SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended September 30, 1998, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _____________ to
____________
Commission file number 0-4366
Regan Holding Corp.
(Exact Name of Registrant as Specified in Its Charter)
California 68-0211359
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1179 N. McDowell Blvd., Petaluma, California 94954
(Address of Principal Executive Offices) (Zip Code)
(707) 778-8638
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---------- ----------
The number of shares outstanding of the registrant's common stock, as
of October 31, 1998 was:
Common Stock-Series A 26,289,896
Common Stock-Series B 600,398
Page 1 of 11
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
REGAN HOLDING CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited) (Audited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 8,083,986 $ 5,194,332
Investments 14,906,933 7,692,279
Accounts receivable 1,899,782 1,239,306
Prepaid expenses 598,404 572,932
Marketing supplies inventory 399,928 228,853
Deferred income taxes-current 896,053 488,437
----------------- -----------------
Total current assets 26,785,086 15,416,139
----------------- -----------------
Net fixed assets 3,239,091 2,610,324
Deferred income taxes-non current 756,049 783,477
Other assets 402,776 471,001
----------------- -----------------
Total non-current assets 4,397,916 3,864,802
----------------- -----------------
TOTAL ASSETS $ 31,183,002 $ 19,280,941
================= =================
LIABILITIES, REDEEMABLE COMMON STOCK,
AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Accounts payable $ 386,853 $ 344,071
Income taxes payable 850,934 389,561
Accrued sales convention costs 2,181,979 1,226,169
Other accrued liabilities 4,600,937 1,379,685
----------------- -----------------
Total current liabilities 8,020,703 3,339,486
----------------- -----------------
Loan payable 132,285 132,285
Deferred incentive compensation 381,886 149,609
----------------- -----------------
Total non-current liabilities 514,171 281,894
----------------- -----------------
TOTAL LIABILITIES 8,534,874 3,621,380
----------------- -----------------
COMMITMENTS AND CONTINGENCIES -- --
REDEEMABLE COMMON STOCK 11,462,963 11,842,651
----------------- -----------------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 100,000,000 shares
authorized, no shares issued or outstanding -- --
Series A common stock, no par value, 45,000,000 shares
authorized, 20,548,224 and 20,614,014 shares issued
and outstanding at September 30, 1998 and
December 31, 1997, respectively 3,266,874 3,382,914
Paid-in capital from redemption and retirement
of common stock 840,750 611,559
Paid-in capital from non-employee stock options 18,750 --
Retained earnings (accumulated deficit) 7,109,759 (182,433)
Net unrealized gains (losses) on investments (50,968) 4,870
----------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 11,185,165 3,816,910
----------------- -----------------
TOTAL LIABILITIES, REDEEMABLE COMMON
STOCK & SHAREHOLDERS' EQUITY $ 31,183,002 $ 19,280,941
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 2 of 11
<PAGE>
REGAN HOLDING CORP. AND SUBSIDIARIES
Consolidated Income Statements
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------------------------- ---------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME:
Marketing allowances $ 7,619,535 $ 3,231,598 $ 19,299,171 $ 8,492,401
Commission income 3,586,450 1,448,541 9,180,142 3,732,659
Administrative fees 1,798,173 950,330 4,872,523 2,515,183
Investment income 332,228 164,185 833,332 476,768
Other income 37,567 54,695 194,805 191,693
------------ ------------ ------------ ------------
TOTAL INCOME 13,373,953 5,849,349 34,379,973 15,408,704
------------ ------------ ------------ ------------
EXPENSES:
Salaries and related benefits 4,777,738 2,673,329 12,501,208 7,688,238
Sales promotion and support 2,015,193 642,647 3,982,620 1,743,553
Litigation settlement (Note 3) -- -- 1,104,404 --
Professional fees 332,168 159,196 906,570 517,188
Occupancy 334,254 272,472 805,744 642,184
Depreciation and amortization 295,422 199,456 724,422 459,219
Stationery and supplies 232,491 109,422 560,691 269,048
Courier and postage 202,118 166,651 515,246 369,695
Travel and entertainment 204,122 83,812 447,504 196,771
Equipment 176,769 93,459 432,154 267,113
Insurance 38,850 42,636 123,491 129,097
Other expenses 33,119 10,040 133,199 123,686
------------ ------------ ------------ ------------
TOTAL EXPENSES 8,642,244 4,453,120 22,237,253 12,405,792
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 4,731,709 1,396,229 12,142,720 3,002,912
PROVISION FOR INCOME TAXES 1,864,576 565,623 4,850,528 1,235,402
------------ ------------ ------------ ------------
NET INCOME $ 2,867,133 $ 830,606 $ 7,292,192 $ 1,767,510
============ ============ ============ ============
EARNINGS PER SHARE:
Weighted average shares
outstanding - basic 26,600,241 26,865,131 26,703,920 26,937,299
Basic earnings per share $ .11 $ .03 $ .27 $ .07
============ ============ ============ ===========
Weighted average shares
outstanding - diluted 27,263,913 26,865,131 27,090,580 26,937,299
Diluted earnings per share $ .11 $ .03 $ .27 $ .07
============ ============ ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 11
<PAGE>
REGAN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statement of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
Paid-in
Capital
from
Paid-in Capital Non- Retained
from Retirement Employee Earnings/ Unrealized
Series A Common Stock of Stock (Accumulated Gains
Shares Amount Common Stock Options Deficit) (Losses) Total
------ ------ ------------ ------- -------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
January 1, 1998 20,614,014 $ 3,382,914 $ 611,559 $ -- $ (182,433) $ 4,870 $ 3,816,910
Net income for the
nine months ended
September 30, 1998 7,292,192 7,292,192
Redemption and
retirement of
common stock (65,790) (116,040) 229,191 113,151
Non-employee stock
options expense 18,750 18,750
Net unrealized losses
on investments (93,844) (93,844)
Deferred tax on net
unrealized losses 38,006 38,006
----------- ----------- ----------- --------- ----------- --------- -----------
Balance
September 30, 1998 20,548,224 $ 3,266,874 $ 840,750 $ 18,750 $ 7,109,759 $ (50,968) $11,185,165
=========== =========== =========== ========= =========== ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 11
<PAGE>
REGAN HOLDING CORP. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
-------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,292,192 $ 1,767,510
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization of fixed assets 671,665 454,190
Amortization of intangible assets 52,757 5,029
Amortization/accretion of investments (46,765) (24,547)
Non-employee stock option expense 18,750 --
Realized loss (gain) on sales of investments (14,463) 28,686
Changes in assets and liabilities:
Net change in accounts receivable (660,476) (510,966)
Net change in prepaid expenses (25,472) (201,504)
Net change in marketing supplies inventory (171,075) 40,259
Net change in deferred income taxes (342,182) 152,239
Net change in accounts payable 42,782 (5,899)
Net change in income taxes payable 461,373 527,820
Net change in accrued sales convention costs 955,810 (91,087)
Net change in other accrued liabilities 3,221,252 (54,597)
Net change in other assets and liabilities 265,551 135,013
-------------- --------------
Net cash provided by operating activities 11,721,699 2,222,146
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (10,049,466) (11,060,306)
Proceeds from sales and maturities of investments 2,802,196 9,739,821
Purchases of fixed assets (1,300,432) (1,215,750)
Payments for organization costs (17,806) (10,640)
-------------- --------------
Net cash used in investing activities (8,565,508) (2,546,875)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption and retirement of common stock (266,537) (271,091)
--------------- ---------------
Net cash used in financing activities (266,537) (271,091)
-------------- --------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,889,654 (595,820)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,194,332 2,202,596
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 8,083,986 $ 1,606,776
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 11
<PAGE>
REGAN HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Financial Information
The accompanying consolidated financial statements are prepared in
conformity with generally accepted accounting principles and include
the accounts of Regan Holding Corp. and its wholly-owned subsidiaries,
Legacy Marketing Group ("LMG"), Legacy Financial Services, Inc., Legacy
Advisory Services, Inc., and LifeSurance Corporation. All intercompany
transactions have been eliminated.
The statements are unaudited but reflect all adjustments (consisting
only of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the Company's
financial position and results of operations. The consolidated balance
sheet data at December 31, 1997, was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. The results for the nine months ended
September 30, 1998, are not necessarily indicative of the results to be
expected for the entire year. Users of these financial statements are
encouraged to refer to the Annual Report on Form 10-K for the year
ended December 31, 1997, for additional disclosure.
2. Redeemable Common Stock
The Company is obligated to repurchase certain of its shares of common
stock pursuant to various agreements under which the stock was issued.
During the nine months ended September 30, 1998, redeemable common
stock was redeemed and retired as follows:
<TABLE>
<CAPTION>
Series A Redeemable Series B Redeemable Total Redeemable
Common Stock Common Stock Common Stock
Carrying Carrying Carrying
(Issuance) (Issuance) (Issuance)
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Balance
December 31, 1997 5,507,326 $ 10,040,068 600,861 $ 1,802,583 6,108,187 $11,842,651
Redemption and
retirement of common
stock (200,935) (378,299) (463) (1,389) (201,398) (379,688)
---------- ------------ ---------- ----------- ---------- -----------
Balance
September 30, 1998 5,306,391 $ 9,661,769 600,398 $ 1,801,194 5,906,789 $11,462,963
========== ============ ========== =========== ========== ===========
</TABLE>
3. Litigation Settlement
In December 1996, LMG and American National Insurance Company
("American National") were named in a lawsuit filed in the Circuit
Court of Jefferson County, Alabama, alleging misrepresentation and
price discrimination in connection with the sale of certain annuity
products issued by American National and marketed by LMG. American
National and LMG have denied the allegations contained in the complaint
as well as any wrongdoing with respect to the sale and issuance of
annuities. However, on June 17, 1998, in order to avoid protracted
litigation, American National and LMG entered into a settlement
agreement with the plaintiffs and other class members. LMG's portion of
the settlement, net of recovery under its errors and omissions
insurance policy, was recorded as an expense during the second quarter
of 1998.
Page 6 of 11
<PAGE>
4. Lease Commitment
The Company currently leases approximately 43,000 square feet of office
space in Petaluma, California, at which the Company's headquarters are
located. The lease for this space was terminated on September 11, 1998,
and the Company intends to vacate such space in March, 1999. On October
27, 1998, the Company entered into a new lease for approximately 72,000
square feet of office space in Petaluma, California, into which the
Company intends to move its headquarters upon vacating the space it
currently leases. This lease expires in April, 2009, and includes an
option to extend the term for two five-year periods. Pursuant to the
lease, the Company will pay monthly rent of $71,612, plus a pro-rate
share of property taxes and operating expenses based on leased square
footage.
5. Amendments to Marketing and Processing Agreements
In October, 1998, LMG and American National amended the terms of the
Marketing Agreement and Insurance Processing Agreement to extend the
initial terms thereof to January 1, 1999. LMG and American National are
in the process of negotiating a five year extension.
6. Related Party Transactions
In May of 1998, the Company entered into a Shareholder's Agreement with
Lynda Regan, Chief Executive Officer of the Company and Chairman of the
Company's Board of Directors, and certain other individuals. Under the
terms of this agreement, in the event of the death of Ms. Regan, the
Company shall repurchase from Ms. Regan's estate all shares of Common
Stock that were owned by Ms. Regan at the time of her death or were
transferred by her to one or more trusts prior to her death. The
purchase price to be paid by the Company shall be equal to 125% of the
fair market value of the shares.
7. Comprehensive Income
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in a full set of
general purpose financial statements. Comprehensive income is defined
as the change in equity of a business enterprise during a period
resulting from transactions and other events and circumstances from
non-owner sources. The Company's comprehensive income for the nine
month period ended September 30, 1998 and 1997, includes unrealized
losses, net of deferred tax, of $55,838 and $34,016, respectively.
8. Recent Accounting Pronouncements--Internal Use Software Cost
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1").
SOP 98-1 provides guidance on determining whether computer software is
internal-use software and on accounting for the proceeds of computer
software originally developed or obtained for internal use and then
subsequently sold to the public. It also provides guidance on
capitalization of the costs incurred for computer software developed or
obtained for internal use. The Company has not yet determined the
impact, if any, of adopting SOP 98-1, which will be effective for the
Company's year ending December 31, 1999.
9. Reclassifications
Certain amounts in the 1997 financial statements have been reclassified
to conform with 1998 classifications.
Page 7 of 11
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Except for historical information contained herein, the matters
discussed in this report contain forward looking statements that involve risks
and uncertainties that could cause actual results to differ materially.
Results of Operations
Summary--The Company's net income for the quarter ended September 30,
1998, increased approximately $2.0 million, or 245.2%, from the corresponding
quarter in 1997, and approximately $5.5 million, or 312.6%, for the nine months
ended September 30, 1998, compared with the corresponding period in 1997. These
increases are attributable primarily to increases in sales volume, as discussed
below.
Income--The Company's major sources of income are marketing allowances,
commission overrides and administrative fees from sales and administration of
annuity and life insurance products on behalf of the three insurance companies
for which the Company markets and administers policies, American National
Insurance Company ("American National"), IL Annuity and Insurance Company ("IL
Annuity") and Transamerica Life Insurance and Annuity Company ("Transamerica")
(collectively, the "Carriers"). Levels of marketing allowances and commission
overrides are directly related to, and increase with, the volume of sales of
such products. Administration fees are a function not only of product sales, but
also administration of policies inforce and producer appointments. Total income
increased approximately $7.5 million, or 128.6%, during the three months ended
September 30, 1998, compared to the three months ended September 30, 1997. For
the nine months ended September 30, 1998, total income increased $19.0 million,
or 123.1%, over the corresponding nine month period in 1997. This increase
resulted primarily from increases in sales volume, as discussed below.
Marketing allowances and commission income, combined, increased
approximately $6.5 million, or 139.4%, in the third quarter of 1998, compared to
the third quarter of 1997. Such allowances and commissions increased
approximately $16.3 million, or 133.0% for the nine month period ended September
30, 1998, compared with the nine month period ended September 30, 1997. This
increase is due primarily to increases in volume of sales by the Company's
distribution network on behalf of the Carriers. Premium placed inforce for the
Carriers totaled approximately $484.7 million and $1.2 billion, respectively
during the three months and nine months ended September 30, 1998, compared to
$203.4 million and $526.0 million during the same periods in 1997, representing
increases of 138.2% and 131.1%, respectively. Also contributing to increases in
income during the first nine months of 1998 was a shift in sales mix to sales of
products which yield higher marketing allowances and commission income.
Administrative fees increased approximately $848,000, or 89.2%, in the
third quarter of 1998, compared to the same period in 1997. For the nine months
ended September 30, 1998, administrative fees increased approximately $2.4
million, or 93.7%, over the corresponding period in 1997. These increases are
due primarily to increases in the number of policies sold and administered
during the respective periods and to a shift in policies administered to those
which generate higher administrative fees.
During the three months ended September 30, 1998, 9.4%, 84.0% and 1.0%
of the Company's total revenue resulted from agreements with American National,
IL Annuity and Transamerica, respectively. During the three months ended
September 30, 1997, 42.2% and 51.0% of the Company's total revenue resulted from
agreements with American National and IL Annuity, respectively. Sales and
administration of Transamerica products began during the third quarter of 1998.
The shift from American National to IL Annuity products is attributed to
favorable market acceptance of IL Annuity's products.
Expenses--Total expenses increased approximately $4.2 million, or
94.1%, during the three months ended September 30, 1998, compared to the three
months ended September 30, 1997, and $9.8 million, or 79.2%, during the nine
months ended September 30, 1998, compared to the corresponding nine months of
1997. These increases are attributable primarily to increases in compensation,
sales promotion and support, stationery and supplies, and travel and
entertainment expenses and to accrual for settlement of a legal matter, as
discussed below.
Page 8 of 11
<PAGE>
As a service organization, the Company's primary expenses are salaries
and related employee benefits, which increased approximately $2.1 million, or
78.7%, during the three months ended September 30, 1998, compared to the same
period in 1997, and approximately $4.8 million, or 62.6%, during the nine months
ended September 30, 1998, compared to the same period in 1997. These increases
resulted primarily from increases in the average number of full-time equivalent
employees, which rose to 324 during the quarter ended September 30, 1998,
compared with 192 during the quarter ended September 30, 1997. These increases
in employment were necessary to accommodate increases in sales volume, as
discussed above. Salaries and benefits also increased due to the addition of
personnel at higher pay levels and to scheduled pay increases for existing
employees.
Sales promotion and support expense consists primarily of costs
relating to the Company's annual national sales conventions, incentives paid to
the Company's higher level Producers for recruitment and development of
additional Producers, and costs relating to various sales meetings and training
activities. Also included in sales promotion and support expense is the cost of
designing and printing sales brochures for use by Producers in the Company's
sales distribution network. It is expected that these expenses will continue to
be a major element of the Company's cost structure, as attendance at the
national sales conventions increases, as the number of Producers marketing
products for the Company increases, and as new products are introduced. This
expense increased approximately $1.4 million, or 213.6%, for the quarter ended
September 30, 1998, compared with the quarter ended September 30, 1997, and
approximately $2.2 million, or 128.4%, for the nine months ended September 30,
1998, compared with the corresponding period in 1997. These increases are due
primarily to an increase in costs associated with the Company's national sales
conventions and increased anticipated attendance at such conventions, and to
increased incentives paid to Producers by the Company.
In order to avoid protracted future litigation, the Company's principal
subsidiary, LMG, together with American National, entered into an agreement to
settle a lawsuit filed in Jefferson County, Alabama. LMG's net cost of the
settlement, approximately $1.1 million, was recorded as an expense during the
second quarter of 1998. See footnotes to Part I, Item 1, "Financial Statements."
Professional fees increased $173,000, or 108.7%, for the three months
ended September 30, 1998, and $389,000, or 75.3%, for the nine month period
ended September 30, 1998, compared with the corresponding periods in 1997. These
increases are primarily the result of consulting fees related to various
information systems projects and increased legal fees associated with the
settlement of the litigation described in footnotes to Part I, Item 1,
"Financial Statements."
Stationery and supplies expense increased approximately $123,000, or
112.5%, for the quarter ended September 30, 1998, and approximately $292,000, or
108.4%, for the nine months ended September 30, 1998, compared with the
corresponding periods in 1997. These increases are primarily the result of
additional supplies necessary to support the increased volume of business and
increased number of employees, as described above.
Travel and entertainment increased approximately $120,000, or 143.5%,
for the quarter ended September 30, 1998, compared with the quarter ended
September 30, 1997, and approximately $251,000, or 127.4%, for the nine months
ended September 30, 1998, compared with the corresponding period in 1997. The
increases are due to increased travel by personnel in the Company's marketing
department, to travel related to implementation of the carrier relationship with
Transamerica, as discussed above, and to travel necessary for set-up and
training for an east coast service center which became operational in July,
1998.
