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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 17, 1997
WEST COAST REALTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
California 33-32466 95-4246740
(State or other Jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
5933 W. Century Blvd. #900, Los Angeles, CA 90045
(Address of principal executive offices) (zip code)
Registrant's telephone number including area code: (310) 670-0800
(Former name or former address, if changed since last report)
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<PAGE>
Item 2. Acquisition or Disposition of Assets
REAL PROPERTY INVESTMENTS
Tycom Property, Irvine, California
On January 17, 1997, the Company acquired the investment described below (the
"Tycom Property" or the "Property"). The funds to acquire the Tycom Property
were available as the result of the sale of the Company's Shares in the current
and previous offerings, and the receipt of proceeds from first trust deed
mortgage financing provided by a bank in connection with the acquisition.
Description. The Tycom Property consists of a two story building, with
underground parking, located at 17862 Fitch Street, Irvine, California. The
Building site is in the southern part of Irvine, with access to Interstate 405
(San Diego Freeway) and State Highway 55 (Costa Mesa Freeway) and is within two
miles of John Wayne Airport (the major commercial airport for Orange County).
The building is located on a site of approximately 92,783 square feet. Total
building square footage is approximately 63,225 square feet (both floors), while
the property has 164 striped parking spaces. These spaces are located both below
the building in a subterranean parking level, and on the side of the building.
The building was constructed using concrete footings foundation, and a
combination of concrete tilt-up and wood frame construction walls, with a flat
tar and gravel roof. The subject lot has been zoned "industrial" by the City of
Irvine. The zoning is designed to preserve city land appropriate for industrial
uses and to attract and preserve desirable manufacturing and
research/development areas. The building is approximately twelve years old.
There are substantial new tenant improvements that are substantially complete at
this time that will enhance the building for office usage. These improvements
include improved air conditioning, Americans with Disabilities Act compliance, a
complete fire sprinkler system, new electrical, new restrooms, and new carpet.
After completion of the improvements, the building will be allocated to
approximately 50% office, 30% research and development, and 20% manufacturing
and storage.
The sole tenant of the Property is Tycom Corporation ("Tycom" or "the Tenant").
Tycom, a privately held company, is a manufacturer of drill bits and assorted
items used by the semi-conductor and dental industries, and has been in business
for approximately ten years. 1995 sales were $100 million, up from $60 million
in 1994. The Tenant initially purchased this building and is investing $1.4
million in improvements and renovation. Tycom sold the building to
Brutten/Reynolds/Shidler Investment Corp. ("the Seller") on December 19, 1996,
for an unknown value. The Tenant began occupying the building December 19,
1996, at which time the provisions of the lease became effective.
<PAGE>
The term of the lease is eleven years, and is intended to be a "triple-net"
lease with the Tenant paying for virtually all taxes, insurance, utilities, and
other operating costs of the Property. The base rent is $37,302.75 per month.
Although the rent is fixed, there are provisions for annual rent increases over
the life of the lease based on increases in the consumer price index. The
Tenant has an option to extend the lease for an additional five years.
The Property is being acquired from an unrelated third party--
Brutten/Reynolds/Shidler Investment Corp. Several methods of economic analysis
were used to determine the propriety of the purchase price, and economic
feasibility of the property, prior to acquisition. A review of rental rates for
similar size buildings and uses in the same general area revealed rates ranging
from $.57 to $.72 per square foot--all on a triple net basis. The current
monthly rate is set at $.59 per square foot, meaning that the Property is
renting near the lowest rate available in this market for similar types of
buildings. In addition, this Property is occupied by a quality tenant with a
long-term lease in place. Given the fact that vacancy rates in the surrounding
area range from 3% to 5%, the potential for higher rental rates per square foot
is possible given the fact that the Property's current rental rate of
$.59/square foot is considered to be on the low side. Comparable market listing
and sales activity were also reviewed by the Advisor. These revealed the price
per square foot for similar buildings in the area to range from $67 to $77 per
square foot. The $73 per square foot that the Company is paying for the
Property is reasonable, considering the approximately $1,400,000 in tenant
improvements that the Tenant has invested into the Property, the eleven year
lease term, and the credit quality of the tenant. (The $73/square foot figure
does not include acquisition fees and expenses, which will increase the cost per
square foot to $77).
In the opinion of the Advisor, the $4,625,000 that the Advisor is paying for the
Property is reasonable.
Property Operations. The Tycom Property is being managed by West Coast Realty
Management, Inc. ("WCRM"), an affiliate of the Company. WCRM will charge the
Company 3% of the gross rents collected as a management fee for managing the
Property, as allowed by the Property Management Agreement. In the opinion of
the Advisor, the Tycom Property is adequately insured. Although the tenant is
obligated to pay property taxes, property tax in the first year is estimated to
be $47,000 (approximately 1% of the sales price).
Terms of Purchase. Total consideration paid by the Company for the Tycom
Property was $4,902,500. The total acquisition cost included $4,625,000 paid to
the Seller, $10,825 in legal, appraisal, and closing costs, and a $266,675
Acquisition Fee payable to the Advisor. In addition, $37,303 was received from
the Seller for the Tenant's security deposit.
Financing was utilized in connection with the acquisition of the Tycom Property.
A short-term promissory note was provided by First National Bank of San Diego
with the following terms:
<PAGE>
Original Loan Amount: $2,300,000
Interest Rate: Fixed at 9.25% Term of Loan: One year
Amortization: Interest Only Payments
Monthly Payment: $17,729
Due Date: February 1, 1998
Balance at One year Due Date: $2,300,000
Other: Nonrecourse; no pre-payment penalty; no finance costs or "points".
The Company plans on replacing this financing prior to the due date with a first
trust deed mortgage from a bank with the following expected terms:
Original Loan Amount: $2,300,000
Interest Rate: Fixed at 140 basis points over the five year Treasury Rate
(rate would be approximately 7.65% currently).
Term of Loan: Five year term, with option to extend the loan for an additional
three years using same interest formula, at not additional cost to the Company.
Amortization: Twenty-five years
Monthly Payment: $17,222 (estimated)
Balance at first three year Due Date (estimated): $2,113,653
Other: Nonrecourse; fully assumable for 1% fee; pre-payment penalty in fifth
year only; all financing costs paid by the Seller.
Thus, in summary, the purchase was funded through $2,300,000 in new financing
and $2,565,197 in cash raised from the sale of shares in the current and
previous offerings (this includes assumption of the tenant's security deposit).
The purchase price was arrived at through arms-length negotiations with the
Seller.
General. The computation of depreciation for the Tycom Property is based on the
cost of the property, including Acquisition Fees and Acquisition Expenses. The
Allocation of the cost of the Property to various asset categories is estimated,
based on allocations in the appraisal report. Depreciation is computed on a
straight-line basis over the component useful life of the assets. Pro forma
financial information is prepared based on information contained in the signed
lease for the property, and assuming that the Seller-provided financing will be
in place for one full year (even though the Company intends on replacing it
prior to the due date with financing having more favorable terms).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WEST COAST REALTY INVESTORS, INC.
Dated: January 17, 1997
By:
--------------------------------------
Michael G. Clark
Vice President and Treasurer
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Financial Statements of Business Acquired
Pro Forma Financial Information. Attached hereto are the following:
Re: Tycom Property
Estimated Twelve Month Pro Forma Statement of Taxable Operating Income
(unaudited)
Estimated Twelve Month Pro Forma Statement of Cash Available from Operations
(unaudited)
Notes to Pro Forma Financial Statements (unaudited)
Re: West Coast Realty Investors, Inc.
(i) Pro Forma Balance Sheet at September 30, 1996, including introduction and
footnotes.
(ii) Pro Forma Statement of Income for the Nine Months Ended September 30, 1996,
including introduction and footnotes.
(iii) Pro Forma Statement of Income for the year ended December 31, 1995,
including introduction and footnotes.
( c) Exhibits
See separate exhibit index.
<PAGE>
Item 7 (a)
Financial Statements of Businesses Acquired
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders
West Coast Realty Investors, Inc.
We have audited the accompanying summary of historical information relating to
operating revenues and specified expenses of Tycom Property (the Property) for
the period January 12, 1996 to December 17, 1996. These financial statements
are the responsibility of Tycom Property's management. Our responsibility is to
express an opinion on these financial statements based upon 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 summary of historical information relating to
operating revenues and specified expenses is free of material misstatement. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the summary of historical information relating to operating
revenues and specified expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall summary relating to operating revenues and specified
expenses presentation. We believe our audit provides a reasonable basis for our
opinion.
The accompanying summary of historical information relating to operating
revenues and specified expenses was prepared for the purpose of complying with
the rules and regulations of the Securities and Exchange Commission and excludes
certain material expenses, described in Note 2, that would not be comparable to
those resulting from the proposed future operations of the Property.
In our opinion, the summary of historical information relating to operating
revenues and specified expenses referred to above presents fairly, in all
material respects, the operating revenues and specified expenses, exclusive of
expenses described in Note 2, of the Property for period January 12, 1996 until
December 17, 1996 in conformity with generally accepted accounting principles.
January 17, 1997
Woodland Hills, California
<PAGE>
<TABLE>
TYCOM PROPERTY
SUMMARY OF HISTORICAL INFORMATION RELATING TO
OPERATING REVENUES AND SPECIFIED EXPENSES
For the Period January 12, 1996 to December 17, 1996
<CAPTION>
<S> <C>
Operating Revenues:
Rental income $ ---------
Total operating revenue ---------
Specified Expenses:
Operating expenses 19,800
---------
Total specified expenses 19,800
---------
Excess of specified expenses
over operating revenues $(19,800)
=========
</TABLE>
[FN]
See accompanying notes to summary of historical information
<PAGE>
TYCOM PROPERTY
NOTES TO SUMMARY OF HISTORICAL INFORMATION RELATING TO
OPERATING REVENUES AND SPECIFIED EXPENSES
NOTE 1 - The Property
The Tycom Property (the Property) is comprised of a two story building with
underground parking located in the city of Irvine, California. The Tycom
Property has a rental area approximating 63,255 square feet.
The sole tenant of the Property is Tycom Corporation. Tycom Corporation
acquired the Property in January 1996. The Property was vacant prior to Tycom
Corporation's acquisition.
Tycom Corporation substantially improved the Property subsequent to acquisition.
Tycom Corporation did not occupy the Property until on or about December 17,
1996 when Tycom Corporation sold the property to an unrelated third party
(Seller) and entered into a lease agreement to occupy the Property under an
eleven year term. Accordingly, the management of the Property from January 12,
1996 until December 17, 1996, Tycom Corporation, did not incur any operating
revenues or specified expenses of the Property other than utility expenses. The
utility expenses are shown as operating expenses on the accompanying summary of
historical information relating to operating revenues and specified expenses .
The lease agreement entered into between Tycom Corporation and the Seller, among
other things, provides minimum rental income of $298,422, $447,633, $447,633,
$447,663, $447,663, for the years ended December 31, 1997 through December 31,
2001 and $2,704,450 for years thereafter.
The Property was acquired by West Coast Realty Investors, Inc. in January 1997
from the Seller.
NOTE 2 - Basis of Presentation
The summary of historical information relating to operating revenues and
specified expenses of the Property excludes the following items, which are not
comparable to the future operations of the Property under the ownership of West
Coast Realty Investors, Inc.
(c) Interest expense on mortgages
(b) Depreciation of buildings, improvements and equipment
(c) Nonrecurring income and expenses
Rental income is recognized when earned and expenses are recognized when
incurred.
<PAGE>
Item 7 (b)
Pro Forma Financial Information
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
ESTIMATED TWELVE MONTH PRO FORMA STATEMENT OF
TAXABLE OPERATING INCOME (NOTE 1)
BASED ON ACQUISITION OF THE TYCOM PROPERTY
<CAPTION>
Tycom Property-- Audited
Historical Operating Financial Results
Financial Results for the period January 12, Pro Forma Estimated Pro
December 31, 1995 1996 to December 17, 1996 Adjustments (Note2) Forma Results
<S> <C> <C> <C> <C>
REVENUE:
Rental Income $1,692,176 $335,725 (a) $2,027,901
Interest Income 120,950 (55,000)(b) 65,950
1,813,126 0 280,725 2,093,851
COSTS AND EXPENSES:
Operating 169,679 19,800 10,072 (c) 179,751
(19,800)(f)
Interest 620,031 159,561 (d) 779,592
General and
Administrative 117,667 117,667
Depreciation and
amortization 256,144 132,618 (e) 388,762
1,163,521 19,800 282,451 1,465,772
Taxable Operating
Income $649,605 ($19,800) ($1,726) $628,079
<CAPTION>
WEST COAST REALTY INVESTORS, INC.
STATEMENT OF CASH AVAILABLE FROM OPERATIONS (NOTE 1)
Pro Forma Taxable Net Operating Income $628,079
Add: Depreciation 388,762
Pro Forma Cash Available from Operations $1,016,841
</TABLE>
[FN]
See accompanying notes to pro forma financial statements
<PAGE>
West Coast Realty Investors, Inc.
Tycom Property
Notes to Pro Forma Financial Statements
(unaudited)
NOTE 1 -- BASIS OF PRESENTATION
The preceding unaudited pro forma statements are based on information obtained
from the lease and Agreement to Purchase documents pertaining to the property
located at 17862 Fitch Street, Irvine, California (the "Tycom Property" or the
"Property").
The pro forma statements use the audited financial statements for the period
from January 18, 1996 to December 18, 1996 as a base for preparing the estimated
pro forma operations for the Property during its first full year of operations.
The Property's current tenant, Tycom Corporation, leases 100% of the space in
the building. The lease on the building expires December, 2007. The lease is
triple net in nature.
The pro forma results reflect a full year of operations for the Property
assuming that it was acquired January 1, 1995. They contain certain adjustments
which are expected to be incurred in the Property's first year of operations.
There can be no assurance that the foregoing results will be obtained.
The Company acquired the property from a third party. The Company is unaware of
any material factors which would cause the reported financial information not to
be indicative of future operating results.
NOTE 2 - PRO FORMA ADJUSTMENTS
The significant pro forma adjustments are as follows:
(a) To reflect a full year's worth of rental income per provisions of the lease
with the Property's tenant. In calculating the amount, the total remaining
minimum monthly rent from December 1996 to December, 2007 is recognized on a
straight-line basis in accordance with generally accepted accounting principles.
(b) To eliminate interest income not earned due to assumed application of funds
toward purchase of Tycom Property.
(c) To reflect approximate property management fees of 3% of rental income in
the first year of the lease.
<PAGE>
West Coast Realty Investors, Inc.
Tycom Property
Notes to Pro Forma Financial Statements
(unaudited)
(d) To reflect interest expense incurred in connection with debt on the Tycom
property.
(e) The computation of depreciation is based on the cost of the Property
including estimated Acquisition Fees and Expenses, and is for the initial twelve
months subsequent to the purchase. The allocation of the cost of the property
to the various asset categories and lives is based on the allocations contained
in the final appraisal report for the Property. Depreciation has been computed
on a straight-line basis over the component useful life of the assets.
Depreciable Life Cost Depreciation
Building & Improvements 39 $1,932,500 $49,551
Tenant Improvements 11 1,400,000 127,273
Land --- 1,570,000 ---
$ 4,902,500 $176,824
(f) To eliminate operating expenses incurred in period prior to ownership since
this lease is triple-net in nature.
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS,INC.
PRO FORMA STATEMENT OF INCOME
For the Nine Months Ended September 30, 1996
INTRODUCTION
The following unaudited pro forma financial statement is presented to
illustrate the effect of the acquisition of the Java City and Tycom
Properties, as described elsewhere in this Offering, on the results of
operations of the Company.
The unaudited pro forma statement of income has been prepared as if the Java
City and Tycom Properties had been acquired and occupied by their respective
tenants on January 1, 1996.
Because the Tycom property is not expected to be occupied until time of
acquisition, and the previous owner of the Building when it was last
occupied was Tycom, there are no current audited operating results available
for that Property. Information from the lease that will go into effect upon
occupancy by Tycom was used in coming up with the pro forma financial
statement.
The unaudited pro forma financial statement is not necessarily indicative of
the Company's future operations and should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this
prospectus.
<CAPTION>
Java City Tycom
Audited Results Audited Results Pro Forma
Historical 3 months ended January 12, 1996 to Adjustments
September 30, 1996 March 31, 1996 December 17, 1996 (Note 2) Pro Forma
<S> <C> <C> <C> <C> <C>
Revenues:
Rent $1,772,462 $45,219 $67,404(1) 2,220,810
335,725(2)
Interest 70,564 (60,000)(3) 10,564
1,843,026 45,219 343,129 2,231,374
Expenses:
Operating 83,061 2,700 19,800 (19,800)(11) 85,761
Property Taxes 55,927 55,927
Property Management
Fees-related party 78,213 3,379 (4) 91,663
10,072 (5)
Interest 639,327 15,985 21,313 (6) 836,186
159,561 (7)
General and
Administrative 105,542 105,542
Depreciation and
Amortization 288,237 19,506 (8) 440,361
132,618 (9)
Advisory Fees 35,912 21,570 (10) 57,482
1,286,219 18,685 19,800 348,218 1,672,922
NET INCOME $556,807 $26,534 ($19,800) (5,090) $558,451
NET INCOME
PER SHARE $0.41 $0.35
Weighted Average
Shares Outstanding 1,430,333 Weighted average shares used for 1,602,404
pro forma calculation (Note 3)
</TABLE>
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 1996
(Unaudited)
1. BASIS OF PRESENTATION
The pro forma statements of income reflects operations for the Company assuming
that the Java City and Tycom Properties were acquired on January 1, 1996. This
statement contains certain adjustments which are expected to be incurred in
those properties' first year of operations, with a full nine month's worth of
operations reflected in the Statement of Income for the nine months ended
September 30, 1996.
There can be no assurance that the foregoing results will be obtained.
2. PRO FORMA ADJUSTMENTS
The adjustments to the pro forma statement of income are as follows:
(1) To reflect rental income from January 1, 1996 to August 1, 1996 for Java
City.
(2) To reflect nine months of rental income for the Tycom Property based
on the provisions of the first year of the lease on Tycom.
(3) To eliminate interest income on funds used to purchase the Java City and
Tycom Properties from January 1, 1996 to August 1, 1996.
(4) To reflect property management fees from January 1, 1996 to August 1,
1996. for Java City.
(5) To reflect property management fees for nine months based on the first nine
months of the lease on the Tycom property.
(6) To reflect added interest expense for the Java City property from January
1, 1996 to August 1, 1996.
(7) To reflect added interest expense for the Tycom property based on the first
nine months of payments under the projected amortization schedule for the
Tycom Property loan.
(8) To reflect depreciation expense on the Java City Property from
January 1 to August 1, 1996.
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 1996
(Unaudited)
(9) To reflect depreciation expense on the Tycom Property based on the first
nine months of operations.
(10) To reflect approximate additional advisory fees payable to the Advisor
as a result of ownership of the Java City and Tycom Properties from
January 1, 1996 to August 1, 1996. It should be noted that of the $35,912
in Advisory Fees actually incurred during the nine months ended
September 30, 1996, $20,912 (58%) were waived by the Advisor, and the
amount waived was treated as an equity contribution into the Company. In
addition, Advisory fees were incurred for the quarter ended
September 30, 1996, only, due to a change in the Advisory schedule approved
by the Company's stockholders in June 1996, that was effective July 1, 1996.
(11) To eliminate operating expenses incurred by previous owner of Tycom
Property in 1996 since the Company will be operating the Property on a triple
net basis.
2. PER SHARE AMOUNTS
The pro forma income statement assumes that the Java City and Tycom properties
were owned as of January 1, 1996. The Company has and is using approximately
$3.7 million in cash to acquire these properties. However, as of January 1,
1996, the Company actually had approximately $1.5 million available for the
acquisition of additional properties. The properties were acquired primarily
using funds raised subsequent to January 1, 1996. Therefore, the weighted
average shares outstanding as of September 30, 1996, was calculated assuming
that an additional $2.8 million in shares (280,000 shares) were outstanding as
of January 1, 1996, and that no additional shares were issued throughout the
year. This is assumed to be the minimum number of shares that would be sold
given the offering expenses and reserves that are allocated against shares sold.
<PAGE>
<TABLE>
WEST COAST REALTY INVESTORS, INC.
PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
INTRODUCTION
The following unaudited pro forma financial statement is presented to
illustrate the acquisition of the Safeguard Building, Technology Drive, Java
City Properties, and Tycom Property as described in this offering, on the
results of operations of the Company.
The unaudited pro forma statement of income has been prepared as if all the
aforementioned properties had been acquired and occupied by their respective
tenants on January 1, 1995.
The unaudited pro forma financial statements are not necessarily indicative
of the Company's future operations and should be read in conjunction with
the other financial statements and notes thereto included elsewhere in this
Prospectus.
Pro Forma
Historical Safeguard Technology Java Adjustments Condensed
December 31, 1995 Building(I) Drive(II) City(III) Tycom (IV) (Note 1) December 31, 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental $1,692,176 $680,457 $236,039 $176,815 ($437,744)(a) $2,851,554
20,745 (b)
35,433 (c)
447,633 (d)
Interest 120,950 (120,000)(e) 950
1,813,126 680,457 236,039 176,815 (53,933) 2,852,504
Expenses:
Operating 169,679 5,862 170 19,800 11,148 (f) 214,359
7,704 (g)
6,367 (h)
13,429 (i)
(19,800)(q)
Interest 620,031 38,246 63,931 84,130 (j) 1,245,512
13,678 (k)
212,748 (l)
Depreciation and
amortization 256,144 38,492 (m) 553,696
56,228 (n)
26,008 (o)
176,824 (p)
General and
administrative 117,667 117,667
1,045,854 44,108 64,101 19,800 626,956 2,131,234
Net Income $649,605 $680,457 $191,931 $112,714 ($19,800) (680,889) $721,270
Net Income Per Share $0.58 Net Income Per Share $0.42
Weighted Average Shares Weighted Average Shares Used For Pro Forma
Used for Historical calculation 1,117,494 Calculation (Note 2) 1,721,986
- -------------------------------
</TABLE>
[FN]
(I) Year ended December 31, 1994 (audited)
(II) Nine months ended September 30, 1995 (audited)
(III) Year ended December 31, 1995 (audited)
(IV) Period January 12, 1996 to December 17, 1996 (audited)
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA STATEMENT OF INCOME
For the Year Ended December 31, 1995 (Unaudited)
BASIS OF PRESENTATION
The pro forma Statements of Income reflects operations for the Company assuming
that the Safeguard Building, Technology Drive, Java City, and Tycom properties
were acquired on January 1, 1995. This statement contains certain adjustments
which are expected to be incurred in those properties' first year of operations,
reflected in the Statement of Income for the year ended December 31, 1995.
There can be no assurance that the foregoing results will be obtained.
1. PRO FORMA ADJUSTMENTS
The adjustments to the pro forma statement of income are as follows:
a. To adjust historical Safeguard Building information to reflect rental
income from January 1, 1995 to May 22, 1995 (date of acquisition).
b. To record rental income for Technology Drive property from October 1 to
October 31, 1995 (date of acquisition), reflecting leases in effect during
1995.
c. To adjust rental income for the Java City property to recognize rental
income on a straight-line basis for 1995 using lease rates in effect from
January 1, 1995 to August 1, 2003.
d. To reflect one year of rental income for Tycom Property
e. To eliminate interest income to reflect funds used for the acquisition of
properties.
f. To reflect additional property management fees for the Safeguard Building
for the entire year.
g. To reflect additional property management fees for the Technology Drive
property for the entire year.
h. To reflect additional property management fees for the Java City property.
i. To reflect one year of property management fee for the Tycom Property.
j. To reflect interest expense on the Safeguard Building for calendar 1995.
k. To reflect interest expense on Technology Drive for calendar 1995.
l. To reflect interest expense on Tycom Property for first year of mortgage
debt.
<PAGE>
WEST COAST REALTY INVESTORS, INC.
NOTES TO PRO FORMA STATEMENT OF INCOME
For the Year Ended December 31, 1995 (Unaudited)
(CONTINUED)
m. To reflect additional depreciation expense on the Safeguard Building for
calendar 1995.
n. To reflect additional depreciation expense on the Technology Drive property
for calendar 1995.
o. To reflect depreciation expense on the Java City Property for 1995.
p. To reflect depreciation expense on the Tycom Property for its first
year of ownership.
q. To eliminate operating expenses incurred on the Tycom property by prior
ownership, since the Company will be operating and leasing the property on a
triple-net basis.
2. PER SHARE AMOUNTS
The pro forma income statement assumes that the Technology Drive, Safeguard
Building, Java City, and Tycom properties were owned as of January 1, 1995.
The Company used approximately $7.8 million in cash to acquire these properties.
However, as of January 1, 1995, the Company actually had approximately $1.4
million available for the acquisition of additional properties. The properties
were acquired primarily using funds raised subsequent to January 1, 1995.
Therefore, the weighted average shares outstanding as of December 31, 1995, was
calculated assuming that an additional $8.1 million in shares (810,000 shares)
were outstanding as of January 1, 1995, and that no additional shares were
issued throughout the year. This is assumed to be the minimum number of shares
that would be sold given the offering expenses and reserves that are allocated
against shares sold.
<PAGE>
<TABLE>
West Coast Realty Investors
Pro Forma Balance Sheet
September 30, 1996
<CAPTION>
PRO FORMA PRO FORMA
ASSETS SEPTEMBER 30, 1996 ADJUSTMENTS BALANCE
<S> <C> <C> <C>
RENTAL REAL ESTATE 21,211,737 4,902,500 (2) 26,114,237
CASH AND CASH EQUIVALENTS 1,679,934 1,400,000 (1) 514,737
(2,565,197)(2)
ACCOUNTS RECEIVABLE 241,164 241,164
OTHER ASSETS 160,444 160,444
23,293,279 27,030,582
LIABILITIES AND STOCKHOLDERS' EQUITY
DUE TO RELATED PARTY 26,437 26,437
DIVIDENDS PAYABLE 292,531 292,531
SECURITY DEPOSITS 112,334 37,303(2) 149,637
OTHER LIABILITIES 158,556 158,556
NOTES PAYABLE 10,129,735 2,300,000(2) 12,429,735
TOTAL LIABILITIES 10,719,593 13,056,896
COMMITMENTS AND CONTINGENCIES
COMMON STOCK AND ADDITIONAL
PAID-IN CAPITAL 13,391,355 1,400,000(1) 14,791,355
DISTRIBUTIONS IN EXCESS
OF EARNINGS (817,669) (817,669)
TOTAL STOCKHOLDERS' EQUITY 12,573,686 13,973,686
23,293,279 27,030,582
</TABLE>
<PAGE>
West Coast Realty Investors, Inc.
Notes to Pro Forma Balance Sheet
September 30, 1996
The pro forma Balance Sheet assumes that the Tycom Property was acquired on
September 30, 1996. This statement reflects certain changes to the balance
sheet that would be reflected if the property was acquired on that date.
Note 1 - Additional Equity Raised
The Company would not have had enough funds available to acquire the property
as of September 30, 1996. Therefore, an assumption was made that the Company
had raised an additional $1.4 million in investor proceeds, from the sale of
approximately 159,091 shares. This would be sufficient funds to acquire the
Property and maintain a reserve account of 3% of all funds raised. In reality,
between November 6, 1996 and January 14, 1997 the Company received approximately
$1,475,000 in net proceeds from the sale of shares sold from August 1 to
December 29, 1996.
Note 2 - Acquisition of Tycom Property
These adjustments reflect the effect of acquiring the Tycom Property,
including an increase in security deposits, notes payable and rental real
estate, and a net decrease in cash and cash equivalents.
<PAGE>
AN APPRAISAL OF
An Office/Industrial Facility
17862 Fitch Street Irvine,
California
Effective Date of Value: December 1O,1996
Date of Preparation: December 1O,1996
<PAGE>
L.F. Sherman & Company, Inc.
Financial and Real Estate Consultants
Telephone 714-452-0202 Facsimile 714-452-0569
December 10,1996
Mr. W. Thomas Maudlin Jr.
President
West Coast Realty Advisors, Inc.
5922 West Century Blvd. 9th Floor
Los Angeles, California 90067-2731
RE: Appraisal and Evaluation of Real Property:
An Office/Industrial Building
17862 Fitch Street
Irvine, California 92714
Dear Mr. Maudlin:
At your request, we have appraised the real property located 17862 Fitch Street,
Irvine, California.
The purpose of this appraisal is to estimate the market value of the fee simple
interest in the real estate subject to the definition of value, the assumptions
and limiting conditions and the certification in the attached report for
possible purchase of subject property.
The descriptions of the property appraised together with explanations of the
appraisal procedures used are presented in the report.
23521 Paseo de Valencia Suite 302-B, Laguna Hills, CA 92653
<PAGE>
Mr. W. Thomas Maudlin, Jr. Page Two
December 10, 1996
Based on the data and conclusions presented in the attached report, it is our
opinion that the market value of the subject property, as of December 10, 1996
is:
FOUR MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS
$4,950,000
In this appraisal we have given substantial consideration to the value of land
in the subject location as well as the building condition, plus the state of the
economy affecting the area for possible resale purposes. We have reviewed the
economic environment for business in the area and section referred to as
Northgate.
Our report is prepared and this letter summarizes the valuation opinion. It is
based on our field work, research, and appraisal data as of the date of
preparation of this report.
A report detailing our analysis and conclusions is attached. Thank you for using
our services. A physical inspection of the subject property and this report was
prepared by Dr. Lawrence F. Sherman JD, ASA, IFAC.
Respectfully submitted,
L.F. SHERMAN & COMPANY, INC.
LAWRENCE F. SHERMAN PhD., JD, ASA, IFAC State Certified General Appraiser #AG-
006353
LFS:me
<PAGE>
CERTIFICATION
I certify that, to the best of my knowledge and belief:
1. the statements of fact contained in this report are true and correct.
2. the reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions, and are my personal,
unbiased professional analyses, opinions, and conclusions.
3. I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest or bias with
respect to the parties involved.
4. my compensation is not contingent upon the reporting of a predetermined
value or direction in value that favors the cause of the client, the amount of
the value estimate, the attainment of a stipulated result, or the occurrence
of subsequent event resulting from the analyses, opinions, or conclusions, or
the use of this report.
5. my analyses, opinions, and conclusions were developed, and this report has
been prepared, in conformity with the Uniform Standard of Professional Appraisal
Practice.
6. I have made a personal inspection of the property that is the subject of
this report.
7. no one provided significant professional assistance to the person signing
this report.
8. I certify that, to the best of my knowledge and belief, the reported
analysis, opinion, conclusions were developed, and this report has been
prepared, in conformity with the requirements of the Code of Professional
Ethics and the Standards of Professional Practice of the American Society of
Appraisers.
9. I certify that the use of this report is subject to the requirements of the
American Society of Appraisers relating to review by its duly authorized
representatives.
<PAGE>
RESTRICTIONS, ASSUMPTIONS, AND LIMITING CONDITIONS
This appraisal is made with respect to the following assumptions:
Assumptions:
1. No responsibility is assumed for the legal description or for matters
including legal or title considerations. Title to the property is assumed to
be good and marketable unless otherwise stated.
2. The property is appraised free and clear of any or all liens or encumbrances
unless otherwise stated.
3. Responsible ownership and competent property management are assumed.
4 The information furnished by others is believed to be reliable. However, no
warranty is given for its accuracy.
5. All engineering is assumed to be correct. The plot plans and illustrative
material in this report are included only to assist the reader in visualizing
the property.
6. It is assumed that there are no hidden or unapparent conditions of the
property, subsoil, or structures that render it more or less valuable. No
responsibility is assumed for such conditions or for arranging for engineering
studies that may be required to discover them.
7. It is that there is full compliance with all applicable federal, state, and
local environmental regulations and laws unless compliance is stated, defined,
and considered in the appraisal report.
8. It is assumed that all applicable zoning and use regulations and restrictions
have been complied with, unless a nonconformity has been stated, defined, and
considered in the appraisal report.
9. It is assumed that all required licenses, certificates of occupancy,
consents, or other legislative or administrative authority from any local state,
or national government or private entity or organization have been or can be
obtained or renewed for any use on which the value estimate contained in this
report is based.
10. It is assumed that the utilization of the land and improvements is within
the boundaries or property lines of the property described and that there is no
encroachment or trespass unless noted in the report.
<PAGE>
Limiting Conditions:
This appraisal report has been made with the following general limiting
conditions:
1. The distribution, if any, of the total valuation in this report between land
and improvements applies only under the stated program of utilization. The
separate allocations for land and buildings must not be used in conjunction with
any other appraisal and are invalid if so used.
2. Possession of this report, or a copy thereof, does not carry with it the
right of publication.
3. The appraiser, by reason of this appraisal, is not required to give further
consultation, testimony, or be in attendance in court with reference to the
property in question unless arrangements have been previously made.
4. Neither all nor any part of the contents of this report (especially any
conclusions as to value, the identity of the appraiser, or the firm with which
the appraiser is connected) shall be disseminated to the public through
advertising, public relations, news, sales, or other media without the prior
written consent and approval of the appraiser.
5. The definition of "market value" is defined in the subject report.
6. The definition of "fee simple estate" is:
Absolute ownership unencumbered by any other interest or estate; subject only to
the four powers of government.
7. The definition of "Highest and Best Use" is:
The reasonably probable and legal use of vacant land or an improved property,
which is physically possible, appropriately supported, financially feasible, and
that results in the highest value. The four criteria the highest and best use
must meet are: legal permissibility, physical possibility, financial
feasibility, and maximum profitability.
* The Dictionary of Real Estate Appraisal, second edition.
<PAGE>
APPRAISAL
OF
AN OFFICE / INDUSTRIAL BUILDING
LOCATED AT
17862 FITCH STREET
IRVINE, CALIFORNIA
AS OF
DECEMBER 10, 1996
PREPARED AS OF
DECEMBER 10, 1996
Appraisal by
Lawrence F. Sherman Ph.D., JD, ASA, IFAC
State Certified General Appraiser #AG-006353
L.F. Sherman & Company, Inc.
23521 Paseo de Valencia, Suite 302-B
Laguna, California 92653
<PAGE>
TABLE OF CONTENTS
INTRODUCTION Page No.
Identification of the Property 1
Plat Map 3
Purpose and Function of the Appraisal 4
Definition of Market Value 4
Assumptions and Limiting Conditions 4
DESCRIPTIVE SECTION 8
Regional Map 9
Regional Analysis 11
City Analysis 12
Neighborhood Analysis 13
Site Analysis 13
Assessment and Tax Data 19
Zoning Map 19
Photographs--Improvement 22
Improvement Analysis 23
Highest and Best Use 25
VALUATION SECTION 30
Appraisal Procedures 33
Valuation Analysis 33
Cost Approach 33
Land Valuation 33
Improvement Valuation 35
Summation 41
Income Approach 41
Income Analysis 41
Expense Analysis 41
Capitalization Process 46
Market Approach 49
Comparable Market Sales 51
Summary Analysis 52
Conclusion of Value 54
ADDENDA
Market Data: Selected
Economic Profile
Preliminary Title Report
Lease Summary
Certifications and Qualifications of Appraiser
<PAGE>
Summary of Important Data and Conclusions
Location: 17862 Fitch Street
Irvine, California
Interest Appraised: Fee Simple Interest
Owner(s) Brutten/Reynolds/Shidler Investment Corp.
Property Type: An Office/Industrial Building
Building Area: Measured at 60,524 Square Feet
Land Area: Reported at:
A.P.N. 427-254-04 92,783
Zoning: Office Building
Principle Improvements: Class C Building with concrete
tilt-up construction
61,929 S.F. - 2 story
Highest & Best Use: Yes
Fair Market Value: $4,975,000
Valuation Date: December 10, 1996
<PAGE>
INTRODUCTION
<PAGE>
PURPOSE OF THE APPRAISAL
The purpose of the appraisal is to estimate the market value of the property
appraised, in fee simple title as of December 10, 1996.
FUNCTION OF THE APPRAISAL
The function of the appraisal is to provide value information for due diligence
and
purchase decision of West Coast Realty Advisors, Inc.
DEFINITION OF MARKET VALUE
For the purposes of this report, market value is defined as:
"The most probable price in terms of money which a property will bring in a
competitive and open market under all conditions requisite to a fair sale, the
buyer and seller each acting prudently, knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the consummation
of a sale as of a specified date and the passing of title from seller to buyer
under conditions whereby: (1) buyer and seller are typically motivated, (2) both
parties are well informed or well advised, and each acting on what each
considers to be his own best interest, (3) a reasonable time is allowed for
exposure in the open market, (4) payment is made in cash or its equivalent, (5)
financing, if any, is on terms generally available in the community at the
specified date and typical for the property type in its locale, (6) the price
represents a normal consideration for the property sold unaffected by special
financing amounts and/or terms, services, fees, costs, or credits incurred in
the transactions."
HISTORY OF OWNERSHIP
It was reported that the January 12. 1996 for $1.800 0()0 and
then completely renovated with a $1,500,000 renovation which is to be completed
in January 1997. The seller was the AID Association For Lutherans. The
building is going through a complete renovation and refitting.
<PAGE>
ASSUMPTIONS AND LIMITING CONDITIONS
Title to Real Estate - A copy of the preliminary title report was provided for
the purpose of this appraisal. In accordance with professional appraisal
practice, we assume that:
a) The title to the property is marketable;
b) The property is free and clear of all liens, encumbrances, easements and
restriction except where noted in this report;
c) The property does not exist in violation of any applicable codes/ordinances,
statutes or other government regulations;
d) The property is under responsible ownership and competent management
and is available for its highest and best use.
We have reviewed the preliminary title reports reproduced in the Addenda to this
report.
Sketches and Maps - Sketches and maps in this report are provided to aid the
reader in visualizing the property and are the results of field
investigations made by the appraiser.
Dimensions and descriptions are based on public records and information that was
furnished by them. These dimensions and descriptions are not meant to be used to
replace matters of survey.
Information and Data - Information supplied by others is considered in this
valuation.
These information sources are believed to be reliable, and no further
responsibility is assumed for their contribution to the value estimate. A
change in the value estimate may be required upon consideration of
additional or more reliable data that may become available.
<PAGE>
Unexpected Conditions - It is assumed that there are no expected or unexpected
conditions of the property that would adversely affect value.
Distribution of Value - The distribution of total value for land and
improvements is applied only under the state of usage and utilization.
Separate values for land and improvements may not be used in conjunction
with any other appraisal and are invalid if so used.
Legal or Specialized Expertise - No opinion is customarily expressed for matters
requiring legal expertise, or other matters under investigation, or of knowledge
beyond that customarily expressed by real estate appraisers.
Advertising - Neither all nor any part of this appraisal report shall be
conveyed to the public through advertising, public relations, news, sales or
other methods without the written consent and approval of the appraiser(s).
Court Testimony - Testimony or attendance in court by reason of this appraisal
shall not be required unless arrangements for such services were previously
made.
Effective Date of Value - The date of value, to which the conclusions and
opinions expressed in this report apply, is set forth in the letter of
transmittal. The effective date of value is the date of inspection of the
subject property. The dollar amount of any value opinion reported is based
on the purchasing power of the U.S. dollar as of that date. The appraiser
assumes no responsibility for economic or physical factors occurring
subsequent to the date of value which may affect the opinions reported.
<PAGE>
Mineral Rights - The value of mineral rights, if any, was not considered in this
appraisal unless otherwise noted.
Structural Deficiencies - The appraiser found no obvious evidence of structural
deficiencies except as stated, however, no responsibility for structural
soundness or conformity to city or county building and safety codes can be
assumed without an independent structural engineering report.
Property Inspection - The appraiser(s) personally inspected the subject property
as part of the appraisal assignment.
