<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB
(Mark One)
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934. For the fiscal year ended December 31, 1996.
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the transition period from __________ to __________.
Commission File No. 0-15501
BIKERS DREAM, INC.
(Name of small business issuer in its charter)
California 33-0140149
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1420 Village Way, Santa Ana, California 92705
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (714) 835-8464
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
----- -----
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. / /
The issuer had revenues of $8,996,659 for the fiscal year ended December 31,
1996.
The aggregate market value of the voting stock held by non-affiliates on March
31, 1997 was approximately $7,530,300, based on the average of the bid and
asked prices of the issuer's Common Stock in the over-the-counter market on such
date as reported by the OTC Bulletin Board.
As of March 31, 1997, 8,748,680 shares of the issuer's Common Stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format (check one): Yes No X
----- -----
<PAGE> 2
PART I
ITEM 1. Description of Business
GENERAL BUSINESS DEVELOPMENT
The Company, which was formerly known as HDL Communications, was
incorporated in California in October, 1985. The Company was engaged in the
publishing business until June, 1989, when it discontinued operations. The
Company remained inactive until March 13, 1995 when it acquired Bikers Dream,
Inc., a California corporation engaged in the sales and service of used
Harley-Davidson motorcycles and in retail sales of aftermarket accessories and
parts for Harley-Davidson motorcycles. Prior to its acquisition of Bikers Dream,
Inc., the Company effected a 1 for 1,363,341.473 reverse split of its
outstanding Common Stock. After the acquisition, Bikers Dream, Inc. was merged
into HDL Communications and HDL Communications changed its name to Bikers Dream,
Inc. For accounting purposes, Bikers Dream, Inc. is considered to be the
acquirer of HDL Communications.
In September 1996, the Company formed a joint venture with Mull Acres,
Investments Inc. ("MAI"), whose Ultra Kustom Cycles division of Riverside,
California is a manufacturer of custom V-twin motorcycles and show-bikes. The
joint venture was formed to act as the exclusive distributor of Ultra Cycles
with exclusive rights to all direct retail sales of Ultra Cycles in Southern
California, Sacramento, California, and Dallas, Texas. In connection with the
formation of the joint venture, the Company granted an option to Mull Acres
Investments, Inc. to purchase 2,500,000 shares of Common Stock at a price of
$1.65 per share.
In February 1997, the Company, through its wholly owned subsidiary,
Ultra Acquisition Corporation, a Nevada corporation ("UAC") purchased from MAI
certain assets, including equipment and inventory, of MAI's Ultra Kustom Cycles
and Ultra Kustom Parts divisions that had been used in connection with the
manufacture, distribution and sale of motorcycles and motorcycle parts and
accessories.
BUSINESS OF BIKERS DREAM
The Company has two lines of business: Retail Stores and Motorcycle and
Parts Manufacturing. The Company operates four retail outlets known as Bikers
Dream Superstores ("Superstores") , selling Ultra Cycles , used Harley-Davidson
motorcycles ("Harleys") and Big Dog Motorcycles complemented by a full range of
aftermarket parts, accessories and service. The Company is not a licensed
Harley-Davidson dealer and does not sell new Harley-Davidson motorcycles or buy
any products or services directly from Harley-Davidson, Inc. Heavyweight or
cruiser motorcycles are in high demand. While annual overall motorcycle unit
sales in the U.S. have remained stagnant at 300,000 units since 1990,
heavyweight or cruiser motorcycles have grown from 78,000 units in 1990 to over
129,000 units in 1995. This growth has been led by Harley-Davidson, which
according to industry reports, controls over 50% of the heavyweight market.
Based on available information, the Company estimates the total retail sales
volume for the U.S. motorcycle market exceeds $5 billion annually (including
motorcycles, parts, accessories and service). The Company believes the
heavyweight segment, including related parts, accessories and service, accounts
for over 40% of the U.S. motorcycle market.
The Company's Superstores are located in San Diego, California, Santa
Ana, California, Sacramento, California and Dallas, Texas. The Company is also
establishing a network of Bikers Dream Superstore dealers, seven of which are
open and operating as of March 16, 1997, and eight additional dealers have
signed dealer contracts as of such date. There are currently nineteen
independent Ultra Motorcycle dealers (not including Bikers Dream dealers) in
operation. The Company intends to actively pursue a strategy of business growth
that involves the opening of additional corporate-owned Superstores, the opening
of additional Bikers Dream Superstore dealers and the continued growth in the
number of independent Ultra Motorcycle dealers.
The Company further operates what it believes is the first retail store
of its type on wheels, which the Company calls "Dream Wheels." This mobile
retail store is a 53 foot tractor/trailer which travels the United States to
promote and sell motorcycles, accessories and apparel to motorcycle enthusiasts
at nationally acclaimed events such as Daytona Bike Week, Sturgis, Laconia and
the Laughlin River Run. Dream Wheels will carry up to 20 motorcycles for sale as
well as a variety of accessories and apparel. It made its initial debut at
Daytona Bike Week, March 1-10, 1996.
2
<PAGE> 3
RETAIL STORES - BIKERS DREAM SUPERSTORES
Each Superstore features a large showroom for the display of
merchandise, warehousing for inventory and a repair and service department. The
Santa Ana Superstore also contains administrative and dealer training offices.
The showroom is organized to allow variations in location of the displays to
accommodate customer traffic flow within the store and heighten customer
interest. The service area houses a staff of mechanics and service personnel to
accommodate customer service and warranty needs The forward area of the showroom
is reserved for the display of new Ultra cycles as well as other motorcycles
carried for sale. Larger Superstores are approximately 10,000 square feet in
size, while smaller Superstores are approximately 4,000 to 6,000 square feet.
Management believes the Bikers Dream Superstores compare favorably with many of
the independent retailers of heavyweight motorcycles. The independent retailers
are usually smaller shops, ranging in size from approximately 1,500 to 4,000
square feet which limits space for display of motorcycles and accessories.
The Company's Superstores and dealers all offer a complete line of
Ultra Cycles. Ultra Cycle models include the "Groundpounder" the "Ultra
Sprinter", the "Ultra Classic", the "Ultra Cruiser" and the "Ultra Wide Drive".
These production models can be customized based on a customers desires with
numerous available options. All Ultra motorcycles carry a full warranty with a
back up support program by Bikers Dream and Ultra dealers. Third party warranty
policies are offered on used motorcycles.
The Company stocks and sells an extensive range of aftermarket products
for the motorcycle enthusiast. Many of these products are not offered by
Harley-Davidson dealers who are subject to company imposed licensing
restrictions nor by independent retailers who typically carry a limited range of
products for a variety of motorcycles. The Company currently offers as many as
10,000 different parts, accessories and apparel items.
The Company has supply arrangements with most of the major motorcycle
aftermarket parts and accessory suppliers. Under these arrangements, the Bikers
Dream Superstores (including dealers) receive quantity discounts, allowing the
Superstores to purchase these goods more affordably. The Company purchases its
parts and accessories from numerous suppliers, with no supplier accounting for
more than 10% of sales. Management believes that the loss of any supplier would
not have a material adverse effect on the Company because other suppliers could
be relied upon to meet the Company's requirements at a comparable cost.
The Company sells a line of accessories under the brand names Dream
Products, Bikers Dream Products, Ultra Parts and Ultra Kustom Parts. The Company
also sells a complete line of products under its Chrome Exchange Program. Under
this program, retail customers select a chrome part from a list of over 100
items that the Company keeps in stock. These are new and like new parts which
have been chrome plated by a quality outside vendor. The customer pays not only
for the added chrome, but also a "core" charge for the part itself at the time
of purchase. The customer then has the option to return his like kind "core,"
which was removed from his motorcycle, for credit. The returned core is
completely inspected by qualified Bikers Dream personnel to ensure that it meets
the original manufacturers specifications. If it meets those strict
specifications, the customer then receives credit for the core.
The service department of each Superstore performs service work on most
cruiser motorcycles, including Ultra Cycles, Big Dog Motorcycles and Harleys.
The service department also perform safety checks on all motorcycles sold and
warranty work on authorized brands including Ultra Cycles. The service
department can also install parts and accessories sold in the Superstore.
RETAIL STORES-DEALER ACTIVITIES AND FRANCHISING
The Company is in the process of establishing a network of Bikers Dream
superstore dealers. The dealers' stores are modeled after the Company-owned
Superstores and are expected to be located throughout the United States and
internationally to service the markets not directly serviced by Company-owned
Superstores. There are presently seven Bikers Dream superstore dealers with
eight additional dealers under contract as of March 31, 1997. All superstore
dealers are located outside of California. There are presently nineteen
independent Ultra Cycle dealers. Some of these dealers are considering
converting to Bikers Dream dealers.
3
<PAGE> 4
The Company has marketed its dealer program primarily by advertising in
motorcycle and speciality magazines. The dealer advertisement has appeared in a
portion of a larger general advertisement featuring the Company's products. Each
dealer receives an exclusive territory. The Company provides dealers with
in-house and on-site training and a copy of the Company dealer operations
manual, ongoing newsletters, site training and other operational marketing
assistance.
The Company has suspended all future franchising activity. The Company
sold ten Bikers Dream franchises (three in California and seven in other states)
prior to March 1995. At December 31, 1996, two franchises remained open and
since then one has been converted into a Bikers Dream dealer.
MOTORCYCLE AND PARTS MANUFACTURING
The Company, through its Ultra Kustom Cycles subsidiary, manufactures
and assembles heavyweight or cruiser motorcycles and parts at two facilities in
Riverside, California. Currently five models are offered under the Ultra Cycle
name; the "Groundpounder", the "Ultra Sprinter", the "Ultra Classic", the "Ultra
Cruiser", and the "Ultra Wide Drive". Ultra Cycles and Ultra Parts are
distributed through all Bikers Dream superstores and Ultra dealers. Ultra Cycles
emphasize S&S engines, custom paint, enhanced customization and higher
performance to appeal to each customer's desire. All Ultra cycles are sold with
a twelve-month, twelve thousand mile warranty.
The major product categories for Ultra Parts are custom parts,
replacement parts and rider accessories. Parts in these product categories are
being developed and enhanced as the Company increases production capabilities.
COMPETITION
The market in which Bikers Dream competes is highly competitive. The
main sources of competition are the Harley-Davidson Company and the licensed
Harley-Davidson motorcycle dealer network, which primarily sells new Harley-
Davidson motorcycles, accessories and parts. Other competitors include the
10,000+ motorcycle retail outlets located throughout the U.S. which provide
aftermarket parts, services and accessories. Bikers Dream believes that many of
the aftermarket motorcycle shops are small, privately owned businesses with
limited facilities, capital and other resources.
PATENTS, LICENSES AND TRADEMARKS
The Company has no patents or product licenses. The Company has
obtained a service mark registration in the United States for the mark "Bikers
Dream."
REGULATION
The Company's operations are subject to regulation, supervision and
licensing under various federal, state and local statutes, ordinances and
regulations. Compliance with existing laws and regulations applicable to the
Company has not had a material adverse effect on the Company's operations.
Management believes that it maintains all requisite licenses and permits and is
in compliance with all applicable federal, state and local laws and regulations.
EMPLOYEES
As of December 31, 1996, the Company had 35 full time employees.
ITEM 2. Description of Property
Bikers Dream operations are conducted in leased facilities located in
California and Texas. Its executive offices are located in Santa Ana,
California. The following table describes the general character of the existing
facilities as of February 1, 1997:
4
<PAGE> 5
<TABLE>
<CAPTION>
SQUARE LEASE
LOCATION PRIMARY FUNCTION FEET EXPIRES
- -------- ---------------- ---- -------
<S> <C> <C> <C>
Santa Ana, California Executive Offices 12,107 2003
and Retail Superstore
Dallas, Texas Retail Superstore 10,000 1999
Sacramento, California Retail Store 10,480 2000
San Diego, California Retail Store 6,935 2001
Riverside, California Motorcycle assembly 20,487 1999
Riverside, California Administration 3,200 1998
</TABLE>
While the Company believes that its current facilities are adequate for
its current needs, future expansion of additional Company-owned retail stores
and dealer stores may necessitate expansion of the assembly facilities and
executive offices.
ITEM 3. Legal Proceedings
The Company is not a party to any pending legal proceeding other than
the proceedings described below.
David Bogert, Brenda Bogert and Bikers Dream of North Carolina, Inc.
(the "Plaintiffs") filed an action against the Company on February 28, 1996 in
the General Court of Justice, Superior Court Division, of Catawba County, North
Carolina claiming violation by the Company of the requirements of the Federal
Trade Commission Rule and the requirements of the North Carolina Business
Opportunity Sales Statute in connection with the Company's sale of a franchise
to the Plaintiffs in June 1994, as well as breach of contract. The Plaintiffs
were seeking recovery of all sums paid to the Company, a sum in excess of
$10,000 for breach of contract and a sum in excess of $10,000 for punitive
damages. In December 1996, the Court dismissed the case pursuant to a provision
in the License Agreement regarding arbitration of disputes. No arbitration had
been commenced as of March 31, 1997, although an attorney representing the
Plaintiffs has made written demand for arbitration.
Harley Davidson Motor Company ("Harley Davidson") filed an action
against the Company in January 1997, in the U.S. District Court, District of
California, for trademark infringement, trade dress infringement, unfair
competition and related claims. The Company has denied the allegations that are
the basis of these claims and intends to vigorously defend the action.
Bryan Quan, d/b/a Uplift Enterprises filed an action against the
Company in September 1996, in the Superior Court, County of Orange, California,
claiming unfair competition and related claims, and seeking an injunction and
unspecified damages. The Company has stipulated to the entry of an injunction
but has denied the allegations that are the basis of the damages claim.
Jeff Simon filed an arbitration demand against the Company in
July 1996, in Orange County, California, claiming breach of an employment
contract and defamation. Mr. Simon is seeking damages of $375,000 for unpaid
wages under the contract and $250,000 for defamation. No arbitration had been
commenced as of March 31, 1997. The Company intends to vigorously defend this
claim.
ITEM 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of the Company's fiscal year ended December 31, 1996.
5
<PAGE> 6
PART II
ITEM 5. Market for Common Stock and Related Stockholder Matters
The Company's Common Stock is traded in the over-the-counter market and
quoted on the National Association of Securities Dealers Electronic Bulletin
Board ("OTC Bulletin Board") under the symbol "BIKR." It was previously traded
under the ticker symbol "HOGS" until December 29, 1995 when it was changed to
the current "BIKR" symbol. There was no active trading market for the Company's
Common Stock prior to March 23, 1995. To date, the volume of trading in the
Common Stock has been limited and, therefore, the market prices for the Common
Stock may not accurately reflect the value of the Company. The following table
reflects the high and low bid prices of the Company's Common Stock as reported
by the OTC Bulletin Board from March 23, 1995 to December 31, 1996. Such prices
are inter-dealer quotations without retail mark-ups, mark-downs or commissions,
and may not represent actual transactions.
<TABLE>
<CAPTION>
1995 LOW HIGH
---- --- ----
<S> <C> <C>
First Quarter $1.75 $1.75
Second Quarter $1.75 $4.00
Third Quarter $1.25 $4.75
Fourth Quarter $1.375 $4.75
1996 LOW HIGH
---- --- ----
First Quarter $1.63 $3.50
Second Quarter $2.13 $3.25
Third Quarter $1.50 $3.06
Fourth Quarter $1.88 $3.25
</TABLE>
To date, the Company has not paid dividends on its Common Stock.
As of December 31, 1996, there were approximately 1,280 shareholders of
record of the Company's Common Stock.
During the fiscal year ended December 31, 1996, the Company sold
securities that were not registered under the Securities Act of 1933, other than
unregistered sales made in reliance on Regulation S, as follows:
In a private offering that commenced in November 1995 and terminated in
January 1996, the Company sold $1,079,500 of convertible promissory notes to 16
accredited investors. The notes were subsequently converted into 634,991 shares
of Common Stock. The securities were issued pursuant to Section 4(2) of the
Securities Act of 1933 and Regulation D promulgated thereunder.
In May 1996, the Company sold seven Units (each Unit consisting of one
share of Preferred Stock and one warrant to purchase 50,000 shares of Common
Stock) to six accredited investors for a total of $1,225,000 cash. The Company
paid $122,500 and issued warrants to purchase 35,000 shares of the Company's
Common Stock to M.J. Segal & Company, Inc. as a finder's fee in connection with
the transaction. The securities were issued pursuant to Section 4(2) of the
Securities Act of 1933 and Regulation D promulgated thereunder.
In August 1996, the Company issued 208,020 shares of the Company's
Common Stock to the Company's lawyers and financial consultants for services
rendered. The securities were issued pursuant to Section 4(2) of the Securities
Act of 1933 and Regulation D promulgated thereunder.
6
<PAGE> 7
In a private offering that commenced in September 1996 and terminated
in November 1996, the Company sold 1,660,500 Units (each Unit consisting of two
shares of Common Stock, one Series A warrant to purchase at any time prior to
January 31, 1997, one share of Common Stock at a price of $2.10, and one Series
B warrant to purchase, at any time prior to March 31, 1997, one share of Common
Stock at a price of $3.15) to 22 investors for $2,987,250 cash and cancellation
of $499,800 of debt. The exercise period and exercise price of the Series A
Warrants was subsequently changed to March 31, 1997 and $1.05 per share, and the
exercise period and exercise price of the Series B Warrants was subsequently
changed to May 31, 1997 and $1.50 per share. A portion of the securities were
issued to accredited investors pursuant to Section 4(2) of the Securities Act of
1933 and Regulation D promulgated thereunder, and the balance were issued
pursuant to Regulation S.
In September 1996, the Company granted to Meyer Duffy an option to
purchase, at a price of $1.70 per share, 50,000 shares of Common Stock. The
option was granted pursuant to Section 4 (2) of the Securities Act of 1933 and
Regulation D promulgated thereunder.
In September 1996, the Company granted to Dennis Campbell, a former
officer and director of the Company, an option to purchase, at a price of $3.00
per share, 100,000 shares of Common Stock. The option was granted pursuant to
Section 4(2) of the Securities Act of 1933 and Regulation promulgated
thereunder.
In September 1996, the Company granted to each of Donald J. Duffy and
Rowland W. Day II, officers and directors of the Company, options to purchase,
at any time prior to September 8, 1998, 200,000 shares of Common Stock at a
price of $1.05 per share. The options were granted pursuant to Section 4(2) of
the Securities Act of 1933 and Regulation D promulgated thereunder.
In September 1996, the Company granted incentive stock options under
its Incentive Stock Option Plan to three Company employees to purchase an
aggregate of 66,500 shares of Common Stock. The options were granted pursuant to
Section 4(2) of the Securities Act of 1933 and Regulation D promulgated
thereunder.
In December 1996, the Company granted to each of Marco Trischitta and
Allessandro Parravicini, each an accredited investor, options to purchase, at
any time, prior to December 31, 1997, 250,000 shares of Common Stock at a price
of $2.25 per share for consulting services. The options were granted pursuant to
Section 4(2) of the Securities Act of 1933 and Regulation D promulgated
thereunder.
ITEM 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
From 1990 until late 1993, the business operated in a 2,400 square foot
facility in Huntington Beach, California. The business was relocated and
expanded in December 1993 when the Company opened its first Superstore, a 12,100
square foot facility located in an up-scale commercial center in Santa Ana,
California. The Company owns three additional Superstores. The second
Superstore, a 10,000 square foot facility, was opened on April 8, 1995 in
Dallas, Texas. The third Company-owned Superstore, a 10,000 square foot facility
located in Sacramento, California, was acquired in November 1995 from a former
franchisee. The fourth Company-owned Superstore, a 6,935 square foot facility
located in San Diego, California, was opened in February 1997.
A previously Company-owned Superstore in Clearwater, Florida (Tampa Bay
area), was opened on July 28, 1995 and subsequently sold on September 5, 1996 to
Dennis Campbell, the former president of Bikers Dream, Inc.
Another Superstore located in Thousand Oaks, California, which was
acquired from a former franchisee on September 22, 1995, was closed in April
1996.
7
<PAGE> 8
In early 1996, the Company launched its first mobile store. This store,
which is a custom built 53 foot trailer pulled by a Kenworth tractor, is
believed to be the first of its kind in the industry. This mobile store, called
"Dream Wheels," carries motorcycles, parts, accessories and apparel for sale at
major motorcycle events throughout the United States. The tractor and the
trailer have been financed substantially with outside debt for which the
equipment is pledged as security. Dream Wheels made its debut at Daytona Bike
Week on March 1, 1996.
The Company was in the process of establishing a network of franchised
Bikers Dream stores but has suspended future franchising activity indefinitely.
A total of ten Bikers Dream franchises (three in California and seven in other
states) were sold prior to March 1995 at a price of $15,000 per franchise. The
Company repurchased two of the franchises, one of the franchises has been
converted to a Bikers Dream dealer and disputes with all but one of the
remaining franchises have been resolved.
The franchising program is being replaced by a rapidly growing
worldwide network of Bikers Dream Superstore dealers. The dealer stores are
modeled after the Company-owned Superstores and are expected to be located
throughout the United States and the world to service the markets not directly
serviced by large Company-owned Superstores. As of March 31, 1997, seven
Superstore dealers were in operation and an additional eight dealers have
executed agreements and are expected to become operational during 1997. In
addition, the Company has assumed 19 Ultra Cycle dealerships (motorcycles only).
RESULTS OF OPERATION
The following table sets forth for the period indicated, the income and
expense items for the years ended December 31, 1996 and 1995.
8
<PAGE> 9
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER
--------
NET REVENUES 1996 1995
- ------------ ---- ----
<S> <C> <C>
Net Revenues $ 8,996,659 $ 7,790,090
Cost of goods sold 7,476,786 5,980,469
Gross Profit 1,519,873 1,809,621
Other Expenses (income)
Selling, general and administrative 4,963,229 3,870,014
Depreciation and amortization 197,476 74,543
Interest expense 169,731 33,359
Franchise income (34,290) (146,996)
Franchise reacquisition expense 269,918
Loss on closure of store 166,634
Equity loss (Ultra Bikers, LLC) 16,145
Other (income) expense 70,316 (3,250)
----------- -----------
5,549,241 4,097,588
Loss before benefit (provision) for
income taxes (4,029,368) (2,287,967)
Provision for income taxes 800 59,726
Net Loss $(4,030,168) $(2,347,693)
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995:
Net revenues for the year ended December 31, 1996 were $8,996,659, an
increase of $1,206,569 or 15.5% from the year ended December 31, 1995. The
increase in net revenue is due to the opening of new Company-owned Superstores
in Dallas, Texas and Clearwater, Florida during 1995 as well as the acquisition
of two former franchises in Thousand Oaks and Sacramento, California.
Gross profit for the year ended December 31, 1996 was $1,519,873 which
was a decrease of $289,748 or 16.0% compared to the same period in 1995. The
decrease in gross profit was mainly due to inventory shrinkage charges. The
gross profit rate for the year ended December 31, 1996 was 16.9% compared to
23.2% for the same period in 1995. The change in rate was due to sales mix
differences and provisions for inventory shrinkage.
Selling, general and administrative expenses were $4,963,229 for the
year ended December 31, 1996 which represents an increase of $1,093,215 or 28.2%
over the same period last year. This increase is due to several factors,
including 1) operating costs of new Company-owned Superstores, 2) the launch of
the new Dream Wheels Mobile Superstore in March 1996, 3) legal and accounting
fees related to becoming an SEC reporting company, and 4) legal fees for
pending litigation.
Depreciation and amortization expense was $197,476 for the year, which
was $122,933 or 164.9% higher than the same period in the prior year. The
increase was due to the addition of two Company-owned Superstores for the full
year, the addition of computers necessary to bring the advertising and financial
functions in-house, and the launch of the Dream Wheels mobile store in March
1996 offset by the transfer of fixed assets resulting from the sale of the
Clearwater, Florida Superstore in September 1996.
Franchise income for the year ended December 31, 1996 was $34,290 which
represents a decrease of $112,706 or 76.7% less than the preceding year. This
decrease is attributed to the phasing out of the franchising program.
9
<PAGE> 10
Franchise reacquisition expenses include all costs incurred in excess
of the value of assets acquired in connection with the acquisition of stores
from former franchisees claiming there were defects in the Company's original
franchise offering circular. There were no franchises acquired in 1994 or 1996.
Loss on closure of store of $166,634 relates to the closing of the
Thousand Oaks, California store that was reacquired from a franchisee.
Other expenses for the year include a $70,000 payment in conjunction
with an employee release, litigation settlement provision of $50,000, and a
recovery of sales tax that was in dispute with the franchise tax board.
There was a minimum provision for income taxes in 1996. The Company
fully reserved for deferred tax asset primarily related to its net operating
loss carry forwards beginning in the second quarter of 1995. In addition, the
Company's management has concluded that based upon its assessment of all
available evidence, the future benefit of this asset cannot be projected
accurately at this time.
The net loss for the year ended December 31, 1996 was $4,030,168 as
compared to a loss of $2,347,693 in the same period in 1995. This increase of
$1,682,475 was due to continued investment by the Company to expand the business
through (1) the opening of new Superstores in various parts of the United States
in 1995 and 1996, which have not yet turned profitable, (2) the costs associated
with preparing and filing a registration statement with the SEC, (3) the
provision for store closing costs and (4) provision for legal fees, inventory
shrinkage and allowance for doubtful accounts.
While the Company does not expect inflation to have a material impact
upon its operating results, there can be no assurance that inflation will not
affect the Company's business in the future.
LIQUIDITY AND CAPITAL RESOURCES
The Company has relied substantially on equity and/or debt financing to
meet its operating and growth needs. In 1996, over $1,700,000 of debt was
converted into equity and over $4,200,000 was raised through equity sales. In
1997, an additional $2,210,000 was raised from the sale of promissory notes, of
which $1,100,000 was used to purchase the business and assets of Ultra Kustom
Cycles and Ultra Custom Parts.
In order to continue to meet its operating needs and expand the
manufacturing and retail lines of its business, the Company will be seeking
additional funding from a number of sources including private placement of debt
and equity, the implementation of a floor planning financing program for sales
of the Company's motorcycles to its dealers, and establishment of a working
capital line of credit. The Company recently hired a consultant who has
significant experience in locating sources for floor plan financing and
working capital credit lines.
ITEM 7. Financial Statements
Page
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
for the Year Ended December 31, 1996 F-1
REPORT OF INDEPENDENT ACCOUNTANTS for the year ended
December 31, 1995 F-2
Consolidated Balance Sheet F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Shareholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
A change in accountants was previously reported in a report on Form 8-K
dated January 6, 1997. There were no disagreements with the Company's prior
accountants over accounting or reporting matters.
10
<PAGE> 11
PART III
ITEM 9. Directors and Executive Officers
The Company's current officers and directors consist of the following
persons:
<TABLE>
<CAPTION>
NAME OFFICE
---- ------
<S> <C>
Rowland W. Day II Co-CEO, Secretary and Director
Donald J. Duffy Co-CEO, CFO and Director
Humbert B. Powell, III Director
</TABLE>
Mr. Day, age 41, has been a director of the Company since October 1985,
serving in various executive capacities, including President, from October 1985
until March 13, 1995. Mr. Duffy, age 29, and Mr. Powell, age 57, became
directors of the Company on December 19, 1995.
On September 9, 1996, Dennis Campbell resigned as President, Chief
Executive Officer and director, Richard King, Jr. resigned as Secretary and
director, and William Gresher resigned as Chief Financial Officer and director.
On September 9, 1996, the Company's Board of Directors appointed Donald
J. Duffy as Co-Chief Executive Officer and Chief Financial Officer and Rowland
W. Day II as Co-Chief Executive Officer and Secretary.
Directors are elected on an annual basis at the Company's annual
meeting of stockholders. The present term of each director will expire at the
next annual meeting of stockholders or at such time as their respective
successors are duly elected and qualified. Executive officers are elected
annually and, except to the extent governed by employment contracts, serve at
the discretion of the Board of Directors.
Rowland W. Day II is a partner in the law firm of Day, Campbell &
McGill, the Company's corporate counsel. He has practiced in the area of
business and corporate law and corporate finance for 12 years. Mr. Day is a
member of the California State Bar. He holds a Bachelor of Arts degree from
California State University at Fullerton and a Juris Doctorate from Whittier Law
School.
Donald J. Duffy is a founder and principal of Meyer, Duffy &
Associates, Inc. a strategic consulting group based in New York City. He is also
a founder and board member of Predictive Systems, a network management
consulting company. Mr. Duffy has served in a variety of analytical and
investment management positions at Oak Hill Capital Advisors, Inc. and Sloate,
Weisman, Murray & Company, Inc. specializing in research and investments in
retail and gaming companies.
Humbert B. Powell, III is an associate with Sanders, Morris and Mundy.
He was formerly a Vice Chairman of Marleau, Lemire Securities, Inc. and Chairman
of Marleau, Lemire USA. He served as Senior Managing Director in the Corporate
Finance Department of Bear Sterns & Co. for eight years with responsibility for
domestic and international investment banking. Mr. Powell has also served as
Senior Vice President and Director of E.F. Hutton & Co. where he was employed
for 18 years. He is also a Director of Tatham Offshore Corp., and Salem-Teiko
University.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended December 31, 1996, all
11
<PAGE> 12
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with, except that an initial
report of ownership was not filed by Donald J. Duffy and reports of
transactions were not filed by Mr. Duffy and Rowland W. Day II.
ITEM 10. Executive Compensation
The following table sets forth certain summary information regarding
compensation paid by the Company for services rendered during the fiscal years
ended December 31, 1995 and 1996, respectively, to the Company's Chief Executive
Officers and Chief Financial Officer during such period. No other executive
officer of the Company holding office in fiscal 1996 received total annual
salary and bonus exceeding $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
Securities
Year Underlying
Name and Principal Ending Other Annual Options/SARS
Position December 31 Salary Bonus Compensation (#)
- ------------------ ----------- ------ ----- ------------ -------------
<S> <C> <C> <C> <C> <C>
Dennis Campbell(1) 1995 $95,000 $164,155 $ 11,356(2) 50,000
1996 82,000 0 0 0
William Gresher(3) 1995 49,333 0 1,089 350,000
1996 122,850 0 0 0
Rowland W. Day II(4) 1996 0 0 0(5) 200,000
Donald J. Duffy(4) 1996 0 0 0(5) 200,000
</TABLE>
- -------------
(1) Mr. Campbell resigned in September 1996.
(2) Includes an allowance for automobile expenses and insurance premiums.
(3) Mr. Gresher resigned in September 1996.
(4) Messrs. Day and Duffy were elected as Co-Chief Executive Officers in
September 1996.
(5) Messrs. Day and Duffy are each entitled to receive a motorcycle valued
at not more than $20,000 for each full year of employment.
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1996
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options
Underlying Granted Exercise or
Options to Employees Base Price Expiration
Name Granted in 1996 ($/Share) Date
---- ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Dennis Campbell 0 -- -- --
William Gresher 0 -- -- --
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Rowland W. Day II 200,000 44% $ 1.05 September 8, 1998
Donald J. Duffy 200,000 44% $ 1.05 September 8, 1998
</TABLE>
AGGREGATED OPTION EXERCISES IN
FISCAL YEAR ENDED DECEMBER 31, 1996 AND OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SHARES UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN THE MONEY
ACQUIRED ON VALUE OPTIONS AT 12/31/96 OPTIONS AT 12/31/96(1)
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Campbell 0 -- 50,000 0 $ 32,812 0
William Gresher 0 -- 92,500 0 $ 21,328 0
Rowland W. Day II 0 -- 225,000 0 $237,656 0
Donald J. Duffy 0 -- 210,000 0 $221,250 0
</TABLE>
- ----------------------
(1) The value of the Company's Common Stock for purposes of the calculation was
based upon the average of the bid and asked prices for the Common Stock on
December 31, 1996 as reported by the OTC Bulletin Board, minus the exercise
price.
The Company entered into two-year employment agreements with each of
Donald J. Duffy and Rowland W. Day II as of September 9, 1996 pursuant to which
each is employed as Co-Chief Executive Officer of the Company. Messrs. Duffy and
Day do not receive any salary, employee benefits or other compensation other
than one motorcycle with a value of not more than $20,000 per year. The Company
agreed to grant options to each of Messrs. Duffy and Day to purchase, at a price
of $1.05 per share, 200,000 shares of Common Stock at any time within two years.
The Company has adopted a non-qualified stock option plan for its
directors (the "Plan") and has reserved a total of 300,000 shares of Common
Stock to be issued upon exercise of options granted under the Plan. As of March
31, 1997, there were options outstanding under the Plan to purchase a total of
265,000 shares of Common Stock and no options granted under the Plan had been
exercised.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding ownership
of Common Stock as of March 31, 1997 by each director of the Company, each
person known by the Company to be the beneficial owner of more than five percent
of the Common Stock, and all of the directors and executive officers of the
Company as a group. All persons named have sole voting power and investment
power over their shares except as otherwise noted.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES OWNED OF CLASS
---------------- ------------ --------
<S> <C> <C>
Rowland W. Day II 1,215,783(1) 13%
3070 Bristol Street, Suite 650
Costa Mesa, California 92626
Donald J. Duffy 478,254(2) 5.2%
237 Park Avenue, Eighth Floor
New York, New York 10017
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C> <C>
Humbert B. Powell, III 15,000(3) less than 1%
712 Fifth Avenue, Eleventh Floor
New York, New York 10019
M.D. Strategic, L.P. 899,047(4) 9.9%
237 Park Avenue, Eighth Floor
New York, NY 10017
PV II, L.P. 558,500(5) 6.1%
237 Park Avenue, Eighth Floor
New York, NY 10017
All officers and directors as a
group (3 persons) 1,709,037(1)(2)(3) 17.5%
</TABLE>
- -----------------------
(1) Includes 630,000 shares issuable upon exercise of options held by
Mr. Day and the Day Family Trust that are exercisable within 60 days.
(2) Includes 265,000 shares issuable upon exercise of options held by Mr.
Duffy that are exercisable within 60 days. Also includes 23,900 of the
shares owned by PV II, L.P., an investment partnership of which Mr.
Duffy is one of two general partners, and 58, 124 of the shares owned
by M.D. Strategic L.P., an investment partnership of which Mr. Duffy is
one of two general partners, which number of shares represents Mr.
Duffy's pecuniary interest in the total number of shares owned by each
such partnership. Also includes 40,000 of the shares issuable upon
exercise of options held by Meyer Duffy & Associates, 31,950 of the
shares issuable upon exercise of warrants held by PV II, L.P. and
31,780 of the shares issuable upon exercise of warrants held by MD
Strategic L.P., which number of shares represents Mr. Duffy's pecuniary
interest in the total number of shares issuable upon exercise of
options held by Meyer Duffy & Associates and warrants held by each such
partnership.
(3) Includes 15,000 shares issuable upon exercise of an option held by Mr.
Powell that is exercisable within 60 days.
(4) Includes 317,800 shares issuable upon exercise of warrants.
(5) Includes 319,500 shares issuable upon exercise of warrants.
ITEM 12. Certain Relationships and Related Transactions
In August 1994, Rowland W. Day II loaned $300,000 to HDL. HDL used the
proceeds of the loan from Mr. Day along with the proceeds of other loans from
non-affiliates in the aggregate additional amount of $200,000 to make a $500,000
collateralized loan to the Company. The loan was evidenced by the Company's
non-interest bearing convertible promissory note which was converted into shares
of the Company's Common Stock in connection with the acquisition of Bikers
Dream, Inc. at the conversion price of $1.00 per share. The Company also agreed
to issue warrants to such non-affiliates to purchase 200,000 shares of the
Company's Common Stock at a price of $1.50 per share. The warrants were
converted to 200,000 shares of Common Stock on September 8, 1995.
In February 1995, Rowland W. Day II loaned $50,000 to the Company, the
proceeds of which were used to purchase four used Harley-Davidson motorcycles.
The Company repaid the loan and interest thereon in the amount of $2,000 to Mr.
Day in March 1995.
The Company agreed to grant to Rowland W. Day II and/or his assigns,
upon consummation of the Bikers Dream Acquisition, an irrevocable three-year
option to purchase, at a price of $1.00 per share, 550,000 shares of Common
Stock. Mr. Day has assigned his right to receive options to purchase 170,000 of
such shares to other persons.
The Company granted options to Bill Gresher, a former officer and
director, in connection with an employment agreement, to purchase 300,000 shares
of Common Stock at a per share exercise price of $2.50.
14
<PAGE> 15
In April 1995, the Company granted options to each of its then current
directors to purchase, at an exercise price of $1.50 per share, 50,000 share of
Common Stock, which options vest in increments over a five-year period.
In April 1995, Dennis Campbell, its then president, Chief Executive
Officer and a director of the Company, loaned $75,000 to the Company, the
proceeds of which were used for working capital. The Company agreed to repay the
loan and interest thereon of $5,000 within 60 days after the date of the loan.
This loan was subsequently paid in full with interest.
On April 6, 1995, the Company entered into a consulting agreement with
Meyer Duffy & Associates, Inc. ("Meyer Duffy") for management consulting,
financial advisory and investment banking services to be rendered to the Company
for six months in consideration of a monthly fee of 2,500 shares of the
Company's Common Stock, plus travel expenses, if incurred. This agreement was
effective through September 1995, and the 15,000 shares were issued in December
1995 at $2.00 per share. Donald Duffy, a member of the Board of Directors of the
Company, is a principal of Meyer Duffy.
The Company has granted non-qualified options to Meyer Duffy to purchase
30,000 shares of Common Stock at $2.50 per share. The options vested at the time
of grant for services rendered, and are exercisable within two years following
the date of grant in April 1995.
On August 31, 1995, Dennis Campbell loaned the Company $24,000 on a
demand note at an interest rate of 16% per annum. This note was repaid in
September 1996.
On December 31, 1995, Dennis Campbell loaned the Company $14,547 on
demand at 10% interest. This note was paid in full during January 1996.
On October 1, 1995, the Company entered into a consulting agreement with
Meyer Duffy, which was amended on November 1, 1995, whereby Meyer Duffy was
retained to provide consulting, financial advisory and investment banking
services for a ten-month term commencing October 1, 1995 for a consulting fee
payment of $5,000 per month. In addition, the Company agreed to grant Meyer
Duffy a two year option to purchase 50,000 shares of the Company's Common Stock
at a price of $1.70 per share as compensation for arranging bridge financing for
the Company in the amount of $1.1 million in convertible debt, and to pay Meyer
Duffy a fee of 5% of all proceeds received from the bridge financing in excess
of $100,000. This agreement was terminated September 9, 1996.
On October 17, 1995, William R. Gresher, then Senior Vice President,
Chief Financial Officer and a director of the Company, loaned $50,000 to the
Company pursuant to a note bearing interest at 11% per annum, on demand, and on
October 24, 1995, Mr. Gresher loaned an additional $10,000 to the Company on the
same terms. These notes were paid in September 1996.
In November and December 1995, M.D. Strategic L.P., a partnership of
which Donald Duffy, a director of the Company, is a general partner, loaned a
total of $200,000 to the Company. The loans were evidenced by the Company's
convertible promissory notes which bore interest at an annual rate of 8%. These
notes were converted into 117,647 shares of Common Stock on March 14, 1996.
In April 1996, the Company obtained a 90-day unsecured loan in the
amount of $300,000 from M.D. Strategic L.P. The loan, which bore interest at an
annual rate of 14%, was extended to September 10, 1996 when it was converted
into 142,800 Units (each Unit consisting of two shares of Common Stock, one
Series A Warrant to purchase one share of Common Stock and one Series B Warrant
to purchase one share of Common Stock).
In April 1996, the Company obtained a 90-day, unsecured loan in the
amount of $200,00 from M.D. Strategic, L.P., a partnership of which Donald
Duffy, a director of the Company, is a general partner. The loan, which bore
interest at an annual rate of 14%, was extended until September 10, 1996 when an
investor purchased the loan and converted it into 95,200 Units (each Unit
consisting of two shares of Common Stock, one Series A Warrant to purchase one
share of Common Stock and one Series B Warrant to purchase one share of Common
Stock).
In September, 1996, the Company sold the assets of its Clearwater/Tampa
Bay, Florida Bikers Dream Superstore and dealership rights in the
Clearwater/Tampa Bay market place to its then President, Dennis Campbell, for
consideration
15
<PAGE> 16
which included 950,000 shares of the Company's Common Stock owned by Mr.
Campbell. In connection with the transaction, an option to purchase 50,000
shares previously granted to Mr. Campbell under the Company's 1995 Non-
Qualified Directors Stock Option Plan was deemed fully vested, an additional
option to purchase, at a price of $3.00 per share, 100,000 shares of Common
Stock was granted to Mr. Campbell, and Mr. Campbell resigned as an officer and
director of the Company.
In September 1996, 90% of the outstanding fees owned to Day Campbell &
McGill and Meyer Duffy were converted into 59,557 shares and 38,462 shares,
respectively, of Common Stock of the Company.
In September 1996, the Company issued 50,000 shares of Common Stock to
Day Campbell & McGill, 50,000 shares to Meyer Duffy and 10,000 shares to Richard
King, Jr., as payment for prior services rendered.
In September 1996, the Company entered into employment agreements with
Rowland Day II and Donald J. Duffy, pursuant to which options were granted to
each of them to purchase, at any time within two years, 200,000 shares of the
Company's Common Stock at a price of $1.05.
During 1996 and 1995, the Company incurred $133,689 and $219,045,
respectively, in legal and/or consulting fees to a law firm in which Mr. Day, a
director of the Company, is a partner.
During 1996 and 1995, the Company incurred $52,201 and $28,557,
respectively, in legal fees to the law offices of Richard E. King, Jr., of which
Mr. King, a director of the Company, is the principal.
ITEM 13. Exhibits, List and Reports on Form 8-K.
(a) List of Exhibits:
2.1 Agreement and Plan of Reorganization dated August 4,
1994 among HDL Communications (now known as Bikers
Dream, Inc.), Bikers Dream, Inc. and the stockholders
of Bikers Dream, Inc., as amended by agreements dated
November 11, 1994, February 3, 1995 and February 20,
1995.*
3.1 Articles of Incorporation, as amended, of Bikers
Dream, Inc. (formerly known as HDL Communications).*
3.1.1 Certificate of Amendment, Articles of Incorporation,
June, 1996.
3.2 Certificate of Ownership of HDL Communications (now
known as Bikers Dream, Inc.).*
3.3 Bylaws, as amended, of Bikers Dream, Inc.*
10.1 Lease dated August 5, 1993 between the Company and
McFadden Plaza.*
10.2 Lease dated November 1, 1994 between the Company and
Valley View Partnership.*
10.3 Lease dated February 8, 1995 between the Lily Company
and Jim Kinnicutt and Susan Rasmussen, dba Bikers
Dream of Sacramento.
10.4 Lease dated October 30, 1996 between the Company and
Inland Industries.
10.5 Employment Agreement dated as of February 8, 1995
between the Company and Jeffrey L. Simons.*
10.6 Consulting Agreement dated April 6, 1995 between the
Company and Meyer, Duffy & Associates.*
16
<PAGE> 17
10.7 Consulting Agreement effective as of October 1, 1995
between the Company and Meyer, Duffy & Associates.*
10.8 Amendment to Consulting Agreement and Stock Option
Agreement dated November 1, 1995, between the Company
and Meyer Duffy & Associates.
10.9 Asset Purchase Agreement dated September 22, 1995
between the Company, Joe Melia and Charles Melia.*
10.10 Lease Agreement dated June 9, 1994 between Charles
Melia and Joe Melia and Westlake Professional Center
Partnership and Assignment thereof to the Company
dated September 22, 1995.*
10.11 The 1995 Incentive Stock Option Plan of the Company,
as amended.**+
10.12 The 1995 Non-Qualified Stock Option Plan of the
Company, as amended.**+
10.13 The 1995 Non-Qualified Directors' Stock Option Plan
of the Company, as amended.**+
10.14 Employment Agreement dated September 9, 1996 between
the Company and Donald J. Duffy.+
10.15 Employment Agreement dated September 9, 1996 between
the Company and Rowland W. Day II.+
10.16 Promissory Note and Security Agreement dated February
14, 1996 between the Company and Green Tree Financial
Servicing Corporation.
10.17 Promissory Note and Security Agreement dated December
28, 1995 between the Company and Green Tree Financial
Servicing Corporation.
10.18 Form of Dealer Agreement between the Company and its
dealers, and a schedule identifying all dealer
agreements to which the Company is a party as of
March 31, 1997 which are substantially identical
to the attached Dealer Agreement, except with respect
to the parties thereto, dates of execution and
territory.
10.19 Stock Repurchase Agreement dated as of September 9,
1996 among the Company, Dennis Campbell and DC
Enterprises, Inc.
10.20 Stock Option Agreement dated September 13, 1996
between the Company and Mull Acres Investments, Inc.
10.21 Asset Purchase Agreement dated January 30, 1997 among
the Company, Ultra Acquisition Corp. and Mull Acres
Investments, Inc.***
10.22 Senior Subordinated Promissory Note of the Company
dated January 30, 1997 payable to Mull Acres
Investments, Inc. in the amount of $2,700,000.
10.23 Security Agreement dated January 30, 1997 between the
Company and Mull Acres Investments, Inc.
17
<PAGE> 18
10.24 Lease dated February 12, 1996 between Mull Acres
Investments, Inc. and Lincoln Riverside Business
Center.
10.25 Lease dated October 11, 1996 between Mull Acres
Investments, Inc. and Lincoln Riverside Business
Center.
21.1 List of subsidiaries.**
27 Financial Data Schedule.
- -------------------------------------------
* Incorporated by reference to the Company's Registration Statement on
Form SB-2 (Registration No. 33- 92294) filed with the Commission on May
31, 1995 and Amendment No. 1 thereto filed with the Commission on
October 16, 1995.
** Incorporated by reference to the Company's Form 10-KSB dated April 12,
1996 filed with the Commission on April 15, 1996.
*** Incorporated by reference to the Company's Form 8-K dated January 30,
1997 filed with the Commission on February 14, 1997.
+ A compensatory plan or arrangement.
(b) Reports on Form 8-K.
The Company filed the following reports on Form 8-K during the quarter
ended December 31, 1996:
1. Form 8-K dated December 9, 1996 reporting the resignation of
Messrs. Dennis Campbell, William Gresher and Richard King, Jr. as officers and
directors of the Company, the transfer of the Company's Clearwater, Florida
store, including the assets of the store and dealership rights in the
Clearwater/Tampa Bay marketplace, to Dennis Campbell in exchange for 950,000
shares of the Company's Common Stock owned by Mr. Campbell, and the formation of
a joint venture with Mull Acres Investments, Inc. ("MAI") to act as exclusive
distributor of Ultra Kustom Motorcycles manufactured by the Ultra Kustom Cycles
division of MAI.
2. Form 8-K dated December 13, 1996 reporting a change in the
Company's independent accountant.
18
<PAGE> 19
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Bikers Dream, Inc.
Dated: April 15, 1997 By: /s/ Donald J. Duffy
---------------------------------
Donald J. Duffy, Co-Chief Executive Officer
Dated: April 15, 1997 By: /s/ Rowland W. Day II
---------------------------------
Rowland W. Day II, Co-Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
/s/ Donald J. Duffy April 15, 1997
- ------------------------------------
Donald J. Duffy
Co-Chief Executive Officer,
Chief Financial Officer and Director
/s/ Rowland W. Day II April 15, 1997
- ------------------------------------
Rowland W. Day II
Co-Chief Executive Officer and
Director
/s/ Owen Naccarato April 15, 1997
- ------------------------------------
Owen Naccarato
Controller
/s/ Humbert B. Powell, III April 15, 1997
- ------------------------------------
Humbert B. Powell, III
Director
19
<PAGE> 20
BIKERS DREAM, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 1996 AND 1995
<PAGE> 21
BIKERS DREAM, INC. AND SUBSIDIARIES
CONTENTS
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS for the Year Ended December 31, 1996 F-1
REPORT OF INDEPENDENT ACCOUNTANTS for the year ended December 31, 1995 F-2
Consolidated Balance Sheet F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Shareholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-8
</TABLE>
<PAGE> 22
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
Bikers Dream, Inc.
We have audited the accompanying consolidated balance sheet of Bikers Dream,
Inc. and subsidiaries as of December 31, 1996, and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Bikers Dream, Inc.
and subsidiaries as of December 31, 1996, and the consolidated results of their
operations and their consolidated cash flows for the year then ended, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $4,030,168 during the year ended December 31,
1996 and had negative cash flows from operations. These factors, among others,
as discussed in Note 1 to the financial statements, raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
As discussed in Note 5, the Company is a defendant in lawsuits arising from the
sale of a franchise, trademark infringements, and related claims. The final
outcome of the legal matters cannot be determined. Management has estimated the
Company's losses and has accrued such losses in the financial statements. The
final resolution of these matters could have a material adverse effect on the
Company's financial position. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
- -----------------------------------------------
SINGER LEWAK GREENBAUM & GOLDSTEIN LLP
Los Angeles, California
March 24, 1997
F-1
<PAGE> 23
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Bikers Dream, Inc.
Santa Ana, California
We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of Bikers Dream, Inc. and Subsidiaries for
the year ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the consolidated results of operations and cash flows
of Bikers Dream, Inc. and Subsidiaries for the year ended December 31, 1995 in
conformity with generally accepted accounting principles.
The accompanying 1995 consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has incurred
recurring losses from operations and the ability of the Company to raise
additional funds and ultimately achieve positive operating cash flows is
uncertain and, therefore, this raises substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ COOPERS & LYBRAND L.L.P.
- -------------------------------
COOPERS & LYBRAND L.L.P.
Newport Beach, California
February 27, 1996
F-2
<PAGE> 24
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash and cash equivalents (Note 2) $ 247,891
Accounts receivable, net of allowance for doubtful
accounts of $50,000 142,127
Inventories 1,442,426
Prepaid expenses and other current assets 79,114
-----------
Total current assets 1,911,558
FURNITURE AND EQUIPMENT, net of accumulated depreciation of
$179,413 (Notes 3, 6, and 7) 758,149
INVESTMENT IN ULTRA BIKERS, LLC, AT EQUITY (Note 4) 1,508,855
DEPOSITS AND OTHER ASSETS 29,508
-----------
TOTAL ASSETS $ 4,208,070
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 440,932
Other accrued expenses 1,018,695
Current portion of long-term debt (Note 6) 81,211
Current portion of notes payable (Note 7) 50,516
Note payable to shareholder (Note 11) 48,000
-----------
Total current liabilities 1,639,354
DEFERRED RENT 67,537
LONG-TERM DEBT, less current portion (Note 6) 371,823
NOTES PAYABLE, less current portion (Note 7) 86,926
NOTE PAYABLE TO SHAREHOLDER, less current portion (Note 11) 36,000
-----------
Total liabilities 2,201,640
-----------
COMMITMENTS AND CONTINGENCIES (Notes 5 and 11)
SHAREHOLDERS' EQUITY (Notes 10, 11, and 12)
Preferred stock, no par value:
10,000,000 shares authorized, 7 issued and outstanding 1,102,500
Common stock, no par value:
25,000,000 shares authorized, 8,748,680 issued and outstanding 7,477,913
Accumulated deficit (6,573,983)
-----------
Total shareholders' equity 2,006,430
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,208,070
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 25
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
REVENUES
Product sales $ 8,903,517 $ 7,589,933
Financing contracts 93,142 200,157
----------- -----------
Total revenues 8,996,659 7,790,090
COST OF GOODS SOLD 7,476,786 5,980,469
----------- -----------
GROSS PROFIT 1,519,873 1,809,621
----------- -----------
EXPENSES
Selling, general, and administrative expenses 4,963,229 3,870,014
Depreciation and amortization 197,476 74,543
Interest expense 169,731 33,359
Franchise income (34,290) (146,996)
Franchise reacquisition expense -- 269,918
Loss on closure of store 166,634 --
Equity in loss of Ultra Bikers, LLC 16,145 --
Other (income) expense, net 70,316 (3,250)
----------- -----------
Total expenses 5,549,241 4,097,588
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (4,029,368) (2,287,967)
PROVISION FOR INCOME TAXES 800 59,726
----------- -----------
NET LOSS $(4,030,168) $(2,347,693)
=========== ===========
NET LOSS PER SHARE $ (0.59) $ (0.50)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 6,824,091 4,730,885
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 26
BIKERS DREAM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock Total
------------------- -------------------- Accumulated Shareholders'
Shares Amount Shares Amount Deficit Equity
------ ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 - $ - 3,300,000 $ 448,990 $ (135,122) $ 313,868
REVERSE MERGER 300,920 300,920 300,920
PRIVATE PLACEMENT 600,000 900,000 900,000
NOTES PAYABLE CONVERSIONS 1,120,000 1,740,000 1,740,000
ISSUANCE OF COMMON STOCK IN EXCHANGE
FOR SERVICES 15,000 30,000 30,000
WARRANTS EXERCISED FOR CASH 200,000 300,000 300,000
OFFERING COSTS (552,940) (552,940)
NET LOSS (2,347,693) (2,347,693)
----- ---------- ---------- ---------- ----------- -----------
BALANCE, DECEMBER 31, 1995 - - 5,535,920 3,166,970 (2,482,815) 684,155
PRIVATE PLACEMENT 7 1,225,000 2,845,000 2,987,250 4,212,250
OFFERING COSTS (122,500) (93,416) (215,916)
DEBT CONVERTED TO EQUITY 1,110,991 1,579,300 1,579,300
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
CONVERTED TO EQUITY 98,019 135,467 135,467
CANCELLATION OF SHARES (950,000) (569,458) (569,458)
ISSUANCE OF COMMON STOCK IN EXCHANGE
FOR SERVICES 108,750 151,800 151,800
EXPENSE RELATING TO STOCK OPTIONS GRANTED
BELOW THE FAIR MARKET VALUE 120,000 120,000
DIVIDENDS DECLARED (61,000) (61,000)
NET LOSS (4,030,168) (4,030,168)
----- ---------- ---------- ---------- ----------- -----------
BALANCE, DECEMBER 31, 1996 7 $1,102,500 8,748,680 $7,477,913 $(6,573,983) $ 2,006,430
===== ========== ========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 27
BIKERS DREAM, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(4,030,168) $(2,347,693)
Adjustments to reconcile net loss to net cash
used in operating activities
Deferred income taxes -- 58,926
Note receivable from shareholder - forgiven -- 24,616
Depreciation and amortization 197,476 74,543
Loss on disposal of fixed assets 130,949 --
Franchise reacquisition expense -- 269,918
Issuance of common stock for services 151,800 30,000
Stock options granted below the fair market value 120,000 --
Equity in loss of Ultra Bikers, LLC 16,145 --
(Increase) decrease in
Accounts receivable 144,265 (184,850)
Inventories (251,439) (895,191)
Prepaid expenses and other current assets 51,981 (64,127)
Increase (decrease) in
Accounts payable 88,657 458,745
Other accrued expenses 380,106 504,918
----------- -----------
Net cash used in operating activities (3,000,228) (2,070,195)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (Increase) in deposits 151,643 (133,753)
Payments for purchases of fixed assets (178,010) (387,431)
Acquisition of franchises -- (94,871)
Investment in Ultra Bikers, LLC (1,525,000) --
Increase in deferred rent 12,604 24,870
----------- -----------
Net cash used in investing activities (1,538,763) (591,185)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments made on long-term debt
and capitalized leases (64,606) (89,690)
Proceeds from issuance of preferred stock 1,225,000 --
Cost associated with issuance of preferred stock (122,500) --
Proceeds from issuance of common stock 2,987,250 1,200,000
Costs associated with issuance of common stock (93,416) (252,020)
Proceeds from issuance of convertible notes payable 450,500 1,869,000
Proceeds from issuance of notes payable 570,000 --
Principal payments made on notes payable (188,035) (145,357)
Proceeds from notes payable to shareholders -- 198,547
Payments on notes payable to shareholders (113,047) (1,500)
----------- -----------
Net cash provided by financing activities 4,651,146 2,778,980
----------- -----------
Net increase in cash and cash equivalents 112,155 117,600
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 135,736 18,136
----------- -----------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 247,891 $ 135,736
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 28
BIKERS DREAM, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
For the years ended December 31, 1996 and 1995, $169,731 and $33,359,
respectively, of cash was paid for interest expense, and $800 of cash was paid
for state income taxes each year.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
The Company entered into capital lease obligations in the amounts of $4,795 and
$127,928 during 1996 and 1995, respectively.
In 1996 and 1995, the Company entered into a note payable with a lender for
equipment in the amounts of $303,555 and $97,498, respectively.
In 1996 and 1995, the Company converted the 8% convertible notes of $1,079,500
and $1,240,000, respectively, into 634,991 and 620,000 shares of common stock,
respectively.
In 1996, the Company converted notes payable in the amount of $499,800 into
238,000 Units (each Unit consists of two shares of common stock, one Series A
warrant to purchase one share of common stock for $1.05 per share and one
Series B warrant to purchase one share of common stock at $1.50 per share).
In 1996, the company converted accounts payable and accrued expenses of $53,177
and $82,290, respectively, into 98,019 shares of common stock.
In 1996, the Company transferred the Company-owned superstore in Clearwater,
Florida to the former president, chief financial officer, and director of the
Company in exchange for the cancellation of 950,000 shares of Bikers Dream, Inc.
common stock. In connection with the transfer, the Company transferred $612,899
of assets consisting of inventory of $466,473 and fixed assets of $146,426. In
addition, the Company wrote-off deferred rent of $43,441.
In September 1995, the Company purchased assets in the amount of $103,359 from a
former franchisee, consisting of inventory of $30,961, deposits of $8,820, and
equipment of $63,578. In connection with this transaction, notes payable in the
amount of $247,950 were issued and cash was paid in the amount of $94,871. In
November 1995, the company purchased assets from a second franchisee in the
amount of $101,338 consisting of inventory of $44,155, deposits and other assets
of $13,752, and equipment of $43,431. In connection with this transaction, a
note payable of $29,293 was issued to the former franchisee and debt was assumed
in the amount of $102,591. With respect to both of the above transactions, the
excess of the purchase price over assets acquired was expensed during 1995 as
these franchises were reacquired due to disputes with the franchisees as a
result of the Company's franchise circular not being in compliance with
applicable federal and state laws.
In March 1995, the Company converted a $500,000 promissory note into 500,000
shares of the Company in connection with the acquisition of HDL Communications
by Bikers Dream, Inc.
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 29
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Line of Business
Bikers Dream, Inc. (the "Company") was originally incorporated in 1991.
As of March 13, 1995, the Company acquired a publicly-traded dormant
entity formerly known as HDL Communications ("HDL"). After the
acquisition, the Company was merged into HDL, and HDL changed its name
to Bikers Dream, Inc. At the time of acquisition, there was no active
trading market for the Company's stock and management of the Company,
and HDL determined in arm's length negotiation that the market value of
the combined entities was approximately $4.0 million (or approximately
$1.00 per share) which was evidenced by the number of shares issued
(4,100,000) in connection with the acquisition as follows:
- 3.3 million shares to former Company shareholders
- .3 million shares to former HDL shareholders
- .5 million shares to holders of $500,000 of convertible
notes of HDL who converted them into shares of the
Company at a price of $1.00 per share immediately prior
to the closing of the acquisition
At the time of the merger, HDL's assets and liabilities consisted of a
note receivable of $500,000 from the Company and notes payable in the
amount of $500,000. As the notes were converted into shares concurrent
with the acquisition, the .3 million shares issued to former HDL
shareholders were issued in consideration for the public entity HDL.
The substance of the transaction was a recapitalization of the
Company's shares for those of HDL's shares. Shareholders' equity has
been restated to give retroactive recognition to the recapitalization
and has been treated as a stock split for all periods presented. In
addition, all references in the financial statements to number of
shares and per share amounts of the Company's common stock have been
restated.
The surviving company is in the business of selling new Ultra Kustom
and used Harley Davidson motorcycles, parts, accessories, apparel and
service through Company-owned retail stores, and dealer-operated stores
throughout the United States.
Basis of Presentation
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company
experienced net losses of $4,030,168 and $2,347,693 for the years ended
December 31, 1996 and 1995, respectively, and had negative cash flow
from operations. In view of this matter, realization of a major portion
of the assets in the accompanying balance sheet is dependent upon the
Company's ability to meet its financing requirements and the success of
its future operations.
Management has previously relied on equity sources to fund operations
as the Company is in its initial growth and expansion stage and the
Company's access to third party financing has been limited. Access to
debt financing has been limited to capital leases entered into for
fixed asset purchases. As a result, the reliance by the Company on
equity sourcing is critical.
F-8
<PAGE> 30
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Presentation (Continued)
The ability of the Company to raise additional funds and ultimately
achieve positive operating cash flows is uncertain. However, based on
the following, management believes that it will have sufficient working
capital for the foreseeable future.
1. In January 1997, the Company raised $2,210,000 of debt
financing to complete the acquisition of the assets of Ultra
Kustom Cycles which have higher gross margins than used
motorcycles.
2. The Company-owned superstore in Clearwater, Florida, which
was unprofitable and costly to operate from California, was
sold in September, 1996. The Company also opened a new
Superstore in San Diego in February 1997.
3. The Company discontinued its unprofitable franchising program
in late 1996 and instituted a dealership program. At the end
of 1996 the Company had two franchises and two dealers. As of
March 31, 1997, the Company had seven dealers and one
franchise operational. An additional eight dealers have
executed dealership agreements and will become operational in
1997. In addition, the Company has assumed nineteen, Ultra
Cycle dealerships (motorcycles only).
4. A reduction in corporate employees will result in reduced
annualized salaries of approximately $500,000.
5. The Company has retained an outside consultant to assist in
obtaining floor planning financing for motorcycles and a
working capital line of credit.
Principles of Consolidation
The consolidated financial statements include the accounts of Bikers
Dream, Inc. and all of its wholly-owned subsidiaries, including the
accounts of Bikers Dream International, Inc., Bikers Dream
Distribution, Inc., Bikers Dream Management Services, Inc. and Bikers
Dream Eagle Enterprises, Inc. All significant intercompany accounts and
transactions are eliminated in consolidation.
Revenue Recognition
Product Sales
Revenue from the sale of products is recognized at the time of
sale to a retail customer.
Financing Income
Financing income is the Company's participation in finance
contracts for motorcycle sales. Revenue from financing income
is recognized when earned.
Franchise Income
Income from the sale of franchises is recognized at the time
the franchise commences retail operations and the Company has
performed substantially all of the services which it is
required to perform under the Company's franchise agreement.
These services provided to franchises include, but are not
limited to, assistance in site selection and in-house and
on-site training with instruction using the Company's
franchise operations manual.
Superstore Pre-Opening Costs
All costs associated with opening a Company-owned and operated
Superstore, with the exception of capitalized furniture, fixtures and
equipment, are expensed when incurred.
Advertising Costs
Those costs associated with placement of advertisements in various
periodicals are expensed when the advertisement is run. Internal
development costs are expensed as incurred.
Catalog Costs
Internal costs associated with the development of mail order catalogs
are expensed as incurred. External costs, excluding printing, relating
to the development of the catalog are capitalized and amortized over 12
months from the first publication. Costs associated with printing
catalogs are inventoried when purchased and expensed as catalogs are
sold or distributed.
F-9
<PAGE> 31
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Company utilizes Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes," which requires the
recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred income
taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws
and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the
amount expected to be realized. The provision for income taxes
represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
Net Loss Per Share
Net loss per share is based on the weighted average number of common
shares outstanding during each year. The shares to be issued upon the
exercise of outstanding stock options, warrants, and convertible
preferred stock are not included as they are anti-dilutive.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly-liquid investments purchased with original maturities of three
months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (first-in, first-out basis)
or market and consists primarily of motorcycles and motorcycle parts
which are categorized as finished goods. At December 31, 1996 and 1995,
the reserve for obsolescence was $100,000 and $30,000, respectively.
Furniture and Equipment
Furniture and equipment, including capitalized leases, are stated at
cost less accumulated depreciation. The Company provides for
depreciation using the straight-line method over the estimated useful
lives of five to seven years or the term of the lease, whichever is the
lesser as follows:
<TABLE>
<CAPTION>
<S> <C>
Furniture and fixtures 7 years
Leasehold improvements 7 years
Equipment 5 to 7 years
Computers 5 years
Autos and trucks 7 years
</TABLE>
Repairs and maintenance are expensed as incurred. When furniture and
equipment are retired or disposed of, the related costs and accumulated
depreciation are eliminated from the accounts and any gain or loss on
such disposition is reflected in operations.
F-10
<PAGE> 32
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Deferred Rent
Deferred rent arises from rent abatements which are negotiated at the
beginning of certain property leases. The total amount of the base rent
payments is being charged to expense on the straight-line method over
the term of the lease. The Company has recorded deferred rent to
reflect the excess of rent expense over the cash payments since the
inception of the lease.
Concentration of Risk
The Company is operating in a growing market due to the current
nationwide popularity of custom motorcycles. Its future success is
dependent on the continuation of interest in the recreational
motorcycle industry.
Concentration of Credit Risk
Other financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
These concentrations are limited due to the large number of customers
comprising the Company's customer base and their dispersion across
different geographic regions. The Company performs ongoing credit
evaluations of customers and generally does not require collateral.
Allowances are maintained for potential credit losses, and such losses
have been within management's expectations. As of December 31, 1996,
the Company has no significant concentrations of credit risk.
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 disclosures of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenue
and expenses during the reported period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the
Company's financial instruments, including cash, accounts receivable,
accounts payable, and accrued expenses, the carrying amounts
approximate fair value due to their short maturities. The amounts shown
for notes payable and long-term debt also approximate fair value
because current interest rates offered to the Company for debt of
similar maturities are substantially the same.
NOTE 2 - CASH
The Company maintains cash deposits at several banks. Deposits at each
bank are insured by the Federal Deposit Insurance Corporation up to
$100,000. As of December 31, 1996, uninsured portions amounted to
$110,501. The Company has not experienced any losses in such accounts
and believes it is not exposed to any significant credit risk on cash
and cash equivalents.
F-11
<PAGE> 33
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 3 - FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Furniture and fixtures $118,176
Leasehold improvements 132,135
Equipment 56,599
Computers 164,883
Autos and trucks 465,769
--------
937,562
Less accumulated depreciation 179,413
--------
TOTAL $758,149
========
</TABLE>
Included in furniture and equipment is capitalized leased equipment of
$90,144 with accumulated amortization of $17,950 at December 31, 1996.
NOTE 4 - EQUITY INVESTMENT IN ULTRA BIKERS, LLC
In September 1996, the Company entered into an agreement with Mull
Acres Investments, Inc. ("Mull Acres") to become members of Ultra
Bikers, LLC, a newly-formed, California limited liability company (the
"LLC"). The Company contributed $1,525,000 for a 49% interest in the
LLC and Mull Acres received a 51% interest for its expertise in the
business of manufacturing, distributing, and selling custom
motorcycles.
The proceeds of the Company's investment in the LLC were loaned to the
Ultra Kustom Cycles division ("UKC") of Mull Acres to be used to
manufacture motorcycles and related parts and accessories. UKC sells
the motorcycles and related parts and accessories to the LLC at cost,
and the LLC then sells the motorcycles to the Company and unrelated
parties.
At December 31, 1996, the Company accounted for its investment in the
LLC on the equity method.
On January 30, 1997, the Company entered into an agreement with Mull
Acres to purchase the assets, which include the employee base and
manufacturing expertise, of UKC for $3,800,000. After the close of the
transaction, the LLC was dissolved and the Company owned 100% of the
assets of UKC.
F-12
<PAGE> 34
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 4 - EQUITY INVESTMENT IN ULTRA BIKERS, LLC (CONTINUED)
Summary financial information for the LLC from inception to December
31, 1996 is listed below:
<TABLE>
<CAPTION>
<S> <C>
Operating statement data
Net sales $1,096,654
Net loss $ 32,949
Balance sheet data
Total assets $1,496,996
Total liabilities $ 4,945
Members' equity $1,492,051
</TABLE>
NOTE 5 - COMMITMENTS AND CONTINGENCIES
Leases
The Company leases all of its operating facilities. The Santa Ana,
California operating facility, which serves as a retail Superstore as
well as the Corporate warehouse and executive offices, is leased under
a non-cancelable tenant operating lease for the monthly rent of $11,865
subject to annual CPI increases starting the third year of the lease.
The lease term is 120 months commencing November 1, 1993 with two
successive five-year options.
The Company negotiated a lease at a second Company-owned Superstore in
Dallas, Texas. The terms of the lease call for a monthly rent of $8,000
subject to CPI increases. The lease term is sixty months commencing
January 1, 1995 with two successive five-year options.
On November 21, 1995, the Company purchased another of its franchise
stores. The Company did not assume this lease, but instead issued a
guarantee to the former franchisee to continue its lease payment. The
lease term is 63 months commencing on April 1, 1995 with monthly lease
payment of $3,039 per month. The monthly lease payments increase to
$3,555 per month over the term of the lease. The Company has the option
to extend the lease for five years.
On October 31, 1996, the Company negotiated a lease for a new
Company-owned superstore in San Diego, California which opened in 1997.
The lease term is 60 months commencing January 1, 1997 with monthly
lease payments of $5,271 per month. The Company has the option to
extend the lease for five years.
F-13
<PAGE> 35
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Leases (Continued)
Minimum annual non-cancelable commitments under these leases are as
follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1997 $ 340,320
1998 341,868
1999 343,476
2000 226,962
2001 205,632
Thereafter 261,030
----------
TOTAL $1,719,288
==========
</TABLE>
Total rent expense incurred by the Company for the years ended December
31, 1996 and 1995 was $368,564 and $313,924, respectively.
Litigation
The Company is involved in various litigation arising from the sale of
a franchise, trademark infringements and related claims, and claims
arising in the ordinary course of business. Although the final outcome
of these legal matters cannot be determined, management has estimated
the Company's loss and accrued for such amounts in the December 31,
1996 financial statements. The final resolution of these matters could
have a material adverse effect on the financial position of the
Company.
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Capitalized lease obligation payable to a finance company,
collateralized by certain computer equipment, requiring principal
and interest payments of $2,272 per month, with interest at
20% per annum through May 2000. $66,869
Capitalized lease obligation payable to a finance company,
collateralized by certain computer equipment, requiring principal
and interest payments of $937 per month, with interest at
16% per annum through December 2000. 36,673
Long-term note payable to a finance company, collateralized by a
diesel tractor, requiring principal and interest payments of $1,870
per month, with interest at 10% per annum through January
2001. 74,610
</TABLE>
F-14
<PAGE> 36
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 6 - LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
Long-term note payable to a finance company, collateralized by a
trailer, requiring principal and interest payments of $5,739 per
month, with interest at 10.75% per annum through February
2002. $272,110
Capitalized lease obligation payable to a finance company,
collateralized by equipment, requiring principal and
interest payments of $232 per month, with interest at 16%
per annum through January 1998. 2,772
--------
453,034
Less current portion 81,211
--------
LONG-TERM DEBT, NET OF CURRENT PORTION $371,823
========
</TABLE>
Minimum future principal debt payments at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Year Ending Capitalized
December 31, Leases Other Total
------------ ----------- -------- --------
<S> <C> <C> <C>
1997 $ 41,292 $ 91,308 $132,600
1998 38,740 91,308 130,048
1999 38,508 91,308 129,816
2000 25,925 91,308 117,233
2001 - 70,738 70,738
Thereafter - 11,478 11,478
-------- -------- --------
144,465 447,448 591,913
Less amounts representing interest 38,151 100,728 138,879
-------- -------- --------
TOTAL $106,314 $346,720 $453,034
======== ======== ========
</TABLE>
NOTE 7 - NOTES PAYABLE
The notes payable consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Note payable to bank which was assumed in conjunction with the
acquisition of a former franchise operation. The note is
guaranteed by the Small Business Administration ("SBA")
and is collateralized by all the assets of the Sacramento
store. The note accrues interest at the rate of prime plus
2 1/2% per annum on the unpaid balance and is payable in
monthly installments through April 2005. As of December 31,
1996, the interest rate was 10.75% $94,796
</TABLE>
F-15
<PAGE> 37
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 7 - NOTES PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
<S> <C>
Note payable to former franchisee in conjunction with acquisition of
former franchise operation. Note is uncollateralized, non-interest-
bearing and is payable in 24 equal installments of $1,221 through
November 1997. $ 14,646
Note payable to former officer and director of the Company.
