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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES ACT OF 1934)
FOR THE FISCAL YEAR ENDED MARCH 1, 1997 COMMISSION FILE NUMBER 0-12182
CALIFORNIA AMPLIFIER, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 95-3647070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
460 CALLE SAN PABLO, CAMARILLO, CALIFORNIA 93012
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (805) 987-9000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange
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None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
$.01 PAR VALUE COMMON STOCK
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [/X/]
The aggregate market value of the voting stock of the Registrant held by
non-affiliates of the Registrant as of May 23, 1997 was approximately
$50,381,000.
There were 11,717,222 shares of the Registrant's Common Stock outstanding
as of May 23, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on July 18, 1997 is incorporated by reference
into Part III, Items 10, 11, 12 and 13 of this Form 10-K. This Proxy Statement
will be filed within 120 days after the end of the fiscal year covered by this
report.
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PART I
ITEM 1. BUSINESS
THE COMPANY
California Amplifier, Inc. (the "Company") was incorporated in 1981. Since
its inception, the Company has been involved in the design, manufacture and
marketing of microwave components used in conjunction with the delivery of
multichannel pay television. The Company currently operates in two product
segments: Wireless Cable Television and Satellite Television products.
WIRELESS CABLE TELEVISION
Wireless Cable Television uses well established technologies, in many ways
similar to coaxial cable multichannel television transmission. The key
difference is that Wireless Cable does not have cable connecting the
headend/transmission site to each home, but instead uses a microwave frequency
band to transmit programming to subscribers. A wireless system is composed of a
headend/transmission site, a transmission tower, and at each subscriber's home,
a reception antenna, downconverter and a decoder or set-top converter.
The headend equipment receives programming from satellites and other
programming sources such as local VHF and UHF television stations and sends them
to a transmission tower for transmission to subscribers via microwave signals.
The signal can generally be received by subscribers within a 25-35 mile radius
of the transmission tower depending on the transmitter power; however, the
subscriber must have a direct line-of-sight or "view" between the tower and the
receive antenna. Typically, 65%-80% of the homes within the service area will
be able to receive the wireless signal, with the remainder shadowed from the
transmitter. The percentage of line-of-sight homes is affected by the tower
elevation, local topography and antenna height.
The history of Wireless Cable in the United States and traditional hardwire
cable are intertwined. Wireless Cable was initially used to provide educational
or premium video programming in cities where cable was not available. In 1974,
the Federal Communications Commission (FCC) authorized the use of spectrum in
the 2150-2162 MHz frequency range for transmission of two video signals in the
50 largest markets. In 1983, the 2500-2686 MHz frequency range was reallocated
and commercial Wireless Cable was given eight of the 31 resulting channels. At
the same time, however, various FCC regulations made it very difficult to
aggregate channels with the 2500-2686 MHz bandwidth, thereby limiting the number
of channels Wireless Cable operators were able to offer. In addition, because
subscriber numbers were low at most Wireless Cable operations, program networks,
often owned by cable operators, charged higher programming fees to Wireless
operators or simply refused to provide programming. These factors, accompanied
by the fact that most Wireless Cable operators had limited capital, made it
difficult for Wireless Cable to be a viable delivery alternative to hardwire
cable
In the late 1980's and early 1990's, as public dissatisfaction with cable's
monopoly status grew, the FCC and Congress gave further attention to ways in
which they could foster competition. In 1990 and 1991, the FCC made a series of
rulings which made it easier for the Wireless Cable operators to consolidate
channel frequency licenses, thereby increasing the channel capacity to 33
channels. In addition, the Cable Television Consumer Protection and Competition
Act of 1992 was passed into law on October 5, 1992. Industry experts believe
this legislation was the single biggest boost for the Wireless Cable industry.
It essentially requires that programmers must make their service available to
all at fair and reasonable prices, and that cable operators cannot price their
services differently in various areas of their system. This prevents larger
cable companies from pricing differently in regional areas where Wireless Cable
is attracting customers.
In February 1996, Congress passed the 1996 Telecommunications Act which the
Company expects also should significantly benefit the Wireless Cable industry
generally. One key provision of the legislation was in removing cross-ownership
restrictions for telecommunications companies, allowing them to directly compete
in the video distribution market, and vice versa for cable companies to provide
voice and data communication services. This legislative development allows the
telecommunications companies, such as Bell South, and Pacific Telesis, to use
Wireless Cable technology as a deployment tool in delivering digital video
programming to selected major
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markets.
Additionally, Section 303 of the 1996 Telecommunications Act has authorized
the FCC to issue a Notice of Proposed Rule Making (NPRM), calling for the
preemption of state, local, and non-governmental restrictions (such as
homeowners associations) on DBS satellite antennas, and Wireless Cable antennas
under one meter in diameter, except in reasonable cases involving public safety
or historical heritage. This provision is intended to foster full and fair
competition among different types of video programming services. If enacted,
the proposed rule would expand the marketability of Wireless Cable service to
households which were subject to zoning codes, covenants, and homeowners
association restrictions. No assurances can be made, however, as to whether the
FCC will issue such a rule.
In the United States there are approximately 100 million television
households, of which approximately 60% receive its programming from cable
companies. Currently there are approximately 200 Wireless Cable operations in
the United States, serving approximately 1.0 million subscribers, with
line-of-sight access to approximately 30 million television households.
Industry analysts estimate that a fully-financed wireless system could reach
penetration levels of 10%-15% of line-of-sight homes due to inherent cost
advantages of the technology, compared to cable. These penetration levels can
be achieved by addressing various factors: additional capital availability to
finance growth, the adoption of digital compression which would eliminate
constraints with respect to channel capacity.
In 1995 the Wireless Cable industry in the United States generated a great
deal of interest with Tele-TV, a consortium comprised of Bell Atlantic, NYNEX
and Pacific Telesis, which announced its intention to deliver video to customers
using Wireless Cable digital technology. Initial projections for a digital
subscriber rollout by Tele-TV were 2.0 million within three years of
introduction. In late 1996, the Tele-TV consortium announced that certain
members (Bell Atlantic and NYNEX) had changed their strategic emphasis and were
not going forward with their Wireless Cable plans. Pacific Telesis has remained
committed to Wireless Cable, but on a slower rollout than previously planned.
The Tele-TV participation in Wireless Cable television was viewed by many
industry experts as the beginning of well financed companies entering the
Wireless Cable market through acquisition or alliances with existing domestic,
multiple system operators. The decision by the Tele-TV partners to re-access
their video delivery strategy, combined with other factors, has resulted in a
significant slowdown in the domestic market. Operators are confronted with
limited financing alternatives, negative cash flow from operations with current
subscriber levels, and the decision of whether to expand subscriber counts using
analog equipment prior to the availability of digital equipment.
The decision to switch from analog to digital is a costly one, both from a
system architecture, and per subscriber standpoint. As a result of the current
capital constraints confronting the independent system operators, the conversion
from analog to digital is no longer an equipment availability issue. Until the
Wireless Cable industry in the United States can attract financial resources to
introduce digital Wireless Cable television through alliances, acquisitions or
the equity/debt markets, the industry will continue to be an insignificant
participant in the delivery of multichannel pay television to consumers.
Internationally, the Wireless Cable industry has experienced significant
growth in response to increasing worldwide demand for multichannel television
and the increased availability of a variety of programming such as HBO, CNN,
MTV, ESPN and Disney. The Company believes that Wireless Cable technology, in
many instances, is better suited than traditional cable to provide multichannel
television to the consumer, especially in less developed countries and in areas
that are not densely populated. The lack of a need for a cable network allows
Wireless Cable operators to commence broadcasting more quickly, with less of an
initial investment than for traditional cable, and to quickly expand throughout
a service area. To date, Wireless Cable systems have been launched throughout
the world, including major systems in Mexico, Venezuela, Brazil, Argentina,
Paraguay, Chile, Qatar, Thailand, Malaysia, Nigeria, Australia, Czech Republic,
Russia and Ireland. Similar launches in these countries, and other geographical
areas, are expected to continue as programming is made available to these areas.
Because the international markets do not have a high percentage of pay
television subscribers to television households, and are not dominated by a
single method of delivery, as cable is in the United States, the potential
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for Wireless Cable as a programming delivery method internationally, is
significant.
SATELLITE TELEVISION
Satellite dishes are used for the reception of video, audio and data
transmitted from orbiting satellites. The Company's products are used both in
commercial satellite dish applications and home satellite dishes. The Company's
Satellite Television product sales, however, are primarily generated from sales
of downconverters, amplifiers and integrated feedhorns and amplifiers used in
home satellite dish applications.
The satellite dish is a parabolic reflector antenna. Microwaves are
transmitted from orbiting satellites toward the earth's surface. The dish
reflects the microwaves back to a focal point where a feedhorn collects the
microwaves transferring the signals into an amplifier/downconverter. The
microwave amplifier literally amplifies the microwave signal millions of times
for further processing. The downconverter changes the frequency into an
intermediate frequency so that the receiver and television can process the
signal and create a picture.
The home satellite industry has undergone substantial changes over the past
several years. During the early 1980's, home satellite systems in the United
States were capable of receiving a wide variety of television broadcast signals,
including those delivered to pay television and cable television operators,
without charge since the transmitted signals were not scrambled. In 1986,
certain broadcasters began to scramble their signal, and today virtually all
premium programmers in the U.S. scramble their programming. To view scrambled
programs, the viewer is required to purchase a decoder and pay a periodic fee to
the programmer or program reseller.
In 1994, the Direct Broadcast System (DBS) was introduced in the United
States. The DBS system uses high powered satellites and Ku-Band to transmit
programming to subscribers digitally. As a result of the satellite
transmission power and the Ku frequency, the satellite dish required for
signal reception is only eighteen inches in diameter. This compares to
C-Band dishes that range from five to twelve feet in diameter. The Ku-DBS
system has been very well accepted since its introduction and installations
total over 4.5 million television households, while C-Band installations
approximate 2.3 million. A small dish with the capability of receiving a
significant number of channels, primarily because the DBS satellite transmits
digital signals at high power levels, offers a consumer an alternative to the
big, C-Band backyard dish. As a result, since the DBS launch C-band
installations have reduced dramatically to less than 100,00 per year. This
trend is likely to continue in the United States as more DBS satellites and
providers enter the DBS market.
The international market for Satellite Television exists primarily in
Europe, the Middle East, Asia and Latin America where cable penetration is
substantially less than in the United States. The Company believes the
international market for Satellite Television, which has an installed base of
over 20 million dishes, will continue to grow in response to increased worldwide
demand for television spurred, in part, by an increase in the availability and
variety of programming. Certain United States cable television networks have
expanded their programming coverage internationally. The availability of highly
desirable programming such as HBO, CNN, MTV, ESPN and Disney has led to the
growth of the various methods of multichannel television delivery in the many
international markets. As previously stated, both C-Band and Ku-Band dishes
will be used by consumers depending upon how the programmers choose to transmit
such signals. Both Ku-Band and C-Band satellite launches are scheduled over the
next several years, however the Ku-DBS alternative is becoming increasingly more
popular to programmers as a means of delivery directly to subscribers.
Because DBS, Ku-Band products are becoming a more significant market, the
Company is focusing some of its research and development resources on the
development of Ku-DBS products to sustain its position in the Satellite
Television market.
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INVESTMENT IN MICRO PULSE, INC.
In January 1993, the Company purchased a 50% ownership interest in Micro
Pulse, Inc. ("Micro Pulse") for $100,000 in cash and a $400,000 convertible
promissory note. In April 1995, the note was converted into 100,000 shares of
the Company's common stock. Micro Pulse designs, manufactures and markets
antennas and amplifiers used principally in global positioning systems ("GPS").
Such products are used in surveying applications, vehicle tracking and marine
and airborne navigation. In March 1997, the Company acquired additional shares
resulting in a 50.5% controlling interest. See Note 3 of Notes to Consolidated
Financial Statements.
PRODUCTS
The Company designs a broad line of amplifiers, downconverters, antennas
and integrated products used in the reception, conversion and amplification of
microwave signals used in conjunction with the reception of video, audio, and
data transmitted from satellites or earth-based transmitters using microwave
signals. Products serve both the Wireless Cable (S-Band) industry and the
Satellite Television industry (C-Band and Ku-Band).
In addition, the Company manufactures and markets a broadband scrambling
system called MultiCipher-Registered Trademark-, used by Wireless Cable
operators to protect their signals from unauthorized viewing. Because
MultiCipher is a broadband scrambling system, it decodes all channels
transmitted simultaneously. This allows a "whole-house" solution for the
Wireless Cable operator and eliminates the requirement of installing a
conventional set-top box on each television in the subscribers' home. The
Company most recently has introduced MultiCipher Plus-TM-, a broadband,
whole-house scrambling system with the additional feature of tiering. Tiering
allows the operator to offer premium or pay per view programming to individual
subscribers, a feature the initial MultiCipher system did not have.
During fiscal years 1997, 1996 and 1995, Wireless Cable products, which
include MultiCipher products, accounted for 69.9%, 70.0% and 45.9% of the
Company's sales, respectively, and Satellite Television products accounted for
29.9%, 29.3% and 53.4% of the Company's sales, respectively. For additional
information regarding the Company's sales by geographical areas, see Note 10 of
Notes to Consolidated Financial Statements.
MANUFACTURING
The Company manufactures and assembles its products in its Camarillo,
California, USA, facility and in a contract labor facility in Mexico.
Manufacturing operations consist principally of assembling of components built
from fabricated parts, printed circuit boards and electronic devices, and
microwave tuning and testing of assembled products. The Company is currently
evaluating other manufacturing operations in other countries.
Electronic devices, components and raw materials used in the Company's
products are generally obtained from a number of suppliers, although certain
materials are obtained from a limited number of sources. Some devices or
components are standard items while others are manufactured to the Company's
specifications by its suppliers. The Company attempts to operate without
substantial levels of raw materials by depending on certain key suppliers to
provide material on a "just-in-time'' basis. The Company believes that most raw
materials are available from alternative suppliers. However, any significant
interruption in the delivery of such items could have an adverse effect on the
Company's operations.
ISO 9001 INTERNATIONAL CERTIFICATION
In August 1995, the Company became registered to ISO 9001, the
international standard for conformance to quality excellence in meeting market
needs in all areas including product design, manufacturing, quality assurance
and marketing. The registration assessment was performed by Underwriter's
Laboratory, Inc., according to the ISO 9001:1994 International Standard.
Continuous assessments to maintain certification will be performed semi-annually
by Underwriter's Laboratory, Inc.
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RESEARCH AND DEVELOPMENT
The Wireless Cable and Satellite Television markets are characterized by
technological change, evolving industry standards, and new product requirements
to meet market growth. During the last three years, the Company has focused its
research and development resources on three primary areas: digital Wireless
Cable reception products, the MultiCipher "whole-house" broadband scrambling
system, and Ku-DBS products. In addition, development resources were allocated
to broaden existing product lines, reducing product costs and improving
performance by product redesign efforts. Research and development costs have
increased significantly over the past three fiscal years consistent with this
strategy.
Research and development expenses were $5,789,000, $4,376,000, and
$3,155,000 during fiscal years 1997, 1996 and 1995, respectively.
SALES AND MARKETING
The Company sells its Wireless Cable products directly to Wireless Cable
operators, but will occasionally utilize a distributor for certain geographical
regions. The Company sells its Satellite Television products through satellite
equipment distributors, but, from time to time, sells certain products to
manufacturers for incorporation into complete satellite dish systems, or
directly to DBS operators.
The Company's sales and marketing functions are centralized in its
Camarillo, California, U.S.A., corporate headquarters. In addition, the Company
has sales offices and personnel in Paris, France; Sao Paulo, Brazil; and
Bangkok, Thailand. The Company may add additional sales offices and employees
as market conditions warrant, in market areas that require additional sales and
customer support not adequately served by a major distributor or reseller. See
also Note 10 of Notes to Consolidated Financial Statements for major customer
and geographical sales information.
COMPETITION
The markets in which the Company participates are highly competitive. In
addition, if the markets for the Company's products continue to grow, the
Company anticipates increased competition from new companies entering such
markets, some of whom may have financial and technical resources substantially
greater than those of the Company. Furthermore, because some of the Company's
products may not be proprietary, they may be duplicated by low-cost producers,
resulting in price and margin pressures.
The Company believes that competition in its markets is based primarily on
price, performance, reputation, product reliability and technical support. In
the Wireless Cable market, the Company has supplier relationships with major
Wireless Cable operators in various regions of the world, and believes that its
pricing, accompanied by product performance, reliability, low field failure
rate, and its ongoing technical support, are currently competitive advantages to
the Company. In the Satellite Television market, where the Company has
participated since its inception in 1981, its reputation for performance and
quality allows the Company a competitive advantage if pricing of its products is
comparable to its competitors.
The Company's continued success in these markets, however, will depend upon
its ability to continue to design and manufacture quality products at
competitive prices.
BACKLOG
The Company's products are sold to customers that do not usually enter into
long-term purchase agreements, and as a result, the Company's backlog at any
date is not significant. As the Company's sales shift from Satellite Television
products to Wireless Cable products, however, the Company is emphasizing
long-term arrangements with Wireless Operators to increase backlog and sales
visibility. Because of customer order modifications, cancellations, or orders
requiring wire transfers or letters of credit from international customers, the
Company's backlog as of any particular date, may not be indicative of sales for
any future period.
PATENTS, TRADEMARKS AND LICENSES
The Company's timely application of its technology and its design,
development and marketing capabilities have been of substantially greater
importance to its business than patents or licenses.
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The Company currently has nine patents ranging from design features for
downconverter and antenna products, to its MultiCipher broadband scrambling
system. Those that relate to its downconverter products do not give the
Company any significant advantage since other manufacturers using different
design approaches can offer similar microwave products in the marketplace.
The Company does believe, however, that certain Wireless Cable antenna
patented designs, and the broadband scrambling technology for encoding and
decoding multi-channel television signals used in the MultiCipher systen are
significant and may result in a competitive advantage for the Company. In
May, 1997, the Company filed suit in the U.S. District Court for the Central
District of California against Pacific Monolithics, Inc., for patent
infringement of the Company's MultiCipher patent.
The Company currently has 15 other patents pending.
California Amplifier-Registered Trademark- and MultiCipher-Registered
Trademark- are federally registered trademarks of the Company. The Company has
also filed for trademark protection for its MultiCipher Plus product line.
EMPLOYEES
At March 1, 1997, the Company had 348 employees. None of the Company's
employees are represented by a labor union.
ITEM 2. PROPERTIES
The Company's corporate headquarters and manufacturing facility is located
in Camarillo, California (approximately 60 miles north of Los Angeles) and
consists of approximately 64,000 square feet located on approximately four acres
of land. In addition, the Company leases an aggregate of approximately 30,000
square feet of space across and adjacent to its headquarters facility which is
used for shipping, finished goods and a tool and die operation. These leases
expire in 2004. The Company also leases offices in Paris, France; Sao Paulo,
Brazil; and Bangkok, Thailand. See also Note 9 to Consolidated Financial
Statements.
ITEM 3. LEGAL PROCEEDINGS
In May, 1997, in response to the Company's suit filed against it (see
Patents, Trademarks and Licenses above), Pacific Monolithics filed suit
against the Company for infringing on a design patent for a Wireless Cable
antenna. The Company believes the claim is frivolous and without merit, and
will aggressively defend its broadband scrambling patent on which Pacific
Monolithics has infringed.
The Company is currently not a defendant in any legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the three months ended March 1, 1997, no matters were submitted to a
vote of the Company's security holders.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The Company's Common Stock is traded on the Nasdaq National Market ("NNM")
under the trading symbol "CAMP." The following table sets forth for each fiscal
period indicated the high and low closing sale prices for the Company's Common
Stock, as reported by the NNM:
LOW HIGH
FISCAL YEAR ENDED MARCH 1, 1997:
1st Quarter 22-1/8 46
2nd Quarter 6-1/2 48-3/4
3rd Quarter 6-1/8 14-1/4
4th Quarter 4-7/8 9-1/2
FISCAL YEAR ENDED MARCH 2, 1996:
1st Quarter 3-1/8 5-3/8
2nd Quarter 4-3/4 7-1/2
3rd Quarter 7-3/16 14-11/16
4th Quarter 12-1/8 24-3/16
On March 22, 1996, the Company effected a two-for-one stock split. All per
share amounts contained herein have been retroactively adjusted to reflect the
stock split.
At May 23, 1997 the number of stockholders of record of the Company's
Common Stock was 342. The number of stockholders of record does not include the
number of persons having beneficial ownership held in "street name" which are
estimated to approximate 7,000.
The Company has never paid a cash dividend and has no current plans to pay
cash dividends on its Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data which has
been derived from the audited financial statements of the Company for each of
the respective years. The selected financial data should be read in conjunction
with the consolidated financial statements and related notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained herein.
CONSOLIDATED STATEMENT OF INCOME DATA:
(in thousands, except per share data)
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YEARS ENDED
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MAR. 1, MAR 2, MAR 4, FEB 26, FEB 27,
1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Sales $ 49,290 $ 61,590 $ 45,656 $ 40,664 $ 35,785
Income before taxes 1,037 7,638 3,770 2,279 4,204
Net income 633 4,958 2,451 1,556 3,050
Net income per share .05 .41 .22 .14 .30
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CONSOLIDATED BALANCE SHEET DATA:
(in thousands)
AS OF EACH YEAR END
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1997 1996 1995 1994 1993
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Total assets $ 29,536 $ 32,573 $ 22,087 $ 19,599 $ 16,037
Working capital 15,001 15,743 8,552 6,093 2,472
Long-term debt 525 767 782 773 400
Stockholders' equity 24,148 22,924 14,899 12,163 7,288
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of sales represented by items included in the Company's Consolidated Statements
of Income:
YEARS ENDED
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MARCH 1, MARCH 2, MARCH 4,
1997 1996 1995
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Sales:
Wireless Cable 69.9% 70.0% 45.9%
Satellite Television 30.0 29.3 53.4
Other .1 .7 .7
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Total sales 100.0 100.0 100.0
Gross profit 29.4 34.0 31.2
Research and development 11.8 7.1 6.9
Selling 9.7 8.1 8.1
General and administrative 6.5 6.6 7.9
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Income from operations 1.4 12.2 8.3
Interest and other, net .7 - -
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Income before provision for
income taxes 2.1 12.2 8.3
Provision for income taxes .8 4.3 2.9
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Net income 1.3% 7.9% 5.4%
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FISCAL YEARS 1997 AND 1996
Sales decreased by $12.3 million, or 20.0%, from $61.6 million in fiscal
year 1996 to $49.3 million in fiscal year 1997. The fiscal year 1997 sales
decrease resulted from declines in both Wireless Cable and Satellite Television
product sales. Sales of Wireless Cable products decreased $8.7 million, or
20.2%, from $43.2 million to $34.4 million. Sales of Satellite Television
products decreased $3.3 million, or 18.3%, from $18.1 million to $14.8 million.
Domestic sales from both product lines decreased $66,000 to $17.1 million.
Decreases in domestic sales of Satellite Television products and Wireless Cable
reception products were offset by increases in MultiCipher product sales.
Foreign sales decreased $12.2 million, or 27.5%, from $44.4 million to $32.2
million. The primary geographical areas of decrease were Asia for Wireless
Cable products, and Europe and Australia for Satellite Television products.
The decrease in Wireless Cable sales was a result of two major factors.
First, international markets, which had been expanding subscriber growth
through new system additions as well as the growth of existing systems, saw a
decrease in the number of new system additions in calendar 1996, as compared
to prior years. This impacted overall subscriber growth in markets where the
Company has significant market share. Second, the U.S. domestic market,
which was expected to begin a digital rollout in calendar 1996, delayed this
technology shift as certain regional Bell operating companies re-evaluated
their video delivery strategy. This caused uncertainty in the market and
resulted in several independent operators having less access to capital which
limited their expansion strategies for analog installations and conversion to
systems using digital technologies. As a result, sales of Wireless reception
products decreased from prior year amounts. However, sales of the Company's
MultiCipher products to analog wireless systems offset the Wireless reception
product shortfall.
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The decrease in Satellite Television product sales resulted from continued
softness in the domestic C-band market and continued pricing pressures
internationally. The Company offset the decrease in C-band sales with increased
sales of its Ku-band products, primarily to international markets where the
Ku-band product offerings are much broader than the current United States
Ku-band DBS market.
Gross profits decreased by $6.5 million, or 30.9%, from $21.0 million to
$14.5 million. Gross margins decreased from 34% to 29.4%. The decrease in
gross profit resulted from a 20% decrease in sales, a decline in gross margins,
and under-utilization of factory overhead. The gross margin pressures resulted
from competitive pricing pressures, to which the Company responded by lowering
unit sales prices, delays in cost reduction programs because development
resources were allocated to the development of digital products, the
introduction of "MultiCipher Plus" during fiscal year 1997 at gross margins
lower than expected margins, and higher than anticipated product returns on
initial shipments of MultiCipher Plus. Also included in cost of sales, which
negatively impacted gross profits and gross margins, were amounts relating to
under-utilization of the Company's manufacturing infrastructure as sales volumes
decreased during the second half of fiscal year 1997.
Research and development expenses increased by $1.4 million, from $4.4
million to $5.8 million. As a percentage of sales, research and development
increased from 7.1% to 11.8%. The increases resulted from the need for
additional resources, primarily personnel and equipment, to focus on the design
and development of a digital line of Wireless Cable reception products; the
MultiCipher "whole-house" scrambling system; and Ku-DBS products for Satellite
Television.
Selling expenses decreased by $201,000, from $5.0 million to $4.8 million,
but as a percentage of sales, increased from 8.1% to 9.7%. The Company closely
monitored selling and marketing expenses during the third and fourth quarters in
response to the decrease in sales volumes. Because the Company utilizes a
direct sales force, a significant percentage of costs are fixed in nature,
excluding variable sales commission programs.