Property Included - No consideration was given in this appraisal to personal
property located on the premises. Only the Real Property was considered as
part of the appraisal assignment. However, the appraiser has considered the
value of tenant improvements in valuation conclusion.
Earthquakes - As earthquakes are not uncommon in the area, no responsibility is
assumed for their possible effect on individual properties unless detailed
geologic reports are made available.
Soil Conditions - No detailed soil studies of the subject were available to the
appraiser. Therefore, statements regarding soil qualities made in this report
are not conclusive but have been considered consistent with the information
available to us.
<PAGE>
Mechanical Equipment - It is assumed by the appraiser that all mechanical
equipment is in operative condition. The mechanical equipment is not included in
this appraisal.
Environmental Study - This appraisal is not an environmental study and reliance
should not be placed on this report for matters that are the province of an
environmental study. Such a study has not been provided to the appraiser for our
review.
Hazardous Waste - The appraiser has not learned of any hazardous waste or toxic
material in existence at the subject property, therefore, the indicated value
does not reflect their existence, if any.
<PAGE>
DESCRIPTIVE SECTION
AND
REGIONAL DISCUSSION
<PAGE>
NEIGHBORHOOD DISCUSSION
<PAGE>
County of Orange
The subject property is located in one of the most desirable areas for research
and development in the United States. The area in vicinity of the building has
strong tenant demand in a desirable world class location. Orange County's office
market has improved substantially over the past 24 months as the economy is
strengthening. Office vacancy rate is declining and is in the 12% to 16% range
by various estimates. However, in the immediate area of the subject property the
vacancy rate is below 5% with minimal listings for lease or for sale.
There is a growing demand for research and development in the vicinity of the
subject property. Research and Development has strong demand as the location is
in close proximity to international airports surrounding John Wayne airport.
Local Area Description
The property is located near the 55 Freeway and the 405 Freeway. There is easy
access to the John Wayne Airport. The property is in the middle of an
industrial and research/development area. It blends well with the
surroundings. There is a mixture of high tech manufacturing, office,
industrial, and research/development space in the immediate area.
Overall, the immediate area is a very desirable market area located in the
center of Southern California.
<PAGE>
NEIGHBORHOOD ANALYSIS
SITE ANALYSIS
The subject site is in close proximity to good freeway access, the center
section of Orange County, and air transportation facilities. It is surrounded by
industrial and commercial buildings of similar vintage in a desirable industrial
and research location. The property is located in a prestigious
Office/Industrial subpark area. It is located in the immediate area near the 55
and 405 freeway intersection and is in proximity to John Wayne Airport.
The tenant in the subject building is TYCOM which has a major location directly
north of the subject property.
Vacancy is spread throughout the City of Irvine though not substantial in large
business parks. An examination of rental rates in the immediate area, however,
showed a stability of rental rates and there was limited vacancy in structures
the size of the subject property other than what was normal for the area and to
allow for transition. Minimal vacancy existed in the larger industrial/office
buildings in direct proximity to the subject property.
<PAGE>
Discussion with several commercial brokers in the area indicated that leasing
demand is relatively good and sales activity is reasonably strong, but hindered
by the past recession based economy. There was few properties available for sale
in the immediate area.
Topography was level and the site was well landscaped. Discussions with the
listing broker indicated that the building will be finished from its major
renovation in January 1997.
<PAGE>
SITE ANALYSIS
Site Improvements: The site is covered by building improvements, and associated
asphalt paving, of approximately 92,783 square feet of area comprising the
property. Total building square footage, for both stories of the buildings, is
61,929 square feet.
The subject property fronts to Fitch Street with good access to the 55 freeway
and 405 Freeway.
Dimensions/Shape/Area:
The subject lot is rectangularly shaped. The site enjoys frontage on Fitch
Street which is a 2 lane street. The site has 92,783 square feet of space
with good access to neighboring through streets.
Zoning is industrial which allows the existing use for research and development
and industrial use with adequate built up of office space . Property usage is
recorded as Office Building.
Flood Zone
The property is in zone X as per flood map 06059C-0038E. This is not in a flood
zone area.
<PAGE>
Topography:
The lot and surrounding area is level for the subject and in the immediate area
of the neighboring properties. Topography is level and very slightly downward
from front to back of the lot to allow for drainage. Neighboring properties
are basically level and there was no evidence of settling in the subject
property or area.
Soil & Subsoil Conditions:
The subject soil appears to be adequate, there is no evidence of land and
building settlement in the subject neighborhood. However, no soil report was
made available to the appraiser. The City is not subject to unstable soil
conditions other than Earthquakes as discussed with the Economic Planning
department of the City.
It is assumed for appraisal purposes that there are no adverse soil conditions
which might adversely affect the value of the subject property. The land use
before the building was built was undisclosed. The building was built in
1979/1980.
It is assumed for appraisal purpose that the previous use posed no form of toxic
danger which could adversely affect the value of the subject property. The
appraiser(s) has not reviewed any environmental study, nor does the appraiser(s)
claim to be an expert in the field of environmental study. If concern over
environmental contamination is an issue, a prospective purchaser is urged to
consider environmental studies. Environmental studies are common for
industrial locations such as the subject property, prior to property
transfers.
<PAGE>
Drainage:
The lot appears to be adequate for drainage. No noticeable area of water
accumulation was found, nor noticed. Drainage from the surrounding areas
appear minimal.
Utilities and Services: The subject property is connected to all public
utilities.
Access:
The lot is accessible from Fitch Street and is within easy access to main
thoroughfares.
Easements:
There are no adverse noticeable adverse easements affecting the property. The
appraiser has reviewed a preliminary title or title report of the property in
that determination. There is the availability for ingress and egress and
also for public utility easements. A copy of the Preliminary Title report is
reprinted in the Addenda to this report.
Man-Made Improvements:
The subject street is maintained by the City of Irvine. The offsite improvements
include sidewalks, curbs, electrical street lights, sanitary sewers and storm
sewers.
<PAGE>
Assessment and Taxes: According to the Orange County Assessor, current assessed
costs are presented current and not payable. Assessments are as follow:
APN: 237-0600-003
Land $1,299,000
Improvements $ 1,753,000
TAXES:
1st. Installment paid
2nd Installment paid
Paid Property Tax was $23,352.32 for 1995.
Based on Proposition 13 taxes should increase annually by 2% unless there is a
change of ownership, at which time they will increase to an amount based on the
current tax rates against existing market value.
Zoning:
The subject lot is zoned industrial City of Irvine. This zoning allows for a
variety of uses including the existing use. Zoning is designed to preserve
city land appropriate for industrial uses and to attract and preserve
desirable manufacturing and research/development areas.
Zoning is intended to provide safeguards and appropriate transitions to
surrounding land uses that may be sensitive to industrial/commercial activities
and to permit efficient design of infrastructure and public services to serve
these uses. Such infrastructure serves the neighboring area. The property is in
a well structured industrial area.
<PAGE>
IMPROVEMENT ANALYSIS
<PAGE>
IMPROVEMENT ANALYSIS
Building Improvements: The primary improvement is a two story Class C building
that is of concrete tilt-up construction building located at 17862 Fitch,
Irvine, CA It contains a total of 61,929 square feet. Construction plans are
available from West Coast Realty Advisors.
Age: The subject properties were originally constructed in 1979/80. It has a
chronological age of 10 years, an effective age of 5 years, and a remaining
economic life of 45 to 50 years. The building has been completely renovated
which is in process.
Based on the appraiser's inspection and assessment of the condition of the
improvements, the subject has an estimated effective age of 5 years and a
remaining useful life in excess of 50 years. It is adequately maintained for
it's intended use. There was no deferred maintenance noted.
Tenant improvements may not exceed the 50% permitted by existing zone
ordinances.
<PAGE>
The Construction is summarized as follows:
Construction: Concrete footings, foundation and slab; concrete tilt-up flat
tar/gravel roof 2 story.
Basement: Parking
Exterior Walls: Stucco wood frame construction
Interior Walls: Painted and finished drywall with baseboard molding.
Windows: 1/4" tinted glass in metal and wood casement.
Roof: Wood, flat roof with built-up tar/gravel roof cover.
Plumbing: Adequate bathroom and plumbing facilities present.
Adequate plumbing and normal equipment is evidenced.
Air Conditioning.
Ventilation: There is adequate heating and air conditioning equipment
Area is clean and air conditioned.
Electric: 110/220 volt electrical service. The entire building has adequate
Amperage service with the ability to expand as need.
Lighting: For the office area and lobby area, lighting is provided
Sprinkled: The building is fully sprinkled for fire protection.
Parking: Parking is adequate and within applicable building codes
Comments: The subject building is in good/excellent condition and evidences a
desirable qualify of construction.
Deferred Maintenance: There was no deferred maintenance noted.
Other Factors: There is substantial tenant improvements that enhances the use of
the building for Office usage including additional tenant
improvements.
Renovation improvements are: air conditioning, ADA
compliance, complete fire sprinkler system, new electrical, new
restrooms, and 70% carpeted. The building is 50% office, 30%
R and D, and 20% manufacturing. Major improvements total
over $1,400,000.
<PAGE>
Highest and Best Use
Highest and Best use is defined as:
"That reasonable and probable use that supports the highest present value, as
defined, as of the effective date of appraisal.
Alternatively, that use, from among reasonable, probable and legal alternative
uses, found to be physically possible, appropriately supported, financially
feasible and which results in highest land value.
The definition immediately above applied specifically to the highest and best
use of land. It is to be recognized that in cases where a site has existing
improvements on it, the highest and best use may be determined to be different
from the existing use. The existing use will continue, however, unless and until
land value in its highest and best use exceeds the total value of the property
in its existing use."
The above describes the concept of highest and best use where the existing
improvements have a number of years of physical life remaining that does enhance
the total property value.
The overall analysis of the real estate indicates that the improvements are not
new, but suffers some depreciation. The trends indicate that land values are
stable and/or increasing slightly; however, the improvements contribute to the
overall property value and razing of these improvements would not be feasible
until the value of the current use is exceeded by the land. The net return of
the building is greater than the return which could be earned if the site were
vacant.
<PAGE>
Based on the existing uses and trends in the neighborhood, zoning, and location,
the highest and best use of the land is for industrial/research and development
usage.
The existing improvements are developed with this type of use and therefore, are
concluded to represent the highest and best use as improved. Therefore, the
property is at highest & best use as presently zoned and developed.
Lease Analysis In evaluating the lease for the subject property a description of
the Lessee's business is reproduced in the Addenda to this report. It should be
noted that the tenant is a closed held company. The company is a well financed
and a well run company in a niche market that is expanding which requires the
addition of more conferencing facilities. THE VALUE OF THE PROPERTY IS
CONTINGENT ON THE LEASE BEING SIGNED AND APPROVED BY LESSEE AND LESSER.
Lease Agreement
Lessee: TYCOM
Building Square Footage: 61,929 square footage
Lease expiration: To be determined (see agreement in Addenda)
Office space: 61,929 square feet
Existing rent: $.60 per square foot NNN (Start rent)
Lease Term: 11 years with 1 five year option
Rent Increase: CPI Index as per lease
A copy of the complete but unsigned lease is presented in the Addenda to the
report.
<PAGE>
VALUATION SECTION
<PAGE>
VALUATION SECTION
Appraisal Procedures
The three traditional approaches to value are applied in order to arrive at a
final value conclusion. A synopsis of the procedures employed in each
approach follows.
COST APPROACH
The Cost Approach is based upon the proposition that the informed purchaser
would pay no more than the cost of producing a substitute property with the same
utility as the subject. It is particularly applicable when the property under
appraisement involves new or newer improvements which represent the highest and
best use of the land. Additionally it is applicable to those types of properties
which are unique and contain specialized improvements for which there is no
comparable data in the market. The Cost Approach includes the following steps:
1. Estimate the market value for the land.
2. Estimate the reproduction cost of the improvements.
3. Deducting appropriate depreciation from the cost new to arrive at a
depreciated improvement value.
4. Adding the land and depreciated improvement value to arrive at a
property value estimate.
<PAGE>
INCOME APPROACH
The Income Approach views the property as a revenue producing assets whose value
is derived from satisfying investment criteria. This approach generally follows
the following steps:
1. Recognizing the revenue producing potential of the property.
2. Considering appropriate expenses associated with the revenue including
normal operating costs and real property taxes as well as vacancy and collection
loss factors. Care is exercised in keeping expenses within acceptable
proportions for the specific investment.
3. Subtracting the expenses from revenues in order to arrive at a net annual
income stream produced by the property.
4. Capitalizing the net operating income at an Overall Rate which considers
the risks inherent in the property as compared to alternate investments.
THE MARKET APPROACH
This method produces an estimate of value by comparing the subject property to
sales and/or listing of similar properties in the same or competing areas.
This technique is used to indicate the value established by informed buyers
and sellers in the market. At the date of this appraisal, there was not
indicated by an inspection of market sales from use of DAMAR/TRW, COMPS INC.
and assessor data an abundance of comparable sales of this type of property.
These industrial buildings are build and designed by investors who
generally hold onto the property and lease the properties such as the present
building to technology oriented companies. At the date of the appraisal such
companies are generally doing well in the recession based California economy.
Since the property is newly constructed the cost approach is felt to bear
significance in the value determination. The lease rate, available
capitalization rates from similar size properties, and the examination of the
income stream, plus the long term nature of the lease are factors that the
income approach should consider.
<PAGE>
VALUATION ANALYSIS
The Cost Approach
This approach involves the summation of the depreciation value of the building
and site improvements with the market value of the land. The market value of
land added to the depreciated improvement value estimate is the value indicated
by the cost approach. The land sales used to derive our estimate of land value
is presented on the following pages under land valuation.
We have made adjustments for location, time of sales, size, corner influence,
traffic count, and potential use to arrive at our estimate of land value. This
value when added to the depreciated improvement value estimates produces the
following value estimate attributable to the cost approach.
Land Valuation
The comparison method, or market approach is the most common way of developing a
market value estimate for land. In the comparison method, sales and listings of
vacant land comparable to the subject property are gathered and analyzed. The
sale prices are adjusted for time, location, physical characteristics, and other
relevant variations. The adjusted prices are reduced to some common unit of
comparison, such as price per acre or price per square foot. The appraiser
analyzed this information and derives a unit value applicable to the subject
property. When applied to the appropriate unit measure, this results in an
estimate of the market value of the vacant land.
<PAGE>
An investigation of land sales in the subject's vicinity disclosed several that
were useful in our analysis. However, at the preparation of this report these
sales were in the process of being verified. Sales ranged from $8 to $26 dollars
per square foot. There is minimal sales of vacant land in the immediate area as
the Irvine industrial and office center where the property is located is fully
constructed.
<TABLE>
We have used land sales in the immediate area to formulate the value conclusion
as follows:
<CAPTION>
No. Address Lot area Zoning Sale Date Sale Price Per Square Foot
<S> <C> <C> <C> <C> <C> <C>
1. 2314 Newport Blvd. 9,000 Commercial 10/17/96 $400,000 $44.44
Costa Mesa, CA.
A.P.N. 439-271-03
2. 9800 Muirland Blvd. 375,750 Industrial 07/16/96 $4,345,000 $11.56
Irvine, CA.
A.P.N. 590-031-01
3. 7 Bendix 34,543 Industrial 12/07/95 $914,000 $26.45
Irvine, CA.
A.P.N. 591-024-01
</TABLE>
Analysis:
An analysis of land sales in the immediate area did not disclose an
abundance to draw our value conclusion. An attachment to this report will be
prepared to supplement the analysis of land value.
<PAGE>
Land Sale Discussion:
Summary
The review of vacant land sales was conducted and consideration was given to
other sales which did not contradict the comparables selected. Estimating
the value of the subject site as though vacant is a primary step in completing
the cost approach to value. Vacant land sales reported were helpful in
estimating the value of the subject site as though vacant.
With adjustments, the land value of the subject is similar to these comparables.
After making adjustments for location, size, date of sale, retail access,
proximity to the central business district, and probable use, we conclude that
the indicated market value of the subject's land value is conservatively stated
at $17.00 per square foot since the property is desirable and considering the
size of the parcel and the abundance of industrial land in the area for
development. Therefore, the total land value for the land is calculated as:
$17.00 x 92,383 square feet = $1,570,511
which results in a total rounded value of $1,570,000 for land value under the
definition of fair market value.
Improvement Valuation
The next step in the Cost Approach is to estimate the Reproduction Cost New of
the improvements. Reproduction Cost New is defined as follows:
"The cost of construction at current prices of an exact duplicate or replica
using the same materials, construction standards, design, layout, and quality of
workmanship, embodying all the deficiencies, super-adequacies and obsolescence
of the subject."
<PAGE>
The Reproduction Cost estimate is based upon the current market and includes all
items necessary to reproduce the subject improvements as of the date of
appraisal. In compiling the cost estimate the Marshall Valuation Cost Manual
was employed and reflects not only the cost of material and labor, but also
includes architect's fees, engineering expenses, contractor's fees, overhead
and profit. As an improvement ages, it typically loses value or depreciates
because of deterioration and/or obsolescence resulting from wear and tear,
inadequacy or over-adequacy. Accrued Depreciation is defined as follows:
"A loss from the upper limit of value. An effect caused by deterioration and/or
obsolescence. Deterioration is evidenced by wear and tear, decay, dry rot,
cracks, encrustation, or structural defects. Obsolescence is divisible into two
parts, functional and economic. Functional obsolescence may be due to poor floor
plan, mechanical inadequacy or over-adequacy, functional inadequacy or over-
adequacy due to size, style, age, etc. It is evidenced by conditions within the
property. Economic obsolescence is caused by changes external to the property
such as changes in neighboring property uses, changes in zoning and legislation,
etc. It is also the actual decline in market value of the improvement to land
from time of purchase to the time of resale."
Depreciation is divided into three classifications, Physical Deterioration,
Functional Obsolescence, and Economic Obsolescence. Physical deterioration
refers to the loss in value due to the wear and tear of the physical
components of the structure. Curable physical deterioration is normally
measured by the cost of those physical aspects of the structure which are in
need of repair. Non-curable Physical Deterioration is estimated by the
"Age-Life Method" wherein the depreciation is based upon the relationship of
the structure's effective age to the total estimated physical life when new.
<PAGE>
Functional obsolescence is a loss or reduction in the utility of a structure
resulting from a decreased capacity of the structure or one of its component
parts to perform the function for which it was intended. This type of
depreciation or obsolescence is evidenced by conditions within the property and
is generally caused by deficiencies in architectural style, placement of the
improvements on the site, or the general floor plan.
Functional obsolescence can be curable or non-curable. As an example curable
functional obsolescence could present itself as a lack of loading doors in an
industrial property. All things being equal the cure would be to construct
additional doors to permit the building to be competitive with other facilities.
Non-curable obsolescence could be evidenced by low ceiling heights in comparison
to competing structures.
Economic Obsolescence is the loss in value of a property due to factors outside
the limits of the property itself. An example is a major free-standing chain
store relocating and its effects on neighboring local retailers. In general, the
local merchants are highly dependent on the foot traffic created by a large
chain store. The absence of this store will reduce foot traffic and retail sales
for the local merchants. This can reduce the economic rentals which a property
could command prior to the moving of the chain store. Other examples include the
re-routing of thoroughfares, changing of zoning, etc.
<PAGE>
Physical Deterioration - Subject Property
Physical Deterioration was based on analysis of the physical condition of the
subject improvements. Consideration was given to the physical deterioration
created by the wear of elements and use, and the estimated effective age of the
improvements with respect to the total estimated physical life of sane (Age/Life
Method).
Although the improvement's actual age is 18 years, it was noted that the
property has been adequately maintained and has been completely renovated. An
effective age of 5 years was determined and a remaining economic life of 55
years was considered to be appropriate. The physical depreciation calculation is
set forth as follows.
The effective age is estimated at 5 years which is divided by the effective age
plus the estimated remaining economic life of 60 years. Therefore, physical
depreciation is calculated as: 5/60 = 8.33% depreciation.
If, we had considered that the building will depreciate on a curve-linear basis,
the depreciation would be 3% based on Marshall and Swift Valuation Guide. Curve-
linear depreciation is thought to better represent the physical depreciation of
the improvements. As a result, the appraiser has used a depreciation Percentage
of 3% after consideration of both calculations, the extent of the tenant
improvements, and the present good qualm and condition of the improvements.
<PAGE>
Functional Obsolescence - Subject Property
None Evident. The subject is well designed for its present and intended purpose.
Economic Obsolescence - Subject Property
None Evident. The area supports the value of the property.
Our Cost Approach Summary is presented on the following page.
<PAGE>
COST APPROACH SUMMARY
A. Two Story Research and Industrial Building, Class C
Good Quality, Excellent Condition with square
feet of 61,929 @ an average of $65 PSF*, new: $4,025,385
Less Estimated Depreciation from all causes:
Physical Deterioration @ 3% $120,761
Functional Obsolescence: None
Economic Obsolescence: None <120,761>
Total Depreciated Value of the Main Improvement $3,904,623
C. Estimated Value of Site Improvements $75,000
D. Total Estimated Value of the Improvements: $3,979,623
E. Add Estimated Land Value $1,570,000
Total Value Indicated by the Cost Approach: $5,549,623
Rounded to: $5,550,000
* Estimated from Marshall & Swift Section 14, Page 14, Industrial Buildings and
adjusted for tenant improvements. It was reported that the client will make
$1,400,000 in tenant improved as reported by TYCOM, the lessee, before the
renovation is completed.
<PAGE>
INCOME APPROACH
The next step in the appraisal process is to develop an estimate of value for
the subject property by applying the income approach This Approach is recognized
as most applicable to those properties which are considered "investment oriented
real estate." The Net Income generated by the property is capitalized based on
the premise that the value of the subject property is represented by the present
worth of anticipated net income.
The projected income stream is based on an analysis of the quality, as well as
the quantity and duration, of the income expectancy. This income stream is
capitalized into an indication of value using a capitalization rate developed
from market sales analysis. The estimates of income, expense, and capitalized
property values are presented in the following paragraphs.
In preparation of the Income Approach we have not been provided nor have we
reviewed the financial statements of the landlords to determine the applicable
income and expenses of the subject as these were not available.
Income Analysis
The first step in the income approach is to determine the economic rent for the
subject property. To do this, we have obtained rental data on properties
similar to the subject. A sampling of this information is presented in the
following section of this report.
Rental Analysis
The income approach utilizes an estimate of economic market rental income
adjusted to a triple net basis, which is capitalized into a value estimate
abstracted from the market which is summarized below:
<PAGE>
Considering the location, regular maintenance and repair, and the size of the
structure, the subject would be desirable rental space if exposed to the open
market.
The appraiser has determined that an economic rental rate for the subject is
best represented by current rental rates. The property is a desirable
industrial and research and development area. The current lease is to a
quality tenant and has 7 years remaining. It is likely that the rental
income will be stable for that period. In purchasing the property the
appraisal/evaluation must consider the rental income received from the lease
to account for the economic benefits due the prospective purchaser.
The appraiser has determined that the estimate of market rent is calculated as
follows:
Net Lease Basis
Address Square Foot Net Lease Rate Total Rent
17862 Fitch 63,225 NNN $37,302
X 12
Total Market Rental Rate $447,624
* Based on lease terms and analysis of market rents at $0.59 per square foot
triple net. Total rental revenue is estimated at $447,624 assuming full
occupancy and considering comparable rental rates in the immediate area An
examination of the existing lease showed a CPI adjustment for lease rate year
which is typical adjustments for the market, but exposes the lessee to
additional payment risk should inflation return.
Other rental rates are generally near or above the subject property in the
surrounding area. The subject property is an older building relative to a number
of other R ~ D buildings where rents are about $0.65 to $0.75 NNN and is of the
same vintage as many office/industrial buildings near the present location.
Today's rental rates are realistic although may be on the low side given
existing rents in the area. However, off-setting this is vacancy rates for
surrounding properties which are dropping to 3-5% and the value of a long term
lease to a quality tenant. Thus, we have used existing rental rates of $0.60 NNN
as market rates for fair rental value.
<PAGE>
Vacancy loss has been estimated at 1% given the vacancy and growing competitive
nature of the rental market, the quality tenant, and the existing lease. The
appraiser has considered the vacancy and collection in the immediate and
neighboring area to establish the vacancy rate of 3-5./0, but then considered
the lease which insures a minimum vacancy as long as the subject company honors
it's existing lease.
A study of the market place indicated that there are similar properties to the
subject, but in general they are less desirable properties that are vacant And
for sale.
The benefit for the subject property is that it is located in a desirable
industrial location for industrial and research and development. It is part of a
desirable industrial/office location for the property and should be reasonably
rentable in today's existing market place.
Common management expenses would include collecting rents, servicing the debt,
if any, paying operating expenses and paying taxes when due.
A study of operating expenses indicate that expenses are estimated to
approximate 2% of Total Rental Revenue. Management expenses have been estimated
at 1% of annual income and is included in the estimate of operating costs.
<PAGE>
Reserves cover the replacement of short-lived building components (and deferred
maintenance). In this case, reserves for replacement would include items covered
items such as resurfacing, pavement of parking areas, and roofing repairs.
Such reserves are included in the estimate of operating expenses as short
lived items are paid for out of the revenue stream as needed. Since the
improvements are not new, but are in good to excellent condition and with
good maintenance, the reserves for replacement and management fee have been
estimated at 2% of annual income.
Statement of Pro-Forma Net Operating Income
Gross Revenue ($0.60x 12x 63,225 s.f.) $455,220
Less: Vacancy and Collection Loss @1% < 4,552>
Effective Gross Annual Income $450,667
Operating Expense, Reserve For Replacements, etc. 2% $< 9,013>
Net Income $441,654
Capitalization Process
The capitalization of income has been made on the premise that value is
represented by the present worth of anticipated net income. The projected
income stream is based on an analysis of the quality, as well as the
quantity and duration of the income expectancy. This income stream is
capitalized into an indication of value using a capitalization rate
developed from the market.
Using the technique of direct capitalization, the capitalization rate is
calculated using market data as follows:
<PAGE>
We have concluded that a capitalization rate of 8.80% appears appropriate given
the time of sale, and the market sales in the recent past. The majority of
sales are owner occupied and not investment owned and it has not been
possible to derive capitalization rates from them. However, sales in the
nearby vicinity generally shows a dropping capitalization rate as rental
income increases and with a slight increase in market values. The outlook for
commercial real estate is favorable in the market served.
An analysis of direct sales indicated that most of the industrial sales are of a
similar size and type in the immediate area and was not investment owned
properties.
After analyzing these sales and the nature of the market in general it is our
opinion that the capitalization rates is for sales in the 1995- 1996 period is
due to the anticipation of the return being obtained at the end of the
investment holding period (as a reversion or sale). Investment in the subject
property requires that a projection be made of resale price in the future and/or
of rental rates in the future. This is difficult to do, but the direction of
change is rising price per square foot, lower vacancy rates, and stable market
interest rates. A review of economic activity in the area shows a high growth
rate which should be favorable, barring a major economic recession, due to
the technology emphasis in the immediate area. In particular, the appraiser
has weighted carefully the credit nature of the tenant, the commitment of
tenant improvements by the lessee, the length of the lease, the terms of the
lease, and the potential in the event that interest rates would rise due to
the CPI adjustment clause when coupled with the strengthening of the
commercial real estate market.
<PAGE>
As a result, we have arrived at a direct capitalization approach to arrive at an
overall capitalization rate of approximately 8.80%. We have selected an overall
rate to reflect the rate appropriate for the risks and returns of this type of
investment. We have added to the capitalization rate to reflect the risk in the
economy due to recession and increasing elicited in the market for industrial
property in the immediate area.
The value conclusion as it applies to the subject is as follows:
Net Income + Overall Rate = Value Indication
$441,654 .0880 = $5,018,795
Rounded To: $5,019,000
<PAGE>
Market Approach
The next step in the appraisal process is the development of the
market approach for the subject property. The market approach is an appraisal
technique in which a market value estimate is based on prices paid in actual
market value estimate is based on prices paid in actual market transactions and
on current listings. It is a process of analyzing recently sold and listed
properties similar to the subject. The reliability of this technique depends on
(a) the degree of comparability of the property appraised with each sale or
listing, (b) the length of time since the sale, (c.) the accuracy of the sale
data, and (d) the absence of unusual conditions affects;; the sale.
Once the sales are selected they are compared to the subject property on some
unit of comparison which is generally recognized in the marketplace, such as
square feet of improvement area, including land value, square feet of
improvement area after land value has been subtracted, annual gross rent
multiplier, etc.
A search of the subject's area disclosed several sales that were useful in my
analysis. The property is selling at the top of the market range indicated
partially due to the changing market, the favorable 11 year lease term ( with 3
- - 5 year terms), and the credit quality of the tenant. The structure has
slightly over 50% improved office space and is of sturdy construction.
The appraiser has considered sales from 1994 to present, plus has checked
several listings in the determination of the comparables to use in the
analysis. Generally, properties in the immediate area that were available
for sale were of similar locations and were in similar conditions of
maintenance.
Number Location
A summary of each sale is presented below:
These sales are summed on the following pages and listed below:
1. 3 Morgan, Irvine, California
2. 15253 Bake Parkway, Irvine, California
3. 1779 Fitch, Irvine, California
4. 17900 Von Karman, Irvine, California
5. 9800 Muirlard Blvd., Irvine, California
6. 125 Pacific, Irvine, California
<PAGE>
Summary: These 6 sales represent similar research and development, office, and
industrial sales which have sold in the same market area. Although some
adjustments have been noted for each analysis the properties are all similar in
use, age and design. As no one sale indicates a market other sales have been
considered, but the other sales did not refute the sales selected. The subject
property is very desirable and comparable to the sales in this market area It
will be completely renovated by the tenant and is in a desirable and accessible
location to the 55 and 405 freeway, plus John Wayne Airport. The property teas
an 11 year lease that make this desirable from an investor's point of view with
a CPI escalation clause in the event of increasing price levels. The tenant is
reported to be a quality tenant that is going through expansion plans. The
appraiser has not reviewed financial statements of the tenant to make any
judgment as to credit quality other than to note that expansion plans are in
process to enter the profitable medical instrument industry.
Considering these sales on a price per square foot basis after adjustments, a
range of $75.00 to $79.50 per square foot was determined to be appropriate. Then
considering the "scarcity" of a near market rate lease with minimal tenant
improvement concessions for a term of 11 years the appraiser has judgmentally
determined a market price per square foot of $78.00 which is near the high end
of the adjusted sales range. That value appears justified in comparison to
properties presently on the market and the fact that the subject company is
making an investment of $1,400,000 in tenant improvements which is factored into
the value conclusion, but adds an incentive for the tenant not to breach the
terms of the lease contract; otherwise, the property becomes the property of the
lesser.
Adjustments were made for size of lot, size of structure, age, location, date of
sale, and other factors such as accessibility to major freeways. Also,
considered was the state of the recovering economy and the potential for
improvement in Orange County real estate relative to this appropriate time
period.
<PAGE>
Therefore, our valuation opinion is based on the following:
Rentable Area: 63,225 s.f. x $78.00* = $4,931,550
* The price per square foot is based on extensive tenant improvements which is
to be part of the real estate. Tenant improvements are reported to be a total of
$1,400,000 once completed. An inspection of the property indicated they were
being made in a workman like manner.
In the market approach we have weighted each comparable carefully to arrive at a
market value indicated at $4,932,000. This valuation has also considered the
quality of the tenant and the nature of the existing lease to be signed on the
premises. The value would markedly change without the lease in place. In
addition there were several sales of neighboring properties that were less
desirable than the subject property based on the quality of improvements and
occupancy. We have considered those sales and they can be justified on the basis
of a slightly less visible location, lack of quality tenants, and due to
one being an REO property.
<PAGE>
CONCLUSION OF VALUE
The three approaches have various degrees of applicability depending on the
circumstances. The cost approach is usually relied on when the improvements
are new, or nearly new, and are fully utilized for their designed intent, or
when the improvements represent a special purpose property on which
no reliable income or market data is available.
In this instance the cost approach was considered less reliable than the
other approaches and set an upper limit to value. This is due to the recovery
of the commercial market in the area and difficulty of estimating land value.
The cost approach indication of value was $5,550,000 which was, however,
used in deriving the value conclusion.
The income approach is often used for properties that are typically leased. The
income approach was given substantial weight as this property is "investment
oriented" real estate. The income approach indication of value is $5,019,000.
The market approach reflects actual prices paid for similar properties. This
approach is generally used when reliable and comparable market data are
available. The indicated value for the unit of comparison is then applied
against the subject property. This approach was given the weight in the
value conclusion although timely market data indicated that a recovery was
starting as optimistically reported by several commercial brokers in the
area. The market approach indication of value is $4,932,000.
<PAGE>
The appraiser has given the greatest weight to the income approach and market
approach while carefully considering the cost approach. In general, market
conditions had changed with few sales in the 1995-1996 time period. However, the
cost approach gives support for an even higher market value given the extensive
renovation and the near "new" interior condition of the improvements.
As a result, we have tempered the values arrived at by the market (e.g. direct
sales) approach for the change in market conditions. Since substantial factors
such as income generating ability must be considered in this type of appraisal
we have carefully considered the income approach to value. That approach while
yielding the second lowest indication of value suggests that an investment in
industrial buildings must carefully consider the income generating ability of
real property. Generally, market variation in property characteristics suggest
that the income approach should be given the greatest weight in the value
conclusion since this is typically investor owned properties.
In conclusion, based upon the foregoing analysis, it is our opinion that the
Fair Market Value of the subject rendered, as of December 10, 1996 is estimated
at:
FOUR MILLION NINE HUNDRED SEVENTY FIVE THOUSAND DOLLARS
$4,975,000.
<PAGE>
The appraiser has given weight to the income approach, market approach, and cost
approach, but has given slightly less weight to the cost approach due to the
lack of land sales to carefully document land value.
Carefully considered was the terms of the existing lease and the tenant
mix/quality. The appraiser has not reviewed the financial condition, nor
financial statements of the tenants. All assumptions is that the tenant is a
quality and secure tenant with little risk of bankruptcy or credit problems.
Other Factors:
The economy is strengthening and improving in Orange County in
California. The outlook is favorable and there is a growing demand for research
& development and industrial space in the Irvine area. It was reported that
values are rising, capitalization rates are decreasing, and vacancy rates are
falling to earlier levels. The outlook is favorable for the subject property at
the date of the appraisal.
<PAGE>
FILE NO. 60483-DB
At.
AT THE DAll: HEREOF EXCEPTIONS TO COVERAGE IN ADDITION TO THE
PRINTED EXCEPTIONS AND EXCLUSIONS IN SAID POLICY FORM WOULD BE AS - FOLLOWS:
A. Property taxes, including any personal property taxes and any
assessments collected with taxes, for the fiscal year 1996-1997.
First Installment: $10,595.56 (OPEN)
Penalty: S1,059.56 delinquent 12/10/96)
Second Installment: $10,595.56 (OPEN)
Penalty: $1,069.56 (DELINQUENT 04/10/97)
Exemption: None Shown
Code Area: 26~36
Assessment No.: 427-254-04
B. The lien of supplemental taxes, if any, assessed pursuant to the
provisions of Chapter 3.5 (Commencing with Section 75) of the Revenue and
Taxation Code of the State of California.
C. A pending assessment for the District shown below. When Notice of the
assessment is recorded with the County Recorder the assessment shall become a
lien on said land.
District: Proposed boundaries-facilities Dist. 89-1
Recorded: October 30, 1989 as Instrument No. 89-581708, of Official
Records
1. A perpetual air or flight easement, sometimes referred to as aviation
rights, in and to all the air space above those portions of particular planes
or imaginary surfaces that overlie said land for use by aircraft, present or
future, from or to the Orange County Airport, said easements and rights being
more particularly described and defined in and granted to the County of
Orange by deed recorded March 17, 1964 in Book 6965,
Page 721, Official Records, upon the terms, covenants and conditions therein.
The planes above which said easement lies are more particularly described in
said deed and shown on a map therein referred to.
2. Covenants, conditions and restrictions (deleting therefrom any
restrictions indicating any preference, limitation or discrimination based
on race, color, religion, sex, handicap, familial status or national origin)
as set forth in the document. Recorded: in Book 7529, Page 600,
Official Records
<PAGE>
SCHEDULE B
The foregoing Basic Lease Information is incorporated in ant made a part of the
Lease to winch it is attached. If there is any convict between the Basic Lease
Information and the Lease, the Lease shall control.
Landlord:
A: (I: By Its Tenant: TYCOM CORPORATION a Delaware Corporation
By Its
<PAGE>
EXHIBIT E
rid
Date:
Landlord: To be provided
Tenant: TYCOM Corporation, a Delaware Corporation
Premises (section 1.1): Address: 17862 Fitch, City of Irvine, County of Orange,
State of California
it. ,1996
Term (section 2.1); Eleven (11) years plus the partial month between the
Commencement Date and the last day of the calendar month during which the
Commencement Date occurs.
Commencement Date (section 2.1):
Expiration Date (section 2.1):
Initial Base Rent (section 3.1(a)): S37,302.75 per month.
Use (section 6.1): For office, warehousing, light manufacturing, storage,
shipping, conference center.
Liability Insurance (section 10.3): S5,000,000.
Landlord's Address for Notice (section 23.1): to be provided
Landlord's Address for Payment of Rent (Article 3): 2878 Camino de Rio South,
Suite 260, San Diego, CA 92108, Attn.: Controller.
Option to Extend (Article 25 ): One five year option to extent at fair market
rental.
<PAGE>
COMMERCIAL LEASE - NET
(Single Tenant Building)
Basic Lease information
Security Deposit (section 3.5): S37,302.75.
Tenant's Address (section 23.1): 17862 Fitch, Irvine, California
Exhibits and Addenda (section 24.3): Exhibit A - Legal Description
<PAGE>
FILE NO. 60483-DB
Said covenants, conditions and restrictions provide that a violation thereof
shall not defeat the lien of any mortgage or deed of trust made in good faith
and for value.
Modification(s) of said covenants, conditions and restrictions
Recorded: March 2, 1990 as Instrument No. 9~112441, Official Records
Modification(s) of said covenants, conditions and restrictions
Recorded: October s, 1990 as Instrument No. 9~535152, Official Records
An easement for the purpose shown below and rights incidental thereto as set
forth in a document
Granted to: Southern California Edison Company
Purpose: Electric lines, consisting of wood and/or metal poles,
guy wires and anchors, corsairs, wires and other fixtures
and appliances and communication circuits with necessary
appurtenances, both overhead and underground
Recorded: February 9, 1973 in Book 10550, Page 393, Official Records
Described: as follows:
A strip of land 15 feet wide lying within that portion of Parcel 42 adjacent to
Red Hill Avenue, as delineated on a map filed in Book 97, Pages 1 to 5
inclusive.
4. Covenants, conditions and reservations (delving therefrom any
reservations indicating any preference, limitation or discrimination based on
race, color, religion, sex, handicap, familial status or national origin) as
set forth in the document.
Recorded: March 11, 1977 in Book 12101, Page 526, Official Records
Said covenants, conditions and restrictions provide the a violation thereof
shall not defeat the lien of any mortgage or deed of trust made in good faith
and for value.
5. The fan that the ownership of said land does not include rights of
access to or from the street or highway abutting said land, such rights having
been relinquished by the map of said tract.
Affects: Red Hill Avenue, except at signal intersections
Said land however, abuts upon a public thoroughfare ocher than referred to above
over which rights of vehicular ingress and egress have not been relinquished.
<PAGE>
FILE NO. 60483-DB
6. An easement the purposes shown below and rights incidental thereto as
shown or as offered for dedication on the recorded map shown below.