During 1996, the Company bought out the remaining term of
an officer's employment contract for $70,000. This amount
was added to an existing note of $60,000 plus $10,000 in
accrued interest. The total obligation of $140,000 is
non-interest bearing. As of December 31, 1996, the
Company paid $112,000 of the obligation. 28,000
--------
137,442
Less current portion 50,516
--------
NOTES PAYABLE, LONG-TERM PORTION $ 86,926
========
</TABLE>
The following is a schedule, by years, of future maturities of
long-term debts:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1997 $ 50,516
1998 8,709
1999 9,636
2000 10,663
2001 11,799
Thereafter 46,119
--------
TOTAL $137,442
========
</TABLE>
NOTE 8 - FRANCHISE INCOME
The Company entered into five franchise store agreements during the
year 1995. The Company received a $15,000 fee for each store and is due
to receive 5% of each store's weekly sales through the term of the
franchise agreements. The franchise agreement initial term does not
exceed twenty years. During 1995 the Company reacquired two franchise
operations and refunded the franchise fee at a third franchisee.
F-16
<PAGE> 38
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 9 - INCOME TAXES
The following table presents the current and deferred income tax
provision for federal and state income taxes:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Current
Federal $ -- $ --
State 800 800
------- -------
800 800
------- -------
Deferred
Federal -- 50,710
State -- 8,216
------- -------
-- 58,926
------- -------
PROVISION FOR INCOME TAXES $ 800 $59,726
======= =======
</TABLE>
The tax effects of temporary differences which give rise to the
deferred tax (provision) benefit consist of:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Furniture and equipment $ (8,968) $ (19,983)
Accrued liabilities 12,638 19,320
Accounts receivable allowance 9,932 10,068
Inventory reserve 27,010 12,990
Net operating losses 1,415,258 813,984
Other (16,074) 23,964
Valuation allowance (1,439,796) (919,269)
----------- ---------
TOTAL $ -- $ (58,926)
=========== =========
</TABLE>
The provision for income taxes differs from the amount that would
result from applying the federal statutory rate as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1996 1995
------------------------
Percentage Percentage
---------- ----------
<S> <C> <C>
Statutory regular federal income tax rate (34.0) (34.0)
State income taxes, net of federal benefit -- 0.2
Change in valuation allowance 33.5 36.5
Other 0.5 (0.1)
----- -----
TOTAL -- 2.6
===== =====
</TABLE>
F-17
<PAGE> 39
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 9 - INCOME TAXES (CONTINUED)
The components of the deferred income tax assets (liabilities) as of
December 31, are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Furniture and equipment $ (35,753) $ (26,785)
Accrued expenses 31,958 19,320
Accounts receivable allowance 20,000 10,068
Inventory reserve 40,000 12,990
Net operating loss carryforwards 2,275,849 860,591
Other 27,011 43,085
----------- ---------
2,359,065 919,269
Valuation allowance (2,359,065) (919,269)
----------- ---------
TOTAL $ -- $ --
=========== =========
</TABLE>
As of December 31, 1996, the Company had net operating loss
carryforwards for federal and state purposes of approximately
$6,156,000 and $3,044,000, respectively. The net operating loss
carryforwards begin expiring in 2005 and 1997, respectively. The
utilization of net operating loss carryforwards may be limited due to
the ownership change, under the provisions of Internal Revenue Code
Section 382 and similar state provisions.
NOTE 10 - SHAREHOLDERS' EQUITY
Preferred Stock
In 1996, the Company sold 7 units of preferred stock for a price of
$175,000 per unit, for a total consideration of $1,102,500, net of
offering costs. Each unit consists of one share of convertible
preferred stock which pays annual stock dividends of 10%. Each share of
preferred stock is convertible at the option of the holder, after the
effective date of the registration statement with respect to the common
stock, into 50,000 shares of the Company's common stock at a conversion
rate of $3.50 per share. If at the time of conversion 75% of the
current bid price is less than $3.50 per share, the holder will receive
a greater number of shares, but in no case will the conversion rate be
less than $1.50 per share. In addition, the Company may call for the
conversion of the preferred stock if the average closing price of the
Company's common stock is $7.50 per share for ten consecutive trading
days or any time after the third anniversary of the private placement.
Preferred shareholders shall have preferences on liquidation over
common shareholders.
The holder of each unit will receive 50,000 warrants at an exercise
price of $5.00 per share or lower if the Board of Directors deems
appropriate, six months after the issuance of the preferred stock,
unless the holder converted the preferred shares prior to the six
months. The warrants expire three years after issuance. In addition,
warrants are callable if the Company's common stock closes at $7.50 per
share for ten consecutive trading days after registration of the
preferred stock. As of December 31, 1996, the Company has outstanding
350,000 of the above warrants.
In 1996, the Company declared dividends of Common Stock valued at
$61,000.
F-18
<PAGE> 40
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)
Common Stock
In 1996, the Company sold 1,422,500 units of common stock for a price
of $2.10 per unit in two private placement offerings for a total
consideration of $2,987,250 before offering costs. Each unit consists
of two shares of the Company's common stock. In addition, the holder of
each unit received one Series A Common Stock Purchase Warrant ("Series
A Warrants") to purchase one share of the Company's common stock at a
price of $1.05 per share and one Series B Common Stock Purchase Warrant
("Series B Warrants") to purchase one share of the Company's common
stock at $1.50 per share. At December 31, 1996, the Company has
outstanding 1,660,500 Series A Warrants and 1,660,500 Series B
Warrants.
In 1996, the Company issued 108,750 shares of common stock in exchange
for services rendered.
Stock Option Plans
The Company has adopted three stock option plans, the 1995 Incentive
Stock Option Plan, the 1995 Non-Qualified Stock Option Plan, and the
1995 Non-Qualified Directors' Stock Option Plan. The shares issued
pursuant to the plans are restricted shares, until or unless registered
by the Company.
Under the Incentive Stock Option Plan, options may be granted by the
Compensation Committee to its officers, key employees, and other
employees according to responsibility and length of service. Options
may not be granted to employees owning more than 10% of the total
combined voting power of the stock of the corporation. Options granted
under the plan shall be granted within 10 years of the date of the
adoption of the plan, and must be exercised within 10 years of the
grant. The aggregate number of shares that may be issued pursuant to
the plan is 500,000 over the life of the plan, and the aggregate fair
market value of the stock for exercise for the first time during any
calendar year is $100,000 per individual. The exercise price of the
options is determined by the Compensation Committee, but in any case
the exercise price may not be less than 100% of the fair market value
on the date of grant. Options vest pro rata over a four-year period.
The Nonqualified Stock Plan provides for incentives to management,
executive personnel of the Company and others. The plan limits the
number of shares to 1,000,000, and the aggregate value of underlying
shares granted in any year for any single employee may not exceed
$100,000 in value. The option price is fixed by the bid price of the
Company's shares as quoted on NASDAQ or the Bulletin Board at the close
of business on the date of the grant. Options must be exercised within
10 years of the date of grant thereof and shall vest at such time or
times as the Board of Directors shall fix on the date of grant.
The Director's plan is a Nonqualified Plan and provides for 300,000
shares in total, 50,000 shares to be granted to each director on
assuming office. The underlying share price is determined by the bid
price on NASDAQ or the Bulletin Board on the date of the grant. The
options vest over a five-year period. Options must be exercised within
ten years of the date of grant.
F-19
<PAGE> 41
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)
Stock Option Plans (Continued)
The Company has adopted only the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." It applies Accounting
Principles Bulletin ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations in accounting for its
plans and does not recognize compensation expense for its stock-based
compensation plans other than for restricted stock and options issued
to outside third parties. If the Company had elected to recognize
compensation expense based upon the fair value at the grant date for
awards under these plans consistent with the methodology prescribed by
SFAS 123, the Company's net loss and loss per share would be reduced to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1995
---- ----
<S> <C> <C> <C>
Net loss
As reported $(4,030,168) $(2,347,693)
Pro forma $(4,206,309) $(2,991,993)
Loss per common share
As reported $ (0.59) $ (0.50)
Pro forma $ (0.62) $ (0.63)
</TABLE>
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense
related to grants made before 1995. The fair value of these options was
estimated at the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions for the years
ended December 31, 1996 and 1995: dividend yields of 0%; expected
volatility of 65.0%; risk-free interest rates of 7.0%; and expected
life of 2.95 and 2.24 years, respectively. The weighted-average fair
value of options granted during the years ended December 31, 1996 and
1995 was $0.47 and $0.78, respectively, and the weighted-average
exercise price was $1.54 and $1.55, respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
Compensation expense recognized as a result of the issuance of stock
options was $120,000 and $0 for the years ended December 31, 1996 and
1995, respectively.
F-20
<PAGE> 42
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)
Stock Option Plans (Continued)
<TABLE>
<CAPTION>
Incentive Granted
Stock Price
Option Plan Per Share
<S> <C> <C>
Shares under option ----------- ------------
Activity during 1995
Granted 374,800 $ 1.50-2.875
Exercised - -
Canceled -
-----------
Outstanding, December 31, 1995 374,800 $ 1.50-2.875
Granted 66,500 $ 1.50-2.875
Exercised - -
Canceled (421,300) $ 1.50-2.875
-----------
OUTSTANDING, DECEMBER 31, 1996 20,000 $ 1.75
===========
EXERCISABLE AT DECEMBER 31, 1996 3,333
===========
</TABLE>
The weighted-average remaining contractual life of options outstanding
issued under the Incentive Stock Option Plan is 9.7 years at December
31, 1996.
<TABLE>
<CAPTION>
Granted Director's Granted
Nonqualified Price Nonqualified Price
Option Plan Per Share Option Plan Per Share
----------- ------------ ------------ -------------
<S> <C> <C> <C> <C>
Shares under option
Activity during 1995
Granted 140,000 $ 1.70-2.50 300,000 $ 1.50-2.875
Exercised - - - -
Canceled - -
--------- -----------
Outstanding,
December 31,
1995 140,000 $ 1.70-2.50 300,000 $ 1.50-2.875
Granted 500,000 $ 1.05-3.00 - -
Exercised - - - -
Canceled - - (35,000) $1.50
--------- -----------
OUTSTANDING,
DECEMBER 31,
1996 640,000 $ 1.05-3.00 265,000 $ 1.50-2.875
========= ============
EXERCISABLE AT
DECEMBER 31,
1996 640,000 135,000
========= ============
</TABLE>
F-21
<PAGE> 43
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 10 - SHAREHOLDERS' EQUITY (CONTINUED)
Stock Option Plans (Continued)
The weighted-average remaining contractual life of options outstanding
issued under the Nonqualified Option Plan and the Director's
Nonqualified Option Plan is 8.37 and 8.53 years, respectively, at
December 31, 1996.
In addition to the options mentioned above the Company issued the
following stock options and warrants:
1. issued nonqualified options, in conjunction with the HDL and
Company merger, to purchase 550,000 shares of common stock at an
exercise price of $1.00 per share. The options are exercisable at
any time prior to March 13, 1998. The $1.00 exercise price was
established at the time the Company agreed to be acquired by HDL in
August 1994.
2. issued 35,000 warrants to purchase shares of the Company's common
stock for $3.00 per share in May 1996. The warrants were issued to
a finder for the placement of the Company's preferred stock. The
warrants expire in May 1999.
3. issued 500,000 options to purchase the Company's common stock for
$2.25 per share to consultants in December 1996. The options expire
in December 1997.
4. issued 2,500,000 options to purchase the Company's common stock for
$1.65 per share to Mull Acres in September 1996. The options were
issued in connection with the agreement to form Ultra Bikers, LLC
(see Note 4). The options must be exercised between August 1997 and
September 1998.
Prior to April 1995, when options were granted to key employees and
directors at an option price of $1.50 per share, there was no active
trading of the shares. To set the option value, the Company looked to
the valuation of the most recent large transaction, i.e., shares issued
at a price of $1.50 per share in connection with the HDL acquisition of
the Company in March 1995. Subsequent to that period, the Company has
used the bid price for the shares.
NOTE 11 - RELATED PARTY TRANSACTIONS
During 1996 and 1995, the Company incurred $133,689 and $219,045,
respectively, in legal fees and/or consulting fees from a law firm of
which Rowland W. Day, II, member of the Board of Directors and
Co-Chairman of the Company, is a partner.
In August 1994, Rowland W. Day, II loaned $300,000 to HDL. HDL used the
proceeds from the loan from Mr. Day, along with the proceeds of other
loans from non-affiliates in the aggregate additional amount of
$200,000, to make a $500,000 collateralized loan to the Company upon
the signing of the Acquisition Agreement. The loan was evidenced by the
Company's non-interest-bearing convertible promissory note which was
converted into shares of the Company's common stock upon consummation
of the acquisition on March 13, 1995 at the conversion price of $1.00
per share. The Company also agreed to issue warrants to such
non-affiliates to purchase 200,000 shares of the Company's common stock
at a price of $1.50 per share. The warrants were converted to 200,000
shares of common stock on September 8, 1995.
In February 1995, Rowland W. Day, II loaned $50,000 to the Company, the
proceeds of which were used to purchase four used Harley-Davidson
motorcycles. The Company repaid the loan and interest thereon in the
amount of $2,000 to Mr. Day in March 1995.
The Company agreed to grant to Rowland W. Day, II and/or his assigns,
upon consummation of the Bikers Dream Acquisition, an irrevocable
three-year option to purchase, at a price of $1.00 per share, 550,000
shares of common stock (see Note 10). Mr. Day has assigned his right to
receive options to purchase 170,000 of such shares to other persons.
F-22
<PAGE> 44
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 11 - RELATED PARTY TRANSACTIONS (CONTINUED)
The Company has granted options to Company officers, in connection with
employment agreements, to purchase 100,000 shares and 350,000 shares of
common stock at a per share exercise price of $1.50 and $2.50,
respectively. The options vest over a five-year period commencing in
March 1995 and September 1995, respectively. The options expire 10
years following the date of the option grant.
In April 1995, the Company granted options to each of its then current
directors to purchase, at an exercise price of $1.50 per share, 50,000
shares of common stock, which options vest in increments over a
five-year period.
In April 1995, Dennis Campbell, President, Chief Executive Officer, and
a director of the Company at that time, loaned $75,000 to the Company,
the proceeds of which were used for working capital. (Mr. Campbell
subsequently resigned his positions with the Company.) The Company
agreed to repay the loan and interest thereon of $5,000 within 60 days
after the date of the loan. This loan was subsequently paid in full
with interest.
On April 6, 1995, the Company entered into a consulting agreement with
Meyer Duffy & Associates, Inc. ("Meyer Duffy") for management
consulting, financial advisory and investment banking services to be
rendered to the Company for six months in consideration of a monthly
fee of 2,500 shares of the Company's common stock, plus travel
expenses, if incurred. This agreement was effective through September
1995, and the 15,000 shares were issued in December 1995 at $2 per
share. Donald Duffy, a member of the Board of Directors and Co-Chairman
of the Company, is a principal of Meyer Duffy.
The Company has granted nonqualified options to Meyer Duffy to purchase
30,000 shares of common stock at $2.50 per share. The options vested at
the time of grant for services rendered, and are exercisable within two
years following the date of grant in April 1995.
On August 31, 1995, Dennis Campbell loaned the Company $24,000 on a
demand note at an interest rate of 16% per annum. This note was reduced
by a principal payment of $1,500 during 1995, leaving a balance of
$22,500 as of December 31, 1995. The remaining balance was paid as of
December 31, 1996.
On December 31, 1995, Dennis Campbell loaned the Company $14,547 on
demand at 10% interest, which note was outstanding at December 31,
1995, and subsequently paid in full in January 1996.
On December 31, 1995, the Company issued its demand note payable in
lieu of compensation to Dennis Campbell in the sum of $100,000, bearing
interest at 10%, in consideration of a bonus deferral. This note was
reduced by principal payments of $16,000 during 1996, leaving a balance
of $84,000 as of December 31, 1996.
On October 1, 1995, the Company entered into a consulting agreement
with Meyer Duffy, which was amended on November 1, 1995, whereby Meyer
Duffy was retained to provide consulting, financial advisory, and
investment banking services for a ten-month term commencing October 1,
1995. The agreement provides for the payment of $5,000 per month to
Meyer Duffy.
F-23
<PAGE> 45
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 11 - RELATED PARTY TRANSACTIONS (CONTINUED)
Under the terms of the agreement, Meyer Duffy is to use its best
efforts to obtain a commitment from an investment banking firm to raise
up to $20 million in capital for the Company. The agreement provides
that upon the successful closing of an offering through an investment
banker introduced by Meyer Duffy, the Company will issue an option to
Meyer Duffy to purchase 10,000 shares of the Company's common stock for
each $1 million of capital received by the Company in such an offering,
up to a maximum of 100,000 shares for $20 million in capital received,
and that the option is granted in pro rata increments, exercisable at a
price of $1.70 per share at any time within two years after the date of
completion of a successful financing pursuant thereto. In addition,
Meyer Duffy is to be compensated by means of an option to purchase
50,000 shares of the Company's common stock at a price of $1.70 per
share within two years of a grant in consideration of arranging for
bridge financing to the Company in the amount of $1.1 million in
convertible debt, and a fee of 5% of all proceeds received from the
bridge financing in excess of $100,000.
On October 17, 1995, William R. Gresher, Senior Vice President, Chief
Financial Officer and a director of the Company at that time, loaned
$50,000 to the Company, pursuant to a note bearing interest at 11% per
annum, on demand, and on October 24, 1995, Mr. Gresher loaned an
additional $10,000 to the Company on the same terms. (Mr. Gresher
subsequently resigned his positions with the Company and was given a
$70,000 severance package of which $28,000 is payable at December 31,
1996 [see Note 7].) The loan was subsequently repaid including interest
of $10,000.
On November 3, 1995, M.D. Strategic L.P., a partnership of which Donald
Duffy is a principal, loaned $100,003 to the Company for 90 days at 8%
interest per annum, receiving notes which are convertible into shares
of common stock of the Company at $1.70 per share on certain conditions
related to proposed asset-based financing of the Company. On December
3,1995, M.D. Strategic made an additional loan of $49,997 to the
Company, and on December 5, 1995, a similar loan was consummated in the
sum of $50,000, for convertible notes bearing the same terms and due 90
days from the funding thereof. These notes were converted on March
14,1996 into 117,647 shares of common stock of the Company.
During 1996 and 1995, the Company incurred $52,201 and $28,557 in legal
fees to the law offices of Robert E. King, Jr. of which Richard E.
King, Jr., Secretary and a director of the Company, is the principal.
(Mr. King subsequently resigned his positions with the Company.)
In April 1996, the Company obtained a 90-day, unsecured loan in the
amount of $299,880 from M.D. Strategic L.P., a partnership of which
Donald Duffy is a principal. The loan bears interest at 14% per annum
and was extended until September 10, 1996 when it was converted into
142,800 Units (each Unit consists of two shares of common stock, one
Series A warrant to purchase one share of common stock for $1.05 per
share and one Series B warrant to purchase one share of common stock
for $1.50 per share).
In 1996, the Company obtained a 90-day, unsecured loan in the amount of
$199,920 from M.D. Strategic L.P., a partnership of which Donald Duffy
is a principal. The loan bears interest at 14% per annum and was
extended until September 10, 1996 when an investor bought the principal
balance and then converted the loan into 95,200 Units (each Unit
consists of two shares of common stock, one Series A warrant to
purchase one share of common stock for $1.05 per share and one Series B
warrant to purchase one share of common stock for $1.50 per share).
In September 1996, the Company converted accrued legal and consulting
expenses of $53,177 due to Meyer Duffy into 38,462 shares of common
stock.
F-24
<PAGE> 46
BIKERS DREAM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 11 - RELATED PARTY TRANSACTIONS (CONTINUED)
In September 1996, the Company converted accrued legal and consulting
expenses of $82,290 due to Day, Campbell & McGill into 59,557 shares of
common stock.
In September 1996, the Company issued 50,000, 50,000, and 10,000 shares
of common stock to Day, Campbell & McGill, Meyer Duffy, and Richard
King, Jr., respectively, for services rendered.
In September 1996, the Company granted 200,000 stock options to both
Rowland W. Day II and Donald J. Duffy at an exercise price of $1.05,
vesting immediately, with piggyback registration rights and exercisable
over two years with a cashless exercise feature.
NOTE 12 - SUBSEQUENT EVENTS (UNAUDITED)
In 1997, the Company issued 12% promissory notes in the amount of
$2,210,000 payable on January 30, 1998. In addition, each holder of the
above notes received Series C five-year warrants to purchase the
Company's common stock at an exercise price of $1.625 per share. The
number of warrants outstanding was 1,105,000.
On January 1, 1997, the Company issued 97,200 options to employees to
purchase common stock with an exercise price of $1.65 per share.
F-25
<PAGE> 47
EXHIBIT INDEX
2.1 Agreement and Plan of Reorganization dated August 4, 1994 among HDL
Communications (now known as Bikers Dream, Inc.), Bikers Dream, Inc. and
the stockholders of Bikers Dream, Inc., as amended by agreements dated
November 11, 1994, February 3, 1995 and February 20, 1995.*
3.1 Articles of Incorporation, as amended, of Bikers Dream, Inc. (formerly
known as HDL Communications).*
3.1.1 Certificate of Amendment, Articles of Incorporation, June, 1996.
3.2 Certificate of Ownership of HDL Communications (now known as Bikers
Dream, Inc.)*
3.3 Bylaws, as amended, of Bikers Dream, Inc.*
10.1 Lease dated August 5, 1993 between the Company and McFadden Plaza.*
10.2 Lease dated November 1, 1994 between the Company and Valley View
Partnership.*
10.3 Lease dated February 8, 1995 between the Lily Company and Jim Kinnicutt
and Susan Rasmussen dba Bikers Dream of Sacramento.
10.4 Lease dated October 30, 1996 between the Company and Inland Industries.
<PAGE> 48
10.5 Employment Agreement dated as of February 8, 1995 between the Company
and Jeffrey L. Simons.*
10.6 Consulting Agreement dated April 6, 1995 between the Company and Meyer,
Duffy & Associates.*
10.7 Consulting Agreement effective as of October 1, 1995 between the
Company and Meyer, Duffy & Associates.*
10.8 Amendment to Consulting Agreement and Stock Option Agreement dated
November 1, 1995, between the Company and Meyer Duffy & Associates.
10.9 Asset Purchase Agreement dated September 22, 1995 between the Company,
Joe Melia and Charles Melia.*
10.10 Lease Agreement dated June 9, 1994 between Charles Melia and Joe Melia
and Westlake Professional Center Partnership and Assignment thereof to
the Company dated September 22, 1995.*
10.11 The 1995 Incentive Stock Option Plan of the Company, as amended.**+
10.12 The 1995 Non-Qualified Stock Option Plan of the Company, as amended.**+
10.13 The 1995 Non-Qualified Directors' Stock Option Plan of the Company, as
amended.**+
10.14 Employment Agreement dated September 9, 1996 between the Company and
Donald J. Duffy.+
10.15 Employment Agreement dated September 9, 1996 between the Company and
Rowland W. Day II.+
10.16 Promissory Note and Security Agreement dated February 14, 1996 between
the Company and Green Tree Financial Servicing Corporation.
10.17 Promissory Note and Security Agreement dated December 28, 1995 between
the Company and Green Tree Financial Servicing Corporation.
10.18 Form of Dealer Agreement between the Company and its dealers, and a
schedule identifying all dealer agreements to which the Company is a
party as of December 31, 1996 which are substantially identical to the
attached Dealer Agreement, except with respect to the parties thereto,
dates of execution and territory.
10.19 Stock Repurchase Agreement dated as of September 9, 1996 among the
Company, Dennis Campbell and DC Enterprises, Inc.
10.20 Stock Option Agreement dated September 13, 1996 between the Company and
Mull Acres Investments, Inc.
10.21 Asset Purchase Agreement dated January 30, 1997 among the Company,
Ultra Acquisition Corp. and Mull Acres Investments, Inc.***
10.22 Senior Subordinated Promissory Note of the Company dated January 30,
1997 payable to Mull Acres Investments, Inc. in the amount of
$2,700,000.
<PAGE> 49
10.23 Security Agreement dated January 30, 1997 between the Company and Mull
Acres Investments, Inc.
10.24 Lease dated February 12, 1996 between Mull Acres Investments, Inc. and
Lincoln Riverside Business Center.
10.25 Lease dated October 11, 1996 between Mull Acres Investments, Inc. and
Lincoln Riverside Business Center.
21.1 List of subsidiaries.**
27 Financial Data Schedule
---------------
* Incorporated by reference to the Company's Registration Statement on
Form SB-2 (Registration No. 33-92294) filed with the Commission on
May 31, 1995 and Amendment No. 1 thereto filed with the Commission on
October 16, 1995.
** Incorporated by reference to the Company's Form 10-KSB dated April 12,
1996 filed with the Commission on April 15, 1996.
*** Incorporated by reference to the Company's Form 8-K dated January 30, 1997
filed with the Commission on February 14, 1997.
+ A compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 10.3
1. Parties. This Lease, dated, for reference purposes only, February 8,
1995, is made by and between The Lily Company, a Calif. Limited Partnership
(herein called "Lessor") and Jim Kinnicutt and Susan Rasmussen dba Biker Dream
of Sacramento (herein called "Lessee")
2. Premises, Parking and Common Areas.
2.1 Premises. Lessor hereby leases to Lessee and Lessee leases
from Lessor for the term, at the rental, and upon all of the
conditions set forth herein, real property situated in the
County of Sacramento, State of California commonly known as
1715 I Street and described as 10,480 +/- Square Feet of
Office/Warehouse space,
herein referred to as the "Premises," as may be outlined on an Exhibit attached
hereto, including rights to the Common Areas as hereinafter specified but not
including any rights to the roof of the Premises or to any Building in the
Industrial Center. The Premises are a portion of a building, herein referred
to as the "Building." The Premises, the Building, the Common Areas, the land
upon which the same are located, along with all other buildings and
improvements thereon, are herein collectively referred to as the "Industrial
Center."
2.2 Vehicle Parking. Lessee shall be entitled to N/A vehicle
parking spaces, unreserved and unassigned, on those portions of the Common
Areas designated by Lessor for parking. Lessee shall not use more parking
spaces than said number. Said parking spaces shall be used only for parking by
vehicles no larger than full size passenger automobiles or pick-up trucks,
herein called "Permitted Size Vehicles." Vehicles other than Permitted Size
Vehicles are herein referred to as "Oversized Vehicles." Lessor reserves the
right to assign parking.
2.2.1 Lessee shall not permit or allow any vehicles that belong to
or are controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
2.2.2 If Lessee permits or allows any of the prohibited activities
described in paragraph 2.2 of this Lease, then Lessor shall have the right,
without notice, in addition to such other rights and remedies that it may have,
to remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
2.3 Common Areas--Definition. The term "Common Areas" is defined
as all areas and facilities outside the Premises and within the exterior
boundary line of the Industrial Center that are provided and designated by the
Lessor from time to time for the general non-exclusive use of Lessor, Lessee
and of other lessees of the Industrial Center and their respective employees,
suppliers, shippers, customers and invitees, including parking areas, loading
and unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways and landscaped areas.
2.4 Common Areas--Lessee's Rights. Lessor hereby grants to Lessee,
for the benefit of Lessee and its employees, suppliers, shippers, customers and
invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor's designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove the property and charge the cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.
2.5 Common Areas--Rules and Regulations. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable rules and regulations with respect
thereto. Lessee agrees to abide by and conform to all such rules and
regulations, and to cause its employees, suppliers, shippers, customers, and
invitees to so abide and conform. Lessor shall not be responsible to Lessee
for the non-compliance with said rules and regulations by other lessees of the
Industrial Center.
2.6 Common Areas--Changes. Lessor shall have the right, in
Lessor's sole discretion, from time to time:
(a) To make changes to the Common Areas, including,
without limitation, changes in the location, size, shape and number of
driveways, entrances, parking spaces, parking areas, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas and walkways;
(b) To close temporarily any of the Common Areas for maintenance purposes, so
long as reasonable access to the Premises remains available; (c) To designate
other land outside the boundaries of the Industrial Center to be a part of the
Common Areas; (d) To add additional buildings and improvements to the Common
Areas; (e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; (f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Industrial Center as Lessor may,
in the exercise of sound business judgment, deem to be appropriate.
3. Term.
3.1 Term. The term of this Lease shall be for Five (5) Years and
Three (3) Months commencing on April 1, 1995 or sooner and ending on June 30,
2000 unless sooner terminated pursuant to any provision hereof.
3.2 Delay in Possession. Notwithstanding said commencement date,
if for any reason Lessor cannot deliver possession of the Premises to Lessee on
said 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 be
obligated to pay rent or perform any other obligation of Lessee under the terms
of this Lease, except as may be otherwise provided in this Lease, until
possession of the Premises is tendered to Lessee; provided, however, that if
Lessor shall not have delivered possession of the Premises within sixty (60)
days from said commencement date, Lessee may, at Lessee's option, by notice in
writing to Lessor within ten (10) days thereafter, cancel this Lease, in which
event the parties shall be discharged from all obligations hereunder; provided
further, however, that if such written notice of Lessee is not received by
Lessor within said ten (10) day period, Lessee's right to cancel this Lease
hereunder shall terminate and be of no further force or effect.
3.3 Early Possession. If Lessee occupies the Premises prior to
said commencement date, such occupancy shall be subject to all provisions of
this Lease, such occupancy shall not advance the termination date, and Lessee
shall pay rent for such period at the initial monthly rates set forth below.
4. Rent.
4.1 Base Rent. Lessee shall pay to Lessor, as Base Rent for the
Premises, without any offset or deduction, except as may be otherwise expressly
provided in this Lease, on the First day of each month of the term hereof,
monthly payments in advance of $3039.20 (See Rent Schedule - Addendum) Rent
shall be adjusted downward commensurate to the use of the Tenant Improvement
Allowance.
Lessee shall pay Lessor upon execution hereof $3039.20 as Base Rent for June
1995 Rent for any period during the term hereof which is for less than one
month shall be a pro rata portion of the Base Rent. Rent shall be payable in
lawful money of the United States to Lessor at the address stated herein or to
such other persons or at such other places as Lessor may designate in writing.
4.2 Operating Expenses. Lessee shall pay to Lessor during the
term hereof, in addition to the Base Rent, Lessee's Share, as hereinafter
defined, of all Operating Expenses, as hereinafter defined, during each
calendar year of the term of this Lease, in accordance with the following
provisions:
(a) "Lessee's Share" is defined, for purposes of this Lease as
54.35 percent. Building Gross 19,280 SF.
(b) "Operating Expenses" is defined, for purposes of this Lease,
as all costs incurred by Lessor, in any, for:
(i) The operation, repair and maintenance, in neat,
clean, good order and condition, of the following:
(aa) The Common Areas, including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways, landscaped areas, striping, bumpers, irrigation systems,
Common Area lighting facilities and fences and gates.
Lessee to contract for own trash disposal service.
(cc) Tenant directories.
(dd) FIre detection systems including sprinkler
system maintenance and repair.
Initials: __________
MULTI-TENANT-GROSS
<PAGE> 2
(ee) Security services.
(ff) Any other service to be provided by Lessor that
is elsewhere in this Lease stated to be an "Operating Expense."
(ii) The cost of water, gas and electricity to service the
Common Areas.
(c) The inclusion of the improvements, facilities and services set
forth in paragraph 4.2(b)(i) of the definition of Operating Expenses shall not
be deemed to impose an obligation upon Lessor to either have said improvements
or facilities or to provide those services unless the Industrial Center already
has the same, Lessor already provides the services, or Lessor has agreed
elsewhere in this Lease to provide the same or some of them.
(d) Lessee's Share of Operating Expenses shall be payable by
Lessee within ten (10) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of annual
Operating Expenses and the same shall be payable monthly or quarterly, as
Lessor shall designate, during each twelve-month period of the Lease term, on
the same day as the Base Rent is due hereunder. In the event that Lessee pays
Lessor's estimate of Lessee's Share of Operating Expenses as aforesaid, Lessor
shall deliver to Lessee within sixty (60) days after the expiration of each
calendar year a reasonably detailed statement showing Lessee's Share of the
actual Operating Expenses incurred during the preceding year. If Lessee's
payments under this paragraph 4.2(d) during said preceding year exceed Lessee's
Share as indicated on said statement, Lessee shall be entitled to credit the
amount of such overpayment against Lessee's Share of Operating Expenses next
falling due. If Lessee's payments under this paragraph during said preceding
year were less than Lessee's Share as indicated on said statement, Lessee
shall pay to Lessor the amount of the deficiency within ten (10) days after
delivery by Lessor to Lessee of said statement.
5. Security Deposit. Lessee shall deposit with Lessor upon execution
hereof $3552.10 as security for Lessee's faithful performance of Lessee's
obligations hereunder. If Lessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Lease,
Lessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any other
sum to which Lessor may become obligated by reason of Lessee's default, or to
compensate Lessor for any loss or damage which Lessor may suffer thereby. If
Lessor so uses or applies all or any portion of said deposit, Lessee shall
within ten (10) days after written demand therefor deposit cash with Lessor in
an amount sufficient to restore said deposit to the full amount then required
of Lessee. If the monthly rent shall, from time to time, increase during the
term of this Lease, Lessee shall, at the time of such increase, deposit with
Lessor additional money as a security deposit so that the total amount of the
security deposit held by Lessor shall at all times bear the same proportion to
the then current Base Rent as the initial security deposit bears to the initial
Base Rent set forth in paragraph 4. Lessor shall not be required to keep said
security deposit separate from its general accounts. If Lessee performs all of
Lessee's obligations hereunder, said deposit, or so much thereof as has not
theretofore been applied by Lessor, shall be returned, without payment of
interest or other increment for its use, to Lessee (or, at Lessor's option, to
the last assignee, if any, of Lessee's interest hereunder) at the expiration of
the term hereof, and after Lessee has vacated the Premises. No trust
relationship is created herein between Lessor and Lessee with respect to said
Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for Sales and
repairs of motorcycles and related accessories, or any other use which is
reasonably comparable and for no other purpose.
6.2 Compliance with Law.
(b) Except as provided in paragraph 6.2(a) Lessee shall,
at Lessee's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements of any fire insurance underwriters or rating bureaus, now in
effect or which may hereafter come into effect, whether or not they reflect a
change in policy from that now existing, during the term or any part of the
term hereof, relating in any manner to the Premises and the occupation and use
by Lessee of the Premises and of the Common Areas. Lessee shall not use nor
permit the use of the Premises or the Common Areas in any manner that will tend
to create waste or a nuisance or shall tend to disturb other occupants of the
Industrial Center.
6.3 Condition of Premises. (See Addendum-Item 53)
(b) Except as otherwise provided in this Lease, Lessee
hereby accepts the Premises in their condition existing as of the Lease
commencement date or the date that Lessee takes possession of the Premises,
whichever is earlier, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of the
Premises, and any covenants or restrictions of record, and accepts this Lease
subject thereto and to all matters disclosed thereby and by any exhibits
attached hereto. Lessee acknowledges that neither Lessor nor Lessor's agent
has made any representation or warranty as to the present or future suitability
of the Premises for the conduct of Lessee's business.
7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessor's Obligations. Subject to the provisions of paragraphs
4.2 (Operating Expenses), 6 (Use), 7.2 (Lessee's Obligations) and 9 (Damage or
Destruction) and except for damage caused by any negligent or intentional act
or omission of Lessee, Lessee's employees, suppliers, shippers, customers, or
invitees, in which event Lessee shall repair the damage. Lessor, at Lessor's
expense, subject to reimbursement pursuant to paragraph 4.2, shall keep in good
condition and repair the foundations, exterior walls, structural condition of
interior bearing walls, and roof of the Premises, as well as the parking lots,
walkways, driveways, landscaping, fences, signs and utility installations of
the Common Areas and all parts thereof, as well as providing the services for
which there is an Operating Expense pursuant to paragraph 4.2. Lessor shall
not, however, be obligated to paint the exterior or interior surface of
exterior walls, nor shall Lessor be required to maintain, repair or replace
windows, doors or plate glass of the Premises. Lessor shall have no obligation
to make repairs under this paragraph 7.1 until a reasonable time after receipt
of written notice from Lessee of the need for such repairs. Lessee expressly
waives the benefits of any statute now or hereafter in effect which would
otherwise afford Lessee the right to make repairs at Lessor's expense or to
terminate this Lease because of Lessor's failure to keep the Premises in good
order, condition and repair. Lessor shall not be liable for damages or loss of
any kind or nature by reason of Lessor's failure to furnish any Common Area
Services when such failure is caused by accident, breakage, repairs, strikes,
lockout, or other labor disturbances or disputes of any character, or by any
other cause beyond the reasonable control of Lessor.
7.2 Lessee's Obligations.
(a) Subject to the provisions of paragraphs 6 (Use), 7.1
(Lessor's Obligations), and 9 (Damage or Destruction), Lessee, at Lessee's
expense, shall keep in good order, condition and repair the Premises and every
part thereof (whether or not the damaged portion of the Premises or the means of
repairing the same are reasonably or readily accessible to Lessee) including,
without limiting the generality of the foregoing, all plumbing, heating,
ventilating and air conditioning systems (Lessee shall procure and maintain, at
Lessee's expense, a ventilating and air conditioning system maintenance
contract), electrical and lighting facilities and equipment within the Premises,
fixtures, interior walls and interior surfaces of exterior walls, ceilings,
windows, doors, plate glass, and skylights located within the Premises. Lessor
reserves the right to procure and maintain the ventilating and air conditioning
system maintenance contract and if Lessor so elects, Lessee shall reimburse
Lessor, upon demand, for the cost thereof.
(b) If Lessee fails to perform Lessee's obligations under
this paragraph 7.2 or under any other paragraph of this Lease, Lessor may enter
upon the Premises after ten (10) days' prior written notice to Lessee (except
in the case of emergency, in which no notice shall be required), perform such
obligations on Lessee's behalf and put the Premises in good order, condition
and repair, and the cost thereof together with interest thereon at the maximum
rate then allowable by law shall be due and payable as additional rent to
Lessor together with Lessee's next Base Rent installment.
(c) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same condition
as received, ordinary wear and tear excepted, clean and free of debris. Any
damage or deterioration of the Premises shall not be deemed ordinary wear and
tear if the same could have been prevented by good maintenance practices.
Lessee shall repair any damage to the Premises occasioned by the installation or
removal of Lessee's trade fixtures, alterations, furnishings and equipment.
Notwithstanding anything to the contrary otherwise stated in this Lease, Lessee
shall leave the air lines, power panels, electrical distribution systems,
lighting fixtures, space heaters, air conditioning, plumbing and fencing on the
Premises in good operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written
consent make any alterations, improvements, additions, or Utility Installations
in, on or about the Premises, or the Industrial Center, except for nonstructural
alterations to the Premises not exceeding $2,500 in cumulative costs, during the
term of this Lease. In any event, whether or not in excess of $2,500 in
cumulative cost, Lessee shall make no change or alteration to the exterior of
the Premises nor the exterior of the Building nor the Industrial Center without
Lessor's prior written consent. As used in this paragraph 7.3 the term "Utility
Installation" shall mean carpeting, window coverings, air lines, power panels,
electrical distribution systems, lighting fixtures, space heaters, air
conditioning, plumbing, and fencing. Lessor may require that Lessee remove any
or all of said alterations, improvements, additions or Utility Installations at
the
Initials: ________
MULTI-TENANT-GROSS
-2-
<PAGE> 3
expiration of the term, and restore the Premises and the Industrial Center to
their prior condition. Lessor may require Lessee to provide Lessor, at
Lessee's sole cost and expense, a lien and completion bond in an amount equal
to one and one-half times the estimated cost of such improvements, to insure
Lessor against any liability for mechanic's and materialmen's liens and to
insure completion of the work. Should Lessee make any alterations,
improvements, additions or Utility Installations without the prior approval of
Lessor, Lessor may, at any time during the term of this Lease, require that
Lessee remove any or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Industrial Center that Lessee
shall desire to make and which requires the consent of the Lessor shall be
presented to Lessor in written form, with proposed detailed plans. If Lessor
shall give its consent, the consent shall be deemed conditioned upon Lessee
acquiring a permit to do so from appropriate governmental agencies, the
furnishing of a copy thereof to Lessor prior to the commencement of the work
and the compliance by Lessee of all conditions of said permit in a prompt and
expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or
for use in the Premises, which claims are or may be secured by any mechanic's
or materialmen's lien against the Premises, or the Industrial Center, or any
interest therein. Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in the Premises, and Lessor shall have
the right to post notices of non-responsibility in or on the Premises or the
Building 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 itself and Lessor against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises or the Industrial Center, upon the
condition that if Lessor shall require, Lessee shall furnish to Lessor a surety
bond satisfactory to Lessor in an amount equal to such contested lien claim or
demand indemnifying Lessor against liability for the same and holding the
Premises and the Industrial Center 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 Lessor's
best interest to do so.
(d) All alterations, improvements, additions and Utility
Installations (whether or not such Utility Installations constitute trade
fixtures of Lessee), which may be made on the Premises, shall be the property
of Lessor and shall remain upon and be surrendered with the Premises at the
expiration of the Lease term, unless Lessor requires their removal pursuant to
paragraph 7.3(a). Notwithstanding the provisions of this paragraph 7.3(d),
Lessee's machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to the Premises,
and other than Utility Installations, shall remain the property of Lessee and
may be removed by Lessee subject to the provisions of paragraph 7.2.
7.4 Utility Additions. Lessor reserves the right to install new
or additional utility facilities throughout the Building and the Common Areas
for the benefit of Lessor or Lessee, or any other lessee of the Industrial
Center, including, but not by way of limitation, such utilities as plumbing,
electrical systems, security systems, communication systems, and fire
protection and detection systems, so long as such installations do not
unreasonably interfere with Lessee's use of the Premises.
8. Insurance; Indemnity.
8.1 Liability Insurance--Lessee. Lessee shall, at Lessee's
expense, obtain and keep in force during the term of this Lease a policy of
Combined Single Limit Bodily Injury and Property Damage insurance insuring
Lessee and Lessor against any liability arising out of the use, occupancy or
maintenance of the Premises and the Industrial Center. Such insurance shall be
in an amount not less than $500,000.00 per occurrence. The policy shall insure
performance by Lessee of the indemnity provisions of this paragraph 8. The
limits of said insurance shall not, however, limit the liability of Lessee
hereunder.
8.2 Liability Insurance--Lessor. Lessor shall obtain and keep in
force during the term of this Lease a policy of Combined Single Limit Bodily
Injury and Property Damage Insurance, insuring Lessor, but not Lessee, against
any liability arising out of the ownership, use, occupancy or maintenance of
the Industrial Center in an amount not less than $500,000.00 per occurrence.
8.3 Property Insurance. Lessor shall obtain and keep in force
during the term of this Lease a policy or policies of insurance covering loss
or damage to the Industrial Center improvements, but not Lessee's personal
property, fixtures, equipment or tenant improvements, in an amount not to
exceed the full replacement value thereof, as the same may exist from time to
time, providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief, flood
(in the event same is required by a lender having a lien on the Premises),
special extended perils ("all risk," as such term is used in the insurance
industry), plate glass insurance and such other insurance as Lessor deems
advisable. In addition, Lessor shall obtain and keep in force, during the term
of this Lease, a policy of rental value insurance covering a period of one
year, with loss payable to Lessor, which insurance shall also cover all
Operating Expenses for said period.
8.4 Payment of Premium Increase.
(a) After the term of this Lease has commenced, Lessee
shall not be responsible for paying Lessee's Share of any increase in the
property insurance premium for the Industrial Center specified by Lessor's
insurance carrier as being caused by the use, acts or omissions of any other
lessee of the Industrial Center, or by the nature of such other lessee's
occupancy which create an extraordinary or unusual risk.
(b) Lessee, however, shall pay the entirety of any
increase in the property insurance premium for the Industrial Center over what
it was immediately prior to the commencement of the term of this Lease if the
Increase is specified by Lessor's insurance carrier as being caused by the
nature of Lessee's occupancy or any act or omission of Lessee.
(c) Lessee shall pay to Lessor, during the term hereof,
in addition to the rent, Lessee's Share (as defined in paragraph 4.2[a]) of the
amount of any increase in premiums for the insurance required under paragraphs
8.2 and 8.3 over and above such premiums paid during the Base Period, as
hereinafter defined, whether such premium increase shall be the result of the
nature of Lessee's occupancy, any act or omission of Lessee, requirements of
the holder of a mortgage or deed of trust covering the Premises, increased
valuation of the Premises, or general rate increases. In the event that the
Premises have been occupied previously, the words "Base Period" shall mean the
last twelve months of the prior occupancy. In the event that the Premises have
never been occupied previously, the premiums during the "Base Period" shall be
deemed to be the lowest premiums reasonably obtainable for said insurance
assuming the most nominal use of the Premises. Provided, however, in lieu of
the Base Period, the parties may insert a dollar amount at the end of this
sentence which figure shall be considered as the insurance premium for the Base
Period: $447.87. In no event, however, shall Lessee be responsible for any
portion of the premium cost attributable to liability insurance coverage in
excess of $500,000.00 procured under paragraph 8.2.
(d) Lessee shall pay any such premium increases to Lessor
within 30 days after receipt by Lessee of a copy of the premium statement or
other satisfactory evidence of the amount due. If the insurance policies
maintained hereunder cover other improvements in addition to the Premises,
Lessor shall also deliver to Lessee a statement of the amount of such increase
attributable to the Premises and showing in reasonable detail, the manner in
which such amount was computed. If the term of this Lease shall not expire
concurrently with the expiration of the period covered by such insurance,
Lessee's liability for premium increases shall be prorated on an annual basis.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies holding a "General Policyholders Rating" of at lease B plus, or such
other rating as may be required by a lender having a lien on the Promises, 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 carried by Lessor. Lessee shall deliver to Lessor copies of liability
insurance policies required under paragraph 8.1 or certificates evidencing the
existence and amounts of such insurance within seven (7) days after the
commencement date of this Lease. No such policy shall be cancellable or
subject to reduction of coverage or other modification except after thirty (30)
days prior written notice to Lessor. Lessee shall, at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with renewals or
"binders" thereof.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release
and relieve the other, and waive their entire right of recovery against the
other for loss or damage arising out of or incident to the perils insured
against which perils occur in, on or about the Premises, whether due to the
negligence of Lessor or Lessee or their agents, employees, contractors and/or
invitees. Lessee and Lessor shall, upon obtaining the policies of insurance
required hereunder, give notice to the insurance carrier or carriers that the
foregoing mutual waiver of subrogation is contained in this Lease.
8.7 Indemnity. Lessee shall indemnify and hold harmless Lessor
from and against any and all claims arising from Lessee's use of the Industrial
Center, or from the conduct of Lessee's business or from any activity, work or
things done, permitted or suffered by Lessee in or about the Premises or
elsewhere and shall further indemnify and hold harmless Lessor from and against
any and all claims arising from any breach or default in the performance of any
obligation on Lessee's part to be performed under the terms of this Lease, or
arising from any act or omission of Lessee, or any of Lessee's agents,
contractors, or employees, and from and against all costs, attorney's fees,
expenses and liabilities incurred in the defense of any such claim or any action
or proceeding brought thereon, and in case any action or proceeding be brought
against Lessor by reason of any such claim. Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessee, as a
material part of the consideration to Lessor, hereby assumes all risk of damage
to property of Lessee or injury to persons, in, upon or about the Industrial
Center arising from any cause and Lessee hereby waives all claims in respect
thereof against Lessor.
8.8 Exemption of Lessor from Liability. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of
income therefrom or for damage to the goods, wares, merchandise or other
property of Lessee, Lessee's employees, invitees, customers, or any other
person in or about the Premises or the Industrial Center, nor shall Lessor be
liable for injury to the person of Lessee, Lessee's employees, agents or
contractors, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether said
damage or injury results from conditions arising upon the Premises or upon
other portions of the Industrial Center, 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 inaccessible to Lessee. Lessor shall not be liable for
any damages arising from any act or neglect of any other lessee, occupant
or user of the Industrial Center, nor from the failure of Lessor to enforce the
provisions of any other lease of the Industrial Center.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean if the Premises are
damaged or destroyed to the extent that the cost of repair is less than fifty
percent of the then replacement cost of the Premises.
Initials: ________
MULTI-TENANT-GROSS
-3-
<PAGE> 4
(b) "Premises Total Destruction" shall mean if the
Premises are damaged or destroyed to the extent that the cost of repair is
fifty percent or more of the then replacement cost of the Premises.
(c) "Premises Building Partial Damage" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the extent
that the cost to repair is less than fifty percent of the then replacement cost
of the Building.
(d) "Premises Building Total Destruction" shall mean if
the Building of which the Premises are a part is damaged or destroyed to the
extent that the cost to repair is fifty percent or more of the then replacement
cost of the Building.
(e) "Industrial Center Buildings" shall mean all of the
buildings on the Industrial Center site.
(f) "Industrial Center Buildings Total Destruction" shall
mean if the Industrial Center Buildings are damaged or destroyed to the extent
that the cost of repair is fifty percent or more of the then replacement cost
of the Industrial Center Buildings.
(g) "Insured Loss" shall mean damage or destruction which
was caused by an event required to be covered by the insurance described in
paragraph 8. The fact that an insured Loss has a deductible amount shall not
make the loss an uninsured loss.
(h) "Replacement Cost" shall mean the amount of money
necessary to be spent in order to repair or rebuild the damaged area to the
condition that existed immediately prior to the damage occurring excluding all
improvements made by lessees.
9.2 Promises Partial Damage; Premises Building Partial Damage.
(a) Insured Loss: Subject to the provisions of paragraphs
9.4 and 9.5, if at any time during the term of this Lease there is damage which
is an Insured Loss and which falls into the classification of either Premises
Partial Damage or Premises Building Partial Damage, then Lessor shall, at
Lessor's expense, repair such damage to the Premises, but not Lessee's fixtures,
equipment or tenant improvements, as soon as reasonably possible and this Lease
shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of
paragraphs 9.4 and 9.5, if at any time during the term of this Lease there is
damage which is not an insured Loss and which falls within the classification
of Promises Partial Damage or Premises Building Partial Damage, unless caused
by a negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense), which damage prevents Lessee from using the
Premises, 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 the date of the occurrence of such damage of Lessor's
intention to cancel and terminate this Lease as of the date of the occurrence
of such damage. In the event Lessor elects to give such notice of Lessor's
intention to cancel and 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 intention to repair such damage at Lessee's expense, without
reimbursement from Lessor, in which event this Lease shall continue in full
force and effect, and Lessee shall proceed to make such repairs as soon as
reasonably possible. If Lessee does not give such notice within such 10-day
period this Lease shall be cancelled and terminated as of the date of the
occurrence of such damage.
9.3 Premises Total Destruction; Premises Building Total
Destruction; Industrial Center Buildings Total Destruction.
(a) Subject to the provisions of paragraphs 9.4 and 9.5,
if at any time during the term of this Lease there is damage, whether or not it
is an Insured Loss, and which falls into the classifications of either (i)
Premises Total Destruction, or (ii) Premises Building Total Destruction, or
(iii) Industrial Center Buildings Total Destruction, then Lessor may at
Lessor's option either (i) repair such damage or destruction, but not Lessee's
fixtures, equipment or tenant improvements, as soon as reasonably possible at
Lessor's expense, and this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after the dale of
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease, in which case this Lease shall be cancelled and terminated as of the
date of the occurrence of such damage.
9.4 Damage Near End of Term.
(a) Subject to paragraph 9.4(b), if at any time during
the last six months of the term of this Lease there is substantial damage,
whether or not an Insured Loss, which falls within the classification of
Premises Partial Damage, Lessor may at Lessor's option cancel and terminate
this Lease as of the date of occurrence of such damage by giving written notice
to Lessee of Lessor's election to do so within 30 days after the date of
occurrence of such damage.
(b) Notwithstanding paragraph 9.4(a), in the event that
Lessee has an option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than twenty (20) days after
the occurrence of an Insured Loss falling within the classification of Premises
Partial Damage, during the last six months of the term of this Lease. If
Lessee duly exercises such option during said twenty (20) day period, Lessor
shall, at Lessor's expense, repair such damage, but not Lessee's fixtures,
equipment or tenant improvements, as soon as reasonably possible and this Lease
shall continue in full force and effect. If Lessee fails to exercise such
option during said twenty (20) day period, then Lessor may at Lessor's option
terminate and cancel this Lease as of the expiration of said twenty (20) day
period by giving written notice to Lessee of Lessor's election to do so within
ten (10) days after the expiration of said twenty (20) day period,
notwithstanding any term or provision in the grant of option to the contrary.
9.5 Abatement of Rent; Lessee's Remedies.
(a) In the event Lessor repairs or restores the Premises
pursuant to the provisions of this paragraph 9, the rent payable hereunder for
the period during which such damage, repair or restoration continues shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired. Except for abatement of rent, if any, Lessee shall have no claim
against Lessor for any damage suffered by reason of any such damage,
destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provisions of this paragraph 9 and shall not commence such
repair or restoration within ninety (90) days after such obligation shall
accrue, Lessee may at Lessee's option cancel and terminate this Lease by
giving Lessor written notice of Lessee's election to do so at any time prior to
the commencement of such repair or restoration. In such event this Lease shall
terminate as of the date of such notice.
9.6 Termination-Advance Payments. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made concerning
advance rent and any advance payments made by Lessee to Lessor. Lessor shall,
in addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statute
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Tax Increase. Lessor shall pay the real property
tax, as defined in paragraph 10.3, applicable to the Industrial Center,
provided, however, that Lessee shall pay, in addition to rent, Lessee's Share
(as defined in paragraph 4.21(a)) of the amount, if any, by which real property
taxes applicable to the Premises increase over the fiscal real estate tax year
1994, 1995. Such payment shall be made by Lessee within thirty (30) days
after receipt of Lessor's written statement setting forth the amount of such
increase and the computation thereof. If the term of this Lease shall not
expire concurrently with the expiration of the tax fiscal year, Lessee's
liability for increased taxes for the last partial lease year shall be prorated
on an annual basis.
10.2 Additional Improvements. Lessee shall not be responsible for
paying Lessee's Share of any increase in real property tax specified in the tax
assessor's records and work sheets as being caused by additional improvements
placed upon the Industrial Center by other lessees or by Lessor for the
exclusive enjoyment of such other lessees. Lessee shall, however, pay to
Lessor at the time that Operating Expenses are payable under paragraph 4.2(c)
the entirety of any increase in real property tax if assessed solely by reason
of additional improvements placed upon the Premises by Lessee or at Lessee's
request.
10.3 Definition of "Real Property Tax." As used herein, the term
"real property tax" 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 on the Industrial Center or any
portion thereof by any authority having the direct or indirect power to tax,
including any city, county, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement district
thereof, as against any legal or equitable interest of Lessor in the Industrial
Center or in any portion thereof, as against Lessor's right to rent or other
income therefrom, and as against Lessor's business of leasing the Industrial
Center. The term "real property tax" shall also include any tax, fee, levy,
assessment or charge (i) in substitution of, partially or totally, any tax,
fee, levy, assessment or charge hereinabove included within the definition of
"real property tax," or (ii) the nature of which was hereinbefore included
within the definition of "real property tax," or (iii) which is imposed for a
service or right not charged prior to June 1, 1978, or, if previously charged,
has been increased since June 1, 1978, or (iv) which is imposed as a result of
a transfer, either partial or total, of Lessor's interest in the Industrial
Center or which is added to a tax or charge hereinbefore included within the
definition of real property tax by reason of such transfer, or (v) which is
imposed by reason of this transaction, any modifications or changes hereto, or
any transfers hereof.
10.4 Joint Assessment. If the Industrial Center is not separately
assessed, Lessee's Share of the real properly tax 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.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes
assessed against and levied upon trade fixtures, furnishings, equipment and
all other personal property of Lessee contained in the Premises or elsewhere.
When possible, Lessee shall cause said trade fixtures, furnishings, equipment
and all other personal property to be assessed and billed separately from the
real property of Lessor.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.
11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to the
Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a
reasonable proportion to be determined by Lessor of all charges jointly metered
with other premises in the Building.
Initials: ________
-4-
<PAGE> 5
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the Premises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease without the need for notice to Lessee under paragraph 13.1.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph
12.1 hereof, Lessee may assign or sublet the Premises, or any portion thereof,
without Lessor's consent, to any corporation which controls, is controlled by
or is under common control with Lessee, or to any corporation resulting from
the merger or consolidation with Lessee, or to any person or entity which
acquires all the assets of Lessee as a going concern of the business that is
being conducted on the Premises, all of which are referred to as "Lessee
Affiliate," provided that before such assignment shall be effective said
assignee shall assume, in full, the obligations of Lessee under this Lease.
Any such assignment shall not, in any way, affect or limit the liability of
Lessee under the terms of this Lease even if after such assignment or
subletting the terms of this Lease are materially changed or altered without
the consent of Lessee, the consent of whom shall not be necessary.
12.3 Terms and Conditions of Assignment. Regardless of Lessor's
consent, no assignment shall release Lessee of Lessee's obligations hereunder
or alter the primary liability of Lessee to pay the Base Rent and Lessee's
Share of Operating Expenses, and to perform all other obligations to be
performed by Lessee hereunder. Lessor may accept rent from any person other
than Lessee pending approval or disapproval of such assignment. Neither a
delay in the approval or disapproval of such assignment nor the acceptance of
rent shall constitute a waiver or estoppel of Lessor's right to exercise its
remedies for the breach of any of the terms or conditions of this paragraph 12
or this Lease. Consent to one assignment shall not be deemed consent to any
subsequent assignment. In the event of default by any assignee of Lessee or
any successor of Lessee, in the performance of any of the terms hereof, Lessor
may proceed directly against Lessee without the necessity of exhausting
remedies against said assignee. Lessor may consent to subsequent assignments
of this Lease or amendments or modifications to this Lease with assignees of
Lessee, without notifying Lessee, or any successor of Lessee, and without
obtaining its or their consent thereto and such action shall not relieve Lessee
of liability under this Lease.
12.4 Terms and Conditions Applicable to Subletting. Regardless of
Lessor's consent, the following terms and conditions shall apply to any
subletting by Lessee of all or any part of the Premises and shall be included
in subleases:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease
heretofore or hereafter made by Lessee, and Lessor may collect such rent and
income and apply same toward Lessee's obligations under this Lease; provided,
however, that until a default shall occur in the performance of Lessee's
obligations under this Lease, Lessee may receive, collect and enjoy the rents
accruing under such sublease. Lessor shall not, by reason of this or any other
assignment of such sublease to Lessor nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such sublessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a default
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents due and to become due under the sublease. Lessee agrees that
such sublessee shall have the right to rely upon any such statement and request
from Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee or Lessor for any such
rents so paid by said sublessee to Lessor.
(b) No sublease entered into by Lessee shall be effective
unless and until it has been approved in writing by Lessor. In entering into
any sublease, Lessee shall use only such form of sublease as is satisfactory
to Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublessee shall, by
reason of entering into a sublease under this Lease, be deemed, for the benefit
of Lessor, to have assumed and agreed to conform and comply with each and every
obligation herein to be performed by Lessee other than such obligations as are
contrary to or inconsistent with provisions contained in a sublease to which
Lessor has expressly consented in writing.
(c) If Lessee's obligations under this Lease have been
guaranteed by third parties, then a sublease, and Lessor's consent thereto,
shall not be effective unless said guarantors give their written consent to
such sublease and the terms thereof.
(d) The consent by Lessor to any subletting shall not
release Lessee from its obligations or alter the primary liability of Lessee to
pay the rent and perform and comply with all of the obligations of Lessee to be
performed under this Lease.
(e) The consent by Lessor to any subletting shall not
constitute a consent to any subsequent subletting by Lessee or to any
assignment or subletting by the sublessee. However, Lessor may consent to
subsequent sublettings and assignments of the sublease or any amendments or
modifications thereto without notifying Lessee or anyone else liable on the
Lease or sublease and without obtaining their consent and such action shall not
relieve such persons from liability.
(f) In the event of any default under this Lease, Lessor
may proceed directly against Lessee, any guarantors or any one else responsible
for the performance of this Lease, including the sublessee, without first
exhausting Lessor's remedies against any other person or entity responsible
therefor to Lessor, or any security held by Lessor or Lessee.
(g) In the event Lessee shall default in the performance
of its obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of Lessee under such sublease from
the time of the exercise of said option to the termination of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to Lessee or for any other prior defaults of
Lessee under such sublease.
(h) Each and every consent required of Lessee under a
sublease shall also require the consent of Lessor.
(i) No sublessee shall further assign or sublet all or
any part of the Premises without Lessor's prior written consent.
(j) Lessor's written consent to any subletting of the
Premises by Lessee shall not constitute an acknowledgement that no default then
exists under this Lease of the obligations to be performed by Lessee nor shall
such consent be deemed a waiver of any then existing default, except as may be
otherwise stated by Lessor at the time.
(k) With respect to any subletting to which Lessor has
consented, Lessor agrees to deliver a copy of any notice of default by Lessee
to the sublessee. Such sublessee shall have the right to cure a default of
Lessee within ten (10) days after service of said notice of default upon such
sublessee, and the sublessee shall have a right of reimbursement and offset
from and against Lessee for any such defaults cured by the sublessee.
12.5 Attorney's Fees. In the event Lessee shall assign or sublet
the Premises or request the consent of Lessor to any assignment or subletting
or if Lessee shall request the consent of Lessor for any act Lessee proposes to
do then Lessee shall pay Lessor's reasonable attorney's fees incurred in
connection therewith, such attorney's fees not to exceed $350.00 for each such
request.
13. Default; Remedies.
13.1 Default. The occurrence of any one or more of the following
events shall constitute a material default of this Lease by Lessee:
(a) The vacating or abandonment of the Premises by
Lessee.
(b) The failure by Lessee to make any payment of rent or
any other payment required to be made by Lessee hereunder, as and when due,
where such failure shall continue for a period of three (3) days after written
notice thereof from Lessor to Lessee. In the event that Lessor serves Lessee
with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer
statutes such Notice to Pay Rent or Quit shall also constitute the notice
required by this subparagraph.
(c) Except as otherwise provided in this Lease, the
failure by Lessee to observe or perform any of the covenants, conditions or
provisions of this Lease to be observed or performed by Lessee, other than
described in paragraph (b) above, where such failure shall continue for a
period of thirty (30) days after written notice thereof from Lessor to Lessee;
provided, however, that if the nature of Lessee's noncompliance is such that
more than thirty (30) days are reasonably required for its cure, then Lessee
shall not be deemed to be in default if Lessee commenced such cure within said
thirty (30) day period and thereafter diligently prosecutes such cure to
completion. To the extent permitted by law, such thirty (30) day notice shall
constitute the sole and exclusive notice required to be given to Lessee under
applicable Unlawful Detainer statutes.
(d) (i) The making by Lessee of any general arrangement
or general assignment for the benefit of creditors; (ii) Lessee becomes 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. In the event that any provision of this paragraph 13.1 (d)
is contrary to any applicable law, such provision shall be of no force or
effect.
(e) The discovery by Lessor that any financial statement
given to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee's obligation
hereunder, was materially false.
13.2 Remedies. In the event of any such material default by
Lessee, Lessor may at any time thereafter, with or without notice or demand
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such default:
(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 all damages incurred by Lessor by reason of Lessee's default 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 attorney's fees, and any real estate commission actually paid; the
worth at the time of award by the court having jurisdiction thereof of the
amount by which the unpaid rent for the balance of the term after the time of
such award exceeds the amount of such rental loss for the same period that
Lessee proves could be reasonably avoided; that portion of the leasing
commission paid by Lessor pursuant to paragraph 15 applicable to the unexpired
term of this Lease.
Initials: _______
-5-
<PAGE> 6
(b) Maintain Lessee's right to possession in which case
this Lease shall continue in effect whether or not Lessee shall have vacated or
abandoned the Premises. In such event Lessor shall be entitled to enforce all
of Lessor's rights and remedies under this Lease, Including the right to
recover the rent as It becomes due hereunder.
(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. Unpaid Installments of rent and other unpaid monetary obligations
of Lessee under the terms of this Lease shall bear interest from the date due
at the maximum rate then allowable by law.
13.3 DEFAULT BY LESSOR. Lessor shall not be in default unless
Lessor fails to perform obligations required of Lessor within a reasonable
time, but in no event later than thirty (30) days after written notice by
Lessee to Lessor and to the holder of any first mortgage or deed of trust
covering the Premises whose name and address shall have theretofore been
furnished to Lessee in writing, specifying wherein Lessor has failed to perform
such obligation; provided, however, that if the nature of Lessor's obligation
is such that more than thirty (30) days are required for performance then
Lessor shall not be in default if Lessor commences performance within such
thirty (30) day period and thereafter diligently prosecutes the same to
completion.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of Base Rent, Lessee's Share of Operating Expenses or other
sums due hereunder will cause Lessor to Incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Lessor by the terms of any mortgage or
trust deed covering the Industrial Center. Accordingly, If any Installment of
Base Rent, Operating Expenses, or any other sum due from Lessee shall not be
received by Lessor or Lessor's designee within ten (10) days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall
pay to Lessor a late charge equal to 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 with respect to such overdue amount, nor prevent Lessor from exercising
any of the other rights and remedies granted hereunder. In the event that a
late charge is payable hereunder, whether or not collected, for three (3)
consecutive Installments of any of the aforesaid monetary obligations of
Lessee, then Base Rent shall automatically become due and payable quarterly in
advance, rather than monthly, notwithstanding paragraph 4.1 or any other
provision of this Lease to the contrary.
14. CONDEMNATION. If the Premises or any portion thereof or the
Industrial Center 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 of the floor area of the Premises, or more
than twenty-five percent of that portion of the Common Areas designated as
parking for the Industrial Center is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing only 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 rent shall be reduced in the
proportion that the floor area of the Premises taken bears to the total floor
area of the Premises. No reduction of rent shall occur if the only area taken
is that which does not have the Premises located thereon. Any award for the
taking of all or any part of the Premises under the power of eminent domain or
any payment made under threat of the exercise of such power shall be the
property of Lessor, whether such award shall be made as compensation for
diminution 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
award for loss of or damage to Lessee's trade fixtures and removable personal
property. In the event that this Lease is not terminated by reason of such
condemnation, Lessor shall to the extent of severance damages received by
Lessor in connection with such condemnation, repair any damage to the Premises
caused by such condemnation except to the extent that Lessee has been
reimbursed therefor by the condemning authority. Lessee shall pay any amount
in excess of such severance damages required to complete such repair.
15. BROKER'S FEE. Fees shall be adjusted with any rent adjustments.
(a) Upon execution of this Lease by both parties, Lessor shall pay
to Ernest L. Siller $4,938.39 (50%) and Paul Wyne, $4,938.38 (50%) Licensed real
estate broker(s), a fee as set forth in a separate agreement between Lessor and
said broker(s), or in the event there Is no separate agreement between Lessor
and said broker(s), the sum of $9,876.77, for brokerage services rendered by
said broker(s) to Lessor in this transaction.
(b) Lessor further agrees that it Lessee exercises any Option, as
defined in paragraph 39.1 of this Lease, which is granted to Lessee under this
Lease, or any subsequently granted option which is substantially similar to an
Option granted to Lessee under this Lease, or 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 if Lessee remains in possession of the Premises after
the expiration of the term of this Lease after having failed to exercise an
Option, or if said broker(s) 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, then as to any of said transactions,
Lessor shall pay said broker(s) a fee in accordance with the schedule of said
broker(s) in effect at the time of execution of this Lease.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but
also on behalf of any person, corporation, association, or other entity having
an ownership interest in said real property or any part thereof, when such fee
is due hereunder. Any transferee of Lessor's interests 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. Said broker shall be a
third party beneficiary of the provisions of this paragraph 15.
16. ESTOPPEL CERTIFICATE.
(a) Each party (as "responding party") shall at any time upon not
less than ten (10) days' prior written notice from the other party ("requesting
party") execute, acknowledge and deliver to the requesting party a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to the responding party's knowledge, any
uncured defaults on the part of the requesting party, or specifying such
defaults if any are claimed. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises or of the
business of the requesting party.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it shall
be conclusive upon such party that (i) this Lease is in full force and effect,
without modification except as may be represented by the requesting party, (ii)
there are no uncured defaults in the requesting party's performance, and (iii)
if Lessor is the requesting party, not more than one month's rent has been paid
in advance.
(c) If Lessor desires to finance, refinance, or sell the
Industrial Center, or any part thereof, Lessee hereby agrees to deliver to any
lender or purchaser designated by Lessor such financial statements of Lessee as
may be reasonably required by such lender or purchaser. Such statements shall
include the past three (3) years' financial statements of Lessee. All such
financial statements shall be received by Lessor and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only
the owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Industrial Center, and except as expressly
provided in paragraph 15, in the event of any transfer of such title or
interest. Lessor herein named (and in case of any subsequent transfers then
the grantor) shall be relieved from and after the dale of such transfer of all
liability as respects Lessor's obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall,
subject as aforesaid, be binding on Lessor's successors and assigns, only
during their respective periods of ownership.
18. SEVERABILITY. The invalidity of any provision of this Lease as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein
provided, any amount due to Lessor not paid when due shall bear Interest at the
maximum rate then allowable by law from the date due. Payment of such interest
shall not excuse or cure any default by Lessee under this Lease; provided,
however, that interest shall not be payable on late charges incurred by Lessee
nor on any amounts upon which late charges are paid by Lessee.
20. TIME OF ESSENCE. Time is of the essence with respect to the
obligations to be performed under this Lease.
21. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under
the terms of this Lease, including but not limited to Lessee's Share of
Operating Expenses and insurance and tax expenses payable shall be deemed to be
rent.
22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains
all agreements of the parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only, signed
by the parties in interest at the time of the modification. Except as
otherwise stated in this Lease, Lessee hereby acknowledges that neither the
real estate broker listed in paragraph 15 hereof nor any cooperating broker on
this transaction nor the Lessor or any employee or agents of any of said
persons has made any oral or written warranties or representations to Lessee
relative to the condition or use by Lessee of the Premises or the Industrial
Center and Lessee acknowledges that Lessee assumes all responsibility regarding
the Occupational Safety Health Act, the legal use and adaptability of the
Premises and the compliance thereof with all applicable laws and regulations in
effect during the term of this Lease except as otherwise specifically stated in
this Lease.
23. NOTICES. Any notice required or permitted to be given
hereunder shall be in writing and may be given by personal delivery or
by certified mail, and if given personally or by mail, shall be deemed
sufficiently given if addressed to Lessee or to Lessor at the address noted
below the signature of the respective parties, as the case may be. Either
party may by notice to the other specify a different address for notice
purposes except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for notice purposes. A copy of all
notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by notice to Lessee.
Initials: ________
-6-
<PAGE> 7
24. WAIVERS. No waiver by Lessor or any provision hereof shall be deemed
a waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent
so accepted, regardless of Lessor's knowledge of such preceding breach at the
time of acceptance of such rent.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession
of the Premises or any part thereof after the expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all the provisions
of this Lease pertaining to the obligations of Lessee, but all Options, if any,
granted under the terms of this Lease shall be deemed terminated and be of no
further effect during said month to month tenancy.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions of
paragraph 17, this Lease shall bind the parties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the State
where the Industrial Center is located and any litigation concerning this Lease
between the parties hereto shall be initiated in the county in which the
Industrial Center is located.
30. SUBORDINATION.
(a) This Lease, and any Option granted hereby, at Lessor's option,
shall be subordinate to any ground lease, mortgage, deed of trust, or any other
hypothecation or security now or hereafter placed upon the Industrial Center
and to any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not be disturbed if Lessee is not in default and so long as
Lessee shall pay the rent and observe and perform all of the provisions of this
Lease, unless this Lease is otherwise terminated pursuant to its terms. If any
mortgagee, trustee or ground lessor shall elect to have this Lease and any
Options granted hereby prior to the lien of its mortgage, deed of trust or
ground lease, and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such mortgage, deed of trust or ground
lease, whether this Lease or such Options are dated prior or subsequent to the
date of said mortgage, deed of trust or ground lease or the date of recording
thereof.
(b) Lessee agrees to execute any documents required to effectuate
an attornment, a subordination or to make this Lease or any Option granted
herein prior to the lien of any mortgage, deed of trust or ground lease, as the
case may be. Lessee's failure to execute such documents within ten (10) days
after written demand shall constitute a material default by Lessee hereunder
without further notice to Lessee or, at Lessor's option, Lessor shall execute
such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does
hereby make, constitute and irrevocably appoint Lessor as Lessee's
attorney-in-fact and in Lessee's name, place and stead, to execute such
documents in accordance with this paragraph 30(b).