Liquidity and Capital Resources
The Company's ability to mobilize its assets remained strong, with cash
and investments representing 73.7% of the Company's total assets as of September
30, 1998.
Page 9 of 11
<PAGE>
Year 2000
As the year 2000 approaches, a critical business issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. In brief, many existing application software
products in the marketplace were designed to only accommodate a two digit date
position which represents the year (e.g., '95 is stored in the system and
represents the year 1995). As a result, the year 1999 (i.e. '99) could be the
maximum date value these systems will be able to accurately process. Management
has developed and is in the process of implementing a plan to insure that the
Company will be year 2000 compliant. This plan consists of the following four
stages: (i) conducting an inventory of all hardware, software and support
systems; (ii) assessing whether such hardware, software and support systems are
year 2000 complaint; (iii) correcting or replacing any non-compliant hardware,
software and support systems; and (iv) testing to ensure that all corrections or
replacements made pursuant to the third phase of the plan are functioning
properly. The first two stages of this plan have been completed and management
anticipates that the last two stages will be completed by March 31, 1999. The
Company is also working closely with significant customers and vendors to ensure
that their systems will be fully year 2000 compliant. Based on information
currently available, management does not anticipate that the Company will incur
significant operating expenses or be required to invest heavily in computer
system improvements to be year 2000 compliant, however, as noted, the Company
has not completed implementation of its compliance plan. To the extent the
Company's systems are not fully year 2000 compliant, there can be no assurance
that potential systems interruptions or the cost necessary to update software
would not have a material adverse effect on the Company's business, financial
condition, results of operations and business prospects.
Page 10 of 11
<PAGE>
PART II OTHER INFORMATION
Item 5. Other Information
In October of 1998, LMG and American National amended the terms of the
Marketing Agreement and Insurance Processing Agreement to extend the initial
terms thereof to January 1, 1999. LMG and American National are in the process
of negotiating a five year extension.
Item 6. Exhibits and Reports on Form 8-K
(a) Index to Exhibits
Exhibit 10.1 Amendment Three to Insurance Processing Agreement with
American National Insurance Company
Exhibit 10.2 Amendment Four to Marketing Agreement with American
National Insurance Company
Exhibit 10.3 Lease Agreement for 2090 Marine Ave., Petaluma Calif.
Exhibit 10.4 Buy-Sell
Exhibit 11 Computation of Earnings Per Share--Basic and Diluted
Exhibit 27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REGAN HOLDING CORP.
Date: November 12, 1998 Signature: /s/ R. Preston Pitts
-------------------------------------
R. Preston Pitts,
President & Chief Operating Officer
Date: November 12, 1998 Signature: /s/ David A. Skup
-------------------------------------
David A. Skup,
Chief Financial Officer
Page 11 of 11
AMENDMENT THREE TO INSURANCE PROCESSING AGREEMENT
This document is Amendment Three to the Insurance Processing Agreement made and
entered into, as of June 1, 1993 (the "Agreement"), by and between American
National Insurance Company ("American National") a Texas corporation, and Legacy
Marketing Group ("LMG"), a California corporation.
In consideration of mutual covenants contained herein, the parties agree as
follows:
1. Section 6.1 of the Agreement is hereby deleted in its entirety and the
following new Section 6.1 shall be substituted therefor:
"6.1 Subject to termination has hereinafter provided, this Agreement shall
remain in force and effect until the close of business on January 1, 1999,
the initial term of this Agreement. This Agreement may be renewed by mutual
agreement for additional successive terms of one (1) year unless terminated
by either party by prior written notice to the other at least one hundred
eighty (180) days prior to the end of the initial term or the renewal
term."
2. Except as specifically amended hereby, all terms and provisions of the
Insurance Processing Agreement shall remain in full force and effect.
LEGACY MARKETING GROUP AMERICAN NATIONAL INSURANCE
COMPANY
By: /s/ R. Preston Pitts By: /s/ J. Pozzi
------------------------------- --------------------------------
Title: President Title: Executive Vice President
---------------------------- -----------------------------
Witness: /s/ Anne Sedleniek Witness: N. Abraham
-------------------------- ---------------------------
Date: September 25, 1998 Date: October 28, 1998
----------------------------- ------------------------------
<PAGE>
AMENDMENT FOUR TO MARKETING AGREEMENT
This document is Amendment Four to the Marketing Agreement made and entered
into, as of June 1, 1993 (the "Agreement"), by and between American National
Insurance Company ("American National") a Texas corporation, and Legacy
Marketing Group ("LMG"), a California corporation.
In consideration of mutual covenants contained herein, the parties agree as
follows:
1. Section 6.1 of the Agreement is hereby deleted in its entirety and the
following new Section 6.1 shall be substituted therefor:
"6.1 Subject to termination has hereinafter provided, this Agreement shall
remain in force and effect until the close of business on January 1, 1999,
the initial term of this Agreement. This Agreement may be renewed by mutual
agreement for additional successive terms of one (1) year unless terminated
by either party by prior written notice to the other at least one hundred
eighty (180) days prior to the end of the initial term or the renewal
term."
2. Except as specifically amended hereby, all terms and provisions of the
Insurance Processing Agreement shall remain in full force and effect.
LEGACY MARKETING GROUP AMERICAN NATIONAL INSURANCE
COMPANY
By: /s/ R. Preston By: /s/ J. Pozzi
------------------------------ ---------------------------------
Title: President Title: Executive Vice President
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Witness: /s/ Anne Sedleniek Witness: /s/ N. Abraham
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Date: October 19, 1998 Date: October 29, 1998
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LAKEVILLE INDUSTRIAL CENTER
NET LEASE
BASIC LEASE INFORMATION
1. DATE
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2. LANDLORD G & W/Lakeville Corporate Center, LLC
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3. TENANT Regan Holding Corp., a California corporation
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4. PREMISES REFERENCE
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a. Project Lakeville Industrial Center Paragraph 1
b. Building Building 1 & 2
c. Address 2084 Lakeville Highway
2090 Marina Avenue
d. Assessor's Parcel # 005-050-006, 007, 008, 020, 031
e. Suite N/A
f. Usable Sq. Ft. 70,513
g. Rentable Sq. Ft. 71,612
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5. TERM Paragraph 2
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a. Estimated Commencement Date March 15, 1999
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b. Length of Term 10 years & 1 month
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6. BASE RENT Paragraph 3
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a. Monthly Base Rent See Addendum
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b. Advanced Base Rent $71,612
(Paid Upon Lease Execution)
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c. Adjustment Date of Monthly Base Rent Year 2
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7. PROPERTY TAXES AND OPERATING EXPENSES Paragraph 4
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a. Initial Monthly Allocation per rentable Sq.Ft. $0.18
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b. Premises v. Building Sq.Ft. Ratio 71,612/71,612=100%
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c. Premises v. Project Sq.Ft. Ratio 71,612/71,612=100%
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8. SECURITY DEPOSIT $71,612 Paragraph 16
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9. TENANT IMPROVEMENTS Turn-key Exhibit B
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10. USE General office use Paragraph 6
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11. TENANT'S ADDRESS FOR NOTICES Paragraph 20
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David A. Skup, CFO
Regan Holding Corp.2090 Marina Avenue
P.O. Box 7873 Petaluma, CA 94954
San Francisco, CA 94120-7873
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12. LANDLORD'S ADDRESS FOR NOTICES Paragraph 20
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G & W/Lakeville Corporate Center c/o G&W Management Co.
P.O. Box 808030
Petaluma, CA 94975
1318 Redwood Way, Suite 140
Petaluma, CA 94954
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With a Copy to:
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13. REAL ESTATE BROKERS Paragraph 23
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Sabella & Lipman
Keegan & Coppin, Co., Inc.
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EXHIBITS AND ADDENDUM
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Addendum No. 1
Exhibit 1: Early Occupancy Agreement
Exhibit A: Diagram of Premises
Exhibit A-1: Diagram of the Project
Exhibit A-2: Legal Description
Exhibit B: Work Letter Agreement
Exhibit B-1: Space Plan
Exhibit C: Rules and Regulations
Exhibit D: Hazardous Materials List
Exhibit E: Tenant's Financial Statement
<PAGE>
LAKEVILLE INDUSTRIAL CENTER
NET LEASE
THIS LEASE, dated ____________________, 199___, is made and entered into by
and between G & W/Lakeville Corporate Center, LLC, a limited liability company
("Landlord"), and Regan Holding Corp., a California corporation ("Tenant").
1. Premises.
Landlord leases to Tenant, and Tenant hereby leases from Landlord
for the term of this Lease ("Term") and at the rent and upon the conditions set
forth below, the Premises described in the Basic Lease Information and
identified on the plan attached hereto as Exhibit A. The Premises are located
within the Buildings described in the Basic Lease Information, and constitute
part of the Project described in the Basic Lease Information and as shown in
Exhibit A-1 attached hereto, at the Lakeville Industrial Center, located in
Petaluma, California. The Project is more particularly described in Exhibit A-2
attached hereto. All areas and facilities outside the Buildings and within the
exterior boundaries of the Project that are provided and designated by Landlord
from time to time for the exclusive use and convenience of the tenants of the
Project shall be known as "Common Areas" except for the maintenance rights of
Landlord as provided herein.
2. Term.
(a) The Term shall commence upon the date ("Commencement Date")
which is the earlier of: (i) substantial completion of the Premises, as the term
"substantial completion" is defined in the Work Letter Agreement, attached
hereto as Exhibit B; or (ii) the date substantial completion would have occurred
but for Tenant Delays (as the term is defined in the Work Letter Agreement). The
Estimated Commencement Date is set forth in the Basic Lease Information, which
date may be postponed due to a delay in delivering the Premises as provided in
Paragraph 2(b) below. A "Lease Year" is a period of twelve (12) consecutive
calendar months. A "Lease Month" is a calendar month. The initial Term of this
Lease shall be determined as follows:
(1) If the Commencement Date of this Lease occurs on the
first calendar day of a calendar month, the Term shall be for a period of Lease
Years and Months as specified in the Basic Lease Information, unless terminated
sooner as provided in this Lease.
(2) If the Commencement Date of this Lease occurs on
other than the first calendar day of a calendar month, the Term shall be for a
period of Lease Years and Months as specified in the Basic Lease Information,
plus the number of days remaining in the calendar month in which the
Commencement Date occurs, unless terminated sooner as provided in this Lease.
(b) Subject to the provisions of Paragraph 22 below, in the event
the Premises are not substantially completed (in accordance with the Work Letter
Agreement) on or before the Estimated Commencement Date, then Landlord shall
credit to Tenant an amount equal to twenty thousand dollars ($20,000) per month
prorated for each day that the commencement date is delayed past the Estimated
Commencement Date.
(c) Subject to the provisions of Paragraph 22 below, in the event
the Premises are not substantially completed (in accordance with the Work Letter
Agreement) on or within three (3) months after the Estimated Commencement Date,
then Tenant may, at Tenant's option, by notice in writing to Landlord within ten
(10) days thereafter, cancel this Lease, in which event, (i) this Lease shall be
deemed null and void and have no further force or effect, (ii) all security or
other deposits made herewith shall be promptly returned to Tenant, and (iii) the
parties shall have no further obligation to each other; provided further,
however, that if such written notice of Tenant is not received by Landlord
within said 10-day period, Tenant's right to cancel this Lease hereunder shall
terminate and be of no further force or effect.
3. Rent.
(a) For purposes of this Lease, the term "Rent" shall mean the Base
Rent, Advanced Base Rent, all additional rent, and all of the other monetary
obligations of Tenant under this Lease. Upon execution of this Lease, Tenant
shall pay to Landlord the Advanced Base Rent set forth in the Basic Lease
Information. Tenant shall pay to Landlord the Base Rent specified in the Basic
Lease Information, payable on or before the first day of each and every
successive calendar month following the Commencement Date. If the Term commences
on other than the first day of a calendar month, the first payment of Base Rent
shall be appropriately prorated, on the basis of a 30-day month. Tenant's
payment of any Advanced Base Rent(excluding that portion specifically
attributable to last month's rent, if any) shall be credited against Tenant's
obligation to pay Base Rent beginning as of the Commencement Date.
(b) Tenant shall pay, as additional rent, all amounts of money
required to be paid to Landlord by Tenant under this Lease in addition to
monthly Base Rent, whether or not the same be designated "additional rent." If
such amounts are not paid at the time provided in this Lease, they shall
nevertheless be collectable as additional rent with the next installment of
monthly Base Rent thereafter falling due, but nothing herein contained shall be
deemed to suspend or delay the payment of any amount of money at the time the
same becomes due and payable hereunder, or limit any other remedy of Landlord.
(c) Tenant acknowledges that late payment by Tenant to Landlord of
Rent after the expiration of any applicable grace period will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any trust deed covering the Premises. Accordingly, if
any installment of Rent or any other sums due from Tenant shall not be received
by Landlord when due, Tenant shall pay to Landlord, in addition to interest due
under Paragraph 3(d) and attorneys' fees a late charge equal to six percent (6%)
of such overdue amount. The parties agree that such late charge represents a
fair and reasonable estimate of the costs Landlord will incur by reason of late
payment by Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder. The parties acknowledge that the applicable grace period with regard
to payment of Rent is as set forth in Paragraph 14(a)(1).
(d) Any amount due to Landlord, if not paid when due, shall bear
interest from the date due until paid at the rate of ten percent (10%) per
annum. Payment of interest shall not excuse or cure any default hereunder by
Tenant.
(e) All payments due from Tenant to Landlord hereunder shall be
made to Landlord without deduction or offset, in lawful money of the United
States of America at Landlord's address for notices hereunder, or to such other
person or at such other place as Landlord may from time to time designate in
writing to Tenant.
4. Taxes and Operating Expenses.
(a) In addition to the Base Rent, Tenant shall pay (i) Tenant's
Percentage Share of Property Taxes (according to the percentage set forth in the
Basic Lease Information) relating to those Property Taxes (as the term is
defined under Paragraph 4(a)(1) below) which are assessed during the Term, and
(ii) Tenant's Percentage Share of Operating Expenses (according to the
percentage set forth in the Basic Lease Information) relating to those Operating
Expenses (as the term is defined under Paragraph 4(a)(2) below) which are paid
or incurred by Landlord during the Term. The Percentage Share for Property Tax
shall be determined by the ratio of the Buildings square footage divided by the
total square footage of the Buildings on the tax parcel of which the Buildings
are a part. The Percentage Share used for calculating Tenant's share of
Operating Expenses shall vary as to how the specific Operating Expense is billed
e.g., if billed for the Buildings it shall be 7.b. of the Basic Lease
Information, if billed for the project it shall be 7.c. of the Basic Lease
Information.
(1) Property Taxes" shall mean all real property
taxes, bonds and assessments and governmentally imposed fees or charges (and any
tax levied wholly or partly in lieu thereof) levied, assessed, confirmed,
imposed or which have become a lien against the Buildings (which for the
purposes of defining "Property Taxes" shall include the tax parcel of which the
Buildings are a part) and Common Areas.
(2) Except as provided in Paragraph 8(b), "Operating
Expenses" shall mean the following: (A) all costs of management, operation,
maintenance and repair of the Buildings and Common Areas, including, without
limitation, property management expenses, maintenance and repair materials,
supplies and equipment; (B) all costs of water, power, electricity, refuse
collection, parking lot sweeping, landscaping, and other services relating to
the Common Areas; (C) all costs of alterations or improvements to the Buildings
or Common Areas made to achieve compliance with federal, state and local law
including, without limitation, the Americans with Disabilities Act (42 U.S.C.
Section 12101 et seq.), which costs will be amortized over the useful life of
each alteration or improvement; (D) all costs of public liability and casualty
or other insurance maintained by Landlord with respect to the Buildings and
Common Areas; (E) all costs incurred by Landlord for making any capital
improvements or modifications to the Buildings or Common Areas or making any
improvements or modifications intended to reduce Operating Expenses, which costs
will be amortized over the useful life of each capital improvement, structural
repair or modification; (F) all costs of maintaining machinery, equipment and
directional signage or other markers; and (G) the share allocable to the
Buildings of dues and assessments payable under any reciprocal easement or
common area maintenance agreements or declarations or by any owners'
associations affecting the Buildings. That portion of the Operating Expenses
relating to the property management expenses for the Buildings and Common Areas
which shall be charged to Tenant shall be four percent (4%) of both Tenant's
annual Base Rent and the subtotal of Tenant's share of Operating Expenses of the
Buildings. In the event that Landlord calculates Operating Expenses based upon
the Project instead of the Buildings, as indicated on the Basic Lease
Information, then the term "Project" shall be substituted in the place of all
references to the term "Buildings" in this paragraph.
(b) The Property Taxes to be paid by Tenant shall be determined
by multiplying the total amount of the Property Taxes by Tenant's Percentage
Share of Property Taxes (which percentage is determined by multiplying 100% by a
fraction, the numerator of which is the rentable area of the Premises and the
denominator of which is the total rentable area of all improvements located
within the tax parcel of which the Premises are a part). Landlord may cause the
Common Areas of the Project to be separately assessed from other areas and
Buildings of the Project. In such case, Tenant's Percentage Share of Property
Taxes attributable to the Common Areas shall be determined by the ratio that the
total rentable square feet in the Premises bears to the total number of square
feet of rentable area which is included in the property subject to the
assessment.
(c) Operating Expenses for each calendar year shall be adjusted to
equal Landlord's reasonable estimate of Operating Expenses as though ninety-five
percent (95%) of the total rentable area of the Buildings had been occupied.
When the Buildings are one hundred percent (100%) occupied, the Operating
Expenses shall be adjusted to reflect 100% occupied Buildings. The Operating
Expenses to be paid by Tenant shall be determined by multiplying the total
amount of the Operating Expenses as adjusted above by Tenant's Percentage Share
of Operating Expenses (which percentage is determined by multiplying 100% by a
fraction, the numerator of which is the rentable area of the Premises and the
denominator of which is the total rentable area located within the Buildings, if
the Operating Expenses are calculated for the Buildings, or within the Project,
if the Operating Expenses are calculated for the Project).
(d) Tenant shall pay to Landlord each month at the same time and in
the same manner as monthly Base Rent one-twelfth (1/12th) of Landlord's estimate
of the amount of Property Taxes and one-twelfth (1/12th) of Landlord's estimate
of Operating Expenses payable by Tenant for the then-current calendar year. The
initial monthly amount shall be as set forth in the Basic Lease Information.
Within one hundred twenty (120) days after the close of each calendar year, or
as soon after such 120-day period as practicable, Landlord shall deliver to
Tenant a statement in reasonable detail of the actual amount of Property Taxes
and Operating Expenses payable by Tenant in accordance with this Paragraph 4 for
such calendar year. Tenant may request further information if desired.