Map of: Said Map
Purpose: Public utilities
Affects: A strip of land, 3.00 feet wide, lying within said land and
adjacent to ditch, as delineated on a map filed in Book 97,
Pages 1 to 5 inclusive of Parcel Maps
7. An easement for the purpose shown below and rights incidental thereto
as set forth in a document
Granted to: Southern California Edison Company
Purpose: Wires, underground conduits, cables, vaults, manholes,,
and including above-ground enclosures, markers and concrete
pads and other appurtenant futures and equipment
Recorded: June 12, 1978 in Book 12712, Page 1101, Official Records
Affects: The Northwesterly 6 feet of said land
8. Covenants, conditions and restrictions (deleting therefrom any
restrictions indicating any preference, limitation or discrimination based on
race, color, religion, sex, handicap, familial status or national origin)
as set forth in the document.
Recorded: October 31, 1978 in Book 12903, Page 618, Official Records
Said covenants, conditions and restrictions provide that a violation thereof
shall not defeat the lien of any mortgage or deed of trust made in good faith
and for value.
9. An easement for the purpose shown below and rights incidental thereto
as set forth in a document
Granted to: Southern California Edison Company
Purpose: Underground electrical supply systems and communication
systems
Recorded: August 28, 1979 in Book 13288, Page 1182, Official Records
Affects: The Northerly 150 feat of the Easterly 6 feet of salt land
Also a strip of lent 8 feet in width, lying within said Parcel 42; the
centerline of said strip of land being described as follows:
Beginning at a point on the Easterly line of said parcel, distant thereon South
18. 37' 30" Ease 146 feet from the most Northerly corner of said parcel; thence
South 71. 22' 30~ Vest 18 feet.
<PAGE>
FILE NO. 60483-DB
10. A Consent under Conditions to Grant Deed and Clarification under Declaration
of Restrictions made as of November 6, 1990 by The Irvine Company, a Michigan
corporation, recorded November 13, 1990 as Instrument No. 9-596217, Official
Records.
11. Any easements not disclosed by those public records which impart
constructive notice and which are not visible and apparent from an inspection of
the surface of said land.
12. Water rights, claims or title to water, whether or not shown by the public
records.
13. Matters which may be disclosed by an inspection or by a survey of said land
that is satisfactory to this Company, or by inquiry of the parties in possession
thereof.
14. A claim of mechanic's lien
Amount: $25,107.63
Claimant: Wakers Wholesale
Recorded: October 18, 1996 as Instrument NO. 19960530223, Official Records
END OF SCHEDULE B
<PAGE>
FILE NO. 60483-DB
SCHEDULE C
THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF ORANGE, AND IS DESCRIBED AS FOLLOWS:
Parcel 42, in the city of Irvine, County of Orange, State of California, as
shown on a Parcel Map filet in Book 97, Pages 1 to 5 inclusive of Parcel Maps,
in the office of the County Recorder of said County.
EXCEPT all oil, oil rights, minerals, mineral rights and other hydrocarbons by
whatsoever name known that may be within or under the parcel of land hereinabove
described, together with the perpetual right of drilling, mining, exploring and
operating therefor and storing in and removing the same from said land or any
other land, including the right to whipstock or directionally drill and mine
from lands other than those hereinabove described oil or gas wells, tunnels and
shafts into, through or across the subsurface of the land hereinabove described
and to bottom such whipstocked or directionally drilled wells, tunnels and
shafts under and beneath or beyond the exterior limits thereof, and to redrill,
retunnel, equip, maintain, repair, deepen and operate any such wells, or mines,
without, however, the right to drill, mine, store, explore and operate through
the surface or the upper five hundred (s00) feet of the subsurface of the land
hereinabove described, as reserved by The Irvine Company, a Michigan
corporation, in deed recorded October 14, 1977 in Book 12415, Page 997, Official
Records.
ALSO EXCEPT any and all water rights or interest in water rights and any and all
geothermal rights or interests in geothermal rights, no matter how acquired in
connection with or with respect to said land, whether such water rights shall be
riparian, overlying, appropriative percolating, prescriptive or contractual,
together with full right and power, among others, to transfer or assign to
others or to use or utilize on any other property; owned or leased by the
grantor; provided, however, that the exception ant reservation made herein shall
not have any right to enter upon the surface of the property described herein
the exercise of such rights, as reserved in deed from Title Insurance and Trust
Company, a Trustee under Trust No. IR-192300 2, recorded October 31, 1978 in
Book 12903, Page 618, Official Records.
DB/oc
<PAGE>
Am:
FILE NO. 60483-DB
REQUIREMENTS
Note No. 1: We will require a statement of information from the parties named
below in order to complete this report, based on the effect of documents,
proceedings, liens, decrees, or other matters which do not specifically describe
said land, but which, if any do exist, affect the title or impose liens or
encumbrances thereon.
Parties: All Parties
(Note: The statement of information is necessary to complete the search and
examination of title under this order. Any title search includes matters that
are indexed by name only, ant having a completed statement of information
assists the Company in the elimination of certain matters which appear to
involve the parties but in fact affect another party with the same or similar
name. Be assured that the statement of information is essential and will be kept
strictly confidential to this file.)
Note No. 2: Before issuing its policy of title insurance, this Company will
require evidence, satisfactory to the Company, that TYCOM CORPORATION, A
DELAWARE CORPORATION.
(a) is validly formed on the date when documents in this transaction are to be
signed; and
(b) is in good standing and authorized to do business in the state or country
where the said corporation was formed.
Note No. 3: This Company is requiring that the attached "Owners Declaration" be
completed by the owner of the estate described or referred to in the vesting
herein, immediately Prior to the close of this transaction and returned for
approval
The purpose of the declaration is to provide this Company with certain
information that cannot necessarily be ascertained by making a physical
inspection of the land.
Please contact us in the event you require assistance in completing said
Declaration.
<PAGE>
FILE NO. 60483-DB
OWNER'S DECLARATION
1. Declarant has requested FIDELITY NATIONAL TITLE INSURANCE COMPANY
Policy(s) of Title Insurance, Binder(s), or Commitment(s), Preliminary
Report(s), Guarantee(s), or Endorsement(s), insuring an interest in or title
to real property described in Exhibit "A" attached thereto (hereinafter
referred to as "said property") without exception to or providing certain
affirmative insurance against unrecorded matters.
2. Declarant knows of no leases, defects, liens, encumbrances, adverse
claims, or other matters affecting said property other than as shown on the
Preliminary Report or Commitment bearing the above-referenced order number,
prepared by FIDELITY NATIONAL TITLE INSURANCE COMPANY.
3. Declarant hereby affirms that there is no one in possession or
entitled to possession of said property other than the vestee shown in said
Preliminary Report except:
4. Declarant hereby affirms that there are no liens or rights to liens
upon said property for labor, services, materials, appliances, equipment,
teams, or power furnished or to be furnished to the work of improvement
which are imposed by law and not shown by the public records, whether done
by an owner, Lessee, Sub-Lessee or tenant and which has been completed
within the last year or which is now in progress.
This Declaration is made to induce FIDELITY NATIONAL TITLE INSURANCE COMPANY to
issue its Policy(s) of Title Insurance with respect to the above-referenced
order number.
DECLARANT
ADDRESS
DECLARANT
ADDRESS
Executed under penalty of perjury on the day of, 19-
<PAGE>
FILE NO. 60483-DB
** NOTES:**
Note No. 1: There are no conveyances affecting said land recorded within six (6)
months of the date of this report.
Note No. 2: If you are aware of any improvements whatsoever that have been
recently completed, that are going on or contemplated prior to closing, this
office must be informed of these facts immediately so that your transaction is
not delayed.
"NOTE: Section 12413.1, California Insurance Code, commonly known a Assembly
Bill 512, became effective January 1, 1990. This legislation deals with the
disbursement of funds deposited with any title entity acting in an escrow of
subescrow capacity. The law requires that all funds be deposited and collected
by the title entity's escrow and/or subescrow account prior to disbursement of
any funds. Some methods of funding may subject funds to a holding period which
must expire before any funds may be disbursed. In order to avoid any such
delays, all fundings should be done through wire transfer, certified check or
checks drawn on California Financial institutions.
"NOTE: California State Senate Bill Number 2319, effective January 1, 1991,
requires that the Buyer in all sales of California real estate, wherein the
seller shows an out of state address, withhold 3 1/3% of the total sales price
as California State Income Tax, subject to the various provisions of the law as
therein contained.
<PAGE>
WIRE INSTRUCTIONS
FIDELITY NATIONAL TITLE INSURANCE COMPANY
COMMERCIAL/INDUSTRIAL DEPARTMENT
Senate Bill 1550, which became effective January 1, 1985, requiring the title
companies to disburse on collected funds has raised many questions. The
following information is provided to assist our customers with this law:
The fastest method for receiving collected funds is by wire transfer of funds
credited to your account. The following instructions should be used when funds
are being wired to our bank:
A) Wire funds through the Federal Reserve Bank to:
First Bank & Trust
2400 Michelson Drive
Irvine, CA 92715
ABA # 081009428
B) Credit to the account of Fidelity National Title
Account Number 6400 931016
For Further Credit Title Order No.:
By Order of
Special Instructions Title Officer:
<PAGE>
time or both, will become such a default. Tenant has not delivered to Landlord
any notice of default with respect to the Landlord's obligations under the
Lease.
7. Tenant is not an affiliate of Landlord.
8. Tenant is in actual possession of the entire Leased Premises and, to the best
knowledge of Tenant, is not in any respect in default under any of the terms ant
conditions of the Lease, nor is there now any fact or condition which, with
notice or lapse of time or both, will become such a default. Tenant has not
received from Landlord any notice of default with respect to Tenant's
obligations under the Lease.
9. Tenant has not assigned, transferred, mortgaged or otherwise encumbered its
interest under the Leash nor subleased any of the Leased Premises, nor permitted
any person or entity to use the Leased Premises, except as otherwise indicated
on Schedule A annexed hereto.
1O. Except as expressly provided in the Lease, Tenant
(i) does not have any right to renew or extend the term of the Lease,
(ii) does not have any right to cancel or surrender the Lease prior to the
expiration of the term of the Lease,
(iii) does not have any option or rights of first refusal or first offer to
purchase or lease all or any part of the Leased Premises or the real property of
which the Leased Premises are a part,
(iv) does not have any right, title or interest with respect to the Leased
Premises other than as lessee under the Lease, and
(v) does not have any right to relocate into other property owned by Landlord or
any of Landlord's affiliates.
11. There has not been filed by or against Tenant a petition in bankruptcy,
voluntary or otherwise, any assignment for the benefit of creditors, any
petition seeking reorganization or arrangement under the bankruptcy laws of the
United States, or any state thereof, or any other action brought under said
bankruptcy laws with respect to Tenant.
12. If Tenant Is required to provide insurance coverage under the I mice, Tenant
has not given or received written notice that Tenant insurance coverage will be
canceled or will not be renewed.
13. The individual executing this Tenant Estoppel Certificate on behalf of
Tenant represents and warrants that has the power and the authority to execute
this Tenant Estoppel Certificate on behalf of Tenant.
<PAGE>
14. Lender [Purchaser] has advised Tenant that Lender [Purchaser] will rely upon
the truth of this certification in making the Loan to Landlord [Purchaser]. This
Tenant Estoppel Certificate shall inure to the benefit of Landlord and Lender
[Purchaser] ant their respective nominees, successors, assigns, participants and
designees and shall be binding upon Tenant and its successors and assigns.
Dated this day of , 199
Tenant
Its:
TYCOM CORPORATION, a Delaware
Corporation
<PAGE>
LEASE
THIS LEASE, made as of the date specified in the Basic Lease Information, by and
between the landlord specified in the Basic Lease Information ("Landlord"), and
the tenant specified in the Basic Lease Information ("Tenant"),
ARTICLE 1
Premises
1.1 Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord,
for the term and subject to the covenants hereinafter set forth, to all of which
Landlord and Tenant hereby agree, the building specified in the Basic Lease
Information (the "Premises") containing sixty three thousand two hundred twenty-
five (63,225) square feet of space, which includes the lath and which the
Premises are located and the improvements thereon.
ARTICLE 2
Term
2.1 The term of this Lease shall be eleven (11) years commencing on the Closing
Date as specified in that certain Purchase Agreement between Tenant and
Brutten/Reynolds/Shidler Investment Corporation dated August 12, 1996 (the
"Commencement Date") and, unless sooner terminated as hereinafter provided,
shall end on the day prior to the eleventh anniversary of the Commencement
Date (the "Expiration Date"). Within thirty (30) days after the
determination of the Commencement Date, Landlord and Tenant shall execute a
memorandum acknowledging the Commencement Date ant the Expiration Date.
2.2 If the Commencement Date is not the first day of a calendar month, Tenant
shall pay to Landlord, as additional rent, the Base Rent payable under section
3.1, calculated on a per diem basis, for the period from the Commencement Date
until the first day of the next full calendar month. Tenant shall pay the
Base Rent in respect of such period to Landlord on the Commencement Date.
2.3 Tenant shall accept the Premises "as is" on the Commencement Date. Landlord
shall have no obligation to constrict or install any improvements in the
Premises. Tenant acknowledges that, prior to the Commencement Date, Tenant
occupied the Premises. Tenant's possession of the Premises shall constitute
Tenant's acknowledgment that the Premises are h all respects in the
condition in which Landlord is required to deliver the Premises to Tenant under
this Lease and that Tenant has examined the Premises and is fully informed to
Tenant's satisfaction of the physical and environmental condition and the
utility of the Premises. Tenant acknowledges that Landlord, its agents and
employees and other persons acting on behalf of Landlord have made no
representation or warranty of any kind in connection with any matter
relating to the physical or environmental condition, value, fitness, use or
zoning of the Premises upon which Tenant has relied directly or indirectly
for any amount.
ARTICLE 3
Rent
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<PAGE>
3.1 Tenant shall pay to Landlord the following amounts as rent for the Premises:
(a) During the period between the Commencement Date ant the last day of the
twelfth full calendar month thereafter, Tenant shall pay to Landlord, as base
monthly rent, the amount of monthly rent specified in the Basic Lease
Information (the Base Rent"); provided that Tenant shall not be obligated to pay
Base Rent for the first four (4) months of the Lease Term. Commencing on the
first day of the thirteenth full calendar month after the Commencement Date, and
on each anniversary of that date thereafter (including during all renewal terms
if any), the Base Rent shall be increased every one (1) year on the anniversary
of the Commencement Date, either (I) in accordance with the increase in the
United States Department of Labor, Bureau of Labor Statistics, Consumer Price
Index for Urban Wage Earners and Clerical Workers (all items for the Los
Angeles-Long Beach statistical area on the basis of 1982-84=100) (the "Index"),
as provided in Section 3.1(b).
(b) The Base Rent shall be increased at the times specified in Subsection 3.
l(a) above, in proportion to the increase in the Index which has occurred
between the month which is three months prior to the first month of the Term`,
or the previous adjustment date, as applicable, and the month which is three
months prior to the month in which the rent is to be increased. Landlord shall
notify Tenant of each increase by delivering a written statement setting forth
the Index for the month which is three months prior to the first month of the
Term, the index for the month which is three months prior to the month in which
the Base Rent is to be increased, the percentage increase between those two
indices, and the new amount of the Base Rent. In no event shall any increase in
Base Monthly Rent under this paragraph 3.1(a) be more than seven percent (7X) or
less than three percent (3%) of the amount of the Base Rent payable during the
immediately preceding twelve (12) months of the Term. Tenant shall pay the new
Base Rent from its effective date until the next periodic increase. Landlord's
notice may be given after the elective date of the increase since the Index for
the appropriate month may be unavailable on the effective date. In such event,
Tenant shall pay Landlord the necessary rental adjustment for the months elapsed
between the effective date of the increase and Landlord's notice of such
increase within ten days after Landlord's notice. If the combat or components of
the Index are materially changed after the Commencement Date of Lease, 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 Date of Lease. Landlord shall notify Tenant of the substituted index, which
shall be used to calculate the increase in the Base Rent. In making such
calculations, no effect shall be given to existing rent concessions or
abatements (if any).
(c) Throughout the term of this Lease, Tenant shall pay, as additional rent, all
other amounts of money and charges required to be paid by Tenant under this
Lease, whether or not such amounts of money or charges are designated
"additional rent.. As used in this Lease, "rent" shall mean and include all Base
Rent and additional rent payable - by Tenant in accordance with this Lease.
3.2 It is the intention of Landlord and Tenant that the Base Rent payable by
Tenant to Landlord during the entire term of this Lease shall be absolutely net
of all costs and expenses incurred in connection with the management, operation,
maintenance, repair and replacement of the Premises in accordance with this
Lease. Landlord shall have no obligations or inability's whatsoever with respect
to the management, operation maintenance, repair or replacement of the Premises
during the term of this Lease, ant Tenant shall manage, operate, maintain,
repair and replace the Premises in accordance with this Lease and shall pay all
costs and expenses incurred in connection therewith before such costs or
expenses become delinquent. Without limiting the generalist of the foregoing,
throughout the entire term of this Lease, Tenant shall pay, as
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<PAGE>
additional rent, all premiums for all property and liability insurance covering
the Premises carried by Tenant, all Property Taxes (as defined in section 4.1)
and all Other Taxes (as defined in section 5.1 ) that accrue during or are
allocable to the term this Lease.
3.3 Tenant shall pay all Base Rent to Landlord, in advance; on or before the
first day of each and every calendar month during the term of this Lease. Tenant
shall pay all additional rent upon demand. Tenant shall pay all rent to Landlord
without notice, demand, deduction or offset, in lawful money of the United
States of America, at the address of landlord specified in the Basic Lease
Information, or to such other person or at such other place as Landlord may from
time to tone designate in writing.
3.4 Tenant acknowledges that the late payment by Tenant of any Base Rent or
additional rent (including the items described in section 3.2) will cause
Landlord to incur costs and expenses, the exact amount of which is extremely
difficult and impractical to fix. Such costs and expenses will include
administration and collection costs and processing and accounting expenses.
Therefore, if any Base Rent or additional rent is not received by Landlord
within five (5) days after it is due, Tenant shall immediately pay to Landlord a
late charge equal to one and one-half percent (1 1/2%) of such delinquent
amount. Landlord and Tenant agree that such late charge represents a reasonable
estimate of such costs and expenses arid is fair compensation to Landlord for
the loss suffered by Tenant's failure to make timely payment. In no event shall
such late charge be deemed to grant to Tenant a grace period or extension of
time within which to pay any rent or prevent Landlord from exercising any right
or enforcing any remedy available to Landlord upon Tenant's failure to pay all
rent due under this Lease in a timely fashion including the right to terminate
this Lease. All amounts of money payable by Tenant to Landlord hereunder, if not
paid when due, shall bear interest from the date delinquent until paid at the
rate often percent (10%) per annum but in no event in excess of the maximum
annual interest rate allowed by law for business loans (not primarily for
personal, family or household purposes) not exempt from theusury law at such
delinquency date.
3.5 Tenant has deposited with Landlord the sum of Thirty Seven Thousand Three
Hundred Two and 75/100 t$37.302.75). as the security deposit ("Security
Deposit". The Security Deposit shall be held by Landlord as security for the
faithful performance by Tenant of all the terms. covenants and conditions of
this Lease to be kept and performed by Tenant during the Term. If Tenant
defaults with respect to any provision of this Lease. including. but not limited
to. the provisions relating to the Payment of rentals or the condition of the
Premises upon the termination of the Lease. Landlord may (but shall not be
required to use. apply or retain all or any part of the Security Deposit for
the payment of any rent or any other sum in default. or for the payment of any
amount that Landlord may spend or become obligated to spend by reason of
Tenant's default. or to compensate Landlord for any other loss or damage hat
Landlord may suffer by reason of Tenant's default. If any portion of the
Security Deposit is so used or applied. Tenant shall. within five (5) days after
written demand therefor. deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount, and Tenant's failure to do
so shall be a material breach of this Lease. Landlord shall not be required to
keep the Security Deposit separate from its general funds. and Tenant shall not
be entitled to interest on the Security Deposit. Landlord is not a trustee of
the Security Deposit and may use it in ordinary business. transfer it or assign
it. or use it in any combination of such ways. If Tenant fully and faithfully
performs every provision of this Lease to be performed by it. the remaining
Portion of the Security Deposit shall be returned to Tenant (or. at Landlord's
option. to the last assignee of Tenant's interest hereunder) within two (21
weeks After the termination of the Lease and Tenant's vacation of the Premises:
provided. however. if any portion of the Security Deposit is to be applied to
repair damage to the Premises caused by Tenant or Tenant's agents. contractors
or assigns or to clean the Premises. then the balance of the Security Deposit
shall be resumed to Tenant (or. at Landlord's option. to the last assignee of
Tenant's interest hereunder) no later than thirty (30) days from the date when
Landlord receives possession of the Premises. Tenant shall
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<PAGE>
not transfer or encumber the Security Deposit. nor shall Landlord be bound by
attempt to do so. If Landlord's interest in this Lease is terminated. Landlord
may transfer the Security Deposit to Landlord's successor in interest. and upon
such transfer Landlord shall be released from any liability to Tenant with
respect to the Security Deposit. and Tenant shall look only to the transferee
for any return of the Security Deposit to which Tenant may be entitled.
ARTICLE 4
Property Taxes
4.1 "Property Taxes" shall mean all taxes, assessments, excises, levies, fees
and charges (and any tax, assessment, excise, levy, fee or charge levied wholly
or partly in lieu thereof or as a substitute therefor or as an addition thereto)
of every kind and description, general or special, ordinary or extraordinary,
foreseen or unforeseen, secured or unsecured, whether or not now customary or
within the contemplation of Landlord and Tenant, that are levied, assesses,
charged, confined or imposed by any public or government authority on or
against, or otherwise with respect to, the Premises or any part thereof or any
personal property used in connection with the Premises. Property Taxes shall not
include net income (measured by the income of Landlord from all sources or from
sources other than solely rent), franchise, inheritance or capital stock taxes
of Landlord, unless levied or assessed against Landlord in whole or in part in
lieu of, as a substitute for, or as an addition to any Property Taxes.
ARTICLE 5
Other Taxes
5.1 Other Taxes" shall mean all taxes, assessments, excises, levies, owner's
association dues or similar charges, fees and charges, including all payments
related to the cost of providing facilities or services, whether or not now
customary or within the contemplation of Landlord and Tenant, that are levied,
assessed, charged, confirmed or imposed by any public or government authority
upon, or measured by, or reasonably attributable to (a) the Premises, (b) the
cost or value of Tenant's equipment, furniture, pictures and other personal
property located in the Premises or the cost or value of any leasehold
improvements made in or to the Premises by or for Tenant, regardless of whether
title to such improvements is vested in Tenant or Landlord, (c) any rent payable
under this Lease, including any gross income tax or excise tax levied by any
public or government authority with respect to the receipt of any such rent, (d)
the possession, leasing, operation, management, maintenance, alteration, repair,
replacement, use or occupancy by Tenant of the Premises, or (e) this transaction
or any document to which Tenant is a party creating or transferring an interest
or an estate in the Premises. Other Taxes shall not include net income (measured
by the income of Landlord from all sources or from sources other than solely
rent), franchise, inheritance or capital stock taxes of Landlord, unless levied
or assessed against Landlord in whole or in part in lieu of, as a substitute
for, or as an addition to any Other Taxes.
ARTICLE 6
Use
6.1 The Premises shall be used only for the purpose specified in the Basic Lease
Information and no other purpose without Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed; provided, however,
Landlord's withholding of consent shall be conclusively presumed reasonable if
the proposed use would materially increase the wear
-4-
<PAGE>
and tear on or the risk of damage to the Premises above levels or aisles
resulting from Tenant's use as of the date of this Lease or the proposed use is
for an illegal, immoral or disreputable purpose. Tenant shall not do or permit
to be done in, on or about the Premises, nor bring or keep or permit to be
brought or kept therein anything which is prohibited by or will in any way
conflict with any law, ordinance, rule, regulation or order now in force or
which may hereafter be enacted, or which is prohibited by any insurance policy
for the Premises, or will in any cause a cancellation or reduction of any
insurance for the Premises. Tenant shall not do or permit anything to be done
in, on or about the Premises which will in any way obstruct or interfere with
the rights of Landlord. Tenant shall not maintain or permit any nuisance in, on
or about the Premises or commit or suffer to be committed any waste in, on or
about the Premises.
ARTICLE 7
Services
7.1 Tenant shall, at Tenant's sole cost and expense, supply the Premises with
electricity, heating, ventilating and air conditioning, water, natural gas,
lighting replacement for all lights, restroom supplies, telephone service,
window washing, security service, janitor, scavenger and disposal services, and
such other services as Tenant determines to furnish In the Premises. Landlord
shall not be in default hereunder or be liable for any damage or loss directly
or indirectly resulting from, nor shall the rent be abated or a constructive or
other eviction be teemed to have occurred by reason of, the installation, use or
interruption of use of any equipment in connection with the furnishing of any of
the foregoing services, any failure to furnish or delay in furnishing any such
services, whether such failure or delay is caused by accident or any condition
beyond the control of Landlord or Tenant or by the making of repairs or
improvements to the Premises, or any limitation, curtailment, rationing or
restriction on use of water, electricity, gas or any form of energy serving the
Premises, whether such results from mandatory governmental restriction or
voluntary compliance with governmental guidelines. Tenant shall pay the full
cost of all of the foregoing services as additional rent.
ARTICLE 8
Maintenance and Repairs: Capital Improvements
8.1 Tenant shall, at all times during the term of this Lease and at Tenant's
sole cost and expense, maintain, repair and replace the Premises and every part
thereof and all grounds, landscaping, parking areas, lighting, roof, walls,
floors, foundations, signs, heating, ventilating and air conditioning,
mechanical, electrical, plumbing, sprinkler ant life safety systems, equipment,
fixtures, alterations, additions and improvements therein or thereon and keep
all of the foregoing clean and in good order and operating condition (including
painting the exterior of the Premises as open as reasonably needed to keep such
exterior in a good, well painted condition, cleaning interior and exterior
doors, windows and glass, and repairing and replacing any exterior windows and
glass that is broken, cracked or damaged). Tenant shall engage a duly licensed
independent contractor to perform all maintenance and repair services on all
heating, ventilating and air conditioning, mechanical, electrical, plumbing,
sprinkler and life safety systems and equipment in the Premises that is to be
performed by Tenant in accordance with this section 8.1. Landlord and its
consultants or contractors shall have the right to inspect the Premises to
determine Tenant's compliance with this section 8.1, and Tenant shaft promptly
complete any work required by Landlord or its consultants or contractors as a
result of any such inspection pursuant to the terms of this Lease. Tenant hereby
waives all rights to make repairs at the expense of Landlord or in lieu
thereafter vacate the Premises. Subject to section 9.3, Tenant shall, at the end
of the term of this Lease, surrender to Landlord the' Premises and all
alterations, Guidons, fixtures and
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improvements therein or thereto in the same condition as when received, ordinary
wear and tear and damage thereto by fire or other casualty excepted.
Notwithstanding anything in the foregoing to the contrary, Tenant shall only be
obligated to pay a prorate portion of any capital improvements (including
replacements of capital items) determined by dividing the number of years
remaining in the term of the Lease at the date of the improvement (or
replacement) by the number of years of useful life of such improvement (or
replacement). In making the calculation required by the preceding sentence, the
term of any unexplored options to extend the Lease contained herein shall not be
included, provided that upon Tenant validly exercising any such options, said
calculation shall be remade including the term of such validly exercised options
and Tenant shall pay Landlord immediately upon demand any sums owing to Landlord
as a result of such recalculation.
ARTICLE 9
Alterations
9.1 Except of the improvements currently being made by Tenant at the Premises,
which have been approved by Landlord, Tenant shall not make any alterations,
additions or improvements in or to the Premises or any part thereof, or attach
any fixtures or equipment thereto, without Landlord's prior written consent.
Notwithstanding the preceding sentence, Tenant may make such alterations,
additions or improvements without Landlord's consent only if the total cost of
such alterations, additions or improvements in any twelve (12) month period does
not exceed seventy five thousand dollars (S75,000) and such alterations,
additions or improvements will not affect in any way the structural, exterior or
roof elements of the Premises or mechanical, electrical, plumbing, utility or
life safety systems of the Premises, but Tenant shall give prior written notice
of any such alterations, additions or improvements to Landlord. In no event
shall Tenant be permitted to install underground storage tanks or fuel systems
on the Premises. Landlord's refusal to consent to the installation of an
underground tank or fuel system shall be conclusively presumed to be reasonable.
All alterations, additions and improvements in or to the Premises to which
Landlord's consent is required shall be made by Tenant at Tenant's sole cost and
expense as follows:
(a) Tenant shall submit to Landlord, for Landlord's written approval, complete
plans and specifications for all work to be done by Tenant. Such plans and
specifications shall be prepared by the licensed architect(s) and engineer(s),
shall comply with all applicable codes, laws, ordinances, rules and regulations,
shall not adversely affect the structural elements of the Premises, shall be in
a form sufficient to secure the approval of all government authorities with
jurisdiction over the Premises, and shall be otherwise satisfactory to Landlord
in Landlord's reasonable discretion.
(b) Landlord shall notify Tenant promptly in writing whether Landlord approves
or disapproves such plans and specifications and, if Landlord disapproves such
plans and specifications, Landlord shall describe the reasons for disapproval.
Tenant may submit to Landlord revised plans and specifications for Landlord's
prior written approval. Tenant shall pay all costs, including the fees and
expenses of the licensed architect(s) and engineer(s), in preparing such plans
and specifications.
(c) All changes in the plans and specifications approved by Landlord shall be
subject to Landlord's prior written approval. If Tenant wishes to make any such
change in such approved plans and specifications, Tenant shall have such
architect(s) and engineer(s) prepare plans and specifications for such change
and submit them to Landlord for Landlord's written approval. Landlord shall
notify Tenant in writing promptly whether Landlord approves or disapproves such
change and, if Landlord disapproves such change, Landlord shall describe the
reasons for disapproval. Tenant may submit to Landlord
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revised plans and specifications for such change for Landlord's Striven
approval. After Landlord's written approval of such change, such change shall
become part of the plans and specifications approved by Landlord.
(d) Tenant shall obtain and comply with all building permits and other
governmental permits and approvals required in connection with the work. Tenant
shall, through Tenant's licensed contractor, perform the work substantially in
accordance with (i) the plans ant specifications approved in writing by
Landlord, (ii) the permits obtained by Tenant, and (iii) all applicable codes,
laws, ordinances, rules and regulations. Tenant shall pay, as additional rent,
the entire cost of all work (including the cost of all utilities, permits, fees,
taxes, and property and Liability insurance premiums in connection therewith)
required to make the alterations, additions and improvements. Under no
circumstances shall Landlord be liable to Tenant for any damage, loss, cost or
expense incurred by Tenant on account of any plans and specifications,
contractors or subcontractors, design of any work, construction of any work, or
delay in completion of any work.
(e) Tenant shall give written notice to Landlord of the date on which
construction of any work u ill be commenced at least ten (10) days prior to such
date. Tenant shall keep the Premises free from mechanics, materialmen's and all
other liens arising out of any work performed, labor supplied, materials.
furnished or other obligations incurred by Tenant. Tenant shall promptly and
fully pay and discharge all claims on which any such lien could be based.
Landlord shall have the right to post and keep posted on the Premises any
notices that may be provided by law or which Landlord may deem to be proper for
the protection of Landlord and the Premises from such liens, and to take any
other action Landlord deems necessary to remove or discharge liens or
encumbrances at the expense of Tenant.
9.2 All alterations, additions, fixtures and improvements, whether temporary or
permanent in character, made in or to the Premises by Landlord or Tenant, shall
become part of the Premises and Landlord's property excluding, however,
underground tanks which shall remain the property of Tenant and shall be
registered in the name of Tenant so long as this Lease remains in effect. Upon
termination of this Lease, Landlord shall have the right, at Landlord's option,
by giving written notice to Tenant at any time before or within ten (10) days
after such termination, to retain all such alterations, additions, fixtures and
improvements in the Premises without compensation to Tenant, or to require
Tenant to remove all such alterations, additions, fixtures and improvements from
the Premises, repair all damage caused by any such removal, and restore the
Premises to the condition in which the Premises existed before such alterations,
additions, fixtures and improvements were made; provided that Tenant shall not
be required to remove any alterations, additions, fixtures or improvements that
Landlord has agreed, at the time such items were installed in the Premises, may
remain in the Premises. All movable furniture, equipment, trade fixtures and
other personal property shall remain the property of Tenant. Upon termination of
this Lease, Tenant shall, at Tenant's expense, remove all such movable
furniture, equipment, trade closures other personal property from the Premises
and repair all damage caused by any such removal. Termination of this Lease
shall not affect the obligations of Tenant pursuant to this section 9.2 to be
performed after such termination.
ARTICLE 10
Insurance
10.1 Landlord shall not be liable to Tenant for any damage to or loss or theft
of any property or for any bodily or personal injury, illness or death of any
person in, on or about the
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Premises arising at any time and from any cause whatsoever, except to the
extent caused by the active negligence or willful misconduct of Landlord.
Tenant waives all claims against Landlord arising from any liability
described in this section 10.1, except to the extent caused by the active
negligence or willful misconduct of Landlord.
10.2 Tenant shall indemnify defend Landlord against and hold Landlord
harmless from all claims, demands, liabilities, damages, losses, costs and
expenses, including reasonable attorney's' fees and disbursements, arising
from or related to any use or occupancy of the Premises, or any default in
the performance of Tenant's obligations, or any damage to any property
(including property of employees and invitees of Tenant) or any bodily or
personal injury, illness or death of any person (including employees and
invitees of Tenant) occurring in, on or about the Premises or any part
thereof or any part of the building or the land containing the Premises
arising at any time and from any cause whatsoever (except to the extent
caused by the active negligence or willful misconduct of Landlord) or
occurring outside the Premises when such damage, bodily or personal injury,
illness or death is caused by any act or omission of Tenant or its agents,
officers, employees, contractors, invitees or licensees. This section 10.2
shall survive the termination of this Lease with respect to any damage,
bodily or personal injury, illness or death occurring prior to such
termination.
10.3 Tenant shall, at all times during the term of this Lease and at
Tenant's sole cost and expense, obtain and keep in force comprehensive
general liability insurance, including contractual liability (specifically
covering this Lease), and premises operations, all on an "occurrence" policy
Bonn, with a minimum combined single limit in the amount specified in the
Basic Lease Information per occurrence for bodily or personal injury to,
illness of, or death of persons and damage to property occurring in, on or
about the Premises, such insurance shall name the Landlord and any other
parties designated by Landlord as additional insured. Tenant shall, at
Tenant's sole cost and expense, be responsible for insuring Tenant's
furniture, equipment, fixtures, computers, office machines and personal
property.
10.4 Tenant shall, at all times during the term of this Lease and at
Tenant's sole cost and expense, obtain and keep in force worker's
compensation and employer's liability insurance in all states in which the
Premises and any other operations of the Tenant are located and any other
state in which the Tenant or its contractors or subcontractors may be
subject to any statutory or other liability arising in any manner whatsoever
out of the actual or alleged employment of others. The total limits of the
employer's liability coverage required hereunder shall not be less than the
amounts specified in section 10.3.
10.5 Tenant shall, at all times tuning the term of this Lease, at such
party's sole cost and expense, obtain and keep in force (a) insurance against
loss or damage to the Premises by fire and all other risks of physical loss
covered by insurance of the type now known as "special form," in an amount
not less than. the full replacement cost of the Premises (without seduction
for depreciation), including the cost of debris removal and such endorsements
as Landlord may reasonably require, and containing the Replacement Cost
Endorsement"; (b) boiler and machinery insurance covering pressure vessels,
air tanks, boilers, machinery, pressure piping, heating, ventilation and air
conditioning equipment, and elevator and escalator equipment, provided the
Premises contain equipment of such nature and against loss of occupancy or
use arising from any of any such items, in such amounts as Landlord may
determine; and (e) plate glass Insurance in such amount as Landlord may
reasonably determine if the Premises contain plate glass.
10.6 All insurance required to be maintained by Tenant under this Article
10 and all renewals thereof shall be issued by good and responsible companies
qualified to do and doing business in the state where the Premises are
located and having a rating in Best's Insurance Guide of at least A-XI. All
deductible amounts under each such insurance policy shall be subject to
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Landlord's prior written approval. Each policy to be maintained by Tenant shall
expressly provide that the policy shall not be canceled or the policy limit or
conditions reduced without thirty (30) says' prior written notice to Landlord.
All insurance under this Article 10 to be maintained by Tenant, excluding
workers compensation and employer's liability insurance shall name Landlord and
any other parties designated by Landlord as an additional insured, shall be
primary and noncontributing with any insurance which may be carried by Landlord,
shall afford coverage for all claims based on any act, omission, event or
condition that occurred or arose (or the onset of which occurred or arose)
during the policy period, and shall expressly provide that Landlord, although
named as an additional insured, shall nevertheless be entitled to recover under
the policy for any loss, injury or damage to Landlord. Upon the issuance of each
such policy to be maintained by Tenant, Tenant shall deliver each such policy or
a certified copy ant a certificate thereafter landlord for retention by
Landlord. If Tenant fails to insure or fails to furnish to Landlord upon notice
to do so any policy to be maintained by Tenant or certified copy and certificate
thereof as required, Landlord shall have the right from time to time to effect
such insurance for the benefit of Tenant or Landlord or both of them and all
premiums paid by Landlord shall be payable by Tenant as additional rent on
demand. Tenant shall pay to Landlord, immediately upon demand all costs incurred
by Landlord as a result of Tenant's failure to obtain and maintain in effect the
policies of insurance required under this Article 10.
10.7 Tenant waives on behalf of all insurers under all policies of property,
liability and other insurance (excluding workers' compensation) now or hereafter
earned by Tenant insuring or covering the Premises, or any portion or any
contents thereof, or any operations therein, all rights of subrogation which any
insurer Bright otherwise, if at all, have to any claims of Tenant against
Landlord. Landlord waives on behalf of all insurers under all policies of
property, liability and other insurance (excluding workers' compensation and
employers liability insurance) now or hereafter carried by Landlord insuring or
covering the Premises or any portion or any contents thereof, or any operations
therein, all rights of subrogation which any insurer might otherwise, if at all,
have to any claims of Landlord against Tenant. Tenant shall, prior to or
immediately after the date of this Lease, procure from each of the insurers
under all policies of property, liability and other insurance (excluding
workers' compensation) now or hereafter carried by Tenant insuring or covering
the Premises, or any portion or any contents thereof, or any operations therein,
a waiver of all rights of subrogation which the insurer might otherwise, if at
all, have to any claims of Tenant against Landlord as required by this section
10.6.
ARTICLE 11
Compliance With Legal Requirements
11.1 Tenant shall, at Tenant's sole cost and expense, promptly comply with all
laws, ordinances, rules, regulations, orders and other requirements of any
government or public authority now in force or which may hereafter be in force,
with all requirements of any board of fire underwriters or other similar body
now or hereafter constituted, and with all directions and certificates of
occupancy issued pursuant to any law by any governmental agency or officer,
insofar as any to or are required by the condition, use or occupancy of the
Premises or the operation, use or maintenance of any personal property, figures,
machinery, equipment or improvements in the Premises.
