<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from___________________ to __________________
Commission file number 1-8625
____________________
CITADEL HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-3885184
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
600 NORTH BRAND BOULEVARD
GLENDALE, CALIFORNIA 91203
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 956-7100
____________________
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. The number of shares of Common
Stock, par value $.01 per share, of Registrant outstanding as of May 19, 1995
was 6,003,924 shares.
================================================================================
<PAGE>
CITADEL HOLDING CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1995
AND DECEMBER 31, 1994
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) FOR THE QUARTERS ENDED MARCH
31, 1995 AND 1994
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) FOR THE QUARTERS ENDED MARCH
31, 1995 AND 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except per share amounts)
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) (Note 1)
--------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1995 1994
<S> <C> <C>
Cash and other cash equivalents $ 6,174 $ 4,805
Investment in Fidelity Federal Bank - held for sale 13,405 13,405
Rental properties, less accumulated depreciation 14,798 19,858
Other receivables 1,274 1,219
Other assets 462 625
-------- --------
TOTAL $ 36,113 $ 39,912
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Security deposits payable $ 136 $ 227
Accounts payable and accrued liabilities 1,669 3,001
Deferred proceeds from bulk sales agreement 4,000 4,000
Short-term line of credit 950 950
Mortgage notes payable 10,174 13,896
-------- --------
Total liabilities 16,929 22,074
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Serial preferred stock, par value $.01 per share; 5,000,000 shares
authorized 3% Cumulative Voting Convertible, ($3.95 or $5,250,000
- stated value) - 1,329,114 shares issued and outstanding at
December 31, 1994 and March 31, 1995 13 13
Common stock, par value $.01 per share; 10,000,000 shares
authorized, 6,669,924 shares issued and outstanding
at December 31, 1994 and March 31, 1995 67 67
Paid in capital 65,298 65,298
Retained earnings (deficit) (46,194) (47,540)
-------- --------
Total stockholders' equity 19,184 17,838
-------- --------
TOTAL $ 36,113 $ 39,912
======== ========
</TABLE>
See notes to consolidated financial statements.
- 2 -
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts) (Note 1)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
<S> <C> <C>
REAL ESTATE OPERATIONS:
Rental income $1,037
Interest income 76
------
1,113
Real estate operating expenses 545
Depreciation and amortization 100
Interest expense 238
General and administrative expenses 425
------
Total expenses 1,308
------
GAIN ON SALE OF RENTAL PROPERTY 1,541
------
NET GAIN FROM REAL ESTATE OPERATIONS 1,346
FINANCIAL SERVICES OPERATIONS:
Interest income $64,074
Interest expense 38,663
-------
NET INTEREST INCOME 25,411
Provisions for estimated loan losses 15,600
------ -------
NET INTEREST INCOME AFTER PROVISION
FOR ESTIMATED LOAN LOSSES 9,811
------ -------
NONINTEREST INCOME (EXPENSE):
Loan and other fees 1,199
Loss on sales of loans, net (2,804)
Fee income from investment products 1,225
Fee income on deposits and other income 906
Provision for estimated real estate losses (4,300)
Real estate operations on specific properties (2,057)
Loss on sale of mortgage-backed securities and investment securities, net (292)
Operating expenses (26,363)
------ -------
Total noninterest expense (32,486)
------ -------
LOSS FROM FINANCIAL SERVICES OPERATIONS (22,675)
------ -------
See notes to consolidated financial statements.
(Continued)
</TABLE>
- 3 -
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share) (Note 1)
-------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1995 1994
<S> <C> <C>
INCOME (LOSS) BEFORE INCOME TAXES $ 1,346 $ (22,675)
INCOME TAX EXPENSE (BENEFIT) (7,918)
---------- ----------
NET EARNINGS (LOSS) $ 1,346 $ (14,757)
========== ==========
NET EARNINGS (LOSS) PER SHARE (AFTER PREFERRED
STOCK DIVIDEND) $ 0.20 $ (2.24)
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,669,924 6,595,624
========== ==========
</TABLE>
See notes to consolidated financial statements.
(Concluded)
- 4 -
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) (Note 1)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
Three Months Ended
March 31,
-------------------
1995 1994
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES:
Net earnings (loss) $ 1,346 $(14,757)
Reconciliation of net earnings (loss) to net cash from operations:
Provisions for estimated losses 19,900
Loss on sales of loans and securities 3,096
Capitalized loan origination costs (538)
Amortization of deferred loan items, net (537)
Purchases of investment securities available for sale (5,074)
Purchases of mortgage-backed securities available for sale (54,812)
Principle repayments of mortgage-backed securities available for sale 3,953
Proceeds from sales of mortgage-backed securities available for sale 93,552
Originations of loans held for sale (43,643)
Proceeds from sales of loans held for sale 207,973
FHLB stock dividend (467)
Depreciation and amortization 100 1,675
Interest receivable increase (406)
Other receivable increase (55)
Other assets (increase) decrease 163 1,048
Deferred income tax benefit (9,666)
Interest payable decrease 5,994
Security deposits payable (91)
Other liabilities and deferred income increase (decrease) (1,332) (16,092)
Other, net 155
------- --------
Operating cash flows, net 131 191,354
------- --------
CASH FLOWS - INVESTING ACTIVITIES:
Purchase of loans (770)
Loans receivable, net increase (15,138)
Real estate investment, net 4,960
Proceeds from sales of real estate 7,426
Premises and equipment (additions), net (1,262)
------- --------
Investing cash flows, net 4,960 (9,744)
------- --------
</TABLE>
See notes to consolidated financial statements.
(Continued)
- 5 -
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) (Note 1)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
---------------------
1995 1994
<S> <C> <C>
CASH FLOWS - FINANCING ACTIVITIES:
Demand deposits and passbook savings, net increase (decrease) $ 28,132
Certificate accounts, net increase (decrease) (225,599)
Proceeds from FHLB advances 50,000
Repayment of FHLB advances (33,700)
Short-term borrowings increase (decrease) (53,830)
Repayments of long-term borrowings $(3,722)
------- ---------
Financing cash flows, net (3,722) (234,997)
------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,369 (53,387)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,805 145,961
------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,174 $ 92,574
======= =========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest on mortgages and line of credit $ 238
Interest on deposits, advances and other borrowings 32,136
Income taxes (1,781)
NONCASH TRANSACTIONS:
Additions to real estate owned acquired through foreclosure 38,133
Loans originated to finance sale of real estate acquired through foreclosure 4,947
</TABLE>
See notes to consolidated financial statements.
(Concluded)
- 6 -
<PAGE>
CITADEL HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
On August 4, 1994, ("the Closing") Citadel Holding Corporation ("Citadel")
completed a restructuring (together with the other transactions described
below, the "Restructuring") in which, among other things, Citadel's
ownership interest in Fidelity Federal Bank, a Federal Savings Bank
("Fidelity"), was reduced from 100% to approximately 16%. The reduction was
a result of Fidelity issuing and selling to investors in a public offering
shares of Class A and Class C common stock. Citadel's investment in
Fidelity was reclassified into 4,202,243 shares of Class B common stock of
Fidelity. As a result, effective January 1, 1994, Citadel no longer
consolidates Fidelity in its financial statements; rather it accounts for
its investment on the cost basis. In addition, several other significant
events occurred in the Restructuring, including:
a. Citadel sold to Fidelity all of the stock of Gateway Investment
Services, Inc., previously a wholly owned subsidiary of Citadel
("Gateway").
b. A newly-formed subsidiary of Citadel, Citadel Realty, Inc. ("CRI"),
purchased four real properties from Fidelity for a purchase price of
$19.8 million (Fidelity's book value) of which $13.9 million was
financed by Fidelity on a secured basis and the balance of which was
financed by Craig Corporation ("Craig"), a significant stockholder of
Citadel, under a short-term line of credit (the "Craig Line of
Credit") (Citadel and its directly or indirectly owned subsidiaries
are referred to herein as the "Company").
c. Citadel received from Fidelity by way of dividend (i) one-year
transferable options (subsequently contributed to CRI) to acquire two
office buildings in Sherman Oaks and Glendale, California (the "Office
Buildings") used in the operations of Fidelity (including its
headquarters buildings) for an aggregate exercise price of $9.3
million (the "Office Building Options"), portions of which buildings
would be leased back by Fidelity upon purchase by the Company, and
(ii) Fidelity's interest in a lawsuit filed against the former carrier
of Fidelity's directors' and officers' insurance policies involving
certain coverage and indemnity issues which resulted in Citadel
collecting $2.5 million.
d. Citadel and Fidelity entered into a Stockholders' Agreement (the
"Stockholders' Agreement"), under which Citadel is required to
reimburse Fidelity for certain losses that may be incurred by Fidelity
as a result of certain environmental and other representations made by
Fidelity in connection with the bulk sale of loans and other assets to
certain third parties in connection with the Restructuring. Subject to
a $4 million limit, the Stockholders' Agreement requires Citadel to
reimburse Fidelity for losses incurred by Fidelity, in either
repurchasing assets (sold in connection with the bulk sale) in the
event of breached representations, or curing such breaches.
The information for the three months ended March 31, 1994 presents the
Company's results of operations, as the holding company of Fidelity, prior
to the Restructuring.
-7-
<PAGE>
2. RENTAL PROPERTIES
During the three months ended March 31, 1995, the Company sold its rental
property located in Harbor City for $5.9 million in cash, net of expenses.
The sale resulted in a gain of approximately $980,000 for financial
statement purposes. As a result of the sale, $3,693,000 of its mortgage
notes payable to Fidelity were assumed by the purchaser.
On February 2, 1995, the Company exercised its office building options to
purchase the two buildings (see Note 1) and on March 23, 1995, purchased
and immediately sold the Sherman Oaks building for a gain of $560,000 for
financial statement purposes. On May 18, 1995, the Company purchased the
Glendale Building. The Glendale building purchase was financed by a $5.34
million loan from Fidelity on the following terms and conditions: a 5 year
mortgage, amortized on a 20 year basis with interest payable monthly at
LIBOR plus 4.5%.
Upon the acquisition of the Glendale building, Citadel and Fidelity entered
into a 10-year, full-service gross lease for four of the six floors. The
rental rate for the first five years of the lease term is approximately
$26,000 per month (including parking) for the ground floor and
approximately $75,000 per month (including parking) for the fourth, fifth
and sixth floors. This lease provides for annual rental increases at a rate
equal to the lower of the increase in the Consumer Price Index ("CPI") or
3%. After the first five years of the lease term, the rental rate for the
ground floor will be adjusted to the higher of the then current market rate
or the prevailing rental rate in the fifth year of the lease and the rental
rate for the upper floors will be adjusted to the higher of the then
current market rate or $1.50 per square foot increased by the annual rental
rate increase applied during the first five years of the lease as described
in the preceding sentence. Fidelity will have the option to extend the
lease of the groung floor for two consecutive five year terms at a market
rental rate and will have the option to purchase the Glendale Building at a
market rate at the expiration of the lease term, provided that the Company
then owns the building.
Public Storage occupies 30,879 square feet (two floors) on a lease that
expires in April 1996 with a total rental of $53,900 per month
($1.75/sq.ft.).
3. INCOME TAXES
No provision for income taxes was required during the three months ended
March 31, 1995 due to the differences in tax basis versus book basis of the
assets sold.
4. SUBSEQUENT EVENTS
On November 7, 1994, a stockholder, Dillon Investors, filed a lawsuit in
the Court of Chancery of the State of Delaware. The suit named as
defendants the Company, its directors and Craig, and alleged that the
Citadel Preferred Stock and the Citadel Common Stock sold to Craig during
the fourth quarter of 1994 were issued at unfair prices in order to
entrench the Board of Directors in power in the face of an announced proxy
contest and possible consent solicitation by Dillon Investors to take over
control of the Board of Directors. The suit sought rescission of the
issuance of the Citadel Common and Preferred Stock and the reinstatement of
borrowings from Craig under the Craig Line of Credit.
On December 5, 1994, the Company filed a lawsuit in the United States
District Court for the Central District of California. The suit named as
defendants Dillon Investors, Roderick H. Dillon, Jr., and certain entities
affiliated with Dillon Investors, and alleged that the defendants had made
insufficient disclosure under Section 13 of the Securities Exchange Act of
1934, as amended.
On April 3, 1995, the Company, Craig and Dillon parties and his affiliates
entered into settlement agreements to resolve these two suits, and the
settlements were consummated on April 13, 1995. Under the settlement
agreements, Dillon and his affiliates purchased from Citadel 1.295 million
shares of Class B Common Stock of Fidelity (which immediately converted
into an equal number of Class A shares of Fidelity) in exchange for which
Citadel received from the Dillon parties 666,000 shares of Citadel Common
Stock and $2.22 million dollars in cash. Additionally, all existing
litigation among Citadel, Craig and the Dillon group was terminated, with
mutual releases executed and delivered. The Dillon parties also agreed, for
a period of one year following the closing, not to purchase or acquire any
other beneficial interests in any of Citadel's securities, and not to
engage in any solicitation of consents or proxies during such period.
The settlement terms also included an agreement by Craig with the Dillon
parties not to exercise, prior to February 4, 1996, its right to tender any
shares of the 3% Cumulative Voting Convertible Preferred Stock of Citadel
for conversion into Citadel Common Stock without the prior consent of
holders of a majority of the outstanding shares of Citadel Common Stock. In
exchange for such concession from Craig, Citadel separately agreed to grant
Craig a two-year warrant to acquire the 666,000 shares of Citadel Common
Stock being acquired from the Dillon entities at a price of $3.00 per
share, and Citadel also agreed to reimburse Craig for certain expenses
associated with the litigation up to $75,000.
On April 17, 1995, the Company sold 2,900,000 shares of Fidelity stock
resulting in net proceeds of $9,718,000. The net proceeds, when combined
with the proceeds of the Dillon transaction described above, approximate
the book value of such Fidelity stock as of December 31, 1994.
-8-
<PAGE>
Subsequent to March 31, 1995, the Company repaid the outstanding balance of
the Craig Line of Credit. In addition, the Company no longer has funds
available through the Craig Line of Credit.
In May 1995, the Company declared a dividend on the 3% Cumulative Voting
Convertible Preferred Stock. The Company intends to pay the declared
dividend, which had accrued from the issuance of the Preferred Stock in
November 1994 until March 31, 1995, in the near future. The declared
dividend was calculated at 3% and the approximate amount of the dividend is
$62,000.
* * * * * *
-9-
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ("MD&A")
Citadel Holding Corporation, a Delaware corporation ("Citadel" and
collectively with its directly or indirectly wholly owned subsidiary, the
"Company"), was incorporated in 1983 to serve as the holding company for
Fidelity Federal Bank, a Federal Savings Bank ("Fidelity"). On August 4, 1994,
Citadel and Fidelity completed the recapitalization component of a
recapitalization and restructuring transaction (the "Restructuring"), which
resulted in (i) the reduction of Citadel's interest in Fidelity from 100% to
16.2%, (ii) the acquisition by the Company, at bulk sale prices from Fidelity,
of four Real Estate Owned properties (the "REO Properties"), (iii) the sale by
Citadel to Fidelity of its Gateway Investment Services, Inc. ("Gateway")
subsidiary for approximately $1 million, (iv) the transfer to Citadel of
Fidelity's interest in certain outstanding litigation, and (v) the receipt by
way of dividend from Fidelity of options to acquire at book value two office
buildings used by Fidelity in its operations (the "Building Options"). Also in
connection with the Restructuring, Citadel agreed to indemnify Fidelity with
respect to certain environmental and structural representations and warranties
made by Fidelity to certain third party buyers in connection with bulk sales by
Fidelity made as a part of the Restructuring, up to a limit of $4 million (the
"Bulk Sale Indemnity").
As a result of the Restructuring, Citadel no longer consolidates Fidelity
in its financial statements; rather its accounts for its investment on the cost
basis. This change was effective as of January 1, 1994 for purposes of the
financial statements included elsewhere in this report, although Fidelity's
operations results through August 4, 1994 are reflected in Citadel's financial
statements.
Since the Restructuring, Citadel has been engaged primarily in the
ownership and management of commercial and residential real property.
RESULTS OF OPERATIONS
The Company reported earnings of $1.35 million for the quarter ended March
31, 1995. Those earnings included gains from the sale of the Sherman Oaks and
Harbor City properties of $1.54 million. It should be noted that a substantial
portion of the Company's revenue for the first quarter of 1995 was derived from
the sale of real estate assets. No such sales occurred in the fourth quarter of
1994, and substantially all of the Company's revenue for that period were in the
form of real property rents. Additional assets have been sold in the period
subsequent to March 31, 1995 resulting in gross cash proceeds to the Company of
$12.37 million. The Company's general and administrative expenses for the fourth
quarter of 1994 were $1.7 million, including $1.13 million with respect to an
aborted proxy solicitation by a dissident stockholder and resultant litigation
between the Company and such shareholder. There were no significant costs
relating to that litigation or the settlement thereof in the first quarter of
1995, as these costs were provided for in the fourth quarter of 1994.
As a consequence of these activities, the Company's income for the first
quarter of 1995 should not be regarded as necessarily indicative of the
Company's financial performance going forward.
As a consequence of the Restructuring, no meaningful comparisons can be
made between the first quarter of 1995 and the first quarter of 1994.
10
<PAGE>
REAL ESTATE INTERESTS
The table below provides an overview of the properties which constituted
all of the real properties owned by the Company at March 31, 1995.
<TABLE>
<CAPTION>
REMAINING
UNITS/SQUARE % LEASED MAJOR LEASE
ADDRESS TYPE FEET AT 3/31/95 TENANTS TERMS
--------------------- ---------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
ARBOLEDA Office/ 178,000 99 American 1-5 Yrs
1661 Camelback Rd. Restaurant Express
Phoenix, Arizona
VESELICH Apartment 216 95 NA 6-12
3939 Veselich Ave. 176,000 months
Los Angeles, Calif.
PARTHENIA Apartment 27 96 NA 6-12
21028 Parthenia 26,000 months
Canoga Park, Calif.
</TABLE>
ARBOLEDA, PHOENIX
Although this property was 100% leased at March 31, 1995, American Express,
which occupies 58% (100,098 sq.ft.) of the property, announced that it does not
intend to renew at the expiration of the current term in February 1997. While
management believes that the leasing market in Phoenix will continue to
strengthen, it is anticipated that significant capital expenditures would be
necessary to relet the American Express space and that the space may remain
vacant for some time. With the uncertainty regarding the American Express lease
and certain planning issues on an adjacent site, management believes it to be
unlikely that proceeds would be maximized by a current disposition of the
property.
VESELICH, LOS ANGELES
While the occupancy rate of this property in the last 12 months has ranged
from 80% to 95%, the property has historically experienced considerable turnover
of tenants. This has resulted in high overhead and reduced cash flows.
Management is addressing this issue by carrying out deferred maintenance,
increasing marketing expenditures and improving diligence on prospective
tenants. This has resulted in occupancy of 90% - 95% during the first quarter
of 1995. It is expected that the property will be stabilized at near to full
occupancy sometime during 1995, but there can be no assurance on this point.
PARTHENIA, CANOGA PARK
Of the 27 units in this complex, 21 were significantly damaged in the
January 1994 Northridge earthquake. The Company has since completed appropriate
repairs. The apartment complex remained 33% occupied during the earthquake
renovation, and occupancy had increased to 96% by March 31, 1995.
11
<PAGE>
WESTERN AVENUE, HARBOR CITY
A fourth property acquired in the Restructuring, located on Western Avenue
in Harbor City, was sold during the first quarter of 1995 for a net price of
$5.9 million and a gain of approximately $980,000. As part of that transaction,
a mortgage note payable to Fidelity of $3.7 million was assumed by the
purchaser.
BUILDING OPTIONS
As part of the Restructuring, Citadel acquired, by way of dividend, the
Building Options, which were assigned to Citadel Realty Inc., its wholly owned
subsidiary. The office buildings subject to the Building Options are used by
Fidelity in its operations and are located in Glendale (the "Glendale Building")
and in Sherman Oaks (the "Sherman Oaks Building"). The aggregate exercise price
of the Building Options was $9.3 million, which was equal to the aggregate net
book value of the two buildings on the books of Fidelity as of June 30, 1994.
On February 2, 1995, the Company exercised each of the Building Options.
On March 22, 1994, the Company purchased and immediately sold the Sherman Oaks
Building for a gain of approximately $560,000.
The purchase of the Glendale Building closed on May 18, 1995. The Company
funded the $7.18 million exercise price to purchase the Glendale Building
through borrowing of $5.34 million from Fidelity with the balance of the funds
coming from internal sources.
With regard to the purchase of the Glendale Building, Fidelity extended a 5
year loan, amortizing over 20 years, at an adjustable rate of interest tied to
LIBOR plus 4.5% per annum, adjustable monthly. The Company paid Fidelity one (1)
point plus normal closing costs and the loan is subject to prepayment penalties
in year one of 4%, decreasing by one point in each subsequent year.
The table below provides an overview of the Glendale Building:
<TABLE>
<CAPTION>
UNITS/
SQUARE % LEASED
ADDRESS TYPE FEET AT 3/31/95 MAJOR TENANTS
----------------------- ------ ------ ---------- --------------
<S> <C> <C> <C> <C>
GLENDALE BUILDING Office 89,000 100 Fidelity;
600 North Brand Blvd. Public Storage
Glendale, California
</TABLE>
The Glendale Building is the headquarters building of Fidelity. Citadel
and Fidelity have entered into a 10-year, full service gross lease for four of
the six floors of the Glendale Building. The rental rate for the first five
years of the lease term is approximately $26,000 per month (including parking)
for the ground floor and approximately $75,000 per month (including parking) for
the fourth, fifth and sixth floors. This lease provides for annual rental
increases at a rate equal to the lower of the increase in the Consumer Price
Index ("CPI") or 3%. After the first five years of the lease term, the rental
rate for the ground floor will be adjusted to the higher of the then current
market rate or the prevailing rental rate in the fifth year
12
<PAGE>
of the lease and the rental rate for the upper floors will be
adjusted to the higher of the then current market rate or $1.50 per square foot
increased by the annual rental rate increase applied during the first five years
of the lease as described in the preceding sentence. Fidelity will have the
option to extend the lease of the ground floor for two consecutive five year
terms at a market rental rate and will have the option to purchase the Glendale
Building at a market rate at the expiration of the lease term, provided that the
Company then owns the building.
Public Storage occupies 30,879 square feet (two floors) on a lease that
expires in April 1996 with a total rental of $53,900 per month ($1.75/sq.ft.).
FINANCING OF REAL ESTATE INTERESTS
The Company's acquisition of the REO Properties was 100% leveraged: $13.9
million was obtained in the form of conventional mortgage loans by Fidelity
against the Arboleda, Veselich and Western Avenue Properties, while the balance
was obtained through drawdowns ($6.2 million) on an $8.2 million line of credit
the ("Craig Line of Credit") from Craig Corporation ("Craig").
With respect to the Veselich property (a 216 unit apartment complex),
Fidelity extended a 10-year loan, amortizing over 30 years, at an adjustable
rate of interest tied to the one-year Treasury rate plus approximately 3.70% per
annum, with an initial interest rate of 7.25%. The rate on the Veselich
property loan is currently 7.25%. The loan relating to the Western Avenue
property was assumed by the purchaser when the property was sold in January,
1995. The loan secured by the Arboleda property has a seven-year term,
amortizing over 25 years, with an adjustable rate of interest tied to a six-
month LIBOR rate plus 4.5% per annum, with an initial rate of 9.25% per annum.
The rate on this loan is currently 9.25%. Fidelity did not provide financing
with respect to the Parthenia property (an apartment complex, which is currently
held free of debt).
The remainder of the purchase price of the REO Properties was drawn on the
Craig Line of Credit. At the time of the Restructuring, Craig held approximately
9% of the outstanding common stock of Citadel. At the time of Citadel's
borrowing under the Craig Line of Credit, James J. Cotter was Chairman of each
of Citadel and Craig, and S. Craig Tompkins was a director of Citadel and the
President and a director of Craig.
The Craig Line of Credit was initially committed in the amount of $8.2
million, of which $6.2 million was immediately drawn down.
On November 10, 1994, the Company retired $5.25 million of the Craig Line
of Credit by issuance to Craig of the 1,329,144 shares of Citadel's 3%
Cumulative Voting Convertible Preferred Stock. The remaining $950,000 of the
Craig Line of Credit was retired in May, 1995; Citadel has no further funds
available under the Craig Line of Credit.
FIDELITY INVESTMENT
In April, 1995, Citadel completed the sale of 2.9 million shares of Class B
Common Stock of Fidelity Federal Bank at $3.50 per share before costs. This
transaction, combined with the transfer of 1,295,000 shares of Fidelity Class B
Common Stock to Roderick H. Dillon, Jr. (as described below), reduced Citadel's
ownership to 7,243 Class B shares which have been converted, under Fidelity's
charter, to Class A shares. It is Citadel's intention to dispose of these
shares.
13
<PAGE>
BUSINESS PLAN, CAPITAL RESOURCES AND LIQUIDITY OF THE COMPANY
In prior periods, Citadel relied almost exclusively on cash flow from the
operations of Fidelity and Gateway for its liquidity needs. As a result of the
Restructuring on August 4, 1994, Fidelity and Gateway are no longer subsidiaries
of Citadel, and Citadel and its wholly owned subsidiary, CRI, no longer have the
benefit of cash flow from these companies to meet the Company's liquidity needs.
The Company expects that its sources of funds in the near term will include
cash on hand ($6.174 million at March 31, 1995 and $18.494 million at April 30,
1995), cash flow from the operations of its real estate properties, if any, and
proceeds from sales of properties.
In the short term, uses of funds are expected to include funding of (i) the
repair of the earthquake damage to the parking structure of the Glendale
Building, (ii) operating expenses, (iii) any amounts that may become payable
under the $4 million Bulk Sale Indemnity, (iv) debt service under the Fidelity
mortgages relating to the properties and (v) dividends declared, if any, under
the Preferred Stock. Management believes that the Company's sources of funds
will be sufficient to meet its cash flow requirements for the foreseeable
future.
Management is currently evaluating the assets and opportunities available
to the Company with a view to developing a new business plan. Among the
alternatives under consideration are the continuation and expansion of its real
estate operations, the movement into a new line or lines of business, merger or
sale of the entire Company, and liquidation. However, as management believes
that the Company has value as a publicly traded entity with significant assets,
management believes it is unlikely that liquidation will be the selected
business plan. No final conclusions have been reached regarding any of the
foregoing alternatives.
In May 1995, the Company declared a dividend on the 3% Cumulative Voting
Convertible Preferred Stock. The Company intends to pay the declared dividend,
which had accrued from the issuance of the Preferred Stock in November 1994
until March 31, 1995, in the near future. The declared dividend was calculated
at 3% and the approximate amount of the dividend is $62,000.
14
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
On November 7, 1994, a stockholder, Dillon Investors, filed a lawsuit in
the Court of Chancery of the State of Delaware. The suit named as defendants
the Company, its directors and Craig, and alleged that the Citadel Preferred
Stock and the Citadel Common Stock sold to Craig during the fourth quarter of
1994 were issued at unfair prices in order to entrench the Board of Directors
in power in the face of an announced proxy contest and possible consent
solicitation by Dillon Investors to take over control of the Board of Directors.
The suit sought rescission of the issuance of the Citadel Common and Preferred
Stock and the reinstatement of borrowings from Craig under the Craig Line of
Credit.
On December 5, 1994, the Company filed a lawsuit in the United States
District Court for the Central District of California. The suit named as
defendants Dillon Investors, Roderick H. Dillon, Jr., and certain entities
affiliated with Dillon Investors, and alleged that the defendants had made
insufficient disclosure under Section 13 of the Securities Exchange Act of 1934,
as amended.
On April 3, 1995, the Company, Craig and Dillon parties and his affiliates
entered into settlement agreements to resolve these two suits, and the
settlements were consummated on April 13, 1995. Under the settlement
agreements, Dillon and his affiliates purchased from Citadel 1.295 million
shares of Class B Common Stock of Fidelity (which immediately converted into an
equal number of Class A shares of Fidelity) in exchange for which Citadel
received from the Dillon parties 666,000 shares of Citadel Common Stock and
$2.22 million dollars in cash. Additionally, all existing litigation among
Citadel, Craig and the Dillon group was terminated, with mutual releases
executed and delivered. The Dillon parties also agreed, for a period of one
year following the closing, not to purchase or acquire any other beneficial
interests in any of Citadel's securities, and not to engage in any solicitation
of consents or proxies during such period.
The settlement terms also included an agreement by Craig with the Dillon
parties not to exercise, prior to February 4, 1996, its right to tender any
shares of the 3% Cumulative Voting Convertible Preferred Stock of Citadel for
conversion into Citadel Common Stock without the prior consent of holders of a
majority of the outstanding shares of Citadel Common Stock. In exchange for
such concession from Craig, Citadel separately agreed to grant Craig a two-year
warrant to acquire the 666,000 shares of Citadel Common Stock being acquired
from the Dillon entities at a price of $3.00 per share, and Citadel also agreed
to reimburse Craig for certain expenses associated with the litigation up to
$75,000.
The Company, Hecco Ventures I and James J. Cotter are defendants in a civil
action filed in 1990 by Alfred Roven in the United States District Court for the
Central District of California. The complaint alleges fraud by the Company in a
proxy solicitation relating to the Company's 1987 annual meeting of stockholders
and breach of fiduciary duty. The complaint seeks compensatory and punitive
damages in an amount alleged to exceed $40,000,000. The complaint grew out of
and was originally asserted as a counter-claim in an action brought by the
Company against Roven for illegal short-swing profits. The Company's motion for
summary judgment was granted in the spring of 1991 and all federal claims were
dismissed. However, the Court retained jurisdiction over pendent state law
claims for breach of fiduciary duty. Roven was granted summary judgment on the
short swings profits claim. Roven has now filed a complaint in the California
Superior Court against the Company, Hecco Ventures I and James J. Cotter and, in
addition, S. Craig Tompkins and certain other persons including the Company's
counsel and certain former directors of the Company, for malicious prosecution
in connection with the short swings profit litigation. The Company believes
that it has meritorious
15
<PAGE>
defenses to these claims, and has not reserved any amounts with respect thereto.
However, costs of defense could be material, particularly given the Company's
limited cash flow and operating profits.
Following the Restructuring, Fidelity has significantly reduced staffing as
a part of its efforts to reduce costs. Certain terminated employees have
threatened, and in one case filed, claims asserting that Citadel is in some
manner liable for what is asserted to be wrongful termination of these
individuals by Fidelity. In light of the facts that, among other things, these
individuals were never employees of Citadel and were terminated only after
Citadel's interest in Fidelity had been reduced to 16% and essentially non-
voting interests in Fidelity, the Company believes that it should have no
liability to these individuals. However, costs of defense could be material.
ITEM 2: CHANGES IN SECURITIES
Not applicable.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1994 annual meeting of stockholders (the "1994 Meeting") was held on
January 10, 1995. At the 1994 Meeting, (1) each of the current directors was
elected to serve on the Board until the next annual meeting and until successors
are elected; and (2) the number of authorized shares was increased from 10
million to 20 million.
ITEM 5: OTHER INFORMATION
Not applicable.
16
<PAGE>
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.1 Certificate of Amendment of Restated Certificate of Incorporation of
Citadel Holding Corporation (filed as Exhibit 3.1 to the Company's
Report on Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference)
3.2 Restated By-laws of Citadel Holding Corporation (filed as Exhibit 3.2
to the Company's Form 10-K for the year ended December 31, 1988, and
incorporated herein by reference)
4.1 Certificate of Designation of the 3% Cumulative Voting Convertible
Preferred Stock of Citadel Holding Corporation (filed as Exhibit 3 to
the Company's Report on Form 8-K, filed on November 14, 1994, and
incorporated herein by reference)
10.1 Form of Investor Purchase Agreement between Fidelity Federal Bank and
the investors (filed as Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1994, and incorporated
herein by reference)
10.2 Settlement Agreement between Fidelity Federal Bank, Citadel Holding
Corporation and certain lenders, dated as of June 3, 1994 (the "Letter
Agreement") (filed as Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1994, and incorporated
herein by reference)
10.3 Amendment No. 1 to the Letter Agreement, dated as of June 30, 1994
(filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.4 Amendment No. 2 to Letter Agreement, dated as of July 28, 1994 (filed
as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.5 Amendment No. 3 to Letter Agreement, dated as of August 3, 1994 (filed
as Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.6 Mutual Release, dated as of August 4, 1994, between Fidelity Federal
Bank, Citadel Holding Corporation and certain lenders (filed as
Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.7 Mutual Release between Fidelity Federal Bank, Citadel Holding
Corporation, and The Chase Manhattan Bank, N.A., dated June 17, 1994
(filed as Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.8 Loan and REO Purchase Agreement (Primary), dated as of July 13, 1994,
between Fidelity Federal Bank and Colony Capital, Inc. (filed as
Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.9 Deposit Escrow Agreement, dated as of July 13, 1994, among Colony
Capital, Inc., Fidelity Federal Bank, and Morgan Guaranty Trust
Company of New York (filed as Exhibit 10.9 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.10 Real Estate Purchase Agreement, dated as of August 3, 1994, between
Fidelity Federal Bank and Citadel Realty, Inc. (filed as Exhibit 10.10
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994, and incorporated herein by reference)
10.11 Loan and REO Purchase Agreement (Secondary), dated as of July 12,
1994, between Fidelity Federal Bank and EMC Mortgage Corporation
(filed as Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.12 Deposit Escrow Agreement, dated as of July 13, 1994, between EMC
Mortgage Corporation, Fidelity Federal Bank, and Morgan Guaranty Trust
Company of New York (filed as Exhibit 10.12 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.13 Loan and REO Purchase Agreement (Secondary), dated as of July 21,
1994, between Fidelity Federal Bank and Internationale Nederlanden
(US) Capital Corporation, Farallon Capital Partners, L.P., Tinicum
Partners, L.P. and Essex Management Corporation (filed as Exhibit
10.13 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, and incorporated herein by reference)
10.14 Deposit Escrow Agreement, dated as of July 21, 1994, between Fidelity
Federal Bank and Internationale Nederlanden (US) Capital Corporation,
Farallon Capital Partners, L.P., Tinicum Partners, L.P., Essex
Management Corporation, and Morgan Guaranty Trust Company of New York
(filed as Exhibit 10.14 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.15 Purchase of Assets and Liability Assumption Agreement by and between
Home Savings of America, FSB and Fidelity Federal Bank, FSB, dated as
of July 19, 1994 (filed as Exhibit 10.15 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.16 Credit Agreement among Citadel Realty, Inc., Citadel Holding
Corporation and Craig Corporation, dated as of August 2, 1994 (filed
as Exhibit 10.16 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by reference)
10.17 Promissory Note, dated as of August 2, 1994, by Citadel Realty, Inc.
in favor of Craig Corporation (filed as Exhibit 10.17 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.18 Guaranty, dated as of August 2, 1994, by Citadel Holding Corporation
in favor of Craig Corporation (filed as Exhibit 10.18 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.19 Pledge Agreement, dated as of August 2, 1994, between Citadel Holding
Corporation and Craig Corporation (filed as Exhibit 10.19 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1994, and incorporated herein by reference)
10.20 Promissory Note, dated August 3, 1994, by Citadel Realty, Inc., in
favor of Fidelity Federal Bank (filed as Exhibit 10.20 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1994, and incorporated herein by reference)
10.21 Promissory Note, dated July 28, 1994, by Citadel Realty, Inc. in favor
of Fidelity Federal Bank (filed as Exhibit 10.21 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.22 Guaranty Agreement, dated August 3, 1994, by Citadel Holding
Corporation, in favor of Fidelity Federal Bank (filed as Exhibit 10.22
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994, and incorporated herein by reference)
10.23 Unsecured Environmental Indemnity Agreement dated as of August 3,
1994, by Citadel Realty, Inc., in favor of Fidelity Federal Bank
(filed as Exhibit 10.23 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.24 Unsecured Environmental Indemnity Agreement dated as of July 28, 1994,
by Citadel Realty, Inc. in favor of Fidelity Federal Bank (filed as
Exhibit 10.24 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.25 Registration Rights Agreement dated as of June 30, 1994, between
Fidelity Federal Bank, Citadel Holding Corporation and certain holders
of Class C Common Stock of Fidelity Federal Bank (filed as Exhibit
10.25 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, and incorporated herein by reference)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.26 Stockholders Agreement, dated as of June 30, 1994, between Citadel
Holding Corporation and Fidelity Federal Bank (filed as Exhibit 10.26
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994, and incorporated herein by reference)
10.27 Tax Disaffiliation Agreement, dated as of August 4, 1994, by and
between Citadel Holding Corporation and Fidelity Federal Bank (filed
as Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by reference)
10.28 Option Agreement, dated as of August 4, 1994, by and between Fidelity
Federal Bank and Citadel Holding Corporation (filed as Exhibit 10.28
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994, and incorporated herein by reference)
10.29 Assignment of Option Agreement, dated as of August 4, 1994, by and
between Citadel Holding Corporation and Citadel Realty, Inc. (filed as
Exhibit 10.29 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.30 Amendment No. 2 to Executive Employment Agreement, dated as of August
4, 1994, between Richard M. Greenwood and Fidelity Federal Bank (filed
as Exhibit 10.30 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by reference)
10.31 Amended and Restated Term Note, dated October 29, 1992, by Richard M.
Greenwood in favor of Citadel Holding Corporation (filed as Exhibit
10.31 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994, and incorporated herein by reference)
10.32 Letter Agreement dated August 4, 1994, between Richard M. Greenwood
and Citadel Holding Corporation (filed as Exhibit 10.32 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1994, and incorporated herein by reference)
10.33 Amended and Restated Charter S of Fidelity Federal Bank (filed as
Exhibit 10.33 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, and incorporated herein by reference)
10.34 Amended Service Agreement between Fidelity Federal Bank and Citadel
Holding Corporation dated as of August 1, 1994 (filed as Exhibit 10.34
to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994, and incorporated herein by reference)
10.35 Placement Agency Agreement, dated July 12, 1994 between J.P. Morgan
Securities Inc., Fidelity Federal Bank and Citadel Holding Corporation
(filed as Exhibit 10.35 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, and incorporated herein by
reference)
10.36 Side letter, dated August 3, 1994, between Fidelity Federal Bank and
Citadel Realty, Inc. (filed as Exhibit 10.36 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and
incorporated herein by reference)
10.37 Stock Exchange and Settlement Agreement, dated April 3, 1995, by and
among Citadel Holding Corporation, Dillon Investors, L.P., a Delaware
partnership, Roderick H. Dillon, Jr., an individual, Roderick H.
Dillon, Jr. Foundation, an Ohio trust, and Roderick H. Dillon, Jr.--
IRA (filed as Exhibit 10.1 to the Company's Report on Form 8-K, filed
on April 4, 1995, and incorporated herein by reference)
10.38 Stock Purchase Agreement, dated October 21, 1994, by and between
Citadel Holding Corporation and Craig Corporation, a Delaware
corporation (filed as Exhibit 2 to the Company's Report on Form 8-K,
filed on October 25, 1994, and incorporated herein by reference)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.39 Preferred Stock Purchase Agreement, dated November 10, 1994, by and
between Citadel Holding Corporation and Craig Corporation, a Delaware
corporation (filed as Exhibit 2 to the Company's Report on Form 8-K,
filed on November 14, 1994, and incorporated herein by reference)
10.40 Conversion Deferral, Warrant and Reimbursement Agreement, dated as of
April 11, 1995, by and between Citadel Holding Corporation and Craig
Corporation, a Delaware corporation (filed as Exhibit 10.40 to the
Company's Report on Form 10-K for the year ended December 31, 1994, and
incorporated herein by reference)
10.41 Employment Agreement between Citadel Holding Corporation and Steve
Wesson (filed as Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994, and incorporated
herein by reference)
10.42 Standard Office Lease, dated as of July 15, 1994, by and between
Citadel Realty, Inc. and Fidelity Federal Bank
10.43 First Amendment to Standard Office Lease, dated May 15, 1995, by and
between Citadel Realty, Inc. and Fidelity Federal Bank
10.44 Form of Stock Purchase Agreement, dated April 17, 1995, entered into by
Citadel Holding Corporation and certain purchases of shares of Class B
Common Stock of Fidelity Federal Bank
10.45 Environmental Indemnity Agreement, dated May 15, 1995, by and among
Citadel Realty, Inc. and Fidelity Federal Bank
10.46 Promissory Note secured by Deed of Trust, dated May 15, 1995, made by
Citadel Realty, Inc., in favor of Fidelity Federal Bank
10.47 Guaranty of Payment dated May 15, 1995 by Citadel Holding Corporation
in favor of Fidelity Federal Bank
10.48 Deed of Trust, Assignment of Rents and Leases, Security Agreement and
Fixture Filing, dated as of May 15, 1995, made by Citadel Realty, Inc.
in favor of Fidelity Federal Bank.
27 Financial Data Schedule
(b) The Company filed no Reports on Form 8-K during the quarter
ended March 31, 1995.