31. ATTORNEY'S FEES. If either party or the broker(s) named herein bring
an action to enforce the terms hereof or declare rights hereunder, the
prevailing party in any such action, on trial or appeal, shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
court. The provisions of this paragraph shall inure to the benefit of the
broker named herein who seeks to enforce a right hereunder.
32. LESSOR'S ACCESS. Lessor and Lessor's agents shall have the right to
enter the Premises at reasonable times for the purpose of inspecting the same,
showing the same to prospective purchasers, lenders, or lessees, and making
such alterations, repairs, improvements or additions to the Premises or to the
Industrial Center as Lessor may deem necessary or desirable. Lessor may at any
time place on or about the Premises or the Building any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs. All activities
of Lessor pursuant to this paragraph shall be without abatement of rent, nor
shall Lessor have any liability to Lessee for the same.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common Areas
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent.
34. SIGNS. Lessee shall not place any sign upon the Premises or the
Industrial Center without Lessor's prior written consent. Under no
circumstances shall Lessee place a sign on any roof of the Industrial Center.
35. MERGER. The voluntary or other surrender of this Lease by Lessee, or
a mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
36. CONSENTS. Except for paragraph 33 hereof, wherever in this Lease the
consent of one party is required to an act of the other party such consent
shall not be unreasonably withheld or delayed.
37. GUARANTOR. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Industrial Center.
39. OPTIONS.
39.1 DEFINITION. As used in this paragraph the word "Option" has
the following meaning: (1) the right or option 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; (2) the option or 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 space within the Industrial Center or other
property of Lessor or the right of first offer to lease other space within the
Industrial Center or other property of Lessor; (3) the right or option to
purchase the Premises or the Industrial Center, or the right of first refusal
to purchase the Premises or the Industrial Center, or the right of first offer
to purchase the Premises or the Industrial Center, or the right or option 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. Each Option granted to Lessee in this Lease
Is personal to the original Lessee and may be exercised only by the original
Lessee while occupying the Premises who does so without the intent of
thereafter assigning this Lease or subletting the Premises or any portion
thereof, and may not be exercised or be assigned, voluntarily or involuntarily,
by or to any person or entity other than Lessee, provided, however, that an
Option may be exercised by or assigned to any Lessee Affiliate as defined in
paragraph 12.2 of this Lease. The Options, if any, herein granted to Lessee
are not assignable separate and apart from this Lease, nor may any Option be
separated from this Lease in any manner, either by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
options to extend or renew this Lease a later option cannot be exercised unless
the prior option to extend or renew this Lease has been so exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary, (i) during
the time commencing from the date Lessor gives to Lessee a notice of default
pursuant to paragraph 13.1(b) or 13.1(c) and continuing until the noncompliance
alleged in said notice of default is cured, or (ii) during the period of time
commencing on the date after a monetary obligation to Lessor is due from Lessee
and unpaid (without any necessity for notice thereof to Lessee) and continuing
until the obligation is paid, or (iii) at any time after an event of default
described in paragraphs 13.1(a), 13.1(d), or 13.1(e) (without any necessity of
Lessor to give notice of such default to Lessee), or (iv) in the event that
Lessor has given to Lessee three or more notices of default under paragraph
13.1(b) or paragraph 13.1(c), whether or not the defaults are cured, during the
12 month period of time immediately prior to the time that Lessee attempts to
exercise the subject Option.
(b) The period of time within which an Option may be
exercised shall not be extended or enlarged by reason of Lessee's Inability to
exercise an Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessee fails to commence to cure a default specified in paragraph 13.1(c) within
thirty (30) days after the date that Lessor gives notice to Lessee of such
default and/or Lessee fails thereafter to diligently prosecute said cure to
completion, or (iii) Lessee commits a default described in paragraphs 13.1(a),
13.1(d) or 13.1(e) (without any necessity of Lessor to give notice of such
default to Lessee), or (iv) Lessor gives to Lessee three or more notices of
default under paragraph 13.1(b), or paragraph 13.1(c), whether or not the
defaults are cured.
40. SECURITY MEASURES. Lessee hereby acknowledges that Lessor shall have
no obligation whatsoever to provide guard service or other security measures
for the benefit of the Premises or the Industrial Center. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole
option, from providing security protection for the Industrial Center or any
part thereof, in which event the cost thereof shall be included within the
definition of Operating Expenses, as set forth in paragraph 4.2(b).
Initials: ________
-7-
<PAGE> 8
42. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to 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.
43. AUTHORITY. If Lessee 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 behalf of said entity. If Lessee is a corporation, trust
or partnership, Lessee shall, within thirty (30) days after execution of this
Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
44. CONFLICT. Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions, if any, shall be controlled by
the typewritten or handwritten provisions.
45. 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. This
Lesse shall become binding upon Lessor and Lessee only when fully executed by
Lessor and Lessee.
46. ADDENDUM. Attached hereto is an addendum or addenda containing
paragraphs 47 through 54 which constitute a part of this Lease.
Exhibit "A" Building Floor Plan
Exhibit "B" Walk Through Inspection Sheet
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY
FOR APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY
THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE
OR THE TRANSACTION RELATING THERETO. THE PARTIES SHALL RELY
SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE
LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
LESSOR LESSEE
THE LILY COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
---------------------------------- -----------------------------
By /s/ SAMUEL B. FONG By /s/ JIM KINNICUTT 2/21/95
---------------------------------- -----------------------------
Jim Kinnicutt
By Samuel B. Fong, General Partner By /s/ SUSAN RASMUSSEN 2/21/95
---------------------------------- -----------------------------
Susan Rasmussen
Executed on Executed on
------------------------ ----------------------
(Corporate Seal) (Corporate Seal)
ADDRESS FOR NOTICES AND RENT ADDRESS
The Lily Company
- ------------------------------------ ----------------------------------
501 S. Street, Ste 1
- ------------------------------------ ----------------------------------
Sacramento, CA 95814 (916) 448-8903
- ------------------------------------ ----------------------------------
NOTE: 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 St., M-1, Los Angeles, CA 90071 (213)
687-8777
<PAGE> 9
ADDENDUM TO STANDARD INDUSTRIAL LEASE-MULTI-TENANT
DATED FEBRUARY 8, 1995
BY AND BETWEEN
THE LILY COMPANY, A CALIFORNIA LIMITED PARTNERSHIP (LESSOR)
AND
JIM KINNICUTT AND SUSAN RASMUSSEN
DBA BIKERS OF SACRAMENTO (LESSEE)
47. RENT SCHEDULE
MONTHS RENT/MONTHLY
1-3 Free
4-15 $3039.20
16-27 $3160.77
28-39 $3287.20
40-51 $3418.69
52-63 $3555.43
Estimated CAM/Outside Expense: Months 1-12 $300.95 Per Month
48. OPTION TO EXTEND
Provided that Lessee is not in default hereunder, either at the time
of exercise or at the time the extended term commences, Lessee shall
have the option to extend the initial five (5) year term of this Lease
for one (1) additional successive period of five (5) years on the same
terms, covenants and conditions provided herein, except that upon each
such renewal the monthly rent due hereunder shall be in the amount
satisfactory to Lessor and Lessee, but not less than or decreased
below the annual rental reserved for the original term. Unless a
fully executed Lease or extension thereof including the rental rate is
settled and finalized within thirty (30) days from the date written
notice of intention to exercise is received by the Lessor; the Lease
option shall terminate and become void and the Lease and all rights
thereunder on the part of the Lessee shall expire at the end of the
initial term of the Lease. Lessee shall exercise this option by
giving Lessor written notice at least one hundred eighty (180) days,
but not more than two hundred seventy (270) days prior to the
expiration of the initial term of this Lease. In addition, the
provisions of Article 39 shall apply to this option.
49. TENANT IMPROVEMENTS
Lessor to provide a tenant improvement allowance of $18,000.00. Lessor
and Lessee shall mutually agree upon a licensed/bonded contractor to
be hired by Lessor to complete the designated tenant improvements.
Lessor shall maintain control and disburse tenant improvement funds to
the contractor based on generally accepted practices in the
construction industry. Lessee shall pay in advance all cost in excess
of the $18,000.00 allowance. Conversely, Lessor shall reduce the rent
commensurate to the allowance used below $18,000.00. Rent shall be
adjusted and attached as an addendum to the lease.
*such items as
The tenant improvement allowance shall be used for* the following
improvements in order of priority as listed below**:
- Repair or replacement of both the four (4) and five (5) ton
heating and air conditioning units on the roof and vented to
the front area of the facility. Lessor to reasonably cooperate
in participating with the current SMUD energy rebate program.*
- Repair/upgrade to include but not limited to replacing
restroom plumbing fixtures, flooring, lighting and hot water
heater.
- Provide a commercial grade carpet throughout the front portion
of the facility.
**to bring the property up to Bikers Dream of Sacramento
Standards:
*Upon repair or replacement, then Lessor shall be responsible
for repair or replacement or the AC compressors.
<PAGE> 10
- Paint both the interior and exterior (white)
- Replace any damaged windows or doors.
- Repair, replace and provide minor distribution of electrical
panels, outlets, switches and light fixtures.
- Provide telephone outlets.
50. HAZARDOUS MATERIALS
Lessee shall (i) not cause or permit any Hazardous Material to be
brought upon, kept or used in or about the Premises by Lessee, its
agents, employees, contractors or invitee, without the prior written
consent of Lessor (which consent Lessor shall not unreasonably
withhold as long as Lessee demonstrates to Lessor's reasonable
satisfaction that such Hazardous Material is necessary or useful to
Lessee's business and will be used, kept and stored in a manner that
complies with all laws relating to any such Hazardous Material so
brought upon or used or kept in or about the Premises). If Lessee
breaches the obligations stated in the preceding sentence, or if the
presence of Hazardous Material on the Premises caused or permitted by
Lessee results in contamination of the Premises by Hazardous Material
otherwise occurs for which Lessee is legally liable to Lessor for
damage resulting therefrom, then Lessee shall indemnify, defend and
hold Lessor harmless from any and all claims, judgments, damages,
penalties, fines, costs, liabilities or losses (including, without
limitation, diminution in value of the Premises, damages for the loss
or restriction on use of rentable or usable space or to any amenity of
the Premises, damages arising from any adverse impact on marketing of
the Premises, and sums paid in settlement of claims, attorneys' fees,
consultant fees and expert fees) which arise during or after the lease
term as a result of such contamination. The indemnification set forth
herein shall run to the benefit of any bank or other lender to which
Lessor or Lessor's successors and assign may grant a security interest
in the Property and or the Premises. This indemnification of Lessor
by Lessee includes, without limitation, costs incurred in connection
with any investigation of site conditions or any cleanup, remedial,
removal or restoration work required by any federal, state or local
governmental agency or political subdivision because of Hazardous
Material present in the soil or ground water on or under the Premises.
Without limiting the foregoing, if the presence of any Hazardous
Material on the Premises caused or permitted by Lessee results in any
contamination of the Premises, Lessee shall promptly take all actions
at its sole expense as are necessary to return the Premises to the
condition existing prior to the introduction of any such Hazardous
Material to the Premises; provided that Lessor's approval of such
actions shall first be obtained, which approval shall not be
unreasonably withheld so long as such actions would not potentially
have any material adverse long-term or short-term effect on the
Premises.
As used herein, the term "Hazardous Material" means any hazardous or
toxic substance, material or waste which is potentially injurious to
the public health safety or welfare or becomes regulated by any local
governmental authority, the State of California or the United States
Government.
51. HAZARDOUS MATERIAL CONDITIONS.
In addition to Sections 9.1, 9.2, 9.3, 9.4, 9.5, 9.6 & 9.7, if a
Hazardous Material 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 Material
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
<PAGE> 11
(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 Material 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 Material 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 Material 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 9.5(a) for a
period of not to exceed twelve months.
52. COMMON AREA EXPENSES (OPERATING EXPENSES)
Lessee shall pay a prorata share of Outside Expenses. Outside
Expenses are defined as reasonable management fees (management fees
shall be equal to four (4%) percent of the gross scheduled rent) and
the cost of labor, materials, supplies and services used or consumed
in operating, maintaining and repairing landscaping and sprinkler
systems, maintaining and repairing concrete walkways, driveways, paved
parking areas, and parking bumpers, maintaining and repairing site
lighting. Operating and outside expenses shall not increase more than
five (5%) percent of the estimated base cost. In addition, the
provisions of Section 4.2 shall apply to this provision.
53. CONDITION OF PREMISES
Lessee expressly understands and acknowledges that there may be damage,
inoperable conditions and needed repairs or replacement to all the
heating and air conditioning systems electrical wire distribution,
light fixtures/switches, electrical outlets, windows, doors,
interior/exterior walls, roll-up doors and ceiling. Lessor will not
warrant or be responsible for repairs or replacement regarding the
above referenced building conditions. Lessee, at Lessee's choice and
expense, may repair, replace or maintain the 3.5 ton heating and air
conditioning unit located in the mezzanine office area.
LESSOR: THE LILY COMPANY, A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ SAMUEL B. FONG Date: 3-1-95
------------------------------- -------
Samuel B. Fong, General Partner
LESSEE: /s/ JIM KINNICUTT Date: 2-21-95
-------------------------------- -------
Jim Kinnicutt
/s/ SUSAN RASMUSSEN Date: 2-21-98
-------------------------------- -------
Susan Rasmussen
54. This Lease shall be subject to the Funding of an SBA (7A) Business
Loan to Lessee on/or before commencement date.
<PAGE> 12
EXHIBIT "A"
SITE MAP DELOE BUILDING
I STREET
PARKING
1715 I STREET
AVAILABLE
MEZZANINE (2ND LEVEL)
1705 I STREET
LEASED
LEASED
ALLEY
17TH STREET
17' 79' 76'4" 115' 40' 4' 160' 5'
BUILDING = 19,540 S/F
LOT = 25,600 S/F
SETBACKS = N 5'
W 4'
<PAGE> 13
ERNEST L. SILLER REAL ESTATE
SALE/LEASE AMERICANS WITH DISABILITIES ACT
AND HAZARDOUS MATERIALS DISCLOSURES
The United States Congress has recently enacted the Americans With Disabilities
Act. Among other things, this act is intended to make many business
establishments equally accessible to persons with a variety of disabilities;
modifications to real property may be required. State and local laws also may
mandate changes. The real estate brokers in this transaction are not qualified
to advise you as to what, if any, changes may be required, now or in the
future. Owner and tenants should consult the attorneys and qualified design
professionals of their choice for information regarding these matters. Real
estate brokers cannot determine which attorneys or design professionals have
the appropriate expertise in this area.
Various construction material may contain items that have been or may be in the
future be determined to be hazardous (toxic) or undesirable and may need to be
specifically treated/handled or removed. For example, some transformers and
other electrical components contain PCB's, and asbestos has been used in
components such as fire proofing, heating and cooling systems, air duct
insulation, spray-on and tile acoustical materials, linoleum, floor tiles,
roofing, dry wall and plaster. Due to prior or current uses of the Property or
the area, the Property may have hazardous or undesirable metals, minerals,
chemicals, hydrocarbons, or biological or radioactive items (including electric
and magnetic fields) in soils, water, building components, above or
below-ground containers or elsewhere in areas that may or may not be accessible
or noticeable. Such items may leak or otherwise be released. Real estate
agents/brokers have no expertise in the detection or correction of hazardous or
undesirable items. Expert inspections are necessary. Current or future laws
may require clean up by past, present and/or future owner and/or operators. It
is the responsibility of the Seller/Lessor and Buyer/Tenant to retain qualified
experts to detect and correct such matters and to consult with legal counsel of
their choice to determine what provisions, if any, they may wish to include in
transaction documents regarding the Property.
To the best of Seller/Lessor's knowledge, Seller/Lessor has attached to this
Disclosure copies of all existing surveys and reports known to Seller/Lessor
regarding asbestos and other hazardous materials and undesirable substances
related to the Property. Sellers/Leanors are required under California Health
and Safety Code Section 25915 et seq. to disclose reports and surveys regarding
asbestos to certain persons, including their employees, contractors, co-owners,
purchasers and tenants. Buyers/Tenants have similar disclosure obligations.
Seller/Lessors and Buyers/Tenants have additional hazardous materials
disclosure responsibilities to each other under California Health and Safety
Code Section 25359.7 and other California laws. Consult your attorney
regarding this matter.
SELLERS/LESSORS BUYERS/TENANTS
/s/ SAMUEL B. FONG /s/ SUSAN RASMUSSEN
- ------------------- --------------------
Susan Rasmussen
- ------------------- --------------------
Date: 2-21-95 Date: 2-21-95
------------ -------------
<PAGE> 14
SECOND ADDENDUM TO LEASE
THIS ADDENDUM is made on April 1, 1995 to the Lease dated February 8, 1995,
("Lease") between THE LILY COMPANY, a California Limited Partnership, as Lessor
and JIM KINNICUTT and SUSAN RASMUSSEN, dba Bikers Dream of Sacramento, as
Lessee as follows:
1. SBA Funding. Lessor and Lessee agree to extend Item 54 of Lease to
April 28, 1995.
2. Rent/Security Deposit. Lessee shall pay to Lessor $3039.20 as base
rent for the first month of the rent commencement date. Rent for any
period less than one month shall be a pro rata portion of base rent.
Also, Lessee shall deposit with Lessor security in the amount of
$3552.10.
3. Commencement. Lease commencement shall begin upon written
notification rescinding Item 1 of this addendum, by Lessee, on or
before April 28, 1995, or the Lease becomes null and void and all
advance rents and security deposit become non refundable to Lessee.
4. In all other respects, this Lease is unmodified and remains in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this addendum to Lease as
of the date first written above.
LESSOR: THE LILY COMPANY a California Limited Partnership
By: /s/ SAMUEL B. FONG
-----------------------
Samuel B. Fong
LESSEE: /s/ JIM KINNICUTT
-------------------------
Jim Kinnicutt
/s/ SUSAN RASMUSSEN
--------------------------
Susan Rasmussen
<PAGE> 1
EXHIBIT 10.4
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - GROSS
(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, October 30, 1996 is made by and between Inland Industries, a California
Partnership ("LESSOR") AND Bikers Dream, Inc., a California 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 5097 Santa Fe Avenue, located in
the County of San Diego, State of California, and generally described as
(describe briefly the nature of the property) Approximately 6,935 square feet
of showroom and warehouse ("PREMISES"). (See Paragraph 2 for further
provisions.)
1.3 TERM. Five (5) years and Zero (0) months ("ORIGINAL TERM")
commencing on January 1, 1997 ("COMMENCEMENT DATE") and ending December 31,
2001, ("EXPIRATION DATE"). (See Paragraph 3 for further provisions.)
1.4 EARLY POSSESSION. Upon substantial completion of tenant
improvements ("EARLY POSSESSION DATE"). (See Paragraphs 3.2 and 3.3 for further
provisions.)
1.5 BASE RENT. $5,270.60 per month ("BASE RENT"), payable on the
First (1st) day of each month commencing January 1997. (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. $5,270.60 as Base Rent for the
period January 1997.
1.7 SECURITY DEPOSIT. $5,270.60 ("SECURITY DEPOSIT"). (See
Paragraph 5 for further provisions.)
1.8 PERMITTED USE. Sales of motorcycles, their accessories and
service of same. (See Paragraph 6 for further provisions.)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY".
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):
John Burnham & Company
represents
[ ] Lessor exclusively ("LESSOR'S BROKER") [X] 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 N/A ("GUARANTOR"). (See Paragraph 37 for further
provisions.)
1.12 ADDENDA. Attached hereto is an Addendum or Addenda consisting
of Paragraphs 49 through 50 and Exhibits 1, 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 free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, fire sprinkler system, lighting, air conditioning, heating,
and loading doors, if any, in the Premises, other than those constructed by
Lessee, shall be in good operating condition 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 Lessor's expense. It 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 the 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 TERM. 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 1.4, 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 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, if 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 have
enjoyed under the terms hereof, but minus any days of delay caused by the acts,
changes or omissions of Lessee.
Initials: ________
GROSS PAGE 1
<PAGE> 2
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 1.7 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 1 3.1), Lessor may use, apply or
retain all or any portion of said Security Deposit for the payment of any
amount due Lessor or to reimburse or compensate Lessor for any liability, cost,
expense, loss or damage (including attorneys' fees) which Lessor may suffer or
incur by reason thereof. If Lessor uses or applies all or any portion of said
Security Deposit, Lessee shall within ten (10) days after written request
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, of Lessee's interest herein), that portion of the Security
Deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the Security Deposit shall be considered to be
held in trust, to bear interest or other increment for its use, or to be
prepayment for any moneys to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the
purposes 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 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) 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 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 all 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 any contamination therein involved, and shall survive the
expiration or earlier termination of this Lease. No termination, cancellation
or release agreement entered into by Lessor and Lessee shall release Lessee
from its obligations under this Lease with respect to Hazardous Substances 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 of 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, compliant 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 the 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 INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's warranty
as to condition), 2.3 (Lessor's warranty as to compliance with covenants,
etc.), 7.2 (Lessor's obligations to repair), 9 (damage and destruction), and 14
(condemnation), Lessee shall, at Lessee's sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition and
repair, (whether or not such portion of the Premises requiring repair, or the
means of repairing the same, are reasonably or readily accessible to Lessee,
and whether or not the need for such repairs occurs as a result of Lessee's
use, any prior use, the elements or the age of such portion of the Premises),
including, without limiting the generality of the foregoing, all equipment or
facilities 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
fire extinguishing system, including fire alarm and/or smoke detection systems
and equipment, fire hydrants, fixtures, walls (interior and exterior),
Initials: ________
GROSS PAGE 2
<PAGE> 3
ceilings, 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, but excluding foundations,
the exterior roof and the structural aspects of 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.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain 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 condition and ventilation equipment,
(ii) boiler, fired or unfired pressure vessels, (iii) fire 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 LESSOR'S OBLIGATIONS. Upon receipt of written notice of the
need for such repairs and subject to Paragraph 13.5, Lessor shall, at Lessor's
expense, keep the foundations, exterior roof and structural aspects of the
Premises in good order, condition and repair. Lessor shall not, however, be
obligated to paint the exterior surface of the exterior walls or to maintain
the windows, doors or plate glass or the interior surface of exterior walls.
Lessor shall not, in any event, have any obligation to make any repairs until
Lessor receives written notice of the need for such repairs. 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 INSTALLATIONS; TRADE FIXTURES: ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" 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 7.4(a). Lessee
shall not make any Alterations or Utility Installations in, on, under or about
the Premises without Lessor's prior written consent. Lessee may, however, make
non-structural 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 $25,000.
(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 therefor. 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 mechanics' or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than ten (10) days' notice prior to
the commencement of any work in, on or about the Premises, and Lessor shall
have the right to post notices of non-responsibility in or on the Premises as
provided by law. If Lessee shall, in good faith, contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole expense defend and
protect itself, Lessor and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises. If Lessor shall
require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in
an amount equal to one and one-half times the amount of such contested lien
claim or demand, indemnifying Lessor against liability for the same, as
required by law for the holding of the Premises free from the effect of such
lien or claim. 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 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
obligations 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 the Premises per this
Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES. - INTENTIONALLY DELETED
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 injury, personal injury and property damage based upon,
involving or arising out of the ownership, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be on an
occurrence basis providing single limit coverage in an amount not less than
$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 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 8.2(a), above, in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an
additional insured therein,
Initials: ________
GROSS PAGE 3
<PAGE> 4
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 of damage to the Premises. The amount of such insurance shall be
equal to the full replacement cost of 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. Lessee Owned Alterations and Utility
Installations shall be insured by Lessee under Paragraph 8.4. 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, but not including plate glass insurance. Said policy or policies shall
also contain an agreed valuation provision in lieu of any coinsurance clause,
waiver of subrogation, and initiation 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.
(b) RENTAL VALUE. Lessor 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 shall contain an
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.
(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. Since Lessor is the Insuring
Party, the Lessor shall not be required to insure Lessee Owned Alterations and
Utility Installations unless the item in question has become the property of
Lessor under the terms of this Lease.
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
Lessor's 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 Insuring Party with
respect to the insurance required by this Paragraph 8.4 and shall provide
Lessor with 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.
Lessee shall cause to be delivered to Lessor certified copies of, or
certificates evidencing the existence and amounts of, the insurance, and with
the additional insureds, required under Paragraphs 8.2(a) and 8.4. No such
policy shall be cancelable or subject to modification except after thirty (30)
days prior written notice to Lessor. Lessee shall at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or "insurance binders" 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.
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 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 of 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 judgement,
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 or
neglect to 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 OR 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
rebuild the improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the
occurrence or discovery of a condition involving the presence of, or a
contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in,
on, or under the Premises.
9.2 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. 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 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
Initials: ________
GROSS PAGE 4
<PAGE> 5
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 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 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 reimbursement
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, if 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 the time provided in such
option for its exercise, whichever is earlier ("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) 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 of 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.
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 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 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Premises.
(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 Tax Increase to be paid in advance
to Lessor by Lessee, either: (i) in a lump sum amount equal to the amount 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 Tax Increase to be paid. When the actual amount of
the applicable Tax Increase is known, the amount of such equal monthly advance
payment shall be adjusted as required to provide the fund needed to pay the
applicable Tax Increase 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 Tax Increase as the same becomes due, Lessee
shall pay to Lessor, upon Lessor's demand, such additional sums are necessary
to pay such obligation. 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.
Initials: ________
GROSS PAGE 5
<PAGE> 6
(c) ADDITIONAL IMPROVEMENTS. Notwithstanding Paragraph
10.1(a) hereof, Lessee shall pay to Lessor upon demand therefor the entirety
of any increase in Real Property Taxes Assessed by reason of Alterations or
Utility Installations placed upon the Premises by Lessee or at Lessee's
request.
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 or
federal government, or any school, agricultural, sanitary, fire, street,
drainage or other improvement district thereof, levied against any legal or
equitable interest of Lessor in the Premises or in the real property of which
the Premises are a part, Lessor's right to rent or other income therefrom,
and/or Lessor's business of leasing the Premises. The term "REAL PROPERTY
TAXES" shall also include any tax, fee, levy, assessment or charge, or any
increase therein, 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, the 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 all 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 subject 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 LESSEE" for purposes of this Lease shall be the net
worth of Lessee (excluding any guarantors) established under generally accepted
accounting principles consistently applied.
(d) An assignment or subletting of Lessee's interest in
this Lease without Lessor's specific prior written consent shall, at 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. 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 fair 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 Lease
being considered an encumbrance or any deduction for depreciation or
obsolescence, and considering the Premises at its highest and best use and in
good condition), or one hundred ten percent (110%) of the price previously in
effect, 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 or any amendments or modifications thereto without
notifying Lessee or anyone else liable on the Lease or sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or 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.
(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 subletting, 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
Initials: ________
--------
GROSS PAGE 6
<PAGE> 7
obligations under this Lease, Lessee may, except as otherwise provided in this
Lease, receive, collect and enjoy the rents accruing under such sublease.
Lessor shall not, by reason of this or any other assignment of such sublease to
Lessor, nor by reason of the collection of the rents from a sublessee, be
deemed liable to the sublessee for any failure of Lessee to perform and comply
with any of Lessee's obligations to such sublessee under such sublease. Lessee
hereby irrevocably authorizes and directs any such sublessee, upon receipt of a
written notice from Lessor stating that a 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
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.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney
is consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in
said notice as rent due and payable to 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, if 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 commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i)
The making by Lessee of any general arrangement or assignment for the benefit
of creditors; (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 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 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 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
Initials: ________
________
GROSS PAGE 7
<PAGE> 8
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 of 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 at 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 terms 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 the event that a late charge
is payable hereunder, whether or not collected, for three (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 the property of Lessor,
whether such award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any 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 such 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 $20,552.04 for brokerage services
rendered by said Brokers to Lessor in this transaction.
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 39.1) 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, attorneys' 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 purchaser in confidence and shall be used only for the purposes
herein set forth.
Initials: ________
GROSS PAGE 8
<PAGE> 9
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 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 AGREEMENTS; 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-four (24) hours after
delivery of the same to the United States Postal Service or courier. If any
notice is transmitted by facsimile transmission or similar means, the same
shall be deemed served or delivered upon telephone confirmation of receipt of
the transmission thereof, provided a copy is also delivered via delivery or
mail. If 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.
Lessor's consent to, or approval of, any act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of, any
subsequent 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 such 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
documentation or recordation thereof.
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
offsets 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 refinancing 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 fee schedule, but shall be such as
to fully reimburse all attorney's fees reasonably incurred. Lessor shall be
entitled to attorney's fees, 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.
Initials: ________
GROSS PAGE 9
<PAGE> 10
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 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).
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 lessor estate
in the Premises; provided, however, Lessor shall, in the event of any such
surrender, termination or cancellation, have the option to continue any one or
all of any existing subtenancies. Lessor's failure within ten (10) days
following any such event to make a written election to the contrary by written
notice to the holder of any such lesser interest, shall constitute Lessor's
election to have such event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, whereby in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' 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 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 or 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 time of consent of such further or other conditions as are
then reasonable with reference to the particular matter for which consent is
being given.
37. GUARANTOR.
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 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, conditions and
provisions on Lessee's part to be observed and performed under this Lease,
Lessee shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this 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 incurred, 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 Option may be
exercised shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provision 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 to Lessee three or more notices of Default under Paragraph
13.1 during any twelve month period, whether 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 of 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,
Initials: ________
GROSS PAGE 10
<PAGE> 11
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 easement rights, dedication,
map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to 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 Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease
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 the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY 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.
<TABLE>
<CAPTION>
<S> <C>
Executed at San Diego Executed at San Diego
-------------------------------- --------------------------------
on 11/18/96 on 11/ /96
---------------------------------------- ----------------------------------------
by LESSOR: by LESSEE:
Inland Industries, a California Partnership Bikers Dream, Inc., a California Corporation
- ------------------------------------------- -------------------------------------------
By /s/ JEREMY BERG By /s/ DONALD DUFFY
----------------------------------------- -----------------------------------------
Nane Printed: Jeremy Berg Name Printed: Donald Duffy
------------------------------ ------------------------------
Title: Managing Partner Title: Co-Chief Executive Officer
------------------------------------- -------------------------------------
By By /s/ DONALD DUFFY
----------------------------------------- -----------------------------------------
Name Printed: Name Printed: Donald Duffy
------------------------------ ------------------------------
Title: Title: Co-CEO
------------------------------------- -------------------------------------
Address: 964 - 5th Avenue Address: 1420 Villege Way
---------------------------------- ----------------------------------
San Diego, CA 92101 Santa Ana, CA 92705
- ------------------------------------------- -------------------------------------------
Tel.No.(619) 544-1458 Fax No.(619) 544-1417 Tel.No.(714) 835-8464 Fax No.(714) 835-2414
-------- -------- -------- --------
</TABLE>
GROSS PAGE 11 Initials:
-------
<PAGE> 12
ADDENDUM
Addendum to that certain Lease dated October 30, 1996, by and between
Inland Industries, a California Partnership (Lessor) and Bikers Dream, Inc., a
California Corporation (Lessee) for Property located 5097 Santa Fe Street, San
Diego, California 92117.
49. Rental Adjustments:
The Base Monthly Rent shall be adjusted by a fixed four percent (4%)
and follow the rent schedule below:
<TABLE>
<CAPTION>
Base
Year Rent Monthly Rent
---- ---- ------------
<S> <C> <C>
1 $.760 $5,270.60/gross
2 $.790 $5,478.65/gross
3 $.822 $5,700.57/gross
4 $.855 $5,929.42/gross
5 $.889 $6,165.86/gross
</TABLE>
50. Tenant Improvements:
Landlord will improve the Premises per a mutually approved space plan.
Initial investigations regarding space plans and construction costs conclude
that a Tenant Improvement allowance of $35,808 is the basis for an estimation
from Fielder Construction. Although this quote does not include carpet, base,
or shop electric, an additional allowance has been placed on these items of
less than or equal to $5,000. Lessor requests that Lessee pay for half
($17,904) of the initial amount ($35,808) in case and as consideration for said
payment, Lessor will provide $1.00/s.f. toward Tenant Improvements and shall
amortize the remaining portion on ($10,969) over the term of the initial lease.
The allowance to cover carpet, base and shop electric of less than or equal to
$5,000, shall be handled in the same manner, 50% paid by Tenant in case; 50% to
be added to the amortized total over the initial lease term.
All other Tenant Improvements required by Lessee shall, after approval
by Lessor, be at Lessee's sole cost and expense.
Initials: ________
GROSS PAGE 12
<PAGE> 13
AMENDMENT
AMENDMENT TO THAT CERTAIN LEASE DATED OCTOBER 30, 1996 BY AND BETWEEN INLAND
INDUSTRIES, A CALIFORNIA PARTNERSHIP (LESSOR) AND BIKER'S DREAM, INC., A
CALIFORNIA CORPORATION (LESSEE) FOR PROPERTY LOCATED AT 5097 SANTA FE STREET,
SAN DIEGO, CALIFORNIA 92117.
1. Option Period: Subject to the provisions of Paragraph 39, Lessee
shall be granted one (1) 5-year option to extend the initial lease by
giving Lessor 120-days written notice prior to the expiration of said
initial lease. The Option Period rent shall follow the Rent Schedule
below:
<TABLE>
<CAPTION>
Year Base Year Monthly Rent
---- --------- ------------
<S> <C> <C>
1 $.916/sq. ft. $6,352.46
2 $.943/sq. ft. $6,539.71
3 $.971/sq. ft. $6,733.88
4 $1.00/sq. ft. $6,935.00
5 $1.031/sq. ft. $7,143.05
</TABLE>
________ initials ________ initials
<PAGE> 1
EXHIBIT 10.8
AMENDMENT TO CONSULTING AGREEMENT
This Amendment to Consulting Agreement (the "Amendment") made and
entered into as of November 1, 1995, is by and between Bikers Dream, Inc., a
California corporation (the "Company") and Meyer, Duffy & Associates (the
"Consultant").
RECITALS
WHEREAS, the Company and the Consultant entered into that certain
Consulting Agreement effective as of October 1, 1995 (the "Agreement"),
pursuant to which the Consultant was engaged by the Company to provide
consulting, financial advisory and investment banking services; and
WHEREAS, the parties desire to amend the Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. All terms defined in the Agreement and used herein shall have
the meaning given them in the Agreement.
2. Paragraph II of the Agreement is hereby amended by changing
the amount of capital to be raised for the Company from up to
$10,000,000 to up to $20,000,000.
3. Subparagraph D of Paragraph III of the Agreement is hereby
renumbered subparagraph E and is amended to read in full as
follows:
"E. In addition, the Consultant is assisting the Company in
raising up to $20,000,000.00 of additional capital through an
investment banker or bankers introduced by Consultant to the
Company. Upon the successful closing of an offering(s)
through such an investment banker, the Company agrees to grant
to Consultant an option, in the form of the option attached
hereto, to purchase 5,000 shares of the Company's common stock
for each $1,000,000 of capital received by the Company in such
offering(s), up to a maximum of 100,000 shares for $20,000,000
of capital received. The option shall be granted in pro rata
increments, e.g., $7,500,000 in capital raised equates to
37,500 option shares. The option shall be exercisable at a
price of $2.50 per share, at any time within two years after
the date of completion of a successful financing pursuant
hereto."
4. Paragraph III of the Agreement is hereby amended by adding a
new subparagraph D thereto which shall read as follows:
<PAGE> 2
"D. In addition, in consideration of Consultants' assistance
in raising additional capital for the Company of up to
$1,000,000 in debt convertible to common stock at a price no
less than $2.20 per share (the "Bridge Financing"), at least
$100,000 of which shall have been received by the Company on
or before November 3, 1995, the Company will compensate
Consultant as follows:
(1) The Company will grant to Consultant an
option, in the form of the option attached hereto, to
purchase, at any time within two years after the date of
grant, 50,000 shares of the Company's common stock at a price
of $1.70 per share.
(2) The Company will pay Consultant a fee of 5%
of all proceeds received by the Company from the Bridge
Financing in excess of the first $100,000 of such proceeds,
such fee to be paid, without any interest thereon, within ten
days after the date on which written demand for such payment
is made by Consultant; provided that consultant shall not
make demand for payment within 180 days after the date on
which all of the proceeds from the Bridge Financing have been
received by the Company.
5. Except as expressly set forth herein, the Agreement shall
remain in full force and effect.
6. This Amendment may be executed in several counterparts, each
of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first hereinabove written.
COMPANY
Bikers Dream, Inc.
By: _______________________________
Its: __________________________
CONSULTANT
Meyer, Duffy & Associates
By: _______________________________
Its: __________________________
<PAGE> 1
EXHIBIT 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
September 9, 1996 by and between Bikers Dream, Inc. (the "Company") and Donald
J. Duffy ( "Officer").
WITNESSETH:
WHEREAS, the Company and Officer desire to enter into this Agreement
to assure the Company and the Officer of the continuing service of Officer and
to set forth the terms and conditions of Officer's employment with the Company.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties agree as follows:
1. Term. The Company agrees to employ Officer and Officer hereby
accepts such employment, in accordance with the terms of this Agreement,
commencing September 9, 1996 and ending September 8, 1998 unless this Agreement
is earlier terminated as provided herein.
2. Services and Exclusivity of Services. So long as this
Agreement shall continue in effect, Officer shall devote a reasonable amount of
his business time, energy and ability to the business, affairs and interests of
the Company and its affiliates or subsidiaries ("Affiliates") and matters
related thereto to promote the Company's interests, and shall perform the
services contemplated by this Agreement in accordance with policies established
by and under the direction of the Board of Directors of the Company. The
Company acknowledges that Officer has significant outside business interests
that impact his ability to devote his full business time to his duties
hereunder.
3. Duties and Responsibilities. Officer shall serve as Co-Chief
Executive Officer of the Company for the duration of this Agreement. Officer
duties and responsibilities shall be generally consistent with such title,
subject to limitations on his availability described in Section 2 hereof.
Officer shall report directly to the Board of Directors of the Company and
shall be subject to the direction of the Board of Directors and to such limits
on Officer's authority as the Board of Directors may from time to time impose.
4. Compensation
(a) No Compensation. During the term of this Agreement, the Company
will pay Officer no salary.
(b) No Benefits. Officer shall not be entitled to any rights and
benefits for which Officer is otherwise eligible under any bonus plan,
incentive, participation or extra compensation plan, pension plan,
profit-sharing plan, life, medical, dental, disability, or insurance plan or
policy or other
<PAGE> 2
plan or benefit that the Company or its Affiliates may provide for employees
generally as from time to time in effect, except for any as may be specifically
approved by the Board of Directors from time to time.
(c) Perquisites. Officer shall be entitled to select one new or
used motorcycle from inventory each twelve-month period, title to which shall
then be conveyed to Officer.
(d) Options. Officer shall be granted options to purchase 200,000
shares of the Company's common stock at an exercise price of $1.05 per share,
such options to be exercisable for two years, with a cashless exercise
feature, and shall not be terminable notwithstanding any termination of this
Agreement for any reason. The shares underlying such options shall have
piggyback registration rights on the next registration statement to be filed by
the Company covering the registration of shares for resale.
5. Termination. This Agreement and all obligations hereunder,
except the obligations contained in Section 7, which shall survive any
termination hereunder, shall terminate upon the earliest to occur of any of the
following:
(a) Expiration of Term. The expiration of the term provided for
in Section 1 or the voluntary termination by Officer.
(b) Death or Disability of Officer. For the purposes of this
Agreement, disability shall mean the absence of Officer performing Officer's
duties with the Company for a period of 6 months, as a result of incapacity due
to mental or physical illness which is determined to be total and permanent by
a physician selected by the Company or its insurers and acceptable to Officer
or Officer's legal representative (such agreement as to acceptability not to be
withheld unreasonably). If Officer shall become disabled, Officer's employment
may be terminated by written notice from the Company to Officer.
(c) For Cause. The Company may terminate Officer's employment
hereunder for cause. For purposes of this Agreement, the term "cause" shall be
defined as any of the following:
(i) Officer's material breach of any of the duties and response
(other than as a result of incapacity due to Officer's disability), or breach
of Officer's fiduciary duty as those terms are defined by the California Labor
Code;
(ii) Officer's conviction by, or entry of a plea of guilty or nolo
contendere in, a court of competent jurisdiction for a felony;
(iii) Officer's commission of an act of fraud, as determined by a
court of competent jurisdiction after all appeals have been exhausted, upon the
Company.
2
<PAGE> 3
(iv) Officer's willful failure or refusal to perform Officer's
duties or responsibilities under this Agreement or Officer's material violation
of any duty of loyalty to the Company or a breach of Officer's fiduciary duty
as those terms are defined by the California Labor Code.
Notwithstanding the foregoing, Officer shall not be terminated for cause
pursuant to clauses (i) through (iv) of this Section 5(c) unless and until
Officer has received notice of a proposed termination for cause and Officer has
had an opportunity to be heard before at least a majority of members of the
Board of Directors. Officer shall be deemed to have had such an opportunity if
given written or telephonic notice at least 72 hours in advance of a meeting.
(d) Without Cause. Notwithstanding any other provision of this
Section 5, the Board shall have the right to terminate Officer's employment
with the Company without cause at any time, provided that the Company shall
first permit the Officer to select one new or used motorcycle in addition to
the motorcycles provided for in Section 4(c) above.
6. Business Expenses. During the term of this Agreement, to the
extent that such expenditures satisfy the criteria under the Internal Revenue
Code for deductibility by the Company (whether or not fully deductible by the
Company) for federal income tax purposes as ordinary and necessary business
expenses, the Company shall reimburse Officer promptly for reasonable business
expenditures (including travel, entertainment, parking, business meetings, and
professional dues but not the costs of or dues associated with maintaining club
memberships) made and substantiated in accordance with policies, practices and
procedures established from time to time by the Company
7. Indemnity. To the fullest extent permitted by applicable law
and the bylaws of the Company, as from time to time in effect, the Company
shall indemnify Officer and hold Officer harmless for any acts or decisions
made in good faith while performing services for the Company, and the Company
shall use its best efforts to obtain coverage for Officer (provided the same
may be obtained at reasonable cost) under any liability insurance policy or
policies now in force or hereafter obtained during the term of this Agreement
that cover other officers of the Company having comparable or lesser status and
responsibility. To the same extent the Company will pay all expenses,
including reasonable attorneys' fees and costs of court approved settlements,
actually and necessarily incurred by Officer in connection with the defense of
any action, suit or proceeding and in connection with any appeal thereon, which
has been brought against Officer by reason of Officer's service as an officer
or agent of the Company or of any Affiliate of the Company. The parties
understand and agree that this does not reduce or modify any and all statutory
or common law duties to indemnify Officer in the course or scope of his
employment.
8. Severability. If any provision of this Agreement is held to
be unenforceable for any reason, it shall be adjusted rather than voided, if
possible, to achieve the intent of the parties to the extent possible. In any
event, all other provisions of this Agreement shall be deemed valid and
enforceable to the extent possible.
3
<PAGE> 4
9. Succession, This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns and any such
successor or assignee shall be deemed substituted for the Company under the
terms of this Agreement for all purposes. As used herein, "successor" and
"assignee" shall include any person, firm, corporation or other business entity
which at any time, whether by purchase, merger or otherwise, directly or
indirectly acquires the stock of the Company or to which the Company assigns
this Agreement, by operation of law or otherwise. The obligations and duties
of Officer hereunder are personal and otherwise not assignable. Officer's
obligations and representations under this Agreement will survive the
termination of Officer's employment, regardless of the manner of such
termination.
10. Notices. Any notice or other communication provided for in
this Agreement shall be in writing and sent if to the Company to its principal
office at:
Bikers Dream, Inc.
1420 Village Way
Santa Ana, CA 92705
Attention: Controller
with a copy to: Rowland W. Day II
Day Campbell & McGill
3070 Bristol, Suite 650
Costa Mesa, California 92626
with a copy to: Donald J. Duffy
Meyer, Duffy & Associates
237 Park Avenue, 8th Floor
New York, New York 10017
or at such other address as the Company may from time to time in writing
designate, and if to Officer at such address as Officer may from time to time
in writing designate. Each such notice or other communication shall be
effective (i) if given by telecommunication, when transmitted to the applicable
number so specified in this Section 10 and a verification of receipt is
received, (ii) if given by mail, three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when actually delivered at such address.
11. Entire Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
any prior agreements, undertakings, commitments and practices relating to
Officer's employment by the Company, other than option or warrant agreements or
other agreements not inconsistent herewith.
12. Amendments. No amendment or modification of the terms of this
Agreement shall be valid unless made in writing and duly executed by both
parties.
4
<PAGE> 5
13. Waiver, No failure on the part of any party to exercise or
delay in exercising any right hereunder shall be deemed a waiver thereof or of
any other right, nor shall any single or partial exercise preclude any further
or other exercise of such right or any other right.
14. Governing Law. This Agreement, and the legal relations
between the parties, shall be governed by and construed in accordance with the
laws of the State of California.
15. Attorneys' Fees. If any litigation shall occur between
Officer and the Company which litigation arises out of or as a result of this
Agreement or the acts of the parties hereto pursuant to this Agreement, or
which seeks an interpretation of this Agreement, each party in such litigation
shall bear its own expenses, including attorneys' fees and costs.
16. Withholdings. All compensation payable hereunder, including
salary and other benefits, shall be subject to applicable taxes, withholding
and other required, normal or elected employee deductions.
17. Counterparts. This Agreement and any amendment hereto may be
executed in one or more counterparts. All of such counterparts shall constitute
one and the same agreement and shall become effective when a copy signed by
each party has been delivered to the other party.
18. Headings. Section and other headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY
Bikers Dream, Inc.
/s/ ROWLAND W. DAY II
-----------------------------------
By: ROWLAND W. DAY II
Its Co-CEO
------------------------------
OFFICER
/s/ DONALD J. DUFFY
-----------------------------------
DONALD J. DUFFY
5
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
September 9, 1996 by and between Bikers Dream, Inc. (the "Company") and Rowland
W. Day II ("Officer").
WITNESSETH:
WHEREAS, the Company and Officer desire to enter into this Agreement
to assure the Company and the Officer of the continuing service of Officer and
to set forth the terms and conditions of Officer's employment with the Company.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties agree as follows:
1. Term. The Company agrees to employ Officer and Officer hereby
accepts such employment, in accordance with the terms of this Agreement,
commencing September 9, 1996 and ending September 8, 1998 unless this Agreement
is earlier terminated as provided herein.
2. Services and Exclusivity of Services. So long as this
Agreement shall continue in effect, Officer shall devote a reasonable amount of
his business time, energy and ability to the business, affairs and interests of
the Company and its affiliates or subsidiaries ("Affiliates") and matters
related thereto to promote the Company's interests, and shall perform the
services contemplated by this Agreement in accordance with policies established
by and under the direction of the Board of Directors of the Company. The
Company acknowledges that Officer has significant outside business interests
that impact his ability to devote his full business time to his duties
hereunder.
3. Duties and Responsibilities. Officer shall serve as Co-Chief
Executive Officer of the Company for the duration of this Agreement. Officer
duties and responsibilities shall be generally consistent with such title,
subject to limitations on his availability described in Section 2 hereof
Officer shall report directly to the Board of Directors of the Company and
shall be subject to the direction of the Board of Directors and to such limits
on Officer's authority as the Board of Directors may from time to time impose.
4. Compensation.
(a) No Compensation. During the term of this Agreement, the
Company will pay Officer no salary.
(b) No Benefits. Officer shall not be entitled to any rights and
benefits for which Officer is otherwise eligible under any bonus plan,
incentive, participation or extra compensation plan, pension plan,
profit-sharing plan, life, medical, dental, disability, or insurance plan or
policy or other
<PAGE> 2
plan or benefit that the Company or its Affiliates may Provide for employees
generally as from time to time in effect, except for any as may be specifically
approved by the Board of Directors from time to time.
(c) Perquisites. Officer shall be entitled to select one new or
used motorcycle not to exceed $20,000 at cost from inventory each twelve-month
period, title to which shall then be conveyed to Officer.
(d) Options. Officer shall be granted options to purchase 200,000
shares of the Company's common stock at an exercise price of $1.05 per share,
such options to be exercisable for two years, with a cashless exercise feature,
and shall not be terminable notwithstanding any termination of this Agreement
for any reason. The shares underlying such options shall have piggyback
registration rights on the next registration statement to be filed by the
Company covering the registration of shares for resale.
5. Termination. This Agreement and all obligations hereunder,
except the obligations contained in Section 7, which shall survive any
termination hereunder, shall terminate upon the earliest to occur of any of the
following:
(a) Expiration of Term. The expiration of the term provided for
in Section 1 or the voluntary termination by Officer.
(b) Death or Disability of Officer. For the purposes of this
Agreement, disability shall mean the absence of Officer performing Officer's
duties with the Company for a period of 6 months, as a result of incapacity due
to mental or physical illness which is determined to be total and permanent by
a physician selected by the Company or its insurers and acceptable to Officer
or Officer's legal representative (such agreement as to acceptability not to be
withheld unreasonably). If Officer shall become disabled, Officer's employment
may be terminated by written notice from the Company to Officer.
(c) For Cause. The Company may terminate Officer's employment
hereunder for cause. For purposes of this Agreement, the term "cause" shall be
defined as any of the following:
(i) Officer's material breach of any of the duties and
responsibilities under this Agreement (other than as a result of incapacity due
to Officer's disability), or breach of Officer's fiduciary duty as those terms
are defined by the California Labor Code;
(ii) Officer's conviction by, or entry of a plea of guilty or nolo
contenders in, a court of competent jurisdiction for a felony;
(iii) Officer's commission of an act of fraud, as determined by a
court of competent jurisdiction after all appeals have been exhausted, upon the
Company.
2
<PAGE> 3
Notwithstanding the foregoing, Officer shall not be terminated for
cause pursuant to clauses (i) through (iv) of this Section 5(c) unless and
until Officer has received notice of a proposed termination for cause and
Officer has had an opportunity to be heard before at least a majority of
members of the Board of Directors. Officer shall be deemed to have had such an
opportunity if given written or telephonic notice at least 72 hours in advance
of a meeting.
(d) Without Cause. Notwithstanding any other provision of this
Section 5, the Board shall have the right to terminate Officer's employment
with the Company without cause at any time, provided that the Company shall
first permit the Officer to select one new or used motorcycle in addition to
the motorcycles provided for in Section 4(c) above.
6. Business Expenses. During the term of this Agreement, to the
extent that such expenditures satisfy the criteria under the Internal Revenue
Code for deductibility by the Company (whether or not fully deductible by the
Company) for federal income tax purposes as ordinary and necessary business
expenses, the Company shall reimburse Officer promptly for reasonable business
expenditures (including travel, entertainment, parking, business meetings, and
professional dues but not the costs of or dues associated with maintaining club
memberships) made and substantiated in accordance with policies, practices and
procedures established from time to time by the Company
7. Indemnity. To the fullest extent permitted by applicable law
and the bylaws of the Company, as from time to time in effect, the Company
shall indemnify Officer and hold Officer harmless for any acts or decisions
made in good faith while performing services for the Company, and the Company
shall use its best efforts to obtain coverage for Officer (provided the same
may be obtained at reasonable cost) under any liability insurance policy or
policies now in force or hereafter obtained during the term of this Agreement
that cover other officers of the Company having comparable or lesser status and
responsibility. To the same extent, the Company will pay all expenses,
including reasonable attorneys' fees and costs of court approved settlements,
actually and necessarily incurred by Officer in connection with the defense of
any action, suit or proceeding and in connection with any appeal thereon, which
has been brought against Officer by reason of Officer's service as an officer
or agent of the Company or of any Affiliate of the Company. The parties
understand and agree that this does not reduce or modify any and all statutory
or common law duties to indemnify Officer in the course or scope of his
employment.
8. Severabilty. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, to achieve the intent of the parties to the extent possible. In any
event, all other provisions of this Agreement shall be deemed valid and
enforceable to the extent possible.
9. Succession. This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns and any such
successor or assignee shall be deemed substituted for the Company under the
terms of this Agreement for all purposes. As used herein, "successor" and
"assignee" shall include any person, firm, corporation or other business entity
which at any time, whether by purchase, merger or otherwise, directly or
indirectly acquires the stock of the
3
<PAGE> 4
Company or to which the Company assigns this Agreement, by operation of law or
otherwise. The obligations and duties of Officer hereunder are personal and
otherwise not assignable. Officer's obligations and representations under this
Agreement will survive the termination of Officer's employment, regardless of
the manner of such termination.
10. Notices, Any notice or other communication provided for in
this Agreement shall be in writing and sent if to the Company to its principal
office at:
Bikers Dream, Inc.
1420 Village Way
Santa Ana, CA 92705
Attention: Controller
with a copy to: Rowland W. Day II
Day Campbell & McGill
3070 Bristol, Suite 650
Costa Mesa, California 92626
with a copy to: Donald J. Duffy
Meyer, Duffy & Associates
237 Park Avenue, 8th Floor
New York, New York 10017
or at such other address as the Company may from time to time in writing
designate, and if to Officer at such address as Officer may from time to time
in writing designate. Each such notice or other communication shall be
effective (i) if given by telecommunication, when transmitted to the applicable
number so specified in this Section 10 and a verification of receipt is
received, (ii) if given by mail, three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when actually delivered at such address.
11. Entire Agreement. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
any prior agreements, undertakings, commitments and practices relating to
Officer's employment by the Company, other than option or warrant agreements or
other agreements not inconsistent herewith.
12. Amendments. No amendment or modification of the terms of this
Agreement shall be valid unless made in writing and duly executed by both
parties.
13. Waiver, No failure on the part of any party to exercise or
delay in exercising any right hereunder shall be deemed a waiver thereof or of
any other right, nor shall any single or partial exercise preclude any further
or other exercise of such right or any other fight.
4
<PAGE> 5
14. Governing Law. This Agreement, and the legal relations
between the parties, shall be governed by and construed in accordance with the
laws of the State of California.
15. Attorneys' Fees. If any litigation shall occur between
Officer and the Company which litigation arises out of or as a result of this
Agreement or the acts of the parties hereto pursuant to this Agreement, or
which seeks an interpretation of this Agreement, each party in such litigation
shall bear its own expenses, including attorneys' fees and costs.
16. Withholding. All compensation payable hereunder, including
salary and other benefits, shall be subject to applicable taxes, withholding
and other required, normal or elected employee deductions.
17. Counterparts. This Agreement and any amendment hereto may be
executed in one or more Counterparts. All of such counterparts shall
constitute one and the same agreement and shall become effective when a copy
signed by each party has been delivered to the other party.
18. Headings. Section and other headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE COMPANY
Bikers Dream, Inc.
-----------------------------------
By: Donald J. Duffy
Its Co-CEO
-------------------------------
OFFICER
/s/ ROWLAND W. DAY, II
-----------------------------------
Rowland W. Day, II
5
<PAGE> 1
<TABLE>
<S> <C>
GT-19-00-410 (5/95)
Tractor
EXHIBIT 10.16
COMMERCIAL PROMISSORY NOTE AND SECURITY AGREEMENT
BORROWER(S): Biker's Dream, Inc., 1420 Village Way, Santa Ana, CA 92705
-----------------------------------------------------------------------------------
(Print full name) (No. Street) (City - State - Zip)
CREDITOR: Green Tree Financial Servicing Corp., 345 St. Peter St., St. Paul, MN 55102
-------------------------------------------------------------------------------------
(Name of Financial Institution) (No. Street) (City - State - Zip)
Loan: The above Borrower(s), meaning all Borrower(s) jointly and severally ("Borrower(s)"),
promise to pay Creditor the loan Principal Balance of $87,497.71, plus accrued interest at 10.25%
per annum calculated according to the actuarial method, under the terms and provisions of this
agreement, which obligation is secured by the following described commercial use property with
all present and future attachments, accessories, replacement parts, repairs, additions, and all
proceeds thereof (herein referred to as "Collateral").
DESCRIPTION OF PROPERTY PURCHASED
- -------------------------------------------------------------------------------------------------
Year Make/Model Identification No. License No./Year Other Description
(GVW, new or used)
1996 Kenworth/t-600 1XKADB9X2TS688410 N
Collateral Will Be Kept At 1420 Village Way, Santa Ana, CA 92705
----------------------------------------------------------------------
(Address) (County) (State)
- -------------------------------------------------------------------------------------------------
My payment schedule will be:
=================================================================================================
Number of Payments Amount of Payments When Payments Are Due
- -------------------------------------------------------------------------------------------------
60 1869.85 Monthly beginning 2/1/96
- -------------------------------------------------------------------------------------------------
=================================================================================================
ITEMIZATION OF THE LOAN PRINCIPAL BALANCE
1. Amount Paid on My Behalf (including taxes of) $ ......................... $ 87,497.71
2. Amounts Paid to Others on My Behalf .....................................
a. Paid to Public Officials ............................................. +$
b. Paid to Insurance Companies .......................................... +$
c. Other ................................................................ +$
3. Principal Balance (1+2a-c) .............................................. $ 87,497.71
4. Finance Charge .......................................................... $ 24,693.29
5. Total of Payments (3+4) ................................................. $112,191.00
- -------------------------------------------------------------------------------------------------
</TABLE>
INSURANCE COVERAGE
LIABILITY INSURANCE COVERAGE FOR BODILY INJURY AND PROPERTY DAMAGE
CAUSED TO OTHERS IS NOT INCLUDED IN THIS AGREEMENT.
PHYSICAL DAMAGE INSURANCE COVERING THE COLLATERAL IS REQUIRED. Borrower has the
option of furnishing the required insurance through an agent or broker of
Borrower's choice.
Page 1 of 4
<PAGE> 2
GT-19-00-410 (5/95)
Check One: _____ Borrower requests and authorizes Creditor to obtain the
insurance coverage checked below on the Collateral for
____ months from the date of this agreement, and for the
premium of $___________
Deductible: _____ $_______________ Deductible Fire, Theft, Combined
Additional Coverage, and $_______ Collision; or
_____ $_______________ Deductible Comprehensive and
$_______________ Deductible Collision.
X Buyer has obtained the required coverages through:
-----
____________________________________
(Name of Insurance Company)
_____________________________ _____________________________
(Agent's Name) (Agent's Address)
- -------------------------------------------------------------------------------
CREDIT INSURANCE, if included, is not a factor in the approval of credit, is
not required by the Creditor and is for the term of the credit only.
Check One: _____ Credit Life: Premium: $ ________________
_____ Credit Disability: Premium: $ ________________
_____ Joint Credit Life: Premium: $ ________________
_____ Joint Credit Disability: Premium: $ ________________
I want the Credit Insurance specified above:
BORROWER: ___________________________________________ __________________
(Borrower: Each Borrower insured must sign) (Date)
___________________________________________ __________________
(Borrower: Each Borrower insured must sign) (Date)
PAYMENTS: Borrowers promises to pay Creditor the amount shown as PRINCIPAL
BALANCE on page 1 according to the PAYMENT SCHEDULE on page 1.
SECURITY INTEREST: To secure payment of the TOTAL OF PAYMENTS, Creditor retains
title to and a security interest in the Collateral regardless of any retaking
and redelivery of the Collateral to Borrowers. Borrowers also assign directly
to Creditor any interest Borrowers may have in insurance premium refunds or
proceeds. Borrowers agree to execute any application for certificate of title,
financing statement or other documents necessary to perfect Creditor's security
interest in the Collateral.
CROSS SECURITY: Borrowers grants to Creditor a security interest in the
Collateral to secure the payment and performance of all absolute and all
contingent obligations and liabilities of Borrowers to Creditor, or to any
assignee of Creditor, now existing or hereafter arising, whether under this
agreement or any other agreement and whether due directly or by assignment.
DISCLAIMER: There are no warranties other than those made by the manufacturer
of the Collateral. LENDER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, AS TO THE QUALITY, WORKMANSHIP, DESIGN, MERCHANTABILITY, SUITABILITY,
OR FITNESS OF THE COLLATERAL FOR ANY PARTICULAR PURPOSE, OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, unless such
warranties are in writing and signed by Creditor. Creditor shall not under any
circumstances be liable for loss of anticipatory profits or consequential
damages of any kind.
PREPAYMENT: Borrowers have the right to prepay all or part of the unpaid
balance of this loan without any penalty. Borrowers understand that any
prepayment in an amount less than $25.00 will be considered a prepayment of the
"Finance Charge" and applied to the next monthly payment due. Any prepayment
in an amount of $25.00 or more will be applied as a prepayment of the "Amount
Financed" at the next scheduled payment date. If Borrowers prepay this Loan in
full, Creditor will give Borrowers a refund of part of the Finance Charge. Any
prepaid finance charge will not be included to figure this refund. The refund
will be figured by the actuarial method, except that Creditor will assume
Borrowers made all payments on the due date. Borrowers will not get a refund if
the amount is less than $1.00.
LATE CHARGES: In the event Borrower's payment is more than ten (10) days late,
Borrowers will be charged 5.00% of the amount due or $5.00, whichever is
GREATER or no more than the legally permissible amount of late charges.
ADDITIONAL COVENANTS AND ORAL AGREEMENT. Borrowers and Creditor agree that the
"Statement of Additional Covenants" set forth below constitutes a part of this
Agreement. No oral agreement, guaranty, promise, representation or warranty
shall be binding on Creditor.
DATED December 28, 1995
Page 2 of 4
<PAGE> 3
GT-19-00-410 (5/95)
The Borrowers hereby acknowledges receipt of a copy of this Contract.
Borrowers /s/ BIKER'S DREAM, INC. /s/ [SIG ILLEGIBLE]
------------------------------- ------------------------------------
Biker's Dream, Inc. Its: PRESIDENT
--------------------------------
(If corporation, authorized officer
must show corporate title. If
partnership, a general partner must
sign. If officer(s) or partner,
show which.)
Borrowers /s/
-------------------------------
_______________________________________________________________________________
GUARANTY: I guarantee that all amounts owed under this Agreement will be paid
when due. I will still be obligated even if any of the Borrowers are released
or if you waive (give up) or delay enforcement of any of your rights under this
Agreement. You do not have to give me notice of any such waiver, delay or
release. I also have to pay your attorney's fees and other court costs of
enforcing this guarantee.
/s/ [SIG ILLEGIBLE]
- -------------------------------------------------------------------------------
(Signature of Guarantor) (Address)
/s/ DENNIS CAMPBELL
- -------------------------------------------------------------------------------
(Signature of Guarantor) (Address)
_______________________________________________________________________________
STATEMENT OF ADDITIONAL COVENANTS
BORROWER'S COVENANTS: A. Borrowers warrant and agree that (a) the Collateral was
delivered to an accepted by them in satisfactory condition; (b) the Collateral
is free from and will be kept free from all liens, claims, security interests
and encumbrances except for the security interest granted herein; (c) and
Borrowers will not without Creditor's prior written consent, sell, rent, lend,
encumber, pledge, transfer, secrete or otherwise dispose of any of the
Collateral, nor will Borrowers permit any such act; (d) the Collateral will be
maintained in good operating condition, repair and appearance, and will be used
and operated with care, only by qualified personnel in the regular course of
Borrower's business and in conformity with all applicable governmental laws and
regulations; (e) the Creditor may inspect the Collateral at all reasonable
times, and the Collateral will be kept by Borrowers at the location set forth
for it on the face hereof and will not be removed from said location without the
prior written consent of Creditor, except that an item of Collateral which is
mobile and of a type normally used at more than one location may be used by
Borrowers away from said location in the regular course of Borrower's business.
In any event upon Creditor's request, Borrowers will provide in writing the
current location of the Collateral to the Creditor; (f) Borrower covenants that
the Collateral will at all times be used solely for business purposes.
B. Borrowers agrees, at its own cost and expense to do everything necessary or
expedient to perfect and preserve the security interest of Creditor obtained
hereunder, to defend any action, proceeding or claim affecting the Collateral;
to pay all expenses incurred by Creditor in enforcing its rights after the
occurrence of an event of default hereunder, including the reasonable fees of
any attorneys retained by Creditor and to pay promptly all taxes, assessments,
license fees and other public or private charges when levied or assessed
against the Collateral this agreement or any accompanying note.
C. Borrowers shall at all times bear all risk of loss of damage to or
destruction of the Collateral. Borrowers agrees to procure forthwith and
maintain insurance on the Collateral for the greater of the actual cash value
or loan balance during the life of this Agreement, in the form of fire
insurance with combined additional coverage and collision, theft and/or
vandalism and malicious mischief coverage when appropriate, plus such other
insurance as Creditor may specify from time to time, all in form and amount and
with insurers satisfactory to Creditor. Borrowers agrees to deliver promptly to
Creditor certificates, or, if requested, policies of insurance satisfactory to
Creditor, each with a standard long-form loss-payable endorsement naming
Creditor and assigns as loss-payee as their interests may appear. Each policy
shall provide that Creditor's interest therein will not be invalidated by the
acts, omissions or neglect of anyone other than Creditor, and will contain
insurer's agreement to give 30 days prior written notice to Creditor before
cancellation of or any material change in the policy will be effective as to
Creditor, whether such cancellation or change is at the discretion of Borrowers
or insurer. Creditor's acceptance of policies in lesser amounts or risks will
not be a waiver of Borrower's foregoing obligation. Borrowers assigns to
Creditor all proceeds of such insurance, including returned and unearned
premiums up to the amount owing hereunder by Borrowers. Borrowers directs all
insurers to pay such proceeds directly to Creditor. Borrowers authorizes
Creditor to endorse Borrowers name to all insurance remittances without the
joinder of Borrowers.
D. If permitted by law, Borrowers agrees that a carbon, photographic or other
reproduction of this agreement or of a financing statement may be filed as a
financing statement.
E. If Borrowers fails to perform any of their obligations hereunder, Creditor
may perform the same, but shall not be obligated to do so, for the account of
Borrowers to protect the interest of Creditor or Borrowers or both, at
Creditor's option, and Borrowers shall immediately repay to Creditor any
amounts paid by Creditor in such performance, together with interest thereof at
the same rate as is set forth on the face hereof as payable upon acceleration.
DEFAULT: Time is of the essence. An event of default shall occur if; (a)
Borrowers fails to pay when due any amount owed by it to Creditor or to any
affiliate of Creditor, whether hereunder or under any other instrument or
agreement; (b) Borrowers fails to perform or observe any other term or
provision to be performed or observed by it hereunder or under any other
instrument or agreement, furnished by Borrowers to Creditor or to any affiliate
of Creditor or otherwise acquired by Creditor or any affiliate of Creditor; (c)
Borrowers becomes insolvent or ceases to do business as a going concern; (d)
any of the Collateral is lost or destroyed; (e) Borrowers makes an assignment
for the benefit of creditors or takes advantage of any law for the relief of
debtors; (f) a petition in bankruptcy or for an arrangement, reorganization, or
similar relief is filed by or against Borrowers; (g) any property of Borrowers
is attached, or a trustee or receiver is appointed for Borrowers or for a
substantial part of Borrower's property, or Borrowers applies for such
appointment, or (h) Creditor is good faith believes that the prospect
<PAGE> 4
GT-19-00-410 (5/95)
of payment or performance hereunder is impaired or insecure.
Upon the occurrence of an event of default, and at any time thereafter as long
as the default continues, Creditor may, at its option, with or without notice
to Borrowers (i) declare this agreement to be in default, whereupon the
indebtedness specifically described herein will become immediately due and
payable, (ii) declare all other debts then owing by Borrowers to Creditor to be
immediately due and payable, (iii) cancel any insurance and credit and refund to
the indebtedness, and (iv) exercise all of the rights and remedies of a secured
party under the Uniform Commercial Code and any other applicable laws,
including the right to require Borrowers to assemble the Collateral and deliver
it to Creditor at a place to be designated by Creditor which is reasonably
convenient to both parties. Any property other than Collateral which is in or
upon the Collateral at the time of repossession may be taken and held without
liability until its return is requested by Borrowers. Unless otherwise provided
by law, any requirement of reasonable notice which Creditor may be obligated to
give regarding the sale or other disposition of Collateral will be met if such
notice is mailed to Borrowers at its address shown herein at least ten days
before the time of sale or other disposition. Creditor may buy at any sale and
become the owner of the Collateral. Borrowers agrees that Creditor may bring
any legal proceedings it deems necessary to enforce the payment and performance
of Borrower's obligations hereunder in any court in the state shown in
Creditor's address set forth herein, and service of its address shown herein.
The inclusion of a trade name or division name in the identification of
Borrowers hereunder shall not limit Creditor's right, after the occurrence of
an event of default, to proceed against all of Borrower's assets, including
those held or used by Borrowers individually or under another trade or division
name. Expenses of retaking, holding, preparing for sale, selling and the like
shall include (a) the reasonable fees of any attorneys retained by Creditor, and
(b) all other legal expenses incurred by Creditor. Borrowers agrees that it is
liable for and will promptly pay any deficiency resulting from any disposition
of Collateral after default.
WAIVER. Waiver of any default shall not be a waiver of any other default; all
of Creditor's rights are cumulative and not alternative. No waiver or change in
this agreement or in any related note shall bond Creditor unless in writing
signed by one of its officers. The term "Creditor" shall include any assignee
of Creditor who is the holder of this agreement. Any provisions hereof contrary
to, prohibited by or invalid under applicable laws or regulations shall be
inapplicable and deemed omitted herefrom, but shall not invalidate the
remaining provisions hereof. Borrowers waives all exemptions to the extent
permitted by law. Creditor may correct patent errors herein. All of the terms
and provisions of this agreement shall apply to and be binding upon Borrowers,
its heirs, personal representatives, successors and assigns and shall inure to
the benefit of Creditor, its successors and assigns. The Agreement shall be
interpreted under the law of Borrower's principal offices.
ARBITRATION: All disputes, claims or controversies arising from or relating to
this Loan or the relationships which result from this Contract, or the validity
of this arbitration clause or the entire Contract, shall be resolved by binding
arbitration by one arbitrator selected by Creditor with consent of Borrowers.
This arbitration agreement is made pursuant to this transaction in interstate
commerce, and shall be governed by the Federal Arbitration Act at 9 U.S.C.
Section 1, Judgment upon the award rendered may be entered in any court having
jurisdiction. The parties agree and understand that they choose arbitration
instead of litigation to resolve disputes. The parties understand that they
have a right or opportunity to litigate disputes through a court, but that they
prefer to resolve their disputes through arbitration, except as provided
herein. THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO A
JURY TRIAL EITHER PURSUANT TO ARBITRATION UNDER THIS CLAUSE OR PURSUANT TO A
COURT ACTION BY CREDITOR (AS PROVIDED HEREIN). The parties agree and understand
that all disputes arising under case law, statutory law and all other laws
including, but not limited to, all contract, tort and property disputes will be
subject to binding arbitration in accord with this Agreement. The parties agree
and understand that the arbitrator shall have all powers provided by the law
and this Agreement. These powers shall include all legal and equitable remedies
including, but not limited to, money damages, declaratory relief and injunctive
relief. Notwithstanding anything hereunto the contrary, Creditor retains an
option to use judicial or non-judicial relief to enforce a security agreement
relating to the Collateral secured in a transaction underlying this arbitration
agreement, to enforce the monetary obligation secured by the Collateral or to
foreclose on the Collateral. Such judicial relief would take the form of a
lawsuit. The institution and maintenance of an action for judicial relief in a
court to repossess any Collateral, to obtain a monetary judgment or to enforce
the security agreement shall constitute a waiver of the right of any party to
compel arbitration regarding any other dispute or remedy subject to arbitration
in this Agreement, including the filing of a counterclaim in a suit brought by
Creditor pursuant to this provision.
The debtor's rights and interests in the Reserve Account and Total Reserve
Credit under the Reserve Addendum to Dealer Agreement between the debtors and
the secured party dated February 28, 1994.
/s/ Dennis Campbell
---------------------------
Dennis Campbell
Dated 12-28-95
Page 4 of 4
<PAGE> 5
INDIVIDUAL GUARANTY
TO: Green Tree Financial Corporation or its subsidiary (hereinafter "Green
Tree")
RE: Biker's Dream, Inc (hereinafter "Buyer(s)")
-------------------------
- ------------------------------
- ------------------------------
To induce Green Tree to provide financing as set forth in the
Promissory note and Security Agreement ("Contract") dated December 28, 1995
(the "Contract"), between Green Tree Financial Servicing Corporation, as
Creditor, and Biker's Dream, Inc., as Buyer(s), I the undersigned Guarantor(s),
hereby guarantee to Green Tree performance of all debts or obligations of which
the Buyer owes Green Tree under the Contract.