ARTICLE 12
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Assignment or Sublease
12.1 Tenant shall not, directly or indirectly, without the prior written consent
of Landlord (which consent shall not be unreasonably withheld), assign this
Lease or any interest herein or sublease the Premises or any part thereof, or
permit the use or occupancy of the Premises by any person or entity other than
Tenant; provided, however, Landlord's withholding of consent shall be
conclusively presumed reasonable if: (a) the financial condition of the proposed
transferee is not suitable to perform the obligations being assumed by it
hereunder; or (b) the proposed use of the Premises (i) is not permitted
hereunder or under any legal and other requirements described in Article 11, or
(ii) would materially increase the wear and tear on or the risk of damage to the
Premises above levels or risks resulting from Tenant's use as of the date of
this Lease, or (iii) is for any illegal, immoral or disreputable purpose. This
Lease shall not, nor shall any interest herein, be assignable as to the interest
of Tenant involuntarily or by operation of law without the prior written consent
of Landlord. Any of the foregoing acts without such prior written consent of
Landlord shall be void and shall, at the option of Landlord, constitute a
default that entitles Landlord to terminate this Lease. Tenant agrees that the
instrument by which any assignment or sublease to which Landlord consents is
accomplished shall expressly provide that the assignee or subtenant will perform
all of the covenants to be performed by Tenant under this Lease (in the case of
a sublease, only insofar as such covenants relate to the portion of the Premises
subject to such sublease) as and when performance is due after the effective
date of the assignment or sublease and that Landlord will have the right to
enforce such covenants directly against such assignee or subtenant. Any
purported assignment or sublease without an instrument containing the foregoing
provisions shall be void. Tenant shall in all cases remain liable for the
performance by any assignee or subtenant of all such covenants.
12.2 If Landlord consents in writing, Tenant may complete the intended
assignment or sublease subject to the following covenants: (a) no assignment or
sublease shall be valid and no assignee or subtenant shall take possession of
the Premises or any part thereof until an executed duplicate original of such
assignment or sublease, in compliance with section 12.1, has been delivered to
Landlord, and (b) no assignee or subtenant shall have a right further to assign
or sublease without Landlord's consent.
12.3 No assignment or sublease whatsoever shall release Tenant from Tenant's
obligations and liabilities under this Lease or alter the prawns liability of
Tenant to pay all rent ant to person all obligations to be paid and performed by
Tenant. The acceptance of rent by Landlord from any other person or entity shall
not be deemed to be a waiver by Landlord of any provision of Ws Lease. Consent
to one assignment or sublease shall not be deemed consent to any subsequent
assignment or sublease. If any assignee, subtenant or successor of Tenant
defaults in the performance of any obligation to be performed by Tenant under
this Lease, Landlord may proceed directly against Tenant without the necessity
of exhausting remedies against such assignee, subtenant or successor. Landlord
may consent to subsequent assignments or subleases or amendments or
modifications to this Lease with assignees, subtenants or successors of Tenant,
without notifying Tenant or any successor of Tenant and without obtaining any
consent thereto from Tenant or any successor of Tenant, and such action shall
not release Tenant from liability under this Lease.
ARTICLE 13
Entry by Landlord
13.1 Landlord shall have the right to enter the Premises during normal
business hours and look upon 24 hours notice to Tenant, except in an emergency,
to (a) inspect the Premises, (b) exhibit the Premises to prospective purchasers,
lenders or tenants, (c) determine whether Tenant is
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performing all of Tenant's obligations, (d) perform any obligations of Tenant in
accordance with section 14.5, (e) post notices of nonresponsibility, "For sale"
and "For lease" signs in and about the Premises, (f) make any repairs to the
Premises ant (g) investigate ant perform tests to determine Tenant's compliance
with Article 21. Tenant waives all claims for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises or any other loss occasioned by such entry.
If Landlord removes any existing underground tanks ant fueling system from the
Premises, Landlord shall have no obligation to replace them or provide alternate
tanks or a fueling system. Landlord shall at all times have a key to unlock all
such doors and Landlord shall have the right to use any ant all means winch
Landlord may teem proper to open such doors in an emergency to obtain entry to
the Premises. Any entry to the Premises obtained by Landlord by any of such
means shall not under any circumstances be construed or teemed to be a forcible
or unlawful entry into or a detainer of the Premises or an eviction, actual or
constructive, of Tenant from the Premises or any portion thereof, provided,
however, Landlord shall minimize any interference with Tenant's operations.
ARTICLE 14
Events of Default and Remedies
14.1 The occurrence of any one or more of the following events ("Event of
Default") shall constitute a breach of this Lease by Tenant.
(a) Tenant fails to pay any Base Rent within five (5) days after such rent
becomes due; or
(b) Tenant fails to pay any additional rent or other amount of money or charge
payable by Tenant hereunder as ant when such additional rent or amount or charge
becomes due and payable and such failure continues for more than ten (10) days
after Landlord gives written notice thereof to Tenant; provided, however, that
after the second such failure in a calendar year, only the passage of time, but
no funkier notice, shall be required to establish an Event of Default h the same
calendar year, unless Tenant would not know that such payment were due without
notice; or
(c) Tenant fails to perform or breaches any other agreement or covenant of this
Lease to be performed or observed by Tenant as and when performance or
observance is due ant such failure or breach continues for more than thirty (30)
days after Landlord gives written notice thereof to Tenant; provided, however,
that if by the nature of such agreement or covenant, such failure or breach
cannot reasonably be cured within such period of thirty (30) days, an Event of
Default shall not exist as long as Tenant commences with due diligence and
dispatch the curing of such failure or breach within such period of thirty (30)
days and, having so commenced, thereafter prosecutes with diligence and dispatch
and completes the curing of such failure or breach within a reasonable time; or
(d) Tenant (i) files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy, insolvency or other debtors, relief law of any jurisdiction, Eli)
makes an assignment for the benefit omits creditors,) consents to the
appointment of a custodian, receiver, trustee or other officer with similar
powers of Tenant or of any substantial part of Tenant's property, or TV) takes
action for the purpose of any of the Foregoing; or
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(e) Without consent by Tenant, a court or government authority enters an order,
and such order is not vacated within sixty (60) days, (i) appointing a
custodian, receiver, trustee or other officer with similar powers with respect
to Tenant or with respect to any substantial part of Tenant's property, or (u)
constituting an order for relief or approving a petition for relief or
reorganization or arrangement or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy, insolvency or other debtors'
relief law of any jurisdiction, or (iii) ordering the dissolution, winding-up or
liquidation of Tenant; or
(f) This Lease or any estate of Tenant hereunder is levied upon under any
attachment or execution and such attachment or execution is not vacated within
sixty (60) days; or
(g) Tenant abandons the Premises.
14.2 If an Event of Default occurs, Landlord shall have the right at any time to
give a written termination notice to Tenant and, on the date specified in such
notice, Tenant's right to possession shall terminate and this Lease shall
terminate. Upon such termination, Landlord shall have the right to recover from
Tenant:
(a) The worth at the time of award of all unpaid rent which had been earned at
the time of termination;
(b) The worth at the time of award of the amount by which all unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that Tenant proves could have been reasonably
avoided;
(c) The worth at the time of award of the amount by which all unpaid rent for
the balance of the term of this Lease after the time of award exceeds the amount
of such rental loss that Tenant proves could be reasonably avoided; and
(d) All other amounts necessary to compensate Landlord for all the detriment
approximately caused by Tenant's failure to perform all of Tenant's obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom. The "worth at the time of award" of the amounts referred to in
clauses (a) and (b) above shall be computed by allowing interest at the rate
often percent (10%) per annum but not greater than the maximum annual interest
rate allowed by law for business loans (not primarily for personal, family or
household purposes) not exempt from the assume law at the time of termination.
The "worth at the time of award" of the amount referred to in clause (c) above
shall be computed by discounting such amount at the discount rate of the Federal
Reserve Bank located nearest the Premises at the time of award plus one percent
(1%). For the purpose of determining unpaid rent under clauses (a), (b) and (c)
above, the rent reserved in this Intense shall be deemed to be the total rent
payable by Tenant under Articles 3 and 5 hereof.
14.3 Even though Tenant has breached this Lease, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right to possession,
and Landlord shall have the right to enforce all its rights and remedies under
this Lease, including the right to recover all rent as it becomes due under this
Lease. Acts of maintenance or preservation or efforts to relet the Premises or
the appointment of a receiver upon initiative of Landlord to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession unless written notice of termination is given by Landlord to
Tenant.
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14.4 The remedies provided for in this Lease are in addition to all other
remedies available to Landlord at law or in equity by statute or otherwise.
14.5 All agreements and covenants to be performed or observed by Tenant under
this Lease shall, except as otherwise expressly provided in this Lease, be at
Tenant's sole cost and expense and without any abatement of rent. If Tenant
fails to pay any sum of money to be pan' by Tenant or to perform any other act
to be performed by Tenant under this Lease, Landlord shall have the right, but
shall not be obligated, ant without waiving or releasing Tenant from any
obligations of Tenant, to make any such payment or to perform any such other act
on behalf of Tenant in accordance with this Lease. All sums so paid by Landlord
and all necessary incidental costs shall be deemed additional rent hereunder ant
shall be payable by Tenant to Landlord on demand, together with interest on all
such sums from the date of expenditure by Landlord to the date of repayment by
Tenant at the rate often percent (10%) per annum but not greater than the
maximum annual interest rate allowed by law for business loans (not primarily
for personal, family or household purposes) not exempt from the usury law at the
date of expenditure. Landlord shall have, in addition to all other rights and
remedies of Landlord, the same rights and remedies in the event of the
nonpayment of such sums plus interest by Tenant as in the case of default by
Tenant in the payment of rent.
14.6 If Tenant abandons or surrenders the Premises, or is dispossessed by
process of law or otherwise, any movable furniture, equipment, trade fixtures or
personal property belonging to Tenant and left in the Premises shall be teemed
to be abandoned, at the option of Landlord, ant Landlord shall have the right to
sell or otherwise dispose of such personal property in any commercially
reasonable manner.
ARTICLE 15
Damage or Destruction
15.1 If the Premises, or any part thereof, is damaged by fire or other casualty
before the Commencement Date or during the term of this Lease, Tenant shall
repair such damage and restore the Premises to substantially the same or better
condition as existed before the occurrence of such fire or other casualty,
Tenant shall repair and replace all such movable furniture, equipment, trade
fixtures and personal property, and this Lease shall remain in full force and
effect. Such repair and replacement by Tenant shall be tone in accordance with
Article 9. In no event shall rent abate. Provided Tenant is not in default under
this Lease (and no event has occurred which, with the passage of time, the
giving of notice, or both, would constitute a default), ant provided Tenant has
(i) delivered to Landlord plans and specifications ant a budget for such repair
and restoration (all of which Landlord shall have approved in its reasonable
judgment), and (ii) deposited with Landlord (or with an insurance company,
either or escrow company mutually acceptable to Landlord and Tenant) cash (or
provided security reasonably satisfactory to Landlord that Tenant will be able
to meet its obligation to pay its share of any repair cost as and when the same
become due) in the sum equal to the excess, if any, of the total cost set forth
in such approved budget over the amount of insurance proceeds received on
account of such casualty, then Landlord shall make available to Tenant all
insurance proceeds actually received by Landlord on account of such casualty,
for application to the costs of such approved repair and restoration. Such
insurance proceeds shall be made available to Tenant pursuant to disbursement
procedures (i) required by any lender with a lien on the Premises, (ii) required
by any insurance company providing such insurance proceeds, provided that the
disbursement control procedures of such insurance company are reasonably
acceptable to Landlord and Tenant, or (iii) if no disbursement control
procedures are required under (i) or (ii), as mutually agreed by Landlord and
Tenant.
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15.2 If the Premises, or any part thereof, is damaged by fire or other casualty
and (a) such fire or other casualty occurs during the last twelve (12) months of
the term of this Lease ant the repair and restoration work to be performed by
Tenant in accordance with section IS. 1 cannot, as reasonably estimated by
Landlord, be completed within two (2) months after the occurrence of such fire
or other casualty, or (b) the insurance proceeds received by Landlord and Tenant
in respect of such carnage are not adequate to pay the entire cost, as
reasonably estimated by Landlord, of the repair and restoration work to be
performed by Landlord in accordance with section 15.1 then either Landlord or
Tenant shall have the right, by giving written notice to the other within sixty
(60) days After the-occurrence of such fire or other casualty, to terminate this
Lease as of the date of such casualty, in which case all insurance proceeds on
account of such casualty shall be paid to Landlord. In the event that the
Landlord elects to terminate the Lease pursuant to this section 15.2 and Tenant
has any unexercised options to extend the term of this Lease pursuant to the
terms ant conditions hereof, the Tenant may within fifteen (15) days of the date
of Landlord's election to terminate notify Landlord of Tenant's exercise of such
option, in which event this Lease shall not terminate and Tenant shall proceed
to rebuilt the Premises in accordance with section 15.1.
ARTICLE 16
Eminent Domain
16.1 If a substantial portion of the Premises is taken and the remaining portion
of the Premises is not reasonably suitable for Tenant's purposes, or if a
portion of the Premises is taken resulting in loss of access to and from the
Premises without reasonable substitute access being available, Landlord and
Tenant each shall have the right, by giving written notice to the other
within thirty (30) days after the date of such taking, to terminate this
Lease. If either Landlord or Tenant exercises such right to terminate this
Lease in accordance with this section 1 6.1, this Lease shall terminate as of
the date of such. If neither Landlord nor Tenant exercises such right to
terminate this Lease in accordance with this section 16.1, this Lease shall
terminate as to the portion of the Promises so taken as of the date of such
taking and shall remain in full force and effect as to the portion of the
Premises not so taken, Tenant shall restore the portion of the Premises not
so taken to an integrated architectural unit in accordance with Article 9
and the Base Rent shall be reduces as of the date of such taking in the
proportion that the rentable area of the Premises so taken bears to the
total rentable area of the Premises. If all of the Premises is taken
by exercise of the power of eminent domain before the Commencement Date or
during the term of this Lease, this Lease shall terminate as of the date of
such taking.
16.2 If all or any part of the Premises is taken by exercise of the power of
eminent domain, all awards, compensation, damages, income, rent and interest
payable in connection with such taking shall, except as expressly set forth in
this section 16.2, be paid to and become the property of Landlord, and Tenant
hereby assigns to Landlord all of the foregoing. Without limiting the generality
of the foregoing, Tenant shall have no claim against Landlord or the entity
exercising the power of eminent domain for the value of the leasehold estate
created by this Lease or any unexplored term of this Lease. Tenant shall have
the right to claim and receive directly from the exercising the power of eminent
domain only the share of any award determined to be owing to Tenant for the
taking of improvements installed in the portion of the Premises so taken by
Tenant at Tenant's sole cost and expense based on the unamortized cost actually
paid by Tenant for such improvements, for the taking of Tenant's movable
furniture, equipment, bate fixtures ant personal property, for loss of goodwill,
for interference with or interruption of Tenant's business, or for removal ant
relocation expenses.
16.3 In the event of any talking unless this Lease is terminated as provided in
section 16.1, this Lease shall continue In full force ant effect, Tenant shall
continue to pay all of the rent
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and to perform all of the covenants of Tenant in accordance with this Lease and
Tenant shall restore the Premises to an integrated architectural unit in
accordance with Article 9. Provided Tenant is not in default under this Lease
(and no event has occurred which, with the passage of time, the giving of
notice, or both, would constitute a default), and provided Tenant has (i)
delivered to Landlord plans and specifications and a budget for such repair and
restoration (all of which Landlord shall have approved in its reasonable
judgment), and (ii) deposited with Landlord cash (or provided security
reasonably satisfactory to Landlord that Tenant will be able to meet its
obligation to pay its share of any repair cost as and when the same become due)
in the sum equal to the excess, if any, of the total cost set forth in such
approved budget over the amount of condemnation award proceeds received on
account of such taking, then Landlord shall make available to Tenant all
condemnation award proceeds actually received by Landlord on account of such
taking, for application to the costs of such approved repair ant restoration.
Such condemnation award proceeds shall be made available to Tenant pursuant to
disbursement procedures (i) required by any lender with a lien on the Premises,
or (ii) if there is no lender with a lien on the Premises that requires such
disbursement control procedures, as mutually agreed by Landlord and Tenant.
16.4 As used in this Article 16, a "taking" means the acquisition of all or part
of the Premises for a public use by exercise of the power of eminent domain (or
a sale of any or all of the Premises in lieu, or under threat, thereof ant the
taking shall be considered to occur as of the earlier of the date on which
possession of the Premises (or part so taken) by the entity exercising the power
of eminent domain is authorizer as stated in an order for possession or the date
on which title to the Premises (or part so taken) vests in the entity exercising
the power of eminent domain.
ARTICLE 17
Subordination. Merger and Sale
17.1 This Lease shall be subject and subordinate at all times to the lien of all
mortgages and deeds of trust securing any amount or amounts whatsoever, ant any
ground lease or master lease of the Premises, which may now exist or hereafter
be placed on or against the Premises or on or against Landlord's interest or
estate therein, all without the necessity of having further instruments executed
by Tenant to effect such subordination. Notwithstanding the foregoing, in the
event of a foreclosure of any such mortgage or deed of trust or of any other
action or proceeding for the enforcement thereof, or of any sale thereunder,
this Lease shall not be terminated or extinguished, nor shall the rights and
possession of Tenant hereunder be disturbed, if no Event of Default then exists
under this Lease, and Tenant shall attend to the person who acquires Landlord's
interest hereunder through any such mortgage or deed of trust. Tenant agrees to
execute, acknowledge and deliver upon demand such further instruments evidencing
such subordination of this Lease to the lien of all such mortgages and deeds of
trust or to all such ground leases or master leases of the Premises as may
reasonably be required by Landlord or Tenant, but Tenant's covenant to
subordinate this Lease to mortgages or deeds of trust, or ground leases or
master leases, hereafter executed is conditioned upon each such senior montage
or teed of trust, or ground lease or master lease, or a separate subordination
agreement, containing the commitments specified in the preceding sentence.
Without limiting the generality of the foregoing, Tenant agrees to enter into a
subordination, nondisturbance an attainment agreement in the form required by
the holder of any such mortgage or teed of trust or by any party to any such
ground lease or master lease.
17.2 The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger and shall, at the option of
Landlord, terminate all or any existing subleases or subtenancies or operate as
an assignment to Landlord of any or all subleases or subtenancies.
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17.3 If the original Landlord hereunder, or any successor owner of the Premises,
sells or conveys the Premises, all liabilities and obligations on the part of
the original Landlord, or such successor owner, under this Lease accruing after
such sale or conveyance shad terminate and the original Landlord, or such
successor owner, shall automatically be released therefrom, and thereupon all
such liabilities and obligations shall be binding upon the new owner. Tenant
agrees to attain to such new owner.
ARTICLE 18
Estoppel Certificate
18.1 At any time and from time to time, Tenant shall, within ten (10) days after
written request by Landlord, execute, acknowledge and deliver to Landlord a
certificate, in the form attached as Exhibit A, certifying: (a) that this Lease
is unmodified and in full force and effect (or, if there have been
modifications, that this Lease is in full force and effect as modified, ant
stating the date and nature of each modification); (b) the Commencement Date and
the Expiration Date determined in accordance with Article 2 and the date, if
any, to which all rent and other sums payable hereunder have been paid; (c) that
no notice has been received by Tenant of any default by Tenant hereunder which
has not been cured, except as to defaults specified in such certificate; (d)
that Landlord is not in default under this Lease, except as to defaults
specified in such certificate; and (e) such other matters as may be reasonably
requested by Landlord or any actual or prospective purchaser or mortgage lender.
Any such certificate may be relied upon by Landlord and any actual or
prospective purchaser or mortgage lender of the Premises or any part thereof.
ARTICLE 19
Holding Over
19.1 If, without objection by Landlord, Tenant holds possession of the Premises
after expiration of the term of this Lease, Tenant shall become a tenant from
month to month upon the teens herein specified but at a Base Rent equal to the
rent previously due under this Lease or such other Base Rent as Landlord and
Tenant may agree. If Tenant holds possession of the Premises after expiration of
the term of this Lease over Landlord's objection, Tenant shall have no
continuing right to occupy the Premises but shall pay for any such period after
the expiration of this Lease that Tenant occupies the Premises a Base Rent equal
to two hundred percent (200%) of the Base Rent in effect at the expiration of
the term of this Lease pursuant to article 3, payable in advance on or before
the first day of each month. Such month to month tenancy may be terminated by
either Landlord or Tenant by giving thirty (30) days' written notice of
termination to the other at any time.
ARTICLE 20
Financial Statements
20.1 On or before April 1 of each year, Tenant shall deliver to Landlord
Tenant's audited financial statements (Financial Statements") for the fiscal
year of Tenant ended on the previous December 31, which Financial Statements
shall include an audited consolidated balance sheet of
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Tenant and its consolidated subsidiaries as at the end of such fiscal year, a
consolidated statement of operations of Tenant and its consolidated subsidiaries
for such fiscal year, and a certificate of Tenant's auditor (which shall be a
recognized national independent accounting firm) to the effect that such
Financial Statements were prepared in accordance with generally accepted
accounting principals consistently applied and fairly present the financial
condition and operations of Tenant and its consolidated subsidiaries for and as
at the end of such fiscal year.
ARTICLE 21
Hazardous Materials
21.1 As used herein, the term "Hazardous Material" means any hazardous or toxic
substance, material or waste, or any pollutant or contaminant, or words of
similar import, which is or becomes regulated by any local governmental
authority, the state in which the Premises are located, or the United States
Government. The term "Hazardous Material" includes, but is not limited to, any
material or substance which is, (i) designated as a "hazardous substance"
pursuant to section 311 of the Federal Water Pollution Control Act (33 U.S.C.
section 1317), (ii) defined as a "hazardous waste" pursuant to section 1004 of
the Pedal Resource Conservation and Recovery Act, 42 U.S.C. section 6901, et
seq. (42 U.S.C. section 6903), (iii) defined as a "hazardous substance" pursuant
to section 101 of the Comprehensive Environmental Response Compensation and
Liability Act (42 U.S.C. section 9601, et seq.), (iv) asbestos, (v) petroleum
(including crude oil or any fraction thereof, natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel, or any mixture
thereof), (vi) petroleum products, (vii) polychlorinated biphenyl, (viii) urea
formaldehyde, (ix) radon gas, (x) radioactive matter, (xi) medical waste, and
(xii) chemicals which may cause cancer or reproductive toxicity.
21.2 As used herein, the term Environmental Requirements" means all laws,
ordinances, rules, regulations, orders and other requirements of any government
or public authority now in force or which may hereafter be in force relating to
protection of human health or the environment, including all requirements
pertaining to reporting, licensing, permitting, investigation and remediation of
emissions, discharges, storage, disposal or releases of Hazardous Materials and
all requirements pertaining to the protection of the health and safety of
employees or the public.
21.3 Tenant shall not permit or conduct the handling, use, generation,
treatment, storage or disposal on, in or about the Premises of any Hazardous
Material in violation of any Environmental.
21.4 Tenant shall, within five (5) days after the receipt thereof, give written
notice to Landlord of any notice or other communication regarding any (a) actual
or alleged violation of Environmental Requirements by Tenant or with respect to
the Premises, (b) actual or threatened migration of Hazardous Material from the
Premises, or (c) the existence of Hazardous Material in or on the Premises and
the uses thereof or regarding any actual or threatened investigation, inquiry,
lawsuit, claim, citation, directive, summons, proceeding, complaint, notice,
order, writ or injunction relating to any of the foregoing.
21.5 Tenant shall indemnify, defend (with courted reasonably approved by
Landlord) and hold Landlord harmless from and against any and all claims,
demands, liabilities, damages, fines, encumbrances, liens, losses, costs ant
expenses, including reasonable attorneys' fees ant disbursements, and costs and
expenses of investigation ("Claims ") which arise during the Term of this Lease
as a result of the breach by Tenant of any of the obligations and covenants set
forth in Sections 21.3 and 21.4 above and/or any continuation of the Premises
directly or indirectly arising from the activities of Tenant. Tenant shall, to
the reasonable satisfaction of
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Landlord, perform all remedial actions necessary to remove any Hazardous
Material in or on the Premises on or after the Commencement Date or to remedy
actual or threatened migration from the Premises of any Hazardous Material or to
remedy any actual or threatened violation of Environmental Requirements,
provided such remedial action is required under Environmental Requirements. This
section 21.5 shall survive termination of this Lease. Notwithstanding anything
contained in this Section 21.5 to the contrary, Tenant (in its capacity as
tenant and without limiting or otherwise affecting any liability it may have as
seller under the purchase agreement between Landlord and Tenant or as a prior
owner of the Premises) shall not be responsible under this section 21.5 for any
costs or expenses relating to the remediation or cleanup of Hazardous Materials
which (i) were located on, under or about the Property prior to the date of this
Lease and were not caused by Tenant, its agents, contractors, assigns, guests or
invitees, (ii) migrate onto the Premises during the term of this Lease from an
offsite source through no fault or culpability of Tenant, or (iii) are placed or
discharged on or about the Property by Landlord or Landlord's employees,
contractors, agents and invitees (collectively, "Non-Tenant Conditions").
21.6 If, at any time when the term of this Lease (including any renewal term)
would expire but for the teens of this section 21.6, a Hazardous Material exists
in, on, about or under the Premises, then the term of this Lease shall
automatically be extended and this Lease shall remain in effect until the
earlier of (i) the completion of all remedial action required under section
21.5, or (ii) the date specified in a written notice from Landlord to Tenant
terminating this Lease. During any such extension period, Tenant shall perform
all of its obligations under this Lease including payments of all rent due
hereunder.
ARTICLE 22
Waiver
22.1 The waiver by Landlord or Tenant of any breach of any covenant in this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
any other covenant in this Lease, nor shall any custom or practice which may
grow up between Landlord and Tenant in the administration of this Lease be
construed to waive or to lessen the right of Landlord or Tenant to insist upon
the performance by Landlord or Tenant in strict accordance with this Lease. The
subsequent acceptance of rent hereunder by Landlord or the payment of rent by
Tenant shall not waive any preceding breach by Tenant of any covenant in this
Lease, nor cure any Event of Default, nor waive any forfeiture of this Lease or
unlawful detainer action, other than the failure of Tenant to pay the particular
rent so accepted, regardless of Landlord's or Tenant's knowledge of such
preceding breach at the time of acceptance or payment of such rent.
ARTICLE 23
Notices
23.1 All requests, approvals, consents, notices and other communications given
by Landlord or Tenant under this Lease shall be properly given if made in
writing ant either deposited in the United States mail, postage prepaid,
certified with return receipt requested, or delivered by hand (which may be
through a messenger or recognized delivery or courier service) and addressed as
follows: To Landlord at the address of Landlord specified In the Basic Lease
Information. or at such other place as landlord may be on time to time
designate in a written notice to Tenant; and to Tenant, before the Commencement
Date, at the address of Tenant specified in the Basic Lease Information and
After the Commencement Date, at the Premises, or at such other place as Tenant
may from time to time designate in a written notice to Landlord. Such requests,
approvals, consents, notices and other communications shall be effective on the
date of receipt (evidenced by the certified mail receipt) if mailed or on the
date of delivery if hand delivered.
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ARTICLE 24
Miscellaneous
24.1 The words "Landlord" and 'Tenant" as used herein shall include the plural
as well as the singular. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." Tenant shall
indemnify and defend Landlord against and hold Landlord harmless from all
claims, demands, liabilities, damages, losses, costs and expenses, including
reasonable attorneys' fees and disbursements, arising out of or resulting from
any failure by Tenant to perform any of its obligations or any breach by Tenant
of any of its representations or warranties in accordance with this Lease. If
there is more than one Tenant, the obligations hereunder imposed upon Tenant
shall be joint and several. Time is of the essence of this Lease and each and
all of its provisions. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for lease,
and it is not effective as a Lease or otherwise until execution and delivery by
both Landlord and Tenant. Subject to Article 12, this Lease shall benefit and
bind Landlord and Tenant and the personal representatives, heirs, successors and
assigns of Landlord and Tenant. If any provision of this Lease is determined to
be illegal or unenforceable, such determination shall not affect any other
provision of this Lease and all such other provisions shall remain in full force
and effect. This Lease shall be governed by and construed in accordance with the
laws of the state where the Premises are located.
24.2 If there is any legal action or proceeding between Landlord and Tenant to
enforce this Lease or to protect or establish any right or remedy under this
Lease, the unsuccessful party to such action or proceeding shall pay to the
prevailing party all costs and expenses, including reasonable attorneys' fees
and disbursements, incurred by such prevailing party in such action or
proceeding and in any appeal in connection therewith. If such prevailing party
recovers a Judgment in any such action, proceeding or appeal, such costs,
expenses and attorneys" fees and disbursements shall be included in and as a
part of such judgment.
24.3 The exhibits and addenda, if any, specified in the Basic Lease Information
are attached to and made a part of this Lease.
24.4 Tenant warrants and represents to Landlord that Tenant and has not
authorized or employed, or acted by implication to authorize or to employ, any
real estate broker or salesman to act for Tenant in connection with this Lease.
24.5 Tenant and each person executing this Lease on behalf of Tenant represents
and warrants to Landlord that (a) Tenant is a corporation, duly organized and
validly existing under the laws of the State of Delaware, (b) Tenant is
qualified to do business h the state where the Premises is located, (c) Tenant
has full right, power and authority to eater into this Lease and to perform all
of Tenant's obligations hereunder, and (d) each person signing this Lease on
behalf of Tenant is duly and validly authorized to do so.
24.6 Landlord and each person executing this Lease on behalf of Landlord
represents and warrants to Tenant that (a) Landlord is a corporation, duly
organized and validly existing under the laws of the State of California, (b)
Landlord is qualified to do business in the state where the Premises is located,
(c) Landlord has full right, power and authority to enter into this Lease and to
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perform all of Landlord's obligations hereunder, and (d) each person signing
this Lease on behalf of Landlord is duly and validly authorized to do so
24.6 There are no oral agreements between Landlord and Tenant affecting this
Lease, and this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, and understandings, oral or written, if any, between
Landlord and Tenant or displayed by Landlord to Tenant with respect to the
subject matter of this Lease or the Premises. There are no representations
between Landlord and Tenant or between any real estate broker and Tenant other
than those expressly set forth in this Lease and all reliance with respect to
any representations is solely upon representations expressly set forth in this
Lease. This Lease may not be Intended or modified h any respect whatsoever
except by an instrument in writing signed by Landlord and Tenant.
ARTICLE 25
Option to Extend
25.1 Landlord grants to Tenant the option to extend the Term (the "Renewal
Option") as of the Expiration Date of the initial Term for one period of five
(I) years (the "Renewal Term"). The Renewal Term shall commence immediately
following the Expiration Date of the initial Term and shall expire as of
midnight on the day prior to the fifth (5th) anniversary of the commencement of
the Renewal Term. The Renewal Option shall be exercised, if at all, by notice
(the "Renewal Notice") to Landlord at any time prior to nine (9) months prior to
the Expiration Date of the initial Term, which notice shall be irrevocable by
Tenant. Notwithstanding the foregoing, if an event of default exists under this
Lease and all applicable grace periods have expired, either at the time Tenant
exercises the Renewal Option or at any time thereafter prior to or upon the
commencement of the Renewal Term, Landlord shall have, In addition to all of
Landlord's other rights ant remedies under this Lease, the right to terminate
the Renewal Option and to cancel unilaterally Tenant's exercise of the Renewal
Option, in which event the Expiration Date of this Lease shall be and remain the
then scheduled Expiration Date, and Tenant shall have no further rights under
this Lease to renew or extend the Term.
25.2 The Renewal Term shall be upon and subject to all of the terms, covenants
and conditions of this Lease; provided, however, that, effective as of the first
day of the Renewal Term the Base Rent for the Renewal Term shall be equal to the
Prevailing Market Rental for space comparable to the Premises in the Irvine,
California area as of the date of commencement of the applicable Renewal Term.
The term "Prevailing Market Rental" shall mean the base annual rental for such
comparable space, taking into account any additional rental and all other
monetary payments and escalations payable hereunder and by tenants under leases
of such comparable space, and any tenant improvements and other concessions
granted to Tenant ant tenants under leases of such comparable space (excluding,
however, the value of improvements paid for by Tenant but including the value of
such improvements to the Premises paid for by Landlord). Such Base Rent shall be
determined by Landlord not later than four (4) months prior to the commencement
of the Renewal Term. Tenant shall send to Landlord a notice, within twenty (20)
business days after the date of Landlord's notice setting forth the Prevailing
Market Rental for the Renewal Term, which notice shall state that Tenant either
(x) agrees with Landlord's determination of Prevailing Market Rental for the
Renewal Term or (y) disagrees with Landlord's determination of Prevailing Market
Rental for the Renewal Term and Sects to resolve the disagreement as provided in
section 25.3, below. If Tenant does not send to Landlord a notice as provided in
the previous sentence, Landlord's determination of the Prevailing Market Rental
shall be determinative. Until the disagreement is resolved as provided in
section 25.3, below, Tenant's monthly payments of Base Rent shall be in an
amount not less than the Base Rent payable for the twelve (12) month period
immediately preceding the commencement of the applicable Renewal Term. Within
ten (10) business days following the resolution of such dispute by the parties
or the
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decision of the brokers, as applicable, Tenant shall pay to Landlord or Landlord
shall refund to Tenant, as the case may be, the amount of any deficiency or over
payment in the Base Rent therefore paid. Tenant shall in any event pay all
applicable additional charges with respect to the Premises, in the manner and at
the times provided in this Lease, effective upon the commencement of the Renewal
Term, and notwithstanding any dispute regarding the Base Rent for the Renewal
Term.
25.3 Any disagreement regarding the Prevailing Market Rental as defined in this
Article 25 shall be resolved as follows:
Within twenty (20) days after Tenant's response to Landlord's notice to Tenant
of the Prevailing Market Rental, Landlord and Tenant shall meet no less than two
(2) times, at a mutually agreeable time and place, to attempt to resolve any
such disagreement.
If, within the twenty (20) day consultation period, Landlord and Tenant cannot
reach an agreement as to the Prevailing Market Rental, they shall each select
one broker to determine the Prevailing Market Rental and the two brokers so
selected shall select a third broker (the "Neutral Broker"). Each of the first
two brokers shall arrive at a determination of the Prevailing Market Rental and
submit their conclusions to the Neutral Broker within thirty (30) days after the
expiration of the twenty (20) day consultation period.
If only one determination is submitted within the requisite time period, it
shall be deemed to be the Prevailing Market Rental. If both determinations are
submitted within such time period the Neutral Broker shall determine in writing
which determination of the Prevailing Market Rate is correct or closest to being
correct, and such determination shall be the Prevailing Market Rate. The
determination of the Neutral Broker shall be conclusive and binding on the
parties.
25.4 All brokers specified pursuant to this Article 25 shall be real estate
brokers licensed and in good standing with the State of California with not less
than ten (10) years experience in commercial property leasing in the Irvine-
Costa Mesa-Newport Beach area. Each party shall pay the cost of the broker
selected by such party and one-half of the cost of the Neutral Broker plus one-
half of any other costs incurred in resolving the disagreement pursuant to
section 25.3.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the date
first hereinabove written.
Landlord:
By
Tenant:
TYCOM
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EXHIBIT B
Certification
<PAGE>
CERTIFICATION
I certify that, to the best of my knowledge and belief, the statements of fact
contained in this report are true and correct.
The reported analyses, opinions, and conclusions are limited only by the
reported assumptions and limiting conditions, and are my personal, unbiased
professional analyses, opinions, and conclusions.
I have no present or prospective interest in the property that is the subject of
this report, and I have no personal interest or bias with respect to the parties
involved.
My compensation is not contingent on an action or event resulting from the
analyses, opinions, or conclusions in, or the use of, this report.
My analyses, opinions, and conclusions were developed, and this report has been
prepared, in conformity with the requirements of the Code of Professional Ethics
and the Standards of Professional Practice of the Appraisal Institute.
I have made a personal inspection of the property that is the subject of this
report.
Lawrence F. Sherman PhD., ID, ASA, IFAC
State Certified Genera AG-006353
<PAGE>
EXHIBIT C
Appraiser Qualification.
<PAGE>
Professional Qualifications
Of
Dr. Lawrence F. Sherman
Introduction
Dr. Sherman has been involved for the past 15 years in the area of mortgage
banking, real estate brokerage, real estate counseling, business valuation,
financial analysis and real estate appraisal. He has been involved in investment
analysis, development of cashflows and projections for development projects,
corporate location analysis, and the traditional feasibility and valuation
analysis studies. He has also completed appraisal and valuation consulting of
hospitals, hotels, shopping centers, industrial properties, and commercial
properties. Valuation assignments have been on a nationwide basis. In addition,
Dr. Sherman has worked extensively with top management of midsize companies
doing financial analysis. He is a practicing financial analyst and economist
specializing in corporate and real estate market analysis.
Education
Eastern Illinois University, Charleston, Illinois
Awarded Bachelor of Science (B.S.) in Business Administration in 1972.
Thomas Jefferson College of Law, Los Angeles, California
Awarded Juris Doctor (J.D.) Law in 1987.
University of Illinois at Urbana -- Champaign
Awarded Doctorate (Ph.D.) in Finance and Economics in 1977.
University of Illinois at Urbana -- Champaign
Awarded Master of Science (M.S.) in Finance in 1973.
<PAGE>
Professional Licenses:
California Real Estate Brokers License
Illinois Real Estate Brokers
N.A.S.D. Securities License - Series 3, 7 and 63
California Licensed Certified General Appraiser Number AG-006353
Apprisal Courses Take:
Principles of Income Property Appraisal
Real Estate Appraisal Principles
Basic Valuation Procedures
Residential Valuation
Valuation Analysis & Report Writing
Standards of Professional Practice
Real Estate Law
Real Estate Principles
Real Estate Finance
Case Studies In Real Estate Appraisal
Course on Uniform Standards of Professional Appraisal Practice (U.S.A.P.)
Partial Interest Valuations
Seminars and Additional Courses on Real Estate Appraisal Topics
Designations (Professional)
Senior Member - American Society of Appraisers (ASA)
Senior Member- National Association of Independent Fee Appraisers (IFAC)
Specialist Real Estate Investment - Real Estate Investment Association (SRI)
Professional Affiliations:
Member- World Trade Association
Member - Real Estate Investment Association
Member- Mortgage Bankers Association
Member- National Association of Realtors
Member- Southern California CCIM Chapter
Member - Los Angeles Society of Financial Analysts
<PAGE>
Over the past 15 years it is estimated that over $4,000,000,000 of tangible and
intangible assets have been appraised. Dr. Sherman appraises real estate and
business assets for mortgage, tax related, and accounting purposes.
Present Position:
L.F. Sherman & Company, Inc. - Chairman/Chief Executive Officer Huntington
As Chairman of L.F. Sherman & Company, Inc. Dr. Sherman is responsible for the
conduct of all phases of company operations. The company specializes in the area
of mortgage banking, real estate counseling, financial valuations, and
appraisals for business decision making, taxation, and litigation. The Company
offers Financial Advisory Services for corporate clients and has a real estate
office and mortgage banking division. Dr. Sherman is a Senior Designated
Appraiser in business valuation and real estate appraisal with the American
Society of Appraisals. He is an accomplished author in those fields.
California State University, Long Beach - Associate Professor of finance
As Santa Anita Professor of Real Estate, Dr. Shemman has published extensively
in major real estate, finance, and banking publications and journals. He has
taught such courses as: Real Estate Investment Analysis, Real Estate Appraisal,
Real Estate Finance, Principles of Real Estate, Problems and Issues In Real
Estate, Security Markets, Security Analysis, Financial Management, and has
supervised independent study projects. He has taught all aspects of loan
processing and mortgage regulations in his real estate finance classes as well
as real estate appraisal and income property appraisal.
<PAGE>
Previous Work Experience:
Hollingsworth & Lord, Incorporated - Mortgage Banker, Beverly Hills, California
As a Major Loan Officer he was responsible for the origination and underwriting
of major loans on commercial properties, apartments, and office buildings
including residential subdivisions and special purpose properties. He also
processed his own loan originations.