Landlord's failure to provide such statement to Tenant within the 120-day period
shall not act as a waiver and shall not excuse Tenant or Landlord from making
the adjustments to reflect actual costs as provided herein. If on the basis of
such statement Tenant owes an amount that is less than the estimated payments
for such calendar year previously made by Tenant, Landlord shall credit such
excess to Tenant against future additional rent due under this Paragraph 4. If
on the basis of such statement Tenant owes an amount that is more than the
estimated payments for such calendar year previously made by Tenant, Tenant
shall pay the deficiency to Landlord within fifteen (15) days after delivery of
the statement. The obligations of Landlord and Tenant under this Paragraph 4(d)
with respect to the reconciliation between the estimated and actual amounts of
Property Taxes and Operating Expenses payable by Tenant for the last year of the
Term shall survive the termination of the Lease. When the final determination is
made of the actual amounts of Property Taxes and Operating Expenses payable by
Tenant for the year in which this Lease terminates, Tenant shall immediately pay
any increase due over the estimated payments and, conversely, any overpayment
made by Tenant shall be credited to any other amounts then due from Tenant, and
any balance shall be immediately reimbursed to Tenant by Landlord.
(e) Tenant shall have the right at it's own cost and expense to
audit and/or inspect Landlord's records (not more than once in any Lease Year)
with respect to Property Taxes and Operating Expenses payable by Tenant under
this Lease for any Lease Year. Tenant shall give Landlord not less than thirty
(30) days written notice of its intention to conduct any such audit. Tenant
shall have sixty (60) days to notify Landlord of any objection to Landlord's
records. Thereafter, Landlord and Tenant shall use reasonable efforts to settle
the objection. If a settlement cannot be reached, then a CPA acceptable to both
parties shall audit Landlord's records. If such audit discloses that the amount
paid by Tenant for Property Taxes or Operating Expenses for the Lease Years
under consideration has been overstated by more than ten percent (10%), then, in
addition to rebating to Tenant the overcharge, Landlord shall also pay the
reasonable costs incurred by Tenant for such audit.
5. Other Taxes.
In addition to Tenant's obligations under Paragraph 4 above, Tenant
shall pay or reimburse Landlord for (i) any taxes upon, measured by or
reasonably attributable to the cost or value of Tenant's equipment, furniture,
fixtures, and other personal property located in the Premises or leasehold
improvements made in or to the Premises at Tenant's expense, (ii) for taxes, if
any, measured by or reasonably attributable to tenant improvements paid for by
Tenant, and (iii) for any taxes, assessments, fees, or charges imposed by any
public authority or private community maintenance association upon or by reason
of the development, possession, use or occupancy of the Premises or the parking
facilities used by Tenant in connection with the Premises. On request by
Landlord, Tenant shall furnish Landlord with satisfactory evidence of payment of
Tenant's business personal property taxes and deliver copies of such business
personal property tax bills to Landlord.
6. Use.
6.1 Prohibited Uses.
(a) The Premises shall be used and occupied by Tenant
solely for the use set forth in the Basic Lease Information. Tenant shall, at
Tenant's expense, comply promptly with all applicable federal, state and local
laws, regulations, ordinances, rules, orders, and requirements in effect during
the Term relating to the condition, use or occupancy of the Premises. Tenant
shall not use or permit the use of the Premises in any manner that will tend to
create waste or a nuisance, or that unreasonably disturbs other tenants of the
Buildings or Project, nor shall Tenant place or maintain any signs, antennas,
awnings, lighting or plumbing fixtures, loudspeakers, exterior decoration or
similar devises on or visible from the exterior of the Premises, without
Landlord's prior written consent, which may be withheld in Landlord's sole
discretion. Tenant shall not use any corridors, sidewalks, stairs, elevators, or
other areas outside of the Premises for storage or any purpose other than access
to the Premises. Tenant shall not use, keep, or permit to be used or kept on the
Premises any foul or noxious gas or substance, nor shall Tenant do or permit to
be done anything in and about the Premises, either in connection with activities
hereunder expressly permitted or otherwise, which would cause an increase in
premiums for or a cancellation of any policy of insurance (including fire
insurance) maintained by Landlord in connection with the Premises or the
Buildings or which would violate the terms of any covenants, conditions, or
restrictions, or the design guidelines, or the sign guidelines affecting the
Buildings or the land on which it is located, or the Rules (as the term is
defined under Paragraph 6.3(b) below).
(b) Landlord, at its sole expense, shall erect signage in
the parking lot designating Tenant's parking and designating parking on the
adjacent property for other parties. Landlord shall erect a sign (the design of
which shall be submitted by Landlord and approved by Tenant) at the corner of
Lakeville and Marina reading "Legacy Office Park." The cost of constructing and
installing such sign will be shared by Landlord and Tenant on a 50/50 basis.
Tenant shall not attach any signage to or on any part of the outside of the
Premises, the Buildings or the Project, or in the halls, lobbies, windows or
elevator banks of the Buildings without Landlord's prior written consent, which
consent may be withheld in Landlord's sole discretion. Any signage so permitted
shall be subject to prior approval of and conformance with the requirements of
the design review committee of the Project and the design review agency of the
city. At Tenant's expense, Tenant shall (i) maintain all permitted signage, and
(ii) upon the expiration or termination of this Lease, remove such signage and
repair any damage caused by their removal. If Tenant fails to do so, Landlord
may maintain, repair or remove such signage without notice to Tenant and at
Tenant's expense, the cost of which shall be payable by Tenant as additional
rent in accordance with Paragraph 14(b)(2) below.
6.2 Suitability. Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation or warranty with respect to the
Premises or the Buildings or with respect to the suitability or fitness of
either for the conduct of Tenant's business or for any other purpose. Nor has
Landlord agreed to undertake any modification, alteration or improvement to the
Premises except as provided in this Lease. Tenant acknowledges that the Premises
are located in a 100-year flood zone and that the finished floor elevations of
the Buildings are designed to be at least one (1) foot above the federal
government's estimate of the 100-year flood level at the time of initial
construction.
6.3 Use of Common Areas.
(a) Landlord gives Tenant and its authorized employees,
agents, customers, representatives, and invitees the exclusive right to use the
Common Areas, except for the maintenance rights of Landlord provided herein.
(b) All Common Areas shall be subject to the control and
management of Landlord and Landlord shall have the right to establish, modify,
amend, and enforce reasonable rules and regulations with respect to the Common
Areas. Tenant acknowledges receipt of a copy of the current rules and
regulations, attached hereto as Exhibit C, and agrees that they may, from time
to time, be modified or amended by Landlord in a commercially reasonable manner
(the "Rules"). Tenant agrees to abide by and conform with such Rules; to cause
its concessionaires and its and their employees and agents to abide by such
Rules; and to use its best efforts to cause its customers, invitees, and
licensees to abide by such Rules.
(c) Landlord shall have the right to close temporarily
any portion of the Common Areas for the purpose of discouraging use by parties
who are not tenants or customers of tenants; to use portions of the Common Areas
while engaged in making additional improvements or repairs or alterations to the
Property; to use or permit the use of the Common Areas by others to whom
Landlord may grant or have granted such rights; and to do and perform such acts
in, to, and with respect to, the Common Areas as in the use of good business
judgment Landlord shall determine to be appropriate for the Project.
(d) Landlord shall have the unqualified right to increase
or reduce the Common Areas, provided the Project meets the parking requirement
under Paragraph 6.5 below.
(e) Tenant shall cooperate with Landlord in recycling
waste paper, cardboard, or such other materials identified under any trash
recycling program that may be established in order to reduce trash collection
costs.
6.4 Environmental Matters.
(a) (1) The term "Hazardous Materials" as used herein
means any petroleum products, asbestos, polychlorinated biphenyls, P.C.B.'s,
chemicals, compounds, materials, mixtures or substances that are now or
hereafter defined or listed in, or otherwise classified as a "hazardous
substance", "hazardous material", "hazardous waste", "extremely hazardous
waste", "infectious waste", "toxic substance", "toxic pollutant" or any other
formulation intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity or toxicity pursuant to any federal, state or local
environmental law, regulation, ordinance, resolution, order or decree relating
to industrial hygiene, environmental protection or the use, analysis,
generation, manufacture, storage, release, disposal or transportation of the
same ("Hazardous Materials Laws").
(2) Except for ordinary office supplies and
janitorial cleaning materials which in common business practice are customarily
and lawfully used, stored and disposed of in small quantities, and except for
those Hazardous Materials listed on Exhibit D attached hereto, Tenant shall not
use, manufacture, store, release, dispose or transport any Hazardous Materials
in, on, under or about the Premises, the Buildings or the Project without giving
prior written notice to Landlord and obtaining Landlord's prior written consent,
which consent Landlord may withhold in its sole discretion. Subject to
Landlord's prior written consent, Tenant may request that Hazardous Materials be
added to Exhibit D on an annual review basis; any such amendments to Exhibit D
shall be signed by each party and attached hereto. Tenant shall at its own
expense procure, maintain in effect, and comply with all conditions of any and
all permits, licenses, and other governmental and regulatory approvals required
in connection with Tenant's generation, use, storage, disposal and
transportation of Hazardous Materials. Except as discharged into the sanitary
sewer in strict accordance and conformity with all applicable Hazardous
Materials Laws, Tenant shall cause any and all Hazardous Materials removed from
the Premises to be removed and transported solely by duly licensed haulers to
duly licensed facilities for final disposal of such materials and wastes.
Regardless whether permitted under the Hazardous Materials Laws, Tenant shall
not maintain in, on, under, or about the Premises, the Buildings or the Project
any above or below ground storage tanks, clarifiers, or sumps, nor shall any
wells for the monitoring of ground water, soils, or subsoils be allowed.
(3) Tenant shall immediately notify Landlord in
writing of: (a) any enforcement, cleanup, removal or other governmental or
regulatory action instituted, completed or threatened pursuant to any Hazardous
Materials Law; (b) any claim made or threatened by any person or entity against
Tenant or the Premises relating to damage, contribution, cost, recovery,
compensation, loss or injury resulting from or claimed to result from any
Hazardous Materials; and (c) any reports, information, inquiries or demands
made, ordered, or received by or on behalf of Tenant which arise out of or in
connection with the existence or potential existence of any Hazardous Materials
in, on, under or about the Premises, the Buildings, or the Project, including,
without limitation, any complaints, notices, warnings, asserted violations, or
mandatory or voluntary informational filings with any governmental agency in
connection therewith, and immediately supply Landlord with copies thereof.
(b) Tenant shall indemnify, defend (by counsel reasonably
acceptable to Landlord), protect, and hold Landlord, and each of Landlord's
partners, officers, directors, partners, employees, affiliates, joint venturers,
members, trustees, owners, shareholders, principals, agents, representatives,
attorneys, successors and assigns, free and harmless from and against any and
all claims, liabilities, damages, fines, penalties, forfeitures, losses, cleanup
and remediation costs or expenses (including attorneys' fees) or death of or
injury to any person or damage to any property whatsoever, arising from or
caused in whole or in part, directly or indirectly, by (i) Tenant's use,
analysis, generation, manufacture, storage, release, disposal, or transportation
of Hazardous Materials by Tenant, Tenant's agents, employees, contractors,
licensees or invitees to, in, on, under, about or from the Premises, the
Buildings, or the Project, or (ii) Tenant's failure to comply with any Hazardous
Materials Law. Tenant's obligations hereunder shall include, without limitation,
and whether foreseeable or unforeseeable, all costs of any required or necessary
repair, cleanup, detoxification or decontamination of the Premises, the
Buildings, or the Project and the preparation and implementation of any closure,
remedial action or other required plans in connection therewith, and shall
survive the expiration or earlier termination of this Lease.
(c) Landlord shall have the right to enter the Premises
at all times during regular business hours upon reasonable prior notice for the
purposes of ascertaining compliance by Tenant with all applicable Hazardous
Materials Laws, provided, however, that in the instance of an emergency
Landlord's entry onto the Premises shall not be restricted to regular business
hours nor shall notice be required.
(d) Landlord shall have the option to declare a default
of this Lease for the release or discharge of Hazardous Materials by Tenant,
Tenant's employees, agents, contractors, or invitees on the Premises, Buildings
or Project or in violation of law or in deviation from prescribed procedures in
Tenant's use or storage of Hazardous Materials. If Tenant fails to comply with
any of the provisions under this Paragraph 6.4, Landlord shall have the right
(but not the obligation) to remove or otherwise clean up any Hazardous Materials
from the Premises, the Building or the Project. In such case, the costs of any
Hazardous Materials investigation, removal or other cleanup (including, without
limitation, transportation, storage, disposal and attorneys' fees and costs)
will be additional rent due under this Lease, whether or not a court has ordered
the cleanup, and will become due and payable on demand by Landlord.
6.5 Parking. Landlord grants to Tenant and Tenant's customers,
suppliers, employees and invitees an exclusive non-revocable license to use
unassigned and unreserved parking spaces in the Common Areas for the use of
motor vehicles during the Term subject to rights reserved to Landlord as
specified in this Paragraph 6.5. Landlord reserves the right to promulgate rules
and regulations relating to the use of the Common Areas including parking by
tenant and employees of tenant; to make changes in the parking layout from time
to time; and to do and perform any other acts in and to these areas and
improvements as Landlord determines to be advisable. Tenant agrees not to
overburden the parking facilities and to abide by and conform with the rules and
regulations and to cause its employees and agents to abide by and conform to the
rules and regulations. Upon request, Tenant shall provide Landlord with license
plate numbers of all vehicles driven by its employees and to cause Tenant's
employees to park only in spaces specifically designated for tenant parking.
Landlord shall have the unqualified right to rearrange or reduce the number of
parking spaces; provided, however, the total number of parking spaces available
to Tenant will be approximately 360 spaces, but no less than 350.
7. Services.
(a) Tenant shall pay for all water, sewer, gas, electricity, heat,
cooling, telephone, refuse collection, and other utility-type services furnished
to Tenant or the Premises, together with all related installation or connection
charges or deposits. Wherever it is practical to do so such services shall be
separately metered or charged to Tenant by the provider thereof and paid for
directly by Tenant. To the extent any of the foregoing services are provided by
Landlord, Tenant shall reimburse Landlord for all costs incurred by Landlord in
connection with the provision of such services based on Landlord's reasonable
estimate of the level of Tenant's use or consumption of such services. Landlord
shall bill Tenant on a monthly or other periodic basis for such services and
payment shall be made by Tenant within ten (10) days after submittal of
Landlord's statement.
(b) Landlord shall not be in default hereunder or be liable for any
damages or personal injuries to any person directly or indirectly resulting
from, nor shall there be any Rent abatement by reason of, any interruption or
curtailment whatsoever in utility services.
8. Maintenance, Repairs and Alterations.
(a) Tenant shall, at Tenant's expense, maintain every part of the
Premises in good order, condition and repair, including without limitation, (i)
all interior surfaces, ceilings, walls, door frames, window frames, floors,
carpets, draperies, window coverings and fixtures, (ii) all windows, doors,
locks and closing devices, entrances, plate glass, and signs, (iii) all plumbing
and sewage pipes, fixtures and fittings, (iv) all phone lines, electrical
wiring, equipment, switches, outlets, and light bulbs, (v) any fire detection,
fire sprinkler or extinguisher equipment, (vi) all of Tenant's personal
property, improvements and alterations, and (vii) all other fixtures and special
items installed by or for the benefit of, or at the expense of Tenant. Tenant
shall, at its expense, cause to be maintained in good operating condition and
repair, all heating, ventilating, and air conditioning equipment installed in,
or on the roof of the Premises. Tenant shall keep in force a preventive
maintenance contract with a qualified maintenance company covering all heating,
ventilating and air conditioning equipment and shall annually provide Landlord
with a copy of this contract. Tenant shall not enter onto the roof area of the
Buildings, except for the purpose of maintaining the heating, ventilating, and
air conditioning equipment and provided that Tenant shall repair any damage to
the roof area caused by its entry. Tenant shall be responsible for its own
janitorial service. Landlord shall incur no expense (nor have any obligation) of
any kind whatsoever in connection with the maintenance of the Premises.
(b) Notwithstanding any other provision of this lease, Landlord
shall keep, at Landlord's sole expense, in good condition and repair the
foundation, roof structure, exterior walls and other structural parts of the
Buildings, and all other portions of the Buildings not the obligation of Tenant
or any other tenant in the Buildings. Tenant expressly waives the benefits of
any statute, including Civil Code Sections 1941 and 1942, which would afford
Tenant the right to make repairs at Landlord's expense or to terminate this
Lease due to Landlord's failure to keep the Buildings in good order, condition
and repair. Landlord shall have no liability to Tenant for any damage,
inconvenience, or interference with the use of the Premises by Tenant as the
result of Landlord performing any such maintenance and repair work.
(c) In the event Tenant fails to perform Tenant's obligations
under this Paragraph 8, Landlord may, but shall not be required to, give Tenant
notice to do such acts as are reasonably required to so maintain the Premises.
If Tenant shall fail to commence such work within 5 days of Landlord's notice
and thereafter diligently prosecute it to completion, then Landlord shall have
the right (but not the obligation) to do such acts and expend such funds at the
expense of Tenant as are reasonably required to perform such work. Any amounts
so expended by Landlord will be additional rent due under this Lease, and such
amounts will become due and payable on demand by Landlord. Landlord shall have
no liability to Tenant for any such damages, inconvenience, or interference with
the use of the Premises by Tenant as a result of performing such work.
(d) Upon the expiration or earlier termination of this Lease,
Tenant shall surrender the Premises in good condition and repair, only ordinary
wear and tear excepted. Tenant, at its sole cost and expense, agrees to repair
any damages to the Premises caused by or in connection with the removal of any
articles of personal property, business or trade fixtures, signs, machinery,
equipment, cabinetwork, furniture, moveable partitions, or permanent
improvements or additions, including without limitation thereto, repairing the
floor and patching and painting the walls where required by Landlord, to
Landlord's reasonable satisfaction. Tenant shall indemnify Landlord against any
loss or liability resulting from delay by Tenant in so surrendering the
Premises, including without limitation, any claims made by any succeeding tenant
resulting from such delay.
(e) Tenant shall not make any alterations, improvements, or
additions in, on, or about the Premises without Landlord's prior written
consent, except that Tenant may make alterations, improvements, or additions
without Landlord's prior written consent where (i) the reasonably estimated cost
does not exceed $2,500, and (ii) such alterations, improvements, or additions do
not affect or involve the structural integrity, roof membrane, exterior areas,
Building systems, or water-tight nature of the Premises, the Buildings or the
Project. In requesting Landlord's consent, Tenant shall, at Tenant's sole cost,
submit to Landlord complete drawings and specifications describing such work and
the identity of the proposed contractor at least ten (10) business days prior to
the commencement of any work.
