<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For the Fiscal Year Ended December 31, 1996
Commission File No. 0-21821
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
COLORADO 93-0962072
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 17TH STREET, SUITE 400, DENVER, COLORADO 80202
(888) 313-8051
(Address of principal executive offices; issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Shares
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 there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB: [ ]
Issuer's revenues for the most recent fiscal year: $ 17,269
The aggregate market value of the voting stock held by non-affiliates
of the issuer was approximately $17,531,649. The aggregate market value was
based upon the mean between the closing bid and asked price for the Common
Shares as reported on the NASD Electronic Bulletin Board as of March 3, 1997.
As of March 3, 1997, there were 15,705,460 of the Issuer's Common
Shares outstanding.
Documents Incorporated by Reference:
None
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE> 2
TABLE OF CONTENTS
FORM 10-KSB ANNUAL REPORT - FOR FISCAL YEAR ENDED
DECEMBER 31, 1996
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
<TABLE>
<CAPTION>
PART I
<S> <C>
Item 1. Description of Business....................................... 1
Item 2. Description of Property....................................... 11
Item 3. Legal Proceedings............................................. 12
Item 4. Submission of Matters to a Vote
of Security Holders......................................... 12
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters......................................... 13
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operation.................. 14
Item 7. Financial Statements and Supplementary Data................... 17
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...................... 17
PART III
Item 9. Directors and Executive Officers.............................. 19
Item 10. Executive Compensation........................................ 21
Item 11. Security Ownership of Certain
Beneficial Owners and Management............................ 25
Item 12. Certain Relationships and
Related Transactions........................................ 27
PART IV
Item 13. Exhibits and Reports on Form 8-K.............................. 28
SIGNATURE PAGE.................................................................... S-1
FINANCIAL STATEMENTS.............................................................. F-1
</TABLE>
i
<PAGE> 3
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY OF THE COMPANY
Consolidated Capital of North America, Inc. (the "Company") was
incorporated under the laws of the State of Delaware on November 24, 1987. In
March 1992, the Company was reincorporated in the State of Colorado through the
merger of the Delaware corporation into a newly formed Colorado corporation.
The Company was originally organized to take advantage of potential
business opportunities made available to the Board of Directors. Commencing in
1989 the Company investigated business opportunities in various industries and
in 1991 the Company acquired an interest in a natural gas pipeline located in
southeast Kansas and northeast Oklahoma. The pipeline was operated by an
independent third party on behalf of the Company and its joint venture partner
until May 1993, when the pipeline was sold.
Commencing in 1994, the Company focused on real estate development and
acquired an interest in two entities participating in the real estate industry
in Colorado Springs, Colorado - the Northcrest Joint Venture and the Bear Star
Limited Liability Company. The Northcrest Joint Venture owns undeveloped real
estate east of Colorado Springs which has been zoned for single family
residential development. The Company owned a 53% interest in that entity until
such interest was sold in January 1997 prior to the Merger described below. Bear
Star Limited Liability Company was organized to develop and market partially
developed real estate west of Colorado Springs and zoned for single family
manufactured homes. The Company owned an 18.54% interest in that entity until
such interest was sold in April 1997. See "Narrative Description of Business -
Real Estate Development Business" for a description of the Northcrest Joint
Venture and the Bear Star Limited Liability Company.
During 1995, the Company organized the Golden Prairie Joint Venture to
acquire additional real estate adjoining the Northcrest Joint Venture property.
The Company sold its interest in the Golden Prairie Joint Venture in November
1995. See "Narrative Description of Business - Real Estate Development Business"
for a description of the Golden Prairie Joint Venture.
On January 21, 1997, Consolidated Land & Cattle Company, a subsidiary
of the Company, merged with Angeles Acquisition Corp. ("Angeles Acquisition"), a
privately held company, with Angeles Acquisition surviving the Merger as a
wholly owned subsidiary of the Company (the "Merger"). Prior to the Merger,
Angeles Acquisition had acquired Angeles Metal Trim Co., which does business as
Angeles Metal Systems ("Angeles"), for a purchase price of $3,450,000 which was
paid in cash to the former shareholders of Angeles. Angeles and its wholly owned
subsidiary, California Building Systems, Inc. ("CBS"), fabricate and sell steel
framing materials for commercial and residential structures. CBS has also
developed a low-cost complete steel frame housing structure. Angeles is a wholly
owned subsidiary of Angeles Acquisition. See "Narrative Description of Business
- - Angeles Metal Systems" for a description of the business of Angeles and CBS.
Information on the Merger, the acquisition of Angeles, and the obligations of
the Company incurred in connection with such acquisition appears in Note H of
the Notes to Consolidated
1
<PAGE> 4
Capital of North America, Inc.'s Financial Statements for December 31, 1996 that
are included in this report. See also "Item 6. Management's Discussion and
Analysis of Financial Condition and Results of Operation."
Prior to the Merger, the Company sold certain assets of the Company,
including the Company's interest in the Northcrest Joint Venture, to the three
executive officers and directors (the "Former Directors") of the Company (the
"Asset Sale"). In the Asset Sale, the Former Directors of the Company provided
certain consideration and assumed all obligations of the Company existing prior
to the Merger. See "Item 12. Certain Relationships and Related Transactions" for
a description of the Asset Sale. Subsequent to the Merger, the Former Directors
resigned as directors and executive officers of the Company and new officers and
directors were appointed to serve in such positions. See "Item 9. Directors and
Executive Officers" for information regarding the new directors and officers of
the Company.
In the Merger, the Company issued 8,638,003 new Common Shares to the
sole stockholder of Angeles Acquisition. Immediately following the Merger, the
Company sold 5,496,911 Common Shares in a private transaction to seven
purchasers for an aggregate purchase price of $1.0 million (the "Share
Issuance").
With the recent acquisition of Angeles, the Company intends to focus on
the steel frame building business and complementary businesses.
-2-
<PAGE> 5
NARRATIVE DESCRIPTION OF BUSINESS
Real Estate Development Business
During the fiscal year ended December 31, 1996, the Company's
operations were exclusively in the real estate development business described
below. Prior to the Merger, the Company sold certain assets of the Company,
including the Company's interest in the Northcrest Joint Venture, to the Former
Directors of the Company in the Asset Sale. As part of the Asset Sale, the
Former Directors assumed all obligations of the Company existing prior to the
Merger. See "Item 12. Certain Relationships and Related Transactions" for a
description of the Asset Sale. As described above, in April 1997 the Company
sold its interest in Bear Star.
The Northcrest Joint Venture. The Company's first real estate endeavor
was the proposed development of land for resale in connection with construction
of single family homes. In April 1994, the Company advanced $200,000 to an
unrelated party in conjunction with the acquisition by that party of a 75 acre
parcel of property, commonly known as the "Northcrest Development," located east
of Colorado Springs. Shortly after the acquisition, 16 acres of that parcel were
transferred. The remaining 59 acres were proposed for development of
approximately 189 lots.
In July 1994, the Company acquired an interest in the property through
the formation of the Northcrest Joint Venture (the "Northcrest Joint Venture")
with Glacier Valley Holding Corporation ("Glacier Valley") and certain other
entities for purposes of developing the property. The property was originally
acquired by Glacier Valley for $550,000, including Northcrest Joint Venture
contributions of $325,000 and a promissory note for $225,000 (the "Glacier
Valley Note"). The Northcrest Joint Venture owns the property in fee simple.
The Company's initial investment in the Northcrest Joint Venture
consisted of approximately $200,000 cash in exchange for a 53% interest in the
Northcrest Joint Venture. The investment represented conversion of a previously
outstanding loan by the Company. The Company was also obligated to pay its
pro-rata share of all expenses associated with development and sale of the
property. The Company acted as manager of the Northcrest Joint Venture.
In exchange for their relative contributions, the Northcrest Joint
Venture participants were entitled to share in distributions. Cash flow
generated by sale of the property was distributed to the participants in the
discretion of the Company in proportion to their respective interests in the
Northcrest Joint Venture.
The primary purpose of the Northcrest Joint Venture was to complete
installation of improvements to the property and resell all or a portion of the
lots for construction of detached, single family homes by independent parties.
However, prior to commencing any development work, the Northcrest Joint Venture
received an offer to purchase a portion of the property which included
development by the purchaser. Accordingly, in September 1994, after completing
required platting, the Northcrest Joint Venture executed an agreement to sell 27
of the 189 lots comprising the development to JBS Corporation, an unaffiliated
third party, and the Company granted an option to JBS with regard to the
remaining lots, which option was contingent upon completion of the initial
-3-
<PAGE> 6
purchase. Through December 31, 1995, the Company sold 90 lots to JBS
Corporation.
The purchase price for the initial 27 lots was $162,000, of which
$60,000 was paid at closing and the balance represented by a promissory note in
the amount of $102,000 which has been paid in full. The sale price for the next
63 lots on May 11, 1995 consisted of $50,000 paid at closing and the balance
represented by a promissory note in favor of the Northcrest Joint Venture in the
amount of $265,000 which has been paid in full.
On April 12, 1996, the Company entered into a new option agreement with
Elite Properties of America ("Elite"), an unaffiliated third party, to sell the
remaining 99 lots of the development. In a transaction effective June 21, 1996,
the Northcrest Joint Venture sold the remaining 99 lots to Elite. The property
was sold for a price of $668,250, which was reduced by an improvement credit of
$50,000 given to Elite, prior deposits of $5,000 and miscellaneous closing costs
paid by the Company of $1,629. The remaining balance due was $611,620, of which
$5,870 was paid at closing and the balance of $605,750 represented by a
non-recourse promissory note in favor of the Northcrest Joint Venture (the
"Elite Note"). Principal is payable in equal monthly installments of $10,000
commencing October 21, 1996, and continuing until May 21, 1998. Thereafter, the
monthly payments increase to $16,000 until the Elite Note is paid in full or
June 21, 2000, when the remaining principal and accrued interest are payable in
full. Interest at the rate of 9 1/4% per annum is due on the maturity date. The
Elite Note is secured by a deed of trust on the property in favor of the
Northcrest Joint Venture. Effective October 3, 1996, the Northcrest Joint
Venture discounted a portion of the Elite Note and accepted payment in the
amount of $172,000 in payment of that portion of the Elite Note represented by
the $10,000 installments due and payable commencing October 21, 1996. Remaining
installments under the Elite Note are scheduled to commence in 1998.
Prior to the January 1997 Merger, the Company sold its entire interest
in the Northcrest Joint Venture and its interest in the Elite Note to the Former
Directors of the Company as part of the Asset Sale. In such Asset Sale the
Former Directors of the Company provided certain consideration and assumed all
obligations of the Company existing prior to the Merger including any obligation
of the Company relating to its interest in the Northcrest Joint Venture. See
"Item 12. Certain Relationships and Related Transactions."
Golden Prairie Northcrest Joint Venture. During the first quarter of
1995, the Company organized another joint venture to acquire additional real
estate adjoining the Northcrest Development. The Golden Prairie Northcrest Joint
Venture was comprised of the Company and Glacier Valley, as equal participants,
and acquired approximately seven acres of undeveloped land for a promissory note
of $130,000. The promissory note, secured by an interest in the property, was
payable at the rate of $8,000 per month commencing June 1995.
On November 13, 1995, the Company sold its 50% interest in Golden
Prairie to affiliates of Glacier Valley for a promissory note in the amount of
$18,000 (the "Golden Prairie Note") and an assumption of liabilities of the
Golden Prairie Joint Venture by the purchaser. Terms of the Golden Prairie Note
require payment of the Note on or before February 10, 1996. During the fiscal
year ended December 31, 1996, no principal or interest was paid on the Golden
Prairie Note. Prior to the Merger as part of the Asset Sale, the Company sold
its interest in the Golden Prairie Note to the Former Directors of the Company.
See "Item 12. Certain Relationships and Related Transactions."
-4-
<PAGE> 7
Columbine Homes Sales LLC. The Company owned approximately 19% of
Columbine Homes Sales, LLC, which interest was acquired in 1994. Columbine Home
Sales, LLC operated a retail manufactured housing dealership in Colorado Springs
and owned 60% of a real estate development known as "The Community at Bear
Creek," a manufactured housing community located west of Colorado Springs. It
was anticipated that homes would be sold from the sales lot for placement at
Bear Creek or other locations, in the discretion of the purchaser.
During 1995, the Company transferred its interest in Columbine.
Concurrent with the sale, the ownership of Columbine and Bear Star Limited
Liability Company were reorganized such that the Company's indirect interest in
Bear Star was converted to a direct interest, together with that of the
remaining members of Columbine. The Company and the other Columbine members also
purchased the remaining interest in Bear Star such that the Company and the
other Columbine members owned 100% of that entity after such reorganization.
See "Bear Star Limited Liability Company."
The interests of the Company and other members of Columbine were sold
for a $125,000 promissory note (the "Columbine Promissory Note") due and payable
on October 20, 1997, with interest payments due monthly and the balance due and
payable on the maturity date. The Company, as a former owner of Columbine, owned
an 18.54% undivided interest in the Columbine Promissory Note.
Bear Star Limited Liability Company. Bear Star Limited Liability
Company ("Bear Star") was formed to acquire, develop and market developed and
partially developed land located west of Colorado Springs. Bear Star was owned
60% by Columbine and 40% by unrelated parties, but reorganized so that the
owners of Columbine directly acquired an interest in Bear Star. Following the
reorganization and acquisition of the remaining minority interest, the Company
owned 18.54% of Bear Star.
In June 1994, Bear Star acquired approximately 16 acres of partially
developed property, zoned for double-wide manufactured homes and intended for
approximately 110 lots. In conjunction with this purchase, Bear Star also
acquired an option to acquire an additional 14 acres of undeveloped land, which
additional property is also zoned for manufactured homes. During fiscal 1996,
Bear Star sold approximately 5.6 acres of the 16 acres to a third party. As of
December 31, 1996, Bear Star had also sold 33 lots of the developed portion of
the property, leaving 15 lots unsold.
The original 16 acres were acquired by Bear Star for an effective price
of approximately $2,065,000, consisting of two promissory notes in the aggregate
principle amount of $765,000 (the "Bear Star Property Notes") and approximately
$1,300,000 in cash and property. The Bear Star Property Notes were paid in full
in 1996.
The interest of the minority members was acquired by the Company and
the other former owners of Columbine for an $880,000 promissory note and secured
by a then second mortgage on the property. That note was subsequently canceled
in exchange for the issuance of two new notes, both equally secured by a new
first mortgage on the property. The first note is in the principal amount of
$509,400, bearing no interest, with installment payments due upon sale or
transfer of any lots at the rate of $7,000 per lot. A minimum of ten
installments are due by each anniversary of the note with excess payments during
any year carried over to the following year. The remaining note
-5-
<PAGE> 8
is in the principal amount of $217,000, bearing interest at the rate of 11% and
payable at the rate of $6,451 per lot, together with monthly interest payments.
The balance of these two notes at December 31, 1996 was $432,400 and $146,029,
respectively.
In April 1997, the Company sold its interest in Bear Star for $30,000
cash.
-6-
<PAGE> 9
Angeles Metal Systems
Products and Markets. Angeles Metal Trim Co., and its wholly owned
subsidiary California Building Systems, Inc. ("CBS"), which together do business
as Angeles Metal Systems ("Angeles"), is in the business of fabricating and
selling light gauge steel framing materials for commercial and residential
structures. Products of Angeles include galvanized steel components, framing
materials, studs, track, trusses and joists for domestic and international
markets. Angeles also provides technical support, engineering and estimating
services for specialized projects, primarily in the residential housing market.
CBS has also developed a proprietary low-cost steel frame housing structure.
Angeles has been supplying its steel framing products to the commercial
construction industry for over 40 years. The commercial construction market
segment represents approximately 75% of the sales by Angeles for its fiscal year
ended December 31, 1996.
Since 1992, Angeles has been developing the use of steel framing for
residential housing markets. The residential construction market segment
represents approximately 25% of the sales by Angeles during its last fiscal
year. While the use of steel framing is not new in residential construction, the
recent escalation and volatility in lumber prices has caused widespread
attention to be focused on the advantages of building homes with steel.
Management believes that the early entry by Angeles into this growing market
gives it a significant advantage over its competitors in terms of designing and
engineering products, training framers and subcontractors, and developing
relationships with builders.
Management believes that its sales to the residential construction
market segment will continue to grow during the current fiscal year. Steel has a
number of attractive qualities over lumber and concrete block as a building
material, including (i) steel's comparatively lower cost compared to lumber
which is becoming increasingly scarce and expensive due to environmental and
other factors; (ii) steel's long life compared to lumber which rots and is
susceptible to termites and other pests; (iii) steel's greater structural
integrity which allows for greater consistency of quality, straightness and
strength under adverse conditions such as earthquakes; (iv) steel's faster
construction time with an experienced crew; (v) steel's pre-cut convenience and
ease of assembly with conventional tools; and (vi) steel's ability to be
re-cycled. Where wood is desired as an exterior material or trim, it can easily
be mixed with steel. The Company believes that the use of steel frames in
residential construction will continue to grow given the high cost of
conventional framing and the numerous positive attributes of steel framing.
In addition to selling light gauge steel framing materials and
components for residential structure, CBS also sells a pre-engineered low-cost
steel frame housing structure which it developed, known as the Model 640. This
product is a pre-engineered 640 square foot steel framed basic structure which
can be easily customized to meet the differing requirements of a variety of
customers. It is a complete, steel framed housing structure that provides
punch-outs for subsequent plumbing and wiring. The materials can be delivered to
a housing site for a price of under $2,500.
The Model 640 was primarily designed for export. The company has
identified the worldwide low-cost housing market as a significant market ready
to experience substantial growth. The need for small, but affordable housing, is
mushrooming in third-world countries which are just beginning
-7-
<PAGE> 10
to emerge economically, but still have very under-developed housing
infrastructures for their populations. The Model 640 and customized versions of
the Model 640 have been sold in the Pacific Rim and there has been additional
interest in Europe, South America and the Far East.
Most of the steel utilized in the Model 640 is pre-cut and galvanized
for corrosion resistance for maximum durability, even in the most damp climates.
Models can be engineered to withstand winds up to 155 mph and each home can be
engineered to be earthquake resistant up to a seismic 4 rating. The Model 640 is
(i) designed to meet the requirements of most governmental agencies; (ii) wind,
earthquake, corrosion, termite and dry rot resistant; (iii) easy to build and
quickly assembled, even with semi-skilled labor; (iv) economic to ship; and (v)
available with flexible floor plans.
Manufacturing. Products of Angeles are manufactured in accordance with
customer specifications. Most products of Angeles comply with Angeles
certification by the International Conference of Building Officials (ICBO).
Angeles is the only major steel roll forming company on the West Coast that has
it's own ICBO certification in addition to being ICBO certified through Angeles'
membership in the Metal Stud Manufacturing Association (MSMA).
All of the design, engineering, manufacturing and administration
operations of Angeles are performed at the company's manufacturing facilities in
Los Angeles, California and Vancouver, Washington. Angeles manufactures
approximately 85-90% of the goods it sells and outsources the remaining 10-15%.
Both manufacturing locations also conduct sales, marketing and distribution. In
addition, Angeles maintains marketing, sales and distribution facilities in
Tacoma, Washington and Sacramento, California. All of the facilities of Angeles
are leased. See "Item 2. Description of Property."
Angeles is currently operating with one full and one partial shift and
is equipped (but not staffed) to run two shifts. Angeles owns all of its
manufacturing and engineering equipment.
Angeles strives to provide its customers with fast, reliable delivery
of its products. Angeles keeps sufficient inventory to respond quickly to
customer needs. Purchases of raw materials utilized by Angeles are made in
advance. The raw materials consist of full and slit steel coils. Angeles
distributes its products on a truckload basis. Residential products are also
delivered by the truckload, to framing companies, value added centers and to
specific job sites. In some cases, trusses are assembled at the company and
other cases they are assembled on site.
Marketing, Distribution and Customers. Unlike many of its competitors,
Angeles primarily markets and sells its steel products directly to building
contractors rather than through wholesalers or distributors. As a result of
transportation costs, products are marketed and sold primarily in 13 western
states. Products are also sold in Hawaii, Canada, Mexico and internationally.
During 1996, international sales were approximately 5% of total sales,
reflecting sales primarily to Japan. The top ten customers of 1996 represented
approximately 26% of sales by Angeles with no one customer representing more
than 5% of sales.
Raw Materials and Supplies. Galvanized steel is the primary raw
material utilized by Angeles which represents the majority of cost of goods
sold. Sources for this steel are numerous and the supply has been and is
expected to remain sufficient to meet the needs of Angeles. USS Posco, a
-8-
<PAGE> 11
joint venture between U.S. Steel and the Pohang Steel Company of Korea, has been
the primary supplier of steel for Angeles. In addition, Angeles has also
maintained continuous and competitive purchasing relationships with other
companies in order to ensure an uninterrupted supply of material. Recently,
Angeles has focused attention on more aggressively sourcing these steel supply
contracts, including additional purchases on the secondary and spot markets.
Development. During the past five years Angeles has invested
approximately $1.5 million in the development of steel framing and other related
products for the residential construction industry. Of that total, approximately
$400,000 has been spent during the last two fiscal years. This investment has
encompassed the development of technical designs, seeking approvals and changes
to building codes, training of contractor personnel, construction of test homes
as well as creating the marketing materials to promote these new products. The
net result of this investment has been the creation of a residential segment of
Angeles' business which represented in 1996 approximately 25% of the total sales
of Angeles. The Company expects this segment to grow in concert with the growth
and acceptance of residential steel framing.
Patents. Angeles holds a number of patents and trademarks on its
products, none of which is essential to the business. Management believes that
the reputation, know how and experience of Angeles in the steel framing business
is more important than its patents and trademarks. Accordingly, Angeles relies
upon trade secrets and other unpatented proprietary information in its product
development activities.
COMPETITION
Competition in the steel frame industry is intense and Angeles
competes with a number of entities, some of which may have greater financial
resources than Angeles. Angeles competes against a number of other companies for
sales in both the commercial and residential steel framing markets. To the
extent that steel framing for residential housing becomes more widely accepted
as an alternative to conventional lumber and concrete construction, competition
may increase. Angeles competes for orders from its customers primarily on the
basis of price, quality, timely delivery, engineering capability and
reliability. Most of Angeles' orders are awarded by its customers on the basis
of competitive bidding. Angeles sells primarily on a direct basis to contractors
and sub-contractors, while it's competitors sell primarily though building
material dealers. Angeles believes that it can better service customers by
selling products directly, rather than through dealers.
In addition to competitors who sell directly to contractors and to
sub-contractors, manufacturers also sell to building materials houses, who, in
turn, sell to contractors and subcontractors. Those building materials houses
sell materials in addition to the light gauge steel
-9-
<PAGE> 12
products, and may, from time to time, sell the steel products delivered to the
job sites, and stocked by lifting equipment with other materials.
GOVERNMENT REGULATION
The operations of Angeles are subject to extensive federal, state and
local laws and regulations, relating to the protection of human health and the
environment. The Company believes that the facilities of Angeles are in material
compliance with these provisions and does not believe that future compliance
with such provisions will have a material adverse effect on its results of
operations or financial condition.
The use of steel framing products in commercial and residential
construction are governed by local building codes. Over the past several years,
local building codes in a number of jurisdictions have been revised to provide
for the use of steel for residential construction in addition to the traditional
wood framing. Angeles anticipates no significant adverse effects of governmental
regulations related to the use of light gage steel in commercial and residential
framing.
Pursuant to the Stock Purchase Agreement (the "Angeles Purchase
Agreement") executed in January 1997 in connection with the acquisition of
Angeles from the prior stockholders of Angeles (the "Angeles Acquisition"), the
former majority stockholder of Angeles has agreed to indemnify the Company for
any liability arising out of any environmental condition existing at the
properties leased to Angeles by the former majority stockholder if such
condition existed prior to the Angeles Acquisition or relates to the failure of
Angeles to comply with applicable federal or state environmental statutes and
regulations prior to the Angeles Acquisition. Any such indemnification claim
must be presented within one year of the Angeles Acquisition and must be in
excess of $75,000.
EMPLOYEES
At December 31, 1996 the Company had three employees, all of which
acted as its executive officers.
At February 28, 1997, the Company had 102 full-time employees at the
Angeles Metal Systems level. The Company believes that its employee relations
are good.
-10-
<PAGE> 13
During the year ended December 31, 1996, the Company retained the
services of various attorneys, accountants, and engineers in connection with its
responsibilities as a public reporting company and in connection with
acquisition and development of its real estate projects.
ITEM 2. DESCRIPTION OF PROPERTY
Executive Offices
The Company currently occupies office space at 410 17th Street, Suite
400, Denver, Colorado 80202. The Company shares its Denver office, consisting of
an aggregate of 7,585 square feet, including office space, conference facilities
and reception area, with the Stone Pine Companies, an affiliated entity. Stone
Pine Atlantic, LLC and its affiliates provide administrative, accounting,
investor relations services and investment banking services to the Company
pursuant to a Services Agreement. See "Item 12. Certain Relationships and
Related Transactions." The Company also maintains executive offices at Angeles
Metal Systems, 4817 East Sheila Street, Los Angeles, California 90040,
consisting of an aggregate of 10,300 square feet, including office space,
conference facilities and reception area. Management is of the opinion that the
executive office space in Denver and Los Angeles is adequate for the needs of
the Company for the foreseeable future.
Real Estate Development Business
At December 31, 1996, the Company owned interests in two separate real
estate projects. The Company owned an undivided 53% interest in the Northcrest
Development, through an entity known as the Northcrest Joint Venture. The
Northcrest Development was originally comprised of 75 acres of unimproved
property, of which 16 acres were transferred shortly after closing. The
remaining 59 acres were proposed for development of approximately 189 lots, all
of which had been sold by the Northcrest Joint Venture at December 31, 1996.
Prior to the January 1997 Merger, the Company sold its interest in the
Northcrest Joint Venture and related assets to the Former Directors of the
Company. See "Item 12. Certain Relationships and Related Transactions."
The Company owned an 18.54% undivided interest in Bear Star which had
an interest in approximately 22 acres of land located west of Colorado Springs,
Colorado, and included in a development called the "Community of Bear Creek."
In April 1997, the Company sold its interest in Bear Star.
-11-
<PAGE> 14
See "Item 1. Description of Business - Narrative Description of
Business - Real Estate Development Business" for a further description of the
Northcrest Development and the property owned by Bear Star.
Angeles Metal Systems
The principal office and production facilities of Angeles, all of
which are leased, consist of the following:
<TABLE>
<CAPTION>
Approximate
Location Square Footage Lease Term
-------- -------------- ----------
<S> <C> <C>
Los Angeles, California Buildings 60,000 01-15-97 through
(Corporate Headquarters, Manufacturing Plant, Land 125,000 01-14-2000
Warehouse, Land and Buildings)
Vancouver, Washington Buildings 20,000 01-15-97 through
(Plant, Offices, Warehouse, Land and Land 130,680 01-14-2000
Buildings)
Sacramento, California Buildings 11,500 Month to Month
(Warehouse and Office) Land 46,600
Tacoma, Washington Buildings 20,000 10-01-96 through
(Warehouse and Offices) Land 93,400 09-30-99
Vancouver, Washington Building 7,500 Month to Month
(Production Plant, Warehouse, Land and Land 120,000
Building)
Los Angeles, California Land 33,000 Month to Month
(Land)
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings to which the Company or any subsidiary of
the Company is a party or to which the property of the Company or any subsidiary
of the Company is subject, is pending or is known by the Company to be
contemplated other than ordinary routine litigation incidental to the business
of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of fiscal 1996.
-12-
<PAGE> 15
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Shares are traded in the over-the-counter market
and are quoted in the OTC Bulletin Board maintained by the NASD under the symbol
"CDNO." The following table sets forth the range of high and low bid quotations
as reported by the NASD for the Common Shares of the Company for the periods
indicated. Quotations represent prices between dealers, do not include retail
markups, markdowns or commissions, and do not necessarily represent prices at
which actual transactions were effected.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
------------------------------------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
1st Quarter............. $.30 $.30 $.31 $.125
2nd Quarter............. (1) (1) $.30 $ .25
3rd Quarter............. $.25(2) $.25(2) $.25 $ .25
4th Quarter............. $.01(2) $.01(2) $.28 $ .25
</TABLE>
- ------------------------------
(1) No quotations reported by the NASD.
(2) Sales price reported by the NASD.
The number of record holders of Common Shares of the Company as of
March 3, 1997 was 119. During the fiscal year ended December 31, 1996, the
Company issued, in a private transaction exempt under Section 4(2) of the
Securities Act of 1933, as amended, 28,500 Common Shares in exchange for
cancellation of certain stock options and 12,500 Common Shares in consideration
of legal services provided to the Company.
Holders of Common Shares are entitled to receive such dividends as may
be declared by the Company's Board of Directors. No dividends on the Common
Shares have been paid by the Company to date. The Company currently intends to
retain future earnings to fund the development and growth of its business and,
therefore, does not anticipate paying cash dividends within the foreseeable
future. Any future payment of dividends will be determined by the Company's
Board of Directors and will depend on the Company's financial condition, results
of operations and other factors deemed relevant by its Board of Directors.
-13-
<PAGE> 16
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
report.
INTRODUCTION
During the fiscal year ended December 31, 1996, the Company's
operations were exclusively in the real estate business. Subsequent to year end
in January 1997, Consolidated Land & Cattle Company, a subsidiary of the
Company, merged with Angeles Acquisition Corp. ("Angeles Acquisition"), a
privately held company, with Angeles Acquisition surviving the merger as a
wholly owned subsidiary of the Company (the "Merger"). Prior to the Merger,
Angeles Acquisition had acquired Angeles Metal Trim Co. ("Angeles"), for a total
consideration including the purchase price for the shares of Angeles, broker
fees, acquisition expenses including legal and other related costs, of
approximately $4,300,000. Angeles Metal Trim Co. and its wholly owned subsidiary
California Building Systems, Inc., fabricate and sell steel framing materials
for commercial and residential structures.
Prior to the Merger, the Company sold certain assets of the Company,
including the Company's interest in the Northcrest Joint Venture described
herein, to the three executive officers and directors (the "Former Directors")
of the Company (the "Asset Sale"). In the Asset Sale, the Former Directors of
the Company provided certain consideration and assumed all obligations of the
Company that existed prior to the Merger. See "Item 12. Certain Relationships
and Related Transactions" for a description of the Asset Sale.
In the Merger, the Company issued 8,638,003 new Common Shares to the
sole stockholder of Angeles Acquisition. Immediately following the Merger, the
Company sold 5,496,911 Common Shares, in a private transaction to seven
purchasers for an aggregate purchase price of $1.0 million (the "Share
Issuance").
In April 1997, the Company sold its interest in Bear Star Limited
Liability Company for $30,000.
Information on the Merger, the acquisition of Angeles, and the
obligations of the Company incurred in connection with such acquisition appears
in Note H of the Notes to Consolidated Capital of North America, Inc.'s
Financial Statements for December 31, 1996 that are included in this report.
See the Financial Statements of Angeles Metal Trim Co. included elsewhere in
this report for detailed financial information regarding Angeles.
PLAN OF OPERATION
With the recent acquisition of Angeles, the Company intends to focus on
the steel frame building business and complementary businesses. Acquisition
plans, capital needs and plans to raise additional capital by the Company are
described below under "Liquidity, Capital Resources and Financial Condition."
The Company's Common Shares are currently traded on the NASD OTC
Bulletin Board. The Company intends to qualify for listing on the Nasdaq Stock
Market as soon as possible.
RESULTS OF OPERATIONS
Year ended December 31, 1996
For the year ended December 31, 1996, the Company had a loss of
$312,482 on revenues of $17,269 from interest income. This loss is mainly the
result of the loss incurred on the writedown to realizable value of the assets
included in the Asset Sale based upon fair value of such assets as determined by
the Asset Sale. This loss amounted to $213,672. Also, the Company incurred a
loss in the buyout of certain stock options of $11,400 resulting from the
Company issuing 28,500 of its Common Shares to cancel options covering 35,000
Common Shares. The Company did not incur similar losses for 1995. The balance of
the loss from
-14-
<PAGE> 17
#2
operations is composed of general and administrative, personnel and consulting,
interest and other expenses for 1996. The net loss per share amounted to $.20
for 1996 as compared to $.00 loss per share for 1995.
Year ended December 31, 1995
For the year ended December 31, 1995, the Company realized an operating
loss of $83,273. The net loss for the year, including other income or expense,
was $5,306, or $.00 per share. This compares to a loss of $152,893, or $.13 per
share, for the year ended December 31, 1994. Operations during fiscal 1995 were
aided by a sale of portions of the Northcrest Development.
Effect of Inflation
Inflation did not have a significant effect on the operations of the
Company during the fiscal year ended December 31, 1996. However, in the steel
business, acquisition of steel is a major cost factor in the production process.
As steel prices continue to rise, management believes that proper selection and
competition of steel supply companies and timing of purchases along with future
price increases should preclude any significant adverse effect on Angeles.
Seasonality
The operations of Angeles are somewhat seasonal in nature with the
strongest sales generally occurring in the second and third quarters.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
As of December 31, 1996, Consolidated Capital of North America, Inc.
had working capital of $77,430 as compared to the working capital at December
31, 1995 of $366,227, and stockholders' equity of $77,430. The decrease in
working capital was a result of most assets being held for sale as of December
31, 1996 at the realizable value of such assets rather than at a value based on
cost. A portion of the Company's real estate assets were sold in January 1997
and the remaining real estate assets were sold in April 1997. The Company
intends to concentrate on the business of steel framing with the recent
acquisition of Angeles.
As of December 31, 1996, Angeles had working capital of $662,420 and
stockholders' equity of $25,896. At December 31, 1996 the total assets of
Angeles were $4,783,631, consisting of cash of $27,704, accounts receivable of
$2,485,956, inventories of $1,974,139, prepaid expenses of $32,356, property and
equipment of $227,013 (after accumulated depreciation and amortization) and
other assets of $36,463. The total current liabilities of Angeles at December
31, 1996 were $3,857,735, consisting of $3,432,166 in accounts payable, accrued
liabilities of $140,569 and a $285,000 note payable to an officer of
-15-
<PAGE> 18
#2
Angeles prior to the Merger. See the Financial Statements of Angeles Metal Trim
Co. included elsewhere in this report for detailed financial information
regarding Angeles. The short-term bank debt was repaid in January 1997 with
funds provided by the Union Bank Facility described below.
In January 1997, the Company incurred $4.2 million of indebtedness, $1
million of which was utilized for the repayment of outstanding indebtedness of
Angeles and $3.2 million of which was utilized in connection with the
acquisition of Angeles. Union Bank of California, N.A. provided $2.8 million in
financing under a revolving line of credit (the "Union Bank Facility") and
General Electric Capital Corporation provided $1.4 million in financing under a
term loan (the "GE Term Loan").
Under the Union Bank Facility, Angeles can borrow up to a maximum of $4
million determined by eligible accounts receivable and inventory and compliance
with certain financial conditions of Angeles. The Union Bank Facility is
available, subject to support by the appropriate levels of assets and compliance
with the applicable financial covenants, to provide financing for general
corporate purposes. The Union Bank Facility is due on December 15, 1998. Amounts
drawn under the Union Bank Facility bear interest at a base interest rate which
is 2% per annum over Union Bank's LIBOR-Rate for the interest period. The GE
Term Loan is payable in forty-eight monthly installments of principal and
interest at a fixed rate of 9.78% per annum commencing February 17, 1997.
All of the equipment and rolling stock of Angeles have been pledged as
security for the GE Term Loan and all of the accounts, inventory and intangibles
have been pledged as security for the Union Bank Facility. The Union Bank
Facility has been guaranteed by Angeles Acquisition, a wholly owned subsidiary
of the Company, of which Angeles is a direct subsidiary. The Union Bank Facility
agreement contains a number of financial covenants including certain working
capital and profit requirements and limitations on total liabilities. Angeles
was not in compliance with certain bank covenants contained in the Union Bank
Facility agreement which have been waived by Union Bank through December 31,
1997.
In connection with the Merger and the acquisition of Angeles in January
1997, the Company incurred certain additional obligations. The Company issued a
promissory note in January 1997 payable to Stone Pine Colorado, LLC in the
amount of $250,000 payable on demand in consideration of an acquisition
structuring fee related to the Merger and the related transactions. Angeles has
outstanding a promissory note payable to a former officer of Angeles in the
amount of $285,000, which bears interest at 10% per annum and is payable upon
demand, in consideration of loans advanced by such officer to Angeles. In
connection with the acquisition of Angeles, the former officer of Angeles
entered into a one year Non-Competition and Consulting Agreement providing for
the payment of approximately $212,000 over the period February 1997 through
April 1998.
In January 1997, immediately following the Merger described herein, the
Company sold 5,496,911 Common Shares in a private transaction to seven
purchasers for an aggregate purchase price of $1.0 million.
In April 1997, ERB Acquisition Group, LLC, a Nebraska limited liability
company, loaned $300,000 to Angeles (the "ERB Loan"), which loan is evidenced by
a promissory note payable to ERB (the "ERB Note"). In consideration of such
loan, Angeles agreed to pay ERB a facility fee of $9,000, which has been added
to the principal balance of the ERB Note, and the Company agreed to issue 50,000
of its Common Shares to ERB upon such funding and 10,000 Common Shares on the
first day of each month commencing July 1, 1997 until the ERB Note is repaid in
full. The ERB Note bears interest at 12% per annum monthly in arrears beginning
May 1, 1997. The principal of the ERB Note and accrued and unpaid interest is
due and payable on April 9, 1999. The ERB Note may be prepaid at any time at the
option of Angeles.
The obligations under the ERB Loan have been guaranteed by the Company
and Stone Pine Colorado, LLC. All of the assets of the Company and all of the
assets of Stone Pine Colorado, LLC, including the Company's Common Shares owned
by Stone Pine Colorado, LLC, have been pledged as security for the obligations
under the ERB Loan. Stone Pine Colorado, LLC is the owner of approximately 42%
of the outstanding Common Shares and all of the directors of the Company have a
financial interest in Stone Pine Colorado, LLC. Thompson H. Rogers and Paul
Bagley, directors of the Company, have a financial interest in ERB Acquisition
Group, LLC.
The Company needs to raise additional capital to meet the Company's
needs and satisfy the Company's obligations for the next twelve months based on
the Company's current plan of operation. The Company intends to obtain
additional capital of at least $1 million through the
-16-
<PAGE> 19
sale of Common Shares. The Company will need such additional capital for
principal and interest payments under the financing arrangements and for the
other obligations of the Company described herein as well as for working capital
purposes. There can be no assurances that such additional capital will be
available to the Company.
The Company also plans to engage in strategic acquisitions. As these
investments are identified and funds are needed to complete such acquisitions,
additional funding will be necessary.
The Company believes that its operating cash flows, funds available
under the Union Bank Facility together with funds raised in an equity issuance
will provide adequate resources to fund ongoing operating requirements and
future capital expenditures related to the development of its business for the
next twelve months. The Company may be required to obtain additional lines of
credit for working capital purposes and possibly make periodic public offerings
or private placements in order to meet the liquidity needs of such growth. While
the Company does not believe it will be restricted in financing such growth,
there can be no assurances that such sources of financing will be available to
the Company in sufficient amounts or on acceptable terms. Under such
circumstances, the Company would expect to manage its growth within the
financing available.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements beginning on page F-1 are filed as part of
this Annual Report on Form 10-KSB and are incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 12, 1996, Hein & Associates, LLP was dismissed as the
principal accountant for the Company. The decision was approved by the Board of
Directors of the Company. Hein & Associates, LLP reports on financial statements
of the Company for the fiscal years ended December 31, 1994 and 1995 contained
unqualified opinions. There were no disagreements on any matter of accounting
principle or practice, financial statement disclosure, or auditing scope or
procedure with Hein & Associates, LLP.
On March 12, 1996, the Company engaged the firm of Kish, Leake &
Associates, P.C. as its principal accountants. This decision was approved by the
Board of Directors of the Company. The Company had no discussion with Kish,
Leake & Associates concerning the application of an accounting principle or
practice related to a specific completed or contemplated transaction, or the
type of audit opinion which might be rendered.
Subsequent to the January 1997 Merger, Kish Leake & Associates, P.C.,
was dismissed by vote of the Board of Directors, effective February 4, 1997. The
prior accountants report on financial statements for the fiscal year ended
December 31, 1995 did not contain an adverse opinion or a disclaimer of opinion;
nor was it modified as to uncertainty, audit scope or accounting principles.
Prior to the dismissal of Kish Leake & Associates, P.C., there were no
disagreements between the Company and Kish Leake & Associates, P.C. on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of the former accountant would have caused it to make reference to
the subject matter
-17-
<PAGE> 20
of the disagreement in connection with its report. Furthermore there were no
unresolved issues with the prior accountants.
The Board of Directors of the Company appointed Grant Thornton LLP as
the Company's new certifying accountants to audit the Company's financial
statements effective February 4, 1997. Grant Thornton LLP was not consulted
concerning the application of accounting principles to any specific transaction,
either completed or proposed or the type of audit opinion that might be rendered
on the Company's financial statements, nor was a written report provided to the
Company nor oral advice given by the new accountant regarding important factors
considered by the Company in reaching its decision as to any accounting,
auditing or financial reporting issue.
-18-
<PAGE> 21
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
Immediately after the consummation of the Merger, the Company's
directors, Raymond E. McElhaney, Ronald R. McGinnis and Bill M. Conrad, resigned
as directors and executive officers of the Company as of January 21, 1997 and
new directors and officers were appointed to serve in such positions. The
following information relates to the current directors and executive officers of
the Company.
<TABLE>
<CAPTION>
Directors and Executive Officers Age Position
- -------------------------------- --- --------
<S> <C> <C>
Thompson H. Rogers 43 Chairman of the Board
Paul Bagley 54 Director
L. Wayne Harber 43 Director
Donald R. Jackson 47 Director, Chief Financial Officer,
Secretary and Treasurer of the
Company
Ronald F. Martin 61 President of Angeles Metal
Systems
John D. McKey, Jr. 53 Director
</TABLE>
Thompson H. Rogers, was appointed the Chairman of the Board of the
Company on January 21, 1997. Mr. Rogers is a General Partner of Stone Pine
Capital, LLC (since 1994) and is the Chairman of Affiliated Holdings, Inc., a
private investment management company (since 1985). Prior thereto, Mr. Rogers
was with FIRSTIER, now know as First Bank, a financial institution in Omaha,
Nebraska. From 1995 to 1996, Mr. Rogers was the Chairman of Laidlaw Holdings
Asset Management, Inc. Mr. Rogers serves on the Board of Directors of America
First Eureka Holdings, Inc. which is a subsidiary corporation of America First
Financial Fund 1987, a Nasdaq listed company, and serves as the holding company
for EurekaBank located in San Francisco, California; Pinnacle Bank of Omaha,
located in Omaha, Nebraska; Havelock Bank, located in Lincoln, Nebraska; Aspen
Holdings Inc., an insurance holding company; and Worldwave Communications
Inc., a telecommunications company.
Paul Bagley, a director of the Company since January 21, 1997, is
Chairman and Chief Executive Officer of FCM Fiduciary Capital Management
Company (since 1989), an investment-related company. Mr. Bagley was Chief
Executive Officer of Laidlaw Holdings from 1995 to 1996. For more than twenty
years prior to October 1988, Mr. Bagley was engaged in investment banking
activities with Shearson Lehman Hutton Inc. and its predecessor, E.F. Hutton &
Company Inc. Mr. Bagley has served on the boards of a number of public and
private companies. Currently he is on the boards of America First Eureka
Holdings, Inc. which is a subsidiary corporation of America First Financial
Fund 1987, a Nasdaq listed company, and serves as the holding company for
Eureka Bank; Fiduciary Capital; EurekaBank; Hollis-Eden Pharmaceuticals; LMC
Operating Corp.; and Pacific Consumer Funding.
-19-
<PAGE> 22
L. Wayne Harber, a director of the Company since January 21, 1997, is
a Managing Director of Stone Pine Capital, LLC (since 1994). From 1990 to 1993,
Mr. Harber was the Senior Vice President of Marketing for Aegis Holdings
Corporation, an asset management and investment banking concern specializing
in asset securitization and structured finance. From 1980 to 1990, Mr. Harber
was a Vice President and National Sales Manager for Franchise Finance
Corporation of America.
Donald R. Jackson, the Chief Financial Officer, Secretary and Treasurer
and a director of the Company since January 21, 1997, is a Senior Vice
President, Treasurer and Chief Financial Officer of FCM Fiduciary Capital
Management Company. From January 1990 to June 1994, Mr. Jackson was a
Corporate Vice President with PaineWebber Incorporated, where he was involved
in the financial administration of various publicly and privately offered
investment programs. During 1989, Mr. Jackson was self-employed. Immediately
prior to that he was a First Vice President in the Direct Investments Group
with Shearson Lehman Hutton Inc. From 1972 to 1986, Mr. Jackson was associated
with the accounting firm of Arthur Andersen & Co., serving as a partner from
1981 to 1986. Mr. Jackson is a director of LMC Operating Corp.
Ronald F. Martin, was appointed the President of Angeles Metal Systems
effective April 10, 1997. Mr. Martin was the President and Chief Executive
Officer of Noman Technology, Inc. from 1994 until April 1997. Prior thereto he
was the President and Chief Executive Officer of Harris Tube from 1989 until
1993 and President of Harris Tube from 1986 to 1989. For over 25 years Mr.
Martin held a number of positions with Rheem Manufacturing Co. from entry level
to senior management positions.
John D. McKey, Jr., a director of the Company since January 21, 1997,
has been a partner at the law firm of McCarthy, Summers, Bobko & McKey, P.A.
since September 1993, and from June 1986 to September 1993, was a partner at
Kohn, Bobko, McKey & Higgins, P.A. Mr. McKey currently serves as a director of
Publishing Company of North America and Lithium Technology Corporation.
Each director is serving a term of office which shall continue until
the next annual meeting of shareholders and until his successor has been duly
elected and qualified. Officers of the Company serve at the pleasure of the
Board of Directors.
No family relationships exist between any of the officers and directors
of the Company.
In June 1993, Harris Tube filed for bankruptcy under Chapter 11 of the
U.S. Bankruptcy Code. Mr. Ronald Martin was serving as an executive officer of
Harris Tube at the time of such filing.
Innovest Holdings, Ltd., which purchased Common Shares of the Company
in the January 1997 Share Issuance, has the right to nominate two directors to
the Board of Directors of the Company or, in the alternative, has the right to
be present at all Board meetings. As of the date hereof no such directors have
been nominated to the Board of Directors of the Company.
-20-
<PAGE> 23
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the Former
Chief Executive Officer, the only Named Executive Officer of the Company, for
the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Annual Compensation Long-Term Compensation
------------------- ----------------------
Securities
Underlying
Name and Principal Options
Position Year Salary (#)
- -------- ---- ------ ----------
<S> <C> <C> <C>
Raymond E. McElhaney, 1996 $12,000(2) 0
Former President and 1995 $12,000 0
CEO(1) 1994 $12,000 170,000
</TABLE>
(1) Mr. McElhaney resigned his position as the President and Chief
Executive Officer of the Company effective January 21, 1997.