Each Guarantor agrees that should the Buyer breach any or all terms and
conditions contained in the Contract, all duties and obligations of the Buyer
for said breach shall apply to the Guarantor.
The liability of each Guarantor hereunder is direct and unconditional
in the case of a breach by the Buyer and may be enforced without requiring
Green Tree first to resort to any right, remedy or security. Nothing shall
discharge or satisfy the liability of the Guarantor hereunder except the full
payment and performance of all of Buyer's debts and obligations to Green Tree.
Each Guarantor agrees that none of the Guarantors can avail
himself/herself of any defense whatsoever which Buyer may have against Green
Tree other than the payment of the debts or obligations. Each Guarantor hereby
for himself/herself, his/her heirs, executors and personal representatives
waives all defenses given to sureties or guarantors at law or in equity other
than the payment of said Contract.
Notice of acceptance of this Guaranty, of any adverse change in Buyer's
financial condition or of any other fact which might materially increase the
Guarantor's risk is hereby waived. The extension of time of payment,
performance of agreements or obligations or any other indulgence may be granted
to Buyer without notice to Guarantor, and all settlements and compromises made
in good faith with Buyer shall be binding upon each Guarantor. EACH GUARANTOR
HEREBY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR BASED UPON THIS GUARANTY.
In the event of default in the performance of this Guaranty, the
Guarantor agrees to pay all reasonable court costs, attorneys' fees and other
expenses paid or incurred by Green Tree in the enforcement hereof.
This Guaranty constitutes the entire agreement and no waivers or
modifications shall be valid unless in writing and signed by Green Tree and the
Guarantor.
This Guaranty shall be binding upon the heirs, executors,
administrators, successors and assigns of each of the undersigned and shall
inure to the benefit of Green Tree's successors and assigns.
Dated: December 28, 1995
<TABLE>
<S> <C>
(1) Dennis Campbell (2)
------------------------------------- -------------------------------------
(Guarantor's Name - printed or typed) (Guarantor's Name - printed or typed)
/s/ DENNIS CAMPBELL
------------------------------------- -------------------------------------
(Guarantor's Signature) (Guarantor's Signature)
</TABLE>
<PAGE> 6
LOAN PROCEEDS AUTHORIZATION
12/28/95
----------------------
(Date)
Green Tree Financial Servicing Corporation
or its affiliates ("Green Tree")
Truck/Trailer Group
500 Landmark Towers
345 St. Peter Street
Saint Paul, Minnesota 55102
Re: Commercial Promissory Note and Security Agreement dated 12-28-95 between
Biker's Dream Inc. (Borrower(s)) and Green Tree (Creditor) regarding the
following described collateral:
Gentlemen:
You are hereby irrevocably instructed to disburse from the proceeds of the loan
evidenced by the above referenced promissory note the respective amounts to the
respective payee designated below:
Amount Payee (name and address)
------ ------------------------
$ 87,497.71 Inland Kenworth
--------------------------------
9730 CHERRY AVENUE
--------------------------------
FONTANA, CA 92335
--------------------------------
$
----------- --------------------------------
--------------------------------
--------------------------------
$
----------- --------------------------------
--------------------------------
--------------------------------
$
----------- --------------------------------
--------------------------------
--------------------------------
In making the above disbursements or any other disbursements you make pursuant
to the terms of the above referenced loan, you may use checks, drafts, orders,
transfer funds, wire transfer, or any other method or media you deem desirable.
Further, you may make such disbursements in your name and on our behalf, or in
our name.
Disbursement by you in accordance with the foregoing instructions shall be and
constitute payment and delivery to and receipt by us of any and all of such
proceeds.
Very truly yours,
Biker's Dream Inc.
- ------------------------------------------------------------
(Name of Debtor)
By [SIG] Title President
-------------------------------- --------------------
(If Corporation or Partnership)
<PAGE> 7
<TABLE>
<S> <C> <C>
345 St. Peter Street, Suite 500
St. Paul, MN 55102 Equipment Finance Division
[GREENTREE LOGO) Phone: (800) 851-1370 Truck/Trailer Credit Application
Fax: (800) 699-1671 --------------------------------
----------------------------------
FOR INTERNAL USE - DO NOT COMPLETE
- ------------------------------------------------------------------------------------------------------------------------------------
Dealer Date Taken Time Rec. Date Approved
GREEN TREE FINANCIAL SVC. CORP 12/19/95 17:06 12/27/95
- ------------------------------------------------------------------------------------------------------------------------------------
Sales Person Phone Taken By In Person Fax Mail
800-851-1370 J MAHER
- ------------------------------------------------------------------------------------------------------------------------------------
APPLICANT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Full Name Social Security Number Home Phone Birth Date No. of
DENNIS CAMPBELL ###-##-#### 12-8-59 Dependents
-----
- ------------------------------------------------------------------------------------------------------------------------------------
Present Street Address City State Zip How long at present address
25362 SHOSHONE LAKE FOREST CA 92630 00 Years 00 Months
---- ------
- ------------------------------------------------------------------------------------------------------------------------------------
US Citizen Marital Status Own [ ] Rent/Mortgage If Owned: Jointly [ ] Value Mortgage Balance
[X] Yes [ ] No Rent [ ] Payment $ Solely [ ] $ $
- ------------------------------------------------------------------------------------------------------------------------------------
Former address (Street, City, State & Zip) How long at former address
00 Years 00 Months
------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
Employer/Contact Person Business Phone Position or Title Hire Date
BIKERS DREAM INC 714-835-8464 OWNER 00 Mo. 00 Yr.
------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
Monthly/or Annual Income Other Income (Describe) * Amount * Alimony, child support or maintenance payment
are optional information and need not be reported
$ $ if the applicant does not choose to rely on such
income in applying for credit.
- ------------------------------------------------------------------------------------------------------------------------------------
Former Employer (if less than 3 years at current) Business Phone Employed From To
00 Mo. 00 Yr. 00 Mo. 00 Yr.
---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
Nearest Relative Not Living With You
Name Address: Phone:
- ------------------------------------------------------------------------------------------------------------------------------------
PERSONAL FINANCIAL OBLIGATIONS AND/OR CREDIT REFERENCES (List all mortgages, auto, boat, truck, trailer, and personal loans)
- ------------------------------------------------------------------------------------------------------------------------------------
Personal Primary Bank Phone Checking Account No.
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of Loan
Type of Account --------------- Monthly Person to
Creditor Account Number Current Balance Payment Contact
- ------------------------------------------------------------------------------------------------------------------------------------
Name (Mortgage)
- ---------------------------------- -------------------
Phone
- ------------------------------------------------------------------------------------------------------------------------------------
Name (Auto)
- ---------------------------------- -------------------
Phone
- ------------------------------------------------------------------------------------------------------------------------------------
Name (Truck/Trailer)
- ---------------------------------- -------------------
Phone
- ------------------------------------------------------------------------------------------------------------------------------------
Name
- ---------------------------------- -------------------
Phone
- ------------------------------------------------------------------------------------------------------------------------------------
Name
- ---------------------------------- -------------------
Phone
- ------------------------------------------------------------------------------------------------------------------------------------
CO-APPLICANT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
CO-APPLICANT Applicant's spouse must complete the section below if the applicant is relying on the spouse's income as a basis for
repayment of the credit, or if the applicant resides in Arizona, California, Hawaii, Idaho, Louisiana, Michigan,
Nebraska, Nevada, New Mexico, Oklahoma, Oregon, Texas or Washington.
- ------------------------------------------------------------------------------------------------------------------------------------
Full Name Social Security Number Home Phone Birth Date
- ------------------------------------------------------------------------------------------------------------------------------------
Present Street Address City State Zip How long at present address
00000 00 Years 00 Months
---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
Employer's Name & Address Business Phone Monthly Income Hire Date
$ 00 Mo. 00 Yr.
---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
Bank Phone Checking Account No.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
This FINANCING STATEMENT is presented for filing and will remain effective,
with certain exceptions, for five years from the date of filing, pursuant to
Section 9403 of the California Uniform Commercial Code.
- --------------------------------------------------------------------------------
1. DEBTOR (LAST NAME FIRST -- IF AN INDIVIDUAL)
Biker's Dream, Inc.
1A. SOCIAL SECURITY OR FEDERAL TAX NO.
33-0140149
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
1420 Village Way Santa Ana, CA 92705
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST -- IF AN INDIVIDUAL)
2A. SOCIAL SECURITY OR FEDERAL TAX NO.
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
3. DEBTOR'S TRADE NAME OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
4. SECURED PARTY
NAME Green Tree Financial Servicing Corporation
MAILING ADDRESS 345 St. Peter St.
CITY St. Paul STATE MN ZIP CODE 55102
4A. SOCIAL SECURITY NO., FEDERAL TAX NO. OR BANK TRANSIT AND A.B.A. NO.
5. ASSIGNEE OF SECURED PARTY (IF ANY)
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
5A. SOCIAL SECURITY NO., FEDERAL TAX NO. OR BANK TRANSIT AND A.B.A. NO.
6. This FINANCING STATEMENT covers the following types or items of property
(INCLUDE DESCRIPTION OF REAL PROPERTY ON WHICH LOCATED AND OWNER OF RECORD WHEN
REQUIRED BY INSTRUCTION 4).
The debtor's rights and interests in the Reserve Account and Total
Reserve Credit under the Reserve Addendum to Dealer Agreement between
the debtors and the secured party dated February 28, 1994
7. CHECK /x/ 7A. / / PRODUCTS OF COLLATERAL
IF APPLICABLE ARE ALSO COVERED
7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH INSTRUCTION 5(A) ITEM:
/ / (1) / / (2) / / (3) / / (4)
8. CHECK /x/
IF APPLICABLE
/ / DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC
SEC. 9015(1)(N)
THIS FINANCING STATEMENT IS EFFECTIVE UNTIL A TERMINATION STATEMENT IS
FILED.
9. SIGNATURE(S) OF DEBTOR(S) DATE:
/s/ [SIG] 12-28-95
TYPE OR PRINT NAME(S) OF DEBTOR(S)
/s/ Biker's Dream Inc. By Dennis Campbell
SIGNATURE(S) OF SECURED PARTY(IES)
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES)
10. THIS SPACE FOR USE OF FILING OFFICER (DATE, TIME, FILE NUMBER AND FILING
OFFICER)
- --------------------------------------------------------------------------------
CODE 1 2 3 4 5 6 7 8 9 0
================================================================================
11. Return Copy to:
NAME Green Tree Financial Servicing Corp
ADDRESS 345 St. Peter St.
CITY St. Paul, MN 55102
STATE
ZIP CODE
================================================================================
(1) FILING OFFICER COPY
FORM UCC-1--_____
Approved by the Secretary of State
<PAGE> 9
This FINANCING STATEMENT is presented for filing and will remain effective,
with certain exceptions, for five years from the date of filing, pursuant to
Section 9403 of the California Uniform Commercial Code.
- --------------------------------------------------------------------------------
1. DEBTOR (LAST NAME FIRST -- IF AN INDIVIDUAL)
Biker's Dream, Inc.
1A. SOCIAL SECURITY OR FEDERAL TAX NO.
33-0140149
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
1420 Village Way Santa Ana, CA 92705
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST -- IF AN INDIVIDUAL)
2A. SOCIAL SECURITY OR FEDERAL TAX NO.
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
4. SECURED PARTY
NAME Green Tree Financial Servicing Corporation
MAILING ADDRESS 345 St. Peter St.
CITY St. Paul STATE MN ZIP CODE 55102
4A. SOCIAL SECURITY NO., FEDERAL TAX NO. OR BANK TRANSIT AND A.B.A. NO.
5. ASSIGNEE OF SECURED PARTY (IF ANY)
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
5A. SOCIAL SECURITY NO., FEDERAL TAX NO. OR BANK TRANSIT AND A.B.A. NO.
6. This FINANCING STATEMENT covers the following types or items of property
(INCLUDE DESCRIPTION OF REAL PROPERTY ON WHICH LOCATED AND OWNER OF RECORD WHEN
REQUIRED BY INSTRUCTION 4).
The debtor's rights and interests in the Reserve Account and Total
Reserve Credit under the Reserve Addendum to Dealer Agreement between
the debtors and the secured party dated February 28, 1995
7. CHECK /x/ 7A. / / PRODUCTS OF COLLATERAL
IF APPLICABLE ARE ALSO COVERED
7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH INSTRUCTION 5(A) ITEM:
/ / (1) / / (2) / / (3) / / (4)
8. CHECK /x/
IF APPLICABLE
/ / DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC
SEC. 9015(1)(N)
THIS FINANCING STATEMENT IS EFFECTIVE UNTIL A TERMINATION STATEMENT IS
FILED.
9. SIGNATURE(S) OF DEBTOR(S) DATE:
/s/ [SIG] 12-28-95
TYPE OR PRINT NAME(S) OF DEBTOR(S)
/s/ Dennis Campbell for Biker's Dream Inc.
SIGNATURE(S) OF SECURED PARTY(IES)
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES)
10. THIS SPACE FOR USE OF FILING OFFICER (DATE, TIME, FILE NUMBER AND FILING
OFFICER)
- --------------------------------------------------------------------------------
CODE 1 2 3 4 5 6 7 8 9 0
================================================================================
11. Return Copy to:
NAME Green Tree Financial Servicing Corp
ADDRESS 345 St. Peter St.
CITY St. Paul, MN 55102
STATE
ZIP CODE
================================================================================
(1) FILING OFFICER COPY
FORM UCC-1--_____
Approved by the Secretary of State
<PAGE> 1
<TABLE>
<S> <C>
GT-19-00-410 (5/95)
Trailer
EXHIBIT 10.17
COMMERCIAL PROMISSORY NOTE AND SECURITY AGREEMENT
BORROWER(S): Biker's Dream Inc. 1420 Village Way, Santa Ana CA 92705
-------------------------------------------------------------------------------
(Print full name) (No. Street) (City - State - Zip)
CREDITOR: Green Tree Financial Servicing Corporation, 345 St. Peter St. St. Paul MN 55102
----------------------------------------------------------------------------------
(Name of Financial Institution) (No. Street) (City - State - Zip)
</TABLE>
Loan. The above Borrower(s), meaning all Borrower(s) jointly and severally
("Borrower(s)"), promise to pay Creditor the loan Principal Balance of
$303,555.00, plus accrued interest at 10.75% per annum calculated according to
the actuarial method, under the terms and provisions of this agreement, which
obligation is secured by the following described commercial use property with
all present and future attachments, accessories, replacement parts, repairs,
additions, and all proceeds thereof (herein referred to as "Collateral").
<TABLE>
DESCRIPTION OF PROPERTY PURCHASED
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Make/Model Identification No. License No./Year Other Description
(GVW, new or used)
1996 Champion/53 IC9SC5339T1048124
Collateral Will Be Kept At 1520 Village Way, Santa Ana CA 92705
------------------------------------------------------------------
(Address) (County) (State)
- --------------------------------------------------------------------------------------------
My payment schedule will be:
============================================================================================
Number of Payments Amount of Payments When Payments Are Due
- --------------------------------------------------------------------------------------------
72 $5,739.09 Monthly beginning 3/15/96
- --------------------------------------------------------------------------------------------
============================================================================================
ITEMIZATION OF THE LOAN PRINCIPAL BALANCE
1. Amount Paid on My Behalf (including taxes of) $ ............. $303,555.00
2. Amounts Paid to Others on My Behalf ....................................
a. Paid to Public Officials .......................................... +$
b. Paid to Insurance Companies ....................................... +$
c. Other ............................................................. +$
3. Principal Balance (1+2a-c) ............................................. $303,555.00
4. Finance Charge ......................................................... $109,659.48
5. Total of Payments (3+4) ................................................ $413,214.48
- --------------------------------------------------------------------------------------------
</TABLE>
INSURANCE COVERAGE
LIABILITY INSURANCE COVERAGE FOR BODILY INJURY AND PROPERTY DAMAGE
CAUSED TO OTHERS IS NOT INCLUDED IN THIS AGREEMENT.
PHYSICAL DAMAGE INSURANCE COVERING THE COLLATERAL IS REQUIRED. Borrower has the
option of furnishing the required insurance through an agent or broker of
Borrower's choice.
Page 1 of 4
<PAGE> 2
Check One: _____ Borrower requests and authorizes Creditor to obtain the
insurance coverage checked below on the Collateral for
____ months from the date of this agreement, and for the
premium of $___________
Deductible: _____ $_______________ Deductible Fire, Theft, Combined
Additional Coverage, and $_______ Collision; or
_____ $_______________ Deductible Comprehensive and
$_______________ Deductible Collision.
_____ Buyer has obtained the required coverages through:
____________________________________
(Name of Insurance Company)
_____________________________ _____________________________
(Agent's Name) (Agent's Address)
- -------------------------------------------------------------------------------
CREDIT INSURANCE, if included, is not a factor in the approval of credit, is
not required by the Creditor and is for the term of the credit only.
Check One: _____ Credit Life: Premium: $ ________________
_____ Credit Disability: Premium: $ ________________
_____ Joint Credit Life: Premium: $ ________________
_____ Joint Credit Disability: Premium: $ ________________
I want the Credit Insurance specified above:
BORROWER: ___________________________________________ __________________
(Borrower: Each Borrower insured must sign) (Date)
___________________________________________ __________________
(Borrower: Each Borrower insured must sign) (Date)
PAYMENTS: Borrowers promises to pay Creditor the amount shown as PRINCIPAL
BALANCE on page 1 according to the PAYMENT SCHEDULE on page 1.
SECURITY INTEREST: To secure payment of the TOTAL OF PAYMENTS, Creditor retains
title to and a security interest in the Collateral regardless of any retaking
and redelivery of the Collateral to Borrowers. Borrowers also assign directly
to Creditor any interest Borrowers may have in insurance premium refunds or
proceeds. Borrowers agree to execute any application for certificate of title,
financing statement or other documents necessary to perfect Creditor's security
interest in the Collateral.
CROSS SECURITY: Borrowers grants to Creditor a security interest in the
Collateral to secure the payment and performance of all absolute and all
contingent obligations and liabilities of Borrowers to Creditor, or to any
assignee of Creditor, now existing or hereafter arising, whether under this
agreement or any other agreement and whether due directly or by assignment.
DISCLAIMER: There are no warranties other than those made by the manufacturer
of the Collateral. LENDER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, AS TO THE QUALITY, WORKMANSHIP, DESIGN, MERCHANTABILITY, SUITABILITY,
OR FITNESS OF THE COLLATERAL FOR ANY PARTICULAR PURPOSE, OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, unless such
warranties are in writing and signed by Creditor. Creditor shall not under any
circumstances be liable for loss of anticipatory profits or consequential
damages of any kind.
PREPAYMENT: Borrowers have the right to prepay all or part of the unpaid
balance of this loan without any penalty. Borrowers understand that any
prepayment in an amount less than $25.00 will be considered a prepayment of the
"Finance Charge" and applied to the next monthly payment due. Any prepayment
in an amount of $25.00 or more will be applied as a prepayment of the "Amount
Financed" at the next scheduled payment date. If Borrowers prepay this Loan in
full, Creditor will give Borrowers a refund of part of the Finance Charge. Any
prepaid finance charge will not be included to figure this refund. The refund
will be figured by the actuarial method, except that Creditor will assume
Borrowers made all payments on the due date. Borrowers will not get a refund if
the amount is less than $1.00.
LATE CHARGES: In the event Borrower's payment is more than ten (10) days late,
Borrowers will be charged 5.00% of the amount due or $5.00, whichever is
GREATER or no more than the legally permissible amount of late charges.
ADDITIONAL COVENANTS AND ORAL AGREEMENT. Borrowers and Creditor agree that the
"Statement of Additional Covenants" set forth below constitutes a part of this
Agreement. No oral agreement, guaranty, promise, representation or warranty
shall be binding on Creditor.
DATED February 14, 1996
Page 2 of 4
<PAGE> 3
The Borrowers hereby acknowledges receipt of a copy of this Contract.
Borrowers X Bikers Dream Inc. X [SIG]
----------------------------- -------------------------------
Borrowers X Its: CEO/President
----------------------------- ----------------------------
(If corporation, authorized officer
must sign and show corporate title.
If partnership, a general partner
must sign. If officer(s) or
partner, show which.)
Borrowers X
-----------------------------
- --------------------------------------------------------------------------------
GUARANTY: I guarantee that all amounts owed under this Agreement will be paid
when due. I will still be obligated even if any of the Borrowers are released
or if you waive (give up) or delay enforcement of any of your rights under this
Agreement. You do not have to give me notice of any such waiver, delay or
release. I also have to pay your attorney's fees and other court costs of
enforcing this guarantee.
X [SIG]
...............................................................................
(Signature of Guarantor) (Address)
X
...............................................................................
(Signature of Guarantor) (Address)
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL COVENANTS
BORROWER'S COVENANTS: A. Borrowers warrant and agree that (a) the Collateral
was delivered to and accepted by them in satisfactory condition; (b) the
Collateral is free from and will be kept free from all liens, claims, security
interests and encumbrances except for the security interest granted herein; (c)
Borrowers will not without Creditor's prior written consent, sell, rent, lend,
encumber, pledge, transfer, secrete or otherwise dispose of any of the
Collateral, nor will Borrowers permit any such act; (d) the Collateral will be
maintained in good operating condition, repair and appearance, and will be used
and operated with care, only by qualified personnel in the regular course of
Borrower's business and in conformity with all applicable governmental laws and
regulations; (e) the Creditor may inspect the Collateral at all reasonable
times, and the Collateral will be kept by Borrowers at the location set forth
for it on the face hereof and will not be removed from said location without
the prior written consent of Creditor, except that an item of Collateral which
is mobile and of a type normally used at more than one location may be used by
Borrowers away from said location in the regular course of Borrower's business.
In any event upon Creditor's request, Borrowers will provide in writing the
current location of the Collateral to the Creditor; (f) Borrower covenants that
the Collateral will at all times be used solely for business purposes.
B. Borrowers agrees, at its own cost and expense to do everything necessary or
expedient to perfect and preserve the security interest of Creditor obtained
hereunder; to defend any action, proceeding or claim affecting the Collateral;
to pay all expenses incurred by Creditor in enforcing its rights after the
occurrence of an event of default hereunder, including the reasonable fees of
any attorneys retained by Creditor and to pay promptly all taxes, assessments,
license fees and other public or private charges when levied or assessed
against the Collateral this agreement or any accompanying note.
C. Borrowers shall at all times bear all risk of loss of damage to or
destruction of the Collateral. Borrowers agrees to procure forthwith and
maintain insurance on the Collateral for the greater of the actual cash value or
loan balance during the life of this Agreement, in the form of fire insurance
with combined additional coverage and collision, theft and/or vandalism and
malicious mischief coverage when appropriate, plus such other insurance as
Creditor may specify from time to time, all in form and amount and with insurers
satisfactory to Creditor. Borrowers agrees to deliver promptly to Creditor
certificates or, if requested, policies of insurance satisfactory to Creditor,
each with a standard long-form loss-payable endorsement naming Creditor and
assigns as loss-payee as their interests may appear. Each policy shall provide
that Creditor's interest therein will not be invalidated by the acts, omissions
or neglect of anyone other than Creditor, and will contain insurer's agreements
to give 30 days prior written notice to Creditor before cancellation of or any
material change in the policy will be effective as to Creditor, whether such
cancellation or change is at the direction of Borrowers or insurer. Creditor's
acceptance of policies in lesser amounts or risks will not be a waiver of
Borrower's foregoing obligation. Borrowers assigns to Creditor all proceeds of
such insurance, including returned and unearned premiums up to the amount owing
hereunder by Borrowers. Borrowers directs all insurers to pay such proceeds
directly to Creditor. Borrowers authorizes Creditor to endorse Borrower's name
to all insurance remittances without the joinder of Borrowers.
D. If permitted by law, Borrowers agrees that a carbon, photographic or other
reproduction of this agreement or of a financing statement may be filed as a
financing statement.
E. If Borrowers fails to perform any of their obligations hereunder, Creditor
may perform the same, but shall not be obligated to do so, for the account of
Borrowers to protect the interest of Creditor or Borrowers or both, at
Creditor's option, and Borrowers shall immediately repay to Creditor any
amounts paid by Creditor in such performance, together with interest thereof at
the same rate as is set forth on the face hereof as payable upon acceleration.
DEFAULT: Time is of the essence. An event of default shall occur if; (a)
Borrowers fails to pay when due any amount owed by it to Creditor or to any
affiliate of Creditor, whether hereunder or under any other instrument or
agreement; (b) Borrowers fails to perform or observe any other term or
provision to be performed or observed by it hereunder or under any other
instrument or agreement, furnished by Borrowers to Creditor or to any affiliate
of Creditor or otherwise acquired by Creditor or any affiliate of Creditor; (c)
Borrowers becomes insolvent or ceases to do business as a going concern; (d)
any of the Collateral is lost or destroyed; (e) Borrowers makes an assignment
for the benefit of creditors or takes advantage of any law for the relief of
debtors; (f) a petition in bankruptcy or for an arrangement, reorganization, or
similar relief is filed by or against Borrowers; (g) any property of Borrowers
is attached, or a trustee or receiver is appointed for Borrowers or for a
substantial part of Borrower's property, or Borrowers applies for such
appointment; or (h) Creditor in good faith believes that the prospect
<PAGE> 4
GT-19-00-410 (5/95)
of payment or performance hereunder is impaired or insecure.
Upon the occurrence of an event of default, and at any time thereafter as long
as the default continues, Creditor may, at its option, with or without notice
to Borrowers (i) declare this agreement to be in default, whereupon the
indebtedness specifically described herein will become immediately due and
payable, (ii) declare all other debts then owing by Borrowers to Creditor to be
immediately due and payable, (iii) cancel any insurance and credit any refund to
the indebtedness, and (iv) exercise all of the rights and remedies of a secured
party under the Uniform Commercial Code and any other applicable laws,
including the right to require Borrowers to assemble the Collateral and deliver
it to Creditor at a place to be designated by Creditor which is reasonably
convenient to both parties. Any property other than Collateral which is in or
upon the Collateral at the time of repossession may be taken and held without
liability until its return is requested by Borrowers. Unless otherwise provided
by law, any requirement of reasonable notice which Creditor may be obligated to
give regarding the sale or other disposition of Collateral will be met if such
notice is mailed to Borrowers at its address shown herein at least ten days
before the time of sale or other disposition. Creditor may buy at any sale and
become the owner of the Collateral. Borrowers agrees that Creditor may bring
any legal proceedings it deems necessary to enforce the payment and performance
of Borrower's obligations hereunder in any court in the state shown in
Creditor's address set forth herein, and service of its address shown herein.
The inclusion of a trade name or division name in the identification of
Borrowers hereunder shall not limit Creditor's right, after the occurrence of
an event of default, to proceed against all of Borrower's assets, including
those held or used by Borrowers individually or under another trade or division
name. Expenses of retaking, holding, preparing for sale, selling and the like
shall include (a) the reasonable fees of any attorneys retained by Creditor, and
(b) all other legal expenses incurred by Creditor. Borrowers agrees that it is
liable for and will promptly pay any deficiency resulting from any disposition
of Collateral after default.
WAIVER. Waiver of any default shall not be a waiver of any other default; all
of Creditor's rights are cumulative and not alternative. No waiver or change in
this agreement or in any related note shall bind Creditor unless in writing
signed by one of its officers. The term "Creditor" shall include any assignee
of Creditor who is the holder of this agreement. Any provisions hereof contrary
to, prohibited by or invalid under applicable laws or regulations shall be
inapplicable and deemed omitted herefrom, but shall not invalidate the
remaining provisions hereof. Borrowers waives all exemptions to the extent
permitted by law. Creditor may correct patent errors herein. All of the terms
and provisions of this agreement shall apply to and be binding upon Borrowers,
its heirs, personal representatives, successors and assigns and shall inure to
the benefit of Creditor, its successors and assigns. The Agreement shall be
interpreted under the law of Borrower's principal offices.
ARBITRATION: All disputes, claims or controversies arising from or relating to
this Loan or the relationships which result from this Contract, or the validity
of this arbitration clause or the entire Contract, shall be resolved by binding
arbitration by one arbitrator selected by Creditor with consent of Borrowers.
This arbitration agreement is made pursuant to this transaction in interstate
commerce, and shall be governed by the Federal Arbitration Act at 9 U.S.C.
Section 1, Judgment upon the award rendered may be entered in any court having
jurisdiction. The parties agree and understand that they choose arbitration
instead of litigation to resolve disputes. The parties understand that they
have a right or opportunity to litigate disputes through a court, but that they
prefer to resolve their disputes through arbitration, except as provided
herein. THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO A
JURY TRIAL EITHER PURSUANT TO ARBITRATION UNDER THIS CLAUSE OR PURSUANT TO A
COURT ACTION BY CREDITOR (AS PROVIDED HEREIN). The parties agree and understand
that all disputes arising under case law, statutory law and all other laws
including, but not limited to, all contract, tort and property disputes will be
subject to binding arbitration in accord with this Agreement. The parties agree
and understand that the arbitrator shall have all powers provided by the law
and this Agreement. These powers shall include all legal and equitable remedies
including, but not limited to, money damages, declaratory relief and injunctive
relief. Notwithstanding anything hereunto the contrary, Creditor retains an
option to use judicial or non-judicial relief to enforce a security agreement
relating to the Collateral secured in a transaction underlying this arbitration
agreement, to enforce the monetary obligation secured by the Collateral or to
foreclose on the Collateral. Such judicial relief would take the form of a
lawsuit. The institution and maintenance of an action for judicial relief in a
court to repossess any Collateral, to obtain a monetary judgment or to enforce
the security agreement shall constitute a waiver of the right of any party to
compel arbitration regarding any other dispute or remedy subject to arbitration
in this Agreement, including the filing of a counterclaim in a suit brought by
Creditor pursuant to this provision.
The debtor's rights and interests in the Reserve Account and Total Reserve
Credit under the Reserve Addendum to Dealer Agreement between the debtors and
the secured party dated February 28, 1994.
/s/ Dennis Campbell
---------------------------
Dennis Campbell
Dated 12-14-96
Page 4 of 4
<PAGE> 5
INDIVIDUAL GUARANTY
TO: Green Tree Financial Corporation or its subsidiary (hereinafter "Green
Tree")
RE: Biker's Dream, Inc (hereinafter "Buyer(s)")
-------------------------
- ------------------------------
- ------------------------------
To induce Green Tree to provide financing as set forth in the
Promissory note and Security Agreement ("Contract") dated February 14, 1996
(the "Contract"), between Green Tree Financial Servicing Corporation, as
Creditor, and Biker's Dream, Inc., as Buyer(s), I the undersigned Guarantor(s),
hereby guarantee to Green Tree performance of all debts or obligations of which
the Buyer owes Green Tree under the Contract.
Each Guarantor agrees that should the Buyer breach any or all terms and
conditions contained in the Contract, all duties and obligations of the Buyer
for said breach shall apply to the Guarantor.
The liability of each Guarantor hereunder is direct and unconditional
in the case of a breach by the Buyer and may be enforced without requiring
Green Tree first to resort to any right, remedy or security. Nothing shall
discharge or satisfy the liability of the Guarantor hereunder except the full
payment and performance of all of Buyer's debts and obligations to Green Tree.
Each Guarantor agrees that none of the Guarantors can avail
himself/herself of any defense whatsoever which Buyer may have against Green
Tree other than the payment of the debts or obligations. Each Guarantor hereby
for himself/herself, his/her heirs, executors and personal representatives
waives all defenses given to sureties or guarantors at law or in equity other
than the payment of said Contract.
Notice of acceptance of this Guaranty, of any adverse change in Buyer's
financial condition or of any other fact which might materially increase the
Guarantor's risk is hereby waived. The extension of time of payment,
performance of agreements or obligations or any other indulgence may be granted
to Buyer without notice to Guarantor, and all settlements and compromises made
in good faith with Buyer shall be binding upon each Guarantor. EACH GUARANTOR
HEREBY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR BASED UPON THIS GUARANTY.
In the event of default in the performance of this Guaranty, the
Guarantor agrees to pay all reasonable court costs, attorneys' fees and other
expenses paid or incurred by Green Tree in the enforcement hereof.
This Guaranty constitutes the entire agreement and no waivers or
modifications shall be valid unless in writing and signed by Green Tree and the
Guarantor.
This Guaranty shall be binding upon the heirs, executors,
administrators, successors and assigns of each of the undersigned and shall
inure to the benefit of Green Tree's successors and assigns.
Dated: February 14, 1996
<TABLE>
<S> <C>
(1) Dennis Campbell (2)
------------------------------------- -------------------------------------
(Guarantor's Name - printed or typed) (Guarantor's Name - printed or typed)
/s/ DENNIS CAMPBELL
------------------------------------- -------------------------------------
(Guarantor's Signature) (Guarantor's Signature)
</TABLE>
<PAGE> 6
LOAN PROCEEDS AUTHORIZATION
Feb. 14, 1996
----------------------
(Date)
Green Tree Financial Servicing Corporation
or its affiliates ("Green Tree")
Truck/Trailer Group
500 Landmark Towers
345 St. Peter Street
Saint Paul, Minnesota 55102
Re: Commercial Promissory Note and Security Agreement dated Feb. 14, 1996
between Biker's Dream Inc. (Borrower(s)) and Green Tree (Creditor) regarding the
following described collateral:
Champion 53 VIN # 1C9SC5339T1048124
Gentlemen:
You are hereby irrevocably instructed to disburse from the proceeds of the loan
evidenced by the above referenced promissory note the respective amounts to the
respective payee designated below:
Amount Payee (name and address)
------ ------------------------
$ 110,000.00 Bikers Dream Inc.
--------------------------------
1420 Village Way
--------------------------------
Santa Ana, CA 92704
--------------------------------
$ 193,555.00 Champion Trailer, Inc.
----------- --------------------------------
1620 East Hwy 121
--------------------------------
Lewisville, Texas 75066
--------------------------------
$
----------- --------------------------------
--------------------------------
--------------------------------
$
----------- --------------------------------
--------------------------------
--------------------------------
In making the above disbursements or any other disbursements you make pursuant
to the terms of the above referenced loan, you may use checks, drafts, orders,
transfer funds, wire transfer, or any other method or media you deem desirable.
Further, you may make such disbursements in your name and on our behalf, or in
our name.
Disbursement by you in accordance with the foregoing instructions shall be and
constitute payment and delivery to and receipt by us of any and all of such
proceeds.
Very truly yours,
Biker's Dream Inc.
- ------------------------------------------------------------
(Name of Debtor)
By [SIG] Title President/CEO
-------------------------------- --------------------
(If Corporation or Partnership)
<PAGE> 7
FORM OF GUARANTOR'S RESOLUTIONS
SECRETARY'S CERTIFICATE
I, Richard E. King, Jr., the duly elected and qualified Secretary of
Biker's Dream, Inc. a California corporation (the "Corporation"), hereby
certify that set forth below is a true and complete copy of certain resolutions
duly adopted by the Board of Directors of the Corporation, at a meeting duly
held on December 7, 1995 at which a quorum was present and acting throughout,
and such resolutions have not been amended or rescinded, are in full force and
effect on the date hereof, and are the only resolutions adopted by said Board
which relate to the matters referred to therein:
RESOLVED, that the form, terms and provisions of a proposed Guaranty
(the "Guaranty") to be made and given by this Corporation to Green Tree
Financial Servicing Corporation or its assignee or designee (collectively -
"Creditor") in order to induce Creditor to finance certain Truck or Trailer on
behalf of Biker's Dream Inc., a California corporation ("Obligor"), pursuant to
the (proposed) Security Agreement/Conditional Sale Agreement and/or Note
between Obligor and Creditor, all as submitted to this meeting and filed with
the records of this Corporation, be, and the same hereby are, approved in all
respects; and that the President (officer) and Sr. Vice President (officer) of
this Corporation or any one of them be, and each such officer hereby is,
authorized and directed to execute and deliver to Creditor the Guaranty,
substantially in the form presented to this meeting, together with such
changes, additions and modifications as may be approved by any such officer,
such approval to be conclusively evidenced by an authorized officer's execution
of the Guaranty; and
RESOLVED, that the officers of this Corporation be, and each any such
officer hereby is, authorized and directed to execute and deliver all documents
and to take or cause to be taken all other action, in the name and on behalf of
this Corporation, as may be required by Creditor or otherwise deemed by such
officers or any of them necessary or desirable to fully effectuate the purposes
and intent of, and consummate the transactions authorized by, the foregoing
resolution and to comply with the terms and provisions of the Guaranty and, if
required, the terms and provisions of the Agreement.
IN WITNESS WHEREOF, I have hereunto signed my name this 14 day of
February, 1996.
/s/ RICHARD E. KING JR.
-----------------------------------
Secretary's Name
Richard E. King, Jr.
-----------------------------------
Secretary's Name
<PAGE> 8
- -------------------------------------------------------------------------------
Buyer or Borrower:
- -------------------------------------------------------------------------------
I, the undersigned Secretary or Assistant Secretary of ________________________
(the "Corporation"), HEREBY CERTIFY that the Corporation is organized and
existing under and by virtue of the laws of the State of California.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation (or by
other duly authorized corporate action in lieu of a meeting), duly called and
held on December 7, 1995, at which a quorum was present and voting, the
following resolutions were adopted:
BE IT RESOLVED, that any one (1) of the following named officers, employees, or
agents of this Corporation, whose actual signature is shown below:
NAME POSITION ACTUAL SIGNATURE
- ---- -------- ----------------
Dennis W. Campbell Chief Executive Officer [SIG]
- ----------------------- ----------------------- -----------------------
- ----------------------- ----------------------- -----------------------
- ----------------------- ----------------------- -----------------------
acting for and on behalf of this Corporation and as its act and deed be, and he
or she hereby is, authorized and empowered:
BORROW MONEY. To borrow from time to time from Seller/Assignee or
Lender, on such terms as may be agreed upon between the officer, employee, or
agent and Seller/Assignee or Lender, such sum or sums of money as in his or her
judgment should be borrowed.
EXECUTE NOTES. To execute and deliver to Seller/Assignee or Lender the
commercial installment contract(s) ("Contracts") and security agreement(s) or
promissory note(s) of the Corporation, on Seller/Assignee or Lender's forms, at
such rates of interest and on such terms as may be agreed upon, evidencing the
sums of money so borrowed or any indebtedness of the Corporation to
Seller/Assignee or Lender, and also to execute and deliver to Seller/Assignee
or Lender one or more renewals, extensions, modifications, refinancing,
consolidations, or substitutions for one or more of the Contracts or notes, or
any portion of the Contracts or notes.
GRANT SECURITY. To mortgage, pledge, hypothecate, or otherwise encumber
and deliver to Seller/Assignee or Lender, as security for the payment of any
loan so obtained, any commercial installment contract(s) and security
agreement(s) or promissory note(s) so executed, or any other or further
indebtedness of the Corporation to Seller/Assignee or Lender at any time owing,
however the same may be evidenced, any property now or hereafter belonging to
the Corporation or in which the Corporation now or hereafter may have an
interest, including without limitation all real property and all personal
property of the Corporation or in which the Corporation now or hereafter may
have an hypothecated, or encumbered at the time such loans are obtained or such
indebtedness is incurred, or at any other time or times, and may be either in
addition to or in lieu of any property theretofore mortgaged, pledged,
hypothecated, or encumbered.
EXECUTE SECURITY DOCUMENTS. To execute and deliver to Seller/Assignee
or Lender the forms of mortgage, deed of trust, pledge agreement, hypothecation
agreement, and other security agreements and financing statements which may be
submitted by Seller/Assignee or Lender, and which shall evidence the terms and
conditions under and pursuant to which such liens and encumbrances, or any of
them, are given; and also to execute and deliver to Seller/Assignee or Lender
any other written instruments, any chattel paper, or any other collateral, of
any kind or nature, which he or she may in his or her discretion deem
reasonably necessary or proper in connection with or pertaining to the giving
of the liens and encumbrances.
FURTHER ACTS. To do and perform such other acts and things, to pay any
and all fees and costs, and to execute and deliver such other documents and
agreements, including agreements waiving the right to a trial by jury, as he or
she may in his or her discretion deem reasonably necessary or proper in order
to carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
Resolutions performed prior to the passage of these Resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Seller/Assignee or Lender may rely on these Resolutions until
written notice of their revocation shall have been delivered to and received by
Seller/Assignee or Lender. Any such notice shall not affect any of the
corporation's agreements or commitments in effect at the time notice is given.
I FURTHER CERTIFY that the officer, employee, or agent named above is duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupies the position set opposite the name; that the foregoing Resolutions
now stand of record on the books of the Corporation; and that the Resolutions
are in full force and effect and have not been modified or revoked in any
manner whatsoever.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the seal of the
Corporation on ____________________, 19___ and attest that the signatures set
opposite the names listed above are their genuine signatures.
CERTIFIED TO AND ATTESTED BY:
CORPORATE
SEAL /s/ RICHARD E. KING JR.
-----------------------------
Secretary
Richard E. King, Jr.
------------------------------
* NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this certificate should
be signed by a second Officer or Director of the Corporation.
<PAGE> 9
This FINANCING STATEMENT is presented for filing and will remain effective,
with certain exceptions, for five years from the date of filing, pursuant to
Section 9403 of the California Uniform Commercial Code.
- --------------------------------------------------------------------------------
1. DEBTOR (LAST NAME FIRST -- IF AN INDIVIDUAL)
Biker's Dream, Inc.
1A. SOCIAL SECURITY OR FEDERAL TAX NO.
33-0140149
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
1420 Village Way Santa Ana, CA 92705
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST -- IF AN INDIVIDUAL)
2A. SOCIAL SECURITY OR FEDERAL TAX NO.
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
3. DEBTOR'S TRADE NAME OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
4. SECURED PARTY
NAME Green Tree Financial Servicing Corporation
MAILING ADDRESS 345 St. Peter St.
CITY St. Paul STATE MN ZIP CODE 55102
4A. SOCIAL SECURITY NO., FEDERAL TAX NO. OR BANK TRANSIT AND A.B.A. NO.
5. ASSIGNEE OF SECURED PARTY (IF ANY)
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
5A. SOCIAL SECURITY NO., FEDERAL TAX NO. OR BANK TRANSIT AND A.B.A. NO.
6. This FINANCING STATEMENT covers the following types or items of property
(INCLUDE DESCRIPTION OF REAL PROPERTY ON WHICH LOCATED AND OWNER OF RECORD WHEN
REQUIRED BY INSTRUCTION 4).
The debtor's rights and interests in the Reserve Account and Total
Reserve under the reserve addendum to Dealer Agreement between
the debtors and the secured party dated February 28, 1994
7. CHECK /x/ 7A. / / PRODUCTS OF COLLATERAL
IF APPLICABLE ARE ALSO COVERED
7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH INSTRUCTION 5(A) ITEM:
/ / (1) / / (2) / / (3) / / (4)
8. CHECK /x/
IF APPLICABLE
/ / DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC
SEC. 9015(1)(N)
THIS FINANCING STATEMENT IS EFFECTIVE UNTIL A TERMINATION STATEMENT IS
FILED.
9. SIGNATURE(S) OF DEBTOR(S) DATE:
/s/ Bikers Dream Inc. By 2-14-96
TYPE OR PRINT NAME(S) OF DEBTOR(S)
SIGNATURE(S) OF SECURED PARTY(IES)
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES)
10. THIS SPACE FOR USE OF FILING OFFICER (DATE, TIME, FILE NUMBER AND FILING
OFFICER)
- --------------------------------------------------------------------------------
CODE 1 2 3 4 5 6 7 8 9 0
================================================================================
11. Return Copy to:
NAME Green Tree Financial Servicing Corp
ADDRESS 345 St. Peter St.
CITY St. Paul, MN 55102
STATE
ZIP CODE
================================================================================
(1) FILING OFFICER COPY
FORM UCC-1--_____
Approved by the Secretary of State
<PAGE> 10
This FINANCING STATEMENT is presented for filing and will remain effective, with
certain exceptions, for five years from the date of filing, pursuant to Section
9403 of the California Uniform Commercial Code.
- --------------------------------------------------------------------------------
1. DEBTOR (LAST NAME FIRST -- IF AN INDIVIDUAL)
Biker's Dream, Inc.
1A. SOCIAL SECURITY OR FEDERAL TAX NO.
33-0140149
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
1420 Village Way Santa Ana, CA 92705
2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST -- IF AN INDIVIDUAL)
2A. SOCIAL SECURITY OR FEDERAL TAX NO.
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
3. DEBTOR'S TRADE NAME OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER
4. SECURED PARTY
NAME Green Tree Financial Servicing Corporation
MAILING ADDRESS 345 St. Peter St.
CITY St. Paul STATE MN ZIP CODE 55102
4A. SOCIAL SECURITY NO., FEDERAL TAX NO. OR BANK TRANSIT AND A.B.A. NO.
5. ASSIGNEE OF SECURED PARTY (IF ANY)
NAME
MAILING ADDRESS
CITY STATE ZIP CODE
5A. SOCIAL SECURITY NO., FEDERAL TAX NO. OR BANK TRANSIT AND A.B.A. NO.
6. This FINANCING STATEMENT covers the following types or items of property
(INCLUDE DESCRIPTION OF REAL PROPERTY ON WHICH LOCATED AND OWNER OF RECORD WHEN
REQUIRED BY INSTRUCTION 4).
The debtor's rights and interests in the Reserve Account and Total
Reserve under the Reserve Addendum to Dealer Agreement between
the debtors and the secured party dated February 28, 1994
7. CHECK /x/ 7A. / / PRODUCTS OF COLLATERAL
IF APPLICABLE ARE ALSO COVERED
7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH INSTRUCTION 5(A) ITEM:
/ / (1) / / (2) / / (3) / / (4)
8. CHECK /x/
IF APPLICABLE
/ / DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC
SEC. 9015(1)(N)
THIS FINANCING STATEMENT IS EFFECTIVE UNTIL A TERMINATION STATEMENT IS
FILED.
9. SIGNATURE(S) OF DEBTOR(S) DATE:
/s/ [SIG] 2-14-96
TYPE OR PRINT NAME(S) OF DEBTOR(S)
SIGNATURE(S) OF SECURED PARTY(IES)
TYPE OR PRINT NAME(S) OF SECURED PARTY(IES)
10. THIS SPACE FOR USE OF FILING OFFICER (DATE, TIME, FILE NUMBER AND FILING
OFFICER)
- --------------------------------------------------------------------------------
CODE 1 2 3 4 5 6 7 8 9 0
================================================================================
11. Return Copy to:
NAME Green Tree Financial Servicing Corp
ADDRESS 345 St. Peter St.
CITY St. Paul, MN 55102
STATE
ZIP CODE
================================================================================
(1) FILING OFFICER COPY
FORM UCC-1--_____
Approved by the Secretary of State
<PAGE> 11
<TABLE>
<S> <C> <C>
345 St. Peter Street, Suite 500
St. Paul, MN 55102 Equipment Finance Division
[GREENTREE LOGO) Phone: (800) 851-1370 Truck/Trailer Credit Application
Fax: (800) 699-1671 --------------------------------
----------------------------------
FOR INTERNAL USE - DO NOT COMPLETE
- ------------------------------------------------------------------------------------------------------------------------------------
Dealer Date Taken Time Rec. Date Approved
CHAMPION TRAILER LEWISVILLE, TX 8/14/95 9:27 10/12/95
- ------------------------------------------------------------------------------------------------------------------------------------
Sales Person Phone Taken By In Person Fax Mail
HAROLD PECK STEPHANIE
- ------------------------------------------------------------------------------------------------------------------------------------
APPLICANT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
Full Name Social Security Number Home Phone Birth Date No. of
DENNIS CAMPBELL ###-##-#### 714-587-1445 12/8/59 Dependents 0
-----
- ------------------------------------------------------------------------------------------------------------------------------------
Present Street Address City State Zip How long at present address
25362 Shoshone Lake Forest CA 92630 8 Years 00 Months
----- ------
- ------------------------------------------------------------------------------------------------------------------------------------
US Citizen Marital Status Own [X] Rent/Mortgage If Owned: Jointly [ ] Value Mortgage Balance
[X] Yes [ ] No S Rent [ ] Payment $1,700.00 Solely [X] $270,000 $223,000
- ------------------------------------------------------------------------------------------------------------------------------------
Former address (Street, City, State & Zip) How long at former address
00 Years 00 Months
------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
Employer/Contact Person Business Phone Position or Title Hire Date
BIKERS DREAM INC. 714-835-8464 CEO/PRES. Mo. 90 Yr.
------ ------
- ------------------------------------------------------------------------------------------------------------------------------------
Monthly/or Annual Income Other Income (Describe) * Amount * Alimony, child support or maintenance payment
are optional information and need not be reported
$ .00 $ .00 if the applicant does not choose to rely on such
income in applying for credit.
- ------------------------------------------------------------------------------------------------------------------------------------
Former Employer (if less than 3 years at current) Business Phone Employed From To
00 Mo. 00 Yr. 00 Mo. 00 Yr.
---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
Nearest Relative Not Living With You
Name Address: Phone:
- ------------------------------------------------------------------------------------------------------------------------------------
PERSONAL FINANCIAL OBLIGATIONS AND/OR CREDIT REFERENCES (List all mortgages, auto, boat, truck, trailer, and personal loans)
- ------------------------------------------------------------------------------------------------------------------------------------
Personal Primary Bank Phone Checking Account No.
COMMERCIAL NATIONAL BANK
- ------------------------------------------------------------------------------------------------------------------------------------
Amount of Loan
Type of Account --------------- Monthly Person to
Creditor Account Number Current Balance Payment Contact
- ------------------------------------------------------------------------------------------------------------------------------------
Name (Mortgage)
MBCC
- ---------------------------------- ------------------- ON CBR
Phone
- ------------------------------------------------------------------------------------------------------------------------------------
Name (Auto)
MELON BANK
- ---------------------------------- ------------------- ON CBR
Phone
- ------------------------------------------------------------------------------------------------------------------------------------
Name (Truck/Trailer)
MELON BANK
- ---------------------------------- ------------------- ON CBR
Phone
- ------------------------------------------------------------------------------------------------------------------------------------
Name
- ---------------------------------- ------------------- RANDI ROBINSON
Phone
- ------------------------------------------------------------------------------------------------------------------------------------
Name
- ---------------------------------- ------------------- O
Phone
- ------------------------------------------------------------------------------------------------------------------------------------
CO-APPLICANT INFORMATION
- ------------------------------------------------------------------------------------------------------------------------------------
CO-APPLICANT Applicant's spouse must complete the section below if the applicant is relying on the spouse's income as a basis for
repayment of the credit, or if the applicant resides in Arizona, California, Hawaii, Idaho, Louisiana, Michigan,
Nebraska, Nevada, New Mexico, Oklahoma, Oregon, Texas or Washington.
- ------------------------------------------------------------------------------------------------------------------------------------
Full Name Social Security Number Home Phone Birth Date
- ------------------------------------------------------------------------------------------------------------------------------------
Present Street Address City State Zip How long at present address
00000 00 Years 00 Months
---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
Employer's Name & Address Business Phone Monthly Income Hire Date
$ 00 Mo. 00 Yr.
---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
Bank Phone Checking Account No.
COMMERCIAL NATIONAL BANK
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 12
BIKERS DREAMELL
- -----------------------------------------------------------------------------
Address
1420 VILLAGE WAY SANTA ANA CA 92705
- -----------------------------------------------------------------------------
Phone Type of Business
412-423-0961 [ ] Corporation [ ] Partnership [X] Proprietorship
- -----------------------------------------------------------------------------
Site & Date of Incorporation Federal I.D. Tax No. (E.I.N.)
[illegible] CA
- -----------------------------------------------------------------------------
Type of Business or Primary Use of Truck/Trailer:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
BUSINESS FINANCIAL OBLIGATIONS AND/OR CREDIT REFERENCES (List all)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Creditor Name & Address Phone No. Account Number Current Balance ($) Monthly Payment ($)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Primary Bank Name: Checking Account No.
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OWNER/OPERATOR INFORMATION
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
How Long as Owner/Operator? 1 Operator's License No. & State: Date License Expires:
00
- -------------------------------------------------------------------------------------------------------
Purchaser to Drive? IF NO: Driver Name: Driver Social Security No.: Driver Address:
[ ] Yes [X] No DENNIS CAMPBELL
- -------------------------------------------------------------------------------------------------------
Truck/Trailer to Work For: (Company Name) Company Phone: Contact Name:
TLX 800-676-4580 DAVE
- -------------------------------------------------------------------------------------------------------
Truck to be Garaged at: (Street Address, City, State & Zip)
PO BOX 289A LATROBE PA 15650
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TRUCK/TRAILER INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year Make Model Serial Number Requested Terms:
[ ] Truck [ ] Trailer [ ] Replacement
[X] New [ ] Used 1996 FREIGHTLINER 53 [X] Additional
- ----------------------------------------------------------------------------------------------------------------------------------
FIRE, THEFT, CAC AND COLLISION INSURANCE REQUIRED Type of Contract: Contract 1. Selling Price
- -------------------------------------------------- Expires:
Green Tree Insurance subsidiary to facilitate [ ] Oral [ ] Written $ 343555.00
the placing of insurance? --------------------------------- ----------
[ ] Yes [ ] No DESCRIPTION OF TRADE IN 2. Cash Down
--------------------------------- $ 40000.00
Premium $ Terms: 12 Months Year: Model: ----------
--------- ------
Deductible $ 1000.00 00 3. Trade in
---------- Allowance
- ------------------------------------------------------------------------------------ $___________
If insured by company other than Green Tree, Make:
please complete below: 4. Payoff on
- ------------------------------------------------------------------------------------ Trade
Other: $__________
Agent: __________________ Phone _____________
5. Net Trade
(Item 3
Name of Company _____________________________ --------------------------------- less Item 4) $__________
TRUCK USEAGE INCOME
POLICY NUMBER _______________________________ --------------------------------- 6. Total $ Down
Estimated Average Income (Item 5 + 2) $ 40000.00
Coverage to be subject to Mileage Restriction? Per Month: ---------
7. Amount of unpaid
[ ] Yes [ ] No If YES, radius _____________ Expected Cash Price (1-6) $ 303555.00
Revenue Miles ________ Per: ----------
- ---------------------------------------------
OPTIONAL CREDIT LIFE & DISABILITY INSURANCE [ ] Month [ ] Year 8. Other Permissible
- --------------------------------------------- Fees (Filing Fees,
etc.) $__________
Single Credit Life Insurance $______________
Revenue Per Mile $_________ 9. Insurance
Joint Credit Life Insurance $______________ $__________
The term of the insurance is ______ months Projected Month Revenue: $ 8000.00 10. Finance Amount
--------- (Items 7 + 8 + 9) $ 303555.00
Contract Effective Date: ____________ ----------
</TABLE>
All of the statements made in this application are true and correct and are
made for the purpose of obtaining credit with Green Tree Financial Corporation.
You are authorized to investigate my credit record, to verify my employment,
income references, and to obtain such other information as you deem necessary.
DATE: Feb 14, 1996 SIGNATURE OF APPLICANT: /s/ DENNIS CAMPBELL
---------------------- -------------------------
DATE: SIGNATURE OF CO-APPLICANT:
---------------------- -----------------------
<PAGE> 1
EXHIBIT 10.18
BIKERS DREAM, INC.
DEALER AGREEMENT
ARTICLE I
PARTIES AND RECITALS
1.1 EFFECTIVE DATE; PARTIES. This Dealer Agreement (this "Agreement") is
made, entered into and effective as of __________________, 199__, by and between
Bikers Dream, Inc., a California corporation ("Bikers Dream"), and
_______________________________________________________________________________
(the "Dealer"). The purpose of this Agreement is to set forth the relationship
of the parties.
1.2 BIKERS DREAM BUSINESS SYSTEM. Bikers Dream has developed a
distinctive business concept for selling, customizing and repairing
previously-owned Harley-Davidson(R) motorcycles and for selling motorcycle
products, merchandise, collectibles, clothing, jewelry and accessories in
retail stores located in stand-alone buildings or strip shopping malls under
the name "Bikers Dream(R)" (the "Bikers Dream Business System" or "Business
System").
1.3 TRADEMARKS AND SERVICE MARKS. Bikers Dream has the right and
authority to license the use of the name "Bikers Dream(R)" and certain other
trademarks, service marks, slogans, logos, and commercial symbols (the "Marks")
for use with the Business System to selected persons, businesses, and entities
who will comply with the uniformity requirements and quality standards
established by Bikers Dream.
1.4 BIKERS DREAM MOTORCYCLE DEALERSHIP. The Dealer desires, upon the
terms and conditions set forth herein, to obtain a license to operate a retail
Bikers Dream business which will utilize the Marks and the Business System (the
"Business", the "Dealership" or the "Bikers Dream Motorcycle Dealership") in
conformity with the uniformity requirements and quality standards established
by Bikers Dream. The Dealer acknowledges that to maintain high quality
standards and to preserve the integrity of the Marks and the goodwill of Bikers
Dream, each Bikers Dream dealer must maintain and adhere to certain uniform
standards, procedures and policies prescribed by Bikers Dream.
ARTICLE 2
GRANT OF DEALERSHIP RIGHTS; EXCLUSIVE TERRITORY
2.1 PREMISES. Bikers Dream hereby grants the Dealer a nonexclusive license
to operate one (1) Bikers Dream Motorcycle Dealership utilizing the Business
System and the Marks at the following single location:
____________________________________________________________________________
__________________________________________________________ (the "Premises").
2.2 NONEXCLUSIVE LICENSE; EXCLUSIVE TERRITORY. The Dealer will have a
nonexclusive license to operate one (1) Bikers Dream Motorcycle Dealership
pursuant to the Business System at the Premises. Nonexclusive, for the purposes
of this provision, means that Bikers Dream has or will grant Bikers Dream
dealerships to other dealers authorizing them to operate Bikers Dream motorcycle
dealerships in conformity with the Business System using the name "Bikers
Dream(R)" and the other Marks. Except as set forth in Article 2.3, the Dealer
will have an exclusive territory equal to the area within a _________________
(_) mile radius of the Premises (the "Exclusive Territory"). The Exclusive
Territory is exclusive to the extent that, during the term of this Agreement,
Bikers Dream
D-1
<PAGE> 2
will not own, operate or grant to any other person or entity the right to own
and operate a Bikers Dream motorcycle dealership at a retail location located
within the Exclusive Territory. Bikers Dream will have the absolute right to
own, operate or license other Bikers Dream motorcycle dealerships outside of
the Exclusive Territory. Bikers Dream will also have the right to conduct
promotional events and to participate in promotional activities anywhere,
including within the Exclusive Territory, which may include, but will not be
limited to, participation by Bikers Dream in motorcycle and automotive events,
trade shows, rallies and technical seminars.
2.3 SALE OF PROPRIETARY PRODUCTS. Bikers Dream and its affiliates will
have the right to directly or indirectly sell proprietary or other products or
merchandise under the name "Bikers Dream(R)", "Dream Wheels", or any other name
that has been or may be developed or acquired by Bikers Dream (hereinafter
referred to as "Bikers Dream Branded Products") to other persons, businesses or
entities through other methods of distribution including, but not limited to,
direct sales at national motorcycle and automotive events, rallies and trade
shows, mail order, catalog sales and telemarketing, anywhere in the world,
including the Exclusive Territory. Except for T-shirts, hats, jackets, scarfs,
sweatshirts and other clothing, novelties and jewelry, Bikers Dream will not
sell any Bikers Dream Branded Products to any motorcycle retail store located
within the Exclusive Territory that will re-sell these products to retail
customers. Bikers Dream and its affiliates will have the absolute right to use
and exploit the Marks in connection with other business concepts, including
restaurant services, anywhere in the world, including the Exclusive Territory.
2.4 NO PAYMENTS. The Dealer will not be required to make any payments
to Bikers Dream in connection with the grant of this Dealership to the Dealer.
2.5 PURCHASES OF PRODUCT. The Dealer will have the right, but not the
obligation, to purchase products, goods and services sold by Bikers Dream upon
such terms and conditions as may be established by Bikers Dream from time to
time. Bikers Dream will not have any obligation to repurchase any products,
goods or services purchased by the Dealer.
2.6 Conditions. The Dealer acknowledges that this Dealership is granted
only for the purpose of permitting the Dealer to offer the products and
services of the Business System to customers of the Dealer's Bikers Dream
Motorcycle Dealership in the manner prescribed in this Agreement and in strict
accordance with the Business System.
2.7 PERSONAL LICENSE. The Dealer will not have the right to license or
sublicense its rights under this Agreement. The Dealer will not have the
right to assign or transfer this Agreement or its rights under this Agreement,
except as specifically provided for herein.
ARTICLE 3
TERM OF AGREEMENT
3.1 TERM. The term of this Agreement will be for (___) years, commencing
on the date set forth in Article 1.1 of this Agreement. This Agreement will not
be enforceable until it has been signed by both the Dealer and the President of
Bikers Dream, and until a fully signed copy of this Agreement has been delivered
to the Dealer.
D-2
<PAGE> 3
ARTICLE 4
ADVERTISING AND MARKETING
4.1 OBLIGATIONS OF DEALER. The Dealer will be solely responsible for
creating, developing and implementing all programs and plans necessary to
market, advertise and promote the Dealership's business to the Dealer's
customers including the creation, development and implementation of all
newspaper, direct mail, Internet, telemarketing, print, radio, television and
other media advertising and promotion.
4.2 ADVERTISING. Each calendar year during the term of this Agreement,
the Dealer will spend at least four percent (4%) of its Gross Sales for
advertising, marketing, public relations, telemarketing and/or promotional
programs for the Dealer's Bikers Dream Motorcycle Dealership in the Dealer's
market area. For purposes of this provision, "Gross Sales" will mean the
aggregate gross amount of all revenues which arise from or are derived by the
Dealer from the operation of the Dealership.
4.3 TELEPHONE DIRECTORY LISTINGS. The Dealer will, at its expense,
continually advertise in the Yellow Pages in the market area where the Dealer's
Bikers Dream Motorcycle Dealership is located under the listings "Motorcycles &
Motor Scooters - Dealers", "Motorcycles & Motor Scooters - Accessories" or in
such other directories and listings as may be designated by Bikers Dream in
writing. The format, size and content of the listings will conform in all
respects to the standards established by Bikers Dream from time to time.
Expenditures made by the Dealer for Yellow Pages advertising will be applied to
the Dealer's required advertising expenditures.
4.4 APPROVAL OF ADVERTISING MATERIALS. The Dealer will Submit to Bikers
Dream for its prior approval (except with respect to the prices to be charged),
samples of all marketing materials and advertising to be used by the Dealer
that have not been prepared or previously approved by Bikers Dream. If Bikers
Dream does not respond to the Dealer within ten (10) business days after
Bikers Dream's receipt of the materials, then the submitted advertising and
marketing materials will be deemed to be approved by Bikers Dream.
ARTICLE 5
MARKS
5.1 USE OF MARKS. Bikers Dream hereby grants to the Dealer the
nonexclusive personal right to use the Marks in accordance with the provisions
of this Agreement. The Dealer expressly acknowledges that Bikers Dream is the
sole and exclusive licensor of the Marks and will not represent in any manner
that the Dealer has acquired any ownership rights in the Marks. The Dealer
will not to use any of the Marks or any marks, names, logos or indicia which
are or may be confusingly similar in its own corporate or business name except
as authorized by this Agreement. All goodwill associated with the Business
System and identified by the Marks will inure directly and exclusively to the
benefit of Bikers Dream and upon the expiration or termination of this
Agreement for any reason, no monetary amount will be assigned or attributable
to any goodwill associated with the Dealer's use of the Marks.
5.2 INFRINGEMENT. The Dealer's use of the Marks, other than as expressly
authorized by this Agreement, without Bikers Dream's prior written consent will
constitute an infringement of Bikers Dream's rights, and the Dealer's right
to use the Marks will not extend beyond the termination or expiration of this
Agreement. The Dealer will not, directly or indirectly, commit any act of
D-3
<PAGE> 4
infringement or contest (or aid others in contesting) the validity of Bikers
Dream's rights to the Marks or take any other action in derogation thereof.
5.3 UNAUTHORIZED USE; DEFENSE OR ENFORCEMENT OF RIGHTS. The Dealer will
have no right to and will not undertake to defend or enforce any rights
associated with the Marks or the Business System in any Court or other
proceedings for or against imitation, infringement, prior use or for any other
claim or allegation. The Dealer will promptly notify Bikers Dream in writing
of any claim, demand or cause of action that Bikers Dream may have based upon
or arising from any unauthorized attempt by any person or legal entity to use
the Marks or the Business System, any colorable variation thereof, or any
other mark, name or indicia which Bikers Dream has or claims a proprietary
interest and all other claims or complaints made against, associated with or
relating to the Marks and the Business System. The Dealer will assist Bikers
Dream, upon request and without the Dealer being compensated for its time or
effort, in taking such action, if any, as Bikers Dream may deem appropriate to
defend against or halt such activities, and the Dealer will take no action nor
incur any expenses on Bikers Dream's behalf without Bikers Dream's prior
written approval. If Bikers Dream undertakes the defense or prosecution of any
litigation relating to the Marks or the Business System, the Dealer agrees to
execute any and all documents and to do such acts and things as may, in the
opinion of Bikers Dream's legal counsel, be reasonably necessary to carry out
such defense or prosecution.
5.4 TENDER OF DEFENSE. If the Dealer is named as a defendant or party in
any action involving the Marks or the Business System solely because the
plaintiff or claimant is alleging that the Dealer does not have the right to
use the Marks or the Business System, then the Dealer will have the right to
tender the defense of the action to Bikers Dream within ten (10) days after
receiving service of the Summons and Complaint in the action, and Bikers Dream
will, at its expense, defend the Dealer in the action.
5.5 CONDITIONS TO LICENSE. The Dealer further agrees and covenants: (A)
to operate and advertise the Business only under the name or names from time to
time designated by Bikers Dream for use by similar Bikers Dream dealers; (B)
to adopt and use the Marks solely in the manner prescribed by Bikers Dream;
(C) to refrain from using the Marks to perform any activity or to incur any
obligation or indebtedness in such a manner as may, in any way, subject Bikers
Dream to liability therefor; (D) to observe all laws with respect to the
registration of trade names and assumed or fictitious names and to include in
any application therefor a statement that the Dealer's use of the Marks is
limited by the terms of this Agreement; (E) to provide Bikers Dream with a copy
of any such application and other registration document(s); (F) to observe such
requirements with respect to trademark and service mark registrations and
copyright notices as Bikers Dream may, from time to time, require including,
without limitation, affixing "SM)," "TM" or "(R)" adjacent to all such Marks;
and (G) to utilize such other appropriate notice of ownership, registration and
copyright as may be required by Bikers Dream or applicable law.
5.6 NEW MARKS. Bikers Dream reserves the right, in its sole discretion,
to designate one or more new, modified or replacement Marks for use by all
Bikers Dream dealers and to require the use by the Dealer of any such new,
modified or replacement Marks in addition to or in lieu of any previously
designated Marks. Any expenses or costs associated with the use by the Dealer
of any such new, modified or replacement Marks will be the sole responsibility
of the Dealer.
D-4
<PAGE> 5
ARTICLE 6
SITE SELECTION; PREMISES
6.1 SITE SELECTION. The Dealer will be solely responsible for selecting
the site for the Premises and for purchasing or leasing the real estate and
constructing or remodeling the building for the Premises. Accordingly, no
provision of this Agreement will be construed or interpreted to impose any
obligation upon Bikers Dream to locate a suitable site for the Premises, to
assist the Dealer in the selection of a suitable site for the Premises, to
provide any assistance to the Dealer in the purchase or lease of the Premises,
or to assist the Dealer with the construction or remodeling of the Premises.
The Dealer acknowledges that neither Bikers Dream's review of the proposed site
for the Premises nor any assistance that may be provided by Bikers Dream in the
selection or development of the site constitutes a representation, warranty or
guaranty by Bikers Dream regarding the potential financial success of the
Dealer's Bikers Dream Motorcycle Dealership operated at that site, and the
Dealer assumes all business and economic risks associated with the site.
6.2 LEASE FOR PREMISES. If the Premises are leased by the Dealer, then
the Dealer will be solely responsible for negotiating and obtaining a lease for
the Premises.
ARTICLE 7
SIGNS
The Bikers Dream signs used at or on the Premises (the "Signs"), must at all
times comply with Bikers Dream's current standards and specifications. The
Dealer will, at its expense, be responsible for any and all Sign costs,
installation costs, architectural fees, engineering costs, design costs,
construction costs, permits, licenses, repairs, maintenance, utilities,
insurance, taxes, assessments and levies in connection with the erection or use
of the Signs. The Dealer will not alter, remove, change, modify, or redesign
the Signs unless approved by Bikers Dream in writing.
ARTICLE 8
STANDARDS OF OPERATION
8.1 USE OF PREMISES. The Dealer will use the Premises solely for the
operation of the Business in the manner and pursuant to the standards
prescribed by Bikers Dream herein or otherwise in writing, and the Dealer will
not use the Premises for any other purpose or activity.
8.2 COMPLIANCE WITH APPLICABLE LAWS. The Dealer will, at its expense,
comply with all applicable federal, state, city, local and municipal laws,
ordinances, rules and regulations pertaining to the Premises and the operation
of the Bikers Dream Motorcycle Dealership including, but not limited to, motor
vehicle dealers laws, licensing laws, health and safety regulations, laws
relating to employees, environmental laws, discrimination laws, sexual
harassment laws and laws relating to the disabled. The Dealer will, at its
expense, be absolutely and exclusively responsible for determining the licenses,
certifications and permits required by law for the Business, for qualifying for
and obtaining all such licenses, certifications and permits, for maintaining all
such licenses, certifications and permits in force and effect at all times, and
for complying with all applicable laws.
8.3 PAYMENT OF TAXES. The Dealer will be absolutely and exclusively
responsible and liable for the prompt filing of all tax returns and the prompt
payment of all federal, state, city and local taxes including, but not limited
to, individual and corporate income taxes, sales and use taxes, franchise
taxes, gross receipts taxes, employee withholding taxes, F.I.C.A. taxes,
unemployment taxes,
D-5
<PAGE> 6
inventory taxes, personal property taxes, real estate taxes and other taxes
payable in connection with the Dealer's Bikers Dream Motorcycle Dealership
(hereinafter referred to as "Taxes"). Bikers Dream will have no liability for
the Taxes which arise or result from the Business and the Dealer will indemnify
Bikers Dream for any such Taxes that may be assessed or levied against Bikers
Dream which arise or result from the Business. It is expressly understood and
agreed by the Personal Guarantors to this Agreement that their personal
guaranty applies to the prompt filing of all returns and the prompt payment of
all Taxes which arise or result from the Business.
8.4 OPERATION OF DEALERSHIP. The Dealer will refrain from operating the
Business in any manner which adversely reflects on Bikers Dream's name,
goodwill or the Marks. Without limiting the generality of the foregoing, the
Dealer agrees to: (A) maintain a sufficient supply of merchandise, products,
inventory, materials, supplies and equipment previously approved in writing by
Bikers Dream; and (B) sell and offer for sale all merchandise, products and
services that Bikers Dream may require which meet its uniform quality standards
and specifications.
8.5 IDENTIFICATION OF BUSINESS. In all advertising displays and materials
as Bikers Dream may require for the Business and at the Premises, the Dealer
will, in such form and manner as may be specified by Bikers Dream, notify the
public that the Dealer is operating the business licensed hereunder as an
authorized Dealer of Bikers Dream.
8.6 MAINTENANCE. The Dealer will, at its expense, repair, paint and keep
in a clean and sanitary condition the interior, the exterior, signage, exterior
lighting, the Premises for the Dealer's Business, and the Dealer will replace
all floor covering, wall coverings, light fixtures, curtains, blinds, shades,
furniture, room furnishings, wall hangings, signs, fixtures and other decor
items as such items become worn-out, soiled or in disrepair.
ARTICLE 9
ASSIGNMENT
9.1 ASSIGNMENT BY BIKERS DREAM. This Agreement may be unilaterally
assigned and transferred by Bikers Dream without the approval or consent of the
Dealer, and will insure to the benefit of Bikers Dream's successors and assigns.
Bikers Dream will provide the Dealer with written notice of any such assignment
or transfer, and the assignee will be required to fully perform Bikers Dream's
obligations under this Agreement.