With respect to any alterations, improvements or additions
made to the Premises by Tenant:
(1) Before commencing any work relating toalterations,
additions, or improvements affecting the Premises, Tenant shall notify Landlord
of the expected date of commencement thereof and of the anticipated cost
thereof. Landlord shall then have the right at any time and from time to time to
post and maintain on the Premises such notices as Landlord reasonably deems
necessary to protect the Premises and Landlord from mechanics' liens or any
other liens.
(2) Tenant shall pay when due all claims for labor or
materials furnished to Tenant for use in the Premises. Tenant shall not permit
any mechanics' liens or any other liens to be levied against the Premises for
any labor or materials in connection with work performed on the Premises by or
at the direction of Tenant. Tenant shall indemnify, hold harmless and defend
Landlord (by counsel reasonably satisfactory to Landlord) from any liens and
encumbrances arising out of any work performed or materials furnished by, or at
the direction of Tenant. In the event that Tenant shall not, within twenty (20)
days following the imposition of any such lien, cause such lien to be released
of record by payment or posting of a proper bond, Landlord shall have, in
addition to all other remedies provided herein by law, the right, but not the
obligation, to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All such sums
paid by Landlord and all expenses incurred by it in connection therewith,
including attorneys' fees and costs, shall be payable to Landlord by Tenant on
demand with interest at the rate of twelve percent (12%) per annum.
(3) All alterations, improvements or additions in or
about the Premises performed by or on behalf of Tenant shall be done in a
first-class, workmanlike manner, shall not unreasonably lessen the value of
leasehold improvements in the Premises, and shall be completed in compliance
with all applicable laws, ordinances, regulations and orders of any governmental
authority having jurisdiction thereover, as well as the requirements of insurers
of the Premises and the Buildings.
(4) Upon Landlord's request, Tenant shall remove any
contractor, subcontractor or material supplier from the Premises and the
Buildings if the work or presence of such person or entity results in labor
disputes in or about the Buildings or Project or damage to the Premises,
Buildings or Project.
(5) Landlord, at Landlord's sole discretion, may refuse
to grant Tenant permission for alterations, improvements or additions which
require, because of application of Americans with Disabilities Act or other
laws, substantial improvements or alterations to be made to the Common Areas.
(6) Landlord may, at any time up to sixty (60) days prior
to the expiration of the Term, require that Tenant, at Tenant's expense, remove
any such alterations, improvements or additions prior to or upon the expiration
of this Lease, and restore the Premises to their condition prior to such
alterations, improvements or additions.
(7) Unless Landlord requires their removal, as set forth
above, all alterations, improvements, or additions made to the Premises shall
become the property of Landlord and remain upon and be surrendered with the
Premises upon the expiration of this Lease; provided, however, that Tenant's
machinery, equipment, and trade fixtures, other than any which may be affixed to
the Premises so that they cannot be removed without material damage to the
Premises, shall remain the property of Tenant and may be removed by Tenant
subject to the provisions of Paragraph 8(d) above.
9. Construction of Tenant Improvements.
Landlord shall be responsible for constructing the tenant
improvements ("Tenant Improvements") in the Premises, as provided in the Work
Letter Agreement, attached hereto as Exhibit B.
10. Insurance and Indemnity.
10.1 Insurance.
(a) Tenant shall obtain and maintain during the Term
commercial general liability insurance with a combined single limit for personal
injury and property damage in an amount of not less than $2,000,000 (in a form,
with a deductible amount, and with carriers reasonably acceptable to Landlord)
and employer's liability and workers' compensation insurance as required by law.
The insurance carrier shall be authorized to do business in the State of
California, with a policyholders and financial rating of at least A:IX Class
status as rated in the most recent edition of Best's Key-Rating guide. Tenant's
commercial general liability insurance policy shall be endorsed to provide that
(i) it may not be canceled or altered in such a manner as to adversely affect
the coverage afforded thereby without thirty (30) days' prior written notice to
Landlord, (ii) Landlord, and if requested by Landlord, its lender and property
manager, is designated as an additional insured, (iii) the insurer acknowledges
acceptance of the mutual waiver of claims by Landlord and Tenant pursuant to
Paragraph 10.2(b) below, and (iv) such insurance is primary with respect to
Landlord and that any other insurance maintained by Landlord is excess and
noncontributing with such insurance. If, in the opinion of Landlord's lender or
in the commercially reasonable opinion of Landlord's insurance adviser, the
specified amounts of coverage are no longer adequate, such coverage shall,
within 30 days written notice to Tenant, be appropriately increased. Prior to
the commencement of the Term, Tenant shall deliver to Landlord a duplicate of
such policy or a certificate thereof to Landlord for retention by it, with
endorsements. At least thirty (30) days prior to the expiration of such policy
or any renewal or modification thereof, Tenant shall deliver to Landlord a
replacement or renewal binder, followed by a duplicate policy or certificate
within a reasonable time thereafter. If Tenant fails to obtain such insurance or
to furnish Landlord any such duplicate policy or certificate as herein required,
Landlord may, at its election, without notice to Tenant and without any
obligation to do so, procure and maintain such coverage and Tenant shall
reimburse Landlord on demand as additional rent for any premium so paid by
Landlord.
(b) Landlord waives all claims against Tenant, and
Tenant's officers, directors, partners, employees, agents and representatives
for loss or damage to the extent that such loss or damage is insured against
under any valid and collected insurance policy insuring Landlord or would have
been insured against but for any deductible amount under any such policy. Tenant
waives all claims against Landlord, and Landlord's officers, directors,
partners, employees, affiliates, joint venturers, members, trustees, owners,
shareholders, principals, agents, representatives, successors and assigns, for
loss or damage to the extent such loss or damage is insured against under any
valid and collected insurance policy maintained by Tenant under this Lease, or
would have been insured against but for any deductible amount under any such
policy. The insuring party shall, upon obtaining the policies of insurance
required under this Lease, give notice to the insurance carrier or carriers that
the foregoing mutual waiver of claims is contained in this Lease. Tenant agrees
that in the event of a sale, assignment or transfer of the Premises by Landlord,
this waiver of claims shall continue in favor of the original Landlord and any
subsequent Landlord.
(c) Tenant shall at its own cost maintain on all its
personal property, Tenant's improvements, and alterations, in, on, or about the
Premises, a policy of standard fire and extended coverage insurance, with
vandalism and malicious mischief endorsements, to the extent of at least one
hundred percent (100%) of their full replacement value. The proceeds from any
such policy shall be used by Tenant for the replacement of personal property and
the restoration of Tenant's improvements or alterations. Notwithstanding any
other provisions of the Lease, Landlord shall have no liability for damage to or
destruction of Tenant's personal property, regardless of whether the damage or
destruction results from the acts or omissions of Landlord unless such damage or
destruction is due to Landlord's active negligence or willful misconduct.
(d) During the Term, Landlord shall keep the Buildings,
and improvements within which the Premises are located, insured against loss or
damage by (i) fire, with extended coverage and vandalism, malicious mischief and
special extended perils (all risk) endorsements or their equivalents, in amounts
not less than ninety percent (90%) of the replacement cost of the Buildings and
structures insured, and (ii) flood, in the maximum amount provided for by FEMA
under its flood loss insurance program, with loss payable thereunder to Landlord
and to any authorized encumbrancer of Landlord (with standard mortgagee loss
payable clause) in accordance with their respective interests. Landlord may
maintain rent insurance, for the benefit of Landlord, equal to at least one
year's Base Rent hereunder. If the Lease is terminated as a result of damage by
fire, casualty or earthquake as set forth in this Paragraph 10, all insurance
proceeds shall be paid to and retained by Landlord, subject to the rights of any
authorized encumbrancer of Landlord.
(e) Tenant acknowledges that Landlord does not, at the
time of the signing of this Lease, insure the Buildings for earthquake damage.
Landlord shall, if specifically required by lender, insure the Buildings fully
or partially for earthquake damage. At such time, the premium for earthquake
insurance will be included in the calculation of Operating Expenses.
10.2 Indemnity.
(a) Tenant waives all claims against Landlord for damage
to any property or injury to or death of any person in, on, or about the
Premises, the Buildings, or any other portion of the Project arising at any time
and from any cause, unless caused by the active negligence or willful misconduct
of Landlord, its agents, employees, or contractors. Tenant shall indemnify,
defend (by counsel reasonably satisfactory to Landlord) and hold harmless
Landlord, and Landlord's officers, directors, partners, employees, affiliates,
joint venturers, members, trustees, owners, shareholders, principals, agents,
representatives, successors and assigns, from and against all claims, costs,
damages, actions, indebtedness and liabilities (except such as may arise from
the active negligence or willful misconduct of Landlord, and Landlord's
officers, directors, partners, employees, affiliates, joint venturers, members,
trustees, owners, shareholders, principals, agents, representatives, successors
and assigns) arising by reason of any death, bodily injury, personal injury,
property damage or any other injury or damage in connection with (i) any
condition or occurrence in or about or resulting from any condition or
occurrence in or about the Premises during the Term, or (ii) any act or omission
of Tenant, or Tenant's agents, representatives, officers, directors,
shareholders, partners, employees, successors and assigns, wherever it occurs.
The foregoing indemnity obligation of Tenant shall include reasonable attorneys'
fees, and all other reasonable costs and expenses incurred by Landlord from the
first notice that any claim or demand is to be made. The provisions of this
Paragraph 10.2 shall survive the termination or expiration of this Lease with
respect to any damage, injury, or death occurring prior to such expiration or
termination.
(b) Neither party shall be liable to the other for any
unauthorized or criminal entry of third parties into the Premises, Buildings,
Project, Common Areas, or parking facilities, or for any damage to person or
property, or loss of property in and about the Premises, Buildings, Project,
Common Areas, parking facilities and the approaches, entrances, streets,
sidewalks, stairs, elevators, restrooms, or corridors thereto, by or from any
unauthorized or criminal acts of third parties, regardless of any breakdown,
malfunction or insufficiency of any security measures, practices or equipment
provided by Landlord or Tenant. Tenant shall immediately notify Landlord in
writing of any breakdown or malfunction of any security measures, practices or
equipment provided by Landlord as to which Tenant has knowledge.
(c) Any diminution or interference with light, air or
view by any structure which may be erected on land adjacent to the Buildings or
resulting from any other cause shall in no way alter this Lease or impose any
liability on Landlord.
(d) Tenant agrees that in no event shall Landlord be
liable for consequential damages, including injury to Tenant's business or any
loss of income therefrom.
(e) In the event that Landlord or any successor owner of
the Buildings sells or conveys the Buildings, then all liabilities and
obligations of Landlord or the successor owner under this Lease accruing after
the sale or conveyance shall terminate and become binding on the new owner, and
Tenant shall release Landlord from all liability under this Lease (including,
without limitation, the Security Deposit, as defined under Paragraph 16 below),
except for acts or omissions of Landlord occurring prior to such sale or
conveyance.
(f) Tenant expressly agrees that (i) the obligations of
Landlord shall not constitute personal obligations of the officers, directors,
partners, employees, affiliates, joint venturers, members, trustees, owners,
shareholders, or other principals, agents or representatives of such business
entity ("Member of Landlord"), and (ii) Tenant shall have recourse only to
Landlord's interest in the Buildings of which the Premises are a part for the
satisfaction of such obligations and not against other assets of Landlord, or
the assets of such Member of Landlord. In this regard, Tenant agrees that in the
event of any actual or alleged failure, breach or default by Landlord of its
obligations under this Lease, that (i) no Member of Landlord shall be sued or
named as a party in any suit or action (except as may be necessary to secure
jurisdiction of Landlord), (ii) no judgment will be taken against any Member of
Landlord, and any judgment taken against any Member of Landlord may be vacated
and set aside at any time without hearing, (iii) no writ of execution will ever
be levied against the assets of any Member of Landlord, and (iv) these
agreements by Tenant are enforceable both by Landlord and by any Member of
Landlord.
11. Damage or Destruction.
(a) Subject to the provisions of Paragraphs 11(b) and 11(c) and 22
below, if, during the Term, the Premises are totally or partially destroyed from
any insured casualty, Landlord shall, within ninety (90) days after the
destruction, commence to restore the Premises to substantially the same
condition as they were in immediately before the destruction and prosecute the
same diligently to completion. Such destruction shall not terminate this Lease.
Landlord's obligation shall not include repair or replacement of Tenant's
alterations or Tenant's equipment, furnishings, fixtures and personal property.
If the existing laws do not permit the Premises to be restored to substantially
the same condition as they were in immediately before destruction, and Landlord
is unable to get a variance to such laws to permit the commencement of
restoration of the Premises within the 90-day period, then either party may
terminate this Lease by giving written notice to the other party within thirty
(30) days after expiration of the 90-day period.
(b) Despite the provisions of Paragraph 11(a) above, Landlord may
elect within ninety (90) days after such destruction to demolish the Buildings
rather than rebuild it, in which case this Lease shall terminate as of the date
of the destruction. Landlord shall give Tenant written notice of its election
within forty-five (45) days after the destruction.
(c) If any destruction occurs to the Premises during the last six
(6) months of the initial Term or during the last six (6) months of any
extension period, regardless of the nature and extent of the destruction, either
party can elect to terminate this Lease within thirty (30) days after the
destruction occurs. If this Lease does not terminate pursuant to this Paragraph
11(c), the provisions of Paragraph 11(a) above shall apply.
(d) If the Premises are damaged from any uninsured casualty to any
extent whatsoever, Landlord may within ninety (90) days following the date of
such damage elect to either: (i) restore the Premises to substantially the same
condition as they were in immediately before the damage and prosecute the same
diligently to completion, in which event this Lease shall continue in full force
and effect; or (ii)elect not to so restore the Premises, in which event this
Lease shall cease and terminate as of the date of Landlord's election. In either
such event, Landlord shall give Tenant written notice of its intention within
forty-five(45) days after destruction.
(e) In the event of destruction or damage to the Premises which
materially interferes with Tenant's use of the Premises, if this Lease is not
terminated as above provided, there shall be an abatement or reduction of Base
Rent between the date of destruction and the date Landlord substantially
completes its reconstruction obligations, based upon the extent to which the
destruction materially interferes with Tenant's use of the Premises. All other
obligations of Tenant under this Lease shall remain in full force and effect.
Except for abatement of Base Rent, Tenant shall have no claim against Landlord
for any loss suffered by Tenant due to damage or destruction of the Premises or
any work of repair undertaken as herein provided.
(f) The provisions of California Civil Code Sections 1932(2) and
1933(4), and any successor statutes, are inapplicable with respect to any
destruction of the Premises, such sections providing that a lease terminates
upon the destruction of the Premises unless otherwise agreed between the parties
to the contrary.
(g) The cost of repairing any destruction under this paragraph 11
shall be treated as an Operating Expense for purposes of paragraph 11 only to
the extent of the deductible amount on Landlord's casualty insurance policy or,
if the destruction is uninsured, to a like amount which amount is currently
$1,000 and shall not exceed $5,000.
12. Eminent Domain.
(a) If all or any part of the Premises shall be taken as a result
of the exercise of the power of eminent domain, this Lease shall terminate as to
the part so taken as of the date of taking. In the case of a partial taking of
greater than fifty percent (50%) of the rentable area of the Premises, either
Landlord or Tenant shall have the right to terminate this Lease as to the
balance of the Premises by notice to the other within thirty (30) days after the
date of the taking. In the event of a partial taking of the Premises which does
not result in a termination of this Lease, the monthly Base Rent thereafter to
be paid shall be equitably reduced on a square footage basis. If the continued
occupancy of Tenant is materially interfered with for any time during the
partial taking, notwithstanding the partial taking does not terminate this Lease
as to the part not so taken, the Base Rent shall proportionately abate so long
as Tenant is not able to continuously occupy the part remaining and not so
taken.
(b) All compensation awarded or paid upon a total or partial taking
of the fee title shall belong to Landlord whether such compensation be awarded
or paid as compensation for diminution in value of the leasehold or of the fee
except: Tenant shall retain and have a claim for the following, to the extent
specifically designated by the condemning authority: (i) the unamortized value
over the Term of Tenant's leasehold improvements (to the extent Landlord has not
contributed to the cost thereof); (ii) that portion (if any) of the award made
to Landlord as a result of removing fixtures, removable by Tenant herein, under
the terms of this Lease but which are required to be taken by the condemnor or
are so acquired by the condemnor; and (iii) all relocation assistance, moving
and relocation expenses to the extent (if any) provided by the condemning
authority directly to Tenant.
13. Assignment and Subletting.
(a) Tenant shall not assign, sublet or hypothecate this Lease or
any interest herein or sublet the Premises or any part thereof or permit the use
of the Premises by any party other than Tenant without the prior written consent
of Landlord, which consent shall not be unreasonably withheld. Any of the
foregoing acts without Landlord's consent shall be void and shall, at the option
of Landlord, terminate this Lease. In connection with each consent requested by
Tenant, Tenant shall submit to Landlord the terms of the proposed transaction,
the identity of the parties to the transaction, the proposed documentation for
the transaction, current financial statements of any proposed assignee or
sublessee and all other information reasonably requested by Landlord concerning
the proposed transaction and the parties involved therein.
(b) As used in this Paragraph 13, the term "assign" or "assignment"
shall include, without limitation, any sale, transfer, or other disposition of
all or any portion of Tenant's estate under this Lease, whether voluntary or
involuntary, and whether by operation of law or otherwise, including any of the
following:
(1) if Tenant is a corporation or a limited liability
company: (A) any dissolution, merger, consolidation, or other reorganization of
Tenant; or (B) a sale or other transfer of more than fifty percent (50%) of the
value of the assets of Tenant; or (C) if Tenant is a corporation with fewer than
500 shareholders, a sale or other transfer of a controlling percentage of the
capital stock of Tenant; or (D) if Tenant is a limited liability company, a sale
or other transfer of a controlling percentage of the interest in Tenant. The
phrase "controlling percentage" means the ownership of, and the right to vote,
stocks or interests possessing at least fifty percent (50%) of the total
combined voting power of the limited liability company or, in the case of a
corporation, of all classes of Tenant's stock issues, outstanding and permitted
to vote for the election of directors of the corporation;
(2) if Tenant is a trust, the transfer of more than fifty
percent (50%) of the beneficial interest of Tenant, or the dissolution of the
trust;
(3) if Tenant is a partnership or joint venture, the
withdrawal, or the transfer of the interest, of any general partner or joint
venturer or the dissolution of the partnership or joint venture; and
(4) if Tenant is composed of tenants-in-common, the
transfer of interest of any cotenants or the partition or dissolution of the
cotenancy.
(5) Notwithstanding any of the foregoing, the following
items shall be excluded from the definition of "assign" or "assignment": (A) any
public offering of Tenant's stock; (B) a transfer of stock to a trust for the
beneficiary of a stockholder's family and; (C) the transfer of shares upon the
death of a stockholder.
(c) No sublessee shall have a right further to sublet, and any
assignment by a sublessee of its sublease shall be subject to Landlord's prior
written consent in the same manner as if Tenant were entering into a new
sublease.