</TABLE>
20
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CITADEL HOLDING CORPORATION
Date: May 19, 1995 /s/ STEVE WESSON
---------------------------------
Steve Wesson
President and Chief
Executive Officer
21
<PAGE>
EXHBIT 10.42
STANDARD OFFICE LEASE
MODIFIED GROSS
1. BASIC LEASE PROVISIONS ("Basic Lease Provisions").
1.1 PARTIES: This Lease, dated, for reference purposes only, July 15,
1994, is made by and between Citadel Realty, Inc. (herein called "Lessor") and
Fidelity Federal Bank, a Federal Savings Bank (herein called Lessee").
1.2 PREMISES: The ground floor, consisting of approximately 11,823 BOMA
rentable square feet (the "Ground Floor") and the fourth, fifth and sixth
floors, consisting of approximately 46,384 BOMA rentable square feet (the "Upper
Floors"), more or less, as defined in paragraph 2 and as shown on Exhibit "A"
hereto (the Ground Floor and the "Upper Floors" are collectively referred to
herein as the "Premises"). If BOMA measurements of rentable square footage for
the Premises vary from the numbers set forth above, an adjustment to the rental
rate per square foot shall be made so that the monthly Base Rent set forth in
paragraph 1.6 hereof remains the same and an adjustment shall be made to
Lessee's share of operating expenses as set forth in paragraph 1.10.
1.3 BUILDING: Commonly described as being located at 600 North Brand
Boulevard, in the City of Glendale, County of Los Angeles, State of California,
as more particularly described in Exhibit "B" hereto, and as defined in
paragraph 2.
1.4 PERMITTED USE: Retail bank branch on the Ground Floor and general
office use on the Upper Floors, subject to paragraph 6.
1.5 TERM: Ten (10) years commencing May 18, 1995 ("Commencement Date")
and ending May 17, 2005 (the "Expiration Date"), as set forth in paragraph 3.
1.6 BASE RENT: $101,744 per month ($2.25 per square foot for the Ground
Floor and $1.62 per square foot for the Upper Floors. (11,823 x 2.25 = $26,602)
+ (46,384 x 1.62 = $75,142) = $101,744), payable on the first day of each month,
in advance, per paragraph 4.1.
1.7 BASE RENT INCREASE: On the date which is twelve (12) months from the
Commencement Date and each twelve (12) months thereafter during the term of this
Lease, the monthly Base Rent payable under paragraph 1.6 above shall be adjusted
as provided in paragraph 4.8.1 below and Base Rent shall be additionally
increased in the sixth year of the lease as set forth in 4.8.4 below.
1.8 RENT PAID UPON EXECUTION: Same as paragraph 1.6.
1.9 SECURITY DEPOSIT: One month's rent.
1.10 LESSEE'S SHARE OF OPERATING EXPENSES: 65.34% (based on 89,081 total
Building sq. ft.), subject to adjustment after BOMA measurements as set forth in
paragraph 1.2 above.
1.11 EXPENSE BASE YEAR: Calendar year 1995, as defined in 4.2.
1.12 TAX BASE YEAR: Calendar year 1995, as defined in paragraph 4.2.
1.13 OPTIONS TO EXTEND TERM: Two (2) five-year options to extend the term
of the Lease for the Ground Floor only, as described in paragraph 39.5.
1.14 OPTION TO PURCHASE: Lessee shall have the option to purchase the
Office Building Project at fair market value at the end of the Term, provided
that the Office Building Project is then owned by Lessor, as described in
paragraph 39.6.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 PREMISES: The Premises are a portion of a building, herein sometimes
referred to as the "Building" identified in paragraph 1.3 of the Basic Lease
Provisions. "Building" shall include adjacent parking structures used in
connection therewith. The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and improvements
thereon or thereunder, are herein collectively referred to as the "Office
Building Project." Lessor hereby leases to Lessee and Lessee leases from Lessor
for the term, at the rental, and upon all of the conditions set forth herein,
the real property referred to in the Basic Lease Provisions, paragraph 1.2, as
the "Premises," including rights to the Common Areas as hereinafter specified.
2.2. VEHICLE PARKING: So long as Lessee is not in default, and subject to
the rules and regulations attached hereto as Exhibit C, and as established by
Lessor from time to time Lessee shall be entitled to use 160 reserved spaces in
the parking garage and 35 spaces in the adjacent surface parking lot, with the
right to require the Lessor to mark as "reserved" 15 of such 35 spaces closest
to the retail branch entrance; provided that nothing in this sentence shall
alter Lessor's rights to make changes to the Common Areas as set forth in
paragraph 2.5. All of the above parking spaces are included in the rental rate;
provided, however, that Lessee shall pay any and all taxes or surcharges
applicable to such parking use which may be levied by any state or local
governmental agency
1
<PAGE>
from time to time. Further, Lessee shall have the right to rent up to an
additional 50 spaces in the parking garage, at the monthly rate applicable from
time to time for monthly parking as set by lessor and/or its licensee. With
respect to all parking provided hereunder, Lessee shall be entitled to an amount
of reserved parking spaces on each floor of the parking garage equal to the pro
rata amount of leased space it occupies in the Building (i.e. 65.34%).
2.2.1 If Lessee commits, permits or allows any of the prohibited
activities, described in the Lease or the rules then in effect, then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove or tow away the vehicle involved and charge
the cost to Lessee, which cost shall be immediately payable upon demand by
Lessor.
2.2.2 With respect to the up to 50 additional spaces available to
Lessee,the monthly parking rate per parking space will be $45.00 per month at
the commencement of the term of this Lease, and is subject to change upon thirty
(30) days, prior written notice to Lessee; provided that in no event shall the
monthly parking rate charged Lessee exceed the prevailing rate charged for
similar parking facilities by similar first class office buildings in Glendale,
California. Monthly parking fees shall be payable in advance on the first day of
each calendar month.
2.3 COMMON AREAS - DEFINITION. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Office Building Project that are provided and designated by the Lessor
from time to time for the general non-exclusive use of Lessor, Lessee and of
other lessees of the Office Building Project and their respective employees,
suppliers, shippers, customers and invitees, including, but not limited to,
common entrances, lobbies, corridors, stairways and stairwells, public
restrooms, elevators, escalators, parking areas to the extent not otherwise
prohibited by this Lease, loading and unloading areas, trash areas, roadways,
sidewalks, walkways, parkways, ramps, driveways, landscaped areas and decorative
walls.
2.4 COMMON AREAS - RULES AND REGULATIONS. Lessee agrees to abide by and
conform to the rules and regulations attached hereto as Exhibit C with respect
to the Office Building Project and Common Areas, and to cause its employees,
suppliers, shippers, customers, and invitees to so abide and conform. Lessor or
such other person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time, to
modify, amend and enforce said rules and regulations. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees, their agents, employees and invitees of the Office Building
Project.
2.5 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's sole
discretion, from time to time:
(a) To make changes to the Building interior and exterior and Common
Areas, including, without limitation, changes in the location, size, shape,
number and appearance thereof, including but not limited to the lobbies,
windows, stairways, air shafts, elevators, escalators, restrooms, driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, discretion of traffic, decorative walls, landscaped areas and walkways;
provided, however, Lessor shall at all times provide that the parking facilities
required by applicable law (but in no event shall Lessor be required to provide
parking spaces in excess of those currently existing) and that reasonable access
to the Building shall always remain available;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available (without
any abatement of rent to Lessee);
(c) To designate other land and improvements outside the boundaries
of the Office Building Project to be a part of the Common Areas, provided that
such other land and improvements have a reasonable and functional relationship
to the Office Building Project;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Office Building Project, or any
portion hereof;
(f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Office Building Project as Lessor
may, in the exercise of sound business judgment deem to be appropriate.
3. TERM.
3.1 TERM. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 INTENTIONALLY OMITTED.
3.2.1 INTENTIONALLY OMITTED.
3.2.2 INTENTIONALLY OMITTED.
3.3 INTENTIONALLY OMITTED.
2
<PAGE>
3.4 INTENTIONALLY OMITTED.
4. RENT.
4.1 BASE RENT. Subject to adjustment as hereinafter provided in paragraph
4.8, and except as may be otherwise expressly provided in this Lease, Lessee
shall pay to Lessor the Base Rent for the Premises set forth in paragraph 1.6 of
the Basic Lease Provisions, without any offset or deduction whatsoever. Lessee
shall pay Lessor upon execution hereof the advance Base Rent described in
paragraph 1.8 of the Basic Lease Provisions. Rent for any period during the
term hereof which is for less than one month shall be prorated based upon the
actual number of days of the calendar month involved. Rent shall be payable in
lawful money of the United States to Lessor at the address stated herein or to
such other persons or at such other places as Lessor may designate in writing.
4.2 DEFINITIONS. The following definitions shall apply to this
Article 4:
(a) "Expense Base Year" shall mean calendar year 1995.
(b) "Tax Base Year" shall mean calendar year 1995.
(c) "Expense Comparison Year" shall mean each successive calendar
year after the Expense Base Year during the Lease Term.
(d) "Tax Comparison Year" shall mean each successive calendar year
after the Tax Base Year during the Lease Term.
(e) "Lessee's Share of Operating Expenses" shall mean the percentage
of Lessee's Share of Operating Expenses specified in the Basic Lease Provisions.
Lessee's Share of Operating Expenses was calculated by dividing the rentable
area of the Premises by the total rental area of the office space in the
Building. It is understood and agreed that the square footage figures set forth
in the Basic Lease Provisions are approximations which Lessor and Lessee agree
are reasonable and shall not be subject to revision (other than as set forth in
Article 1).
(f) "Lessee's Tax Share" shall mean the percentage of Lessee's Tax
Share specified in the Basic Lease Provisions. Lessee's Tax Share was calculated
by dividing the rentable area of the Premises by the total rentable area of the
office space in the Building. It is understood and agreed that the square
footage figures set forth in the Basic Lease Provisions are approximations which
Lessor and Lessee agree are reasonable and shall not be subject to revision
(other than as set forth in Article 1).
(g) "Operating Expenses" shall mean any and all direct costs and
expenses paid or incurred by Lessor in connection with the operation,
maintenance, management and repair of the Office Building Project. By way of
illustration but not limitation, Operating Expenses shall include the following:
(i) the cost of air conditioning, electricity, steam, heating, water, plumbing,
mechanical, ventilating, electrical systems, sanitary and storm drainage, life
safety equipment, telecommunications equipment, lessee directories, fire
detection systems, sprinkler systems, the cost of environmental surcharges
imposed by any government entity, escalator and elevator systems and all other
utilities and the cost of supplies and equipment and maintenance and service
contracts in connection therewith; (ii) the cost of repairs and general
maintenance and cleaning, including all goods, services and supplies purchased
by Lessor in connection therewith; (iii) the cost of fire, extended coverage,
boiler, sprinkler, public liability, property damage, loss of rent, earthquake
and other insurance on or covering operations of the Building, including such
other endorsements as Lessor may desire, all in such amounts as Lessor may
reasonably determine or the Building's share of a blanket policy, whether or not
it is actually paid for by the Building, as reasonably determined by Lessor, and
the cost of any losses payable by Lessor as a deductible; (iv) wages, salaries
and other labor costs, including uniforms, taxes, insurance, retirement, medical
and other employee benefits; (v) reasonable fees, charges and other costs,
including without limitation management fees, consulting fees, legal fees and
accounting fees, of all independent contractors engaged by Lessor to perform
services directly relating to the management of the Office Building Project or
reasonably charged by Lessor if Lessor or its affiliate(s) perform management
services in connection with the Office Building Project, and the costs of
supplying, replacing and cleaning employee uniforms; (vi) the cost of licenses,
permits and inspections and the cost of contesting the validity or applicability
of any governmental enactments which may affect Operating Expenses; (vii) the
cost of window coverings, decorative items, carpeting and other wall or floor
coverings furnished by Lessor from time to time in public corridors and Common
Areas; (viii) the cost of repairs, maintenance and cleaning of the Common Areas
including, but not limited to striping, bumpers, irrigation systems, Common Area
lighting facilities, Building exteriors and roofs, fences and gates; (ix)
Lessor's contributions to any owner's associations providing maintenance or
other services or benefits to the Building; (x) the cost of trash disposal,
janitorial and security services; (xi) the amount of any reasonable reserves
established for anticipated expenditures; and (xii) the cost of any capital
improvements made to the Building after completion of its construction as a
labor-saving or energy conservation device or to effect other economies in the
operation or maintenance of the Building, or made to the Building after the date
of this Lease that are required under any governmental law or regulation that
was not applicable to the Building at the time that permits for the construction
thereof were obtained (including without limitation those undertaken to comply
with the Americans With Disabilities Act, as such Act applies to the Common
Areas), such costs to be amortized over such reasonable period as Lessor shall
determine, together with interest on the unamortized balance at a market rate.
3
<PAGE>
For purposes of this Lease, Operating Expenses shall not include
taxes covered under clause (h) below, interest expense (except as provided in
clause (ix) above), leasing commissions, the cost of tenant improvements,
depreciation on the improvements contained in the Building (except as provided
in clause (ix) above), the cost of capital expenditures not included within
clause (ix) above or any costs which are paid by any tenant directly to third
parties or as to which Lessor is otherwise reimbursed by any other tenant, third
party or by insurance proceeds. The computation of Operating Expenses shall be
made in accordance with fair and reasonable accounting principles customarily
applied by owners of similar properties in Los Angeles County, California.
(h) "Applicable Taxes" shall mean all taxes, assessments and charges
levied on or with respect to the Building, the Office Building Project, or any
personal property of Lessor used in the operation thereof and payable by Lessor.
Applicable Taxes shall include, without limitation, all general real property
taxes and general and special assessments, fees, assessments or charges for
transit, police, fire, housing, other governmental services, or purported
benefits to the Building, service payments in lieu of taxes, and any tax, fee or
excise on the act of entering into this Lease or on the use or occupancy of the
Building or any part thereof, or on the rent payable under any lease or in
connection with the business of renting space in the Building, that are now or
hereafter levied on or assessed against Lessor by, or payable by Lessor as a
result of, the requirements of the United States of America, the State of
California, or any political subdivision, public corporation, district or other
political or public entity, and shall also include any other tax, fee or other
excise, however described, that may be levied or assessed as a substitute for,
or as an addition to, in whole or in part, any other taxes. Applicable Taxes
shall not include franchise, transfer, inheritance or capital stock taxes or
income taxes measured by the net income of Lessor from all sources, unless, due
to a change in the method of taxation, any of such taxes are levied or assessed
against Lessor as a substitute for, in whole or in part, any other tax which
would otherwise constitute an Applicable Tax. Applicable Taxes shall also
include reasonable legal fees, costs and disbursements incurred in connection
with proceedings to contest, determine or reduce Applicable Taxes.
Notwithstanding, anything to the contrary in this Lease, in the event that any
Applicable Taxes are payable, or may at the option of the taxpayer be paid in
installments, such Applicable Taxes shall be deemed to have been paid in
installments, regardless of the method of actual payment by Lessor, and Lessee's
Share of such Applicable Taxes shall only include those installments which would
become due and payable during the Term.
4.3 PAYMENT OF INCREASES. If, with respect to any Expense Comparison
Year, the Operating Expenses shall be higher than the Operating Expenses for the
Expense Base Year, Lessee shall pay to Lessor as additional rent Lessee's Share
of Operating Expenses of any such increase in Operating Expenses in the manner
provided herein. If, with respect to any Tax Comparison Year, the Applicable
Taxes shall be higher than the Applicable Taxes for the Tax Base Year, Lessee
shall pay to Lessor as additional rent, Lessee's Tax Share of any such increase
in Applicable Taxes in the manner provided herein. Notwithstanding anything to
the contrary contained in the foregoing, Lessee shall not be assessed, nor shall
it pay, Lessee's Share of any increase in Operating Expenses or Applicable Taxes
over the Expense Base Year or Tax Base Year, respectively, until the thirteenth
(13) month following the Commencement Date.
4.4 TIME FOR PAYMENT. The payments contemplated under paragraph 4.3 shall
be made as follows:
(a) During each month of each Comparison Year, Lessee shall pay to
Lessor, with each installment of Base Rent, such amounts as are estimated by
Lessor to be one-twelfth (1/12th) of the amounts payable pursuant to paragraph
4.3 with respect to each Tax Comparison Year and Expense Comparison Year;
provided, however, that Lessor may, by written notice to Lessee, revise its
estimates for such year and subsequent payments during the Comparison Year shall
be based upon such revised estimate.
(b) With reasonable promptness after the end of each Tax and/or
Expense Comparison Year, Lessor shall deliver to Lessee a statement setting
forth the actual Operating Expenses and Applicable Taxes for the Comparison
Year, a comparison with the Operating Expenses and Applicable Taxes for the Base
Year and a comparison of any amounts payable under paragraph 4.3 with the
estimated payments made by Lessee. If the amounts payable under paragraph 4.3
are less than the estimated payments made by Lessee with respect to such
Comparison Year, the statement shall be accompanied by a refund of the excess by
Lessor, or, at Lessor's election a notice that Lessor shall credit the excess to
the next succeeding monthly installments of the Base Rent. If the amounts
payable under paragraph 4.3 are more than the estimated payments made by Lessee
with respect to such Comparison Year, Lessee shall pay the deficiency to Lessor
within thirty (30) days after delivery of such statement. Statements provided by
Lessor shall be final and binding upon Lessee, if Lessee fails to contest the
same within ninety (90) days after the date of delivery to Lessee.
4.5 PARTIAL YEAR. If the Commencement or Expiration Date shall occur on a
date other than the first or last day of a Comparison Year, Lessee's Tax Share
and Lessee's Share of Operating Expenses for such Comparison Year shall be
prorated according to the ratio that the number of days during said Comparison
Year that the Lease was in effect bears to 365.
4.6 VACANCY ADJUSTMENT. Notwithstanding anything to the contrary in this
Lease, if during any Expense Comparison Year the Building is less than 95%
occupied, for the purposes of computing Lessee's Share of Operating Expenses for
said year, those Operating Expenses which vary based upon occupancy levels shall
be adjusted as though the Building were 95% occupied; provided, however, in no
event shall the aggregate amount collected by Lessor from all tenants in the
Building exceed the actual Operating Expenses for said year.
4
<PAGE>
4.7 LESSEE'S RIGHT TO AUDIT. If, within thirty days following Lessee's
receipt of Lessor's annual statement of actual Operating Expenses pursuant to
paragraph 4.4 Lessee notifies Lessor that Lessee desires to audit Lessor's
statement, Lessor shall cooperate with Lessee to permit such audit during normal
business hours at Lessee's sole cost and expense. If the audit shows that
actual Operating Expenses were less than the amount charged by Lessor pursuant
to paragraph 4.4 (b), the excess amount paid by Lessee (after the Base Year)
shall immediately be refunded by Lessor. If the audit shows that Lessor
overstated actual Operating Expenses by more than five percent (5%), Landlord
shall pay all the costs and expenses of the audit.
4.8 RENT INCREASE.
4.8.1 At the times set forth in paragraph 1.7 of the Basic Lease
Provisions, the monthly Base Rent payable under paragraph 4.1 of this Lease
shall be adjusted by the lesser of (i) the increase, if any, in the Consumer
Price index of the Bureau of Labor Statistics of the Department of Labor for All
Urban Consumers, (1982-84=100), "All Items," for LA/Anaheim/Riverside area,
herein referred to as "C.P.I.," since the date of this Lease and (ii) three
percent (3%), but in no event shall such new monthly Base Rent be less than the
Base Rent payable for the month immediately preceding the date for the rent
adjustment.
4.8.2 The increase in C.P.I. set forth in paragraph 4.8.1(i) shall be
calculated as follows: The Base Rent payable for the first month of the term of
this Lease, as set forth in paragraph 4.1 of this Lease, shall be multiplied by
a fraction the numerator of which shall be the C.P.I. of the calendar month
during which the adjustment is to take effect, and the denominator of which
shall be the C.P.I. for the calendar month in which the original Lease term
commences.
4.8.3 In the event the compilation and/or publication of the C.P.I.
shall be transferred to any other governmental department or bureau or agency or
shall be discontinued, then the index most nearly the same as the C.P.I. shall
be used to make such calculations. In the event that Lessor and Lessee cannot
agree on such alternative index, then the matter shall be submitted for decision
to the American Arbitration Association in the county in which the Premises are
located, in accordance with the then rules of said association and the decision
of the arbitrators shall be binding upon the parties, notwithstanding one party
failing to appear after due notice of the proceeding. The cost of said
Arbitrators shall be paid equally by Lessor and Lessee.
4.8.4 In addition to the annual increases in Base Rent described in
paragraph 4.8.1, the monthly base Rent under the Lease shall be increased on the
first day of the sixth year of the lease to the following amounts: the Base
Rent for the Ground Floor shall be adjusted to the higher of the "fair market
rental rate" as determined below and the prevailing Base Rent in the fifth year
of the Lease and the Base Rent for the Upper Floors shall be adjusted to the
higher of the "fair market rental rate" and the rate equal to $1.50 per square
foot increased by the annual Base Rent increases applied during the first five
(5) years of the Lease term as set forth in paragraph 4.8.1. The "fair market
rental rate" shall mean and refer to the monthly rental rate then being charged
for non-renewal, non-expansion, then-current, comparable, non-sublease, non-
encumbered, non-equity space for retail bank branch or office use, as applicable
to the Ground Floor and Upper Floors, respectively (collectively, "Comparable
Space") in reasonably equivalent first class office buildings in the
Glendale/Burbank area, similarly improved, taking into consideration the floor
level on which the Premises are located, existing tenant improvements or, if no
such improvements exist, allowances provided or to be provided for such
comparable space, rental abatement concessions, if any, the length of the
relevant term, the extent of services to be provided to the Premises, the date
as of which the fair market rental rate is to become effective, and any other
relevant terms or conditions. In order to determine the fair market rental
rate for purposes hereof, Lessor shall provide written notice of the fair market
rental rate not later than ninety (90) days prior to the first day of the sixth
year of the Lease. Lessee shall have fifteen (15) days (Lessee's Review
Period") after receipt of Lessor's notice within which to accept such fair
market rental rate or to reasonably object thereto in writing. Failure of
Lessee to so object to the fair market rental rate submitted by Lessor in
writing within Lessee's Review Period shall conclusively be deemed its approval
thereof. In the event Lessor objects to the fair market rental rate submitted
by Lessor, Lessor and Lessee shall attempt in good faith to reach agreement on
such fair market rental rate within fifteen (15) days following Lessee's Review
Period (the "Outside Agreement Date"), after which each party's determination
shall be submitted to appraisal as follows. Lessor and Lessee shall each
appoint one independent appraiser who shall by profession be a real estate
professional who shall have been active over the five (5) year period ending on
the date of such appointment in the leasing of commercial properties in the
Glendale/Burbank area. The determination of the appraisers shall be limited
solely to the issue of whether Lessor's or Lessee's submitted fair market rental
rate for the Premises is the closest to the actual fair market rental rate for
the Premises as determined by the appraisers, taking into account the
requirements for Comparable Space outlined above. Such decision shall be based
upon the projected prevailing fair market rental rate as of the commencement
date of the sixth year of the Lease. Each such appraiser shall be appointed
within ten (10) days of the Outside Agreement Date. The two (2) appraisers so
appointed shall within ten (10) days of the date of the appointment of the last
appointed appraiser agree upon and appoint a third appraiser who shall be
qualified under the same criteria set forth hereinabove for qualification of the
initial two (2) appraisers. The three (3) appraisers shall within (30) days of
the appointment of the third appraiser reach a decision as to whether the
parties shall use Lessor's or Lessee's submitted fair market rental rate, and
shall notify the parties thereof. The decision of the majority of the three (3)
appraisers shall be binding upon Lessor and Lessee. If either Lessor or Lessee
fails to appoint an appraiser within the time period specified hereinabove, the
appraiser appointed by one of them shall reach a decision based upon the same
procedures as set forth above and shall notify Lessor and Lessee thereof, and
such appraiser's decision shall be binding upon Lessor and Lessee. If the two
(2) appraisers fail to agree upon and appoint a third appraiser, both appraisers
shall submit the limited issue of choosing a third appraiser to arbitration
under the provisions of the American Arbitration Association, based
5
<PAGE>
upon the same procedures as set forth above. The cost of the appraisers and/or
of arbitration shall be paid by the losing party.
4.8.5 Lessee shall continue to pay the rent at the rate previously in
effect until the increase, if any, is determined. Within thirty (30) days
following the date on which the increase is determined, Lessee shall make such
payment to Lessor as will bring the increased rental current, commencing with
the effective date of such increase through the date of any rental installments
than due. Thereafter the rental shall be paid at the increased rate.
4.8.6 At such time as the amount of the change in rental rate in
the sixth year of the Lease is known or determined, Lessor and Lessee shall
execute an amendment to this Lease setting forth such change. Failure to execute
any such amendment shall not affect Lessee's obligation to pay the increased
Base Rent.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the security deposit set forth in paragraph 1.9 of the Basic Lease Provisions as
security for Lessee's faithful performance of Lessee's obligations hereunder.
If Lessee fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Lease, Lessor may use, apply or
retain all or any portion of said deposit for the payment of any rent or other
charge in default for the payment of any other sum to which Lessor may become
obligated by reason of Lessee's default, or to compensate Lessor for any loss or
damage which Lessor may suffer thereby. If Lessor so uses or applies all or any
portion of said deposit, Lessee shall within ten (10) days after written demand
therefor deposit cash with Lessor in an amount sufficient to restore said
deposit to the full amount then required of Lessee. If the monthly Base Rent
shall, from time to time, increase during the term of this Lease (other than as
set forth in paragraph 4.8.1), Lessee shall, at the time of such increase,
deposit with Lessor additional money as a security deposit so that the total
amount of the security deposit held by Lessor shall at all times bear the same
proportion to the then current Base Rent as the initial security deposit bears
to the initial Base Rent set forth in paragraph 1.6 of the Basic Lease
Provisions, Lessor shall not be required to keep said security deposit separate
from its general accounts. If Lessee performs all of the Lessee's obligations
hereunder, said deposit, or so much thereof as has not heretofore been applied
by Lessor, shall be returned, without payment of interest or other increment for
its use, to Lessee (or, at Lessor's option, to the last assignee, if any, of
Lessee's interest hereunder) within 30 days after the expiration of the term
hereof, and after Lessee has vacated the Premises. No trust relationship is
created herein between Lessor and Lessee with respect to said Security Deposit,
and under no circumstances shall Lessor be required to keep the Security Deposit
separate from its other funds or in an interest-bearing account, nor shall
Lessee be entitled to any interest on such amounts regardless of whether or not
the Security Deposit is deposited in an interest-bearing account.
6. PERMITTED USE.
6.1 PERMITTED USE. The Premises shall be used and occupied only for the
purpose set forth in paragraph 1.4 of the Basic Lease Provisions and for no
other purpose.
6.2 COMPLIANCE WITH LAW.
(a) Lessor makes no representation or warranty to Lessee regarding the
condition of the Premises or with respect to whether or not the Premises, or the
use for which Lessee will occupy the Premises, will violate any covenants or
restrictions of record, or any applicable building code, regulation, law or
ordinance in effect on the Lease term Commencement Date or at any other time.
(b) Lessee shall, at Lessee's expense, promptly comply with all
applicable statutes, ordinances, rules, regulations, orders, covenants and
restrictions of record, and requirements of any fire insurance underwriters or
rating bureaus, now in effect or which may hereafter come into effect, whether
or not they reflect a change in policy from that now existing, during the term
or any part of the term hereof, relating in any manner to the Premises and the
occupation and use by Lessee of the Premises. Lessee shall conduct its business
in a lawful manner and shall not use or permit the use of the Premises or the
Common Areas in any manner that will tend to create waste or a nuisance or shall
tend to disturb other occupants of the Office Building Project.
6.3 CONDITION OF PREMISES.
(a) Lessor acknowledges that it is in possession of the Premises on
the Commencement Date and Lessor makes no representation or warranty regarding
the condition of the Premises.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts
the Premises and the Office Building Project in their condition existing as of
the Lease Commencement Date or the date that Lessee takes possession of the
Premises, whichever is earlier, subject to all applicable zoning, municipal,
county and state laws, ordinances and regulations governing and regulating the
use of the Premises, and any easements, covenants or restrictions of record, and
accepts this Lease subject thereto and to all matters disclosed thereby and by
any exhibits attached hereto. Lessee acknowledges that it has satisfied itself
by its own independent investigation that the Premises are suitable for its
intended use, and that neither Lessor nor Lessor's agent or agents has made any
representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Office Building Project for the conduct of Lessee's
business.
6
<PAGE>
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.
7.1 LESSOR'S OBLIGATIONS. Lessor shall keep the Office Building Project,
including the Premises, interior and exterior walls (but not the interior walls
within the Premises), roof, and Common Areas, in good condition and repair;
provided, however, Lessor shall not be obligated to paint, repair or replace
wall coverings, or to repair or replace any improvements that are not ordinarily
a part of the Building or are above then Building standards. Except as provided
in paragraph 9.5, there shall be no abatement of rent or liability of Lessee on
account of any injury or interference with Lessee's business with respect to any
improvements, alterations or repairs made by Lessor to the Office Building
Project or any part thereof, or on account of any interruption of services or of
access to the Premises, Building or Office Building Project. Lessee expressly
waives the benefits of any statute now or hereafter in effect which would
otherwise afford Lessee the right to make repairs at Lessor's expense or to
terminate this Lease because of Lessor's failure to keep the Premises in good
order, condition and repair. Notwithstanding the foregoing, Lessor shall not be
responsible for repair or replacement of any item which Lessee knew or should
have known was in need of imminent repair or replacement on the Commencement
Date.
7.2 LESSEE'S OBLIGATIONS.
(a) Notwithstanding Lessor's obligation to keep the Premises in good
condition and repair, Lessee shall be responsible for payment of the cost
thereof to Lessor as additional rent for that portion of the cost of any
maintenance and repair of the Premises, or any equipment (wherever located) that
serves only Lessee or the Premises, to the extent such cost is attributable to
causes beyond normal wear and tear. Lessee shall be responsible for the cost of
painting, repairing or replacing wall coverings, and to repair or replace any
Premises improvements that are not ordinarily a part of the Building or that are
above then Building standards. Lessor may, at its option, upon reasonable
notice, elect to have Lessee perform any particular such maintenance or repairs
the cost of which is otherwise Lessee's responsibility hereunder.
(b) 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 received,
ordinary wear and tear excepted, clean and free of debris. Any damage or
deterioration of the Premises shall not be deemed ordinary wear and tear if the
same could have been prevented by good maintenance practices by Lessee. Lessee
shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, alterations, furnishings and equipment.
Except as otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, air
conditioning, window coverings, wall coverings, carpets, wall paneling, ceilings
and plumbing on the Premises and in good operating condition.
7.3 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent, which
consent shall not be unreasonably withheld, make any alterations, improvements,
additions, Utility Installations or repairs in, on or about the Premises, or the
Office Building Project; provided, however, that Lessee may make any non-
structural alteration, improvement, addition, Utility Installation or repair to
the interior of the Premises as long as it is not visible from the outside, does
not involve puncturing, relocating or removing the roof or any existing walls,
and does not require the procurement of a building permit. As used in this
paragraph 7.3 the term "Utility Installation" shall mean carpeting, window and
wall coverings, power panels, electrical distribution systems, lighting
fixtures, air conditioning, plumbing, and telephone and telecommunication wiring
and equipment. At the expiration of the term, Lessor may require the removal of
any or all of said alterations, improvements, additions or Utility
Installations, and the restoration of the Premises and the Office Building
Project to their prior condition, at Lessee's expense; provided, however, that
Lessee shall have no obligation to remove the walk-in vault on the Ground Floor.
Should Lessor permit Lessee to make its own alterations, improvements, additions
or Utility Installations, Lessee shall use only such contractor as has been
expressly approved by Lessor, and Lessor may require Lessee to provide Lessor,
at Lessee's sole cost and expense, a lien and completion bond in an amount equal
to the estimated cost of such improvements, to insure Lessor against any
liability for mechanic's and materialmen's liens and to insure completion of the
work. In addition, Lessee shall require all contractors and subcontractors
performing work at the Premises to carry workers' compensation insurance and
liability insurance in an amount reasonably acceptable to Lessor, and Lessee
shall provide copies of all such workers' compensation and liability insurance
policies or certificates to Lessor. Should Lessee make any alterations,
improvements, additions or Utility Installations without the prior approval of
Lessor (unless such approval is not required pursuant to the first sentence of
this paragraph 7.3(a)), or use a contractor not expressly approved by Lessor,
Lessor may, at any time during the term of this Lease, require that Lessee
remove any part or all of the same.
(b) Any alterations, improvements, additions or Utility Installations
in or about the Premises or the Office Building Project that Lessee shall desire
to make shall be presented to Lessor in written form, with proposed detailed
plans. If Lessor shall give its consent to Lessee's making such alteration,
improvement, addition or Utility Installation, the consent shall be deemed
conditioned upon Lessee acquiring a permit to do so from the applicable
governmental agencies, if required, furnishing a copy thereof to Lessor prior to
the commencement of the work, and compliance by Lessee with all conditions of
said permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises, the Building or the Office Building
Project, or any interest therein.
7
<PAGE>
(d) Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises by Lessee, and Lessor
shall have the right to post notices of non-responsibility in or on the Premises
or the Building as provided by law. Lessee shall at all times keep the Premises,
the Building and the Office Building Project free and clear of liens
attributable in any way to a work of improvement commissioned by Lessee, or to
the acts or omissions of Lessee, any of Lessee's employees, agents, or
contractors, or any of their employees, agents or sub-contractors. If Lessee
shall, in good faith, contest the validity of any such lien, claim or demand,
then Lessee shall, at its sole expense defend itself and Lessor against the same
and shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof against Lessor or the Premises, the Building or
the Office Building Project, upon the condition that if Lessor shall require,
Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount
not less than one hundred ten percent (110%) of the amount of such contested
lien claim or demand indemnifying Lessor against liability for the same and
holding the Premises, the Building and the Office Building Project free from the
effect of such lien or claim. In addition, Lessor may require Lessee to pay
Lessor's reasonable attorneys' fees and costs in participating in such action if
Lessor shall decide it is to Lessor's best interest so to do.
(e) All alterations, improvements, additions and Utility installations
(whether or not such Utility Installations constitute trade fixtures of Lessee),
which may be made to the Premises by Lessee, including but not limited to, floor
coverings, panelings, doors, drapes, built-ins, moldings, sound attenuation, and
lighting and telephone or communication systems, conduit, wiring and outlets,
shall be made and done in a good and workmanlike manner and of good and
sufficient quality and materials and shall be the property of Lessor and remain
upon and be surrendered with the Premises at the expiration of the lease term,
unless Lessor requires their removal pursuant to paragraph 7.3(a). Provided
Lessee is not in default, notwithstanding the provisions of this paragraph
7.3(e), Lessee's personal property and equipment, other than that which is
affixed to the Premises so that it cannot be removed without material damage to
the Premises or the Building, and other than Utility Installations, shall remain
the property of Lessee and may be removed by Lessee subject to the provisions of
paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and specification
for any alterations, improvements, additions or Utility Installations for which
a building permit is required.
(g) Lessee shall be allowed to maintain any automatic teller machines
(ATM) existing on the Premises on the Commencement Date. In addition, Lessee may
install one night depository and/or one or more ATM(s) protruding through the
exterior walls of the Office Building Project on the Premises, at any time
during the Term of the Lease, subject to all applicable laws and regulations and
Lessor's prior written approval, which shall not be unreasonably withheld.
Lessor's approval shall not be deemed unreasonably withheld if based on concerns
regarding the impact of the installation of the night depository or ATM(s) upon
the structure or aesthetics of the Office Building Project, the projected
traffic flow or the safety of Lessor's and Lessee's employees, representatives
and invitees. Subject to Lessor's ability to withhold approval for the
installation of night depository and ATM(s) as set forth above, Lessor shall
cooperate with Lessee to install the night depository and ATM(s) in such a
manner as to provide adequate security for night depository and ATM users. At
the expiration of the Term, Lessor may require the removal of any night
depository and ATM(s) installed by Lessee and the restoration of the Premises to
their prior condition.
7.4 UTILITY ADDITIONS. Lessor reserves the right to install new or
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building Project,
including, but not by way of limitation, such utilities as plumbing, electrical
systems, security systems, communication systems, and fire protection and
detection systems, so long as such installations do not unreasonably interfere
with Lessee's use of the Premises.
8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE-LESSEE. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease a policy of Comprehensive
General Liability insurance utilizing an Insurance Services Office standard form
with Broad Form General Liability Endorsement (GL0404), or equivalent, in an
amount of not less than $2,000,000 per occurrence of bodily injury and property
damage combined or in a greater amount as reasonably determined by Lessor and
shall insure Lessee with Lessor and any mortgagee of which Lessee has been
provided notice as additional insureds against liability arising out of the use,
occupancy or maintenance of the Premises. Compliance with the above requirement
shall not, however, limit the liability of Lessee hereunder.
8.2 LIABILITY AND EARTHQUAKE INSURANCE-LESSOR. Although Lessor shall not
be required to maintain any liability or earthquake insurance, any premiums for
such insurance maintained by Lessor relating to the Premises, the Building or
the Office Building Project shall be Operating Expenses hereunder.
8.3 PROPERTY INSURANCE-LESSEE. Lessee shall, at Lessee's expense, obtain
and keep in force during the term of this Lease for the benefit of Lessee,
replacement cost all-risks insurance, including without limitation fire and
extended coverage insurance, with vandalism and malicious mischief, sprinkler
leakage and earthquake sprinkler leakage endorsements, in an amount sufficient
to cover not less than 100% of the full replacement costs, as the same may exist
from time to time, of all of Lessee's personal property, fixtures, equipment and
tenant improvements, less the amount of such standard deductibles as determined
by Lessee.
8.4 PROPERTY INSURANCE-LESSOR. 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 Office Building Project improvements, but not
8
<PAGE>
Lessee's personal property, fixtures, equipment or tenant improvements, in the
amount of the full replacement cost thereof, as the same may exist from time to
time, utilizing Insurance Services Office standard form, or equivalent providing
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, plate glass, and such other
perils as Lessor deems advisable or may be required by a lender having a lien on
the Office Building Project. In addition, Lessor shall 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 Operating Expenses for said period. Lessee will not be named in any
such policies carried by Lessor and shall have no right to any proceeds
therefrom. The policies required by these paragraphs 8.2 and 8.4 shall contain
such deductibles as Lessor or the aforesaid lender may determine. In the event
that the Premises shall suffer an insured loss as defined in paragraph 9.1(f)
hereof, the deductible amounts under the applicable insurance policies shall be
deemed an Operating Expense. Lessee shall not do or permit to be done anything
which shall invalidate the insurance policies carried by Lessor. Lessee shall
pay the entirety of any increase in the property insurance premium for the
Office Building Project over what it was immediately prior to the commencement
of the term of this Lease if the increase is specified by Lessor's insurance
carrier as being caused by the nature of Lessee's occupancy or any act or
omission of Lessee.
8.5 INSURANCE POLICIES. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease.
Each policy required to be obtained by Lessee hereunder shall: (a) be
issued by insurers authorized to do business in the state in which the Building
is located and rated not less than financial class X, and not less than
policyholder rating A, in the most recent version of Best's Key Rating Guide, or
the equivalent rating in any other comparable guide selected by Lessor (provided
that, in any event, the same insurance company shall provide the coverages
described in paragraphs 8.1 and 8.3 above); (b) be in form reasonably
satisfactory from time to time to Lessor; (c) name Lessee as named insured
thereunder and shall name Lessor and, at Lessor's request, Lessor's mortgagees
and ground lessors of which Lessee has been informed in writing, as additional
insureds (d) not have a deductible amount exceeding Twenty-Five Thousand Dollars
($25,000.00); (e) specifically provide that the insurance afforded by such
policy for the benefit of Lessor and Lessor's mortgagees and ground lessors
shall be primary, and any insurance carried by Lessor or Lessor's mortgagees and
ground lessors shall be excess and non-contributing; (f) except for worker's
compensation insurance, contain an endorsement that the insurer waives its right
to subrogation as described in paragraph 8.6 below: and (g) contain an
undertaking by the insurer to notify Lessor (and the mortgagees and ground
lessors of Lessor who are named as additional insureds) in writing not less than
ten (10) days prior to any material change, reduction in coverage, cancellation
or other termination thereof. Lessee agrees to deliver to Lessor, as soon as
practicable after the placing of the required insurance, but in no event later
than ten (10) days after the date Lessee takes possession of all or any part of
the Premises, certified copies of each such insurance policy (or certificates
from the insurance company evidencing the existence of such insurance and
Lessee's compliance with the foregoing provisions of this paragraph 8). Lessee
shall cause replacement policies or certificates to be delivered to Lessor not
less than ten (10) days prior to the expiration of any such policy or policies.
If any such initial or replacement policies or certificates are not furnished
within the time(s) specified herein, Lessee shall be deemed to be in material
default under this Lease without the benefit of any additional notice or cure
period provided herein, and Lessor shall have the right, but not the obligation,
to procure such policies and certificates at Lessee's expense.