9.2 ASSIGNMENT UPON DEATH OR PERMANENT DISABILITY OF DEALER. if the
Dealer is an individual, then in the event of the death or permanent disability
of the Dealer, this Agreement may be assigned, transferred or bequeathed by the
Dealer to any designated person or beneficiary without first offering Bikers
Dream the right to acquire this Agreement. However, the transferee, assignee or
beneficiary of the Dealer must agree to be unconditionally bound by the terms
and conditions of this Agreement and to personally guarantee the performance of
the Dealer's obligations under this Agreement.
9.3 ASSIGNMENT BY DEALER. This Agreement and the rights granted to the
Dealer pursuant to this Agreement may be sold, assigned or transferred by the
Dealer only with the prior written approval of Bikers Dream, which will not be
unreasonably withheld.
D-6
<PAGE> 7
ARTICLE 10
TERMINATION
10.1 TERMINATION ON NOTICE. Bikers Dream and the Dealer will each have the
right and privilege to terminate this Agreement, with or without cause, by
providing the other party with sixty (60) days written notice of termination.
If this Agreement is terminated pursuant to this Article, then the effective
date of termination of this Agreement will be at the close of business on the
sixtieth (60th) day after the written notice of termination is received. If
the Dealer fails to timely pay any of its uncontested obligations or
liabilities due and owing to Suppliers, banks, purveyors, and other creditors,
then Bikers Dream will have the right to terminate this Agreement by giving the
Dealer fifteen (15) days written notice of termination, and specifying the
default. If the Dealer fails to correct the default specified in the written
notice within the fifteen (15) day period, then the effective date of
termination of this Agreement will be at the close of business on the fifteenth
(15th) day after the written notice of termination is received by the Dealer.
10.2 IMMEDIATE TERMINATION. Bikers Dream will have the absolute right and
privilege to immediately terminate this Agreement upon written notice to the
Dealer if: (A) the Dealer or any of its Managers, partners, Directors, officers
or majority shareholders are convicted of, or plead guilty to or no contest to
a charge of violating any law relating to the Dealer's Bikers Dream Motorcycle
Dealership, or any felony; (B) the Dealer is deemed insolvent within the
meaning of any state or federal law, any involuntary petition for bankruptcy is
filed against the Dealer, or the Dealer files for bankruptcy or is adjudicated
a bankrupt under any state or federal law; (C) the Dealer makes an assignment
for the benefit of creditors or enters into any similar arrangement for the
disposition of its assets for the benefit of creditors; (D) the Dealer
Voluntarily or otherwise abandons the Bikers Dream Motorcycle Dealership; (E)
the Dealer is involved in any act or conduct which materially impairs the
goodwill associated with Bikers Dream's Marks or the Business System and the
Dealer fails to correct the breach within twenty-four (24) hours of receipt of
written notice from Bikers Dream of the breach; (F) the Dealer fails to timely
file all federal and state tax returns or fails to timely pay all required
federal and state taxes; or (G) the Dealer fails to timely pay its open account
in accordance with the credit terms granted to the Dealer by Bikers Dream.
ARTICLE 11
POST-TERM OBLIGATIONS
11.1 DEALER'S POST-TERM OBLIGATIONS. Upon the expiration or termination of
this Agreement:
(A) the Dealer will immediately cease to be a dealer of Bikers
Dream, cease to operate the former Business under the Business
System, and the Dealer will not thereafter, directly or indirectly,
represent to the public that the former Business is or was operated or
is in any way connected with the Business System or Bikers Dream, or
hold itself out as a present or former dealer of Bikers Dream;
(B) the Dealer will pay all sums and fees owing to Bikers Dream;
such sums will include actual damages, costs and expenses incurred by
Bikers Dream as a result of a default of this Agreement;
(C) the Dealer will return to Bikers Dream all trade secrets and
confidential materials, equipment and other property owned by Bikers
Dream, and all copies thereof. The Dealer will retain no copy or
other record of any of the foregoing. The Dealer may retain its copy
of this Agreement, any correspondence between the parties and any
other documents which the Dealer reasonably needs for compliance with
any applicable laws;
D-7
<PAGE> 8
(D) the Dealer will cease to use in advertising, or in any manner
whatsoever, the name "Bikers Dream(R)", the other Marks, any methods,
procedures or techniques associated with the Business System or the
Marks, and any other symbols and indicia of operation associated with
the Business System or the Marks, and remove all trade dress and other
indications of operation under the Business System from the
Premises. The Dealer agrees that Bikers Dream or a designated agent
may enter upon the Premises at any time to make such changes at the
Dealer's sole risk and expense and without liability for trespass; and
(E) the Dealer will cancel all classified and other directory listings
under the "Bikers Dream(R)" name.
ARTICLE 12
INSURANCE
The Dealer will, at its sole cost and expense, procure and maintain in full
force and effect: (A) a general liability insurance policy with coverage of at
least One Million Dollars ($1,000,000); (B) automobile, truck and motorcycle
liability insurance with coverage of at least Five Hundred Thousand Dollars
($500,000); (C) employer's liability and workers' compensation insurance as
required by law; and (D) all other insurance required by state or federal law.
All insurance policies will name Bikers Dream as an additional insured.
ARTICLE 13
INDEMNIFICATION; INDEPENDENT CONTRACTOR
13.1 INDEMNIFICATION. Bikers Dream will not be obligated to any person or
entity for damages arising out of the operation of the Business that is
Conducted by the Dealer pursuant to this Agreement. The Dealer will protect,
defend, indemnify, and hold Bikers Dream and its respective Directors,
officers, agents, employees and shareholders, jointly and severally, harmless
from and against all claims, actions, proceedings, damages, costs, expenses and
other losses and liabilities, consequently, directly and indirectly incurred
(including, without limitation, attorneys' and accountants' fees) as a result
of, arising out of, or connected with the operation of the Dealer's Business.
Bikers Dream will have the right to defend any claim made against it arising as
a result of or from the Dealer's Bikers Dream Motorcycle Dealership. The
Dealer will reimburse Bikers Dream for all damages for which Bikers Dream is
held liable and for all costs reasonably incurred by Bikers Dream in the
defense of any such claim brought against it or in any action arising out of
the Business in which Bikers Dream is named as a party. In addition, the
Dealer will pay all costs and expenses incurred by Bikers Dream in enforcing
any term, condition or provision of this Agreement or in seeking to enjoin any
violation of this Agreement by the Dealer, including attorneys' fees actually
incurred by Bikers Dream. The indemnification and other obligations contained
herein will continue in full force and effect subsequent to and notwithstanding
the expiration or termination of this Agreement.
13.2 INDEPENDENT CONTRACTOR. Nothing in this Agreement is intended by the
parties to create a fiduciary relationship between them nor to make the Dealer
an agent, legal representative, subsidiary, joint venturer, partner, employee
or servant of Bikers Dream for any purpose whatsoever. It is understood and
agreed that the Dealer is an independent contractor and is in no way
authorized to make any contract, warranty or representation or to create any
obligation on behalf of Bikers Dream. In all dealings with third parties
including employees, suppliers and customers, the Dealer will disclose that it
is an independent entity licensed by Bikers Dream.
D-8
<PAGE> 9
13.3 OPERATION OR BUSINESS. The Dealer will be totally and solely
responsible for the operation of its Bikers Dream Motorcycle Dealership, and
will control, supervise and manage all of the employees, agents and independent
contractors who work for or with the Dealer. The Dealer will be responsible
for the acts of its employees, agents and independent contractors and will take
all reasonable business actions necessary to ensure that its employees, agents
and independent contractors comply with all federal, state and local laws,
rules and regulations including, but not limited to, all discrimination laws,
sexual harassment laws and laws relating to the disabled. Bikers Dream will
not have any right, obligation or responsibility to control, supervise, hire,
fire or manage the Dealer's employees, agents or independent contractors.
ARTICLE 14
WRITTEN APPROVALS, WAIVER AND AMENDMENT
14.1 WRITTEN APPROVALS. Whenever this Agreement requires Bikers Dream's
prior approval, the Dealer will make a timely written request for such
approval. Unless a different time period is specified in this Agreement,
Bikers Dream will respond with its approval or disapproval within fifteen (15)
business days after receipt of the written request.
14.2 NO WAIVERS. No failure of Bikers Dream to exercise any power reserved
to it by this Agreement and no custom or practice of the parties at variance
with the terms hereof will constitute a waiver of Bikers Dream's right to
demand exact compliance with any of the terms herein. A waiver or approval by
Bikers Dream of any particular default by the Dealer or acceptance by Bikers
Dream of any payments due hereunder will not be considered a waiver or approval
by Bikers Dream of any preceding or subsequent breach by the Dealer of any
term, covenant or condition of this Agreement.
14.3 AMENDMENT OF AGREEMENT. No amendment, change or variance from this
Agreement will be binding upon either Bikers Dream or the Dealer, except by
mutual written agreement signed by the Dealer and the President of Bikers
Dream. If an amendment to this Agreement is executed at the Dealer's request,
any legal fees or costs incurred by Bikers Dream will be paid by the Dealer.
ARTICLE 15
ENFORCEMENT
15.1 GOVERNING LAW. Except to the extent governed by the United States
Trademark Act of 1946 (Lanham Act, 15 U.S.C. Section 1051 et seq.), this
Agreement and the relationship between Bikers Dream and the Dealer will be
governed by the laws of the state in which the Premises for the Business are
located. The provisions of this Agreement which conflict with or are
inconsistent with applicable governing law will be Superseded and/or modified
by Such applicable law only to the extent such provisions are inconsistent.
All other provisions of this Agreement will be enforceable as originally made
and entered into upon the execution of this Agreement by the Dealer and Bikers
Dream.
15.2 VENUE AND JURISDICTION. Unless provided by this Agreement or
applicable law to the contrary, all litigation, lawsuits, hearings, proceedings
and other actions initiated by either party against the other party will be
venued exclusively in Santa Ana, California. The Dealer, each of its officers,
Directors and shareholders, and the Personal Guarantors (do hereby agree and
submit to personal jurisdiction in the State of California for the purposes of
any suit, proceeding or hearing brought to enforce or construe the terms of
this Agreement or to resolve any dispute or controversy arising under, as a
result of, or in connection with this Agreement, the Premises or the Business,
and do
D-9
<PAGE> 10
hereby agree and stipulate that any such suits, proceedings, hearings or other
actions will be exclusively venued and held in Santa Ana, California.
15.3 BINDING AGREEMENT. This Agreement is binding upon the parties hereto
and their respective executors, administrators, heirs, assigns and successors
in interest.
15.4 JOINT AND SEVERAL LIABILITY. If the Dealer consists of more than one
individual, then the liability of all such individuals under this Agreement
will be deemed to be joint and several.
15.5 ENTIRE AGREEMENT. This Agreement supersedes and terminates all prior
Agreements, either oral or in writing, between the parties involving the
relationship between the Dealer and Bikers Dream, and therefore,
representations, inducements, promises or agreements alleged by either Bikers
Dream or the Dealer that are not contained in this Agreement will not be
enforceable. This Agreement constitutes the entire agreement of the parties,
and there are no other oral or written understandings or agreements between
Bikers Dream and the Dealer relating to the subject matter of this Agreement.
15.6 PAYMENT OF COSTS. If Bikers Dream prevails in any legal proceeding
arising out of or in connection with this Agreement or if any amounts due from
the Dealer to Bikers Dream are collected by or through an attorney or
collection agency, the Dealer will be liable to Bikers Dream for all costs and
expenses incurred by Bikers Dream including, but not limited to, court costs
and reasonable attorneys' fees.
15.7 NO ORAL MODIFICATION. No modification, change, addition, rescission,
release, amendment or waiver of this Agreement and no approval, consent or
authorization required by any provision of this Agreement may be made except by
a written agreement signed by duly authorized officers or partners of the
Dealer and the President of Bikers Dream. The Dealer and Bikers Dream will not
have the right to amend or modify this Agreement orally or verbally, and any
attempt to do so will be void and unenforceable in all respects.
15.8 SEVERABILITY. Should any part of this Agreement, for any reason, be
declared invalid by a Court of competent jurisdiction, such decision or
determination will not affect the validity of any remaining portion and such
remaining portion will remain in force and effect as if this Agreement had been
executed with the invalid portion eliminated; provided, however, that in the
event of a declaration of invalidity, the provision declared invalid will not
be invalidated in its entirety, but will be observed and performed by the
parties to the extent such provision is valid and enforceable. The parties
hereby agree that any such provision will be deemed to be altered and amended
to the extent necessary to effect such validity and enforceability.
ARTICLE 16
NOTICES
All notices required under this Agreement to Bikers Dream must be in writing
and must be delivered by personal service upon an officer of Bikers Dream or
sent by prepaid United States certified mail addressed to Bikers Dream at 1420
Village Way, Santa Ana, California 92705, or such other address as Bikers Dream
may designate in writing, with a copy to Rowland W. Day, II, Esq., Day &
Campbell, 3070 Bristol Street, Costa Mesa, California 92626. All notices
required under this Agreement to the Dealer must be in writing and must be
delivered by personal service upon the Dealer (or, if applicable, upon an
officer of the Dealer) or sent by prepaid United States certified
D-10
<PAGE> 11
mail addressed to the Dealer at the Premises, or such other address as the
Dealer may designate in writing. A notice delivered by a recognized overnight
delivery service such as Federal Express, UPS, and Purolator that requires a
written receipt signed by the addressee will be deemed to have been personally
served under this Agreement if the receipt is properly signed by an employee of
the addressee.
ARTICLE 17
ACKNOWLEDGMENTS
17.1 No INCOME OR REFUND. Bikers Dream will not: (A) warrant or guarantee
that the Dealer will derive income or profit from the Business; (B) refund all
or part of any fees paid to Bikers Dream for services rendered or repurchase
any of the inventory, furniture, fixtures, products, equiprnent or supplies
supplied or sold by Bikers Dream if the Dealer is unsatisfied with its Bikers
Dream Dealership; (C) warrant or guarantee that the location or site selected
by the Dealer for the Dealership will be economically or financially
successful; or (D) provide the Dealer with business plans, marketing programs
or plans, sales programs or plans, advertising materials, or advertising or
strategic plans.
17.2 OPPORTUITY TO CONSULT ADVISORS. The Dealer acknowledges that it has
had ample opportunity to consult with its attorneys, accountants and other
advisors and that tile attorneys for Bikers Dream have not advised or
represented the Dealer with respect to this Agreement or the relationship
thereby created.
17.3 DISCLAIMER BY BIKERS DREAM. Bikers Dream expressly disclaims the making
of any express or implied representations or warranties regarding the revenues,
earnings, income, profits, Gross Sales, Motorcycle Sales, expenses, business or
financial success, or value of the Dealership Business.
IN WITNESS WHEREOF, Bikers Dream, the Dealer and the Dealer's shareholders have
respectively signed and sealed this Agreement effective as of the day and year
first above written.
"DEALER" "BIKERS DREAM"
______________________________ Bikers Dream, Inc.
By ___________________________ By ________________________________
Its __________________________ Its _______________________________
D-11
<PAGE> 12
PERSONAL, GUARANTY AND AGREEMENT TO BE BOUND
PERSONALLY BY THE TERMS AND CONDITIONS
OF THE BIKERS DREAM DEALER AGREEEMT
In consideration of the execution of this Agreement by Bikers Dream, and for
other good and valuable consideration, the undersigned, for themselves, their
heirs, successors, and assigns, do jointly, individually and severally hereby
become surety and guaranty for the payment of all amounts and the performance
of the covenants, terms and conditions in this Agreement, to be paid, kept and
performed by the Dealer.
Further, the undersigned, individually and jointly, hereby agree to be
personally bound by each and every condition and term contained in this
Agreement and agree that this Personal Guaranty should be construed as though
the undersigned and each of them executed an agreement containing the identical
terms and conditions of this Agreement.
If any default should at any time be made therein by the Dealer, then the
undersigned, their heirs, successors and assigns, do hereby, individually,
jointly and severally, promise and agree to pay to Bikers Dream all monies due
and payable to Bikers Dream under the terms and conditions of this Agreement. In
addition, if the Dealer fails to comply with any other terms and conditions of
this Agreement, then the undersigned, their heirs, successors and assigns, do
hereby, individually, jointly and severally, promise and agree to comply with
the terms and conditions of this Agreement for and on behalf of the Dealer.
In addition, should the Dealer at any time be in default on any obligation to
pay monies to Bikers Dream or any subsidiary or affiliate of Bikers Dream,
whether for merchandise, products, supplies, furniture, fixtures, equipment or
other goods purchased by the Dealer from Bikers Dream or any subsidiary or
affiliate of Bikers Dream, or for any other indebtedness of the Dealer to
Bikers Dream or any subsidiary or affiliate of Bikers Dream, then the
undersigned, their heirs, successors and assigns, do hereby, individually,
jointly and severally, promise and agree to pay all such monies due and payable
from the Dealer to Bikers Dream or any subsidiary or affiliate of Bikers Dream
upon default by the Dealer.
It is further understood and agreed by the undersigned that the provisions,
covenants and conditions of this Personal Guaranty will inure to the benefit of
the successors and assigns of Bikers Dream.
PERSONAL GUARANTORS
__________________________________ _________________________________
Individually Individually
__________________________________ _________________________________
Address Address
__________________________________ _________________________________
City State Zip Code City State Zip Code
__________________________________ _________________________________
Telephone Telephone
D-12
<PAGE> 13
SCHEDULE OF BIKERS DREAM DEALERS
Bikers Dream Tampa Bay
6170 Ulmerton Road
Clearwater, FL 34620
Bikers Dream Scottsdale
2302 N. Scottsdale Road
Scottsdale, AZ 85257
Bikers Dream of Joliet
17326 New Lenox Road
Joliet, IL 60433
Bikers Dream of Albuquerque
431 Edmond Rd. NE
Albuquerque, NM 87107
Bikers Dream of Atlanta
5895 Highway 9
Alpharetta, GA 30201
Bikers Dream of Utah
3528 W. 3500 South
West Valley, UT 84119
Bikers Dream of Korea
306-69 Shinjang-Dong
Songtab City, Korea
<PAGE> 1
EXHIBIT 10.19
STOCK REPURCHASE AGREEMENT
Between and Among
DENNIS CAMPBELL,
DC ENTERPRISES, INC.
and
BIKERS DREAM, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
1. Sale and Purchase of Shares ......................................... 1
1.1 Shares Sold and Acquired ....................................... 1
1.2 Consideration; Dealership Rights ............................... 1
1.3 Additional Consideration ....................................... 3
1.4 Balance Sheet .................................................. 3
1.5 Assumption of Liabilities; Lease ............................... 4
1.6 Sales and Use Taxes ............................................ 4
2. Representations and Warranties of Seller and Campbell ............... 4
2.1 Power .......................................................... 4
2.2 Binding Obligation ............................................. 4
2.3 No Conflicts ................................................... 5
2.4 Litigation and Other Proceedings ............................... 5
2.5 No Consent ..................................................... 5
2.6 Title .......................................................... 5
2.7 Due Diligence .................................................. 5
3. Representations and Warranties of Purchaser .......................... 5
3.1 Organization .................................................... 6
3.2 Authority ....................................................... 6
3.3 Binding Obligation .............................................. 6
3.4 No Conflicts .................................................... 6
3.5 Litigation and Other Proceedings ................................ 6
3.6 No Consent ...................................................... 6
4. The Closing .......................................................... 7
4.1 The Closing Date and Place ...................................... 7
4.2 Actions and Deliveries by Purchaser at the Closing .............. 7
4.3 Actions and Deliveries by Seller at the Closing ................. 7
5. Conditions to Closing ................................................ 8
5.1 Conditions Precedent of Purchaser ............................... 8
5.2 Conditions Precedent of Seller .................................. 8
5.3 Condition Subsequent ............................................ 9
6. Obligations After Closing ............................................ 9
6.1 Further Assurances .............................................. 9
6.2 Indemnification by Seller and Campbell .......................... 9
6.3 Indemnification by Purchaser .................................... 9
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
6.4 Defense of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.5 Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.6 Florida License. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.7 Solicitation of Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.8 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7. Costs and Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.1 Costs Borne by Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2 Broker's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8. Form of Agreement and Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.1 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9. Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.1 Other Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 12
11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12. Confidentiality and Non-Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.1 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.2 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14. Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 4
STOCK REPURCHASE AGREEMENT
THIS STOCK REPURCHASE AGREEMENT (this "Agreement"), effective as of
September 9, 1996, is made between and among DENNIS CAMPBELL, an individual
resident of Florida, for himself and as trustee and sole grantor under the
"Dennis Wayne Campbell Revocable Trust datd 9/27/94" ("Campbell"), DC
ENTERPRISES, INC., a Nevada corporation (the "Seller") and BIKERS DREAM, INC.,
a California corporation (the "Purchaser"):
WITNESSETH:
WHEREAS, Seller is wholly owned by Campbell, who is currently
President of Purchaser; and
WHEREAS, Campbell has contributed 950,000 shares of Purchaser's common
stock, no par value per share (the "Shares") held in the name of "Dennis Wayne
Campbell Revocable Trust dtd 9/27/94" to Seller; and
WHEREAS, Campbell desires to cause Seller to sell the Shares to
Purchaser in exchange for, among other consideration, Purchaser granting
Seller dealership rights in Purchaser's motorcycle, motorcycle parts,
accessories and service business (the "Business") located at 6170 Ulmerton
Road, Clearwater, Florida 34620 (the "Location"); and
WHEREAS, Purchaser desires to acquire such Shares from Seller upon the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and subject to the terms and
conditions hereof, the parties agree as follows:
SECTION 1
SALE AND PURCHASE OF SHARES
1.1 SHARES SOLD AND ACQUIRED. Subject to the terms and conditions
set forth in this Agreement, Seller does hereby agree to sell, transfer, and
deliver to Purchaser, and Purchaser does hereby agree to purchase, acquire, and
accept from Seller, on the Closing Date all fights, title and interest of
Seller in and to the Shares.
1.2 CONSIDERATION; DEALERSHIP RIGHTS. Purchaser agrees to grant
Seller dealership rights (the "Rights") to the Location in accordance with its
standard dealership agreement, a copy of which is attached as Exhibit 1.2
hereto, with the following additional terms and conditions:
(a) The Rights shall be royalty-free for a period of
three years from the Closing Date (as defined in Section 4.1, below);
<PAGE> 5
(b) At the Closing (as defined in Section 4.1, below),
Purchaser shall transfer, assign and convey to Seller all inventory at the
Location as shown on the Balance Sheet (as defined in Section 1.4, below),
which inventory shall have a value of at least $250,000, valued at cost to
Purchaser for inventory selection purposes;
(c) At Closing, Purchaser shall retain rights to all
accounts receivable and shall remain obligated for all accounts payable
incurred or accrued by the Business conducted at the Location prior to the
Closing as shown on the Balance Sheet;
(d) At Closing Purchaser shall cause there to be ten
motorcycles at the Location as part of the Inventory, comprised as follows:
five motorcycles presently located at the Location, one "Low Boy" presently
located at Purchaser's location in Santa Ana, California, and four motorcycles
with stock numbers of HD5327, HD6419, HD7103A and HD9305 and to be shipped from
Purchaser's location in Dallas, Texas;
(e) At Closing Purchaser shall transfer, assign and
convey to Seller all merchandise located on Purchaser's rented U-haul support
vehicle, which merchandise shall have a value of $100,000, valued at cost to
Purchaser;
(f) At Closing Purchaser shall cause there to be $10,000
cash on hand at the Location, which cash on hand Purchaser shall transfer,
assign and convey to Seller;
(g) Purchaser shall pay all costs relative to the
transportation of one shipment of inventory from Purchaser's location at Santa
Ana, California to the Location, including motorcycles, and will likewise pay
all costs relating to the transportation of motorcycles that are required to be
shipped to the Location from Purchaser's location at Dallas, Texas;
(h) Purchaser shall cause all payroll to be fully paid
through the Closing Date with respect to all employees employed by Purchaser at
any time up to and through the Closing Date at the Location;
(i) Purchaser agrees to grant Seller future dealership
rights (cancelable by Purchaser upon 90 days' written notice) for new "Bikers
Dream" motorcycle, motorcycle parts, accessories and service businesses within
the one hundred square mile area surrounding the Location, which new stores
shall be granted pursuant to Purchaser's standard dealership agreement, a copy
of which is attached as Exhibit 1.2 hereto, and which dealership agreements
will not include the supplemental terms described in Section 1.2(a) through (h)
or in Section 1.3 hereof, or in any other provision of this Agreement,
inconsistent with such standard dealership agreement;
(j) Notwithstanding anything contained in Purchaser's
standard dealership agreement, Seller and Campbell acknowledge that they have no
rights to the name "Bikers Dream" or any related trademark except to the extent
granted to them as part of the Rights, and, in particular, without limiting the
foregoing, shall have no rights to open a restaurant or conduct or engage in any
2
<PAGE> 6
other business, except as specifically described herein, using the name "Bikers
Dream" or any derivative thereof or any other name or mark that is confusingly
similar thereto; and
(k) The Rights may be canceled at any time by Purchaser
upon 90 days' written notice.
1.3 ADDITIONAL CONSIDERATION. In addition to the foregoing,
Purchaser agrees to pay the following consideration:
(a) In cancellation of prior indebtedness of $115,500,
Purchaser shall pay Campbell the aggregate amount of $19,500 at Closing and the
balance in equal monthly installments starting 30 days after Closing for a
period of 24 months;
(b) At Closing Purchaser shall pay the balance on
Campbell's MBNA credit card (the "Credit Card") up to the amount of $24,000;
(c) Purchaser agrees to maintain and continue Campbell's
coverage under Purchaser's health care plan through December 31, 1996, to the
same extent to which Campbell was covered by such plan as of the day prior to
the Closing Date, and to assume all costs relating to such continuing coverage;
(d) At Closing Purchaser shall transfer, assign and
convey to Seller all of the furniture located in Campbell's office at
Purchaser's location at Santa Ana, California, including without limitation, a
desk, chair, bookcase and credenza, not including any computers and printers;
and
(e) At Closing Purchaser shall cause the 50,000 options
previously granted to Campbell pursuant to an option agreement dated April 4,
1995 to become fully vested, and Purchaser shall cause there to be issued
100,000 non-qualified plan options to purchase shares of Purchaser at a price
of $3 per share, exercisable at any time within three years from the Closing
Date, with a "cashless exercise" provision whereby optionee shall sell
sufficient shares at exercise to generate the exercise price, which shall be
paid to the Company.
1.4 BALANCE SHEET. A physical count of all inventory of the
business conducted at the Location will be taken by representatives of Seller
and Purchaser on or before the Closing Date and again, if necessary, in an
abbreviated fashion, on the Closing Date. For the purposes of this Agreement,
the value of each item of inventory shall be determined at Purchaser's cost for
such item, and only useable, merchantable items of the inventory shall be
included in the calculation of the value of the inventory. Based on the
results of such physical count of inventory, Seller and Purchaser shall create
a balance sheet of the Location as of September 5, 1996 (the "Balance Sheet"),
which balance sheet shall have been prepared in accordance with generally
accepted accounting principles consistently applied with prior periods, will be
complete and correct, and will contain and reflect accruals for any obligations
of any nature, whether absolute, contingent or otherwise, known to Purchaser as
of the date of such Balance Sheet, except for accruals not required to be
maintained under general accepted accounting principles. Such Balance Sheet
will reflect the accounts payable and the accounts receivables to be retained
by Purchaser pursuant to Section 1.2(c) hereof.
3
<PAGE> 7
1.5 ASSUMPTION OF LIABILITIES; LEASE.
(a) Purchaser shall have paid rent and wages relating to
the business conducted at the Location up to the Closing Date, and Seller and
Campbell at Closing will assume all liabilities, claims and other obligations
of Purchaser, whether now existing or arising in the future, whether accrued,
contingent or otherwise, including, without limitation, the payment of rent,
utilities, wages (and other employee benefits), taxes, material supplies,
unpaid installments of the price of inventory, equipment, furniture and
fixtures, and any other liabilities of Purchaser accrued from and after the
Closing Date, relating to, or arising out of the business conducted at, the
Location.
(b) In addition to the foregoing, Seller and Campbell
agree that they will assume any and all obligations under the presently
existing lease relating to the Location (the "Lease"). As a condition to
Closing under this Agreement, Purchaser, Seller and Campbell shall enter into
an Assignment of Lease, Acceptance and Assumption and Consent of Lessor in the
form attached as Exhibit 1.5(b) hereto (the "Lease Assignment"), which
Assignment shall either (i) release Purchaser from any further liability
relating to such Lease or (ii) provide, in the event landlord under the Lease
does not sign the Lease Assignment, for 150,000 shares (which number shall be
reviewed two years from the date hereof) of the Purchaser's common stock owned
by Campbell to be placed in escrow to be utilized to compensate Purchaser for
any Losses (defined in Section 6.2) arising out of any breach by Seller or
Campbell under the Lease.
1.6 SALES AND USE TAXES. All sales and use taxes, and any other
transfer taxes, payable with respect to this Agreement shall be paid by
Purchaser.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF SELLER AND CAMPBELL
In order to induce Purchaser to enter into this Agreement, Seller and
Campbell jointly and severally represent and warrant to, and covenant with,
Purchaser as set forth below:
2.1 POWER. Seller is a Nevada corporation, duly organized,
validly existing and in good standing under the laws of Nevada, and will be
qualified to do business in Florida, and has the corporate power and authority
to execute and deliver, and to perform its obligations under, this Agreement
and any agreements to be executed in connection with this Agreement on the
Closing Date. Campbell is under no legal disability and has the power and
authority to execute and deliver, and to perform his obligations under, this
Agreement and any agreements to be executed in connection with this Agreement
on the Closing Date. Campbell owns all the issued and outstanding securities
of Seller.
2.2 BINDING OBLIGATION. This Agreement has been, and any
agreements to be executed in connection with this Agreement on the Closing Date
will have been, duly executed by Campbell
4
<PAGE> 8
and by and on behalf of Seller and constitutes, or will constitute when
executed, valid and binding obligations of Seller and Campbell in accordance
with their terms, which obligations are enforceable in accordance with their
terms.
2.3 NO CONFLICTS. The execution, delivery, and performance of
this Agreement, and any agreements to be executed in connection with this
Agreement on the Closing Date, by Seller or Campbell do not and will not
violate, conflict with, or result in a breach of, or constitute a default
under, any of the terms, conditions or provisions of any statute, law or
regulation of any jurisdiction as it relates to Seller or Campbell, or any
judgment, order, injunction, decree or award of any court, arbitrator,
administrative agency or governmental or regulatory body against or binding
upon Seller or Campbell, or any agreement, contract or obligation binding upon
Seller or Campbell, or as to which any of their assets may be subject.
2.4 LITIGATION AND OTHER PROCEEDINGS. There are no claims,
actions, suits or proceedings pending before any court or governmental
authority or any investigations pending, nor has Seller nor Campbell received
notice of any claims, actions, suits, proceedings or investigations threatened,
which question or challenge the validity of this Agreement, and any agreements
to be executed in connection with this Agreement on the Closing Date, or any
action taken or to be taken by Seller or Campbell in connection with the
transactions contemplated hereby.
2.5 NO CONSENT. No consent of any other party and no consent,
license, approval or authorization of, or exemption by, or registration or
declaration or filing with, any governmental authority is required in
connection with the execution, delivery or performance of this Agreement with
respect to Seller or Campbell, or the consummation by Seller or Campbell of the
transactions contemplated hereby.
2.6 TITLE. Seller has, or will have on the Closing Date, good and
marketable title to the Shares, with full right and authority to sell and
deliver the same in accordance with this Agreement, and the Shares are free and
clear of all liens, mortgages, claims, charges, security interests,
encumbrances or other restrictions or limitations of any nature whatsoever.
2.7 DUE DILIGENCE. Campbell is the sole stockholder of Seller and
is at the date hereof President and a Director of Purchaser, and Campbell has
fully satisfied himself as to Purchaser's current financial condition and the
future direction of Purchaser's business, and has likewise fully satisfied
himself as to the current financial condition of the Location, and has availed
himself of a full opportunity to inspect all of Purchaser's books and records,
including those relating to the Location.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
In order to induce Seller and Campbell to enter into this Agreement,
Purchaser represents and warrants to, and covenants with, Seller and Campbell
as set forth below:
5
<PAGE> 9
3.1 ORGANIZATION. Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
California, and has the corporate power and authority to execute and deliver,
and to perform obligations under, this Agreement and any agreements to be
executed in connection with this Agreement on the Closing Date.
3.2 AUTHORITY. The execution, delivery, and performance of this
Agreement have been, and any agreements to be executed in connection with this
Agreement on the Closing Date will have been, duly and validly authorized and
approved by the Board of Directors of Purchaser, and no further corporate
action is required to authorize the execution, delivery, or performance of this
Agreement, and any agreements to be executed in connection with this Agreement
on the Closing Date, by such corporation.
3.3 BINDING OBLIGATION. This Agreement has been, and any
agreements to be executed in connection with this Agreement on the Closing Date
will have been, duly executed by and on behalf of Purchaser and constitutes, or
will constitute when executed, the valid and binding obligation of such
corporation, which obligations are enforceable in accordance with their terms,
subject only to applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws.
3.4 NO CONFLICTS. The execution, delivery, and performance of
this Agreement, and any agreements to be executed in connection with this
Agreement on the Closing Date, by Purchaser, do not and will not violate,
conflict with, or result in a breach of, or constitute a default under, any of
the terms, conditions, or provisions of the Articles of Incorporation or Bylaws
of such corporation, any statute, law, or regulation of any jurisdiction as it
relates to such corporation, or any judgment, order, injunction, decree, or
award of any court, arbitrator, administrative agency, or governmental or
regulatory body against or binding upon such corporation.
3.5 LITIGATION AND OTHER PROCEEDINGS. There are no claims,
actions, suits or proceedings pending before any court or governmental
authority or any investigations pending, or claims, actions, suits, proceedings
or investigations threatened, which question or challenge the validity of this
Agreement, and any agreements to be executed in connection with this Agreement
on the Closing Date, or any action taken or to be taken by each such
corporation in connection with the transactions contemplated hereby.
3.6 NO CONSENT. No consent of any other party and no consent,
license, approval or authorization of, or exemption by, or registration or
declaration or filing with, any governmental authority is required in
connection with the execution, delivery or performance of this Agreement with
respect to Purchaser, or the consummation by Purchaser of the transactions
contemplated hereby.
6
<PAGE> 10
SECTION 4
THE CLOSING
4.1 THE CLOSING DATE AND PLACE. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Purchaser in Santa Ana, California, on or about 10:00 a.m. Pacific Standard
Time on September 9, 1996 (the "Closing Date").
4.2 ACTIONS AND DELIVERIES BY PURCHASER AT THE CLOSING. At the
Closing, Purchaser shall deliver or cause to be delivered to Seller or
Campbell, as required by this Agreement, against delivery of the items
specified in Section 4.3:
(a) A Dealership Agreement Granting Seller the Rights on
the terms set forth herein (the "Dealership Agreement");
(b) A general bill of sale, in the form of Exhibit 4.2(b)
attached hereto and incorporated herein by reference, conveying, assigning,
transferring and selling the inventory and other assets required to be
transferred, assigned and conveyed by Purchaser to Seller pursuant to Section
1.2 hereof, to Seller, together with the relevant documents of title thereto,
if any;
(c) The cash and additional consideration required to be
paid by Purchaser to Seller or Campbell at Closing in accordance with Section
1.3 hereof;
(d) The Lease Assignment; and
(e) Possession of the Location.
4.3 ACTIONS AND DELIVERIES BY SELLER AT THE CLOSING. At the
Closing, Seller or Campbell or both, as the case may be, shall deliver or cause
to be delivered to Purchaser, against delivery of the items specified in
Section 4.2:
(a) Seller will deliver the stock certificate(s)
representing the Shares, duly endorsed for transfer to Purchaser or together
with duly executed stock assignments or transfer powers sufficient to transfer
and assign to Purchaser all right, title and interest therein;
(b) The Dealership Agreement;
(c) The Lease Assignment; and
(d) Campbell's written resignation as an officer,
director and employee of Purchaser.
7
<PAGE> 11
SECTION 5
CONDITIONS TO CLOSING
5.1 CONDITIONS PRECEDENT OF PURCHASER. The obligations of
Purchaser under this Agreement to be performed on the Closing Date shall be
subject to the conditions that, on or before the Closing Date:
(a) Representations and Warranties True at Closing. Each
of the representations and warranties of Seller and Campbell contained in this
Agreement or any certificate or document delivered pursuant to the provisions
of this Agreement shall be true in all respects on and as of the Closing Date
as though such representations and warranties were made at and as of such date;
(b) Compliance with Agreement. Seller or Campbell shall
have performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by such parties prior to or at
the Closing Date;
(c) Lease. The Landlord under the Lease shall have given
and delivered to Purchaser its written consent to the assignment of the Lease
to Seller and shall have released Purchaser from any and all liability with
respect to or arising pursuant to or in connection with the Lease; and
(d) Actions and Deliveries. Seller and Campbell shall be
prepared to deliver or cause to be delivered the documents required to be
delivered to Purchaser pursuant to Section 4.3 hereof.
5.2 CONDITIONS PRECEDENT OF SELLER. The obligations of Seller and
Campbell under this Agreement to be performed on the Closing Date shall be
subject to the following conditions that, on or before the Closing Date:
(a) Representations and Warranties True at Closing. Each
of the representations and warranties of Purchaser contained in this Agreement
or any certificate or document delivered pursuant to the provisions of this
Agreement shall be true in all respects on and as of the Closing Date as though
such representations and warranties were made at and as of such date;
(b) Compliance with Agreement. Purchaser shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by such parties prior to or at the
Closing Date; and
(c) Actions and Deliveries. Purchaser shall be prepared
to deliver or cause to be delivered the documents required to be delivered to
Seller pursuant to Section 4.2 hereof.
8
<PAGE> 12
5.3 CONDITION SUBSEQUENT. Notwithstanding anything contained elsewhere
herein, in the event the Dealership Agreement shall not have been executed and
delivered at Closing, the Closing shall be subject to a condition subsequent
that the parties shall enter into a Dealership Agreement which shall include
the terms set forth in Section 1.2 (a) through (h) hereof, each of the parties
hereto agreeing to negotiate such Dealership Agreement in good faith and
agreeing further that the execution and delivery thereof by such party shall
not be unreasonably withheld.
SECTION 6
OBLIGATIONS AFTER CLOSING
6.1 FURTHER ASSURANCES. The parties hereto, on and at any time
after the Closing Date, will execute, acknowledge, and deliver any further
assignments, conveyances, and other assurances, documents, and instruments of
transfer reasonably requested by any other party and will take any other action
consistent with the terms of this Agreement that may be reasonably requested by
such party for the purpose of giving effect to the transactions described
herein.
6.2 INDEMNIFICATION by SELLER AND CAMPBELL. Seller and Campbell,
jointly and severally, hereby agree to indemnify and hold harmless Purchaser
and its officers, directors, partners, employees, agents, and counsel, from and
against any and all losses, claims, assessments, judgments, costs and expenses,
damages or deficiencies (including, but not limited to, reasonable attorneys'
fees and other costs and expenses incident to proceedings or investigations or
to the defense of any claim) ("Losses") or deficiencies resulting from (i) any
misrepresentation, breach of warranty or nonfulfillment of any covenant,
indemnity, undertaking or agreement on the part of Seller or Campbell contained
in this Agreement or any agreement executed in connection with this Agreement,
and (ii) any and all actions, suits, proceedings, demands, assessments or
judgments, costs or expenses (including, but not limited to, reasonable
attorneys' fees and other costs and expenses incident to proceedings or
investigations or to the defense of any claim) related to any of the foregoing.
Any liability under this Section 6.2 shall accrue and be due and payable to
Purchaser as and when such damages or deficiencies are accrued and due and
payable by Purchaser.
6.3 INDEMNIFICATION BY PURCHASER. Purchaser hereby agrees to
indemnify and hold harmless Seller, its respective heirs and successors, from
and against any and all Losses or deficiencies resulting from (i) any
misrepresentation, breach of warranty or nonfulfillment of any covenant,
indemnity, undertaking or agreement on the part of Purchaser contained in this
Agreement or any agreement executed in connection with this Agreement, and (ii)
any and all actions, suits, proceedings, demands, assessments or judgments,
costs, or expenses (including, but not limited to, reasonable attorneys' fees
and other costs and expenses incident to proceedings or investigations or to the
defense of any claim) related to any of the foregoing. Any liability under this
Section 6.3 shall accrue and be due and payable to Seller, as and when such
damages or deficiencies are accrued and due and payable by Seller.
9
<PAGE> 13
6.4 DEFENSE OF CLAIM. If any party (the "Indemnified Party")
asserts that another party (the "Indemnifying Party") has become obligated to
the Indemnified Party pursuant to Section 6.2 or 6.3, or in the event that any
suit, action, investigation, claim or proceeding is begun, made or instituted
as a result of which the Indemnifying Party may become obligated to the
Indemnified Party under Section 6.2 or 6.3, then the Indemnified Party shall
give prompt written notice thereof to the Indemnifying Party. The Indemnifying
Party shall have the right, at its expense and with counsel of their choosing,
to control and defend, contest, settle (at no cost to the Indemnified Party),
or otherwise protect against any such suit, action, investigation, claim or
proceeding. The Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in the defense thereof by counsel
of the Indemnified Party's choice. In any event, the Indemnified Party shall
cooperate with the Indemnifying Party in the defense of any such suit, action,
investigation, claim or proceeding. Without limiting the generality of the
foregoing, the Indemnified Party shall furnish documentary or other evidence as
is then in its possession as may reasonably be requested by the Indemnifying
Party for the purpose of defending against any such suit, action,
investigation, claim or proceeding. In the event that the Indemnifying Party
does not elect to control and defend, contest, settle or otherwise protect
against any such suit, action, investigation, claim or proceeding, the
Indemnified Parry may do so and the Indemnifying Party shall indemnify the
Indemnified Party with respect thereto and reimburse the Indemnified Party's
expenses as incurred.
6.5 RESIGNATION. Campbell will resign as an employee, officer and
director of Purchaser as of the Closing Date.
6.6 FLORIDA LICENSE. Seller agrees to permit Purchaser to use
Seller's license for three years in order to sell motorcycles in Florida, for
a fee of $200 per motorcycle, if required by Purchaser.
6.7 SOLICITATION OF EMPLOYEES. Purchaser agrees that for a period
of at least one year following the Closing Date it will not induce or attempt
to persuade any employee, agent, customer or supplier of the Location to
terminate such employment, agency or business relationship in order to enter
into any such relationship on behalf of any other business organization in
competition with the Location.
6.8 GUARANTEE. Campbell hereby agrees to guarantee each and every
obligation, covenant and agreement of Seller contained herein.
SECTION 7
COSTS AND BROKER'S FEES
7.1 COSTS BORNE BY PARTIES. Except as otherwise provided herein,
Seller, Campbell and Purchaser shall pay all costs and expenses incurred by
them in negotiating and preparing this Agreement and in closing and carrying
out the transactions contemplated by this Agreement.
10
<PAGE> 14
7.2 BROKER'S FEES. Purchaser and Seller and Campbell each
represent and warrant to the other that it or they did not deal directly or
indirectly with or through any broker or finder in connection with the
transactions contemplated by this Agreement.
SECTION 8
FORM OF AGREEMENT AND SEVERABILITY
8.1 HEADINGS. The subject headings of the Sections of this
Agreement are included for purposes of convenience only, and shall not affect
the construction or interpretation of any of its provisions.
8.2 ENTIRE AGREEMENT. Except to the extent specifically referred
to in any other agreement, this Agreement constitutes the entire agreement
between the parties pertaining to the specific subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations,
negotiations and understandings of the parties. No supplement, modification,
or amendment of this Agreement shall be binding unless executed in writing by
the party against whom enforcement is sought. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by
the party making, the waiver.
8.3 COUNTERPARTS. This Agreement may be executed simultaneously
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
8.4 SEVERABILITY. If any terms or provisions of this Agreement
shall be held to be invalid, illegal, or unenforceable, the validity of the
other terms and provisions hereof shall in no way be affected thereby.
SECTION 9
PARTIES
9.1 OTHER PARTIES. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve
or discharge the obligation or liability of any third persons to any party to
this Agreement, nor shall any provision give any third persons any right of
subrogation or action against any party to this Agreement.
9.2 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns,
11
<PAGE> 15
but neither this Agreement nor any of the rights, interests, and obligations
hereunder shall be assigned by any of the parties hereto without prior written
consent of each of the other parties hereto.
SECTION 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations, warranties, opinions, or other writings provided
for in this Agreement and the covenants and agreements to be performed or
complied with by the respective parties before or on or after the Closing Date
shall be deemed to be continuing and shall survive the Closing for a period of
two (2) years.
SECTION 11
NOTICES
All notices, requests, demands, and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given (a)
on the date of service if served personally on the party to whom notice is to
be given, or (b) on the day of mailing, if mailed to the party to whom notice
is to be given by first class mail, registered or certified, postage prepaid,
and properly addressed as set forth below:
To Seller or Campbell: Bikers Dream
6170 Ulmerton Road
Clearwater, Florida 34620
Attn: Dennis Campbell
With a copy to: Richard E. King, Jr., Esq.
2244 West Coast Highway, Suite 100
Newport Beach, California 92663
To Purchaser: Bikers Dream, Inc.
1420 Village Way
Santa Ana, CA 92705
Attention: President
With a Copy To: Day Campbell & McGill
3070 Bristol Street
Suite 650
Costa Mesa, CA 92626
Attention: Caldwell R. Campbell, Esq.
12
<PAGE> 16
Any party may change its address for purposes of this Section by giving the
other parties notice of the new address in the manner set forth above;
provided, however, any notice of change of address shall not be effective until
received.
SECTION 12
CONFIDENTIALITY AND NON-COMPETE
12.1 CONFIDENTIAL INFORMATION.
(a) DEFINITION. For the purposes of this Agreement,
"Confidential Information" shall mean any information, knowledge and know-how,
not known to the general public, regarding the Purchaser Entities or the
Purchaser Entities' processes and products, customers, suppliers, accounts,
financial statements, business systems and any other information, knowledge and
know-how relating to the Purchaser Entities or the Purchaser Entities'
business. In addition, "Confidential Information" shall mean any information
disclosed to Seller, or to which they obtained access as a franchisee of
Purchaser, which they should reasonably believe to be confidential or
proprietary to the Purchaser Entities, or which is treated by the Purchaser
Entities as being confidential or proprietary. "Confidential Information" shall
include, but not be limited to, trade secrets and all customer information of
the Purchaser Entities.
(b) NONDISCLOSURE AND NONUSE. Neither Seller nor
Campbell shall in any manner or form disclose, provide or otherwise make
available, in whole or in part, any Confidential Information to any person or
entity without the prior written consent of Purchaser unless disclosed pursuant
to court or government actions. Seller shall not in any manner or form use or
permit others within its control to use any Confidential Information for its
own account or for the account of others without the prior written consent of
Purchaser.
12.2 COVENANT NOT TO COMPETE. From the Closing Date to and
including the later of (a) the third anniversary of the Closing Date or (b) the
third anniversary of the termination of the Dealership Agreement, Seller and
Campbell hereby agree that, except pursuant to the Dealership Agreement or any
other written agreement between Purchaser and Seller or Campbell, neither he
nor it nor their affiliates shall, directly or indirectly, engage or be
interested in any business that competes with, and shall not, directly or
indirectly, have any interest in, own, manage, operate, control, be connected
with as a stockholder (other than as a stockholder of less than five percent
(5%) of the issued and outstanding stock of a publicly held corporation), joint
venturer, or otherwise engage or invest or participate in, any business that
competes with the business of Purchaser as conducted on the date hereof in any
county or any other political subdivision of the following states of the United
States: South Dakota, Florida (save as permitted by this Agreement or in
connection with the Rights), South Carolina, Nevada, California, Arizona, New
Mexico and Texas. The business of Purchaser is defined for purposes of this
Agreement as the operation of retail motorcycle and motorcycle parts,
motorcycle accessories, and motorcycle service centers, both in fixed and
mobile sites, and electronically over the Internet, and related retailing of
clothing and other items bearing a
13
<PAGE> 17
relationship with or signifying a motorcycle theme. All of the parties agree
that the duration and area for which the covenant not to compete set forth in
this Section 12.2 is to be effective are reasonable. In the event that any
court determines that the time period or the geographical areas provided for in
this Section 12.2, or both of them, are unreasonable and that such covenant is
to that extent unenforceable, such covenant shall remain in full force and
effect for the greatest time period and in the greatest geographical area that
would not render it unenforceable. The parties intend that this covenant shall
be deemed to be a series of separate covenants, one for each and every county
of each and every state of the United States of America where this covenant is
intended to be effective. Notwithstanding the foregoing, Campbell shall not be
prohibited from lending money to or doing business with Colormania in the
custom paint business.
12.3 REMEDIES. Seller and Campbell expressly agree that the
foregoing is reasonable and needed to protect the legitimate business interests
of the Purchaser Entities. Seller and Campbell also agree that Purchaser will
be irreparably harmed and that damages alone cannot adequately compensate
Purchaser if there is a violation or breach by Seller or Campbell of the
provisions of Section 12.1 or 12.2, and that injunctive relief is essential for
the protection of Purchaser. Therefore, Purchaser shall be entitled to obtain
injunctive relief without posting any bond or security, in addition to all of
their rights and remedies which may be available under this Agreement or
applicable law.
SECTION 13
GOVERNING LAW
This Agreement, the rights and obligations hereunder, and the remedies
available hereunder or at law or in equity, shall be governed by and construed
in accordance with the laws of the State of California. By execution of this
Agreement, the parties hereto agree and submit to personal jurisdiction in the
State of California for the purposes of any suit or proceeding brought to
enforce or construe the terms and conditions of this Agreement and agree that
venue for any such suit or proceeding shall be in Orange County, California.
SECTION 14
ADVICE OF COUNSEL
Each party acknowledges and represents to the other that it has had
the advice of counsel of its own choosing in connection with the negotiation
and execution of this Agreement.
14
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and effective as of the date first above written.
The "Seller"
DC ENTERPRISES, INC.
By: /s/ DENNIS CAMPBELL
-----------------------------------
Name: Dennis Campbell
Title: President
"CAMPBELL"
/s/ DENNIS CAMPBELL
--------------------------------------
Dennis Campbell
The "Purchaser"
BIKERS DREAM, INC.
By: /s/ DON DUFFY
-----------------------------------
Name: Don Duffy
Title: Member, Executive Committee
By: /s/ ROWLAND W. DAY
-----------------------------------
Name: Rowland W. Day
Title: Member, Executive Committee
15
<PAGE> 19
BILL OF SALE
For good and valuable consideration, receipt of which is hereby
acknowledged, the undersigned, BIKERS DREAM INC., a California corporation
("Seller"), does hereby sell, transfer, assign, convey and deliver to DC
ENTERPRISES, INC., a Nevada corporation ("Buyer"), pursuant to that certain
Stock Repurchase Agreement dated as of September 9, 1996 between Seller, Buyer
and Dennis Campbell (the "Purchase Agreement"), all of Seller's rights, title
and interest in and to each item of tangible personal property (the "Personal
Property") required to be conveyed by Seller to Buyer by the Purchase Agreement
as described at Section 1.2 of the Purchase Agreement.
This instrument is made without representation or warranty by, or
recourse against, Seller.
At or after the Closing, Seller, at the request of Buyer, shall
execute and deliver to Buyer all such further bills of sale or other documents,
in form and substance reasonably satisfactory to Buyer and its counsel, and
take such further action as Buyer may reasonably request in order to vest in
Buyer title to and possession of the Personal Property.
All references to "Seller" and "Buyer" herein shall be deemed to
include their respective heirs, representatives, nominees, successors and/or
assigns, where the context permits.
Dated: September 9, 1996 BIKERS DREAM, INC.,
a California corporation
By: _______________________________
Its:
<PAGE> 20
EXHIBIT 1.5(b)
ASSIGNMENT OF LEASE, ACCEPTANCE AND ASSUMPTION
AND CONSENT OF LESSOR
THIS ASSIGNMENT OF LEASE, ACCEPTANCE AND ASSUMPTION AND CONSENT OF
LESSOR ("Assignment") is made as of the __ day of September 1996, by and among
BIKERS DREAM, INC., a California corporation ("Assignor"), DC ENTERPRISES, INC.,
a Nevada corporation ("Assignee"), , a
("Landlord"), and DENNIS CAMPBELL, the sole stockholder of
Assignee, as Guarantor ("Campbell").
RECITALS
A. Landlord, as landlord, and Assignor, as tenant, entered into
that certain Lease Agreement, dated 199 a copy of which is
attached hereto as Exhibit A (the "Lease"), pursuant to which Landlord leased to
Assignor the real property in Clearwater, Florida, as more particularly
described in the Lease (the "Premises").
B. Assignor desires to assign all its right, title and interest
in the Lease and the Premises to Assignee, Assignee desires to accept such
assignment and assume the obligations of Assignor under the Lease, Campbell
agrees to guarantee all of the obligations of Assignee hereunder, and Landlord
is willing to consent to such assignment.
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto agree as follows:
1. Assignment. Assignor hereby assigns, conveys and transfers
to Assignee all of Assignor's right, title and interest in and to the Lease and
the Premises. This Assignment includes all options to lease additional space or
to acquire the Premises or other rights and privileges whether similar or
dissimilar to the foregoing under the terms of the Lease.
2. Leasehold Improvements and Personal Property. Effective as of
the Closing Date, Assignor grants, bargains, sells, conveys, sets over and
transfers to assignee, to have and to hold, to itself and its successors and
assigns forever, to the full extent allowed by the Lease, Assignor's right,
title and interest in and to those certain leasehold fixtures and personal
property which Assignor owns and which are located within or incorporated into
the Premises (collectively, the "Leasehold Improvements").
3. Assumption. Assignee accepts the foregoing Assignment and
assumes the Lease and agrees with and for the benefit of Landlord to perform,
observe and be bound by all of the obligations, covenants, terms and conditions
contained in the Lease on the part of the tenant therein to be performed and
observed on and after the date hereof, to all intents and purposes as though
Assignee were, from and after such date, the original tenant under the Lease.
<PAGE> 21
4. Consent of Landlord. Landlord hereby consents to the foregoing
Assignment of the Lease by Assignor and assumption thereof by Assignee and
agrees to the provisions of this Assignment, subject to the express condition
that no further assignment, mortgage, encumbrance or use by others shall be
made, created or permitted, except upon the terms of and in strict compliance
with, the Lease.
5. Release. Landlord hereby releases and discharges Assignor
from any and all obligations, covenants, agreements, liabilities, claims and
causes of action arising under or relating to the Lease, the Premises, or
Assignor's interest in the Lease or the Premises of every kind and description
whether known or unknown, to the extent that such obligations, covenants,
agreements, liabilities, claims, or causes of action accrue or arise on or
after the Closing Date, it being the intention of the parties that the
foregoing provisions of this paragraph shall release and discharge Assignor
from all obligations, covenants, terms and conditions assumed by Assignee.
6. Landlord's Representation. To the knowledge of Landlord,
there is at the date hereof no default under the Lease nor any event or
condition which with the passage of time, or the giving of notice or both, would
be or become an event of default under the Lease and all rent to and including
the period ending September , 1996 has heretofore been paid in full. Landlord
agrees to advise Assignee of the occurrence of any event of default under the
Lease or the occurrence of any event or condition which with the passage of
time, or the giving of notice, or both, would be or become an event of default
under the Lease, which may arise or occur between the date of this Assignment
and the Closing Date.
7. Binding Effect. This Assignment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
distributees, executors, administrators, successors and, except as otherwise
provided herein or the Lease, their assigns.
8. Guarantee. Dennis Campbell, for good and valuable
consideration, and as President and sole stockholder of Assignee, hereby
guarantees all of Assignee's obligations hereunder and under the Lease.
9. Governing Law. This Assignment shall be governed by and
construed in accordance with the laws of the State of Florida.
2
<PAGE> 22
IN WITNESS WHEREOF, Assignor, Assignee and Landlord have respectively
signed this Assignment as of the date first above written.
SIGNED AND SEALED "LANDLORD"
IN THE PRESENCE OF:
a ___________________________________
___________________________ By: _________________________________
AS TO LANDLORD
Its: _____________________________
"ASSIGNOR"
BIKERS DREAM, DX.,
a California corporation
___________________________ By: _________________________________
AS TO ASSIGNOR
"ASSIGNEE"
DC ENTERPRISES, INC.,
a Nevada corporation
___________________________ By: _________________________________
AS TO ASSIGNEE Dennis Campbell
President
"GUARANTOR"
_____________________________________
Dennis Campbell
3
<PAGE> 23
STATE OF FLORIDA )
)ss.
COUNTY OF )
On before me, the undersigned, a notary public
in and for said State, personally appeared ,
personally known to me (or proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
signatures) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature _____________________________________ (SEAL)
NOTARY PUBLIC
STATE OF FLORIDA )
) ss.
COUNTY OF )
On before me, the undersigned, a notary public in and
for said State, personally appeared , personally known to
me (or proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their signatures) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature _____________________________________ (SEAL)
NOTARY PUBLIC
4
<PAGE> 24
STATE OF FLORIDA )
)ss.
COUNTY OF )
On before me, the undersigned, a notary public
in and for said State, personally appeared ,
personally known to me (or proved to me on the basis of satisfactory evidence to
be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
signatures) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature _______________________________________________ (SEAL)
NOTARY PUBLIC
STATE OF FLORIDA )
)ss:
COUNTY OF )
On before me, the undersigned, a notary public in and
for said State, personally appeared , personally known to
me (or proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their signatures) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature _______________________________________________ (SEAL)
NOTARY PUBLIC
5
<PAGE> 25
EXHIBIT 4.2(5)
BILL OF SALE
For good and valuable consideration, receipt of which is hereby
acknowledged, the undersigned, BIKERS DREAM, INC., a California corporation
("Seller"), does hereby sell, transfer, assign, convey and deliver to DC
ENTERPRISES, INC., a Nevada corporation ("Buyer,"), pursuant to that certain
Stock Repurchase Agreement dated as of September 9, 1996 between Seller, Buyer
and Dennis Campbell (the "Purchase Agreement"), all of Seller's rights, title
and interest in and to each item of tangible personal property (the "Personal
Property") required to be conveyed by Seller to Buyer by the Purchase Agreement
as described at Section 1.2 of the Purchase Agreement.
This instrument is made without representation or warranty by, or
recourse against, Seller.
At or after the Closing, Seller, at the request of Buyer, shall
execute and deliver to Buyer all such further bills of sale or other documents,
in form and substance reasonably satisfactory to Buyer and its counsel, and
take such further action as Buyer may reasonably request in order to vest in
Buyer title to and possession of the Personal Property.
All references to "Seller" and "Buyer" herein shall be deemed to
include their respective heirs, representatives, nominees, successors and/or
assigns, where the context permits.
Dated: September 9, 1996 BIKERS DREAM, INC.,
a California corporation
By: _________________________________
Its:
<PAGE> 1
EXHIBIT 10.20
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered into as
of the 13th day of September, 1996, by and between Bikers Dream, Inc., a
California corporation ("Company") and Mull Acres Investments, Inc., a
California corporation ("Optionee").
RECITALS
A. Company is in the business of developing and operating Bikers
Dream Superstores in the United States.
B. Company and Optionee have formed a California limited
liability company named Ultra Bikers, LLC (the "LLC").
C. Pursuant to the operating agreement (the "Operating
Agreement") governing the operations of the LLC, Company has agreed to grant
Optionee an irrevocable option to purchase 2,500,000 shares (the "Shares") of
Company common stock ("Common Stock"), subject to the terms of this Agreement.
In consideration of the terms and conditions set forth in this
Agreement, Company and Optionee hereby agree as follows:
1. Grant of Option. Company hereby grants to Optionee the
irrevocable right and option (the "Option") to purchase 2,500,000 shares of
the Company's common stock (the "Option Shares"), at a price (the "Option
Price") of $1.65 per share, on the terms set forth in this Agreement.
2. Exercise of Option.
(a) The Option may be exercised at any time between
August 31, 1997 and September 30, 1998, provided that Optionee agrees to
deliver to Company between August 31, 1997 and September 5, 1997 written notice
as to whether or not it intends to exercise the Option, and provided further
that the Option may be exercised earlier than August 31, 1997 with the written
consent of Company. The Option shall be exercised by giving notice in writing
by personal service or prepaid United States registered mail to the Company at
its principal executive office. The notice shall state Optionee's election to
exercise the Option and the number of Option Shares with respect to which the
Option is being exercised. The Option shall be exercisable, at the election of
the Optionee, either in full or from time to time in part and, in the event
that the Option is partially exercised, a new Option Agreement evidencing the
remaining portion of the Option shall be executed by both parties hereto.
(b) Payment of the aggregate Option Price shall be made
in cash or by check. At the option of the Optionee, in lieu of payment of the
Option Price for Shares, the Optionee may request in writing that the Company
issue to it the number of Shares issuable as determined in accordance with the
following formula:
<PAGE> 2
NS = OS - [(OP/CMP) x OS]
NS = "net" Shares
OS = No. of Shares issuable upon exercises of the options.
OP = Option Price
CMP= Current Market Price as defined in Section 2(c) hereof
Upon such surrender of this Agreement and payment for the Shares or
written request that the Company issue the "net" Shares in accordance with the
foregoing formula, the Company shall issue or cause to be issued and deliver or
cause to be delivered, within 30 days, to the Optionee a certificate or
certificates for the number of full Shares or "net" Shares as the case may be
in respect of which the Option is being exercised, together with cash, as
provided in Section 2(c) hereof, in respect of any fractional Share otherwise
issuable upon such exercise.
(c) The Company shall not be required to issue fractional
Shares on the exercise of the Option. If any fraction of a Share would, except
for the provisions of Section 2(c), be issuable on the exercise of the Option,
the Company shall pay an amount in cash equal to the then Current Market Price
multiplied by such fraction. For purposes of this Agreement, the term "Current
Market Price" shall mean (i) if the Common Stock is traded in the
over-the-counter market and not in the NASDAQ National Market System nor on any
national securities exchange, the average per share closing bid prices of the
Common Stock for the fifteen (15) consecutive trading days immediately
preceding the date in question, as reported by NASDAQ or (ii) if the Common
Stock is traded in the NASDAQ National Market System or on a national
securities exchange, the average for the fifteen (15) consecutive trading days
immediately preceding the date in question of the daily per share closing
prices of the Common Stock in the NASDAQ National Market System or on the
principal stock exchange on which it is listed, as the case may be. For
purposes of clause (i) above, if trading in the Common Stock is not reported by
NASDAQ, the average referred to in said clause shall be as reported in the OTC
Bulletin Board, the "pink sheets" published by National Quotation Bureau,
Incorporated or any other comparable quotation medium. The closing price
referred to in clause (ii) above shall be the last reported sale price or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices, in either case, in the NASDAQ National Market
System or on the national securities exchange on which the Common Stock is then
listed.
3. Registration Rights: Lock-Up.
(a) The Company agrees to register the resale of the
Option Shares at its own expense pursuant to a registration statement to be
filed by the Company with the Securities and Exchange Commission, such
registration statement to be effective at least for the period from September
5, 1997 to the end of the applicable Rule 144 restricted period.
(b) Notwithstanding the foregoing, or anything contained
elsewhere herein, Optionee agrees that prior to September 30, 1998, neither
they nor any entity controlled by them will sell, contract to sell or make any
other disposition of, or grant any purchase option for the sale of, any Options
or Option Shares without first obtaining the prior written consent of the
Company.
2
<PAGE> 3
4. Closing. Delivery of a certificate for the number of Option
Shares as to which the Option is being exercised and payment of the purchase
price therefore pursuant to Section 2(b) will take place at the Company's
principal executive office, within 48 hours after receipt by Company of notice
of Optionee's exercise of the Option (the "Closing Date").
5. Representations and Warranties of Company. Company represents
and warrants as follows:
(a) The execution, delivery and performance by Company of
this Agreement have been duly authorized by all necessary corporate action, and
this Agreement has been duly executed and delivered by Company.
(b) Company shall at all times reserve and keep available
a number of its authorized but unissued shares of common stock that will be
sufficient to permit the exercise in full of the Option.
(c) The Option Shares to be issued upon the exercise of
the Option and payment therefor, have been duly authorized and, when issued and
paid for, will be validly issued, fully paid and nonassessable.
6. Investment Representations of Optionee. Optionee represents,
acknowledges and agrees as follows:
(a) Optionee is acquiring the Option and any Option
Shares acquired upon exercise of the Option for Optionee's own account and not
with a view to, or for sale in connection with, any distribution thereof.
(b) The Option Shares shall not be sold or transferred
until either (i) they first shall have been registered under the Securities Act
of 1933, or (ii) Company first shall have been furnished with an opinion of
legal counsel, reasonably satisfactory to Company, to the effect that such sale
or transfer is exempt from the registration requirements of the Securities Act
of 1933.
(c) The certificates evidencing the Option Shares issued
upon exercise of the Option will bear the following restrictive legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("THE ACT") AS AMENDED, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS AND UNTIL SUCH SHARES
ARE REGISTERED UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION IS NOT
REQUIRED."
3
<PAGE> 4
7. Privileges of Stock Ownership. Neither Optionee nor any
transferee of Optionee shall have any of the rights or privileges of a
stockholder of Company with respect to any Option Shares issuable upon the
exercise of the Option until certificates representing such Option Shares shall
have been issued and delivered.
8. Adjustment to Number and Purchase Price of Option Shares. If
the outstanding shares of the Company's common stock are increased or
decreased, or are changed into or exchanged for a different number or kind of
shares or securities or other forms of property (including cash) or rights, as
a result of one or more reorganizations, recapitalizations, spin-offs, stock
splits, reverse stock splits, stock dividends or the like, appropriate
adjustments shall be made in the number and/or kind of shares or securities or
other forms of property (including cash) or rights for which this Option may
thereafter be exercised, all without any change in the aggregate exercise price
applicable to the unexercised portions of the Option, but with a corresponding
adjustment in the exercise price per share. No fractional share of stock shall
be issued under this Option or in connection with any such adjustment. Such
adjustments shall be made by the independent certified public accountants
regularly retained by Company whose determinations as to what adjustments shall
be made, and the extent thereof, shall be final, binding and conclusive.
Upon the dissolution or liquidation of Company, or upon a
reorganization merger or consolidation of Company as a result of which the
outstanding shares of common stock are changed into or exchanged for property
(including cash), rights or securities not of Company's issue, or any
combination thereof, or upon a sale of substantially all the property of
Company to, or the acquisition of stock representing more than eighty percent
(80%) of the voting power of the stock of Company then outstanding by, another
corporation or person, this Option shall terminate, unless provision be made in
writing in connection with such transaction for the assumption of this Option,
or the substitution for this Option of an option covering the stock of a
successor corporation, or a parent or a subsidiary thereof, with appropriate
adjustments in accordance with the provisions hereinabove in this Section as to
the number and kind of shares optioned and their exercise prices, in which
event this Option shall continue in the manner and under the terms so provided.
If this Option shall terminate pursuant to the next preceding
paragraph, Optionee or other person then entitled to exercise this Option shall
have the right, at such time prior to the consummation of the transaction
causing such termination as Optionee shall designate, to exercise the
unexercised portion of this Option, including the portions thereof which would,
but for this Section, not yet be exercisable.
9. Default and Remedies. Optionee agrees that any failure by
Optionee to faithfully perform any of its obligations under the Operating
Agreement or any other agreement between the parties shall constitute a default
under this Agreement. Upon the occurrence of an event of default hereunder,
Company shall have all of the rights and remedies accorded to it under the laws
of the State of California and any other applicable jurisdiction, all of which
rights and remedies shall, to the full extent permitted by law, be cumulative.
Without limiting the generality of the foregoing upon
4
<PAGE> 5
the occurrence of a default hereunder, Company shall be entitled to immediately
cancel any stock options, Option Shares or other securities granted or issued
to Optionee hereunder.
10. Binding Effect. This Agreement will be binding upon the
parties, their heirs, legal representatives, successors, and assigns.
11. Amendments and Modifications. This Agreement may be amended
or modified only by a writing signed by both parties. Any attempt by either
party to modify or amend this Agreement orally will be void in all respects.
12. Non-waiver. No delay or failure by either party to exercise
any right under this Agreement, and no partial or single exercise of that
right, will constitute a waiver of that or any other right, unless otherwise
expressly provided herein.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which
together will constitute one and the same instrument.
15. Arbitration. All disputes and controversies arising under or
relating to this Agreement, including allegations of fraud and
misrepresentation, will be resolved by arbitration in Santa Ana, California, in
accordance with the rules and regulations of the American Arbitration
Association. The decision of the arbitrator will be final and binding on the
parties and may be filed as a judgment in any court of competent jurisdiction.
Each party will pay one-half of the arbitrator's fees and expenses.
16. Survival. All representations, warranties, covenants and
agreements of the parties contained in this Agreement shall survive the
execution and delivery hereof.
17. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be validly
given or made to another party if given by personal delivery, telex, facsimile,
telegram, or if deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested. If such notice, demand or other
communication is given by personal delivery, telex, facsimile or telegram,
service shall be conclusively deemed made at the time of receipt. If such
notice, demand or other communication is given by mail; such notice shall be
conclusively deemed given forty-eight (48) hours after the deposit thereof in
the United States mail addressed to the party to whom such notice, demand or
other communication is to be given as hereinafter set forth:
5
<PAGE> 6
If to Company: Bikers Dream, Inc.
1420 Village Way
Santa Ana, California 92705
Attn: Rowland W. Day, II
If to Optionee: Mull Acres Investments, Inc.
1420 Village Way
Santa Ana, California 92705
Attn: Kraig Kavanagh
Any party may change its address for purposes of this paragraph by
giving the other parties written notice of the new address in the manner set
forth above.
18. Assignment The Option may not be assigned by Optionee without
the prior written consent of Company.
IN WITNESS WHEREOF, the parties have signed this Agreement on the day,
month and year first written above.
MULL ACRES INVESTMENTS, INC. BIKERS DREAM, INC.
By: [SIG] By: [SIG]
------------------------- ----------------------------
Its: Its: Co-Chief Executive Officer
------------------------ --------------------------
6
<PAGE> 1
EXHIBIT 10.22
SENIOR SECURED SUBORDINATED PROMISSORY NOTE
$2,700,000 Santa Ana, California
January 30, 1997
FOR VALUE RECEIVED, ULTRA ACQUISITION CORP., a Nevada corporation
("Obligor"), hereby promises to pay to the order of MULL ACRES INVESTMENTS,
INC., a California corporation ("Obligee"), in lawful money of the United
States of America, at 1420 Village Way, Santa Ana, California 92705, or at
such other place as Obligee may from time to time designate, the principal sum
of Two Million Seven Hundred Thousand Dollars ($2,700,000) (the "Principal
Amount"), payable (except as set forth below) on March 31, 1998 ("Maturity
Date"), with interest at the rate of 2.7037% payable for 12 months only,
monthly in arrears, commencing February 28, 1997.
This Note may be prepaid in whole or in part at any time without
penalty or premium.
This Note is secured pursuant to the terms of a Security Agreement
between Bikers Dream, Inc., a California corporation and the parent of Obligor
("Bikers Dream"), and Obligee dated the date hereof ("Security Agreement"), as
the same may amended, extended, modified or replaced from time to time, and is
subject to all the terms and conditions thereof including, but not limited to,
the remedies specified therein.
THIS NOTE IS SUBJECT TO RIGHTS OF SETOFF SET FORTH in AN ASSET
PURCHASE AND SALE AGREEMENT BETWEEN OBLIGOR, BIKERS DREAM AND OBLIGEE DATED THE
DATE HEREOF (THE "PURCHASE AGREEMENT"), AND IS SUBJECT TO THE TERMS AND
CONDITIONS THEREOF.
The Maturity Date may be extended at the option of Obligee to March
28, 1999, provided that in such event Obligor shall pay Obligee on such
extended Maturity Date the Principal Amount plus interest calculated at the
rate of 10% per annum accrued from March 28, 1998 to the date of repayment.