General and administrative expenses decreased by $876,000, from $4.1
million to $3.2 million, and decreased as a percentage of sales, from 6.6% to
6.5%. The decrease in general and administrative expenses resulted primarily
from a reduction in incentive bonuses in fiscal year 1997 due to the decline in
operating performance as compared to fiscal year 1996.
Income from operations decreased by $6.8 million, or 91%, from $7.5 million
to $688,000. The principal reasons for the decline were decreased sales and
gross margins, and increases in research and development expenses.
The $140,000 income attributable to non-consolidated subsidiary relates to
the Company's 50% equity investment in Micro Pulse. The Company recognized
$275,000 in income which represented 50% of Micro Pulse's fiscal year 1997 net
income of $550,000, offset by $135,000 in amortization expense relating to the
Company's initial investment in excess of 50% of Micro Pulse's net equity.
The provision for income taxes decreased by $2.3 million, from $2.7 million
to $404,000. Income taxes as a percentage of income before taxes were 39.0% in
fiscal year 1997 and 35.0% in fiscal year 1996. The tax rates are a result of
taxes, based upon a statutory rate, offset by benefits relating to the Company's
foreign sales corporation, and research and development tax credits.
Net income decreased $4.3 million, or 87%, from $5.0 million to $633,000.
FISCAL YEARS 1996 AND 1995
Sales increased by $15.9 million, or 34.8%, from $45.7 million in fiscal
year 1995 to $61.6 million in fiscal year 1996. The fiscal year 1996 sales
increase was primarily a result of increases in Wireless Cable sales offset by
decreases in Satellite Television sales. Sales of Wireless Cable products
increased $22.2 million, or 105.8%, from $21.0 million to $43.2 million, while
sales of Satellite Television products decreased $6.3 million, or 25.9%, from
$24.4 million to $18.1 million.
11
<PAGE>
The increase in Wireless Cable sales resulted from strong international
demand for the Company's Wireless Cable reception products and the introduction
of the Company's broadband scrambling system, MultiCipher. Wireless Cable sales
in the United States remained relatively flat with the sales of the prior year.
This is a result of ordering patterns by domestic operators as they more closely
monitor inventory levels to growth projections; increased competition; and the
decision by some operators to limit their growth plans awaiting the availability
of digital equipment.
The decrease in Satellite Television product sales resulted from continued
pressure domestically on C-Band satellite dish sales as the market shifts to the
Ku-DBS alternative, and increased competition in Latin America for C-Band
products. The Company has recently introduced a Ku-Band, DBS type downconverter
and feedhorn.
Gross profits increased by $6.7 million, or 47.3%, from $14.2 million to
$21.0 million. Gross margins increased from 31.2% to 34%. The increase in
gross profit resulted from increased sales volumes of Wireless Cable products
and an increase in gross margins over the prior year. In a focused effort to
increase gross margins, the Company emphasized the following: a sales shift from
Satellite Television products to Wireless Cable products, lower cost designs,
new product introductions and manufacturing process improvement and cost
reduction programs.
Research and development expenses increased by $1.2 million, from $3.2
million to $4.4 million. As a percentage of sales, research and development
increased from 6.9% to 7.1%. The increases resulted from the need for
additional resources, primarily personnel and equipment, to focus on the design
and development of a broader line of Wireless Cable reception products; the
MultiCipher "whole-house" scrambling system; and Ku-DBS products for Satellite
Television.
Selling expenses increased by $1.3 million, from $3.7 million to $5.0
million, but as a percentage of sales remained constant at 8.1%. Selling
expenses increased due to increased sales to foreign markets and the Company's
focus on expanding its sales and marketing presence in these markets.
General and administrative expenses increased by $494,000, from $3.6
million to $4.1 million, but decreased as a percentage of sales, from 7.9% to
6.6%. The increase in expenses resulted primarily from increased personnel in
administration and information services, and increased incentive bonuses based
upon fiscal year 1996 operating performance.
Income from operations increased by $3.7 million, or 98.6%, from $3.8
million to $7.5 million. The principal reasons for the growth were increased
sales and gross margins, offset by increases in operating expenses.
The $100,000 loss attributable to non-consolidated subsidiary relates to
the Company's 50% equity investment in Micro Pulse. The Company recognized
$125,000 in income which represented 50% of Micro Pulse's fiscal year 1996 net
income of $250,000, offset by $225,000 in amortization expense relating to the
Company's initial investment in excess of 50% of Micro Pulse's net equity.
The provision for income taxes increased by $1.4 million, from $1.3 million
to $2.7 million. Income taxes as a percentage of income before taxes were 35%
in fiscal years 1996 and 1995. The 35% rate is a result of taxes based upon a
statutory rate offset by benefits relating to the Company's foreign sales
corporation and research and development tax credits.
Net income increased $2.5 million, or 102%, from $2.5 million to $5.0
million.
LIQUIDITY AND CAPITAL RESOURCES
As of March 1, 1997 the Company had cash on hand of $3.2 million and
working capital of $15.0 million. In addition, the Company has a $6.0 million
working capital facility with California United Bank, a $2.0 million capital
equipment facility with NationsBank and California Amplifier s.a.r.l., its
foreign subsidiary, has an informal arrangement with a French Bank to borrow up
to $600,000. As of March 1, 1997, no amounts were outstanding under any of
these arrangements, except for approximately $1.3 million in term debt due to
NationsBank, borrowed under prior capital equipment agreements. The $6.0
million credit facility with California United Bank
12
<PAGE>
expires on August 4, 1997, however, the Company has verbal assurances from the
Bank that the agreement will be renewed for an additional year at similar or
more favorable terms. The equipment facility with NationsBank expires in
December 1997, at which time the Company will decide whether to renew such
arrangement.
The Company believes that cash flow from operations, together with the
funds available under its credit facilities, are sufficient to support
operations and capital equipment requirements over the next twelve months.
The Company believes that inflation has not had a material effect on its
operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and related financial information required to be
filed hereunder are indexed on page 18 of this report and are incorporated
herein by reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
Name Age Position
------------------------ --- ---------------------------------------
Ira Coron 68 Chairman, Chief Executive Officer and
Director
Michael R. Ferron 42 Vice President, Finance, Chief Financial
Officer and Corporate Secretary
Kris Kelkar 33 Vice President, Marketing
Arthur H. Hausman (1) 73 Director
William E. McKenna (1)(2) 77 Director
Thomas L. Ringer (2) 65 Director
- -------------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Ira Coron joined the Company as Chairman and Chief Executive Officer in
March 1994. From 1989 to 1994 he was an independent management consultant to
several companies and venture capital firms. He retired from TRW, Inc., after
serving in numerous senior management positions from June 1967 to July 1989
among which was Vice President and General Manager of TRW's Electronic
Components Group. He also serves on the Board of Directors of the Wireless
Cable Association, Made 2 Manage Systems, Inc., and CMC Industries, Inc.
Michael R. Ferron joined the Company as Vice President, Finance and Chief
Financial Officer in October 1990 and was appointed Corporate Secretary in March
1991. Prior to October 1990, Mr. Ferron was employed by the accounting firms of
Deloitte & Touche and Arthur Young & Company, respectively.
13
<PAGE>
Kris Kelkar was appointed Senior Vice President of Sales and Marketing in
April 1995 and Vice President, Marketing in April 1997. Since 1988 he held
various positions with General Instrument Corporation, more recently he held the
position of Vice President of International Marketing for General Instrument's
Communications Division.
Arthur H. Hausman has been a director of the Company since 1987. Mr.
Hausman is Chairman Emeritus of the Board of Ampex Corporation. He served as
Chairman of the Board of Directors and Chief Executive Officer of Ampex, having
been with Ampex for 27 years until his retirement in 1988. He currently serves
as a director of Drexler Technology Corporation, California Microwave, Inc., and
director emeritus of TCI, Inc. He was appointed by President Reagan to the
President's Export Council, to the Council's Executive Committee and to the
Chairmanship of the Export Administration Subordinate Committee of the Council
for the period 1985 to 1989.
William E. McKenna has been a director of the Company since October 1983.
Since December 1977, Mr. McKenna has been general partner of MCK Investment
Company, a private investment company. Mr. McKenna was Chairman of the Board of
Directors of Technicolor, Inc. from 1970 to 1976 and was formerly Chairman of
the Board of Directors and Chief Executive Officer of Hunt Foods & Industries,
Inc. and its successor, Norton Simon, Inc. From 1960 to 1967, Mr. McKenna was
associated with Litton Industries, Inc. as a Director and in various executive
capacities. He is currently a director of Midway Games, Inc., Drexler
Technology Company, WMS Industries, Inc. and Williams Hospitality Group, Inc.
Thomas Ringer has been a director of the Company since August 1996. Mr.
Ringer is Chairman of the Board of E*Capital Corporation (formally Wedbush
Corp.), the holding company for Wedbush Morgan Securities, Inc. Mr. Ringer has
served as Chairman, President and Chief Executive Officer for Recognition
Equipment, Inc., President and Chief Executive Officer of Fujitsu Systems of
America, Inc., and President and Chief Executive Officer of Computer Machinery
Corporation. In addition, Mr. Ringer currently serves on the Board of Directors
of Document Sciences Corporation, M.S. Aerospace, Inc., Public Safety Equipment,
Inc., and the Center for Innovation and Entrepreneurship.
Officers are appointed by and serve at the discretion of the Board of
Directors. Each director holds office until the next annual meeting of
stockholders or until his successor has been duly elected and qualified. Each
non-employee director receives an annual stock option grant to purchase 8,000
shares at the fair-market-value at time of grant which vest over a one-year
period, a monthly fee of $1,250, and reimbursement of out-of-pocket expenses in
attending the Company's Board of Directors meetings. There are no family
relationships among any directors or executive officers of the Company.
The Company has a Compensation Committee which reviews and makes
recommendations to the Board of Directors with respect to the compensation of
the Company's officers and to administer the Company's Key Employee Stock Option
Plan. The Company also has an Audit Committee which reviews the scope of audit
procedures employed by the Company's independent auditors, reviews the audit
reports rendered by the Company's independent auditors and approves the audit
fee charged by the independent auditors. The Audit Committee reports to the
Board of Directors with respect to such matters and recommends the selection of
independent auditors.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the information under the captions
"Executive Compensation" in the Company's definitive proxy statement for the
Annual Meeting of Stockholders to be held on July 18, 1997.
14
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the information under the caption "Stock
Ownership" in the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on July 18, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the information contained under the caption
"Certain Relationships and Related Transactions" in the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held on July 18,
1997.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS. Reference is made to the Index to Consolidated
Financial Statements on page 18 of this report.
(b) FORM 8-K. The Company made no filings on Form 8-K during the three months
ended March 1, 1997.
(c) EXHIBITS. Reference is made to the Index to Exhibits on pages 33-35 of
this report.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CALIFORNIA AMPLIFIER, INC.
By: /s/ Ira Coron
-----------------------------
Ira Coron
Chairman of the Board and
Chief Executive Officer
Dated: May 30, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
CAPACITIES
SIGNATURES IN WHICH SERVED DATES
- ----------------------- ------------------------- ----------------
/s/ Ira Coron Chairman, Chief Executive May 30, 1997
- ----------------------- Officer and Director
Ira Coron (Principal Executive
Officer)
/s/ William E. McKenna Director May 30, 1997
- -----------------------
William E. McKenna
/s/ Arthur H. Hausman Director May 30, 1997
- -----------------------
Arthur H. Hausman
/s/ Thomas L. Ringer Director May 30, 1997
- -----------------------
Thomas L. Ringer
/s/ Michael R. Ferron Vice President, Finance May 30, 1997
- ----------------------- Chief Financial
Michael R. Ferron Officer (Principal
Accounting Officer)
and Corporate Secretary
17
<PAGE>
CALIFORNIA AMPLIFIER, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 19
FINANCIAL STATEMENTS:
Consolidated Balance Sheets 20
Consolidated Statements of Income 21
Consolidated Statements of Stockholders' Equity 22
Consolidated Statements of Cash Flows 23
Notes to Consolidated Financial Statements 24-32
18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
California Amplifier, Inc.:
We have audited the accompanying consolidated balance sheets of California
Amplifier, Inc. (a Delaware corporation) and subsidiaries as of March 1, 1997,
and March 2, 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended March 1, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of California Amplifier, Inc.
and subsidiaries as of March 1, 1997, and March 2, 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended March 1, 1997 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
April 9, 1997
19
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE)
MARCH 1, MARCH 2,
1997 1996
- -------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,165 $11,637
Accounts receivable 6,510 4,645
Income tax receivable 806 ---
Inventories 8,200 6,744
Deferred tax asset 800 1,200
Prepaid expenses and other current assets 383 399
- -------------------------------------------------------------------------------
Total current assets 19,864 24,625
Property and equipment -- at cost, net of
accumulated depreciation and amortization 7,407 6,160
Investment in non-consolidated subsidiary 1,000 852
Other assets 1,265 936
- -------------------------------------------------------------------------------
$29,536 $32,573
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,136 $ 3,230
Accrued liabilities 1,928 4,659
Current portion of long-term debt 799 993
- -------------------------------------------------------------------------------
Total current liabilities 4,863 8,882
Long-term debt 525 767
Commitments --- ---
Stockholders' equity:
Preferred stock, 3,000 shares authorized;
no shares outstanding --- ---
Common stock, $.01 par value; 30,000 shares authorized;
11,713 shares outstanding in March 1997 and
11,519 shares outstanding in March 1996 117 115
Additional paid-in capital 13,990 13,255
Foreign currency translation adjustment (127) 19
Retained earnings 10,168 9,535
- -------------------------------------------------------------------------------
Total stockholders' equity 24,148 22,924
- -------------------------------------------------------------------------------
$29,536 $32,573
- -------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
20
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT NET INCOME PER SHARE)
YEARS ENDED
- -------------------------------------------------------------------------------
MARCH 1, MARCH 2, MARCH 4,
1997 1996 1995
- -------------------------------------------------------------------------------
Sales $ 49,290 $ 61,590 $ 45,656
Cost of sales 34,810 40,637 31,432
- -------------------------------------------------------------------------------
Gross profit 14,480 20,953 14,224
Research and development 5,789 4,376 3,155
Selling 4,802 5,003 3,712
General and administrative 3,201 4,077 3,583
- -------------------------------------------------------------------------------
Income from operations 688 7,497 3,774
Interest and other income, net 327 460 247
Interest expense (118) (219) (201)
Income (loss) attributable to
non-consolidated subsidiary 140 (100) (50)
- -------------------------------------------------------------------------------
Income before provision for
income taxes 1,037 7,638 3,770
Provision for income taxes 404 2,680 1,319
- -------------------------------------------------------------------------------
Net income $ 633 $ 4,958 $ 2,451
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net income per share $ .05 $ .41 $ .22
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Weighted average shares outstanding 12,551 12,182 11,182
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
21
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Cumulative
Foreign
Common Stock Additional Currency
------------------- Paid-in Translation Retained
Shares Amount Capital Adjustment Earnings Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at February 26, 1994 10,576 $106 $9,931 $ --- $2,126 $12,163
Exercise of stock options 240 2 283 --- --- 285
Net income --- --- --- --- 2,451 2,451
- -----------------------------------------------------------------------------------------------------------
Balances at March 4, 1995 10,816 108 10,214 --- 4,577 14,899
Conversion of debt 100 1 399 --- --- 400
Exercise of stock options 603 6 2,642 --- --- 2,648
Currency translation adjustment --- --- --- 19 --- 19
Net income --- --- --- --- 4,958 4,958
- -----------------------------------------------------------------------------------------------------------
Balances at March 2, 1996 11,519 115 13,255 19 9,535 22,924
Exercise of stock options
and warrants 194 2 735 --- --- 737
Currency translation adjustment --- --- --- (146) --- (146)
Net income --- --- --- --- 633 633
- -----------------------------------------------------------------------------------------------------------
Balances at March 1, 1997 11,713 $117 $13,990 $ (127) $10,168 $24,148
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
22
<PAGE>
CALIFORNIA AMPLIFIER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
- ----------------------------------------------------------------------------------------------------
MARCH 1, MARCH 2, MARCH 4,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 633 $ 4,958 $ 2,451
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,016 2,693 2,363
Loss on sale of property and equipment 12 12 19
(Income)/loss attributable to
non-consolidated subsidiary (140) 100 50
(Increase) decrease in:
Accounts receivable (1,865) 1,394 (773)
Inventories (1,456) (715) (389)
Income tax receivable (806) --- ---
Deferred tax asset 400 (400) (200)
Prepaid expenses and other assets (313) (229) 284
Increase (decrease) in:
Accounts payable (1,094) 755 (1,329)
Accrued liabilities (2,731) 1,719 972
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (5,344) 10,287 3,448
- ----------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of property and equipment (3,420) (3,408) (3,005)
Proceeds from note receivable --- 25 105
Payments from (advances to)
non-consolidated subsidiary (8) 25 (27)
- ----------------------------------------------------------------------------------------------------
Net cash used in investing activities (3,428) (3,358) (2,927)
- ----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Repayments under line of credit arrangements --- --- (666)
Debt borrowings 608 1,304 1,273
Debt repayments (1,044) (917) (498)
Issuances of common stock, net of retirements 736 2,667 285
- ----------------------------------------------------------------------------------------------------
Net cash provided by financing activities 300 3,054 394
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (8,472) 9,983 915
Cash and cash equivalents
at beginning of year 11,637 1,654 739
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents
at end of year $ 3,165 $11,637 $ 1,654
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
California Amplifier, Inc. (the "Company") designs, manufactures and markets a
broad line of amplifiers, downconverters, antennas and integrated products for
the reception of microwave signals used primarily in conjunction with the
delivery of multichannel television.
The Company also has a 50% ownership interest in Micro Pulse, Inc. ("Micro
Pulse"), a company that designs, manufactures and markets antennas and
amplifiers used principally in global positioning systems. Such products are
used in surveying applications, vehicle tracking, and marine and airborne
navigation. Subsequent to March 1, 1997, the Company acquired additional shares
resulting in a 50.5% controlling interest in Micro Pulse. As a result,
beginning in fiscal year 1998, the Company's current method of accounting for
Micro Pulse using the equity method as presented in the accompanying financial
statements will be changed to the consolidation method of accounting. (See Notes
2 and 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, California Amplifier s.a.r.l., the Company's
subsidiary in France, and Cal Amp FSC, Inc., a foreign sales corporation
established for tax purposes. All significant intercompany transactions have
been eliminated.
The Company's 50% ownership interest in Micro Pulse is accounted for using the
equity method.
FISCAL YEAR
The Company reports results on the basis of a 52/53 week accounting calendar
ending on the last Saturday of February or the first Saturday of March.
STOCK SPLIT
On February 16, 1996, the Board of Directors approved a two-for-one stock split
distributed in the form of a stock dividend on March 22, 1996. All per share
amounts have been retroactively adjusted to reflect this stock split.
REVENUE RECOGNITION
Revenue on product sales is recognized at the time of shipment.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CONCENTRATION OF RISK
As of March 1, 1997, the Company had cash and cash equivalent balances of
$3,165,000 at financial institutions (primarily California United Bank and Smith
Barney) which were in excess of federally insured amounts.
24
<PAGE>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company has established a reserve for potential write-offs relating to
noncollectibility of accounts receivable. As of March 1, 1997, and March 2,
1996, the allowance for doubtful accounts was $560,000 and $1,217,000,
respectively. In fiscal year 1997, 1996 and 1995, $14,000, $473,000 and $601,000
was charged to expense, respectively. Amounts charged to the allowance account
for bad debt write-offs and costs relating to product returns were $671,000,
$12,000 and $153,000 in fiscal years 1997, 1996 and 1995, respectively.
WARRANTY
The Company warrants its products against defects over periods ranging from
one to five years. An accrual for estimated future costs relating to
products returned under warranty is recorded as an expense when products are
shipped. Warranty expense was $206,000, $969,000 and $578,000 in fiscal years
1997, 1996 and 1995, respectively. Amounts charged to accrued warranty for
the actual costs of maintaining the Company's warranty program were $806,000,
$469,000 and $578,000, in fiscal years 1997, 1996 and 1995, respectively.
INVENTORIES
Inventories include costs of materials, labor and manufacturing overhead and are
stated at the lower of cost (first-in, first-out) or market, and consist of the
following (in 000's):
March 1, March 2,
1997 1996
- -------------------------------------------------------------------------------
Raw materials $ 2,510 $ 2,480
Work in process 1,568 562
Finished goods 4,122 3,702
- -------------------------------------------------------------------------------
$ 8,200 $ 6,744
- -------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consists of the following (in
000's):
March 1, March 2,
1997 1996
- -------------------------------------------------------------------------------
Land $ 706 $ -
Machinery and equipment 9,125 7,516
Furniture and computers 4,271 3,731
Tooling 3,201 2,620
Leasehold improvements 1,084 580
- -------------------------------------------------------------------------------
18,387 14,447
Less accumulated depreciation
and amortization (10,980) (8,287)
- -------------------------------------------------------------------------------
$ 7,407 $ 6,160
- -------------------------------------------------------------------------------
The Company follows the policy of capitalizing expenditures which materially
increase asset lives, and charging ordinary maintenance and repairs to
operations, as incurred.
When assets are sold or disposed of, the cost and related depreciation are
removed from the accounts and any resulting gain or loss is included in income.
Depreciation and amortization is based upon the estimated useful lives of the
related assets using the straight-line method. Useful lives range from two to
five years.
25
<PAGE>
STATEMENTS OF CASH FLOWS
The Company considers all liquid investments with an original maturity of less
than three months to be cash equivalents.
The Company paid interest of $118,000, $219,000 and $196,000 in fiscal years
1997, 1996 and 1995, respectively. The Company paid income taxes of $839,000,
$1,103,000 and $780,000 in fiscal years 1997, 1996 and 1995, respectively.
In fiscal year 1996, the Company excluded from the consolidated statements of
cash flows the following non-cash transactions: issuance of 100,000 shares of
its common stock as part of a $400,000 convertible debt arrangement (see Note
3).
NET INCOME PER SHARE
Net income per share is based upon the weighted average number of shares
outstanding during each of the respective years, including the dilutive effects
of stock options and warrants using the treasury stock method. The number of
shares used in the computation of net income per share for fiscal years 1997,
1996 and 1995 were increased by 913,000, 996,000 and 466,000 shares,
respectively, for the dilutive effects of stock options and warrants. Primary
earnings per share were not materially different from fully diluted earnings per
share.
ACCOUNTING FOR STOCK OPTION STOCK BASED COMPENSATION
The Company adopted Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" (SFAS 123) in fiscal 1997. As allowed
by SFAS 123, the Company has elected to continue to measure compensation cost
under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" (APB 25) and comply with the pro forma disclosure requirements of
the new standard (see Note 8).
NEW AUTHORITATIVE PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128) and
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure" (SFAS 129). SFAS 128 revises and simplifies the
computation for earnings per share and requires certain additional disclosures.
SFAS 129 requires additional disclosures regarding the Company's capital
structure. Both standards will be adopted in fiscal year 1998. Management does
not expect the adoption of these standards to have a material effect on the
Company's financial position or results of operations.
3. INVESTMENT IN NON-CONSOLIDATED SUBSIDIARY
In January 1993, the Company purchased a 50% ownership interest in Micro Pulse
for $500,000. Under the terms of the agreement, the Company paid $100,000 in
cash to the principal stockholders of Micro Pulse and issued a $400,000
convertible subordinated note bearing interest at 8% due in January 1996. In
April 1995, the holders of the note chose to convert the note, and received
100,000 shares of the Company's common stock. Subsequent to March 1, 1997, the
Company acquired additional shares resulting in a 50.5% controlling interest in
Micro Pulse for forgiveness of $100,000 of debt due from Micro Pulse.
26
<PAGE>
The investment in Micro Pulse is accounted for using the equity method of
accounting. The investment is increased (reduced) by a credit (charge) to
income for 50% of the Micro Pulse income (loss). In addition, the portion of
the investment that exceeds 50% of Micro Pulse's net equity is being amortized
over ten years. For financial statement presentation purposes, the Company
considers all amounts advanced to Micro Pulse as part of its investment. A
summary of the activity in the investment for fiscal years 1997, 1996 and 1995
is as follows (in 000's):
1997 1996 1995
- -------------------------------------------------------------------------------
Beginning balance $ 852 $977 $1,000
Net advances (payments) to/from Micro Pulse 8 (25) 27
Amortization of investment in
excess of 50% of Micro Pulse net equity (39) (225) (100)
50% of Micro Pulse income 179 125 50
- -------------------------------------------------------------------------------
Ending balance $1,000 $852 $977
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Summary information relating to the results of operations and the financial
condition of Micro Pulse for fiscal years 1997, 1996 and 1995 is as follows (in
000's):
1997 1996 1995
- -------------------------------------------------------------------------------
Sales $5,540 3,500 $2,400
Net income 358 250 100
Total assets 2,031 1,100 600
Stockholders' Equity (Deficit) 152 (145) (395)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The Company recognized sales to Micro Pulse of $93,000, $377,000, and $302,000
in fiscal years 1997, 1996, and 1995, respectively. The Company recognized
interest income relating to the receivable due from Micro Pulse of $68,000,
$75,000 and $78,000 in fiscal years 1997, 1996, and 1995 respectively. The
Company recognized interest expense relating to the $400,000 note payable prior
to its conversion in April 1995 of $5,000 in fiscal year 1996 and $33,000 in
fiscal year 1995.
4. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in 000's):
March 1, March 2,
1997 1996
- -------------------------------------------------------------------------------
Payroll and related expenses $ 744 $1,547
Warranty 500 1,100
Income taxes --- 987
Other accrued liabilities 684 1,025
- -------------------------------------------------------------------------------
$1,928 $4,659
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
27
<PAGE>
5. SHORT-TERM BORROWINGS
The Company has a $6.0 million working capital credit facility with a bank.
Borrowings outstanding bear interest at the bank's prime rate (8.25% at March 1,
1997) and are secured by substantially all of the Company's assets, excluding
the assets secured by other debt arrangements. The credit facility expires on
August 4, 1997. At March 1, 1997, no amounts were outstanding under this credit
facility, and $6.0 million was available for borrowing.
The Company's foreign subsidiary has a $600,000 borrowing facility with a French
bank. The borrowings are unsecured and bear interest at rates ranging from 6%
to 8%. At March 1, 1997, no amounts were outstanding under the credit
arrangement, and $600,000 was available for borrowing. The facility can be
withdrawn by the bank at any time.
Selected information regarding short-term borrowings for fiscal years 1997, 1996
and 1995 is as follows (in 000's, except percentages):
1997 1996 1995
- -------------------------------------------------------------------------------
Average amount outstanding $ - $ - $ 339
Maximum amount outstanding - - 800
Weighted average interest rate during the period - - 7.75%
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6. LONG-TERM DEBT
Long-term debt consists of the following (in 000's):
March 1, March 2,
1997 1996
- -------------------------------------------------------------------------------
Note payable to a bank, secured by equipment,
bearing interest at rates ranging from 6.76% to 7.96%
payable monthly through November 2000 $1,324 $1,760
Less portion due within one year (799) (993)
- -------------------------------------------------------------------------------
$ 525 $ 767
- -------------------------------------------------------------------------------
Annual maturities on long-term debt as of March 1, 1997, are as follows (in
000's):
1998 $ 799
1999 290
2000 134
2001 101
- -------------------------------------------------------------------------------
$1,324
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
28
<PAGE>
7. INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of the
Financial Accounting Standards Board Statement No. 109 "Accounting for Income
Taxes" (SFAS No. 109). Under SFAS No. 109, deferred income tax assets or
liabilities are computed based on the temporary difference between the financial
statement and income tax bases of assets and liabilities using the enacted
marginal income tax rate in effect for the year in which the differences are
expected to reverse. Deferred income tax expenses or credits are based on
changes in the deferred income tax assets or liabilities from period to period.
The provision for income taxes for fiscal years 1997, 1996 and 1995 are as
follows (in 000's):
1997 1996 1995
- -------------------------------------------------------------------------------
Current - Federal $(175) $2,512 $1,211
- State (31) 443 214
- Foreign 210 125 94
Deferred - Federal 340 (340) (170)
- State 60 (60) (30)
- -------------------------------------------------------------------------------
$ 404 $2,680 $1,319
- -------------------------------------------------------------------------------
Differences between the provision for income taxes and income taxes computed
using the statutory federal income tax rate for fiscal years 1997, 1996 and 1995
are as follows (in 000's):
1997 1996 1995
- -------------------------------------------------------------------------------
Income tax at statutory federal rate (34%) $353 $2,597 $1,282
State income taxes (9.3%), net of federal 62
income tax effect 62 458 226
Foreign taxes 210 125 94
Research and development credit --- (102) (418)
Alternative Minimum Tax credit --- (83) ---
- -------------------------------------------------------------------------------
Other, net (221) (315) 135
- -------------------------------------------------------------------------------
$404 $2,680 $1,319
The components of the net deferred income tax asset are as follows (in 000's):
March 1, March 2,
1997 1996
- -------------------------------------------------------------------------------
Depreciation $ 95 $ (280)
Warranties 200 430
Inventory valuation 440 325
Allowance for doubtful accounts 160 420
Other, net (95) 305
- -------------------------------------------------------------------------------
$ 800 $1,200
- -------------------------------------------------------------------------------
29
<PAGE>
8. COMMON STOCK
STOCK OPTIONS
The Company has one stock option plan for its employees, the 1989 Key Employee
Stock Option Plan ("1989 Plan''). Under the 1989 Plan, stock options can be
granted at prices not less than 100% of the fair market value at the date of
grant. Option grants are exercisable at the discretion of the Compensation
Committee, but usually over a four year vesting period.
The following table summarizes the option activity for fiscal years 1997, 1996
and 1995 (in 000's except dollar amounts):
Weighted
Number Average
Shares Option Price
- ------------------------------------------------------------------------------
Outstanding at February 26, 1994 1,298 $ 1.95
Granted 458 2.32
Exercised (240) .74
Canceled (152) 2.63
- ------------------------------------------------------------------------------
Outstanding at March 4, 1995 1,464 2.24
Granted 562 7.09
Exercised (603) 2.27
Canceled (109) 4.15
- ------------------------------------------------------------------------------
Outstanding at March 2, 1996 1,314 4.83
Granted 330 18.19
Exercised (109) 3.08
Canceled (147) 11.00
- ------------------------------------------------------------------------------
Outstanding at March 1, 1997 1,388 $ 7.49
- ------------------------------------------------------------------------------
The weighted average theoretical value for options granted during the year
was $15.01 and $5.66 for fiscal year 1997 and 1996, respectively.
The number of common stock options available for grant as of each fiscal year
were 912,650 for 1997, 299,400 for 1996, and 381,000 for 1995. On July 19,
1996, the Stockholders approved the proposal to increase the number of shares
available to grant by 800,000 shares.
Options outstanding at March 1, 1997 and related weighted average price and life
information is as follows:
<TABLE>
<CAPTION>
Weighted Total
Total Average Weighted Options Weighted
Range of Options Remaining Life Average Exercisable Average
Exercise Prices Outstanding (Years) Exercise Price (000's) Exercise Price
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.69 - $ 0.82 147,300 6.5 $ 0.74 147,300 $ 0.74
$ 1.69 - $ 2.57 268,000 7.3 $ 2.32 85,000 2.35
$ 3.50 - $ 4.88 275,900 7.4 $ 3.72 142,900 3.62
$ 5.53 - $ 9.00 478,850 8.5 $ 7.12 101,150 6.98
$13.60 - $16.25 48,000 8.8 $14.78 8,000 14.05
$21.88 - $26.97 170,000 9.1 $26.97 6,576 21.88
- ----------------------------------------------------------------------------------------------------------
$0.69 - $26.97 1,388,000 7.9 $ 7.49 490,926 $ 3.64
</TABLE>
As permitted by SFAS 123, the Company continues to apply the accounting rules of
APB 25 governing the recognition of compensation expense from its Stock Option
Plans. Such accounting rules measure compensation expense on the first date at
which both the number of shares and the exercise price are known. Under the
30
<PAGE>
Company's plans, this would typically be the grant date. To the extent that the
exercise price equals or exceeds the market value of the stock on the grant
date, no expense is recognized. As options are generally granted at exercise
prices not less than the fair market value on the date of grant, no compensation
expense is recognized under this accounting treatment in the accompanying
statements of operations.
The fair value of options at date of grant was estimated using the Black-Scholes
model with the following weighted average assumptions:
1997 1996
----- -----
Expected life (years) 10 10
Dividend yield -- --
The range for interest rates is 5.63% - 7.14%, range for volatility is 70.95%
- -77.17%. The estimated stock-based compensation cost calculated using the
assumptions indicated totaled $1,863,000 and $404,000 in fiscal year 1997 and
fiscal year 1996, respectively. This would result in a pro forma net loss
resulting from the increased compensation cost of $485,000 $0.04 per share
and pro forma net income of $4,716,000, or $0.39 per share in fiscal year
1997 and fiscal year 1996, respectively. The effect of stock-based
compensation on net income for fiscal 1997 and 1996 may not be representative
of the effect on pro forma net income in future years because compensation
expense related to grants made prior to fiscal 1996 is not considered.
9. COMMITMENTS
The Company leases its corporate and manufacturing facility as part of an
operating lease through February 2004. The Company pays annual rents of
$461,000 through July 2001, at which time the annual rent will increase to
$480,000 until February 2004 when the lease expires. The lease agreement also
requires the Company to pay all property taxes and any insurance premiums
associated with the coverage of the facility.
In addition, the Company leases a shipping, finished goods and storage facility
as part of an operating lease through February 2004. The Company pays annual
rents of $30,000 through October 1998 at which time the annual rent will
increase to $32,000. The Company also leases offices in Paris, France; Sao
Paulo, Brazil; and Bangkok, Thailand, under certain lease arrangements. In
addition, the Company leases equipment used in the manufacturing operation.
The following table represents the future minimum rent payments required under
all operating leases with terms in excess of one year as of March 1, 1997 (in
000's):
Fiscal Year:
1998 $ 598
1999 602
2000 607
2001 610
2002 590
Thereafter 1,205
- -------------------------------------------------------------------------------
$4,212
- -------------------------------------------------------------------------------
Rent expense for fiscal years 1997, 1996 and 1995 was $1,013,000, $1,200,000 and
$1,186,000, respectively.
10. MAJOR CUSTOMERS AND FOREIGN SALES INFORMATION
The Company operates in a single business segment: the design, manufacture and
sale of microwave components and subsystems. In fiscal year 1997, one customer
accounted for 11.1% of the Company's sales. In fiscal year 1996, one customer
accounted for 13% of the Company's sales, and in fiscal year 1995, no customer
accounted for more than 10% of the Company's sales.
31
<PAGE>
Sales information by product line, by domestic and foreign sales, and by
geographical area are as follows (unaudited in 000's):
1997 1996 1995
- --------------------------------------------------------------------------------
Wireless Cable $ 34,438 $ 43,155 $ 20,965
Satellite Television 14,758 18,058 24,389
- --------------------------------------------------------------------------------
Other 94 377 302
- --------------------------------------------------------------------------------
$ 49,290 $ 61,590 $ 45,656
- --------------------------------------------------------------------------------
Domestic $ 17,070 $ 17,136 $ 20,565
Foreign 32,220 44,454 25,091
- --------------------------------------------------------------------------------
$ 49,290 $ 61,590 $ 45,656
- --------------------------------------------------------------------------------
U.S. & Canada $ 19,025 $ 18,113 $ 20,822
Latin America 8,495 9,673 13,544
Europe 5,265 10,871 2,064
Middle East 2,267 245 2,331
Africa 4,637 3,085 4,546
Asia 8,921 17,343 2,223
Australia 680 2,260 126
- --------------------------------------------------------------------------------
$ 49,290 $ 61,590 $ 45,656
- --------------------------------------------------------------------------------
11. QUARTERLY FINANCIAL INFORMATION
The following summarizes certain quarterly statement of income data for each of
the quarters in fiscal years 1997 and 1996 (unaudited in 000's, except
percentages and per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Fiscal 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 17,275 $ 11,463 $ 11,702 $ 8,850 $ 49,290
Gross profits 6,043 3,430 3,406 1,601 14,480
Gross margins 35% 29.9% 29.1% 18.1% 29.4%
Net income (loss) 1,623 (209) 127 (908) 633
Income (loss) per share $ 0.13 $ (0.02) $ 0.01 $ (0.08) $ 0.05
- ------------------------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Fiscal 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 12,665 $ 14,505 $ 16,314 $ 18,106 $ 61,590
Gross profits 4,204 4,876 5,562 6,311 20,953
Gross margins 33.2% 33.6% 34.1% 34.9% 34.0%
Net income 852 1,071 1,357 1,678 4,958
Income per share $ .07 $ .09 $ .11 $ .14 $ .41
- ------------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
INDEX TO EXHIBITS
3.1 Certificate of Incorporation of the Registrant, as amended, filed as
Exhibit 3.1 to the Registrant's Registration Statement on Form S-1
(33-59702) and by this reference is incorporated herein and made a part
hereof.
3.1.1 Amendment to Certificate of Incorporation of the Registrant, as filed
with the Delaware Secretary of State on September 19, 1996, filed as
Exhibit 3.1.1 to the Registrant's Interim Report on Form 10-Q for the
period ended August 31, 1996.
3.2 Bylaws of the Registrant, as amended, filed as Exhibit 3.2 to the
Registrant's Form 8-K dated February 27, 1992 and by this reference is
incorporated herein and made a part hereof.
10.1 1984 Key Employee Stock Option Plan filed as Exhibit 10.1 to the
Registrant's Registration Statement on Form S-1 (2-87042) and by this
reference is incorporated herein and made a part hereof.
10.2 Form of Incentive Stock Option Agreement filed as Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1 (2-87042) and by this
reference is incorporated herein and made a part hereof.
10.3 Form of Nonqualified Stock Option Agreement filed as Exhibit 10.3 to
the Registrant's Registration Statement on Form S-1 (2-87042) and by
this reference is incorporated herein and made a part hereof.
10.4 1989 Key Employee Stock Option Plan filed as Exhibit 4.4 to the
Registrant's Registration Statement on Form S-8 (33-31427) and by this
reference is incorporated herein and made a part hereof.
10.4.1 Amendment No. 1 to the 1989 Key Employee Stock Option Plan filed as
Exhibit 4.7 to the Registrant's Registration Statement on Form S-8
(33-36944) and by this reference is incorporated herein and made a part
hereof.
10.4.2 Amendment No. 2 to the 1989 Key Employee Stock Option Plan filed as
Exhibit 4.8 to the Registrant's Registration Statement on Form S-8
(33-72704) and by this reference is incorporated herein and made a part
hereof.
10.4.3 Amendment No. 3 to the 1989 Key Employee Stock Option Plan filed as
Exhibit 4.10 to the Registrant's Registration Statement on Form S-8
(33-60879) and by this reference is incorporated herein and made a part
hereof.
10.5 Form of Incentive Stock Option Agreement filed as Exhibit 4.6 to the
Registrant's Registration Statement on Form S-8 (33-31427) and by this
reference is incorporated herein and made a part hereof.
10.6 Form of Nonqualified Stock Option Agreement filed as Exhibit 4.6 to the
Registrant's Registration Statement on Form S-8 (33-31427) and by this
reference is incorporated herein and made a part hereof.
10.7 Form of Option Agreement for Non-Employee Directors filed as Exhibit
4.9 to the Registrant's Registration Statement on Form S-8 (33-36944)
and by this reference is incorporated herein and made a part hereof.
10.8 Letter Agreements regarding sale of the building dated July 18, 1988,
filed as an exhibit to Form 8-K, dated February 27, 1989, filed as an
exhibit to the Registrant's Annual Report on Form 10-K for the fiscal
year ended February 28, 1989 and by this reference is incorporated
herein and made a part hereof.
33
<PAGE>
10.9 Building Lease and Rider on building between the Registrant and Calle
San Pablo Property Co. dated January 31, 1989, filed as an exhibit to
the Registrant's Annual Report on Form 10-K for the fiscal year ended
February 28, 1989 and by this reference is incorporated herein and made
a part hereof.
10.9.1 Amendment of Lease on building between the Registrant and Calle San
Pablo Property Co. dated February 9, 1995, filed as an exhibit to this
Annual Report on Form 10-K for the fiscal year ended March 4, 1995.
10.10 Form of Indemnity Agreement filed as an exhibit to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 29, 1988
and by this reference is incorporated herein and made a part hereof.
10.11 Stockholder Rights Plan filed as an exhibit to the Registrant's Form
8-K dated September 5, 1991 and by this reference is incorporated
herein and made a part hereof.
10.12 Distribution Agreement between Registrant and Pan Asian Systems, Ltd.,
dated July 3, 1992 filed as Exhibit 10.17 to the Company's Registration
Statement on Form S-1 (33-59702) and by this reference is incorporated
herein and made a part hereof.
10.13 Stock Purchase Agreement dated December 31, 1992 by and among
Registrant, Peter J. Connolly, Steven G. Ow and Toni Ow, and The Peter
J. Connolly Charitable Remainder Unitrust dated June 15, 1992 filed as
Exhibit 10.20 to the Company's Registration Statement on Form S-1
(33-59702) and by this reference is incorporated herein and made a part
hereof.
10.14 8% Convertible Subordinated Note dated January 20, 1993 by Registrant
payable to The Peter J. Connolly Charitable Remainder Unitrust dated
June 15, 1992 filed as Exhibit 10.21 to the Registrant's Registration
Statement on Form S-1 (33-59702) and by this reference is incorporated
herein and made a part hereof.
10.15 8% Convertible Subordinated Note dated January 20, 1993 by Registrant
payable to Steven G. Ow and Toni Ow dated June 15, 1992 filed as
Exhibit 10.22 to the Registrant's Registration Statement on Form S-1
(33-59702) and by this reference is incorporated herein and made a part
hereof.
10.16 Promissory Note dated January 20, 1993 by Micro Pulse Incorporated,
payable to Registrant filed as Exhibit 10.23 to the Registrant's
Registration statement on Form S-1 (33-59702) and by this reference is
incorporated herein and made a part hereof.
10.17 Option Agreement entered into as of February 4, 1993 by and among CAMP
Acquisition Corp., Mr. Charles W. Ergen and the Registrant filed as
Exhibit 10.24 to the Registrant's Registration Statement on Form S-1
(33-59702) and by this reference is incorporated herein and made a part
hereof.
10.18 Promissory Note Agreement between Registrant and California United Bank
dated April 5, 1993, filed as Exhibit 10.18 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended February 27, 1993 and by
this reference is incorporated herein and made part hereof.
34
<PAGE>
10.19 Change in Terms Agreement between Registrant and California United
Bank, dated July 22, 1994, and filed as Exhibit 10.19 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended March
4, 1995.
10.20 First Amendment to Business Loan Agreement between Registrant and
California United Bank, dated July 22, 1994, filed as Exhibit 10.20 to
the Registrant's Annual Report on Form 10-K for the fiscal year ended
March 4, 1995.
10.21 Second Amendment to Business Loan Agreement between Registrant and
California United Bank, dated September 13, 1994, filed as Exhibit
10.21 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended March 4, 1995.
10.22 Business Loan Agreement between Registrant and California United Bank,
dated July 26, 1995, filed as Exhibit 10.22 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended March 2, 1996.
10.23 Promissory Note between Registrant and California United Bank dated
July 26, 1995, filed as Exhibit 10.23 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended March 2, 1996.
10.24 Commercial Security Agreement between Registrant and California United
Bank dated July 26, 1995, filed as Exhibit 10.24 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended March 2, 1996.
10.25 First Amendment to Business Loan Agreement between Registrant and
California United Bank, dated July 26, 1995, filed as Exhibit 10.25 to
the Registrant's Annual Report on Form 10-K for the fiscal year ended
March 2, 1996.
*10.26 Promissory Note between Registrant and California United Bank dated
August 6, 1996, filed as an exhibit to this Annual Report on Form 10-K
for the fiscal year ended March 1, 1997.
*10.27 Second Amendment to Business Loan Agreement between Registrant and
California United Bank, dated August 6, 1996, filed as an exhibit to
this Annual Report on Form 10-K for the fiscal year ended
March 1, 1997.
*10.28 Building Lease on building between the Registrant and The Jennings
Bypass Trust, dated September 11, 1996, filed as an exhibit to this
Annual Report on Form 10-K for the fiscal year ended March 1, 1997.
*10.29 Land Purchase Agreement on land between the Registrant and Rhoda-May A.
Dallas Trust, dated February 13, 1996, filed as an exhibit to this
Annual Report on Form 10-K for the fiscal year ended March 1, 1997.
*27 Financial Data Schedule
- -------------------
*Filed herewith
35
<PAGE>
PROMISSORY NOTE
Borrower: California Amplifier, Inc.
460 Calle San Pablo
Camarillo, CA 93012
Lender: California United Bank
Encino Main Office
16030 Ventura Boulevard
Encino, CA 91436
Principal Amount: $6,000,000.00 Initial Rate: 8.250% Date of Note:
August 6, 1996
PROMISE TO PAY. California Amplifier, Inc. ("Borrower") promises to pay to
California United Bank ("Lender"), or order, in lawful money of the United
States of America, the principal amount of Six Million & 00/100 Dollars
($6,000,000.00) or so much as may be outstanding, together with interest on
the unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in
one payment of all outstanding principal plus all accrued unpaid interest on
August 4, 1997. In addition, Borrower will pay regular monthly payments of
accrued unpaid interest beginning September 1, 1996, and all subsequent
interest payments are due on the same day of each month after that. Interest
on this Note is computed on a 365/360 simple interest basis; that is, by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to any unpaid collection costs and any late
charges, then to any unpaid interest, and any remaining amount to principal.
The receipt of any wire transfer of funds, check or other item of payment by
the bank shall be immediately applied to conditionally reduce Borrower's
obligations, but shall not be considered a payment on account unless such
wire transfer is of immediately available federal funds and is made to the
appropriate deposit account of Bank or unless and until such check or other
item of payment is honored when presented for payment.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an independent index which is the prime
rate published on a daily basis in the "Money Rates" Section of the Western
Edition of the Wall Street Journal (the "Index"). The Index is not
necessarily the lowest rate charged by Lender on its loans. If the Index
becomes unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell Borrower the
current Index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will
not occur more often than each day. The Index currently is 8.250% per annum.
The interest rate to be applied to the unpaid principal balance of this Note
will be at a rate equal to the Index, resulting in an initial rate of 8.250%
per annum. NOTICE: Under no circumstances will the interest rate on this
Note be more than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment
of this Note, Borrower understands that Lender is entitled to a minimum
interest charge of $250.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless
agreed to by Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments of accrued unpaid interest. Rather, they will
reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note or any agreement related to this Note, or in any other agreement or loan
Borrower has with Lender. (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially
affect any of Borrower's property or Borrower's ability to repay this Note or
perform Borrower's obligations under this Note or any of the Related
Documents. (d) Any representation or statement made or furnished to Lender
by Borrower or on Borrower's behalf is false or misleading in any material
respect either now or at the time made or furnished. (e) Borrower becomes
insolvent, a receiver is appointed for any part of Borrower's property,
Borrower makes an assignment for the benefit of creditors, or any proceeding
is commenced either by Borrower or against Borrower under any bankruptcy or
insolvency laws. (f) Any creditor tries to take any of Borrower's property
on or in which Lender has a lien or security interest. This includes a
garnishment of any of Borrower's accounts with Lender. (g) Any guarantor
dies or any of the other events described in this default section occurs with
respect to any guarantor of this Note. (h) A material adverse change occurs
in Borrower's financial condition, or Lender believes the prospect of payment
or performance of the Indebtedness is impaired. (i) Lender in good faith
deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay that amount. Upon Borrower's
failure to pay all amounts declared due pursuant to this section, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, do one or both of the following: (a)
increase the variable interest rate on this Note to 5.000 percentage points
over the Index, and (b) add any unpaid accrued interest to principal and
such sum will bear interest therefrom until paid at the rate provided in this
Note (including any increased rate). Lender may hire or pay someone else to
help collect this Note if Borrower does not pay. Borrower also will pay
Lender that amount. This includes, subject to any limits under applicable
law, Lender's attorneys' fees and Lender's legal expenses whether or not
there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all other
sums provided by law. This Note has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of Los
Angeles County, the State of California. Subject to the provisions on
arbitration, this Note shall be governed by and construed in accordance with
the laws of the State of California.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's
accounts with Lender (whether checking, savings, or some other account),
including without limitation all accounts held jointly with someone else and
all accounts Borrower may open in the future, excluding however all IRA and
Keogh accounts, and all trust accounts for which the grant of a security
interest would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on
this Note against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note may be requested orally by Borrower or by an authorized
person. Lender may, but need not, require that all oral requests be confirmed
in writing. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the line
of credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: Ira Coron, Chairman of the
Board; Michael Ferron, Vice President/Finance; and Glenda Blum, Controller.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs.
<PAGE>
PROMISSORY NOTE Page 2
(Continued)
=================================================================
Lender will have no obligation to advance funds under this Note if: (a)
Borrower or any guarantor is in default under the terms of this Note or any
agreement that Borrower or any guarantor has with Lender, including any
agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor
seeks, claims or otherwise attempts to limit, modify or revoke such
guarantor's guarantee of this Note or any other loan with Lender; (d)
Borrower has applied funds provided pursuant to this Note for purposes other
than those authorized by Lender; or (e) Lender in good faith deems itself
insecure under this Note or any other agreement between Lender and Borrower.
ARBITRATION. Lender and Borrower agree that all disputes, claims and
controversies between them, whether individual, joint, or class in nature,
arising from this Note or otherwise, including without limitation contract
and tort disputes, shall be arbitrated pursuant to the Rules of the American
Arbitration Association, upon request of either party. No act to take or
dispose of any collateral securing this Note shall constitute a waiver of
this arbitration agreement or be prohibited by this arbitration agreement.
This includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or
mortgage; obtaining a writ of attachment or imposition of a receiver; or
exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims, or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right, concerning any collateral securing this Note,
including any claim to rescind, reform, or otherwise modify any agreement
relating to the collateral securing this Note, shall also be arbitrated,
provided however that no arbitrator shall have the right or the power to
enjoin or restrain any act of any party. Lender and Borrower agree that in
the event of an action for judicial foreclosure pursuant to California Code
of Civil Procedure Section 726, or any similar provision in any other state,
the commencement of such an action will not constitute a waiver of the right
to arbitrate and the court shall refer to arbitration as much of such action,
including counterclaims, as lawfully may be referred to arbitration.
Judgment upon any award rendered by any arbitrator may be entered in any
court having jurisdiction. Nothing in this Note shall preclude any party
from seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, laches, and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of an action for
these purposes. The Federal Arbitration Act shall apply to the construction,
interpretation, and enforcement of this arbitration provision.
BUSINESS LOAN AGREEMENT. Reference is hereby made to that certain Business
Loan Agreement, dated as of July 26, 1995, as it may be amended, modified, or
replaced, from time to time, for additional terms and conditions.
