Board, 1994 202,446(1)(3) --- --- --- 3,600
President and Chief 1993 184,040(1)(3) --- --- --- 3,600
Executive Officer
Renate Graf 1995 $117,049(2)(3) 30,000 --- --- ---
Vice President 1994 107,207(2)(3) --- --- --- ---
Controller 1993 96,495(2)(3) --- 50,000 --- ---
- - ------------------------------
<FN>
(1) The consulting fee due Harry Shuster, Chairman of the Board, President
and Chief Executive Officer of the Company under the Amended and
Restated Consulting Agreement described below for each of the years in
the above table was not paid in full. $24,521, $52,245 and $19,426 of
the amount was accrued on the books of the Company for later payment in
1995, 1994 and 1993, respectively. See Note 11 of "Notes to
Consolidated Financial Statements" in Item 7.
(2) Includes $300 per month car allowance paid Mr. Shuster.
(3) See this Item, "Executive Compensation -- Consulting and Employment
Agreements".
</FN>
</TABLE>
-----------------------------------
The Company has no employee bonus or benefit plans, profit sharing plans,
retirement plans or deferred compensation plans. No fees are paid Directors for
attendance at meetings of the Board of Directors, although out-of-pocket
expenses incurred in connection therewith are reimbursed.
Stock Option Grants in 1995
No stock option grants to the executive officers named in the Summary
Compensation Table above were made in 1995.
43
<PAGE>
Stock Option Exercises in 1995 and Option Values at December 31, 1995
<TABLE>
<CAPTION>
Shares Value of Unexercised
Acquired Number of Unexercised Options In-the-Money Options
on Value at December 31, 1995 at December 31, 1995(1)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Harry Shuster............ --- --- 506,950 --- 506,950/$896,232 $ --
Renate Graf.............. --- --- 100,000 --- 100,000/$196,050 --
- - --------------------
<FN>
(1) Represents difference between market price of the Company's Common Stock
and the respective exercise prices of the options at December 31, 1995.
Such amounts may not necessarily be realized. Actual values which may be
realized, if any, upon any exercise of such options will be based on the
market price of the Common Stock at the time of any such exercise and
thus are dependent upon future performance of the Common Stock.
</FN>
</TABLE>
Consulting and Employment Agreements
As of June 1, 1994, the Company and Mr. Shuster entered into an Amended
and Restated Consulting Agreement (the "Consulting Agreement"), updating an
arrangement originally effective as of September 1, 1984. The Consulting
Agreement provides that Mr. Shuster will act as the President and Chief
Executive Officer and a Director of the Company throughout the rolling five-year
term of the Agreement for annual compensation set at $208,984 per annum for
1994, to be increased 10% during each successive year of the Agreement. Mr.
Shuster is also to be provided with either the use of a Company car in carrying
out his duties for the Company or $300 per month car allowance. During 1994, Mr.
Shuster received a consulting fee of $202,446 under the Consulting Agreement,
$52,245 of which was accrued on the books of the Company for later payment.
During 1995, Mr. Shuster received a consulting fee of $196,790 under the
Consulting Agreement, and an additional $24,521 was accrued on the books of the
Company for late payment. The Consulting Agreement provides for certain
disability benefits for a period of up to three years. The Consulting Agreement
provides that, so long as Mr. Shuster spends as much time as is necessary to
properly carry out his duties as President and Chief Executive Officer of the
Company, he will be otherwise permitted to spend a reasonable amount of time
pursuing his own outside interests. It is estimated that Mr. Shuster devoted
approximately 30 hours per week to the affairs of the Company during 1994 and
1995. See Item 9, "Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act -- Directors and Executive
Officers". The Consulting Agreement provides for automatic one year renewals for
each contract year that ends without termination of the Consulting Agreement by
either party. The Consulting Agreement terminates upon Mr. Shuster's death or in
the event of a breach of the Consulting Agreement by Mr. Shuster.
The Company and Renate Graf are parties to a rolling three-year Amended
and Restated Employment Agreement, dated as of June 1, 1994 (the "Employment
Agreement"), updating an arrangement that originally became effective September
1, 1984. The Employment Agreement provides that Mrs. Graf shall be employed as
Vice President-Controller and a Director of the Company for the term of the
Employment Agreement at an annual base salary of $110,664 for 1994, which
increases by 10% each year of the Employment Agreement. Mrs. Graf received
$110,664 under the Agreement in 1994 and $117,049 in 1995. The Employment
Agreement provides for automatic one-year renewals for each contract year that
ends without termination of the Employment Agreement by either party. The
Employment
44
<PAGE>
Agreement terminates upon Mrs. Graf's death or in the event of a breach of the
Employment Agreement by Mrs. Graf.
See Exhibits 10-3 and 10-4 attached to and made a part of this Annual
Report on Form 10-KSB for the complete terms and provisions on the
above-described Consulting Agreement and Employment Agreement.
Stock Options
At March 1, 1996, there were outstanding presently exercisable
non-qualified stock options to purchase an aggregate of 631,950 shares of the
Common Stock of the Company held by the Company's officers and Directors. Of
these, 506,950 were held by Harry Shuster, Chairman of the Board, President and
Chief Executive Officer of the Company, 100,000 were held by Renate Graf, Vice
President- Controller and a Director of the Company, and 125,000 were held by
the other Directors of the Company, at option prices ranging from $.30 to $1.38
per share. See Item 11, "Security Ownership of Certain Beneficial Owners and
Management".
All non-qualified stock options issued by the Company to its executive
officers and Directors are in substantially the same form, except as set forth
below. All options issued have a term which expires on December 31, 1997, and
are immediately exercisable as to all of the shares of Common Stock covered
thereby. The option price is the fair market value of the Common Stock of the
Company as of the date of grant. Each option terminates at the end of 90 days
following termination of association with or employment by the Company for any
reason other than death or at the end of one year in the event such terminated
is caused by death, except for the Stock Options held by Renate Graf, which do
not provide for termination of the option in the event of termination of
employment. All options are non-transferable and contain standard anti-dilution
protection for the optionholders. Options are granted to Directors and executive
officers from time-to-time by the Board of Directors in consideration of
extraordinary benefits provided the Company by the optionees.
In addition to the non-qualified stock options held by executive
officers and Directors of the Company, at March 1, 1995, there were outstanding
non-qualified options to purchase an aggregate of 210,000 shares of the Common
Stock of the Company held by third parties. All of these non-qualified options
are in substantially in the same form as those issued to executive officers and
Directors of the Company, except that generally they are not terminable until
they expire, as they are contractual obligations. These options have exercise
prices ranging from $.30 to $1.00 and expire at either February 28, 1997, or
December 31, 1997.
Reference is made to Exhibits 10-5 through 10-15, 10-19, 10-24, 10-25,
10-27 and 10-29 attached to and made a part of this Annual Report on Form 10-KSB
for the complete terms and provisions of the above outstanding stock options.
See also Note 15 of "Notes to Consolidated Financial Statements" in Item 7.
45
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
General
The following table sets forth certain information with respect to all
persons, or groups of persons, known by the Company to own beneficially more
than five percent of the Common Stock of the Company, and as to the beneficial
ownership thereof of the officers and Directors of the Company, individually and
as a group, all as at March 29, 1996:
<TABLE>
<CAPTION>
Name and Address Shares Percentage
of Beneficial Owner (a) Beneficially Owned Ownership (g)
----------------------- ------------------ -------------
<S> <C> <C>
Harry Shuster 5,606,132(b) 49.10% (b)
8800 Irvine Center Drive
Irvine, California 92718
Walton N.B. Imrie 737,430(c) 5.90% (c)
c/o Kestral S.A.
Pausilippe Ch.
Des Trois-Portes 11
2006 Neuchatel, Switzerland
Alvin Cassel 167,600(d)(e) 1.35% (d)(e)
Alvin Alexander 8,021 *
Renate Graf 101,400(e)(f) *
All Officers and Directors as a
Group (4 persons) 5,740,553(b)(d)(e)(f) 43.86% (b)(d)(e)(f)
- - ------------------------------
<FN>
(a) Addresses are shown only for the beneficial owners of at least five
percent of the class of security shown.
(b) At March 29, 1996, Koorn N.V., a Netherlands Antilles corporation, all of
whose capital shares are owned by Harry Shuster, was the record owner of
142,600 shares of Common Stock of the Company. Mr. Shuster also owns
directly 201,032 shares of Common Stock which he has held for a number of
years, and 3,755,550 shares of Common Stock which he acquired in June,
1994 pursuant to the conversion of the Preferred Stock owned by him. See
Item 12, "Certain Relationships and Related Transactions". In addition,
Mr. Shuster also holds presently exercisable non-qualified stock options
to purchase an aggregate of 506,950 shares of the Common Stock of the
Company at exercise prices ranging from $1.00 per share to $1.38 per
share. All such shares are attributed to Mr. Shuster in the above table.
See Item 10, "Executive Compensation-- Stock Options", Item 12, "Certain
Relationships and Related Transactions" and Note 15 of "Notes to
Consolidated Financial Statements" in Item 7.
46
<PAGE>
All shares held of record by Koorn N.V. are owned with sole investment
power by Mr. Shuster, the beneficial owner thereof, but with shared
voting power. Alvin Cassel, a Director and Secretary- Treasurer of the
Company, acts as Managing Director of Koorn N.V.
(c) These shares are owned by Plus One Finance, Ltd., a British Virgin
Islands corporation, which is wholly-owned by Walton N.B. Imrie, a
resident of Switzerland. Consists of 654,430 shares of Common Stock and
presently exercisable Warrants to Purchase Common Stock covering 83,000
shares. The Common Stock Purchase Warrants were acquired in connection
with a $900,000 deposit made with the United States Bankruptcy Court in
connection with The Irvine Company Litigation, and the balance of 571,430
were purchased in a private placement in June, 1994. See Item 1,
"Business-- Children's Play-Learning Centers" and Item 3, "Legal
Proceedings-- Subsidiary Bankruptcy".
(d) Includes 142,600 shares held by Koorn N.V., as to which Mr. Cassel has
shared voting power.
(e) Includes shares which may be acquired upon exercise of presently
exercisable non-qualified stock options held by executive officers other
than Mr. Shuster, 100,000 for Mrs. Graf, 25,000 and for Mr. Cassel. See
Item 10, "Executive Compensation -- Stock Options". All of these shares
and options, except those owned by Koorn N.V., are owned with sole
investment and voting power.
(f) Includes 600 shares of Common Stock owned by Mrs. Graf's husband, as to
which she disclaims beneficial ownership.
(g) Assumes no exercise or conversion of Unit Purchase Option held by
Stratton Oakmont, Inc., the Underwriter in the public offering completed
in 1994, or the Class A Warrants issued in such offering.
* Less than 1%.
</FN>
</TABLE>
-----------------------------------
Item 12. Certain Relationships and Related Transactions.
From time-to-time since 1980, because the Company was unable to borrow
based on its own credit, Harry Shuster, Chairman of the Board, President and
Chief Executive Officer of the Company, personally provided, or otherwise
arranged for, the Company, loans, personal guarantees and other credit
accommodations. These loans and accommodations were necessary to provide the
Company with much- needed working capital to enable the Company to continue its
operations at an adequate level and to enable it to carry out certain
transactions considered by Management to be important to the Company's business.
On June 1, 1985, all of the previous loan transactions were consolidated into
one loan in connection with the provision by Mr. Shuster of $563,000 in
additional funds to the Company. At such date, the indebtedness owed Mr. Shuster
aggregated $973,927 and was represented by a Demand Promissory Note bearing
interest at 3% above the prime rate of City National Bank, Los Angeles,
California. As security for the payment of this Note, the Company granted Mr.
Shuster a security interest in the Irvine Ground Lease and all contract rights
of the Company and the proceeds thereof. In addition, since the date of this
loan transaction, Mr. Shuster has deferred payment of certain of the interest
due him under the loan arrangement and certain of the amounts due him under his
Consulting Agreement with the
47
<PAGE>
Company. See Note 10 of "Notes to Consolidated Financial Statements" in Item 7
for a description of the total of $1,003,265 owed Mr. Shuster by the Company at
December 31, 1995. From time-to-time since 1985, the amount of indebtedness owed
Mr. Shuster by the Company has fluctuated. See "Management's Discussion and
Analysis of Financial Condition or Plan of Operation" in Item 6.
On July 29, 1995, the Company made an advance in the amount of $100,000
to Harry Shuster, Chairman of the Board, President and Chief Executive Officer
of the Company, for personal expenses. The advance bears interest at 10% per
annum and is anticipated to be repaid on or about July 20, 1996.
See also Note 11 of "Notes to Consolidated Financial Statements".
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
2. Exhibits.
3-1. Restated Certificate of Incorporation of the
Company, as filed in the office of the Secretary
of State of the State of Delaware on June 27,
1988, filed as Exhibit 3-1 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
3-2. Bylaws of the Company, filed as Exhibit 3-2 to the
Company's Registration Statement on Form SB-2
(Registration No. 33-81074), are hereby
incorporated herein by reference.
4-1. Warrant Agreement, dated November 18, 1994,
between the Company and OTR, Inc., filed as
Exhibit 4-1 to the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31,
1994, is hereby incorporated herein by reference.
4-2. Form of Warrant to Purchase Common Stock used in
connection with 12% Promissory Note unit private
placement and Bankruptcy Court deposit, filed as
Exhibit 4-1 to the Company's Registration
Statement on Form SB-2 (Registration No.
33-81074), is hereby incorporated herein by
reference.
4-3. Underwriter's Unit Purchase Option, dated November
18, 1994, issued to Stratton Oakmont, Inc., filed
as Exhibit 4-3 to the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31,
1994, is hereby incorporated herein by reference.
48
<PAGE>
10-1. Ground Lease, dated February 11, 1968, between The
Irvine Company and National Leisure, Inc., a
Florida corporation, Amendment No. 1 dated July
13, 1970; Amendment No. 2 dated March 8, 1971;
Amendment No. 3 to Ground Lease, dated May 8,
1972, between The Irvine Company and Lion Country
Safari, Inc.-California; Amendment No. 4 to Ground
Lease, dated January 12, 1976, between The Irvine
Company and Lion Country Safari, Inc.-California;
Amendment No. 5 to Ground Lease, dated April 1,
1976, between The Irvine Company and Lion Country
Safari, Inc.-California; Amendment No. 6 to Ground
Lease, dated August 11, 1976, between The Irvine
Company and Lion Country Safari, Inc.-California;
Amendment No. 7 to Ground Lease, dated March 7,
1977, between The Irvine Company and Lion Country
Safari, Inc.- California; Amendment No. 8 to
Ground Lease, dated April 22, 1977, between The
Irvine Company and Lion Country Safari,
Inc.-California; Amendment No. 9 to Ground Lease,
dated March 23, 1983, between The Irvine Company
and Lion Country Safari, Inc.-California; Letter,
dated June 4, 1984, from The Irvine Company
addressed to Lion Country Safari, Inc.; Amendment
to Ground Lease (unnumbered), dated November 15,
1984, between The Irvine Company and Lion Country
Safari, Inc.-California; Amendment No. 10 to
Ground Lease, dated January 20, 1986, between The
Irvine Company and Lion Country Safari,
Inc.-California; Consent to Sublease;
Nondisturbance Agreement: Amendment to Sublease,
dated as of December 26, 1985, among The Irvine
Company, Lion Country Safari, Inc.-California and
The Splash; Consent to and Agreement Concerning
Encumbrance of Sublease, dated January 22, 1986
among The Irvine Company and Lion Country Safari,
Inc.- California; Assignment and Purchase
Agreement, dated March 23, 1983, between The
Irvine Company and Lion Country Safari,
Inc.-California; Partial Assignment of Sublessor's
Interest in Sublease, dated March 23, 1983, by
Lion Country Safari, Inc. to The Irvine Company,
filed as Exhibit 10-1 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-2. Sublease Agreement, dated August 7, 1980, between
Lion Country Safari, Inc.-California and Feyline
Presents, Inc.; Assignment of Sublease Agreement,
dated August 19, 1980, between Feyline Presents,
Inc. and Irvine Meadows Amphitheater; Amendment to
Sublease, dated September 16, 1980, between Lion
Country Safari, Inc.-California and Irvine Meadows
Amphitheater; Agreement, dated September 12, 1980,
among The Irvine Company, Lion Country Safari,
Inc. and Lion Country Safari, Inc.-California;
Letter Agreement, between The Irvine Company and
Lion Country Safari, Inc.- California; Amendment
to Sublease, dated January 1, 1981, between Lion
Country Safari, Inc. and Irvine Meadows
Amphitheater; Letter, dated July 28, 1981, of
Irvine Meadows Amphitheater addressed to the
Company, filed as Exhibit 10-2 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-3. Amended and Restated Consulting Agreement, dated
as of June 1, 1994, between the Company and Harry
Shuster, filed as Exhibit 10-3 to the
49
<PAGE>
Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-4. Amended and Restated Employment Agreement, dated
as of June 1, 1994, between the Company and Renate
Graf, filed as Exhibit 10-4 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-5. Stock Option Agreement, dated December 7, 1990,
between the Company and Haskell Slaughter Young &
Johnston, Professional Association, covering
50,000 shares of Common Stock, par value $.01 per
share, of the Company, filed as Exhibit 10-5 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-6. Stock Option Agreement, dated December 7, 1990,
between the Company and Alvin Cassel covering
10,000 shares of Common Stock, par value $.01 per
share, of the Company, filed as Exhibit 10-6 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-7. Stock Option Agreement, dated December 7, 1990,
between the Company and Renate Graf covering
10,000 shares of Common Stock, par value $.01 per
share, of the Company, filed as Exhibit 10-7 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-8. Stock Option Agreement, dated April 22, 1988,
between the Company and Renate Graf covering
25,000 shares of Common Stock, par value $.01 per
share, of the Company; Extension of Option
Agreement, dated April 20, 1993, between the
Company and Renate Graf, filed as Exhibit 10-9 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-9. Stock Option Agreement, dated April 22, 1988,
between the Company and Alvin Cassel covering
10,000 shares of Common Stock, par value $.01 per
share, of United Leisure Corporation; Extension of
Option Agreement, dated April 20, 1993, between
the Company and Alvin Cassel, filed as Exhibit
10-10 to the Company's Registration Statement on
Form SB-2 (Registration No. 33- 81074), is hereby
incorporated herein by reference.
50
<PAGE>
10-10. Stock Option Agreement, dated October 7, 1988,
between the Company and Harry Shuster covering
37,500 shares of Common Stock, par value $.01 per
share, of the Company; Extension of Option
Agreement, dated April 20, 1993, between the
Company and Harry Shuster, filed as Exhibit 10-12
to the Company's Registration Statement on Form
SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-11. Stock Option Agreement, dated November 17, 1988,
between the Company and Harry Shuster covering
75,000 shares of Common Stock, par value $.01 per
share, of the Company; Extension of Option
Agreement, dated April 20, 1993, between the
Company and Harry Shuster, filed as Exhibit 10-13
to the Company's Registration Statement on Form
SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-12. Stock Option Agreement, dated December 5, 1988,
between the Company and Harry Shuster covering
37,500 shares of Common Stock, par value $.01 per
share, of the Company; Extension of Option
Agreement, dated April 20, 1993, between the
Company and Harry Shuster, filed as Exhibit 10-14
to the Company's Registration Statement on Form
SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-13. Option Agreement, dated January 20, 1987, between
the Company and Renate Graf covering 15,000 shares
of Common Stock, par value $.01 per share, of the
Company; Extension of Option Agreement, dated May
5, 1992, between the Company and Renate Graf,
filed as Exhibit 10-15 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-14. Stock Option Agreement, dated July 24, 1987,
between the Company and Harry Shuster; Extension
of Option Agreement, dated April 20, 1993, between
the Company and Harry Shuster, covering 750,000
shares of Common Stock, par value $.01 per share,
of the Company, filed as Exhibit 10-16 to the
Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-15. Option Agreement dated as of April 22, 1988,
between the Company and Haskell Slaughter Young &
Johnston, Professional Association, covering
50,000 shares of Common Stock, par value $.01 per
share, of the Company; Extension of Option
Agreement, dated April 20, 1993, between the
Company and Haskell Slaughter Young & Johnston,
Professional Association, filed as Exhibit 10-17
to the Company's Registration Statement on Form
SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
51
<PAGE>
10-16. Option to Sublease, dated as of September 25,
1984, between Lion Country Safari, Inc.-California
and American Sportsworld, Inc., including the
proposed Lease and Agreement to be entered into
upon exercise thereof, filed as Exhibit 10-19 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-17. Letter, dated February 22, 1985, from Lion Country
Safari, Inc.-California addressed to American
Sportsworld, Inc.; Lease, dated as of May 14,
1985, between Lion Country Safari, Inc.-California
and American Sportsworld, Inc.; Amendment to
Lease, dated December 2, 1985, between Lion
Country Safari, Inc. and American Sportsworld,
Inc.; Letter Contract, dated June 27, 1985,
between the Company and The Splash; Assignment of
Sublease, dated as of December 26, 1985, between
Lion Country Safari, Inc.-California, American
Sportsworld, Inc. and The Splash; Bill of Sale,
dated January 10, 1986, between Lion Country
Safari, Inc.-California and The Splash; Agreement
of Limited Partnership (undated) of The Splash;
Letter Agreement, dated October 16, 1986, between
Lion Country Safari, Inc.-California and The
Splash; Letter Agreement, dated November 21, 1986,
between Lion Country Safari, Inc.-California and
The Splash; Letter Agreement, dated November 25,
1986, between Lion Country Safari, Inc.-California
and The Splash, filed as Exhibit 10-20 to the
Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-18. Letter Agreement, dated January 31, 1986, between
Africa Arts of California, Inc. and the Company,
filed as Exhibit 10-21 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-19. Option Agreement, dated as of February 1, 1986,
between the Company and Africa Arts of California,
Inc. covering 35,000 shares of Common Stock, par
value $.01 per share, of the Company, filed as
Exhibit 10-22 to the Company's Registration
Statement on Form SB-2 (Registration No.
33-81074), is hereby incorporated herein by
reference.
10-20. Promissory Note, dated June 1, 1985, of Lion
Country Safari, Inc.-California in the principal
amount of $973,927 drawn to the order of Harry
Shuster, filed as Exhibit 10-23 to the Company's
Registration Statement on Form SB-2 (Registration
No. 33-81074), is hereby incorporated herein by
reference.
10-21. Deed of Trust, Assignment of Rents and Security
Agreement, dated June 1, 1985, between Lion
Country Safari, Inc.-California, Brian H. Kay,
Trustee,
52
<PAGE>
and Harry Shuster, filed as Exhibit 10-24 to the
Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-22. Collateral Assignment of Leases and Rents, dated
June 1, 1985, between Lion Country Safari,
Inc.-California and Harry Shuster, filed as
Exhibit 10-25 to the Company's Registration
Statement on Form SB-2 (Registration No.
33-81074), is hereby incorporated herein by
reference.
10-23. Commercial Lease (General Form), dated July 21,
1986, between Lion Country Safari, Inc.-California
and Orange County Transit District; Amendment No.
3 to Lease Agreement, dated April 17, 1989,
between Lion Country Safari, Inc.-California and
Orange County Transit District filed as Exhibit
10-26 to the Company's Registration Statement on
Form SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-24. Stock Option Agreement, dated as of February 22,
1989, covering 67,500 shares of the Common Stock,
par value $.01 per share, of the Company in favor
of Tactron Liquidating Trust, filed as Exhibit
10-27 to the Company's Registration Statement on
Form SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-25. Stock Option Agreement, dated as of February 22,
1989, covering 7,500 shares of the Common Sock,
par value $.01 per share, of the Company in favor
of Lindsey & Associates, Inc., filed as Exhibit
10-28 to the Company's Registration Statement on
Form SB-2 (Registration No. 33-81074), is hereby
incorporated herein by reference.
10-26. Memorandum of Agreement, dated March 7, 1990,
between Lion Country Safari, Inc., - California
and James Productions, Inc., filed as Exhibit
10-34 to the Company's Registration Statement on
Form SB-2 (Registration No. 33- 81074), is hereby
incorporated herein by reference.
10-27. Form of Indemnity Agreement entered into by the
Company with each of its Directors, filed as
Exhibit 10-35 to the Company's Registration
Statement on Form SB-2 (Registration No.
33-81074), is hereby incorporated herein by
reference.
10-28. Stock Option Agreement, dated September 23, 1993,
between the Company and Renate Graf, covering
50,000 shares of Common Stock, par value $.01 per
share, of the Company, filed as Exhibit 10-40 to
the Company's Registration Statement on Form SB-2
(Registration No. 33-81074), is hereby
incorporated herein by reference.
10-29. Stock Option Agreement, dated September 23, 1993,
between the Company and Alvin Cassel, covering
5,000 shares of Common Stock, par value $.01 per
share, of the Company, filed as Exhibit 10-41 to
the Company's Registration
53
<PAGE>
Statement on Form SB-2 (Registration No.
33-81074), is hereby incorporated herein by
reference.
10-30. Agreement for Purchase and Sale and Joint Escrow
Instructions, dated April 5, 1995, between PLC
Properties, Inc. and United Leisure Corporation.
10-31. Sub-Operating Agreement, dated April 11, 1995,
between Canyon R.V. Park and Camp Frasier, Inc.,
together with related Operating Agreements.
10-32. Standard Retail/Office Complex Lease, dated
October 12, 1994, between PSA Properties and
Planet Kids, Inc.
10-33. Commercial Lease, between Eastrich Multiple
Investor Fund L.P., Midland Loan Services, L.P et
al., and Planet Kids, Inc. and Rider thereto.
10-34. Lease, dated June 29, 1995, between Magnolia
Square and Planet Kids, Inc. and Addendum thereto.
10-35. Territory Rights Agreement, between Planet Kids,
Inc. and PT Planet Kidsndo.
21. Subsidiaries of the Company.
27. Financial Data Schedule
(b) Reports on Form 8-K. United Leisure Corporation filed no Current
Report on Form 8-K during or with respect to the last quarter of 1995.
54
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934 the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UNITED LEISURE CORPORATION
By /s/HARRY SHUSTER
------------------------------------------
Harry Shuster, Chairman of the Board,
President and Chief Executive Officer
Date: April 15, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
HARRY SHUSTER
- - -------------------------------------- Chairman of the Board, April 15, 1996
(Harry Shuster) President and Chief Executive Officer
(Principal Financial Officer)
and Director
ALVIN CASSEL Director April 15, 1996
- - --------------------------------------
(Alvin Cassel)
RENATE GRAF
- - -------------------------------------- Vice President and Controller April 15, 1996
(Renate Graf) (Principal Accounting Officer)
and Director)
ALVIN ALEXANDER Director April 15, 1996
- - ---------------------------------------
(Alvin Alexander)
</TABLE>
55
<PAGE>
PLC Properties, Inc.
2255 Camino Del Rio South, Suite 300
San Diego, California 92108
April 6, 1995
United Leisure Corporation
8800 Irvine Center Drive
Irvine, California 92718
Attn: Renate Graf
Dear Ms. Graf:
This letter evidences an agreement between United Leisure Corporation, a
Delaware corporation ("Buyer") and PLC Properties, Inc., a California
corporation ("Seller"), in connection with the Agreement For Purchase And Sale
And Joint Escrow Instructions dated as of April 5, 1995, by and between Buyer
and Seller (the "Purchase Agreement"). All capitalized terms used but not
otherwise defined in this letter have the meanings ascribed to them in the
Purchase Agreement.
The Purchase Agreement contemplates the sale by Seller to Buyer of the Property
which excludes certain personal property referred to in the Purchase Agreement
as the "Other Personal Property" and the amusement ride commonly known as the
"Rock-O-Plane" (the "Plane"). Buyer and Seller agree that commencing on the
Close of Escrow, Seller shall pay a storage fee to Buyer on account of the Other
Personal Property and the Plane at a rate of $250 for each day that any of the
Other Personal Property remains on the Real Property and $100 for each day that
the Plane remains on the Real Property. This letter is effective only if the
Close of Escrow occurs on or before April 10, 1995.
<PAGE>
Buyer disclaims any responsibility for the maintenance, safe-keeping or insuring
of the Other Personal Property and the Plane during the period such property is
stored on the Real Property in accordance with this letter.
PLC PROPERTIES, INC.,
a California corporation
By: /s/Lawrence P. Casey
--------------------------------------
Lawrence P. Casey,
Executive Vice President
The undersigned agrees to the terms and conditions of this letter agreement.
UNITED LEISURE CORPORATION,
a Delaware corporation.
By: /s/Renate Graf
------------------------------
Renate Graf,
Vice-President/Controller
<PAGE>
PLC REO #94012
AGREEMENT FOR PURCHASE AND SALE
-------------------------------
AND JOINT ESCROW INSTRUCTIONS
-----------------------------
(Marshal Scotty's Amusement Park)
This Agreement for Purchase and Sale and Joint Escrow Instructions
(this "Agreement") is entered into as of April 5, 1995, by and between PLC
PROPERTIES, INC., a California corporation ("Seller"), and UNITED LEISURE
CORPORATION, a Delaware corporation ("Buyer"), who agree and, to the extent
applicable, instruct Chicago Title Insurance Company ("Escrow Holder"), as
escrow holder, as follows:
1. This Agreement is made with reference to the following facts:
1.1. Seller acquired title through foreclosure of the real property
located in San Diego, California, described on the attached Exhibit "A" (the
"Real Property") and the personal property described on the attached Exhibit "B"
(the "Personal Property") and may also have acquired the other personal property
located on the Real Property (including furniture, kitchen equipment, go-carts
and maintenance equipment) (collectively, the "Other Personal Property") as well
as the amusement ride commonly known as the "Rock-O-Plane". The Real Property,
the Personal Property, and the Other Personal Property have been used in
connection with an amusement park commonly known as Marshal Scotty's Amusement
Park which has not been in operation since Buyer acquired its title to the Real
Property. Because Seller acquired title to the Real Property and Personal
Property by foreclosure of a trust deed and security agreement and not by a
negotiated purchase and sale agreement, Seller represents that it does not have
detailed knowledge of the prior uses and present condition of the Property.
1.2. Along with the Real Property and the Personal Property, Buyer
intends to purchase and Seller intends to sell, in accordance with this
Agreement, all improvements constructed in, on or under the Real Property (the
"Improvements").
1.3. By this Agreement, Buyer and Seller intend to provide for the
sale of the Real Property, Personal Property, and Improvements (collectively,
the "Property") by Seller to Buyer.
1.4. Seller and San Diego Southern Baptist Association of
California, a California corporation ("SBA"), entered into an Agreement
Regarding Boundary Adjustment and Land Transfer dated as of March 29, 1995 (the
"SBA Agreement"), pursuant to which Seller agreed to grant an easement over a
portion of the Property, and SBA and Seller agreed to prorate and pay over time
certain past-due taxes (the "SBA Taxes").
2. Purchase and Sale. Subject to this Agreement, Seller agrees to sell
the Property to Buyer, and Buyer agrees to purchase the Property from Seller, in
its "as-is" condition.
3. Escrow.
3.1. Opening of Escrow. Buyer shall cause an escrow (the "Escrow")
to be opened with Escrow Holder at 925 B Street, P.O. Box 1150, San Diego, CA
92112, Attention: Cynthia McGrew, Escrow No. 816506-31, for the purpose of
facilitating the consummation of this Agreement, by delivering the Deposit (as
defined in Section 4.1 below) to Escrow Holder along with a copy of the fully
executed original (or executed counterparts) of this Agreement within two days
after executing this Agreement. This Agreement constitutes instructions to
Escrow Holder and includes the general
<PAGE>
escrow provisions attached to this Agreement as Schedule 1. (the "General
Provisions"). Buyer and Seller shall execute such additional mutual instructions
as Escrow Holder may require, consistent with this Agreement. Any inconsistency
between the General Provisions (or any such further mutual instructions) and
this Agreement must be resolved in a manner consistent with this Agreement and
the provisions of this Agreement prevail unless Buyer and Seller waive such
inconsistent provision in writing by specifically referring to the fact of such
inconsistency and their intent to waive it.
3.2. Closing Date. Escrow Holder shall close escrow in accordance
with Section 9 below (the "Close of Escrow"), after having received all of
Buyer's and Seller's Deliveries in accordance with Sections 7 and 8 below, on or
before April 7, 1995 (the "Closing Date"). If the Close of Escrow does not occur
on or before the Closing Date, then Buyer or Seller, if not in default under
this Agreement, may at any time thereafter give written notice to Escrow Holder
to cancel the Escrow whereupon the Escrow and the subject transaction become
terminated and Escrow Holder shall distribute all monies and documents in Escrow
Holder's possession in accordance with this Agreement and all additional mutual
instructions as the parties may provide. Such cancellation of Escrow shall not
prejudice or limit any legal or equitable rights of Buyer or Seller, except as
may be limited by Section 13, below.
4. Purchase Price. The purchase price payable by Buyer for the Property
("Purchase Price") is One Million Six Hundred Fifty Thousand Dollars
($1,650,000.00), payable as follows:
4.1. Deposit. Concurrently with Buyer's delivery of an executed
copy of this Agreement to Escrow Holder, Buyer shall deliver to Escrow Holder
immediately available funds in the amount of Fifty Thousand Dollars ($50,000.00)
(the "Deposit"). The Deposit, plus any interest accrued thereon, is applicable
towards the Purchase Price.
4.2. Assumption of Loan. On or before the Close of Escrow, Buyer
shall deposit with Escrow Holder a Modification of Note and Deed of Trust
between Frank Stanley Hobbs and Jessie Steel Hobbs, husband and wife as joint
tenants ("Hobbs") and Buyer in the restated principal amount of One Hundred
Twenty Thousand Dollars ($120,000.00) substantially in the form of the attached
Exhibit C (the "Hobbs Note Amendment"). The Hobbs Note Amendment will amend and
supersede the promissory note secured by the deed of trust encumbering a portion
of the Property made by Bernard Pludow and Pauline F. Pludow as of January 11,
1979, and recorded on January 31, 1979, in the Official Records of the County of
San Diego, California (the "Official Records") as instrument number 79-048088
(the "Hobbs Trust Deed").
4.3. Purchase Money Loan. On or before the Close of Escrow, Buyer
shall deposit with Escrow Holder a promissory note made by Buyer in favor of
Seller in the original principal amount of Seven Hundred Thirty Thousand Dollars
($730,000.00) substantially in the form of the attached Exhibit "D" (the
"Purchase Money Note") secured by a deed of trust and security agreement
encumbering the Property substantially in the form of the attached Exhibit "E"
(the "Second Trust Deed"). The original principal balance of the Purchase Money
Note is applicable to the Purchase Price, accrues interest at Nine and 67/100ths
percent (9.67%) per annum, and provides for fifty-nine (59) monthly
interest-only payments of approximately Five Thousand Eight Hundred Eighty-Three
Dollars ($5,883) with all principal due and payable sixty (60) months after the
first day of the first calendar month following the Close of Escrow.
4.4. Balance. On or before the Closing Date, Buyer shall deposit
with Escrow Holder cash or other immediately available funds in the amount of
the balance of the Purchase Price, plus the other sums required of Buyer under
this Agreement to pay costs.
5. Owner's Policy. As a condition to Buyer's obligations to purchase
the Property, on or before the Close of Escrow, Chicago Title Insurance Company
("Title Company") must be prepared to issue
2
<PAGE>
Buyer a CLTA Owner's Policy of Title Insurance, including an endorsement
substantially in the form of the attached Schedule 3 (the "Title Policy") as of
the Close of Escrow insuring Buyer in the amount of the Purchase Price that
title to the Real Property is vested in Buyer on the Close of Escrow, subject
only to the Permitted Exceptions (as defined in Section 6 below), the Hobbs
Trust Deed (as modified by the Hobbs Note Amendment), the SBA Taxes, the SBA
Agreement, and the Second Trust Deed. After the Close of Escrow, Seller shall
cooperate with Buyer, at no expense or liability to Seller, in order to assist
Buyer in obtaining and recording a record of survey with respect to the Real
Property.
6. Title. All exceptions to title described on Schedule B to the Title
Policy proforma issued by Title Company and attached to this Agreement as
Schedule 2 (the "Pro-Forma"), in addition to an exception for matters that would
be disclosed by a survey, but excluding exception nos. 20 and 21, are "Permitted
Exceptions" except that the loan amount referred to in item no. 39 must be
revised to equal the amount of the Purchase Money Note. The Permitted Exceptions
include an agreement regarding the construction of a signal light as referenced
under Exception Nos. 14, 27, and 35 of the Pro-Forma (the "Improvement
Agreement"). Seller may not suffer any liability in connection with its failure
to cause title to the Property to be in a condition permitting Title Company to
issue the Title Policy. Buyer's sole remedy for Seller's failure to do so is
termination of this Agreement for the failure of Buyer's condition under Section
5 to have been satisfied.
7. Buyer's Deliveries. Buyer shall deliver to Escrow Holder, on or
before the Closing Date, for disbursement, delivery and recordation, as provided
in this Agreement, the following funds, instruments, and documents, the delivery
of which is material to the consummation of the subject transaction ("Close of
Escrow"):
7.1. Funds. Immediately available funds in the amount required of
Buyer under this Agreement including sufficient funds to meet Buyer's
obligations under Sections 4.4, 10, and 11.
7.2. Evidence of Authorization. Evidence in form and substance
reasonably satisfactory to Seller and its legal counsel that Buyer is authorized
to enter into and consummate the transactions contemplated by this Agreement.
7.3. Loan Documents. A duly executed original of the Purchase Money
Note, a duly executed and appropriately acknowledged original of the Hobbs Note
Amendment and the Second Trust Deed in recordable form, and an Unsecured
Indemnity Agreement in the form of the attached Exhibit "F" duly executed by
Buyer.
7.4. Other Documents. Any documents reasonably required of Buyer by
Title Company or Escrow Holder in order to consummate the subject transaction.
8. Seller's Deliveries. Seller shall deliver to Escrow Holder on or
before the Close of Escrow, for disbursement, delivery and recordation, as
provided in this Agreement, the following instruments and documents, the
delivery of which is material to the Close of Escrow:
8.1. Deed and Bill of Sale. A grant deed duly executed and
acknowledged by Seller conveying all of Seller's interest in the Real Property
to Buyer (the "Deed") and a quitclaim bill of sale executed by Seller conveying
all of Seller's interest in the Personal Property to Buyer. The Bill of Sale
must incorporate by reference Seller's representations and warranties set forth
in Section 15.5 below.
8.2. FIRPTA Affidavit. A FIRPTA affidavit duly executed and
acknowledged by Seller certifying under penalty of perjury (a) Seller's United
States taxpayer identification number and (b) that Seller is not a foreign
person, in accordance with Section 1445 of the Internal Revenue Code of 1986, as
amended (the Foreign Investment in Real Property Tax Act).
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8.3. Other Documents. All other documents reasonably required of
Seller by Title Company or Escrow Holder in order to consummate the subject
transaction.
9. Closing Escrow. Upon the Closing Date, and provided Escrow Holder
has received all the documents, instruments and funds required to be delivered
by Buyer and Seller in accordance with Articles 7 and 8 above, and provided
Title Company is prepared to issue the Title Policy upon the Close of Escrow,
and provided the actions described in the first sentence of Section 2 of the SBA
Agreement have been consummated, and that all other conditions to the Close of
Escrow have been satisfied (or waived by the party to this Agreement who
benefits from such condition), and provided Escrow Holder is prepared to perform
all of the following, Escrow Holder shall promptly perform all of the following:
9.1. Recording. Cause to be recorded with the Official Records of
San Diego County, California, the Deed, the Hobbs Note Amendment, and then the
Second Trust Deed, and then any other documents which Buyer and Seller may
mutually direct.
9.2. Buyer's Deliveries. Deliver to Hobbs a copy of the Hobbs Note
Amendment and deliver to Seller all of the other deliveries of Buyer made
pursuant to Section 7 above.
9.3. Seller's Deliveries. Deliver to Buyer all of the other
deliveries of Seller made pursuant to Section 8 above.
9.4. Costs and Prorations. Pay the costs and apply the prorations in
accordance with Sections 10 and 11 below.
9.5. Issuance of Owner's Policy. Cause the Title Policy to be issued
and delivered to Buyer.
9.6. Issuance of Seller's Lender's Policy. Cause a CLTA loan policy
of title insurance--Form 1976--to be issued by Title Company in favor of and
delivered to Seller insuring the priority and enforceability of the Second Trust
Deed encumbering the Real Property subject only to the Permitted Exceptions, the
SBA Taxes, and the Hobbs Trust Deed, and reflecting Buyer as the fee title owner
of the Real Property (the "Lender's Policy").
9.7. Issuance of Hobbs' Lender's Policy. Cause a CLTA loan policy of
title insurance--Form 1976--to be issued by Title Company in favor of and
delivered to Hobbs insuring the priority and enforceability of the Hobbs Trust
Deed encumbering the Real Property subject only to the Permitted Exceptions and
the SBA Taxes, and reflecting Buyer as the fee title owner of the Real Property
(the "Hobbs Title Policy").
9.8. Disbursement of Purchase Price. Disburse to Seller, or in
accordance with Seller's instructions (after making appropriate adjustments for
costs as provided in this Agreement), all funds deposited with Escrow Holder by
Buyer in payment of the Purchase Price.
10. Costs. Seller shall pay (a) one-half of Escrow Holder's fee, (b)
documentary transfer and stamp taxes payable in connection with the recordation
of the Deed, (c) the portion of the cost of the Title Policy which would be
charged for a CLTA rather than an ALTA title insurance policy, and (d) Escrow
Holder's customary charges to a seller for document drafting, recording and
miscellaneous charges. Buyer shall pay (i) one-half of Escrow Holder's fee, (ii)
Escrow Holder's customary charges to a buyer for document drafting, recording
and miscellaneous charges, (iii) the difference between the cost of the ALTA
title policy and a CLTA policy, and the cost of any endorsements requested by
Buyer, with respect to the Title Policy, and (iv) the cost of the Lender's
Policy and the Hobbs Title Policy.
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11. Prorations. Escrow Holder shall pay and prorate the following
between Buyer and Seller as of the Close of Escrow, on the basis of the actual
number of days during the month in which the Close of Escrow occurs: general,
special, and supplemental county and city real property taxes and special
assessments, other than the SBA Taxes ("Taxes"). Proration of Taxes shall be
based on the most recent official tax bills or notice of valuation available to
the general public for the fiscal year in which the Close of Escrow occurs, and
to the extent that such tax bills do not accurately reflect the actual Taxes
assessed against the Property (or any portion of the Property) and allocable
either to the period prior to the Close of Escrow or to the period after the
Close of Escrow, then Buyer and Seller shall adjust such actual Taxes between
Buyer and Sellers, outside of Escrow, as soon as reasonably possible following
the Close of Escrow. In addition to the foregoing apportionments, Seller shall
receive all other income accrued, and shall pay all other expenses accrued or
incurred in connection with the ownership or operation of Property, before the
Close of Escrow and Buyer shall receive all other Income accruing, and shall pay
all other expenses accrued or incurred in connection with the ownership or
operation of Property, on or after the Close of Escrow. Escrow Holder shall
credit Seller and charge Buyer at the Close of Escrow for (a) the $200 rental
fence removal deposit held in connection with a fence on the Property and (b)
prepaid interest on the Purchase Money Note for the period from the Close of
Escrow through April 30, 1995. Escrow Holder shall not be concerned with any
prorations that are to be made after the Close of Escrow pursuant to this
Agreement or with respect to the SBA Taxes. Upon the Close of Escrow, Buyer
assumes Seller's obligations under Section 4 of the SBA Agreement, but Seller is
responsible for that portion of the SBA Taxes accrued until the Closing Date and
shall indemnify Buyer for any loss Buyer suffers as a result of Seller or SBA
failing to eventually pay the SBA Taxes. Seller also is responsible for the
payment obligations under the Improvement Agreement and shall indemnify Buyer
for any loss Buyer suffers as a result of Seller's failure to pay such
obligations. If Seller fails to indermnify Buyer under either of the two
preceding sentences, Buyer may offset its payment obligations under the Purchase
Money Note to the extent of such unfulfilled indemnity obligations.
12. Failure of Escrow to Close. If Escrow fails to close by reason of
the failure of any of Buyer's Conditions to be satisfied within the applicable
Contingency Periods, or by reason of any default by Seller under this Agreement,
Buyer is entitled to the immediate return of the Deposit less one-half of Escrow
Holder's and Title Company's cancellation costs upon delivery of written notice
by Buyer to Escrow Holder. If this Agreement or Escrow is terminated, Buyer
shall return to Seller, within two business days after the termination of
Escrow, all documents and materials provided by Seller or its agents to Buyer or
its agents in connection with this Agreement or the Property and all copies
thereof.
13. LIQUIDATED DAMAGES. THE PARTIES HAVE DISCUSSED AND NEGOTIATED IN
GOOD FAITH UPON THE QUESTION OF THE DAMAGES THAT WOULD BE SUFFERED BY SELLER IN
THE EVENT BUYER BREACHES THIS AGREEMENT AND HAVE ENDEAVORED TO REASONABLY
ESTIMATE SUCH DAMAGES AND THEY AGREE THAT (I) SUCH DAMAGES ARE AND WILL BE
IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX, (II) LIQUIDATED DAMAGES IN THE
AMOUNT OF THE DEPOSIT ARE AND WILL BE REASONABLE, (III) IN THE EVENT OF SUCH
BREACH, SELLER IS ENTITLED TO THE DEPOSIT AS SUCH LIQUIDATED DAMAGES, AND (IV)
IN CONSIDERATION OF THE PAYMENT OF SUCH LIQUIDATED DAMAGES, SELLER SHALL BE
DEEMED TO HAVE WAIVED ALL OTHER CLAIMS FOR DAMAGES OR RELIEF AT LAW OR IN
EQUITY, EXCEPT FOR: (A) CLAIMS FOR INDEMNITY PURSUANT TO SECTION 20; (B) CLAIMS
FOR THE RETURN OF DOCUMENTS IN CONNECTION WITH THIS AGREEMENT; (C)
<PAGE>
ACTIONS TO EXPUNGE A LIS PENDENS OR OTHER CLOUDS ON TITLE CAUSED BY BUYER; AND
(D) ATTORNEYS' FEES AND COSTS INCURRED BY SELLER INCIDENT TO CLAUSES (A) THROUGH
(C).
SELLER'S INITIALS BUYER'S INITIALS
/i/JC /i/RG
____ ____
14. Possession. Possession of the Property shall be delivered by Seller
to Buyer on the Close of Escrow.
15. Seller's Representations and Warranties. The accuracy and
completeness of the following constitute a condition to the Close of Escrow and
Seller represents and warrants that the following are complete and accurate as
of the date of this Agreement, and will be complete and accurate as of the Close
of Escrow.
15.1. Legal Power, Right, Authority and Enforceability. Seller is
duly organized, validly existing, and qualified to conduct its business and has
the legal power, right and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. All requisite action
has been taken by Seller in connection with entering into this Agreement and the
consummation of the transactions contemplated by this Agreement and the
individual executing this Agreement on behalf of Seller has the legal power,
right, and actual authority to bind Seller to the terms and conditions of this
Agreement. Notwithstanding the foregoing, as of the date of this Agreement the
Real Property is not yet legally divided in accordance with the California
Subdivision Map Act and the Close of Escrow is conditioned upon Seller obtaining
a boundary adjustment which would establish the Real Property as a legal lot or
lots under the California Subdivision Map Act. Seller shall use its reasonable
efforts to obtain such compliance but may not suffer any liability under this
Agreement for its failure to accomplish such compliance.
15.2. No Conflict or Breach. To Seller's knowledge, neither the
execution and delivery of this Agreement, nor the incurrence of the obligations
set forth in this Agreement, nor the consummation of the transactions
contemplated by this Agreement, nor compliance with the provisions of this
Agreement will conflict with or result in a breach of any of the provisions of,
or constitute a default under, any bond, note or other evidence of indebtedness,
contract, indenture, mortgage, deed of trust, loan, agreement, lease or other
agreement or instrument to which Seller may be bound.
15.3. FIRPTA. Seller is not a foreign person within the meaning of
Section 1445 of the Internal Revenue Code of 1986, as amended (the Foreign
Investment in Real Property Tax Act).
15.4. Environmental. To the actual knowledge of the current
employees of Seller's asset management department as of the date of this
Agreement, without investigation or inquiry, the Property: (a) is not in
violation of any law or regulation relating to Hazardous Materials (as defined
in Section 21 below), (b) has never been used by Seller to generate, treat or
transport Hazardous Materials, and (c) is not the subject of any proceeding or
inquiry by any governmental authority (including without limitation the
Environmental Protection Agency or the California State Department of Health
Services) with respect to the presence of any Hazardous Materials on the
Property or migration from or to other property. Seller's actual knowledge does
not include facts, the knowledge of which is imputed to Seller solely because
such facts are within the knowledge of a non-employee agent of Seller or an
employee of Seller or any of Seller's affiliates who are not current employees
of Seller's asset management department, or of any previous owners, operators,
or lienholders of the Property.
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15.5. Title to Personal Property. Seller owns the Personal Property
described on the attached Exhibit "B" free of all claims, liens, and
encumbrances.
16. Buyer's Representations and Warranties. The accuracy and completeness
of the following shall constitute a condition to the close of escrow and Buyer
represents and warrants that the following are complete and accurate as of the
date of this Agreement and shall be complete and accurate as of the Close of
Escrow, and survive the Close of Escrow in perpetuity.
16. 1. Legal Power, Right and Authority. Buyer is duly organized,
validly existing, and qualified to conduct its business and has the legal power,
right and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. All requisite action (corporate,
partnership, trust or otherwise) has been taken by Buyer in connection with
entering into this Agreement and the consummation of the transactions
contemplated by this Agreement. The individual executing this Agreement on
behalf of Buyer has the legal power, right, and actual authority to bind Buyer
to the terms and conditions of this Agreement. This Agreement and all documents
required by this Agreement to be executed by Buyer are and will be valid,
legally binding obligations of and enforceable against Buyer in accordance with
their terms.
16.2. No Conflict or Breach. Neither the execution and delivery of
this Agreement, nor the incurrence of the obligations set forth in this
Agreement, nor the consummation of the transactions contemplated by this
Agreement, nor compliance with the terms of this Agreement will conflict with or
result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, any bond, note or other evidence of indebtedness or
any contract, indenture, mortgage, deed of trust, loan, agreement, lease or
other agreement or instrument to which Buyer is a party or by which any of
Buyer's properties may be bound.
17. Condemnation. If, prior to the Close of Escrow, any portion of the
Property is taken by eminent domain (or is the subject of a pending or
contemplated taking which has not been consummated), then (a) Seller, if Seller
has actual knowledge thereof, shall notify Buyer of such fact, and (b) Buyer and
Seller each shall have the option to terminate this Agreement upon written
notice to Escrow Holder and the other party given no later than 10 days after
Seller's notice. If this Agreement is so terminated, then (i) each Buyer and
Seller shall pay one half of all costs associated with the cancellation of the
Escrow pursuant to this Section, (ii) neither Buyer nor Seller shall have any
further rights or obligations under this Agreement (except to the extent of any
indemnities under this Agreement with respect to events occurring prior to such
termination, which indemnities shall survive any such termination), and (iii)
Escrow Holder shall, without requiring any further instruction from Seller,
immediately return to Buyer the Deposit and all interest accrued thereon. If
neither Buyer nor Seller terminates this Agreement, then (A) neither Buyer nor
Seller shall have the right to terminate this Agreement by reason of such
taking, (B) Buyer and Seller shall proceed to the close of escrow pursuant to
the terms of this Agreement, without modification of the terms of this
Agreement, except that (1) the Property shall not include the Property so taken,
and (2) the Purchase Price shall be reduced by the amount of any awards for such
taking awarded to Seller as of the Closing Date, and (3) Seller shall assign and
turn over to Buyer, and Buyer shall be entitled to receive and retain, all
awards for such taking not yet awarded as of the Close of Escrow.
18. Destruction. If the Property is damaged by fire or other casualty
on or before the Closing Date and the damage is of an amount less than
$100,000.00, Buyer and Seller shall proceed to the Close of Escrow in accordance
with the terms of this Agreement, without modification of the terms of this
Agreement, and Buyer is entitled to an assignment of the proceeds of all
insurance relating to such fire or other casualty; provided, however, the
Purchase Price must be reduced by an amount equal to the difference between the
cost of such damage minus the insurance proceeds assigned to Buyer. If the
damage is of an amount greater than $100,000.00, either party may terminate this
Agreement and
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Escrow upon written notice to the other party within 10 days after the
terminating-party receives notice of such damage. If this Agreement and Escrow
are terminated in accordance with the preceding sentence, Escrow Holder shall
return the Deposit (minus one-half of any escrow or title cancellation fees) to
Buyer and neither party will have any additional rights or obligations under
this Agreement.
19. Brokers. Each party to this Agreement represents that no real
estate or business broker, agent, finder, or other person is responsible for
bringing about or negotiating this Agreement and that such party has not dealt
with any real estate broker, agent, finder, or other person, relative to this
Agreement in any manner. Each party to this Agreement shall defend, indemnify,
and hold harmless the other party to this Agreement against all liabilities,
damages, losses, costs, expenses, attorneys' fees and claims arising from (a)
any breach of such representation by such indemnifying party set forth in the
preceding sentence, and (b) any claims that may be made against such indemnified
party by any real estate broker, agent, finder, or other person alleging to have
acted on behalf of or to have dealt with such indemnifying party.
20. As-Is Purchase. Buyer acknowledges that it is purchasing the
Property in reliance solely on: (i) Buyer's inspection of the Real Property, the
Personal Property and the Improvements; (ii) Buyer's independent verification of
the truth of any documents made available to Buyer; (iii) the representations
and warranties of Seller under Article 15 above, and (iv) the opinions and
advice concerning the Property of consultants and attorneys engaged by Buyer.
Buyer acknowledges that it already has performed its due diligence
investigations of and with respect to the Property before entering into this
Agreement and before Seller obtained title to any of the Property and that Buyer
has performed all due diligence on and in connection with the Property as Buyer
deems appropriate including engineering studies, soils tests, environmental
surveys, physical inspections, ALTA or other surveys, and market analyses as
well as Buyer's evaluation of the condition and status of the Personal Property
and Improvements and the operation and future prospects of the Property. Upon
the Close of Escrow, Buyer accepts the Property, and the matters relating to the
Property listed below, in their "as is" condition or status as of the Closing
Date. The matters include: soils and geological condition, flood conditions
(including the fact that the Property is within a "flood zone" and has suffered
recent flood- related damage), topography, area and configuration of the Real
Property; the age and condition of the Improvements and Personal Property; the
existence of any Hazardous Materials (as defined in the following Article),
construction defects or other matters which would or could necessitate abatement
or remediation action by the Property's owner; any physical or mechanical
defects in the Improvements or Personal Property; any easement, license or
encroachment which is not a matter of public record, whether or not visible upon
inspection of the Property, the zoning and other land use regulations applicable
to the Property; and any other matter relating to the Property including, but
not limited to, value, title, income, feasibility, cost, marketing and
investment return. Buyer acknowledges and agrees that Seller is not making any
express or implied warranties or representations of any kind or character with
respect to the Property. Buyer warrants and represents that it has not relied
upon and will not rely upon, either directly or indirectly, any warranty or
representation of Seller not explicitly set forth in this Agreement or otherwise
in writing from Seller. Notwithstanding the foregoing, if the Close of Escrow
occurs, Buyer may exercise any of its rights and remedies upon and on account of
any breach by Seller of any of Seller's representations and warranties set forth
in Article 15 above, including a lawsuit against Seller for contract damages.
In consideration for Seller's permission to Buyer and its agents to perform
investigations and testing on and about the Property, Buyer has agreed that
Buyer shall defend, indemnify and hold harmless Seller, Seller's officers,
employees, agents, contractors, successors, assigns, and affiliates
(collectively, the "Indemnitees"), and the Property from all claims, costs,
liens, actions and judgments (including, without limitation, Seller's attorneys'
fees and defense costs) resulting from Buyer's investigation or otherwise caused
by Buyer or any of its employees, agents or independent contractors. Unless and
until the Close of Escrow occurs, Buyer shall maintain all the information it
obtains in connection with the Property
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in strict confidence and may not reveal any of such information to any party
other than its management personnel, or parties to which it may otherwise be
required to disclose in accordance with applicable law. Buyer shall, at Buyer's
sole cost, promptly repair any damage resulting from its activities on the
Property and restore the Property to its condition as of the date of this
Agreement. If the Close of Escrow does not occur on or before the Closing Date,
Buyer shall provide Seller, at no cost to Seller, copies of all reports and
materials derived from Buyer's investigation of the Property.
21. Buyer's Environmental Indemnity. As partial consideration for the
Property, if the Close of Escrow occurs, Buyer shall defend, indemnify and hold
harmless the Indemnitees (as defined in the preceding paragraph), and waives,
releases and forever discharges Indemnitees, from and against all losses, costs,
damages, injuries, penalties, actions, claims, and expenses (including
attorneys' and expert witness, and other consultants' fees and costs) arising
out of or in any way relating to or resulting from the presence of Hazardous
Materials (as defined below) in, on, under, or about the Property, whether
existing or caused before, during or after Seller's or Buyer's ownership or
operation of the Property. For purposes of this Agreement, "Hazardous Materials"
means all chemicals, substances, materials, objects, conditions, and living
organisms that are or may be hazardous to human health or safety or to the
environment or which may be regulated by any governmental or regulatory
authority, including without limitation petroleum hydrocarbons and petroleum
products, lead, asbestos, radon, polychlorinated biphenyl (PCBs), as well as all
other chemicals, substances, materials, objects conditions, and living organisms
that are now or become in the future listed or defined as toxic, hazardous or
regulated by any federal, state or local law. Buyer's obligations under this
paragraph shall survive in perpetuity.
22. Sale of Other Personal Property. Seller shall hold a public auction
at which it will sell the Other Personal Property and the Rock-O-Plane
separately (the "Auction"). Notice of the Auction must be published by April 14,
1995, and the Auction date must be set for a date no earlier than twenty-one
days, nor later than thirty days, after the initial publication of such notice.
If Buyer is the successful bidder at the Auction for the Other Personal
Property, then: (a) Buyer shall pay its last bid price (the "Auction Price") to
Seller; (b) Seller shall convey its interest in the Other Personal Property to
Buyer by a quitclaim bill of sale without any representation or warranty; and
(c) the balance of the Purchase Money Note will be automatically reduced by the
Auction Price. If before the Auction Buyer consummates a purchase of the Other
Personal Property, then the Auction will be cancelled and the balance of the
Purchase Money Note will be automatically reduced by Buyer's direct cost of
acquiring the Other Personal Property. If Buyer acquires the Other Personal
Property via the Auction, Seller shall indemnify Buyer from any claims by third
parties claiming to own an interest in the Other Personal Property; if Seller
fails to so indemnify Buyer, Buyer may offset its payment obligations under the
Purchase Money Note to the extent of such unfulfilled indemnity obligations. If
Buyer acquires the Other Personal Property under this paragraph, then: (i) any
storage fee for any of the Other Personal Property or the Rock-O-Plane charged
by Buyer to Seller is automatically deemed discharged or void, and (ii) any
storage fee for any of the Other Personal Property or the Rock-O-Plane located
on the Property received by Buyer, regardless of the source of the payment, must
be added to the principal balance of the Purchase Money Note and Buyer shall
execute a new or additional Promissory note reflecting such increased loan
balance. In the event of any inconsistency between the preceding sentence and
the provision of any other agreement or letter, whether executed before, after
or concurrent with this Agreement, the preceding sentence controls.
23. Estoppel Regarding Loan Balance. This Agreement provides for the
automatic reduction or increase of the loan balance evidenced by the Purchase
Money Note upon the occurrence of certain events. Notwithstanding any other
provision in this Agreement, no reduction may be made to the Purchase Money Note
on account of a claim under this Agreement which is not made by written notice
to Seller within one year after the Close of Escrow. At any time(s) Seller
requests in writing from Buyer an estoppel as to the amount owing under the
Purchase Money Note, Buyer has twenty-
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one days to appropriately respond in writing to Seller's inquiry or otherwise be
estopped from claiming any offset to the Purchase Money Note that it may have
under this Agreement.
24. Governing Law. This Agreement is governed by and construed in
accordance with the laws of the State of California, irrespective of
California's choice-of-law principles.
25. Further Assurances. Each party to this Agreement shall execute and
deliver all instruments and documents and take all actions as may be reasonably
required or appropriate to carry out the purposes of this Agreement.
26. Venue and jurisdiction. All actions and proceedings arising in
connection with this Agreement must be tried and litigated exclusively in the
State and Federal courts located in the County of San Diego, State of
California, which courts have personal jurisdiction and venue over each of the
parties to this Agreement for the purpose of adjudicating all matters arising
out of or related to this Agreement. Each party authorizes and accepts service
of process sufficient for personal jurisdiction in any action against it as
contemplated by this paragraph by registered or certified mail, return receipt
requested, postage prepaid, to its address for the giving of notices set forth
in this Agreement.
27. Counterparts and Exhibits. This Agreement may be executed in
counterparts, each of which is deemed an original and all of which together
constitute one document. All exhibits attached to and referenced in this
Agreement are incorporated into this Agreement.
28. Time of Essence. Time and strict and punctual performance are of
the essence with respect to each provision of this Agreement.
29. Attorney's Fees. The prevailing party in any litigation,
arbitration, mediation, bankruptcy, insolvency or other proceeding
("Proceeding") relating to the enforcement or interpretation of this Agreement
may recover from the unsuccessful party all costs, expenses, and actual
attorney's fees (including expert witness and other consultants' fees and costs)
relating to or arising out of (a) the Proceeding (whether or not the Proceeding
proceeds to judgment), and (b) any post-judgment or post-award proceeding
including, without limitation, one to enforce or collect any judgment or award
resulting from the Proceeding. All such judgments and awards shall contain a
specific provision for the recovery of all such subsequently incurred costs,
expenses, and actual attorney's fees.
30. Modification. This Agreement may be modified only by a contract in
writing executed by the party to this Agreement against whom enforcement of the
modification is sought.
31. Headings. The paragraph headings in this Agreement: (a) are
included only for convenience, (b) do not in any manner modify or limit any of
the provisions of this Agreement, and (c) may not be used in the interpretation
of this Agreement.
32. Prior Understandings. This Agreement and all documents specifically
referred to and executed in connection with this Agreement: (a) contain the
entire and final agreement of the parties to this Agreement with respect to the
subject matter of this Agreement, and (b) supersede all negotiations,
stipulations, understandings, agreements, representations and warranties, if
any, with respect to such subject matter, which precede or accompany the
execution of this Agreement.
33. Interpretation. Whenever the context so requires in this Agreement,
all words used in the singular may include the plural (and vice versa) and the
word "person" includes a natural person, a corporation, a firm, a partnership, a
joint venture, a trust, an estate or any other entity. The terms includes" and
"including" do not imply any limitation. For purposes of this Agreement, the
term "day" means any calendar day and the term "business day" means any calendar
day other than a
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Saturday, Sunday or any other day designated as a holiday under California
Government Code Sections 6700-6701. Any act permitted or required to be
performed under this Agreement upon a particular day which is not a business day
may be performed on the next business day with the same effect as if it had been
performed upon the day appointed. No remedy or election under this Agreement is
exclusive, but rather, to the extent permitted by applicable law, each such
remedy and election is cumulative with all other remedies at law or in equity.
34. Partial Invalidity. Each provision of this Agreement is valid and
enforceable to the fullest extent permitted by law. If any provision of this
Agreement (or the application of such provision to any person or circumstance)
is or becomes invalid or unenforceable, the remainder of this Agreement, and the
application of such provision to persons or circumstances other than those as to
which it Is held invalid or unenforceable, are not affected by such invalidity
or unenforceability.
35. Successors-in-Interest and Assigns. Buyer may assign its rights
under this Agreement to a nominee but Buyer is not thereby released of its
obligations or liability under this Agreement unless such nominee assumes all of
Buyer's obligations under this Agreement in a writing for the benefit of Seller
and Seller approves of such nominee in Seller's sole and absolute discretion,
which approval may not unreasonably be withheld. Subject to the foregoing and
any other restrictions on transferability contained in this Agreement, this
Agreement is binding upon and inures to the benefit of the
successors-in-interest and assigns of each party to this Agreement.
36. Notices. Each notice and other communication required or perrmitted
to be given under this Agreement ("Notice") must be in writing. Notice is duly
given to another party upon: (a) hand delivery to the other party, (b) receipt
by the other party when sent by facsimile to the address and number for such
party set forth below (provided, however, that the Notice is not effective
unless a duplicate copy of the facsimile Notice is promptly given by one of the
other methods permitted under this paragraph), (c) three business days after the
Notice has been deposited with the United States postal service as first class
certified mail, return receipt requested, postage prepaid, and addressed to the
party as set forth below, or (d) the next business day after the Notice has been
deposited with a reputable overnight delivery service, postage prepaid,
addressed to the party as set forth below with next-business-day delivery
guaranteed, provided that the sending party receives a confirmation of delivery
from the delivery-service-provider.
If to Seller, to: PLC Properties Inc.
2255 Camino Del Rio South, Ste. 300
San Diego, California 92108
Attn: Howard Harris
with a copy to: Solomon Ward Seidenwurm & Smith
401 B Street, Suite 1200
San Diego, CA 92101
Attn: Richard L. Seidenwurm, Esq.
If to Buyer, to: United Leisure Corporation
8800 Irvine Center Drive
Irvine, California 92718
Attn: Harry Shuster
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with a copy to:
Richman, Lawrence, Mann, Greene, Arbiter & Chizever
9601 Wilshire Blvd., Penthouse
Beverly Hills, California 90210
Attn: Gerald M. Chizever, Esq.
Each party shall make a reasonable, good faith effort to ensure that it will
accept or receive Notices to it that are given in accordance with this
paragraph. A party may change its address for purposes of this paragraph by
giving the other party(ies) written notice of a new address in the manner set
forth above.
37. Waiver. Any waiver of a default or provision under this Agreement
must be in writing. No such waiver constitutes a waiver of any other default or
provision concerning the same or any other provision of this Agreement. No delay
or omission by a party in the exercise of any of its rights or remedies
constitutes a waiver of (or otherwise impairs) such right or remedy. A consent
to or approval of an act does not waive or render unnecessary the consent to or
approval of any other or subsequent act.
38. Drafting Ambiguities. Each party to this Agreement and its legal
counsel have reviewed and revised this Agreement. The rule of construction that
ambiguities are to be resolved against the drafting party or in favor of the
party receiving a particular benefit under an agreement may not be employed in
the interpretation of this Agreement or any amendment to this Agreement.
39. Third Party Beneficiaries. Nothing in this Agreement is intended to
confer any rights or remedies on any person or entity other than the parties to
this Agreement and their respective successors-in-interest and permitted
assignees, unless such rights are expressly granted in this Agreement to another
person specifically identified as a "Third Party Beneficiary."
40. Time. Time is of the essence with respect to the obligations of
each of the parties under this Agreement.
SELLER: PLC PROPERTIES, INC.,
a California corporation
By: /s/Lawrence P. Casey
---------------------------
Lawrence P. Casey, Executive Vice President
BUYER: UNITED LEISURE CORPORATION
a Delaware Corporation
By: /s/Renate Graf
---------------------------
Renate Graf, Vice-President/Controller
12
<PAGE>
CONSENT AND ACCEPTANCE OF ESCROW HOLDER:
The undersigned consents to and accepts the instructions set forth in
the above Agreement for Purchase and Sale and Joint Escrow Instructions.
Chicago Title Insurance Company
By:
--------------------------------------
Its:
--------------------------------------
13
<PAGE>
EXHIBIT "A" DESCRIPTION
Page 1
Policy No. 975386-PA 15
PARCEL 1:
THAT PORTION OF TRACT "S" OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO, STATE
OF CALIFORNIA, ACCORDING TO MAP OF THE SUBDIVISION OF SAID TRACT "S", RECORDED
IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, IN BOOK 170, PAGE 71
OF DEEDS, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE CENTER OF THE ROAD THAT FORMS THE NORTHERLY BOUNDARY
OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID SUBDIVISION, DISTANT THEREON, SOUTH 72
DEGREES 30' WEST, 500 FEET FROM THE POINT WHERE SAID ROAD IS INTERSECTED BY THE
WESTERLY RIGHT OF WAY LINE OF THE SAN DIEGO FLUME, SAID POINT OF BEGINNING BEING
THE NORTHWEST CORNER OF LAND DESCRIBED IN DEED TO J. T. WILLIAMS AND WIFE,
RECORDED JANUARY 26, 1943, IN BOOK 1440, PAGE 458 OF OFFICIAL RECORDS IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY; THENCE CONTINUING ALONG SAID
CENTER LINE, SOUTH 73 DEGREE 30' WEST, 225 FEET TO THE NORTHEAST CORNER OF LAND
DESCRIBED IN THE DEED FROM WILLIAM JOHN MEADER TO HAROLD H. LUSK, ET UX,
RECORDED FEBRUARY 7, 1938, IN BOOK 739, PAGE 377 OF OFFICIAL RECORDS IN SAID
RECORDER'S OFFICE; THENCE DUE SOUTH ALONG THE EAST LINE OF LAND SO CONVEYED TO
LUSK, 870 FEET, MORE OR LESS, TO THE SOUTHEAST CORNER THEREOF, BEING A POINT ON
THE NORTHERLY RIGHT OF WAY LIKE OF SAN DIEGO FLUME; THENCE EASTERLY FOLLOWING
THE NORTHERLY RIGHT OF WAY LINE OF SAID FLUME, 225 FEET, MORE OR LESS, TO A
POINT DUE SOUTH OF THE POINT OF BEGINNING, SAID POINT BEING ALSO THE SOUTHWEST
CORNER OF DESCRIBED IN DEED TO WILLIAMS ABOVE REFERRED TO; THENCE DUE NORTH
ALONG THE WEST LINE OF SAID WILLIAMS' LAND TO THE POINT OF BEGINNING.
EXCEPTING THAT PORTION LYING NORTHERLY AND NORTHEASTERLY OF THE FOLLOWING
DESCRIBED LINE:
BEGINNING AT A POINT ON THE EASTERLY LINE OF THAT PARCEL OF LAND CONVEYED TO LEE
RAMAGE, ET UX, BY DEED RECORDED FEBRUARY 11, 1959, IN BOOK 7492, PAGE 505 OF
OFFICIAL RECORDS OF SAID SAN DIEGO COUNTY, DISTANT THEREON, NORTH 11 DEGREES 52'
25" EAST, 73.05 FEET FROM A 1/2 INCH IRON PIPE HAVING COORDINATES Y EQUALS
246,219.53 FEET AND X EQUALS 1,805,256.21 FEET, PURPORTEDLY SET FOR THE
SOUTHEAST CORNER OF SAID RAMAGE LAND; THENCE NORTH 52 DEGREES 05' 27" EAST,
267.90 FEET; THENCE ALONG A TANGENT CURVE TO THE RIGHT WITH A RADIUS OF 350 FEET
THROUGH AN ANGLE OF 21 DEGREE 52' 04", A DISTANCE OF 133.58 FEET; THENCE NORTH
73 DEGREE 57' 31" EAST, 407.33 FEET; THENCE ALONG A TANGENT CURVE TO THE RIGHT
WITH A RADIUS OF 300 FEET THROUGH AN ANGLE OF 51 DEGREES 17' 36", A DISTANCE OF
268.57 FEET; THENCE SOUTH 54 DEGREES 44' 53" EAST, 47.89 FEET TO A POINT ON THE
WESTERLY LINE OF THAT PARCEL OF LAND CONVEYED TO EDWARD L. BREWER, ET UX, BY
DEED RECORDED MAY 16, 1957, IN BOOK 6580, PAGE 320 OF OFFICIAL RECORDS OF SAID
SAN DIEGO COUNTY, DISTANT THEREON, NORTH 01 DEGREE 26' 58" EAST, 271.22 FEET
FROM A 1 1/2 INCH IRON PIPE MARKED, "L. S. 2201" HAVING COORDIANTES Y EQUALS
246,286.30 FEET AND X EQUALS 1,806,280.71 FEET, PURPORTEDLY SET FOR THE
SOUTHWEST CORNER OF SAID BREWER LAND.
PARCEL 2:
THAT PORTION OF THE NORTHERLY HALF OF THE SAN DIEGO FLUME COMPANY'S RIGHT OF WAY
LYING SOUTHERLY OF AND ADJOINING THE FOLLOWING DESCRIBED LAND:
THAT PORTION OF TRACT "S" OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO, STATE
OF CALIFORNIA, ACCORDING TO MAP OF THE SUBDIVISION OF SAID TRACT "S", RECORDED
IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, IN BOOK 170, PAGE 71
OF DEEDS, DESCRIBED AS FOLLOWS:
<PAGE>
DESCRIPTION
Page 2
Policy No. 975386-PA 15
BEGINNING AT A POINT IN THE CENTER OF THE ROAD THAT FORMS THE NORTHERLY BOUNDARY
OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID SUBDIVSION, DISTANT THEREON, SOUTH 72
DEGREE 30' WEST, 500 FEET FROM THE POINT WHERE SAID ROAD IS INTERSECTED BY THE
WESTERLY RIGHT OF WAY LINE OF THE SAN DIEGO FLUME; SAID POINT OF BEGINNING BEING
THE NORTHWEST CORNER OF LAND DESCRIBED IN DEED TO J. T. WILLIAMS AND WIFE,
RECORDED JANUARY 16, 1943, IN BOOK 1440, PAGE 458 OF OFFICIAL RECORDS IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY; THENCE CONTINUING ALONG SAID
CENTER LINE, SOUTH 73 DEGREES 30' WEST, 225 FEET TO THE NORTHEAST CORNER OF LAND
DESCRIBED IN THE DEED FROM WILLIAM JOHN MEADER TO HAROLD H. LUSK, ET UX,
RECORDED FEBRUARY 7, 1938, IN BOOK 739, PAGE 377 OF OFFICIAL RECORDS IN SAID
RECORDER'S OFFICE; THENCE DUE SOUTH ALONG THE EAST LINE OF SAID LAND SO CONVEYED
TO SAID LUSK, 870 FEET, MORE OR LESS, TO THE SOUTHEAST CORNER THEREOF, BEING A
POINT ON THE NORTHERLY RIGHT OF WAY LINE OF SAN DIEGO FLUME; THENCE EASTERLY
FOLLOWING THE NORTHERLY RIGHT OF WAY LINE OF SAID FLUME, 225 FEET, MORE OR LESS,
TO A POINT DUE SOUTH OF THE POINT OF BEGINNING, SAID POINT BEING ALSO THE
SOUTHWEST CORNER OF LAND DESCRIBED IN DEED TO WILLIAMS ABOVE REFERRED TO; THENCE
DUE NORTH ALONG THE WEST LINE OF SAID WILLIAMS' LAND TO THE POINT OF BEGINNING.
THE SIDELINES OF SAID PORTION OF THE NORTHERLY HALF OF SAID FLUME TO TERMINATE
IN THE SOUTHERLY PROLONGATIONS OF THE EASTERLY AND WESTERLY LINES OF THE ABOVE
DESCRIBED LAND.
PARCEL 3:
THAT PORTION OF LOT 45 AND THAT PORTION OF LOT 48, IF ANY OF THE "S" TRACT OF
RANCHO EL CAJON, IN THE COUNTRY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO
MAP THEREOF ON FILE IN DEED BOOK 170, PAGE 71, RECORDS OF SAID SAN DIEGO COUNTY,
DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE CENTER OF THE ROAD THAT FORMS THE NORTHERLY BOUNDARY
OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID SUBDIVISION, DISTANT THEREON SOUTH 72
DEGREES 30' WEST, 275.00 FEET FROM THE POINT WHERE SAID ROAD IS INTERSECTED BY
THE WESTERLY RIGHT OF WAY LINE OF THE SAN DIEGO FLUME SAID POINT OF BEGINNING
BEING THE NORTHWEST CORNER OF THE LAND DESCRIBED IN THE DEED FROM WILLIAM JOHN
MEADER TO LEONARD ALVIN KEEVER, RECORDED AUGUST 26, 1936 IN BOOK 550, PAGE 292
OF OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY;
THENCE CONTINUING ALONG SAID CENTER LINE, SOUTH 72 DEGREES 30' WEST, 225 FEET;
THENCE DUE SOUTH TO A POINT ON THE NORTHERLY RIGHT OF WAY LINE OF SAID SAN DIEGO
FLUME; THENCE EASTERLY FOLLOWING THE NORTHERLY RIGHT OF WAY OF SAID FLUME 225
FEET MORE OR LESS TO A POINT DUE SOME OF THE POINT OF BEGINNING, BEING ALSO THE
SOUTHWEST CORNER OF LAND DESCRIBED IN DEED TO KEEVER, ABOVE REFERRED TO; THENCE
DUE NORTH ALONG THE WEST LINE OF SAID KEEVER LAND, 890 FEET, MORE OR LESS, TO
THE POINT OF BEGINNING.
ALSO TOGETHER WITH THAT PORTION OF THE NORTHERLY HALF OF THE RIGHT OF WAY OF THE
CUYAMACA FLUME COMPANY LYING SOUTHERLY OF AND ADJACENT TO THE MOST SOUTHERLLY
LINE OF THE PROPERTY DESCRIBED ABOVE.
EXCEPTING THEREFROM THAT PORTION LYING SOUTHERLY AND EASTERLY OF THE FOLLOWING
DESCRIBED LINE:
COMMENCING AT THE INTERSECTION OF THE CENTER LINE OF THE 50.00 FOOT RIGHT OF WAY
OF THE CUYAMACA FLUME AND THE CENTER LINE OF THE 100.00 FOOT STATE HIGHWAY
(FORMERLY THE CENTER LINE OF THE COUNTY ROAD, AS SHOWN ON SAID MAP OF THE "S"
TRACT OF RANCHO EL CAJON), ACCORDING TO THE LAYOUT KNOWN AS DISTRICT VII, SAN
<PAGE>
DESCRIPTION
Page 3
Policy No. 975386-PA 15
DIEGO, ROUTE 12, SECTION C, A PLAT OF WHICH IS ON FILE IN THE OFFICE OF THE
DIVISION ENGINEER CALIFORNIA STATE DIVISION OF HIGHWAYS OF SAN DIEGO,
CALIFORNIA, AND APPROVED FEBRUARY 8, 1932, SAID POINT OF INTERSECTION BEING ON
OR NEAR ENGINEER'S CENTER LINE STATION 333 PLUS 97.97 P.O.T. OF SAID STATE
HIGHWAY LAYOUT; THENCE SOUTH 73 DEGREES 36' 30" WEST ALONG SAID CENTER LINE OF
SAID STATE HIGHWAY, A DISTANCE OF 300.03 FEET TO A POINT ON SAID CENTER LINE
THAT IS DISTANT THEREON 275.00 FEET WESTERLY FROM ITS INTERSECTION WITH THE
WESTERLY RIGHT OF WAY LINE OF SAID CUYAMCA FLUME; THENCE SOUTH 1 DEGREE 0l' 10"
WEST, A DISTANCE OF 940.31 FEET, MORE OR LESS, TO A POINT IN THE NORTHERLY LINE
OF SAID CUYAMACA FLUME RIGHT OF WAY; THENCE RETRACTING NORTH 1 DEGREE 01' 10"
EAST 225.00 FEET; TO THE TRUE POINT OF BEGINNING OF THE FOLLOWING DESCRIBED
LINE; THENCE NORTH 85 DEGREES 14' 10" WEST 100.00 FEET; THENCE SOUTH 01 DEGREE
Ol' 10" EAST TO THE CENTER LINE OF THE RIGHT OF WAY OF CUYAMACA FLUME COMPANY.
ALSO EXCEPTING THEREFROM THAT PORTION LYING NORTHERLY OF THE FOLLOWING DESCRIBED
LINE:
BEGINNING AT THE POINT OF BEGINNING DESCRIBED AS THE SOUTHWEST CORNER OF THAT
PARCEL OF LAND CONVEYED TO THE STATE OF CALIFORNIA BY A DEED RECORDED MARCH 5,
1963, AS FILE NO. 37982 OF OFFICIAL RECORDS, SAID POINT BEING AT THE WESTERLY
TERMINUS OF SAID LAND CONVEYED TO THE STATE OF CALIFORNIA DESCRIBED ABOVE AS
COURSE (3) DESCRIBED SOUTH 85 DEGREES 31' 51" WEST 309.11 FEET, THENCE
CONTINUING ALONG THE WESTERLY PROJECTION OF SAID COURSE (3) SOUTH 85 DEGREES 31'
51" WEST 215.72 FEET MORE OR LESS TO THE EASTERLY LINE OF THAT PARCEL OF LAND
CONVEYED TO THE WILLIAM P. LEE COMPANY, INC., BY A DEED RECORDED JULY 2, 1986,
AS FILE NO. 86-274086.
PARCEL 4:
THAT PORTION OF THE "S" TRACT OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 355, FILED IN THE OFFICE OF
THE COUNTY RECORDER OF SAN DIEGO COUNTY, JULY 24, 1886, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE CENTER LINE OF THAT CERTAIN UNNAMED ROAD WHICH FORMS
THE NORTHERLY BOUNDARY OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID "S" TRACT,
DISTANT THEREON SOUTH 72 DEGREES 30' 00" WEST, 725.00 FEET FROM THE INTERSECTION
OF SAID CENTER LINE WITH THE WESTERLY LINE OF THE RIGHT OF WAY OF THE SAN DIEGO
FLUME COMPANY; THENCE ALONG SAID CENTER LINE AS FOLLOWS:
CONTINUING SOUTH 72 DEGREES 30' 00" WEST, 405.00 FEET TO AN ANGLE POINT THEREIN;
AND SOUTH 62 DEGREES 56' 00" WEST, 157.20 FEET TO AN INTERSECTION WITH THE
CENTER LINE OF THAT CERTAIN UNNAMED ROAD WHICH FORMS THE WESTERLY BOUNDARY OF
SAID BLOCK 45, ALSO KNOWN AS LOT 45; THENCE ALONG SAID CENTER LINE LAST
HEREINABOVE REFERRED TO AS FOLLOWS:
SOUTH 11 DEGREES 29' 00" WEST, 859.70 FEET TO AN ANGLE POINT; AND S0UTH 30
DEGREES 00' 00" WEST, 221.58 FEET TO THE NORTHERLY LINE OF SAID SAN DIEGO FLUME
COMPANY'S RIGHT OF WAY; THENCE NORTHEASTERLY AND EASTERLY ALONG SAID NORTHERLY
LINE, 1162.00 FEET, MORE OR LESS, TO A LINE WHICH BEARS DUE SOUTH FROM THE POINT
OF BEGINNING; THENCE DUE NORTH 870.00 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THAT PORTION CONDEMNED FOR STATE HIGHWAY PURPOSES AS
DESCRIBED IN FINAL ORDER OF CONDEMNATION RECORDED OCTOBER 19, 1964 AS FILE NO.
190709 OF OFFICIAL RECORDS.
PARCEL 4A:
<PAGE>
DESCRIPTION
Page 4
Policy No. 975366-PA 15
THAT PORTION OF THE NORTHERLY HALF OF THE SAN DIEGO FLUME COMPANY'S RIGHT OF
WAY, LYING SOUTHERLY OF AND ADJOINING THAT CERTAIN PARCEL OF LAND DESCRIBED AS
FOLLOWS:
THAT PORTION OF THE "S" TRACT OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 355, FILED IN THE OFFICE OF
THE COUNTY RECORDER OF SAN DIEGO COUNTY, JULY 24, 1886, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE CENTER LINE OF THAT CERTAIN UNNAMED ROAD WHICH FORMS
THE NORTHERLY BOUNDARY OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID "S" TRACT,
DISTANT THEREON SOUTH 72 DEGREES 30' 00" WEST, 725.00 FEET FROM THE INTERSECTION
OF SAID CENTER LINE WITH THE WESTERLY LINE OF THE RIGHT OF WAY OF THE SAN DIEGO
FLUME COMPANY; THENCE ALONG SAID CENTER LINE AS FOLLOWS:
CONTINUING SOUTH 72 DEGREES 30' 00" WEST, 405.00 FEET TO AN ANGLE POINT THEREIN;
AND SOUTH 62 DEGREES 56' 00" WEST, 157.20 FEET TO AN INTERSECTION WITH THE
CENTER LINE OF THAT CERTAIN UNNAMED ROAD WHICH FORMS THE WESTERLY BOUNDARY OF
SAID BLOCK 45, ALSO KNOWN AS LOT 45; THENCE ALONG SAID CENTER LINE LAST
HEREINABOVE REFERRED TO AS FOLLOWS:
SOUTH 11 DEGREES 29' 00" WEST, 859.70 FEET TO AN ANGLE POINT; AND SOUTH 30
DEGREES 00' 00" WEST, 221.58 FEET TO THE NORTHERLY LINE OF SAID SAN DIEGO FLUME
COMPANY'S RIGHT OF WAY; THENCE NORTHEASTERLY AND EASTERLY ALONG SAID NORTHERLY
LINE, 1162.00 FEET, MORE OR LESS, TO A LINE WHICH BEARS DUE SOUTH FROM THE POINT
OF BEGINNING; THENCE DUE NORTH 870.00 FEET TO THE POINT OF BEGINNING.
<PAGE>
Exhibit "B" to Purchase Agreement
MARSHALL SCOTTY'S AMUSEMENT PARK
--------------------------------
Personal Property List
----------------------
- - --------------------------------------------------------------------------------
RIDES MANUFACTURERS
SLICK GO CART TRACK (NO CARS INCLUDED)
5OO' INGROUND FOAM PADDED CONCRETE
INNER-TUBE WATER SLIDE ("RIVER RIDE")
MINI TRAIN W/5 COACHES -CHANCE C.P. HUNTINGTON
BUMPER CARS -CARS BY SOLI
TILT-A-WHIRL -SELLNER
TANK RIDE -ALLAN HERSHELL
SKY FIGHTER -ALLAN HERSHELL
BULGY THE WHALE -EVERLY AIRCRAFT
FERRIS WHEEL -GARBRECK
ZUMER -SAN ANTONIO ROLLER WORKS
MINI BIKE -UNKNOWN
CAR RIDE -ALLAN HERSHELL
CHAIR SWING -UNKNOWN
TWISTER -UNKNOWN
BOAT RIDE (6 BOATS) -ALLAN HERSHELL
ROLLER COASTER -ALLAN HERSHELL
- - --------------------------------------------------------------------------------
<PAGE>
Exhibit "C"
RECORDING REQUESTED BY
WHEN RECORDED MAIL TO:
F. Beard Hobbs
890 South Park Place
El Cajon, CA 92021
- - --------------------------------------------------------------------------------
SPACE ABOVE LINE FOR RECORDER'S USE
MODIFICATION OF NOTE AND DEED OF TRUST
This Modification of Note and Deed of Trust (this "Modification") is entered
into as of March _, 1995, by and between FRANK STANLEY HOBBS and JESSIE STEEL
HOBBS, husband and wife as joint tenants (collectively, "Beneficiary"), and
UNITED LEISURE CORPORATION, a Delaware corporation ("Owner"), in connection
with:
(a) the Installment Note - Interest Included dated January 11,
1979, in the original principal amount of $230,000.00 executed
by Bernard Pludow and Pauline F. Pludow (collectively,
"Pludow"), collectively as maker, in favor of Beneficiary (the
"Note"); and
(b) the Short Form Deed of Trust and Assignment of Rents made on
January 11, 1979, by Pludow, as trustor, in favor of
Beneficiary, as beneficiary, and recorded in the Official
Records of the County of San Diego, California (the "Official
Records"), on January 31, 1979, as instrument no. 79-048088
(the "Trust Deed").
The Trust Deed encumbers the real property described therein (the "Property"),
which Property is owned by Owner.
Beneficiary and Owner agree that the Note and the Trust Deed are each
amended and modified as of the date of this Modification as follows:
1. Interest Rate Increase. The interest rate under the Note is
increased to twelve percent (12%) per annum beginning on the
date of this Modification.
2. Interest-Only : Payments and Maturity: Date. Interest under
the Note is due and payable on the first day of each calendar
month following the date of this Modification and continuing
until April 1, 2000 (the "Maturity Date"), on which date all
principal and interest owing under the Note becomes due and
payable. No principal payments are required to be made until
the Maturity Date, but Owner reserves the right to prepay all
or any portion of the indebtedness without penalty or premium.
3. Due on Sale. In the event of any sale, transfer or conveyance
of the Property, whether voluntary or involuntary, without the
prior written consent of Beneficiary, the entire balance of
principal and interest under the Note becomes, at
Beneficiary's written election, immediately due and payable.
<PAGE>
4. Acknowledgment of Current Balance. Beneficiary acknowledges
and represents that as of the date of this Modification: (a)
the outstanding balance under the Note is $120,000, (b) the
maker under the Note is not in default under the Note or the
Trust Deed, and (c) no event has occurred which, upon notice
or the lapse of time, will result in a default under the Note
or the Trust Deed.
5. Security Interest. As additional security for the repayment
obligations under the Note, Owner grants to Beneficiary a
security interest in all machinery, equipment and personal
property located on or used in connection with the operation
of the business located at 14011-14009 Ridgehill Road, El
Cajon, California. At Beneficiary's request, Owner shall
execute and file a Financing Statement with the Secretary of
State of California evidencing and perfecting the security
interest granted under this paragraph.
6. Insurance and Indemnity. Owner shall indemnify and hold
harmless Beneficiary from all claims of any nature relating to
or arising out of the Property during Owner's ownership of the
Property. Owner shall maintain general liability insurance in
an amount of at least Two Million Dollars naming Beneficiary
as an additional insured. Additionally, Owner shall insure the
Property with an "All-Risk" policy of fire and hazard
insurance in an amount equal to or greater than the lesser of
the following: (a) the value of the improvements and personal
property located on the Property, or (b) the outstanding
balance under the Note.
7. Attorney's Fees. The prevailing party in any litigation,
arbitration, mediation, bankruptcy, insolvency or other
proceeding ("Proceeding") relating to the enforcement or
interpretation of any dispute arising out of the Note, the
Trust Deed or this Modification may recover from the
unsuccessful party all costs, expenses, and actual attorney's
fees (including expert witness and other consultants' fees and
costs) relating to or arising out of (a) the Proceeding
(whether or not the Proceeding proceeds to judgment), and (b)
any post-judgment or post-award proceeding including, without
limitation, one to enforce or collect any judgment or award
resulting from the Proceeding.
8. Late Charge. If any payment due under the Note is not received
by Beneficiary within fifteen (15) days after such payment is
due, Owner shall immediately pay to Beneficiary an additional
sum of five percent (5%) of such overdue amount as a late
charge. Such late charge is fair and reasonable based on the
facts and circumstances existing as of the date of this
Modification. Acceptance of the late charge by Beneficiary
does not constitute a waiver of Owner's default with respect
to the overdue amount, nor prevent Beneficiary from exercising
any of the other rights and remedies available to Beneficiary
under the Note and Trust Deed.
This Modification may be executed in counterparts, each of which is deemed an
original and all of which together constitute one document.
Except as specifically set forth in this Modification, the Note and Trust Deed
remain unmodified and in full force.
BENEFICIARY:
-----------------------------------
Frank Stanley Hobbs
-----------------------------------
Jessie Steel Hobbs
OWNER: UNITED LEISURE CORPORATION,
a Delaware corporation
By:
-------------------------------
Its:
----------------------------
-2-
<PAGE>
State of California )
)
County of__________________________)
On_________________________before me,_______________________________________,
Date Name, Title Of Officer
personally appeared____________________________________________________________,
Name(s) Of Signer(s)
[ ] 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
State of California )
)
County of__________________________)
On_________________________before me,_______________________________________,
Date Name, Title Of Officer
personally appeared____________________________________________________________,
Name(s) Of Signer(s)
[ ] 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
-3-
<PAGE>
Exhibit "D"
SECURED PROMISSORY NOTE
$730,000.00 Date: April 7, 1995
FOR VALUE RECEIVED, UNITED LEISURE CORPORATION, a Delaware corporation,
whose address for notices is 8800 Irvine Center Drive, Irvine, California 92718,
Attn: Harry Shuster ("Maker"), promises to pay to PLC PROPERTIES INC., a
California corporation ("Holder"), or order, at 2255 Camino Del Rio South,
Suite 300, San Diego, California 92108 (or such other address designated by
Holder from time to time) the principal sum of Seven Hundred Thirty Thousand
Dollars ($730,000.00), plus interest thereon from the date hereof until all
amounts due hereunder are paid in full, at the rate of nine and 67/100ths
percent (9.67%) per annum, payable as more fully set forth below:
1. Payments. Interest under this Secured Promissory Note (this "Note")
is due in arrears on the first day of the following calendar month commencing
May 1, 1995. On March 1, 2000 (the "Maturity Date"), Maker shall pay to Holder
all remaining unpaid principal and all accrued and unpaid interest and other
charges under this Note.
2. Manner of Payments. All payments by Maker under this Note must be
(a) made in lawful money of the United States of America without set-off,
deduction or counterclaim of any kind whatsoever, (b) credited first to amounts
for late charges, if any, second to amounts for Holder's costs of enforcing this
Note, if any, third to amounts of interest due hereunder, if any, and finally to
the principal balance under this Note, and (c) deemed paid by Maker upon their
actual receipt by Holder.
3. Prepayment. Maker may prepay all or any portion of the principal
amount of this Note at any time without penalty.
4. Late Charge. If any amount of interest or principal under this Note
is not received by Holder within ten days after its due date (including the
payment due on the Maturity Date), then, without any requirement for notice to
Maker, Maker shall immediately pay to Holder an additional sum of seven percent
(7.0%) of such overdue amount as a late charge. Maker acknowledges and agrees
that such late charge is fair and reasonable based upon the facts and
circumstances existing as of the date of this Note. Acceptance of such late
charge by Holder does not constitute a waiver of Maker's default with respect to
the overdue amount, nor prevent Holder from exercising any of the other rights
and remedies available to Holder under this Note or any of the Security
Instruments (as defined below).
5. Default Interest. In the event Maker fails to pay any installment of
principal or interest (including the payment due upon the Maturity Date), within
30 days of the date such installment is due, then in addition to any other
amounts payable hereunder, including the late charge provided for under
Paragraph 4, above, the entire outstanding balance of principal and interest
under this Note shall thereafter bear interest, until such overdue payment is
paid in full, at the increased rate of twelve percent (12%) per annum.
<PAGE>
6. Acceleration. All unpaid principal and accrued and unpaid interest
under this Note shall, at Holder's election, be immediately due and payable upon
the occurrence of any of the following events, each of which constitutes a
default hereunder:
6.l. Any amount due under this Note is not received by Holder
on or before its due date.
6.2. A default occurs under any of the Security Instruments
(as defined below).
6.3. The making by Maker of any general arrangement or
assignment for the benefit of creditors; Maker's becoming bankrupt, insolvent
or a "debtor" as defined in 11 U.S.C. Section 101, or any successor statute
(unless, in the case of an involuntary petition filed against any Maker, if such
petition is dismissed within 30 days after its original filing); the institution
of proceedings under the bankruptcy or similar laws in which Maker is the debtor
or bankrupt; the appointing of a trustee or receiver to take possession of
substantially all of Maker's assets (unless possession is restored to Maker
within 30 days after such taking); the attachment, execution or judicial seizure
of substantially all of Maker's assets (unless such attachment, execution or
judicial seizure is discharged within 30 days after such attachment, execution
or judicial seizure).
7. Commercial Purposes. Maker acknowledges that the loan evidenced by
this Note is being obtained for business or commercial purposes, the proceeds of
which will not be used primarily for personal, family, household or agricultural
purposes.
8. Security. This Note is or will be, upon execution thereof, secured
by (a) a second priority Deed of Trust With Assignment of Rents, Security
Agreement and Fixture Filing encumbering the property described therein, duly
executed and appropriately acknowledged by Maker, as trustor and debtor, in
favor of Chicago Title Company, as trustee, for the benefit of Holder, as
beneficiary and secured party, and (b) certain other documents and instruments
referenced therein and by each other document or instrument which expressly
states that it secures Maker's obligations under this Note (collectively, the
"Security Instruments"). The Deed of Trust described above contains the
following provision:
" Accelerating Transfers. "Accelerating Transfer" means any
sale, contract to sell, conveyance, encumbrance, lease, or other
transfer of all or any material part of the Property or any interest in
it, whether voluntary, involuntary, by operation of law or otherwise.
"Trustor acknowledges that Beneficiary is making the loan
modification secured hereby in reliance on the expertise, skill and
experience of Trustor; thus, the Secured Obligations include material
elements similar in nature to a personal service contract. In
consideration of Beneficiary's reliance, Trustor agrees that, unless
the transfer is preceded by Beneficiary's express written consent to
the particular transaction and transferee, which consent Beneficiary
may withhold in its sole discretion, if any Accelerating Transfer
occurs, Beneficiary, in its sole discretion may declare all of the
Secured Obligations to be immediately due and payable, and Beneficiary
and Trustee may invoke any rights and remedies provided by this Trust
Deed."
9. Interest Limitation. It is not intended by any provision of this
Note to charge interest at a rate in excess of the maximum rate of interest
permitted to be charged to Maker under applicable law on a cumulative basis over
the life of the loan evidenced by this Note (the "Loan"). Nevertheless, in the
event it is determined that interest has been collected in an amount exceeding
the maximum interest
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permitted by law, such excess shall be applied to reduce the principal amount
outstanding hereunder and, to the extent such excess exceeds such principal, it
shall be returned to Maker.
10. Note Waivers. Maker waives presentment, notice, demand, protest,
notice of demand and dishonor.
11. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of California.
12. Further Assurances. Each party to this Note shall execute all
instruments and documents and take all actions as may be reasonably required to
effectuate this Note.
13. Time of Essence. Time and strict and punctual performance are of
the essence with respect to each provision of this Note.
14. Attorney's Fees. In the event any litigation, arbitration,
mediation, or other proceeding ("Proceeding") is initiated by any party against
any other party to enforce, interpret, collect upon, foreclose, or otherwise
obtain judicial or quasi-judicial relief in connection with this Note, the
prevailing party in such Proceeding shall be entitled to recover from the
unsuccessful party all costs, expenses (including expert witness and other
consultant fees and costs), and actual attorney's fees relating to or arising
out of (i) such Proceeding (whether or not such Proceeding proceeds to
judgment), and (ii) any post-judgment or post-award proceeding including without
limitation one to enforce any judgment or award resulting from any such
Proceeding. Any such judgment or award shall contain a specific provision for
the recovery of all such subsequently incurred costs, expenses, and actual
attorney's fees.
15. Modification. This Note may be modified only by a contract in
writing executed by the party to this Note against whom enforcement of such
modification is sought.
16. Waiver. Any waiver of a default under this Note must be in writing
and shall not be a waiver of any other default concerning the same or any other
provision of this Note. No delay or omission in the exercise of any right or
remedy shall impair such right or remedy or be construed as a waiver. A consent
to or approval of any act shall not be deemed to waive or render unnecessary
consent to or approval of any other or subsequent act.
17. Drafting Ambiguities. Maker and its legal counsel have reviewed and
had an opportunity to negotiate the terms of this Note and the Security
Instruments. The rule of construction that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Note or of any of the Security Instruments.
MAKER: UNITED LEISURE CORPORATION,
a Delaware corporation
By:
------------------------
Its:
--------------------
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Exhibit "E"
RECORDING REQUESTED BY
WHEN RECORDED MAIL TO:
PLC Properties, Inc.
2255 Camino Del Rio South, Ste. 300
San Diego, CA 92108
Attention: Howard Harris
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SPACE ABOVE LINE FOR RECORDER'S USE
DEED OF TRUST WITH ASSIGNMENT OF
RENTS, SECURITY AGREEMENT AND FIXTURE FILING
THIS DEED OF TRUST WITH ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE
FILING (this "Trust Deed") is made as of April 7, 1995, by UNITED LEISURE
CORPORATION, a Delaware corporation, having an address for notices at 8800
Irvine Center Drive, Irvine, California 92718, Attn: Harry Shuster ("Trustor"),
in favor of Chicago Title Company ("Trustee"), for the benefit of PLC
PROPERTIES, INC., a California corporation, having an address for notices at
2255 Camino Del Rio South, Ste. 300, San Diego, California 92108, Attn: Howard
Harris ("Beneficiary"), who agree as follows:
THIS TRUST DEED IS A SECOND PRIORITY DEED OF TRUST JUNIOR TO THE DEED
OF TRUST MADE AS OF JANUARY 11, 1979, BY BERNARD PLUDOW AND PULINE
PLUDOW, AS TRUSTOR, IN FAVOR OF FRANK STANLEY HOBBS AND JESSIE STEEL
HOBBS (THE "HOBBS"), AS BENEFICIARY, RECORDED IN THE OFFICIAL RECORDS
OF SAN DEEGO COUNTY, CALIFORNIA, ON JANUARY 31, 1979, AS INSTRUMENT NO.
79-048088, WHICH DEED OF TRUST WAS MODIFIED AS OF THE DATE OF THIS
TRUST DEED BY AGREEMENT BETWEEN TRUSTOR AND THE HOBBS (AS AMENDED, THE
"FIRST TRUST DEED").
1. Grant in Trust and Security Agreement. For valuable consideration,
Trustor irrevocably grants, transfers and assigns to Trustee, in trust, with
power of sale, for the benefit of Beneficiary, the following property (the
"Trust Estate"):
(a) the real property described on the attached Exhibit "A" (the
"Land");
(b) all buildings, structures, and other improvements now or in the
future located or to be constructed on the Land (the "Improvements");
(c) all tenements, hereditament, appurtenances, privileges and other
rights and interests now or in the future benefitting or otherwise relating to
the Land or the Improvements, including
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easements, rights-of-way, development rights, mineral rights, water rights and
water stock (the "Appurtenances," and together with the Land and the
Improvements, the "Real Property");
(d) all leases, rental agreements and occupancy agreements affecting
the Land or the Improvements (the "Leases");
(e) all present and future right, title, and interest of Trustor in
and to all inventory, equipment, fixtures and other goods (as those terms are
defined in Division 9 of the California Uniform Commercial Code (the "UCC"), now
or in the future located at, upon or about, or affixed or attached to or
installed in, the Real Property, or used or to be used in connection with or
otherwise relating to the Real Property or the ownership, use, development,
construction, maintenance, management, operation, marketing, leasing or
occupancy of the Real Property, including furniture, furnishings, machinery,
appliances, building materials and supplies, work in progress, equipment,
generators, boilers, furnaces, water tanks, heating, ventilating and air
conditioning equipment and all other types of tangible personal property of any
kind or nature, and all accessories, additions, attachments, parts, proceeds,
products, repairs, replacements and substitutions of or to any of such property
and including the items of personal property described on the attached Exhibit
"B," which were purchased by Trustor from Beneficiary (collectively the "Goods,"
and together with the Real Property and the Leases, the "Property"); and
(f) all present and future right, title and interest of Trustor in
and to all general intangibles, chattel paper, instruments and documents (as
those terms are defined in the UCC) and all other agreements, obligations,
rights and written materials (in each case whether existing now or in the
future) now or in the future relating to or otherwise arising in connection with
or derived from the Property or any other part of the Trust Estate or the
ownership, use, development, construction, maintenance, management, operation,
marketing, leasing, occupancy, sale or financing of the Property or any other
part of the Trust Estate, including (i) permits, approvals and other
governmental authorizations, (ii) improvement plans and specifications and
architectural drawings, (iii) agreements with contractors, subcontractors,
suppliers, project managers and supervisors, designers, architects, engineers,
sales agents, leasing agents, consultants and property managers, (iv) takeout,
refinancing and permanent loan commitments, (v) warranties, guaranties,
indemnities and insurance policies, together with insurance payments and
unearned insurance premiums, (vi) claims, demands, awards, settlements and other
payments arising or resulting from or otherwise relating to any insurance or any
loss or destruction of, injury or damage to, trespass on or taking, condemnation
(or conveyance in lieu of condemnation) or public use of any of the Property,
(vii) any cash collateral account maintained pursuant to any document evidencing
the Secured Obligations (as defined in Section 3 below), and any amounts
deposited by Trustor with Beneficiary which are to be held in any such cash
collateral account, (viii) service and maintenance agreements, purchase and sale
agreements and purchase options, together with advance payments, security
deposits and other amounts paid to or deposited with Trustor under any such
agreements, (ix) reserves, deposits, bonds, deferred payments, refunds, rebates,
discounts, cost savings, escrow proceeds, sale proceeds and other rights to the
payment of money, trade names, trademarks, goodwill and all other types of
intangible personal property of any kind or nature, (x) all voting rights
relating to the Property, and (xi) all supplements, modifications, amendments,
renewals,
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extensions, proceeds, replacements and substitutions of or to any of such
property (the "Intangibles," and together with the Appurtenances and the Rents
[as defined in Section 5], the "Rights").