(d) Regardless of Landlord's consent, no subletting or assignment
shall release Tenant of Tenant's obligation, or alter the primary liability of
Tenant to pay the Rent and to perform all other obligations to be performed by
Tenant hereunder. The acceptance of Rent by Landlord from any other person shall
not be deemed to be a waiver by Landlord of any provisions hereof. Consent to
one assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee of Tenant or
any successor of Tenant in the performance of any of the terms hereof, Landlord
may proceed directly against Tenant without the necessity of exhausting remedies
against such assignee or successor.
(e) In the event Tenant shall assign or sublet the Premises or
request the consent of Landlord to any assignment or subletting, then Tenant
shall reimburse Landlord for an administrative fee of $200 and reasonable costs
and attorneys' fees incurred in connection therewith in a total amount not to
exceed $1,000.00.
14. Default by Tenant.
(a) The following events shall constitute Events of Default under
this Lease:
(1) a failure by Tenant to pay any Rent or to deliver an
estoppel certificate (as provided in Paragraph 17 below) where such failure
continues for five (5) days after written notice by Landlord to Tenant;
(2) the bankruptcy or insolvency of Tenant, any transfer
by Tenant to defraud creditors, any assignment by Tenant for the benefit of
creditors, or the commencement of any proceedings of any kind by or against
Tenant under any provision of the Federal Bankruptcy Act or under any other
insolvency, bankruptcy or reorganization act unless, in the event any such
proceedings are involuntary, Tenant is discharged from the same within sixty
(60) days thereafter; the appointment of a receiver for a substantial part of
the assets of Tenant; or the levy upon this Lease or any estate of Tenant
hereunder by any attachment or execution;
(3) the abandonment or vacation of the Premises;
(4) the discovery by Landlord that any financial
statement given to Landlord by Tenant, any assignee of Tenant, any subtenant of
Tenant, any successor in interest of Tenant or any guarantor of Tenant's
obligation hereunder, and any of them, was materially false; and
(5) a failure by Tenant to perform any of the terms,
covenants, agreements or conditions of this Lease to be observed or performed by
Tenant (excluding any event of default under Paragraph 14(a)(1) above), where
such failure continues for thirty (30) days after written notice thereof by
Landlord to Tenant; provided, however, that if the nature of the default is such
that the same cannot reasonably be cured within the 30-day period, Tenant shall
not be deemed to be in default if Tenant shall within such period commence such
cure and thereafter diligently prosecute the same to completion.
(b) In the event of any Event of Default, Landlord may at any time
thereafter, without limiting Landlord in the exercise of any right or remedy at
law or in equity which Landlord may have by reason of such default or breach:
(1) Pursue the remedy described in California Civil Code
Section 1951.4 whereby Landlord may continue this Lease in full force and effect
after Tenant's Default and recover the Rent and any other monetary charges as
they become due, without terminating Tenant's right to sublet or assign this
Lease, subject only to reasonable limitations as herein provided. During the
period Tenant is in default, Landlord shall have the right to do all acts
necessary to preserve and maintain the Premises as Landlord deems reasonable and
necessary, including removal of all persons and property from the Premises, and
Landlord can enter the Premises and relet them, or any part of them, to third
parties for Tenant's account. Tenant shall be liable immediately to Landlord for
all costs Landlord incurs in reletting the Premises, including, without
limitation, brokers' commissions, expenses of remodeling the Premises required
by the reletting, and like costs. Reletting may be for a period shorter or
longer than the remaining Term in Landlord's discretion.
(2) Pay or perform such obligation due (but Landlord
shall not be obligated to do so), if Tenant fails to pay or perform any
obligations when due under this Lease within the time permitted for their
payment or performance. In such case, the costs incurred by Landlord in
connection with the performance of any such obligation will be additional rent
due under this Lease and will become due and payable on demand by Landlord.
(3) Terminate Tenant's right to possession by any lawful
means, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. In such event Landlord shall
be entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant's default, including, without limitation, the following: (A) the worth at
the time of award of any unpaid Rent which had been earned at the time of such
termination; plus (B) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such Rent loss that is proved could have been
reasonably avoided; plus (C) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such Rent loss that is proved could be reasonably avoided;
plus (D) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which in the ordinary course of events would be likely to result
therefrom; plus (E) at Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by applicable
law. Upon any such termination of Tenant's possessory interest in and to the
Premises, Tenant (and at Landlord's sole election, Tenant's sublessees) shall no
longer have any interest in the Premises, and Landlord shall have the right to
make any reasonable repairs, alterations or modifications to the Premises which
Landlord in its sole discretion deems reasonable and necessary. The "worth at
the time of award" of the amounts referred to in subparagraphs (A) and (B) above
is computed by allowing interest at the maximum rate of twelve percent (12%).
The worth at the time of award of the amount referred to in subparagraph (C)
above is computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).
(4) Pursue any other legal or equitable remedy available
to Landlord. Unpaid installments of Rent and other unpaid monetary obligations
of Tenant under the terms of this Lease shall bear interest from the date due at
the rate of ten percent (10%) per annum.
(c) In the event Tenant is evicted or Landlord takes possession of
the Premises by reason of any default by Tenant hereunder, Tenant hereby waives
any right of redemption or relief from forfeiture as provided by law.
(d) Even though Tenant has breached this Lease and abandoned the
Premises, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant's right to possession, and Landlord may enforce all its rights
and remedies under this Lease, including the right to recover Rent as it becomes
due under this Lease. Acts of maintenance or preservation, 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.
(e) In the event Tenant is in default under any provision of this
Lease then, at Landlord's sole election: (i) Tenant shall not have the right to
exercise any available right, option or election under this Lease ("Tenant's
Exercise Rights") (ii) Tenant shall not have the right to consummate any
transaction or event triggered by the exercise of any of Tenant's Exercise
Rights, and (iii) Landlord shall not be obligated to give Tenant any required
notices or information relating to the exercise of any of Tenant's Exercise
Rights hereunder.
15. Default by Landlord, Notice to Mortgagee.
Landlord shall not be in default unless Landlord, or the holder of
any mortgage, deed of trust or ground lease covering the Premises, fails to
perform obligations required of Landlord within a reasonable time, but in no
event more than thirty (30) days after written notice by Tenant to Landlord
certified mail, postage prepaid, and to the holder of any first mortgage, deed
of trust or ground lease covering the Premises whose name and address shall have
been furnished to Tenant in writing, specifying wherein Landlord has failed to
perform such obligations; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for performance
then Landlord shall not be in default if Landlord or the holder of any such
mortgage, deed of trust or ground lease commences performance within such 30-day
period and thereafter diligently prosecutes the same to completion. In no event
shall Tenant be entitled to terminate this Lease or offset against Rent by
reason of Landlord's default, and Tenant's remedies shall be limited to an
action for monetary damages at law.
16. Security Deposit.
On execution of this Lease, Tenant shall deposit with Landlord the
sum specified in the Basic Lease Information (the "Security Deposit"). The
Security Deposit shall be held by Landlord as security for the performance by
Tenant of all of the provisions of this Lease. If Tenant fails to pay Rent or
other charges due hereunder, or otherwise defaults with respect to any provision
of this Lease, Landlord may use, apply, or retain all or any portion of the
Security Deposit for the payment of any Rent or other charge in default, or the
payment of any other sum to which Landlord may become obligated by reason of
Tenant's default, or to compensate Landlord for any loss or damage which
Landlord may suffer thereby. If Landlord so uses or applies all or any portion
of the Security Deposit, then within ten (10) days after demand therefor Tenant
shall deposit cash with Landlord in an amount sufficient to restore the deposit
to the full amount thereof, 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 accounts. If Tenant performs all of Tenant's
obligations hereunder, the Security Deposit, or so much thereof as has not
theretofore been applied by Landlord, shall be returned, without payment of
interest for its use, to Tenant (or, at Landlord's option to the last assignee,
if any, of Tenant's interest hereunder) at the expiration of the Term, and after
Tenant has vacated the Premises. No trust relationship is created herein between
Landlord and Tenant with respect to the Security Deposit.
17. Estoppel Certificate.
(a) Tenant shall within ten (10) days of notice from Landlord
execute, acknowledge and deliver to Landlord a statement certifying (i) that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification and certifying that this Lease, as so modified,
is in full force and effect), (ii) the amount of the Security Deposit, (iii) the
date to which the Rent has been paid, (iv) acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on the part of Landlord hereunder, or
specifying such defaults, if any are claimed, and (v) such other matters as may
reasonably be requested by Landlord. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the Buildings.
(b) Tenant's failure to deliver such statement within such time
shall be conclusive upon Tenant, (i) that this Lease is in full force and
effect, without modification except as may be represented by Landlord, (ii) that
there are no uncured defaults in Landlord's performance, and (iii) that not more
than one month's Base Rent has been paid in advance.
(c) If Landlord desires to finance or refinance the Buildings,
Tenant agrees to deliver to any lender designated by Landlord such financial
statements of Tenant as may be customarily required by such lender. All such
financial statements shall be received by Landlord in confidence and shall be
used for the purposes herein set forth.
18. Subordination.
This Lease, at Landlord's sole option, shall be subordinate to any
ground lease, mortgage, deed of trust, or any other hypothecation for security
now or hereafter placed upon the Buildings and to any and all advances made on
the security thereof and to all renewals, modifications, consolidations,
replacements, refinancings and extensions thereof. Notwithstanding such
subordination, Tenant's right to quiet possession of the Premises shall not be
disturbed by Landlord or any person claiming by, through or under Landlord if
Tenant is not in default and so long as Tenant shall pay the Rent and observe
and perform all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgagee, trustee, or ground lessor
shall elect to have this Lease prior to the lien of its mortgage, deed of trust
or ground lease, and shall give notice thereof to Tenant, this Lease shall be
deemed prior to such mortgage, deed of trust, or ground lease, whether this
Lease is dated prior to or subsequent to the date of said mortgage, deed of
trust or ground lease or the date of recording thereof. If any mortgage or deed
of trust to which this Lease is subordinate is foreclosed or a deed in lieu of
foreclosure is given to the mortgagee or beneficiary, Tenant shall attorn to the
purchaser at the foreclosure sale or to the grantee under the deed in lieu of
foreclosure; if any ground lease to which this Lease is subordinate is
terminated, Tenant shall attorn to the ground lessor. Tenant agrees to execute
any documents required to effectuate such subordination or to make this Lease
prior to the lien of any mortgage, deed of trust or ground lease, as the case
may be, or to evidence such attornment. Any such document of attornment shall
also provide that the successor shall not disturb Tenant in its use of the
Premises in accordance with this Lease.
19. Attorneys' Fees.
In the event legal action is initiated by either party, the
prevailing party shall be entitled to recover all costs and expenses incurred in
such action, including, without limitation, reasonable attorneys' fees and
costs, including attorneys' fees incurred at trial and on appeal, if any.
20. Notices.
All notices, consents, demands, and other communications from one
party to the other given pursuant to the terms of this Lease shall be in writing
and shall be personally delivered, delivered by courier service, sent via
facsimile (confirmation receipt required), or deposited in the United States
mail, certified or registered, postage prepaid, and addressed as follows: To
Tenant at the address specified in the Basic Lease Information or to such other
place as Tenant may from time to time designate in a notice to Landlord; to
Landlord at the address specified in the Basic Lease Information, or to such
other place and to such other parties as Landlord may from time to time
designate in a notice to Tenant. All notices shall be effective upon delivery or
refusal of delivery.
21. General Provisions.
(a) This Lease shall be governed by and construed in accordance
with the internal laws of the State of California, notwithstanding any choice of
law statutes, regulations, provisions or requirements to the contrary.
(b) The invalidity of any provision of this Lease, as determined by
a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
(c) This Lease including attached Exhibits, Addenda, and Basic
Lease Information contains all agreements and understandings of the parties and
supersedes and cancels any and all prior or contemporaneous written or oral
agreements, instruments, understandings, and communications of the parties with
respect to the subject matter herein. This Lease, including the attached
Exhibits, Addenda, and Basic Lease Information, may be modified only in a
writing signed by each of the parties.
(d) No waiver of any provision hereof by either party shall be
deemed by the other party to be a waiver of any other provision, or of any
subsequent breach of the same provision. Landlord's or Tenant's consent to, or
approval of, any act shall not be deemed to render unnecessary the obtaining of
Landlord's or Tenant's consent to, or approval of, any subsequent act by the
other party.
(e) If Tenant remains in possession, with the express written
consent of Landlord, of all or any part of the Premises after the expiration of
the Term, such tenancy shall be from month to month only, and not a renewal
hereof or an extension for any further term, and in such case, Rent shall be
payable in the amount of 125% the last month's Base Rent and all other charges
under the Lease and such month-to-month tenancy shall be subject to every other
term, covenant and agreement contained herein.
(f) Subject to the provisions of this Lease restricting assignment
or subletting by Tenant, this Lease shall bind the parties, their personal
representatives, successors, and assigns.
(g) Upon reasonable prior notice to Tenant (which notice shall not
be required in the event of an emergency), Landlord and Landlord's
representatives and agents shall have the right to enter the Premises during
regular business hours for the purpose of inspecting the same, showing the same
to prospective purchasers or lenders, (and during the last six months of the
Term, prospective tenants) and making such alterations, repairs, improvements,
or additions to the Premises, the Buildings or the Common Areas as Landlord may
deem necessary or desirable. Landlord may at any time during the last one
hundred twenty (120) days of the Term place on or about the Premises any
ordinary "For Lease" sign. Landlord may at any time place on or about the
Premises any ordinary "For Sale" sign.
(h) The voluntary or other surrender of this Lease by Tenant, the
mutual cancellation thereof or the termination of this Lease by Landlord as a
result of Tenant's default shall, at the option of Landlord, terminate all or
any existing subtenancies or may, at the option of Landlord, operate as an
assignment to Landlord of any or all of such subtenancies.
(i) If Tenant is a corporation, limited liability company or
partnership, each individual executing this Lease on behalf of Tenant represents
and warrants that he is duly authorized to execute and deliver this Lease on
behalf of the corporation, company or partnership in accordance with, where
applicable, a duly adopted resolution of the board of directors of the
corporation, the vote of the members of the limited liability company or the
vote of the partners within the partnership, and that this Lease is binding upon
the corporation, company or partnership in accordance with its terms.
<PAGE>
(j) Time is expressly declared to be of the essence of this Lease
and of each and every covenant, term, condition, and provision hereof, except as
to the conditions relating to the delivery of possession of the Premises to
Tenant.
(k) If there is more than one party comprising Tenant, the
obligations imposed on Tenant shall be joint and several.
(l) The language in all parts of this Lease shall be in all cases
construed as a whole according to its fair meaning and not strictly for nor
against either Landlord or Tenant.
(m) As used in this Lease and whenever required by the context
thereof, each number, both singular and plural, shall include all numbers and in
each gender shall include all genders. Landlord and Tenant, as used in this
Lease or in any other instrument referred to in or made a part of this Lease,
shall likewise include both the singular and the plural, a corporation, limited
liability company, partnership, individual or person acting in any fiduciary
capacity as executor, administrator, trustee or in any other representative
capacity.
(n) The Exhibits and Addendum, if any, specified in the Basic Lease
Information are attached to this Lease and by this reference made a part hereof.
(o) The receipt and acceptance by Landlord of delinquent Rent shall
not constitute a waiver of any other default.
22. Force Majeure.
Any delay in construction, repairs, or rebuilding any Building,
improvement or other structure herein shall be excused and the time limit
extended to the extent that the delay is occasioned by reason of acts of God,
labor troubles, laws or regulations of general applicability, acts of Tenant or
Tenant Delays (as the term is defined in the Work Letter Agreement attached
hereto as Exhibit B), or other occurrences beyond the reasonable control of
Landlord. Accordingly, Landlord's obligation to perform shall be excused for the
period of the delay and the period for performance shall be extended for a
period equal to the period of such delay.
23. Broker's Fee.
Each party represents that it has not had dealings with any real
estate broker, finder, or other person, with respect to this Lease in any
manner, except the brokerage firm(s) specified in the Basic Lease Information.
Each party shall hold harmless the other party from all damages resulting from
any claim that may be asserted against the other party by any broker, finder, or
other person with whom the other party has or purportedly has dealt. Landlord
shall pay any commissions or fees that are payable to the broker or finder
specified in the Basic Lease Information, with respect to this Lease in
accordance with the provisions of a separate commission contract.
24. Financial Statement.
It is acknowledged by all parties hereto that the attached
financial declaration of Tenant is incorporated as a part of this Lease as
Exhibit E, that the information contained therein is true and correct in all
material respects, and that the accuracy of the information is a significant
fact upon which Landlord has relied in the granting of this Lease.
IN WITNESS WHEREOF, the parties have executed this Lease on the
date first mentioned above.
TENANT: LANDLORD:
REGAN HOLDING CORP. G & W/LAKEVILLE CORPORATE CENTER, LLC
A CALIFORNIA CORPORATION A CALIFORNIA LIMITED LIABILITY COMPANY
By:_______________________________ By: G & W Management Co.
Its: Manager
Print name:_______________________ By:______________________________
William C. White
Its:______________________________ Its: President
By:_______________________________ By: ______________________________
Matthew T. White
Its: Chief Operating Officer
Print name:_______________________
Its:______________________________
<PAGE>
ADDENDUM NO. 1
1. BASE RENT:
LEASE YEAR MONTHLY BLENDED NNN BASE RENT PER SQ. FT.
1 (Month 1) Free
---------------------------------- ---------------------------------------
1 (Months 2 - 12) $1.00
---------------------------------- ---------------------------------------
2 $1.05
---------------------------------- ---------------------------------------
3 - 10 & 1 month (See below)
At the start of the third, fifth, seventh, and ninth lease years of the
term, the Base Rent from the preceding Lease Year shall be increased by six
percent (6%).
2. OPTION TO EXTEND:
(a) Tenant shall have the option to extend the term of this Lease for two
(2) five (5) year terms ("Extended Term(s)") commencing upon the expiration
of the Initial Term (and the Extended Term), provided that in each such case
Tenant gives Landlord at least nine (9) months prior written notice of the
exercise of its option to extend the term of the Lease. However, (i) if
Tenant is in default on the date of giving the Option Notice, then the
notice shall be deemed ineffective and invalid, or (ii) if Tenant is in
default on the commencement date of the Extended Term(s), then the Extended
Term(s) and this Lease shall expire at the end of the Current Lease Term.
Tenant shall have no other right to extend the term of the Lease beyond the
Extended Terms.
(b) The Base Rent for the first year of the Extended Term(s) shall be
the average then-prevailing fair market rent for comparable space in
Sonoma County at the time of renewal, but in no event shall the Base
Rent be less than the rent being paid at the end of the Initial Term.