8.6 WAIVER OF SUBROGATION. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other,
for direct or consequential loss or damage arising out of or incident to the
perils covered by property insurance carried by such party, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. If necessary all property insurance policies required under this
Lease shall be endorsed to so provide.
8.7 INDEMNITY. Lessee shall indemnify and hold harmless Lessor and its
officers, directors, contractors, agents, Lessor's master or ground lessor,
partners and lenders, from and against any and all claims, actions, liabilities,
costs, penalties and expenses of any kind and nature for damage to the person
(including death) or property of anyone or any entity arising from Lessee's use
of the Office Building Project, or from the conduct of Lessee's business or from
any activity, work or things done, permitted or suffered by Lessee in or about
the Premises or elsewhere and shall further indemnify and hold harmless Lessor
from and against any and all claims, costs and expenses 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 or omission of Lessee, or
any of Lessee's agents, contractors, employees or invitees and from and against
all costs, attorneys' fees, expenses and liabilities incurred by Lessor as the
result of any such use, conduct, activity, work, things done, permitted or
suffered, breach, default or negligence, and in dealing reasonably therewith,
including but not limited to the defense or pursuit of any claim or any action
or proceeding involved therein; and in case any action or proceeding be brought
against Lessor by reason of any such matter, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be so indemnified. Lessee, as a
material part of the consideration to Lessor, hereby assumes all risk of damage
to property of Lessee or injury to persons, in, upon or about the Office
Building Project arising from any cause and Lessee hereby waives all claims in
respect thereof against Lessor. Notwithstanding anything to the contrary
contained in this paragraph 8.7, Lessee shall not indemnify Lessor or any other
person from any loss, liability or expense to the extent that a cause was (i)
negligence or misconduct on the part of Lessor or any of Lessor's agents,
contractors, employees or invitees or (ii) any defect in the Office Building
Project, unless such loss, liability, expense or defect was the result of any
negligence or misconduct on the part of Lessee or any of Lessee's agents,
contractors, employees or invitees.
9
<PAGE>
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or for loss of or damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other person
in or about the Premises or the Office Building Project, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from theft,
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon other
portions of the Office Building Project, or from other sources or places, or
from new construction or the repair, alteration or improvement of any part of
the Office Building Project, or of the equipment, fixtures or appurtenances
applicable thereto, and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible, Lessor shall not be liable
for any damages arising from any act or neglect of any other lessee, occupant or
user of the Office Building Project, nor from the failure of Lessor to enforce
the provisions of any other lease of any other lessee of the Office Building
Project. Notwithstanding anything to the contrary contained in this paragraph
8.8, nothing contained herein shall exempt Lessor from liability which it
otherwise would have, to the extent that it is attributable to (i) negligence or
misconduct on the part of Lessor or any of Lessor's agents, contractors,
employees or invitees or (ii) any defect in the Office Building Project, unless
such liability or defect was the result of any negligence or misconduct on the
part of Lessee or any of Lessee's agents, contractors, employees or invitees.
8.9 NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Lessee's property or obligations under
this Lease.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Damage" shall mean if the Premises are damaged or
destroyed to a significant extent.
(b) "Premises Building Partial Damage" shall mean if the Building of
which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is less than fifty percent (50%) of the then Replacement Cost of
the Building.
(c) "Premises Building Total Destruction" shall mean if the Building
of which the Premises are a part is damaged or destroyed to the extent that the
cost to repair is fifty percent (50%) or more of the then Replacement Cost of
the Building.
(d) "Office Building Project Buildings" shall mean all of the
buildings on the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction" shall mean
if the Office Building Project Buildings are damaged or destroyed to the extent
that the cost of repair is fifty percent (50%) or more of the then Replacement
Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which was caused
by an event either required to be covered by the insurance described in
paragraph 8 or for which no coverage is required by the insurance described in
paragraph 8, but for which Lessor is nonetheless insured. The fact that an
Insured Loss has a deductible amount shall not make the loss an uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary to be
spent in order to repair or rebuild the damaged area to the condition that
existed immediately prior to the damage occurring, excluding all improvements
made by lessees, other than those installed by Lessor at Lessee's expense.
9.2 PREMISES DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the Term of this Lease there is damage which is an
Insured Loss and which falls into the classification of Premises Building
Partial Damage, then Lessor shall, as soon as reasonably possible and to the
extent sufficient insurance proceeds are available and the required materials
and labor are readily available through usual commercial channels, at Lessor's
expense, repair such damage (but not Lessee's fixtures, equipment or tenant
improvements originally paid for by Lessee, unless Lessor, its employees, agents
or representatives were responsible for such damage) to its condition existing
at the time of the damage, and this Lease shall continue in full force and
effect. Notwithstanding the foregoing, in the event that such Premises Building
Partial Damage was caused by the negligent act or omission of Lessee, its
agents, employees or contractors, Lessor shall be required to repair such damage
only to the extent that insurance proceeds are available to cover the cost of
such repair, and any portion of the cost of repair for which insurance proceeds
are unavailable shall be borne by Lessee.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4 and
9.5, if at any time during the Term of this Lease there is damage which is not
an Insured Loss and which falls within the classification of Premises Damage or
Premises Building Partial Damage, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense), which
damage prevents Lessee from making any substantial use of the Premises, Lessor
may at Lessor's option either (i) repair such damage as soon as reasonably
10
<PAGE>
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) give written notice to Lessee within sixty (60) days
after the date of the occurrence of such damage of Lessor's intention to cancel
and terminate this Lease as of the date of the occurrence of such damage, in
which event this Lease shall terminate as of the date of the occurrence of such
damage.
9.3 PREMISES BUILDING TOTAL DESTRUCTION; OFFICE BUILDING PROJECT TOTAL
DESTRUCTION. Subject to the provisions of paragraphs 9.4 and 9.5, if at any
time during the term of this Lease there is damage, whether or not it is an
insured Loss, which falls into the classifications of either (i) Premises
Building Total Destruction, or (ii) Office Building Project Total Destruction,
then Lessor may at Lessor's option either (i) repair such damage or destruction
as soon as reasonably possible at Lessor's expense (to the extent the required
materials are readily available through usual commercial channels) to its
condition existing at the time of the damage, but not Lessee's fixtures,
equipment or tenant improvements unless Lessor, its employees, agents or
representatives were responsible for such damage, and this Lease shall continue
in full force and effect, or (ii) give written notice to Lessee within sixty
(60) days after the date of occurrence of such damage of Lessor's intention to
cancel and terminate this Lease, in which case this Lease shall terminate as of
the date of the occurrence of such damage.
9.4 DAMAGE NEAR END OF TERM.
(a) Subject to paragraph 9.4(b), if at any time during the last
eighteen (18) months of the Term of this Lease there is substantial damage to
the Premises, Lessor may at Lessor's option cancel and terminate this Lease as
of the date of occurrence of such damage by giving written notice to Lessee of
Lessor's election to do so within 30 days after the date of occurrence of such
damage.
(b) Notwithstanding paragraph 9.4(a), in the event that Lessee has an
option to extend or renew this Lease, and the time within which said option may
be exercised has not yet expired, Lessee shall exercise such option, if it is to
be exercised at all, no later than thirty (30) days after the occurrence of an
Insured Loss falling within the classification of Premises Damage during the
last eighteen (18) months of the term of this Lease. If Lessee duly exercises
such option during said thirty (30) day period, Lessor shall, at Lessor's
expense, repair such damage, but not Lessee's fixtures, equipment or tenant
improvements, unless Lessor, its employees, agents or representatives were
responsible for such damage, as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option
during said thirty (30) day period, then Lessor may at Lessor's option terminate
and cancel this Lease as of the expiration of said thirty (30) day period by
giving written notice to Lessee of Lessor's election to do so within ten (10)
days after the expiration of said thirty (30) day period, notwithstanding any
term or provision in the grant of option to the contrary.
9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) If, in the event of Premises Damage, Lessor repairs or restores
the Building or Premises pursuant to the provisions of this paragraph 9, and any
part of the Premises are not usable (including loss of use due to loss of access
or essential services), the rent payable hereunder (including Lessee's Share of
Operating Expenses) for the period during which such damage, repair or
restoration continues shall be abated to the extent in excess of rental
interruption insurance or loss insurance proceeds received by Lessor and
credited to Lessee for the payment of rent hereunder, provided (1) the damage
was not the result of the negligence of Lessee, and (2) such abatement shall
only be to the extent to which the Premises Damage interferes with Lessee's use
of the Premises. Except for said abatement of rent, if any, Lessee shall have no
claim against Lessor for any damage suffered by reason of any such damage,
destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
or the Building under the provisions of this paragraph 9 or if Lessor elects to
repair or restore the Premises or the Building under paragraph 9.2(b), and shall
not immediately commence diligent repair or restoration efforts (including,
without limitation, submitting applications for building permits) after such
occurrence, or if Lessor shall not complete the restoration and repair (as
evidenced by receipt of a certificate of occupancy, temporary certificate of
occupancy or other relevant certification that improvements have been completed)
within nine (9) months after such occurrence, Lessee may at Lessee's option
cancel and terminate this Lease by giving Lessor written notice of Lessee's
election to do so at any time prior to the commencement or completion,
respectively, of such repair or restoration. In such event this Lease shall
terminate as of the date of such notice. Notwithstanding the foregoing, if
Lessor believes that it will be unable to complete the restoration and repair of
the Premises or the Building within nine (9) months from the date of such
occurrence, Lessor shall so notify Lessee as soon as such determination is made
by Lessor, and Lessee shall have the option to allow Lessor a longer period of
time within which to complete the restoration or repair or to terminate the
Lease upon ten (10) days written notice to Lessor.
(c) Lessee agrees to cooperate with Lessor in connection with any such
restoration and repair, including but not limited to the approval and/or
execution of plans and specifications required.
9.6 TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease pursuant
to this paragraph 9, all advance rent and any advance payments made by Lessee to
Lessor, less any amounts due and owing to Lessor under the Lease, shall be
refunded to Lessee. Lessor shall, in addition, return to Lessee so much of
Lessee's security deposit as has not theretofore been applied by Lessor.
9.7 WAIVER. Lessor and Lessee waive the provisions of any statute which
relate to termination of leases when leased property is destroyed and agree that
such event shall be governed by the terms of this Lease.
11
<PAGE>
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Applicable Taxes, as defined
in paragraph 4.2, applicable to the Office Building Project subject to
reimbursement by Lessee of Lessee's Tax Share in accordance with the provisions
of paragraph 4.3, except as otherwise provided in paragraph 10.2.
10.2 ADDITIONAL IMPROVEMENTS. Lessee shall not be responsible for paying
any increase in Applicable Taxes specified in the tax assessor's records and
work sheets as being caused by additional improvements placed upon the Office
Building Project by other lessees or by Lessor for the exclusive enjoyment of
any other lessee. Lessee shall, however, pay to Lessor at the time that
Operating Expenses are payable under paragraph 4.3 the entirety of any increase
in Applicable Taxes if assessed solely by reason of additional improvements
placed upon the Premises by Lessee or at Lessee's request.
10.3 JOINT ASSESSMENT. If the improvements or property, the taxes for
which are to be paid separately by Lessee under paragraph 10.2 or 10.4 are not
separately assessed, Lessee's portion of that tax shall be equitably determined
by Lessor from the respective valuations assigned in the assessor's work sheets
or such other information (which may include the cost of construction) as may be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay to Lessor the taxes attributable to
Lessee within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Lessee's property.
11. UTILITIES.
11.1 SERVICES PROVIDED BY LESSOR. Lessor shall provide heating,
ventilation, air conditioning and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines, tap
water for reasonable and normal drinking and lavatory use, and replacement light
bulbs and/or florescent tubes and ballasts for standard overhead fixtures.
Janitorial service shall be provided Monday through Friday with the exception of
holidays designated by Lessor. All such water, gas and electricity shall be
available to the Premises 24 hours a day, seven (7) days a week for normal
office purposes. Costs incurred by Lessor in providing such services to Lessee
that are not directly metered to Lessee shall be Operating Expenses.
11.2. SERVICES EXCLUSIVE TO LESSOR. Lessee shall pay for all gas, heat,
light, power, telephone and other utilities and services specially or
exclusively supplied and/or metered exclusively to the Premises or to Lessee,
together with any taxes thereon. If any such services are not separately
metered to the Premises, Lessee shall pay a reasonable proportion to be
determined by Lessor of all charges jointly metered with other premises in the
Building.
11.3 HOURS OF SERVICE. Said services and utilities shall be provided
during the hours between 8:00 a.m. and 6:00 p.m. on Monday through Friday and
between 8:00 a.m. and 12:00 noon on Saturday or such other days or hours as may
hereafter be set forth in the Rules and Regulations or any amendment thereto.
Utilities and services required at other times shall be subject to advance
request and reimbursement by Lessee to Lessor of the cost thereof.
11.4 EXCESS USAGE BY LESSEE. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water, lighting
or power, or suffer or permit any act that causes extra burden upon the
utilities or services, including but not limited to security services, over
standard office usage for the Office Building Project. Lessor shall require
Lessee to reimburse Lessor for any excess expenses or costs that may arise out
of a breach of this subparagraph by Lessee. Lessee shall reimburse Lessor for
the costs of all HVAC and electricity for lights furnished to the Premises
before 8:00 a.m. and after 6:00 p.m. on business days and after 12:00 noon on
Saturday and before 8:00 a.m. on Monday. Lessor may, with the consent of
Lessee, which shall not be unreasonably withheld, install at Lessee's expense
supplemental equipment and/or separate metering applicable to Lessee's excess
usage or loading.
11.5 INTERRUPTIONS. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service, when the cause thereof
was beyond Lessor's reasonable control. In the case of any such interruption,
Lessor shall immediately take all reasonable steps to restore the interrupted
utilities and services.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer,
12
<PAGE>
mortgage, encumbrance or subletting without such consent shall be void, and
shall constitute a material default and breach of this Lease without the need
for notice to Lessee under paragraph 13.1. "Transfer" within the meaning of
this paragraph 12 shall include the transfer or transfers aggregating: (a) if
Lessee is a corporation, more than fifty percent (50%) of the voting stock of
such corporation or (b) if Lessee is a partnership, more than fifty percent
(50%) of the profit and loss participation in such partnership. Notwithstanding
the foregoing to the contrary, Lessee may assign or sublet the Premises or any
portion thereof to any affiliate or subsidiary of Lessee upon notice to Lessor,
but without the consent of Lessor.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, no assignment or subletting
shall release Lessee of Lessee's obligations hereunder or alter the primary
liability of Lessee to pay the rent and other sums due Lessor hereunder
including Lessee's Share of Operating Expenses, and to perform all other
obligations to be performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than Lessee pending
approval or disapproval of such assignment without being deemed to have
consented thereto.
(c) Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a waiver
or estoppel of Lessor's right to exercise its remedies for the breach of any of
the terms or conditions of this paragraph 12 of this Lease.
(d) If Lessee's obligations under this Lease have been guaranteed by
third parties, then an assignment or sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to such
sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease or any amendments or modifications thereto without notifying Lessee or
anyone else liable on the Lease or sublease and without obtaining their consent
and such action shall not relieve such persons from liability under this Lease
or said sublease; provided, however, such persons shall not be responsible to
the extent any such amendment or modification enlarges or increases the
obligations of the Lessee or sublessee under this Lease or such sublease.
(f) In the event of any default under this Lease, Lessor may proceed
directly against Lessee, any guarantors or anyone else responsible for the
performance of this Lease, including the sublessee, without first exhausting
Lessor's remedies against any other person or entity responsible therefor to
Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no default then
exists under this Lease of the obligations to be performed by Lessee nor shall
such consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement relied
upon by Lessor in giving its consent to an assignment or subletting was
materially false shall, at Lessor's election, render Lessor's said consent null
and void.
(i) In no event shall Lessee enter into a sublease or assignment of
the Ground Floor for any use other than as a retail bank branch or of the Upper
Floors for any use other than general office use.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. Regardless
of Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be deemed
included in all subleases under this Lease whether or not expressly incorporated
therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease heretofore or
hereafter made by Lessee, and Lessor may collect such rent and income and apply
same toward Lessee's obligations under this Lease; provided, however, that until
a default shall occur in the performance of Lessee's obligations under this
Lease, Lessee may receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of such
sublease to Lessor nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
sublease. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a default exists in
the performance of Lessee's obligations under this Lease, to pay to Lessor the
rents due and to become due under the sublease. Lessee agrees that such
sublessee shall have the right to rely upon any such statement and request from
Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against said sublessee or Lessor for any such rents
so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective unless and
until it has been approved in writing by Lessor. In entering into any sublease,
Lessee shall use only such form of sublease as is satisfactory
13
<PAGE>
to Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublessee shall, by reason
of entering into a sublease under this Lease, be deemed, for the benefit of
Lessor, to have assumed and agreed to conform and comply with each and every
obligation herein to be performed by Lessee other than such obligations as are
contrary to or inconsistent with provisions contained in a sublease to which
Lessor has expressly consented in writing.
(c) In the event Lessee shall default in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorn to Lessor, in which event Lessor
shall undertake the obligations of Lessee under such sublease from the time of
the exercise of said option to the termination of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to Lessee or for any other prior defaults of Lessee under
such sublease.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has consented,
Lessor agrees to deliver a copy of any notice of default by Lessee to the
sublessee. Such sublessee shall have the right to cure a default of Lessee
within five (5) business days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset from
and against Lessee for any such defaults cured by the sublessee.
(f) Notwithstanding anything to the contrary in the foregoing, fifty
percent (50%) of any rent or other economic consideration received by Lessee as
a result of an assignment or subletting which exceeds, in the aggregate, (i) the
total rent which Lessee is obligated to pay to Lessor under the Lease (prorated
to reflect obligations allocable to any portion of the Premises subleased), plus
(ii) any reasonable and customary brokerage commissions (not to exceed three
percent (3%) of base rent payable under the assignment or sublease), and
reasonable attorneys' or consultant's fees actually paid by Lessee in connection
with such assignment or subletting, shall be paid to Lessor within ten (10)
business days after receipt thereof as additional rent hereunder, without
altering or reducing any other obligations of Lessee hereunder.
(g) Notwithstanding anything to the contrary contained in this
paragraph 12, Lessor shall convey to Lessee in writing its approval or
reasonable disapproval of any assignment or subletting, no more than fifteen
(15) business days following receipt of Lessee's written request, along with any
additional information and/or documentation reasonably requested by Lessor.
Lessor's failure to respond to Lessee's request for approval of any assignment
of subletting within such fifteen (15) day period shall be conclusively deemed
an approval of such request.
12.4 LESSOR'S EXPENSES. In the event Lessee shall assign or sublet the
Premises or request the consent of Lessor to any assignment or subletting or if
Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable costs and expenses incurred in
connection therewith, including without limitation, attorneys', architects',
engineers' and other consultants' fees.
12.5 CONDITIONS TO CONSENT. Lessor reserves the right to condition any
approval to assign or sublet upon Lessor's determination that (a) the proposed
assignee or sublessee shall conduct a business on the Premises of a quality
substantially equal to that of Lessee and consistent with the general character
of the other occupants of the Office Building Project and not in violation of
any exclusives or rights then held by other lessees, and (b) the proposed
assignee or sublessee be at least as financially responsible as Lessee was
expected to be at the time of the execution of this Lease or of such assignment
or subletting, whichever is greater.
13. DEFAULT; REMEDIES.
13.1 DEFAULT. The occurrence of any one or more of the following events
shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee. Vacation
of the Premises shall include the failure to occupy the Premises for a
continuous period of sixty (60) days or more, whether or not the rent is paid.
(b) The breach by Lessee of any of the covenants, conditions or
provisions of paragraphs 7.3(a),(b) or (d) (alterations), 12.1 (assignment or
subletting), 13.1(a) (vacation or abandonment), 13.1(e) (insolvency), 13.1(f)
(false statement), 16(a) (estoppel certificate), 30(b) (subordination), 33
(auctions), or 41.1 (easements), all of which are hereby deemed to be material,
non-curable defaults without the necessity of any notice by Lessor to Lessee
thereof.
(c) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of ten (10) days after written notice
thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a
Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes
such Notice to Pay Rent or Quit shall also constitute the notice required by
this subparagraph.
(d) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Lessee other than those referenced in subparagraphs (b) and (c),
14
<PAGE>
above, where such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor to Lessee; provided, however, that if the
nature of Lessee's noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default if Lessee commenced such cure within said thirty (30) day period and
thereafter diligently pursues such cure to completion. To the extent permitted
by law, such thirty (30) day notice shall constitute the sole and exclusive
notice required to be given to Lessee under applicable Unlawful Detainer
statutes.
(e) (i) The making by Lessee of any general arrangement or general
assignment for the benefit of creditors; (ii) Lessee becoming a "debtor" as
defined in 11 U.S.C. (S) 101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within sixty (60)
days; (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within thirty
(30) days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 13.1(e) is contrary to
any applicable law, such provision shall be of no force or effect.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee, or its successor in interest or by any guarantor of Lessee's
obligation hereunder, was materially false.
13.2 LESSOR'S REMEDIES.
(a) Termination. In the event of any default by Lessee, in addition
to any other remedies available to Lessor under this Lease, at law or in equity,
Lessor shall have the immediate option to terminate this Lease and all rights of
Lessee hereunder. In the event that Lessor shall elect to so terminate this
Lease, then Lessor may recover from Lessee:
(i) the worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus
(ii) the worth at the time of the award of the amount by which
the unpaid rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that Lessee
proves could have been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that Lessee proves could be
reasonable avoided; plus
(iv) any other amount necessary to compensate Lessor for all
the detriment proximately caused by Lessee's failure to perform its
obligations under this Lease including, but not limited to: attorneys'
fees; brokers' commissions; the costs of refurbishment, alterations,
renovation and repair of the Premises; and removal (including the
repair of damage caused by such removal) and storage (or disposal) of
Lessee's personal property, equipment, fixtures, Lessee's alterations,
additions, leasehold improvements and any other items which Lessee is
required under this Lease to remove but does not remove.
As used in subparagraphs (i) and (ii), above, the "worth at the time
of award" is computed by allowing interest at the maximum interest rate which
Lessor is permitted by law to charge to Lessee (the "Lease Rate"). As used in
subparagraph (iii), above, the "worth at the time of award" is 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%).
(b) Re-Entry Rights. In the event of any default by Lessee, in
addition to any other remedies available to Lessor under this Lease, at law or
in equity, Lessor shall also have the right, with or without terminating this
Lease, to re-enter the Premises and remove all persons and property from the
Premises; such property may be removed, stored and/or disposed of pursuant to
this Lease or any other procedures permitted by applicable law. No re-entry or
taking possession of the Premises by Lessor pursuant to this paragraph 13.2(b),
and no acceptance of surrender of the Premises or other action on Lessor's part,
shall be construed as an election 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.
(c) Continuation of Lease. In the event of any default by Lessee, in
addition to any other remedies available to Lessor under this Lease, at law or
in equity, Lessor shall have the right to continue this Lease in full force and
effect, whether or not Lessee shall have abandoned the Premises. The foregoing
remedy shall also be available to Lessor pursuant to California Civil Code
Section 1951.4 and any successor statute thereof in the event Lessee has
abandoned the Premises. In the event Lessor elects to continue this Lease in
full force and effect pursuant to this paragraph 13.2(c), then Lessor shall be
entitled to enforce all of its rights and remedies under this Lease, including
the right to recover rent as it becomes due. Lessor's election not to terminate
this Lease pursuant to this paragraph 13.2(c) or pursuant to any other provision
of this Lease, at law or in equity, shall not preclude Lessor from subsequently
electing to terminate this Lease or pursuing any of its other remedies.
(d) Rights and Remedies Cumulative. All rights, options and
remedies of Lessor contained in this paragraph 13.2 and elsewhere in this Lease
shall be construed and held to be cumulative, and no one of them
15
<PAGE>
shall be exclusive of the other, and Lessor shall have the right to pursue any
one or all of such remedies or any other remedy or relief which may be provided
by law or in equity, whether or not stated in this Lease. Nothing in this
paragraph 13.2 shall be deemed to limit or otherwise affect Lessee's
indemnification of Lessor pursuant to any provision of this Lease.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor
fails to perform obligations required of Lessor within a reasonable time, but in
no event later than thirty (30) days after written notice by Lessee to Lessor
and to the holder of any first Mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to Lessee in
writing, specifying wherein Lessor has failed to perform such obligation;
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
default if Lessor commences performance within such 30-day period and thereafter
diligently pursues the same to completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
to Lessor of Base Rent, Lessee's Share of Operating Expenses or other sums due
hereunder will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed on Lessor by the terms of any mortgage or trust
deed covering the Office Building Project. Accordingly, if any installment of
Base Rent, Lessee's Share of Operating Expenses, Lessee's Tax Share or any other
sum due from Lessee shall not be received by Lessor or Lessor's designee within
fifteen (15) business days after such amount shall be due, then, without any
requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal
to 5% of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's default with respect to such
overdue amount, nor prevent Lessor from exercising any of the other rights and
remedies granted hereunder.
14. CONDEMNATION. If the Premises or any portion thereof or the Office
Building Project are taken under the power of eminent domain, or sold under the
threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first occurs;
provided that if so much of the Premises or the Office Building Project are
taken by such condemnation as would substantially and adversely affect the
operation and profitability of Lessee's business conducted from the Premises,
Lessee shall have the option, to be exercised only in writing within thirty (30)
days after Lessor shall have given Lessee written notice of such taking (or in
the absence of such notice, within thirty (30) days after the condemning
authority shall have taken possession), to terminate this Lease as of the date
the condemning authority takes such possession. If Lessee does not terminate
this Lease in accordance with the foregoing, this Lease shall remain in full
force and effect as to the portion of the Premises remaining, except that the
rent and Lessee's Share of Operating Expenses and Lessee's Tax Share shall be
reduced as set forth in paragraph 4.2 in the proportion that the floor area of
the Premises taken bears to the total floor area of the Premises. Common Areas
taken shall be excluded from the Common Areas usable by Lessee and no reduction
of rent shall occur with respect thereto or by reason thereof. Lessor shall
have the option in its sole discretion to terminate this Lease as of the taking
of possession by the condemning authority, by giving written notice to Lessee of
such election within thirty (30) days after receipt of notice of a taking by
condemnation of any part of the Premises or the Office Building Project. Any
award for the taking of all or any part of the Premises or the Office Building
Project under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Lessee
shall be entitled to any separate award for loss of or damage to Lessee's trade
fixtures, removable personal property and unamortized tenant improvements that
have been paid for by Lessee. For that purpose the cost of such improvements
shall be amortized over the original term of this Lease excluding any options.
In the event that this Lease is not terminated by reason of such condemnation,
Lessor shall to the extent of severance damages received by Lessor in connection
with such condemnation, repair any damage to the Premises caused by such
condemnation except to the extent that Lessee has been reimbursed therefor by
the condemning authority. Lessee shall pay any amount in excess of such
severance damages required to complete such repair.
15. INTENTIONALLY OMITTED.
16. ESTOPPEL CERTIFICATE.
(a) Each party (as "responding party") shall at any time upon not less
than ten (10) business days' prior written notice from the other party
("requesting party") execute, acknowledge and deliver to the requesting party a
statement in writing (i) certifying 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
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed, and (iii) in the case of Lessee, certify as to such
other matters as may be requested by Lessor or by a prospective purchaser or
encumbrancer of all or any part of the Office Building Project. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Office Building Project or of the business of Lessee.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i) this Lease is in full force and effect,
without modification except as may be
16
<PAGE>
represented by the requesting party, (ii) there are no uncured defaults in the
requesting party's performance, (iii) if Lessor is the requesting party, not
more than one month's rent has been paid in advance, and (iv) if Lessor is the
requesting party, there are no remaining obligations of the requesting party
under this Lease yet to be performed.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only the
owner or owners and any receiver, at the time in question, of the fee title or a
Lessee's interest in a ground lease of the Office Building Project, and except
as expressly provided in this Lease, in the event of any transfer of such title
or interest, Lessor herein named (and in case of any subsequent transfers then
the grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall, subject
as aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction shall in no way affect the validity of any
other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the maximum rate
then allowable by law or judgments from the date due (the "Lease Rate").
Payment of such interest shall not excuse or cure any default by Lessee under
this Lease; provided, however, that interest shall not be payable on late
charges incurred by Lessee nor on any amounts upon which late charges are paid
by Lessee.
20. TIME OF ESSENCE. Time is of the essence with respect to the obligations to
be performed under this Lease.
21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expense and any other expenses payable by Lessee hereunder shall be deemed to be
rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
or contemporaneous agreement or understanding pertaining to any such matter
shall be effective. This Lease may be modified in writing only, signed by the
parties in interest at the time of the modification. Except as otherwise
stated in this Lease, Lessee hereby acknowledges that no real estate broker nor
the Lessor or any employee or agents of any of said persons has made any oral or
written warranties or representations to Lessee relative to the condition or use
by Lessee of the Premises or the Office Building Project and Lessee acknowledges
that Lessee assumes all responsibility regarding the Occupational Safety Health
Act, the legal use and adaptability of the Premises and the compliance thereof
with all applicable laws and regulations in effect during the term of this
Lease.
23. NOTICES. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified or registered
mail, and shall be deemed sufficiently given if delivered or addressed to Lessee
or to Lessor at the address noted below or adjacent to the signature of the
respective parties, as the case may be. In addition, a copy of all notices
pertaining to any event of default, termination of tenancy or any matters which
may give rise to a dispute between the parties shall also be delivered to Lessee
at: Fidelity Federal Bank, 600 North Brand Boulevard, P.O. Box 1631, Glendale,
California 91209, Attention: Legal Department. Mailed notices shall be deemed
given upon actual receipt at the address required, or forty-eight hours
following deposit in the mail, postage prepaid, whichever first occurs. Either
party may by notice to the other specify a different address for notice purposes
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.
24. WAIVERS. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent so
accepted, regardless of Lessor's knowledge of such preceding breach at the time
of acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, except that the rent payable
shall be one hundred twenty percent (120%) of the rent payable immediately
preceding the termination date of this Lease, and all Options, if any, granted
under the terms of this Lease shall be deemed terminated and be of no further
effect during said month to month tenancy.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
17
<PAGE>
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
of California applicable to contracts to be wholly performed within such State.
30. SUBORDINATION.
(a) This Lease, and any Option or right of first refusal granted hereby, at
Lessor's option, shall, without the necessity of Lessee or any other party
executing any additional documentation, be subordinate to any ground lease,
mortgage, deed of trust, or any other hypothecation or security now or hereafter
placed upon the Office Building Project and to any and all advances made on the
security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. If any mortgagee, trustee or ground lessor
shall elect to have this Lease and any Options granted hereby prior to the lien
of its mortgage, deed of trust or ground lease, and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
mortgage, deed of trust or ground lease whether this Lease or such Options are
dated prior or subsequent to the date of said mortgage, deed of trust or ground
lease or the date of recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination, or to make this Lease or any Option granted herein
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be; provided, however, that Lessor must use best efforts to secure from
lender a nondisturbance agreement containing provisions which are reasonable and
customary for commercial leasing transactions. Lessee's failure to execute such
documents within fifteen (15) business days after written demand shall
constitute a material default by Lessee hereunder without further notice to
Lessee.
31. ATTORNEYS' FEES.
31.1 If either party named herein bring an action to enforce the terms
hereof or declare rights hereunder, the prevailing party in any such action,
trial or appeal thereon, shall be entitled to his reasonable attorneys' fees to
be paid by the losing party as fixed by the court in the same or a separate
suit, and whether or not such action is pursued to decision or judgment.
31.2 The attorneys' fee award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all other
costs and expenses incurred in the preparation and service of notices of default
and consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such default.
32. LESSOR'S ACCESS.
32.1 Lessor and Lessor's agents shall have the right to enter the Premises
at reasonable times for the purpose of inspecting the same, performing any
services required of Lessor, showing the same to prospective purchasers,
lenders, or lessees, taking such safety measures, erecting such scaffolding or
other necessary structures, making such alterations, repairs, improvements or
additions to the Premises or to the Office Building Project as Lessor may
reasonably deem necessary or desirable and the erecting, using and maintaining
of utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect to Lessee's use of the
Premises. Lessor may at any time place on or about the Premises or the Building
any ordinary "For Sale" signs and "Office For Lease" signs, and Lessor may at
any time during the last 120 days of the term hereof place on or about the
Premises any ordinary "For Lease" signs.
32.2 All activities of Lessor pursuant to this paragraph shall be without
abatement of rent, nor shall Lessor have any liability to Lessee for the same.
32.3 Lessor shall have the right to retain keys to the Premises and to
unlock all doors in or upon the Premises other than to files, vaults and safes,
and in the case of emergency to enter the Premises by any reasonably appropriate
means, and any such entry shall not be deemed a forcible or unlawful entry or
detainer of the Premises or an eviction. Lessee waives any charges for damages
or injuries or interference with Lessee's property or business in connection
therewith.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent. The holding of any auction on the Premises or Common Areas in
violation of this paragraph shall constitute a material default of this Lease.
34. SIGNS. Lessee shall not place any additional permanent sign upon the
Premises or the Office Building Project without Lessor's prior written consent;
provided, however, that Lessee may replace any currently existing permanent sign
upon the Premises or the Office Building
18
<PAGE>
Project with the consent of Lessor, which consent shall not be unreasonably
withheld. Under no circumstances shall Lessee place a sign on any roof of the
Office Building Project. Notwithstanding the foregoing, Lessee shall be allowed
to maintain, and Lessor hereby approves of, all permanent signs existing on the
Premises and the Office Building Project as of the Commencement Date.
Additionally, Lessee shall be entitled to affix its other customary signs,
advertising placards, names, insignia, trademarks and other descriptive
materials to the interior of the Ground Floor of the Premises in accordance with
the signage plan attached hereto as Exhibit D (except that signs notifying
Lessee's customers of branch holiday closings may be placed on the entrance
doors to the Premises and the doors from the Premises to the Building lobby);
provided that all such signs, advertising placards, and other descriptive
materials shall be commercially printed and shall occupy no more than ten
percent (10%) of the interior surface area of the glass on the Ground Floor of
the Premises.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
36. CONSENTS. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Office Building Project.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the work "Option" has the
following meaning: (i) the right or option to extend the term of this Lease or
to renew this Lease or (ii) the right or option to purchase the Office Building
Project.
39.2 OPTIONS PERSONAL. Each Option granted to Lessee in this Lease is
personal to the original Lessee and may be exercised only by the original Lessee
while occupying the Premises who does so without the intent of thereafter
assigning this Lease or subletting the Premises or any portion thereof, and may
not be exercised or be assigned, voluntarily or involuntarily, by or to any
person or entity other than Lessee; provided, however, that an Option may be
exercised by or assigned to any Lessee Affiliate as defined in paragraph 12.2 of
this Lease. The Options, if any, herein granted to Lessee are not assignable
separate and apart from this Lease, nor may any Option be separated from this
Lease in any manner, either by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple options
to extend or renew this Lease a later option cannot be exercised unless the
prior option to extend or renew this Lease has been so exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary, (i) during the time
commencing from the date Lessor gives to Lessee a notice of default pursuant to
paragraph 13.1(c) or 13.1(d) and continuing until the noncompliance alleged in
said notice of default is cured, or (ii) during the period of time commencing on
the day after a monetary obligation to Lessor is due from Lessee and unpaid
(without any necessity for notice thereof to Lessee) and continuing until the
obligation is paid, or (iii) in the event that Lessor has given to Lessee three
or more notices of default under paragraph 13.1(c), or paragraph 13.1(d),
whether or not the defaults are cured, during the 12-month period of time
immediately prior to the time that Lessee attempts to exercise the subject
Option, (iv) if Lessee has committed any non-curable breach, including without
limitation those described in paragraph 13.1(b), or is otherwise in default of
any of the terms, covenants or conditions of this Lease.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to
commence to cure a default specified in paragraph 13.1(d) within thirty (30)
days after the date that Lessor gives notice to Lessee of such default and/or
Lessee fails thereafter to diligently prosecute said cure to completion, (iii)
Lessor gives to Lessee three or more notices of default under paragraph 13.1(c),
or paragraph 13.1(d), whether or not the defaults are cured, or (iv) if Lessee
has committed any non-curable breach, including without limitation those
described in paragraph 13.1(b), or is otherwise in default of any of the terms,
covenants and conditions of this Lease.
19
<PAGE>
39.5 OPTION TO EXTEND TERM. Lessee shall have the Option to extend the
term of the Lease for the Ground Floor only on all the provisions of the Lease
(modified to reflect the lease of the Ground Floor only), including the annual
increase in Base Rent set forth in paragraph 4.8.1 hereof, except for monthly
Base Rent, for two (2) consecutive five-year terms (each an "extended term")
following expiration of the initial Term of the Lease, by giving written notice
of exercise of each Option (the "option notice") to Lessor at least six (6)
months, but no more than nine (9) months before the expiration of the existing
term of the Lease, at an annual Base Rent equal to the higher of the "fair
market rental rate" or the prevailing Base Rent payable by Lessee in the twelve
(12) months immediately preceding the extended term. The "fair market rental
rate" for the extended term shall be determined as set forth in paragraph 4.8.4
hereof, except that Lessor shall provide written notice of the fair market
rental rate not later than thirty (30) days after the last day on which the
option notice may be given by Lessee and the determination of the appraisers
regarding whether Lessor's or Lessee's submitted fair market rental rate for the
Ground Floor is the closest to the actual fair market rental rate for the Ground
Floor shall be based upon the projected fair market rental rate as of the
commencement date of the extended term.
39.6 OPTION TO PURCHASE. Lessee shall have an Option to purchase the
Office Building Project upon expiration of the initial term of the Lease at fair
market value, provided that Lessor then owns the Office Building Project, by
delivering written notice of exercise of the Option (the "option notice") to
Lessor at least six (6) months but no more than nine (9) months before the
expiration of the initial term of the Lease. The "fair market value" shall mean
and refer to the sales price of comparable first class office buildings in the
Glendale/Burbank area that were sold in transactions that were negotiated at
arms length, under no threat of condemnation or foreclosure, but excluding sales
made to a lender or its affiliate pursuant to a foreclosure sale and sales
subject to options to purchase (collectively, "Comparable Sales") in last year
prior to the end of the initial term, taking into consideration the highest and
best use for the Office Building Project, location, condition, existing leases,
entitlements, encumbrances, title and all other matters which typically affect
market value of a building. If less than five (5) such Comparable Sales were
made in the last year prior to the end of the initial term, then fair market
value shall refer to Comparable Sales made in the last two (2) years prior to
the end of the Term. In order to determine the fair market value for purposes
hereof, Lessor shall provide written notice of the fair market value not later
than thirty (30) days after the last day upon which the option notice could be
given. Lessee shall have fifteen (15) days (Lessee's Review Period") after
receipt of Lessor's notice within which to accept such fair market value or to
reasonably object thereto in writing. Failure of Lessee to so object to the
fair market value submitted by Lessor in writing within Lessee's Review Period
shall conclusively be deemed its approval thereof. In the event Lessor objects
to the fair market value submitted by Lessor, Lessor and Lessee shall attempt in
good faith to reach agreement on such fair market value within forty-five (45)
days following Lessee's Review Period (the "Outside Agreement Date"), after
which each party's determination shall be submitted to appraisal as follows.
Lessor and Lessee shall each appoint one independent appraiser who shall by
profession be a real estate appraiser who has been active over the five (5) year
period ending on the date of such appointment in the evaluation of sales of
commercial properties in the Glendale/Burbank area. The determination of the
appraisers shall be limited solely to the issue of whether Lessor's or Lessee's
submitted fair market value for the Office Building Project is the closest to
the actual fair market value for the Office Building Project as determined by
the appraisers, taking into account the requirements for Comparable Sales
outlined above. Such decision shall be based upon the projected fair market
value as of the proposed sales date of the Office Building Project. Each such
appraiser shall be appointed within fifteen (15) days of the Outside Agreement
Date. The two (2) appraisers so appointed shall within fifteen (15) days of the
date of the appointment of the last appointed appraiser agree upon and appoint a
third appraiser who shall be qualified under the same criteria set forth
hereinabove for qualification of the initial two (2) appraisers. The three (3)
appraisers shall within (30) days of the appointment of the third appraiser
reach a decision as to whether the parties shall use Lessor's or Lessee's
submitted fair market value, and shall notify the parties thereof. The decision
of the majority of the three (3) appraisers shall be binding upon Lessor and
Lessee. If either Lessor or Lessee fails to appoint an appraiser within the
time period specified hereinabove, the appraiser appointed by one of them shall
reach a decision based upon the same procedures as set forth above and shall
notify Lessor and Lessee thereof, and such appraiser's decision shall be binding
upon Lessor and Lessee. If the two (2) appraisers fail to agree upon and
appoint a third appraiser, both appraisers shall submit the limited issue of
choosing the third appraiser to arbitration under the provisions of the American
Arbitration Association, based upon the same procedures as set forth above. The
cost of the appraisers and/or of arbitration shall be paid by the losing party.