COLLATERAL. This loan is secured by the Collateral as described in that
certain Commercial Security Agreement, dated as of July 26, 1995, as it may
be amended, modified, or replaced, from time to time, executed by Grantor in
favor of Lender.
BORROWER'S ACKNOWLEDGMENT. Borrower hereby acknowledges that this Note is an
increased renewal of Note numbered 4707 as evidenced by that certain
Promissory Note, dated as of July 26, 1995, in the original principal amount
of $5,000,000.00, executed by Borrower in favor of Lender.
ADDITIONAL MATTERS. Lender reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in
Lender's rights and benefits hereunder. In connection therewith, Lender may
disclose all documents and information which Lender now or hereafter may have
relating to Borrower.
GENERAL PROVISIONS. This Note is payable on demand. The inclusion of
specific default provisions or rights of Lender shall not preclude Lender's
right to declare payment of this Note on its demand. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this
Note, to the extent allowed by law, waive any applicable statute of
limitations, presentment, demand for payment, protest and notice of dishonor.
Upon any change in the terms of this Note, and unless otherwise expressly
stated in writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length
of time) this loan, or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender without the
consent of or notice to anyone. All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the
party with whom the modification is made.
INTEGRATION; AMENDMENT. This Note and the other written documents and
instruments between Borrower and Lender set forth in full the terms of
agreement between the parties and are intended as the full, complete and
exclusive agreement governing the relationship between the parties. This
Note supersedes all prior discussions, promises, representations, warranties,
agreements and understandings between the parties. This Note may not be
modified or amended, nor may any rights hereunder be waived, except in a
writing signed by the party against whom enforcement of the modification,
amendment or waiver is sought. No course of dealing between the parties, no
usage of trade, and no parol or extrinsic evidence of any nature shall be
used or be relevant to supplement, explain or modify any term or provision of
this Note or any supplement or amendment hereto. There are no oral
agreements or understandings between Borrower and Lender regarding any
extension of the maturity of this Note or making any modifications to this
Note, or regarding any other matter.
MUTUAL WAIVER OF RIGHT TO JURY TRIAL. Lender and Borrower each hereby waive
the right to trial by jury in any action or proceeding based upon, arising
out of, or in any way relating to: (i) this Note; or (ii) any other present
or future instrument or agreement between Lender and Borrower; or (iii) any
conduct, acts or omissions of Lender or Borrower or any of their directors,
officers, employees, agents, attorneys or any other persons affiliated with
Lender or Borrower; in each of the foregoing cases, whether sounding in
contract or tort or otherwise.
<PAGE>
PROMISSORY NOTE Page 3
(Continued)
=================================================================
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
California Amplifier, Inc.
X___________________________________________________________
Authorized Officer
LENDER:
California United Bank
By:_________________________________________________________
Authorized Officer
=================================================================
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off.,
Ver. 3.23 (c) 1996 CFI ProServices, Inc. All rights reserved.
[CA-D20 CALAMP.LN C10.OVL]
<PAGE>
SECOND AMENDMENT TO BUSINESS LOAN AGREEMENT
THIS AGREEMENT, dated as of August 6, 1996, is entered into by and between
CALIFORNIA AMPLIFIER, INC., a Delaware corporation ("Borrower") and
CALIFORNIA UNITED BANK, N.A., a national banking association ("Lender").
RECITALS:
A. The Borrower and Lender are parties to a Business Loan Agreement, dated
as of July 26, 1995, as amended dated as of March 11, 1996 (collectively the
"Agreement").
B. Borrower and Lender have agreed to amend certain terms and conditions of
the Agreement in certain respects.
C. Borrower and Lender are contemporaneously with this Agreement entering
into a Promissory Note which may also amend certain terms of the Business
Loan Agreement.
AGREEMENT:
Borrower and Lender agree as follows:
1. Each of the terms defined in the Agreement, unless defined herein, shall
have the same meaning when used herein.
2. The Financial Covenants and Ratios (a) and (f) section of the Agreement
is hereby amended in full to read as follows:
(a) Effective Tangible Net Worth. (defined as net worth plus
subordinated debt, less any intangible assets, and less any amounts
due from shareholders, officers and affiliates of Borrower) not at
any time less than $18,000,000.00.
(f) Capital Expenditures. Borrower shall not, without the prior written
consent of Lender, make any new investment in fixed assets in any
fiscal year in excess of aggregate of $5,000,000.00
3. The subsection titled Change in Ownership of the Agreement is hereby
deleted in full without substitution therefor.
4. Except as specifically amended above, the Agreement shall remain in full
force and effect and is hereby ratified and confirmed. This Amendment and
the Amendment shall be read together, as one document.
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<PAGE>
5. Borrower represents and warrants as follows:
(a) Each of the representations and warranties contained in the
Agreement, as amended hereby, is hereby reaffirmed as of the date
hereof;
(b) The execution, delivery and performance of the Amendment and any
note required hereunder are within the Borrower's powers, have been
duly authorized by all necessary action, have received all
necessary governmental approvals, if any, and do note contravene any
law or any contractual restriction binding on Borrower; and
(c) No event has occurred and is continuing or would result from this
Amendment that constitutes an Event of Default under the Agreement,
or would constitute an Event of Default but for the requirement that
notice be given or time elapse or both.
WITNESS the due execution hereof as of the date first above written.
CALIFORNIA AMPLIFIER, INC.
By:______________________________________
Michael Ferron, Vice President/Finance
CALIFORNIA UNITED BANK, N.A.
By:______________________________________
Karen Brown, Vice President
2
<PAGE>
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET
(Do not use this form for Multi-Tenant Property)
1. Basic Provisions ("Basic Provisions")
1.1 Parties: This Lease (Lease"), dated for reference purposes only,
September 11, 1996, is made by and between The Jennings Bypass Trust
(''Lessor") and California Amplifier, Inc., a Delaware Corporation
("Lessee"). (collectively the "Parties", or individually a "Party").
1.2 Premises: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and
commonly known by the street address of 461 Calle San Pablo located in the
County of Ventura, State of California and generally described as (describe
briefly the nature of the property) an approximate 24,844 sq. ft. CTU
industrial building on approximately 39,639 sq. ft. of MI zoned land.
("Premises"). (See Paragraph 2 for further provisions.)
1.3 Term Seven (7) years and Four (4)months("Original Term") commencing
November 1, 1996 ("Commencement Date") and ending February 28, 2004
("Expiration Date"). (See Paragraph 3 for further provisions.)
1.4 Early Possession: Upon lease execution ("Early Possession Date").
See Paragraphs 3.2 and 3.3 for further provisions.)
1.5 Base Rent: $ 8, 898 .00 per month ("Base Rent"), payable on the
1st. day of each month commencing November 1, 1996 (See Paragraph 4 for
further provisions.) X If this box is checked, there are provisions in this
Lease for the Base Rent to be adjusted.
1.6 Base Rent Paid upon Execution $ 8,898.00 as Base Rent for the period
November 1 to November 30, 1996
1.7 Security Deposit: $9,000.00 (''Security Deposit"). (See Paragraph 5
for further provisions.)
1.8 Permitted Use: microwave telecommunications manufacturing and
warehousing and related administrative uses. (See Paragraph 6 for further
provisions.)
1.9 Insuring Party: Lessor is the "Insuring Party" unless otherwise
stated herein. (See Paragraph 8 for further provisions)
1.10 Real Estate Brokers: The following real estate brokers
(collectively, the "Brokers") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes): CB
Commercial Real Estate Group, Inc. represents__ Lessor exclusively ("Lessor's
Broker"); __ both lessor and Lessee, and represents ___ Lessee exclusively
("Lessee's Broker"); __both Lessee and Lessor. (See Paragraph 15 for further
provisions.)
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by ("Guarantor"). (See Paragraph 37 for further provisions.)
1.12 Addenda. Attached hereto is an Addendum or Addenda consisting of
Paragraphs 1.6 through 52 and Exhibits "A" Building site plan all of which
constitute a part of this Lease
2. Premises.
2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this Lease, or
that may have been used in calculating rental, is an approximation which
Lessor and Lessee agree is reasonable and the rental based thereon is not
subject to revision whether or not the actual square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and
tree of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, fire sprinkler system, lighting, air conditioning,
heating, and loading doors, it any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition
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on the Commencement Date. If a non-compliance with said warranty exists as of
the Commencement Date, Lessor shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify same
at Lessors expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within thirty (30) days after the
Commencement Date, correction of that non-compliance shall be the obligation
of Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building codes,
regulations and ordinances in effect on the Commencement Date. Said warranty
does not apply to the use to which Lessee will put the Premises or to any
Alterations or Utility installations (as defined in Paragraph 7.3 (a) made or
to be made by Lessee. If the Premises do not comply with said warranty,
Lessor shall, except as otherwise provided in this Lease, promptly after
receipt of written notice from Lessee setting forth with specificity the
nature and extent of such non-compliance, rectify me same at Lessor s
expense. If Lessee does not give Lessor written notice of a non-compliance
with this warranty within six (6) months following the Commencement Date,
correction of that non compliance shall be the obligation of Lessee at
Lessee's sole cost and expense.
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it has
been advised by the Brokers to satisfy itself with respect to the condition
of the Premises (including but not limited to the electrical and fire
sprinkler systems security, environmental aspects, compliance with Applicable
Law as defined in Paragraph 6.3) and the present and future suitability of
the Premises for Lessee's intended use, (b) that Lessee has made such
investigation as it deems necessary with reference to such matters and
assumes all responsibility therefor as the same relate to Lessee's occupancy
of the Premises and/or the term of this Lease, and (c) that neither Lessor,
nor any of Lessor's agents, has made any oral or written representations or
warranties with respect to the said matters other than as set forth in this
Lease.
2.5 Lessee Prior Owner/Occupant. The warranties made by Lessor in this
Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises.
In such event, Lessee shall at Lessee's sole cost and expense, correct any
non-compliance of the Premises with said warranties.
3. Term.
3.1 The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3
3.2 Early Possession. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent
shall be abated for the period of such early possession. All other terms of
this Lease, however, (including but not limited to the obligations to pay
Real Property Taxes and insurance premiums and to maintain the Premises)
shall be in effect during such period. Any such early possession shall not
affect nor advance the Expiration Date of the Original Term.
3.3 Delay In Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early Possession
Date, if one is specified in Paragraph 14, or, if no Early Possession Date is
specified by the Commencement Date Lessor shall not be subject to any
liability therefor, nor shall such failure affect the validity of this Lease,
or the obligations of Lessee hereunder, or extend the term hereof, but in
such case, Lessee shall not, except as otherwise provided herein, be
obligated to pay rent or perform any other obligation of Lessee under the
terms of this Lease until Lessor delivers possession of the Premises to
Lessee If possession of the Premises is not delivered to Lessee within sixty
(60) days after the Commencement Date, Lessee may, at its option, by notice
in writing to Lessor within
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<PAGE>
ten (10) days thereafter, cancel this Lease, in which event the Parties shall
be discharged from all obligations hereunder; provided, however, that if such
written notice by Lessee is not received by Lessor within said ten (10) day
period, Lessee's right to cancel this Lease shall terminate and be of no
further force or effect. Except as may be otherwise provided, and regardless
of when the term actually commences, if possession is not tendered to Lessee
when required by this Lease and Lessee does not terminate this Lease, as
aforesaid, the period free of the obligation to pay Base Rent, it any, that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would otherwise haw
enjoyed under the terms hereof, but minus any days of delay caused by the
acts, changes or omissions of Lessee.
4. Rent.
4.1 Base Rent. Lessee shall cause payment of Base Rent and other rent
or charges, as the same may be adjusted from time to time, to be received by
Lessor in lawful money of the United States, without offset or deduction, on
or before the day on which it is due under the terms of this Lease Base Rent
and all other rent and charges for any period during the term hereof which is
for less than one (1) full calendar month shall be prorated based upon the
actual number of days of the calendar month involved. Payment of Base Rent
and other charges shall be made to Lessor at its address stated herein or to
such other persons or at such other addresses as Lessor may from time to time
designate in writing to Lessee.
5. Security Deposit. Lessee shall deposit with Lessor upon execution
hereof the Security Deposit set forth in Paragraph 17 as security for
Lessee's faithful performance of Lessee's obligations under this Lease. If
Lessee fails to pay Base Rent or other rent or charges due hereunder, or
otherwise Defaults under this Lease (as defined in Paragraph 131), Lessor may
use, apply or retain all or any portion of said Security Deposit for the
payment of any amount due Lessor or to reimburse or compensate Lessor for any
liability, cost, expense, loss or damage (including attorneys fees) which
Lessor may utter or incur by reason thereof. If Lessor uses or applies all or
any portion of said Security Deposit, Lessee shall within ten (10) days after
written request therefor Deposit moneys with Lessor sufficient to restore
said Security Deposit to the full amount required by this Lease. Any time the
Base Rent increases during the term of this Lease, Lessee shall, upon written
request from Lessor, deposit additional moneys with Lessor sufficient to
maintain the same ratio between the Security Deposit and the Base Rent as
those amounts are specified in the Basic Provisions. Lessor shall not be
required to keep all or any part of the Security Deposit separate from its
general accounts. Lessor shall, at the expiration or earlier termination of
the term hereof and after Lessee has vacated the Premises, return to Lessee
(or, at Lessor's option, to the last assignee, if any, or Lessee's interest
herein), that portion of the Security Deposit not used or applied by Lessor.
Unless otherwise expressly agreed in writing by Lessor, no part of the
Security Deposit shall be considered to be held in trust, to bear interest or
other increment for its use, or to be prepayment for any moneys to be paid by
Lessee under this Lease.
6. Use.
6.1 Use. Lessee shall use and occupy the Premises only for the purpose
set forth in Paragraph 1 8, or any other use which is comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises
in a manner that creates waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to, neighboring premises or properties.
6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance" as
used in this Lease shall mean any product, substance, chemical material or
waste whose presence, nature, quantity and/or
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intensity of existence, use, manufacture, disposal, transportation, spill,
release or effect, either by itself or in combination with other materials
expected to be on the Premises, is either: (i) potentially injurious to the
public health, safety or welfare, the environment or the Premises, (ii)
regulated or monitored by any governmental authority, or (iii) a basis for
liability of Lessor to any governmental agency or third party under any
applicable statute or common law theory. Hazardous Substance shall include,
but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any
products, by-products or fractions thereof. Lessee shall not engage in any
activity in, on or about the Premises which constitutes a Reportable Use (as
hereinafter defined) of Hazardous Substances without the express prior
written consent of Lessor and compliance in a timely manner (at Lessee's sole
cost and expense) with all Applicable Law (as defined in Paragraph 6.3).
"Reportable Use" shall mean (i) the installation or use of any above or below
ground storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business
plan is required to be filed with, any governmental authority. Reportable Use
shall also include Lessee's being responsible for the presence in, on or
about the Premises of a Hazardous Substance with respect to which any
Applicable Law requires that a notice be given to persons entering or
occupying the Premises or neighboring properties. Notwithstanding the
foregoing, Lessee may, without Lessor s prior consent, but in compliance with
all Applicable Law, use any ordinary and customary materials reasonably
required to be used by Lessee in the normal course of Lessee's business
permitted on the Premises so long as such use is not a Reportable Use and does
not expose the Premises or neighboring properties to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In
addition, Lessor may (but without any obligation to do so) condition its
consent to the use or presence of any Hazardous Substance, activity or
storage tank by Lessee upon Lessee s giving Lessor such additional assurances
as Lessor, in its reasonable discretion, deems necessary to protect itself,
the public, the Premises and the environment against damage, contamination or
injury and/or liability therefrom or therefor, including, but not limited to,
the installation (and removal on or before Lease expiration or earlier
termination) of reasonably necessary protective modifications to the Premises
{such as concrete encasements) and/or the deposit of an additional Security
Deposit under Paragraph 5 hereof.
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance, or a condition involving or resulting
from same, has come to be located in, on, under or about the Premises, other
than as previously consented to by Lessor, Lessee shall immediately give
written notice of such fact to Lessor. Lessee shall also immediately give
Lessor a copy of any statement report, notice, registration, application,
permit business plan, license, claim, action or proceeding given to, or
received from, any governmental authority or private party, or persons
entering or occupying the Premises, concerning the presence, spill, release,
discharge of, or exposure to, any Hazardous Substance or contamination in,
on, or about the Premises, including but not limited to all such documents as
may be involved in any Reportable Uses involving the Premises.
(c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and an loss of rents and/or damages,
liabilities, judgments, costs, claims, liens, expenses, penalties, permits
and attorney's and consultant's fees arising out of or involving any
Hazardous Substance or storage tank brought onto the Premises by or for
Lessee or under Lessee's control. Lessee's obligations under this Paragraph 6
shall include, but not be limited to, the effects of any contamination or
injury to person, property or the environment created or suffered by Lessee,
and the cost of investigation (including consultant's and attorney's fees and
testing), removal, remediation, restoration and/or abatement thereof, or of
any contamination therein involved, and shall survive the expiration or
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<PAGE>
earlier termination of this Lease. No termination, cancellation or release
agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substance's or storage
tanks, unless specifically so agreed by Lessor in writing at the time of such
agreement.
6.3 Lessee's Compliance with Law. Except as otherwise provided in this
Lease, Lessee, shall, at Lessee's sole cost and expense, fully, diligently
and in a timely manner, comply with all "Applicable Law", which term is used
in this Lease to include all laws, rules, regulations, ordinances,
directives. covenants, easements and restrictions of record, permits, the
requirements of any applicable fire insurance underwriter or rating bureau,
and the recommendations of Lessor's engineers and/or consultants, relating in
any manner to the Premises (including but not limited to matters pertaining to
(i) industrial hygiene, (ii) environmental conditions on, in, under or about
the Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or
storage tank), now in effect or which may hereafter come into effect and
whether or not reflecting a change in policy from any previously existing
policy. Lessee shall, within five (5) days after receipt of Lessor's written
request, provide Lessor with copies of all documents and Information,
including, but not limited to, permits, registrations, manifests,
applications, reports and certificates, evidencing Lessee's compliance with
any Applicable Law specified by Lessor, and shall immediately upon receipt,
notify Lessor in writing (with copies of any documents involved) of any
threatened or actual claim, notice, citation, warning, complaint or report
pertaining to or involving failure by Lessee or the Premises to comply with
any Applicable Law.
6.4 Inspection; Compliance. Lessor and Lessor's Lender(s) (as defined
in Paragraph 8.3(a) shall have the right to enter the Premises at any time, in
the case of an emergency, and otherwise at reasonable times, for the purpose
of inspecting the condition of be Premises and for verifying compliance by
Lessee with this Lease and all Applicable Laws (as defined in Paragraph 6.3),
and to employ experts and/or consultants in connection therewith and/or to
advise Lessor with respect to Lessee's activities, including but not limited
to the installation operation, use, monitoring, maintenance, or removal of
any Hazardous Substance or storage tank on or from the Premises. The costs
and expenses of any such inspections shall be paid by the party requesting
same, unless a Default or Breach of this Lease, violation of Applicable Law
or a contamination, caused or materially contributed to by Lessee is found to
exist or be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent
violation or contamination. In any such case, Lessee shall upon request
reimburse Lessor or Lessor's Lender, as the case may be, for the costs and
expenses of such inspections.
7. Maintenance; Repairs; Utility Installation: Trade Fixtures and Alterations.
7.1 Lessee's Obligations
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's warranty as
to compliance with covenants, etc.), 7.2 (Lessor's obligations to repair), 9
(damage and destruction), and 14 (condemnation), Lessee's sole cost and
expense and at all times, keep the Premises and every part thereof in good
order, condition and repair, structural and non-structural (whether or not
such portion of the Premises requiring repair, or the means of repairing the
same, are reasonably or readily accessible to Lessee, and whether or not the
need for such repairs occurs as a result of Lessee's use, any prior use, the
elements or the age of such portion of the Premises), including, without
limiting the generality of the foregoing. All equipment or facilities serving
the Premises, such as plumbing, heating, air conditioning, ventilating,
electrical, lighting facilities, boilers, fired or unfired pressure vessels,
fire sprinkler and/or standpipe and hose or other automatic
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fire extinguishing system, including fire alarm and/or smoke detection
systems and equipment, fire hydrants, fixtures, walls (interior and
exterior), foundations, ceilings, roofs, floors, windows, doors, plate glass,
skylights, landscaping, driveways. parking lots, fences, retaining walls,
signs, sidewalks and parkways located in, on, about, or adjacent to the
Premises. Lessee shall not cause or permit any Hazardous Substance to be
spilled or released in, on, under or about the Premises (including through
the plumbing or sanitary sewer system) and shall promptly, at Lessee's
expense, take all investigatory and/or remedial action reasonably
recommended, whether or not formally ordered or required, for the cleanup of
any contamination of, and for the maintenance, security and/or monitoring of,
the Premises, the elements surrounding same, or neighboring properties, that
was caused or materially contributed to by Lessee, or pertaining to or
involving any Hazardous Substance and/or storage tank brought onto the
Premises by or for Lessee or under its control. Lessee, in keeping the
Premises in good order, condition and repair, shall exercise and perform good
maintenance practices. Lessee's obligations shall include restorations,
replacements or renewals when necessary to keep the Premises and all
improvements thereon or a part thereof in good order, condition and state of
repair. If Lessee occupies the Premises for seven (7) years or more, Lessor
may require Lessee to repaint the exterior of the buildings on the Premises
as reasonably required, but not more frequently than once every seven (7)
years.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain any, contracts with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in, the
inspection, maintenance and service of the following equipment and
improvements, if any, located on the Premises (i) heating, air conditioning
and ventilation equipment, (ii) boiler, fired or unfired pressure vessels,
(iii) tire sprinkler and/or standpipe and hose or other automatic fire
extinguishing systems, including fire alarm and/or smoke detection, (iv)
landscaping and irrigation systems, (v) roof covering and drain maintenance
and (vi) asphalt and parking lot maintenance.
7.2 Lessors Obligations. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the Premises),
2.3 (relating to compliance with covenants, restrictions and building code),
9 (relating to destruction of the Premises) and 14 (relating to condemnation
of the Premises), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises,
the improvements located thereon, or the equipment therein, whether
structural or non structural, all of which obligations are intended to be
that of the Lessee under Paragraph 7.1 hereof. It is the intention of the
Parties that the terms of this Lease govern the respective obligations of the
Parties as to maintenance and repair of the Premises. Lessee and Lessor
expressly waive the benefit of any statute now or hereafter in effect to the
extent it is inconsistent with the terms of this Lease with respect to, or
which affords Lessee the right to make repairs at the expense of Lessor or to
terminate this Lease by reason of, any needed repairs.
7.3 Utility Installation; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term "Utility Installation" is
used in this Lease to refer to all carpeting, window coverings, air lines,
power panels, electrical distribution, security, fire protection systems,
communication systems, lighting fixtures, heating, ventilating, and air
conditioning equipment, plumbing, and fencing in, on or about the Premises.
The term "Trade Fixtures" shall mean Lessee's machinery and equipment that
can be removed without doing material damage to the Premises. The term
"Alterations" shall mean any modification of the improvements on the Premises
from that which are provided by Lessor under the terms of this Lease, other
than Utility Installations or Trade Fixtures, whether by addition or
deletion. "Lessee Owned Alterations and/or Utility Installations" are defined
as Alterations and/or Utility Installations made by Lessee that are not yet
owned by Lessor as defined in Paragraph 74(a). Lessee shall not make any
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Alterations or Utility Installations in, on, under or about the Premises
without Lessor's prior written consent Lessee may, however, make
nonstructural Utility Installations to the interior of the Premises
(excluding the roof), as long as they are not visible from the outside, do
not involve puncturing, relocating or removing the roof or any existing
walls, and the cumulative cost thereof during the term of this Lease as
extended does not exceed S25,000.
(b) Consent. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented
to Lessor in written form with proposed detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent. shall be deemed conditioned upon: (i) Lessee s acquiring all
applicable permits required by governmental authorities, (ii) the furnishing
of copies of such permits together with a copy of the plans and
specifications for the Alteration or Utility Installation to Lessor prior to
commencement of the work thereon, and (iii) the compliance by Lessee with all
conditions of said permits in a prompt and expeditious manner. Any
Alterations or Utility Installations by Lessee during the term of this Lease
shall be done in a good and workmanlike manner, with good and sufficient
materials, and in compliance with all Applicable Law. Lessee shall promptly
upon completion thereof furnish Lessor with as-built plans and specifications
thereof. Lessor may (but without obligation to do so) condition its consent
to any requested Alteration or Utility Installation that costs $10,000 or
more upon Lessee's providing Lessor with a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such Alteration
or Utility installation and/or upon Lessee's posting an additional Security
Deposit with Lessor under Paragraph 36 hereof.
(c) Indemnification. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at
or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days' notice prior
to the commencement of any work in, on or about the Premises, and Lessor
shall have the right to post notices of non-responsibility in or on the
Premises as provided by law. If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same
and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises. It
Lessor shall require, Lessee shall furnish to Lessor a security bond
satisfactory to Lessor in an amount equal to one and one-half times the
amount of such contested lien claim or demand, indemnifying Lessor against
liability for the same, as required by law for the holding of the Premises
free from the effect of such lien or claim. In addition, Lessor may require
Lessee to pay Lessor's attorney's fees and costs in participating in such
action if Lessor shall decide it is to its best interest to do so.
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal or
become the owner thereof as hereinafter provided in this Paragraph 7.4, all
Alterations and Utility Additions made to the Premises by Lessee shall be the
property of and owned by Lessee, but considered a part of the Premises.