(2) No cash salary payments were made to Mr. McElhaney during 1996. The
accrued amount of $12,000 and future payments due under Mr. McElhaney's
Employment Agreement were partial consideration for the Asset Purchase
in January 1997. See "Item 12. Certain Relationships and Related
Transactions."
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
Shown below is information at December 31, 1996, with respect to the
options to purchase the Company's Common Shares held by the only Named Executive
Officer.
<TABLE>
<CAPTION>
Number of
Securities Value of
Shares Underlying Unexercised In-the
Acquired Value Unexercised Money Options at
on Exercise Realized Options Held at December 31,
Name (#) $ 0 December 31, 1996 1996
- ----------------------------- ---------- ---------- ----------------- ------------------
<S> <C> <C> <C> <C>
Raymond E. McElhaney 0 $ 0 151,818(1) $ 0
</TABLE>
(1) The 151,818 options held by Mr. McElhaney were cancelled in partial
consideration for the Asset Purchase in January 1997. See "Item 12.
Certain Relationships and Relation Transactions." All of such options
were exercisable at year end.
-21-
<PAGE> 24
Other than the Compensatory Benefit Plan, the Company's Incentive Stock
Option Plan and Non-Qualified Stock Option Plan (discussed below), and a medical
insurance plan for two of its officers effective August, 1993, the Company had
no other retirement, pension, profit sharing or insurance program for the
benefit of its officers, directors or other employees during 1996.
COMPENSATION OF DIRECTORS
Directors receive no cash compensation for serving on the Company's
Board of Directors other than reimbursement for out-of-pocket expenses incurred
in attending meetings.
EMPLOYMENT CONTRACTS
Raymond E. McElhaney, Bill M. Conrad and Ronald R. McGinnis each served
as officers of the Company pursuant to three-year Employment Agreements with the
Company which had termination dates of November 17, 1997. Messrs. McElhaney,
Conrad and McGinnis resigned from such positions as of January 21, 1997
immediately after the consummation of the Merger. Each Employment Agreement
provided for payment of salary in the amount of $1,000 per month plus
reimbursement of reasonable and necessary expenses incurred on behalf of the
Company. The Agreements were terminable without liability to the Company
immediately for "cause" and upon 90 days advance written notice in other cases.
No payments were made to Messrs. McElhaney, Conrad or McGinnis under such
Agreements during 1996 (the "Accrued Payments"). The Accrued Payments and future
payments due under such Agreements were partial consideration for the Asset
Purchase and such Employment Agreements were terminated in connection with such
transaction. See "Item 12. Certain Relationships and Related Transactions."
SERVICES AGREEMENT
The Company has entered into a Services Agreement (the "Services
Agreement") with Stone Pine Atlantic, LLC ("Stone Pine Atlantic") effective as
of February 1, 1997 pursuant to which Stone Pine Atlantic and its affiliates
provide administrative, accounting and investor relations services to the
Company and its subsidiaries as well as investment banking services and
assistance in merger and acquisition transactions, financing transactions and
stock offerings by the Company. In consideration for such services, the Company
is obligated to pay Stone Pine Atlantic $10,000 per month plus reimbursement for
the cost of providing the administrative, accounting and investor relations
services. All of the directors of the Company have a financial interest in Stone
Pine Atlantic.
The Services Agreement has a term of five years, and is subject to
automatic renewals of one year unless either party provides written notice of
non-renewal to the other party at least ninety days prior to the expiration of
the initial or any renewal term of the Services Agreement. Stone Pine Atlantic
has the option to terminate the Agreement at any time for any reason upon thirty
days written notice. The Company may terminate the Services Agreement at any
time upon written notice; however, in the event this provision is exercised by
the Company, Stone Pine Atlantic shall not receive less compensation and
benefits than would otherwise be due to it for the remainder of the term of the
Services Agreement. The Company may terminate the Services Agreement for cause,
effective upon written notice, and upon such a termination the Company shall be
obligated to pay Stone Pine Atlantic fees and any expense reimbursement through
the date of termination. "Cause" is defined to mean that Stone Pine Atlantic
has: (i) knowingly acted fraudulently in Stone Pine
-22-
<PAGE> 25
Atlantic's relations with the Company, (ii) misappropriated or done material,
intentional damage to the property of the Company, (iii) willfully and
materially failed to follow a legal and reasonable order or directive by the
Chairman of the Board of Directors of the Company (which order or directive is
consistent with the provisions of this Agreement), or (iv) been grossly
negligent in the performance of the duties.
COMPENSATORY BENEFIT PLAN
The Company has adopted a compensatory benefit plan (the "Compensatory
Benefit Plan") to compensate officers, directors, consultants and advisors for
services rendered to the Company through the issuance of Common Shares. The
Compensatory Benefit Plan vests sole authority and discretion in the Board of
Directors to value the services rendered and determine the amount of Common
Shares to be issued to any recipient. In determining the value of services
rendered to the Company, the Board of Directors will consider, among others,
such factors as the value of comparable services rendered by other professionals
or individuals in the community, benefits received by the Company for such
services and the availability of comparable services in the community. In
determining the value of shares to be issued in connection with those services,
the Board of Directors may consider such factors as present and anticipated
capitalization of the Company, present market for the Common Shares and net
tangible book value of the Company at the time of issuance. An aggregate of
140,000 Common Shares of the Company have been reserved for issuance under the
Compensatory Benefit Plan, of which 70,000 remain available for issuance. No
shares were issued under the plan during the year ended December 31, 1996.
INCENTIVE STOCK OPTION PLAN
Effective January 31, 1988, the Company adopted an Incentive Stock
Option Plan (the "Incentive Plan") and reserved a total of 100,000 Common Shares
(after giving effect to the reverse stock split in January 1991) for issuance
under the Incentive Plan. The number of Common Shares reserved under the
Incentive Plan was increased to 5 million pursuant to a resolution of the Board
of Directors effective February 25, 1994. The Incentive Plan, designed as an
incentive for key employees, is administered by a Compensation Committee
appointed by the Board of Directors or in the absence of such appointment, by
the Board of Directors, which selects optionees and determines the number of
Common Shares subject to each option.
The Incentive Plan provides that no option may be granted at an
exercise price less than the fair market value of the Common Shares of the
Company on the date of grant. Under the terms of the Incentive Plan, the fair
market value is determined by the average of the highest and lowest reported
sales price of the Common Shares on the date of the grant or as otherwise
determined by the Compensation Committee or the Board of Directors. In the event
there is no established trading market for the Common Shares, the value may be
determined by reference to such factors as the capitalization of the Company,
its history of operations, the financial condition of the Company and the
condition of the securities market in general. In addition, no options may be
granted to an employee who, at the time of the grant, holds 10% or more of the
Company's Common Shares, unless such option meets specific requirements of
Section 422 of the Internal Revenue Code of 1986, as amended, which Section
authorizes the issuance if the option price is at least 110% of the fair market
value of the Common Shares subject to the option and the option by its terms is
not exercisable for more than five years from the date it is granted. Unless
otherwise specified, the other
-23-
<PAGE> 26
options expire ten years from date of grant. Thereafter, options may be
exercised in whole or in part, depending on terms of the particular option.
During 1996, 10,000 options were granted under the Incentive Plan all of which
were cancelled subsequently in 1996 in exchange for 8,500 Common Shares. As of
December 31, 1996, options to acquire an aggregate of 455,454 Common Shares
were outstanding under the Incentive Plan, all exercisable at such date,
at an exercise price of $.55 per share. Such options were held by Messrs.
McElhaney, Conrad and McGinnis and were cancelled in partial consideration for
the Asset Purchase in January 1997. See "Item 12. Certain Relationships and
Related Transactions."
1994 STOCK OPTION PLAN
The Company has adopted a Non-qualified Stock Option and Stock Grant
Plan (the "1994 Plan") for the benefit of key personnel and others providing
significant services to the Company. An aggregate of 750,000 Common Shares has
been reserved for issuance under the 1994 Plan. During the year ended December
31, 1996, no options were issued under the 1994 Plan; 25,000 options which were
outstanding under the 1994 Plan were cancelled in 1996 in exchange for 20,000
Common Shares.
The 1994 Plan is administered by the Board of Directors, who select
optionees and recipients of any stock grants, the number of shares, and the
terms and conditions of any options or grants to key persons defined in the
plan. In determining the value of services rendered to the Company, the Board of
Directors will consider among other things, such person's position with the
Company, the duties and responsibilities, ability, productivity, length of
service or association, morale and interest of such person in the Company,
recommendation by supervisors and the value of comparable services rendered by
others in the community. All options granted pursuant to the 1994 Plan are
exercisable at a price not less than the fair market value of the stock on the
date of the grant. Unless otherwise specified, the options expire 10 years from
the date of grant.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act") requires the Company's executive officers and directors, and
persons who own more than ten percent of a class of the Company's equity
securities registered under the Exchange Act, to file reports of ownership on
Form 3 and changes in ownership on Form 4 or Form 5 with the Securities and
Exchange Commission (the "SEC"). Such officers, directors and 10% stockholders
are also required by SEC rules to furnish the Company with copies of all Section
16(a) forms they file. The Company's Common Shares were not a registered class
of equity securities under the Exchange Act until December 11, 1996. The
executive officers, directors and ten percent Stockholders of the Company were
required to make Section 16(a) filings within ten days of such date, however
such filings were made on December 30, 1996.
-24-
<PAGE> 27
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At December 31, 1996, the Company had outstanding 1,529,546 Common
Shares, the only class of voting securities outstanding. In the Merger, the
Company issued 8,638,003 Common Shares. Immediately following the Merger, the
Company sold 5,496,911 Common Shares in a private transaction exempt from
registration under Regulation S of the Securities Act of 1933, as amended (the
"Share Issuance"). With the consummation of the Merger and the Share Issuance,
there are 15,705,460 of the Company's Common Shares outstanding. Preferred
shares previously issued by the Company in the amount of 450,000 were converted
into 225,000 Common Shares on May 4, 1995. There are no preferred shares issued
and outstanding.
The following tabulates holdings of Common Shares of the Company by
each person who holds of record or is known by management of the Company to own
beneficially more than 5% of the voting securities outstanding, and, in
addition, by all directors and executive officers of the Company individually
and as a group as of April 10, 1997.
<TABLE>
<CAPTION>
PERCENT
NAME NUMBER OF SHARES OF VOTING SECURITIES
---- ---------------- --------------------
<S> <C> <C>
STONE PINE COLORADO, LLC(1)(2) 8,538,003(2) 54.36%
STONE PINE CAPITAL, LLC(1)(2) 8,538,003(2) 54.36%
STONE PINE ATLANTIC EQUITIES, LLC(1)(2) 8,538,003(2) 54.36%
THOMPSON H. ROGERS(1)(2)(3)(5)(6) 8,588,003(2)(3) 54.68%
PAUL BAGLEY(1)(2)(3)(5) 8,588,003(2)(3) 54.68%
W. DUKE DEGRASSI(1)(2) 8,538,003(2) 54.36%
L. WAYNE HARBER(1)(5) - 0 - --
DONALD R. JACKSON(1)(5)(6) - 0 - --
RONALD F. MARTIN(6)(7) - 0 - --
JOHN D. MCKEY(1)(5) - 0 - --
ATLANTIS HOLDING CORP.(4) 1,412,068(4) 8.99%
INVESTOR CAPITAL ENTERPRISES, INC.(4) 1,412,068(4) 8.99%
GARY KUCHER(4) 1,412,068(4) 8.99%
ALL DIRECTORS AND EXECUTIVE OFFICERS 8,588,003(2)(3) 54.68%
AS A GROUP (6 PERSONS)(2)
RAYMOND MCELHANEY (8) 370,563 2.34%
</TABLE>
-25-
<PAGE> 28
(1) THE ADDRESS FOR EACH PERSON OR ENTITY IS 410 17TH STREET, SUITE 400, DENVER,
COLORADO 80202.
(2) STONE PINE COLORADO DIRECTLY OWNS 6,556,867 OF THE COMPANY'S OUTSTANDING
COMMON SHARES (THE "STONE PINE SHARES"). STONE PINE COLORADO HOLDS A PROXY TO
VOTE 1,211,568 COMMON SHARES (THE "AHC SHARES") WHICH WERE TRANSFERRED TO
ATLANTIS HOLDING CORP. AND 769,568 COMMON SHARES (THE "HERSTONE SHARES") WHICH
WERE TRANSFERRED TO RICHARD HERSTONE, UNTIL THE EARLIER OF A TRANSFER OF THE AHC
SHARES AND THE HERSTONE SHARES, RESPECTIVELY, AND FEBRUARY 4, 2000. THE
FOLLOWING ENTITIES AND INDIVIDUALS ARE MEMBERS OF STONE PINE COLORADO, LLC
("STONE PINE COLORADO") AND EACH OWN AN EQUAL VOTING INTEREST IN STONE PINE
COLORADO: STONE PINE CAPITAL, LLC ("STONE PINE CAPITAL"), STONE PINE ATLANTIC
EQUITIES, LLC ("STONE PINE ATLANTIC"), AND THOMPSON H. ROGERS. PAUL BAGLEY AND
W. DUKE DEGRASSI ARE THE DESIGNATED VOTING PERSONS FOR STONE PINE CAPITAL AND
STONE PINE ATLANTIC, RESPECTIVELY. STONE PINE COLORADO, STONE PINE CAPITAL,
STONE PINE ATLANTIC, THOMPSON H. ROGERS, PAUL BAGLEY AND W. DUKE DEGRASSI ARE
REFERRED TO HEREIN AS THE "STONE PINE REPORTING PERSONS."
EACH STONE PINE REPORTING PERSON MAY BE DEEMED A MEMBER OF A GROUP THAT SHARES
VOTING POWER OVER THE AHC SHARES AND THE HERSTONE SHARES AND VOTING AND
DISPOSITIVE POWER OVER THE STONE PINE SHARES AND ACCORDINGLY MAY BE DEEMED TO
BENEFICIALLY OWN THE AHC SHARES, THE HERSTONE SHARES AND THE STONE PINE SHARES.
(3) INCLUDES 50,000 SHARES BENEFICIALLY OWNED BY ERB ACQUISITION GROUP, LLC.
("ERB"). MESSRS. BAGLEY AND ROGERS ARE MEMBERS OF ERB AND MAY BE DEEMED TO
BENEFICIALLY OWN SUCH SHARES.
(4) ATLANTIS HOLDING CORP. DIRECTLY OWNS 1,211,568 COMMON SHARES (THE "AHC
SHARES"). AHC HAS THE SOLE DISPOSITIVE POWER OVER THE AHC SHARES AND STONE PINE
COLORADO HAS THE SOLE VOTING POWER OVER THE AHC SHARES PURSUANT TO A VOTING
PROXY UNTIL THE EARLIER OF THE TRANSFER BY AHC OF THE AHC SHARES TO A
NONAFFILIATE AND FEBRUARY 4, 2000. INVESTOR CAPITAL ENTERPRISES, INC. ("ICE")
DIRECTLY OWNS OR HAS THE RIGHT TO ACQUIRE 200,000 COMMON SHARES (THE "ICE
SHARES"). GARY KUCHER DIRECTLY OWNS 500 COMMON SHARES (THE "KUCHER SHARES").
MR. KUCHER AS THE SOLE SHAREHOLDER OF AHC HAS DISPOSITIVE POWER OF THE AHC
SHARES AND AS THE SOLE SHAREHOLDER, DIRECTOR AND EXECUTIVE OFFICER OF ICE HAS
VOTING AND DISPOSITIVE POWER OF THE ICE SHARES AND THEREFORE MAY BE DEEMED TO
BENEFICIALLY OWN THE AHC SHARES AND ICE SHARES. MR. KUCHER, AHC AND ICE MAY BE
DEEMED TO BE PERSONS WHO COMPRISE A GROUP WITHIN THE MEANING OF SECTION 13(D)(3)
OF THE EXCHANGE ACT AND THEREFORE EACH MAY BE DEEMED TO BENEFICIALLY OWN ALL OF
THE AHC SHARES, THE KUCHER SHARES AND THE ICE SHARES. THE ADDRESS FOR AHC, ICE
AND MR. KUCHER IS 7986 E. ARAPAHOE CT., SUITE 1800, ENGLEWOOD, COLORADO 80112.
(5) DIRECTOR.
(6) EXECUTIVE OFFICER.
(7) THE ADDRESS FOR MR. MARTIN IS 4817 EAST SHEILA STREET, LOS ANGELES, CA.
(8) FORMER PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE COMPANY; THE "NAMED
EXECUTIVE OFFICER" OF THE COMPANY FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
THE ADDRESS FOR MR. MCELHANEY IS 5525 ERINDALE DRIVE, SUITE 201, COLORADO
SPRINGS, COLORADO 80918
-26-
<PAGE> 29
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the January 1997 Merger described herein, Raymond McElhaney,
Bill Conrad, and Ronald McGinnis, the sole executive officers and directors of
the Company (the "Former Directors"), purchased from the Company the following
assets of the Company (the "Asset Sale"): (i) the furniture and equipment of the
Company, (ii) 7,000 shares of common stock of American Educational Products,
Inc. including warrants to purchase additional shares of the common stock of
American Education Products, Inc., (iii) 37,500 shares of common stock of Gold
Capital Corporation, (iv) a Promissory Note receivable by and between the
Company and Glacier Valley Holding Corporation dated November 13, 1995 in the
principal amount of $18,000 (See "Item 1. Description of Business Narrative
Description of Business - Real Estate Development Business - Glacier Valley")
and (v) the Company's interest in and to the Elite Note and the Company's
interest in the Northcrest Joint Venture (See "Item 1. Description of Business -
Narrative Description of Business - Real Estate Development Business - The
Northcrest Joint Venture").
The purchase price for the assets sold in the Asset Sale was $99,625
which consideration consisted of (x) the cancellation of stock options held by
the Former Directors to acquire an aggregate of 455,454 shares of the common
stock of the Company at the exercise price of $.55 per share, (y) the
relinquishment of any interest in and to the salaries which were accrued for the
accounts of the Former Directors and any claim for future salaries pursuant to
the Employment Agreements between the Company and the Former Directors, in the
aggregate amount of $69,000, and the cancellation of such Employment Agreements
and (z) the assumption by the Former Directors of all debts, liabilities and
outstanding accounts of the Company which were outstanding prior to the Merger.
The following assets purchased by the Former Directors and included in
the Asset Sale were acquired during the last two years for the following
purchase price: (i) 7,000 shares of common stock of American Educational
Products, Inc. and warrants to purchase additional shares of common stock,
$7,000, (ii) a promissory note receivable from Glacier Valley Holding
Corporation, $18,000, and (iii) a 52% interest in the nonrecourse promissory
note payable by Elite Properties of America, $415,750, with a principal balance
equal to $216,190 at the time of sale.
The Company has agreed to pay Stone Pine Colorado, LLC an acquisition
structuring fee of $250,000 in connection with the Merger and the related
transactions and has delivered a Promissory Note in favor of Stone Pine
Colorado, LLC, for such amount, payable on demand. Stone Pine Colorado, LLC is
the owner of approximately 42% of the outstanding Common Shares and all of the
directors of the Company have a financial interest in Stone Pine Colorado, LLC.
The Company paid $80,000 in consideration of services provided by
Investor Capital Enterprises, Inc. in connection with the Merger.
The Company has entered into a Services Agreement (the "Services
Agreement") with Stone Pine Atlantic, LLC ("Stone Pine Atlantic") effective as
of February 1, 1997 pursuant to which Stone Pine Atlantic, LLC provides
administrative, accounting and investor relations services to the Company and
its subsidiaries as well as investment banking services and will provide
assistance in merger and acquisition transactions, financing transactions and
stock offerings by the Company. In consideration for such services, the Company
is obligated to pay Stone Pine Atlantic $10,000 per month plus reimbursement for
the cost of providing the administrative, accounting and investor relations
services. All of the directors of the Company have a financial interest in Stone
Pine Atlantic, LLC. See "Item 10. Executive Compensation - Services Agreement."
In April 1997, ERB Acquisition Group, LLC, a Nebraska limited liability
company, loaned $300,000 to Angeles (the "ERB Loan"), which loan is evidenced by
a promissory note payable to ERB (the "ERB Note"). In consideration of such
loan, Angeles agreed to pay ERB a facility fee of $9,000, which has been added
to the principal balance of the ERB Note, and the Company agreed to issue 50,000
of its Common Shares to ERB upon such funding and 10,000 Common Shares on the
first day of each month commencing July 1, 1997 until the ERB Note is repaid in
full. The ERB Note bears interest at 12% per annum monthly in arrears beginning
May 1, 1997. The principal of the ERB Note and accrued and unpaid interest is
due and payable on April 9, 1999. The ERB Note may be prepaid at any time at the
option of Angeles.
The obligations under the ERB Loan have been guaranteed by the Company
and Stone Pine Colorado, LLC. All of the assets of the Company and all of the
assets of Stone Pine Colorado, LLC, including the Company's Common Shares owned
by Stone Pine Colorado, LLC, have been pledged as security for the obligations
under the ERB Loan. Stone Pine Colorado, LLC is the owner of approximately 42%
of the outstanding Common Shares and all of the directors of the Company have a
financial interest in Stone Pine Colorado, LLC. Thompson H. Rogers and Paul
Bagley, directors of the Company, have a financial interest in ERB Acquisition
Group, LLC.
-27-
<PAGE> 30
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following documents are filed herewith or
incorporated herein by reference as exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- --------------------------------------------
<S> <C>
2.1(1) Stock Purchase Agreement dated as of January
15, 1997 between Angeles Acquisition Corp.,
Angeles Metal Trim Co., California Building
Systems, Inc., and the shareholders of
Angeles Metal Trim Co. and D. Kingston Cable
(Exhibits and Schedules omitted).
2.2(1) Agreement and Plan of Merger dated January
16, 1997 between the Company, Consolidated
Land & Cattle Company, Raymond E. McElhaney,
Bill M. Conrad, Ronald R. McGinnis, Angeles
Acquisition Corp. and Stone Pine Colorado,
LLC (Exhibits and Schedules omitted).
3.1(2) Articles of Incorporation of the Company.
3.2(3) By-laws.
10.1(4) Real Estate Development Agreement, dated
July 26, 1994, by and between the Company,
Glacier Valley Holding Corporation, and
other unrelated third parties.
10.2(4) Lot Option Agreement dated September 28,
1994, by and between the Company and JBS
Corporation.
10.3(5) Promissory Note dated May 11, 1995, by and
between JBS Corporation and Northcrest Joint
Venture.
10.4(5) Lot Option Agreement dated April 12, 1996,
by and between the Company and Elite
Properties of America.
10.5(4) Form of Promissory Note by and between the
Company and Bear Star Limited Liability
Company.
10.6(4) Form of Promissory Note by and between the
Company and Columbine Home Sales Limited
Liability Company.
</TABLE>
-28-
<PAGE> 31
<TABLE>
<S> <C>
10.7(4) Contract to Buy and Sell Real Estate by and
between Bear Star Limited Liability Company
and the purchasers, dated June 24, 1994.
10.8(4) Contract to Buy and Sell Real Estate by and
between Columbine Homes, L.L.C., and Allen
E. Pezoldt Living Trust and Allen E.
Pezoldt, dated February 22, 1995.
10.9(6) Form of Employment Agreement between the
Company and Raymond E. McElhaney, Bill M.
Conrad and Ronald R. McGinnis.
10.10 Purchase and Sale Agreement dated January
16, 1997 between the Company, Raymond
McElhaney, Bill Conrad and Ronald McGinnis
(Exhibits and Schedules omitted).
10.11(1) Form of Stock Purchase Agreement dated
January 16, 1997 between the Company and the
investors (Exhibits and Schedules omitted).
10.12 Lease Agreement dated January 15, 1997 by
and between Angeles Metal Trim Co. and D.
Kingston Cable, Trustee of the Daniel
Kingston Cable and Barbara White Cable 1995
Revocable Intervivos Trust (Re: property at
4817 and 4915 Sheila Street, Commerce,
California).
10.13 Lease Agreement dated January 15, 1997 by
and between Angeles Metal Trim Co. and D.
Kingston Cable, Trustee of the Daniel
Kingston Cable and Barbara White Cable 1995
Revocable Intervivos Trust (Re: property at
116 Y Street, Vancouver, Washington).
10.14 Lease Agreement dated November 13, 1989 by
and between Angeles Metal Trim Co. and 83rd
Street Investors (Re: property at 4841 83rd
Street, Sacramento, California).
10.15 Lease Agreement dated October 1, 1996 by and
between Angeles Metal Trim Co. and Fred G.
and Patricia A. Duncolon (Re: property at
1851 Alexander Avenue, Tacoma, Washington).
10.16 Business Loan Agreement dated as of January
15, 1997 between Angeles Metal Trim Co. and
Union Bank of California, N. A. ("Union
Bank").
10.17 Security Agreement dated as of January 9,
1997 between Angeles Metal Trim Co. and
Union Bank.
10.18 Promissory Note dated as of January 15, 1997
by Angeles Metal Trim Co. in favor of Union
Bank.
10.19 Continuing Guaranty by Angeles Acquisition
Co. in favor of Union Bank.
</TABLE>
-29-
<PAGE> 32
<TABLE>
<S> <C>
10.20 Master Security Agreement dated as of
January 8, 1997 between Angeles Metal Trim
Co. and General Electric Capital Corporation
("GE").
10.21 Promissory Note dated as of January 17, 1997
by Angeles Metal Trim Co. in favor of GE.
10.22 Services Agreement dated as of February 1,
1997 between the Company and Stone Pine
Atlantic, LLC.
10.23 Non-Competition and Consulting Agreement
dated as of January 15, 1997 between Angeles
Metal Trim Co. and D. Kingston Cable.
10.24 Promissory Note dated as of January 16, 1997
by the Company in favor of Stone Pine
Colorado, LLC.
16.(7) Letter from Kish Leake & Associates, P.C.
dated February 5, 1997 regarding change of
certifying accountant.
21. Subsidiaries of the Company.
27. Financial Data Schedule.
</TABLE>
(1) Incorporated by reference from the Company's Report on Form 8-K dated
January 23, 1997.
(2) Incorporated by reference from the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991.
(3) Incorporated by reference from the Company's Registration Statement on
Form S-18, Registration Number 33-24299, dated October 27, 1988.
(4) Incorporated by reference from the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1994.
(5) Incorporated by reference from the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1995.
(6) Incorporated by reference from the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1993.
(7) Incorporated by reference from the Company's Report on Form 8-K filed
on February 7, 1997.
-30-
<PAGE> 33
(b) Reports on Form 8-K.
The Company filed a Form 8-K on January 23, 1997 to report on the
Merger and related transactions.
The Company filed a Form 8-K on February 7, 1997 to report on the
change in accountants.
-31-
<PAGE> 34
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Capital of North America, Inc.
Report of Independent Certified Public
Accountants ............................................... F-2
Report of Independent Certified Public
Accountants ............................................... F-3
Balance Sheets at December 31, 1996 and December 31, 1995.... F-4
Statements of Operations for the Years Ended December 31,
1996 and December 31, 1995................................. F-5
Statement of Stockholders' Equity for the Year Ended
December 31, 1996.......................................... F-6
Statements of Cash Flows for the Years Ended December 31, 1996
and December 31, 1995...................................... F-7
Notes to Financial Statements for the Years Ended December 31,
1996 and December 31, 1995 (Pro forma condensed financial
information for the acquisition of Angeles Metal Trim Co.
is included in Note H) .................................... F-8
Angeles Metal Trim Co. and Subsidiary
Report of Independent Certified Public Accountants........... F-19
Consolidated Balance Sheets at December 31, 1996 and
December 31, 1995.......................................... F-20
Consolidated Statements of Operations for the Years Ended
December 31, 1996 and December 31, 1995.................... F-22
Consolidated Statement of Stockholders' Equity for the Year
Ended December 31, 1996.................................... F-23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996 and December 31, 1995.................... F-24
Notes to Consolidated Financial Statements................... F-26
</TABLE>
F-1
<PAGE> 35
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Consolidated Capital of North America, Inc.
We have audited the accompanying balance sheet of Consolidated Capital of North
America, Inc. (the "Company") as of December 31, 1996, and the related
statements of operations, stockholders' equity, and cash flow 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 financial position of Consolidated Capital of North
America, Inc. as of December 31, 1996, and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.
Grant Thornton LLP
Los Angeles, California
March 21, 1997 (except for Note H,
as to which the date is April 11, 1997)
F-2
<PAGE> 36
KISH . LEAKE & ASSOCIATES, P.C.
Certified Public Accountants
J.D. Kish, C.P.A., M.B.A. 7901 E. Belleview Ave., Suite 220
James D. Leake, C.P.A.,, M.T. Englewood, Colorado 80111
-------------------- Telephone (303) 779-5006
Arleen R. Brogan, C.P.A. Facsimile (303) 779-5724
We have audited the accompanying balance sheet of Consolidated Capital of North
America, Inc., as of December 31, 1995, and the related statements of
operations, cash flows, and changes in shareholders' equity 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
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 financial position of Consolidated Capital of North
America, Inc., at December 31, 1995, and the results of its operations and its
cash flows for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.
Kish, Leake & Associates, P.C.
Certified Public Accountant
Englewood, Colorado
May 23, 1996
F-3
<PAGE> 37
Consolidated Capital of North America, Inc.
BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
--------- ---------
<S> <C> <C>
Current Assets
Cash $ 26,937 $ 5,467
Notes receivable 32,125 176,928
Investment in joint venture held for sale 52,000 187,033
Equipment held for sale 2,500 25,209
Marketable securities held for sale 44,500 37,500
--------- ---------
Total current assets $ 158,062 $ 432,137
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Note payable $ -- $12,524
Accounts payable 24,632 28,631
Accrued liabilities 36,000 24,755
Other 20,000 --
--------- ---------
Total current liabilities 80,632 65,910
--------- ---------
Stockholders' equity
Preferred stock - authorized, 10,000,000 shares of $.01
par value; none issued and outstanding -- --
Common stock - authorized 50,000,000 shares of $.0001
par value; issued and outstanding 1,570,546 shares in 1996
and 1,529,546 in 1995 157 153
Additional paid-in capital 855,756 832,075
Accumulated deficit (778,483) (466,001)
--------- ---------
Total stockholders' equity 77,430 366,227
--------- ---------
Total liabilities and stockholders' equity $ 158,062 $ 432,137
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 38
Consolidated Capital of North America, Inc.
STATEMENTS OF OPERATIONS
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Operating expenses
Payroll and related benefits $ 40,487 $ 50,842
General and administrative 50,623 32,431
--------- --------
Loss from operations (91,110) (83,273)
Other income and (expense)
Gain on sale of affiliate -- 35,605
Interest income 17,269 11,732
Interest expense (3,671) (894)
Income (loss) from operations of affiliates
held for sale (9,898) 31,524
Write-down of assets held for sale (213,672) --
Settlement of stock options (11,400) --
--------- --------
(221,372) 77,967
--------- --------
NET LOSS $(312,482) $ (5,306)
========= ========
Net loss per share ($ 0.20) ($ 0.00)
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 39
Consolidated Capital of North America, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
Two Years ended December 31, 1996
<TABLE>
<CAPTION>
Number of Shares
------------------------- Additional
Common Preferred Common Preferred Paid-in
Stock Stock Stock Stock Capital
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 1,304,546 450,000 $131 $ 4,500 $827,598
Conversion of preferred stock 225,000 (450,000) 22 (4,500) 4,477
Net loss for the year -- -- -- --
--------- ------- ---- ------- --------
Balance at December 31, 1995 1,529,546 -- 153 -- 832,075
Issuance of common stock:
Legal services 12,500 -- 1 -- 12,284
Cancellation of stock options 28,500 -- 3 -- 11,397
Net loss for the year -- -- -- --
--------- ------- ---- ------- --------
Balance at December 31, 1996 1,570,546 $ -- 157 $ -- $855,756
========= ========= === ======= ========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Deficit Total
------- -----
<S> <C> <C>
Balance at January 1, 1995 $(460,695) $ 371,534
Conversion of preferred stock -- (1)
Net loss for the year (5,306) (5,306)
--------- ----------
Balance at December 31, 1995 (466,001) 366,227
Issuance of common stock:
Legal services -- 12,285
Cancellation of stock options -- 11,400
Net loss for the year (312,482) (312,482)
--------- ---------
Balance at December 31, 1996 $(778,483) $ 77,430
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE> 40
Consolidated Capital of North America, Inc.
STATEMENTS OF CASH FLOWS
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------- ------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(312,482) $ (5,306)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities
Income from operations and gain on sale of affiliates
held for sale -- (44,233)
Stock options settled for stock 11,400 --
Write-down of assets held for sale 213,757 --
Legal services paid in stock 12,285 --
Increase in accrued interest receivable -- (11,655)
Increase in accounts payable and accrued liabilities 7,246 32,170
-------- ---------
Net cash provided by (used in) operating activities (67,794) (29,024)
-------- ---------
Cash flows from investing activities:
Purchases of marketable securities (7,000) --
Proceeds from the sale of equipment 4,200 3,000
Deposit received in connection with acquisition 20,000 --
Proceeds from sale of marketable securities -- 124,623
Payments from notes receivable -- (139,819)
Distribution from investment in affiliates held for sale 84,588 37,228
-------- ---------
Net cash provided by (used in) investing activities 101,788 25,032
-------- ---------
Net cash provided by (used in) financing activity - increase (decrease) in note
payable (12,524) 8,181
-------- ---------
Increase in cash 21,470 4,189
Cash at beginning of year 5,467 1,278
-------- ---------
Cash at end of year $ 26,937 $ 5,467
========= =========
Supplemental disclosure of cash flow information:
Noncash investing and financing activities:
Common stock issued for preferred shares $ -- $ 4,500
Note receivable in exchange for investment $ -- $ 22,896
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE> 41
Consolidated Capital of North America, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - GENERAL
Consolidated Capital of North America, Inc., (the "Company") was organized
in 1987 and is incorporated as a Colorado corporation. The Company
maintains an interest in a manufactured housing community and a joint
venture operated for development and resale of single family housing lots.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies applied in the
preparation of the accompanying financial statements follows:
1. Investments
The Company accounts for its interest in investments for which it has less
than a 50% interest and in majority owned subsidiaries where control is
expected to be temporary under the equity method. Under this method, the
Company's proportionate share of the equity investments' income or loss
either increases or decreases the Company's investment. At December 31,
1995, the Company discontinued recognizing losses attributable to its
investment in Bear Star Limited Liability Company because such losses
reduced the investment below zero. At December 31, 1996, the Company
reduced its investment to net realizable value.
In January 1997, the Company sold its 53% interest in the Northcrest Joint
Venture. At December 31, 1996, the carrying amount was reduced to net
realizable value. Amounts in the 1995 financial statements have been
reclassified to conform with the 1996 presentation.
2. Equipment Held for Sale
Equipment held for sale includes certain oil and gas equipment and is
recorded at the lower of management's estimate of net realizable value or
cost.
3. Marketable Securities Held for Sale
Investments in equity securities are classified as trading. Trading
securities are measured at fair value, with net unrealized holding gains
and losses reported in operations.
F-8
<PAGE> 42
Consolidated Capital of North America, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
4. Earnings Per Share
The net loss per common share is computed by dividing the net loss for each
year then ended by the weighted average number of common shares outstanding
(1,532,129 in 1996 and 1,435,796 in 1995). Stock options were excluded from
the computation of earnings per share as their effect would be antidilutive
in both 1996 and 1995.
5. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
6. Income Taxes
Deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future
years to differences between the financial statement carrying amounts and
the tax bases of existing asset and liabilities. The effect on deferred
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date.
7. Fair Value of Financial Instruments
The carrying amount of cash, receivables, accounts payable and notes
payable approximate fair value at December 31, 1996 due to the relatively
short maturity of these instruments. The fair value of marketable
securities was determined based upon available market information. The fair
value estimates are based upon pertinent information available to
management at the balance sheet date.
F-9
<PAGE> 43
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996 AND 1995
NOTE C - ACQUISITION OF REAL ESTATE INTEREST
During 1995 the Company acquired, through a joint venture, a 50% interest
in property for $67,500 in Colorado Springs, Colorado, under a note
arrangement with the seller at 12% interest. The note was for $135,000 with
monthly payments of $8,000 per month commencing June 1995. In May 1995,
through joint venture contributions of $25,000 (including $12,500 by the
Company) the note was reduced to $110,000. This interest was sold in
November 1995 for $18,000 in exchange for a note from the other joint
venture partner plus the assumption of remaining debt.
Also during 1995, notes receivable of the Company were assigned to an
affiliate, Bear Star Limited Liability Company, in connection with the
reorganization of such entity. This reorganization resulted in the
Company owning approximately 19% of such affiliate and acquiring a note
receivable of $22,897.
Summarized financial information of Bear Star is as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Revenues $782,764 $113,449
Gross Profit 82,476 6,779
Net Loss (78,114) (77,404)
</TABLE>
The Company's original indirect interest in the affiliate was acquired
through advances of approximately $114,000. The affiliate had substantial
obligations including notes payable of approximately $1,000,000 and
$2,164,534 as of December 31, 1996 and 1995, respectively. As of December
31, 1996, in the opinion of management, the investment and advances in the
affiliate was carried at their net realizable value.
NOTE D - RELATED PARTY TRANSACTIONS
During 1995, the Company paid approximately $1,700 to certain former
officers and directors for office space and services.
At various times during 1995, the Company borrowed funds from various
related parties including officers and directors. The notes bore interest
at a rate of 9% to 12%. These notes were either paid or assumed by former
officers and directors.
F-10
<PAGE> 44
Consolidated Capital of North America, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE E - MARKETABLE SECURITIES
In 1993, the Company sold an asset to U.S. Exploration ("USXP") for 62,000
restricted shares of USXP common stock at an agreed-upon value of
approximately $100,000. The Company then exchanged 42,000 shares of USXP to
reduce a related liability of approximately $67,500. The Company realized a
gain on this sale of approximately $54,000. The shares of USXP were subject
to resale restrictions under Rule 144, which enabled the Company to resell
the remaining shares in 1995 for $21,628 resulting in a loss. The former
officers and directors of the Company are stockholders of USXP, and a
former director of the Company is also an officer/director of USXP.
In December 1993, the Company acquired 12,500 units in Gold Capital
Corporation ("GCC") in a private offering of securities at a per unit cost
of $2.00 with each unit consisting of two common shares and one warrant to
purchase common shares at $1.00. In 1994, the Company exercised its
warrants and held a total of 37,500 shares.
Subsequent to December 31, 1996, the Company exchanged all of its GCC
securities in satisfaction of certain obligations. (See Note F)
NOTE F - STOCKHOLDERS' EQUITY
The Company has 10,000,000 preferred shares, which are authorized but
unissued. These shares may be issued in a series with rights and
preference at the discretion of the Board of Directors.
In October 1991, the Company issued in a private placement 450,000 shares
of its $.01 par value preferred stock designated as Series A
Preferred Shares. The Series A Preferred Shares were convertible into
common stock. The preferred stock was issued in exchange for a 50% interest
in a joint venture, which owned a gas gathering system. In 1995, the
preferred shareholders converted their preferred stock into 225,000 shares
of common stock.
F-11
<PAGE> 45
Consolidated Capital of North America, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE F - STOCKHOLDERS' EQUITY - Continued
The Board of Directors has adopted a compensatory benefit plan (the
Compensatory Benefit Plan). The purpose of this plan is to compensate
officers, directors, consultants and advisors for services rendered to the
Company through the issuance of common shares. According to the
Compensatory Benefit Plan, the Board of Directors will value the services
rendered and determine the amount of common shares to be issued any
recipient. An aggregate of 140,000 common shares of the Company have been
reserved for issuance under the Compensatory Benefit Plan, of which 70,000
remain available for issuance. No shares were issued under the Compensatory
Benefit Plan in 1996 or 1995.
The Company has 100,000 common shares reserved (which was increased by the
Board of Directors, subject to shareholder approval, to 5,000,000 common
shares) for future issuance under an Incentive Stock Option Plan (the
Plan). The Plan provides that no option may be granted at an exercise price
less than the fair market value of the common shares of the Company on the
date of grant. During 1994, the Company granted 520,000 options to
employees and officers/directors generally at $.55 per share. These options
expire in 2004. In September 1994, 54,546 stock options were exercised. As
of December 31, 1996, stock options to exercise 10,000 shares were settled
through the issuance of 8,500 shares of common stock with a fair value of
$3,400. The remaining 455,454 options outstanding were cancelled in January
1997 in exchange for certain assets.
In 1994, the Company also reserved 750,000 shares of common stock for
possible issuance under a nonqualified stock option plan. In 1995, options
to acquire a total of 25,000 common shares at an exercise price of $.50
were issued. As of December 31, 1996, stock options to exercise 25,000
shares were settled through the issuance of 20,000 shares of common stock
with a fair value of $8,000.
NOTE G - INCOME TAXES
At December 31, 1996 and 1995, the Company had net operating loss
carryforwards available for Federal and State income tax purposes of
approximately $638,000 and $589,000 which, if not used, will expire at
varying dates through 2011. Due to the change in ownership, these operating
losses are subject to limitations imposed by the tax regulations. As of
December 31, 1996 and 1995, the Company had a deferred tax asset of
$325,000 and $204,000, respectively, that was fully reserved through a
valuation allowance. The change in the valuation allowance for 1996 and
1995 is $121,000 and $9,000, respectively. The difference between the
Company's effective tax rate and statutory tax rate is due to the valuation
allowance for the year ended December 31, 1996 and 1995. No cash was paid
for income taxes in 1996 and 1995.
F-12
<PAGE> 46
Consolidated Capital of North America, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE H - SUBSEQUENT EVENTS
On January 21, 1997, Consolidated Land & Cattle Company (a subsidiary of the
Company) merged with Angeles Acquisition Corp. (a privately held company).
Angeles Acquisition Corp. survived the merger and is a wholly owned subsidiary
of the Company. Prior to the merger, the Company sold certain assets, including
an interest in a majority-owned joint venture to three former executive officers
and directors of the Company. Subsequent to the merger, the former officers and
directors resigned. As part of the merger, the Company issued 8,638,003 new
common shares to the sole stockholder of Angeles Acquisition Corp. Concurrent
with the merger, the Company sold 5,496,911 shares of common stock, in a private
transaction exempt from registration under Regulation S of the Securities Act of
1933, as amended, for an aggregate purchase price of $1,000,000. Prior to the
merger, Angeles Acquisition Corp. acquired Angeles Metal Trim Co. and
Subsidiary, for approximately $4,300,000, including fees and expenses, Angeles
Metal Trim Co. incurred new indebtedness of approximately $4,200,000, which was
used in connection with this acquisition. Angeles Metal Trim Co. was not in
compliance with certain loan covenants which have been waived by the bank
through December 31, 1997. A portion of the proceeds from the indebtedness was
used to repay the outstanding balance of $900,000 under Angeles Metal Trim Co.'s
line of credit.
F-13
<PAGE> 47
Consolidated Capital of North America, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE H - SUBSEQUENT EVENTS - Continued
The following unaudited proforma balance sheet information gives effect of
the acquisition and related transactions as if they had occurred on
December 31, 1996. The unaudited proforma statement of operations gives
effect to such transactions as if they had occurred on January 1, 1996.
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------------------------------
Consolidated
Capital of North Angeles Metal Proforma Proforma
America, Inc. Trim Co. Adjustments Consolidated
---------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets
Cash $ 26,937 $ 27,704 3 $ 100,000 $ 154,641
Notes receivable 32,125 -- 1 (2,125) 30,000
Investment in joint ventures
held for sale 52,000 -- 1 (52,000) --
Equipment held for sale 2,500 -- 1 (2,500) --
Marketable securities held for sale 44,500 -- 1 (44,500) --
Accounts receivable, net -- 2,485,956 -- 2,485,956
Inventories, net -- 1,974,139 -- 1,974,139
Prepaid expenses -- 32,356 -- 32,356
-------- ----------- ----------- ----------
Total current assets 158,062 4,520,155 (1,125) 4,677,092
-------- ----------- ----------- ----------
Property and equipment -- 4,400,518 2 (2,248,966) 2,151,552
Less accumulated
depreciation and amortization -- (4,173,505) 2 4,173,505 --
-------- ----------- ----------- ----------
-- 227,013 1,924,539 2,151,552
Other assets
Excess purchase price
over net assets acquired -- -- 2 2,384,804 2,384,804
Cash surrender value of life
insurance -- 23,012 4 (23,012) --
Deposits -- 13,451 -- 13,451
-------- ----------- ----------- ----------
-- 36,463 2,361,792 2,398,255
-------- ----------- ----------- ----------
Total assets $158,062 $ 4,783,631 $ 4,285,206 $ 9,226,899
======== =========== =========== ===========
</TABLE>
F-14
<PAGE> 48
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS-CONTINUED
DECEMBER 31, 1996 AND 1995
NOTE H - SUBSEQUENT EVENTS - Continued
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------------------------------------
Consolidated
Capital of North Angeles Metal Proforma Proforma
America,Inc. Trim Co. Adjustments Consolidated
------------ -------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Current liabilities
Notes payable and
short-term borrowings $ -- $ 285,000 3 $ 267,447 $ 552,447
Note payable - affiliate -- -- 3 250,000 250,000
Accounts payable 24,632 3,432,166 3 33,000 3,489,798
Accrued liabilities 36,000 140,569 1 (36,000) 140,569
Other 20,000 -- 4 (20,000) --
------- ----------- ----------- ------------
Total current liabilities 80,632 3,857,735 494,447 4,432,814
------- ----------- ----------- ------------
Note payable - long-term -- 900,000 3 2,911,793 3,811,793
Stockholders' equity
Preferred stock -- -- -- --
Common stock 157 1,420 2 (1,420) 1,570
3 1,413
Additional paid-in capital 855,756 108,876 2 (108,876) 1,822,205
3 966,449
Accumulated deficit (778,483) (84,400) 2 107,412 (841,483)
1 (63,000)
4 (23,012)
-------- ----------- ----------- -----------
Total stockholders' equity 77,430 25,896 878,966 982,292
-------- ----------- ----------- -----------
Total liabilities and
stockholders' equity $ 158,062 $ 4,783,631 $ 4,285,206 $ 9,226,899
=========== =========== =========== ===========
</TABLE>
F-15
<PAGE> 49
Consolidated Capital of North America, Inc.