Thereafter, the Base Rent for the Extended Term(s) shall be increased
annually by three percent (3%) from the preceding Lease Year.
(c) Tenant shall have no other right to extend the term beyond the
Extended Term.
3. EARLY POSSESSION:
Tenant shall enter into the Early Occupancy Agreement attached as
Exhibit 1 to this Addendum No. 1 in order to have occupancy up to 60
days prior to the Estimated Commencement Date in which to install
Tenant's fixtures, equipment, or telephone or computer wiring, and
begin relocating files, workstations and relocate personnel if legally
permissible.
4. OPTION TO PURCHASE:
Tenant shall have the option to purchase the Project in the 25th month
of the Lease Term ("Purchase Option"), subject to the following terms
and conditions:
(a) The purchase price ("Purchase Price") of the Project shall be
Ten Million Six Hundred Thousand Dollars ($10,600,000). The
property being purchased includes the Buildings and all of the
Common Area located in the Project.
(b) Tenant may exercise its Purchase Option by: (1) providing
Landlord with written notice ("Tenant's Purchase Notice") no
later than the last day of the 20th month of the Lease Term,
and (2) closing the purchase of the Project no later than the
last day of the 25th month of the Lease Term. If Tenant does
not comply with all of the conditions set forth in this
Paragraph 4, then (1) Landlord shall be relieved of Landlord's
obligation to sell the Project to Tenant, except as provided
in Paragraph 5 below, and (2) the provisions of this Paragraph
4 shall no longer apply to Landlord.
(c) The Purchase Price (as provided under Paragraph 4(a) above)
does not include the dollar amount of assessment bonds
relating to the Project, which includes the Buildings. Any
assessment bonds relating to the Project shall be assumed by
Buyer. Escrow costs shall be shared according to the
prevailing customs in Sonoma County.
(d) Tenant's Purchase Option shall be personal to Tenant and shall
terminate with an assignment of the Lease, as defined in
Paragraph 13 of the Lease, or subletting of more than 20% the
Premises.
5. RIGHT OF FIRST OFFER:
Tenant shall have a right of first offer to purchase the Project,
subject to the following terms and conditions:
<PAGE>
(a) If at any time after the twenty-fifth (25th) month of the
Lease during the initial term of this Lease, Landlord desires
to sell or otherwise transfer the Project, Landlord shall
first notify Tenant in writing of the proposed terms and
conditions for selling the Project (the "Sale Notice"). The
Sale Notice shall, at a minimum, include the following
information:
(i) the purchase price;
(ii) the method of payment of the purchase price;
(iii) the amount and terms of any Landlord financing; and
(iv) the time and location of the close of escrow and
sharing of escrow costs (which costs shall be shared
according to the prevailing customs in Sonoma
County).
(b) In order to exercise this Right of First Offer, Tenant must
provide Landlord with written notice of Tenant's interest in
purchasing the Project within fourteen (14) days after
Landlord's delivery to Tenant of the Sale Notice.
(c) If (i) Tenant does not provide Landlord with written notice of
Tenant's interest in purchasing the Project within the period
stated in Paragraph 5(b) above, or (ii) the Sale Notice is not
unconditionally accepted by Tenant, then this Right of First
Offer shall automatically terminate and Tenant shall no longer
have any options or rights with respect to purchasing the
Project (except as provided in Paragraphs 5(f) and 6 below).
(d) This Right of First Offer shall be personal to Tenant and
shall not be assigned or transferred to any third party;
provided, however, this Right of First Offer may be assigned
or transferred by Tenant to an affiliate, parent, subsidiary
or related entity of Tenant. Tenant shall be barred from
exercising this Right of First Offer if Tenant is currently in
material default of any obligation owed by Tenant to Landlord.
(e) If Tenant accepts the First Offer, Tenant shall have thirty
(30) days following acceptance of the First Offer to deposit
Two Hundred Fifty Thousand Dollars ($250,000) as a
non-refundable deposit toward the purchase of the Project
and sixty (60 ) days following acceptance of the First Offer
("Closing Period") to consummate the purchase of the Project
pursuant to the terms and conditions of the First Offer. If
Tenant fails to consummate the purchase of the Project
within the Closing Period, the Right of First Offer shall be
terminated. After the termination, Landlord shall be free to
enter into an agreement for the sale of the Project with a
third party on whatever terms Landlord may choose to offer
without further obligation to Tenant (except as provided in
Paragraph 6 below).
(f) If Landlord does not enter into an agreement for the sale of
the Project with a third party within twelve (12) months
following the delivery of the Sale Notice to Tenant, then this
Right of First Offer shall revive, subject to the terms and
conditions set forth above.
6. RIGHT OF FIRST REFUSAL:
Tenant shall have a right of first refusal to purchase the Project,
subject to the following terms and conditions:
(a) If at any time after the twenty-fifth (25th) month of the
Lease during the initial term of this Lease, the Right of
First Offer has terminated as set forth in Paragraph 5 above
and Landlord proposes to sell the Project to a third party at
a purchase price which is less than ninety percent (90%) of
the purchase price presented to Tenant in the Sale Notice,
Landlord shall re-offer the Project to Tenant with the
proposed terms and conditions for selling the Project (the
"Revised Sale Notice"). The Revised Sale Notice shall include
the following information:
(i) the purchase price;
(ii) the method of payment of the purchase price;
(iii) the amount and terms of any Landlord financing; and
(iv) the time and location of the close of escrow and
sharing of escrow costs.
(b) In order to exercise this Right of First Refusal, Tenant must
provide Landlord with written notice of Tenant's interest in
purchasing the Project within seven (7) days after Landlord's
delivery to Tenant of the Revised Sale Notice.
(c) If (i) Tenant does not provide Landlord with written notice of
Tenant's interest in purchasing the Project within the
period stated in Paragraph 6(b) above, or (ii) the Revised
Sale Notice is not unconditionally accepted by Tenant, then
this Right of First Refusal shall automatically terminate
and Tenant shall no longer have any options or rights with
respect to purchasing the Project (except as provided in
Paragraph 5(f) above).
(d) This Right of First Refusal shall be personal to Tenant and
shall not be assigned or transferred to any third party;
provided, however, this Right of First Refusal may be assigned
or transferred by Tenant to an affiliate, parent, subsidiary
or related entity of Tenant. Tenant shall be barred from
exercising this Right of First Refusal if Tenant is currently
in material default of any obligation owed by Tenant to
Landlord.
(e) If Tenant accepts the First Refusal, Tenant shall consummate
the purchase of the Project pursuant to the terms and
conditions of the First Refusal. If Tenant fails to consummate
the purchase of the Project within the time provided for
closing of the transaction, the Right of First Refusal shall
be terminated. After the termination, Landlord shall be free
to enter into an agreement for the sale of the Project with a
third party on whatever terms Landlord may choose to offer
without further obligation to Tenant.
<PAGE>
EXHIBIT 1 TO ADDENDUM NO. 1
EARLY OCCUPANCY AGREEMENT
THIS OCCUPANCY AGREEMENT ("Agreement"), dated ____________________, 199___,
is made and entered into by and between G & W/Lakeville Corporate Center, LLC, a
California limited liability company ("Landlord"), and Regan Holding Corp., a
California corporation ("Tenant").
Definitions
A. "Project":Lakeville Industrial Center, Petaluma, California.
B. "Building":2084 Lakeville Drive and 2090 Marina Avenue, Petaluma,
California.
C. "Premises":_________________________________, as more particularly
described on the floor plan attached to the Lease as Exhibit A and incorporated
herein by reference.
Agreement
1. Occupancy of Premises. Landlord hereby agrees to allow Tenant to occupy
the Premises, and Tenant hereby agrees to occupy the Premises, subject to the
terms and conditions contained herein. The term of this Agreement ("Term") shall
commence no sooner than 60 days prior to Estimated Commencement Date, and expire
upon the earlier to occur, upon Landlord's substantial completion of the lease
space subject to a binding lease between Landlord and Tenant in the event
Landlord is permitting Tenant to occupy the Premises in consideration of the
parties' execution of the binding lease.
2. Rent. Tenant shall not be required to pay any monthly base rent during
the Term. To the extent any of the foregoing services are provided by Landlord,
Tenant shall reimburse Landlord for all costs incurred by Landlord in connection
with the provision of such services. Tenant shall not be required to pay
Tenant's Operating Expense Share of operating expenses or Tenant's Property Tax
Share of property taxes which are paid or incurred by Landlord during the Term.
3. Use. The Premises shall be used and occupied by Tenant solely for the
following use: to install its fixtures, equipment, or telephone or computer
wiring, and begin relocating files, workstations and relocate personnel if
legally permissible. Tenant shall, at Tenant's sole expense, comply promptly
with all applicable federal, state and local laws, regulations, ordinances,
rules, orders and requirements in effect during the Term relating to the
condition, use or occupancy of the Premises, including, without limitation, the
Americans with Disabilities Act. Tenant shall not use or permit the use of the
Premises in any manner that will tend to create waste or a nuisance, or that
unreasonably disturbs other tenants of the Building or Project, nor shall Tenant
place or maintain any signs, antennas, awnings, lighting or plumbing fixtures,
loudspeakers, exterior decoration or similar devises on or visible from the
exterior of the Premises, without Landlord's prior written consent, which
consent may be withheld in Landlord's sole discretion.
4. Condition of Premises. Landlord is entering into this Agreement solely
as an accommodation to Tenant. Accordingly, Tenant shall occupy the Premises
pursuant to this Agreement in its current "AS-IS" condition.
In the event the Premises are subject to a binding lease between Landlord
and Tenant, which lease has yet to commence, Tenant acknowledges and understands
that its early occupancy of the Premises may cause delays in the construction of
tenant improvements and that any such delays will not be a cause for a delay in
the commencement date of the lease and/or the forgiveness of any rental or other
obligations of Tenant that are due under the lease; furthermore, Tenant agrees
that it shall not materially interfere with the progress of Landlord's work
within the Premises.
5. Common Area. Tenant acknowledges receipt of a copy of the current common
area rules and regulations, attached to the Lease as Exhibit C and incorporated
herein by reference. Tenant agrees to abide by and conform with such rules and
regulations; to cause its employees, agents, contractors and concessionaires to
abide by the same; and to use its best efforts to cause its customers and
invitees to abide by the same.
6. Alterations and Improvements. Tenant shall not alter or improve any
portion of the Premises (unless the same constitutes "Tenant Work" that is
expressly permitted and defined in a tenant improvement work letter that has
been incorporated into a binding lease between the parties), without the prior
written consent of Landlord, which consent may be withheld in Landlord's sole
discretion.
7. Environmental. Tenant shall not use, manufacture, store, release,
dispose or transport any hazardous or toxic materials or substances in, on,
under or about the Premises, Building or Project.
<PAGE>
8. Insurance. Tenant shall obtain and maintain during the Term
comprehensive general liability insurance with a combined single limit for
personal injury and property damage in an amount of not less than $2,000,000 (in
a form, with a deductible amount, and with carriers reasonably acceptable to
Landlord) and employer's liability and workers' compensation insurance as
required by law. The insurance carrier shall be authorized to do business in the
State of California, with a policyholders and financial rating of at least A:IX
Class status as rated in the most recent edition of Best's Key-Rating guide.
Tenant's comprehensive general liability insurance policy shall be endorsed to
provide that (i) it may not be canceled or altered in such a manner as to
adversely affect the coverage afforded thereby without thirty (30) days' prior
written notice to Landlord, (ii) Landlord is designated as an additional
insured, (iii) the insurer acknowledges acceptance of the mutual waiver of
claims by Landlord and Tenant, and (iv) such insurance is primary with respect
to Landlord and that any other insurance maintained by Landlord is excess and
noncontributing with such insurance. Prior to the commencement of the Term and
at least thirty (30) days prior to the expiration of such policy or any renewal
or modification thereof, Tenant shall deliver to Landlord a duplicate or
certificate of such policy and/or a replacement or renewal binder for retention
by Landlord, with endorsements. If Tenant fails to obtain such insurance or to
furnish Landlord with any such duplicate or certificate as herein required,
Landlord may, at its election, without notice to Tenant and without any
obligation to do so, procure and maintain such coverage and Tenant shall
reimburse Landlord on demand as additional rent for any premium so paid by
Landlord.
Landlord waives all claims against Tenant, and Tenant's officers,
directors, partners, employees, agents and representatives for loss or damage to
the extent that such loss or damage is insured against under any valid and
collectable insurance policy insuring Landlord or would have been insured
against but for any deductible amount under any such policy. Tenant waives all
claims against Landlord, and Landlord's officers, directors, partners,
employees, affiliates, joint venturers, members, trustees, owners, shareholders,
principals, agents, representatives, successors and assigns, for loss or damage
to the extent such loss or damage is insured against under any valid and
collectable insurance policy insuring Tenant or required to be maintained by
Tenant under this Agreement, or would have been insured against but for any
deductible amount under any such policy. The insuring party shall, upon
obtaining the policies of insurance required under this Agreement, give notice
to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Agreement. Tenant agrees that in the event of a
sale, assignment or transfer of the Premises by Landlord, this waiver of
subrogation shall continue in favor of the original Landlord and any subsequent
landlord.
If this Agreement is terminated as a result of damage by fire, casualty or
earthquake, all insurance proceeds generated from policies maintained by
Landlord shall be paid to and retained by Landlord, subject to the rights of any
authorized encumbrancer of Landlord. Tenant shall at its own cost maintain on
all its fixtures, furnishings, equipment, inventory, personal property, and
permitted Tenant improvements and alterations (collectively, "Tenant's
Property"), in, on, under or about the Premises, a policy of standard fire and
extended coverage insurance, with vandalism and malicious mischief endorsements,
to the extent of at least one hundred percent (100%) of their full replacement
value. The proceeds from any such policy shall be used by Tenant for the
replacement and restoration of Tenant's Property. Notwithstanding any other
provisions in this Agreement, Landlord shall have no liability for damage to or
destruction of Tenant's Property, unless the damage or destruction results from
the active negligence or willful misconduct of Landlord.
9. Indemnity. Tenant waives all claims against Landlord for damage to any
property or injury to or death of any person in, on, or about the Premises,
Building or Project arising at any time and from any cause, unless caused by the
active negligence or willful misconduct of Landlord, its agents, employees, or
contractors. Tenant shall indemnify, defend (by counsel reasonably satisfactory
to Landlord) and hold harmless Landlord, and Landlord's officers, directors,
partners, employees, affiliates, joint venturers, property managers, members,
trustees, owners, shareholders, principals, agents, representatives, successors
and assigns, from and against all claims, costs, damages, actions, indebtedness
and liabilities (except such as may arise from the active negligence or willful
misconduct of Landlord, and Landlord's officers, directors, partners, employees,
affiliates, joint venturers, members, trustees, owners, shareholders,
principals, agents, representatives, successors and assigns) arising by reason
of any death, bodily injury, personal injury, property damage or any other
injury or damage in connection with (i) Tenant's use or occupancy of the
Premises, or (ii) any act or omission of Tenant, or Tenant's agents, successors
and assigns, wherever it occurs. The foregoing indemnity obligation of Tenant
shall include reasonable attorneys' fees, and all other reasonable costs and
expenses incurred by Landlord from the first notice that any claim or demand is
to be made.
Tenant agrees that in no event shall Landlord be liable for consequential
damages, including injury to Tenant's business or any loss of income therefrom.
Furthermore, neither party shall be liable to the other for any unauthorized or
criminal entry of third parties into or damage to person or property in or about
the Premises, Building, Project, Common Areas, or parking facilities. Tenant
shall immediately notify Landlord in writing of any breakdown or malfunction of
any security measures, practices or equipment provided by Landlord as to which
Tenant has knowledge.
<PAGE>
Tenant expressly agrees that so long as Landlord is a corporation, limited
liability company, trust, partnership, joint venture, unincorporated association
or other form of business entity, (i) the obligations of Landlord shall not
constitute personal obligations of the officers, directors, partners, employees,
affiliates, joint venturers, members, trustees, owners, shareholders, or other
principals, agents or representatives of such business entity (collectively,
"Member of Landlord"), and (ii) Tenant shall have recourse only to the interest
of such business entity in the Building of which the Premises are a part for the
satisfaction of such obligations and not against the assets of such Member of
Landlord other than to the extent of their respective interests in the Building.
In this regard, Tenant agrees that (i) no Member of Landlord shall be sued or
named as a party in any suit or action (except as may be necessary to secure
jurisdiction of Landlord), (ii) no judgment will be taken against any Member of
Landlord, and any judgment taken against any Member of Landlord may be vacated
and set aside at any time without hearing, (iii) no writ of execution will ever
be levied against the assets of any Member of Landlord, and (iv) these
agreements by Tenant are enforceable both by Landlord and by any Member of
Landlord.
10. Assignment and Subletting. Tenant shall not assign, transfer,
hypothecate or sublet this Agreement or the Premises, in whole or in part
(either by assignment or transfer of stock, ownership or voting interests,
assets or otherwise), or permit the use of the Premises by any party other than
Tenant. Any of the foregoing acts without Landlord's consent shall be void and
shall, at the sole election of Landlord, immediately terminate this Agreement.
11. Default by Tenant. In the event of any material default by Tenant
hereunder, Landlord may immediately terminate this Agreement upon giving Tenant
notice thereof, or exercise any available rights or remedies, at law or in
equity, which Landlord may have by reason of such default.
12. Surrender. Upon the expiration or early termination of this Agreement,
Tenant shall promptly surrender possession of the Premises to Landlord in good
and clean condition and repair, ordinary wear and tear excepted.
13. Survival of Tenant Obligations. The obligations of Tenant hereunder
shall survive the termination or expiration of this Agreement with respect to
any damage, liability, loss, or expense arising out of or in connection with
this Agreement or Tenant's use or occupancy of the Premises.
14. Attorneys' Fees. In the event legal action is initiated by either
party, the prevailing party shall be entitled to recover all costs and expenses
incurred in such action, including, without limitation, reasonable attorneys'
fees and costs, including attorneys' fees incurred at trial and on appeal, if
any.
15. Integration. This Agreement, including attached exhibits, contains all
agreements and understandings of the parties and supersedes and cancels any and
all contemporaneous oral or prior written or oral agreements, instruments,
understandings and communications of the parties with respect to the subject
matter herein, except where a binding lease with respect to the Premises has
been entered into, in which case this Agreement and the binding lease shall be
construed together in order to achieve the intent of the parties. This
Agreement, including attached exhibits, may be modified only in a writing signed
by each of the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first mentioned above.
TENANT: LANDLORD:
REGAN HOLDING CORP. G & W/LAKEVILLE CORPORATE CENTER, LLC
A CALIFORNIA CORPORATION A CALIFORNIA LIMITED LIABILITY COMPANY
By:___________________________ By: G & W Management Co.