2. Security Agreement and Fixture Filing. Trustor additionally grants
to Beneficiary, pursuant to the UCC, a security interest in all present and
future right, title and interest of Trustor in and to all Goods and Intangibles
in which a security interest may be created under the UCC (the "Personal
Property"). IN ADDITION TO CONSTITUTING A DEED OF TRUST AND SECURITY AGREEMENT,
THIS TRUST DEED CONSTITUTES A FINANCING STATEMENT FILED AS A FIXTURE FILING
UNDER SECTION 9402(6) OF THE UCC, AS AMENDED OR RECODIFIED FROM TIME TO TIME,
COVERING ANY PORTION OR ITEM OF THE TRUST ESTATE WHICH NOW IS OR LATER MAY
BECOME A FIXTURE ATTACHED TO THE REAL PROPERTY OR IMPROVEMENTS.
3. Obligations Secured. This Trust Deed is given for the purpose of
securing payment and performance of the following (the "Secured Obligations"):
(a) all present and future indebtedness evidenced by the Secured Promissory Note
made as of the date of this Trust Deed by Trustor in favor of Beneficiary in the
stated principal amount of $730,000.00 (the "Note"), including principal,
interest and all other amounts payable under the terms of the Note and all
renewals and replacements thereof; (b) all present and future obligations of
Trustor under this Trust Deed; (c) all additional present and future obligations
of Trustor to Beneficiary under any other agreement or instrument (whether
existing now or in the future) which states that it is, or such obligations are,
secured by this Trust Deed; and (d) all obligations of Trustor under the
Agreement for Purchase and Sale and Joint Escrow Instructions dated as of April
5, 1995, between Trustor and Beneficiary; in each case as such indebtedness and
other obligations may from time to time be supplemented, modified, amended,
renewed and extended, whether evidenced by new or additional Documents or
resulting in a change in the interest rate on any indebtedness or otherwise.
4. Trustor's Covenants. To protect the security of this Trust Deed,
Trustor agrees as follows:
4.1 Payment and Performance of Secured Obligations. Trustor shall
pay and perform all Secured Obligations in accordance with the respective terms
of such Secured Obligations, whether evidenced by or arising under this Trust
Deed, the Note or otherwise.
4.2 Maintenance of Trust Estate. Trustor shall (a) keep the Property
in good condition and repair, and promptly and in a good and workmanlike manner
(and with new materials of good quality) complete any Improvements to be
constructed on the Land, repair or restore any part of the Real Property that
may be injured, damaged or destroyed, and repair, restore or replace any Goods
that may be injured, damaged, destroyed or lost or that may be or become
obsolete, defective or worn out (except that Trustor shall not be required to
repair, restore or replace any such Goods of insignificant value which are not
reasonably necessary or appropriate to the efficient operation of the Real
Property, and except that Trustor may sell Goods to disinterested third-parties
for fair market value without replacing such Goods so long as Trustor applies
all proceeds of such sales to reduce the principal outstanding under the Note
immediately upon each such sale), and in each case pay when due all valid claims
for labor, service, equipment and material and any other costs incurred in
connection with any such action, (b) not commit or
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permit any waste of any part of the Property, (e) not permit or consent to any
restriction that would prevent or otherwise impair the use or development of the
Real Property for its current and intended purposes, (f) comply in all material
respects with all laws and other requirements, and not commit or permit any
material violation of any Laws or Other Requirements, which affect any part of
the Trust Estate or require any alterations or improvements to be made to any
part of the Property, (g) take such action from time to time as may be
reasonably necessary or appropriate, or as Beneficiary may reasonably require,
to protect the physical security of the Property, (h) not permit the existence
of any hazardous or toxic substances upon the Property (excluding lawful uses of
common household cleaning agents), (i) pay all utility charges relating to the
Property, and (j) take all other action which may be reasonably necessary or
appropriate to preserve, maintain and protect the Trust Estate, including the
enforcement or performance of any rights or obligations of Trustor or any
conditions with respect to any rights. Trustor shall keep accurate and complete
books and records with respect to the Property and with respect to Trustor
regarding the financial condition of the Property and of Trustor and all matters
relating to the operation of the Property (the "Books and Records") and shall
maintain the Books and Records at Trustor's main office at all times. Trustor
shall make the Books and Records available to Beneficiary at any reasonable time
upon Beneficiary's request.
4.3 Insurance, Condemnation and Damage Claims. Trustor shall
maintain fire and other insurance on the Property to the extent reasonably
required by Beneficiary from time to time. All proceeds of any claim, demand,
award, settlement or other payment arising or resulting from or otherwise
relating to any such insurance or any loss or destruction of, injury or damage
to, trespass on or taking, condemnation (or conveyance in lieu of condemnation)
or public use of any of the Property (a "Damage Claim") are hereby assigned and
shall be payable and delivered to Beneficiary (any such proceeds of any Damage
Claim being referred to in this Trust Deed as "Damage Proceeds"). Trustor shall
take all action reasonably necessary or required by Beneficiary in order to
protect Trustor's and Beneficiary's rights and interests with respect to any
Damage Claim, including the commencement of, appearance in and prosecution of
any appropriate action or other proceeding, and Beneficiary may in its
discretion participate in any such action or proceeding at the expense of
Trustor.
So long as no Event of Default has occurred and is continuing,
Trustor may settle, compromise or adjust any Damage Claim with the prior written
consent of Beneficiary (which shall not be unreasonably withheld). Upon the
occurrence and during the continuance of any Event of Default, Beneficiary shall
have the sole right to settle, compromise or adjust any Damage Claim in such
manner as Beneficiary may determine, and for this purpose Beneficiary may, in
its own name or in the name of Trustor, take such action as Beneficiary deems
appropriate to realize on any such Damage Claim. In either case, all Damage
Proceeds payable in connection with any such Damage Claim shall be delivered
directly to Beneficiary as provided in the preceding paragraph.
Beneficiary shall release all or a portion of the Damage Proceeds to
Trustor and permit Trustor to use all or a portion of the Damage Proceeds to
restore the Property in accordance with and to the extent approved by
Beneficiary in writing (which approval may not unreasonably be withheld), except
that Beneficiary shall not release such Damage Proceeds (and may apply such
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Damage Proceeds to the Secured Obligations as set forth above) to the extent
such Damage Proceeds relate to any condemnation, seizure or other appropriation
by any Governmental Agency of all or any portion of the Property (including
Damage Proceeds payable in lieu of any such action), or if Beneficiary has
reasonably determined that the security of this Trust Deed has been impaired, or
will be impaired upon release of Damage Proceeds to Trustor, in which case
Damage Proceeds received by Beneficiary and not released to Trustor may be
applied by Beneficiary in payment of the Secured Obligations in such order and
manner as Beneficiary may determine. Any application or release of Damage
Proceeds or additional amounts deposited with Beneficiary pursuant to this
Section 4.3 shall not cure or waive any Event of Default or notice of default or
invalidate any act done pursuant to such notice.
4.4 Liens and Taxes. Trustor shall pay, at least fourteen (14) days
prior to delinquency, all taxes and assessments which are or may become a lien
affecting any part of the Trust Estate (including assessments on appurtenant
water stock and payments due on any liens senior to the lien of this Trust Deed
such as the First Trust Deed). In addition, Trustor shall immediately discharge
any lien on the Trust Estate which Beneficiary has not consented to in writing
and Trustor shall pay when due each obligation secured by or reducible to a
lien, charge, or encumbrance against any portion of the Trust Estate.
4.5 Actions. Trustor shall appear in and defend all claims, actions
and other proceeding purporting to affect title or other interests relating to
any part of the Trust Estate, the security of this Trust Deed or the rights or
powers of Beneficiary or Trustee, and give Beneficiary prompt written notice of
any such claim, action or proceeding. Beneficiary and Trustee may, at the
expense of Trustor, appear in and defend any such claim, action or proceeding
and any claim, action or other proceeding asserted or brought against
Beneficiary or Trustee in connection with or relating to any part of the Trust
Estate or this Trust Deed.
4.6 Action By Beneficiary or Trustee. If Trustor fails to perform any
of its obligations under this Trust Deed, Beneficiary or Trustee may, but
without any obligation to do so and without notice to or demand upon Trustor and
without releasing Trustor from any obligations under this Trust Deed, and at the
expense of Trustor: (a) perform such obligations in such manner and to such
extent and make such payments and take such other action as either may deem
necessary in order to protect the security of this Trust Deed, Beneficiary or
Trustee being authorized to enter upon the Real Property for such purposes, (b)
appear in and defend any claim or any action or other proceeding purporting to
affect title or other interests relating to any part of the Trust Estate, the
security of this Trust Deed or the rights or powers of Beneficiary or Trustee,
and (c) pay, purchase, contest or compromise any lien or right of others which
in the reasonable judgment of either is or appears to be or may for any reason
become prior or superior to this Trust Deed. If Beneficiary or Trustee shall
elect to pay any such lien or right of others or any taxes or assessments which
are or may become a lien affecting any part of the Trust Estate or make any
other payments to protect the security of this Trust Deed, Beneficiary or
Trustee may do so without inquiring into the validity or enforceability of any
apparent or threatened lien, right of others or taxes or assessments, and may
pay any such taxes and assessments in reliance on information from the
appropriate taxing authority or public office without further inquiry. In
addition to the foregoing, the Beneficiary and its agents and representatives
shall have the right, at
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any reasonable time, to enter and visit the Property for purposes relating to
preservation of the Trust Estate or confirmation that Trustor is performing the
Secured Obligations, or otherwise relating to the loan which is the subject
matter hereof. The foregoing rights shall include the right to conduct tests and
other investigations upon the Property.
4.7 Obligations With Respect to Trust Estate. Neither Beneficiary
nor Trustee are under any obligation to preserve, maintain or protect the Trust
Estate or any of Trustor's rights or interests in the Trust Estate, or make or
give any presentments, demands for performance, protests, notices of
nonperformance, protest or dishonor or other notices of any kind in connection
with any Rights, or take any other action with respect to any other matters
relating to the Trust Estate. Beneficiary and Trustee do not assume and shall
have no liability for, and shall not be obligated to perform, any of Trustor's
obligations with respect to any Rights or any other matters relating to the
Trust Estate, and nothing contained in this Trust Deed shall release Trustor
from any such obligations.
5. Assignment of Rents. Trustor irrevocably grants, transfers and
assigns to Beneficiary, all of Trustor's right, title and interest in and to all
rents, issues, income, revenues, royalties, and profits now or in the future
payable with respect to or otherwise derived from the Real Property or the
ownership, use, management, operation, leasing, or occupancy of the Real
Property ("Rents"). The foregoing is an absolute assignment, not an assignment
for security only. Notwithstanding such assignment, Beneficiary hereby confers
upon Trustor a license ("License") to collect the Rents as they become due and
payable, so long as no Event of Default (as defined below) shall exist and be
continuing; provided, that unless Beneficiary otherwise consents in writing any
such Rents paid more than 30 days in advance of the date when due shall be
delivered to Beneficiary and held by Beneficiary in a cash collateral account
(over which Beneficiary shall have sole and exclusive control and right of
withdrawal), to be released and applied on the date when due (or, if an Event of
Default has occurred and is continuing, at such other time or times and in such
manner as Beneficiary may determine). Such revokable license is subject to the
condition that all Rents so collected are to be applied by Trustor first to the
obligations of Trustor secured hereby, then to other reasonable expenses
relating to the Property, and finally, in such manner as Trustor may determine.
Upon the occurrence of an Event of Default this License shall terminate without
notice to or demand upon Trustor, and without regard to the adequacy of
Beneficiary's security under this Trust Deed. Any collection of Rents by
Beneficiary shall not cure or waive any Event of Default or notice of default or
invalidate any act done pursuant to such notice. Failure or discontinuance of
Beneficiary at any time, or from time to time, to collect the Rents shall not in
any manner affect the subsequent enforcement by Beneficiary of the right to
collect the same. Nothing contained in this Trust Deed, nor the exercise of the
right by Beneficiary to collect the Rents, shall be deemed to make Beneficiary a
"mortgagee in possession" or shall be, or be construed to be, an affirmation by
Beneficiary of, or an assumption of liability by Beneficiary under, or a
subordination of the Lien of this Trust Deed to, any tenancy, lease or option,
nor shall Beneficiary have any duty to produce Rents from the Property. Trustor
hereby further grants to Beneficiary the right (i) to enter upon and take
possession of the Property for the purpose of collecting the Rents, (ii) either
personally or through the appointment of a receiver, to demand, receive, and
enforce payment of the Rents and to sue either in the name of Trustor or
Beneficiary to collect any such Rents, (iii) to dispossess by the usual summary
proceedings any tenant
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defaulting in the payment of Rents to Beneficiary, (iv) to lease all or any part
of the Property, and (v) to apply the Rents, after payment of all necessary
charges and expenses, on account of the obligation secured hereby.
6. Accelerating Transfers, Default and Remedies.
6.1 Accelerating Transfers. "Accelerating Transfer" means any sale,
contract to sell, conveyance, encumbrance, lease, or other transfer of all or
any material part of the Property or any interest in it, whether voluntary,
involuntary, by operation of law or otherwise.
Trustor acknowledges that Beneficiary is making the loan secured
hereby in reliance on the expertise, skill and experience of Trustor; thus, the
Secured Obligations include material elements similar in nature to a personal
service contract. In consideration of Beneficiary's reliance, Trustor agrees
that, unless the transfer is preceded by Beneficiary's express written consent
to the particular transaction and transferee, which consent Beneficiary may
withhold in its sole discretion, if any Accelerating Transfer occurs,
Beneficiary, in its sole discretion may declare all of the Secured Obligations
to be immediately due and payable, and Beneficiary and Trustee may invoke any
rights and remedies provided by Section 6.3 of this Trust Deed.
6.2 Events of Default. Trustor will be in default under this Trust
Deed upon the occurrence of any one or more of the following events (some or all
collectively, "Events of Default;" any one singly, an "Event of Default");
(1) Trustor fails to perform any obligation to
pay money which arises under this Trust Deed, and does
not cure that failure within five (5) days after
written notice from Beneficiary or Trustee;
(ii) Trustor fails to perform any obligation
arising under this Trust Deed other than one to pay
money, and does not cure that failure either within
thirty (30) days ("Initial Cure Period") after written
notice from Beneficiary or Trustee, or within ninety
(90) days after such written notice, so long as
Trustor begins within the Initial Cure Period and
diligently continues to cure the failure, and
Beneficiary, exercising reasonable judgment,
determines that the cure cannot reasonably be
completed at or before expiration of the Initial Cure
Period;
(iii) Trustor defaults under the First Trust
Deed; or
(lv) A default occurs under any of the Secured
Obligations, other than as described above.
6.3 Default. Upon the occurrence of any Event of Default: (a)
Trustor shall be in default under this Trust Deed and all Secured Obligations,
and all principal and interest under the Note immediately becomes due and
payable without further notice to Trustor; (b) upon demand by
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Beneficiary, Trustor shall pay to Beneficiary, in addition to all other payments
specifically required under the Secured Obligations, in monthly installments, at
the times and in the amounts required by Beneficiary from time to time, sums
which when cumulated will be sufficient to pay one month prior to the time the
same become delinquent, all taxes which are or may become a lien affecting the
Trust Estate and the premiums for all policies of insurance required by
Beneficiary (all such payments to be held in a cash collateral account over
which Beneficiary shall have sole and exclusive control and right of
withdrawal); and (c) Beneficiary may, without notice to or demand upon Trustor,
which are expressly waived by Trustor (except for notices or demands otherwise
required by applicable laws to the extent not effectively waived by Trustor and
any notices or demands specified below), and without releasing Trustor from any
of its obligations, exercise any one or more of the following remedies as
Beneficiary may determine:
(i) Beneficiary may, either directly or through
an agent or court-appointed receiver, and without
regard to the adequacy of any security for the Secured
Obligations:
(A) enter, take possession of, manage,
operate, protect, preserve and maintain, and exercise
any other rights of an owner of, the Trust Estate, and
use any other properties or facilities of Trustor
relating to the Trust Estate, all without payment of
rent or other compensation to Trustor;
(B) enter into such contracts and take such
other action as Beneficiary deems appropriate to
complete all or any part of any construction which may
have commenced on the Land, subject to such
modifications and other changes in the plan of
development as Beneficiary may deem appropriate;
(C) make, cancel, enforce or modify leases,
obtain and evict tenants, fix or modify rents and, in
its own name or in the name of Trustor, otherwise
conduct any business of Trustor in relation to the
Trust Estate and deal with Trustor's creditors,
debtors, tenants, agents and employees and any other
Persons having any relationship with Trustor in
relation to the Trust Estate, and amend any contracts
between them, in any manner Beneficiary may determine;
(D) either with or without taking
possession of the Trust Estate, notify obligors on any
Rights that all payments and other performance are to
be made and rendered directly and exclusively to
Beneficiary, and in its own name supplement, modify,
amend, renew, extend, accelerate, accept partial
payments or performance on, make allowances and
adjustments and issue credits with respect to, give
approvals, waivers and consents under, release, settle,
compromise, compound, sue for, collect or otherwise
liquidate, enforce or deal with any Rights, including
collection of amounts past due and unpaid (Trustor
agreeing not to take any such action after the
occurrence of an Event of Default without prior written
authorization from Beneficiary);
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<PAGE>
(E) endorse, in the name of Trustor, all
checks, drafts and other evidences of payment relating
to the Trust Estate, and receive, open and dispose of
all mail addressed to Trustor and notify the postal
authorities to change the address for delivery of such
mail to such address as Beneficiary may designate; and
(F) take such other action as Beneficiary
deems appropriate to protect the security of this
Trust Deed.
(ii) Beneficiary may execute and deliver to
Trustee written declaration of default and demand for
sale and written notice of default and of election to
cause all or any part of the Trust Estate to be sold,
which notice Trustee shall cause to be filed for
record; and after the lapse of such time as may then
be required by law following the recordation of such
notice of default, and notice of sale having been
given as then required by law, Trustee, without demand
on Trustor, shall sell such property at the time and
place fixed by it in such notice of sale, either as a
whole or in separate parcels and in such order as
Beneficiary may direct (Trustor waiving any right to
direct the order of sale), at public auction to the
highest bidder for cash in lawful money of the United
States (or cash equivalents acceptable to Trustee to
the extent permitted by applicable law), payable at
the time of sale. Trustee may postpone the sale of all
or any part of the Trust Estate by public announcement
at such time and place of sale, and from time to time
after any such postponement may postpone such sale by
public announcement at the time fixed by the preceding
postponement. Trustee shall deliver to the purchaser
at such sale its deed conveying the property so sold,
but without any covenant or warranty, express or
implied, and the recitals in such deed of any matters
or facts shall be conclusive proof of the truthfulness
thereof. Any person, including Trustee or Beneficiary,
may purchase at such sale, and any bid by Beneficiary
may be, in whole or in part, in the form of
cancellation of all or any part of the Secured
Obligations. Any such sale shall be free and clear of
any interest of Trustor and any lease, encumbrance or
other matter affecting the property so sold which is
subject or subordinate to this Trust Deed, except that
any such sale shall not result in the termination of
any such lease (A) if and to the extent otherwise
provided in an agreement executed by the tenant and
Beneficiary, or (B) if the purchaser at such sale
gives written notice to the tenant, within 30 days
after the date of sale, that the lease will continue
in effect.
(iii) With respect to any Personal Property,
Beneficiary shall have in any jurisdiction where
enforcement of this Trust Deed is sought all remedies
of a secured party under the UCC and may require
Trustor, on demand, to assemble all Personal Property
and make it available to Beneficiary at places that
Beneficiary may select that are reasonably convenient
for both parties, whether at the premises of Trustor
or elsewhere. Furthermore, Beneficiary shall have the
right to sell any such Personal Property separately or
together with the sale of any of the Property as
permitted under Section 9501(4) of the UCC.
-9-
<PAGE>
(iv) Beneficiary may proceed to protect,
exercise and enforce any and all other remedies
provided under the Secured Obligations or by applicable
Laws.
(v) Beneficiary, as a matter of right and
without notice to Trustor or anyone claiming under
Trustor, and without regard to the then value of the
Property or the interest of Trustor therein, shall have
the right to apply to any court having jurisdiction
over the Property to appoint a receiver(s) over the
Property or any portion thereof. Any such receiver(s)
shall have all the usual powers and duties of receivers
in like or similar cases and all powers and duties of
Beneficiary in case of entry as provided in this Trust
Deed, and shall continue as such and exercise all such
(powers until the date of confirmation of the sale of
the Property unless such powers until the date of
confirmation of the sale of the Property unless such
receivership is sooner terminated by Beneficiary. In
connection with the application to any court for the
appointment of a receiver, such receiver may take any
action which it deems necessary to protect the security
of this Trust Deed with regard to the value of the
collateral securing the Secured Obligations or the
solvency of any persons secondarily liable for the
payment of such Secured Obligations.
All proceeds of collection, sale or other liquidation of the Trust
Estate shall be applied first to all costs, fees, expenses and other amounts
(including interest) payable by Trustor under Section 8 of this Trust Deed and
to all other Secured Obligations not otherwise repaid in such order and manner
as Beneficiary may determine, and the remainder, if any, to the person or
persons legally entitled thereto.
Each of the remedies provided in this Trust Deed is cumulative and not
exclusive of, and shall not prejudice, any other remedy provided in this Trust
Deed or by applicable laws or under any other Secured Obligation of loan
document. Each remedy may be exercised from time to time as often as deemed
necessary by Trustee and Beneficiary, and in such order and manner as
Beneficiary may determine. This Trust Deed is independent of any other security
for the Secured Obligations, and upon the occurrence of an Event of Default,
Trustee or Beneficiary may proceed in the enforcement of this Trust Deed
independently of any other remedy that Trustee or Beneficiary may at any time
hold with respect to the Trust Estate or the Secured Obligations or any other
security. Trustor, for itself and for any other person claiming by or through
Trustor, waives, to the fullest extent permitted by applicable Laws, all rights
to require a marshalling of assets by Trustee or Beneficiary or to require
Trustee or Beneficiary to first resort to any particular portion of the Trust
Estate or any other security (whether such portion shall have been retained or
conveyed by Trustor) before resorting to any other portion, and all rights of
redemption, stay and appraisal.
8. Costs, Fees and Expenses. Trustor shall pay, on demand, all costs,
fees, expenses, advances, charges, losses and liabilities of Trustee and
Beneficiary under or in connection with this Trust Deed or the enforcement of,
or the exercise of any remedy or any other action taken by Trustee or
Beneficiary under, this Trust Deed or the collection of the Secured Obligations,
in each case including (a) reconveyance and foreclosure fees of Trustee, (b)
costs and expenses of Beneficiary or Trustee or any receiver appointed under
this Trust Deed in connection with the operation, maintenance, management,
protection, preservation, collection, sale or other liquidation of the
-10-
<PAGE>
Trust Estate or foreclosure of this Trust Deed, (c) advances made by Beneficiary
to complete or partially construct all or any part of any construction which may
have commenced on the Land or otherwise to protect the security of this Trust
Deed, (d) cost of evidence of title, and (e) fees and disbursements of Trustee's
and Beneficiary's legal counsel, expert witness and other consultant fees and
costs, and other out-of-pocket expenses, and the reasonable charges of
Beneficiary's internal legal counsel; together with interest on all such amounts
until paid (i) at the rate of fifteen percent (15%) per annum (but not to exceed
the amounts or rate permitted by applicable laws) in the case of any such
interest payable to Beneficiary, and (ii) at the rate provided by law in the
case of any such interest payable to Trustee. In addition, Trustor shall
indemnify, defend, and hold Beneficiary harmless from and against any and all
claims, actions, demands, expenses, and liabilities arising out of or relating
to the Trust Estate or the enforcement of Trustor's obligations or Beneficiary's
rights hereunder.
9. Late Payments. By accepting payment of any part of the Secured
Obligations after its due date, Beneficiary does not waive its right either to
require prompt payment when due of all other Secured Obligations or to declare a
default for failure to so pay.
10. Reconveyance. Upon written request of Beneficiary and surrender of
this Trust Deed and the Note to Trustee for cancellation or endorsement, and
upon payment of its fees and charges, Trustee shall reconvey, without warranty,
all or any part of the property then subject to this Trust Deed. Any
reconveyance, whether full or partial, may be made in terms to "the person or
persons legally entitled thereto," and the recitals in such reconveyance of any
matters or facts shall be conclusive proof of the truthfulness thereof.
11. Powers of Trustee. The Trustee shall have all power and authority
expressly provided for in this Trust Deed or otherwise available to a trustee
under a deed of trust pursuant to the laws of the State of California.
12. Substitution of Trustee. Beneficiary may from time to time, by
instrument in writing, substitute a successor or successors to any Trustee named
in or acting under this Trust Deed, which instrument, when executed by
Beneficiary and duly acknowledged and recorded in the office of the recorder of
the county or counties where the Land is situated, shall be conclusive proof of
proper substitution of such successor Trustee or Trustees who shall, without
conveyance from the predecessor Trustee, succeed to all of its title, estate,
rights, powers and duties. Such instrument must contain the name of the original
Trustor, Trustee and Beneficiary, the book and page where this Trust Deed is
recorded (or the date of recording and instrument number) and the name of the
new Trustee.
14. Successors and Assigns. This Trust Deed applies to and shall be
binding on and inure to the benefit of all parties to this Trust Deed and their
respective successors and assigns.
15. Acceptance. Notice of acceptance of this Trust Deed by Beneficiary
or Trustee is waived by Trustor. Trustee accepts this Trust Deed when this Trust
Deed, duly executed and acknowledged, is made a public record as provided by
law.
-11-
<PAGE>
16. Beneficiary's Statements. For any statement regarding the Secured
Obligations, Beneficiary may charge the maximum amount permitted by law at the
time of the request for such statement.
17. Fixture Filing. This Trust Deed covers certain Goods which are or
are to become fixtures related to the Land and constitutes a "fixture filing"
with respect to such Goods executed by Trustor (as "debtor") in favor of
Beneficiary (as "secured party").
18. Governing Law. This Trust Deed shall be governed by, and construed
and enforced in accordance with, the Laws of California.
19. Request for Notice. Trustor requests that a copy of any notice of
default and a copy of any notice of sale be mailed to Trustor at Trustor's
address set forth above.
TRUSTOR: UNITED LEISURE CORPORATION,
a Delaware corporation
By:
----------------------------------
Its:
-----------------------------
-12-
<PAGE>
EXHIBIT "A" DESCRIPTION
Page 1
Policy No. 975386-PA 15
PARCEL 1:
THAT PORTION OF TRACT "S" OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO, STATE
OF CALIFORNIA, ACCORDING TO MAP OF THE SUBDIVISION OF SAID TRACT "S", RECORDED
IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, IN BOOK 170, PAGE 71
OF DEEDS, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE CENTER OF THE ROAD THAT FORMS THE NORTHERLY BOUNDARY
OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID SUBDIVISION, DISTANT THEREON, SOUTH 72
DEGREES 30' WEST, 500 FEET FROM THE POINT WHERE SAID ROAD IS INTERSECTED BY THE
WESTERLY RIGHT OF WAY LINE OF THE SAN DIEGO FLUME, SAID POINT OF BEGINNING BEING
THE NORTHWEST CORNER OF LAND DESCRIBED IN DEED TO J. T. WILLIAMS AND WIFE,
RECORDED JANUARY 16, 1943, IN BOOK 1440, PAGE 458 OF OFFICIAL RECORDS IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY; THENCE CONTINUING ALONG SAID
CENTER LINE, SOUTH 73 DEGREES 30' WEST, 225 FEET TO THE NORTHEAST CORNER OF LAND
DESCRIBED IN THE DEED FROM WILLIAM JOHN MEADER TO HAROLD H. LUSK, ET UX,
RECORDED FEBRUARY 7, 1938, IN BOOK 739, PAGE 377 OF OFFICIAL RECORDS IN SAID
RECORDER'S OFFICE; THENCE DUE SOUTH ALONG THE EAST LINE OF LAND SO CONVEYED TO
LUSK, 870 FEET, MORE OR LESS, TO THE SOUTHEAST CORNER THEREOF, BEING A POINT ON
THE NORTHERLY RIGHT OF WAY LIKE OF SAN DIEGO FLUME; THENCE EASTERLY FOLLOWING
THE NORTHERLY RIGHT OF WAY LINE OF SAID FLUME, 225 FEET, MORE OR LESS, TO A
POINT DUE SOUTH OF THE POINT OF BEGINNING, SAID POINT BEING ALSO THE SOUTHWEST
CORNER OF DESCRIBED IN DEED TO WILLIAMS ABOVE REFERRED TO; THENCE DUE NORTH
ALONG THE WEST LINE OF SAID WILLIAMS LAND TO THE POINT OF BEGINNING.
EXCEPTING THAT PORTION LYING NORTHERLY AND NORTHEASTERLY OF THE FOLLOWING
DESCRIBED LINE:
BEGINNING AT A POINT ON THE EASTERLY LINE OF THAT PARCEL OF LAND CONVEYED TO LEE
RAMAGE, ET UX, BY DEED RECORDED FEBRUARY 11, 1959, IN BOOK 7492, PAGE 505 OF
OFFICIAL RECORDS OF SAID SAN DIEGO COUNTY, DISTANT THEREON, NORTH 11 DEGREES 52'
25" EAST, 73.05 FEET FROM A 1/2 INCH IRON PIPE HAVING COORDINATES Y EQUALS
246,219.53 FEET AND X EQUALS 1,805,256.21 FEET, PURPORTEDLY SET FOR THE
SOUTHEAST CORNER OF SAID RAMAGE LAND; THENCE NORTH 52 DEGREES 05' 27" EAST,
267.90 FEET; THENCE ALONG A TANGENT CURVE TO THE RIGHT WITH A RADIUS OF 350 FEET
THROUGH AN ANGLE OF 21 DEGREES 52' 04", A DISTANCE OF 133.58 FEET; THENCE NORTH
73 DEGREES 57' 31" EAST, 407.33 FEET; THENCE ALONG A TANGENT CURVE TO THE RIGHT
WITH A RADIUS OF 300 FEET THROUGH AN ANGLE OF 51 DEGREES 17' 36", A DISTANCE OF
268.57 FEET; THENCE SOUTH 54 DEGREES 44' 53" EAST, 47.89 FEET TO A POINT ON THE
WESTERLY LINE OF THAT PARCEL OF LAND CONVEYED TO EDWARD L. BREWER, ET UX, BY
DEED RECORDED MAY 16, 1957, IN BOOK 6580, PAGE 320 OF OFFICIAL RECORDS OF SAID
SAN DIEGO COUNTY, DISTANT THEREON, NORTH 01 DEGREE 26' 56" EAST, 271.22 FEET
FROM A 1 1/2 INCH IRON PIPE MARKED, "L. S. 2201" HAVING COORDINATES Y EQUALS
246,286.30 FEET AND X EQUALS 1,806,280.71 FEET, PURPORTEDLY SET FOR THE
SOUTHWEST CORNER OF SAID BREWER LAND.
PARCEL 2:
THAT PORTION OF THE NORTHERLY HALF OF THE SAN DIEGO FLUME COMPANY'S RIGHT OF WAY
LYING SOUTHERLY OF AND ADJOINING THE FOLLOWING DESCRIBED LAND:
THAT PORTION OF TRACT "S" OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO, STATE
OF CALIFORNIA, ACCORDING TO MAP OF THE SUBDIVISION OF SAID TRACT "S", RECORDED
IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, IN BOOK 170, PAGE 71
OF DEEDS, DESCRIBED AS FOLLOWS:
<PAGE>
DESCRIPTION
Page 2
Policy No. 975386-PA 15
BEGINNING AT A POINT IN THE CENTER OF THE ROAD THAT FORMS THE NORTHERLY BOUNDARY
OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID SUBDIVISION, DISTANT THEREON, SOUTH 72
DEGREES 30' WEST, 500 FEET FROM THE POINT WHERE SAID ROAD IS INTERSECTED BY THE
WESTERLY RIGHT OF WAY LINE OF THE SAN DIEGO FLUME; SAID POINT OF BEGINNING BEING
THE NORTHWEST CORNER OF LAND DESCRIBED IN DEED TO J. T. WILLIAMS AND WIFE,
RECORDED JANUARY 16, 1943, IN BOOK 1440, PAGE 458 OF OFFICIAL RECORDS IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY; THENCE CONTINUING ALONG SAID
CENTER LINE, SOUTH 73 DEGREES 30' WEST, 225 FEET TO THE NORTHEAST CORNER OF LAND
DESCRIBED IN THE DEED FROM WILLIAM JOHN MEADER TO HAROLD H. LUSK, ET UX,
RECORDED FEBRUARY 7, 1938, IN BOOK 739, PAGE 377 OF OFFICIAL RECORDS IN SAID
RECORDER'S OFFICE; THENCE DUE SOUTH ALONG THE EAST LINE OF SAID LAND SO CONVEYED
TO SAID LUSK, 870 FEET, MORE OR LESS, TO THE SOUTHEAST CORNER THEREOF, BEING A
POINT ON THE NORTHERLY RIGHT OF WAY LINE OF SAN DIEGO FLUME; THENCE EASTERLY
FOLLOWING THE NORTHERLY RIGHT OF WAY LINE OF SAID FLUME, 225 FEET, MORE OR LESS,
TO A POINT DUE SOUTH OF THE POINT OF BEGINNING, SAID POINT BEING ALSO THE
SOUTHWEST CORNER OF LAND DESCRIBED IN DEED TO WILLIAMS ABOVE REFERRED TO; THENCE
DUE NORTH ALONG THE WEST LINE OF SAID WILLIAMS' LAND TO THE POINT OF BEGINNING.
THE SIDELINES OF SAID PORTION OF THE NORTHERLY HALF OF SAID FLUME TO TERMINATE
IN THE SOUTHERLY PROLONGATIONS OF THE EASTERLY AND WESTERLY LINES OF THE ABOVE
DESCRIBED LAND.
PARCEL 3:
THAT PORTION OF LOT 45 AND THAT PORTION OF LOT 48, IF ANY OF THE "S" TRACT OF
RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO
MAP THEREOF ON FILE IN DEED BOOK 170, PAGE 71, RECORDS OF SAID SAN DIEGO COUNTY,
DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE CENTER OF THE ROAD THAT FORMS THE NORTHERLY BOUNDARY
OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID SUBDIVISION, DISTANT THEREON SOUTH 72
DEGREES 30' WEST, 275.00 FEET FROM THE POINT WHERE SAID ROAD IS INTERSECTED BY
THE WESTERLY RIGHT OF WAY LINE OF THE SAN DIEGO FLUME SAID POINT OF BEGINNING
BEING THE NORTHWEST CORNER OF THE LAND DESCRIBED IN THE DEED FROM WILLIAM JOHN
MEADER TO LEONARD ALVIN KEEVER, RECORDED AUGUST 26, 1936 IN BOOK 550, PAGE 292
OF OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY;
THENCE CONTINUING ALONG SAID CENTER LINE, SOUTH 72 DEGREES 30' WEST, 225 FEET;
THENCE DUE SOUTH TO A POINT ON THE NORTHERLY RIGHT OF WAY LINE OF SAID SAN DIEGO
FLUME; THENCE EASTERLY FOLLOWING THE NORTHERLY RIGHT OF WAY OF SAID FLUME 225
FEET MORE OR LESS TO A POINT DUE SOUTH OF THE POINT OF BEGINNING, BEING ALSO THE
SOUTHWEST CORNER OF LAND DESCRIBED IN DEED TO KEEVER, ABOVE REFERRED TO; THENCE
DUE NORTH ALONG THE WEST LINE OF SAID KEEVER LAND, 890 FEET, MORE OR LESS, TO
THE POINT OF BEGINNING.
ALSO TOGETHER WITH THAT PORTION OF THE NORTHERLY HALF OF THE RIGHT OF WAY OF THE
CUYAMACA FLUME COMPANY LYING SOUTHERLY OF AND ADJACENT TO THE MOST SOUTHERLLY
LINE OF THE PROPERTY DESCRIBED ABOVE.
EXCEPTING THEREFROM THAT PORTION LYING SOUTHERLY AND EASTERLY OF THE FOLLOWING
DESCRIBED LINE:
COMMENCING AT THE INTERSECTION OF THE CENTER LINE OF THE 50.00 FOOT RIGHT OF WAY
OF THE CUYAMACA FLUME AND THE CENTER LINE OF THE 100.00 FOOT STATE HIGHWAY
(FORMERLY THE CENTER LINE OF THE COUNTY ROAD, AS SHOWN ON SAID MAP OF THE "S"
TRACT OF RANCHO EL CAJON), ACCORDING TO THE LAYOUT KNOWN AS DISTRICT VII, SAN
<PAGE>
DESCRIPTION
Page 3
Policy No. 975386-PA 15
DIEGO, ROUTE 12, SECTION C, A PLAT OF WHICH IS ON FILE IN THE OFFICE OF THE
DIVISION ENGINEER CALIFORNIA STATE DIVISION OF HIGHWAYS OF SAN DIEGO,
CALIFORNIA, AND APPROVED FEBRUARY 8, 1932, SAID POINT OF INTERSECTION BEING ON
OR NEAR ENGINEER'S CENTER LINE STATION 333 PLUS 97.97 P.O.T. OF SAID STATE
HIGHWAY LAYOUT; THENCE SOUTH 73 DEGREES 36' 30" WEST ALONG SAID CENTER LINE OF
SAID STATE HIGHWAY, A DISTANCE OF 300.03 FEET TO A POINT ON SAID CENTER LINE
THAT IS DISTANT THEREON 275.00 FEET WESTERLY FROM ITS INTERSECTION WITH THE
WESTERLY RIGHT OF WAY LINE OF SAID CUYAMCA FLUME; THENCE SOUTH 1 DEGREE 0l' 10"
WEST, A DISTANCE OF 940.31 FEET, MORE OR LESS, TO A POINT IN THE NORTHERLY LINE
OF SAID CUYAMACA FLUME RIGHT OF WAY; THENCE RETRACTING NORTH 1 DEGREE 01' 10"
EAST 225.00 FEET; TO THE TRUE POINT OF BEGINNING OF THE FOLLOWING DESCRIBED
LINE; THENCE NORTH 85 DEGREES 14' 10" WEST 100.00 FEET; THENCE SOUTH 01 DEGREE
Ol' 10" EAST TO THE CENTER LINE OF THE RIGHT OF WAY OF CUYAMACA FLUME COMPANY.
ALSO EXCEPTING THEREFROM THAT PORTION LYING NORTHERLY OF THE FOLLOWING DESCRIBED
LINE:
BEGINNING AT THE POINT OF BEGINNING DESCRIBED AS THE SOUTHWEST CORNER OF THAT
PARCEL OF LAND CONVEYED TO THE STATE OF CALIFORNIA BY A DEED RECORDED MARCH 5,
1963, AS FILE NO. 37982 OF OFFICIAL RECORDS, SAID POINT BEING AT THE WESTERLY
TERMINUS OF SAID LAND CONVEYED TO THE STATE OF CALIFORNIA DESCRIBED ABOVE AS
COURSE (3) DESCRIBED SOUTH 85 DEGREES 31' 51" WEST 309.11 FEET, THENCE
CONTINUING ALONG THE WESTERLY PROJECTION OF SAID COURSE (3) SOUTH 85 DEGREES 31'
51" WEST 215.72 FEET MORE OR LESS TO THE EASTERLY LINE OF THAT PARCEL OF LAND
CONVEYED TO THE WILLIAM P. LEE COMPANY, INC., BY A DEED RECORDED JULY 2, 1986,
AS FILE NO. 86-274086.
PARCEL 4:
THAT PORTION OF THE "S" TRACT OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 355, FILED IN THE OFFICE OF
THE COUNTY RECORDER OF SAN DIEGO COUNTY, JULY 24, 1886, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE CENTER LINE OF THAT CERTAIN UNNAMED ROAD WHICH FORMS
THE NORTHERLY BOUNDARY OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID "S" TRACT,
DISTANT THEREON SOUTH 72 DEGREES 30' 00" WEST, 725.00 FEET FROM THE INTERSECTION
OF SAID CENTER LINE WITH THE WESTERLY LINE OF THE RIGHT OF WAY OF THE SAN DIEGO
FLUME COMPANY; THENCE ALONG SAID CENTER LINE AS FOLLOWS:
CONTINUING SOUTH 72 DEGREES 30' 00" WEST, 405.00 FEET TO AN ANGLE POINT THEREIN;
AND SOUTH 62 DEGREES 56' 00" WEST, 157.20 FEET TO AN INTERSECTION WITH THE
CENTER LINE OF THAT CERTAIN UNNAMED ROAD WHICH FORMS THE WESTERLY BOUNDARY OF
SAID BLOCK 45, ALSO KNOWN AS LOT 45; THENCE ALONG SAID CENTER LINE LAST
HEREINABOVE REFERRED TO AS FOLLOWS:
SOUTH 11 DEGREES 29' 00" WEST, 859.70 FEET TO AN ANGLE POINT; AND S0UTH 30
DEGREES 00' 00" WEST, 221.58 FEET TO THE NORTHERLY LINE OF SAID SAN DIEGO FLUME
COMPANY'S RIGHT OF WAY; THENCE NORTHEASTERLY AND EASTERLY ALONG SAID NORTHERLY
LINE, 1162.00 FEET, MORE OR LESS, TO A LINE WHICH BEARS DUE SOUTH FROM THE POINT
OF BEGINNING; THENCE DUE NORTH 870.00 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THAT PORTION CONDEMNED FOR STATE HIGHWAY PURPOSES AS
DESCRIBED IN FINAL ORDER OF CONDEMNATION RECORDED OCTOBER 19, 1964 AS FILE NO.
190709 OF OFFICIAL RECORDS.
PARCEL 4A:
<PAGE>
DESCRIPTION
Page 4
Policy No. 975386-PA 15
THAT PORTION OF THE NORTHERLY HALF OF THE SAN DIEGO FLUME COMPANY'S RIGHT OF
WAY, LYING SOUTHERLY OF AND ADJOINING THAT CERTAIN PARCEL OF LAND DESCRIBED AS
FOLLOWS:
THAT PORTION OF THE "S" TRACT OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 355, FILED IN THE OFFICE OF
THE COUNTY RECORDER OF SAN DIEGO COUNTY, JULY 24, 1886, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE CENTERED LINE OF THAT CERTAIN UNNAMED ROAD WHICH
FORMS THE NORTHERLY BOUNDARY OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID "S"
TRACT, DISTANT THEREON SOUTH 72 DEGREES 30' 00" WEST, 725.00 FEET FROM THE
INTERSECTION OF SAID CENTER LINE WITH THE WESTERLY LINE OF THE RIGHT OF WAY OF
THE SAN DIEGO FLUME COMPANY; THENCE ALONG SAID CENTER LINE AS FOLLOWS:
CONTINUING SOUTH 72 DEGREES 30' 00" WEST, 405.O0 FEET TO AN ANGLE POINT THEREIN;
AND SOUTH 62 DEGREES 56' 00" WEST, 157.20 FEET TO AN INTERSECTION WITH THE
CENTER LINE OF THAT CERTAIN UNNAMED ROAD WHICH FORMS THE WESTERLY BOUNDARY OF
SAID BLOCK 45, ALSO KNOWN AS LOT 45; THENCE ALONG SAID CENTER LINE LAST
HEREINABOVE REFERRED TO AS FOLLOWS:
SOUTH 11 DEGREES 29' 00" WEST, 859.70 FEET TO AN ANGLE POINT; AND SOUTH 30
DEGREES 00' 00" WEST, 221.58 FEET TO THE NORTHERLY LINE OF SAID SAN DIEGO FLUME
COMPANY'S RIGHT OF WAY; THENCE NORTHEASTERLY AND EASTERLY ALONG SAID NORTHERLY
LINE, 1162.00 FEET, MORE OR LESS, TO A LINE WHICH BEARS DUE SOUTH FROM THE POINT
OF BEGINNING; THENCE DUE NORTH 870.00 FEET TO THE POINT OF BEGINNING.
<PAGE>
Exhibit "B" to Purchase Agreement
MARSHALL SCOTTY'S AMUSEMENT PARK
--------------------------------
Personal Property List
----------------------
- - --------------------------------------------------------------------------------
RIDES MANUFACTURERS
SLICK GO CART TRACK (NO CARS INCLUDED)
5OO' INGROUND FOAM PADDED CONCRETE
INNER-TUBE WATER SLIDE ("RIVER RIDE") -CHANCE C.P. HUNTINGTON
MINI TRAIN W/5 COACHES -CARS BY SOLI
BUMPER CARS -SELLNER
TILT-A-WHIRL -ALLAN HERSHELL
TANK RIDE -ALLAN HERSHELL
SKY FIGHTER -EVERLY AIRCRAFT
BULGY THE WHALE -GARBRECK
FERRIS WHEEL -SAN ANTONIO ROLLER WORKS
ZUMER -UNKNOWN
MINI BIKE -ALLAN HERSHELL
CAR RIDE -UNKNOWN
CHAIR SWING -UNKNOWN
TWISTER -ALLAN HERSHELL
BOAT RIDE (6 BOATS) -ALLAN HERSHELL
ROLLER COASTER
- - --------------------------------------------------------------------------------
<PAGE>
State of California )
)
County of San Diego )
On_______________, before me,___________________________, 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.
- - -----------------------------------
[signature of notary]
State of California )
)
County of San Diego )
On_______________, before me,___________________________, 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.
- - -----------------------------------
[signature of notary]
-15-
<PAGE>
Exhibit "F"
UNSECURED INDEMNITY AGREEMENT
-----------------------------
This Unsecured Indemnity Agreement ("Agreement") is made as of April 7,
1995, by UNITED LEISURE CORPORATION, a Delaware corporation, having an address
for notices at 8800 Irvine Center Drive, Irvine, California 92718, Attn: Harry
Shuster ("Indemnitor"), in favor of PLC PROPERTIES, INC., a California
corporation, having an address for notices at 2255 Camino Del Rio South, Ste.
300, San Diego, California 92108, Attn: Howard Harris ("Lender").
1. Recital. This Agreement is made with reference to and in
contemplation of the following recital of essential facts:
1.1. Lender made a loan (the "Loan") to Indemnitor, as
evidenced by the Secured Promissory Note made by Indemnitor in the original
principal amount of Seven Hundred Thirty Thousand Dollars ($730,000.00) in favor
of Lender (the "Note"). The obligations of Indemnitor under the Note are secured
by, among other things, the Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing dated as of the date of this Agreement, by
Indemnitor, as trustor, in favor of Lender, as beneficiary (the "Trust Deed").
The Trust Deed encumbers certain real property located in the City of San Diego,
County of San Diego, California, more particularly described therein and other
improvements and personal property located thereon.
1.2. As a condition to making the loan evidenced by the Note,
Lender requires that Indemnitor execute this Agreement.
1.3. Because Lender is obtaining the Trust Deed as security
for the Loan, Lender may become subject to liabilities or alleged liabilities
relating to environmental conditions as an "owner" or "operator" under
applicable environmental law. These costs and liabilities may arise before or
after repayment of the Loan, and before or after foreclosure under the Trust
Deed. Because these costs and liabilities, if they occur, will be the result of
Lender's agreement to make the Loan, and in consideration of that agreement,
Lender and Indemnitor have agreed as set forth below.
2. Definitions. In addition to any terms defined elsewhere in this
Agreement, as used in this Agreement:
2.1. "Hazardous Substance" means any substance, material or
waste (including petroleum and petroleum products) which is or becomes
designated, classified or regulated as being "toxic" or "hazardous" or a
"pollutant," or which is or becomes similarly designated, classified or
regulated, under any federal, state or local law, regulation or ordinance.
2.2. "Indemnified Costs" means all actual or threatened
liabilities, claims, actions, causes of action, judgments, orders, damages
(including foreseeable and unforeseeable consequential damages), costs,
expenses, fines, penalties and losses (including sums paid in settlement of
claims and all consultant, expert and legal fees and expenses of Lender's
counsel), including those incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work (whether of
the Property, as defined below, or any other property), or any resulting
damages, harm or injuries to the person or property of any third parties or to
any natural resources.
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2.3. "Indemnified Parties" means and includes Lender, its
parent, subsidiary and affiliated companies, assignees of any of Lender's
interest in the Loan, owners of participation or other interests in the Loan,
any purchasers of the Property at any foreclosure sale or from Lender or any of
its affiliates, and the officers, directors, employees and agents of each of
them.
2.4. "Property" means all property that is or was at any time
encumbered by the Trust Deed, which may later include any and all property
previously released from it.
3. Indemnity Agreement.
3.1. Not Secured By Trust Deed. Notwithstanding any provision
of the Original Note, Original Trust Deed, the Note, or any of the Trust Deed or
any other document or instrument evidencing the Loan (collectively, the "Loan
Documents"), the rights of the Indemnified Parties under this Agreement are not
secured by the Trust Deed. Notwithstanding any provision of the Loan Documents,
the rights of the Indemnified Parties under this Agreement shall not be affected
by any provision of the Loan Documents limiting Lender's recourse or limiting
any of the Indemnitor's liability for the Loan.
3.2. Indemnity Regarding Hazardous Substances. Indemnitor
shall indemnify, defend and hold harmless the Indemnified Parties from and
against any and all Indemnified Costs directly or indirectly arising out of or
resulting from any Hazardous Substance being present or released in, on or
around any part of the Property, or in the soil, groundwater or soil vapor on or
under the Property, including:
any claim for such Indemnified Costs asserted
by any federal, state or local governmental
agency, including the United States
Environmental Protection Agency and the
California Department of Health Services, and
including any claim that any Indemnified Party
is liable for any such Indemnified Costs as an
"owner" or "operator" of the Property under any
law relating to Hazardous Substances; and
any such Indemnified Costs claimed against any
Indemnified Party by any person other than a
governmental agency, including any person who
may purchase or lease all or any portion of the
Property from Indemnitor, from any Indemnified
Party, or from any other purchaser or lessee;
any person who may at any time have any
interest in all or any portion of the Property;
any person who may at any time be responsible
for any clean-up costs or other Indemnified
Costs relating to the Property; and any person
claiming to have been Injured in any way as a
result of exposure to any Hazardous Substance;
and
any such Indemnified Costs resulting from
currently existing conditions in, on or around
the Property, whether known or unknown by
Indemnitor or the Indemnified Parties at the
time this Agreement is executed, and any such
Indemnified Costs resulting from the activities
of Indemnitor or any of its tenants, or any
other person in, on or around the Property.
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3.3. Indemnity Regarding Construction and Other Risks.
Indemnitor shall indemnify, defend and hold harmless the Indemnified Parties
from and against any and all Indemnified Costs directly or indirectly arising
out of or resulting from construction of any improvements on the Property,
including any defective workmanship or materials; or any failure to satisfy any
requirements of any laws, regulations, ordinances, governmental policies or
standards, reports, subdivision maps or development agreements that apply or
pertain to the Property; or breach of any representation or warranty made or
given by Indemnitor to any of the Indemnified Parties or to any prospective or
actual buyer of all or any portion of the Property; or any claim or cause of
action of any kind by any party that any Indemnified Party is liable for any act
or omission of Indemnitor or any other person or entity in connection with the
ownership, sale, operation or development of the Property.
3.4. Defense of Indemnified Parties. Upon demand by any
Indemnified Party, Indemnitor shall defend any investigation, action or
proceeding involving any Indemnified Costs which is brought or commenced against
any Indemnified Party, whether alone or together with Indemnitor or any other
person, all at Indemnitor's own cost and by counsel to be approved by the
Indemnified Party in the exercise of its reasonable judgment. In the
alternative, any Indemnified Party may elect to conduct its own defense at the
expense of Indemnitor.
3.5. Compliance Regarding Hazardous Substances. Indemnitor has
complied, and shall comply and cause all tenants and any other persons who may
come upon the Property to comply, with all laws, regulations and ordinances
governing or applicable to Hazardous Substances, including those requiring
disclosures to prospective and actual buyers of all or any portion of the
Property. Indemnitor also has complied and shall comply with the recommendations
of any qualified environmental engineer or other expert which apply or pertain
to the Property.
3.6. Notices Regarding Hazardous Substances. Indemnitor shall
promptly notify Lender if it knows, suspects or believes there may be any
Hazardous Substance in or around the Property, or in the soil, groundwater or
soil vapor on or under the Property, or that Indemnitor or the Property may be
subject to any threatened or pending investigation by any governmental agency
under any law, regulation or ordinance pertaining to any Hazardous Substance.
3.7. Site Visits, Observations and Testing. The Indemnified
Parties and their agents and representatives shall have the right at any
reasonable time and upon reasonable notice to enter and visit the Property for
the purposes of observing the Property, taking and removing soil or groundwater
samples, and conducting tests on any part of the Property; provided that the
Indemnified Parties shall reasonably restore the Property to the condition it
would be in without such tests having been conducted. The Indemnified Parties
have no duty, however, to visit or observe the Property or to conduct tests, and
no site visit, observation or testing by any Indemnified Party shall impose any
liability on any Indemnified Party. In no event shall any site visit,
observation or testing by any Indemnified Party be a representation that
Hazardous Substances are or are not present in, on or under the Property, or
that there has been or shall be compliance with any law, regulation or ordinance
pertaining to Hazardous Substances or any other applicable governmental law.
Neither Indemnitor nor any other party is entitled to rely on any site visit,
observation or testing by any Indemnified Party. The Indemnified Parties owe no
duty of care to protect Indemnitor or any other party against, or to inform
Indemnitor or any other party of, any Hazardous Substances or any other adverse
condition affecting the Property. Any Indemnified Party shall give Indemnitor
reasonable notice before entering the Property. The Indemnified Party shall make
reasonable efforts to avoid interfering with Indemnitor's use of the Property in
exercising any rights provided in this Section.
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3.8. Costs and Expenses. Indemnitor agrees to pay all of the
Indemnified Parties' costs and expenses, including attorneys' fees, which may be
incurred in any effort to enforce any term of this Agreement, including all such
costs and expenses which may be incurred by any Indemnified Party in any legal
action, reference or arbitration proceeding. From the time(s) incurred until
paid in full to the Indemnified Party, those sums shall bear interest at ten
percent (10%) per annum.
4. General Provisions.
4.l. Events of Default. Lender may declare Indemnitor to be in
default under this Agreement upon the occurrence of any of the following events
("Events of Default"):
(a) Indemnitor fails to perform any of its
obligations under this Agreement; or
(b) Indemnitor revokes this Agreement.
4.2. Reservation of Other Rights and Remedies. Nothing in this
Agreement shall be construed to limit any claim or right which any Indemnified
Party may otherwise have at any time against Indemnitor or any other person
arising from any source other than this Agreement, including any claim for
fraud, misrepresentation, waste or breach of contract other than this Agreement,
and any rights of contribution or indemnity under federal or state environmental
law or any other applicable law, regulation or ordinance.
4.3. Delay, Cumulative Remedies. If any Indemnified Party
delays in exercising or fails to exercise any right or remedy against
Indemnitor, that alone shall not be construed as a waiver of such right or
remedy. All remedies of any Indemnified Party against Indemnitor are cumulative.
4.4. In-House Counsel Fees. Whenever Indemnitor or an
Indemnified Party is obligated to pay or reimburse another party under this
Agreement for any attorneys' fees, those fees shall include the allocated costs
for services of in-house counsel.
4.5. Integration; Modifications. The Loan Documents, including
this Agreement, (a) integrate all the terms and conditions mentioned in or
incidental to this Agreement, (b) supersede all oral negotiations and prior
writings with respect to their subject matter, and (c) are intended by the
parties as the final expression of the agreement with respect to the terms and
conditions set forth in the Loan Documents and as the complete and exclusive
statement of the terms agreed to by the parties. No representation,
understanding, promise or condition shall be enforceable against any party
unless it is contained in the Loan Documents. This Agreement may not be modified
except in a writing signed by both Lender and Indemnitor.
4.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
4.7. Further Assurances. Each party to this Agreement shall
execute all instruments and documents and take all actions as may be reasonably
required to effectuate this Agreement.
4.8. Venue and Jurisdiction. For purposes of venue and
Jurisdiction, this Agreement shall be deemed made and to be performed in the
City of San Diego, California.
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4.9. Time of Essence. Time and strict and punctual performance
are of the essence with respect to each provision of this Agreement.
4.10. Attorney's Fees. In the event any litigation,
arbitration, mediation, or other proceeding ("Proceeding") is initiated by
Indemnitor or any Indemnified Party to enforce, interpret or otherwise obtain
judicial or quasi-judicial relief in connection with this Agreement, the
prevailing party(ies) in such Proceeding shall be entitled to recover from the
unsuccessful party(ies) all costs, expenses (including expert witness and other
consultant fees and costs), and actual attorney's fees relating to or arising
out of (a) such Proceeding (whether or not such Proceeding proceeds to
judgment), and (b) any post-judgment or post-award proceeding including without
limitation one to enforce any judgment or award resulting from any such
Proceeding. Any such judgment or award shall contain a specific provision for
the recovery of all such subsequently incurred costs, expenses, and actual
attorney's fees.
4.11. Modification. This Agreement may be modified only by a
contract in writing executed by the party(ies) to this Agreement against whom
enforcement of such modification is sought.
4.12. Partial Invalidity. Each provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law. If any
provision of this Agreement or the application of such provision to any person
or circumstance shall, to any extent, be invalid or unenforceable, the remainder
of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected by such invalidity or unenforceability, unless such
provision or such application of such provision is essential to this Agreement.
4.13. Successors-in-Interest and Assigns. This Agreement shall
be binding upon and shall inure to the benefit of the successors-in-interest and
assigns of Indemnitor and each Indemnified Party.
4.14. Notices. All notices or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
personally delivered, sent by certified mail, return receipt requested, or sent
by an overnight express courier service that provides postage prepaid, written
confirmation of delivery, to such party at the address first set forth above.
Each such notice or other communication shall be deemed given, delivered and
received upon its actual receipt, except that if it is sent by mail in
accordance with this Paragraph, then it shall be deemed given, delivered and
received three days after the date such notice or other communication is
deposited with the United States Postal Service in accordance with this
Paragraph. Any party to this Agreement may give a notice of a change of its
address to the other party to this Agreement.
4.15. Waiver. Any waiver of a default under this Agreement
must be in writing and shall not be a waiver of any other default concerning the
same or any other provision of this Agreement. No delay or omission in the
exercise of any right or remedy shall impair such right or remedy or be
construed as a waiver. A consent to or approval of any act shall not be deemed
to waive or render unnecessary consent to or approval of any other or subsequent
act.
4.16. Drafting Ambiguities. Indemnitor and its legal counsel
have reviewed and revised this Agreement. The rule of construction that any
ambiguities are to be resolved against the drafting
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party shall not be employed in the interpretation of this Agreement or of any
amendments or exhibits to this Agreement.
Indemnitor: UNITED LEISURE CORPORATION,
a Delaware corporation
By:
------------------------------
Harry Shuster, President
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SCHEDULE 1
GENERAL PROVISIONS
1. These escrow instructions embody, by reference above, those certain
instructions executed by and between PLC PROPERTIES, INC., a California
corporation ("Seller") and UNITED LEISURE CORPORATION, a Delaware corporation.
2. In the event of any conflict or inconsistency between these escrow
instructions and those in AGREEMENT, AGREEMENT shall fully control as between
all parties to this escrow with no detrimental effect of the reciprocal
relations of such parties among themselves.
3. The Escrow Holder is fully empowered by the parties hereto to decline to
perform some of the acts it is or may be instructed to perform under the
AGREEMENT, if in the considered opinion and sound judgment of the Escrow Holder
those acts are too onerous, hazardous, or not within the ordinary scope of the
Escrow Holders activity.
4. The parties hereto fully understand the total responsibility and agency
authority of the Escrow Holder is limited to those actions requiring that
performance and compliance by the principals that are identified as conditions
precedent to the recording of the documents and delivery of the instruments to
the respective parties entitled thereto, and the disbursement of funds in escrow
as a consequence of said closing. The parties hereto, by execution of these
instructions acknowledge the Escrow Holder assumes no responsibility or
liability for the supervision of any act or the performance of any condition
which is a condition subsequent to the closing of this transaction.
5. Any provisions of the AGREEMENT notwithstanding, the Escrow Holder shall have
the right and authority to withhold any action and require the written consent
of all necessary parties, if, in the judgment of the Escrow Holder, such action
calls or appears to require the use of discretionary judgment by the Escrow
Holder.
6. "Close of escrow" shall mean the day papers are filed for record.
7. All adjustments and/or prorations are to be made on the basis of a 30 day
month, unless Escrow Holder is otherwise instructed in writing. Escrow Holder is
to use the information contained in the last available tax statement, rental
statement as furnished by the Seller and beneficiary's statement provided by the
Lender
<PAGE>
2
and fire insurance policies delivered into escrow as the basis of prorations.
8. Funds deposited into this escrow are to be maintained in a Federally Insured
trust account, and any escrow related services provided to Escrow Holder by any
depository bank or savings and loan association are hereby consented to and
approved.
9. Proceeds of this escrow are to be disbursed by your check, payable to the
party as their names are signed hereto, and your checks and documents may be
mailed, or if directed by any party delivered, to the addresses set forth in
these instructions.
10. If for any reason funds are retained or remain in escrow after the closing
date, you are to deduct therefrom a reasonable monthly charge as custodian
thereof of not more than $25.00 per month.
11. You are instructed to furnish any Broker or Lender identified with this
transaction, or anyone acting on behalf of said Lender, any information
concerning this escrow, copies of all instructions, amendments, and statements
upon request.
12. If the conditions of this escrow have not been complied with at the time
provided herein, you are nevertheless to complete the same as soon as the
conditions (except as to time) have been complied with, unless I shall have made
written demand upon you for the return of money and/or instruments deposited by
me. Either principal hereunder claiming to exercise the right of revocation of
your agency as Escrow Holder or the escrow shall file notice and demand for
revocation with your office, in writing, in duplicate. You shall promptly mail
one copy of such writing to the other principal at his address stated herein.
Unless written objection thereto shall be filed in your office by such other
principal within ten (10) days, exclusive of Sundays and legal holidays;
thereafter you are instructed to comply with such notice and demand upon payment
of your accrued charges. In the event that such written objection shall be
filed, you are authorized, but not obligated, to hold all money and instruments
in this escrow pending agreement of the principals or order of a court of
competent jurisdiction.
13. No notice, demand or change of instructions, except a demand for revocation
made in accordance with the foregoing paragraph, shall be of any effect in this
escrow unless given in writing by all parties affected thereby.
14. You shall be under no obligation or liability for a failure to inform either
party regarding any sale, loan, exchange, or other transaction or facts within
your knowledge, even though some concern the property described herein; provided
they do not prevent your compliance with these instructions, nor shall you be
<PAGE>
3
liable for the sufficiency or correctness as to any form, manner of execution,
or validity of any instrument deposited into this escrow, unless prepared by
you, nor as to the identity, authority, or rights of any person executing the
same. Your liability as Escrow Holder shall be confined to the things
specifically provided for in the written instructions to this escrow.
15. Should you, before or after the close of this escrow, receive or become
aware of any conflicting demands or claims with respect to this escrow or the
right of any of the parties hereto, or any money or property deposited herein or
affected hereby, you shall have the absolute right at your election to
discontinue any or all further acts on your part until such conflict is resolved
to your satisfaction, and you shall have the further right to commence or defend
any action or proceedings for the determination of such conflict. The
non-prevailing party to such action or proceeding agrees to pay on demand, as
well as to indemnify and hold you harmless from and against all costs, and
expenses of any kind or nature, including reasonable attorney's fees, and
including but without limiting the generality of the foregoing, a suit of
interpleader brought by you, which, in good faith, you may incur or sustain in
connection with or arising out of this escrow. In the event you file a suit of
interpleader, you shall be ipso facto fully released and discharged from all
obligations further to perform any and all duties or obligations imposed upon
you in this escrow.
16. Any amended, supplemental, or additional instructions given shall be subject
to the foregoing conditions.
17. ALL PARTIES TO THIS ESCROW ACKNOWLEDGE THAT CHICAGO TITLE COMPANY DOES NOT
PROVIDE LEGAL ADVICE NOR HAS IT MADE ANY INVESTIGATION, REPRESENTATIONS, OR
ASSURANCES WHATSOEVER REGARDING THE COMPLIANCE OF THIS TRANSACTION WITH ANY TAX,
SECURITIES, OR OTHER LAWS OF THE UNITED STATES OR THE STATE IN WHICH THE
TRANSACTION IS CONSUMMATED.
ESCROW HOLDER'S NOTICES:
RECORDING PENALTIES FOR NON-STANDARD DOCUMENTS: As a result of CHAPTER 87, (AB
689-1992), all documents submitted for record on or after July 1, 1994, MUST
comply with specified standards relating to format, size, quality and color of
paper, title page caption(s) to be indexed and other related matters.
A surcharge shall be charged if the standards are not met. Government Code
Section 27361 (a)(2) states the recorder shall charge $3.00 extra PER PAGE OR
SHEET of the NON-STANDARD document. This surcharge applies whether the entire
document or one page of the document is non-standard.
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4
STANDARD paper size is 8 1/2" x 11". Legal size documents (8 1/2" x 14") are
NON-STANDARD. Be aware that notary acknowledgments must also be STANDARD size
pages - use of 3 1/2" x 8 1/2" notary acknowledgments will increase your
recording fees by $3.00 per page of the entire document.
Document pages must be photographically reproducible to meet state standards.
Use of pages that are not reproducible will result in the entire document being
rejected for recordation.
Please carefully review your recordable documents for compliance with Government
Code Sections 26205.5 and 27322.2 which set forth the standards for quality of
paper, size and color which will reproduce legibly.
FAX SIGNATURES: Any documents and/or writings deposited in this escrow by means
of electronic transmission must be confirmed by the deposit of the original
document bearing the signatures of the principals prior to the close of this
escrow.
DOCUMENTARY TRANSFER TAX: If the documentary tax declaration has not been
furnished in connection with the deed from the grantor to grantee you are
instructed to complete and sign the declaration on such deed showing documentary
transfer tax paid as required ($1.10 per thousand on the full value of the
property conveyed, or on full value less liens and encumbrances remaining
thereon at time of sale).
DEPOSIT FUNDS: If this company is requested to disburse funds in connection with
this escrow, Chapter 598, Statutes of 1989 mandates hold periods for checks
deposited to escrow accounts. Except for funds deposited by wire transfer or
electronic payment, California Insurance Code Section 12413.1, (Chapter 598,
Statutes OF 1989), prohibits the disbursement of funds until the day funds are
made available under the Statute. Loan funds by Cashier's, Certified or Teller's
checks are generally available on the next business day following deposit,
however, other forms of payment may further delay the date of recordation (close
of escrow) AND DISBURSEMENT OF FUNDS.
WIRE INSTRUCTIONS:
WIRES SHALL BE ACCEPTED FOR DEPOSIT ONLY WHEN CHICAGO TITLE COMPANY HOLDS ESCROW
INSTRUCTIONS SIGNED BY ALL PARTIES. CHICAGO TITLE COMPANY WILL NOT BE HELD
RESPONSIBLE FOR VERIFYING RECEIPT OF WIRES UNTIL THE DEPOSITOR NOTIFIES THE
ESCROW OFFICER OF (1) TIME THE WIRE WAS SENT (2) NAME AND ADDRESS OF THE WIRING
BANK AND (3) FEDERAL RESERVE NUMBER. ANY WIRES BEING INITIATED FOR DEPOSIT TO
THIS ESCROW ARE TO BE DIRECTED AS FOLLOWS:
BANK OF AMERICA NT&SA
1850 GATEWAY BOULEVARD
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5
CONCORD, CALIFORNIA 94520
ABA 121-000358
CREDIT TO CHICAGO TITLE ESCROW DEPOSITORY
ACCOUNT NO. 12351-50751
FOR FURTHER CREDIT TO ESCROW NO, 816506-31
ATTENTION; CYNTHIA L. MCGREW, ESCROW OFFICER
THE FOLLOWING ARE ADDITIONAL DOCUMENTS, AS THEY MAY APPLY, TO BE HANDED ESCROW
HOLDER AS A PREREQUISITE TO CLOSING:
(A) IF YOU ARE A CORPORATION: A Certificate of Corporation Resolution, signed by
the Secretary of the Corporation with an affixed corporate seal, authorizing the
acquisition, encumbering (if applicable) or sale of the within property, and
designating the authorized signatories on behalf of the Corporation. (B) IF YOU
ARE A GENERAL PARTNERSHIP: An original Statement of Partnership to record in the
Recorders Office in which the property is located, if not already so recorded. A
copy of the Partnership Agreement MUST ALSO be submitted. (C) IF YOU ARE A
LIMITED PARTNERSHIP: The LP1 Form, Certified by the Secretary Of State to record
in the Recorders Office in which the property is located. A copy of the
Partnership Agreement MUST ALSO be submitted. (D) IF YOU ARE A JOINT VENTURE:
The requirements specified in (A), (B) and (C) herein will be applicable as it
relates to the entity or entities which the Joint Venture is composed or
comprised. (E) IF YOU ARE A TRUSTEE: The requirement that a copy of the Trust
Instrument creating such Trust, and all amendments thereto, together with a
written Verification by all present Trustees that the copy is a true and correct
copy of the Trust, as it may have been amended, and that it has not been revoked
or terminated. (F) IF YOU ARE LIMITED LIABILITY COMPANY: The requirement that a
copy of the Articles of Organization and all amendments thereto and as filed
with the Secretary of State and a copy of the operating agreement.
NOTICE OF TAX WITHHOLDING REQUIREMENTS: In accordance with Sections 18662 and
18668 of the Revenue and Taxation Code, a Buyer may be required to withhold an
amount equal to THREE AND ONE-THIRD percent (3-1/3%) of the Total Sales Price in
the case of a disposition of California real property interest by either:
1. A Seller who is an individual with a last known street address
outside of California or when the disbursement instructions authorize
the proceeds be sent to a "financial intermediary" of the Seller, OR
2. A corporate Seller which has no permanent place of business in
California.
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6
The Buyer may become subject to penalty for failure to withhold, an
amount equal to the greater of TEN percent (10%) of the amount required
to be withheld or five hundred dollars ($500.00).
However, notwithstanding any other provisions included in the California
Statutes referenced above, no Buyer will be required to withhold any amount or
be subject to penalty for failure to withhold if:
1. The sales price of the California real property conveyed does not
exceed One Hundred Thousand Dollars ($100,000.00), OR
2. The Seller executes a written certificate, under the penalty of
perjury, certifying that the Seller is a resident of California, or if
a corporation, has a permanent place of business in California, OR
3. The Seller, who is an individual, executes a written certificate,
under the penalty of perjury, that the California real property being
conveyed is the Seller's "PRINCIPAL RESIDENCE" (as defined in Section
1034 of the Internal Revenue Code of 1986), OR
4. The Seller is a "Partnership" as determined in accordance with
Subchapter K or Chapter 1 of Subtitle A of The Internal Revenue Code,
provided that none of the partners, whether general or limited, reside
outside California.
The Seller is subject to penalty for knowingly filing a fraudulent certificate
for the purpose of avoiding the withholding requirement.
Additionally, under the Federal "Foreign Investment in Real Property Tax Act"
(FIRPTA), as amended and related Laws, a Buyer may be required to withhold, and
could be liable for, an additional tax equal to TEN percent (10%) of the sales
price of the real property being conveyed, in the case of a Seller who may also
be classified as a "FOREIGN PERSON" under Section 1445 of the Internal Revenue
Code of 1986.
The Federal and California Statutes referenced above include provisions which
authorize the IRS and FRANCHISE TAX BOARD to grant reduced withholding and
waivers from withholding on a case-by-case basis. The undersigned may wish to
investigate these options with their own legal or financial advisors, the
Franchise Tax Board Or The Internal Revenue Service.
BUYER AND SELLER UNDERSTAND THAT THE ESCROW HOLDER WILL NOT UNDERTAKE TO
WITHHOLD OR REMIT FUNDS TO ANY TAXING AUTHORITY,
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UNLESS SPECIFICALLY INSTRUCTED IN WRITING TO DO SO. In the event escrow is so
instructed, Buyer and Seller agree to cooperate fully and provide, prior to
closing, any funds, information, additional instructions, and/or completed tax
forms required to comply.
Any information contained in Seller's "1099" reporting Solicitation or
disbursement instructions, which may be relevant to Buyer in determining whether
or not withholding is necessary, shall be provided to Buyer, or Buyer's legal or
financial advisor, for consideration.
DUE TO THE COMPLEXITY OF THESE TAX LAWS, AND THE PENALTY PROVISIONS FOR FAILURE
TO WITHHOLD, IT IS STRONGLY RECOMMENDED THAT BOTH BUYER AND SELLER CONSULT WITH
THEIR RESPECTIVE ATTORNEYS OR FINANCIAL ADVISORS AS TO THEIR OBLIGATIONS
THEREUNDER, IF ANY, PRIOR TO THE CLOSE OF ESCROW.
THE UNDERSIGNED HEREBY ACKNOWLEDGE RECEIPT OF THIS NOTICE AND ALSO THAT NO
REPRESENTATION OR RECOMMENDATION HAS BEEN MADE BY THIS COMPANY CONCERNING THE
ABOVE REFERENCED WITHHOLDING REQUIREMENTS.
The escrow fee payable upon close of this escrow is $2,800.00 and is to be paid
between the parties as provided in the Agreement. We appreciate this opportunity
to serve you. Please notify us immediately in the event there are changes in
terms, documentation or time periods set forth.
<PAGE>
SCHEDULE 2
AMERICAN LAND TITLE ASSOCIATION
OWNER'S POLICY
(10-17-92)
PROFORMA
CHICAGO TITLE INSURANCE COMPANY
SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED
IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, CHICAGO TITLE INSURANCE
COMPANY, a Missouri corporation, herein called the Company, insures, as of Date
of Policy shown in Schedule A, against loss or damage, not exceeding the Amount
of Insurance stated in Schedule A, sustained or incurred by the insured by
reason of:
1. Title to the estate or interest described in Schedule A being vested
other than as stated therein;
2. Any defect in or lien or encumbrance on the title:
3. Unmarketability of the title;
4. Lack of a right of access to and from the land.
The Company will also pay the costs, attorneys' fees and expenses incurred in
defense of the title, as insured, but only to the extent provided in the
Conditions and Stipulations.
In Witness Whereof, CHICAGO TITLE INSURANCE COMPANY has caused this policy to be
signed and sealed as of Date of Policy shown in Schedule A, the policy to become
valid when countersigned by an authorized signatory.
CHICAGO TITLE INSURANCE COMPANY
Issued by: By:
CHICAGO TITLE COMPANY
925 "B" Street
San Diego, CA 92101
(619) 239-6081 President
By:
Secretary
<PAGE>
EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this policy
and the Company will not pay loss or damage, costs, attorneys' fees or expenses
which arise by reason of:
1. (a) Any law, ordinance or governmental regulation (including but
not limited to building and zoning laws, ordinances, or
regulations) restricting, regulating, prohibiting or relating
to (i) the occupancy, use, or enjoyment of the land; (ii) the
character, dimensions or location of any improvement now or
hereafter erected on the land; (iii) a separation in ownership
or a change in the dimensions or area of the land or any
parcel of which the land is or was a part; or (iv)
environmental protection, or the effect of any violation of
these laws, ordinances or governmental regulations, except to
the extent that a notice of the enforcement thereof or a
notice of a defect, lien or encumbrance resulting from a
violation or alleged violation affecting the land has been
recorded in the public records at Date of Policy.
(b) Any governmental police power not excluded by (a) above,
except to the extent that a notice of the exercise thereof or
a notice of a defect, lien or encumbrance resulting from a
violation or alleged violation affecting the land has been
recorded in the public records at Date of Policy.
2. Rights of eminent domain unless notice of the exercise thereof has been
recorded in the public records at Date of Policy, but not excluding
from coverage any taking which has occurred prior to Date of Policy
which would be binding on the rights of a purchaser for value without
knowledge.
3. Defects, liens, encumbrances, adverse claims or other matters:
(a) created, suffered, assumed or agreed to by the insured
claimant;
(b) not known to the Company, not recorded in the public records
at Date of Policy, but known to the insured claimant and not
disclosed in writing to the Company by the insured claimant
prior to the date the insured claimant became an insured under
this policy;
(c) resulting in no loss or damage to the insured claimant;
(d) attaching or created subsequent to Date of Policy; or
(e) resulting in loss or damage which would not have been
sustained if the insured claimant had paid value for the
estate or interest insured by this policy.
<PAGE>
4. Any claim, which arises out of the transaction vesting in the Insured
the estate or interest insured by this policy, by reason of the
operation of federal bankruptcy, state insolvency, or similar
creditors' rights laws, that is based on:
(i) the transaction creating the estate or interest insured by
this policy being deemed a fraudulent conveyance or fraudulent
transfer; or
(ii) the transaction creating the estate or interest insured by
this policy being deemed a preferential transfer except where
the preferential transfer results from the failure:
(a) to timely record the instrument of transfer; or
(b) of such recordation to impart notice to a purchaser
for value or a judgment or lien creditor.
<PAGE>
SCHEDULE A
Your Ref: MARSHALL SCOTTY
Policy No. 975386-PA 15
Premium:
Amount of Insurance: $1,800,000.00
Date of Policy: at 8:00 A.M.
1. Name of Insured:
UNITED LEISURE CORPORATION, A DELAWARE CORPORATION
2. The estate or interest in the land which is covered by this
policy is:
A FEE
3. Title to the estate or interest in the land is vested in:
UNITED LEISURE CORPORATION, A DELAWARE CORPORATION
4. The land referred to in this policy is situated in the State
of California, County of SAN DIEGO and is described as
follows:
SEE ATTACHED DESCRIPTION
This Policy valid only if Schedule B is attached.
<PAGE>
DESCRIPTION
Page 1
Policy No. 975386-PA 15
PARCEL 1:
THAT PORTION OF TRACT "S" OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO, STATE
OF CALIFORNIA, ACCORDING TO MAP OF THE SUBDIVISION OF SAID TRACT "S", RECORDED
IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, IN BOOK 170, PAGE 71
OF DEEDS, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE CENTER OF THE ROAD THAT FORMS THE NORTHERLY BOUNDARY
OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID SUBDIVISION, DISTANT THEREON, SOUTH 72
DEGREES 30' WEST, 500 FEET FROM THE POINT WHERE SAID ROAD IS INTERSECTED BY THE
WESTERLY RIGHT OF WAY LINE OF THE SAN DIEGO FLUME, SAID POINT OF BEGINNING BEING
THE NORTHWEST CORNER OF LAND DESCRIBED IN DEED TO J. T. WILLIAMS AND WIFE,
RECORDED JANUARY 16, 1943, IN BOOK 1440, PAGE 458 OF OFFICIAL RECORDS IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY; THENCE CONTINUING ALONG SAID
CENTER LINE, SOUTH 73 DEGREES 30' WEST, 225 FEET TO THE NORTHEAST CORNER OF LAND
DESCRIBED IN THE DEED FROM WILLIAM JOHN MEADER TO HAROLD H. LUSK, ET UX,
RECORDED FEBRUARY 7, 1938, IN BOOK 739, PAGE 377 OF OFFICIAL RECORDS IN SAID
RECORDER'S OFFICE; THENCE DUE SOUTH ALONG THE EAST LINE OF LAND SO CONVEYED TO
LUSK, 870 FEET, MORE OR LESS, TO THE SOUTHEAST CORNER THEREOF, BEING A POINT ON
THE NORTHERLY RIGHT OF WAY LINE OF SAN DIEGO FLUME; THENCE EASTERLY FOLLOWING
THE NORTHERLY RIGHT OF WAY LINE OF SAID FLUME, 225 FEET, MORE OR LESS, TO A
POINT DUE SOUTH OF THE POINT OF BEGINNING, SAID POINT BEING ALSO THE SOUTHWEST
CORNER OF LAND DESCRIBED IN DEED TO WILLAIMS ABOVE REFERRED TO; THENCE DUE NORTH
ALONG THE WEST LINE OF SAID WILLIAMS' LAND TO THE POINT OF BEGINNING.
EXCEPTING THAT PORTION LYING NORTHERLY AND NORTHEASTERLY OF THE FOLLOWING
DESCRIBED LINE:
BEGINNING AT A POINT ON THE EASTERLY LINE OF THAT PARCEL OF LAND CONVEYED TO LEE
RAMAGE, ET UX, BY DEED RECORDED FEBRUARY 11, 1959, IN BOOK 7492, PAGE 505 OF
OFFICIAL RECORDS OF SAID SAN DIEGO COUNTY, DISTANT THEREON, NORTH 11 DEGREES 52'
25" EAST, 73.05 FEET FROM A 1/2 INCH IRON PIPE HAVING COORDINATES Y EQUALS
246,219.53 FEET AND X EQUALS 1,805,256.21 FEET, PURPORTEDLY SET FOR THE
SOUTHEAST CORNER OF SAID RAMAGE LAND; THENCE NORTH 52 DEGREES 05' 27" EAST,
267.90 FEET THENCE ALONG A TANGENT CURVE TO THE RIGHT WITH A RADIUS OF 350 FEET
THROUGH AN ANGLE OF 21 DEGREES 52' 04", A DISTANCE OF 133.58 FEET; THENCE NORTH
73 DEGREES 57' 31" EAST, 407.33 FEET; THENCE ALONG A TANGENT CURVE TO THE RIGHT
WITH A RADIUS OF 300 FEET THROUGH AN ANGLE OF 51 DEGREES 17' 36", A DISTANCE OF
268.57 FEET; THENCE SOUTH 54 DEGREES 44' 53" EAST, 47.89 FEET TO A POINT ON THE
WESTERLY LINE OF THAT PARCEL OF LAND CONVEYED TO EDWARD L. BREWER, ET UX, BY
<PAGE>
DEED RECORDED MAY 16, 1957, IN BOOK 6580, PAGE 32O OF OFFICIAL RECORDS OF SAID
SAN DIEGO COUNTY, DISTANT THEREON, NORTH 01 DEGREES 26' 58" EAST, 271.22 FEET
FROM A 1 1/2 INCH IRON PIPE MARKED, "L.S. 2201" HAVING COORDIANTES Y EQUALS
246,286.30 FEET AND X EQUALS 1,806,280.71 FEET, PURPORTEDLY SET FOR THE
SOUTHWEST CORNER OF SAID BREWER LAND.
PARCEL 2:
THAT PORTION OF THE NORTHERLY HALF OF THE SAN DIEGO FLUME COMPANY'S RIGHT OF WAY
LYING SOUTHERLY OF AND ADJOINING THE FOLLOWING DESCRIBED LAND:
THAT PORTION OF TRACT "S" OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO, STATE
OF CALIFORNIA, ACCORDING TO MAP OF THE SUBDIVISION OF SAID TRACT "S", RECORDED
IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, IN BOOK 170, PAGE 71
OF DEEDS, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE CENTER OF THE ROAD THAT FORMS THE NORTHERLY BOUNDARY
OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID SUBDIVISION, DISTANT THEREON, SOUTH 72
DEGREES, 30' WEST, 500 FEET FROM THE POINT WHERE SAID ROAD IS INTERSECTED BY THE
WESTERLY RIGHT OF WAY LINE OF THE SAN DIEGO FLUME; SAID POINT OF BEGINNING BEING
THE NORTHWEST CORNER OF LAND DESCRIBED INN DEED TO J. T. WILLIAMS AND WIFE,
RECORDED JANUARY 16, 1943, IN BOOK 1440, PAGE 458 OF OFFICIAL RECORDS IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY; THENCE CONTINUING ALONG SAID
CENTER LINE, SOUTH 73 DEGREES 30' WEST, 225 FEET TO THE NORTHEAST CORNER OF LAND
DESCRIBED IN THE DEED FROM WILLIAM JOHN MEADER TO HAROLD H. LUSK, ET UX,
RECORDED FEBRUARY 7, 1938, IN BOOK 739, PAGE 377 OF OFFICIAL RECORDS IN SAID
RECORDER'S OFFICE; THENCE DUE SOUTH ALONG THE EAST LINE OF SAID LAND SO CONVEYED
TO SAID LUSK, 870 FEET, MORE OR LESS, TO THE SOUTHEAST CORNER THEREOF, BEING A
POINT ON THE NORTHERLY RIGHT OF WAY LINE OF SAN DIEGO FLUME; THENCE EASTERLY
FOLLOWING THE NORTHERLY RIGHT OF WAY LINE OF SAID FLUME, 225 FEET, MORE OR LESS,
TO A POINT DUE SOUTH OF THE PONT OF BEGINNING, SAID POINT BEING ALSO THE
SOUTHWEST CORNER OF LAND DESCRIBED IN DEED TO WILLIAMS ABOVE REFERRED TO; THENCE
DUE NORTH ALONG THE WEST LINE OF SAID WILLIAMS' LAND TO THE POINT OF BEGINNING.
THE SIDELINES OF SAID PORTION OF THE NORTHERLY HALF OF SAID FLUME TO TERMINATE
IN THE SOUTHERLY PROLONGATIONS OF THE EASTERLY AND WESTERLY LINES OF THE ABOVE
DESCRIBED LAND.
PARCEL 3:
THAT PORTION OF LOT 45 AND THAT PORTION OF LOT 48, IF ANY OF THE "S" TRACT OF
RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO
MAP THEREOF ON FILE IN DEED BOOK 170, PAGE 71, RECORDS OF SAID SAN DIEGO COUNTY,
DESCRIBED AS FOLLOWS:
<PAGE>
BEGINNING AT A POINT IN THE CENTER OF THE ROAD THAT FORMS THE NORTHERLY BOUNDARY
OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID SUBDIVISION, DISTANT THEREON SOUTH 72
DEGREES 30' WEST, 275.00 FEET FROM THE POINT WHERE SAID ROAD IS INTERSECTED BY
THE WESTERLY RIGHT OF WAY LINE OF THE SAN DIEGO FLUME SAID POINT OF BEGINNING
BEING THE NORTHWEST CORNER OF THE LAND DESCRIBED IN THE DEED FROM WILLIAM JOHN
MEADER TO LEONARD ALVIN KEEVER, RECORDED AUGUST 26, 1936 IN BOOK 550, PAGE 292
OF OFFICIAL RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY;
THENCE CONTINUING ALONG SAID CENTER LINE, SOUTH 72 DEGREES 30' WEST, 225 FEET;
THENCE DUE SOUTH TO A POINT ON THE NORTHERLY RIGHT OF WAY LINE OF SAID SAN DIEGO
FLUME; THENCE EASTERLY FOLLOWING THE NORTHERLY RIGHT OF WAY OF SAID FLUME 225
FEET MORE OR LESS TO A POINT DUE SOUTH OF THE POINT OF BEGINNING, BEING ALSO THE
SOUTHWEST CORNER OF LAND DESCRIBED IN DEED TO KEEVER, ABOVE REFERRED TO; THENCE
DUE NORTH ALONG THE WEST LINE OF SAID KEEVER LAND, 890 FEET, MORE OR LESS, TO
THE POINT OF BEGINNING.
ALSO TOGETHER WITH THAT PORTION OF THE NORTHERLY HALF OF THE RIGHT OF WAY OF THE
CUYAMACA FLUME COMPANY LYING SOUTHERLY OF AND ADJACENT TO THE MOST SOUTHERLY
LINE OF THE PROPERTY DESCRIBED ABOVE.
EXCEPTING THEREFROM THAT PORTION LYING SOUTHERLY AND EASTERLY OF THE FOLLOWING
DESCRIBED LINE:
COMMENCING AT THE INTERSECTION OF THE CENTER LINE OF THE 50.00 FOOT RIGHT OF WAY
OF THE CUYAMACA FLUME AND THE CENTER LINE OF THE 100.00 FOOT STATE HIGHWAY
(FORMERLY THE CENTER LINE OF THE COUNTY ROAD, AS SHOWN ON SAID MAP OF THE "S"
TRACT OF RANCHO EL CAJON), ACCORDING TO THE LAYOUT KNOWN AS DISTRICT VII, SAN
DIEGO, ROUTE 12, SECTION C, A PLAT OF WHICH IS ON FILE IN THE OFFICE OF THE
DIVISION ENGINEER CALIFORNIA STATE DIVISION OF HIGHWAYS OF SAN DIEGO,
CALIFORNIA, AND APPROVED FEBRUARY 8, 1932, SAID POINT OF INTERSECTION BEING ON
OR NEAR ENGINEER'S CENTER LINE STATION 333 PLUS 97.97 P.O.T. OF SAID STATE
HIGHWAY LAYOUT; THENCE SOUTH 73 DEGREES 36' 30" WEST ALONG SAID CENTER LINE OF
SAID HIGHWAY, A DISTANCE OF 300.03 FEET TO A POINT ON SAID CENTER LINE THAT IS
DISTANT THEREON 275.00 FEET WESTERLY FROM ITS INTERSECTION WITH THE WESTERLY
RIGHT OF WAY LINE OF SAID CUYAMACA FLUME; THENCE SOUTH 01 DEGREES 01' 10" WEST,
A DISTANCE OF 940.31 FEET, MORE OR LESS, TO A POINT IN THE NORTHERLY LINE OF
SAID CUYAMACA FLUME RIGHT OF WAY; THENCE RETRACING NORTH 1 DEGREES 01' 10" EAST
225.00 FEET; TO THE TRUE POINT OF BEGINNING OF THE FOLLOWING DESCRIBED LINE;
THENCE NORTH 85 DEGREES 14' 10" WEST 100.00 FEET; THENCE SOUTH 01 DEGREES 01'
10" EAST TO THE CENTER LINE OF THE RIGHT OF WAY OF CUYAMACA FLUME COMPANY.
ALSO EXCEPTING THEREFROM THAT PORTION LYING NORTHERLY OF THE FOLLOWING DESCRIBED
LINE:
BEGINNING AT THE POINT OF BEGINNING DESCRIBED AS THE SOUTHWEST CORNER OF THAT
PARCEL OF LAND CONVEYED TO THE STATE OF CALIFORNIA BY A DEED RECORDED MARCH 5,
1963, AS FILE NO. 37982 OF OFFICIAL
<PAGE>
RECORDS, SAID POINT BEING AT THE WESTERLY TERMINUS OF SAID LAND CONVEYED TO THE
STATE OF CALIFORNIA DESCRIBED ABOVE AS COURSE (3) DESCRIBED SOUTH 85 DEGREES 31'
51" WEST 309.11 FEET, THENCE CONTINUING ALONG THE WESTERLY PROJECTION OF SAID
COURSE (3) SOUTH 85 DEGREES 31' 51" WEST 215.72 FEET MORE OR LESS TO THE
EASTERLY LINE OF THAT PARCEL OF LAND CONVEYED TO THE WILLIAM P. LEE COMPANY,
INC., BY A DEED RECORDED JULY 2, 1986, AS FILE NO. 86- 274086.
PARCEL 4:
THAT PORTION OF THE "S" TRACT OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 355, FILED IN THE OFFICE OF
THE COUNTY RECORDER OF SAN DIEGO COUNTY, JULY 24, 1886, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE CENTER LINE OF THAT CERTAIN UNNAMED ROAD WHICH FORMS
THE NORTHERLY BOUNDARY OF BLOCK 45, ALSO KNOWN AS LOT 45 OF SAID "S" TRACT,
DISTANT THEREON SOUTH 72 DEGREES 30' 00" WEST, 725.00 FEET FROM THE INTERSECTION
OF SAID CENTER LINE WITH THE WESTERLY LINE OF THE RIGHT OF WAY OF THE SAN DIEGO
FLUME COMPANY; THENCE ALONG SAID CENTER LINE AS FOLLOWS:
CONTINUING SOUTH 72 DEGREES 30' 00" WEST, 405.00 FEET TO AN ANGLE POINT THEREIN;
AND SOUTH 62 DEGREES 56' 00" WEST, 157.20 FEET TO AN INTERSECTION WITH THE
CENTER LINE OF THAT CERTAIN UNNAMED ROAD WHICH FORMS THE WESTERLY BOUNDARY OF
SAID BLOCK 45, ALSO KNOWN AS LOT 45; THENCE ALONG SAID CENTER LINE LAST
HEREINABOVE REFERRED TO AS FOLLOWS:
SOUTH 11 DEGREES 29' 00" WEST, 859.70 FEET TO AN ANGLE POINT; AND SOUTH 30
DEGREES 00' 00" WEST, 221.58 FEET TO THE NORTHERLY LINE OF SAID SAN DIEGO FLUME
COMPANY'S RIGHT OF WAY; THENCE NORTHEASTERLY AND EASTERLY ALONG SAID NORTHERLY
LINE, 1162.00 FEET, MORE OR LESS, TO A LINE WHICH BEARS DUE SOUTH FROM THE POINT
OF BEGINNING; THENCE DUE NORTH 870.00 FEET TO THE POINT OF BEGINNING.
EXCEPTING THEREFROM THAT PORTION CONDEMNED FOR STATE HIGHWAY PURPOSES AS
DESCRIBED IN FINAL ORDER OF CONDEMNATION RECORDED OCTOBER 19, 1964 AS FILE NO.
190709 OF OFFICIAL RECORDS.
PARCEL 4A:
THAT PORTION OF THE NORTHERLY HALF OF THE SAN DIEGO FLUME COMPANY'S RIGHT OF
WAY, LYING SOUTHERLY OF AND ADJOINING THAT CERTAIN PARCEL OF LAND DESCRIBED AS
FOLLOWS:
THAT PORTION OF THE "S" TRACT OF RANCHO EL CAJON, IN THE COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 355, FILED IN THE OFFICE OF
THE COUNTY RECORDER OF SAN DIEGO COUNTY, JULY 24, 1886, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE CENTER LINE OF THAT CERTAIN UNNAMED
<PAGE>
ROAD WHICH FORMS THE NORTHERLY BOUNDARY OF BLOCK 45, ALSO KNOWN AS LOT 45 OF
SAID "S" TRACT, DISTANT THEREON SOUTH 72 DEGREES 30' 00" WEST, 725.00 FEET FROM
THE INTERSECTION OF SAID CENTER LINE WITH THE WESTERLY LINE OF THE RIGHT OF WAY
OF THE SAN DIEGO FLUME COMPANY; THENCE ALONG SAID CENTER LINE AS FOLLOWS:
CONTINUING SOUTH 72 DEGREES 30' 00" WEST, 405.00 FEET TO AN ANGLE POINT THEREIN;
AND SOUTH 62 DEGREES 56' 00" WEST, 157.20 FEET TO AN INTERSECTION WITH THE
CENTER LINE OF THAT CERTAIN UNNAMED ROAD WHICH FORMS THE WESTERLY BOUNDARY OF
SAID BLOCK 45, ALSO KNOWN AS LOT 45; THENCE ALONG SAID CENTER LINE LAST
HEREINABOVE REFERRED TO AS FOLLOWS:
SOUTH 11 DEGREES 29' 00" WEST, 859.70 FEET TO AN ANGLE POINT; AND SOUTH 30
DEGREES 00' 00" WEST, 221.58 FEET TO THE NORTHERLY LINE OF SAID SAN DIEGO FLUME
COMPANY'S RIGHT OF WAY; THENCE NORTHEASTERLY AND EASTERLY ALONG SAID NORTHERLY
LINE, 1162.00 FEET, THENCE DUE NORTH 870.00 FEET TO THE POINT OF BEGINNING.
<PAGE>
SCHEDULE B
Your Ref: MARSHALL SCOTTY
Policy No. 975386-PA 15
EXCEPTIONS FROM COVERAGE
This policy does not insure against loss or damage (and the Company
will not pay costs, attorneys' fees or expenses) which arise by reason of:
1. PROPERTY TAXES, INCLUDING ANY ASSESSMENTS COLLECTED WITH
TAXES, TO BE LEVIED FOR THE FISCAL YEAR 1995-96 WHICH ARE A
LIEN NOT YET PAYABLE.
2. THE LIEN OF SUPPLEMENTAL TAXES, IF ANY, ASSESSED PURSUANT TO
THE PROVISIONS OF CHAPTER 3.5 (COMMENCING WITH SECTION 75) OF
THE REVENUE AND TAXATION CODE OF THE STATE OF CALIFORNIA.
THE FOLLOWING ITEMS AFFECT PARCELS 1 AND 2:
3. A RIGHT OF WAY FOR PIPELINES AND AQUEDUCTS OF THE SAN DIEGO
FLUME COMPANY, ITS SUCCESSORS AND ASSIGNS
RECORDED: JULY 8, 1886 IN BOOK 64, PAGE 164 AND
BOOK 179, PAGE 225, BOTH OF DEEDS
4. THE RIGHTS OF THE PUBLIC IN AND TO THAT PORTION OF THE HEREIN
DESCRIBED PROPERTY LYING WITHIN SIERRA ALTA WAY.
5. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: SAN DIEGO GAS & ELECTRIC COMPANY
PURPOSE: PUBLIC UTILITIES, INGRESS AND EGRESS
RECORDED: JULY 14, 1920 IN BOOK 815, PAGE 476 OF
DEEDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
6. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS
INCIDENTAL THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: THE PACIFIC TELEPHONE AND TELEGRAPH
COMPANY
PURPOSE: PUBLIC UTILITIES, INGRESS AND EGRESS
RECORDED: DECEMBER 12, 1929 IN BOOK 1713, PAGE 373
OF DEEDS
AFFECTS: THE EXACT LOCATION AND EXTENT OF SAID
EASEMENT IS NOT DISCLOSED OF RECORD.
<PAGE>
SCHEDULE B
(Continued)
Page 1
POLICY NO. 975486-PA 15
7. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: THE STATE OF CALIFORNIA
PURPOSE: PUBLIC ROAD
RECORDED: APRIL 15, 1931 IN BOOK 1886, PAGE 151 OF
DEEDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
SAID INSTRUMENT ADDITIONALLY CONTAINS THE PRIVILEGE AND RIGHT
TO EXTEND DRAINAGE STRUCTURES AND EXCAVATION AND EMBANKMENT
SLOPES BEYOND THE LIMITS OF THE ABOVE DESCRIBED RIGHT OF WAY
WHERE REQUIRED FOR THE CONSTRUCTION AND MAINTENANCE THEREOF.
8. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: EARL JOBE AND RHODA A. JOBE
PURPOSE: ROADWAY
RECORDED: MAY 27, 1947 IN BOOK 2410, PAGE 396, AS
FILE NO. 55620, OFFICIAL RECORDS
AFFECTS: THE EXACT LOCATION AND EXTENT OF SAID
EASEMENT IS NOT DISCLOSED OF RECORD.
9. THE FACT THAT THE OWNERSHIP OF SAID LAND DOES NOT INCLUDE
RIGHTS OF ACCESS TO OR FROM THE STREET OR HIGHWAY ABUTTING
SAID LAND, SUCH RIGHTS HAVING BEEN SEVERED FROM SAID LAND BY
THE DOCUMENT
RECORDED: APRIL 12, 1963 AS FILE NO. 62930,
OFFICIAL RECORDS
AFFECTS: ADJOINING THE STATE HIGHWAY
10. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: LAKESIDE SANITATION DISTRICT
PURPOSE: SEWER
RECORDED: MAY 26, 1966 AS FILE NO. 88184, OFFICIAL
RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
<PAGE>
SCHEDULE B
(Continued)
Page 2
POLICY NO. 975486-PA 15
11. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: LAKESIDE SANITATION DISTRICT
PURPOSE: SEWER PIPELINES AND/OR MAINS, MANHOLES,
SEWER LATERAL PIPELINES
RECORDED: DECEMBER 27, 1966 AS FILE NO. 200092,
OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
12. A DECLARATION OF COVENANTS FOR STREET IMPROVEMENTS, DATED
FEBRUARY 26, 1972, UPON THE TERMS, COVENANTS AND CONDITIONS
CONTAINED THEREIN, EXECUTED BY AND BETWEEN THE FIRST BAPTIST
CHURCH OF JOHNSTOWN AND THE COUNTY OF SAN DIEGO, RECORDED
MARCH 31, 1972 AS FILE NO. 80357 OF OFFICIAL RECORDS.
13. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: SAN DIEGO GAS & ELECTRIC COMPANY
PURPOSE: PUBLIC UTILITIES, INGRESS AND EGRESS
RECORDED: JULY 16, 1974 AS FILE NO. 74-190220,
OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
14. AN AGREEMENT FOR IMPROVEMENTS IN A PUBLIC RIGHT OF WAY,
WHEREIN SAID OWNER GRANTS SAID CITY A LIEN UPON THE LAND
HEREIN DESCRIBED AND AGREES, COVENANTS AND PROMISES, UPON THE
TERMS, COVENANTS AND CONDITIONS THEREIN CONTAINED TO INSTALL
AND CONSTRUCT OR CAUSE TO BE INSTALLED OR CONSTRUCTED CERTAIN
PUBLIC IMPROVEMENTS,
DATED: JANUARY 21, 1987
CITY OF: COUNTY OF SAN DIEGO
OWNER: WILLIAM P. LEE COMPANY, INC.
RECORDED: JANUARY 27, 1987 AS FILE NO. 87-045018,
OFFICIAL RECORDS
15. NOTICE OF CONSENT TO USE OF LAND PURSUANT TO CIVIL CODE
SECTION 813, RECORDED MAY 17, 1990, AS FILE NO. 90-
<PAGE>
SCHEDULE B
(Continued)
Page 3
POLICY NO. 975486-PA 15
271476, OFFICIAL RECORDS.
SAID DOCUMENT ADDITIONALLY RECITES,
"EL CADO ASSOCIATION CURRENTLY MAINTAINS A FENCE WHICH
ENCROACHES ONTO THE PROPERTY. ALTHOUGH THE UNDERSIGNED
CURRENTLY DOES NOT OBJECT TO THE ENCROACHMENT, NO RIGHTS ARE
BEING GAINED IN THE PROPERTY THROUGH SUCH ENCROACHMENT."
REFERENCE IS MADE TO SAID DOCUMENT FOR FULL PARTICULARS.
THE FOLLOWING ITEMS AFFECT PARCEL 3:
16. A RIGHT OF WAY FOR PIPELINES AND AQUEDUCTS OF SAN DIEGO FLUME
COMPANY, ITS SUCCESSORS AND ASSIGNS. THE DEFINITE LOCATION OF
SAID RIGHT OF WAY IS NOT SET OUT.
17. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: THE PACIFIC TELEPHONE AND TELEGRAPH
COMPANY
PURPOSE: PUBLIC UTILITIES, INGRESS AND EGRESS
RECORDED: DECEMBER 12, 1929 IN BOOK 1713, PAGE 373
OF DEEDS
AFFECTS: THE EXACT LOCATION AND EXTENT OF SAID
EASEMENT IS NOT DISCLOSED OF RECORD.
18. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: EARL JOBE AND RHODA A. JOBE, HUSBAND AND
WIFE
PURPOSE: ROADWAY
RECORDED: MAY 27, 1947 IN BOOK 2410, PAGE 396 OF
OFFICIAL RECORDS
AFFECTS: THE EXACT LOCATION AND EXTENT OF SAID
EASEMENT IS NOT DISCLOSED OF RECORD.
19. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
<PAGE>
SCHEDULE B
(Continued)
Page 4
POLICY NO. 975486-PA 15
GRANTED TO: CLYDE E. LAKE AND BETTY LAKE, HUSBAND
AND WIFE
PURPOSE: WATER PIPELINE
RECORDED: OCTOBER 7, 1958 IN BOOK 7287, PAGE 320
AS FILE NO. 164804, OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
20. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: THE STATE OF CALIFORNIA
PURPOSE: DRAINAGE
RECORDED: DECEMBER 6, 1965 AS FILE NO. 219694,
OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
21. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: THE STATE OF CALIFORNIA
PURPOSE: POLE LINES AND WIRES
RECORDED: DECEMBER 6, 1965 AS FILE NO. 219694,
OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
22. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: LAKESIDE SANITATION DISTRICT
PURPOSE: SEWER PIPELINES AND/OR MAINS, MANHOLES,
SEWER LATERAL PIPELINES
RECORDED: DECEMBER 27, 1966 AS FILE NO. 200092,
OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
23. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
<PAGE>
SCHEDULE B
(Continued)
Page 5
POLICY NO. 975486-PA 15
GRANTED TO: LAKESIDE SANITATION DISTRICT AND COUNTY
OF SAN DIEGO
PURPOSE: SEWER PIPELINES AND/OR MAINS, MANHOLES,
SEWER LATERAL PIPELINES
RECORDED: SEPTEMBER 25, 1967 AS FILE NO. 146611,
OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
24. A DECLARATION OF COVENANTS FOR STREET IMPROVEMENTS, DATED
FEBRUARY 26, 1972 UPON THE TERMS, COVENANTS AND CONDITIONS
CONTAINED THEREIN, EXECUTED BY AND BETWEEN THE FIRST BAPTIST
CHURCH OF JOHNSTOWN AND THE COUNTY OF SAN DIEGO, RECORDED
MARCH 31, 1972 AS FILE NO. 80357 OF OFFICIAL RECORDS.
25. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: PETER TORRES
PURPOSE: SEWER LINE
RECORDED: MAY 27, 1975 AS FILE NO. 75-108786,
OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
26. SUCH RIGHTS OR EASEMENTS AFFECTING A PORTION OF SAID
LAND HEREIN STATED, FOR PUBLIC ROAD AND INCIDENTAL
PURPOSES, AS PROVIDED IN AN IRREVOCABLE AND PERPETUAL
OFFER TO DEDICATE
RECORDED: JANUARY 27, 1987, AS FILE NO. 87-045016,
OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND SAID INSTRUMENT
ADDITIONALLY CONTAINS THE PRIVILEGE AND
RIGHT TO EXTEND DRAINAGE STRUCTURES AND
EXCAVATION AND EMBANKMENT SLOPES BEYOND
THE LIMITS OF THE ABOVE DESCRIBED RIGHT
OF WAY WHERE REQUIRED FOR THE
CONSTRUCTION AND MAINTENANCE THEREOF.
27. A CONTRACT AND AGREEMENT FOR IMPROVEMENTS IN PUBLIC RIGHT OF
WAY, WHEREIN SAID OWNER GRANTS SAID AGENCY A
<PAGE>
SCHEDULE B
(Continued)
Page 6
POLICY NO. 975486-PA 15
LIEN UPON THE LAND HEREIN DESCRIBED AND AGREES, COVENANTS AND
PROMISES, UPON TERMS, COVENANTS AND CONDITIONS CONTAINED, TO
INSTALL AND CONSTRUCT OR CAUSE TO BE INSTALLED OR CONSTRUCTED,
CERTAIN PUBLIC IMPROVEMENTS
DATED: JANUARY 21, 1987
EXECUTED BY: WILLIAM P. LEE COMPANY, INC.
AGENCY: COUNTY OF SAN DIEGO
RECORDED: JANUARY 27, 1987 AS FILE NO. 87-045018,
OFFICIAL RECORDS
28. NOTICE OF CONSENT TO USE OF LAND PURSUANT TO CIVIL CODE
SECTION 813, RECORDED MAY 17, 1990, AS FILE NO. 90- 271476,
OFFICIAL RECORDS.
SAID DOCUMENT ADDITIONALLY RECITES,
"EL CADO ASSOCIATION CURRENTLY MAINTAINS A FENCE WHICH
ENCROACHES ONTO THE PROPERTY. ALTHOUGH THE UNDERSIGNED
CURRENTLY DOES NOT OBJECT TO THE ENCROACHMENT, NO RIGHTS ARE
BEING GAINED IN THE PROPERTY THROUGH SUCH ENCROACHMENT."
REFERENCE IS MADE TO SAID DOCUMENT FOR FULL PARTICULARS.
THE FOLLOWING ITEMS AFFECT PARCELS 4 AND 4A:
29. RIGHT OF WAY FOR PIPE LINES AND AQUEDUCTS OF SAN DIEGO FLUME
COMPANY, ITS SUCCESSORS AND ASSIGNS. THE DEFINITE LOCATION OF
SAID RIGHT OF WAY IS NOT SET OUT
30. THE PRIVILEGE AND RIGHT TO EXTEND DRAINAGE STRUCTURES AND
EXCAVATION AND EMBANKMENT SLOPES BEYOND THE LIMITS OF THE
RIGHT OF WAY WHERE REQUIRED FOR THE CONSTRUCTION AND
MAINTENANCE OF SAID RIGHT OF WAY AS CONTAINED IN THE DEED
RECORDED APRIL 15, 1931 IN BOOK 1886, PAGE 151 OF DEEDS.
31. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
<PAGE>
SCHEDULE B
(Continued)
Page 7
POLICY NO. 975486-PA 15
GRANTED TO: SAN DIEGO GAS & ELECTRIC COMPANY
PURPOSE: PUBLIC UTILITIES, INGRESS AND EGRESS
RECORDED: FEBRUARY 8, 1956 IN BOOK 5896, PAGE 588
OF OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
32. THE FACT THAT THE OWNERSHIP OF SAID LAND DOES NOT INCLUDE
RIGHTS OF ACCESS TO OR FROM THE STREET OR HIGHWAY ABUTTING
SAID LAND, SUCH RIGHTS HAVING BEEN SEVERED FROM SAID LAND BY
THE DOCUMENT
RECORDED: OCTOBER 19, 1964 AS FILE NO. 190709,
OFFICIAL RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
33. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL
THERETO AS SET FORTH IN A DOCUMENT
GRANTED TO: LAKESIDE SANITATION DISTRICT
PURPOSE: SEWER
RECORDED: MAY 26, 1966 AS FILE NO. 88184, OFFICIAL
RECORDS
AFFECTS: THE ROUTE THEREOF AFFECTS A PORTION OF
SAID LAND AND IS MORE FULLY DESCRIBED IN
SAID DOCUMENT.
34. A DEED OF TRUST TO SECURE AN INDEBTEDNESS IN THE ORIGINAL
AMOUNT SHOWN BELOW
AMOUNT: $230,000.00
DATED: JANUARY 11, 1979
TRUSTOR: BERNARD PLUDOW AND PAULINE F. PLUDOW,
HUSBAND AND WIFE
TRUSTEE: CALIFORNIA LAND TITLE COMPANY OF SAN
DIEGO, A CALIFORNIA CORPORATION
BENEFICIARY: FRANK STANLEY HOBBS AND JESSIE STEEL
HOBBS, HUSBAND AND WIFE AS JOINT TENANTS
RECORDED: JANUARY 31, 1979 AS FILE NO. 79-048088,
OFFICIAL RECORDS
<PAGE>
SCHEDULE B
(Continued)
Page 8
POLICY NO. 975486-PA 15
A SUBSTITUTION OF TRUSTEE UNDER SAID DEED OF TRUST WHICH NAMES
AS THE SUBSTITUTED TRUSTEE, THE FOLLOWING
TRUSTEE: STATEWIDE FORECLOSURE SERVICES
RECORDED: OCTOBER 2, 1989 AS FILE NO. 89-530720,
OFFICIAL RECORDS
AN ASSIGNMENT OF THE BENEFICIAL INTEREST UNDER SAID DEED OF
TRUST WHICH NAMES
AS ASSIGNEE: FRANK STANLEY HOBBS, (CO-TRUSTEE), AND
JESSIE STEEL HOBBS, (CO-TRUSTEE), CO-
TRUSTEES, OR THEIR SUCCESSORS IN TRUST,
UNDER THE HOBBS FAMILY TRUST, DATED
AND ANY AMENDMENTS THERETO
RECORDED JANUARY 3, 1991 AS FILE NO. 1991-
0003245, OFFICIAL RECORDS
AN AGREEMENT TO MODIFY THE TERMS AND PROVISIONS OF SAID DEED
OF TRUST AS THEREIN PROVIDED
EXECUTED BY: ______________
RECORDED: ___________AS FILE NO.___________,
OFFICIAL RECORDS
35. A CONTRACT AND AGREEMENT FOR IMPROVEMENTS IN PUBLIC RIGHT OF
WAY, WHEREIN SAID OWNER GRANTS SAID AGENCY A LIEN UPON THE
LAND HEREIN DESCRIBED AND AGREES, COVENANTS AND PROMISES, UPON
TERMS, COVENANTS AND CONDITIONS THEREIN CONTAINED, TO INSTALL
AND CONSTRUCT OR CAUSE TO BE INSTALLED OR CONSTRUCTED, CERTAIN
PUBLIC IMPROVEMENTS
DATED: JANUARY 21, 1987
EXECUTED BY: WILLIAM P. LEE COMPANY, INC.
AGENCY: COUNTY OF SAN DIEGO
RECORDED: JANUARY 27, 1987 AS FILE NO. 87-045018,
OFFICIAL RECORDS
36. NOTICE OF CONSENT TO USE OF LAND PURSUANT TO CIVIL CODE
SECTION 8 13 RECORDED MAY 17, 1990 AS FILE NO. 90- 271475,
OFFICIAL RECORDS
SAID DOCUMENT ADDITIONAL RECITES:
OSCAR C. HALL AND INA C. HALL CURRENTLY MAINTAIN A
<PAGE>
SCHEDULE B
(Continued)
Page 9
POLICY NO. 975486-PA 15
FENCE WHICH ENCROACHES ONTO THE PROPERTY. ALTHOUGH THE
UNDERSIGNED CURRENTLY DOES NOT OBJECT TO THE ENCROACHMENT, NO
RIGHTS ARE BEING GAINED IN THE PROPERTY THROUGH SUCH
ENCROACHMENT
REFERENCE IS MADE TO SAID DOCUMENT FOR FULL PARTICULARS.
37. NOTICE OF CONSENT TO USE OF LAND PURSUANT TO CIVIL CODE
SECTION 813, RECORDED MAY 17, 1990, AS FILE NO. 90- 271476,
OFFICIAL RECORDS.
SAID DOCUMENT ADDITIONALLY RECITES,
"EL CADO ASSOCIATION CURRENTLY MAINTAINS A FENCE WHICH
ENCROACHES ONTO THE PROPERTY. ALTHOUGH THE UNDERSIGNED
CURRENTLY DOES NOT OBJECT TO THE ENCROACHMENT, NO RIGHTS ARE
BEING GAINED IN THE PROPERTY THROUGH SUCH ENCROACHMENT."
REFERENCE IS MADE TO SAID DOCUMENT FOR FULL PARTICULARS.
38. THE RIGHTS OF THE PUBLIC TO USE ANY PORTION OF SAID LAND LYING
WITHIN SIERRA ALTA WAY.
THE FOLLOWING ITEM AFFECTS ALL PARCELS:
39. A DEED OF TRUST TO SECURE AN INDEBTEDNESS IN THE ORIGINAL
AMOUNT SHOWN BELOW
AMOUNT: $880,000.00
DATED _______________
TRUSTOR: UNITED LEISURE CORPORATION
TRUSTEE: _______________
BENEFICIARY: PLC PROPERTIES
RECORDED: ____________AS FILE NO._________,
OFFICIAL RECORDS
END OF SCHEDULE B
NOTE NO. 1: IN ADDITION TO THE MATTERS SHOWN IN SCHEDULE B
ABOVE, THE TITLE INSURANCE POLICY, WHEN
<PAGE>
SCHEDULE B
(Continued)
Page 10
POLICY NO. 975486-PA 15
ISSUED, WILL EXCEPT FROM THE COVERAGE AFFORDED ANY DEFECT,
LIEN, ENCUMBRANCE OR OTHER MATTER AFFECTING THE ESTATE OR
INTEREST COVERED BY THE POLICY WHICH SHALL HAVE INTERVENED OR
OCCURRED, OR BECOME FOR THE FIRST TIME DISCLOSED TO THE
COMPANY, BETWEEN THE DATE THIS PRO FORMA POLICY WAS PREPARED
AND THE ULTIMATE DATE OF THE POLICY OF TITLE INSURANCE. THIS
PRO FORMA POLICY DOES NOT REFLECT THE PRESENT CONDITION OF
TITLE BUT, RATHER, INDICATES THE FORM OF TITLE INSURANCE
POLICY, TOGETHER WITH THE SCHEDULES THEREOF AND THE
ENDORSEMENTS THERETO, WHICH THE COMPANY IS PREPARED TO ISSUE
WHEN ALL NECESSARY DOCUMENTS ARE RECEIVED AND ALL ACTS
PERFORMED TO ITS SATISFACTION. THIS PRO FORMA POLICY IS TO BE
USED FOR INFORMATIONAL PURPOSES ONLY, IS NOT A COMMITMENT TO
INSURE, AND NO LIABILITY IS ASSUMED BY ITS ISSUANCE.
EH
<PAGE>
CONDITIONS AND STIPULATIONS
1. DEFINITION OF TERMS
The following terms when used in this policy mean:
(a) "insured": the insured named in Schedule A, and , subject
to any rights or defenses the Company would have had against the named insured,
those who succeed to the interest of the named insured by operation of law as
distinguished from purchase including, but not limited to, heirs, distributees,
devisees, survivors, personal representatives, next of kin, or corporate or
fiduciary successors.
(b) "insured claimant": an insured claiming loss or damage.
(c) "knowledge" or "known": actual knowledge, not
constructive knowledge or notice Which may be imputed to an insured by reason of
the public records as defined in this policy or any other records which impart
constructive notice of matters affecting the land.
(d) "land": the land described or referred to in Schedule A, and
improvements affixed thereto which by law constitute real property. The term
"land" does not include any property beyond the lines of the area described or
referred to in Schedule A, nor any right, title, interest, estate or easement in
abutting streets, roads, avenues, alleys, lanes, ways or waterways, but nothing
herein shall modify or limit the extent to which a right of access to and from
the land is insured by this policy.
(e) "mortgage": mortgage, deed of trust, trust deed, or other
security instrument.
(f) "public records": records established under state statutes at Date
of Policy for the purpose of imparting constructive notice of matters relating
to real property to purchasers for value and without knowledge. With respct to
Section 1(a)(iv) of the Exclusions From Coverage, "public records" shall also
include environmental protection liens filed in the records of the clerk of the
United States district court for the district in which the land is located.
(g) "unmarketability of the title": an alleged or apparent matter
affecting the title to the land, not excluded or excepted from coverage, which
would entitle a purchaser of the estate or interest described in Schedule A to
be released from the obligation to purchase by virtue of a contractual condition
requiring the delivery of marketable title.
2. CONTINUATION OF INSURANCE AFTER CONVEYANCE OF TITLE
The coverage of this policy shall continue in force as of Date of
Policy in favor of an insured only so long as the insured retains an estate or
interest in the land, or holds an indebetedness secured by a purchase money
mortgage given by a purchaser from the insured, or only so long as the insured
shall have liability by reason of covenants of warranty made by the insured in
any transfer or conveyance of the estate or interest. This policy shall not
continue in force in favor of any purchaser from the insured of either (i) an
estate or interest in the land, or (ii) an indebtedness secured by a purchase
money mortgage given
<PAGE>
to the insured.
3. NOTICE OF CLAIM TO BE GIVEN BY INSURED CLAIMANT
The insured shall notify the Company promptly in writing (i) in case of
any litigation as set forth in Section 4(a) below, (ii) in case knowledge shall
come to an insured hereunder of any claim of title or interest which is adverse
to the title to the estate or interest, as insured, and which might cause loss
or damage for which the Company may be liable by virtue of this policy, or (iii)
if title to the estate or interest, as insured, is rejected as unmarketable. If
prompt notice shall not be given to the Company, then as to the insured all
liability of the Company shall terminate with regard to the matter or matters
for which prompt notice is required; provided, however, that failure to notify
the Company shall in no case prejudice the rights of any insured under this
policy unless the Company shall be prejudiced by the failure and then only to
the extent of the prejudice.
4. DEFENSE AND PROSECUTION OF ACTIONS; DUTY OF INSURED CLAIMANT
TO COOPERATE
(a) Upon written request by the insured and subject to the
options contained in Section 6 of these Conditions and Stipulations, the
Company, at its own cost and without unreasonable delay, shall provide for the
defense of an insured in litigation in which any third party asserts a claim
adverse to the title or interest as insured, but only as to those stated causes
of action alleging a defect, lien or encumbrance or other matter insured against
by this policy. The Company shall have the right to select counsel of its choice
(subject to the right of the insured to object for reasonable cause) to
represent the insured as to those stated causes of action and shall not be
liable for and will not pay the fees of any other counsel. The Company will not
pay any fees, costs or expenses incurred by the insured in the defense of those
causes of action which allege matters not insured against by this policy.
(b) The Company shall have the right, at its own cost, to institute and
prosecute any action or proceeding or to do any other act which in its opinion
may be necessary or desirable to establish the title to the estate or interest,
as insured, or to prevent or reduce loss or damage to the insured. The Company
may take any appropriate action under the terms of this policy, whether or not
it shall be liable hereunder, and shall not thereby concede liability or waive
any provision of this policy. If the Company shall exercise its rights under
this paragraph it shall do so diligently.
(c) Whenever the Company shall have brought an action or interposed a
defense as required or permitted by the provisions of this policy, the Company
may pursue any litigation to final determination by a court of competent
jurisdiction and expressly reserves the right, in its sole discretion, to appeal
from any adverse judgment or order.
(d) In all cases where this policy permits or requires the Company to
prosecute or provide for the defense of any action or proceeding, the insured
shall secure to the Company the right to so
<PAGE>
prosecute or provide defense in the aciton or proceeding, and all appeals
therein, and permit the Company to use, at its option, the name of the insured
for this purpose. Whenever requested by the Company all reasonable aid (i) in
any action or proceeding, securing evidence, obtaining witnesses, prosecuting or
defending the action or proceeding, or effecting settlement, and (ii) in any
other lawful act which in the opinion of the Company may be necessary or
desirable to establish the title to the estate or interest as insured. If the
Company is prejudiced by the failure of the insured to furnish the required
cooperation, the Company's obligations to the insured under the policy shall
terminate, including any liability or obligation to defend, prosecute, or
continue any litigaiton, with regard to the matter or matters requiring such
cooperation.
5. PROOF OF LOSS OR DAMAGE
In addition to and after the notices required under Section 3 of these
Conditions and Stipulations have been provided the Company, a proof of loss or
damage signed and sworn to by the insured claimant shall be furnished to the
Company within 90 days after the insured claimant shall ascertain the facts
giving rise to the loss or damage. The poroof of loss or damage shall describe
the defect in, or lien or encumbrance on the title, or other matter insured
against by this policy which constitutes the basis of loss or damage and shall
state, to the extent possible, the basis of calculating the amount of the loss
or damage. If the Company is prejudiced by the failure of the insured claimant
to provide the required proof of loss or damage, the Company's obligations to
the insured under this policy shall terminate, including any liability or
obligation to defend, prosecute, or continue any litigation, with regard to the
matter or matters requiring such proof of loss or damage.
In addition, the insured claimant may reasonably be required to submit
to examination under oath by any authorized representative of the Company and
shall produce for examination, inspection and copying, at such reasonable times
and places as may be designated by any authorized representative of the Company,
all records, books, ledgers, checks, correspondence and memoranda, whether
bearing a date before or after Date of Policy, which reasonably pertain to the
loss or damage. Further, if requested by any authorized representative of the
Company, the insured claimant shall grant its permission, in writing, for any
authorized representative of the Company to examine, inspect and copy all
records, books, ledgers, checks, correspondence and memoranda in the custody or
control of a third party, which reasonably pertain to the loss or damage. All
information designated as confidential by the insured claimant provided to the
Company pursuant to this Section shall not be disclosed to others unless, in the
reasonable judgment of the Company, it is necessary in the administration of the
claim. Failure of the insured claimant to submit for examination under oath,
produce other reasonably requested information or grant permission to secure
reasonably necessary information from third parties as required in this
paragraph shall terminate any liability of the Company under this policy as to
that
<PAGE>
claim.
6. OPTIONS TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION OF
LIABILITY
In case of a claim under this policy, the company shall have the
following additional options:
(a) To Pay or Tender Payment of the Amount of Insurance.
To pay or tender payment of the amount of insurance under this policy
together with any costs, attorneys' fees and expenses incurred by the insured
claimant, which were authorized by the Company, up to the time or payment or
tender of payment and which the Company is obligated to pay.
Upon the exercise by the Company of this option, all liability and
obligations to the insured under this policy, other than to make the payment
required, shall terminate, including any liability or obligation to defend,
prosecute, or continue any litigation, and the policy shall be surrendered to
the company for cancellation.
(b) ToPay or Otherwise Settle With Parties Othere than the Insured or
With the Insured Claimant.
(i) to pay or otherwise settle with other parties for or in
the name of an insured claimant any claim insured against under this policy,
together with any costs, attorneys' fees and expenses incurred by the insured
claimant which were authorized by the Company up to the time of payment and
which the Company is obligated to pay; or
(ii) to pay or otherwise settle with the insured claimant the
loss or damage provided for under this policy, together with any costs,
attorneys' fees and expenses incurred by the insured claimant which were
authorized by the Company up to the time of payment and which the Company is
obligated to pay.
Upon the exercise by the Company of either of the options provided for
in paragraphs (b)(i) or (ii), the Company's obligations to the insured under
this policy for the claimed loss or damage, other than the payments required to
be made, shall terminate, including any liability or obligation to defend,
prosecute or continue any litigation.
7. DETERMINATION, EXTENT OF LIABILITY AND COINSURANCE
This policy is a contract of indemnity against actual monetary
loss or damage sustained or incurred by the insured claimant who has suffered
loss or damage by reason of matters insured against by this policy and only to
the extent herein described.
(a) The liability of the Company under this policy shall not
exceed the least of:
(i) the amount of Insurance stated in Schedule A; or,
(ii) the difference between the value of the insured
estate or interest as insured and the value of the insured estate or interest
subject to the defect lien or encumbrance insured against b y this policy.
(b) in the event the Amount of Insurance stated in Schedule A at the
Date of Policy is less than 80 percent of the value of the insured estate or
interest or the full consideration paid for the land, whichever is less, or if
subsequent to the Date of Policy an improvement is erected on the land which
increases the value of the
<PAGE>
insured estate or interest by at least 20 percent over the Amount of Insurance
stated in Schedule A, then this Policy is subject to the following:
(i) where no subsequent improvement has been made, as to any
partial loss, the Company shall only pay the loss pro rata in the proportion
that the amount of insurance at Date of Policy bears to the total value of the
insured estate or interest at Date of Policy; or
(ii) where a subsequent improvement has been made, as to any
partial loss, the Company shall only pay the loss pro rata in the proportion
that 120 percent of the Amount of Insurance stated in Schedule A bears to the
sum of the amount of Insurance stated in Schedule A and the amount expended for
the improvement.
The provisions of this paragraph shall not apply to costs, attorney's
fees and expenses for which the Company is liable under this policy, and shall
only apply to that portion of any loss which exceeds, in the aggregate, 10
percent of the Amount of insurance stated in Schedule A.
(c) The Company will pay only those costs, attorneys' fees and expenses
incurred in accordance with Section 4 of these Conditions and Stipulations.
8. APPORTIONMENT
If the land described in Schedule A consists of two or more parcels
which are not used as a single site, and a loss is established affecting one or
more of the parcels but not all, the loss shall be computed and settled on a pro
rata basis as if the amount of insurance under this policy was divided pro rata
as to the value on Date of Policy of each separate parcel to the whole,
exclusive of any improvements made subsequent to Date of Policy, unless a
liability or value has otherwise been agreed upon as to each parcel by the
Company and the insured at the time of the issuance of this policy and shown by
an express statement or by an endorsement attached to this policy.
9. LIMITATION OF LIABILITY
(a) If the Company establishes the title, or removes the alleged
defect, lien or encumbrance, or cures the lack of a right of access to or from
the land, or cures the claim of unmarketability of title, all as insured, in a
reasonably diligent manner by any method, including litigation and the
completion of any appeals therefrom, it shall have fully performed its
obligations with respect to that matter and shall not be liable for any loss or
damage caused thereby.
(b) In the event of any litigation, including litigation by the Company
or with the Company's consent, the Company shall have no liability for loss or
damage until there has been a final determination by a court of competent
jurisdiction, and disposition of all appeals therefrom, adverse to the title as
insured.
(c) The company shall not be liable for loss or damage to any insured
for liability voluntarily assumed by the insured in settling any claim or suit
without the prior written consent of the Company.
<PAGE>
10. REDUCTION OF INSURANCE; REDUCTION OR TERMINATION OF LIABILITY
All payments under this policy, except payments made for costs,
attorneys' fees and expenses, shall reduce the amount of the insurance pro
tanto.
11. LIABILITY NONCUMULATIVE
It is expressly understood that the amount of insurance under this
policy shall be reduced by any amount the Company may pay under any policy
insuring a mortgage to which exception is taken in Schedule B or to which the
insured has agreed, assumed, or taken subject, or which is hereafter executed by
an insured and which is a charge or lien on the estate or interest described or
referred to in Schedule A, and the amount so paid shall be deemed a payment
under this policy to the insured owner.
12. PAYMENT OF LOSS
(a) No payment shall be made without producing this policy for
endorsement of the payment unless the policy has been lost or destroyed, in
which case proof of loss or destruction shall be furnished to the satisfaction
of the Company.
(b) When liability and the extent of loss or damage has been definitely
fixed in accordance with these Conditions and Stipulations, the loss or damage
shall be payable within 30 days thereafter.
13. SUBROGATION UPON PAYMENT OR SETTLEMENT
(a) The Company's Right of Subrogation.
Whenever the Company shall have settled and paid a claim under this
policy, all right of subrogation shall vest in the Company unaffected by any act
of the insured claimant.
The Company shall be subrogated to and be entitled to all rights and
remedies which the insured claimant would have had against any person or
property in respect to the claim had this policy not been issued. If requested
by the Company, the insured claimant shall transfer to the Company all rights
and remedies against any person or property necessary in order to perfect this
right of subrogation. The insured claimant shall permit the Company to sue,
compromise or settle in the name of the insured claimant and to use the name of
the insured claimant in any transaction or litigation involving these rights or
remedies.
If a payment on account of a claim does not fully cover the loss of the
insured claimant, the company shall be subrogated to these rights and remedies
in the proportion which the Company's payment bears to the whole amount of the
loss.
If loss should result from any act of the insured claimant, as stated
above, that act shall not void this policy, but the Company, in that event,
shall be required to pay only that part of any losses insured against by this
policy which shall exceed the amount, if any, lost to the Company by reason of
the impairment by the insured claimant of the company's right of subrogation.
(b) The Company's Rights Against Non-Insured Obligors.
the Company's right of subrogation against non-insured obligors shall
exist and shall include, without limitation, the rights of the insured to the
indemnities, guaranties, other
<PAGE>
policies of insurance or bonds, notwithstanding any terms or conditions
contained in those instruments which provide for subrogation rights by reason of
this policy.
14. ARBITRATION
Unless prohibited by applicable law, either the Company or the insured
may demand arbitration pursuant to the Title insurance Arbitration Rules of the
American Arbitration Association. Arbitrable matters may include, but are not
limited to, any controversy or claim between the Company and the insured arising
out of or relating to this policy, any service of the Company in connection with
its issuance or the breach of a policy provision or other obligation. All
arbitrable matters when the amount of Insurance is $1,000,000 or less shall be
arbitrated at the option of either the Company or the insured. All arbitrable
matters when the Amount of Insurance is in excess of $1,000,000 shall be
arbitrated only when agreed to by both the Company and the insured. Arbitration
pursuant to this policy and under the Rules in effect on the date the demand for
arbitration is made or, at the option of the insured, the Rules in effect at
Date of Policy shall be binding upon the parties. The award may include
attorneys' fees only if the laws of the state in which the land is located
permit a court to award attorneys' fees to a prevailing party. Judgment upon the
award rendered by the Arbitrator(s) may be entered in any court having
jurisdiction thereof.
The law of the situs of the land shall apply to an arbitration under
the Title Insurance Arbitration Rules.
A copy of the Rules may be obtained from the Company upon request.
15. LIABILITY LIMITED TO THIS POLICY; POLICY ENTIRE CONTRACT
(a) This policy together with all endorsements, if any, attached hereto
by the Company is the entire policy and contract between the insured and the
Company. In interpreting any provision of this policy, this policy shall be
construed as a whole.
(b) Any claim of loss or damage, whether or not based on negligence,
and which arises out of the status of the title to the estate or interest
covered hereby or by any action asserting such claim, shall be restricted to
this policy.
(c) No amendment of or endorsement to this policy can be made except by
a writing endorsed hereon or attached hereto signed by either the President, a
Vice President, the Secretary, an Assistant Secretary, or validating officer or
authorized signatory of the Company.
16. SEVERABILITY
In the event any provision of the policy is held invalid or
unenforceable under applicable law, the policy shall be deemed not to included
that provision and all other provisions shall remain in full force and effect.
17. NOTICES, WHERE SENT
all notices required to be given the Company and any statement in
writing required to be furnished the Company shall include the
<PAGE>
number of this policy and shall be addressed to the Company at the issuing
office or to:
Chicago Title Insurance Company
Claims Department
171 North Clark Street
Chicago, Illinois 60601-3294
Reorder Form 8256-10
<PAGE>
ENDORSEMENT SCHEDULE 3
Attached to and forming a part of
Policy No. RYKOWSKI
Issued by
CHICAGO TITLE INSURANCE COMPANY
The Company hereby insures the owner of the indebtedness secured by the
mortgage referred to in paragraph of Schedule against loss
which the insured shall sustain in the event that the owner of the adjacent
parcel to the east seeks to enforce right of access over an existing stairway on
Parcel 3 herein described of Schedule B shall, for the purpose of compel the
removal of any portion of the improvements on the land which encroach upon said
easement
This endorsement is made a part of the policy and is subject to all of
the terms and provisions thereof and of any prior endorsements thereto. Except
to the extent expressly stated, it neither modifies any of the terms and
provisions of the policy and any prior endorsements, nor does it extend the
effective date of the policy and any prior endorsements, nor does it increase
the face amount thereof.
Dated:
CHICAGO TITLE INSURANCE COMPANY
By:
--------------------------------
Authorized Signatory
CLTA Form 103.3 (Rev. 9-10-93)
EN 1033-04/13/94 AA
<PAGE>
SUB-OPERATING AGREEMENT
-----------------------
THIS SUB-OPERATING AGREEMENT ("Agreement") is made and entered into this _____
day of __________, 1995, by and between CANYON R.V. PARK, a California General
Partnerships ("Operator"), and CAMP FRASIER, INC., a California Corporation
("Suboperator"), with reference to the following facts:
A. On or about June 16, 1993, Operator and the County of Orange, State
of California ("County") entered into a certain Operating Agreement ("Master
Agreement") for the operation and maintenance of a recreational vehicle
campground at Featherly Regional Park in Orange County, California. A copy of
the Master Agreement is attached hereto, marked Exhibit "A" and made a part
hereof by reference.
B. On or about Juen 16, 1993, County granted to Operator an option
("Phase II Option") to enter into a long-term lease with respect to the
above-referenced recreational vehicle campground, which includes provisions for
the redevelopment and expansion of said facilities. A copy of the Phase II
Option is attached hereto, marked Exhibit "B" and made a part hereof by
reference.
C. Operator and Suboperator desire to enter into this Agreement to
enable Suboperator to operator a summer day camp ona portion of the real
property described in the Master Agreement, on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties agree as follows:
1. Grant of Rights; Premises; Use. Operator hereby grants to
Suboperator and Suboperator hereby accepts from Operator the right to use and
operate the real property described on Exhibit "C" attached hereto and made a
part hereof by reference (the "Premises"), together with al limprovements
thereon, as a summer day camp, subject tothe terms and conditions of this
Agreement.
2. Term. The term of this Agreement shall be for a period of thirty
(30) years commencing on the date that County consents in writing to this
Agreement, subject to earlier termination as provided in this Agreement, subject
to earlier termination as provided in this Agreement. Notwithstanding the
foregoing, Suboperator's rights under this Agreement shall only apply during the
period from approximately June 1 through the Friday before Labor Day of each
year during the term (the "Summer Months"), and Operator shall have the right to
occupy and use the Premises at all other times as well as during Memorial Day,
July 4, Labor Day and from 6:30 P.M. on Friday evenings through 7:00 P.M. on
Sunday evenings of each week during the Summer Months, provided that in
connection with any such occupancy and use by Operator, Operator shall clean,
repair, upkeep and maintain the Premises, and all improvements thereon, in the
same condition as when delivered to Operator ineach instance, reasonable wear
and tear excepted. Notwithstanding the foregoing, Suboperator shall have the
exclusive right, and Operator shall have no right, to use the Premises from
<PAGE>
6:30 P.M. on Friday evenings through 12:00 P.M. on Saturdays during the Summer
Months on three (3) occasions selected by Suboperator and consented to by
Operator, which consent will not be unreasonably withheld, during each year of
the term. The parties acknowledge that the next term of the Summer Months may
vary from year to year depending upon differences in the calendar, school
schedules and other similar factors which may affect the operations of a summer
camp, and to that end each year during the term, not later than the first (1st)
day of March, Suboperator shall submit to Operator for its approval, which will
not be unreasonably withheld, the time period which it deems it to be the Summer
Months for that year.
Any rights, privileges or obligations of Suboperator under this
Agreement which are stated to apply during the term shall not include periods
other than the Summer Months.
3. Rent. Suboperator shall pay to Operator, as Rent for the Premises,
the following amounts:
(a) Fifty cents ($.50) per day for each camper for the first
five (5) years for the term; and
One Dollar ($1) per day for each camper for the next five (5)
years of the terms; and
One and 50/100 Dollar ($1.50) per day for each camper or five
percent (5%) of Suboperator's gross receipts from all sources of its
day camp, whichever is greater, for each year of the term thereafter.
The amounts provided for in this subparagraph (a) shall not be
included in determining percentage rent paid by Operator to County
under Paragraph 7.B and 8 of the Master Agreement.
(b) In addition to the amounts paid under (a) above,
Suboperator shall also pay as Rent the following percentage of its
gross receipts from the following sources:
(i) 71/2% during the first two (2) years and 10%
thereafter of all camper enrollment fees;
(ii) 5% of food and beverage;
(iii) 5% of merchandise.
The amounts provided for in this subparagraph (b) shall, when
received by Operator to County under Paragraph 7.B and 8 of the Master
Agreement.
Rent shall be computed based on any and all fees collected by
Suboperator "as and when collected."
2
<PAGE>
Rent for each calendar month shall be payable on or before the 10th day
of the following calendar month. Any payment not made within five (5) days after
its due date shall be subject to the same late charges as provided for in
Paragraph 13 of the Master Agreement.
Rent shall be payable in lawful money of the United States to Operator
at such place as shall be designated by Operator in writing. Rent for any period
during the term which is for less than one (1) month shall be prorated.
For the purpose of computing Rent, (i) a "camper" shall mean a person
who is duly enrolled in summer camp with Suboperator and who has paid all fees
due to Suboperator for such enrollment, and (ii) a "day" shall mean a day for
which a camper is actually enrolled in summer camp during the Summer Months.
4. Records and Accounts. Suboperator shall at all times during the term
of this Agreement keep or cause to be kept true and complete books, records and
accounts of all financial transactions relating to the operation of the Premises
as a summer camp. All of such books, records and accounts shall be available,
upon reasonable advance notice and during regular business hours, for inspection
and copying by Operator, at Operator's expense, or if required under the Master
Agreement, by the County. Operator shall not be held responsible to county for
the accuracy of record keeping, reporting and payment of the percentage rents
due hereunder.
5. Condition of Premises. Suboperator hereby accepts the Premises in
the condition existing as of the date of execution of this Agreement, subject to
all applicable zoning, municipal, county and state laws, ordinances and
regulations governing and regulating the use of the Premises, and subject to all
covenants, conditions, restrictions and exceptions of record or apparent,
including those which are set our in the Record of Survey 89-1169.
Operator represents and warrants to Suboperator that the Premises, in
its existing state, but without regard to the use for which Suboperator will use
the Premises, does not violate any applicable building code, regulation or
ordinance on the date of execution of this Agreement.
Operator further represents and warrants that it has no knowledge of
the release of any Hazardous Materials from the Premises, or of the existence of
any Hazardous Materials in, on, under or about the Premises, except to the
extent disclosed in that certain LSA Baseline Environmental Assessment dated
July 6, 1992, a copy of which has been delivered by Operator to Suboperator.
6. Damage or Destruction. In the event of material damage to or
destruction of the Premises or the improvements located therein (being damage or
destruction in excess of One Hundred Thousand Dollars ($100,000)) which is not
fully covered by insurance (other than deductibles) or the condemnation or other
governmental taking of all or a substantial portion of the Premises, Suboperator
shall have the option, exercisable upon
3
<PAGE>
written notice to Operator within sixty (60) days after the applicable event, to
terminate this Agreement, whereupon neither Operator nor Suboperator shall have
any further rights or obligations hereunder. If such notice is not given within
the time specified, this Agreement shall continue in full force and effect and
the provisions of the Master Agreement relating to damage or destruction shall
apply.
7. Master Agreement. This Agreement is and shall be at all times
subject and subordinate to the terms and conditions of the Master Agreement.
Except to the extent that the provisions of this Agreement contradict
or are inconsistent with the provisions of the Master Agreement, the terms,
conditions and respective obligations of Operator and Suboperator to each other
under this Agreement, insofar as they are applicable to the Premises. In the
event of any such contradiction or inconsistency, the provisions of this
Agreement shall control. Accordingly, for the purposes of this Agreement,
wherever in the Master Agreement the word "county" is used it shall be deemed to
mean the Operator herein, and wherever in the Master Agreement the word
"Operator" is used it shall be deemed to mean the Suboperator herein.
In the event that the Master Agreement requires the consent or approval
of County to any act or action proposed to be undertaken by Suboperator,
Operator agrees to promptly request such approval or consent. In any such event,
should the County give its consent or approval, then Operator will not withhold
its consent or approval.
During the term of this Agreement, Suboperator expressly assumes and
agrees to perform and comply with, for the benefit of Operator, the following
provisions of the Master Agreement, but only insofar as they are applicable to
the Premises: Paragraphs 8, 9, 11, 12 14-27 inclusive, and General Conditions
1-25, inclusive ("Suboperator's Assumed Obligations"). With respect to the
liability insurance policies, Operator shall be named as an additional insured.
All other obligations of Operator under the Master Lease (including, but not
limited to, the obligations under the paragraphs of the Master Agreement
referenced above insofar as they are applicable to portions of the property
which are the subject of the Master Agreement other than the Premises or which
are applicable to periods other than during the Summer Months) are referred to
as the "Operator's Remaining Obligations".
The failure of Suboperator to comply with or perform any of its Assumed
Obligations of the Master Agreement, or any obligations of this Agreement, where
such failure continues for thirty (30) days after written notice thereof from
Operator to Suboperator shall be cause for termination of this Agreement by
Operator; provided, however, that if more than thirty (30) days are reasonably
required to remedy the failure, then Operator shall not have the right to
terminate this Agreement if Suboperator begins
4
<PAGE>
such cure within the thirty (30) day period and thereafter completes such cure
as diligently as possible.
8. Representations and Covenants of Operator. Operator represents to
Suboperator that the Master Agreement and the Phase II Option are each in full
force and effect, that such agreements have not been amended or modified, except
as shown on Exhibits "A" and "B", respectively, and that no default exists on
the part of Operator or County thereunder. Operator agrees that it will, during
the term, maintain the Master Agreement and the Phase II Option in full force
and effect and that it will not, without the prior written consent of
Suboperator, cancel, terminate or amend or modify the Master Agreement or the
Phase II Option in a manner which adversely affects Suboperator's rights
hereunder.
9. Improvements by Suboperator. Suboperator agrees that it will expend
not less than One Hundred Fifty Thousand Dollars ($150,000) in capital
improvements to the Premises including, but not limited to, installing a
swimming pool, by the end of the first twenty-four (24) months of the term of
this Agreement. All improvements must first be approved by Operator and County,
which approval may not be unreasonably withheld. Failure to give disapproval
within ten (10) days after submission shall be deemed approval. Lien releases
shall be appropriately furnished by Suboperator to Operator.
10. Exercise of Option and Default Under Master Agreement. The parties
acknowledge that the Master Agreement expires on June 30, 1998 and that in order
to give Suboperator the benefit of the full term agreed upon herein, it will be
necessary for Operator to exercise the Phase II Option. Operator agrees that it
will timely and property exercise the Phase II Option (including the performance
of such acts as may be necessary to satisfy all conditions precedent to the
exercise of such option) and, pursuant thereto, it will enter into the lease
which is attached to the instrument evidencing the Phase II Option as Attachment
"I" ("Phase II Lease"). Upon such exercise of the Phase II option and execution
of the Phase II Lease, the Master Agreement shall be deemed to include the Phase
II Lease, except that in such event Suboperator's Assumed Obligations shall be
the following paragraphs of the Phase II Lease: Paragraphs 17-31, inclusive, and
General Conditions 1-25, inclusive.
If, for any reason whatsoever, Operator fails or refuses to duly
exercise the Phase II Option, then Operator shall vacate the Premises as and
when the Master Agreement terminates (exclusive of any extension under the Phase
II Option) and, without any further actions required on the part of Operator or
Suboperator, Suboperator shall be deemed to have acquired all of Operator's
right, title and interest in and to the Master Lease; provided, however, that
(a) upon vacating the Premises, Operator may remove two (2) mobile homes located
on the Premises and personal belongings of Operator (including a lawnmower) and
(b) Suboperator shall have the right toe exercise the Phase II Option, which
right may be exercised at any time during the 12 months following Operator's
failure to timely exercise the Phase II Option.
5
<PAGE>
In the event that Operator commits a default under the Master Agreement
and it does not cure said default within the applicable cure period then, at
Suboperator's election, Operator shall forthwith vacate the Premises and
Suboperator shall be deemed to have acquired all of Operator's right, title and
interest in and to the Master Agreement; provided, however, Suboperator shall be
required to pay to county up to four months of any rent unpaid by Operator which
payment shall constitute a total cure of any of Operator's defaults.
11. Exclusivity. Operator agrees that it will not, during the term,
enter into any other suboperating agreement, sublease, or similar agreement with
any other party allowing for the use of any part of the property which is the
subject of the Master Agreement as a summer camp.
12. Indemnifications. Suboperator agrees to indemnify, defend and hold
harmless Operator, County and their respective shareholders, directors,
officers, employees, agents and representatives, and the heirs, successors and
assigns of each of the foregoing, from any and all liens, claims, demands,
expenses, lawsuits, actions, causes of action, judgments, obligations and other
liabilities of every nature whatsoever, including reasonable attorneys' fees,
arising out of the use or occupancy of the Premises by Suboperator and arising
out of Suboperator's failure to comply with or perform Suboperator's Assumed
Obligations.
Operator agrees to indemnify, defend and hold harmless Suboperator, and
its shareholders, directors, officers, employees, agents and representatives,
and the heirs, successors and assigns of each of the foregoing, from any and all
claims, demands, expenses, lawsuits, actions, causes of action, judgments,
obligations and other liabilities of every nature whatsoever, including
reasonable attorneys' fees, arising out of the use or occupancy of the Premises
by Operator and arising out of Operator's failure to comply with or perform
Operator's Remaining Obligations.
13. Arbitration of Disputes. Any dispute or claim in law or equity
arising out of this Agreement or any resulting transaction shall be decided by
neutral binding arbitration in accordance with the rules of the American
Arbitration Association, and not by court action except as provided by
California law for judicial review of arbitration proceedings. Judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. The parties shall have the right to discovery in
accordance with the Code of Civil Procedure section 1283.05. The filing of a
judicial action to enable the recording of a notice of pending action, for order
of attachment, receivership, injunction, or other provisional remedies, shall
not constitute a waiver of the right to arbitrate under this provision.
NOTICE: By initialing in the space below, the parties are agreeing to
have any dispute arising out of the matters included in the 'ARBITRATION OF
DISPUTES' provision decided by neutral arbitration as provided by California law
and they are giving up
<PAGE>
any rights they might posses to have the dispute litigated in a court or jury
trial.
By initialing in the space below you are giving up your judicial right
to discovery and appeal, unless those rights are specifically included in the
'ARBITRATION OF DISPUTES' provision. If you refuse to submit to arbitration
after agreeing to this provision, you may be compelled to arbitrate under the
authority of the California Code of Civil Procedure.
YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
We have read and understand the foregoing and agree to submit disputes
arising out of the matters included in the 'ARBITRATION OF DISPUTES' provision
to neutral arbitration.
Operator (_____________) Suboperator (________/________)
14. Licenses and Permits. Suboperator shall be solely responsible for
all licenses, permits, fees and taxes as they relate to the Suboperator's
operations and facilities. Operator is to be additionally names as an operator
on the pool permit to be issued by the County Health Department. If any such
taxes, assessments or fees are imposed by an governmental agency in the future,
Suboperator shall be fully responsible for paying such taxes, assessments or
fees.
15. Miscellaneous.
---------------
(a) Capitalized terms used in this Agreement shall have the same
meaning as set forth in the Master Agreement, unless otherwise specified or
unless the context clearly indicates otherwise.
(b) In any action, proceeding or arbitration arising out of this
Agreement, the prevailing party shall be entitled to, in addition to any other
relief awarded, reasonable attorney's fees and costs.
(c) All notices required or permitted to be given pursuant to this
Agreement shall be in writing, and shall be delivered either personally, by
overnight delivery service or by U.S. certified or registered mail, postage
prepaid, return-receipt requested and addressed to the parties at their
respective addresses as they appear below their signatures hereon. l Notices may
also be given by facsimile transmission to the facsimile telephone numbers which
appear below the parties' respective signatures hereon, provided that either (a)
receipt of the facsimile transmission is acknowledged in writing by the
receiving party, which may also be by a facsimile transmission, or (b) the
transmitting party obtains a written confirmation from its own facsimile machine
showing that the entire transmission was transmitted to the receiving party,
without interruption, and a copy of the notice is also sent by one of the other
above-described methods of service. The parties may change their addresses or
facsimile telephone numbers for notice by giving notice of such change in
accordance
7
<PAGE>
with this section. Notices sent by overnight delivery service shall be deemed
received on the business day following the date of deposit with the delivery
service. Mailed notices shall be deemed received upon the earlier of the date of
delivery shown on the return-receipt, or the second business day after the date
of mailing. Notices sent by facsimile transmission shall be deemed served on the
date of transmission, provided that such notices are sent during regular
business hours, otherwise on the next business day.
(d) Captions are for convenience only and shall not be considered
in interpreting any of the provisions hereof.
(e) As used herein, the masculine, feminine or neuter gender, and
the singular or plural number, shall each be deemed to include the others
whenever the context so indicates.
(f) The covenants and conditions herein contained, subject to the
provisions as to assignment, apply to and bind the successors and assigns of the
parties hereto.
(g) Neither Operator or Suboperator shall record this Agreement,
but a short form memorandum hereof may be recorded at the request of
Suboperator.
(h) Upon Suboperator paying all Rent, and all other sums reserved
hereunder and observing and performing all of the covenants, conditions and
provisions on Suboperator's part to be observed and performed hereunder,
Suboperator shall have quiet possession of the Premises for the entire term
hereof, subject to all the provisions of this Agreement and the Master
Agreement.
(i) This Agreement contains all of the agreements of the parties
hereto with respect to any matter covered or mentioned in this Agreement, and no
prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Agreement may be amended or
added to except by an agreement in writing signed by the parties hereto.
(j) If any provision of this Agreement is declared by a court of
competent jurisdiction to be invalid or unenforceable, the remaining provisions
hereof shall nevertheless be given full force and effect.
(k) This Agreement shall be governed by the laws of the State of
California.
(l) Each individual executing this Agreement on behalf of Operator
and Suboperator, respectively, represents and warrants that he is duly
authorized to execute and deliver this Agreement on behalf of said entity, and
that this Agreement is legally binding upon said entity.
(m) The effectiveness of this Agreement is expressly conditioned
upon County's consent to this Agreement within ten (10) days after execution
hereof.
8
<PAGE>
(n) This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same agreement.
(o) Suboperator shall be responsible for paying any and all fees
imposed by the County in approving and executing this Agreement and any future
amendments thereto, and any agreement executed between County and Suboperator
pertaining to the Premises, but not to exceed $1,000.00.
(p) Suboperator shall cooperate with Operator regarding general
operating procedures and rules of the campground, including but not limited to
procedures for access to and from the Premises.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"OPERATOR" "SUBOPERATOR"
CANYON R.V. PARK, a California CAMP FRASIER, INC., a
General Partnership California Corporation
By St. Clair Investments,
Inc., a California
corporation, General
Partner
By /s/Harry Shuster
--------------------------
Harry Shuster, President
By /s/Vernon St. Clair Address
---------------------
Vernon St. Clair 8800 Irvine Center Drive
President --------------------------------
Irvine, CA 92718
--------------------------------
By Mobile Modular Development,
Inc, A Nevada corporation, Facsimile: 310-474-7475
General Partner ---------------------
By /s/John DeFalco
---------------------
John DeFalco
President
Address:
25550 Hawthorne Blvd.
Suite 106
Torrance, CA 90505
Facsimile: (310) 791-1527
9
<PAGE>
EXHIBIT "A"
MASTER LEASE
------------
10
<PAGE>
EXHIBIT "B"
PHASE II OPTION
---------------
11
<PAGE>
EXHIBIT "C"
PREMISES DESCRIPTION
--------------------
12
<PAGE>
PR09B-16
Featherly Regional Park
OPERATING AGREEMENT
PHASE I
THIS OPERATING AGREEMENT is made June 16, 1993 by and between County of Orange,
hereinafter referred to as "COUNTY" it and Canyon Recreational Vehicle Park, a
California general partnership, hereinafter referred to as "OPERATOR," without
regard to number and gender.
1. DEFINITIONS (PMA2.1 N)
The following words in this Operating Agreement have the significance attached
to them in this clause unless otherwise apparent from context:
"Board of Supervisors" means the Board of Supervisors of the County of Orange, a
political subdivision of the State of California.
"Director, EMA/Harbors, Beaches and Parks" means the Director of Harbors,
Beaches and Parks of the County of Orange, or his designee, or upon written
notice to OPERATOR, such other person or entity as shall be designated by the
Board of Supervisors.
"Real Estate Director" means the Director, General Services Agency, Real Estate
of the County of Orange, or his designee, or upon written notice to OPERATOR,
such other person or entity as shall be designated by the Board of Supervisors.
"Auditor-Controller" means the Auditor-Controller of the County of Orange, or
his designee, or upon written notice to OPERATOR, such other person or entity as
shall be designated by Board of Supervisors.
2. PREMISES (PMA3.1 N)
The area covered by this Operating Agreement is that certain property
hereinafter referred to as "Premises," described in "Exhibit A" and shown on
"Exhibit B," which exhibits are attached hereto and by reference made a part
hereof.
A list of improvements provided by County at the commencement of this Operating
Agreement is attached hereto as "Exhibit C" and made a part hereof. OPERATOR
shall provide all other improvements and equipment necessary to fully provide
the services and uses required by the Operating Agreement.
<PAGE>
3. LIMITATION OF THE AGREEMENT (PMA5.1 N)
This Operating Agreement and the rights and privileges granted OPERATOR in and
to the Premises are subject to all covenants, conditions, restrictions, and
exceptions of record or apparent, including those which are set out in the
Record of Survey 89-1169. Nothing contained in this Operating Agreement or in
any document related hereto shall be construed to imply the conveyance to
OPERATOR of rights in the Premises which exceed those owned by COUNTY, or any
representation or warranty, either express or implied, relating to the nature or
condition of the Premises or COUNTY's interest therein. OPERATOR acknowledges
that OPERATOR has conducted a complete and adequate investigation of the
Premises and that OPERATOR has accepted the Premises in its "as is" condition
except as stated below.
Due to Spring, 1993 flood/storm damage, the total number of campsites or other
improvements may vary as stated on Exhibit C. COUNTY hereby agrees, at its
option, to either replace in kind or restore the campsites/improvements to the
same condition as they existed immediately prior to the Spring, 1993 flood/storm
damage as necessary to permit full use and occupancy of the Premises for the
purposes required by the Operating Agreement.
OPERATOR acknowledges receipt of the LSA Baseline Environmental Assessment dated
July 6, 1992, incorporated into this Operating Agreement by reference, for
Featherly Regional Park which outlines the existing environmental conditions on
the Premises and the opportunities and constraints of expanding the RV park and
campground at Featherly Regional Park.
4. REQUIRED AND OPTIONAL SERVICES AND USES (PMBI.3 N)
A. Required Services and Uses. OPERATOR's use of the Premises shall be
limited to the operation of a recreational vehicle park and
campground. Operator shall during the entire Operating Agreement term,
maintain and operate the following:
(1) Recreational Vehicle Park
(2) Youth Group Camping (Affordable)
(3) Tent/Wilderness Camping
(4) Pay Telephones
(5) Drinking Fountains
(6) Public Restrooms
(7) Pump-Out Station
B. Optional Services and Uses. OPERATOR is granted the option to
provide the following optional services and uses:
(1) Merchandise Sales
(2) Food and Beverage Concessions
(3) Vending, Machines
(4) Games Machines
<PAGE>
(5) Newspaper Racks
(6) Equipment Rental
(7) Cable TV/Telephone Service
(8) Day Use/Public Parking
Subject to the prior written approval of Director, EMA/Harbors,
Beaches and Parks, OPERATOR is granted the option to provide those
additional services and uses which are ancillary to and compatible
with the required services and uses herein.
C. Restricted Use. The above-listed services and uses, both required
and optional, shall be the only services and uses permitted. OPERATOR
agrees not to use the Premises for any other purpose or engage in or
permit any other business activity within or from the Premises.
No beer, wine, or other intoxicating beverages shall be sold or
consumed from public areas on the Premises. Sale of such items shall
be limited to the convenience store and areas as designated by the
Director, EMA/Harbors, Beaches and Parks. Consumption shall be limited
to areas specifically designated in writing by the Director,
EMA/Harbors, Beaches and Parks.
OPERATOR shall use its best efforts to ensure that OPERATOR's
customers and guests comply with this requirement. This shall include,
but is not limited to, placement of signs that intoxicating beverages
are prohibited in public areas on the Premises. All such signs shall
be of size, format, design, and location acceptable to the Director,
EMA/Harbors, Beaches and Parks.
The OPERATOR shall be required to observe the principle that the
primary purpose of the Premises are to satisfy the recreational
vehicle and camping needs of those patrons who wish to utilize the
facilities on a short-term basis for recreational purposes. Generally,
it shall be permissible for OPERATOR to allow extended stays when the
number of extended stay patrons does not preclude usage for those
patrons who wish to stay at the facility during the most heavily used
periods (weekends and summertime). The Director, EMA/Harbors, Beaches
and Parks, at his discretion, may withdraw or modify this policy
regarding extended stays upon thirty (30) days written notice, if in
his determination, the OPERATOR is not meeting the purpose of this
clause and/or meeting the recreational needs of the public.
NO TOBACCO PRODUCTS SHALL BE SOLD FROM THE PREMISES.
5. TERM (PMB2.1 N)
The term of this Operating Agreement shall be five (5) years, commencing the
first day of the first full calendar month following the date of execution of
this Operating Agreement by COUNTY.
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In the event COUNTY is unable to deliver possession of the Premises to OPERATOR
at the time of commencement of the term of this Operating Agreement, OPERATOR
agrees that COUNTY and officers, agents, employees, or contractors, shall incur
no liability to OPERATOR for any damage caused thereby, and that this Operating
Agreement shall not become void or voidable, nor shall the term herein specified
be in any way extended, but in such event the obligation to pay rent shall
commence when the COUNTY does deliver possession of the Premises to OPERATOR.
The OPERATOR shall not be liable for any rent until the time that COUNTY
delivers such possession.
6. RENT (PMCI.2 N)
A. Minimum Annual Rent. The minimum annual rent for the Premises shall
be Twenty-Five Thousand Dollars ($25,000). There shall be no minimum
annual rent for the first twelve (12) months of this Operating
Agreement. Should this waiver apply to more than one accounting year,
the applicable minimum annual rent shall be prorated.
Should this Operating Agreement be terminated during an accounting
year, the applicable minimum annual rent shall be prorated.
B. Percentage Rent. Percentage rent for the Premises shall be
calculated using the following percentages of gross receipts from
business operations conducted on or from the Premises:
Percentage of
Service or Use Gross Receipts
-------------- --------------
(1) Recreational Vehicle Park 10%
(2) Youth Group Camping 10%
(3) Tent/Wilderness Camping 10%
(4) Pump-Out Station 10%
(5) Pay Telephones 5%
Percentage rents for approved optional services and uses shall be in
accordance with the Clause entitled RENT FOR OPTIONAL SERVICES AND
USES.
C. Gross Receipts. Gross Receipts shall be defined in accordance with
the provisions of the Clause entitled DEFINITION OF GROSS RECEIPTS.
The term "gross receipt" as it applies to individual optional services
(categories) or uses shall be determined by the Real Estate Director.
D. Annual Rent. OPERATOR shall pay to COUNTY for each accounting year
either the minimum annual rent or the percentage rent, whichever is
greater.
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E. Payment of Rent. Rent payments shall be made in accordance with the
provisions of the Clause entitled RENT PAYMENT PROCEDURE.
7. RENT FOR OPTIONAL SERVICES AND USES (PMC2.1 N
OPERATOR shall pay to COUNTY each accounting year, at the times and in the
manner herein provided, an amount of money equal to the following percentages of
the gross receipts from operations and business conducted on or from the
Premises which are permitted as optional services and uses in the Clause
entitled REQUIRED AND OPTIONAL SERVICES AND USES in the body of the Operating
Agreement. This clause does not authorize or allow any listed service or use.
This clause merely establishes a percentage rent for services and uses that may
be allowed by Director, EMA/Harbors, Bi2aches and Parks.
Percentage of
Service or Use Gross Receipts
-------------- --------------
(1) Merchandise Sales 5%
(2) Food and Beverage Concessions 5%
(3) Vending Machines 5%
(4) Games Machines 5%
(5) Newspaper Racks 5%
(6) Equipment Rental 5%
(7) Cable TV/Telephone Service 5%
(8) Day Use/Public Parking 5%
Rent for other approved services and uses shall be determined by the Real Estate
Director.
8. CHARGE FOR UNAUTHORIZED SERVICES AND USES (PMC3.1 S)
In the event OPERATOR breaches this Operating Agreement by using or permitting
the Premises to be used in any manner other than as expressly permitted under
this Operating Agreement, OPERATOR shall pay COUNTY a sum equal to 100 percent
of the "gross receipts," as defined in the Clause entitled DEFINITION OF GROSS
RECEIPTS for any service or use that is not permitted by this Operating
Agreement, or otherwise authorized in Clause entitled RENT PAYMENT PROCEDURE and
the "charge for late payment" provided in Clause entitled CHARGE FOR LATE
PAYMENT. The existence of the 100 percent charge in this clause, or the payment
or receipt of money under this clause, does not constitute an authorization for
a particular service or use and does not constitute a waiver of COUNTY's right
to require OPERATOR to terminate such service or use.
The parties agree that COUNTY's actual damages, in the event of such a breach by
OPERATOR would be extremely difficult or impossible to determine; therefore, an
amount equal to the amount of 100 percent of such gross receipts has been agreed
upon, after negotiation, as the parties' best estimate of COUNTY's reasonable
damages.
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9. DEFINITION OF GROSS RECEIPTS (PMC5.2 N)
As used in this Clause, the term "OPERATOR" shall include OPERATOR, OPERATOR's
agents, sublessee concessionaires, or licensees, or any person acting under
contract with OPERATOR. The term "gross receipts" upon which percentage rents
for the services and uses listed in the Clause entitled REQUIRED AND OPTIONAL
SERVICES AND USES are to be based shall include:
A. The sale price of all goods, wares, merchandise, and products sold
on or from the Premises by OPERATOR, whether for cash or credit and
whether payment is actuallv made or not, whether delivery of the items
sold is made from the Premises and whether title to such items is
transferred;
B. The charges made by OPERATOR for the sale or rendition on or from
the Premises of services of any nature or kind whatsoever, whether for
cash or credit, whether payment is actually made or not and whether
the services are actually performed or not;
C. All admission, entry, rental, and other fees of any nature or kind
charged by OPERATOR including but not limited to deposits accepted by
OPERATOR);
D. All sums deposited in any coin-operated vending machine or other
device maintained on the Premises, regardless of the ownership of the
machine or device except pay telephones, or whether such sums are
removed and counted by OPERATOR or others and regardless of what
percentage thereof OPERATOR is entitled to receive except pay
telephones and newspaper racks as follows:
(1) Pay telephones gross receipts shall be determined as follows:
a. If telephones are owned by OPERATOR, gross receipts shall
be the gross amount deposited or charged for use of the
telephones.
b. If telephones are owned and operated by a third party,
gross receipts shall be the commission of payment received by
OPERATOR.
(2) For newspaper racks gross receipts shall be the commission or
payment received by OPERATOR from racks owned and operated by a
third party.
The term "gross receipts" also includes the fair rental value of facilities used
by OPERATOR or its employees for purposes other than the business purposes for
which the Premises are operated and the value of all consideration, including
consideration other than cash, received by OPERATOR or its employees in exchange
for the items sold or services rendered.
Under the Clause entitled REQUIRED AND OPTIONAL SERVICES AND USES, OPERATOR has
been granted the option to provide certain additional services and uses
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subject to further approval. The term "gross receipts" as it applies to these
business operations shall be determined by the Real Estate Director at the time
approval is granted.
Gross receipts shall exclude all sales and excise taxes payable by OPERATOR to
federal, state, county, or municipal governments as a direct result of
operations under this Operating Agreement. Refunds for goods returned and
deposits shall be deducted from current gross receipts upon return. Bad debt
losses shall not be deducted from gross receipts.
10. RENT PAYMENT PROCEDURE (PMC6.1 N)
A. Payment of Rent. On or before the twentieth day of each month,
OPERATOR shall deliver to Auditor-Controller a correct statement of
all applicable gross receipts for that portion of the accounting year
which ends with and includes the last day of the preceding calendar
month. The statement shall be signed by OPERATOR or OPERATOR's
responsible agent under penalty of perjury, and shall be in the form
prescribed by Auditor-Controller. Each statement shall indicate:
(1) One-twelfth of the annual minimum rent payment;
(2) The total gross receipts for said portion of the accounting
year, itemized as to each of the business categories for which a
separate percentage rental is established. A breakdown of the
gross receipts of each business conducted on the Premises must be
attached to each statement where a reported business category is
comprised of more than one business operation;
(3) The related itemized amounts of percentage rent computed as
herein provided and the total thereof;
(4) The total rent previously paid by OPERATOR for the accounting
year within which the preceding month falls; and
(5) The rent due for the preceding month.
Concurrently with the rendering of each monthly statement, OPERATOR shall pay to
COUNTY the greater of the following two amounts:
(a) The total percentage rent computed for that portion of the
accounting year ending with and including the last day of the
preceding month [Item (3), above] less total rents previously paid
for the accounting year [Item (4), above], or
(b) One-twelfth of the annual minimum rent, multiplied by the
number of months from the beginning of the accounting year to and
including the preceding month, less total rents previously paid
for the accounting year [Item (4), above].
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B. Place of Payment and Filing. Rental payments shall be delivered to,
and statements required by this Clause and the Clause entitled RECORDS
AND ACCOUNTS) shall be filed with the County of Orange, Office of the
Auditor-Controller, P. 0. Box 567 (630 North Broadway), Santa Ana,
California 92702. The designated place of payment and filing may be
changed at any time by COUNTY upon ten days written notice to
OPERATOR. Rent payments may be made by check made payable to the
County of Orange. OPERATOR assumes all risk of loss if payments are
made by mail.
C. All rent shall be paid in lawful money of the United States of
America, without offset or deduction or prior notice or demand. No
payment by OPERATOR or receipt by COUNTY of a lesser amount than the
rent due shall be deemed to be other than on account of the rent due,
nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and
satisfaction, and COUNTY shall accept such check or payment without
prejudice to COUNTY's right to recover the balance of said rent or
pursue any other remedy in this Operating Agreement.
11. CHARGE FOR LATE PAYMENT (PMC7.1 N)
OPERATOR hereby acknowledges that the late payment of rent or any other sums due
hereunder will cause COUNTY to incur costs not contemplated by this Operating
Agreement, the exact amount of which will be extremely difficult to ascertain.
Such costs include but are not limited to costs such as administrative
processing of delinquent notices, increased accounting costs, etc.
Accordingly, if any payment of rent as specified in the Clause entitled RENT or
of any other sum due COUNTY is not received by COUNTY by the due date, a late
charge of one and one-half percent (1.5%) of the payment due and unpaid plus
$100 shall be added to the payment, and the total sum shall become immediately
due and payable to COUNTY. An additional charge of one and one-half percent
(1.5%) of said payment excluding late charges, shall be added for each
additional month that said payment remains unpaid.
OPERATOR and COUNTY hereby agree that such late charges represent a fair and
reasonable estimate of the costs that COUNTY will incur by reason of OPERATOR's
late payment. Acceptance of such late charges (and/or any portion of the over
due payment) by COUNTY shall in no event constitute a waiver of OPERATOR's
default with respect to such overdue payment, or prevent COUNTY from exercising
any of the other rights and remedies granted hereunder.
12. RECORDS AND ACCOUNTS (PMC8.1 N)
A. Records. OPERATOR shall, at all times during the term of this
Operating Agreement, keep or cause to be kept true and complete books,
records, and accounts of all financial transactions in the operation
of all business activities, of whatever nature,
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conducted in pursuance of the rights granted herein. The records must
be supported by source documents such as sales slips, cash register
tapes, purchase invoices, or other pertinent documents.
Except as otherwise provided herein, all retail sales and charges
shall be recorded by means of cash registers or other comparable
devices which display to the customer the amount of the transaction
and automatically issue a receipt. The registers shall be equipped
with devices which lock in sales totals and other transaction records,
or with counters which are not resettable and which record transaction
numbers and sales details. Totals registered shall be read and
recorded by OPERATOR at the beginning and end of each business day.
In the event of admission charges or rentals, OPERATOR shall issue
serially numbered tickets for each such admission or rental and shall
keep an adequate record of said tickets, both issued and unissued.
All retail sales and charges may be recorded by a system other than
cash registers or other comparable devices provided said system is
approved by Auditor-Controller.
B. The Accounting Year. The accounting year shall be twelve full
calendar months. The accounting year may be established by OPERATOR,
provided OPERATOR notifies Auditor-Controller in writing of the
accounting year to be used. Said accounting year shall be deemed to be
approved by Auditor-Controller unless Auditor-Controller has objected
to OPERATOR's selection in writing within sixty days of OPERATOR's
written notification.
In the event OPERATOR fails to establish an accounting year of its
choice, regardless of the cause, the accounting year shall be
synonymous with the twelve-month period contained in the first
one-year term of the Operating Agreement.
Any portion of a year that is not reconciled, should the accounting
year and the anniversary year of the lease commencement not be the
same, shall be accounted for as if it were a complete accounting year.
Once an accounting year is established, it shall be continued through
the term of the lease unless Auditor-Controller specifically approves
in writing a different accounting year. Auditor-Controller shall only
approve a change in accounting years in the event of undue hardship
being placed on either the OPERATOR or COUNTY, and not because of mere
convenience or inconvenience.
C. Financial Statements. Within ninety (90) days after the end of each
accounting year, OPERATOR shall at his own expense submit to
Auditor-Controller a balance sheet and income statement prepared by a
Certified Public Accountant who is a member of AICPA and the
California Society of CPAS, reflecting business transacted on or from
the
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Premises during the preceding accounting year. The Certified Public
Accountant must attest that the balance sheet and income statement
submitted are an accurate representation of OPERATOR's records as
reported to the United States of America for income tax purposes. At
the same time, OPERATOR shall submit to Auditor-Controller a statement
certified as to accuracy by a Public Accountant who is a member of
AICPA and the California Society of CPAS, wherein the total gross
receipts for the accounting year are classified according to the
categories of business established for percentage rent and listed in
the Clause entitled RENT and the Clause entitled RENT FOR OPTIONAL
SERVICES AND USES and for any other business conducted on or from the
Premises. OPERATOR shall provide COUNTY with copies of any Certified
Public Accountant's (CPA) management letters prepared in conjunction
with their audits of OPERATOR's operations from the Premises. Copies
of management letters shall be provided directly to COUNTY by the CPA
at the same time OPERATOR's copy is provided to OPERATOR.
OPERATOR acknowledges its understanding that any and all of the
Financial Statement submitted to the COUNTY pursuant to this Operating
Agreement become Public Records and are subject to public inspection
pursuant to ss.ss. 6250 et. seq. of the California Government Code.
ALL OPERATOR's books of account and records and supporting source
documents related to this Operating Agreement or to business
operations conducted within or from the Premises shall be kept and
made available at one location within the limits of the County of
Orange. COUNTY shall, through its duly authorized agents or
representatives, have the right to examine and audit said books of
account and records and supporting source documents at any and all
reasonable times for the purpose of determining the accuracy thereof,
and of the monthly statements of sales made and monies received.
Auditor-Controller, upon request of OPERATOR and at said
Auditor-Controller's sole discretion, may authorize the
above-referenced books and records and supporting source documents to
be kept in a single location outside the limits of Orange County
provided OPERATOR shall agree to pay all expenses including but not
limited to transportation, food, and lodging necessary for
Auditor-Controller to send a representative to audit said books and
records. Said right shall not be exercised by Auditor-Controller more
than once each accounting year.
The full cost of said audit, as determined by Auditor-Controller,
shall be borne by OPERATOR if either or both of the following
conditions exist:
(1) The audit reveals an underpayment of more than two percent
(2%) between the rent due as reported and paid by OPERATOR in
accordance with this Operating Agreement and the rent due as
determined by said audit;
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(2) OPERATOR has failed to maintain true and complete books,
records, accounts and supporting source documents in accordance
with Section A "Records" above. The adequacy of records shall be
determined at the sole discretion of Auditor-Controller.
Otherwise, COUNTY shall bear the cost of said audit, excluding the
aforementioned expenses related to audit of documents kept outside the
limits of Orange County.
Upon the request of Auditor-Controller, OPERATOR shall promptly
provide, at OPERATOR's expense, necessary data to enable COUNTY to
fully comply with any and every requirement of the State of California
or the United States of America for information or reports relating to
this Operating Agreement and to OPERATOR's use of the Premises. Such
data shall include, if required, a detailed breakdown of OPERATOR's
receipts and expenses.
In addition to any other remedies available to COUNTY at law or in
equity or under this Operating Agreement, in the event the OPERATOR
fails to maintain and keep books, records, and accounts from the
Premises and/or source documents relating thereto, or to make the same
available to COUNTY for examination and audit, or to record sales
and/or to maintain registers to record sales, or to provide financial
statements and other information to COUNTY regarding gross sales as
required by this Operating Agreement, COUNTY, at COUNTY's option, may:
(I) Perform such examinations, audits, and/or investigations
itself or through agents or employees as COUNTY and/or its
auditors may deem appropriate to confirm the amount of percentage
rents payable by OPERATOR under this Operating Agreement and any
and all costs and/or expenses incurred by COUNTY in connection
therewith shall be promptly reimbursed to COUNTY by OPERATOR upon
demand.
(II) Provide accounting services and/or a system for recording
retail sales and charges, including without limitation, cash
registers, for use by OPERATOR in business transactions upon or
from the Premises, and, at COUNTY's option, maintain personnel on
the Premises to observe and/or record such sales during OPERATOR's
business hours, or from time to time, all at OPERATOR's sole cost
and expense and, in such event, OPERATOR shall promptly reimburse
COUNTY for any and all costs incurred by COUNTY in connection
therewith; and/or
(III) Require that OPERATOR pay percentage rents based on COUNTY's
best good faith estimate of OPERATOR's gross receipts from
business operations conducted on or from the premises and any such
determination made by COUNTY shall be conclusive and binding upon
OPERATOR.
The above costs payable by OPERATOR shall include reimbursement to
COUNTY of COUNTY-provided services at such rates as COUNTY may from
time to time, in good
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faith, establish for such services. In the case of services provided
by COUNTY's employees, such rates shall be sufficient to reimburse
COUNTY for employees' salaries, including employee taxes and benefits
and COUNTY's overhead or, at COUNTY's option, may be the rate for such
services that would be charged by a qualified third party or parties,
approved by COUNTY, if engaged by COUNTY to perform such services.
13. SECURITY DEPOSIT (PMC9.1 S)
A security deposit in the sum of Ten Thousand Dollars ($10,000) shall be
provided to COUNTY by OPERATOR. The security deposit shall take one of the forms
set out below and shall guarantee OPERATOR's full and faithful performance of
all the terms, covenants, and conditions of this Operating Agreement:
A. Cash.
B. The assignment to COUNTY of a savings deposit held in a financial
institution in Orange County acceptable to Real Estate Director. At the
minimum, such assignment shall be evidenced by the delivery to Real
Estate Director of the original passbook reflecting said savings
deposit and a written assignment of said deposit to County of Orange,
GSA/Real Estate, in a form approved by Real Estate Director.
C. A Time Certificate of Deposit from a financial institution in Orange
County wherein the principal sum is made payable to County of Orange,
GSA/Real Estate, or order. Both the financial institution and the form
of the certificate must be approved by Real Estate Director.
D. An instrument or instruments of credit from one or more financial
institutions, subject to regulation by the state or federal government,
pledging that funds necessary to secure performance of the lease terms,
covenants, and conditions are on deposit and guaranteed for payment,
and agreeing that said funds shall be trust funds securing OPERATOR's
performance and that all or any part shall be paid to County of Orange,
GSA/Real Estate, or order upon demand by Real Estate Director. Both the
financial institution(s) and the form of the instrument(s) must be
approved by Real Estate Director. At any time that Real Estate Director
deems appropriate to insure the availability of the security deposit,
Real Estate Director shall have the right to convert any savings
deposit, time certificate of deposit, or instrument of credit to cash
without recourse to OPERATOR.
Regardless of the form in which OPERATOR elects to make said security deposit,
all or a portion of the principal sum shall be available unconditionally to Real
Estate Director, for correcting any default or breach of this Operating
Agreement by OPERATOR, his successors or assigns, or for payment of expenses
incurred by COUNTY as a result of the failure of OPERATOR, his successors or
assigns, to faithfully perform all terms, covenants, and conditions of this
Operating Agreement.
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Should OPERATOR elect to assign a savings deposit, provide a Time Certificate of
Deposit or an instrument of credit to fulfill the security deposit requirements
of this Operating Agreement, said assignment, certificate, or instrument shall
have the effect of releasing the depository or creditor therein from liability
to OPERATOR on account of the payment of any or all of the principal sum to
County of Orange, GSA/Real Estate, or order upon demand by Real Estate Director.
The agreement entered in to by OPERATOR with a financial institution to
establish the deposit necessary to permit assignment or issuance of a
certificate as provided above may allow the payment to OPERATOR or order of
interest accruing on account of said deposit.
In the event Real Estate Director withdraws any or all of the security deposit
as provided herein, OPERATOR shall, within ten (10) days of any withdrawal by
Real Estate Director, replenish the security deposit to maintain it at amounts
as herein required throughout the Operating Agreement. Failure to do so shall be
deemed a default and shall be grounds for immediate termination of this
Operating Agreement.
The security deposit shall be rebated, reassigned, released, or endorsed by Real
Estate Director to OPERATOR or order, as applicable, at the end of the Operating
Agreement, provided OPERATOR has fully and faithfully performed each and every
term, covenant, and condition of this Operating Agreement.
14. CONSTRUCTION AND/OR ALTERATION BY OPERATOR (PMD2.1 N)
A. COUNTY's Consent. No structures, improvements, or facilities shall
be constructed, erected, altered, disposed, demolished, or made within
the Premises without prior written consent of Director, EMA/Harbors,
Beaches and Parks. Any conditions relating to the manner, method,
design, and construction of said structures, improvements, or
facilities fixed by the Director, EMA/Harbors, Beaches and Parks as a
condition to granting such consent, shall be conditions hereof as
though originally stated herein. OPERATOR may, at any time and at its
sole expense, install and place business fixtures and equipment within
any building constructed by OPERATOR, or any pre-existing building
permitted by COUNTY for use by OPERATOR under the terms of this
Operating Agreement.
B. Strict Compliance with Plans and Specifications. All improvements
constructed by OPERATOR within the Premises shall be constructed in
strict compliance with detailed plans and specifications approved by
Director, EMA/Harbors, Beaches and Parks.
15. MECHANICS LIENS OR STOP-NOTICES (PMD4.1 S)
OPERATOR shall at all times indemnify and save COUNTY harmless from all claims,
losses, demands, damages, cost, expenses, or liability costs for labor or
materials in connection with construction, repair, alteration, or installation
of structures, improvements, equipment, or facilities within the Premises, and
from the cost of defending against such claims, including attorney fees and
costs.
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In the event a lien or stop-notice is imposed upon the Premises as a result of
such construction, repair, alteration, or installation, OPERATOR shall either:
1. Record a valid Release of Lien, or
2. Procure and record a bond in accordance with Section 3143 of the
Civil Code, which frees the Premises from the claim of the lien or
stop-notice and from any action brought to foreclose the lien.
Should OPERATOR fail to accomplish either of the two optional actions above
within 15 davs after the filing of such a lien or stop-notice, the Operating
Agreement shall be in default and shall be subject to immediate termination.
16. "AS-BUILT" PLANS AND CONSTRUCTION COSTS (PMD5.1 S)
Within 60 days following completion of any substantial improvement within the
Premises, OPERATOR shall furnish Director, EMA/Harbors, Beaches and Parks a
complete set of reproducibles and two sets of prints of "As-Built" plans. In
addition, OPERATOR shall furnish Director, EMA/Harbors, Beaches and Parks an
itemized statement of the actual construction cost of such improvement. The
statement of cost shall be sworn to and signed by OPERATOR or his responsible
agent under penalty of perjury. OPERATOR must obtain Director, EMA/Harbors,
Beaches and Park's approval of "As Built" plans, and the form and content of the
itemized statement.
17. OWNERSHIP OF IMPROVEMENTS (PMD6.1 S)
All buildings, improvements, and facilities, exclusive of trade fixtures,
constructed or placed within the Premises by OPERATOR must, upon completion, be
free and clear all liens, claims, or liability for labor or material and at
COUNTY's option shall be the property of COUNTY at the expiration of this
Operating Agreement or upon earlier termination hereof. COUNTY retains the right
to require OPERATOR, at OPERATOR's cost, to remove all OPERATOR improvements
located on the Premises at the expiration or termination hereof. Said removal
shall include leveling the Premises, the removal of any underground
obstructions, and the compaction of filled excavations to ninety percent (90%)
compaction.
18. UTILITTES (PME1.1 N)
COUNTY has caused to be constructed the utilities on the Premises, including
sewer, water, telephone, and electricity. OPERATOR acknowledges that the
existing electricity, water, and sewer systems are deemed adequate for the
current level of operations under this Operating Agreement. In the event
OPERATOR changes the uses or intensifies the use/development of the Premises,
OPERATOR shall construc@ or cause to be constructed, all utility facilities
necessary for the increased development and operation of the Premises.
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The utilities and utility systems are the sole responsibility of OPERATOR and
COUNTY is under no obligation to repair or maintain the utilities on the
Premises.
OPERATOR shall be responsible for and pay, prior to the delinquency date, all
charges for utilities supplied to the Premises.
19. MAINTENANCE OBLIGATIONS OF OPERATOR (PME2.1 S)
OPERATOR shall, to the satisfaction of Director, EMA/Harbors, Beaches and Parks,
keep and maintain the Premises and all improvements of any kind which may be
erected, installed, or made thereon in good condition and in substantial repair.
It shall be OPERATOR's responsibility to take all steps necessary or appropriate
to maintain such a standard of condition and repair.
OPERATOR expressly agrees to maintain the Premises in a safe, clean, wholesome,
sanitary condition, to the complete satisfaction of Director, EMA/Harbors,
Beaches and Parks and in compliance with all applicable laws. OPERATOR further
agrees to provide approved containers for trash and garbage and to keep the
Premises free and clear of rubbish and litter. Director, EMA/Harbors, Beaches
and Parks shall have the right to enter upon and inspect the Premises at anytime
for cleanliness and safety.
OPERATOR shall designate in writing to Director, EMA/Harbors, Beaches and Parks
an on-site representative who shall be responsible for the day-to-day operation
and level of maintenance, cleanliness, and general order.
If OPERATOR fails to maintain or make repairs or replacements as required
herein, Director, EMA/Harbors, Beaches and Parks shall notify OPERATOR in
writing of said failure. Should OPERATOR fail to correct the situation within
three days after receipt of written notice, Director, EMA/Harbors, Beaches and
Parks may make the necessary correction or cause it to be made and the cost
thereof, including but not limited to the cost of labor, materials, equipment,
and an administrative fee equal to fifteen percent (15%) of the sum of such
items, shall be paid by OPERATOR within 10 days of receipt of a statement of
said cost from Director, EMA/Harbors, Beaches and Parks. Director, EMA/Harbors,
Beaches and Parks may, at his option, choose other remedies available herein, or
by law.
20. MAINTENANCE OBLIGATIONS OF COUNTY (PME3.1 N)
COUNTY shall have no obligation or responsibility to, remove debris, or to
maintain, repair, or replace improvements constructed within the Premises.
However, upon written notice to OPERATOR, COUNTY may at its discretion choose to
do any grading, sandbagging, filling, construction of levees, replacement and/or
repair of any other improvements in order to enhance public safety and protect
the Premises or other property in Featherly Regional Park. OPERATOR shall not be
limited to or precluded from performing such work as OPERATOR
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and Director, EMA/Harbors, Beaches and Parks agree is appropriate for the
operation and use of the Premises.
21. OPERATION OBLIGATIONS OF OPERATOR (N)
As used in this Clause, the term "OPERATOR" shall include OPERATOR, OPERATORS's
agents, suboperators, concessionaires, or licensees, or any other person acting
under contract with OPERATOR.
A. Standards of Operation.
-----------------------
1. Services and Securi!y. OPERATOR shall operate the Premises in a
manner similar with those prevailing in other recreational vehicle
park and campgrounds furnishing similar services and amenities.
OPERATOR shall at all times during the Operating Agreement term
provide adequate security measures to reasonably protect persons
and property on the Premises, the maintenance of a constant patrol
for the purpose of preserving order and preventing theft,
vandalism, or other improper or unlawful use of the Premises or
any of the facilities.
2. Protection of Environment. TENANT shall take all reasonable
measures available to:
a. Avoid any pollution of the atmosphere or littering of land or
water caused by or originating in, on, or about TENANT"s facility.
b. To protect all wildlife, natural vegetation, and improvements.
B. Property Management
------------------
1. Manager. OPERATOR shall employ a competent manager, "Manager,"
who shall be responsible for the day-to-day operation and level of
maintenance, cleanliness, and general order for the Premises. Such
persons shall be vested with the authority of OPERATOR with
respect to the supervision over the operation and maintenance of
the Premises, including the authority to enforce compliance by
OPERATOR'S, agents, suboperators, concessionaires, or licensees
with the term and conditions of this Lease and any and all rules
and regulations adopted hereunder. OPERATOR expressly agrees that
any notice herein required to be served upon OPERATOR may, at the
option of COUNTY or Director, EMA/Harbors, Beaches and Parks, be
personally served upon said Manager and that such service shall
have the same force and effect as service upon OPERATOR. OPERATOR
shall notify COUNTY in writing of the name of the Manager
currently so employed as provided in the Clause entitled Notices.
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2. Residences. OPERATOR shall have the option to provide on-site
living quarters (hereinafter referred to as "residences") on the
Premises, subject to review and approval by Director, EMA/Harbors,
Beaches and Parks. Said approval shall be conditionally granted to
facilitate better management, maintenance, security, and on-site
control. Said residences may be authorized for the specific
purpose and intent that an on-site manager, maintenance
specialist, or security personnel will be able to provide better
management and level of public service. The residences are not
provided to benefit individual employees or as a means to
circumvent the intent of this clause but to provide better public
service and is intended solely for necessary on-site management
personnel.
Director, EMA/Harbors, Beaches and Parks, at his discretion, may
withdraw consent upon thirty (30) days written notice if, in his
determination, the residences are not providing or meeting the
stated purpose of this Clause.
22. DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS (PME4.1 S)
In the event of damage to or destruction of the buildings, facilities, or
improvements located within the Premises or in the event the constructed
buildings, facilities, or improvements located within the Premises are declared
unsafe or unfit for use or occupancy by a public entity with the authority to
make and enforce such declaration, OPERATOR shall, within 30 days, commence and
diligently pursue to complete the repair, replacement, or reconstruction of
improvements to the same size and floor area as they existed immediately prior
to the event causing the damage or destruction, as necessary to permit full use
and occupancy of the Premises for the purposes required by the Operating
Agreement. Repair, replacement, or reconstruction of improvements within the
Premises shall be accomplished in a manner and according to plans approved by
Director, EMA/Harbors, Beaches and Parks. Except as otherwise provided herein,
termination of this Operating Agreement shall not reduce or nullify OPERATOR's
obligation under this paragraph. With respect to damage or destruction to be
repaired by COUNTY or which COUNTY elects to repair, OPERATOR waives and release
its rights under California Civil Code Sections 1932 (2) and 1933 (4).
23. RISK ACCEPTANCE OF FLOOD ZONE (N)
OPERATOR acknowledges that a portion or all of the Premises covered in this
Operating Agreement is located within an area designated on the Federal
Emergency Management Flood Agency Insurance Rate Maps as a special flood hazard
area which may be subject to flooding and OPERATOR assumes all risks associated
therewith, including but not limited to, destruction of improvements and
interruption of business operations.
OPERATOR shall indemnify and hold harmless COUNTY, its officers, agents, and
employees, from and against any claim, demand, expense, loss, or liability of
any kind or nature which COUNTY, its officers, agents, and employees, may
sustain or incur or which may be imposed upon them or any of them as a result
of, arising out of, or in any way connected with this
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Operating Agreement or with occupancy and use of the Premises by OPERATOR, its
officers, agents, employees, suboperators, licenses, patrons, or visitors.
OPERATOR shall indemnify and hold harmless COUNTY and its officers, agents, and
employees, from and against any claim, demand, expense, loss, or liability of
any kind or nature which may arise from flows of water upon and across the
Premises, whether flood flows are generated naturally, or are surge flows that
arise from upstream water spreading, construction, or maintenance operations, or
are flows that result from intentional releases of water for any purpose from
upstream storage.
Notwithstanding the above, there shall be no minimum monthly rent due for any
given month in which OPERATOR is required to cease operations and/or close the
campground in excess of seven consecutive days or ten cumulative days for any
given month due to flows of water upon and across the Premises. The minimum
annual rent shall be prorated for each month in which no minimum monthly rent is
due. In any event, percentage rent shall apply.
TENANT shall notify Director, EMA/Harbors, Beaches and Parks, in writing, that
the campground is closed due to the conditions specified above within 24 hours
after said facility is closed to the public. Should TENANT fail to properly
notify Director, EMA/Harbors, Beaches and Parks as required above, TENANT shall
not be allowed to waive the monthly minimum rent and/or prorate the minimum
annual rent.
24. INSURANCE (PME5.1.1 S)
OPERATOR shall maintain insurance acceptable to Real Estate Director in full
force and effect throughout the term of this Operating Agreement. The policy or
policies of insurance maintained by OPERATOR shall provide the following limits
and coverages.
A. Liability Insurance
Coverage Minimum Limits
Comprehensive General Liability 1,000,000
B. Fire and Extended Coverage: OPERATOR shall insure all
buildings, facilities and
improvements to at least
90% of their replacement
cost, using a standard form
fire insurance policy
containing the "extended
coverage" endorsement.
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C. Workers Compensation and
Employers Liability
Statutory
Insurance shall be in force the first day of the term of this Operating
Agreement. Each liability insurance policy required by this Operating Agreement
shall contain the following three clauses:
A. "This insurance shall not be cancelled, limited in scope of
coverage or non-renewed until after 30 days written notice has been
given to the County of Orange, General Services Agency/Real Estate,
P. 0. Box 4106, Santa Ana, California 92702-4106."
B. "County of Orange is added as an insured as respects operations of
the named insured at or from the Premises operated pursuant to an
agreement with the County of Orange."
C. "It is agreed that any insurance maintained by the County of Orange
will apply in excess of, and not contribute with, insurance
provided by this policy."
Each property insurance policy required by this Operating Agreement shall
contain Clause A above and the following two clauses:
D. "All rights of subrogation are hereby waived against the County of
Orange and the members of the Board of Supervisors and elective or
appointive officers or employees, when acting within the scope of
their employment or appointment."
E. "County of Orange is named as loss payee on this property insurance
policy."
OPERATOR agrees to deposit with Real Estate Director, at or before the effective
date of this Operating Agreement, certificates of insurance necessary to satisfy
Real Estate Director that the insurance provisions of this Operating Agreement
have been complied with, and to keep such insurance in effect and the
certificates therefor on deposit with Real Estate Director during the entire
term of this Operating Agreement.
Real Estate Director shall retain the right at any time to review the coverage,
form, and amount of the insurance required hereby. If, in the opinion of Real
Estate Director, the insurance provisions in this Operating Agreement do not
provide adequate protection for COUNTY and members of the public using the
Premises, Real Estate Director may require OPERATOR to obtain insurance
sufficient in coverage, form, and amount to provide adequate protection. Real
Estate Director's requirements shall be reasonable but shall be designed to
assure protection from and against the kind and extent of the risks which exist
at the time a change in insurance is required.
Real Estate Director shall notify OPERATOR in writing of changes in the
insurance requirements; and if OPERATOR does not deposit copies of acceptable
insurance policies with
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Real Estate Director incorporating such changes within thirty days of receipt of
such notice, this Operating Agreement shall be in default without further notice
to OPERATOR, and COUNTY shall be entitled to all legal remedies.
The procuring of such required policy or policies of insurance shall not be
construed to limit OPERATOR's liability hereunder nor to fulfill the
indemnification provisions and requirements of this Operating Acreement.
25. ASSIGNING, SUBLETTING, AND ENCUMBERING (PME7.2 N)
Any mortgage, pledge, hypothecation, encumbrance, transfer, suboperating
agreement, suboperating agreement amendment or assignment (hereinafter in this
clause referred to collectively as "Encumbrance") of OPERATOR's interest in the
Premises, or any part or portion thereof, shall first be approved in writing by
COUNTY. Occupancy of the Premises by a prospective transferee, suboperator or
assignee before approval of the transfer, suboperating agreement, or assignment
by TENANT shall constitute a breach of this Operating Agreement. All
suboperating agreements shall be between OPERATOR and suboperator; the entry
into sub-suboperating agreements is prohibited and shall constitute a breach of
this Operating Agreement. ( A rental agreement for a period less than one (1)
year shall not be subject to the requirement of prior approval by County.
If the OPERATOR hereunder is a corporation or an unincorporated association or
partnership, the Encumbrance of any stock or interest in said corporation,
association, partnership in the aggregate exceeding 25 percent shall be deemed
an assignment within the meaning of this Operating Agreement.
Should COUNTY consent to any Encumbrance, such consent shall not constitute a
waiver of any of the terms, covenants, or conditions of this Operating Agreement
or be construed as COUNTY's consent to any further Encumbrance. Such terms,
covenant or conditions shall apply to each and every Encumbrance hereunder and
shall be severally binding upon each and every party thereto. Any document to
mortgage, pledge, hypothecate, encumber, transfer, suboperate, or assign the
Premises or any part thereof shall not be inconsistent with the provisions of
this Operating Agreement and in the event of any such inconsistency, the
provisions of this Operating Agreement shall control.
COUNTY agrees that it will not arbitrarily withhold consent of any Encumbrance,
but COUNTY may withhold consent at its sole discretion if any of the following
conditions exist:
A. OPERATOR or any of his successors or assigns are in default in any
term, covenant or condition of this Operating Agreement, whether
notice of default has or has not been given by COUNTY.
B. The prospective Encumbrancer has not agreed in writing to keep,
perform, and be bound by all the terms, covenants, and conditions
of this Operating Agreement.
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C. All the terms, covenants, and conditions of Encumbrance, including
the consideration therefor of any and every kind, have not been
revealed in writing to COUNTY.
D. OPERATOR has not provided Real Estate Director with a copy of all
documents relating thereto including, but not limited to,
appraisals if any.
E. The construction required of OPERATOR as a condition of this
Operating Agreement has not been completed to the satisfaction of
COUNTY.
F. The processing fee required by COUNTY and set out below has not
been paid to COUNTY by delivery of said fee to COUNTY.
(1) A fee of $1,500 shall be paid to COUNTY for processing
each consent to mortgage, pledge, hypothecation, consent to
assignment, transfer, or Encumbrance submit to COUNTY as
required by this Operating Agreement. This processing fee
shall be deemed earned by COUNTY when paid and shall not be
refundable.
(2) A fee of $500 shall be paid to COUNTY for processing each
suboperating agreement submitted to COUNTY required by this
Operating Agreement. This processing fee shall be deemed
earned by COUNTY when paid and shall not be refundable.
26. HAZARDOUS MATERIALS (PMF9.1 S)
OPERATOR shall not cause or permit any "Hazardous Material," as hereinafter
defined, to be brought upon, kept, or used in or about the Premises. If OPERATOR
breaches the obligations stated herein, or if contamination of the Premises by
Hazardous Materials otherwise occurs for which OPERATOR is legally liable to
COUNTY for damage resulting therefrom, then OPERATOR shall indemnify, defend,
and hold COUNTY harmless from any and all claims, judgments, damages, penalties,
fines, costs, liabilities, or losses (including without limitation, diminution
in value of the Premises, damages for the loss or restriction on use of rentable
or usable space or of any amenity of the Premises, damages arising from any
adverse impact on marketing of space in the Premises or portion of any building
of which the Premises is a part, and sums paid in settlement of claims,
attorneys fees, consultant fees, and expert witness fees) which arise during or
after the agreement term as a result of such contamination. This indemnification
includes without limitation, costs incurred by COUNTY in connection with any
investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state, or legal governmental entity
because of Hazardous Material being present in the soil or ground water or under
the Premises. OPERATOR shall promptly take all actions at its sole cost and
expense as are necessary to clean, remove, and restore the Premises to its
condition prior to the introduction of such Hazardous Material by OPERATOR,
provided OPERATOR shall first have obtained COUNTY's approval and the approval
of any necessary governmental entities.
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<PAGE>
OPERATOR acknowledges that COUNTY may become legally liable for the costs of
complying with laws relating to Hazardous Material which are not the
responsibility of COUNTY hereunder, including the following: (i) Hazardous
Material present in the soil or ground water on the Premises of which COUNTY has
no knowledge as of the Effective Date; (ii) a change in laws, statutes,
ordinances, and other governmental regulations which relate to Hazardous
Material which could cause any material now or hereinafter located on the
Premises to be deemed hazardous, whether known or unknown to COUNTY, or a
violation of any such laws; (iii) Hazardous Material that migrates, flows,
percolates, defuses, or in any way moves on to or under the Premises after the
execution and delivery of this Operating Agreement; (iv) Hazardous Material
present on or under the Premises as a result of any discharge, dumping, or
spilling (whether accidental or otherwise) on the Premises by other operators of
the Premises or their agents, employees, contractors, or invitees, or by others.
COUNTY and OPERATOR agree that the cost of complying with such laws, statutes,
ordinances, or governmental regulations relating to such matters for which the
COUNTY is or may become legally liable shall be paid by OPERATOR to COUNTY,
within ten (10) days following the receipt by OPERATOR of a written demand from
COUNTY to do so. In the event COUNTY subsequently recovers, or is reimbursed
from a third party, all or any portion of the sums paid by OPERATOR, COUNTY
shall reimburse OPERATOR to the extent of any such recovery or reimbursement.
As used herein the term "Hazardous Material" means any hazardous or toxic
substance, material, or waste which is or shall become regulated by any
oovernmental entity, including without limitation, COUNTY acting in its
governmental capacity, the State of California or the United States government.
OPERATOR agrees to comply with all statutes, orders, and governmental
regulations relating to said Hazardous Materials and all amendments and/or
modifications thereto, whether now in effect or hereinafter enacted, for which
COUNTY is or may become legally liable and to promptly take such remedial action
or actions as may be required to place the Premises in compliance with such
statutes, orders, and governmental requirements in a manner and pursuant to
plans and specifications for such work approved by the Director, EMA/Harbors,
Beaches and Parks. Subject to force majeure, all such remedial work required to
comply with said statutes, orders, and governmental requirements in effect as of
the date of this Operating Agreement shall be completed by OPERATOR in a good
and workmanlike manner and in compliance with plans and specifications for such
work approved by the Director, EMA/Harbors, Beaches and Parks within 30 days of
the date of this Operating Agreement. OPERATOR further agrees to waive any and
all claims, demands, liabilities, and/or obligations against and/or of COUNTY
arising out of or resulting from the presence of such Hazardous Materials upon
or within the Premises and hereby agrees to indemnify and hold COUNTY harmless
from any and all claims, demands, liabilities, and/or obligations arising out of
or resulting from the presence of Hazardous Materials upon or within the
Premises including without limitation reasonable attorney's fees and costs, but
excluding any such claims, demands, liabilities, and/or obligations to the
extent based upon causes of action for damages accrued prior to the date of this
Operating, Agreement.
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27. OPERATOR IS SOLE EMPLOYER; DUTY TO INFORM (N)
OPERATOR agrees to notify each and every of its current and future employees
prior to their beginning work at the Premises, and all bargaining units
representing said employees, (1) that OPERATOR is the only employing agency and
employer, (2) that the COUNTY is not an employer with regard to the Premises,
but rather is a party hiring the OPERATOR to perform the terms of this Operating
Agreement, and (3) that employment at the Premises cannot be expected beyond the
term of this Operating Agreement.
OPERATOR agrees to inform each employee in writing of the above details and to
obtain a signed acknowledgement by the employee of such notification.
28. OPERATIONS MANUAL (N)
Prior to the commencement date of this Operating Agreement, OPERATOR shall have
prepared an Operations Manual approved by the Director, EMA/Harbors, Beaches and
Parks specifying in detail OPERATOR's proposed plan for operating and
maintaining the Premises.
Said Operations Manual and the operating procedures contained therein are hereby
incorporated into and included as part of this Operating Agreement. OPERATOR
hereby agrees to operate the premises in strict compliance with the provisions
of said Operations Manual.
29. NOTICES (PMFl0.1 S)
All notices pursuant to this Operating Agreement shall be addressed as set forth
below or as either party may hereafter designate by written notice and shall be
sent through the United States mail in the State of California, duly registered
or certified, return receipt requested, with postage prepaid. If any notice is
sent by registered or certified mail, as aforesaid, the same shall be deemed to
have been served or delivered twenty-four (24) hours after mailing thereof as
above provided. Notwithstanding the above, COUNTY may also provide notices to
OPERATOR by personal delivery or by regular mail and any such notice so given
shall be deemed to have been given upon receipt.
TO: COUNTY TO: OPERATOR
------- ---------
County of Orange Vernon St. Clair
EMA/Harbors, Beaches and Parks St. Clair Investments, Inc.
P.O. Box 4048 435 N. Pacific Coast Hwy.
Santa Ana, CA 92702-4048 Suite 110
Redondo Beach, CA 90277
and
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County of Orange
GSA/Real Estate
P. 0. Box 4106
Santa Ana, CA 92702-4106
30. ATTACHMENTS TO OPERATING AGREEMENT (PMFll.l S)
This Operating Agreement includes the following, which are attached hereto and
made a part hereof:
I. GENERAL CONDITIONS
II. EXHIBIT A - Legal Description
III. EXHIBIT B - Parcel Map
IV. EXHIBIT C - List of Improvements
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IN WITNESS WHEREOF, the parties have executed this Operating Agreement the day
and year first above written.
APPROVED AS TO FORM: OPERATOR
County Counsel ---------
CANYON RV PARK a California general
partnership
By
-----------------------------
Dated
-------------------------
By
-----------------------------------------
St. Clair Investments, Inc.,
APPROVED AS TO AUDIT & ACCOUNTING: General Partner
Auditor-Controller By Vernon St. Clair, President
By /s/Lisa Montijo
----------------------------- By
-----------------------------------------
Mobile Modular Development Inc.,
General Partner
RECOMMENDED FOR APPROVAL: By John De Falco, President
Environmental Management Agency
Harbors, Beaches and Parks
By /s/Robert G. Fisher
-----------------------------
General Services Agency
Real Estate
By
-----------------------------
Real Property Agent
COUNTY
------
SIGNED AND CERTIFIED THAT A COPY
OF THIS DOCUMENT HAS BEEN COUNTY OF ORANGE
DELIVERED TO THE CHAIRMAN OF THE
BOARD
By
- - ------------------------------- -----------------------------------------
Phyllis A. Henderson Chairman, Board of Supervisors
Clerk of the Board of Supervisors,
Orange County, California
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1. GENERAL CONDITIONS (PMGEI.2-26.2 S)
1. TIME (PMGE1.2 S)
Time is of the essence of this Operating Agreement. Failure to comply with any
time requirement of this Operating Agreement shall constitute a material breach
of this Operating Agreement.
2. SIGNS (PMGE2.2 S)
OPERATOR agrees not to construct, maintain, or allow any signs, banners, flags,
etc., upon the Premises except as approved by the Director, EMA/Harbors,
Beaches, and Parks. Unapproved signs, banners, flags, etc., may be removed by
Director, EMA/Harbors, Beaches, and Parks without prior notice to OPERATOR.
3. PERMITS AND LICENSES (PMGE3.2 S)
OPERATOR shall be required to obtain any and all approvals, permits and/or
licenses which may be required in connection with the operation of the Premises
as set out herein. No permit, approval, or consent given hereunder by COUNTY, in
its governmental capacity, shall affect or limit OPERATOR's obligations
hereunder, nor shall any approvals or consents given by COUNTY, as a party to
this Operating Agreement, be deemed approval as to compliance or conformance
with applicable governmental codes, laws, rules, or regulations.
4. CONTROL OF HOURS, PROCEDURES, AND PRICES (PMGE4.2 N)
OPERATOR shall at all times maintain a written schedule delineating the
operating hours and operating procedures for each business operation on or from
the Premises. A schedule of prices charged for all goods and/or services
supplied to the public on or from the Premises shall also be maintained.