NOTES TO FINANCIAL STATEMENTS-Continued
December 31, 1996 and 1995
NOTE H - SUBSEQUENT EVENTS - Continued
<TABLE>
<CAPTION>
Year ended December 31, 1996
--------------------------------------------------------------------------------
Consolidated
Capital of Proforma
North Angeles Metal Proforma Consolidated
America, Inc. Trim Co. Adjustments Statements
------------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $ -- $ 20,879,891 $ -- $ 20,879,891
Cost of goods sold -- 18,231,030 5 145,795 18,376,825
--------- ------------ --------- ------------
Gross profit -- 2,648,861 (145,795) 2,503,066
Operating expenses
Selling and shipping -- 2,962,443 -- 2,962,443
General and administrative 91,110 1,234,569 6 215,789 1,541,468
Other 3,671 -- 3,671
--------- ------------ --------- ------------
Total expenses 94,781 4,197,012 215,789 4,507,582
--------- ------------ --------- ------------
Operating loss (94,781) (1,548,151) (361,584) (2,004,516)
Other income (expense)
Interest expense -- (101,804) 7 101,804 (325,167)
7 (325,167)
Other income 17,269 197,855 -- 215,124
Other expense -- (2,136) -- (2,136)
Loss from write downs of assets and
settlement of stock options (234,970) -- -- (234,970)
--------- ------------ --------- ------------
NET LOSS $(312,482) $ (1,454,236) $(584,947) $ (2,351,665)
========= ============ ========= ============
</TABLE>
F-16
<PAGE> 50
Consolidated Capital of North America, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE H - SUBSEQUENT EVENTS - Continued
Balance Sheet - Proforma Adjustments
1. Sale of assets primarily to former directors in satisfaction of
certain liabilities.
2. Adjustments for the acquisition of the net assets acquired:
<TABLE>
<S> <C>
Purchase price of net assets acquired $4,309,443
Net adjustment to fair value of net identifiable
tangible assets acquired 1,924,539
----------
Excess purchase price over fair value of net
assets acquired $2,384,904
==========
</TABLE>
3. In connection with the acquisition, the Company incurred indebtedness
of approximately $4.2 million and raised $966,500, net of accrued stock
offering cost of approximately $33,500, through the issuance of
5,496,911 shares of common stock. Also, the Company issued 8,638,003
shares of common stock to the sole stockholder of Angeles Acquisition
Corp. A portion of the proceeds from the indebtedness was used to repay
the outstanding line of credit of $900,000. In addition, the Company
issued a promissory note in January 1997 in the amount of $250,000,
payable on demand in consideration of an acquisition structuring fee
related to the merger and the related transactions.
4. The $23,012 represents the cash surrender value of life insurance
policies that were distributed to a former shareholder of Angeles
Metals Trim Co. a day prior to the date of acquisition. The $20,000
represents earnest funds previously received in connection with this
acquisition.
F-17
<PAGE> 51
Consolidated Capital of North America, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE H - SUBSEQUENT EVENTS - Continued
Income Statement - Pro Forma Adjustments
5. To adjust for additional depreciation resulting from the revaluation of
assets as determined by appraisal. Assets are depreciated over their
useful lives using the straight line method after giving consideration
for salvage value.
6. To adjust for amortization of the excess of purchase price over assets
acquired. The amortization is based on a ten-year life using the
straight-line method.
7. Interest on the new indebtedness incurred to finance the purchase of
Angeles Metal Trim Co. less reduction for the interest on the old
line of credit.
F-18
<PAGE> 52
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Angeles Metal Trim Co. and Subsidiary
We have audited the accompanying consolidated balance sheets of Angeles Metal
Trim Co. and Subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements present fairly, in all material
respects, the consolidated financial position of Angeles Metal Trim Co. and
Subsidiary as of December 31, 1996 and 1995, and the consolidated results of
their operations and their consolidated cash flows for the years then ended,
in conformity with generally accepted accounting principles.
Grant Thornton LLP
Los Angeles, California
March 21, 1997 (except for Note C,
as to which the date is April 11, 1997)
F-19
<PAGE> 53
Angeles Metal Trim Co. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 27,704 $ 46,996
Notes receivable -- 13,419
Accounts receivable - trade, less allowance
for doubtful accounts of $235,258 and $166,159
in 1996 and 1995, respectively 2,485,956 2,701,196
Inventories, net 1,974,139 2,399,459
Prepaid expenses and other 32,356 87,055
----------- -----------
Total current assets 4,520,155 5,248,125
PROPERTY AND EQUIPMENT - AT COST
Machinery and equipment 2,955,167 2,850,540
Transportation equipment 745,094 735,406
Furniture and fixtures 434,619 392,951
Leasehold improvements 243,931 243,931
Construction in progress 21,707 16,735
----------- -----------
4,400,518 4,239,563
Less accumulated depreciation and amortization (4,173,505) (4,103,391)
----------- -----------
227,013 136,172
OTHER ASSETS
Cash surrender value of life insurance policies,
net of policy loans of $155,639 23,012 23,013
Deposits 13,451 15,692
----------- -----------
36,463 38,705
----------- -----------
Total assets $ 4,783,631 $ 5,423,002
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 54
ANGELES METAL TRIM CO. AND SUBSIDIARY
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Short-term borrowings $ -- $ 250,000
Accounts payable 3,432,166 3,030,698
Accrued liabilities 140,569 377,172
Notes payable to former officer 285,000 --
----------- ----------
Total current liabilities 3,857,735 3,657,870
LONG-TERM INDEBTEDNESS
Note payable - long-term 900,000 --
Notes payable to former officer -- 285,000
COMMITMENTS -- --
STOCKHOLDERS' EQUITY
Common stock - authorized, 1,000 shares of $10
par value; issued and outstanding, 142 shares; 1,420 1,420
Capital contributed in excess of par value 108,876 108,876
Retained (deficit) earnings (84,400) 1,369,836
----------- ----------
25,896 1,480,132
----------- ----------
Total liabilities and stockholders' equity $ 4,783,631 $5,423,002
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE> 55
Angeles Metal Trim Co. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Net sales $ 20,879,891 $ 22,315,108
Cost of goods sold 18,231,030 18,584,372
------------ ------------
Gross profit 2,648,861 3,730,736
Operating expenses
Selling and shipping 2,962,443 2,400,273
General and administrative 1,234,569 1,090,108
------------ ------------
4,197,012 3,490,381
------------ ------------
(Loss) income from operations (1,548,151) 240,355
Other income (expense)
Interest expense (101,804) (88,367)
Other income 197,855 169,746
Other expense (2,136) (35,933)
------------ ------------
93,915 45,446
------------ ------------
Net (loss) earnings before income taxes (1,454,236) 285,801
Income tax expense -- 9,637
------------ ------------
NET (LOSS) EARNINGS $ (1,454,236) $ 276,164
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE> 56
Angeles Metal Trim Co. and Subsidiary
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Two Years ended December 31, 1996
<TABLE>
<CAPTION>
Capital
Common stock contributed Retained Minority
------------------ in excess of (deficit) interest in
Shares Amount par value earnings subsidiary Total
------ ------ --------- -------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 142 $1,420 $108,876 $1,397,290 $(283,618) $1,223,968
Redemption of shares of minority shareholder - - - (303,618) 283,618 (20,000)
Net earnings - - - 276,164 - 276,164
----- ------ ---------- ---------- ---------- ----------
Balance at December 31, 1995 142 1,420 108,876 1,369,836 - 1,480,132
Net loss - - - (1,454,236) - (1,454,236)
----- ------ ---------- ---------- ---------- ----------
Balance at December 31, 1996 142 $1,420 $ 108,876 $ (84,400) $ - $ 25,896
===== ====== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-23
<PAGE> 57
Angeles Metal Trim Co. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) earnings $(1,454,236) $ 276,164
Adjustments to reconcile net (loss) earnings to net cash used in
operating activities:
Depreciation and amortization 70,114 83,963
Provision for bad debts 335,150 150,268
Write-off of property and equipment -- 51,773
Write-off of notes receivable 13,419 --
Increase in accounts receivable (119,910) (430,924)
(Increase) decrease in inventories 425,320 (1,032,888)
(Increase) decrease in prepaid expenses and other assets 56,941 (42,469)
Increase in accounts payable 401,468 657,987
(Decrease) increase in accrued liabilities (236,603) 135,644
----------- -----------
Total adjustments 945,899 (426,646)
----------- -----------
Net cash used in operating activities (508,337) (150,482)
Cash flows from investing activities:
Additions to notes receivable -- (30,366)
Repayment of notes receivable -- 26,497
Acquisition of property and equipment (171,450) (138,402)
Proceeds from sale of property and equipment 10,495 4,000
Redemption of shares of minority shareholder -- (20,000)
----------- -----------
Net cash used in investing activities (160,955) (158,271)
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 58
Angeles Metal Trim Co. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from financing activities:
Proceeds of short-term borrowings $ 650,000 $ 250,000
Repayment of long-term debt -- (137,745)
--------- ---------
Net cash used in financing activities 650,000 112,255
--------- ---------
Net decrease in cash (19,292) (196,498)
Cash at beginning of year 46,996 243,494
--------- ---------
Cash at end of year $ 27,704 $ 46,996
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 101,804 $ 88,367
========= =========
Income taxes $ -- $ 34,379
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 59
Angeles Metal Trim Co. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Business Activities
Angeles Metal Trim Co. and Subsidiary ("the Company") manufactures steel
framing used in commercial and residential structures. The Company's primary
market is domestic; however, approximately 5% of sales are to foreign markets,
primarily Japan.
2. Principles of Consolidation and Minority Interest in Subsidiary
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, California Building Systems, Inc. (CBS). All
significant intercompany accounts and transactions have been eliminated.
Effective at the beginning of 1995, the Company acquired the minority interest
in CBS from a related party for $20,000.
3. Inventories
Inventories are stated at the lower of standard cost (which approximates
first-in, first-out basis) or market.
4. Depreciation and Amortization
Depreciation and amortization are provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their estimated service lives
using principally the straight-line method. Leasehold improvements are
amortized over the lives of the respective leases or the service lives of the
improvements, whichever is shorter.
5. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-26
<PAGE> 60
Angeles Metal Trim Co. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
6. Concentrations
The Company maintains cash in a financial institution. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
$100,000. Uninsured balances aggregate to $41,709 and $163,944 at December 31,
1996 and 1995, respectively.
For the year ended December 31, 1996, the Company purchased 50% of its
materials from one vendor.
7. Financial Instruments
The carrying amounts of the Company's accounts receivable, accounts payable,
and short-term debt approximated fair value as of December 31, 1996 and 1995,
because of the relatively short maturity.
NOTE B - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Raw materials $ 530,441 $ 835,217
Work-in-process 381,211 306,035
Finished goods 1,293,882 1,258,207
---------- ----------
2,205,534 2,399,459
Less: allowance for obsolete inventory 231,395 -
---------- ----------
$1,974,139 $2,399,459
========== ==========
</TABLE>
F-27
<PAGE> 61
Angeles Metal Trim Co. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE C - NOTE PAYABLE BANK
The Company had a line of credit and term loan with a commercial bank. The line
of credit in the amount of $2,000,000 was guaranteed by an officer of the
Company and bore interest at the bank's prime rate plus 0.75% (9.75% at
December 31, 1996). Borrowings under the line of credit were collateralized by
accounts receivables and property and equipment. At December 31, 1996 and 1995,
$900,000 and $250,000 was outstanding under the line of credit, respectively.
Under the term loan the Company could borrow $650,000, of which any outstanding
borrowings would bear interest at the bank's prime rate plus 1.25%. The term
loan expired on December 31, 1996.
On January 15, 1997, the Company repaid the outstanding balance, terminated its
line of credit with the above commercial bank and entered into a revolving line
of credit with another bank. The line of credit has been shown as long-term
debt. Under this credit facility, the Company borrowed approximately $2,800,000
and can borrow up to $4,000,000 limited by eligible accounts receivable and
inventory. This credit facility is due on December 15, 1998 and bears interest
at a base interest rate of 2% per annum over the Bank's LIBOR-Rate for the
interest period. The line of credit is collateralized by accounts receivable and
inventory. The Company is subject to certain restrictive covenants under the
above lending arrangements, as defined in the agreement. The Company was not in
compliance with certain loan covenants which have been waived by the bank
through December 31, 1997.
On January 17, 1997, the Company also borrowed $1.4 million at an interest rate
of 9.78%, payable in forty-eight installments, with the final payment due
February 17, 2001.
NOTE D - NOTES PAYABLE TO FORMER OFFICER
Notes payable to a former officer were payable upon demand and bore interest at
10% per annum. One note payable was similar to a revolving line of credit with
the maximum limit not to exceed $500,000. As discussed in Note G, the Company
was sold to unrelated parties and these notes payable were due on the closing of
the sale. The notes were classified as long-term in 1995 because the former
officer did not intend to demand payment in the near-term.
F-28
<PAGE> 62
Angeles Metal Trim Co. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
December 31, 1996 and 1995
NOTE E -- INCOME TAXES
The actual tax expense differs from amounts computed using the statutory
Federal tax rate of 34% in 1996 and 1995 primarily due to a valuation allowance
for deferred tax assets and utilization of net operating loss carryforwards.
Deferred taxes are determined based on the estimated future tax effects of
difference between the financial statement and the basis of assets and
liabilities under the provisions of the enacted tax laws.
The tax effects of temporary differences that give rise to net deferred taxes
at December 31, 1996 and 1995 are:
<TABLE>
<CAPTION>
<S> <C> <C>
1996 1995
---- ----
Deferred tax assets:
Allowance for bad debts $101,858 $70,818
Reserve for inventory 100,194 --
Net operating loss carryforward 470,261 71,396
Inventory capitalization 61,158 50,373
State franchise tax 816 4,093
Depreciation and amortization 9,198 --
-------- -------
Total deferred tax assets 743,485 196,680
Valuation allowance for deferred tax assets (743,485) (161,112)
-------- --------
Net deferred tax asset -- 35,568
Deferred tax liability:
Depreciation and amortization -- (35,568)
-------- --------
Net deferred taxes $ -- $ --
========= ========
</TABLE>
A valuation allowance was established because of the uncertainty that the
deferred tax asset will be realized. The valuation allowance increased
approximately $582,373 and decreased $187,827 at December 31, 1996 and 1995,
respectively.
The amount of federal and state operating loss carryforwards at December 31,
1996 was approximately $1,285,000 and $357,000, respectively, with expiration
dates through 2011. Due to the subsequent change in ownership, these operating
losses are subject to limitations imposed by the tax regulations.
F-29
<PAGE> 63
Angeles Metal Trim Co. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1996 and 1995
NOTE F - COMMITMENTS
The Company leases its plant facilities under various operating lease
agreements.
Principal portions of its plant facilities were leased from a former
officer of the Company under month to month leases. On January 21,
1997, the Company entered into noncancellable lease agreements with
the former officer. (See Note G).
Total rent expense under operating lease agreements for the years
ended December 31, 1996 and 1995, (net of sublease rental income of
$21,071) was $289,774 and $144,347, respectively. In addition to the
lease payments, the Company is responsible for property taxes.
The following is a schedule of approximate future minimum lease
payments under operating leases for facilities and equipment that
have initial or remaining noncancellable lease terms in excess of
one year:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1997 $250,000
1998 269,000
1999 250,000
2000 8,000
--------
$777,000
========
</TABLE>
NOTE G - SUBSEQUENT EVENTS
On January 21, 1997, Angeles Acquisition Corporation acquired the
Company for $4,300,000, including fees and expenses. In connection
with this acquisition, the Company incurred indebtedness of
approximately $4,500,000.
F-30
<PAGE> 64
SIGNATURES
In accordance, Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has caused this report signed on its behalf by the
undersigned, thereunto duly authorized.
CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC.
Date: April 14, 1997 By: /s/ Thompson H. Rogers
--------------------------
Thompson H. Rogers
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thompson H. Rogers Chairman of the April 14, 1997
- ------------------------------ Board, and
Thompson H. Rogers Director (Principal
Executive Officer)
/s/ Donald R. Jackson Secretary, Treasurer, April 14, 1997
- ------------------------------ Chief Financial Officer
Donald R. Jackson and Director (Principal
Financial and
Accounting Officer)
/s/ Paul Bagley Director April 14, 1997
- ------------------------------
Paul Bagley
/s/ L. Wayne Harber Director April 14, 1997
- ------------------------------
L. Wayne Harber
/s/ John D. McKey, Jr. Director April 11, 1997
- ------------------------------
John D. McKey, Jr.
</TABLE>
S-1
<PAGE> 65
EXHIBIT INDEX
Exhibit No. Description
- ----------- ----------------------------------------------------------------
2.1 (1) Stock Purchase Agreement dated as of January 15, 1997 between
Angeles Acquisition Corp., Angeles Metal Trim Co., California
Building Systems, Inc., and the shareholders of Angeles Metal
Trim Co. and D. Kingston Cable (Exhibits and Schedules omitted).
2.2 (1) Agreement and Plan of Merger dated January 16, 1997 between the
Company, Consolidated Land & Cattle Company, Raymond E.
McElhaney, Bill M. Conrad, Ronald R. McGinnis, Angeles
Acquisition Corp. and Stone Pine Colorado, LLC (Exhibits and
Schedules omitted).
3.1 (2) Articles of Incorporation of the Company.
3.2 (3) By-laws.
10.1 (4) Real Estate Development Agreement, dated July 26, 1994, by and
between the Company, Glacier Valley Holding Corporation, and
other unrelated third parties.
10.2 (4) Lot Option Agreement dated September 28, 1994, by and between
the Company and JBS Corporation.
10.3 (5) Promissory Note dated May 11, 1995, by and between JBS
Corporation and Northcrest Joint Venture.
10.4 (5) Lot Option Agreement dated April 12, 1996, by and between the
Company and Elite Properties of America.
10.5 (4) Form of Promissory Note by and between the Company and Bear
Star Limited Liability Company.
10.6 (4) Form of Promissory Note by and between the Company and
Columbine Home Sales Limited Liability Company.
10.7 (4) Contract to Buy and Sell Real Estate by and between Bear Star
Limited Liability Company and the purchasers, dated June 24,
1994.
10.8 (4) Contract to Buy and Sell Real Estate by and between Columbine
Homes, L.L.C., and Allen E. Pezoldt Living Trust and Allen E.
Pezoldt, dated February 22, 1995.
<PAGE> 66
10.9 (6) Form of Employment Agreement between the Company and Raymond E.
McElhaney, Bill M. Conrad and Ronald R. McGinnis.
10.10 Purchase and Sale Agreement dated January 16, 1997 between the
Company, Raymond McElhaney, Bill Conrad and Ronald McGinnis
(Exhibits and Schedules omitted).
10.11 (1) Form of Stock Purchase Agreement dated January 16, 1997 between
the Company and the investors (Exhibits and Schedules omitted).
10.12 Lease Agreement dated January 15, 1997 by and between Angeles
Metal Trim Co. and D. Kingston Cable, Trustee of the Daniel
Kingston Cable and Barbara White Cable 1995 Revocable
Intervivos Trust (Re: property at 4817 and 4915 Sheila Street,
Commerce, California).
10.13 Lease Agreement dated January 15, 1997 by and between Angeles
Metal Trim Co. and D. Kingston Cable, Trustee of the Daniel
Kingston Cable and Barbara White Cable 1995 Revocable
Intervivos Trust (Re: property at 116 Y Street, Vancouver,
Washington).
10.14 Lease Agreement dated November 13, 1989 by and between Angeles
Metal Trim Co. and 83rd Street Investors (Re: property at 4841
83rd Street, Sacramento, California).
10.15 Lease Agreement dated October 1, 1996 by and between Angeles
Metal Trim Co. and Fred G. and Patricia A. Duncolon (Re:
property at 1851 Alexander Avenue, Tacoma, Washington).
10.16 Business Loan Agreement dated as of January 15, 1997 between
Angeles Metal Trim Co. and Union Bank of California, N.A.
("Union Bank").
10.17 Security Agreement dated as of January 9, 1997 between Angeles
Metal Trim Co. and Union Bank.
10.18 Promissory Note dated as of January 15, 1997 by Angeles Metal
Trim Co. in favor of Union Bank.
10.19 Continuing Guaranty by Angeles Acquisition Co. in favor of
Union Bank.
10.20 Master Security Agreement dated as of January 8, 1997 between
Angeles Metal Trim Co. and General Electric Capital Corporation
("GE").
10.21 Promissory Note dated as of January 17, 1997 by Angeles Metal
Trim Co. in favor of GE.
<PAGE> 67
10.22 Services Agreement dated as of February 1, 1997 between the
Company and Stone Pine Atlantic, LLC.
10.23 Non-Competition and Consulting Agreement dated as of
January 15, 1997 between Angeles Metal Trim Co. and
D. Kingston Cable.
10.24 Promissory Note dated as of January 16, 1997 by the Company in
favor of Stone Pine Cebrado, LLC.
16.(7) Letter from Kish Leake & Associates, P.C. dated February 5,
1997 regarding change of certifying accountant.
21. Subsidiaries of the Company.
27. Financial Data Schedule.
- -------------------------
(1) Incorporated by reference from the Company's Report on
Form 8-K dated January 23, 1997.
(2) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991.
(3) Incorporated by reference from the Company's Registration
Statement on Form S-18, Registration Number 33-24299, dated
October 27, 1988.
(4) Incorporated by reference from the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1994.
(5) Incorporated by reference from the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1995.
(6) Incorporated by reference from the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1993.
(7) Incorporated by reference from the Company's Report on Form 8-K
filed on February 7, 1997.
<PAGE> 1
EXHIBIT 10.10
PURCHASE AND SALE AGREEMENT
This Agreement is made and entered into this 16th day of January, 1997
(hereinafter the "Effective Date"), by and between CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC., a Colorado corporation (hereinafter referred to as "Seller"),
with its principal place of business located at 5525 Erindale Drive, Suite 201,
Colorado Springs, Colorado 80918, and RAYMOND E. MCELHANEY, BILL M. CONRAD AND
RONALD R. MCGINNIS (collectively referred to as the "Purchasers").
RECITALS
WHEREAS the Seller is a Colorado corporation duly authorized and
empowered to transact all lawful business for which corporations may be engaged
under the terms and conditions of the Colorado Business Corporations Act,
Section 7-101-101 and which owns certain assets as more fully set forth below;
WHEREAS the Purchasers are individuals who are desirous of obtaining
the Seller's interest in and to those certain assets in amounts of equal value.
NOW THEREFORE, in consideration of the above stated recitals which
shall be deemed to be a substantive part of this Agreement and the mutual
promises, covenants, agreements, representations and warranties contained in
this Agreement, the receipt and sufficiency of which is hereby acknowledged, the
parties hereby covenant, promise, agree, represent and warrant as follows:
ARTICLE I
PURCHASE AND SALE
1.1 On the terms and subject to the conditions set forth in this
Agreement, at the Closing on the Closing Date (as such terms are defined
herein), the Seller shall sell, assign, transfer and deliver to the Purchasers
or their affiliates and the Purchasers shall purchase from the Seller all of the
right, title and interest of the Seller in and to the following assets of the
Seller (all of which assets of the Seller are hereinafter collectively referred
to as the "Assets"):
1.1.1 The Seller's furniture and equipment as described in
Exhibit "A" attached hereto and incorporated herein by reference;
1.1.2 That certain 7,000 shares of Common Stock, $.01 par
value, per share of American Educational Products, Inc. including the
attendant Warrants to purchase additional shares of the Common Stock of
American Educational Products, Inc.;
1.1.3 That certain 37,500 shares of Common Stock, $.0001 par
value, per share of Gold Capital Corporation;
1
<PAGE> 2
1.1.4 That certain Promissory Note receivable by and between
the Seller and Glacier Valley Holding Corporation dated November 13,
1995 in the principal amount of $18,000;
1.1.5 The Seller's 52% interest in and to the Promissory Note
receivable and between Elite Properties of America, Inc. and the
Northcrest Joint Venture dated June 21, 1996 and the Seller's interest
in the Northcrest Joint Venture as evidenced by that certain Real
Estate Development Agreement dated July 27, 1994.
1.2 Purchase Price. The Purchase Price to be paid at Closing for the
Assets shall be $99,625 (the "Purchase Price") which the parties agree is the
fair market value of the Assets as of the date of this Agreement. The parties
agree that the Purchase Price for the Assets shall be allocated among the Assets
as follows:
<TABLE>
<S> <C>
Equipment and Furniture $ 1,000
Note Receivable-Glacier Valley Holding Corporation $ 2,125
Securities $44,500
Joint Venture $52,000
-------
Total $99,625
</TABLE>
1.2.1 A portion of the Purchase Price shall be paid by the
Purchasers agreeing to cancel Incentive Stock Options granted under the
terms and conditions of the Seller's 1988 Incentive Stock Option Plan,
dated July 26, 1994, granting to them the right to acquire an aggregate
of 455,454 shares of the Sellers Common Stock, $.0001 par value per
share, at the exercise price of $.55 per share and which options the
parties agree shall have a value of $30,625 for purposes of this
transaction;
1.2.2 In addition, the Purchasers shall relinquish any claim,
right, or interest in and to the salaries which have accrued for their
accounts and any claim for future salaries pursuant to those certain
Employment Agreements between the Seller and the Purchasers dated
November 15, 1994, as amended from time to time, in the aggregate
amount of $69,000, and agree that those Employment Agreements will be
canceled contemporaneously with the effective date of this Agreement.
1.2.3 Prior to the Closing, the Purchasers shall assume all
debts, liabilities and outstanding accounts of the Seller which have
not been paid on or before the Closing Date.
1.3 Documents of Conveyance. Prior to or at the Closing, the Seller
shall prepare and the Purchasers and the Seller shall execute, with respect to
the specific Assets to be sold, certain documents of conveyance. Specifically,
the Seller shall provide a Bill of Sale, in substantially
2
<PAGE> 3
the same form as Exhibit "B" attached hereto and incorporated herein by
reference, conveying all the Seller's right, title and interest in and to the
Assets listed in Section 1.1.1 to MCM Capital Management, Inc., an affiliate of
Messrs. Conrad and McElhaney. In addition, the Seller shall execute and deliver
to the Purchasers Assignments, in substantially the same form as Exhibits "C"
through "F", assigning all of the Seller's right, title and interest in and to
the Assets listed in Sections 1.1.2 through 1.1.5.
1.3.1 The Purchasers shall notify the Seller prior to Closing,
how the Purchasers desire to have the transferred Assets titled.
1.4 Closing Date. The Closing of the purchase and sale of the Assets
contemplated by this Agreement (referred to throughout this Agreement as the
"Closing") shall take place at the offices of Overton, Babiarz & Sykes, P.C.,
Englewood, Colorado, on December 30, 1996, at such time as may be agreed to
between Seller & Purchasers.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations of Seller. Seller represents and warrants to
Purchaser as follows:
2.1.1 Due Organization: Name and Address; Good Standing; Authority of
Seller. The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Colorado. The only name and business
address of the Seller which has been used by the Seller at any time within the
past three years ending at the date of this Agreement is Consolidated Capital of
North America, Inc., 5525 Erindale Drive, Colorado Springs, Colorado 80918. The
Seller has full right, power and authority to own, lease and operate its
properties and assets, and to carry on its business. The Seller is duly
licensed, qualified and authorized to do business in each jurisdiction in which
the properties and assets owned by it or the nature of the business conducted by
it make such licensing, qualification and authorization legally necessary. The
Seller is not in breach or violation of, and the execution, delivery and
performance of this Agreement will not result in a breach or violation of, any
of the provisions of the Seller's Articles of Incorporation, as amended to the
date of this Agreement or Bylaws, as amended to the date of this Agreement.
2.1.2 Agreement not in Conflict with Other Instruments; Required
Approvals Obtained. The execution, acknowledgment, sealing, delivery, and
performance of this Agreement and the consummation of the transactions
contemplated by this Agreement will not (i) violate or require any consent,
approval, or filing under, (A) any common law, law, statute, ordinance, rule or
regulation of any federal, state or local government or any agency, bureau,
commission, instrumentality or judicial body of any government, or (B) any
judgment, injunction, order, writ or decree of any court, arbitrator, government
agency by which the Seller, any of the Assets are bound; (ii) conflict with,
require any consent, approval, or filing under, result in the breach or
termination of any provision of, constitute a default under, or result in the
creation of any claim,
3
<PAGE> 4
security interest, lien, charge, or encumbrance upon any of the Assets pursuant
to, (A) the Seller's articles of incorporation or bylaws, (B) any indenture,
mortgage, deed of trust, license, permit, approval, consent, franchise, lease,
contract, or other instrument, document or agreement to which the Seller is a
party or by which the Seller or any of the Assets is bound, or (iii) any
judgment, injunction, order, writ or decree of any court, arbitrator, government
agency by which the Seller or any of the Assets is bound; and all permits,
licenses and authorizations of any government or government agency required to
be obtained prior to the Closing, shall have been obtained and shall be in full
force and effect as of the Closing Date.
2.1.3 Conduct of Business in Compliance with Regulatory and Contractual
Requirements. The Seller has conducted and is conducting its business in
compliance with all applicable laws. The sale of the Assets (i) is in compliance
with all laws applicable with respect thereto, and (ii) in compliance with all
restrictions, covenants, agreements, contracts, commitments, understandings and
arrangements applicable with respect thereto.
2.1.4 Title to Assets. The Seller has good and marketable title to all
Assets free and clear of any and all pledges, claims, threats, liens,
restrictions, agreements, leases, security interests, charges and encumbrances.
2.1.5 Disclaimer of Fraudulent Intent. The Seller represents and
warrants that the transaction described in this Agreement has been undertaken by
it in good faith, considering its obligations to any person or entity to whom
the Seller owes a right to payment, whether or not the right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured (collectively such
persons and entities with such claims are called "Creditors"), and has
undertaken the transaction contemplated by this Agreement without any intent to
hinder, delay or defraud any such Creditor, and has not and will not conceal
this Agreement or the proceeds herefrom, from any such Creditor. Seller further
represents and warrants: (i) it will not retain possession or control of any of
the property transferred under this Agreement following the Closing, except as
expressly provided herein and then only for and on behalf of the accounts of the
Purchasers; (ii) the Seller has not been sued or threatened with suit by any
Creditor prior to the execution of this Agreement, except as fully disclosed
herein; (iii) the Seller has not removed or concealed any assets from Creditors;
(iv) the Seller has not incurred any individual or aggregate substantial debt
that is significantly greater than the normal and customary debts of the Seller
in the ordinary course of business; (v) the Seller, at Closing, believes in good
faith that the Seller will receive consideration reasonably equivalent to the
value of the Assets transferred under this Agreement.
2.1.6 Notification. The Seller shall notify the Obligor of the Notes
described in 1.1.4 and 1.1.5 above, of the Seller's Assignment of all of its
right, title and interest in and to those Notes and shall direct the Obligors to
make all payments as required by the terms and conditions contained therein to
the Purchasers as directed by the Purchasers. The Seller shall also notify the
participants to the Joint Venture as defined in that Agreement of the Seller's
Assignment of its rights under that Agreement, to the Purchasers and shall
direct them to take all steps as are necessary to ensure the Purchasers position
as participants in the Joint Venture.
4
<PAGE> 5
2.1.7 Indemnification by Seller. The Seller shall defend, indemnify and
hold harmless the Purchasers and each of them, their respective heirs, personal
and legal representatives, guardians, successors and assigns and insurers of the
same, from and against any and all claims, threats, liabilities, taxes,
interest, fines, penalties, suits, actions, proceedings, demands, damages,
losses, costs and expenses (including attorneys' and experts' fees and court
costs) of every kind and nature arising out of, resulting from, or in connection
with:
2.1.7.1 Any nonperformance by Seller of the covenant contained
in 2.1.6 any covenant, promise or agreement of the Seller contained in
this Agreement or any agreement attached hereto.
2.2 Representations of Purchaser. The Purchasers and each of them
hereby represent, warrant, and agree as follows:
2.2.1 Condition of Assets. The Purchasers accept the Assets in
their "as is", "where is" condition with no warranties of fitness,
merchantability of condition except as expressly provided for herein.
2.2.2 Assumption and Payment of Seller Liabilities. Prior to
the Closing, the Purchasers hereby covenant, promise and agree jointly
and severally, to settle, pay or assume all of the debts, liabilities
and outstanding accounts of the Seller which have not been paid on or
before the Closing Date (the "Assumed Liabilities") and the Purchasers
shall execute and deliver to the Seller, Purchasers Assumption
Agreement, in substantially the same form as Exhibit G, pursuant to
which the Purchasers will assume all of the Assumed Liabilities.
2.2.3 Indemnification by Purchasers. The Purchasers and each
of them shall defend, indemnify and hold harmless the Seller its
officers, directors, stockholders, agents, servants and employees and
their respective heirs, personal and legal representatives, guardians,
successors, assigns and insurers of the same from and against any and
all claims, threats, liabilities, taxes, interest, fines, penalties,
suits, actions, proceedings, demands, damages, losses, costs and
expenses (including attorneys' and experts' fees and court costs) of
every kind and nature arising out of, resulting from, or in connection
with;
2.2.3.1 Any misrepresentation, omission or breach by
the Purchasers of any representation or warranty contained in
this Agreement.
2.2.3.2 Any nonperformance, failure to comply or
breach by the Purchasers of any covenant, promise or agreement
of the Purchasers contained in this Agreement.
5
<PAGE> 6
ARTICLE III
CONDITIONS PRECEDENT TO CLOSING
3.1 Closing of Related Transaction. The closing of the transactions
contemplated hereby shall be the Effective Time of the merger of a wholly owned
subsidiary of the Seller with Angeles Acquisition Co., a Delaware Corporation,
as contemplated by that certain Letter of Intent dated November 22, 1996 by and
between the Seller and Stone Pine Atlantic, LLC.
ARTICLE IV
MISCELLANEOUS
4.1 Costs. Each party shall bear all costs incurred by it in the
Transaction.
4.2 Amendment. This Agreement may not be altered or amended, nor any
rights or conditions hereunder be waived, except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver. No
waiver of any term, provision, or condition in this Agreement, in any one or
more instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, provision or condition of this Agreement.
4.3 Further Assurances. The parties to this Agreement shall execute,
acknowledge and deliver, or cause to be executed, shall take such other action
as may be necessary or advisable to carry out their respective obligations under
this Agreement.
4.4 Assignment. No party may assign its rights or delegate its duties
or obligations under this Agreement without the prior written consent of all of
the other parties.
4.5 Headings. The headings of the Articles and Sections of this
Agreement are for convenience of reference only and shall not limit or otherwise
affect any of the terms or provisions of this Agreement.
4.6 Governing Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of Colorado.
4.7 Survival. All of the covenants, agreements, representations and
warranties set forth in this Agreement shall survive and inure to the benefit of
the parties so long as this Agreement is effective.
4.8 Counterparts. This Agreement may be executed by the parties in any
number of counterparts, each of which shall be deemed an original instrument,
all of which together shall constitute one and the same agreement.
4.9 Parties in Interest. This Agreement shall be binding upon, and
shall inure to the
6
<PAGE> 7
benefit of, the parties hereto and their respective successors and assigns.
Nothing contained in this Agreement, express or implied, is intended to confer
upon any other person or entity any benefits, rights or remedies whatsoever.
IN WITNESS WHEREOF, this Agreement has been executed by the parties to
be effective as of the date first above written.
Seller:
CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC.
By: /s/ Raymond E. McElhaney, President
---------------------------------------
Raymond E. McElhaney, President
Purchasers:
/s/ Raymond E. McElhaney
--------------------------------------------
Raymond E. McElhaney
/s/ Bill M. Conrad
--------------------------------------------
Bill M. Conrad
/s/ Ronald R. McGinnis
--------------------------------------------
Ronald R. McGinnis
7
<PAGE> 1
Exhibit 10.12
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-GROSS
1. Basic Provisions ("Basic Provisions")
1.1 Parties: This Lease ("Lease"), dated for reference purposes only, January
15, 1997 is made by and between Daniel Kingston Cable, Trustee of the Daniel
Kingston Cable and Barbara White Cable 1995 Revocable Intervivos Trust dated
2/15/95 ("Lessor") and Angeles Metal Trim Co., Inc. ("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 4817 and 4915 Sheila Street, City of Commerce located in
the county of Los Angeles, State of California, and generally described as
(describe briefly the nature of the property) Lots 3,4,5,6,7,8 of Tract 7275 as
per Map recorded in Map Book 109, Pages 88 and 89, Los Angeles County,
California. See Exhibit "A" for a plot plan attached hereto and hereby
incorporated herein by this reference. Subject to all rights of way,
encumbrances and other matters of record ("Premises"). (See Paragraph 2 for
further provisions.)
1.3 Term: 3 years and 0 months ("Original Term") commencing ("Commencement
Date") and ending ("Expiration Date"). (See Paragraph 3 for further provisions.)
1.4 [omitted]
1.5 Base Rent: $10,000 per month ("Base Rent"), payable on the 15th day of each
month during the first 12 months of this Lease and $11,000 per month for the
remaining 24 months of the initial term of this Lease. (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: $10,000 as Base Rent for the period.
1.7 Security Deposit: $10,000 ("Security Deposit"). (See Paragraph 5 for further
provisions.).
1.8 Permitted Use: offices, manufacturing and warehousing of light gage metal
building materials (See Paragraph 6 for further provisions.)
1.9 Insuring Party: Lessor is the "Insuring party." $__________ is the "Base
Premium." (See Paragraph 8 for further provisions.)
1.10 [omitted]
1.11[omitted]
1.12 Addenda. Attached hereto is an Addendum or Addenda consisting of Paragraphs
41 through 45 and Exhibits A option to extend and rent adjustment 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.
<PAGE> 2
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 operation 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. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within thirty
(30) days after the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor warrants
to Lessee that the improvements on the Premises comply with all applicable
covenants or restrictions of record and applicable building codes, regulations
and ordinances in effect on the Commencement Date. Said warranty does not apply
to the use to which Lessee will put the Premises or to any Alterations or
Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by
Lessee. If the Premises do not comply with said warranty, Lessor shall, except
as otherwise provided in this Lease, promptly after receipt of written notice
from Lessee setting forth with specificity the nature and extent of such
non-compliance, rectify 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 *** as
defined in Paragraph 6.3) and the present and future suitability of the Premises
of Lessee's intended use, (b) the 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, not 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,
shall be in effect during such period. Any such early possession shall not
affect nor advance the Expiration Date of the Original Term.
<PAGE> 3
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.
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 addressees 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 13.1), 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 should 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
<PAGE> 4
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 Lessee, no part of the Security Deposit
shall be considered to be held in trust, to bear interest or other *** 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. Lessor
hereby agrees to not unreasonably withhold or delay its consent to any written
request by Lessee, Lessees assignees or subtenants, and by prospective assignees
and subtenants of the Lessee, its assignees and subtenants, for a modification
of said permitted purpose for which the premises may be used or occupied, so
long as the same will not impair the structural integrity of the improvements on
the Premises, the mechanical or electrical systems therein, is not significantly
more burdensome to the Premises and the improvements thereon, and is otherwise
permissible pursuant to this Paragraph 6. If Lessor elects to withhold such
consent, Lessor shall within five (5) business days give a written notification
of same, which notice shall include an explanation of Lessor's reasonable
objections to the change in use.
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) a basis for liability of Lessor to any governmental agency or third party
under any applicable statute or common law theory. Hazardous Substance shall
include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or
any products, by-products or *** thereof. Lessee shall not engage in any
activity in, on or about the Premises which constitutes a Reportable Use (as
hereinafter defined) of Hazardous Substances without the express prior written
consent of Lessor and compliance in a timely manner (at Lessee's sole cost and
expense) with all Applicable Law (as defined in Paragraph 6.3). "Reportable Use"
shall mean (i) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or disposal
of a Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with, any
governmental authority. Reportable Use shall also include Lessee's being
responsible for the presence in, on or about the Premises of a Hazardous
Substance with respect to which any Applicable Law requires that a notice be
given to persons entering or occupying the Premises or neighboring properties.
Notwithstanding the foregoing, Lessee may, without Lessor's prior consent, but
in
<PAGE> 5
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 therefore, 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 therefore, 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 and 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, releases, 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 of 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, permit, 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)
<PAGE> 6
environmental conditions on, in, under or about the Premises, including soil and
ground water conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill or release of
any Hazardous Substance or storage tank), now in effect or which may hereafter
come into effect, and whether or not reflecting a change in policy from any
previously existing policy. Lessee shall, within five (5) days after receipt of
Lessor's written request, provide Lessor with copies of all documents and
information, including, but not limited to, permits, registrations, manifests,
applications, reports and certificates. Evidencing Lessee's compliance with any
Applicable Law specified by Lessor, and shall immediately upon receipt, notify
Lessor in writing (with copies of any documents involved) of any threatened or
actual claim, notice, citation, warning, complaint or report pertaining to or
involving failure by Lessee or the Premises to comply with any Applicable Law.
6.4 Inspection; Compliance. Lessor and Lessor's lender(s) (as defined in
Paragraph 8.3(a) shall have the right to enter the Premises at any time in the
case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as outlined 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 (Leasor'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), 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
<PAGE> 7
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 [omitted] 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 conditioning 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' machinery and equipment that can be removed without
doing material damage to the Premises. The term "Alternations" 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
<PAGE> 8
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 Alteration 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
<PAGE> 9
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 obligation of Lessee shall include the repair of any damage
occasioned by the installation, maintenance or removal of Lessee's Trade
Fixtures, furnishings, equipment, and Alterations and/or Utility Installations,
as well as the removal of any storage tank installed by or for Lessee, and the
removal, replacement, or remediation of any soil, material or ground water
contaminated by Lessee, all as may then be required by Applicable Law and/or
good service practice. Lessee's Trade Fixtures shall remain the property of the
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.
(a) Lessee shall pay to Lessor any insurance cost increase ("Insurance Cost
Increase") occurring during the term of this Lease. "Insurance Cost Increase" is
defined as any increase in the actual cost of the insurance required under
Paragraphs 8.2(b), 8.3(a) and 8.3(b). ("Required Insurance"), over and above the
Base Premium, as hereinafter defined, calculated on an annual basis, "Insurance
Cost Increase" shall include but not be limited to increases resulting from 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, and/or a premium rate increase. If the parties insert a dollar
amount in Paragraph 1.9, such amount shall be considered the "Base Premium." In
lieu thereof, if the Premises have been previously occupied, the "Base Premium"
shall be the annual premium applicable to the most recent occupancy. If the
Premises have never been occupied, the "Base Premium" shall be the lowest annual
premium reasonably obtainable for the Required Insurance as of the commencement
of the Original Term, assuming the most nominal use possible of the Premises. In
no event, however, shall Lessee be responsible for any portion of the premium
cost attributable to liability insurance coverage in excess of $1,000,000
procured under Paragraph 8.2(b) (Liability Insurance Carried By Lessor).
<PAGE> 10
(b) Lessee shall pay any such Insurance Cost Increase to Lessor within thirty
(30) days after receipt by Lessee of a copy of the premium statement or other
reasonable evidence of the amount due. If the insurance policies maintained
hereunder cover other property besides the Premises, Lessor shall also deliver
to Lessee a statement of the amount of such Insurance Cost Increase attributable
only to the Premises showing in reasonable detail the manner in which such
amount was computed. Premiums for policy periods commencing prior to, or
extending beyond, the term of this Lease shall be prorated to coincide with the
corresponding Commencement or Expiration of the Lease term.
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 as between an 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. 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.
8.3. Property Insurance-Building, Improvements and Rental Value.
(a) Building and improvements. The insuring Party shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to the holders of any mortgages, deeds of trust or
ground leases on the Premises ("Lender(s)"), insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, or the amount
required by Lenders, but in the 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
<PAGE> 11
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 inflation guard protection causing an increase in the
annual property insurance coverage amount by a factor of no 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 a 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 or 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 more 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 Paragraph 8.2(a) and 8.4.
<PAGE> 12
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 be insured against under Paragraph
8. The effect of such releases and waivers of the right to recover damages shall
not be limited by the amount of insurance carried or required, or by any
deductibles applicable thereto.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master *** ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for injury or
damage to the person or goods, wares, merchandise or other property of Lessee,
Lessee's employees, contractors, invitees, customers, or any other person in or
about the Premises, whether such damage or injury is caused by or results from
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. Damage or Destruction.
9.1. Definitiions.
<PAGE> 13
(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
involve.
(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 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 affect. 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
<PAGE> 14
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 reasonable possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage of Lessor's desire to terminate this Lease as of the date sixty (60) days
following the giving of such notice. In the event Lessor elects to give such
notice of Lessor's intention to terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's commitment to pay for the repair of such damage
totally at Lessee's expense and without 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
<PAGE> 15
expirations 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 expirations 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
<PAGE> 16
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 (12) 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 Lessee to Lessor. Lessor
shall, in addition, return to Lessee so much of Lessee's Security Deposit as
has not been, or is not then required to be, used by Lessor under the terms
of this Lease.
9.9 Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall
govern the effect of any damage to or destruction of the Premises with
respect to the termination of this lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
10. Real Property Taxes.
10.1 (a) Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined
in Paragraph 10.2, applicable to the Premises; provided, however, that Lessee
shall pay, in addition to rent, the amount, if any, by which Real Property Taxes
applicable to the Premises increase over the fiscal tax year during which the
Commencement Date occurs ("Tax Increase"). Subject to Paragraph 10.1(b), payment
of any such Tax Increase shall be made by Lessee within thirty (30) days after
receipt of Lessor's written statement setting forth the amount due and the
computation thereof. Lessee shall promptly furnish Lessor with satisfactory
evidence that such taxes have been paid. If any such taxes to be paid by Lessee
shall cover any period of time prior to or after the expiration, or earlier
termination of the term hereof, Lessee's share of such taxes shall be equitably
prorated to cover only the period of time within the tax fiscal year this Lease
is in effect, and Lessor shall reimburse Lessee for any overpayment after such
proration. (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.
<PAGE> 17
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 as 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.
(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
<PAGE> 18
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 noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to
treat such unconsented to assignment or subletting as a noncurable 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
<PAGE> 19
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.
(d) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor shall be
limited to compensatory damages and injunctive relief.
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) releases
Lessee of any obligations hereunder, or (iii) alter the primary liability of
Lessee for the payment of Base Rent and other sums due Lessee 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 disapprovel 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 of 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 sublessees, 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.
<PAGE> 20
(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 outlined in Paragraph 13.1) shall
occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease receive, collect and enjoy
the rents accruing under such 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 sublessees, upon receipt of a written notice
from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor the rents and other charges
due and to become due under the sublease. Sublessee shall rely upon any such
statement and request from Lessor and shall pay such rents and other charges
to Lessor without any obligation or right to inquire as to whether such
Breach exists and notwithstanding any notice from or claim from Lessee to
the contrary. Lessee shall have no right or claim against said sublessee,
or, until the Breach has been cured, against Lessor, for any such rents and
other charges so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its obligations
under this Lease, Lessor, at its option and without any obligation to do so,
may require any sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from the time
of the exercise of said option to the expiration of such sublease; provided,
however, Lessor shall not be liable for any prepaid
<PAGE> 21
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 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, 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.