Pepperdine University, Culver City, California Adjuct Professor of Corporate
Finance.
Arthur D. L - e Valuation, Inc., Woodland Hills, California As a Senior
Corporate Consultant, Dr. Sherman worked on consulting assignments in the area
of valuation consulting for major projects dealing with Fortune 100 clients.
Valuation Counselors, Inc., Los Angeles, California As a Senior Financial
Consultant, Dr. Sherman was involved in health care consulting and valuation
studies for Income Tax purposes. He was a national expert in the area of mergers
and acquisitions with respect to the legal aspects of business organizations and
combinations requiring purchase price allocation under IRS Section 338.
Valtec Associates, Inc., Chicago, Illinois Responsible for preparation of fair
market value studies for merger and acquisition analysis. Special interest in
valuation of intangible assets and real estate. Specialist in comparative market
analysis.
University of Wisconsin, Milwaukee, Wisconsin. Responsible for teaching advanced
and intermediate financial management courses involving principles and methods
of corporate finance, planning and control of funds, capital budgeting and cash
management, and financial policy planning.
Marquette University, Milwaukee, Wisconsin. Responsible for teaching of
financial administration, accounting, and advanced financial management.
Conducted research on strategic planning and forecasting models.
U.S. Treasury Department (Senior Financial Economist), Washington, D.C.
Responsible for the initiation, development, and completion of research projects
of an ongoing and special nature relating to the banking industry through
economic analysis.
<PAGE>
FDIC (Research Analyst), Washington, D.C. Responsible for the completion of
research projects as a research analyst. Experience related to the statistical
analysis of research projects related to problem banks, analysis of operating
performance, and functions of the Federal Deposit Insurance Corporation.
Emphasis was on special projects relating to banking and financial institutions.
Performed statistical analysis and special studies.
Military Service
Served as an electrician onboard the U.S.S. Richard L. Page (D-E-G 5) and at the
U.S. Naval Destroyer School, Newport, Rhode Island.
Publications
Dr. Sherman has published over 25 articles in the areas of finance, valuation,
real estate appraisal and practice, and banking.
<PAGE>
PROMISSORY NOTE
Principal Amount: S2,300,000.00 Interest Rate: 9.250%
Date of Note: January 9, 1997
PROMISE TO PAY. WEST COAST REALTY INVESTORS, INC. ("Borrower") promises to pay
to FIRST National BANK, N A. (lender"), or order, In lawful money of the United
States of America, the prepaid amount of Two Million Three Hundred Thousand &
00/100 Dollars (S2,300,000.00), together with Interest at the rate of 9.250% per
annum on the unpaid principal balance from January 9, 1997, unfit paid In hilt
PAYMENT. The owner will pay this loan In one principal payment of S2,300,000.00
plus inferred on January e, 1998. This payment due January 8, 1998, will be for
ail principal and accrued Interest not yet paid. In addition, Borrower will pay
regular monthly payments of all accrued unpaid Interest due as of each payment
date, beginning February 1,1997, with all subsequent Interest payments to be due
on the same day of each month after tied. Interest on the Note is computed on a
365/360 simple interest basis, that A, by applying the ratio of the annual
interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied first to any unpaid
collection cost and any late charges, then to any unpaid Interest, and any
remaining amount to principal.
PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and
other prepaid finance charges are earned fully as of She date of the loan and
will not be subject to refund upon easy payment (whether voluntary or as a
result of default), except as otherwise required by law. In any event, even upon
full prepayment of this Note, Borrower understands that Lender is entitled to a
minimum Interest charge of S100.00. Other than Borrower's obligation to pay any
minimum interest charge, Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower's obligation to continue
to make payments under the payment schedule. Rather, they will reduce the
principal balance due.
LATE CHARGE. if a payment is 10 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $10.00,
whichever is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (o} Borrower defaults undress analog or' credit. security
agreement, purchase agreement' or any other agreement, in favor of any ether or
portion that may affect any of borrower's property or Borrower's ability to - y
this slots or perform borrower's obligation under this Acts or any of the Reds.
(d) Any representation or statement made or furnished to Lender by Borrower or
false or misleading in any material respect either now or at the
time made or furnished. (e) Borrower becomes insolvent, a receiver is appointed
for any part of Borrower's property, Borrower makes an assignment for the
benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender.(h) A material adverse change occurs in Borrower's financial condition,
and Lender reasonably believes the prospect of payment or performance of the
Indebtedness is impaired.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest Immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
anal maturity, Lender, at its option, may also, if permitted under applicable
law, increase the interest rate on this Note 5.000 percentage points. Lender may
hire or pay someone else to help collect this Note if Borrower does not pay.
Borrower also will pay Lender that amount. The includes, subject to any limits
under applicable law, Lender's attorneys' fees and Lender's legal expenses
whether or not there is a lawsuit, including attorneys' tees and led expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction); appeals, and any anticipated post-Judgment collection
services. Borrower also will pay any court costs, In addition to all other sums
provided by law. This Note has been delivered to Lender and accepted by Lender
In the State of California. It there Is a lawsuit, Borrower agrees upon Lender's
request to submit to the of the courts of San Diego County, the State of
California. Lender and Borrower hereby waive the
right to any Jury trial In any action, proceeding, or counterclaim brought by
either Lender or Borrower against the other. (Initial Here ) The Note shall be
governed by and construed In accordance with the laws of the State of
California.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower's loan and the check on preauthorized charge with
which Borrower pays is later dishonored.
COLLATERAL Borrower acknowledges this Note is secured by a Deed of Trust dated
January 9, 1997, to a trustee in flavor of Lender on real property heated in
Orange County, State of California. That agreement contains the following due on
sale provision: Lender may, at Its option, declare immediately due and payable
all sums secured by this Deed of Trust upon the sale or transfer, without the
Lender's prior written consent, of all or any part of the Real Properly, or any
interest in the Real Properly. A Sale or transfer. means the conveyance of Real
Properly or any right, title or interest therein; whether Am, beneficial or
equitable; whether voluntary or involuntary; whether by outright sale, deed,
Installment sate contract, land contract, contract fee deed, leasehold interest
with a term greater than three (3) years, lease option contract, or by sale,
assignment, or transfer of any beneficial Interest in or to any land trust
holding title to the Real Properly, or by any other method of conveyance of Real
Properly Interest. If any Trustor is a corporation, partnership or limited
liability company, transfer also includes any change in ownership of more than
seventy-five percent (75%) of the voting stock, partnership Interest or limited
liability company interests, as the case may be. However, this option shall not
be exercised by Lender if such exercise is prohibited by applicable law.
CONDITIONS.
1) Borrower to provide IRS Tax Returns annually.
2) Borrower to provide financial statements annually or upon request
3) Borrower to provide operating statements and rent role on property annually
or upon request.
Borrower: WEST COAST REALTY INVESTORS, INC.
c/o West Coast Really Advisors, Inc.
5933 W. Century Blvd., #900
Los Angeles, CA 90045-5454
Lender; FIRST NATIONAL BANK, NA
Construction/Real Estate Lending
P.O. Box 85625 (CS#51)
San Diego, CA 92186-5625
<PAGE>
01-09-1997 Loan No 6231284961
PROMISSORY NOTE (Continued) Page 2
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of Limitations, presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no parry who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or guarantor or
collateral; or impair, fail to realize upon or perfect Lender's security
Interest in the collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD AIL THE PROVISIONS OF
THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF
A COMPLETED COPY OF THE NOTE.
BORROWER:
WEST COAST, REALTY INVESTORS, INC.
Thomas Maudlin ,Jr., President
<PAGE>
RIDER TO PROMISSORY NOTE
This Rider to Promissory Note is attached to and part of that certain Promissory
Note, dated January 9, 1997 (the "Note"), by West Coast Realty Investors, Inc.
as borrower ("Borrower"), in favor of First National Bank, as lender ("Lender").
Borrower and Lender agree, notwithstanding the terms of the Note or any other
documents executed therewith (collectively, the "Related Documents") as,
1. The recourse of the Lender for liability under the terms of the Note or any
other Related Documents shall be limited to the personal guaranty of James C.
Reynolds ("Guarantor") and Marc R Brutten ("Guarantor") and Borrower's interest
in the Property. Neither Borrower nor any shareholder, officer, director,
partner, member or affiliate of Borrower (an "Exculpated Party") shall have any
liability under the Note; provided, however, the foregoing shall not be deemed
to impair any right of Lender to foreclose or exercise any of its remedies
against the Property and/or Guarantors under the Note and the other Related
Documents and notwithstanding anything contained in this Note or in any of the
other Related Documents, nothing contained herein or therein shall (a) limit or
impair the rights of Lender to proceed against any of the Property in accordance
with the terms of the Related Documents, (b) limit or impair the rights of
Lender to proceed against any person under any guarantee, indemnity (including
but not limited to any indemnity relating to environmental matters or persons
with disabilities) or any other provision of any of the Related Documents
providing for the personal liability of any such person, or to enforce the
rights of Lender under any such guaranty, indemnity or other provision in
accordance with its terms, or (c) limit or impair the rights of Lender to
proceed against Borrower or any other person to recover or collect, or limit or
restrict the personal liability of Borrower or any other person for the payment
to Lender for, any of the following, including reasonable attorneys' fees and
costs incurred by lender in connection with any such recovery, collection or
payment:
(i) damages suffered by Lender as a result of (u) fraud or misrepresentation by
Borrower in connection with the Loan, (v) waste of any of the Property committed
by Borrower provided that waste shall not include failure to maintain the
Property after an Event of Default if all revenues from the Property received
after an Event of Default are applied to the Property expenses or debt service,
(w) the amendment modification or termination of any lease of any of the
Security Property in violation of any provision of the Related Documents, or (x)
failure to comply with any of the obligations of Borrower under any of the
Related Documents pertaining to environmental matters and access for disabled
persons;
(ii) any rents, issues or profits of any of the Property collected by or on
behalf of Borrower after an Event of Default not applied to Property expenses
and debt service under this Note or any of the Related Documents;
<PAGE>
(iii) any security deposits or, other similar deposits receives from tenants or
occupants of the Property to the extent that funds for such security deposits
are not obtained by Lender from Borrower;
(iv) the fair market value of any property or fixtures removed from any of the
Property by or on behalf of Borrower, which property or fixtures are not
replaced by similar property or fixtures of equal or greater value;
(v) any insurance proceeds, condemnation awards or proceeds resulting from any
sale of any of the Security Property which are misapplied to misappropriated by
or on behalf of Borrower or which, under the terms of the Related Documents,
should have been paid to Lender;
(vi) the amount of any valid unpaid mechanic's liens, materialmen's liens or
other liens, whether or not similar arising due to work performed or material
furnished in connection with any of the Property at Borrower's request which
could create lien on any portion of the Property.
2. If there is any inconsistency between the Rider and the Note or any other
Related Document, this Rider shall control.
IN WITNESS WHEREOF, Borrower and Lender have caused this Rider to Promissory
Note to be executed as of the 15th day of January, 1997.
BORROWER:
By: West Coast Realty Investors, Inc.
W. Thomas Maudlin, Jr.
President
LENDER:
First National Bank
By:
Cary Wenthur
Vice President
<PAGE>
Purchase and Sale Contract
West Coast Realty Investors,
a Delaware corporation
("Buyer")
and
Shidler West Investment corporation,
a Delaware corporation
("Seller")
<PAGE>
Table of Contents PAGE
Section 1 - Definitions 1
1.1 Acquisition Loan 1
1.2 Acquisition Loan Documents 1
1.3 Business Day(s) 2
1.4 Buyer's Counsel 2
1.5 Closing 2
1.6 Closing Date 2
1.7 Contingency Date 2
1.8 Deed 2
1.9 Due Diligence Conditions 2
1.10 Due Diligence Documents 2
1.11 Effective Date 2
1.12 Escrow 2
1.13 Improvements 3
1.14 Initial Deposit 3
1.15 Intangible Property 3
1.16 Land 3
1.17 Lender 3
1.18 Permitted Encumbrances 3
1.19 Permits 3
1.20 Property 3
1.21 Purchase Money Deed of Trust 3
1.22 Purchase Money Note 3
1.23 Purchase Price 3
1.24 Real Property 3
1.25 Tycom Contract 3
1.26 Tycom Lease 3
1.27 Seller's Counsel 4
1.28 Title Company 4
1.29 Title Policy 4
Section 2 - Sale and Purchase of Property 4
Section 3 - Payment of Purchase Price. 4
3.1 Initial Deposit. . . . . . . 4
3.2 Balance of Downpayment. . . . 4
3.3 Purchase Money Note. . . . . 4
3.4 Balance of Purchase Price. . 4
3.5 Summary of Purchase Price. . 4
4 - Escrow. . . . . . . . . . . . 4
4.1 Buyer's Deliveries to Escrow. 5
4.2 Seller's Deliveries to Escrow 5
4.3 Seller's Deliveries to Buyer. 6
Section 5 - Special Conditions Precedent. . . . . . 6
5.1 Special Conditions. . . . . . 6
5.2 Satisfaction/Waiver. . . . . 8
5.3 Termination of this Contract. 8
<PAGE>
PAGE
Section 6 - The Closing. 9
6.1 Conditions to Closing. . . . . 9
6.2 Delayed Closing. . . . . . . . 9
Section 7 - Closing Costs. Prorations. 10
7 1 Seller's Costs 10
7.2 Buyer's Costs 10
7.3 Acquisition Loan Costs 10
7.4 Prorations 11
Section 8 - Representations and Warranties 12
8.1 Seller's Representations and Warranties. . . . 12
8.2 Covenants of Seller. . . . . . . . . . . . . . 14
8.3 Acceptance of Property in As-Is Condition. . . 15
Section 9 - Possession 15
Section 10 - Covenants Re Acquisition Loan. . . 15
10.1 Loan Application. . . . . . . . . . . 16
10.2 Loan Processing Costs. . . . . . . . 16
Section 11 - Default and Remedies. . 16
11.1 Events of Default. . . . . . 16
11.2 Remedies of Buyer. . . . . 17
11.3 Seller's Remedies. . . . . 17
Section 12 - Miscellaneous Provisions. 18
12.1 Time is of the Essence. . 18
12.2 No Waiver. . . . . . . . . . . . . . 18
12.3 Survival of Terms. . . . . . . . . 18
12.4 California Law. . . . . . . . . . 18
12.5 Interpretation of Contract. 19
12.6 Sole Agreement. . . . . . . . . 19
12.7 Partial Invalidity. . . . . . . 19
12.8 No Joint Venture. . . . . . . . 19
12.9 Seller's Tax-Deferred Exchange. 19
12.10 Buyer's Tax-Deferred Exchange. 19
12.11 Exhibit.. . . . . . . . 20
12.12 Notices. . . . . . . . . 20
12.13 Headings of Sections. . . 20
12.14 Assignment. . . . . . . 21
12.15 Books and Records. . . . . . . . 21
<PAGE>
Purchase and Sale Contract
This Purchase and Sale Contract ("contract") dated as of November 18, 1996,
supersedes all prior offers and counter-offers and is executed by and between
(1) West Coast Realty Investors, a Delaware corporation, whose principal place
of business and post office address is 5933 West Century Boulevard, Suite 900,
Los Angeles, California 90043-5434 ("Buyer"), and (2) Shidler west Investment
Corporation, a Delaware corporation f/k/a/ Brutten/Reynolds/Shidler Investment
Corporation, whose principal place of business and post office address is 2878
Camino del Rio South, Suite 260, San Diego, California 92108, or assignee
("Seller").
Recitals.
This Contract is entered into with reference to the following facts:
A. The Property (defined below) is presently owned and occupied by Tycom
Corporation ("Tycom").
B. Seller is presently a party to a contract with Tycom pursuant to the terms of
which (1) Seller has agreed to buy and Tycom has agreed to sell the Property and
(2) upon Seller's acquisition of the Property, Seller will lease to Tycom the
Property.
C. Following Seller's acquisition of the Property, Buyer desires to buy and
Seller desires to sell the Property in accordance with the terms of the
Contract.
D. Prior to the Closing (defined below) Seller and Buyer have agreed to
cooperate in order to obtain from Lender (defined below) the Acquisition Loan
(defined below) which shall be funded and recorded concurrently with the Closing
(defined below).
Covenants.
Seller and Buyer hereby agree as follows:
Section 1 - Definitions. The following terms shall have the following
definitions in this Contract:
1.1 Acquisition Loan. The loan to be funded by Lender in the original principal
amount of S2,312,500 on the terms and conditions specified in the Acquisition
Loan Documents.
1.2 Acquisition Loan Documents. The documents which evidence and secure the
Acquisition Loan, a performs copy of which has been or, with the delivery of the
Due Diligence Documents, will be delivered to Buyer.
<PAGE>
1.3 Business Day(s). Any day other than a Saturday, Sunday or legal holiday
recognized in the State of California.
1.4 Buyer Is Counsel. Allen, Matkins, Leck, Gamble Mallory, Attention: Michael
L. Matkins.
1.5 Closing. The time and date when the Deed conveying fee title to the Real
Property is recorded in the county Recorder's office of Orange County.
1.6 Closing Date. The Closing Date is February 17, 1997, or such earlier date
selected by Buyer; however, if the option to extend under Section 5.1.2.2 is
exercised, the Closing Date shall in no event be later than March 3, 1997.
1.7 Continence Date. The date which is 30 days after the Effective Date.
1.8 Deed. The grant deed to be used to convey title to the Real Property to
Buyer.
1.9 Due Diligence Conditions. The special conditions in Sections 5.1.1.1,
through 5.1.1.5, below.
1.10 Due Diligence Documents. The documents Seller is obligated to deliver to
Buyer upon the Effective Date as provided below in the section hereof entitled
"Seller's Deliveries to Buyer" which consist of (1) the Tycom Contract, (2) the
documents delivered to Seller by Tycom as listed in Exhibit D to the Tycom
contract, (3) survey by Walden Associates, dated December 21, 1995, (4) the copy
of the Acquisition Loan Documents, (5) Tycom financial statements which consist
of (i) financial statements dated December 31, 1994 and December 30, 1995,
prepared by KPMG Peat Marwick LLP and (ii) balance sheet and profit and loss
statement for period ended June 30, 1996, (6) letter by City of Irvine,
Community Development Department dated October 9, 1996, regarding confirmation
of zoning, (7) update report for Tycom Corporation dated December 1995 which
updates previous environmental assessment report by Phase One, Inc., (8)
proposal for asbestos abatement by Diversified Associates, Inc. dated February
22, 1996, (9) certificate concerning asbestos removed by Diversified Associates
dated July 18, 1996, and (10) renovation plans date. June 28, 1996, by MacIntosh
Design.
1.11 Effective Date. The date as of which both Buyer and Seller have executed
this Contract an evidenced by the dates adjacent to their signatures below (e.g.
if Seller signed this Contract on November 18, 1996, and Buyer signed this
Contract on November 19, 1996, then November 19, 1996 would be the Effective
Date).
1.12 Escrow. Commerce Escrow, 1545 Wilshire Boulevard, Suite 600, Los Angeles,
California 90017 (Phil Graf).
<PAGE>
1.13 Improvements. All buildings and other improvements located on the Land and
all fixtures therein including the building which has a common address of 17862
Fitch, Irvine, California.
1.14 Initial Deposit. The payment to be made by Buyer and deposited with Escrow
as provided in Section 3.1.
1.15 Intangible Property. All intangible property to the extent owned or held by
Seller in connection with the management, maintenance, repair and operation of
the Real Property, including but not limited to, all leases, contract rights and
agreements.
1.16 Land. That certain fee simple parcel of land located in Irvine, California,
more particularly described in Exhibit 1 hereto.
1.17 Lender. Nationwide Life Insurance Company.
1.18 Permitted Encumbrances. The encumbrances to title to the Real Property
approved by Buyer as provided herein.
1.19 Permits. All certificates of occupancy, licenses, permits, authorizations
and approvals which have been issued by any governmental authority (including
local zoning authorities) having jurisdiction which have been issued for or
relate to the Improvements.
1.20 Property. The Real Property, the Improvements and the Intangible Property.
1.21 Purchase Money Deed of Trust. The deed of trust in form and of content as
Exhibit 2 attached hereto.
1.22 Purchase Money Note. The Promissory Note Secured by Deed of Trust in form
and of content as Exhibit 3 attached hereto.
1.23 Purchase Price. The sum of S4,625,000, the purchase price of the Property
payable as set forth in Section 3 of this Contract.
1.24 Real Property. The Land and the Improvements.
1.25 Tycom Contract. The written Purchase Agreement dated August 12, 1996,
between Tycom, as seller, and Shidler West Investment Corporation, f/k/a
Brutten/Reynolds/Shidler Investment Corporation (i.e. Seller under this
Contract), as buyer, pursuant to the terms of which Seller has agreed to
purchase from Tycom the Property.
1.26 Tycom Lease. The written lease to be executed by and between Seller, as
landlord, and Tycom, as tenant, pertaining to the Real Property.
<PAGE>
1.27 Seller's Counsel. F. Sigmund Luther, Esq.
1.28 Title Company. Fidelity National Title Insurance company at 17911 van
Karman Avenue, suite 540, Irvine, California 92614. (Dan Bryson)
1.29 Title Policy. The Title Policy shall be an ALTA owner's policy of title
insurance naming Buyer as the insured and insuring Buyer that Buyer is the owner
of the fee interest in the Real Property and the amount of the policy shall be
equal to the Purchase Price.
Section 2 - Sale and Purchase of Property. Seller hereby agrees to sell the
Property to Buyer and Buyer hereby agrees to purchase the Property from Seller
at the price and on the terms, covenants and conditions set forth in this
Contract.
Section 3 - Payment of Purchase Price. Buyer shall pay to Seller the Purchase
Price as follows:
3.1 Initial Deposit. Buyer will deposit the sum of S46,250 into Escrow upon
Opening of Escrow (defined below) which shall be applied against the Purchase
Price at the Closing. Any interest thereon shall accrue to Buyer. The Initial
Deposit will be applied to the Purchase Price. Escrow is directed to deposit the
Initial Deposit in an interest bearing account for the benefit of Buyer.
3.2 Balance of Downpayment. The balance of the downpayment (i.e., $1,666,250)
shall be paid by wire transfer or other good funds through Escrow at the
Closing.
3.3 Purchase Money Note. A portion of the Purchase Price in the amount of
$600,000 shall be paid in accordance with the terms of the Purchase Money Note.
3.4 Balance of Purchase Price. The balance of the Purchase Price shall be paid
by Buyer accepting title to the Real Property subject to the Acquisition Loan.
3.5 Summary of Purchase Price. A summary of the means by which the Purchase
Price shall be paid is as follows:
Initial Deposit $ 46,250
Balance of Cash Downpayment 1,666,250
Acquisition Loan Amount 2,312,500
Purchase Money Note 600,000
Total Purchase Price $4,625,000
Section 4 - Escrow. Escrow shall act as escrow under this Contract. An executed
copy of this Contract shall be delivered to Escrow by both parties within two
Business Days following the Effective Date ("Opening of Escrow") and the parties
hereby instruct Escrow to act in accordance with the terms
<PAGE>
of this Contract. Buyer and Seller shall execute such further escrow
instructions as may be required by Escrow to consummate the transactions
contemplated by this Contract, but in the event of any conflict between the
provisions of such escrow instructions and this Contract, the provisions of this
contract shall control as between Buyer and Seller.
4.1 Buyer's Deliveries to Escrow. Buyer shall make the following deliveries to
Escrow:
4.1.1 Initial Deposit. Concurrently with the Opening of Escrow, Buyer will
deliver to Escrow, as part of the Purchase Price, the Initial Deposit.
4.1.2 Closing Deposits. No later than 3:00 p.m. of the last regular Business Day
before the Closing Date, Buyer shall deliver to Escrow:
4.1.2.1 Buyer's Additional Funds. Wire transfer or other good funds in an amount
equal to the sum of (1) the balance of the cash downpayment and (2) Buyer's
costs, fees and prorations. Buyer's obligation under this Section 4.1.2.1 to
deliver funds is subject to Buyer's receipt of telephonic or other Notification
by Escrow that, except for the delivery, escrow is in condition to be closed.
Escrow shall be instructed to give the telephonic or other notification to Buyer
when this escrow cam, except as to the receipt and disbursement of cash and the
recording of documents, be closed.
4.1.2.2 Assignment of Tycom Lease.
Counterpart original of an Assignment and Assumption of Landlord's Interest
Under Lease in form and of content as Exhibit 4 attached hereto bearing the
signature of an authorized officer of Buyer.
4.1.2.3 Acquisition Loan Documents. All document" required by Lender and
approved by Buyer relating to the Acquisition Loan.
4.1.2.4 Purchase Money Documents. The Purchase Money Note signed by a duly
authorized officer of Buyer and the Purchase Money Deed of Trust signed by a
duly authorized officer of Buyer and acknowledged before a notary public.
4.2 Seller's Deliveries to Escrow. No later than 3:00 p.m. of the last regular
Business Day before the Closing Date, Seller shall deliver to Escrow:
4.2.1 The Seller's Grant Deed. The Deed conveying the Real Property to Buyer,
signed and acknowledged by Seller and such person(s) as Title Company requires
in order to issue the Title Policy.
4.2.2 Assignment of Tycom Lease. Counterpart original of an Assignment and
Assumption of Landlord's Interest Under Lease in form and of content as Exhibit
4 attached hereto bearing the signature of an authorized officer of Seller.
<PAGE>
4.2.3 Discharge of Encumbrances Seller's Charges
If the funds deposited with Escrow by Buyer are insufficient to (1) discharge
all encumbrances other than the Permitted Encumbrances and (2) pay the charges
to Seller's prorations, fees and costs, Seller will deliver to Escrow sufficient
funds and instruments to discharge and pay such encumbrances and charges.
4.2.4 Miscellaneous Assignments. A General Assignment to Buyer of the Intangible
Property in form and of content as Exhibit 5 attached hereto bearing the
signature of an authorized officer of Seller.
4.2.5 Rent Letter. A letter executed by Seller in the form prepared by Buyer
informing Tycom of the sale of the Property to Buyer and providing instructions
for future rent payments under the Tycom Lease.
4.2.6 Affidavit of Non-Foreign Status. An affidavit in a form satisfactory, to
Buyer pursuant to (1) Internal Revenue Code section 1445, fully signed and
acknowledged, by Seller confirming Seller not a foreign person and (2)
California Revenue & Taxation Code section 18805 or 26131, as the case may be,
fully signed and acknowledged by Seller confirming facts to allow Buyer to
determine if this transaction is subject to California "atsource" withholding.
4.3 Seller's Deliveries to Buyer. On or before the Effective Date, Seller shall
deliver to Buyer copies of the Due Diligence Documents.
Section 5 - Special Conditions Precedent.
5.1 Special Conditions. The following are special conditions to the obligations
of the parties under this Agreement:
5.1.1 Buyer's Special Conditions. Buyer's obligations under this Contract
(including, without limitation, the obligation to deliver to Escrow the balance
of the Purchase Price) are subject to each of the following special conditions:
5.1.1.1 Investment Committee Approval. Within 10 Business Days following the
Effective Date, receipt by Buyer of approval from Buyer's Investment Committee
of the terms and conditions of this Contract.
5.1.1.2 Appraisal. On or before the Contingency Date, Buyer's review and
approval of an appraisal of the Property which shall be prepared by an appraiser
of Buyer's choice at Buyer's expense.
5.1.1.3 Title Documents. On or before the Contingency Date, Buyer's review and
approval of a preliminary report of title dated as of November 19, 1996,
<PAGE>
by Title Company covering the Real Property together with copies of all
instruments described in the title report and evidencing or affecting exceptions
to title thereto (the title report and copies of exceptions are referred to
herein as the "Title Report"). The exceptions to the Report approved by Buyer,
if any, the recorded documents which secure the Acquisition Loan and the
Purchase Money Deed of Trust (if applicable) shall constitute "Permitted
Encumbrances" for all purposes of this Contract.
5.1.1.4 Due Diligence Documents. On or before the Contingency Date, Buyer's
review and approval of all Due Diligence Documents.
5.1.1.5 Physical Condition. On or before the Contingency Date, Buyer's review
and approval of the physical condition of the Property. Prior to and after the
Effective Date, Seller shall use reasonable best efforts to afford to Buyer and
Buyers agents, employees and contractors reasonable access to the Property
during normal business hours, upon reasonable notice to Seller for the purpose
of making such investigations as Buyer deems prudent with respect to the
physical condition of the Property.
5.1.1.6 Acquisition Loan Commitment. Within 30 days following waiver or
satisfaction of the Due Diligence Conditions, receipt from Lender by Buyer and
Seller of a written loan commitment pursuant to the terms of which Lender will
agree to loan to Buyer the principal sum of $2,312,000 with interest at the
fixed rate not to exceed 8.5 percent per annum with monthly payments of
principal and interest based upon a 25 year amortization with all principal and
interest due in a balloon payment 10 years following the date of loan funding
and otherwise on the terms and conditions contained in the proforma copy of the
Acquisition Loan Documents.
5.1.1.7 Estoppel Certificate. Within five Business Days after Buyer's receipt
thereof, Buyer's review and approval of a tenant Estoppel certificate signed by
Tycom and dated not earlier than January 1, 1997 and otherwise in form and
substance as Exhibit 6 attached hereto. Seller shall use reasonable best efforts
to deliver to Buyer the Estoppel certificate not later than January 24, 1997.
Buyer shall approve the Estoppel certificate if the signed Estoppel certificate
is returned without any modification or interlineation.
5.1.1.8 Final Acquisition Loan Documents. On or before three Business Days
following Buyer's receipt thereof, Buyer's review and approval of the final
signature originals of the Acquisition Loan Documents. Buyer shall approve the
final signature originals of the Acquisition Loan Documents if such documents
are not materially inconsistent with the proforma loan documents approved by
Buyer as provided above and are not materially inconsistent with the loan
commitment received from Lender.
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5.1.2 Joint Special Conditions. The obligations of Buyer and Seller under this
Contract are subject to:
5.1.2.1 Seller's Acquisition of Title Property. On or before January 20, 1997,
Seller shall have' acquired from Tycom fee title to the Property and Seller and
Tycom shall have executed and delivered to each other counterpart originals of
the Tycom Lease; provided, however, Seller may not elect to terminate this
Contract for failure of this condition precedent if Seller's failure timely to
acquire fee title to the Property and execute the Tycom Lease is due to Seller's
breach of Seller's obligations under the Tycom Contract.
5.1.2.2 Funding of the Acquisition Loan. On or before
February 17, 1997, Lender shall have deposited with
Escrow the proceeds of the Acquisition Loan with instructions to
Escrow to allow Escrow to disburse the proceeds to allow the
Closing to occur as provided in this Contract; provided, however,
if (l) Buyer and Seller have diligently pursued, and are continuing
diligently to pursue, completion of the Acquisition Loan funding
and, nevertheless the Acquisition Loan has not funded on or before
February 17 , 1997 , and (2) the parties have waived all other
Contract, then either Escrow and the other special conditions in this Section 5
of this party may, by delivery of written notice to party,
extend the Closing Date and the time period for satisfaction of this special
condition to the earlier of March 3, 1997 or the date of funding of the
Acquisition Loan.
5.2 Satisfaction/Waiver. Buyer may unilaterally waive Any special condition set
forth in Section 5.1.1 above. Waiver of the special conditions in Section 5.1.2
shall require the joint Waiver by Buyer and Seller. Except as provided in
Section 5.3 Below, satisfaction or waiver of a special condition will be
effective only if the same is (i) in writing, (ii) signed by the party for whose
benefit the condition exists and (iii) delivered to Escrow no later than the
date such condition is to be satisfied.
5.3 Termination of this Contract. In the event any of Buyer's special conditions
precedent in Section 5.1.1 above have not been disapproved in writing by Buyer
on or before the date specified in the special condition, then the special
condition shall be deemed satisfied and waived without the requirement of any
further writing from Buyer. In the event either of the joint special conditions
precedent in Section 5.1.2 above is not satisfied or waived before the date
specified in the special condition, then either party may terminate this
Contract by delivering to Escrow a notice of termination. If either (1) Buyer
provides timely written disapproval of a special condition in Section 5.1.1 or
(2) either party delivers written notice of termination under the preceding
sentence, then (1) Escrow shall return to Buyer any deposits made by Buyer and
any interest accrued thereon, (2) all costs incurred by each party shall be
borne by such party, (3) all costs incurred by Escrow shall be borne by the
party responsible for such costs a" provided herein and (4)
thereafter, no party shall have any further rights or obligations under this
contract.
<PAGE>
Section 6 - The Closing. The parties further agree:
6.1 Conditions to Closing. Escrow will close this escrow on the Closing Date by
(I) filing for record the Deed (and such other documents as may be necessary to
procure the Title Policy) and (ii) delivering funds and documents to the parties
WHEN AND ONLY WHEN each of the following conditions has been satisfied:
6.1.1 Deliveries. All funds and documents required to be delivered to Escrow
have been delivered to Escrow.
6.1.2 Special Conditions. Each of the conditions set forth in the section
entitled "Special Conditions Precedent" has been, or upon Closing will be,
satisfied or waived in the manner specified in said section.
6.1.3 The Title Policy. Escrow can procure (1) the Title Policy from Title
Company, with liability in the amount of the Purchase Price, insuring that fee
title as to the Real Property vests in Buyer subject only to the following and
(2) an ALTA lender's policy of title insurance in favor of Seller with liability
in the amount of the Purchase Money Note subject only to the following:
(a) General and special real estate taxes and assessments which are, as of the
Closing, not delinquent.
(b) Supplemental taxes, if any, assessed pursuant to California Revenue and
Taxation Code sections 75 and following.
(c) The Permitted Encumbrances (including the first deed of trust securing the
Acquisition Loan and the Purchase Money Deed of Trust).
6.1.4 Acquisition Loan Funding. Concurrently with the Closing, the Acquisition
Loan shall be funded.
6.1.5 Event of Default. There does not exist an event of default by either
party.
6.2 Delayed Closing. If Escrow cannot close this escrow on or before the Closing
Date, it will, nevertheless, close this escrow when all conditions have been
satisfied or waived unless, after the Closing Date and prior to the close of
this escrow, Escrow receives a written notice to terminate this escrow from a
party who, at the time the notice is delivered, is not in default under this
Contract. If Escrow is not able to close because one of the conditions specified
in Section 6.1- above has not been timely satisfied, the inability of Escrow to
close shall not relieve Buyer and/or Seller of any obligations which may, at
that time, continue to exist under this Contract.
<PAGE>
Section 7 - Closing Costs. Prorations. Expenses in connection with the
transactions contemplated by this contract shall be paid as follows:
7.1 Seller's costs. Seller shall pay for the following:
7.1.1 Customary seller's drafting charges;
7.1.2 Seller's notary fees;
7.1.3 Customary seller's recording and filing fees;
7.1.4 The Documentary transfer tax due on the conveyance and sale of the
Property to Buyer;
7.1.5 The cost of preparation of the Title Report and all updates thereto and an
amount equal to the premium for a CLTA owner's policy of title insurance without
endorsements;
7.1.6 One-half of the Escrow's fees;
7.1.7 All fees incurred by Seller for services by dealer's Counsel; and
7.1.8 Seller's portion of the Acquisition Loan Costs (defined below) as provided
below.
7.2 Buyer's Costs. Buyer shall pay for the following:
7.2.1 Customary buyer's drafting charges;
7.2.2 Costs of buyer's notary fees;
7.2.3 Customary buyer's recording and filing fees;
7.2.4 One-half of the Escrow's fees;
7.2.5 The amount of any additional premium necessary to procure the Title Policy
in excess of the portion of the premium to be paid by Seller a. provided in
Section 7.1.5;
7.2.6 All fees incurred by Buyer for services by Buyer's Counsel;
7.2.7 Buyer's portion of the Ancillary Acquisition Loan Costs as provided below;
and
7.2.8 The premium, if any, for the ALTA lender's policy to be issued in favor of
Seller for the Purchase Money Deed of Trust.
7.3 Acquisition Loan Costs. The parties' obligations with respect to the payment
of costs incurred in connection with the Acquisition Loan are as follows:
<PAGE>
7.3.1 Seller shall pay (1) the loan origination fee payable to the lender
(contemplated by the parties to be 1.0 percent of the original loan principal
balance), (2) any fees payable to loan brokers (contemplated by the parties to
be none), (3) the first portion of the Ancillary Acquisition Loan Costs (defined
below) equal to 0.5 percent of the original principal balance of the Acquisition
Loan and (4) the balance of Ancillary Acquisition Loan Costs, if any, in excess
of the amount to be paid by Buyer pursuant to Section 7.3.2.
7.3.2 Excluding (1) the loan origination fee, (2) any fees payable to loan
brokers and (3) the first portion of the Ancillary Acquisition Loan Costs equal
to the 0.5 percent of the original principal balance of the Acquisition Loan
(which sums shall be paid by Seller as provided in the preceding section), Buyer
shall pay the next portion of the Ancillary Acquisition Loan Costs, not to
exceed an amount equal to 0.5 percent of the original principal balance of the
Acquisition Loan.
As used herein, the term "Acquisition Loan Costs" shall mean all costs incurred
in connection with the origination, processing and funding of the Acquisition
Loan. As used herein, the term "Ancillary Acquisition Loan Costs" shall mean the
balance of the Acquisition Loan Costs excluding the loan origination fee and any
loan broker's fees. Ancillary Acquisition Loan Costs include, but are not
limited to, expenses for title reports, title policies, escrow services,
appraisals, recording documents and updating surveys. By way of example, if (1)
the original principal balance of the loan were $2,312,500.00, (2) the Lender
charged an origination fee equal to 1.0 percent of the loan balance and there
were no broker's fee. and (3) all costs other than the origination fee were
$25,000, then (1) Seller would pay the $23,125 loan origination fee, (2) Seller
would pay the first S11,562.50 of the Ancillary Acquisition Loan Costs, (3)
Buyer would pay the next all, 562.50 of the Ancillary Acquisition Loan Costs and
(4) Seller would pay the $1,875.00 balance of the Ancillary Acquisition Loan
Costs.
7.4 Prorations. All non-delinquent real property taxes, rents, interest on the
Acquisition Loan if any), operating costs, insurance premiums (if policy(ies)
assigned) and other items of expense and income pertaining to the Property shall
be prorated between Seller and Buyer as of the Closing; provided, however, if
items to be prorated are required to be paid directly by Tycom under the Tycom
Lease, then such items shall not be prorated between Buyer and Seller at the
Closing. Buyer shall also receive credit at the Closing for the (1) security
deposit under the Tycom Lease (contemplated to be $37,302.75) and (2) any "free"
rent allowed under the Tycom Lease accruing after the Closing.
7.4.1 Time of Prorations. Prorations shall be made as of 12:01 a.m. on the day
of Closing, with Buyer to be entitled to all rent and to be charged for all
expenses for such day. All prorations shall be final except as otherwise
provided herein.
<PAGE>
7.4.2 Unknown Amounts. In the event that the amount of any prorated items is not
known at Cloning, the parties agree that such items shall be prorated at Closing
upon the basis of the best information available, and shall be adjusted when the
actual amount(s) of such items are known, with appropriate charges and credits
to be made. In the event, subsequent to the Closing, any adjustment pursuant to
this Section shall be necessitated, then either party hereto who is entitled to
additional monies shall invoice the other party for such additional amounts as
may be owing, and such amount shall be paid within ten days from receipt of the
invoice. The provisions of this Section shall survive the Closing.
Section 8 - Representations and Warranties.