Lessor may, at any time and at its option, elect in writing to Lessee to be
the owner of all or any specified part of the Lessee Owned Alterations and
Utility Installations. Unless otherwise instructed per subparagraph 7.4(b)
hereof, all Lessee Owned Alterations and Utility installations shall, at the
expiration or earlier termination of this Lease, become the property of
Lessor and remain upon and be surrendered by Lessee with the Premises.
(b) Removal. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee Owned Alterations or Utility Installations be removed
by the expiration or earlier termination of
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this Lease, notwithstanding their installation may have been consented to by
Lessor. Lessor may require the removal at any time of all or any part of any
Lessee Owned Alterations or Utility installations made without the required
consent of Lessor.
(c) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date with
all of the improvements, parts and surfaces thereof clean and free of debris
and in good operating order, condition and state of repair, ordinary wear and
tear excepted. "Ordinary wear and tear" shall not include any damage or
deterioration that would have been prevented by good maintenance practice or
by Lessee performing all of its obligations under this Lease. Except as
otherwise agreed or specified in writing by Lessor, the Premises, as
surrendered shall include the Utility installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment,
and Alterations and/or Utility Installations, as well as the removal of any
storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all
as may then be required by Applicable Law and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore me Premises per this
Lease.
8. Insurance' Indemnity.
8.1 Payment For Insurance. Regardless of whether the Lessor or Lessee
is the Insuring Party, Lessee shall pay for all insurance required under this
Paragraph 8 except to the extent of the cost attributable to liability
insurance carried by Lessor in excess of $1,000,000 per occurrence. Premiums
for policy periods commencing prior to or extending beyond the Lease term
shall be prorated to correspond to the Lease term. Payment shall be made by
Lessee to Lessor within ten (10) days following receipt of an invoice for any
amount due.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during the
term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims for
bodily injure, personal injury and property damage based upon, involving or
arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $1,000,000
per occurrence with an "Additional Insured-Managers or Lessors of Premises"
Endorsement and contain the "Amendment of the Pollution Exclusion" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not
contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this
Lease as an "insured contract" for the performance of Lessee's indemnity
obligations under this Lease. The limits of said insurance required by this
Lease or as carried by Lessee shall not, however, limit the liability of
Lessee nor relieve Lessee of any obligation hereunder. All insurance to be
carried by Lessee shall be primary to and not contributory with any similar
insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) Carried By Lessor. In the event Lessor is the Insuring Party,
Lessor shall also maintain liability insurance described in Paragraph 8.21a),
above, in addition to, and not in Lieu of, the insurance required to be
maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 Property insurance-Building, Improvements and Rental Value.
(a) Building and Improvements. The insuring Party shall obtain and keep
in force during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and to the holders of any mortgages,
deeds of trust or ground leases on the Premises ( Lender(s) "), insuring loss
or damage to the Premises. The amount of such insurance shall be equal to the
full replacement cost of
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the Premises, as the same shall exist from time to time, or the amount
required by Lenders but in no event more than the commercially reasonable and
available insurable value thereof if, by reason of the unique nature or age
of the improvements involved, such latter amount is less than full
replacement cost. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations shall be insured by Lessee under
Paragraph 8. 4 rather than by Lessor. If the coverage is available and
commercially appropriate, such policy or policies shall insure against all
risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Premises
required to be demolished or removed by reason of the enforcement of any
building zoning, safety or land use laws as the result of a covered cause of
loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property
insurance coverage amount by a factor of not less than the adjusted U. S.
Department of Labor Consumer Price index for All Urban Consumers for the city
nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deducible amount shall not exceed $1,000 per
occurrence, and Lessee shall be liable for such deductible amount in the
event of an Insured Loss, as defined in Paragraph 9.1 (c)
(b) Rental Value. The Insuring Party shall, in addition, obtain and
keep in force during the term of this Lease a policy or policies in the name
of lessor, with loss payable to Lessor and Lender(s), insuring the loss of
the full rental and other charges payable by Lessee to Lessor under this
Lease for one (1) year (including all real estate taxes, insurance costs, and
any scheduled rental increases). Said insurance shall provide that in the
event the Lease is terminated by reason of an insured loss, the period of
indemnity for such coverage shall be extended beyond the date of the
completion of repairs or replacement of the Premises, to provide for one full
year's loss of rental revenues from the date of any such loss. Said
insurance shall1 contain as agreed valuation provision in lieu of any
coinsurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental income, property taxes, insurance premium costs
and other expenses, if any, otherwise payable by Lessee for the next twelve
(12) month period. Lessee shall be liable for any deducible amount in the
event of such loss
(c) Adjacent Premises. If the Premises are part of a larger building,
or if the Premises are part of a group of buildings owned by Lessor which are
adjacent to the Premises, the Lessee shall pay for any increase in the
premiums for the property insurance of such building or buildings if said
increase is caused by Lessee's acts, omissions, use or occupancy of the
Premises.
(d) Tenant's Improvements. If the Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee Owned Alterations and Utility
installations unless me item in question has become the property of Lessor
under the terms of this Lease. If Lessee is the Insuring Party, the policy
carried by Lessee under this Paragraph 8.3 shall insure Lessee Owned
Alterations and Utility Installations.
8.4 Lessee's Property Insurance. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessors option, by endorsement to a policy already carried, maintain
insurance coverage on all of Lessee's personal property. Lessee Owned
Alterations and Utility Installations in, on, or about the Premises similar
in coverage to that carried by the Insuring Party under Paragraph 8.3. Such
insurance shall be full replacement cost coverage with a deductible of not to
exceed $1,000 per occurrence. The proceeds from any such insurance shall be
used by Lessee for the replacement of personal property or the restoration of
Lessee Owned Alterations and Utility Installations Lessee shall be the in
insuring Party with respect
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to the insurance required by this Paragraph 8.4 and shall provide Lessor wit
written evidence that such insurance is in force.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, or such other rating as may be required by a
Lender having a lien on the Premises, as set forth in the most current issue
of "Best's Insurance Guide". Lessee shall not do or permit to be done
anything which shall invalidate the insurance policies referred to in this
Paragraph 8. If Lessee is the Insuring Party, Lessee shall cause to be
delivered to Lessor certified copies of policies of such insurance or
certificates evidencing the evidence and amounts of such insurance with the
insiders and loss payable clauses as required by this Lease. No such policy
shall be cancelable or subject to modification except after Thirty (30) days
upon written notice to Lessor. Lessee shall at least thirty (30) days prior
to the expiration of such policies, furnish Lessor with evidence of renewals
or "insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand. If the Insuring Party shall fail to
procure and maintain the insurance required to be carried by the Insuring
Party under this Paragraph 8, the other Party may, but shall not be required
to, procure and maintain the same, but at Lessee's expense.
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor ( "Waiving Party" ) each hereby release and
relieve the other and waive their entire right to recover damages (whether in
contract or in tort) against the other, for loss of or damage to the Waiving
Party's property arising out of or incident to the perils required to be
insured against under Paragraph 8. The effect of such releases and waivers of
the right to recover damages shall not be limited by the amount of insurance
carried or required, or by any deductibles applicable thereto.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners
and Lenders, from and against any and all claims, loss of rents and/or
damages, costs, liens, judgments, penalties, permits, attorney's and
consultant's fees, expenses and/or liabilities arising out of, involving, or
in dealing with, the occupancy of the Premises by Lessee, the conduct of
Lessee's business, any act, omission or neglect of Lessee, its agents,
contractors, employees or invitees, and out of any Default or Breach by
Lessee in the performance in a timely manner of any obligation on Lessee's
part to be performed under this Lease. The foregoing shall include, but not
be limited to, the defense or pursuit of any claim or any action or
proceeding involved therein, and whether or not (in the case of claims made
against Lessor) litigated and/or reduced to judgment, and whether well
founded or not. In case any action or proceeding be brought against Lessor by
reason of any of the foregoing matters, Lessee upon notice from Lessor shall
defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need
not have first paid any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property
of Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures, or from
any other cause, whether the said injury or damage results from conditions
arising upon the Premises or upon other portions of the building of which the
Premises are a part, or from other sources or places, and regardless of
whether the cause of such damage or injury or the means of repairing the same
is accessible or not. Lessor shall not be liable for any damages arising from
any act
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or neglect of any other tenant of Lessor. Notwithstanding Lessor's negligence
or breach of this Lease, Lessor shall under no circumstances be liable for
injury to Lessee's business or for any loss of income or profit therefrom.
9. Damage and Destruction.
9.1 Definitions
(a) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises other than Lessee Owned Alterations and Utility
Installations, the repair cost of which damage or destruction is less than
50% of the then Replacement Cost of the Premises immediately prior to such
damage or destruction, excluding from such calculation the value of the land
and Lessee Owned Alterations and Utility Installations.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility Installations
the repair cost of which damage or destruction is 50% or more of the then
Replacement Cost of the Premises immediately prior to such damage or
destruction, excluding from such calculation the value of the land and Lessee
Owned Alterations and Utility Installations.
(c) "Insured Loss" shall mean damage or destruction to improvements on
the Premises other than Lessee Owned Alterations and Utility Installations,
which was caused by an event required to be covered by the insurance
described in Paragraph 8.3 (a), irrespective of any deductible amounts or
coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or re-build the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances
or laws and without deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence of
discovery or a condition involving the presence of, or a combination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 Partial Damage-Insured Loss. If a Premises Partial Damage that is
an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and
Utility installations) as soon as reasonably possible and this Lease shall
continue in full force and effect; provided, however, that Lessee shall, at
Lessor's election, make the repair of any damage or destruction the total
cost to repair of which is $10,000 or less, and, in such event, Lessor shall
make the insurance proceeds available to Lessee on a reasonable basis for
that purpose. Notwithstanding the foregoing, if the required insurance was
not in force or the insurance proceeds are not sufficient to effect such
repair, the Insuring Party shall promptly contribute the shortage in proceeds
(except as to the deductible which is Lessee's responsibility) as and when
required to complete said repairs. In the event, however, the shortage in
proceeds was due to the fact that, by reason of the unique nature of the
improvements, full replacement cost insurance coverage was not commercially
reasonable and available, Lessor shall have no obligation to pay for the
shortage in insurance proceeds or to fully restore the unique aspects of the
Premises unless Lessee provides Lessor with the funds to cover same, or
adequate assurance thereof, within ten (10) days following receipt of written
notice of such shortage and request therefor. If Lessor receives said funds
or adequate assurance thereof within said ten (10) day period, the party
responsible for making the repairs shall complete them as soon as reasonably
possible and this Lease shall remain in full force and effect. If Lessor
does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days
thereafter to make such restoration and repair as is commercially reasonable
with Lessor paying any shortage in proceeds, in which case this Lease shall
remain in full force and effect. If in such
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case Lessor does not so elect, then this Lease shall terminate sixty (60)
days following the occurrence of the damage or destruction. Unless otherwise
agreed, Lessee shall in no event have any right to reimbursement from Lessor
for any funds contributed by Lessee to repair any such damage or destruction.
Premises Partial Damage due to flood or earthquake shall be subject to
Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be
made available for the repairs if made by either Party.
9.3 Partial Damage-Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense and
this Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 13), Lessor may at Lessor's option, either: (i) repair
such damage as soon as reasonably possible at Lessor's expense, in which
event this Lease shall continue in full force and effect, or (ii) give
written notice to Lessee within thirty (30) days after receipt by Lessor of
knowledge of the occurrence of such damage of Lessor's desire to terminate
this Lease as of the date sixty (60) days following the giving of such
notice. In the event Lessor elects to give such notice of Lessor's intention
to terminate this Lease, Lessee shall have the right within ten (10) days
after the receipt of such notice to give written notice to Lessor of
Lessee's commitment to pay for the repair of such damage totally at Lessee's
expense and without reimbursement5 from Lessor. Lessee shall provide Lessor
with the required funds or satisfactory assurance thereof within thirty (30)
days following Lessee's said commitment. In such event this Lease shall
continue in full force and effect, and Lessor shall proceed to make such
repairs as soon as reasonably possible and the required funds are available.
If Lessee does not give such notice and provide the funds or assurance
thereof within the times specified above, this Lease shall terminate as of
the date specified in Lessor's notice of termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, it a
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the
damage or destruction is an insured Loss or was caused by a negligent or
willful act of Lessee. In the event, however, that the damage or destruction
was caused by Lessee, Lessor shall have the right to recover Lessor's damages
from Lessee except as released and waived in Paragraph 8.6.
9.5 Damage Near End of Term. If at any time during the last six (6) months
of the term of this Lease there is damage for which the cost to repair exceeds
one (1) month's Base Rent, whether or not an Insured Loss, Lessor may, at
Lessor's option, terminate this Lease effective sixty (60) days following the
date of occurrence of such damage by giving written notice to Lessee of Lessor's
election to do so within thirty (30) days after the date of occurrence of such
damage. Provided, however, if Lessee at that time has an exercisable option to
extend this Lease or to purchase the Premises, then Lessee may preserve this
Lease by, within twenty (20) days following the occurrence of the damage, or
before the expiration of me time provided in such option for its exercise,
whichever is ear1ier ("Exercise Period"), (i) exercising such option and (ii)
providing Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs. If Lessee duly exercises such option
during said Exercise Period and provides Lessor with funds (or adequate
assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at
Lessor's expense repair such damage as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise such
option and provide such funds or assurance during said Exercise Period, then
Lessor may at Lessor's option terminate this Lease as of the expiration of said
sixty (60) day period following the occurrence of such damage by giving written
notice to Lessee of Lessor's election to do so within ten (10)
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days after the expiration of The Exercise Period, notwithstanding any term or
provision in the grant of option to the contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage-Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and other
charges, if any, payable by Lessee hereunder for the period during which such
damage, its repair or the restoration continues (not to exceed the period for
which rental value insurance is required under Paragraph 8.3(b) ), shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement or Base Rent, Real Property Taxes, insurance
premiums, and other charges, if any, as aforesaid, all other obligations of
Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim
against Lessor for any damage suffered by reason of any such repair or
restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may at any
time prior to the commencement of such repair or restoration give written
notice to Lessor and to any Lenders of which Lessee has actual notice of
Lessee's election to terminate this Lease on a date not less than sixty (60)
days following the giving of such notice. If Lessee gives such notice to
Lessor and such Lenders and such repair or restoration is not commenced
within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commences the repair or restoration of the Premises within thirty (30) days
after receipt of such notice this Lease shall continue in full force and
effect. "Commence" as used in this Paragraph shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises whichever first occurs.
9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Law and this Lease shall continue in full force and effect, but subject to
Lessor's rights under Paragraph 13), Lessor may at Lessor's option either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor's expense, in which event this Lease
shall continue in full force and effect, or (ii) if the estimated cost to
investigate and remediate such condition exceeds twelve (12) times the then
monthly Base Rent or $100,000 whichever is greater, give written notice to
Lessee within thirty (30) days after receipt by Lessor of knowledge of the
occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the giving of
such notice. In the event Lessor elects to give such notice of Lessor's
intention to terminate this Lease, Lessee shall have the right within ten
(10) days after the receipt of such notice to give written notice to Lessor
of Lessee's commitment to pay for the investigation and remediation of such
Hazardous Substance Condition totally at Lessee's expense and without
reimbursement from Lessor except to the extent of an amount equal to twelve
(12) times the then monthly Base Rent or $100,000 whichever is greater.
Lessee shall provide Lessor with the funds required of Lessee or satisfactory
assurance thereof within thirty (30) days following Lessee's said commitment.
In such event this Lease shall continue in full force and effect, and Lessor
shall proceed to make such investigation and remediation as soon as
reasonably possible and the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof within
the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination. If a Hazardous Substance
Condition occurs for which Lessee is not legally responsible, there shall be
abatement of Lessee's obligations under this Lease to the same extent as
provided in Paragraph 9.6(a) for a period of not to exceed twelve months.
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9.8 Termination-Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by
Lessor under the terms of this Lease.
9.9 Waive Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
with respect to the termination of this Lease and hereby waive the provisions
of any present or future statute to the extent inconsistent herewith.
10. Real Property Taxes.
10.1 (a) Payment of Taxes. Lessee shall pay the Real Property Taxes as
defined in Paragraph 10.2, applicable to the Premises during the term of this
Lease. Subject to Paragraph 10.1(b), all such payments shall be made at least
ten (10) days prior to The delinquency date of the applicable installment.
Lessee shall promptly furnish Lessor with satisfactory evidence that such
taxes have been paid. If any such taxes to be paid by Lessee shall cover any
period of time prior to or after the expiration or earlier termination of The
term hereof, Lessee's share of such taxes shall be equitably prorated to
cover only the period of time within the tax fiscal year this Lease is in
effect, and Lessor shall reimburse Lessee for any overpayment after such
proration. If Lessee shall fail to pay any Real Property Taxes required by
this Lease to be paid by Lessee, Lessor shall have the right to pay the same,
and Lessee shall reimburse Lessor therefor upon demand.
(b) Advance Payment. In order to insure payment when due and before
delinquency of any or all Real Property Taxes, Lessor reserves the right, at
Lessor's option to estimate the current Real Property Taxes applicable to the
Premises, and to require such current year's Real Property Taxes to be paid
in advance to Lessor by Lessee, either (i) in a lump sum amount equal to the
installment due at least twenty (20) days prior to the applicable delinquency
date, or (ii) monthly in advance with the payment of The Base Rent. If Lessor
elects to require payment monthly in advance, the monthly payment shall be
that equal monthly amount which, over the number of months remaining before
the month in which the applicable tax installment would become delinquent
(and without interest thereon), would provide a fund large enough to fully
discharge before delinquency the estimated installment of taxes to be paid.
When the actual amount of the applicable tax bill is known, the amount of
such equal monthly advance payment shall be adjusted as required to provide
the fund needed to pay the applicable taxes before delinquency. If the
amounts paid to Lessor by Lessee under the provisions of this Paragraph are
insufficient to discharge the obligations of Lessee to pay such Real Property
Taxes as the same become due Lessee shall pay to Lessor, upon lessor's
demand, such additional sums as are necessary to pay such obligations. All
moneys paid to Lessor under this Paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a Breach by
Lessee in the performance of the obligations of Lessee under this Lease, then
any balance of funds paid to Lessor under the provisions of this Paragraph
may, subject to proration as provided in Paragraph 10.1 (a), at the option of
Lessor, be treated as an additional Security Deposit under Paragraph 5.
10.2 Definition of "Real Property Taxes". As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state of federal
government or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, Lessor's right to rent or other income therefrom. and/or
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Lessor's business of leasing the Premises. The term "Real Property Taxes"
shall also include any tax, fee, levy, assessment or charge, or any increase
therein, imposed by reason of events occurring, or changes in applicable law
taking effect, during the term of this Lease, including but not limited to a
change in the ownership of the Premises or in the improvements thereon, to
execution of this Lease, or any modification, amendment or transfer thereof,
and whether or not contemplated by the Parties.
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property
Taxes for all of the land and improvements included within the tax parcel
assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information
as may be reasonably available. Lessor's reasonable determination thereof,
in good faith, shall be conclusive.
10.4 Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings equipment and all personal
property of Lessee contained in the Premises or elsewhere. When possible,
Lessee shall cause its Trade Fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property
of Lessor. If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay 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 or, at Lessor's option, as
provided in Paragraph 10.1 (b).
11. Utilities. Lessee shall pay for all water gas heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of a11 charges jointly metered with other premises.
12. Assignment and Subletting
12.1 Lessor's Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"assignment") or sublet all or any part of Lessee's interest in this Lease or
in the Premises without Lessor's prior written consent given under and sublet
to the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an assignment
requiring Lessor's consent. The transfer on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger sale acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a
formal assignment or hypothecation of this Lease or Lessee's assets occurs,
which results or will result in a reduction of the Net Worth of Lessee as
hereinafter defined by an amount equal to or greater than twenty-five percent
(25%) of such Net Worth of Lessee as it was represented to Lessor at the time
of the execution by Lessor of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior
to said transaction or transactions constituting such reduction, at whichever
time said Net Worth of Lessee was or is greater, shall be considered an
assignment of this Lease by Lessee to which Lessor may reasonably withhold
its consent. "Net Worth of Lessor purposes of this Lease shall be the net
worth of Lessee (excluding any guarantors) established under generally
accepted accounting principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be
a Default curable after notice per Paragraph 13.1 (c), or a non-curable
Breach without the necessity of any notice and grace period.
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If Lessor elects to treat such unconsented to assignment or subletting as a
non-curable Breach, Lessor shall have the right to either: (i) terminate this
Lease or (ii) upon thirty (30) days written notice (Lessor's Notice ),
increase the monthly Base Rent to his market rental value or one hundred ten
percent (110%) of the Base Rent then in effect, whichever is greater Pending
determination of the new fair market rental value, if disputed by Lessee,
Lessee shall pay the amount set forth in Lessor's Notice, with any
overpayment credited against the next installment(s) of Base Rent coming due
and any underpayment for the period retroactively to the effective date of
the adjustment being due and payable immediately upon the determination
thereof. Further in the event of such Breach and market value adjustment,
(i) the purchase price of any option to purchase the Premises held by Lessee
shall be subject to similar adjustment to the then fair market value (without
the Lessee being considered an encumbrance or any deduction for depreciation
or obsolescence, and considering the Premises at its highest and best use and
in good condition),or one hundred ten percent (110%) of the price previously
in effect, whichever is greater, (ii) any index-oriented rental or price
adjustment formulas contained in this Lease shall be adjusted to require that
the base index be determined with reference to the index applicable to the
time of such adjustment, and (iii) any fixed rental adjustments scheduled
during the remainder of the Lease term shall be increased in the same ratio
as the new market rental bears to the Base Rent in effect immediately prior
to the market value adjustment.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor's consent, any assignment or subletting shall
not: (i) be effective without the express written assumption by such assignee
or sublessee of the obligations of Lessee under this Lease, (ii) release
Lessee of any obligations hereunder, or (iii) alter the primary liability of
Lessee for the payment of Base Rent and other sums due Lessor hereunder or
for the performance of any other obligations to be performed by Lessee under
this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of any rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach
by Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the sublessee.
However, Lessor may consent to subsequent sublettings and assignments of the
sublease w 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 sublease.
(d) In the event of any Default or Breach of Lessee's obligations under
this Lease, Lessor may proceed directly against Lessee, any Guarantors or any
one else responsible for the performance of the Lessee's obligations under
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.
(e) Each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and or required modification of the Premises, if any, together with a
non-refundable deposit of $1,000 or ten percent (10%) of the current monthly
Base Rent, whichever is greater, as reasonable consideration for Lessor's
considering and processing the request for consent. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may
be reasonably requested by Lessor.
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(f) Any assignee of, or sublessee under this Lease shall, by reason of
accepting such assignment or entering into such sublease, be deemed, for the
benefit of Lessor, to have assumed and agreed to conform and comply with each
and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other
than such obligations as are contrary to or inconsistent with provisions of
an assignment or sublease to which Lessor has specifically consented in
writing.
(g) The occurrence of a transaction described in Paragraph 12.1 ( C)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased to an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
amount required to establish such Security Deposit a condition to Lessor's
consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or
working may require that the amount and adjustment structure of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment structure for property similar to the Premises as then constituted.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all
or any part of the Premises and shall be deemed included in all subleases
under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a
portion of the Premises heretofore or hereafter made by Lessee, and Lessor
may collect such rent and income and apply same toward Lessee s obligations
under this Lease; provided, however, that until a Breach (as defined in
Paragraph 13.1) shall occur in the performance of Lessee's obligations under
this Lease, Lessee may, except as otherwise provided in this Lease, receive,
collect and enjoy the rents accruing under such sub ease. 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 sublease, be deemed liable to
the sublessee for any failure of Lessee to perform and comply with any of
Lessee's obligations to such sublessee under such sublease. Lessee hereby
irrevocably authorizes and directs any such sublessee. upon receipt of a
written notice from Lessor stating that a Breach exists in the performance of
Lessee's obligations under this Lease, to pay to Lessor the rents and other
charges due and to become due under the sublease. Sublessee shall rely upon
any such statement and request from Lessor and shall pay such rents and other
charges to Lessor without any obligation or right to inquire as to whether
such Breach exists and notwithstanding any notice from or claim from Lessee
to the contrary. Lessee shall have no right or claim against said sublessee,
or, until the Breach has been cured, against Lessor for any such rents and
other charges so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of
such sublease; provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sublessee to such sublessor or for any
other prior Defaults or Breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. Default; Breach; Remedies.