40. SECURITY MEASURES--LESSOR'S RESERVATIONS.
40.1 Lessor shall have the obligation to provide guard service in the
lobby of the Office Building Project from the hours of 8:00 a.m. to 6:00 p.m.
Monday through Friday and to provide a parking lot attendant from the hours of
8:00 a.m. to 4:00 p.m. Monday through Thursday and from the hours of 8:00 a.m.
to 6:00 p.m. on Friday for the benefit of the Premises or the Office Building
Project and the cost thereof shall be included within the definition of
Operating Expenses. Nothing herein contained shall prevent Lessor, at Lessor's
sole option, from providing additional security protection for the Office
Building Project or any part thereof, in which event the cost thereof shall be
included within the definition of Operating Expenses, as set forth in paragraph
4.2(g). Notwitstanding the foregoing or any other provisions of this Lease,
Lessor and Lessee acknowledge that Lessor shall have no responsibility or
liability for the security or safety of Lessee's employees or customers
utilizing the night depositories or ATM(s) installed on the Premises.
40.2 Without limiting its rights at law or elsewhere under this Lease,
Lessor shall have the following rights:
(a) To change the name, address or title of the Office Building
Project or building in which the Premises are located upon not less than 90
days' prior written notice;
20
<PAGE>
(b) To, at Lessee's expense, provide and install Building standard
graphics on the door of the Premises and such portions of the Common Areas as
Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any business
as long as such exclusive does not conflict with any rights expressly given
herein;
(d) To place such signs, notices or displays as Lessor reasonably
deems necessary or advisable upon the roof, exterior of the buildings or the
Office Building Project or on pole signs in the Common Areas.
40.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of the Building
or the Office Building Project or their name(s) in connection with Lessee's
business (other than in Lessee's annual report) without Lessee's prior consent,
which shall not be unreasonably withheld;
(b) Suffer or permit anyone, except in emergency, to go upon the roof
of the Building.
41. EASEMENTS.
41.1 Lessor reserves to itself the right, from time to time, to grant such
easements, rights and dedications that Lessor deems necessary or desirable, and
to cause the recordation of Parcel Maps and restrictions, so long as such
easements, rights, dedications, Maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.
41.2 The obstruction of Lessee's view, air, or light by any structure
erected in the vicinity of the Building, whether by Lessor or third parties,
shall in no way affect this Lease or impose any liability upon Lessor.
42. LESSOR'S RIGHT TO REDEVELOP DURING EXTENSION TERM. If, during the
"extended term" (as defined in paragraph 39.5) of this Lease, in connection with
the Redevelopment (as defined below) of the Office Building Project, Lessor
obtains either approval from the City of Glendale to structurally alter the
Office Building Project or a demolition permit from the City of Glendale to
demolish all or part of the Office Building Project, Lessor shall have the
right, upon one (1) year's prior written notice to Lessee, to require that
Lessee temporarily relocate while Lessor completes the Redevelopment; provided
that Lessor shall pay for all costs incurred by Lessee in connection with
Lessee's relocation, including, but not limited to, moving costs (including
insurance associated therewith), telephone and computer installation charges,
stationery reprinting costs, utilities hook-up charges, related advertising
costs and the cost of any rent payable by Lessee for Comparable Space (as
defined in paragraph 4.8.4 hereof) in the Glendale/Burbank area in excess of the
then current rent plus expenses payable by Lessee under this Lease during the
same period; provided that Lessee shall use its best efforts to obtain
Comparable Space at a comparable rental rate. As used in this paragraph, "the
Redevelopment" means a change in the the structural configuration of the Office
Building Project such that the construction would impair the operation of
Lessee's business in the Ground Floor of the Premises. After Lessor delivers
written notice to Lessee of the Redevelopment, the Lease shall continue in full
force and effect until the earlier of (i) the date which is one (1) year from
the date of written notice to Lessee of the Redevelopment and (ii) the date on
which Lessee vacates the Premises. In the Redevelopment, Lessor shall include
space with square footage of not less than 5,000 and not more than 10,000 square
feet suitable for Lessee's operation of a retail bank branch on the ground floor
of the Building. Lessee shall deliver written notice to Lessor specifying the
exact square footage it desires within the range set forth above within three
(3) months from the date that Lessor delivers written notice of Redevelopment to
Lessee; provided that if Lessee fails to deliver such notice within the time
period specified, Lessor shall conclusively determine the size of the retail
bank branch space in its sole discretion. Lessor hereby agrees that as part of
the Redevelopment, it shall provide to Lessee a credit for tenant improvements
on the ground floor of the Building at a price per square foot equal to the
price per square foot then being spent by Lessee for tenant improvement in its
branches in comparable first class office buildings. Lessor shall complete the
Redevelopment within twenty-four (24) months from the earlier of (i) the date
which is one (1) year from the date on which Lessor delivered notice of
Redevelopment to Lessee or (ii) the date on which Lessor actually commences
demolition of the Building. If Lessor fails to complete the Redevelopment
within the twenty-four (24) month period specified above, upon relocation by
Lessee in the Office Building Project, Lessee shall receive one month's free
rent for each month, or any portion thereof, which completion of the
Redevelopment is delayed beyond such twenty-four (24) month period; provided,
however, that if Lessor's failure to complete the Redevelopment is due to a
force majeure event, such twenty-four (24) month period shall be extended by the
number of days that Lessor was unable to conduct such redevelopment efforts due
to such force majeure event. Lessee shall have the first right of acceptance to
lease the ground floor of the Office Building Project upon the same or
substantially the same terms of this Lease, except that the term shall be equal
to ten (10) years and the price per square foot payable by Lessee shall be equal
to the "fair market rental value" determined in the manner set forth in
paragraph 4.8.4 hereof; provided that Lessee must deliver written notice to
Lessor of exercise of its first right of acceptance as set forth above within
thirty (30) days from the date that Lessee vacates the Premises after notice of
Redevelopment.
43. LESSOR'S RIGHT TO PERFORM. Except as specifically provided otherwise in
this Lease, all covenants and agreements by Lessee under this Lease shall be
performed by Lessee at Lessee's sole cost and expense and without any abatement
or offset of rent. If Lessee shall fail to pay any sum of money (other than
Basic Rent) or perform any other act on its part to be paid or performed
hereunder and such failure shall continue for ten (10) days with respect to
monetary obligations (or thirty (30) days with respect to non-monetary
obligations) then,
21
<PAGE>
notwithstanding anything to the contrary provided elsewhere herein, after
Lessee's receipt of written notice thereof from Lessor, Lessor may, without
waiving or releasing Lessee from any of Lessee's obligations, make such payment
or perform such other act on behalf of Lessee. All sums so paid by Lessor and
all necessary incidental costs incurred by Lessor in performing such other acts,
together with interest at the Lease Rate, shall be payable by Lessee to Lessor
within five (5) days after demand therefor as additional rent. The foregoing
rights are in addition to any and all remedies available to Lessor upon Lessee's
default as described in paragraph 13.2
44. LIMITATION ON LESSOR'S LIABILITY. Notwithstanding anything contained in
this Lease to the contrary, the obligations of Lessor under this Lease
(including any actual or alleged breach or default by Lessor) do not constitute
personal obligations of the individual partners, directors, officers or
shareholders of Lessor or Lessor's partners, or Lessor's mortgagees, and Lessee
shall not seek recourse against the individual partners, directors, officers or
shareholders of Lessor or Lessor's partners, or Lessor's mortgagees, or any of
their personal assets, for satisfaction of any liability with respect to this
Lease. In addition, in consideration of the benefits accruing hereunder to
Lessee and notwithstanding anything contained in this Lease to the contrary,
Lessee hereby covenants and agrees for itself and all of its successor and
assigns that the liability of Lessor for its obligations under this Lease
(including any liability as a result of any actual or alleged failure, breach or
default hereunder by Lessor), shall be limited solely to, and Lessee's and its
successors' and assigns' sole and exclusive remedy shall be against, Lessor's
interest in the Office Building Project and proceeds therefrom, and no other
assets of Lessor.
45. TOXIC MATERIALS.
(a) Definitions.
For purposes of this paragraph 45, "Hazardous Material" shall mean any
substance:
(i) the presence of which requires investigation or remediation under
any federal, state or local statute, regulation, ordinance, order, action or
policy; or
(ii) which is or becomes defined as a "hazardous waste" or "hazardous
substance" under any federal, state or local statute, regulation, ordinance or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. section 9601
et seq.) and or the Resource Conservation and Recovery Act (42 U.S.C. section
6901 et seq.); or
(iii) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic, or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of the United States, the State of California or any
political subdivision thereof; or
(iv) the presence of which on the Premises, Building or Office
Building Project causes or threatens to cause a nuisance upon the Premises,
Building or Office Building Project or to adjacent properties or poses or
threatens to pose a hazard to the Premises, Building or Office Building Project
or to the health or safety of persons on or about the Premises, Building or
Office Building Project; or
(v) without limitation which contains gasoline, diesel fuel or other
petroleum hydrocarbons; or
(vi) without limitation which contains polychlorinated bipheynols
(PCBs), asbestos or urea formaldehyde foam insulation; or
(vii) which is or becomes defined as "medical waste" under the
Medical Waste Management Act (Health & Safety Code Sections 25015-25099.3).
For purposes of this paragraph 45, "Environmental Requirements" means all
applicable present and future statutes, regulations, rules, ordinances, codes,
licenses, permits, orders, approvals, plans, authorizations, concessions,
franchises and similar items, of all governmental agencies, departments,
commissions, boards, bureaus or instrumentalities of the United States, states
and political subdivisions thereof and all applicable judicial and
administrative and regulatory decrees, judgments and orders relating to the
protection of human health or the environment, including without limitation:
(i) all requirements, including but not limited to those pertaining to
reporting, licensing, permitting, investigation and remediation of emissions,
discharges, releases or threatened releases of "Hazardous Materials," chemical
substances, pollutants, contaminants or hazardous or toxic substances, materials
or wastes whether solid, liquid or gaseous in nature, into the air, surface
water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
chemical substances, pollutants, contaminants or hazardous or toxic substances,
materials, or wastes, whether solid, liquid or gaseous in nature; and
(ii) all requirements pertaining to the protection of the health and
safety of employees or the public.
For purposes of this paragraph 45, "Environmental Damages" means all
claims, judgments, damages, losses, penalties, fines, liabilities (including
strict liability), encumbrances, liens, costs and expenses of
22
<PAGE>
investigation and defense of any claim, whether or not such claim is ultimately
defeated, and of any good faith settlement of judgment, of whatever kind or
nature, contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, including without limitation reasonable attorneys' fees and
disbursements and consultants' fees, any of which are incurred at any time as a
result of the existence on or after the date upon which Lessee takes possession
of the Premises (the "Possession Date") of "Hazardous Material" upon, about,
beneath the Premises, Building or Office Building Project or migrating or
threatening to migrate to or from the Premises, Building or Office Building
Project or the existence of a violation of "Environmental Requirements"
pertaining to the Premises, Building or Office Building Project, regardless of
whether the existence of such "Hazardous Material" or the violation of
"Environmental Requirements" arose prior to the present ownership or operation
of the Premises, Building or Office Building Project, and including without
limitation:
(i) damages for personal injury, or injury to property or natural
resources occurring upon or off of the Premises, Building or Office Building
Project, foreseeable or unforeseeable, including, without limitation, lost
profits, consequential damages, the cost of demolition and rebuilding of any
improvements on real property, interest and penalties including but not limited
to claims brought by or on behalf of employees of Lessee, with respect to which
Lessee waives any immunity to which it may be entitled under any industrial or
worker's compensation laws;
(ii) fees incurred for the service of attorneys, consultants,
contractors, experts, laboratories and all other costs incurred in connection
with the investigation or remediation of such "Hazardous Materials" or violation
of "Environmental Requirements" including, but not limited to, the preparation
of any feasibility studies or reports or the performance of any cleanup,
remedial, removal, response, abatement, containment, closure, restoration or
monitoring work required by any federal, state or local governmental agency or
political subdivision, or reasonably necessary to make full economic use of the
Premises, Building or Office Building Project or any other property or otherwise
expended in connection with such conditions, and including without limitation
any attorneys' fees, costs and expenses incurred in enforcing this Lease or
collection of any sums due hereunder;
(iii) liability to any third person or governmental agency to
indemnify such person or agency for costs expended in connection with the items
referenced in subparagraph (ii) herein; and
(iv) diminution in the value of the Premises, Building or Office
Building Project, and damages for the loss of business and restriction on the
use of or adverse impact on the marketing of rentable or usable space or of any
amenity of the Premises, Building or Office Building Project.
(b) Lessee's Obligations.
Lessee, at its sole cost and expense, shall comply with all Environmental
Requirements relating to the storage, use and disposal of all Hazardous
Materials, including those materials identified in Sections 66680 through 66685
of Title 22 of the California Administrative Code, Division 4, Chapter 30
("Title 22") as the same may be amended from time to time. If Lessee does
store, use or dispose of any Hazardous Materials, Lessee shall notify Lessor in
writing at least ten (10) days prior to the first appearance of such materials
on the Premises, Building or Office Building Project, and Lessor shall have the
right to disapprove of Lessee's use thereof on the Premises (provided that
Lessor's failure to disapprove thereof shall not constitute Lessor's approval
thereof or excuse Lessee from complying with the terms of this paragraph 45),
and Lessee's failure to so notify Lessor shall constitute a default under this
Lease. Lessee shall be solely responsible for and shall protect, defend,
indemnify, and hold Lessor, its agents and contractors harmless from and against
all Environmental Damages arising out of or in connection with the storage, use
and disposal of Hazardous Materials by Lessee, its officers, employees, agents,
representatives, servants, sublessees, concessionaires, licensees, contractors,
invitees or permittees. If the presence of Hazardous Materials on the Premises,
Building or Office Building Project caused or permitted by Lessee results in
contamination or deterioration of water or soil resulting in a level of
contamination greater than the levels established by any governmental agency
having jurisdiction over such contamination, then Lessee shall, at its sole cost
and expense, promptly take any and all action necessary to clean up such
contamination if required by law or as a condition to the issuance or continuing
effectiveness of any governmental approval which relates to the use of the
Premises, Building or Office Building Project. If at any time prior to the
expiration of the Lease term, Lessor shall reach a reasonable good faith
determination that Lessee or its officers, employees, agents, representatives,
servants, sublessees, concessionaires, licensees, contractors, invitees or
permittees have at any time violated any Environmental Requirements, discharged
any Hazardous Material onto the Premises, Building or Office Building Project,
or surrounding areas or otherwise subjected Lessor or the Office Building
Project to liability for Environmental Damages, then Lessor shall have the right
to require Lessee to conduct appropriate tests of water and soil and to deliver
to Lessor the result of such tests to demonstrate that no contamination in
excess of legally permitted levels has occurred as a result of Lessee's use of
the Premises, Building or Office Building Project. If the presence of Hazardous
Materials on the Premises, Building or office Building Project is caused or
permitted by Lessee or its officers, employees, agents, representatives,
servants, sublessees, concessionaires, licensees, contractors, invitees or
permittees such that Lessor or Lessee becomes obligated to conduct the necessary
clean-up of such contamination as required above, then, Lessee shall further be
solely responsible for, and shall protect, defend, indemnify and hold Lessor,
its agents and contractors harmless from and against all claims, costs and
liabilities, including actual attorneys' fees, expert witness fees and costs,
arising out of or in connection with any removal, cleanup and restoration work
and materials required hereunder to return the Premises, Building or office
Building Project and any other property of whatever nature to conditions which
existed prior to Lessee's use thereof and which are within acceptable levels
according to all Environmental Requirements or any other Federal, State or
23
<PAGE>
local governmental requirements. Lessee's obligations hereunder shall survive
the expiration or earlier termination of this Lease.
46. AUTHORITY. Lessee and Lessor, and each individual executing this Lease on
behalf of such entity, represent and warrant that such individual is duly
authorized to execute and deliver this Lease on behalf of said entity. Lessee
and Lessor shall, within thirty (30) days after execution of this Lease, deliver
to one another evidence of such authority.
47. CONFLICT. Any conflict between the printed provisions, Exhibits or Addenda
of this Lease and the computer-generated, typewritten or handwritten provisions,
if any, shall be controlled by the computer-generated, typewritten or
handwritten provisions.
48. NO OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully executed
by both parties.
49. INTENTIONALLY OMITTED.
50. MULTIPLE PARTIES. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee,
respectively.
51. INTENTIONALLY OMITTED.
53. ATTACHMENTS. Attached hereto are the following documents which constitute
a part of this Lease: See Exhibit List below.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
<TABLE>
<S> <C>
LESSOR LESSEE
CITADEL REALTY, INC. FIDELITY FEDERAL BANK, FSB
By /s/ STEVE WESSON By /s/ MEL M. SOLWAY
----------------------------------- ------------------------------------------
Its PRESIDENT Its SENIOR VICE PRESIDENT
------------------------------ -------------------------------------
By By
----------------------------------- -----------------------------------------
Its Its
----------------------------- -------------------------------------
Executed at 333 So. Grand, LA, CA Executed at 600 N. Brand Blvd., Glendale, CA
------------------------ --------------------------------
on on
--------------------------------- -----------------------------------------
Address: 600 North Brand Boulevard Address: 600 North Brand Boulevard
P.O. Box 1631 P.O. Box 1631
Glendale, California 91209 Glendale, California 91209
Attention: President Attention: Corporate Properties Department
</TABLE>
24
<PAGE>
EXHIBIT LIST
------------
EXHIBIT A -- Premises
EXHIBIT B -- Legal Description
EXHIBIT C -- Rules and Regulations
EXHIBIT D -- Signage Plan
25
<PAGE>
EXHIBIT A
STANDARD OFFICE LEASE
FLOOR PLAN
(DIAGRAM OF FLOOR PLAN)
26
<PAGE>
(DIAGRAM OF FOURTH FLOOR)
27
<PAGE>
(DIAGRAM OF FIFTH FLOOR)
28
<PAGE>
(DIAGRAM OF SIXTH FLOOR)
(ARCHITECTURAL INTERIOR
AND EXTERIOR WALLS)
29
<PAGE>
EXHIBIT "B"
2. Title to said estate or interest at the date hereof is vested in:
FIDELITY FEDERAL SAVINGS AND LOAN ASSOCIATION, A UNITED STATES CORPORATION.
3. The land referred to in this report is situated in the State of California.
County of LOS ANGELES and is described as follows:
LOTS 1, 2, 3, 4, 6, 7 AND 8 OF MCNUTT TRACT, IN THE CITY OF GLENDALE, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 160 OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
<PAGE>
EXHIBIT C
RULES AND REGULATIONS FOR
STANDARD OFFICE LEASE
TO THE EXTENT ANY PROVISION OF THESE RULES AND REGULATIONS CONFLICTS WITH
THE TERMS OF THE LEASE, THE PROVISIONS OF THE LEASE SHALL PREVAIL.
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in
good faith judges to be a threat to the safety, reputation, or property of the
Office Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the Office
Building Project.
4. Lessee shall not keep animals or birds within the Office Building
Project, and shall not bring bicycles, motorcycles or other vehicles into areas
not designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. No sign, advertisement of notice shall be displayed, printed or affixed
on or to the Premises or to the outside or inside of the Building or so as to be
visible from outside the Premises or Building without Lessor's prior written
consent. Lessor shall have the right to remove any non-approved sign,
advertisement or notice, without notice to and at the expense of Lessee, and
Lessor shall not be liable in damages for such removal. All approved signs or
lettering on doors and walls shall be printed, painted, affixed or inscribed at
the expense of Lessee by Lessor or by a person selected by Lessor and in a
manner and style acceptable to Lessor.
7. The sidewalks, halls, passages, exits, entrances, elevators and
stairways and other portions of the common areas shall not be obstructed by
Lessee or used for any purpose other than for ingress and egress from Lessee's
Premises.
8. Toilet rooms, toilets, urinals, wash bowls and other apparatus shall
not be used for any purpose other than for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein.
9. Lessee shall not overload the floor of the Premises or mark, drive
nails, screw or drill into the partitions, ceilings or floor or in any way
deface the Premises nor shall Lessee suffer or permit any thing in or around the
Premises or Building that causes excessive vibration or floor loading in any
part of the Office Building Project.
10. Lessor shall have the right to prescribe the weight, size and position
of all safes and other heavy equipment brought into the Building, except for the
existing ground floor walk-in vault. The times and manner of moving the same in
and out of the Building shall be prescribed by Lessor, and all such moving must
be done under the supervision of Lessor. Lessor may exclude from the Building
any such heavy or bulky equipment or articles, the weight of which may exceed
the floor load for which the Building is designed, or such equipment or articles
as may violate any provisions of the Lease of which these rules and regulations
are a part. Lessee shall not use any machinery or other bulky articles on the
Premises, even though its installation may have been permitted, which may cause
any noise, or jar, or tremor in the floors or walls, or which by its weight
might injure the floor of the Building. Safes or other heavy equipment shall,
as considered necessary by Lessor, stand on a platform of such thickness as is
necessary to properly distribute the weight.
11. Lessee shall not use or keep in the Premises, Building or Office
Building Project any kerosene, gasoline or inflammable, explosive or combustible
fluid or material, or use any method of heating or air-conditioning other than
that supplied by Lessor.
12. Lessee shall not lay linoleum, tile, carpet or other similar floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Lessor.
13. Lessee shall cooperate with Lessor in obtaining maximum effectiveness
of the cooling system by closing drapes when the sun's rays fall directly on
windows of the Premises. Lessee shall not obstruct, alter, or in any way impair
the efficient operation of Lessor's heating, ventilating and air-conditioning
system. Lessee shall not tamper with or change the setting of any thermostats
or control valves.
14. The Premises shall not be used for manufacturing or for the storage of
merchandise. Lessee shall not, without Lessor's prior written consent, occupy
or permit any portion of the Premises to be occupied or used for the manufacture
or sale of liquor or tobacco in any form, or as a barber or manicure shop, or as
an employment
31
<PAGE>
bureau. The Premises shall not be used for lodging or sleeping or for any
improper, objectionable or immoral purpose. No auction shall be conducted on the
Premises.
15. Lessee shall not make, or permit to be made, any unseemly or
disturbing noises, or disturb or interfere with occupants of the Building, the
Office Building Project or neighboring buildings or premises or those having
business with it by the use of any musical instrument, radio, phonographs or
unusual noise, or in any other way.
16. No bicycles, vehicles or animals of any kind shall be brought into or
kept in or about the Premises, and no cooking (except in microwave ovens for
consumption by Lessee's employees) shall be done or permitted by any lessee in
the Premises, except that the preparation of coffee, tea, hot chocolate and
similar items for lessees, their employees and visitors shall be permitted. No
lessee shall cause or permit any unusual or objectionable odors to be produced
in or permeate from or throughout the Premises.
17. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by any lessee, nor shall any
bottles, parcels or other articles be placed on the windowsills.
18. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by any lessee, nor shall any changes be made in existing
locks or the mechanisms thereof unless Lessor is first notified thereof, gives
written approval, which shall not be unreasonably withheld, and is furnished a
key therefor. Each lessee must, upon the termination of its tenancy, give the
Lessor all keys of stores, offices, or toilets and toilet rooms, either
furnished to, or otherwise procured by, such lessee, and in the event of the
loss of any keys so furnished, such lessee shall pay Lessor the cost of
replacing the same or of changing the lock or locks opened by such key if Lessor
shall deem it necessary to make such change.
19. Lessor shall have the right to prohibit any advertising by any lessee
which, in Lessor's opinion, tends to impair the reputation of the Building or
the Office Building Project or its desirability as an office building and upon
written notice from Lessor any lessee shall refrain from and discontinue such
advertising.
20. Any person employed by any lessee to do janitorial work shall, while
in the Building or the Office Building Project and outside of the Premises, be
subject to and under the control and direction of the office of the Office
Building Project (but not as an agent or servant of Lessor, and the lessee shall
be responsible for all acts of such persons).
21. No air conditioning unit or other similar apparatus shall be installed
or used by any lessee without the prior written consent of Lessor. Lessee shall
pay the cost of all electricity used for air conditioning in the Premises if
such electrical consumption exceeds normal office requirements or is
attributable to after hours use, regardless of whether additional apparatus is
installed pursuant to the preceding sentence.
22. There shall not be used in any space, or in the public halls of the
Building, either by any lessee or others, any hand trucks except those equipped
with rubber tires and side guards.
23. All electrical ceiling fixtures hung in offices or spaces along the
perimeter of the Building must be florescent and/or of a quality, type, design
and bulb color approved by Lessor. Lessee shall not permit the consumption in
the Premises of an average of more than 21/2 watts per net usable square foot in
the Premises in respect of office lighting nor shall Lessee permit the
consumption in the Premises of more than 11/2 watts per net usable square foot
of space in the Premises in respect of the power outlets therein, at any one
time. In the event that such limits are exceeded, Lessor shall have the right
to remove any lighting fixture or any florescent tube or bulb therein as it
deems necessary and/or to charge Lessee for the cost of the additional
electricity consumed.
24. Lessee shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any kind are to be
inserted therein.
25. Lessee shall not deface the walls, partitions or other surfaces of the
Premises or Office Building Project.
26. Furniture, significant freight and equipment shall be moved into or
out of the Building only with Lessor's knowledge and consent, and subject to
such reasonable limitations, techniques and timing, as may be designated by
Lessor. Lessee shall be responsible for any damage to the Office Building
Project arising from any such activity.
27. Lessee shall not employ any service or contractor for services or work
to be performed in the Building, except as approved by Lessor.
28. Lessor reserves the right to close and lock the Building on Saturdays,
Sundays and legal holidays, and on other days between the hours of 8 P.M. and
6:00 A.M. of the following day, or such other hours as Lessor may determine. If
Lessee uses the Premises during such periods, Lessee shall be responsible for
securely locking any doors it may have opened for entry and shall be required to
pay such fee for HVAC and other services as may be charged by Lessor.
29. No window coverings, shades or awnings shall be installed or used by
Lessee.
32
<PAGE>
30. No Lessee, employee or invitee shall go upon the roof of the Building,
except in an emergency.
31. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by applicable
governmental agencies as non-smoking areas.
32. Lessee shall not use any method of heating or air conditioning other
than as provided by Lessor.
33. Lessee shall not install, maintain or operate any vending machines
upon the Premises without Lessor's written consent, other than those currently
on the Premises for the exclusive use of Lessee and its employees and any
replacements thereof.
34. The Premises shall not be used for lodging or manufacturing.
35. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
36. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to such Lessee.
37. Lessee assumes all risks from theft or vandalism and agrees to keep
its Premises locked as may be required.
38. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the appropriate
operation and safety of the Office Building Project and its occupants. Lessee
agrees to abide by these and such rules and regulations.
39. All doors opening onto public corridors shall be kept closed, except
when being used for ingress and egress.
40. The requirements of lessees will be attended to only upon application
to the Office of the Building.
41. Canvassing, soliciting and peddling in the Building are prohibited and
each lessee shall cooperate to prevent the same.
PARKING RULES
1. Parking areas shall be used only for parking by vehicles no longer than
full size, passenger automobiles herein called "Permitted Size Vehicles."
Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized
Vehicles."
2. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Lessor for such activities.
3. Parking stickers or identification devices shall be the property of
Lessor and be returned to Lessor by the holder thereof upon termination of the
holder's parking privileges. Lessee will pay such replacement charge as is
reasonably established by Lessor for the loss of such devices.
4. Lessor reserves the right to refuse the sale of monthly identification
devices to any person or entity that willfully refuses to comply with the
applicable rules, regulations, laws and/or agreements.
5. Lessor reserves the right to relocate all or a part of parking spaces
from floor to floor, within one floor, and/or to reasonably adjacent offsite
locations(s), and to reasonably allocate them between compact and standard size
spaces, as long as the same complies with applicable laws, ordinances and
regulations.
6. Users of the parking area will obey all posted signs and park only in
the areas designated for vehicle parking.
7. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be responsible for
any damage to vehicles, injury to persons or loss of property, all of which
risks are assumed by the party using the parking area.
8. Validation, if established, will be permissible only by such method or
methods as Lessor and/or its licensee may establish at rates generally
applicable to visitor parking.
9. The maintenance, washing, waxing or cleaning of vehicles in the parking
structure or Common Areas is prohibited.
10. Lessee shall be responsible for seeing that all of its employees,
agents and invitees comply with the applicable parking rules, regulations, laws
and agreements.
33
<PAGE>
11. Lessor reserves the right to modify these rules and/or adopt such
other reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
12. Such parking use as is herein provided is intended merely as a license
only and no bailment is intended or shall be created hereby.
13. Lessor or its agent may tow or otherwise remove any vehicles which are
parked illegally in the parking areas, which are parked in the parking areas for
more than seventy-two (72) consecutive hours without Lessor's prior written
consent or which constitute a nuisance or annoyance to other users of the Office
Building Project or parking areas. Such towing shall be at the sole cost and
expense of the lessee which is in any way responsible for the presence of such
vehicle in the parking area (for example, if the vehicle is parked by any
particular lessee's invitee, customer or employer, such lessee shall be
responsible for the cost of towing such vehicle).
34
<PAGE>
EXHIBIT "D"
[SIGNAGE PLAN FOR GLENDALE BUILDING AND PREMISES]
35
<PAGE>
EXHIBIT 10.43
FIRST AMENDMENT TO STANDARD OFFICE LEASE
(MODIFIED GROSS)
This First Amendment to Standard Office Lease (Modified Gross) is entered
into as of this 15th day of May 1995 by and between CITADEL REALTY, INC., a
Delaware corporation ("Lessor") and FIDELITY FEDERAL BANK, A FEDERAL SAVINGS
BANK, a federally chartered savings association ("Lessee").
RECITALS
A. Lessor and Lessee are parties to a Standard Office Lease (Modified
Gross) dated for reference purposes only July 15, 1994 (the "Lease") relating to
certain portions ofthe real property commonly described as 600 North Brand
Boulevard, Glendale, California, all as more particularly described in the Lease
(the "Premises").
B. Lessee, as lender, and Lessor, as borrower, are considering the
consummation of a lending transaction pursuant to which Lessee, as lender (in
such capacity, "Lender") would lend to Lessor, as borrower (in such capacity,
"Borrower") the sum of $5,338,500 (the "Loan") and Borrower would execute, among
other documents and instruments, a Promissory Note Secured by Deed of Trust in
favor of Lender (the "Note") and would further execute a Deed of Trust
encumbering certain real property, including that real property in which the
Premises are located (the "Deed of Trust"). The Note, Deed of Trust and any
other documents evidencing or securing the Loan are referred to as the "Loan
Documents."
C. In order to induce the Lender to make the Loan, Lessor has agreed to
amend the Lease as set forth below.
AGREEMENT
On the basis of the foregoing recitals, the parties agree as follows:
1. Paragraph 1.6 of the Lease shall be amended to delete the word "first"
and insert in lieu thereof the word "fourteenth."
2. A new paragraph 4.9 shall be added to the Lease, to read in its
entirety as follows:
4.9 (a) Notwithstanding anything to the contrary in the Lease,
if on the day any payment of monthly Base Rent is due from Lessee
to Lessor under the Lease (a "Lease Payment Date"), Borrower has
failed to pay in full an amount due under the Note, the Deed of Trust
or any other Loan Document ("the Delinquent Amount"), then the
original Lessee shall have the right to suspend ("Suspension Right")
payment of the then monthly Base Rent (and no other amounts) to the
extent of such Delinquent Amount, (the amount so suspended, the
<PAGE>
"Suspension Amount") provided that (i) Lessee is not in breach or
default under the Lease, and (ii) Lessee pays to Lessor the amount,
if any, by which the then monthly Base Rent exceeds the Suspension
Amount. The Delinquent Amount shall be based upon the amount of
payments due under the Note, Deed of Trust or other Loan Documents,
without giving effect to the acceleration of principal and interest
under the Note, except if the Note has matured by its own terms. The
Suspension Amount shall be computed by Lessee; provided however that
in the event of manifest error in the computation of the Suspension
Amount which results in overstatement of such amount, Lessee shall pay
to Lessor interest at the rate provided in Section 3.1 of the Note on
the amount incorrectly suspended from the date of such suspension to
the date such amount is paid to Lessor.
(b) Lessee may, in its discretion, but shall have no
obligation to, apply any Suspension Amount to the reduction of any
amount owing under the Loan Documents. Lessee may, in its discretion,
request waivers and other documentation which Lessee and its counsel
determines to be appropriate, as a condition to application of such
amounts. Lessee shall notify Lessor in the event, after any exercise
of its Suspension Right, Lessee, in its discretion, determines not to
apply any Suspension Amount to reduction of any amount owing under the
Loan Documents.
(c) Lessee shall, within five business days after the date
all the Delinquent Amounts have been paid, pay to Lessor any and
all Suspension Amounts (except to the extent such payment has been
applied pursuant to subparagraph (b) above). Prior to such payment of
the Delinquent Amounts and the expiration of such five-business-day
period, Lessor shall not be entitled to exercise any right or remedy
available to Lessor for nonpayment of the Suspension Amount including
without limitation, application of the Security Deposit; provided,
however, Lessor shall have the right to pursue all of Lessor's rights
and remedies for any breach or default by Lessee other than payment of
the Suspension Amount.
3. The first sentence of paragraph (c) of Section 13.1 is amended to
read as follows:
"The failure by Lessee (i) to make any payment of Base Rent as and
when due (giving effect, where applicable, to the provisions of
Section 4.9), where such failure shall continue for a period of ten
(10) days after the due date thereof, or (ii) to make any payment
required to be made by Lessee hereunder (other than payment of Base
Rent), as and when due, where such failure shall continue for a period
of ten (10) days after written notice thereof from Lessor to Lessee."
4. Sections 1 through 3 of this Amendment shall terminate and be of
no further force and effect upon the occurrence of the earlier of any of the
following: (i) the original Lessee is released of liability under the Lease,
(ii) payment in full of all of the amounts due under the Note and other Loan
Documents.
<PAGE>
5. The first sentence of Section 39.6 of the Lease shall be amended
to state as follows:
Fidelity Federal Bank, a Federal Savings Bank, as Lessee, shall have
an Option to purchase the Office Building Project upon expiration of the initial
term of the Lease at fair market value, provided that Citadel Realty, Inc. as
Lessor or any direct or indirect subsidiary of Citadel Realty, Inc. or Citadel
Holding Corporation (all such persons or entities shall be collectively referred
to as "Lessor" for purposes of this Section 39.6 and Section 1.14 only) then
owns the Office Building Project, by delivering written notice of exercise of
the Option (the "option notice") to Citadel Realty, Inc., as Lessor, at least
six (6) months, but no more than nine (9) months before the expiration of the
initial term of the Lease."
6. Except as modified in this Amendment, the terms of the Lease
remain in full force and effect.
IN WITNESS WHEREOF, we hereunto set our hands of the date first above
written.
CITADEL REALTY, INC.
By: /s/ STEVE WESSON
____________________________________
FIDELITY FEDERAL BANK, A
FEDERAL SAVINGS BANK
By: /s/ MEL M. SOLWAY
____________________________________
<PAGE>
Exhibit 10.44
CITADEL HOLDING CORPORATION
4565 Colorado Street, Los Angeles, California 90401
April 17, 1995
BUYER
BUYER Address
RE: Sale of Stock of Fidelity Federal Bank, A Federal Savings Bank
--------------------------------------------------------------
This letter confirms our understanding and agreement on the sale by Citadel
Holding Corporation, a Delaware corporation ("Citadel"), of shares of the Common
Stock, par value $.01 per share (the "Common Stock"), of Fidelity Federal Bank,
a Federal Savings Bank ("Fidelity"), to ____________ ("Buyer"). Citadel hereby
agrees to sell to Buyer, and Buyer hereby agrees to purchase from Seller,
_____________ shares (the "Shares") of the Common Stock for a cash purchase
price, payable by wire transfer of immediately available funds to an account
designated by Citadel, equal to $3.50 per share, or $_____ in the aggregate. The
closing of such sale and purchase shall occur on April 24, 1995.
The Shares to be delivered to Buyer pursuant to this Agreement shall be
shares of Fidelity's Class A Common Stock (the "Class A Shares"). Citadel hereby
represents to Buyer that, so long as Buyer is not a dealer or an affiliate of
Fidelity, Buyer may freely resell the Class A Shares without registration under
the rules and regulations of the Office of Thrift Supervision.
Buyer hereby represents and warrants to Citadel that, after giving effect
to Buyer's acquisition of the Class A Shares hereunder, Buyer (including any
"group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) of which Buyer is a member) and its
affiliates (as defined in Rule 144 promulgated under the Securities Act of 1933,
as amended) will beneficially own (within the meaning of Rule 13d-3 or 13d-5 of
the Exchange Act and including, for this purpose, any shares they have the right
to acquire, whether immediately or after the passage of time) in the aggregate
no more than 1,385,493 shares of the outstanding Common Stock of all classes of
Fidelity.
Please indicate your agreement to the terms of this Letter Agreement by
signing where indicated below.
Very truly yours,
CITADEL HOLDING CORPORATION
-------------------------------------
Steve Wesson
President and Chief Executive Officer
Acknowledged and Agreed:
BUYER
By:
----------------------------------
Title:
-------------------------------
<PAGE>
EXHIBIT 10.45
ENVIRONMENTAL INDEMNITY AGREEMENT
Loan Number: 3038879
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (the "AGREEMENT") is entered
into as of this 15th day of May, 1995 by and among CITADEL REALTY, INC., a
Delaware corporation (the "BORROWER") (the Borrower is sometimes hereinafter
referred to as the "INDEMNITOR"), and FIDELITY FEDERAL BANK, A FEDERAL SAVINGS
BANK (the "Lender"):
RECITALS
WHEREAS, Borrower has requested that Lender loan the amount of
$5,338,500.00 (the "LOAN") to Borrower as evidenced by a Promissory Note Secured
by Deed of Trust (the "Note"), dated as of even date herewith, in the original
principal sum of $5,338,500.00, which Loan and Note will, among other things, be
secured by that certain deed of trust, assignment of rents and security
agreement (the "DEED OF TRUST"), dated as of even date herewith, executed by
Borrower for the benefit of Lender and encumbering the Property (as hereinafter
defined); and
WHEREAS, Lender would not make the Loan to Borrower unless Borrower
executed and delivered this Agreement to Lender.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, Indemnitor and Lender
hereby agree as follows:
1. DEFINITIONS. As used in this Agreement:
(i) "Property" shall collectively mean all or any portion of the real
property located in Los Angeles County, California more particularly described
in EXHIBIT A attached to this Agreement and incorporated herein by reference for
all purposes, together with all improvements and fixtures located thereon, all
property used in or connected with the operation of the business located
thereon, and the soil, ground water, surface water and air located at such real
property; (ii) "Environmental Laws" means any federal, state or local law,
ordinance or regulation or any rule adopted or guideline promulgated pursuant
thereto, or any order, ruling or directive of any federal, state, local,
executive, judicial, legislative, administrative or other governmental agency,
board or public authority relating to health, industrial hygiene, the
environment, or the occupational or environmental conditions on, under or about
the Property (including ambient air, soil, soil vapor, groundwater, surface
water or land use), whether now or hereafter in force; (iii) "Governmental
Entity" shall mean and
1
<PAGE>
include the State of California, County of Los Angeles, City of Glendale, the
United States Environmental Protection Agency, the United States Department of
Labor, the United States Department of Transportation, any successors thereto,
or any other federal, state or local governmental agency now or hereafter
regulating substances and materials in the environment located at or adjacent to
the Property; (iv) "Hazardous Materials" shall mean and include (a) any solid,
gaseous or liquid wastes (including hazardous wastes), hazardous air pollutants,
hazardous substances, hazardous materials, regulated substances, restricted
hazardous wastes, hazardous chemical substances, mixtures, toxic substances,
pollutants or contaminants or terms of similar import, as such terms are defined
in any Environmental Law, (b) any substance or material which now or in the
future is known to constitute a threat to health, safety, property or the
environment or which has been or is in the future determined by any Governmental
Entity to be capable of posing a risk of injury to health, safety, property or
the environment or exposure to which is prohibited, limited or regulated by any
Environmental Law or Governmental Entity, including all of those materials,
wastes and substances designated now or in the future as hazardous or toxic by
any Governmental Entity, and (c) any petroleum or petroleum produces or by-
products, radioactive materials, asbestos, whether friable or non-friable, urea
formaldehyde foam insulation, polychlorinated biphenyls, or radon gas; and (v)
"including" shall be deemed to mean "including, without limitation".