8.1 Seller's Representations and warranties. Seller hereby represents and
warrants to Buyer that as of the Effective Date and the Closing:
8.1.1 Organization. Standing and Authority of Seller. Seller is a corporation
duly organized and validly existing and in good standing under the laws of the
State of Delaware and has all requisite power and authority to carry on the
business and own the property that it now carries on and owns. Seller further
represents:
8.1.1.1 Seller has duly qualified with the Secretary of State of the State of
California to do business in California.
8.1.1.2 Seller has the legal power, right and authority to enter into this
Contract and the instruments referenced herein, and to consummate the
transactions contemplated hereby.
8.1.1.3 All requisite action (corporate, trust, partnership or otherwise) has
been taken by Seller in connection with the entering into of this Contract, the
instruments referenced herein, and the consummation of the transactions
contemplated hereby. No consent of any partner, shareholder, creditor, investor,
judicial or administrative body, governmental authority or other party is
required.
8.1.1.4 The individuals executing this Contract and the instruments referenced
herein on behalf of Seller and the partners, officers or trustees of Seller, if
any, have the legal power, right and actual authority to bind Seller to the
terms and conditions hereof and thereof.
8.1.1.5 Seller's legal name was previously "Brutten/Reynolds/Shidler Investment
Corporation." By amendment filed with the secretary of State of the State of
Delaware on September 6, 1996, Seller's name was changed to "Shidler West, Inc."
By amendment filed with the Secretary of State of the State of Delaware on
October 8 1996, Seller's name was changed to "Shidler West Investment
Corporation."
<PAGE>
8.1.2 Enforceable contract. This contract and all documents required hereby to
be executed by Seller are and shall be valid, legally -binding obligations of
and enforceable against Seller in accordance with their terms, subject only to
applicable bankruptcy, insolvency, reorganization, moratorium laws or similar
laws or equitable principles affecting or limiting the rights of contracting
parties generally.
8.1.3 No Conflict With Other Agreements. Neither the execution and delivery of
this Contract and documents referenced herein, nor the incurrance of the
obligations set forth herein, nor the consummation of the transactions herein
contemplated, nor compliance with the terms of this Contract and the documents
referenced herein conflict with or result in the material breach of any terms,
conditions or provisions of, or constitute a default under, any bond, note or
other evidence of indebtedness or any contract, indenture, mortgage, deed of
trust, loan, partnership agreement, lease or other agreements or instruments to
which Seller is a party or affecting the Property.
8.1.4 Outstanding Bills. Except to the extent that Tycom is obligated to pay
such costs directly, Seller has paid or will pay in full, prior to the Closing,
all bills and invoices for labor, goods, materials and services of any kind
relating to the Property and utility charges, relating to the period prior to
the Closing.
8.1.5 Litigation. To Seller's actual knowledge, there have been no and presently
there are no action-, suits or proceedings pending or threatened against or
affecting Seller or the Property in any court at law or in equity, or before or
by any governmental department, commission, board, bureau, agency or
instrumentality, an adverse decision in which has or might materially affect the
Property or Seller's ability to perform Seller's obligations under this
Contract.
8.1.6 Condemnation. Seller has no knowledge of any pending, threatened or
proposed condemnation of any portion of the Property.
8.1.7 Rights of Others. Seller has not granted to any other person any option or
right of first refusal which is still effective to acquire all or any portion of
the Property.
8.1.8 Due Diligence Documents. To Seller's actual knowledge, the Due Diligence
Documents are and shall be true copies of the originals of such documents.
8.1.9 Survival of Covenants. Representations and Warranties. All of the
covenants, representations and warranties of Seller set forth in any and all
provisions of this Contract shall survive the Closing and the delivery of the
Deed. In the event that prior to the closing, Buyer discovers
<PAGE>
any material misrepresentation of Seller or any material breach of Sellers
representations or warranties hereunder (excluding any misrepresentation
amounting to fraud), then, for a period of three Business Days following the
discovery, Buyer shall have the right to terminate this Contract and, if Buyer
elects to terminate this Contract, the damages recoverable by Buyer hereunder in
such event shall be limited to a return of the Initial Deposit. If,
notwithstanding Buyer's discovery of a misrepresentation of Seller or any breach
of Seller's representations or warranties hereunder, Buyer elects to affirm this
Contract and proceed with the Closing, such election shall, upon the Closing,
constitute a waiver by Buyer of any and all claims relating to such
misrepresentation of Seller or breach of Seller's representations or warranties
hereunder. If, after the Closing, Buyer discovers a breach of any representation
or warranty in this Section 8~1, then any action by Buyer for breach of such
representation or warranty under Section 8.1 must be commenced within one year
after the Closing.
8.2 Covenants of Seller. Seller hereby covenants and agrees with Buyer, that
from and after the date hereof through the Closing but not thereafter:
8.2.1 No Amendment to Tycom Lease. Seller will not alter, amend or modify the
terms or provisions of the Tycom Lease, or enter into any new lease without the
prior written approval of Buyer, which approval shall not be unreasonably
withheld.
8.2.2 No Amendment to Tycom Contract. Seller will not alter, amend or modify the
terms or provisions of the Tycom Contract in a manner that would diminish the
rights under the Tycom contract which are to be assigned to Buyer pursuant to
the General Assignment attached hereto as Exhibit 5, without the prior written
approval of Buyer, which approval shall not be unreasonably withheld.
8.2.3 No Other Contracts. Seller will not enter into contracts or agreements
related to the operation or maintenance of the Property, or alter' amend or
modify the terms of any existing contracts, except in good faith in the ordinary
course of business and which provide that the same may be terminated without
cost to Buyer upon not more than ten days prior notice.
8.2.4 No Granting of Interest in Property. Seller will not grant to or purport
to create in any third party any interest in the Property or any entity holding
title to the Property without the prior written approval of Buyer.
8.2.5 Maintenance of Insurance. Seller will maintain or cause Tycom to maintain
fire, extended coverage and public liability insurance covering the Property.
8.2.6 Notice of Liens. Seller will promptly notify Buyer in writing of the levy
(or threatened levy of which it gains knowledge or is notified) of any special
Governmental assessment of the nature described herein affecting
<PAGE>
the Real Property, and of any alleged violation of any law, regulation,
ordinance, order or other requirement of any governmental authority having
jurisdiction over or affecting all or any part of the Real Property of which it
gains knowledge or is notified.
8.3 Acceptance of Property in As-Is Condition. Buyer hereby represents and
warrants to Seller that Buyer has or will have employed consultants as Buyer has
deemed necessary and has or will have conducted investigations of the Property
to determine its suitability for the use and development proposed by Buyer.
Buyer acknowledges that on or prior to the Closing Date that Buyer has or will
have examined and approved all things concerning the Property which Buyer deems
material to its purchase and the use, development and resale of the Property,
including, but not limited to, floor area of the building, overall area of the
Land, topography, geology, condition of the soil, condition of title to the
Property, availability and capacity of utilities and sanitary facilities
(including, without limitation, water, sewer, electricity, gas, telephone, cable
television), suitability for intended use, feasibility of development, zoning,
availability of fire and police protection, the possibility of moratoria, land
use regulations of the City of Irvine and the County of Orange, the feasibility
and availability of building permits and other entitlements from the City for
the development of the Property and the past or present existence on the
property of underground or above-ground storage tanks used for the storage of
fuel or any other hazardous substances. Buyer understands and agrees that Seller
does not, in any respect, guaranty, warrant or represent that the City of Irvine
or the County of Orange will permit any specific development of the Property.
Buyer shall accept the Property in an "as-is, where-is" condition, and
acknowledges that, except as provided in Section 8.1 above, Seller has not made
and does not make any warranty or representation whatsoever as to the physical
condition or suitability for intended use of the Property, whether express or
implied. Buyer warrants and represents that, except as otherwise expressly
provided in Section 8.1, Buyer is purchasing the Property solely in reliance on
Buyer'" own investigation and is not relying upon any information, whether
written or oral, provided to it by Seller and/or any broker and/or agent
involved in the transaction evidenced by this Contract.
Section 9 - Possession. Subject to the rights of Tycom under the Tycom Lease to
be assigned to Buyer, possession of the Property shall be delivered by Seller to
Buyer as of the time of recording the Deed on the day of Closing; provided,
however, that Seller shall use reasonable efforts to provide to authorized
representatives of Buyer reasonable access to the Property for the purposes Of
it) satisfaction of any conditions precedent to the Closing contained herein;
and (ii) Buyer becoming familiar with the operation of the Property.
Section 10 - Covenants Re Acquisition Loan. With respect to the origination and
funding of the Acquisition Loan, Buyer and Seller agree as follows:
<PAGE>
10.1 Loan--Application. Within five Business Days following the satisfaction or
waiver of the Due Diligence Conditions, Buyer shall submit to Lender a written
application to obtain the Acquisition Loan. In connection with the initial
application and pre-funding processing of the Acquisition Loan, Buyer and Seller
shall use reasonable best efforts timely and fully to respond to Lender's
requests for documents and information needed to obtain approval and funding of
the Acquisition Loan upon the following terms:
10.1.1 Original Principal Balance. The Acquisition Loan shall have an original
principal balance in the amount of $2,312,500.
10.1.2 Interest Rate. The rate at which interest shall accrue on the principal
balance shall be a fixed rate not to exceed 8.5 percent per annum.
10.1.3 Loan Payments. The Acquisition Loan shall be repaid with monthly payments
of principal and interest based upon a 25 year amortization with a balloon
payment 10 years following the date of loan funding.
10.1.4 Non-Recourse. Subject to the so-called "non-recourse exceptions" (which
may include exceptions for waste, hazardous waste, fraud, appropriation of rent
while in default and other intentional misconduct), the liability under the
Acquisition Loan Documents shall be non-recourse.
10.1.5 Consistency With Proforma Documents. The terms of the Acquisition Loan
shall otherwise be consistent with the proforma loan documents which are
included in the Due Diligence Documents.
10.2 Loan Processing Costs. Seller shall advance to Lender all costs required to
be paid to Lender during the loan processing; provided, however, Buyer shall be
responsible for payment and/or reimbursement to Seller of Buyer's share of the
Ancillary Acquisition Loan Costs as provided in Section 7.3 above.
Section 11 - Default and Remedies.
11.1 Events of Default. The following shall constitute "Events of Default" under
this Contract:
11.1.1 Seller or Buyer shall fail to pay or deposit with Escrow any sum of money
when due under this Contract;
11.1.2 Seller or Buyer shall, prior to the filing or recording of the Deed, fail
to observe or perform any other term or provision to be observed or performed by
such party under this Contract and such default shall not be cured by the first
to occur of the following dates: (i) five days after written notice is received
by the defaulting party informing such party of the default, or within such
longer period of time as may be reasonably necessary to cure such default
provided that the defaulting party has taken steps in good faith within such
period to remedy such default and is continuing to so act with diligence and
continuity, or (ii) the Closing Date;
<PAGE>
11.1.3 Seller or Buyer shall, after the recording of the Deed, fail to observe
or perform any other term or provisions to be observed or performed after
Closing by such party under this Contract within ten (10) days after written
notice is received by the defaulting party informing such party of the default,
or within such longer period of time as may be reasonably necessary to cure such
default provided that such party has taken steps in good faith within such
period to remedy such default and is continuing to so act with diligence and
continuity; or
11.1.4 Any representation or warranty made by Seller or Buyer in this Contract
shall be untrue in any material respect as of the date when made, or shall be
untrue in any material respect as of the Closing.
11.2 Remedies of Buyer. If any of the Events of Default shall occur with respect
to Seller, then Buyer shall not be obligated to close the acquisition of the
Property in accordance with this Contract and, if Buyer elects not to close the
acquisition of the property, Buyer shall be entitled to the return of any
deposits. Buyer shall be entitled to all legal or equitable remedies available
to Buyer because of Seller's default, including, without limitation, the right
to (1) allow the Closing to occur and reserve any right to damages and/or (2)
obtain specific performance of Seller's obligations hereunder because of the
inadequacy of remedies at law in favor of Buyer. The mere existence of Buyer's
right to terminate this Contract as provided herein shall in no event be
construed so as to excuse Seller from attempting in good faith and with
reasonable diligence to perform and comply with the covenants and agreements set
forth in this Contract.
11.3 Seller's Remedies. If any material event of default occurs with respect to
Buyer's obligations under this Contract, then Seller may, at Seller's option,
elect either of the following remedies:
11.3.1 Liquidated Damages. Cancel this Contract, whereupon -all rights and
options of Buyer and duties and obligations of Seller shall terminate and the
following provision shall apply:
<PAGE>
LIQUIDATED DAMAGES. IF BUYER FAILS TO COMPLETE THE
PURCHASE OF THE PROPERTY AND SUCH FAILURE CONTRIBUTES A
BREACH OF THIS CONTRACT, THEN SELLER SHALL BE RELEASED
FROM ITS OBLIGATIONS OF SELLING THE PROPERTY TO BUYER
PROVIDED, HOWEVER, THAT BY PLACING THEIR INITIALS BELOW, BUYER AND SELLER AGREE
THAT THE INITIAL DEPOSIT OF $46,250 SHALL CONSTITUTE LIQUIDATED DAMAGES TO THE
SELLER FOR ANY SUCH BREACH BY BUYER. BUYER AND SELLER AGREE THAT SAID AMOUNT IS
A REASONABLE AMOUNT FOR LIQUIDATED DAMAGES FOR SUCH A BREACH UNDER THE
CIRCUMSTANCES EXISTING AT THE TIME THIS CONTRACT IS ENTERED INTO AND CONSTITUTES
A REASONABLE ESTIMATE OF THE DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE
SECTION 1671, ET SEQ. BUYER AND SELLER AGREE THAT IT WOULD BE IMPOSSIBLE OR
IMPRACTICAL TO PREDICT WHAT MONETARY DAMAGES SELLER WOULD SUFFER IN SUCH AN
EVENT.
Initials Initials of
of Seller Buyer
11.3.2 Specific Performance. Maintain this Contract in full force and effect
and, pursuant to Civil Code sections 1680 and 3389 commence an action against
Buyer to obtain specific performance of the terms of this Contract.
Section 12 - Miscellaneous Provisions.
12.1 Time is of the Essence. Time is hereby expressly declared to be of the
essence of this Contract.
12.2 No Waiver. Any failure to insist upon strict performance of any of the
terms and provisions of thin Contract shall not constitute or be deemed to be a
waiver of any such term or provision, or constitute an amendment or waiver of
any such term or provision by course of performance, and each party,
notwithstanding any failure to insist upon strict performance, shall have the
right thereafter to insist upon the strict performance of any and all of the
terms and provisions of this Contract.
12.3 Survival of Terms. Subject to the requirement that any action by Buyer for
breach of the representations and warranties under Section 8.1 above be
commenced within one year following the Closing (see Section 8.1.9), all of the
agreements, representation-, warranties and obligations of the parties set forth
in this Contract shall survive the Closing and the conveyance of the Property to
Buyer, and shall continue thereafter to be binding upon and inure to the benefit
of the parties hereto, and their respective permitted successors and permitted
assigns.
12.4 California Law. This Contract shall be governed by and construed under the
laws of the State of California. Any legal action hereunder shall be filed
in the California judicial system only, and, with respect to disputes arising
under this Agreement, Seller and Buyer hereby unconditionally submit
themselves to the jurisdiction of the courts of the state of California.
<PAGE>
12.5 Interpretation of contract. The parties acknowledge that both parties have
caused this Contract to be reviewed and approved by legal counsel of their own
choice.
12.6 Sole Agreement. This is the sole and only agreement between the parties.
Any and all prior oral or written representations, correspondence, letters of
intent and agreements are merged into and superseded by this Contract and shall
be of no force or effect. Any modifications of this Contract must be in writing
and signed by the parties hereto.
12.7 Partial Invalidity. If any provision hereof is held invalid or not
enforceable to its fullest extent, such provision shall be enforced to the
extent permitted by law, and the validity of the remaining provisions hereof
shall not be affected thereby.
12.8 No Joint Venture. The execution and performance of this Contract, Buyer's
and seller's review and approval rights described in this Contract, the
agreements of the parties in this contract and the exercise of any rights
hereunder, are not Intended, and shall not be construed, to create a
partnership, joint venture or co-tenancy between Seller and Buyer.
12.9 Seller's Tax-Deferred Exchange. Buyer acknowledges that Seller intends to
transfer the Property in a manner that will Complete or result in a tax-deferred
exchange. Buyer agrees to cooperate with Seller to complete the exchange and
Seller shall have the right to assign all of its right, title and interest under
this Contract to any entity or entities at any time prior to the Closing Date,
whereupon such assignee or assignees shall succeed to all of the rights and
obligations of Seller hereunder. Buyer shall not be required to bear any
additional cost and expense or incur any additional liability or obligation or
otherwise suffer any adverse effect as a consequence of any assignment in excess
of the costs, expenses, liabilities, obligations and other effects which would
have been applicable if the Property were transferred by Seller without
accommodating a tax-deferred exchange. No assignment shall relieve Seller of any
obligations under this Contract.
12.10 Buyers Tax-Deferred Exchange. Seller acknowledges that Buyer may desire to
acquire the Property in a manner that will complete or result in a tax-deferred
exchange. Seller agrees to cooperate with Buyer to complete the exchange and
Buyer shall have the right to assign all of its right, title and interest under
this Contract to any entity or entities at any time prior to the Closing Date,
whereupon such assignee or assignees shall succeed to all of the rights and
obligations of Buyer hereunder. Seller shall not be required to bear any
additional cost and expense or incur any additional liability or obligation
or otherwise suffer any adverse effect as a consequence of any assignment in
excess of the costs, expenses, liabilities, obligations and other effects
which would have been applicable if the Property were transferred by Buyer
without accommodating a taxdeferred exchange. No assignment shall relieve
Buyer of any obligations under this Contract.
<PAGE>
12.11 Exhibits. All exhibits, if any, to this Contract are incorporated herein
by reference.
12.12 Notices. All notices, requests, demands or documents which are required or
permitted to be given or served hereunder shall be in writing and personally
delivered, or sent by Federal Express or registered or certified mail, postage
prepaid, addressed as follows:
To Seller at: Marc R. Brutten
2878 Camino del Rio South, Suite 260
San Diego, California 92108
and
James C. Reynolds
810 Richards Street, Suite 1000
Honolulu, Hawaii 96813
with a copy to
Seller's counsel: F. Sigmund Luther, Esq.
401 West "A" Street, Suite 1625
San Diego, California 92101
To Buyer at: W. Thomas Maudlin, Jr.
West Coast Realty Investors
5933 West Century Boulevard
Suite 900
Los Angeles, California 90043-5434
with a copy to
Buyer's counsel: Michael L. Matkins, Esq.
Allen, Matkins, Leck, Gamble & Mallory
515 South Figueroa Street, Seventh Floor
Los Angeles, California 90071-3398
Such addresses may be changed from time to time by the addressee by serving
notice as heretofore provided. Service of such notice or demand shall be deemed
complete on the date of actual delivery as shown by the addressee's registry or
certification receipt or at the expiration of the third day after the date of
mailing (whether or not actually received by the addressee), whichever is
earlier in time.
12.13 Headings of Sections. The headings of Sections and Subsections herein are
inserted only for convenience and reference and shall in no way define,
limit or describe the scope or intent of any provision of this Contract.
<PAGE>
12.14 Assignment. Buyer shall have the right to assign Buyer's rights and
obligations under this Contract; provided, however, no such assignment shall
relieve Buyer of Buyer's obligations under this Contract.
12.15 Books and Records. During the period prior to the Contingency Date, Buyer
shall have the right upon reasonable notice and at reasonable times to inspect
and copy at Seller's office any documents in Seller's possession pertaining to
the Property.
Shidler Went Investment West Coast Realty Investors,
Corporation, a Delaware Inc., a Delaware corporation
corporation
By By
Marc R. Brutten, President Tom Maudlin, President
Executed by Seller on: Executed by Buyer on:
November 20, 1996 November 21, 1996
<PAGE>
Schedule of Exhibits
1 - Legal Description of Real Property
2 - Purchase Money Deed of Trust
3 - Purchase Money Note
4 - Assignment and Assumption of Landlord's
Interest Under Lease
5 - General Assignment
6 - Estoppel Certificate
<PAGE>
REAL PROPERTY
THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF ORANGE, AND IS DESCRIBED AS FOLLOWS:
Parcel 42, in the City of Irvine, County of Orange, State of California, as
shown on a Parcel Mop filed in Book 97, Pages 1 to 5 inclusive of Parcel Maps,
in the office of the County Recorder of said County.
EXCEPT all oil, oil rights, minerals, mineral rights and other hydrocarbons by
whatsoever name known that may be within or under the parcel of land hereinabove
described, together with the perpetual right of drilling, mining, exploring and
operating therefore and storing in and the same from said land or any other
land, incurring the right to whipstock or directionally drill and mine from
lands other than those hereinabove described oil or gas well' tunnels and shafts
into, through or across the subsurface of the land hereinabove described and to
bottom such whipstocked or directionally drilled wells, tunnels and shafts under
and beneath or beyond the exterior limits thereof, and to redrill, retunnel,
equip, maintain, repair, deepen and operate any such wells, or mines, without,
however, the right to drift, mine, store, explore and operate through the
surface or the upper five hundred (500) fee: of the subsurface of the land
hereinabove described, as reserved by The Irvine Company, a Michigan
corporation, in recorded October 14, 1977 in Book 12415, Page 997, Official
Records.
ALSO, EXCEPT any and all other rights or interest in water rights and any and
all geothermal rights or interests in geothermal rights, no Matter how acquired
in connection with or with respect to said land, Whether such water rights shall
be riparian, overlying, appropriative, prescriptive or contractual, together
Rich full right and power, among others, to transfer or assign to others or to
Use or utilize on any other property; owned or leased by the grantor; provided,
however, that the exception and reservation made herein shall not have any right
to enter upon the surface of the property described herein the exercise of such
rights, as reserved in deed from Title Insurance and Trust Company, a Trustee
under Trust No. IR-192300-2, recorded October 31, 1978 in Book 12903, Page 618,
Official Records.
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO
Shidler West Investment Corp.
C/O F. Sigmund Luther, Esq.
401 West A Street, Ste. 1625
San Diego, CA 92101
SPACE ABOVE THIS LINE FOR RECORDER'S USE
DEED OF TRUST WITH ASSIGNMENT OF RENTS AS ADDITIONAL SECURITY
This DEED OF TRUST, made , 1997, , between
WEST COAST REALTY INVESTORS, a Delaware corporation
herein called TRUSTOR,
whose address is 5933 West Century Blvd., Ste. 900, Los Angeles,
California 900454
CHICAGO TITLE COMPANY, a California Corporation, herein called TRUSTEE, and
SHIDLER WEST INVESTMENT CORPORATION, a Delaware corporation
herein called BENEFICIARY,
Trustor irrevocably grants, transfers and assigns to Trustee in Trust, with
Power of Sales that property in City of Irvine, County of Orange, California.
SEE EXHIBIT A ATTACHED HERETO
Together with the rents, issues and profits thereof, subject, however, to the
right, power and authority hereinafter given to and conferred upon Beneficiary
to collect and apply such rents, issues and profits.
For the Purpose of Securing (1) payment of the sum of S 600,000.00 with interest
thereon according to the terms of a promissory note or notes of even date
herewith made by Trustor, payable to order of Beneficiary, and extensions or
renewals thereof; (2) the performance of each agreement of Trustor incorporated
by reference or contained herein or reciting it is so secured; (3) Payment of
additional sums and interest thereon which may hereafter be loaned to Trustor,
or his or her successors Of assigns, when evidenced by a promissory note or
notes reciting that they are secured by this Deed of Trust.
To protect the security of this Deed of Trust, and with respect to the property
above described, Trustor expressly makes each and all of the agreements, and
adopts and agrees to perform and be bound by each and all of the terms and
provisions set forth in subdivision A of that certain fictitious Deed of Trust
referenced herein, and it is mutually agreed that all of the provisions set
forth in subdivision B of that certain factitious Deed of Trust recorded in the
book and page of Official Records in the office of the county recorder of the
county where said property is located, noted below opposite the name of such
county, namely:
COUNTY BOOK PAGE COUNTY BOOK PAGE COUNTY BOOK PAGE COUNTY BOOK PAGE
Alameda 1288 sse Kinge 858 713 Placer 1028 379 Sierra 38 187
Alpine 3 130-31 Lake 437 110 Plumas 166 1307 Sisklyou 506 762
Amador 133 438 Lassen 192 367 Riverside 3778 347 Solano 1287 621
Butte 1330 513 L.A. T-3878 874 Sac. 71-1028 615 Sonoma 2067 427
Calaveras 185 338 Madera 911 136 San Benito300 405 Stanislaus1970 56
Colusa 323 391 Marln 1849 122 San Bern.6213 768 Sutter 655 585
ContraCosta4684 1 Mariposa 90 453 San Fran.A-804598 Tahama 457 183
Del Norte 101 549 Mendocino 667 99 San Joaquln 2855283 Trinity 108 595
El Dorado 704 635 Merced 1660 753 SLO 1311 137 Tulare 2530 108
Fresno 5052 623 Modoc 191 93 SanMateo4778 175 Tuolumna 177 160
Glenn 469 76 Mono 69 302SantaBarbara2065 881 Ventura 2607 237
Humboldt 801 83 Monterey 357 239 SantaClara6626 664 Yolo 769 16
Imperial 1189 701 Napa 704 742 SantaCrua 1638 607 Yuba 398 693
Inyo 165 672 Nevada 363 94 Shasta 800 633
Kern 3756 690 Orange 7182 18 San Diego Series 5 Book 1964, P.149774
Initial
<PAGE>
shall inure to and bind the parties hereto, with respect to the property above
described. Said agreements, terms and provisions contained in said subdivisions
A and B. (identical in all counties) are preprinted on the following pages
hereof and are by the within reference thereto, incorporated herein, and made a
part of this Deed of Trust for all purposes as fully as if set forth at length
herein and beneficiary may charge or a statement regarding the obligation
secured hereby, provided the charge thereof does not exceed the maximum allowed
by laws.
The undersigned Trustor, requests that a copy of any notice of default and any
notice of sale hereunder be mailed to him at his address hereinbefore set forth.
STATE OF CALIFORNIA
COUNTY OF }S.S.
On before me,
a Notary Public in and for said
County and State, personally appeared
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to ma that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the
instrument.
WITNESS my hand and official seal
Signature
Signature of Trustor
West Coast Realty Investors,
a Delaware
By
Print Name:
Title
(This area for official notarial seal)
<PAGE>
DO NO RECORD
The following is a copy of Subdivisions A and B of the fictitious of Trust
recorded in each county in California as stated in the foregoing Deed of Trust
and incorporated by reference in said Deed of Trust as being a part thereof as
it set forth at length therein.
A. To protect the security of this Deed of Trust, Trustor agrees
(l) To keep said property in good condition and repair not to remove or demolish
any building thereon; to complete or restore promptly and In good and
workmanlike manner any building which may be constructed, damaged or destroyed
thereon and to pay when due ail claims for labor per. formed and materials
furnished therefor; to comply With all laws affecting said property or requiring
any alterations or improvements to be made thereon. not to commit or permit
waste thereof: not to commit, super or permit any act upon said property in
violation of law: to cultivate, irrigate, fertilize, 'prune and do all other
acts which from the character or use of said property may be reasonably
necessary, the specific enumerations herein not excluding the general.
(2) To provide, maintain and deliver to Beneficiary fire insurance satisfactory
to and with toss payable to Beneficiary. The amount collected under any fire or
other insurance policy ma, be applied by Beneficiary upon any indebtedness
secured hereby and in such order as Beneficiary may deter. mine. or at option of
Beneficiary the entire amount so collected or any part thereof may be released
to Trustor. Such application or release shall not cure or waive any default or
notice of default hereunder or invalidate any act done pursuant to such notice.
(3) To appear in and defend any action or proceeding purporting to affect the
security hereof or the rights or powers of Beneficiary or Trustee: and to pay
all costs and expenses. including cost of evidence of title and attorney s tees
in a reasonable sum, in any action or proceeding in which Beneficiary or Trustee
may appear, and in any suit brought by Beneficiary to foreclose this Deed.
(4) To pay: at least ten days before delinquency ail taxes and assessments
affecting said property, including assessments on appurtenant water stock; when
due, all encumbrances. charges and liens, with interest, on said property or any
part thereof, which appear to be prior or superior hereto;
all costs, fees and expenses of this Trust.
Should Trustor fait to make any payment or to do any act as herein provided,
then Beneficiary or Trustee, but without obligation so to do and without notice
to or demand upon Trustor and without releasing Trustor from ally obligation
hereof, may, make or do the same in such manner and to such extent as either may
deem necessary to protect the security hereof, Beneficiary or Trustee being
authorized to enter upon said property for such put poses; appear in and defend
any action or proceeding purporting to affect the security hereof or the rights
or powers of Beneficiary or Trustee; pay purchase, contest or compromise any
encumbrance, charge, or lien which in the judgment of either appears to be prior
or superior hereto; and, in exercising any such powers, pay necessary expenses,
employ counsel and pay his or her reasonable fees.
(5) To pay immediately and without demand all sums so expended by Beneficiary or
Trustee, with interest from date of expenditure at the amount allowed by law in
effect at the date hereof, and to pay for any statement provided for by law in
effect at the date hereof regarding the obligation secured hereby, any amount
demanded by the Beneficiary not to exceed the maximum allowed by law at the time
when said statement is demanded.
<PAGE>
B. It is mutually agreed:
(1 ) That any award of damages in connection with any condemnation for public
use of or injury to said property or any pert thereof is hereby assigned and
shall be paid to Beneficiary who may apply or release such moneys received by
him or her in the same manner and with the same effect as above provided for
regarding disposition of proceeds of tire or other insurance.
(2) That by accepting payment of any sum secured hereby after its due date,
Beneficiary does not waive his or hat right either to require prompt payment
when due of all other sums so secured or to declare default for failure so to
pay.
(3) That at any time or from time to time, without liability therefor and
without notice, upon written request of Beneficiary and presentation of this
Deed and said note for endorsement, and without affecting the personal liability
of any person for payment of the indebtedness secured hereby, Trustee may:
reconvey any part of said property; consent to the making of any map or plat
thereof; join in granting any easement thereon; or join in any extension
agreement or any agreement subordinating the lien or charge hereof.
(4) That upon written request of Beneficiary stating that all sums secured
hereby have been paid, and upon surrender of this Deed and said note to Trustee
for cancellation and retention or other disposition as Trustee in its sofa
discretion may choose and upon payment of its fees Trustee shall reconvey,
without warranty, the property then held hereunder. The recitals in such
reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof. The Grantee in such reconveyance may be described as "the
person or persons legally entitled thereto."
(5) That as additional security, Trustor hereby gives to and confers upon
Beneficiary the, power and authority, during the continuance of these Trusts, to
collect the rents, issues and profits of said property, reserving unto Trustor
the right, prior to any default by Trustor in payment of any indebtedness
secured hereby or in performance of any agreement hereunder, to collect and
retain such rents, issues and profits as they become due and payable. Upon any
such default, Beneficiary may at any time without notice, either in parson, by
agent, or by a receiver to be appointed by a court, and without regard to the
adequacy of any security for the indebtedness hereby secured enter upon and take
possession of said property or any part thereof, in his or her own name sue for
or otherwise collect such rents, issues, and profits, including those past due
and unpaid, and apply the same, less costs and expenses of operation and
collection, including reasonable attorney's tees, upon any indebtedness secured
hereby, and in such order as Beneficiary may determine. The entering upon and
taking possession of said property, the collection of such rants, issues and
profits and the application thereof as aforesaid, shad not cure or waive any
default or notice of detach thereunder or invalidate any act done pursuant to
such notice.
<PAGE>
(6) That upon default by Trustor in payment of any indebtedness secured hereby
or in performance of any agreement thereunder, Beneficiary may declare all sums
secured hereby immediately due and payable by delivery to Trustee of written
declaration of default and demand for sale and of written notice of default and
of election to cause to be sold said property, which notice Trustee shall cause
to be sighted for record. Beneficiary also shall deposit with Trustee this Deed,
said note and all documents evidencing expenditures secured hereby.
And the lapse of such time as may than be required by law the recordation of
said notice of default, and notice of sale having been given as then required by
law. Trustee, without demand on Trustor, shall sell said property at the time
and place fixed by it in said notice of sale, either as a whole or in separate
parcels, and in such order as it may determine, at public auction to the highest
bidder for cash in lawful money of the United States, payable at time of sale.
Trustee may postpone sale of all or any potion of said property by public
announcement at such time and place of sale, and from time to time thereafter
may postpone such sale by pubic announcement at the time fixed by the preceding
postponement. Trustee shall deliver to such purchase its deed conveying the
property so sold, but without any covenant or warranty, express or implied. The
recitals in such deed of any matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including Trustor, Trustee, or Beneficiary as
hereinafter defined, may purchase at such sale.
After deducting all costs, tees and expanses of Trustee and of this Trust,
including cost of avoidance of title in connection with sate, Trustee shaft
apply the proceeds of sate to payment of: all sums expended under the terms
hereof, not then repaid, with accrued interest at the amount allowed by law in
effect at the date hereof; all other sums than secured hereby; and the
remainder, if any, to the person of persons legally entitled thereto.
(7) Beneficiary, or any successor in ownership of any indebtedness secured
hereby, may from time to time, by instrument in writing, substitute a successor
or successors to any Trustee named herein or acting hereunder, which instrument,
executed by the Beneficiary and duly acknowledged and recorded in the office of
the recorder of the county or counties where said property is situated, shall be
conclusive proof of proper substitution of such successor Trustee or Trustees,
who shall, without conveyance from the Trustee predecessor, succeed to all its
title, estate, rights, powers and duties. Said instrument must contain the name
of the original Trustor, Trustee and beneficiary hereunder, the book and page
where this Dead is recorded and the name and address of the now Trustee.
(8) That this Deed applies to, inures to the benefit of, and binds all panics
hereto, their heirs, legatees, devisees, administrators, executors, sue.
censors, and assigns. The term Beneficiary shall mean the owner and holder,
including pledges, of the note secured hereby, whether or not named as
Beneficiary herein. In this Deed, whenever the context so requires, the
masculine gender includes the feminine and/or the neuter, and the singular
number includes the plural.
<PAGE>
(9) the Trustee accepts this Trust when this Deed duly executed and
acknowledged. is made a public record as provided by law Trustee Is not
obligated to notify any parry hereto of pending sale under any other Deed of
Trust or OT and action At shall be a party unless brought by Trustee
DO NOT RECORD
TO CHICAGO TITLE COMPANY REQUEST FOR FULL RECONVEYANCE
The undersigned is the legal owner and holder of the note or notes, and of all
other indebtedness secured by the foregoing Deed of Trust. Said
note or notes. together with all other indebtedness secured by said Deed of
Trust have been fully paid and satisfied; and you are hereby requested and
directed. on payment to you of any sums owing to you under the terms of said
Deed OT Trust to cancel said note or notes above mentioned. and all other
evidence of Indebtedness secured by said Deed of Trust deli tiered to you
herewith together with the said Deed of Trust and reconvey without warranty. to
the panics designated by the terms of said Deed of Trust all the estate now held
by you under the same.
Dated
Please mail Deed of Trust
Note and Reconveyance to
Do not lose or destroy this Deed of Trust OR THE NOTE which it secures. Both
must De delivered to the Trustee /or cancellation before reconveyance will be
made
<PAGE>
REAL PROPERTY
THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF ORANGE, AND IS DESCRIBED AS FOLLOWS:
Parcel 42, in the City of Irvine, County of Orange, State at California, as
shown on a Parcel Mop filed in Book 97, Pages 1 to 5 inclusive of Parcel Maps,
in the office of the County Recorder o{ said County.
EXCEPT all oil, oil rights, minerals, mineral rights and other hydrocarbons by
whatsoever name known that may be within or under the parcel of land hereinabove
described, together with the perpetual right of drilling, mining, exploring and
operating therefor and storing in and removing the same from said land or any
other land, including the right to whipstock or directionally drill and mine
from lands ocher than chose hereinabove described oil or gas wells, runners and
shafts into, through or across the subsurface of the land hereinabove described
and to bottom such whipstocked or directionally drilled wells, tunnels and
shafts under and beneath or beyond the exterior limits thereof, and to REDRILL,
RETUNNEL, equip, maintain, repair, deepen and operate any such wells, or mines,
without, however, the right to drill, mine, store, EXPLORE and operate through
the surface or the upper five hundred (500) FEET of the subsurface of the land
hereinabove described, as reserved by The Irvine Company, a Michigan
corporation, in deed recorded October 14, 1977 in Book 12415, Page 997, Official
Records.
ALSO EXCEPT any and all water rights or interest in water rights and any and all
geothermal rights or interests in geothermal rights, no matter how acquired in
connection with or with respect to said land, whether such water rights shall
be, overlying, appropriative percolating, prescriptive or contractual, together
with full right and power, among others, to TRANSFER or assign to others or to
use or utilize on any other property; owned or leased by the grantor; provided,
however, that THE exception and reservation made herein shall no: have any right
to enter upon she surface of the property described herein the exercise of such
rights, as reserved in deed from Title Insurance and Trust Company, a Trustee
under Trust No. IR-192300 2, recorded October 31, 1978 in Book 12903, Page 618,
Official Records.
<PAGE>
DO NOT DESTROY THIS NOTE: When paid, this Note, with the Deed of Trust securing
this Note, must be surrendered to the Trustee for cancellation before
reconveyance will be made.
Purchase-Money Promissory Note Secured by Deed of Trust
$600,000.00 San Diego, California, 1997
As stated in this Note, for value received, West Coast Realty Inventors, a
Delaware corporation, ("Maker"), promises to pay to Shidler West Investment
Corporation, a Delaware corporation ("Holder"), or order, at San Diego,
California, or such other place as Holder may from time to time direct in
writing, the principal sum of $600,000.00, together with simple interest in
arrears on the balance of principal from time to time unpaid at the rate 9.68
percent per annum computed from and including the date of recording the deed of
trust which secures this Note ("the Commencement Date"). Interest shall be paid
monthly commencing on the date that is one month following the Commencement Date
and so continuing on the same day of each month thereafter until the date which
is five months following the Commencement Date, at which time all unpaid
principal and accrued interest shall be paid in full (i.e. if Maker makes full
and timely payment, Maker will make four interest payments of $5,500.00 each and
one final payment of principal and interest in the amount of $605,500.00). The
privilege is reserved to make, at any time(s), without penalty or charge,
additional principal payment(s).
Time is of the essence of this Note. Upon failure to make a punctual payment
required by this Note, or upon default in the performance of any other
obligation secured by or set forth in the Deed of Trust securing this Note,
Holder will have the right to declare, without making demand of any kind, that
the entire indebtedness secured by or set forth in the Deed of Trust is
immediately due. Waiver of the right to so accelerate the maturity of
obligations hereunder will be effective only if set forth in a written
instrument signed by Holder. Failure to exercise, or delay in exercising, the
right will not be construed as a waiver of the right.
Maker acknowledges that, if any amount is not paid when due, Holder will incur
additional costs. The exact amount of these additional costs (which include, but
are not limited to, processing and accounting charges as well as lose of use of
money due) is difficult and impracticable to assess. Maker acknowledge. that the
sum of six percent of the overdue amount or five dollars, whichever is greater,
is, under the circumstances existing at the time this note is made, a reasonable
late charge and Maker will pay the late charge when due. The late charge will
become immediately due ten days after the date on which any payment required to
be made under
<PAGE>
the terms of this Note became due and remains unpaid. Maker acknowledges that
the obligation to pay the late charge does not, in any way, affect the rights of
Holder set forth in the preceding paragraph.