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13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost o such services and costs in
said notice as rent due and payable to cure said Default. A "Default" is
defined as a failure by the Lessee to observe, comply with or perform any of
the terms, covenants, conditions or rules applicable to Lessee under this
Lease. A "Breach" is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is
specified herein, the failure by Lessee to cure such Default prior to the
expiration of the applicable grace period, and shall entitle Lessor to pursue
the remedies set forth in Paragraphs 13.2 and/or 13.3
(a) The vacating of the Premises without the intention to reoccupy
same. or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee hereunder, whether to Lessor or to a third
party, as and when due, the failure by Lessee to provide Lessor with
reasonable evidence of insurance or surety bond required under this Lease, or
the failure of Lessee to fulfill any obligation under this Lease which
endangers or threatens life or property, where such failure continues for a
period of three (3) days following written notice thereof by or on behalf of
Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, it applicable) of (i) compliance with applicable law
per Paragraph 6.3, (ii) the inspection, maintenance and service contracts
required under Paragraph 7.1(b), (iii) the recission of an unauthorized
assignment or subletting per Paragraph 12.1(b), (iv) a Tenancy Statement per
Paragraphs 16 or 37, (v) the subordination or non-subordination of this Lease
per Paragraph 30, (vi) the guaranty of the performance of Lessee's
obligations under this Lease if required under Paragraphs 1.11 and 37, (vii)
the execution of any document requested under Paragraph 42 (easements), or
(viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of ten (10) days following written notice by or on
behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
that are to be observed, complied with or performed by Lessee, other than
those described in subparagraphs (a),(b) or (c), above, where such Default
continues for a period of thirty (30) days after written notice thereof by or
on behalf of Lessor to Lessee, provided, however, that if the nature of
Lessee's Default is such that more than thirty (30) days are reasonably
required for its cure, then it shall not be deemed to be a Breach of this
Lease by Lessee if Lessee commence such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) The making by
Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S.C. section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment
of a trustee or receiver to take possession of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease, where
possession is not restored to Lessee within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this
Lease, where such seizure is not discharged within thirty (30) days;
provided, however, in the event that any provision of this subparagraph (e)
is contrary to any
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applicable law, such provision shall be of no force or effect, and not affect
the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a guarantor. (ii) the termination of a
guarantor's liability with respect to this Lease other than in accordance
with the terms of such guaranty, (iii) a guarantor's becoming insolvent or
the subject of a bankruptcy filing, (iv) a guarantor's refusal to honor the
guaranty, or (v) a guarantor's breach of its guaranty obligation on an
anticipatory breach basis, and Lessee's failure, within sixty (60) days
following written notice by or on behalf of Lessor to Lessee of any such
event, to provide Lessor with written alternative assurance or security,
which, when coupled with the then existing resources of Lessee, equals or
exceeds the combined financial resources of Lessee and the guarantors that
existed at the time of execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written
notice to Lessee (or in case of an emergency, without notice), Lessor may at
its option (but without obligation to do so), perform such duty or obligation
on Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee to Lessor upon invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made under this
Lease by Lessee to be made only by cashier's check. In the event of a Breach
of this Lease by Lessee, as defined in Paragraph 13.1, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate
and Lessee shall immediately surrender possession of the Premises to Lessor.
In such event Lessor shall be entitled to recover from Lessee: (i) the worth
at the time of the award of the unpaid rent which had been earned at the time
of termination; (ii) the worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time
of award exceeds the amount of such rental loss that the Lessee proves could
have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor
for all the detriment proximately caused by the Lessee's failure to perform
its obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including but not limited to the cost of
recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys
fees, and that portion of the leasing commission paid by Lessor applicable to
the unexpired term of this Lease. The worth at the time of award of the
amount referred to in provision (iii) of the prior sentence shall be computed
by discounting such amount at the discount rate of the federal Reserve Bank
of San Francisco at the time of award plus one percent. Efforts by Lessor to
mitigate damages caused by Lessee s Default or Breach of this Lease shall
not waive Lessor's right to recover damages under this Paragraph. If
termination of this Lease is obtained through the provisional remedy of
unlawful detainer, Lessor shall have the right to recover in such proceeding
the unpaid rent and damages as are recoverable therein, or Lessor may reserve
therein the right to recover all or any part thereof in a separate suit for
such rent and/or damages. If a notice and grace period required under
subparagraphs 13.1(b), (c) or (d) was not
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previously given, a notice to pay rent or quit, or to perform or quit, as the
case may be, given to Lessee under any statute authorizing the forfeiture of
leases for unlawful detainer shall also constitute the applicable notice for
grace period purposes required by subparagraphs 13.1(b), (c) or (d). In such
case, the applicable grace period under subparagraphs 13.1(b), (c) or (d) and
under the unlawful detainer statute shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within the
greater of the two such grace periods shall constitute both an unlawful
detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach
and abandonment and recover the rent as it becomes due, provided Lessee has
the right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver
to protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee s right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state wherein the Premises are located.
(d) The expiration or termination of this Lease and/or the termination
of Lessee's right to possession shall not relieve Lessee from liability under
any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.
13.3 Inducement Recapture in Event of Breach. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for
the giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of
which concessions are hereinafter referred to as "Inducement Provisions",
shall be deemed conditioned upon Lessee's full and faithful performance of
all of the terms, covenants and conditions of this Lease to be performed or
observed by Lessee during the term hereof as the same may be extended. Upon
the occurrence of a Breach of this Lease by Lessee, as defined in Paragraph
13.1, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other
charge, bonus, inducement or consideration theretofore abated, given or paid
by Lessor under such an Inducement Provision shall be immediately due and
payable by Lessee to Lessor, and recoverable by Lessor as additional rent due
under this Lease, notwithstanding any subsequent cure of said Breach by
Lessee. The acceptance by Lessor of rent or the cure of the Breach which
initiated the operation of this Paragraph shall not be deemed a waiver by
Lessor of the provisions of this Paragraph unless specifically so stated in
writing by Lessor of the time of such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the forms of any ground lease, mortgage or trust deed covering the
Premises. Accordingly, if any installment of rent or any other sum due from
Lessee shall not be received by Lessor or Lessor's designee within five (5)
days after such amount shall be due, then, without any requirement for notice
to Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%)
of such overdue amount. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of late payment by Lessee. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's Default or Breach with
respect to such overdue amount, nor prevent Lessor from exercising any of the
other rights and remedies granted hereunder. In
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the event that a late charge is payable hereunder whether or not collected,
for more (3) consecutive installments of Base Rent, then notwithstanding
Paragraph 4.1 or any other provision of this Lease to the contrary, Base Rent
shall, at Lessor's option, become due and payable quarterly in advance.
13.5 Breach by Lessor. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt
by Lessor, and by the holders of any ground lease, mortgage or deed of trust
covering the Premises whose name and address shall have been furnished Lessee
in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after
such notice are reasonably required for its performance, then Lessor shall
not be in breach of this Lease if performance is commenced within such thirty
(30) day period and thereafter diligently pursued to completion.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority
takes title or possession, whichever first occurs. If more than ten percent
(10%) of the floor area of the Premises, or more than twenty-five percent
(25%) of the land area not occupied by any building, is taken by
condemnation, Lessee may, at Lessee's option, to be exercised in writing
within ten (10) days after Lessor shall have given Lessee written notice of
such taking (or in the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession) terminate this Lease as of
the date the condemning authority takes such possession. If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the Base Rent shall be reduced in the same proportion as the
rentable floor area of the Premises taken bears to the total rentable floor
area of the building located on the Premises. No reduction of Base Rent shall
occur if the only portion of the Premises taken is land on which there is no
building. Any award for the taking of all or any part of the Premises under
the power of eminent domain or any payment made under threat of the exercise
of such power shall be me 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 compensation, separately awarded to Lessee for
Lessee's relocation expenses and/or loss of Lessee's Trade Fixtures. In the
event that this Lease is not terminated by reason of such condemnation,
Lessor shall to the extent of its net severance damages received, over and
above the legal and other expenses incurred by Lessor in the condemnation
matter 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 be responsible for the payment of any amount in excess
of which net severance damages required to complete such repair
15. Broker's Fee.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.2 Upon execution of this Lease by both Parties, Lessor shall pay to
said Brokers jointly, or in such separate shares as they may mutually
designate in writing, a fee as set forth in a separate written, agreement
between Lessor and said Brokers (or in the event there is no separate written
agreement between Lessor and said Brokers, the sum of $42, 669.92) for
brokerage services rendered by said Brokers to Lessor in this transaction.
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15.3 Unless Lessor and Brokers have otherwise agreed in writing, Lessor
further agrees that (a) if Lessee exercises any Option (as defined in
Paragraph 391) or any Option subsequently granted which is substantially
similar to an Option granted to Lessee in this Lease, or (b) if Lessee
acquires any rights to the Premises or other premises described in this Lease
which are substantially similar to what Lessee would have acquired had an
Option herein granted to Lessee been exercised, or (c) if Lessee remains in
Possession of the Premises, with the consent of Lessor, after the expiration
of the term of this Lease after having failed to exercise an Option, or (d)
if said Brokers are the procuring cause of any other lease or sale entered
into between the Parties pertaining to the Premises and/or any adjacent
property in which Lessor has an interest, or (e) if Base Rent is increased,
whether by agreement or operation of an escalation clause herein, then as to
any of said transactions, Lessor shall pay said Brokers a fee in accordance
with the schedule of said Brokers in effect at the time of the execution of
this Lease.
15.4 Any buyer or transferee of Lessor's interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Lessor's obligation under this Paragraph 15. Each Broker shall be a
third party beneficiary of the provisions of this Paragraph 15 to the extent
of its interest in any commission arising from this Lease and may enforce
that right directly against Lessor and its successors.
15.5 Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than the
Brokers, if any named in Paragraph 1.10) in connection with the negotiation
of this Lease and/or the consummation of the transaction contemplated hereby,
and that no broker or other person, firm or entity other than said named
Brokers is entitled to any commission or finder's fee in connection with said
transaction. Lessee and Lessor do each hereby agree to indemnify, protect,
defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any such unnamed broker,
finder or other similar party by reason of any dealings or actions of the
indemnifying Party, including any costs, expenses attorney's fees reasonably
incurred with respect thereto.
15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. Tenancy Statement.
16.1 Each Party (as "Responding Party") shall within ten (10) days after
written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in
form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises, any
part thereof, or the building of which the Premises are a part, Lessee and
all Guarantors of Lessee's performance hereunder shall deliver to any
potential lender or purchaser designated by Lessor such financial statements
of Lessee and such Guarantors as may be reasonably required by such lender or
purchaser, including but not limited to Lessee's financial statements for the
past three (3) years. All such financial statements shall be received by
Lessor and such lender or purchase in confidence and shall be used only for
the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or,
if this is a sublease, of the lessee's interest in the prior lease. In the
event of a transfer of Lessor's title or interest in the Premises or in this
Lease, Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor at the time of such
transfer or assignment. Except as provided in
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Paragraph 15, upon such transfer or assignment and delivery of the Security
Deposit, as aforesaid, the prior Lessor shall be relieved of all liability
with respect to the obligations and/or covenants under this Lease thereafter
to be performed by the Lessor. Subject to the foregoing, the obligations
and/or covenants in this Lease to be performed by the Lessor shall be binding
only upon the Lessor as hereinabove defined.
18. Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. Interest on Past Due Obligations. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty (30)
days following the date on which it was due, shall bear interest from the
thirty-first (31st) day after it was due at the rate of 12% per annum, but
not exceeding the maximum rate allowed by law, in addition to the late charge
provided for in Paragraph 13 4.
20. Time of Essence. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this
Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease are deemed to be rent.
22. No Prior or Other Agreement; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that
it has made, and is relying solely upon, its own investigation as to the
nature, quality, character and financial responsibility of the other Party to
this Lease and as to the nature, quality and character of the Premises.
Brokers have no responsibility with respect thereto or with respect to any
default or breach hereof by either Party.
23. Notices
23.1 All notices required or permitted by this Lease shall be in writing
and may be delivered in person (by hand or by messenger or courier service)
or may be sent by regular, certified or registered mail or U.S. Postal
Service Express Mail. with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23. The addresses noted adjacent to a Party's signature on this
Lease shall be that Party's address for delivery or mailing of notice
purposes. Either Party may by written notice to the other specify a different
address for notice purposes, except that upon Lessee's taking possession of
the Premises, the Premises shall constitute Lessee's address for the purpose
of mailing or delivering notices to Lessee. A copy of all notices required or
permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by written notice to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by
regular mail the notice shall be deemed given forty eight (48) hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given Twenty-tour (24) hours
after delivery of the same to the United States Postal Service or courier. If
any notice is transmitted by facsimile transmission or similar means, the
same shall be deemed served or delivered upon telephone confirmation of
receipt of the transmission thereof, provided a copy is also delivered via
delivery or mail. If
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notice is received on a Sunday or legal holiday, it shall be deemed received
on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof.
Lessors 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 or similar act by Lessee, or be construed as the basis of an
estoppel to enforce the provision or provisions of this Lease requiring such
consent. Regardless of Lessor's knowledge of a Default or Breach at the time
of accepting rent, the acceptance of rent by Lessor shall not be a waiver of
any preceding Default or Breach by Lessee of any provision hereof, other
than the failure of Lessee to pay the particular rent so accepted. Any
payment given Lessor by Lessee may be accepted by Lessor on account of moneys
or damages due Lessor, notwithstanding any qualifying statements or
conditions made by Lessee in connection therewith, which such statements
and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to in writing by Lessor at or before the time of deposit
of such payment.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. Covenants and Conditions. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions
29. Binding Effect; Choice of Law. This Lease shall be binding upon the
parties. their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease mortgage deed of trust or other
hypothecation or security device (collectively, Security Device ), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all
renewals, modifications, consolidations, replacements and extensions thereof
Lessee agrees that the Lenders holding any such Security Device shall have no
duty, liability or obligation to perform any of the obligations of Lessor
under this Lease, but that in the event of Lessor s default with respect to
any such obligation, Lessee will give any Lender whose name and address have
been furnished Lessee in writing for which purpose notice of Lessor s default
and allow such Lender thirty (30) days following receipt of such notice for
the cure of said default before invoking any remedies Lessee may have by
reason thereof. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall
give written notice thereof to Lessee. this Lease and such Options shall be
deemed prior to such Security Device, notwithstanding the relative dates of
the document on or recordation thereof.
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30.2 Attornment Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device,
and that in the event of such foreclosure, such new owner shall not (i) be
liable for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership, (ii) be subject to any of sets
or defenses which Lessee might have against any prior lessor, or (iii) be
bound by prepayment of more than one month s rent.
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving assurance (a "non-disturbance agreement)
from the Lender that Lessee's possession and this Lease, including any
options to extend the term hereof, will not be disturbed so long as Lessee is
not in Breach hereof and attorns to the record owner of the Premises
30.4 Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents: provided
however, that, upon written request from Lessor or a Lender in connection
with a sale, financing or re-financing of the Premises, Lessee and Lessor
shall execute such further writings as may be reasonably required to
separately document any such subordination or non-subordination, attornment
and/or non-disturbance agreement as is provided for herein
31. Attorney's Fees. If any Party or Broker brings an action or proceeding
to enforce the terms hereof or declare rights hereunder, the "Prevailing
Party" (as hereafter defined) or Broker in any such proceeding, action, or
appeal thereon, shall be entitled to reasonable attorney's fees. Such fees
may be awarded in the same suit or recovered in a separate suit, whether or
not such action or proceeding is pursued to decision or judgment. The term
"Prevailing Party" shall include, without limitation, a Party or Broker who
substantially obtains or defeats the relief sought, as the case may be.
whether by compromise. settlement, judgment. or the abandonment by the other
Party or Broker of its claim or defense. The attorney's fee award shall not
be computed in accordance with any court tee schedule, but shall be such as
to fully reimburse all attorney's fees reasonably incurred. Lessor shall be
entitled to attorney s tees, 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 or resulting Breach.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor s agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the
same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, improvements or additions to the Premises or to the
building of which they are a part, as Lessor may reasonably deem necessary
Lessor may at any time place on or about the Premises or building any
ordinary "For Sale" signs and Lessor may at any time during the last one
hundred twenty (120) days of the term hereof place on or about the Premises
any ordinary "For Lease" signs. All such activities of Lessor shall be
without abatement of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first
having obtained Lessor's prior written consent. Notwithstanding anything to
the contrary in this Lease. Lessor shall not be obligated to exercise any
standard of reasonableness in determining whether to grant such consent
34. Signs. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not
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on the roof such signs as are reasonably required to advertise Lessee's own
business The installation of any sign on the Premises by or for Lessee shall
be subject to the provisions of Paragraph 7 (Maintenance Repairs. Utility
Installations, Trade Fixtures and Alterations) Unless otherwise expressly
agreed herein Lessor reserves all rights to the use of the root and the right
to install, and all revenues from the installation of, such advertising signs
on the Premises Including the root, as do not unreasonably interfere with the
conduct of Lessee's business
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee the mutual
termination or cancellation hereof, or a termination hereof by Lessor for
Breach by Lessee, shall automatically terminate any sublease or lesser estate
In the Premises. provided, however, Lessor shall, In the event of any such
surrender. termination or cancellation. have the option to continue any one
of all of any existing sub-tenancies Lessor's failure within ten (10) days
following any such event to make a written election to the contrary by
written notice to the holder of any such lesser interest shall constitute
Lessor's election to have such event constitute the termination of such
interest
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party's required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed Lessor's actual reasonable costs and expenses (including but not
limited to architects, attorney's' engineers' or other consultants fees)
incurred in the consideration of, or response to. a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment, a subletting or the presence or use of
a Hazardous Substance, practice or storage tank, shall be paid by Lessee to
Lessor upon receipt of an invoice and supporting documentation therefor
Subject to Paragraph 12.2(e) (applicable to assignment or subletting), Lessor
may, as a condition to considering any such request by Lessee require that
Lessee deposit with Lessor an amount of money (in addition to the Security
Deposit held under Paragraph 5) reasonably calculated by Lessor to represent
the cost Lessor will incur in considering and responding to Lessee's request
Except as otherwise provided, any unused portion of said deposit shall be
refunded to Lessee without interest Lessor's consent to any act. assignment
of this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default o Breach,
except as may be otherwise specifically stated in writing by Lessor at the
time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable The failure to specify herein any
particular condition to Lessor's consent shall not preclude the imposition by
Lessor at the lime of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. Guarantor.
37.1 If there are to be any Guarantors of this Lease per paragraph 1.11,
the form of the guaranty to be executed by each such Guarantor shall be in
the form most recently published by the American Industrial Real Estate
Association, and each said Guarantor shall have the same obligations as
Lessee under this Lease. including but not limited to the obligation to
provide the Tenancy Statement and information called for by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if any
such Guarantor fails or refuses, upon reasonable request by Lessor to give
(a) evidence of the due execution of the guaranty called for by this Lease,
including the authority of the Guarantor (and of the
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party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and including in the case of a corporate Guarantor, a certified
copy of a resolution of its board of directors authorizing the making of such
guaranty, together with a certificate of incumbency showing the signatures of
the persons authorized to sign on its behalf, (b) current financial
statements of Guarantor as may from time to time be requested by Lessor, (c)
a Tenancy Statement, or /d) written confirmation that the guaranty is still
in effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the Premises
and the observance and performance of all of the covenants, condition and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. Options.
39.1 Definition. As used in this Paragraph 39 the word "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property
of Lessor; (b) the right of first refusal to lease the Premises or the right
of first offer to lease the Premises or the right of first refusal to lease
other property of Lessor or the right of first offer to lease other property
of Lessor; (c) the right to purchase the Premises, or the right of first
refusal to purchase the Premises, or the right of first offer to purchase the
Premises, or the right to purchase other property of Lessor, or the right of
first refusal to purchase other property of Lessor, or the right of first
offer to purchase other property of Lessor.
39.2 Options Personal To Original Lessee. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1
hereof, and cannot be voluntarily or involuntarily assigned or exercised by
any person or entity other than said original Lessee while the original
Lessee is in full and actual possession of the Premises and without the
intention of thereafter assigning or subletting The Options, if any, herein
granted to Lessee are not assignable, either as a part of an assignment of
this Lease or separately or apart therefrom, and no Option may be separated
from this Lease in any manner, by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later option cannot be exercised
unless the prior Options to extend or renew this Lease have been validly
exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option notwithstanding
any provision in the grant of Option to the contrary (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured or (ii) during the period of
time any monetary obligation due Lessor from Lessee is unpaid (without regard
to whether notice thereof is given Lessee) or (iii) during the time Lessee is
in Breach of this Lease or (iv) in the event that Lessor has given to Lessee
three (3) or more notices of Default under Paragraph 13.1 whether or not the
Defaults are cured, during the twelve (12) month period immediately preceding
the exercise of the Option.
(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)
Lessor gives b Lessee three or more notices of Default under Paragraph 13.1
during any twelve month period whether
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or not the Defaults are cured or (iii) if Lessee commits a Breach of this
Lease.
40. Multiple Buildings. If the Premises are part of a group of buildings
controlled by Lessor Lessee agrees that it will abide by keep and observe all
reasonable rules and regulations which Lessor may make from time to time for
the management safety care and cleanliness of the grounds the parking and
unloading of vehicles and the preservation of good order as well as for the
convenience other occupants or tenants of such other buildings and their
invitees, and that Lessee will pay its fair share of common expenses
incurred in connection therewith.
41. Security Measures. Lessee hereby acknowledges that the rental payable
to Lessor hereunder does not include the cost of guard service or other
security measures and that Lessor shall have no obligation whatsoever to
provide same. Lessee assumes all responsibility for the protection of the
Premises, Lessee, its agents and invitees and their property from the acts of
third parties.
42. Reservations. Lessor reserves to itself the right from time to time to
grant without the consent or joinder of Lessee such easements rights and
dedications that Lessor deems necessary 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 agrees to sign any documents reasonably requested
by Lessor to effectuate any such easement rights dedication map or
restrictions.
43. Performance Under Protest. If any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall survive
the right on the part of said Party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal obligation on the part
of said Party to pay such sum or any part thereof said Party shall be
entitled to recover such sum or so much thereof as it was not legally
required to pay under the provisions of this Lease.
44. Authority. If either Party hereto is a corporation trust or general or
limited partnership each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute
and deliver this Lease on its behalf. If Lease is a corporation trust or
partnership Lessee shall within thirty (30) days after request by Lessor
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to Lessee
this Lease is not intended to be binding until executed by all Parties hereto.
47. Amendments. This Lease may be modified only in writing signed by the
parties in interest at the time of the modification The parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the
property of which me Premises are a part.
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48. Multiple Parties. Except as otherwise expressly provided herein if more
than one person or entity is named herein as either Lessor or Lessee the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO THE PARTIES HEREBY AGREE THAT AT THE
TIME THIS LEASE IS EXECUTED THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO YOUR
ATTORNEY FOR HIS APPROVAL FURTHER EXPERTS SHOULD BE CONSULTED TO EVALUATE THE
CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF ASBESTOS STORAGE
TANKS OR HAZARDOUS SUBSTANCES NO REPRESENTATION OR RECOMMENDATION IS MADE BY
THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE
BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY LEGAL
EFFECT OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL
AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE IF THE SUBJECT PROPERTY IS
LOCATED IN A STATE OTHER THAN CALIFORNIA AN ATTORNEY FROM THE STATE WHERE THE
PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates
specified above to their respective signatures.
Executed at Camarillo, CA Executed at Camarillo, CA
on 9/17/96 on 9/16/96
by LESSOR: The Jennings Bypass Trust by LESSEE: California
Amplifier, Inc.
By Christine Olson By Michael R. Ferron
Name Printed: Christine Olson Name Printed: Michael R. Ferron
Title Trustee of the Jennings Bypass Trust Title C.F.O.
Address 2368 Solano Dr. Address 460 Calle San Pablo
Camarillo, CA 93012 Camarillo, CA 93012
Tel. No. 805-987-6394 Fax 805/484-8174 Tel. No. 805-987-9000
Fax 805/987-2655
NOTICE: These forms are often modified to meet changing requirements of law
and industry needs. Always write or call to make sure you are utilizing the
most current form: American Industrial Real Estate Association, 345 South
Figueroa Street, Suite M-1, Los Angeles, CA 90071. (213)687-6777. Fax No.
(213)687-8616
Copyright 1990- By American Industrial Real Estate Association. All rights
reserved. No part of these works may be reproduced in any form without
permission in writing.
Form 204N-3/90
ADDENDUM TO THAT STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET
DATED SEPTEMBER 11, 1996 BY AND BETWEEN THE JENNINGS BYPASS TRUST AS LESSOR
AND CALIFORNIA AMPLIFIER, INC., A DELAWARE CORPORATION AS LESSEE FOR THAT
CERTAIN PROPERTY COMMONLY KNOWN AS 461 CALLE SAN PABLO, CAMARILLO, CALIFORNIA.
1.6 BASE RENT: The Base Rent for the initial lease term shall be adjusted on
the following schedule:
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November 1, 1996 - October 31, 1998 - $ 8,898/month.
November 1, 1998 - October 31, 2000 - $ 9,378/month.
November 1, 2000 - October 31, 2002 - $ 9,885/month.
November 1, 2002 - February 29, 2004 - $10,419/month.
49. RENT ABATEMENT: If Lessee is not then in default of any of its
obligations under this Lease, Lessee shall be conditionally excused from
paying rent for the months of December 1996, December 1997, and December
1998. If at any time thereafter Lessee is in default of any of the
provisions of this lease, Lessee shall forthwith pay the rental conditionally
excused prior to the date of such default.
50. CONDITIONS OF PREMISES: Lessor, at Lessor's sole cost and expense,
shall be responsible for maintenance of roof, foundation, and structure for
the initial thirty-six (36) months of the lease term. Lessee shall receive
premises in "As Is" condition and shall be responsible for building cleanup,
at Lessee's sole cost of expense.
Paragraph 2.2 titled CONDITION, shall not apply at the commencement date of
this lease.
51. HAZARDOUS MATERIALS: As in any real estate transaction, it is
recommended that you consult with a professional such as a civil engineer,
industrial hygienist or other person, with experience in evaluating the
condition of the property including the possible presence of asbestos,
hazardous materials and underground storage tanks. Owner agrees to disclose
to Broker and to prospective purchasers and tenants any and all information
which Owner actually has regarding present and future zoning and
environmental matters affecting the Property and regarding the condition of
the Property including, but not limited to, structural, mechanical, and soils
conditions, the presence and location of contaminated substances, and
underground storage tanks, in, on or about the Property. Broker is
authorized to disclose any such information to prospective purchasers or
tenants.
52. ADA: Lessee shall, at Lessee's sole expense, take such steps as may be
necessary to comply with the Americans With Disabilities Act (the ADA), a
Federal law codified at 42 USC Section 1210 et seq.