Obligor hereby agrees to pay all costs and expenses, including
reasonable attorneys' fees, incurred by Obligee and arising out of or related
to the collection of any amounts due hereunder or the enforcement of any rights
provided for herein. Such costs and expenses shall include, without
limitation, all costs, attorneys' fees and expenses incurred by Obligee in
connection with any insolvency, bankruptcy, reorganization, or other similar
proceedings involving Obligor which in any way affect the exercise by Obligee
of its rights and remedies under this Note or any instrument securing this
Note.
<PAGE> 2
Presentment, demand, protest, and all notices of every kind (including
notices of protest, dishonor and nonpayment of this Note) are hereby waived by
Obligor.
Nothing contained herein shall prevent Obligee from waiving, in
writing, in any certain instance or on any particular occasion, any right or
remedy hereunder (including, but not limited to, the operation of the
acceleration clauses above). Consent to one such transaction shall not be
deemed to be a consent or waiver to any future transaction. No such waiver
shall constitute a further or continuing waiver of such right or remedy as to
any preceding or succeeding breach hereunder. No single or partial exercise of
any right hereunder shall preclude any other or further exercise thereof or the
exercise of any other right. No delay or omission on the part of Obligee in
exercising any right hereunder shall operate as a waiver of such right or of
any other right under this Note. No acceptance by Obligee of any payment due
hereunder which is less than the full amount then due and owing shall operate
as a waiver of the same or any other right or option, except as and to the
extent provided by law. The release of any party liable on this Note shall not
operate to release any other party liable hereon. All rights and remedies of
Obligee hereunder are cumulative.
Notwithstanding anything to the contrary in this Note, the
indebtedness evidenced by the Note and the obligations of Obligor hereunder and
under the Security Agreement shall be subordinate and junior in right of
payment to indebtedness of Obligor or Bikers Dream with any persons pursuant to
a bridge financing incurred for the purpose of paying cash amount due to
Obligee by Obligor pursuant to the Purchase Agreement (the foregoing being
referred to as "Superior Indebtedness"), regardless of whether any Superior
Indebtedness was incurred prior to or is incurred after the date of this Note,
and shall be senior to any other indebtedness of Obligor or Bikers Dream. No
payments may be made on this Note, nor may any action be taken with respect to
any collateral securing this Note, if Obligor is in default on any Superior
Indebtedness or if payment on this Note would result in Obligor's inability to
make a scheduled payment of any Superior Indebtedness. Holders of Superior
Indebtedness shall be third party beneficiaries of this paragraph.
Any notice, request, demand, waiver, consent, approval or other
communication required or permitted hereunder or by law shall be validly given
or made only if in writing and delivered in person to an officer or duly
authorized representative of the other party or deposited in the United States
mail, duly certified or registered (return receipt requested), postage prepaid,
and addressed to the party for who intended, as follows:
Obligee: Mull Acres Investments, Inc.
11631 Sterling Avenue
Riverside, California 92503
Attn: William Alden
Obligor: Ultra Acquisition Corp.
1420 Village Way
Santa Ana, California 92705
2
<PAGE> 3
Either party may from time to time, by written notice to the other,
designate a different address which shall be substituted for that specified
above. If any notice or other document is sent by mail as stated above, the
same shall be deemed to be fully delivered and received two days after mailing
as provided above.
This Note shall be governed by and construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF, Obligor day and year first written above.
ULTRA ACQUISITION CORP.
a Nevada corporation
By: [SIG]
---------------------------------
MULL ACRES INVESTMENTS, INC.,
a California corporation
By: [SIG]
---------------------------------
3
<PAGE> 1
EXHIBIT 10.23
SECURITY AGREEMENT
This Security Agreement (the "Security Agreement") is by and between
Bikers Dream, Inc., a California corporation ("Bikers Dream"), and Mull Acres
Investments, Inc., a California corporation ("Secured Party").
RECITALS
A. The parties hereto have entered into that certain Asset
Purchase and Sale Agreement dated as of January 30, 1997 between Bikers Dream,
Ultra Acquisition Corp., a Nevada corporation and a wholly owned subsidiary of
Bikers Dream ("UAC") and Secured Party (the "Purchase Agreement"). Pursuant to
the Purchase Agreement, Secured Party agreed (among other things) to sell to
UAC certain property, as described therein.
B. UAC in consideration for the purchase of assets pursuant to
the Purchase Agreement agreed to pay to Secured Party the amount of $3,800,000,
of which $2,700,000 was evidenced by UAC's senior secured subordinated
promissory note dated the date hereof (the "Secured Note").
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Bikers Dream and Secured Party
agree as follows:
1. Definitions. As used in this Agreement:
(a) "Collateral" means all of the following
property ("Collateral") in which Bikers Dream now has or hereafter acquires any
right, title or interest, wheresoever located and whether in the possession of
Bikers Dream or any other person, and all accessions, improvements, additions,
substitutions and replacements thereto and thereof, and all proceeds thereof;
Any "equipment" and "inventory," as such
terms are defined in the California Uniform Commercial Code (as amended and
modified from time to time, the "Code").
(b) "Obligations" means the indebtedness of UAC
to Secured Party evidenced by the Secured Note, and all costs and expenses,
including reasonable attorneys' fees, incurred by Secured Party in enforcing
and exercising any of Secured Party's rights under the Secured Note or this
Agreement.
2. Creation of Security Interest. Bikers Dream grants
Secured Party a security interest in the Collateral to secure payment of the
Obligations.
<PAGE> 2
3. Bikers Dream's Representations and Warranties.
Bikers Dream represents and warrants as follows:
(a) Bikers Dream is a corporation duly organized,
validly existing, and in good standing under the laws of California, and has
all necessary authority to conduct its business wherever it is conducted.
(b) Bikers Dream has been authorized to execute
and deliver this Security Agreement and the Agreement, and such agreements are
valid and binding obligations of Bikers Dream.
4. Termination. This Security Agreement will terminate
when UAC fully satisfies all of the Obligations to Secured Party evidenced by
the Secured Note, or when the Secured Note is canceled or extinguished by
setoff or otherwise.
5. Default. Bikers Dream will be in default ("Event of
Default") under this Security Agreement if UAC fails to pay, as and when due,
its obligations under the Secured Note.
6. Remedies. When an Event of Default occurs:
(a) Secured Party may:
(1) Declare the Obligations immediately
due and payable, without demand, presentment, protest, or notice to Bikers
Dream of any kind, all of which Bikers Dream expressly waives; and
(2) Exercise all rights and remedies
available to a secured creditor after default, including but not limited to the
rights and remedies of secured creditors under the California Uniform
Commercial Code.
(b) Bikers Dream must:
(1) Assemble the Collateral and make it
and all records relating to it available to Secured Party as Secured Party
directs; and
(2) Allow Secured Party, its representatives,
and its agents to enter the premises where all or any part of the Collateral,
the records, or both may be, and remove any or all of it.
(3) Endorse and deliver to Secured Party
evidences of title to the Collateral.
(c) Application of Proceeds. The proceeds
realized upon any disposition of the Collateral, after deduction for all
expenses incurred by Secured Party in relation to such
2
<PAGE> 3
disposition, including, without limitation, all attorneys' fees and costs,
shall be applied in satisfaction of the Obligations secured hereby.
(d) Subordination. Secured Party acknowledges
that the Secured Note is by its terms subordinated to other Superior
Indebtedness, as such term is defined in the Senior Note, and Secured Party
agrees not to interfere with the rights of holders of senior indebtedness, and
further acknowledges and agrees that all of Secured Party's rights hereunder
are subject to and subordinated to the rights of holders of such Superior
Indebtedness.
7. Waiver by Secured Party. No waiver by Secured Party
of any breach or default will constitute a waiver of any breach or default
occurring later. A waiver will be valid only if it is in writing and signed by
Secured Party.
8. Assignment. The Agreement will bind and benefit the
successors and assigns of the parties.
9. Miscellaneous.
(a) Governing Law. The Agreement will be
governed by the laws of the State of California.
(b) Possession and Use of Collateral. Except as
otherwise provided in this Agreement, and so long as no Event of Default
exists, Bikers Dream may possess the Collateral in the ordinary course of
Bikers Dream's business.
(c) Entire Agreement. The Agreement and the
agreements referred to herein, and all agreements referred to therein, is the
entire agreement, and supersedes any prior agreement or understandings, between
Secured Party and Bikers Dream relating to the Collateral.
(d) Further Assurances. From time to time, at
the other party's request and without further consideration, each of the
parties will execute and deliver to the others such documents and take such
action as the other party may reasonably request in order to consummate more
effectively the transactions contemplated hereby.
(e) Payment of Fees and Expenses. If any legal
action or any arbitration or other proceeding is brought for the enforcement of
this Security Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Security
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
(f) Parties in Interest. Except as otherwise
expressly provided herein, all the terms and provisions of this Security
Agreement shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective heirs, beneficiaries, personal and legal
representatives, successors and assigns of the parties hereto.
3
<PAGE> 4
(g) Headings Etc. The section and paragraph
headings contained in this Security Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Security
Agreement.
(h) Pronouns. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine or neuter, singular
or plural, as the identity of the person, persons, entity or entities may
require.
(i) Notices. Any and all notices, demands or
other communications required or desired to be given hereunder by any party
shall be in writing and shall be validly given or made to another party if
given by personal delivery, telex, facsimile, telegram or if deposited in the
United States mail, certified or registered, postage prepaid, return receipt
requested. If such notice, demand or other communication is given by personal
delivery, telex, facsimile (with machine printed confirmation of receipt) or
telegram, service shall be conclusively deemed made at the time of receipt. If
such notice, demand or other communication is given by mail, such notice shall
be conclusively deemed given forty-eight (48) hours after the deposit thereof
in the United States mail addressed to the party to whom such notice, demand or
other communication is to be given as hereinafter set forth:
If to the Bikers Dream: Bikers Dream, Inc.
1420 Village Way
Santa Ana, California 92705
Attn: President
If to Secured Party: Mull Acres Investments, Inc.
11631 Sterling Avenue
Riverside, California 92503
Attn: President
Dated: January 30, 1997 BIKERS DREAM, INC.
By: [SIG]
---------------------
Title: CO-CEO
----------------
MULL ACRES INVESTMENTS, INC.
By: [SIG]
---------------------
Title: President
----------------
4
<PAGE> 1
EXHIBIT 10.24
LEASE AGREEMENT
(Industrial Gross)
BASIC LEASE INFORMATION
LEASE DATE: February 12, 1996
LESSOR: LINCOLN RIVERSIDE BUSINESS CENTER,
a California Limited Partnership
LESSOR'S ADDRESS: P.O. Box 19693, 30 Executive Park, Suite 100
Irvine, California 92713-9693
LESSEE: MUL ACRES, INC.,
A California Corporation
LESSEE'S ADDRESS: 3565 Courtside Circle
Huntington Beach, California 92649
PREMISES: Approximately 20,487 square feet as shown on
Exhibit A
PREMISES ADDRESS: 11631 Sterling Avenue
Riverside, CA 92503
BUILDING: 20,487 square feet
LOT (BUILDING'S TAX PARCEL): N/A
PARK: 280,354 square feet
TERM: March 1, 1996 ("Commencement Date"), through
April 30, 1999 ("Expiration Date")
BASE RENT (P3): Six Thousand Two Hundred and 00/100 Dollars
($6,200.00) per month
ADJUSTMENTS TO BASE RENT: AUGUST 1, 1996 to August 31, 1996 $0.00 Rent Waiver
Period.
October 1, 1996 to October 31, 1996 $0.00 Rent
Waiver Period.
March 1, 1997 to FEBRUARY 28, 1998 $6,510.00
per month.
MARCH 1, 1998 to April 30, 1999 $6,835.50
per month.
SECURITY DEPOSIT (P4.A): $6,200.00.
CLEANING DEPOSIT (P4.B): N/A
TRASH AND WATER CHARGE (P7): N/A
BASE YEAR FOR LESSEE'S SHARE OF EXPENSES: 1996
*LESSEE'S SHARE OF INCREASES IN OPERATING EXPENSES (P6.A): 7.31% of the
Park
*LESSEE'S SHARE OF INCREASES IN TAX EXPENSES (P6.B): 7.31% of the
Park
*LESSEE'S SHARE OF INCREASES IN COMMON AREA UTILITY COSTS (P7): 7.31% of the
Park
*The amount of Lessee's Share of the increases in expenses as referenced above
shall be subject to modification as set forth Lease.
PERMITTED USES: General office and warehouse functions of a
limousine manufacturing company.
GENERAL LIABILITY INSURANCE Bodily injury limit of not less than
AMOUNT (P12): $1,000,000.00 per occurrence;
Property damage limit of not less than
$1,000,000.00 per occurrence; Combined single
limit of not less than $1,000,000.00.
UNRESERVED PARKING SPACES: Twenty-five (25) nonexclusive and undesignated
spaces.
BROKER (P38): CB Commercial Real Estate.
EXHIBITS: Exhibit A - Premises, Building, Lot and/or
Park
Exhibit B - Tenant Improvements
Exhibit C - Rules and Regulations
Exhibit D - CC&Rs
Exhibit E - Sign Certificate
Exhibit F - Hazardous Materials Disclosure
Certificate
Exhibit G - Change of Commencement Date -
Example
Exhibit H - Guaranty of Lease
ADDENDA: None.
1
<PAGE> 2
LEASE AGREEMENT
DATE: This Lease is made and entered into as of the Lease Date defined on
Page 1. The Basic Lease information set forth on Page 1 and this Lease
are and shall be construed as a single instrument.
1. PREMISES: Lessor hereby leases the Premises to Lessee upon the terms
and conditions contained herein. Lessor hereby grants to Lessee a revocable
license for the right to use, on a non-exclusive basis, parking areas and
ancillary facilities located within the Common Area of the Park, subject to
the terms of this Lease.
2. ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES: If Lessor
cannot deliver possession of the Premises on the Commencement Date, Lessor
shall not be subject to any liability nor shall the validity of the Lease be
affected; provided the Lease term and the obligation to pay Rent shall commence
on the date possession is tendered and the termination date shall be extended
by a period of time equal to the period computed from the Commencement Date to
the date possession is tendered by Lessor to Lessee. In the event the
commencement date of this Lease is other than the Commencement Date provided on
Page 1, Lessor and Lessee shall execute a written amendment to this Lease,
substantially in the form of Exhibit G hereto, wherein the parties shall
specify the actual commencement date, termination date and the date on which
Lessee is to commence paying Rent. In the event that Lessor permits Lessee to
occupy the Premises prior to the Commencement Date, such occupancy shall be at
Lessee's sole risk and subject to all the provisions of this Lease, including,
but not limited to, (the requirement to pay Rent and the Security Deposit, and
to obtain the insurance required pursuant to this Lease and to deliver
insurance certificates as required herein. In addition to the foregoing,
Lessor shall have the right to impose such additional conditions on Lessee's
early entry as Lessor shall deem appropriate. By taking possession of the
Premises, Lessee shall be deemed to have accepted the Premises in a good, clean
and completed condition and state of repair, in compliance with all applicable
laws, codes, regulations, administrative orders and ordinances, and subject to
all matters of record. Lessee hereby acknowledges and agrees that neither
Lessor nor Lessor's agents or representatives has made any representations or
warranties as to the suitability, safety or fitness of the Premises for the
conduct of Lessee's business, Lessee's intended use of the Premises or for any
other purpose, and that neither Lessor nor Lessor's agents or representatives
has agreed to undertake any alterations or construct any Tenant Improvements to
the Premises except as expressly provided in this Lease. Lessee agrees that at
anytime before or during the term of this Lease, Lessor shall have the right
to relocate Lessee from the Premises described herein to other space within
the Park on substantially the same terms and conditions of this Lease provided
the other space is of comparable size.
3. RENT: On the date that Lessee executes this Lease, Lessee shall
deliver to Lessor the original executed Lease, the Base Rent (which shall be
applied against the Rent payable for the first month Lessee is required to pay
Base Rent), the Security Deposit, the Cleaning Deposit, and all insurance
certificates evidencing the insurance required to be obtained by Lessee under
Paragraph 12 of this Lease. Lessee agrees to pay Lessor, without prior notice
or demand, or abatement, offset, deduction or claim, the Base Rent described on
Page 1, payable in advance at Lessor's address shown on Page 1 on the first day
of each month throughout the term of the Lease. In addition to the Base Rent
set forth on Page 1, Lessee shall pay Lessor in advance and on the first (1st)
day of each month throughout the term of this Lease (including any extensions
of such term), as additional rent Lessee's share, as set forth on Page 1, of
Increases in Operating Expenses, Increases in Tax Expenses, Increases in Common
Area Utility Costs, administrative expenses, Trash and Water Charge and Utility
Expenses, as specified in Paragraphs 6.A., 6.B., 6.C. and 7 of this Lease,
respectively. Additionally, Lessee shall pay to Lessor as additional rent
hereunder, immediately on Lessor's demand therefore, any and all costs and
expenses incurred by Lessor to enforce the provisions of this Lease, including,
but not limited to, costs associated with any proposed assignment or subletting
of all or any portion of the Premises by Lessee, costs associated with the
delivery of notices, delivery and recordation of notice(s) of default,
attorneys' fees, expert fees, court costs and filing fees (collectively, the
"Enforcement Expenses"). The term "Rent" whenever used herein refers to the
aggregate of all these amounts. If Lessor permits Lessee to occupy the
Premises without requiring Lessee to pay rental payments for a period of time,
the waiver of the requirement to pay rental payments shall only apply to
waiver of the Base Rent and Lessee shall otherwise perform all other
obligations of Lessee hereunder, including, but not limited to paying to Lessor
any and all amounts considered additional rent, such as Lessee's share of
Increases in Operating Expenses, Increases in Tax Expenses, Increases in Common
Area Utility Costs, Trash and Water Charge, Utility Expenses, and
administrative expenses. If, at any time, Lessee is in default of or otherwise
breaches any term, condition or provision of this Lease, any such waiver by
Lessor of Lessee's requirement to pay rental payments shall be null and void
and Lessee shall immediately pay to Lessor all rental payments waived by
Lessor. The Rent for any fractional part of a calendar month at the
commencement or termination of the Lease term shall be a prorated amount of the
Rent for a full calendar month based upon a thirty (30) day month. The
prorated Rent shall be paid on the Commencement Date and the first day of the
calendar month in which the date of termination occurs, as the case may be.
4. SECURITY DEPOSIT AND CLEANING DEPOSIT:
A. Security Deposit: Upon Lessee's execution of this Lease,
Lessee shall deliver to Lessor, as a Security Deposit for the performance by
Lessee of its obligations under this Lease, the amount described on Page
2
<PAGE> 3
1. If Lessee is in default, Lessor may, but without obligation to do so,
use the Security Deposit, or any portion thereof, to cure the default or to
compensate Lessor for all damages sustained by Lessor resulting from Lessee's
default, including, but not limited to the Enforcement Expenses. Lessee
shall, immediately on demand, pay to Lessor a sum equal to the portion of the
Security Deposit so applied or used so as to replenish the amount of the
Security Deposit held up to the amount initially deposited with Lessor.
Concurrently with any increase in the Base Rent, Lessee shall deliver to
Lessor an amount equal to such increase, which amount shall be added to the
Security Deposit being held by Lessor and be deemed a part of such Security
Deposit thereafter. At anytime after Lessee has defaulted hereunder, Lessor
may require an increase in the amount of the Security Deposit required
hereunder for the then balance of the Lease term and Lessee shall, immediately
on demand, pay to Lessor additional sums in the amount of such increase. As
soon as practicable after the termination of this Lease, Lessor shall return
the Security Deposit to Lessee, less such amounts as are reasonably necessary,
as determined solely by Lessor, to remedy Lessee's default(s) hereunder or to
otherwise restore the Premises to a clean and safe condition, reasonable went
and tear excepted. If the cost to restore the Premises exceeds the amount of
the Security Deposit, Lessee shall promptly deliver to Lessor any and all of
such excess sums as determined solely by Lessor. Lessor shall not be required
to keep the Security Deposit separate from other funds, and, unless otherwise
required by law, Lessee shall not be entitled to interest on the Security
Deposit. In no event or circumstance shall Lessee have the right to any use of
the Security Deposit and, specifically, Lessee may not use the Security
Deposit as a credit or to otherwise offset any payments requited hereunder,
including, but not limited to, Rent or any portion thereof.
B. CLEANING DEPOSIT: Upon Lessee's execution of this Lease,
Lessee shall deliver to Lessor, as a Cleaning Deposit for the performance by
Lessee of its obligations under this Lease including, but not limited to,
Paragraph 11 below, the amount described on Page 1. The Cleaning Deposit is to
be used for purposes relating to cleaning up the Premises and the area adjacent
to the Premises to the satisfaction of Lessor. If Lessee is in default, Lessor
may, but without obligation to do so, use the Cleaning Deposit, or any portion
thereof, to cure the default or to compensate Lessor for all damages sustained
by Lessor resulting from Lessee's default, including, but not limited to the
Enforcement Expenses. Lessee shall, immediately on demand, pay to Lessor a sum
equal to the portion or the Cleaning Deposit so applied or used so as to
replenish the amount of the Cleaning Deposit held up to the amount initially
deposited with Lessor. At anytime after Lessee has defaulted hereunder, Lessor
may require an increase in the amount of the Cleaning Deposit required
hereunder for the then balance of the Lease term and Lessee shall, immediately
on demand, pay to Lessor additional sums in the amount of such increase. As
soon as practicable after the termination of this Lease, Lessor shall return
the Cleaning Deposit to Lessee, less such amounts as are reasonably necessary
to remedy Lessee's default(s) hereunder or to otherwise restore the Premises to
a clean and safe condition as determined by Lessor. Lessor shall not be
required to keep the Cleaning Deposit separate from other funds, and, unless
otherwise required by law, Lessee shall not be entitled to interest on the
Cleaning Deposit. In no event or circumstance shall Lessee have the right to
any use of the Cleaning Deposit and, specifically, Lessee may not use the
Cleaning Deposit as a credit or to otherwise offset any payments required
hereunder, including, but not limited to, Rent or any portion thereof.
5. CONDITION OF PREMISES: Lessee hereby accepts the Premises in its
current "as is" condition unless otherwise specified in Exhibit B, attached
hereto and incorporated herein by this reference. If so specified in Exhibit
B hereto, Lessor or Lessee, as the case may be, shall install the improvements
("Tenant Improvements") on the Premises as described and in accordance with the
terms, conditions, criteria and provisions set forth in Exhibit B, attached and
incorporated herein by this reference. Lessee acknowledges that neither Lessor
nor any of Lessor's agents, representatives or employees has made any
representations as to the suitability or fitness of the Premises for the
conduct of Lessee's business or for any other purpose, and that neither Lessor
nor any of Lessor's agents, representatives or employees has agreed to
undertake any alterations or construct any Tenant Improvements to the Premises
except as expressly provided in Exhibit B to this Lease.
6. EXPENSES:
A. OPERATING EXPENSES: In addition to the Base Rent set forth in
Paragraph 3, Lessee shall pay its share, which is defined on Page 1, of all
Operating Expenses in excess of the amount of said expenses for the calendar
year in which this Lease commenced ("Increases in Operating Expenses") as
additional rent. The term "Operating Expenses" as used herein shall mean the
total amounts paid or payable by Lessor in connection with the ownership,
maintenance, repair and operation of the Premises, the Building and the Lot,
and where applicable, of the Park referred to on Page 1. The amount of Lessee's
share of Increases in Operating Expenses shall be reviewed from time to time by
Lessor and shall be subject to modification by Lessor, as reasonably determined
by Lessor, including, but not limited to modifications due to the sale or
addition of a building or additional space within the Lot or the Park. These
Operating Expenses may include, but are not limited to:
(i) Lessor's cost of non-structural repairs to and
maintenance of the roof and exterior walls of (the Building;
(ii) Lessor's cost of maintaining the outside paved area,
landscaping and other common areas for the Park. The term "Common
Area" shall mean all areas and facilities within the Park exclusive of
the Premises and the other portions of the Park leased exclusively to
other tenants. The Common Area includes, but is not limited to,
interior lobbies, mezzanines, parking areas, access and perimeter
roads, sidewalks, landscaped areas and similar areas and facilities;
3
<PAGE> 4
(iii) Lessor's annual cost of insurance insuring against
fire and extended coverage (including, if Lessor elects, "all risk"
coverage) and all other insurance, including, but not limited to,
earthquake, flood and/or surface water endorsements for the Building,
the Lot and the Park (including the Common Area), and rental value
insurance against loss of Rent in an amount equal to the amount of
Rent for a period of at least six (6) months commencing on the date of
loss;
(iv) Lessor's cost of modifications to the Building, the
Common Area and/or the Park occasioned by any rules, laws or
regulations effective subsequent to the commencement of the Lease;
(v) Lessor's cost of modifications to the Building, the
Common Area and/or the Park occasioned by any rules, laws or
regulations arising from Lessee's use of the Premises regardless of
when such rules, laws or regulations became effective;
(vi) If Lessor elects to so procure, Lessor's cost of
preventative maintenance, repair and replacement contracts including,
but not limited to, contracts for elevator systems and heating,
ventilation and air conditioning systems, and trash or refuse
collection;
(vii) Lessor's cost of security and fire protection services
for the Park, if in Lessor's sole discretion such services are
provided;
(viii) Lessor's establishment of reasonable reserves for
replacements and/or repairs of Common Area improvements, equipment and
supplies;
(ix) Lessor's cost for the creation and negotiation of, and
pursuant to, any rail spur or track agreements, licenses, easements or
other similar undertakings; and
(x) Lessor's cost of supplies, equipment, rental equipment
and other similar items used in the operation and/or maintenance of the
Park.
B. TAX EXPENSES: In addition to the Base Rent set forth in
Paragraph 3, Lessee shall pay its share, which is defined on Page 1, of all
real property taxes applicable to the land and improvements included within the
Lot on which the Premises are situated in excess of the amount of the Tax
Expenses for the calendar year in which this Lease commenced ("Increases in Tax
Expenses") and one hundred percent (100%) of all personal property taxes now or
hereafter assessed or levied against the Premises or Lessee's personal
property. The amount of Lessee's share of Increases in Tax Expenses shall be
reviewed from time to time by Lessor and shall be subject to modification by
Lessor, as reasonably determined by Lessor, including, but not limited to
modifications due to the sale or addition of a building or additional space
within the Lot or the Park. Lessee shall also pay any increase in real
property taxes attributable, in Lessor's sole discretion, to any and all
alterations, Tenant improvements or other improvements of any kind whatsoever
placed in, on or about the Premises for the benefit of, at the request of, or
by Lessee. The term "Tax Expenses" includes, but is not limited to, any form
of tax and assessment (general, special, ordinary or extraordinary), commercial
rental tax, payments under any improvement bond or bonds, license, rental tax,
transaction tax, levy, or penalty imposed by authority having the direct or
indirect power of tax (including any city, county, state or federal government,
or any school, agricultural, lighting, drainage or other improvement district
thereof) as against any legal or equitable interest of Lessor in the Premises,
Lot or Park, as against Lessor's right to rent or other income therefrom, or as
against Lessor's business of leasing the Premises or the occupancy of Lessee or
any other tax, fee, or excise, however described (excluding inheritance or
estate taxes), including any value added tax, or any tax imposed in
substitution, partially or totally, of any tax previously included within the
definition of real property taxes, or any additional tax the nature of which
was previously included within the definition of real property tax.
C. PAYMENT OF EXPENSES AND ADMINISTRATIVE EXPENSES: Lessor shall
estimate Lessee's share of the Increases in Operating Expenses and Increases in
Tax Expenses for the calendar year in which the Lease commences. Commencing
in January of the following calendar year, one-twelfth (1/12th) of this
estimated amount shall be paid by Lessee to Lessor, as additional rent, on the
first (1st) day of each month and throughout the remaining months of such
calendar year. Thereafter, Lessor may estimate such expenses as of the
beginning of each calendar year and Lessee shall pay one-twelfth (1/12th) of
such estimated amount as additional rent hereunder on the first day of each
month during such calendar year and for each ensuing calendar year throughout
the term of this Lease (including any extensions of the term). Not later than
March 31 of each of the following calendar years, or as soon thereafter as
reasonably possible, including the calendar year after the calendar year in
which this Lease terminates or the term expires, Lessor shall endeavor to
furnish Lessee with a true and correct accounting of actual Increases in
Operating Expenses and Increases in Tax Expenses. Within thirty (30) days of
Lessor's delivery of such accounting, Lessee shall pay to Lessor the amount of
any underpayment. Notwithstanding the foregoing, failure by Lessor to give
such accounting by such date shall not constitute a waiver by Lessor of its
right to collect any of Lessee's underpayment at anytime. Lessor shall credit
the amount of any overpayment by Lessee toward the next estimated monthly
installment(s) falling due, or where the term of the Lease has expired, refund
the amount of overpayment to Lessee. Lessee, at its sole cost and expense
through any certified public accountant designated by it, shall have the right
to examine and/or audit the books and records evidencing such costs and
expenses for the previous one (1) calendar year, during Lessor's reasonable
business hours and not more frequently than once during any calendar year.
Lessee's obligations to pay its share of Increased Operating Expenses and
Increased Tax Expenses shall survive the expiration or earlier termination of
this Lease.
4
<PAGE> 5
If the term of the Lease expires prior to the annual reconciliation of
expenses, if any, Lessor shall have the right to reasonably estimate Lessee's
share of such expenses, and if Lessor determines that an underpayment is due,
Lessee hereby agrees that Lessor shall be entitled to deduct such underpayment
from Lessee's Security Deposit. If Lessor reasonably determines that an
overpayment has been made by Lessee, Lessor shall refund said overpayment
together with the return of Lessee's Security Deposit. Notwithstanding the
foregoing, failure of Lessor to accurately estimate Lessee's share of such
expenses shall not constitute a waiver of Lessor's right to collect any of
Lessee's underpayment at anytime.
In addition to the Base Rent set forth in Paragraph 3 hereof, Lessee
shall pay Lessor, without prior notice or demand, on the first (1st) day of
each month throughout the term of this Lease (including any extensions of such
term), as compensation to Lessor for accounting and management services
rendered on behalf of the Park, an amount equal to ten percent (10%) of the
aggregate of Lessee's share of (i) the total Increases in Operating Expenses
and Increases in Tax Expenses as described in Paragraphs 6.A. and 6.B. above,
respectively, and (ii) all Increases in Common Area Utility Costs for the Park
as described in Paragraph 7. Lessee's obligations to pay its share of such
administrative expenses shall survive the expiration or earlier termination of
this Lease.
7. UTILITIES: Lessee shall pay the cost of all water, sewer use and
connection fees, gas, heat, electricity, refuse pickup, janitorial service,
telephone and other utilities billed or metered separately to the Premises
and/or Lessee. Lessee shall also pay its share of any assessments or charges
for utility or similar purposes included within any tax bill for the Lot on
which the Premises are situated. For any such utility fees or use charges that
are not billed or metered separately to Lessee, Lessee shall pay to Lessor, as
additional rent, without prior notice or demand, on the first (1st) day of
each month throughout the term of this Lease (the amount which is attributable
to Lessee's use of the Premises as reasonably estimated and determined by
Lessor based upon factors such as size of the Premises and intensity of use of
such utilities by Lessee such that Lessee shall pay the portion of such charges
reasonably consistent with Lessee's use of such utilities ("Utility Expenses").
If Lessee disputes any such estimate or determination, then Lessee shall either
pay the estimated amount or cause the Premises to be separately metered at
Lessee's sole expense. In addition, Lessee shall pay Lessor a trash and water
charge (the "Trash and Water Charge") in the amount set forth on Page 1, as
additional rent. Lessee shall also pay to Lessor its share, which is described
on Page 1, as additional rent, of any Common Area utility costs, fees, charges
or expenses in excess of the amount of such costs, fees, charges or expenses
for the calendar year in which this Lease commenced ("Increases in Common Area
Utility Costs") within fifteen (15) days after receiving a bill from Lessor.
The amount of Lessee's share of Increases in Common Area Utility Costs shall be
reviewed from time to time by Lessor and shall be subject to modification by
Lessor, as reasonably determined by Lessor, including, but not limited to
modifications due to the sale or addition of a building or additional space
within the Lot or the Park. Lessee acknowledges that the Premises may become
subject to the rationing of utility services or restrictions on utility use as
required by a public utility company, governmental agency or other similar
entity having jurisdiction thereof. Notwithstanding any such rationing or
restrictions on use of any such facility services, Lessee acknowledges and
agrees that its tenancy and occupancy hereunder shall be subject to such
rationing restrictions as may be imposed upon Lessor, Lessee, the Premises,
the Building or the Park, and Lessee shall in no event be excused or relieved
from any covenant or obligation to be kept or performed by Lessee by reason of
any such rationing or restrictions. Lessee further agrees to pay and
discharge, prior to delinquency, any amount, tax, charge, surcharge, assessment
or imposition levied, assessed or imposed upon the Premises, or Lessee's use
and occupancy thereof, or as a result directly or indirectly of any such
rationing or restrictions.
8. LATE CHARGES: Lessee acknowledges that late payment (the second day of
each month or anytime thereafter) by Lessee to Lessor of Base Rent, Lessee's
share of Increases in Operating Expenses, Increases in Tax Expenses, Increases
in Common Area Utility Costs, the Trash and Water Charge, Utility Expenses or
other sums due hereunder, will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and
accounting charges, and late charges that may be imposed on Lessor by the
terms of any note secured by any encumbrance against the Premises, and late
charges and penalties due to the late payment of real property taxes on the
Premises. Therefore, if any installment of Rent or any other sum due from
Lessee is not received by Lessor when due, Lessee shall promptly pay to Lessor
all of the following, as applicable: (a) an additional sum equal to ten
percent (10%) of such delinquent amount plus interest on such delinquent amount
at the rate equal to the prime rate plus three percent (3%) for the time
period such payments are delinquent as a late charge for every month or portion
thereof that such sums remain unpaid, (b) the amount of seventy-five dollars
($75) for each three-day notice prepared for, or served on, Lessee, (c) the
amount of fifty dollars ($50) relating to checks for which there are not
sufficient funds. The parties agree that this late charge and the other
charges referenced above represent a fair and reasonable estimate of the costs
that Lessor will incur by reason of late payment by Lessee. Acceptance of any
late charge or other charges shall not constitute a waiver by Lessor of
Lessee's default with respect to the delinquent amount, nor prevent Lessor from
exercising any of the other rights and remedies available to Lessor for any
other breach of Lessee under this Lease. If a late charge or other charge
becomes payable for any three (3) installments of Rent within any twelve (12)
month period, then Lessor, at Lessor's sole option, can either require the
Rent be paid quarterly in advance, or be paid monthly in advance by cashier's
check or by electronic funds transfer.
9. USE OF PREMISES: The Premises are to be used solely for the uses
stated on Page 1 and for no other uses or purposes without Lessor's prior
written consent. The use of the Premises by Lessee and its agents, invitees
and employees shall be subject to, and at all times in compliance with,
(a) any and all applicable laws, ordinances, statutes, orders and regulations
as same exist from time to time (collectively, the "Laws"), and (b) any and all
5
<PAGE> 6
declarations of covenants, conditions and restrictions ("CC&Rs") and any
supplement thereto which has been or hereafter is recorded in any official or
public records with respect to the Premises, the Building, the Lot and/or the
Park, or any portion thereof.
Lessee shall not use the Premises or permit anything to be done in or
about the Premises nor keep or bring anything therein which will in any way
conflict with any of the requirements of the Board of Fire Underwriters or
similar body now or hereafter constituted or in any way increase the existing
rate of or affect any policy of fire or other insurance upon the Building or
any of its contents, or cause a cancellation of any insurance policy. Lessee
shall not do or permit anything to be done in or about the Premises which will
in any way obstruct or interfere with the rights of Lessor, other tenants or
occupants of the Building, other buildings in the Park, or other persons or
businesses in the area, or injure or annoy other tenants or use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable
purpose, as determined by Lessor, in its sole discretion, for the benefit,
quiet enjoyment and use by Lessor and all other tenants or occupants of the
Building or other buildings in the Park; nor shall Lessee cause, maintain or
permit any private or public nuisance in, on or about the Premises, Building,
Park and/or the Common Area, including, but not limited to, any offensive odors,
fumes or vibrations. Lessee shall not damage or deface or otherwise commit or
suffer to be committed any waste in, upon or about the Premises. Lessee shall
not store, nor permit any other person or entity to store, any property,
equipment, materials, supplies, personal property or any other items or goods
outside of the Premises. Lessee shall not permit any animals, including, but
not limited to, any household pets, to be brought or kept in or about the
Premises. Lessee shall place no loads upon the floors, walls, or ceilings in
excess of the maximum designed load permitted by the applicable Uniform
Building Code or which may damage the Building or outside areas; nor place any
harmful liquids in the drainage systems; nor dump or store waste materials,
refuse or other such materials, or allow such to remain outside the Building
area, except in refuse dumpsters or in any enclosed trash areas provided.
Lessee shall honor the terms of all recorded CC&Rs relating to the Premises,
the Building, the Lot and/or the Park. Lessee shall honor the rules and
regulations set forth in Exhibit C, attached to and made a part of this Lease,
and any other reasonable rules and regulations of Lessor now or hereafter
enacted relating to parking and the operation of the Building and the Park.
If Lessee fails to comply with such Laws, CC&Rs, rules and regulations or the
provisions of this Lease, Lessor shall have the right to collect from Lessee a
reasonable sum as a penalty, in addition to all rights and remedies of Lessor
hereunder including, but not limited to, the payment by Lessee to Lessor of all
Enforcement Expenses and Lessor's costs and expenses, if any, to cure any of
such failures of Lessee, if Lessor, at its sole option, elects to undertake
such cure.
10. ALTERATIONS AND ADDITIONS: Lessee shall not install any signs,
fixtures, improvements, nor make or permit any other alterations or additions
to the Premises without the prior written consent of Lessor. If any such
alteration or addition is expressly permitted by Lessor, Lessee shall deliver
at least twenty (20) days prior notice to Lessor, from the date Lessee intends
to commence construction, sufficient to enable Lessor to post a Notice of
Non-Responsibility. In all events, Lessee shall obtain all permits or other
governmental approvals prior to commencing any of such work and deliver a copy
of same to Lessor. All alterations and additions shall be installed by a
licensed contractor approved by Lessor, at Lessee's sole expense in compliance
with all applicable Laws, CC&Rs, and Lessor's rules and regulations. Lessee
shall keep the Premises and the property on which the Premises are situated
free from any liens arising out of any work performed, materials furnished or
obligations incurred by or on behalf of Lessee. As a condition to Lessor's
consent to the installation of any fixtures or improvements, Lessor may require
Lessee to post and obtain a completion and indemnity bond for tip to one
hundred fifty percent (150%) of the cost of the work. Upon termination of this
Lease, Lessee shall remove all signs, fixtures, furniture and furnishings and
if requested by Lessor, remove any improvements made by Lessee and repair any
damage caused by the installation or removal of such signs, fixtures,
furniture, furnishings and improvements and leave the Premises in as good
condition as they were in at the time of the commencement of this Lease,
excepting for reasonable wear and tear. Reasonable wear and tear shall not
include any damage or deterioration that would have been prevented by proper
maintenance by Lessee or Lessee otherwise performing all of its obligations
under this Lease.
11. REPAIRS AND MAINTENANCE: Lessee shall, at Lessee's sole cost and
expense, keep and maintain the Premises and the adjacent areas in good, clean
and safe condition and repair to the satisfaction of Lessor including, but not
limited to, repairing any damage caused by Lessee or its employees,
representatives, agents, invitees, licensees or contractors. Without limiting
the generality of the foregoing, Lessee shall be solely responsible for
maintaining, repairing and replacing all interior plumbing and mechanical
systems, heating, ventilation and air conditioning systems, interior electrical
wiring and equipment, interior lighting, all interior glass, interior window
casements, partitions, tenant signage, interior doors and door closers,
fixtures, equipment, interior painting, and interior walls and floors of the
Premises. Lessee's obligation to keep, maintain, preserve and repair the
Premises and the adjacent area shall specifically extend to the cleanup and
removal of any and all Hazardous Materials (hereafter defined) occurring in, on
or about the Premises.
Subject to the provisions of Paragraphs 6 and 9 of this Lease and
except for repairs rendered necessary by the active or passive negligent acts
or emissions of Lessee, its agents, customers, employees and invitees, Lessor
agrees, at Lessor's expense, subject to reimbursement pursuant to Paragraph 6
above, to keep in good repair the plumbing and mechanical systems exterior to
the Premises, roof membranes, signage (exclusive of tenant signage), exterior
electrical wiring and equipment, exterior lighting, all exterior glass,
exterior doors and entrances, exterior window casements, exterior doors and
door closers, exterior painting, and underground utility and sewer pipes
outside the exterior walls of the Building. Lessor reserves the right, but
without the obligation, to procure and maintain the heating, ventilation and
air conditioning systems maintenance contract and if Lessor so elects, Lessee
will reimburse Lessor for the cost thereof in accordance with the provisions of
Paragraph 6 above.
6
<PAGE> 7
Except for repairs rendered necessary by the active or passive
negligent acts or omissions of Lessee, its agents, customers, employees and
invitees, Lessor agrees, at Lessor's sole cost and expense, to keep in good
repair the structural portions of the floors, foundations, exterior walls
(exclusive of glass and exterior doors), and the structural portions of the
roof (excluding the roof membrane) of the Building.
Except for normal maintenance and repair of the items outlined above,
Lessee shall have no right of access to or right to install any device on the
roof of the Building nor make any penetrations of the roof of the Building
without the express prior written consent of Lessor. If Lessee refuses or
neglects to repair and maintain the Premises and the adjacent areas properly as
required herein and to the reasonable satisfaction of Lessor, Lessor may, but
without obligation to do so, at anytime make such repairs and/or maintenance
without Lessor having any liability to Lessee for any loss or damage that may
accrue to Lessee's merchandise, fixtures or other property, or to Lessee's
business by reason thereof. In the event Lessor makes such repairs and/or
maintenance, upon completion thereof Lessee shall pay to Lessor, as additional
rent, the Lessor's costs for making such repairs and/or maintenance, plus
twenty percent (20%) for overhead, upon presentation of a bill therefor, plus
any Enforcement Expenses. The obligations of Lessee hereunder shall survive
the expiration of the term of this Lease or the earlier termination thereof,
Lessee hereby waives any right to repair at the expense of Lessor under any
applicable Laws now or hereafter in effect respecting the Premises.
12. INSURANCE: Lessee shall maintain in full force and effect at all times
during the term of this Lease, at Lessee's sole cost and expense, for the
protection of Lessee and Lessor, as their interests may appear, policies of
insurance issued by a carrier or carriers acceptable to Lessor and its
lender(s) which afford the following coverages: (i) worker's compensation:
statutory limits; (ii) employer's liability: as required by law with a minimum
of $1,000,000; (iii) comprehensive general liability insurance (occurrence
form) including blanket contractual liability, broad form property damage,
premises, personal injury, completed operations, products liability, personal
and advertising coverage, a plate-glass rider to provide coverage for all glass
in, on or about the Premises including, without limitation, skylights, and fire
damage with a combined single limit of not less than (the amount set forth on
Page 1) per occurrence, and (the amount set forth on Page 1) per occurrence per
location if Lessee has multiple locations, with deletion of (a) the exclusion
for operations within fifty (50) feet of a railroad track (railroad protective
liability), if applicable, and (b) the exclusion for explosion, collapse or
underground hazard, if applicable, and if necessary, Lessee shall provide for
restoration of the aggregate limit; (iv) comprehensive automobile liability
insurance: a combined single limit of not less than $2,000,000 per occurrence
and insuring Lessee against liability for claims arising out of the ownership,
maintenance, or use of any owned, hired or non-owned automobiles; and (v) "all
risk" property insurance including boiler and machinery comprehensive form, if
applicable, covering damage to or loss of any personal property, fixtures and
equipment, including, without limitation, electronic data processing equipment,
of Lessee (and coverage for the full replacement cost thereof including
business interruption of Lessee), together with, if the property of Lessee's
invitees is to be kept in the Premises, warehouser's legal liability or bailee
customers insurance for the full replacement cost of the property belonging to
invitees and located in the Premises.
Insurance required to be maintained by Lessee shall be written by
companies licensed to do business in the State of California and having a
"General Policyholders Rating" of at least A (or such higher 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 deliver to Lessor
certificates of insurance for all insurance required to be maintained by Lessee
hereunder at the time of execution of this Lease by Lessee. Lessee shall, at
least thirty (30) days prior to expiration of each policy, furnish Lessor with
certificates of renewal or "binders" thereof. Each certificate shall expressly
provide that such policies shall not be cancelable or otherwise subject lo
modification except after thirty (30) days prior written notice to the parties
named as additional insureds as required in this Lease (except for cancellation
for nonpayment of premium, in which event cancellation shall not take effect
until at least ten (10) days' notice has been given to Lessor). If Lessee
fails to maintain any insurance required in this Lease, Lessee shall be liable
for all losses and costs resulting from such failure.
Lessor, any property management company of Lessor for the Premises,
any lender(s) of Lessor having a lien against the Premises, the Building, the
Lot or the Park, and any joint venture partners of Lessor shall be named as
additional insureds under all of the policies required in Paragraph 12.(iii)
above. Additionally, such policies shall provide for severability of interest.
All insurance to be maintained by Lessee shall, except for workers'
compensation and employer's liability insurance, be primary, without right of
contribution from insurance maintained by Lessor. Any umbrella liability
policy or excess liability policy (which shall be in "following form") shall
provide that if the underlying aggregate is exhausted, the excess coverage
will drop down as primary insurance. The limits of insurance maintained by
Lessee shall not limit Lessee's liability under this Lease.
13. LIMITATION OF LIABILITY AND INDEMNITY: Except for damage resulting
from the sole active gross negligence or willful misconduct of Lessor or its
authorized representatives, Lessee agrees to protect, defend (with counsel
acceptable to Lessor) and hold Lessor and Lessor's lender(s), partners,
employees, representatives, legal representatives, successors and assigns
(collectively, the "Indemnitees") harmless and indemnify the Indemnitees from
and against all liabilities, damages, claims, losses, judgments, charges and
expenses (including reasonable attorneys' fees, costs of court and expenses
necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to, directly
or indirectly. Lessee's use of the Premises and/or the Park, or the conduct
of Lessee's business, or from any activity, work or thing done, permitted or
suffered by Lessee in or about the Premises, or in any way connected with the
Premises or with the improvements or personal property therein, including, but
not limited to, any liability for injury to person or property of Lessee,
7
<PAGE> 8
its agents or employees or third party persons. Lessee agrees that the
obligations of Lessee herein shall survive the expiration or earlier
termination of this Lease.
Except for damage resulting from the sole active gross negligence or
willful misconduct of Lessor or its authorized representatives, Lessor shall
not be liable to Lessee for any loss or damage to Lessee or Lessee's property,
for any injury to or loss of Lessee's business or for any damage or injury to
any person from any cause whatsoever, including, but not limited to, any acts,
errors or omissions by or on behalf of any other tenants or occupants of the
Building and/or the Park. Lessee shall not, in any event or circumstance, be
permitted to offset or otherwise credit against any payments of Rent required
herein for matters for which Lessor may be liable hereunder. Lessor and its
authorized representatives shall not be liable for any interference with light
or air, or for any latent defect in the Premises or the Building. To the
fullest extent permitted by law, Lessee agrees that neither Lessor nor any of
Lessor's lender(s), partners, employees, representatives, legal
representatives, successors and assigns shall at any time or to any extent
whatsoever be liable, responsible or in any way accountable for any loss,
liability, injury, death or damage to persons or property which at any time may
be suffered or sustained by Lessee or by any person(s) whomsoever who may at
any time be using or occupying or visiting the Premises, the Building or the
Park.
14. ASSIGNMENT AND SUBLEASING:
A. PROHIBITION: Lessee shall not assign, mortgage, hypothecate,
encumber, grant any license or concession, pledge or otherwise transfer this
Lease (collectively, "assignment"), in whole or in part, whether voluntarily or
involuntarily or by operation of law, nor sublet or permit occupancy by any
person other than Lessee of all or any portion of the Premises without first
obtaining the prior written consent of Lessor, which shall not be unreasonably
withheld. If Lessee seeks to sublet or assign all or any portion of the
Premises, Lessee shall deliver to Lessor at least thirty (30) days prior to the
proposed commencement of the sublease or assignment (the "Proposed Effective
Date") the following: (i) the name of the proposed assignee or sublessee; (ii)
such information as to such assignee's or sublessee's financial responsibility
and standing as Lessor may reasonably require; and (iii) a copy of the proposed
sublease or assignment agreement and all agreements collateral thereto, which
instrument shall include a provision whereby the assignee or sublessee assumes
all of Lessee's obligations hereunder and agrees to be bound by the terms
hereof. As additional rent hereunder, Lessee shall pay to Lessor a fee in the
amount of five hundred dollars ($500) plus Lessee shall reimburse Lessor for
actual legal and other expenses incurred by Lessor in connection with any
request by Lessee for Lessor's consent to assignment or subletting. In the
event the sublease (1) by itself or taken together with prior sublease(s)
covers or totals, as the case may be, more than twenty-five percent (25%) of
the rentable square feet of the Premises or (2) is for a term which by itself
or taken together with prior or other subleases is greater than fifty percent
(50%) of the period remaining in the term of this Lease as of the time of the
Proposed Effective Date, then Lessor shall have the right, to be exercised by
giving written notice to Lessee, to recapture the space described in the
sublease. If such recapture notice is given, it shall serve to terminate this
Lease with respect to the proposed sublease space, or, if the proposed sublease
space covers all the Premises, it shall serve to terminate the entire term of
this Lease, in either case as of the Proposed Effective Date. However, no
termination of this Lease with respect to part or all of the Premises shall
become effective without the prior written consent, where necessary, of the
holder of each deed of trust encumbering the Premises or any part thereof. If
this Lease is terminated pursuant to the foregoing with respect to less than
the entire Premises, the Rent shall be adjusted on the basis of the proportion
of square feet retained by Lessee to the square feet originally demised and
this Lease as so amended shall continue thereafter in full force and effect.
Each permitted assignee or sublessee shall assume and be deemed to assume this
Lease and shall be and remain liable jointly and severally with Lessee for
payment of Rent and for the due performance of, and compliance with all the
terms, covenants, conditions and agreements herein contained on Lessee's part
to be performed or complied with, for the term of this Lease. No assignment or
subletting shall affect the continuing primary liability of Lessee (which,
following assignment, shall be joint and several with the assignee), and Lessee
shall not be released from performing any of the terms, covenants and
conditions of this Lease. For purposes hereof, in the event Lessee is a
corporation, partnership, joint venture, trust or other entity other than a
natural person, any change in the direct or indirect ownership of Lessee
(whether pursuant to one or more transfers) which results in a change of more
than fifty percent (50%) in the direct or indirect ownership of Lessee shall be
deemed to be an assignment within the meaning of this Paragraph 14 and shall be
subject to all the provisions hereof. Any and all options, first rights of
refusal, tenant improvement allowances and other similar rights granted to
Lessee in this Lease, if any, shall not be assignable by Lessee unless
expressly authorized in writing by Lessor.
B. EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION: In the
event of any sublease or assignment of all or any portion of the Premises
where the rent or other consideration provided for in the sublease or
assignment either initially or over the term of the sublease or assignment
exceeds the Rent or pro rata portion of the Rent, as the case may be, for such
space reserved in the Lease, Lessee shall pay the Lessor monthly, as additional
rent, at the same time as the monthly installments of Rent are payable
hereunder, fifty percent (50%) of the excess of each such payment of rent or
other consideration in excess of the Rent called for hereunder.
C. WAIVER: Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Lessor to any assignee
or sublessee, or failure by Lessor to take action against any assignee or
sublessee, Lessee waives notice of any default of any assignee or sublessee and
agrees that Lessor may, at its option, proceed against Lessee without having
taken action against or joined such assignee or sublessee, except that Lessee
shall have the benefit of any indulgences, waivers and extensions of time
granted to any such assignee or sublessee.
8
<PAGE> 9
15. WAIVER OF SUBROGATION: Lessee waives any right to recover against
Lessor for claims for damages to Lessee's property, including, but not limited
to, personal property, fixtures and equipment, covered by insurance. This
provision is intended to waive fully, and for the benefit of Lessor, any rights
and/or claims which might give rise to a right of subrogation in favor of any
insurance carrier. The coverage obtained by Lessee pursuant to this Lease
shall include, without limitation, a waiver of subrogation endorsement attached
to the certificate of insurance.
16. AD VALOREM TAXES: Prior to delinquency, Lessee shall pay all taxes and
assessments levied upon trade fixtures, alterations, additions, improvements,
inventories and personal property located and/or installed on or in the
Premises by, or on behalf of, Lessee; and if requested by Lessor, Lessee shall
promptly deliver to Lessor copies of receipts for payment of all such taxes and
assessments. To the extent any such taxes are not separately assessed or
billed to Lessee, Lessee shall pay the amount thereof as invoiced by Lessor.
17. SUBORDINATION: Without the necessity of any additional document being
executed by Lessee for the purpose of effecting a subordination, and at the
election of Lessor or any bona fide mortgagee or dead of trust beneficiary with
a lien on all or any portion of the Premises or any ground lessor with respect
to the land of which the Premises are a part, this Lease shall be subject and
subordinate at all times to: (i) all ground leases or underlying leases which
may now exist or hereafter be executed affecting the Building or the land upon
which the Building is situated or both, and (ii) the lien of any mortgage or
deed of trust which may now exist or hereafter be executed in any amount for
which the Building, the Lot, ground leases or underlying leases, or Lessor's
interest or estate in any of said items is specified as security.
Notwithstanding the foregoing, Lessor or any such ground lessor, mortgagee, or
any beneficiary shall have the right to subordinate or cause to be subordinated
any such ground leases or underlying leases or any such liens to this Lease.
If any ground lease or underlying lease terminates for any reason or any
mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure
is made for any reason, Lessee shall, notwithstanding any subordination and
upon the request of such successor to Lessor, attorn to and become the Lessee of
the successor in interest to Lessor, provided such successor in interest will
not disturb Lessee's use, occupancy or quiet enjoyment of the Premises so long
as Lessee is not in default of the terms and provisions of this Lease. The
successor in interest to Lessor following foreclosure, sale or deed in lieu
thereof shall not be (a) liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (b) subject
to any offsets or defenses which Lessee might have against any prior lessor;
(c) bound by prepayment of more than one (1) month's Rent; or (d) liable to
Lessee for any Security Deposit not actually received by such successor in
interest. Lessee covenants and agrees to execute (and acknowledge if required
by Lessor, any lender or ground lessor) and deliver, within five (5) days of a
demand or request by Lessor and in the form requested by Lessor, ground lessor,
mortgagee or beneficiary, any additional documents evidencing the priority or
subordination or this Lease with respect to any such ground leases or
underlying leases or the lien of any such mortgage or deed of trust. Lessee's
failure to timely execute and deliver such additional documents shall, at
Lessor's option, constitute a material default hereunder. It is further agreed
that Lessee shall be liable to Lessor, and shall indemnify Lessor from and
against any loss, cost, damage or expense, incidental, consequential, or
otherwise, arising or accruing directly or indirectly, from any failure of
Lessee to execute or deliver to Lessor any such additional documents. Lessee
hereby irrevocably appoints Lessor as attorney-in-fact of Lessee, which
appointment is coupled with an interest, to execute, deliver and record any
such documents in the name and on behalf of Lessee.
18. RIGHT OF ENTRY: Lessee grants Lessor or its agents the right to enter
the Premises at all reasonable times for purposes of inspection, exhibition,
posting of notices, repair or alteration. At Lessor's option, Lessor shall at
all times have and retain a key with which to unlock all the doors in, upon and
about the Premises, excluding Lessee's vaults and safes. It is further agreed
that Lessor shall have the right to use any and all means Lessor deems
necessary to enter the Premises in an emergency. Lessor shall also have the
right to place "for rent" and/or "for sale" signs on the outside of the
Premises. Lessee hereby waives any claim from damages or for any injury or
inconvenience to or in reference with Lessee's business, or any other loss
occasioned thereby except for any claim for any of the foregoing arising out of
the gross active negligent acts or willful misconduct of Lessor or its
authorized representatives.
19. ESTOPPEL CERTIFICATE: Lessee shall execute (and acknowledge if
required by any lender or ground lessor) and deliver to Lessor, within not less
than five (5) days after Lessor provides such to Lessee, a statement in writing
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification), the date to which the Rent
and other charges are paid in advance, if any, acknowledging that there are
not, to Lessee's knowledge, any uncured defaults on the part of Lessor
hereunder or specifying such defaults as are claimed, and such other matters as
Lessor may reasonably require. Any such statement may be conclusively relied
upon by Lessor and any prospective purchaser or encumbrancer of the Premises.
Lessee's failure to deliver such statement within such time shall be conclusive
upon the Lessee that (a) this Lease is in full force and effect, without
modification except as may be represented by Lessor; (b) there are no uncured
defaults in Lessor's performance; and (c) not more than one month's Rent has
been paid in advance, except in those instances when Lessee pays Rent quarterly
in advance pursuant to Paragraph 8 hereof, then not more than three month's
Rent has been paid in advance. Failure by Lessee to so deliver such certified
estoppel certificate shall be a default of the provisions of this Lease.
Lessee shall be liable to Lessor, and shall indemnify Lessor from and against
any loss, cost, damage or expense, incidental, consequential, or otherwise,
arising or accruing directly or indirectly, from any failure of Lessee to
execute or deliver to Lessor any such certified estoppel certificate.
9
<PAGE> 10
Lessee hereby irrevocably appoints Lessor as attorney-in-fact of
Lessee, which appointment is coupled with an interest, to act in Lessee's name,
place and stead to execute and deliver such estoppel certificate on behalf of
Lessee.
20. LESSEE'S DEFAULT: The occurrence of any one or more of the following
events shall, at Lessor's option, constitute a default and breach of (this
Lease by Lessee:
(i) The vacation or abandonment of the Premises by Lessee
for a period of ten (10) consecutive days, and Lessee waives any right
to notice Lessee may have under applicable law;
(ii) The failure by Lessee to make any payment of Rent or
any other payment required hereunder on the date said payment is due;
(iii) The failure by Lessee to observe, perform or comply
with any of the conditions, covenants or provisions of this Lease
(except default in the payment of Rent); provided, if such default is
susceptible of cure and Lessee has promptly commenced the cure of such
default and is diligently prosecuting such cure to completion, then
the same must remain uncured for a period, unless otherwise noted
herein, of fifteen (15) days after written notice;
(iv) The making of a general assignment by Lessee for the
benefit of creditors, the filing of a voluntary petition by Lessee or
the filing of an involuntary petition by any of Lessee's creditors
seeking the rehabilitation, liquidation, or reorganization of Lessee
under any law relating to bankruptcy, insolvency or other relief of
debtors and, in the case of an involuntary action, the failure to
remove or discharge the same within sixty (60) days of such filing,
the appointment of a receiver or other custodian to take possession of
substantially all of Lessee's assets or this leasehold, Lessee's
insolvency or inability to pay Lessee's debts or failure generally to
pay Lessee's debts when due, any court entering a decree or order
directing the winding up or liquidation of Lessee or of substantially
all of Lessee's assets, Lessee taking any action toward the
dissolution or winding up of Lessee's affairs, the cessation or
suspension of Lessee's use of the Premises, or the attachment,
execution or other judicial seizure of substantially all of Lessee's
assets or this leasehold;
(v) Lessee's use or storage of Hazardous Materials on the
Premises other than as permitted by the provisions of Paragraph 29
below;
(vi) The making of any material misrepresentation or
omission by Lessee in any materials delivered by or on behalf of
Lessee to Lessor pursuant to this Lease; or
(vii) Lessee's default or other breach of any covenant,
condition or provision of any lease agreement between Lessee or an
affiliated entity of Lessee, as the tenant, and Lessor or an
affiliated entity of Lessor, as landlord, with regard to any and all
leased premises other than the Premises as described herein.
21. REMEDIES FOR LESSEE'S DEFAULT: In the event of Lessee's default or
breach of the Lease, Lessor may terminate Lessee's right to possession of the
Premises by any lawful means in which case upon delivery of written notice by
Lessor this Lease shall terminate on the date specified by Lessor in such
notice and Lessee shall immediately surrender possession of the Premises to
Lessor. In addition, the Lessor shall have the immediate right of re-entry
whether or not this Lease is terminated, and if this right of re-entry is
exercised following abandonment of the Premises by Lessee, Lessor may consider
any personal property belonging to Lessee and left on the Premises to also have
been abandoned. No re-entry or taking possession of the Premises by Lessor
pursuant to this Paragraph 21 shall be construed as an election to terminate
this Lease unless a written notice of such intention is given to Lessee. If
Lessor relets the Premises or any portion thereof, (i) Lessee shall be liable
immediately to Lessor for all costs Lessor incurs in reletting the Premises or
any part thereof, including, without limitation, broker's commissions, expenses
of cleaning, redecorating, and further improving the Premises and other similar
costs, and (ii) the rent received by Lessor from such reletting shall be
applied to the payment of, first, any indebtedness from Lessee to Lessor other
than Base Rent, Increases in Operating Expenses, Increases in Tax Expenses,
Increases in Common Area Utility Costs, the Trash and Water Charge and Utility
Expenses; second, all costs including maintenance, incurred by Lessor in
reletting; and, third, Base Rent, Increases in Operating Expenses, Increases in
Tax Expenses, Increases in Common Area Utility Costs, the Trash and Water
Charge and Utility Expenses due under this Lease. After deducting the payments
referred to above, any sum remaining from the rental Lessor receives from
reletting shall be held by Lessor and applied in payment of future Rent as Rent
becomes due under this Lease. In no event shall Lessee be entitled to any
excess rent received by Lessor. Reletting may be for a period shorter or
longer than the remaining term of this Lease. No act by Lessor other than
giving written notice to Lessee shall terminate this Lease. Acts of
maintenance, efforts to relet the Premises or the appointment of a receiver on
Lessor's initiative to protect Lessor's interest under this Lease shall not
constitute a termination of Lessee's right to possession. So long as this
Lease is not terminated, Lessor shall have the right to remedy any default of
Lessee, to maintain or improve the Premises, to cause a receiver to be
appointed to administer the Premises and new or existing subleases and to add
to the Rent payable hereunder all of Lessor's reasonable costs in so doing,
with interest at the maximum rate permitted by law from the date of such
expenditure.
If Lessee breaches this Lease and abandons the property before the end
of the term, or if Lessee's right to possession is terminated by Lessor because
of a breach or default of the Lease, then in either such case, Lessor may
10
<PAGE> 11
recover from Lessee all damages suffered by Lessor as a result of Lessee's
failure to perform its obligations hereunder, including, but not limited to,
the cost of any tenant improvements, and all costs Lessor incurs in reletting
the Premises or any part thereof, including without limitation, brokerage or
leasing commissions, expenses of cleaning, redecorating, and further improving
the Premises and like costs, and the worth at the time of the award (computed
in accordance with paragraph (3) of Subdivision (a) of Section 1951.2 of the
California Civil Code) of the amount by which the Rent then unpaid hereunder
for the balance of the Lease term exceeds the amount of such loss of Rent for
the same period which Lessee proves could be reasonably avoided by Lessor and
in such case, Lessor prior to the award, may relet the Premises for the purpose
of mitigating damages suffered by Lessor because of Lessee's failure to perform
its obligations hereunder; provided, however, that even though Lessee has
abandoned the Premises following such breach, this Lease shall nevertheless
continue in full force and effect for as long as Lessor does not terminate
Lessee's right of possession, and until such termination, Lessor shall have the
remedy described in Section 1951.4 of the California Civil Code (Lessor may
continue this Lease in effect after Lessee's breach and abandonment and recover
Rent as it becomes due, if Lessee has the right to sublet or assign, subject
only to reasonable limitations) and may enforce all its rights and remedies
under this Lease, including the right to recover the Rent from Lessee as it
becomes due hereunder. The "worth at the time of the award" within the meaning
of Subparagraphs (a)(1) and (a)(2) of Section 1951.2 of the California Civil
Code shall be computed by allowing interest at the rate of ten percent (10%)
per annum. Lessee waives redemption or relief from forfeiture under California
Code of Civil Procedure Sections 1174 and 1179, or under any other present or
future law, in the event Lessee is evicted or Lessor takes possession of the
Premises by reason of any default of Lessee hereunder.
The foregoing rights and remedies of Lessor are not exclusive; they
are cumulative in addition to any rights and remedies now or hereafter existing
at law, in equity by statute or otherwise, or to any equitable remedies Lessor
may have, and to any remedies Lessor may have under bankruptcy laws or laws
affecting creditor's rights generally. In addition to all remedies set forth
above, if Lessee defaults or otherwise breaches this Lease, any and all Base
Rent waived by Lessor under Paragraph 3 above shall be immediately due and
payable to Lessor and all options granted to Lessee hereunder shall
automatically terminate, unless otherwise expressly agreed to in writing by
Lessor.
The waiver by Lessor of any default or breach of any provision of this
Lease shall not be deemed or construed a waiver of any other breach or default
by Lessee hereunder or of any subsequent breach or default of this Lease,
except for the default specified in the waiver.
22. HOLDING OVER: If Lessee holds possession of the Premises after the
expiration of the term of this Lease with Lessor's consent, Lessee shall become
a tenant from month-to-month upon the terms and provisions of this Lease,
provided the monthly Base Rent during such hold over period shall be 200% of
the Base Rent due on the last month of the Lease term, payable in advance on or
before the first day of each month. Such month-to-month tenancy shall not
constitute a renewal or extension for any further term. All options, if any,
granted under the terms of this Lease shall be deemed automatically terminated
and be of no force or effect during said month-to-month tenancy. Lessee shall
continue in possession until such tenancy shall be terminated by either Lessor
or Lessee giving written notice of termination to the other party at least
thirty (30) days prior to the effective date of termination. This paragraph
shall not be construed as Lessor's permission for Lessee to hold over.
Acceptance of Base Rent by Lessor following expiration or termination of this
Lease shall not constitute a renewal of this Lease.
23. LESSOR'S DEFAULT: Lessor shall not be deemed in breach or default of
this Lease unless Lessor fails within a reasonable time to perform an
obligation required to be performed by Lessor hereunder. For purposes of this
provision, a reasonable time shall in no event be less than thirty (30) days
after receipt by Lessor of written notice specifying the nature of the
obligation Lessor has not performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days, after receipt of
written notice, is reasonably necessary for its performance, then Lessor shall
not be in breach or default of this Lease if performance of such obligation is
commenced within such thirty (30) day period and thereafter diligently pursued
to completion.
24. PARKING: Lessee shall have a license to use the number of undesignated
and nonexclusive parking spaces set forth on Page 1. Lessor shall exercise
reasonable efforts to insure that such spaces are available to Lessee for its
use, but Lessor shall not be required to enforce Lessee's right to use the
same.
25. SALE OF PREMISES: In the event of any sale of the Premises by Lessor,
Lessor shall be and is hereby entirely released from any and all of its
obligations to perform or further perform under this Lease and from all
liability hereunder as of the date of such sale; and the purchaser, at such,
sale or any subsequent sale of the Premises shall be deemed, without any
further agreement between the parties or their successors in interest or
between the parties and any such purchaser, to have assumed and agreed to carry
out any and all of the covenants and obligations of the Lessor under this
Lease. Lessee agrees to attorn to such new owner provided such new owner does
not disturb Lessee's use, occupancy or quiet enjoyment of the Premises so long
as Lessee is not in default of any of the provisions of this Lease.
26. WAIVER: No delay or omission in the exercise of any right or remedy of
Lessor on any default by Lessee shall impair such a right or remedy or be
construed as a waiver.
11
<PAGE> 12
The subsequent acceptance of Rent by Lessor after breach by Lessee of
any covenant or term of this Lease shall not be deemed a waiver of such breach,
other than a waiver of timely payment for the particular Rent payment involved,
and shall not prevent Lessor from maintaining an unlawful detainer or other
action based on such breach.
No payment by Lessee or receipt by Lessor of a lesser amount than the
monthly Rent and other sums due hereunder shall be deemed to be other than on
account of the earliest Rent or other sums due, nor shall any endorsement or
statement on any check or accompanying any check or payment be deemed an accord
and satisfaction; and Lessor may accept such check or payment without prejudice
to Lessor's right to recover the balance of such Rent or other sum or pursue
any other remedy provided in this Lease.
27. CASUALTY DAMAGE: If the Premises or any part thereof shall be damaged
by fire or other casualty, Lessee shall give prompt written notice thereof to
Lessor. In case the Building shall be so damaged by fire or other casualty
that substantial alteration or reconstruction of the Building shall, in
Lessor's sole opinion, be required (whether or not the Premises shall have
been damaged by such fire or other casualty), Lessor may, at its option,
terminate Lease by notifying Lessee in writing of such termination within sixty
(60) days after the date of such damage, in which event the Rent shall be
abated as of the date of such damage. If Lessor does not elect to terminate
this Lease and provided insurance proceeds and any contributions from Lessee,
if necessary, are available to fully repair the damage, Lessor shall within
ninety (90) days after the date of such damage commence to repair and restore
the Building and shall proceed with reasonable diligence to restore the
Building (except that Lessor shall not be responsible for delays outside its
control) to substantially the same condition in which it was immediately prior
to the happening of the casualty; provided, Lessor shall not be required to
rebuild, repair, or replace any part of Lessee's furniture, furnishings or
fixtures and equipment removable by Lessee or any improvements, alterations or
additions installed by or for the benefit of Lessee under the provisions of
this Lease. Lessor shall not in any event be required to spend for such work
an amount in excess of the insurance proceeds and any contributions from
Lessee, if necessary, actually received by Lessor as a result of the fire or
other casualty. Lessor shall not be liable for any inconvenience or annoyance
to Lessee, injury to the business of Lessee, loss of use of any part of the
Premises by the Lessee or loss of Lessee's personal property resulting in any
way from such damage or the repair thereof, except that, subject to the
provisions of the next sentence, Lessor shall allow Lessee a fair diminution of
Rent during the time and to the extent the Premises are unfit for occupancy.
If the Premises or any other portion of the Building be damaged by fire or
other casualty resulting from the fault or active or passive negligence or
omissions of Lessee or any of Lessee's agents, employees, or invitees, the
Rent shall not be diminished during the repair of such damage and Lessee shall
be liable to Lessor for the cost and expense of the repair and restoration of
the Building caused thereby to the extent such cost and expense is not covered
by insurance proceeds. In the event the holder of any indebtedness secured by
the Premises requires that the insurance proceeds be applied to such
indebtedness, then Lessor shall have the right to terminate this Lease by
delivering written notice of termination to Lessee within thirty (30) days
after the date of notice to Lessee of any such event, whereupon all rights and
obligations shall cease and terminate hereunder.
Except as otherwise provided in this Paragraph 27, Lessee hereby
waives the provisions of Sections 1932(2.), 1933(4.), 1941 and 1942 of the
California Civil Code.
28. CONDEMNATION: If twenty-five percent (25%) or more of the Premises is
condemned by eminent domain, inversely condemned or sold in lieu of
condemnation for any public or quasi-public use or purpose ("Condemned"), then
Lessee or Lessor may terminate this Lease as of the date when physical
possession of the Premises is taken and title vests in such condemning
authority, and Rent shall be adjusted to the date of termination. Lessee shall
not because of such condemnation assert any claim against Lessor or the
condemning authority for any compensation because of such condemnation, and
Lessor shall be entitled to receive the entire amount of any award without
deduction for any estate of interest or interest of Lessee. If a substantial
portion of the Premises, Building or the Lot is so Condemned, Lessor at its
option may terminate this Lease. If Lessor does not elect to terminate this
Lease, Lessor shall, if necessary, promptly proceed to restore the Premises or
the Building to substantially its same condition prior to such partial
condemnation, allowing for the reasonable effects of such partial
condemnation, and a proportionate allowance shall be made to Lessee, as solely
determined by Lessor, for the Rent corresponding to the time during which, and
to the part of the Premises of which, Lessee is deprived on account of such
partial condemnation and restoration. Lessor shall not be required to spend
funds for restoration in excess of the amount received by Lessor as
compensation awarded.