Upon written request, OPERATOR shall furnish the Director, EMA/Harbors, Beaches,
and Parks a copy of said schedules and procedures. Should Director of
EMA/Harbors, Beaches, and Parks, upon review and conference with OPERATOR,
decide any part of said schedules or procedures is not justified with regard to
fairly satisfying the needs of the public, OPERATOR, upon written notice from
Director of EMA/Harbors, Beaches, and Parks, shall modify said schedules or
procedures to the satisfaction of said Director.
Primary consideration shall be given to the public's benefit in implementing
this clause. All prices charged for goods and/or services supplied to the public
on or from the
Page 1 of 11
<PAGE>
Premises shall be fair and reasonable, based upon the market prices charged by
other competing and/or comparable businesses or 125% of prices charged by
comparable state parks, whichever is less.
Affordable youth group camping is considered an important public service on the
Premises. To ensure that this service is available to the public and that the
prices charged for this use is affordable, the number of youth group camping
sites and all prices charged for youth group camping shall be subject to prior
written approval by the Director, EMA/Harbors, Beaches and Parks.
OPERATOR agrees that he will operate and manage the services and facilities
offered in a competent and efficient manner at least comparable to other well
managed operations of similar type.
OPERATOR shall at all times retain active, qualified, competent, and experienced
personnel to supervise OPERATOR's operation and to represent and act for
OPERATOR.
OPERATOR shall require its attendants and employees to be properly dressed,
clean, courteous, efficient, and neat in appearance at all times. OPERATOR shall
not employ any person(s) in or about the Premises who shall use offensive
language or act in a loud, boisterous, or otherwise improper manner.
OPERATOR shall maintain a close check over attendants and employees to insure
the maintenance of a high standard of service to the public. OPERATOR shall
replace any employee whose conduct is detrimental to the best interests of the
public.
OPERATOR's failure to comply with the provisions of this clause shall constitute
a serious breach of this Operating Agreement and COUNTY may immediately
terminate this Operating Agreement.
5. OPERATING AGREEMENT ORGANIZATION (PMGE5.2 S)
The various headings and numbers herein, the grouping of provisions of this
Operating Agreement into separate clauses and paragraphs, and the organization
hereof, are for the purpose of convenience only and shall not be considered
otherwise.
6. AMENDMENTS (PMGE6.2 S)
This Operating Agreement is the sole and only agreement between the parties
regarding the subject matter hereof; other agreements, either oral or written,
are void. Any changes to this Operating Agreement shall be in writing and shall
be properly executed by both parties.
Page 2 of 11
<PAGE>
7. UNLAWFUL USE (PMGE7.2 S)
OPERATOR agrees no improvements shall be erected, placed upon, operated, nor
maintained within the Premises, nor any business conducted or carried on therein
or therefrom, in violation of the terms of this Operating Agreement, or of any
regulation, order of law, statute, bylaw, or ordinance of a governmental agency
having jurisdiction.
8. NONDISCRIMINATION (PMGE8.2 S)
OPERATOR agrees not to discriminate against any person or class of persons by
reason of sex, age, race, color, creed, physical handicap, or national origin in
employment practices and in the activities conducted pursuant to this Operating
Agreement. OPERATOR shall make its accommodations and services available to the
public on fair and reasonable terms.
9. INSPECTION (PMGE9.2 S)
COUNTY or its authorized representative shall have the right at all reasonable
times to inspect the Premises to determine if the provisions of this Operating
Acreement are being complied with.
10. HOLD HARMLESS (PMGE10.2 S)
OPERATOR hereby waives all claims and recourse against COUNTY including the
right of contribution for loss or damage of persons or property arising from,
growing out of or in any way connected with or related to this agreement except
claims arising from the concurrent active or sole negligence of COUNTY, its
officers, agents, and employees. OPERATOR hereby agrees to indemnify, hold
harmless, and defend COUNTY, its officers, agents, and employees against any and
all claims, loss, demands, damages, cost, expenses or liability costs arising
out of the operation or maintenance of the property described herein, and/or
OPERATOR's exercise of the rights under this Operating Agreement, except for
liability arising out of the concurrent active or sole negligence of COUNTY, its
officers, agents, or employees, including the cost of defense of any lawsuit
arising therefrom. In the event COUNTY is named as co-defendant, OPERATOR shall
notify COUNTY of such fact and shall represent COUNTY in such legal action
unless COUNTY undertakes to represent itself as co-defendant in such legal
action, in which event OPERATOR shall pay to COUNTY its litigation costs,
expenses and attomey's fees. In the event judgment is entered against COUNTY and
OPERATOR because of the concurrent active negligence of COUNTY and OPERATOR,
their officers, agents, or employees, an apportionment of liability to pay such
judgment shall be made by a court of competent jurisdiction. Neither party shall
request a jury apportionment.
Page 3 of 11
<PAGE>
11. TAXES AND ASSESSMENTS (PMGE11.2 S)
This Operating Agreement may create a possessory interest which is subject to
the payment of taxes levied on such interest. It is understood and agreed that
all taxes and assessments (including but not limited to said possessory interest
tax) which become due and payable upon the Premises or upon fixtures, equipment,
or other property installed or constructed thereon, shall be the full
responsibility of OPERATOR, and OPERATOR shall cause said taxes and assessments
to be paid promptly.
12. SUCCESSORS IN INTEREST (PMGE12.2 S)
Unless otherwise provided in this Operating Agreement, the terms, covenants, and
conditions contained herein shall apply to and bind the heirs, successors,
executors, administrators, and assigns of all the parties hereto, all of whom
shall be jointly and severally liable hereunder.
13. CIRCUMSTANCES WHICH EXCUSE PERFORMANCE (PMGE13.2 S)
If COUNTY or TENANT shall be delayed or prevented from the performance of any
act required hereunder by reason of Acts of God, restrictive governmental laws
or regulations, or other cause without fault and beyond the control of the party
obligated (financial inability excepted), performance of such act shall be
excused for the period of the delay and the period for the performance of any
such act shall be extended for a period equivalent to the period of such delay.
14. PARTIAL INVALIDITY (PMGE14.2 S)
If any term, covenant, condition, or provision of this Operating, Agreement is
held by a court of competent jurisdiction to be invalid, void, or unenforceable,
the remainder of the provisions hereof shall remain in full force and effect and
shall in no way be affected, impaired, or invalidated thereby.
15. WAIVER OF RIGHTS (PMGE15.2 S)
The failure of COUNTY or OPERATOR to insist upon strict performance of any of
the terms, covenants, or conditions of this Operating Agreement shall not be
deemed a waiver of any right or remedy that COUNTY or OPERATOR may have, and
shall not be deemed a waiver of the right to require strict performance of all
the terms, covenants, and conditions of the Operating Agreement thereafter, nor
a waiver of any remedy for the subsequent breach or default of any term,
covenant, or condition of the Operating Agreement. Any waiver, in order to be
effective, must be signed by the party whose right or remedy is being waived.
Page 4 of 11
<PAGE>
16. DEFAULT IN TERMS OF THE OPERATING AGREEMENT BY OPERATOR (PMGE16.2 S)
The occurrence of any one or more of the following events shall constitute a
default hereunder by OPERATOR:
(a) The abandonment or vacation of the Premises by OPERATOR.
(b) The failure by OPERATOR to make any payment of rent or any other
sum payable hereunder by OPERATOR, as and when due, where such failure
shall continue for a period of three (3) days after written notice
thereof from COUNTY to OPERATOR; provided, however, that any such
notice shall be in lieu of, and not in addition to, any notice required
under California Code of Civil Procedure Section 1161 et seq.
(c) The failure or inability by OPERATOR to observe or perform any of
the provisions of this Operating Agreement to be observed or performed
by OPERATOR, other than specified in (a) or (b) above, where such
failure shall continue for a period of ten (10) days after written
notice thereof from COUNTY to OPERATOR; provided, however, that any
such notice shall be in lieu of, and not in addition to, any notice
required under California Code of Civil Procedure Section 1161 et seq.;
provided, further, that if the nature of such failure is such that it
can be cured by OPERATOR but that more than ten (10) days are
reasonably required for its cure (for any reason other than financial
inability), then OPERATOR shall not be deemed to be in default if
OPERATOR shall commence such cure within said ten (10) days, and
thereafter diligently prosecutes such cure to completion.
(d) (i) The making by OPERATOR of any general assignment for the
benefit of creditors; (ii) a case is commenced by or against OPERATOR
under Chapters 7, 11 or 13 of the Bankruptcy Code, Title 11 of the
United States Code as now in force or hereafter amended and if so
commenced against OPERATOR, the same is not dismissed within sixty (60)
days; (iii) the appointment of a trustee or receiver to take possession
of substantially all of OPERATOR's assets located at the Premises or of
OPERATOR's interest in this Operating Agreement where such seizure is
not discharged within thirty (30) days; or (iv) OPERATOR's convening of
a meeting of its creditors or any class thereof for the purpose of
effecting a moratorium upon or composition of its debts. In the event
of any such default, neither this Operating Agreement nor any interests
of OPERATOR in and to the Premises shall become an asset in any of such
proceedings and, in any such event and in addition to any and all
rights or remedies of the COUNTY hereunder or by law; provided, it
shall be lawful for the COUNTY to declare the term hereof ended and to
re-enter the Premises and take possession thereof and remove all
persons therefrom, and OPERATOR and its creditors (other than COUNTY)
shall have no further claim thereon or hereunder.
Page 5 of 11
<PAGE>
In the event of any default by OPERATOR, then, in addition to any other
remedies available to COUNTY at law or in equity, COUNTY may exercise
the following remedies:
(A) COUNTY may terminate this Operating Agreement and all rights of
OPERATOR hereunder by giving written notice of such termination to
OPERATOR. In the event that COUNTY shall so elect to terminate this
Operating Agreement, then COUNTY may recover from OPERATOR:
(i) The worth at the time of award of the unpaid rent and
other charges, which had been earned as of the date of the
termination hereof;
(ii) The worth at the time of award of the amount by which the
unpaid rent and other charges which would have been earned
after the date of the termination hereof until the time of
award exceeds the amount of such rental loss that OPERATOR
proves could have been reasonably avoided;
(iii) The worth at the time of award of the amount by which
the unpaid rent and other charges for the balance of the term
hereof after the time of award exceeds the amount of such
rental loss that OPERATOR proves could be reasonably avoided;
(iv) Any other amount necessary to compensate COUNTY for all
the detriment proximately caused by OPERATOR's failure to
perform its obligations under this Operating Agreement or
which in the ordinary course of things would be likely to
result therefrom, including, but not limited to, the cost of
recovering possession of the Premises, expenses of reletting,
including necessary repair, renovation and alteration of the
Premises, reasonable attorneys' fees, expert witness costs,
and any other reasonable costs; and
(v) Any other amount which COUNTY may by law hereafter be
permitted to recover from OPERATOR to compensate COUNTY for
the detriment caused by OPERATOR's default.
The term "rent" as used herein shall be deemed to be and to
mean the annual rent and all other sums required to be paid by
OPERATOR pursuant to the terms of this Operating Agreement.
All such sums, other than the annual rent, shall be computed
on the basis of the average monthly amount thereof accruing
during the 24-month period immediately prior to default,
except that if it becomes necessary to compute such rental
before such 24-month period has occurred, then such sums shall
be computed on the basis of the average monthly amount during
such shorter period. As used in subparagrapbs (i) and (ii)
above, the "worth at the time of award" shall be computed by
allowing interest at the maximum rate permitted by law. As
used in subparagraph (iii)
Page 6 of 11
<PAGE>
above, the "worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one
percent (1%), but not in excess of ten percent (10%) per
annum.
(B) Continue this Operating Agreement in effect without terminating
OPERATOR's right to possession even though OPERATOR has breached this
Operating Agreement and abandoned the Premises and to enforce all of
COUNTY's rights and remedies under this Operating Agreement, at law or
in equity, including the right to recover the rent as it becomes due
under this Operating Agreement; provided, however, that COUNTY may at
any time thereafter elect to terminate this Operating Agreement for
such previous breach by notifying OPERATOR in writing that OPERATOR's
right to possession of the Premises has been terminated.
(C) Nothing in this Section shall be deemed to affect OPERATOR's
indemnity of COUNTY liability or liabilities based upon occurrences
prior to the termination of this Operating Agreement for personal
injuries or property damage under the indemnification clause or clauses
contained in this Operating Agreement.
No delay or omission of COUNTY to exercise any right or remedy shall be
construed as a waiver of such right or remedy or any default by OPERATOR
hereunder. The acceptance of COUNTY of rent or any other sums hereunder shall
not be (i) a waiver of any preceding breach or default by OPERATOR of any
provision thereof, other than the failure of OPERATOR to pay the particular rent
or sum accepted, regardless of COUNTY's knowledge of such preceding breach or
default at the time of acceptance of such rent or sum, or (ii) waiver of
COUNTY's right to exercise any remedy available to COUNTY by virtue of such
breach or default. No act or thing done by COUNTY or COUNTY's agents during the
term of this Operating Agreement shall be deemed an acceptance of a surrender of
the Premises, and no agreement to accept a surrender shall be valid unless in
writing and signed by COUNTY.
Any installment or rent due under this Operating Agreement or any other sums not
paid to COUNTY when due (other than interest) shall bear interest at the maximum
rate allowed by law from the date such payment is due until paid, provided,
however, that the payment of such interest shall not excuse or cure the default.
All covenants and agreements to be performed by OPERATOR under any of the terms
of this Operating Agreement shall be performed by OPERATOR at OPERATOR's sole
cost and expenses and without any abatement of rent. If OPERATOR shall fail to
pay any sum of money, other than rent required to be paid by it hereunder or
shall fail to perform any other act on its part to be performed hereunder, or to
provide any insurance or evidence of insurance to be provided by OPERATOR, then
in addition to any other remedies provided herein, COUNTY may, but shall not be
obligated to do so,
Page 7 of 11
<PAGE>
and without waiving or releasing OPERATOR from any obligations of OPERATOR, make
any such payment or perform any such act on OPERATOR's part to be made or
performed as provided in this Operating Agreement or to provide such insurance.
Any payment or performance of any act or the provision of any such insurance by
COUNTY on OPERATOR's behalf shall not give rise to any responsibility of COUNTY
to continue making the same or similar payments or performing the same or
similar acts. All costs, expenses, and other sums incurred or paid bv COUNTY in
connection therewith, together with interest at the maximum rate permitted by
law from the date incurred or paid by COUNTY shall be deemed to be additional
rent hereunder and shall be paid by OPERATOR with and at the same time as the
next monthly installment of rent hereunder, and any default therein shall
constitute a breach of the covenants and conditions of this Operating Agreement.
17. RESERVATIONS TO COUNTY (PMGE1 8.2 S)
The Premises are accepted as is and where is by OPERATOR subject to any and all
existing easements and Encumbrances. COUNTY reserves the right to install, lay,
construct, maintain, repair, and operate such sanitary sewers, drains, storm
water sewers, pipelines, manholes, and connections; water, oil, and gas
pipelines; telephone and telegraph power lines; and the appliances and
appurtenances necessary or convenient in connection therewith, in, over, upon,
through, across, and along the Premises or any part thereof, and to enter the
Premises for any and all such purposes. COUNTY also reserves the right to grant
franchises, easements, rights of way, and permits in, over, upon, through,
across, and along any and all portions of the Premises.
COUNTY reserves the right for:
1) Access, pass, and repass for the purpose of managing the balance of
the wilderness areas of Featherly Regional Park;
2) Use of office space and one desk for the Park Ranger in the
administration building;
3) The use of the maintenance yard for COUNTY vehicle and equipment
storage;
4) To inspect and maintain the interpretive exhibits, including the
permanently installed "SAVI Headworks" exhibits; and
5) To schedule and conduct nature walks, campfires, and other
interpretive programs and the use of the amphitheater in the main
section of the park.
No right reserved by COUNTY in this clause shall be so exercised as to interfere
unreasonably with OPERATOR's operations hereunder or to impair the security of
any secured creditor of OPERATOR.
Page 8 of 11
<PAGE>
COUNTY agrees that rights granted to third parties by reason of this clause
shall contain provisions that the surface of the land shall be restored as
nearly as practicable to its original condition upon the completion of any
construction. COUNTY further agrees that should the exercise of these rights
temporarily interfere with the use of any or all of the Premises by OPERATOR,
the rental shall be reduced in proportion to the interference with OPERATOR's
use of the Premises.
18. HOLDING OVER (PMGE19.2 S)
In the event OPERATOR shall continue in possession of the Premises after the
term of this Operating Agreement, such possession shall not be considered a
renewal of this Operating Agreement but a tenancy from month to month and shall
be governed by the conditions and covenants contained in this Operating
Agreement.
19. CONDITION OF PREMISES UPON TERMINATION (PMGE20.2 S)
Except as otherwise agreed to herein, upon temiination of this Operating
Agreement, OPERATOR shall re-deliver possession of said Premises to COUNTY in
substantially the same condition that existed immediately prior to OPERATOR's
entry thereon, reasonable wear and tear, flood, earthquakes, war, and any act of
war, excepted. References to the "Termination of the Operating Agreement" in
this Operating Agreement shall include termination by reason of the expiration
of the Operating Agreement term.
20. DISPOSITION OF ABANDONED PERSONAL PROPERTY (PMGE21.2 S)
If OPERATOR abandons or quits the Premises or is dispossessed thereof by process
of law or otherwise, title to any personal property belonging to and left on the
Premises fifteen (15) days after such event shall, at COUNTY's option, be deemed
to have been transferred to COUNTY. COUNTY shall have the right to remove and to
dispose of such property without liability therefor to OPERATOR or to any person
claiming under OPERATOR, and shall have no need to account therefor.
21. QUITCLAIM OF OPERATOR'S INTEREST UPON TERMINATION (PMGE22.2 S)
Upon termination of this Operating Agreement for any reason, including but not
limited to termination because of default by OPERATOR, OPERATOR shall execute,
acknowledge, and deliver to COUNTY, within thirty (30) days after receipt of
written demand therefor, a good and sufficient deed whereby all right, title,
and interest of OPERATOR in the Premises is quitclaimed to COUNTY. Should
OPERATOR fail or refuse to deliver the required deed to COUNTY, COUNTY may
prepare and record a notice reciting the failure of OPERATOR to execute,
acknowledge, and deliver such deed and said notice shall be conclusive evidence
of the termination of this Operating
Page 9 of 11
<PAGE>
Agreement and of all rights of OPERATOR or those claiming under OPERATOR in and
to the Premises.
22. COUNTY'S RIGHT TO RE-ENTER (PMGE23.2 S)
OPERATOR agrees to yield and peaceably deliver possession of the Premises to
COUNTY on the date of termination of this Operating Agreement, whatsoever the
reason for such termination.
Upon giving written notice of termination to OPERATOR, COUNTY shall have the
right to re-enter and take possession of the Premises on the date such
termination becomes effective without further notice of any kind and without
institution of summary or regular legal proceedings. Termination of the
Operating Agreement and re-entry of the Premises by COUNTY shall in no way alter
or diminish any obligation of OPERATOR under the lease terms and shall not
constitute an acceptance or surrender.
OPERATOR waives any and all right of redemption under any existing or future law
or statute in the event of eviction from or dispossession of the Premises for
any lawful reason or in the event COUNTY re-enters and takes possession of the
Premises in a lawful manner.
23. AUTHORITY OF OPERATOR (PMGE 24.2 S)
If OPERATOR is a corporation, each individual executing this Operating Agreement
on behalf of said corporation represents and warrants that he is duly authorized
to execute and deliver this Operating Agreement on behalf of said corporation,
in accordance with the by-laws of said corporation, and that this Operating
Agreement is binding upon said corporation.
24. PUBLIC RECORDS (PMGE25.2 S)
Any and all written information submitted to and/or obtained by COUNTY from
OPERATOR or any other person or entity having to do with or related to this
Operating Agreement and/or the Premises, either pursuant to this Operating
Agreement or otherwise, at the option of COUNTY, may be treated as a public
record open to inspection by the public pursuant to the California Records Act
(Government Code Section 6250, Et Seq.) as now in force or hereafter amended, or
any Act in substitution thereof, or otherwise made available to the public and
OPERATOR hereby waives, for itself, its agents, employees, subtenants, and any
person claiming by, through or under OPERATOR, any right or claim that any such
information is not a public record or that the same is a trade secret or
confidential information and hereby agrees to indemnify and hold COUNTY harmless
from any and all claims, demands, liabilities, and/or obligations arising out of
or resulting from a claim by OPERATOR or any third party
Page 10 of 11
<PAGE>
that such information is a trade secret, or confidential, or not subject to
inspection by the public, including without limitation reasonable attorneys'
fees and costs.
25. RELATIONSHIP OF PARTIES (PMGE26.2 S)
The relationship of the parties hereto is that of COUNTY and OPERATOR, and it is
expressly understood and agreed that COUNTY does not in any way or for any
purpose become a partner of OPERATOR in the conduct of OPERATOR's business or
otherwise, or a joint venturer with OPERATOR, and the provisions of this
Operating Agreement and the agreements relating to rent payable hereunder are
included solely for the purpose of providing a method by which rental payments
are to be measured and ascertained.
Page 11 of 11
<PAGE>
6/15/93
LEGAL DESCRIPTION OF FEATHERLY PARK LEASE AREA 1
THOSE PORTIONS OF "PARCEL 101.03", "PARCEL 102.01" AND "PARCELS 103 AND 103.1"
AS DESCRIBED IN THE DEED TO ORANGE COUNTY HARBORS, BEACHES AND PARKS DISTRICT,
RECORDED IN BOOK 14196, PAGES 96 THROUGH 98 INCLUSIVE AND RERECORDED IN BOOK
14249, PAGES 1278 THROUGH 1280 INCLUSIVE, TOGETHER WITH THE PARCEL RELINQUISHED
BY THE STATE OF CALIFORNIA TO THE COUNTY OF ORANGE BY DOCUMENT RECORDED IN BOOK
14011, PAGE 745 INCLUSIVE, ALL OF OFFICIAL RECORDS OF THE COUNTY OF ORANGE,
STATE OF CALIFORNIA, SHOWN AS LEASE AREA 1 ON RECORD OF SURVEY 89-1169, FILED IN
BOOK 141, PAGES 30 THROUGH 36 INCLUSIVE, IN THE OFFICE OF THE ORANGE COUNTY
RECORDER.
CONTAINING 62.970 ACRES
LEGAL DESCRIPTION OF FEATHERLY PARK LEASE AREA 2
THAT PORTION OF "PARCEL 101.03" AS DESCRIBED IN THE DEED TO ORANGE COUNTY
HARBORS, BEACHES AND PARKS DISTRICT, RECORDED IN BOOK 14196, PAGES 96 THROUGH 98
INCLUSIVE AND RERECORDED IN BOOK 14249, PAGES 1278 THROUGH 1280 INCLUSIVE, ALL
OF OFFICIAL RECORDS OF THE COUNTY OF ORANGE, STATE OF CALIFORNIA, SHOWN AS LEASE
AREA 2 ON RECORD OF SURVEY 89-1169, FILED IN BOOK 141, PAGES 30 THROUGH 36
INCLUSIVE, IN THE OFFICE OF THE ORANGE COUNTY RECORDER.
CONTAINING 1,549 ACRES
APPROVED;
- - --------------------------
HAROLD I. COTT
Riglit of Way Engineer
EXHIBIT A
<PAGE>
PLACEHOLDER
EXHIBIT B
PARCEL MAP
<PAGE>
FEATHERLY REGIONAL PARK
RV PARK & CAMPGROUND
IMPROVEMENTS PROVIDED BY COUNTY
Facilities Number/Size
Family RV Campsites (without 119
hook-ups)
Youth Group Campsites 21
Adult Group Campsites 3
Parking Spaces 176
Roads (paved linear feet) 13,200
Lights (street and safety) 56
Rest Rooms
1. Buildings/square feet 8/5040
2. Rest Room toilets/urinals 59/NA
3. Shower buildincs/stalls 4/22
Entry/Control Points 1/100 (sq. ft)
Visitor Center 1/200 (sq. ft)
Administration Offices 1/1500 (sq. ft)
Maintenance Area
Yard 87,120 (sq. ft)
Interior Storage/Office 500 (sq. ft)
Interior Work Area 860 (sq. ft)
Concession Building 1,500 (sq. ft)
All information is deemed reliable but is not guaranteed.
EXHIBIT C
<PAGE>
PR09B- 16
Featherly Regional Park
0 P T I 0 N
PHASE 11
THIS OPTION AGREEMENT is made June 16, 1993, by and between COUNTY OF ORANGE,
hereinafter referred to as "COUNTY," and Canyon Recreational Vehicle Park, a
California general partnership, hereinafter referred to as "OPTIONEE."
R E C I T A L S
OPTIONEE has been granted an Option Phase I for an Operating Agreement for the
operation of the County's RV Park and Campground at Featherly Regional Park.
OPTIONEE proposes to redevelop and expand the RV Park and Campground at
Featherly Regional Park in two additional phases, Phase IIA and Phase IIB. In
order to facilitate this phased redevelopment and expansion and provide
increased public service, COUNTY and OPTIONEE agree to replace the Operating
Agreement and enter into a lease for Phase IIA (hereinafter referred to as
"Lease") attached hereto as ATTACHMENT I and made a part hereof, for the
purposes and uses provided in the Lease.
OPTIONEE and COUNTY also desire a means to amend said Lease to extend the term
of the Lease based on the redevelopment and expansion scheduled for Phase IIB.
COUNTY is willing to amend the Lease to extend the term of the Lease by means of
a lease amendment (hereinafter referred to as" Phase IIB Lease Amendment") and
attached hereto as ATTACHMENT 11 and made a part hereof, to extend the term of
the Lease in accordance with the terms of the Phase IIB Lease Amendment.
NOW, THEREFORE, in consideration of the above, the parties hereto mutually agree
to the following terms and conditions:
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<PAGE>
1. DEFINITIONS (PM02.1 S)
"COUNTY" means the County of Orange. Actions to be taken by the COUNTY under
this Option Agreement shall be taken by the Board of Supervisors of the
political body which executed this Agreement or its representatives specifically
authorized to take such action under this Option Agreement.
"Director, EMA/Harbor, Beaches and Parks" means the Director of Harbors, Beaches
and Parks, Environmental Management Agency of the County of Orange, or upon
written notice to OPTIONEE, Director's designee.
"Real Estate Director" means the Director, General Services Agency, Real Estate
of the County of Orange, or upon written notice to OPTIONEE, Director's
designee.
"Design Review Board" means the Design Review Board to be created by the
Director, EMA/Harbors, Beaches and Parks for the purpose of reviewing and
approving the development plans proposed by OPTIONEE.
"Phase IIA" means the first phase of a two phase redevelopment and expansion
plan for the RV Park and Campground at Featherly Regional Park. Phase IIA
improvements shall consist of adding water and electrical hookups to the
existing RV sites.
"Phase IIB" means the second phase of a two phase redevelopment and expansion
plan for the RV Park and Campground at Featherly Regional Park. Phase IIB shall
consist of expanding the number of RV sites and the addition of sewer hook-ups
to all RV sites.
2. OPTION (PM03.1 S)
COUNTY grants to OPTIONEE an option to enter into a Lease covering said Premises
for the term and in accordance with covenants and conditions set forth in the
Lease and an option to extend the term of the Lease in accordance with the
covenants and conditions set forth in the Phase IIB Lease Amendment. The
purchase price of the option granted herein is included in the purchase price of
the option granted for the Option Phase I.
3. TERM (PM05.1 S)
The term of this option shall be the five (5) years and shall commence upon the
date first written above.
4. CONDITIONS (PM07.1 S)
A. Phase IIA. The option to enter into the Lease may not be exercised
until the following terms and conditions have been met:
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<PAGE>
1. Schematic Plans and Environmental Requirements- Phase IIA
---------------------------------------------------------
Prior to the beginning of the third year of this Option, OPTIONEE shall
submit to the Design Review Board "schematic plans" for development and
use of said Premises, in accordance with requirements of the Lease.
Schematic plans shall be prepared by an architect licensed in the State
of California and shall include:
(a) A site layout of the Premises showing uses, buildings,
landscape development, drainage, and other features;
(b) Schematic floor plans of all structures, simple elevations
of buildings, architectural theme;
(c) A general description of improvements and methods of
operation;
(d) A general outline of specifications indicating materials
and methods of construction and an estimate of the total cost
of improvements planned.
A draft Initial Study, to be prepared at OPTIONEE's expense, will be
submitted by the OPTIONEE to the Design Review Board concurrently with
or prior to the submission of the schematic plans in order for the
County of Orange to determine whether a Negative Declaration or an
Environmental Impact Report will be necessary for the proposed project.
This decision will be made in accordance with County of Orange
procedures.
If a Negative Declaration is determined to be appropriate, the Design
Review Board will approve, rule, reject, or comment as appropriate,
regarding the schematic plans submitted within thirty (30) days after
the day the Negative Declaration becomes official, or the day the
schematic plans were submitted, whichever comes later.
If an Environmental Impact Report is determined appropriate, OPTIONEE
shall obtain a screen check Environmental Impact Report and draft
Environmental Impact Report at its own expense and shall process same
in accordance with County of Orange procedure, and the Design Review
Board will approve, rule, reject, or comment as appropriate regarding
the schematic plans within fifteen days of the certification of
completion of the final Environmental Impact Report, or the day the
schematic plans were submitted, whichever comes later.
In addition, OPTIONEE shall request a finding from the Planning Agency
of the County (or City, if the Premises is located in an incorporated
City), that the proposed development is in conformance with the General
Plan pursuant to Section 65402 of the Government Code.
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<PAGE>
2. Preliminaiy Plans - Phase IIA
-----------------------------
Within ninety (90) days after the date of Design Review Board approval
of schematic plans, OPTIONEE shall submit to the Design Review Board
"preliminary plans" for development and use of said Premises in
accordance with the requirements of the Lease. Preliminary plans shall
be prepared by an architect licensed in the State of California and
shall consist of:
(a) A detailed site plan of the Premises showing all
improvements planned for the site. This plan shall show any
existing and proposed easements affecting the Premises,
ingress and egress to and from the Premises, parking, location
of all utilities, drainage plan, and grade elevations of all
structures;
(b) Floor plans, elevations, and sections of all structures;
(c) Finalized landscape development plans prepared by a
Licensed Landscape Architect with horticulture palette and
irrigation plans;
(d) Structural, mechanical and lighting systems;
(e) Complete outline specifications to cover all phases of the
work;
(f) A detailed cost estimate of all improvements;
(g) Exterior color scheme;
(h) A detailed estimate of the construction schedule; and
(i) Colored rendering or model.
The Design Review Board will approve, rule, reject, or comment on the
preliminary plans within thirty (30) days of the day the preliminary
plans were submitted.
3. Construction Contract Documents - Phase IIA
--------------------------------------------
Within ninety (90) days after the date of Design Review Board approval
of preliminary plans, OPTIONEE shall submit to the Design Review Board
"Construction Contract Documents" and architect's cost estimates for
development of the Premises. "Construction Contract Documents" shall
consist of the following:
(a) Complete architectural, landscape, and engineering working
drawings;
(b) Complete specifications;
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<PAGE>
(c) Construction contract form; and
(d) Construction schedule.
The Design Review Board will approve, rule, reject, or comment on the
construction contract documents within thirty (30) days of the day the
construction contract documents were submitted.
4. At the same time construction contract documents are submitted in
accordance with "3" above, OPTIONEE will submit construction contract
documents to EMA/Regulation for plan check and pay such fees as
required.
5. Within forty-five (45) days after review of construction contract
documents as called for in "3" and "4" above, OPTIONEE shall have
completed all corrections and adjustments in construction contract
documents as required by the Design Review Board, EMA/Regulation, and
other concerned agencies, and shall have obtained Design Review Board
approval and appropriate permits for construction.
6. OPTIONEE has submitted the following to the Real Estate Director:
(a) Satisfactory evidence of OPTIONEE's ability to finance the
cost of the development planned for said Premises in
accordance with the requirements of the Lease. If OPTIONEE
Plans to hypothecate the leasehold as security for a loan,
OPTIONEE shall submit all documents proposed in the loan
transaction along with a request and processing fees for
COUNTY consent to the proposed hypothecation. Such
hypothecation documents shall be submitted in accordance with
the Clause entitled (ASSIGNING, SUBLETTING, AND ENCUMBERING)
of the Lease.
(b) The security deposit as required by the Clause entitled
(SECURITY DEPOSIT) of the Lease.
(c) Assurance of construction completion in accordance with
the Clause entitled (TENANT's ASSURANCE OF CONSTRUCTION
COMPLETION) of the Lease, or a letter of intent to bond that
is sufficient to assure COUNTY that a bond is forthcoming.
(d) Evidence of insurance coverage which fully complies with
the Clause entitled (INSURANCE) of the Lease.
(e) Evidence that the proposed development is in conformance
with the General Plan of the County, or if located within a
City, that it is in conformance with the General Plan of that
City.
-5-
<PAGE>
(f) A properly executed Quitclaim Deed of the Operating
Agreement acceptable to the Real Estate Director. The
Quitclaim Deed will be recorded upon execution by the County
of the Lease.
B. Phase IIB. The option for the Phase IIB Lease Amendment may not be exercised
until the following terms and conditions have been met:
1. Schematic Plans and Environmental Requirements- Phase IIB
---------------------------------------------------------
Prior to the beginning of the fifth year of this Option, OPTIONEE shall
submit to the Design Review Board "schematic plans" for development and
use of said Premises, in accordance with requirements of the Lease.
Schematic plans shall be prepared by an architect licensed in the State
of California and shall include:
(a) A site layout of the Premises showing uses, buildings,
landscape development, drainage, and other features;
(b) Schematic floor plans of all structures, simple elevations
of buildings, architectural theme;
(c) A general description of improvements and methods of
operation;
(d) A general outline of specifications indicating materials
and methods of construction and an estimate of the total cost
of improvements planned.
A draft Initial Study, to be prepared at OPTIONEE's expense, will be
submitted by the OPTIONEE to the Design Review Board concurrently with
or prior to the submission of the schematic plans in order for the
County of Orange to determine whether a Negative Declaration or an
Environmental Impact Report will be necessary for the proposed project.
This decision will be made in accordance with County of Orange
procedures.
If a Negative Declaration is determined to be appropriate, the Design
Review Board will approve, rule, reject, or comment as appropriate,
regarding the schematic plans submitted within thirty (30) days after
the day the Negative Declaration becomes official, or the day the
schematic plans were submitted, whichever comes later.
If an Environmental Impact Report is determined appropriate, OPTIONEE
shall obtain a screen check Environmental Impact Report and draft
Environmental Impact Report at its own expense and shall process same
in accordance with County of Orange procedure, and the Design Review
Board will approve, rule, reject, or comment as appropriate regarding
the schematic plans within fifteen days of the certification of
completion of the final Environmental Impact Report, or the day the
schematic plans were submitted, whichever comes later.
-6-
<PAGE>
In addition, OPTIONEE shall request a finding from the Planning Agency
of the County (or City, if the Premises is located in an incorporated
City), that the proposed development is in conformance with the General
Plan pursuant to Section 65402 of the Government Code.
2. Preliminaiy Plans - Phase IIB
Within ninety (90) days after the date of Design Review Board approval
of schematic plans, OPTIONEE shall submit to the Design Review Board
"preliminary plans" for development and use of said Premises in
accordance with the requirements of the Lease. Preliminary plans shall
be prepared by an architect licensed in the State of California and
shall consist of:
(a) A detailed site plan of the Premises showing all
improvements planned for the site. This plan shall show any
existing and proposed easements affecting the Premises,
ingress and egress to and from the Premises, parking, location
of all utilities, drainage plan, and grade elevations of all
structures;
(b) Floor plans, elevations, and sections of all structures;
(c) Finalized landscape development plans prepared by a
Licensed Landscape Architect with horticulture palette and
irrigation plans;
(d) Structural, mechanical and lighting systems;
(e) Complete outline specifications to cover all phases of the
work;
(f) A detailed cost estimate of all improvements;
(g) Exterior color scheme;
(h) A detailed estimate of the construction schedule; and
(i) Colored rendering or model.
The Design Review Board will approve, rule, reject, or comment on the
preliminary plans within thirty (30) days of the day the preliminary
plans were submitted.
3. Construction Contract Documents - Phase IIB
Within ninety (90) days after the date of Design Review Board approval
of preliminary plans, OPTIONEE shall submit to the Design Review Board
"Construction Contract Documents" and architect's cost estimates for
development of the Premises. "Construction Contract Documents" shall
consist of the following:
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(a) Complete architectural, landscape, and engineering working
drawings;
(b) Complete specifications;
(c) Construction contract form; and
(d) Construction schedule.
The Design Review Board will approve, rule, reject, or comment on the
construction contract documents within thirty (30) days of the day the
construction contract documents were submitted.
4. At the same time construction contract documents are submitted in
accordance with "3" above, OPTIONEE will submit construction contract
documents to EMA/Regulation for plan check and pay such fees as
required.
5. Within forty-five (45) days after review of construction contract
documents as called for in "3" and "4" above, OPTIONEE shall have
completed all corrections and adjustments in construction contract
documents as required by the Design Review Board, EMA/Regulation, and
other concerned agencies, and shall have obtained Design Review Board
approval and appropriate permits for construction.
6. OPTIONEE has submitted the following to the Real Estate Director:
(a) Satisfactory evidence of OPTIONEE's ability to finance the
cost of the development planned for said Premises in
accordance with the requirements of the Lease. If OPTIONEE
Plans to hypothecate the leasehold as security for a loan,
OPTIONEE shall submit all documents proposed in the loan
transaction along with a request and processing fees for
COUNTY consent to the proposed hypothecation. Such
hypothecation documents shall be submitted in accordance with
the Clause entitled (ASSIGNING, SUBLETTING, AND ENCUMBERING)
of the Lease.
(b) Assurance of construction completion in accordance with
the Clause entitled (TENANT's ASSURANCE OF CONSTRUCTION
COMPLETION) of the Lease, or a letter of intent bond that is
sufficient to assure COUNTY that a bond is forthcoming.
(c) Evidence of insurance coverage which fully complies with
the Clause entitled (INSURANCE) of the Lease.
(d) Evidence that the proposed development is in conformance
with the General Plan of the County, or if located within a
City, that it is in conformance with the General Plan of that
City.
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<PAGE>
5. REVIEW BY COUNTY (PM08.1 S)
OPTIONEE hereby acknowledges that one of the purposes of this option is to
afford OPTIONEE and COUNTY the opportunity to determine whether or not OPTIONEE
is able to meet the various conditions of the Option Agreement and obtain the
required approvals as set forth in this Option Agreement. Several of those
conditions involve obtaining review and approval from officers, employees or
agents of COUNTY. Each of those reviews shall be conducted in an independent
manner and nothing contained herein shall be deemed to limit the jurisdiction or
authority otherwise possessed by said officers, employees or agents in the
conduct of such review.
Nothing contained in this Option Agreement shall be deemed to imply that said
approval will be forthcoming, and the failure to issue any such approval or
permit by any officer, employee or agent of COUNTY shall not be deemed in any
manner a breach of this option, nor shall any such denial give raise to any
claim, liability, obligation, or cause of action with respect to this option or
the attached Lease.
OPTIBNEE shall obtain any and all permits, licenses, or approvals that may be
required in connection with the demolition, construction, maintenance, or
operation of the structures and improvements on the Premises including but not
limited to, approvals and permits from the following agencies:
1) County of Orange
2) California Department of Fish and Game
3) California Regional Water Quality Control Board
4) California Department of Housing and Community
Development
5) Army Corps of Engineers
6) City of Yorba Linda
ID addition State and Federal grant funds that may be impacted by project
changes to use may require State and Federal approvals.
COUNTY agrees to consent to any application by OPTIONEE with respect to any
permits or approvals related to activities or improvements approved by COUNTY in
accordance with the Option Agreement which may be required by any governmental
or regulatory agency.
No permit, approval, or consent given by COUNTY or its officers, employees, or
agents, acting in its/their governmental capacity, shall affect or limit
OPTIONEE's obligations under this Option Agreement or the Lease nor shall any
approvals or consents given under this Option Agreement by COUNTY, as a party to
this Option Agreement, be deemed approval as to compliance or conformance with
applicable governmental codes, laws, rules, and/or regulations.
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6. ASSIGNMENT (PM010.1 S)
This Option Agreement shall not be sold, assigned, or otherwise transferred
without the prior written consent of COUNTY. Failure to obtain COUNTY's required
written consent shall render said sale, assignment, or transfer void.
If OPTIONEE hereunder is a corporation or a unincorporated association or
partnership, the sale, transfer, or assignment of any stock or interest in said
corporation, association, or partnership in the aggregate exceeding 25 percent
shall be deemed an assignment within the meaning of this clause.
7. EXERCISE OF OPTION (PM011.1 S)
At any time during the option term regarding Phase IIA and/or Phase IIB that
OPTIONEE shall have performed all conditions as set forth in the Clause entitled
(CONDITIONS) of this Option Agreement for the Lease and/or Phase IIB Lease
Amendment to the satisfaction of COUNTY, OPTIONEE may exercise each portion
(Lease and/or Phase IIB Lease Amendment) of option by giving Real Estate
Director written notice of election do so, accompanied by properly executed
copies of the Lease and/or Phase IIB Lease Amendment in triplicate.
8. EXECUTION OF LEASE (PM012.1 S)
Upon proper exercise of the option to lease by OPTIONEE, as defined in this
Option Agreement, COUNTY shall execute the Lease and/or Phase IIB Lease
Amendment within thirty (30) days.
9. LEASE DATE (PM013.1 S)
It is understood and agreed that the date of the Lease and/or Phase IIB Lease
Amendment shall be the date of execution of the Lease and/or Phase II Lease
Amendment by COUNTY.
10. TERMINATION (PM014.1 S)
Failure of OPTIONEE to meet the terms and conditions of this Option Agreement
fully and satisfactorily within the time limits stated shall absolutely and
conclusively terminate OPTIONEE's rights hereunder, notwithstanding the fact
that COUNTY may choose to negotiate a lease and/or lease amendment with OPTIONEE
within a reasonable time after the expiration of this Option Agreement.
In the event of any such termination, within 5 days of COUNTY's request,
OPTIONEE shall execute, acknowledge, and deliver to COUNTY for recording, a
quitclaim deed or other document reasonably requested to remove any cloud on
title created by this Option Agreement.
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<PAGE>
11. DISCLAIMER OF REPRESENTATIONS OR WARRANTIES (PM015.1 S)
A. OPTIONEE agrees that COUNTY has made no representations, warranties, or
agreements as to any matters concerning the Premises, including, but
without being limited to, the land, marketability of title, topography,
climate, air, water, water rights, utilities, present or future zoning,
soil, subsoil, hazardous substances, waste or materials, the purposes for
which the property is suited, drainage, access to public roads, proposed
routes of roads or extensions thereof or the availability of governmental
permits or approvals of any kind. OPTIONEE represents and warrants to
COUNTY that it and its representatives and employees have made or will make
their own independent inspection and investigation of such property.
B. OPTIONEE acknowledges that COUNTY has made no representations or
warranties regarding the nature of its interest in the Premises. Regardless
of the nature of such interest, OPTIONEE agrees to accept, without
warranty, only such right, title, and interest, if any, as COUNTY may have
in and to such real property.
12. ENTIRE AGREEMENT (PM017.1 S)
This instrument contains the entire agreement between the parties relating to
the option granted by this Option Agreement and all negotiations and agreements
between the parties hereto or their agents with respect to this transaction are
merged herein. Any oral representations, modifications, or waivers concerning
this instrument shall be of no force and effect except in a subsequent
instrument made in writing, and signed by both parties. Time is of the essence
in the performance of the parties' respective obligations herein contained.
Subject to the restrictions against sale, assignment, or other transfer above
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, successors, and assigns.
13. NOTICES (PM018.1 S)
Any notice, tender, or delivery to be given in accordance with this Option
Agreement by either party to the other shall be sent through the United States
Mails duly registered or certified, return receipt requested, with postage
prepaid, or made by personal delivery to the addresses set forth below:
TO: COUNTY TO: OPTIONEE
------- --------
County of Orange Vernon St. Clair
EMA/Harbors, Beaches and Parks St. Clair Investments, Inc.
P. O. Box 4048 435 N. Pacific Coast Hwy.
Santa Ana, CA 92702-4048 Suite 110
Redondo Beach, CA 90277
and
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County of Orange
GSA/Real Estate
P. O. Box 4106
Santa Ana, CA 92702-4106
Either party hereto may from time to time, by written notice to the other,
designate a different address which shall be substituted for the one above
specified.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Option the day and year first
above written.
OPTIONEE
---------
APPROVED AS TO FORM:
County Counsel CANYON RECREATIONAL VEHICLE PARK, a
California general partnership
By
-----------------------------
Dated
-------------------------
By
-----------------------------------------
St. Clair Investments, Inc.
General Partner
By Vernon St. Clair, President
By
-----------------------------------------
Mobile Modular Development Inc.,
General Partner
RECOMMENDED FOR APPROVAL: By John De Falco, President
Environmental Management Agency
Harbors, Beaches and Parks
By /s/Robert G. Fisher
-----------------------------
General Services Agency
Real Estate
By
-----------------------------
Real Property Agent
COUNTY
------
SIGNED AND CERTIFIED THAT A COPY
OF THIS DOCUMENT HAS BEEN COUNTY OF ORANGE
DELIVERED TO THE CHAIRMAN OF THE
BOARD
By
- - ------------------------------- -----------------------------------------
Phyllis A. Henderson Chairman, Board of Supervisors
Clerk of the Board of Supervisors,
Orange County, California
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PR09B- 16
Featherly Regional Park
LEASE
PHASE II
THIS LEASE is made, 19 _ by and between County of Orange, hereinafter referred
to as "LESSOR," and Canyon Recreational Vehicle Park, a California general
partnership, hereinafter referred to as "TENANT," without regard to number and
gender.
1. DEFINITIONS (PMA2.1 S)
The following words in this Lease have the significance attached to them in this
clause unless otherwise apparent from context:
"Board of Supervisors" means the Board of Supervisors of the County of Orange, a
political subdivision of the State of California.
"Director, EMA/Harbors, Beaches and Parks" means the Director of Harbors,
Beaches and Parks, Environmental Management Agency of the County of Orange, or
his designee, or upon written notice to TENANT, such other person or entity as
shall be designated by the Board of Supervisors.
"Real Estate Director" means the Director, General Services Agency, Real Estate
of the County of Orange, or his designee, or upon written notice to TENANT, such
other person or entity as shall be designated by the Board of Supervisors.
"Auditor-Controller" means the Auditor-Controller of the County of Orange, or
his designee, or upon written notice to TENANT, such other person or entity as
shall be designated by Board of Supervisors.
"Phase IIA" means the first phase of a two-phased redevelopment and expansion
plan for the RV Park and Campground at Featherly Regional Park. Phase IIA
improvements shall consist of adding water and electrical hook-ups to the
existing RV sites.
Phase IIB" means the second phase of a two-phased redevelopment and expansion
plan for the RV Park and Campground at Featherly Regional Park. Phase IIB shall
consist of expanding the number of RV sites and the addition of sewer hook-ups
to all RV sites.
ATTACHMENT 1
<PAGE>
2. PREMISES (PMA3.1 S)
LESSOR leases to TENANT that certain property hereinafter referred to as
"Premises," described in "Exhibit A" and shown on "Exhibit B," which exhibits
are attached hereto and by reference made a part hereof.
3. TERMINATION OF PRIOR AGREEMENTS (PMA4.1 S)
It is mutually agreed that this Lease shall terminate and supersede any prior
leases or agreements between the parties hereto covering all or any portion of
the Premises.
4. LIMITATION OF THE LEASEHOLD (PMA5.1 S)
This Lease and the rights and privileges granted TENANT in and to the Premises
are subject to all covenants, conditions, restrictions, and exceptions of record
or apparent, including those which are set out in the Record of Survey 89-116
and the LSA Baseline Environmental Assessment dated July 6, 1992, hereinafter
incorporated into this Lease by reference, for Featherly Regional Park which
outlines the existing environmental conditions on the Premises and the
opportunities and constraints of expanding the RV park and campground at
Featherly Regional Park.
Nothing contained in this Lease or in any document related hereto shall be
construed to imply the conveyance to TENANT of rights in the Premises which
exceed those owned by LESSOR, or any representation or warranty, either express
or implied, relating to the nature or condition of the Premises or LESSOR's
interest therein. TENANT acknowledges that TENANT has conducted a complete and
adequate investigation of the Premises and that TENANT has accepted the Premises
in its "as is" condition.
5. REQUIRED AND OPTIONAL SERVICES (N)
A. Required Services and Uses. LESSOR's primary purpose for entering
into this Lease is to promote the development and operation of a public
recreational vehicle park and campground and other services within the
Premises which are compatible with LESSOR's use of the property. In
furtherance of that purpose. upon completion of construction as
required, TENANT shall during the entire lease term, maintain and
operate the following:
1) Recreational Vehicle Park
2) Youth Group Camping (affordable)
3) Tent/Wilderness Camping
4) Pay Telephones
5) Drinking Fountains
6) Public Restrooms
7) Pump-Out Station
8) Riding and Hiking Trails Staging Areas
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B. Optional Services and Uses. OPERATOR is oranted the option to provide the
following optional services and uses:
1) Merchandise Sales
2) Food and Beverage Concessions
3) Vending Machines
4) Game Machines
5) Newspaper Racks
6) Equipment Rentals
7) Cable TV/Telephone Service
8) Day use/Public Parking
Subject to prior written approval of Director, EMA/Harbors, Beaches and Parks,
OPERATOR is granted the option to provide those additional services and uses
which are ancillary to and compatible with the required services and uses
herein.
C. Restricted Use. The above-listed services and uses, both required and
optional, shall be the only services and uses permitted. TENANT agrees not to
use the Premises for any other purpose or engage in or permit any other business
activity within or from the Premises.
No beer, wine or other intoxicating beverages shall be sold or consumed from
public areas on the Premises. Sale of such items shall be limited to the
convenience store and areas as designated by the Director, EMA/Harbors, Beaches
and Parks. Consumption shall be limited to areas specifically designated in
writing by the Director, EMA/Harbors, Beaches and Parks.
TENANT shall use its best efforts to ensure that TENANT's customers and guests
comply with this requirement. This shall include, but is not limited to,
placement of signs that intoxicating beverages are prohibited in public areas on
the Premises. All such signs shall be of a size, format, design and location
acceptable to the Director, EMA/Harbors, Beaches and Parks.
TENANT shall be required to observe the principle that the primary purpose of
the Premises is to satisfy the recreational vehicle and camping needs of those
patrons who wish to utilize the facilities on a short-term basis. Generally, it
shall be permissible for TENAINT to allow extended stays when the number of
extended stay patrons does not preclude usage for those patrons who wish to stay
at the facility during the most heavily used periods (weekends and summertime).
The Director, EMA/Harbors, Beaches and Parks, at his discretion, may withdraw or
modify this policy regarding extended stays upon thirty (30) days written
notice, if in his determination, TENANT is not meeting the purpose of this
clause and/or meeting the needs of the public.
NO TOBACCO PRODUCTS SHALL BE SOLD ON THE PREMISES.
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6. TERM (PMB2.1 S)
The term of this Lease shall be thirty (30) years, commencing the first day of
the first full calendar month following the date of execution of this Lease by
LESSOR.
7. RENT (PMC1.2 S)
A. Minimum Annual Rent. The minimum annual rent for the Premises shall
be Twenty-Five Thousand Dollars ($25,000). There shall be no minimum
annual rent for the first year of this Lease. Should this waiver apply
to more than one accounting year, the applicable minimum annual rent
shall be prorated.
The minimum annual rent shall be adjusted in accordance with the
provisions of the Clause entitled REVISION OF RENTS.
Should this Lease be terminated during an accounting year, the
applicable minimum annual rent shall be prorated.
B. Percentape Rent. Percentage rent for the Premises shall be
calculated using the following percentages of gross receipts from
business operations conducted on or from the Premises:
Percentage of
Service or Use Gross Receipts
-------------- --------------
(1) Recreational Vehicle Park 10%
(2) Youth Group Camping 10%
(3) Tent/Wilderness Camping 10%
(4) Pump-Out Station 10%
(5) Pay Telephones 5%
Percentage rents for approved optional services and uses shall be in
accordance with the Clause entitled RENT FOR OPTIONAL SERVICES AND
USES.
Percentage rent shall be subject to revision in accordance with the
Clause entitled REVISION OF RENTS.
C. Gross Receipts. Gross Receipts shall be defined in accordance with
the provisions of the Clause entitled DEFINITION OF GROSS RECEIPTS. The
term "gross receipt" as it applies to individual optional uses
(categories) or uses shall be determined by the Real Estate Director.
D. Annual Rent. TENANT shall pay to LESSOR for each accounting year
either the minimum annual rent or the percentage rent, whichever is
greater.
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E. Payment of Rent. Rent payments shall be made in accordance with the
provisions of the Clause entitled RENT PAYMENT PROCEDURE.
8. RENT FOR OPTIONAL SERVICES AND USES (PMC2.1 S)
TENANT shall pay to LESSOR each accounting year, subject to the Clause entitled
REVISION OF RENTS at the times and in the manner herein provided, an amount of
money equal to the following percentages of the gross receipts from operations
and business conducted on or from the Premises which are permitted as optional
services and uses in the Clause entitled REQUIRED AND OPTIONAL SERVICES AND USES
in the body of the Lease. This clause does not authorize or allow any listed
service or use. This clause merely establishes a percentage rent for services
and uses that may be allowed by LESSOR.
Percentage of
Service or Use Gross Receipts
-------------- --------------
(1) Merchandise Sales 5%
(2) Food and Beverage Concessions 5%
(3) Vending Machines 5%
(4) Games Machines 5%
(5) Newspaper Racks 5%
(6) Equipment Rental 5%
(7) Cable TV/Telephone Service 5%
(8) Day Use/Public Parking 5%
Rent for other approved services and uses shall be determined by the Real Estate
Director.
9. CHARGE FOR UNAUTHORIZED SERVICES AND USES (PMC3.1 S)
In the event TENANT breaches this Lease by using or permitting the Premises to
be used in any manner, other than as expressly permitted under this Lease,
TENANT shall pay LESSOR a sum equal to 100 percent of the "gross receipts," as
defined in the Clause entitled DEFINITION OF GROSS RECEIPTS for any service or
use that is not permitted by this lease, or otherwise authorized in the Clause
entitle RENT PAYMENT PROCEDURE and the "charge for late payment" provided in the
Clause entitled CHARGE FOR LATE PAYMENT. The existence of the 100% charge in
this clause, or the payment or receipt of money under this clause, does not
constitute an authorization for a particular service or use and does not
constitute a waiver of LESSOR's right to require TENANT to terminate such
service or use.
The parties agree that LESSOR's actual damages, in the event of such a breach by
TENANT would be extremely difficult or impossible to determine; therefor, an
amount equal to the amount 100% of such gross receipts has been agreed upon,
after negotiation, as the parties' best estimate of LESSOR's reasonable damages.
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10. REVISION OF RENTS (PMC4.5 S)
A. Revision of Percentage Rents. Effective January 1, 2015 and every
ten years thereafter any of the percentage rents specified in the
Clause entitled RENT or the Clause entitled RENT FOR OPTIONAL SERVICES
AND USES shall be subject to periodic revision as provided herein.
To revise any one or more of the percentage rents, either party must
submit a written demand upon the other party between the duties of
April 1 through June 30 of the year immediately preceding the next date
for revision. In the event percentage rent revisions are not determined
until after the date such revisions are to take effect, the revised
percentage rents shall be retroactive to the date such revisions are to
take effect.
The intent and purpose of revision of percentage rents and the
instruction to appraisers, and arbitrator, if necessary, shall be to
adjust percentage rents to reflect current percentage rents for
comparable business activities as of the date the percentage rent is to
take effect. Adjustments shall be made by negotiation; but if agreement
is not reached within two (2) months after demand thereof, LESSOR and
TENANT within sixty (60) days after expiration of the two-month period,
shall each employ a qualified real estate appraiser. The term
"Qualified Real Estate Appraiser," as used herein, shall mean and refer
to a real estate appraiser certified by one of the nationally
recognized professional appraisal associations, qualified for and
experienced in appraising property similar to the Premises. In the
event either party should fail to select a qualified real estate
appraiser within said sixty-day period, then the qualified real estate
appraiser selected by the one party shall be the sole appraiser
responsible for determining the revised percentage rental rates
hereunder, and his opinion shall be binding upon the parties hereto. If
both parties timely select a qualified real estate appraiser, each
appraiser employed by LESSOR and TENANT shall prepare a fully
documented written report which shall contain his opinion of the
current fair percentage rents for services and uses provided by TENANT.
Each appraiser shall, within sixty (60) days from his employment,
deliver a copy of his complete report to both LESSOR and TENANT. LESSOR
and TENANT shall pay the fee of the appraiser each has employed.
LESSOR and TENANT shall review both appraisal reports and shall attempt
to negotiate an agreement on revision of the rental rates. If agreement
cannot be reached within sixty (60) days after receipt of the appraisal
reports, the revision of rents shall be determined by arbitration under
Part 3, Title 9, of the California Code of Civil Procedure. Payment of
expenses for arbitration shall be as provided by 1284.2 of said Part 3,
Title 9 of said Code.
B. Revision of Minimum Annual Rent. On the fifth (5th) anniversary of
the effective date of this Lease, and every five years thereafter, the
minimum annual rent shall be automatically adjusted to the greater of
the following:
(1) Seventy-five percent (75%) of the average (mean) annual rent
paid by TENANT to LESSOR for the preceding three (3) years, or
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(2) The base minimum annual rent of $25,000 adjusted in proportion
to changes in the Consumer Price Index for Los
Angeles--Anaheim--Riverside (All Urban Consumers--All Items)
promulgated by the Bureau of Labor Statistics of the U. S.
Department of Labor. This automatic adjustment shall be calculated
by means of the following formula:
A = $25,000 x B
-
C
A = Adjusted Minimum Annual Rent
B = Monthly index for the fourth month prior to the month in
which each rental rate adjustment is to become effective
C = Monthly index for the month in which the lease becomes
effective
11. DEFINITION OF GROSS RECEIPTS (PMC5.2 S)
As used in this Clause, the term "TENANT" shall include TENANT, TENANT's agents,
sublessee concessionaires, or licensees, or any person acting under contract
with TENANT. The term "cross receipts" upon which percentage rents for the
services and uses listed in the Clause entitled REQUIRED AND OPTIONAL, SERVICES
AND USES) are to be based shall include:
A. The sale price of all goods, wares, merchandise, and products sold
on or from the Premises by TENANT, whether for cash or credit and
whether payment is actually made or not, whether delivery of the items
sold is made from the Premises and whether title to such items is
transferred;
B. The charges made by TENANT for the sale or rendition on or from the
Premises of services of any nature or kind whatsoever, whether for cash
or credit, whether payment is actually made or not and whether the
services are actually performed or not;
C. All admission, entry, rental, and other fees of any nature or kind
charged by TENANT (including but not limited to deposits accepted by
TENANT);
D. All sums deposited in any coin-operated vending machine or other
device maintained on the Premises, regardless of the ownership of the
machine or device except pay telephones, or whether such sums are
removed and counted by TENANT or others and regardless of what
percentage thereof TENANT is entitled to receive; except pay telephones
and newspaper racks as follows:
(1) Pay telephones gross receipts shall be determined as follows:
a. If telephones are owned by OPERATOR, cross receipts shall be
the gross amount deposited or charged for use of the telephones.
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b. If telephones are owned and operated by a third party, gross
receipts shall be the commission or payment received by OPERATOR.
(2) For newspaper racks gross receipts shall be the commission or
payment received by OPERATOR from racks owned and operated by a
third party.
The term "gross receipts" also includes the fair rental value of facilities used
by TENANT or its employees for purposes other than the business purposes for
which the Premises are leased and the value of all consideration, including
consideration other than cash, received by TENANT or its employees in exchange
for the items sold or services rendered.
Under the Clause entitled REQUIRED AND OPTIONAL SERVICES AND USES, TENANT has
been granted the option to provide certain additional services and uses subject
to further approval. The term "gross receipts" as it applies to these business
operations shall be determined by the Real Estate Director at the time approval
is granted.
Gross receipts shall exclude all sales and excise taxes payable by TENANT to
federal, state, county, or municipal governments as a direct result of
operations under this Lease. Refunds for goods returned and deposits shall be
deducted from current gross receipts upon return. Bad debt losses shall not be
deducted from gross receipts.
12. RENT PAYMENT PROCEDURE (PMC6.1 S)
A. Payment of Rent. On or before the twentieth day of each month,
TENANT shall deliver to Auditor-Controller a correct statement of all
applicable gross receipts for that portion of the accounting year which
ends with and includes the last day of the preceding calendar month.
The statement shall be signed by TENANT or TENANT's responsible agent
under penalty of perjury, and shall be in the form prescribed by
Auditor-Controller. Each statement shall indicate:
(1) One-twelfth of the annual minimum rent payment;
(2) The total gross receipts for said portion of the
accounting year, itemized as to each of the business
categories for which a separate percentage rental is
established. A breakdown of the gross receipts of each
business conducted on the Premises must be attached to each
statement where a reported business category is comprised of
more than one business operation;
(3) The related itemized amounts of percentage rent computed
as herein provided and the total thereof;
(4) The total rent previously paid by TENANT for the
accounting year within which the preceding month falls; and
(5) The rent due for the preceding month.
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Concurrently with the rendering of each monthly statement, TENANT shall
pay to LESSOR the greater of the following two amounts:
(a) The total percentage rent computed for that portion of the
accounting year ending with and including the last day of the
preceding month [Item (3), above] less total rents previously paid
for the accounting year [Item (4), above], or
(b) One-twelfth of the annual minimum rent, multiplied by the number
of months from the beginning of the accounting year to and including
the preceding month, less total rents previously paid for the
accounting year [Item (4), above].
B. Place of Payment and Filing. Rental payments shall be delivered to,
and statements required by this Clause and the Clause entitled RECORDS
AND ACCOUNTS shall be filed with the County of Orange, Office of the
Auditor-Controller, P. O. Box 567 (630 North Broadway), Santa Ana,
California 92702. The designated place of payment and filing may be
changed at any time by LESSOR upon ten days written notice to TENANT.
Rent payments may be made by check made payable to the County of
Orange. TENANT assumes all risk of loss if payments are made by mail.
C. All rent shall be paid in lawful money of the United States of
America, without offset or deduction or prior notice or demand. No
payment by TENANT or receipt by LESSOR of a lesser amount than the rent
due shall be deemed to be other than on account of the rent due, nor
shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent be deemed an accord and
satisfaction, and LESSOR shall accept such check or payment without
prejudice to LESSOR's right to recover the balance of said rent or
pursue any other remedy in this Lease.
13. CHARGE FOR LATE PAYMENT (PMC7.1 S)
TENANT hereby acknowledges that the late payment of rent or any other sums due
hereunder will cause LESSOR to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include but are not limited to costs such as administrative processing of
delinquent notices, increased accounting costs, etc.
Accordingly, if any payment of rent as specified in the Clause entitled RENT or
of any other sum due LESSOR is not received by LESSOR by the due date, a late
charge of one and one-half percent (1.5%) of the payment due and unpaid plus
$100 shall be added to the payment, and the total sum shall become immediately
due and payable to LESSOR. An additional charge of one and one-half percent
(1.5%) of said payment excluding late charges, shall be added for each
additional month that said payment remains unpaid.
TENANT and LESSOR hereby agree that such late charges represent a fair and
reasonable estimate of the costs that LESSOR will incur by reason of TENANT's
late payment. Acceptance of such late charges (and/or any portion of the overdue
payment) by LESSOR shall
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in no event constitute a waiver of TENANT's default with respect to such overdue
payment, or prevent LESSOR from exercising any of the other rights and remedies
granted hereunder.
14. RECORDS AND ACCOUNTS (PMC8.1 S)
A. Records. TENANT shall, at all times during the term of this Lease,
keep or cause to be kept true and complete books, records, and accounts
of all financial transactions in the operation of all business
activities, of whatever nature, conducted in pursuance of the rights
granted herein. The records must be supported by source documents such
as sales slips, cash register tapes, purchase invoices, or other
pertinent documents.
Except as otherwise provided herein, all retail sales and charges shall
be recorded by means of cash registers or other comparable devices
which display to the customer the amount of the transaction and
automatically issue a receipt. The registers shall be equipped with
devices which lock in sales totals and other transaction records, or
with counters which are not resettable and which record transaction
numbers and sales details. Totals registered shall be read and recorded
by TENANT at the beginning and end of each business day.
In the event of admission charges or rentals, TENANT shall issue
serially numbered tickets for each such admission or rental and shall
keep an adequate record of said tickets, both issued and unissued.
All retail sales and charges may be recorded by a system other than
cash registers or other comparable devices provided said system is
approved by Auditor-Controller.
B. The Accounting Year. The accounting year shall be twelve full
calendar months. The accounting year may be established by TENANT,
provided TENANT notifies Auditor-Controller in writing of the
accounting year to be used. Said accounting year shall be deemed to be
approved by Auditor-Controller unless Auditor-Controller has objected
to TENANT's selection in writing within sixty days of TENANT's written
notification.
In the event TENANT fails to establish an accounting year of its
choice, regardless of the cause, the accounting year shall be
synonymous with the twelve-month period contained in the first one-year
term of the Lease.
Any portion of a year that is not reconciled, should the accounting
year and the anniversary year of the lease commencement not be the
same, shall be accounted for as if it were a complete accounting year.
Once an accounting year is established, it shall be continued through
the term of the lease unless Auditor-Controller specifically approves
in writing a different accounting year.
Auditor-Controller shall only approve a change in accounting years in
the event of undue hardship being placed on either the TENANT or
LESSOR, and not because of mere convenience or inconvenience.
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C. Financial Statements. Within ninety (90) days after the end of each
accounting year. TENANT shall at his own expense submit to Auditor-Controller a
balance sheet and income statement prepared by a Certified Public Accountant who
is a member of AICPA and the California Society of CPAS, reflecting business
transacted on or from the Premises during the preceding accounting year. The
Certified Public Accountant must attest that the balance sheet and income
statement submitted are an accurate representation of TENANT's records as
reported to the United States of America for income tax purposes. At the same
time, TENANT shall submit to Auditor-Controller a statement certified as to
accuracy by a Public Accountant who is a member of AICPA and the California
Society of CPAS, wherein the total gross receipts for the accounting year are
classified according to the categories of business established for percentage
rent and listed in the Clause entitled RENT and the Clause entitled RENT FOR
OPTIONAL SERVICES AND USES and for any other business conducted on or from the
Premises. TENANT shall provide LESSOR with copies of any Certified Public
Accountant's (CPA) management letters prepared in conjunction with their audits
of TENANT's operations from the Premises. Copies of management letters shall be
provided directly to LESSOR by the CPA at the same time TENANT's copy is
provided to TENANT.
TENANT acknowledges its understanding that any and all of the Financial
Statement submitted to the LESSOR pursuant to this Lease become Public Records
and are subject to public inspection pursuant to section 6250 et. seq, of the
California Government Code.
All TENANT's books of account and records and supporting source documents
related to this Lease or to business operations conducted within or from the
Premises shall be kept and made available at one location within the limits of
the County of Orange. LESSOR shall, through its duly authorized agents or
representatives, have the right to examine and audit said books of account and
records and supporting source documents at any and all reasonable times for the
purpose of determining the accuracy thereof, and of the monthly statements of
sales made and monies received.
Auditor-Controller, upon request of TENANT and at said Auditor-Controller's sole
discretion, may authorize the above-referenced books and records and supporting
source documents to be kept in a single location outside the limits of Orange
County provided TENANT shall agree to pay all expenses including but not limited
to transportation, food, and lodging necessary for Auditor- Controller to send a
representative to audit said books and records. Said right shall not be
exercised by Auditor-Controller more than once each accounting year.
The full cost of said audit, as determined by Auditor-Controller, shall be borne
by TENANT if either or both of the following conditions exist:
(1) The audit reveals an underpayment of more than two percent (2%)
between the rent due as reported and paid by TENANT in accordance with
this Lease and the rent due as determined by said audit;
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(2) TENANT has failed to maintain true and complete books, records,
accounts and supporting source documents in accordance with Section A
"Records" above. The adequacy of records shall be determined at the
sole discretion of Auditor-Controller.
Otherwise, LESSOR shall bear the cost of said audit, excluding the
aforementioned expenses related to audit of documents kept outside the limits of
Orange County.
Upon the request of Auditor-Controller, TENANT shall promptly provide, at
TENANT's expense, necessary data to enable LESSOR to fully comply with any and
every requirement of the State of California or the United States of America for
information or reports relating to this Lease and to TENANT's use of the
Premises. Such data shall include, if required, a detailed breakdown of TENANT's
receipts and expenses.
In addition to any other remedies available to LESSOR at law or in equity or
under this Lease, in the event the TENANT fails to maintain and keep books,
records, and accounts from the Premises and/or source documents relating
thereto, or to make the same available to LESSOR for examination and audit, or
to record sales and/or to maintain registers to record sales, or to provide
financial statements and other information to LESSOR regarding, aross sales as
required by this Lease, LESSOR, at LESSOR's option, may:
(I) Perform such examinations, audits, and/or investigations itself or
through agents or employees as LESSOR and/or its auditors may deem
appropriate to confirm the amount of percentage rents payable by TENANT
under this Lease and any and all costs and/or expenses incurred by
LESSOR in connection therewith shall be promptly reimbursed to LESSOR
by TENANT upon demand.
(II) Provide accounting services and/or a system for recording retail
sales, and charges, including without limitation, cash registers, for
use by TENANT in business transactions upon or from the Premises, and,
at LESSOR's option, maintain personnel on the Premises to observe
and/or record such sales during TENANT's business hours, or from time
to time, all at TENANT's sole cost and expense and, in such event,
TENANT shall promptly reimburse LESSOR for any and all costs incurred
by LESSOR in connection therewith; and/or
(III) Require that TENANT pay percentage rents based on LESSOR's best
good faith estimate of TENANT's gross receipts from business operations
conducted on or from the Premises and any such determination made by
LESSOR shall be conclusive and binding upon TENANT.
The above costs payable by TENANT shall include reimbursement to LESSOR
of LESSOR-provided services at such rates as LESSOR may from time to
time, in good faith, establish for such services. In the case of
services provided by LESSOR's employees, such rates shall be sufficient
to reimburse LESSOR for employees' salaries, including employee and
LESSOR's overhead or, at LESSOR's option, may be the rate for taxes and
benefits and LESSOR's overhead or, at LESSOR's option, may be the rate
for
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such services that would be charged by a qualified third party or
parties, approved by LESSOR, if engaged by LESSOR to perform such
services.
15. SECURITY DEPOSIT (PMC9.2 S)
During the term of this Lease and subject to the provisions for adjustment as
provided hereinafter, TENANT shall provide LESSOR with a security deposit in the
sum of Twenty-Five Thousand Dollars ($25,000). Concurrently with each revision
of the rent pursuant to the Clause entitled REVISION OF RENT the security
deposit to be provided by TENAINT shall be adjusted in proportion to changes in
the Consumer Price Index for Los Angeles--Anaheim--Riverside (All Urban
Consumers--All Items) promulgated by the Bureau of Labor Statistics of the U.S.
Department of Labor, or any replacement index published thereto. Each adjustment
shall be calculated by the following formula:
X = $25,000 x A
-
B
X = Adjusted security deposit
A = Monthly index for the fourth month prior to the month in
which the adjustment is to become effective
B = Monthly index for the month in which the Lease becomes
effective
In no event shall the amount of the security deposit be reduced. All increased
amounts in the security deposit that result from the above adjustment shall be
due and payable to County of Orange, GSA/Real Estate, within ten (10) days of
receipt of a notice of security deposit adjustment from Real Estate Director.
In the event that the Consumer Price Index is not issued or published for the
period for which such adjustment is to be computed hereunder, or in the event
that the Bureau of Labor Statistics of the United States Department of Labor
should cease to publish said index figures, then any similar index published by
another branch or department of the U.S. Government selected by LESSOR shall be
used and if none is so published, then another index generally recognized and
authoritative shall be substituted by LESSOR.
The security deposit shall take one of the forms set out below and shall
guarantee TENANT's full and faithful performance of all the terms, covenants,
and conditions of this Lease:
A. Cash
B. The assignment to County of Orange, GSA/Real Estate, of a savings
deposit held in a financial institution in Orange County acceptable to
Real Estate Director. At the minimum, such assignment shall be
evidenced by the delivery to Real Estate Director of the original
passbook reflecting said savings deposit and a written assignment of
said deposit to County of Orange, GSA/Real Estate, in a form approved
by Real Estate Director.
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C. A Time Certificate of Deposit from a financial institution in Orange
County wherein the principal sum is made payable to County of Orange,
GSA/Real Estate, or order. Both the financial institution and the form
of the certificate must be approved by Real Estate Director.
D. An instrument or instruments of credit from one or more financial
institutions, subject to regulation by the state or federal government,
pledging that funds necessary to secure performance of the lease terms,
covenants, and conditions are on deposit and guaranteed for payment,
and agreeing that said funds shall be trust funds securing TENANT's
performance and that all or any part shall be paid to County of Orange,
GSA/Real Estate, or order upon demand by the Real Estate Director. Both
the financial institution(s) and the form of the instrument(s) must be
approved by Real Estate Director.
Regardless of the form in which TENANT elects to make said security deposit, all
or any portion of the principal sum shall be available unconditionally to Real
Estate Director for correcting any default or breach of this Lease by TENANT,
his successors or assigns, or for payment of expenses incurred by LESSOR as a
result of the failure of TENANT, his successors or assigns, to faithfully
perform all terms, covenants, and conditions of this Lease. At any time that
Real Estate Director deems appropriate to insure the availability of the
security deposit, Real Estate Director shall have the right to convert any
savings deposit, time certificate of deposit, or instrument of credit to cash
without recourse to TENANT.
Should TENANT elect to assign a savings deposit, provide a Time Certificate of
Deposit or provide an instrument of credit to fulfill the security deposit
requirements of this Lease, said assignment, certificate, or instrument shall
have the effect of releasing depository or creditor therein from liability on
account of the payment of any or all of the principal sum to County of Orange,
GSA/Real Estate, or order upon demand by Real Estate Director. The agreement
entered into by TENANT with a financial institution to establish the deposit
necessary to permit assignment or issuance of a certificate as provided above
may allow the payment to TENANT or order of interest accruing on account of said
deposit.
In the event Real Estate Director withdraws any or all of the security deposit
as provided herein, TENANT shall, within ten (10) days of any withdrawal by Real
Estate Director, replenish the security deposit to maintain it at amounts herein
required. Failure to do so shall be deemed a default and shall be grounds for
immediate termination of this Lease.
The security deposit shall be rebated, reassigned, released, or endorsed by Real
Estate Director to TENANT or order, as applicable, at the end of the lease term,
provided TENANT has fully and faithfully performed each and every term, covenant
and condition of this Lease.
16. INITIAL CONSTRUCTION BY TENANT (PMDI.1 N)
A. Minimum Construction and Timing. TENANT shall be responsible for any
demolition of existing improvements and shall cause to be designed,
constructed, and installed within the Premises, at no cost to LESSOR,
appropriate improvements to adequately accommodate
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those services and uses, both required and any other optional services and uses
approved pursuant to the Clause entitled REQUIRED AND OPTIONAL SERVICES AND
USES.
Said improvements and time for construction for each phase shall be:
1) Phase IIA: The construction period for Phase IIA shall be twelve
(12) months and the improvements shall consist of adding water and
electrical hook-ups to the existing RV sites.
2) Phase IIB: The construction period for Phase IIB shall be twelve (12)
months and the improvements shall consist of expanding the number of RV
sites and the addition of sewer hook-ups to all RV sites.
The schematic plans prepared by TENANT and approved by Director, EMA/Harbors,
Beaches and Parks during the option period preceding execution of this Lease
shall be a master plan development of the Premises, and the working drawings
prepared by TENANT approved by Director, EMA/Harbors, Beaches and Parks during,
the same period shall be the plans, specifications, and time schedule for
constructing improvements. Development proposed by TENANT in said master plan
may be scheduled in increments approved by Director, EMA/Harbors, Beaches and
Parks.
B. Development Plan and Construction Standards. Development of the Premises
shall be conducted in a good workmanlike manner and shall be of a good and
workmanlike quality.
C. Minimum Cost of Improvements. the term "cost of improvements" shall mean the
direct construction costs, including costs paid to contractors, architects,
engineers, laborers, and suppliers but not indirect costs such as financing,
cost, administrative and overhead expenses, bond premiums, permit fees, and
developer fees paid to TENANT or its affiliates.
The minimum cost of improvements shall be:
(1) Phase IIA: the cost of said improvements shall exceed One Million
Dollars ($1,000,000).
(2) Phase IIB: the cost of said improvements shall exceed Three Million
Dollars ($3,000,000). The $3,000,000 shall be adjusted at the time of
submittal of "Construction Contract Documents" as described in Clause 4
(CONDITIONS) Phase IIB (3) of the Option Agreement (Phase 11). The
adjustment shall be in proportion to changes in the Consumer Price
Index for Los Angeles - Anaheim - Riverside (All Urban consumers - All
Items) promulgated by the Bureau of Labor Statistics of the U.S.
Department of Labor, or any replacement index published hereto. the
adjustment shall be calculated by the following formula:
X = $3,000,000 x A
-
B
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X = Adjusted Improvement Value
A = Monthly index for the fourth month prior to the month in which the
Construction Contract Documents are submitted
B = Monthly index for May, 1993
The minimum costs of the improvements may be reduced at the sole
discretion of the Director, EMA/Harbors, Beaches and Parks if, in his
determination, the improvement costs proposed are adequate to meet the
required and approved optional uses of this Lease and the intent of
this Clause.
In the event that the Consumer Price Index is not issued or published
for the period for which such adjustments is to be computed hereunder,
or in the event that the Bureau of Labor Statistics of the U.S.
Department of Labor should cease to publish said index figures, then
any similar index published by another branch or department of the U.S.
Government selected by LESSOR shall be used and if none is published,
then another index generally recognized and authoritative shall be
substituted by LESSOR.
17. CONSTRUCTION AND/OR ALTERATION BY TENANT (PMD2.1 S)
A. Lessor's Consent. No structures, improvements, or facilities shall
be constructed, erected, altered, or made within the Premises without
prior written consent of Director, EMA/Harbors, Beaches and Parks. Any
conditions relating to the manner, method, design, and construction of
said structures, improvements, or facilities fixed by the EMA/Harbors,
Beaches and Parks as a condition to granting such consent, shall be
conditions hereof as though originally stated herein. TENANT may, at
any time and at its sole expense, install and place business fixtures
and equipment within any building constructed by TENANT.
B. Strict Compliance with Plans and Specifications. All improvements
constructed by TENANT within the Premises shall be constructed in
strict compliance with detailed plans and specifications approved by
Director, EMA/Harbors, Beaches and Parks.
C. Notice of Non-Responsibility. For any construction, LESSOR may post
upon the Premises a "Notice of Non-Responsibility." There shall be no
limitation to the number of times said notice may be posted by LESSOR.
18. TENANT'S ASSURANCE OF CONSTRUCTION COMPLETION (PMD3.1 S)
Prior to commencement of construction of approved facilities, or any phase
thereof, within the Premises by TENANT, TENANT shall furnish to LESSOR evidence
that assures LESSOR that sufficient monies will be available to complete the
proposed construction. The amount of money available shall be at least the total
estimated construction cost. Such evidence may take one of the following forms:
A. Completion bond issued to LESSOR as obligee.
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B. Irrevocable letter of credit issued to LESSOR from a financial
institution to be in effect until LESSOR acknowledges satisfactory
completion of construction.
C. Cash
D. The delivery to Director of Real Estate of true and complete copies
of all documentation from a bank, savings and loan association, or
other institutional lender approved by Director of Real Estate relating
to and evidencing the commitment of construction funds in an amount not
less than the estimated construction costs to pay said construction
costs and that all conditions to the disbursement of construction loan
funds capable of being satisfied prior to the commencement of
construction have been satisfied, which documentation shall be in a
form and content satisfactory to Director of Real Estate.
E. Any combination of the above.
All bonds and letters of credit must be issued by a company qualified to do
business in the State of California and acceptable to Real Estate Director. All
bonds and letters of credit shall be in a form acceptable to Real Estate
Director and shall insure faithful and full observance and performance by TENANT
of all terms, conditions, covenants, and agreements relating, to the
construction of improvements within the Premises.
Prior to commencement of construction of approved facilities, or any phase
thereof, within the Premises by TENANT, TENANT shall furnish to LESSOR a
performance bond and labor and material bond in a principal sum equal to the
total estimated construction cost supplied by TENANT's contractor or
contractors, provided said bonds are issued jointly to TENANT and LESSOR as
obligees.
19. MECHANICS LIENS OR STOP-NOTICES (PMD4.1 S)
TENANT shall at all times indemnify and save LESSOR harmless from all claims,
losses, demands, damages, cost, expenses, or liability costs for labor or
materials in connection with construction, repair, alteration, or installation
of structures, improvements, equipment, or facilities within the Premises, and
from the cost of defending against such claims, including attorney fees and
costs.
In the event a lien or stop-notice is imposed upon the Premises as a result of
such construction, repair, alteration, or installation, TENANT shall either:
1. Record a valid Release of Lien, or
2. Procure and record a bond in accordance with Section 3143 of the
Civil Code, which frees the Premises from the claim of the lien or
stop-notice and from any action brought to foreclose the lien.
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Should TENANT fail to accomplish either of the two optional actions above within
15 days after the filing of such a lien or stop-notice, the Lease shall be in
default and shall be subject to immediate termination.
20. "AS-BUILT PLANS AND CONSTRUCTION COSTS (PMD5.1 S)
Within 60 days following completion of any substantial improvement within the
Premises, TENANT shall furnish Director, EMA/Harbors, Beaches and Parks a
complete set of reproducibles and two sets of prints of "As-Built" plans. In
addition, TENANT shall furnish EMA/Harbors, Beaches and Parks an itemized
statement of the actual construction cost of such improvement. The statement of
cost shall be sworn to and signed by TENANT or his responsible agent under
penalty of perjury. TENANT must obtain EMA/Harbors, Beaches and Park's approval
of "As-Built" plans, and the form and content of the itemized statement.
21. OWNERSHIP OF IMPROVEMENTS (PMD6.1 S)
All buildings, improvements, and facilities, exclusive of trade fixtures,
constructed or placed within the Premises by TENANT must upon completion, be
free and clear an liens, claims, or liability for labor or material and at
LESSOR's option shall be the property of LESSOR at the expiration of this Lease
or upon earlier termination hereof. LESSOR retains the right to require TENANT,
at TENANT's cost, to remove all TENANT improvements located on the Premises at
the expiration or termination hereof. Said removal shall include leveling the
Premises, the removal of any underground obstructions, and the compaction of
filled excavations to ninety percent (90%) compaction.
22. UTILITIES (PME1.2 N)
TENANT, at no cost to LESSOR, shall construct, or cause to be constructed, all
utility facilities necessary for the development and operation of the Premises.
TENANT shall be responsible for and pay, prior to delinquency date, all charges
for utilities supplied to the Premises.
23. MAINTENANCE OBLIGATIONS OF TENANT (PME2.1 S)
TENANT shall, to the satisfaction of Director, EMA/Harbors, Beaches and Parks,
keep and maintain the Premises and all improvements of any kind which may be
erected, installed, or made thereon in good condition and in substantial repair.
It shall be TENANT's responsibility to take all steps necessary or appropriate
to maintain such a standard of condition and repair.
TENANT expressly agrees to maintain the Premises in a safe, clean, wholesome,
sanitary condition, to the complete satisfaction of Director, EMA/Harbors,
Beaches and Parks and in compliance with all applicable laws. TENANT further
agrees to provide approved containers for trash and garbage and to keep the
Premises free and clear of rubbish and litter. Director,
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EMA/Harbors, Beaches and Parks shall have the right to enter upon and inspect
the Premises at anytime for cleanliness and safety.
TENANT shall designate in writing to Director, EMA/Harbors, Beaches and Parks an
on-site representative who shall be responsible for the day-to-day operation and
level of maintenance, cleanliness, and general order.
If TENANT fails to maintain or make repairs or replacements as required herein,
Director, EMA/Harbors, Beaches and Parks shall notify TENANT in writing of said
failure. Should TENANT fail to correct the situation within three days after
receipt of written notice, Director, EMA/Harbors, Beaches and Parks may make the
necessary correction or cause it to be made and the cost thereof, including but
not limited to the cost of labor, materials, equipment, and an administrative
fee equal to fifteen percent (15%) of the sum of such items, shall be paid by
TENANT within 10 days of receipt of a statement of said cost from Director,
EMA/Harbors, Beaches and Parks. Director, EMA/Harbors, Beaches and Parks may, at
his option, choose other remedies available herein, or by law.
24. MAINTENANCE RESPONSIBILITY OF LESSOR (PME3.1 N)
LESSOR shall have no obligation or responsibility to remove debris, or to
maintain, repair, or replace improvements constructed within the Premises.
However, upon written notice to TENANT, LESSOR may at its discretion choose to
do any grading, sandbagging, filling, construction of levees, replacement and/or
repair of any other improvements in order to enhance public safety and protect
the Premises or other property in Featherly Regional Park. TENANT shall not be
limited or precluded from performing such work as TENANT and Director,
EMA/Harbors, Beaches and Parks agree is appropriate for the operation and use of
the Premises.
25. OPERATION OBLIGATIONS OF TENANT (N)
As used in this Clause, the term "TENANT" shall include TENANT, TENANT's agents,
sublessees, concessionaires, or licensees, or any other person acting under
contract with TENANT.
A. Standards of Operation.
1. Services and Security. TENANT shall operate the Premises in
a manner similar with those prevailing in other recreational
vehicle parks and campgrounds furnishing similar services and
amenities. TENANT shall at all times during the Lease term
provide adequate security measures to reasonably protect
persons and property on the Premises, the maintenance of a
constant patrol for the purpose of preserving order and
preventing theft, vandalism, or other improper or unlawful use
of the Premises or any of the facilities.
2. Protection of Environment. TENANT shall take all reasonable
measures available to:
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a. Avoid any pollution of the atmosphere or littering of land
or water caused by or originating in, on, or about TENANT's
facility.
b. To protect all wildlife, natural vegetation, and
improvements.
B. Properiy Management
1. Manager. TENANT shall employ a competent manager, "Manager," who
shall be responsible for the day-to-day operation and level of
maintenance, cleanliness, and general order for the Premises. Such
person shall be vested with the authority of TENANT with respect to the
supervision over the operation and maintenance of the Premises,
including the authority to enforce compliance by TENANT, agents,
subtenants, concessionaires, or licensees with the terms and conditions
of this Lease and any and an rules and regulations adopted hereunder.
TENANT expressly agrees that any notice herein required to be served
upon TENANT may, at the option of LESSOR or Director, EMA/Harbors,
Beaches and Parks, be personally served upon said Manager and that such
services shall have the same force and effect as service upon TENANT.
TENANT shall notify LESSOR in writing of the name of the Manager
currently so employed as provided in the Clause entitled Notices.
2. Residences. TENANT shall have the option to provide on-site living
quarters (hereinafter referred to as "residences") on the Premises,
subject to review and approval by Director, EMA/Harbors, Beaches and
Parks. Said approval shall be conditionally granted to facilitate
better management, maintenance, security, and on-site control. Said
residences may be authorized for the specific purpose and intent that
an on-site manager, maintenance specialist, or security personnel will
be able to provide better management and level of public service. The
residences are not provided to benefit individual employees or as a
means to circumvent the intent of this clause to provide better public
service and are intended solely for necessary on-site management
personnel.
Director, EMA/Harbors, Beaches and Parks, at his discretion, may
withdraw consent upon thirty (30) days written notice if, in his
determination, the residences are not providing, or meeting the stated
purpose of this Clause.
26. DAMAGE TO OR DESTRUCTION OF IMPROVEMENTS (PME4.1 S)
In the event of damage to or destruction of buildings, facilities, or
improvements located within the Premises or in the event buildings, facilities,
or improvements located within the Premises are declared unsafe or unfit for use
or occupancy by a public entity with the authority to make and enforce such
declaration, TENANT shall, within 30 days, commence and diligently pursue to
complete the repair, replacement, or reconstruction of improvements to the same
size and floor area as they existed immediately prior to the event causing the
damage or destruction, as necessary to permit full use and occupancy of the
Premises for the purposes required by the Lease. Repair, replacement, or
reconstruction of improvements within the Premises shall be accomplished in a
manner and according to plans approved by Director, EMA/Harbors,
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Beaches and Parks. Except as otherwise provided herein, termination of this
Lease shall not reduce or nullify TENANT's obligation under this paragraph. With
respect to damage or destruction to be repaired by LESSOR or which LESSOR elects
to repair, TENANT waives and release its rights under California Civil Code
Sections 1932 (2) and 1933 (4).
27. RISK ACCEPTANCE OF FLOOD ZONE
TENANT acknowledges that a portion of the Premises covered in this Lease is
located within an area designated on the Federal Emergency Management Agency
Flood Insurance Rate Maps as a special flood hazard area which may be subject to
flooding and TENANT assumes all risks associated therewith, including but not
limited to, destruction of improvements and interruption of business operations.
TENANT shall indemnify and hold harmless LESSOR and its officers, agents, and
employees, from and against any claim, demand, expense, loss, or liability of
any kind or nature which may arise from flows of water upon and across the
Premises, whether flood flows are generated naturally, or are surge flows that
arise from upstream water spreading, construction, or maintenance operations, or
are flows that result from intentional releases of water for any purpose from
upstream storage.
Notwithstanding the above, there shall be no minimum monthly rent due for any
given month in which OPERATOR is required to cease operations and/or close the
campground in excess of seven consecutive days or ten cumulative days for any
given month due to flows of water upon and across the Premises. The minimum
annual rent shall be prorated for each month in which no minimum monthly rent is
due. In any event, percentage rent shall apply.
TENANT shall notify Director, EMA/Harbors, Beaches and Parks, in writing, that
the campground is closed due to the conditions specified above within 24 hours
after said facility is closed to the public. Should TENANT fail to properly
notify Director, EMA/Harbors, Beaches and Parks as required above, TENANT shall
not be allowed to waive the monthly minimum rent and/or prorate the minimum
annual rent.
28. INSURANCE (PME5.1.1 S)
TENANT shall maintain insurance acceptable to Real Estate Director in full force
and effect throughout the term of this Lease. The policy or policies of
insurance maintained by TENANT shall provide the following limits and coverages.
A. Liability Insurance
-------------------
Coverage Minimum Limits
-------- --------------
Comprehensive General Liability $1,000,000 Combined
single limit
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B. Fire and Extended Coverne: TENANT shall insure all buildings,
-------------------------- facilities and improvements to at
least 90% of their replacement
cost, using a standard form fire
insurance policy containing the
"extended coverage" endorsement.
C. Workers' Compensation and
-------------------------
Employer's Liability Statutory
--------------------
Insurance shall be in force the first day of the term of this Lease.
Each liability insurance policy required by this Lease shall contain the
following three clauses:
A. "This insurance shall not be cancelled, limited in scope of
coverage or non-renewed until after 30 days written notice has
been given to the County of Orange, General Services
Agency/Real Estate, P. O. Box 4106, Santa Ana, California
92702-4106."
B. "County of Orange is added as an insured as respects
operations of the named insured at or from premises leased
from the County of Orange."
C. "It is agreed that any insurance maintained by the County of
Orange will apply in excess of, and not contribute with,
insurance provided by this policy."
Each property insurance policy required by this Lease shall contain Clause A
above and the following two clauses:
D. "All rights of subrogation are hereby waived against the
County of Orange and the members of the Board of Supervisors
and elective or appointive officers or employees, when acting
within the scope of their employment or appointment."
E. "County of Orange is named as loss payee on this property
insurance policy."
TENANT agrees to deposit with Real Estate Director, at or before the effective
date of this Lease, certificates of insurance necessary to satisfy Real Estate
Director that the insurance provisions of this Lease have been complied with,
and to keep such insurance in effect and the certificates therefor on deposit
with Real Estate Director during the entire term of this Lease.
Real Estate Director shall retain the right at any time to review the coverage,
form, and amount of the insurance required hereby. If, in the opinion of Real
Estate Director, the insurance provisions in this Lease do not provide adequate
protection for LESSOR and members of the public using the Premises, Real Estate
Director may require TENANT to obtain insurance sufficient in coverage, form,
and amount to provide adequate protection. Real Estate Director's requirements
shall be reasonable but shall be designed to assure protection from and against
the kind and extent of the risks which exist at the time a change in insurance
is required.
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Real Estate Director shall notify TENANT in writing of changes in the insurance
requirements; and if TENANT does not deposit copies of acceptable insurance
policies with Real Estate Director incorporating such changes within thirty days
of receipt of such notice, this Lease shall be in default without further notice
to TENANT, and LESSOR shall be entitled to au legal remedies.
The procuring of such required policy or policies of insurance shall not be
construed to limit TENANT's liability hereunder nor to fulfill the
indemnification provisions and requirements of this Lease.
29. ASSIGNING, SUBLETTING, AND ENCUMBERING (PME7.1 S)
A. General. Any mortgage, pledge, hypothecation, encumbrance, transfer,
sublease, sublease amendment, or assignment (hereinafter in this clause
referred to collectively as "Encumbrance") of TENANT's interest in the
Premises, or any part or portion thereof, shall first be approved in
writing by LESSOR, unless otherwise provided herein. Failure to obtain
LESSOR's required written approval of an Encumbrance will render such
Encumbrance void. Occupancy of the Premises by a prospective
transferee, sublessee, or assignee before approval of the transfer,
sublease, or assignment by LESSOR shall constitute a breach of this
Lease. All subleases shall be between TENANT and sublessee; the entry
into sub-subleases is prohibited and shall constitute a breach of this
Lease.
If the TENANT hereunder is a corporation or an unincorporated
association or partnership, the Encumbrance of any stock or interest in
said corporation, association, partnership in the aggregate exceeding
25% shall be deemed an assignment within the meaning of this Lease.
Should LESSOR consent to any Encumbrance, such consent shall not
constitute a waiver of any of the terms, covenants, or conditions of
this Lease or be construed as LESSOR's consent to any further
Encumbrance. Such terms, covenant or conditions shall apply to each and
every Encumbrance hereunder and shall be severally binding upon each
and every party thereto. Any document to mortgage, pledge, hypothecate,
encumber, transfer, sublet, or assign the Premises or any part thereof
shall not be inconsistent with the provisions of this Lease and in the
event of any such inconsistency, the provisions of this Lease shall
control.
B. Personal Information to be Supplied LESSOR. TENANT shall supply Real
Estate Manager with the necessary information to conduct background
investigations on all persons or firms that TENANT proposes to sublet
to or assign to, or that might establish rights to enter, control, or
otherwise encumber the Premises by reason of agreements made by TENANT.
C. Conditions of LESSOR Approval
1. Subleases of five years or less, assignments and amendments
of subleases with a remaining term less than five years, and
assignment of stock:
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a. Subleases for a period of five years or less (hereinafter
referred to as short-term subleases), assignment of subleases
with a remaining term of five years or less, or assignment of
twenty-five percent (25%) or less of the stock as hereinbefore
described shall not be subject to the requirement of prior
approval by LESSOR. TENANT shall not however, be precluded
from requesting such prior approval.
b. TENANT must notify LESSOR of all short-term subleases,
assignment and amendment of subleases, or assignments of stock
by providing, Real Estate Director with:
(1) a copy of all documents relating thereto, and
(2) a statement of all terms and conditions of said
transaction, including the consideration therefor.
c. Should TENANT choose not to obtain LESSOR's approval of
short-term subleases, assignment or amendments of subleases,
or assignment of stock, LESSOR reserves the right to disallow
any unapproved short-term subleases, sublease amendments,
assignment of sublease, or assignment of stock if any of the
following conditions prevail:
(1) TENANT, its successors or assians, are in default
in the terms of this Lease at the time of execution
of the short-term sublease, sublease amendments,
assignment of sublease or assignment of the stock
whether notice of default has or has not been given
by LESSOR.
(2) Sublessee or assignee has not agreed in writing
to keep, perform, and be bound by all the terms,
covenants, and conditions of this Lease.
(3) Sublessee's use is in conflict with the terms of
this Lease.
(4) All terms, covenants, and conditions of
Encumbrance, including the consideration therefor of
any and every kind, have not been revealed in writing
to LESSOR.
(5) Additions to or alteration of existing
structures, or construction of new structures by
sublessee or that are required of TENANT as a result
of short-term sublease, have not been approved by
LESSOR and are not in compliance with all government
regulations and ordinances.
(6) If sublessee or assignee prove to be of
undesirable character.
Real Estate Director shall notify TENANT in writing of the
disallowance of short-term sublease, sublease amendment, or
assignment of sublease for any of the above reasons, and
TENANT shall immediately proceed to remove any persons or
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firms from the Premises that were indicated by said notice.
Failure to comply within a reasonable time on the part of
TENANT shall constitute a breach of this Lease.
2. Assignments, including assignments of subleases with a remaining
term greater than five (5) years, assignment of more than twenty-five
percent (25%) of the stock, transfers, subleases (both long-term and
short-term), sublease amendments, hypothecations, mortgages, or other
Encumbrances:
a. LESSOR agrees that it will not arbitrarily withhold consent
of any Encumbrance, but LESSOR may withhold consent at its
sole discretion if any of the following conditions exist:
(1) TENANT or any of his successors or assigns are in
default in any term, covenant or condition of this
Lease, whether notice of default has or has not been
given by LESSOR.
(2) The prospective Encumbrancer has not agreed in
writing, to keep, perform, and be bound by all the
terms, covenants, and conditions of this Lease.
(3) All the terms, covenants, and conditions of
Encumbrance, including the consideration therefor of
any and every kind, have not been revealed in
writing, to LESSOR.
(4) The construction required of TENANT as a
condition of this Lease has not been completed to the
satisfaction of LESSOR.
(5) The processing fee required by LESSOR and set out
below has not been paid to LESSOR by delivery of said
fee to LESSOR.
(a) A fee of $1,500 shall be paid to LESSOR
for processing each consent to mortgage,
pledge, hypothecation, or Encumbrance
submitted to LESSOR as required by this
Lease. This processing fee shall be deemed
earned by LESSOR when paid and shall not be
refundable.
(b) A fee of $2,500 shall be paid to LESSOR
for processing each consent to assignment,
transfer, or sublease submitted to LESSOR
required by this Lease. This processing fee
shall be deemed earned by LESSOR when paid
and shall not be refundable.
If a processing fee has been paid by TENANT for
another phase of same transaction, a second fee will
not be charged.
The amounts specified above for processing fees shall
be automatically adjusted for all consents required
or requested subsequent to the second year of this
Lease. Said adjustment shall be in proportion to the
change in the Consumer
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<PAGE>
Price Index for Los Angeles--Anaheim--Riverside, CA
(All Urban Consumers--All Items) as promulgated by
the Bureau of Labor Statistics of the U. S.
Department of Labor, or any replacement index
thereto.
Said automatic adjustment shall be calculated by
means of the following formula, then rounded to the
nearest ten dollar figure:
A = B x C
-
D
Where A = adjusted processing fee
B = $ [the amount inserted in 5a or 5b above]
C = Monthly index for the fourth month prior to
the effective date of the Consent
D = Monthly index for the date this Lease was
signed by LESSOR
b. If requested by TENANT, LESSOR agrees to execute its
written consent to an assignment of this Lease to a trustee
under a trust deed for the benefit of a lender (herein called
"Beneficiary"), provided that TENANT has complied with all
other provisions of this clause, upon and subject to the
follow covenants and conditions:
(1) Said trust deed and all rights acquired
thereunder shall be subject to each and all of the
covenants, conditions, and restrictions set forth in
this Lease and to all rights and interests of LESSOR
hereunder, except as herein otherwise provided.
(2) In the event of any conflict between the
provisions of this Lease and the provisions of any
such trust deed, the provisions of this Lease shall
control.
(3) Upon and immediately after the recording of a
trust deed affecting the Premises, TENANT at TENANT's
expense, shall cause to be recorded in the office of
the Recorder, County of Orange, California, a written
request, executed and acknowledged by LESSOR, for a
copy of any notice of default and of any notice of
sale under the trust deed provided by the statutes of
the State of California relating thereto.
(4) At the time of requesting consent to a trust
deed, TENANT shall furnish to Real Estate Director a
complete copy of the trust deed and note to be
secured thereby, together with the name and address
of the holder thereof.
(5) LESSOR agrees that it will not terminate this
Lease because of a default or breach on the part of
TENANT if the Beneficiary under any trust deed to
which LESSOR has given its consent, within 60 days
after service of written notice on
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<PAGE>
the Beneficiary by LESSOR of its intention to
terminate this Lease for such default or breach,
shall:
(a) Cure such default or breach if the same
can be cured by the payment or expenditure
of money required to be paid under the term
of this Lease; or if such default or breach
is not curable, cause trustee under the
trust deed to commence and thereafter
diligently pursue to completion steps and
proceedings for the exercise of the power of
sale under and pursuant to the trust deed in
the manner provided by law; and
(b) Keep and perform all of the covenants
and conditions of this Lease requiring the
payment or expenditure of money by TENANT
until such time as the leasehold shall be
sold upon foreclosure pursuance to the trust
deed or shall be released or reconveyed
thereunder; provided, however, that if the
Beneficiary shall fail or refuse to comply
with any or an of the conditions of this
paragraph, then thereupon LESSOR shall be
released from the covenant of forbearance.
(6) The prior written consent of LESSOR shall
not be required:
(a) To a transfer of the leasehold at
foreclosure sale pursuant to a trust deed,
by judicial foreclosure, or by an assignment
in lieu of foreclosure; or
(b) To any subsequent transfer by the
Beneficiary if the Beneficiary is an
established bank, savings and loan
association, insurance company, retirement
trust fund, or other organization that has
been approved by LESSOR and such Beneficiary
is the purchaser at such foreclosure sale;
provided that in either such event, the
Beneficiary forthwith gives notice to LESSOR
in writing of any such transfer, setting,
forth the name and address of the
transferee, the effective date of such
transfer, and the express agreement of the
transferee assuming and agreeing to perform
all of the obligations under this Lease, and
submits to Real Estate Director a copy of
the document by which such transfer was
made.
(7) The amount of the principal indebtedness to be
secured by the proposed trust deed (together with the
principal balances secured by any underlying trust
deeds encumbering TENANT's leasehold estate) shall
not exceed eighty percent (80%) of the fair market
value of TENANT's leasebold estate as determined by a
qualified real estate appraiser, which appraiser and
appraisal shall be subject to Real Estate Director's
approval, which approval shall not unreasonably be
withheld. This provision, however, shall not prohibit
the addition of accrued but unpaid interest to the
principal balance secured by said deed of trust or
the trust deed beneficiary's advance of additional
funds to protect the value of the security for its
trust deed and/or to enforce its rights under its
trust deed. Said appraisal shall include, without
limitation, (i) an appraisal of the fair market value
of the
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LESSOR's interests under this Lease and of its
reversionary interests in and to the Premises, taking
into account all rents and other sums payable
hereunder by TENANT and the revisions and the
adjustments to such rents and other sums provided for
herein, (ii) an appraisal of the fair market value of
TENANT's leasehold estate under this Lease, and (iii)
an appraisal of the fair market value of the real
property demised by this Lease, including without
limitation an improvements constructed upon said real
property by or under TENANT, appraised as though
unencumbered by this Lease. Said appraisal shall be
based on the uses then being made of the Premises,
provided that if any portion of the Premises is then
undeveloped, such portion shall be appraised for the
highest and best use or uses for such portion
permitted under this Lease. Notwithstanding the
above, in the case of a construction loan, said
appraisal shall take into account the value to be
added by the proposed construction for its intended
uses. LESSOR shall have a period of up to forty-five
(45) days following receipt of such appraisal to
determine whether or not to consent to TENANT's
proposed trust deed.