2. INDEMNITOR'S REPRESENTATIONS AND WARRANTIES. As of the date
hereof Indemnitor hereby represents and warrants that: (a) except for customary
office supplies stored or used, in customary amounts, on the Property, there are
no Hazardous Materials located in, on, under, upon or affecting the Property or,
to the best knowledge of Indemnitor, any of the real property or water bodies
adjacent to the Property; (b) no notice has been received by or on behalf of the
Indemnitor from, and Indemnitor has no knowledge that notice has been given to
any party in the Property's chain of title or to the Borrower by, any
Governmental Entity or by any person or entity claiming any violation of, or
requiring compliance with, any Environmental Laws or demanding payment or
contribution for any environmental damage in, on, under, upon or affecting the
Property; (c) no investigation, administrative order, consent order or
agreement, litigation, or settlement with respect to Hazardous Materials located
in, on, under, upon or affecting the Property is pending, or, to the knowledge
of the Indemnitor, proposed, threatened or anticipated; (d) Indemnitor has
delivered to Lender, not less than thirty (30) days prior to the date hereof,
true, correct and complete copies of all environmental reports, surveys, audits
and/or studies, concerning the Property in their possession; (e) to Indemnitor's
knowledge, no property adjoining the Property is being used, or has ever been
used at any previous time, for the disposal, storage, treatment, processing or
other handling of Hazardous Materials not in compliance with Environmental Law;
(f) the execution, delivery and performance by the Indemnitor of this Agreement
does not and will not contravene any (i) law or governmental rule, regulation or
order which is applicable to the Indemnitor, and no authorization approval or
other action by, and no notice to or filing with, any Governmental Entity is
required for the due execution, delivery and
2
<PAGE>
performance by the Indemnitor of this Agreement, or (ii) contractual restriction
which is binding upon or which affects the Indemnitor, and does not and will not
result in or require the creation of any lien, security interest or other charge
or encumbrance upon or with respect to any properties of the Indemnitor; (g) the
Indemnitor is a corporation duly formed, validly existing and in good standing
under the laws of the State of Delaware, is duly qualified to do business in
each jurisdiction where the conduct of its business requires such qualification
and has full corporate power and authority to enter into and perform its
obligations under this Agreement; and (h) this Agreement is a legal, valid and
binding obligation of the Indemnitor, enforceable against the Indemnitor in
accordance with its terms, subject to applicable bankruptcy, insolvency and
other laws affecting generally the enforcement of creditors' rights and to
general principles of equity.
Lender acknowledges receipt of a Phase I Environmental Assessment
Report relating to the Property from Phase One, Inc. under cover of a letter
dated February 18, 1994 and a letter dated February 13, 1995 from Green
Environmental, Inc. entitled "Review of Environmental Data" and relating to the
Bank of America Facility located at 611 North Brand Boulevard, Glendale,
California.
3. COVENANTS. Indemnitor covenants and agrees that Borrower shall
not (a) cause or permit the presence, use, generation, manufacture, production,
processing, installation, release, discharge, storage (including above-and
under-ground storage tanks for petroleum or petroleum products, but excluding
small containers of gasoline used for maintenance equipment or similar
purposes), treatment, handling, or disposal of any Hazardous Materials on,
under, in or about the Property, or in any way affecting the Property or which
may form the basis for any present or future claim, demand or action seeking
cleanup or remediation of the Property, or the transportation of any Hazardous
Materials to or from the Property except, in each case in compliance with
Environmental Law; or (b) cause, permit or exacerbate any occurrence or
condition on the Property that is or may be in violation of any Environmental
Law. Indemnitor shall take all appropriate steps to secure compliance by all
tenants and subtenants on the Property with Indemnitor's covenants and
agreements in this paragraph 3. Indemnitor shall at all times comply fully and
in a timely manner with, and shall cause all employees, agents, contractors, and
subcontractors of Borrower and any other persons occupying or present on the
Property to so comply with (x) any program of operations and maintenance (O&M)
relating to the Property that is required by Lender with respect to one or more
Hazardous Materials and (y) all applicable Environmental Laws, and shall keep
the Property free and clear of any liens imposed pursuant to such Environmental
Laws. Borrower shall promptly notify Lender in writing of (i) any enforcement,
cleanup, remediation, removal or other governmental or regulatory action,
investigation, or any other proceeding instituted, completed or threatened in
connection with any Hazardous Materials in, on, under or affecting the Property;
(ii) any suit, cause of action, or any other claim made or threatened by any
third party against Borrower or the Property relating to damage, contribution,
cost recovery, compensation, loss or
3
<PAGE>
injury resulting from any Hazardous Materials; and (iii) Borrower's discovery of
any occurrence or condition on any real property adjoining or in the vicinity of
the Property that could cause all or any portion of the Property to be subject
to any restrictions on the ownership, occupancy, transferability or use of the
Property under any Environmental Law, and immediately deliver a copy of such
notice or advice to Lender. Following such notice or advice, Borrower shall
conduct and complete all investigations, studies, sampling, testing, and all
remedial actions necessary to clean up, remediate and remove all Hazardous
Materials from the Property in accordance with all applicable Environmental
Laws. The provisions of this paragraph 3 shall be in addition to any and all
obligations and liabilities that Borrower may have under applicable law.
4. INDEMNIFICATION. Indemnitor shall protect, defend (by counsel
selected by Lender and reasonably acceptable to Indemnitor), indemnify and hold
harmless Lender and Lender's officers, directors, partners, shareholders,
employees, affiliates, agents, attorneys, lessees, successors and assigns and
any successors to Lender's interest in the Loan or the Property, their officers,
directors, partners, shareholders, employees, affiliates, agents, attorneys,
lessees, successors and assigns (collectively, the "Indemnitees") from and
against all liabilities (including sums paid in settlement of claims), losses
(including lost profits and diminution in the value of the Loan or the
Property), costs, obligations, demands, suits, liens, damages (including
consequential and punitive damages), fines (including any sums ordered to be
paid or expended by Indemnitees by any Governmental Entity as a fine, penalty or
damages for any violation of any Environmental Law or to remediate, clean-up or
remove any Hazardous Materials), penalties, forfeitures, actions, defenses,
administrative proceedings (including informal proceedings), judgments, orders,
equitable relief, expenses (including experts' and consultants' fees and costs),
attorneys' fees and expenses (including any fees and expenses incurred in
enforcing or interpreting this Agreement), and claims (including third party
claims for personal injury or real or personal property damage) of any kind or
nature whatsoever (whether foreseeable or unforeseeable, contingent or
noncontingent, or arising out of contracts entered into or indemnifications
provided by Indemnitees or otherwise) (collectively, the "Liabilities") sought
from or asserted against Indemnitees in connection with, in whole or in part,
directly or indirectly, (a) the breach of any representation, covenant or
agreement of the Indemnitor contained in this Agreement, and/or (b) the
presence, suspected presence, release, suspected release, or threat of release
of any Hazardous Materials in, on, under, from or affecting (1) the Property
and/or (2) any real property adjacent to or in the vicinity of the Property to
which Hazardous Materials have (x) spread from the Property or (y) been released
in, on or under as a result of or in connection with the operations of the
Property; provided, however, that there shall be excluded from the foregoing
indemnification obligation of Indemnitor (a) any Liability to the extent such
Liability arises as a direct result of the wilful misconduct or gross negligence
of the Lender and (b) any Liability to the extent that such Liability arises
directly from (i) the presence or release of Hazardous Materials in, on, under,
from or affecting (A) the Property and/or (B) any real property adjacent to or
in the vicinity of
4
<PAGE>
the Property to which Hazardous Materials have spread from the Property or have
been released in, on or under as a result of or in connection with the
operations of the Property, in each case, where the presence, release or spread
of such Hazardous Materials occurred as a result of the actions of the Lender
during the period of ownership by Lender of the Property from approximately
October, 1975 (or September, 1981 as to the portion of the Property relating to
the parking structure) to the Recordation Date, as such term is defined in the
Note. The Liabilities shall include: (i) injury or death to any person, (ii)
damage to or loss use of the Property or any other property or ground water,
waterway or body of water adjacent to the Property; (iii) the cost of removal,
clean-up or remedial action with respect to any and all Hazardous Materials from
the Property or surrounding area including any ground water, waterway or body of
water and the preparation of any closure or other activity required by any
Governmental Entity; (iv) the cost required to take necessary precautions to
protect against the release of any Hazardous Materials in, on or under the
Property, the air, any ground water, waterway or body of water, any public
domain or any surrounding areas to the Property, (v) the cost of any demolition
and rebuilding or repair of improvements on the Property or in any surrounding
areas to the Property; (vi) any lawsuit brought or threatened, settlement
reached, or governmental order relating to the presence, suspected presence,
disposal, release or threatened release of any Hazardous Materials in, on,
under, from or affecting the Property or in any surrounding areas to the
Property; and (vii) the imposition of any lien on or against the Property or in
any surrounding areas to the Property arising from the presence, disposal,
release or threatened release of any Hazardous Materials in, on, under, from or
affecting the Property.
5. NO LIMITATION. The liability of Indemnitor under this Agreement
shall in no way be limited or impaired by, and each Indemnitor hereby consents
to and agrees to be bound by, any amendment or modification of the provisions of
the Note, the Deed of Trust or any other Loan Document (as defined in the Deed
of Trust). In addition, the liability of Indemnitor under this Agreement shall
in no way be limited or impaired by (i) any extensions of time for performance
required by the Note, the Deed of Trust or any other Loan Document, (ii) any
sale or transfer of all or part of the Property, (iii) any exculpatory provision
in the Note, the Deed of Trust or any other Loan Document limiting Lender's
recourse to property encumbered by the Deed of Trust or to any other security,
or limiting Lender's rights to a deficiency judgment against Borrower, (iv) the
release of Borrower or any other person from performance or observance of any of
the agreements, covenants, terms or conditions contained in the Note, the Deed
of Trust or any other Loan Document by operation of law, Lender's voluntary act,
or otherwise or (v) the release or substitution in whole or in part of any
security for the Note.
6. INDEPENDENT REMEDIES. Lender may enforce the obligations of
Indemnitor without first resorting to or exhausting any security or collateral
or without first having recourse to the Note, the Deed of Trust or any other
Loan Document or any of the Property, through foreclosure proceedings or
otherwise, provided, however,
5
<PAGE>
that nothing herein shall inhibit or prevent Lender from exercising any of its
rights and remedies under the Note, the instrument or any other Loan Document.
7. PAYMENT. Any amounts payable to Lender under this Agreement shall
become immediately due and payable and, if not paid within ten (10) days of
written demand therefor, shall bear interest at the monetary default interest
rate provided for in the Note from the date of such demand.
8. BORROWER'S COOPERATION. Lender and its agents, representatives
and workmen are hereby authorized to enter at any reasonable time upon the
Property, upon reasonable notice to Borrower, to inspect or investigate the same
for any purpose relating to Lender's interest in the Property; provided,
however, no such entry upon the Property shall unreasonably interfere with
Borrower's or Borrower's tenants' use of the Property. Borrower agrees that such
inspection or investigation may include studies, borings, sampling, and other
tests. Borrower shall cooperate with Lender in the conduct of all inspections
and investigations under this Section and shall cause all tenants to permit
Lender access for the purpose of such inspections and investigations. Trustor
acknowledges the Lender's rights under this Section shall include, but not be
limited to, the right to conduct a site assessment and environmental audit.
Borrower shall also promptly provide true, correct and complete copies of any
environmental reports and/or test results concerning the Property obtained by
Borrower from and after the date hereof.
9. ASSIGNMENT. This Agreement shall bind and inure to the benefit
of the parties and their respective heirs, executors, successors and assigns.
Lender and any successor to Lender's interest in the Loan or the Property may
assign all or any part of its rights or remedies under this Agreement to any
party or parties (without limitation) who acquires an interest in the Loan or
the Property; provided, however, the indemnification granted to Lender and each
successive assignee shall continue to exist for the benefit of such party
notwithstanding any such assignment of this Agreement by such party. Indemnitor
may not assign any of its rights or obligations under this Agreement.
10. SURVIVAL. The representations, warranties, covenants, indemnities,
and other obligations and liabilities of Indemnitor under this Agreement shall
survive the repayment of the Loan or any entry of a judgment of foreclosure,
foreclosure sale of the Property (whether by judicial or non-judicial process)
or the delivery or acceptance of a deed in lieu of foreclosure concerning the
Property.
11. CONSTRUCTION. This Agreement shall be governed by and construed in
accordance with the laws of the state in which the Property is located without
giving effect to principles of conflict of law. Nothing contained in this
Agreement shall constitute a waiver of any of Indemnitees' rights or remedies at
law or in equity. If any provision of this Agreement or the application thereof
to any party or circumstances shall to any extent be invalid or unenforceable,
the remainder of this
6
<PAGE>
Agreement, or the application of such provision to parties or circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected thereby, and each provision shall be valid and be enforced to the
fullest extent permitted by law.
12. WAIVER OF JURY TRIAL. INDEMNITOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS
AGREEMENT, THE NOTE, THE DEED OF TRUST, ANY OTHER LOAN DOCUMENT, ANY OTHER
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
EITHER PARTY.
IN WITNESS WHEREOF, Lender and Indemnitor have executed this
Agreement as of the date first written above.
LENDER:
FIDELITY FEDERAL BANK,
a Federal Savings Bank
By: /s/ FELIX PRESSLER
-------------------------------------------
Print
Name: FELIX PRESSLER
-----------------------------------------
Its: Vice President, Major Loan
Department Manager
-----------------------------------------
INDEMNITOR:
"BORROWER"
CITADEL REALTY, INC.
By: /s/ STEVE WESSON
--------------------------------------------
Steve Wesson, President
7
<PAGE>
EXHIBIT A
PROPERTY
--------
8
<PAGE>
EXHIBIT 10.46
Loan Number: 3038879
NOTICE TO BORROWER:
THIS NOTE REQUIRES A BALLOON PAYMENT AT MATURITY.
================================================================================
PROMISSORY NOTE SECURED BY DEED OF TRUST
U.S. $5,338,500 Glendale, California
May 15, 1995
1. Borrower's Promise to Pay. FOR VALUE RECEIVED, the undersigned,
-------------------------
CITADEL REALTY, INC., a Delaware corporation, promises to pay to the order of
FIDELITY FEDERAL BANK, A FEDERAL SAVINGS BANK, a federally chartered savings
association, at 600 North Brand Boulevard, Glendale, California 91203, or such
other place as Lender from time to time may designate, the principal sum of FIVE
MILLION THREE HUNDRED THIRTY EIGHT THOUSAND, FIVE HUNDRED DOLLARS ($5,338,500),
together with interest from the Recordation Date until paid in full, with
principal and interest payable as provided below in lawful money of the United
States.
2. Definitions. Capitalized terms in this Note that are not defined
-----------
when first used have the meanings set forth below:
(a) Borrower. Borrower includes the undersigned maker of this Note
--------
and any other person or entity that may acquire any interest in any of the real
property described in the Deed of Trust.
(b) Business Day. A Business Day is any day on which savings and loan
------------
associations, savings banks, banks or other financial institutions are generally
open for regular banking business in the state in which this Note is payable.
(c) Deed of Trust. The Deed of Trust is the Deed of Trust, Assignment
-------------
of Rents and Leases, Security Agreement and Fixture Filing dated the same date
as this Note, and which constitutes a lien on certain real property located in
Los Angeles County, California which is more particularly described in the Deed
of Trust.
(d) Lender. The Lender is Fidelity Federal Bank, a Federal Savings
------
Bank or, if Fidelity Federal Bank, a Federal Savings Bank transfers this Note,
the holder or other transferee of this Note.
(e) Loan Documents. The Loan Documents are the Note, the Deed of
--------------
Trust, the Guaranty of Payment and any and all other documents or
1
<PAGE>
instruments expressly referred to in the Deed of Trust or any modifications or
amendments thereto.
(f) Maturity Date. The Maturity Date is June 1, 2000.
-------------
(g) Recordation Date. The Recordation Date is the date on which the
----------------
Deed of Trust is recorded in the Official Records of Los Angeles County,
California.
3. Payment of Principal and Interest. Principal and interest shall
---------------------------------
be payable in accordance with the following provisions:
3.1 Interest Rate, Index and Current Index. Subject to paragraph 7
-------------------------------------- -----------
below, the unpaid principal balance of this Note shall bear interest at a rate
per annum equal to the Index plus 4.50 percentage points. The Index shall be
the average of interbank offered rates for one-month U.S. dollar-denominated
deposits in the London market ("LIBOR") as published in the Wall Street Journal.
The initial Interest Rate is 10.563% per annum. The Interest Rate shall be
adjusted on July 1, 1995 and on the first day of each calendar month thereafter
(a "Change Date"). The most recent Index figure available as of the first
Business Day of the month immediately preceding the month in which the Change
Date occurs is called the "Current Index". If the Index is no longer available,
the Lender will choose a new Index that is based upon comparable information.
The Lender will provide notice to the Borrower of such new Index.
3.2 Payments. Payments of principal and interest in amounts
--------
sufficient to amortize the principal amount plus interest on the outstanding
balance over a period of twenty (20) years from the date of the note shall be
due and payable commencing on July 1, 1995 and continuing on the first day of
each calendar month thereafter, until the Maturity Date. The initial payment of
principal and interest shall be in the amount of $53,057.58. Thereafter,
payments of principal and interest shall be as computed in accordance with
Section 3.3.
3.3 Changes in Interest Rate and Payments. Subject to paragraph 7
-------------------------------------
below, before each Change Date, the Lender will calculate the new interest rate
by adding 4.50 percentage points to the applicable Current Index. The Lender
shall then determine the amount of the monthly payment that would be sufficient
to repay the unpaid principal amount to be owed at the Change Date in full in
accordance with the remainder of the amortization schedule set forth in the
first sentence of paragraph 3.2 of this Note at the new interest rate in
substantially equal payments. The result of this calculation shall be the
amount of the next monthly payment.
3.4 Payment at Maturity. The entire unpaid principal balance of this
-------------------
Note and all accrued but unpaid interest under this Note shall be due and
payable on the Maturity Date. BORROWER ACKNOWLEDGES THAT LENDER IS UNDER NO
OBLIGATION TO REFINANCE THE INDEBTEDNESS EVIDENCED BY THIS NOTE AT
2
<PAGE>
MATURITY, AND BORROWER WILL ARRANGE TO REPAY THIS NOTE WITH FUNDS OBTAINED FROM
SOURCES OTHER THAN A NEW LOAN BY LENDER.
3.5 Calculation of Interest. Interest payable with respect to any
-----------------------
full calendar month shall be calculated on the assumption that such month is a
30-day month in a 360-day year. Interest payable with respect to any period
that is less than a full calendar month shall be calculated according to the
actual number of days in such period as a fraction of a 360-day year.
4. Application of Payments. Except to the extent otherwise required
-----------------------
by law or by the express terms of any other Loan Document, Lender shall apply
and credit funds received by Lender pursuant to this Note or any other Loan
Document (a) first, to pay, or reimburse Lender for amounts advanced by Lender
(other than principal of the loan evidenced by this Note) pursuant to any
provision of the Loan Documents (including, without limitation, those costs and
expenses described in paragraph 9), (b) second, to fund any deposits that
-----------
Borrower may be required by the terms of any Loan Document to make with Lender
and that Borrower has in fact failed to make, including any such deposits to be
used to pay the cost of repairing or constructing any improvements, insurance
premiums, property taxes and assessments and utility charges, (c) third, to pay
any late payment charges due under this Note or any other Loan Document, (d)
fourth, to pay any other sums due under the Loan Documents, excluding interest
earned or accrued under this Note and principal, (e) fifth, to pay any interest
earned or accrued under this Note, and (f) sixth, to pay principal outstanding
under this Note.
5. Prepayment. The principal of this Note may be prepaid at any time
----------
upon the payment of the Applicable Prepayment Percentage applied to the amount
of principal prepaid. The Applicable Prepayment Percentage shall be (i) four
percent with respect to any prepayment made between the date of this Note and
the first anniversary thereof (or, if such anniversary is not a Business Day, on
the Business Day thereafter); (ii) three percent with respect to any prepayment
made after the end of the period described in the preceding clause (i) but on or
before the second anniversary of the date of this Note (or, if such anniversary
is not a Business Day, on the Business Day thereafter); (iii) two percent with
respect to any prepayment made after the end of the period described in the
preceding clause (ii) but on or before the third anniversary of the date of this
Note (or, if such anniversary is not a Business Day, on the Business Day
thereafter); (iv) one percent with respect to any prepayment made after the end
of the period described in the preceding clause (iii) but on or before the
fourth anniversary of the date of this Note (or, if such anniversary is not a
Business Day, on the Business Day thereafter). On and after the end of the
period described in clause (iv) of the preceding sentence, the principal of this
Note may be prepaid in whole or in part without premium or penalty.
Concurrently with any prepayment of principal, Borrower shall notify Lender in
writing that Borrower is making a prepayment in an amount specified in such
written notice. Any such prepayment of principal shall be accompanied by the
prepayment premium with respect to such prepayment computed in accordance with
this Section 5.
---------
3
<PAGE>
6. Security; Acceleration upon Certain Transfers. Repayment of this
---------------------------------------------
Note is secured by the Deed of Trust. The Deed of Trust contains the following
provisions:
Transfer of Property or Interest in Trustor.
-------------------------------------------
(a) Upon (i) any sale, encumbrance, pledge or other transfer of the
Property, or any part of or interest in the Property or (ii) any merger or
consolidation of the Trustor with any corporation or other entity or (iii) any
sale or other transfer of, or series of sales or transfers of, in excess of 50%,
in the aggregate, of the voting stock of Trustor or (iv) issuance or series of
issuances by Trustor of newly issued voting stock constituting, in the
aggregate, in excess of 50% of the voting stock of Trustor, Beneficiary may, at
its option, declare all of the sums secured by this Deed of Trust to be
immediately due and payable, and if such sums are not immediately paid in full,
Trustor shall be in default under this Deed of Trust and Beneficiary may invoke
all of the remedies available under this Deed of Trust and the other Loan
Documents as well as all additional remedies available at law or at equity.
(b) Paragraph (a) of this Section 2.11 shall not be applicable to
(A) any transfer of (i) the Property, or (ii) all of the issued and outstanding
shares of the Trustor, in either case, to a subsidiary of Trustor or Citadel
Holding Corporation or (B) any transfer of the Property by operation of law as a
result of a merger or consolidation of Trustor or any subsidiary to which the
Property has been transferred pursuant to this paragraph (b) on the one hand,
and Citadel Holding Corporation, on the other; provided, that in the event of a
transfer permitted under this paragraph (b), such subsidiary or Citadel Holding
Corporation, as applicable, shall be bound by and subject to clauses (i), (ii),
(iii) and (iv) of paragraph (a) to the same extent as Trustor.
(c) So long as (i) Borrower is not in default under any of the terms
of the Note, this Deed of Trust or any other loan document, and (ii) no
situation exists which with the passage of time or the giving of notice or both
would constitute a default under the Note, this Deed of Trust or any other loan
document, in the event Borrower desires to transfer all of the property to
another party (the "Transferee") and have the Transferee assume all of
Borrower's obligations under the Note, this Deed of Trust and all of the other
Loan Documents (collectively, the "Transfer and Assumption"), Borrower, subject
to the terms of this paragraph, may make a written application to Beneficiary
for Beneficiary's consent to the Transfer and Assumption, which consent will not
be unreasonably withheld, taking into account the creditworthiness of the
proposed new borrower and the terms of the proposed transaction. Together with
such written application (and afterwards if requested by Beneficiary), Borrower
will submit to Beneficiary true, correct and complete copies of any and all
information and documents of any kind requested by Beneficiary concerning the
Property, Transferee, the transaction, and/or Borrower, together with any review
fee required by Beneficiary, in Beneficiary's discretion. If Beneficiary
consents to the Transfer and Assumption, the Transferee and Borrower shall (i)
deliver to Beneficiary an assumption fee in an amount equal to one percent of
the unpaid principal balance of the Loan on the date of the Transfer and
Assumption (ii) execute
4
<PAGE>
and deliver to Beneficiary any and all documents required by Beneficiary, in
form and substance required by Beneficiary, in Beneficiary's sole discretion
(the "Assumption Documents"), (iii) deliver to Beneficiary an endorsement to the
mortgagee policy of title insurance then insuring the lien created by this Deed
of Trust in form and substance acceptable to Beneficiary, in Beneficiary's sole
discretion (the "Endorsement"), and (iv) deliver to Beneficiary a payment in the
amount of all costs incurred by Beneficiary in connection with the Transfer and
Assumption, including but not limited to, Beneficiary's attorneys fees and
expenses, all recording fees for the assumption documents, and all fees payable
to the title company for the delivery to Beneficiary of the Endorsement.
Notwithstanding anything contained in this paragraph to the contrary, under no
circumstances may the property and loan be transferred and assumed by any party
under the terms of this paragraph more than once during the entire term of the
loan.
7. Default. If any payment under this Note is not paid within ten
-------
days after the date on which the payment is due (irrespective of whether
Borrower has received any notice of such nonpayment) or if any covenant or
obligation made or undertaken for the benefit of lender in any other Loan
Document is not fully performed within the time required by the terms of such
Loan Document, then Borrower shall be in default hereunder and Lender may elect,
without any further notice or demand to Borrower, to declare all principal and
accrued but unpaid interest under this Note immediately due and payable. If any
covenant or obligation made or undertaken for the benefit of Lender in the Loan
Documents is not fully performed within the time required by the terms of such
document, then Borrower shall be in default hereunder and Lender may elect,
without any further notice or demand to Borrower, to declare all principal and
accrued but unpaid interest under this Note immediately due and payable. Any
failure of Lender to make such election following a default or defaults shall
not constitute a waiver of Lender's right to make the election in the event of
any subsequent default. Borrower agrees that upon the occurrence of any Event
of Default, Lender shall have the option, without notice to Borrower, of
increasing the rate of interest on the entire unpaid principal balance of this
Note (provided, however, that such rate of interest shall be increased
automatically without notice or election by Maker, upon the occurrence of any of
the events set forth in Section 5.1(a)(i) of the Deed of Trust), effective from
the date of such Event of Default (provided the Default Rate shall cease to be
applicable upon the curing of such Events of Default), to a rate (the "Default
Rate") equal to (a) five percent (5%) over the Interest Rate then applicable
under this Note in the case of a monetary Event of Default, and (b) two percent
(2%) over the Interest Rate then applicable under this Note in the case of a
material non-monetary Event of Default, and (c) the higher of the rates if both
a monetary and non-monetary Event of Default exist at the same time. This
clause, however, shall not be construed as an agreement or privilege to extend
the maturity date, nor as a waiver of any other right or remedy accruing to
Payee by reason of the occurrence of an Event of Default. Lender shall retain
the right to exercise any and all rights and remedies available at law and in
equity. In the event of any such failure to timely make any payment due under
this Note, interest shall continue to accrue and be payable at the Default Rate
notwithstanding any suspension by the lender of lease
5
<PAGE>
payments under the First Amendment to Office Lease between the Borrower, a
lessor and the Lender, as lessee.
8. Late Payment Charge. If any payment under this Note (whether of
-------------------
principal or interest, or both, and including the payment due on the Maturity
Date or upon any acceleration of this Note) is not paid within ten days after
the date on which the payment is due, Borrower shall pay to Lender, in addition
to the delinquent payment and without any requirement of notice or demand by
Lender except as may be imposed by law, a late payment charge equal to 10% of
the amount of the delinquent payment. Borrower expressly acknowledges and
agrees that the foregoing late payment charge provision is reasonable under the
circumstances existing on the date of this Note, that it would be extremely
difficult and impractical to fix Lender's actual damages arising out of any late
payment and that the foregoing late payment charge shall be presumed to be the
actual amount of such damages incurred by Lender. No provision in this Note
(including the provisions for a late payment charge and for additional interest
on any amounts remaining unpaid after the Maturity Date) shall be construed as
in any way excusing Borrower from its obligation to make each payment under this
Note promptly when due. In the event of any such failure to timely make any
payment due under this Note, such late payment charge shall be payable
notwithstanding any suspension prior to expiration of such ten-day period by the
Lender of lease payments under the First Amendment to Office Lease between the
Borrower, as Lessor, and the Lender, as lessee.
9. Costs of Collection and Enforcement. Borrower and any endorsers
-----------------------------------
jointly and severally promise to pay (a) all reasonable out-of-pocket attorneys'
fees and other reasonable out-of-pocket costs and expenses of any nature
incurred by Lender in connection with the collection of this Note or the
enforcement of Lender's rights and remedies under the Loan Documents, including
attorneys' fees incurred by Lender for legal advice concerning Lender's rights
and remedies following any act or occurrence that constitutes a default under
any Loan Document; (b) reasonable out-of-pocket attorneys' fees, as determined
by the court, and all other reasonable out-of-pocket costs, expenses and fees
incurred by Lender in connection with any suit or proceeding, remedies under the
Loan Documents, whether or not such suit or proceeding instituted to collect
this Note or to enforce Lender's rights and remedies under the Loan Documents,
whether or not such suit or proceeding is prosecuted to judgment or conclusion;
and (c) all reasonable out-of-pocket attorneys' fees and other reasonable out-
of-pocket costs and expenses incurred by Lender in connection with any
bankruptcy, insolvency or reorganization proceeding or receivership involving
Borrower or any affiliate of Borrower, including all attorneys' fees incurred in
making any appearance in any such proceeding or in seeking relief from any stay
or injunction issued in or arising out of any such proceeding.
10. Offsets. No indebtedness evidenced by this Note shall be deemed
-------
to have been offset or shall be offset or compensated by all or part of any
claim, cause of action, counterclaim or cross-claim, whether liquidated or
unliquidated, which Borrower now or hereafter may have or may claim to have
against Lender.
6
<PAGE>
Furthermore, Borrower waives to the fullest extent permitted by law any rights
Borrower may have under California Code of Civil Procedure Section 431.70.
11. Certain Waivers. Borrower and all endorsers jointly and
---------------
severally waive diligence, grace, demand, presentment for payment, exhibition of
this Note, protest, notice of protest, notice of dishonor, notice of demand,
notice of nonpayment, and any and all exemption rights against the indebtedness
evidence by this Note, and agree to any and all extensions or renewals from time
to time without notice and to any partial payments of this Note made before or
after maturity and that no such extension, renewal or partial payment shall
release any one or all of them from the obligation of payment of this Note or
any installment of this Note, and consent to offsets of any sums owed to any one
or all of them by Lender at any time.
12. Waiver of Jury Trial. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
--------------------
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS
AGREEMENT, THIS NOTE, THE DEED OF TRUST, ANY OTHER LOAN DOCUMENT, ANY OTHER
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
EITHER PARTY.
13. Loss, Theft, Destruction or Mutilation of Note. In the event of
----------------------------------------------
the loss, theft or destruction of this Note, upon Borrower's receipt of a
reasonably satisfactory indemnification agreement executed in favor of Borrower
by the party who held this Note immediately prior to its loss, theft or
destruction, or in the event of the mutilation of this Note, upon Lender's
surrender to the Borrower of the mutilated Note, Borrower shall execute and
deliver to such party or Lender, as the case may be, a new promissory note in
form and content identical to this Note in lieu of the lost, stolen, destroyed
or mutilated Note.
14. Notices. The provisions of the Deed of Trust concerning the
-------
giving and receipt of notices shall apply to a notice or other communication
given under this Note.
15. Obligations Joint and Several. If Borrower consists of more than
-----------------------------
one person or entity, each shall be jointly and severally liable for the
performance of each of the obligations of Borrower to Lender hereunder.
16. Construction of Note. Captions in this Note are included solely
--------------------
for convenience and are not to be referred to in construing or interpreting this
Note. Each reference in this Note to a particular paragraph is a reference to a
paragraph of this Note unless otherwise expressly indicated. The term
"include," "includes" and "including" are not used in any limiting sense, but
rather by way of example or illustration. If any portion of this Note is
declared invalid, illegal or unenforceable by any court of competent
jurisdiction, said portion shall be deemed severed from this Note and the
remaining portions shall continue in full force and effect. Time is strictly
7
<PAGE>
of the essence of each and every provision of this Note. This Note shall be
governed by and interpreted and enforced under the laws of the State of
California.
17. Payment on Business Days. If any payment to be made hereunder or
------------------------
under the other Loan Documents shall become due on a day other than a Business
Day, such payment shall be made on the Business Day next following the day on
which such payment would otherwise have been due.
BORROWER:
CITADEL REALTY, INC., a Delaware
corporation
By: /s/ STEVE WESSON
___________________________________
Steve Wesson, President
8
<PAGE>
EXHIBIT 10.47
GUARANTY OF PAYMENT
Loan Number: 3038879
The undersigned, CITADEL HOLDING CORPORATION, a Delaware corporation
("Guarantor"), hereby executes and delivers this guaranty to FIDELITY FEDERAL
BANK, A FEDERAL SAVINGS BANK ("Lender") for the purpose of inducing Lender to
make a loan in the original principal amount of $5,338,500.00 to CITADEL REALTY,
INC., a Delaware corporation ("Borrower"), which loan is evidenced by a
Promissory Note Secured by Deed of Trust dated May 15, 1995 in the original
principal amount of $5,338,500.00 (the "Note") and secured by a Deed of Trust,
Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated May
15, 1995 constituting a lien and charge against certain real property located in
the County of Los Angeles, State of California (the "Deed of Trust"). For other
good, valuable and adequate consideration, the receipt and adequacy of which are
hereby acknowledged, Guarantor hereby covenants with, and represents and
warrants to Lender as follows:
1. Guarantor hereby irrevocably and unconditionally guarantees and
promises to pay to Lender or its order the indebtedness of Borrower to Lender
evidenced by the Note and to perform any and all obligations of Borrower under
(a) the terms of the Deed of Trust and (b) any other instrument evidencing,
securing or pertaining to any such indebtedness. Such other instruments,
together with the Note and the Deed of Trust, are referred to collectively as
the "Loan Documents." Payment shall be made in any coin or currency which at
the time of payment is legal tender in the United States of America for public
and private debts. It is understood and agreed that the amount of indebtedness
guaranteed hereby may exceed the face amount of the Note.
2. The Loan Documents have been duly authorized and executed and are
legal, valid and binding instruments, enforceable in accordance with their
respective terms. Guarantor has actual knowledge that the representations and
warranties made by Borrower in the Loan Documents are true and correct in all
material respects and acknowledges that Lender is entering into the transactions
contemplated by the Loan Documents in reliance upon the veracity of this
representation and warranty of Guarantor. Guarantor agrees and acknowledges
that the execution of this guaranty is a material inducement to Lender to make
the Loan and further that Guarantor has a material interest in ensuring that the
Loan is made by Lender to Borrower.
3. In such manner, upon such terms and at such times as Lender deems best
and without notice to Guarantor, Lender may alter, modify, compromise,
1
<PAGE>
accelerate, extend or change the time or manner for the payment of any
indebtedness or the performance of any obligation hereby guaranteed, increase or
reduce the rate of interest on the Note, release Borrower, by acceptance of a
deed in lieu of foreclosure or otherwise, as to all or any portion of the
obligations hereby guaranteed, release, substitute or add any one or more
guarantors or endorsers, accept additional or substituted security therefor, or
release, alter, exchange, surrender, reconvey (partially or otherwise) or
subordinate any security therefor. No exercise or non-exercise by Lender of any
right hereby given Lender, no dealing by Lender with Guarantor or any guarantor,
indorser or any other person, and no change, impairment, release or suspension
of any right or remedy of Lender against any person including Borrower and any
other guarantor shall in any way affect any of the obligations of Guarantor
hereunder or any security furnished by Guarantor or give Guarantor any recourse
against Lender. Notwithstanding any provision of the Loan Documents limiting
the liability of Borrower, or any subsequent exculpation of Borrower, in whole
or in part, from personal liability, such provision or exculpation shall not
affect the obligations of Guarantor hereunder, it being understood that
Guarantor's obligations hereunder are independent of the obligations of Borrower
and are to be construed as if no such exculpation is given. It is further
understood and agreed that if any such exculpation is given, Lender does so in
reliance upon the agreements of Guarantor expressed herein.
4. In addition to all liens and rights of setoff given to Lender by law
against any property of Borrower or of Guarantor, Lender shall have a general
lien on and security interest in and a right of setoff against all property of
Guarantor now or hereafter in the physical possession of or on deposit with
Lender, whether held in a general or special account, on deposit or for
safekeeping or otherwise. Each such lien, security interest and right of setoff
may be enforced or exercised without demand upon or notice to Guarantor, shall
continue in full force unless specifically waived or released by Lender in
writing and shall not be deemed waived by any conduct of Lender, by any failure
of Lender to exercise any such right of setoff or to enforce any such lien or
security interest or by any neglect or delay in so doing.
5. Guarantor hereby expressly waives and relinquishes all rights,
remedies, and defenses accorded by applicable law to guarantors and agrees not
to assert or take advantage of any such rights, remedies, or defenses, including
but not limited to (a) any right to require Lender, as a condition of
enforcement of this guaranty, to proceed against Borrower or any other person or
to proceed against or exhaust any security held by Lender at any time or to
pursue any other right or remedy in Lender's power before proceeding against
Guarantor; (b) the defense of the statute of limitations in any action hereunder
or in any action for the collection of any indebtedness or the performance of
any obligation hereby guaranteed; (c) any defense that may arise by reason of
the incapacity, lack of authority, death or disability of any other person or
persons or the failure of Lender to file or enforce a claim against the
2
<PAGE>
estate (in administration, bankruptcy, or any other proceeding) of any other
person or persons; (d) any defense based upon the failure to give notice of the
acceptance of this guaranty by any person; (e) any defense based upon the
failure to make, give, or serve demand, notice of default or nonpayment,
presentment, protest and all other notices of any kind to which Guarantor might
otherwise be entitled in connection with this guaranty or the Loan Documents
including but not limited to notice of indebtedness under the Note or the
existence, creation or incurring of any new or additional indebtedness or
obligation or of any action or nonaction on the part of Borrower, Lender, any
endorser or creditor of Borrower or Guarantor or any other person; (f) any
defense based upon an election of remedies by Lender, including but not limited
to an election to proceed by non-judicial rather than judicial foreclosure,
which destroys or otherwise impairs the subrogation rights of Guarantor or the
right of Guarantor to proceed against Borrower for reimbursement, or both; (g)
any defense based upon any lack of diligence by Lender in the collection of the
indebtedness evidenced by the Note; (h) any defense based upon any statute or
rule of law which provides that the obligation of a surety must be neither
larger in amount nor in other respects more burdensome than that of the
principal; (i) any duty on the part of Lender to disclose to Guarantor any facts
Lender may now or hereafter know about Borrower, regardless of whether Lender
has reason to believe that any such facts materially increase the risk beyond
that which Guarantor intends to assume or has reason to believe that such facts
are unknown to Guarantor or has a reasonable opportunity to communicate such
facts to Guarantor, it being understood and agreed that Guarantor is fully
responsible for being and keeping informed of the financial condition of
Borrower and of all circumstances bearing on the risk of nonpayment of any
indebtedness hereby guaranteed; (j) any defense arising because of an election
made by Lender under Section 1111(b)(2) of the Federal Bankruptcy Code; and (k)
any defense based on any borrowing or grant of a security interest under Section
364 of the Federal Bankruptcy Code, it being agreed by Guarantor that this
guaranty is an absolute guaranty of payment and not of collection, that the
failure of Lender to exercise any rights or remedies it has or may have against
Borrower shall in no way impair the obligation of such guaranty and that the
liability of Guarantor hereunder is and shall be direct and unconditional.
Without limiting the generality of the foregoing or any other provision hereof,
Guarantor hereby expressly waives any and all benefit which might otherwise be
available to Guarantor under California Civil Code Sections 2809, 2810, 2819,
2839, 2845, 2849, 2850, 2899 and 3433 and California Code of Civil Procedure
Sections 580a, 580b, 580d and 726, or any of such sections. In addition,
Guarantor waives all rights and defenses arising out of an election of remedies
by the creditor, even though that election or remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
the guarantor's rights of subrogation and reimbursement against the principal by
the operation of Section 580d of the Code of Civil Procedure or otherwise.
Further, without limiting the effect of any of the foregoing, Guarantor
acknowledges that, in the absence of the foregoing waivers, particularly the
waiver contained in subpart (f),
3
<PAGE>
above, Guarantor would have the right to assert as a defense to Lender's attempt
to collect from Guarantor any deficiency following a non-judicial foreclosure of
the property encumbered by the Deed of Trust the same defenses that would be
available to Borrower pursuant to California Code of Civil Procedure Section
580d, which provides in pertinent part that no deficiency judgement shall be
had following a non-judicial foreclosure. California law extends the defense
provided to borrower under such section to guarantors in connection with the
subrogation rights of guarantors, but permits the waiver of the same.
6. Guarantor agrees to the following: (a) no change of ownership or legal
title to the real property described in the Deed of Trust, whether effected with
or without the consent of Lender or any successor in interest to Lender, shall
affect or change or discharge the obligations of Guarantor hereunder, (b) this
guaranty shall not be discharged or affected by the death or incompetency of
Guarantor, (c) this guaranty may be enforced by action against Guarantor,
without necessity of joining in such action any other party, and (d) in the
event action is commenced to enforce this guaranty, Guarantor agrees to pay
reasonable attorneys' fees and court costs.
7. Guarantor has made an independent investigation of the financial
condition of Borrower and the ability of Borrower to perform the obligations
hereby guaranteed prior to making this guaranty, and Guarantor hereby waives any
defense that Guarantor may have by reason of the failure of Lender or any
successor in interest to Lender to provide Guarantor with any information
respecting the financial condition of Borrower, or Borrower's ability to perform
any of the obligations hereby guaranteed.