<PAGE> 22
(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
<PAGE> 23
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
(1%). Efforts by Lessor to mitigate damages caused by Lessee's Default or
Breach of this Lease shall not waive Lessor's right to recover damages under
this Paragraph. If termination of this Lease is obtained through the
provisional remedy of unlawful detainer, Lessor shall have the right to
recover in such proceeding the unpaid rent and damages as are recoverable
therein, or Lessor may reserve therein the right to recover all or any part
thereof in a separate suit for such rent and/or damages. If a notice and
grace period required under subparagraphs 13.1 (b), (c) or (d) was not
previously given, a notice to pay rent or quit, or to perform or quit, as
the case may be, given to Lessee under any statute authorizing the
forfeiture of leases for unlawful detainer shall also constitute the
applicable notice for grace period purposes required by subparagraphs
13.1(b), (c) or (d). In such case, the applicable grace period under
subparagraphs 13.1(b), (c) or (d) and under the unlawful detainer statute
shall run concurrently after the one such statutory notice, and the failure
of Lessee to cure the Default within the greater of the two such grace
periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by
said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in California
under California Civil Code Section 1951.4) after Lessee's Breach and
abandonment and recover the rent as it becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a
receiver to protect the Lessor's interest under the Lease, shall not
constitute a termination of the Lessee's right to possession.
<PAGE> 24
(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,
<PAGE> 25
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 or
any amount in excess of such no 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 $_________________)
for brokerage services rendered by said Broker to Lessor in this
transaction.
<PAGE> 26
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 in 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 *** 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 Lessees 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
<PAGE> 27
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 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 or 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
<PAGE> 28
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 money
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 *** 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 there of 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.
<PAGE> 29
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 (1) 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
<PAGE> 30
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.
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). Unless otherwise expressly
agreed herein, Lessor reserves all rights to the use of the roof and the
right to install, and all revenues from the installation of, such
advertising signs on the Premises, including the roof, as do not
unreasonably interfere with the conduct of Lessee's business.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for
Breach by Lessee, shall automatically terminate any sublease or lesser
estate in the Premises; provided, however, Lessor shall, in the event of any
such surrender, termination or cancellation, have the option to continue any
one 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,
wherever 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
<PAGE> 31
consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, practice or storage tank, shall be paid by Lessee to
Lessor upon receipt of an invoice and supporting documentation therefor.
Subject to Paragraph 12.2(e) (applicable to assignment or subletting),
Lessor may, as a condition to considering any such request by Lessee,
require that Lessee deposit with Lessor an amount of money (in addition to
the Security Deposit held under Paragraph 5) reasonably calculated by Lessor
to represent the cost Lessor will incur in considering and responding to
Lessee's request. Except as otherwise provided, any unused portion of said
deposit shall be refunded to Lessee without interest. Lessor's consent to
any act, assignment of this Lease or subletting of the Premises by Lessee
shall not constitute an acknowledgment that no Default or Breach by Lessee
of this Lease exists, nor shall such consent be deemed a waiver of any then
existing Default 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 signature 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
<PAGE> 32
first refusal to lease the Premises or the right of first offer to lease
the Premises or the right of first refusal to lease other property of
Lessor or the right of first offer to lease other property of Lessor; (c)
the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the
Premises, or the right to purchase other property of Lessor, or the right
of first refusal to purchase other property of Lessor, or the right of
first offer to purchase other property of Lessor.
39.2 Options Personal to Original Lessee. Each Option granted to Lessee in this
Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in
full and actual possession of the Premises and without the intention of
thereafter assigning or subletting. The Options, if any, herein granted to
Lessee are not assignable, either as a part of an assignment of this Lease
or separately or apart therefrom, and no Option may be separated from this
Lease in any manner, by reservation or otherwise.
39.3 Multiple Options. In the event that Lessee has any Multiple Options to
extend or renew this Lease, a later Option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding any
provision in the grant of Option to the contrary; (i) during the period
commencing with the giving of any notice of Default under Paragraph 13.1 and
continuing until the noticed Default is cured, or (ii) during the period of
time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has
given to Lessee three (3) or more notices of Default under Paragraph 13.1,
whether or not the Defaults are cured, during the twelve (12) month period
immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee's inability to exercise an Option
because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall terminate and
be of no further force or effect, notwithstanding Lessee's due and timely
exercise of the Option, if, after such exercise and during the term of this
Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee for
a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives
to Lessee three (3) or more notices of Default under Paragraph 13.1 during
any twelve (12) 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 building of vehicles and the preservation of good order, as well
as for the convenience of other occupants or tenants of such other
<PAGE> 33
buildings and their invitees, and that Lessee will pay its fair share of
common expenses incurred in connection therewith.
41. Security Measures. Lessees hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to
provide same. Lessee assumes all responsibility for the protection of the
Premises, Lessee, its agents and invitees and their property from the acts
of third parties.
42. Reservations. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of
parcel maps and restrictions, so long as such easements, rights,
dedications, maps and restrictions do not unreasonably interfere with the
use of the Premises by Lessee. Lessee agrees to sign any documents
reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. Performance Under Protest. If 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
<PAGE> 34
Multiple Parties shall be the joint and several responsibility of all
persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW
THEIR INFORMED AND VOLUNTARY CONSENT THERETO, THE PARTIES HEREBY AGREE
THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND
LESSEE WITH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL, FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES, NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE
LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE
ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE, IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA,
AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE
CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at Los Angeles, California Executed at
on on
by LESSOR: by LESSEE:
Daniel Kingston Cable, Trustee of the Daniel ANGELES METAL TRIM CO.,
INC.
Kingston Cable and Barbara White Cable 1995
Revocable Intervivos Trust dated 2/15/95
By By
Name Printed: Name Printed:
Title: Title:
By: By:
<PAGE> 35
Name Printed: Name Printed:
Title: Title:
Address: 3907 Bouton Drive, Lakewood, CA 90712 Address:
Tel No ( ) Fax No ( ) Tel No ( ) Fax No ( )
<PAGE> 36
Exhibit A
[Drawing of Premises]
<PAGE> 37
RENT ADJUSTMENT(S)
ADDENDUM TO
STANDARD LEASE
Dated January 15, 1997
By and Between (Lessor) DANIEL KINGSTON CABLE, TRUSTEE
(Lessee) ANGELES METAL TRIM CO., INC.
Property Address: 4817 and 4915 Sheila Street, City of Commerce
Paragraph 1.5
A. RENT ADJUSTMENTS:
The monthly rent for each month of the adjustment period(s) specified below
shall be increased using the method(s) indicated below:
(Check Method(s) to be Used and Fill in Appropriately)
x 1. Cost of Living Adjustment(s) (COL)
(a) On (Fill in COL Adjustment Date(s): every 12 months, during the initial term
of this Lease and any extension thereof, including the "Option Period" the
monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be adjusted by the change, if any, from the Base Month specified
below, in the Consumer Price Index of the Bureau of Labor Statistics of the
U.S. Department of Labor for All Urban Consumers - U.S. City Average. All
items herein referrred to as "C.P.I.".
(b) The monthly rent payable in accordance with paragraph A1(a) of this Addendum
shall be calculated as follows: the Base Rent set forth in paragraph 1.5 of
the attached Lease, shall be multiplied by a fraction the numerator of which
shall be the C.P.I. of the calendar month 2 (two) months prior to the
month(s) specified in paragraph A1(a) above during which the adjustment is
to take effect, and the denominator of which shall be the C.P.I. of the
calendar month which is two (2) months prior to (select one): the first
month of the term of this Lease as set forth in paragraph 1.3 ("Base Month")
or (Fill in Other "Base Month"): . The sum so calculated shall constitute
the new monthly rent hereunder, but in no event, shall any such new monthly
rent be less than the rent payable for the month immediately preceding the
date for rent adjustment.
(c) In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau or agency or
shall be discontinued, then the index most nearly the same as the C.P.I.
shall be used to make such calculation. In the
<PAGE> 38
event that Lessor and Lessee cannot agree on such alternative index, then
the matter shall be submitted for decision to the American Arbitration
Association in accordance with the then rules of said association and the
decision of the arbitrators shall be binding upon the parties. The cost of
said Arbitrators shall be paid equally by Lessor and Lessee.
II. Market Rental Value Adjustment(s) (MRV)
[not applicable]
III. Fixed Rental Adjustment(s) FRA
The monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be increased to the following amounts
On (Fill in FRA adjustment Date(s): The New Base Rental shall be:
at the conclusion of the first $11,000
------------------------------ --------------
12 months of the initial term $
------------------------------ --------------
of this Lease $
------------------------------ --------------
$
--------------
<PAGE> 39
ADDENDUM TO
STANDARD INDUSTRIAL LEASE
Dated January 15, 1997
By and Between DANIEL KINGSTON CABLE, TRUSTEE AND
ANGELES METAL TRIM CO., INC.
39. (Continued) OPTION TO EXTEND
A. Lessor hereby grants to Lessee the option to extend the term of this lease
for 2-3 year periods commencing when the prior term expires upon each and
all of the following terms and conditions.
(i) Lessee gives to Lessor, and Lessor actually receives, on a date which
is prior to the date that the option period would commence (if exercised)
by at least six (6) and not more than nine (9) months, a written notice of
the exercise of the option to extend this lease for said additional term,
time being of the essence. If said notification of the exercise of said
option is not so given and received, this option shall automatically
expire:
(ii)The provisions of paragraph 39, including the provision relating to
default of Lessee set forth in paragraph 39.4 of this Lease are conditions
of this Option:
(iii) All of the terms and conditions of this Lease except where
specifically modified by this option shall apply:
(iv) The monthly rent for each month of the option period shall be
calculated as follows:
(a) As used herein, the term "C.P.I." shall mean the Consumer Price Index
of the Bureau of Labor Statistics of the U.S. Department of Labor for All
Urban Consumers - U.S. City Average, "All Items", herein referred to as
"C.P.I."
(b) The rent payable for the first month of the initial term of this Lease,
as set forth in paragraph 4 of the attached lease, shall be multiplied by a
fraction the numerator of which shall be the C.P.I. of the calendar month
during which the option period commences and the denominator of which shall
be the C.P.I. for the month in which the original Lease term commenced. The
sum calculated shall constitute the new monthly rent during the option
period, but, in no event, shall such new monthly rent be less than the rent
payable for the month immediately preceding the commencement of the option
period.
(c) Pending receipt of the required C.P.I. and determination of the actual
adjustment, Lessee shall pay an estimated adjusted rental, as reasonably
determined by Lessor by reference to the then available C.P.I. information.
Upon notification of the actual
<PAGE> 40
adjustment after publication of the required C.P.I., any overpayment shall
be credited against the next installment of rent due, and any underpayment
shall be immediately due and payable by Lessee. Lessor's failure to request
payment of an estimated or actual rent adjustment shall not constitute a
waiver of the right to any adjustment provided for in the Lease or this
addendum.
(d) In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau or agency or
shall be discontinued, then the index most nearly the same as the C.P.I.
shall be used to make such calculation. In the event that Lessor and Lessee
cannot agree on such alternative index, then the matter shall be submitted
for decision to the American Arbitration Association in accordance with the
then rules of said association and the decision of the arbitrators shall be
paid equally by Lessor and Lessee.
<PAGE> 41
ADDENDUM TO LEASE
FOR THE PREMISES COMMONLY KNOWN AS
4817 AND 4915 SHEILA STREET
CITY OF COMMERCE, CALIFORNIA
41. Notwithstanding anything contained in the Lease to the contrary the Lessee
has been afforded an opportunity to inspect the Premises utilizing experts
of its own choice; the Premises are being leased on an "AS IS BASIS".
Lessor represents that to the best of his knowledge the Premises have no
hazardous or other materials in violation of any EPA, environmental or
other local, state or federal laws or regulations (the "Environmental
Regulations"). In the event any pre-existing violation of the Environmental
Regulations is discovered during the lease term or option renewal period
which violation materially interferes with the conduct of Lessees business
on the Premises, then Lessee shall have the right upon thirty (30) days
written notice to Lessor to terminate the least unless Lessor shall
forthwith take action to correct such violation of the Environmental
Regulations so the same does not then materially interfere with the conduct
of Lessees business on the Premises.
42. Notwithstanding anything contained in the Lease to the contrary, Lessee
represents and warrants to Lessor that it will at Lessee's cost and expense
and at no cost or expense to Lessor comply with all governmental
restrictions and requirements with respect to the use of the Premises.
43. Lessee understands and acknowledges that the Premises are located within a
Redevelopment Area of the City of Commerce. Lessor and its successors and
assigns shall have the right to terminate this Lease without payment of any
kind by Lessor or any governmental agency to Lessee upon six (6) months
notice in the event that the Premises are transferred or sold for
redevelopment purposes.
44. Nothwithstanding anything contained in this Lease to the contrary, Lessee
assumes full responsibility and all expenses not to exceed $5,000 for
obtaining necessary occupancy permits for the Premises.
45. Lessor shall provide to Lessee (D.K. Cable) without cost, the continued use
by Lessee (D.K. Cable) of his existing office and its existing use for the
first 12 months of the initial term of this Lease.
<PAGE> 1
Exhibit 10.13
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE -- GROSS
1. Basic Provisions ("Basic Provisions")
1.1 Parties: This Lease ("Lease"), dated for reference purposes only, January
15, 1997 is made by and between Daniel Kingston Cable, Trustee of the Daniel
Kingston Cable and Barbara White Cable 1995 Revocable Intervivos Trust Dated
2/15/95 ("Lessor") and Angeles Metal Trim Co., Inc. ("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 116 Y Street, City of Vancouver located in the County of
Clark, State of Washington, and generally described as (describe briefly the
nature of the property) See Exhibit "A-1" and "A-2" attached hereto and
incorporated herein by this reference consisting of as Tract Map and Legal
Description for said premises ("Premises"). (See Paragraph 2 for further
provisions.)
1.3 Term: 3 - years and 0 months ("Original Term") (See Paragraph 3 for further
provisions.)
1.4 [omitted]
1.5 Base Rent: $5,000 per month ("Base Rent"), payable on the 15th day of each
month (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.
B. NOTICE: Unless specified otherwise herein, notice of any escalations other
than Fixed Rental Adjustment(s) shall be made as specified in paragraph 23 of
the attached Lease.
C. BROKER'S FEE:
The Real Estate Brokers specified in paragraph 1.10 of the attached
Lease shall be paid a Brokerage Fee for each adjustment specified above
in accordance with paragraph 15 of the attached Lease.
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: $5,000 as Base Rent for the period the first
month of the initial term of the Lease
1.7 Security Deposit: $5,000 ("Security Deposit"). (See Paragraph 5 for further
provisions.)
1.8 Permitted Use: offices, manufacturing and warehousing of light gage metal
building material (See Paragraph 6 for further provisions.)
1.9 Insuring Party: Lessor is the "Insuring Party." $ is the "Base Premium."
(See Paragraph 8 for -------------- further provisions.)
1.10 [omitted]
1.11 [omitted]
1.12 Addenda. Attached hereto is an Addendum or Addenda consisting of Paragraphs
41 through 42 and Exhibits A-1, A-2 option to extend and rent adjustment 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
<PAGE> 2
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 operation 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. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within thirty
(30) days after the Commencement Date, correction of that non-compliance shall
be the obligation of Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor warrants
to Lessee that the improvements on the Premises comply with all applicable
covenants or restrictions of record and applicable building codes, regulations
and ordinances in effect on the Commencement Date. Said warranty does not apply
to the use to which Lessee will put the Premises or to any Alterations or
Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by
Lessee. If the Premises do not comply with said warranty, Lessor shall, except
as otherwise provided in this Lease, promptly after receipt of written notice
from Lessee setting forth with specificity the nature and extent of such
non-compliance, rectify 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 and the present and future suitability of the Premises of Lessee's
intended use, (b) the 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, not 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,
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,
<PAGE> 3
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.
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 addressees 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 13.1), 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 should 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 Lessee, 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. Lessor
hereby agrees to not unreasonably withhold or delay its consent to any written
request by Lessee, Lessees assignees or subtenants, and by prospective assignees
and subtenants of the Lessee, its assignees and subtenants, for a modification
of said permitted purpose for which the premises may be used or occupied, so
long as the same will not impair the structural integrity of the improvements on
the Premises, the mechanical or electrical systems therein, is not significantly
more burdensome to the Premises and the improvements thereon, and is otherwise
permissible pursuant to this Paragraph 6. If Lessor elects to withhold such
consent, Lessor shall within five (5) business days give a written notification
of same, which notice shall include an explanation of Lessor's reasonable
objections to the change in use.
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) a basis for liability of Lessor to any governmental agency or third party
under any applicable statute or common law theory. Hazardous Substance shall
include, but not be limited to, hydrocarbons, petroleum,
<PAGE> 4
gasoline, crude oil or any products, by-products or fractions thereof. Lessee
shall not engage in any activity in, on or about the Premises which constitutes
a Reportable Use (as hereinafter defined) of Hazardous Substances without the
express prior written consent of Lessor and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Law (as defined in Paragraph
6.3). "Reportable Use" shall mean (i) the installation or use of any above or
below ground storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority. Reportable Use shall
also include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the Premises or
neighboring properties. Notwithstanding the foregoing, Lessee may, without
Lessor's prior consent, but in compliance with all Applicable Law, use any
ordinary and customary materials reasonably required to be used by Lessee in the
normal course of Lessee's business permitted on the Premises, so long as such
use is not a Reportable Use and does not expose the Premises or neighboring
properties to any meaningful risk of contamination or damage or expose Lessor to
any liability therefor, in addition, Lessor may (but without any obligation to
do so) condition its consent to the use or presence of any Hazardous Substance,
activity or storage tank by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public; the Premises and the environment against damage,
contamination or injury and/or liability therefrom or therefor, including, but
not limited to, the installation (and removal on or before Lease expiration or
earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of and 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, releases, 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 of 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, permit, 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
ground water conditions, and (iii) the use, generation, manufacture, production,
installation, maintenance, removal, transportation, storage, spill or release of
any Hazardous Substance or storage tank), now in effect or which may hereafter
come into effect, and whether or not reflecting a change in policy from any
previously existing policy. Lessee shall, within five (5) days after receipt of
Lessor's written request, provide Lessor with copies of all documents and
information, including, but
<PAGE> 5
not limited to, permits, registrations, manifests, applications, reports and
certificates. Evidencing Lessee's compliance with any Applicable Law specified
by Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving failure by
Lessee or the Premises to comply with any Applicable Law.
6.4 Inspection; Compliance. Lessor and Lessor's lender(s) (as defined in
Paragraph 8.3(a) shall have the right to enter the Premises at any time in the
case of an emergency, and otherwise at reasonable times, for the purpose of
inspecting the condition of the Premises and for verifying compliance by Lessee
with this Lease and all Applicable Laws (as outlined 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 (Leasor'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), 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 [omitted] 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 conditioning 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
<PAGE> 6
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' machinery and equipment that can be removed without
doing material damage to the Premises. The term "Alternations" 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 Alteration 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
<PAGE> 7
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 obligation of Lessee shall include the
repair of any damage occasioned by the installation, maintenance or removal of
Lessee's Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
ground water contaminated by Lessee, all as may then be required by Applicable
Law and/or good service practice. Lessee's Trade Fixtures shall remain the
property of the 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. (a) Lessee shall pay to Lessor any insurance
cost increase ("Insurance Cost Increase") occurring during the term of this
Lease. "Insurance Cost Increase" is defined as any increase in the actual cost
of the insurance required under Paragraphs 8.2(b), 8.3(a) and 8.3(b). ("Required
Insurance"), over and above the Base Premium, as hereinafter defined, calculated
on an annual basis, "Insurance Cost Increase" shall include but not be limited
to increases resulting from 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, and/or a premium
rate increase. If the parties insert a dollar amount in Paragraph 1.9, such
amount shall be considered the "Base Premium." In lieu thereof, if the Premises
have been previously occupied, the "Base Premium" shall be the annual premium
applicable to the most recent occupancy. If the Premises have never been
occupied, the "Base Premium" shall be the lowest annual premium reasonably
obtainable for the Required Insurance as of the commencement of the Original
Term, assuming the most nominal use possible of the Premises. In no event,
however, shall Lessee be responsible for any portion of the premium cost
attributable to liability insurance coverage in excess of $1,000,000 procured
under Paragraph 8.2(b) (Liability Insurance Carried By Lessor). (b) Lessee shall
pay any such Insurance Cost Increase to Lessor within thirty (30) days after
receipt by Lessee of a copy of the premium statement or other reasonable
evidence of the amount due. If the insurance policies maintained hereunder cover
other property besides the Premises, Lessor shall also deliver to Lessee a
statement of the amount of such Insurance Cost Increase attributable only to the
Premises showing in reasonable detail the manner in which such amount was
computed. Premiums for policy periods commencing prior to, or extending beyond,
the term of this Lease shall be prorated to coincide with the corresponding
Commencement or Expiration of the Lease term.
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
<PAGE> 8
contain any intra-insured exclusions as between an 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.
8.3. Property Insurance-Building, Improvements and Rental Value.
(a) Building and improvements. The insuring Party shall obtain and keep in force
during the term of this Lease a policy or policies in the name of Lessor, with
loss payable to Lessor and to the holders of any mortgages, deeds of trust or
ground leases on the Premises ("Lender(s)"), insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, or the amount
required by Lenders, but in the 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 inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of no less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for [illegible].
(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 a 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. (c) Tenant's
Improvements. Since Lessor or 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
<PAGE> 9
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 more 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 Paragraph 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 be insured against under Paragraph
8. The effect of such releases and waivers of the right to recover damages shall
not be limited by the amount of insurance carried or required, or by any
deductibles applicable thereto.
8.7 Indemnity. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, permits, attorney's and consultant's fees,
expenses and/or liabilities arising out of, involving, or in dealing with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment, and
whether well founded or not. In case any action or proceeding be brought against
Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor
shall defend the same at Lessee's expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Lessor shall not be liable for injury or
damage to the person or goods, wares, merchandise or other property of Lessee,
Lessee's employees, contractors, invitees, customers, or any other person in or
about the Premises, whether such damage or injury is caused by or results from
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible or not.
Lessor shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach of
this Lease, Lessor shall under no circumstances be liable for injury to Lessee's
business or for any loss of income or profit therefrom.
9. Damage or Destruction.
9.1. Definitiions.
(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
<PAGE> 10
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
involve.
(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 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 affect. 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 reasonable possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage of Lessor's desire to terminate this Lease as of the date sixty (60) days
following the giving of such notice. In the event Lessor elects to give such
notice of Lessor's intention to terminate this Lease, Lessee shall have the
right within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's commitment to pay for the repair of such damage
totally at Lessee's expense and without 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
<PAGE> 11
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 expirations 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 expirations
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
<PAGE> 12
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 (12)
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 Lessee to Lessor. Lessor shall, in
addition, return to Lessee so much of Lessee's Security Deposit as has not been,
or is not then required to be, used by Lessor under the terms of this Lease. 9.9
Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall
govern the effect of any damage to or destruction of the Premises with respect
to the termination of this lease and hereby waive the provisions of any present
or future statute to the extent inconsistent herewith.
<PAGE> 13
10. Real Property Taxes.
10.1 (a) Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined
in Paragraph 10.2, applicable to the Premises; provided, however, that Lessee
shall pay, in addition to rent, the amount, if any, by which Real Property Taxes
applicable to the Premises increase over the fiscal tax year during which the
Commencement Date occurs ("Tax Increase"). Subject to Paragraph 10.1(b), payment
of any such Tax Increase shall be made by Lessee within thirty (30) days after
receipt of Lessor's written statement setting forth the amount due and the
computation thereof. Lessee shall promptly furnish Lessor with satisfactory
evidence that such taxes have been paid. If any such taxes to be paid by Lessee
shall cover any period of time prior to or after the expiration, or earlier
termination of the term hereof, Lessee's share of such taxes shall be equitably
prorated to cover only the period of time within the tax fiscal year this Lease
is in effect, and Lessor shall reimburse Lessee for any overpayment after such
proration.
(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 as 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.
(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
<PAGE> 14
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 noncurable Breach without the
necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a noncurable 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.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor shall be
limited to compensatory damages and injunctive relief.
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) releases
<PAGE> 15
Lessee of any obligations hereunder, or (iii) alter the primary liability of
Lessee for the payment of Base Rent and other sums due Lessee 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 disapprovel 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 of 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 sublessees, 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 outlined in Paragraph 13.1) shall
occur in the performance of Lessee's obligations under this Lease, Lessee may,
except as otherwise provided in this Lease receive, collect and enjoy the rents
accruing under such 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
sublessees, upon receipt of a written notice from Lessor stating that a Breach
exists in the performance of Lessee's obligations under this Lease, to pay to
Lessor the rents and other charges due and to become due under the sublease.
Sublessee shall rely upon any such statement and request from Lessor and shall
pay such rents and other charges to Lessor without any obligation
<PAGE> 16
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 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, 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.
<PAGE> 17
(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 aftertermination
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 (1%). 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 reoover in such proceeding the unpaid rent and
damages as are recoverable therein, or Lessor may reserve therein the right to
recover all or any part thereof in a separate suit for such rent and/or damages.
If a notice and grace period required under subparagraphs 13.1 (b), (c) or (d)
was not 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
<PAGE> 18
shall also constitute the applicable notice for grace period purposes required
by subparagraphs 13.1(b), (c) or (d). In such case, the applicable grace period
under subparagraphs 13.1(b), (c) or (d) and under the unlawful detainer statute
shall run concurrently after the one such statutory notice, and the failure of
Lessee to cure the Default within the greater of the two such grace periods
shall constitute both an unlawful detainer and a Breach of this Lease entitling
Lessor to the remedies provided for in this Lease and/or by said statute. (b)
Continue the Lease and Lessee's right to possession in effect (in California
under California Civil Code Section 1951.4) after Lessee's Breach and
abandonment and recover the rent as it becomes due, provided Lessee has the
right to sublet or assign, subject only to reasonable limitations. See
Paragraphs 12 and 36 for the limitations on assignment and subletting which
limitations Lessee and Lessor agree are reasonable. Acts of maintenance or
preservation, efforts to relet the Premises, or the appointment of a receiver to
protect the Lessor's interest under the Lease, shall not constitute a
termination of the Lessee's right to possession. (c) Pursue any other remedy now
or hereafter available to Lessor under the laws or judicial decisions of the
state wherein the Premises are located. (d) The expiration or termination of
this Lease and/or the termination of Lessee's right to possession shall not
relieve Lessee from liability under any indemnity provisions of this Lease as to
matters occurring or accruing during the term hereof or by reason of Lessee's
occupancy of the Premises. 13.3 Inducement Recapture in Event of Breach. Any
agreement by Lessor for free or abated rent or other charges applicable to the
Premises, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as "Inducement Provisions,"
shall be deemed conditioned upon Lessee's full and faithful performance of all
of the terms, covenants and conditions of this Lease to be performed or observed
by Lessee during the term hereof as the same may be extended. Upon the
occurrence of a Breach of this Lease by Lessee, as defined in Paragraph 13.1,
any such Inducement Provision shall automatically be deemed deleted from this
Lease and of no further force or effect, and any rent, other charge, bonus,
inducement or consideration theretofore abated, given or paid by Lessor under
such an Inducement Provision shall be immediately due and payable by Lessee to
Lessor, and recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph shall not be deemed a waiver by Lessor of the provisions of this
Paragraph unless specifically so stated in writing by Lessor 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.
<PAGE> 19
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 or any amount in excess of such no 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 $_________________) for brokerage services
rendered by said Broker [illegible]
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 (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 in 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 of 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.
<PAGE> 20
15.6 Lessor and Lessees 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.
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 or 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
<PAGE> 21
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 money 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 there of 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
<PAGE> 22
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 (1) 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.
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.
<PAGE> 23
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). Unless otherwise expressly agreed herein,
Lessor reserves all rights to the use of the roof and the right to install, and
all revenues from the installation of, such advertising signs on the Premises,
including the roof, as do not unreasonably interfere with the conduct of
Lessee's business.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one 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,
wherever 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 to represent the cost Lessor will incur in
considering and responding to Lessee's request. Except as otherwise provided,
any unused portion of said deposit shall be refunded to Lessee without interest.
Lessor's consent to any act, assignment of this Lease or subletting of the
Premises by Lessee shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver
of any then existing Default 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 signature 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.
<PAGE> 24
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 cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to
whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of Default under Paragraph 13.1, whether or not the Defaults
are cured, during the twelve (12) month period immediately preceding the
exercise of the Option.
(b) The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee's inability to exercise an Option
because of the provisions of Paragraph 39.4 (a).
(c) All rights of Lessee under the provisions of an Option shall terminate and
be of no further force or effect, notwithstanding Lessee's due and timely
exercise of the Option, if, after such exercise and during the term of this
Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lessee for a
period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of Default under Paragraph 13.1 during any
twelve (12) 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
building 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. Lessees 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.
<PAGE> 25
42. Reservations. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. Performance Under Protest. If 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 THE EXECUTION OF THIS LEASE SHOW
THEIR INFORMED AND VOLUNTARY CONSENT THERETO, THE PARTIES HEREBY AGREE
THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND
LESSEE WITH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL, FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES, NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES AS TO THE
LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE
<PAGE> 26
ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE, IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA,
AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE
CONSULTED.
The parties hereto have executed this Lease at the place on the dates specified
above to their respective signatures.
Executed at Los Angeles, California Executed at
on on
by LESSOR: by LESSEE:
Daniel Kingston Cable, Trustee of the Daniel ANGELES METAL TRIM CO., INC.
Kingston Cable and Barbara White Cable 1995
Revocable Intervivos Trust dated 2/15/95
By By
-------------------------------- -------------------------
Name Printed: Name Printed:
Title: Title:
By: By:
Name Printed: Name Printed:
Title: Title:
Address: 3907 Bouton Drive, Lakewood, CA 90712 Address:
Tel No ( ) Fax No ( ) Tel No ( ) Fax No ( )
<PAGE> 27
Exhibit A-1
[Drawing of Premises]
<PAGE> 28
Exhibit A-2
The following described real property situated in the County of Clark, State of
Washington, to-wit:
The East 246 feet of that portion of the Southeast quarter of Section 26,
Township 2 North, Range 1 East of the Willamette Meridian in Clark County
Washington, being particularly described as follows: Beginning at a point that
is North 70.91 feet and East 1073.58 feet from the quarter corner between
Sections 26 and 35, Township 2 North, Range 1 East of the Willamette Meridian,
said point being the Southwest corner of that tract conveyed to Jantzen, Inc.,
by deed recorded under Auditor's File No. G 712449; thence North 02*02'00" West
parallel with the Westerly line of East "Y" Street, 240.00 feet to the Northwest
corner thereof and the true point of beginning; thence continuing North
02*02'00" West along the Northerly extension of said West line, a distance of
176.82 feet to the North line of that tract conveyed to Gardner-Risley
Enterprises by deed recorded under Auditor's File No. G 479565; thence North
87*58' East along said North line, a distance of 359.91 feet to the Northeast
corner thereof, said point also being on the West line of East "Y" Street;
thence South 02*02'00" East along said West line, 176.82 feet to the northeast
corner of sand Jantzen, Inc. tract; thence South 87*58' West along the North
line of said Jantzen, Inc., tract a distance of 359.91 feet to the true point of
beginning.
<PAGE> 29
RENT ADJUSTMENT(S)
ADDENDUM TO
STANDARD LEASE
Dated January 15, 1997
By and Between (Lessor) DANIEL KINGSTON CABLE, TRUSTEE
(Lessee) ANGELES METAL TRIM CO., INC.
Property Address: 116 Y STREET, CITY OF VANCOUVER
Paragraph 1.5
A. RENT ADJUSTMENTS:
The monthly rent for each month of the adjustment period(s) specified below
shall be increased using the method(s) indicated below:
(Check Method(s) to be Used and Fill in Appropriately)
x 1. Cost of Living Adjustment(s) (COL)
(a) On (Fill in COL Adjustment Date(s): every 12 months, during initial term of
this Lease and any extension thereof, including the "Option Period" the monthly
rent payable under paragraph 1.5 ("Base Rent") of the attached Lease shall be
adjusted by the change, if any, from the Base Month specified below, in the
Consumer Price Index of the Bureau of Labor Statistics of the U.S. Department of
Labor for All Urban Consumers - U.S. City Average. All items herein referrred
to as "C.P.I.".
(b) The monthly rent payable in accordance with paragraph A1(a) of this Addendum
shall be calculated as follows: the Base Rent set forth in paragraph 1.5 of the
attached Lease, shall be multiplied by a fraction the numerator of which shall
be the C.P.I. of the calendar month 2 (two) months prior to the month(s)
specified in paragraph A1(a) above during which the adjustment is to take
effect, and the denominator of which shall be the C.P.I. of the calendar month
which is two (2) months prior to (select one): the first month of the term of
this Lease as set forth in paragraph 1.3 ("Base Month") or (Fill in Other "Base
Month"): . The sum so calculated shall constitute the new monthly rent
hereunder, but in no event, shall any such new monthly rent be less than the
rent payable for the month immediately preceding the date for rent adjustment.
(c) In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the C.P.I. shall be used to
make such calculation. In the event that Lessor and Lessee cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitrators shall be paid equally by Lessor and
Lessee.
II. Market Rental Value Adjustment(s) (MRV) [not applicable]
III.Fixed Rental Adjustment(s) FRA
The monthly rent payable under paragraph 1.5 ("Base Rent") of the attached Lease
shall be increased to the following amounts
<PAGE> 30
On (Fill in FRA Adjustment Date(s)): The New Base Rental shall be:
at the conclusion of the first $6,000
------------------------------ ----------------------
12 months of the initial term $
------------------------------ ----------------------
of this Lease $
------------------------------ ----------------------
$
----------------------
B. NOTICE: Unless specified otherwise herein, notice of any escalations other
than Fixed Rental Adjustment(s) shall be made as specified in paragraph 23 of
the attached Lease.
C. BROKER'S FEE:
The Real Estate Brokers specified in paragraph 1.10 of the attached Lease
shall be paid a Brokerage Fee for each adjustment specified above in
accordance with paragraph 15 of the attached Lease.
<PAGE> 31
ADDENDUM TO
STANDARD INDUSTRIAL LEASE
Dated January 15, 1997
By and Between DANIEL KINGSTON CABLE, TRUSTEE AND
ANGELES METAL TRIM CO., INC.
39. (Continued) OPTION TO EXTEND
A. Lessor hereby grants to Lessee the option to extend the term of this lease
for 2-3 year periods commencing when the prior term expires upon each and
all of the following terms and conditions.
(i) Lessee gives to Lessor, and Lessor actually receives, on a date which
is prior to the date that the option period would commence (if exercised)
by at least six (6) and not more than nine (9) months, a written notice of
the exercise of the option to extend this lease for said additional term,
time being of the essence. If said notification of the exercise of said
option is not so given and received, this option shall automatically
expire:
(ii)The provisions of paragraph 39, including the provision relating to
default of Lessee set forth in paragraph 39.4 of this Lease are conditions
of this Option:
(iii) All of the terms and conditions of this Lease except where
specifically modified by this option shall apply:
(iv)The monthly rent for each month of the option period shall be
calculated as follows:
(a) As used herein, the term "C.P.I." shall mean the Consumer Price Index
of the Bureau of Labor Statistics of the U.S. Department of Labor for All
Urban Consumers - U.S. City Average, "All Items", herein referred to as
"C.P.I."
(b) The rent payable for the first month of the initial term of this Lease,
as set forth in paragraph 4 of the attached lease, shall be multiplied by a
fraction the numerator of which shall be the C.P.I. of the calendar month
during which the option period commences and the denominator of which shall
be the C.P.I. for the month in which the original Lease term commenced. The
sum calculated shall constitute the new monthly rent during the option
period, but, in no event, shall such new monthly rent be less than the rent
payable for the month immediately preceding the commencement of the option
period.
(c) Pending receipt of the required C.P.I. and determination of the actual
adjustment, Lessee shall pay an estimated adjusted rental, as reasonably
determined by Lessor by reference to the then available C.P.I. information.
Upon notification of the actual adjustment after publication of the
required C.P.I., any overpayment shall be credited against the next
installment of rent due, and any underpayment shall be immediately due and
payable by Lessee. Lessor's failure to request payment of an estimated or
actual rent adjustment shall not constitute a waiver of the right to any
adjustment provided for in the Lease or this addendum.
(d) In the event the compilation and/or publication of the C.P.I. shall be
transferred to any other governmental department or bureau or agency or
shall be discontinued, then the index most nearly the same as the C.P.I.
shall be used to make such calculation. In the event that Lessor and Lessee
cannot agree on such alternative index, then the matter shall be submitted
for decision to the American Arbitration Association in accordance with the
then rules of said association and the decision of the arbitrators shall be
binding upon the parties. The cost of said arbitrators shall be paid
equally by Lesser and Lessee.
<PAGE> 32
ADDENDUM TO LEASE
FOR THE PREMISES COMMONLY KNOWN AS
116 Y STREET, CITY OF VANCOUVER, WASHINGTON
41. Notwithstanding anything contained in the Lease to the contrary the Lessee
has been afforded an opportunity to inspect the Premises utilizing experts
of its own choice; the Premises are being leased on an "AS IS BASIS". Lessor
represents that to the best of his knowledge the Premises have no hazardous
or other materials in violation of any EPA, environmental or other local,
state or federal laws or regulations (the "Environmental Regulations"). In
the event any pre-existing violation of the Environmental Regulations is
discovered during the lease term or option renewal period which violation
materially interferes with the conduct of Lessees business on the Premises,
then Lessee shall have the right upon thirty (30) days written notice to
Lessor to terminate the least unless Lessor shall forthwith take action to
correct such violation of the Environmental Regulations so the same does not
then materially interfere with the conduct of Lessees business on the
Premises.
42. Notwithstanding anything contained in the Lease to the contrary, Lessee
represents and warrants to Lessor that it will at Lessee's cost and expense
and at no cost or expense to Lessor comply with all governmental
restrictions and requirements with respect to the use of the Premises.
<PAGE> 1
Exhibit 10.14
INDUSTRIAL REAL ESTATE LEASE
(Single-Tenant Facility)
ARTICLE ONE: BASIC TERMS
This Article One contains the Basic Terms of this Lease between the Landlord and
Tenant named below. Other Articles, Sections and Paragraphs of the Lease
referred to in this Article One explain and define the Basic Terms and are to be
read in conjunction with the Basic Terms.
Section 1.0.1. Date of Lease: November 13, 1989
Section 1.0.2. Landlord (include legal entity): 83rd Street Investors
Address of Landlord: 3601 Winding Creek Road
Sacramento, California 95834
Section 1.0.3. Tenant (include legal entity): Angeles Metal Trim, a California
corporation
Address of Tenant: 4817 East Sheila Street
Los Angeles, California 90040
Section 1.0.4. Property: (include street address, approximate square footage and
description) 4841 83rd Street in Sacramento, California, 95826, consisting of an
approximate 11,500/SF industrial building on approximately 1.07 acres of land
commonly known as the northern portion of Sacramento County Assessor's Parcel
Number 61-161-24.
Section 1.0.5. Lease Term: three (3) years -0- months beginning on December 1,
1989 or such other date as is specified in this Lease, and ending on November
30, 1992
Section 1.0.6. Permitted Uses: (See Article Five) Assembly, storage,
manufacture, distribution and sale of construction products and related legal
uses not injurious to the facility.
Section 1.0.7. Tenant's Guarantor: (If none, so state) NONE
Section 1.0.8. Brokers: (See Article Fourteen) (If none, so state)
Landlord's Broker: Coldwell Banker Commercial Real Estate Services
Tenant's Broker: Coldwell Banker Commercial Real Estate Services
Section 1.0.9. Commission Payable to Landlord's Broker: (See Article Fourteen)
Section 1.10. Initial Security Deposit: (See Section 3.03) $3,000.00
Section 1.11. Vehicle Parking Spaces Allocated to Tenant: Unassigned
<PAGE> 2
Section 1.12. Rent and Other Charges Payable by Tenant:
(a) BASE RENT: THREE THOUSAND AND NO/100 Dollars ($3,000.00) per month, for the
first 36 months, as provided in Section 3.01, and shall be increased on the
first day of the No Increase after the Commencement Date, either (i) as provided
in Section 3.02, or (ii) .
(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02); (ii)
Utilities (see Section 4.03); (iii) Insurance Premiums (See Section 4.04); (iv)
Impounds for Insurance Premiums and Property Taxes (See Section 4.07); (v)
Maintenance, Repairs and Alterations (See Article Six).
Section 1.13. Landlord's Share of Profit on Assignment or Sublease: (See Section
9.05) percent (-0-%) of the Profit (the "Landlord's Share").
Section 1.14. Riders: The following Riders are attached to and made a part of
this Lease: See attached Addendum, Sections 15 through 17 and attached Exhibits
"A" and "B".
ARTICLE TWO: LEASE TERM
Section 2.01. Lease of Property For Lease Term. Landlord leases the Property to
Tenant and Tenant leases the Property from Landlord for the Lease Term. The
Lease Term is for the period stated in Section 1.05 above and shall begin and
end on the dates specified in Section 1.05 above, unless the beginning or end of
the Lease Term is changed under any provision of this Lease. The "Commencement
Date" shall be the date specified in Section 1.05 above for the beginning of the
Lease Term, unless advanced or delayed under any provision of this Lease.
Section 2.02. Delay in Commencement. Landlord shall not be liable to Tenant if
Landlord does not delivery possession of the Property to Tenant on the
Commencement Date. Landlord's non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. If Landlord does not delivery possession of the Property to Tenant within
sixty (60) days after the Commencement Date, Tenant may elect to cancel this
Lease by giving written notice to Landlord within ten (10) days after the sixty
(60)-day period ends. If Tenant gives such notice, the Lease shall be cancelled
and neither Landlord nor Tenant shall have any further obligations to the other.
If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Tenant. If delivery of possession of the Property to Tenant is
delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to
this Lease setting forth the actual Commencement Date and expiration date of the
Lease. Failure to execute
<PAGE> 3
such amendment shall not affect the actual Commencement Date and expiration date
of the Lease.
Section 2.03. Early Occupancy. If Tenant occupies the Property prior to the
Commencement Date, Tenant's occupancy of the Property shall be subject to all of
the provisions of this Lease. Early occupancy of the Property shall not advance
the expiration date of this Lease. Tenant shall pay Base Rent and all other
charges specified in this Lease for the early occupancy period.
Section 2.04. Holding Over. Tenant shall vacate the Property upon the expiration
or earlier termination of this Lease. Tenant shall reimburse Landlord for and
indemnify Landlord against all damages which Landlord incurs from Tenant's delay
in vacating the Property. If Tenant does not vacate the Property upon the
expiration or earlier termination of the Lease and Landlord thereafter accepts
rent from Tenant, Tenant's occupancy of the Property shall be a "month-to-month"
tenancy, subject to all of the terms of this Lease applicable to a
month-to-month tenancy, except that the Base rent then in effect shall be
increased by twenty-five percent (25%).
ARTICLE THREE: BASE RENT
Section 3.01. Time and Manner of Payment. Upon execution of this Lease, Tenant
shall pay Landlord the Base Rent in the amount stated in Paragraph 1.12(a) above
for the first month of the Lease Term. On the first day of the second month of
the Lease Term and each month thereafter, Tenant shall pay Landlord the Base
Rent, in advance, without offset, deduction or prior demand. The Base Rent shall
be payable at Landlord's address or at such other place as Landlord may
designate in writing.
Section 3.02. Cost of Living Increases. The Base Rent shall be increased on each
date (the "Rental Adjustment Date") stated in Paragraph 1.12(a) above in
accordance with the increase in the United States Department of Labor, Bureau of
Labor Statistics, Consumer Price Index for All Urban Consumers (all items for
the geographical Statistical Area in which the Property is located on the basis
on 1982-1994 = 100) (the "Index) as follows:
(a) The Base Rent (the "Comparison Base Rent") in effect immediately before each
Rental Adjustment Date shall be increased by the percentage that the index has
increased from the date (the "Comparison Date") on which payment of the
Comparison Base Rent began through the month in which the applicable Rental
Adjustment Date occurs. The Base Rent shall not be reduced by reason of such
computation. Landlord shall notify Tenant of each increase by a written
statement which shall include the Index for the applicable Comparison Date, the
Index for the applicable Rental Adjustment Date, the percentage increase between
those two Indices, and the new Base Rent. Any increase in the Base Rent provided
for in this Section 3.02 shall be subject to any minimum or maximum increase, if
provided for in Paragraph 1.12(a).
<PAGE> 4
(b) Tenant shall pay the new Base Rent from the applicable Rental Adjustment
Date until the next Rental Adjustment Date. Landlord's notice may be given after
the applicable Rental Adjustment Date of the increase, and Tenant shall pay
Landlord the accrued rental adjustment for the months elapsed between the
effective date of the increase and Landlord's notice of such increase within ten
(10) days after Landlord's notice. If the format or components of the Index are
materially changed after the Commencement Date, Landlord shall substitute an
index which is published by the Bureau of Labor Statistics or similar agency and
which is most nearly equivalent to the Index in effect on the Commencement Date.
The substitute index shall be used to calculate the increase in the Base Rent
unless Tenant objects to such index in writing within fifteen (15) days after
receipt of Landlord's notice. If Tenant objects, Landlord and Tenant shall
submit the selection of the substitute index for binding arbitration in
accordance with the rules and regulations of the American Arbitration
Association at its office closest to the Property. The costs of arbitration
shall be borne equally by Landlord and Tenant.
Section 3.03. Security Deposit; Increases.
(a) Upon the execution of this Lease, Tenant shall deposit with Landlord a cash
Security Deposit in the amount set forth in Section 1.10 above. Landlord may
apply all or part of the Security Deposit to any unpaid rent or other charges
due from Tenant or to cure any other defaults of Tenant. If Landlord uses any
part of the Security Deposit, Tenant shall restore the Security Deposit to its
full amount within ten (10) days after Landlord's written request. Tenant's
failure to do so shall be a material default under this lease. No interest shall
be paid on the Security Deposit. Landlord shall not be required to keep the
Security Deposit separate from its other accounts and no trust relationship is
created with respect to the Security Deposit.
(b) Each time the Base Rent is increased, Tenant shall deposit additional funds
with Landlord sufficient to increase the Security Deposit to an amount which
bears the same relationship to the adjusted Base Rent as the initial Security
Deposit bore to the initial Base Rent.
Section 3.04. Termination; Advance Payments. Upon termination of this Lease
under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any
other termination not resulting from Tenant's default, and after Tenant has
vacated the Property in the manner required by this Lease, Landlord shall refund
or credit to Tenant (or Tenant's successor) the unused portion of the Security
Deposit, any advance rent or other advance payments made by Tenant to Landlord,
and any amounts paid for real property taxes and other reserves which apply to
any time periods after termination of the Lease.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.01. Additional Rent. All charges payable by Tenant other than Base
Rent are called "Additional Rent." Unless this Lease provides otherwise, Tenant
shall pay all
<PAGE> 5
Additional Rent then due with the next monthly installment of Base Rent. The
term "rent" shall mean Base Rent and Additional Rent.
Section 4.02. Property Taxes.