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS: Concurrently with executing
this Lease, and within thirty (30) days of each anniversary of the Commencement
Date during the term of this Lease, Lessee shall execute, and deliver to
Lessor, the Hazardous Materials Disclosure Certificate in substantially the
form attached as Exhibit F, and any other reasonably necessary documents as
requested by Lessor. Subject to the remaining provisions of this paragraph,
Lessee shall be entitled to use and store only those Hazardous Materials
(defined below), that are necessary for Lessee's business and to the extent
disclosed in the Hazardous Materials Disclosure Certificate, provided that
such usage and storage is in full compliance with any and all local, state and
federal environmental, health and/or safety-related laws, statutes, orders,
standards, courts' decisions, ordinances, rules and regulations (as interpreted
by judicial and administrative decisions), decrees, directives, guidelines,
permits or permit conditions, currently existing and as amended, enacted,
issued or adopted in the future which are or become applicable to Lessee or the
Premises (collectively, the "Environmental Laws"). Lessor shall have the right
at all times during the term of this Lease to (i) inspect the Premises, (ii)
conduct tests and investigations to determine whether Lessee is in compliance
with the provisions of this paragraph, and (iii) request lists of all Hazardous
Materials used, stored or
12
<PAGE> 13
located on, under or about the Premises; the cost of all such inspections,
tests and investigations to be borne by Lessee, if Lessor reasonably believes
they are necessary. Lessee shall give to Lessor immediate verbal and follow-up
written notice of any spills, releases or discharges of Hazardous Materials on,
under or about the Premises, or in any Common Areas or parking lots (if not
considered part of the Premises). Lessee covenants to promptly investigate,
clean up and otherwise remediate any spill, release or discharge of Hazardous
Materials caused by the acts (active or passive) or omissions of Lessee, or its
agents, employees, representatives, invitees, licensees, subtenants, customers
or contractors at Lessee's sole cost and expense; such investigation, clean up
and remediation to be performed after Lessee has obtained Lessor's written
consent, which shall not be unreasonably withheld; provided, however, that
Lessee shall be entitled to respond immediately to an emergency without first
obtaining Lessor's written consent. If Lessee fails to so promptly
investigate, clean up or otherwise remediate, Lessor may, but without
obligation to do so, take any and all steps necessary to rectify the same and
Lessee shall promptly reimburse Lessor, upon demand, for all costs and expenses
to Lessor of performing investigation and remediation work. Lessee shall
indemnify, defend (with counsel acceptable to Lessor) and hold Lessor and
Lessor's lenders, partners, property management company (if other than Lessor),
directors, officers, employees, representatives, contractors and shareholders
and each of their respective successors and assigns harmless from and against
any and all claims, judgments, damages, penalties, fines, liabilities, losses,
suits, administrative proceedings and costs (including, but not limited to,
attorneys' and consultant fees and court costs) arising at any time during or
after the term of this Lease in connection with or related to the use,
presence, transportation, storage, disposal, spill, release or discharge of
Hazardous Materials on, in or about the Premises as a result (directly or
indirectly) of the acts (active or passive) or omissions of Lessee, its agents,
employees, representatives, invitees, licensees, subtenants, customers or
contractors. Lessee shall not be entitled to install any tanks under, on or
about the Premises for the storage of Hazardous Materials without the express
written consent of Lessor, which may be given or withheld in Lessor's sole
discretion. Neither the written consent of Lessor to the presence of
Hazardous Materials on, under or about the Premises nor the strict compliance
by Lessee with all Environmental Laws shall excuse Lessee from its obligation
of indemnification pursuant hereto. As used herein, the term Hazardous
Materials shall mean (i) any hazardous or toxic wastes, materials or
substances, and other pollutants or contaminants, which are or become regulated
by any Environmental Laws; (ii) petroleum and petroleum by products; (iii)
asbestos; (iv) polychlorinated biphenyls; and (v) radioactive materials. The
provisions of this paragraph shall survive the termination of this Lease. If
it is determined by Lessor that Lessee, its use of the Premises, Building
and/or Park, or the condition of the Premises, Building and/or Park is not in
compliance with all Environmental Laws at the expiration or termination of this
Lease, then at Lessor's sole option, Lessor may require Lessee to hold over
possession of the Premises until Lessee can surrender the Premises to Lessor in
compliance with all Environmental Laws. Any such holdover by Lessee will be
with Lessor's consent, and will not be terminable by Lessee in any event or
circumstance, and will otherwise be subject to the provisions of Paragraph 22
of this Lease.
30. FINANCIAL STATEMENTS: Lessee, for the reliance of Lessor, any lender
holding or anticipated to acquire a lien upon the Premises, the Building or the
Park or any portion thereof, or any prospective purchaser of the Building or
the Park or any portion thereof, within ten (10) days after Lessor's request
therefor, but not more often than once annually so long as Lessee is not in
default of this Lease, shall deliver to Lessor the then current audited
financial statements of Lessee (including interim periods following the end of
the last fiscal year for which annual statements are available) which
statements shall be prepared or compiled by a certified public accountant and
shall present fairly the financial condition of Lessee at such dates and the
result of its operations and changes in its financial positions for the
periods ended on such dates. If an audited financial statement has not been
prepared, Lessee shall provide Lessor with an unaudited financial statement
and/or such other information, the type and form of which are acceptable to
Lessor in Lessor's reasonable discretion, which reflects the financial
condition of Lessee. If Lessor so requests, Lessee shall deliver to Lessor an
opinion of a certified public accountant, including a balance sheet and profit
and loss statement for the most recent prior year, all prepared in accordance
with generally accepted accounting principles consistently applied. Any and
all options granted to Lessee hereunder shall be subject to and conditioned
upon Lessor's reasonable approval of Lessee's financial condition at the time
of Lessee's exercise of any such option.
31. GENERAL PROVISIONS:
(i) TIME. Time is of the essence in this Lease and with
respect to each and all of its provisions in which performance is a
factor.
(ii) SUCCESSORS AND ASSIGNS. The covenants and conditions
herein contained, subject to the provisions as to assignment,apply to
and bind the heirs, successors, executors, administrators and assigns
of the parties hereto.
(iii) RECORDATION. Lessee shall not record this Lease or a
short form memorandum hereof without the prior written consent of the
Lessor.
(iv) LESSOR'S PERSONAL LIABILITY. The liability of Lessor
(which, for purposes of this Lease, shall include Lessor and the
owner of the Building if other than Lessor) to Lessee for any default
by Lessor under the terms of this Lease shall be limited to the actual
interest of Lessor and its present or future partners in the Premises
or the Building and Lessee agrees to look solely to the Premises for
satisfaction of any liability and shall not look to other assets of
Lessor nor seek any recourse against the assets of the individual
partners, directors, officers, shareholders, agents or employees of
Lessor; it being intended that Lessor and the individual partners,
directors, officers, shareholders, agents or employees of Lessor shall
not be personally liable in any manner whatsoever for any judgment or
deficiency. The liability of Lessor under this Lease is limited to
its actual period of ownership of
13
<PAGE> 14
title to the Building, and Lessor shall be automatically released from
further performance under this Lease and from all further liabilities
and expenses hereunder upon transfer of Lessor's interest in the
Premises or the Building. Lessee agrees to attorn to any entity
purchasing or otherwise acquiring the Premises.
(v) SEPARABILITY. Any provisions of this Lease which
shall prove to be invalid, void or illegal shall in no way affect,
impair or invalidate any other provisions hereof and such other
provision shall remain in full force and effect.
(vi) CHOICE OF LAW. This Lease shall be governed by the
laws of the State of California.
(vii) ATTORNEYS' FEES. In the event any legal action is
brought to enforce or interpret the provisions of this Lease, the
prevailing party therein shall be entitled to recover all costs and
expenses including reasonable attorneys' fees.
(viii) ENTIRE AGREEMENT. This Lease supersedes any prior
agreements, representations, negotiations or correspondence between
the parties, and contains the entire agreement of the parties on
matters covered. No other agreement, statement or promise made by
any party that is not in writing and signed by all parties to this
Lease shall be binding.
(ix) WARRANTY OF AUTHORITY. Each person executing this
agreement on behalf of a party represents and warrants that (1) such
person is duly and validly authorized to do so on behalf of the
entity it purports to so bind, and (2) if such party is a
partnership, corporation or trustee, that such partnership,
corporation or trustee has full right and authority to enter into
this Lease and perform all of its obligations hereunder.
(x) NOTICES. All notices and demands required or
permitted to be sent to Lessor or Lessee shall be in writing and
shall be sent by United States mail, certified and postage prepaid,
or by personal delivery or by overnight courier, addressed to Lessor
at 30 Executive Park, Suite 100, Irvine, California 92714, or to
Lessee at the Premises, or to such other place as such party may
designate in a notice to the other party given as provided herein.
Notice shall be deemed given upon the earlier of actual receipt or
the third day following deposit in the United States mail.
(xi) JOINT AND SEVERAL. If Lessee consists of more
than one person or entity, the obligations of all such persons or
entities shall be joint and several.
(xii) COVENANTS AND CONDITIONS. Each provision to be
performed by Lessee hereunder shall be deemed to be both a covenant
and a condition.
(xiii) WAIVER OF JURY TRIAL. The parties hereto shall and
they hereby do waive trial by jury in any action, proceeding or
counterclaim brought by either of the parties hereto against the
other on any matters whatsoever arising out of or in any way related
to this Lease, the relationship of Lessor and Lessee, Lessee's use or
occupancy of the Premises, the Building or the Park, and/or any claim
of injury, loss or damage.
(xiv) COUNTERCLAIMS. In the event Lessor commences any
proceedings for nonpayment of Rent, or any other sums or amounts due
hereunder, Lessee shall not interpose any counterclaim of whatever
nature or description in any such proceedings, provided, however,
nothing contained herein shall be deemed or construed as a waiver of
the Lessee's right to assert such claims in any separate action
brought by Lessee or the right to offset the amount of any final
judgment owed by Lessor to Lessee.
32. SIGNS: All signs and graphics of every kind visible in or from
public view or corridors or the exterior of the Premises shall be subject
to Lessor's prior written approval and shall be subject to any applicable
governmental laws, ordinances, and regulations and in compliance with
Lessor's Sign Criteria as set forth in Exhibit E hereto and made a part
hereof. Lessee shall remove all such signs and graphics prior to the
termination of this Lease. Such installations and removals shall be made in a
manner as to avoid damage or defacement of the Premises; and Lessee shall
repair any damage or defacement, including without limitation, discoloration
caused by such installation or removal. Lessor shall have the right, at its
option, to deduct from the Security Deposit such sums as are reasonably
necessary to remove such signs, including, but not limited to, the costs and
expenses associated with any repairs necessitated by such removal.
Notwithstanding the foregoing, in no event shall any: (a) neon, flashing or
moving sign(s) or (b) sign(s) which shall interfere with the visibility of
any sign, awning, canopy, advertising matter, or decoration of any kind of
any other business or occupant of the Building or the Park be permitted
hereunder. Lessee further agrees to maintain any such sign, awning, canopy,
advertising matter, lettering, decoration or other thing as may be approved
in good condition and repair at all times.
33. MORTGAGEE PROTECTION: Upon any breach or default on the part of
Lessor, Lessee will give written notice by registered or certified mail to
any beneficiary of a deed of trust or mortgagee of a mortgage covering the
Premises who has provided Lessee with notice of their interest together
with an address for receiving notice, and shall offer such beneficiary or
mortgagee a reasonable opportunity to cure the default (which, in no event
shall be less than ninety (90) days), including time to obtain possession of
the Premises by power of sale or a judicial foreclosure, if such should prove
necessary to effect a cure. If such breach or default cannot be cured within
such time period, then such additional time as may be necessary will be given
to such beneficiary or mortgagee to effect such cure so long as such
beneficiary or mortgagee has commenced the cure within the original time period
and
14
<PAGE> 15
thereafter diligently pursues such cure to completion, in which event this
Lease shall not be terminated while such cure is being diligently pursued.
Lessee agrees that each lender to whom this Lease has been assigned by Lessor
is an express third party beneficiary hereof. Lessee shall not make any
prepayment of Rent more than one (1) month in advance without the prior
written consent of each such lender, except if Lessee is required to make
quarterly payments of Rent in advance pursuant to the provisions of
Paragraph 8 above. Lessee waives the collection of any deposit from such
lender(s) or any purchaser at a foreclosure sale of such lender(s)' deed of
trust unless the lender(s) or such purchaser shall have actually received and
not refunded the deposit. Lessee agrees to make all payments under this
Lease to the lender with the most senior encumbrance upon receiving a
direction, in writing, to pay said amounts to such lender. Lessee shall
comply with such written direction to pay without determining whether an event
of default exists under such lender's loan to Lessor.
34. QUITCLAIM: Upon any termination of this Lease, Lessee shall, at
Lessor's request, execute, have acknowledged and deliver to Lessor a
quitclaim deed of Lessee's interest in and to the Premises.
35. MODIFICATIONS FOR LENDER: If, in connection with obtaining financing
for the Premises or any portion thereof, Lessor's lender shall request
reasonable modification(s) to this Lease as a condition to such financing,
Lessee shall not unreasonably withhold, delay or defer its consent thereto,
provided such modifications do not materially adversely affect Lessee's
rights hereunder or the use, occupancy or quiet enjoyment of Lessee
hereunder.
36. WARRANTIES OF LESSEE: Lessee hereby warrants and represents to
Lessor, for the express benefit of Lessor, that Lessee has undertaken a
complete and independent evaluation of the risks inherent in the execution
of this Lease and the operation of the Premises for the use permitted
hereby, and that, based upon said independent evaluation, Lessee has elected
to enter into this Lease and hereby assumes all risks with respect thereto.
Lessee hereby further warrants and represents to Lessor, for the express
benefit of Lessor, that in entering into this Lease, Lessee has not relied
upon any statement, fact, promise or representation (whether express or
implied, written or oral) not specifically set forth herein in writing and
that any statement, fact, promise or representation (whether express or
implied, written or oral) made at any time to Lessee, which is not expressly
incorporated herein in writing, is hereby waived by Lessee.
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT: Lessor and Lessee
hereby agree and acknowledge that the Premises, the Building and/or the Park
may be subject to the requirements of the Americans with Disabilities Act (the
"ADA"), a federal law codified at 42 U.S.C. 12101 et seq, including, but
not limited to Title III thereof, all regulations and guidelines related
thereto, and any amendments thereof. Any Tenant Improvements to be
constructed hereunder shall be in compliance with the requirements of the
ADA, and all costs incurred for purposes of compliance therewith shall be a
part of and included in the costs of the Tenant Improvements. Lessee is
responsible for conducting its own independent investigation of this matter.
Except for the construction of any Tenant Improvements, for which Lessee shall
be solely responsible for compliance with the ADA, if any barrier removal work
or other work is required to the Building, the Common Area or the Park under
Title III of the ADA, then such work shall be performed by Lessor; provided,
if such work is required under the ADA as a result of Lessee's use of the
Premises or any work or alteration made to the Premises by or on behalf of
Lessee, then such work shall be performed by Lessor at the sole cost and
expense of Lessee. Except as otherwise provided in this provision, Lessee
shall be responsible at its sole cost and expense for fully and faithfully
complying with all applicable requirements of the ADA.
38. BROKERAGE COMMISSION: Lessee hereby represents and warrants to
Lessor that Lessee's sole contact with Lessor or with the Premises in
connection with this Lease has been directly with Lessor and the Broker (as
set forth on Page 1), and that no other broker or finder can properly claim
a right to a commission or a finder's fee based upon contacts between the
claimant and Lessee. Lessee shall indemnify, defend by counsel acceptable to
Lessor, protect and hold Lessor harmless from and against any loss,
liability, suit, judgment, cost or expense, including, but not limited to,
experts' and attorneys' fees and costs, arising from or relating to any claim
for a fee or commission by any broker or finder in connection with the
Premises and this Lease other than Broker, if any.
15
<PAGE> 16
IN WITNESS WHEREOF, this Lease is executed on the date and year first
written above.
LESSOR: RIVERSIDE BUSINESS CENTER, a California Limited Partnership
By: LINCOLN PROPERTY COMPANY NO. 1239, Limited Partnership,
the General Partner
By: /s/ ERIK M. HANSEN 2/16/96
-------------------------------------------------------
Erik M. Hansen Date
a Managing General Partner
LESSEE: MUL ACRES, INC.,
A California Corporation
By: /s/ JEFFREY SILVERS 2/12-96
-------------------------------------------------------
Jeffrey Silvers, Date
President
16
<PAGE> 17
EXHIBIT "A"
SITE PLAN
MASTER SITE PLAN
<PAGE> 18
EXHIBIT B - TENANT IMPROVEMENTS
1. TENANT IMPROVEMENTS:
--------------------
Lessor, at his sole cost and expense, herein agrees to complete the
following tenant improvements to the leased premises:
1. Spot paint exterior of building; scope of work to be mutually
agreed upon between Lessor and Lessee.
2. Repaint all existing office areas in Lincoln Riverside
Business Center standard colors.
3. Clean all existing office carpet areas.
4. Repair and/or replace damaged ceiling tiles throughout existing
office areas.
5. Complete enclosure of existing roll-up door along northeast
corner of building.
Lessee, at his sole cost and expense, herein reserves the right to
contract for the installation of a warehouse/shop restroom. Said
restroom shall include the following facilities: one (1) sink, one (1)
toilet, two (2) urinals.
Upon receipt of proof of payment in full for said restroom
installation by a contractor licensed and insured within the State of
California, Lessor agrees to reimburse Lessee the sum of $5,000.00.
LESSOR: RIVERSIDE BUSINESS CENTER, a California Limited Partnership
By: LINCOLN PROPERTY COMPANY NO. 1239, Limited Partnership,
the General Partner
By: /s/ Erik M. Hansen 2/16/96
----------------------------------------------
Erik M. Hansen, Date
a Managing General Partner
LESSEE: MUL ACRES, INC.,
A California Corporation
By: /s/ Jeffrey H. Silvers 2/12/96
----------------------------------------------
Jeffrey H. Silvers Date
<PAGE> 19
EXHIBIT C
RULES AND REGULATIONS
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in good
faith judges to be a threat to the safety, reputation, or property of
the Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the
Project.
4. Lessee shall not keep animals or birds within the Project, and shall not
bring bicycles, motorcycles or other vehicles into areas not designated
as authorized for the same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
bolts, without Lessor's written prior consent.
7. Lessee shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any kind
are to be inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the
premises of the Project.
9. Lessee shall not suffer or permit any thing in or around the Premises or
Building that causes excessive vibration or floor loading in any part of
the Project.
10. Lessee shall return all keys at the termination of its tenancy and shall
be responsible for the cost of replacing any keys that are lost.
11. No window coverings, shades or awnings shall be installed or used by
Lessee, without Lessor's written prior consent.
12. No Lessee, employee or Invitee shall go upon the roof of the Building
without Lessor's written prior consent.
13. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by
applicable governmental agencies as non-smoking areas.
14. Lessee shall not use any method of heating or air conditioning other
than as provided by Lessor.
15. Lessee shall not install, maintain or operate any vending machines
upon the Premises without Lessor's written consent.
16. The Premises shall not be used for lodging, cooking or food
preparation.
17. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental agency.
18. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver
shall not constitute a waiver of any other rule or regulation or any
subsequent application thereof to such Lessee.
19. Lessee assumes all risks from theft or vandalism and agrees to keep its
Premises locked as may be required.
20. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the
appropriate operation and safety of the Project and its occupants.
Lessee agrees to abide by these and such rules and regulations.
PARKING RULES
1. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.
2. Users of the parking area will obey all posted signs and park only in
the areas designated for vehicle parking.
3. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be
responsible for any damage to vehicles, injury to persons or loss of
property, all of which risks are assumed by the party using the
parking area.
4. The maintenance, washing, waxing or cleaning of vehicles in the Common
Area is prohibited.
5. Lessee shall be responsible for seeing that all of its employees, agents
and invitees comply with the applicable parking rules, regulations, laws
and agreements.
6. Lessor reserves the right to modify these rules and/or adopt such
other reasonable and non-discriminatory rules and regulations as it may
deem necessary for the proper operation of the parking area.
LESSOR'S INITIALS: [SIG]
-----------
LESSEE'S INITIALS: [SIG]
-----------
<PAGE> 20
EXHIBIT D
COVENANT AND AGREEMENT AND
DECLARATION OF RESTRICTIONS
This Covenant and Agreement and Declaration of Restriction is made and
entered into this l7th day of October, 1986, by LINCOLN RIVERSIDE BUSINESS
CENTER, a California Limited Partnership, the owner of record of the following
described real property situated in the City of Riverside, County of Riverside,
State of California:
Parcels 1, 2 and 3 of Parcel Map 21191 as shown by map on file in Book
134 of Parcel Maps at Pages 33 through 34 thereof, Records of
Riverside County, California,
which property is referred to herein as Parcels 1, 2 or 3 or collectively as
the property.
WHEREAS the undersigned desires to divide the property into three
parcels, as described above, pursuant to tentative Parcel Map 21191; and
WHEREAS the undersigned desires to establish a common driveway to
serve Parcels 1, 2 and 3; and
WHEREAS the undersigned desires to restrict the property with the
nonexclusive, reciprocal easements and the obligations contained herein;
NOW, THEREFORE, the undersigned hereby covenants and agrees with the
City of Riverside as follows:
1. A nonexclusive, reciprocal easement for ingress and egress is
hereby established over and across the northeasterly 15 feet
and the southeasterly 13 1/2 feet of Parcel 1 for the use and
benefit of Parcels 2 and 3.
2. A nonexclusive, reciprocal easement for ingress and egress is
hereby established over and across the southwesterly 15 feet
and the southeasterly 13 1/2 feet of Parcel 2 for the use and
benefit of Parcels 1 and 3.
3. A nonexclusive, reciprocal easement for ingress and egress is
hereby established over and across the northwesterly 13 1/2
feet of Parcel 3 for the use and benefit of Parcels 1 and 2.
4. The easement areas described above are planned to be developed
as a common driveway and shall be kept in a free and open
condition at all times to permit unimpeded access to parcels
1, 2 and 3 and Magnolia Avenue, Pierce Street and Merced
Drive. No structure shall be placed or constructed in the
easement areas. No parking of vehicles shall be permitted in
the easement areas. Each easement area shall be maintained in
accordance with the standards of the City of Riverside for
private driveways and in a good, usable and safe condition at
all times by the fee owner of such easement area.
5. In the event any of the property is sold or leased or the
ownership is otherwise changed, as the parcels are conveyed,
the grantor shall grant and/or reserve, as appropriate, the
above-described nonexclusive, reciprocal easements for ingress
and egress. This easement shall include all rights deemed
reasonable and necessary for the construction, maintenance and
use of common driveway facilities.
6. The terms of this Covenant and Agreement and Declaration of
Restrictions may be enforced by the City of Riverside, its
successors or assigns, or by any owner or tenant of any of the
property. Should the City or any owner or tenant bring an
action to enforce any of the terms of this Covenant and
Agreement and Declaration of Restrictions, the prevailing
party shall be entitled to reasonable attorneys' fees, expert
witnesses' fees and reasonable costs of unit.
7. This Covenant and Agreement and Declaration of Restrictions
shall run with the land and shall be binding upon the
undersigned, its successors and assigns and shall continue in
effect until such time as it is released by the City Council
of the City of Riverside.
<PAGE> 21
EXHIBIT E
RIVERSIDE BUSINESS CENTER
SIGN CRITERIA
MULTI-TENANT AND INDUSTRIAL SUITES
All Tenants are required to install signage at the Tenant's expense and in
accordance with the sign criteria.
All signs shall be approved by the Landlord and properly permitted by local
governing authorities prior to installation.
I. TYPE
A. Multi-Tenant Buildings 1-10, 12 and 13 - Tenants leasing less
than 3,000 square feet may have a fiberglass mounted wall sign
with a maximum 1-1/2" thick x 16" high x 5' long sign
dimensions, Tenants leasing 3,000 square feet or greater may
have the aforementioned sign or individually cut foam letters
which are 2" thick and 24" high, with a maximum sign width
which is equal to no more than 75% of lineal leased frontage.
B. Industrial Buildings 14-19 - Maximum width shall be equal to
no more than 75% of lineal leased frontage, 24" maximum
channel-lite letters.
II. DESIGN
A. Channel Letters: 8" (maximum) thick internally illuminated
channel letters, with 60 mi. amp. neon tubing, shall be
composed of red faces (211-1 Acrylite Red, same as 2283 Red).
B. Foam Letters: 2" thick non-illuminated foam letters composed
of "Profound Blue" #260 (Ameritone) faces and "Badger Gray"
#298 returns for Buildings 1-10, 12 and 13 and 14-19 with over
3,000 square feet of Tenant lease space.
C. Wall Mounted Fiberglass Plaques: Non-illuminated wall mounted
fiberglass identifications sign shall be composed of "Profound
Blue" #260 background and white copy #AGB-225D for Buildings
1-10, 12 and 13 less than 3,000 square feet of Tenant lease
space.
Tenants with two (2) frontage on a public street, parking lot or mall shall be
allowed two (2) wall signs.
III. GENERAL SPECIFICATIONS
A. No animated, flashing or audible signs will be permitted.
B. No exposed lamps or tubing will be permitted.
C. No exposed crossovers, raceways or conduit will be permitted.
D. Painted lettering will not be permitted.
E. Each Tenant shall be permitted to place upon each entrance of
its demised premises not more than 144 square inches of vinyl,
white lettering not to exceed two (2) inches in height,
indicating hours of business, emergency telephone numbers,
approved credit cards, etc.
F. Special event or sales advertising may be placed in or on the
interior windows for a maximum of 30 days, otherwise, no
advertising place cards, flags, balloons, banners, etc., shall
be affixed or maintained upon either the interior or exterior
of the glass panes and supports of the show windows and doors,
or upon the exterior wall of the buildings.
G. Each Tenant who has a non-customer door for receiving
merchandise may have uniformly applied on said door in
location, as directed by Landlord, in 2" high block letters,
the Tenant's name and address. Color letter shall be
"Profound Blue" #260.
H. At the termination of Tenant's Lease, Tenant shall be required
to remove his signs and patch the area to match the
surrounding area.
1
<PAGE> 22
EXHIBIT F
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Lessor (identified below) to evaluate and finalize a lease agreement
with you as lessee. After a lease agreement is signed by you and the Lessor
(the "Lease Agreement"), on an annual basis in accordance with the provisions
of Paragraph 29 of the signed Lease Agreement, you are to provide an update to
the information initially provided by you in this certificate. The information
contained in the initial Hazardous Materials Disclosure Certificate and each
annual certificate provided by you thereafter will be maintained in
confidentiality by Lessor subject to release and disclosure as required by (i)
any lenders and owners and their respective environmental consultants, (ii) any
prospective purchaser(s) of all or any portion of the property on which the
Premises are located, (iii) Lessor to defend itself or its lenders, partners or
representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders; decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which
are not otherwise defined herein, shall have the same meaning ascribed to such
term in the signed Lease Agreement. Any questions regarding this certificate
should be directed to, and when completed, the certificate should be delivered
to:
Lessor: LINCOLN RIVERSIDE BUSINESS CENTER
P.O. Box 19693
30 Executive Park, Suite 100
Irvine, California 92713-9693
Attn: Mr. Erik M. Hansen
Phone: (714) 261-2100
Name of Lessee: MUL ACRES, INC.,
A California Corporation
Mailing Address: 11631 Sterling Avenue
Riverside, CA 92503
Contact Person, Title and Telephone Number(s): Jeffrey H. Silvers:
(310) 592-5561
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):
Same as above.
- --------------
Address of Premises: Same.
Length of initial Term: 38 months.
- --------------------------------------------------------------------------------
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or
about the Premises, including, without limitation, principal products
processed, manufactured or assembled services and activities to be
provided or otherwise conducted. Existing lessees should describe any
proposed changes to on-going operations.
-----------------------------------------------------------------------
-----------------------------------------------------------------------
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or
disposed of in, on or about the Premises? Existing lessees
should describe any Hazardous Materials which continue to be
used, generated, stored or disposed of in, on or about the
Premises.
Wastes Yes [ ] No [ ]
Chemical Products Yes [ ] No [ ]
Other Yes [ ] No [ ]
If Yes is marked, please explain:
----------------------------
---------------------------------------------------------------
2.2 If Yes is marked in Section 2.1, attach a list of any
Hazardous Materials to be used, generated, stored or disposed
of in, on or about the Premises, including the applicable
hazard class and an estimate of the quantities of such
Hazardous Materials at any given time; estimated annual
throughput; the proposed
<PAGE> 23
location(s) and method of storage (excluding nominal amounts of
ordinary household cleaners and janitorial supplies which are not
regulated by any Environmental Laws); and the proposed location(s) and
method of disposal for each Hazardous Material, including, the
estimated frequency, and the proposed contractors or subcontractors.
Existing lessees should attach a list setting forth the information
requested above and such list should include actual data from on-going
operations and the identification of any variations in such
information from the prior year's certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel,
petroleum, or other Hazardous Materials in tanks or sumps
proposed in, on or about the Premises? Existing lessees
should describe any such actual or proposed activities.
Yes [ ] No [ ]
If Yes, please explain:
---------------------------------------------------------------
---------------------------------------------------------------
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator
I.D. Number? Existing lessees should describe any additional
identification numbers issued since the previous certificate.
Yes [ ] No [ ]
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing lessees should describe
any new reports filed.
Yes [ ] No [ ]
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
______ storm drain? ______ sewer?
______ surface water? ______ no wastewater or other
wastes discharged.
Existing lessees should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
---------------------------------------------------------------
---------------------------------------------------------------
5.2 Will any such wastewater or waste be treated before discharge?
Yes [ ] No [ ]
If yes, describe the type of treatment proposed to be
conducted. Existing lessees should describe the actual
treatment conducted.
---------------------------------------------------------------
---------------------------------------------------------------
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or stacks to be
used in your company's operations in, on or about the Premises
that will discharge into the air; and will such air emissions
be monitored? Existing lessees should indicate whether or not
there are any such air filtration systems or stacks in use in,
on or about the Premises which discharge into the air and
whether such air emissions are being monitored.
Yes [ ] No [ ]
If yes, please describe:
---------------------------------------------------------------
---------------------------------------------------------------
<PAGE> 24
6.2 Do you propose to operate any of the following types of
equipment, or any other equipment requiring an air emissions
permit? Existing lessees should specify any such equipment
being operated in, on or about the Premises.
______ Spray booth(s) ______ Incinerator(s)
______ Dip tank(s) ______ Other (Please describe)
______ Drying oven(s) ______ No Equipment Requiring
Air Permits
If yes, please describe:
---------------------------------------------------------------
---------------------------------------------------------------
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous Materials management plan ("Management Plan")
pursuant to Fire Department or other governmental or
regulatory agencies' requirements? Existing lessees should
indicate whether or not a Management Plan is required and has
been prepared.
Yes [ ] No [ ]
If yes, attach a copy of the Management Plan. Existing
lessees should attach a copy of any required updates to the
Management Plan.
7.2 Are any of the Hazardous Materials, and in particular
chemicals, proposed to be used in your operations in, on or
about the Premises regulated under Proposition 65? Existing
lessees should indicate whether or not there are any new
Hazardous Materials being so used which are regulated under
Proposition 65.
Yes [ ] No [ ]
If yes, please explain:
---------------------------------------------------------------
---------------------------------------------------------------
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has
your company ever been subject to any agency enforcement
actions, administrative orders, or consent decrees or has your
company received requests for information, notice or demand
letters, or any other inquiries regarding its operations?
Existing lessees should indicate whether or not any such
actions, orders or decrees have been, or are in the process of
being, undertaken or if any such requests have been received.
Yes [ ] No [ ]
If yes, describe the actions, orders or decrees and any
continuing compliance obligations imposed as a result of these
actions, orders or decrees and also describe any requests,
notices or demands, and attach a copy of all such documents.
Existing lessees should describe and attach a copy of any new
actions, orders, decrees, requests, notices or demands not
already delivered to Lessor pursuant to the provisions of
Paragraph 29 of the signed Lease Agreement.
---------------------------------------------------------------
---------------------------------------------------------------
8.2 Have there ever been, or are there now pending, any lawsuits
against your company regarding any environmental or health and
safety concerns?
Yes [ ] No [ ]
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other
documents related thereto as requested by Lessor. Existing
lessees should describe and attach a copy of any new
complaint(s), cross-complaint(s), pleadings and other related
documents not already delivered to Lessor pursuant to the
provisions of Paragraph 29 of the signed Lease Agreement.
---------------------------------------------------------------
---------------------------------------------------------------
<PAGE> 25
8.3 Have there been any problems or complaints from adjacent
tenants, owners or other neighbors at your company's current
facility with regard to environmental or health and safety
concerns? Existing lessees should indicate whether or not
there have been any such problems or complaints from adjacent
tenants, owners or other neighbors at, about or near the
Premises.
Yes [ ] No [ ]
If yes, please describe. Existing lessees should describe any
such problems or complaints not already disclosed to Lessor
under the provisions of the signed Lease Agreement.
---------------------------------------------------------------
---------------------------------------------------------------
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and licenses
issued to your company with respect to its proposed
operations in, on or about the Premises, including, without
limitation, any wastewater discharge permits, air emissions
permits, and use permits or approvals. Existing lessees
should attach copies of any new permits and licenses as well
as any renewals of permits or licenses previously issued.
The undersigned hereby acknowledges and agrees that this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Lessor in connection with the evaluation and finalization of a Lease
Agreement and will be attached thereto as an exhibit. The undersigned further
acknowledges and agrees that this Hazardous Materials Disclosure Certificate is
being delivered in accordance with, and as required by, the provisions of
Paragraph 29 of the Lease Agreement. The undersigned further acknowledges and
agrees that the Lessor and its partners, lenders and representatives may, and
will, rely upon the statements, representations, warranties, and certifications
made herein and the truthfulness thereof in entering into the Lease Agreement
and the continuance thereof throughout the term, and any renewals thereof, of
the Lease Agreement. I (Donovan F. Stark), acting with full authority to bind
the (proposed) Lessee and on behalf of the (proposed) Lessee, certify,
represent and warrant that the information contained in this certificate is
true and correct.
LESSEE:
MUL ACRES, INC.,
A California Corporation
By: /s/ JEFFREY H. SILVERS Date: 2-12-96
------------------------------------ ------------------
Jeffrey H. Silvers, President
<PAGE> 26
SAMPLE
EXHIBIT G
CHANGE OF COMMENCEMENT DATE
FIRST AMENDMENT TO LEASE AGREEMENT
This First Amendment to Lease Agreement (the "Amendment") is made as of _______
by and between __________________, ("Lessor") and ________________, ("Lessee")
with reference to that certain Lease Agreement (the "Lease"), dated____________,
by and between Lessor and Lessee for the leasing of certain premises (the
"Premises") located at ____________________________________________________.
A. Lessor and Lessee hereby agree that the Lease shall be amended as
follows:
1. The Commencement Date shall be ______________________________.
2. The last date of the term of the Lease shall be _____________.
3. The rent start date shall be ________________________________.
4. The dates on which the Base Rent will be adjusted are:
B. Lessor and Lessee hereby further agree that the Lease is in full
force and effect, and that the terms and provisions of the Lease shall remain
unchanged except as modified in this Amendment.
LESSOR:
RIVERSIDE BUSINESS CENTER, a California Limited Partnership
By: LINCOLN PROPERTY COMPANY NO. 1239, Limited Partnership,
the General Partner
By: ______________________________________________
Erik M. Hansen, Date
a Managing General Partner
Date: ________________________________
LESSEE:
<PAGE> 27
EXHIBIT H
GUARANTY
IN CONSIDERATION of and as an inducement for the granting, execution and
delivery by LINCOLN RIVERSIDE BUSINESS CENTER, a California Limited
Partnership, as Lessor ("Lessor"), of the Lease Agreement (the "Lease") dated
February 12, 1996 with MUL ACRES, INC., a California Corporation, as Lessee
("Lessee"), relating to the leasing and use of those certain premises located
at 11631 Sterling Avenue, Riverside, California 92503, as more particularly
described in the Lease (the "Premises"), the undersigned, Jeffrey H. Silvers
("Guarantor"), hereby covenants and agrees as follows:
1. Guarantor unconditionally and irrevocably guarantees to Lessor the
full and prompt payment of Rent (as such term is defined in the Lease) and any
and all other sums and charges payable by Lessee under the Lease, and hereby
unconditionally and irrevocably guarantees the full, faithful and timely
performance and observance of all the covenants, terms, conditions and
agreements required to be performed and observed by Lessee under the Lease and
any amendment, modification or renewal thereof.
2. Guarantor hereby covenants and agrees to and with Lessor that if a
default shall at any time be made by Lessee in the payment of any such Rent or
other such sums and charges payable by Lessee under the Lease, or if Lessee
should default in the performance and observance of any of the terms,
covenants, provisions or conditions contained in the Lease or, should Rent or
other sums and charges not be paid or terms, covenants, provisions and
conditions not be performed in the event of a Financial Proceeding (as defined
in Paragraph 10 below), Guarantor shall and forthwith pay such Rent and other
such sums and charges and any arrears thereof (including, without limitation,
damages, interest, costs, fees, attorneys' fees and expenses) (collectively,
the "Lease Amounts"), and shall and will forthwith pay all Lease Amounts that
(a) may arise in connection with or otherwise relate to any default by Lessee
under the Lease and/or any enforcement of this Guaranty, or (b) would have
accrued under the Lease but for the commencement of a Financial Proceeding.
3. Guarantor's obligations under this Guaranty shall be binding on
Guarantor's successors and assigns. All references in this Guaranty (a) to
Lessor and Lessee shall include their successors, assigns or subtenants, as
the case may be, (b) to Lessee, shall also include any entity created by or
pursuant to any Financial Proceeding; and (c) to Lessee, shall include any
successors in interest to Lessee (whether or not directly succeeding Lessee),
by reason of an Event of Reorganization (as defined in Paragraph 10 below).
4. The provisions of the Lease may be changed by agreement between
Lessor and Lessee without the consent of or notice to Guarantor. The
provisions of the Lease may be changed by agreement between Lessor and any
permitted assignee of Lessee or any subsequent assignee without the consent of
or notice to Guarantor. The Lease may be assigned by Lessor or Lessee, and the
Premises, or a portion thereof, may be sublet by Lessee, all in accordance with
the provisions of the Lease, without the consent of or notice to Guarantor.
This Guaranty shall guarantee the performance of the Lease so assigned.
Without limiting the generality of the foregoing, Guarantor waives the rights
and benefits of California Civil Code Sections 2819 and 2820 with respect to
any change to the Lease between Lessor and Lessee, and with respect to any
change to the Lease between Lessor and any permitted assignee of Lessee or any
subsequent assignees, and agrees that by doing so Guarantor's liability shall
continue even if (a) Lessor and Lessee alter any Lease obligations, or Lessor
and any permitted assignee of Lessee or any subsequent assignees alter the
Lease obligation, or (b) Guarantor's remedies or rights against Lessee are
impaired or suspended without Guarantor's consent by such alteration of Lease
obligations.
5. This Guaranty shall not be modified or affected by Lessor's failure or
delay from time to time to enforce any of its rights under either the Lease or
this Guaranty.
1
<PAGE> 28
6. If Lessee breaches or otherwise is in default under the Lease, Lessor
may proceed against either Guarantor or Lessee, or both, or Lessor may enforce
against Guarantor or Lessee any rights that Lessor has under the Lease, in
equity or under applicable law. If the Lease terminates and Lessor has any
rights against Lessee after termination, Lessor may enforce those rights
against Guarantor, without giving previous notice to Lessee or Guarantor.
Guarantor hereby agrees that no notice of default need be given to Guarantor,
it being specifically agreed and understood that this Guaranty of the
undersigned is a continuing guarantee under which Lessor may proceed forth with
and immediately against Lessee or against Guarantor following any breach or
default by Lessee.
7. Guarantor hereby waives all benefits and defenses under California
Civil Code Sections 2845, 2848, 2849 and 2850, including without limitation:
(a) (the right to require Lessor to proceed against Lessee, proceed against or
exhaust any security that Lessor holds from Lessee, or pursue any other remedy
in Lessor's power; (b) any defense to its obligations hereunder based on the
termination of Lessee's liability; (c) all presentments, demands for
performance, notices of nonperformance, protests, notices of protest, notices
of dishonor, and notices of acceptance of this Guaranty; and (d) all notices of
the existence, creation, or incurring of new or additional obligations. Lessor
shall have the right to enforce this Guaranty regardless of the acceptance of
additional security from Lessee and regardless of the release or discharge of
Lessee by Lessor or by others, or by operation of any law.
8. The obligations of Lessee under the Lease to execute and deliver
estoppel certificates and applicable financial statements, if any, shall be
interpreted to also require such documents from Guarantor with respect to this
Guaranty within the same time periods prescribed in the Lease, except that such
certificates and statements shall be with regard to the Guaranty, not the
Lease.
9. Guarantor's liability hereunder shall continue until all sums due and
owing Lessor under the Lease have been paid and all obligations of Lessee to be
performed under the Lease have been performed, all to the satisfaction of
Lessor.
10. The obligations of Guarantor under this Guaranty shall remain in full
force and effect and Guarantor shall not be discharged by any of the following
events with respect to Lessee or Guarantor: (a) insolvency, bankruptcy,
reorganization arrangement, adjustment, composition, assignment for the benefit
of creditors, liquidation, winding up or dissolution (each, a "Financial
Proceeding"); (b) any merger, acquisition, consolidation or change in entity
structure, or any sale, lease, transfer, or other disposition of any entity's
assets, or any sale or other transfer of interests in the entity (each, an
"Event of Reorganization"); or (c) any sale, exchange, assignment,
hypothecation or other transfer, in whole or in part, of Lessor's interest in
the Premises or the Lease. Nothing in this Paragraph 10 shall diminish the
effect of any subsequent written agreement between Guarantor and Lessor.
11. Guarantor hereby represents and warrants that it has executed this
Guaranty based solely on its independent investigation of Lessee's financial
condition. Guarantor hereby assumes responsibility for keeping informed of
Lessee's financial condition and all other circumstances affecting Lessee's
performance of its obligations under the Lease. Absent a written request for
such information by Guarantor, Lessor shall have no duty to advise Guarantor of
any information known to it regarding such financial condition or
circumstances.
12. Guarantor further agrees that it may be joined in any action against
Lessee in connection with the said obligations of Lessee and recovery may be
had against Guarantor in any such action. Guarantor hereby expressly waives
the benefits and defenses under California Civil Code Sections 2821, 2839,
2847, 2848, 2849 and 2855 to the fullest extent permitted by applicable law.
Guarantor agrees not to exercise any of its rights of subrogation or
reimbursement against Lessee until after all amounts due and owing under the
Lease have been paid. If the foregoing waiver is determined by a court of
competent jurisdiction to be void or voidable, Guarantor agrees to subordinate
its rights of subrogation and reimbursement against Lessee to Lessor's rights
against Lessee under the Lease.
13. Guarantor hereby represents and warrants that, as of the date of the
execution of this Guaranty by Guarantor, there is no action or proceeding
pending or, to Guarantor's knowledge after due inquiry, threatened against
Guarantor before any court or administrative agency which could adversely
affect the Guarantor's financial condition. The foregoing representation and
warranty shall survive the execution and delivery of this Guaranty and is
expressly made for the benefit of Lessor, and Lessor's partners, lenders,
representatives, successors and assigns.
2
<PAGE> 29
14. This Guaranty shall be one of payment and performance and not of
collection. If there is more than one undersigned Guarantor, the term
Guarantor, as used herein, shall include and be binding upon each and every
one of the undersigned, and each of the undersigned shall be jointly and
severally liable hereunder. If there is more than one undersigned Guarantor,
Lessor shall have the right to join one or all of them in any proceeding or to
proceed against them in any order.
15. Guarantor shall indemnify, defend (with counsel acceptable to Lessor),
protect and hold harmless Lessor, and Lessor's partners, lenders,
representatives, successors and assigns from and against all liabilities,
losses, claims, demands, judgments, expenses and costs (including all
attorneys' fees and costs to enforce any of the terms of this Guaranty or
otherwise awarded hereunder) arising from or in any way related to any failure
by Lessee or Guarantor to pay Rent and any and all other sums and charges
payable by Lessee under the Lease, or to fully, faithfully and timely perform
and observe all the covenants, terms, conditions and agreements required to be
performed and observed by Lessee under the Lease.
16. The term "Lease" whenever used in this Guaranty shall be deemed, and
interpreted so as, to also include any renewals or extensions of the initial
or renewal term(s), as the case may be, and any holdover periods thereunder.
17. All demands, notices and other communications under or pursuant to
this Guaranty shall be in writing, and shall be deemed to have been duly given
when personally delivered, or three (3) days after the date deposited in the
United States Postal Service, first-class postage prepaid, certified with
return receipt requested, or the delivery date designated for overnight courier
services (e.g. Federal Express), addressed to the party at the address set
forth below, or at such other address as may be hereafter designated in writing
by either party to the other.
LESSOR:
LINCOLN RIVERSIDE BUSINESS CENTER, a California Limited Partnership
c/o Lincoln Property Company, N.C., Inc.
30 Executive Park, Suite 100
Irvine, California 92714
Attention: Mr. Erik M. Hansen
GUARANTOR:
Jeffrey H. Silvers
3565 Courtside Circle
Huntington Beach, California 92649
18. Guarantor hereby represents and warrants that he is duly authorized
to execute and deliver this Guaranty; that this Guaranty is binding on
Guarantor in accordance with its terms; that the terms and provisions of this
Guaranty are intended to be valid and enforceable in accordance with its terms;
and that the signatory to this Guaranty is duly authorized to bind Guarantor
and execute this Guaranty on Guarantor's behalf.
19. Lessor may assign this Guaranty in conjunction with the assignment of
all or any portion of Lessor's interest in the Lease, without the necessity of
obtaining Guarantor's consent thereto, and any such assignment shall not
affect, or otherwise relieve, Guarantor from its obligations or liability
hereunder. Guarantor may not assign or otherwise delegate any of its rights or
obligations hereunder without first obtaining Lessor's written consent thereto,
which consent may be withheld in Lessor's sole discretion. The terms and
provisions of this Guaranty shall inure to the benefit of Lessor and Lessor's
partners, lenders, representatives, successors and assigns. Guarantor hereby
acknowledges that Lessor is relying upon Guarantor's covenants, representations
and warranties contained in this Guaranty in entering into the Lease with
Lessee, and Guarantor hereby undertakes to perform its obligations hereunder
promptly and in good faith.
20. If all or any portion of the obligations guaranteed hereunder are
paid or performed and all or any part of such payment or performance is
avoided or recovered, directly or indirectly, from Lessor as a preference,
fraudulent transfer or otherwise, then Guarantor's obligations hereunder shall
continue and remain in full force and effect as to any such avoided or
recovered payment or performance.
3
<PAGE> 30
21. All representations and warranties by Guarantor contained herein or
made in writing pursuant to this Guaranty are intended to and shall remain true
and correct as of the time of execution of this Guaranty, shall be deemed to be
material, shall survive the execution and delivery of this Guaranty, and shall
be relied upon by Lessor and Lessor's partners, lenders, representatives,
successors and assigns.
22. This Guaranty shall be governed by and construed in accordance with
the laws of the State of California, irrespective of its conflict of law rules.
Guarantor hereby consents to the jurisdiction of the courts of the State of
California. This Guaranty shall be subject to all valid applicable laws and
official orders, rules and regulations, and, in the event this Guaranty or any
portion thereof is found to be inconsistent with or contrary to any such laws
or official orders, rules or regulations, the latter shall be deemed to
control, and this Guaranty shall be regarded as modified and shall continue in
full force and effect; provided, however, that nothing herein contained shall
be construed as a waiver of any right to question or contest any such law,
order, rule or regulation in any forum having jurisdiction in the Premises.
23. This Guaranty and any exhibits hereto constitute the entire agreement
between the parties with respect to the matters covered herein and supersedes
all prior agreements and understandings between the parties hereto relating to
the subject matter hereof.
24. In the event Guarantor fails to perform any of its obligations under
this Guaranty or in the event a dispute arises concerning the meaning or
interpretation of any provision of this Guaranty, the defaulting party or the
party not prevailing in such dispute, as the case may be, shall pay any and all
costs and expenses incurred by the other party in enforcing or establishing its
rights hereunder, including, without limitation, court costs, expert fees, and
reasonable attorneys' fees.
25. In the event of the death of Guarantor, all parties herein acknowledge
that this Guaranty shall become null and void.
26. Time is of the essence of this Guaranty.
This guaranty is valid for 12 months only.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be signed by
its duly authorized representative or officer as of the date set forth below.
GUARANTOR:
By: /s/ Jeffrey H. Silvers
--------------------------------
Jeffrey H. Silvers
Date: 2-12-96
-------------------------
4
<PAGE> 1
EXHIBIT 10.25
LEASE AGREEMENT
(Industrial Gross)
BASIC LEASE INFORMATION
<TABLE>
<CAPTION>
<S> <C>
LEASE DATE: October 11, 1996
LESSOR: LINCOLN RIVERSIDE BUSINESS CENTER,
a California Limited Partnership
LESSOR'S ADDRESS: P.O. Box 19693, 30 Executive Park, Suite 100
Irvine, California 92713-9693
LESSEE: MUL ACRES, INC.
a California Corporation
LESSEE'S ADDRESS: 3565 Courtside Circle
Huntington Beach, CA 92649
PREMISES: Approximately 3,200 square feet as shown on Exhibit A
PREMISES ADDRESS: 11800 Sterling Avenue, Suites I & J
Riverside, CA 92503
BUILDING: 19,748 square feet
LOT (BUILDING'S TAX PARCEL): N/A
PARK: 280,354 square feet
TERM: October 15, 1996 ("Commencement Date"), through
November 14, 1998 ("Expiration Date")
BASE RENT (Para. 13): One Thousand Four Hundred and 00/100 Dollars ($1,400.00) per month
ADJUSTMENTS TO BASE RENT: October 15, 1996 to November 14, 1996 $0.00 (Rent Waiver Period)
November 15, 1996 to November 14, 1998 $1,400.00 per month
SECURITY DEPOSIT (Para. 4.A): One Thousand Four Hundred Forty and 00/100 Dollars ($1,440.00)
CLEANING DEPOSIT (Para. 4.B): N/A
TRASH AND WATER CHARGE (Para. 7): Forty and 00/100 Dollars ($40.00) per month
BASE YEAR FOR LESSEE'S SHARE OF THE EXPENSES: 1997
*LESSEE'S SHARE OF INCREASES IN OPERATING EXPENSES (Para. 6.A): 1.14% of the Park
*LESSEE'S SHARE OF INCREASES IN TAX EXPENSES (Para. 6.B): 1.14% of the Park
*LESSEE'S SHARE OF INCREASES IN COMMON AREA UTILITY COSTS (Para. 7): 1.14% of the Park
*The amount of Lessee's Share of the increases in expenses as referenced above
shall be subject to Modification as set forth in this Lease.
PERMITTED USES: Warehousing and assembly of motorcycle parts.
GENERAL LIABILITY INSURANCE Bodily injury, limit of not less than $1,000,000.00 per occurrence;
AMOUNT (Para. 12): Property damage limit of not less than $1,000,000.00 per occurrence;
Combined single limit of not less than $1,000,000.00.
UNRESERVED PARKING SPACES: Six (6) nonexclusive and undesignated spaces
BROKER (Para. 38): None.
Exhibits: Exhibit A - Premises, Building, Lot and/or Park
Exhibit C - Rules and Regulations
Exhibit D - CC&Rs
Exhibit E - Sign Criteria
Exhibit F - Hazardous Materials Disclosure Certificate
Exhibit H - Guaranty of Lease
Addenda: None.
</TABLE>
1
<PAGE> 2
LEASE AGREEMENT
DATE This Lease is made and entered into as of the Lease Date defined on
Page 1. The Basic Lease information set forth on Page 1 and this Lease
are and shall be construed as a single instrument.
1. PREMISES: Lessor hereby leases the Premises to Lessee upon the terms
and conditions contained herein. Lessor hereby grants to Lessee a revocable
license for the right to use, on a non-exclusive basis, parking areas and
ancillary facilities located within the Common Area of the Park, subject to the
terms of this Lease.
2. ADJUSTMENT OF COMMENCEMENT DATE; CONDITION OF THE PREMISES: If Lessor
cannot deliver possession of the Premises on the Commencement Date, Lessor
shall not be subject to any liability nor shall the validity of the Lease be
affected; provided the Lease term and the obligation to pay Rent shall commence
on the date possession is tendered and the termination date shall be extended
by a period of time equal to the period computed from the Commencement Date to
the date possession is tendered by Lessor to Lessee. In the event the
commencement date of this Lease is other than the Commencement Date provided on
Page 1, Lessor and Lessee shall execute a written amendment to this Lease,
substantially in the form of Exhibit G hereto, wherein the parties shall
specify the actual commencement date, termination date and the date on which
Lessee is to commence paying Rent. In the event that Lessor permits Lessee to
occupy the Premises prior to the Commencement Date, such occupancy shall be at
Lessee's sole risk and subject to all the provisions of this Lease, including,
but not limited to, the requirement to pay Rent and the Security Deposit, and
to obtain the insurance required pursuant to this Lease and to deliver
insurance certificates as required herein. In addition to the foregoing,
Lessor shall have the right to impose such additional conditions on Lessee's
early entry as Lessor shall deem appropriate. By taking possession of the
Premises, Lessee shall be deemed to have accepted the Premises in a good,
clean and completed condition and state of repair, in compliance with all
applicable laws, codes, regulations, administrative orders and ordinances, and
subject to all matters of record. Lessee hereby acknowledges and agrees that
neither Lessor nor Lessor's agents or representatives has made any
representations or warranties as to the suitability, safety or fitness of
the Premises for the conduct of Lessee's business, Lessee's intended use of the
Premises or for any other purpose, and that neither Lessor nor Lessor's agents
or representatives has agreed to undertake any alterations or construct any
Tenant Improvements to the Premises except as expressly provided in this
Lease. Lessee agrees that at anytime before or during the term of this Lease,
Lessor shall have the right to relocate Lessee from the Premises described
herein to other space within the Park on substantially the same terms and
conditions of this Lease provided the other space is of comparable size.
3. RENT: On the date that Lessee executes this Lease, Lessee shall
deliver to Lessor the original executed Lease, the Base Rent (which shall be
applied against the Rent payable for the first month Lessee is required to pay
Base Rent), the Security Deposit, the Cleaning Deposit, and all insurance
certificates evidencing the insurance required to be obtained by Lessee under
Paragraph 12 of this Lease. Lessee agrees to pay Lessor, without prior notice
or demand, or abatement, offset, deduction or claim, the Base Rent described
on Page 1, payable in advance at Lessor's address shown on Page 1 on the first
day of each month throughout the term of the Lease. In addition to the Base
Rent set forth on Page 1, Lessee shall pay Lessor in advance and on the first
(1st) day of each month throughout (the term of this Lease (including any
extensions of such term), as additional rent Lessee's share, as set forth on
Page 1, of Increases in Operating Expenses, Increases in Tax Expenses,
Increases in Common Area Utility Costs, administrative expenses, Trash and
Water Charge and Utility Expenses, as specified in Paragraphs 6.A,, 6.13., 6.C.
and 7 of this Lease, respectively. Additionally, Lessee shall pay to Lessor as
additional rent hereunder, immediately on Lessor's demand therefor, any and all
costs and expenses incurred by Lessor to enforce the provisions of this Lease,
including, but not limited to, costs associated with any proposed assignment or
subletting of all or any portion of the Premises by Lessee, costs associated
with the delivery of notices, delivery and recordation of notice(s) of default,
attorneys' fees, expert fees, court costs and filing fees (collectively, the
"Enforcement Expenses"). The term "Rent" whenever used herein refers to the
aggregate of all these amounts. If Lessor permits Lessee to occupy the
Premises without requiring Lessee to pay rental payments for a period of time,
the waiver of the requirement to pay rental payments shall only apply to
waiver of the Base Rent and Lessee shall otherwise perform all other
obligations of Lessee hereunder, including, but not limited to paying to Lessor
any and all amounts considered additional rent, such as Lessee's share of
Increases in Operating Expenses, Increases in Tax Expenses, Increases in Common
Area Utility Costs, Trash and Water Charge, Utility Expenses, and administrative
expenses. If,
2
<PAGE> 3
at any time, Lessee is in default of or otherwise breaches any term, condition
or provision of this Lease, any such waiver by Lessor of Lessee's requirement
to pay rental payments shall be null and void and Lessee shall immediately pay
to Lessor all rental payments waived by Lessor. The Rent for any fractional
part of a calendar month at the commencement or termination of the Lease term
shall be a prorated amount of the Rent for a full calendar month based upon a
thirty (30) day month. The prorated Rent shall be paid on the Commencement Date
and the first day of the calendar month in which the date of termination
occurs, as the case may be.
4. SECURITY DEPOSIT AND CLEANING DEPOSIT:
A. SECURITY DEPOSIT: Upon Lessee's execution of this Lease,
Lessee shall deliver to Lessor, as a Security Deposit for the performance by
Lessee of its obligations under this Lease, the amount described on Page 1. If
Lessee is in default, Lessor may, but without obligation to do so, use the
Security Deposit, or any portion thereof, to cure the default or to compensate
Lessor for all damages sustained by Lessor resulting from Lessee's default,
including, but not limited to the Enforcement Expenses. Lessee shall,
immediately on demand, pay to Lessor a sum equal to the portion of the Security
Deposit so applied or used so as to replenish the amount of the Security
Deposit held up to the amount initially deposited with Lessor. Concurrently
with any increase in the Base Rent, Lessee shall deliver to Lessor an amount
equal to such increase, which amount shall be added to the Security Deposit
being held by Lessor and be deemed a part of such Security Deposit thereafter.
At anytime after Lessee has defaulted hereunder, Lessor may require an
increase in the amount of the Security Deposit required hereunder for the then
balance of the Lease term and Lessee shall, immediately on demand, pay to
Lessor additional sums in the amount of such increase. As soon as practicable
after the termination of this Lease, Lessor shall return the Security Deposit
to Lessee, less such amounts as are reasonably necessary, as determined solely
by Lessor, to remedy Lessee's default(s) hereunder or to otherwise restore the
Premises to a clean and safe condition, reasonable wear and tear excepted. If
the cost to restore the Premises exceeds the amount of the Security Deposit,
Lessee shall promptly deliver to Lessor any and all of such excess sums as
determined solely by Lessor. Lessor shall not be required to keep the Security
Deposit separate from other funds, and, unless otherwise required by law,
Lessee shall not be entitled to interest on the Security Deposit. In no event
or circumstance shall Lessee have the right to any use of the Security Deposit
and, specifically, Lessee may not use the Security Deposit as a credit or to
otherwise offset any payments required hereunder, including, but not limited
to, Rent or any portion thereof.
B. CLEANING DEPOSIT: Upon Lessee's execution of this Lease,
Lessee shall deliver to Lessor, as a Cleaning Deposit for the performance by
Lessee of its obligations under this Lease including, but not limited to,
Paragraph 11 below, the amount described on Page 1. The Cleaning Deposit is to
be used for purposes relating to cleaning up the Premises and the Park adjacent
to the Premises to the satisfaction of Lessor. If Lessee is in default, Lessor
may, but without obligation to do so, use the Cleaning Deposit, or any portion
thereof, to cure the default or to compensate Lessor for all damages sustained
by Lessor resulting from Lessee's default, including, but not limited to the
Enforcement Expenses. Lessee shall, immediately on demand, pay to Lessor a sum
equal to the portion of the Cleaning Deposit so applied or used so as to
replenish the amount of the Cleaning Deposit held up to the amount initially
deposited with Lessor. At anytime after Lessee has defaulted hereunder, Lessor
may require an increase in the amount of the Cleaning Deposit required
hereunder for the then balance of the Lease term and Lessee shall, immediately
on demand, pay to Lessor additional sums in the amount of such increase. As
soon as practicable after the termination of this Lease, Lessor shall return
the Cleaning Deposit to Lessee, less such amounts as are reasonably necessary
to remedy Lessee's default(s) hereunder or to otherwise restore the Premises to
a clean and safe condition as determined by Lessor. Lessor shall not be
required to keep the Cleaning Deposit separate from other funds, and, unless
otherwise required by law, Lessee shall not be entitled to interest on the
Cleaning Deposit. In no event or circumstance shall Lessee have the right to
any use of the Cleaning Deposit and, specifically, Lessee may not use the
Cleaning Deposit as a credit or to otherwise offset any payments required
hereunder, including, but not limited to, Rent or any portion thereof.
5. CONDITION OF PREMISES: Lessee hereby accepts the Premises in its
current "as is" condition unless otherwise specified in Exhibit B, attached
hereto and incorporated herein by this reference. If so specified in Exhibit B
hereto, Lessor or Lessee, as the case may be, shall install the improvements
("Tenant Improvements") on the Premises as described and in accordance with the
terms, conditions, criteria and provisions set forth in Exhibit B, attached and
incorporated herein by this reference. Lessee acknowledges that neither Lessor
nor any of Lessor's agents, representatives or employees has made any
representations as to the suitability or fitness of the Premises for the
conduct of Lessee's business or for any other purpose, and that neither Lessor
nor any of Lessor's agents, representatives or employees has agreed to
undertake any alterations or construct any Tenant Improvements to the Premises
except as expressly provided in Exhibit B to this Lease.
3
<PAGE> 4
6. Expenses:
A. OPERATING EXPENSES: In addition to the Base Rent set forth in
Paragraph 3, Lessee shall pay its share, which is defined on Page 1, of all
Operating Expenses in excess of the amount of said expenses for the calendar
year in which this Lease commenced ("Increases in Operating Expenses") as
additional rent. The term "Operating Expenses" as used herein shall mean the
total amounts paid or payable by Lessor in connection with the ownership,
maintenance, repair and operation of the Premises, the Building and the Lot, and
where applicable, of the Park referred to on Page 1. The amount of Lessee's
share of Increases in Operating Expenses shall be reviewed from time to time by
Lessor and shall be subject to modification by Lessor, as reasonably determined
by Lessor, including, but not limited to modifications due to the sale or
addition of a building or additional space within the Lot or the Park. These
Operating Expenses may include, but are not limited to:
(i) Lessor's cost of non-structural repairs to and
maintenance of the roof and exterior walls of the Building;
(ii) Lessor's cost of maintaining the outside paved area,
landscaping and other common areas for the Park. The term "Common Area"
shall mean all areas and facilities within the Park exclusive of the
Premises and the other portions of the Park lased exclusively to other
tenants. The Common Area includes, but is not limited to, interior
lobbies, mezzanines, parking areas, access and perimeter roads,
sidewalks, landscaped areas and similar areas and facilities;
(iii) Lessor's annual cost of insurance insuring against fire
and extended coverage (including, if Lessor elects, "all risk" coverage)
and all other insurance, including, but not limited to, earthquake,
flood and/or surface water endorsements for the Building, the Lot and
the Park (including the Common Area), and rental value insurance against
loss of Rent in an amount equal to the amount of Rent for a period of at
least six (6) months commencing on the date of loss;
(iv) Lessor's cost of modifications to the Building, the
Common Area and/or the Park occasioned by any rules, laws or
regulations effective subsequent to the commencement of the Lease;
(v) Lessor's cost of modifications to the Building, the
Common Area and/or the Park occasioned by any rules, laws or regulations
became effective;
(vi) If Lessor elects to so procure, Lessor's cost of
preventative maintenance, repair and replacement contracts including,
but not limited to, contracts for elevator systems and heating,
ventilation and air conditioning systems, and trash or refuse
collection;
(vii) Lessor's cost of security and fire protection services
for the Park, if in Lessor's sole discretion such services are provided;
(viii) Lessor's establishment of reasonable reserves for
replacements and/or repairs of Common Area improvements, equipment and
supplies;
(ix) Lessor's cost for the creation and negotiation of, and
pursuant to, any rail spur or track agreements, licenses, easements or
other similar undertakings; and
(x) Lessor's cost of supplies, equipment, rental equipment
and other similar items used in the operation and/or maintenance of the
Park.
B. TAX EXPENSES: In addition to the Base Rent set forth in
Paragraph 3, Lessee shall pay its share, which is defined on Page 1, of all
real property taxes applicable to the land and improvements included within the
Lot on which the Premises are situated in excess of the amount of the Tax
Expenses for the calendar year in which this Lease commenced ("Increases in
Tax Expenses") and one hundred percent (100%) of all personal property taxes
now or hereafter assessed or levied against the Premises or Lessee's personal
property. The amount of Lessee's share of Increases in Tax Expenses shall be
reviewed from time to time by Lessor and shall be subject to modification by
Lessor, as reasonably determined by Lessor, including, but not limited to
modifications due to the sale or addition of a building or additional space
within the Lot or the Park. Lessee shall also pay any increase in real
property taxes attributable, in Lessor's sole discretion, to any and all
alterations, Tenant Improvements or other improvements of any kind whatsoever
placed in, on or about the Premises for the benefit of, at the request of, or
by Lessee. The term "Tax Expenses" includes, but is not limited to, any form
of tax and assessment (general, special, ordinary or extraordinary), commercial
rental tax, payments under any improvement bond or bonds,
4
<PAGE> 5
license, rental tax, transaction tax, levy, or penalty imposed by authority
having the direct or indirect power of tax (including any city, county, state
or federal government, or any school, agricultural, lighting, drainage or other
improvement district thereof) as against any legal or equitable interest of
Lessor in the Premises, Lot or Park, as against Lessor's right to rent or other
income therefrom, or as against Lessor's business of leasing the Premises or
the occupancy of Lessee or any other tax, fee, or excise, however described
(excluding inheritance or estate taxes), including any value added tax, or any
tax imposed in substitution, partially or totally, of any tax previously
included within the definition of real property taxes, or any additional tax
the nature of which was previously included within the definition of real
property tax.
C. PAYMENT OF EXPENSES AND ADMINISTRATIVE EXPENSES: Lessor shall
estimate Lessee's share of the Increases in Operating Expenses and Increases in
Tax Expenses for the calendar year in which the Lease commences. Commencing in
January of the following calendar year, one-twelfth (1/12th) of this estimated
amount shall be paid by Lessee to Lessor, as additional rent, on the first
(1st) day of each month and throughout the remaining months of such calendar
year. Thereafter, Lessor may estimate such expenses as of the beginning of each
calendar year and Lessee shall pay one-twelfth (1/12th) of such estimated
amount as additional rent hereunder on the first day of each month during such
calendar year and for each ensuing calendar year throughout the term of this
Lease (including any extensions of the term). Not later than March 31 of each
of the following calendar years, or as soon thereafter as reasonably possible,
including the calendar year after the calendar year in which this Lease
terminates or the term expires, Lessor shall endeavor to furnish Lessee with a
true and correct accounting of actual Increases in Operating Expenses and
Increases in Tax Expenses. Within thirty (30) days of Lessor's delivery of such
accounting, Lessee shall pay to Lessor the amount of any underpayment.
Notwithstanding the foregoing, failure by Lessor to give such accounting by
such date shall not constitute a waiver by Lessor of its right to collect any
of Lessee's underpayment at anytime. Lessor shall credit the amount of any
overpayment by Lessee toward the next estimated monthly installment(s) falling
due, or where the term of the Lease has expired, refund the amount of
overpayment to Lessee. Lessee, at its sole cost and expense through any
certified public accountant designated by it, shall have the right to examine
and/or audit the books and records evidencing such costs and expenses for the
previous one (1) calendar year, during Lessor's reasonable business hours and
not more frequently than once during any calendar year. Lessee's obligations to
pay its share of Increased Operating Expenses and Increased Tax Expenses shall
survive the expiration or earlier termination of this Lease.
If the term of the Lease expires prior to the annual reconciliation of
expenses, if any, Lessor shall have the right to reasonably estimate Lessee's
share of such expenses, and if Lessor determines that an underpayment is due,
Lessee hereby agrees that Lessor shall be entitled to deduct such underpayment
from Lessee's Security Deposit. If Lessor reasonably determines that an
overpayment has been made by Lessee, Lessor shall refund said overpayment
together with the return of Lessee's Security Deposit. Notwithstanding the
foregoing, failure of Lessor to accurately estimate Lessee's share of such
expenses shall not constitute a waiver of Lessor's right to collect any of
Lessee's underpayment at anytime.
In addition to the Base Rent set forth in Paragraph 3 hereof, Lessee
shall pay Lessor, without prior notice or demand, on the first (1st) day of
each month throughout the term of this Lease (including any extensions of such
term), as compensation to Lessor for accounting and management services
rendered on behalf of the Park, an amount equal to ten percent (10%) of the
aggregate of Lessee's share of (i) the total Increases in Operating Expenses
and Increases in Tax Expenses as described in Paragraphs 6.A. and 6.B. above,
respectively, and (ii) all Increases in Common Area Utility Costs for the Park
as described in Paragraph 7. Lessee's obligations to pay its share of such
administrative expenses shall survive the expiration or earlier termination of
this Lease.
7. UTILITIES: Lessee shall pay the cost of all water, sewer use
and connection fees, gas, heat, electricity, refuse pickup, janitorial service,
telephone and other utilities billed or metered separately to the Premises
and/or Lessee. Lessee shall also pay its share of any assessments or charges
for utility or similar purposes included within any tax bill for the Lot on
which the Premises are situated. For any such utility fees or use charges that
are not billed or metered separately to Lessee, Lessee shall pay to Lessor, as
additional rent, without prior notice or demand, on the first (1st) day of each
month throughout the term of this Lease the amount which is attributable to
Lessee's use of the Premises as reasonably estimated and determined by Lessor
based upon factors such as size of the Premises and intensity of use of such
utilities by Lessee such that Lessee shall pay the portion of such charges
reasonably consistent with Lessee's use of such utilities ("Utility Expenses").
If Lessee disputes any such estimate or determination, then Lessee shall either
pay the estimated amount or cause the Premises to be separately metered at
Lessee's sole expense. In addition, Lessee shall pay Lessor a trash and water
charge (the "Trash and Water Charge") in the amount set forth on Page 1, as
additional rent. Lessee shall also pay to Lessor its share, which is described
on Page 1, as additional rent, of any Common Area utility costs, fees, charges
or expenses in excess of the amount of such costs, fees, charges or expenses
for the calendar year in
5
<PAGE> 6
which this Lease commenced ("Increases in Common Area Utility Costs") within
fifteen (15) days after receiving a bill from Lessor. The amount of Lessee's
share of Increases in Common Area Utility Costs shall be reviewed from time to
time by Lessor and shall be subject to modification by Lessor, as reasonably
determined by Lessor, including, but not limited to modifications due to the
sale or addition of a building or additional space within the Lot or the Park.
Lessee acknowledges that the Premises may become subject to the rationing of
utility services or restrictions on utility use as required by a public utility
company, governmental agency or other similar entity having jurisdiction
thereof. Notwithstanding any such rationing or restrictions on use of any such
utility services, Lessee acknowledges and agrees that its tenancy and occupancy
hereunder shall be subject to such rationing restrictions as may be imposed
upon Lessor, Lessee, the Premises, the Building or the Park, and Lessee shall
in no event be excused or relieved from any covenant or obligation to be kept
or performed by Lessee by reason of any such rationing or restrictions. Lessee
further agrees to pay and discharge, prior to delinquency, any amount, tax,
charge, surcharge, assessment or imposition levied, assessed or imposed upon
the Premises, or Lessee's use and occupancy thereof, or as a result directly or
indirectly of any such rationing or restrictions.
8. LATE CHARGES: Lessee acknowledges that late payment (the second day of
each month or anytime thereafter) by Lessee to Lessor of Base Rent, Lessee's
share of Increases in Operating Expenses, Increases in Tax Expenses, Increases
in Common Area Utility Costs, the Trash and Water Charge, Utility Expenses or
other sums due hereunder, will cause Lessor to incur costs not contemplated by
this Lease, the exact amount of such costs being extremely difficult and
impracticable to fix. Such costs include, without limitation, processing and
accounting charges, and late charges that may be imposed on Lessor by the terms
of any note secured by any encumbrance against the Premises, and late charges
and penalties due to the late payment of real property taxes on the Premises.
Therefore, if any installment of Rent or any other sum due from Lessee is not
received by Lessor when due, Lessee shall promptly pay to Lessor all of the
following, as applicable: (a) an additional sum equal to ten percent (10%) of
such delinquent amount plus interest on such delinquent amount at the rate equal
to the prime rate plus three percent (3%) for the time period such payments are
delinquent as a late charge for every month or portion thereof that such sums
remain unpaid, (b) the amount of seventy-five dollars ($75) for each three-day
notice prepared for, or served on, Lessee, (c) the amount of fifty dollars ($50)
relating to checks for which there are not sufficient funds. The parties agree
that this late charge and the other charges referenced above represent a fair
and reasonable estimate of the costs that Lessor will incur by reason of late
payment by Lessee. Acceptance of any late charge or other charges shall not
constitute a waiver by Lessor of Lessee's default with respect to the delinquent
amount, nor prevent Lessor from exercising any of the other rights and remedies
available to Lessor for any other breach of Lessee under this Lease. If a late
charge or other charge becomes payable for any three (3) installments of Rent
within any twelve (12) month period, then Lessor, at Lessor's sole option, can
either require the Rent to be paid quarterly in advance, or be paid monthly in
advance by cashier's check or by electronic funds transfer.
9. USE OF PREMISES: The Premises are to be used solely for the uses stated
on Page 1 and for no other uses or purposes without Lessor's prior written
consent. The use of the Premises by Lessee and its agents, invitees and
employees shall be subject to, and at all times in compliance with, (a) any and
all applicable laws, ordinances, statutes, orders and regulations as same exist
from time to time (collectively, the "Laws"), and (b) any and all declarations
of covenants, conditions and restrictions ("CC&Rs") and any supplement thereto
which has been or hereafter is recorded in any official or public records with
respect to the Premises, the Building, the Lot and/or the Park, or any portion
thereof.
Lessee shall not use the Premises or permit anything to be done in or
about the Premises nor keep or bring anything therein which will in any way
conflict with any of the requirements of the Board of Fire Underwriters or
similar body now or hereafter constituted or in any way increase the existing
rate of or affect any policy of fire or other insurance upon the Building or any
of its contents, or cause a cancellation of any insurance policy. Lessee shall
not do or permit anything to be done in or about the Premises which will in any
way obstruct or interfere with the rights of Lessor, other tenants or occupants
of the Building, other buildings in the Park, or other persons or businesses in
the Park, or injure or annoy other tenants or use or allow the Premises to be
used for any improper, immoral, unlawful or objectionable purpose, as determined
by Lessor, in its sole discretion, for the benefit, quiet enjoyment and use by
Lessor and all other tenants or occupants of the Building or other buildings in
the Park; nor shall Lessee cause, maintain or permit any private or public
nuisance in, on or about the Premises, Building, Park and/or the Common Area,
including, but not limited to, any offensive odors, fumes or vibrations. Lessee
shall not damage or deface or otherwise commit or suffer to be committed any
waste in, upon or about the Premises. Lessee shall not store, nor permit any
other person or entity to store, any property, equipment, materials, supplies,
personal property or any other items or goods outside of the Premises. Lessee
shall not permit any animals, including, but not limited to, any household pets,
to be brought or kept in or about the Premises. Lessee shall place no loads upon
the floors, walls, or ceilings in excess of the
6
<PAGE> 7
maximum designed load permitted by the applicable Uniform Building Code or
which may damage the Building or outside areas; nor place any harmful liquids
in the drainage systems; nor dump or store waste materials, refuse or other
such materials, or allow such to remain outside the Building area, except in
refuse dumpsters or in any enclosed trash areas provided. Lessee shall honor
the terms of all recorded CC&Rs relating to the Premises, the Building, the Lot
and/or the Park. Lessee shall honor the rules and regulations set forth in
Exhibit C, attached to and made a part of this Lease, and any other reasonable
rules and regulations of Lessor now or hereafter enacted relating to parking
and the operation of the Building and the Park. If Lessee fails to comply with
such Laws, CC&Rs, rules and regulations or the provisions of this Lease, Lessor
shall have the right to collect from Lessee a reasonable sum as a penalty, in
addition to all rights and remedies of Lessor hereunder including, but not
limited to, the payment by Lessee to Lessor of all Enforcement Expenses and
Lessor's costs and expenses, if any, to cure any of such failures of Lessee, if
Lessor, at its sole option, elects to undertake such cure.
10. ALTERATIONS AND ADDITIONS: Lessee shall not install any signs,
fixtures, improvements, nor make or permit any other alterations or additions
to the Premises without the prior written consent of Lessor. If any such
alteration or addition is expressly permitted by Lessor, Lessee shall deliver
at least twenty (20) days prior notice to Lessor, from the date Lessee intends
to commence construction, sufficient to enable Lessor to post a Notice of
Non-Responsibility. In all events, Lessee shall obtain all permits or other
governmental approvals prior to commencing any of such work and deliver a copy
of same to Lessor. All alterations and additions shall be installed by a
licensed contractor approved by Lessor, at Lessee's sole expense in compliance
with all applicable Laws, CC&Rs, and Lessor's rules and regulations. Lessee
shall keep the Premises and the property on which the Premises are situated
free from any liens arising out of any work performed, materials furnished or
obligations incurred by or on behalf of Lessee. As a condition to Lessor's
consent to the installation of any fixtures or improvements, Lessor may require
Lessee to post and obtain a completion and indemnity bond for up to one hundred
fifty percent (150%) of the cost of the work. Upon termination of this Lease,
Lessee shall remove all signs, fixtures, furniture and furnishings and if
requested by Lessor, remove any improvements made by Lessee and repair any
damage caused by the installation or removal of such signs, fixtures,
furniture, furnishings and improvements and leave the Premises in as good
condition as they were in at the time of the commencement of this Lease,
excepting for reasonable wear and tear. Reasonable wear and tear shall not
include any damage or deterioration that would have been prevented by proper
maintenance by Lessee or Lessee otherwise performing all of its obligations
under this Lease.
11. REPAIRS AND MAINTENANCE: Lessee shall, at Lessee's sole cost and
expense, keep and maintain the Premises and the adjacent Park in good, clean
and safe condition and repair to the satisfaction of Lessor including, but not
limited to, repairing any damage caused by Lessee or its employees,
representatives, agents, invitees, licensees or contractors. Without limiting
the generality of the foregoing, Lessee shall be solely responsible for
maintaining, repairing and replacing all interior plumbing and mechanical
systems, heating, ventilation and air conditioning systems, interior electrical
wiring and equipment, interior lighting, all interior glass, interior window
easements, partitions, tenant signage, interior doors and door closers,
fixtures, equipment, interior painting, and interior walls and floors of the
Premises. Lessee's obligation to keep, maintain, preserve and repair the
Premises and the adjacent Park shall specifically extend to the cleanup and
removal of any and all Hazardous Materials (hereafter defined) occurring in, on
or about the Premises.
Subject to the provisions of Paragraphs 6 and 9 of this Lease and
except for repairs rendered necessary by the active or passive negligent acts
or omissions of Lessee, its agents, customers, employees and invitees, Lessor
agrees, at Lessor's expense, subject to reimbursement pursuant to Paragraph 6
above, to keep in good repair the plumbing and mechanical systems exterior to
the Premises, roof membranes, signage (exclusive of tenant signage), exterior
electrical wiring and equipment, exterior lighting, all exterior glass,
exterior doors and entrances, exterior window easements, exterior doors and door
closers, exterior painting, and underground utility and sewer pipes outside the
exterior walls of the Building. Lessor reserves the right, but without the
obligation, to procure and maintain the heating, ventilation and air
conditioning systems maintenance contract and if Lessor so elects, Lessee will
reimburse Lessor for the cost thereof in accordance with the provisions of
Paragraph 6 above.
Except for repairs rendered necessary by the active or passive
negligent acts or omissions of Lessee, its agents, customers, employees and
invitees, Lessor agrees, at Lessor's sole cost and expense, to keep in good
repair the structural portions of the floors, foundations, exterior walls
(exclusive of glass and exterior doors), and the structural portions of the
roof (excluding the roof membrane) of the Building.
Except for normal maintenance and repair of the items outlined above,
Lessee shall have no right of access to or right to install any device on the
roof of the Building nor make any penetrations of the roof of the Building
without the express prior written consent of Lessor. If Lessee refuses or
neglects to
7
<PAGE> 8
repair and maintain the Premises and the adjacent Park properly as required
herein and to the reasonable satisfaction of Lessor, Lessor may, but without
obligation to do so, at anytime make such repairs and/or maintenance without
Lessor having any liability to Lessee for any loss or damage that may accrue to
Lessee's merchandise, fixtures or other property, or to Lessee's business by
reason thereof. In the event Lessor makes such repairs and/or maintenance, upon
completion thereof Lessee shall pay to Lessor, as additional rent, the Lessor's
costs for making such repairs and/or maintenance, plus twenty percent (20%) for
overhead, upon presentation of a bill thereof, plus any Enforcement Expenses.
The obligations of Lessee hereunder shall survive the expiration of the term of
this Lease or the earlier termination thereof. Lessee hereby waives any right
to repair at the expense of Lessor under any applicable Laws now or hereafter
in effect respecting the Premises.
12. INSURANCE: Lessee shall maintain in full force and effect at all times
during the term of this Lease, at Lessee's sole cost and expense, for the
protection of Lessee and Lessor, as their interests may appear, policies of
insurance issued by a carrier or carriers acceptable to Lessor and its
lenders(s) which afford the following coverages: (i) worker's compensation:
statutory limits; (ii) employer's liability: as required by law with a minimum
of $1,000,000; (iii) comprehensive general liability insurance (occurrence form)
including blanket contractual liability, broad form property damage, premises,
personal injury, completed operations, products liability, personal and
advertising coverage, a plate-glass rider to provide coverage for all glass in,
on or abbot the Premises including, without limitation, skylights, and fire
damage with a combined single limit of not less than (the amount set forth on
Page 1) per occurrence, and (the amount set forth on Page 1) per occurrence per
location if Lessee has multiple locations, with deletion of (a) the exclusion
for operations within fifty (50) feet of a railroad track (railroad protective
liability), if applicable, and (b) the exclusion for explosion, collapse or
underground hazard, if applicable, and if necessary, Lessee shall provide for
restoration of the aggregate limit; (iv) comprehensive automobile liability
insurance: a combined single limit of not less than $2,000,000 per occurrence
and insuring Lessee against liability for claims arising out of the ownership,
maintenance, or use of any owned, hired or non-owned automobiles; and (v) "all
risk" property insurance including boiler and machinery comprehensive form, if
applicable, covering damage to or loss of any personal property, fixtures and
equipment, including, without limitation, electronic data processing equipment,
of Lessee (and coverage for the full replacement cost thereof including business
interruption of Lessee), together with, if the property of Lessee's invitees is
to be kept in the Premises, warehouser's legal liability or bailee customers
insurance for the full replacement cost of the property belonging to invitees
and located in the Premises.
Insurance required to be maintained by lessee shall be written by
companies licensed to do business in the State of California and having a
"General Policyholders Rating" of at least A (or such higher 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 deliver to Lessor
certificates of insurance for all insurance required to be maintained by Lessee
hereunder at the time of execution of this Lease by Lessee. Lessee shall, at
least thirty (30) days prior to expiration of each policy, furnish Lessor with
certificates of renewal or "binders" thereof. Each certificate shall expressly
provide that such policies shall not be cancelable or otherwise subject to
modification except after thirty (30) days prior written notice to the parties
named as additional insureds as required in this Lease (except for cancellation
for nonpayment of premium, in which event cancellation shall not take effect
until at least ten (10) days' notice has been given to Lessor). If Lessee fails
to maintain any insurance required in this Lease, Lessee shall be liable for
all losses and costs resulting from such failure.
Lessor, any property management company of Lessor for the Premises, any
lender(s) of Lessor having a lien against the Premises, the Building, the Lot
or the Park, and any joint venture partners of Lessor shall be named as
additional insureds under all of the policies required in Paragraph 12.(iii)
above. Additionally, such policies shall provide for severability of interest.
All insurance to be maintained by Lessee shall, except for workers'
compensation and employer's liability insurance, be primary, without right of
contribution from insurance maintained by Lessor. Any umbrella liability policy
or excess liability policy (which shall be in "following form") shall provide
that if the underlying aggregate is exhausted, the excess coverage will drop
down as primary insurance. The limits of insurance maintained by Lessee shall
not limit Lessee's liability under this Lease.
13. LIMITATION OF LIABILITY AND INDEMNITY: Except for damage resulting from
the sole active gross negligence or willful misconduct of Lessor or its
authorized representatives, Lessee agrees to protect, defend (with counsel
acceptable to Lessor) and hold Lessor and Lessor's lender(s), partners,
employees, representatives, legal representatives, successors and assigns
(collectively, the "Indemnitees") harmless and indemnify the Indemnitees from
and against all liabilities, damages, claims, losses, judgments, charges and
expenses (including reasonable attorneys' fees, costs of court and expenses
necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to, directly
or indirectly, Lessee's use of the Premises and/or the Park, or the conduct of
8
<PAGE> 9
Lessee's business, or from any activity, work or thing done, permitted or
suffered by Lessee in or about the Premises, or in any way connected with the
Premises or with the improvements or personal property therein, including, but
not limited to, any liability for injury to person or property of Lessee, its
agents or employees or third party persons. Lessee agrees that the obligations
of Lessee herein shall survive the expiration or earlier termination of this
Lease.
Except for damage resulting from the sole active gross negligence or
willful misconduct of Lessor or its authorized representative, Lessor shall not
be liable to Lessee for any loss or damage to Lessee or Lessee's property, for
any injury to or loss of Lessee's business or for any damage or injury to any
person from any cause whatsoever, including, but not limited to, any acts,
errors or omissions by or on behalf of any other tenants or occupants of the
Building and/or the Park. Lessee shall not, in any event or circumstance, be
permitted to offset or otherwise credit against any payments of Rent required
herein for matters for which Lessor may be liable hereunder. Lessor and its
authorized representatives shall not be liable for any interference with light
or air, or for any latent defect in the Premises or the Building. To the
fullest extent permitted by law, Lessee agrees that neither Lessor nor any of
Lessor's lender(s), partners, employees, representatives, legal representatives,
successors and assigns shall at any time or to any extent whatsoever be liable,
responsible or in any way accountable for any loss, liability, injury, death or
damage to persons or property which at any time may be suffered or sustained by
Lessee or by any person(s) whomsoever who may at any time be using or occupying
or visiting the Premises, the Building or the Park.
14. ASSIGNMENT AND SUBLEASING:
A. PROHIBITION: Lessee shall not assign, mortgage, hypothecate,
encumber, grant any license or concession, pledge or otherwise transfer this
Lease (collectively, "assignment"), in whole or in part, whether voluntarily or
involuntarily or by operation of law, nor sublet or permit occupancy by any
person other than Lessee of all or any portion of the Premises without first
obtaining the prior written consent of Lessor, which shall not be unreasonably
withheld. If Lessee seeks to sublet or assign all or any portion of the
Premises, Lessee shall deliver to Lessor at least thirty (30) days prior to the
proposed commencement of the sublease or assignment (the "Proposed Effective
Date") the following: (i) the name of the proposed assignee or sublessee; (ii)
such information as to such assignee's or sublessee's financial responsibility
and standing as Lessor may reasonably require; and (iii) a copy of the proposed
sublease or assignment agreement and all agreements collateral thereto, which
instrument shall include a provision whereby the assignee or sublessee assumes
all of Lessee's obligations hereunder and agrees to be bound by the terms
hereof. As additional rent hereunder, Lessee shall pay to Lessor a fee in the
amount of five hundred dollars ($500) plus Lessee shall reimburse Lessor for
actual legal and other expenses incurred by Lessor in connection with any
request by Lessee for Lessor's consent to assignment or subletting. In the
event the sublease (1) by itself or taken together with prior sublease(s) covers
or totals, as the case may be, more than twenty-five percent (25%) of the
rentable square feet of the Premises or(2) is for a term which by itself or
taken together with prior or other subleases is greater than fifty percent
(50%) of the period remaining in the term of this Lease as of the time of the
Proposed Effective Date, then Lessor shall have the right, to be exercised by
giving written notice to Lessee, to recapture the space described in the
sublease. If such recapture notice is given, it shall serve to terminate this
Lease with respect to the proposed sublease space, or, if the proposed sublease
space covers all the Premises, it shall serve to terminate the entire term of
this Lease, in either case as of the Proposed Effective Date. However, no
termination of this Lease with respect to part or all of the Premises shall
become effective without the prior written consent, where necessary, of the
holder of each deed of trust encumbering the Premises or any part thereof. If
this Lease is terminated pursuant to the foregoing with respect to less than the
entire Premises, the Rent shall be adjusted on the basis of the proportion of
square feet retained by Lessee to the square feet originally demised and this
Lease as so amended shall continue thereafter in full force and effect. Each
permitted assignee or sublessee shall assume and be deemed to assume this
Lease and shall be and remain liable jointly and severally with Lessee for
payment of Rent and for the due performance of, and compliance with all the
terms, covenants, conditions and agreements herein contained on Lessee's part
to be performed or complied with, for the term of this Lease. No assignment or
subletting shall affect the continuing primary liability of Lessee (which,
following assignment, shall be joint and several with the assignee), and Lessee
shall not be released from performing any of the terms, covenants and
conditions of this Lease. For purposes hereof, in the event Lessee is a
corporation, partnership, joint venture, trust or other entity other than a
natural person, any change in the direct or indirect ownership of Lessee
(whether pursuant to one or more transfers) which results in a change of more
than fifty percent (50%) in the direct or indirect ownership of Lessee shall be
deemed to be an assignment within the meaning of this Paragraph 14 and shall be
subject to all the provisions hereof. Any and all options, first rights of
refusal, tenant improvement allowances and other similar rights granted to
Lessee in this Lease, if any, shall not be assignable by Lessee unless
expressly authorized in writing by Lessor.
9
<PAGE> 10
B. EXCESS SUBLEASE RENTAL OR ASSIGNMENT CONSIDERATION: In the
event of any sublease or assignment of all or any portion of the Premises where
the rent or other consideration provided for in the sublease or assignment
either initially or over the term of the sublease or assignment exceeds the
Rent or pro rata portion of the Rent, as the case may be, for such space
reserved in the Lease, Lessee shall pay the Lessor monthly, as additional rent,
at the same time as the monthly installments of Rent are payable hereunder,
fifty percent (50%) of the excess of each such payment of rent or other
consideration in excess of the Rent called for hereunder.
C. WAIVER: Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Lessor to any assignee or
sublessee, or failure by Lessor to take action against any assignee or
sublessee, Lessee waives notice of any default of any assignee or sublessee and
agrees that Lessor may, at its option, proceed against Lessee without having
taken action against or joined such assignee or sublessee, except that Lessee
shall have the benefit of any indulgences, waivers and extensions of time
granted to any such assignee or sublessee.
15. WAIVER OF SUBROGATION: Lessee waives any right to recover against
Lessor for claims for damages to Lessee's property, including, but not limited
to, personal property, fixtures and equipment, covered by insurance. This
provision is intended to waive fully, and for the benefit of Lessor, any rights
and/or claims which might give rise to a right of subrogation in favor of any
insurance carrier. The coverage obtained by Lessee pursuant to this Lease
shall include, without limitation, a waiver of subrogation endorsement
attached to the certificate of insurance.
16. AD VALOREM TAXES: Prior to delinquency, Lessee shall pay all taxes and
assessments levied upon trade fixtures, alterations, additions, improvements,
inventories and personal property located and/or installed on or in the
Premises by, or on behalf of, Lessee; and if requested by Lessor, Lessee shall
promptly deliver to Lessor copies of receipts for payment of all such taxes and
assessments. To the extent any such taxes are not separately assessed or
billed to Lessee, Lessee shall pay the amount thereof as invoiced by Lessor.
17. SUBORDINATION: Without the necessity of any additional document being
executed by Lessee for the purpose of effecting a subordination, and at the
election of Lessor or any bona fide mortgagee or deed of trust beneficiary with
a lien on all or any portion of the Premises or any ground lessor with respect
to the land of which the Premises are a part, this Lease shall be subject and
subordinate at all times to: (i) all ground leases or underlying leases which
may now exist or hereafter be executed affecting the Building or the land upon
which the Building is situated or both, and (ii) the lien of any mortgage or
deed of trust which may now exist or hereafter be executed in any amount for
which the Building, the Lot, ground leases or underlying leases, or Lessor's
interest or estate in any of said items is specified as security.
Notwithstanding the foregoing, Lessor or any such ground lessor, mortgagee, or
any beneficiary shall have the right to subordinate or cause to be subordinated
any such ground leases or underlying leases or any such liens to this Lease. If
any ground lease or underlying lease terminates for any reason or any mortgage
or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made
for any reason, Lessee shall, notwithstanding any subordination and upon the
request of such successor to Lessor, attorn to and become the Lessee of the
successor in interest to Lessor, provided such successor in interest will not
disturb Lessee's use, occupancy or quiet enjoyment of the premises so long as
Lessee is not in default of the terms and provisions of this Lease. The
successor in interest to Lessor following foreclosure, sale or deed in lieu
thereof shall not be (a) liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (b) subject
to any offsets or defenses which Lessee might have against any prior lessor;
(c) bound by prepayment of more than one (1) month's Rent; or (d) liable to
Lessee for any Security Deposit not actually received by such successor in
interest. Lessee covenants and agrees to execute (and acknowledge if required
by Lessor, any lender or ground lessor) and deliver, within five (5) days of a
demand or request by Lessor and in the form requested by Lessor, ground lessor,
mortgagee or beneficiary, any additional documents evidencing the priority or
subordination of this Lease with respect to any such ground leases or
underlying leases or the lien of any such mortgage or deed of trust. Lessee's
failure to timely execute and deliver such additional documents shall, at
Lessor's option, constitute a material default hereunder. It is further agreed
that Lessee shall be liable to Lessor, and shall indemnify Lessor from and
against any loss, cost, damage or expense, incidental, consequential, or
otherwise, arising or accruing directly or indirectly, from any failure of
Lessee to execute or deliver to Lessor any such additional documents. Lessee
hereby irrevocably appoints Lessor as attorney-in-fact of Lessee, which
appointment is coupled with an interest, to execute, deliver and record any
such documents in the name and on behalf of Lessee.
10
<PAGE> 11
18. RIGHT OF ENTRY: Lessee grants Lessor or its agents the right to enter
the Premises at all reasonable times for purposes of inspection, exhibition,
posting of notices, repair or alteration. At Lessor's option, Lessor shall at
all times have and retain a key with which to unlock all the doors in, upon and
about the Premises, excluding Lessee's vaults and safes. It is further agreed
that Lessor shall have the right to use any and all means Lessor deems necessary
to enter the Premises in an emergency. Lessor shall also have the right to place
"for rent" and/or "for sale" signs on the outside of the Premises. Lessee hereby
waives any claim from damages or for any injury or inconvenience to or
interference with Lessee's business, or any other loss occasioned thereby except
for any claim for any of the foregoing arising out of the gross active negligent
acts of willful misconduct of Lessor or its authorized representatives.
19. ESTOPPEL CERTIFICATE: Lessee shall execute (and acknowledge if required
by any lender or ground lessor) and deliver to Lessor, within five (5) days
after Lessor provides such to Lessee, a statement in writing certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification), the date to which the Rent and other charges
are paid in advance, if any, acknowledging that there are not, to Lessee's
knowledge, any uncured defaults on the part of Lessor hereunder or specifying
such defaults as are claimed, and such other matters as Lessor may reasonably
require. Any such statement may be conclusively relied upon by Lessor and any
prospective purchaser or encumbrancer of the Premises. Lessee's failure to
deliver such statement within such time shall be conclusive upon the Lessee that
(a) this Lease is in full force and effect, without modification except as may
be represented by Lessor, (b) there are no uncured defaults in Lessor's
performance; and (c) not more than one month's Rent has been paid in advance,
except in those instances when Lessee pays Rent quarterly in advance pursuant to
Paragraph 8 hereof, the not more than three month's Rent has been paid in
advance. Failure by Lessee to so deliver such certified estoppel certificate
shall be a default of the provisions of this Lease. Lessee shall be liable to
Lessor, and shall indemnify Lessor from and against any loss, cost, damage or
expense, incidental, consequential, or otherwise, arising or accruing directly
or indirectly, from any failure of Lessee to execute or deliver to Lessor any
such certified estoppel certificate.
Lessee hereby irrevocably appoints Lessor as attorney-in-fact of Lessee, which
appointment is coupled with an interest, to act in Lessee's name, place and
stead to execute and deliver such estoppel certificate on behalf of Lessee.
20. LESSEE'S DEFAULT: The occurrence of any one or more of the following
events shall, at Lessor's option, constitute a default and breach of this
Lease by Lessee:
(i) The vacation or abandonment of the Premises by Lessee
for a period of ten (10) consecutive days, and Lessee waives any right
to notice Lessee may have under applicable law;
(ii) The failure by Lessee to make any payment of Rent or any
other payment required hereunder on the date said payment is due;
(iii) The failure by Lessee to observe, perform or comply with
any of the conditions, covenants or provisions of this Lease (except
default in the payment of Rent); provided, if such default is
susceptible of cure and Lessee has promptly commenced the cure of such
default and is diligently prosecuting such cure to completion, the
same must remain uncured for a period, unless otherwise noted herein, of
fifteen (15) days after written notice;
(iv) The making of a general assignment by Lessee for the
benefit of creditors, the filing of voluntary petition by Lessee or the
filing of an involuntary petition by any of Lessee's creditors seeking
the rehabilitation, liquidation, or reorganization of Lessee under any
law relating to bankruptcy, insolvency or other relief of debtors and,
in the case of an involuntary action, the failure to remove or discharge
the same within sixty (60) days of such filing, the appointment of a
receiver or other custodian to take possession of substantially all of
Lessee's assets or this leasehold, Lessee's insolvency or inability to
pay Lessee's debts or failure generally to pay Lessee's debts when due,
any court entering a decree or order directing the winding up or
liquidation of Lessee or of substantially all of Lessee's assets, Lessee
taking any action toward the dissolution or winding up of Lessee's
affairs, the cessation or suspension of Lessee's use of the Premises, or
the attachment, execution or other judicial seizure of substantially all
of Lessee's assets or this leasehold;
(v) Lessee's use or storage of Hazardous Materials on the
Premises other than as permitted by the provisions of Paragraph 29
below;
(vi) The making of any material misrepresentation or omission
by Lessee in any materials delivered by or on behalf of Lessee to Lessor
pursuant to this Lease; or
11
<PAGE> 12
(vii) Lessee's default or other breach of any covenant, condition or
provision of any lease agreement between Lessee or an affiliated entity of
Lessee, as the tenant, and Lessor or an affiliated entity of Lessor, as
landlord, with regard to any and all leased premises other than the Premises as
described herein.
21. REMEDIES FOR LESSEE'S DEFAULT: In the event of Lessee's default or
breach of the Lease, Lessor may terminate Lessee's right to possession of the
Premises by any lawful means in which case upon delivery of written notice by
Lessor this Lease shall terminate on the date specified by Lessor in such notice
and Lessee shall immediately surrender possession of the Premises to Lessor. In
addition, the Lessor shall have the immediate right of re-entry whether or not
this Lease is terminated, and if this right of re-entry is exercised following
abandonment of the Premises by Lessee, Lessor may consider any personal property
belonging to Lessee and left on the Premises to also have been abandoned. No
re-entry or taking possession of the Premises by Lessor pursuant to this
Paragraph 21 shall be construed as an election to terminate this Lease unless a
written notice of such intention is given to Lessee. If Lessor relets the
Premises or any portion thereof, (i) Lessee shall be liable immediately to
Lessor for all costs Lessor incurs in reletting the Premises or any part
thereof, including, without limitation, broker's commissions, expenses of
cleaning, redecorating, and further improving the Premises and other similar
costs and (ii) the rent received by Lessor from such reletting shall be applied
to the payment of, first, any indebtedness from Lessee to Lessor other than Base
Rent, Increases in Operating Expenses, Increases in Tax Expenses, Increases in
Common Area Utility Costs, the Trash and Water Charge and Utility Expenses;
second, all costs including maintenance, incurred by Lessor in reletting; and,
third, Base Rent, Increases in Operating Expenses, Increases in Tax Expenses,
Increases in Common Area Utility Costs, the Trash and Water Charge and Utility
Expenses due under this Lease. After deducting the payments referred to above,
any sum remaining from the rental Lessor receives from reletting shall be held
by Lessor and applied in payment of future Rent as Rent becomes due under this
Lease. In no event shall Lessee be entitled to any excess rent received by
Lessor. Reletting may be for a period shorter or longer than the remaining term
of this Lease. No act by Lessor other than giving written notice to Lessee
shall terminate this Lease. Acts of maintenance, efforts to relet the Premises
or the appointment of a receiver on Lessor's initiative to protect Lessor's
interest under this Lease shall not constitute a termination of Lessee's right
to possession. So long as this Lease is not terminated, Lessor shall have the
right to remedy any default of Lessee, to maintain or improve the Premises, to
cause a receiver to be appointed to administer the Premises and new or existing
subleases and to add to the Rent payable hereunder all of Lessor's reasonable
costs in so doing, with interest at the maximum rate permitted by law from the
date of such expenditure.
If Lessee breaches this Lease and abandons the property before the end
of the term, or if Lessee's right to possession is terminated by Lessor because
of a breach or default of the Lease, then in either such case, Lessor may
recover from Lessee all damages suffered by Lessor as a result of Lessee's
failure to perform its obligations hereunder, including, but not limited to,
the cost of any tenant improvements, and all costs Lessor incurs in reletting
the Premises or any part thereof, including without limitation, brokerage or
leasing commissions, expenses of cleaning, redecorating, and further improving
the Premises and like costs, and the worth at the time of the award (computed
in accordance with paragraph (3) of Subdivision (a) of Section 1951.2 of the
California Civil Code) of the amount by which the Rent then unpaid hereunder
for the balance of the Lease term exceeds the amount of such loss of Rent for
the same period which Lessee proves could be reasonably avoided by Lessor and
in such case, Lessor prior to the award, may relet the Premises for the purpose
of mitigating damages suffered by Lessor because of Lessee's failure to perform
its obligations hereunder; provided, however, that even though Lessee has
abandoned the Premises following such breach, this Lease shall nevertheless
continue in full force and effect for as long as Lessor does not terminate
Lessee's right of possession, and until such termination, Lessor shall have the
remedy described in Section 1951.4 of the California Civil Code (Lessor may
continue this Lease in effect after Lessee's breach and abandonment and recover
Rent as it becomes due, if Lessee has the right to sublet or assign, subject
only to reasonable limitations) and may enforce all its rights and remedies
under this Lease, including the right to recover the Rent from Lessee as it
becomes due hereunder. The "worth at the time of the award" within the meaning
of Subparagraphs (a)(1) and (a)(2) of Section 1951.2 of the California Civil
Code shall be computed by allowing interest at the rate of ten percent (10%)
per annum. Lessee waives redemption or relief from forfeiture under California
Code of Civil Procedure Sections 1174 and 1179, or under any other present or
future law, in the event Lessee is evicted or Lessor takes possession of the
Premises by reason of any default of Lessee hereunder.
The foregoing rights and remedies of Lessor are not exclusive; they are
cumulative in addition to any rights and remedies now or hereafter existing at
law, in equity by statute or otherwise, or to any equitable remedies Lessor may
have, and to any remedies Lessor may have under bankruptcy laws or laws
affecting creditor's rights generally. In addition to all remedies set forth
above, if Lessee defaults or otherwise breaches this Lease, any and all Base
Rent waived by Lessor under Paragraph 3 above shall
12
<PAGE> 13
be immediately due and payable to Lessor and all options granted to Lessee
hereunder shall automatically terminate, unless otherwise expressly agreed to in
writing by Lessor.
The waiver by Lessor of any default or breach of any provision of this
Lease shall not be deemed or construed a waiver of any other breach or default
by Lessee hereunder or of any subsequent breach or default of this Lease, except
for the default specified in the waiver.
22. HOLDING OVER: If Lessee holds possession of the Premises after the
expiration of the term of this Lease with Lessor's consent, Lessee shall become
a tenant from month-to-month upon the terms and provisions of this Lease,
provided the monthly Base Rent during such hold over period shall be 200% of the
Base Rent due on the last month of the Lease term, payable in advance on or
before the first day of each month. Such month-to-month tenancy shall not
constitute a renewal or extension for any further term. All options, if any,
granted under the terms of this Lease shall be deemed automatically terminated
and be of no force or effect during said month-to-month tenancy. Lessee shall
continue in possession until such tenancy shall be terminated by either Lessor
or Lessee giving written notice of termination to the other party at least
thirty (30) days prior to the effective date of termination. This paragraph
shall not be construed as Lessor's permission for Lessee to hold over.
Acceptance of Base Rent by Lessor following expiration or termination of this
Lease shall not constitute a renewal of this Lease.
23. LESSOR'S DEFAULT: Lessor shall not be deemed in breach or default of
this Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor hereunder. For purposes of this provision, a
reasonable time shall in no event be more than thirty (30) days after receipt by
Lessor of written notice specifying the nature of the obligation Lessor has not
performed; provided, however, that if the nature of Lessor's obligation is such
that more than thirty (30) days, after receipt of written notice, is reasonably
necessary for its performance, then Lessor shall not be in breach or default of
this Lease if performance of such obligation is commenced within such thirty
(30) day period and thereafter diligently pursued to completion.
24. PARKING: Lessee shall have a license to use the number of undesignated
and nonexclusive parking spaces set forth on Page 1. Lessor shall exercise
reasonable efforts to insure that such spaces are available to Lessee for its
use, but Lessor shall not be required to enforce Lessee's right to use the same.
25. SALE OF PREMISES: In the event of any sale of the Premises by Lessor,
Lessor shall be and is hereby entirely released from any and all of its
obligations to perform or further perform under this Lease and from all
liability hereunder as of the date of such sale; and the purchaser, at such sale
or any subsequent sale of the Premises shall be deemed, without any further
agreement between the parties or their successors in interest or between the
parties and any such purchaser, to have assumed and agreed to carry out any and
all of the covenants and obligations of the Lessor under this Lease. Lessee
agrees to attorn to such new owner provided such new owner does not disturb
Lessee's use, occupancy or quiet enjoyment of the Premises so long as Lessee is
not in default of any of the provisions of this Lease.
26. WAIVER: No delay or omission in the exercise of any right or remedy of
Lessor on any default by Lessee shall impair such a right or remedy or be
construed as a waiver.
The subsequent acceptance of Rent by Lessor after breach by Lessee of
any covenant or term of this Lease shall not be deemed a waiver of such breach,
other than a waiver of timely payment for the particular Rent payment involved,
and shall not prevent Lessor from maintaining an unlawful detainer or other
action based on such breach.
No payment by Lessee or receipt by Lessor of a lesser amount than the
monthly Rent and other sums due hereunder shall be deemed to be other than on
account of the earliest Rent or other sums due, nor shall any endorsement or
statement on any check or accompanying any check or payment be deemed an accord
and satisfaction; and Lessor may accept such check or payment without prejudice
to Lessor's right to recover the balance of such Rent or other sum or pursue
any other remedy provided in this Lease.
27. CASUALTY DAMAGE: If the Premises or any part thereof shall be damaged by
fire or other casualty, Lessee shall give prompt written notice thereof to
Lessor. In case the Building shall be so damaged by fire or other casualty that
substantial alteration or reconstruction of the Building shall, in Lessor's sole
opinion, be required (whether or not the Premises shall have been damaged by
such fire or other casualty), Lessor may, at its option, terminate this Lease by
notifying Lessee in writing of such termination within
13
<PAGE> 14
sixty (60) days after the date of such damage, in which event the Rent shall be
abated as of the date of such damage. If Lessor does not elect to terminate this
Lease and provided insurance proceeds and any contributions from Lessee, if
necessary, are available to fully repair the damage, Lessor shall within ninety
(90) days after the date of such damage commence to repair and restore the
Building and shall proceed with reasonable diligence to restore the Building
(except that Lessor shall not be responsible for delays outside its control) to
substantially the same condition in which it was immediately prior to the
happening of the casualty; provided, Lessor shall not be required to rebuild,
repair, or replace any part of Lessee's furniture, furnishings or fixtures and
equipment removable by Lessee or any improvements, alterations or additions
installed by or for the benefit of Lessee under the provisions of this Lease.
Lessor shall not in any event be required to spend for such work an amount in
excess of the insurance proceeds and any contributions from Lessee, if
necessary, actually received by Lessor as a result of the fire or other
casualty. Lessor shall not be liable for any inconvenience or annoyance to
Lessee, injury to the business of Lessee, loss of use of any part of the
Premises by the Lessee or loss of Lessor's personal property resulting in any
way from such damage or the repair thereof, except that, subject to the
provisions of the next sentence, Lessor shall allow Lessee a fair diminution of
Rent during the time and to the extent the Premises are unfit for occupancy. If
the Premises or any other portion of the Building be damaged by fire or other
casualty resulting from the fault or active or passive negligence or omissions
of Lessee or any of Lessee's agents, employees, or invitees, the Rent shall not
be diminished during the repair of such damage and Lessee shall be liable for
the cost and expense of the repair and restoration of the Building caused
thereby to the extent such cost and expense is not covered by insurance
proceeds. In the event the holder of any indebtedness secured by the Premises
requires that the insurance proceeds be applied to such indebtedness, then
Lessor shall have the right to terminate this Lessee by delivering written
notice of termination to Lessee within thirty (30) days after the date of notice
to Lessee of any such event, whereupon all rights and obligations shall cease
and terminate hereunder.
Except as otherwise provided in this Paragraph 27, Lessee hereby waives
the provisions of Sections 1932(2), 1933(4.), 1941 and 1942 of the California
Civil Code.
28. CONDEMNATION. If twenty-five percent (25%) or more of the Premises is
condemned by eminent domain, inversely condemned or sold in lieu of condemnation
for any public or quasi-public use or purpose ("Condemned"), then Lessee or
Lessor may terminate this Lease as of the date when physical possession of the
Premises is taken and title vests in such condemning authority, and Rent shall
be adjusted to the date of termination. Lessee shall not because of such
condemnation asset any claim against Lessor or the condemning authority for any
compensation because of such condemnation, and Lessor shall be entitled to
receive the entire amount of any award without deduction for any estate of
interest or interest of Lessee. If a substantial portion of the Premises,
Building or the Lot is so Condemned, Lessor at its option may terminate this
Lease. If Lessor does not elect to terminate this Lease, Lessor shall, if
necessary, promptly proceed to restore the Premises or the Building to
substantially its same condition prior to such partial condemnation, allowing
for the reasonable effects of such partial condemnation, and a proportionate
allowance shall be made to Lessee, as solely determined by Lessor, for the Rent
corresponding to the time during which, and to the part of the Premises of
which, Lessee is deprived on account of such partial condemnation and
restoration. Lessor shall not be required to spend funds for restoration in
excess of the amount received by Lessor as compensation awarded.
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS: Concurrently with executing
this Lease, and within thirty (30) days of each anniversary of the Commencement
Date during the term of this Lease, Lessee shall execute, and deliver to Lessor,
the Hazardous Materials Disclosure Certificate in substantially the form
attached as Exhibit F, and any other reasonably necessary documents as
requested by Lessor. Subject to the remaining provisions of this paragraph,
Lessee shall be entitled to use and store only those Hazardous Materials
(defined below), that are necessary for Lessee's business and to the extent
disclosed in the Hazardous Materials Disclosure Certificate, provided that such
usage and storage is in full compliance with any and all local, state and
federal environmental, health and/or safety-related laws, statutes, orders,
standards, court's decisions, ordinances, rules and regulations (as interpreted
by judicial and administrative decisions), decrees, directives, guidelines,
permits or permit conditions, currently existing and as amended, enacted,
issued or adopted in the future which are or become applicable to Lessee or the
Premises (collectively, the "Environmental Laws"). Lessor shall have the right
at all times during the term of this Lease to (i) inspect the Premises, (ii)
conduct tests and investigations to determine whether Lessee is in compliance
with the provisions of this paragraph, and (iii) request lists of all Hazardous
Materials used, stored or located on, under or about the Premises; the cost of
all such inspections, tests and investigations to be borne by Lessee, if Lessor
reasonably believes they are necessary. Lessee shall give to Lessor immediate
verbal and follow-up written notice of any spills, releases or discharges of
Hazardous Materials on, under or about the Premises, or in any Common Areas or
parking lots (if not considered part of the Premises). Lessee covenants to
promptly investigate, cleanup and otherwise remediate any spill, release or
discharge of Hazardous Materials caused by the acts
14
<PAGE> 15
(active or passive) or omissions of Lessee, or its agents, employees,
representatives, invitees, licensees, subtenants, customers or contractors at
Lessee's sole cost and expense; such investigation, clean up and remediation to
be performed after Lessee has obtained Lessor's written consent, which shall not
be unreasonably withheld; provided, however, that Lessee shall be entitled to
respond immediately to an emergency without first obtaining Lessor's written
consent. If Lessee fails to so promptly investigate, clean up or otherwise
remediate, Lessor may, but without obligation to do so, take any and all steps
necessary to rectify the same and Lessee shall promptly reimburse Lessor, upon
demand, for all costs and expenses to Lessor of performing investigation and
remediation work. Lessee shall indemnify, defend (with counsel acceptable to
Lessor) and hold Lessor and Lessor's lenders, partners, property management
company (if other than Lessor), directors, officers, employees, representatives,
contractors and shareholders and each of their respective successors and assigns
harmless from and against any and all claims, judgments, damages, penalties,
fines, liabilities, losses, suits, administrative proceedings and costs
(including, but not limited to, attorneys' and consultant fees and court costs)
arising at any time during or after the term of this Lease in connection with or
related to the use, presence, transportation, storage, disposal, spill, release
or discharge of Hazardous Materials on, in or about the Premises as a result
(directly or indirectly) of the acts (active or passive) or omissions of Lessee,
its agents, employees, representatives, invitees, licensees, subtenants,
customers or contractors. Lessee shall not be entitled to install any tanks
under, on or about the Premises for the storage of Hazardous Materials without
the express written consent of Lessor, which may be given or withheld in
Lessor's sole discretion. Neither the written consent of Lessor to the presence
of Hazardous Materials on, under or about the Premises nor the strict compliance
by Lessee with all Environmental Laws shall excuse Lessee from its obligation of
indemnification pursuant hereto. As used herein, the term Hazardous Materials
shall mean (i) any hazardous or toxic wastes, materials or substances, and other
pollutants or contaminants, which are or become regulated by any Environmental
Laws; (ii) petroleum and petroleum by products; (iii) asbestos; (iv)
polychlorinated biphenyls; and (v) radioactive materials. The provisions of this
paragraph shall survive the termination of this Lease. If it is determined by
Lessor that Lessee, its use of the Premises, Building and/or Park, or the
condition of the Premises, Building and/or Park is not in compliance with all
Environmental Laws at the expiration or termination of this Lease, then at
Lessor's sole option, Lessor may require Lessee to hold over possession of the
Premises until Lessee can surrender the Premises to Lessor in compliance with
all Environmental Laws. Any such holdover by Lessee will be with Lessor's
consent, and will not be terminable by Lessee in any event or circumstance, and
will otherwise be subject to the provisions of Paragraph 22 of this Lease.
30. FINANCIAL STATEMENTS: Lessee, for the reliance of Lessor, any lender
holding or anticipated to acquire a lien upon the Premises, the Building or the
Park or any portion thereof, or any prospective purchaser of the Building or the
Park or any portion thereof, within ten (10) days after Lessor's request
therefor, but not more often than once annually so long as Lessee is not in
default of this Lease, shall deliver to Lessor the then current audited
financial statements of Lessee (including interim periods following the end of
the last fiscal year for which annual statements are available) which statements
shall be prepared or compiled by a certified public accountant and shall present
fairly the financial condition of Lessee at such dates and the result of its
operations and changes in its financial positions for the periods ended on such
dates. If an audited financial statement has not been prepared, Lessee shall
provide Lessor with an unaudited financial statement and/or such other
information, the type and form of which are acceptable to Lessor in Lessor's
reasonable discretion, which reflects the financial condition of Lessee. If
Lessor so requests, Lessee shall deliver to Lessor an opinion of a certified
public accountant, including a balance sheet and profit and loss statement for
the most recent prior year, all prepared in accordance with generally accepted
accounting principles consistently applied. Any and all options granted to
Lessee hereunder shall be subject to and conditioned upon Lessor's reasonable
approval of Lessee's financial condition at the time of Lessee's exercise of any
such option.
31. GENERAL PROVISIONS:
(i) TIME. Time is of the essence in this Lease and with respect to
each and all of its provisions in which performance is a factor.
(ii) SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of the parties hereto.
(iii) RECORDATION. Lessee shall not record this Lease or a short form
memorandum hereof without the prior written consent of the Lessor.
(iv) LESSOR'S PERSONAL LIABILITY. The liability of Lessor (which,
for purposes of this Lease, shall include Lessor and the owner of the Building
if other than Lessor) to Lessee for any default by
15
<PAGE> 16
Lessor under the terms of this Lease shall be limited to the actual interest of
Lessor and its present or future partners in the Premises or the Building and
Lessee agrees to look solely to the Premises for satisfaction of any liability
and shall not look to other assets of Lessor nor seek any recourse against the
assets of the individual partners, directors, officers, shareholders, agents or
employees of Lessor; it being intended that Lessor and the individual partners,
directors, officers, shareholders, agents or employees of Lessor shall not be
personally liable in any manner whatsoever for any judgment or deficiency. The
liability of Lessor under this Lease is limited to its actual period of
ownership of title to the Building, and Lessor shall be automatically released
from further performance under this Lease and from all further liabilities and
expenses hereunder upon transfer of Lessor's interest in the Premises or the
Building. Lessee agrees to attorn to any entity purchasing or otherwise
acquiring the Premises.
(v) SEPARABILITY. Any provisions of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate any
other provisions hereof and such other provision shall remain in full force and
effect.
(vi) CHOICE OF LAW. This Lease shall be governed by the laws of the
State of California.
(vii) ATTORNEYS' FEES. In the event any legal action is brought to
enforce or interpret the provisions of this Lease, the prevailing party therein
shall be entitled to recover all costs and expenses including reasonable
attorneys' fees.
(viii) ENTIRE AGREEMENT. This Lease supersedes any prior agreements,
representations, negotiations or correspondence between the parties, and
contains the entire agreement of the parties on matters covered. No other
agreement, statement or promise made by any party that is not in writing and
signed by all parties to this Lease shall be binding.
(ix) WARRANTY OF AUTHORITY. Each person executing this agreement on
behalf of a party represents and warrants that (1) such person is duly and
validly authorized to do so on behalf of the entity it purports to so bind, and
(2) if such party is a partnership, corporation or trustee, that such
partnership, corporation or trustee has full right and authority to enter into
this Lease and perform all of its obligations hereunder.
(x) NOTICES. All notices and demands required or permitted to be
sent to Lessor or Lessee shall be in writing and shall be sent by United States
mail, certified and postage prepaid, or by personal delivery or by overnight
courier, addressed to Lessor at 30 Executive Park, Suite 100, Irvine, California
92714, or to Lessee at the Premises, or to such other place as such party may
designate in a notice to the other party given as provided herein. Notice
shall be deemed given upon the earlier of actual receipt or the third day
following deposit in the United States mail.
(xi) JOINT AND SEVERAL. If Lessee consists of more than one person
or entity, the obligations of all such persons or entities shall be joint and
several.
(xii) COVENANTS AND CONDITIONS. Each provision to be performed by
Lessee hereunder shall be deemed to be both a covenant and a condition.
(xiii) WAIVER OF JURY TRIAL. The parties hereto shall and they hereby
do waive trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other on any matters whatsoever
arising out of or in any way related to this Lease, the relationship of Lessor
and Lessee, Lessee's use or occupancy of the Premises, the Building or the
Park, and/or any claim of injury, loss or damage.
(xiv) COUNTERCLAIMS. In the event Lessor commences any proceedings
for nonpayment of Rent, or any other sums or amounts due hereunder, Lessee shall
not interpose any counterclaim of whatever nature or description in any such
proceedings, provided, however, nothing contained herein shall be deemed or
construed as a waiver of the Lessee's right to assert such claims in any
separate action brought by Lessee or the right to offset the amount of any
final judgment owed by Lessor to Lessee.
32. SIGNS: All signs and graphics of every kind visible in or from public
view or corridors or the exterior of the Premises shall be subject to Lessor's
prior written approval and shall be subject to any applicable governmental laws,
ordinances, and regulations and in compliance with Lessor's Sign Criteria as
set forth in Exhibit E hereto and made a part hereof. Lessee shall remove all
such signs and graphics prior to the termination of this Lease. Such
installations and removals shall be made in a manner as to avoid damage or
defacement of the Premises; and Lessee shall repair any damage or defacement,
including without limitation, discoloration caused by such installation or
removal. Lessor shall have the right, at its option, to deduct from the
Security Deposit such sums as are reasonably necessary to remove
<PAGE> 17
such signs, including but not limited to, the costs and expenses associated
with any repairs necessitated by such removal. Notwithstanding the foregoing,
in no event shall any: (a) neon, flashing or moving sign(s) or (b) sign(s)
which shall interfere with the visibility of any sign, awning, canopy,
advertising matter, or decoration of any kind of any other business or occupant
of the Building or the Park be permitted hereunder. Lessee further agrees to
maintain any such sign, awning, canopy, advertising matter, lettering,
decoration or other thing as may be approved in good condition and repair at
all times.
33. MORTGAGEE PROTECTION: Upon any breach or default on the part of Lessor,
Lessee will give written notice by registered or certified mail to any
beneficiary of a deed of trust or mortgagee of a mortgage covering the Premises
who has provided Lessee with notice of their interest together with an address
for receiving notice, and shall offer such beneficiary or mortgagee a reasonable
opportunity to cure the default (which, in no event shall be more than ninety
(90) days), including time to obtain possession of the Premises by power of sale
or a judicial foreclosure, if such should prove necessary to effect a cure. If
such breach or default cannot be cured within such time period, then such
additional time as may be necessary will be given to such beneficiary or
mortgagee to effect such cure so long as such beneficiary or mortgagee has
commenced the cure within the original time period and thereafter diligently
pursues such cure to completion, in which event this Lease shall not be
terminated while such cure is being diligently pursued. Lessee agrees that each
lender to whom this Lease has been assigned by Lessor is an express third party
beneficiary hereof. Lessee shall not make any prepayment of Rent more than one
(1) month in advance without the prior written consent of each such lender,
except if Lessee is required to make quarterly payments of Rent in advance
pursuant to the provisions of Paragraph 8 above. Lessee waives the collection of
any deposit from such lender(s) or any purchaser at a foreclosure sale of such
lender(s)' deed of trust unless the lender(s) or such purchaser shall have
actually received and not refunded the deposit. Lessee agrees to make all
payments under this Lease to the lender with the most senior encumbrance upon
receiving a direction, in writing, to pay said amounts to such lender. Lessee
shall comply with such written direction to pay without determining whether an
event of default exists under such lender's loan to Lessor.
34. QUITCLAIM: Upon any termination of this Lease, Lessee shall, at
Lessor's request, execute, have acknowledged and deliver to Lessor a quitclaim
deed of Lessee's interest in and to the Premises.
35. MODIFICATIONS FOR LENDER: If, in connection with obtaining financing for
the Premises or any portion thereof, Lessor's lender shall request reasonable
modification(s) to this Lease as a condition to such financing, Lessee shall not
unreasonably withhold, delay or defer its consent thereto, provided such
modifications do not materially adversely affect Lessee's rights hereunder or
the use, occupancy or quiet enjoyment of Lessee hereunder.
36. WARRANTIES OF LESSEE: Lessee hereby warrants and represents to Lessor,
for the express benefit of Lessor, that Lessee has undertaken a complete and
independent evaluation of the risks inherent in the execution of this Lease and
the operation of the Premises for the use permitted hereby, and that, based upon
said independent evaluation, Lessee has elected to enter into this Lease and
hereby assumes all risks with respect thereto. Lessee hereby further warrants
and represents to Lessor, for the express benefit of Lessor, that in entering
into this Lease, Lessee has not relied upon any statement, fact, promise or
representation (whether express or implied, written or oral) not specifically
set forth herein in writing and that any statement, fact, promise or
representation (whether express or implied, written or oral) made at any time to
Lessee, which is not expressly incorporated herein in writing, is hereby waived
by Lessee.
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT: Lessor and Lessee
hereby agree and acknowledge that the Premises, the Building and/or the Park may
be subject to the requirements of the Americans with Disabilities Act (the
"ADA"), a federal law codified at 42 U.S.C. 12101 et seq, including, but not
limited to Title III thereof, all regulations and guidelines related thereto,
and any amendments thereof. Any Tenant Improvements to be constructed hereunder
shall be in compliance with the requirements of the ADA, and all costs incurred
for purposes of compliance therewith shall be a part of and included in the
costs of the Tenant Improvements. Lessee is responsible for conducting its own
independent investigation of this matter. Except for the construction of any
Tenant Improvements, for which Lessee shall be solely responsible for compliance
with the ADA, if any barrier removal work or other work is required to the
Building, the Common Area or the Park under Title III of the ADA, then such work
shall be performed by Lessor; provided, if such work is required under the ADA
as a result of Lessee's use of the Premises or any work or alteration made to
the Premises by or on behalf of Lessee, then such work shall be performed by
Lessor at the sole cost and expense of Lessee. Except as otherwise
17
<PAGE> 18
provided in this provision, Lessee shall be responsible at its sole cost and
expense for fully and faithfully complying with all applicable requirements of
the ADA.
38. BROKERAGE COMMISSION: Lessee hereby represents and warrants to Lessor
that Lessee's sole contact with Lessor or with the Premises in connection with
this Lease has been directly with Lessor and the Broker (as set forth on
Page 1), and that no other broker or finder can properly claim a right to a
commission or a finder's fee based upon contacts between the claimant and
Lessee. Lessee shall indemnify, defend by counsel acceptable to Lessor, protect
and hold Lessor harmless from and against any loss, liability, suit, judgment,
cost or expense, including, but not limited to, experts' and attorneys' fees and
costs, arising from or relating to any claim for a fee or commission by any
broker or finder in connection with the Premises and this Lease other than
Broker, if any.
IN WITNESS WHEREOF, this Lease is executed on the date and year first
written above.
LESSOR: RIVERSIDE BUSINESS CENTER, a California Limited Partnership
By: LINCOLN PROPERTY COMPANY NO. 1239, Limited Partnership,
the General Partner
By: Lincoln Property Company N.C., Inc., as Agent and Manager for
Riverside Business Center, a California Limited Partnership
By: /s/ Terry Thompson 10/24/96
---------------------------------------------------
Terry Thompson, Date
Vice President
LESSEE:
MUL ACRES, INC., a California Corporation
By: /s/ Jeff Silvers 10/13/96
---------------------------------------------------
Jeff Silvers, Date
President
<PAGE> 19
EXHIBIT "A"
FLOOR PLAN
[FLOOR PLAN MAP]
Building 12
11800 Sterling Ave.
19,748 Square Feet
SITE PLAN
[SITE PLAN MAP]
<PAGE> 20
EXHIBIT C
RULES AND REGULATIONS
1. Lessee shall not suffer or permit the obstruction of any Common Areas,
including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in
good faith judges to be a threat to the safety, reputation, or property
of the Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or
interfere with other lessees or persons having business within the
Project.
4. Lessee shall not keep animals or birds within the Project, and shall
not bring bicycles, motorcycles or other vehicles into areas not
designated as authorized for the same.
5. Lessee shall not make, suffer or permit litter except in appropriate
receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or
bolts, without Lessor's written prior consent.
7. Lessee shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any kind
are to be inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the
premises of the Project.
9. Lessee shall not suffer or permit any thing in or around the Premises
or Building that causes excessive vibration or floor loading in any
part of the Project.
10. Lessee shall return all keys at the termination of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.
11. No window coverings, shades or awnings shall be installed or used by
Lessee, without Lessor's written prior consent.
12. No Lessee, employee or Invitee shall go upon the roof of the Building
without Lessor's written prior consent.
13. Lessee shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Lessor or by
applicable governmental agencies as non-smoking areas.
14. Lessee shall not use any method of heating or air conditioning other
than as provided by Lessor.
15. Lessee shall not install, maintain or operate any vending machines upon
the Premises without Lessor's written consent.
16. The Premises shall not be used for lodging, cooking or food
preparation.
17. Lessee shall comply with all safety, fire protection and evacuation
regulations established by Lessor or any applicable governmental
agency.
18. Lessor reserves the right to waive any one of these rules or
regulations, and/or as to any particular Lessee, and any such waiver
shall not constitute a waiver of any other rule or regulation or any
subsequent application thereof to such Lessee.
19. Lessee assumes all risks from theft or vandalism and agrees to keep its
Premises locked as may be required.
20. Lessor reserves the right to make such other reasonable rules and
regulations as it may from time to time deem necessary for the
appropriate operation and safety of the Project and its occupants.
Lessee agrees to abide by these and such rules and regulations.
PARKING RULES
1. Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.
2. Users of the parking area will obey all posted signs and park only
in the areas designated for vehicle parking.
3. Unless otherwise instructed, every person using the parking area is
required to park and lock his own vehicle. Lessor will not be
responsible for any damage to vehicles, injury to persons or loss of
property, all of which risks are assumed by the party using the parking
area.
4. The maintenance, washing, waxing or cleaning of vehicles in the Common
Area is prohibited.
5. Lessee shall be responsible for seeing that all of its employees,
agents and invitees comply with the applicable parking rules,
regulations, laws and agreements.
6. Lessor reserves the right to modify these rules and/or adopt such other
reasonable and non-discriminatory rules and regulations as it may deem
necessary for the proper operation of the parking area.
LESSOR'S INITIALS: ____________
LESSEE'S INITIALS: ____________
1
<PAGE> 21
EXHIBIT D
COVENANT AND AGREEMENT AND
DECLARATION OF RESTRICTIONS
This Covenant and Agreement and Declaration of Restriction is made and
entered into this 17th day of October, 1986, by LINCOLN RIVERSIDE BUSINESS
CENTER, a California Limited Partnership, the owner of record of the following
described real property situated in the City of Riverside, County of Riverside,
State of California:
Parcels 1, 2 and 3 of Parcel Map 21191 as shown by map on file in
Book 134 of Parcel Maps at pages 33 through 34 thereof, Records of
Riverside County, California,
which property is referred to herein as Parcels 1, 2 or 3 or collectively as
the property.
WHEREAS the undersigned desires to divide the property into three
parcels, as described above, pursuant to tentative Parcel Map 21191; and
WHEREAS the undersigned desires to establish a common driveway to serve
Parcels 1, 2 and 3; and
WHEREAS the undersigned desires to restrict the property with the
nonexclusive, reciprocal easements and the obligations contained herein;
NOW, THEREFORE, the undersigned hereby covenants and agrees with the
City of Riverside as follows:
1. A nonexclusive, reciprocal easement for ingress and egress is
hereby established over and across the northeasterly 15 feet and
the southeasterly 13 1/2 feet of Parcel 1 for the use and
benefit of Parcels 2 and 3.
2. A nonexclusive, reciprocal easement for ingress and egress is
hereby established over and across the southwesterly 15 feet and
the southeasterly 13 1/2 feet of Parcel 2 for the use and
benefit of Parcels 1 and 3.
3. A nonexclusive, reciprocal easement for ingress and egress is
hereby established over and across the northwesterly 13 1/2 feet
of Parcel 3 for the use and benefit of Parcels 1 and 2.
4. The easement areas described above are planned to be developed
as a common driveway and shall be kept in a free and open
condition at all times to permit unimpeded access to parcels 1,
2 and 3 and Magnolia Avenue, Pierce Street and Merced Drive. No
structure shall be placed or constructed in the easement areas.
No parking of vehicles shall be permitted in the easement areas.
Each easement area shall be maintained in accordance with the
standards of the City of Riverside for private driveways and in
a good, usable and safe condition at all times by the fee owner
of such easement area.
5. In the event any of the property is sold or leased or the
ownership is otherwise changed, as the parcels are conveyed, the
grantor shall grant and/or reserve, as appropriate, the
above-described nonexclusive, reciprocal easements for ingress
and egress. This easement shall include all rights deemed
reasonable and necessary for the construction, maintenance and
use of common driveway facilities.
6. The terms of this Covenant and Agreement and Declaration of
Restrictions may be enforced by the City of Riverside, its
successors or assigns, or by any owner or tenant of any of the
property. Should the City or any owner or tenant bring an
action to enforce any of the terms of this Covenant and
Agreement and Declaration of Restrictions, the prevailing party
shall be entitled to reasonable attorneys' fees, expert
witnesses' fees and reasonable costs of unit.
7. This Covenant and Agreement and Declaration of Restrictions
shall run with the land and shall be binding upon the
undersigned, its successors and assigns and shall continue in
effect until such time as it is released by the City Council of
the City of Riverside.
<PAGE> 22
EXHIBIT E
RIVERSIDE BUSINESS CENTER
SIGN CRITERIA
MULTI-TENANT AND INDUSTRIAL SUITES
All Tenants are required to install signage at the Tenant's expense and in
accordance with the sign criteria.
All signs shall be approved by the Landlord and properly permitted by local
governing authorities prior to installation.
I. TYPE
A. Multi-Tenant Buildings 1-10, 12 and 13 - Tenants leasing less
than 3,000 square feet may have a fiberglass mounted wall sign
with a maximum 1-1/2" thick x 16" high x 5' long sign dimension,
Tenants leasing 3,000 square feet or greater may have the
aforementioned sign or individually cut foam letters which are
2" thick and 24" high, with a maximum sign width which is equal
to no more than 75% of lineal leased frontage.
B. Industrial Buildings 14-19 - Maximum width shall be equal to no
more than 75% of lineal leased frontage, 24" maximum
channel-lite letters.
II. DESIGN
A. Channel Letters: 8" (maximum) thick internally illuminated
channel letters, with 60 mi. amp. neon tubing, shall be composed
of red faces (211-1 Acrylite Red, same as 2283 Red).
B. Foam Letter: 2" thick non-illuminated foam letters composed of
"Profound Blue" #260 (Ameritone) faces and "Badger Gray" #298
returns for Buildings 1-10, 12 and 13 and 14-19 with over 3,000
square feet of Tenant lease space.
C. Wall Mounted Fiberglass Plaques: Non-illuminated wall mounted
fiberglass identifications sign shall be composed of "Profound
Blue" #260 background and white copy #AGB-225D for Buildings
1-10, 12 and 13 less than 3,000 square feet of Tenant lease
space.
Tenants with two (2) frontage on a public street, parking lot or mall shall be
allowed two (2) wall signs.
III. GENERAL SPECIFICATIONS
A. No animated, flashing or audible signs will be permitted.
B. No exposed lamps or tubing will be permitted.
C. No exposed crossovers, raceways or conduit will be permitted.
D. Painted lettering will not be permitted.
E. Each Tenant shall be permitted to place upon each entrance of
its demised premises not more than 144 square inches of vinyl,
white lettering not to exceed two (2) inches in height,
indicating hours of business, emergency telephone numbers,
approved credit cards, etc.
F. Special event or sales advertising may be placed in or on the
interior windows for a maximum of 30 days, otherwise, no
advertising place cards, flags, balloons, banners, etc., shall
be affixed or maintained upon either the interior or exterior of
the glass panes and supports of the show windows and doors, or
upon the exterior wall of the buildings.
G. Each Tenant who has a non-customer door for receiving
merchandise may have uniformly applied on said door in location,
as directed by Landlord, in 2" high block letters, the Tenant's
name and address. Color letter shall be "Profound Blue" #260.
H. At the termination of Tenant's Lease, Tenant shall be required
to remove his signs and patch the area to match the surrounding
area.
2
<PAGE> 23
EXHIBIT F
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Lessor (identified below) to evaluate and finalize a lease agreement
with you as lessee. After a lease agreement is signed by you and the Lessor
(the "Lease Agreement"), on an annual basis in accordance with the provisions of
Paragraph 29 of the signed Lease Agreement, you are to provide an update to the
information initially provided by you in this certificate. The information
contained in the initial Hazardous Materials Disclosure Certificate and each
annual certificate provided by you thereafter will be maintained in
confidentiality by Lessor subject to release and disclosure as required by (i)
any lenders and owners and their respective environmental consultants, (ii) any
prospective purchaser(s) of all or any portion of the property on which the
Premises are located, (iii) Lessor to defend itself or its lenders, partners or
representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders, decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which are
not otherwise defined herein, shall have the same meaning ascribed to such term
in the signed Lease Agreement. Any questions regarding this certificate should
be directed to, and when completed, the certificate should be delivered to:
Lessor: RIVERSIDE BUSINESS CENTER,
a California Partnership
C/O Lincoln Property Company Management Services
P.O. Box 19693
30 Executive Park, Suite 100
Irvine, California 92713-9693
Attn: Mr. Terry Thompson
Phone: (714) 261-2100
Name of Lessee: Mul Acres, Inc.
Mailing Address: 11800 Sterling Avenue, Suites I & J
Riverside, CA 92503
Contact Person, Title and Telephone Number(s): Jeff Silvers: (310) 592-5561
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):
Same as above.
Address of Premises: Same as above.
Length of initial Term: 25 months.
- --------------------------------------------------------------------------------
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or about
the Premises, including, without limitation, principal products
processed, manufactured or assembled services and activities to be
provided or otherwise conducted. Existing lessees should describe any
proposed changes to on-going operations.
------------------------------------------------------------------------
------------------------------------------------------------------------
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or
disposed of in, on or about the Premises? Existing lessees
should describe any Hazardous Materials which continue to be
used, generated, stored or disposed of in, on or about the
Premises.
Wastes Yes [ ] No [X]
Chemical Products Yes [ ] No [X]
Other Yes [ ] No [X]
If Yes is marked, please explain:
------------------------------
- --------------------------------------------------------------------------------
2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous
Materials to be used, generated, stored or disposed of in, on or
about the Premises, including the applicable hazard class and an
estimate of the
<PAGE> 24
quantities of such Hazardous Materials at any given time; estimated
annual throughput; the proposed location(s) and method of storage
(excluding nominal amounts of ordinary household cleaners and janitorial
supplies which are not regulated by any Environmental Laws); and the
proposed location(s) and method of disposal for each Hazardous Material,
including, the estimated frequency, and the proposed contractors or
subcontractors. Existing lessees should attach a list setting forth the
information requested above and such list should include actual data
from on-going operations and the identification of any variations in
such information from the prior year's certificate.
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel,
petroleum, or other Hazardous Materials in tanks or sumps
proposed in, on or about the Premises? Existing lessees should
describe any such actual or proposed activities.
Yes [ ] No [X]
If yes, please explain:
____________________________________________________________
____________________________________________________________
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator
I.D. Number? Existing lessees should describe any additional
identification numbers issued since the previous certificate.
Yes [ ] No [X]
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing lessees should describe any
new reports filed.
Yes [ ] No [X]
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
storm drain? sewer?
---- ----
surface water? X no wastewater or other wastes
---- ---- discharged.
Existing lessees should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
____________________________________________________________
____________________________________________________________
5.2 Will any such wastewater or waste be treated before discharge?
Yes [ ] No [X]
If yes, describe the type of treatment proposed to be
conducted. Existing lessees should describe the actual
treatment conducted.
____________________________________________________________
____________________________________________________________
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or stacks to be used
in your company's operations in, on or about the Premises that
will discharge into the air; and will such air emissions be
monitored? Existing lessees should indicate whether or not there
are any such air filtration systems or stacks in use in, on or
about the Premises which discharge into the air and whether such
air emissions are being monitored.
Yes [ ] No [X]
If yes, please describe:
____________________________________________________________
<PAGE> 25
-----------------------------------------------------------------
6.2 Do you propose to operate any of the following types of
equipment, or any other equipment requiring an air emissions
permit? Existing lessees should specify any such equipment being
operated in, or about the Premises.
______ Spray booth(s) ______ Incinerator(s)
______ Dip tanks(s) ______ Other (Please describe)
______ Drying oven(s) ______ No Equipment Requiring
Air Permits
If yes, please describe:
-----------------------------------------------------------------
-----------------------------------------------------------------
7. HAZARDOUS MATERIALS DISCLOSURES:
7.1 Has your company prepared or will it be required to prepare a
Hazardous Materials management plan ("Management Plan") pursuant
to Fire Department or other governmental or regulatory agencies'
requirements? Existing lessees should indicate whether or not a
Management Plan is required and has been prepared.
Yes [ ] No [ ]
If yes, attach a copy of the Management Plan. Existing lessees
should attach a copy of any required updates to the Management
Plan.
7.2 Are any of the Hazardous Materials, and in particular chemicals,
proposed to be used in your operations in, on or about the
Premises regulated under Proposition 65? Existing lessees should
indicate whether or not there are any new Hazardous Materials
being so used which are regulated under Proposition 65.
Yes [ ] No [ ]
If yes, please explain:
-----------------------------------------------------------------
-----------------------------------------------------------------
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has
your company ever been subject to any agency enforcement
actions, administrative orders, or consent decrees or has your
company received requests for information, notice or demand
letters, or any other inquiries regarding its operations?
Existing lessees should indicate whether or not any such
actions, orders or decrees have been, or are in the process of
being, undertaken or if any such requests have been received.
Yes [ ] No [ ]
If yes, describe the actions, orders or decrees and any
continuing compliance obligations imposed as a result of these
actions, orders or decrees and also describe any requests,
notices or demands, and attach a copy of all such documents.
Existing lessees should describe and attach a copy of any new
actions, orders, decrees, requests, notices or demands not
already delivered to Lessor pursuant to the provisions of
Paragraph 29 of the signed Lease Agreement.
-----------------------------------------------------------------
-----------------------------------------------------------------
8.2 Have there ever been, or are there now pending, any lawsuits
against your company regarding any environmental or health and
safety concerns?
Yes [ ] No [ ]
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other
documents related thereto as requested by Lessor. Existing
lessees should describe and attach a copy of any new
complaint(s), cross-complaint(s), pleadings and other related
documents not already delivered to Lessor pursuant to the
provisions of Paragraph 29 of the signed Lease Agreement.
-----------------------------------------------------------------
-----------------------------------------------------------------
<PAGE> 26
8.3 Have there been any problems or complaints from adjacent
tenants, owners or other neighbors at your company's current
facility with regard to environmental or health and safety
concerns? Existing lessees should indicate whether or not there
have been any such problems or complaints from adjacent tenants,
owners or other neighbors at, about or near the Premises.
Yes [ ] No [X]
If yes, please describe. Existing lessees should describe any
such problems or complaints not already disclosed to Lessor
under the provisions of the signed Lease Agreement.
____________________________________________________________
__________________________________________________________
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and licenses
issued to your company with respect to its proposed operations
in, on or about the Premises, including, without limitation, any
wastewater discharge permits, air emissions permits, and use
permits or approvals. Existing lessees should attach copies of
any new permits and licenses as well as any renewals of permits
or licenses previously issued.
The undersigned hereby acknowledges and agrees that this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Lessor in connection with the evaluation and finalization of a Lease
Agreement and will be attached thereto as an exhibit. The undersigned further
acknowledges and agrees that this Hazardous Materials Disclosure Certificate is
being delivered in accordance with, and as required by, the provisions of
Paragraph 29 of the Lease Agreement. The undersigned further acknowledges and
agrees that the Lessor and its partners, lenders and representatives may, and
will, rely upon the statements, representations, warranties, and certifications
made herein and the truthfulness thereof in entering into the Lease Agreement
and the continuance thereof throughout the term, and any renewals thereof, of
the Lease Agreement. I (Jeff Silvers), acting with full authority to bind the
(proposed) lessee and on behalf of the (proposed) Lessee, certify, represent
and warrant that the information contained in this certificate is true and
correct.
LESSEE:
MUL ACRES, INC., a California Corporation
By: /s/ JEFF SILVERS Date: 10-13-96
------------------------------ -------------------------
Jeff Silvers,
President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 247,891
<SECURITIES> 0
<RECEIVABLES> 192,127
<ALLOWANCES> 50,000
<INVENTORY> 1,442,426
<CURRENT-ASSETS> 1,911,558
<PP&E> 937,562
<DEPRECIATION> 179,413
<TOTAL-ASSETS> 4,208,070
<CURRENT-LIABILITIES> 1,639,354
<BONDS> 2,201,640
0
1,102,500
<COMMON> 7,477,913
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,208,070
<SALES> 8,903,517
<TOTAL-REVENUES> 8,996,659
<CGS> 7,476,786
<TOTAL-COSTS> 5,309,194
<OTHER-EXPENSES> 70,316
<LOSS-PROVISION> 50,000
<INTEREST-EXPENSE> 169,731
<INCOME-PRETAX> (4,029,368)
<INCOME-TAX> 800
<INCOME-CONTINUING> (4,030,168)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,030,168)
<EPS-PRIMARY> (.59)
<EPS-DILUTED> (.59)
</TABLE>