8. From the date hereof to the first business day following the expiration
of twelve (12) months after the date all sums owing under the Note and Deed of
Trust are fully paid, Guarantor waives all rights of subrogation, reimbursement,
indemnity, and contribution, all rights to enforce any remedy Lender may have
against Borrower, and all rights to participate in any security held by the
Lender for the guaranteed obligations, including any such right or any other
right set forth in either of Sections 2848 and 2849 of the California Civil
Code, as well as any defense based upon the impairment of any subrogation,
reimbursement, indemnity, or contribution rights, or of any of the other
foregoing rights, that Guarantor might have absent the foregoing waiver.
Further, Guarantor agrees (a) not to seek to enforce or to obtain any such
right, or to accept any payment from any other person, in violation of the
foregoing waiver, and (b) that any agreement or other understanding at any time
entered into with any person granting any such right to Guarantor shall be null
and void.
9. All existing and future indebtedness of Borrower to Guarantor is hereby
subordinated to all indebtedness hereby guaranteed and, without the prior
4
<PAGE>
written consent of Lender, such subordinated indebtedness shall not be paid in
whole or in part nor will Guarantor accept any payment of or on account of any
such indebtedness while this Guaranty is in effect. At Lender' request,
Guarantor shall cause Borrower to pay to Lender all or any part of such
subordinated indebtedness. Each such payment by Borrower in violation of this
guaranty shall be received by Guarantor in trust for Lender, and Guarantor shall
cause the same to be paid to Lender immediately on account of the indebtedness
of Borrower to Lender. No such payment shall reduce or affect in any manner the
liability of Guarantor under this guaranty.
10. Guarantor shall file in any bankruptcy or other proceeding in which
the filing of claims is required by law all claims which Guarantor may have
against Borrower relating to any indebtedness of Borrower to Guarantor and will
assign to Lender all rights of Guarantor thereunder. If Guarantor does not file
any such claim, Lender, as attorney-in-fact for Guarantor, is hereby authorized
to do so in the name of Guarantor or, in Lender's discretion, to assign the
claim to a nominee and to cause proof of claim to be filed in the name of
Lender's nominee. The foregoing power of attorney is coupled with an interest
and cannot be revoked. Lender or its nominee shall have the sole right to
accept or reject any plan proposed in such proceeding and to take any other
action which a party filing a claim is entitled to do. In all such cases,
whether in administration, bankruptcy or otherwise, the person or persons
authorized to pay such claim shall pay to Lender the amount payable on such
claim and, to the full extent necessary for that purpose, Guarantor hereby
assigns to Lender all of Guarantor's rights to any such payments or
distributions to which Guarantor would otherwise be entitled; provided, however,
Guarantor's obligations hereunder shall not be satisfied except to the extent
that Lender receives cash by reason of any such payment or distribution. If
Lender receives anything hereunder other than cash, the same may, at Lender's
option, be held as collateral for amounts due under this guaranty or may be
returned by Lender.
11. With or without notice to Guarantor, Lender, in Lender's sole
discretion and at any time and from time to time and in such manner and upon
such terms as Lender deems fit, may (a) apply any or all payments or recoveries
from Borrower or from any other guarantor or endorser under any other
instrument, or realized from any security, in such manner and order of priority
as Lender may determine, to any indebtedness of Borrower to Lender, whether or
not such indebtedness is guaranteed hereby or is otherwise secured or is due at
the time of such application, and (b) refund to Borrower any payment received by
Lender upon any indebtedness hereby guaranteed, and payment of the amount
refunded shall be fully guaranteed hereby.
12. The amount of Guarantor's liability and all rights, powers and
remedies of Lender hereunder and under any other agreement now or at any time
hereafter in force between Lender and Guarantor, including any other guaranty
5
<PAGE>
executed by Guarantor relating to any indebtedness of Borrower to Lender, shall
be cumulative and not alternative and such rights, powers and remedies shall be
in addition to all rights, powers and remedies given to Lender by law. This
guaranty is in addition to and exclusive of the guaranty of any other guarantor
of any indebtedness of Borrower to Lender.
13. The obligations of Guarantor hereunder are independent of the
obligations of Borrower and, in the event of any default hereunder, a separate
action or actions may be brought and prosecuted against Guarantor whether or not
Borrower is joined therein or a separate action or actions are brought against
Borrower. Lender may maintain successive actions for other defaults. Lender's
rights hereunder shall not be exhausted by its exercise of any of its rights or
remedies or by any such action or by any number of successive actions until and
unless all indebtedness and obligations the payment and performance of which are
hereby guaranteed have been paid and fully performed.
14. Guarantor shall pay to Lender reasonable attorneys' fees and all costs
and other expenses that Lender expends or incurs in collecting or compromising
any indebtedness hereby guaranteed or in enforcing this guaranty against
Guarantor, whether or not suit is filed, expressly including but not limited to
all costs, attorneys' fees and expenses incurred by Lender in connection with
any insolvency, bankruptcy, reorganization, arrangement or other similar
proceedings involving Guarantor which in any way affect the exercise by Lender
of its rights and remedies hereunder.
15. The most recent financial statements of Borrower and Guarantor
heretofore delivered to Lender are true and correct in all material respects,
have been prepared in accordance with generally accepted accounting practices
and fairly present the financial condition of Borrower and Guarantor as of the
respective dates thereof, and no material adverse change has occurred in the
financial condition of Borrower or Guarantor since the respective dates thereof.
16. If any provision or portion of this guaranty is declared or found by a
court of competent jurisdiction to be unenforceable or null and void, such
provision or portion thereof shall be deemed stricken and severed from this
guaranty, and the remaining provisions and portions thereof shall continue in
full force and effect.
17. This guaranty shall inure to the benefit of Lender, successors and
assigns, including the assignees of any indebtedness hereby guaranteed, and
shall bind the heirs, executors, administrators, personal representatives,
successors and assigns of Guarantor. This guaranty may be assigned by Lender
with respect to all or any portion of the indebtedness hereby guaranteed, and,
when it has been so assigned, Guarantor shall be liable to the assignees under
this guaranty without in any manner affecting the liability of Guarantor
hereunder with respect to any indebtedness
6
<PAGE>
retained by Lender. Notice of assignment, transfer or negotiation of the Note
is hereby waived by Guarantor.
18. No provisions of this guaranty or right of Lender hereunder can be
waived in whole or in part, nor can Guarantor be released from Guarantor's
obligations hereunder except by a writing duly executed by Lender.
19. When the context and construction so require, all words used in the
singular herein shall be deemed to have been used in the plural and the
masculine shall include the feminine and neuter and vice versa. The word
"person" as used herein shall include any individual, company, firm,
association, partnership, corporation, trust or other legal entity of any kind
whatsoever.
20. This guaranty shall be governed by and construed in accordance with
the laws of the State of California. Except as provided in any other written
agreement now or at any time hereafter in force between Lender and Guarantor,
this guaranty shall constitute the entire agreement of Guarantor with Lender
with respect to the subject matter hereof, and no representation, understanding,
promise or condition concerning the subject matter hereof shall be binding upon
Lender unless expressed herein.
21. WAIVER OF JURY TRIAL. GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY
LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THIS
AGREEMENT, THE NOTE, THE DEED OF TRUST, ANY OTHER LOAN DOCUMENT, ANY OTHER
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
EITHER PARTY.
EXECUTED as of the 15th day of May, 1995.
"Guarantor"
CITADEL HOLDING COMPANY
By: /s/ STEVE WESSON
________________________________
7
<PAGE>
EXHIBIT 10.48
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Fidelity Federal Bank, a Federal
Savings Bank
600 North Brand Boulevard
Glendale, California 91203
Loan Number: 3038879
================================================================================
DEED OF TRUST,
ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
NOTICE: THIS DEED OF TRUST ALSO CONSTITUTES AND IS FILED AS A FIXTURE FILING
------
UNDER CALIFORNIA COMMERCIAL CODE SECTION 9402(6).
THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND
FIXTURE FILING (this "Deed of Trust") is made as of this 15th day of May, 1995,
by CITADEL REALTY, INC., a Delaware corporation ("Trustor"), whose address is
c/o Kenneth W. Swenson, Esq., Buchalter, Nemer, Fields & Younger, 601 South
Figueroa Street, Suite 2500, Los Angeles, California 90017-5704, in favor of
GATEWAY MORTGAGE CORPORATION, a California corporation ("Trustee"), for the
benefit of FIDELITY FEDERAL BANK, A FEDERAL SAVINGS BANK, a federally chartered
savings association ("Beneficiary"), whose address is 600 North Brand Boulevard,
Glendale, California 91203.
Trustor has executed a promissory note of even date herewith in the
principal amount of $5,338,500 and payable by Trustor to the order of
Beneficiary (the "Note"). The indebtedness evidenced by the Note is hereinafter
referred to as the "Loan," provided that the use of such term shall not be
construed to imply that Beneficiary is advancing new funds or doing anything
other than financing the sale of its own assets.
In consideration of the Loan, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Trustor hereby irrevocably grants, transfers and assigns to Trustee, in trust
for Beneficiary, with power of sale, under and subject to the terms and
conditions hereinafter set forth, for the benefit and security of Beneficiary,
all of its present and future estate, right, title and interest in and to
certain real property located at 600 North Brand Boulevard, Glendale, California
and 600 North Maryland Avenue, Glendale, California and more particularly
described in EXHIBIT A attached hereto, together with all of the following
1
<PAGE>
now owned or hereafter acquired by Trustor (which grant, transfer and assignment
are subject and subordinate to the absolute assignment to Beneficiary of rents
and leases in Article III, to the security interest and power of sale and all
-----------
other rights of enforcement granted to Beneficiary in Article IV, and to
----------
security interests granted to Beneficiary in other instruments, agreements and
documents):
(a) all buildings, structures, improvements and tenements now or hereafter
located on the real property described above (together with the real property
described in EXHIBIT A, the "REAL PROPERTY");
(b) all fixtures, machinery, equipment, mobile homes, trailers, furniture,
furnishings, building materials, appliances, apparatuses, communications and
utility systems and facilities, landscaping and goods of every nature whatsoever
now or hereafter located in or on, or used or intended to be used in connection
with, the Real Property, whether or not physically affixed to the Real Property;
(c) all rights to minerals, oil and gas and other hydrocarbon substances,
all water, irrigation and drainage rights, and all crops and timber on, under or
relating to the Real Property; all shares of stock in any water company or other
utility supplying water or utility services to the Real Property; and all
damages, royalties and revenues of every kind, nature and description whatsoever
that Trustor may be entitled to receive from any person or entity owning or
hereafter acquiring a right to the oil, gas and mineral rights and reservations
of the Real Property;
(d) all privileges and other rights now or hereafter appurtenant or
incidental to the Real Property, including air rights and development rights
relating to the Real Property and all right, title and interest of Trustor in
and to all streets, curbs, gutters, sidewalks, sewers, storm drains, roads and
public places, open or proposed; and all easements and rights of way, public or
private, now or hereafter used in connection with the Real Property;
(e) all rents (including room rents, minimum rents, additional rents and
percentage rents), cash, income, issues, accounts receivable, royalties,
proceeds, profits, service charges, parking and maintenance charges and fees,
tax and insurance contributions, proceeds from the sale of utilities and
services, cancellation premiums, and other revenues of or relating to the Real
Property or any business conducted thereon (including those now due, past due or
to become due by virtue of any "Lease" [as defined below] or in consideration of
any service performed by Trustor or in connection with the use or hiring of the
Property, regardless of to whom payable), also including any rights to payment
for goods sold or leased or to be sold or leased or for services rendered or to
be rendered or for claims for damages arising from any breach of the Leases,
proceeds from any sale or other disposition of all or any portion of the
Property, and all other benefits arising from the use or enjoyment of, or the
lease, sale or other disposition of, all or any portion of the Property
(collectively, "RENTS");
(f) Trustor's right, title and interest in and to any and all
2
<PAGE>
existing and future leases, subleases, tenancies, occupancy agreements, licenses
and other agreements for the use and occupancy of all or any portion of the
Property, whether written or oral, and any guarantees thereof, together with any
and all extensions, modifications, amendments, assignments and renewals thereof,
and all cash or other security deposited to secure performance by the lessees or
tenants of their obligations thereunder, whether such cash or security is to be
held until the expiration of the terms of such leases or applied to one or more
of the installments of rent coming due prior to the expiration of the term
thereof (collectively, the "LEASES");
(g) all insurance and insurance policies insuring the Property (as defined
after paragraph (q) below) or any activity thereon or part thereof or interest
therein, and all proceeds of such insurance policies; all claims, awards,
damages, causes of action, judgments, recoveries, compensation and insurance
proceeds arising on account of injury or damage to or taking of all or any part
of the Property or for any loss or diminution in value of the Property; all
advance payments of insurance premiums made by Trustor with respect to the
Property; all deposits made with or other security given by Trustor to
governmental authorities or utility companies with respect to the Property; all
claims or demands with respect to such deposits or security; and all right to
refunds or rebates of any such insurance premiums or deposits, taxes or
assessments on the Property;
(h) the Impound Funds (as defined in Section 2.8); all funds deposited by
-----------
Trustor with Beneficiary in connection with the Loan; and all deposit accounts
of Trustor with Beneficiary;
(i) any and all plans, specifications, contracts and agreements for
construction of any improvements on the Real Property and all studies, data and
drawings relating thereto; Trustor's rights under all payment, performance or
other bonds and in all deposits and other security delivered to, by or for the
benefit of Trustor in connection with the construction of improvements on the
Real Property; any and all construction materials, supplies and equipment used
or to be used in connection with the construction of improvements on the Real
Property, whether or not stored on the Real Property, and all warranties and
guaranties relating thereto; any and all contracts, agreements, and purchase
orders with contractors, subcontractors, suppliers and materialmen incidental to
construction of improvements on the Real Property; all reserves, deferred
payment deposits, cost savings and payments of any kind relating to construction
of such improvements; and any and all drawings, maps, plats, surveys, studies
and reports relating to the Real Property prepared by or on behalf of Trustor;
(j) all licenses (including liquor licenses, operating licenses or similar
licenses), contracts, management contracts or agreements, franchise agreements,
building, occupancy and other governmental permits, authorities, consents or
certificates acquired or used in connection with the construction, use,
ownership, operation, occupancy, maintenance, repair, improvement or development
of, or conduct of business on, the Real Property;
3
<PAGE>
(k) all accounts receivable, general intangibles and contract rights
relating to the construction, ownership, operation, occupancy, maintenance,
repair, improvement, use or development of, the Real Property, including
Trustor's leasehold interest, subject to the terms of the applicable lease, in
any equipment leased by Trustor;
(l) all names, trade names, trademarks, service marks, and logos by which
the Real Property is known or operated, all rights to conduct business under any
such name or any variation thereof, and all goodwill in any way relating to the
Real Property;
(m) all right, title and interest of Trustor in and to any entity that has
any interest of any nature in the Real Property; and all share certificates,
membership cards and other evidences of Trustor's ownership, membership,
participation or rights in such entity or entities;
(n) all sales agreements, deposit receipts, escrow agreements and other
ancillary documents and agreements entered into by or on behalf of Trustor for
the sale of all or any portion of the Real Property, and all deposits thereunder
and proceeds thereof, all purchase agreements, deposit receipts, escrow
agreements and other ancillary documents and agreements entered into by or an
behalf of Trustor for the purchase of all or any portion of the Real Property,
and all proceeds thereof;
(o) all books, records, accounts and other documents relating to the
construction, ownership, use, management, operation, occupancy, leasing,
maintenance, repair, improvement, or development of, or conduct of business on,
the Real Property;
(p) all other personal property of Trustor, whether tangible or intangible,
located on or used or to be used in any way in connection with, the Real
Property or the construction, ownership, use, management, operation, occupancy,
leasing, maintenance, repair, improvement, or development of, the Real Property,
whether now owned or hereafter acquired or created (including, equipment,
inventory, goods, documents, instruments, general intangibles, chattel paper,
accounts, accounts receivable, deposit accounts, and contract rights, as all
such terms are used in the California Uniform Commercial Code); and
(q) all supplements, modifications and amendments to any of the foregoing;
all substitutions, replacements, additions, and accessions to any and all of the
foregoing; any of the foregoing hereafter acquired by Trustor; and all proceeds
of all of the foregoing.
The Real Property and all of the items described in paragraphs (b) through
(p) above are hereinafter referred to collectively as the "PROPERTY."
4
<PAGE>
ARTICLE I
OBLIGATIONS SECURED
This Deed of Trust secures: (a) the payment and performance of all of
Trustor's indebtedness and obligations, now or hereafter incurred by Trustor,
under the Note, this Deed of Trust, and all other Loan Documents, including all
principal due and all interest, late charges, loan fees and other charges at any
time accruing or owing under the Loan Documents (provided, however, that this
-------- -------
Deed of Trust shall not secure the payment or performance of any indebtedness or
obligation of Trustor to be paid or performed under or pursuant to any Loan
Document or any provision in any Loan Document that expressly provides that such
Loan Document or provision is not secured by this Deed of Trust); (b) the
payment of all sums advanced, paid or expended by Beneficiary under or pursuant
to any provision of this Deed of Trust or any other Loan Document, or to protect
the Property or any other security for the Loan, together with interest on each
such advance, payment or expenditure at the rate of interest in effect under the
Note from the date of such advance, payment or expenditure until paid in full;
and (c) the payment of principal, interest and any other indebtedness hereafter
owing by Trustor under any additional loans made by Beneficiary to Trustor that
are evidenced by a promissory note or other writing reciting that the same is
secured hereby, including all prepayment charges, late charges, loan fees and
other charges accruing or assessed under such promissory note or other writing
("ADDITIONAL ADVANCES"). All of the foregoing amounts shall be secured by this
Deed of Trust to the same extent and with the same priority as the initial debt
secured by this Deed of Trust.
ARTICLE II
COVENANTS AND AGREEMENTS OF TRUSTOR
2.1 Any representations and warranties made by Trustor in the Loan
Documents shall remain continuing representations and warranties so long as any
portion of the indebtedness secured by this Deed of Trust remains outstanding.
Should any representation or warranty prove to be untrue as of the date of this
Deed of Trust, then Beneficiary may declare a default under the Note and Deed of
Trust. Trustor agrees to indemnify and hold Beneficiary free and harmless from
all liabilities, obligations, damages, causes of action, judgments, cost and
expenses (including without limitation reasonable attorneys' fees) that
Beneficiary may incur or suffer in connection with any breach by Trustor of any
of Trustor's representations or warranties.
2.2 Application of Payments. Except to the extent otherwise required
-----------------------
by law, Beneficiary shall apply and credit funds received by Beneficiary
pursuant to this Deed of Trust, the Note or any other Loan Document in the
manner and order of priority set forth in the Note, and if the Note does not
specify the manner and order of priority, funds shall be applied and credited
(a) first, to pay or reimburse Beneficiary for amounts advanced by Beneficiary
(other than principal of the Loan) pursuant to any provision of this Deed of
Trust or any other Loan Document, (b) second, to fund any
5
<PAGE>
deposits that Trustor may be required by the terms of any Loan Document to make
with Beneficiary and that Trustor has in fact failed to make, including any
deposits to be used to pay the cost of repairing or constructing any
improvements, insurance premiums, property taxes and assessments and utility
charges, (c) third, to pay any late payment charges due under the Note or any
other Loan Document, (d) fourth, to pay any other sums due under the Loan
Documents, excluding interest earned or accrued under the Note and principal,
(e) fifth, to pay any interest earned or accrued under the Note and not added to
principal, and (f) sixth, to pay principal outstanding under the Note (including
any accrued interest added to principal). Lease payments suspended by
Beneficiary shall not be deemed subject to this Section 2.2 except to the extent
applied against amounts outstanding under the Note.
2.3 Maintenance, Repair, Alterations; Use and Operation. Trustor
---------------------------------------------------
shall (a) keep the Property in good condition and repair and, in the event of
any damage, injury or loss, restore or repair promptly and in a good and
workmanlike manner such part of the Property to the equivalent of its condition
prior to such damage, injury or loss, or such other condition as Beneficiary may
approve in writing, whether or not insurance proceeds are available to cover, in
whole or in part, the costs of such restoration or repair, and, subject to
Section 4.3(a), replace fixtures, equipment, machinery and appliances when
--------------
necessary to keep such items in good repair; (b) not commit or permit waste,
impairment or deterioration of the Property; (c) comply with all, and not suffer
or permit to exist any violation of any, of the following that may materially
affect the Property or pertain to acts committed or existing thereon: (i) Laws;
(ii) covenants, conditions and restrictions and servitudes (including those
contained in any declaration and constituent documents of any condominium,
cooperative, planned development or other common interest project), whether
public or private, of every kind and character; and (iii) requirements of
insurance companies and all bureaus or agencies that establish standards of
insurability; (d) obtain, keep in effect and perform all obligations under all
permits, licenses, rights, privileges, franchises, concessions, maps, bonds and
other agreements required by applicable Laws or granted to or contracted for by
Trustor (including zoning variances and other special exceptions, exemptions and
permits) for the construction, ownership, use, management, operation, occupancy,
leasing, maintenance, repair, improvement, financing, sale, or development of,
or conduct of Trustor's business on the Property; (e) not take any action that
might invalidate any insurance carried on the Property; (f) not initiate, join
in, or consent to any change in any private restrictive covenant, zoning
ordinance or zoning classification or conditions of use, or other public or
private restrictions limiting the uses that may be made of the Property; (g) not
alter the general use of all or any part of the Property without the prior
written consent of Beneficiary; (h) not abandon the Property; and (i) cultivate,
irrigate, fertilize, fumigate, prune and do all other acts in a timely and
proper manner which, from the character or use of the Property or any portion
thereof, may be necessary or appropriate for the care, protection or
preservation of the Property or the protection of Beneficiary's security.
2.4 Required Insurance Coverage. Trustor shall at all times provide,
---------------------------
maintain and keep in force all of the following policies of insurance:
6
<PAGE>
(a) Fire and Extended Coverage. Insurance of the type commonly known
--------------------------
as the "broad form of extended coverage," insuring the property against loss or
damage by fire, lightning, vandalism, malicious mischief, windstorm, hail,
explosion, riot, riot attending a strike, civil commotion, aircraft, vehicles
and smoke, and all other risks covered by an all perils endorsement, in an
amount sufficient to prevent Beneficiary or Trustor from becoming a co-insurer
under the terms of the applicable policies and at least equal to 100% of the
then full replacement cost of the improvements thereon and Personal Property
without deduction for physical depreciation, and subject to a deductible
reasonably satisfactory to Beneficiary. Each such policy shall contain a
replacement cost endorsement;
(b) Rental Loss. If required by Beneficiary, upon the occupancy of
-----------
any portion of the Property, insurance against the loss of "rental value" of the
improvements on a "rented basis," and including the fair rental value of any
portion of the improvements occupied by Trustor, arising out of fire or the
perils of the broad form of extended coverage, in an amount satisfactory to
Beneficiary;
(c) Commercial General Liability. Comprehensive broad form general
----------------------------
public liability insurance, insuring against claims and liability for personal
injury, death or property damage arising from the use, occupancy, disuse or
condition of the Property and the adjoining areas or ways, with a single limit
of coverage in an amount reasonably approved by Beneficiary, but in no event
less than $3,000,000;
(d) Worker's Compensation. Worker's compensation insurance (including
---------------------
employer's liability insurance, if requested by Beneficiary) for all employees
of Trustor engaged on or with respect to the Property, in such amount as is
reasonably satisfactory to Beneficiary, or, if such limits are established by
law, in the amounts so established;
(e) Builder's Risk. During the course of any construction or repair
--------------
of improvements on the Real Property, builder's "completed value" insurance
against "all risks of physical loss," including collapse and transit coverage,
in nonreporting form, covering the total value of work performed and equipment,
supplies, materials, supervision and fixtures furnished, containing the
"permission to occupy upon completion of work or occupancy" endorsement and no
deletion or restriction in coverage due to occupancy, and covering Beneficiary's
interest in the Property, as it may appear;
(f) Flood. If the Property lies within a 100-year flood plain as
-----
designated by the Federal Emergency Management Association from time to time,
insurance against damage by flood or similar occurrences, in the event such
insurance is available pursuant to the provisions of the Flood Disaster
Protection Act of 1973 or other applicable Law, in an amount equal to the lesser
of 100% of the insurable value of the Property or the maximum amount obtainable
under such Law; provided, however, that Beneficiary may require that Trustor
-------- -------
secure flood insurance in excess of the amount obtainable under such Law if such
insurance is commercially available;
7
<PAGE>
(g) Other. If available, such other policies of insurance (including
-----
without limitation earthquake, boiler, pressure, vessel and machinery and plate
glass insurance) as, and in such amounts as, under good insurance practices,
from time to time, are carried by persons engaged in the same or similar type of
business as Trustor, and located in the same or similar areas as the Real
Property, or as any governmental or quasi-governmental authority having
jurisdiction over Trustor or the Property shall from time to time require.
Each insurance policy required by this Section 2.4 shall: (i) be
-----------
primary and noncontributory with any other insurance Trustor may carry; (ii)
name or be endorsed to name Beneficiary as an additional insured and/or loss
payee thereunder as its interest may appear; (iii) contain mortgagee and other
endorsements reasonably required by Beneficiary in form and substance acceptable
to Beneficiary; (iv) be issued by companies authorized to conduct business in
California; (v) be subject to the written reasonable approval of Beneficiary as
to insurer; (vi) provide or be endorsed to provide that the policy (including
all endorsements thereto) shall not be cancelled or modified without at least 30
days' prior written notice to Beneficiary; and (vii) shall contain waivers of
subrogation in form and substance acceptable to Beneficiary.
Trustor shall furnish Beneficiary with: (i) a copy, certified by the
appropriate insurance broker or carrier, of each policy required under this
Section 2.4 or a certificate for each such policy, in form and substance
-----------
reasonably satisfactory to Beneficiary; and (ii) at least 15 days prior to the
expiration of each such policy, evidence satisfactory to Beneficiary of the
payment of premiums and the reissuance of a policy continuing in force the
coverage provided by the expiring policy. In the event Trustor fails to
provide, maintain, keep in force, deliver or furnish to Beneficiary the policies
of insurance required by this Deed of Trust, Beneficiary, may, at its option,
procure such insurance (or single interest insurance covering Beneficiary's
interest) with a company selected by Beneficiary, and Trustor shall pay all
premiums thereon promptly upon demand by Beneficiary.
Trustor, for itself and on behalf of its insurers, hereby releases
Beneficiary and Trustee from any liability as to which insurance is required to
be carried pursuant to any of the Loan Documents, including liability by way of
contribution, indemnity, or subrogation.
In the event of foreclosure of this Deed of Trust or other transfer of
title to the Property that extinguishes the lien of this Deed of Trust, all
right, title and interest of Trustor in and to all then existing policies of
insurance or premiums or payments in satisfaction of claims or any other rights
thereunder shall be deemed assigned to, and thereupon shall inure to the benefit
of and pass to the purchaser or grantee, regardless of the amount bid at such
foreclosure sale.
8
<PAGE>
2.5 Assignment of, and Disposition of Proceeds from, Insurance and
--------------------------------------------------------------
Other Claims and Condemnation Awards.
------------------------------------
(a) Trustor hereby assigns to Beneficiary: (i) all insurance proceeds
that Trustor may receive or become entitled to receive by reason of loss
sustained with respect to the Property or any part thereof under any policy of
insurance required by this Deed of Trust; (ii) all compensation, awards and
other payments or relief and all proceeds of the foregoing that Trustor may
receive or become entitled to receive by reason of a taking for public use or an
action in eminent domain affecting all or any part of the Property or any
interest therein, the exercise of a police power, whether by a condemnation
proceeding or otherwise (such as by inverse condemnation), or any transfer of
all or any part of the Property under threat or in avoidance of an exercise of
the power of eminent domain; and (iii) all causes of action, money judgments,
monetary awards, and monetary liens (whether arising by judgment or otherwise)
and all proceeds of the foregoing that Trustor may acquire or become entitled to
receive from any persons whomsoever as a result of design, construction defects,
or other defects or defective conditions in, on or relating to the Property or
any portion thereof, or damage or injury to the Property or any portion thereof
or interest therein from any cause whatsoever. Trustor shall execute such
assignments, documents or instruments as Beneficiary may from time to time
request in order to evidence any of the foregoing assignments. To the extent
any such assigned claim or action is prosecuted by Trustor, Trustor shall be
entitled to deduct from any proceeds otherwise payable to the Beneficiary
hereunder the reasonable costs and expenses of investigation and prosecution of
such claim or action, including reasonable attorneys fees. Trustor shall
furnish to Beneficiary at Beneficiary's request periodic written accountings of
such costs, expenses and proceeds. Beneficiary may, but in no event shall be
obligated to, commence, appear in, defend or prosecute (in Beneficiary's name or
otherwise) any assigned claim or action, and adjust, compromise, settle and
collect all claims and awards assigned to Beneficiary hereunder, but shall not
be responsible for any failure to collect any claim or award, regardless of the
cause of the failure. Trustor shall cooperate with Beneficiary in making and
prosecuting insurance claims and claims against third parties.
(b) Application of Proceeds. Any sums obtained or received by
-----------------------
Beneficiary pursuant to Section 2.5(a) shall be applied first to reimburse
--------------
Beneficiary for costs and expenses incurred in connection with obtaining any
such sums and then, provided there is no impairment of security and no Event of
Default exists, in Beneficiary's reasonable discretion: (i) disbursed to
Trustor to pay the costs and expenses of necessary repairs or restoration of the
Property, subject to Section 2.5(c) and (ii) applied to the payment of any
--------------
indebtedness secured by this Deed of Trust, whether or not such indebtedness is
then due, and to such components thereof as Beneficiary shall determine in its
sole and absolute discretion without prepayment penalty or premium. Any
remaining sums then held by Beneficiary pursuant to Section 2.5(a) shall be
--------------
released to Trustor. Unless Trustor and Beneficiary otherwise agree in writing,
any application of proceeds to principal shall not extend or postpone the due
date of the monthly installments required under the Note or funds required under
Section 2.8.
-----------
9
<PAGE>
(c) Conditions of Disbursement. In the event that insurance or other
--------------------------
proceeds remaining after deduction of Beneficiary's costs and expenses incurred
in connection with obtaining such proceeds are made available to Trustor for
payment of the costs and expenses of repair and restoration of the Property in
accordance with Section 2.5(b), such proceeds shall be disbursed as provided in
--------------
Section 2.5(d) upon the following terms and conditions: (i) no Event of Default
--------------
shall have occurred and be continuing; (ii) Beneficiary shall be reasonably
satisfied, in its sole discretion, that the portion of the Property damaged,
lost or destroyed can and shall be fully restored to the equivalent of its
original condition and value, or such other condition as Beneficiary may
approve, within a reasonable period of time and in any event prior to maturity
of the Note; (iii) Beneficiary shall have reasonably approved: (A) a detailed
budget and cost breakdown for the repair and reconstruction work; (B) the plans
and specifications for the repair and reconstruction work and all approvals of
governmental authorities required by Law in connection with such work; and (C)
the general contractor proposed to be engaged to perform such work and the
construction contract pursuant to which such work is to be performed; (iv) no
material lease in effect immediately prior to the event of loss shall have been
cancelled nor provide for any right to cancel that remains exercisable as a
result of the damage or destruction, or, in the event such cancellation occurs
or such exercisable right of cancellation exists, Beneficiary shall have
determined that the Property can be restored to be an economically viable unit
with a use which is consistent with the use of the Property prior to such damage
or destruction; and (v) receipt of such additional data, instruments, documents,
agreements and other materials or information relating to the repair or
restoration, as Beneficiary may reasonably request, and satisfaction of such
additional conditions, as Beneficiary may reasonably require, to protect its
security. Trustor hereby acknowledges that the specific conditions described in
this Section 2.5(c) are reasonable.
--------------
(d) Disbursement Procedures. Upon satisfaction of all conditions set
-----------------------
forth in Section 2.5(c), Trustor shall cause the work of repair and restoration
--------------
to be commenced promptly and pursued diligently to completion in accordance with
plans and specifications approved by Beneficiary and all applicable Laws.
Beneficiary shall disburse such proceeds and any additional funds deposited by
Trustor subject to Beneficiary's usual construction loan disbursement procedures
and requirements, which include the following: (i) submission by Trustor and the
general contractor of vouchers with such architect's certificates and/or other
supporting information as requested by Beneficiary, all in form and content
reasonably satisfactory to Beneficiary, evidencing the work for which
disbursement is requested and the cost thereof; (ii) procurement by Trustor of
performance and payment bonds, where required by any applicable governmental
authority, and builders' risk insurance, and receipt by Beneficiary of evidence
satisfactory to it that such coverage is in full force and effect; (iii) if
required by Beneficiary, the retainage by Beneficiary of up to 10% of the costs
of repair and restoration until (A) completion of such work in accordance with
the approved plans and specifications and (B) Beneficiary's receipt of
satisfactory evidence that the period for filing mechanics' liens has expired,
that the Property is free from mechanics' and materialman's liens, and that all
governmental approvals required for occupancy of the Property have been
obtained; and (iv) satis-
10
<PAGE>
faction of all of Beneficiary's other customary disbursement procedures and
requirements for property comparable to the Property, and if Beneficiary has no
such procedures, such procedures as are then customary and usual in the
institutional construction lending industry in the county in which the Real
Property is located.
(e) Excess Funds. Trustor's failure to satisfy the conditions set
------------
forth in Section 2.5(c) within 90 days after Beneficiary's receipt of such
--------------
proceeds, or to commence promptly and complete diligently the restoration of the
Property in accordance with Section 2.5(d), shall constitute an Event of Default
--------------
hereunder. If any Event of Default occurs during the restoration, Beneficiary
may apply such funds and proceeds held to the indebtedness secured by this Deed
of Trust and to such components thereof as Beneficiary shall determine, in its
sole and absolute discretion, and at Beneficiary's option, declare the entire
indebtedness secured hereby immediately due and payable. Any such application
of proceeds and funds shall not cure or waive any Event of Default or notice of
default under this Deed of Trust or invalidate any act done pursuant to such
notice.
(f) Application of Rent. Notwithstanding anything to the contrary in
-------------------
this Section 2.5, rent and business interruption insurance proceeds (net of
-----------
Beneficiary's costs and expenses) shall be applied to payments of amounts due
under the Note and may, at Beneficiary's option, be applied to any other
payments due and required to be made by Trustor under the Loan Documents, until
such time as the improvements have been restored and placed in full operation,
at which time, if no uncured Event of Default (as defined in Section 5.1) then
-----------
exists, the balance of such insurance proceeds shall be returned to Trustor.
2.6 Taxes and Impositions.
---------------------
(a) Payment of Impositions. Subject to Section 2.8 and Section
---------------------- ----------- -------
2.6(c), Trustor shall pay, at least 10 days prior to delinquency, all taxes,
assessments, levies, licenses, and fees of any kind whatsoever, including
maintenance charges, owners' association dues, charges or fees, and levies or
charges resulting from covenants, conditions and restrictions affecting the
Property that become due and payable and create or appear to create a lien upon
or are levied, assessed or imposed with respect to the construction, ownership,
use, management, operation, occupancy, leasing, maintenance, repair, improvement
or development of the Property or any part thereof or interest therein or the
conduct of business thereon, and any tax, assessment, levy or charge in lieu of
or in addition to any of the foregoing (collectively, "IMPOSITIONS"). If any
Imposition is payable in installments, Trustor may pay the same, in installments
as the same may become due and before any fine, penalty, interest or cost may be
added thereto for the nonpayment of any such installment and interest.
(b) Evidence of Payment. Subject to the provisions of Section 2.6(c),
------------------- --------------
Trustor shall, upon request of Beneficiary, promptly furnish to Beneficiary
copies, certified by the Trustor to be true and correct copies, of official
receipts of the appropriate taxing or assessing authority, or other proof
satisfactory to Beneficiary,
11
<PAGE>
evidencing the payment thereof.
(c) Right to Contest Impositions. Trustor shall have the right,
----------------------------
before any delinquency occurs, to contest or object to the amount or validity of
any Imposition by appropriate legal proceedings diligently prosecuted. Such
right shall not relieve, modify or extend Trustor's obligation to pay any such
Imposition at the time and in the manner provided in this Section 2.6 unless (i)
-----------
the legal proceedings shall operate to stay the foreclosure or sale of the
Property or any part thereof to satisfy such Imposition prior to final
determination of such proceedings, and (ii) Trustor shall have provided such
bond or other undertaking as may be required or permitted by law to accomplish
such stay.
2.7 Utilities. Subject to Section 2.8, Trustor shall pay when due
--------- -----------
all utility charges incurred by or on behalf of Trustor in connection with, or
that may become a charge or lien against, the Property and all other assessments
or charges of a similar nature, public or private, affecting the Property or any
portion thereof (collectively, "UTILITY CHARGES").
2.8 Impounds.
--------
(a) At any time after the occurrence of any Event of Default,
Beneficiary may, at its option and without limiting or waiving any of
Beneficiary's other rights or remedies, require Trustor to pay to Beneficiary,
on the first day of each month (or on such other day of the month as may be
designated in writing by Beneficiary) funds ("IMPOUND FUNDS") in an amount
reasonably estimated from time to time by Beneficiary to be sufficient to allow
the payment of such charges at least 30 days before they become due. At any
time after the occurrence of an Event of Default, Beneficiary may also require
Trustor to pay to Beneficiary, in advance, in a lump sum or in periodic
installments, such other funds for Utility Charges or other charges in
connection with the Property or any portion thereof or interest therein that
Beneficiary may reasonably deem necessary to protect Beneficiary's interests.
If at any time the amount of the Impound Funds held by Beneficiary shall be less
than the amount deemed necessary by Beneficiary to pay Impositions and Premiums
as they fall due, Trustor shall pay to Beneficiary the amount necessary to make
up the deficiency within 10 days after written notice from Beneficiary to
Trustor requesting payment thereof. During the continuance of any Event of
Default, Beneficiary may, at its option, apply all or any part of the Impound
Funds to any indebtedness secured by this Deed of Trust then due, and to such
components thereof as Beneficiary shall determine in its sole discretion, and in
order to cure such Event of Default, Trustor shall be required to restore all of
the Impound Funds as well as to correct the event or condition giving rise to
such Event of Default. Upon payment in full of the indebtedness secured hereby,
Beneficiary shall promptly pay to Trustor all Impound Funds then held by
Beneficiary. Trustor acknowledges that the collection of Impound Funds by
Beneficiary is solely for Beneficiary's protection and shall impose no
obligations upon Beneficiary other than those expressly provided herein, and, in
the event of payment in full of the indebtedness secured by this Deed of Trust,
to allow due credit for sums received by Beneficiary. Nothing contained herein
shall constitute
12
<PAGE>
Beneficiary as a trustee of Impound Funds. Beneficiary may commingle the
Impound Funds with its own funds and shall not be obligated to pay Trustor
interest on the Impound Fund. Upon assignment of Beneficiary's interest in this
Deed of Trust, any Impound Funds then held by Beneficiary shall be turned over
to the assignee, and all further responsibility of Beneficiary with respect
thereto shall terminate.
(b) Commencing on the first day a monthly installment of principal and
interest is due and payable under the Note and continuing on the first calendar
day of each calendar month thereafter, Borrower shall deliver to Beneficiary,
together with the regular installments of principal and interest an amount (a
"Real Property Tax Impound Payment") determined by Beneficiary in its reasonable
discretion to be sufficient to pay and defray anticipated real property taxes
relative to the property on the dates when such taxes are due. Each Real
Property Tax Impound Payment will be placed in interest bearing deposits or
accounts in the name of Beneficiary and shall be held in accordance with the
terms of paragraph (a) of this section 2.8 of this Deed of Trust. Each Real
Property Tax Impound Payment is pledged as additional security for the sums
secured by this Deed of Trust and any of the other loan documents. Borrower
hereby grants to Beneficiary a lien and security interest in each Real Property
Tax Impound Payment and the deposit or other accounts in which such payments are
placed.
2.9 Reserve Relating to Public Storage Lease.
-----------------------------------------
(a) Borrower shall, together with the regular installments of
principal and interest and such other impounds as may be required hereunder from
time to time, deliver to Beneficiary an amount equal to $29,858.40 (each, a
"Lease Reserve Payment") for the following period: Commencing on the first day
a monthly installment of principal and interest is due and payable under the
Note and continuing on the first calendar day of each calendar month thereafter,
until the earlier of the date that (i) the aggregate amount of all sums
collected as the Lease Reserve Payments ("Total Lease Reserve") equals
$298,584.00, or (ii) that portion of the Property currently leased to Public
Storage, Inc., as lessee ("Public Storage Premises") with a term ending April
30, 1996 ("Public Storage Lease") has been leased pursuant to one or more leases
for a term expiring on or after the Maturity Date (individually "New Storage
Lease" and collectively, "New Storage Leases"), and such New Storage Lease(s)
generate at least $48,600 per month rent ("Aggregate Storage Rent"). A New
Storage Lease may also include an extension, renewal or modification of the
Public Storage Lease.