(a) Real Property Taxes. Tenant shall pay all real property taxes on the
Property (including any fees, taxes or assessments against, or as a result of,
any tenant improvements installed on the Property by or for the benefit of
Tenant) during the Lease Term. Subject to Paragraph 4.02(c) and Section 4.07
below, such payment shall be made at least ten (10) days prior to the
delinquency date of the taxes. Within such ten (10) -day period, Tenant shall
furnish Landlord with satisfactory evidence that the real property taxes have
been paid. Landlord shall reimburse Tenant for any real property taxes paid by
Tenant covering any period of time prior to or after the Lease Term. If Tenant
fails to pay the real property taxes when due, Landlord may pay the taxes and
Tenant shall reimburse Landlord for the amount of such tax payment as Additional
Rent.
(b) Definition of "Real Property Tax." "Real property tax" means: (i) any fee,
license fee, license tax, business license fee, commercial rental tax, levy,
charge, assessment, penalty or tax imposed by any taxing authority against the
Property; (ii) any tax on the Landlord's right to receive, or the receipt of,
rent or income from the Property or against Landlord's business of leasing the
Property; (iii) any tax or charge for fire protection, streets, sidewalks, road
maintenance, refuse or other services provided to the Property by any government
agency; (iv) any tax imposed upon this transaction or based upon a re-assessment
of the Property due to a change of ownership, as defined by applicable law, or
other transfer of all or part of Landlord's interest in the Property; and (v)
any charge or fee replacing any tax previously included within the definition of
real property tax. "Real property tax" does not, however, include Landlord's
federal or state income, franchise, inheritance or estate taxes.
(c) Joint Assessment. If the Property is not separately assessed, Landlord shall
reasonably determine Tenant's share of the real property tax payable by Tenant
under Paragraph 4.02(a) from the assessor's worksheets or other reasonably
available information. Tenant shall pay such share to Landlord within fifteen
(15) days after receipt of Landlord's written statement.
(d) Personal Property Taxes.
(i) Tenant shall pay all taxes charged against trade fixtures, furnishings,
equipment or any other personal property belonging to Tenant. Tenant shall try
to have personal property taxes separately from the Property.
(ii) If any of Tenant's personal property is taxed with the Property, Tenant
shall pay Landlord the taxes for the personal property within fifteen (15) days
after Tenant receives a written statement from Landlord for such personal
property taxes.
<PAGE> 6
(e) Tenant's Right to Contest Taxes. Tenant may attempt to have the assessed
valuation of the Property reduced or may initiate proceedings to contest the
real property taxes. If required by law, Landlord shall join in the proceedings
brought by Tenant. However, Tenant shall pay all costs of the proceedings,
including any costs or fees incurred by Landlord. Upon the final determination
of any proceedings or contest, Tenant shall immediately pay the real property
taxes due, together with all costs, charges, interest and penalties incidental
to the proceedings. If Tenant does not pay the real property taxes when due and
contests such taxes, Tenant shall not be in default under this Lease for
nonpayment of such taxes if Tenant deposits funds with Landlord or opens an
interest-bearing account reasonably acceptable to Landlord in the joint names of
Landlord and Tenant. The amount of such deposit shall be sufficient to pay the
real property taxes plus a reasonable estimate of the interest, costs, charges
and penalties which may accrue if Tenant's action is unsuccessful, less any
applicable tax impounds previously paid by Tenant to Landlord. The deposit shall
be applied to the real property taxes due, as determined at such proceedings.
The real property taxes shall be paid under protest from such deposit if such
payment under protest is necessary to prevent the Property from being sold under
a "tax sale" or similar enforcement proceeding.
Section 4.03. Utilities. Tenant shall pay, directly to the appropriate supplier,
the cost of all natural gas, heat, light, power, sewer service, telephone,
water, refuse disposal and other utilities and services supplied to the
Property. However, if any services or utilities are jointly metered with other
property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord's
written statement.
Section 4.04. Insurance Policies.
(a) Liability Insurance. During the Lease Term, Tenant shall maintain a policy
of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the Property. Tenant
shall name Landlord as an additional insured under such policy. The initial
amount of such insurance shall be One Million Dollars ($1,000,000) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord's professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and non-contributing; (ii)
contain cross-liability endorsements; and (iii) insure Landlord against Tenant's
performance under Section 5.05, if the matters giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and coverage
of such insurance shall not limit Tenant's liability nor relieve Tenant of any
other obligation under this Lease. Landlord may also obtain comprehensive public
liability insurance in an amount and with coverage determined by Landlord
insuring Landlord against liability arising out of ownership, operation, use or
occupancy of the Property. The
<PAGE> 7
policy obtained by Landlord shall not be contributory and shall not provide
primary insurance.
(b) Property and Rental Income Insurance. During the Lease Term, Landlord shall
maintain policies of insurance covering loss of or damage to the Property in the
full amount of its replacement value. Such policy shall contain an inflation
Guard Endorsement and shall provide protection against all perils included
within the classification of fire, extended coverage, vandalism, malicious
mischief, special extended perils (all risk), sprinkler leakage and any other
perils which Landlord deems reasonably necessary. Landlord shall have the right
to obtain flood and earthquake insurance if required by any lender holding a
security interest in the Property. Landlord shall not obtain insurance for
Tenant's fixtures or equipment or building improvements installed by Tenant on
the Property. During the Lease Term, Landlord shall also maintain a rental
income improvements installed by Tenant on the Property. During the Lease Term,
Landlord shall also maintain a rental income insurance policy, with loss payable
to Landlord, in an amount equal to one year's Base Rent, plus estimated real
property taxes and insurance premiums. Tenant shall be liable for the payment of
any deductible amount under Landlord's or Tenant's insurance policies maintained
pursuant to this Section 4.04, in an amount not to exceed Ten Thousand dollars
($10,000). Tenant shall not do or permit anything to be done with invalidates
any such insurance policies.
(c) Payment of Premiums. Subject to Section 4.07, Tenant shall pay all premiums
for the insurance policies described in Paragraphs 4.04(a) and (b) (whether
obtained by Landlord or Tenant) within fifteen (15) days after Tenant's receipt
of a copy of the premium statement or other evidence of the amount due, except
Landlord shall pay all premiums for non-primary comprehensive public liability
insurance which Landlord elects to obtain as provided in Paragraph 4.04(a). If
insurance policies maintained by Landlord cover improvements on real property
other than the Property, Landlord shall deliver to Tenant a statement of the
premium applicable to the Property showing in reasonable detail how Tenant's
share of the premium was computed. If the Lease Term expires before the
expiration of an insurance policy maintained by Landlord, Tenant shall be liable
for Tenant's prorated share of the insurance premiums. Before the Commencement
Date, Tenant shall deliver to Landlord a copy of any policy of insurance which
Tenant is required to maintain under this Section 4.04. At least thirty (30)
days prior to the expiration of any such policy, Tenant shall deliver to
Landlord a renewal of such policy. As an alternative to providing a policy of
insurance, Tenant shall have the right to provide Landlord a certificate of
insurance, executed by an authorized officer of the insurance company, showing
that the insurance which Tenant is required to maintain under this Section 4.04
is in full force and effect and containing such other information which Landlord
reasonably requires.
<PAGE> 8
(d) General Insurance Provisions.
(i) Any insurance which Tenant is required to maintain under this Lease shall
include a provision which requires the insurance carrier to give Landlord not
less than thirty (30) days' written notice prior to any cancellation or
modification of such coverage.
(ii) If Tenant fails to deliver any policy, certificate or renewal to Landlord
required under this Lease within the prescribed time period or if any such
policy is cancelled or modified during the Lease Term with Landlord's consent.
Landlord may obtain such insurance, in which case Tenant shall reimburse
Landlord for the cost of such insurance within fifteen (15) days after receipt
of a statement that indicates the cost of such insurance.
(iii) Tenant shall maintain all insurance required under this Lease with
companies holding a "General Policy Rating" of A-12 or better, as set forth in
the most current issue of "Best Key Rating Guide". Landlord and Tenant
acknowledge the insurance markets are rapidly changing and that insurance in the
form and amounts described in this Section 4.04 may not be available in the
future. Tenant acknowledges that the insurance described in this section 4.04 is
for the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease, Tenant
shall nevertheless maintain insurance coverage which is customary and
commercially reasonable in the insurance industry for Tenant's type of business,
as that coverage may change from time to time. Landlord makes no representation
as to the adequacy of such insurance to protect Landlord's or Tenant's
interests. Therefore, Tenant shall obtain any such additional property or
liability insurance which Tenant deems necessary to protect Landlord and Tenant.
(iv) Unless prohibited under any applicable insurance policies maintained,
Landlord and Tenant each hereby waive any and all rights of recovery against the
other, or against the officers, employees, agents or representatives of the
other, for loss of or damage to its property or the property of others under its
control, if such loss or damage is covered by any insurance policy in force
(whether or not described in this Lease) at the time of such loss or damage.
Upon obtaining the required policies of insurance, Landlord and Tenant shall
give notice to the insurance carriers of this mutual waiver of subrogation.
Section 4.05. Late Charges. Tenant's failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by a ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
<PAGE> 9
Section 4.06. Interest on Past Due Obligations. Any amount owed by Tenant to
Landlord which is not paid when due shall bear interest at the rate of fifteen
percent (15%) per annum from the due date of such amount. However, interest
shall not be payable on late charges to be paid by Tenant under this Lease. The
payment of interest on such amounts shall not excuse or cure any default by
Tenant under this Lease. If the interest rate specified in this Lease is higher
than the rate permitted by law, the interest rate is hereby decreased to the
maximum legal interest rate permitted by law.
Section 4.07. Impounds for Insurance Premiums and Real Property Taxes. If
requested by any ground lessor or lender to whom Landlord has granted a security
interest in the Property, or if Tenant is more than ten (10) days late in the
payment of rent more than once in any consecutive twelve (12) -month period,
Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real
property taxes and insurance premiums payable by Tenant under this Lease,
together with each payment of Base Rent. Landlord shall hold such payments in a
non-interest bearing impound account. If unknown, Landlord shall reasonably
estimate the amount of real property taxes and insurance premiums when due.
Tenant shall pay any deficiency of funds in the impound account to Landlord upon
written request. If Tenant defaults under this Lease, Landlord may apply any
funds in the impound account to any obligation then due under this Lease.
ARTICLE FIVE: USE OF PROPERTY
Section 5.01. Permitted Uses. Tenant may use the Property only for the Permitted
Uses set forth in Section 1.06 above.
Section 5.02. Manner of Use. Tenant shall not cause or permit the Property to be
used in any way which constitutes a violation of any law, ordinance, or
government regulation or order, which annoys or interferes with the rights of
other tenants of Landlord, or which constitutes a nuisance or waste. Tenant
shall obtain and pay for all permits, including a Certificate of Occupancy,
required for Tenant's occupancy of the Property and shall promptly take all
actions necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.
Section 5.03. Hazardous Materials. As used in this Lease, the term "Hazardous
Material" means any flammable items, explosives, radioactive materials,
hazardous or toxic substances, material or waster or related materials,
including any substances defined as or included in the definition of "hazardous
substances", "hazardous waste", "hazardous materials" or "toxic substances"
now or subsequently regulated under any applicable federal, state or local laws
or regulations, including compounds and other chemical products, asbestos, PCBs
and similar compounds, and including any different products and materials which
are subsequently found to have adverse effects on the environment or the health
and safety of persons. Tenant shall not cause or permit any Hazardous Material
to be generated, produced, brought upon, used, stored, treated or disposed of in
or about the Property by Tenant, its agents, employees,
<PAGE> 10
contractors, sublessees or invitees without the prior written consent of
Landlord. Landlord shall be entitled to take into account such other factors or
facts as Landlord may reasonably determine to be relevant in determining whether
to grant or withhold consent to Tenant's proposed activity with respect to
Hazardous Material. In no event, however, shall Landlord be required to consent
to the installation or use of any storage tanks on the Property.
Section 5.04. Signs and Auctions. Tenant shall not place any signs on the
Property without Landlord's prior written consent. Tenant shall or conduct or
permit any auctions or sheriff's sales at the Property.
Section 5.05. Indemnity. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's gross
negligence or willful misconduct. As used in this Section , the term "Tenant"
shall include Tenant's employees, agents, contractors and invitees, if
applicable.
Section 5.06. Landlord's Access. Landlord or its agents may enter the Property
at all reasonable times to show the Property to potential buyers, investors or
tenants or other parties; to do any other act or to inspect and conduct tests in
order to monitor Tenant's compliance with all applicable environmental laws and
all laws governing the presence and use of Hazardous Material; or for any other
purpose Landlord deems necessary. Landlord shall give Tenant prior notice of
such entry, except in the case of an emergency. Landlord may place customary
"For Sale" or "For Lease" signs on the Property.
Section 5.07. Quiet Possession. If Tenant pays the rent and complies with all
other terms of this Lease, Tenant may enjoy the Property for the full Lease
Term, subject to the provisions of this Lease.
ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE; REPAIRS AND
ALTERATIONS
Section 6.01. Existing Conditions. Tenant accepts the Property in its condition
as of the execution of the Lease, subject to all recorded matters, laws,
ordinances, and government
<PAGE> 11
regulations and orders. Except as provided herein, Tenant acknowledges that
neither Landlord nor any agent of Landlord has made any representation as to the
condition of the Property or the suitability of the Property for Tenant's
intended use. Tenant represents and warrants that Tenant has made its own
inspection of an inquiry regarding the condition of the Property and is not
relying on any representations of Landlord or any Broker with respect thereto.
If Landlord or Landlord's Broker has provided Property Information Sheet or
other Disclosure Statement regarding the Property, a copy is attached as an
exhibit to the Lease.
Section 6.02. Exemption of Landlord from Liability. Landlord shall not be liable
for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Property or upon other portions of the Project, or from other sources or places;
or (d) any act or omission of any other tenant of the Project. Landlord shall
not be liable for any such damage or injury even though the cause of or the
means of repairing such damage or injury are not accessible to Tenant. The
provisions of this Section 6.02 shall not, however, exempt Landlord from
liability for Landlord's gross negligence or willful misconduct.
Section 6.03. Landlord's Obligations. Subject to the provisions of Article Seven
(Damage or Destruction) and Article Eight (Condemnation), Landlord shall have
absolutely no responsibility to repair, maintain or replace any portion of the
Property at any time. Tenant waives the benefit of any present or future law
which might give Tenant the right to repair the Property at Landlord's expense
or to terminate the Lease due to the condition of the Property.
Section 6.04. Tenant's Obligations.
(a) Except as provided in Article seven (Damage or Destruction) and Article
Eight (Condemnation), Tenant shall keep all portions of the Property (including
structural, nonstructural, interior, exterior, and landscaped areas, portions,
systems and equipment) in good order, condition and repair (including interior
repainting and refinishing, as needed). If any portion of the property or any
system or equipment in the Property which Tenant is obligated to repair cannot
be fully repaired or restored, Tenant shall promptly replace such portion of the
Property or system or equipment in the Property, regardless of whether the
benefit of such replacement extends beyond the Lease Term; but if the benefit or
useful life of such replacement extends beyond the Lease Term (as such term may
be extended by exercise of any options), the useful life of such replacement
shall be prorated over the remaining portion of the Lease Term (as extended),
and Tenant shall be liable only for that portion of the cost which is applicable
to the Lease Term (as extended). Tenant shall maintain a preventive maintenance
contract providing for the regular inspection and maintenance of the heating and
air conditioning system by a licensed heating and air
<PAGE> 12
conditioning contractor. If any part of the Property is damaged by any act or
omission of Tenant, Tenant shall pay Landlord the cost of repairing or replacing
such damaged property, whether or not Landlord would otherwise be obliged to pay
the cost of maintaining or repairing such property. It is the intention of
Landlord and Tenant that at all times Tenant shall maintain the portions of the
Property which Tenant is obligated to maintain in an attractive, first-class and
fully operative condition.
(b) Tenant shall fulfill all of Tenant's obligations under this Section 6.04 at
Tenant's sole expense. If Tenant fails to maintain, repair or replace the
Property as required by this Section 6.04, Landlord may, upon ten (10 days'
prior notice to Tenant (except that no notice shall be required in the case of
an emergency), enter the Property and perform such maintenance or repair
(including replacement, as needed) on behalf of Tenant. In such case, Tenant
shall reimburse Landlord for all costs incurred in performing such maintenance
or repair immediately upon demand.
Section 6.05. Alternations, Additions, and Improvements.
(a) Tenant shall not make any alterations, additions, or improvements to the
Property without Landlord's prior written consent, except for non-structural
alterations which do not exceed Ten Thousand Dollars ($10,000) in cost
cumulatively over the Lease Term and which are not visible from the outside of
any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written request. All alterations, additions, and improvements
shall be done in a good and workmanlike manner, in conformity with all
applicable laws and regulations, and by a contractor approved by Landlord. Upon
completion of any such work, Tenant shall provide Landlord with "as built"
plans, copies of all construction contracts, and proof of payment for all labor
and materials.
(b) Tenant shall pay when due all claims for labor and material furnished to the
Property. Tenant shall give Landlord at least twenty (20) days' prior written
notice of the commencement of any work on the Property, regardless of whether
Landlord's consent to such work is required. Landlord may elect to record and
post notices of non-responsibility on the Property.
Section 6.06. Condition upon Termination. Upon the termination of the Lease,
Tenant shall surrender the Property to Landlord, broom clean and in the same
condition as received except for ordinary wear and tear which Tenant was not
otherwise obligated to remedy under any provision of this Lease. However, Tenant
shall not be obligated to repair any damage which Landlord is required to repair
under Article Seven (Damage or Destruction). In addition, Landlord may require
Tenant to remove any alterations, additions or improvements (whether or not made
with Landlord's consent) prior to the expiration of the Lease and to restore the
Property to its prior condition, all at Tenant's expense. All alterations,
additions
<PAGE> 13
and improvements which Landlord has not required Tenant to remove shall become
Landlord's property and shall be surrendered to Landlord upon the expiration or
earlier termination of the Lease, except that Tenant may remove any of Tenant's
machinery or equipment which can be removed without material damage to the
Property. Tenant shall repair, at Tenant's expense, any damage to the Property
caused by the removal of any such machinery or equipment. In no event, however,
shall Tenant remove any o f the following materials or equipment (which shall be
deemed Landlord's property) without Landlord's prior written consent: any power
wiring or power panels; lighting or lighting fixtures; wall coverings; drapes,
blinds or other window coverings, carpets or other floor coverings; heaters, air
conditioners or any other heating or air conditioning equipment; fencing or
security gates; or other similar building operating equipment and decorations.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.01. Partial Damage to Property.
(a) Tenant shall notify Landlord in writing immediately upon the occurrence of
any damage to the Property. If the Property is only partially damaged (i.e.,
less than fifty percent (50%) of the Property is untenantable as a result of
such damage or less than fifty percent (50%) of Tenant's operations are
materially impaired) and if the proceeds received by Landlord from the insurance
policies described in Paragraph 4.04(b) are sufficient to pay for the necessary
repairs, this Lease shall remain in effect and Landlord shall repair the damage
as soon as reasonably possible. Landlord may elect (but is not required) to
repair any damage to Tenant's fixtures, equipment, or improvements.
(b) If the insurance proceeds received by Landlord are not sufficient to pay the
entire cost of repair, or if the cause of the damage is not covered by the
insurance policies which Landlord maintains under paragraph 4.04(b), Landlord
may elect either to (I) repair the damage as soon as reasonably possible, in
which case this Lease shall remain in full force and effect, or (ii) terminate
this Lease as of the date the damage occurred. Landlord shall notify Tenant
within thirty (30) days after receipt of notice of the occurrence of the damage
whether Landlord elects to repair the damage or terminate the Lease. If Landlord
elects to repair the damage, Tenant shall pay Landlord the "deductible amount"
(if any) under Landlord's insurance policies and, if the damage was due to an
act or omission of Tenant, or Tenant's employees, agents, contractors or
invitees, the difference between the actual cost of repair and any insurance
proceeds received by L. If Landlord elects to terminate the Lease, Tenant may
elect to continue this Lease in full force and effect, in which case Tenant
shall repair any damage to the Property and any building in which the Property
is located. Tenant shall pay the cost of such repairs, except that upon
satisfactory completion of such repairs, Landlord shall deliver to Tenant any
insurance proceeds received by Landlord for the damage repaired by Tenant.
Tenant shall give Landlord written notice of such election within ten (10) days
after receiving Landlord's termination notice.
<PAGE> 14
(c) If the damage to the Property occurs during the last six (6) months of the
Lease Term and such damage will require more than thirty (30) days to repair,
either Landlord or Tenant may elect to terminate this Lease as of the date the
damage occurred, regardless of the sufficiency of any insurance proceeds. The
party electing to terminate this Lease shall give written notification to the
other party of such election within thirty (30) days after Tenant's notice to
Landlord of the occurrence of the damage.
Section 7.02. Substantial or Total Destruction. If the Property is substantially
or totally destroyed by any cause whatsoever (i.e., the damage to the Property
is greater than partial damage as described in Section 7.01), and regardless of
whether Landlord receives any insurance proceeds, this Lease shall terminate as
of the date the destruction occurred. Notwithstanding the preceding sentence, if
the Property can be rebuilt within six (6) months after the date of destruction.
Landlord may elect to rebuild the Property at Landlord's own expense, in which
case this Lease shall remain in full force and effect. Landlord shall notify
Tenant of such election within thirty (30) days after Tenant's notice of the
occurrence of total or substantial destruction. If Landlord so elects, Landlord
shall rebuild the Property at Landlord's sole expense, except that if the
destruction was caused by an act or omission of Tenant, Tenant shall pay
Landlord the difference between the actual cost of rebuilding and any insurance
proceeds received by Landlord.
Section 7.03. Temporary Reduction of Rent. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes. Except for such possible reduction in Base Rent,
insurance premiums and real property taxes, Tenant shall not be entitled to any
compensation, reduction, or reimbursement from Landlord as a result of any
damage, destruction, repair, or restoration of or to the Property.
Section 7.04. Waiver. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Property is taken under the power of eminent domain
or sold under the threat of that power (all of which are called "Condemnation"),
this Lease shall terminate as to the part taken or sold on the date the
condemning authority takes title or possession, whichever occurs first. If more
than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority
<PAGE> 15
takes title or possession, by delivering written notice to the other within ten
(10) days after receipt of written notice of such taking (or in the absence of
such notice, within 10 (10) days after the condemning authority takes title or
possession). If neither Landlord nor Tenant terminates this Lease, this Lease
shall remain in effect as to the portion of the Property not taken, except that
the Base Rent and Additional rent shall be reduced in proportion to the
reduction in the floor area of the Property. Any Condemnation award or payment
shall be distributed in the following order: (a) first, to any ground lessor,
mortgagee or beneficiary under a deed of trust encumbering the Property, the
amount of its interest in the Property: (b) second, to Tenant, only the amount
of any award specifically designated for loss of or damage to Tenant's trade
fixtures or removable personal property; and (c) third, to Landlord, the
remainder of such award, whether as compensation for reduction in the value of
the leasehold, the taking of the fee, or otherwise. If this Lease is not
terminated, Landlord shall repair any damage to the Property caused by the
Condemnation, except the Landlord shall not be obligated to repair any damage
for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to either terminate this Lease or make
such repair at Landlord's expense.
ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.01. Landlord's Consent Required. No portion of the Property or of
Tenant's interest in this Lease may be acquired by any other person or entity,
whether by sale, assignment, mortgage, sublease, transfer, operation of law, or
act of Tenant, without Landlord's prior written consent, except as provided in
Section 9.02 below. Landlord has the right to grant or withhold its consent as
provided in Section 9.05 below. Any attempted transfer without consent shall be
void and shall constitute a non-curable breach of this Lease. If Tenant is a
partnership, any cumulative transfer of more than twenty percent (20%) of the
partnership interests shall require Landlord's consent. If Tenant is a
corporation, any change in the ownership of a controlling interest of the voting
stock of the corporation shall require Landlord's consent.
Section 9.02. Tenant Affiliate. Tenant may assign this Lease or sublease the
Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all of
Tenant's obligations under this Lease.
Section 9.03. No Release of Tenant. No transfer permitted by this Article Nine,
whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord's acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant's transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
<PAGE> 16
or modifications of this Lease by Tenant's transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant's liability under
this Lease.
Section 9.04. Offer to Terminate. If Tenant desires to assign the Lease or
sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. If Landlord does
not elect, the Lease shall continue in effect until otherwise terminated and the
provisions of Section 9.05 with respect to any proposed transfer shall continue
to apply.
Section 9.05. Landlord's Consent.
(a) Tenant's request for consent to any transfer described in Section 9.01 shall
set forth in writing the details of the proposed transfer, including the name,
business and financial condition of the prospective transferee, financial
details of the proposed transfer (e.g., the term of and the rent and security
deposit payable under any proposed assignment or sublease), and any other
information Landlord deems relevant. Landlord shall have the right to withhold
consent, if reasonable, or to grant consent, based on the following factors: (I)
the business of the proposed assignee or subtenant and the proposed use of the
Property; (ii) the net worth and financial reputation of the proposed assignee
or subtenant; (iii) Tenant's compliance with all of its obligations under the
Lease; and (iv) such other factors as Landlord may reasonably deem relevant. If
Landlord objects to a proposed assignment solely because of the net worth and/or
financial reputation of the proposed assignee. Tenant may nonetheless sublease
(but not assign), all or a portion of the Property to the proposed transferee,
but only on the other terms of the proposed transfer.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Tenant shall pay to Landlord as Additional Rent under the Lease the
Landlord's Share (stated in Section 1.13) of the Profit (defined below) on such
transaction as and when received by Tenant, unless Landlord gives written notice
to Tenant and the assignee or subtenant that Landlord's Share shall be paid by
the assignee or subtenant to Landlord directory. The "Profit" means (A) all
amounts paid to Tenant for such assignment or sublease, including "key" money,
monthly rent in excess of the monthly rent payable under the Lease, and all fees
and other consideration paid for the assignment or sublease, including fees
under any collateral agreements, less (B) costs and expenses directly incurred
by Tenant in connection with the execution and performance of such assignment or
sublease for real estate broker's commissions and costs of renovation or
construction of tenant improvements required under such assignment or sublease.
Tenant is entitled to recover such costs and expenses before Tenant is obligated
to pay the Landlord's Share to Landlord. The Profit in the case of a sublease of
less than all the Property is the rent allocable to the subleased space as a
percentage on a square footage basis.
<PAGE> 17
(ii) Tenant shall provide Landlord a written statement certifying all amounts to
be paid from any assignment or sublease of the Property within thirty (30) days
after the transaction documentation is signed, and Landlord may inspect Tenant's
books and records to verify the accuracy of such statement. On written request,
Tenant shall promptly furnish to Landlord copies of all the transaction
documentation, all of which shall be certified by Tenant to be complete, true
and correct. Landlord's receipt of Landlord's Share shall not be a consent to
any further assignment or subletting. The breach of Tenant's obligation under
this Paragraph 9.05(b) shall be a material default of the Lease.
Section 9.06. No Merger. No merger shall result from Tenant's sublease of the
Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.01. Covenants and Conditions. Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.
Section 10.02. Defaults. Tenant shall be in material default under this Lease:
(a) If Tenant abandons the Property or if Tenant's vacation of the Property
results in the cancellation of any insurance described in Section 4.04;
(b) If Tenant fails to pay rent or any other charge when due;
(c) If Tenant fails to perform of Tenant's non-monetary obligations under this
Lease for a period of thirty (30) days after written notice from Landlord;
provided that if more than thirty (30) days are required to complete such
performance. Tenant shall not be in default if Tenant commences such performance
within the thirty (30) -day period and thereafter diligently pursues its
completion. However, Landlord shall not be required to give such notice if
Tenant's failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Paragraph is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.
(d) (i) If Tenant makes a general assignment or general arrangement for the
benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant's assets
located at the Property or of Tenant's interest in the Lease is subjected to
attachment, execution or other
<PAGE> 18
judicial seizure which is not discharged within thirty (30) days. If a court of
competent jurisdiction determines that any of the acts described in this
subparagraph (d) is not a default under this Lease, and a trustee is appointed
to take possession (or if Tenant remains a debtor in possession) and such
trustee or Tenant transfers Tenant's interest hereunder,then Landlord shall
receive, as Additional Rent, the excess, if any, of the rent(or any other
consideration) paid in connection with such assignment or sublease over the
rent payable by Tenant under this Lease.
(e) If any guarantor of the Lease revokes or otherwise terminates, or purports
to revoke or otherwise terminate, any guaranty of all or any portion of Tenant's
obligations under the Lease. Unless otherwise expressly provided, no guaranty of
the Lease is revocable.
Section 10.03. Remedies. On the occurrence of any material default by Tenant,
Landlord may, at any time thereafter, with or without notice or demand and
without limiting Landlord in the exercise of any right or remedy which Landlord
may have:
(a) Terminate Tenant's right to possession of the Property by any lawful means,
in which case this Lease shall terminate and Tenant shall immediately surrender
possession of the Property to Landlord. In such event, Landlord shall be
entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant's default, including (i) the worth at the time of the award of the unpaid
Base Rent, Additional Rent and other charges which Landlord had earned at the
time of the termination; (ii) the worth at the time of the award of the amount
by which the unpaid Base Rent, Additional rent and other charges which Landlord
would have earned after termination until the time of the award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; (iii) the worth at the time of the award of the amount by which the
unpaid Base Rent, Additional Rent and other charges which Tenant would have paid
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss that Tenant proves Landlord could have reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under the
Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, any costs or expenses Landlord incurs
in maintaining or preserving the Property after such default, the cost of
recovering possession of the Property, expenses of reletting, including
necessary renovation or alteration of the Property, Landlord's reasonable
attorneys' fees incurred in connection therewith, and any real estate commission
paid or payable. As used in subparts (i) and (ii) above, the "worth at the time
of the award" is computed by allowing interest on unpaid amounts at the rate of
fifteen percent (15%) per annum, or such lesser amount as may then be the
maximum lawful rate. As used in subpart (iii) above, the "worth at the time of
the award" is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one percent
(1%). If Tenant has abandoned the Property, Landlord shall have the option of
(I) retaking possession o the Property and recovering from Tenant the amount
specified in this Paragraph 10.03)a), or (ii) proceeding under Paragraph
10.03(b);
<PAGE> 19
(b) Maintain Tenant's right to possession, in which case this Lease shall
continue in effect whether or not Tenant has abandoned the Property. In such
event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;
(c) Pursue any other remedy now or hereafter available to Landlord under the
laws or judicial decisions of the state in which the Property is located.
Section 10.04. Repayment of "Free" Rent. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent".
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession. In such cases Abated Rent shall
be calculated based on the full initial rent payable under this Lease.
Section 10.05. Automatic Termination. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord's intention to terminate the Lease as
provided in section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord's right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.
Section 10.06. Cumulative Remedies. Landlord's exercise of any right or remedy
shall not prevent it from exercising any other right or remedy.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.01. Subordination. Landlord shall have the right to subordinating
this Lease to any ground lease, deed of trust or mortgage encumbering the
Property, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or
<PAGE> 20
extensions thereof, whenever made or recorded. Tenant shall cooperate with
Landlord and any lender which is acquiring a security interest in the Property
or the Lease. Tenant shall execute such further documents and assurances as such
lender may require, provided that Tenant's obligations under this Lease shall
not be increased in any material way (the performance of ministerial acts shall
not be deemed material), and Tenant shall not be disturbed if Tenant pays the
rent and performs all of Tenant's obligations under this Lease and is not
otherwise in default. If any ground lessor, beneficiary or mortgagee elects to
have this Lease prior to the lien of its ground lease, deed or trust or mortgage
and gives written notice thereof to Tenant, this Lease shall be deemed prior to
such ground lease, deed of trust or mortgage whether this Lease is dated prior
to subsequent to the date of said ground lease, deed of trust or mortgage or the
date of recording thereof.
Section 11.02. Attornment. If Landlord's interest in the Property is acquired by
any ground lessor, beneficiary under a deed of trust, mortgage, or purchaser at
a foreclosure sale, Tenant shall attorn to the transferee of our successor to
Landlord's interest in the Property and recognize such transferee or successor
as Landlord under this Lease. Tenant waives the protection of any statute or
rule of law which gives or purports to give Tenant any right to terminate this
Lease or surrender possession of the Property upon the transfer of Landlord's
interest.
Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request, Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.
Section 11.04. Estoppel Certificates.
(a) Upon Landlord's written request, Tenant shall execute, acknowledge and
deliver to Landlord a written statement certifying: (i) that none of the terms
or provisions of this Lease have been changed (or if they have been changed,
stating how they have been changed); (ii) that this Lease has not been cancelled
or terminated; (iii) the last date of payment of the Base Rent and other charges
and the time period covered by such payment; (iv) that Landlord is not in
default under this Lease (or, if Landlord is claimed to be in default, stating
why); and (v) such other representations or information with respect to Tenant
or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrancer of the Property may require. Tenant shall deliver such
statement to Landlord with ten (10) days after Landlord's request. Landlord may
give any such statement by Tenant to any prospective purchaser or encumbrancer
of the Property. Such purchaser or encumbrancer may rely conclusively upon such
statement as true and correct.
<PAGE> 21
(b) If Tenant does not deliver such statement to Landlord within such ten (10
- -day period, Landlord, and any prospective purchaser or encumbrancer, may
conclusively presume and rely upon the following facts: (i) that the terms and
provisions of this Lease have not been changed except as otherwise represented
by Landlord; (ii) that this Lease has not been cancelled or terminated except as
otherwise represented by Landlord; (iii) that not more than one month's Base
Rent or other charges have been paid in advanced; and (iv) that Landlord is not
in default under the Lease. In such event, Tenant shall be stopped from denying
the truth of such facts.
Section 11.05. Tenant's Financial Condition. Within ten (10) days after written
request from Landlord, Tenant shall deliver to Landlord such financial
statements as Landlord reasonably requires to verify the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender designated by Landlord any financial statements required
by such lender to facilitate the financing or refinancing of the Property.
Tenant represents and warrants to Landlord that each such financial statement is
a true and accurate statement as of the date of such statement. All financial
statements shall be confidential and shall be used only for the purposes set
forth in this Lease.
ARTICLE TWELVE: LEGAL COSTS
Section 12.01. Legal Proceedings. If Tenant or Landlord shall be in breach or
default under this Lease, such party (the "Defaulting Party") shall reimburse
the other party (the "Nondefaulting Party") upon demand for any costs or
expenses that the Nondefaulting Party incurs in connection with any break or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys' fees and
costs. The losing party in such action shall pay such attorneys' fees and costs.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability Landlord may incur if Landlord becomes or
is made a party to any claim or action (a) instituted by Tenant against any
third party, or by any third party against Tenant, or by or against any person
holding any interest under or using the Property by license of or agreement with
Tenant; (b) for foreclosure of any lien for labor or material furnished to or
for Tenant or such other person; (c) otherwise arising out of or resulting from
any act or transaction of Tenant or such other person; or (d) necessary to
protect Landlord's interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 11 of the United States code, as amended. Tenant
shall defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs Landlord incurs in any such
claim or action.
<PAGE> 22
Section 12.02. Landlord's Consent. Tenant shall pay Landlord's reasonable
attorneys' fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord's consent.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.01. Non-Discrimination. Tenant promises, and it is a condition to the
continuance of this Lease, that there will be no discrimination against, or
segregation of, any person or group of persons on the basis of race, color, sec,
creed, national origin or ancestry in the leasing, subleasing, transferring,
occupancy, tenure or use of the Property or any portion thereof.
Section 13.02. Landlord's Liability; Certain Duties.
(a) As used in this Lease, the term "Landlord" means only the current owner or
owners of the fee title to the Property or the leasehold estate under a ground
lease of the Property at the time in question. Each Landlord is obligated to
perform the obligations of Landlord under this Lease only during the time such
Landlord owns such interest or title. Any Landlord who transfers its title or
interest is relieved of all liability with respect to the obligations of
Landlord under this Lease to be performed on or after the date of transfer.
However, each Landlord shall deliver to its transferee all funds that Tenant
previously paid if such funds have not yet been applied under the terms of this
Lease.
(b) Tenant shall give written notice of any failure by Landlord to perform any
of its obligations under this Lease to Landlord and to any ground lessor,
mortgagee or beneficiary under any deed of trust encumbering the Property whose
name and address have been furnished to Tenant in writing. Landlord shall not be
in default under this Lease unless Landlord (or such ground lessor, mortgagee or
beneficiary) fails to cure such non-performance within thirty (30) days after
receipt of Tenant's notice. However, if such non-performance reasonably requires
more than thirty (30) days to cure, Landlord shall not be in default if such
cure is commenced within such thirty (30) -day period and thereafter diligently
pursued to completion.
(c) Notwithstanding any term or provision herein to the contrary, the liability
of Landlord for the performance of its duties and obligations under this Lease
is limited to Landlord's interest in the Property, and neither the Landlord nor
its partners, shareholders, officers or other principals shall have any personal
liability under this Lease.
Section 13.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.
<PAGE> 23
Section 13.04. Interpretation. The captions of the Articles or Sections of this
Lease are to assist the parties in reading this Lease and are not a part of the
terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the Term "Tenant" shall include Tenant's agents, employees, contractors,
invitees, successors or others using the Property with Tenant's expressed or
implied permission.
Section 13.05. Incorporation of Prior Agreements; Modifications. This Lease is
the only agreement between the parties pertaining to the lease of the Property
and no other agreements are effective. All amendments to this Lease shall be in
writing and signed by all parties. Any other attempted amendment shall be void.
Section 13.06. Notices. All notices required or permitted under this Lease shall
be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid. Notices to Tenant shall be delivered
t the address specified in Section 1.03 above, except that upon Tenant's taking
possession of the Property, the Property shall be Tenant's address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Section 1.02 above. All notices shall be effective upon delivery. Either party
may change its notice address upon written notice to the other party.
Section 13.07. Waivers. All waivers must be in writing and signed by the waiving
party. Landlord's failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
Section 13.08. No Recordation. Tenant shall not record this Lease without prior
written consent from Landlord. However, either Landlord or Tenant may require
that a "Short Form" memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.
Section 13.09. Binding Effect: Choice of Law. This Lease binds any party who
legally acquires any rights or interest in this Lease from Landlord or Tenant.
However, Landlord shall have no obligation to Tenant's successor unless the
rights or interests of tenant's successor are acquired in accordance with the
terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.
Section 13.10. Corporate Authority: Partnership Authority. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of
<PAGE> 24
Tenant's Board of Directors authorizing the execution of this Lease or other
evidence of such authority reasonably acceptable to Landlord. If Tenant is a
partnership, each person or entity signing this Lease for Tenant represents and
warrants that he or it is a general partner of the partnership, that he or it
has full authority to sign for the partnership and that this Lease binds the
partnership and all general partners of the partnership. Tenant shall give
written notice to Landlord of any general partner's withdrawal or addition.
Within thirty (30) days after this Lease is signed, Tenant shall deliver to
Landlord a copy of Tenant's recorded statement of partnership or certificate of
limited partnership.
Section 13.11. Joint and Several Liability. All parties signing this Lease as
Tenant shall be jointly and severally liable for all obligations of Tenant.
Section 13.12. Force Majeure. If Landlord cannot perform any of its obligations
due to events beyond Landlord's control, the time provided for performing such
obligations shall be extended by a period of time equal to the duration of such
events. Events beyond Landlord's control include, but are not limited to, acts
of God, war, civil commotion, labor disputes, strikes, fire, flood or other
casualty, shortages of labor or material, government regulation or restriction
and weather conditions.
Section 13.13. Execution of Lease. This Lease may be executed in counterparts
and, when all counterpart documents are executed, the counterparts shall
constitute a single binding instrument. Landlord's delivery of this Lease to
Tenant shall not be deemed to be an offer to lease and shall not be binding upon
either party until executed and delivered by both parties.
Section 13.14. Survival. All representations and warranties of Landlord and
Tenant shall survive the termination of this Lease.
ARTICLE FOURTEEN: BROKERS
Section 14.01. Broker's Fee. When this Lease is signed by and delivered to both
Landlord and Tenant, Landlord shall pay a real estate commission to Landlord's
Broker named in Section 1.08 above, if any, as provided in the written agreement
between Landlord and Landlord's Broker, or the sum stated in Section 1.09 above
for services rendered to Landlord by Landlord's Broker in this transaction.
Landlord shall pay Landlord's Broker a commission if Tenant exercises any option
to extend the Lease Term or to buy the Property, or any similar option or right
which Landlord may grant to Tenant, or if Landlord's Broker is the procuring
cause of any other lease or sale entered into between Landlord and Tenant
covering the Property. Such commission shall be the amount set forth in
Landlord's Broker's commission schedule in effect as of the execution of this
Lease. If a Tenant's Broker is named in Section 1.08 above, Landlord's Broker
shall pay an appropriate portion of its commission to Tenant's Broker if so
provided in any agreement between Landlord's Broker and Tenant's Broker. Nothing
contained in this Lease shall impose any obligation on Landlord to pay a
commission or fee to any party other than Landlord's Broker.
<PAGE> 25
Section 14.02. Protection of Brokers. If Landlord sells the Property, or assigns
Landlord's interest in this Lease, the buyer or assignee shall, by accepting
such conveyance of the Property or assignment of the Lease, be conclusively
deemed to have agreed to make all payments to Landlord's Broker thereafter
required of Landlord under this Article Fourteen. Landlord's Broker shall have
the right to bring a legal action to enforce or declare rights under this
provision. The prevailing party in such action shall be entitled to reasonable
attorneys' fees to be paid by the losing party. Such attorneys' fees shall be
fixed by the court in such action. This Paragraph is included in this Lease for
the benefit of the Landlord's Broker.
Section 14.03. Broker's Disclosure of Agency. Landlord's Broker hereby discloses
to Landlord and Tenant and Landlord and Tenant hereby consent to Landlord's
Broker acting in this transaction as the agent of (check one):
Landlord exclusively; or
- ---
x both Landlord and Tenant.
- ---
Section 14.04. No Other Brokers. Tenant represents and warrants to Landlord that
the brokers named in Section 1.08 above are the only agents, brokers, finders or
other parties with whom Tenant has dealt who are or may be entitled to any
commission or fee with respect to this Lease or the Property.
ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS
ATTACHED HERETO OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL
PROVISIONS ARE INSERTED, PLEASE DRAW A LINE THROUGH THE SPACE
BELOW.
<PAGE> 26
Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialed all Riders which
are attached to or incorporated by reference in this Lease.
"LANDLORD"
Signed on , 19 83rd Street Investors
---------------- ------
at .
---------------------------------
By: _____________________
David K. Werner
Its: Partner
By: /s/ John E. Van Valkenburgh
----------------------------
Its: Partner
"TENANT"
Signed on December 4, 1989. Angeles Metal Trim, a California
at Los Angeles, CA. corporation
By: /s/ Richard W. Blenking
---------------------------
Its: President
IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH A
PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON
WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE
POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE
TANKS.
THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE DIRECTION OF
THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE
REALTORS(R), INC., NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE SOUTHERN
CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS(R), INC.,
ITS LEGAL COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR
AGENTS, AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX CONSEQUENCES OF THIS
LEASE OR OF THIS TRANSACTION. LANDLORD AND TENANT SHOULD RETAIN LEGAL COUNSEL TO
ADVISE THEM ON SUCH MATTERS AND SHOULD RELY UPON THE ADVISE OF SUCH LEGAL
COUNSEL.
<PAGE> 27
ADDENDUM TO INDUSTRIAL REAL ESTATE LEASE
(SINGLE-TENANT FACILITY-NET)
DATED NOVEMBER 13, 1989
BY AND BETWEEN
83RD STREET INVESTORS, AS LANDLORD
AND
ANGELES METAL TRIM,
A CALIFORNIA CORPORATION, AS TENANT
15. RENT: The rent for the premises shall be as follows:
Months 1-36 $3,000.00 per month
16. TENANT IMPROVEMENTS: Landlord, at Landlord's sole cost, agrees to furnish
and install the following:
A. Deliver the premises free and clear of debris with the warehouse and yard
area in a broom clean condition.
B. Provide that all ground level sliding and/or roll up doors are in good
condition and repair and in full working order.
C. Provide that the existing wall mounted air conditioning unit is in good order
and repair and in full working order or replace said item.
D. Provide that the exterior chain link fencing and all applicable gates are
repaired to meet Tenant's needs.
E. Furnish and install 12"x12" vinyl floor tile in existing office areas.
F. Clean, repair and/or replace all existing toilet fixtures (toilets and sinks)
so as to provide the existing restrooms fit to be used.
G. Furnish, install and/or upgrade existing exterior lighting so as to provide a
well lit yard area to meet Tenant's needs. Any new lighting is to be attached to
the exterior roof level of the existing building. No exterior pole lighting in
yard area is to be provided.
H. Remove existing above-ground storage tank to the north of the property that
was used by prior tenant.
I. Deliver the building in excellent repair including the roof (free of leaks)
and exterior siding.
J. Extend the chain link fence on the North side of the building to the front
with a 15' gate connecting the fence at the Northwest corner of the building.
17. OPTION TO PURCHASE: Landlord hereby grants Tenant an option to purchase the
entire Premises described as two (2) industrial buildings totaling approximately
22,500 square feet (11,000 square feet and 11,500 square feet) and one (1)
office building (1,600 square feet) on approximately 2.43 acres of land commonly
known as Sacramento County Assessor's Parcel Number 61-161-24 (see attached
Exhibits). Said option to purchase can be exercised at any time during the
original term of this lease providing Tenant is not in default under the terms
and conditions of the Lease at the time Tenant exercises the option.
<PAGE> 28
Tenant shall exercise the option by giving written notice to Landlord within the
option period and by delivering to escrow holder, pursuant to the provisions of
Paragraph 17.02, an option deposit ("the deposit") in the amount of TEN THOUSAND
AND NO/100 ($10,000) DOLLARS. Option deposit is to be credited towards the
purchase price at close of escrow. Tenant shall have the right to exercise the
option to purchase as follows:
At any time during the original term of thirty-six (36) months (November 1, 1989
to October 31, 1992). The purchase price of the Premises as defined above shall
be calculated by dividing the Net Annual Income (Net Rent) by 10% (.10).
Example: If the net income from the entire premises is $6,000.00 per month then
the Purchase Price is calculated as follows:
Price = $6,000/month x 12 months = $720,000
------------------------
.10
The Purchase price is payable in cash or cashiers check at close of escrow.
17.01 Title to Premises: Landlord shall deliver to Tenant an executed grant deed
in recordable form conveying the premises. Title to the premises shall be
conveyed by Landlord to Tenant free and clear of all liens, encumbrances,
covenants, conditions, restrictions, easements, and rights of way of record,
leases or other tenancy agreements, andother matters of record, except current
taxes, a lien not yet delinquent, those portions of current assessments not yet
due and payable, and anything of record that affects title to the premises.
17.02 Escrow: The sale shall be consummated through an escrow with Stewart Title
Company, 555 Capitol Mall, Suite 280, Sacramento, California, 95814 (Escrow
holder) to be opened by Tenant within five (5) days after the option notice has
been given to Landlord. Tenant shall deposit to escrow the option deposit within
three (3) days of the opening of escrow by Tenant. Landlord and Tenant shall
execute all documents reasonably required by Escrow holder which are consistent
with the provisions of the purchase and sale. Escrow shall close within sixty
(60) days after the full ratification of the purchase documents as outlined
above, but no later than October 31, 1992.