Its: Manager
Print name:___________________ By:_______________________________
William C. White
Its:__________________________ Its: President
By:___________________________ By:_______________________________
Its: Chief Operating Officer
Print name:___________________
Its:__________________________
<PAGE>
EXHIBIT A-2
Legal Description
PARCEL NOS. 005-050-031 & 020
TRACT A:
PARCEL ONE:
PARCELS 1 and 2 as shown and designated upon City of Petaluma Map No. 171, filed
December 30, 1980 in Book 316 of Maps, Page 22, Sonoma County Records.
EXCEPTING THEREFROM that portion contained in Deed to the City of Petaluma, a
Municipal Corporation, recorded February 1, 1990 under Instrument No. 90-11544,
and re-recorded March 27, 1990 as Document No. 90-30134, and re-recorded April
18, 1990 as Document No. 90-38789, Sonoma County Records.
ALSO EXCEPTING THEREFROM that portion contained in Deed to John M. Headley, et
al, recorded February 1, 1990 as Instrument No. 90-11545, and re-recorded March
27, 1990 as Document No. 90-30135.
ALSO EXCEPTING THEREFROM that portion contained in Deed to the City of Petaluma
recorded June 7, 1996 as Document No. 96-50841, Sonoma County Records.
PARCEL TWO:
AN EASEMENT for public utilities, 10 feet wide, lying Easterly of and adjacent
to, the Westerly line of the above-described Parcel, being more particularly
described as follows:
BEGINNING at Point "X" as set forth in Parcel 1 of Corporation Grant Deed
recorded February 1, 1990 in Document No. 90-11545. Thence along said line
common to Teitler and U-haul Company South 54 degrees 08 minutes 19 seconds
East, 10.00 feet; thence leaving said line and parallel with the above-described
Right-Of-Way line South 35 degrees 51 minutes 41 second West, 143.47 feet to the
point of curvature; thence on a tangent curve to the right, radius 133, feet,
through a central angle of 27 degrees 28 minutes 28 seconds, in arc length of
63.78 feet to a point on the existing Easterly Right-Of-Way line of Marina
Avenue; thence along said line North 35 degrees 51 minutes 41 seconds East,
26.65 feet; thence along on a non-tangent curve to the right whose center bears
North 37 degrees 44 minutes 44 seconds West, radius 123 feet, through a central
angle of 16 degrees 23 minutes 35 seconds, an arc length of 35.19 feet to a
point of tangency; thence North 35 degrees 51 minutes 41 seconds East, 143.47
feet to the point of beginning.
PARCEL THREE:
FOR THE PLACE OF COMMENCEMENT BEGIN at the Northwesterly corner of the tract of
land described in the Deed from the Brandon Heirs to A.W. Baker, dated May 14,
1912 and recorded in Book 73 of Official Records of Sonoma County, Page 388,
said Northwesterly corner being on the Southerly line of the Lakeville Highway,
thence Easterly along the Southerly line of said Highway, 318.36 feet to a
point; thence Southwesterly and parallel with the Northwesterly line of said
tract of land so conveyed to A.W. Baker, 239.12 feet to the actual place of
commencement; thence Northwesterly at right angles, 100 feet to a point; thence
Northwesterly at right angles, 60 feet to a point on the Southwesterly line of
the land described in the Deed from A.W. Baker, et al, to Stanley McCutchan,
dated October 13, 1927 and recorded June 26, 1928 in Book 205 of Official
Records of Sonoma County, Page 149; thence Southeasterly at right angles and
along the Southwesterly line of said land conveyed to McCutchan, 100 feet to a
point; thence Southwesterly at right angles 60 feet to the place of
commencement.
EXCEPTING THEREFROM that portion lying within the City of Petaluma, Sonoma
County, California, being a portion of the Lands of John M. Headley and Delores
A. Headley, husband and wife, co-trustees under a declaration of trust dated
April 2, 1981 and amended June 14, 1982, as conveyed by Deed recorded under
Document No. 90-11543 of Official Records, Sonoma County Records, and being more
particularly described as follows:
BEGINNING at the most Westerly corner of said lands, also being a point on the
Easterly Right-Of-Way line of Marina Avenue; thence along said Right-Of-Way line
North 35 degrees 51 minutes 41 seconds East, 8.56 feet to a point hereinafter
referred to as Point "A"; thence leaving said Right-Of-Way line in a Southerly
direction, on a curve concave Westerly, with a radius of 155 feet, through a
central angle of 3 degrees 14 minutes 35 seconds, an arc length of 8.77 feet to
a point on the Southwesterly line of said lands; thence along said line North 54
degrees 08 minutes 19 seconds West, 1.94 feet to the point of beginning.
<PAGE>
PARCEL NO. 005-050-006
TRACT B:
PARCEL ONE:
BEING A PORTION of the land deeded to Henry Reynaud by A.W. Baker in that
certain Deed of November 10, 1926, Second Tract, recorded in Liber 154 of
Official Records, Page 185, Sonoma County Records. Starting at a point on the
Southerly side of Lakeville Highway, said point being where the boundary lines
of the land of George McClintaock and the lands of Joseph and Mary Pereira
intersect the Southerly side line of the Lakeville Highway; thence from said
point Easterly and along the Southerly side of the Lakeville Highway, 185.71
feet to a point; thence Westerly and parallel with the Easterly boundary line of
the lands of Pereira, 151.98 feet to the point of beginning; thence at right
angles 100 feet to a point (this being in an Easterly direction); thence at an
angle and in a Southerly direction and parallel with the boundary line of
Pereira 40 feet to a point; thence at an angle and in a Westerly direction, 100
feet to a point; thence at an angle and in a Northerly direction and parallel
with the boundary line (Easterly) of the lands of Pereira, 40 feet to the point
of beginning. The land to be deeded being bounded on one side by Hobbie and the
side, by Vail.
PARCEL NO. 005-050-007
BEING a portion of that tract of land deeded to A.W. Baker by the Brandon heirs
on May 14, 1924 as recorded in Book 73 of Official Records, page 388, Sonoma
County Records; beginning at a point on the Southerly side of the Lakeville
Highway, said point being the Northwesterly corner of said tract of land, and is
a point common with the lands of S.M. Bell, and running thence from said corner
in an Easterly direction along the Southerly side line of the Lakeville Highway,
172.65 feet, more or less, to a point; thence running in a Southerly direction
and parallel with the Westerly side line of said tract of land, 191.98 feet,
more or less, to the point of commencement.
BEGINNING at said point of commencement and running in an Easterly direction and
at right angles with the said Westerly line, 100 feet; thence at right angles in
a Southerly direction and parallel with the Westerly side line of said tract, 40
feet, more or less; thence at right angles running Westerly to a point 100 feet;
and thence at right angles and running in a Northerly direction and parallel
with the Westerly side line of said tract, 40 feet to the point of commencement.
PARCEL NO. 005-050-008
PARCEL TWO:
COMMENCING at the common corner of the lands of S.M. Bell and A.W. Baker as
described in Deed dated September 25, 1929 and recorded September 30, 1929 in
Liber 237 of Official Records, at Page 429, Sonoma County Records; thence along
the Southerly line of Lakeville Highway, North 84(Degree) 07' East 318.36 feet;
thence South 35(Degree) 54' West 319.12 feet to the point of beginning; and
thence from said point of beginning at right angles Northwesterly, 100 feet to
the Easterly line of Petroleum Avenue; thence South 35(Degree) 54' West, 80 feet
along the Easterly line of Petroleum Avenue to a point; thence at right angles
Southeasterly 100 feet to a point; thence North 35(Degree) 54' East, 80 feet to
the point of beginning.
<PAGE>
EXHIBIT B
WORK LETTER AGREEMENT
(Turn Key - Single Story)
THIS WORK LETTER AGREEMENT supplements that certain Net Lease dated , 19
("Lease"), executed by G & W/Lakeville Corporate Center, LLC, a limited
liability company, as Landlord, and Regan Holding Corp., a California
corporation as Tenant. All capitalized terms not otherwise defined herein shall
have the same meaning as those capitalized terms contained in the Lease.
1. Landlord shall be responsible for constructing within the Premises the
tenant improvements ("Tenant Improvements") described in the preliminary space
plan attached hereto as Exhibit B-1 ("Preliminary Space Plan"). The Tenant
Improvements for the Premises will be more particularly described in the plans
and construction drawings ("Construction Drawings") as approved below. Any
additional work ("Tenant Extra Improvements") required under the approved
Construction Drawings shall be at Tenant's expense.
2. Landlord and Tenant shall diligently finalize the Preliminary Space Plan
for construction of the Tenant Improvements and Tenant Extra Improvements so
that, within thirty (30) days after execution of the Lease, Landlord can provide
Tenant with the Construction Drawings. The Construction Drawings shall indicate
the specific requirements of Tenant's lease space, outlining in detail interior
partitions, floor coverings, a reflected ceiling plan, plumbing fixtures, and
electrical plans (setting forth the electrical requirements of Tenant), all in
conformity with the Preliminary Space Plan. The Construction Drawings shall
include full energy calculations as required by the State of California and the
city agencies.
3. Within five (5) days after receipt of the Construction Drawings, Tenant
shall approve the drawings and/or request changes or modifications thereto. Any
such request for changes or modifications shall be subject to Landlord's
approval and, thereafter, the Construction Drawings shall be resubmitted for
Tenant's approval in accordance with the preceding sentence. Tenant acknowledges
that the Construction Drawings are subject to the approval of the appropriate
government authorities. It shall be Tenant's responsibility to ensure that the
design and function of the Tenant Improvements and Tenant Extra Improvements are
suitable for Tenant's business and needs. The improvements shall be constructed
in accordance with current building standards, laws, regulations, ordinances and
codes. Landlord shall not be required to install any Tenant Improvements or
Tenant Extra Improvements which do not conform to the Construction Drawings.
4. Landlord shall furnish and install the units and quantities of Tenant
Improvements as set forth on Exhibit B-1 and shall include:
(a) The costs of the Preliminary Space Plan (including one
revision thereto) and final Construction Drawings and engineering costs
associated with completion of the State of California energy utilization
calculations under Title 24 legislation, and
(b) The costs of obtaining building permits and other
necessary authorizations from the city, county and the State of California.
5. In no event shall the Tenant Improvements payable by Landlord include
(i) the costs of procuring or installing any trade fixtures, equipment,
furniture, furnishings, telephone or computer equipment or wiring or other
personal property ("Personal Property"), or (ii) any Change Orders (as the term
is defined in Paragraph 6 below). Such items shall be paid by Tenant.
<PAGE>
6. Following Tenant's approval of the Construction Drawings, Tenant may
request changes or modifications thereto ("Change Order"), however, the cost of
any Change Order(s) shall be borne by Tenant. If Tenant shall request any Change
Order, then Landlord shall promptly give Tenant a written estimate of (a) the
cost of engineering and design services to prepare the Change Order, (b) the
cost of work to be performed pursuant to the Change Order, and (c) the time
delay expected because of such requested Change Order. Within three (3) days
after Tenant's receipt of the written estimate, Tenant shall notify Landlord in
writing whether it approves the written estimate. If Tenant approves the written
estimate, then Tenant shall accompany its approval with a check made payable to
Landlord in the amount of the estimated cost of the Change Order. Upon
Landlord's completion of the Change Order and submission of the final cost
thereof to Tenant, Tenant shall promptly pay to Landlord any additional amounts
incurred in excess of the written estimate. If such written authorization and
check are not received by Landlord, then Landlord shall not be obligated to
commence work on the Premises and Tenant shall be chargeable for any delay in
the completion of the Premises in accordance with Paragraph 7 below.
7. If the Commencement Date of the Lease has not occurred on or before the
Estimated Commencement Date, and if the cause of the delay in the occurrence of
the Commencement Date is attributable to Tenant, then the Lease shall begin on
the date the Commencement Date otherwise would have occurred but for the Tenant
delays. Delays attributable to Tenant ("Tenant Delays") shall include, without
limitation, those caused by (a) delays by Tenant in approving the Construction
Drawings and costs, (b) Tenant's request for special materials not available
when needed for construction in accordance with the construction schedule, (c)
Change Orders, and (d) interference with Landlord's work caused by Tenant or
Tenant's agents. All costs and expenses occasioned by a Tenant Delay, including,
without limitation, increases in labor or materials, shall be borne by Tenant.
8. Tenant may, with Landlord's written consent, enter the Premises prior to
the Commencement Date solely for the purpose of installing its Personal Property
as long as such entry will not interfere with the orderly construction and
completion of the Premises ("Tenant's Work"). Tenant shall notify Landlord of
its desired time(s) of entry and shall submit for Landlord's written approval
the scope of the Tenant's Work to be performed and the name(s) of the
contractor(s) who will perform such work. Tenant agrees to indemnify, defend and
hold harmless Landlord, any mortgagee or beneficiary of a deed of trust
encumbering, secured by or affecting the Premises or the Buildings, from and
against any and all claims, actions, losses, liabilities, damages, costs or
expenses (including, without limitation, reasonable attorneys' fees and claims
for worker's compensation) of any nature whatsoever, arising out of or in
connection with the Tenant's Work (including, without limitation, claims for
breach of warranty, personal injury or property damage).
9. During the course of construction, at Tenant's expense, Tenant shall
obtain or maintain public liability and worker's compensation insurance, in
amounts acceptable to Landlord, and which name Landlord and Tenant as parties
insured from and against any and all liability for death of or injury to person
or damage to property caused in or about or by reason of the construction of the
Tenant's Work.
10. Except as otherwise provided in Paragraph 8(b) of the Lease, upon
substantial completion of the Premises in accordance with the Construction
Drawings, Tenant agrees to accept the Premises in the condition which it may
then be and waives any right or claim against Landlord for any cause directly or
indirectly arising out of the condition of the Premises, appurtenances thereto,
improvements thereon, and equipment therein. Tenant shall hold harmless Landlord
from and against any liability or damage as provided under Paragraph 10.2 of the
Lease. With the exception of the roof membrane which shall be warranted for a
period of five (5) years, Landlord shall not be liable for any latent or patent
defects therein, except that Landlord warrants the Buildings against latent
defects for a period of one (1) year from the date of substantial completion.
After the expiration of such one (1) year warranty, should a problem arise due
to a latent defect in the Buildings, Landlord agrees to pursue with good faith
and reasonable efforts reimbursement from the contractor or subcontractor
11. With the exception of paragraph 2(b) of the Lease, Tenant releases
Landlord from any claim whatsoever for damages against Landlord for any delay in
the date on which the Premises shall be ready for occupancy by Tenant.
12. The Premises shall be deemed "substantially completed" as of the date
that all of the following conditions are satisfied:
(a) The Tenant Improvements have been substantially completed
in accordance with the approved Construction Drawings (except for those punch
list items referenced in Paragraph 13 below), such that Tenant can reasonably
conduct business within the Premises; and
(b) A certificate of occupancy and/or finalized building
permit has been issued for the Premises.
13. Tenant shall immediately prior to occupancy inspect the Premises and
compile and furnish Landlord with an initial punch list of any missing or
deficient Tenant Improvements. Within the first thirty (30) days after delivery
of the Premises, Tenant shall make a final punch list and submit this list to
Landlord. Landlord shall use its best efforts to complete the corrective work in
a prompt, good and workman-like manner. Punch list corrections shall not delay
the Commencement Date, nor shall a delay in making corrections be grounds for a
delay or reduction in any rent payments due Landlord.
14. All floor area calculations are from the center line of the partitions
and the outside line of the exterior and hall walls. No deduction is allowed for
the columns, sprinkler risers, roof drains, or air conditioning units serving
Tenant and located within the Premises.
<PAGE>
15. Landlord shall select the manufacturer and vendor of all building
materials and equipment with respect to the Tenant Improvements and Tenant Extra
Improvements to be constructed hereunder. If there is deviation from the
Construction Drawings, Landlord will notify Tenant of the alternate manufacturer
or vendor. If Tenant does not respond within three (3) days, the alternate
manufacturer or vendor will be deemed acceptable.
TENANT: LANDLORD:
REGAN HOLDING CORP. G & W/LAKEVILLE CORPORATE CENTER, LLC
A CALIFORNIA CORPORATION A CALIFORNIA LIMITED LIABILITY COMPANY
By:______________________________ By: G & W Management Co.
Its: Manager
Print name:______________________ By:__________________________________
William C. White
Its:_____________________________ Its: President
By:______________________________ By:__________________________________
Matthew T. White
Its: Chief Operating Officer
Print name:______________________
Its:_____________________________
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
It is further agreed that the following Rules and Regulations shall be and are
hereby made a part of this Lease, and Tenant agrees that Tenant's employees and
agents, or any others permitted by Tenant to occupy or enter the Premises, will
at all times abide by said Rules and Regulations, unless otherwise specified or
provided for in the Lease, to wit:
1. The driveways, entrances and exits to the Property, sidewalks, passages,
building entries, lobbies, corridors, stairways, and elevators of the Buildings
shall not be obstructed by Tenant, or Tenant's agents or employees, or used for
any purpose other than ingress and egress to and from the Premises. Tenant or
Tenant's agents or employees shall not loiter on the lawn areas or other common
areas of the Property.
(a) Furniture, freight equipment and supplies will be moved in
or out of the Buildings only through the rear service entrances or other
entrances designated by Landlord and then only during such hours and in such
manner as may be reasonably prescribed by Landlord. Tenant shall cause its
movers to use only the loading facilities, and entrances designated by Landlord.
In the event Tenant's movers damage any part of the Buildings or Property,
Tenant shall forthwith pay to Landlord the amount required to repair said
damage.
(b) No safe or article, the weight of which may in the opinion
of Landlord constitute a hazard to or damage to the Buildings or the Buildings'
equipment, shall be moved into the Premises without Landlord's prior written
approval, but such consent or approval shall not be unreasonably withheld,
conditioned or delayed. Landlord and Tenant shall mutually agree to the location
of such articles in the Premises. All damage done to the Property, Buildings or
Premises by putting in, taking out or maintaining extra heavy equipment shall be
repaired at the expense of Tenant.
(c) Landlord reserves the right to close and keep locked any
and all entrances and exits of the Buildings and Property and gates or doors
closing the parking areas thereof during such hours as Landlord may deem
advisable for the adequate protection of the Property and all tenants therein.
2. Except as otherwise provided for in the Lease, no sign, advertisement or
notice shall be inscribed, painted or affixed on any part of the inside or
outside of the Buildings unless of such color, size and style and in such place
upon or in the Buildings as shall be first approved in writing by Landlord. No
furniture or other materials shall be placed in front of the Buildings or in any
lobby or corridor, without the prior written consent of Landlord. Landlord shall
have the right to remove all non permitted signs and furniture, without notice
to Tenant.