INITIALS INITIALS
EXHIBIT A
[FLOOR PLAN OF BUILDING AND PARKING AREA]
INITIALS
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STANDARD OFFER, AGREEMENT AND ESCROW
INSTRUCTIONS FOR PURCHASE OF REAL ESTATE
(Non-Residential)
American Industrial Real Estate Association
February 13, 1996
(Date for Reference Purposes)
1. BUYER.
1.1 California Amplifier, Inc., a California Corporation (the
"Buyer")hereby offers to purchase the real property, hereinafter described,
from the owner thereof (the "Seller") (collectively, the "Parties" or
individually, a "Party"), through an escrow (the "Escrow") to close on 45
days from the Date of Agreement (the "Expected Closing Date") to be held by:
Continental Lawyers Title Company (the "Escrow Holder") whose address is 751
Daily Drive, Suite 100, Camarillo, CA 93010. Phone No. (805) 484-2701,
Facsimile No.(805) 388-3993, upon the terms and conditions set forth in this
agreement (the "Agreement"). Buyer shall have the right to assign Buyer's
rights hereunder, but any such assignment shall not relieve Buyer of Buyer's
obligations herein unless the Seller expressly releases Buyer.
1.2 The term "Date of Agreement as used herein shall be the date when
by execution and delivery (as defined in paragraph 20.2) of this document or
a subsequent counter-offer thereto, Buyer and Seller have reached agreement
in writing whereby Seller agrees to sell, and Buyer agrees to purchase, the
Property upon terms accepted by both Parties.
2. PROPERTY.
2.1 The real property (the "Property") that is the subject of this
offer consists of (insert a brief physical description) an approximately 3.05
acre parcel zoned M1 is located in the City of Camarillo County of Ventura,
State of California, is commonly known by the street address of NE corner of
Calle San Pablo and Pleasant Valley Road and is legally described as: to be
supplied in escrow.
2.2 If the legal description of the Property is not complete or is
inaccurate, this Agreement shall not be invalid and the legal description
shall be completed or corrected to meet the requirements of Continental
Lawyers Title Company (the "Title Company") which Title Company shall issue
the title policy hereinafter described.
2.3 The Property includes, at no additional cost to Buyer, the
permanent improvements thereon, including those items which the law of the
state in which the Property is located provides is part of the Property, as
well as the following items, if any, owned by Seller and presently located in
the Property: electrical distribution systems (power panels, buss ducting,
conduits, disconnects, lighting fixtures), telephone distribution systems
(lines, jacks and connections), space heaters, air conditioning equipment,
air lines, fire sprinkler systems, security systems, carpets, window
coverings, wall coverings and (collectively, the "Improvements").
2.4 If the Property is located in the State of California, the
Broker(s) is/are required under the Alquist-Priolo Special Studies Zones Act,
to disclose to a prospective purchaser of real property whether the property
being purchased is located within a delineated special studies zone (a zone
that encompasses a potentially or recently active trace of an earthquake
fault that is deemed by the State Geologist to be sufficiently active and
well defined enough to constitute a potential hazard to structures from
surface faulting or fault (creep). If the Property is located within such a
special studies zone, its development may require a geologic report from a
state registered geologist. In accordance with such law, the Broker(s) hereby
inform(s) Buyer that the Property:
X (a) Is not within such a special studies zone
(b) Is within such a special studies zone.
2.5 If (1) the Property is located in the State of California, (2) the
Improvements were constructed prior to 1975, and (3) the
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Improvements include structures with (i) pre-cast (e.g., tilt-up) concrete or
reinforced masonry walls together with wood frame floors or roofs or (ii)
unreinforced masonry walls, California law requires that Seller or Seller's
Broker provide Buyer with a copy of The Commercial Property Owner's Guide to
Earthquake Safety (the "Booklet") published by the California Seismic Safety
Commission. Seller and Seller's Broker hereby inform Buyer that the Property:
(a) meets the foregoing requirements, and Seller and Seller's Broker
are required to provide Buyer with a copy of the Booklet. Seller or Seller's
Broker shall, within five (5) business days of the Date of Agreement,
deliver to Buyer a copy of the Booklet and a completed "Commercial Property
Earthquake Weakness. Disclosure Report" contained in the Booklet duly
executed by Seller. Within five (5) business days of Buyer's receipt of said
Disclosure Report, Buyer shall deliver a duly countersigned copy of the same
to Escrow Holder, with a copy to Seller and Seller's Broker. Escrow Holder
is hereby instructed that the Escrow shall not close unless and until Escrow
Holder has received the Disclosure Report duly signed by both Seller and
Buyer.
X (b) does not meet the foregoing requirements requiring the delivery of
the Booklet
3. PURCHASE PRICE.
3.1 The purchase price (the "Purchase Price") to be paid by Buyer to
Seller for the Property shall be $ 697, 500.00, payable as follows:
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Initials Initials
(a) Cash down payment, including the Deposit as defined in paragraph 4.3
$697,500.00
(or if an all cash transaction, the Purchase Price)
Total Purchase Price:
$697,500.00
3.2 If an Existing Deed of Trust permits the beneficiary thereof to
require payment of a transfer fee as a condition to the transfer of the
Property subject to such Existing Deed of Trust, Buyer agrees to pay transfer
fees and costs of up to one and one-half percent (1-1/2%) of the unpaid
principal balance of the applicable Existing Note.
4. DEPOSITS.
4.1 Buyer hereby delivers a check in the sum of $10,000.00 payable to
Continental Lawyers Title Company to be (check applicable box) forthwith
deposited in the payee's trust account, X held uncashed until the Date of
Agreement. When cashed, the check shall be deposited into the payee's trust
account to be applied toward the Purchase Price of the Property at the
Closing, as defined in paragraph 8.3. Should Buyer and Seller not enter into
an agreement for purchase and sale, Buyer's check or funds shall, upon
request by Buyer, be promptly returned to Buyer.
4.2 Within five (5) business days after the Day of Agreement, Buyer
shall deposit with Escrow Holder the additional sum of $ -0- to be
applied to the Purchase Price at the Closing.
4.3 The funds deposited with Escrow Holder by or on behalf of Buyer
under paragraphs 4.1 and 4.2, above (collectively the "Deposit"), shall be
deposited by Escrow Holder in such State or Federally chartered
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bank as Buyer may select and in such interest-bearing account or accounts as
Escrow Holder or Broker(s) deem appropriate and consistent with the timing
requirements of this transaction. The interest therefrom shall accrue to the
benefit of Buyer, who hereby acknowledges that there may be penalties or
interest forfeitures if the applicable instrument is redeemed prior to its
specified maturity.
Buyer's Federal Tax Identification Number is: to be supplied
7. REAL ESTATE BROKERS.
7.1 The following real estate broker(s) (collectively, the "Brokers")
and brokerage relationships exist in this transaction and are consented to by
the parties (check applicable boxes):
X Equity Com'l R . E . Services represents Seller exclusively ("SELLER'S
BROKER")
X DAUM Com'l R . E . Services represents Buyer exclusively ("BUYER'S
BROKER"); or
represents both Seller and Buyer ("DUAL AGENCY"). (Also see Paragraph
26 ) (the "Broker(s)"), all such named Broker(s) being the procuring cause(s)
of this Agreement. See paragraph 26 for Disclosures Regarding the Nature of a
Real Estate Agency Relationship. Buyer shall use the services of Buyer's
Broker exclusively in connection with any and all negotiations and offers
with respect to the property described in paragraph 2.1 for a period of one
year from the date above.
7.2 Buyer and Seller each represent and warrant to the other that
he/she/it has had no dealings with any person, firm, broker or finder in
connection with the negotiation of this Agreement and/or the consummation of
the purchase and sale contemplated herein, other than the Broker(s) named in
paragraph 7.1, and no broker or other person, firm or entity, other than said
Broker(s) is/are entitled to any commission or finder's fee in connection
with this transaction as the result of any dealings or acts of such Party.
Buyer and Seller do each hereby agree to indemnify, defend, protect and hold
the other harmless from and against any costs, expenses or liability for
compensation, commission or charges which may be claimed by any broker,
finder or other similar party, other than said named Broker(s) by reason of
any dealings or act of the indemnifying Party.
8. ESCROW AND CLOSING.
8.1 Upon acceptance hereof by Seller, this Agreement, including any
counter-offers incorporated herein by the Parties, shall constitute not only
the agreement of purchase and sale between Buyer and Seller, but also
instructions to Escrow Holder for the consummation of the Agreement through
the Escrow. Escrow Holder shall not prepare any further escrow instructions
restating or amending this Agreement unless specifically so instructed by the
Parties of a Broker herein.
8.2 Escrow Holder is hereby authorized and instructed to conduct the
Escrow in accordance with this Agreement, applicable law, custom and practice
of the community in which Escrow Holder is located, including any reporting
requirements of the Internal Revenue Code. In the event of a conflict between
the law of the state where the Property is located and the law of the state
where the Escrow Holder is located, the law of the state where the Property
is located shall prevail.
8.3 Subject to satisfaction of the contingencies herein described,
Escrow Holder shall close this escrow (the "Closing") by recording the grant
deed and other documents required to be recorded and by disbursing the funds
and documents in accordance with this Agreement.
8.4 If this transaction is terminated for non-satisfaction and
non-waiver of a Buyer's Contingency, as defined in paragraph 9.4, then
neither of the Parties shall thereafter have any liability to the other under
this Agreement, except to the extent of the breach of any affirmative
covenant or warranty in this Agreement that may have been involved. In the
event of such termination, Buyer shall be promptly refunded all funds
deposited by or on behalf of Buyer with a Broker, Escrow Holder or Seller,
less only Title Company and Escrow Holder cancellation fees and costs, all of
which shall be Buyer's obligation.
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8.5 The Closing shall occur on the Expected Closing Date, or as soon
thereafter as the Escrow is in condition for Closing; provided, however, that
if the Closing does not occur by the Expected Closing Date and the Expected
Closing Date is not extended by mutual instructions of the Parties, a Party
hereto not then in default under this Agreement may notify the other Party,
Escrow Holder, and Broker(s), in writing that, unless the Closing occurs
within five (5) business days following said notice, the Escrow and this
Agreement shall be deemed terminated without further notice or instructions.
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Initials Initials
8.6 Should the Closing not occur during said five (5) day period, this
Agreement and Escrow shall be deemed terminated and Escrow Holder shall
forthwith return all monies and documents, less only Escrow Holder's
reasonable fees and expenses, to the Party who deposited them. Such Party
shall indemnify and hold Escrow Holder harmless in connection with such
return. However, no refunds or documents shall be returned to a party claimed
by written notice to Escrow Holder to be in default under this Agreement.
8.7 Except as otherwise provided herein, the termination of Escrow and
this Agreement and/or the return of deposited funds or documents shall not
relieve or release either Buyer or Seller from any obligation to pay Escrow
Holder's fees and costs or constitute a waiver, release or discharge of any
breach or default that has occurred in the performance of the obligations,
agreements, covenants or warranties contained herein.
8.8 If this Agreement terminates for any reason other than Seller's
breach or default, then at Seller's request, and as a condition to the return
of Buyer's deposit, Buyer shall within five (5) days after written request
deliver to Seller, at no charge, copies of all surveys, engineering studies,
soil reports, maps, master plans, feasibility studies and other similar items
prepared by or for Buyer that pertain to the Property.
9. CONTINGENCIES TO CLOSING.
9.1 The Closing of this transaction is contingent upon the satisfaction
or waiver of the following contingencies:
(a) Disclosure. Buyer's receipt and written approval, within ten (10)
days after delivery to Buyer, of a completed Property Information Sheet (the
"Property Information Sheet"), concerning the Property, duly executed by or
on behalf of Seller in the current form or equivalent to that published by
the American Industrial Real Estate Association (the "A. I .R.") . Seller
shall provide Buyer with the Property Information Sheet within ten (10) days
following the Date of Agreement. See also paragraph 2.5 for possible
additional disclosure and contingency regarding a "Commercial Property
Earthquake Weakness Disclosure Report."
(b) Physical Inspection. Buyer's written approval, within ten (10) days
following the later of the Date of Agreement or receipt by Buyer of the
Property Information Sheet, of an inspection by Buyer, at Buyer's expense. of
the physical aspects of the Property.
(c) Hazardous Substance Conditions Report. Buyer's written approval,
within thirty (30) days following the later of the Date of Agreement or
receipt by Buyer of the Property Information Sheet, of a Hazardous Substance
Conditions Report concerning the Property and relevant adjoining properties.
Such report will be obtained at Buyer's direction and expense. A "Hazardous
Substance" for purposes of this Agreement is defined as any substance whose
nature and/or quantity of existence, use, manufacture, disposal or effect,
render it subject to
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Federal, state or local regulation investigation, remediation or removal as
potentially injurious to public health or welfare. A "Hazardous Substance
Condition" for purposes of this Agreement is defined as the existence on,
under or relevantly adjacent to the Property of a Hazardous Substance that
would require remediation and/or removal under applicable Federal, state or
local law.
(d) Soil Inspection. Buyer's written approval, within thirty (30) days
after the later of the Date of Agreement or receipt by Buyer of the Property
Information Sheet, of a soil test report concerning the Property. Said report
shall be obtained at Buyer's direction and expense. Seller shall promptly
provide to Buyer copies of any existing soils reports that Seller may have.
(e) Governmental Approvals. Buyer's receipt, within fifteen (15) days
of the Date of Agreement, of all approvals and permits from governmental
agencies or departments which have or may have jurisdiction over the Property
which Buyer deems necessary or desirable in connection with its intended use
of the Property, including, but not limited to, permits and approvals
required with respect to zoning, planning! building and safety, fire, police,
handicapped access, transportation and environmental matters. Buyer's failure
to deliver to Escrow Holder and Seller written notice terminating this
Agreement prior to the expiration of said fifteen (15) day period as a result
of Buyer's failure to obtain such approvals and permits shall be conclusively
deemed to be Buyer's waiver of this condition to Buyer's obligations under
this Agreement.
(f) Condition of Title. Buyer's written approval of a current
preliminary title report concerning the Property (the "PTR") issued by the
Title Company, as well as all documents (the "Underlying Documents") referred
to in the PTR, and the issuance by the Title Company of the title policy
described in 10.1. Seller shall cause the PTR and all Underlying Documents to
be delivered to Buyer promptly after the Date of Agreement. Buyer's approval
is to be given within ten (10) days after receipt of said PTR and legible
copies of all Underlying Documents. The disapproval by Buyer of any monetary
encumbrance, which by the terms of this Agreement is not to remain against
the Property after the Closing, shall not be considered a failure of this
condition, as Seller shall have the obligation, at Seller's expense, to
satisfy and remove such disapproved monetary encumbrance at or before the
Closing.
(g) Survey. Buyer's written approval, within thirty (30) days after
receipt of the PTR and Underlying Documents, of an ALTA title supplement
based upon a survey prepared to American Land Title Association (the "ALTA")
standards for an owner's policy by a licensed surveyor, showing the legal
description and boundary lines of the Property, any easements of record, and
any improvements, poles structures and things located within ten (10) feet
either side of the Property boundary lines. The survey shall be prepared at
Buyer's direction and expense. If Buyer has obtained a survey and approved
the ALTA title supplement, Buyer may elect within the period allowed for
Buyer's approval of a survey to have an ALTA extended coverage owner's form
of title policy, in which event Buyer shall pay any additional premium
attributable thereto.
(h) Existing Leases and Tenancy Statements. Buyer's written approval,
within ten (10) days after receipt of legible copies of all leases, subleases or
rental arrangements ((collectively the "Existing Leases") affecting the
Property, and a statement (the "Tenancy Statement") in the latest form or
equivalent to that published by the A.L.R., executed by Seller and each tenant
and subtenant of the Property. Seller shall use its best efforts to provide
Buyer with said Existing Leases and Tenancy Statements promptly after the Date
of Agreement.
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Initials Initials
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(i) Other Agreements. Buyer's written approval, within ten (10) days
after receipt, of a copy of any other agreements ("Other Agreements") known
to Seller that will affect the Property beyond the Closing. Seller shall
cause said copies to be delivered to Buyer promptly after the Date of
Agreement.
(j) Financing. If paragraph 5 hereof dealing with a financing
contingency has not been stricken, the satisfaction or waiver of such New
Loan contingency.
(k) Existing Notes. If paragraph 3.1 (c) has not been stricken, Buyer's
written approval, within ten (10) days after receipt of conformed and legible
copies of the Existing Notes, Existing Deeds of Trust and related agreements
(collectively the "Loan Documents") to which the Property will remain subject
after the Closing, including a beneficiary statement (the "Beneficiary
Statement") executed by the holders of the Existing Notes confirming: (1) the
amount of the unpaid principal balance, the current interest rate, and the
date to which interest is paid, and (2) the nature and amount of any impounds
held by the beneficiary in connection with said loan. Seller shall use its
best efforts to provide Buyer with said Loan Documents and Beneficiary
Statement promptly after the Date of Agreement. Buyer's obligation to close
is further conditioned upon Buyer's being able to purchase the Property
without acceleration or change in the terms of any Existing Notes o charges
to Buyer except as otherwise provided in this Agreement or approved by Buyer,
provided, however, Buyer shall pay the transfer fee referred to in paragraph
3.2 hereof.
(l) Destruction, Damage or Loss. There shall not have occurred prior to
the Closing, a destruction of, or damage or loss to, the Property or any
portion thereof, from any cause whatsoever, which would cost more than
$10,000.00 to repair or cure. If the cost of repair or cure is $10,000.00 or
less, Seller shall repair or cure the loss prior to the Closing. Buyer shall
have the option, within ten (10) days after receipt of written notice of a
loss costing more than $10,000.00 to repair or cure, to either terminate this
transaction or to purchase the Property notwithstanding such loss, but
without deduction or offset against the Purchase Price. If the cost to repair
or cure is more than $10,000.00, and Buyer does not elect to terminate this
transaction, Buyer shall be entitled to any insurance proceeds applicable to
such loss. Unless otherwise notified in writing by either Party or Broker,
Escrow Holder shall assume no destruction damage or loss costing more than
$10,000.00 to repair or cure has occurred prior to Closing.
(m) Material Change. No Material Change, as hereinafter defined, shall
have occurred with respect to the Property that has not been approved in
writing by Buyer. For purposes of this Agreement, a "Material Change" shall
be a change in the status of the use, occupancy tenants or condition of the
Property as reasonably expected by the Buyer, that occurs after the date of
this offer and prior to the Closing. Buyer shall have ten (10) days following
receipt of written notice from any source of any such Material Change within
which to approve or disapprove same. Unless otherwise notified in writing by
either Party or Broker, Escrow Holder shall assume that no Material Change
has occurred prior to the Closing.
(n) Seller Performance. The delivery of all documents and the due
performance by Seller of each and every undertaking and agreement to be
performed by Seller under this Agreement.
(o) Breach of Warranty. That each representation and warranty of Seller
herein be true and correct as of the Closing. Escrow Holder shall assume that
this condition has been satisfied unless notified to the contrary in writing
by Buyer or Broker(s) prior to the Closing.
(p) Broker's Fee. Payment at the Closing of such Broker's Fee as is
specified in this Agreement or later written instructions to Escrow Holder
executed by Seller and Broker(s). It is agreed by Buyer, Seller and Escrow
Holder that Broker(s) is/are a third party beneficiary of this Agreement
insofar as the Broker's fee is concerned, and that no change shall be made by
Buyer, Seller or Escrow Holder with respect to
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the time of payment, amount of payment, or the conditions to payment of the
Broker's fee specified in this Agreement, without the written consent of
Broker(s).
9.2 All of the contingencies specified in sub-paragraphs (a) through
(p) of paragraph 9.1 are for the benefit of, and may be waived by, Buyer, and
may be elsewhere herein referred to as "Buyer Contingencies."
9.3 If Buyer shall fail, within the applicable time specified, to
approve or disapprove in writing to Escrow Holder, Seller and the other
Party's Broker, any item matter or document subject to Buyer's approval under
the terms of this Agreement, it shall be conclusively presumed that Buyer has
approved such item, matter or document. Buyer's conditional approval shall
constitute a disapproval, unless provision is made by the Seller within the
time specified therefor by the Buyer in the conditional approval or by this
Agreement, whichever is later, for the satisfaction of the condition imposed
by the Buyer.
9.4 If any Buyer's Contingency is not satisfied or if Buyer disapproves
any matter subject to its approval within the time period applicable thereto
("Disapproved Item"), Seller shall have the right within ten (10) days
following the expiration of the time period applicable to such Buyer
Contingency or receipt of notice of Buyer's disapproval, as the case may be,
to elect to cure such Disapproved Item prior to the Expected Closing Date
("Seller's Election"). Seller's failure to give to Buyer within said ten (10)
day period, written notice of Seller's commitment to cure such Disapproved
Item on or before the Expected Closing Date shall be conclusively presumed to
be Seller's Election not to cure such Disapproved Item. If Seller elects,
either by written notice or failure to give written notice, not to cure a
Disapproved Item, Buyer shall have the election, within ten (10) days after
Seller's Election to either accept title to the Property subject to that
Disapproved Item, or to terminate this transaction. Buyer's failure to elect
termination by written notice to Seller within said ten (10) day period shall
constitute Buyer's election to accept title to the Property subject to that
Disapproved Item without deduction or offset. Unless expressly provided
otherwise herein, Sellers right to cure shall not apply to Hazardous
Substance Conditions referenced in paragraph 9.1 (c) or to the Financing
Contingency set forth in paragraph 5. Unless the parties mutually instruct
otherwise, if the time periods for the satisfaction of contingencies or for
Seller's and Buyer's said Elections would expire on a date after the Expected
Closing Date, the Expected Closing Date shall be deemed extended to coincide
with the expiration of three (3) business days following the expiration of:
(a) the applicable contingency period(s), (b) the period within which the
Seller may elect to cure the Disapproved Item, or (c) if Seller elects not to
cure, the period within which Buyer may elect to terminate this transaction,
whichever is later.
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Initials Initials
9.5 Buyer understands and agrees that until such time as all Buyer's
Contingencies have been satisfied or waived, Seller and/or its agents may
solicit, entertain and/or accept back-up offers to purchase the subject
Property in the event the transaction covered by this Agreement is not
consummated.
9.6 As defined in subparagraph 9.1 (c), Buyer and Seller acknowledge
that extensive local state and Federal legislation establish broad liability
upon owners and/or users of real property for the investigation and
remediation of a Hazardous Substance Condition. The determination of the
existence of a Hazardous Substance Condition and the evaluation of the impact
of such a condition are highly technical
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and beyond the expertise of Broker(s). Buyer and Seller acknowledge that they
have been advised by Broker(s) to consult their own technical and legal
experts with respect to the possible Hazardous Substance Condition aspects of
this Property or adjoining properties, and Buyer and Seller are not relying
upon any investigation by or statement of Broker(s) with respect thereto.
Buyer and Seller hereby assume all responsibility for the impact of such
Hazardous Substance Conditions upon their respective interests herein.
10. DOCUMENTS REQUIRED AT CLOSING.
10.1 Escrow Holder shall cause to be issued to Buyer a standard coverage
(or ALTA extended, if so elected under paragraph 9.1(f) owner's form policy
of title insurance effective as of the Closing, issued by the Title Company
in the full amount of the Purchase Price, insuring title to the Property
vested in Buyer, subject only to the exceptions approved by Buyer. In the
event there is a Purchase Money Deed of Trust in this transaction, the policy
of title insurance shall be a joint protection policy insuring both Buyer and
Seller.
"IMPORTANT: IN A PURCHASE OR EXCHANGE OF REAL PROPERTY, IT MAY BE ADVISABLE
TO OBTAIN TITLE INSURANCE IN CONNECTION WITH THE CLOSE OF ESCROW SINCE THERE
MAY BE PRIOR RECORDED LIENS AND ENCUMBRANCES WHICH AFFECT YOUR INTEREST IN
THE PROPERTY BEING ACQUIRED. A NEW POLICY OF TITLE INSURANCE SHOULD BE
OBTAINED IN ORDER TO ENSURE YOUR INTEREST IN THE PROPERTY THAT YOU ARE
ACQUIRING".
10.2 Seller shall deliver or cause to be delivered to Escrow Holder in
time for delivery to Buyer at the Closing, an original ink signed:
(a) Grant deed (or equivalent), duly executed and in recordable form,
conveying fee title to the Property to Buyer.
(b) If paragraph 3.1 (c) has not been stricken, the Beneficiary
Statements concerning Existing Note(s)
(c) If applicable, the Existing Leases and Other Agreements together
with duly executed assignments thereof by Seller and Buyer. The assignment of
Existing Leases shall be on the most recent Assignment and Assumption of
Lessor's Interest in Lease form published by the A.l.R. or its equivalent.
(d) If applicable, the Tenancy Statements executed by Seller and the
Tenant(s) of the Property.
(e) An affidavit executed by Seller to the effect that Seller is not a
"foreign person" with in the meaning of Internal Revenue Code Section 1445 or
successor statutes. If Seller does not provide such affidavit in form
reasonably satisfactory to Buyer at least three (3) business days prior to
the Closing Escrow Holder shall at the Closing deduct from Seller's proceeds
and remit to Internal Revenue Service such sum as is required by applicable
Federal law with respect to purchases from foreign sellers.
10.3 Buyer shall deliver or cause to be delivered to Seller through escrow:
(a) The cash portion of the Purchase Price and such additional sums as
are required of Buyer under this Agreement for prorations, expenses and
adjustments. The balance of the cash portion of the Purchase Price, including
Buyer's escrow charges and other cash charges, if any, shall be deposited by
Buyer with Escrow Holder, by cashier's check drawn upon a local major banking
institution, federal funds wire transfer, or any other method acceptable to
Escrow Holder as immediately collectable funds, no later than 11:00 o'clock
A.M. on the business day prior to the Expected Closing Date.