17.03 Title Insurance: At the close of escrow, escrow holder must be prepared to
issue a CLTA Standard Coverage Policy of Title Insurance in the amount of the
purchase price insuring title to the premises vested in Tenant. The full cost of
said policy to be borne by Landlord. In the event Tenant requests an ALTA
Policy, the cost of the premium for the ALTA increment shall be borne solely by
Tenant.
17.04 Proration of Costs and Income: Rent, except taxes and insurance premiums,
shall be prorated as of the close of escrow. The security deposit and prepaid
rent, if any, shall be credited to Tenant in escrow.
<PAGE> 29
17.05 Closing Costs: All escrow fees, recording costs, and transfer taxes shall
be borne equally by Landlord and Tenant.
17.06 Destruction of Building or Other Improvements: If the building or other
improvements that are part of the premises are totally or partially destroyed
between the date Tenant exercises the option to purchase and the close of
escrow, Landlord shall restore the premises pursuant to Paragraphs 7.01, 7.02,
and 7.03. However, if Landlord elects to terminate this Lease pursuant to those
paragraphs, Tenant's right to purchase the premises shall terminate, unless
Tenant notifies Landlord that Tenant will purchase the premises despite the
destruction and without reduction in the purchase price. Tenant must notify
Landlord of its decision to purchase the premises within ten (10) days after
Tenant receives written notice of Landlords' election to terminate this lease.
If Tenant elects to purchase, Tenant shall be entitled to receive all insurance
proceeds resulting from the destruction. If this Lease does not terminate as a
result of the destruction and Landlord restores the premises, the time for close
of escrow shall be extended for a period of time equal to the period of time
Landlord takes to fully restore the premises.
17.07 Close of Escrow-Termination: On close of escrow, this Lease shall
terminate and Landlord and Tenant shall be released from all obligations under
this Lease.
17.08 Liquidated Damages: If Tenant fails to complete said purchase as herein
provided by reason of any default of Tenant, Landlord and Tenant hereby
acknowledge and agree that it would be impractical or extremely difficult to fix
actual damages in case of Tenant's default, that the amount of the option
deposit, together with accrued interest thereon (collectively "the deposit") is
a reasonable estimate of the damages, and that in the event of such default by
Tenant, Landlord shall retain the deposit as its sole right to damages under
this real property purchase option. Said rights to retain the deposit, will,
except as herein otherwise provided, be exercised by written notice thereof by
landlord to escrow holder and Tenant, upon receipt of which escrow agent shall
transmit said deposit to landlord, in which event this agreement and such escrow
shall terminate and cancel all rights and obligations of the parties hereto
shall cease and be of no further force and effect.
/s/ RWB /s/ JW
- ----------------- -------------------
Tenant's Initials Landlord's Initials
17.09 Exchange Provision: Each party ("Cooperating party") agrees to accommodate
the other party ("Requesting party") in effecting a tax deferred exchange,
providing (1) Cooperating party incurs no greater liabilities, costs or expenses
in excess of those required of Cooperating party herein and Requesting party
agrees to indemnify and hold Cooperating party harmless from all costs and
liabilities in connection with such Exchange, and (2) in the event the exchange
property acceptable to Requesting party is not obtained within the escrow
period, Cooperating party hereby expressly agrees to close escrow as if this
transaction is a straight sale. Cooperating party hereby acknowledges that
Requesting party has been advised to seek the counsel of its own tax attorney or
certified public accountant for the
<PAGE> 30
determination of any income tax consequences concerning any exchange with
respect to this transaction and therefore Requesting party hereby fully
indemnifies and holds Cooperating party and the escrow agent harmless from any
loss which Requesting party may sustain in the event this exchange transaction
is audited by the Internal Revenue Service and disallowed as a tax deferred
exchange.
17.10 Fuel Pumps and Underground Storage Facilities: Landlord shall remove all
existing fuel pumps and underground storage facilities located on the property.
Landlord shall transfer the property to Tenant free and clear of any hazardous
substances and in full compliance with governmental (federal, state, county,
etc.) regulations. Said excavated area shall be filled, compacted and resurfaced
to match surrounding pavement. Tenant shall not be liable or held responsible
for any contamination to the soil or damage to the surrounding area and Landlord
further agrees to deliver the property safe from any hazardous waste at no cost
to the Tenant. The title company shall be instructed that the Tenant's
obligation to purchase the property and the close of escrow are expressly
conditioned on both Landlord's completion of the excavation and clean-up work
required by this section 17.10 no later than forty-five (45) days after receipt
of written notification to exercise the Option to Purchase along with deposit by
Landlord and on delivery by Landlord of the following items to the title company
at least three (3) days before the close of escrow: (i) An affidavit from a
licensed engineer certifying that the excavation and clean-up are complete, that
there has been compliance with all applicable statutes, regulations and
ordinances, and that all foreign and toxic substances have been removed from the
affected area; and (ii) certificates from applicable government agencies
evidencing Landlord's compliance with the pertinent government statutes,
regulations, and ordinances. Completion of these requirements shall be the sole
cost and expense of Landlord.
AGREED AND ACCEPTED:
"LANDLORD" "TENANT"
83rd STREET INVESTORS ANGELES METAL TRIM, A
CALIFORNIA CORPORATION
By: /s/ John E. Van Valkenburgh By: /s/ Richard W. Blenking
------------------------------------ -----------------------
John E. Van Valkenburgh, Partner President
Date: 12/18/89 Date: 12/4/89
<PAGE> 31
Exhibit A
[Drawing of Premises]
<PAGE> 32
Exhibit B
[Site Plan]
<PAGE> 33
AMENDMENT TO THE LEASE BETWEEN 83rd STREET INVESTORS, A CALIFORNIA
PARTNERSHIP ("LANDLORD"), AND ANGELES METAL TRIM, A CALIFORNIA
CORPORATION ("TENANT"), FOR PREMISES AT 4841 83rd STREET, SACRAMENTO,
CALIFORNIA
The parties hereby agree to the following:
1. The current lease, which expires November 30, 1994, will be extended for two
years, until November 30, 1996. The rental rate during this period will be Three
Thousand and No/100 ($3,000) per month. All other terms and conditions of the
lease shall remain the same. 2. Tenant agrees that there are no additional
options to extend this lease.
LANDLORD TENANT
83rd Street Investors, a Angeles Metal Trim, a
California Partnership California Corporation
/s/ John E. Van Valkenburgh /s/ D. K. Cable
- --------------------------- ----------------
John E. Van Valkenburgh D.K. Cable
General Partner Chairman
Date: 10/17/94 Date: 10/6/94
<PAGE> 34
ANGELES METAL SYSTEMS
October 5, 1992
David K. Werner
3601 Winding Creek Road
Sacramento, CA 95864
Dear Mr. Werner:
Lease Renewal Agreement
This Lease Renewal Agreement is entered into by and between 83rd Street
Investors, a California partnership ("Landlord"), and Angeles Metal Trim, a
California Corporation ("Tenant"), with reference to the following facts:
A. Pursuant to the Lease Agreement dated November 13, 1989, Tenant is
presently leasing from Landlord premises known as 4841 83rd Street in
Sacramento, California, 95826 consisting of an approximate 11,500/SF
industrial building on approximately 1.07 acres of land.
B. The present lease expires on Oct. 31, 1992.
C. Tenant and Landlord wish to renew the lease for a period of two (2) years
commencing December 1, 1992 and expiring on November 30, 1994.
D. The Tenant shall have the option to renew said lease for an additional 2
years.
E. All other provisions of the lease shall remain unchanged including the base
rent remaining at $3,000 with no increases during the new term.
F. The option to purchase outlined in the addendum dated November 13, 1992,
Paragraph 17 shall remain in effect and Tenant will retain the option to
purchase the Premises as outlined in the original Addendum. A copy of the
Addendum is attached as Ex. A.
LANDLORD TENANT
83rd Street Investors, a Angeles Metal Trim, a
California Partnership California Corporation
By: /s/ D. Werner By: /s/ D. K. Cable
--------------- ---------------
General Partner Chairman
<PAGE> 1
Exhibit 10.15
LEASE AGREEMENT
1. Specific Information:
1.1. The "Landlord" is Fred G. and Patricia A. Ducolon, Husband and Wife, dba
SMI Properties, Inc..
1.2. The "Tenant" is Angeles Metal Trim Company dba Angeles Metal Systems, a
California corporation.
1.3. Location of Premises: The street address of the leased property
("Premises") is 1851 Alexander Avenue, Tacoma, Washington, which is legally
described on Exhibit A.
1.4. Lease Duration:
1.4.1. The "Commencement Date" of this Lease is October 1, 1996, with Tenant
having occupancy September 1, 1996.
1.4.2. The "Termination Date" of this Lease is September 30, 1999.
1.5. The "Basic Monthly Rent" at the commencement of this Lease is See Addendum
No. 1 (which shall be adjusted periodically in accordance with Schedule 1.5, if
attached).
1.6. The "Allowed Use" of the Premises is manufacturing of metal studs, joist
and/or related uses and/or any legal purposes.
1.7. On signing this Lease, Tenant shall pay Landlord Six Thousand Five Hundred
and No/100th Dollars ($6,500.00) to be applied toward payment of the first
month's rent of this Lease ("Advance Rent") and shall deposit Dollars
($6,500.00) to be held as the last month's rent.
1.8 Notice Address of Tenant: cc: D.K. Cable
Angeles Metal System Angeles Metal Systems
Attention: Steven D. Tallman 4817 Sheila Street
1851 Alexander Avenue Los Angeles, CA 90040
Tacoma, WA 98421 (213) 268-1777
(213) 266-2921 FAX
1.9. Notice Address of Landlord:
Fred G. and Patricia A. Ducolon
8707 Portland Avenue East
Tacoma, WA 98445
(206) 537-6520
(206) 537-7485 Fax
1.10. Date. This Lease is dated, for reference purposes only, as of June 27,
1996.
2. Premises. Landlord hereby leases to Tenant and Tenant leases from Landlord
for the term, at the rental, and on all of the terms and conditions of this
Lease, the Premises.
<PAGE> 2
3. Term.
3.1. Term. The term of this Lease is from the Commencement Date until the
Termination Date, unless sooner terminated pursuant to any provision hereof.
3.2. Paragraph deleted.
3.3. Early Possession. If Tenant occupies the Premises before the Commencement
Date of the term, all of Tenant's Lease obligations (including payment of
Operating Expenses, but not Basic Monthly Rent) shall become effective
immediately although such early possession shall not accelerate the Termination
Date of this Lease.
4. Rent.
4.1. Basic Monthly Rent. Tenant shall pay to Landlord as rent for the Premises
the Basic Monthly Rent, in advance, on the first day of each month of the term
hereof. Rent for any period during the term hereof which is for less than one
(1) month shall be a pro-rata portion of the monthly installment. Rent shall be
payable in lawful money of the United States of America to Landlord at such
address and to such other persons or at such other places as Landlord may
designate in writing.
4.2. Operating Expenses.
4.2.1. In addition to the Basic Monthly Rent and commencing on the earlier of
Tenant's occupancy or the Commencement Date, Tenant shall pay to Landlord upon
receipt of tax bill from Landlord in reimbursement for real estate taxes, and
insurance premium if not paid by Tenant, if applicable to the Premises.
4.2.2. Definition of Operating Expenses. "Operating Expenses" shall mean only
the total costs and expenses paid for or incurred by Landlord for the Premises
which in accordance with reasonable accounting and management practices
consistently applied, including, without limitations for (1) Real Estate Taxes;
(2) Insurance Premiums; (3) the cost of utilities consumed in the Premises if
paid for by Landlord.
5. Paragraph deleted.
6. Use.
6.1. Allowed Use. The Premises shall be used and occupied only for any lawful
purpose.
6.2. Compliance with Law. Tenant shall, at Tenant's expense, comply promptly
with all present and future laws and requirements regulating the use of the
Premises by Tenant for Tenant's business. Tenant shall not create or allow waste
or a nuisance, or unreasonably disturb any other person. Landlord to make
facility in compliance with governmental requirements during the lease and any
extension of the lease, and Tenant shall have no obligation to do so unless the
same is peculiar to Tenant's use and not with respect to the Premises in
general.
6.3. Insurance Cancellation. Despite any other provision of this Lease, no use
of the Premises may be made or permitted nor acts done which will adversely
affect or increase the cost of any insurance policy maintained by Landlord.
6.4. Paragraph deleted.
<PAGE> 3
7. Maintenance Repairs and Alteration.
7.1. Landlord's Obligation. Except for damage caused or allowed by Tenant and
its employees or invitees, Landlord shall maintain, at Landlord's expense and
not as an Operating Expense, the structural foundations and all paved areas of
the yard and Premises and the entire roof(s) of the Premises. Landlord shall
have no obligation to make such repairs until a reasonable time after receipt of
written notice of the need for such repairs. Except as provided in this Section
and as provided in this Lease as to damage by casualty, Landlord shall have no
obligation to make any repair, change or improvement of the Property or the
Premises.
7.2. Tenant's Obligations. Tenant, at Tenant's expense, shall maintain in
present condition and appearance all and every part of the Premises, except as
provided in Paragraph 7.1. Without limiting Tenant's duty, Tenant shall so
maintain all walls (both the exterior and interior), all plumbing, heating, air
conditioning, ventilating, electrical and lighting facilities and equipment,
fixtures, ceilings, doors, glass, and skylights, landscaping, fences and signs
on the Premises. Tenant shall maintain Premises from condition of occupancy less
reasonable wear and tear.
7.3. Reasonable Initial Condition of Premises. Tenant accepts the Premises in
the condition existing when this Lease is signed. Tenant acknowledges that
neither Landlord nor the Broker has made any representation or warranty as to
(i) the physical condition of the Premises other than Landlord represents that
Landlord is not presently aware of any existing physical condition of the
Premises which presently is legally required to be rectified or altered, or (ii)
the suitability or zoning of the Premises for the conduct of Tenant's business,
except as provided in Addendum No. 1, Paragraph F. Unless expressly provided in
a Schedule 7.1., 7.3 and 6.2 attached to the Lease and signed or initialed by
the Landlord, Landlord has no obligation to make any improvements or changes to
the Premises. Landlord warrants leased premises are in good condition and repair
and are in compliance with all laws, rules and regulations of governmental
agencies.
7.4. Surrender. On the Termination Date of this Lease, or on any sooner
termination of this Lease, Tenant shall surrender the Premises to Landlord in
good condition and in accordance with Tenant's maintenance obligation and broom
clean, ordinary wear and tear excepted. Tenant shall patch, fill and paint any
holes resulting from attachment of any of Tenant's trade fixtures, furnishings
and equipment. Tenant shall remove any alterations or improvements made by
Tenant without the prior written approval of Landlord.
7.5. Landlord's Rights. If Tenant fails to perform Tenant's maintenance
obligations, Landlord may, at its option (but shall not be required to) enter
the Premises, after ten (10) days prior written notice to Tenant or with no
prior written notice in an emergency, and perform Tenant's maintenance
obligations and Tenant shall immediately, fully reimburse Landlord for such
expense together with interest thereon at the rate of twelve percent (12%) per
annum.
7.6. Alterations and Additions.
7.6.1. Without Landlord's prior written consent, provided Landlord's consent
shall not be unreasonably withheld or delayed Tenant shall not make any
alterations, improvements or additions to the Premises, except for non-permanent
changes costing less than Thirty Thousand and No/100th Dollars ($30,000.00) in
the aggregate per year. As a condition of consent, Landlord may require that
Tenant be responsible to remove any such alterations, improvements or additions
at the expiration of the term, and to restore the Premises to the prior
condition; Landlord may impose such other conditions as are reasonable. Tenant
shall secure all governmental permits required in connection with any such work.
<PAGE> 4
7.6.2. Before commencing any work relating to alterations, additions and
improvements affecting the Premises (none of which are required or requested by
Landlord, nor any obligation of Tenant under this Lease), Tenant shall notify
Landlord in writing of the expected date of commencement thereof. Landlord shall
then have the right at any time to maintain on the Premises such notices as
Landlord reasonably deems necessary to protect the Premises and Landlord from
any lien. In any event, Tenant shall pay, when due, all charges incurred by
Tenant. Tenant shall not permit any lien to be asserted, against the Premises or
Property for any charge incurred or alleged to have been incurred by Tenant, and
Tenant shall indemnify, defend Landlord against, and hold Landlord harmless from
any and all liability, costs, damages therefrom.
7.6.3. Unless Landlord requires removal, as provided elsewhere in this Lease,
other than that which is affixed to the Premises so that it cannot be removed
without material damage to the Premises, shall remain the property of Tenant and
may be removed by Tenant prior to the end of the term of the Lease and subject
to Tenant's obligations to maintain the Premises.
8. Hazardous Substances.
8.1. As used in this Lease, the term "Hazardous Substance" means any substance
or material, the storage, use or disposal of which is or becomes regulated under
any law, now or hereafter in effect.
8.2. Landlord warrants to Tenant that Landlord has not released or deposited on
the Premises any Hazardous Substance, and Landlord has no knowledge of the
presence of any hazardous substance on the Premises. Landlord agrees to
indemnify and hold Tenant harmless from any loss or damage. Including, but not
limited to, loss of use and business interruption expense of any pre-existing
Hazardous Substance on or about Premise.
8.3. Without Landlord's prior written consent, the Tenant shall not knowingly
receive, store or otherwise allow any Hazardous Substance on the Premises. In
the event of any release or presence of any Hazardous Substances on or about the
Premises occurring on or after the Commencement Date of this Lease, Tenant
agrees to immediately, fully and completely remove (and to dispose of such in
accordance with applicable law) all of such Hazardous Substance from the
Premises if the quantity or concentration of such Hazardous Substance would
require remediation under the provisions of law. Tenant further agrees to
defend, indemnify, and hold harmless Landlord, its employees, agents and
contractors and Lender from and against any and all losses, claims, liabilities,
damages, demands, fines, costs, and expenses (including reasonable attorneys'
fees) arising out of or resulting from any release or presence of any Hazardous
Substances by Tenant on or about the Premises; the provisions of this sentence
shall survive (and be enforceable thereafter) the termination or expiration of
this Lease and the surrender of the Premises by Tenant. If Tenant becomes aware
of the release or presence on the Premises of any Hazardous Substance, Tenant
shall immediately advise Landlord of such release or presence, and Tenant
further shall provide Landlord with copies of any reports, studies,
recommendations or requirements received by Tenant from any third person
including a governmental agency. Tenant shall have the right to use substances
referred to on Exhibit "8.3" attached hereto without further permission from
Landlord required, provided however, Tenant shall comply with all governmental
requirements with respect thereto.
9. Insurance; Indemnity.
9.1. Payment of Premium. "Insurance Premiums" are the actual cost of the
insurance applicable to improvements on the Property and required to be carried
by Landlord by this Lease. Tenant shall provide insurance binder as attachment
to Lease.
9.2. Liability Insurance.
<PAGE> 5
9.2.1. Carried by Tenant. Tenant shall obtain and keep in force during the term
of this Lease a commercial (comprehensive) liability insurance policy protecting
Tenant, Landlord (as additional insureds) 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, as set forth on Exhibit "9.2.l" attached hereto.
9.2.2 Carried by Landlord. At Landlord's own expense, Landlord may also maintain
liability insurance similar to that described in the preceding Section , in
addition to and not in lieu of, the insurance required to be maintained by
Tenant. Tenant shall not be named as an additional insured therein.
9.3. Property Insurance - Building, Improvements and Rental Value.
9.3.1. Building and Improvements. Tenant shall obtain and keep in force during
the term of this Lease a policy or policies in the name of Landlord, with loss
payable to Landlord and to any Lender(s), insuring against loss or damage to the
Premises as set forth on Exhibit "9.3.1" attached hereto.
9.3.2. Paragraph deleted.
9.4. Tenant's Property Insurance. Tenant at its own cost shall maintain
insurance coverage on all of Tenant's personal property, trade fixtures and
Tenant-owned alterations and improvements in the Premises as set forth on
Exhibit "9.4" attached hereto.
9.5. 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 Tenant shall not do or permit to be done anything which shall invalidate
the insurance policies maintained by Tenant. Tenant shall cause to be delivered
to Landlord, within seven (7) days after the earlier of the Early Possession
Date or the Commencement Date, certified copies of, or certificates evidencing
the existence and amounts of, the insurance required of Tenant by this Lease. No
such policy shall be cancelable or subject to modification except after thirty
(30) days' prior written notice to Landlord if available. At least thirty (30)
days prior to the expiration of such policies, Tenant shall furnish Landlord
with evidence of renewals or "insurance binders" evidencing renewal thereof, or
Landlord may obtain such insurance and charge the cost thereof to Tenant, which
amount shall be payable by Tenant to Landlord upon demand.
9.6. Waiver of Subrogation. Without affecting any other rights or remedies,
Tenant and Landlord 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 or damage to their property arising out of or incident to the
perils required to be insured against under this Lease to the actual extent of
the insurance actually maintained. Landlord and Tenant agree to have their
respective insurance companies issuing property damage insurance waive any right
to subrogation that such companies may have against Landlord or Tenant, if
available without additional charge as the case may be, so long as the insurance
is not invalidated thereby.
9.7. Indemnity. Except to the extent of Landlord's comparative negligence or
breach of an express provision of this Lease, Tenant shall indemnify, protect,
defend and hold harmless the Landlord and its Lenders from and against all
claims, loss of rents and damages, costs, liens, judgments, penalties, loss of
permits, attorneys' fees, expenses and liabilities arising out of, involving, or
in connection with, the occupancy of the Premises by Tenant, the conduct of
Tenant's business, any act, omission or neglect of Tenant, its agents,
contractors, employees or invitees, and out of any Default or Breach by Tenant
in the performance in a timely manner of any obligation on Tenant'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 Landlord)
litigated or reduced to judgment. In case any action or proceeding be brought
against Landlord by reason of any of
<PAGE> 6
the foregoing matters, Tenant upon notice from Landlord shall defend the same at
Tenant's expense by counsel reasonably satisfactory to Landlord and Landlord
shall cooperate with Tenant in such defense. Landlord need not have first paid
any such claim in order to be so indemnified. In the event of concurrent
negligence of Landlord and Tenant resulting in injury or damage to persons or
property and which relates to the construction, alterations, repair, addition
to, subtraction from, improvement to or maintenance of the Premises, the
indemnifying party's obligation to indemnify the other party as set forth in
this Section shall be limited to the extent of the indemnifying party's
negligence, and that of its agents, employees, sublessees, invitees, licensees
or contractors.
9.8 Paragraph deleted.
10. Damage or Destruction.
10.1 Partial Damage - Insured. If the Premises or property are Partially Damaged
and such damage was caused by a casualty covered under an insurance policy
required to be maintained by Tenant or Landlord pursuant to this Lease, Landlord
shall commence repair work and substantially complete within forty-five (45)
days, and this Lease shall continue in full force and effect. If, however, the
insurance proceeds actually available to Landlord (after deduction of any
proceeds required by a Lender to be applied to reduction of indebtedness) are
not sufficient to effect such repair, Landlord shall not be obligated to make
such repairs unless Tenant elects, without obligation to do so, to contribute,
without right of reimbursement, the required amount. In the event that Landlord
is not obligated and does not voluntarily agree to repair such damage, either
Tenant or Landlord may declare this Lease terminated by thirty (30) days written
notice to the other party.
10.2. Damage - Uninsured. In the event the Premises are damaged or destroyed by
a casualty which is not covered under an insurance policy required to be
maintained by Tenant or Landlord, the Landlord may elect to repair within
forty-five (45) days of such damage, and this Lease shall continue in full force
and effect. If Landlord does not so elect within fifteen (15) days after the
occurrence of the casualty to repair, either Tenant or Landlord may declare this
Lease terminated by ten (10) days written notice to the other party; provided
Tenant may avoid termination of this Lease if Tenant voluntarily agrees to pay,
without right of reimbursement, all of the costs of such repairs by Landlord.
10.3. Total Destruction. If the Premises are Totally Destroyed by a casualty
covered under an insurance policy required to be maintained by Tenant or
Landlord pursuant to this Lease, this Lease shall automatically terminate as of
the date of such total destruction.
10.4. Damage Near End of Term. If the premises are Partially Damaged during the
last-one(1) years-of the term in this Lease, Landlord may, at Landlord's option,
cancel and terminate this Lease as of the date of occurrence of such damage by
giving written notice to Tenant of Landlord's election to do so within thirty
(30) days after Landlord receives notice of occurrence of such damage; provided
Landlord shall continue to have all rights to receive the proceeds of any
insurance policy required by the Lease to be maintained by Tenant.
10.5. Abatement of Rent. If the Premises are Partially Damaged, the rent payable
while such damage, repair or restoration continues shall be abated in proportion
to the degree to which Tenant's reasonable use of the Premises is substantially
impaired. Tenant shall have no claim against Landlord for any damage suffered by
reason of any such damage, destruction, repair or restoration (except as
otherwise provided for in this Lease.)
10.6. Definitions. For the purposes of this Lease, the term Partially Damaged
shall be deemed to mean damage to the Premises (excluding any damage to Tenant
owned property or alterations) which is reasonably estimated to cost to repair
less than fifty percent (50%) and Totally Destroyed shall be deemed
<PAGE> 7
to mean damage to the Premises or Property (excluding any damage to Tenant owned
property or alterations) which is reasonably estimated to cost to repair more
than fifty percent (50%) of the reasonable fair market value of the improvements
constituting the Premises (but not the land) calculated immediately prior to the
occurrence of the damage. Cost shall include the cost to rebuild all of the
damaged improvements owned by Landlord including demolition, debris removal,
requirements of applicable building codes and other laws, mitigating
requirements and without regard for depreciation.
11. Taxes.
11.1. Taxes. Landlord shall pay all Taxes applicable to the Premises, and be
reimbursed by Tenant per 4.2.1. If any Taxes cover any period of the time prior
to or after expiration of the term hereof, Tenant's share of such taxes shall be
equitably prorated to cover only the period of time within which this Lease
shall be in effect. As used herein, the term Taxes shall include any form of
required payment, assessment, license fee, tax on rent, levy, penalty, or tax
(other than Landlord's net income tax and inheritance or estate taxes) imposed
by any authority having the direct or indirect power to tax any legal or
equitable interest of Landlord in the Property or Landlord's right to rent or
other income therefrom.
11.2. Personal Property Taxes. Tenant shall pay prior to delinquency all taxes
assessed against and levied on any leasehold improvements, fixtures,
furnishings, equipment and other property of Tenant. Tenant shall cause such
Tenant property to be assessed separately from Landlord's Property or reimburse
Landlord for the taxes attributable to Tenant within ten (10) days after receipt
of a written statement from Landlord setting forth the taxes applicable to
Tenant's property.
12. Utilities. Tenant shall pay for all water, gas, drainage service, sewer
service, garbage service, heat, light, power, telephone and other utilities and
services supplied to the Premises, together with any taxes thereon.
13. Assignment and Subletting.
13.1. Landlord's Consent Required. Tenant shall with Landlord's prior consent,
which shall not be unreasonably withheld or delayed, have the right to assign,
transfer, mortgage, sublet, or otherwise transfer or encumber all or any part of
Tenant's interest in this lease or the Premises. Any purported assignment,
transfer, mortgage, encumbrance, or subletting without consent shall be void and
constitute a breach of this Lease. In the event that Tenant is not a natural
person, then any transfer (or the aggregate of a series of transfers) of thirty
percent (30%) or more of the beneficial ownership of Tenant shall be deemed a
prohibited assignment. The acceptance of rent by Landlord from a person other
than Tenant shall not be deemed to be a waiver by Landlord of any provision
thereof. Consent to one assignment or subletting shall not be deemed consent to
any subsequent assignment or subletting.
13.2. No Release of Tenant. Regardless of Landlord's consent, no subletting or
assignment shall release Tenant's primary obligation to pay or perform any
obligation from this Lease.
13.3. Paragraph deleted.
13.4. Assignment by Landlord. Landlord shall be permitted freely to assign all
of its rights and obligations hereunder. In the event of a sale or other
transfer of the Premises, whether by foreclosure or otherwise, the Tenant agrees
to attorn to the new owner and to recognize such owner as the Landlord under
this Lease and Tenant shall thereafter look solely to such transferee for
performance of this Lease. Notwithstanding the foregoing, the Landlord shall
remain liable for any prior obligations under this Lease.
14. Defaults; Remedies.
<PAGE> 8
14.1. Defaults. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant:
14.1.1. The vacation or abandonment of the Premises by Tenant.
14.1.2. The failure by Tenant to make any payment required to be made by Tenant
hereunder, as and when due where such failure shall continue for a period of ten
(10) days after written notice thereof from Landlord to Tenant.
14.1.3. The failure by Tenant to observe or perform any of the provisions of
this Lease (other than the payment of money) to be observed or performed by
Tenant where such failure shall continue for a period of thirty (30) days after
written notice thereof from Landlord to Tenant; provided, however, that if the
nature of Tenant's default is such that more than thirty (30) days are
reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant commenced such cure within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion.
14.1.4. The making by Tenant or any guarantor of Tenant of any general
assignment, or general assignment for the benefit of creditors; (ii) the filing
by or against Tenant or any guarantor of Tenant of a petition to have Tenant
adjudged a bankrupt or petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against Tenant,
the same is dismissed within sixty (60) days; *iii) the appointment of a trustee
or receiver to take possession of substantially all of Tenant's assets located
at the Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within ten (10) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where such seizure is not
discharged within ten (10) days.
14.2. Remedies in Default. Upon the occurrence of a Default by Tenant, Landlord,
without notice to Tenant (except where expressly provided for in this Lease or
by applicable law) may do any one or more of the following:
14.2.1. Elect to terminate this Lease and the tenancy created hereby by giving
notice of such election to Tenant, and reenter the Premises, without the
necessity of legal proceedings, and remove Tenant and all other persons and
property from the Premises, and may store such property in a public warehouse or
elsewhere at the cost of and for the account of Tenant without resort to legal
process and without Landlord being deemed guilty of trespass or becoming liable
for any loss or damage occasioned thereby; and
14.2.2. Exercise any other legal or equitable right o remedy which it may have.
14.3. Damages. If this Lease is terminated by Landlord pursuant to this section,
Tenant nevertheless shall remain liable for (a) any rents and damages which may
be due or sustained prior to such termination, all reasonable costs, fees and
expenses including, but not limited to, reasonable attorneys' fees, costs and
expenses incurred by Landlord in pursuit of its remedies hereunder, or in
renting the Premises to others from time to time until the original Termination
Date of this Lease (all such rents, damages, costs, fees and expenses being
referred to herein as "Termination Damages"), and (b) additional damages ("Post-
Termination Damages"), which Post-Termination Damages, at the election of
Landlord, shall be either:
14.3.1. an amount equal to the rents which, but for termination of this Lease,
would have become due during the remainder of the Term, less the amount of
rents, if any, which Landlord shall receive during such period from others to
whom the Premises may be rented, in which case such Post-Termination Damages
shall be computed and payable in monthly installments, in advance, on the first
day of each calendar month following termination of the Lease and continuing
until the date on which the Term would have expired but for such termination,
and any suit or action brought to collect any such Post-Termination
<PAGE> 9
Damages for any month shall not in any manner prejudice the right of Landlord to
collect any Post- Termination Damages for any subsequent month by a similar
proceeding; or
14.3.2. an amount equal to the present worth (as of the date of such
termination) of rents which, but for termination of this Lease, would have
become due during the remainder of the Term, less the fair rental value of the
Premises, as determined by an independent real estate appraiser named by
Landlord, in which case such Post-Termination Damages shall be payable to
Landlord in one lump sum on demand and shall bear interest at the Default Rate
until paid. For purposes of this section "present worth" shall be computed by
discounting such amount to present worth at a discount rate equal to one
percentage point above the discount rate then in effect at the Federal Reserve
Bank nearest to the Premises; provided that Tenant may avoid the application of
this section so long as Tenant voluntarily agrees to pay, and, in fact, does pay
all sums due to date under the immediately preceding section within forty-five
(45) days of receipt of notice of Landlord's declaration of the termination of
this Lease and Tenant continues thereafter to pay such amounts monthly until the
Termination Date.
14.4. Miscellaneous. If Landlord elects to terminate this Lease following the
default of Tenant, Landlord may relet the Premises or any party thereof, alone
or together with other premises, for such term or terms (which may be greater or
less than the period which otherwise would have constituted the balance of the
Term) and on such terms and conditions (which may include concessions or free
rent, alterations of the Premises and payment of brokers) as Landlord, in its
sole discretion, may determine, and the costs thereof shall be included in the
total of Landlord's Termination Damages which shall be paid by Tenant. Nothing
contained in this Lease shall limit or prejudice the right of Landlord to prove
for and obtain, in proceedings for the termination of this Lease by reason of
bankruptcy or insolvency, an amount equal to the maximum allowed by any statute
or rule of law in effect at the time when, and governing the proceedings in
which, the damages are to be proved, whether or not the amount be greater, equal
to, or less than the amount of the loss or damages referred to above. The
failure or refusal of Landlord to relet the Premises or any part or parts
thereof shall not release or affect Tenant's liability for damages. Landlord
must act reasonably with respect to all of the foregoing rights and obligations.
14.5. Default by Landlord. Landlord shall not be in default unless Landlord
fails to perform obligations required of Landlord within a reasonable time, but
in no event later than ten (10) days after written notice by Tenant to Landlord
any Lender whose name and address shall have been furnished to Tenant in
writing, specifying wherein Landlord has failed to perform such obligation;
provided, however, that the nature of the Landlord's obligation is such that
more than ten (10) days are required for performance, then Landlord shall not be
in default if Landlord commences performances within such thirty (30) day period
and thereafter diligently prosecutes the same to completion.
14.6. Late Charges and Interest. Any amount due to Landlord not paid when due
shall bear interest at twelve percent (12%) per annum ("Default Rate") from the
due date. Payment of such interest or late charge shall not excuse or cure any
default by Tenant under this Lease.
14.7. Cure by Landlord. Landlord, at any time after Tenant commits a default,
may cure the default at Tenant's cost. If Landlord at any time pays any sum or
does any act that requires the payment of any sum, repayment of the sum paid by
Landlord shall be due immediately from Tenant together with interest at the
Default Rate.
14.8. Condemnation. If all of the Premises or any portion of the Premises which
is reasonably necessary for the reasonably convenient use of the Premises are
taken under the power of eminent domain, or sold by Landlord under the threat of
the exercise of said power (all of which is referred to in this Lease as
"condemnation") or if more than ten percent (10%) of the floor area of all
buildings constituting the Premises, or more than ten percent (10%) of the
parking areas on the Property is taken by condemnation, either Landlord or
Tenant may terminate this Lease as of the date the condemning authority takes
<PAGE> 10
possession by notice in writing of such election within twenty (20) days after
Landlord shall have notified Tenant of the taking, or, in the absence of such
notice, then within twenty (20) days after the condemning authority shall have
taken possession; provided Landlord may avoid termination of the Lease by Tenant
by providing, within a reasonable time, a substantially similar replacement for
the facilities so taken. If this Lease is not terminated by either Landlord or
Tenant then it shall remain in full force and effect as to the portion of the
Premises remaining, provided the Basic Monthly Rent shall be reduced by the
proportion to the floor area of the Premises taken by condemnation bears to the
total floor area of the Premises. All awards for the taking of any part of the
Premises or any payment made under the threat of the exercise of power of
eminent domain shall be the property of Landlord, whether made as compensation
for diminution of value of the leasehold or for the taking of the fee or as
severance damages; provided, however, that Tenant shall be entitled to any
separately made award for loss of or damage to Tenant's trade fixtures and
removable personal property.
15. General Provisions
15.1. Reasonableness of Consent. Whenever the consent of Landlord or Tenant is
required by the terms of this Lease, such consent shall not be unreasonably
withheld or delayed although it may be subject to reasonable conditions.
15.2. Payments Are Rent. All payments due to Landlord from Tenant shall be
deemed to be rent due under this Lease.
15.3. Estoppel Certificate.
15.3.1. Tenant shall, at any time, on not less than ten (10) days prior written
notice from Landlord, sign and deliver to Landlord 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, security deposit, and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord or Tenant under this lease, or specifying such defaults, if
any, which are claimed, and agreeing to give reasonable written notice to a
Lender of any future default. Any such statement may be conclusively relied upon
by any prospective purchaser or encumbrancer of the Premises.
15.3.2. Paragraph deleted.
153.3. Paragraph deleted.
15.4. Landlord's Interest. The term "Landlord as used herein shall mean only the
owner or owners at the time in question of the fee title, vendee's interest
under a real estate contract, or a tenant's interest in a ground lease of the
Premises. In the event of any transfer of such title or interest, Landlord
herein named (and in case of any subsequent transfers, the then grantor) shall
be relieved from and after the date of such transfer of all liability as
respects Landlord's obligations thereafter to be performed provided that any
funds in the hands of Landlord or the then grantor at the time of such transfer,
in which Tenant has an interest, shall be delivered to the grantee. The
obligations in this Lease to be performed by Landlord shall be binding upon
Landlord's successors and assigns, only during their respective periods of
ownership.
15.5. Signage. At Tenant's own expense, Tenant may place one or more signs on
the Property so long as (i) such sign(s) conform to all applicable governmental
rules and regulations, Tenant maintains such sign is in good condition and
appearance and (ii) at the termination of this Lease, Tenant shall remove all
such signs and repair any damage caused by such sign or its removal at Tenant's
sole expense.
<PAGE> 11
15.6. 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.
15.7. Time of Essence. Time is of the essence.
15.8. Captions. Article and paragraph captions are for convenience only are not
a part of this Lease.
15.9. Incorporation of Prior Agreement; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No prior
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.
15.10. Waiver. No waiver by Landlord of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Tenant of
the same or any other provision. Landlord's consent to or approval of any act
shall not be deemed to render unnecessary the obtaining of Landlord's consent to
or approval of any subsequent act by Tenant. The acceptance of rent hereunder by
Landlord shall not be a waiver of any preceding breach by Tenant of any
provision hereof, other than the failure of Tenant to pay the particular rent so
accepted regardless of Landlord's knowledge of such preceding breach at the time
of acceptance of such rent.
15.11. Recording. Tenant shall not record this Lease.
15.12. Holding Over. If Tenant remains in possession of the Premises or any part
thereof after the expiration of the term hereof without the express written
consent of Landlord, such occupancy shall be a tenancy from month to month at a
rental equal to one hundred ten percent (110%) of the Basic Monthly Rent due for
the last month of the Lease term plus all other charges payable hereunder, and
upon the terms hereof applicable to a month to month tenancy.
15.13. 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.
15.14. Covenants and Conditions. Each provision of this Lease performable by
Tenant shall be deemed both a covenant and a condition.
15.15. Binding Effect; Choice of Law; Proration. Subject to any provisions
hereof restricting assignment or subletting by Tenant or as may be expressly
provided in this Lease, 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 premises are located.
15.16 Subordination.
15.16.1 Paragraph deleted.
15.16.2 Paragraph deleted.
15.17. Attorneys Fees. If Tenant or Landlord brings 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 attorneys fees
to be paid by the losing party as fixed by the court.
15.18. Landlord's Access. Landlord and Landlord'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 or Lenders, and making such
alterations, repairs, improvements or additions to the Premises or to the
building
<PAGE> 12
of which they are a part as Landlord may deem necessary or desirable. Landlord
may at any time place on or about the Premises signs advertising the
availability for sale of the Property or a portion thereof, and, during the last
one hundred twenty (120) days of the term of this Lease, Landlord may place
signs on the Premises advertising the availability for lease of the Premises so
long as such signs do not unreasonably obscure Tenant's existing signs
identifying its business.
15.19. Auctions. Tenant shall not advertise or conduct any auction or going out
of business sale in the Premises.
15.20. Corporate Authority. If Tenant is a legal entity, 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 such
entity and that this Lease in binding upon such entity in accordance with its
terms.
15.21. Paragraph deleted.
15.22. Broker's Fee. Upon execution of this Lease by both parties, Landlord
shall pay to Kidder, Mathews & Segner, Inc., a licensed real estate broker, a
fee as set forth in a separate agreement between Landlord and said broker.
Landlord further agrees that if Tenant exercises any option granted herein or
any option substantially similar thereto, either to extend the term of this
Lease, to renew this Lease, to purchase said Premises or any part thereof and/or
any adjacent property which Landlord may own or in which Landlord has an
interest or any other option granted herein, or if said broker is 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 Landlord has an interest,
then as to any said transactions, Landlord shall pay said broker a fee in
accordance with the schedule of said broker in effect at the time of execution
of this Lease. Landlord agrees to pay said fee not only on behalf of Landlord
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 Landlord's interest in this Lease,
by accepting an assignment of such interest, shall be deemed to have assumed
Landlord's obligation under this Paragraph 15.22. Said broker shall be a third
party beneficiary of the provisions of this Paragraph.
15.23. Notices. Wherever under this Lease provision is made for any demand,
notice or declaration of any kind, or where it is deemed desirable or necessary
by either party to give or serve any such notice, demand or declaration to the
other party, it shall be in writing and served either personally or sent by
United States mail, postage prepaid, addressed to the address stated at the
beginning of this Lease or such subsequent address as may have been specified
for such purpose in a written notice given to the other party or in the
alternative, if facsimile to the number specified above accompanied by such
written notice.
15.24. Special Articles. The following Schedules are attached and are a part of
this Lease: Addendum No. 1
LANDLORD: TENANT: ANGELES METAL TRIM CO.
A California Corporation
FRED G. AND PATRICIA A. DUCOLON DBA ANGELES METAL SYSTEMS
HUSBAND AND WIFE
By:___________________________________ By:_____________________________
Fred G. Ducolon
Its: ___________________________
Date:_________________________________
Date: September 5, 1996
By:___________________________________
<PAGE> 13
Patricia A. Ducolon
Date:_________________________________
STATE OF WASHINGTON )
) ss.
COUNTY OF _______________ )
I certify that I know or have satisfactory evidence that
_________________________ is the person who appeared before me, and said person
acknowledged that he signed this instrument, on oath stated that he was
authorized to execute the instrument and acknowledge it as the ______________ of
_____________, to be the free and voluntary act of such party for the uses and
purposes stated therein.
Dated: _______________________
Name:______________________________________________________
NOTARY PUBLIC, State of Washington
My appointment expires________________________________________
STATE OF WASHINGTON )
) ss.
COUNTY OF _______________ )
I certify that I know or have satisfactory evidence that
_________________________ is the person who appeared before me, and said person
acknowledged that he signed this instrument, on oath stated that he was
authorized to execute the instrument and acknowledge it as the ______________ of
_____________, to be the free and voluntary act of such party for the uses and
purposes stated therein.
Dated: _______________________
Name:______________________________________________________
NOTARY PUBLIC, State of Washington
My appointment expires________________________________________
<PAGE> 14
CORPORATE
STATE OF WASHINGTON )
) ss.
COUNTY OF PIERCE )
On this _____ day of ________________ A. D. 19_____, before me personally
appeared __________________________ to me known to be the
_______________________ and _______________the corporation that executed the
within the foregoing instrument, and acknowledged the same instrument to be the
free and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned and on oath stated that they were authorized to execute said
instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed by official seal,
the day and year first above written.
- -----------------------------------
Notary Public in and for the State of Washington, residing at _________________.
<PAGE> 15
ADDENDUM NO. 1
This addendum No. 1 to that certain Lease Agreement dated for reference purposes
only June 17, 1996, by and between ANGELES METAL TRIM CO., DBA ANGELES METAL
SYSTEMS, a California corporation ("Tenant") and FREDERICK A. AND PATRICIA
DUCOLON, Husband and Wife ("Landlord") for the lease of that certain real
property commonly known as 1851 Alexander Avenue, Tacoma, Washington. In the
event of any inconsistencies between the Agreement and this Addendum, this
Addendum shall control the transaction.
A. Term; Possession:
1.) Term: Thirty-six (36) months commencing October 1, 1996.
2.) Possession: Tenant shall have possession of the premises upon
mutual execution of lease.
B. 1.) Base Rent: Period Monthly Rent
Months 01-36 $6,500.00 NNN
(Tenant shall be responsible for property
taxes, insurance, interior and common area
maintenance, and utilities expenses) except
for 7.1.
2.) Prepaid Rent: Tenant shall deposit herewith Thirteen Thousand and
No/100 Dollars ($13,000.00), representing the first
month's rent of $6,500.00, and the last months rent
of $6,500.00, for a total of $13,000.00.
C. Option to renew: Tenant shall have the right to extend the lease for
two (2) consecutive three (3) year periods on the
same terms and conditions, except for rent, which
shall be adjusted to reflect the full changes in
the C.P.I. from the current date of this lease. To
exercise an Option to Renew, Tenant shall provide
One Hundred Twenty (120) days' prior written
notice.
D. Condition of Premises: Tenant accepts premises in its present condition
subject to Landlord's (1) delivering space
broom-cleaned, (2) cleaning and repainting the
office area and replacing the existing carpeted
areas, and (3) warranting that all mechanical
systems and other items that shall be the Tenant's
responsibility shall be in working order, including
the bathroom, upon lease commencement. Landlord
warrants property is in good condition and repair
and complies with all applicable government laws
and rules and insurance company requests.
E. Agency: Todd Clarke of Kidder, Mathews and Segner ("KMS")
represented the Landlord and David B. Douglas, SIOR
and John Jewett of Kidder, Mathews & Segner ("KMS")
represented the Tenant in this transaction with
full acknowledgment and approval by all parties.
F. Occupancy Permit: This Lease shall not be effective unless and until
the Certificate of Occupancy and any Hazardous
Materials Use/Business Plans or Permits are
obtained by Tenant for its use of the Premises.
<PAGE> 16
ACKNOWLEDGED AND AGREED: ACKNOWLEDGED AND AGREED:
LANDLORD: TENANT:
FREDERICK G. AND PATRICIA A. DUCOLON, ANGELES METAL TRIM CO.
Husband and Wife A California Corporation
DBA ANGELES METAL SYSTEMS
By:___________________________________ By:__________________________________
By:___________________________________ Its: ________________________________
Date:_________________________________ Date: _______________________________
[Legal Description - drawing omitted]
<PAGE> 1
Exhibit 10.16
BUSINESS LOAN AGREEMENT
This Business Loan Agreement (this "Agreement") is entered into as of the date
set forth below between Union Bank of California, N.A. ("Bank") and the
undersigned ("Borrower") with respect to each and every extension of credit
(whether one or more, collectively referred to as the "Loan") from Bank to
Borrower. In consideration of the Loan, Bank and Borrower agree to the following
terms and conditions:
1. The Loan.
1.1 The Note. The Loan is evidenced by one or more promissory notes or other
evidences of indebtedness, including each amendment, extension, renewal or
replacement thereof, which are incorporated herein by this reference (whether
one or more, collectively referred to as the "Note").
1.2 Borrowing Base. An amount of the Loan equal to $4,000,000.00, *is a
revolving loan subject to a borrowing base ("Borrowing Base Loan").