Principal and interest will be paid in lawful money of the United States of
America. Every party who is now or hereafter becomes liable for the payment of
this Note, and any person who guaranties the same, (1) waives diligence,
presentment, protest, demand for payment, notice of protest, dishonor and notice
of nonpayment of this Note, (2) expressly agrees that this Note, or any payment
under this Note, may he unilaterally extended by Holder from time to time, (3)
consents that Holder may (but will not be required to) release all or any part
of the property encumbered by the Deed of Trust, and (4) consents to the
acceptance of additional security for this Note, all without in any way
affecting the liability of any party.
If Holder engages an attorney in connection with (1) any judicial or non-
judicial proceeding on this Note and the Deed of Trust (including, but not
limited to, judicial or trustee's power of sale foreclosure), (2) any action or
proceeding commenced by any person including, but not limited to, actions or
proceedings (a) Under Title 11 of United States Code, (b) for condemnation, (c)
under the California Probate Code, (d) any state or federal tax lien or (e)
involving mechanic's or materialmen's liens or stop notices and/or (3)
enforcement of the assignment of rents provisions pertaining to the Property
serving as security for this Note, Maker will pay reasonable attorneys' fees
incurred by Holder.
This Note is secured by a peed of Trust of even date herewith to Chicago Title
Company.
By
Print Name:
Title:
West Coast Realty Investors, a Delaware Corporation
<PAGE>
Assignment and Assumption of
Landlord's Interest Under Lease
This Assignment and Assumption Agreement ("this Assignment")' dated as of -- ,
1997, is executed by and between (1) Shidler west, Inc., a Delaware corporation
f/k/a/ Brutten/Reynolds/ Shidler Investment Corporation, a California limited
partnership ("Shidler Went") and (2) Went Coast Realty Investors, a Delaware
corporation ("West Coast").
1. Recitals. This Assignment is executed with reference to the following facts:
1.1 On or about , Shidler West, as landlord, and Tycom Corporation,
as tenant, executed and delivered that certain Lease ("the Tycom Lease")
pertaining to real property in the City of Irvine, County of Orange, State of
California, commonly known as 17862 Fitch.
1.2 Pursuant to the terms of that certain Purchase and Sale Contract dated
November 18, 1996, ("the Contract"), Shidler West is, concurrently with the
recording of this Assignment, conveying to West Coast all of Shidler West's
right, title and interest in and to the Property.
1.3 By this Assignment, the parties desire to confirm the assignment of all of
Shidler West's right, title and interest in and to the Tycom Lease and the
assumption by West Coast of all of the landlord's obligations under the Tycom
Lease.
2. Covenants of the Parties. In consideration of the above recitals and other
valuable consideration receipt of which is hereby acknowledged, the parties
agree:
2.1 Effective as of the date of the Closing (as such term is defined in the
Contract), Shidler West hereby assigns, transfers and convey. to West Coast all
of Shidler West's right, title and interest as landlord under the Tycom Lease.
2.2 Effective as of the date of the Closing, West Coast hereby assumes the
obligation. of landlord under the Tycom Lease which accrue on and after the
Closing.
Shidler West, Inc. a West Coast Realty Investors, a
Delaware corporation Delaware corporation
By By
Marc R. Brutten, President Print Name
Title
<PAGE>
General Assignment
This General Assignment, dated as of, 1997, is executed by Shidler West
Investment Corporation, a Delaware corporation f/k/a/ Brutten/Reynolds/Shidler
Investment Corporation, ("Assignor"), in favor of West Coast Realty Investors, a
Delaware corporation ("Assignee"). In accordance with that certain Purchase and
Sale Contract dated November 18, 1996, ("the Contract"), respecting the sale of
certain real property ("the Property") in the City of Irvine, County of Orange,
State of California, commonly known as 17862 Fitch, Assignor hereby assigns,
transfers, quitclaims and conveys all of Assignor's right, title and interest,
if any, in and to the Intangible Property (as such term is defined in the
Contract), Permits (as such term is defined in the Contract) and all other
tangible and intangible rights appurtenant or pertaining to the Property.
Without limiting the generality of the foregoing, Assignor hereby specifically
assigns to Assignee:
1. All of Seller's rights in and to the representations and warranties received
by Assignor from Tycom Corporation pursuant to Paragraph 8 of that certain
Purchase Agreement dated August 12, 1996 ("the Tycom Contract").
2. All indemnity rights received by Assignor from Tycom Corporation under
Paragraph 10 of the Tycom Contract.
3. All rights under the covenant received by Assignor from Tycom Corporation
under Paragraph 13 of the Tycom Contract.
Seller represents that the Tycom Contract. not been amended or modified by Tycom
Corporation and Assignor to diminish the rights under the Tycom Contract as
described above. This assignment shall be binding upon and inure to the benefit
of the successors, assigns and personal representatives, heirs and legatees of
all the respective parties.
Shidler West Investment
Corporation, a Delaware corporation
By:
Marc R. Brutten, President
<PAGE>
TENANT ESTOPPEL CERTIFICATE
TO: WEST COAST REALTY INVESTORS, INC.
5933 West Century Boulevard, Suite 900
Los Angeles, California 90045-5454
Re: Lease, dates as of ,199 , between TYCOM CORPORATION, a Delaware
Corporation, as tenant (the "Tenant"), and Shidler West, Inc., formerly known as
Brutten-Reynolds/Shidler Investment Corporation, as landlord, covering certain
premises known by the street address 17862 Fitch, in the City of Irvine, County
of Orange, State of California (the "Leased Premises"), as amended as noted on
attached Schedule A (collectively, the ''Lease")
Gentlemen:
The undersigned Tenant hereby represent', warrant, and certifies to West Coast
Realty Investors, Inc. ("Landlord") and any person who may hold or hereafter
hold a mortgage, deed of trust or other security interest in the Leased Premises
or Lease ("Lender") that:
1. The Lease has not been modified, changed, altered or amended in any respect,
either orally or in writing, and constitutes the entire agreement between Tenant
and Landlord affecting Tenant's leasing of the Leaned Premises. A true "d
correct copy of the Lease is attached as Schedule A. The Lease is in full force
ant effect and is not subject to any contingencies or conditions not set forth
in The Lease.
2. The term of the Lease commenced on, 199 .
3. Tenant has paid all fixed ant additional rent and other sums which are due
and payable under the Lease through the date hereof and Tenant has not made and
will not make any prepayment of fixed rent for more than one month in advance.
There are no presently unexplored rental concession or abatements due under the
Lease except that Tenant is not obligated to pay Base Rent for the first four
months of the term of the Lease. Tenant has no credits, offsets, abatements,
defenses, counterclaims or deductions against any rental or other payments due
under the Lease respect to its performance of the other terms and conditions of
the Lease, and has asserted no claims against Landlord.
4. Tenant has paid to Landlord a security deposit in the amount of S37,302.75.
Tenant has not made any other payments to Landlord as a security deposit,
advance or prepaid rent.
5. Landlord is not, and was not, required to complete or pay for any work or
improvements to the Leased Premises and Tenant has accepted the Leased Premises
in its "AS-IS" condition.
<PAGE>
6. To the best knowledge of Tenant, Landlord is not in default in the
performance of any of the teens of the Lease, nor is there now any fact or
condition which, with notice or lapse of time or both, will become such a
default. Tenant has not delivered to Landlord any notice of default with respect
to the Landlord's obligations trader the Lease.
7. Tenant is not an affiliate of Landlord.
8. Tenant is in actual possession of the entire Leased Premises and, to the best
knowledge of Tenant' is not in any respect In default under any of the terms and
conditions of the Lease, nor is there now any fact or condition which, with
notice or lapse of time or both, will become such a default. Tenant has not
received from Landlord any notice of default with respect to Tenant's
obligations under the Lease.
9. Tenant has not assigned, transferred, mortgaged or otherwise encumbered its
interest under the Lease, nor subleased any of the Leased Premises, nor
permitted any person or entity to use the Leased Premises.
10. Except as expressly provided in the Lease, Tenant
(i) does not have any right to renew or extend the term of the Lease
(ii) does not have any to cancel or surrender the Lease prior to the expiration
of the term of the Lease,
(iii) does not have any option or rights of first refusal or first over to
purchase or lease all or any part of the Leased Premises or the real properly of
which the Leased Premises are a part,
(iv) does not have any title or interest with respect to the Leased Processes
other than as lessee under the Lease, and
(v) does not have any right to relocate into other proper owned by Landlord or
any of Landlord's affiliates.
11 There has not been filed by or against Tenant a petition in bankruptcy,
voluntary or otherwise, any assignment for the benefit of creditors, any
petition seeking reorganization arrangement under the bankruptcy laws of the
United States, or any state thereof or Nether action brought under said
bankruptcy laws with respect to Tenant.
12. Tenant has not given or received notice that Tenant'' insurance coverage
will be canceled or will not be renewed.
13. The individual executing this Tenant Estoppel Certificate on behalf of
Tenant represents and warrants that such person has the power and the authority
to execute this Tenant Esteemed Certificate on behalf of Tenant.
<PAGE>
14. Tenant has been advises that Landlord and Lender will rely upon the truth of
this certification in purchasing the Leased Premises and/or making a loan to be
secured by the Leased Premises. I his Tenant Estoppel Certificate shall inure to
the benefit of Landlord, Lender and their respective nominees, successors,
assigns, participants and designees and shall be binding upon Tenant and Its
successors and assigns
Dated this day of 199 .
Tenant
TYCOM CORPORATION, a Delaware corporation
By:
Name:
Title:
<PAGE>
COMMERCIAL LEASE - NET
(Single Tenant Building)
Basic Lease Information
Date: December 18 ,1996
Landlord: Shidler West Investment Corporation, a Delaware corporation, formerly
known as Brutten/Reynolds/Shidler Investment Corporation
Tenant: Tycom Corporation, a Delaware corporation
Premises (section 1.1): Address: 17862 Fitch, City of Irvine, County of Orange,
State of California
Term (section 2.1); Eleven (11) years plus the partial month between the
Commencement Date and the last day of the calendar month during which the
Commencement Date occurs.
Commencement Date (section 2.1): December 18, 1996
Expiration Date (section 2.1): December 31, 2007
Initial Base Rent (section 3.1(a)): S37,302.75 per month
Use (section 6.1): For office, warehousing, light manufacturing, storage,
shipping, conference center.
Liability Insurance (section 10.3): $5,000,000.00
Landlord's Address for Notice (section 23.1): c/o The Shidler Group, 2878
Camino del Rio South, Suite 260, San Diego California, 92108
Attn: Marc H. Brutten
Landlords Address for payment of Rent(Article 3): 2878 Camino del Rio South,
Suite 260, San Diego CA 92108. Attn: Controller
Option to Extend (Article 25 ): One five year option to exceed at fair market
rental.
Security Deposit (section 3.5): $37,302.75.
Tenant's Address (section 23,1): 17862 Pitch, Irvine, California
Exhibits and Addenda (section 24.3):
Exhibit A - Tenant Estoppel Certificate
Exhibit B - Legal Description
<PAGE>
The foregoing Basic Lease Information is incorporated in and made a part of the
Lease to which it is attached. If there is any conflict between the Basic Lease
Information and the Lease, the Lease shall control.
LANDLORD:
SHIDLER WEST INVESTMENT
CORPORATION, a Delaware corporation
By:
Its:
TENANT:
TYCOM CORPORATION, a Delaware
corporation
By:
Its:
<PAGE>
LEASE
THIS LEASE, made as of the date specified in the Basic Lease Information, by and
between the landlord specified in the Basic Lease Information ("Landlord"), and
the tenant specified in the Basic Lease Information ("Tenant"),
WITNESSETH:
ARTICLE 1
Premises
1.1 Landlord hereby leases to Tenant, and Tenant hereby leases from landlord,
for the term and subject to the covenants hereinafter set forth, to all of which
Landlord and Tenant hereby agree, the building specified in the Basic Lease
Information(the "Premises") containing sixty three thousand two hundred twenty-
five (63,225) square feet of space, which includes the land on which the
Premises are located and the improvements thereon.
ARTICLE 2
Term
2.1 The term of this Lease shall be eleven (11) years commencing on the Closing
Date as specified in that certain purchase Agreement between Tenant and
Brutten/Reynolds/Shidler Investment Corporation dated August 12, 1996, as
amended (the Commencement Dated, plus the partial month between the Tent sate
and the last day of the calendar month during which the Comment Date occurs and,
unless sooner terminated as hereinafter provided, shall end on the day prior to
the eleventh anniversary of the first day of the calendar month following the
Commencement Date (the Expiration Dates). Within thirty (30) days after the
determination of the Commencement Date, Landlord and Tenant shall execute a
memorandum acknowledging the Commencement Date and the Expiration Date.
2.2 If the Commencement Date is not the first day of a calendar month, Tenant
shall pay to Landlord, as additional rent, the Base Rent payable under section
3.1, calculated on a per diem basis, for the period from the Commencement Date
until the first day of the next full calendar month. Tenant to pay the Base
Rent in respect of such period to Landlord on the Commencement Date.
2.3 Tenant shall accept the Premises "As-is" on the Commencement Date. Landlord
shall have no obligation to construct or install any improvements in the
Premises. Tenant acknowledges that, prior to the Commencement Date, Tenant
occupied the Premises. Tenants possession of the Premises shall constitute
Tenant's acknowledgment that the Premises are in all respects in the condition
in which Landlord is required to deliver the Premises to Tenant under this Lease
and that Tenant has examined the Premises and is fully informed to Tenant's
satisfaction of the physical and environmental condition and the utility of the
Premises. Tenant acknowledges that Landlord, its agents and employees and other
persons acting on behalf of Landlord have made no representation or warranty of
any kind in connection with any matter relating to the physical or environmental
condition, value, fitness, use or zoning of the Premises upon which Tenant has
relied directly or indirectly for any purpose.
<PAGE>
ARTICLE 3
Rent
3.1 Tenant shall pay to Landlord the following amounts as rent for the Premises:
(a) During the period between the Commencement Date and the last day of the 1997
calendar year, Tenant shall pay to Landlord, as base monthly rent, the amount of
monthly rent specified in the Base Lease Information(the "Base Rent"); provided
that Tenant shall be obligated to pay only one-half (1/2) of the Base Rent for
the first eight (8) calendar months of the Lease Term (January through August
1997, inclusive). Commencing on the first day of the thirteenth full calendar
month after the Commencement Date, and on each anniversary of that date
thereafter (including during all renewal terms if any), the Base Rent shall be
increased every one (1) year on the anniversary of the Commencement Date, in
accordance with the increase in the United States Department of Labor, Bureau of
Labor Statistics, Consumer Price Index for Urban Wage Earners and Clerical
Workers (all items for the Los Angeles-Long Beach statistical area on the basis
of 1982-84=100) (the "Index"), as provided In Section 3.1(b).
(b) The Base Rent "shall be increased at the times specified in Subsection
3.1(a) above, in proportion to the increase in the Index which has occurred
between the month which is three months prior to the first month of the Term, or
the previous adjustment date, as applicable, and the month which is three months
prior to the month in which the rent is to be increased. Landlord shall notify
Tenant of each increase by delivering a written statement setting forth the
Index for the month which is three months prior to the first month of the Term,
the index for the month which is three months prior to the month in which the
Base Rent is to be increased, the percentage increase between those two indices,
and the new amount of the Base Rent. In no event shall any increase in Base
Monthly Rent under this paragraph 3.1(a) be more than seven percent (7%) or less
than three percent (3%) of the amount of the Base Rent payable during the
Immediately preceding twelve (12) months of the Term. Tenant shall pay the new
Base Rent from its effective date until the new periodic increase. Landlord's
notice may be given after the effective date of the increase since the Index for
the appropriate month may be unavailable on the effective date. In such event,
Tenant shall pay landlord the necessary rental adjustment for the months elapsed
between the effective date of the increase and Landlord's notice of such
increase within ten days after landlord's notice. If the format or components of
the Index are materially changed after the Commencement Date of Lease, 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 Date of Lease. Landlord Shall notify Tenant of the substituted index, which
shall be used to calculate the increase in the Base Rent. In making such
calculations, no effect shall be given to rent concessions or abatements (if
any).
(c) Throughout the Term of this Lease, Tenant shall pay, as additional rent, all
other amounts of money and charges required to be paid by Tenant under this
Lease, whether or not such amounts of money or charges are designated
"Additional rent." As used in this Lease, "rent" shall mean and include all Base
Rent and additional rent payable by Tenant in accordance with this Lease.
<PAGE>
3.2 It is the intention of Landlord and Tenant that the Base Rent payable by
Tenant to Landlord during the Entire Lease shall be absolutely net of all costs
and expenses incurred in connection with the management, operation, maintenance,
repair and replacement of the Premises in accordance with this Lease. Landlord
shall have no obligations or liabilities whatsoever with respect to the
management, operation, maintenance, repair or replacement of the Premises during
the term of this Lease, and Tenant shall manage, operate, maintain, repair and
replace the Premises in accordance with this Lease and shall pay all costs and
expenses incurred in connection therewith before such costs or expenses become
delinquent. Without limiting the generality of the foregoing, throughout the
entire term of this Lease, Tenant shall pay, as additional rent, all premiums
for all property and liability insurance covering the Premises carried by
Tenant, all Property Taxes (as defined in section 4.1) and all Other Taxes (as
defined in section 5.1) that accrue during or are allocable to the term of this
Lease.
3.3 Tenant shall pay all Base Rent to Landlord, in advance; on or before the
first day of each and every calendar month during the term of this Lease. Tenant
shall pay all additional rent upon demand. Tenant shall pay all rent to Landlord
without notice, demand, deduction or offset, in lawful money of the United
States of America, at the address of landlord specified in the Basic Lease
Information, or to such other person or at such other place as Landlord may from
time to time designate in writing.
3.4 Tenant acknowledges that the late payment by Tenant of any Base Rent or
additional rent (including the items described in section 3.2) will cause
Landlord to incur costs and expenses, the exact amount of which is extremely
difficult and impractical to fix. Such costs and expenses will include
administration and collection costs and processing and accounting expenses.
Therefore, if any Base Rent or additions; rent is not received by Landlord
within five (5) days after it is due, Tenant shall immediately pay to Landlord a
late charge equal to one and one-half percent (1 1/2%) of such delinquent
amount. Landlord and Tenant agree that such late charge represents a reasonable
estimate of such costs and expenses and is fair compensation to Landlord for the
loss suffered by Tenant's failure to make timely payment. In no event shall such
late Charge be deemed to grant to Tenant a grace period or extension of time
within which to pay any rent or prevent Landlord from exercising any right or
enforcing any remedy available to Landlord upon Tenant's failure to pay all rent
due under this Lease in a timely fashion, including the daft to terminate this
Lease. All amounts of money payable by Tenant to Landlord hereunder, If not paid
when due, shall bear interest from the date delinquent until paid at the rate of
ten percent (10%) Per annum but in no event in excess of the maximum annual
interest rate allowed by law for business loans (not primarily for personal,
family or household purposes) not exempt from the usuary law at such delinquency
date.
<PAGE>
3.5 Tenant has deposited with Landlord the sum of Thirty Seven Thousand Three
Hundred Two and 75/100 Dollars (37,302.75) as the security deposit ("Security
Deposit"). The Security Deposit shall be held by Landlord as security for the
faithful performance by tenant of all the terms, covenants and conditions of
this Lease to be kept and performed by Tenant during the Term. If Tenant
defaults with respect to any provision of this Lease, including, but not limited
to, the provisions relating to the payment of rentals or the condition of the
Premises upon the termination of the Lease. Landlord may (but shall not be
required to) use, apply or retain all or any part of the Security Deposit for
the payment of any rent or any other sum in default, for the payment of any
amount that landlord may spend or become obligated to spend by reason Of
Tenant's default, or to compensate Landlord for any other loss or damage that
Landlord may suffer by reason of Tenant's default. If any position of the
Security Deposit is so used or applied, Tenant shall, within five (5) days after
written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount. and Tenant's failure to do
so shall be a material breach of this Lease. Landlord shall not be required to
keep the Deposit separate from its general funds, and Tenant shall not be
entitled to interest on the Security Deposit. Landlord is not a trustee of the
Security Deposit and may use it in ordinary business, transfer it or assign it,
or use it in any combination of such ways. If Tenant fully and faithfully
performs every provision of this lease to be performed by it, the remaining
portion of the Security Deposit shall be returned to tenant (or, at Landlord's
option, to the last assignee of Tenant's interest hereunder) within 2 weeks
after the termination of the Lease and Tenant's vacation of the Premises;
provided, however, if any portion of the Security Deposit is to be applied to
repair damage to the Premises caused by Tenant or Tenant's agents, contractors
or assigns or to clean the Premises, then the balance of the Security Deposit
shall be returned to Tenant (or. at Landlord's option, to the last assignee of
Tenant's interest hereunder) no later than thirty (30) days from the date when
Landlord receives possession of the Premises. Tenant shall not transfer or
encumber the Security Deposit, nor shall Landlord be bound by Tenant's attempt
to do so. If Landlord's interest in this Lease is terminated, Landlord may
transfer the Security Deposit to Landlord's successor. in interest, and upon
such transfer Landlord shall be released from any liability to Tenant with
respect to the Security Deposit, and Tenant shall look only to the transferee
for any return of the Security Deposit to which Tenant may be entitled.
ARTICLE 4
Property Taxes
4.1 "Property taxes shall mean all taxes, assessments, excises, levies, fees and
charges(and any tax, assessment, excise, levy, fee or charge levied wholly or
partly in lieu thereof or as a substitute therefor or as an addition thereto) of
every kind and description, general or special, ordinary or extraordinary,
foreseen or unforeseen, secured or unsecured, whether or not now customary or
within the contemplation of Landlord and Tenant, that are levied, assessed,
charged, confirmed or imposed by any public or government authority on or
against, or otherwise with respect to, the Premises or any part thereof or any
personal property used in connection with the Premises. Property Taxes shall not
include net income (measured by the income of Landlord from ad sources or from
sources other than solely rent), franchise, inheritance or capital stock taxes
of Landlord, unless levied or assessed against Landlord in whole or in part in
lieu of, as a substitute for, or as an addition to any Property Taxes.
<PAGE>
ARTICLE 5
Other Taxes
5.1 "Other Taxes shall mean all taxes, assessments, excises, levies, owners
association dues or similar clauses, fees and charges, including all payments
related to the cost of providing facilities or services, whether or not now
customary or within the contemplation of Landlord and Tenant, that are levied,
assessed, charged, confirmed or imposed by any public or government authority
upon, or measured by, or reasonably attributable to (a) the Premises, (b) the
cost or value of Tenant's equipment, furniture, fixtures and other personal
property located in the Premises or the cost or value of any leasehold
improvements made in or to the Premises by or for Tenant, regardless of whether
title to such improvements is vested in Tenant or Landlord, (c) any rent payable
under this Lease, including any gross income tax or excise tax levied by any
public or government authority with respect to the receipt of any such rent, (d)
the possession, leasing, operation, management, maintenance, alteration, repair,
replacement, use or occupancy by Tenant of the Premises, or (e) this transaction
or any document to which Tenant is a party creating or transferring an interest
or an estate in the Premises. Other Taxes shall not include net income (measured
by the income of Landlord from all sources or from sources other than solely
rent), franchise, inheritance or capital stock taxes of Landlord, unless levied
or assessed against Landlord in whole or in lieu of, as a substitute for, or as
an addition to any Other Taxes.
ARTICLE 6
Use
6.1 The Premises shall be used only for the purpose specified in the Basic Lease
Information and no other purpose without Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed; provided, however,
Landlord's withholding of consent shall be conclusively presumed reasonable if
the proposed use would materially increase the wear and tear on or the risk of
damage to the Premises above levels or risks resulting from Tenants use as of
the date of this Lease or the proposed use is for an illegal, immoral or
disreputable purpose. Tenant shall not do or permit to be done in, on or about
the Premises, nor bring or keep or permit to be brought or kept therein,
anything which is prohibited by or will in any way conflict with any law,
ordinance, rule, regulation or order now in force or which may hereafter be
enacted, or which is prohibited by any insurance policy for the Premise, or will
in any way cause a cancellation or reduction of any insurance for the Premises.
Tenant shall not do or permit anything to be done in, on or about the Premises
which will in any way obstruct or interfere with the rights of the Landlord.
Tenant shall not maintain or permit any nuisance in, on or about the Premises or
commit or suffer to be committed any waste in, on or about the Premises.
<PAGE>
ARTICLE 7
Services
7.1 Tenant shall, at Tenant's sole cost and expense, supply the Premises with
electricity, heating, ventilating and air conditioning, water, natural gas,
lighting replacement for all lights, restroom supplies, telephone service,
window washing, security service, janitor, scavenger and disposal services, and
such other services as Tenant determines to furnish to the Premises. Landlord
shall not be in default hereunder or be liable for said damage or loss directly
or indirectly resulting from, nor shall the rent be abated or a constructive or
other eviction be deemed to have occurred by reason of the installation, use or
interruption of use of any equipment in connection with the furnishing of the
foregoing services, any failure to furnish or delay in furnishing any such
services, whether such failure or delay is caused by accident or said condition
beyond the control of Landlord or Tenant or by the making of repairs or
improvements to the Premises, or any limitation curtailment, rationing or
restriction on use of water, electricity, gas or any form of energy serving the
Premises, whether such results from mandatory governmental restriction or
voluntary compliance with governmental guidelines. Tenant will pay the full cost
of all of the foregoing services as additional rent.
ARTICLE 8
Maintenance and Repairs; Capital Improvements
8.1 Tenant shall, at all times during the term of this Lease and at Tenants sole
cost and expense, maintain, repair and replace the Premises and every part
thereof and all grounds, landscaping, parking areas, lighting, roof, walls,
floors, foundations, signs, heating, ventilating and air conditioning,
mechanical, electrical, plumbing, sprinkler and life safety systems, equipment,
fixtures, alterations, additions and improvements therein or thereon and keep
all of the foregoing clean and in good order and operating condition (including
painting the exterior of the Premises as often as reasonably needed to keep such
exterior in a good, well painted condition, cleaning interior and exterior
doors, windows and glass, and repairing and replacing any exterior windows and
glass that is broken, cracked or damaged). Tenant shall engage a duly licensed
Independent contractor to perform all maintenance and repair services on all
heating, ventilating and air conditioning, mechanical, electrical, plumbing,
sprinkler and life safety systems and equipment in the Premises that is to be
performed by Tenant in accordance with this section 8.1. Landlord and its
consultants or contractors shall have the right to inspect the Premises to
determine Tenant's compliance with this section 8.1, and Tenant shall promptly
complete any work required by Landlord or its consultants or contractors as a
result of any such inspection pursuant to the terms of this Lease. Tenant hereby
waives all rights to make repairs at the expense of Landlord or in lieu thereof
to vacate the Premises. Subject to section 9.3, Tenant shall, at the end of the
term of this Lease, surrender to Landlord the Premises and all alterations,
additions, fixtures and improvements therein or thereto in the same condition as
when received, ordinary wear and tear and damage thereto by fire or other
casualty excepted. Notwithstanding anything in the foregoing to the contrary,
Tenant shall only be obligated today a prorate portion of any capital
improvements (including replacements of capital items) determined by dividing
the number of years remaining in the term of the Lease at the date of the
improvement (or replacement) by the number of years of useful life of such
improvement (or replacement). In making the calculation required by the
preceding sentence, the term of any unexpired options to extend the Lease
contained herein shall not be included, provided that upon Tenant validly
exercising any such options, said calculation shall be remade including the term
of such validly exercised options and Tenant shall pay Landlord immediately upon
demand any sums owing to Landlord as a remit of such recalculation.
<PAGE>
ARTICLE 9
Alterations
9.1 Except for the improvements currently being made by Tenant at the Premises,
which have been approved by landlord, Tenant shall not make any alterations,
additions or improvements in or to the Premises or any part thereof, or attach
any fixtures or equipment thereto, without Landlord's prior written consent.
Notwithstanding the preceding sentence, Tenant may make such alterations,
additions or improvements without Landlord's consent only if the total cost of
such alterations, additions or improvements in any twelve (12) month period does
not exceed seventy five thousand dollars ($75,000) and such alterations,
additions or improvements will not affect in any way the structural, exterior
or roof elements of the Premises or mechanical, electrical, plumbing, utility or
life safety systems of the Premises, but Tenant shall give prior written notice
of any such alterations, additions or improvements to Landlord. In no event
shall Tenant be permitted to install underground storage tanks or fuel systems
on the Premises. Landlord's refusal to consent to the installment of an
underground tank or fuel system shall be conclusively presumed to be reasonable.
All alterations, additions and improvements in or to the Premises to which
Landlord's consent is required shall be made by Tenant at Tenant's sole cost and
expense as follows:
(a) Tenant shall submit to Landlord, for Landlord's written approval, complete
plans and specifications for all work to be done by Tenant. Such plans and
specification shall be prepared by the licensed architect(s) and engineer(s),
shall comply with all applicable codes, laws, ordinances, rules and regulations,
shall not adversely affect the structural elements of the Premises, shall be in
a form sufficient to secure the approval of all government authorities with
jurisdiction over the Premises, and shall be otherwise satisfactory to Landlord
in landlord's reasonable discretion.
(b) Landlord shall notify Tenant promptly in writing whether Landlord approves
or disapproves such plans and specifications and, if landlord disapproves such
plans and specifications, Landlord shall describe the reasons for disapproval.
Tenant may submit to Landlord revised plans and specifications for Landlord's
prior written approval. Tenant shall pay all costs, including the fees and
expenses of the licensed architect(s) and engineer(s), in preparing such plans
and specifications.
(c) All changes in the plans and specifications approved by Landlord shall be
subject to Landlord's prior written approval. If Tenant wishes to make any such
change in such approved plans and specifications, Tenant shall have such
architect(s) and engineer(s) prepare plans and specifications for such change
and submit them to Landlord for Landlord's written approval. Landlord shall
notify Tenant in writing promptly whether Landlord approves or disapproves such
change and, if Landlord disapproves such change Landlord shall describe the
reasons for disapproval. Tenant may submit to Landlord revised plans and
specifications for such change for landlord's written approval. After Landlord's
written approval of such change, such change shall become part of the plans and
specifications approved by Landlord.
<PAGE>
(d) Tenet shall obtain and comply ninth all budding permits and other
governmental permits and approvals required in connection with the work Tenant
shall, rough Tenants licensed contractor, perform the work substantially in
accordance with (it) the plans and specifications approved in writing by
Landlord, (ii) the permits obtained by Tenant, and iii) all applicable codes,
laws, ordinances, rules and regulations. Tenant shall pay, as additional
rent, the cost of all work including the cost of all utilities, permits,
fees, taxes, and property and liability insurance premiums in connection
therewith) required to make the alterations, additions and improvements.
Under no circumstances shall Landlord be liable to Tenant for any damage,
loss, cost or expense incurred by Tenant on account of any plans and
specifications, contractors or subcontractors, design of any work,
construction of any work or delay in completion of any work.
(e) Tenant shall give written notice to Landlord of the date on which
construction of any work will; be commenced at least ten (1-0) days prior to
such date. Tenant shall keep the Premises free from mechanics, materialmen's and
all other liens arising out of any work performed, labor supplied, mated
furnished or other obligations incurred by Tenant. Tenant shall promptly and
fully pay and-discharge all claims on which any such lien could be based.
Landlord shall have the tight to post and keep posted on the Premises any
notices that may be provided by law or which may deem to be proper for the
protection of Landlord and the Premises from such liens, and to take any other
action Landlord deems necessary to remove or discharge liens or encumbrances
at the expense of Tenant.
9.2 All alterations, additions, fixtures and improvements, whether temporary or
permanent in character, made in or to the Premises by Landlord or Tenant, shall
become part of the Premises and Landlord's property excluding however,
underground tanks which shall remain property of Tenant and shall be registered
by name of Tenant so long as this Lease remains in effect. Upon termination of
this Lease, Landlord shall have the right, at Landlords option, by giving
written notice to Tenant at any time before or within ten (10) days after such
termination, to retain all such alterations, additions, fixtures and
improvements in the Premises without compensation to Tenant, or to require
Tenant to remove all such alterations, additions, fixtures and improvements from
the Premises, repair all damage caused by any such removal, and restore the
Premises to the condition in which the Premises existed before such alterations,
additions, fixtures and improvements were made; provided that Tenant shall not
be required to remove any alterations, additions, fixtures or improvements that
Landlord has agreed, at the time such items were installed in the Premises, may
remain in the Premises. All movable furniture, equipment, trade fixtures and
other personal property shall remain the property of Tenant. Upon termination of
this Lease, Tenant shall, at Tenants expense, remove all such movable furniture,
equipment, trade fixtures and other personal property from the Premises and
repair all damage caused by any such removal. Termination of this Lease shall
not affect the obligations of Tenant pursuant to this section 9.2 to be
performed after such termination.
<PAGE>
ARTICLE 10
Insurance
10.1 Landlord shall not be liable to Tenant for any damage to or loss or theft
of any property or for any bodily or personal injury, illness or death of any
person in, on or about the Premises arising at any time and from any cause
whatsoever, except to the extent caused by the active negligence or willful
misconduct of Landlord. Tenant waives all claims against Landlord arising from
any liability described in this section 10.1, except to the extent caused by the
active negligence or willful misconduct of Landlord.
10.2 Tenant shall indemnity and defend Landlord against and hold Landlord
harmless from all claims, demands, liabilities, damages, losses, costs and
expenses, including reasonable attorneys' feed and disbursements, arising from
or related to any use or occupancy of the Premises, or any default in the
performance of Tenant's obligations, or any damage to any property ( including
property or employees and invitees of Tenant) or any bodily or personal injury,
illness or death of any person (including employees and invitees of Tenant)
occurring in, on or about the Premises or any part thereof or any part of the
building or the land containing the Premises arising at any time and from any
cause whatsoever (except to the extent caused by the active negligence or
willful misconduct of Landlord) or occurring outside the Premises when such
damage, bodily or personal injury, illness or death is caused by any act or
omission of Tenant or its agents, officers, employees, contractor invitees or
licensees. This section 10.2 shall survive the termination of this Lease with
respect to any damage, bodily or personal injury, illness or death occurring
prior to such termination.
10.3 Tenant shall, at all times during the term of this Lease and at Tenants
sole cost and expense, obtain and keep in force comprehensive general liability
insurance, including contractual liability (specifically covering this Lease),
and premises operations, all on an "occurrence" policy form, with a minimum
combined single limit in the amount specified in the Basic Lease Information per
occurrence for bodily or personal injury, illness or death of persons and damage
to property occurring in, nor about the Premises, such insurance shall name the
Landlord and any other parties designated by Landlord as additional insured.
Tenants shall, at Tenant's sole cost and expense, be responsible for insuring
Tenants furniture, equipment, computers, office machines and personal property.
10.4 Tenant shall at all times during the term of this Lease and at Tenants sole
cost and expense, obtain and keep in force worker's compensation and employer's
liability insurance for all states in which the Premises and any other
operations of the Tenant are located and any other state in which the Tenant or
its contractors or subcontractors may be subject to any statutory or other
liability arising in any manner whatsoever out of the actual or alleged
employment of others. The total limits of the employers liability coverage
required hereunder shall not be less than the amounts specified in section 10.3.
10.5 Tenant shall, at all times during the term of this Lease, at its sole cost
and expense, obtain and keep in force (a)insurance against loss or damage to the
Premises by fire and all other risks of physical loss covered by insurance of
the type now known as "special form," in an amount not less than the full
replacement cost of the Premises (without deduction for depreciation), including
the cost of debris removal and such endorsements as Landlord may reasonably
require, and containing the Replacement Cost Endorsements; (b) boiler and
machinery insurance covering pressure vessels, air tanks, boilers, machinery,
pressure piping, heating, ventilation and air conditioning equipment, and
elevator and escalator equipment, provided the Premises contain equipment of
such nature and against loss of occupancy or use arising from any of any such
items, in such amounts as Landlord may determine; and (c) plate glass insurance
in such amount as Landlord may reasonably determine if the Premises contain
plate glass.
<PAGE>
10.6 All insurance required to be maintained by Tenant under this Article 10 and
all renewals thereof shall be issued by good and responsible companies qualified
to do and doing business in the state where the Premises are located and having
a rating in Best's Insurance Guide of at least A-XI. All deductible amounts
under each such insurance policy shall be subject to Landlord's prior written
approval. Each policy to be maintained by Tenant shall expressly provide that
the policy shall not be canceled or the policy limit or conditions reduced
without thirty (30) days' prior written notice to Landlord. All insurance under
this article 10 to be maintained by Tenant, excluding workers compensation and
employer's liability insurance shall name Landlord and any other parties
designated by Landlord as an additional insured, shall be primary and
noncontributing with any insurance which may be carried by Landlord, shall
afford coverage for all claims based on any act, omission, event or condition
that occurred or arose (or the onset of which occurred or arose) during the
policy period, and shall expressly provide that Landlord, although named as an
additional insured, shall nevertheless be entitled to recover under the policy
for any loss, injury or damage to Landlord. Upon the issuance of each such
policy to be maintained by Tenant, Tenant shall deliver each such policy or a
certified copy and a certificate thereof to Landlord for retention by landlord.
If Tenant fails to insure or fails to furnish to Landlord upon notice to do so
any policy to be maintained by Tenant or certified copy and certificate thereof
as required Landlord shall have the right from time to time to effect such
insurance for the benefit of Tenant or Landlord or both of them and all premiums
paid by Landlord shall be payable by Tenant as additional rent on demand. Tenant
shall pay to Landlord, immediately upon demand all costs incurred by Landlord as
a result of Tenant's failure to obtain and maintain in effect the policies of
insurance required under this Article 10.
10.7 Tenant waives on behalf of all insurers under all policies of property,
liability and other insurance (excluding workers' compensation) now or hereafter
canted by Tenant insuring or covering the Premises, or any portion or any
contents thereof or-any operations therein, all rights of subrogation which any
insurer might otherwise, if at all, have any claims of Tenant against Landlord.
Landlord waves on behalf of all insurers under all polices of property,
liability and other insurance (excluding workers' compensation and employers
liability insurance) now or hereafter carried by Landlord insuring or covering
the Premises or any portion or any contents thereof, or any operations therein
all rights of subrogation which any insurer might otherwise, if at all, have to
any claims of Landlord against Tenant. Tenant shall, prior to or immediately
after the date of this Lease, procure from each of the insurers under all
polices of property, liability and other insurance (excluding workers'
compensation) now or hereafter carried by Tenant or covering the Premises, or
any portion or any contents thereof, or any operations therein, a waiver of all
rights of subrogation which the insurer might otherwise, if at all, have to any
claims of Tenant against Landlord as required by this section 10.7.
<PAGE>
ARTICLE 11
Compliance With Legal Requirements
11.1 Tenant shall, at Tenant's sole cost and expense, promptly comply with all
laws, ordinances, rules, regulations, orders and other requirements of any
government or public authority now in force or which may hereafter be in force,
with all requirements of any board of fire underwriters or other similar body
now or hereafter constituted, and with all directions and certificates of
occupancy issued pursuant to any law by any governmental agency or officer,
insofar as any thereof relate to or are required by the condition, use or
occupancy of the Premises or the operation, use or maintenance of any
personal property, fixtures, machinery, equipment or improvements in the
Premises.