(b) Beneficiary shall place the Lease Reserve Payments in one or more
interest bearing accounts at Beneficiary in the name of Borrower. Beneficiary
shall use reasonable good faith efforts to cooperate with Borrower with a view
to minimizing to the extent possible the portion or portions of such accounts
which are in excess of the $100,000 deposit insurance limit. Borrower hereby
pledges each Lease Reserve Payment and the Total Lease Reserve as additional
security for the sums secured by this Deed of Trust and any of the other Loan
Documents. Borrower hereby grants to Beneficiary a lien and security interest
in each Lease Reserve Payment and the deposit
13
<PAGE>
or other accounts in which such payments are placed. The interest accrued on
the Lease Reserve Payments from time to time shall be added to the Total Lease
Reserve. The Total Lease Reserve may be drawn upon by Borrower upon the terms
of and for the purpose set forth in subparagraph (c) below, and shall be
remitted to Borrower in accordance with the provisions of subparagraph (d), (e)
and (f) below.
(c) On and after May 1, 1996, Borrower shall, subject to the following
provisions of this subparagraph (c) and upon ten days prior written notice to
Beneficiary ("Draw Notice"), be entitled to draw on the Total Lease Reserve
account solely to make a partial payment of the Note in an amount not to exceed
$10,080.00 per month ("Draw Amount"), provided that Borrower (i) is not in
default under any of the terms of the Note, this Deed of Trust or any of the
other Loan Documents, (ii) no situation exists which with the passage of time or
the giving of notice or both would constitute an Event of Default under this
Note, the Deed of Trust or any of the other Loan Documents, (iii) together with
the Draw Notice, Borrower advises the Draw Amount requested by Borrower, and
Borrower remits to Beneficiary an amount equal to the amount by which the
payment under the Note and Deed of Trust exceeds the Draw Amount requested in
the Draw Notice, and (iv) Beneficiary shall not have objected to such draw
(which objection shall not be unreasonably made) before the expiration of five
days from the receipt by Beneficiary of the Draw Notice. Borrower may not,
without Beneficiary's consent, which consent shall not be unreasonably withheld,
make any draws on the Total Lease Reserve account for an amount which is less
than $500.
(d) Beneficiary shall, within 10 days after Borrower's request for a
remittance, but subject to subparagraph (f) below, ("Remittance Application"),
remit to Borrower such portion of the Total Lease Reserve as required under
subparagraph (e) below, provided that (i) Borrower provides to Beneficiary a
fully executed copy of the New Storage Lease(s) not previously provided to
Beneficiary, (ii) Borrower is not in default under any of the terms of the Note,
this Deed of Trust or any of the other Loan Documents, and (iii) no situation
exists which with the passage of time or the giving of notice or both would
constitute an Event of Default under this Note, the Deed of Trust of any of the
other Loan Documents.
(e) In response to a Remittance Application, Beneficiary shall remit
to Borrower an amount ("Remittance Amount") equal to (i) the Total Lease Reserve
multiplied by a fraction the numerator of which is the Aggregate Storage Rent as
of the date of the Remittance Application, and the denominator of which is
$48,600, less (ii) the sum of (A) the aggregate of all amounts applied toward
payments on the Note under subparagraph (c) above and (B) on second and
subsequent Remittance Applications, the amounts previously remitted by
Beneficiary and received by Borrower. Borrower may, from time to time, submit
one or more Remittance Applications to Beneficiary. Borrower may not submit a
Remittance Application unless the Remittance Amount requested thereunder is for
at least 25% of the Total Lease Reserve; provided, however, if such Remittance
Application requests the remittance of the entire remaining balance of the Total
Lease Reserve then held by Beneficiary, then such Remittance Application may be
for a lesser amount. If by the
14
<PAGE>
Maturity Date the Total Lease Reserve has not been remitted to Borrower, then
Beneficiary shall apply the remaining balance of the Total Lease Reserve to
Borrower's obligations due under the Note. Under no circumstances hereunder
shall the Beneficiary be obligated to remit to Borrower an amount in excess of
the Total Lease Reserve.
(f) Notwithstanding anything to the contrary in this Section 2.9,
Beneficiary shall not be required to remit any Remittance Amount attributable to
a New Storage Lease entered into on or after May 1, 1996 until the earlier of
(i) entry by the tenant into occupancy of the premises subject to such New
Storage Lease or (ii) commencement of rent payments by the tenant under such New
Storage Lease.
2.10 Actions Affecting Property: Duty to Protect Beneficiary and
------------------------------------------------------------
Security. Trustor shall, at its own expense, appear in, prosecute, defend and
--------
contest any action or proceeding that purports to affect the Property or any
portion thereof or Trustor's title thereto. The validity or priority of the
lien of this Deed of Trust, or the rights, powers, liabilities or obligations of
Beneficiary or Trustee. Without in any way mitigating or excusing Trustor's
performance of the foregoing obligations, Beneficiary shall have the right, but
not the obligation, at Beneficiary's expense, to participate to whatever extent
Beneficiary may desire, with counsel of Beneficiary's choice, in any such action
or proceeding. Trustor shall indemnify, defend and hold harmless Beneficiary,
any successor to Beneficiary, any assignee of Beneficiary's interest in the
Loan, the directors, officers, shareholders, employees, and agents of such
entities and their respective heirs, executors, administrators, legal
representatives, successors and assigns from and against all claims, demands,
liabilities, losses, obligations, judgments, damages, costs and expenses of any
nature, including all Hazardous Materials Claims (as defined in Section 2.19),
------------
reasonable court costs and attorneys' fees that Beneficiary may directly or
indirectly suffer or incur in connection with any such action or proceeding,
except to the extent that the same may have been caused by Beneficiary's willful
misconduct or gross negligence. As used herein, the term "proceeding" shall
include litigation (whether by way of complaint, answer, cross-complaint,
counter claim or third-party claim), arbitration and administrative hearings or
proceedings.
2.11 Transfer of Property or Interest in Trustor.
-------------------------------------------
(a) Upon (i) any sale, encumbrance, pledge or other transfer of the
Property, or any part of or interest in the Property or (ii) any merger or
consolidation of the Trustor with any corporation or other entity or (iii) any
sale or other transfer of, or series of sales or transfers of, in excess of 50%,
in the aggregate, of the voting stock of Trustor or (iv) issuance or series of
issuances by Trustor of newly issued voting stock constituting, in the
aggregate, in excess of 50% of the voting stock of Trustor, Beneficiary may, at
its option, declare all of the sums secured by this Deed of Trust to be
immediately due and payable, and if such sums are not immediately paid in full,
Trustor shall be in default under this Deed of Trust and Beneficiary may invoke
all of the remedies available under this Deed of Trust and the other Loan
Documents as well as all additional remedies available at law or at equity.
15
<PAGE>
(b) Paragraph (a) of this Section 2.11 shall not be applicable to
(A) any transfer of (i) the Property or (ii) all of the issued and outstanding
shares of the Trustor, in either case, to a subsidiary of Trustor or Citadel
Holding Corporation; or (B) any transfer of the Property by operation of law as
a result of a merger or consolidation of Trustor or any subsidiary to which the
Property has been transferred pursuant to this paragraph (b), on the one hand,
and Citadel Holding Corporation, on the other; provided, that in the event of a
transfer permitted under this paragraph (b), such subsidiary or Citadel Holding
Corporation, as applicable, shall be subject to and bound by clauses (i), (ii),
(iii) and (iv) of paragraph (a) to the same extent as Trustor.
(c) So long as (i) Borrower is not in default under any of the terms
of the Note, this Deed of Trust or any other loan document, and (ii) no
situation exists which with the passage of time or the giving of notice or both
would constitute a default under the Note, this Deed of Trust or any other loan
document, in the event Borrower desires to transfer all of the property to
another party (the "Transferee") and have the Transferee assume all of
Borrower's obligations under the Note, this Deed of Trust and all of the other
Loan Documents (collectively, the "Transfer and Assumption"), Borrower, subject
to the terms of this paragraph, may make a written application to Beneficiary
for Beneficiary's consent to the Transfer and Assumption, which consent will not
be unreasonably withheld, taking into account the creditworthiness of the
proposed new borrower and the terms of the proposed transaction. Together with
such written application (and afterwards if requested by Beneficiary), Borrower
will submit to Beneficiary true, correct and complete copies of any and all
information and documents of any kind requested by Beneficiary concerning the
Property, Transferee, the transaction, and/or Borrower, together with any review
fee required by Beneficiary, in Beneficiary's discretion. If Beneficiary
consents to the Transfer and Assumption, the Transferee and Borrower shall (i)
deliver to Beneficiary an assumption fee in an amount equal to one percent of
the unpaid principal balance of the Loan on the date of the Transfer and
Assumption (ii) execute and deliver to Beneficiary any and all documents
required by Beneficiary, in form and substance required by Beneficiary, in
Beneficiary's sole discretion (the "Assumption Documents"), (iii) deliver to
Beneficiary an endorsement to the mortgagee policy of title insurance then
insuring the lien created by this Deed of Trust in form and substance acceptable
to Beneficiary, in Beneficiary's sole discretion (the "Endorsement"), and (iv)
deliver to Beneficiary a payment in the amount of all costs incurred by
Beneficiary in connection with the Transfer and Assumption, including but not
limited to, Beneficiary's attorneys fees and expenses, all recording fees for
the assumption documents, and all fees payable to the title company for the
delivery to Beneficiary of the Endorsement. Notwithstanding anything contained
in this paragraph to the contrary, under no circumstances may the property and
loan be transferred and assumed by any party under the terms of this paragraph
more than once during the entire term of the loan.
2.12 Inspections. Beneficiary and its agents, representatives and
-----------
workmen are hereby authorized to enter at any reasonable time upon the Property,
upon reasonable notice to Trustor, to inspect or investigate the same for any
purpose relating to Beneficiary's interest in the Property, including for the
purpose of
16
<PAGE>
ascertaining the status of compliance with Laws or performing any act
Beneficiary is authorized to perform under this Deed of Trust; provided,
however, no such entry upon the Property shall unreasonably interfere with
Trustor's or Trustor's tenants' use of the Property. In the event Beneficiary
undertakes an inspection or investigation for Hazardous Materials in connection
with the commencement of foreclosure proceedings or acceptance of a deed in lieu
of foreclosure, Trustor agrees that such inspection or investigation may include
studies, borings, sampling, and other tests. Trustor shall cooperate with
Beneficiary in the conduct of all inspections and investigations under this
Section and shall cause all tenants to permit Beneficiary access for the purpose
of such inspections and investigations. Trustor acknowledges that Beneficiary's
rights under this Section shall include, but not be limited to, the right to
conduct a site assessment and environmental audit prior to or in connection with
the commencement of foreclosure proceedings or acceptance of a deed in lieu of
foreclosure and the right to monitor any Remedial Work (as defined in Section
-------
2.19). Trustor agrees to reimburse Beneficiary, upon demand, for all reasonable
----
expenses, costs or other amounts incurred by Beneficiary in performing any
inspection, investigation or site assessment and environmental audit, or in
monitoring any Remedial Work under this Section if Beneficiary discovers that an
Event of Default exists as a result of such inspection, investigation, site
assessment or environmental audits or if Beneficiary conducts a site assessment
and environmental audit prior to or in connection with the commencement of
foreclosure proceedings or acceptance of a deed in lieu of foreclosure.
2.13 Liens, Encumbrances, and Charges. Trustor shall (a) pay all
--------------------------------
indebtedness secured by liens, encumbrances and charges upon the Property or any
part thereof (whether senior or junior in priority to the lien of this Deed of
Trust) as and when such indebtedness becomes due; (b) immediately pay in full
and discharge all liens, encumbrances and charges that may be or appear to be
superior to the lien of this Deed of Trust, except for any such liens,
encumbrances or charges that have been approved by Beneficiary and are shown as
exceptions to title in Beneficiary's title insurance policy provided, however
that Trustor shall have the right to contest in good faith, with due diligence
in appropriate proceedings, at no cost or expense to the Beneficiary, the
validity, applicability or the amount of any such lien, encumbrance or charge,
provided however that Trustor, prior to commencing such contest, shall have
furnished to Beneficiary bond or other security in such form, substance and
amount as is reasonably satisfactory to Beneficiary; and (c) immediately cause
any statutory lien for labor or materials or any other statutory or involuntary
lien, encumbrance or charge that may arise against the Property to be removed
and discharged, either by paying in full the amount claimed to be due by the
lienor or by obtaining and recording a surety bond that by statute will result
automatically in the removal and discharge of such lien, encumbrance or charge.
If Trustor shall fail to discharge any such lien, encumbrance or charge, then,
in addition to any other right or remedy of Beneficiary, Beneficiary may, but
shall not be obligated to, discharge the same by paying the amount claimed to be
due or by procuring discharge of such lien in such other manner as may be
authorized by law.
2.14 Books and Records. Trustor shall keep and maintain at all
-----------------
times,
17
<PAGE>
at Trustor's address stated on the first page of this Deed of Trust, or such
other place as Beneficiary may approve in writing, complete and accurate books
of accounts and records adequate to reflect correctly the results of the
operation of the Property and the business conducted thereon, and copies of all
written contracts, budgets, leases and other documents, instruments and
agreements that affect the Property or the ownership, operation, use,
management, occupancy, maintenance, repair, improve ment or development thereof
or construction of improvements or conduct of business thereon. Such books,
records and documents shall be subject to examination, inspection and copying at
reasonable times upon 10 days' prior notice by Beneficiary and its agents and
representatives.
2.15 Financial Statements. Trustor shall deliver to Beneficiary,
--------------------
within 60 days after the end of each fiscal year of Trustor a written statement
setting forth each item of operating income and operating expense for the
Property during the immediately preceding fiscal year and any additional
information concerning the Property that Beneficiary may request, which
statements shall be in form satisfactory to Beneficiary. Trustor shall deliver
to Beneficiary, 90 days after the end of each fiscal year in the case of
uncertified financial statements and 150 days after the end of each fiscal year
in the case of certified financial statements, financial statements of Trustor
for such immediately preceding fiscal year, including a balance sheet and income
statement, with each such financial statement to be in reasonable detail and
certified by the person or entity that is the subject thereof. All financial
statements shall be prepared in accordance with generally accepted accounting
principles consistently applied, and if required by Beneficiary, shall be
certified by an independent certified public accountant. All financial
statements required under this Section shall be provided at the expense of the
party submitting them.
2.16 Required Notices to Beneficiary. Trustor shall notify
-------------------------------
Beneficiary promptly of the occurrence of any of the following: (a) the
occurrence of any fire or other casualty affecting the Property, whether or not
insured against; (b) commencement of or receipt of notice of any action
described in Section 2.5(a) or Section 2.9; (c) any transfer or proposed
-------------- -----------
transfer (as evidenced by an executed agreement) subject to Section 2.10; (d)
------------
receipt of notice from any governmental authority relating to the construction
of the improvements on or materially affecting the use, operation, maintenance
or occupancy of the Property or the conduct of business thereon; (e) receipt of
any notice claiming a default under any obligation secured by any deed of trust
or other lien, encumbrance or charge on the Property or any part thereof,
whether senior or junior to the lien of this Deed of Trust; (f) the occurrence
of any material act or event relating to the Property or Trustor's ownership,
operation, management, leasing, improvement, marketing, financing, sale or other
disposition of the Property, including the commencement or threat of any action,
suit, claim, or proceeding against or investigation of Trustor or the Property
that could (i) materially adversely affect Trustor or the Property, (ii)
materially impair the validity, effectiveness or enforceability of the Loan
Documents, or (iii) materially impair Trustor's ability to perform its
obligations under the Loan Documents; and (g) the occurrence of any Event of
Default or any event that, with the passage of time, the giving of notice or
both, would become an Event of Default. Trustor shall furnish Beneficiary a
copy of
18
<PAGE>
any notice received by Trustor of which Trustor is required by this Section to
notify Beneficiary.
2.17 Tax Service. If requested by Beneficiary, Trustor shall cause
-----------
to be furnished to Beneficiary, at Trustee's sole cost and expense, a property
tax reporting service contract covering the Property, of a type and duration and
with a company satisfactory to Beneficiary.
2.18 Further Assurances. Trustor shall, from time to time, at
------------------
Beneficiary's request, execute and deliver to Beneficiary, and when appropriate,
acknowledge, file and/or record such instruments, documents and agreements, and
take such actions as Beneficiary may deem reasonably necessary or appropriate
for the preservation, continuance, and perfection of the security of this Deed
of Trust, to evidence or confirm the lien of this Deed of Trust on any of the
Property, or otherwise to effectuate the intent and provisions of this Deed of
Trust.
2.19 Compliance with Environmental Laws.
----------------------------------
(a) Definitions. The following terms used in this Deed of Trust
-----------
shall have the meanings set forth below:
(A) "HAZARDOUS MATERIAL" means any chemical, substance, object,
condition, material or waste that is or may be hazardous to human health or
safety or to the environment, due to its radioactivity, ignitability,
corrosivity, flammability, reproductive toxicity, infectiousness or other
harmful properties or effects, including all chemicals, substances, materials or
wastes that are now or hereafter may be regulated in any manner, classified as
dangerous, hazardous or toxic, or as pollutants or contaminants, or to which
exposure is prohibited or restricted by any federal, state or local governmental
agency, board or public authority or by any Environmental Law.
(B) "ENVIRONMENTAL LAW" means any federal, state or local law,
ordinance or regulation or any rule adopted or guideline promulgated pursuant
thereto, or any order, ruling or directive of any federal, state, local,
executive, judicial, legislative, administrative or other governmental agency,
board or public authority relating to health, industrial hygiene, the
environment, or the occupational or environmental conditions on, under or about
the Property (including ambient air, soil, soil vapor, groundwater, surface
water or land use), whether now or hereafter in force.
(C) "HAZARDOUS MATERIALS CLAIMS" means any and all claims, causes of
action, demands, liens, losses, damages, injuries to persons and/or property,
judgments, penalties, fines, suits, proceedings, defenses, offsets, obligations,
duties, costs (including all remedial, removal, response, abatement, cleanup,
compliance, legal, investigative, planning and monitoring costs and other
related costs, expenses and disbursements, such as attorneys', paralegals' and
experts' fees), charges, expenses and other liabilities whether instituted,
made,
19
<PAGE>
sought, brought, imposed, completed, threatened, incurred or suffered, directly
or indirectly arising out of or attributable to (A) the use, generation,
manufacture, production, transportation, treatment, storage, release, threatened
release, discharge, disposal, or presence or suspected presence of, or exposure
of any person or property to, a Hazardous Material on, under, or about the
Property; (B) the migration, escape, seepage, leakage, spillage, emission or
release of a Hazardous Material to or from the Property; or (C) the violation
of, or failure to comply with, any Environmental Law by Trustor or any
predecessor in title to Trustor.
(b) Compliance with Environmental Laws. Trustor shall at all times
----------------------------------
keep and maintain the Property in compliance with, and shall not cause or permit
the Property or any activities conducted thereon to be in violation of, any
Environmental Law, and shall give all notices and warnings and make all
disclosures required by Environmental Laws. Trustor shall not, and shall not
permit any tenant, lessee or other occupant of, or any contractor, subcontractor
or any other person present on the Property to use, generate, manufacture,
store, produce, distribute, treat, release, discharge, dispose of or otherwise
permit the presence of, on, under or about the Property or transport to or from
the Property any Hazardous Materials in a manner or quantity so as to be in
violation of any Environmental Law.
(c) Notification to Beneficiary. Trustor shall immediately advise
---------------------------
Beneficiary in writing of Trustor's discovery of or receipt of notice of (i) any
and all Hazardous Materials Claims; (ii) any use, generation, manufacture,
production, release, discharge, treatment, storage, disposal or presence of
Hazardous Materials in violation of Environmental Law, or substantial threat of
any of the foregoing, on, under or about the Property or within any improvements
located thereon or into the newer, septic, waste treatment, storage or disposal
system servicing the Property; (iii) any occurrence or condition on any real
property adjoining or in the vicinity of the Property that could cause the
Property or any part thereof to be classified as "border-zone property" under
the provisions of California Health and Safety Code, Sections 25220 et seq., as
amended, or any regulation adopted in accordance therewith or pursuant thereto,
or to be otherwise subject to any restrictions on the ownership, occupancy,
transferability or use of the Property under any Hazardous Materials Law; and
(iv) any Remedial Work (as defined below) that Trustor proposes to undertake.
Trustor shall also provide to Beneficiary copies of all notices received by
Trustor from governmental authorities relating to any of the foregoing and all
responses to such notices, including all reports, studies, analyses, data, test
results, consultants' reports, laboratory analyses and/or remedial action plans
and other materials prepared by or on behalf of Trustor. Trustor shall not,
without Beneficiary's prior written consent, enter into any settlement
agreement, consent decree, or other compromise in respect to any Hazardous
Materials Claim if such settlement, consent or compromise might, in
Beneficiary's reasonable judgment, materially impair the value of Beneficiary's
security.
(d) Environmental Reports. Beneficiary acknowledges receipt of a
---------------------
Phase I Environmental Assessment Report relating to the Property from Phase One,
Inc. under cover of a letter dated February 18, 1994 and a letter dated February
13, 1995 from Green Environmental, Inc. entitled "Review of Environmental Data"
and
20
<PAGE>
relating to the Bank of America Facility at 611 North Brand Boulevard, Glendale,
California. In the event Beneficiary shall have reasonable cause to believe
that Hazardous Materials are present in, on, under or about the Property in
violation of Environmental Laws, Trustor shall, at Trustor's sole cost and
expense, cause to be prepared and submitted to Beneficiary a comprehensive
environmental survey and report (the "ENVIRONMENTAL REPORT") concerning the
Property prepared by or in conjunction with a qualified environmental
engineering firm approved by Beneficiary. The Environmental Report shall (i)
identify any Hazardous Materials existing in, on, under or about the Property,
(ii) assess Trustor's and the Property's compliance with the requirements of all
Environmental Laws, and (iii) set forth recommendations and procedures for the
containment, removal or cleanup of any Hazardous Materials and the maintenance,
repair or decontamination of the Property in a manner consistent with
Environmental Laws, all other applicable Laws and good commercial standards.
(e) Remedial Work. In the event that any investigation, site
-------------
monitoring, abatement, containment, cleanup, removal, restoration, response or
other remedial work of any kind or nature with respect to the Property (the
"REMEDIAL WORK") is required under any Environmental Law, Trustor shall notify
Beneficiary and shall (i) promptly and within the period of time required under
applicable Environmental Laws commence to perform, or cause to be commenced, and
thereafter diligently prosecute to completion free of all liens and
encumbrances, all such Remedial Work at Truster's sole cost and expense, in
compliance with applicable Environmental Laws and in good and workmanlike
manner, and (ii) if requested by Beneficiary, provide Beneficiary with a bond,
letter of credit or similar financial assurance acceptable to Beneficiary
evidencing that funds are available to pay for the cost of such Remedial Work.
Any Remedial Work shall be performed by one or more contractors, reasonably
approved in advance in writing by Beneficiary, and, to the extent possible,
shall be performed in a manner that does not impair Beneficiary's security. In
the event Trustor shall fail to timely commence or fail to diligently prosecute
to completion such Remedial Work, Beneficiary may, but shall not be required to,
cause such Remedial Work to be performed and all reasonable costs and expenses
thereof, or incurred in connection therewith, shall become part of the
indebtedness secured hereby. Trustor hereby specifically grants to Beneficiary
and its agents and employees an irrevocable license to enter upon the Property
for the purpose of exercising its rights under this Section 2.18.
------------
Notwithstanding the foregoing, Trustor may contest in good faith with due
diligence the obligation to perform such remedial work as long as such contest
does not subject the Property to any lien or forfeiture or otherwise further
subject the Property to further material contamination as a result of the
release of additional hazardous materials or create a substantial risk to
persons or property.
ARTICLE III
ASSIGNMENT OF RENTS AND LEASES
3.1 Absolute and Unconditional Assignment. Trustor hereby absolutely
-------------------------------------
and unconditionally assigns and transfers to Beneficiary all Rents and all of
Trustor's rights under and interest in the Leases. This assignment is made
concurrently with
21
<PAGE>
the granting by Trustor to Beneficiary of a security Interest in the Rents and
Leases pursuant to Article IV, which security interest shall be subject and
subordinate to this assignment. This assignment is an absolute assignment and
not an assignment as additional security, and Beneficiary's right to Rents is
not contingent upon, and may be exercised without Beneficiary's taking
possession of, the Property. This assignment shall not confer upon Beneficiary
the right to possession of the Property except as provided in Section 3.7.
-----------
Neither this assignment nor any action taken by Beneficiary pursuant to this
assignment shall: (a) impose upon Beneficiary any duty to produce Rents from the
Property; (b) cause Beneficiary to be a "mortgagee in possession" for any
purpose unless Trustor and Beneficiary, subsequent hereto, shall enter into a
written agreement for Beneficiary to enter into possession as a beneficiary in
possession; or (c) impose upon Beneficiary any responsibility for (i) performing
any obligations of the lessor under any Lease, (ii) any waste committed by
lessees or any other parties, (iii) any dangerous or defective condition of the
Property, (iv) any negligence in the management, maintenance, repair or control
of the Property, or (v) any security deposits paid to the lessor under any Lease
by the lessee unless such security deposits are delivered to Beneficiary.
3.2 Representations and Warranties. To the actual knowledge and
------------------------------
belief of Trustor, and not including any Leases to Beneficiary as tenant,
Trustor represents and warrants to Beneficiary that: (a) the Leases are in full
force and effect and have not been modified or amended; (b) the Rents have not
been waived, discounted, compromised, setoff or paid more than one month in
advance; (c) there are no other assignments, transfers, pledges or encumbrances
of any Leases or Rents; (d) no lessee under the Leases has any defense, set off
or counterclaim under any of the Leases; and (e) neither Trustor nor the lessees
under the Leases are in default under the Leases, nor has any event occurred
that with the giving of notice or the passage of time would become a default.
3.3 Leases. Trustor, at Beneficiary's request, shall furnish
------
Beneficiary with executed copies of all Leases now existing or hereafter made.
All Leases of non-residential space for terms greater than one month shall
specifically provide (a) that they are subordinate to this Deed of Trust, (b)
that the lessee shall attorn to Beneficiary effective upon Beneficiary's
acquisition of title to the Property, (c) that the lessee agrees to execute such
further evidences of attornment as Beneficiary may from time to time request,
(d) that the attornment of the lessee shall not be terminated by foreclosure,
and (e) that Beneficiary may, at Beneficiary's option, accept or reject such
attornments. Trustor shall furnish, from time to time at Beneficiary's request,
a rent schedule for the Property, certified by Trustor, showing the name of each
lessee and, for each lessee, the space occupied, the lease expiration date, the
amount of the security deposit and the rent paid.
3.4 Performance under the Lease. Trustor shall (a) fulfill or
---------------------------
perform each and every material term, covenant and provision of the Leases to be
fulfilled or performed by the lessor thereunder, (b) furnish to Beneficiary,
immediately upon delivery or receipt, a copy of any notice or demand to or from
any lessee under the Leases and (c) enforce, short of termination thereof, the
performance or observance
22
<PAGE>
of each and every material term, covenant and provision of each Lease to be
performed or observed by the lessees thereunder. If Trustor becomes aware that
any lessee proposes to do, or is doing, any act or thing that may give rise to
any right of set-off against rent, Trustor shall (a) take such steps as shall be
reasonably calculated to prevent the accrual of any right to a set-off against
rent, (b) notify Beneficiary thereof and of the amount of said set-offs, and (c)
within 10 days after such accrual, reimburse the lessee who shall have acquired
such right to set-off or take such other steps as shall effectively discharge
such set-off and as shall assure that rents thereafter due shall continue to be
payable without set-off or deduction.
3.5 Cancellation, Modification or Alteration of Leases. Trustor,
--------------------------------------------------
without the prior written consent of Beneficiary, shall not (a) cancel, modify,
alter, extend or renew or accept the surrender of, any Lease, except for Leases
of one year or less, and then only in good faith, (b) accept any Rents more than
one month in advance of the accrual thereof, (c) pledge or assign future Rents
or Leases, (d) consent to an assignment of the lessee's interest in any Lease or
to any subletting unless all preceding lessees remain liable for the obligations
under such Lease, or (e) do or permit any thing, the omission of which could be
a material breach or default under the terms of any Lease or a basis for
termination thereof.
3.6 Collection and Receipt of Rents. Beneficiary hereby grants to
-------------------------------
Trustor a license to collect, receive and hold the Rents as they become due and
payable, and to exercise the rights of the lessor under the Leases, until the
occurrence of an Event of Default. Trustor hereby authorizes and directs each
and every lessee named in a Lease or any other or future lessee or occupant of
the Property or any part thereof, upon receipt of written notice from
Beneficiary, to pay all Rents to Beneficiary, and to continue to do so until
otherwise notified in writing by Beneficiary.
3.7 Remedies. Upon the occurrence of an Event of Default, the
--------
license granted pursuant to Section 3.6 shall automatically terminate, and upon
-----------
such termination, regardless of the adequacy of Beneficiary's security for the
indebtedness secured by this Deed of Trust, Beneficiary may:
(a) Sue for, collect and retain the Rents (including those past due
and unpaid) without notice to or demand upon Trustor or lessees under any of the
Leases, and without taking possession of the Property, and demand payment from
Trustor of all Rents collected by Trustor from the date on which the Event of
Default occurred, which shall, from and after the occurrence of an Event of
Default, be held by Trustor in trust for Beneficiary;
(b) In person, by an agent, or by a court appointed receiver, enter
upon and take possession of the Property or any part thereof, and in so doing,
assume control of the use, operation, repair and maintenance thereof and conduct
of business thereon and do any or all of the following: (i) exclude Trustor and
Trustor's agents and employees from the Property; (ii) sue for and collect the
Rents; (iii) complete any construction that may be in progress; (iv) do such
maintenance and make such repairs and alterations as Beneficiary or the receiver
deems necessary;
23
<PAGE>
(v) use all stores of materials, supplies and equipment on the Property and
replace such items at the expense of the receivership estate; (vi) pay all
Impositions, Premiums, Utility Charges and any and all other charges, costs and
expenses of operating the Property, and the cost of maintenance and repair of
the Property; (vii) execute, cancel or modify Leases or contracts providing for
management, maintenance or other services rendered to the Property; and (viii)
generally do anything that Trustor could legally do if Trustor were in
possession of the Property, on such terms as Beneficiary shall deem appropriate,
in its sole and absolute discretion, to protect and preserve the security of
this Deed of Trust. All expenses incurred by Beneficiary or the receiver shall
constitute part of the indebtedness secured hereby. Beneficiary and the
receiver shall be entitled to have access to those books and records of Trustor
that contain information necessary to enable Beneficiary or the receiver to
manage and operate the Property. Trustor hereby agrees that it will do nothing
to impair Beneficiary's or the receiver's ability to collect and retain the
Rents and that any lessee occupying the Property or any part thereof may pay any
and all rents or other charges directly to Beneficiary or the receiver upon
notice from Beneficiary without the necessity of any notice from Trustor; and/or
(c) Exercise any other rights or remedies available under applicable
Law or under the Loan Documents.
3.8 Application of Rents.
--------------------
(a) The Rents collected by Beneficiary or the receiver shall be
applied: (i) first, to payment of the costs and expenses of the receivership,
including attorneys' fees incurred by the receiver, borrowings of the receiver,
receivers' fees, premiums on receiver's bonds, costs of repairs of the Property,
Premiums, Impositions, Utility Charges and other costs, expenses and charges of
operating the Property, and the costs of discharging any obligation or liability
of Trustor as lessor of the Property; (ii) second, to payment of the reasonable
attorneys' fees and other expenses incurred by Beneficiary in connection with
the action and proceedings in which the receiver was appointed; and (iii) third,
to payment of the indebtedness secured by this Deed of Trust.
(b) If the Rents are insufficient in amount to defray all costs and
expenses of the receivership, any funds expended by Beneficiary for such
purposes shall become indebtedness of Trustor to Beneficiary secured by this
Deed of Trust pursuant to Section 6.11.
------------
(c) Neither the entry into possession of the Property by Beneficiary,
its agent or a receiver pursuant to Section 3.7 nor any application of Rents
-----------
pursuant hereto shall cure or waive any Event of Default hereunder or invalidate
any notice of default under this Deed of Trust or any action taken pursuant
hereto.
3.9 Further Assignments; Pledge of Security Deposits. Trustor shall
------------------------------------------------
not execute any assignment of Rents for the benefit of any person or entity
other the Beneficiary, and shall give Beneficiary, at any time upon demand, any
further or
24
<PAGE>
additional forms of assignment or transfer of Rents or Leases, as may be
requested by Beneficiary, and deliver to Beneficiary, Trustor's executed
originals of such Leases. The assignment of Rents herein includes an assignment
of all security deposits received by Trustor or its agents. After occurrence of
an Event of Default, Trustor shall, as and when requested by Beneficiary,
deliver to Beneficiary all security deposits relating to the Property and
execute and deliver to Beneficiary such instruments, documents and agreements in
connection therewith as Beneficiary may require. Any security deposits held by
Beneficiary shall not bear interest unless required by applicable law or
agreement.
3.10 Reassignment of Rents. The recordation in the official records
---------------------
of the county in which the Real Property is located of a full reconveyance of
the Deed of Trust shall operate as a reassignment of Rents and Leases to the
person or persons legally entitled thereto, unless such reconveyance expressly
provides to the contrary.
3.11 Beneficiary Not Liable. Beneficiary shall not be liable for any
----------------------
loss sustained by Trustor resulting from Beneficiary's failure to let the
Property or any part thereof or from any other act or omission of Beneficiary in
managing the Property, unless such loss is caused by the gross negligence or
willful misconduct of Beneficiary. Beneficiary shall not be obligated to
perform or discharge, nor does Beneficiary undertake to perform or discharge,
any obligation, duty or liability under the Leases or under or by reason of this
assignment, and Trustor agrees to indemnify Beneficiary for, and to hold
Beneficiary harmless from, any liability, loss or damage that may be incurred
under the Leases or under or by reason of this assignment and from any claims
and demands that may be asserted against Beneficiary by reason of any alleged
obligations or undertakings to perform or discharge any of the terms, covenants
or agreements contained in the Leases. Should Beneficiary incur any such
liability under the Leases or under or by reason of this assignment or in
defense of any such claims or demands, the amount thereof, including costs,
expenses and reasonable attorneys' fees, shall be reimbursed by Trustor to
Beneficiary immediately upon demand, and upon failure of Trustor to make such
reimbursement within five days after the date of such demand, the unpaid portion
thereof, while still immediately due and payable, shall bear interest at the
rate of interest then in effect under the Note.
ARTICLE IV
CALIFORNIA UNIFORM COMMERCIAL CODE
SECURITY AGREEMENT
4.1 Grant of Security Interest. Trustor hereby grants to Beneficiary
--------------------------
a security interest in goods that are or are to become fixtures (as that term is
defined in Section 9313(1) of the California Uniform Commercial Code) and all
other items included among the Property now owned or hereafter acquired by
Trustor in which a security interest may be granted pursuant to the California
Uniform Commercial Code (such items shall herein be referred to collectively as
the "PERSONAL PROPERTY"). Such security interest is subject and subordinate to
the absolute assignment to Beneficiary
25
<PAGE>
of Rents and Leases pursuant to Section 3.1. Beneficiary shall have all of the
-----------
rights and remedies of a secured party under the California Uniform Commercial
Code, as well as all other rights and remedies available at law or in equity.
The security interest granted in this Section shall not be construed to derogate
from or impair the lien or any provision of, or any rights of Beneficiary under,
this Deed of Trust with respect to any of the Property that may be real
property. Trustor and Beneficiary intend that, to the extent permitted by Law,
all of the Property shall be deemed to be real property, regardless of the means
or extent of its affixation to the Real Property. The security interest granted
in this Section is separate and distinct from the lien of this Deed of Trust,
and there shall be no merger of any lien on the Real Property created by this
Deed of Trust with the security interest granted under this Section 4.1 by
-----------
reason of Beneficiary's acquiring title to the Real Property. The address of
Beneficiary from which information concerning this security interest may be
obtained is the address set forth on the first page of this Deed of Trust.
4.2 Inventory. Trustor shall, from time to time upon the reasonable
---------
request of Beneficiary, provide to Beneficiary a current inventory of the
Personal Property in such detail as Beneficiary may require.
4.3 Additional Covenants Respecting Personal Property. Trustor shall
-------------------------------------------------
not, without Beneficiary's prior written consent:
(a) Lease, sell, convey, transfer or remove from the Property any
Personal Property in which Beneficiary has a security interest, unless (i) such
Personal Property is replaced by similar property of at least equivalent value,
with respect to which Beneficiary will immediately have a valid security
interest of first priority or (ii) such removal is incidental to repair or
routine maintenance of such Personal Property; or
(b) Assign, pledge or encumber or otherwise permit any liens or
security interests (other than purchase-money liens created pursuant to the
California Commercial Code) to attach to any of the Personal Property or enter
into any lease of the Personal Property; or
(c) Install on or in the Property any materials, equipment, fixtures
or articles of personal property in which any third party holds a security
interest or reserves or purports to reserve title or the right of removal or
repossession or the right to consider such items personal property after their
incorporation into the Property (other than purchase-money liens created
pursuant to the California Commercial Code). No consent given by Beneficiary
pursuant to this Section shall be deemed to constitute an agreement to
subordinate any right of Beneficiary in the Personal Property. Beneficiary
shall be deemed to have given its prior written consent to any installation of
materials, equipment, fixtures or articles of personal property required
pursuant to this Paragraph 4.3(c) if Trustor shall have received written request
therefore with sufficient information and shall not have approved or objected
before the expiration of 30 calendar days after such receipt.
26
<PAGE>
4.4 Other Security Interests. Trustor covenants to pay all sums and
------------------------
perform all obligations secured by a security interest in the Personal Property
in favor of any creditor other than Beneficiary. If Trustor fails to make any
payment on an obligation secured by such a security interest in the Personal
Property, Beneficiary, at its option, upon notice to Trustor, may make such
payment and such amount shall become part of the indebtedness secured by this
Deed of Trust.
4.5 Rights of Beneficiary Following Event of Default. Upon the
------------------------------------------------
occurrence of an Event of Default, Beneficiary shall have the right to cause the
Personal Property or any part thereof to be sold at any one or more public or
private sales as permitted by applicable law, including the California Uniform
Commercial Code, and Beneficiary shall further have all other rights and
remedies, whether at law or in equity, available to secured creditors under
applicable law, including the right to use and operate any of the Personal
Property in the possession of Beneficiary in connection with the construction,
use, ownership, operation, occupancy, maintenance, repair, improvement,
development, sale or financing, or conduct of business on, the Real Property.
The proceeds of any sale or other disposition of the Personal Property shall be
applied: (a) first, to the reasonable expenses of retaking, holding, handling,
preparing for sale (or other disposition) of the Personal Property, including
the reasonable attorneys fees and court costs, if any, incurred by Beneficiary
in so doing; (b) then, to any and all indebtedness secured hereby; and (c) the
surplus, if any, shall be delivered to the parties entitled thereto pursuant to
the California Uniform Commercial Code. Beneficiary may buy at any public sale
of the Personal Property and if the Personal Property is of a type customarily
sold in a recognized market or in the subject of widely or regularly distributed
price quotations, then Beneficiary may buy at any private sale. Any such sale
(whether public or private) may be conducted by an auctioneer, or by an officer,
attorney or agent of Beneficiary. Trustor, upon demand of Beneficiary, shall
assemble the Personal Property and make it available to Beneficiary at the Real
Property, which is hereby agreed to be a place reasonably convenient to
Beneficiary and Trustor. Beneficiary shall give Trustor at least five days'
prior written notice of the time and place of any public sale of such property
or of the time of or after which any private sale is to be held, and it is
hereby agreed that if such notice is sent to Trustor, as the same is provided
for the mailing of notices herein, such notice and such sale shall be deemed
commercially reasonable. Beneficiary shall have no obligation to apply any
proceeds of any disposition of Personal Property pursuant to the California
Uniform Commercial Code to reinstate the indebtedness secured by this Deed of
Trust or otherwise to cure any default of Trustor hereunder, and may continue to
pursue any and all remedies it may have with respect to any other part of the
Property. Beneficiary may elect to enforce any of its rights, remedies or
interests against the Real Property or the Personal Property or both, or any
part of either, as Beneficiary may from time to time deem appropriate. In the
event that Beneficiary elects to sell the Real Property separately from and
prior to the Personal Property, the provisions of this Deed of Trust, insofar as
they constitute a security agreement covering the Personal Property, shall
survive the extinguishment of the lien of this Deed of Trust.
4.6 Fixture Filing. This Deed of Trust constitutes and is filed as a
--------------
27
<PAGE>
fixture filing under Section 9402 of the California Uniform Commercial Code.