30. LESSOR'S FIRST REFUSAL RIGHT (PMF8.1 S)
TENANT grants to LESSOR the exclusive right at LESSOR's option to purchase
TENANT's leasehold estate under this Lease upon the same terms and conditions
and at the same price as any bona fide offer for the purchase of said leasehold
estate received by TENANT from any person or entity and which offer to purchase
TENANT desires to accept. Upon receipt of a bona fide offer which is acceptable
to TENANT, and each time any such offer is received, TENANT shall notify LESSOR
in writing of the full details of such offer, including price, terms, length of
escrow, etc. and deliver to LESSOR copies of any and an title reports, plans and
specifications, rent rolls, subleases and any other documentation relating to
TENANT's leasehold estate theretofore delivered or made available to the
offeror, whereupon LESSOR shall have Forty-five (45) days from receipt in which
to elect to exercise LESSOR's prior right to purchase. TENANT shall cause any
such offeror to separately state the purchase price for TENANT's leasehold
estate under this Lease, in an equitable manner, if the offer includes
additional leasehold estates or other real property.
No sale or voluntary transfer of title to said leasehold estate shall be binding
on LESSOR unless and until the foregoing requirements are fully complied with.
In the event that LESSOR fails to exercise its prior right to purchase as
granted herein with respect to any proposed offer, TENANT may accept such offer
and thereafter assign this Lease to the offeror pursuant to and in accordance
with the terms and provisions of said offer, subject, however, to compliance
with the provisions of the Clause of this Lease entitled ASSIGNING, SUBLETTING,
AND ENCUMBERING PROHIBITED, upon all of the terms and provisions of this Lease,
including without limitation the provisions of this Section which shall continue
in full force and effect. Any material amendment or modification to the terms of
said offer shall constitute a new offer for the purposes of this Clause.
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31. HAZARDOUS MATERIALS (PMF9.1 S)
TENANT shall not cause or permit any "Hazardous Material" as hereinafter
defined, to be brought upon, kept, or used in or about the Premises. If TENANT
breaches the obligations stated herein, or if contamination of the Premises by
Hazardous Materials otherwise occurs for which TENANT is legally liable to
LESSOR for damage resulting therefrom, then TENANT shall indemnify, defend, and
hold LESSOR harmless from any and all claims, judgments, damages, penalties,
fines, costs, liabilities, or losses (including without limitation, diminution
in value of the Premises, damages for the loss or restriction on use of rentable
or usable space or of any amenity of the Premises, damages arising from any
adverse impact on marketing of space in the Premises or portion of any building,
of which the Premises is a part, and sums paid in settlement of claims,
attorneys fees, consultant fees, and expert witness fees) which arise during or
after the lease term as a result of such contamination. This indemnification
includes without limitation, costs incurred by LESSOR in connection with any
investigation of site conditions or any cleanup, remedial, removal, or
restoration work required by any federal, state, or legal governmental entity
because of Hazardous Material being present in the soil or ground water or under
the Premises. TENANT shall promptly take all actions at its sole cost and
expense as are necessary to clean, remove, and restore the Premises to its
condition prior to the introduction of such Hazardous Material by TENANT,
provided TENANT shall first have obtained LESSOR's approval and the approval of
any necessary governmental entities.
TENANT acknowledges that LESSOR may become legally liable for the costs of
complying with laws relating to Hazardous Material which are not the
responsibility of LESSOR hereunder, including the following: (i) Hazardous
Material present in the soil or ground water on the Premises of which LESSOR has
no knowledge as of the Effective Date; (ii) a change in laws, statutes,
ordinances, and other Governmental regulations which relate to Hazardous
Material which could cause any material now or hereinafter located on the
Premises to be deemed hazardous, whether known or unknown to LESSOR, or a
violation of any such laws; (iii) Hazardous Material that migrates, flows,
percolates, defuses, or in any way moves on to or under the Premises after the
execution and delivery of this Lease; (iv) Hazardous Material present on or
under the Premises as a result of any discharge, dumping, or spilling (whether
accidental or otherwise) on the Premises by other lessees of the Premises or
their agents, employees, contractors, or invitees, or by others. LESSOR and
TENANT agree that the cost of complying with such laws, statutes, ordinances, or
Governmental regulations relating to such matters for which the LESSOR is or may
become legally liable shall be paid by TENANT to LESSOR, within ten (10) days
following the receipt by TENANT of a written demand from LESSOR to do so. In the
event LESSOR subsequently recovers, or is reimbursed from a third party, all or
any portion of the sums paid by TENANT, LESSOR shall reimburse TENANT to the
extent of any such recovery or reimbursement.
As used herein the term "Hazardous Material" means any hazardous or toxic
substance, material, or waste which is or shall become regulated by any
Governmental entity, including without limitation, LESSOR acting, in its
governmental capacity, the State of California or the United States government.
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32. NOTICES (PMFIO.1 S)
All notices pursuant to this Lease shall be addressed as set forth below or as
either party may hereafter designate by written notice and shall be sent through
the United States mail in the State of California, duly registered or certified,
return receipt requested, with postage prepaid. If any notice is sent by
registered or certified mail, as aforesaid, the same shall be deemed to have
been served or delivered twenty-four (24) hours after mailing thereof as above
provided. Notwithstanding the above, LESSOR may also provide notices to TENANT
by personal delivery or by regular mail and any such notice so given shall be
deemed to have been given upon receipt.
TO: LESSOR TO: TENANT
------ ------
County of Orange Vernon St. Clair
EMA/Harbors, Beaches and Parks St. Clair Investments, Inc.
P.O. Box 4048 435 N. Pacific Coast Hwy.
Santa Ana, CA 92702-4048 Suite 110
Redondo Beach, CA 90277
and
County of Orange
GSA/Real Estate
P.O. Box 4106
Santa Ana, CA 92702-4106
33. ATTACHMENT TO LEASE (PMF11.1 S)
This Lease includes the following, which are attached hereto and made a part
hereof:
I. GENERAL CONDITIONS
II. Exhibit A - Legal Description
III. Exhibit B - Parcel Map
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease the day and year first
above written.
TENANT
---------
APPROVED AS TO FORM:
County Counsel CANYON RECREATIONAL VEHICLE
PARK, a California general partnership
By
-----------------------------
By
Dated -----------------------------------------
------------------------- St. Clair Investments, Inc. General
Partner By Vernon St. Clair, President
APPROVED AS TO AUDIT & ACCOUNTING:
Auditor-Controller
By
-----------------------------------------
Mobile Modular Development Inc., General
By: /s/Lisa Montijo Partner
--------------------------- By John De Falco, President
RECOMMENDED FOR APPROVAL:
Environmental Mangement Agency
Harbors, Beaches and Parks
By /s/Robert G. Fisher
-----------------------------
General Services Agency
Real Estate
By
-----------------------------
Real Property Agent
LESSOR
------
SIGNED AND CERTIFIED THAT A COPY
OF THIS DOCUMENT HAS BEEN COUNTY OF ORANGE
DELIVERED TO THE CHAIRMAN OF THE
BOARD
By
- - ------------------------------- -----------------------------------------
Phyllis A. Henderson Chairman, Board of Supervisors
Clerk of the Board of Supervisors,
Orange County, California
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<PAGE>
I. GENERAL CONDITIONS (PMGEI.2-26.2 S)
1. TIME (PMGEI.2 S)
Time is of the essence of this Lease. Failure to comply with any time
requirement of this Lease shall constitute a material breach of this Lease.
2. SIGNS (PMGE2.2 S)
TENANT agrees not to construct, maintain, or allow any signs, banners, flags,
etc., upon the Premises except as approved by Director, EMA/Harbors, Beaches,
and Parks. Unapproved signs, banners, flags, etc., may be removed by Director,
EMA/Harbors, Beaches, and Parks without prior notice to TENANT.
3. PERMITS AND LICENSES (PMGE3.2 S)
TENANT shall be required to obtain any and all approvals, permits and/or
licenses which may be required in connection with the operation of the Premises
as set out herein. No permit, approval, or consent given hereunder by LESSOR, in
its governmental capacity, shall affect or limit TENANT's obligations hereunder,
nor shall any approvals or consents given by LESSOR, as a party to this Lease,
be deemed approval as to compliance or conformance with applicable Governmental
codes, laws, rules, or regulations.
4. CONTROL OF HOURS, PROCEDURES, AND PRICES (PMGE4.2 N)
TENANT shall at all times maintain a written schedule delineating the operating
hours and operating procedures for each business operation on or from the
Premises. A schedule of prices charged for all goods and/or services supplied to
the public on or from the Premises shall also be maintained.
Upon written request, TENANT shall furnish the Director, EMA/Harbors, Beaches,
and Parks a copy of said schedules and procedures. Should Director, EMA/Harbors,
Beaches, and Parks, upon review and conference with TENANT, decide any part of
said schedules or procedures is not unjustified with regard to fairly satisfying
the needs of the public, TENANT, upon written notice from Director, EMA/Harbors,
Beaches, and Parks, shall modify said schedules or procedures to the
satisfaction of said Director.
Primary consideration shall be given to the public's benefit in implementing
this clause. All prices charged for goods and/or services supplied to the public
on or from the Premises shall be fair and reasonable, based upon the market
prices charged by other competing and/or in comparable businesses or 125% of
prices charced by comparable state parks, whichever is less.
Page 1 of 10
<PAGE>
Affordable youth group camping is considered an important public service on the
Premises. To ensure that this service is available to the public and that the
prices charged for this use is affordable, the number of youth group camping
sites and all prices charged for youth group camping shall be subject to prior
written approval by the Director, EMA/Harbors, Beaches and Parks.
TENANT agrees that he will operate and manage the services and facilities
offered in a competent and efficient manner at least comparable to other well
managed operations of similar type.
TENANT shall at all times retain active, qualified, competent, and experienced
personnel to supervise TENANT's operation and to represent and act for TENANT.
TENANT shall require its attendants and employees to be properly dressed, clean,
courteous, efficient, and neat in appearance at all times. TENANT shall not
employ any person(s) in or about the Premises who shall use offensive language
or act in a loud, boisterous, or otherwise improper manner.
TENANT shall maintain a close check over attendants and employees to insure the
maintenance of a high standard of service to the public. TENANT shall replace
any employee whose conduct is detrimental to the best interests of the public.
TENANT's failure to comply with the provisions of this clause shall constitute a
serious breach of this Lease and LESSOR may immediately terminate this Lease.
5. LEASE ORGANIZATION (PMGE5.2 S)
The various headings and numbers herein, the grouping of provisions of this
Lease into separate clauses and paragraphs, and the organization hereof, are for
the purpose of convenience only and shall not be considered otherwise.
6. AMENDMENTS (PMGE6.2 S)
This Lease is the sole and only agreement between the parties regarding the
subject matter hereof; other agreements, either oral or written, are void. Any
changes to this Lease shall be in writing and shall be properly executed by both
parties.
7. UNLAWFUL USE (PMGE7.2 S)
TENANT agrees no improvements shall be erected, placed upon, operated, nor
maintained within the Premises, nor any business conducted or carried on therein
or therefrom, in violation of the terms of this Lease, or of any regulation,
order of law, statute, bylaw, or ordinance of a governmental agency having
jurisdiction.
Page 2 of 10
<PAGE>
8. NONDISCRIMINATION (PMGE8.2 S)
TENANT agrees not to discriminate against any person or class of persons by
reason of sex, age, race, color, creed, physical handicap, or national origin in
employment practices and in the activities conducted pursuant to this Lease.
TENANT shall make its accommodations and services available to the public on
fair and reasonable terms.
9. INSPECTION (PMGE9.2 S)
LESSOR or its authorized representative shall have the right at an reasonable
times to inspect the Premises to determine if the provisions of this Lease are
being complied with.
10. HOLD HARMLESS (PMGEIO.2 S)
TENANT hereby waives all claims and recourse against LESSOR including the right
of contribution for loss or damage of persons or property arising from, growing
out of or in any way connected with or related to this agreement except claims
arising from the concurrent active or sole negligence of LESSOR, its officers,
agents, and employees. TENANT hereby agrees to indemnify, hold harmless, and
defend LESSOR, its officers, agents, and employees against any and all claims,
loss, demands, damages, cost, expenses or liability costs arising out of the
operation or maintenance of the property described herein, and/or TENANT's
exercise of the rights under this Lease, except for liability arising out of the
concurrent active or sole negligence of LESSOR, its officers, agents, or
employees, including the cost of defense of any lawsuit arising therefrom. In
the event LESSOR is named as co-defendant, TENANT shall notify LESSOR of such
fact and shall represent LESSOR in such legal action unless LESSOR undertakes to
represent itself as co-defendant in such legal action, in which event TENANT
shall pay to LESSOR its litigation costs, expenses and attorney's fees. In the
event judgment is entered against LESSOR and TENANT because of the concurrent
active negligence of LESSOR and TENANT, their officers, agents, or employees, an
apportionment of liability to pay such judgment shall be made by a court of
competent jurisdiction. Neither party shall request a jury apportionment.
11. TAXES AND ASSESSMENTS (PMGEII.2 S)
This Lease may create a possessory interest which is subject to the payment of
taxes levied on such interest. It is understood and agreed that all taxes and
assessments (including but not limited to said possessory interest tax) which
become due and payable upon the Premises or upon fixtures, equipment, or other
property installed or constructed thereon, shall be the full responsibility of
TENANT, and TENANT shall cause said taxes and assessments to be paid promptly.
12. SUCCESSORS IN INTEREST (PMGE12.2 S)
Unless otherwise provided in this Lease, the terms, covenants, and conditions
contained herein shall apply to and bind the heirs, successors, executors,
administrators, and assigns of all the parties hereto, all of whom shall be
jointly and severally liable hereunder.
Page 3 of 10
<PAGE>
13. CIRCUMSTANCES WHICH EXCUSE PERFORMANCE (PMGE13.2 S)
If LESSOR or TENANT shall be delayed or prevented from the performance of any
act required hereunder by reason of Acts of God, restrictive governmental laws
or regulations, or other cause without fault and beyond the control of the party
obligated (financial inability excepted), performance of such act shall be
excused for the period of the delay and the period for the performance of any
such act shall be extended for a period equivalent to the period of such delay,
14. PARTIAL INVALIDITY (PMGE14.2 S)
If any term, covenant, condition, or provision of this Lease is held by a court
of competent jurisdiction to be invalid, void, or unenforceable, the remainder
of the provisions hereof shall remain in full force and effect and shall in no
way be affected, impaired, or invalidated thereby.
15. WAIVER OF RIGHTS (PMGE15.2 S)
The failure of LESSOR or TENANT to insist upon strict performance of any of the
terms, covenants, or conditions of this Lease shall not be deemed a waiver of
any right or remedy that LESSOR or TENANT may have, and shall not be deemed a
waiver of the right to require strict performance of all the terms, covenants,
and conditions of the Lease thereafter, nor a waiver of any remedy for the
subsequent breach or default of any term, covenant, or condition of the Lease.
Any waiver, in order to be effective, must be signed by the party whose right or
remedy is being waived.
16. DEFAULT IN TERMS OF THE LEASE BY TENANT (PMGE16.2 S)
The occurrence of any one or more of the following events shall constitute a
default hereunder by TENANT:
(a) The abandonment or vacation of the Premises by TENANT.
(b) The failure by TENANT to make any payment of rent or any other
sum pavable hereunder by TENANT, as and when due, where such
failure shall continue for a period of three (3) days after
written notice thereof from LESSOR to TENANT; provided,
however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of
Civil Procedure Section 1161 et seq.
(c) The failure or inability by TENANT to observe or perform any
of the provisions of this Lease to be observed or performed by
TENANT, other than specified in (a) or (b) above, where such
failure shall continue for a period of ten (10) days after
written notice thereof from LESSOR to TENANT; provided,
however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of
Civil Procedure Section 1161 et seq.; provided, further, that
if the nature of such failure is such that it can be cured by
TENANT but that more than ten (10) days are reasonably
required for its cure (for any
Pace 4 of 10
<PAGE>
reason other than financial inability), then TENANT shall not be deemed
to default if TENANT shall commence such cure within said ten (10)
days, and thereafter diligently prosecutes such cure to completion.
(d) (i) The making by TENANT of any general assignment for the benefit
of creditors; (ii) a case is commenced by or against TENANT under
Chapters 7, 11 or 13 of the Bankruptcy Code, Title 11 of the United
States Code as now in force or hereafter amended and if so commenced
against TENANT, the same is not dismissed within sixty (60) days; (iii)
the appointment of a trustee or receiver to take possession of
substantially all of TENANT's assets located at the Premises or of
TENANT's interest in this Lease, where such seizure is not discharged
within thirty (30) days; or (iv) TENANT's convening of a meeting of its
creditors or any class thereof for the purpose of effecting a
moratorium upon or composition of its debts. In the event of any such
default, neither this Lease nor any interests of TENANT in and to the
Premises shall become an asset in any of such proceedings and, in any
such event and in addition to any and all rights or remedies of the
LESSOR hereunder or by law; provided, it shall be lawful for the LESSOR
to declare the term hereof ended and to re-enter the Premises and take
possession thereof and remove all persons therefrom, and TENANT and its
creditors (other than LESSOR) shall have no further claim thereon or
hereunder.
In the event of any default by TENANT, then, in addition to any other
remedies available to LESSOR at law or in equity, LESSOR may exercise
the following remedies:
(A) LESSOR may terminate this Lease and all rights of TENANT hereunder
by giving written notice of such termination to TENANT. In the event
that LESSOR shall so elect to terminate this Lease, then LESSOR may
recover from TENANT:
(i) The worth at the time of award of the unpaid rent and
other charges, which had been earned as of the date of the
termination hereof;
(ii) The worth at the time of award of the amount by which the
unpaid rent and other charges which would have been earned
after the date of the termination hereof until the time of
award exceeds the amount of such rental loss that TENANT
proves could have been reasonably avoided;
(iii) The worth at the time of award of the amount by which
the unpaid rent and other charges for the balance of the term
hereof after the time of award exceeds the amount of such
rental loss that TENANT proves could be reasonably avoided;
(iv) Any other amount necessary to compensate LESSOR for all
the detriment proximately caused by TENANTs failure to perform
its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom,
including, but not limited to, the cost of recovering
possession of the Premises, expenses of reletting, including
necessary repair, renovation and alteration of the Premises,
reasonable attorneys' fees, expert witness costs, and any
other reasonable costs; and
Page 5 of 10
<PAGE>
(v) Any other amount which LESSOR may by law hereafter be
permitted to recover from TENANT to compensate LESSOR for the
detriment caused by TENANT's default.
The term "rent" as used herein shall be deemed to be and to
mean the annual rent and all other sums required to be paid by
TENANT pursuant to the terms of this Lease. All such sums,
other than the annual rent, shall be computed on the basis of
the average monthly amount thereof accruing during the 24-
month period immediately prior to default, except that if it
becomes necessary to compute such rental before such 24-month
period has occurred, then such sums shall be computed on the
basis of the average monthly amount during such shorter
period. As used in subparagraphs (i) and (ii) above, the
"worth at the time of award" shall be computed by allowing
interest at the maximum rate permitted by law. As used in
subparagraph (iii) above, the "worth at the time of award"
shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time
of award plus one percent (1%), but not in excess of ten
percent (10%) per annum.
(B) Continue this Lease in effect without terminating TENANT's right to
possession even though TENANT has breached this Lease and abandoned the
Premises and to enforce au of LESSOR's rights and remedies under this
Lease, at law or in equity, including the right to recover the rent as
it becomes due under this Lease; provided, however, that LESSOR may at
any time thereafter elect to terminate this Lease for such previous
breach by notifying TENANT in writing, that TENANT's right to
possession of the Premises has been terminated.
(C) Nothing, in this Section shall be deemed to affect TENANT's
indemnity of LESSOR liability or liabilities based upon occurrences
prior to the termination of this Lease for personal injuries or
property damage under the indemnification clause or clauses contained
in this Lease.
No delay or omission of LESSOR to exercise any right or remedy shall be
construed as a waiver of such richt or remedy or any default by TENANT
hereunder. The acceptance of LESSOR of rent or any other sums hereunder shall
not be (i) a waiver of any preceding breach or default by TENANT of any
provision thereof, other than the failure of TENANT to pay the particular rent
or sum accepted, regardless of LESSOR's knowledge of such preceding breach or
default at the time of acceptance of such rent or sum, or (ii) waiver of
LESSOR's right to exercise any remedy available to LESSOR by virtue of such
breach or default. No act or thing done by LESSOR or LESSOR's agents during the
term of this Lease shall be deemed an acceptance of a surrender of the Premises,
and no agreement to accept a surrender shall be valid unless in writing and
signed by LESSOR.
Any installment or rent due under this Lease or any other sums not paid to
LESSOR when due (other than interest) shall bear interest at the maximum rate
allowed by law from the date such payment is due until paid, provided, however,
that the payment of such interest shall not excuse or cure the default.
Page 6 of 10
<PAGE>
All covenants and agreements to be performed by TENANT under any of the terms of
this Lease shall be performed by TENANT at TENANT's sole cost and expenses and
without any abatement of rent. If TENANT shall fail to pay any sum of money,
other than rent required to be paid by it hereunder or shall fail to perform any
other act on its part to be performed hereunder, or to provide any insurance or
evidence of insurance to be provided by TENANT, then in addition to any other
remedies provided herein, LESSOR may, but shall not be obligated to do so, and
without waiving or releasing TENANT from any obligations of TENANT, make any
such payment or perform anv such act on TENANT's part to be made or performed as
provided in this Lease or to provide such insurance. Any payment or performance
of any act or the provision of any such insurance by LESSOR on TENANT's behalf
shall not give rise to any responsibility of LESSOR to continue making the same
or similar payments or performing the same or similar acts. All costs, expenses,
and other sums incurred or paid by LESSOR in connection therewith, together with
interest at the maximum rate permitted by law from the date incurred or paid by
LESSOR shall be deemed to be additional rent hereunder and shall be paid by
TENANT with and at the same time as the next monthly installment of rent
hereunder, and any default therein shall constitute a breach of the covenants
and conditions of this Lease.
17. RESERVATIONS TO LESSOR (PMGE18.2 S)
The Premises are accepted as is and where is by TENANT subject to any and all
existing easements and Encumbrances. LESSOR reserves the right to install, lay,
construct, maintain, repair, and operate such sanitary sewers, drains, storm
water sewers, pipelines, manholes, and connections; water, oil, and gas
pipelines; telephone and telegraph power lines; and the appliances and
appurtenances necessary or convenient in connection therewith, in, over, upon,
through, across, and along the Premises or any part thereof, and to enter the
Premises for any and all such purposes. LESSOR also reserves the right to grant
franchises, easements, rights of way, and permits in, over, upon, through,
across, and along any and all portions of the Premises.
COUNTY reserves the right for:
1) Access, pass and repass for the purpose of managing the balance of
the wilderness areas of Featherly Regional Park;
2) Use of office space and desk for the Park Ranger in the
administration building;
3) The use of the maintenance yard for LESSOR vehicle and equipment
storage;
4) To inspect and maintain the interpretive exhibits, including but not
limited to the permanently installed "SAVI Headworks" exhibits; and
5) To schedule and conduct nature walks, campfires, and other
interpretive programs and the use of the amphitheater in the main
section of the park.
Page 7 of 10
<PAGE>
No right reserved by LESSOR in this clause shall be so exercised as to interfere
unreasonably with TENANT's operations hereunder or to impair the security of any
secured creditor of TENANT.
LESSOR agrees that rights granted to third parties by reason of this clause
shall contain provisions that the surface of the land shall be restored as
nearly as practicable to its original condition upon the completion of any
construction. LESSOR further agrees that should the exercise of these rights
temporarily interfere with the use of any or all of the Premises by TENANT, the
rental shall be reduced in proportion to the interference with TENANT's use of
the Premises.
18. HOLDING OVER (PMGE19.2 S)
In the event TENANT shall continue in possession of the Premises after the term
of this Lease, such possession shall not be considered a renewal of this Lease
but a tenancy from month to month and shall be governed by the conditions and
covenants contained in this Lease.
19. CONDITION OF DEMISED PREMISES UPON TERMINATION (PMGE20.2 S)
Except as otherwise agreed to herein, upon termination of this Lease, TENANT
shall re-deliver possession of said Premises to LESSOR in substantially the same
condition that existed immediately prior to TENANT's entry thereon, reasonable
wear and tear, flood, earthquakes, war, and any act of war, excepted. References
to the "Termination of the Lease" in this Lease shall include termination by
reason of the expiration of the Lease term.
20. DISPOSITION OF ABANDONED PERSONAL PROPERTY (PMGE21.2 S)
If TENANT abandons or quits the Premises or is dispossessed thereof by process
of law or otherwise, title to any personal property belonging to and left on the
Premises fifteen (15) days after such event shall, at LESSOR's option, be deemed
to have been transferred to LESSOR. LESSOR shall have the right to remove and to
dispose of such property without liability therefor to TENANT or to any person
claiming under TENANT, and shall have no need to account therefor.
21. QUITCLAIM OF TENANT'S INTEREST UPON TERMINATION (PMGE22.2 S)
Upon termination of this Lease for any reason, including but not limited to
termination because of 11 default by TENANT, TENANT shall execute, acknowledge,
and deliver to LESSOR, with-in thirty (30) days after receipt of written demand
therefor, a good and sufficient deed whereby all night, title, and interest of
TENANT in the Premises is quitclaimed to LESSOR. Should TENANT fail or refuse to
deliver the required deed to LESSOR, LESSOR may prepare and record a notice
reciting, the failure of TENANT to execute, acknowledge, and deliver such deed
and said notice shall be conclusive evidence of the termination of this Lease
and of all rights of TENANT or those claiming under TENANT in and to the
Premises.
Pace 8 of 10
<PAGE>
22. LESSOR'S RIGHT TO RE-ENTER (PMGE23.2 S)
TENANT agrees to yield and peaceably deliver possession of the Premises to
LESSOR on the date of termination of this Lease, whatsoever the reason for such
termination.
Upon giving written notice of termination to TENANT, LESSOR shall have the right
to re-enter and take possession of the Premises on the date such termination
becomes effective without further notice of any kind and without institution of
summary or regular legal proceedings. Termination of the Lease and re-entry of
the Premises by LESSOR shall in no way alter or diminish any obligation of
TENANT under the lease terms and shall not constitute an acceptance or
surrender.
TENANT waives any and all right of redemption under any existing or future law
or statute in the event of eviction from or dispossession of the Premises for
any lawful reason or in the event LESSOR re-enters and takes possession of the
Premises in a lawful manner.
23. AUTHORITY OF TENANT (PMGE 24.2 S)
If TENANT is a corporation, each individual executing this Lease on behalf of
said corporation represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of said corporation, in accordance with the
by-laws of said corporation, and that this Lease is binding upon said
corporation.
24. PUBLIC RECORDS (PMGE25.2 S)
Any and all written information submitted to and/or obtained by LESSOR from
TENANT or any other person or entity having to do with or related to this Lease
and/or the Premises, either pursuant to this Lease or otherwise, at the option
of LESSOR, may be treated as a public record open to inspection by the public
pursuant to the California Records Act (Government Code Section 6250, Et Seq.)
as now in force or hereafter amended, or any Act in substitution thereof, or
otherwise made available to the public and TENANT hereby waives, for itself, its
agents, employees, subtenants, and any person claiming by, through or under
TENANT, any right or claim that any such information is not a public record or
that the same is a trade secret or confidential information and hereby agrees to
indemnify and hold LESSOR harmless from any and all claims demands, liabilities,
and/or obligations arising out of or resulting from a claim by TENANT or any
third party that such information is a trade secret, or confidential, or not
subject to inspection by the public, including without limitation reasonable
attorneys' fees and costs.
25. RELATIONSHIP OF PARTIES (PMGE26.2 S)
The relationship of the parties hereto is that of LESSOR and TENANT, and it is
expressly understood and agreed that LESSOR does not in any way or for any
purpose become a partner of TENANT in the conduct of TENANT's business or
otherwise, or a joint venturer with TENANT, and the provisions of this Lease and
the agreements relating to rent payable hereunder are
Page 9 of 10
<PAGE>
included solely for the purpose of providing a method by which rental payments
are to be measured and ascertained.
Page 10 of 10
<PAGE>
6/15/93
LEGAL DESCRIPTION OF FEATHERLY PARK LEASE AREA 1
THOSE PORTIONS OF "PARCEL 101.0311, "PARCEL 102.01" AND "PARCELS 103 AND 103.1"
AS DESCRIBED IN THE DEED TO ORANGE COUNTY HARBORS, BEACHES AND PARKS DISTRICT,
RECORDED IN BOOK 14196, PAGES 96 THROUGH 98 INCLUSIVE AND RERECORDED IN BOOK
14249, PAGES 1278 THROUGH 1280 INCLUSIVE, TOGETHER WITH THE PARCEL RELINQUISHED
BY THE STATE OF CALIFORNIA TO THE COUNTY OF ORANGE BY DOCUMENT RECORDED IN BOOK
14011, PAGE 745 INCLUSIVE, ALL OF OFFICIAL RECORDS OF THE COUNTY OF ORANGE,
STATE OF CALIFORNIA, SHOWN AS LEASE AREA 1 ON RECORD OF SURVEY 89-1169, FILED IN
BOOK 141, PAGES 30 THROUGH 36 INCLUSIVE, IN THE OFFICE OF THE ORANGE COUNTY
RECORDER.
CONTAINING 62.970 ACRES
LEGAL DESCRIPTION OF FEATHERLY PARK LEASE AREA 2
THAT PORTION OF "PARCEL 101.03" AS DESCRIBED IN THE DEED TO ORANGE COUNTY
HARBORS, BEACHES AND PARKS DISTRICT, RECORDED IN BOOK 14196, PAGES 96 THROUGH 98
INCLUSIVE AND RERECORDED IN BOOK 14249, PAGES 1278 THROUGH 1280 INCLUSIVE, ALL
OF OFFICIAL RECORDS OF THE COUNTY OF ORANGE, STATE OF CALIFORNIA, SHOWN AS LEASE
AREA 2 ON RECORD OF SURVEY 89-1169, FILED IN BOOK 141, PAGES 30 THROUGH 36
INCLUSIVE, IN THE OFFICE OF THE ORANGE COUNTY RECORDER.
CONTAINING 1,549 ACRES
APPROVED
_________________________
HAROLD I. SCOTT
Right of Way Engiiieer
EXHIBIT A
<PAGE>
PLACEHOLDER
EXHIBIT B
PARCEL MAP
<PAGE>
PR09B-16
Featherly Regional Park
PHASE IIB LEASE AMENDMENT
THIS PHASE IIB LEASE AMENDMENT, hereinafter referred to as "Lease Amendment," is
made _________, 19__ by and between County of Orange, hereinafter referred to as
"LESSOR," and Canyon Recreational Vehicle Park, a California general
partnership, hereinafter referred to as "TENANT," without regard to number and
gender.
RECITALS
1. On 1993, LESSOR and TENANT entered into an option agreement, hereinafter
referred to as "Option Phase II," for the phased redevelopment and expansion of
the RV Park and Campground at Featherly Regional Park.
2. The redevelopment and expansion will be completed in two phases, Phase IIA
and Phase IIB. Phase IIA consists of adding electrical and water to the existing
RV campsites and Phase IIB consists of expanding the number of RV sites and
adding sewer hook-ups to all RV sites.
3. On ____________________1993, TENANT exercised the option with regard to Phase
IIA and LESSOR and TENANT entered into a lease, hereinafter referred to as
"Lease" for the redevelopment and operation of the RV Park and Campground.
4. Pursuant to the terms of the Option Phase II and satisfactory compliance with
the Option conditions for Phase IIB, LESSOR and TENANT now agree to amend said
Lease to extend the term of the Lease from thirty (30) years to forty (40)
years.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter contained,
LESSOR and TENANT do mutually agree to amend said Lease as follows:
A. Delete Clause 6 (TERM) and substitute therefore the
following:
TERM (PMB2.1 S)
The term of this Lease shall be forty (40) years, commencing the first
day of the first full calendar month following the date of execution of
this Lease by LESSOR.
B. All other terms and conditions of the Lease shall remain unchanged.
ATTACHMFNT II
-1-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease Amendment the day and
year first above written.
TENANT
---------
APPROVED AS TO FORM:
County Counsel CANYON RECREATIONAL VEHICLE
PARK, a California general partnership
By
-----------------------------
By
Dated -----------------------------------------
------------------------- St. Clair Investments, Inc. General
Partner By Vernon St. Clair, President
APPROVED AS TO AUDIT & ACCOUNTING:
Auditor-Controller
By
-----------------------------------------
Mobile Modular Development Inc., General
By: /s/Lisa Montijo Partner
--------------------------- By John De Falco, President
RECOMMENDED FOR APPROVAL:
Environmental Mangement Agency
Harbors, Beaches and Parks
By /s/Robert G. Fisher
-----------------------------
General Services Agency
Real Estate
By
-----------------------------
Real Property Agent
LESSOR
------
SIGNED AND CERTIFIED THAT A COPY
OF THIS DOCUMENT HAS BEEN COUNTY OF ORANGE
DELIVERED TO THE CHAIRMAN OF THE
BOARD
By
- - ------------------------------- -----------------------------------------
Phyllis A. Henderson Chairman, Board of Supervisors
Clerk of the Board of Supervisors,
Orange County, California
-2-
<PAGE>
STANDARD RETAIL/OFFICE COMPLEX LEASE
TABLE OF CONTENTS
October 12, 1994
PLANET KIDS, INC., A CALIFORNIA CORPORATION (Tenant)
SECTION
- - -------
1. Basic Lease Provisions
2. Premises
3. Common Areas
4. Term
5. Base Rent
6. Additional Rent
7. Percentage Rent and Financial Information
8. Taxes on Tenant's Property
9. Security Deposit
10. Construction and Acceptance of Premises
11. Use of Premises
12. Alterations
13. Liens
14. Maintenance and Repairs
15. Project Services
16. Management of the Project
17. Indemnification and Waiver
18. Insurance
19. Waivers of Subrogation
<PAGE>
20. Damage or Destruction
21. Eminent Domain
22. Default
23. Assignment and Subletting
24. Rent and Other Charges
25. Subordination
26. Estoppel Certificate and Financial Statements
27. Interest on Past Due Obligations
28. Sale or Transfer by Landlord
29. Landlord's Right to Cure Defaults
30. Waiver
31. Force Majeure
32. Rules and Regulations
33. Surrender of Premises
34. Holding Over
35. Relocation
36. Miscellaneous
Signatures
Addendum
Exhibit "A" Site Plan
Exhibit "B" Floor Plan
Exhibit "C" Rules arid Regulations
Exhibit "D" Lease Confirmation
Exhibit "E" Lease Guaranty
Exhibit "F" Non-Disturbance Agreement
<PAGE>
STANDARD RETAIL OFFICE COMPLEX LEASE
This Standard Retail/Off ice Complex Lease ('Lease') is made and entered into
this 12th day of October 1994 by and between PSA PROPERTIES ('Landlord') and
PLANET KIDS, INC., A CALIFORNIA CORPORATION , ('Tenant') who agree as follows:
1. BASIC LEASE PROVISIONS.
(a) Premises: The space within the Laguna Farms Market Center, which is to
be changed to Moulton La Paz Center, complex identified by the cross-hatching on
Exhibit 'A', with an area of approximately 12,200 square feet, located at
26-538H Moulton Parkway, Laguna Hills, California 92653
(b) Duration:
(1) Term: 1O years and 0 months., from Rent Commencement Date (defined
below)
(2) Rent Commencement Date: See Addendum Paragraph 38.
(3) Expiration Date: 10 Years of Commencement Date
(c) Initial Base Rent: $11,590.00 per month (Eleven Thousand Five Hundred
Ninety Dollars per month) Dollars), subject to increases in accordance with
Section 5.
(d) Tenant's Proportionate Share of the Project: 20.64 % (12, 200 sq. ft.
divided by 59,119 sq. ft
(e) Security Deposit: $ See Addendum Paragraph 48.
(f) Tenant's Business: Children's Recreation, Educational and Fitness Center
and any other use reasonably consistent with other uses in the complex, as long
as any such other uses are not
(g) Address for Payment of Rent and Notices: prohibited under the terms of any
other tenant's lease.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
To Landlord: Western Capital Resources with copy to: Loeterman, shulkin & Kraemer
11611 San Vicente Boulevard, #650 11611 San Vicente Blvd. #1050
Los Angeles, California 90049 Los Angeles, CA 90049
To Tenant: Planet Kids, Inc. with copy to: Harry Shuster
26-538H Moulton Parkway 1430 Loma Vista
Laguna Hills, CA 92653 Beverly Hills, CA 90210
</TABLE>
(h) A Work Letter for the construction of Lease hold Improvements is not
attached as Exhibit "E" and made a part of this Lease.
2. PREMISES.
<PAGE>
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord, in
consideration of and upon the terms and conditions set forth herein, that
certain retail space (the "Premises") identified in paragraph 1(a), outlined on
the Site Plan attached hereto as Exhibit "A". The Premises are located in the
Laguna Farms Market Center, which is to be changed to Moulton La Paz Center,
located at 26-538H Moulton Parkway, Laguna Hills, California 92653 ("Shopping
Center"), which is located upon the real property described in Exhibit "HI
attached hereto (the "Property"). The Premises, Shopping Center, Property and
Common Areas (defined below) are collectively referred to herein as the
"Project".
*,providing such changes do not unreasonably
interfere with Tenant's use of access to and
quiet enjoyment of the property, common
areas and Premises,
3. COMMON AREAS.
(a) Definition. The "Common Areas" are all areas and facilities outside the
Premises and within the boundary lines of the Property that are provided by
Landlord from time to time for the non-exclusive use of Landlord, the tenants of
the Project and their respective employees, suppliers, customers and invitees.
The Common Areas include, but are not limited to, exterior building surfaces,
walls, and roofs.
(b) Changes. Landlord shall have the right, in its sole discretion, from
time to time* to make changes to the Project including, without limitation,
changes in the Project and the Common Areas, including any and all entrances,
loading and unloading areas, decorative walls, landscaped areas and walkways; to
close temporarily any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available; to designate other land and
improvements outside the boundaries of the Property to be part of the Project;
to use the Common Areas to facilitate making additional improvements, repairs,
or alterations to any part of the Project; and to do and perform such other acts
and make such other changes in, to or with respect to the Project as Landlord
may deem appropriate.
(c) No Private Use of Common Area. Tenant shall not use the Common Areas for
any private use or business activities including, without limitation,
merchandising, the sale of goods or storage. Tenant shall have no right to block
off any portion of the Common Areas.
4. TERM.
(a) Commencement. The term of this Lease ("Term") shall be that approximate
period set forth in Section 1(b)(1). See Addendum Paragraph 38. Landlord will
sign and deliver to Tenant a Lease Confirmation Form which Tenant shall
countersign and return to Landlord in the form of the letter attached hereto as
Exhibit "D".
(b) Failure to Take Possession. Tenant's inability or failure to take
possession of the Premises on the Rent Commencement Date (or, in the event of
excused delay, when possession of the Premises is tendered) shall not delay the
commencement of the Lease or Tenant's obligation to pay rent.- Tenant
acknowledges that Landlord shall incur significant expenses upon the execution
of this Lease, even if Tenant never takes possession of the Premises. **unless
same is due to Landlords delays or force majeure.
5. BASE RENT. (a) When Due. Commencing on the Rent Commencement Date, Tenant
covenants to pay to Landlord during the Term, at the address set forth fin
Section 1 (g) or to such other persons or at such other places as directed by
written notice to Tenant from Landlord, a monthly rental (hereafter 'Base
Plant') initially in the amount set forth in Section I (c), due and payable,
without demand offset or deduction. in advance on the first day of each calendar
month (for which such rent is due) ; except that Base Rent for the first full
calendar month*** -for a total of $ 11.590.00 shall be paid when Tenant executes
this Lease. If the Rent Commencement Date occurs on a day other than the first
day of a calendar month. or the Expiration Date occurs on a day other than the
last day of a calendar month, then the Base Rent for such month shall be
prorated on the basis of a thirty (30) day month. ***plus the estimate of
Tenant's Proportionate Share of Expenses and Taxes,
<PAGE>
(b) CPI Increases. The Base Rent shall be adjusted on each twelve (12) month
anniversary on the Rent Commencement Date (the "Adjustment Date") or, if the
Rent Commencement Date is a day other than the first day of a calendar month,
the Adjustment Date shall be on the first day of the calendar month next
preceding such anniversary date. Such adjustments shall be made during the Term
of the Lease and any renewal or extension periods. The amount of the adjustment
shall be equal to the percentage, if any, which the United States Department of
Labor, Bureau of Labor Statistics, Consumer Price Index for Urban Wage Earners
and Clerical Workers for the Los Angeles-Anaheim-Riverside Area with a reference
base of 1982-84 = 100 ("C.P.I.") has increased. The new monthly Base Rent
payable upon the Adjustment Date shall be calculated by multiplying the Base
Rent payable for the preceding year by the fraction, the numerator of which
shall be the C.P.I. for the calendar month three (3) months prior to the
Adjustment Date of the subject rent adjustment, and the denominator of which
shall be the C.P.I. for the month, three (3) months prior to the immediately
preceding Adjustment Date. The amount so calculated shall constitute the new
monthly Base Rent. In the event the C.P.I. is discontinued, Landlord shall
substitute a comparable index which will be used to determine any increase. In
no event shall the Base Rent computed on any Adjustment Date be less than in the
prior year. Upon Landlord's completion of the computation for the adjusted Base
Rent, Landlord shall give written notice to Tenant, retroactive to the
Adjustment Date. Notwithstanding the fact that Landlord's notice may be given
after the Adjustment Date, Tenant shall pay Landlord within ten (10) days after
Landlord's notice, the difference, if any, between the Base Rent paid and the
Base Rent as adjusted during any months elapsed from the Adjustment Date to the
date of the notice. No delay or failure by Landlord to enforce this provision
shall be deemed to be a waiver or prevent enforcement of this Section. See
Addendum Paragraph 37.
6. ADDITIONAL RENT.
(a) Payment of Expenses and Taxes. Tenant shall pay to Landlord as
Additional Rent its Proportionate Share of "Expenses" and "taxes" (as those
terms are hereinafter defined) which are incurred by Landlord in the operation
of the Project.
Tenant's "Proportionate Share" of expenses shall mean the percentage set
forth in Section 1(d). In the event the demised Area of the Premises, by reason
of amendment or modification, shall change from the Area expressed herein, or
the area of the Project shall change for any reason, Tenant's Proportionate
Share shall be adjusted accordingly.
<PAGE>
(b) Expenses. The term "Expenses" shall mean the sum of all expenses paid or
incurred by Landlord during any calendar year of the Term in connection with the
operation, maintenance, insurance, management, and repair of the Project
regardless of whether said expenses or charges were incurred by Landlord
directly in the performance of the work itself or paid by Landlord to outside
contractors. By way of example, Expenses shall include without limitation: all
expenses paid or incurred by Landlord during any calendar year of the Term for:
(1) electricity, water, gas, sewer, and any other utility services including
utility taxes; usage, service, hook-up, connection, availability, and/or standby
fees; and deposits for utilities which are not separately billed to individual
tenants; (2) operation, maintenance and repaid of electrical, mechanical, and
plumbing equipment and services; (3) labor costs for employees engaged in the
operation, maintenance and repair of the Project; (4) the services of any
building management company engaged in the management of the Project; (5)
premiums for property damage, liability, and all other insurance carried by
Landlord for the Project; (6) building and cleaning supplies, tools, equipment,
and materials; (7) licenses, permits, and inspection fees; (8) public accounting
and legal service provided to the Project; (9) rubbish and trash removal; (10)
hazardous waste removal and/or abatement; (11) periodic maintenance, repair,
replacement, restoration, remodeling, and up-grading of decorations and
landscaping (permanent or temporary, seasonal or otherwise), lighting, signs,
awnings, interior and exterior building surfaces and roof; (12) periodic
maintenance, repair, replacement, restoration, and up-grading of drains and
gutters, curbs, and sidewalks, and walkways, if any; (13) ten percent (10%) of
all operating expenses as reimbursement for Landlord's administration and
overhead costs; (14) the annual amortized cost, together with interest at the
rate of the lesser of ten percent (10%) per annum of the highest rate allowed by
law, (whether or not such costs are actually financed) of (I) equipment and
tooled used in the operation, maintenance and repair of the Project, if the
entire cost of such items are not included in Expenses on a current basis; (ii)
improvements which are designed or intended to reduce Expenses or to improve
operations; (iii) improvements which Landlord is required to make (including,
without limitation, to the electrical, mechanical, plumbing, or other systems or
components) to comply with any law or regulation of any governmental entity,
including without limitation, any present or anticipated labor, energy, safety,
conservation or other program, providing such law or regulation is enacted or
enforced after the Lease Commencement Date.
For purposes of this Section, annual amortization shall be determined by
dividing the original cost of each capital expenditure by the number of years of
useful life of the capital item acquired, which useful life shall be reasonably
determined by Landlord in accordance with generally accepted accounting
principles.
(c) Exclusions. Expenses shall not include costs of preparing or leasing
space for new tenants; the costs of special services rendered to tenants
(including Tenant) for which a separate charge is made; interest or amortization
paid by Landlord in connection with any loan or loans secured by the real
property of which the Premises are a part, unless such loans are made to finance
costs included herein in the definition of Expenses (in which event such costs
shall be included). See Addendum Paragraph 41.
(d) Taxes. The term "Taxes" shall mean all real property taxes (including
increases caused by reappraisal upon changes in the ownership of the Project of
Landlord's interest therein as defined by applicable statutes for property tax
purposes, or otherwise) and personal property taxes, charges and assessments
which are levied, assessed, or imposed by any governmental authority or
political subdivision thereof during any calendar year of the Term with respect
to the Project and the land upon which the Project is located and any
improvements, fixtures, and equipment and all other property of Landlord, real
or personal, used in connection with the operation of the Project (computed as
if paid in permitted installments regardless of whether actually so paid) and
any tax which shall be levied or assessed in addition to or in lieu of such real
or personal property taxes, and any license fees, traffic mitigation fees, tax
measured by or imposed upon rents, or other tax or charge upon Landlord's
business of leasing space in the Project, but shall not include any federal or
state income taxes, or any franchise, capital stock, estate or inheritance
taxes. In addition to the foregoing, all assessments, taxes, fees, levies and
charges imposed by governmental agencies for services such as fire protection,
street, sidewalk and road maintenance, refuse removal, and other public services
generally provided without charge to owners or occupants prior to the adoption
of Proposition 13 in June, 1978, shall be deemed included within the definition
of "Taxes" for the purpose of this Lease. (e) Estimated Payments (1) Tenant
shall pay to Landlord with seven (7) business days after delivery of Landlord's
statement therefor, Tenant's Proportionate Share of Expenses and Taxes at
Landlord's election, in (I) equal periodic installments which have been
estimated in advance by Landlord for a particular twelve month period, in which
event Landlord shall as soon as practical after the end of such twelve month
period, adjust the estimated expenses to reflect the actual
<PAGE>
Expenses and Taxes incurred for such period, of (ii) the amount of such Expenses
and Taxes actually incurred during the billing period. In the event Taxes or
Expenses increase, Landlord may adjust both retroactively and prospectively
Tenant's monthly payments upon thirty days advance notice. If Landlord estimates
Expenses or Taxes, in the event of any underpayment, Tenant shall immediately
pay the additional amount owing to Landlord. Any overpayment shall be credited
against Tenant's future accruing liability for Expenses and Taxes. If the Term
shall have expired and no further Rent shall be due, Tenant shall receive a
refund of such difference within sixty (60) days after Landlord send the
statement. This clause shall survive the expiration of this Lease. If the Term
shall have expired before a final determination is made of Tenant's obligation
for actual Expenses and Taxes, upon receipt of the Statement, Tenant shall
promptly pay any excess due Landlord over the estimated Expenses and/or Taxes
paid or Landlord shall promptly refund any estimated payments made by Tenant in
excess of the actual Expenses and Taxes. Landlord's failure to bill Tenant for
Expenses and Taxes in a timely manner shall neither constitute a default by
Landlord nor a waiver of Landlord's rights to Additional Rent.
(2) In the Term commences other than on January 1, or ends other than
on December 31, Tenant's obligations to pay estimated and actual amounts towards
Taxes and Expenses for such first or final calendar years shall be prorated to
reflect the portion of such years included in the Term.
(3) Landlord shall maintain records respecting Taxes and Expenses
determined in accordance with sound accounting practices, consistently applied.
Tenant or its representative shall have the right to examine such records upon
reasonable prior notice specifying the records Tenant desires to examine, during
normal business hours at the place where such records are normally kept by
sending such notice no later than forty-five (45) days following the furnishing
of a statement for such Expenses and Taxes. Tenant may take exception to matters
included in Taxes and Expenses, or Landlord's computation of Tenant's obligation
for either, by sending notice specifying such exception and the reasons therefor
to Landlord no later than thirty (30) days after Landlord makes such records
available for examination. Landlord's statement for Expenses and Taxes shall be
considered final, except as to matters to which exception is taken after
examination of Landlords' records in the foregoing manner and with the foregoing
time periods. Tenant acknowledged that Landlord's ability to budget and incur
expenses depends of the finality of the statement, and accordingly agree that
time is of the essence of this Section. If Tenant takes exception to any matter
contained in the statement, Landlord shall refer the matter to an independently
certified public accountant, whose certification as to the proper amount shall
be final and conclusive as between Landlord and Tenant. Tenant shall promptly
pay the cost of such examination unless it resulted in a determination that
Tenant was overbilled by more than five percent (5%), in which event Landlord
will pay the cost of such examination. Pending resolution of any such exceptions
in the foregoing manner, Tenant shall continue paying Tenant's Proportionate
Share of Taxes and Expenses in the amounts determined by Landlord, subject to
adjustment after any such exceptions are resolved.
8. TAXES ON TENANT'S PROPERTY.
Personal Properly Taxes. Tenant shall be liable for and shall pay
before delinquency taxes, assessments, license fees, and other similar charges
levied against any personal property or trade fixtures placed by Tenant or at
Tenant's direction in or about the Premises. Tenant shall furnish Landlord with
satisfactory evidence of those payments upon request. If any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property, or if the assessed value of the Project is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant, pays such
taxes based upon such increased assessment, which Landlord shall have the right
to do regardless of the validity thereof, but only under proper protest if
requested by Tenant, in writing, Tenant shall, within five (5) days after
written demand, reimburse Landlord for the taxes so levied against Landlord, or
the proportion of such taxes resulting from such increase in the assessment. In
such event, Tenant shall have the right, provided Tenant holds Landlord
cooperation, to bring suit against the County Tax Collector in a court of
competent jurisdiction to recover the amount of any such taxes so paid under
protest.
(b) Increased Assessment. If construction of the leasehold improvements
in the Premises, whether installed and/or paid for by Landlord or Tenant and
whether or not affixed to the real property so as to become a part thereof,
cause the real estate tax assessment for the Project to be increased, then the
real property Taxes and assessments levied against Landlord or the Project by
reason of such excess assessed valuation shall be governed by the provisions of
Section 8(a). If the records of the County Assessor are available and
sufficiently detailed to serve as a basis for determining to what extent
leasehold improvements increased the assessed value of the Project, such records
shall be binding on both Landlord and Tenant. If the records of the County
Assessor
<PAGE>
are not available or sufficiently detailed to serve as a basis for making this
determination, the actual costs of construction shall be used. *
9. SECURITY DEPOSIT.
(a) In General. Tenant has deposited with Landlord a security deposit
as set forth in Section 1(e) as security for the performance of every provision
of this Lease to be performed by Tenant. If Tenant defaults with respect to any
provision of this Lease, including, but not limited to, the provisions relating
to the payment of Base Rent, Additional Rent, or Percentage Rent, Landlord may
use, apply, or retain all or any part of the security deposit for the payment of
rent or any other sum in default, or for the payment of any other amount which
Landlord may spend or become obligated to spend by reason of Tenant's default or
to compensate Landlord for any other loss, cost, or damage which Landlord may
suffer by reason of Tenant's default. If any portion of the security deposit is
so used or applied, Tenant shall, within five (5) days after written demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
security deposit to its original amount, and Tenant's failure to do so shall be
a material breach of this Lease. Landlord shall not be required to keep the
security deposit separate from its general funds and Tenant shall not be
entitled to interest on such deposit. If Tenant shall fully and faithfully
perform every provision of this Lease to be performed by it, the security
deposit or any balance thereof shall be returned to Tenant (or, at Landlord's
option, to the last transferee of Tenant's interest hereunder) within a
reasonable time after both the expiration of the Term and Tenant's delivery of
the Premises to Landlord; provided, however, that Landlord may retain a portion
of the security deposit sufficient to satisfy any Amount due from Tenant
pursuant to Sections 6 and 7 hereof until such amounts have been determined and
paid in full. Should Landlord transfer its interest in the Project, Tenant shall
look only to the new Landlord for return of the security deposit if such is
actually transferred to the new Landlord.
10. CONSTRUCTION AND ACCEPTANCE OF PREMISES.
(a) Construction. Tenant has thoroughly inspected the Premises and
agrees to accept the Premises in their existing condition and acknowledges that
Landlord has made no representation or warranty concerning the current condition
of the Premises or its operating systems nor any agreement to make any
alteration, repair, or improvement to the Premises unless Landlord
<PAGE>
and Tenant have signed a Work Agreement which is attached hereto as Exhibit "E"
in which event the Premises shall be constructed in accordance with Exhibit "E."
See Addendum Paragraph 39.
11. USE OF PREMISES.
(a) Purpose. The Premises shall be used and occupied by Tenant for a
children's recreation, educational and fitness center, including a planned play
environment, educational learning center, a snack bar/eating area and retail
sales of toys, and any other use reasonably consistent with other uses in the
Complex as long as any such other use is not prohibited under the terms of any
other tenant's lease. And for no other purpose whatsoever. Tenant shall conduct
its business under the trade name of Planet Kids as a quality retail
establishment in accordance with the standards of the Project. Tenant
acknowledges the importance of Tenant's operations to the image of Landlord's
Project as first class, upscale retail/office complex. Accordingly, Tenant shall
at all times operate its business in a first class, upscale manner consistent
with the operations of other quality businesses.
(b) Suitability. Tenant acknowledges that, except as expressly provided
herein, neither Landlord nor any agent of Landlord has made any representation
or warranty with respect to the Premises or the Project or with respect to the
suitability of either for the conduct of Tenant's business. Tenant ,acknowledges
that neither Landlord nor its agents have made any representations or warranties
of any nature whatsoever with respect to the mix of tenants who will occupy
space in the Project.
Neither Landlord nor its agents have made any representations or
warranties with respect to the availability or adequacy of off-site parking for
the Project or the Premises.
(C) Compliance with Laws. Tenant shall not do or permit anything to be
done which will in any way obstruct or interfere with the rights of other
tenants or occupants of the Project or injure or annoy them. Tenant shall not
use or allow the Premises to be used for any improper, unlawful or immoral
purpose. Tenant shall not cause or maintain or permit any nuisance or commit or
suffer the commission of any waste on or about the Project. Tenant shall not
cause or permit any hazardous or toxic waste, substance, or material to be
brought to the Project or used, handled, stored or disposed of at the Project.
Tenant shall not conduct business or any other activity at the Project if of
such a nature as to place an unreasonable and excessive burden upon the Project.
Tenant, at Tenant's sole expense, shall comply with all statutes, laws,
ordinances or code requirements now in force or which may hereafter be in force
pertaining to the use or condition
<PAGE>
of the Premises. The judgement of any court of competent jurisdiction or the
admission of Tenant in any action or proceeding against Tenant, whether Landlord
be a party thereto or not, that Tenant has violated any requirement with respect
to the use or condition of the Premises shall be conclusive of that fact as
between Landlord and Tenant. See Insert 1 (following page)
(d) Restrictions. Tenant shall not, without Landlord's prior written
consent, in Landlord's sole discretion: (I) conduct any fire, auction or
bankruptcy sale on or from the Premises; (ii) conduct any close-out sale except
in connection with the expiration of the Term on or from the Premises; or (iv)
sell or display any merchandise outside the exterior walls of the Premises.
12. ALTERATIONS.
(a) Consent Required. Except for improvements approved by Landlord
prior to the date of execution of the Lease, non-systemic alterations, which are
not visible from outside the Premises and which have an aggregate cost of less
than $2,500 in any calendar year, Tenant shall not make or allow any
alterations, additions, or improvements in or to the Premises without Landlord's
prior written consent. All alterations shall be performed by licensed
contractors, and in accordance with plans and specifications, approved in
advance in writing by Landlord. All such work shall be done by tenant at such
time and manner as Landlord may designate and under Landlord's supervision.
Prior to performing any alteration, Tenant shall furnish Landlord with plans and
specifications showing the proposed alteration to the Premises. All such work
shall be performed in full compliance with all laws, regulations, and
requirements of governmental agencies having jurisdiction. Before commencing any
work, Tenant shall give Landlord at least ten (10) days written notice of the
proposed commencement of such work and shall, if the work costs in aggregate
over $20,000 and if required by Landlord, secure at Tenant's own cost and
expense, a completion and lien indemnity bond, satisfactory to Landlord.
Landlord shall have the right to post notices of non-responsibility on the
Premises and record verified copies thereof in connection with work and
alterations to the Premises.
(b) Removal. All alterations and improvements to the Premises including
fixed partitions and/or appurtenances attached to or built into the Premises
prior to or during the Term, whether by Landlord, at its expense, or at the
expense of Tenant, or both, shall be and remain part of the Premises and shall
not be removed by Tenant at the end of the Term unless such removal is required
<PAGE>
by Landlord pursuant to written notice to Tenant given at least thirty (30) days
prior to the expiration or sooner termination of the Term. Tenant shall repair
any damage to the Premises caused by any such removal. See Insert 2 (following
page)
13. LIENS.
(a) In General. Tenant shall keep the Premises, the Project, and the
Property free from any liens arising out of work performed, materials furnished,
or obligations incurred by or on behalf of Tenant. Tenant further covenants and
agrees that should any mechanic's lien be filed against the Premises, the
Project, or the Property for work claimed to have been done, or materials
claimed to have been furnished to Tenant, said lien will be discharged by
Tenant, by bond or otherwise, within five (5) days after the filing thereof, at
the cost and expense of Tenant. Should Tenant fail to discharge any such lien,
Landlord may, but shall not be obliged to, discharge said lien at Tenant's
expense, without being responsible for investigating the validity thereof. This
paragraph shall not mean that Tenant shall be liable to discharge liens for work
performed by Landlord, but rather that Tenant shall be liable to discharge liens
for work performed by Tenant.
14. MAINTENANCE AND REPAIRS.
(a) Landlord's Obligation. Landlord shall keep in good condition and
repair, the roof, foundations, exterior surfaces, facade [See Insert 3
(following page)] and structural aspects of bearing walls of the Premises and
Common Areas of the Property. The cost of all maintenance and repairs made by
Landlord shall be included in Expenses, pursuant to Section 6, unless such
maintenance and repairs are caused in whole or in part by leasehold improvements
to the Premises constructed by Tenant or at Tenant's direction, or by the act,
neglect, fault, or omission of Tenant, its agents, servants, employees, or
visitors, in which case, Tenant shall pay to Landlord upon demand the reasonable
cost (or portion thereof equitably allocated to Tenant, in Landlord's best
judgement) of such maintenance and repairs. Landlord shall not be liable for any
failure to comply with its obligations to make any repairs or to perform any
maintenance unless, as a consequence, the Premises becomes untenantable as set
forth in Section 60, in which case, as Tenant's sole remedy, rent shall abate in
accordance with Section 60. Except as provided in Section 20, there shall be no
abatement of rent and no liability of Landlord by reason of any injury to or
inference with Tenant's business arising from the making of any repairs,
alterations, or
<PAGE>
improvements in or to any portion of the Project. Tenant irrevocably waives the
right to make repairs at Landlord's expense under Section 1942 of the California
Civil Code, or any other such law, statute, or ordinance now or hereafter in
effect. See Insert 4 (following page).
(b) Tenant's Obligations. Except as expressly provided in 14(a) above,
Landlord shall not be obligated to make repairs, replacements, or additions of
any kind upon the exterior or interior of the Premises or upon any trade
fixture, equipment or personal property of Tenant. Except as provided in Section
14(a) above, Tenant shall maintain the Premises in good condition and repair at
Tenant's sole expense, including, without limitation, maintenance, replacement,
and repair of any doors, plate glass, heating, air conditioning, electrical and
plumbing components within the Premises or walls, ceiling, or floor of the
Premises, except for electrical or plumbing lines which service premises other
than Tenant's. Tenant shall keep its fixtures and equipment in good order and in
sanitary and safe condition and repair and in compliance with all governmental
requirements and insurance requirements. Tenant shall at all times during the
Term, maintain service and maintenance contract for the heating and air
conditioning equipment serving the Premises, approved as to form and content by
Landlord. If during the term, any modification, repair, alteration, or other
change shall be required to be made in or to the Premises by any Code
Requirement, ordinance, regulation, or law, or by and governmental authority,
Tenant shall first request and obtain Landlord's written consent thereto and
such modification or alteration shall then be made by Tenant at Tenant's sole
expense. Subject to the provisions of Section 20, all damage and injury to the
Premises or the Project caused by the act or negligence of Tenant, its
employees, agents, or visitors, shall be promptly repaired by Tenant at its sole
cost and expense, to the satisfaction of Landlord. Landlord shall have the
right, but not the obligation, to make any repairs which are not promptly made
by Tenant and charge Tenant for the cost thereof. All repairs Tenant is required
to make hereunder shall be made strictly in accordance with any instructions
therefor given by Landlord. Tenant shall upon the expiration or sooner
termination of the Term surrender the Premises to Landlord in the same condition
as when received, ordinary wear and tear excepted. Landlord shall have no
obligation to alter, remodel, improve, repair, decorate, or paint the Premises
or any part thereof, and Tenant acknowledges that Landlord has made no
representations respecting the condition of the Premises or the Project except
as specifically set forth herein.
<PAGE>
(C) Life Safety Systems. If there now is or shall be installed in the
Project a sprinkler system, heat, or smoke detection system or any other
life-safety system, and any such system or any of its appliances shall be
damaged or injured or not in proper working order by reason of any act or
omission of Tenant, Tenant's agents, servants, employees, contractors, visitors,
or licensees, Tenant shall forthwith notify Landlord, and Landlord shall restore
the same to good working condition at Tenant's expense. If the Insurance
Services Office or any other similar body or any governmental authority having
jurisdiction, requires or recommends that nay modifications, replacements, or
additional equipment be made or supplied in or to any such system by reason of
Tenant's business, or the location of partitions, trade fixtures, or other
contents of the Premises, or if any such modifications, replacements, or
additional equipment become necessary to prevent the imposition of a penalty or
charge against the full allowance for any such system in the insurance rate as
fixed by said Office or by any insurance company, Landlord shall have the right,
but not the obligation, to make and supply such modifications, replacements, or
additional equipment at Tenant's sole cost and expense.
15. PROJECT SERVICES
(a) Utilities. During the Term of this Lease, Tenant shall obtain and
pay, before delinquency, all charges for water, gas, heat, electricity, power,
telephone service, trash removal, sewer service, and sewer availability charges
attributable to the Premises, and all other services or utilities used in
connection with the Premises. Landlord may at its option require Tenant to
install and operate separate meters, submeters or any other reasonable system
for monitoring or estimating any services or utilities used exclusively by
Tenant in connection with the Premises.
(b) Limitations. Landlord shall not be liable for and Tenant shall not
be entitled to and abatement of rent by reason of interruption of services or
utilities to the Premises or failure of any of the foregoing whether caused by
riot, strike, labor disputes, breakdowns, necessary repairs, breakage,
accidents, the unavailability of natural or other energy resources, other causes
beyond the Landlord's reasonable control, excepting Landlord's negligence in
which event Tenant's remedy shall be limited to abatement of rent under the
conditions set forth in Section 60 below. Tenant will not connect with electric
current, except through existing electrical outlets in the Premises, or with
water pipes, any apparatus or device which uses electric current or
<PAGE>
water. Landlord reserves the right to stop service of plumbing, HVAC,
electrical, mechanical or other systems, when necessary to be made, until same
shall have been completed, and shall further have no responsibility or liability
for failure to supply service in such instance. Landlord shall not be deemed to
have warranted the effectiveness of any particular security system which nay be
utilized at the Premises. Nor shall Landlord be responsible for damage or injury
to Tenant, its employees, invitees or others due to the failure, action, or
inaction of any such security system.
*Landlord warrants that no personal property taxes for any individual tenant in
the Shopping Center are included in Expenses & Taxes (paragraph 6 hereof).
Landlord shall enforce the terms of this paragraph 8 in a non- discriminatory
manner for all tenants in the Shopping Center.
<PAGE>
INSERTS FOR LEASE PARAGRAPHS ll(C), 12(B), 14(A) (PREVIOUS PAGE).
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Insert 1 (for paragraph 11(c).
- - ------------------------------
Tenant shall not be responsible for any non-compliance with laws by Landlord
prior to the date of execution of the Lease. In addition, Tenant shall not be
responsible for any structural work necessary for compliance with laws which
become effective following the Commencement Date, unless necessitated as a
result of Tenant's particular use and/or operation of the Premises in which
event Tenant shall pay for the work.
Insert 2 (for paragraph 12(b).
- - ------------------------------
At Landlord's option, at the end of the Term Tenant shall be required to
return the Premises to Landlord in its condition on the date of execution of the
Lease (normal wear and tear excluded); that is, if required by Landlord the
interior of the Premises shall be returned in its "shell" condition and the
exterior shall be returned to its condition at the date of execution of the
Lease.
Insert 3 (for paragraph 14(a).
- - ------------------------------
, electrical, plumbing and other systems which are necessary for the
operation of Tenant's business at the Premises but not within the Premises or
otherwise Tenant's obligation pursuant to paragraph 14(b) below.
Insert 4 (for paragraph 14(a).
- - ------------------------------
In addition, if Landlord fails to repair or maintain an item (which is
Landlord's responsibility to repair or maintain) and such item does not
constitute an emergency situation as covered in paragraph 59 and affects only
the Premises (and not any other portion of the Project), Tenant shall have the
right to perform the repair or maintenance work if (and only if) Tenant gives
Landlord written notice of the need for the repair or maintenance work and
Landlord does not perform the repair or maintenance work within ten (10) days
following the date Landlord receives Tenant"s notice; provided, however, if the
subject repair or maintenance work cannot reasonably be performed within the
subject ten-day (10-day) period, and Landlord is diligently pursuing the
completion of the repair or maintenance work, then Tenant may not perform the
repair or maintenance work. if Tenant makes a repair in accordance with the
foregoing and Landlord does not dispute Tenant's right to so make the repair but
does not reimburse Tenant therefor within ten (10) days following receipt of the
invoice for the repair, Tenant may offset its rent by the amount of the repair
(as reflected on the invoice received by Landlord). If Tenant makes a repair
pursuant to this paragraph and Landlord disputes Tenant's right to so make the
repair, the dispute shall be submitted to arbitration before a retired judge in
accordance with the rules of the American Arbitrators Association; in that
event, Tenant shall not have the right to offset as forestated until the dispute
is resolved to the satisfaction of both parties. The losing party in such
arbitration shall pay the costs of the arbitration.
================================================================================
(pki-inl)
<PAGE>
16. MANAGEMENT OF THE PROJECT.
(a) Entry by Landlord. Landlord reserves the right to enter the
Premises for any necessary purpose, including to examine, test or inspect the
same; to supply any maintenance or service to be provided by Landlord; to
exhibit the Premises to prospective purchasers, lenders, or tenants; to post
notices of non-responsibility, to alter, improve, or repair the Premises; to
install, use, relocate, repair, and replace pipes, ducts, conduits, wires,
meters, and equipment for services above the ceiling surfaces, below the floors,
within the walls, and through the Premises. Landlord shall use reasonable
efforts to advise Tenant in advance of any Such entry, except in case of
emergency.
(b) Alterations in the Project. Landlord reserves the right to alter,
improve, or repair any portion of the Project, including shoring the
foundations, footings, and walls, by any reasonable means including such
alterations to the Premises as Landlord may deem necessary or desirable for
health, life safety, or other purposes. Landlord may, in order to carry out such
purposes, erect scaffolding, props, or other mechanical devices where reasonably
required by the character of the work to be performed. Landlord reserves the
right to alter, improve or repair any portion of the Project, including shoring
the foundations, footings and walls, by any reasonable means, including
alterations to the Premises if required by law or reasonably necessary for
health, life safety or other similar purposes. if any alteration, improvement or
repair work is performed by Landlord pursuant to this paragraph 16(b) and, as a
result thereof, Tenant is prevented from using more than 25% of the Premises,
then Tenant shall be entitled to an abatement of rent for the duration of the
period in which it is unable to use its Premises in an amount which is
proportionate to the percentage of the Premises that Tenant is able to use.
(C) Waiver of Claims. Tenant waives any claim for damages, injury, or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned by exercise of
Landlord's rights hereunder, except for Landlord's negligence or willful
misconduct. Tenant acknowledges that if Tenant shall not personally be present
to open and permit an entry into the Premises at a time when such entry by
Landlord is necessary, Landlord may enter by use of a master key or forcibly,
without any liability to Tenant except for any failure to exercise due care for
Tenant's property. Under no circumstances shall Landlord's entry be construed or
deemed to be a forcible or unlawful entry into, or detainer of the Premises.
(d) Landlord shall operate and manage the Shopping Center in a first
class manner consistent with the operations and management of other quality
property operations in Southern California.
<PAGE>
17. INDEMNIFICATION AND WAIVER.
(a) In General. Tenant hereby agrees to indemnify and hold Landlord
harmless from any and all claims of damage or injury arising from Tenant's use
of the Premises or the conduct of its business, or from any activity, work, or
thing done, permitted or suffered by Tenant to be done in or about the Project
and from any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease or arising from any act, neglect, fault, or omission of Tenant, or
of its agents, employees, visitors, invitees, or licensees, and from all costs,
attorneys fees, expenses, and liabilities incurred by reason of any such claim
or any action or proceeding brought by reason thereof. In the event that any
action or proceeding is brought against Landlord by reason of such claim,
Tenant, upon notice from Landlord, shall defend the same at Tenant's expense by
counsel reasonably satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to Tenant's
property or injury to Tenant's employees, agents, visitors, invitees, and
licensees in or about the Project, and Tenant hereby waives all claims in
respect thereof, from any cause whatsoever, against Landlord, except claims for
personal injury which are caused by the failure of Landlord to observe any of
the terms and conditions of this Lease for an unreasonable period of time after
written notice thereof or by the gross neglect or fault of Landlord. Neither
party shall be liable to the other for any damage to person or property, or loss
of property in or about the Project, by or from explosion, falling plaster,
steam, gas, electricity, water or rain which may leak from any part of the
Project, the roof, street or sub-surface, from pipes, appliances or plumbing
apparatus, or resulting from dampness or any other patent or latent condition
whatsoever, or from any unauthorized entry or criminal acts of third parties,
whether or not caused by the lack of or a breakdown, malfunction, or
insufficiency of any security measures, practices, or equipment provided by
Landlord or Tenant. Landlord shall not be liable to Tenant for interference with
light, view, or other incorporeal hereditaments. Tenant hereby agrees that in no
event shall Landlord be liable for consequential damages, including injury to
Tenant's business or any loss of income therefrom. Nor shall Landlord be liable
to Tenant for any damages caused by the act or neglect of any other tenant in
the Project.
18. INSURANCE.
(a) Tenant's Property Damage Insurance. At all times during the Term,
Tenant shall maintain in effect policies of property damage insurance in an
amount not less than one hundred percent (100%) of actual replacement cost as
shall be determined from time to time during the Term, covering (I) all
leasehold improvements (including any alterations, additions, or improvements as
may be made thereto) in which Tenant has an insurable interest and (ii)trade
fixtures, merchandise, and other personal property in or about the Premises,
providing protection against any peril included with in the classification "Fire
and Extended Coverage" together with insurance against plate glass damage,
sprinkler damage, vandalism and malicious mischief. The proceeds of such
insurance shall be used for the repair or replacement of the property so
insured. Upon termination of this Lease following a casualty as set forth
herein, the proceeds under 18(a)(I) shall be paid to Landlord and the proceeds
under 18(a) (II) shall be paid to Tenant.
(b) Tenant's Liability Insurance. Tenant shall, at all times during the
Term at its sole expense, procure and continue in force comprehensive general
liability insurance for bodily Injury and property damage, operations hazards,
contractual liability, and owner's protective coverage, adequate to protect
Landlord against liability for injury to or death of any person, arising in
connection with the construction of improvements in the Premises or the use,
operation or condition of the Premises. Such insurance shall be in an amount not
less than a combined single limit of Three Million Dollars ($3,000,000.00).
(C) Requirements. All Insurance required to be carried by Tenant
hereunder shall be in a form satisfactory to Landlord and Landlord's lenders, if
any, and issued by insurance companies qualified to do business in the State of
California reasonably acceptable to Landlord. Each policy shall name Landlord,
and at Landlord's request, any lender of Landlord, as an additional insured, as
their respective interests may appear. Copies of all policies or certificates
evidencing the existence and amounts of such insurance shall be delivered to
Landlord by Tenant least tn (10) days prior to Tenant's occupancy of the
Premises for any purpose. No such policy shall be cancelable and no material
change in coverage may be made except after thirty (30) days prior written
notice to Landlord. Tenant shall furnish Landlord with renewals or "binders" of
any such policy at least thirty (30) days prior to the expiration thereof.
Tenant agrees that if Tenant does not obtain and maintain such insurance,
Landlord may, but shall not be required to, procure said insurance on Tenant's
behalf and charge Tenant the actual premiums, plus a ten percent (10%) handling
charge payable upon demand.
<PAGE>
Tenant shall have the right to provide such insurance pursuant to blanket
policies obtained by Tenant provided such blanket policies expressly afford
coverage to the Premises and to Tenant as required by this Lease and include
endorsements naming Landlord and its lenders as additional insureds.
(d) Additional Coverage. At Landlord's election, from time to time
during the term, Tenant and Landlord shall agree in writing on the full
replacement cost of the leasehold improvements. If, in the opinion of Landlord
or Landlord's lenders, the amount or type of public liability and property
damage coverage, or any other amount or type of insurance [See Insert 5
(following page)] at that time is not adequate or not provided for herein,
Tenant shall acquire or increase the coverage as required by Landlord.
(e) Landlord's Insurance. At all times during the Term, Landlord shall
maintain in effect a policy or policies of property damage insurance covering
the Project in such amounts and with such deductibles as Landlord considers
appropriate. At Landlord's option, Landlord may purchase endorsements for flood,
earthquake, theft, and collapse and any other form of coverage Landlord may
determine is advisable. Landlord may provide any such insurance coverage
pursuant to blanket policies. If Tenant vacates the Premises or any portion
thereof during the Term and Landlord's cost for property damage insurance is
increased as a consequence, Tenant shall reimburse Landlord, upon demand, for
the full amount of such additional cost. See Insert 6 (following page).
19. WAIVERS OF SUBROGATION.
(a) In General. All policies covering real or personal property which
either party obtains affecting the Premises shall include a clause or
endorsement denying the insurer any rights of subrogation against the other
party to the extent rights have been waived by the insured before the occurrence
of injury or loss, if same are obtainable without unreasonable cost. Each of the
parties hereby waives any and all rights to recovery against the other or
against any other tenant or occupant of the Project, or against the officers,
shareholders, employees, agents, representatives, customers, and business
visitors of such other party or of such other tenant or occupant of the Project,
for loss or damage to person or property or the property of others under its
control, arising from any cause insured against under the standard form of
property damage insurance policy with all permissible extensions and
endorsements covering extended perils or under any other policy of insurance
carried by such waiving party in lieu thereof.
20. DAMAGE OR DESTRUCTION.
(a) Obligation to Repair. In the event of damage to or destruction of
the Project or the Premises, Landlord shall be responsible for repairing such
damage and restoring the Project or the Premises except as hereinafter provided.
(b) Insured Peril. In the event the Premises or the Project are damaged
by any peril Landlord has (or is required hereunder to have) insured against
under the terms of this Lease and: (1) the destruction of the Project is total
[See Insert 7 (following page)] or (2) in the event of partial damage, (I) the
damage cannot, in Landlord's opinion, be repaired within three hundred sixty
(360) days of commencement of repair or without payment for overtime or other
premiums; or (iii) the damage cannot be repaired unless the Project is restored
in a substantially different structural or architectural form than existed
before the damage and destruction, Landlord shall have no obligation to repair.
In the event of total destruction or partial destruction from an
insured peril, which Landlord is not obligated to repair, Landlord shall have
the option to either terminate this Lease or to repair or restore the Project
subject to the notice provisions stated below. See insert 8 (following page).
(C) Uninsured Peril. In the event the Premises or the Project are
damaged by any cause other than a peril Landlord has insured against under the
terms of this Lease and (1) the destruction of the Project is total [See Insert
7 (following page)] or (2) in the event of partial damage, (I) the damage
cannot, in Landlord's opinion, be repaired within three hundred sixty (360) days
of commencement of repair or restoration without payment for overtime or other
premium;(ii)the estimated cost of repair or restoration exceeds five percent
(5%) of the full replacement cost of the Project; or (iii) the damage cannot be
repaired unless the Project is restored in a substantially different structural
or architectural form than existed before the damage and destruction, Landlord
shall have no obligation to repair.
<PAGE>
INSERTS FOR LEASE PARAGRAPHS 18(D), 18(E), AND 20(B) (PREVIOUS PAGE).
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Insert 5 (for paragraph 18(d).
- - ------------------------------
(as long as not materially in excess of or different from what
comparable tenants in comparable projects are required to carry)
Insert 6 (for paragraph 18(e).
- - ------------------------------
Landlord shall maintain: (I) property damage insurance covering the
full replacement cost of the Building, and (ii) twelve-month rental loss
insurance.
Insert 7 (for paragraph 20(b).
- - ------------------------------
and Landlord does not intend to rebuild the Project
Insert 8 (for paragraph 20(b).
- - ------------------------------
In the event the damage or destruction will take over 360 days to
repair and restore, in addition to any rights of Landlord to terminate this
Lease as provided herein, Tenant shall also have the right to terminate this
Lease by giving Landlord written notice of Tenant's election to terminate within
ten (10) days following notice from Landlord that the repair and restoration
period will exceed 360 days, which notice shall be delivered as soon as
reasonably possible but in no event later than ninety (90) days after the
applicable damage or destruction.
================================================================================
(pki-in2)
<PAGE>
In the event of total destruction of the Project or partial destruction
from an uninsured peril, which Landlord is not obligated to repair, Landlord
shall have the option to either terminate this Lease or to repair or restore the
Premises or the portion of the Project in which the Premises are located,
subject to the notice provisions stated below.
(d) Notice of Termination. In the event that Landlord elects to
terminate this Lease, Landlord shall give notice to Tenant within ninety (90)
days after the occurrence of such damage, terminating this Lease as of the date
specified in such notice, which date shall not be less than thirty (30) nor more
than sixty (60) days after the giving of such notice. In the event such notice
is given, this Lease shall expire and all interest of Tenant in the Premises
shall terminate on the date specified in the notice, and the rent(abated in
accordance with the provisions of this Section) shall be paid up to the date of
termination. Landlord shall refund to Tenant the rent paid in advance for any
period of time subsequent to such date. Any such termination of the Lease shall
not operate to relieve Tenant of monetary obligations which have accrued and are
then unpaid by Tenant.
(a) Rent Abatement. Unless the damage or destruction is caused by the
negligence of Tenant, or its employees or agents, in the event Landlord repairs
or restores as herein provided, the rental to be paid under this Lease shall be
abated proportionately to the square footage of Tenant's Premises that has been
impaired from the date of such partial destruction of all or part of the Project
or of the Premises until Tenant's ability to use such portion of the Premises is
restored. Except for abatement of rent, Tenant shall not be entitled to any
compensation or damages from Landlord of the whole or a part of said Premises or
for any inconvenience or annoyance occasioned by any such damage, repair or
restoration. See Insert 9.
(f) Delay. Notwithstanding any destruction or damage to the Premises,
the Project, or its Common Areas, Tenant shall not be released from any of its
obligations under this Lease except to the extent and upon the conditions
expressly stated in this Section. Notwithstanding anything to the contrary
contained in this Section, should Landlord be delayed or prevented from
repairing or restoring said damage for one (1) year after the occurrence of such
damage or destruction, by reason of acts of God, war, governmental restrictions,
inability to procure the necessary labor or materials, or other cause beyond
Landlord's control, Landlord and Tenant shall each have the right to terminate
this Lease, effective upon thirty (30) days prior written notice, so long as the
Premises shall still not have been substantially repaired or restored.
<PAGE>
(g) Landlord Does Not Insure Tenant's Property. It is hereby
acknowledged that if Landlord is obligated to, or elects to repair or restore as
herein provided, Landlord shall be obligated to make repairs or restoration only
of those portions of the Premises which were originally provided at Landlord's
expense. The repair and restoration of items not provided at Landlord's expense
shall be the obligation of Tenant and at Tenant's expense. Tenant understands
that Landlord will not carry insurance of any kind on Tenant's furniture,
furnishings, trade fixtures, equipment or other personal property, and that
Landlord shall not be obligated to repair or replace same.
(b) No Obligation To Repair. Notwithstanding anything to the contrary
contained in this Section, Landlord shall have no obligation whatsoever to
repair or restore the Premises when the cost to repair damage resulting from any
casualty exceeds one month's Base Rent and occurs during the last twelve (12)
months of the Term, or any extension thereof, unless Tenant shall elect to
exercise any option which it may have to extend the Term. Landlord shall give
Tenant notice of such intent not to repair within thirty (30) days after the
damage or destruction and the Lease shall terminate as of the date of
termination set forth in such notice unless Tenant exercises said option within
fifteen (15) days after receipt of Landlord's notice. See Insert 10.
(I) Waiver. The provisions of Section 1932, Subsection 2 and Section
1933, Subsection 4 of the California Civil Code, including any amendments
thereto and any other law which may hereinafter be in force during the Term
which authorizes termination of the Lease upon partial or complete destruction
of the Premises are hereby waived by Tenant.
21. EMINENT DOMAIN.
(a) In General. If the whole of the Premises shall be taken, or such
part thereof shall be taken as shall substantially interfere with Tenant's use
and occupancy of the remainder, under power of eminent domain, or sold,
transferred, or conveyed in lieu thereof, either Tenant or Landlord may
terminate this Lease as of the date of such condemnation or as of the date
possession is taken by the condemning authority, whichever date occurs later. If
any part of the Project other than the Premises, shall be so taken, sold,
transferred or conveyed in lieu thereof, Landlord shall have the right, at its
option, to terminate this Lease as of the date of such condemnation or as of the
date possession is taken by the condemning authority. Landlord and Tenant shall
each be entitled to prosecute their own claims for damages insofar as possible;
provided, however,
<PAGE>
no award for any partial or total taking shall be apportioned, and Tenant hereby
assigns to Landlord any award which may be made in such taking or condemnation,
together with any and all rights of Tenant now or hereafter arising in or to the
same or any part thereof; provided, however, that nothing contained herein shall
be deemed to give Landlord any interest in or require Tenant to assign to
Landlord any award made to Tenant for the taking of personal property and
fixtures belonging to Tenant and removable by Tenant at the expiration of the
Term, or for relocation expenses recoverable against the condemning authority or
for loss of goodwill of Tenant's business. In the event of a partial taking, or
a sale, transfer, or conveyance in lieu thereof, which does not result in a
termination of this Lease, Landlord shall, to the extent of any funds received
from the condemning authority for repair or restoration, restore the Premises
substantially to their concretion prior to such partial taking and, thereafter,
rent shall be abated in the proportion which the square footage of the part of
the Premises so made unusable bears to the Area of the Premises immediately
prior to the taking. No temporary taking for a period of one hundred eighty
(180) days or less, of a part of the Premises or of the Project shall give
Tenant any right to terminate this Lease or to any abatement of rent.
22. DEFAULT.
(a) Covenants and Conditions. Performance of each of Tenant's
obligations under this Lease is a condition as well as a covenant. Tenant's
right to continue in possession of the Premises is conditioned upon such
performance. Time is of the essence in the performance of all covenants and
conditions contained in this Lease and the strict performance of each shall be a
condition precedent to Tenant's right to remain in possession of the Premises or
to have this Lease continue in effect.
(b) Events of Default. Any of the following events shall constitute a
default under this Lease by Tenant:
(1) Failure by Tenant to make any payment of Base Rent,
Additional Rent, Percentage Rent, or other payment required by this Lease within
five (5) days following notice to Tenant. The notice required by this subsection
is intended to satisfy any and all notice requirements imposed by law on
Landlord and is not in addition to any such requirement; (if not cured within
the period provided in section 23(a)).
(2) The vacating (except as may be necessary to facilitate the
reoccupancy of the Premises for a permitted use pursuant to an authorized
assignment or sublease), or the abandoning of the Premises (including Tenant's
absence from the Premises for more than five (5) days);
<PAGE>
(3) Except as expressly permitted under this Lease, any
attempted conveyance, assignment, mortgage or sublease of this Lease; (if not
cured within the period provided in section 23(a)).
(4) The making by Tenant of a general assignment or general
arrangement for the benefit of creditors; the filing by or against Tenant of a
petition to have Tenant adjudged bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy and the failure of Tenant or
Tenant's trustee-in- bankruptcy to assume this Lease within sixty (60) days
after the date of the filing of the petition, (or within such additional time as
the court may fix for cause within such sixty (60) day period), or the rejection
of this Lease by Tenant or the trustee during such sixty (60) day period; or if
this Lease is assumed, then the failure of Tenant or the trustee to comply with
the provisions of this Lease respecting assignment; the taking of any action at
the corporate level by Tenant to authorize the filing of a
petition-in-bankruptcy on behalf of Tenant. If a court of competent jurisdiction
determines that any of the acts described in this subsection is not a default
under this Lease, and a trustee is appointed to take possession (or if Tenant
retains a debtor in possession) and such trustee or Tenant transfers Tenant's
interest hereunder, then Landlord shall receive, as rent, the difference between
the rent and consideration paid in connection with such assignment or sublease
and the rent payable by Tenant hereunder;
(5) The attachment, execution or other judicial seizure of
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Lease, where such seizure is not discharged within thirty (30)
days;
(6) The failure by Tenant to observe or perform any covenant,
condition, or provision in this Lease, including the Rules and Regulations, not
already specifically mentioned in this Section, where such failure is material
and continues for 10 (ten) business days after written notice from Landlord
notifying Tenant of such failure; provided, however, that if the nature of
Tenant's failure is such that more than 10 (ten) business days are reasonably
required for its cure, then Tenant shall not be in default if it begins such
cure within the 10 (ten) day Period and thereafter diligently prosecutes such
cure to completion. The notice required by this subsection is intended to
satisfy any and all notice requirements imposed by law and is not in addition to
any such requirement;
(7) If any guarantor of Tenant's obligations hereunder
("Guarantor") shall be adjudicated insolvent pursuant to the provisions of any
present or future insolvency law, or if any
<PAGE>
proceedings are filed by or against such Guarantor under the United States
Bankruptcy Code, or if a receiver or a trustee of the property of such Guarantor
shall be appointed under California law by reason of the Guarantor's insolvency
or inability to pay its debts as they become due or otherwise; or if any
assignment shall be made of the Guarantor's property for the benefit of
creditors under California law and Tenant fails to substitute an individual in
place of Guarantor, acceptable to Landlord, who is at least as creditworthy as
Guarantor and who in Landlord's opinion has the financial strength and stability
to guaranty the obligations under this Lease to be performed by Tenant; and
(8) If any financial statement or any written representation
given to Landlord by Tenant or any successor of Tenant or any guarantor of this
Lease proves to be false or misleading in any material respect.
(C) Landlord's Rights Upon Tenant's Default. Upon the occurrence of any
default by Tenant, Landlord shall have the following rights and remedies at any
time thereafter, with or without notice or demand and without limiting Landlord
in the exercise of any right or remedy which Landlord may have by reason of such
default.
<PAGE>
INSERTS FOR LEASE PARAGRAPHS 20(E) AND 20(H) (PREVIOUS-PAGE).
-------------------------------------------------------------
Insert 9 (for paragraph 20(e).
- - ------------------------------
Notwithstanding the foregoing, if the damage or destruction is due to
the negligence of Tenant or its employees or agents and Landlord collects rental
loss proceeds for Tenant's Premises, Landlord shall give Tenant a rental
abatement as set forth below (but in no event in an amount greater than the
rental loss proceeds received by Landlord for the Premises). Further, in the
event damage or destruction is due to the negligence of Tenant or its employees
or agents, Landlord shall make a good faith claim for rental loss insurance but
shall have no duty to appeal or further pursue any denial of such claim.
In the event there is only partial damage to the Premises but Tenant
alleges it is prohibited from using the whole of the Premises by the partial
damage, Landlord shall make a good faith claim for full rental abatement
proceeds on the basis thereof and give the full benefit of such proceeds to
Tenant; provided, if Landlord does not receive full rental loss proceeds in
respect of the partial damage, Landlord shall have no duty to give Tenant full
rental abatement, but in no event will Tenant be entitled to less than the
prorata rental abatement except as set forth above..
Insert 10 (for paragraph 20(h).
- - -------------------------------
If the Lease is not terminated by Landlord pursuant to the foregoing,
Tenant shall have the right to terminate the Lease if there shall be less than
six (6) months remaining in the Term following the date of completion of
Landlord's repair of the damage and destruction. Notice of Tenant's election to
terminate shall be given to Landlord in writing within ten (10) days following
the date Landlord gives Tenant notice of the estimated completion date for
Landlord's repairs.
================================================================================
(pki-in3)
<PAGE>
(1) Termination of Lease. Landlord may declare this Lease ended and
terminated, re-enter the Premises, remove and eject all persons therefrom, take
possession of the Premises, and use the Premises together with all additions,
alterations, and improvements and Tenant shall have no further claim thereto. In
the event Landlord elects to terminate the Lease, Landlord shall be entitled to
all of the rights and remedies available to Landlord under Section 1951.2 of the
California Civil Code, which Section is incorporated herein by this reference as
though set forth in full. In computing Landlord's damages pursuant to Sections
1951.2, the "worth at the time of award" shall be computed by allowing interest
at the Prime Rate then in effect plus three (3) percentage points. The amount of
damages which Landlord may recover in the event of such termination shall
include the worth at the time of award of the amount by which the unpaid rent
for the balance of the Lease Term after the time of award exceeds the amount of
rental loss that Tenant proves could be reasonably avoided, computed in
accordance with Section 1951.2(b), plus reasonable attorneys" fees and other
damages caused by Tenant's failure to perform the obligations under this Lease.
(2) Continuation of Lease. Pursuant to Section 1951.4 of the California
Civil Code, even though Tenant has breached the Lease and abandoned the
Premises, at Landlord's option the Lease shall continue in effect for so long as
Landlord does not terminate Tenant's right to possession, and Landlord may
enforce all of its rights and remedies hereunder, including the right to recover
rent as it comes due under this Lease. In such event Landlord will permit Tenant
to sublet the Premises or to assign its interest in the Lease, or both, with the
consent of Landlord, which consent will not be unreasonably withheld provided
the proposed assignee or sublessee is reasonably satisfactory to Landlord as to
credit, business experience and reputation and will occupy the Premises for the
same purposes as specified herein, and such tenancy is not inconsistent with
Landlord's commitments to other tenants in the Project. For purposes of this
subsection, the following shall not constitute a Termination of Tenant's right
to possession: (I) acts of maintenance or preservation or efforts to relet the
Premises; or (ii) the appointment of a receiver at the initiative of Landlord to
protect Landlord's interest. In the event Landlord elects its rights and
remedies under Section 1951.4, Landlord may relet the Premises, or any part
thereof, for the account of Tenant for the remainder of the Lease Term, at such
rental, and upon such other provisions as Landlord, in its sole discretion, may
deem advisable. Landlord shall have the right, in reletting the Premises, to
make reasonable alterations and repairs to the Premises, at Tenant's
<PAGE>
expense. In the event of any such reletting, Tenant shall pay to Landlord any
unpaid Rent and other amounts payable hereunder to the date of such reletting,
and shall also pay upon demand all of the costs and expenses of reentry,
alterations,, repairs, and reletting, including, but not limited to, attorneys"
fees and leasing commissions. Thereafter, upon the first day of each calendar
month during the remainder of the Lease Tern, Tenant shall pay to Landlord an
amount equal to the excess, if any, of the Base Rent and Additional Rent over
the amount received by Landlord. In the event Landlord, upon such reletting,
receives amounts in excess of the Rent owed hereunder, such excess shall be held
by Landlord and applied in payment of future Rent, as the same may become due
and payable hereunder, or applied to other obligations due to Landlord from
Tenant.
(d) Election of Remedy. Even though Landlord may have reentered the
Premises without declaring this Lease ended and terminated, Landlord may
thereafter elect to terminate this Lease and all of the rights of Tenant in and
to the Premises. The various rights, options, elections, powers and remedies
reserved to Landlord herein shall be cumulative and, except is otherwise
provided by statute, Landlord may pursue any or all such rights and remedies,
whether at the same time or otherwise, and no single fight shall be deemed to be
exclusive of any others or of any right or priority allowed by law or in equity,
No delay or omission of Landlord to exercise any right or remedy shall be
construed as a waiver of any such light or remedy or waiver of any default by
Tenant. In addition to the foregoing, Landlord may exercise any other remedy now
or hereafter available to a landlord against a defaulting tenant under the laws
of the State of California.
(e) Personal Properly. In the event of default, all of Tenant's
fixtures, furniture, equipment, improvements, additions, alterations and other
personal property shall remain on the Premises, and Landlord shall have the
right to remove and store such property at Tenant's sole cost and expense, or
take exclusive possession of same and to use same, free of charge, until all
defaults are cured, or at its option, to require Tenant to forthwith remove
same.
(f) Waiver. In the event of the exercise by Landlord of any one or more
of its rights and remedies under this Section, Tenant hereby expressly waives
any and all rights of redemption or relief from forfeiture under California Code
of Civil Procedure Section 1174 or 1179, or granted by or under any present or
future laws, and further releases Landlord, from any and all claims, demands,
and liabilities by reason of such exercise by Landlord.
<PAGE>
(g) Landlord's Cure of Tenant's Default. If at any time during the
Lease Term, Tenant fails, refuses or neglects to perform any of its obligations
under this Lease and such failure is not cured within the applicable cure
period, Landlord shall have the right, but shall not be required, to perform
such at the expense and for the account of Tenant. The amount of any monies so
expended or obligations so incurred by Landlord, together with interest thereon
at the maximum rate permitted by law, shall be repaid to Landlord within five
(5) days of Tenant's receipt of Landlord's statement.
(h) Late Charges. Tenant hereby acknowledges that late payment by
Tenant of rent and other charges due under this Lease will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing fees, attorneys fees, bookkeeping and accounting charges, and late
fees which may be imposed on Landlord under the terms of any mortgage or trust
deed covering the Premises. Accordingly, if any installment of rent or any other
charges due from Tenant is not received by Landlord within five (5) days after
notice that such amount is due, then, at Landlord's election and upon Landlord's
demand, Tenant shall pay to Landlord a late charge equal to six percent (6%) of
such overdue amount, and in such event the parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of the late payment by Tenant. No late charge may be imposed
more than once for the same late rental payment. Acceptance of such late charge
by Landlord shall not constitute a waiver of Tenant's default with respect to
any unpaid amount, nor prevent Landlord from exercising any other right or
remedy granted to it hereunder.
23. ASSIGNMENT AND SUBLETTING.
(a) Restriction. Tenant acknowledges that this Lease grants only a
personal right to Tenant to use and occupy the Premises. No portion of the
Premises or of Tenant's interest in this Lease may transferred to any other
person or entity, whether by assignment, sublease, mortgage, pledge, or
operation of law without first obtaining the written consent of Landlord in
accordance with this Section. Any attempted transfer without consent shall be
void, if not cured within thirty (30) days, shall constitute breach of this
Lease.
(b) No Release of Tenant. No transfer permitted by this Section shall
release Tenant or change Tenant's primary liability to pay Rent and to perform
all other obligations of Tenant under this
<PAGE>
Lease (including for any extended term of this Lease, pursuant to an option
herein, exercised by assignees or sublessee) Landlord's acceptance of Rent from
any other person is not a waiver of any provision of this Section. Consent to
one transfer is not a consent to any subsequent transfer. If Tenant's transferee
defaults under this Lease, Landlord may proceed directly against Tenant without
pursuing its remedies against the transferee.
(C) Right to Transfer with Landlord's Consent. Tenant's request for
Landlord's consent to any transfer described in Section 23(a) shall be made in
writing at least thirty (30) days prior to the proposed effective date of the
transfer. The request shall be accompanied by a written statement setting forth
the details of the proposed transfer, including the exact nature of the
business, and business experience and reputation of the proposed transferee,
documentation of the creditworthiness and financial condition of the proposed
transferee, including current, complete, and accurate audited or certified
financial statements for the transferee's two most recent fiscal years, the
terms and conditions of the proposed transfer, including the rent and any other
consideration to be paid to Tenant, and any other information Landlord
reasonably requests. Landlord shall have thirty (30) days after receipt of the
information specified above, to consent or disapprove of the transfer.
(d) Conditions of Consent. Tenant acknowledges that Tenant's intended
use of the Premises as well as Tenant's business expertise, reputation,
financial strength, and background, and planned future business operations are
of a special and unique value to Landlord and are an important and valuable part
of the balanced and unique tenant mix which Landlord has attempted to establish
within the Project and these facts constitute material consideration to Landlord
for this Lease. Tenant acknowledges that consideration of such facts are valid
and commercially reasonable grounds for the exercise of Landlord's right to
withhold consent to any proposed transfer of this lease. It shall not be deemed
unreasonable for Landlord to withhold consent to a transfer if the proposed
transferee is not reasonably creditworthy, is not experienced and well reputed
in the business for which the premises are to be used, intends to use the
Premises for purposes other than the use specified in this Lease, or for
purposes which are inconsistent with Landlord's commitments to other tenants or
the general character of business carried on by tenants of the Project or which
could have an adverse impact on the Project. Tenant acknowledges that such
conditions are reasonable and appropriate to protect Landlord's legitimate
interests and reserved rights.
(a) Documents. Prior to the commencement date of any transfer, Landlord
shall be furnished with a copy of a fully executed sublease or assignment
agreement, and Tenant's written certification of the sums contributed by Tenant,
if any, for leasehold improvements in connection with assignment, and any other
out-of-pocket concessions furnished to such transferee by Tenant. If there in a
change of controlling person(s) as a result of
<PAGE>
(f) Fee. Any notice by Tenant to Landlord pursuant to this Section, of
a proposed transfer, shall be accompanied by a payment of $500.00 as a
non-refundable fee for Landlord's time in the processing of Tenant's request for
consent. In addition to this fee, Tenant shall reimburse Landlord for reasonable
attorney's fees incurred by Landlord in connection with the preparation of any
required documents.
(g) Joint and Several Liability. Each transferee shall be deemed to
have assumed this Lease and shall be liable jointly and severally with Tenant
for the performance of all Lease provisions on Tenant's part be performed. No
transfer shall be binding on Landlord unless the transferee shall deliver to
LanDlord a recordable, written covenant of assumption of all the obligations of
Tenant undar the Lease in form and substance satisfactory to Lanclord, but the
failure or refusal of the transferee to execute such coveant of assumption shall
not release or discharge the transferee from its joint and several liability
with Tenant for the paymant of rent and performance of all oblegations to be
performed on Tenant's part under this Lease. A transferee who does comply with
this requirement shall have no interest in the Security Deposit. A transferee
who does shall automabcally succeed to Tonant's interest in the Security Deposit
and Landlord shall have the right to refund the same to the transferee at any
time with no liability to Tenant.
(h) Transfer of Partnership Interest. If Tenant is partnership, a
transfer of any interest or withdrawal of a general partner from the
partnership, or the dissolution of the partnership, shall be deemed to be an
assignment of this Lease.
(i) Transfer of Stock. If Tenant is a corporation, and if there is a
change of controlling person(s) as a result of any dissolution, merger,
consolidation, or other reorganization of Tenant or sale or other transfer of a
percentage of capital stock of Tenant or the sale or other transfer of
substantially all of the assets of Tenant, such event shall be deemed to be an
assignment of this Lease.
(j) Rents and Consideration from Transfers. As a condition to
Landlord's consent to any transfer, Landlord shall be entitled to receive and
Tenant shall pay to Landlord as additionnl rent, within five (5) business days
following receipt of such sums (i) the amount by which the rent payable by the
transferee exceeds Rent otherwise payable by Tenant to Landlord under this Lease
plus (ii) all other consideration, no matter how denominated, payable for the
transfer of this Lease, including, but not limited to, excess security deposit.
The term 'consideration' shall mean and include money, services, property or any
other thing of value. See Addendum Paragraph 53.
(k) Assignment as a Result of Tonant's Bankruptcy.
(1) Assumption of Lease. In the event that Tenant shall
file a petition, or an order for relief is entered against the Tenant, under
Chapters 7, 9, 11, or 13 of the Bankruptcy Code (11 USC Section 101 et seq.)
(the "Bankruptcy Code"), and the trustee of Tenant or debtor-in-possession shall
elect to assume this Lease for the purpose of assigning same, such assumption
and/or assignment may only be made if all of the terms and conditions of
subsections (2) and (3) hereof are satisfied. If truste/debtor-in-possession
shall fail to elect to assume this Lease within sixty (60) days after such
trustee of Tenant shall have been appointed, or the date of filing of the
petition, as the case may be, this Lease shall be deemed to have been rejected.
Landlord shall thereupon immediately be entitled to possession of the Premises
without further obligation to the Tenant or Tenant's trustee in bankruptcy, and
this Lease shall be cancelled, but Landlord's right to be compensated for
damages in such bankruptcy shall survive such cancellation.
(2) Assumption Requirements. No election to assume this Lease
shall be effective unless in writing and addressed to Landlord and unless, in
the Landlord's business judgment, all of the conditions set forth in subsections
(a)-(e) inclusive, which Landlord and Tonant acknowledge to be commercially
reasonable, have been satisfied.
(a) Adequate Assurance From Trustee/Debtor-in- Possession. The
trustee/debtor-in-possession has cured or has provided Landlord "adequate
assurance" (as defined hereunder) that:
(i) within ten (10) days from the date of such assumption,
the trustee/debtor-in-possession will cure all monetary defaults under this
Lease; and
(ii) within thirty (30) days from the date of such
assumption, the trustee/debtor-in-possession will cure all nonmonetary defaults
under this Lease.
(b) Reimbursement of Landford's Pecuniary Loss. The
trustee/debtor-in-possession has compensated, or has provided to Landlord
adequate assurance within ten (10) days from the date of assumption that
Landlord will be compensated, for any pecuniary loss incurred by Landlord
arising from the default of the Tenant, the trustee, or the
debtor-in-possession, as recited in Landlord's written statement of pecuniary
loss sent to the trustee/debtor-in- possession;
(c) Adequate Assurance of Future Performance. The
trustee/debtor-in-possession has provided Landlord with adequate assurance of
the future performance of each of Tenant's obligations under the Lease, and:
(i) the trustee/debtor-in-possession shall also deposit
with Landlord, as security for the timely payment of rent, an amount equal to
three (3) months' of the then current Base Rent and other monetary charges
accruing under this Lease; and
(ii) the obligations imposed upon the
trustee/debtor-in-possession shall continue with respect to Tenant after the
completion of bankruptcy proceedings.
(d) Landlord's Determination of No Adverse Consequences.
Landlord has determined that the assumption of the Lease will not:
(i) breach and provision in any other lease, mortgage,
financing agreement or other agreement by which Landlord is bound relating to
the Project; or
(ii) disrupt, in Landiord's judgment, the reputation and
profitability of the Project.
(e) Definition of Adequate Assurance. For purposes of this
Section 23 "adequate assurance" shall mean:
(i) Landlord shall determine that the
trustee/debtor-in-possession has and will continue to have sufficient
unencumbered assets after the payment of all secured obligations and
administrative expenses to assure Landlord that the
trustee/debtor-in-trustee/debtor-in-possession will have sufficient funds to
fulfill the obligations of Tenant under this Lease; and
(ii) an order shall have been entered segregating
sufficient cash payable to Landiord and/or there shall have been granted a valid
and perfected first (1st) lien and security interest in property of the Tenant,
trustee or debtor-in- possession, acceptable to Landlord as to value and kind,
to secure to Landlord the obligation of the Tenant to cure the monetary and/or
nonmonetaty defaults under this Lease, with the time periods set forth above.
(3) Landlord's Acknowledgment of Adequate Assurance. If the
trustee/debtor-in-possession has assumad the Lease pursuant to the terms and
provisions of subsections (1) and (2) herein, for the purpose of assigning (or
election to assign) the Tenant's interest under this Lease or the estate created
hereby, to any other person, such interest or estate may be so assigned only if
Landlord shall acknowledge in writing that the intended assignee has provided
"adequate assurance" (as defined in this subsection (3) of future performance of
all of the terms, covenants and conditions of this Lease to be performed by
Tenant. For purposes of this subsection (3), adequate assurance of future
performance shall mean that Landlord shall have ascertained that each of the
following conditions has been satisfied.
<PAGE>
(a) Assignee's Net Worth. The assignee has submitted a current
financial statement audited by a Certified Public Acoountant which shows a net
worth and working capitil in amounts determined to be sufficient by Landlord to
assure the future performance by such assignee of the Tenant's obligations under
this Lease;
(b) Guarantors of Assignee's Performance. If requested by
Landlord, the assiginee shall have obtained guarantees in form and substance
safisfactory to Landlord from one (1) or more persons who satisfy Landlord's
standards of creditworthiness;
(c) Consent by Landlord's Mortgagees/Lenders. Landlord has
obtained all consents or waivers from any third (3rd) party required under any
lease, mortgage, financing arrangement or other agreement by which Landlord is
bound to enable Landlord to permit such assignment;
(d) Assignee's Security Deposit. The assignee has deposited an
adequate security deposit with Landlord; and
(e) Assignee's Intended Use of Premises. The assignee has
demonstrated that its intended use of the Premises is consistent with the forms
of this Lease and will not diminish the reputation of the Project, violate any
"exclusive" which has been granted to another tenant in the Project or cause any
governmental authority to revoke its consent to the Premises being used as set
forth in Section 11 of this Lease.
(4) Use and Occupancy Charges. When pursuant to the Bankruptcy Code,
the trustee/debtor-in-possession shall be obligated to pay reasonable use and
occupancy charges for the use of the Premises or any portion thereof, such
charges shall not be less then the then current Base Rent as defined in this
Lease and other monetary obligations of Tenant.
(5) No Transfer of Tenant's Interest by Operation of Law. Neither
Tenant's interest in the Lease, nor any lessor interest of Tenant herein, nor
any estate of Tenant hereby created, shall pass to any trustee, receiver,
assignee for the benefit of creditors, or any other person or entity, or
otherwise by operation of the law under the laws of any state having
jurisdiction of the person or property of the Tenant unless Landlord shall
consent to such transfer in writing. No acceptance by Landlord of rent or any
other payments from any such trustee, receiver, assignee, person or other entity
shall be deemed to have waived, nor shall it waive the need to obtain Landlord's
consent or Landlord's right to terminate this Lease for any transfer of Tenant's
interest under this Lease without such consent.
(6) Confirmation of Assumption of Lease Obligations. Any person or
entity to which this Lease is assigned pursuant to the provisions of the
Bankruptcy Code shall be deemed without further act or deed to have assumed all
of the obligations arising under this Lease on or after the date of such
assignment. Any such assignee shall, upon demand, execute and deliver to
Landlord an instrument confirming such assumption.
(1) Tenant's Acknowledgement of Lease Transfer Restrictions. Tenant
expressly acknowledges that the limitations and restrictions on its right to
assign this Lease or to sublet the Premises, as set forth in this Section 23,
are a part of the economic terms of this Lease that were expressly for at the
time this Lease was entered into by Landlord and Tenant.
<PAGE>
24. RENT AND OTHER CHARGES.
(a) Rent, Additional Rent, Percentage Rent, and any other amounts which
Tenant is or becomes obligated to pay Landlord under this Lease or othor
agreement entered in connection herewith shall be deemed to be "Rent", and all
remedies applicable to the non-payment of Rent shall be applicable thereto. All
sums required to be paid pursuant to the provisions of this Lease shall be paid
in lawful currency of the United States of America and may be paid by check;
provided, however, that if Tenant's check should for any reason fail to clear
the bank and is returned unpaid to Landlord, thereaftor, for the balance of the
Term, at Lanclord's option, Tenant may be required to pay Rent by cashier's
check, certified check or cash.
25. SUBORDINATION.
(a) In General. This Lease is subject and subordinate to all ground or
underlying leases, mortgages, and deeds of trust which now affect the Premises
and the real property of which it is a part, and to all renewals, modifications,
consolidations, replacements, and extensions thereof. If the lessor under any
such lease or the holder of any such mortgage or deed of trust shall advise
Landlord that they desire this Lease to be prior and superior thereto, or that
they desire a collateral assignment to them of this Lease, upon written request
of Lanclord to Tenant, Tenant agrees promptly to execute, acknowledge, and
deliver any and all documents or instruments which Landlord or such lessor or
holder deems reasonably necessary. Lanclord shall have the right to cause this
Lease to be and become and remain subject and subordinate to any and all ground
or underlying leases, mortgages or deeds of trust which may hereafter be
executed covering the Premises and the real property of which it is a part, or
any renewals, modifications, consolidations, replacements or extensions thereof,
for the full amount of all advances made or to be made thereunder and without
regard to the time or character of such advances, together with interest thereon
and subject to all the terms and provsions thereof. Tenant agrees, within ten
(10) days after Landiord's written request, to execute, acknowledge, and deliver
any and all documents or instruments requested by Landlord that are necessary or
proper to assure the o ubordinadeed of trust, ore to any such mortgage,
leasehold estate; provided, however, that the foregoing provisions with respect
to such election of subordination by Landlord shall not be effective unless the
owner or holder of any such mortgage, deed of trust, or the lessor under any
such leasehold estate shall execute with Tenant a nondisturbance agreement under
which such owner, holder. or lessor shall agree, in the event of termination of
such leasehold estate or upon the foreclosure of any such mortgage or deed of
trust, that Tenant's quiet enjoyment of the Premises will not be disturbed so
long as Tenant pays rent and observes and performs all of the provisions of this
Lease to be observed and performed by Tenant. Notwithstanding anything to the
contrary set forth in this Section, Tenant hereby attorns subject to the
nondistrubance agreement and agrees, upon request, to attorn to any person,
firm, or corporation purchasing or otherwise acquiring the Project and the real
property of which it is a part, at any sale or other proceeding or pursuant to
the exercise of any other rights, powers, or remedies under any such mortgage,
or deed of trust, or ground or underlying lease, as if such person, firm, or
corporation had been named as Landlord herein, it being intended hereby that if
this Lease is terminated, cut-off, or otherwise defeated by reason of any action
by the owner or holder of any such mortgage or deed of trust or the lessor under
any such leasehold estate, then, at the option of any such person, firm, or
corporation so purchasing or otherwise acquiring the Project and the real
property of which it is a part, this Lease shall confinue in full force and
effect. If Tenant fails to timely exectute any document provided for herein,
Tenant hereby appoints Lanolord its attorney-in-fact, irrevocably, to execute
and deliver any such documents called for herein for and in the name of Tenant;
such power, being coupled with an interest, being irrevocable. See Addendum
Paragraph 56.
<PAGE>
26. ESTOPPEL CERTIFICATES AND FINANIAL STATEMENTS.
(a) Estoppel Certifcates. Upon writtten reasonable request (such as in
the case of a sale or refinancing of the Project or a portion thereof) from the
other party, Landlord or Tenant (as the case maybe) shall execute, acknowledge,
and deliver to *** written statement certifying information regarding this Lease
including that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect) and the amount of and dates
to which the rent, security deposit, and other charges, if any, are paid in
advance, and acknowledging that there are not, to such party's knowledge, any
uncured defaults on the part of *** or specifying such defaluts, if any are
claimed. It is expressly understood and agreed that any prospective purchaser or
encumbrancer of all or any portion of the Project or of the real property of
which it is a part shall be entitled to rely upon any such statement if a party
fails to deliver such statement within ten (10) days from the other's request,
Landlord or Tenat, as the case may be,and any prospecfive purchaser or
encumbrancer, may conclusively presume that (i) this Lease is in full force and
effect without modification except as may be represented by Landlord, (ii) there
are no uncured defaults in the other party's perrformance, and (iii) not more
than one (1) month's rental has been paid in advance. If Tenant fails to deliver
the certificate in ten (10) days, Tenant hereby appoints Landlord as its
attorney-in-fact, to execute and deliver the certificate to a third party, such
power, being coupled with an interest, being irrevocable. Tenant's failure to
timely deliver the certificate shall at Landiord's option consfitute a material
breach.
(b) Financial Statements. Tenant represents and warrants that all
financial statements, records, and information furnished by Tenant to Landlord
in connection with this Lease will be true, correct, and complete in all
respects, and Landlord agrees that (unless Tenant is a company whose financial
statements are a matter of public record) it will treat said information with
confidentiality, except that Landlord shall be entitled to disclose such
information to lenders, insurers, and prospective purchasers of the Project.
27. INTEREST ON PAST DUE OBLIGATIONS.
(a) Interest. Except as otherwise expressly provided in this Lease, any
amount due from Tenant hereunder which is not paid when due shall bear interest
at the rate of ten percent (10%) per annum or the highest rate then allowed
under the usury laws of the State of California, whichever is less, from the
date due unfit paid.
(b) Default Interest. Notwithstanding the foregoing, any amount due
from Tenant to Landlord hereunder which is not paid within thirty (30) days of
notice from Landlord that such amount is overdue shall bear interest at the
lesser of eighteen percent (18%) per annum or the highest rate then allowed
under met the usury laws of the State of California from the dale due until the
date received by Landlord.
28. SALE OR TRANSFER BY LANDLORD.
(a) Transfer. In the event of a transfer(s) of Landiord's interest in
the Premises, except a transfer for security purposes only, the transferee shall
automatically be relieved of all obligations and liabilities on the part of the
Landlord accruing from and after the date of such transfer; provided, however,
that any funds in the hands of Landlord in which Tenant has an interest, at the
time of such transfer, may be turned over to the transferee and upon such
transfer, or upon the transferee acknowledging in writing responsibility for
return of such funds, Landlord shall be discharged from any further liability
with regard to such funds. The covenants and obligations of Landlord contained
in this Lease shall be binding upon Landlord, its successors, and assigns only
during their respective periods of ownership. Tenant agrees to look solely to
Landlord's interest in the Project, and the real property of which it is a part
(or the proceeds thereof) for the satisfaction of any remedy, for the collection
of a judgment (or other judicial process) requiring the payment of money by
Landlord in the event of any default by Landlord, and no other property or
assets of Landlord shall be subject to levy, execution, or other enforcement
procedure for the satisfaction of Tenant's remedies, with respect to this Lease,
the relafionship of Landlord and Tenant hereunder, or Tenant's use or occupancy
of the Premises.
<PAGE>
29. LANDLORD'S RIGHT TO CURE DEFAULTS.
(a) Landlord's Right to Cure. All obligations of Tenant under the terms
of the Lease shall be at Tenant's sole cost and expense. If Tenant shall fail to
pay any sum of money, other than Base Rpnt or Additional Rent required to be
paid by it***** or shall fail to perform any other act on its part to be
performed, such failure continuing following Tenant's applicable cure period set
forth in Section 22, Landlord may, but shall not be obligated to, and without
waiving any rights of Landlord or releasing Tenint from any obligafion, make
such payment or perform such other act at Tonant's cost. All sums so paid by
Landlord and all necessary incidental costs together with interest thereon from
the date of such payment by Landlord in connection with the performance of any
such act by Landlord shall be considered rent hereunder. Except as otherwise
expressly provided, such rent shall be payable to Landlord on demand, or at the
option of Landlord, in such installments as Landlord may elect and may be added
to any other rent then due or thereafter becoming due under this Lease, and
Landlord shall have (in addfion to any other right or remedy) the same rights
and remedies in the event of the nonpayment thereof by Tenant as in the case of
default by Tenant in the payment of rent.
(b) Landlord's Nonparformance. Landiord shall not be deemed to be in
default of any obligation required of it unless and until it has failed to
perform such obligation for thirty (30) clays after written notice by Tenant to
Landlord specifying the obligafion Landlord has failed to perform; provided,
however, that if the nature of Lanclord's obligation is such that more than
thirty (30) days are required for its performance then Landlord shall not be
deemed to be in default if it shall commenoe such performance within such thirty
(30) day period and thereafter diligently prosecute or pursue the same to
completion.
30. WAIVER.
(a) No Waiver. No delay or omission in the exercise of any right or
remedy by either party to this Lease upon any default by the other partyshall
impair such right or remedy or be considered as a waiver. The acceptance by
Landlord of delinquent rent shall not constitute a waiver of any other default;
it shall constitute only a waiver of timely payment of the amount paid. No act
or conduct of Landlord, including, without limitation, the acceptance of keys to
the Premises shall consfitute an acceptance of the surrender of the Premise
before expiration of the Term. Only written notice from Landlord to Tenant shall
constitute acceptance of surrender of the Premises and accomplish a termination
of the Lease. Landlord's or Tenant's consent to any act by the other requiring
consent shall not be deemed to rendor unnecessary consent to any subsequent act
by the other. Any waiver by either party of any default must be in writing and
shall not be a waiver of any other default concerning the same or any other
provision of the Lease.
(b) No Release. No acceptance by Landlord of a sum less than the rent
then due shall be deemed to be other than on account of the earliest installment
of rent due, nor shall any endorsement or statement on any check or accompanying
letter be deemed an accord and satisfaction, and Landlord may accept such
payment without prejudice to Landiord's right to recover the balance of such
installment or pursue any other remedy in this Lease.
<PAGE>
31. FORCE MAJEURE.
(a) In General. Whenever a day is appointed on which, or a period of
time is given within which either party is required to do or complete an act,
the time for its performance or completion shall be extended by a period of time
equal to the number of days during which such party is prevented from, or is
unreasonably interfered with in performing or completing the act because of
strikes, labor disturbances, unavailability of labor or materials, wars, civil
disorder, national emergencies, acts of God, or other causes beyond such party's
reasonable control (financial inability excepted); provided, however, that
nothing herein contained shall excuse Tenant from the prompt payment of any
rental or other charge required of Tenant.
32. RULES AND REGULATIONS.
Tenant agrees to observe and comply with the rules and regulations
attached as Exhibit "C: (hereafter the "Rules and Regulations") for the Project,
and to cause its employees, suppliers, customers, and invitees to comply with
the Rules and Regulatons and such modifications or amendments thereto as
Landlord may from time to time adopt. Failure by Tenant to strictly comply with
the Rules and Regulations, such failure continuing for ten (10) days after
notice from Landlord, shall, at the option of Landlord, constitute a material
default of this Lease, Landlord shall not be responsible to Tenant for
non-compliance with the Rules and Regulations by any other Tenant or occupant of
the Project. If there is a conflict between the Rules and Regulations and any of
the provisions of this Lease, the provisions of this Lease shall prevail.
Landlord shall use reasonable efforts to enforce the Rules and Regulations in a
non-discriminatory manner.
33. SURRENDER OF PREMISES.
(a) No Merger. The voluntary or other surrender of this Lease by Tenant
or a mutual termination of the Lease shall not result in merger and shall at the
option of Landlord, operate as an assignment to it of any or all subleases
affecting the Premises.
(b) Condition Upon Termination or Surrender. Upon expiration of the
Term, or earlier termination of this Lease, Tenant shall surrender possession of
the Premises to Landlord in as good order and condition as the same are now or
are hereafter improved by Landlord or Tenant, repairs which are Landiord's
obligation and reasonable wear and tear which does not materially detract from
the appearance or function of the Premises excepted, and shall, without expense
to Landlord, remove or cause to be removed from the Premises all debris, all
furniture, equipment, business and trade fixtures, free-standing cabinet work,
moveable partitions and other articles of personal property owned by Tenant or
installed or placed by Tenant at its expense in the Premises, and all similar
articles of any other persons claiming under Tenant and Tenant shall repair all
damage to the Premises resulting from such removal.
(c) Notice from Tenant. Tenant shall, at least ninety (90) days before
the last day of the Term, give Landlord a written notice of intention to
surrender the Premises on or before that date. Nothing herein contained shall be
construed as extending the Term or as consent of Landlord to any holding over by
Tenant. If during the last month of the Term, Tenant shall have removed
substantially all of its property from the Premises, Landiord may then enter and
alter, renovate, or redecorate the Premises without any abatement of rent or
liability to Tenant.
34. HOLDING OVER.
(a). Failure to Vacate. Tenant shall vacate the Premises upon the
expiration date or earlier termination of this Lease. Tenant shall reimburse
Landlord for and indemnify and hold Landlord harmless from all losses or
liabilities resulting from any delay by Tenant in vacating the Premises
incurring, without limitation, claims made by any succeeding tenant founded on
or resulting from such failure to surrender, and any loss of rent from such
succeeding tenant. Should Tenant, with or without Landiord's written consent,
hold over after the termination of this Lease, such possession by Tenant shall
be deemed to be a month-to-month tenancy terminable upon thirty (30) days notice
given at any time, upon each and all of the terms herein provided as may be
applicable to a month-to-month
<PAGE>
tenancy except that the Base Rent then in effect shall be increased to one
hundred fifty percent (150%) of the sum of (i) the Base Rent in effect at the
Expirafion Date or earlier termination of this Lease, and (ii) the monthly
Percentage Rent paid or payable by Tenant during the immediately preceding
twelve (12) month period. In no event shall holding over constitute an extension
of this Lease. The provisions of this Section are in addition to and do not
affect Landloid's right of re-entry or any other rights hereunder or as
otherwise provided by law.
36. MISCELLANEOUS.
(a) Severability. Any provision of this Lease which shall prove to be
invalid, void, or illegal shall in no way affect, impair, or invalidate any
other provision and such other provisions shall remain in full force and effect.
(b) Attorney's Fees. In the event of any litigation between Tenant and
Landlord, to enforce any provision of this Lease or any right of either party
concerning this Lease, or to secure a judicial determination of any right or
obligation of either party, the unsuccessful party in such litigation shall pay
to the other all costs and expenses, including reasonable attorney's fees,
incurred theroin. Moreover, if either party, is, without fault, made a party to
litigation instituted by or against theather, such otherparly shall indemnify
Landlord or Tenant, as the case may be, against all costs and expenses,
including reasonable attorney's fees, incurred by it in connection therewith.
(c) Captions. The section captions contained in this Lease are for
convenience and do not limit or add to any term or provision of this Lease and
shall have no effect on its interpretation.
(d) Terminology. The terms "Landlord" and "Tenant" as used herein shall
include the plural as well as the singular, and the neuter shall include the
masculine and feminine genders The obligations imposed upon Tenant shall be
joint and several as to each of the persons, firms, or corporations of which
Tenant may be composed.
(e) Entire Agreement. This Lease and the exhibits and any dder or
addendum attached hereto constitute the entire agreement between the parties
with respect to the subject matter hereof, and no prior agreement or
understanding pertaining to any such matter shall be effecfive for any purpose.
No provision of this Lease may be amended or supplemented except by an agreement
in writing signed by the parties or their successors in interest.
(f) No Offer. The submission of this Lease by Landlord for examination
or execution by Tenant does not constitute an option or offer to lease the
Premises upon the terms and conditions contained herein or a reservation of the
Premises in favor of Tenant, it being intended that this Lease shall only become
effective upon its execution by Landlord and delivery of a fully executed
counterpart to Tenant.
(g) California Law. This Lease shall be interpreted and enforced in
accordance with the laws of the State of California, which shall apply in all
respects to any disputes or Controversies arising out of this Lease.
(h) Quiet Possession. Upon Tenant's paying the Rent and other sums
provided hereunder and observing and performing all of the covenants,
conditions, and provisions on Tenant's part to be performed, Tenant shall have
quiet possession of the Premises for the Term, subject to all of the provisions
of this Lease.
(i)Successors. Except as otherwise provided in this Lease, all of the
covenants, conditions, and provisions of this Lease shall be binding upon and
shall inure to Hie benefit of the parties, their respective heirs, personal
representatives, successors, and assigns.
(j) Notices. Any notice required or permitted to be given hereunder
shall be in writing and may be given by personal delivery or by certified mail,
return receipt requested, addressed to Tennni or to Landlord at the addresses
provided in Section 1(g). Either party may by notice to the other, specify a
different address for notice purposes. A copy of all notices to be given to
Landlord hereunder shall be concurrently transmitted by Tenant to any other
party Landlord may hereafter designate, Notices shall be deemed given and
received when personally delivered, or forty-eight (48) hours after the date a
written notice is placed, postage prepaid, in a depository for United States
mail.
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(k) Brokers. In connection with the negotiation of this Lease, Tenant
warrants and represents that it has had no dealings with any real estate broker
oragent except Fred Sands Realtors, CP Commercial Brokerage and Jon Douglas
Brokerage, and knows of no other person who is or might be entitled to a
commission, finders fee, or other payment in connection herewith, and does
hereby indemnify and agree to hold Landlord harmless from and against any and
all claims and expenses, including attorneys fees that Landlord may incur should
such warranty and representation prove incorrect. Landlord shall pay the
brokerage commission due CP Commerical Brokerage and Jon Douglas Brokerage for
this Lease.
(1) Interpretation. The text of this Lease shall be construed according
to its fair meaning, and not strictly for or against either Landlord or Tenant
(m) Resolution. If Tenant is a corporation, Tenant shall. it so requested by
Landlord, deliver to Landlord upon execution of this Lease a certified copy of n
resolution of its board of directors authorizing the execution of this Lease and
naming the officers that are authorized to execute this Lease on its behalf. (n)
Recordation. This Lease shall not be recorded, except that if Landlord requests
Tenant to do so, the parties shall execute a memorandum of this Lease in
recordable form. Tenant shall execute and deliver to Landlord on the expiration
or termination of this Lease, at Landlord's request, a quitclaim deed to the
Premises, in recordable form, designating Landlord as transferee. Any expenses
incurred therewith shall be bome by Landlord.
(o) Restrictions. If the amount of Base Rent or any other payment due
under this Lease violates the terms of any governmental resirictions on such
rent or payment, then the rent or payment due during die period of such
restrictions shall be the maximum amount allowable under those restrictions.
Upon termination of the restrictions, Landlord shall, to the extent it is
legally permitted, recover from Tenant the difference between the amounts
received during the period of restrictions and die amounts Landlord would have
received had there been no restrictions.
(p) Approvals By Landlord. No approval or consent by Landlord, nor any
supervision by Landlord of any work performed by or at the direction of Tenant,
shall constitute a representation, warranty or affirmation of the correctness or
quality of the matter so approved or supervised nor an indication that any work
or other act of Tenant complies with any governmental low, vile or regulation.
(q) Counterparts. This Lease may be executed in counterparts and if so executed,
each counterpart shall have the force and effect of an original.
LANDLORD:
PSA PROPERTIES
BY WESTERN CAPITAL RESOURCES, A CALIFORNIA CORPORATION,
ITS DULY AUTHORIZED AGENT
By /s/Randi S. Sellers Date: 11/30/94
---------------------------- -----------------------
Randi S. Sellers
Director of Corporate Leasing
TENANT:
PLANET KIDS,
A CALIFORNIA CORPORATION
By: Date:
---------------------------- -----------------------
Harry Shuster, President
<PAGE>
ADDENDUM
PSA PROPERTIES, BY WESTERN CAPITAL RESOURCES,
A CALIFORNIA CORPORATION, ITS DULY AUTHORIZED AGENT (LANDLORD) -
PLANET KIDS, INC., A CALIFORNIA CORPORATION (TENANT)
THIS ADDENDUM is attached to and hereby made a part of that certain Standard
Retail/office Complex Lease dated October 12, 1994 by and between the above
named parties. All of the following terms and conditions are hereby incorporated
into the Lease and made a part thereof. In the event of any conf lict between
any of the terms and conditions contained in the standard printed form lease as
compared to the terms and conditions contained in the Addendum, the terms and
conditions contained in this Addendum shall be controlling. The term "Lease" as
used herein shall mean the printed form lease as modified by this Addendum.
Except as stated otherwise herein, all capitalized terms shall have the meaning
set forth therefor in the Lease.
37. Base Rent.
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Notwithstanding the provisions of paragraph 5 of the Lease, Tenant's
rent shall not be subject to Consumer Price Index increases during the initial
term, but instead shall be increased as follows:
Effective on the first day of the sixty-first (61st) month following
the Rent Commencement Date (defined below), Tenant's Base Rent shall be
increased to Fourteen Thousand Thirty Dollars ($14,030.00) and shall remain
fixed for the remainder of the initial term.
38. Lease Commencement/Rent Commencement.
-------------------------------------
(a) The Term of the Lease shall commence on the date (i) the work
designated in paragraph 39 below is substantially completed, and (ii) the
Premises are delivered to Tenant ("Lease Commencement Date").
(b) Tenant's obligation to pay Base Rent and Tenant's Proportionate
Share of Expenses and Taxes commences on the date which is the earlier to occur
of (i) four (4) months following the later of (xx) the Lease Commencement Date
or (yy) the date on which approval of Tenant's Use (as set forth in paragraph 57
below) is obtained from the applicable government entity, or (ii) the date
Tenant opens for business at the Premises (the "Rent Commencement Date").
(Subject to extension on a day for day basis for each day of force majeure
and/or Landlord's delays which affect the completion of Tenant's improvement
work.)
39. Condition of Premises.
(a) Landlord shall deliver the Premises in "shell" condition, which
shall consist of the following:
(1) Level, smoothed and finished concrete slab floor;
(2) H.V.A.C. system in good working order, which system
consists of six (6) 5-ton units;
(3) Paint-ready interior walls (taped and sanded);
(4) Stubbed-in telephone line;
(5) Stubbed-in electrical service (1,000 amp service); and
(6) Six-inch (611) sewer lines, two-inch (211) main water
line, and one & one-half inch (1-1/211) natural gas line.
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(b) With the above exceptions, the Premises shall be delivered to
Tenant in their "AS IS" condition subject to Tenant's punch list, to be
submitted to Landlord within 10 days of Tenant's possession. Landlord shall not
be required to install any tenant improvements or perform any other work for the
Premises including, without limitation, any work necessary for the Premises to
comply with the requirements of the Americans with Disabilities Act. All floor
coverings, window treatments and other improvements and work for the Premises
("Tenant's Work") shall be performed by Tenant at Tenant's sole cost; provided,
all of Tenant's Work is subject to Landlord's prior written consent in
accordance with paragraph 12 of the Lease. All items of Tenant's Work shall be
and remain the property of Landlord, with the exception of electronic software
and hardware, Tenant"s trade fixtures and custom and specialty items peculiar to
Tenant's business. The building systems which are necessary for Tenant's use of
the Premises are in good working order on the date of execution of the Lease.
40. Tenant Improvement AllowancelRental credit.
-------------------------------------------
Landlord and Tenant agree that the Premises are to be remodeled. All
such remodeling shall be for the account of Tenant; provided, however, that
Landlord shall do the following:
(a) Provide Tenant with a tenant improvement allowance ("Improvement
Allowance") of One Hundred Thousand Dollars ($100,000.00). The Improvement
Allowance shall be used by Tenant to pay for the cost of permanent alterations
or improvements to the Premises that are approved and identified in advance by
Landlord. Prior to the commencement of work, Tenant shall furnish Landlord with
copies of all plans and specifications for the alterations, as well as copies of
the bids it receives. All alterations shall be accomplished in accordance with
the provisions of paragraph 12 of this Lease, and Tenant shall submit to
Landlord actual invoices received by it prior to Landlord making payment thereof
to the providing contractor from the Improvement Allowance. Landlord is required
to reimburse amounts (in respect of the Improvement Allowance) to Tenant within
thirty (30) days following receipt by Landlord of actual invoices and
satisfactory lien releases from the general contractor and all sub-contractors.
If Landlord does not make a payment of the Improvement
Allowance which is due the contractor and Landlord does not have a legitimate
reason for withholding payment (such as a dispute regarding the amount due, work
performed, or the contractor's compliance with the plans) , after providing
Landlord with ten (10) days written notice of Tenant's intent to pay the
contractor Tenant may pay the contractor (unless Landlord has done so by such
date) and offset rent due Landlord by such amount.
(b) Provide Tenant with a rental credit of Fifty Thousand Dollars
($50,000.00) to be applied toward the Base Rent in one hundred sixteen (116)
equal installments of Four Hundred Thirty-One and 03/100 Dollars ($431.03) each
during months five through one hundred twenty (5-120) of the Lease Term.
41. Exclusions.
-----------
(a) Notwithstanding anything to the contrary in the definition of
Expenses or Taxes in the Lease to the contrary, Expenses and Taxes shall not
include the following, except to the extent specifically permitted by a specific
exception to the following:
(1) Any ground lease rental;
(2) Costs of items considered capital replacements,
improvements and equipment under generally accepted accounting principles
consistently applied [or otherwise] ("Capital Items")
2
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except as expressly set forth in the definition of Expenses set forth in the
printed form of Lease;
(3) Rentals for items (except when needed in connection with
normal repairs and maintenance of permanent systems) which if purchased, rather
than rented, would constitute a capital improvement which is specifically
excluded in subparagraph (2) above (excluding, however, equipment not affixed to
the Project which is used in providing janitorial or similar services);
(4) Costs incurred by Landlord for the repair of damage to the
Project, to the extent that Landlord is reimbursed by insurance proceeds,
regardless of whether such repairs are covered by insurance;
(5) Costs, including permit, license and inspection costs,
incurred with respect to the installation of tenant or other occupants'
improvements in the Project or incurred in renovating or otherwise improving,
decorating, painting or redecorating vacant space for tenants or other occupants
of-the Project;
(6) Depreciation, amortization and interest payments, except
as provided herein and except on materials, tools, supplies and vendor-type
equipment purchased by Landlord to enable Landlord to supply services Landlord
might otherwise contract for with a third party where such depreciation,
amortization and interest payments would otherwise have been included in the
charge for such third party's services, all as determined in accordance with
generally accepted accounting principles, consistently applied, and when
depreciation or amortization is permitted or required the item shall be
amortized over its reasonably anticipated useful life;
(7) Costs in connection with services or other benefits which
are not offered to Tenant or for which Tenant is charged for directly but which
are provided to another tenant or occupant of the Project;
(8) Costs incurred by Landlord due to the violation by
Landlord or any tenant (excepting Tenant) of the terms and conditions of any
lease of space in the Project;
(9) overhead and profit increment paid to Landlord or to
subsidiaries or affiliates of Landlord for goods and/or services in or to the
Project to the extent the same exceeds the costs of such goods and/or services
rendered by unaffiliated third parties on a competitive basis;
(10) Landlord's general corporate overhead and general and
administrative costs, except for the administrative fee added to the annual
expenses to be paid by Tenant;
(11) Advertising and promotional expenditures, and costs of
signs in or on the Project identifying the owner of the Project or other
tenants' signs;
(12) The cost of any electric power used by any tenant in the
Project, excepting that used by Tenant or for any common areas;
(13) Costs incurred in connection with upgrading the Project
to comply with disability, life, fire and safety codes, ordinances, statutes, or
other laws in effect prior to the Lease Commencement Date including, without
limitation, the ADA, including penalties or damages incurred due to such
noncompliance;
(14) Tax penalties incurred as a result of Landlord's
negligence, inability or unwillingness to make payments and/or to file any tax
or informational returns when due;
(15) Costs for which Landlord has been compensated by a
management fee, and any management fees in excess of those management
3
<PAGE>
fees which are normally and customarily charged by landlords of comparable
projects in the vicinity of the Project;
(16) Costs arising from the negligence or fault of other
tenants or Landlord or its agents, or any vendors, contractors, or providers of
materials or services selected, hired or engaged by Landlord or its agents
including, without limitation, the selection of building materials;
(17) Notwithstanding any contrary provision of the Lease,
including, without limitation, any provision relating to capital expenditures,
any and all costs arising from the presence of hazardous materials or substances
(as defined by applicable laws in effect on October 15, 1994) in or about the
Project including, without limitation, hazardous substances in the ground water
or soil, not placed in the Premises or Project by Tenant;
(18) Costs arising from Landlord's charitable or political
contributions;
(19) Costs arising from latent defects in the Base, Shell, or
Core of the Project or improvements installed by Landlord or repair thereof,
unless covered by insurance or legal damage awards;
(20) Costs for the acquisition of sculpture, paintings or
other objects of art;
(21) Costs (including in connection therewith all attorneys'
fees and costs of settlement judgements and payments in lieu thereof) arising
from claims, disputes or potential disputes in connection with potential or
actual claims litigation or arbitrations pertaining to Landlord and/or the
Project; and
(22) Costs associated with the operation of the business of
the partnership or entity which constitutes Landlord as the same are
distinguished from the costs of operation of the Project, including partnership
accounting and legal matters, costs of defending any lawsuits with any mortgagee
(except as the actions of Tenant may be in issue), costs of selling,
syndicating, financing, mortgaging or hypothecating any of Landlord's interest
in the Project, costs of any disputes between Landlord and its employees (if
any) not engaged in Project operation, disputes of Landlord with Project
management, or outside fees paid in connection with disputes with other tenants.
(b) Landlord further agrees that since one of the purposes of Expenses
is to allow Landlord to require Tenant to pay for the costs attributable to the
Premises, Landlord agrees that: (i) Landlord will not collect or be entitled to
collect Expenses from all of its tenants in an amount which is in excess of one
hundred percent (100%) of the Expenses actually paid by Landlord in connection
with the operation of the Project, and (ii) Landlord shall make no profit from
Landlord's collections of Expenses. All assessments and premiums which are not
specifically charged to Tenant because of what Tenant has done, which can be
paid by Landlord in installments, shall be paid by Landlord in the maximum
number of installments permitted by law and not included as Expenses except in
the year in which the assessment or premium installment is actually paid;
provided, however, that if the prevailing practice in other comparable projects
in the vicinity of the Project is to pay such assessments or premiums on an
earlier basis, and Landlord pays on such basis, such assessments or premiums
shall be included in Expenses as paid by Landlord; in no event, however, shall
Landlord include any accrued interest (resulting from such assessments or
premiums) in its computation of Expenses.
(c) Each time Landlord provides Tenant with an actual and/or estimated
statement of Expenses, such statement shall be itemized on a line item by line
item basis, showing the applicable expense for the applicable year and the year
prior to the applicable year.
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42. Signs and Advertising.
----------------------
(a) General. All signs and signage on the exterior of the Premises or
visible from any portion of the Common Areas shall be at Tenant's sole cost and
expense and subject to Landlord's prior written approval. Any such signage
installed without Landlord's prior written approval shall, at Landlord's sole
option, be immediately removed by Tenant and replaced, at Tenant's sole cost and
expense, with signage approved by Landlord.
(b) Interior. Tenant may at Tenant's own expense erect and maintain
upon the interior sales areas of the Premises all signs and advertising matter
customary and appropriate in the conduct of Tenant's business. If Landlord
reasonably objects to any interior signage and/or advertising materials, Tenant
shall promptly remove same.
(c) Exterior. Tenant shall, at Tenant's own expense erect and maintain
an exterior sign on its store facia which conforms to such reasonable criteria
as may be established by Landlord, but subject to Landlord's prior written
approval of said sign. Except for those signs and advertising devices which are
(a) provided for in plans and specifications or a scale sign drawing submitted
by Tenant and approved in writing by Landlord, and (ii) which comply with
governmental requirements, Tenant shall not erect, place, paint or maintain in
or on the Premises any sign, exterior advertising medium or any other object or
any kind whatsoever visible outside the Premises. Tenant shall not change the
color, size, location, composition, wording or design of any sign or
advertisement on the Premises that may have been previously approved by Landlord
and governmental authorities without the prior written approval of Landlord and
such authorities. Tenant shall, at Tenant's own expense, maintain and keep in
good repair all installations, signs and advertising devices which Tenant is
permitted by Landlord to maintain and shall pay all charges required to keep
them in good repair. At least one of Tenant's exterior signs shall be installed
and operating within three (3) days of Tenantfs opening for business at the
Premises.
(d) Except as hereinabove mentioned, Tenant shall not place or cause to
be placed, erected or maintained on any exterior door, wall, window or the roof
of the Premises, or on the glass of any window or door of the Premises, or on
any sidewalk or other location outside the Premises, or within any display
window space in the Premises, or within five (5) feet of the front of the
storefront leaseline, whether or not there is display window space in the
Premises, or within any entrance to the Premises, any sign, decal, placard,
decoration, flashing, moving or hanging light, lettering, or any other
advertising matter of any kind or description; if Tenant places or causes to be
placed or maintained any of the foregoing, the same may be removed by Landlord
or Landlord's representative without notice and without such removal
constituting the breach of this Lease or entitling Tenant to claim damages on
account thereof. No symbol, design, name, mark or insignia adopted by Landlord
for the Shopping Center shall be used without the prior written consent of
Landlord. No illuminated sign located in the interior of the Premises which is
visible from the outside shall be permitted without the prior written approval
of Landlord. All signs located in the interior of the Premises shall be in good
taste so as not to detract from the general appearance of the premises and
Shopping center. Tenant shall not, without the prior written approval of
Landlord, display or sell merchandise in, or otherwise obstruct, any area
outside of' the Premises, nor solicit business in the parking area or other
common areas, nor distribute any hand bills or other advertising matter in the
parking area or in other common areas.
(e) Name of the Center.
Landlord shall rename the property Moulton La Paz Center, which
name shall appear in the top position on the Moulton Parkway monument sign.
Tenant shall be permitted the use of the second
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<PAGE>
position on the monument sign, and Tenant's sign shall be larger than that of
the Center, subject to City requirements and/or limitations. All costs
associated with Tenant's portion of such sign, including installation, shall be
at Tenant's sole cost and expense.
(i) Tenant may elect to design a new monument sign; however,
if Tenant elects to do so, such new sign must include the proper identification
of the Moulton La Paz Center. Any such sign shall be at Tenant's sole cost and
expense with the exception that Landlord shall pay for the lettering or panel,
as the case may be, that identifies "Moulton La Paz Center". Any such sign shall
be subject to Landlord's prior written approval, which approval shall not be
unreasonably withheld.
(ii) In the event that the appropriate governmental agency
gives approval for a new monument sign on La Paz, Landlord shall install such
new monument sign at Landlord's cost and expense and Tenant shall be responsible
for the cost of Tenant's insertion on said monument.
(f) Landlord acknowledges that Tenant's signage (including the sign on
the front of the Premises) will, given the permitted use of the Premises, be
intended to appeal to and to attract children and, therefore, it will not be
reasonable for Landlord to withhold its consent to any signage proposed by
Tenant solely on the grounds that it does not conform to what would be
considered "normal" shopping center signage. Without limiting the generality of
the foregoing, Landlord specifically acknowledges that the incorporation of
bright colors and/or odd shapes into Tenant's signage will not solely be
reasonable grounds for Landlord's refusal to consent to Tenant's signage.
43. Common Areas.
-------------
(a) Inclusions. In addition to those items specified in paragraph 3(a)
of the Lease, the Common Areas shall also include, without limitation, the
following: common entrances, lobbies, corridors, balconies, stairways,
stairwells, public restrooms, elevators, escalators, parking areas, parking lot
and canopy lighting, loading and unloading areas, trash areas, roadways,
sidewalks, parkways, ramps, driveways, water features, irrigation systems, base
fire sprinkler system, drainage systems, and landscape areas.
(b) Parking; Employee Parking. Parking in the Common Areas designated
as such, from time to time, by Landlord shall be for Tenant and Tenant's
employees, customers and invitees for business purposes and during the Shopping
Center's business hours as established by Landlord, from time to time. Landlord
may designate those portions of the Common Areas, if any, which shall be used
for automobile parking by employees of Tenant. No employee of Tenant shall use
any part of the Common Areas for parking except such area or areas as may be so
designated by Landlord. As part of the Rules and Regulations, Landlord may
require Tenant to supply Landlord, upon request, with a current list of license
plate numbers of Tenant's employees, and Landlord, without liability, shall have
the right to tow employee automobiles parking in areas not designated for
employee parking and to impose fines or charges on Tenant for same.
(c) Barriers. No fence, wall, structure, division, rail or obstruction
shall be placed, kept, permitted or maintained on any part of the Common Areas
by Tenant; nor shall Tenant conduct or maintain any sale, display, advertising,
promotion or storage of merchandise or any business activities of any kind
whatsoever in the Common Areas without Laiidlord's prior written consent. Tenant
shall not cause or permit any person to use the Common Areas for solicitations,
demonstrations or any other activities that would interfere with the conduct of
business in the Shopping Center or which might tend to create civil disorder or
commotion.
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44. Business Taxes.
---------------
Tenant shall pay all special taxes, assessments and license fees
levied, assessed or imposed by law or ordinance by reason of Tenant's use of the
Premises.
45. Hours of Operation.
-------------------
Tenant shall be permitted to use the Premises for "sleep-over" parties;
provided, Tenant shall pay any additional costs associated with such use of the
Premises (that is, due to use for "sleep- overs" and due to use after normal
hours of operation of the Project) and shall indemnify, defend and hold harmless
Landlord from any damages, loss, liability and costs (including attorneys' fees
and costs) arising from or in connection with such use of the Premises. Tenant
shall be required to be open for business seven (7) days a week (excluding the
following holidays: New Years Day, Easter Sunday, Memorial Day, July 4th, Labor
Day, Thanksgiving Day, and Christmas Day) from the hours of 10:00 a.m. to 7:00
p.m.
46. Option to Extend.
-----------------
So long as Tenant is not in default under the terms and conditions of
this Lease, Landlord grants to Tenant three (3) options to extend the Term of
this Lease for an additional five (5) years each ("Option Periods") , commencing
upon the date this Lease would otherwise expire. The options to extend are
personal to the original Tenant under the Lease and shall not be exercisable by
successor or assignee Tenant(s) regardless of whether Landlord consents to any
assignment or subletting of the Lease (unless at the time of a request for
Landlord's consent to an assignment or sublease Tenant requests that the option
be assignable to the proposed assignee or sublessee and Landlord grants its
consent thereto). The Option Periods shall be pursuant to the terms and
conditions of this Lease except for those relating to Base Rent and any
increases in Base Rent over the Term, the Cap on Expenses & Taxes, the Option to
Extend,, Tenant Improvements by Landlord, if any, and waived rent or rental
abatement.
The initial Base Rent for the Option Periods shall be at the "Fair
Rental Value" (as hereinafter defined), but not more than 110% of the previous
yearfs rental rate of the Premises at the commencement of the Option Periods.
Fair Rental Value shall mean the Base Rent payable by a willing tenant to a
willing landlord for like and comparable space in a comparable building in the
immediate area of the Premises with existing tenant improvements of comparable
quality to those then existing in the Premises taking into account the following
factors only: the Lease provisions for the payment of Additional Rent and
Consumer Price Index increases and free rent concessions then being offered. No
other factors or concessions may be considered.
To exercise the options granted to Tenant under this paragraph, Tenant
shall notify Landlord in writing ("Option Notices") of Tenant's election to
exercise these options. Such Option Notices must be received by Landlord no
later than one hundred eighty (180) days prior to the expiration of the original
Term of this Lease or each succeeding option period. If Tenant does not exercise
each Option in strict accordance with the time frames and provisions set forth
herein or if either at the time the Option Notice is given or at the time the
option is to commence, Tenant is in default under any provision of this Lease or
has been in material default with respect to the payment of any rental called
for under this Lease on more than five (5) occasions during the Term, Tenant's
Option Notice shall be deemed ineffective and Tenant's Option rights shall
terminate and be of no further force or effect.
Within thirty (30) days after Landlord receives Tenant's Option Notice, Landlord
shall notify Tenant of its determination of Fair Rental Value ("Landlord's
Notification"). If Tenant does not notify Landlord, in writing, that it agrees
with the amount determined by
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Landlord within fifteen (15) days after receipt of Landlord's Notification, it
shall be deemed that Tenant disagrees with Landlord's determination. If Tenant
disagrees with Landlord's determination, Landlord and Tenant shall have sixty
(60) days following the prior 15-day period (set forth in the preceding
sentence) within which to agree upon the Fair Rental Value. If the parties agree
on the monthly rent for each Option Period, they shall promptly execute an
amendment to the Lease stating- the initial Base Rent for each Option Period.
If the parties are unable to agree to such Fair Rental Value within the
aforesaid sixty (60) days, then Landlord and Tenant shall each give written
notice to the other of their appointment of an Independent Appraiser (as
hereinafter defined) within ten (10) days after the expiration of the aforesaid
sixty (60) days. Thereafter, the Fair Rental Value shall be determined by the
appraisers appointed by Landlord and Tenant, or, in the event of a failure of
either party to timely appoint an appraiser, the single appraiser appointed
shall determine Fair Rental Value. In determining Fair Rental Value, the
appraisers shall be bound by the definition of Fair Rental Value contained in
this option to Extend. An Independent Appraiser shall mean a real estate
appraiser who has been engaged in the appraisal of commercial real estate in the
area of the Premises for a period of not less than five (5) years.
If the two (2) appraisers reach a determination of Fair Rental Value
which does not differ from one another by more than ten percent (10%) , then the
Fair Rental Value shall be deemed to be the average of the two (2) appraisals.
If within the aforesaid thirty (30) days the two (2) appraisers cannot reach a
determination of Fair Rental Value or their determinations differ by more than
ten percent (10%) within thirty (30) days after the second appraiser has been
appointed, the two (2) appraisers will, within ten (10) days a ' fter the
expiration of the aforesaid thirty (30) days select a third appraiser meeting
the stated qualifications. If within such ten (10) day period they are unable to
agree on the third appraiser, either Landlord or Tenant, by giving ten (10)
days' prior written notice to the other, may apply to the Superior Court for the
County of Los Angeles for the selection of a third appraiser who meets the
stated qualifications.
Within thirty (30) days after the selection of a third appraiser, a
majority of the appraisers will determine the Fair Rental Value. If a majority
are unable to determine Fair Rental Value within said thirty (30) days, each of
the three (3) appraisers will submit their appraisals in writing and the two (2)
appraisals which are numerically closest will be averaged and the average will
be the initial Base Rent for the Option Period. Each party shall pay the cost of
the appraiser appointed by it and one-half of the cost of the third appraiser,
if needed.
If Fair Rental Value shall not have been determined by commencement of
the Option Periods, Tenant shall pay as Base Rent, the amount determined by
Landlord's appraiser to be the Fair Market Rental Value until such time as the
Fair Rental Value has been determined whereupon Tenant shall pay any additional
amount due to Landlord based upon such subsequent determination of Fair Rental
Value, together with the next monthly rent payment due. If the Base Rent so paid
by Tenant is higher than that ultimately determined by the appraisal process,
Landlord shall credit Tenant such difference. Once the new Base Rent has been
determined, then for purposes of computing future CPI adjustments, the CPI base
month shall be the month which is three (3) months prior to the commencement of
each Option Period. With respect to each CPI adjustment during the Option
Period(s) , the minimum adjustment shall be four percent (4%) and the maximum
adjustment shall be seven percent (7%) (there shall be no downward adjustments)
. Any reference to a default shall mean the existence of a default following any
notice and cure period expressly provided for in this lease.
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47. Minimum Net Worth.
------------------
In consideration of Landlord's waiver of a personal guaranty of the
Lease, Tenant agrees to maintain throughout the Term: (i) a minimum
stockholder's equity ("Net Worth") in Tenant of $750,000, and (ii) a liquidity
ratio ("Ratio") of at least 2-1/2 to 1 (current assets to current liabilities),
cash or good receivables, pursuant to generally accepted accounting principles,
consistently applied. Tenant shall provide to Landlord within fifteen (15) days
following the end of each fiscal quarter, a certification signed by Tenant and
Tenant's in-house accountant stating that the Net Worth is at least $750,000 and
that the Ratio is at least 2- 1/2 to 1. Further, Tenant shall provide to
Landlord within ninety (90) days following the end of each fiscal year of
Tenant, a financial statement for such fiscal year certified by an independent
certified public accountant prepared in accordance with generally accepted
accounting principles consistently applied. Tenant agrees that if at any time
the Net Worth falls below $750,000 or the Ratio is not at least 2-1/2 to 1,
Tenant shall cause Planet Kids Learning Center, Inc., a Delaware corporation
(IIPKLII) or United Leisure Corporation, a Delaware corporation ("ULCII)
(collectively "Contributing Parties") to, and Contributing Parties have by
separate guaranty agreement agreed to, within 10 days after determination by
Tenant or Landlord that Tenant failed to meet the Net Worth and/or Ratio
requirements, contribute enough monies to Tenant so that Tenant's Net Worth is
increased to at least $750,000 and Tenant's Ratio is at least 2-1/2 to 1. The
parties acknowledge and agree that Tenant shall first require PKL to contribute
any such required monies and that if Tenant is unable to cause PKL to contribute
any such required monies Tenant shall then cause ULC to contribute any such
required monies (this shall not extend the lo-day time period). If PKL and/or
ULC do not contribute monies as and when required by this paragraph, Tenant
shall be in default of the Lease and, pursuant to the separate guaranty
agreement signed by PKL and ULC, PKL and ULC shall be in default of 'such
separate guaranty agreement.
48. Security Deposit.
------------------
The amount of the Security Deposit is Fifteen Thousand Three Hundred
Seventy-Two Dollars ($15,372.00).
49. Trash Removal.
--------------
Notwithstanding any other provision in the Lease to the contrary,
Tenant shall be responsible for all garbage, trash and refuse collection and
removal from the Premises at Tenant's sole cost and expense; provided, however,
Tenant shall not be charged any "common area" cost for trash removal unless it
is determined that Tenant is using trash bins or receptacles designated for the
Common Areas.
50. General Provisions.
-------------------
(a) No Partnership. Landlord shall not in any way or for any purpose be
deemed a partner, joint venturer or member of any joint enterprise with Tenant.
(b) Mortgagee Protection. If, in the course of obtaining financing or
refinancing, for the Shopping Center, the prospective lender who has been
requested to provide such financing request reasonable modification to the Lease
as a condition to such financing, Tenant shall not unreasonably withhold or
delay Tenant's consent to such modifications, provided that such modifications
shall not increase the obligation of Tenant hereunder or materially and
adversely affect the leasehold interest created by this Lease or Tenant's rights
under the Lease. Further, this Lease is subject to the approval of the existing
lender.
(c) Grant of Easement. Tenant hereby grants to Landlord such licenses
and/or easements in, under or over the premises or any portion or portions
thereof as shall be reasonably required for the
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installation or maintenance of mains, conduits, pipes, drains or other
facilities to serve the Shopping Center or any part thereof, including the
premises of any tenant.
51. Confidentiality.
----------------
The rates, terms and conditions of this Lease shall remain strictly
confidential. Tenant agrees not to discuss such terms and conditions with other
tenants in the Shopping Center or with any other individuals save Tenant's
attorney, accountant or other advisors to Tenant's business.
52. Environmental Matters.
----------------------
Tenant shall not cause or permit any "Hazardous Material" (as
hereinafter defined) to be brought, kept or used in or about the Premises by
Tenant, its subtenants, agents, employees, contractors or invitees except in
commercial quantities similar to those quantities usually kept on similar
premises by others in the same business or profession. Tenant shall store, use
and dispose of such materials in compliance with the applicable laws. If the
presence of any Hazardous Materials in the Premises caused or permitted by
Tenant results in any contamination of the Premises, Tenant shall promptly take
all actions, at its sole expense, as are necessary to return the affected area
to the condition existing prior to the introduction of any such Hazardous
Material. Tenant shall indemnity Landlord from and against any breach by Tenant
of the obligations stated in the preceding sentence, and agrees to defend and
hold Landlord harmless from and against any and all claims, judgments, damages,
penalties, fines, costs, liabilities or losses (including attorney's fees),
which arise during or after the term of this Lease as a result of such breach.
As used herein, the term "Hazardous Material" means any hazardous or toxic
substance, material or waste which is or becomes regulated by any local
governmental authority, the State' of California or the United States
Government. The term "Hazardous Material" includes, without limitation, any
material or substance which is (i) designated as a "hazardous substance"
pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C.
Section 1317), (ii) defined as a "hazardous waste" pursuant to Section 1004 of
the Federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., (iii) defined as a "hazardous substance" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 6901 et seq., (iv) petroleum or, (v) asbestos. Notwithstanding the
foregoing, no radioactive materials shall be permitted on the Premises.
Landlord represents that, to the best of our actual knowledge, the
current state of the Property does not violate any environmental laws, and that
the Property does not have or contain hazardous material, except those used in
the ordinary course of the businesses at the Shopping Center and in compliance
with law.
53. Assignment/Subleasing.
----------------------
Supplementing the provisions of paragraph 23 of this Lease, and
notwithstanding anything to the contrary set forth therein, it is agreed that:
(a) For the purposes of this paragraph, "Profits" shall mean that
amount remaining, if any, from the rentals and other leasing consideration paid
or payable by a subtenant or assignee, as the case may be, after deducting
therefrom the following:
(i) All the rentals payable under this Lease for the same
space and for the same period of time as covered under the sublease or
assignment;
(ii) The reasonable cost of any services provided by Tenant to
such subtenant at no extra charge under a sublease, such as use of a law library
or conference room; and
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(iii)Economic concessions or allowances made by Tenant to such
subtenant or assignee (such as free rent, improvement allowances, moving
expenses) and costs reasonably incurred by Tenant to secure such subtenant or
assignee (such as leasing consultant and brokers fees & commissions, marketing
costs, and spz!ce planner fees).
(b) In the event Tenant assigns this Lease or subleases all or any
portion of the Premises, then in that event Landlord shall be entitled to
receive from Tenant one-half (1/2) of the Profits realized by Tenant from such
assignment or subleases) , and Tenant shall pay to Landlord its portion of the
Profits within twenty (20) days following Tenant's receipt of rentals and/or
other consideration upon which such profits are calculated.
54. Intrabuilding Network Cable.
----------------------------
Tenant acknowledges and agrees that an intrabuilding network cable
system ("INC") has been or may be installed in the Project where the Premises
are located. Expenses shall include amounts paid or incurred by Landlord for:
(i) operation, maintenance, alteration, repair and additions (which are not
capital in nature) to any INC; (ii) service contract fees for any INC; and (iii)
taxes, usage, service, hook-up, connection availability fees, deposits and
surcharges for any INC. Landlord shall not be liable to Tenant, and Tenant shall
not be entitled to any abatement of rent or other remedy, by reason of the
failure or breakdown of any INC (or any part thereof). Landlord shall perform
all routine maintenance and repair work for any INC.
55. Tenant's Exclusive.
-------------------
Landlord shall not lease or approve an assignment or sublease for any
portion of the Project to any person or entity for use primarily as a children's
recreation and entertainment center. The foregoing shall not prevent Landlord
from leasing any portion of the Project for a use which may include children's
recreation and entertainment (as long as the use is not primarily for children's
recreation and entertainment). Further, Landlord shall not be in default of the
Lease in the event any current tenant of the Project (or any current tenant's
assignee or sublessee) now has a right to, and does, implement a use which is a
children's recreation and entertainment center. This exclusive is personal to
Tenant or to a controlled affiliate; a transfer of a controlling interest in
Tenant or to a non-controlled affiliate shall be subject to Landlord's approval.
56. Non-Disturbance Agreement.
--------------------------
Within thirty (30) days following the execution of this Lease, Landlord
and Landlord's lender for the Building shall provide to Tenant a non-disturbance
agreement from the existing lender, which shall be in the form of the
Non-Disturbance Agreement attached hereto as Exhibit 'IF". If Landlord and
LandlordIs lender do not provide Tenant with the Non-Disturbance Agreement
described in the preceding sentence, Tenant shall have a right to terminate this
Lease by giving Landlord written notice of Tenant's election to terminate within
ten (10) days following the date which is thirty (30) days following the
execution of this Lease. Upon request, Tenant agrees to subordinate this Lease
to any future lender's lien provided Tenant receives a Non-Disturbance Agreement
reasonably acceptable to Tenant.
57. Zoning.
-------
Landlord and Tenant acknowledge that as of the date of execution of the
Lease, the zoning for the Premises does not allow for the use set forth in
paragraph l(f) of the Lease ("Tenant's Use"). Tenant shall use good faith
efforts to expeditiously cause the zoning for the Premises to be changed, or to
obtain a variance to such .zoning,
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so that Tenant's Use is permitted at the Premises. Landlord shall cooperate with
Tenant in obtaining the subject zoning change/variance and do all things
reasonably necessary for such zoning change/variance.
If the subject zoning changp/variance is not obtained by the Deadline
(defined below), then, except as expressly provided below, the Lease
automatically shall terminate and the Te.rmination Fee (or applicable portion
thereof) shall be retained by Landlord pursuant to this paragraph; in such
event, Landlord shall return Tenant's Sedurity Deposit and any prepaid rent.
Notwithstanding the foregoing, if by the Deadline the subject zoning
change/variance has not yet occurred but the City has given reasonable
assurances that the subject zoning change/variance will occur within the thirty
(30) day period following the Deadline, the Deadline shall be extended thirty
(30) days. The "Deadline" is February 15, 1995.
Upon execution of the Lease, Landlord has given Tenant a cashier's
check in the amount of One Hundred Eighty Thousand Dollars ($180,000). This
amount of $180,000 is the "Termination Fee". The Termination Fee constitutes
approximately the amount of the Base Rent and Additional Rent due by Tenant
during one year of the Lease. The Termination Fee shall be returned to Tenant if
the subject zoning change/variance is obtained by the Deadline. If the subject
zoning change/variance is not obtained by the Deadline, the Termination Fee (or
applicable portion thereof) shall be retained by Landlord in accordance with
this paragraph. Landlord may commingle the Termination Fee with other of
Landlord's funds and shall in no event owe Tenant any interest on the
Termination Fee (or any portion thereof).
If the Lease is terminated pursuant to this paragraph, Landlord shall
use good faith reasonable efforts to find another tenant for the Premises. If
Landlord is successful in locating a new tenant, Tenant shall be entitled to
reimbursement of a portion of the termination Fee as set forth below in this
paragraph. Landlord shall be entitled to retain that portion of the Termination
Fee which is for the period from the Deadline to the commencement date of the
term of the new lease for the Premises; the remainder of the Termination Fee
shall be reimbursed to Tenant as soon as practicable following the commencement
date of the term of the new lease for the Premises. For example, if nine months
following the Deadline the term of a new lease commences, Landlord shall retain
9/12 (since the Termination Fee is for a 12-month period) of the Termination Fee
(that is, $135,000) and shall reimburse to Tenant 3/12 of the Termination Fee
(that is, $45,000).
If the Lease is terminated pursuant to this paragraph 57 and Tenant
thereafter obtains the subject zoning change/variance, and desires to be the
tenant of the Premises, Landlord shall be required to lease the Premises to
Tenant pursuant to the terms herein as long as Landlord has not procured another
tenant (or is negotiating with another tenant for the Premises) and no material
changes in Tenant or its parents or other relative factors has occurred.
58. Financial Contingency.
----------------------
The parties acknowledge and agree that Landlord is relying on the
financial strength of ULC in considering Tenant's financial strength and in
foregoing the requirement that the Lease be personally guaranteed. The parties
further acknowledge and agree that Landlord is relying on ULC's financial
strength improving considerably if and when ULC's proposed public offering of
4,000,000 of its shares is sold. Thus, in the event ULC is unable to sell the
4,000,000 shares as contemplated by the prospectus for such sale, Landlord shall
have the option, in its sole and absolute discretion (the General Reasonability
Clause - paragraph 61 shall not affect this discretion to terminate the Lease)
to terminate the Lease on or before December 31, 1994 by giving Tenant written
notice of Landlord's election to terminate, in which event the following fees
shall be returned to Tenant: the Termination Fee, the Security Deposit, and any
pre-paid rent.
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so that Tenant's Use is permitted at the Premises. Landlord shall cooperate with
Tenant in obtaining the subject zoning change/variance and do all things
reasonably necessary for such zoning change/variance.
If the subject zoning change/variance is not obtained by the Deadline
(defined below), then, except as expressly provided below, the Lease
automatically shall terminate and the Termination Fee (or applicable portion
thereof) shall be retained by Landlord pursuant to this paragraph; in such
event, Landlord shall return Tenant's Security Deposit and any prepaid rent.
Notwithstanding the foregoing, if by the Deadline the subject zoning
change/variance has not yet occurred but the City has given reasonable
assurances that the subject zoning change/variance will occur within the thirty
(30) day period following the Deadline, the Deadline shall be extended thirty
(30) days. The "Deadline" is February 15, 1995.
Upon execution of the Lease, Landlord has given Tenant a cashier's
check in the amount of One Hundred Eighty Thousand Dollars ($180,000). This
amount of $180,000 is the "Termination Fee". The Termination Fee constitutes
approximately the amount of the Base Rent and Additional Rent due by Tenant
during one year of the Lease. The Termination Fee shall be returned to Tenant if
the subject zoning change/variance is obtained by the Deadline. If the subject
zoning change/variance is not obtained by the Deadline, the Termination Fee (or
applicable portion thereof) shall be retained by Landlord in accordance with
this paragraph. Landlord may commingle the Termination Fee with other of
Landlord's funds and shall in no event owe Tenant any interest on the
Termination Fee (or any portion thereof).
If the Lease is terminated pursuant to this paragraph, Landlord shall
use good faith reasonable efforts to find another tenant for the Premises. If
Landlord is successful in locating a new tenant, Tenant shall be entitled to
reimbursement of a portion of the termination Fee as set forth below in this
paragraph. Landlord shall be entitled to retain that portion of the Termination
Fee which is for the period from the Deadline to the commencement date of the
term of the new lease for the Premises; the remainder of the Termination Fee
shall be reimbursed to Tenant as soon as practicable following the commencement
date of the term of the new lease for the Premises. For example, if nine months
following the Deadline the term of a new lease commences, Landlord shall retain
9/12 (since the Termination Fee is for a 12-month period) of the Termination Fee
(that is, $135,000) and shall reimburse to Tenant 3/12 of the Termination Fee
(that is, $45,000).
If the Lease is terminated pursuant to this paragraph 57 and Tenant
thereafter obtains the subject zoning change/variance, and desires to be the
tenant of the Premises, Landlord shall be required to lease the Premises to
Tenant pursuant to the terms herein as long as Landlord has not procured another
tenant (or is negotiating with another tenant for the Premises) and no material
changes in Tenant or its parents or other relative factors has occurred.
58. Financial Contingency.
----------------------
The parties acknowledge and agree that Landlord is relying on the
financial strength of ULC in considering Tenant's financial strength and in
foregoing the requirement that the Lease be personally guaranteed. The parties
further acknowledge and agree that Landlord is relying on ULC's financial
strength improving considerably if and when ULC's proposed public offering of
4,000,000 of its shares is sold. Thus, in the event ULC is unable to sell the
4,000,000 shares as contemplated by the prospectus for such sale, Landlord shall
have the option, in its sole and absolute discretion (the General Reasonability
Clause - paragraph 61 shall not affect this discretion to terminate the Lease)
to terminate the Lease on or before December 31, 1994 by giving Tenant written
notice of Landlord's election to terminate, in which event the following fees
shall be returned to Tenant: the Termination Fee, the Security Deposit, and any
pre-paid rent.
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59. Tenant's Right to Repair.
-------------------------
Notwithstanding any provision set forth in the -Lease to the contrary,
if Tenant provides written notice (or oral notice in the event of an emergency
(which, for purposes of this paragraph, means imminent danger to life or limb or
Tenant's continued operation of its business) involving damage or destruction to
or of a non-structural and interior component in the Premises and Landlord fails
to provide such action within a reasonable period of time, given the
circumstances, after the receipt of such notice, but in any event not later than
thirty (30) days after receipt of such notice, unless the action required takes
more than 30 days and Landlord has commenced the action within the subject
30-day period and pursues the completion of such action, then Tenant may proceed
to take the required action upon delivery of an additional ten (10) business
days' notice to Landlord specifying that Tenant is taking such required action
(provided, however, that such additional notice shall not be required in the
event of an emergency), and if such action was required under the terms of the
Lease to be taken by Landlord, then Tenant shall be entitled to prompt
reimbursement by Landlord of Tenant's reasonable costs and expenses in taking
such action. if Tenant makes a repair in accordance with the foregoing and
Landlord does not dispute Tenant's right to so make the repair but does not
reimburse Tenant therefor within ten (10) days following receipt of the invoice
for the repair, Tenant may offset its rent by the amount of the repair (as
reflected on the invoice received by Landlord. if Tenant makes a repair pursuant
to this paragraph and Landlord disputes Tenant's right to so make the repair,
the dispute shall be submitted to arbitration before a retired judge in
accordance with the rules of the American Arbitrators Association; in that
event, Tenant shall not have the right to offset as aforestated until the
dispute is resolved to the satisfaction of both parties. The losing party in
such arbitration shall pay the costs of the arbitration.
60. Rent Abatement.
---------------
Except in the event of damage or destruction of the Project (or any
portion thereof), in which event paragraph 20(e) applies instead of this
paragraph, in the event that Tenant is prevented from using, and does not use,
the Premises for five (5) consecutive business days or ten (10) days in any
twelve (12) month period (the "Eligibility Period") as a result of any repair,
maintenance or alteration performed by Landlord after the Rent Commencement Date
and required by the Lease, which interferes with Tenant's use of the Premises,
or Landlord's failure to provide services or access to the Premises or because
of the presence of hazardous substances in, on or around the Project or the
Premises which could, in Tenant's business judgment and taking into account the
standards, guidances and recommendations included in the then applicable laws
with respect to hazardous substances, pose a health risk to occupants of the
Premises, then Tenant's rent (including both Base Rent and any additional rent)
shall be abated or reduced, as the case may be, after expiration of the
Eligibility Period for such time that Tenant continues to be so prevented from
using, and does not use, the Premises. The rent abatement provided for herein
shall apply only if Tenant is prevented by some act or omission of Landlord from
using all of the Premises, and shall not apply if Tenant is prevented from using
the Premises due to an event of force majeure.
61. General Reasonability Clause.
-----------------------------
Regardless of any reference to the words "sole" or "absolute'? (but
except for matters which involve security for the Project or which will have an
adverse effect on the (a) structural integrity of the Project, (b) the Project's
plumbing, heating, life safety, ventilating, air-conditioning, mechanical or
electrical systems ("Project Systems"), or (c) which could affect the exterior
appearance of the Project, whereupon in each such case Landlord's duty is to act
in good faith and in compliance with the Lease) , any time the consent of
Landlord or Tenant is required, such consent shall not be unreasonably withheld,
conditioned or delayed. Whenever the Lease grants Landlord or Tenant the right
to take action
13
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exercise discretion, establish rules and regulations or make allocations or
other determination, Landlord and Tenant shall act reasonably and in good faith
and take no action which might result in the frustration of the reasonable
expectations of a sophisticated landlord and sophisticated tenant concerning the
benefits to be enjoyed under the Lease.
62. Attached Exhibits.
-------------------
Attached hereto and made a part of this Lease are the following
Exhibits:
Exhibit "A" - Site Plan;
Exhibit "B" - Legal Description;
Exhibit "C" - Rules and Regulations;
Exhibit "D" - Lease confirmation;
Exhibit "E" - Guaranty; and
Exhibit "F" - Non-Disturbance Agreement.
LANDLORD:
PSA PROPERTIES
BY WESTERN CAPITAL RESOURCES, A CALIFORNIA CORPORATION,
ITS DULY AURTHORIZED AGENT
By /s/Randi S. Sellers Date: 11/30/94
---------------------------- ------------------------
Randi S. Sellers
Director of Corporate Leasing
TENANT:
PLANET KIDS, INC.,
A CALIFORNIA CORPORATION
By /s/Harry Shuster Date:
---------------------------- ------------------------
Harry Shuster, President
(pki-add)
14
<PAGE>
EXHIBIT "A" SITE PLAN
26-538H Moulton Parkway, Laguna Hills, California
<PAGE>
EXHIBIT "B"
LEGAL DESCRIPTION OF THE REAL PROPERTY
THE REAL PROPERTY IS LOCATED IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA AND IS
MORE PARTICULARLY DESCRIBED AS FOLLOWS:
LOT 25, OF TRACT 11237, IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA, AS PER MAP
RECORDED IN BOOK 494 PAGES 28 THROUGH 33 INCLUSIVE OF MISCELLANEOUS MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, AS AMENDED BY CERTIFICATES OF
CORRECTION RECORDED JANUARY 25, 1983 AS INSTRUMENT NO 83-0@7298, AND MARCH 22,
198i AS INSTRUMENT NO. 83-120675, OFFICIAL RECORDS.
EXCEPTING THEREFROM 100 PERCENT OF ALL RIGHTS TO OIL, GAS AND OTHER HYDROCARBON
AND MINERAL SUBSTANCES LYING UNDER OR THAT MAY BE PRODUCED FROM THE
ABOVE-DESCRIBED LAND, TOGETHER WITH 100 PERCENT OF ALL RIGHTS TO THE PROCEEDS
THEREFROM AND 100 PERCENT OF ALL RENTS, BONUSES AND PROFITS ACCRUING THEREFROM,
PROVIDED, HOWEVER, THAT GRANTOR WAIVES AND RELINQUISHES THE RIGHT TO USE OR
OCCUPY OR TO ENTER UPON ANY PORTION OF THE SURFACE AND 500 FEET BELOW THE
SURFACE, MEASURED VERTICALLY FROM THE SURFACE OF SAID IAND, FOR THE PURPOSE OF
DRILLING FOR, CAPTURING, PRODUCING, EXTRACTING, STORING, TREATING OR OTHERWISE
HANDLING OR UTILIZING SUCH OIL, GAS OR OTHER HYDROCARBON OR MINERAL SUBSTANCES,
OR FOR THE PURPOSE OF EXERCISING GRANTOR'S RIGHTS THERETO, AS RESERVED IN THE
DEEDS FROM FIRST WESTERN BANK AND TRUST COMPANY, TRUSTEE, RECORDED SEPTEMBER 28,
1972 IN BOOK 1034 PAGES 318 AND 232 OF OFFICIAL RECORDS.
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS WHICH CONSTITUTE A PART OF THE LEASE
1. Accoss. Tenant shall not enter upon the roof or go Into or use areas reserved
exclusively for Landlord's use, includlng without limitation, storage areas for
utility, telephone, electrical, and janitorial equipment and supplies.
2. Litter. Tenant shall not cause the distribution of any material which if
discarded would tend to litter the Project. Tenant shall not discard litter
except in refuse cans or other appropriate containers. Tenant shall cooperate so
that the Project may be kept in a clean and orderly fashion and free of any
obstruction.
3. Signs. Tenant shall not affix any sign, placard, picture, banner,
advertisement, name, notice, lettering or direction on any part of the outside
or inside of the Project, or on any part of the inside of the Premises which can
be seen frorn outside of the Premises, without the prior written consent of
Landlord, and then only in such color, size, style, character and substance as
may first be approved in writing by Landlord. Landlord reserves the right to
remove all matter not so approved without notice or liability to Tenant.
4. Alterations. Tenant shall not deface any part of the Project. Landlord shall
direct electricians as to where and how electric and telephone wires are to be
introduced. No boring, cutting, roof penetrations or stringing of wires shall be
performed except with the prior written consent of Landlord and as Landlord may
direct.
Tenant shall not replace or install any burglar alarm or other
electrical security device without the prior written consent of Landlord. 11 any
such alarm or device malfunctions so that it annoys or interferes in any way
with other tenants or their invitees, Tenant shall immediately repair or remove
such alarm or device or Landlord may, without liability to Tenant, disconnect
said device.
Tenant shall not install in the Premises any equipment which requires
more electric current than Landlord is required to provide under this Lease,
without Landlord's prior approval. Tenant shall ascertain the maximum amount of
load or demand for or use of electrical current which can safely be permitted,
taking into account the capacity of electric wiring in the Project and the
Premises and the needs of tenants of the Project and shall not in any event
connect a greater load than such safe capacity.
No awning or other projections or window coverings shall be attached to
the outside walls of the Premises without the prior consent of Landlord, which
consent Landlord may withhold at it's sole discretion.
No window covering shall be attached to the interior windows of the
Premises without the prior consent of Landlord, which consent Landlord may
withhold at it's sole discretion.
5. Prohibited Uses. Tenant shall not serve any alcoholic beverages on the
Premises. If Tenant serves or prepares food in the Premises, it must be properly
vented to preclude odors that may be objectionable to other tenants. Tenant
shall not use the Premises for any immoral or illegal purpose, or in a manner
which is objectionable to Landlord or in a manner which will interfere with the
rights of other tenants or injure, disturb, or annoy occupants of neighboring
property. Nor shall Tenant cause or permit any nuisance or waste in or about the
Premises. Tenant shall not use the Premises in a manner which violates any law,
ordinance, rule, regulation or requirement of public authorities. Tenant shall
at its expense promptly comply with all laws, statutes, ordinances and
governmental rules, regulations, or requirements with the requirements of any
board of fire underwriters or other similar body relating to or affecting the
condition, use or occupancy of the Premises. Tenant shall not do or permit to be
done anything in violation of the certificates of occupancy issued for the
Premises or the Project.
Tenant shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate or affect any fire or other insurance upon the Project or any of
its contents, or cause a cancellation of any insurance policy covering said
Project or any of its contents, nor shall Tenant sell or permit to be kept,
used, or sold in or about said Premises any articles which may be prohibited by
a standard form policy of casualty or liability insurance. Tenant shall promptly
upon demand reimburse Landlord for any additional premium charged under such
policy by reason of Tenant's failure to comply.
Tenant shall comply with all fire and security regulations that may be
issued from time to time by Landlord. Tenant shall not place any radio or
television antennae other than inside of the Premises. Tenant shall not operate
or permit any musical or sound producing instrument or device which may be heard
outside the Premises.
6. Compliance with Laws. Except as provided in the Lease,Tenant shall comply
with all laws, codes, and regulations, including without limitation, health and
safety requirements respecting the Premises, at its sole cost. Tenant will not
bring into the Premises any chemicals or other items that are included in any
list or definition of hazardous materials or waste published by any governing
body,or any such materials or waste which would trigger any employee
"right-to-know" provisions adopted by any such bodies. Tenant shall not allow to
be brought or kept upon the Premises any flammable or combustible matter or
anything that may be dangerous to persons or property (including but not limited
to flammable oils, fluids, paints, chemicals, noxious gas, firearms or any
explosive materials).
<PAGE>
7. Landlord's Rights. Landlord shall have the right to change the name or
address of the Premises or of all or any portion of the Project.
8. Waste/Closing. Tenant shall see that the doors of Tenant's Premises are
securely locked before leaving the Premises and Tenant shall observe strict care
and caution that water faucets, lights, gas, electric and appliances are shut
off before leaving the Premises so as to prevent waste or damage.
9. Publicity. Tenant shall not use the name of the Project for any purpose, or
use any picture or likeness of the Project. Landlord reserves the exclusive
right to negotiate and permit the use of the Project including the exterior of
the Premises in television, motion pictures, or other media.
10. Rules. Tenant shall remain open for business during such hours and days as
Landlord may reasonably require to promote continuity among the various
merchants in all or any part of the Project as designated by Landlord.
Adequately staff the Premises with sufficient employees to handle the
maximum business and carry sufficient stock of merchandise of such amount,
character and quality to accomplish this purpose; Keep the display windows and
signs, if any, well lighted during the hours of sundown lo I 1:00 p.m.;
Keep the Premises and exterior and interior portions of windows, doors,
and all other glass or plate glass fixtures in A neat, clean, sanitary and safe
condition;
Store all trash and garbage in neat and clean containers so as not to
be visible to members of the public shopping at the Site and cause such trash to
be removed on a regular basis;
Landlord may require that certain business hours for all or part of the
Project shall be observed by tenants, as designated by Landlord, in which case
Tenant shall remain open during all such hours.
The foregoing rules apply to Tenant, its employees, agents, visitors,
invitees, contractors. The cost of repairing any damage resulting from a
violation of these Rules shall be borne by the Tenant who, or whose employee,
agent, visitor, invitee, or contractor shall have caused such damage. Any
consent which Tenant is required lo obtain from Landlord shall not be effective
unless in writing. Tenant shall acquaint all persons whom Tenant employs with
these Rules.
================================================================================
<PAGE>
EXHIBIT "D"
LEASE CONFIRMATION
Dated: October 12, 1994 *TO BE UPDATED UPON OCCUPANCY*
TO: Planet Kids, Inc.
26-538H Moulton Parkway
Laguna Hills, California 92653
Lease dated: October 12, 1994
Please acknowledge that on *[to be determined), 19 the Landlord
delivered to you possession of the Premises; that the Commencement Date of the
Lease is *[to be determined], 19_, and the Expiration Date of the Lease is *[to
be determined), 19_; that the Area of the Premises is approximately 12,200
square feet; that your initial Base Rent is $11,590.00 per month and the first
Base Rent Adjustment Date shall be *the first day of the 61st month of the Lease
Term.
LANDLORD:
PSA PROPERTIES
BY WESTERN CAPITAL RESOURCES, A CALIFORNIA CORPORATION,
ITS DULY AUTHORIZED AGENT
By: Date:
--------------------------- --------------------
Randi S. Sellers
Director of Corporate Leasing
Tenant hereby confirms the information set forth above and further
acknowledges its acceptance of possession of the Premises, as of the date
indicated.
TENANT:
PLANET KIDS, INC.,
A CALIFORNIA CORPORATION
By /s/Harry Shuster Date:
---------------------------- ------------------------
Harry Shuster, President
(pki-ex.d)
<PAGE>
EXHIBIT "E" - GUARANTY
======================
THIS GUARANTY is made this 12th day of October, 1994 by Planet Kids
Learning Center, Inc., a Delaware corporation, and United Leisure Corporation, a
Delaware corporation (collectively, the "Parties") in favor of PSA Properties
("PSAII).
Concurrently herewith, PSA and Planet Kids, Inc., a California
corporation ("PKI") are entering into a lease for premises located at 26-538H
Moulton Parkway, Laguna Hills, California (the "Lease"). In lieu of requiring a
personal guaranty of the Lease, PSA, PKI and the Parties have agreed to the
following (which is contained in the Lease as of paragraph 47):
Lease Paragraph 47 - Minimum Net Worth.
---------------------------------------
In consideration of Landlord's waiver of a personal guaranty
of the Lease, Tenant agrees to maintain throughout the Term: (i) a minimum
stockholder's equity ("Net Worth") in Tenant of $750,000, and (ii) a liquidity
ratio ("Ratio") of at least 2-1/2 to 1 (current assets to current liabilities),
cash or good receivables, pursuant to generally accepted accounting principles,
consistently applied. Tenant shall provide to Landlord within fifteen (15) days
following the end of each fiscal quarter, a certification signed by Tenant and
Tenant's in-house accountant stating that the Net Worth is at least $750,000 and
that the Ratio is at least 2-1/2 to 1. Fur-Eher, Tenant shall provide to
Landlord within ninety (90) days following the end of each fiscal year of
Tenant, a financial statement for such fiscal year certified by an independent
certified public accounting prepared in accordance with generally accepted
accounting principles consistently applied. Tenant agrees that if at any time
the Net Worth falls below $750,000 or the Ratio is not at least 2-1/2 to 1,
Tenant shall cause Planet Kids Learning Center, Inc., a Delaware corporation
(IIPKLII) or United Leisure Corporation, a Delaware corporation ("ULCII)
(collectively "Contributing Parties") to, and Contributing Parties have by
separate guaranty agreement agreed to, within 10 days after determination by
Tenant or Landlord that Tenant failed to meet the Net Worth and/or Ratio
requirements, contribute enough monies to Tenant so that Tenant's Net Worth is
increased to at least $750,000 and Tenant's Ratio is at least 2-1/2 to 1. The
parties acknowledge and agree that Tenant shall first require PKL to contribute
any such required monies and that if Tenant is unable to cause PKL to contribute
any such required monies Tenant shall then cause ULC to contribute any such
required monies (this shall not extend the 10-day time period) . if PKL and/or
ULC do not contribute monies as and when required by this paragraph, Tenant
shall be in default of the Lease and, pursuant to the separate guaranty
agreement signed by PKL and ULC, PKL and ULC shall be in default of such
separate guaranty agreement.
PSA would not enter into the Lease without paragraph 47 (as set forth
above) or this Guaranty. The parties have reviewed and understand the provisions
of the Lease and, in particular, paragraph 47 and agree to comply with the
provisions of paragraph 47 of the Lease. As such, Parties agree that in the
event PKI's Net Worth (as defined in paragraph 47) is below $750,000 or PKI's
Ratio (as defined in paragraph 47) is not at least 2-1/2 to 1, PKI and/or ULC
shall contribute enough monies to PKI so that PKI's Net Worth is increased to at
least $750,000 and PKI's Ratio is at least 2-1/2 to 1.
The Parties acknowledge and agree that if they (or either of them) fail
to contribute sums required by paragraph 47 (as and when due), Parties shall be
in default of this Guaranty and PSA shall be entitled to seek all remedies
available at law and in equity, including, without limitation, specific
performance of this Guaranty
1
<PAGE>
Exhibit "E" Guaranty (continued)
This Guaranty shall be governed by the internal laws of the State of California
applicable to instruments, persons and transactions having legal contacts and
relationships solely within the State of California. It is agreed that the venue
for any action pertaining to this Guaranty shall be the California Superior
Court, for the County of Los Angeles.
PLANET KIDS LEARNING CENTER, INC.,
a Delaware corporation
By: /s/Harry Shuster Date:
------------------------------------ -----------------------
type name:
Its: President
----------------------------------
UNITED LEISURE CORPORATION,
a Delaware corporation
By: /s/Harry Shuster Date:
------------------------------------ -----------------------
Harry Shuster, Chairman of the Board
and Chief Executive Officer
PSA PROPERTIES
BY WESTERN CAPITAL RESOURCES, A CALIFORNIA CORPORATION,
ITS DULY AUTHORIZED AGENT
By: /s/Randi S. Sellers Date: 11/30/94
------------------------------------ -----------------------
Randi S. Sellers
Director of Corporate Leasing
(pki-ex.e)
2
<PAGE>
EXHIBIT "F" NON-DISTURBANCE AGREEMENT
RECORDING REQUESTED BY AND
WHEN RECORDED RETURN TO:
- - --------------------------------------------------------------------------------
SUBORDINATION, NON-DISTURBANCE ATRORNMENT AGREEMENT
---------------------------------------------------
NOTICE: THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT RESULTS IV
THE LEASEHOLD ESTATE IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY
THAN THE LIEN OF THE DEED OF TRUST TO _______________________________________.
This Agreement is made as of this ________________ day of
_____________, 19__, by and among _________________________________
("Lessee"),____________________________________,("Beneficiary"), and
________________________, ("Owner").
A. WHEREAS, Owner is the owner of the real property located in the
County of _______________, State of California, more particularly described on
Exhibit "Al, attached hereto and ,made a part hereof ("Property,,); and
B. WHEREAS, Owner has executed a Deed of Trust to Beneficiary, dated
___________________, ("Deed of Trust") recorded in the Official Records of the
County of ___________________, California ("Official Records") on
_____________________ as Instrument No. ____________________ encumbering the
Property as security for a loan (the "Loan") represented by a promissory note
("Note") of even date therewithto the order of Beneficiary in the original
principal amount of __________________________ DOLLARS _______________, payable
with interest thereon and an the terms and conditions contained therein; and
C. WHEREAS, Lessee and Owner have entered into a lease ("Lease"), dated
as of ___________________ , 19_, of certain premises ("Premisees"), located or
to be located at _____________, which Premises are part of the Property
encumbered by the Deed of Trust, and which Premises contain approximately
_____________ square feet of floor space, to have and to hold the Premises for
an
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<PAGE>
EXHIBIT "F" NON-DISTURBANCE AGREEMENT
initial term of ____________ (______) years with _______________ (______)
options to extend for terms of _______________ (______) years each, all as more
fully set forth in the Lease; and
D. WHEREAS, as a condition of the Loan, Beneficiary has required this
subordination of Lessee's leasehold interest under the Lease to the lien of its
Deed of Trust; and
E. WHEREAS, as a condition of the Lease, Lessee has required that
Beneficiary agree not to disturb Lessee for any reason other than a default by
Lessee under the Lease; and
F. WHEREAS, it is to the mutual benefit of the parties hereto that
Beneficiary, Lessee and Owner execute this Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do mutually covenant and agree to the
following:
1. Subordination. All of Lessee's right, title and interest in, Lo and
under the Lease and any renewal, modification, substitution, replacement or
extension thereof, shall be subject and subordinate to the lien and the terms
and conditions of the Deed of Trust and Note, and any renewal, extension,
modification, substitution or replacement thereof, subject to the terms and
provisions of the Agreement.
2. Right to Cure Owner's De Lessee shall furnish Beneficiary written
notice of any Owner's default under the Lease at the address specified in this
Agreement. If Owner fails to cure or commence curing and diligently prosecute to
completion any such Owner's default within thirty (30) days after Lessee
provides such notice of owner's default, then, provided Beneficiary gives Lessee
written, notice within ten (10) days after the expiration of the initial thirty
(30) day period that it shall cure such default, Beneficiary may undertake to
cure any such Owner's default within thirty (30) days after the expiration of
the' initial thirty (30) day period or if any such Owner's default cannot be
cured within such extended time period, then Beneficiary may commence the curing
of such default within such extended time period and such time period shall be
extended for so long thereafter as Beneficiary diligently prosecutes such cure
to completion.
3. Beneficiary's Demand for Rent. Upon the receipt by Lessee of written
notice and demand from Beneficiary of any default under any of the documents
evidencing or securing the Loan, Lessee shall pay to Beneficiary all rental and
other payments required to be made by Lessee to Owner pursuant to the
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<PAGE>
EXHIBIT "F" NON-DISTURBANCE AGREEMENT
terms of the Lease. Owner hereby irrevocably authorizes and notifies Lessee to
rely upon and comply with (and Lessee shall be fully protected by Owner in so
doing) any notice of demand by Beneficiary for payment to Beneficiary of the
rent and other payments required to be made by Lessee under the Lease.
4. Attornment. Lessee agrees to be bound to any 'Purchaser" (as defined
hereinbelow) in accordance with all of the terms of the Lease (including any
modifications thereof approved by Beneficiary) for the duration of the Lease
term, including any renewal periods exercised by it, provided Beneficiary
complies with the terms of this Agreement, and Beneficiary, and any other
Purchaser, agrees to assume and comply with all duties and obligations imposed
upon the lessor under said Lease, during the period it 'is the holder of such
lessor's interest. At the request of Lessee, any Purchaser other than
Beneficiary shall execute a written instrument, in a form reasonably
satisfactory to Lessee, setting forth the above agreements. Lessee further
agrees that Purchaser shall not be personally liable for any act or omission of
any lessor occurring prior to the time Purchaser succeeded to the interest of
lessor. Purchaser shall not be liable for any advance payment of rent in excess
of that required under the Lease, and all such rent shall remain clue and owing
notwithstanding any such advance payment nor shall Purchaser be liable for any
security deposit that Lessee paid to any prior lessor, unless such deposit is
turned over to Purchaser; provided, however, that the foregoing shall not be
deemed a waiver or release of any rights or claims against the prior or
subsequent lessor nor shall it impair, release or waive any of Lessee's rights
and privileges under said Lease, except with respect to such advance rent
payments and/or security deposit. The attornment and assumption provisions
hereof are effective and self-operative without the execution of any further
instrument, immediately upon Purchaser succeeding to the interest of the lessor
and giving written notice thereof to Lessee. However, if requested by Purchaser,
Lessee and Purchaser shall execute and deliver to each other a written
agreement, in a form reasonably satisfactory to Lessee and Purchaser, evidencing
Lessee's attornment and Purchaser's assumption, provided that the terms of such
written agreement conform to the terms of this Agreement.
As used herein the term "Purchaser" shall mean any person or entity who
acquires control over, title to or possession of owner's interest in the
Property, including Beneficiary, if such acquisition occurs by purchase at a
foreclosure sale of Owner's interest in the Property, by a deed in lieu of
foreclosure or by any other exercise of Beneficiary's rights under the documents
evidencing or securing the Loan or as a result of any other means.
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<PAGE>
EXHIBIT "F" NON-DISTURBANCE AGREEMENT
5. Non-disturbance So long as Lessee is not in default under the Lease
(beyond any period given Lessee in the Lease to cure such default) which default
would entitle Owner to terminate the Lease or would cause, without any further
action of Owner, the termination of the Lease, or would entitle Owner to
dispossess Lessee thereunder, then, in the event the interest of Owner under the
Lease or to the Property shall be acquired by a Purchaser, Lessee's possession
of the Premises and Lessee's rights and privileges under the Lease shall not be
disturbed, diminished or interfered with by the Purchaser during the term of the
Lease (or any extensions or renewals thereof which may be effected in accordance
with any option or other provision contained in the Lease), and tile Lease shall
continue in full force and effect and shall not be terminated except in
accordance with the terms of the Lease.
Beneficiary Shall not, in the exercise of any of the rights arising out
of the documents evidencing and securing the Loan or any obligations secured by
the Deed of Trust, or out of any instrument or document modifying or amending
the same or entered into in substitution or replacement thereof, disturb or
deprive Lessee in, or of, its right to possession of the Premises or of any
right or privilege granted to or inuring to the benefit of Lessee under the
Lease.
6. Beneficiarv, Consent. Owner shall not consent to or agree to: (a)
any material amendment, modification, or waiver of any provisions of the Lease;
(b) any release or discharge of Lessee or Lessee's obligations under the Lease,
or (c) any cancellation, termination, surrender, continuation or reinstatement
of the Lease without obtaining the prior written consent of Beneficiary unless
Owner is obligated to do so under the terms of the Lease as of the date hereof.
Beneficiary shall in writing either consent to or disapprove of any such request
by Owner within fifteen (15) days of receipt of the request.
7. Notices. So long as the Loan is outstanding, Beneficiary shall be
entitled to all written notices, demands or other writing required to be given
to Beneficiary under this Agreement or the Lease at tke time and in the manner
such notices are to be given under the Lease. All such notices shall be given to
Beneficiary at the following address:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
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<PAGE>
EXHIBIT "F" NON-DISTURBANCE AGREEMENT
The above address may be changed upon written notice to Lessee and owner as
provided in the Lease. Owner and Lessee shall'be entitled to receive notices
required under this Agreement as provided in the Lease.
B. Ratification . Owner and Lessee hereby represent and warrant, each
for itself, that the Lease is in full force and effect and that the Lease has
not been modified or amended.
9. Miscellaneous Provisions.
-------------------------
a. Time is of the essence of the performance of all conditions
hereof of which Lime is a factor. The masculine shall. include the feminine or
neuter and the singular shall include the plural whenever the context requires.
This Agreement shall be construed according to the laws of the State of
California, except to the extent preempted by Federal Law.
b. Any provision hereof determined to be invalid by a court of
competent jurisdiction shall in no way afEect any other provision hereof. In
such event, each and every such other provision shall remain in full force and
effect.
C. The captions used herein are for convenience only and shall not
be used in construction or interpretation of this Agreement.
d. All remedies of Beneficiary against owner provided herein are
cumulative and shall be in addition to any and all other rights and remedies
provided by law and by other agreements between Beneficiary and Owner or others.
e. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto, their respective personal representatives,
successors and assigns,
NOTICE: THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT CONTAINS A
PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON YOUR LEASE TO OBTAIN A LOAN A
PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE
LAND.
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<PAGE>
EXHIBIT "F" NON-DISTURBANCE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
properly executed by their duly authorized representatives as of the Cate first
above written.
"LESSEE" "BENEFICIARY"
_______________________________ _______________________________________
_______________________________ _______________________________________
_______________________________ _______________________________________
By:____________________________________
Its: ____________________________
By:____________________________________
Its:_____________________________
"OWNER"
_______________________________________
_______________________________________
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<PAGE>
Grubb & Ellis
Jeffrey B. Conover
Senior Retail Associate
August 9, 1995
Mr. Harry Shuster
PLANET KIDS, INC.
8800 Irvine Center Drive
Irvine, California 92718
Re: Commencement Date of Lease
1536 E. Katella Avenue
Orange, California
Dear Harry:
This letter shall act as a rider to your existing lease to reflect the exact
date of lease commencement by and between Eastrich Multiple Investor Fund, L.P.,
a Delaware limited partnership (Landlord) and Planet Kids, Inc., a California
corporation (Tenant).
The exact commencement date of the lease is August 9, 1995.
Pursuant to 4. 1 (a) of the existing lease document, it is mutually agreed to
that fixed minimum rent shall commence one hundred and twenty (120) days after
the commencement date of the lease.
Sincerely,
GRUBB & ELLIS COMPANY
COMMERCIAL REAL ESTATE SERVICES
Jeffrey Conover
Senior Retail Associate
JC/mrf
cc: George Koppe
Rhonda Price
Agreed to and Accepted:
PLANET KIDS, INC.
<PAGE>
- - ------------------------- --------------------------
Harry Shuster, President Date
Grubb & Ellis Company
4000 MacArthur Boulevard, Suite 1500, Newport Beach, CA 92660
(714) 833-2900 Ext. 252 Fax (714) 833-8037
<PAGE>
COMMERCIAL LEASE
Shopping Center Tenant
(Triple Net)
Landlord hereby leases to Tenant and Tenant hereby hires from Landlord the
Premises hereinafter described on the terms and conditions set forth in this
Lease Agreement, hereinafter called "this Lease."
Basic Lease Provisions
The words and figures set forth in Paragraph "A" to "Q" both inclusive, are part
of this Lease wherever reference is made thereto, unless they are expressly
modified elsewhere in this Lease.
A. Date of Execution: K. Percentage Rent Rate: None___________%
As of____________, 199_ Payable monthly.
B. Landlord: Eastrich Multiple L. Landlord's Address for Notices:
Investor Fund, L.P. a Delaware Midland Loan Services, L.P.
Limited Partnership, Midland Loan P.O. Box 419539
Services L.P., a Missouri Limited Kansas City, Missouri 64141-6539
Partnership, its attorney in fact, (816) 435-3635
by Jeff E. Johnson Portfolio
Director
C. Tenant: Planet Kids, Inc., a M. Tenant's Business Address and Phone
California Corporation Number for Notices:
_________________________________ 8800 Irvine Center Drive
Irvine, California 92718
D. Tenant's Trade Name: _____________________________________
Planet Kids______________________ _____________________________________
_____________________________________
E. Shopping Center: The property N. Tenant's Resident Address and Phone
particularly described and depicted Number:______________________________
on the Plot Plan marked Exhibit A, _____________________________________
located at: _____________________________________
1536 E. Katella _____________________________________
Orange, California 92667 _____________________________________
_____________________________________
Name of Shopping Center:
Tustin & Katella Plaza West 0. Tenant's Construction Requirements are
set forth on Exhibit C.
F. Premises: The area shown on
Exhibit A containing the following
approximate measurements: P. Brokers:
Frontage:_____________________feet 1) for Landlord:
Grubb & Ellis Company________________
Depth:________________________feet _____________________________________
Floor Area: 12,240_____square feet 2) for Tenant:
<PAGE>
Grubb & Ellis Company________________
_____________________________________
G. Purpose (Use): Planet Kids child-
ren's oriented, indoor, commercial
recreation facility, with support Q. Guarantors:
activities including food service United Leisure Corporation___________
and gift store. _____________________________________
_________________________________
EXHIBITS: (Check if attached "X")
X A - Site Plan
H. Term: Ten (10) years. B - Sign Criteria
C - Construction Obligations
I. Minimum Rent: $ 10,404.00 per month D - Remodeled Premises
X E - Addendum
J. Security Deposit: $ 10,404.00
Prepaid Rent: $ 10,404.00
LANDLORD TENANT
Eastrich Multiple Investor Fund, L.P. Planet Kids, Inc., a
a Delaware Limited Partnership, California Corporation
Midland Loan Services L.P., a Missouri
Limited Partnership, its attorney in
fact, by Jeff E. Johnson, Portfolio
Director
___________________________________ ________________________________________
Jeff E. Johnson Harry Shuster
<PAGE>
COMMERCIAL LEASE
Shopping Center Tenant
(Triple Net)
Paragraph Page
Number Title Number
30 ABANDONMENT................. 10
47 ADDITIONAL PROVISIONS....... 12
19 ASSIGNMENT AND SUBLETTING... 7
28 ATTORNEY'S FEES............. 10
26 BANKRUPTCY OR INSOLVENCY.... 10
(Face Page) BASIC LEASE PROVISIONS........................ Cover
2 BUSINESS RIGHTS AND RESTRICTIONS.......... 1
5 COMMON AREA............................... 3
36 CONSENT................................... 11
39 CONSTRUCTION FINANCING.................... 11
10 DAMAGE AND RESTORATION.................... 5
25 DEFAULT................................... 8
18 DELAYING CAUSES........................... 7
34 EFFECT OF CONVEYANCE...................... 11
12 EMINENT DOMAIN............................ 6
17 ENTRY BY LANDLORD......................... 7
11 FLOOR AREA DEFINED........................ 5
46 GENERAL PROVISIONS........................ 12
45 GUARANTEES................................ 12
13 INDEMNITY; WAIVER......................... 6
9 INSURANCE................................. 5
37 INTERPRETATION............................ 11
35 LANDLORD'S DEFAULT; NOTICE TO LENDER...... 11
11
<PAGE>
43 LATE CHARGES AND INTEREST.................. 11
16 LIENS...................................... 7
20 NOTICES.................................... 8
24 OFFSET STATEMENT........................... 8
14 OPERATION OF BUSINESS...................... 6
1 PREMISES................................... 1
41 PROHIBITION AGAINST RECORDING.............. 11
22 QUIET ENJOYMENT............................ 8
40 REAL ESTATE BROKERS; FINDERS............... 11
27 REMEDIES CUMULATIVE........................ 10
33 REMOVAL OF TENANT'S PROPERTY............... 10
4 RENT....................................... 2
8 REPAIRS, MAINTENANCE, ALTERATIONS.......... 4
38 REPRESENTATIONS............................ 11
44 SAFETY AND HEALTH.......................... 12
42 SEVERABILITY............................... 12
15 SIGNS AND ADVERTISING...................... 7
23 SUBORDINATION.............................. 8
31 SUBTENANCIES............................... 10
32 SUCCESSORS................................. 10
21 SURRENDER OF POSSESSION............ 8
6 TAXES............................. 1
4
3 TERM............................... 1
7 UTILITIES.......................... 4
29 WAIVER OF DEFAULT.................. 10
<PAGE>
LEASE AGREEMENT
1. PREMISES.
1.1 Construction: The Premises leased to Tenant are to be constructed
substantially in accordance with Exhibit C.
1.2 Location: Tenant's Premises shall be located as shown on Exhibit A. The
parties acknowledge that Exhibit A describes the perimeter of the
shopping center before the dedication or grant of easements for
highways, streets, and public ways. Exhibit A sets forth a proposed
general layout of the shopping center, and shall not be deemed a
representation by Landlord that the shopping center shall be
constructed as indicated thereon or that any tenants or occupants
designated by name or nature of business thereon shall conduct business
in the shopping center during the term of this lease; and Landlord may
in its sole discretion, increase, decrease, or change the number,
locations, and dimensions of the buildings, the premises therein,
driving lanes, driveways, walkways, parking spaces and other
improvements shown on Exhibit A, and Landlord reserves the right to
make additions and alterations to all buildings constructed in the
shopping center. Landlord's right in its sole discretion to change the
nature, size, configuration or other aspects of the common area, shall
include, without limitation the right to (i) underground or multideck
the parking areas, (ii) close off any portion of such common areas for
repairs or to such extent as may be legally sufficient in the opinion
of Landlord's counsel to prevent a dedication thereof or the accrual of
rights of the public or any person therein and/or designate certain
portions of the parking areas for the exclusive use of specified
tenants. The Landlord reserves the right to enter the space above drop
ceilings to install conduits, utilities and other items necessary to
the operation of the shopping center so long as there is not an
unreasonable interference with the business operations of Tenant. Such
reservation in no way affects maintenance obligations imposed herein.
Landlord's changes shall not adversely affect tenant's use, access, and
quiet enjoyment and parking access.
1.3 Lease: References to "this Lease" include all exhibits and matters
incorporated by reference as part of this Lease, and the Basic Lease
Provisions appearing on the Face Page.
2. BUSINESS RIGHTS AND RESTRICTIONS.
2.1 Purpose: The premises shall be used solely for the purpose set forth
in Paragraph G under the trade name set forth in Paragraph D and for no
other purpose whatsoever.
2.2 Restrictions: Tenant shall not, without Landlord's prior written
consent, (a) conduct any auction or bankruptcy sale, (b) conduct any
fire sale except as a result of a fire on the premises, (c) conduct any
close-out sale except at the expiration of the lease term, (d) sell any
so-called "surplus," "Army and Navy," or "secondhand" goods, as those
terms are generally used at this time and from time to time hereafter,
on or from the premises, or (e) violate any restrictive use covenants.
2.3 Covenants and Easements: Tenant's consent shall not be required for the
creation of any covenants, easements or rights of way which are created
by or reasonably required by the action of any governmental authority.
This Lease is subordinate and subject to any Reciprocal Easement
Agreement executed by Landlord with respect to the Shopping Center.
2.4 Limitations on Use: No activity, occurrence or use shall be conducted
or permitted on any part of the Premises which is obnoxious to, out of
harmony with, or objectionable to the development or operation of the
Premises and/or adjoining properties, including, without limitation,
the following prohibited activities, occurrences and uses: (i) no
merchandise shall be displayed or sold outside the enclosed building
areas on the Premises; nor shall any use other than parking and
landscaping, be made of any outside areas; (ii) no solicitation of any
kind, distribution or handbills or other materials, shall be permitted
outside the enclosed building areas on the Premises; (iii) no loud
speakers or other sound which may be heard or experienced outside the
enclosed building areas on the Premises and no nuisance, incineration,
fires on or adjacent to the Premises, explosion, obnoxious odor or
obnoxious noise shall be permitted; (iv) no auction, fire, bankruptcy,
going out of business or similar sale shall be conducted or advertised;
(v) nothing shall be done which shall be injurious to the Premises or
adjoining properties or unlawful or contrary to public policy or to a
law, ordinance, regulation or requirement of any public authority, or
would constitute an extrahazardous use, or would violate, suspend or
void any policy of insurance requlred to be carried on the Premises or
which would increase the rate of insurance thereon, and if the
insurance cost be increased by such an act, the increased cost of such
Insurance shall also be paid by Tenant; (vi) no use shall be made of
the sidewalk area on the Premises other than pedestrian movement; (vii)
there shall not be permitted the use by the public, as such, of the
Premises or any part thereof without restriction or in such manner as
might reasonably tend to 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 of
implied dedication of the Premises of any part thereof; (vill) no act
or omission of Tenant shall permit any lien or encumbrance of any kind
whatsoever to attach to the Premises; and (ix) no act or omission which
would constitute a breach, or event which with passage of time, notice
of either or them, would constitute a breach of any Reciprocal Easement
Agreement.
2.5 Compliance with Laws: Tenant shall throughout the lease term, at
Tenant's sole cost and expense, promptly comply with all laws and
ordinances and notices, orders, rules, regulations and requirements of
all federal, state and municipal governments and appropriate
departments, commissions, boards and officers thereof, and notices,
orders, rules and regulations of the National Board of Fire
Underwriters, or any other body now or hereafter constituted exercising
similar functions, relating to all or any part of the premises,
exterior as well as interior, foreseen or unforeseen, ordinary as well
as extraordinary, structural as well as non-structural, or to the use
or manner of use of the premises or to the sidewalks, curbs and access
ways adjoining the premises; if Tenant should at any time receive
notice of non-compliance with any of the foregoing it shall promptly
give a copy of the same to Landlord. Without limiting the generality of
the foregoing, Tenant shall keep in force at all times all licenses,
consents and permits necessary for the lawful use of the premises for
the purposes herein provided and Tenant shall pay all income taxes,
license fees, and other taxes which are or may be assessed, levied or
imposed upon Tenant in connection with Tenant's operation of its
business upon the premises. The Tenant shall likewise observe and
comply with the requirements of all policies of public liability, fire
and other policies or insurance at any time in force with respect to
the premises. Tenant will not be liable for structural alteration
unless necessitated by Tenant's use of the Premises.
2.6 Certificate of Occupancy: In no event shall Tenant open for business
unless and until Tenant shall have obtained a Certificate of Occupancy
from the appropriate governmental authorities. Tenant shall provide
Landlord with a copy of said Certificate of Occupancy within ten (10)
days of its receipt by Tenant. The parties acknowledge any operation
without a Certificate of Occupancy shall and is deemed to be a
substantial material breach. Such action shall cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Accordingly, in addition to all other
remedies, Landlord may charge Tenant twice the minimum rent for the
period Tenant is open for business without a Certificate of Occupancy,
which the parties agree is a fair and reasonable estimate of the damage
caused Landlord by such action. Acceptance of such rent shall not
constitute a waiver of Tenant's default.
3. TERM.
3.1 Duration: The term of the Lease shall be for a period of years set
forth in paragraph H commencing when Landlord tenders delivery of the
premises to Tenant (hereinafter called "Commencement Date").
1
<PAGE>
3.1a If Tenant is unable to obtain all the necessary governmental approvals and
authorizations (including, without limitation, any required zoning change or
variance and all necessary building permits) required for the construction of
Tenant's initial tenant improvements in the Premises and the operation of
Tenant's business therein (collectively, "Required Approvals") on or before that
day (the "Outside Date") which is ninety (90) days after the date of the
execution and delivery of this Lease by both parties, then the Lease shall,
except as expressly set forth below, automatically terminate as of the Outside
Date without any further action of either party and neither party shall have any
further liability to the other; provided, however, that Landlord shall return to
Tenant any prepaid rent and/or security deposit paid by Tenant. Notwithstanding
the foregoing, if by the Outside Date any Required Approvals have not yet been
granted but the applicable governmental entity has given reasonable assurances
that the remaining Required Approvals will be granted within the thirty (30) day
period following the Outside Date, then the Outside Date shall be extended for
an additional thirty (30) days. Furthermore, if the Lease is terminated pursuant
to this provision and Tenant thereafter obtains all of the Required Approvals
and desires to lease the Premises on the same terms and conditions set forth
herein, then Landlord shall be required to lease the Premises to Tenant pursuant
to the terms herein, so long as Landlord has not procured another tenant (or is
then in active negotiations with another tenant) for the Premises.
I (a)
<PAGE>
3.2 Cancellation: If for any reason whatsoever the term of this Lease has
not commenced within three (3) years after the date of execution of
this Lease, this Lease shall be automatically deemed cancelled and
shall have no further force or effect
3.3 Security Deposit: Upon signing of this Lease, Tenant shall deposit with
Landlord the sum set forth in Paragraph J as security for the faithful
performance of obligations of Tenant under this Lease. This security
deposit shall not constitute payment of the last month's rent
hereunder. If on the expiration of the term, or any extension thereof,
Tenant shall have fully performed all of Tenant's obligations hereunder
then the security deposit, without interest, shall be returned to
Tenant less the standard post move out cleaning charge of two hundred
fifty dollars ($250.00). Landlord shall have the right to but need not
apply the deposit to pay any default of Tenant hereunder, and if
Landlord does so apply the deposit Tenant shall, upon demand,
immediately deposit with Landlord an amount of cash equal to the amount
so applied so that Tenant shall at all times have on deposit with
Landlord the amount herein specified as security. At Landlord's
election, and upon thirty (30) days prior notice to Tenant, the
Security Deposit shall be increased in accordance with the formula for
adjustment of minimum monthly rent as described in Paragraph 4.1(b).
4. RENT.
4.1 Amount: Tenant shall pay Landlord without prior demand, deduction,
set-off, counterclaim or offset during the lease term the rent provided
in this paragraph 4.1: and all other additional sums as provided in
this Lease.
a. "Fixed Minimum Rent," "Minimum Rent" or "Monthly Minimum
Rent," as used herein, shall mean the monthly rate provided in
Paragragh I of the Basic Provisions, payable on the first day
of each month during the term. Fixed minimum rent shall
commence one hundred twenty (120) days after the Commencement
Date of the Lease. The first month's installment of Minimum
Rent shall be prepaid on the execution of this Lease. Fixed
minimum rent does not include any other payments due under
this Lease (i.e., common area charges, taxes, insurance, etc.
which are payable from the Commencement Date) other than the
amount stated in Paragraph I.
b. Fixed minimum monthly rent shall be adjusted as follows: SEE
ADDENDUM II.
4.2 First Partial Month: If fixed minimum rent shall commence on a day
other than the first day of a calendar month:
a. Fixed minimum rent for the first partial month shall be
prorated on the basis which the number of days of the term of
this Lease in such month bears to thirty (30), and as so
prorated shall be paid on the first day of the following
month.
b. Tenant's gross sales for the first partial month shall be
included as gross sales for the first lease year of this
Lease, and the daily minimum rent provided in Paragraph 4.2(a)
shall be deducted in computing the percentage rent payable for
that lease year.
4.3 Lease Year
a. "Lease year" shall mean that period of twelve (12) or less
consecutive months which ends on December 31st of each year
and which falls within the term of this Lease and the period
from the last December 31st during the term to and including
the last day of the term.
2
<PAGE>
4.9 Definition of Rent: The term "rent", whenever used in this
Lease, shall also mean all other charges payable by Tenant in
addition to Fixed Minimum Rent, including Tenant's share of
real estate taxes, insurance and common area charges whether
or not the same be designated as rent. Unless otherwise
provided in this Lease, all rent except Fixed Minimum Rent
shall commence upon the date of delivery of the Premises to
Tenant. The date Fixed Minimum Rent shall commence shall be
set forth in Section 4.1(a), above.
4.10 Accord and Satisfaction: No payment by Tenant or receipt by
Landlord of a lesser amount of monthly rent or any other sum
due hereunder, shall be deemed to be other than a payment of
the earliest due rent or payment, nor shall any endorsement or
statement on a check or any letter accompanying any such check
or payment be deemed an accord and satisfaction, and Landlord
may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or
payment or pursue any other remedy available in this lease, at
law or in equity. Landlord may accept any partial payment from
Tenant without invalidation of any contractual notice
required to be given herein (to the extent such contractual
notice is required) and without invalidation of any notice
given or required to be given pursuant to applicable law.
5. COMMON AREA.
5.1 Definition: The common area is that area within the shopping center
which is neither occupied by buildings (excluding roof overhangs and
canopies, columns supporting roof overhangs and canopies, and
subsurface foundations, enclosed hallways and restrooms not located
within the premises of a single tenant) nor devoted permanently to the
exclusive use of a particular tenant, except that areas containing
pylon signs and buildings or structures which are used with respect to
the operation of the common area shall be deemed to be part of the
common area. The common area includes any area designated as a building
area on Exhibit A until such time as it is improved with a building.
5.2 Initial Construction: The initial construction of common area
improvements shall be completed by Landlord and shall not be charged to
Tenant. Areas designated as building areas on Exhibit A need not be
improved but shall be kept in clean and level condition. Prior to the
Commencement Date Landlord shall complete sufficient portions of the
parking areas to meet governmental requirements for parking for
completed buildings.
5.3 Use: During the lease term Tenant, its subtenants, concessionaires,
licensees, invitees, customers, and employees shall have the
nonexclusive right to use the common area in common with Landlord,
other owners of portions of the shopping center, other tenants, and
their respective subtenants, concessionaires, licensees, invitees,
customers, and employees, subject to the provisions of this Lease.
5.4 Maintenance: Landlord shall pay and be responsible for maintaining all
improvements on the common area in good and sanitary order, condition,
and repair, including making replacements as Landlord deems necessary
or desirable, including without limitation, (1) managing, (2) cleaning
and removing rubbish and dirt, (3) labor, payroll taxes, materials, and
supplies, (4) all utility services utilized in connection therewith,
including sewer service fees, (5) maintaining, repairing, and replacing
paved and unpaved surfaces, curbs, directional and other signs,
landscaping, lighting facilities, drainage, and other similar items,
(6) all premiums on compensation, casualty, public liability, property
damage, and other insurance on the common area, (7) rental cost for or
straight-line depreciation on tools, machinery, and equipment used in
connection with the above, (8) all real property and personal property
taxes and assessments levied or assessed against the common area, and
(9) any regulatory fee or surcharge or similar imposition imposed by
governmental requirements based upon or measured by the number of
parking spaces or the areas devoted to parking in the common area, (10)
policing the parking areas (including costs of security guards, if
necessary), (11) replacements, alterations or additions made in
compliance with governmental requirements (the cost of such items to be
depreciated or amortized as part of common area costs instead of direct
costs if appropriate under generally accepted accounting principles),
(12) Christmas decorations, holiday decorations, promotional and
shopping center grand opening costs, removal of hazardous or toxic
materials. Notwithstanding any of the foregoing, if Tenant causes
additional costs by reason of its operation, such as insurance,
security or lighting for abnormal operating hours, Landlord may in its
discretion charge such costs directly to Tenant.
See Page 3(a)
5.5 Records: Landlord shall keep accurate records showing in detail all
expenses incurred for such maintenance. These records shall, upon
reasonable request, be made available during business hours at the
offices of Landlord for inspection by Tenant. INITIAL
5.6 Tenant's Contribution: The contribution for expenses by major Tenants,
if any, shall be deducted from the total expenses before other Tenants
pro rata shares are calculated and the square footage of such major
Tenants shall not be included in the total square footage of the
Shopping Center for calculating Tenant's pro rata share of common area
costs. The Tenant's
<PAGE>
pro rata share shall be calculated at Landlord's sole discretion as
either (i) the ratio which Tenant's floor area specified in Paragraph F
of the Basic Provisions, bears to the total floor area in the Shopping
Center described in Paragraph E (adjusted for major Tenants as set
forth above and exclusive of outside sales areas, basements and
mezzanines), or (ii) if the Premises are a part of a parcel, the ratio
which Tenant's square footage bears to the total square footage in the
Parcel (adjusted for major Tenants as set forth above, and exclusive of
outside sales areas, basements and mezzanines). Tenants shall pay to
Landlord within three (3) days after delivery of Landlord's statement,
but not more often than monthly. Tenant's pro rata share of the amount
of all expenses described in Paragraph 5.4 together with estimated
taxes per Section 6.2 and estimated insurance per Section 9.3 based
either on (a) the amount of such expenses actually incurred for the
billing period, or (b) equal periodic installments which have been
estimated in advance by Landlord for a particular calendar year, in
which event Landlord shall within ninety (90) days after the end of
such year, adjust the estimated expenses to reflect the actual expenses
incurred for such year. The definition of "major Tenant" for purposes
of this paragraph 5.6 is a Tenant that occupies 15,000 square feet or
more of floor area.
5.7 Operation and Control: Landlord shall have general possession and
control of the entire common area and may from time to time adopt rules
and regulations pertaining to the use thereof. Landlord shall, except
as otherwise provided herein, operate and maintain the common area
during the lease term. The manner in which the common area shall be
operated and maintained and the expenditures therefor shall be in the
Landlord's sole discretion. Landlord reserves the right to appoint a
substitute operator, including but not limited to, any tenant in the
shopping center, to carry out any or all of Landlord's rights and
duties with respect to the common area as provided in this Lease; and
Landlord may enter into a contract either by a separate document or in
a lease agreement with such operator on such terms and conditions and
for such period as Landlord shall deem proper: and if Landlord does so,
Landlord shall pay the charges therefore from the management fees
described in Paragraph 5.4.
3
<PAGE>
Continued Paragraph 5.4 - Exclusion of Capital Repair Items from CAMS:
Notwithstanding anything to the contrary set forth in the Lease, no costs for
items considered capital repairs, replacements, improvements or equipment under
generally accepted accounting principles consistently applied or otherwise shall
be included in the expenses described in this Paragraph 5.4 for purposes of
calculating Tenant's pro rata share thereof pursuant to Paragraph 5.6 of the
Lease.
3 (a)
<PAGE>
5.8 Employee Parking: Landlord may designate what part of the common area,
if any, shall be used for automobile parking by employees of owners and
employees of tenants, occupants, and licensees. No employee of any such
owner, tenant, occupant, or licensee shall use any part of the common
area for parking except such area or areas as may be so designated. As
part of the Rules and Regulations Landlord may require Tenants to
supply lists of license plate numbers of employees, the right to tow
employee automobiles illegally parked without liability and/or the
right to impose fines or charges on Tenant for illegally parked
employee automobiles.
5,9 Obstructions: No fence, wall, structure, division, rail or obstruction
shall be placed, kept, permitted or maintained upon the common area or
any part thereof by Tenant; nor shall the sale, display, advertising,
promotion, or storage of merchandise or any business activities of any
kind whatsoever be conducted therein without Landlord's prior written
consent; nor shall Tenant permit any person to use the common area for
solicitations, demonstrations, or any other activities that would
interfere with the conduct of business in the shopping center or which
might tend to create civil disorder or commotion.
6. TAXES.
6.1 Personal Property Taxes: Tenant shall pay before delinquency all
license fees, public charges, property taxes and assessments on the
furniture, fixtures, equipment and other property of or being used by
Tenant at any time situated on or installed in the premises.
6.2 Real Property Taxes:
a. Tenant shall pay as additional rent any and all real property
taxes and general or special assessments, and installments
thereof, (including any tax on rent whether or not substituted
in whole or in part for real property taxes or assessments and
any license fee imposed by a local governmental body on the
collection of rent, and excluding federal and state income
taxes), which shall during the lease term be levied or
assessed against all or any portion of the premises or imposed
on Landlord. Said real property taxes and assessments for the
first and last lease years hereunder shall, if necessary, be
prorated and apportioned between Landlord and Tenant to
coincide with the commencement and expiration of the lease
term. Tenant shall pay its estimated share of taxes, monthly,
as part of common area maintenance charges pursuant to Section
5.6.
b. Tenant shall be liable only for that portion of the taxes and
assessments attributable to the premises based upon individual
assessment valuations (proration) supplied by the County
Assessor. Said proration shall be conclusive upon both parties
unless the parties otherwise mutually agree in writing. In the
absence of a proration supplied by the County Assessor or a
written agreement by the parties, Tenant's share shall be
determined by multiplying the amount payable set forth in the
tax bill by a fraction in which the numerator is the floor
area of Tenant's premises, as specified in Paragraph F, and in
which the denominator is, at the Landlord's sole election, (i)
the occupied floor area of all premises included in the tax
bill, and (ii) the occupied floor area of all premises in the
Parcel.
C. If the premises are separately billed pursuant to a
segregation, Tenant shall pay as additional rent the amount of
such taxes and assessments directly to the tax collector. If
the premises are not separately assessed, Tenant shall pay
Tenant's share of such taxes and assessments to Landlord as
specified above. Each party shall furnish the other, upon
written request, evidence of payment of such taxes and
assessments.
d. Tenant acknowledges and understands that in the event Landlord
should at any time in the future sell the Premises, then
pursuant to California Constitution Article XIIIA (Proposition
13, Jarvis-Gann Initiative) there would probably be a
substantial increase in the real property taxes which will be
pro-rata borne by Tenant. Landlord expressly retains the right
to sell or otherwise transfer the Premises and/or the Shopping
Center, and neither Landlord nor its purchaser shall have any
liability to Tenant should Tenant's liability for real
property taxes be increased by reason of such sale or
transfer.
6.3 Business Taxes: Tenant shall pay all special taxes and assessments or
license fees levied, assessed or imposed by law or ordinance, by reason
of the use of the premises for the specific purposes set forth in this
Lease.
7. UTILITIES. Nothing contained in this Lease shall limit Landlord in any
way from granting or using easements on, across, over, and under the
shopping center for the purpose of providing utility services. If
Tenant operates any type of food service operation Tenant shall install
and maintain at Tenant's expense, a grease trap.
8. REPAIRS, MAINTENANCE, ALTERATIONS.
8.1 Landlord's Repairs: Landlord shall keep in good condition and repair
the foundation, roof and exterior and bearing walls of the premises,
and perform major parking lot repairs and replacement, and replacement
of air conditioning systems. Landlord will paint the exterior of the
premises. The cost of such repairs, painting and any necessary
replacements shall be
<PAGE>
a portion of the common area expense as specified in Paragraph 5 above.
Because of the substantial cost of any such repairs and the long time
between the necessity for such repairs, Tenant's non-refundable
contribution towards such repairs is hereby established at the rate of
ten percent (10%) of all other common area maintenance charges computed
per Section 5.4 above. Any portion of the Tenant's contribution not
expended in any year shall be reserved for future expenses so that
Tenant's contribution to the common area charge for repairs and
replacements made under this Paragraph 8 shall not exceed said amount
unless the cost of such replacements has exhausted the repair and
replacement reserve created by this charge. This contribution is in
addition to Tenant's contribution to common area expenses as set forth
in Paragraph 5. No portion of said contribution shall be returned to
Tenant upon termination of this Lease, whether or not fully expended at
that time. Landlord will employ a roof maintenance service company and
an air conditioning service company to provide repair and preventative
maintenance for roofs and air conditioning units. Costs of said
services shall be included in the common area charges and shall be
prorated pursuant to Paragraph 5.6. For purposes of this particular
proration, floor area of any buildings not included in said roof
maintenance service or air conditioning service shall be excluded from
denominator.
8.2 Tenant's Repairs: Except as expressly provided in Paragraph 8.1, and
subject to Landlord's prior written approval thereof, Tenant shall make
all required repairs, replacements or additions of any kind whatsoever
upon the exterior or interior of the Premises (including plate glass).
Any equipment, facilities or fixtures shall, at Tenant's sole expense,
be kept, repaired, maintained, and replaced, or added to, at all times
by Tenant to keep same in good order and in sanitary and safe condition
and repair and in accordance with all governmental requirements and
insurance requirements. Tenant shall be liable for any interior damages
caused by roof leaks.
8.3 Alterations: Tenant shall not make any major alterations, changes or
improvements (collectively called "Major improvements") in or to the
interior or exterior of the premises without the prior written consent
of Landlord. All improvements shall become part of realty upon
installation thereof. Any interior work which may affect the air
conditioning system or cause penetration through the roof of the
building must receive Landlord's prior written consent and shall be
accomplished at Tenant's sole risk. Tenant shall be liable for any
consequential damages as a result of these improvements. *
8.4 Notice: Before the commencement of any improvements, Tenant, at its
cost, shall furnish to Landlord a Performance and Completion Bond
issued by an insurance company qualified to do business in California,
in a sum equal to the cost of the improvements (as determined by the
construction contract between Tenant and its contractor) guaranteeing
the completion of the improvements free and clear of all liens and
other charges, and in accordance with the plans and specifications. The
improvements shall be performed in a manner that will not interfere
with the quiet enjoyment of the other tenants of the Shopping Center.
Tenant shall give Landlord not less than ten (10) days' notice in
writing prior to the commencement of the improvements and Landlord
shall have the right to post Notice of Non-Responsibility in or on the
Premises, as provided by law.
*"Major Alteration" shall mean any alteration that involves any
structural supports or structural columns, or any alteration or
addition that costs in excess of $30,000.00.
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8.5 Status of Alterations: Any improvements made, excluding trade fixtures
and all computers and other installations of a non permanent nature,
shall remain on and be surrendered with the Premises on the expiration
or termination of the term, except that Landlord can elect within
thirty (30) days before the expiration of the term, or within thirty
(30) days after termination of the term, to require Tenant to remove
any improvements that Tenant has to the Premises. If Landlord so
elects, Tenant, at its cost, shall restore the Premises to the
condition specified in Paragraph 21.
8.6 As Built Plans: On completion of any work of alteration, addition or
improvement by Tenant, or any subtenant, Tenant shall supply Landlord
with "as built" drawings accurately reflecting all such work.
9. INSURANCE.
9.1 Liability Insurance: a. Tenant shall during the lease term maintain in
full force a policy or policies of comprehensive liability insurance
issued by one or more insurance carriers, insuring against liability
for injury to or death of persons and loss of or damage to property
occurring in or on the premises and any portion of the common area
which is subject to Tenant's exclusive control. Said liability
insurance shall be in an amount of no less than one (1) Million Dollars
($1,000,000) combined single limit for bodily and personal injury and
property damage, which amount may be reasonably increased from time to
time by Landlord.
b. Landlord shall during the lease term, subject to reimbursement
from Tenants, maintain in full force a policy or policies of
comprehensive liability insurance issued by one or more
insurance-carriers, insuring against liability for injury to or
death of persons and loss of or damage to property occurring in or
on the common area, except any portion thereon subject to Tenant's
exclusive control. Said liability insurance shall be in an amount
of not less than One Million Dollars ($1,000,000.00) combined
single limit for bodily and personal injury and property damage.
The cost thereof shall be included within the common area expense
provisions of paragraph 5.6.
9.2 Worker's Compensation Insurance: Tenant shall at all times maintain
Worker's Compensation Insurance in compliance with California law with
limits of not less than One Hundred Thousand Dollars ($100,000).
9.3 Fire Insurance:
a. Landlord shall pay for and shall maintain in full force and effect
during the term of this Lease a standard form of extended coverage
endorsement and standard form of lender's loss payable endorsement
issued to the holder or holders of a mortgage or deed of trust
secured by the premises and on all or part of the shopping center
in an amount equal to the full replacement cost (without deduction
for depreciation) of the premises (including malicious mischief,
special extended coverage, earthquake, and sprinkler leakage
coverage, and rental insurance equal to fixed minimum rent plus
Tenant's share of insurance, taxes and other common area
maintenance expenses for up to one (1) year. Tenant shall
reimburse Landlord for premiums incurred by Landlord for such
insurance as part of common area expense provisions of Paragraph
5.6. If such insurance covers premises in addition to Tenant's
premises, Tenant's share of the premiums shall be based on the
premium allocation made by the insurance carrier or insurance
broker; and if the carrier or insurance broker does not make such
allocation, then at Landlord's election, on the basis which
Tenant's floor area, specified in paragraph F, bears to either (i)
the total occupied floor area covered by such insurance, or (ii)
the total occupied floor area in the Parcel.
b. Tenant shall pay for and shall maintain in full force and effect
during the term of this Lease a standard form policy or policies
of fire, extended coverage and vandalism, with standard form of
extended coverage endorsement covering all stock in trade, trade
fixtures, equipment, and other personal property located in the
premises and used by Tenant in connection with its business.
9.4 Waiver of Subrogation: Each party ("Insured") hereby waives its entire
right of recovery against the other party, the other party's officers,
directors, agents, representatives, employees, successors and assigns
with respect to any loss of damage, including consequential loss or
damage, to the insured's property caused or occasioned by any peril or
perils (including negligent acts) covered by any policy or policies
carried by the insured.
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9.5 General Requirements:
a. All policies of insurance to be carried hereunder by Tenant
shall be written by companies satisfactory to Landlord and
licensed to do business in California, and holding a Best's
Policy Holding Rating of "A" and a size category of "XI" or
better.
b. Each policy of public liability insurance required to be
carried under Paragraphs 9.la and b shall be primary and
noncontributing with the insurance carried by the other party,
except for automobile liability insurance carried by the other
party, and shall be excess over such automobile liability
insurance.
C. The policy required under Paragraph 9.1(a) shall expressly
include, severally and not collectively, as named or
additionally-named insured thereunder, Landlord and any person
or firm designated by the Landlord and having an insurable
interest thereunder, hereinafter called "additional insured,"
as their respective interests may appear.
d. Said insurance shall not be subject to cancellation or
reduction in coverage except upon at least thirty (30) days
prior written notice to each additional insured. The policies
of insurance or duly executed certificates evidencing them,
together with satisfactory evidence of the payment of premiums
thereon, shall be deposited with each additional insured at
the commencement of the term and not less than thirty (30)
days prior to the expiration of the term of such coverage. If
the primary insured falls to comply with this requirement, any
additional insured may obtain such insurance and keep it in
effect, and the primary insured shall pay to the additional
insured the premium cost thereof upon demand with interest
from date of payment by the additional insured to the date of
repayment by the primary insured.
e. If Tenant fails to provide an appropriate certificate of
insurance at least fifteen (15) days prior to the commencement
of the term and each renewal thereof Landlord may procure such
insurance and add the cost thereof to the next monthly rent
due from Tenant with interest.
9.6 Blanket Insurance: Each party shall be entitled to fulfill its
insurance obligations hereunder by maintaining a so-called "blanket"
policy or policies of insurance in such form as to provide by specific
endorsement coverage not less than that which is required hereunder for
the particular property or interest referred to herein.
10. DAMAGE AND RESTORATION.
10.1 Duly to Restore: If the improvements on the premises or the shopping
center are partially or totally damaged by fire or other casualty so as
to become partially or totally untenantable, which damage is insured
against under any policy of fire or extended coverage insurance then
covering the damaged improvements, this Lease shall not terminate and
said improvements shall be rebuilt by Landlord with due diligence at
Landlord's expense unless Landlord elects to terminate this Lease as
provided in Paragraph 10.2.
10.2 Election to Terminate: If the improvements on the premises or the
shopping center, whether or not the premises are a part thereof, are
damaged by an insured casualty to the extent of at least twenty-five
percent (25%) of their replacement cost (cost to repair or replace at
the time of loss without deduction for physical depreciation) during
the term of this Lease other than during the last three (3) lease years
of said term, or to the extent of at least ten percent (10%) thereof
during the last three (3) lease years of said term or to any extent by
an uninsured cause at any time during the lease term, or by an insured
or uninsured cause during any extension or renewal of the lease term,
Landlord shall, within not more than ninety (90) days after such
damage, notify Tenant of Landlord's election to terminate this Lease or
to restore the improvements on the premises and such portion of the
improvements in the balance of the shopping center as in Landlord's
sole discretion is necessary to create an economically feasible
commercial unit. If Landlord elects to repair or restore the damaged
improvements, then with respect to the premises, Landlord and Tenant
each shall restore them in the same manner and to the same extent as
work was done by each of them in the original construction and
fixturizing of the improvements. If Landlord elects not to restore as
aforesaid, this Lease shall terminate effective as of the date of such
damage upon the giving of notice of election by Landlord as aforesaid.
If Landlord elects to restore or fails to give notice of its election
as aforesaid, then this Lease shall remain In full force and effect.
Landlord cannot terminate Tenant, unless Landlord is not going to
rebuild, and cancels all other tenants.
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10.3 Rent After Damage: If this Lease is not terminated as provided in this
Paragraph 10, then during the period of repair and restoration the
fixed minimum rent and the common area expense reimbursement shall be
proportionately reduced or abated in the same proportion that Tenant is
unable to use the Premises.
11 FLOOR AREA DEFINED. "Floor area" means (a) as to each building or part
thereof within the shopping center, including Tenant's premises, the
actual number of square feet of ground floor space measured to the
exterior faces of exterior walls and to the center of party walls,
including columns, stairs, elevators and escalators, excluding exterior
ramps and loading docks, and (b) the actual number of square feet of
any area in the shopping center exclusively used by a particular
tenant, measured from the exterior faces of outside walls, fences, or
boundary markers. If there is more than one floor, the area of each
floor shall be included (excluding mezzanines).
12. EMINENT DOMAIN.
12.1 Definition: If there is any taking of or damage to all or any part of
the shopping center or any interest therein because of the exercise of
the power of eminent domain or inverse condemnation, whether by
condemnation proceedings or otherwise, or any transfer of any part
thereof or any interest therein made in avoidance thereof (all of the
foregoing being hereinafter referred to as "taking") before or during
the term hereof, the rights and obligations of the parties with respect
to such taking shall be as provided in this Paragraph 12.
12.2 Total Condemnatlon: If there is a taking of all of the premises, this
Lease shall terminate as of the date of such taking.
12.3 Partial Condemnation: If twenty-five percent (25%) or more of the floor
area of Tenant's premises shall be taken, either party shall be
entitled to terminate this Lease, or if twenty-five percent (25%) or
more of the floor area of all buildings in the shopping center shall be
taken whether Tenant's premises are taken or not, Landlord shall be
entitled to elect to terminate this Lease; and the terminating party
shall give the other party written notice of such election not later
than thirty (30) days after the date Landlord delivers notice to Tenant
that possession or title to the portion of the premises taken has
vested in the condemnor. If neither party gives such notice or less
that twenty-five percent (25%) of the floor area of either Tenant's
premises or buildings in the shopping center shall be taken, this Lease
shall remain in full force and effect and rent shall be adjusted as
provided in Paragraph 12.7.
12.4 Common Area: If twenty-five percent (25%) or more of the common area
within a radius of four hundred (400) feet from the main entrance to
the premises shall be taken, either party shall be entitled to elect to
cancel and terminate this Lease and shall give the other party written
notice of such election not later than thirty (30) days after the date
Landlord delivers notice to Tenant that possession or title to said
portion of the common area taken has vested in the condemnor. If
neither party gives such notice or more than seventy-five percent (75%)
of said portion of the common area will be available after such taking,
this Lease shall remain in full force and effect. In no event shall
Tenant have the right to terminate this Lease it Landlord provides
additional common area which, when combined with the remaining common
area provides a common area which is at least seventy-five percent
(75%) as large as said portion of the common area before the taking.
12.5 Termination Date: It this Lease is terminated in accordance with the
provisions of this Paragraph 12, such termination shall become
effective as of the date physical possession of the condemned portion
is taken.
12.6 Repair and Restoration: If this Lease is not terminated as provided in
this Paragraph 12, Landlord shall at its sole expense restore with due
diligence the remainder of the improvements occupied by Tenant so far
as practicable to a complete unit of like quality, character, and
condition as that which existed immediately prior to the taking,
provided that the scope of the work shall not exceed the scope of the
work to be done by Landlord originally in constructing the premises,
and further provided that Landlord shall not be obligated to expend an
amount greater than that which was awarded to Landlord for such taking.
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12.7 Rent Adjustment: If this Lease is not terminated as provided in this
Paragraph 12, the fixed minimum rent/and CAM charges shall be reduced
by that proportion which the floor area taken from the premises bears
to Tenant's total floor area immediately before the taking. There shall
be no other abatement.
12.8 Award: The entire award or compensation in such proceedings, whether
for a total or partial taking or for diminution in the value of the
leasehold or for the fee shall belong to and be the property of
Landlord; provided that Tenant shall be entitled to recover from the
condemnor such compensation as may be separately awarded by the
condemnor to Tenant or recoverable from the condemnor by Tenant in its
own right for the taking of trade fixtures and equipment owned by
Tenant (meaning personal property, whether or not attached to real
property, which may be removed without injury to the premises), for the
expense of removing and relocating same, for loss of goodwill to
Tenant's business, and for no other cause.
13. INDEMNITY: WAIVER.
13.1 Indemnity: Tenant shall indemnify and save Landlord harmless from and
against any and all liens, claims, demands, actions, causes of action,
obligations, penalties, charges, liability, damages, loss, cost or
expense, including reasonable attorney's fees for the defense thereof,
arising from or connected with the conduct or management of the
business conducted by Tenant on the premises or any portion of the
common area which is under the exclusive control of Tenant (the
premises and such portion of the common area which is under the
exclusive control of Tenant being referred to as "Tenant's premises" in
Paragraphs 13.1 and 13.2), or the use or occupancy of Tenant's
premises, or from any breach or default on the part of Tenant in the
performance of any covenant or agreement on the part of Tenant to be
performed pursuant to the terms of this Lease, or from violations of or
noncompliance with any governmental requirements or insurance
requirements, or from any acts or omissions of Tenant or any person
upon Tenant's promises by license or invitation of Tenant or occupying
Tenant's premises or any part thereof under Tenant.
13.2 Waiver: All property kept, stored or maintained on Tenant's premises
shall be so kept, stored or maintained at the sole risk of Tenant; and
except in the case of Landlord's willful misconduct, Landlord shall not
be liable, and Tenant waives all claims against Landlord, for damages
to persons or property sustained by Tenant or by any other person or
firm resulting from the building in which the premises are located or
any roof or by reason of the Tenant's premises or any equipment located
therein becoming out of repair, or through the acts or omissions of any
persons present in the shopping center or renting or occupying any part
of the shopping center, or for loss or damage resulting to Tenant or
its property from burst, stopped or leaking sewers, pipes, conduits, or
plumbing fixtures, or for interruption of any utility services, or from
any failure or defect in any electric line, circuit, or facility, or
any other type of improvement or service on or furnished to Tenant's
premises or resulting from any accident in, on, or about Tenant's
premises or the building in which the Tenant's premises are located.
Landlord shall have no liability for conduct of others upon the
premises or the shopping center.
14. OPERATION OF BUSINESS. Tenant shall continuously and uninterruptedly,
subject only to Paragraph 18, during the entire lease term; (a) remain
open for business at least six (6) days a week and at lease eight (8)
hours a day; (b) adequately staff its store with sufficient employees
to handle the maximum business and carry sufficient stock of
merchandise of such amount, character and quality to accomplish this
purpose; (c) keep the display windows and signs, if any, well lighted
during the hours from sundown to 12 midnight; (d) keep the premises and
exterior and interior portions of windows, doors and all other glass or
plate glass fixtures in a neat, clean, sanitary and safe condition; (e)
warehouse, store or stock only such merchandise as Tenant intends to
offer for sale at retail; (f) use for office or other non-selling
purposes only such space as is reasonably required for Tenant's
business in the Premises; (g) refrain from burning any papers or refuse
of any kind in the shopping center; (h) store in the area designated by
Landlord all trash and garbage in neat and clear containers so as not
to be visible to members of the public shopping in the shopping center
and arrange for the regular pickup ard cartage of such trash or garbage
at Tenant's expense or cooperate in the employment of a
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trash removal contractor designated by Landlord if Landlord deems it
desirable to have all waste materials removed by one contractor; (i)
observe and promptly comply with all governmental requirements and
insurance requirements affecting the premises or any part of the common
area which is under Tenant's exclusive control and promulgated during
the term of this Lease; (j) not use or suffer or permit to be used the
premises of any part thereof in any manner that will constitute a
nuisance or unreasonable annoyance to the public, to other occupants of
the shopping center or to Landlord, or that will injure the reputation
of the shopping center, or for any extra hazardous purpose, or in any
manner that will impair the structural strength of the building of
which the premises are a part; and (k) operate the type of business set
forth in paragraph G under the trade name set forth in paragraph D of
the Basic Provisions.
For purposes of computing percentage rent, the gross sales and business
transacted for any time when Tenant does not continuously and
uninterruptedly conduct its business as required by this subparagraph
shall be deemed to be the greater of the gross sales and business
transacted in the premises during such period or during the
corresponding period of the preceding lease year.
15. SIGNS AND ADVERTISING.
15.1
15.2 Interior: Tenant may at its own expense erect and maintain upon the
interior sales areas of the premises all signs and advertising matter
customary and appropriate in the conduct of Tenant's business which
comply with governmental requirements, subject to Landlord's right to
remove any signs or advertising matter which violate Paragraph 14(j),
15.3, or other provisions of this Lease.
15.3 Exterior: Tenant must, at its own expense, erect an exterior sign on
its sign band which conforms with the city of Orange and complies with
all government requirements. Tenant shall not erect, place, paint, and
maintain in or on the premises, any sign, exterior advertising medium,
or any other object of any kind whatsoever, including paper or
cardboard signs, temporary signs (exclusive of contractor signs),
stickers or decals whether an advertising device or not, visible or
audible outside of the premises. The foregoing shall permit the
placement at the entrance of each Tenants' space of a small sticker or
decal, indicating hours of business, emergency telephone numbers and
anything required by applicable regulatory agencies. Tenant shall not
change the color, size, location, composition, wording, or design of
any sign or advertisement on the premises that may have been
theretofore approved by the city of Orange and governmental authorities
without the prior written approval of said authorities. Tenant shall at
its own expense maintain and keep in good repair all installations,
signs, and advertising devices which it is permitted by Landlord to
maintain and shall pay all charges required to keep them in good
repair. Tenant must secure a sign contract within thirty (30) days of
execution of this Lease. Failure to do so is a breach of this Lease.
Tenants' sign must be installed and operating concurrent with its
opening for business. Tenants' sign shall be deemed part of the realty
once installed. Tenant's signs shall be duly inspected and approved by
the appropriate governmental department or authority. Tenant shall
provide Landlord with a copy of the signed inspection report evidencing
such approval within ten (10) days of its receipt by Tenant.
16. LIENS. Tenant shall keep the premises and the shopping center free of
any liens or claims of lien arising from any work performed, material
furnished, or obligations incurred by Tenant in connection with the
premises. If Tenant disputes the correctness or validity of any claim
of lien, Tenant shall within ten (10) days after written request by
Landlord record such bond as will release said property from the lien
claimed. If Tenant fails to obtain such bond within such ten (10) day
period, Landlord may procure same and the costs incurred by
<PAGE>
Landlord in procuring such bond shall be immediately payable by Tenant
to Landlord as additional rent.
17. ENTRY BY LANDLORD. Landlord reserves, and shall at any and all times
have, the right to enter the Premises during business hours to inspect
the same, to submit said Premises to prospective purchasers or tenants,
to post notices of non-responsibility, to repair the Premises and any
portion of the Building of which the Premises are a part that Landlord
may deem necessary or desirable, without abatement of rent, and may for
that purpose erect scaffolding and other necessary structures where
reasonably required by the character of the work to be performed,
always providing that the entrance to the Premises shall not be
unreasonably blocked thereby, and further providing that the business
of the Tenant shall not be interfered with unreasonably. Tenant hereby
waives any claim for damages or for any injury or inconvenience to or
interference with Tenant's business, any loss of occupancy or quiet
enjoyment of the Premises, and any other loss occasioned thereby.
Landlord shall have the right to use any and all means which Landlord
may deem proper in an emergency, to obtain entry to the Premises
without liability to Tenant except for any failure to exercise due care
for Tenant's property and any entry to the Premises obtained by
Landlord by any of said means, or otherwise, shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or an eviction of Tenant from the
premises or any portion thereof.
18. DELAYING CAUSES. If either party is delayed in the performance of any
covenant of this Lease because of any of the following causes (referred
to elsewhere in this Lease as a "delaying cause"): acts of the other
party, action of the elements, war, riot, labor disputes, inability to
procure or general shortage of labor or materials in the normal
channels of trade, delay in transportation, delay in inspections, or
any other cause beyond the reasonable control of the party so
obligated, whether similar or dissimilar to the foregoing, financial
inability excepted, then such performance shall be excused for the
period of the delay and the period for such performance shall be
extended for a period equivalent to the period of such delay, except
that the foregoing shall in no way affect Tenant's obligation to pay
rent and other charges for the length of the term of this Lease.
19. ASSIGNMENT AND SUBLETTING.
19.1 Consent Required: Notwithstanding anything to the contrary contained in
this Lease, Tenant shall not assign this Lease or any interest herein
or sublet, license, grant any concession, or otherwise give permission
to anyone other than Tenant to use or occupy all or any part of the
premises without the prior written consent of Landlord. Any request by
Tenant to Landlord for Landlord's consent to any assignment or sublease
shall be accompanied by the following:
a. Complete financial information with respect to the proposed
assignee or sublessee;
b Copies of all documents in connection with such sublease or
assignment including, where appropriate, copies of documents
with respect to a sale of Tenant's business;
c. A description of the business experience of the proposed
assignee or sublessee;
d. Proof that all payments due Landlord and all reports due have
been delivered to Landlord; and
e. A Seven Hundred Fifty Dollar ($750) payment, which amount can
be increased, yearly, in accordance with the cost of living
adjustment formula described in Paragraph 4.1(b) hereof, to
cover Landlord's handling charges for each such transaction it
is requested to approve. The sale, assignment, transfer, or
disposition, whether for value, by operation of law, gift,
will, or intestacy, of (a) twenty-five percent (25%) or more
of the outstanding stock of Tenant if Tenant is a corporation,
or lb) the interest of any general partner, joint venturer,
associate, or cotenant, if Tenant is a partnership, joint
venture, association, or cotenancy, shall be deemed an
assignment of this Lease under this Paragraph. whether such
transfer is legal, equitable, otherwise, or a combination
thereof.
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19.2 General Conditions: In the event of any assignment of this Lease,
Tenant shall remain primarily liable on its covenants hereunder unless
released in writing by Landlord. In the event of any assignment or
sublease the assignee or sublessee shall agree in writing to perform
and be bound by all of the covenants of this Lease required to be
performed by Tenant. After any one assignment or subletting by Tenant
of its interest in this Lease pursuant to Paragraph 19.1, no further
assignment or subletting shall be made without Landlord's prior written
consent.
19.3 Landlord's Rights with Respect to Tenant's Assignment or Subletting:
Any assignment or subletting without the prior written consent of
Landlord shall be voidable at the election of Landlord. In the event
that Tenant makes a request to Landlord seeking Landlord's consent to
an assignment or subletting, or in the event that Tenant makes or
suffers such assignment or subletting without Landlord's written
consent (including assignment or subletting by operation of law), then
such request for consent, or such act or sufferance or assignment or
subletting shall be deemed to grant an option to Landlord to terminate
this Lease, and the tenancy created hereby (including subtenancies).
Such option must be exercised by Landlord within two (2) months of the
date it receives the written notices described herein; upon the
exercise of said option by Landlord, Tenant shall have a reasonable
time, not exceeding the end of the succeeding calendar month within
which to vacate the entirety of the leased Premises, at which date the
tenancy created by this Lease shall be deemed to have terminated, and
any further occupancy by Tenant (and those holding under Tenant) shall
constitute an unlawful detention. Landlord's consent to any assignment
or subletting shall not relieve Tenant from each and all of Tenant's
obligations hereunder and Tenant shall continue to remain jointly and
severally liable hereunder with said assignee or subtenant. Landlord
may exercise the rights granted in this paragraph 19.3 at any time
prior to receiving written notice if Landlord has actual notice of such
assignment or subletting.
19.4 Excess Rent. See Page 8(a)
20. NOTICES. Whenever under this Lease provision is made for notice,
demand, or request for consent, it shall be in and signed by or on
behalf of the party giving the notice or making the demand and served
by registered or mail, or by telegraph, or facsimile transmission
(FAX). If served by registered or certified mail, it shall be deposited
in the United States mail postage prepaid, with return receipt
requested, addressed to the party to whom such notice or demand is to
be given at the address stated in Paragraphs L or M as the case may be,
and shall be conclusively deemed served on the date indicated on the
return receipt and if the receipt is not returned, then forty-eight
(48) hours after mailing. If served by telegraph or facsimile
transmission (FAX), service to the addressee shall be conclusively
deemed made as confirmed by the telegraphic agency making delivery. The
address of either party may be changed for the purpose of this
Paragraph by notice to the other party.
21. SURRENDER OF POSSESSION.
21.1 Surrender: At the expiration of the tenancy created hereunder, whether
by lapse of time or otherwise, Tenant shall remove all signs and
surrender the premises broom clean and in the same condition and repair
as at the commencement date of the Lease, ordinary wear and tear
excepted, subject to the provisions of Article 33.
<PAGE>
21.2 Holding Over:
a. If Tenant holds the premises after the expiration of the term
hereof, such holding over shall, in the absence of a written
agreement on the subject, be deemed to have created a tenancy
from month to month, terminable on thirty (30) days' written
notice by either party to the other, at a minimum monthly
rental equal to 1.5 times the average monthly rental
(including percentage rent) paid by Tenant to Landlord during
the immediately preceding year, and otherwise subject to all
terms of this Lease, including the payment of percentage
rental and all other charges payable by Tenant hereunder.
Neither acceptance of rent nor of anything contained in this
subparagraph shall be construed as an express or implied
consent to such holding over, nor affect Landlord's right to
recovery of possession as a consequence of holding over.
b. If Tenant fails to surrender the demised premises upon the
termination of this Lease, Tenant shall indemnify and hold
harmless Landlord from loss or liability resulting from such
failure, including, without limiting the generality of the
foregoing, any claims made by any succeeding tenant arising
out of such failure.
22. QUIET ENJOYMENT. Subject to the provisions of this Lease and
conditioned upon performance of all of the provisions to be performed
by Tenant hereunder, Landlord shall secure to Tenant during the lease
term the quiet and peaceful possession of the premises and all rights
and privileges appurtaining thereto.
23. SUBORDINATION. Tenant agrees that this Lease, at Landlord's option,
shall be subordinated to any mortgages, trust deeds or other real
property security interests that may hereafter be placed upon said
premises and to any advances to be made thereunder, any interest
thereon, and all renewals, replacements and extensions thereof,
provided that such mortgagees or beneficiaries first request such
subordination. Tenant shall execute and deliver, without cost to
Landlord, whatever instruments may be required to effect such
subordination. Tenant shall at any time, hereafter, on the request from
Landlord execute any instruments, leases or other documents that may be
required to render Tenant's interest hereunder prior to the lien of any
Mortgage or Dead of Trust and the failure of Tenant to execute any such
instrument, lease or other document shall constitute a default
hereunder. However, should the demised promises be purchased or
otherwise acquired by any person in connection with any sale or other
proceeding under the terms of any mortgage or trust deed, this Lease
shall, at the option of such person, continue in full force and effect,
and Tenant hereby attorns and agrees to attorn to such person. Any
breach of this Paragraph by Tenant shall be and is deemed to be a
substantial material breach.
24. OFFSET STATEMENT. Tenant shall, at any time and from time to time
within ten (10) days after written request therefor by Landlord,
deliver a certificate to Landlord or to any proposed mortgagee, trust
deed beneficiary, purchaser, or successor in interest, certifying the
commencement and expiration date of the lease term, the security
deposit held by Landlord, the date through which rental has been paid,
that this Lease is then in full force and effect and setting forth the
amount and nature of modifications, defenses, or offsets, if any,
claimed by Tenant. If Tenant falls to deliver such certificate within
said ten (10) day period, Tenant hereby appoints Landlord as Tenant's
attorney in fact for the purpose of completing, executing and
delivering the certificate to the person or firm requesting it. Any
breach of this Paragraph by Tenant shall be and is deemed to be a
substantial material breach. Tenant hereby acknowledges that the
failure to submit such certificate in a timely manner will cause
Landlord to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult to ascertain. Accordingly,
in addition to all other remedies, Landlord may impose a charge equal
to one month's minimum rent for failure of Tenant to timely submit such
certificate which the parties agree represents a fair and reasonable
estimate of the damage caused Landlord by such failure. Acceptance of
such charge shall not constitute a waiver of Tenant's default.
<PAGE>
25 DEFAULT.
25.1 Notice and Remedies: In the case of Tenant's failure to pay rent or to
perform any of Tenant's other obligations under this Lease, or any part
thereof, when due or called for hereunder (such failure in each
instance being deemed to be a material breach) Tenant shall have a
period of three (3) days after service of written notice by Landlord
specifying the nature of Tenant's default within which to cure such
defaults provided that if the nature of a non-monetary default is such
that it cannot be fully cured within said three (3) day period. Tenant
shall have such additional time as may be reasonably necessary (not
exceeding one hundred twenty (120) days) to cure such default so long
as Tenant begins promptly after service of Landlord's notice and
proceeds diligently at all times to complete said cure. If Tenant fails
to comply with the foregoing provisions, or if Tenant has breached its
obligations in a fashion which cannot be cured, such as the submission
of false financial statements of Tenant or a guarantor Tenant shall be
deemed to be in material breach of this Lease, and Landlord with or
without further notice or demand of any kind shall have the following
options:
a. Landlord shall have the right to terminate this Lease by
giving to Tenant written notice of such termination.
b If Landlord elects to terminate this Lease as provided in
subparagraph (a) hereof, Landlord may then or at any time
thereafter, re-enter the Premises, or any part thereof, and
expel or remove therefrom Tenant and any other persons
occupying the same, using such force as may be necessary so to
do, and again possess and enjoy the Premises, without
prejudice to any other remedies that Landlord may have by
reason of Tenant's default or of such termination.
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<PAGE>
C. If Landlord elects to terminate this Lease, as provided in
subparagraph (a) hereof, Landlord shall have all of the rights
and remedies of a Landlord provided by Section 1951.2 of the
California Civil Code. The amount of damages which Landlord
may recover In the event of such termination shall Include:
(i) the worth at the time of award (computed by allowing
Interest at the maximum rate permitted by law) of the unpaid
rent and charges equivalent to rent earned as of the date of
termination hereof; (ii) the worth at the time of the award
(computed by allowing interest at the maximum rate allowable
by law) of the amount by which the unpaid rent and charges
equivalent to rent which would have been earned after the date
of termination hereof until the time of award exceeds the
amount of such rental loss that Tenant proves could have been
reasonably avoided; (iii) the worth at the time of award
(computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of the
award plus one percent [1%]) of the amount by which the
unpaid rent and charges equivalent to rent for the balance of
the term hereof after the time of award exceeds the amount of
such rental loss that Tenant proves could be reasonably
avoided; (iv) any other amount necessary to compensate
Landlord for the detriment proximately caused by Tenant's
failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result
therefrom; and (v) any other amount which Landlord may by law
hereafter be permitted to recover from Tenant to compensate
Landlord for the detriment caused by Tenant's default.
d. After terminating this Lease pursuant to subparagraph (a)
hereof, Landlord may, without any further demand or notice,
remove any and all personal property located on the Premises
and place such property in a public or private warehouse or
elsewhere at the risk and sole cost and expense of Tenant. In
the event that Tenant shall not immediately pay the cost of
storage of such property after the same has been stored for a
period of thirty (30) days or more, Landlord may sell any or
all thereof at a public or private sale in such a manner and
at such times and places as Landlord in its sole discretion
may deem proper, without notice to or demand upon Tenant.
Tenant waives all claims for damages that may be caused by
Landlord's re-entering and taking possession of the Premises
or by removing or storing or selling the property as herein
provided, and Tenant shall indemnify and hold Landlord free
and harmless from and against any and all losses, costs and
damages, including without limitation all court costs and
attorney's fees of Landlord occasioned thereby.
e. Landlord shall have the right to cause a receiver to be
appointed in any action against Tenant to take possession of
the Premises and/or to collect the rents or profits derived
therefrom. Said recelver may, if it is necessary or con-
venient in order to collect such rents or profits, conduct the
business and may use the same in conducting such business on
the Premises without compensation to Tenant for such use.
Neither the application for the appointment of such receiver
nor the appointment of such receiver shall constitute an
election on the part of the Landlord to terminate this Lease
unless a written notice of such intention is given to Tenant.
f. Landlord may at Landlord's election re-enter the Premises,
and, without terminating this Lease, at any time and from time
to time relet the Premises and improvements or any part or
parts of them for the account and in the name of Tenant or
otherwise. Any retailing may be for the remainder of the Term
or for a longer or shorter period. Landlord may execute any
leases made under this provision either in Landlord's name or
in Tenant's name and shall be entitled to all rents from the
use, operation, or occupancy of the Premises or improvements
or both. Tenant shall nevertheless pay to Landlord on the due
dates specified in this Lease the equivalent of all sums
required of Tenant under this Lease, plus Landlord's expenses,
less the avails of any reletting or attachment. No act by or
on behalf of Landlord under this provision shall constitute a
termination of this Lease unless Landlord gives Tenant notice
of termination.
g. If Landlord elects to re-enter the Premises without
termination, as provided in subparagraph (f) hereof, Landlord
may at Landlord's election use Tenant's personal property and
trade fixtures or any of such property and fixtures without
compensation and without liability for use or damage, or store
them for the account and at the cost of Tenant. The election
of one remedy for any one item shall not foreclose an election
of any other remedy for another Item or for the same Item at a
later time.
h. Notwlthstandlng anything to the contrary set forth herein,
Landlord's re-entry to perform acts of maintenance of
preservation of or in connection with efforts to relet the
Premises or any portion thereof, or the appointment of a
receiver upon Landlord's initiative to protect Tenant's
interest under this Lease shall not terminate Tenant's right
to possession of the Premises or any portion thereof, and
until Landlord does elect to terminate this Lease by written
notice to Tenant, this Lease shall continue in full force and
effect and Landlord may enforce all of Landlord's rights and
remedies hereunder including, without limitation, the right to
recover from Tenant as it becomes due hereunder all rent,
additional rent and other charges required to be paid by
Tenant under the terms hereof. Any re-letting by Landlord of
the Premises and improvements, or any part or parts of them,
shall be for the account and in the name of Tenant or
otherwise. Any retailing may be for the remainder of the term
of this Lease or for a longer or shorter period. Landlord may
execute any leases made under this provision either In
Landlord's name or in Tenant's name and shall be entitled to
all rents from the use, operation, or occupancy of the
Premises or improvements or both.
i. Nothing in this Article 25 shall be deemed to affect
Landlord's right to defense and indemnification for liability
or liabilities arising prior to the termination of this Lease
for personal injuries or property damage under the
indemnification clause or clauses contained in this Lease.
j. In addition to the other remedies provided in this Lease,
Landlord shall be entitled to injunctive relief in case of the
violation, or attempted or threatened violation, of any
covenant, agreement, condition or provision of this Lease and
to a decree compelling performance of any covenant, agreement,
condition or provision of this Lease and to any other remedy
allowed to Landlord at law or in equity.
25.2 Notice of Termination: No reentry or reletting of the premises shall be
construed as an election by Landlord to terminate Tenant's right to
possession and this Lease unless a written notice of such intention is
given by Landlord to Tenant; and notwithstanding any such reletting
without such termination, Landlord may at any time thereafter elect to
terminate Tenant's right to possession and this Lease in the event that
at such time Tenant remains in default hereunder.
25.3 Waiver of Notice; Performance by Landlord: Notwithstanding any
provision of this Paragraph 25, (a) If Tenant is required to comply
with any governmental requirement, Tenant shall not be entitled to
notice of default from Landlord and right to cure beyond the period
within which such compliance may be required by such requirement; or
(b) If this Lease expressly provides that this Lease may be terminated
effective on service of notice, Tenant shall be entitled to cure its
default only if the right to cure is required by law; or (c) if in
Landlord's judgment the continuance of any default by Tenant for the
full period of notice provided for herein will jeopardize the premises
or the rights of Landlord, Landlord may, with or without notice, elect
to perform those acts in respect to which Tenant is in default for the
account and at the expense of Tenant. if by reason of such default by
Tenant, Landlord is compelled to pay or elects to pay any sum of money,
including, but without limitation, reasonable attorneys' fees, such sum
or sums so paid by Landlord, with interest thereon from the date of
such payment at the rate provided in this Lease, shall be due from
Tenant to Landlord on the first day of the month next following such
payment by Landlord.
25.4 Interest: Any sum accruing to Landlord under the terms and provisions
of this Lease which shall not be paid when due shall bear interest at
the lower of eighteen percent (18%) per annum or the highest rate
permitted under the then existing Usury Statutes for non-consumer
obligations, from the date the same becomes due and payable by the
terms and provisions of this Lease until paid, unless otherwise
specifically provided in this Lease.
25.5 Other Remedies: Nothing contained in this Lease shall limit Landlord to
the remedies set forth in this paragraph 25, and particularly those
which are set forth in Paragraph 25.1; and upon Tenant's default
Landlord shall be entitled to exercise any right or remedy then
provided by law, including, but without limitation, the right to obtain
injunctive relief and the right to recover all damages caused by
Tenant's default in the performance of any of its obligations under
this Lease.
9
<PAGE>
26. BANKRUPTCY OR INSOLVENCY.
26.1 In the event that Tenant shall become Debtor under Chapter 7 of the
Bankruptcy Code, and the Trustee or Tenant shall elect to assume this
Lease for the purpose of assigning the same or otherwise, such election
and assignment may only be made if all of the terms and conditions of
this Lease are satisfied. If such Trustee shall fall to elect or assume
this Lease within sixty (60) days after the filing of the Petition,
this Lease shall be deemed to have been rejected. Landlord shall be
thereupon immediately entitled to possession of the Premises without
further obligation to Tenant or Trustee, and this Lease shall be
cancelled, but Landlord's right to be compensated for damages in such
liquidation proceeding shall survive.
26.2 in the event that a Petition for reorganization or adjustment of debts
is filed concerning Tenant under Chapters 11 or 13 of the Bankruptcy
Code, or a proceeding is filed under Chapter 7 of the Bankruptcy Code
and is transferred to Chapters 11 or 13, the Trustee or Tenant, as
Debtor-In-Possession, must elect to assume this Lease within
seventy-five (75) days from the date of the filing of the Petition
under Chapters 11 or 13, or the Trustee or Debtor-In-Possession shall
be deemed to have rejected this Lease. No election by the Trustee or
Debtor-In-Possession to assume this lease, whether under Chapters 7, 11
or 13, shall be effective unless each of the following conditions,
which Landlord and Tenant acknowledge are commercially reasonable in
the context of a bankruptcy proceeding of Tenant, have been satisfied,
and Landlord has so acknowledged in writing:
a. The Trustee or the Debtor-In-Possession has cured, or has
provided Landlord adequate assurance that:
(1) Within ten (10) days from the date of such assumption
the Trustee will cure all monetary defaults under
this Lease; and
(2) Within thirty (30) days from the date of such
assumption the Trustee will cure all non-monetary
defaults under this Lease.
b. The Trustee or the Debtor-In-Possesslon has compensated, or
has provided to Landlord adequate assurance that within ten
(10) days from the date of assumption Landlord will be
compensated for any pecuniary loss incurred by Landlord
arising from the default of Tenant, the Trustee, or the
Debtor-In-Possession as recited in Landlord's written
statement of pecuniary loss sent to the Trustee or
Debtor-In-Possession.
C. The Trustee or the Debtor-In-Possession has provided Landlord
with adequate assurance of the future performance of each of
Tenant's, Trustee's or Debtor-In-Possession's obligations
under this Lease; provided, however, that:
(1) The Trustee or Debtor-In-Possession shall also
deposit with Landlord, as security for the timely
payment of rent, an amount equal to three (3) months'
rent and other monetary charges accruing under this
Lease; and
(2) If not otherwise required by the terms of this Lease,
the Trustee or Debtor-In-Possession shall also pay in
advance on the date minimum rent is payable
one-twelfth (1/12th) of Tenant's annual obligations
under this Lease for maintenance, common area
charges, real estate taxes, insurance and similar
charges;
(3) From and after the date of the assumption of this
Lease, the Trustee or Debtor-In-Possession shall pay
as minimum rent an amount equal to the sum of the
minimum rental otherwise payable hereunder, plus the
highest amount of the annual percentage rent paid by
Tenant to Landlord within the five (5) year period
prior to the date of Tenant's Petition under the
Bankruptcy Code, which amount shall be payable in
advance in equal monthly installments on the date
minimum rent is payable;
(4) The obligations imposed upon the Trustee or
Debtor-In-Possession shall continue with respect to
Tenant or any assignee of the Lease after the
completion of bankruptcy proceedings.
<PAGE>
26.3 In the event that this Lease is assumed by a Trustee appointed for
Tenant or by Tenant as Debtor-In-Possession under the provisions of
Section 26.2 hereof and thereafter Tenant is liquidated or files a
subsequent Petition for reorganization or adjustment of debts under
Chapters 11 or 13 of the Bankruptcy Code, then, and in either of such
events, Landlord may, at its option, terminate this Lease and all
rights of Tenant hereunder, by giving Tenant written notice of its
election to so terminate, by no later than thirty (30) days after the
occurrence of either of such events.
26.4 When, pursuant to the Bankruptcy Code, the Trustee or
Debtor-In-Possession shall be obligated to pay reasonable use and
occupancy charges for the use of the Premises or any portion thereof,
such charges shall not be less than the minimum annual rent as defined
in this Lease and other monetary obligations of Tenant for the payment
of maintenance, common area charges, real estate taxes, insurance and
other charges payable by Tenant hereunder.
26.5 Neither Tenant's interest in the Lease, nor any lesser interest of
Tenant herein, nor any estate of Tenant hereby created, shall pass to
any trustee, receiver, assignee for the benefit of creditors, or any
other person or entity, or otherwise by operation of law under the laws
of any state having jurisdiction of the person or property of Tenant
(hereinafter referred to as the "state low") unless Landlord shall
consent to such transfer in writing. No acceptance by Landlord of rent
or any other payments from any such trustee, receiver, assignee, person
or other entity shall be deemed to have waived, nor shall it waive
Landlord's right to terminate this Lease nor the need to obtain
Landlord's consent for any transfer of Tenant's interest under this
Lease without such consent.
27. REMEDIES CUMULATIVE. The various rights, elections, and remedies of
Landlord and Tenant contained in this Lease shall be cumulative, and no
one of them shall be construed as exclusive of any of the others, or of
any right, priority, or remedy allowed or provided for by law.
28. ATTORNEYS' FEES. If either party hereto shall file any action or bring
any proceeding against the other party arising out of this Lease or for
the declaration of any rights hereunder, the prevailing party therein
shall be entitled to recover from the other party, all costs and
expenses, including reasonable attorneys' fees, incurred by the
prevailing party as determined by the court. If either party
("secondary party") without its fault is made a party to litigation
instituted by or against the other party ("primary party"), the primary
party shall pay to the secondary party all costs and expenses,
including reasonable attorneys' fees, incurred by the secondary party
in connection therewith.
29. WAIVER OF DEFAULT. The waiver by either party of any default in the
performance by the other of any covenant contained herein shall not be
construed to be a waiver of any preceding or subsequent default of the
same or any other covenant contained herein. The subsequent acceptance
of rent or other sums hereunder by Landlord shall not be deemed a
waiver of any preceding default other than the failure of Tenant to pay
the particular radial or other sum or portion thereof so accepted,
regardless of Landlord's knowledge of such preceding default at the
time of acceptance of such rent or other sum.
30. ABANDONMENT. Lessee shall not vacate or abandon the premises at any
time during the term hereof; such act shall constitute a default. (The
cessation of business for a continuous period of fifteen (15) days or
more except by legal compulsion not created by the act, omission or
defalcation of Tenant shall conclusively be deemed an abandonment.) If
Tenant shall abandon, vacate or surrender said premises or be
dispossessed by process of law or otherwise, in addition to all other
remedies of Landlord, any improvements, fixtures or personal property
belonging to Tenant and left on the premises shall be deemed abandoned,
and at the option of Landlord shall become the property of Landlord.
31. SUBTENANCIES. The voluntary or other surrender of this Lease by Tenant
or a mutual cancellation of this Lease shall not effect a merger and
shall, at Landlord's option, terminate all existing subtenancies or
operate as an assignment to Landlord of any or all of such
subtenancies.
32. SUCCESSORS. Subject to the provisions of paragraph 19 this Lease shall
be binding upon and shall inure to the benefit of the parties hereto
and their successors. The term "successors" is used herein in its
broadest possible meaning and includes, but is not limited to, every
person succeeding to any interest in this Lease or the premises, of
Landlord or Tenant herein, whether such succession results from the act
or omission of such party. Every covenant and condition of this Lease
shall be binding upon all assignees, subtenants, licensees, and
concessionaires of Tenant.
10
<PAGE>
33. REMOVAL OF TENANT'S PROPERTY. Upon the expiration of the term of this
Lease or upon any earlier termination thereof, Tenant shall remove at
its own expense all trade fixtures, equipment, merchandise, and
personal property (collectively called "Tenant's property" in this
Lease) which were installed by Tenant or any subtenant, concessionaire
or licensee in or upon the premises; but if Tenant is in default,
Tenant shall not remove Tenant's property unless notified by Landlord
so to do. In case of any injury or damage to the building or any
portion of the premises resulting from the removal of Tenant's
properly, Tenant shall promptly pay to Landlord the cost of repairing
such injury or damage. Tenant shall complete such removal by the time
provided in the first sentence of this Paragraph 33 unless prevented
from so doing by a delaying cause, or Landlord may, at Landlord's
option, retain any or all of Tenant's property; and title thereto shall
thereupon vest in Landlord without the execution of documents of sale
or conveyance by Tenant, or Landlord may remove any or all Items of
Tenant's property from the premises and dispose of them in any manner
Landlord sees fit, and Tenant shall pay upon demand to Landlord the
actual expense of such removal and disposition together with interest
from the date of payment by Landlord until repayment by Tenant.
34. EFFECT OF CONVEYANCE. If during the term of this Lease, Landlord
conveys its interest in the premises, or this Lease, then from and
after the effective date of such conveyance, Landlord shall be released
and discharged from any and all further obligations and
responsibilities under this Lease except those already accrued of which
Landlord has notice at the time of conveyance.
35. LANDLORD'S DEFAULT; NOTICE TO LENDER.
35.1 Landlord's Default: In the case of a monetary default, Landlord shall
have a period of ten (10) days after notice thereof from Tenant to cure
such monetary default. In the case of a non-monetary default, Landlord
shall commence promptly to cure such default immediately after receipt
of written notice from Tenant specifying the nature of such default and
shall complete such cure within thirty (30) days thereafter, provided
that if the nature of the non-monetary default is such that it cannot
be cured within said thirty (30) day period, Landlord shall have such
additional time as may be reasonably necessary to complete its
performance so long as Landlord has proceeded with diligence after
receipt of Tenant's notice and is then proceeding with diligence to
cure such default. Tenant shall have no right to terminate this Lease
or to withhold or to deduct rent as a remedy for any Landlord default
hereunder; Tenants' only right shall be a claim for damages, and it is
expressly agreed that any judgment for damages obtained by Tenant shall
be satisfied only out of Landlord's net equity in the Shopping Center.
35.2 Notice to Lander: Whenever Tenant is required to serve notice on
Landlord of Landlord's default, written notice shall also be served at
the same time upon the mortgagee under any mortgage or beneficiary
under any deed of trust. Such mortgagee or beneficiary shall have the
periods of time within which to cure Landlord's defaults as are
provided in Paragraph 35.1, which periods shall commence to run ten
(10) days after the commencement of the periods within which Landlord
must cure its defaults under Paragraph 35.1. In this connection any
representative of the mortgagee or beneficiary shall have the right to
enter upon the premises for the purpose of curing the Landlord's
default. Such mortgagee or beneficiary shall notify Landlord and Tenant
in the manner provided by Paragraph 20 of the address of such mortgagee
or beneficiary to which such notice shall be sent, and the agreements
of Tenant hereunder are subject to prior receipt of such notice.
37. INTERPRETATION. The captions by which the paragraphs of this Lease are
identified are for convenience only and shall not affect the
interpretation of this Lease. Wherever the context so requires, the
singular number shall include the plural, the plural shall refer to the
singular, the neuter gender shall include the masculine and feminine
genders. If there is more than one signatory hereto as Tenant, the
liability of such signatories shall be joint and several. If any
provision of this Lease shall be held to be invalid by a court, the
remaining provisions shall remain in effect and shall in no way be
impaired thereby.
38. REPRESENTATIONS. Tenant warrants and represents that there have been no
representations or statements of fact with respect to the Premises, the
shopping center, the surrounding area or otherwise whether by Landlord,
its agents or representatives, any lease broker or any other person,
which representations or statements have in any way induced Tenant to
enter into this Lease or which have served as the basis in any way for
tenant's decision to execute this Lease, except as contained in this
<PAGE>
Lease. Tenant agrees and acknowledges that no lease broker, agent, or
other person has had or does have the authority to bind Landlord to any
statement, covenant, warranty or representation except as contained in
this Lease and that no person purporting to hold such authority shall
bind Landlord to any statement, covenant, warranty or representation
except as contained in this Lease and that it is not reasonable for
Tenant to have assumed that any person had or has such authority.
Further, neither Landlord's execution of this Lease nor any other of
its acts shall be construed in any way to indicate Landlord's
ratification, consent to or approval of any act, statement or
representation of any person except as specifically set forth in this
Lease.
40. REAL ESTATE BROKERS; FINDERS. Each party represents that it has not had
any dealings with any real estate broker, finder, or other person, with
respect to this Lease in any manner, except as set forth in Paragraph
P. Each party shall hold harmless the other party from all damages
resulting from any claims that may be asserted against the other party
by any broker, finder or other person with whom the other party has or
purportedly has dealt, except said brokers. Each party shall pay any
commissions or fees that are payable to the brokers listed under its
name in Paragraph P in accordance with the provisions of a separate
commission contract.
41. PROHIBITION AGAINST RECORDING LEASE. Neither this Lease nor any
memorandum thereof shall be recorded. The recordation hereof by or on
behalf of Tenant shall be deemed a material breach.
42. SEVERABILITY. The unenforceability, invalidity, or illegality of any
provision shall not render the other provisions unenforceable, illegal
or invalid.
43. LATE CHARGES AND INTEREST. Tenant hereby acknowledges that late payment
by Tenant to Landlord of rent and other sums due hereunder will cause
Landlord to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to processing and accounting charges, and
late charges which may be imposed on Landlord by the terms of any
mortgage or trust deed covering the premises. Accordingly, if any
installment of rent or any other sum due from rent shall not be
received by Landlord or Landlord's designee within five (5) days after
such amount shall be due and within 10 days after written notice Tenant
shall pay to Landlord a late charge equal to ten percent (10%) of such
overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payments by Tenant. Acceptance of such late
charge by Landlord shall in no event constitute a waiver of Tenants
default with respect to such overdue amount, nor prevent Landlord from
exercising any of the other rights and ramedies granted hereunder. In
addition, Tenant shall pay interest on all rentals and other charges
not paid on the date when due at an annual interest rate of eighteen
percent (18%) or the highest rate permitted by law, whichever is lower.
<PAGE>
44. SAFETY AND HEALTH. Tenant covenants at all times during the term of
this Lease to comply with the requirements of the occupational Safety
and Health Act of 1970, 29 U.S.C.ss.651 et seq. and any analogous
legislation in California (collectively the "Act"), to the extent that
the Act applies to the premises and any activities thereon. Without
limiting the generality of the foregoing, Tenant covenants to maintain
all working areas, all machinery, structures, electrical facilities and
the like upon the premises in a condition that fully complies with the
requirements of the Act, including such requirements as would be
applicable with respect to agents, employees or contractors of Landlord
who may from time to time be present upon the premises (except to the
extent that the particular activities of such agents, employees or
contractors of Landlord on the premises require safety precautions or
alterations of the conditions of the premises beyond the requirements
of such Act otherwise applicable to the premises, in which event Tenant
shall not be obligated to undertake or provide any such additional
safety precautions or alterations of conditions), and Tenant agrees to
indemnify and hold Landlord harmless from and against any liability,
claim or damages, arising as a result of a breach of the foregoing
covenant and from all costs, expenses and charges arising therefrom,
including without limitation, reasonable attorney's fees and court
costs incurred by Landlord in connection therewith, which indemnity
shall survive the expiration or termination of this Lease.
45. GUARANTEE(S). The obligations of Landlord under this Lease are subject
to the condition precedent that Tenant deliver to Landlord, (and
maintain in full force and effect) the executed guaranty(s) of the
parties designated in Paragraph Q. Such guaranty(s) shall be upon the
form furnished by Landlord.
46. GENERAL PROVISIONS.
46.1 No Partnership: Landlord shall not in any way or for any purpose be
deemed a partner, joint venturer, or member of any joint enterprise
with Tenant.
46.2 Covenants and Conditions: Each provision of this Lease performable by
Tenant shall be deemed both a covenant and a condition.
46.3 Choice of Law: This Lease shall be governed by the laws of the State of
California; any action brought to enforce or nullity this Lease or the
provisions hereof must be brought in Los Angeles County, State of
California and in no other lorum. Each party that executes this Lease
as a Tenant specifically agrees and consents that service of legal
process may be effected by personal delivery, or facsimile transmission
(FAX), or registered or certified mail, postage prepaid, with return
receipt requested, mailed to the Tenant at the address specified in
Paragraph M of the Basic Lease Provisions. Service shall be deemed to
be completed as provided in Paragraph 20 (Notices) of this Lease.
46.4 Net, Net, Net Lease: Landlord and Tenant understand and agree that this
Lease is what is commonly known in the business as a "net, net, net
Lease." Tenant recognizes and acknowledges without limiting the
generality of any other terms or provisions of this Lease, that it is
the intent of the parties hereto that any and all rentals in this Lease
provided to be paid by Tenant to Landlord, shall be not to Landlord,
and any and all expenses incurred in connection with the premises and
the Shopping Center, or in connection with the operations thereon,
including any and all taxes, assessments, general or special license
fees, insurance premiums, public utility bills and costs of repair,
maintenance and operation of the premises and the Shopping Center and
all buildings, structures, permanent fixtures and other improvements
comprised therein, together with the appurtenances thereto, shall be
paid by Tenant, in addition to the rentals herein provided for.
46.5 Finmncial Statements: If Landlord deslres to finance, refinance, sell,
transfer or otherwise convey the Premises, or any part thereof, then
Tenant agrees to deliver to Landlord within ten (10) days after
request, Tenant's financial statements for the immediately preceding
three fiscal years of Tenant.
<PAGE>
46.6 Time of Essence: Time is of the essence.
46.7 Incorporation of Prior Agreements: Amendments: This Lease contains all
agreements of the parties with respect to any matters mentioned herein.
No prior agreement or understanding pertainlng to any matter shall be
effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification.
46.8 Rules and Regulations: Tenant shall observe faithfully and comply
directly with the Rules and Regulations as Landlord may from time to
time reasonably adopt for the safety, care and cleanliness of the
Shopping Center or the preservation of good order therein. Landlord
shall not be liable to Tenant for violation of any such Rules and
Regulations, or for the breach of any covenant or condition in any
lease, by any other tenant in the Shopping Center.
46.9 Mutual Agency; Co-Tenant: Each and every party who now is or
hereinafter becomes a Tenant under this Lease hereby appoints each and
every other Tenant as his, her or its agent, representative, and
attorney in fact, to act for and on behalf of said Principal with
respect to all matters relating to, or arising from this Lease, the
tenancy created hereby, the obligations herein set forth, and the use
and occupancy of the subject promises, specifically including, but not
limited to the right to alter, amend, modify, extend, supplement and
terminate this Lease, and the tenancy created hereunder. This agency
shall continue and is irrevocable at all times during the period that
the demised premises are occupied by any Tenant.
46.10 Corporate Authority: If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and
warrants that he is duly authorized to execute and deliver this Lease
on behalf of said corporation with the duly adopted resolution of the
Board of Directors of said corporation or in accordance with the bylaws
of said corporation, and that this Lease is binding upon said
corporation in accordance with its terms. Further, Tenant shall, within
thirty (30) days after execution of this Lease, deliver to Landlord a
certified copy of a resolution of the Board of Directors of said
corporation authorizing or ratifying the execution of this Lease.
46.11 No Option: The submission of this Lease by Landlord, its agent or
representative for examination or execution by Tenant does not
constitute an option or offer to lease the Premises upon the terms and
conditions contained herein or a reservation of the Premises in favor
of Tenant, it being intended hereby that this Lease shall become
binding upon Landlord only upon Landlord's delivery to Tenant of a
fully executed counterpart hereof.
47. ADDITIONAL PROVISIONS.
47.1 Promises Taken "As Is": The demised Premises are leased to Tenant "as
is", without representation or warranty by the Landlord, and Tenant
accepts the Premises in the condition existing as of the date of
occupancy subject to all applicable zoning, municipal, county and state
laws, ordinances, rules, regulations, orders, restrictions of record,
and requirements in effect during the term or any period of the term
hereof, regulating the leased Premises. Tenant has conducted its own
inspections and has relied entirely thereupon and upon those of its
agents, representatives and consultants in evaluating the Premises.
12
<PAGE>
47.3 Hazardous Waste: Tenant shall not use, store or dispose of any
hazardous materials including, without limitation, asbestos,
formaldehyde, flammables, toxic or radioactive matter or explosives,
including, without limitation, those materials identified in Sections
66680 through 66685, inclusive, of Title 22 of the California
Administrative Code, Division 4, Chapter 30, as the same may be amended
from time to time, on or about the Premises without Landlord's prior
written approval. Tenant shall supply Landlord, by February 1, of each
year, a report of all hazardous materials used, stored or disposed of
on or about the Premises. Prior to the expiration of the tenancy
created hereunder Tenant shall remove and within ten (10) days
thereafter supply Landlord with a certificate executed by a licensed
inspector that all hazardous materials have been removed from the
Premises in accordance with all governmental laws, rules and
regulations.
Notwithstanding the provisions of Paragraph 13 of this Lease, Tenant
shall be solely responsible for and shall defend, indemnify and hold
Landlord and Landlord's employees and agents free and harmless from and
against all claims, costs and liabilities, including attorneys' fees
and costs, arising out of or connected with its storage, use or
disposal of Hazerdous Materials on the Premises.
Tenant's obligations hereunder shall survive the termination of the
Lease. Tenant shall notify Landlord, and provide to Landlord a copy or
copies of the following environmental entitlements or inquiries related
to the Premises: Notices of violation, notices to comply, citations,
inquiries, reports filed pursuant to self-reporting requirements and
reports filed pursuant to any governmental law or regulation relating
to underground tanks. In the event of a release of any Hazardous
Materials into the environment, Tenant shall furnish to Landlord a copy
of any and all reports relating to the release. Upon request of
Landlord, Tenant shall furnish to Landlord a copy or copies of any and
all other environmental entitlements or inquiries relating to the
Premises including, but not limited to, all permit applications,
permits and reports including, without limitation, those reports and
other matters which may be characterized as confidential.
Notwithstanding any other term or provision of the Lease, Tenant shall
permit Landlord or Landlord's agents or employees to enter the Premises
at any time, without prior notice, to inspect, monitor and/or take
emergency or longterm remedial action with respect to Hazardous
Materials on or affecting the Premises, or to discharge Tenant's
obligelions hereunder with respect to such Hazardous materials when
Tenant has failed to do so. All costs and expenses incurred by
Landlord in connection with performing Tenant's obligations hereunder
shall be reimbursed by Tenant to Landlord within ten (10) days of
Tenant's receipt of written request therefor.
Tenant acknowledges no representations or statements have been made by
Landlord, any agent of Landlord, or any real estate broker, except
those contained in this Lease.
LANDLORD TENANT
Eastrich Multiple Investor Fund, L.P., a Planet Kids, Inc.,
Delaware Limited Partnership, Midland Loan a California Corporation
Services, L.P., a Missouri Limited Partnership,
its attorney in fact, by Jeff E. Johnson, Port
By By /s/Harry Shuster, President
--------------------------- --------------------------------------
Jeff E. Johnson
Its: Harry Shuster, President
----------------------------------
By:__________________________ By:_____________________________________
Its:___________________________________
13
<PAGE>
ADDENDUM I
OPTIONS TO EXTEND
A. Option to Renew Lease. Provided Tenant (i) is not, either at the time
of exercise of its rights hereunder or at the commencement date of the
option term, then in default under the Lease with respect to any
material provision thereof beyond any applicable notice and cure period
and (ii) has not been, during the Term of the Lease, in default under
the Lease with respect to a material provision thereof beyond the
applicable notice and cure period more than six (6) times, then Tenant
shall have the right to renew the Term of the Lease for two (2)
consecutive terms of five (5) years each from the termination date of
the Lease.
B. Notice of Election to Renew. Tenant's Notice of Election to Renew shall
be made by serving upon Landlord a notice in writing to the effect that
Tenant elects to extend the term of the Lease for each extended term
provided herein which notice shall be directed to Landlord between one
hundred eighty (180) days and two hundred seventy (270) days prior to
the expiration date of the term of this Lease or the expiration date of
the then existing five (5) year option term, as the case may be. In the
event Tenant shall not have given Landlord written notice in the manner
prescribed herein this Lease shall terminate concurrently with the last
day of the Lease term or the last day of the then existing option term,
as the case may be.
C. Rent for Extended Terms. Rent for the first year of each extended term
of the Lease, shall be the amount agreed upon by the parties hereto,
and shall be based on the market rental rate prevailing for retail
stores of comparable size and similar trade areas at the time of the
commencement of each extended term of the lease. If the parties agree
on the rent, then such agreement shall be placed in writing and shall
be signed by the parties and shall become a part of this Lease. If the
parties are unable to agree upon the amount of rent for the first year
of each five (5) year extended term within ninety (90) days prior to
the commencement date of each period, then the disagreement shall be
promptly submitted to and decided by arbitration. Landlord shall be
entitled to select one arbitrator and Tenant shall be entitled to
select one arbitrator and the two arbitrators so selected shall select
a third arbitrator. Each of the parties shall pay its own arbitrator
and the cost of the third arbitrator shall be divided equally between
Landlord and Tenant. Each arbitrator shall be a licensed real estate
broker with a minimum of five (5) years experience in commercial
leasing and the arbitration shall take place in Los Angeles,
California. It either Landlord or Tenant shall fall or refuse to
appoint an arbitrator within ten (10) days after notice has been given
to it by the other party, the party giving such notice may and shall
name and appoint an arbitrator for and on behalf of the party in
default. The decision of a majority of the arbitrators as to rent shall
be binding upon Landlord and Tenant. The arbitrators shall determine
the rent no later than thirty (30) days prior to the expiratlon of the
term of this Lease. Notwithstanding anything to the contrary contained
herein, the rent determined by arbitratlon for each extended term shall
be an amount no less than the amount of the rent during the last year
of the prior term. Rent for the second (2nd) through fifth (5th) years
of each option term shall increase as provided in paragraph 4.1 (b)
above.
<PAGE>
19.4 Excess Rent
----------------
Whenever Landlord is entitled to share in any excess income resulting
from an assignment or sublease of the Premises, the following shall constitute
the definition of "Profits": the gross revenue received from the assignee or
sublessee during the sublease term or during the assignment, with respect to the
space covered by the sublease or the assignment ("Transferred Space") less: (i)
the gross revenue paid to Landlord by Tenant during the period of the sublease
term or during the assignment with respect to the Transferred Space; (ii) the
gross revenue as to the Transferred Space paid to Landlord by Tenant for all
days the Transferred Space was vacated from the date that Tenant first vacated
the Transferred Space until the date the assignee or sublessee was to pay Rent;
(iii) any improvement allowance (planning allowance, moving expenses, etc.), or
other economic concession paid by Tenant to sublessee or assignee; (iv) brokers'
commissions; (v) attorneys' fees; (vi) costs of advertising the space for
sublease or assignment; (vii) out-of-pocket costs of initial and subsequent
improvements to the Premises actually paid for by Tenant on an unamortized
basis; and (viii) any other costs actually paid in assigning or subletting the
Transferred Space; provided, however, under no circumstance shall Landlord be
paid by Profits until Tenant has recovered all the items set forth in subparts
(i) through (viii) for such Transferred Space, it being understood that if in
any year the gross revenues, less the deductions set forth in subparts (i)
through (viii) above (the "Net Revenues"), are less than any and all costs
actually paid in assigning or subletting the affected space (collectively
"Transaction Costs"), the amount of the excess Transaction Costs shall be
carried over to the next year and then deducted from Net Revenues with the
procedure repeated until a Profit is achieved.
8(a)
<PAGE>
ADDENDUM II
MINIMUM RENT:
Rent Period Rent per Sq. Ft, Monthly Rent
----------- ---------------- ------------
First four (4) months $0.00 $0.00
Next eight (8) months $0.85 $10,404.00
Years 2-5 $1.00 $12,240.00
Years 6-10 $1.15 $14,076.00
LANDLORD'S WORK:
Landlord shall deliver possession of the Premises in its existing "as
is" condition with all HVAC, electrical, and plumbing in proper working
order. Landlord warrants that Premises meets all current building codes
and ordinances.
TENANT'S WORK:
Tenant shall be responsible for the cost of all leasehold improvements.
<PAGE>
EXHIBIT A
MAP
<PAGE>
GUARANTY OF LEASE
THIS GUARANTY OF LEASE is executed as of ________, 1995 by United
Leisure Corporation (collectively, "Guarantors"), in favor of ("Landlord"), with
reference to the following facts:
A. Landlord, as landlord, and Planet Kids, Inc., a California
Corporation as tenant ("Tenant"), are about to execute that certain Shopping
Center Lease dated 1995 (the "Lease") covering certain premises (the "Premises")
described therein situated at California.
B. Landlord has required as a condition precedent to the execution of
the Lease that Guarantors execute and deliver to Landlord this Guaranty of
Lease.
NOW, THEREFORE, IN CONSIDERATION OF the execution of the Lease by
Landlord and as a material inducement to Landlord to execute the Lease,
Guarantors hereby agree as follows:
1. Guarantors hereby jointly and severally unconditionally guarantee to
Landlord and its successors and assigns, without deduction by reason of setoff,
defense or counterclaim, the timely payment of all amounts that Tenant may at
any time owe under the Lease, or any extensions, renewals or modifications of
the Lease, and further guarantee to Landlord the full, faithful and timely
performance by Tenant of all of the covenants, terms and conditions of the
Lease, or any extensions, renewals or modifications of the Lease (collectively,
"Tenant's Obligations"). If Tenant shall fail at any time to pay any rent or any
other sums, costs or charges whatsoever, or to perform any of the other
covenants and obligations of Tenant under the Lease, then Guarantors, at their
expense, shall on demand by Landlord fully and promptly pay all rent, sums,
costs and charges to be paid and perform all other covenants and obligations to
be performed by Tenant under or pursuant to the Lease, and in addition shall on
demand by Landlord pay to Landlord any and all sums due to Landlord, including,
without limitation, all interest on past due obligations of Tenant, costs
advanced by Landlord, damages and all expenses (including, without limitation,
court costs and reasonable attorneys' fees) incurred by Landlord that may arise
in consequence of Tenant's default under the Lease and in seeking to enforce
this Guaranty of Lease.
2. The obligations of Guarantors hereunder are independent of the
obligations of Tenant. A separate action or actions may, at Landlord's option,
be brought and prosecuted against Guarantors individually or jointly, whether or
not any action is first or subsequently brought against Tenant, or whether or
not Tenant is joined in any such action, and Guarantors may be joined in any
action or proceeding commenced by Landlord against Tenant arising out of, in
connection with or based upon the Lease. Guarantors hereby waive all right to
assert or plead at any time any statute of limitations as relating to the Lease,
the obligations of Guarantors hereunder and any and all surety or other defenses
in the nature thereof including, without limitation,
Page 1 of 3
<PAGE>
the provisions of California Civil Code Section 2845 or any similar, related or
successor provision of law. In addition, Guarantors hereby waive any rights to
(a) require Landlord to proceed against Tenant or any other person or entity or
pursue any other remedy in Landlord's power whatsoever; (b) complain of delay in
the enforcement of Landlord's rights under the Lease or under this Guaranty; and
(c) require Landlord to proceed against or exhaust any security held from Tenant
or Guarantors. Guarantors waive any defense arising by reason of any disability
or other defense of Tenant or by reason of the cessation from any cause
whatsoever of the liability of Tenant. Guarantors waive all demand upon and
notices to Tenant and to Guarantors, including, without limitation, demands for
payment or performance, and notices of nonperformance or nonpayment.
3. Any act of Landlord, or its successors or assigns, consisting of a
waiver of any of the terms or conditions of the Lease, or the giving of any
consent to any matter or thing relating to the Lease, or the granting of any
indulgences or extensions of time to Tenant, may be done without notice to
Guarantors and without releasing Guarantors from any of their obligations
hereunder.
4. Guarantors' liability hereunder shall in no way be affected by (a)
the release or discharge of Tenant in any creditors receivership, bankruptcy or
other proceeding; (b) the impairment, limitation or modification of the
liability of Tenant or the estate of Tenant in bankruptcy, or of any remedy for
the enforcement of Tenant's liability under the Lease resulting from the
operation of any present or future provision of the Bankruptcy Code or any
successor statute or any other statute or from the decision of any court; (c)
Landlord's receipt, application or release of any security given for Tenant's
performance and observance of Tenant's Obligations; (d) the rejection or
disaffirmance of the Lease in any such proceedings; (e) the assignment or
transfer of the Lease or subletting of the Premises by Tenant; (f)the assignment
or transfer of the Lease or this Guaranty of Lease by Landlord; (g) the exercise
by Landlord of any of its rights or remedies reserved under the Lease or by law;
or (h) any termination of the Lease.
5. Until all of Tenant's Obligations are fully performed and observed,
Guarantors (a) shall have no right of subrogation against Tenant by reason of
any payments or acts of performance by Guarantors hereunder, and (b) subordinate
any liability or indebtedness of Tenant now or hereafter held by Guarantors to
the obligations of Tenant to Landlord under the Lease.
6. This instrument constitutes the entire agreement between Landlord
and Guarantors with respect to the subject matter hereof.
7. This Guaranty shall be governed by and construed in accordance with
the laws of the State of California.
8. Should Landlord desire to give any notice to Guarantors, such notice
shall be in writing and may be given by personal service or by certified or
registered mail, postage prepaid, return receipt requested, to Guarantors at the
respective addresses indicated below. Guarantors may by written notice given in
the manner described in the preceding sentence designate a different address for
notice purposes. Any notice sent by mail shall be deemed delivered within
seventy-two (72) hours after mailing.
9. Any action to declare or enforce any rights or
Page 2 of 3
<PAGE>
obligations under this Guaranty may be commenced by Landlord in the Superior
Court of Los Angeles County. Guarantors hereby consent to the jurisdiction of
such Court for such purposes and agree that any notice, complaint or other
legal process therein may be delivered to Guarantors in accordance with the
above notice provisions and that any notice, complaint or other legal process so
delivered shall constitute adequate notice and service of process for all
purposes and shall subject Guarantors to the jurisdiction of such Court for
purposes of adjudicating any matter related to this Guaranty.*
IN WITNESS WHEREOF, Guarantors have executed this Guaranty of Lease as
of the date first written above.
Address: United Leisure Corporation
8800 Irvine Center Drive
- - -----------------------------------
/s/Harry Shuster
___________________________________ --------------------------------
Harry Shuster, President
Irvine, California
- - ------ --------------------------
Address:
__________________________________ _________________________________
_______, _________________________
* Notwithstanding anything to the contrary set forth in this Guaranty,
Guarantor does not waive any rights it may have to require Landlord to (i)
proceed against Tenant, (ii) proceed against or exhaust any security that
Landlord holds from Tenant or (iii) pursue any other remedy in Landlord's
power. Accordingly, Landlord must first exhaust all of its rights and
remedies against Tenant before it may proceed against Guarantor under this
Guaranty, so long as such efforts appear to have a reasonable chance of
success, as determined by Landlord in its sole discretion.
Page 3 of 3
<PAGE>
Grubb & Ellis company
Commercial Real Estate Services
State of California
SALE/LEASE AMERICANS WITH DISABILITIES ACT
AND HAZARDOUS MATERIALS DISCLOSURE
The United States Congress has enacted the Americans With Disabilities Act.
Among other things, this act is intended to make many business establishments
equally accessible to persons with a variety of disabilities; modifications to
real property may be required. State and local laws also may mandate changes.
The real estate brokers in this transaction are not qualified to advise you as
to what, if any, changes may be required now, or in the future. Owners and
tenants should consult the attorneys and qualified design professionals of their
choice for information regarding these matters. Real estate brokers cannot
determine which attorneys or design professionals have the appropriate expertise
in this area.
Various construction materials may contain Items that have bison or may be In
the future be determined to be hazardous (toxic) or undesirable and may need to
be specifically treated/handled or removed. For example, some transformers and
other electrical components contain PCB'S, and asbestos has been used in
components such as fire-proofing, heating and cooling systems, air duct
insulation, spray-on and the acoustical materials, linoleum, floor ties,
roofing, dry wall and plaster. Due to prior or current uses of the Property or
in the area, the Property may have hazardous or undesirable metals, minerals.
chemicals, hydrocarbons, or biological or radioactive items (including electric
and magnetic fields) in sols, water, building components, above or below ground
containers, or elsewhere in areas that may or may not be accessible or
noticeable. Such items may look or otherwise be released, Real estate agents
have no expertise in the detection or correction of hazardous or undesirable
items. Expert inspections are necessary. Current or future laws may require
clean up by past, present and/or future owners and/or operators. It is the
responsibility of the Seller/Lessor and Buyer/Tenant to retain qualified experts
to detect and correct such matters and to consult with legal counsel of their
choice to determine what provisions, if any, they may wish to include in
transaction documents regarding the Property.
To the best of Seller/Lessor's knowledge, Seller/Lessor has attached to this
Disclosure copies of all existing surveys and reports known to Seller/Lessor
regarding asbestos and other hazardous materials and undesirable substances
related to the Property. Sellers/Lessors are required under California Health
and Safety Code Section 25915 et seq. to disclose reports and surveys regarding
asbestos to certain persons, including their employees, contractors, co-owners,
purchasers and tenants. Buyers/Tenants have simiar disclosure obligations.
Sellers/Lessors and Buyers/Tenants have additional hazardous materials
disclosure responsibilities to each other under California Health and Safety
Code Section 25359.7 and other California laws. Consult your attorney regarding
this matter. Grubb & Ellis Company is not qualified to assist you in this matter
or provide you with other legal or tax advice.
SELLER/LESSOR BUYER/TENANT
By: ___________________________ By: ___________________________________
Title:_________________________ Title:_________________________________
Date:__________________________ Date:__________________________________
<PAGE>
obligations under this Guaranty may be commenced by Landlord in the Superior
Court of Los Angeles County. Guarantors hereby consent to the jurisdiction of
such Court for such purposes and agree that any notice, complaint or other legal
process therein may be delivered to Guarantors in accordance with the above
notice provisions and that any notice, complaint or other legal process so
delivered shall constitute adequate notice and service of process for all
purposes and shall subject Guarantors to the jurisdiction of such Court for
purposes of adjudicating any matter related, to this Guaranty. *
IN WITNESS WHEREOF, Guarantors have executed this Guaranty of Lease as
of the date first written above.
Address: United Leisure Corporation
8800 Irvine Center Drive
- - -------------------------------------
/s/Harry Shuster
- - ------------------------------------- -----------------------------------
Harry Shuster, President
Irvine, California
- - ------ ----------------------------
Address:
-----------------------------------
- - -------------------------------------
- - -----, -----------------------------
* Notwithstanding anything to the contrary set forth in this Guaranty,
Guarantor does not waive any rights it may have to require Landlord to (i)
proceed against Tenant, (ii) proceed against or exhaust any security that
Landlord holds from Tenant or (iii) pursue any other remedy in Landlord's
power. Accordingly, Landlord must first exhaust all of its rights and
remedies against Tenant before it may proceed against Guarantor under this
Guaranty, so long as such efforts appear to have a reasonable chance of
success, as determined by Landlord in its sole discretion.
Page 3 of 3
<PAGE>
Grubb & Ellis Company
Commercial Real Estate Services
State of California
SALE/LEASE AMERICANS WITH DISABILITIES ACT
AND HAZARDOUS MATERIALS DISCLOSURE
The United States Congress has enacted the Americans With Disabilities Act.
Among other things, this act is intended to make many business establishments
equally accessible to persons with a variety of dlsabilities modifications to
real property may be required. State and local laws also may mandate changes.
The real estate brokers in this transaction are not qualified to advise you as
to what, if any, changes may be required (low, or in the future. Owners and
tenants should consult the attorneys and qualified design professionals of their
choice for information regarding these matters. Real estate brokers cannot
determine which attorneys or design professionals have the appropriate expertise
in this area.
Various construction materials may contain items that have been at may be in the
future be determined to be hazardous (toxic) or undesirable and may need to be
specifically treated/handled at removed. For example, some transformers and
other electrical components contain PCB'S. and asbestos has been used in
components .such as fire-proofing, heating and cooling systems, air duct
insulation, spray-on and the acousitical materials, linoleum, floor ties,
roofing, dry wall and plaster. Due to prior or current uses of the Property or
in the area, the Property may have hazardous or undesirable metals, minerals,
chemicals, hydrocarbons, or biological or radioactive items (including electric
and magnetic fields) in sols, water, building component, above or below ground
containers, or elsewhere in areas that may or may not be accessible or
noticeable. Such items may leak or otherwise be released, Real Estate agents
have no expertise in the detection or correction of hazardous or undesirable
items. Expert inspections are necessary. Current or future laws may require
clean up by past, present and/or future owners and/or operators. It is the
responsibility of the Seller/Lessor and Buyer/Tenant to retain qualified experts
to detect and correct such matters and to consult with legal counsel of their
choice to determine what provisions, if any, they may wish to include in
transaction documents regarding the Property.
To the best of Seller/Lessor's knowledge, Seller/Lessor has attached to this
Disclosure copies of all existing surveys and reports known to Seller/Lessor
regarding asbestos and other hazardous materials and undesirable substances
related to the Property. Sellers/Lessors are required under Californias Health
and Safety Code Section 25915 et seq. to disclose reports and surveys regarding
asbestos to certain persons, including their employees, contractors, co-owners,
purchasers and tenants. Buyer/Tenants have similar disclosure obligations.
Sellers/Lessors and Buyers/Tenants have additional hazardous materials
disclosure responsiblities to each other under California Health and Safety Code
Section 25359.7 and other California laws. Consult your attorney regarding this
matter. Grubb & Ellis Company is not qualified to assist you in this matter or
provide you with other legal or tax advice.
SELLER/LESSOR BUYER/TENANT
By: ____________________________ By:________________________________
Title:__________________________ Title:_____________________________
Date:___________________________ Data:______________________________
<PAGE>
LEASE ADDENDUM
This LEASE ADDENDUM ("Addendum") is made to the Commercial Lease and
Exhibits dated as of June 29, 1995 (collectively, the "Lease"), by and between
MAGNOLIA SQUARE, a partnership ("Landlord"), and PLANET KIDS, INC., a
corporation ("Tenant").
Tenant and Landlord hereby agree that notwithstanding anything
contained in the Lease to the contrary, the provisions set forth below will be
deemed to be a part of the Lease and shall supersede, to the extent appropriate,
any contrary provision in the Lease. All references in the Lease and in this
Addendum shall be construed to mean the Lease and Exhibits, as amended and
supplemented by this Addendum. All defined terms used in this Addendum, unless
specifically defined in this Addendum, shall have the same meaning as such terms
have in the Lease.
1. Consent/Duty to Act Reasonably. Regardless of my reference to the
words "sole" or "absolute" (but except for matters (a) which involve security
for the Shopping center, (b) which will have an adverse effect on the (i)
structural integrity of the Building or (ii) the Building's plumbing, heating,
life safety, ventilating, air-conditioning, mechanical or electrical systems
("Building Systems"), or (c) which could affect the exterior appearance of the
Building, whereupon in each such case Landlord's duty is to act in good faith
and in compliance with the Lease), any time the consent of Landlord or delayed.
Whenever the Lease grants Landlord or Tenant the right to take action, exercise
discretion, establish rules and regulations or make allocations or other
determinations, Landlord and Tenant shall act reasonably and in good faith and
take no action which must result in the frustration of the reasonable
expectations of a sophisticated tenant or landlord concerning the benefits to be
enjoyed under the Lease.
2. Quality of Construction - Standard for Maintenance, Repairs and
Operation. Tenant accepts the building and premises in an "as is" condition.
Landlord warrants and represents that the existing tenant will vacate the leased
Premises and will remove only such fixtures and fittings that are not affixed to
the premises, in particular the existing tenant will not remove any bathroom,
kitchen, or other similar type fixtures, fittings and appliances, air
conditioning and heating, unit ducts, plumbing, electrical writing and fixed
appliances.
3. Non-Disturbance Agreement
(a) Landlord agrees that concurrently with the execution and
delivery of the Lease, it will provide Tenant with commercially reasonable
non-disturbance agreements in favor of Tenant from any ground lessors, mortgage
holders or lien holders (each, a "Superior Mortgagee") then in existence,
substantially in the form of Exhibit "A" attached to the Lease. Said
non-disturbance agreements shall be in recordable form and
<PAGE>
may be recorded at Tenant's election and expense. In the event Landlord fails to
provide such commercially reasonable non-disturbance agreements, Tenant shall
have the right, exercisable at any time thereafter, to give ten (10) business
days' written notice to Landlord terminating the Lease. In the event Landlord
does not provide Tenant with the applicable non-disturbance agreements within
such ten (10) day period, the Lease shall terminate and Landlord shall reimburse
Tenant all of Tenant's out-of-pocket costs incurred in connection with the
design and construction of the Tenant Improvements and Tenant's legal fees
incurred in connection with the review and negotiation of the Lease.
(b) Landlord agrees to provide Tenant with commercially
reasonable non-disturbance agreement(s) in favor of Tenant from any Superior
Mortgagee(s) of Landlord who later come(s) into existence at any time prior to
the expiration of the Term of the Lease, as it may be extended, in consideration
of, and as a condition precedent to. Tenant's agreement to be bound by Lease
Article 28 (Subordination). Said non-disturbance agreements shall be in
recordable form and may be recorded at Tenant's election and expense.
(c) All non-disturbance Agreements shall acknowledge that, to
the extent Landlord has failed to fulfill its obligations with respect to the
payment of any (i) remaining credit of Base Rent or additional rent, or (ii)
unrefunded Security Deposit, Tenant may deduct the amount of the obligation
which Landlord has not paid, together with interest thereon at the Interest
Rate, from the rent next coming due and payable under the Lease.
4. Rules and Regulations and Use. Landlord agrees that the Rules and
Regulations of the Shopping Center shall not be changed, revised or enforced in
any unreasonable way by Landlord, nor enforced or changed by Landlord in such a
way as to interfere unreasonably with the purposes permitted under the Lease. In
the event any other tenant or occupant of the Shopping Center fails to comply
with the Rules and Regulations, and such noncompliance unreasonably interferes
with Tenant's use of the Premises. Landlord shall use reasonable efforts to make
such other tenants and/or occupants comply with the Rules and Regulations.
5. Abatement of Rent When Tenant Is Prevented Form Using
Premises
In the event that Tenant is prevented from using, and does not use, the
Premises or any portion thereof, for three (3) consecutive business days or ten
(10) days in any twelve (12) month period (the "Eligibility Period") as a result
of (a) any damage or destruction to the premises, (b) any repair, maintenance or
alternation performed by Landlord after the Commencement Date and required by
the Lease, which substantially interferes with Tenant's use of the Premises, (d)
because of an eminent domain proceeding, or (c) because of the presence of
hazardous substances in, on or around the Premises, the Building or Site which
could, in Tenant's business judgment and taking into account the standards,
guidances and recommendations included in applicable laws with respect to
hazardous substances, pose a health risk to occupants of the Premises, then
Tenant's Rent shall be
<PAGE>
abated or reduced, as the case may be, after expiration of the Eligibility
Period for such time that Tenant continues to be so prevented from using, and
does not use, the Premises or a portion thereof, in the proportion that the
rentable area of the portio of the Premises that Tenant is prevented from using,
and does not use, bears to the total rentable area of the Premises. However, in
the event that Tenant is prevented from conducing, and does not conduct, its
business in any portion of the Premises for a period of time in excess of the
Eligibility Period, and the remaining portion of the Premises is not sufficient
to allow Tenant to effectively conduct it business therein, and if Tenant does
not conduct its business from such remaining portion, then for such time after
expiration of the Eligibility Period during which Tenant is so prevented from
effectively conducting its business therein, the Rent for the entire Premises
shall be abated, provided, however if Tenant reoccupies and conducts its
business from any portion of the Premises during such period, the Rent allocable
to such reoccupied portion, based on the proportion that the rentable area of
such reoccupied portion of the Premises bears to the total rentable area of the
Premises, shall be payable by Tenant from the date such business operations
commence. If Tenant's right to abatement occurs during a free rent period which
arises after the Commencement Date, Tenant's free rent period shall be extended
for the number of days that the abatement period overlapped the free rent period
("Overlap Period"). Landlord shall have the right to extend the Expiration Date
of the Lease for a period of time equal to the Overlap Period if Landlord sends
a notice to Tenant of such election within ten (10) days following the end of
the extended free rent period. If Tenant's right to abatement occurs because of
an eminent domain taking and/or because of damage or destruction to the Premises
or Tenant's property, tenant's abatement period shall continue until Tenant of
the Premises it is required to rebuild, to install its property, furniture,
fixtures, and equipment to the extent the same shall have been removed as a
result of such damage or destruction and to move in abatement because of an
event covered by Lease Articles 42 (Reconstruction) or 18 (Eminent Domain) then
the Eligibility Period shall not be applicable.