(b) If a Purchase Money Note and Purchase Money Deed of Trust are
called for by this Agreement, the duly executed originals of those documents,
the Purchase Money Deed of Trust being in recordable form, together with
evidence of fire insurance on the improvements in the amount of the full
replacement cost naming Seller as a mortgage loss payee, and a real estate
tax service contract (at Buyer's expense), assuring Seller of notice of the
status of payment of real property taxes during the life of the Purchase
Money Note.
PAGE 8
<PAGE>
(c) The assumption portion of the Assignment and Assumption of Lessor's
Interest in Lease form specified in paragraph 10.2(c), above, duly executed
by Buyer with respect to the obligations of the Lessor accruing after the
Closing as to each Existing Lease.
(d) Assumptions duly executed by Buyer of the obligations of Seller
that accrue after Closing under any Other Agreements.
(e) If applicable, a written assumption duly executed by Buyer of the
loan documents with respect to Existing Notes.
11. PRORATIONS, EXPENSES AND ADJUSTMENTS.
11.1 Taxes. Real property taxes payable by the owner of the Property
shall be prorated through Escrow as of the date of the Closing, based upon
the latest tax bill available. The Parties agree to prorate as of the Closing
any taxes assessed against the Property by supplemental bill levied by reason
of events occurring prior to the Closing. Payment shall be made promptly in
cash upon receipt of a copy of any such supplemental bill of the amount
necessary to accomplish such proration. Seller shall pay and discharge in
full at or before the Closing the unpaid balance of any special assessment
bonds.
11.2 Insurance. If Buyer elects to take an assignment of the existing
casualty and/or liability insurance that is maintained by Seller, the current
premium therefor shall be prorated through Escrow as of the date of Closing.
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Initials Initials
11.3 Rentals, Interest and Expenses. Collected rentals, interest on
Existing Notes, utilities, and operating expenses shall be prorated as of the
date of Closing. The Parties agree to promptly adjust between themselves
outside of Escrow any rents received after the Closing.
11.4 Security Deposit. Security Deposits held by Seller shall be given
to Buyer by a credit to the cash required of Buyer at the Closing.
11.5 Post Closing Matters. Any item to be prorated that is not
determined or determinable at the Closing shall be promptly adjusted by the
Parties by appropriate cash payment outside of the Escrow when the amount due
is determined.
11.6 Variations In Existing Note Balances. In the event that Buyer is
taking title to the Property subject to an Existing Deed of Trust(s), and in
the event that a Beneficiary Statement as to the applicable Existing Note(s)
discloses that the unpaid principal balance of such Existing Note(s) at the
Closing will be more or less than the amount set forth in paragraph 3.1 (c)
hereof (the "Existing Note Variation"), then the Purchase Money Note(s) shall
be reduced or increased by an amount equal to such Existing Note Variation.
If there is to be no Purchase Money Note, the cash required at the Closing
per Paragraph 3.1 (a) shall be reduced or increased by the amount of such
Existing Note Variation.
11.7 Variations In New Loan Balance. In the event Buyer is obtaining a
New Loan and in the event that the amount of the New Loan actually obtained
is greater than the amount set forth in Paragraph 5.1 hereof, the Purchase
Money Note, if one is called for in this transaction, shall be reduced by the
excess of the actual face amount of the New Loan over such amount as
designated in Paragraph 5.1 hereof.
11.8 Buyer and Seller shall each pay one-half of the Escrow Holder's
charges and Seller shall pay the usual recording fees and any required
documentary transfer taxes. Seller shall pay the premium for a standard
coverage owner's or joint protection policy of title insurance.
PAGE 9
<PAGE>
12. REPRESENTATIONS AND WARRANTIES OF SELLER AND DISCLAIMER.
12.1 Seller's warranties and representations shall survive the Closing
and delivery of the deed, and, unless otherwise noted herein, are true,
material and relied upon by Buyer and Broker(s) in all respects, both as of
the Date of Agreement, and as of the date of Closing. Seller hereby makes the
following warranties and representations to Buyer and Broker(s):
(a) Authority of Seller. Seller is the owner of the Property and/or has
the full right, power and authority to sell, convey and transfer the Property
to Buyer as provided herein, and to perform Seller's obligations hereunder.
(b) Maintenance During Escrow and Equipment Condition At Closing.
Except as otherwise provided in paragraph 9.1(1) hereof dealing with
destruction, damage or loss, Seller shall maintain the Property until the
Closing in its present condition, ordinary wear and tear excepted. The
heating, ventilating, air conditioning, plumbing, elevators, loading doors
and electrical systems shall be in good operating order and condition at the
time of Closing.
(c) Hazardous Substances/Storage Tanks. Seller has no knowledge, except
as otherwise disclosed to Buyer in writing, of the existence or prior
existence on the Property of any Hazardous Substance (as defined in paragraph
9.1 (c)), nor of the existence or prior existence of any above or below
ground storage tank or tanks.
(d) Compliance. Seller has no knowledge of any aspect or condition of
the Property which violates applicable laws, rules, regulations, codes, or
covenants, conditions or restrictions, or of improvements or alterations made
to the Property without a permit where one was required, or of any
unfulfilled order or directive of any applicable governmental agency or
casualty insurance company that any work of investigation, remediation,
repair, maintenance or improvement is to be performed on the Property.
(e) Changes in Agreements. Prior to the Closing, Seller will not
violate or modify, orally or in writing, any Existing Lease or Other
Agreement or create any new leases or other agreements affecting the
Property, without Buyer's written approval, which approval will not be
unreasonably withheld.
(f) Possessory Rights. Seller has no knowledge that anyone will, at the
Closing, have any right to possession of the Property, except as disclosed by
this Agreement or otherwise in writing to Buyer.
(g) Mechanics' Liens. There are no unsatisfied mechanic's or
materialman's lien rights concerning the Property.
(h) Actions, Suits or Proceedings. Seller has no knowledge of any
actions, suits or proceedings pending or threatened before any commission
board, bureau. agency, instrumentality, arbitrator(s) court or tribunal that
would affect the Property or the right to occupy or utilize same.
(i) Notice of Changes. Seller will promptly notify Buyer and Broker(s)
in writing of any Material Change (as defined in paragraph 9.1 (m)) affecting
the Property that becomes known to Seller prior to the Closing.
(j) No Tenant Bankruptcy Proceedings. Seller has no notice or knowledge
that any tenant of the Property is the subject of a bankruptcy or insolvency
proceeding.
(k) No Seller Bankruptcy Proceedings. Seller is not the subject of a
bankruptcy, insolvency or probate proceeding.
12.2 Buyer hereby acknowledges that, except as otherwise stated in this
Agreement, Buyer is purchasing the Property in its existing condition and
will by the time called for herein, make or have waived all inspections of
the Property Buyer believes are necessary to protect its own interest in and
its contemplated use of, the Property The Parties acknowledge that, except as
otherwise stated in this Agreement, no representations, inducements,
promises, agreements, assurances, oral or written, concerning the Property,
or any aspect of the Occupational Safety and Health Act, hazardous substance
laws, or any other act, ordinance or law, have been made by either Party or
Broker, or relied upon by either Party hereto.
PAGE 10
<PAGE>
13. POSSESSION.
13.1 Possession of the Property shall be given to Buyer at the Closing
subject to the rights of tenants under Existing Leases.
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Initials Initials
14. BUYER'S ENTRY.
14.1 At any time during the Escrow period, Buyer, and its agents and
representatives, shall have the right at reasonable times and subject to
rights of tenants under Existing Leases, to enter upon the Property for the
purpose of making inspections and tests specified in this Agreement.
Following any such entry or work, unless otherwise directed in writing by
Seller, Buyer shall return the Property to the condition it was in prior to
such entry or work, including the recompaction or removal of any disrupted
soil or material as Seller may reasonably direct. All such inspections and
tests and any other work conducted or materials furnished with respect to the
Property by or for Buyer shall be paid for by Buyer as and when due and Buyer
shall indemnify, defend, protect and hold harmless Seller and the Property of
and from any and all claims, liabilities, demands losses, costs, expenses
(including reasonable attorney's fees), damages or recoveries, including
those for injury to person or property, arising out of or relating to any
such work or materials or the acts or omissions of Buyer, its agents or
employees in connection therewith.
15. FURTHER DOCUMENTS AND ASSURANCES.
15.1 Buyer and Seller shall each, diligently and in good faith,
undertake all actions and procedures reasonably required to place the Escrow
in condition for Closing as and when required by this Agreement. Buyer and
Seller agree to provide all further information, and to execute and deliver
all further documents and instruments, reasonably required by Escrow Holder
or the Title Company.
16. ATTORNEY'S FEES.
16.1 In the event of any litigation or arbitration between the Buyer,
Seller, and Broker(s), or any of them, concerning this transaction, the
prevailing party shall be entitled to reasonable attorney's fees and costs.
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.
17. PRIOR AGREEMENTS/AMENDMENTS.
17.1 The contract in effect as of the Date of Agreement supersedes any
and all prior agreements between Seller and Buyer regarding the Property.
17.2 Amendments to this Agreement are effective only if made in writing
and executed by Buyer and Seller.
18. BROKER'S RIGHTS.
18.1 If this sale shall not be consummated due to the default of either
the Buyer or Seller, the defaulting party shall be liable to and shall pay to
Broker(s) the commission that Broker(s) would have received had the sale been
consummated. This obligation of Buyer, if Buyer is the defaulting party, is
in addition to any obligation with respect to liquidated damages.
18.2 Upon the Closing, Broker(s) is/are authorized to publicize the
facts of this transaction.
19. NOTICES.
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19.1 Whenever any Party hereto, Escrow Holder or Broker(s) herein shall
desire to give or serve any notice, demand, request, approval or other
communication, each such communication shall be in writing and shall be
delivered personally, by messenger or by mail, postage prepaid, addressed as
set forth adjacent to that party's or Broker's signature on this Agreement or
by telecopy with receipt confirmed by telephone. Service of any such
communication shall be deemed made on the date of actual receipt at such
address.
19.2 Any Party or Broker hereto may from time to time, by notice in
writing served upon the other Party as aforesaid, designate a different
address to which, or a different person or additional persons to whom, all
communications are thereafter to be made.
20. DURATION OF OFFER.
20.1 If this offer shall not be accepted by Seller on or before 5:00
P.M. according to the time standard applicable to the city of on the date of
February 21, 1996 , it shall be deemed automatically revoked.
20.2 The acceptance of this offer, or of any subsequent counter-offer
hereto, that creates an agreement between the Parties as described in
paragraph 1.2, shall be deemed made upon delivery to the other Party or
either Broker herein of a duly executed writing unconditionally accepting the
last outstanding offer or counter-offer.
21. LIQUIDATED DAMAGES. (This Liquidated Damages paragraph is applicable
only if initialed by both parties.)
21.1 THE PARTIES AGREE THAT IT WOULD BE IMPRACTICABLE OR EXTREMELY
DIFFICULT TO FIX, PRIOR TO SIGNING THIS AGREEMENT, THE ACTUAL DAMAGES WHICH
WOULD BE SUFFERED BY SELLER IF BUYER FAILS TO PERFORM ITS OBLIGATIONS UNDER
THIS AGREEMENT. THEREFORE, IF, AFTER THE SATISFACTION OR WAIVER OF ALL
CONTINGENCIES PROVIDED FOR THE BUYER'S BENEFIT, BUYERS BREACHES THIS
AGREEMENT, SELLER SHALL BE ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF
$10,000 PLUS INTEREST, IF ANY, ACCRUED THEREON. UPON PAYMENT OF SAID SUM TO
SELLER, BUYER SHALL BE RELEASED FROM ANY FURTHER LIABILITY TO SELLER, AND ANY
ESCROW CANCELLATION FEES AND TITLE COMPANY CHARGES SHALL BE PAID BY SELLER.
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Buyer Initials Seller Initials
22. ARBITRATION OF DISPUTES. (This Arbitration of Disputes paragraph is
applicable only if initialed by both parties and is subject to paragraph 23,
below.)
22.1 ANY CONTROVERSY AS TO WHETHER SELLER IS ENTITLED TO THE LIQUIDATED
DAMAGES AND/OR BUYER IS ENTITLED TO THE RETURN OF DEPOSIT MONEY, SHALL BE
DETERMINED BY BINDING ARBITRATION BY, AND UNDER THE COMMERCIAL RULES (the
"COMMERCIAL RULES") OF, THE AMERICAN ARBITRATION ASSOCIATION. HEARINGS ON
SUCH ARBITRATION SHALL BE HELD IN THE COUNTY WHERE THE
-------- --------
Initials Initials
PROPERTY IS LOCATED. ANY SUCH CONTROVERSY SHALL BE ARBITRATED BY THREE (3)
ARBITRATORS WHO SHALL BE IMPARTIAL REAL ESTATE BROKERS WITH AT LEAST FIVE (5)
FULL TIME YEARS OF EXPERIENCE IN THE AREA WHERE THE PROPERTY IS LOCATED, IN
THE TYPE OF REAL ESTATE THAT IS THE SUBJECT OF THIS AGREEMENT AND SHALL BE
APPOINTED UNDER THE COMMERCIAL RULES. THE ARBITRATORS SHALL HEAR AND
DETERMINE SAID CONTROVERSY IN ACCORDANCE WITH APPLICABLE LAW AND THE
INTENTION OF THE PARTIES AS EXPRESSED IN THIS
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AGREEMENT AS THE SAME MAY HAVE BEEN DULY MODIFIED IN WRITING BY THE PARTIES
PRIOR TO THE ARBITRATION, UPON THE EVIDENCE PRODUCED AT AN ARBITRATION
HEARING SCHEDULED AT THE REQUEST OF EITHER PARTY. SUCH PREARBITRATION
DISCOVERY SHALL BE PERMITTED AS IS AUTHORIZED UNDER THE COMMERCIAL RULES OR
STATE LAW APPLICABLE TO ARBITRATION PROCEEDINGS. THE AWARD SHALL BE EXECUTED
BY AT LEAST TWO (2) OF THE THREE (3) ARBITRATORS, BE RENDERED WITHIN THIRTY
(30) DAYS AFTER THE CONCLUSION OF THE HEARING, AND MAY INCLUDE ATTORNEYS'
FEES AND COSTS TO THE PREVAILING PARTY PER PARAGRAPH 16 HEREOF. JUDGMENT MAY
BE ENTERED ON THE AWARD IN ANY COURT OF COMPETENT JURISDICTION
NOTWITHSTANDING THE FAILURE OF A PARTY DULY NOTIFIED OF THE ARBITRATION
HEARING TO APPEAR THEREAT.
22.2 BUYER'S RESORT TO OR PARTICIPATION IN SUCH ARBITRATION PROCEEDINGS
SHALL NOT BAR SUIT IN A COURT OF COMPETENT JURISDICTION BY THE BUYER FOR
DAMAGES AND/OR SPECIFIC PERFORMANCE UNLESS AND UNTIL THE ARBITRATION RESULTS
IN AN AWARD TO THE SELLER OF LIQUIDATION DAMAGES, IN WHICH EVENT SUCH AWARD
SHALL ACT AS A BAR AGAINST ANY ACTION BY BUYER FOR DAMAGES AND/OR SPECIFIC
PERFORMANCE.
22.3 NOTICE: BY INITIALLING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE
ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA
LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE
LITIGATED IN A COURT OR JURY TRIAL. BY INITIALLING IN THE SPACE BELOW YOU ARE
GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS
ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU
REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE
COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES"
PROVISION TO NEUTRAL ARBITRATION.
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Buyer Initials Seller Initials
23. APPLICABLE LAW.
23.1 This Agreement shall be governed by, and paragraph 22.3 amended to
refer to, the laws of the state in which the Property is located.
24. TIME OF ESSENCE.
24.1 Time is of the essence of this Agreement.
25. COUNTERPARTS.
25.1 This Agreement may be executed by Buyer and Seller in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument. Escrow Holder, after verifying that
the counterparts are identical except for the signatures, is authorized and
instructed to combine the signed signature pages on one of the counterparts,
which shall then constitute the Agreement.
26. DISCLOSURES REGARDING THE NATURE OF A REAL ESTATE AGENCY RELATIONSHIP.
26.1 The Parties and Broker(s) agree that their relationship(s) shall be
governed by the principles set forth in California Civil Code, Section 2375,
as summarized in the following paragraph 26.2.
26.2 When entering into a discussion with a real estate agent regarding
a real estate transaction, a Buyer or Seller should from the outset
understand what type of agency relationship or representation it has with the
agent or agents in the transaction. Buyer and Seller acknowledge being
advised by the Broker(s) in this transaction, as follows:
(a) Seller's Agent. A Seller's agent under a listing agreement with the
Seller acts as the agent for the Seller only. A Seller's agent or subagent
has the following affirmative obligations: (1) To the Seller: A fiduciary
duty of utmost care, integrity, honesty, and loyalty
PAGE 13
<PAGE>
in dealings with the Seller. (2) To the Buyer and the Seller: a. Diligent
exercise of reasonable skill and care in performance of the agent's duties.
b. A duty of honest and fair dealing and good faith. c. A duty to disclose
all facts known to the agent materially affecting the value or desirability
of the property that are not known to, or within the diligent attention and
observation of, the Parties. An agent is not obligated to reveal to either
Party any confidential information obtained from the other Party which does
not involve the affirmative duties set forth above.
(b) Buyer's Agent. A selling agent can, with a Buyer's consent, agree
to act as agent for the Buyer only. In these situations, the agent is not the
Seller's agent, even if by agreement the agent may receive compensation for
services rendered, either in full or in part from the Seller. An agent acting
only for a Buyer has the following affirmative obligations. (1 ) To the
Buyer: A fiduciary duty of utmost care, integrity, honesty, and loyalty in
dealings with the Buyer. (2) To the Buyer and the Seller: a. Diligent
exercise of reasonable skill and care in performance of the agent's duties.
b. A duty of honest and fair dealing and good faith. c. A duty to disclose
all facts known to the agent materially affecting the value or desirability
of the property that are not known to, or within the diligent attention and
observation of, the Parties. An agent is not obligated to reveal to either
Party any confidential information obtained from the other Party which does
not involve the affirmative duties set forth above.
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Initials Initials
(c) Agent Representing Both Seller and Buyer. A real estate agent,
either acting directly or through one or more associate licenses, can legally
be the agent of both the Seller and the Buyer in a transaction, but only with
the knowledge and consent of both the Seller and the Buyer. (t) In a dual
agency situation, the agent has the following affirmative obligations to both
the Seller and the Buyer: a. A fiduciary duty of utmost care, integrity,
honesty and loyalty in the dealings with either Seller or the Buyer. b. Other
duties to the Seller and the Buyer as stated above in their respective
sections (a) or (b) of this paragraph 26.2. (2) In representing both Seller
and Buyer, the agent may not without the express permission of the respective
Party, disclose to the other Party that the Seller will accept a price less
than the listing price or that the Buyer will pay a price greater than the
price offered. (3) The above duties of the agent in a real estate transaction
do not relieve a Seller or Buyer from the responsibility to protect their own
interests. Buyer and Seller should carefully read all agreements to assure
that they adequately express their understanding of the transaction. A real
estate agent is a person qualified to advise about real estate. If legal or
tax advise is desired, consult a competent professional.
(d) Further Disclosures. Throughout this transaction Buyer and Seller
may receive more than one disclosure. depending upon the number of agents
assisting in the transaction. Buyer and Seller should each read its contents
each time it is presented, considering the relationship between them and the
real estate agent in this transaction and that disclosure.
26.3 Confidential Information: Buyer and Seller agree to identify to
Broker(s) as "Confidential" any communication or information given Broker(s)
that is considered by such Party to be confidential.
27. ADDITIONAL PROVISIONS:
Additional provisions of this offer, if any, are as follows or are
attached hereto by an addendum consisting of paragraphs____________
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<PAGE>
through _______________(It will be presumed no other provisions are included
unless specified here.):
Notwithstanding the foregoing, the Buyer shall have 30 days from the Date of
Agree for all the contingencies listed in Paragraph 9, including a Buyer's
feasibility study to determine if the purchase of the property is
economically feasible.
BUYER AND SELLER HEREBY ACKNOWLEDGE THAT THEY HAVE BEEN AND ARE NOW ADVISED
BY THE BROKER(S) TO CONSULT AND RETAIN THEIR OWN EXPERTS TO ADVISE AND
REPRESENT THEM CONCERNING THE LEGAL AND INCOME TAX EFFECTS OF THIS AGREEMENT,
AS WELL AS THE CONDITION AND/OR LEGALITY OF THE PROPERTY, THE IMPROVEMENTS
AND EQUIPMENT THEREIN, THE SOIL THEREOF, THE CONDITION OF TITLE THERETO THE
SURVEY THEREOF , THE ENVIRONMENTAL ASPECTS THEREOF, THE INTENDED AND/OR
PERMITTED USAGE THEREOF, THE EXISTENCE AND NATURE OF TENANCIES THERIN, THE
OUTSTANDING OTHER AGREEMENTS, IF ANY, WITH RESPECT THERETO, AND THE EXISTING
OR CONTEMPLATED FINANCING THEREOF, AND THAT THE BROKER(S) IS/ARE NOT TO BE
RESPONSIBLE FOR PURSUING THE INVESTIGATION OF ANY SUCH MATTERS UNLESS
EXPRESSLY OTHERWISE AGREED TO IN WRITING BY BROKER(S) AND BUYER OR SELLER.
THIS FORM IS NOT FOR USE IN CONNECTION WITH THE SALE OF RESIDENTIAL PROPERTY.
If this Agreement has been filled in, it has been prepared for submission to
your attorney for his approval. No representation or recommendation is made
by the real estate Broker(s) or their agents or employees as to the legal
sufficiency, legal effect, or tax consequences or this Agreement or the
transaction Involved herein. The undersigned Buyer offers and agrees to buy
the property on the terms and conditions stated and acknowledges receipt of a
copy hereof.
BROKER: BUYER:
DAUM Commercial Real Estate Services California Amplifier, Inc., a Calif. Corp.
By By
/Date /Date
Name Printed: George H. Eales Name Printed: Michael Ferron
Scott Owens
Title: Mkg. Consultant Title: CFO, Vice President
Sr. Mkg. Consultant
Address Address
711 Daily Drive, Suite 100 460 Calle San Pablo
Camarillo, CA 93010 Camarillo, CA 93012
Telephone Facsimile No. Telephone Facsimile No.
(805) 987-8866 (805) 987-7645 (805) 987-9000 (805) 987-2655
28. ACCEPTANCE.
28.1 Seller accepts the foregoing offer to purchase the Property and
hereby agrees to sell the Property to Buyer on the terms and conditions
therein specified.
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<PAGE>
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Initials Initials
28.2 Seller acknowledges that Broker(s) has/have been retained to locate
a Buyer and is/are the procuring cause of the purchase and sale of the
Property set forth in this Agreement. In consideration of real estate
brokerage service rendered by Broker(s), Seller agrees to pay Broker(s) a
real estate brokerage fee in a sum equal to 6 % of the Purchase Price (the
"Broker(s) Fee") divided equally in such shares as said Broker(s) shall
direct in writing. As is provided in paragraph 9.1 (p), this Agreement shall
serve as an irrevocable instruction to Escrow Holder to pay such brokerage
fee to Broker(s) out of the proceeds accruing to the account of Seller at the
Closing.
28.3 Seller acknowledges receipt of a copy hereof and authorizes the
Broker(s) to deliver a signed copy to Buyer.
NOTE: A PROPERTY INFORMATION SHEET IS REQUIRED TO BE DELIVERED TO BUYER BY
SELLER UNDER THIS AGREEMENT.
BROKER: SELLER:
Equity Commercial Real Estate Services Rhoda-May A. Dallas Trust 9/11/89
By By
/Date /Date
Name Printed: Kent Pierce Name Printed: Rhoda-May A. Dallas
Title: Title: Trustee
Address Address
1459 Thousand Oaks Blvd
Thousand Oaks, CA 91362
Telephone Facsimile No. Telephone Facsimile No.
(805) 497-2866 (805) 497-0145
These forms are often modified to meet changing requirements of law and needs
of the industry. Always write or call to make sure you are utilizing the most
current form: American Industrial Real Estate Association. 345 So. Figueroa
Street Suite M-1, Los Angeles CA 90071. (213) 687-8777.
Copyright 1989-By American Industrial Real Estate Association. All rights
reserved.
No part of these works may be reproduced in any form without permission in
writing. FORM 729-R-3-1/94
PAGE 16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET ON PAGE 19, AND THE CONSOLIDATED STATEMENTS OF INCOME
ON PAGE 20 OF THE COMPANY'S FORM 10-K FOR THE YEAR ENDED MARCH 1, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-01-1997
<PERIOD-START> MAR-03-1996
<PERIOD-END> MAR-01-1997
<CASH> 3,165
<SECURITIES> 0
<RECEIVABLES> 7,070
<ALLOWANCES> 560
<INVENTORY> 8,200
<CURRENT-ASSETS> 19,864
<PP&E> 18,387
<DEPRECIATION> 10,980
<TOTAL-ASSETS> 29,536
<CURRENT-LIABILITIES> 4,863
<BONDS> 0
0
0
<COMMON> 14,107
<OTHER-SE> 10,041
<TOTAL-LIABILITY-AND-EQUITY> 29,536
<SALES> 49,290
<TOTAL-REVENUES> 49,290
<CGS> 34,810
<TOTAL-COSTS> 13,792
<OTHER-EXPENSES> (467)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 118
<INCOME-PRETAX> 1,037
<INCOME-TAX> 404
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 633
<EPS-PRIMARY> .05
<EPS-DILUTED> 0
</TABLE>