Notwithstanding any other provision of this Agreement or any other Loan
Document, Bank shall not be obligated to advance funds under the Borrowing Base
Loan, if the principal amount of such Borrowing Base Loan including such advance
exceeds 80% of Borrower's Eligible Accounts, plus 50% of Borrower's Eligible
Inventory not to exceed $1,400,000.00.
* Wherever "N/A" appears in a blank in this Agreement, it means the Subsection
in which it appears is deemed deleted from this Agreement.
The term "Accounts" means all presently existing and hereafter arising accounts
receivable, contract rights, chattel paper, and all other forms of obligations
owing to Borrower, payable in U.S. Dollars, arising out of the sale or lease of
goods, or the rendition of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties and other security, as
well as all merchandise returned to or reclaimed by Borrower and Borrower's
books and records relating to any of the foregoing.
The term "Eligible Accounts" means those Accounts, net of finance charges, which
are due and payable within ninety (90) days, or less, from the date of the
invoice, have been validly assigned to Bank and strictly comply with all of
Borrower's warranties and representations to Bank, but eligible Accounts shall
not include the following:
(a) Any Account with respect to which the account debtor is an officer,
shareholder, director, employee or agent of Borrower;
(b) Any Account with respect to which the account debtor is a subsidiary of,
related to, or affiliated or has common officers or directors with Borrower;
<PAGE> 2
(c) Any Account with respect to which goods are placed on consignment,
guaranteed sale or other terms by reason of which the payment by the account
debtor may be conditional;
(d) Any Account with respect to which the account debtor is not a resident of
the United States or Canada;
(e) Any Account with respect to which the account debtor is the United States or
any department, agency or instrumentality of the United States;
(f) Any Account with respect to which Borrower is or may become liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower;
(g) Any Account with respect to which there is asserted a defense, counterclaim,
discount or setoff, whether well-founded or otherwise, except for those
discounts, allowances and returns arising in the ordinary course of Borrower's
business;
(h) Any Account with respect to which the account debtor becomes insolvent,
fails to pay its debts as they mature or goes out of business or is owed by an
account debtor which has become the subject of a proceeding under any provision
of the United States Bankruptcy Code, as amended, or under any other bankruptcy
or insolvency law, including, but not limited to, assignments for the benefit of
creditors, formal or informal moratoriums, compositions or extensions with all
or substantially all of its creditors;
(i) Any Account owed by any account debtor with respect to which 25% or more of
the aggregate dollar amount of its Accounts is not paid within 90 days from the
date of the invoice;
(j) Any Account that is not paid by the account debtor within 90 days of the
date of invoice;
(k) Any Account that is not paid by the account debtor and for which a credit
memo has been issued which is over 90 days old;
(l) That portion of any Account owed by any single account debtor which exceeds
15% of all of the Accounts;
(m) Any Account which Bank deems not to be an Eligible Account; and
The term "Inventory" shall mean all present and future inventory in which the
Borrower has any interest, including, but not limited to, goods, machinery and
equipment held by the Borrower for sale or lease or to be furnished under a
contract of service and all of Borrower's present and future raw materials, work
in process, finished goods and packing and shipping materials, wherever located,
any documents of title representing any of the above.
<PAGE> 3
The term "Eligible Inventory" means that portion of Borrower's inventory of raw
materials and finished goods consisting of Borrower's main line(s) of business
products, which is (a) owned by Borrower, free and clear of all liens or
encumbrances except those in favor of Bank, (b) held for sale or lease by
Borrower and normally and currently saleable in the ordinary course of
Borrower's business, (c) of good and merchantable quality, free from defects,
(d) located only at locations in the United States of which Bank is notified in
writing, and (e) as to which Bank has been able to perfect and maintain
perfected a first priority security interest. Eligible Inventory does not
include any of the following: work in process, spare parts, returned items,
damaged, defective or recalled items, items unfit for further processing,
obsolete or unmerchantable items, items used as salesperson's samples or
demonstrators, inventory held on a consignment basis, inventory held in stock
more than twelve (12) months, or inventory which Bank otherwise deems not to be
Eligible Inventory.
1.3 Fee. Borrower shall pay to Bank an annual audit fee.
1.4 Collateral. The payment and performance of all obligations of Borrower under
the Loan Documents is and shall be during the term of the Loan secured by a
perfected security interest in such real or personal property collateral as is
required by Bank and each security interest shall rank in first priority unless
otherwise specified in writing by Bank.
1.5 Guaranty. The payment and performance of all obligations of Borrower under
the Loan Documents are and shall be during the term of the Loan guaranteed by:
Angeles Acquisition Corp.
1.6 Subordination. Certain other obligations of Borrower are and shall be during
the term of the Loan subordinated, to the repayment of the Loan and all other
obligations of Borrower to Bank, pursuant to one or more subordination
agreement(s) in favor Bank executed and delivered by: N/A.
2. Conditions To Availability of the Loan. Before Bank is obligated to disburse
all or any portion of the Loan, Bank must have received (a) the Note and every
other document required by Bank in connection with the Loan, each of which must
be in form and substance satisfactory to Bank (together with this Agreement,
referred to as the "Loan Documents"), (b) confirmation of the perfection of its
security interest in any collateral for the Loan, and (c) payment of any fee
required in connection with the Loan.
3. Representations and Warranties. Borrower represents and warrants (and each
request for a disbursement of the proceeds of the Loan shall be deemed a
representation and warranty made on the date of such request) that:
3.1 Borrower is an individual or Borrower is duly organized and existing under
the laws of the state of its organization and is duly qualified to conduct
business in each jurisdiction in which its business is conducted;
<PAGE> 4
3.2 The execution, delivery and performance of the Loan Documents executed by
Borrower are within Borrower's power, have been duly authorized, are legal,
valid and binding obligations of Borrower, and are not in conflict with the
terms of any charter, bylaw, or other organization papers of Borrower or with
any law, indenture, agreement or undertaking to which Borrower is a party of by
which Borrower is bound or affected;
3.3 All financial statements and other financial information submitted by
Borrower to Bank are true and correct in all material respects, and there has
been no material adverse change in Borrower's financial condition since the date
of the latest of such financial statements;
3.4 Borrower is properly licensed and in good standing in each state in which
Borrower is doing business, and Borrower has complied with all laws and
regulations affecting Borrower, including without limitation, each applicable
fictitious business name statute;
3.5 There is no event which is, or with notice or lapse of time or both would
be, an Event of Default (as defined in Article 5);
3.6 Borrower is not engaged in the business of extending credit for the purpose
of, and no part of the Loan will be used, directly or indirectly, for purchasing
or carrying margin stock within the meaning of Federal Reserve Board Regulation
U; and
3.7 Borrower is not aware of any fact, occurrence or circumstance which Borrower
has not disclosed to Bank in writing which has, or could reasonably be expected
to have, a material adverse effect on Borrower's ability to repay the Loan or
perform its obligations under the Loan Documents.
4. Covenants. Borrower agrees, so long as the Loan or any commitment to make any
advance under the Loan is outstanding and until full and final payment of all
sums outstanding under any Loan Document, that Borrower will:
4.1 Maintain:
(a) Working Capital equal to at least $500,000.00 As used herein, "Working
Capital" means the excess of current assets over current liabilities);
(b) A ratio of total liabilities to Tangible Net Worth of not greater than 3.75:
1.00 (As used herein "Tangible Net Worth" means net worth increased by
indebtedness of Borrower subordinated to Bank and decreased by patents,
licenses, trademarks, trade names, goodwill and other similar intangible assets,
organizational expenses, and monies due from affiliates including officers,
shareholders and directors);
<PAGE> 5
(c) A profit before taxes of not less than $800,000.00, to be measured as of the
end of each fiscal year of Borrower for the twelve month period immediately
preceding the date of measurement;
All accounting terms used in this Agreement shall have the definitions given
them by generally accepted accounting principles, unless otherwise defined
herein.
4.2 Give written notice to Bank within 15 days of the following:
(a) Any litigation or arbitration proceeding affecting Borrower where the amount
in controversy is $25,000.00 or more;
(b) Any material dispute which may exist between Borrower and any government
regulatory body or law enforcement body;
(c) Any Event of Default or any event which, upon notice, or lapse of time, or
both, would become an Event of Default;
(d) Any other matter which has resulted or is likely to result in a material
adverse change in Borrower's financial condition or operation; and
(e) Any Change in Borrower's name or the location of Borrower's principal place
of business, or the location of any collateral for the Loan, or the
establishment of any new place of business or the discontinuance of any existing
place of business.
4.3 Furnish to Bank an income statement, balance sheet, and statement of
retained earnings, with supportive schedules ("Financial Statement"), and any
other financial information requested by Bank, prepared in accordance with
generally accepted accounting principles and in a form satisfactory to Bank as
follows:
(a) Within 30 days after the close of each month, Borrower's Financial Statement
as of the close of such period;
(b) Within 90 days after the close of each fiscal year, a copy of Borrower's
annual Financial Statement prepared by Grant Thornton certified public
accountant on a (n) reviewed basis. Any independent certified public accountant
who prepares Borrower's Financial Statement shall be selected by Borrower and
reasonably satisfactory to Bank;
(c) If any portion of the Loan is a Borrowing Base Loan, within 20 days after
each calendar month end, a copy of Borrower's monthly accounts receivable and
accounts payable agings, and a certification of compliance with the borrowing
base described in Section 1.2 above, executed by Borrower, which certificate
shall accurately report Borrower's Accounts and Inventory and Eligible Accounts
and Inventory; and
<PAGE> 6
(d) A perpetual inventory system is required to be operating and in place prior
to March 31, 1997.
(e) Promptly upon request, any other financial information requested by Bank.
4.4 Pay or reimburse Bank for all costs, expenses and fees incurred by Bank in
preparing and documenting this Agreement and the Loan, and all amendments and
modifications thereof, including but not limited to all filing and recording
fees, costs of appraisals, insurance and attorney's fees, including the
reasonable estimate of the allocated costs and expenses of in-house legal
counsel and staff.
4.5 Maintain and preserve Borrower's existence, present form of business and all
rights, privileges and franchises necessary or desirable in the normal course of
its business, and keep all of Borrower's properties in good working order and
condition.
4.6 Maintain and keep in force insurance with companies acceptable to Bank and
in such amounts and types, including without limitation fire and public
liability insurance, as is usual in the business carried on by Borrower, or as
Bank may reasonably request. Such insurance policies must be in form and
substance satisfactory to Bank.
4.7 Maintain adequate books, accounts and records and prepare all financial
statements required hereunder in accordance with generally accepted accounting
principles, and in compliance with the regulations of any governmental
regulatory body having jurisdiction over Borrower or Borrower's business and
permit employees or agents of Bank at any reasonable time to inspect Borrower's
assets and properties, and to examine or audit Borrower's books, accounts and
records and make copies and memoranda thereof.
4.8 At all times comply with, or cause to be complied with, all laws, statutes,
rules, regulations, orders and directions of any governmental authority having
jurisdiction over Borrower or Borrower's business, and all material agreements
to which Borrower is a party.
4.9 [omitted]
4.10 Not purchase the debt or equity of another person or entity except for
savings accounts and certificates of deposit of Bank, direct U.S. Government
obligations and commercial paper issued by corporations with top ratings of
Moody's or Standard & Poor's, provided that all such permitted investments shall
mature within one year of purchase.
4.11 Not sell or discount any account receivable or evidence of indebtedness,
except to Bank or not borrow any money or become contingently liable for money
borrowed, except pursuant to agreements made with Bank.
<PAGE> 7
4.12 Neither liquidate, dissolve, enter into any consolidation, merger,
partnership, or other combination; nor convey, sell or lease all or the greater
part of its assets or business; nor purchase or lease all or the greater part of
the assets or business of another.
4.13 Not engage in any business activities or operations substantially different
from or unrelated to present business activities and operations.
4.14 Not, in any single fiscal year of Borrower, expend or incur obligations of
more than $400,000.00 for the acquisition of fixed or capital assets.
4.15 Not, in any single fiscal year of Borrower, enter into any lease of real or
personal property which would cause Borrower's aggregate annual obligations
under all such real and personal property leases to exceed $N/A.
4.16 Borrower will promptly, upon demand by Bank, take such further action and
execute all such additional documents and instruments in connection with this
Agreement as Bank in its reasonable discretion deems necessary, and promptly
supply Bank with such other information concerning its affairs as Bank may
request from time to time.
5. Events of Default. The occurrence of any of the following events ("Events of
Default") shall terminate any obligation on the part of Bank to make or continue
the Loan and automatically, unless otherwise provided under the Loan Documents,
shall make all sums of interest and principal and any other amounts owing under
the Loan immediately due and payable, without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor, or any other
notices or demands:
5.1 Borrower shall default in the due and punctual payment of the principal of
or the interest on the Note or any of the Loan Documents;
5.2 Any default shall occur under the Note;
5.3 Borrower shall default in the due performance or observance of any covenant
or condition of the Loan Documents;
5.4 Any guaranty or subordination agreement required hereunder is breached or
becomes ineffective, or any guarantor or subordinating creditor dies or disavows
or attempts to revoke or terminate such guaranty or subordination agreement; or
5.5 There is a change in ownership or control of 10% or more of the issued and
outstanding stock of Borrower or any quarantor, or (if the Borrower is a
partnership) there is a change in ownership or control of any general partner's
interest.
6. Miscellaneous.
<PAGE> 8
6.1 The rights, power and remedies given to Bank hereunder shall be cumulative
and not alternative and shall be in addition to all rights, power, and remedies
given to Bank by law against Borrower or any other person, including but not
limited to Bank's rights of setoff or banker's lien.
6.2 Any forbearance or failure or delay by Bank in exercising any right, power
or remedy hereunder shall not be deemed a waiver thereof and any single or
partial exercise of any right, power or remedy shall not preclude the further
exercise thereof. No waiver shall be effective unless it is in writing and
signed by an officer of Bank.
6.3 The benefits of this Agreement shall inure to the successors and assigns of
Bank and the permitted successors and assignees of Borrower, and any assignment
by Borrower without Bank's consent shall be null and void.
6.4 This Agreement and all other agreements and instruments required by Bank in
connection herewith shall be governed by and construed according to the laws of
the State of California.
6.5 Should any one or more provisions of this Agreement be determined to be
illegal or unenforceable, all other provisions nevertheless shall be effective.
In the event of conflict between the provisions of this Agreement and the
provisions of any note or reimbursement agreement evidencing any indebtedness
hereunder, the provisions of such note or reimbursement agreement shall prevail.
6.6 Except for documents and instruments specifically referenced herein, this
Agreement constitutes the entire agreement between Bank and Borrower regarding
the Loan and all prior communications, verbal or written, between Borrower and
Bank shall be of no further effect or evidentiary value.
6.7 The section and subsection headings herein are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
6.8 This Agreement may be amended only in writing signed by all parties hereto.
6.9 Borrower and Bank may execute one or more counterparts to this Agreement,
each of which shall be deemed an original, but taken together shall be one and
the same instrument.
6.10 Any notices or other communications provided for or allowed hereunder shall
be effective only when given by one of the following methods and addressed to
the respective party at its address given with the signatures at the end of this
Agreement and shall be considered to have been validly given: (a) upon delivery,
if delivered personally; (b) upon receipt, if mailed, first class postage
prepaid, with the United States Postal Service; (c) on the next business day if
sent by overnight courier service of recognized standing; and (d) upon telephone
confirmation of receipt, if telecopied.
<PAGE> 9
7. Additional Provisions. The following additional provision, if any, are hereby
made part of this Agreement:
In Witness Whereof, the parties hereto have duly executed this Agreement as of
January 15, 1997.
Union Bank of California, N.A. ("Bank") ("Borrower")
By: /s/ Jon Strayer
----------------------
Title: Vice President Angeles Metal Trim Co.
Printed Name: Jon Strayer
By: /s/ Anita P. Saraiya By: /s/ Thompson H. Rogers
------------------------- ----------------------------
Title: Vice President Title: President
Printed Name: Anita P. Sraiya Printed Name: Thompson H. Rogers
By: By: /s/ Jeffrey R. Leach
----------------------------
Title: Title: Secretary
Printed Name: Printed Name: Jeffrey R. Leach
Address where notices to Bank are to be Address where notices to Bank are
sent: to be sent:
4817 East Sheila Street
Los Angeles, CA 90091
Fax Number: Fax Number:
(213) 266-2921
<PAGE> 1
Exhibit 10.17
SECURITY AGREEMENT
This Agreement executed at City of Commerce, on January 9, 1997, by Angeles
Metal Trim Co. (herein called "Debtor").
As security for the payment and performance of all Debtor's obligations to Union
Bank of California, N.A., (herein called "Bank"), irrespective of the manner in
which or the time at which such obligations arose or shall arise, and whether
direct or indirect, alone or with others, absolute or contingent, Debtor does
hereby grant a continuing security interest to Bank in all personal property
(herein called "Collateral"), whether now or hereafter owned or in existence
described as
A. Motor Vehicles:
Year
Trade Name
Body Type
Serial Number
New or Used
Number of Cylinders
B. Other:
All accounts, deposit accounts, instruments, chattel paper, documents, general
intangibles, and inventory, now or hereafter owned or acquired by debtor, all
proceeds and insurance proceeds of the foregoing, all guarantees and other
security therefore, and all of debtor's books and records relating thereto
(including computer-stored information and all software relating thereto) and
all contract rights with third parties relating to the maintenance of any such
books, records and information.
Additional Location: 1851 Alexander Avenue, Tacoma, WA 98421
The Collateral described above will be maintained at 4915 & 4817 E. Sheila
Street, City of Commerce, CA 90040; [omitted] and any other location(s).
C. All personal property of any kind which is delivered to or in the possession
or control of Bank or its agents;
D. Proceeds of any of the above-described property. The grant of a security
interest in proceeds does not imply the right of Debtor to sell or dispose of
any Collateral described herein without the express consent in writing by Bank.
<PAGE> 2
The maximum amount of indebtedness to be secured at any one time is unlimited
unless an amount is inserted N/A ($ N/A).
(To be completed only if an accommodation) N/A is executing this Agreement as an
Accommodation Debtor only and his liability is limited to the security interest
created in Collateral described herein.
The Debtor being accommodated is N/A.
All terms and conditions on the reverse side hereof are incorporated herein as
though set forth in full.
Angeles Metal Trim Co.
By: /s/Thompson H. Rogers
Thompson H. Rogers, President
By: /s/Jeffrey R. Leach
Jeffrey R. Leach, Secretary
AGREEMENT
1. The term credit is used throughout this Agreement in its broadest and most
comprehensive sense. Credit may be granted at the request of any one Debtor
without further authorization or notice to any other Debtor, including an
Accommodation Debtor. Collateral shall be security for any obligations of Debtor
to Bank in accordance with the terms and conditions herein.
2. Debtor will: (a) execute such Financing Statement and other documents and do
such other acts and things, all as Bank may from time to time require, to
establish and maintain a valid security interest in Collateral, including
payment of all costs and fees in connection with any of the foregoing when
deemed necessary by Bank; (b) pay promptly when due all indebtedness to Bank;
(c) furnish bank such information concerning Debtor and Collateral as Bank may
from time to time request, including but not limited to current financial
statements; (d) keep Collateral separate and identifiable and at the location
described herein and permit Bank and its representatives to inspect Collateral
and/or records pertaining thereto from time to time during normal business
hours; (e) not sell, assign or create or permit to exist any lien on or security
interest in Collateral in favor of anyone other than the Bank unless Bank
consents thereto in writing and at Debtor's expense upon Bank's request remove
any unauthorized lien or security interest and defend any claim affecting the
Collateral; (f) pay all charges against Collateral prior to delinquency
including but no limited to taxes, assessments, encumbrances, insurance and
diverse claims, and upon Debtor's failure to do so
<PAGE> 3
Bank may pay any such charge as it deems necessary and add the amount paid to
the indebtedness of Debtor hereunder; (g) reimburse Bank for any expenses
including but not limited to reasonable attorney's fees and legal expenses
incurred by Bank in seeking to protect, collect or enforce any rights in
Collateral; (h) when required provide insurance in form and amounts and with
companies acceptable to Bank and when required assign the policies or the rights
thereunder to Bank; (i) maintain Collateral in good condition and not use
Collateral for any unlawful purpose; (j) at its own expense, upon request of
Bank, notify any parties obligated to Debtor on any Collateral to make payment
to Bank and Debtor hereby irrevocably grants Bank power of attorney to make said
notifications and collections; (k) and does hereby authorize Bank to perform any
and all acts which Bank in good faith deems necessary for the protection and
preservation of Collateral or its value or Bank's security interest therein,
including transferring an Collateral into its own name and receiving the income
thereon as additional security hereunder. Bank may not exercise any right under
any corporate security which might constitute the exercise of control by Bank so
as to make any such corporation an affiliate of Bank within the meaning of the
banking laws until after default.
3. The term default shall mean the occurrence of any of the following events:
(a) non-payment of any indebtedness when due or non-performance of any
obligation when due, whether required hereunder or otherwise; (b) deterioration
or impairment of the value of Collateral; (c) non-performance by Debtor under
this Agreement, default by Debtor of any other agreements with Bank dealing with
the extension of credit or with debt owing Bank or any misrepresentation of
Debtor or its representative to Bank whether or not contained herein; (d) a
change in the composition of any Debtor which is a business entity; or (e)
belief by Bank in good faith that there exists, or the actual existence of, any
deterioration or impairment in the ability of Debtor to meet its obligations to
Bank.
4. Whenever a default exists, Bank, at its option may: (a) without notice
accelerate the maturity of any part or all of the secured obligations and
terminate any agreement for the granting of further credit to Debtor; (b) sell,
lease or otherwise dispose of Collateral at public or private sale, unless
Collateral is perishable and threatens to decline speedily in value or is a type
customarily sold on a recognized market, Bank will give Debtor at least five (5)
days prior written notice of the time and place of any public sale or of the
time after which any private sale or any other intended disposition may be made;
(c) transfer any Collateral into its own name or that of its nominee; (d) retain
Collateral in satisfaction of obligations secured hereby, with notice of such
retention sent to Debtor as required by law; (e) notify any parties obligated on
any Collateral consisting of accounts, instruments, chattel paper, choses in
action or the like to make payment to Bank and enforce collection of any
Collateral herein; (f) required Debtor to assemble and delivery any Collateral
to Bank at a reasonable convenient place designated by Bank; (g) apply all sums
received or collected from or on account of Collateral including the proceeds of
any sales thereof to the payment of the costs and expenses incurred in
preserving and enforcing rights of Bank including but not limited to reasonable
attorney's fees, and indebtedness secured hereby in such order and manner as
Bank in its sole discretion determines; Bank shall account to Debtor for any
<PAGE> 4
surplus remaining thereafter, and shall pay such surplus to the party entitled
thereto, including any second secured party who has made a proper demand upon
Bank and has furnished proof to Bank as requested in the manner provided by law,
in like manner, Debtor, unless an Accommodation Debtor only, agrees to pay to
Bank without demand any deficiency after any Collateral has been disposed of and
proceeds applied as aforesaid; and (h) exercise its banker's lien or right of
setoff in the same manner as though the credit were unsecured. Bank shall have
all the rights and remedies of a secured party under the Uniform Commercial Code
of California in any jurisdiction where enforcement is sought, whether in
California or elsewhere. All rights, power and remedies of Bank hereunder shall
be cumulative and not alternative. No delay on the part of Bank in the exercise
of any right or remedy shall constitute a waiver thereof and no exercise by bank
of any right or remedy shall preclude the exercise of any other right or remedy
or further exercise of the same remedy.
5. Debtor waives: (a) all right to require Bank to proceed against any other
person including any other Debtor hereunder or to apply any Collateral. Bank may
hold at any time or to pursue any other remedy; Collateral, endorsers or
guarantors may be released, substituted or added without affecting the liability
of Debtor hereunder; (b) the defense of the Statute of Limitations in any action
upon any obligations of Debtor secured hereby; (c) if he is an Accommodation
Debtor, all rights under Uniform Commercial Code Section 9112; and (d) any right
of subrogation and any right to participate in Collateral until all obligations
hereby secured have been paid in full.
6. Debtor warrants: (a) that it is or will be the lawful owner of all Collateral
free of all claims, liens or encumbrances whatsoever, other than the security
interest granted pursuant hereto; (b) all information, including but not limited
to financial statements furnished by Debtor to Bank heretofore or hereafter,
whether oral or written, is and will be correct and true as of the date given;
and (c) if Debtor is a business entity, the execution, delivery and performance
hereof are within its powers and have been duly authorized.
7. The right of Bank to have recourse against Collateral shall not be affected
in any way by the fact that the credit is secured by a mortgage, deed of trust
or other lien upon real property.
8. Debtor may terminate this Agreement at any time upon written notice to Bank
of such termination; provided however, that such termination shall not affect
his obligations then outstanding, any extensions or renewals thereof, nor the
security interest granted herein which shall continue until such outstanding
obligations are satisfied in full. Such termination's shall not affect the
obligations of other Debtors if more than one executes this Agreement.
9. If more than one Debtor executes this Agreement, the obligations hereunder
are joint and several. All words used herein in the singular shall be deemed to
have been used in the plural when the context and construction so require. Any
married persons who sign this
<PAGE> 5
Agreement expressly agree that recourse may be had against his/her separate
property for all of his/her obligations to Bank.
10. This Agreement shall inure to the benefit of and bind Bank, its successors
and assigns and each of the undersigned, their respective heirs, executors,
administrators and successors in interest. Upon transfer by Bank of any part of
the obligations secured hereby, Bank shall be fully discharged from all
liability with respect to Collateral transferred therewith.
11. Whenever possible each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but, if any
provision of this agreement shall be prohibited or invalid under applicable law,
such provisions shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such or the remaining
provisions of this Agreement.
<PAGE> 1
EXHIBIT 10.18
PROMISSORY NOTE
(BASE RATE)
Borrower Name ANGELES METAL TRIM CO.
Borrower Address 4817 E. SHEILA STREET
CITY OF COMERCE, CA 90040
Office 21092
Loan Number 0356540152 0080-00-0-001
Maturity Date December 15, 1998
Amount $4,000,000.00
Date January 15, 1997 $4,000,000.00
FOR VALUE RECEIVED, on DECEMBER 15, 1998, the undersigned ("Debtor") promises
to pay to the order of UNION BANK OF CALIFORNIA, N.A. ("Bank"), as indicated
below, the principal sum of FOUR MILLION AND NO/100 Dollars ($4,000,000.00) or
so much thereof as is disbursed, together with interest on the balance of such
principal from time to time outstanding, as per the annum rates and at the
times set forth below.
1. INTEREST PAYMENTS. Debtor shall pay interest on the 15TH day of each MONTH
(commencing FEBRUARY 15, 1997). Should interest not be paid when due it shall
become part of the principal and bear interest as herein provided. All
computations of interest under this note shall be made on the basis of a year
of 360 days. for actual days elapsed.
a. BASE INTEREST RATE. At Debtor's option, amounts outstanding hereunder in
increments of at least $10,000 shall bear interest at a rate to be selected by
Debtor which is 2.00% per annum in excess of Bank's Adjusted LIBOR-Rate for the
Interest Period so selected by Debtor.
Any Base Interest Rate selected by Debtor may not be changed, altered or
otherwise modified until the expiration of the Interest Period for which it was
selected. The exercise of interest options by Debtor shall be as recorded in
Bank's records, which records shall be prima facie evidence of the amount
borrowed under either interest option and the interest rate; provided, however,
that failure of Bank to make any such notation in its records shall not
discharge Debtor from its obligations to repay in full with interest all
amounts borrowed. In no event shall any Interest Period extend beyond the
maturity date of this note.
To select a Base Interest Rate, Debtor may, from time to time with respect to
principal outstanding on which Base Interest Rate has not been selected and on
the expiration of any Interest Period with respect to principal outstanding on
which a Base Interest Rate has been selected, select a Base Interest Rate by
telephoning an authorized lending officer of Bank located at the banking office
identified below prior to 10:00 a.m., California time, on any
<PAGE> 2
Business Day and advising that officer of the Base Interest Rate, the Interest
Period and the Origination Date selected (which Origination Date, for a Base
Interest Rate Loan based on the Adjusted LIBOR-Rate, shall follow the date of
such election by no more than two (2) Business Days).
Bank will confirm the terms of the election in writing by mail to Debtor
promptly after the election is made. Failure to send such confirmation shall
not affect Bank's rights to collect interest at the rate selected. If, on the
date of the election, the Base Interest Rate selected is unavailable for any
reason, the selection shall be void. Bank reserves the right to fund the
principal from any source of funds notwithstanding any Base Interest Rate
selected by Debtor.
b. VARIABLE INTEREST RATE. All principal outstanding hereunder which is not
bearing interest at a Base Interest Rate shall bear interest at a rate per
annum equal to the Reference Rate, which rate shall vary as and when the
Reference Rate changes.
At any time prior to the maturity of this note, subject to the provisions of
paragraph 4, below, of this note, Debtor may borrow, repay and reborrow hereon
so long as the total outstanding at any one time does not exceed the principal
amount of this note. Debtor shall pay all amounts due under this note in
lawful money of the United States at Bank's SAN GABRIEL VALLEY COMMERCIAL
BANKING Office, or such other office as may be designated by Bank, from time to
time.
2. LATE PAYMENTS. If any payment required by the terms of this note shall
remain unpaid ten days after same is due, at the option of the Bank, Debtor
shall pay a fee of $100 to Bank.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the option of
Bank, and, to the extent permitted by law, interest shall be payable on the
outstanding principal under this note at a per annum rate equal to five percent
(5%) in excess of the interest rate specified in paragraph 1. b. above of this
note, calculated from the date of default until all amounts payable under this
note are paid in full.
4. PREPAYMENT.
a. Amounts outstanding under this note bearing interest at a rate based on the
Reference Rate may be prepaid in whole or in part at any time, without penalty
or premium. Amounts outstanding at a Base Interest Rate under this note may
only be prepaid, in whole or in part provided Bank has received not less than
five (5) Business Days prior written notice of an intention to make such
prepayment and Debtor pays a prepayment fee to Bank in an amount equal to: (I)
the difference between (a) the Base Interest Rate applicable to the principal
amount which Debtor intends to prepay, and (b) the return which Bank could
obtain if it used the amount of such prepayment of principal to purchase at bid
price regularly quoted
<PAGE> 3
securities issued by the United States having a maturity date most closely
coinciding with the relevant Base Rate Maturity Date and such securities were
held by Bank until the relevant Base Rate Maturity Date ("Yield Rate"); (ii)
the above difference, if greater than zero, is multiplied by a fraction, the
numerator of which is the number of days in the period between the date of
prepayment and the relevant Base Rate Maturity Date and the denominator of
which is 360 days; (iii) the above product is multiplied by the amount of
principal so prepaid (except in the event that principal payments are required
and have been made as scheduled under the terms of the Base Interest Rate Loan
being prepaid, then the amount multiplied in this section shall be the lesser
of the amount prepaid or 50% of the total of the amount prepaid and the amount
of principal scheduled under the terms of the Base Interest Rate Loan being
prepaid to be outstanding at the relevant Base Rate Maturity Date); and (iv)
the above product is then discounted to present value using the Yield Rate as
the annual discount factor.
b. In no event shall Bank be obligated to make any payment or refund to
Debtor, nor shall Debtor be entitled to any setoff or other claim against Bank,
should the return which Bank could obtain under the above prepayment formula
exceed the interest that Bank would have received if no prepayment had
occurred. All prepayments shall include payment of accrued interest on the
principal amount so prepaid and shall be applied to prepayment of interest
before application to principal. A determination by Bank as to the prepayment
fee amount, if any, shall be conclusive.
c. Such prepayment fee, if any, shall also be payable if prepayment occurs as
the result of the acceleration of the principal of this note by Bank because of
any default hereunder. If, following such acceleration, all or any portion of
a Base Interest Rate Loan is satisfied, whether through sale of property
encumbered by a security agreement or other agreement securing this note, if
any, at a foreclosure sale held thereunder or through the tender of payment any
time following such acceleration, but prior to such a foreclosure sale, then
such satisfaction shall be deemed an evasion of the prepayment conditions set
forth above, and Bank shall, automatically and without notice or demand, be
entitled to receive, concurrently with such satisfaction the prepayment fee set
forth above, and the obligation to pay such prepayment fee shall be added to
the principal. DEBTOR HEREBY ACKNOWLEDGES AND AGREES THAT BANK WOULD NOT LEND
TO DEBTOR THE LOAN EVIDENCED BY THIS NOTE WITHOUT DEBTOR'S AGREEMENT, AS SET
FORTH ABOVE, TO PAY BANK A PREPAYMENT FEE UPON THE SATISFACTION OF ALL OR ANY
PORTION OF THE PRINCIPAL BEARING INTEREST AT A BASE INTEREST RATE FOLLOWING THE
ACCELERATION OF THE MATURITY DATE HEREOF BY REASON OF A DEFAULT. DEBTOR HAS
CAUSED THOSE PERSONS SIGNING THIS NOTE ON ITS BEHALF TO SEPARATELY INITIAL THE
AGREEMENT CONTAINED IN THIS PARAGRAPH BY PLACING THEIR INITIALS BELOW.
5. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include, but
not be limited to, any of the following: (a) the failure of Debtor to make
any payment
<PAGE> 4
required under this note when due; (b) any breach, misrepresentation or other
default by Debtor, any guarantor, co-maker, endorser, or any person or entity
other than Debtor providing security for this note (hereinafter individually
and collectively referred to as the "Obligor") under any security agreement,
guaranty or other agreement between Bank and any Obligor; (c) the insolvency
of any Obligor or the failure of any Obligor generally to pay such Obligor's
debts as such debts become due; (d) the commencement as to any Obligor of any
voluntary or involuntary proceeding under any laws relating to bankruptcy,
insolvency, reorganization, arrangement, debt adjustment or debtor relief; (e)
the assignment by any Obligor for the benefit of such Obligor's creditors, (f)
the appointment, or commencement of any proceeding for the appointment of a
receiver, trustee, custodian or similar official for all or substantially all
of any Obligor's property; (g) the commencement of any proceeding for the
dissolution or liquidation of any Obligor; (h) the termination of existence
or death of any Obligor; (i) the revocation of any guaranty or subordination
agreement given in connection with this note; (j) the failure of any Obligor
to comply with any order, judgment, injunction, decree, writ or demand of any
court or other public authority; (k) the filing or recording against any
Obligor, or the property of any Obligor, of any notice of levy, notice to
withhold, or other legal process for taxes other than property taxes; (l) the
default by any Obligor personally liable for amounts owed hereunder on any
obligation concerning the borrowing of money; (m) the issuance against any
Obligor, or the property of any Obligor, of any writ of attachment, execution,
or other judicial lien; or (n) the deterioration of the financial condition of
any Obligor which results in the Bank deeming itself, in good faith, insecure.
Upon the occurrence of any such default, Bank, in its discretion, may cease to
advance funds hereunder and may declare all obligations under this note
immediately due and payable; however, upon the occurrence of an event of
default under d, e, f, or g, all principal and interest shall automatically
become immediately due and payable.
6. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note are
not paid when due, Debtor promises to pay all costs and expenses, including
reasonable attorney's fees, incurred by Bank in the collection or enforcement
of this note. Debtor and any endorsers of this note, for the maximum period of
time and the full extent permitted by law, (a) waive diligence, presentment,
demand, notice of nonpayment, protest, notice of protest, and notice of every
kind; (b) waive the right to assert the defense of any statute of limitations
to any debt or obligation hereunder; and (c) consent to renewals and extensions
of time for the payment of any amounts due under this note. If this note is
signed by more than one party, the term "Debtor" includes each of the
undersigned and any successors in interest thereof; all of whose liability
shall be joint and several. Any married person who signs this note agrees that
recourse may be had against the separate property of that person for any
obligations hereunder. The receipt of any check or other item of payment by
Bank, at its option, shall not be considered a payment on account until such
check or other item of payment is honored when presented for payment at the
drawee bank. Bank may delay the credit of such payment based upon Bank's
schedule of funds availability, and interest under this note shall accrue until
the funds are deemed collected. In any action brought under or arising out of
this note, Debtor and any Obligor, including their successors or assigns,
<PAGE> 5
hereby consent to the jurisdiction of any competent court within the State of
California, as provided in any alternative dispute resolution agreement
executed between Debtor and Bank, and consent to service of process by any
means authorized by California law. The term "Bank" includes, without
limitation, any holder of this note. This note shall be construed in
accordance with and governed by the laws of the State of California. This note
hereby incorporates any alternative dispute resolution agreement previously,
concurrently or hereafter executed between Debtor and Bank.
7. DEFINITIONS. As used herein, the following terms shall have the meanings
respectively set forth below: "Adjusted LIBOR-Rate" shall mean the LIBOR Base
Rate as adjusted for the reserve requirements imposed on Bank from time to
time. "Base Interest Rate" shall mean a rate of interest based on the adjusted
LIBOR-Rate. "Base Interest Rate Loan" shall mean amounts outstanding under
this note that bear interest at a Base Interest Rate. "Base Rate Maturity
Date" shall mean the last day of the Interest Period with respect to the
principal outstanding on which a Base Interest Rate has been selected by
Debtor. "Business Day" shall mean a day which is not a Saturday or Sunday on
which Bank is open for business in California and on which dealings in U.S.
dollar deposits outside of the United States may be carried on by Bank.
"Interest Period" shall mean any calendar period of one, three, six , nine or
twelve months. In determining an Interest Period, a month means a period that
starts on one Business Day in a month and ends on and includes the day
preceding the numerically corresponding day in the next month. For any month
in which there is no such numerically corresponding day, then as to that month,
such a day shall be deemed to be the last calendar day of such month. Any
Interest Period which would otherwise end on a non-Business Say shall end on
the next succeeding Business Day unless that is the first day of a month, in
which event such Interest Period shall end on the next preceding Business Day.
"LIBOR Base Rate" shall mean for each Interest Period the rate per annum
(rounded upward, if necessary, to the nearest 1/100 of 1%) at which dollar
deposits, in immediately available funds and in lawful money of the United
States would be offered to Bank, outside of the United States, for term
coinciding with such Interest Period and for an amount equal to the amount of
principal covered by Debtor's interest rate election. "Origination Date" shall
mean the Business Day on which funds are made available to Debtor relating to
Debtor's selection of a Base Interest Rate. "Reference Rate" shall mean the
rate announced by Bank from time to time at its corporate headquarters at its
"Reference Rate." The Reference Rate is an index rate determined by Bank from
time to time as a means of pricing certain extensions of credit and is neither
directly tied to any external rate of interest or index nor necessarily the
lowest rate of interest charged by Bank at any given time.
ANGELES METAL TRIM CO.
By /s/Thompson H. Rogers
President
By /s/Jeffrey R. Leach
Secretary
<PAGE> 1
Exhibit 10.19
CONTINUING GUARANTY
1. Obligations Guarantied. For consideration, the adequacy and sufficiency of
which is acknowledged, the undersigned ("Guarantor") unconditionally guaranties
and promises (a) to pay to UNION BANK OF CALIFORNIA, N.A. ("Bank") on demand, in
lawful United States money, all Obligations to Bank of Angeles Metal Trim Co.
("Borrower") and (b) to perform all undertakings of Borrower in connection with
the Obligations. "Obligations" is used in its most comprehensive sense and
includes any and all debts, liabilities, rental obligations, and other
obligations and liabilities of every kind of Borrower to Bank, whether made,
incurred or created previously, concurrently or in the future, whether voluntary
or involuntary and however arising, whether incurred directly or acquired by
Bank by assignment or succession, whether due or not due, absolute or
contingent, liquidated or unliquidated, legal or equitable, whether Borrower is
liable individually or jointly or with others, whether incurred before, during
or after any bankruptcy, reorganization, insolvency, receivership or similar
proceeding ("Insolvency Proceeding"), and whether recovery thereof is or becomes
barred by a statute of limitations or is or becomes otherwise unenforceable,
together with all expenses of, for and incidental to collection, including
reasonable attorneys' fees.
2. Limitation on Guarantor's Liability. Although this Guaranty covers all
Obligations, Guarantor's liability under this Guaranty for Borrower's
Obligations shall not exceed at any one time the sum of the following (the
"Guarantied Liability Amount"): (a) Four Million and No/100 Dollars
($4,000,000.00) for Obligations representing principal and/or rent ("Principal
Amount"), (b) all interest, fees and like charges owing and allocable to the
Principal Amount as determined by Bank, and (c) without allocation in respect of
the Principal Amount, all costs, attorneys' fees, and expenses of Bank relating
to or arising out of the enforcement of the Obligations and all indemnity
liabilities of Guarantor under this Guaranty. The foregoing limitation applies
only to Guarantor's liability under this particular Guaranty. Unless Bank
otherwise agrees in writing, every other guaranty of any Obligations previously,
concurrently, or hereafter given to Bank by Guarantor is independent of this
Guaranty and of every other such guaranty. Without notice to Guarantor, Bank may
permit the Obligations to exceed the Principal Amount and may apply or reapply
any amounts received in respect of the Obligations from any source other than
from Guarantor to that portion of the Obligations not included within the
Guarantied Liability Amount.
3. Continuing Nature/Revocation/Reinstatement. This Guaranty is in addition to
any other guaranties of the Obligations, is continuing and covers all
Obligations, including those arising under successive transactions which
continue or increase the Obligations from time to time, renew all or part of the
Obligations after they have been satisfied, or create new Obligations.
Revocation by one or more signers of this Guaranty or any other guarantors of
the Obligations shall not (a) affect the obligations under this Guaranty of a
non-revoking Guarantor, (b) apply to Obligations outstanding when Bank receives
written notice of revocation, or to any extensions, renewals, readvances,
modifications, amendments or replacements of such Obligations, or (c) apply to
Obligations, arising after Bank receives
<PAGE> 2
such notice of revocation, which are created pursuant to a commitment existing
at the time of the revocation, whether or not there exists an unsatisfied
condition to such commitment or Bank has another defense to its performance. All
of Bank's rights pursuant to this Guaranty continue with respect to amounts
previously paid to Bank on account of any Obligations which are thereafter
restored or returned by Bank, whether in an Insolvency Proceeding of Borrower or
for any other reason, all as though such amounts had not been paid to Bank; and
Guarantor's liability under this Guaranty (and all its terms and provisions)
shall be reinstated and revived, notwithstanding any surrender or cancellation
of this Guaranty. Bank, at its sole discretion, may determine whether any amount
paid to it must be resotored or returned; provided, however, that if Bank elects
to contest any claim for return or restoration, Guarantor agrees to indemnify
and hold Bank harmless from and against all cost and expenses, including
reasonable attorneys' fees, expended or incurred by Bank in connection with such
contest. No payment by guarantor shall reduce the Guarantied Liability Amount
hereunder unless, at or prior to the time of such payment, Bank receives
Guarantor's written notice to that effect. If any Insolvency Proceeding is
commenced by or against Borrower or Guarantor, at Bank's election, Guarantor's
obligations under this Guaranty shall immediately and without notice or demand
become due and payable, whether or not then otherwise due and payable.
4. Authorization. Guarantor authorizes Bank, without notice and without
affecting Guarantor's liability under this Guaranty, from time to time, whether
before or after any revocation of this Guaranty, to (a) renew, compromise,
extend, accelerate, release, subordinate, waive, amend and restate, or otherwise
amend or change, the interest rate, time or place for payment or any other terms
of all or any part of the Obligations; (b) accept delinquent or partial payments
on the Obligations; (c) take or not take security or other credit support for
this Guaranty or for all or any part of the Obligations, and exchange, enforce,
waive, release, subordinate, fail to enforce or perfect, sell, or otherwise
dispose of any such security or credit support; (d) apply proceeds of any such
security or credit support and direct the order or manner of its sale or
enforcement as Bank, at its sole discretion, may determine; and (e) release or
substitute Borrower or any guarantor or other person or entity liable on the
Obligations.
5. Waivers. To the maximum extent permitted by law, Guarantor waives (a) all
rights to require Bank to proceed against Borrower, or any other guarantor, or
proceed against, enforce or exhaust any security for the Obligations or to
marshall assets or to pursue any other remedy in Bank's power whatsoever; (b)
all defenses arising by reasons for any disability or other defense of Borrower,
the cessation for any reason of the liability of Borrower, any defense that any
other indemnity, guaranty or security was to be obtained, any claim that Bank
has made Guarantor's obligations more burdensome or more burdensome than
Borrower's obligations, and the use of any proceeds of the Obligations other
than as intended or understood by Bank or Guarantor; (c) all presentments,
demands for performance, notices of nonperformance, protests, notices of
protest, notices of dishonor, notices of acceptance of this Guaranty and of the
existence or creation of new or additional Obligations, and all other notices or
demands to which Guarantor might otherwise be
<PAGE> 3
entitled; (d) all conditions precedent to the effectiveness of this Guaranty'
(e) all rights to file a claim in connection with the Obligations in an
Insolvency Proceeding filed by or against Borrower; (f) all rights to require
Bank to enforce any of its remedies; and (g) until the Obligations are satisfied
or fully paid with such payment not subject to return: (i) all rights of
subrogation, contribution, indemnification or reimbursement, (ii) all rights of
recourse to any assets or property of Borrower, or to any collateral or credit
support for the Obligations, (iii) all rights to participate in or benefit from
any security or credit support Bank may have or acquire, (iv) all rights,
remedies and defenses Guarantor may have or acquire against Borrower and (v) any
rights or defenses Guarantor may have by reason of protection afforded to
Borrower with respect to the Obligations pursuant to the antideficiency or other
laws of California limiting or discharging Borrower's indebtedness, including,
without limitation, California Code of Civil Procedure Section 580a, 580b, 580d
or 726 and all equivalent legal rules in any form in all applicable
jurisdictions. Guarantor understands that if Bank forecloses by trustee's sale
on a deed of trust securing any of the Obligations, Guarantor would then have a
defense preventing Bank from thereafter enforcing Guarantor's liability for the
unpaid balance of the secured Obligations. This defense arises because the
trustee's sale would eliminate Guarantor's right of subrogation, and therefore
Guarantor would be unable to obtain reimbursement from Borrower. Guarantor
specifically waives this defense and all rights and defenses arising out of an
election of remedies by Bank, even though that election of remedies, such as a
nonjudicial foreclosure with respect to security for a guaranteed obligation,
has destroyed Guarantor's rights of subrogation and reimbursement against
Borrower by the operation of Section 580d of the California code of Civil
Procedure or by the operation of any similar law of any other jurisdiction of
otherwise.
6. Guarantor to Keep Informed. Guarantor warrants having established with
Borrower adequate means of obtaining, on an ongoing basis, such information as
Guarantor may require concerning all matters bearing on the risk of nonpayment
or nonperformance of the Obligations. Guarantor assumes sole, continuing
responsibility for obtaining such information from sources other than from Bank.
Bank has no duty to provide any information to Guarantor until Bank receives
Guarantor's written request for specific information in Bank's possession and
Borrower has authorized Bank to disclose such information to Guarantor.