6. Right to Terminate
(a) Notwithstanding anything in either Lease Article 42
(Reconstruction) or 18 (Eminent Domain) to the contrary, and except as expressly
set forth in Subsection (b) immediately below, in the event that Tenant is
notified or becomes aware of the fact that, within [*six(6)*] months of any of
the following:
(i) damage or destruction to the Premises and/or the
Building or any part thereof so as to interfere
substantially with Tenant's use of the Premises
and/or the Building;
(ii) a taking by eminent domain or exercise of other
governmental authority of the Premises and/or the
Building or any part thereof so as to interfere
substantially with Tenant's use of the Premises
and/or the Building.
<PAGE>
(iii) the inability of Landlord to provide services
to the Premises and/or the Building so as to
interfere substantially with Tenant's use of the
Premises and/or the Building; or
(iv) any discovery of hazardous substances in, on or
around the Premises, the Building and/or the Shopping
Center not placed in, on or around the Premises, the
Building and/or the Shopping Center by Tenant, that
may, considering the nature and amount of the
substances involved, interfere with Tenant's use of
the Premises (each of the items set forth in
provision (a) (i), (ii), (iii) and (iv) being
referred to herein as a "Trigger Event"),
Tenant cannot be given reasonable use of, and access to, a fully repaired,
restored, safe and healthful Premises and Building and Shopping Center (except
for minor "punch-list" items which will be repaid promptly thereafter), and the
utilities and services pertaining to the Premises and the Building, all suitable
for the efficient conduct of Tenant's business therefrom, then Tenant may elect
to exercise an ongoing right to terminate the Lease upon ten (10) days' written
notice sent to Landlord at any time within a period of ninety (90) days
following the particular Trigger Event. If Landlord can deliver a fully
repaired, restored, sage and healthful Premises within [*six (6)*] months of the
occurrence of such Trigger Event, then such termination shall be deemed
rescinded without prejudice to any future exercise of such termination right.
7. Tenant's Right to Make Repairs. Notwithstanding any provision set
forth in the Lease to the contrary, if Tenant provides written notice (or oral
notice in the event of an emergency such as damage or destruction to or of a
structural component, or any Building Systems or telecommunications system of or
in the Premises or the Building (including, but no limited to, damage to the
roof, or exterior window or door)) to Landlord of an event or circumstance which
requires the action of Landlord with respect to repair and/or maintenance, and
Landlord fails to provide such action within a reasonable period of time, given
the circumstances, after the receipt of such notice, but in any event not later
than twenty-one (21) days after receipt of such notice, then Tenant may proceed
to take the required action upon delivery of an additional ten (10) business
days' notice to Landlord specifying that Tenant is taking such required action
(provided, however, that such additional notice shall not be required in the
vent of an emergency), and if such was required under the terms of the Lease to
be taken by Landlord and was not taken by Landlord within such ten (10) day
period, then Tenant shall be entitled to prompt reimbursement by Landlord of
Tenant's reasonable costs and expenses in taking such action plus interest
thereon at the Interest Rate. The "Interest Rate" is defined as the lesser of
(a) the rate publicly announced from time to time, by the largest (as measured
by deposits) chartered bank operating in California, as its prime rate,
reference rate or other similar benchmark rate, plus two percent (2%) or (b) the
maximum rate permitted by law. In the event Tenant takes such action, and such
work will affect the Building Systems or the telecommunications system
(including, without limitation, any intrabuilding network
<PAGE>
cable) or the structural integrity of the Building. Tenant shall use only those
contractors used by Landlord in the Building for work on such systems unless
such contractors are unwilling or unable to perform, or timely perform, such
work, in which event Tenant may utilize the services of nay other qualified
contractor which normally and regularly performs similar work in comparable
buildings. Furthermore, if Landlord does not deliver a detailed written
objection to Tenant within thirty (30) days after receipt of an invoice by
Tenant of its costs of taking action which Tenant claims should have been taken
by Land, of if such invoice from Tenant sets forth a reasonably particularized
breakdown of its costs and expenses in connection with taking such action on
behalf of Landlord, then Tenant shall be entitled to deduct from Rent payable by
Tenant under the Lease, the amount set forth in thirty (30) days after receipt
of tenant's invoice, a written objection to the payment of such invoice, setting
forth with reasonable particularity Landlord's reasons for its claim that such
action did not have to be taken by Landlord pursuant to the terms of the Lease
or that the charges are excessive (in which case Landlord shall pay the amount
it contents would not have been excessive), or that the repairs were not
performed correctly, then Tenant shall not be entitled to such deduction from
Rent, but as Tenant's sole remedy, Tenant may proceed to claim a default by
Landlord, or if elected by either Landlord or Tenant, the matter shall proceed
to resolution by the selection of an arbitrator to resolve the dispute, which
arbitrator shall be selected and qualified pursuant to the then current
procedures and practices of the American Arbitration Association, and whose
costs shall be paid for by the losing party, unless it is not clear that there
is a "losing party," in which event the costs of arbitration shall be shared
equally.
8. Assignment and Subleasing. Tenant may assign the Lease at any time,
or sublease all or part of the Premises, without receipt of Landlord's consent,
to any entity which acquires all or part of Tenant, or which is acquired in
whole or in part by Tenant, or which is controlled directly of indirectly by
Tenant ("Affiliate"), or which owns or is owned by the Affiliate, so long as
such transaction was not entered into a subterfuge to avoid the obligations and
restrictions of the Lease.
9. Alterations and Improvements. Tenant is granted the right to make
non-structural alternations and improvements to the Premises, as long as (a)
Tenant pays for the entire costs of such alternations and improvements, (b)
Tenant agrees to remove said alternations and improvements upon the expiration
or termination of the Lease, if requested by Landlord who at the time the
alterations and improvements are approved by Landlord, or at the time of
expiration/termination of the lease, and 9c) such alternations and improvements
will not adversely affect the structural integrity of the Premises and/or the
Building. Any time Tenant proposes to make such alternations and/or
improvements, together with the plans and specifications, and Landlord shall
grant its approval within such ten (10) day period, unless Landlord reasonably
determines that such alternations and/or improvements would adversely affect the
exterior appearance of the Building, or in Lessor's reasonable determination
that such alternation and/or improvements would be inconsistent with the
appropriate use of the premises.
<PAGE>
10. Access to Building and Parking. Tenant shall be granted access to
the Building, the Premises, and the parking provided to the Building twenty-four
(24) hours per day, seven (7) days per week, every day of the year.
11. Removal of Property. Notwithstanding anything to the contrary set
forth in the Lease, all articles of personal property and all business and trade
fixtures, machinery and equipment, furniture and movable partitions owned by
Tenant or installed by or on behalf of Tenant in the Premises shall remain the
property of Tenant, and may be removed by Tenant at any time during the Term of
the Lease as long as Tenant is not in default hereunder with any applicable cure
period having expired. If Tenant fails to remove all of its effects from the
Premises upon the expiration of earlier termination of the Lease for any cause
whatsoever, Landlord may, at its option, any time after five (5) days' written
notice to Tenant of its intention to remove such effects, remove same in any
manner that Landlord shall choose and dispose of such property.
12. Entry by Landlord. Notwithstanding anything to the contrary set
forth in the Lease, Landlord and/or those acting on Landlord's behalf may only
enter the Premises upon reasonable prior notice to Tenant, except in cases of
emergency, in which case no such notice shall be required. In any event, any
such entry shall be required. In any event, any such entry shall be accomplished
as expeditiously as reasonably possible and in a manner so as to cause as little
interference to Tenant as reasonable possible.
13. Landlord Bankruptcy Proceeding. In the event that the obligations
of Landlord under this Lease are not performed during the pendency of a
bankruptcy or insolvency proceeding involving the Landlord as the debtor, or
following the rejection of the Lease in accordance with Section 365 of the
United States Bankruptcy Code, then notwithstanding any provision of this Lease
to the contrary, Tenant shall have the right to set off against Rents next due
and owing under this Lease (a) any and all damages caused by such
non-performance of Landlord's obligations under this Lease by Landlord,
debtor-in-possession, or the bankruptcy trustee, and 9b) any and all damages
caused by the non-performance of Landlord's obligations under this Lease
following any rejection of this Lease in accordance with Section 365 of the
United States Bankruptcy Code.
14. Audit Right. Notwithstanding any sections of the Lease to the
contrary, in the event of any dispute regarding the amount due as Tenant's pro
rata share of expenses and/or the amount due as pursuant to Lease Article 5
(Additional Rental Expense Payments) Tenant shall have the right, after
reasonable notice and at reasonable times, to inspect and photocopy Landlord's
accounting records at Landlord's office. If, after such inspection and
photocopying, Tenant continues to dispute the amount of its pro rata share of
expenses, Tenant shall be entitled to retain an independent company or certified
public accountant to audit and/or review Landlord's records to determine the
proper amount of Tenant's pro rata share of expenses. If such audit or review
reveals that Landlord has overcharged Tenant, then within five (5) days after
the results of such audit are made available to Landlord, Landlord shall
reimburse Tenant the amount of such overcharge plus interest thereon at the
Interest Rate. If the audit reveals that Tenant was
<PAGE>
undercharged, then within five (5) days after the results of the audit are made
available to Tenant, Tenant shall reimburse Landlord the amount of such
undercharge plus interest thereon at the Interest Rate. If Landlord desires to
contest such audit results, Landlord may do so by submitting the results of the
audit to arbitration pursuant to the then current practices and procedures of
the American Arbitration Association within five (5) days of receipt of the
results of the audit, and the arbitration shall be final and binding upon
Landlord and Tenant. Tenant agrees to pay the costs of such audit, provided that
if the audit reveals that Landlord's determination of Tenant's pro rata share of
expenses as set forth in any actual statement sent to Tenant was in error in
Landlord's favor by more than two percent (2%), Landlord shall pay the cost of
such audit. Landlord shall be required to maintain records of all expenses and
other rent adjustments for the entirety of the three-year period ("Review
Period") following Landlord's delivery to Tenant of each actual statement
setting forth Tenant's pro rata share of expenses. The payment by Tenant of any
amounts pursuant to Lease Article 5 shall not preclude Tenant from questioning
the correctness of any actual statement provided by Landlord at any time during
the Review Period, but the failure of Tenant to object thereto prior to the
expiration of the Review Period shall be conclusively deemed Tenant's approval
of the actual statement.
15. Allocation of Insured Risks/Subrogation. To the extent permitted by
law, Landlord and Tenant each hereby release each other and their respective
officers, employees and agents from any claims for bodily injury to or death of
any person and from property damage to the premises, to the other buildings and
improvements in the shopping center including the common area, and to the
fixtures and personal property of either Landlord or Tenant located in the
shopping center that are caused by or result from risks insured against under
any insurance policy which is required by this lease to be maintained by
Landlord or Tenant. This release shall not be effective if the releasing party's
loss was uninsured due to a breach by the other party. Each party shall cause
each insurance policy obtained by such party pursuant to his lease to provide
that the insurance carrier waives all right of cover by way of subrogation
against both parties and their respective officers, employees and agents in
connection with any injury or damage covered by such policy.
LESSEE:
---------------------------
HARRY SHUSTER, President
Plant Kids, Inc.
A California Corporation
<PAGE>
LESSOR:
---------------------------
CHANDELLE HUMPHRIES, Trustee
Magnolia Square
A California Partnership
<PAGE>
I N D E X
TOPIC ARTICLE NO. PAGE NO.
ABANDONMENT.......................................15....................6
ADDITIONAL RENT....................................5....................2
AIR CONDITIONING ADEQUACY.........................50...................16
ASSIGNMENT AND SUBLETTING.........................17....................7
ALTERATIONS AND ADDITIONS.........................11....................4
ATTORNEY'S FEES...................................29...................13
AUCTIONS..........................................39...................14
BASE RENT ABATEMENT...............................55...................17
BREACH BY LESSOR..................................38...................14
COMPLIANCE WITH LAW...............................10....................4
CONDITION AND MAINTENANCE.........................12....................5
CORPORATIONS......................................48...................16
DEFAULT...........................................24...................11
DEPOSIT AGREEMENT.................................42...................15
EMINENT DOMAIN....................................18....................9
ENTRY BY LESSOR...................................23...................10
ESTOPPEL CERTIFICATE..............................40...................14
FINANCIAL STATEMENTS..............................36...................13
HEATING AND AIR CONDITIONING......................14....................6
HOLDING OVER......................................22...................10
INDEMNIFICATION BY LESSEE.........................20...................10
INSURANCE.........................................19....................9
LANDSCAPING.......................................46...................16
LATE RENT..........................................8....................3
LIENS.............................................16....................6
NON-WAIVER........................................31...................13
NOTICES...........................................32...................13
PARKING...........................................44...................15
PARKING LOT MAINTENANCE...........................45...................15
PERSONAL PROPERTY TAXES...........................21...................10
PLATS AND RIDERS..................................37...................14
POSSESSION.........................................6....................3
PREMISES...........................................1....................1
PRIOR AGREEMENTS..................................51...................16
RENT...............................................3....................1
RECONSTRUCTION....................................41...................14
RECORDING.........................................49...................16
REMEDIES..........................................25...................11
RENTAL MONTH.......................................7....................3
REPRESENTATIONS...................................26...................12
SALE BY LESSOR....................................27...................12
SECURITY DEPOSIT...................................4....................1
SIGNS.............................................43...................15
SUBORDINATION.....................................28...................12
SUCCESSORS........................................35...................13
SURRENDER OF PREMISES.............................30...................13
TERM...............................................2....................1
TIME..............................................34...................13
TITLES AND CAPTIONS...............................33...................13
UNAVOIDABLE DELAY.................................47...................16
USE OF PREMISES....................................9....................4
UTILITIES.........................................13....................6
OPTION............................................53...................16
REV: May 31, 1995
<PAGE>
I N D E X
TOPIC ARTICLE NO. PAGE NO.
ABANDONMENT.......................................15....................6
ADDITIONAL RENT....................................5....................2
AIR CONDITIONING ADEQUACY.........................50...................16
ASSIGNMENT AND SUBLETTING.........................17....................7
ALTERATIONS AND ADDITIONS.........................11....................4
ATTORNEY'S FEES...................................29...................13
AUCTIONS..........................................39...................14
BASE RENT ABATEMENT...............................55...................17
BREACH BY LESSOR..................................38...................14
COMPLIANCE WITH LAW...............................10....................4
CONDITION AND MAINTENANCE.........................12....................5
CORPORATIONS......................................48...................16
DEFAULT...........................................24...................11
DEPOSIT AGREEMENT.................................42...................15
EMINENT DOMAIN....................................18....................9
ENTRY BY LESSOR...................................23...................10
ESTOPPEL CERTIFICATE..............................40...................14
FINANCIAL STATEMENTS..............................36...................13
HEATING AND AIR CONDITIONING......................14....................6
HOLDING OVER......................................22...................10
INDEMNIFICATION BY LESSEE.........................20...................10
INSURANCE.........................................19....................9
LANDSCAPING.......................................46...................16
LATE RENT..........................................8....................3
LIENS.............................................16....................6
NON-WAIVER........................................31...................13
NOTICES...........................................32...................13
PARKING...........................................44...................15
PARKING LOT MAINTENANCE...........................45...................15
PERSONAL PROPERTY TAXES...........................21...................10
PLATS AND RIDERS..................................37...................14
POSSESSION.........................................6....................3
PREMISES...........................................1....................1
PRIOR AGREEMENTS..................................51...................16
RENT...............................................3....................1
RECONSTRUCTION....................................41...................14
RECORDING.........................................49...................16
REMEDIES..........................................25...................11
RENTAL MONTH.......................................7....................3
REPRESENTATIONS...................................26...................12
SALE BY LESSOR....................................27...................12
SECURITY DEPOSIT...................................4....................1
SIGNS.............................................43...................15
SUBORDINATION.....................................28...................12
SUCCESSORS........................................35...................13
SURRENDER OF PREMISES.............................30...................13
TERM...............................................2....................1
TIME..............................................34...................13
TITLES AND CAPTIONS...............................33...................13
UNAVOIDABLE DELAY.................................47...................16
USE OF PREMISES....................................9....................4
UTILITIES.........................................13....................6
OPTION............................................53...................16
REV: May 31, 1995
<PAGE>
L E A S E
PARTIES
This Lease made and entered into this day 29th day of June, 1995, by and between
MAGNOLIA SQUARE hereinafter referred to as Lessor, and PLANET KIDS, INC., A
CALIFORNIA CORPORATION, Hereinafter referred to as Lessee. Lessee shall use the
leased premises solely for the purpose of conducting the business of CHILDREN'S
COMMERCIAL RECREATIONAL FACILITY.
The premises shall be used and occupied by tenant for a children's recreation
and video center, educational and fitness center, including a planned play
environment, educational learning center, a snack bar/ eating area and retail
sales of toys, any other use reasonably consistent with above.
WITNESSETH
In consideration of the mutual promises and covenants of the parties, it is
mutually understood and agreed as follows:
1. PREMISES: Lessor does hereby lease to Lessee and Lessee hereby hires from
Lessor those certain premises (hereinafter called "premises") being located at
18081 MAGNOLIA FOUNTAIN VALLEY, CA 92708.
Said letting and hiring is upon and subject to the terms, covenants and
conditions herein set forth and the Lessee covenants as a material part of the
consideration for this Lease to keep and perform each and all of said terms,
covenants and conditions by it to be kept and performed and that this Lease is
made upon the condition of such performance. Building floor space is
approximately 25,807 square feet.
2. TERM: The term of this Lease shall be for Ten Years (120 months).
A. Lessee is to apply for City Approval in a prompt manner upon
signing of Lease and shall inform Lessor immediately upon
approval or denial.
B. Term of Lease to begin sixty (60) days after City Approval.
C. This Lease is contingent upon approval from the City of Fountain
Valley.
3. RENT: Lessee agrees to pay in advance on the first day of each calendar
month. The payment during years one through five is a minimum Base Monthly
Rental of $9,032.75 per month and during years six through ten is a minimum Base
Monthly Rental of $10,838.94 per month; together with an Additional Monthly
Rental consisting of expenses which are listed in Article 5 of this Lease, in an
initial amount of $3,957.56 per month. The initial total monthly rental will be
$12,990.31 per month. (Additional Monthly Rental is subject to annual
adjustments as stated in Article 5.)
4. SECURITY DEPOSIT: Lessee has deposited with Lessor a security deposit, the
amount of $12,990.31. Said deposit shall be held by Lessor without liability
for interest as security for the faithful performance by Lessee of all the terms
of this Lease by said Lessee to be observed and performed. The security deposit
shall not be mortgaged, assigned, transferred, or encumbered by Lessee without
the written consent of Lessor and any such act on the part of Lessee shall be
without force and effect and shall not be binding upon Lessor. Lessor shall not
be required to keep the security deposit separate from its general funds. In the
event of termination of Lessor's interest in this Lease, Lessor shall transfer
said deposit to Lessor's successor in interest.
1
<PAGE>
In the event of the failure of Lessee to keep and perform any of the terms,
covenants and conditions of this lease to be kept and performed by Lessee, then
the Lessor at its option may appropriate and apply said entire deposit, or so
much thereof as may be necessary to compensate the Lessor for all loss or damage
sustained or suffered by Lessor due to such breach on.the part of Lessee. Should
the entire deposit, or any portion thereof, be appropriated and applied by
Lessor for the payment of overdue rent or other sums due and payable to Lessor
by Lessee hereunder then Lessee shall, upon the written demand of Lessor,
forthwith remit to Lessor a sufficient amount in cash to restore said security
to the original sum deposited, and Lessee's failure to do so within five (5)
days after receipt of such demand shall constitute a breach of this Lease.
Should Lessee comply with all of said terms covenants and conditions and
promptly pay all of the rental herein provided for as it falls due, and all
other sums payable by Lessee to Lessor hereunder, the said deposit shall be
returned in full to Lessee at the end of the term of this Lease, or upon the
earlier termination of this Lease.
Lessor may deliver the funds deposited hereunder by Lessee to the purchaser of
Lessor's interest in the leased premises, in the event that such interest be
sold, and thereupon Lessor shall be discharged from any further liability with
respect to such deposit.
In the event of bankruptcy or other credit-debtor proceedings against Lessee,
all securities shall be deemed to be applied first to the payment of rent and
other charges due Lessor for all periods prior to the filing of such
proceedings.
5. ADDITIONAL RENTAL EXPENSE PAYMENTS: Lessee shall pay to Lessor as additional
rental, its pro-rata share of all expenses in the shopping center of which the
demised premises are a part. The additional rental shall include reimbursement
to Lessor for real property taxes, all risk building insurance, landscaping
maintenance, parking lot cleaning, maintenance and repair including paving
repair, slurry coating, restriping, replacement of bumpers and signing,
supervision, taxes, including but not limited to tax assessments for tenant
improvements (whether assessed against the Lessor or assessed against the Lessee
and collected by the Lessor or both), water and sewer charges, parking lot
lighting and maintenance of lighting, trash collection, and heating and air
conditioning routine maintenance, any expense incurred for the legal and safe
operation of the property. Any taxes, rent fees, or charges levied b local
government in lieu of or additional to property taxes shall be included as
reimbursable building expenses. Lessee shall also pay to Lessor as additional
rent a reasonable allowance for Lessor's supervision of the public and common
area and for his administration of the above" not to exceed ten percent (10%) of
the total common area charges, excluding insurance and taxes; which percentage
includes supervision. Additional Rental Expense shall not include capital cost
or legal fees incurred by reason of Lessor's negligence.
In January of each year or at any time the Lessor may deem necessary (during the
term of this Lease or any extension period), all additional rental expenses for
the coming year shall be estimated using the previous year's expenses and/or any
necessary anticipated expense. The shopping center's estimated annual expenses
shall be divided into twelve (12) monthly payments. Lessee shall pay to Lessor,
its pro-rata share of (48.46%) of the total estimated expense along with the
base monthly rental beginning February first of each year. In the event that any
building space is added or deleted from the shopping center, Lessee's pro-rata
share of the center will be recalculated, based on square footage.
All such payments of additional rent due for any and all of the expenses
outlined in paragraph one (1) of this article shall be added to the base rent
and Lessee shall pay the total of the base monthly rent plus the estimated
additional monthly expenses in one (1) monthly payment. Remedies for the
non-payment or late payment of the one Monthly payment are exactly the same as
for the base rent.
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An estimate of the shopping center's annual expenses is included as Exhibit "A"
of this Lease. These estimated expenses and the pro-rata payments to be made by
Lessee to Lessor may be revised by Lessor when necessary to obtain the most
adequate figures for Lessee's additional rental expense payments. In the event a
supplemental or revised "additional estimated expense" schedule is issued by
Lessor After January of any given year, then the additional rental expense as
reflected on the revised or supplemental schedule shall be paid by Lessee to
Lessor as follows:
In the event a supplemental or revised "additional estimate expense" schedule is
issued by Lessor after January of any given year, then the additional rental
expense as reflected on the revised or supplemental schedule shall be paid by
Lessee to Lessor as follows: Commencing with the month following the issuance of
the revised or supplemental expense schedule, the total additional pro-rated
expense stated on the revised (or supplemental) expense schedule shall be
divided by the number of months remaining in the same calendar year and the
amount of the quotient shall be added to the adjusted base rent for each
remaining month during the balance of the calendar year. "Adjusted Base Rent"
means the base rent plus the additional rental expense as stated in the January
issuance of annual expenses as described above in the second paragraph of
Article 5.
At the close of each calendar year, the cost of all expenses referred to in
paragraph one (1) of this Article for the past year will be totalled along with
the total of the additional rent payments made by Lessee for that period. Should
the amount of additional rent owed by Lessee for the year exceed what Lessee has
paid during the year, then Lessee shall pay any difference owed to Lessor upon
notification. Should the lessee have paid more than his proportionate share due
for the year, then he will be given credit for that difference.
6. POSSESSION: If Lessor, for any reason whatsoever, cannot deliver possession
of the Premises to Lessee on the Commencement Date, Lessor shall not be liable
to Lessee for any loss or damage resulting therefrom, nor shall the validity of
this Lease be affected or its term extended, but under such circumstances rent
shall not commence until the possession of the Premises is offered to Lessee. If
possession of the Premises is not offered to the Lessee within thirty (30) days
following the Commencement Date, then at any time after the thirty (30) day
period but prior to an offer of possession by Lessor, Lessee may terminate this
Lease by notifying Lessor in writing and in such event Lessor shall promptly
refund, without deduction, all monies received from Lessee under this Lease. In
the event that Lessor shall permit Lessee to occupy the Premises prior to the
Commencement Date, such occupancy shall be subject to all the provisions of this
Lease. Said early possession shall not advance the termination date hereinabove
provided.
7. RENTAL MONTH: For the purpose of this Lease a "rental month" shall mean the
period from the first (1st) day of the month through the last day of the month.
should this Lease begin on any other day than the first (lst) of the month, then
payment for one full month will be paid as stated in paragraph 3 of this Lease.
The next month will be prorated the exact number of days that are used and rent
paid for those days will be paid for those pro-rated days, thirty (30) days from
Commencement of this Lease. Thereafter rent will be due the first day of each
month for the term of this Lease. If the last rent payment of this Lease is for
a partial month, then the exact number of pro-rated days will be paid by the
first (1st) day of the last month of this Lease.
When the actual Commencement Date is determined, the parties agree to execute a
memorandum setting forth the actual date of commencement of the leased term, and
attach a copy thereof to this Lease.
B. LATE RENT: Lessee acknowledges that late payment by Lessee to Lessor of rent
or other sums due hereunder will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of which would
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be extremely difficult and impractical to ascertain. Such costs include, but are
not limited to, processing and accounting charges, and late charges which may be
imposed on Lessor by the terms of any mortgage or trust deed covering the
Premises. Therefore, in the event Lessee should fail to pay any installment of
rent or any sum due hereunder after the tenth (10th) day such amount is due,
Lessee shall pay to Lessor as additional rent a late charge equal to ten percent
(10%) of each installment. In addition to the late charge, a $30.00 charge will
be paid by the Lessee to the Lessor for each returned check not honored by
Lessee's bank.
All additional rent payments due Lessor for rental adjustments, assessments, and
expenses, shall be considered as a part of rent payments.
9. USE OF PREMISES: The Leased Premises may be used and occupied only for the
use stated elsewhere in this Lease and for no other purpose or purposes, without
Lessor's prior written consent. Lessee shall promptly comply with all laws,
ordinances, orders, and regulations affecting the Leased Premises and their
cleanliness, safety, occupation, and use. Lessee shall not do or permit anything
to be done in or about the Leased Premises, or bring or keep anything in the
Leased Premises that will in any way increase the fire insurance upon the
Building. Lessee will not perform any act or carry on any practices that may
injure the Building or be a nuisance or menace to other tenants of adjoining
premises or injure or annoy them or use or allow the premises to be used for any
improper, immoral, unlawful, or objectionable purpose. (Non compliance of the
above shall constitute breach of this Lease at the option of Lessor.)
Lessee shall, at Lessee's own expense and judgement, determine whether the
demised premises are suitable for Lessee's use and whether such use is permitted
by governing authorities. Lessor hereby makes no representations to Lessee that
the premises are suitable for Lessee's business or permitted by governing
authorities. However, should the proposed use of the premises not be permitted
by governing authorities through no fault of the Lessee, then this Lease
agreement shall be declared null and void.
10. COMPLIANCE WITH LAW: Lessee shall not use the premises or permit anything to
be done in or about the premises which will in any way conflict with any law,
statute, ordinance, or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated. Lessee shall at its sole cost and expense
promptly comply with all laws, statutes, ordinances, and governmental rules,
regulations or requirements now in force or which may hereafter be in force and
with the requirements of any board of fire underwriters or other similar body
now or hereafter constituted relating to or affecting the condition, use or
occupancy of the premises, excluding structural changes not related to or
affected by Lessee's improvements or acts. The judgement of any court of
competent jurisdiction or the admission of Lessee in any action against Lessee,
whether Lessor be a party thereto or not, that Lessee has violated any law,
statute, ordinance, or governmental rule, regulation or requirement, shall be
conclusive of that fact as between Lessor and Lessee.
11. ALTERATIONS AND ADDITIONS: Except as provided below in regard to Lessee's
trade fixtures, Lessee shall not make any alterations, improvements, or
additions in, on or about the premises, not install, remove or change any signs,
or modify the landscaping in the common area ("Alterations") without Lessors
prior written consent. In granting or withholding its consent to any proposed
Alterations, Lessor may, at its option, take into account, or base its grant or
denial of such consent entirely upon, aesthetic considerations and the
compatibility of any proposed Alterations to the premises or the surrounding
areas. Further, Lessee, as a condition to Lessor's consent to any proposed
Alterations, shall furnish Lessor with (a) plans and specifications for its
approval which have been stamped with notations of approval by the appropriate
governmental building department and (b) lien and completion bonds satisfactory
to Lessor to insure payment of
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the costs thereof. If Lessor consents to the installation of any such
Alterations by Lessee, Lessee's employees, agents and contractors may enter the
Premises and commence the installation of such Alterations; provided, however,
that the work to be done by Lessee's employees, agents or contractors does not
unreasonable interfere with the occupancy of other space in the Center by other
tenants and is performed during reasonable hours designated by Lessor, and
provided further that any contractor or person selected by Lessee to install
such improvements must.first be approved in writing by Lessor.
As further condition to Lessor's consent to any proposed Alterations, Lessor may
require that Lessee agree to return the premises to its condition at the time
immediately prior to installation of the proposed Alterations, reasonable wear
and tear excepted. If Lessor fails to impose such condition in writing, then all
Alterations shall, upon completion thereof, become a part and parcel of the
premises, with title thereto vesting in Lessor on such completion date. Lessee
shall give Lessor not less than ten (10) days notice prior to the commencement
of any approved Alterations and Lessor shall have the right to post notices of
nonresponsibility in or on the premises as provided by law.
12. CONDITION AND MAINTENANCE: Lessee's acceptance of possession of the premises
and common area shall constitute Lessee's acknowledgment that the premises and
common area are in good and tenantable condition. Should any standard or
regulation now or hereafter be imposed on Lessor or Lessee by anybody, state or
federal, charged with the establishment, regulation and enforcement of
occupational health or safety standards for employers, employees, lessors or
lessees, then Lessee agrees, at its sole cost and expense, to comply promptly
with such standards or regulations.
Lessee shall keep and maintain the premises (excluding the structural portions
and common area thereof, but including windows, doors, thresholds, signs,
skylights, store fronts, and all interior portions thereof) in as good, clean
and sanitary order, condition and repair as they shall be upon the commencement
of the term of this Lease, ordinary wear and tear excepted. If Lessee fails to
keep and maintain the premises as aforesaid and such failure is not cured within
ten (10) days or such longer time as may be required, as long as Tenant
commences work within ten (10) days and thereafter diligently prosecutes to
completion, after Lessor's written notice to Lessee of such failure, then Lessor
shall have the option (but not the obligation) to enter upon the premises and
clean, repair, or otherwise .maintain the same to the extent that Lessee has
failed to do so. The costs and expenses incurred by Lessor in so doing, shall be
payable by Lessee promptly upon demand, or at the option of Lessor, shall be
included in the next basic monthly rent installment. Lessee waives all right to
make repairs at the expense of Lessor, to the extent that such rights may be
legally waived. On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the premises to Lessor in the same condition
as when received, broom clean, ordinary wear and tear excepted.
Lessor shall keep or cause to be kept the structural portions of the premises
and automobile parking and common area in a neat, clean and orderly condition,
properly lighted and landscaped.
Lessor hereby reserves the right at any time to make alterations or additions to
and to build additional stories on the building in which the premises are
contained and to build adjoining the same so long as such alterations and
additions do not materially interfere with Lessee's access to and quest
enjoyment of the premises for the conduct of it's business. Lessor also reserves
the right to construct other buildings or improvements in the Center from time
to time and to make alterations thereof or additions thereto and to build
additional stories on any such building or buildings and to build adjoining
same. Easements for light and air are not included in the leasing of these
premises to Lessee. Lessor further reserves the exclusive right to the roof
except as provided in the Lease.
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13. UTILITIES: Lessee shall be solely responsible for and promptly pay all
charges for heat, water, gas, electricity, phone, or any other utility used or
consumed in the leased premises. Should Lessor elect to supply the water, gas,
heat, electricity or any other utility used or consumed in the leased premises,
Lessee agrees to purchase and pay for the same as additional rent as apportioned
by the Lessor. Should Lessee have use for water beyond the normal average of
other tenants in its building, Lessee shall be charged accordingly. All billing
shall be paid monthly, and included with the additional rental expense. In no
event shall Lessor be liable for an interruption or failure in the supply of any
such utilities to the leased premises.
14. HEATING AND AIR CONDITIONING: Maintenance and repair on any heating and air
conditioning installed in the premises (except for manufacturers warranties)
shall be the sole responsibility of the Lessee. All such equipment must be left
in good working order by Lessee at the termination of this Lease. Lessor shall
be responsible for all repairs during the first ninety (90) days that this Lease
is in effect.
Lessee hereby elects to have Lessor contract a heating and air conditioning
maintenance company to routinely perform preventive maintenance on the heating
and air conditioning installed in the premises. Such routine maintenance shall
be performed on a ninety (90) day basis. Lessee shall reimburse Lessor for all
such costs on a monthly basis. This service will not include repairs for which
the Lessee is responsible.
15. ABANDONMENT: Lessee shall not abandon the premises at any time during the
term, and if Lessee shall abandon or surrender said premises, or be dispossessed
by process of law, or otherwise, any personal property belonging to Lessee and
left on the premises shall be deemed to be abandoned.
16. LIENS: Lessee shall not permit any mechanics', laborers', or materialmen's
liens to stand against the premises or against Lessor's or Lessee's interest
therein by reason of any work, labor services or material done for, or supplied
to or claimed to have been done for or supplied to, Lessee or anyone holding the
premises through or under Lessee. If any such lien shall at any time be recorded
against the premises or against Lessor's or Lessee's interest therein, then
Lessee shall (a) give written notice thereof promptly to Lessor and (b) cause
the same to be discharged of record within thirty (30) days after the date of
recording the same, whether by payment, deposit or bond. If Lessee fails to
discharge any such lien within such period, then Lessor, in addition to any
other right or remedy hereunder, shall have the option (but not the obligation)
to procure the discharge of such lien, and all costs and other expenses,
including all attorney's fees, incurred in defending any action to foreclose
such lien, shall be payable by Lessee to Lessor as additional rent on demand or,
at Lessor's election, on the next basic monthly rent installment date.
Lessee will pay for all work performed on the premises by its employees or
contractors and shall indemnify and hold the Lessor harmless for all liability
resulting from any lien or claim of lien arising out of such work. Lessee shall
have the right, upon reasonable notice and at reasonable times, at its sole cost
and expense, to contest the validity of any such lien or claimed lien. Lessor
shall have the right to enter the demised premises for the purpose of posting
notices of nonliability for work performed at the direction of Lessee.
Lessor may require, at Lessor's sole option, that Lessee provide to Lessor, at
Lessee's sole cost and expense, a lien and completion bond in an amount equal to
one and one-half (1 1/2) times the estimated cost of any improvements,
additions, or alterations in the Premises which the Lessee desires to make,
issued by a surety satisfactory to Lessor, to insure Lessor against any
liability for mechanics', laborers' and materialmen's liens and to insure
completion of such work.
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17. ASSIGNMENT AND SUBLETTING: NO ASSIGNMENT. Landlord and Tenant acknowledge
that a shopping center is an interdependent enterprise and that the realization
of the benefits of this Lease, both to Landlord and Tenant, is dependent upon
Tenant creating and maintaining a successful and profitable retail operation in
the Premises. Landlord and Tenant further acknowledge that the character and
quality of Tenant's operation and of the Shopping Center will be enhanced by
Tenant's use of its best efforts, for a reasonable period of time, to establish
a successful character and image. Landlord and Tenant further acknowledge that
two (2) years is a reasonable period of time for attempting to achieve the
above-stated goal. Accordingly, as a material inducement to Landlord to enter
into this Lease and as a matter specifically bargained for between Landlord and
Tenant, Tenant agrees that, for a period of two (2) years from the date on which
Tenant opens for business to the public in the Premises, Tenant shall not
transfer, assign, sublet, enter into franchise, license or concession
agreements, change ownership or voting control, mortgage, encumber, pledge or
hypothecate all or any part of this Lease, Tenant's interest in the Premises or
Tenant's business (collectively, "Assignment" or "Assign") without first
procuring the written consent of Landlord, which consent may be given or
withheld in Landlord's sole and absolute discretion and to which no test of
reasonableness shall be applied. After the expiration of this two (2) year
period, Landlord's consent to any Assignment shall not be unreasonably withheld,
subject to the terms, covenants and conditions contained in this Lease and to
the right of Landlord to elect to terminate this Lease, as provided in Paragraph
2 (Procedures). If Tenant is a corporation which, under the then current
guidelines published by the Commissioner of Corporations of the State of
California, is not deemed a public corporation or is an unincorporated
association or partnership, the transfer, assignment or hypothecation, whether
in one (1) transaction or a series of transactions, of any stock or interest in
such corporation, association or partnership in excess of an aggregate of
twenty-five percent (25%) shall be deemed as Assignment within the meaning and
provisions of the Article 17.
PROCEDURES: Should Tenant desire to enter into an Assignment, Tenant shall
request, in writing, Landlord's consent to the proposed Assignment at least
thirty (30) days before the effective date of the proposed Assignment, which
request shall include the following: (a) Full particulars of the proposed
Assignment including its nature, effective date, terms and conditions,
subleases, letters of commitment or intent and other documents pertaining to the
proposed Assignment; (b) a description of the identity, net worth and previous
business experience of the proposed transferee including, without limitation,
copies of the proposed transferee's latest income statement, balance sheet, and
certified as accurate by the proposed transferee; (c) a detailed description of
the proposed use of the Premises together with the proposed trade name of the
transferee; and (d) any further information relevant to the proposed Assignment
which Landlord shall have requested within fifteen (15) days after receipt of
Tenant's request for consent.
Within sixty (60) days after receipt of Tenant's request for consent to the
proposed Assignment, together with all of the above-required information,
Landlord shall respond and shall have the right to: (i) Consent to the proposed
Assignment, or (ii) refuse to consent to the proposed Assignment.
LANDLORD'S CONSENT: If Tenant requests Landlord's consent to a proposed
Assignment after the above-stated two (2) year period, Landlord and Tenant agree
(by way of example and without limitation) that it shall be reasonable for
Landlord to withhold its consent if any of the following situations exist or may
exist: (a) The proposed transferee's use of the Premises conflicts with that
set forth in the first paragraph of this Lease; (b) in Landlord's reasonable
business judgement, the proposed transferee lacks sufficient business reputation
or experience to operate a successful business of the type and quality permitted
under this Lease; (c) Tenant is in default pursuant to this Lease beyond
applicable notice and cure period; (d) in Landlord's
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reasonable business judgement, the present net worth of the proposed transferee
is less than the greater of Tenant's net worth as of the date of this Lease or
Tenant's net worth at the date of Tenant's request for consent; (e) in
Landlord's reasonable business judgement, the Percentage Rental that Landlord
reasonably anticipates receiving from the proposed transferee is less than the
Percentage Rental which Landlord has received from Tenant; and/or (f) the
Assignment would breach any covenant of Landlord respecting radius, location,
use or exclusivity in any other lease, financing agreement or other agreement
relating to the Shopping Center.
Any attempted or purported Assignment without Landlord's prior written consent
shall be void and of no force or effect and shall not confer any estate or
benefit on anyone. Further, any such attempted or purported Assignment shall
entitle Landlord to immediately terminate this Lease and all further obligations
of Landlord hereunder. A consent to one (1) Assignment by Landlord shall not be
deemed to be a consent to any subsequent Assignment to any other party.
NO RELEASE: No Assignment, whether with or without Landlord's consent, shall
relieve Tenant or any guarantor hereunder from its covenants and obligations
under this Lease.
FORM: Any Assignment shall be evidenced by an instrument in writing in form
satisfactory to Landlord and shall be executed by the transferor, assignor,
sublessor, licensor, concessionaire, hypothecator or mortgagor and the
transferee, assignee, sublessee, licensee, concessionaire or mortgagee in each
instance, as the case may be. Further, Landlord shall be entitled to prorate
Minimum Annual Rental, Percentage Rental and Additional Rental to the effective
date of the Assignment and bill tenant for all such costs, which costs must be
paid by Tenant to Landlord within five (5) days of receipt of a bill for same,
but in no event later than the effective date of the Assignment. Notwithstanding
the foregoing, Tenant acknowledges that certain charges comprising Additional
Rental (including, without limitation, Tenant's share of Common Area Expenses,
merchants' association dues or Promotional Charges, as may be defined herein,
and Taxes payable by Tenant under this Lease may not have been calculated or
billed or, if applicable, reconciled or annually adjusted, as of the effective
date of the Assignment and that Tenant shall nonetheless be responsible for all
such charges attributable to any period prior to such effective date of the
Assignment and shall pay same to Landlord within ten (10) days after receipt of
a bill therefore.
FEES: Tenant shall pay to Landlord, as Additional Rental, concurrently with any
request for consent pursuant to Paragraph 2, a non-refundable fee of Two Hundred
Dollars ($200.00) as payment to Landlord for its review and processing of the
request. If Landlord does not consent to the proposed Assignee, the review and
processing fee shall not be applicable to any requests for consent submitted to
Landlord within 75 days of the date of Landlord's refusal to consent for which
the $200.00 fee was actually paid. If Landlord notifies Tenant that it does not
object to the proposed Assignment, Tenant shall, promptly upon receipt of such
notification, pay to Landlord the sum of Two Hundred dollars ($200.00) (or such
lesser or greater amount as Landlord reasonably requires) as reimbursement for
Landlord's attorneys' fees and costs incurred or to be incurred in connection
with the processing and documentation of Landlord's consent to the proposed
Assignment. The payment of such fee shall be a condition precedent to the
effectiveness of any consent thereafter granted by Landlord.
SUBLETTING: Not withstanding anything stated herein above Tenant shall have the
right to sublet 10,000 square feet of the subject premise without first
obtaining Landlord's consent.
ACKNOWLEDGEMENT: By placing their initials below, Landlord and Tenant hereby
certify that the provisions of this Article 17 have been freely negotiated.
Landlord:_____________ Tenant:____________
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18. EMINENT DOMAIN: If all or any substantial part of the premises shall be
taken or appropriated by any public or quasi-public authority under the power of
eminent domain, either party hereto shall have the right, at its option, to
terminate this Lease, and Lessor shall be p entitled to any and all income,
rent, award, or any interest therein whatsoever which may be paid or made in
connection with such public or quasi-public use or purpose, and Lessee shall
have no claim against Lessor for the value of any unexpired term of this Lease.
If a part of the premises shall be so taken or appropriated and neither party
hereto shall elect to terminate this Lease, the rental thereafter to be paid
shall be equitably reduced. Before Lessee may terminate this Lease by reason of
taking or appropriation as above provided, such taking or appropriation shall be
of such an extent and nature as to substantially handicap, impede or impair
Lessee's use of the premises. If any part of the building other than the
premises shall be so taken or appropriated, Lessor shall have the right, at its
option, to terminate this Lease and shall be entitled to the entire award, as
above provided.
19. INSURANCE: Lessee shall, at Lessee's expense obtain and keep in force during
the term of this Lease a policy of Combined Single Limit, Bodily Injury and
Property Damage insurance insuring Lessor and Lessee against any liability
arising out of the ownership, use, occupancy or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be a combined single limit
policy in an amount not less than $1,000,000. per occurrence. The policy shall
insure performance by Lessee of the indemnity provisions of this Article 20. The
limits of said insurance shall not, however, limit the liability of Lessee
hereunder.
Lessor shall obtain and keep in force during the term of this Lease a policy or
policies of insurance covering loss or damage to the Premises, in the amount of
the full replacement value thereof, against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief, flood
(in the event same is required by a lender having a lien on the Premises), and
special extended perils ("all risk" as such term is used in the insurance
industry). Said insurance shall provide for payment of loss thereunder to Lessor
or to the holders of mortgages or deeds of trust on the Premises. The Lessor
shall, in addition, obtain and keep in force during the term of this Lease a
policy of rental value insurance covering a period of one year, with loss
payable to Lessor, which insurance shall also cover all real estate taxes and
insurance costs for said period. A stipulated value or agreed amount endorsement
deleting the coinsurance provision of the policy shall be procured with said
insurance as well as a automatic increase in insurance endorsement causing the
increase in annual property insurance coverage by 2% per quarter. If the Lessor
shall fail to procure and maintain said insurance the Lessee may, but shall not
be required to, procure and maintain the same, but at the expense of Lessee. If
such insurance coverage has a deductible clause, the deductible amount shall not
exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount. The Lessor shall not insure Lessee's fixtures, equipment or tenant
improvements unless the tenant improvements have become a part of the Premises.
Insurance required hereunder shall be in companies holding a "General
Policyholders Rating" of at least B plus, or such other rating as may be
required by a lender having a lien on the Premises, as set forth in the most
current issue of "Best's Insurance Guide". The Lessee shall deliver to Lessor
certificates evidencing the existence and amounts of payable clauses as
required by this Article 20. No such policy shall be cancelable or subject to
reduction of coverage or other modification except after fifteen (15) days prior
notice to Lessor. Lessee shall, at least fifteen (15) days prior to the
expiration of such policies, furnish Lessor with renewals or "binder" thereof,
or Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee upon demand. Lessee shall not do or permit to
be done anything which shall invalidate the insurance policies referred to in
this Article 20. If Lessee does or permits to be done
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anything which shall increase the cost of the insurance policies obtained by
Lessor, then Lessee shall forthwith upon Lessor's demand reimburse Lessor for
any additional premiums attributable to any act or omission or operation of
Lessee causing such increase in the cost of insurance. Lessor shall deliver to
Lessee a written statement setting forth the amount of any such insurance cost
increase and showing in reasonable detail the manner in which it has been
computed.
20. INDEMNIFICATION BY LESSEE: Lessee shall indemnify and hold harmless Lessor
against and from any and all claims arising from Lessee's use of the Leased
Premises or the conduct of its business or from any activity, work, or thing
done, permitted, or suffered by the Lessee in or about the Leased Premises, and
shall further indemnify and hold harmless Lessor against and from any and all
claims arising from any breach or default in the performance of any obligation
on Lessee's part to be performed under the terms of this Lease, or arising from
any act, neglect, fault or omission of the Lessee, or of its agents or
employees, and from and against all costs, attorney's fees, expenses and
liabilities incurred in or about such claim or any action or proceeding brought
thereof and in case any action or proceeding be brought against Lessor by reason
of any such claim, Lessee upon notice from Lessor shall defend the same at
Lessee's expense by counsel reasonably satisfactory to Lessor. Lessee, as a
material part of the consideration to Lessor, hereby assumes all risk of damage
to property or injury to persons in or about the Leased Premises from any cause
whatsoever except that which is caused by the failure of Lessor to observe any
of the terms and conditions of this Lease and such failure has persisted for an
unreasonable period of time after written notice of such failure, the Lessee
hereby waives all claims in respect thereof against Lessor. The obligations of
Lessee under this section arising by reason of any occurrence taking place
during the term of this Lease shall survive any termination of this Lease.
21. PERSONAL PROPERTY TAXES: Lessee agrees to pay or cause to be paid, before
delinquency, any and all taxes levied or assessed during the term hereof upon
all equipment, furniture, fixtures, and other personal property located in the
premises; except that which may be owned by Lessor.
22. HOLDING OVER: If, without Lessor's consent, Lessee holds possession of the
premises after the term of this Lease, Lessee shall become a tenant from month
to month upon the terms herein specified but at a monthly rental equivalent to
the then prevailing rental rate established by Lessor pursuant to all of the
provisions applicable hereof, payable in advance on or before the first day of
each month, and Lessee shall continue in possession until such tenancy shall be
terminated by Lessor, or until Lessee shall have given to Lessor a written
notice at least one (1) month prior to the date of termination of such monthly
tenancy of his intention to terminate such tenancy.
23. ENTRY BY LESSOR: Lessor, on behalf of itself, its agents and employees,
reserves, and they shall at any and all times, have the right to enter the
Premises, and to inspect the same, to submit said Premises to prospective
purchasers, lenders or tenants, to post signs and notices of non-responsibility,
and to alter, improve or repair the Premises or any portion of the building of
which the Premises are a part that Lessor may deem necessary or desirable,
without abatement of rent or liability to Lessee. Lessor may erect scaffolding
and other structures where reasonably required by the character of the work to
be performed, always providing that the entrance to the Premises shall not be
blocked thereby, and further providing that the business of the Lessee shall not
be interfered with unreasonably. Lessee hereby waives any claim for damages or
for any injury or inconvenience to or interference with Lessee's business, and
loss of occupancy or quiet enjoyment of the Premises, and any other loss
occasioned thereby. For each of the aforesaid purposes, Lessor shall at all
times have and retain a key with which to unlock all of the doors in, upon and
about the Premises, excluding Lessee's vaults, safe and files, and Lessor shall
have the right to use any and all means which Lessor may deem proper to open
said doors in an emergency, in order to obtain entry to
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the Premises, without liability to Lessee except for any failure to exercise due
care for Lessee's property. Any entry to the Premises obtained by Lessor by any
of said means, or otherwise shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into, or a detainer of, the Premises,
or an eviction of Lessee from the Premises or any portion thereof. Lessor may
post "For Lease" signs of reasonable size upon the exterior front of the
Premises during the last ninety (90) days of the term of this Lease without
abatement of rent.
Any entry by Lessor pursuant to this provision shall not interfere with Tenant
access, it's business operation or it's quiet enjoyment therefore. Tenant shall
be entitled to a reasonable rent abatement in the event Lessor violates this
provision.
24. DEFAULT: The occurrence of any of the following shall constitute a material
default and breach of this Lease by Lessee:
(a) Any failure by Lessee to pay the rental or to make any other payments
required to be made by Lessee hereunder when due (where such failure continues
for five (5) days after written notice thereof by Lessor to Lessee) shall
constitute a default on the sixth (6th) day after notice should payments still
not have been received.
(b) The abandonment or vacation of the Premises by Lessee.
(c) A failure by Lessee to observe and perform any other provision of this Lease
to be observed or performed by Lessee, where such failure continues for fifteen
(15) days after written notice thereof by Lessor to Lessee; provided, however,
that if the nature of such default is such that the same cannot reasonable be
cured within such fifteen (15) day period, Lessee shall not be deemed to be in
default if Lessee shall prosecute the same to completion.
(d) The making by Lessee of any general assignment for the benefit of creditors;
the filing by or against Lessee of a petition to have Lessee adjudged a bankrupt
or of a petition for reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against Lessee, the same is
dismissed within sixty (60) days; the appointment of a trustee or receiver to
take possession of substantially all of Lessee's assets located at the Premises
or of Lessee's interest in this Lease, where possession is not restored to
Lessee within sixty (60) days; or the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where seizure is not discharged within sixty
(60) days.
Should any default occur hereunder, the defaulting party shall remedy the same
within fifteen (15) days after the receipt of written notice, except for the
nonpayment of rent, which shall constitute a default if not paid on the date
herein specified. On failure to remedy the default, then at the option of the
party not in default, this Lease shall terminate upon written notice of the
Lessor or Lessee.
25. REMEDIES: In the event of any breach of this Lease, which is not cured
within the applicable notice and cure period in Article 24 above, by Lessee,
then Lessor, besides other rights or remedies it may have, shall have the
immediate right of re-entry and may remove all persons and property from the
demised premises; such property may be removed and stored in a public warehouse
or elsewhere at the cost of, and for the account of Lessee. Should Lessor elect
to re-enter, as herein provided, or should it take possession pursuant to legal
proceedings, or pursuant to any notice provided for by law, it may either
terminate this Lease or it may, from time to time, without terminating this
Lease, re-let the demised premises, or any part thereof, for such term or terms
(which may be for a term extending beyond the term of this Lease) and at such
rental or rentals and upon such other terms and conditions as Lessor, in its
sole discretion, may deem advisable with the right to make alterations and
repairs to the demised premises; upon each such re-letting (a) Lessee shall be
immediately liable to pay to
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Lessor, in addition to any indebtedness other than rent due hereunder, the cost
and expenses of such re-letting and of such alterations and repairs, incurred by
Lessor, and the amount, if any, by which the rent reserved in this Lease for the
period of re-letting (up to but not beyond the term of this Lease ) exceeds the
amount agreed to be paid as rent for the demised premises for such period on
such re-letting; or (b) at the option of Lessor, rents received by such Lessor
from such re-letting shall be applied, first (lst) to the payment of any
indebtedness, other than rent due hereunder from Lessee to Lessor; second (2nd),
to the payment of any costs and expenses of such reletting and of such
alterations and repairs; third (3rd), to the payment of rent due and unpaid
hereunder and the residue, if any, shall be held by Lessor and applied in
payment of future rent as the same may become due and payable hereunder. If
Lessee has been credited with any rent to be received by such re-letting under
option (a), and such rent shall not be promptly paid to Lessor by the new
Lessee, or if such rentals received from such re-letting under option (b) during
any month be less than that to be paid during that month by Lessee hereunder,
Lessee shall pay any such deficiency to Lessor. Such deficiency shall be
calculated and paid monthly. No such re-entry or taking possession of the
demised premises by Lessor shall be construed as an election on its part to
terminate this Lease, unless a written notice of such intention be given to
Lessee, or unless the termination thereof be decreed by a court of competent
jurisdiction. Notwithstanding any such re-letting without termination, Lessor
may at any time thereafter elect to terminate this Lease for such previous
breach. Should Lessor at any time terminate this Lease for any breach, in
addition to any other remedy it may have, it may recover from Lessee all damages
it may incur by reason of such breach, including the cost of recovering the
demised premises, and including the worth at the time of such termination of the
excess, if any, of the amount of rent and charges equivalent to rent reserved in
this Lease for the remainder of the stated term over the then reasonable rental
value of the demised premises for the remainder of the stated term, all of which
amounts shall be immediately due and payable from Lessee to Lessor.
26. REPRESENTATIONS: Lessee does hereby acknowledge that it has read each and
every provision of this Lease, and enters into this Lease in reliance upon its
own inspection thereof, rather than upon any representation of Lessor. Except as
may be otherwise herein provided, Lessee shall, by entering into and occupying
the demised premises, be deemed to have accepted the demised premises and to
have acknowledged that the same are as represented by Lessor and in good order,
condition and repair.
Lessee acknowledges that neither Lessor nor any agent of Lessor has made any
representation or warranty to Lessee concerning the suitability of the premises
to the conduct of Lessee's business.
27. SALE BY LESSOR: In the event of a sale, foreclosure by trust deed holders,
or conveyance by Lessor of the building containing the premises, the same shall
operate to release Lessor from any future liability upon any of the covenants or
conditions, express or implied, herein contained in favor of Lessee, and in such
event Lessee agrees to look solely to the responsibility of the successor in
interest of Lessor in and to this Lease. This Lease shall not be affected by any
such sale, and Lessee agrees to attorn to the purchaser, assignee, or mortgagee.
28. SUBORDINATION: Upon request of the Lessor, Lessee will in writing
subordinate its rights hereunder to the lien of any mortgage or deed of trust,
to any bank, insurance company or other lending institution, now or hereafter in
force against the Premises, and to all advances made or hereafter to be made
upon the security thereof. In the event any proceedings are brought for
foreclosure, or in the event of the exercise of the power of sale under any
mortgage or deed of trust made by the Lessor covering the Premises, the Lessee
shall attorn to the purchaser upon any such foreclosure or sale and recognize
such purchaser as the Lessor under this Lease.
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The provisions of this Article to the contrary notwithstanding, and so long as
Lessee is not in default hereunder, this Lease shall remain in full force and
effect for the full term hereof.
Tenant's obligation to subordinate shall be conditional upon Lessor providing to
Tenant a satisfaction non-disturbance agreement from any new lender.
29. ATTORNEY'S FEES: In the event either Lessor or Lessee shall bring any action
or proceeding for any alleged rents, or to enforce, protect, or establish any
right or remedy of either party, the prevailing party shall be entitled to
recover as part of, or incident to, such action or proceeding, all attorneys'
fees and other costs incurred in connection with such action or proceeding.
30. SURRENDER OF PREMISES: Lessee agrees, that on the last day of the term
hereof or sooner termination of this Lease, to surrender the Premises to Lessor
in the same condition as when received,, broom clean, except any changes or
alterations mutually agreed upon by the parties during the term of the Lease,
reasonable use and wear thereof and damage by fire, act of God, or by the
elements excepted. The voluntary or other surrender of this Lease by Lessee, or
a mutual cancellation thereof, shall not work a merger, and shall, at the option
of Lessor, terminate all or any existing sub-leases or sub-tenancies, or may, at
the option of Lessor, operate as an assignment to Lessor of any or all of such
sub-leases or sub-tenancies.
31. NON-WAIVER: The waiver by either Lessee or Lessor of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition of any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of rent
hereunder by Lessor shall not be deemed to be a waiver of any preceding breach
by Lessee of any term, covenant or condition of this Lease, regardless of
Lessor's knowledge of such preceding breach at the time of acceptance of such
rent.
Any provisions of this Lease determined to be invalid by a court of competent
jurisdiction shall in no way affect any other provision hereof.
32. NOTICES: All notices and demands which may or are to be required or
permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Lessor to the Lessee shall be sent by
United States Mail, postage prepaid, addressed to the Lessee at the Premises, or
to such other place as Lessee may from time to time designate in a notice to the
Lessor, and a copy of Lessee's notice shall be sent to Planet Kids, Inc., a
California Corporation, at 1990 Westwood Blvd., Penthouse, Los Angeles, CA
90025. All notices and demands by the Lessee to the Lessor shall be sent by
United States Mail, postage prepaid, addressed to the Lessor at 30001 Crown
Valley Parkway, Laguna Niguel, CA 92677, or to such other person or place as the
Lessor may from time to time designate in a notice to the Lessee.
33. TITLES AND CAPTIONS: The title or captions of the Paragraphs of this Lease
are for reference purposes only and have no effect upon the construction or
interpretation of any part hereof. The use herein of the singular includes the
plural and vice versa, and the use herein of the neuter gender includes the
masculine and the feminine and vice versa, whenever and wherever the context so
requires.
34. TIME: Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.
35. SUCCESSORS: The terms and provisions of this Lease shall be binding upon and
inure to the benefit of the heirs, executors, administrators, successors, and
assigns of Lessor and Lessee.
36. FINANCIAL STATEMENTS: Lessee shall provide Lessor with a current financial
statement and/or credit information prior to the signing of this Lease. Lessee
shall also provide Lessor, upon request, with its
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current financial statement or credit information during the term of this Lease
and extensions. Any such subsequent requests shall only be made for the purpose
of financing or transferring ownership of the property of which the premises are
a part. All such financial statements shall be received by Lessor in confidence
and shall be used only for the purposes herein set forth.
37. PLATS AND RIDERS: Clauses, plats and riders, if any, signed by Lessor and
Lessee and endorsed on or affixed to this Lease are a part hereof.
38. BREACH BY LESSOR: Lessor shall be in breach of this Lease if at any time
during the term of this Lease it fails to observe or perform any of its
covenants, agreements or obligations hereunder and such notice to Lessor of such
failure; provided, however, that if the nature of Lessor's obligation is such
that more than thirty (30) days are required for performance, then Lessor shall
not be in breach if Lessor commences performance within such thirty (30) period
and thereafter diligently prosecutes the same to completion.
39. AUCTIONS: Lessee shall not conduct or permit to be conducted any sale by
auction in, upon or from the demised premises, whether said auction be
voluntary, involuntary, pursuant to any assignment for the benefit of creditors
or pursuant to any bankruptcy or other insolvency proceeding.
40. ESTOPPEL CERTIFICATE: Within twenty (20) days after request by Lessor,
Lessee shall execute, acknowledge, and deliver to Lessor a statement in writing
(a) certifying that this Lease is unmodified and in full force and effect, or if
modified, is in full force and effect and the date to which the rent and other
charges are paid in advance, if any, and (b) acknowledging that there are not,
to Lessee's knowledge, any uncured defaults on the part of Lessor hereunder, or
specifying such defaults if any are claimed. Any such statement may be
conclusively relied upon by Lessor and any prospective purchaser or encumbrancer
of the Premises.
Lessee's failure to deliver such statement within such time shall be conclusive
upon Lessee (a) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (b) that there are no
uncured defaults in Lessor's performance, and (c) that not more than one (1)
month's rent has been paid in advance.
Lessee.shall have the right to request an Estoppel Certificate from Lessor in
the same manor as stated for Lessor.
41. RECONSTRUCTION: In the event the premises or the building of which the
premises are a part are damaged by fire or other perils covered by extended
coverage insurance, Lessor agrees to forthwith repair the same; and this Lease
shall remain in full force and effect, except that Lessee shall be entitled to a
proportionate reduction of rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs shall interfere with the business carried on by Lessee in the Premises.
In the event the premises or the building of which the premises are a part are
damaged as a result of a cause other than the perils covered by fire and
extended coverage insurance, then Lessor shall forthwith repair the same,
provided the extent of the destruction be less than twenty-five percent (25%) of
the then full replacement value of the premises or the building of which the
premises are a part. In the event the destruction of the premises or of the
building is to an extent greater than the twenty-five percent (25%) of the then
full replacement value, then Lessor shall have the option either:
(a) to repair or restore such damage, this Lease continuing in full force and
effect, but the rent to be proportionately reduced as hereinabove in this
paragraph provided; or,
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(b) to give notice to Lessee at any time within thirty (30) days after such
damage, terminating this Lease as of the date specified in such notice, which
date shall be no less than thirty (30) days and no more than sixty (60) days
after the giving of such notice. In the event of giving of such notice, this
Lease shall expire and all interest to the Lessee in the premises shall
terminate on the date so specified in such notice and the rent, reduced by any
proportionate reduction, based upon the extent, if any, to which such damage
interfered with the business carried on by Lessee in the premises, shall be paid
up to date of such termination.
Notwithstanding anything to the contrary contained in this paragraph, Lessor
shall not have any obligation whatsoever to repair, reconstruct or restore the
premises when the damage resulting from any casualty covered under this
paragraph occurs during the last twelve (12) months of the term of this Lease or
any extension thereof.
Lessor shall not be required to repair any injury or damage by fire or other
cause, or to make any repairs or replacements of any panels, decoration, office
fixtures, railing, ceiling, floor covering, partitions, or any other property
installed in the premises by Lessee.
42. DEPOSIT AGREEMENT: Lessor and Lessee hereby agree that Lessor shall be
entitled to immediately endorse and cash Lessee's good faith rent and security
deposit check(s) accompanying this Lease. It is further agreed and understood
that such action shall not guarantee acceptance of this Lease by Lessor but in
the event Lessor does not accept this Lease, the deposit shall be refunded in
full to Lessee. This Lease shall be effective and Lessee shall be permitted to
occupy the Premises only after Lessee has received a copy fully executed by
Lessor.
43. SIGNS: Lessee shall install and maintain in good repair a store front sign,
at its sole cost and expense including the cost of electricity therefor,
provided that Lessee complies with the following conditions in connection
therewith: (a) prior to installation of such sign, Lessee at its sole cost and
expense, is to obtain from the governmental authorities having jurisdiction
thereof, all approvals necessary for the installation, erection and maintenance
of such sign; (b) Lessor shall have approved, in writing, Lessee's plans for its
sign as to dimension, content, material, location and design prior to the
erection thereof; and (c) such sign when installed shall comply with all
requirements of governmental authority having jurisdiction thereof. Lessee shall
not have the right to install any sign(s) in the parking areas or elsewhere in
or on the Premises or in the Center except as provided in this Paragraph. Lessee
agrees that it will not place on the roof or any exterior wall (including both
the interior and exterior surfaces of windows and doors) of the Premises any
sign, symbol, advertisement, neon, flashing or other light, shade, or any other
object or thing visible to public view outside of the Premises, without first
obtaining Lessor's approval as to whether the same shall be so installed or
placed and, if so, as to the location, number, type and appearance of each
thereof. Lessee shall not alter or modify sign in any way except with Lessor's
approval.
44. PARKING: Lessee shall have the right to use the parking lot located in the
common area adjacent to said building for the parking of motor vehicles, only in
accordance with, and subject to such rules and regulations as Lessor may adopt
from time to time for the orderly operation of said parking area.
45. PARKING LOT MAINTENANCE: Lessor shall periodically, on an "as needed" basis,
conduct maintenance and repairs to the parking lot, including resealing,
repairing holes, maintaining striping etc.. Lessee agrees to reimburse Lessor
for its proportionate share of all such costs incurred, which shall be included
as additional rent on Exhibit A.
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46. LANDSCAPING: Lessor shall maintain and refurbish when necessary, all
landscaping in the shopping center and Lessee shall reimburse Lessor its
proportionate share of all such costs, which shall be included as additional
rent on Exhibit A.
47. UNAVOIDABLE DELAY: If either party shall be delayed or prevented from the
performance of any act required by this Lease by reason of acts of God, strikes,
lockouts, labor troubles, inability to procure materials, restrictive
governmental laws, or regulations or other cause, without fault and beyond the
reasonable control of the party obligated (financial inability excepted),
performance of such act shall be excused for the period of the delay; and the
period for the performance of any such act shall be extended for a period
equivalent to the period of such delay, provided, however, nothing in this
paragraph shall excuse Lessee from the prompt payment of any rental or other
charge required of Lessee except as may be expressly provided elsewhere in this
Lease.
48. CORPORATIONS: Should the Lessee be a corporation, all signatories for the
corporate Lessee warrant that any such signatories have all the necessary
corporate authority to enter into this Lease agreement and assume all liability
in their individual capacities for guaranteeing such corporate authority.
49. RECORDING: Should this Lease be recorded with the County Recorder's Office,
any such recording will be subordinated to all trust deeds that may be placed on
the property and all required easements by municipal authorities or utility
companies.
50. AIR CONDITIONING ADEQUACY: Heating and air conditioning installation has
been designed for normal usage and Lessor does not warranty the adequacy of such
installation for high requirement uses such as, but not limited to, restaurants.
Lessee at Lessee's expense, shall increase the capacity of the heating and air
conditioning systems as may be required by Lessee's special usage of the
premises.
51. PRIOR AGREEMENTS: This lease contains the entire agreement of the parties
hereto and any and all oral and written agreements, understanding,
representations, warranties, promises and statements of the parties hereto and
their respective officers, directors, partners, agents and brokers with respect
to the subject matter of this lease and any matter covered or mentioned in this
lease shall be merged in this lease and no such prior oral or written agreement,
understanding, representation, warranty, promise or statement shall be effective
or binding for any reason or purpose unless specifically set forth in this
lease. No provision of this lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective successors
in interest. This Lease shall not be effective or binding on any party until
fully executed by both parties hereto.
52. OPTION: Lessee shall have the right, to be exercised as hereinafter
provided, to extend this Lease for 3- five (5) year options provided no default
is existing or continuing in the performance of any of the terms of this Lease,
at the time of exercise, or at commencement of, this Option Term. Lessee shall
exercise its right to a renewal in the following manner:
At least ninety (90) days, but not earlier than one hundred and eighty (180)
days, prior to the expiration of the initial term, Lessee shall notify Lessor in
writing of its election to exercise this Option Term. Lessee shall have the
right to exercise it's option to renew earlier that 180 days prior to the
expiration of the initial term provided Lessor gives notice to Lessor in writing
via certified mail, return receipt requested
The Base Monthly Rental as set forth in this Lease shall be increased on the
first day of each five year option period. The first adjustment will be made by
consulting the Consumer Price Index published by the
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Bureau of Labor Statistics, U.S. Government, using the CPI-U Los
Angeles-Anaheim-Riverside, year 1982-84=100. Whatever percentage increase
occurs each sixty (60) months will be added to the base monthly rent for the
ensuing sixty (60) month period. In no case shall the rent fall below the most
recent adjusted rent.
Should the bureau discontinue the publication of the above Index, or publish
same less frequently, or alter same in some other manner, then Lessor shall
adopt a substitute index or substitute procedure which reasonably reflects and
monitors consumer prices.
However, the rent payable shall in no event be less than the rent payable during
the last year of the initial term, increased by not less than the increase in
the consumer Price Index since the last sixty (60) months of the initial term as
published by the Bureau of Labor Statistics of the United States Department of
Labor CPI-U Los Angeles-Anaheim-Riverside, year 1982-84=100, or a successor or
substitute index appropriately adjusted if such index ceases to be published;
and the escalations shall in no event be less than those detailed in the lease
for the initial term.
The Base Rent for each option period shall not be increased more than 15% for
the ensuing five (5) years.
The Security Deposit will be adjusted to the equivalent of one month's rent for
the first year of the Option Term. Upon giving of such notice in the first
paragraph hereof and agreement of rental as described in the second paragraph
hereof, Lessor and Lessee shall exercise an Addendum to this Lease specifying
such agreement, and this Lease, subject to the terms of this provision, shall be
deemed to be renewed and the terms hereof renewed for a period of five (5) years
from date of the expiration of the initial term and the other terms of this
Lease shall continue in full force and effect during said Option Term without
the execution of any further lease or instrument.
In the event the Lessee does not operate the business or maintain the premises
(including fixtures, fittings and merchandise) in a manner consistent with the
shopping center, the Lessor reserves the right not to grant the Option Term,
such right not to be unreasonably withheld.
53. BASE RENT ABATEMENT: Lessee is granted 120 days free Base Rent. Although
Lessee has been given free Base Rent, Lessee shall pay all Additional Rent (as
provided for in Paragraph 5) during the free Base Rent period. The entire Base
Rent otherwise due and payable for the rent abatement period shall become
immediately due and payable upon occurrence of an event of default by Lessee
under this Lease during the first year of this Lease Term.
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IN WITNESS WHEREOF, the parties hereto have duly executed this instrument this
29th day of June, 1995.
LESSEE: /s/Harry Shuster
-------------------------------
Harry Shuster, President
Planet Kids, Inc. A
California Corporation
Residence Address: 8800 Irvine Center, Irvine, CA 92718 Residence phone number,
if needed in an emergency: (714) 837-1200
LESSOR: /s/Chandelle Humphries
------------------------------
Chandelle Humphries, Trustee
Magnolia Square
<PAGE>
GUARANTY OF LEASE
THIS GUARANTY OF LEASE is executed as of June 29, 1995 by United
Leisure Corporation (collectively, "Guarantors") in favor of ("Landlord"), with
reference to the following facts:
A. Landlord, as landlord, and Planet Kids, Inc., a California
Corporation, as tenant ("Tenant") , are about to execute that certain Shopping
Center Lease dated June 29, 1995 (the "Lease") covering certain premises (the
"Premises") described therein situated at California.
B. Landlord has required as a condition precedent to the execution of
the Lease that Guarantors execute and deliver to Landlord this Guaranty of
Lease.
NOW, THEREFORE, IN CONSIDERATION OF the execution of the Lease by
Landlord and as a material inducement to Landlord to execute the Lease,
Guarantors hereby agree as follows:
1. Guarantors hereby jointly and severally unconditionally guarantee to
Landlord and its successors and assigns, without deduction by reason of setoff,
defense or counterclaim, the timely payment of all amounts that Tenant may at
any time owe under the Lease, or any extensions, renewals or modifications of
the Lease, and further guarantee to Landlord the full, faithful and timely
performance by Tenant of all of the covenants, terms and conditions of the
Lease, or any extensions, renewals or modifications of the Lease (collectively,
tenant's Obligations"). If Tenant shall fail at any time to pay any rent or any
other sums, costs or charges whatsoever, or to perform any of the other
covenants and obligation of Tenant under the Lease, then Guarantors, at there
expense, shall on demand by Landlord fully and promptly pay all rent, sums,
costs and charges to be paid and perform all other covenants and obligations to
be performed by Tenant under or pursuant to the Lease, and in addition shall on
demand by Landlord pay to Landlord any and all sums due to Landlord, including,
without limitation, all interest on past due obligations of Tenant, costs
advanced by Landlord, damages and all expenses (including, without limitation,
court costs and reasonable attorneys' fees) incurred by, Landlord that may arise
in consequence of Tenant's default under the Lease and in seeking to enforce
this Guaranty of Lease.
2. The obligations of Guarantors hereunder are independent of the
obligations of Tenant. A separate action or actions may, at Landlord's option,
be brought and prosecuted against Guarantors individually or jointly, whether or
not any action in first or subsequently brought against Tenant, or whether or
not Tenant is joined in any such action, and Guarantors may be joined in any
action or proceeding commenced by Landlord against Tenant arising out of, in
connection with or based upon the Lease. Guarantors hereby waive all right to
assert or plead at any time any statute of limitations as relating to the Lease,
the obligations of Guarantors hereunder and any and all surety or other defenses
in the nature thereof including, without limitation,
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the provisions of California Civil Code Section 2845 or any similar, related or
successor provision of law. In addition, Guarantors ' hereby waive any rights to
(a) require Landlord to proceed against Tenant or any other person or entity or
pursue any other remedy in landlord's power whatsoever, (b) complain of delay in
the enforcement of Landlord his rights under the Lease or under this Guaranty;
and (c) require Landlord to proceed against or exhaust any security held from
Tenant or Guarantors. Guarantors waive any defense arising by reason of any
disability or other defense of Tenant or by reason of the cessation from any
cause whatsoever of the liability of Tenant. Guarantors waive all demand upon
and notices to Tenant and to Guarantors, including, without limitation, demands
for payment or performance, and notices of nonperformance or nonpayment.
3. Any act of Landlord, or its successor* or assigns, consisting of a
waiver of any of the terms or conditions of the Lease, or the giving of any
consent to any matter or thing relating to the Lease, or the granting of any
indulgences or extensions of time to Tenant, may be done without notice to
Guarantors and without releasing Guarantors from any of their obligations
hereunder.
4. Guarantors' liability hereunder shall in no way be affected by (a)
the release or discharge of Tenant in any creditors, receivership, bankruptcy or
other proceeding (b) the impairment, limitation or modification of the liability
of Tenant, or the estate of Tenant in bankruptcy, or of any remedy for the
enforcement of Tenant liability under the Lease resulting from the operation of
any present or future provision of the Bankruptcy Code or any successor statute
or any other statute or from the decision of any court; (c) Landlord's receipt,
application or release of any security given for Tenant's performance and
observance of Tenant's Obligations (d) the rejection or disaffirmance of the
Lease in any such proceedings,, (e) the assignment or transfer of the Lease or
subletting of the Premises by Tenant; (f) the assignment or transfer of the
Lease or this Guaranty of Lease by Landlord; (g) the exercise by Landlord of any
of its rights or remedies reserved under the Lease or by law; or (h) any
termination of the Lease,
5. Until all of Tenant's obligations are fully performed and observed,
Guarantors (a) shall have no right of subrogation against Tenant by reason of
any payments or acts of performance by Guarantors hereunder, and (b) subordinate
any liability or indebtedness of Tenant now or hereafter held by Guarantors to
the obligations.of Tenant to Landlord under the Lease.
6. This instrument constitute* the entire agreement between Landlord
and Guarantors with respect to the subject matter hereof.
7. This Guaranty shall be governed by and construed in accordance with
the laws of the State of California.
8. Should Landlord desire to give any notice to Guarantors, such notice
shall be in writing and may be given by personal service or by . certified or
registered mail, postage prepaid, return receipt requested, to Guarantors at the
respective addresses indicated below. Guarantors -may by written notice given in
the manner described in the preceding sentence designate a different address for
notice purposes. Any notice sent by mail shall be deemed delivered within
seventy-two (72) hours after mailing.
9. Any action to declare or enforce any rights or
Page 2 of 3
<PAGE>
obligations under this Guaranty may be commenced by Landlord in the Superior
Court of Laii Ancleles County. Guarantors hereby consent to the jurisdiction of
such court for such purposes and agree that any notice, complaint or other legal
process therein may be delivered to Guarantors in accordance with the above
notice provisions and that any notice, complaint or other legal process so
delivered shall constitute adequate notice and service of processing for all
purposes and shall subject Guarantors to the jurisdiction of such Court for
purposes of adjudicating any %matter related to this Guaranty. *
IN WITNESS WHEREOF, Guarantors have executed this Guaranty of Lease as
of the date first written above.
Address: United Leisure Corporation
8800 Irvine Center Drive
- - -------------------------------------
/s/Harry Shuster
- - ------------------------------------- -----------------------------------
Harry Shuster, President
Irvine, California
- - ------ ----------------------------
Landlord-Received
Address: /s/Chandelle Humphries
-----------------------------------
Chandelle Humphries, Trustee
- - -------------------------------------
- - -----, -----------------------------
* Notwithstanding anything to the contrary set forth in this Guaranty,
Guarantor does not waive any rights it may have to require Landlord co (I)
proceed against Tenant, (ii) proceed against or exhaust any security that
Landlord holds from Tenant or (iii) pursue any other remedy In Landlord's
power. accordingly, Landlord must first exhaust all of its rights and
remedies against Tenant before it may proceed against Guarantor under this
Guaranty, so long as such efforts appear to have a reasonable chance of
success, as determined by Landlord in its sole discretion.
Page 3 of 3
<PAGE>
TERRITORY RIGHTS AGREEMENT
--------------------------
AGREEMENT, dated ____________, by and between PLANET KIDS, INC., a
California corporation, hereinafter referred to as "Planet Kids", and PT. PLANET
KIDSINDO a Jakarta, Indonesia entity, hereinafter referred to as "Territory
Rights Holder".
WITNESSETH:
1. Recitals of Facts:
(a) Planet Kids owns and controls certain secret formulas, processes,
copyrights and trademarks for the purpose of conducting wholesale and retail
businesses, and has developed many original, new and distinctive plans for the
establishment and development of indoor multimedia, interactive play centers for
children (hereinafter referred to as "the facility" or "facilities.")
(b) Planet Kids has developed techniques for the promotion, sale and
merchandising of its products, services and related items which are being
offered and may be offered through locations operating under the name of Planet
Kids.
(c) In order to advertise and promote its trade name, products and
services sold thereunder, and to enhance the value of the good will attached
thereto as well as to advertise, identify and enhance the value of Planet Kids,
Planet Kids has designed, developed, engineered and adopted a standard, unique
and uniform plan and style for the construction and operation of such Planet
Kids which includes, among other things, and without limitation, engineering for
highest efficiency of operation of said facilities, complete design and
programming of equipment, paper products, operating methods, construction,
control systems, bookkeeping, accounting, delivery and freight systems, and for
creating the greatest sales appeal, the design and programming of advertising,
sales techniques, signs, interior and exterior design and decor, uniforms, and
procedures and training of personnel and management.
(d) Planet Kids now owns and operates indoor, multimedia, interactive
children's play centers, as above described under the name of "Planet Kids" and
intends to own, operate and franchise other such facilities.
(e) Territory Rights Holder desires to obtain exclusive territory
rights to operate "Planet Kids" within the territory hereinafter described and
Planet Kids is willing to grant such rights to Territory Rights Holder upon the
terms and conditions hereinafter set forth.
IN CONSIDERATION OF THE MUTUAL PROMISES and other consideration as
described herein, the parties do hereby agree as follows:
1
<PAGE>
GRANT OF RIGHTS
1. Territory. Planet Kids hereby grants to Territory Rights Holder, and
Territory Rights Holder hereby accepts from Planet Kids upon the terms and
conditions hereinafter set forth, an exclusive territory and exclusive rights
for the operation of Planet Kids within the following territory area
(hereinafter referred to as the "Territory") described as follows:
All of the Territory contained within the boundaries of Indonesia, Hong Kong,
Singapore, Malaysia, Taiwan, China and Philippine.
It is agreed that this Territory Rights Agreement and the rights
granted hereunder pertain only to the establishment and operation of Planet
Kids. Nothing herein contained shall be construed to grant Territory Rights
Holder any right to sell Planet Kids' products other than at a Planet Kids
established under this Agreement.
2. Term. The term of this Agreement shall be in perpetuity unless
sooner terminated under the provisions of this Agreement.
3. Rights Granted. The rights hereby granted constitute all rights
necessary in the Territory to operate Planet Kids within the hereinabove
described Territory. In no event is this Agreement to be construed to grant the
right to Territory Rights Holder to give others the right to operate or to grant
operating rights for Planet Kids; provided, however, that nothing herein
contained shall prevent the Territory Rights Holder from entering into ventures
with local partners in the areas in which Planet Kids are opened and operated,
so long as the Territory Rights Holder maintains no less than a 25% ownership
and voting interest in the venture and the rights and obligations hereunder are
an obligation of the venture. Except as set forth in the immediately preceding
sentence, Territory Rights Holder alone has the right to operate a Planet Kids
and to use Planet Kids' trade name, good will and trade secrets in the operation
of Planet Kids solely within the Territory, and in strict compliance with the
terms hereof, No other facility by any other name, in which Territory Rights
Holder may have any interest, shall serve or advertise any products, programs,
games, software or anything else created by Planet Kids, nor use any of Planet
Kids trade secrets.
It is expressly agreed that the ownership of all right, title and
interest in and to said trade name, good will and trade secrets is and shall
remain vested solely in Planet Kids and nothing herein contained shall be
construed to require Planet Kids to divulge any of the secret processes,
formulas, software codes or proprietary technology.
In addition to the rights granted above, Planet Kids expressly
acknowledges that the entity designated herein as Territory Rights Holder may
transfer sufficient ownership in the business to decrease its ownership to 25%
of voting control, in the event of a public offering, joint venture or other
transaction designed to aid in the growth of the business. Furthermore, PT.
PLANET KIDSINDO shall have the right to transfer all its rights and
2
<PAGE>
obligations hereunder to an associate or affiliated company at any time within
90 days of the date of this Agreement; provided, however, that such associate or
affiliated company has a net capitalization of approximately $1,000,000. The
obligations of Territory Rights Holder shall be owed by the business to Planet
Kids, regardless of any such change in ownership.
4. Development Fees. Territory Rights Holder agrees to pay to Planet
Kids an aggregate initial development fee under this Agreement in the amount of
$100,000 U.S., consisting of a payment of 50% upon the execution and delivery of
this Agreement and a payment of the balance of 50% upon the earlier to occur of
(a) the transfer by PT. PLANET KIDSINDO of all its rights and obligations
hereunder to an associate or affiliated company as provided in Article I,
Section 3 of this Agreement, or (b) the expiration of ninety (90) days from the
date of execution of this Agreement.
5. Rights Fees. Territory Rights Holder agrees to pay Planet Kids a
rights fee with respect to the first Planet Kids to be opened by it of $40,000
U.S., payable in cash, by wire transfer or by cashier's check no later than
seven days after the date of the opening. With respect to the second and third
Planet kids opened by the Territory Rights Holder, the Territory Rights Holder
shall pay to Planet Kids, as rights fees, the sum of $40,000, respectively, in
each case in cash, by wire transfer or by cashier's check no later than seven
days after the opening of each such facility. For all subsequent facilities
openings by the Territory Rights Holder, the Territory Rights Holder shall pay
to Planet Kids a rights fee of $40,000 on the same terms as set forth above.
6. Out-of-pocket Expenses. It is hereby agreed that the Territory
Rights Holder shall pay, through prompt reimbursement, or otherwise, the
out-of-pocket expenses incurred by Planet Kids and its personnel in carrying out
the duties set forth in Article IV, Section I of this Agreement as follows:
(a) With respect to the President of Planet Kids, Territory Rights
Holder shall pay all out-of-pocket expenses, including first class airline
tickets, five-star hotel and other lodging expenses, daily living expenses and
the like; and
(b) With respect to other Planet Kids personnel, Territory Rights
Holder shall pay all business class airline tickets, four- star hotel regular
room accommodations, and a per diem of U.S. $100 to cover other ordinary daily
living expenses.
FINANCIAL OBLIGATIONS TO PLANET KIDS
1. Advances. Territory Rights Holder shall pay to Planet Kids all
amounts advanced, if any, by Planet Kids for and on behalf of the Territory
Rights Holder in accordance with the terms of this Agreement.
2. Perpetual Territory Operations Fee. Beginning on the first Monday
following the end of the first month during which the first, second and third
Planet Kids are opened
3
<PAGE>
in the Territory, and on the first Monday of each and every month thereafter
during the term of this Agreement, and any extension hereof, Territory Rights
Holder shall pay a perpetual operations fee to Planet Kids equal to five percent
(5%) of all gross sales from the first facility during the preceding month, a
perpetual operations fee to Planet Kids equal to 5% of all gross sales from the
second facility during the preceding month, and a perpetual operations fee to
Planet Kids equal to 5% of all gross sales from the third facility during the
preceding month. With respect to all facilities opened subsequent to the first
three facilities identified above, beginning on the first Monday following the
end of the month during which each such Planet Kids is opened in the Territory,
and on each and every first Monday of the month thereafter during the term of
this Agreement, and any extension hereof, the Territory Rights Holder shall pay
a perpetual operations fee to Planet Kids equal to 5% of all gross sales from
each such facility during the preceding month.
Payments are to be mailed to the address hereinafter designated and all
payments shall be accompanied by a "Monthly Report" on a form specified by
Planet Kids, summarizing sales information for the preceding month for all
Planet Kids in the Territory.
3. Other Charges As Set Out in This Agreement. Territory Rights Holder
shall pay to Planet Kids other charges as heretofore or hereinafter set out in
the terms of this Agreement.
DUTIES OF TERRITORY RIGHTS HOLDER
1. Compliance with Laws, Rules, Policies and Procedures. Territory
Rights Holder agrees to operate all Planet Kids in strict compliance with all
applicable laws, rules and regulations of duly constituted governmental
authorities, and in strict compliance with the standard operating policies and
procedures established by Planet Kids, now in existence or which from time to
time may be revised, added to, or subtracted from by Planet Kids. It is
understood that in addition to other matters, the standard operating policies
and procedures will specify design, decoration and decor of Planet Kids, the
type and layout of equipment, minimum hours of operation, menus, design and
colors of all materials and uniforms, standards of service, standards of
sanitation, and in general, will govern all other matters which in Planet Kids'
judgment requires standardization in all Planet Kids. Territory Rights Holder
shall not vary any of such standard operating policies and procedures without
Planet Kids prior written consent. In the event variance is required, on account
of local customs, conditions or otherwise, consent will not be unreasonably
withheld by Planet Kids.
2. Accounting Methods. Territory Rights Holder shall use the method of
accounting designated by Planet Kids including the statements and reports as are
required by Planet Kids. Territory Rights Holder shall furnish to Planet Kids
copies of the statements and reports required of Territory Rights Holder by
Planet Kids, including but not limited to, complete monthly operating statements
and quarterly balance sheets.
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<PAGE>
3. Future Planet Kids. Territory Rights Holder shall advise Planet Kids
as soon as possible as to proposals for locations to establish future Planet
Kids.
4. Inspections by Planet Kids. Planet Kids and its authorized agents
shall be permitted to inspect the premises, books and records of any Planet Kids
at any time during normal business hours. All records relating to gross sales,
including cash register tapes, shall be preserved for a minimum of three years
and for such additional period as may be required by law.
5. Required Establishment of Planet Kids. Within the Territory as an
express condition for the continuation of this Agreement, Territory Rights
Holder agrees to establish at least two Planet Kids in Indonesia within five (5)
years following the execution and delivery of this Agreement. Upon the execution
and delivery of this Agreement, the Territory Rights Holder shall proceed
immediately with preparations to open the first Planet Kids in Hong Kong, and
such facility shall be opened no more than 12 months from the date hereof.Planet
Kids agrees that if Territory Rights Holder is unable to open the first Planet
Kids in Hong Kong during such 12-month period it may substitute another location
within the Territory for opening within such time frame. In any event, however,
Territory Rights Holder shall open at least one Planet Kids in Hong Kong within
24 months of the date hereof. The parties expressly acknowledge that the
foregoing requirements with respect to each individual country or territory
shall not alter or amend the general requirement that the Territory Rights
Holder establish and open at least two Planet Kids during the first five (5)
years following the execution and delivery of this Agreement. If the Territory
Rights Holder meets the schedule set forth above, it shall not be required to
pay any additional development fees to Planet Kids. Additional Planet Kids, over
and above those identified above, may be established within the Territory at the
option of the Territory Rights Holder.
In the event that at any time the Territory Rights Holder fails to meet
the development schedule set forth in the preceding paragraph, then the
Territory Rights Holder, without notice or any other act on behalf of Planet
Kids, shall automatically forfeit all rights to establish and open Planet Kids
in any country or territory granted to the Territory Rights Holder hereunder but
not yet developed. Furthermore, the Territory Rights Holder shall immediately
forfeit all fights to exclusivity within the territories or countries in which a
Planet Kids has been established and opened to that point.
SERVICES OF PLANET KIDS
1. Development, Training and Architectural Services. It is hereby
agreed by the parties to this Agreement that in order for the development
contemplated by this Agreement to be successful Planet Kids shall be required to
provide significant development and training services to the Territory Rights
Holder in connection with the
5
<PAGE>
opening of the first Planet Kids hereunder and thereafter. Planet Kids shall
send such of its key personnel, including its head operations manager, to the
Territory as shall be reasonably required to enable the Territory Rights Holder
to effectively carry out its obligations under this Agreement.
With respect to the first facility established by the Territory Rights
Holder, Planet Kids will send its architect and space planner to the Territory
to design the interior, as per Planet Kids' requirements. Such architect will
also be responsible for supervising construction in association with local
professionals. With respect to all facilities subsequently opened, Planet Kids
will make its architect and space planner available as consultants to the
architect utilized by the Territory Rights Holder at no cost or, if required by
the Territory Rights Holder, will send its architect to the Territory to perform
the services set forth above at the expense of the Territory Rights Holder.
2. Fixtures, Equipment and Signs. Planet Kids shall specify and make
available to Territory Rights Holder designs, specifications, layout and sources
for all fixtures, equipment and signs necessary for the establishment of such
Planet Kids.
3. Insurance. Territory Rights Holder shall obtain through its brokers
and agents and companies of its choosing, on behalf of Territory Rights Holder,
insurance coverage as set out in attached Exhibit "A". Planet Kids does not
intend to imply that such insurance coverage is sufficient to meet each and
every need of Territory Rights Holder which is entitled and encouraged to secure
on its own behalf any insurance in addition to that set out in Exhibit that it
may deem necessary or as is required by law.
Territory Rights Holder shall indemnify Planet Kids and hold it
harmless from any act or omission of Territory Rights Holder, and Territory
Rights Holder shall arrange for Planet Kids to be named as an additional insured
in all liability policies issued in regard to any Planet Kids in the Territory.
4. Accounting and Bookkeeping. Planet Kids, at its election, may
require Territory Rights Holder to use as its accounting system, the accounting
procedures supervised and maintained by Planet Kids at its Home Office, in which
case Planet Kids shall instruct Territory Rights Holder in such systems and
procedures, or Planet Kids may require that said accounting be done by Planet
Kids personnel in its Home Office, in which case Territory Rights Holder shall
pay to Planet Kids the standard charge established by Planet Kids, but not to
exceed the charges being made in the Territory for comparable services.
5. Disclosure of Procedures. Planet Kids will disclose to Territory
Rights Holder its standard operating policies and procedures, and in connection
therewith will furnish copies of its operating manual, its standard forms,
designs and layouts to Territory Rights Holder.
6
<PAGE>
6. Improvements. All improvements made by Planet Kids in its products,
procedures or designs will be made available to Territory Rights Holder.
RELATIONSHIP OF PARTIES
1. Independent Contractor Relationship. At all times pertaining to any
activities related to this Agreement, Territory Rights Holder and its operating
rights holders shall be deemed independent contractors. No employee of Territory
Rights Holder or of its operating rights holders shall be deemed to be an
employee of Planet Kids and nothing herein contained shall be construed as to
create a partnership, joint venture, agency nor any other business relationship
other than independent contractor. Neither party hereto shall be liable for
debts or obligations other than their own.
REMEDIES FOR BREACH
1. Complete Performance Required. Territory Rights Holder acknowledges
that strict performance of all of the terms of this Agreement is necessary, not
only for the protection of Territory Rights Holder but also for the protection
of Planet Kids. It is therefore agreed that strict and exact performance by
Territory Rights Holder of each of the terms of this Agreement is essential to
best preserve, maintain and enhance the reputation, trade name and good will
built up for Planet Kids system, the establishments adopting and using the same,
the products sold and dispensed therefrom, and the trade name and/or trade marks
used in conjunction therewith. It is therefore agreed that strict and exact
performance by the Territory Rights Holder of each of the terms of this
Agreement is a condition to the continuance of this Agreement.
2. Default. If Territory Rights Holder shall be in default in the
performance of any of the terms of this Agreement and such default shall not be
cured within ten (10) days after telecopying written notice thereof to Territory
Rights Holder by Planet Kids, or if bankruptcy, debtor or insolvency proceedings
are commenced by or against Territory Rights Holder, or if Territory Rights
Holder makes an assignment for the benefit of creditors, or if a receiver is
appointed or an attachment or keeper is placed in possession of the business or
assets of Territory Rights Holder, or if Territory Rights Holder transfers,
cumulatively, more than 75% of its business voluntarily or transfers a
substantial part of its business involuntarily without prior written approval of
Planet Kids, which approval shall not be withheld unreasonably, then in addition
to all other remedies it may have by law or in equity, Planet Kids at its
election may declare this Agreement terminated.
In the event there is a default in any of the terms herein other than
the payment of money and such default cannot be cured within said ten (10) days,
but Territory Rights Holder commences to cure said default within ten (10) days,
then Territory Rights Holder
7
<PAGE>
shall be entitled to such additional time as may be deemed reasonable by Planet
Kids to cure such default, but in no event shall such time exceed ninety (90)
days.
3. Non-Waiver. A waiver by Territory Rights Holder of any condition or
term of this Agreement shall not be deemed to be a waiver of any other or
subsequent default or breach.
TERMINATION
1. Effect of Termination. Upon termination of this Agreement, whether
by lapse of time, default or other causes, Territory Rights Holder shall be
entitled to continue all use of Planet Kids' trade name, trade secrets and
procedures as to all of the Planet Kids already opened pursuant to this
Agreement, provided, however, that in the event of termination, the Territory
Rights Holder shall forfeit all of its exclusive rights to open additional
facilities in the Territory. If, however, the breach which causes the
termination is a breach of the Planet Kids operating procedures and requirements
as set forth in this Agreement, at Planet Kids' direction, it may elect to
terminate all rights granted under this Agreement and the Territory Rights
Holder shall forthwith discontinue all use of Planet Kids' trade name, trade
secrets and procedures and shall remove from its own facilities all signs, decor
and decoration characteristic of Planet Kids operations and shall not thereafter
operate or do business under any name or in any manner that might tend to give
the general public the impression that it is dispensing, selling or serving any
of Planet Kids' products. Territory Rights Holder expressly recognizes and
acknowledges the right of Planet Kids, at its election and in addition to all
other remedies, to obtain a permanent injunction to enforce the foregoing
provisions.
In the event of termination of this Agreement for any reason
at any time hereafter or at expiration of this Agreement, then for a period of
five (5) years following such termination or expiration Territory Rights Holder
agrees that it will not compete in any indoor, multimedia, interactive play
centers, either as an owner of an interest in said establishment or business or
as an independent contractor thereto, where such establishment or business is
located within five (5) miles of any existing Planet Kids.
Expiration or termination of this Agreement shall be without prejudice
to the rights of Planet Kids against Territory Rights Holder, nor shall such
expiration and termination relieve Territory Rights Holder of any of its
obligations to Planet Kids existing at the time of the expiration or
termination.
Upon expiration or termination of this Agreement any rights to facility
operations or use of the trade secrets, processes, operations, etc., or any
rights to receive fees from other rights holders shall immediately terminate and
revert to Planet Kids, without payment of any funds whatsoever by Planet Kids to
Territory Rights Holder.
8
<PAGE>
ASSIGNMENT
1. Written Consent. No part of this Agreement shall be assigned either
voluntarily or by operation of law, without the prior written consent of Planet
Kids, except as hereinafter set out. Such written consent shall not be
unreasonably withheld by Planet Kids. Such withholding shall not be deemed to be
unreasonable in the event the proposed assignee does not, in the opinion of
Planet Kids, qualify in all respects as a Territory Rights Holder in the first
instance.
2. Assignment by Planet Kids. This Agreement shall inure to the benefit
of the successors and assigns of Planet Kids.
3. Assignment by Territory Rights Holder to a Corporation. If Territory
Rights Holder is an individual or individuals or a partnership, Planet Kids
expressly consents to the assignment of this Agreement to a corporation formed
and controlled by Territory Rights Holder; provided, however, that at such time
as Territory Rights Holder shall transfer sufficient stock to decrease its
ownership to less than 25% of voting control of the corporation, in the event of
a public offering, joint venture or other transaction designed to benefit the
growth of the (Corporation), such transfer of said stock shall be treated for
purposes of this Agreement as an assignment of rights under this Agreement. Such
an assignment will not release the assignor from liability hereunder.
NATURE OF RIGHTS
1. Limitations. The Territory rights granted hereby constitute rights
to use "Planet Kids" trade name, good will, and standard operating policies and
procedures of said Planet Kids and to benefit from the trade secrets of Planet
Kids in the Territory. Nothing herein contained shall be construed so as to
authorize or pen-nit the use by Territory Rights Holder of such trade name, good
will, standard operating procedures and/or trade secrets within any other region
of the world, or for any purpose other than specifically granted in this
Agreement.
Nothing herein contained shall be construed to require Planet Kids to
divulge any secrets, processes, software codes or technologies to anyone. It is
expressly agreed that ownership of all rights, title and interest in and to said
trade name, good will, standard operating policies and procedures and trade
secrets is and shall remain vested solely in Planet Kids.
2. Solicitation of Personnel. It is agreed that during the effective
term of this agreement, Territory Rights Holder shall not, except with the
consent of Planet Kids, seek to employ or employ any person who is at the time
employed by Planet Kids, or by any Planet Kids, and Territory Rights Holder
shall not directly nor indirectly induce any such person to leave his or her
employment as aforesaid.
9
<PAGE>
INTEGRATION OF AGREEMENTS
1. Attachments, Representations and Prior Agreements. This Agreement
and the attached Exhibits and such other documents as are executed
contemporaneously herewith, shall be constructed together and constitute the
entire agreement between the parties and supersede all prior negotiations,
understandings and agreements. Territory Rights Holder acknowledges that it has
entered in to this Agreement as a result of its own independent investigation
and not as a result of any representations of Planet Kids. its agents, officers
or employees.
NOTICES
1. Mailing Addresses. Any notice required or permitted shall be in
writing and shall be delivered by registered or certified mail, return receipt
requested, or air express, for the protection of both parties. Any notice to
Planet Kids shall be addressed to it in care of Planet Kids, Inc. at 1990
Westwood Blvd., Los Angeles, CA 90025, with a copy to Harry Shuster at 1990
Westwood Blvd., Los Angeles, CA 90025. Any notice to Territory Rights Holder,
shall be addressed to it at Either party may designate another address at any
time by appropriate written notice.
DISABILITY
1. Should any part of this Agreement for any reason be declared invalid
or unenforceable, such decision shall not affect the validity of any remaining
portion, which remaining portion shall remain in force and effect as if this
Agreement had been executed with the invalid portion thereof eliminated and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part or parts, or portion which may, for any reason be hereafter declared
invalid.
DEFINITIONS
1. Gross Sales. The term "gross sales" as used herein shall include the
entire gross receipts of every kind and nature made in, or from all Planet Kids
operating by Territory Rights Holder by virtue of this Agreement whether upon
credit or for cash, in every department operating in or from said facilities,
whether operated by a lessor, lessee, or sublessee or sublessees, or by a
concessionaire or concessionaires, excepting therefrom any rebates and/or
refunds to patrons and the amount of all sales taxes or similar tax receipts
which have to be accounted for to any governmental agency. The term "gross
sales" shall not include sales from automatic cigarette vending machines nor
from public telephones.
10
<PAGE>
ARBITRATION
1. American Arbitration Association. Any controversy or claim arising
out of or relating to this Agreement, or any breach thereof, shall be submitted
to arbitration at Los Angeles, California, in accordance with the Rules of the
American Arbitration Association and judgment upon the award may be entered in
any court having jurisdiction thereof In the case that either party should have
to sue to collect or enforce its agreements, the prevailing party will be
entitled to attorneys' fees and costs.
INTERPRETATION
1. Captions. This Agreement shall be interpreted in accordance with the
laws of the State of California. The captions and headings of the various
sections and paragraphs are for convenience only and shall not affect the
construction or interpretation of this Agreement.
CONSENT TO JURISDICTION
1. Consent to Jurisdiction. This Agreement is delivered in the State of
California and shall be governed by and construed in accordance with the
contract laws of said State. The Territory Rights Holder agrees that any suit,
action or proceeding (an "Action") arising out of or relating to this Agreement
may be instituted, at the election of Planet Kids, in the appropriate State
Courts of the State of California, or in the United States District Court for
the Southern District of California, and hereby waives any objections which it
may now or hereafter have to the laying of venue of any Action and irrevocably
submits to the jurisdiction of any such Court in any Action. The Territory
Rights Holder further acknowledges and agrees that service of process may be
served on it in any Action at the offices of which is hereby appointed agent for
service of process for such purpose. Nothing herein shall prejudice Planet Kids
right to bring any Action in any other jurisdiction in accordance with the laws
of such jurisdiction, and nothing herein shall prejudice Planet Kids right to
serve summonses or process in any jurisdiction in any manner authorized by the
laws of such jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
PLANET KIDS, INC.,
a California corporation
By
-------------------------------
Harry Shuster, President
PT.PLANET KIDSINDO
By
-------------------------------
12
<PAGE>
EXHIBIT 21
Set forth below is a list of all subsidiaries of United Leisure
Corporation, indicating their jurisdictions of incorporation. None of such
subsidiaries do business under any other name.
Jurisdiction
Name of Incorporation
Lion Country Safari, Inc.-California Florida
Planet Kids Learning Centers, Inc. Delaware
Planet Kids, Inc. California
LCS Tours, Inc. Delaware
Frasier Frontier, Inc. California
United Leisure Interactive, Inc. Delaware
Camp Frasier, Inc. California
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 9,929,785
<SECURITIES> 0
<RECEIVABLES> 417,368
<ALLOWANCES> 0
<INVENTORY> 80,301
<CURRENT-ASSETS> 10,605,463
<PP&E> 4,845,406
<DEPRECIATION> 228,150
<TOTAL-ASSETS> 15,882,252
<CURRENT-LIABILITIES> 2,797,092
<BONDS> 0
<COMMON> 123,688
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,882,252
<SALES> 0
<TOTAL-REVENUES> 3,196,869
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<PAGE>
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