Certain of the Property consists of goods that are or are to become fixtures
upon the Real Property, and this Deed of Trust Is to be recorded in the Official
Records of the County in which the Real Property is located. This Deed of Trust
shall remain in effect as a fixture filing until released or satisfied of record
or its effectiveness otherwise terminates as to the Real Property.
ARTICLE V
REMEDIES UPON DEFAULT
5.1 Events of Default.
-----------------
(a) Any of the following shall constitute an "Event of Default": (i)
----------------
Trustor's failure to make any payment of money in accordance with the terms of
the Note, this Deed of Trust or any other Loan Document; or (ii) Trustor's
failure to perform fully and when due any other covenant or obligation of
Trustor under the Note, this Deed of Trust, or any other Loan Document when such
obligation is required hereunder or thereunder to be performed and Trustor's
failure to perform such other covenant or obligation is not fully cured within
30 days after Beneficiary shall have given Trustor notice of such failure, or,
in any case where such default is susceptible of cure but cannot with due
diligence be cured within such 30-day period, such longer period (not to exceed
90 days) as is required diligently to effect the cure of such Event of Default,
but only so long as Trustor promptly notifies the Beneficiary of its intention
to cure and commences cure of such default within such 30-day period and at all
times thereafter prosecutes such cure with all due diligence to completion; or
(iii) a determination by Beneficiary that Trustor's representations or
warranties, if any, contained in this Deed of Trust or any other Loan Document
is untrue or misleading in any material respect; or (iv) the lien or security
interest of this Deed of Trust loses validity or priority; or (v) the occurrence
of an event of default under, or the institution of judicial or nonjudicial
foreclosure or other proceedings to enforce, any deed of trust, security
interest, or other lien or encumbrance of any kind upon the Property or any
portion thereof, whether senior or junior in priority to the lien of this Deed
of Trust or any security interest granted to Beneficiary in the Loan Documents;
or (vi) the issuance of any writ of attachment or execution or any similar
process against the Property or any part thereof of interest therein or the
entry of any judgment that shall become a lien on the Property or any part
thereof or interest therein, if such execution, attachment, process or judgment
is not released, bonded, satisfied, vacated or stayed within 30 days after its
entry or levy; or (vii) any substantial damage to or destruction of the Property
if for any reason the Property cannot be (or is not) restored to its prior
condition within a reasonable period of time, as determined by Beneficiary; or
(viii) any governmental action that in the reasonable judgment of Beneficiary
will have a materially adverse effect on Trustor's ability to repay the Loan as
agreed; (ix) should there occur any event of default in the observance or
performance of any covenant, condition or agreement contained in any instrument
under which any or all of the indebtedness secured by this Deed of Trust is
guaranteed to be paid or should any representation or warranty made in any such
28
<PAGE>
instrument by any such guarantor be untrue in any material respect; or (x)
should Trustor, any guarantor of any obligation of Trustor under any of the Loan
Documents, or any successor or permitted assignee of any of them:
(A) become insolvent, or fail generally, or admit in writing
generally its inability, to pay its debts as they become due; or
(B) make an assignment for the benefit of its creditors; or
(C) file or consent to the filing of a petition in voluntary
bankruptcy or for an arrangement or reorganization under any provision of
bankruptcy or insolvency laws, debtor relief statutes, or any other similar
applicable federal or state law, whether now or hereafter existing (hereafter
referred to as a "Bankruptcy Proceedings"); or
----------------------
(D) file an answer in any such Bankruptcy Proceeding or any other
action admitting insolvency or inability to pay its debts; or
(E) fail to obtain a vacation or stay of any involuntary Bankruptcy
Proceeding within 60 days after the filing thereof; or
(F) have any order, judgment, or decree entered against it decreeing
its dissolution or division which order, judgment or decree remains undischarged
or unstayed for a period in excess of 60 days; or
(G) have a trustee or receiver appointed for or have any court take
jurisdiction of its property or a substantial part thereof, or the Property or
any part thereof or interest therein in any voluntary or involuntary proceeding
for the purposes of reorganization, arrangement, dissolution or liquidation if
such trustee or receiver shall not be discharged or if such jurisdiction shall
not be relinquished, vacated or stayed on appeal or otherwise within 45 days
after the commencement thereof; or
(H) fail to fully pay, satisfy and discharge any final, nonappealable
monetary judgment entered against it within 30 days after the date of entry that
materially affects the Property or any part thereof or otherwise impairs
Beneficiary's security.
(b) Whenever any of the other Loan Documents refers to a "default"
under this Deed of Trust, such reference shall be to an Event of Default as
defined herein.
(c) Upon presentation of an affidavit by Beneficiary setting forth
facts showing an Event of Default, Trustee is authorized to accept as true and
conclusive all facts and statements set forth therein and to act thereon under
this Deed of Trust.
29
<PAGE>
5.2 Rights and Remedies. At any time after the occurrence of an
-------------------
Event of Default, Beneficiary or Trustee may do any one or more of the
following, in any order:
(a) With or without notice to Trustor, declare all indebtedness
secured hereby to be immediately due and payable;
(b) With or without notice, and without releasing Trustor from its
obligations relative to such Event of Default, cure such Event of Default, and
the costs and expense incurred by Beneficiary or Trustee in so doing shall
become a part of the indebtedness secured hereby;
(c) Exercise any remedy afforded by Article III or Article IV;
----------- ----------
(d) Commence and maintain an action or actions to foreclose this Deed
of Trust, to specifically enforce any rights of Beneficiary hereunder (including
rights with respect to possession and sale of any additional security for the
Loan), to enjoin any conduct that impairs or threaten to impair the security of
this Deed of Trust, or to obtain such other equitable remedies as may be
appropriate; provided, however, Beneficiary agrees to provide Trustor at least
10 calendar days' notice prior to filing an action for the appointment of a
receiver to take possession of the Property or any part thereof;
(e) Execute a written declaration of default and demand for sale, and
a written notice of default and election to cause the Property or any part
thereof to be sold by exercise of Trustee's power of sale under this Deed of
Trust, which notice shall be filed for record in the Official Records of the
county in which the Property in located; provided, however, Beneficiary agrees
to provide Trustor at least 10 calendar days' notice prior to filing for record
any such written notice of default and election to sell;
(f) Resort to and realize upon the security for the Loan and any other
security now or hereafter held by Beneficiary in such order as Trustee and
Beneficiary or either of them may, in their sole discretion, determine,
concurrently or successively or in one or several consolidated or independent
judicial actions or nonjudicial proceedings; and
(g) Exercise any and all other remedies at law, including any action
for damages suffered by Beneficiary as a result of any Event of Default, or in
equity as may be available now or hereafter, as Beneficiary may elect.
5.3 Exercise of Trustee's Power of Sale.
-----------------------------------
(a) Should Beneficiary elect to have Trustee exercise the power of
sale herein contained, Beneficiary shall deliver to Trustee a written
declaration of default and demand for sale.
30
<PAGE>
(b) Trustee shall thereupon cause to be recorded, published and/or
delivered to Trustor such notice of default and election to sell as may then be
required by law and by this Deed of Trust. After giving notice of default and
notice of sale, and the lapse of such time period as may be required by Law,
Trustee may, without demand on Trustor, at the time and place of sale fixed in
the notice of sale, either as a whole or in separate parcels or items or through
two or more successive sales, sell the Property or any part thereof at public
auction to the highest bidder for cash in lawful money of the United States
payable at the time of sale. Trustor shall have no right to direct the order in
which the Property is sold. Beneficiary may, in its sole discretion, designate
the order in which the Property shall be offered for sale or sold and determine
if the Property shall be sold in a single sale or in two or more successive
sales or in any other manner Beneficiary deems to be in its best interests. If
Beneficiary determines that the Property shall be sold in two or more sales,
Beneficiary may, at its option, cause such sales to be conducted simultaneously
or successively on the same day or on different days and times and in such order
as Beneficiary shall determine, and no such sale shall extinguish or otherwise
affect the lien of this Deed of Trust or any part of the Property not then sold
until all indebtedness secured hereby has been fully paid. Trustor shall pay
the costs and expenses of each such sale and any judicial proceeding in which
any such sale may be made. Trustee shall deliver to such purchaser its deed
conveying the portion of the Property so sold, but without any covenant or
warranty, express or Implied. The recitals in such deed of any matters or facts
shall be conclusive proof of the truthfulness thereof. Any person, including
Beneficiary, may purchase at such sale.
(c) After deducting all costs, fees and expenses of Trustee and of the
sale, including costs of evidence of title in connection with the sale, Trustee
shall apply the proceeds of sale to payment of all sums expended under the terms
hereof, not then repaid, with accrued interest at the rate then in effect under
the Note, all other sums then secured hereby and the remainder, if any, to the
person or persons legally entitled thereto.
(d) Trustee may postpone the sale of all or any portion of the
Property by public announcement at the time and place first fixed for sale, and
from time to time thereafter may postpone such sale by public announcement at
the time and place fixed by the preceding postponement, and without further
notice make such sale at the time fixed by the last postponement, or may, in its
discretion, give a new notice of sale.
(e) Upon any sale pursuant to this Section, Trustor shall be
completely and irrevocably divested, to the maximum extent permitted by law, of
all its right, title, interest, claims and demands at law or in equity in and to
the Property sold or any part thereof, and such sale shall be a perpetual bar
both at law and in equity against Trustor and any and all other persons claiming
any such right, title, interest, claims or demands by, through or under Trustor.
5.4 Rescission of Notice of Default. Beneficiary from time to time
-------------------------------
before Trustee's sale, may rescind any notice of default and of election to
cause the
31
<PAGE>
Property to be sold by executing and delivering to Trustee a written notice of
such rescission, which notice, when recorded, shall also constitute a
cancellation of any prior declaration of default and demand for sale. The
exercise by Beneficiary of such right of rescission shall not constitute a
waiver of any breach or default then existing or subsequently occurring or
impair the right of Beneficiary to execute and deliver to Trustee, as provided
above, other declarations of default and demand for sale, notices of default and
of election to cause the Property to be sold to satisfy the obligations hereof,
or otherwise affect any provision, agreement, covenant or condition of the Note,
of this Deed of Trust or any of the rights, obligations or remedies of the
parties hereunder.
5.5 Limitation on Trustor's Liability. Notwithstanding anything to
---------------------------------
the contrary in the Note, this Deed of Trust and the Loan Documents, in the
event of any default of Trustor under the Note, this Deed of Trust or any other
Loan Document, Beneficiary's sole recourse shall be to the Property and all
other collateral or security under the Loan Documents, and Beneficiary shall not
be entitled to obtain a personal or deficiency judgment for nonpayment of any
amount due under the Note or nonperformance of any other obligations or
covenants under the Note, this Deed of Trust or any other Loan Document against
Trustor or any other person or entity (other than any guarantor), and no such
judgment shall be sought or entered. It is expressly understood and agreed that
nothing contained in this paragraph shall in any manner constitute or be deemed
to be a release or impairment of the indebtedness evidenced by the Note or
otherwise affect or impair the enforceability of any Loan Document, except to
the extent expressly provided above. Furthermore, nothing in this paragraph
shall preclude Beneficiary from foreclosing under this Deed of Trust, from
proceeding against any and all security held by Beneficiary or from enforcing
any and all of Beneficiary's rights and remedies at law or in equity except as
expressly provided in the Note, this Deed of Trust or any other Loan Document.
Notwithstanding the foregoing provisions. to the extent permitted by law,
Trustor shall be fully liable to Beneficiary, and Beneficiary shall be entitled
to obtain a personal or deficiency judgment, for (a) all damages suffered by
Beneficiary as a result of or in connection with any intentional or willful
fraud or misrepresentation by Trustor in connection with events occurring with
respect to the Note or this Deed of Trust from and after the date hereof, or in
Trustor's representations or warranties, if any, contained in the Note or this
Deed of Trust, (b) the amount of any rental or other income from the Property
collected by Trustor and not paid to beneficiary after Beneficiary has given
Trustor notice that Trustor is in default under any Loan Document, plus all
reasonable out-of-pocket court costs, attorneys' fees and other reasonable out-
of-pocket costs and expenses incurred by Beneficiary to recover the same, (c)
the value of any personal property or fixtures removed from the Property in
violation of any Loan Document, plus all reasonable out-of-pocket court costs,
attorneys' fees and other reasonable out-of-pocket costs and expenses incurred
by Beneficiary to recover the same, (d) the amount of any insurance proceeds or
any awards or other sums resulting from condemnation or threat of exercise of
the power of eminent domain with respect to the Property converted, misapplied
or disposed of in violation of any Loan Document, plus all reasonable out-of-
pocket court costs, attorneys' fees and other reasonable out-of-pocket costs and
expenses incurred by Beneficiary to recover the
32
<PAGE>
same, (e) any loss suffered by Beneficiary as a result of bad faith waste (f)
any Hazardous Materials claim; and (g) all reasonable out-of-pocket court costs,
attorneys' fees and other reasonable out-of-pocket costs incurred by Beneficiary
in connection with any actions or legal proceedings relating to the matters set
forth in this Section 5.5.
-----------
ARTICLE VI
MISCELLANEOUS
6.1 Waiver of Offsets and Other Matters. All sums payable by Trustor
-----------------------------------
under the Note or this Deed of Trust shall be paid without notice, demand, or
defense, without right of counterclaim, setoff, or deduction, and without
abatement, suspension, deferment, diminution or reduction, all of which rights
now or hereafter conferred by law are hereby waived by Trustor. Without
limiting the generality of the foregoing, Trustor also waives, to the fullest
extent permitted by law: (a) any rights Trustor may have under California Code
of Civil Procedure Section 431.70; and (b) any right to require Beneficiary or
Trustee, prior to or as a condition to the enforcement of this Deed of Trust, to
proceed against or exhaust any other security for the obligations secured hereby
or pursue any other remedy whatsoever.
6.2 Governing Law. This Deed of Trust shall be governed by and
-------------
construed and enforced under the laws of the State of California.
6.3 Time of the Essence. Time is of the essence in the performance
-------------------
of each provision of this Deed of Trust.
6.4 Statements of Account; Other Charges. Upon payment to
------------------------------------
Beneficiary of a sum not in excess of the maximum amount permitted by law,
Beneficiary shall, pursuant to Section 2943 of the California Civil Code, issue
to any person entitled thereto a statement regarding the obligations secured by
this Deed of Trust. Trustor further agrees to pay the reasonable charges of
Beneficiary for any other service rendered to Trustor or on Trustor's behalf in
connection with this Deed of Trust or the indebtedness secured hereby.
6.5 Additional Powers of Beneficiary and Trustor.
--------------------------------------------
(a) Without affecting the liability of any other person liable for the
payment of or performance of any indebtedness hereby secured, and without
affecting the lien or charge of this Deed of Trust upon any portion of the
Property not then or theretofore released as security for the full amount of all
unpaid indebtedness, Beneficiary may, at any time, and from time to time,
without notice to or consent of Trustor: (i) release or modify the obligations
of any person primarily or secondarily liable for payment or performance of any
indebtedness secured by this Deed of Trust; (ii) extend the maturity date of or
alter any of the terms of any such indebtedness or accept partial payments
thereon; (iii) grant forbearances; (iv) accept new or additional instruments,
documents or agreements in exchange for or relative to any of the Loan
33
<PAGE>
Documents or the indebtedness secured hereby; (v) release or reconvey, or cause
to be released or reconveyed, any or all of the Property; (vi) take or release
any other or additional security for any indebtedness hereby secured; or (vii)
consent to the transfer of any security.
(b) At any time, and from time to time, without liability therefor and
without the need for any notice to Trustor, upon written request of Beneficiary
and presentation of this Deed of Trust and the Note for endorsement, and without
affecting the personal liability of any person for payment of the indebtedness
secured hereby or the effect of this Deed of Trust upon the remainder of the
Property, Trustee may: (i) reconvey all or any part of the Property; (ii)
consent in writing to the making of any map or plat thereof; (iii) join in
granting any easement thereon; or (iv) join in any extension agreement or any
agreement subordinating the lien or charge hereof.
(c) Trustee or Beneficiary may from time to time apply in any court of
competent jurisdiction for aid and direction in the execution of the trusts
hereunder and the enforcement of the rights and remedies available hereunder,
and Trustee or Beneficiary may obtain orders or decrees directing, confirming or
approving acts in the execution of such trusts and the enforcement of such
remedies. All costs and expenses of any such proceeding (including reasonable
attorneys' fees) shall be borne by Trustor.
(d) Whenever a power of attorney is conferred upon Beneficiary under
this Deed of Trust, it is understood and agreed that such power is conferred
with full power of substitution, and Beneficiary may elect in its sole
discretion to delegate such power or any part thereof to one or more sub-agents.
6.6 Reconveyance by Trustee. Upon written request of Beneficiary and
-----------------------
upon payment by Trustor of Trustee's fees for all services involved in the
preparation, execution and recordation of the reconveyance, Trustee shall
reconvey the Property or portions thereof then held hereunder, in whole or in
part, as designated by Beneficiary and in such portions as designated by
Beneficiary to Trustor, to the person or persons legally entitled thereto, which
reconveyance shall be without recourse or warranty. The recitals in such
reconveyance of any matters or facto shall be conclusive proof of the
truthfulness thereof. The grantee in any reconveyance may be described as "the
person or persons legally entitled thereto." Neither Beneficiary nor Trustee
shall have any duty to determine the rights of persons claiming to be rightful
grantees of any release.
6.7 Notices. Except as otherwise required by Law, whenever
-------
Beneficiary, Trustor or Trustee shall desire to give or serve any notice,
demand, request or other communication with respect to this Deed of Trust or any
other Loan Document ("Notice"), each such Notice shall be in writing and a shall
----------
be personally served or sent by a commercial overnight delivery service or by
certified mail, return receipt requested, and shall be deemed to have been given
on the date actually received if served by messenger or on the next business day
after deposit with an overnight delivery service or on the date of receipt as
shown on the return receipt if
34
<PAGE>
sent by certified mall. The addresses of the parties to which Notices shall be
sent (until notice of a change is served as provided in this Section 6.7) are as
set forth on the first page of this Deed of Trust. Notice of change of address
shall be given by written notice in the manner set forth in this Section 6.7.
-----------
6.8 Request for Notice of Default. Trustor requests that a copy of
-----------------------------
any notice of default and any notice of sale hereunder be mailed to it at the
address set forth on the first page of this Deed of Trust.
6.9 Acceptance by Obligation of Trustee. Trustee accepts the trust
-----------------------------------
herein created when this Deed of Trust, duly executed and acknowledged, is made
a public record as provided by Law. Trustee shall not be obligated to notify
any party hereto of any pending sale of the Property, or any portions thereof,
under any other deed of trust or otherwise, or of any action or proceeding in
which Trustor, Beneficiary or Trustee shall be a party, unless Trustee brings
such action or unless held or commenced and maintained by Trustee under this
Deed of Trust.
6.10 Statements by Trustor. Within 10 days after any request by
---------------------
Beneficiary, Trustor shall deliver to Beneficiary a written statement confirming
the outstanding balance of the Loan, acknowledging that no Event of Default
exists and that no act, event or circumstance has occurred that, with the giving
of notice or the lapse of time, would become an Event of Default (or if any such
act, event or-circumstance has occurred, specifying the nature thereof), and
setting forth such other information concerning the Loan and the Property as
Beneficiary may reasonably request.
6.11 Costs and Expenses; Actions by Trustee and/or Beneficiary to
------------------------------------------------------------
Preserve Property.
-----------------
(a) Subject to Section 5.5, every provision of this Deed of Trust that
-----------
imposes upon Trustor an obligation to perform an act, or embodying an agreement
by Trustor to perform an act, shall be construed as obligating Trustor to pay
all costs and expenses relating thereto. Should Trustor fail to make any
payment or to do any act an herein provided, Beneficiary and/or Trustee, may,
but shall not be obligated to, make or do the same in such manner and to such
extent as either may deem reasonably necessary to protect the security hereof,
all without notice to or demand upon Trustor, without releasing Trustor from any
obligation hereof or secured hereby, and within such times and in such manner as
Beneficiary or Trustee may deem reasonable.
(b) Without limiting any other power of Trustee or Beneficiary under
this Deed of Trust, Trustor acknowledges that Beneficiary and/or Trustee shall
have the right, but not the obligation, to take any action that either of them
may deem reasonably necessary or appropriate for the protection of Beneficiary's
rights hereunder or the security of this Deed of Trust, including the right: (i)
upon occurrence of an Event of Default, to enter upon and take possession of the
Property; (ii) upon occurrence of an Event of Default, to make additions,
alterations, repairs and
35
<PAGE>
improvements to the Property that they or either of them may consider necessary
or proper to keep the Property in good condition or repair; (iii) to appear and
participate in any action or proceeding affecting the Property; (iv) to pay,
purchase, contest or compromise any encumbrance, claim, charge. lien or debt
that in the judgment of either may affect or appear to affect the security of
this Deed of Trust or be senior in priority to the lien hereof; and (v) in
exercising such powers, to employ attorneys or other consultants or experts, and
pay their fees and expenses. All sums advanced in taking such action, together
with all other costs, fees and expenses reasonably incurred by Beneficiary or
Trustee hereunder (including costs of evidence of title, court costs,
appraisals, surveys and attorneys' fees), shall: (A) bear interest at the rate
in effect under the Note from the date advanced until paid in full, (B) be
payable in full, together with interest thereon, upon demand by Beneficiary, and
(C) be added to the indebtedness secured hereby. Neither the reservation nor
any exercise of the foregoing rights shall be construed to excuse Trustor's
failure to perform fully and when due all of Trustor's obligations under this
Deed of Trust or to prevent any such failure from constituting an Event of
Default hereunder.
(c) Subject to Section 5.5, all reasonable out-of-pocket court costs,
-----------
attorneys' fees, witness fees, appraisal fees, survey fees, title charges and
other reasonable out-of-pocket fees, charges, costs and expenses that
Beneficiary may incur in taking any action pursuant to any provision of this
Deed of Trust (including Sections 2.10 and 6.11(b) following any act, event or
------------- -------
circumstance that constitutes or is likely to lead to an Event of Default shall
be added to and included in the indebtedness secured hereby, shall bear interest
at the rate in effect under the Note from the date paid until reimbursed in
full, and shall be payable in full, together with interest, upon demand by
Beneficiary. Without limiting generality of the foregoing provisions, such
fees, charges, costs and expense shall include (i) all out-of-pocket attorneys'
fees and other reasonable out-of-pocket costs and expenses of any nature
incurred by Beneficiary in connection with the collection of the indebtedness
secured by this Deed of Trust or the enforcement of benefits, rights and
remedies under the Loan Documents, including attorneys' fees incurred by
Beneficiary for legal advice concerning Beneficiary's rights and remedies
following any act, event or occurrence that constitutes an Event of Default;
(ii) reasonable out-of-pocket attorneys' fees, as determined by the court, and
all other reasonable out-of-pocket costs, expenses and fees incurred by
Beneficiary in connection with any suit or proceeding instituted to collect the
indebtedness secured by this Deed of Trust or to enforce Beneficiary's rights
and remedies under the Loan Documents, whether or not such suit or proceeding is
prosecuted to judgment or conclusion; and (iii) all reasonable out-of-pocket
attorneys' fees and other reasonable out-of-pocket costs and expenses incurred
by Beneficiary in connection with any bankruptcy, insolvency or reorganization
proceeding or receivership involving Trustor or any affiliate of Trustor,
including all attorneys' fees incurred in making any appearances in any such
proceeding or in seeking relief from any stay or injunction issued in or arising
out of any such proceeding. Such fees, charges, costs and expenses shall be
considered collateral advances made to protect Beneficiary's security and shall
be added to the indebted ness secured hereby as provided above, and shall not be
considered costs and expenses of foreclosure or be subject to any statutory or
other limitation on the
36
<PAGE>
amount thereof that may be demanded or recovered by Beneficiary, unless the
fees, charges, costs and expenses in question are incurred solely and
specifically for services that are (1) performed only after the date of
Beneficiary's written election to declare the entire indebtedness secured hereby
immediately due and payable and (2) directly related to the preparation or
---
giving of any notice of default or notice of sale or the taking of any other
action required by Law in connection with a Trustee's sale or judicial
foreclosure proceeding under this Deed of Trust.
6.12 Invalidity of Lien. If Beneficiary makes an advance under
------------------
the Note or this Deed of Trust that is determined to be unsecured, if the lien
of this Deed of Trust in invalid or unenforceable as to any part of the
indebtedness secured hereby, or if the lien is invalid or unenforceable as to
any part of the Property, the unsecured or partially secured portion of the
indebtedness shall be completely paid prior to the payment of the remaining and
secured or partially secured portion of the indebtedness, and all payments made
on the indebtedness, whether voluntary or under foreclosure or other enforcement
action or procedure, shall be considered to have been first paid on and applied
to the full payment of that portion of the indebtedness that is not secured or
fully secured by the lien of this Deed of Trust.
6.13 Changes in Tax Laws. In the event that following the date of
-------------------
this Deed of Trust any federal, state or local governmental entity having
jurisdiction over the Property enacts any Law that imposes upon Beneficiary the
payment of all or any part of the taxes, charges or liens required to be paid by
Trustor under this Deed of Trust, then the indebtedness secured hereby shall
become immediately due and payable at the option of Beneficiary unless (i)
Trustor is permitted by law to bear and pay the full amount of such taxes,
charges or liens, or to reimburse Beneficiary. therefor, and such payment or
reimbursement would not result in the imposition of interest in excess of the
maximum amount permitted by law, and (ii) Trustor pays such taxes, charges or
liens or reimburses Beneficiary therefor and agrees in writing to pay or
reimburse Beneficiary for any such taxes, charges and liens thereafter levied.
The obligations of Trustor under any such agreement shall be secured by this
Deed of Trust.
6.14 Partial or Late Payment. Neither the acceptance by Beneficiary
-----------------------
of any sum after the same is due [nor the application of payments by
Beneficiary, as lessee, to the debt secured by this Deed of Trust] shall not
constitute a waiver of the right either to require prompt payment, when due, of
an other sums then and thereafter secured hereby, the acceptance by Beneficiary
of any sum or sums in an amount less than the sums then due shall be deemed an
acceptance on account only and upon the condition that it shall not constitute a
waiver of the Event of Default existing by virtue of Trustee's failure to pay
the entire sum then due, or of Beneficiary's right to declare or maintain an
acceleration by virtue of such Event of Default. Trustor's failure to pay the
entire sum then due shall be and continue to be an Event of Default
notwithstanding such acceptance of such amount on account, and Beneficiary and
Trustee shall be at all times thereafter until the entire sum then due shall
have been paid, and notwithstanding the acceptance by Beneficiary thereafter of
further sums or accounts, or otherwise, entitled to exercise all rights in this
Deed
37
<PAGE>
of Trust conferred upon them or either of them upon the occurrence of an Event
of Default.
6.15 Subrogation. To the extent that any proceeds of the Loan or
-----------
any other amount paid or advanced by Beneficiary is used directly or indirectly
to pay, discharge or satisfy, in whole or in part, indebtedness secured by any
lien, charge or encumbrance on the Property or any part thereof senior in
priority to the lien of this Deed of Trust, Beneficiary shall be subrogated to
such other lien, charge or encumbrance regardless of whether such lien, charge
or encumbrance is released.
6.16 No Merger. If Trustor's and Beneficiary's estates hereunder
---------
shall at any time become vested in one owner, this Deed of Trust and the lien
created hereby shall not be destroyed or terminated by application of the
doctrine of merger, and, in such event, Beneficiary shall continue to have and
enjoy all of the rights and privileges of Beneficiary hereunder.
6.17 Waiver of Right to Require Marshalling of Assets. Trustor waives
------------------------------------------------
all right to require a marshalling of assets by Trustee or Beneficiary, and the
right to require Trustee or Beneficiary to resort first to any portion of the
Property retained by Trustor before resorting to any other portion of the
Property that may have been transferred or convoyed subject hereto, whether such
resort to security is undertaken by nonjudicial sale or through proceedings in
judicial foreclosure.
6.18 Captions. The captions or headings at the beginning of Articles,
--------
Sections and paragraphs hereof are for the convenience of reference only and
shall not be used in the interpretation of any provision of this Deed of Trust.
6.19 Incorporation by Reference. Each Exhibit, Schedule and Rider
--------------------------
attached hereto is incorporated herein by the references thereto contained
herein.
6.20 References and Cross References. All references and cross-
-------------------------------
references in this Deed of Trust to Sections, Exhibits, Schedules and Riders,
unless specified otherwise, refer to provisions in, or Exhibits, Schedules or
Riders to, this Deed of Trust.
6.21 Severability. Should any provision of this Deed of Trust be
------------
invalid, illegal or unenforceable, such provision shall be severable from the
rest of this Deed of Trust, and the validity, legality and enforceability of the
remaining provisions of this Deed of Trust shall not in any way be affected or
impaired thereby and shall remain in full force and effect.
6.22 Substitution of Trustee. Beneficiary may, from time to time, by
-----------------------
a written instrument executed and acknowledged by Beneficiary and recorded in
the County in which the Property is located and by otherwise complying with the
provisions of California Civil Code Section 2934a, or any successor section,
substitute a successor or successors to the Trustee named herein or acting
hereunder. Without conveyance of the Property, a successor Trustee shall
succeed to all the title, powers
38
<PAGE>
and duties conferred upon the Trustee herein and by applicable Law.
6.23 Successors and Assigns. This Deed of Trust applies to, inures to
----------------------
the benefit of, and binds all parties hereto, their heirs, legatees, devisees,
administrators, executors, successors and assigns. The term "Beneficiary" shall
-------------
mean the owner and holder (including a pledgee) of the Note, whether or not
named an Beneficiary herein. The term "Trustor" shall mean all parties
---------
executing this Deed of Trust as Trustor, their respective heirs, legatees,
devisees, administrators, executors, successors in interest and assigns to the
extent permitted by this Deed of Trust, provided that neither Beneficiary nor
Trustee shall be obligated to give notice of default or notice of sale hereunder
to any person, firm or entity other than the Trustor shown on the face page
hereof.
6.24 Gender and Number. In this Deed of Trust, whenever the context
-----------------
so requires, the masculine gender includes the feminine and/or neuter, and the
singular number includes the plural.
6.25 Nonliability of Beneficiary.
---------------------------
(a) Beneficiary neither undertakes nor assumes any responsibility or
duty to Trustor or any third party to select, review, inspect, examine,
supervise, pass judgment upon or inform Trustor or any third party of the
quality, adequacy or suitability of: (i) any plans and specifications for the
construction or alteration of improvement on the Property; (ii) architects,
contractors, subcontractors or materialmen employed or utilized in such
construction or alteration; (iii) the presence of any Hazardous Materials on the
Property; (iv) any appraisal of the Property; (v) the progress or course of
construction or its conformance or nonconformance with plans and specifications
or any amendments, alterations or changes thereto; (vi) any Environmental
Report; or (vii) any other matter or item that Beneficiary has the right to
review, inspect, examine or approve under this Deed of Trust. Any such
selection, review, inspection, examination and the like is solely for the
purpose of (i) determining whether or not Trustor's obligations under this Deed
of Trust are being properly discharged and (ii) protecting Beneficiary's
security and preserving Beneficiary's rights under this Deed of Trust, and such
selection, review, inspection, examination and the like shall not render
Beneficiary liable to Trustor or any third party for the sufficiency, accuracy,
completeness, or legality thereof and shall not operate to waive any rights of
Beneficiary hereunder.
(b) Beneficiary owes no duty of care to protect or inform Trustor or
any third party against negligent, faulty, inadequate or defective building or
construction, or the existence of any environmentally hazardous condition in any
manner arising out of or related to the presence of any Hazardous Materials on
the Property, and Beneficiary shall not be responsible or liable to Trustor or
any other party therefor. Trustor shall make or cause to be made such
independent inspections as Trustor may desire for its own protection.
(c) By accepting or approving anything required to be observed,
39
<PAGE>
performed or fulfilled, or to be given to Beneficiary pursuant hereto, including
any financial statement, survey, appraisal or insurance policy, Beneficiary
shall not be deemed to have warranted or represented the sufficiency, legality,
effectiveness or legal effect of the same, or of any term, provision or
condition thereof, and such acceptance or approval thereof shall not be or
constitute any warranty or representation to anyone with respect thereto by
Beneficiary.
(d) Prior to Beneficiary's actual entry upon and taking possession of
the Property, nothing in this Deed of Trust shall operate to impose upon
Beneficiary any responsibility for the operation, control, care, management or
repair of the Property, and the execution of this Deed of Trust by Trustor shall
constitute conclusive evidence that all responsibility for the operation,
control, care, management and repair of the Property is and shall be that of
Trustor prior to Beneficiary's actual entry and taking possession.
(e) Beneficiary is hereby authorized to disclose information
concerning Trustor, the Property or the indebtedness secured hereby to any
insurance agency or company, or to any transferee.
(f) Beneficiary shall not be liable, and is hereby released from
liability, for any act or omission of Trustee, except for such actions as may be
taken by Trustee at the express request of and in accordance with instructions
given by Beneficiary.
6.26 Limitation on Beneficiary's Obligations. No provision of this
---------------------------------------
Deed of Trust that grants Beneficiary the right to incur any expense or take any
action hereunder shall be construed as requiring Beneficiary to incur such
expense or take such action.
6.27 Relationship of Beneficiary and Trustor. Neither this Deed of
---------------------------------------
Trust, nor the Loan Documents, nor any agreements, instruments, documents or
transactions contemplated hereby or thereby, nor any statements or
representations made by Beneficiary pursuant to any of the foregoing or
otherwise, shall in any respect be interpreted, deemed or construed as making
Trustor and Beneficiary partners or joint venturers with one another, or as
creating or constituting any partnership, joint venture, association or other
such relationship between Trustor and Beneficiary other than that of debtor and
creditor.
6.28 Cumulative Rights and Remedies; No Waiver. The rights, powers
-----------------------------------------
and remedies given to Beneficiary pursuant to this Deed of Trust shall be in
addition to, and shall not supersede or preempt, any rights, powers and remedies
given to Beneficiary by virtue of any applicable Law. Every power or remedy
given by this Deed of Trust to Trustee or Beneficiary or to which either of them
may be otherwise entitled, may be exercised concurrently, Independently, or
successively, in any order whatsoever, from time to time and as often as may be
deemed expedient by Trustee or Beneficiary and either of them may pursue
inconsistent remedies. No forbearance, failure or delay by Beneficiary in
exercising any right, power or remedy granted to
40
<PAGE>
Beneficiary hereunder shall be deemed a waiver of such right, power or remedy,
nor shall any such forbearance, failure or delay preclude the further exercise
of such right, power or remedy, or any other right, power or remedy; and every
such right, power and remedy of Beneficiary shall continue in full force and
effect until such right, power or remedy is explicitly waived by Beneficiary in
writing. Consent or approval by Beneficiary to or of any act by Trustor
requiring further consent or approval shall not be deemed to waive or render
unnecessary the consent or approval to or of any subsequent similar act.
6.29 Modification. This Deed of Trust may be modified, supplemented
------------
or amended only by an instrument in writing signed by Trustor or and
Beneficiary.
6.30 Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties made by Trustor in this Deed of Trust shall
survive the closing of the Loan and shall continue for so long as any portion of
the indebtedness secured hereby remains outstanding.
6.31 Construction of Deed of Trust. The use in this Deed of Trust of
-----------------------------
the word "including" shall be construed as providing examples only and shall not
limit the generality of any provision in which it is used.
6.32 Provisions of Note Incorporated by Reference. The provisions of
--------------------------------------------
the Note, including those provisions (if any) governing adjustments to the
interest rate and payment amount, the accrual of interest on interest and
increases in the principal balance, are incorporated by reference as though
fully set forth herein.
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the
date first above written.
TRUSTOR:
CITADEL REALTY, INC.,
a Delaware corporation
By: /s/ STEVE WESSON
-----------------------------
Steve Wesson, President
41
<PAGE>
ACKNOWLEDGMENT OF CITADEL REALTY, INC.
--------------------------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF ____________ )
On this ____ day of May, 1995, before me, the undersigned, a Notary Public
in and for the State of California, personally appeared Steve Wesson, personally
known to me to be the person who executed the within instrument as the President
of Citadel Realty, Inc., the corporation therein named, and acknowledged to me
that executed the within instrument pursuant to its bylaws or a resolution of
its board of directors, and acknowledged to me that such corporation executed
the same.
WITNESS my hand and official seal.
_____________________________________
Notary Public
(Seal]
42
<PAGE>
EXHIBIT A
TO
DEED OF TRUST
43
<PAGE>
EXHIBIT A TO DEED OF TRUST, ASSIGNMENT OF RENTS
AND LEASES, SECURITY AGREEMENT AND FIXTURE FILING
DESCRIPTION
PARCEL A:
LOTS 1, 2, 3, 4, 6, 7 AND 8 of MCNUTT TRACT, IN THE CITY OF GLENDALE, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 160 OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL B:
LOT 9 OF THE MCNUTT TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 160 OF MAPS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY.
PARCEL C:
LOTS 10, 11 AND 12, MCNUTT TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 160 OF MAPS,
IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL D:
PARCEL 1:
LOT 10 OF MARDALE TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 20 OF MAPS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 2:
THAT PORTION OF LOT 7 OF MARDALE TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 20 OF MAPS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, BOUNDED NORTHERLY BY THE
FOLLOWING DESCRIBED LINE.
BEGINNING AT THE SOUTHWESTERLY CORNER OF SAID LOT, THENCE FROM A TANGENT BEARING
NORTH 19 DEGREES 06 MINUTES 19 SECONDS EAST, NORTHEASTERLY ALONG A CURVE CONCAVE
SOUTHEASTERLY AND HAVING A RADIUS OF 15.00 FEET; THROUGH AN ANGLE OF 70 DEGREES
10 MINUTES 13 SECONDS, AN ARC DISTANCE OF 18.37 FEET; THENCE PARALLEL WITH THE
<PAGE>
SOUTHERLY LINE OF SAID LOT 7, NORTH 89 DEGREES 16 MINUTES 32 SECONDS EAST 257.58
FEET TO A TANGENT CURVE, CONCAVE SOUTHWESTERLY AND HAVING A RADIUS OF 15.00
FEET; THENCE SOUTHEASTERLY ALONG LAST SAID CURVE TO THE SOUTHEASTERLY CORNER OF
LOT 8 OF SAID TRACT.
PARCEL E:
LOT 11 OF THE MARDALE TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 20 OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL F:
LOT 14 OF THE MARDALE TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 20 OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
<PAGE>
EXHIBIT A TO ENVIRONMENTAL INDEMNITY
DESCRIPTION
PARCEL A:
LOTS 1, 2, 3, 4, 6, 7 AND 8 of MCNUTT TRACT, IN THE CITY OF GLENDALE, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 160 OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL B:
LOT 9 OF THE MCNUTT TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 160 OF MAPS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY.
PARCEL C:
LOTS 10, 11 AND 12, MCNUTT TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 11 PAGE 160 OF MAPS,
IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL D:
PARCEL 1:
LOT 10 OF MARDALE TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS ANGELES, STATE
OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 20 OF MAPS, IN THE OFFICE OF
THE COUNTY RECORDER OF SAID COUNTY.
PARCEL 2:
THAT PORTION OF LOT 7 OF MARDALE TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 20 OF MAPS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, BOUNDED NORTHERLY BY THE
FOLLOWING DESCRIBED LINE.
BEGINNING AT THE SOUTHWESTERLY CORNER OF SAID LOT, THENCE FROM A TANGENT BEARING
NORTH 19 DEGREES 06 MINUTES 19 SECONDS EAST, NORTHEASTERLY ALONG A CURVE CONCAVE
SOUTHEASTERLY AND HAVING A RADIUS OF 15.00 FEET; THROUGH AN ANGLE OF 70 DEGREES
10 MINUTES 13 SECONDS, AN ARC DISTANCE OF 18.37 FEET; THENCE PARALLEL WITH THE
SOUTHERLY LINE OF SAID LOT 7, NORTH 89 DEGREES 16 MINUTES 32 SECONDS
<PAGE>
EAST 257.58 FEET TO A TANGENT CURVE, CONCAVE SOUTHWESTERLY AND HAVING A RADIUS
OF 15.00 FEET; THENCE SOUTHEASTERLY ALONG LAST SAID CURVE TO THE SOUTHEASTERLY
CORNER OF LOT 8 OF SAID TRACT.
PARCEL E:
LOT 11 OF THE MARDALE TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 20 OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
PARCEL F:
LOT 14 OF THE MARDALE TRACT, IN THE CITY OF GLENDALE, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 16 PAGE 20 OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 6,174
<SECURITIES> 13,405
<RECEIVABLES> 1,274
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 21,097
<PP&E> 15,016
<DEPRECIATION> (218)
<TOTAL-ASSETS> 36,113
<CURRENT-LIABILITIES> 2,755
<BONDS> 0
<COMMON> 67
0
13
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 36,113
<SALES> 1,037
<TOTAL-REVENUES> 2,654
<CGS> 0
<TOTAL-COSTS> 1,070
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 238
<INCOME-PRETAX> 1,346
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,346
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,346
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0
</TABLE>