7. Subordination. All obligations of Borrower to Guarantor which presently or in
the future may exist ("Guarantor's Claims") are hereby subordinated to the
Obligations. At Bank's request, Guarantor's Claims will be enforced and
performance there on received by Guarantor only as a trustee for Bank, and
Guarantor will promptly pay over to Bank all proceeds recovered for application
to the Obligations without reducing or affecting Guarantor's liability under
other provisions of this Guaranty.
8. Security. To secure Guarantor's obligations under this Guaranty, other than
for payment of Obligations which are subject to the disclosure requirements of
the United States Truth in Lending Act; Guarantor grants Bank a security
interest in all moneys, general and
<PAGE> 4
special deposits, instruments and other property of Guarantor at any time
maintained with or held by Bank, and all proceeds of the foregoing.
9. Authorization. Where Borrower is a corporation, partnership or other entity,
Bank need not inquire into or verify the power of Borrower or authority of those
acting or purporting to act on behalf of Borrower, and this Guaranty shall be
enforceable with respect to any Obligations Bank grants or creates in reliance
on the purported exercise of such powers or authority.
10. Assignments. Without notice to Guarantor, Bank may assign the Obligations
and this Guaranty, in whole or in part, and may disclose to any prospective or
actual purchaser of all or part of the Obligations any and all information Bank
has or acquires concerning Guarantor, this Guaranty and any security for this
Guaranty.
11. Counsel Fees and Costs. The prevailing party shall be entitled to attorneys'
fees (including a reasonable allocation for Bank's internal counsel) and all
other costs and expenses which it may incur in connection with the enforcement
or preservation of its rights under, or defense of, this Guaranty or in
connection with any other dispute or proceeding relating to this Guaranty,
whether or not incurred in any Insolvency Proceeding, arbitration, litigation or
other proceeding.
12. Married Guarantors. By executing this Guaranty, a Guarantor who is married
agrees that recourse may be had against his or her separate and community
property for all his or her obligations under this Guaranty.
13. Multiple Guarantors/Borrowers. When there is more than one borrower named
herein or when this Guaranty is executed by more than one guarantor, then the
words "Borrower" and "Guarantor", respectively, shall mean all and any one or
more of them, and their respective successors and assigns, including
debtors-in-possession and bankruptcy trustees; words used herein in the singular
shall be considered to have been used in the plural where the context and
construction so requires in order to refer to more than one Borrower or
Guarantor, as the case may be.
14. Integration/Severability/Amendments. This Guaranty is intended by Guarantor
and Bank as the complete, final expression of their agreement concerning its
subject matter. It supersedes all prior understandings or agreements with
respect thereto and may be changed only by a writing signed by Guarantor and
Bank. No course of dealing, or parole or extrinsic evidence shall be used to
modify or supplement the express terms of this Guaranty. If any provision of
this Guaranty is found to be illegal, invalid or unenforceable, such provision
shall be enforced to the maximum extent permitted, but if fully unenforceable,
such provision shall be severable, and this Guaranty shall be construed as if
such provision had never been a part of this Guaranty, and the remaining
provisions shall continue in full force and effect.
<PAGE> 5
15. Joint and Several. If more than one Guarantor signs this Guaranty, the
obligations of each under this Guaranty are joint and several, and independent
of the Obligations and of the obligations of any other person or entity. A
separate action or actions may be brought and prosecuted against any one or more
guarantors, whether action is brought against Borrower or other guarantors of
the Obligations, and whether Borrower or others are joined in any such action.
16. Notice. Any notice, including notice of revocation, given by any party under
this Guaranty shall be effective only upon its receipt by the other party and
only if (a) given in writing and (b) personally delivered or sent by United
States mail, postage prepaid, and addressed to Bank or Guarantor at their
respective addresses for notices indicated below. Guarantor and Bank may change
the place to which notices, requests, and other communications are to be sent to
them by giving written notice of such change to the other.
17. Governing Law. This Guaranty shall be governed by and construed according to
the laws of California, and, except as provided in any alternative dispute
resolution agreement executed between Guarantor and Bank, Guarantor submits to
the non-exclusive jurisdiction of the state or federal courts in said state.
18. Dispute Resolution. This Guaranty hereby incorporates any alternative
dispute resolution agreement previously, concurrently or hereafter executed
between Guarantor and Bank.
<PAGE> 6
Executed as of January 9, 1997. Guarantor acknowledges having received a copy of
this Guaranty and having made each waiver contained in this Guaranty with full
knowledge of its consequences.
Angeles Acquisition Corp.
By: /s/ Thompson H. Rogers, Secretary
---------------------------------
Thompson H. Rogers
By: /s/ Jeffrey R. Leach, President
---------------------------------
Jeffrey R. Leach
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Jon Strayer
---------------------------------
Jon Strayer
Title: Vice President
Address for notices to Bank: Address for notices to Guarantor:
Attn.: 31 South Street, Suite 207
San Gabriel Valley Commercial Banking Morristown, NJ 07960
Office Tax ID:
17800 Castleton St., Suite 500
City of Industry, CA 91748-1707
<PAGE> 1
Exhibit 10.20
MASTER SECURITY AGREEMENT
THIS MASTER SECURITY AGREEMENT, made as of January 8, 1997
("Agreement"), by and between General Electric Capital Corporation, a New York
corporation with an address at 7700 Irvine Center Drive Suite 400, Irvine, CA
("Secured Party"). and Angeles Metal Trim Co., a corporation organized and
existing under the laws of the State of California with its chief executive
offices located at 4817 East Sheila Street, Los Angeles, CA 90040 ("Debtor").
In consideration of the promises herein contained and of certain other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor and Secured Party hereby agree as follows:
1. CREATION OF SECURITY INTEREST.
Debtor hereby gives, grants and assigns to Secured Party, its
successors and assigns forever, a security interest in and against any and all
property listed on any collateral schedule now or hereafter annexed hereto or
made a part hereof ("Collateral Schedule"), and in and against any and all
additions, attachments, accessories and accessions thereto, any and all
substitutions, replacements or exchanges therefor, and any and all insurance
and/or other proceeds thereof (all of the foregoing being hereinafter
individually and collectively referred to as the "Collateral"). The foregoing
security interest is given to secure the payment and performance of any and all
debts, obligations and liabilities of any kind, nature or description whatsoever
(whether primary, secondary, direct, contingent, sole, joint or several, or
otherwise, and whether due or to become due) of Debtor to secured Party, now
existing or hereafter arising, including but not limited to the payment and
performance of certain Promissory Notes from time to time identified on any
Collateral Schedule (collectively, "Notes" and each a "Note"), and any renewals,
extensions and modifications of such debts, obligations and liabilities (all of
the foregoing being hereinafter referred to as the "Indebtedness").
Notwithstanding the foregoing, and notwithstanding anything to the contrary
contained elsewhere in this Agreement, to the extent that Secured Party asserts
a purchase money security interest in any items of Collateral ("PMSI
Collateral"): (i) the PMSI Collateral shall secure only that portion of the
Indebtedness which has been advanced by Secured Party to enable Debtor to
purchase, or acquire rights in or the use of such PMSI Collateral ( the "PMSI
Indebtedness"), and (ii) no other Collateral shall secure the PMSI Indebtedness.
<PAGE> 2
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.
Debtor hereby represents, warrants and covenants as of the date hereof
and as of the date of execution of each Collateral Schedule hereto that:
(a) Debtor is, and will remain, duly organized, existing and in good
standing under the laws of the State set fourth in the first paragraph of this
Agreement, has its chief executive offices at the location set fourth in such
paragraph, and is, and will remain, duly qualified and licensed in every
jurisdiction wherever necessary to carry on its business and operations;
(b) Debtor has adequate power and capacity to enter into, and to
perform its obligations, under this Agreement, each Note and any other documents
evidencing, or given in connection with , any of the Indebtedness (all of the
foregoing being hereinafter referred to as the "Debt Documents");
(c) This Agreement and the Debt Documents have been duly authorized,
executed and delivered by Debtor and constitute legal, valid and binding
agreements enforceable under all applicable laws in accordance with their terms,
except to the extent that the enforcement of remedies may be limited under
applicable bankruptcy and insolvency laws;
(d) No approval, consent or withholding of objections is required from
any government authority or instrumentality with respect to the entry into, or
performance by, Debtor of any of the Debt Documents, except such as may have
already been obtained;
(e) The entry into, and performance by, Debtor of the Debt Documents
will not (i) violate any of the organizational documents of Debtor or any
judgment, order, law or regulation applicable to Debtor, or (ii) result in any
breach of, constitute a default under, or result in the creation of any lien,
claim or encumbrance on any of Debtor's property (except for liens in favor of
Secured Party) pursuant to, any indenture mortgage, deed of trust, bank loan,
credit agreement, or other agreement or instrument to which Debtor is a party;
(f) There are no suits or proceedings pending or threatened in court or
before any commission, board or other administrative agency against or affecting
Debtor which could, in the aggregate, have a material adverse effect on Debtor,
its business or operations, or its ability to perform its obligations under the
Debt Documents;
(g) All financial statements delivered to Secured Party in connection
with the Indebtedness have been prepared in accordance with generally accepted
accounting principles, and since the date of the most recent financial
statement, there has been no material adverse change;
(h) The Collateral is not, and will not be, used by Debtor for
personal, family or household purposes;
<PAGE> 3
(i) The Collateral is, and will remain, in good condition and repair
and Debtor will not be negligent in the care and use thereof;
(j) Debtor is, and will remain, the sole and lawful owner, and in
possession of, the Collateral and has the sole right and lawful authority to
grant the security interest described in these Agreement; and
(k) The Collateral is, and will remain, free and clear of all liens,
claims and encumbrances of every kind, nature and description, except for (i)
liens in favor of Secured Part, (ii) liens for taxes not yet due or for taxes
being contested in good faith and which do not involve, in the reasonable
judgment of Secured Party, any risk of the sale, forfeiture or loss of any of
the Collateral, and (iii) inchoate materialmen's, mechanic's, repairmen's and
similar liens arising by operation of the law in the normal course of business
for amounts which are not delinquent (all of such permitted liens being
hereinafter referred to as ("Permitted Liens").
3. COLLATERAL.
(a) Until the declaration of any default hereunder, Debtor shall remain
in possession of the Collateral; provided, however, that Secured Party shall
have the right to possess (i) any chattel paper or instrument that constitutes a
part of the Collateral, and (ii) any other Collateral which because of its
nature may require that Secured Party's security interest therein be perfected
by possession. Secured Party, its successors and assigns, and their respective
agents, shall have the right to examine and inspect any of the Collateral at any
time during normal business hours. Upon any request from Secured Party, Debtor
shall provide Secured Party with notice of the then current location of the
Collateral.
(b) Debtor shall (i) use the Collateral only in its trade or business,
(ii) maintain all of the Collateral in good condition and working order, (iii)
use and maintain the Collateral only in compliance with all applicable laws, and
(iv) keep all of the Collateral free and clear of all liens, claims and
encumbrances (except for Permitted Liens).
(c) Debtor shall not, without the prior written consent of Secured
Party, (i) part with possession of any of the Collateral (except to Secured
Party or for maintenance and repair), (ii) remove any of the Collateral from the
continental United States, of (iii) sell, rent, lease, mortgage, grant a
security interest in or otherwise transfer or encumber (except for Permitted
Liens) any of the Collateral.
(d) Debtor shall pay promptly when due all taxes, license fees,
assessments and public and private charges levied or assessed on any of the
Collateral, on the use thereof, or on this Agreement or any of the other Debtor
Documents. At its option, Secured Party may discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and may pay for the maintenance, insurance and preservation of the Collateral or
to effect compliance with the terms of this Agreement or any of the other Debt
<PAGE> 4
Documents. Debtor shall reimburse Secured Party, on demand, for any and all
costs and expenses incurred by Secured Party in connection therewith and agrees
that such reimbursement obligation shall be secured hereby.
(e) Debtor shall, at all times, keep accurate and complete records of
the Collateral, and Secured Party, its successors and assigns, and their
respective agents, shall have the right to examine, inspect, and make extracts
from all of Debtor's books and records relating to the Collateral at any time
during normal business hours.
(f) If agreed by the parties, Secured Party may, but shall in no event
be obligated to, accept substitutions and exchanges of property for property,
and additions to the property, constituting all or any part of the Collateral.
Such substitutions, exchanges and additions shall be accomplished at any time
and from time to time, by the substitution of a revised Collateral Schedule for
the Collateral Schedule now or hereafter annexed. Any property which may be
substituted, exchanged or added as aforesaid shall constitute a portion of the
Collateral and shall be subject to the security interest granted herein.
Additions to, reduction or exchanges of, or substitutions for the Collateral,
payments on account of any obligation or liability secured hereby, increases in
the obligations and liabilities secured hereby, or the creation of additional
obligations and liabilities secured hereby, may from time to time be made or
occur without affecting the provisions of this Agreement of the provisions of
any obligation or liability which this Agreement secures.
(g) Any third person at any time and from time to time holding all or
any portion of the Collateral shall be deemed to, and shall, hold the Collateral
as the agent of, and as pledge holder for, Secured Party. At any time and from
time to time, Secured Party may give notice to any third person holding all or
any protion of the Collateral that such third person is holding the Collateral
as the agent of, and as pledge holder for, the Secured Party.
4. INSURANCE.
The Collateral shall at all times be held at Debtor's risk, and Debtor
shall keep it insured against loss or damage by fire and extended coverage
perils, theft, burglary, and for any or all Collateral which are vehicles, for
risk of loss by collision, and where requested by Secured Party, against other
risks as required thereby, for all replacement value thereof, with companies, in
amounts and under policies acceptable to Secured Party. Debtor shall, if Secured
Party so requires, deliver to Secured Party policies or certificates of
insurance evidencing such coverage, Each policy shall name Secured Party, as
loss payee thereunder, shall provide for coverage to Secured Party regardless of
the breach by Debtor of any warranty or representation made therein, shall not
be subject to co-insurance, and shall provide for thirty (30) days written
notice to Secured Party of the cancellation or material modification thereof.
Debtor hereby appoints Secured Party as its attorney in fact to make proof of
loss, claim for insurance and adjustments with insurers, and to execute or
endorse all documents, checks or drafts in connection with payments made as a
result of any such
<PAGE> 5
insurance policies. Proceeds of insurance shall be applied, at the option of
Secured Party, to repair or replace the Collateral or to reduce any of the
Indebtedness secured hereby.
5. REPORTS.
(a) Debtor shall promptly notify Secured Party in the event of (i) any
changes in the name of Debtor, (ii) any relocation of its chief executive
offices, (iii) any relocation of any of the Collateral, (iv) any of the
Collateral being lost, stolen, missing, destroyed, materially damaged or worn
out, or (v) any lien, claim or encumbrance attaching or being made against any
of the Collateral other than Permitted Liens.
(b) Debtor agrees to furnish its annual financial statements and such
interim statements as Secured Party may require in form satisfactory to Secured
Party. Any and all financial statements submitted and to be submitted to Secured
Party have and will have been prepared on a basis of generally accepted
accounting principles, and are and will be completed and correct and fairly
present Debtor's financial condition as at the date thereof. Secured Party may
at any reasonable time examine the books and records of Debtor and make copies
thereof.
6. FURTHER ASSURANCES.
(a) Debtor shall, upon request of Secured Party, furnish to Secured
Party such further information, execute and deliver to Secured Party such
documents and instruments (including, without limitation, Uniform Commercial
Code financing statements) and do such acts and things as Secured Party may at
any time reasonably request relating to the perfection or protection of the
security interest created by this Agreement or for the purpose of carrying out
the intent of this Agreement. Without limiting the forgoing, Debtor shall
corporate and do all acts deemed necessary or advisable by Secured Party to
continue in Secured Party a perfected first security interest in the Collateral,
and shall obtain and furnish to Secured Party any subordinations, releases,
landlord, lessor, or mortgagee waivers, and similar documents as may be from
time to time requested by, and which are in form and substance satisfactory to,
Secured Party.
(b) Debtor hereby grants to Secured Party the power to sign Debtor's
name and generally to act on behalf of Debtor to execute and file applications
for title, transfer of title, financing statements, notices of lien and other
documents pertaining to any or all of the Collateral. Debtor shall, if any
certificate of title be required or permitted by law for any of the Collateral,
obtain such certificate showing the lien hereof with respect to the Collateral
and promptly deliver same to Secured Party.
(c) Debtor shall indemnify and defend the Secured Party, its successors
and assigns, and their respective directors, officers and employees, from and
against any and all claims, actions and suits (including, without limitation,
related attorneys' fees) of any kind,
<PAGE> 6
nature or description whatsoever arising, directly or indirectly, in connection
with any of the Collateral.
7. EVENTS OF DEFAULT.
Debtor shall be in default under this Agreement and each of the other
Debt Documents upon the occurrence of any of the following "Event(s) of
Default":
(a) Debtor fails to pay any installment or other amount due or coming
due under any of the Debt Documents which ten (10) days after its due date;
(b) Any attempt by Debtor, without the prior written consent of Secured
Party, to sell, rent, lease, mortgage, grant a security interest in, or
otherwise transfer or encumber (except for Permitted Liens) any of the
Collateral;
(c) Debtor fails to procure, or maintain in effect at all times, any of
the insurance on the Collateral in accordance with Section 4 of this Agreement;
(d) Debtor breaches any of its other obligations under any of the Debt
Documents and fails to cure the same within thirty (30) days after written
notice thereof;
(e) Any warranty, representation or statement made by Debtor in any of
the Debt Documents or otherwise in connection with any of the Indebtedness shall
be false or misleading in any material respect;
(f) Any of the Collateral being subjected to, or being threatened with,
attachment, execution, levy, seizure or confiscation in any legal proceeding or
otherwise'
(g) Any default by Debtor under any other agreement between Debtor and
Secure Party;
(h) Any dissolution, termination of existence, merger, consolidation,
change in controlling ownership, insolvency, or business failure of Debtor or
any guarantor or other obligor for any of the Indebtedness (collectively
"Guarantor"), or if Debtor or any Guarantor is a natural person, any death or
incompetency of Debtor or such Guarantor;
(i) The appointment of a receiver for all or of any part of the
property of Debtor or any Guarantor, or any assignment for the benefit of
creditors by Debtor or any Guarantor; or
<PAGE> 7
(j) The filing of a petition by Debtor or any Guarantor under any
bankruptcy, insolvency or similar law, or the filing of any such petition
against Debtor or any Guarantor if the same is not dismissed within thirty (30)
days of such filing.
8. REMEDIES ON DEFAULT.
(a) Upon the occurrence of an Event of Default under this Agreement,
the Secured Party at its option, may declare any or all of the Indebtedness,
including without limitation the Notes, to be immediately due and payable,
without demand or notice to Debtor or any Guarantor. The obligations and
liabilities accelerated thereby shall bear interest (both before and after any
judgment) until paid in full at the lower of eighteen percent (18%) per annum or
the maximum rate not prohibited by applicable law.
(b) Upon such declaration of default, Secured Party shall have all of
the rights and remedies of a Secured Party under the Uniform Commercial Code,
and under any other applicable law. Without limiting the foregoing, Secured
Party shall have the right to (i) notify any account debtor of Debtor or any
obligor on any instrument which constitutes part of the Collateral too make
payment to the Secured Party, (ii) with or without legal process, enter any
premises where the Collateral may be and take possession and/or remove said
Collateral from said premises, (iii) sell the Collateral at public or private
sale, in whole or in part, and have the right to bid and purchase at said sale,
and/or (iv) lease or otherwise dispose of all or part of the Collateral,
applying proceeds therefrom to the obligations then in default. If requested by
Secured Party, Debtor shall promptly assemble the Collateral and make it
available to Secured Party at a place to be designated by Secured Party which is
reasonably convenient to both parties, Secured Party may also render any or all
of the Collateral unusable at the Debtor's premises and may dispose of such
Collateral on such premises without liability for rent or costs. Any notice
which Secured Party is required to give to Debtor under the Uniform Commercial
Code of the time and place of any public sale or the time after which any
private sale or other intended disposition of the Collateral is to be made shall
be deemed to constitute reasonable notice if such is given to the last known
address of Debtor at least five (5) days prior to such action.
(c) Proceeds from any sale or lease or other disposition shall be
applied: first, to all costs of repossession, storage, and disposition including
without limitation attorneys', appraisers', and auctioneers' fees; second, to
discharge the obligations then in default; third, to discharge any other
Indebtedness of Debtor to Secured Party, whether as obligor, endorsor,
guarantor, surety or indemnitor; fourth, to expenses incurred in paying or
settling liens and claims against the Collateral; and lastly, to Debtor, if
there exists any surplus.
Debtor shall remain fully liable for any deficiency.
(d) In the event this Agreement, any Note or any other Debt Documents
are placed in the hands of an attorney for collection of money due or to become
due or to obtain performance of any provision hereof, Debtor and Secured Party
agree that such fees to the extent not in excess of twenty percent (20%) of
subject amount owing after default (if
<PAGE> 8
permitted by law, or such lesser sum as may otherwise be permitted by law) shall
be deemed reasonable.
(e) Secured Party's rights and remedies hereunder or otherwise arising
are cumulative and may be exercised singularly or concurrently. Neither the
failure nor any delay on the part of the Secured Party to exercise any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. Secured Party shall not be deemed to have waived any of its rights
hereunder or under any other agreement, instrument or paper signed by Debtor
unless such waiver be in writing and signed by Secured Party. A waiver on any
one occasion shall not be construed as a bar to or waiver of any right or remedy
on any future occasion.
(f) DEBTOR HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRAIL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, THIS AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS ANY OF THE
INDEBTEDNESS SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED PARTY
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN DEBTOR AND SECURED
PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWAL, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT,
ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO
THIS TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRAIL BY THE COURT.
9. MISCELLANEOUS.
(a) This Agreement, any Note and/or any of the other Debtor Documents
may be assigned, in whole or in part, by Secured Party without notice to Debtor,
and Debtor hereby waives defense, counterclaim or cross-complaint by Debtor any
against assignee, agreeing that Secured Party shall be solely responsible
thereof.
(b) All notices to be given in connection with this Agreement shall be
in writing, shall be addressed to the parties at their respective addresses set
forth herein above (unless and until a different address may be specified in a
written notice to the other party), and shall be deemed given (i) on the date of
receipt if delivered in hand or by facsimile transmission,
<PAGE> 9
(ii) on the next business day after being sent by express mail, and (iii) on the
fourth business day after being sent by regular, registered or certified mail.
As used herein, the term "business day" shall mean and include any day other
than Saturdays, Sundays, or other days on which commercial banks in New York,
New York are required or authorized to be closed.
(c) Secured Party may correct patent errors herein and fill in all
blanks herein or in any Collateral Schedule consistent with agreement of the
parties.
(d) Time is of the essence hereof. This Agreement shall be binding,
jointly and severally, upon all parties described as the "Debtor" and their
respective heirs, executors, representatives, successors and assigns, and shall
inure to the benefit of Secured Party, its successors and assigns.
(e) This Agreement and its Collateral Schedules constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersede all prior understandings (whether written, verbal or implied) with
respect thereto. This Agreement and its Collateral Schedules shall not be
changed or terminated orally or by course of conduct, but only by a writing
signed by both parties hereto. Section headings contained in this Agreement have
been included for convenience only, and shall not affect the construction or
interpretation hereof.
(f) This Agreement shall continue in full force and effect until all of
the Indebtedness has been indefeasibly paid in full to Secured Party, The
Surrender, upon payment or otherwise, of any Note or any of the other documents
evidencing any of the Indebtedness shall not affect the right of Secured Party
to retain the Collateral for such other Indebtedness as may then exist or as it
may be reasonably contemplated will exist in the future. This Agreement shall
automatically be reinstated in the event that Secured Party is ever required to
return the payment of all or any portion of the Indebtedness (all as though such
payment had never been made).
IN WITNESS WHEREOF, Debtor and Secured Party, intending to be legally
bound hereby, have duly executed this Agreement in one or more counterparts,
each of which shall be deemed to be an original, as of the day and year first
aforesaid.
Secured Party: Debtor:
General Electric Capital Corporation Angeles Metal Trim Co.
BY: /s/ W. Muramoto By: /s/ Jeffrey Leach
------------------- ----------------------
Title: Regional Credit Analyst Title: Director, Vice President
<PAGE> 10
COLLATERAL SCHEDULE NO. 1
THIS COLLATERAL SCHEDULE NO. 1 is annexed to and made a part of that certain
Master Security Agreement dated as of January 8, 1997 between General Electric
Capital Corporation as Secured Party and Angeles Metal Trim Co. as Debtor and
describes collateral in which Debtor has granted Secured Party a security
interest in connection with the Indebtedness (as defined in the Security
Agreement) including without limitation that certain Promissory Note dated
January 17, 1997 in the original principal amount of $1,400.000.00.
Year/Model Serial Number Description
All Manufacturing Equipment, Rolling Stock, Office and Shop Equipment all more
completely described on Schedule 'A' which is attached hereto and made a part
hereof, plus all other attachments, accessories, additions, replacements and
substitutions now or hereafter attached thereto.
SECURED PARTY: DEBTOR:
General Electric Capital Corporation Angeles Metal Trim Co.
By: /s/ W. Muramato By: /s/ Jeffrey Leach
------------------------------ -------------------------
Title: Region Circuit Analyst Title: Director and Vice President
Date: January 16, 1997 Date: January 8, 1997
<PAGE> 11
SCHEDULE 'A'
TO COLLATERAL SCHEDULE NO.1
TO MASTER SECURITY AGREEMENT
DATED AS OF JANUARY 8, 1997
[list of collateral omitted]
<PAGE> 1
EXHIBIT 10.21
PROMISSORY NOTE
January 17, 1997
(Date)
4817 East Sheila Street, Los Angeles, Los Angeles County, CA 90040
(Address of Maker)
FOR VALUE RECEIVED, Angeles Metal Trim Co. ("Maker") promises, jointly and
severally if more than one, to pay to the order of General Electric Capital
Corporation or any subsequent holder hereof (each, a "Payee") at its office
located at 7700 Irvine Center Drive, Suite 400, Irvine, CA 92618 or at such
other place as Payee or the holder hereof may designate, the principal sum of
One Million Four Hundred Thousand and 00/100 Dollars ($1,400,000.00) , with
interest thereon, from the date hereof through and including the dates of
payment, at a fixed interest rate of Nine and Seventy-Eight One Hundredths
percent (9.78%) per annum, to be paid in lawful money of the United States, in
Forty-Eight (48) consecutively monthly installments of principal and interest
of Thirty-Four Thousand Seven Hundred Sixty-Nine and 88/100 Dollars
($34,769.88) each ("Periodic Installment") and a final installment which shall
be in the amount of the total outstanding principal and interest. The first
Periodic Installment shall be due and payable on February 17, 1997 and the
following Periodic Installments and the final installment shall be due and
payable on the same day of each succeeding month (each, a "Payment Date").
Such installments have been calculated on the basis of a 360 day year of twelve
30-day months. Each payment may, at the option of the Payee, be calculated and
applied on an assumption that such payment would be made on its due date.
The acceptance by Payee of any payment which is less than payment in full of
all amounts due and owing at such time shall not constitute a waiver of Payee's
right to receive payment in full at such time or at any prior or subsequent
time.
The Maker hereby expressly authorizes the Payee to insert the date value is
actually given in the blank space on the face hereof and on all related
documents pertaining hereto.
This Note may be secured by a security agreement, chattel mortgage, pledge
agreement or like instrument (each of which is hereinafter called a "Security
Agreement").
Time is of the essence hereof. If any installment or any other sum due under
this Note or any Security Agreement is not received within ten (10) days after
its due date, the Maker agrees to pay, in addition to the amount of each such
installment or other sum, a late payment charge of five percent (5%) of the
amount of said installment or other sum, but not exceeding any lawful maximum.
If (i) Maker fails to make payment of any amount due hereunder within ten (10)
days after the same becomes due and payable; or (ii) Maker is in default under,
or fails to perform under any term or condition contained in any Security
Agreement, then the entire principal sum remaining unpaid, together with all
accrued interest thereon and any other sum payable under this Note or any
Security Agreement, at the election of Payee, shall immediately become due and
payable, with interest thereon at the lesser of eighteen percent (18%) per
annum or the highest rate not prohibited by applicable law from the date of
such accelerated maturity until paid (both before and after any judgment).
The Maker may prepay in full, but not in part, its entire indebtedness hereunder
upon payment of an additional sum as a premium equal to the following
percentages of the original principal balance for the indicated period:
<TABLE>
<S> <C>
Prior to the first annual anniversary date of this Note: two percent (2%)
Thereafter and prior to the second annual anniversary date of this Note: one percent (1%)
Thereafter and prior to the third annual anniversary date of this Note: zero percent (0%)
Thereafter and prior to the fourth annual anniversary date of this Note: zero percent (0%)
Thereafter and prior to the fifth annual anniversary date of this Note: zero percent (0%)
</TABLE>
and zero percent (0%) thereafter, plus all other sums due hereunder or under
any Security Agreement.
It is the intention of the parties hereto to comply with the applicable usury
laws; accordingly, it is agreed that, notwithstanding any provision to the
contrary in this Note or any Security Agreement, in no event shall this Note or
any Security Agreement require the payment or permit the collection of interest
in excess of the maximum amount permitted by applicable law. If any such
excess interest
<PAGE> 2
is contracted for, charged or received under this Note or any Security
Agreement, or if all of the principal balance shall be prepaid, so that under
any of such circumstances the amount of interest contracted for, charged or
received under this Note or any Security Agreement on the principal balance
shall exceed the maximum amount of interest permitted by applicable law, then
in such event (a) the provisions of this paragraph shall govern and control,
(b) neither Maker nor any other person or entity now or hereafter liable for
the payment hereof shall be obligated to pay the amount of such interest to the
extent that it is in excess of the maximum amount of interest permitted by
applicable law, (c) any such excess which may have been collected shall be
either applied as a credit against the then unpaid principal balance or
refunded to Maker, at the option of the Payee, and (d) the effective rate of
interest shall be automatically reduced to the maximum lawful contract rate
allowed under applicable law as now or hereafter construed by the courts having
jurisdiction thereof. It is further agreed that without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received under this Note or any Security Agreement which are made for the
purpose of determining whether such rate exceeds the maximum lawful contract
rate, shall be made, to the extent permitted by applicable law, by amortizing,
prorating, allocating and spreading in equal parts during the period of the
full stated term of the indebtedness evidenced hereby, all interest at any time
contracted for, charged or received from Maker or otherwise by Payee in
connection with such indebtedness; provided, however, that if any applicable
state law is amended or the law of the United States of America preempts any
applicable state law, so that it becomes lawful for the Payee to receive a
greater interest per annum rate than is presently allowed, the Maker agrees
that, on the effective date of such amendment or preemption, as the case may
be, the lawful maximum hereunder shall be increased to the maximum interest per
annum rate allowed by the amended state law or the law of the United States of
America.
The Maker and all sureties, endorsers, guarantors or any others (each such
person, other than the Maker, an "Obligor") who may at any time become liable
for the payment hereof jointly and severally consent hereby to any and all
extensions of time, renewals, waivers or modifications of, and all
substitutions or releases of, security or of any party primarily or secondarily
liable on this Note or any Security Agreement or any term and provision of
either, which may be made, granted or consented to by Payee, and agree that
suit may be brought and maintained against any one or more of them, at the
election of Payee without joinder of any other as a party thereto, and that
Payee shall not be required first to foreclose, proceed against, or exhaust any
security hereof in order to enforce payment of this Note. The Make and each
Obligor hereby waives presentment, demand for payment, notice of nonpayment,
protest, notice of protest, notice of dishonor, and all other notices in
connection herewith, as well as filing of suit (if permitted by law) and
diligence in collecting this Note or enforcing any of the security hereof, and
agrees to pay (if permitted by law) all expenses incurred in collection,
including Payee's actual attorneys' fees. Maker and each Obligor agrees that
fees not in excess of twenty (20%) of the amount then due shall be deemed
reasonable.
THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
NOTE, ANY OF THE RELATED DOCUMENTS. ANY DEALINGS BETWEEN MAKER AND PAYEE
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER AND PAYEE. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS.) THIS WAIVER IS REVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE. ANY RELATED DOCUMENTS, OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY OTHER
RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
This Note and any Security Agreement constitute the entire agreement of the
Maker and Payee with respect to the subject matter hereof and supercedes all
prior understandings, agreements and representations, express or implied.
No variation or modification of thei Note, or any waiver of any of its
provisions or conditions, shall be valid unless in writing and signed by an
authorized representative of Maker and Payee. Any such waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given.
Any such provision in this Note or any Security Agreement which is in conflict
with any statute, law or applicable rule shall be deemed omitted, qualified or
altered to conform thereto.
Angeles Metal Trim Co.
- -------------------------- -------------------------------- (L.S.)
(Witness) (Signature)
- -------------------------- --------------------------------
(Print Name) Print name (and title, if applicable)
95-1895001
- ------------------------- --------------------------------
(Address) (Federal tax identification number)
<PAGE> 1
EXHIBIT 10.22
SERVICES AGREEMENT
BETWEEN
CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
AND STONE PINE ATLANTIC, LLC
THIS SERVICES AGREEMENT is effective as of February 1, 1997 between
Consolidated Capital of North America, Inc. (the "Corporation") and Stone Pine
Atlantic, LLC.
WHEREAS, the Corporation is in need of the services of Stone Pine
Atlantic, LLC and its affiliated companies (together referred to herein as
"SPA") in connection with the management and development of the business of the
Corporation; and
WHEREAS, SPA is recognized for its credentials, judgment and experience
in such field, and the parties desire to enter into this Agreement for their
mutual benefit.
1. RESPONSIBILITIES OF SPA. In consideration of the benefits provided
in paragraph 3 of this Agreement:
(a) SPA will provide administrative, accounting, investor relations,
advisory and related services to the Corporation;
(b) SPA will perform such duties for the Corporation as are herein
identified at such time and place as the Corporation and SPA mutually agree; and
(c) SPA will periodically report to the Board of Directors of the
Corporation as requested from time to time.
<PAGE> 2
2. DUTIES OF SPA. SPA will provide to the Corporation and its
subsidiaries the following:
(a) Accounting and related services;
(b) Investor relations services;
(c) Administrative services;
(d) Investment banking services;
(e) Assistance in analyzing, structuring, negotiating and effecting
merger and acquisition transactions involving the Corporation and
its subsidiaries;
(f) Assistance in analyzing, structuring, negotiating and effecting
financing transactions involving the Corporation and its
subsidiaries;
(g) Assistance in analyzing, structuring, negotiating and effecting
stock offerings by the Corporation;
(h) General business advice regarding the Corporation and its
subsidiaries; and
(i) Such other services as are requested of SPA by the Corporation and
its subsidiaries and which are reasonably related to the scope of
SPA's engagement.
3. PAYMENTS FOR SERVICES. In consideration for the services provided by
SPA as specified in Section 1 and Section 2 above, and other good and valuable
consideration, the Corporation agrees that:
(a) The Corporation shall pay SPA a monthly fee of ten thousand
($10,000) plus reimbursement for the cost of providing the services set forth in
Section 2(a)-(c) above. All such compensation shall be payable monthly in
arrears within seven days of the last business day of the month for which
services have been provided.
2
<PAGE> 3
(b) SPA shall be entitled to reimbursement for all other reasonable
business expenses incurred on behalf of the Corporation upon submission of
appropriate written receipts therefor.
4. DURATION. This Agreement will be in effect for a period of five (5)
years, subject to automatic renewals of one (1) year unless either party to this
Agreement provides written notice of non-renewal to the other party at least
ninety (90) days prior to the expiration of the initial or any renewal term of
this Agreement. These terms may be modified as mutually agreed upon by the
parties at any time.
5. VOLUNTARY TERMINATION BY SPA. SPA has the option to terminate this
Agreement at any time for any reason upon thirty (30) days' written notice.
6. TERMINATION OF AGREEMENT BY THE COMPANY.
(a) WITHOUT CAUSE. The Corporation may terminate this Agreement at
any time upon written notice; however, in the event this provision is exercised
by the Corporation, SPA shall not receive less compensation than would otherwise
be due to SPA for the remainder of the term of this Agreement.
(b) WITH CAUSE. The Corporation may terminate this Agreement for
cause, effective upon written notice, and upon such a termination the
Corporation shall be obligated to pay SPA fees and any expense reimbursement
only through the date of termination. For purposes of this paragraph, "cause"
shall mean that SPA has: (i) knowingly acted fraudulently in SPA's relations
with the Corporation, (ii) misappropriated or done material, intentional damage
to the property of the Corporation, (iii) willfully and materially failed to
follow a legal and reasonable order or directive by the Chairman of the Board of
Directors of the Corporation
3
<PAGE> 4
(which order or directive is consistent with the provisions of this Agreement),
or (iv) been grossly negligent in the performance of the duties as described
herein.
7. CONFIDENTIALITY AND NON-COMPETITION.
(a) SPA hereby agrees that during the term of this Agreement and at
all times thereafter, SPA shall: (i) keep secret and confidential and not make
any written or oral announcement or disclosure of (other than as permitted
herein) SPA's discussions with the Corporation or any information about, or
directly or indirectly pertaining to, the business, strategy, properties, or
prospects of the Corporation or any of its subsidiaries or affiliates
("Confidential Information") except to those agents of SPA who have a direct
need to know such information; (ii) not use any Confidential Information to
obtain a commercial, trading or other advantage; (iii) at any time on request
from the Corporation return any written record of any Confidential Information
or other record in any form in SPA's possession; and (iv) promptly notify the
Corporation if any Confidential Information is required to be disclosed by
reason of law or governmental or other regulation and cooperate with the
Corporation regarding the manner of such disclosure or any action which the
Corporation, at its sole cost and expense, may elect to take to challenge
legally the validity of such requirement.
(b) The above undertakings shall not apply to information which: (i)
becomes generally available to the public other than as a result of disclosure
by SPA or any party to whom SPA has disclosed it or other than by way of any
breach of any obligation of confidentiality; (ii) SPA can demonstrate was in
SPA's possession at the time of disclosure to SPA and which SPA lawfully
acquired other than from the Corporation or any of its subsidiaries;
4
<PAGE> 5
(iii) was otherwise available in the public domain; or (iv) was disclosed with
the Corporation's consent.
8. SEVERABILITY. Each paragraph and subparagraph of this Agreement
shall be construed and considered separate and separable from the validity and
enforceability of any other provision contained in this Agreement.
9. TITLES AND HEADINGS. Titles and headings to paragraphs hereof are
for purposes of reference only and shall in no way limit, define or otherwise
affect the provisions hereof.
10. COLORADO LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to any
conflicts of law doctrines.
11. COUNTERPARTS. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be necessary
in making proof of this Agreement to produce or account for more than one
counterpart.
12. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties hereto and may be modified or amended only by a written instrument
executed by both parties hereto.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
which is effective as of the date first set forth above.
CONSOLIDATED CAPITAL OF
NORTH AMERICA, INC.
By: /s/ Peter W. Damisch
----------------------------------
Peter W. Damisch
President
STONE PINE ATLANTIC, LLC
By: /s/ Paul Bagley
----------------------------------
Paul Bagley
Manager
6
<PAGE> 1
EXHIBIT 10.23
NON-COMPETITION AND CONSULTING AGREEMENT
This Non-Competition and Consulting Agreement ("Agreement") dated as of
January 15, 1997, is entered into by and between Angeles Metal Trim Co., Inc.. a
California Corporation ("Angeles") and D. Kingston Cable ("Cable") pursuant to a
Stock Purchase Agreement dated as of January 15, 1997, for the purchase of all
of the outstanding stock of Angeles.
Whereas, Angeles Acquisition Co., a Delaware Corporation is purchasing all
of the issued and outstanding stock of Angeles Metal Trim Co., a California
Corporation; and Whereas, Cable prior to the acquisition to such stock was the
principal officer and stockholder of Angeles and was active in its operations
for many years; and Whereas, Angeles wishes to secure the advice and
consultation of Cable and preclude Cable from competing with Angeles;
Now Therefore, the parties hereto agree as follows:
1. AGREEMENT NOT TO COMPETE TERM: Cable agrees for a period of one (1) year
from the date hereof not to compete directly or indirectly with the existing
business of Angeles on his on behalf or as a partner, officer, director,
employee, consultant or member of the board of directors or trustees of any
person, firm, corporation, association, or other entity within the continental
United States.
2. CONSIDERATION: In consideration for the foregoing agreement not to
compete, Angeles agrees to pay to Cable on the fifteenth (15th) day at the end
of each quarter for a period of twelve (12) months commencing April 15, 1997,
the sum of $31,250.00 for a total consideration of $125,000.00. In the event
that Angeles shall fail to pay said amount or any portion of same when due: (1)
Cable shall be free to compete with Angeles without regard to this Agreement;
(2) Cable may accelerate the entire amount due on this Non-Competition and
Consulting Agreement; and (3) any payment not paid when due shall bear interest
at the rate of 10% per annum until paid.
3. CONSULTING: Cable agrees to provide consultation with Angeles as to the
business of Angeles for a period of one (1) year from date. Such consultation
shall be at the offices of Angeles in Los Angeles, California from time to time
at reasonable hours and intervals acceptable to Cable.
4. CONSIDERATION FOR CONSULTING: Cable shall be paid the sum of $75,000.00
for such consulting at the rate of $6,250.00 per month in advance during each
month of said one (1) year period.
5. BUSINESS EXPENSES: Angeles agrees to promptly pay Cable on the 1st day
of each month commencing February 1, 1997, an allowance of Five Hundred Dollars
($500.00) to reimburse Cable for business expenses (which may in actuality
exceed or be less then said
1
<PAGE> 2
amount) incurred by Cable in connection with such consulting. Further, Angeles
agrees to reimburse Cable for medical insurance premiums monthly in the amount
of $444.41 for said one(1) year period. Angeles shall provide the Cables'
existing office exclusively to Cable during said one (1) year period, including
all necessary telephone, facsimile and other utilities, and secretarial services
as may be reasonably necessary all without cost or expense to Cable.
6. OBLIGATIONS OF ANGELES CONTINUING: The obligations of Angeles with
respect to payments due to Cable under the Non-Competition and Consulting shall
not be subject to termination and shall continue notwithstanding the incapacity,
illness, or death of Cable prior to the end of the term of this Non-Competition
and Consulting Agreement.
7. DISPUTES: In the event that any disputes arise with respect to this
Agreement, the parties hereto agree to arbitrate the same in the offices of the
American Arbitration Association at Los Angeles, California utilizing its
commercial arbitration rules with an arbitrator selected by parties or in the
event that they are unable to do so by the American Arbitration Association. Any
arbitration award shall be binding and enforceable in the Superior Court of the
State of California, County of Los Angeles. The prevailing party in such
arbitration as determined by the arbitrator shall be entitled to reasonable
attorneys fees and costs of such arbitration, costs of suit to enforce such
arbitration award and all costs of collection of such arbitration award.
8. NOTICES: All notices or other communications required or permitted to be
given pursuant to this Agreement shall be in writing and shall be delivered
personally or sent by overnight courier, by telecopy with confirmation by
first-class mail, or by certified mail, return receipt requested. Notices
delivered personally or sent by overnight courier or by telecopy with
confirmation by first-class mail shall be effective on the date first received,
while notices sent via certified mail, return receipt requested, shall be deemed
to have been received and to be effective three(3) business days after deposit
into the mail. Notwithstanding the foregoing, receipt of the Purchase Price
shall only be effective upon actual receipt in the form required under Section
2.2 of this Agreement. Notices shall be given to the parties at the following
respective addresses or to such other addresses as any party shall designate in
writing.
if to Angeles: With a Copy to:
Angeles Metal Trim Co., Inc. Thomas P. Gallagher, Esq.
4817 East Sheila Street GALLAGHER, BRIODY & BUTLER
Los Angeles, CA 91031 212 Carnegie Center, Ste 402
Princeton, N.J. 08540
Fax: (213) 266-2921 Fax: (609) 452-0090
2
<PAGE> 3
If to Cable: With a Copy to:
D.K. Cable Eli B. Dubrow, Esq.
3907 Buton Drive HARRINGTON, FOXX, DUBROW &
Lakewood, CA 90712 CANTER
611 West Sixth St., 30th Flr,
Fax: Los Angeles, CA 90017
------------------- Fax: (2130 622-4158
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of January 15, 1997.
Dated:
--------------------------- -------------------------------
ANGELES METAL TRIM CO., INC.,
a California Corporation
Dated:
--------------------------- -------------------------------
D.K. CABLE
3
<PAGE> 1
Exhibit 10.24
PROMISSORY NOTE
In full payment of an acquisition structuring fee, and upon the terms
and conditions set forth herein, Consolidated Capital of North America, Inc.
(the "Borrower"), hereby promises to pay to the order of Stone Pine Colorado,
LLC ( the "Lender"), the principal amount of TWO HUNDRED FIFTY THOUSAND AND
00/100 DOLLARS ($250,000) on demand.
The Borrower shall have the right, at any time after the date of this
Note, without notice to the Lender, to prepay, in whole or in part, without
premium or penalty, the unpaid principal amount of this Note.
The Borrower hereby waives presentment for payment, demand, notice of
dishonor, and notice of protest of this Note. The Borrower hereby consents to
any extensions of time, renewals, waivers or modifications that may be granted
by the Lender with respect to the payment or other provisions of this Note.
No failure or delay on the part of the Lender in exercising any right,
power or privilege under this Note and no course of dealing between the Borrower
and the Lender shall operate as a waiver thereof. No single or partial exercise
of any right, power or privilege hereunder shall preclude any other or further
exercise of any right, power or privilege the Lender would otherwise have. No
notice to, or demand on, the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the right of the Lender to any other or further action in
any circumstances without notice or demand.
Lender shall be entitled to recover from Borrower all of its costs
(including reasonable attorneys fees) incurred in connection with the
enforcement of this Note.
THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF
COLORADO AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF COLORADO.
CONSOLIDATED CAPITAL OF NORTH
AMERICA, INC.
By: /s/ Peter W. Damisch
------------------------
Name: Peter W. Damisch
Title: President
Dated: January 16, 1997
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF CONSOLIDATED CAPITAL OF NORTH AMERICA, INC.
Angeles Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Consolidated Capital of North America, Inc.
Angeles Metal Trim Co., a California corporation and a wholly owned
subsidiary of Angeles Acquisition Corp. (Angeles Metal Trim Co. does
business as Angeles Metal Systems)
California Building Systems, Inc., a Nevada corporation and a wholly
owned subsidiary of Angeles Metal Trim Co.
Bear Star Limited Liability Company, a Colorado limited liability
company in which Consolidated Capital of North America, Inc. holds a
18.54% interest.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 26,937
<SECURITIES> 44,500
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 158,062
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 158,062
<CURRENT-LIABILITIES> 80,632
<BONDS> 0
0
0
<COMMON> 157
<OTHER-SE> 77,273
<TOTAL-LIABILITY-AND-EQUITY> 158,062
<SALES> 0
<TOTAL-REVENUES> 17,269
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 326,080
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,671
<INCOME-PRETAX> 17,269
<INCOME-TAX> (312,482)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (312,482)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