3. Tenant shall not employ any person or persons other than the janitor or
cleaning contractor of Landlord for the purpose of cleaning or taking care of
the Premises without the prior written consent of Landlord, which shall not be
unreasonably withheld, conditioned or delayed. Except as otherwise provided in
the Lease, Landlord shall in no way be responsible to Tenant for any loss of
property from the Premises, however occurring. The janitor of the Buildings may
at all times keep a pass key, and other agents of Landlord shall at all times be
allowed admittance to the Premises in accordance with the provisions set forth
in the Lease.
4. Water closets and other water fixtures shall not be used for any purpose
other than that for which the same are intended, and any damage resulting to the
same from misuse on the part of Tenant or Tenant's agents or employees, shall be
paid for by Tenant. No person shall waste water by tying back or wedging the
faucets or in any other manner.
5. No animals except seeing-eye dogs or other animals necessary to the
functioning of handicapped personnel shall be allowed on the lawns or sidewalks
or in the offices, halls, and corridors of the Buildings.
6. No persons shall disturb the occupants of this or adjoining buildings or
premises by the use of any radio, sound equipment or musical instrument or by
the making of loud or improper noises, nor interfere in any way with the other
tenants or those having business with them. Should sound mitigation measures be
required due to sounds originating in the Premises, the costs of such measures
shall be paid for by Tenant.
7. Bicycles or other vehicles, other than wheel chairs, shall not be
permitted in the offices, halls, corridors and lobbies in the Buildings nor
shall any obstruction of sidewalks or entrances of the Buildings by such be
permitted.
8. Tenant shall not allow anything to be placed on the outside of the
Buildings, nor shall anything be thrown by Tenant or Tenant's agents or
employees, out of the windows or doors, or down the corridors, ventilation ducts
or shafts of the Buildings. Tenant, except in case of fire or other emergency,
shall not open any outside window.
9. No awnings shall be place over any window or entrance.
10. All garbage, including wet garbage, refuse or trash shall be placed by
Tenant in the receptacles designated by Landlord for that purpose. Tenant shall
not burn any trash or garbage at any time in or about the leased Premises or any
area of the Property. Tenant and Tenant's officers, agents, and employees shall
not throw cigar or cigarette butts or other substances or litter of any kind in
or about the Property.
11. Tenant shall not install or operate any steam or gas engine or boiler,
or other machinery or carry on any mechanical business, other than such
mechanical business which normally is identified with general use in the
Premises. Explosives or other articles of an extra hazardous nature shall not be
brought into the Building complex.
12. Any painting or decorating as may be agreed to be done by and at the
expense of Landlord shall be done during regular weekday working hours. Should
Tenant desire such work on Saturdays, Sundays, holidays or outside of regular
working hours, Tenant shall pay for the extra cost thereof, if any.
13. Tenant and Tenant's agents and employees shall park their vehicles in
areas designated from time-to-time for employee parking.
14. Tenant shall not mark, drive nails, screw, bore, or drill into, paint
or in any way deface the common area walls, exterior walls, roof, foundations,
bearing walls, or pillars without the prior written consent of Landlord. The
expense of repairing any breakage, stoppage or damage resulting from a violation
of this rule shall be borne by Tenant.
15. No waiver of any rule or regulation by Landlord shall be effective
unless expressed in writing and signed by Landlord or his authorized agent.
16. Tenant shall be responsible for cleaning up any trash blowing around
their facility that may have been left by their customers or employees.
17. In the event of any conflict between these rules and regulations or any
further or modified rules and regulations from time to time issued by Landlord,
and the lease provisions, the lease provisions shall govern and control.
18. Landlord reserves the right at any time to change or rescind any one or
more of these rules and regulations, or to make such other and further
reasonable rules and regulations as in Landlord's judgment may from time to time
be necessary for the management, safety, care and cleanliness of the Premises,
and for the preservation of good order therein, as well as for the convenience
of other tenants of the Property. Landlord shall not be responsible to Tenant or
to any other person for the non- observance or violation of the rules and
regulations by any other tenant or person. Tenant shall be deemed to have read
these rules and to have agreed to abide by them as a condition to its occupancy
of the space herein leased, and Tenant shall abide by any additional rules and
regulations which are ordered or requested by Landlord or by any governmental
authority.
<PAGE>
EXHIBIT D
Materials Quantities
Tenant agrees that:
(a) None of the above materials will be used, held or stored on or
about the Premises in quantities of greater than one (1) gallon each, or twenty
(20) pounds each in the case of non-liquid materials; provided, however, that
used or excess materials may be stored together in a fifty-five (55) gallon drum
while awaiting transport off the Premises for disposal.
(b) The materials listed on Page 1 to this Exhibit D shall be stored in
fire-proof lockers on the Premises in accordance with applicable laws,
regulations and ordinances. No storage outside the Premises will be permitted.
(c) No used or excess materials will be disposed of in, on, under or
about the Premises or Lakeville Industrial Center. Instead, such materials shall
be transported off-site, no less often than every one hundred eighty (180) days,
by a duly licensed hazardous materials transporter. While waiting for transport
off-site for disposal, used or excess materials shall be stored in a safe
location on the Premises in secure containers which are appropriately labeled.
(d) No materials listed on Page 1 to this Exhibit D, regardless of
whether they are water-soluable, shall be flushed down any sanitary sewer drains
on or about the Premises or Lakeville Industrial Center.
<PAGE>
EXHIBIT E
FINANCIAL STATEMENT
(TO BE PROVIDED BY TENANT)
REGAN HOLDING CORP.
SHAREHOLDER'S AGREEMENT
THIS SHAREHOLDER'S AGREEMENT (hereinafter referred to as this "Agreement") is
made this 29th day of May, between Lynda Regan, (hereinafter referred to as
"Regan") and Regan Holding Corp., (hereinafter referred to as "RHC"), a
California corporation, Alysia Anne Regan, Melissa Louise Regan, and RAM
Investments (with Lynda Regan as Trustee).
WITNESSETH
WHEREAS, RHC has authorized capital stock consisting of 45,000,000
shares of common stock at no par value (the "Common Stock") of which the
following shares of Common Stock are presently issued, outstanding and owned of
record and beneficially by Regan as follows:
Shareholders Shares
RAM Investments 11,358,222
(Lynda Regan Trustee)
Total
WHEREAS, the parties hereto believe it is desirable and in their mutual
best interests to control the ownership of the Common Stock of RHC and that the
execution of this Agreement will facilitate the continuous, harmonious and
effective management of the affairs, policies, and operations of RHC; and
WHEREAS, the parties intend to allow RHC to purchase Regan's shares
upon her death; and
WHEREAS, the parties believe that the restrictions that this Agreement
places upon Regan's shares combined with the number of shares that she controls
entitles her to receive additional consideration if RHC repurchases them; and
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, promises, agreements, representations and warranties of the parties
hereto and $10.00 as consideration (copy attached), the parties hereto do hereby
covenant, promise, agree, represent and warrant as follows:
1. Insurance.
RHC shall make application for, take out and maintain in
effect such insurance policies on the life of Regan whenever and in such amounts
<PAGE>
as, in the opinion of the Board of Directors of RHC, may be required to fulfill
its obligations under Paragraph 2. Such insurance shall be listed in the Life
Insurance Schedule attached hereto as Schedule A and incorporated by reference
herein (such policies are hereinafter collectively referred to as a "Life
Policy"). RHC shall maintain such Life Policies in full force and effect and
shall not, without the prior written consent of Regan, cancel any Life Policy or
take or omit to take any action which might give rise to the termination or
cancellation thereof. RHC shall pay all premiums on all Life Policies carried by
it pursuant to this Agreement as such premiums may become due and shall, upon
written demand of Regan, give due proof of such payment to Regan within five
days after receipt of such written demand; if any premium on any such Life
Policy is not paid within 20 days after is due date, Regan may pay or cause to
be paid the premium on such Life Policy and shall be entitled to reimbursement
from RHC therefor. RHC may apply any dividends declared on any Life Policies to
the payment of premiums.
2. Purchase and Death.
2.1 Upon the death of Regan (hereinafter referred to as the "Decedent"),
RHC shall purchase, and the Decedent's personal representative(s) and/or
trustee(s) of trust(s) created during Regan's lifetime shall sell, all of the
shares of Common Stock of Regan owned of record and beneficially by the Decedent
at the time of her death (hereinafter referred to as the "Decedent Shares") or
that were transferred by Regan during her lifetime to trust(s) (hereinafter
referred as the "Trust Shares"). RHC shall, by written notice addressed to the
personal representative(s) of the Decedent or Trustee(s), fix a closing date
(the "Decedent Closing Date") for such purchase, the Decedent Closing Date shall
not be less than ten days after the appointment of such personal
representative(s) or notification to the Trustee(s) nor more than six months
after the date of death of the Decedent. RHC shall purchase the Decedent Shares
on the Decedent Closing Date at a price per share (hereinafter referred to as
the "Decedent Purchase Price") which shall be 125% of the Stated Value (as
defined in Section 3 of this Agreement) per share of the Decedent Shares or as
otherwise determine din Section 3.
2.2 The dollar amount of the Decedent Purchase Price multiplied by the
number of Decedent Shares so owned by the Decedent at the date of death of the
Decedent and/or Trustee Shares (the "Aggregate Decedent Purchase Price") shall
be paid in cash on the Decedent Closing Date to the extent of the cash proceeds
received by RHC under the Life Policies insuring the life of the Decedent
("Insurance Proceeds") and neither the Decedent nor her personal representatives
shall have any right, title or interest in or to the Excess Insurance Proceeds.
In the event that the Aggregate Decedent Purchase Price shall exceed the dollar
amount of Insurance Proceeds (the "Decedent Insurance Purchase Price Cash
Shortfall"), RHC shall pay the Decedent Purchase Price Cash Shortfall in cash.
3. Stated Value.
RHC shall issue a Stated Value every six months. RHC shall determine the
"Stated Value" based on the fair market value as evidenced by the Uniform
Standards of Professional Appraisal Practices ("USPAP"). IF RHC fails to give a
<PAGE>
Stated Value for six months, the Stated Value shall be 107.5% of the previous
Stated Value or the fair market value (whichever is greater).
4. Delivery of Certificates.
On the Decedent Closing Date (the "Closing"), the purchase by RHC of the
Shares shall take place at 10:00 a.m. at a location designated by RHC. At the
Closing, the stock certificate or certificates representing the Shares shall be
delivered to RHC duly endorsed in blank, with the signatures thereon guaranteed
by a national bank or member of the New York Stock Exchange, and RHC shall pay
the Purchase Price therefor in cash. If a tender of the Purchase Price in cash
shall be refused, or the stock certificate or certificates representing the
Shares, duly executed and guaranteed, as aforesaid, shall not be so delivered,
then RHC is hereby appointed the attorney-in-fact of the personal
representatives of the Decedent, as the case may be, with full power and
authority to execute, sale and deliver the stock certificate or certificates in
their/her name and stead and to perform any and all other further acts
desirable, necessary or proper in order to transfer such stock certificate or
certificates to RHC in accordance with the terms, provisions and conditions of
this Agreement.
5. Termination
This Agreement shall be perpetual until the happening of the first of any
of the events listed below:
5.1 An agreement in writing between RHC and Regan to terminate this
Agreement.
5.2 The dissolution of RHC.
5.3 In the event that there is a merger, consolidation or share exchange
whereby RHC is not the surviving or successor corporation, as the case may be.
5.4 The adjudication of RHC as bankrupt, the execution by RHC of an
assignment for the benefit of creditors, or the appointment of a receiver for
RHC.
6. Notices. All notices and other communications under this Agreement shall
be in writing and shall be given and deemed to be received when hand-delivered
and a signed receipt is given therefor or mailed registered or certified U.S.
mail, return receipt requested, postage prepaid, and addressed to RHC as
follows: 1179 North McDowell Blvd, Petaluma, California 94954, to Lynda Regan at
351 Wilson Hill Road, Petaluma, California 94952, to RAM Investments at 351
Wilson Hill Road, Petaluma, California 94952, to Alysia Anne Regan at 67 Bridle
Path, Novato, California 94945, and to Melissa Louise Regan at 351 Wilson Hill
Road, Petaluma, California 94952.
7. Additional Actions and Documents.
<PAGE>
Each of the parties hereto agrees to take or cause to be taken such
further actions as are necessary to execute, acknowledge, seal and deliver or
cause to be executed, acknowledged, sealed and delivered such further
instruments and documents as are necessary and to use her/its reasonable efforts
to obtain such requisite consents as any other party may from time to time
reasonably request to fully effectuate the purposes and fulfill the content of
this Agreement.
8. Insertion in Will. Regan agrees to insert in her Will, or to execute a
Codicil thereto, a provision directing and authorizing her personal
representatives to fulfill and comply with the terms, provisions and conditions
of this Agreement and to sell and transfer her shares of Common Stock in
accordance herewith.
9. Transfer of Shares. The parties agree that Regan's shares may be
transferred as security for any transaction (provided that if RHC elects to
purchase the shares, the proceeds must first be used to pay the debt with the
balance being paid to the certificate holder) or transferred to any trust or
estate planning vehicle within fifteen days notice to the parties without being
bound by the restrictions contained herein. However, when Regan dies, Melissa
Louise Regan and Alysia Anne Regan agree to be bound by the restrictions
contained herein as to any stock they own at Regan's death.
10. Miscellaneous.
10.1 This instrument contains the entire, integrated agreement among the
parties and supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein, and no
modification shall be binding upon the party affected unless set forth in
writing and duly executed by each party to this Agreement.
10.2 Regan represents and warrants: that she is the sole owner of the
number of shares of the Common Stock as set forth opposite her signature hereto,
evidenced by the certificate numbers shown immediately after such number of
shares; that all of such shares are free and clear of any and all liens, claims,
charges, security interests or encumbrances of any kind except as reflected by
an endorsements on the certificates; and that she has the full and entire right,
powers and authority to sell or otherwise transfer such shares in accordance
with the terms, provisions and conditions of this Agreement. Regan, however,
discloses that the shares are subject to a contract between Regan and Bobby
Moody, Jr. which requires her to vote her shares to elect him as a director if
he instructs her to do so.
10.3 All of the covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of their
respective heirs, guardians, personal and legal representatives, successors and
permitted assigns.
10.4 This Agreement shall be construed and enforced in accordance with,
and the right of the parties shall be governed by, the laws of the State of
California, without giving effect to its conflict of laws rules.
<PAGE>
10.5 In the event that one or more of the provision of this Agreement
shall be invalid, illegal, or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
10.6 In the event of a breach of this Agreement, any nonbreaching party
hereto may maintain an action for specific performance against the party or
parties hereto who are alleged to have breached any of the terms, conditions,
representations, warranties, provisions, covenants or agreements herein
contained, and it is hereby further agreed that no objection to the form of
action in any proceeding for specific performance of this Agreement shall be
raised by any party hereto so that such specific performance of this Agreement
may not be obtained by the aggrieved party. Anything contained herein to the
contrary notwithstanding, this Subsection 10.6 shall not be construed to limit
in any manner whatsoever any other rights and remedies an aggrieved party may
have by virtue of any breach of this Agreement.
10.7 The descriptive headings of the several sections and paragraphs of
this Agreement are inserted for convenience only and do not constitute a party
of this Agreement.
10.8 Unless the context otherwise requires, whenever used in this
Agreement, the singular shall include the plural, the plural shall include the
singular, and the masculine gender shall include the neuter and feminine gender,
and vice versa.
10.9 This Agreement may be executed in counterparts, each of which shall
be an original, but all of which shall together constitute one document.
[signatures on the following page]
<PAGE>
IN WITNESS WHEREOF, the parties hereunto have executed, sealed and
delivered this Agreement on the day and year first hereinabove set forth.
Shareholder Number of Certificate
shares owned numbers
RAM Investments 11,358,222
(Lynda Regan Trustee)
REGAN HOLDING CORP. LYNDA REGAN
BY: /s/ R. Preston Pitts BY: /s/ Lynda Regan
------------------------- ------------------------------
Title: Lynda Regan
ATTEST: /s/ Cynthia Jameson ATTEST: /s/ Cynthia Jameson
--------------------- ---------------------------
[CORPORATE SEAL]
ALYSIA ANNE REGAN MELISSA LOUISE REGAN
BY: /s/ Alysia Anne Regan BY: /s/ Melissa Louise Regan
------------------------- ------------------------------
Alysia Anne Regan Melissa Louise Regan
ATTEST: /s/ Theresa Fleming ATTEST: /s/ Rebecca Yungert
--------------------- ---------------------------
RAM INVESTMENTS, LYNDA REGAN AS TRUSTEE
BY: /s/ Lynda Regan
-------------------------
Lynda Regan as Trustee
ATTEST: /s/ Cynthia Jameson
---------------------
<PAGE>
Exhibit 11
Computation of Earnings Per Share
(Unaudited)
Basic Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common shares outstanding entire period 26,567,616 26,813,857 26,567,616 26,813,857
Weighted average shares retired
upon redemption 32,625 51,274 136,304 123,442
------------ ------------ ------------ ------------
Total weighted average shares outstanding 26,600,241 26,865,131 26,703,920 $ 26,937,299
============ ============ ============ ============
Net income $ 2,867,133 $ 830,606 $ 7,292,192 $ 1,767,510
============ ============ ============ ============
Basic net income per share $ .11 $ .03 $ .27 $ .07
============ ============ ============ ============
</TABLE>
<PAGE>
Exhibit 11 (continued)
Computation of Earnings Per Share
Unaudited
Diluted Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 26,600,241 26,865,131 26,703,920 26,937,299
Shares issuable pursuant to employee stock
option plan, less shares assumed
repurchased at the average estimated
fair value during the period 429,017 -- 249,333 --
Shares issuable pursuant to independent
Producer option plan, less shares
assumed repurchased at the average
estimated fair value during the period 234,655 -- 137,327 --
------------ ------------ ------------ ------------
Number of shares for computation of
diluted net income per share 27,263,913 26,865,131 27,090,580 26,937,299
============ ============ ============ ============
Net income $ 2,867,133 $ 830,606 $ 7,292,192 $ 1,767,510
============ ============ ============ ============
Diluted net income per share $ .11 $ .03 $ .27 $ .07
============ ============ ============= ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENT6S CONTAINED IN THE COMPANY'S QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 8,083,986
<SECURITIES> 14,906,933
<RECEIVABLES> 1,899,782
<ALLOWANCES> 0
<INVENTORY> 399,928
<CURRENT-ASSETS> 26,785,086
<PP&E> 5,718,768
<DEPRECIATION> (2,479,677)
<TOTAL-ASSETS> 31,183,002
<CURRENT-LIABILITIES> 8,020,703
<BONDS> 0
11,462,963
0
<COMMON> 3,266,874
<OTHER-SE> 7,918,291
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 34,379,973
<CGS> 0
<TOTAL-COSTS> 22,237,253
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,142,720
<INCOME-TAX> 4,850,528
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,292,192
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