ARTICLE 12
Assignment or Sublease
12.1 Tenant shall not, directly or indirectly, without the prior written consent
of Landlord (which consent shall not be unreasonably withheld), assign this
Lease or any interest herein or sublease the Premises or any part thereof, or
permit the use or occupancy of the Premises by any person or entity other than
Tenant; provided, however, lord's withholding of consent to be conclusively
presumed reasonable if: (a) the financial condition of the proposed transferee
is not suitable to perform the obligations being assumed by it hereunder, or (b)
the proposed use of the Premises (i) is not permitted hereunder or under any
legal and other requirements described in Article 11, or ii) would naturally
increase the wear and tear on or the risk of damage to the Premises above levels
or risks resulting from Tenant's use as of the date of this Lease, or (iii) is
for any illegal, immoral or disreputable purpose. This Lease has not, nor shall
any interest, be assignable as to the interest of Tenant involuntarily or by
operation of law without the prior written consent of Landlord. Any of the
foregoing acts without such prewritten consent of Landlord shall be void and
shall, at the option of Landlord, constitute a default that entitles Landlord to
terminate this Lease. Tenant agrees that the instrument by which any assignment
or sublease to which Landlord consents is accomplished shall expressly provide
that the assignee or subtenant will perform all of the covenants to be performed
by Tenant under this Lease (in the case of a sublease, only insofar as such
covenants relate to the portion of the Premises subject to such sublease) as and
when performance is due after the effective date of the assignment or sublease
and that Landlord will have the right to enforce such covenants directly against
such assignee or subtenant. Any purported assignment or sublease without an
instrument containing the foregoing provisions shall be void. Tenant shall in
all cases remain liable for the performance by any assignee or subtenant of all
such covenants.
12.2 If Landlord consents in writing, Tenant may complete the intended
assignment or sublease subject to the following covenants: (a) no assignment or
sublease shall be valid and no assignee or subtenant shall take possession of
the Premises or any part thereof until an executed duplicate original of such
assignment or sublease, in compliance with section 12.1, has been delivered to
Landlord, and (b) no assignee or subtenant shall have a right further to assign
or sublease without Landlord's consent.
12.3 No assignment or sublease whatsoever shall release Tenant from Tenant's
obligations and liabilities under this Lease or alter the primary liability of
Tenant to pay all rent and to perform all obligations to be paid and performed
by Tenant. The acceptance of rent by Landlord from any other person or entity
shall not be deemed to be a waiver by Landlord of any provision of this Lease.
Consent to one assignment or sublease shall not be deemed consent to any
subsequent assignment or sublease. If any assignee, subtenant or successor of
Tenant defaults in the performance of any obligation to be performed by Tenant
under this Lease. Landlord may proceed directly against Tenant without the
necessity of exhausting remedies against such assignee, subtenant or successor.
Landlord may consent to subsequent assignments or subleases or amendments or
modifications to this Lease with assignees, subtenants or successors of Tenant,
without noticing Tenant or any successor of Tenant and without obtaining any
consent thereto from Tenant or any successor of Tenant, and such action shall
not release Tenant from liability under this Lease.
<PAGE>
ARTICLE 13
Entry by Landlord
13.1 Landlord shall have the right to enter the Premises during normal business
hours and upon 24 hours notice to Tenant; except in an emergency, to (a) inspect
the Premises, (b)exhibit the Premises to prospective purchasers, lenders or
tenants, (c) determine whether Tenant is performing all of Tenant's obligations,
(d) perform any obligations of Tenant in accordance with section 14.5, (e) post
notices of nonresponsibility, "For Sale" and "For lease" signs in and about the
Premises, (f) make any repairs to the Premises and (a) investigate and perform
tests to determine Tenant's compliance with Article 21. Tenant waives all claims
for damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises or any other
loss occasioned by such entry. If Landlord removes any existing underground
tanks and fueling system from the Premises, Landlord shall have no obligation to
replace them or provide alternate tanks or a fueling system. Landlord shall at
all times have a key to unlock all such doors and Landlord shall have the night
to use any and all means which Landlord may deem proper to open such doors in an
emergency to obtain entry to the Premises. Any entry to the Premises obtained by
landlord by any of such means shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into or a detainer of the Premises or
an eviction, actual or constructive, of Tenant from the Premises or any portion
thereof, provided, however, Landlord shall minimize any interference with
Tenant's operations.
ARTICLE 14
Events of Default and Remedies
14.1 The occurrence of any one or more of the following events ("Event of
Default") shall constitute a breach of this Lease by Tenant:
(a) Tenant fails to pay any Base Rent within five (5) days after such rent
becomes due: or
(b) Tenant fails to pay any additional rent or other amount of money or charge
payable by Tenant hereunder as and when such additional rent or amount or charge
becomes due and Payable and such failure continues for more than ten (10) days
after Landlord gives written notice thereof to Tenant; provided, however, that
after the second such failure in a calendar year, only the passage of time, but
no further notice, shall be required to establish an Event of Default in the
same calendar year, unless Tenant would not know that such payment were due
without notice; or
(c) Tenant fails to perform or breaches any other agreement or covenant of this
Lease to be performed or observed by Tenant as and when performance or
observance is due and such failure or breach continues for more than thirty (30)
days after landlord gives written notice thereof to Tenant, provided; however,
that if by the nature of such agreement or covenant, such failure or breach
cannot reasonably be cued within such period of thirty (30) days, an Event of
Default shall not exist as long as Tenant commences with due diligence and
dispatch the curing of such failure or breach within such period of thirty (30)
days and, having so commenced; thereafter prosecutes with diligence and dispatch
and completes the curing of such failure or breech within a reasonable time; or
<PAGE>
(d) Tenant (i) files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy, insolvency or other debtors, relief law of any jurisdiction, (ii)
makes an assignment for the benefit of its creditors, (iii) consents to the
appointment of a custodian, receiver, trustee or other officer with similar
powers of Tenant or of any substantial part of Tenant's property, or TV) takes
action for the purpose of any of the foregoing; or
(e) Without consent by Tenant, a court or government authority enters an order,
and such order is not vacated within sixty (60) days, (i) appointing a
custodian, receiver, trustee or other officer with similar powers with respect
to Tenant or with respect to any substantial part of Tenant's property, or (ii)
constituting an order for relief or approving a petition for relief or
reorganization or arrangement or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy, insolvency or other debtors'
relief law of any jurisdiction, or (iii) ordering the dissolution, winding-up or
liquidation of Tenant; or
(f) This Lease or any estate of Tenant hereunder is levied upon under any
attachment or execution and such attachment or execution is not vacated within
sixty (60) days; or
(g) Tenant abandons the Premises.
14.2 If an Event of Default occurs, Landlord shall have the right at any time to
give a written termination notice to Tenant and, on the date specified in such
notice, Tenants right to possession shall terminate and this Lease shall
terminate. Upon such termination, Landlord shall have the right to recover from
Tenant:
(a) The worth at the time of award of all unpaid rent which had been earned at
the time of termination;
(b) The worth at the time of award of the amount by which all unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that Tenant proves-could have been reasonably
avoided;
(c) The worth at the time of award of the amount by which all unpaid rent for
the balance of the term of this Lease after the time of award exceeds the amount
of such rental loss that Tenant proves could be reasonably avoided; and
(d) All other amounts necessary to compensate Landlord for all the detriment
proximately caused by tenant's failure to perform all of Tenant's obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom. The "worth at the time of award" of the amounts referred to in
clauses (a) and (b) above shall be computed by allowing interest at the rate of
ten percent (10%) per annum but not greater than the maximum annual interest
rate allowed by law for business loans (not primarily for personal, family or
household purposes) not exempt Mom the usury law at the time of termination. The
"Worth at the time of award" of the amount referred to in clause (c) above shall
be computed by discounting such amount at the discount rate of the Federal
Reserve Bank located nearest the Premises at the time of award plus one percent
(1%). For the purpose of determining unpaid rent under clauses (a), (b) and (c)
above, the rent reserved in this Lease shall be deemed to be the total rent
payable by Tenant under Articles 3 and 5 hereof.
<PAGE>
14.3 Even though Tenant has breached this Lease, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right to possession,
and Landlord shall have the right to enforce all its rights and remedies under
this Lease, including the right to recover all rent as it becomes due under this
Lease. Acts of maintenance or preservation or efforts to relet the Premises or
the appointment of a receiver upon initiative of Landlord to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession unless written notice of termination is given by Landlord to
Tenant.
14.4 The remedies provided for in this Lease are in addition to all other
remedies available to Landlord at law or in equity by statute or otherwise.
14.5 All agreements and covenants to be performed or observed by Tenant under
this Lease shall, except as otherwise expressly provided in this Lease, be at
Tenants sole cost and expense and without any abatement of rent. If Tenant fails
to pay any sum of money to be paid by Tenant or to perform any other act to be
performed by Tenant under this Lease, Landlord shall have the right, but shall
not be obligated, and without waiving or releasing Tenant from any obligations
of Tenant, to make any such payment or to perform any such other act on behalf
of Tenant in accordance with this Lease. All sums so paid by landlord and all
necessary incidental costs shall be deemed additional rent hereunder and shall
be payable by Tenant to Landlord on demand, together with interest on all such
sums from the date of expenditure by landlord to the date of repayment by Tenant
at the rate of ten percent (10%) per annum but not greater than the maximum
annual interest rate allowed by law for business loans (not primarily for
personal, family or household purposes) not exempt from the usury law at the
date of expenditure. Landlord shall have, in addition to all other rights and
remedies of Landlord, the same rights and remedies in the event of the
nonpayment of such sums plus interest by Tenant as in the case of default by
Tenant in the payment of rent.
14.6 If Tenant abandons or surrenders the Premises, or is dispossessed by
process of law or otherwise, any movable furniture, equipment, trade fixtures or
personal property belonging to Tenant and left in the Premises shall be deemed
to be abandoned, at the option of Landlord, and Landlord shall have the right to
sell or otherwise dispose of such personal property in any commercially
reasonable manner.
<PAGE>
ARTICLE 15
Damage or Destruction
15.1 If the Premises, or any part thereof, is damaged by fire or other casualty
before the Commencement Date or during the term of this Lease, Tenant shall
repair such damage and restore the Premises to substantially the same or better
condition as existed before the occurrence of such fire or other casualty,
Tenant shall repair and replace all such movable furniture, equipment, trade
fixtures and personal property, and this Lease shall remain in full force and
effect. Such repair and replacement by Tenant shall be done in accordance with
Article 9. In no event shall rent abate. Provided Tenant is not in default under
this Lease (and no event has occurred which, with the passage of time, the
giving of notice, or both, would constitute a default), and provided Tenant has
(i) delivered to Landlord plans and specifications and a budget for such repair
and restoration (all of which Landlord shall have approved in its reasonable
judgment), and (ii) deposited with Landlord (or with an insurance company,
lender or escrow company mutually acceptable to Landlord and Tenant) cash (or
provided security reasonably satisfactory to Landlord that Tenant will be able
to meet its obligation to pay its share of any repair cost as and when the same
become due to) in the sum equal to the excess, if any, of the total cost set
forth in such approved budget over the amount of insurance proceeds received on
account of such casualty, then Landlord shall make available to Tenant all
insurance proceeds actually received by Landlord on account of such casualty,
for application to the costs of such approved repair and restoration. Such
insurance proceeds shall be made available to Tenant pursuant to disbursement
procedures (i) required by any lender with a lien on the Premises, (ii) required
by any insurance company providing such insurance proceeds, provided that the
disbursement control procedures of such insurance company are reasonably
acceptable to Landlord and Tenant, or (iii) if no disbursement control
procedures are required under (I) or (ii), as mutually agreed by Landlord and
Tenant.
15.2 If the Premises, or any part thereof, is damaged by fire or other casualty
and (a) such fire or other casualty occurs during the last twelve (12) months of
the term of this Lease and the repair and restoration work to be performed by
Tenant in accordance with section 15.1 cannot, as reasonably estimated by
Landlord, be completed within two (2) months after the occurrence of such fire
or other casualty, or (b) the insurance proceeds received by Landlord and Tenant
in respect of such damage are not adequate to pay the entire cost, as reasonably
estimated by Landlord, of the repair and restoration work to be performed by
Landlord in accordance with section 15.1 then, either Landlord or Tenant shall
have the right, by giving written notice to the other within sixty (60) days
after the occurrence of such fire or other casualty, to terminate this Lease as
of the date of such casualty, in which case all insurance proceeds on account of
such casualty shall be paid to Landlord. In the event that the Landlord elects
to terminate the Lease pursuant to this section 15.2 and Tenant has any
unexercised options to extend the term of this Lease pursuant to the terms and
conditions hereof, the Tenant may within fifteen (15) days of the date of
Landlord's election to terminate notify landlord of Tenant's exercise of such
option, in which event this Lease shall not terminate and Tenant shall proceed
to rebuild the Premises in accordance with section l5.1.
<PAGE>
ARTICLE 16
Eminent Domain
16.1 If a substantial portion of the Premises is taken and the remaining portion
of the Premises is not reasonably suitable for Tenant's purposes, or if a
portion of the Premises is taken resulting in loss of access to and from the
Premises without reasonable substitute access being available, Landlord and
Tenant each shall have the right, by giving written notice to the other within
thirty (30) days after the date of such taking, to terminate this Lease. If
either Landlord or Tenant exercises such right to terminate this Lease in
accordance with this section 16.1, this Lease shall terminate as of the date of
such taking. If neither Landlord nor Tenant exercises such right to terminate
this Lease in accordance with this section 16.1, this Lease shall terminate as
to the portion of the Premises so taken as of the date of such taking and shall
remain in full force and effect as to the portion of the Premises not so taken,
Tenant shall restore the portion of the Premises not so taken to an integrated
architectural unit in accordance with Article 9 and the Base Rent shall be
reduced as of the date of such taking in the proportion that the rentable area
of the Premises so taken bears to the total rentable area of the Premises. If
all of the Premises is taken by exercise of the power of eminent domain before
the Commencement Date or during the term of this Lease, this Lease shall
terminate as of the date of such taking.
16.2 If all or any part of the Premises is taken by exercise of the power of
eminent domain, all awards, compensation, damages, income, rent and interest
payable in connection with such taking shall, except as expressly set forth in
this section 16.2, be paid to and become the property of Landlord, and Tenant
hereby assigns to Landlord all of the foregoing. Without limiting the generality
of the foregoing, Tenant shall have no claim against Landlord or the entity
exercising the power of eminent domain for the value of the leasehold estate
created by this Lease or any unexpired term of this Lease. Tenant shall have the
right to claim and receive directly from the entity exercising the power eminent
domain only the share of any award determined to be owing to Tenant for the
taking of improvements installed in the portion of the Premises so taken by
Tenant at Tenant's sole cost and expense based on the unamortized cost actually
paid by Tenant for such improvements, for the taking of Tenant's movable
furniture, equipment, trade fixtures and personal property, for loss of
goodwill, for interference with or interruption of Tenant's business, or for
removal and relocation expenses.
16.3 In the event of any taking, unless this Lease is terminated as provided in
section 16.1, this Lease shall continue in full force and effect, Tenant shall
continue to pay all of the rent and to perform all of the covenants of Tenant in
accordance with this Lease and Tenant shall restore the Premises to an
integrated architectural unit in accordance with Article 9. Provided Tenant is
not in default under this Lease (and no event has occurred which, with the
passage of time, the giving of notice, or both, would constitute a default), and
provided Tenant has (i) delivered to Landlord plans and specifications and a
budget for such repair and restoration (all of which Landlord shall have
approved in its reasonable judgment), and (ii) deposited with Landlord cash (or
provided security reasonably satisfactory to Landlord that Tenant will be able
to meet its obligation to pay its share of any repair cost as and when the same
become due) in the sum equal to the excess, if any, of the total cost set forth
in such approved budget over the amount of condemnation award proceeds received
on account of such taking, then Landlord shall make available to Tenant all
condemnation award proceeds actually received by landlord on account of such
taking, for application to the costs of such approved repair and restoration.
Such condemnation award proceeds shall be made available to Tenant pursuant to
disbursement procedures (i) required by any lender with a lien on the Premises,
or (ii) if there is no lender with a lien on the Premises that requires such
disbursement control procedures, as mutually agreed by Landlord and Tenant.
16.4 As used in this Article 16, a "taking" means the acquisition of all or part
of the Premises for a public use by exercise of the power of eminent domain (or
a sale of any or all of the Premises in lieu, or under threat, thereof) and the
taking shall be considered to occur as of the earlier of the date on which
possession of the Premises (or part so taken) by the entity exercising the power
of eminent domain is authorized as stated in an order for possession or the date
on which title to the Premises (or part so taken) vests in the entity exercising
the power of eminent domain.
<PAGE>
ARTICLE 17
Subordination, Merger and Sale
17.1 This Lease shall be subject and subordinate at all times to the lien of all
mortgages and deeds of trust securing any amount or amounts whatsoever, and any
ground lease or master lease of the Premises, which may now exist or hereafter
be placed on or against the Premises or on or against Landlord's interest or
estate therein, all without the necessity of having further instruments executed
by Tenant to effect such subordination. Notwithstanding the foregoing, in
the event of a foreclosure of any such mortgage or deed of trust or of any other
action or proceeding for the enforcement thereof, or of any sale thereunder,
this Lease shall not be terminated or extinguished, nor shall the rights and
possession of Tenant hereunder be disturbed, if no Event of Default then exists
under this Lease, and Tenant shall attorn to the person who acquires Landlords
interest hereunder through any such mortgage or deed of trust. Tenant agrees to
execute, acknowledge and deliver upon demand such further instruments evidencing
such subordination of this Lease to the lien of all such mortgages and deeds of
trust or to all such ground leases or master leases of the Premises as may
reasonably be required by landlord or Tenant, but Tenant's covenant to
subordinate this Lease to mortgages or deeds of trust, or ground leases or
master leases, hereafter executed is conditioned upon each such senior mortgage
or deed of trust, or ground lease or master lease, or a separate subordination
agreement, containing the commitments specified in the preceding sentence.
Without limiting the generality of the foregoing, Tenant agrees to enter into a
subordination, nondisturbance and attornment agreement in the form required by
the holder of any such mortgage or deed of trust or by any party to any such
ground lease or master lease.
17.2 The voluntary or other surrender of this Lease by Tenant, or mutual
cancellation thereof, shall not work a merger and shall, at the option of
Landlord, terminate all or any existing subleases or subtenancies or operate as
an assignment to Landlord of any or all such subleases or subtenancies.
17.3 If the original Landlord hereunder, or any successor owner of the Premises,
sells or conveys the Premises, all liabilities and obligations on the past of
the original Landlord, or such successor owner, under this Lease accruing after
such sale or conveyance shall terminate and the original Landlord, or such
successor owner, shall automatically be released therefrom, and thereupon all
such liabilities and obligations shall be binding upon the new owner. Tenant
agrees to attorn to such new owner.
<PAGE>
ARTICLE 18
Estoppel Certificate
18.1 At any tune and from time to time, Tenant shall, within ten (10) days after
written request by Landlord, execute, acknowledge and deliver to Landlord a
certificate, in the form attached as Exhibit A, certifying: (a) that this Lease
is unmodified and in full force and effect (or, if there have been
modifications, that this Lease is in full force and effect as modified, and
stating the date and nature of each modification); (b) the Commencement Date and
the Expiration Date determined in accordance with Article 2 and the date, if
any, to which all rent and other sums payable hereunder have been paid; (c) that
no notice has been received by Tenant of any default by Tenant hereunder which
has not been cured, except as to defaults specified in such certificate; (d)
that Landlord is not in default under this Lease, except as to defaults
specified in such certificate; and (e) such other matters as may be reasonably
requested by Landlord or any actual or prospective purchaser or mortgage lender.
Any such certificate may be relied upon by Landlord and any actual or
prospective purchaser or mortgage lender of the Premises or any part thereof.
ARTICLE 19
Holding Over
19.1 If, without objection by Landlord, Tenant holds possession of the Premises
after expiration of the term of this Lease, Tenant shall become a tenant from
month to month upon the terms herein specified but at a Base Rent equal to the
rent previously due under this Lease or such other Base Rent as Landlord and
Tenant may agree. If Tenant holds possession of the Premises after expiration of
the term of this Lease over Landlord's objection, Tenant shall have no
continuing right to occupy the Premises but shall pay for any such period after
the expiration of this Lease that Tenant occupies the Premises a Base Rent equal
to two hundred percent (200%) of the Base Rent in effect at the expiration of
the term of this Lease pursuant to Article 3, payable in advance on or before
the first day of each month. Such month to month tenancy may be terminated by
either Landlord or Tenant by giving thirty (30) days' written notice of
termination to the other at any time.
ARTICLE 20
Financial Statements
20.1 On or before April 1 of each year, Tenant shall deliver to Landlord
Tenant's audited financial statements ("Financial Statements") for the fiscal
year of Tenant ended on the previous December 31, which Financial Statements
shall include an audited consolidated balance sheet of Tenant and its
consolidated subsidiaries as at the end of such fiscal year, a consolidated
statement of operations of Tenant and its consolidated subsidiaries for such
fiscal year, and a certificate of Tenant's auditor (which shall be a recognized
national independent accounting firm) to the effect that such Financial
Statements were prepared in accordance with generally accepted accounting
principals consistently applied and fairly present the financial condition and
operations of Tenant and its consolidated subsidiaries for and as at the end of
such fiscal year.
<PAGE>
ARTICLE 21
Hazardous Materials
21.1 As used herein, the term "Hazardous Materials" means any hazardous or toxic
substance, material or waste, or any pollutant or contaminant, or words of
similar import, which is or becomes regulated by any local governmental
authority, the state in which the Premises are located, or the United States
Government. The term "Hazardous Material" includes, but is not limited to, any
material or substance which is, (i) designated as a "hazardous substance"
pursuant to section 311 of the Federal Water Pollution Control Act (33 U.S.C.
section 1317), (ii) defined as a "hazardous waste" pursuant to section 1004 of
the Federal Resource Conservation and Recovery Act, 42 U.S.C. section 6901, et
seq. (42 U.S.C. section 6903), (iii) defined as a "Hazardous substance" pursuant
to section 101 of the Comprehensive Environmental Response Compensation and
Liability Act (42 U.S.C. section 9601, et seq.), (iv) asbestos, (v) petroleum
(including crude oil or any fraction thereof, natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel, or any mixture
thereof), (vi) petroleum products, (vii) polychlorinated biphenyls, (viii) urea
formaldehyde, (ix) radon gas, (x) radioactive matter, (xi) medical waste, and
(xii) chemicals which may cause cancer or reproductive toxicity.
21.2 As used herein, the term "Environmental Requirements" means all laws,
ordinances, rules, regulations, orders and other requirements of any government
or public authority now in force or which may hereafter be in force relating to
protection of human health or the environment, including all requirements
pertaining to reporting, licensing, permitting, investigation and remediation of
emissions, discharges, storage, disposal or releases of Hazardous Materials and
all requirements pertaining to the protection of the health and safety of
employees or the public.
21.3 Tenant shall not permit or conduct the handling, use, generation,
treatment, storage or disposal on, in or about the Premises of any Hazardous
Material in violation of any Environmental law.
21.4 Tenant shall, within five (5) days after the receipt thereof, give written
notice to Landlord of any notice or other communication regarding any (a) actual
or alleged violation of Environmental Requirements by Tenant or with respect to
the Premises, (b) actual or threatened migration of Hazardous Material from the
Premises, or (c) the existence of Hazardous Material in or on the Premises and
the uses thereof or regarding any actual or threatened investigation, inquiry,
lawsuit, claim, citation, directive, summons, proceeding, complaint, notice,
order, writ or injunction relating to any of the foregoing.
<PAGE>
21.5 Tenant shall indemnify, defend (with counsel reasonably approved by
Landlord) and hold Landlord harmless from and against any and all claims,
demands, liabilities, damages, fines, encumbrances, liens, losses, costs and
expenses, including reasonable attorneys' fees and disbursements, and costs and
expenses of investigation (collectively, "Claims") which arise during the Term
of this Lease as a result of the breach by Tenant of any of the obligations and
covenants set forth in Sections 21.3 and 21.4 above and/or any contamination of
the Premises directly or indirectly arising from the activities of Tenant.
Tenant shall, to the reasonable satisfaction of Landlord, perform all remedial
actions necessary to remove any Hazardous Material in or on the Premises on or
after the Commencement Date or to remedy actual or threatened migration from the
Premises of any Hazardous Material or to remedy any actual or threatened
violation of Environmental Requirements, provided such remedial action is
required under Environmental Requirements. This section 21.5 shall survive
termination of this Lease. Notwithstanding anything contained in this Section
21.5 to the contrary, Tenant (in its capacity as tenant and without limiting or
otherwise affecting any liability it may have as seller under the purchase
agreement between Landlord and Tenant or as a prior owner of the Premises) shall
not be responsible under this section 21.5 for any costs or expenses relating to
the remediation or cleanup of Hazardous Materials which (i) were located on,
under or about the Property prior to the date of this Lease and were not caused
by Tenant, its agents, contractors, assigns, guests or invitees, (ii) migrate
onto the Premises during the term of this Lease from an offsite source through
no fault or culpability of Tenant, or (iii) are placed or discharged on or about
the Property by Landlord or Landlord's employees, contractors, agents and
invitees (collectively, "Non-Tenant Conditions").
21.6 14 at any time when the term of this Lease (including any renewal term)
would expire but for the terms of this section 21.6, a Hazardous Material exists
in, on, about or under the Premises, then the term of this Lease shall
automatically be extended and this Lease shall remain in effect until the
earlier of (i) the completion of all remedial action required under section
21.5, or (ii) the date specified in a written notice from Landlord to Tenant
terminating this Lease. During any such extension period, Tenant shall perform
all of its obligations under this Lease including payments of all rent due
hereunder.
ARTICLE 22
Waiver
22.1 The waiver by Landlord or Tenant of any breach of any covenant in this
Lease shall not be deemed to be a waver of any subsequent breach of the same or
any other covenant in this Lease, nor shall any custom or practice which may
grow up between Landlord and Tenant in the administration of this Lease be
construed to waive or to lessen the right of Landlord or Tenant to insist upon
the performance by Landlord or Tenant in strict accordance with this Lease. The
subsequent acceptance of rent hereunder by Landlord or the payment of rent by
Tenant shall not waive any preceding breach by Tenant of any covenant in this
Lease, nor cure any Event of Default, nor waive any forfeiture of this Lease or
unlawful detainer action, other than the failure of Tenant to pay the particular
rent so accepted, regardless of Landlord's or Tenant's knowledge of such
preceding breach at the time of acceptance or payment of such rent.
<PAGE>
ARTICLE 23
Notices
23.1 All requests, approvals, consents, notices and other communications given
by Landlord or Tenant under this Lease shall be properly given only if made in
writing and either deposited in the United States mail, postage prepaid,
certified with return receipt requested, or delivered by hand (which may be
through a messenger or recognized delivery or courier service) and addressed as
follows: To Landlord at the address of Landlord specified in the Basic Lease
Information, or at such other place as Landlord may from time to time designate
in a written notice to Tenant; and to Tenant, before the Commencement Date, at
the address of Tenant specified in the Basic Lease Information, and after the
Commencement Date, at the Premises, or at such other place as Tenant may from
time to time designate in a written notice to Landlord. Such requests,
approvals, consents, notices and other communications shall be effective on the
date of receipt (evidenced by the certified mail receipt) if mailed or on the
date of delivery if hand delivered.
ARTICLE 24
Miscellaneous
24.1 The words "Landlord" and "Tenant" as used herein shall include the plural
as well as the singular. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." Tenant shall
indemnify and defend Landlord against and hold Landlord harmless from all
claims, demands, liabilities, damages, losses, costs and expenses, including
reasonable attorneys'' fees and disbursements, arising out of or resulting from
any failure by Tenant to perform any of its obligations or any breach by Tenant
of any of its representations or warranties in accordance with this Lease. If
there is more that one Tenant, the obligations hereunder imposed upon Tenant
shall be joint and several. Time is of the essence of this Lease and each and
all of its provisions. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for lease,
and it is not effective as a Lease or otherwise until execution and delivery by
both Landlord and Tenant. Subject to Article 12, this Lease shall benefit and
bind Landlord and Tenant and the personal representatives, heirs , successors
and assigns of Landlord and Tenant. If any provision of this Lease is determined
to be illegal or unenforceable, such determination shall not affect any other
provision of this Lease and all such other provisions shall remain in full force
and effect. This Lease shall be governed by and construed in accordance with the
laws of the state where the Premises are located.
24.2 If there is any legal action or proceeding between Landlord and Tenant to
enforce this Lease or to protect or establish any right or remedy under this
Lease, the unsuccessful party to such action or proceeding shall pay to the
prevailing party all costs and expenses, including reasonable attorneys' fees
and disbursements, incurred by such prevailing party in such action or
proceeding and in any appeal in connection therewith. If such prevailing parry
recovers a judgment in any such action, proceeding or appeal, such costs,
expenses attorneys' fees and disbursements shall be included in and as a part of
such judgment.
24.3 The exhibits and addenda, if any, specified in the Basic Lease Information
are attached to and made a part of this Lease.
24.4 Tenant warrants and represents to Landlord that Tenant has not authorized
or employed, or acted by implication to authorize or to employ, any real estate
broker or salesman to act for Tenant in connection with this Lease.
<PAGE>
24.5 Tenant and each person executing this Lease on behalf of Tenant represents
and warrants to Landlord that (a) Tenant is a corporation, duly organized
validly existing under the laws of the State of Delaware, (b) Tenant is
qualified to do business in the state where the Premises is located, (c) Tenant
has full right, power and authority to enter into this Lease and to perform all
of Tenant's obligations hereunder, and (d) each person signing this Lease on
behalf of Tenant is duly and validly authorized to do so.
24.6 Landlord and each person executing this Lease on behalf of Landlord
represents and warrants to Tenant that (a) Landlord is a corporation, duly
organized and validly existing under the laws of the State of Delaware, (b)
Landlord is qualified to do business in the state where the Premises is located,
(c) Landlord has full right, power and authority to enter into this Lease and to
perform all of Landlord's obligations hereunder, and (d) each person signing
this Lease on behalf of Landlord is duly and validly authorized to do so.
24.6 There are no oral agreements between Landlord and Tenant affecting this
Lease, and this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, offers, agreements and understandings, oral or written,
if any, between Landlord and Tenant or displayed by Landlord to Tenant with
respect to the subject matter of this Lease or the Premises. There are no
representations between Landlord and Tenant or between any real estate broker
and Tenant other than those expressly set forth in this Lease and all reliance
with respect to any representations is solely upon representations expressly set
forth in this Lease. This Lease may not be amended or modified in any respect
whatsoever except by an instrument in writing signed by Landlord and Tenant.
ARTICLE 25
Option to Extend
25.1 Landlord grants to Tenant the option to extend the Term (the "Renewal
Option") as of the Expiration Date of the initial Term for one period of five
(5) years (the "Renewal Term"). The Renewal Term shall commence immediately
follows the Expiration Date of the initial Term and shall expire as of midnight
on the day prior to the fifth (5th) anniversary of the commencement of the
Renewal Term. The Renewal Option shall be exercised, if at all, by notice (the
"Renewal Notice") to Landlord at any time prior to nine (9) months prior to the
Expiration Date of the initial Term, which notice shall be irrevocable by
Tenant. Notwithstanding the foregoing, if an event of default exists under this
Lease and all applicable grace periods have expired, either at the time Tenant
exercises the Renewal Option or at any time thereafter prior to or upon the
commencement of the Renewal Term, Landlord shall have, in addition to all of
Landlord's other rights and remedies under this Lease, the right to terminate
the Renewal Option and to cancel unilaterally Tenant's exercise of the Renewal
Option, in which event the Expiration Date of this Lease shall be and remain the
then scheduled Expiration Date, and Tenant shall have no further rights under
this Lease to renew or extend the Term.
<PAGE>
25.2 The Renewal Term shall be upon and Subject to all of the terms, covenants
and conditions of this Lease; provided, however, that, effective as of the first
day of the Renewal Term the Base Rent for the Renewal Term shall be equal to the
Prevailing Market Rental for space comparable to the Premises in the Irvine,
California area as of the date of commencement of the applicable Renewal Term.
The term "Prevailing Market Rental" shall mean the base annual rental for such
comparable space, taking into account any additional rental and all other
monetary payments and escalations payable thereunder and by tenants under leases
of such comparable space, and any tenant improvements and other concessions
granted to Tenant and tenants under leases of such comparable space (excluding,
however, the value of improvements paid for by Tenant but including the value of
such improvements to the Premises paid for by Landlord). Such Base Rent shall be
determined by Landlord not later than four (4) months prior to the
commencement of the Renewal Term. Tenant shall send to Landlord a notice, within
twenty (20) business days after the date of Landlord's notice setting forth the
Prevailing Market Rental for the Renewal Term, which notice shall state that
Tenant either (x) agrees with Landlord's determination of Prevailing Market
Rental for the Renewal Term or (y) disagrees with Landlord's determination of
Prevailing Market Rental for the Renewal Term and elects to resolve the
disagreement as provided in section 25.3, below. If Tenant does not send to
Landlord a notice as provided in the previous sentence, Landlord's determination
of the Prevailing Market Rental shall be determinative. Until the disagreement
is resolved as provided in section 25.3, below, Tenant's monthly payments of
Base Rent shall be in an amount not less than the Base Rent payable for the
twelve (12) month period immediately preceding the commencement of the
applicable Renewal Term. Within ten (10) business days following the resolution
of such dispute by the parties or the decision of the brokers, as applicable,
Tenant shall pay to Landlord or Landlord shall refund to Tenant, as the case may
be, the amount of any deficiency or over payment in the Base Rent theretofore
paid. Tenant shall in any event pay all applicable additional charges with
respect to the Premises, in the manner and at the times provided in this Lease,
effective upon the commencement of the Renewal Term, and notwithstanding any
dispute regarding the Base Rent for the Renewal Term.
25.3 Any disagreement regarding the Prevailing Market Rental as defined in this
Article 25 shall be resolved as follows:
Within twenty (20) days after it's response to Landlord's notice to Tenant of
the Prevailing Market Rental, Landlord and Tenant shall meet no less than two
(2) times, at a mutually agreeable time and place, to attempt to resolve any
such disagreement.
<PAGE>
If, within the twenty (20) day consultation period, Landlord and Tenant cannot
reach an agreement as to the Prevailing Market Rental, they shall each select
one broker to determine the Prevailing Market Rental and the two brokers so
selected shall select a third broker (the "Neutral Broker"). Each of the first
two brokers shall arrive at a determination of the Prevailing Market Rental and
submit their conclusions to the Neutral Broker within thirty (30) days after the
expiration of the twenty (20) day consultation period.
If only one determination is submitted within the requisite time period, it
shall be deemed to be the Prevailing Market Rental. If both determinations are
submitted within such time period the Neutral Broker shall determine in writing
which determination of the Prevailing Market Rate is correct or closest to being
correct and such determination shall be the Prevailing Market Rate. The
determination of the Neutral Broker shall be conclusive and binding on the
parties.
25.4 All brokers specified pursuant to this Article 25 shall be real estate
brokers licensed and in good standing with the State of California with not less
than ten (10) years experience in commercial properly leasing in the Irvine-
Costa Mesa-Newport Beach area. Each party shall pay the cost of the broker
selected by such party and one-half of the cost of the Neutral Broker plus one-
half of any other costs incurred in resolving the disagreement pursuant to
section 25.3.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the date
first set forth above.
LANDLORD:
SHIDLER WEST INVESTMENT
CORPORATION, a Delaware corporation
By:
Name: Marc R. Brutten
Title: President
TENANT:
TYCOM CORPORATION, a Delaware
corporation
By:
Name:
Title: CFO
<PAGE>
EXHIBIT A
TENANT ESTOPPEL CERTIFICATE
TO:
Re: Lease, dated as of December 18, 1996, between TYCOM CORPORATION, a Delaware
Corporation, as tenant (the original name tenant under the Lease; together with
such tenant's successors and assigns, being hereinafter referred to as the
"Tenant", and SHIDLER WEST INVESTMENT CORPORATION, as landlord, covering certain
premises known by the street address 17862 Fitch, in the City of Irvine, County
of Orange, State of California (the "Leased Premises"), as amended as noted on
attached Schedule A (collectively, the "Lease")
Gentlemen:
The undersigned Tenant hereby represents, warrants and certifies to Landlord and
its Lender [Purchaser] that:
1. The Lease has not been modified, changed, altered or amended in any respect,
either orally or in writing, except as may be indicated on Schedule A annexed
hereto, and constitutes the entire agreement between Tenant and Landlord
affecting Tenant's leasing of the Leased Premises. A true and correct copy of
the Lease is attached as Schedule B. The Lease is in full force and effect and
is not subject to any contingencies or conditions not set forth in the Lease.
2. The term of the Lease commenced on and will expire on
3. Tenant has paid all fixed and additional rent and other sums which are due
and payable under the Lease through the date hereof, and Tenant has not made and
will not make any prepayments of fixed rent for more than one month in advance.
There are no presently unexpired rental concessions or abatements due under the
Lease except as set forth on Schedule A annexed hereto. Tenant has no credits,
offsets, abatements, defenses, counterclaims or deductions against any rental or
other payments due under the Lease or with respect to its performance of the
other terms and conditions of the Lease, and has asserted no claims against
Landlord, except as set forth in Schedule A.
4. Tenant has paid to Landlord a security deposit in the amount of $ .
Tenant has not made any other payments to Landlord as a security deposit,
advance or prepaid rent.
5. Landlord has completed, and, if required under the Lease, paid for, any and
all tenant work required under the Lease and Tenant has accepted the Leased
Premises. Tenant is not entitled to any further payment or credit for tenant
work.
<PAGE>
6. To the best knowledge of Tenant, Landlord is not in default in the
performance of any of the terms of the Lease, nor is there now any fact or
condition which, with notice or lapse of time or both, will become such a
default. Tenant has not delivered to Landlord any notice of default with respect
to the Landlord's obligations under the Lease.
7. Tenant is not an affiliate of Landlord.
8. Tenant is in actual possession of the entire Leased Premises and, to the best
knowledge of Tenant, is not in any respect in default under any of the terms and
conditions of the Lease, nor is there now any fact or condition which, with
notice or lapse of time or both, will become such a default. Tenant has not
received from Landlord any notice of default with respect to Tenant's
obligations under the Lease.
9. Tenant has not assigned, transferred, mortgaged or otherwise encumbered its
interest under the Lease, nor subleased any of the Leased Premises, nor
permitted any person or entity to use the Leased Premises, except as otherwise
indicated on Schedule A annexed hereto.
10. Except as expressly provided in the Lease, Tenant
(i) does not have any right to renew or extend the term of the Lease,
(ii) does not have any right to cancel or surrender the Lease prior to the
expiration of the term of the Lease,
(iii) does not have any option or rights of first refusal or first offer to
purchase or lease all or any part of the Leased Premises or the real property of
which the Leased Premises are a part,
(iv) does not have any right, title or interest with respect to the Leased
Premises other than as lessee under the Lease, and
(v) does not have any right to relocate into other properly owned by Landlord or
any of Landlord's affiliates.
<PAGE>
11. There has not been filed by or against Tenant a petition in bankruptcy,
voluntary or otherwise, any assignment for the benefit of creditors, any
petition seeking reorganization or arrangement under the bankruptcy laws of the
United States, or any state thereof, or any other action brought under said
bankruptcy laws with respect to Tenant.
12. If Tenant is required to provide insurance coverage under the Lease, Tenant
has not given or received written notice that Tenant insurance coverage will be
canceled or will not be renewed.
13. The individual executing this Tenant Estoppel Certificate on behalf of
Tenant represents and warrants that he or she has the power and the authority to
execute this Tenant Estoppel Certificate on behalf of Tenant.
14. Lender [Purchaser] has advised Tenant that Lender [Purchaser] will rely upon
the truth of this certification in making the Loan to Landlord [Purchaser]. This
Tenant Estoppel Certificate shall inure to the benefit of Landlord and Lender
[Purchaser] and their respective nominees, successors, assigns, participants and
designees and shall be binding upon Tenant and its successors and assigns.
Dated this day of ,1997
TENANT:
TYCOM CORPORATION, a Delaware
Corporation
By:
Its:
