SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from to to .
------ ------
Commission File Number 1-11416
UDC HOMES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 86-0702254
(State of Incorporation) (I.R.S. Employer Identification No.)
6710 North Scottsdale Road, Scottsdale, Arizona 85253
(Current address of principal executive offices) (Zip Code)
Registrant's current telephone number, including area code: (602) 627-3000
4812 S. Mill Avenue, Tempe, Arizona 85282
(Former address of principal executive offices) (Zip Code)
Registrant's former telephone number, including area code: (602) 820-4488
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
--- ---
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
--- ---
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date: As of February 10, 1997 -
Common Stock, $0.01 par value, 1,000 shares.
1
<PAGE>
UDC HOMES, INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
----
PART I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
At December 31, 1996 and September 30, 1996 ....................3
Consolidated Statements of Operations For the three
months ended December 31, 1996, the period from
October 1, 1995 to November 13, 1995, and the
period from November 14, 1995 to December 31,
1995............................................................4
Consolidated Statements of Cash Flows For the three
months ended December 31, 1996, the period from
October 1, 1995 to November 13, 1995, and the
period from November 14, 1995 to December 31,
1995............................................................5
Condensed Notes to Consolidated Financial Statements...............6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................9
PART II - Other Information
Item 1. Legal Proceedings............................................... 17
Item 6. Exhibits and Reports on Form 8-K................................ 19
Signatures ................................................................ 20
2
<PAGE>
UDC HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
December 31, September 30,
1996 1996
----------------- -----------------
(In thousands)
<S> <C> <C>
ASSETS
HOMEBUILDING
Cash and cash equivalents $ 616 $ 2,782
Receivables 939 985
Housing inventory 114,326 116,555
Land inventory 146,645 115,286
Land held for sale 3,958 28,332
Property and equipment - net 14,597 13,216
Goodwill 3,501 3,545
Other assets 2,091 4,497
----------------- -----------------
Total homebuilding assets 286,673 285,198
----------------- -----------------
MORTGAGE BANKING
Residential mortgages 6,353 10,248
Other assets 2,206 897
----------------- -----------------
Total mortgage assets 8,559 11,145
----------------- -----------------
TOTAL $ 295,232 $ 296,343
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING
Accounts payable $ 21,070 $ 35,079
Accrued interest 12,127 17,478
Accrued liabilities and expenses 25,069 23,624
Notes payable 84,525 73,062
Senior unsecured notes payable 70,000 70,000
Subordinated notes payable ($48,525 and $44,628, respectively,
due from related parties) 52,050 50,262
----------------- -----------------
Total homebuilding liabilities 264,841 269,505
----------------- -----------------
MORTGAGE BANKING
Mortgage line of credit 4,506 6,299
Accued liabilities and expenses 418 308
----------------- -----------------
Total mortgage liabilities 4,924 6,607
----------------- -----------------
Total liabilities 269,765 276,112
----------------- -----------------
MINORITY INTEREST 3,244 4,448
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, 1,000 shares
authorized, issued and outstanding - -
Additional paid-in capital 88,000 78,000
Accumulated deficit (65,777) (62,217)
----------------- -----------------
Total stockholders' equity 22,223 15,783
----------------- -----------------
TOTAL $ 295,232 $ 296,343
================= =================
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
3
<PAGE>
UDC HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Predecessor
Successor Company Company
-------------------------------- -------------
Period from Period from
Three Months November 14, October 1,
Ended to to
December 31, December 31, November 13,
1996 1995 1995
------------ ------------ -------------
(In thousands)
<S> <C> <C> <C>
REVENUES
Housing sales $ 80,647 $ 50,358 $ 29,624
Mortgage and finance operations 527 267 268
Other 1,143 - -
------------ ------------ -------------
Total revenues 82,317 50,625 29,892
------------ ------------ -------------
COSTS AND EXPENSES
Homebuilding
Cost of housing sales 69,086 47,678 27,270
Selling and administrative expenses 12,542 3,672 4,969
Interest, net 3,665 3,301 568
Other - 509 35
Mortgage and Finance Operations
General and administrative expenses 473 265 277
Interest, net (63) (20) (37)
Equity in losses of unconsolidated partnerships 174 211 -
Cost of company reorganizations - - 7,051
------------ ------------ -------------
Total costs and expenses 85,877 55,616 40,133
------------ ------------ -------------
LOSS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEMS (3,560) (4,991) (10,241)
INCOME TAXES - - -
------------ ------------ -------------
LOSS BEFORE EXTRAORDINARY ITEMS (3,560) (4,991) (10,241)
EXTRAORDINARY ITEMS
Gain on debt discharge - - 50,264
Fresh start reporting adjustment - - (14,069)
------------ ------------ -------------
NET (LOSS) INCOME $ (3,560) $ (4,991) $ 25,954
============ ============ =============
</TABLE>
See Condensed Notes to Consolidated Financial Statements
4
<PAGE>
UDC HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Predecessor
Successor Company Company
-------------------------------------- ------------------
Period from Period from
Three Months November 14, October 1,
Ended to to
December 31, December 31, November 13,
1996 1995 1995
----------------- ----------------- ------------------
( In thousands )
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (3,560) $ (4,991) $ 25,954
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Depreciation and amortization 1,019 723 536
Fresh start reporting adjustment - - 14,069
Gain on debt discharge - - (50,264)
Equity in losses of unconsolidated partnershsips 174 211 -
Changes in assets and liabilities:
Receivables 46 792 259
Other assets 923 (44) (1,015)
Housing inventory 2,229 1,774 10,890
Land inventory and land held for sale (6,985) (170) 4,328
Receivables from affiliated partnerships - (899) 95
Accounts payable (14,009) (1,065) (2,963)
Accrued liabilities and expenses (3,212) (13,202) 4,655
----------------- ----------------- ------------------
Net cash (used in ) provided by operating activities (23,375) (16,871) 6,544
----------------- ----------------- ------------------
INVESTING ACTIVITIES:
Decrease in mortgage-backed securities and residential mortgages 3,895 847 6,390
Net additions to property and equipment (2,356) (405) 13
----------------- ----------------- ------------------
Net cash provided by investing activities 1,539 442 6,403
----------------- ----------------- ------------------
FINANCING ACTIVITIES:
Capital contribution 10,000 - -
Increase (decrease) in notes payable to financial institutions 11,463 (6,157) (11,492)
Proceeds from issuance of subordinated notes - - 30,000
Proceeds from issuance of common stock - - 78,000
Payment of liabilities subject to compromise - - (83,000)
Payments on collateralized mortgage obligations - (1,298) (247)
Decrease in mortgage line of credit (1,793) (57) (5,799)
----------------- ----------------- ------------------
Net cash provided by (used in) financing activities 19,670 (7,512) 7,462
----------------- ----------------- ------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,166) (23,941) 20,409
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 2,782 25,000 4,591
----------------- ----------------- ------------------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 616 $ 1,059 $ 25,000
================= ================= ==================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of amounts capitalized $ 9,069 $ 5,088 $ 254
================= ================= ==================
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
5
<PAGE>
UDC HOMES, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
On May 17, 1995, UDC Homes, Inc. (the "Predecessor Company") filed a
voluntary petition for reorganization under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Proceedings"). On October 3, 1995, the
Predecessor Company's reorganization plan, as amended (the "Reorganization
Plan"), was approved by the United States Bankruptcy Court. Under the
Reorganization Plan, DMB Property Ventures Limited Partnership ("DMBLP")
entered into an agreement to acquire 100% of the equity (the "Acquisition")
of the company that emerged from Bankruptcy Proceedings (the "Predecessor
Company under Fresh Start reporting"). On November 14, 1995 ("Acquisition
Date"), DMB Residential LLC ("DMB"), an affiliate of DMBLP, completed the
acquisition and as of that date, the financial statements of the Company
reflect the cost of DMB's acquisition of the Company, utilizing the
purchase method of accounting ("Acquisition Cost Basis") ("Successor
Company"). Accordingly, the statements of operations and the statements of
cash flows for the three months ended December 31, 1995 reflect the
operations of the Predecessor Company under Fresh Start reporting for the
period from October 1, 1995 to November 13, 1995 and the accounts of the
Successor Company on the Acquisition Cost Basis from November 14, 1995 to
December 31, 1995 (together the "Company").
On May 6, 1996, pursuant to an option agreement between DMB and AEW
Partners, L.P. ("AEW"), Eastrich No. 184, LLC (as to all interests except
the Westbrook Village Joint Venture ("WBV")) and Eastrich No. 185, LLC (as
to the WBV interest), as assignees of AEW, acquired from DMB 500 shares of
the Common Stock of the Company owned by DMB, $15 million principal amount
of the Company's Series C Subordinated Notes owned by DMB, $5 million
principal amount of the Company's Series D Subordinated Notes owned by DMB
and 50% of the general partner interest held by a DMB affiliate in WBV. As
a result of the above, the Company is now 50% owned by DMB and 50% owned by
AEW.
The statement of operations for the period from October 1, 1995 to
November 13, 1995 contains a $50,264,000 gain on debt discharge arising
from reorganization of the Predecessor Company under the Reorganization
Plan. In addition, a fresh start reporting adjustment of $14,069,000 was
recorded. The cost of company reorganizations of $7,051,000 is comprised
primarily of professional fees and costs related to employee severance
agreements.
The consolidated financial statements include the accounts of UDC
Homes, Inc. and all of its majority-owned subsidiaries, joint ventures and
partnerships. All material intercompany balances and transactions have been
eliminated in consolidation. Investments in unconsolidated partnerships and
joint ventures are recorded using the equity method of accounting.
The consolidated financial statements and related notes thereto
contained in the Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, filed by UDC Homes,
6
<PAGE>
Inc. with the Securities and Exchange Commission, should be read in
conjunction with these consolidated financial statements. The results of
operations for the interim periods presented are not necessarily indicative
of the results to be expected for the entire year. Certain amounts in the
consolidated financial statements of prior periods have been reclassified
to conform to the current presentation. The consolidated financial
statements included herein are unaudited; however, they include all
adjustments of a normal recurring nature which, in the opinion of
management, are necessary to present fairly the consolidated financial
position, results of operations and cash flows for the interim period.
2. NOTES PAYABLE
Notes Payable consist of the following (in thousands):
December 31, September 30,
1996 1996
------------------ -----------------
Revolving credit facility $ 55,885 $ 34,165
Westbrook Village facility 4,622 4,266
Transoccidental note 9,603 13,011
Other 14,415 21,620
------------------ -----------------
$ 84,525 $ 73,062
================== =================
As of December 31, 1996, the Company was in violation of the
tangible net worth, debt to tangible net worth, cumulative net cash flow to
debt service and EBITDA to interest paid covenants of the revolving credit
facility. Waivers for these covenant violations have been obtained.
Additionally, the Company is currently in the process of negotiating the
terms of a new revolving credit facility with a group of banks which would,
among other things, extend the maturity date to March 2000.
3. HOUSING INTEREST
Housing interest incurred is capitalized and expensed through cost of
housing sales, as they relate to housing and land inventories. The
components of housing interest are as follows for the three months ended
December 31, (in thousands):
1996 1995
---------------- ----------------
Interest costs incurred $ 6,508 $ 6,866
Less: interest capitalized 2,790 2,818
---------------- ----------------
Interest expense $ 3,718 $ 4,048
================ ================
Amortization of capitalized interest
included in cost of sales $ 1,926 $ 1,451
================ ================
Interest income $ 53 $ 179
================ ================
As of the Acquisition Date, the Company changed its method of applying
the principles
7
<PAGE>
of Statement of Financial Accounting Standards (SFAS) No. 34,
Capitalization of Interest Cost, in order to better match the
capitalization of interest with actual construction and development efforts
as defined by SFAS No. 34. In connection with such change, the Company also
significantly narrowed its definition of housing under construction and
land under development to exclude land undergoing only periodic entitlement
efforts, the effect of which is to decrease the amount of interest
capitalized and ultimately charged to expense through cost of sales, and
increase interest expense in the period incurred.
Interest on pre-petition, unsecured debt was suspended subsequent to
the commencement of the Bankruptcy Proceedings. Had the accrual of interest
not been suspended, interest incurred and interest expensed for the period
from October 1, 1995 to November 13, 1995 would have increased by
approximately $3,000,000 and $300,000, respectively.
4. CONTINGENCIES AND LEGAL MATTERS
During 1995, three lawsuits were filed against certain former officers
and directors of the Predecessor Company alleging violation of securities
laws, fraud and negligence. These former directors and officers may be
entitled to indemnification by the Company. A settlement has been proposed,
which has received preliminary approval from the Arizona Superior Court,
under which the Company is obligated for the $1,500,000 deductible under
its directors and officers policies. Such amount was paid in December 1995.
In addition, the Company paid $250,000 on behalf of DMB. The Company does
not believe that any other obligations to officers and directors under its
bylaws will exceed its coverage under its officers and directors insurance
policies.
The Company is a defendant in several lawsuits that arise from or are
related to the conduct of the Company's business. The Company does not
believe that the ultimate resolution of these cases will materially effect
the financial position, results of operations or cash flows of the Company.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------- -----------------------------------------------------------------------
of Operations
-------------
Introduction
On November 14, 1995, the Company consummated its Reorganization Plan
and emerged from its Bankruptcy Proceedings as a new reporting entity. The
following discussion and analysis of the Company's operations includes only the
Company's continuing operations in Arizona and California except as otherwise
indicated. The Company has liquidated substantially all remaining assets of its
Southeast operations, and management believes that discussion of such operations
is no longer material to an understanding of the Company's operations.
Revenues
The following table presents comparative housing revenues, deliveries
and average sales price for the three months ended December 31,:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Arizona and California:
Family revenue (000s).............................. $ 55,561 $ 55,448
Retirement revenue (000s).......................... $ 25,086 $ 19,411
Units delivered.................................... 387 330
Average sales price................................ $ 208,390 $ 226,845
Change from prior year............................. 7.7% (17.6)%
Change due to volume............................... 17.2% (28.3)%
Change due to average sales price.................. (9.5)% 10.7%
Southeast:
Housing revenue (000s)............................. $ - $ 5,123
Units delivered.................................... - 26
Average sales price................................ $ - $ 197
</TABLE>
The increase in volume in fiscal 1996 compared to fiscal 1995 resulted
from improved sales in Arizona offset by decreased volumes in California due to
low inventory levels. The decrease in average sales price in fiscal 1996 was
primarily the result of decreased deliveries in California and changes in the
mix of product types sold. The Company believes that its 1995 closings were
adversely affected by home buyer concerns about the Company's financial
condition and restrictions on the Company's ability to finance construction
during its Bankruptcy Proceedings.
9
<PAGE>
Net Orders
The following table presents comparative net orders by region for the
three months ended December 31,(dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Arizona:
Dollars..................................... $ 61,250 $ 60,602
Units ordered............................... 327 327
Average sales price......................... $ 187 $ 185
California:
Dollars..................................... $ 18,751 $ 19,843
Units ordered............................... 75 75
Average sales price......................... $ 250 $ 265
Southeast:
Dollars..................................... $ - $ 3,993
Units ordered............................... - 21
Average sales price......................... $ - $ 190
Company total:
Dollars..................................... $ 80,001 $ 84,438
Units ordered............................... 402 423
Average sales price......................... $ 199 $ 200
</TABLE>
Net orders represent the aggregate dollar value and number of homes for
which the Company has received purchase deposits and signed sales contracts
during the period, net of cancellations.
Net Sales Backlog
Net sales backlog represents the aggregate dollar value and number of
homes ordered, net of cancellations, pending delivery at December 31, for which
the Company had received purchase deposits and signed sales contracts. The
following table presents comparative net sales backlog by region as of December
31(dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Arizona:
Dollars................................................ $ 130,055 $ 135,822
Units in backlog....................................... 656 729
Average sales price.................................... $ 198 $ 186
California:
Dollars................................................ $ 34,391 $ 40,849
Units in backlog....................................... 121 158
Average sales price.................................... $ 284 $ 259
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Southeast:
Dollars................................................ $ - $ 4,971
Units in backlog....................................... - 25
Average sales price.................................... $ - $ 199
Company total:
Dollars................................................ $ 164,446 $ 181,642
Units in backlog....................................... 777 912
Average sales price.................................... $ 212 $ 199
</TABLE>
The decrease in backlog at December 31, 1996 resulted from fewer homes available
for sale in California and Arizona as a result of the Company's inability to
acquire land for homesites during its Bankruptcy Proceedings.
Gross Margins, Selling and Administrative Expenses and Interest, Net
The following table presents comparative information related to the
cost of housing sales, selling and administrative expenses ("S&A") and interest,
net for homebuilding for the three months ended December 31 (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
------------------------------ ---------------------------
Dollars % Dollars %
-------------- --------- ------------ --------
<S> <C> <C> <C> <C>
Revenue from housing sales $ 80,647 100.0% $ 79,982 100.0%
Cost of housing sales 69,086 85.7% 74,948 93.7%
-------------- --------- ------------ --------
Gross margin 11,561 14.3% 5,034 6.3%
S & A expenses (including
reorganization costs) 12,542 15.6% 15,692 19.6%
-------------- --------- ------------ --------
Operating (loss) income
from homebuilding (981) -1.3% (10,658) -13.3%
Interest, net 3,665 4.5% 3,869 4.8%
-------------- --------- ------------ --------
Pre-tax (loss) from homebuilding $ (4,646) -5.8% $ (14,527) -18.1%
============== ========= ============ ========
</TABLE>
Generally Accepted Accounting Principles require that the purchase
accounting principles of APB No. 16 be applied in the valuation of the
reorganized Company's balance sheet as of the Acquisition Date (the "Opening
Balance Sheet"). APB No. 16 requires that the basis assigned to purchased
inventories include a portion of the profit ("Purchased Profit") which would
otherwise have been recognized upon the closing of the related home sale,
consistent with the concept that the earnings process occurs throughout the
construction process. The further the construction process has been completed on
a given home, the more profit is capitalized in the Opening Balance Sheet.
Accordingly, as a result of the application of purchase accounting, margins on
homes held at the Acquisition Date and closed in subsequent fiscal periods will
generally be depressed relative to prior periods and relative to homes not held
at the Acquisition
11
<PAGE>
Date and closed later in the fiscal year. Further, all homes under construction
as of the Acquisition Date will generally have margins less than those on homes
on which construction began after the Acquisition Date. The impact of Purchased
Profit on gross margin is partially offset by the elimination of capitalized
interest in inventory in the Opening Balance Sheet as well as by less interest
being capitalized as a result of the change in the Company's method of applying
the capitalization of interest principles of SFAS No. 34 to housing inventory
discussed in Note 3 to the accompanying condensed notes to consolidated
financial statements.
Gross margins increased during fiscal 1997 compared to fiscal 1996
primarily due to reduced amortization of Purchased Profit from $3.5 million for
the quarter ended December 31, 1995 to $.4 million for the quarter ended
December 31, 1996. Additionally, the Company believes that margins were lower
during the quarter ended December 31, 1995 due to price reductions enacted
during the latter portion of 1995 to entice buyers who may have been hesitant to
purchase a UDC home because of its Bankruptcy Proceedings.
The following table presents the components of selling and
administrative expenses for the three months ended December 31, (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Selling and administrative expenses:
Variable components..................................................... $ 3,193 $ 2,933
Fixed components........................................................ 9,349 5,708
Cost of company reorganizations......................................... - 7,051
------- -------
Total selling and administrative expenses.................................. $12,542 $15,692
======= =======
As a percentage of revenues from housing sales:
Variable components..................................................... 4.0% 3.7%
Fixed components........................................................ 11.6 7.1
Cost of company reorganization.......................................... - 8.8
------- -------
Total selling and administrative expenses.................................. 15.6% 19.6%
======= =======
</TABLE>
The variable component of selling and administrative expenses includes
sales commissions and model furniture amortization. Variable selling and
administrative expenses as a percentage of housing sales increased in fiscal
1997 as compared to fiscal 1996 due to an increase in sales commissions paid and
an increase in model furniture amortization.
The fixed component of selling and administrative expenses includes all
other selling and administrative expenses which generally do not vary with
housing sales volume. Fixed selling and administrative expenses increased in
fiscal 1997 as compared to fiscal 1996 primarily due to increased professional
fees incurred in connection with lingering effects of the Company's Bankruptcy
Proceedings and Reorganization Plan which were classified as "Cost of company
reorganization" during fiscal 1996. Additionally, the Company experienced
increased warranty costs which were offset by decreased advertising
expenditures.
The Company capitalizes certain interest costs for its homebuilding
operations and includes such capitalized interest in cost of home sales when the
related units are delivered.
12
<PAGE>
Accordingly, total interest incurred by the Company's homebuilding operations
was $6,508,000 and $6,866,000 for the three months ended December 31, 1996 and
1995, respectively. Interest, net for homebuilding, was $3,665,000 and
$3,869,000 in fiscal 1997 and 1996, respectively. The decreases in interest
incurred and interest, net resulted from lower average debt levels during the
current period.
Mortgage Operations
The Company's mortgage banking operations are conducted through its
wholly-owned subsidiary UDC Mortgage. The following table presents operating
information for the Company's mortgage banking operations for the three months
ended December 31 (dollars in thousands):
1996 1995
----- -----
Number of loans originated ......................... 160 152
Revenues ........................................... $ 527 $ 535
General and administrative expenses ................ 473 542
----- -----
Operating income from mortgage banking ............. 54 (7)
Interest, net ...................................... (63) (57)
----- -----
Pre-tax profit from mortgage banking ............... $ 117 $ 50
===== =====
General and administrative expenses decreased in fiscal 1997 compared
to fiscal 1996 primarily as a result of the elimination of UDC Mortgage's
goodwill based on purchase accounting principles resulting in a reduction in
amortization expense and additionally, a reduction in legal fees paid.
Liquidity and Capital Resources
The Company's financing needs depend primarily upon sales volume, asset
turnover, land acquisitions and inventory balances. The Company has financed,
and expects to continue to finance, its working capital needs through funds
generated by operations, borrowings and capital contributions by AEW and DMB.
Funds for future land acquisitions and construction costs are expected to be
provided primarily by cash flows from operations, future borrowings as permitted
under the Company's loan agreements and capital contributions by AEW and DMB.
The Company believes that amounts generated from operations, additional
borrowings and capital contributions will provide funds adequate to finance its
homebuilding activities and meet its debt service requirements.
On November 7, 1996, the Company completed an asset sale transaction in
which it sold to DMB/AEW Land Holdings One, LLC, an affiliate of DMB and AEW,
for cash, $25.5 million of assets the Company had previously designated as land
held for sale. Proceeds from the sale were used to reduce the outstanding
balance on the Company's principle revolving credit facility. This sale also
created additional acquisition and development fund availability under the
Company's principle revolving credit facility. The Company has entered into a
management agreement with the DMB/AEW affiliate pursuant to which the Company
will receive a fixed monthly fee for the management and marketing of the land to
third party buyers. To the extent the cash proceeds from the sale of the
property to a third party exceeds certain thresholds, the Company will
participate in excess profits.
13
<PAGE>
At December 31, 1996, the Company finances its homebuilding, land
development and mortgage operations as discussed below:
Construction and Acquisition and Development Financing - The Company's
largest credit facility is a $150 million revolving credit facility with a group
of banks. The facility is available for both construction and acquisition and
development ("A&D") activities in Arizona and California. The amount available
for A&D activities is limited to a maximum of $37.5 million. The facility
accrues interest at prime plus 1% or, at the Company's option, LIBOR plus 3.25%,
payable monthly, and requires payment of a commitment fee of 1% per annum of the
commitment amount, an unused commitment fee of .25% per annum of the average
unused commitment amount, and syndication and agency fees. The facility is
secured by portions of the Company's housing inventory and land held for
development and matures on March 31, 1999. At December 31, 1996, $55.9 million
was outstanding and $26.2 million was available under the facility.
Additionally, the Company has a $23.3 million revolving construction
and A&D facility for Westbrook Village ("WBV"). The WBV facility includes a
$12.5 million construction facility and a $10.8 million A&D facility. These
facilities accrue interest at prime plus 1.5%, payable monthly, require payment
of a commitment fee of 1% per annum and are secured by WBV housing inventory and
land held for development. The A&D facility matures on July 1, 1997, and the
construction facility matures on January 1, 1998. At December 31, 1996, $4.6
million was outstanding under the construction facility and no amounts were
outstanding under the A&D facility.
The construction and A&D facilities described above contain various
covenants, including but not limited to, covenants regarding: (i) encumbrances;
(ii) minimum available liquidity; (iii) maximum total debt to tangible net
worth; (iv) minimum tangible net worth; (v) minimum cumulative net cash flow to
total debt service; (vi) minimum ratio of earnings before interest, taxes,
depreciation and amortization ("EBITDA") to interest paid; (vii) restrictions on
mergers, consolidations and acquisitions; (viii) restrictions on asset sales;
and (ix) restrictions on incurrence of additional indebtedness. Among other
things, such covenants may limit the Company's ability to obtain additional
financing when needed and on terms acceptable to the Company. Further, the
availability of funds under the revolving facilities is dependent upon
compliance with such covenants, certain loan-to-value ratios stated in each
facility and the levels of pre-sold and speculative construction. Accordingly,
all of the committed credit may not be available to the Company at a particular
time. Any inability of the Company to obtain financing when needed in amounts or
on terms favorable to the Company could have a material adverse effect on the
Company's business, operating results and financial condition.
As of December 31, 1996, the Company was in violation of the tangible
net worth, debt to tangible net worth, cumulative net cash flow to debt service
and EBITDA to interest paid covenants. Waivers for these covenant violations
have been obtained. Additionally, the Company is currently in the process of
negotiating the terms of a new revolving credit facility with a group of banks
which would, among other things, extend the maturity date to March 2000. There
can be no assurance that the Company will be able to negotiate the new facility
with terms favorable to the Company.
Other Secured Borrowings - In addition to the credit facilities
described above, the Company has various notes outstanding collateralized
primarily by land held for development.
14
<PAGE>
The notes bear interest at rates ranging from 9.5% to 15% and are due at various
dates. At December 31, 1996, $24.0 million was outstanding under these notes.
Senior Unsecured Notes - On the Acquisition Date, the Company issued
Series A Senior Notes in a principal amount of $60 million and Series B Senior
Notes in a principal amount of $10 million. Interest on the Senior Notes accrues
at a rate of 12.5% per annum, commencing September 1, 1995, and is payable
semi-annually beginning May 1, 1996. Both series of Senior Notes mature on May
1, 2000. The Series B Senior Notes further require prepayments from the proceeds
of certain asset sales in excess of $10 million, subject to certain limitations
related to the Company's new construction and acquisition and development
financing. The Senior Notes contain numerous covenants which may, among other
things, limit the Company's ability to obtain additional financing when needed
and on terms acceptable to the Company.
Subordinated Notes - On the Acquisition Date, the Company issued Series
C Subordinated Notes in a principal amount of $35 million ($30 million were
issued to DMB in connection with its acquisition of the equity of the Company).
Interest on the Series C Subordinated Notes accrues at the rate of 14.5% per
annum and is payable semi-annually beginning November 1, 1996. The Series C
Subordinated Notes mature November 1, 2000. The payment of interest in cash on
the Series C Subordinated Notes is restricted by certain limitations related to
the Company's construction and acquisition and development financing. On May 6,
1996, Eastrich No. 184, LLC acquired $15 million of the Series C Subordinated
Notes from DMB. The November 1, 1996 payment of interest was paid in-kind in
additional Series C Subordinated Notes.
On March 15, 1996, DMB invested $10 million in the Company in exchange
for $10 million Series D Subordinated Notes. The terms for the Series D
Subordinated Notes are identical to the terms for the Series C Subordinated
Notes discussed above, except that payments on the Series D Subordinated Notes
are subordinate to payments on the Series C Subordinated Notes. On May 6, 1996,
Eastrich No. 184, LLC acquired $5 million of the Series D Subordinated Notes
from DMB. The November 1, 1996 payment of interest was paid in-kind in
additional Series D Subordinated Notes.
Common Stock - In connection with the consummation of the
Reorganization Plan, the Company sold all 1,000 of the authorized shares of
Common Stock of the reorganized Company, par value $.01 per share, to DMB. DMB
then entered into an option agreement with AEW which, as amended, gave AEW the
right to purchase 500 shares of the Common Stock owned by DMB, $15 million of
the Series C Subordinated Notes issued to DMB, $5 million of the Series D
Subordinated Notes issued to DMB and 50% of the general partner interest held by
a DMB affiliate in WBV for an aggregate purchase price of $61.25 million, plus
interest. On April 21, 1996, AEW notified DMB that it elected to exercise the
option, and the purchase by Eastrich No. 184, LLC (as to all interests except
the WBV interest) and Eastrich No. 185, LLC (as to the WBV interest), as
assignees of AEW, pursuant to the exercise of the option was completed on May 6,
1996. On December 31, 1996, the Company received additional capital
contributions of $5,000,000 each from DMB and AEW.
Mortgage Debt - The Company finances its mortgage operations with a $10
million committed revolving credit facility which matures on August 30, 1997.
This facility is secured by residential mortgages originated in the closing of
the Company's residential home sales. At December 31, 1996, $4.5 million was
outstanding under the facility.
15
<PAGE>
Inflation
The homebuilding industry is affected by movements in interest rates.
Because it is highly leveraged, the Company is more sensitive than less
leveraged companies to increases in interest rates which affect the cost of the
Company's borrowings and impact the Company's margins and profitability.
Further, the Company may have difficulty expanding its operations when
opportunities are available or securing financing during a downturn in the
homebuilding market. While the Company believes that the move-up family and
active adult home buyers to whom the Company provides housing have been less
sensitive to increasing interest rates than the industry as a whole, the
Company's sales are nonetheless affected by such increases. Higher interest
rates will increase the carrying costs of inventory, thereby increasing costs of
housing sales and decreasing gross margins. Generally, higher interest rates
tend to create a reduction in consumer demand and reduce the consumer's ability
to qualify for mortgage financing. Residential homebuilding companies, including
the Company, can be adversely affected by inflation through higher mortgage
rates and increased costs for materials and subcontractors, resulting in higher
prices, both of which adversely affect buyer demand. Management believes that
the impact of inflation on its revenues and costs has not been material.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
The statements contained herein which are not historical facts may
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended, and are subject to the safe harbors created thereby.
These forward-looking statements involve risks and uncertainties, including, but
not limited to, the Company's success in overcoming negative perceptions on the
part of home buyers as a result of its Bankruptcy Proceedings, the effect of
interest rates on demand for the Company's homes, and fluctuating margins as a
result of product mix and other factors. In addition, the Company's business,
operations and financial condition are subject to substantial risks which are
described in the Company's reports and statements filed from time to time with
the Securities and Exchange Commission.
16
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- ------- -----------------
The Arizona Actions - On June 5, 1995, June 14, 1995 and October
25, 1995, lawsuits were filed on behalf of a purported class of present and
former shareholders of the Company in the Superior Court of the State of
Arizona in and for Maricopa County (the "Court") against, among others,
certain former officers and directors of the Company (the "Director/Officer
Defendants"), entitled Michael A. Isco v. Richard C. Kraemer, et al. (Case
No. CV 95-08941), Larry Alexander et al. V. Arthur Andersen LLP, et al.
(Case No. CV 95-09509), and Crandon Capital Partners v. Kraemer, et al.,
respectively (collectively, the "Arizona Actions"). Subsequently, the
Arizona Actions were consolidated. The Arizona Actions seek, among other
things, unspecified money damages and contain allegations which include
violations of Arizona securities law, fraud, negligent misrepresentation,
breach of fiduciary duty, negligence and gross negligence. The Company is
not a named defendant in these lawsuits. Further, the Company's Bankruptcy
Plan of Reorganization provided for the discharge of claims asserted in
class action lawsuits against the Company. However, the Company could be
required to indemnify certain of the Director/Officer Defendants if such
defendants incur expenses or liability in the Arizona Actions and seek
indemnification. In connection with the settlement described below, the
Director/Officer Defendants agreed to limit their aggregate claim for
indemnification in certain circumstances.
An agreement (the "Settlement Agreement") was previously reached
pursuant to which the plaintiffs and the Director/Officer Defendants agreed
to settle and compromise the Arizona Actions in their entirety, as such
actions relate to the Director/Officer Defendants and the Company, in
exchange for, among other things, $12.75 million. Of such amount, $1.5
million, which represents the self-insured retention under the Company's
applicable directors' and officers' insurance policies, has been paid by
the Company. In addition, the Company paid $250,000 on behalf of DMB.
Certain issuers of the Company's directors' and officers' insurance
policies, together with the Company, have agreed to fund the balance of the
settlement. The Company does not believe that its remaining obligations to
directors and officers will exceed its insurance coverage. The Settlement
Agreement was filed with the Court on January 19, 1996 and after amendment
was preliminarily approved by the Court. The Court now must determine
whether, after notice to class members, to approve the Settlement Agreement
and to enter a bar order designed to limit the ability of non-settling
defendants to seek contributions, indemnification, equitable apportionment
or similar equitable remedies from the Company or the Director/Officer
Defendants. The Court approved the form of notice to be provided to the
class, ordered that the class be given notice, and set a final settlement
hearing date for February 14, 1997. Notice to the class and proofs of claim
have been mailed and the class members had until January 31, 1997, to opt
out of or object to the settlement.
Shadow Moss Homeowners Association Inc. v. UDC-Universal
Development, L.P., dba UDC Homes Limited Partnership, Course View
Properties, Inc., Newman Bower Architects, James M. Taylor, and Mulvaney
Builders and Associates - This case, which was filed on March 5, 1993, is
currently pending in the Horry County, South Carolina Court of Common
Pleas. The plaintiff alleges that numerous construction/design defects
exist at the Company's Shadow Moss condominium project in North Myrtle
Beach, South Carolina. The
17
<PAGE>
complaint alleges breach of contract, breach of implied warranties,
negligence, strict tort liability and unfair trade practices. The plaintiff
seeks $2,500,000 in actual and consequential damages, punitive damages,
costs and attorneys' fees and treble the actual damages as a result of the
unfair trade practices claim. The Company is unable at this time to
determine the likelihood of an unfavorable outcome or the amount or range
of potential loss, if any. CIGNA Insurance Company is defending the Company
under a reservation of rights.
The Company is also involved in various legal proceedings which
generally represent ordinary routine litigation incident to its business,
some of which are covered in whole or in part by insurance. In the
Company's opinion, none of the pending litigation matters will have a
material adverse effect upon the Company's financial position, results of
operations or cash flows.
18
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
Exhibit
Number Description of Document
- ------ -----------------------
10.1 Fourth Amendment to the UDC Master Revolving Line of Credit
(Borrowing Base) Loan Agreement dated February 13, 1997 Bank
One, Arizona, NA, (BOAZ), Bankers Trust, Wells Fargo Bank,
National Association (WFB), The First National Bank of Boston
(BKB), Wells Fargo Realty Advisors Funding, Incorporated
(Wells Fargo), Guaranty Federal Bank, FSB (Guaranty Federal)
and the Company.
10.2 Lease Agreement dated November 5, 1996 between Scottsdale
Spectrum LLC and the Company
27 Financial Data Schedule
All other exhibits are omitted as the information required is inapplicable.
(b) There were no reports on Form 8-K filed during the three
months ended December 31, 1996.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: February 13, 1997 UDC HOMES, INC.
By: /s/ Garth R. Wieger
----------------------------------------
Garth R. Wieger, Chief Executive
Officer, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
Signature Title Date
- --------- ----- ----
/s/ Garth R. Wieger President, Chief Executive February 13, 1997
- ------------------------------------ Officer and Director
Garth R. Wieger (Principal Executive Officer)
/s/ Kenda B. Gonzales Senior Executive Vice President February 13, 1997
- ------------------------------------ and Chief Financial Officer
Kenda B. Gonzales (Principal Financial and Accounting Officer)
</TABLE>
20
FOURTH AMENDMENT
TO
UDC MASTER REVOLVING LINE OF CREDIT (BORROWING BASE)
LOAN AGREEMENT
This FOURTH AMENDMENT TO UDC MASTER REVOLVING LINE OF CREDIT (BORROWING
BASE) LOAN AGREEMENT (the "Fourth Amendment"), dated as of February 13, 1997,
is made and entered into by and between UDC HOMES, INC., a Delaware corporation
("Borrower"); BANK ONE, ARIZONA, NA, a national banking association ("BOAZ");
BANKERS TRUST COMPANY, a New York banking corporation ("Bankers Trust"); WELLS
FARGO BANK, NATIONAL ASSOCIATION, a national banking association, successor by
merger to First Interstate Bank of California, a banking corporation organized
and existing under the laws of California ("WFB"); THE FIRST NATIONAL BANK OF
BOSTON, a national banking association ("BkB"); WELLS FARGO REALTY ADVISORS
FUNDING, INCORPORATED, a Colorado corporation ("Wells Fargo"); and GUARANTY
FEDERAL BANK, F.S.B., a federal savings bank ("Guaranty Federal").
RECITALS:
A. Borrower, BOAZ, Bankers Trust, WFB, BkB, Wells Fargo, and Guaranty
Federal are parties to the UDC Master Revolving Line of Credit (Borrowing Base)
Loan Agreement, dated November 8, 1995 (the "Original Revolving Loan
Agreement"). BkB became a party to the Original Revolving Loan Agreement
pursuant to an Assignment and Acceptance, dated November 30, 1995, between BkB
and Bankers Trust. Wells Fargo became a party to the Original Revolving Loan
Agreement pursuant to an Assignment and Acceptance, dated December 5, 1995,
between Bankers Trust and Wells Fargo. Guaranty Federal became a party to the
Original Revolving Loan Agreement pursuant to an Assignment and Acceptance,
dated December 14, 1995, between Bankers Trust and Guaranty Federal and pursuant
to an Assignment and Acceptance, dated December 14, 1995, between BOAZ and
Guaranty Federal. As of December 14, 1995, Borrower, the Administrative Agent,
the Co-Agents, and the Banks entered into a First Amendment to UDC Master
Revolving Line of Credit (Borrowing Base) Loan Agreement (the "First
Amendment"). As of May 1, 1996, Borrower, the Administrative Agent, the
Co-Agents, and the Banks entered into a Second Amendment to UDC Master Revolving
Line of Credit (Borrowing Base) Loan Agreement (the "Second Amendment"). As of
December 23, 1996, Borrower, the Administrative Agent, the Co-Agents, and the
Banks entered into a Third Amendment to UDC Master Revolving Line of Credit
(Borrowing Base) Loan Agreement (the "Third Amendment"). The Original Revolving
Loan Agreement, as amended by the First Amendment, the Second Amendment, and the
Third Amendment, is referred to in this Fourth Amendment as the "Revolving Loan
Agreement". Capitalized terms used in this Fourth Amendment and not defined in
this Fourth Amendment have the meanings ascribed to them in the Revolving Loan
Agreement.
B. Borrower has requested modifications to certain provisions of the
Revolving Loan Agreement and waivers of certain covenants in the Revolving Loan
Agreement. The Administrative Agent, the Co-Agents, and the Banks are willing to
agree to the modifications and waivers provided in this Fourth Amendment, on the
terms and conditions set forth in this Fourth Amendment.
<PAGE>
AGREEMENT:
NOW THEREFORE, For good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower, the Administrative
Agent, the Co-Agents, and the Banks agree as follows:
1. Waivers.
(a) The Administrative Agent, the Co-Agents, and the Banks
waive compliance by Borrower with the following Financial Covenants as
of December 31, 1996:
(i) The Maximum Total Debt to Tangible Net Worth
Covenant of Section 6.22.3 of the Revolving Loan Agreement;
(ii) The Minimum Tangible Net Worth Covenant of
Section 6.22.4 of the Revolving Loan Agreement;
(iii) The Debt Service Coverage Covenant of Section
6.22.5 of the Revolving Loan Agreement; and
(iv) The Interest Coverage Covenant of Section
6.22.6 of the Revolving Loan Agreement.
(b) The Administrative Agent, the Co-Agents, and the Banks
waive compliance by Borrower with the PICD requirements and
restrictions of Section 7.16.3 of the Revolving Loan Agreement for the
period from December 31, 1996 through March 31, 1997.
(c) The foregoing waivers shall relate only to the Financial
Covenants referred to above and only as of the date stated. Nothing
contained herein shall waive compliance with any other provisions of
the Loan Documents or with respect to any other date or period. Nothing
contained herein shall obligate Administrative Agent, Co-Agents or the
Banks to grant any additional waivers to Borrower.
2. Amendment.
(a) Section 3.7.5(h) of the Revolving Loan Agreement is amended in
its entirety to read as follows:
"Unit Completion Percentage" means, for any Unit, the lesser
of (i) the current percentage of construction completed as reflected in
each Borrowing Base Report, based upon the ratio of (A) costs already
incurred and paid for by Borrower for material and labor actually
incorporated into such Unit pursuant to the Unit Budget (other than the
Unit Lot Cost), to (B) the Unit Budget; and (ii) the applicable
percentages set forth in the Construction Draw Schedules set forth on
Exhibit 3.7.5(h), based on the stage of completion of the particular
Unit; provided, however, that prior to March 31, 1997, Unit Completion
Percentages will be determined without regard to this clause (ii) but
shall instead be in increments of 5%.
2
<PAGE>
(b) Section 3.7.5(e)(v) of the Revolving Loan Agreement is amended
in its entirety to read as follows:
(v) With respect to each A&D Land Project, the lesser of (A)
60% of the A&D Project Appraised Value (A&D Project Appraised Values
being determined as set forth in Section 3.10) for that A&D Project, or
(B) 60% of the A&D Project Cost for that A&D Project; provided,
however, that if the A&D Project for which the Maximum Allowed Advance
is being determined for purposes of this clause (v), and for the
purposes of clause (vi) and clause (vii) below, consists of more than
125 lots, then the percentages in this clause (v) and the percentages
in clause (vi) and clause (vii) will each be reduced by subtracting 5%
from the stated percentages; provided further, that if an A&D Land
Project consists of Existing A&D Entitled Land Collateral or of the
MountainBrook Village Collateral added pursuant to Section 3.4.4 and
is, on the following adjustment dates, still entitled to be included as
Eligible Collateral, then on the first day of the 13th Calendar Month
following the A&D Eligibility Date for such A&D Land Project and on the
first day of each 6th Calendar Month thereafter, the percentages set
forth in this clause (v) (as adjusted pursuant to the first proviso in
this clause (v), if applicable) will be reduced on each such day by
subtracting 5% from the percentage that otherwise would apply; provided
further that with respect to any A&D Land Project, A&D Development
Project and A&D Finished Lot Project first included as Eligible
Collateral after November 1, 1996, the percentages that would otherwise
be applicable pursuant to this clause (v) or pursuant to clause (vi) or
clause (vii) shall be further reduced on March 31, 1997 by five percent
(5%) from the percentage that would otherwise apply (after giving
effect to the adjustments pursuant to the first and second provisos of
this sentence).
3. Extension of Eligibility for Certain Existing A&D Entitled Land.
Notwithstanding the provisions of Section 3.4.1 of the Revolving Loan Agreement,
the A&D Land Projects consisting of the Existing A&D Entitled Land described on
Exhibit 3.2.5(k) of the Revolving Loan Agreement as the Villages-Hidalgo project
and the Villages-Del Lago project shall be entitled to be included as Eligible
Collateral (as A&D Land Projects) from November 1, 1996 through March 31, 1997.
4. Inducements to the Banks. As additional consideration and inducement
to the Administrative Agent, the Co-Agents, and the Banks to grant the waivers
and modifications set forth in this Fourth Amendment and to agree to the other
terms of this Fourth Amendment, with knowledge that the Administrative Agent,
the Co-Agents, and the Banks would not enter into this Fourth Amendment but for
the provisions of this Paragraph 4:
(a) Borrower represents and warrants to the Administrative
Agent, the Co-Agents, and the Banks that:
(i) All Obligations under the Revolving Loan
Agreement (as amended by this Fourth Amendment) and the Loan
Documents are and continue to be valid, binding and
enforceable obligations of Borrower, enforceable in accordance
with their terms, and are and continue to be secured by the
Collateral;
(ii) All of the representations and warranties set
forth in the Revolving Loan Agreement (as amended by this
Fourth Amendment) and the other Loan Documents continue to be
true and correct as of the date hereof;
(iii) With respect to the Revolving Loan Agreement
(as amended hereby), all property and interests (including,
without limitation, property and interests that constitute
3
<PAGE>
Eligible Collateral and property and interests that are not
included in the Eligible Collateral) encumbered under any
Deeds of Trust constitute, and shall continue to be, first
priority liens and collateral security for all of the
Obligations, and the value of such Collateral is and has at
all times been, in the aggregate, greater than the amount of
the Obligations;
(iv) Borrower has no defense, setoff, claim or
counterclaim against the Administrative Agent, the Co-Agents,
or the Banks in regard to its obligations under the Revolving
Loan Agreement, as amended by this Fourth Amendment, any other
Loan Document, any document, instrument, transaction, act or
omission arising out of or related to the Obligations, the
Revolving Loan Agreement (as amended by this Fourth
Amendment), or any other obligation to the Banks, the
Administrative Agent or the Co- Agents, or any of them.
(b) Borrower and all guarantors fully, finally, and forever
release and discharge the Administrative Agent, the Co-Agents, and the
Banks, and their respective successors, assigns, directors, officers,
employees, agents, and representatives from any and all actions, causes
of action, claims, debts, demands, liabilities, obligations, and suits,
of whatever kind or nature, in law or equity of Borrower or any of the
guarantors whether now known or unknown: (i) in respect of the loan
made pursuant to the Revolving Credit Agreement (as amended hereby) or
the acts or omissions of the Administrative Agent, the Co-Agents,
and/or the Banks, or any of them, in respect thereto and (ii) arising
from events occurring prior to the execution and delivery of this
Fourth Amendment by Borrower.
(c) In connection with the releases and waivers contained
herein, Borrower and each guarantor hereby expressly waive any and all
rights and benefits conferred upon it by the provisions of Section 1542
of the California Civil Code (or similar provisions of any other
applicable law) which provides:
"A general release does not extend to claims which
the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must
have materially affected his settlement with the debtor."
Borrower and each guarantor have been advised by their legal counsel,
or Borrower and each guarantor have made a reasoned and fully informed
decision not to be so represented by counsel, and understand and
acknowledge the significance and consequences of this release and of
this specific waiver of Section 1542, and Borrower and each guarantor
expressly consent that the releases contained herein shall be given
full force and effect according to each and all of its express terms
and provisions including those relating to unknown and unsuspected
claims, demands and causes of action, if any, as well as those relating
to any other claims, demands and causes of action hereinabove
specified. The foregoing shall not be deemed to be an agreement by the
Administrative Agent, the Co-Agents or the Banks that California law is
the governing law under the Loan Documents.
5. Ratification. As modified by this Fourth Amendment, the
Revolving Loan Agreement is ratified and confirmed and continues in full force
and effect.
6. Counterpart Execution. This Fourth Amendment may be executed
in one or more counterparts, each of which will be deemed an original and all of
which together will constitute one and
4
<PAGE>
the same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Fourth Amendment to physically form one
document. Telecopied signature pages will be acceptable, provided originally
signed signature pages are provided to each of the other parties by overnight
courier.
7. Integration. This Fourth Amendment shall constitute one of the Loan
Documents, and the Loan Documents, together with this Fourth Amendment, contain
the complete understanding and agreement of Borrower, the Administrative Agent,
the Co-Agents and the Banks with respect to the transactions contemplated by the
Revolving Loan Agreement (except as between the Administrative Agent, the
Co-Agents and the Banks with respect to matters set forth in the
Agency/Participation Agreement) and supersede all prior representations,
warranties, agreements, arrangements, understandings, and negotiations,
including the Loan Commitment.
IN WITNESS WHEREOF, the parties hereto have executed this Fourth
Amendment.
BORROWER: UDC HOMES, INC.,
a Delaware corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Name: Kenda B. Gonzales
-----------------------------------
Title: Sr. Exec. VP
----------------------------------
BOAZ: BANK ONE, ARIZONA, NA, a national
banking association, individually as a
Bank and in its capacity as the
Administrative Agent and as one of the
Co-Agents
By: /s/ Rhonda R. Williams
-------------------------------------
Name: Rhonda R. Williams
-----------------------------------
Title: Vice President
----------------------------------
BANKERS TRUST: BANKERS TRUST COMPANY, a New York
banking corporation, individually as a
Bank and in its capacity as one of the
Co-Agents
By: /s/ A.B.U. Johnson
-------------------------------------
Name: A.B.U. Johnson
-----------------------------------
Title: M.D.
----------------------------------
5
<PAGE>
WFB: WELLS FARGO BANK, NATIONAL ASSOCIATION,
a national banking association,
successor by merger to First Interstate
Bank of California, a banking
corporation organized and existing under
the laws of California
By: /s/ John W. McKinny
-------------------------------------
Name: John W. McKinny
-----------------------------------
Title: Vice President
----------------------------------
BkB: THE FIRST NATIONAL BANK OF BOSTON,
a national banking association
By: /s/ Nicholas Whiting
-------------------------------------
Name: Nicholas Whiting
-----------------------------------
Title: Vice President
----------------------------------
WELLS FARGO: WELLS FARGO REALTY ADVISORS FUNDING,
INCORPORATED, a Colorado corporation
By WELLS FARGO REAL ESTATE GROUP,
a California corporation, as
agent
By: /s/ John W. McKinny
-----------------------------
Name: John W. McKinny
---------------------------
Title: Vice President
--------------------------
GUARANTY FEDERAL: GUARANTY FEDERAL BANK, F.S.B.,
a federal savings bank
By: /s/ Richard V. Thompson
-------------------------------------
Name: Richard V. Thompson
-----------------------------------
Title: Vice President
----------------------------------
6
<PAGE>
CONSENT
-------
The undersigned consent and agree to the foregoing. The undersigned
represent and warrant to Administrative Agent, Co-Agents and Banks that all of
the representations and warranties of the undersigned set forth in the Loan
Documents continue to be true and correct as of the date hereof. The undersigned
ratify and confirm all of their agreements and obligations pursuant to and in
connection with the Loan Documents. The undersigned hereby join in the release
and other provisions contained in the foregoing Fourth Amendment and agree to be
bound by all of the provisions thereof, and the undersigned otherwise fully,
finally and forever release and discharge Administrative Agent, Co-Agents and
Banks and their respective successors, assigns, directors, officers, employees,
agents and representatives from any and all actions, causes of actions, claims,
debts, demands, liabilities, obligations and suits, of whatever nature, in law
or equity of the undersigned, whether now known or unknown to the undersigned,
(i) in respect of the loans made pursuant to the Revolving Credit Agreement (as
amended by the foregoing Fourth amendment) or the acts or omissions of
Administrative Agent, the Co-Agents, and/or Banks, or any of them, in respect
thereto and (ii) arising from events occurring prior to the execution and
delivery of this Consent.
UDC HOMES CONSTRUCTION, INC.,
an Arizona corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Its: Sr. Exec. VP
------------------------------------
UDC ADVISORY SERVICES, INC.,
an Illinois corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Its: Sr. Exec. VP
------------------------------------
UDC MORTGAGE ACCEPTANCE
CORPORATION, an Arizona corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Its: Sr. Exec. VP
------------------------------------
UDC MORTGAGE FINANCE GENERAL
PARTNERSHIP, an Arizona general
partnership
By: UDC Homes, Inc., a Delaware
corporation, General Partner
By: /s/ Kenda B. Gonzales
------------------------------
Its: Sr. Exec. VP
-----------------------------
7
<PAGE>
ABERDEEN SERVICES, INC.,
a Florida corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Its: Sr. Exec. VP
------------------------------------
UDC HOMES OF GEORGIA, INC.,
a Georgia corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Its: Sr. Exec. VP
------------------------------------
REA ACQUISITION CORPORATION,
an Arizona corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Its: Sr. Exec. VP
------------------------------------
MOUNTAINBROOK VILLAGE COMPANY,
an Arizona corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Its: Sr. Exec. VP
------------------------------------
MBV GOLF COURSE, INC.,
an Illinois corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Its: Sr. Exec. VP
------------------------------------
8
08/12/96 02/01/92
09/10/96
09/27/96
10/11/96
10/19/96
10/23/96
10/24/96
OFFICE LEASE
SCOTTSDALE SPECTRUM
THIS INDENTURE OF LEASE (the "Lease"), dated as of the 5th day of
November, 1996, by and between SCOTTSDALE SPECTRUM, L.L.C., an Arizona limited
liability company, owner of the Office Complex (as hereinafter defined),
hereinafter referred to as "Lessor", and UDC HOMES, INC., a Delaware
corporation, hereinafter referred to as "Lessee".
WITNESSETH:
That Lessor, in consideration of the rents and covenants hereinafter
set forth, does hereby lease and let unto Lessee, and Lessee does hereby hire
and take from Lessor, that certain space shown and designated on the floor plan
attached hereto and made a part hereof as Exhibit A, which space shall consist
of approximately 22,451 rentable square feet and shall be located on the first
(1st) floor of the Office Complex to be constructed by Lessor at 6710 North
Scottsdale Road, Scottsdale, Arizona 85253, and to be known as Scottsdale
Spectrum. The aforesaid space leased and let unto Lessee is hereinafter referred
to as the "Premises"; the land (including all easement areas appurtenant
thereto) upon which the building ("Building") of which the Premises are a part
is hereinafter referred to as the "Property"; and the Property and all buildings
and improvements and personal property of Lessor used in connection with the
operation or maintenance thereof located therein and thereon and the appurtenant
parking facilities, if any, are hereinafter called the "Office Complex". The
Office Complex is depicted on Exhibit A-1 attached hereto and incorporated
herein. Lessee acknowledges that Exhibit A-1 is intended only to identify the
real estate comprising the Office Complex and the approximate boundary lines of
the individual parcels and that Exhibit A-1 is not to be considered or construed
as a representation or covenant
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that the shape, size, location, number and extent of the building improvements
shown thereon shall be constructed.
Lessee hereby accepts this Lease and the Premises upon the covenants
and conditions set forth herein and subject to any encumbrances, covenants,
conditions, restrictions and other matters of record and all applicable zoning,
municipal, county, state and federal laws, ordinances and regulations governing
and regulating the use of the Premises.
TO HAVE AND TO HOLD THE SAME PREMISES, without any liability or
obligation on the part of Lessor to make any alterations, improvements or
repairs of any kind on or about the Premises, except as expressly provided
herein, for a term of ten (10) years, zero (0) months, commencing on the first
(1st) day of January, 1997, and ending on the thirty-first (31st) day of
December, 2006, unless sooner terminated, in the manner provided hereinafter, to
be occupied and used by Lessee for office purposes and for no other purpose,
subject to the covenants and agreements hereinafter contained.
ARTICLE I. BASE RENT: In consideration of the leasing aforesaid, Lessee agrees
to pay to Lessor, at c/o Normandale Properties Southwest Corporation, 4742 North
24th Street, Suite 100, Phoenix, Arizona 85016, Attention: Accounting Department
or at such other place as Lessor from time to time may designate in writing, an
annual rental equal to the product of the rentable area of the Premises
multiplied by the rental rate for the applicable portion of the term of this
Lease, as hereinafter set forth, which annual rental may sometimes hereinafter
be referred to as the "Base Rent", payable monthly, in advance, in equal monthly
installments, commencing on the first day of the term and continuing on the
first day of each and every month thereafter for the next succeeding months
during the balance of the term:
Applicable Portion Annual Rental Rate Per
of Term Rentable Square Foot
-------------------- --------------------
Months 01 through 60 $ 23.50
Months 61 through 120 26.00
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If the term commences on a date other than the first day of a calendar month or
ends on a date other than the last day of a calendar month, monthly rent for the
first month of the term or the last month of the term, as the case may be, shall
be prorated based upon the ratio that the number of days in the term within such
month bears to the total number of days in such month.
ARTICLE II. ADDITIONAL RENT: In addition to the Base Rent payable by Lessee
under the provisions of Article I hereof, Lessee shall pay to Lessor "Additional
Rent" as hereinafter provided for in this Article II. All sums under this
Article II and all other sums and charges required to be paid by Lessee under
this Lease (except Base Rent), however denoted, shall be deemed to be
"Additional Rent". If any such amounts or charges are not paid at the time
provided in this Lease, they shall nevertheless be collectible as Additional
Rent with the next installment of Base Rent falling due.
For purposes of this Article II, the parties hereto agree upon the
following Definitions:
A. The term "Lease Year" shall mean each of those calendar years
commencing with and including the year during which the term
of this Lease commences, and ending with the calendar year
during which the term of this Lease (including any extensions
or renewals) terminates.
B. The term "Real Estate Taxes" shall mean and include all
personal property taxes of Lessor relating to Lessor's
personal property located in the Office Complex and used or
useful in connection with the operation and main- tenance
thereof, real estate taxes and installments of special
assessments, including interest thereon, relating to the
Property and the Office Complex, and all other governmental
charges, general and special, ordinary and extraordinary,
foreseen as well as unforeseen, of any kind and nature
whatsoever, or other tax, however described, which is levied
or assessed by the United States of America or the state in
which the Office Com- plex is located or any political
subdivision thereof, against Lessor or all or any part of the
Office Complex as a result of Lessor's ownership of the
Property or the Office Complex, and payable during the
respective Lease
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Year. It shall not include (i) any net income tax, estate tax
or inheritance tax or (ii) interest or penal- ties assessed
for failure of Lessor to pay Real Estate Taxes in a timely
manner.
C. [Intentionally omitted.]
D. The term "Operating Expenses" shall mean and include all
expenses incurred with respect to the maintenance and
operation of the Property and the Office Complex as determined
by Lessor's accountant in accordance with generally accepted
accounting principles consistently followed, including, but
not limited to, insurance pre- miums for insurance required or
permitted hereunder to be obtained and maintained by Lessor
(including insurance premiums for rent insurance), maintenance
and repair costs, steam, electricity, water, sewer, gas and
other utility charges, fuel, lighting (including the tubes,
ballasts and starters of fluorescent parabolic lights), window
washing, janitorial services, trash and rubbish removal, wages
payable to employees of Lessor whose duties are connected with
the operation and maintenance of the Property and the Office
Complex (but only for the portion of their time allocable to
work related to the Office Complex), amounts paid to
contractors or subcontractors for work or services performed
in connection with the operation and maintenance of the
Property and the Office Complex, all costs of uniforms,
supplies and materials used in connection with the operation
and maintenance of the Property and the Office Complex, all
payroll taxes, unemployment insurance costs, vacation
allowances and the cost of providing disability insurance or
benefits, pensions, profit sharing benefits, hospitalization,
retirement or other so-called fringe benefits, and any other
expense imposed on Lessor or its contractors or
subcontractors, pursuant to law or pursuant to any collective
bargaining agreement covering such employees, all services,
supplies, repairs, replacements or other expenses for
maintaining and operating the Office Complex, reasonable
attorneys' fees and costs incurred in connection with appeal
or contest of real estate or other taxes or levies (provided
that such fees
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and costs may only be included in Operating Expenses for the
Lease Year for which such taxes or levies are payable), and
such other expenses as may be ordinarily incurred in the
operation and maintenance of an office complex and not
specifically set forth herein, including reasonable management
fees and the costs of a building office at the Office Complex.
The term "Operating Expenses" shall not include any capital
improvement to the Office Complex other than replacements
required for normal maintenance and repair, nor shall it
include repairs, restoration or other work occasioned by fire,
windstorm or other casualty required to be insured by Lessor
hereunder, expenses incurred in leasing or procuring tenants,
leasing commissions, advertising expenses, expenses for
renovating space for new tenants, expenses (including, without
limitation, legal expenses) incident to enforcement by Lessor
of the terms of any lease, interest or principal payments on
any mortgage or other indebtedness of Lessor, compensation
paid to any employee of Lessor above the grade of building
superintendent, depreciation allowance or expense. In
addition, "Operating Expenses" shall not include (a) costs of
decorating, redecorating, special cleaning or other services
provided at the request of a tenant of the building and not
provided on a regular basis to all tenants of the building;
(b) any charge for depreciation of the building or equipment
and any interest or other financing charge except as expressly
provided herein; (c) any charge for Lessor's income taxes,
excess profit taxes or franchise taxes; (d) all costs relating
to activities for the solicitation and execution of leases of
space in the building, including brokerage commissions, legal
fees and refurbishment or improvement or alteration expenses;
(e) the costs of any service for which Lessee or any other
tenant in the building is reimbursing Lessor directly (as
opposed to reimbursement through Lessee's or such other
tenant's payment of its pro rata share of Operating Expenses);
(f) the cost of correcting defects in the construction of the
Building or in the Building equipment, except that conditions
resulting from ordinary wear and tear will not be deemed
defects for the purpose of this category; (g) the cost of any
repair made by Lessor because of the
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total or partial destruction of the Building or the
condemnation of a portion of the Building to the extent Lessor
is reimbursed by insurance or condemnation proceeds; (h) any
insurance premium to the extent that Lessor is entitled to be
directly reimbursed for such premium by Lessee pursuant to
this Lease or by any tenant of the Building (as opposed to
reimbursement through Lessee's or such other tenant's payment
of its pro rata share of Operating Expenses); (i) the cost of
any items for which Lessor is reimbursed by insurance or
otherwise directly compensated (as opposed to reimbursement
through Lessee's or such other tenant's payment of its pro
rata share of Operating Expenses); (j) the cost of any
additions to the Building subsequent to the date of original
construction; (k) the cost of any repairs, alterations,
additions, changes, replacements and other items that under
generally accepted accounting principles are properly
classified as capital expenditures to the extent they upgrade
or improve the Building as opposed to replace existing items
that have worn out; (l) the cost of tools and equipment used
initially in the construction of the Building; (m) the cost of
overtime or other expense to Lessor in curing its defaults or
in performing work expressly provided in this Lease to be
borne at Lessor's expense; (n) amounts paid (including
interest) on account of, or to cure, violations by Lessor of
statutes, laws, or ordinances; (o) any otherwise permissible
fees or costs, to the extent substantially in excess of
prevailing and competitive market rates for such services in
buildings located in the Camelback Corridor comparable in age,
size, and quality to the Building; and (p) any documentary
transfer taxes imposed in connection with the Lease or any
other lease. Notwithstanding the foregoing, in the event
Lessor installs equipment in or makes improvements or
alterations to the Office Complex which are made reasonably
and in good faith for the primary purpose of reducing energy
costs, maintenance costs or other Operating Expenses, Lessor
may include in Operating Expenses reasonable charges for
interest on such investment and charges for depreciation on
the same so as to amortize such investment over the reasonable
life of such
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equipment, improvement or alteration on a straight line basis,
provided that such charges for depreciation must be reasonable
in relation to the expected reduction in Operating Expenses.
Further, notwithstanding the foregoing, in the event Lessor
installs equipment in or makes improvements or alterations to
the Office Complex which are required under any governmental
laws, regulations or ordinances which were not required at the
date of commencement of the term of this Lease, Lessor may
include in Operating Expenses reasonable charges for interest
on such investment and reasonable charges for depreciation on
the same so as to amortize such investment over the reasonable
life of such equipment, improvement or alteration on a
straight line basis. Operating Expenses shall also be deemed
to include expenses incurred by Lessor in connection with city
sidewalks adjacent to the Property and any pedestrian walkway
system (either above or below ground) or other public facility
to which Lessor or the Office Complex is from time to time
subject in connection with operations of the Property and the
Office Complex. The term "Operating Expenses" shall also
include any assessments or fees or other charges imposed upon
the Office Complex, or upon Lessor as a result of Lessor's
ownership of the Office Complex, under any encumbrances,
covenants, conditions, restrictions or other matters now of
record or hereafter recorded against the Office Complex.
E. The term "Excess Real Estate Taxes and Operating Expenses"
shall mean the sum of Real Estate Taxes and Operating Expenses
for any applicable Lease Year in excess of the product of
Seven and No/100ths Dollars ($7.00) and the total rentable
area of the Office Complex (the "Expense Stop").
F. The term "Lessee's Pro Rata Share of Excess Real Estate Taxes
and Operating Expenses" shall mean the product of (i) the
percentage obtained by dividing the rentable area of the
Premises by the rentable area of the Office Com- plex, and
(ii) the Excess Real Estate Taxes and Operating Expenses for
the applicable Lease Year; provided, how- ever, the percentage
used to calculate Lessee's Pro Rata
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Share of Excess Real Estate Taxes and Operating Expenses shall
be amended each Lease Year to the greater of the following:
(i) if the total rentable area leased in the Office Complex
(pursuant to leases under which the term has commenced) is
ninety-five percent (95%) or less than the rentable area of
the Office Complex, the percentage shall be that which the
rentable area of the Premises bears to ninety-five percent
(95%) of the total rentable area of the Office Complex for
such Lease Year; or (ii) if the total rentable area leased in
the Office Complex (pursuant to leases under which the term
has commenced) is greater than ninety-five percent (95%), the
percentage shall be that which the rentable area of the
Premises bears to the actual rentable area of the Office
Complex for such Lease Year. Rentable area shall in no event
include basement storage space or garage space. For example,
if the total rentable area of the Office Complex is 100,000
square feet, the rentable square footage of the Premises is
25,000 square feet, and the Office Com- plex was 98% leased in
a Lease Year, then Lessee's Pro Rata Share of Excess Real
Estate Taxes and Operating Expenses would be calculated by
dividing 25,000 by 98% of the total rentable area of the
Office Complex (100,000 x 98% = 98,000) and in such event,
Lessee's Pro Rata Share of Excess Real Estate Taxes and
Operating Expenses would equal 25.51% for such Lease Year. In
the event that the Office Complex were only 75% leased in a
Lease Year, Lessee's Pro Rata Share of Excess Real Estate
Taxes and Operating Expenses for such Lease Year would be
calcu- lated by dividing 25,000 by 95% of the total rentable
area of the Office Complex (100,000 x 95% = 95,000), and in
such event, Lessee's Pro Rata Share of Excess Real Estate
Taxes and Operating Expenses for such Lease Year would equal
26.32% for such Lease Year.
G. Anything herein to the contrary notwithstanding, it is agreed
that in the event the Office Complex is not fully occupied
during any calendar year or any Lease Year, or any portion
thereof, a reasonable and equitable adjustment shall be made
by Lessor in computing the Operating Expenses for such year so
that the Operating Expenses shall be adjusted to the amount
that would have
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been incurred had the Office Complex been fully occupied
during such year. The provisions of this paragraph II.G shall
in no event apply to fixed components of Operating Expenses
(which shall mean those components of Operating Expenses which
remain fixed regardless of the level of occupancy of the
Building). By way of illustration, if the variable Operating
Expenses for the Building during a particular Lease Year would
be $10,000 if the Building were fully-occupied (such that if
Lessee's Pro Rata Share of Excess Real Estate Taxes and
Operating Expenses were twenty-five percent (25%), Lessee's
share of such Operating Expenses would be $2,500), the
provisions of this Article II.G would allow the variable
Operating Expenses to be adjusted as described below in the
event the Building is only fifty percent (50%) occupied during
the entirety of such Lease Year and the actual variable
Operating Expenses for the Office Complex for such Lease Year
are $5,000: (actual variable Operating Expenses) x (the ratio
of 100% occupancy divided by the actual occupancy percentage,
based on rentable square feet) = the reasonably and equitably
adjusted variable Operating Expenses, or, in this example,
($5,000) x (100% / 50%) = $10,000. In the foregoing example,
the percentage used to calculate Lessee's Pro Rata Share of
Excess Real Estate Taxes and Operating Expenses would remain
at twenty-five percent (25%), and Lessee would pay $2,500 as
its share of such $5,000 of variable Operating Expenses based
on the adjusted variable Operating Expenses of $10,000.
Notwithstanding the foregoing, in the event any portion of the
rentable area of the Building is leased, such rentable area
shall, for purposes of this Article II.G, be deemed to be
"occupied" regardless of whether such area is physically
occupied, and any adjustment in Operating Expenses shall not
account for such space as unoccupied. In no event shall Lessor
assert that it is entitled to collect, or bill tenants of the
Office Complex for, or attempt to collect from tenants of the
Office Complex, an amount, in the aggregate, for Operating
Expenses for a particular Lease Year in excess of the sum of
(i) the actual fixed Operating Expenses incurred by Lessor for
such Lease Year multiplied by a fraction, the numerator of
which is the rentable area
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leased in the Office Complex and the denominator of which is
the rentable area of the Office Complex, which fraction shall
be subject to adjustment as set forth in Article II.F of this
Lease, and (ii) the actual amount of variable Operating
Expenses incurred by Lessor in connection with the Office
Complex for such Lease Year. For a period of two calendar
years after the expiration of any Lease Year, Lessee shall
have the right to audit Lessor's books and records relating to
Operating Expenses for such Lease Year in order to confirm
compliance with the terms of this Article II.G and, in the
event such audit reveals that Lessee paid an amount for
Operating Expenses in excess of the amount required to be paid
by Lessee hereunder, Lessor shall reimburse Lessee for such
excess within thirty (30) days after notice of same from
Lessee and the conclusion of such audit, and in the event such
excess is five percent (5%) or greater than the amount
required to be paid by Lessee for Operating Expenses
hereunder, Lessor shall also reimburse Lessee for the
reasonable cost of such audit, not to exceed $2,000.
As to the Lease Year in which the term of this Lease commences,
Lessor's estimate of the rentable square footage of the Office Complex is
114,824 square feet, and Lessor's estimate of Lessee's Pro Rata Share of Excess
Real Estate Taxes and Operating Expenses is nineteen and fifty-five one
hundredths percent (19.55%). As to each Lease Year during the term of this
Lease, Lessor shall in good faith reasonably estimate for each such Lease Year
(i) subject to Article XXXVII hereof, the total amount of Excess Real Estate
Taxes and Operating Expenses; (ii) Lessee's Pro Rata Share of Excess Real Estate
Taxes and Operating Expenses; and (iii) the computation of the annual and
monthly rental payable during such Lease Year as a result of increases or
decreases in Lessee's Pro Rata Share of Excess Real Estate Taxes and Operating
Expenses. Said estimate shall be in writing and shall be delivered or mailed to
Lessee at the Premises.
Subject to Article XXV hereof, Lessee shall pay, as Additional Rent,
the amount of Lessee's Pro Rata Share of Excess Real Estate Taxes and Operating
Expenses for each Lease Year, so estimated, in equal monthly installments, in
advance, on the first day of each month during each applicable Lease Year. In
the event that said
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estimate is delivered to Lessee after the first day of January of the applicable
Lease Year, said amount, so estimated, shall be payable as Additional Rent, in
equal monthly installments, in advance, on the first day of each month over the
balance of such Lease Year, with the number of installments being equal to the
number of full calendar months remaining in such Lease Year.
Not more than once during any applicable Lease Year, Lessor may
re-estimate the amount of Excess Real Estate Taxes and Excess Operating Expenses
and Lessee's Pro Rata Share thereof, and in such event Lessor shall notify
Lessee, in writing, of such re-estimate in the manner above set forth and fix
monthly installments for the then remaining balance of such Lease Year in an
amount sufficient to pay the re-estimated amount over the balance of such Lease
Year after giving credit for payments made by Lessee on the previous estimate.
Upon completion of each Lease Year, Lessor shall cause its accountants
to determine the actual amount of Excess Real Estate Taxes and Operating
Expenses for such Lease Year and Lessee's Pro Rata Share thereof and deliver a
written certification of the amounts thereof to Lessee after the end of each
Lease Year. Such determination shall be made in accordance with generally
accepted accounting principles. If Lessee has paid less than its Pro Rata Share
of Excess Real Estate Taxes and Operating Expenses for any Lease Year, Lessee
shall pay the balance of its Pro Rata Share of the same within thirty (30) days
after the receipt of such statement. If Lessee has paid more than its Pro Rata
Share of Excess Real Estate Taxes and Operating Expenses for any Lease Year,
Lessor shall, at Lessee's option, either (i) refund such excess within thirty
(30) days after the delivery of such written certification, or (ii) credit such
excess against the most current monthly installment or installments due Lessor
for its estimate of Lessee's Pro Rata Share of Excess Real Estate Taxes and
Operating Expenses for the next following Lease Year; provided, however, Lessor
shall refund such excess in the event that such excess was paid by Lessee during
the last year of the term of this Lease, as may have been extended in accordance
with Articles XXXIII or XXXIV hereof. A pro rata adjustment shall be made for a
fractional Lease Year occurring during the term of this Lease or any renewal or
extension thereof based upon the number of days of the term of this Lease during
said Lease Year as compared to three hundred sixty-five (365) days and
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all additional sums payable by Lessee or credits due Lessee as a result of the
provisions of this Article II shall be adjusted accordingly.
Further, Lessee shall pay, also as Additional Rent, all other sums and
charges required to be paid by Lessee under this Lease, and any tax or excise on
rents, gross receipts tax, transaction privilege tax or other tax, however
described, which is levied or assessed by the United States of America or the
state in which the Office Complex is located or any political subdivision
thereof, or any city or municipality, against Lessor in respect to the Base
Rent, Additional Rent, or other charges reserved under this Lease or as a result
of Lessor's receipt of such rents or other charges accruing under this Lease;
provided, however, Lessee shall have no obligation to pay net income taxes of
Lessor, nor any taxes on rent or other receipts received by Lessor from other
tenants of the Office Complex, or any tax related to the receipt by Lessor of
the proceeds of the sale or other transfer of the Office Complex or any portion
thereof.
ARTICLE III. LATE CHARGE AND OVERDUE AMOUNTS - RENT INDEPENDENT: Lessee shall
pay to Lessor, as liquidated damages, a late charge equal to five percent (5%)
of any amount not paid on the date when the same is due to compensate Lessor for
its costs in connection with such late payment by Lessee; provided, however, no
such late charge shall be payable on the first two late payments by Lessee in
any twelve (12) month period. Lessor shall use commercially reasonable efforts
to notify Lessee in the event that any payment by Lessee is not paid on the date
when due. The assessment or collection of a late charge hereunder shall not
constitute the waiver by Lessor of a default by Lessee under this Lease and
shall not bar the exercise by Lessor of any rights or remedies available under
this Lease. In addition, any installment of Base Rent, Additional Rent or other
charges to be paid by Lessee accruing under the provisions of this Lease, which
shall not be paid when due, shall bear interest at the rate of eighteen percent
(18%) per annum from the date when the same is due until the same shall be paid,
but if such rate exceeds the maximum interest rate permitted by law, such rate
shall be reduced to the highest rate allowed by law under the circumstances.
Lessee's covenants to pay the Base Rent and the Additional Rent are independent
of any other covenant, condition, provision or agreement herein contained.
Nothing herein contained
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shall be deemed to suspend or delay the payment of any amount of money or charge
at the time the same becomes due and payable hereunder, or limit any other
remedy of Lessor. Base Rent and Additional Rent are sometimes collectively
referred to as "rent". Rent shall be payable without deduction, offset, prior
notice or demand, in lawful money of the United States.
ARTICLE IV. POSSESSION OF PREMISES: Lessor shall use commercially reasonable
efforts to deliver the Premises to Lessee on or before the Target Commencement
Date (as hereinafter defined). For purposes hereof, "delivery of possession"
shall be deemed to have occurred when the last of the following have taken
place: (i) Lessor has received a certificate of occupancy or its equivalent
(temporary or final) sufficient to allow Lessee to occupy the Premises; (ii) the
Premises have been substantially completed in substantial accordance with the
space plan approved by Lessor and Lessee and the construction drawings approved
by Lessee subject only to Tenant Improvement work remaining to be completed
which can be accomplished without material adverse interference with Lessee's
business; and (iii) the physical delivery to Lessee of exclusive possession of
the Premises (subject to the rights of Lessor to enter the Premises to complete
punchlist items). For purposes hereof, the "Target Commencement Date" shall be
January 1, 1997, so long as, on or before October 24, 1996, Lessee has delivered
to Lessor (i) a complete set of construction drawings prepared in accordance
with Article XXVI hereof and reasonably acceptable to Lessor, and (ii) the City
of Scottsdale, Arizona has issued a building permit for the construction of the
Tenant Improvements, it being acknowledged that Tenant has, prior to the date of
this Lease, submitted drawings to the City of Scottsdale to obtain such
issuance. Lessee and Lessor shall reasonably cooperate with each other and shall
act in good faith to obtain the building permit on or before October 24, 1996.
In the event that either of items (i) or (ii) have not been delivered to Lessor
on or before October 24, 1996, then the Target Commencement Date shall be
delayed by one day for each day of delay in the delivery of the items referenced
in clauses (i) and (ii) above after October 24, 1996. If Lessor shall be unable
to give possession of the substantially completed Premises on the Target
Commencement Date because the construction of the Office Complex or the
completion of the Premises has not been sufficiently completed to make the
Premises ready for occupancy, or for any other reason, Lessor shall not be
subject to any claims,
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damages or liabilities for the failure to give possession on said date;
provided, however, that if delivery of possession of the Premises is not
achieved on or before the date that is thirty (30) days after the Target
Commencement Date (herein called the "Completion Deadline") then Lessor shall
afford Lessee one day of occupancy, free of Base Rent and Additional Rent, for
each one day of delay between the Completion Deadline and the actual
commencement date, up to a maximum of ninety (90) days of such free occupancy.
In the event that delivery of possession of the Premises has not occurred on or
before the date which is one hundred eighty (180) days after the Completion
Deadline (the "Termination Date"), because the construction of the Office
Complex or the completion of the Premises has not been sufficiently completed to
make the Premises ready for occupancy, or for any other reason, then Lessee may
terminate this Lease by delivery of written notice to Lessor on or before the
earlier to occur of (i) the date five (5) days after the Termination Date or
(ii) the delivery of possession of the Premises to Lessee. For purposes of this
Article IV, substantial completion of the Tenant Improvements shall be deemed to
have occurred when the only Tenant Improvement work remaining to be completed is
such work which can be accomplished without material adverse interference with
Lessee's business. Except as specifically set forth in the preceding provisions
of this Article IV, if Lessor shall be unable to give possession of the Premises
on the Target Commencement Date because the completion of the Premises has not
been sufficiently completed to make the Premises ready for occupancy, or for any
other reason, Lessor shall not be subject to any claims, damages or liabilities
for the failure to give possession of said date. Under said circumstances, the
rent reserved and covenant to pay same shall not commence until possession of
the Premises is given or the Premises are ready for occupancy, whichever is
earlier (subject to Lessee's right to abatement of rent as set forth in this
Article), and failure to give possession on the Target Commencement Date shall
in no way affect the validity of this Lease or the obligations of Lessee
hereunder; provided, however, that if the date of commencement of the initial
term is delayed beyond the Target Commencement Date, the expiration date of the
initial term shall be extended to provide for a full ten-year, zero-month
initial term of this Lease; and provided further, however, if Lessee receives an
abatement of Base Rent and Additional Rent pursuant to this Article, then the
expiration date of the initial term shall be further extended by the same number
of days as within such abate-
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ment period. If Lessee is given and accepts possession of the Premises on a date
earlier than the Target Commencement Date, the rent reserved herein and all
covenants, agreements and obligations herein and the term of this Lease shall
commence on the date that possession of the Premises is given to Lessee.
Notwithstanding anything to the contrary contained in this Article, if any delay
in the delivery of possession of the Premises is caused or contributed to by act
or neglect of Lessee or those acting for or under Lessee, or by labor disputes,
casualties, acts of God or the public enemy, governmental embargo restrictions,
shortages of fuel, labor or building materials, action or nonaction of public
utilities, or of local, state or federal governments affecting the Tenant
Improvements [such as a delay in the issuance of a building permits or other
governmental approvals], or other causes beyond Lessor's reasonable control,
then the Completion Deadline shall be extended day-to-day for each day of such
delay; provided, however, that under no circumstances shall the Termination Date
be extended beyond the date which is two hundred ten (210) days after the
Completion Deadline.
The acceptance of possession by Lessee shall be deemed conclusively to
establish that the Premises and all other improvements of the Office Complex
required to be constructed by Lessor for use thereof by Lessee hereunder have
been completed at such time to Lessee's satisfaction and in conformity with the
provisions of this Lease in all respects unless Lessee notifies Lessor in
writing within sixty (60) days after commencement of the term as to any items
not completed. Lessee waives any claim as to matters not listed in said notice.
Lessee acknowledges that neither Lessor nor any agent of Lessor has made any
representation or warranty with respect to the Premises or the Office Complex or
with respect to the suitability or fitness of either for the conduct of Lessee's
business or for any other purpose.
ARTICLE V. SERVICES: Subject to the provisions of Article II hereof, Lessor
shall provide the following services on all days excepting Saturdays, Sundays,
holidays, and as otherwise stated:
A. Nightly janitorial services Monday through Friday in and about
the Premises; provided, however, Lessor shall fur- nish
janitorial service on Sunday in lieu of furnishing such
service on Friday. The janitorial services fur-
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nished to the Premises shall include normal cleaning and
upkeep services, normal removal of trash and rubbish,
vacuuming and spot cleaning of carpeting, maintenance of
towels, tissue and other restroom supplies and such other work
as is customarily performed in connection with such nightly
janitorial services in an office complex similar in
construction, general location, use and occupancy to the
Office Complex, and in accordance with the schedule of
janitorial services attached hereto as Exhibit G. Lessor shall
also provide periodic interior and exterior window washing and
cleaning and waxing of uncarpeted floors in accordance with
Lessor's reasonable schedule.
B. Electrical energy will be provided for lighting and oper-
ation of office machines, air conditioning, and heating as
required for normal office usage during the normal working
hours set forth in subparagraph C of this Article. Office
machines will include electric type- writers, desktop personal
computers, fax machines, copy machines and other typical
office equipment. This does not include special lighting in
excess of building standard (2.2 watts per square foot
installed), or any other item of electrical equipment which
singularly consumes more than 0.5 kilowatts per hour at rated
capa- city or requires a voltage other than one hundred twenty
(120) volts single phase. If electrical consumption exceeds
the requirement of normal office use as specified above (such
as in a computer room), Lessor reserves the right to include
and Lessee shall pay upon receipt of invoice, a charge (herein
called "Excess Consumption Charge") based on the average cost
per unit of electri- city for the Office Complex applied to
the excess use determined by an engineer selected by Lessor
and/or by submeter. Notwithstanding the foregoing, Lessor has
reviewed the specifications of (i) Lessee's local and wide
area network servers and (ii) the HVAC unit(s) that will serve
Lessee's computer room, and Lessor agrees that it will not
charge Lessee any Excess Consumption Charges for such
equipment. At the option of either Lessor or Lessee, a
submeter may be provided and installed at Lessee's expense, if
allowable under law and local utility regulations. Lessee
shall pay the cost of all
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equipment and of the installation of all facilities provided
and installed by Lessor at the request of Lessee to provide
such electrical capacity in excess of the above normal office
standards. Lessee shall not make any installation requiring
excess electrical energy without first receiving Lessor's
written consent thereto, which shall not be unreasonably
withheld; and provided further that Lessee shall pay all costs
of installation of facili- ties necessary to furnish such
excess capacity and for such increased electrical usage. All
electric lighting bulbs for specialized lighting within the
Premises in- stalled at Lessee's request shall be replaced by
Lessor at the expense of Lessee and shall be paid by Lessee
upon receipt of invoice from Lessor as rent. The electrical
service required of Lessor by this subparagraph B, and
electricity for other uses consented to by Lessor, shall be
available at all times subject to the requirement that Lessee
pay for usage in excess of the electrical service to be
provided pursuant to the terms of this subparagraph B.
C. Heat and air conditioning from 7 o'clock A.M. to 6 o'clock
P.M. on non-holiday weekdays, and on Saturdays which are not
holidays, from 7 o'clock A.M. to 1 o'clock P.M. Air
conditioning to the Premises is to be provided based on
standard lighting and normal incidental office use only, and
Lessor shall use reasonable efforts to cause sufficient heat
and air conditioning to be provided so as to maintain the
temperature of the Premises at not more than 75 degrees
fahrenheit in the summer season and not less than 68 degrees
during the winter season based on ASHRAE Climatic Conditions,
99% and 1% respectively, under the following conditions:
Lighting at 2.5 watts per square foot, equipment at 1.5 watts
per square foot, occupancy at one person per square foot, and
ventilation at 15 CFM per occupant. During other hours, Lessor
shall provide such amounts of heating and air conditioning
upon reasonable advance notice from Lessee to Lessor given
during normal business hours. Notice given during other than
normal business hours shall not be less than twenty-four (24)
hours in advance. Lessee, upon presentation of a bill for such
after-hours heating and air conditioning,
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shall pay Lessor for such service on an hourly basis at an
amount estimated by Lessor from time to time representing the
actual hourly cost of electricity for such services plus the
actual cost of additional maintenance and administration
incurred by Lessor as a result of such extra usage, it being
acknowledged by the parties hereto that Lessor shall pass
through to Lessee only the foregoing actual costs incurred by
Lessor as a result of such additional usage. If such extended
service is not a continuation of that service furnished during
regular business hours as described above, Lessee shall pay
for a minimum of one (1) hour of such service.
D. Hot and cold water from outlets approved by Lessor as a part
of Lessee's space plan, from the regular building outlets for
lavatory, restrooms and for drinking purposes.
E. Passenger elevator service in common with other tenants to be
provided by automatic elevators. Lessor shall have the right
to restrict the use of elevators for freight purposes to the
freight elevator and to hours to be determined by Lessor.
Lessor shall have the right to limit the number of elevators
to be in operation on Saturdays, Sundays and holidays. Lessor
shall use rea- sonable efforts to provide Lessee with access
to the Premises twenty-four (24) hours, seven (7) days per
week. As part of the initial construction of the Building,
Lessor shall, prior to the Commencement Date, install at the
main entry doors to the Building an electronic access card
security system. Concurrently with delivery of possession of
the Premises to Lessee, Lessor shall issue to Lessee, without
charge to Lessee, one (1) access card for each of Lessee's
employees working at the Premises; thereafter, Lessor shall
issue additional or replacement access cards to Lessee as
requested from time to time by Lessee, and Lessee shall pay to
Lessor a reasonable charge for each such additional or
replacement access card. Lessor may, from time to time during
the term of this Lease, elect to utilize an alternate security
system as is deemed appropriate in Lessor's reasonable
judgment. Lessor shall cause all public entrances to the
Building
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to be locked, and to require the use of such security system
(or an alternate security system) for entry to the Building,
on Saturday and Sunday and during times other than normal
business hours on weekdays.
F. Maintenance in good order, condition and repair of the parking
facilities and all driveways leading thereto and keeping the
same free from any unreasonable accumulation of snow. Lessor
shall keep and maintain the landscaped area and parking
facilities in a neat and orderly condi- tion. Lessor reserves
the right to designate areas of the appurtenant parking
facilities where Lessee, its agents, employees and invitees
shall park and may exclude Lessee and its agents, employees
and invitees from park- ing in other areas as designated by
Lessor; provided, however, Lessor shall not be liable to
Lessee for the failure of any tenant or its invitees,
employees, agents or customers to abide by Lessor's
designations or restrictions. Lessee is aware that Lessor may
be required to designate certain parking stalls due to
governmental request or order to accommodate car or van
poolers.
G. Lessee shall be solely responsible for the direct payment of
all utilities which are separately metered or sepa- rately
charged (electric, natural gas (if any), tele- phone, cable
television (if any) and any other special utility requirements
of Lessee), if any, to the Premises or to Lessee and shall
make such payments to the respec- tive utility companies prior
to delinquency. Such amounts shall not be included as
Operating Expenses.
No interruption in, or temporary stoppage of, any of the aforesaid
services caused by repairs, renewals, improvements, alterations, strikes,
lockouts, labor controversy, accidents, inability to obtain fuel or supplies, or
other causes shall be deemed an eviction or disturbance of Lessee's use and
possession, or render Lessor liable for damages, by abatement of rent or
otherwise or relieve Lessee from any obligation herein set forth; provided,
however, that if there is a localized interruption in, or localized temporary
stoppage of, any of the aforesaid services in the Premises (as opposed to an
interruption in the general vicinity of the Office Complex not under Lessor's
control), and if such
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interruption or temporary stoppage is within the sole control of Lessor and,
after notice to Lessor, Lessor does not diligently attempt and continue diligent
attempts to cure such interruption or temporary stoppage, then Lessee shall be
entitled to a reasonable abatement of Base Rent and Additional Rent if two (2)
consecutive days of such interruption or temporary stoppage occurs after
Lessor's efforts to cure same have failed. In no event shall Lessor be required
to provide any heat, air conditioning, electricity or other service in excess of
that permitted by voluntary or involuntary guidelines or laws, ordinances or
regulations of governmental authority. Lessor reserves the right, from time to
time, to make reasonable and non-discriminatory modifications to the above
standards for utilities and services.
Lessee shall not, without the prior written consent of Lessor, use any
apparatus or device in or about the Premises which shall cause any substantial
noise or vibration or which will increase the amount of electricity or water, if
any, usually furnished or supplied for use of the Premises as general office
space. Lessee shall not connect with electric current or water pipes, except
through electrical or water outlets constructed by Lessor in the Premises in
connection with the construction of the Tenant Improvements, any apparatus or
device for the purposes of using electric current or water. Notwithstanding
anything to the contrary contained herein, and subject to the provisions of
Article VIII hereof, Lessee may install water softeners and water purifiers
within the Premises and connect the same to the water pipes serving the
Premises.
ARTICLE VI. INSURANCE: Lessor shall keep the Office Complex insured for the
benefit of Lessor in an amount equivalent to the full replacement value thereof
(excluding foundation, grading and excavation costs and a commercially
reasonable deductible) against:
(a) loss or damage by fire; and
(b) such other risk or risks of a similar or dissimilar nature as
are now or may be customarily covered with respect to
buildings and improvements similar in construction, general
location, use, occupancy and design to the Office Complex,
including, but without limiting the generality of the
foregoing, windstorms, hail, explosion,
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vandalism, malicious mischief, civil commotion and such other
coverage as may reasonably be deemed necessary by Lessor,
provided such additional coverage is obtainable and provided
such additional coverage is such as is customarily carried
with respect to buildings and improvements similar in
construction, general location, use, occupancy and design to
the Office Complex.
These insurance provisions shall in no way limit or modify any of the
obligations of Lessee under any provision of this Lease. Lessor agrees that such
policy or policies of insurance shall permit releases of liability as provided
herein and/or waiver of subrogation clause as to Lessee, and Lessor waives,
releases and discharges Lessee from all claims or demands whatsoever which
Lessor may have or acquire arising out of damage to or destruction of the Office
Complex or loss of use thereof occasioned by fire or other casualty or property
perils, whether such claim or demand may arise because of the negligence or
fault of Lessee or its agents, employees, customers or business invitees, or
otherwise, and Lessor agrees to look to the insurance coverage only in the event
of such loss. Notwithstanding the foregoing, Lessee shall be obligated to pay
the rental called for hereunder in the event of damage to or destruction of the
Premises or the Office Complex if such damage or destruction is occasioned by
the negligence or fault of Lessee or its agents or employees, except to the
extent of the net proceeds actually received by Lessor on any rental abatement
insurance policy, if Lessor then has a rental abatement insurance policy.
Insurance premiums paid thereon shall be a portion of the "Operating Expenses"
described in Article II hereof. Notwithstanding the above, in the event a
release of Lessee or waiver of subro- gation as to Lessee (without invalidation
of coverage) becomes generally unavailable in insurance policies as to
commercial office projects similar to the Office Complex, the release and any
waiver of subrogation above provided for shall cease upon written notice by
Lessor to Lessee of such event. Thereafter, Lessee may, upon written notice to
Lessor, require Lessor to secure a waiver of subrogation as to Lessee if (a) a
right to waive subrogation as to Lessee thereafter becomes available without
increased premium, or (b) a right to waive subrogation as to Lessee becomes
available and Lessee pays any increased premium required in connection
therewith.
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Lessee shall keep all of its machinery, equipment, furniture, fixtures,
personal property (including also property under the care, custody or control of
Lessee) and business interests which may be located in, upon or about the
Premises insured for the benefit of Lessee in an amount equivalent to the full
replacement value or insurable value thereof (less a commercially reasonable
deductible) against:
(a) loss or damage by fire; and
(b) such other risk or risks of a similar or dissimilar nature as
are now, or may in the future be, customarily covered with
respect to a tenant's machinery, equipment, furniture,
fixtures, personal property and business located in a building
similar in construction, general location, use, occupancy and
design to the Office Com- plex, including, but without
limiting the generality of the foregoing, windstorms, hail,
explosions, vandalism, theft, malicious mischief, civil
commotion and such other coverage as Lessee may deem
appropriate or necessary.
Lessee agrees that such policy or policies of insurance shall permit
releases of liability as provided herein and/or waiver of subrogation clause as
to Lessor, and Lessee waives, releases and discharges Lessor and its agents and
employees from all claims or demands whatsoever which Lessee may have or acquire
arising out of damage to or destruction of the machinery, equipment, furniture,
fixtures, personal property and loss of use thereof occasioned by fire or other
casualty or property perils, whether such claim or demand may arise because of
the negligence or fault of Lessor or its agents, employees or otherwise, and
Lessee agrees to look to the insurance coverage only in the event of such loss.
Notwithstanding anything to the contrary in this Article VI, during
such time as, and only during such time as, (i) UDC Homes, Inc., a Delaware
corporation ("UDC") is the Lessee under this Lease and complies with the
provisions of this paragraph, and (ii) UDC has a tangible net worth equal to or
greater than $50,000,000.00, UDC may elect to act as a self-insured with respect
to the personal property insurance coverage on Lessee's machinery, equipment,
furniture, fixtures, personal property and business interests required to be
maintained by Lessee pursuant to this Article VI. In such
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event, UDC shall deliver to Lessor notice in writing of the required coverages
with respect to which it is not obtaining insurance from a third-party insurer
and is instead self-insuring, which written notice shall state that UDC (i)
fully compensates, reimburses and secures, (ii) protects and defends, and (iii)
holds harmless Lessor from and against all loss or damage in respect to the
Premises to the same extent that insurance required under this Article VI would
have provided. UDC, at Lessor's request, shall provide to Lessor's mortgagee or
assignee a certificate satisfactory to such mortgagee or assignee setting forth
the self-insured coverages, if any. For purposes hereof, "tangible net worth"
shall mean the stockholder's equity (including any preferred stock that is
classified as equity under generally accepted accounting principles) of Lessee
and its subsidiaries on a consolidated basis, as determined as of the end of
each fiscal quarter in accordance with generally accepted accounting principles,
less intangible assets reflected on the consolidated balance sheets of Lessee
and its subsidiaries as of the end of such fiscal quarter; provided, however,
that no reduction shall be made thereto in respect of the collective outstanding
principal amount of the Series C subordinated notes and stockholder investments
up to $81,000,000.
Lessor shall, as a portion of the Operating Expenses defined in Article
II, maintain, for its benefit and the benefit of its managing agent, general
public liability insurance against claims for personal injury, death or property
damage occurring upon, in or about the Office Complex, such insurance to afford
protection to Lessor and its managing agent. Such policies shall be maintained
with commercially reasonable coverage limits and deductibles, and shall include
the contractual liability coverage insuring Lessee's indemnification obligations
contained herein.
Lessee shall, at Lessee's sole cost and expense but for the mutual
benefit of Lessor, its managing agent and Lessee, maintain general public
liability insurance against claims for personal injury, death or property damage
occurring upon, in or about the Premises, such insurance to afford protection to
Lessor, its managing agent and Lessee to the limit of not less than One Million
and No/100 Dollars ($1,000,000.00) in respect to the injury or death to a single
person, and to the limit of not less than Three Million and No/100 Dollars
($3,000,000.00) in respect to any one accident, and to the limit of not less
than Five Hundred Thousand
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and No/100 Dollars ($500,000.00) in respect to any property damage. Such
policies of insurance shall be written in companies reasonably satisfactory to
Lessor, naming Lessor and its managing agent as additional insureds thereunder,
and such policies, or a memorandum or certificate of such insurance, shall be
delivered to Lessor endorsed "Premium Paid" by the company or agency issuing the
same or accompanied by other evidence satisfactory to Lessor that the premium
thereon has been paid. At such time as insurance limits required of tenants in
office buildings in the area in which the Office Complex is located are
generally increased to greater amounts, Lessor shall have the right to require
such greater limits as may then be customary. Lessee agrees to include in such
policy the contractual liability coverage insuring Lessee's indemnification
obligations provided for herein. Any such coverage shall be deemed primary to
any liability coverage secured by Lessor. Such insurance shall also afford
coverage for all claims based upon damage to property or injury to persons,
which claims occurred or arose (or the onset of which occurred or arose) in
whole or in part during the policy period.
Lessee agrees to indemnify, protect, defend and hold harmless Lessor
and Lessor's partners, shareholders, employees, lender and managing agent
harmless from and against any and all claims, losses, costs, liabilities,
actions and damages, including without limitation attorneys' fees and costs, by
or on behalf of any person or persons, firm or firms, corporation or
corporations, arising from any breach or default on the part of Lessee in the
performance of any covenant or agreement on the part of Lessee to be performed,
pursuant to the terms of this Lease, or arising from any act or negligence on
the part of Lessee or its agents, contractors, servants, employees or licensees,
or arising from any accident, injury or damage to the extent caused by Lessee or
its agents or employees to any person, firm or corporation occurring during the
term of this Lease or any renewal thereof, in or about the Premises and the
Office Complex, and from and against all costs, reasonable counsel fees,
expenses and liabilities incurred in or about any such claim or action or
proceeding brought thereon; and in case any action or proceeding be brought
against Lessor or its managing agent by reason of any such claim, Lessee, upon
notice from Lessor, covenants to resist or defend such action or proceeding by
counsel reasonably satisfactory to Lessor.
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Lessee agrees, to the extent not expressly prohibited by law, that
Lessor and Lessor's agents, employees and servants shall not be liable, and
Lessee waives all claims for damage to property and business sustained during
the term of this Lease by Lessee occurring in or about the Office Complex,
resulting directly or indirectly from any existing or future condition, defect,
matter or thing in the Premises, the Office Complex or any part thereof, or from
equipment or appurtenances becoming out of repair, or from accident, or from any
occurrence or act or omission of Lessor, Lessor's agents, employees or servants
(except for any occurrence or act or omission involving the negligence or
willful misconduct of Lessor or its agents, employees or servants), any tenant
or occupant of the Office Complex or any other person. This paragraph shall
apply especially, but not exclusively, to damage caused as aforesaid or by the
flooding of basements or other subsurface areas, or by refrigerators, sprinkling
devices, air conditioning apparatus, water, snow, frost, steam, excessive heat
or cold, falling plaster, broken glass, sewage, gas, odors or noise, or the
bursting or leaking of pipes or plumbing fixtures, and shall apply equally,
whether any such damage results from the act or omission of other tenants or
occupants in the Office Complex or any other persons, and whether such damage be
caused by or result from any of the aforesaid, or shall be caused by or result
from other circumstances of a similar or dissimilar nature.
Anything herein to the contrary notwithstanding, in the event any
damage to the Office Complex results from any act or omission of Lessee or its
agents, employees or invitees, and all or any portion of Lessor's loss is within
the "deductible" portion of Lessor's insurance coverage, Lessee shall pay to
Lessor the amount of such deductible loss (not to exceed $1,000 per event).
Notwithstanding anything to the contrary contained in this Lease, and
notwithstanding the fact that Lessor is installing a security system in the
Building as set forth in Article X.E, all property in the Office Complex or on
the Premises belonging to Lessee or its agents, employees or invitees or
otherwise located at the Premises, shall be at the risk of Lessee only, and
Lessor shall not be liable for damage thereto or theft, misappropriation or loss
thereof, and Lessee agrees to defend and hold Lessor and Lessor's agents,
employees and servants harmless and indemnify them against claims and liability
for injuries to such property. Lessee shall not do or permit anything to be done
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in or about the Premises nor bring or keep anything therein which will in any
way increase the existing rate of or affect in any other way any fire or other
insurance upon the Office Complex or any of its contents, or cause a
cancellation of any insurance policy covering the Office Complex or any of its
contents. In the event that Lessee does not cease such activity or remove such
items within ten (10) days after written notice from Lessor regarding such
activity, Lessee shall promptly, upon demand, reimburse Lessor for the full
amount of any additional premium charged for such policy by reason of Lessee's
failure to comply with the provisions of this paragraph, it being understood
that such demand for reimbursement shall not be Lessor's exclusive remedy.
In the event Lessee fails to provide Lessor with evidence of insurance
required under this Article VI and such failure continues for ten (10) days
after delivery of notice to Lessee of such failure, Lessor may, but shall not be
obligated to, without further demand upon Lessee, and without waiving or
releasing Lessee from any obligation contained in this Lease, obtain such
insurance and Lessee agrees to repay, upon demand, all such sums incurred by
Lessor in effecting such insurance. All such sums shall become a part of the
Additional Rent payable hereunder, but no such payment by Lessor shall relieve
Lessee from any default under this Lease.
ARTICLE VII. CERTAIN RIGHTS RESERVED BY LESSOR: Lessor reserves the following
rights exercisable without notice and without liability to Lessee and without
effecting an eviction, constructive or actual, or disturbance of Lessee's use or
possession, or giving rise to any claim for setoff or abatement of rent,
provided that in exercising any such rights, Lessor shall use reasonable efforts
to interfere as little as reasonably possible with Lessee's business operations
on the Premises under the circumstances, but nothing herein shall require Lessor
to perform such work at other than normal business hours:
A. To control, install, affix and maintain any and all signs on
the Property, or on the exterior of the Office Complex and in
the corridors, entrances and other common areas thereof,
except those signs within the Premises not visible from
outside the Premises and those signs permitted by this Lease
to be installed by Lessee or otherwise permitted by Lessor.
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B. To reasonably designate, limit, restrict and control any
service in or to the Office Complex (except any service to be
performed or provided hereunder by Lessor), includ- ing but
not limited to the designation of sources from which Lessee
may obtain sign painting and lettering. Any restriction,
designation, limitation or control imposed by reason of this
subparagraph shall be imposed uniformly on Lessee and other
tenants occupying space in the Office Complex.
C. To retain at all times and to use in appropriate instances
keys to all doors within and into the Premises. No locks shall
be changed without the prior written consent of Lessor. This
provision shall not apply to Lessee's safes or other areas
maintained by Lessee for the safety and security of monies,
securities, negotiable instruments or similar items.
D. To make repairs, improvements, alterations, additions or
installations, whether structural or otherwise, in and about
the Office Complex, or any part thereof, and for such purposes
to enter upon the Premises, and during the continuation of any
of said work, to temporarily close doors, entryways, public
spaces and corridors in the Office Complex and to interrupt or
temporarily suspend services and facilities; provided,
however, in exercising the rights reserved to Lessor pursuant
to this paragraph VII.D, Lessor shall use commercially
reasonable efforts to minimize any material adverse
interference with or disturbance of Lessee's ability to
utilize the Premises for the use permitted hereunder.
E. To restrict or prohibit vending or dispensing machines of any
kind in or about the Premises; provided, however, Lessor
consents to the installation of vending machines in the pantry
or kitchen areas of the Premises for the dispensing of soda
and other similar drinks and snack foods to Lessee's
employees, clients and visitors.
F. To reasonably approve the weight, size and location of safes
and other heavy equipment and articles in and about the
Premises and the Office Complex and to require all
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such items to be moved into and out of the Office Complex and
the Premises only at such times and in such manner as Lessor
shall direct in writing.
Lessor and its agents may enter the Premises at any time in case of
emergency and shall have the right to use any and all means which Lessor may
reasonably deem proper to open such doors during an emergency in order to obtain
entry to the Premises. Any entry to the Premises obtained by Lessor in the event
of an emergency shall not, under any circumstances, be construed or deemed to be
a forcible or unlawful entry into, or detainer of, the Premises, or to be an
eviction of Lessee from the Premises or any portion thereof.
Lessee shall permit Lessor and its agents, upon notice, to enter and
pass through the Premises or any part thereof at reasonable times during normal
business hours to: (a) post notices of nonresponsibility; and (b) exhibit the
Premises to holders of encumbrances on the interest of Lessor under the Lease
and to prospective purchasers, mortgagees or lessees of the Office Complex;
provided, however, such exhibition of the Premises to prospective lessees shall
be limited to (i) normal business hours during the final six (6) months of the
term hereof, and (ii) such times to which Lessee reasonably agrees. If, during
the last month of the Lease term, Lessee shall have removed substantially all of
Lessee's property and personnel from the Premises, Lessor may enter the Premises
and repair, alter, and redecorate the same, without abatement of rent and
without liability to Lessee, and such acts shall have no effect on this Lease.
All covenants and agreements to be performed by Lessee under any of the
terms of this Lease shall be performed by Lessee at Lessee's sole cost and
expense and without any abatement of rent. If Lessee shall fail to pay any sum
of money (other than rent due Lessor) required to be paid by it hereunder or
shall fail to perform any other act on its part to be performed hereunder,
including, but not limited to, the failure to commence and complete repairs
promptly and adequately, and the failure to remove any liens or otherwise to
perform any act or fulfill any obligation required of Lessee under this Lease,
Lessor may, but shall not be obligated to do so, and without waiving or
releasing Lessee from any obligations of Lessee, make any such payment or
perform any such act on
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Lessee's part to be made or performed as in this Lease provided. All reasonable
sums so paid by Lessor and all necessary and reasonable incidental costs,
together with an administrative charge in the amount of fifteen percent (15%) of
any costs incurred by Lessor, and interest thereon at the rate set forth in
Article III accruing from the date paid or incurred by Lessor until reimbursed
to Lessor by Lessee, shall be payable to Lessor by Lessee as rent on demand and
Lessee covenants to pay all such sums. Lessor shall have (in addition to any
other right or remedy of Lessor) the same rights and remedies in the event of
Lessee's nonpayment of such sums, as in the case of default by Lessee in the
payment of rent to Lessor.
ARTICLE VIII. ALTERATIONS AND IMPROVEMENTS: Lessee shall not make any
improvements, alterations, additions or installations in or to the Premises
(hereinafter referred to as "Work") without Lessor's prior written consent,
which consent shall not be unreasonably withheld or delayed except in the event
that any such Work involves or affects the structural, mechanical, electrical,
plumbing, or fire/life safety systems in the Premises or the Office Complex or
such Work equals or exceeds $25,000.00, in which event such consent may be
withheld in Lessor's sole discretion. Along with any request for Lessor's
consent and before commencement of the Work or delivery of any materials to be
used in the Work to the Premises or into the Office Complex, Lessee shall
furnish Lessor with plans and specifications, names and addresses of
contractors, copies of contracts, necessary permits and licenses, an
indemnification in such form and amount as may be reasonably satisfactory to
Lessor, and, in the event such Work equals or exceeds $25,000.00 in cost, a
performance bond executed by a commercial surety reasonably satisfactory to
Lessor in an amount equal to the cost of the Work and for the payment of all
liens for labor and material arising therefrom. Lessee agrees to defend and hold
Lessor forever harmless from any and all claims and liabilities of any kind and
description which may arise out of or be connected in any way with said
improvements, alterations, additions or installations. All Work shall be done
only by contractors or mechanics reasonably approved by Lessor and at such time
and in such manner as Lessor may from time to time reasonably designate. All
Work done by Lessee or its agents, employees or contractors shall be done in
such a manner as to avoid labor disputes. Lessee shall pay the cost of all such
improvements, alterations, additions or installations (including a reason-
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able charge for Lessor's services and for Lessor's inspection and engineering
time) and the cost of painting, restoring or repairing the Premises and the
Office Complex occasioned by such improvements, alterations, additions or
installations. Upon completion of the Work, Lessee shall furnish Lessor with
contractor's affidavits, full and final waivers of liens and receipted bills
covering all labor and materials expended and used. The Work shall comply with
all insurance requirements and all laws, ordinances, rules and regulations of
all governmental authorities and shall be constructed in a good and workmanlike
manner. Lessee shall permit Lessor to inspect construction operations in
connection with the Work. Lessee shall not be allowed to make any improvements,
alterations, additions or installations if such action results or would result
in a labor dispute or otherwise would materially interfere with Lessor's
operation of the Office Complex. If Lessor desires for Lessee to remove any
improvements, alterations, additions or installations upon the termination of
this Lease, then Lessor shall, at the time it responds to Lessee's request for
consent to the applicable Work, inform Lessee which such improvements,
alterations, additions or installations Lessor shall require Lessee to remove
prior to the termination of the Lease; provided, however, the only improvements,
alterations, additions or installations which Lessee shall remove shall be those
specified in Lessor's notice; and provided further, however, that with respect
to any improvements, alterations, additions or installations not requiring
Lessor's consent, Lessor may require Lessee to remove same upon the termination
of this Lease. Lessor, by written notice to Lessee given at or prior to
termination of this Lease, may require Lessee, at Lessee's sole cost and
expense, to remove any other improvements, alterations, additions or
installations installed by Lessee in the Premises and to repair or restore any
damage caused by the installation and removal of such improvements, alterations,
additions or installations; provided, however, the only improvements,
alterations, additions or installations which Lessee shall remove shall be those
specified in Lessor's notice given pursuant to this sentence or the previous
sentence. Notwithstanding the foregoing sentence, in the event Lessee desires
that Lessor inform Lessee, prior to Lessee's installation of any improvements,
alterations, additions or installations, whether Lessor will require Lessee to
remove any of such improvements, alterations, additions or installations upon
the termination of the term of this Lease, Lessee shall, at the time it requests
Lessor's consent to such improve-
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ments, alterations, additions or installations, specifically request in writing
that Lessor inform Lessee which such improvements, alterations, additions or
installations Lessor shall require Lessee to remove prior to the termination of
the Lease. Lessor shall then inform Lessee, at the same time that Lessor
responds to Lessee's request for consent, whether Lessor shall require Lessee to
remove any such improvements, alterations, additions or installations prior to
the termination of the Lease. Lessee shall keep the Premises and the Office
Complex free from any liens arising out of any work performed, material
furnished or obligations incurred by Lessee, and shall indemnify, protect,
defend and hold harmless Lessor from any liens and encumbrances arising out of
any work performed or material furnished by or at the direction of Lessee. In
the event that Lessee shall not, within twenty (20) days following Lessee's
receipt of written notice of imposition of any such lien, cause such lien to be
released of record by payment or posting of a proper bond, Lessor shall have, in
addition to all other remedies provided herein and 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 and/or defense against the claim giving rise to
such lien. All such reasonable sums paid by Lessor and all reasonable expenses
incurred by it in connection therewith, including reasonable attorneys' fees and
costs, shall be payable as Additional Rent to Lessor by Lessee on demand with
interest at the rate provided in Article III accruing from the date paid or
incurred by Lessor until reimbursed to Lessor by Lessee. Notwithstanding
anything to the contrary contained herein, provided that (a) such work shall be
subject to all the other terms of this Article other than (i) the requirements
set forth in the second sentence of this Article and (ii) furnishing Lessor with
contrac- tors' affidavits and lien waivers if requested by Lessor, and (b)
Lessee notifies Lessor at least ten (10) days prior to the commencement of such
work and delivers to Lessor a copy of the plans for such work, if Lessee has
arranged to have plans prepared therefor, Lessee may, without the further
consent of Lessor, perform work not affecting the structural, mechanical,
electrical, plumbing, or fire/life safety systems of the Premises or the Office
Complex which (i) does not exceed, in the aggregate, a cost in excess of
$25,000.00 during any twelve-month period, or (ii) is cosmetic in nature
(including, without limitation, painting and carpeting or the installation of
other floor coverings). For purposes of this Article VIII, the installation,
reconfiguration or
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relocation of office cubicles or the addition or relocation of telephone lines
within the Premises shall not be deemed to affect the structural, mechanical,
electrical, plumbing or fire/life safety systems of the Premises or the Office
Complex.
ARTICLE IX. REPAIRS: Subject to Article II hereof and to Lessee's specific
obligations, except to the extent of any damage caused by the fault or
negligence of Lessee, Lessor shall use its reasonable efforts to maintain and
keep in good order, condition and repair all common areas of the Office Complex
and the structural portions of the Office Complex, including the outer walls,
roof, floors, foundations, load bearing members, trusses, and joists, the HVAC
facilities serving the Premises, and the portions of the plumbing and electrical
lines located outside of the Premises which serve the Premises. Subject to
Article VI hereof, Lessee shall, during the term of this Lease, at Lessee's
expense, keep the Premises in as good order, condition and repair as they were
at the time Lessee took possession of the same, reasonable wear and tear and
damage from fire and other casualties excepted. Lessee shall keep the Premises
in a neat and sanitary condition, and Lessee shall not commit any nuisance or
waste on the Premises or in, on or about the Office Complex, throw foreign
substances in the plumbing facilities, or waste any of the utilities furnished
by the Lessor. All uninsured damage or injury to the Premises or to the Office
Complex caused by Lessee moving furniture, fixtures, equipment or other devices
in or out of the Premises or the Office Complex or by installation or removal of
furniture, fixtures, equipment, devices or other property of Lessee or its
agents, contractors, servants or employees, due to carelessness, omission,
neglect, improper conduct or other cause of Lessee or its servants, employees,
agents, visitors or licensees, shall be repaired, restored and replaced promptly
by Lessee at its sole cost and expense to the reasonable satisfaction of Lessor.
All repairs, restorations and replacements shall be in quality and class equal
to the original work and shall comply with all requirements of this Lease.
Lessor and its employees and agents shall have the right to enter the
Premises at any reasonable time or times for the purpose of inspection,
cleaning, repairs, altering or improving the same but nothing contained herein
shall be construed as imposing any obligation on Lessor to make any repairs,
improvements, altera-
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tions, additions or installations which are the obligation of Lessee.
At least thirty (30) days prior to the expiration of the term, Lessor
and Lessee shall arrange a joint inspection of the Premises.
ARTICLE X. ASSIGNMENT AND SUBLETTING: Lessee shall not, without the prior
written consent of Lessor, (i) transfer, pledge, mortgage or assign this Lease
or any interest hereunder; (ii) permit any assignment of this Lease by voluntary
act, operation of law or otherwise; (iii) sublet the Premises or any part
thereof; or (iv) permit the use of the Premises by any parties other than Lessee
and its agents and employees (items (i) through (iii) are sometimes hereinafter
collectively referred to as a "Transfer"). Lessee shall seek such written
consent of Lessor by a written request therefor, setting forth such information
as Lessor may reasonably deem necessary. Lessee shall, by notice in writing,
advise Lessor of Lessee's intention, from, on and after a stated date (which
shall not be less than ten [10] days after the date of Lessee's notice), to
assign this Lease or to sublet any part or all of the Premises for the balance
or any part of the term. Lessee's notice shall include all of the terms of the
proposed assignment or sublease and shall state the consideration therefor. In
such event, Lessor shall have the right, to be exercised by giving written
notice to Lessee within thirty (30) days after receipt of Lessee's notice, to
recapture the space described in Lessee's notice and such recapture notice
shall, if given, cancel and terminate this Lease with respect to the space
therein described as of the date stated in Lessee's notice. In the event Lessor
elects to recapture the space described in Lessee's notice, Lessee, in that
event, shall have the option, to be exercised within five (5) days of Lessor's
election to recapture, to rescind said notice, in which event Lessor's right of
recapture of that certain space shall be null and void and Lessee shall not be
entitled to assign or sublet the Premises as contemplated by its original
notice. Lessee's notice shall state the name and address of the proposed
assignee or subtenant and a true and complete copy of the proposed assignment or
sublease shall be delivered to Lessor with Lessee's notice. If Lessee's notice
shall cover all of the Premises, and Lessor shall have exercised its foregoing
recapture right, the term of this Lease shall expire and end on the date stated
in Lessee's notice as fully and completely as if that date had been herein
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definitely fixed for the expiration of the term. If, however, this Lease be
canceled with respect to less than the entire Premises, the Base Rent and
Additional Rent shall be equitably adjusted by Lessor with due consideration of
the size, location, type and quality of the portion of the Premises so remaining
after the "recapture" and such rent shall be reduced accordingly from and after
the termination date for said portion, and this Lease as so amended shall
continue thereafter in full force and effect. The rent adjustments provided for
herein shall be evidenced by an amendment to this Lease executed by Lessor and
Lessee. If this Lease shall be terminated in the manner aforesaid, either as to
the entire Premises or only a portion thereof, to such extent the term of this
Lease shall end upon the appropriate effective date of the proposed sublease or
assignment as if that date had been originally fixed in this Lease for such
expiration, and in the event of a termination affecting less than the entire
Premises, Lessee shall comply with Article XIII ("Surrender of Premises") of
this Lease with respect to such portion of the Premises affected thereby.
Notwithstanding anything to the contrary herein, if Lessee desires to sell its
business and either (i) assign to the purchaser thereof all of Lessee's interest
in this Lease or (ii) sublet all of the Premises to the purchaser thereof, the
provisions of this Article X shall otherwise apply to such situation except
Lessor shall have no right to recapture the Premises.
If Lessor, upon receiving Lessee's notice with respect to any such
space, shall not exercise its right to recapture as aforesaid, Lessor will not
unreasonably withhold its consent to Lessee's assignment of the Lease or
subletting such space to the party identified in Lessee's notice, provided,
however, that in the event Lessor consents to any such assignment or subletting,
and as a condition thereto, Lessee shall pay to Lessor fifty percent (50%) of
all profit derived by Lessee from such assignment or subletting. For purposes of
the foregoing, profit shall be deemed to include, but shall not be limited to,
the amount of all rent payable by such assignee or sublessee in excess of (i)
the Base Rent, and rent adjustments, payable by Lessee under this Lease and (ii)
reasonable leasing commissions and concessions, including, without limitation,
reasonable costs incurred by Lessee in connection with tenant improvements for
such subtenant or assignee, granted by Lessee in connection with such subletting
or assignment. If a part of the consideration for such assignment or subletting
shall be payable
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other than in cash, the payment to Lessor shall be in cash for its share of any
non-cash consideration based upon the fair market value thereof.
Lessee shall and hereby agrees that it will furnish to Lessor upon
request from Lessor a complete statement, certified by an officer of Lessee,
setting forth in detail the computation of all profit derived and to be derived
from such assignment or subletting, such computation to be made in accordance
with generally accepted accounting principles. Lessee agrees that Lessor and its
authorized representatives shall be given access at all reasonable times to the
books, records and papers of Lessee relating to any such assignment or
subletting, and Lessor shall have the right to make copies thereof. The
percentage of Lessee's profit due Lessor hereunder shall be paid by Lessee to
Lessor within five (5) days of receipt by Lessee of all payments made from time
to time by such assignee or sublessee to Lessee.
For purposes of the foregoing, if Lessee is a corporation, the capital
stock of which is not publicly traded on a recognized national stock exchange,
or if Lessee is a partnership or a limited liability company or an
unincorporated association, then any transfer or transfers, by sale, assignment,
operation of law or otherwise, of the shares of stock or other equity interest
of the entity constituting Lessee hereunder resulting in a change in the
aggregate in excess of fifty percent (50%) in the equity holdings in such entity
at the time such entity became the Lessee hereunder, shall be deemed to be an
assignment within the meaning of this Article X; provided, however,
notwithstanding anything to the contrary contained herein, any transfer or
transfers of shares of stock or other equity interest of the entity constituting
Lessee between and among the shareholders of Lessee which owned such shares on
the date of this Lease, or upon the death of a person as a part of the
distribution of such person's estate shall not be deemed an assignment or other
transfer requiring the written consent of Lessor. Notwithstanding the provisions
of this paragraph, the transfer of any or all of the shares of stock of Lessee
shall not be deemed an assignment for purposes of this Article X, provided that,
at the time of such transfer, said stock is publicly traded on a recognized
national stock exchange.
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Any transfer to a parent corporation, subsidiary corporation or other
corporate affiliate of Lessee or to any corporation with which Lessee merges or
consolidates shall be deemed an assignment for which Lessor's consent is not
required under this Article X, provided (A) such corporation assumes and agrees
in writing to perform the covenants of Lessee contained in this Lease, (B) at
the time of such assignment or subletting, such corporation has a net worth not
less than the net worth of Lessee at such time, and (C) such corporation is
controlled by Lessee (or by persons or entities controlling Lessee) or Lessee
(or persons or entities controlling Lessee) controls the resulting entity of any
such merger or consolidation.
Any subletting or assignment hereunder shall not release or discharge
Lessee of or from any liability, whether past, present or future, under this
Lease, and Lessee shall continue fully liable thereunder. The subtenant or
subtenants or assignee shall agree in a form satisfactory to Lessor to comply
with and be bound by all of the terms, covenants, conditions, provisions and
agreements of this Lease to the extent of the space sublet or assigned, and
Lessee shall deliver to Lessor promptly after execution an executed copy of each
such sublease or assignment and an agreement of compliance by each such
subtenant or assignee. Consent by Lessor to any assignment of this Lease or to
any subletting of the Premises shall not be a waiver of Lessor's rights under
this Article X as to any subsequent assignment or subletting.
Any sale, assignment, mortgage, transfer or subletting of this Lease
which is not in compliance with the provisions of this Article X shall be of no
effect and void. Lessor's right to assign its interest in this Lease shall
remain unqualified. Lessor may make a reasonable charge to Lessee for any
reasonable attorneys' fees or expenses incident to a review of any documentation
related to any proposed assignment or subletting by Lessee (not to exceed
$1,500.00).
Notwithstanding anything to the contrary in this Lease, Lessee shall
not assign its rights under this Lease or sublet all or any part of the Premises
to a person, firm or corporation which is (or, immediately prior to such
subletting or assignment, was) a tenant or occupant of the Office Complex or any
office building on property contiguous to the Office Complex owned by Lessor.
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The consent of Lessor to a Transfer may not be unreasonably withheld,
provided that should Lessor withhold its consent for any of the following
reasons, which list is not exclusive, such withholding shall be deemed to be
reasonable:
(a) Financial strength of the proposed transferee does not satisfy
Lessor's financial criteria for new tenants of the Building at
the time of the proposed transfer;
(b) A proposed transferee whose occupation of the Premises would
cause a diminution in the reputation of the Office Complex or
the other businesses located therein;
(c) A proposed transferee whose impact on the common areas or the
other occupants of the Office Complex would be dis-
advantageous; or
(d) A proposed transferee whose occupancy will require any
variation in the terms and conditions of this Lease.
ARTICLE XI. DAMAGE BY FIRE OR OTHER CASUALTY: If fire or other casualty shall
render the whole or any material portion of the Premises untenantable, and the
Premises can reasonably be expected to be made tenantable within one hundred
twenty (120) days from the date of such event, then Lessor shall repair and
restore the Premises and the Office Complex to as near their condition prior to
the fire or other casualty as is reasonably possible within such one hundred
twenty (120) day period (subject to delays for causes beyond Lessor's reasonable
control) and notify Lessee that it will be doing so, such notice to be mailed
within thirty (30) days from the date of such damage or destruction, and this
Lease shall remain in full force and effect, but the rent for the period during
which the Premises or a material portion thereof are untenantable shall be
abated pro rata (based upon the portion of the Premises which is untenantable).
If Lessor is required to repair the Office Complex and/or the Premises, as
aforesaid, said work shall be undertaken and prosecuted with all due diligence
and speed.
If fire or other casualty shall render the whole or any material part
of the Premises untenantable and the Premises cannot reasonably be expected to
be made tenantable within one hundred twenty (120) days from the date of such
event, then either party, by notice in writing to the other mailed within thirty
(30) days from the date of such damage or destruction, may terminate this Lease
effective upon a date within thirty (30) days from the date of such notice.
In the event that more than fifty percent (50%) of the value of the
specific office structure of which the Premises is a part or fifty percent (50%)
of the square footage of the Premises is damaged or destroyed by fire or other
casualty, and irrespective of whether damage or destruction can be made
tenantable within one hundred twenty (120) days thereafter, then at either
party's option, by written notice to the other party, mailed within forty-five
(45) days from the date of such damage or destruction, such party may terminate
this Lease effective upon a date within ninety (90) days from the date of such
notice to the other party.
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If fire or other casualty shall render any portion of the Premises or
any material portion of the Office Complex untenantable and the insurance
proceeds are not sufficient to make repairs, then Lessor may, by notice to
Lessee, mailed within thirty (30) days from the date of such damages or
destruction, terminate this Lease effective upon a date within thirty (30) days
from the date of such notice.
If the Premises or the Office Complex is damaged, and such damage is of
the type insured against under the fire and special form property damage
insurance maintained by Lessor hereunder, the cost of repairing said damage up
to the amount of the deductible under said insurance policy shall be included as
a part of the Operating Expenses. If the damage is not covered by such insurance
policies and Lessor elects to repair the damage, then Lessee shall pay Lessor a
pro rata share of the "deductible amount" (if any) under Lessor's insurance
policies based on Lessee's percentage interest of the Office Complex and, if the
damage was due to an act or omission of Lessee, Lessee shall pay Lessor the
difference between the actual cost of repair and any insurance proceeds received
by Lessor.
If fire or other casualty shall render the whole or any material part
of the Premises untenantable and the Premises cannot reasonably be expected to
be made tenantable within one hundred twenty (120) days from the date of such
event and neither party
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hereto terminates this Lease pursuant to its rights herein or in the event that
more than fifty percent (50%) of the value of the Office Complex is damaged or
destroyed by fire or other casualty, and Lessor does not terminate this Lease
pursuant to its option granted herein, or in the event that fifty percent (50%)
or less of the value of the Office Complex is damaged or destroyed by fire or
other casualty and neither the whole nor any material portion of the Premises is
rendered untenantable, then Lessor shall repair and restore the Premises and the
Office Complex to as near their condition prior to the fire or other casualty as
is reasonably possible with all due diligence and speed (subject to delays for
causes beyond Lessor's reasonable control) and the rent for the period during
which the Premises are untenantable shall be abated pro rata (based upon the
portion of the Premises which is untenantable). In no event shall Lessor be
obligated to repair or restore any special equipment or improvements installed
by Lessee. Anything herein contained to the contrary notwithstanding, Lessor
shall not be obligated to spend more than the net insurance proceeds received by
Lessor on account of any fire or other casualty in order to repair or restore
the Premises or the Office Complex following such casualty; provided, however,
Lessor shall notify Lessee promptly after the casualty if such proceeds are
insufficient and if Lessor is unwilling to expend more than the net insurance
proceeds.
In the event of a termination of this Lease pursuant to this Article
XI, rent shall be apportioned on a per diem basis and paid to the date of the
fire or other casualty.
ARTICLE XII. EMINENT DOMAIN: If the whole of or any substantial part of the
Premises is taken by any public authority under the power of eminent domain, or
taken in any manner for any public or quasi-public use, so as to render the
remaining portion of the Premises unsuitable for the purposes intended
hereunder, then the term of this Lease shall cease as of the day possession
shall be taken by such public authority and Lessor shall make a pro rata refund
of any prepaid rent. All damages awarded for such taking under the power of
eminent domain or any like proceedings shall belong to and be the property of
Lessor, Lessee hereby assigning to Lessor Lessee's interest, if any, in said
award. In the event that fifty percent (50%) or more of the Office Complex
building area or the Premises or fifty percent (50%) or more of the value of the
Office Complex is taken by public authority under the power of
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eminent domain, then, at either party's option, by written notice to the other
party mailed within sixty (60) days from the date possession shall be taken by
such public authority, such party may terminate this Lease effective upon a date
within ninety (90) days from the date of such notice. Further, if the whole of
or any material part of the Premises is taken by public authority under the
power of eminent domain, or taken in any manner for any public or quasi-public
use, so as to render the remaining portion of the Premises unsuitable for the
purposes intended hereunder, upon delivery of possession to the condemning
authority pursuant to the proceedings, Lessee may, at its option, terminate this
Lease as to the remainder of the Premises by written notice to Lessor, such
notice to be given to Lessor within thirty (30) days after Lessee receives
notice of the taking. Any notice of termination shall specify the date no more
than sixty (60) days after the giving of such notice as the date for such
termination.
Anything in this Article XII to the contrary notwithstanding, Lessee
shall have the right to prove in any condemnation proceedings and to receive any
separate award which may be made for damages to or condemnation of Lessee's
movable trade fixtures and equipment and for moving expenses; provided, however,
Lessee shall in no event have any right to receive any award for its interest in
this Lease or for loss of leasehold; and, provided further, Lessee shall not be
entitled to claim any award to the extent the award to Lessor would be reduced
below the amount which would be allowed to Lessor absent such claim by Lessee.
Anything in this Article XII to the contrary notwithstanding, in the event of a
partial condemnation of the Office Complex or the Premises and this Lease is not
terminated, Lessor shall, at its sole cost and expense, restore the Premises and
Office Complex to a complete architectural unit and the Base Rent provided for
herein during the period from and after the date of delivery of possession
pursuant to such proceedings to the termination of this Lease shall be reduced
to a sum equal to the product of the Base Rent provided for herein multiplied by
a fraction, the numerator of which is the fair market rent of the Premises after
such taking and after the same has been restored to a complete architectural
unit, and the denominator of which is the fair market rent of the Premises prior
to such taking.
ARTICLE XIII. SURRENDER OF PREMISES: On the last day of the term of this Lease,
or on the sooner termination thereof, Lessee shall
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peaceably surrender the Premises in good condition and repair (reasonable wear
and tear and damage attributable to casualty or condemnation excepted)
consistent with Lessee's duty to make repairs as herein provided. On or before
the last day of the term of this Lease, or the date of sooner termination
thereof, Lessee shall, at its sole cost and expense, remove all of its property
and trade fixtures and equipment from the Premises, and all property not removed
shall be deemed abandoned. Lessee hereby appoints Lessor its agent to remove all
property of Lessee from the Premises upon termination of this Lease and to cause
its transportation and storage for Lessee's benefit, all at the sole cost and
risk of Lessee, and Lessor shall not be liable for damage, theft,
misappropriation or loss thereof and Lessor shall not be liable in any manner in
respect thereto. Lessee shall pay all costs and expenses of such removal,
transportation and storage. Lessee shall leave the Premises in good order,
condition and repair, reasonable wear and tear and damage from fire and other
casualty excepted. Lessee shall reimburse Lessor upon demand for any expenses
incurred by Lessor with respect to removal, transportation or storage of
abandoned property and with respect to restoring said Premises to good order,
condition and repair. All improvements, alterations, additions, installations
and fixtures, other than Lessee's trade fixtures and equipment, which have been
made or installed by either Lessor or Lessee upon the Premises shall remain the
property of Lessor and shall be surrendered with the Premises as a part thereof,
unless Lessee is required to remove same pursuant to the provisions of Article
VIII hereof. If the Premises are not surrendered at the end of the term or
sooner termination thereof, Lessee shall indemnify Lessor against loss or
liability resulting from delay by Lessee in so surrendering the Premises,
including, without limitation, claims made by any succeeding tenants founded on
such delay and any attorneys' fees resulting therefrom. Lessee shall promptly
surrender all keys for the Premises to Lessor at the place then fixed for the
payment of rent and shall inform Lessor of the combinations of any vaults, locks
and safes left on the Premises.
In the event Lessee remains in possession of the Premises after
expiration of this Lease and without the execution of a new lease, but with
Lessor's written consent, Lessee shall be deemed to be occupying the Premises as
a tenant from month-to-month, subject to all the provisions, conditions and
obligations of this Lease insofar as the same can be applicable to a
month-to-month tenancy,
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except that the Base Rent shall be escalated to Lessor's then current base rent
for the Premises according to Lessor's then current rental rate schedule for
prospective tenants. In the event Lessee remains in possession of the Premises
after expiration of this Lease and without the execution of a new lease and
without Lessor's written consent, Lessee shall be deemed to be occupying the
Premises without claim of right and Lessee shall pay Lessor for all costs
arising out of loss or liability resulting from delay by Lessee in so
surrendering the Premises as above provided and shall pay a charge for each day
of occupancy in an amount equal to the greater of (i) 150% of the Base Rent plus
Additional Rent (on a daily basis) then currently being charged by Lessor on new
leases in the Office Complex for space similar to the Premises, or (ii) 150% of
the Base Rent plus Additional Rent (on a daily basis) payable by Lessee under
this Lease immediately prior to the expiration of this Lease.
ARTICLE XIV. DEFAULT OF LESSEE: The occurrence of any one or more of the
following events (in this Article sometimes called "Event of Default") shall
constitute a default and breach of this Lease by Lessee:
A. If Lessee fails to pay any Base Rent or Additional Rent
payable under this Lease or fails to pay any obligation
required to be paid by Lessee when and as the same shall
become due and payable, and such default continues for a
period of five (5) days after written notice thereof given by
Lessor to Lessee.
B. If Lessee fails to perform any of Lessee's nonmonetary
obligations under this Lease for a period of thirty (30) days
after written notice from Lessor; provided that if more time
is required to complete such performance, Lessee shall not be
in default if Lessee commences such performance within the
thirty-day period and thereafter diligently pursues its
completion. However, Lessor shall not be required to give such
notice if Lessee's failure to perform constitutes a
non-curable breach of this Lease. The notice required by this
subsection is in- tended to satisfy any and all notice
requirements imposed by law on Lessor and is not in addition
to any such requirement.
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C. If Lessee, by operation of law or otherwise, violates the
provisions of Article X hereof relating to assignment,
sublease, mortgage or other transfer of Lessee's interest in
this Lease or in the Premises or in the income arising
therefrom.
D. If Lessee, by operation of law or otherwise, violates the
provisions of Article XVI.R relating to compliance with
environmental laws.
E. If (i) Lessee makes a general assignment or general
arrangement for the benefit of creditors; (ii) a petition for
adjudication of bankruptcy or for reorganization or
rearrangement is filed by or against Lessee and is not
dismissed within sixty (60) days; (iii) if a trustee or
receiver is appointed to take possession of substantially all
of Lessee's assets located at the Premises or of Lessee's
interest in this Lease and possession is not restored to
Lessee within sixty (60) days; or (iv) if substantially all of
Lessee's assets located at the Premises or of Lessee's
interest in this Lease is sub- jected to attachment, execution
or other judicial or non- judicial seizure which is not
discharged within sixty (60) days. If a court of competent
jurisdiction deter- mines that any of the acts described in
this subsection does not constitute an Event of Default and a
trustee is appointed to take possession (or if Lessee remains
a debtor in possession) and such trustee or Lessee trans- fers
Lessee's interest hereunder, then Lessor shall receive, as
Additional Rent, the difference between the rent (or any other
consideration) paid in connection with such assignment or
sublease and the rent payable by Lessee hereunder. If any such
Event of Default shall occur, Lessor, at any time during the
continuance of any such Event of Default, may give written
notice to Lessee stating that this Lease shall expire and
terminate on the date specified in such notice, and upon the
date speci- fied in such notice this Lease, and all rights of
Lessee under this Lease, including all rights of renewal
whether exercised or not, shall expire and terminate, or in
the alternative or in addition to the foregoing remedy, Les-
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sor may assert and have the benefit of any other remedy
allowed herein, at law, or in equity.
Upon the occurrence of an Event of Default by Lessee, and at any time
thereafter, with or without notice or demand and without limiting Lessor in the
exercise of any right or remedy which Lessor may have, Lessor shall be entitled
to the rights and remedies set forth below:
A. With or without notice or demand, terminate Lessee's right to
possession of the Premises by any lawful means, in which case
this Lease shall not terminate unless Lessor gives written
Notice to Lessee of its intention to terminate this Lease and
Lessee shall immediately surrender possession of the Premises
to Lessor. In such event, Lessor shall have the immediate
right to reenter and remove all persons and property, and such
property may be removed and stored in a public warehouse or
elsewhere at the cost of, and for the account of Lessee,
without service of notice or resort to legal process in the
event of a monetary default and without being deemed guilty of
trespass, or becoming liable for any loss or damage which may
be occasioned thereby, unless caused by the gross negligence
of Lessor. A termination of possession pursuant to this
paragraph for a non-monetary default shall be accomplished
only by utilizing the appropriate legal process. In the event
that Lessor shall elect to so terminate this Lease, then
Lessor shall be entitled to recover from Lessee all damages
incurred by Lessor by reason of Lessee's default, including:
1. The equivalent of the amount of the Base Rent and
Additional Rent which would be payable under this
Lease by Lessee if this Lease were still in effect,
less
2. The net proceeds of any reletting affected pursuant
to the provisions of this Article XIV hereof after
deducting all of Lessor's reasonable expenses in
connection with such reletting, including, without
limitation, all repossession costs, brokerage com-
missions, legal expenses, reasonable attorneys'
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fees, alteration costs, and expenses of preparation
of the Premises, or any portion thereof, for such
reletting. Lessor shall provide to Lessee within ten
(10) days after request from Lessor, reasonable
evidence of the deductions referred in this para-
graph.
Lessee shall pay such current damages in the amount determined
in accordance with the terms of this Article XIV as set forth
in a written statement thereof from Lessor to Lessee
(hereinafter called the "Deficiency"), to Lessor in monthly
installments on the days on which the rent would have been
payable under this Lease if this Lease were still in effect,
and Lessor shall be entitled to recover from Lessee each
monthly installment of the Deficiency as the same shall arise.
B. At any time after an Event of Default, whether or not Lessor
shall have collected any monthly Deficiency as set forth in
this Article XIV, and after Lessor has re-let the Premises,
Lessor shall be entitled to recover from Lessee, and Lessee
shall pay to Lessor, on demand, as and for final damages for
Lessee's default, an amount equal to the then present worth of
the aggregate of the Base Rent and Additional Rent and any
other charges to be paid by Lessee hereunder for the unexpired
portion of the term of this Lease (assuming this Lease had not
been so termi- nated). In the computation of present worth, a
discount at the rate of 8% per annum shall be employed. The
amount of rent received upon the reletting required here-
under shall be offset against any monies claimed pursuant to
this subsection. Nothing herein contained or con- tained in
this Article XIV shall limit or prejudice the right of Lessor
to prove for and obtain, as damages, an amount equal to the
maximum allowed by any statute or rule of law in effect at the
time when, and governing the proceedings in which, such
damages are to be proved, whether or not such amount be
greater, equal to or less than the amount of the difference
referred to above.
C. Upon the occurrence of an Event of Default by Lessee, Lessor
shall also have the right, with or without termi-
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nating this Lease, to reenter the Premises to remove all
persons and property from the Premises. Such property may be
removed and stored in a public warehouse or else- where at the
cost of and for the account of Lessee. If Lessor shall elect
to reenter the Premises, Lessor shall not be liable for
damages by reason of such reentry unless caused by the gross
negligence of Lessor.
D. If Lessor does not elect to terminate this Lease as provided
in this Article XIV then Lessor may, from time to time,
recover all rent as it becomes due under this Lease. At any
time thereafter, Lessor may elect to terminate this Lease and
to recover damages to which Lessor is entitled.
E. In the event that Lessor should elect to terminate this Lease
and to relet the Premises, it may execute any new lease in its
own name. In the event that Lessor should not elect to
terminate this Lease, it may re-let the Pre- mises to a
substitute tenant. Lessee hereunder shall have no right or
authority whatsoever to collect any rent from such substitute
tenant. The proceeds of any such reletting shall be applied as
follows:
1. First, to the payment of any indebtedness other than
rent due hereunder from Lessee to Lessor, including
but not limited to reasonable storage charges or
reasonable brokerage commissions owing from Lessee to
Lessor as the result of such relet- ting, provided
that Lessee shall only be respon- sible for the
portion of such commission attribut- able to that
portion of the term of the new lease occurring before
the date that the term of this Lease would otherwise
have expired;
2. Second, to the payment of the reasonable costs and
expenses of reletting the Premises, including
alterations and repairs which Lessor, in its
reasonable discretion, deems reasonably necessary and
advisable and reasonable attorneys' fees incurred by
Lessor in connection with the retaking of the
Premises and such reletting;
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3. Third, to the payment of rent and other charges due
and unpaid hereunder; and
4. Fourth, to the payment of future rent and other
damages payable by Lessee under this Lease.
Lessor shall not be deemed to have terminated this Lease and the
Lessee's right to possession of the leasehold or the liability of Lessee to pay
rent thereafter to accrue or its liability for damages under any of the
provisions hereof, unless Lessor shall have notified Lessee in writing that it
has so elected to terminate this Lease. Lessee covenants that the retaking of
possession by Lessor or the service by Lessor of any notice pursuant to the
applicable unlawful detainer statutes of the state in which the Office Complex
is located and Lessee's surrender of possession pursuant to such notice shall
not (unless Lessor elects to the contrary at the time of, or at any time
subsequent to the service of, such notice, and such election be evidenced by a
written notice to Lessee) be deemed to be a termination of this Lease or of
Lessee's right to possession thereof.
All rights, options and remedies of Lessor contained in this Lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Lessor shall have the right to pursue any one or all
of such remedies or any other remedy or relief which may be provided by law
whether or not stated in this Lease. No waiver by Lessor of a breach of any of
the terms, covenants or conditions of this Lease by Lessee shall be construed or
held to be a waiver of any succeeding or preceding breach of the same or any
other term, covenant or condition therein contained. No waiver of any default of
Lessee hereunder shall be implied from any omission by Lessor to take any action
on account of such default if such default persists or is repeated, and no
express waiver shall affect default other than as specified in said waiver. The
consent or approval by Lessor to or of any act by Lessee requiring Lessor's
consent or approval shall not be deemed to waive or render unnecessary Lessor's
consent to or approval of any subsequent similar acts by Lessee.
If any action for breach of or to enforce the provisions of this Lease
is commenced by either party hereto, the court in such action shall award to the
party in whose favor a judgment is
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entered a reasonable sum as attorneys' fees and costs. Such attorneys' fees and
costs shall be paid by the losing party in such action. Lessee shall also
indemnify Lessor against and hold Lessor harmless from all costs, expenses,
demands and liability incurred by Lessor if Lessor becomes or is made a party to
any claim or action instituted by Lessee against a party other than Lessor, or
by any third party against Lessee. Lessee shall defend Lessor against any such
claim or action at Lessee's expense with counsel reasonably acceptable to Lessor
or, at Lessor's election, Lessee shall reimburse Lessor for any reasonable legal
fees or costs incurred by Lessor in any such claim or action.
In addition, Lessee shall pay Lessor's reasonable attorneys' fees
incurred in connection with Lessee's request for Lessor's consent in connection
with any act which Lessee proposed to do and which requires Lessor's consent
(not to exceed $1,000.00).
Lessee hereby waives all claims by Lessor's reentering and taking
possession of the Premises or removing and storing the property of Lessee as
permitted under this Lease and will save Lessor harmless from all losses, costs
or damages occasioned Lessor thereby except to the extent such losses, costs or
damages are caused by the gross negligence of Lessor. No such reentry shall be
considered or construed to be a forcible entry by Lessor.
ARTICLE XV. SUBORDINATION: This Lease shall be subject and subordinate to any
mortgage, deed of trust or ground lease now or hereafter placed upon the
Premises, the Office Complex, the Property or any portion thereof by Lessor or
its successors or assigns, and to amendments, replacements, renewals and
extensions thereof. Lessee agrees at any time hereafter, upon demand, to execute
and deliver any instruments, releases or other documents in form reasonably
acceptable to Lessee that may be reasonably required for the purpose of
subjecting and subordinating this Lease, as above provided, to the lien of any
such mortgage, deed of trust or ground lease. It is agreed, nevertheless, that
as long as Lessee is not in default in the payment of Base Rent, Additional
Rent, and other charges to be paid by Lessee under this Lease and in the
performance of all covenants, agreements and conditions to be performed by
Lessee under this Lease, then neither Lessee's right to quiet enjoyment under
this Lease, nor the right of Lessee to continue to occupy the Premises and to
conduct its business thereon, in accor-
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dance with the terms of this Lease as against any lessor, lessee, mortgagee,
trustee or their successors or assigns shall be interfered with.
The above subordination shall be effective without the necessity of the
execution and delivery of any further instruments on the part of Lessee to
effectuate such subordination. Notwithstanding anything hereinabove contained in
this Article XV, in the event the holder of any mortgage, deed of trust or
ground lease shall at any time elect to have this Lease constitute a prior and
superior lien to its mortgage, deed of trust or ground lease, then, and in such
event, upon any such holder or landlord notifying Lessee to that effect in
writing, this Lease shall be deemed prior and superior in lien to such mortgage,
deed of trust or ground lease, whether this Lease is dated prior to or
subsequent to the date of such mortgage, deed of trust or ground lease, and
Lessee shall execute such attornment agreement as may be reasonably requested by
said holder or Lessor, in form reasonably acceptable to Lessee.
Lessee agrees, provided the mortgagee, ground lessor or trust deed
holder under any mortgage, ground lease, deed of trust or other security
instrument shall have notified Lessee in writing (by the way of a notice of
assignment of lease or otherwise) of its address, that Lessee shall give such
mortgagee, ground lessor, trust deed holder or other secured party
("Mortgagee"), simultaneously with delivery of notice to Lessor, by registered
or certified mail, a copy of any such notice of default served upon Lessor.
Lessee further agrees that said Mortgagee shall have the right to cure any
alleged default during the same period that Lessor has to cure such default.
Lessee agrees to execute and deliver to Lessor, concurrently with
Lessee's execution of this Lease and delivery thereof to Lessor, a
Subordination, Non-disturbance and Attornment Agreement in the form of Exhibit E
attached hereto. Upon the execution of this Lease by Lessor, Lessor shall
provide Lessee with a fully-exe- cuted copy of such Subordination,
Non-disturbance and Attornment Agreement.
ARTICLE XVI. MISCELLANEOUS:
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A. Lessor and Lessee represent that said parties have dealt directly
with and only with CB Commercial Real Estate Group, Inc. (Brad Anderson) and Lee
& Associates Arizona Real Estate Services Com. (Craig Coppola/Jim Watkins), as
brokers, in connection with this Lease and that insofar as either party knows,
no other broker negotiated or participated in negotiations of this Lease or
submitted or showed the Premises or is entitled to any commission in connection
therewith. Lessor and Lessee agree that no broker shall be entitled to any
commission in connection with any renewal of the term of this Lease or any
expansion of the Premises. Lessor shall pay any brokerage commission due in
connection with this Lease to the Brokers pursuant to a separate agreement.
B. Lessee agrees from time to time, upon not less than ten (10) days
prior written request by Lessor, to deliver to Lessor a statement in writing
certifying (i) this Lease is unmodified and in full force and effect (or if
there have been modifications that the Lease as modified is in full force and
effect and stating the modifications); (ii) the dates to which the rent and
other charges have been paid; (iii) to Lessee's knowledge, Lessor is not in
default in any provision of this Lease or, if in default, the nature thereof
specified in detail; (iv) the amount of monthly rental currently payable by
Lessee; (v) the amount of any prepaid rent, and (vi) such other factual matters
as may be reasonably requested by Lessor or any Mortgagee or prospective
purchaser of the Office Complex. Lessor agrees to furnish a like statement upon
ten (10) business days prior written request by Lessee in connection with any
bona fide permitted assignments and/or permitted subleases by Lessee.
If Lessee does not deliver such statement to Lessor within such ten
(10) day period, Lessor and any prospective purchaser or encumbrancer of the
Premises or the Office Complex may conclusively presume and rely upon the
following facts: (i) that the terms and provisions of this Lease have not been
changed except as otherwise represented by Lessor; (ii) that this Lease has not
been cancelled or terminated and is in full force and effect, except as
otherwise represented by Lessor; (iii) that the current amounts of the Base Rent
and security deposit are as set forth in this Lease and that any charges made
against the security deposit are uncontested and valid; (iv) that there have
been no subleases or assignments of the Lease; (v) that not more than one
month's Base Rent or other charges have been paid in advance; and (vi) that
Lessor is not, to
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Lessee's knowledge, in default under the Lease. In such event, Lessee shall be
estopped from denying the truth of such facts. If Lessor does not transmit such
statement to Lessee within such ten business day period, Lessee and any
prospective encumbrancer of Lessee's property, or assignee or sublessee, may
conclusively presume and rely upon the same facts so set forth above.
C. All notices, demands and requests shall be in writing, and shall be
effectively served by forwarding such notice, demand or request by certified or
registered mail, postage prepaid, or by commercial overnight courier service
addressed as follows:
(i) If addressed to Lessee:
Prior to Commencement Date:
UDC Homes, Inc.
4812 South Mill Road
Tempe, Arizona 85282
Attn: Mr. James J. Grogan
After Commencement Date:
UDC Homes, Inc.
6710 North Scottsdale Road
Scottsdale, Arizona 85253
Attn: Mr. James J. Grogan
with a copy to:
Kilpatrick & Cody, L.L.P.
1100 Peachtree Street
Atlanta, Georgia 30309
Attn: Mr. Mark A. Palmer
(ii) If addressed to Lessor:
Opus Southwest Corporation
4742 North 24th Street, Suite 100
Phoenix, Arizona 85016
Attn: President
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with a copy to:
Opus U.S. Corporation
P.O. Box 59110
Minneapolis, Minnesota 55440
Attn: Legal Department
and with a copy to:
Normandale Properties Southwest Corporation
4742 North 24th Street
Suite 100
Phoenix, Arizona 85016
Attn: Property Manager
and with a copy to:
Gallagher & Kennedy, P.A.
2600 North Central Avenue
Phoenix, Arizona 85004-3020
Attn: Mr. Gregory L. Mast
or at such other addresses as Lessor and Lessee may hereafter designate by
written notice. The effective date of all notices shall be the time of mailing
such notice or the date of delivery to a commercial overnight courier service.
D. All rights and remedies of Lessor under this Lease or that may be
provided by law may be executed by Lessor in its own name, individually, or in
the name of its agent, and all legal proceedings for the enforcement of any such
rights or remedies, including those set forth in Article XIV, may be commenced
and prosecuted to final judgment and execution by Lessor in its own name or in
the name of its agent.
E. Lessor covenants and agrees that Lessee, upon paying the Base Rent,
Additional Rent and other charges herein provided for and observing and keeping
the covenants, agreements and conditions of this Lease on its part to be kept
and performed, shall lawfully and quietly hold, occupy and enjoy the Premises
during the term of this Lease. Time is of the essence of this Lease and each and
every provision contained herein, and any extension of time granted
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by Lessor to Lessee for the performance of any obligation of Lessee under this
Lease shall not be considered an extension of time for the performance of any
subsequent obligation of Lessee under this Lease.
F. The covenants and agreements herein contained shall bind and inure
to the benefit of Lessor and its successors and assigns and Lessee and its
permitted successors and assigns. All obligations of each party constituting
Lessee hereunder shall be the joint and several obligations of each such party.
G. If any term or provision of this Lease shall to any extent be held
invalid or unenforceable, the remaining terms and provisions of this Lease shall
not be affected thereby, but each term and provision of this Lease shall be
valid and enforced to the fullest extent permitted by law. This Lease shall be
construed and enforced in accordance with the laws of the state in which the
Premises are located.
H. Lessee covenants not to do or suffer any waste or damage or
disfigurement or injury to the Premises or the Office Complex.
I. The term "Lessor" as used in this Lease so far as covenants or
obligations on the part of Lessor are concerned shall be limited to mean and
include only the owner or owners of the Office Complex at the time in question,
and in the event of any transfer or transfers or conveyances the then grantor
shall be automatically freed and released from all personal liability accruing
from and after the date of such transfer or conveyance as respects the
performance of any covenant or obligation on the part of Lessor contained in
this Lease to be performed, it being intended hereby that the covenants and
obligations contained in this Lease on the part of Lessor shall be binding on
the Lessor, its successors and assigns, only during and in respect to their
respective successive periods of ownership; provided, however, in no event shall
Lessor be relieved of its obligation to construct the Tenant Improvements.
In the event of a sale or conveyance by Lessor of the Office Complex or
any part of the Office Complex, the same shall operate to release Lessor from
any future liability upon any of the covenants or conditions herein contained
and in such event Lessee agrees to look solely to the responsibility of the
successor in
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interest of Lessor in and to this Lease. This Lease shall not be affected by any
such sale or conveyance, and Lessee agrees to attorn to the purchaser or
grantee, which purchaser or grantee shall be personally obligated on this Lease
only so long as it is the owner of Lessor's interest in and to this Lease.
J. The marginal or topical headings of the several Articles are for
convenience only and do not define, limit or construe the contents of said
Articles.
K. All preliminary negotiations are merged into and incorpo- rated in
this Lease, except for written collateral agreements exe- cuted
contemporaneously herewith.
L. This Lease can only be modified or amended by an agreement in
writing signed by the parties hereto. No receipt of money by Lessor from Lessee
or any other person after termination of this Lease or after the service of any
notice or after the commencement of any suit, or after final judgment for
possession of the Premises, shall reinstate, continue or extend the term of this
Lease or affect any such notice, demand or suit, or imply consent for any action
for which Lessor's consent is required, unless specifically agreed to in writing
by Lessor. Any amounts received by Lessor may be allocated to any specific
amounts due from Lessee to Lessor as Lessor determines.
M. Lessor shall have the right to close any portion of the building
area or land area to the extent as may, in Lessor's reasonable opinion, be
necessary to prevent a dedication thereof or the accrual of any rights to any
person or the public therein. Lessor shall at all times have full control,
management and direction of the Office Complex, subject to the rights of Lessee
in the Premises, and Lessor reserves the right at any time and from time to time
to reduce, increase, enclose or otherwise change the size, number and location
of buildings, layout and nature of the Office Complex, to construct additional
buildings and additions to any building, and to create additional rentable areas
through use and/or enclosure of common areas, or otherwise, and to place signs
on the Office Complex, and to change the name, address, number or designation by
which the Office Complex is commonly known. No implied easements are granted by
this Lease. In exercising the foregoing rights, Lessor shall use reasonable
efforts to interfere
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as little as reasonably possible with Lessee's business operations on the
Premises under the circumstances, but nothing herein shall require Lessor to
perform such work at other than normal business hours.
N. Lessee shall permit Lessor (or its designees) to erect, use,
maintain, replace and repair pipes, cables, conduits, plumbing, vents, and
telephone, electric and other wires or other items, in, to and through the
Premises, as and to the extent that Lessor may now or hereafter deem necessary
or appropriate for the proper operation and maintenance of the Office Complex.
In exercising the foregoing rights, Lessor shall use reasonable efforts to
interfere as little as reasonably possible with Lessee's business operations on
the Premises under the circumstances, but nothing herein shall require Lessor to
perform such work at other than normal business hours.
O. Employees or agents of Lessor have no authority to make or agree to
make a lease or other agreement or undertaking in connection herewith. The
submission of this document for examination does not constitute an offer to
lease, or a reservation of, or option for, the Premises. This document becomes
effective and binding only upon the execution and delivery hereof by the proper
officers of Lessor and by Lessee. Lessee confirms that Lessor and its agents
have made no representations or promises with respect to the Premises or the
making of or entry into this Lease except as in this Lease expressly set forth,
and Lessee agrees that no claim or liability shall be asserted by Lessee against
Lessor for, and Lessor shall not be liable by reason of, breach of any
representations or promises not expressly stated in this Lease. This Lease,
except for the Building Rules and Regulations, in respect to which subparagraph
P of this Article shall prevail, can be modified or altered only by agreement in
writing between Lessor and Lessee, and no act or omission of any employee or
agent of Lessor shall alter, change or modify any of the provisions hereof.
P. Lessee shall perform, observe and comply with the Build- ing Rules
and Regulations of the Office Complex as set forth on Exhibit B attached hereto
and by this reference incorporated herein, with respect to the safety, care and
cleanliness of the Premises and the Office Complex, and the preservation of good
order thereon, and, upon written notice thereof to Lessee, Lessee shall
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perform, observe and comply with any changes, amendments or additions thereto as
from time to time shall be established and deemed advisable by Lessor for
tenants of the Office Complex. No such changes, amendments or additions to said
Building Rules and Regulations shall impose additional monetary obligations on
Lessee. Lessor shall not be liable to Lessee for any failure of any other tenant
or tenants of the Office Complex to comply with such Building Rules and
Regulations.
Q. Lessee shall not use the Premises or permit anything to be done in
or about the Premises which will, in any way, conflict with any law, statute,
ordinance or governmental rule or regulation now in force or which may hereafter
be enacted or promulgated. Lessee shall, at its sole cost and expense, promptly
comply with all laws, statutes, ordinances and governmental rules and
regulations now in force or which may hereafter be in force, and with the
requirements of any fire insurance underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Premises. Lessee shall use the Premises and comply with any recorded
covenants, conditions, and restrictions affecting the Premises and the Office
Complex as of the commencement of the Lease or which are recorded during the
lease term.
R. Lessee shall at all times during the term of this Lease and in all
respects comply with all federal, state and local laws, ordinances and
regulations ("Hazardous Materials Laws") relating to the industrial hygiene,
environmental protection or the use, analysis, generation, manufacture, storage,
presence, disposal or transportation of any oil, petroleum products, flammable
explosives, asbestos, urea formaldehyde, polychlorinated biphenyls, radioactive
materials or waste, or other hazardous, toxic, contaminated or polluting
materials, substances or wastes, including without limitation any "hazardous
substances", "hazardous wastes", "hazardous materials" or "toxic substances"
under any such laws, ordinances or regulations (collectively, "Hazardous
Materials").
Lessee 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 for Lessee's use of the Premises, including,
without limitation, discharge of (appropriately treated) materials or waste into
or through any
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sanitary sewer system serving the Premises. Except as discharged into the
sanitary sewer or otherwise disposed of in conformity with all applicable
Hazardous Materials Laws, Lessee shall cause any and all Hazardous Materials
brought or permitted on the Premises by Lessee to be removed from the Premises
and transported solely by duly licensed haulers to duly licensed facilities for
final disposal of such Hazardous Materials and wastes. Lessee shall in all
respects handle, treat, deal with and manage any and all Hazardous Materials
brought or permitted on the Premises by Lessee in conformity with all applicable
Hazardous Materials Laws and prudent industry practices regarding the management
of such Hazardous Materials. All reporting obligations relating to such
Hazardous Materials to the extent imposed upon Lessee by Hazardous Materials
Laws are solely the responsibility of Lessee. Upon expiration or earlier
termination of this Lease, Lessee shall cause all Hazardous Materials (to the
extent such Hazardous Materials are generated, stored, released or disposed of
during the term of this Lease by Lessee) to be removed from the Premises and
transported for use, storage or disposal in accordance and in compliance with
all applicable Hazardous Materials Laws. Lessee shall not take any remedial
action in response to the presence of any Hazardous Materials in, on, about or
under the Premises or in any improvements situated on the Office Complex, nor
enter into any settlement agreement, consent, decree or other compromise in
respect to any claims relating to or in any way connected with the Premises or
the Office Complex without first notifying Lessor of Lessee's intention to do so
and affording Lessor ample opportunity to appear, intervene or otherwise
appropriately assert and protect Lessor's interest with respect thereto. In
addition, at Lessor's request, at the expiration of the term of this Lease,
Lessee shall remove all tanks or fixtures which were placed on the Premises
during the term of this Lease by or for Lessee and which contain, have contained
or are contaminated with, Hazardous Materials.
Lessee shall immediately notify Lessor in writing of (a) any
enforcement, clean-up, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any Hazardous Materials Laws;
(b) any claim made or threatened by any person against Lessor, 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 made to any environmental agency arising out of or in connection
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<PAGE>
with any Hazardous Materials in, on or about the Premises or with respect to any
Hazardous Materials removed by Lessee from the Premises, including, any
complaints, notices, warnings, reports or asserted violations in connection
therewith. Lessee shall also provide to Lessor, as promptly as possible, and in
any event within five business days after Lessee first receives or sends the
same, copies of all claims, reports, complaints, notices, warnings or asserted
violations relating in any way to the Premises or Lessee's use thereof. Upon
written request of Lessor (to enable Lessor to defend itself from any claim or
charge related to any Hazardous Materials Law), Lessee shall promptly deliver to
Lessor notices of hazardous waste manifests reflecting the legal and proper
disposal of all such Hazardous Materials removed or to be removed from the
Premises.
To Lessor's knowledge, Lessor is not aware of any Hazardous Materials
which exist or are located on or in the Premises, except as may be disclosed in
that certain Phase I and Phase II Environmental Site Assessment prepared by
Geotechnical and Environmental Consultants, dated October 13, 1995. Further,
Lessor represents to Lessee that, to the best of its knowledge, Lessor has not
caused the generation, storage or release of Hazardous Materials upon the
Premises, except in accordance with Hazardous Materials Laws. In the event (a)
Hazardous Materials are discovered upon the Premises, (b) Lessor has been given
written notice of the discovery of such Hazardous Materials, and (c) pursuant to
the provisions of the preceding paragraphs of this Article XVI.R, neither Lessor
nor Lessee is obligated to pay the cost of compliance with Hazardous Materials
Laws, then and in that event Lessor may voluntarily but shall not be obligated
to agree with Lessee to take all action necessary to bring the Premises into
compliance with Hazardous Materials Laws at Lessor's sole cost. In the event
Lessor fails to notify Lessee in writing within thirty (30) days of the notice
to Lessor of the discovery of such Hazardous Materials that Lessor intends to
voluntarily take such action as is necessary to bring the Premises into
compliance with Hazardous Materials Laws, then Lessee may (i) bring the Premises
into compliance with Hazardous Materials Laws at Les- see's sole cost or (ii)
provided such Hazardous Materials endanger persons or property in, on or about
the Premises or interfere with Lessee's use of the Premises, terminate this
Lease on a date not less than ninety (90) days following written notice of such
intent to terminate.
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<PAGE>
Lessor shall indemnify, defend (with counsel reasonably acceptable to
Lessee), protect and hold Lessee and each of Lessee's officers, directors,
partners, employees, agents, attorneys, successors and assigns free and harmless
from and against any and all claims, liabilities, damages, costs, penalties,
forfeitures, losses or expenses (including attorneys' fees) for death or injury
to any person or damage to any property whatsoever (including water tables and
atmosphere) arising or resulting in whole or in part, directly or indirectly,
from the presence or discharge of Hazardous Materials, in, on, under, upon or
from the Premises, including materials used during construction of the Premises
and the Office Complex or from the transportation or disposal of Hazardous
Materials to or from the Premises to the extent caused by Lessor. Lessor's
obligations hereunder shall include, without limitation, and whether
foreseeable, all cost of any required or necessary repairs, clean-up or
detoxification or decontamination of the Premises, and the presence and
implementation of any closure, remedial action or other required plans in
connection therewith, and shall survive the expiration of or early termination
of the term of this Lease. For purposes of the indemnity provided herein, any
acts or omissions of Lessor or its employees, agents, customers, assignees,
contractors or sub-contractors (whether or not they are negligent, intentional,
willful or unlawful) shall be strictly attributable to Lessor.
Lessee shall indemnify, defend (with counsel reasonably acceptable to
Lessor), protect and hold Lessor and each of Lessor's officers, directors,
partners, employees, agents, attorneys, successors and assigns free and harmless
from and against any and all claims, liabilities, damages, costs, penalties,
forfeitures, losses or expenses (including attorneys' fees) for death or injury
to any person or damage to any property whatsoever (including water tables and
atmosphere) arising or resulting in whole or in part, directly or indirectly,
from the presence or discharge of Hazardous Materials, in, on, under, upon or
from the Premises or from the transportation or disposal of Hazardous Materials
to or from the Premises to the extent caused by Lessee whether knowingly or
unknowingly, the standard herein being one of strict liability. Lessee's
obligations hereunder shall include, without limitation, and whether
foreseeable, all cost of any required or necessary repairs, clean-up or
detoxification or decontamination of the Premises, and the presence and
implementation of any closure, remedial action or other required plans in
connection therewith, and shall
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<PAGE>
survive the expiration of or early termination of the term of this Lease. For
purposes of the indemnity provided herein, any acts or omissions of Lessee or
its employees, agents, customers, sub- lessees, assignees, contractors or
sub-contractors (whether or not they are negligent, intentional, willful or
unlawful) shall be strictly attributable to Lessee.
For purposes of the covenants and agreements contained in this Article
XVI.R, inclusive, any acts or omissions of Lessee, its employees, agents,
customers, sublessees, assignees, contractors or sub-contractors (except Opus
Southwest Corporation and its contractors and subcontractors) shall be strictly
attributable to Lessee; any acts or omissions of Lessor, its employees, agents,
customers, assignees, contractors or sub-contractors shall be strictly
attributable to Lessor.
S. All obligations of Lessee hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term hereof, including, without
limitation, all payment obligations with respect to Operating Expenses and Real
Estate Taxes and all obligations concerning the condition of the Premises.
T. Any claim which Lessee may have against Lessor for default in
performance of any of the obligations herein contained to be kept and performed
by Lessor shall be deemed waived unless such claim is asserted by written notice
thereof to Lessor within six (6) months of commencement of the alleged default
or of accrual of the cause of action and unless suit be brought thereon within
one (1) year subsequent to the accrual of such cause of action. Furthermore,
Lessee agrees to look solely to Lessor's interest in the Office Complex,
together with any rents or other proceeds therefrom, for the recovery of any
judgment from Lessor, it being agreed that Lessor, or if Lessor is a
partnership, its partners whether general or limited, or if Lessor is a
corporation, its directors, officers or shareholders, or if Lessor is a limited
liability company, its members, shall never be personally liable for any such
judgment.
U. Lessee shall furnish to Lessor promptly upon demand, a corporate
resolution, proof of due authorization of partners, or
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<PAGE>
other appropriate documentation reasonably requested by Lessor evidencing the
due authorization of Lessee to enter into this Lease.
V. This Lease shall not be deemed or construed to create or establish
any relationship or partnership or joint venture or similar relationship or
arrangement between Lessor and Lessee here-under.
W. Lessee shall in all respects comply with the Americans With
Disabilities Act of 1990 (42 U.S.C. ss. 12101 et seq.), as the same may be
amended from time to time, and the Arizonans with Disabilities Act (A.R.S. ss.
41-1492 et seq.) (as amended, the "ADA"), and Lessee agrees to indemnify and
save Lessor and its managing agent harmless against and from any and all claims,
loss, damage and expense by or on behalf of any person or persons, firm or
firms, corporation or corporations, arising from any failure or alleged failure
of Lessee to comply with the ADA or arising from any claim made under the ADA in
connection with the Premises, and from and against all costs, reasonable
attorneys' fees, expenses and liabilities incurred in or about any such claim or
action or proceeding brought thereon; in case any action or proceeding be
brought against Lessor or its managing agent by reason of any such claim,
Lessee, upon notice from Lessor, covenants to resist or defend such action or
proceeding by counsel reasonably satisfactory to Lessor. Lessor agrees to cause
the Tenant Improvements (as hereinafter defined) to be constructed for general
office purposes in accordance with the public accommodations provisions of Title
III of the Americans With Disabilities Act of 1990 (42 U.S.C. ss. 12101 et seq.)
and the Arizonans with Disabilities Act (A.R.S. ss. 41-1492 et seq.), as
presently interpreted and enforced by the governmental bodies having
jurisdiction thereof. With respect to capital improvements required by the ADA
to be made to the Premises after the substantial completion of the Tenant
Improvements due to Lessee's particular use of the Premises, Lessee shall be
obligated to make such capital improvements, in accordance with the terms and
provisions of this Lease, at Lessee's sole cost and expense. With respect to
capital improvements required by the ADA to be made to the Premises after the
substantial completion of the Tenant Improvements that are not due to Lessee's
particular use of the Premises, then such capital improvements shall be made by
and paid for by Lessor and shall be amortized on a straight-line basis over the
useful life of such improvements and included in Operating Ex-
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<PAGE>
penses. Lessee shall not be required to make any repairs or improvements to the
Office Complex (except for the Premises) in order to cause same to be in
compliance with the ADA; provided, however, subject to the provisions of Article
II hereof, the cost of such modifications made by Lessor may be included in
Operating Expenses.
X. Lessee shall not place, or permit to be placed or maintained, on any
exterior door, wall or window of the Premises any sign, awning or canopy, or
advertising matter or other thing of any kind, and will not place or maintain
any decoration, lettering or advertising matter on the glass of any window or
door, or that can be seen through the glass, of the Premises except as
specifically approved in writing by Lessor. Nothing contained herein shall be
interpreted to prohibit Lessee from placing signs and decorations on the
interior of the reception area of the Premises provided such signs and
decorations are not visible from the exterior of the Premises. Lessee further
agrees to maintain such sign, awning, canopy, decoration, lettering, advertising
matter or thing as may be approved, in good condition and repair at all times.
Lessee agrees at Lessee's sole cost, that any Lessee sign will be maintained in
strict conformance with Lessor's sign criteria, if any, as to design, material,
color, location, size, letter style, and method of installation.
ARTICLE XVII. [Intentionally omitted.]
ARTICLE XVIII. MISCELLANEOUS TAXES: Lessee shall pay, prior to delinquency, all
taxes assessed or levied upon its occupancy of the Premises, or upon the trade
fixtures, furnishings, equipment and all other personal property of Lessee
located in the Premises, and when possible, Lessee shall cause such trade
fixtures, furnishings, equipment and other personal property to be assessed and
billed separately from the property of Lessor. In the event any or all of
Lessee's trade fixtures, furnishings, equipment or other personal property, or
Lessee's occupancy of the Premises, shall be assessed and taxed with the
property of Lessor, Lessee shall pay to Lessor its share of such taxes within
ten (10) days after delivery to Lessee by Lessor of a statement in writing
setting forth the amount of such taxes applicable to Lessee's personal property.
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<PAGE>
ARTICLE XIX. OTHER PROVISIONS: The following are made a part hereof, with the
same force and effect as if specifically set forth herein:
A. Floor Plan - Exhibit A.
A-1. Site Plan of the Office Complex - Exhibit A-1.
B. Building Rules and Regulations - Exhibit B.
C. Rider To Lease - Exhibit C.
D. Form of Subordination, Non-Disturbance and Attornment
Agreement - Exhibit D.
E. Subordination of Lien Rights - Exhibit E.
F. Memorandum of Lease - Exhibit F.
G. Janitorial Services - Exhibit G.
H. Purchase and Sale Agreement - Exhibit H.
I. Parking Garage Plan - Exhibit I.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day
and year first above written.
LESSOR: LESSEE:
SCOTTSDALE SPECTRUM, L.L.C., an UDC HOMES, INC., a Delaware
Arizona limited liability corporation
company
By Opus Southwest Corporation,
a Minnesota corporation By /s/ James J. Grogan
Its Managing Member -------------------------
Its Sr. Exec. VP
----------------------
By /s/ Thomas W. Roberts
------------------------
Thomas W. Roberts
Its President
By Globe Corporation, an
Illinois corporation
Its Member
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<PAGE>
By /s/ George F. Getz
---------------------
George F. Getz
Its Executive Vice President
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<PAGE>
EXHIBIT A
---------
FLOOR PLAN
----------
Exhibit A
(Page 1 of 1)
<PAGE>
EXHIBIT A-1
-----------
SITE PLAN OF THE OFFICE COMPLEX
-------------------------------
Exhibit A-1 (Page 1 of 1)
<PAGE>
EXHIBIT B
---------
BUILDINGS RULES AND REGULATIONS
-------------------------------
1. Any sign, lettering, picture, notice or advertisement installed on
or in any part of the Premises and visible from the exterior of the Office
Complex, or visible from the exterior of the Premises, shall be installed at
Lessee's sole cost and expense, and in such manner, character and style as
Lessor may approve in writing. In the event Lessee does not remove such
unapproved signage within ten (10) days after written notice from Lessor, Lessor
may remove the same without any liability and may charge the expense incurred by
such removal to Lessee.
2. No awning or other projection shall be attached to the outside walls
of the Office Complex. No curtains, blinds, shades or screens visible from the
exterior of the Office Complex or visible from the exterior of the Premises
shall be attached to or hung in, or used in connection with, any window or door
of the Premises without the prior written consent of Lessor. Such curtains,
blinds, shades, screens or other fixtures must be of a quality, type, design and
color, and attached in the manner, approved by Lessor.
3. Lessee and its servants, employees, customers, invitees and guests
shall not obstruct sidewalks, entrances, passages, corridors, vestibules, halls,
elevators or stairways in and about the Office Complex which are used in common
with other tenants and their servants, employees, customers, guests and invitees
and which are not a part of the Premises of Lessee. Lessee shall not place
objects against glass partitions or doors or windows which would be unsightly
from the Office Complex corridors or from the exterior of the Office Complex and
will promptly remove any such objects upon notice from Lessor.
4. Lessee shall not make excessive noises, cause disturbances or
vibrations or use or operate any electrical or mechanical devises that emit
excessive sound or other waves or disturbances, and Lessee shall not create
obnoxious odors (including cigarette, cigar and pipe smoke), any of which may be
offensive to the other
Exhibit B
(Page 1 of 4)
<PAGE>
tenants and occupants of the Office Complex, or that would interfere with the
operation of any device, equipment, radio, television broadcasting or reception
from or within the Office Complex or elsewhere and shall not place or install
any projections, antennas, aerials or similar devices inside or outside of the
Premises or on the Office Complex.
5. Lessee shall not waste electricity, water or air conditioning and
shall cooperate fully with Lessor to insure the most effective operation of the
Office Complex's heating and air conditioning systems and shall refrain from
attempting to adjust any controls other than unlocked room thermostats, if any,
installed for Lessee's use. Lessee shall keep corridor doors closed.
6. Lessee assumes full responsibility for protecting its space from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed and secured after normal business hours.
7. No person or contractor not employed by Lessor shall be used to
perform janitorial work, window washing, cleaning, maintenance, repair or
similar work in the Premises without the written consent of Lessor; provided,
however, nothing contained herein shall prohibit Lessee from obtaining the
services of persons or contractors not employed by Lessor to perform services in
excess of those services provided by Lessor pursuant to Article V.A hereof.
8. In no event shall Lessee bring into the Office Complex inflammables,
such as gasoline, kerosene, naphtha and benzine, or explosives or any other
article of intrinsically dangerous nature. If, by reason of the failure of
Lessee to comply with the provisions of this subparagraph, any insurance premium
for all or any part of the Office Complex shall at any time be increased, Lessee
shall make immediate payment of the whole of the increased insurance premium,
without waiver of any of Lessor's other rights at law or in equity for Lessee's
breach of this Lease.
9. Lessee shall comply with all applicable federal, state and municipal
laws, ordinances and regulations and building rules and shall not directly or
indirectly make any use of the Premises which may be prohibited by any of the
foregoing or which may be
Exhibit B
(Page 2 of 4)
<PAGE>
dangerous to persons or property or may increase the cost of insurance or
require additional insurance coverage.
10. Lessor shall have the right to prohibit any advertising by Lessee
which in Lessor's reasonable opinion tends to impair the reputation of the
Office Complex or its desirability as an office complex for office use, and upon
written notice from Lessor, Lessee shall refrain from or discontinue such
advertising.
11. The Premises shall not be used for lodging, sleeping or
for any immoral or illegal purpose.
12. Lessee and Lessee's servants, employees and agents, shall observe
faithfully and comply strictly with the foregoing rules and regulations and such
other and further appropriate rules and regulations as Lessor or Lessor's agent
may from time to time adopt pursuant to the terms of this Lease. Reasonable
notice of any additional rules and regulations shall be given in writing.
13. Unless expressly permitted by Lessor, no additional locks or
similar devices shall be attached to any door or window and no keys other than
those provided by Lessor shall be made for any door. If more than two keys for
one lock are desired by Lessee, Lessor may provide the same upon payment by
Lessee. Upon termination of this Lease or of Lessee's possession, Lessee shall
surrender all keys of the Premises and shall explain to Lessor all combination
locks on safes, cabinets and vaults. Lessor acknowledges that Lessee may install
locking cabinets in the Premises, and the provisions of this paragraph shall not
apply to such cabinets. Lessor shall not unreasonably withhold its consent to
Lessee installing Lessee's own locks on certain office spaces or closets within
the Premises (if permitted by applicable laws, codes and ordinances).
14. Any carpeting cemented down by Lessee shall be installed with a
releasable adhesive. In the event of a violation of the foregoing by Lessee,
Lessor may charge the expense incurred by such removal to Lessee.
15. The water and wash closets, drinking fountains and other plumbing
fixtures shall not be used for any purpose other than those for which they were
constructed, and no sweepings, rubbish,
Exhibit B
(Page 3 of 4)
<PAGE>
rags, coffee grounds or other substances shall be thrown therein. All damages
resulting from any misuse of the fixtures shall be borne by the lessee who, or
whose servants, employees, agents, visitors or licensees, shall have caused the
same. No person shall waste water by interfering or tampering with the faucets
or otherwise.
16. No electrical circuit for any purpose shall be brought into the
Premises without Lessor's written permission specifying the manner in which same
may be done.
17. No bicycle (except in the parking area and except as may be brought
into the Premises for storage while an employee is at work) or other vehicle,
and no dog or other animal, shall be allowed in offices, halls, corridors or
elsewhere in the Office Complex.
18. Lessee shall not throw anything out of the door or windows or down
any passageways or elevator shafts.
19. All loading, unloading, receiving or delivery of goods, supplies or
disposal of garbage or refuse shall be made only through entryways and freight
elevators provided for such purposes and indicated by Lessor. Lessee shall make
all repairs and improvements reasonably required by Lessor or governmental
authorities in connection with the use or moving of such articles.
20. All safes, equipment or other heavy articles shall be carried in or
out of the Premises only at such time and in such manner as shall be prescribed
in writing by Lessor, and Lessor shall in all cases have the right to specify
the proper position of any such safe, equipment or other heavy article, which
shall only be used by Lessee in a manner which will not interfere with or cause
damage to the Premises or the Office Complex or to the other tenants or
occupants of the Office Complex. Lessee shall be responsible for any damage to
the Office Complex or the property of its employees or others and injuries
sustained by any person whomsoever resulting from the use or moving of such
articles in or out of the Premises, and shall make all repairs and improvements
required by Lessor or governmental authorities in connection with the use or
moving of such articles.
Exhibit B
(Page 4 of 4)
<PAGE>
21. Canvassing, soliciting and peddling in the Office Complex is
prohibited and all tenants of the Office Complex shall cooperate to prevent the
same.
22. Vending machines shall not be installed without permission of
Lessor; provided, however, Lessor consents to the installation of vending
machines in the pantry or kitchen area of the Premises for the dispensing of
soda and other similar drinks and food to Lessee's employees and guests.
23. Wherever in these Building Rules and Regulations the word "Lessee"
occurs, it is understood and agreed that it shall mean Lessee and Lessee's
associates, agents, clerks, servants and visitors. Wherever the word "Lessor"
occurs, it is understood and agreed that it shall mean Lessor and Lessor's
assigns, agents, clerks, servants and visitors.
24. Lessee and its servants, employees, customers, invitees and guests
shall, when using the common parking facilities, if any, in and around the
Office Complex, observe and obey all signs regarding fire lanes and no parking
zones, and when parking, shall always park between the designated lines. Lessor
reserves the right to tow away, at the expense of the owner, any vehicle which
is improperly parked or parked in a no parking zone. All vehicles shall be
parked at the sole risk of the owner, and Lessor assumes no responsibility for
any damage to or loss of vehicles. No vehicles shall be parked overnight;
provided, however, Lessee's employees shall be permitted to park overnight on a
temporary, occasional basis; and provided, further, however, that Lessee shall
be permitted to park overnight, in the common parking facilities, not more than
two (2) commercial vehicles owned by Lessee and used in Lessee's business, in an
area reasonably designated by Lessor from time to time.
25. At all times the Office Complex shall be in the charge of Lessor's
employee in charge and (a) persons may enter the Office Complex only in
accordance with Lessor's regulations, (b) persons entering or departing from the
Office Complex may be questioned as to their business in the Office Complex, and
the right is reserved to require the use of an identification card or other
access device and the registering of such persons as to the hour of entry and
departure, nature of visit, and other information deemed necessary
Exhibit B
(Page 5 of 4)
<PAGE>
for the protection of the Office Complex, and (c) all entries into and
departures from the Office Complex will take place through the main public lobby
entrance doors of the Building and one or more other entrances as Lessor shall
from time to time designate; provided, however, anything herein to the contrary
notwithstanding, Lessor shall not be liable for any lack of security in respect
to the Office Complex whatsoever. Lessor will normally not enforce clauses (a),
(b) and (c) above from 7:00 a.m. to 6:00 p.m., Monday through Friday, and from
8:00 a.m. to 1:00 p.m. on Saturdays, but it reserves the right to do so or not
to do so at any time at its sole discretion. In case of invasion, mob, riot,
public excitement or other commotion, Lessor reserves the right to prevent
access to the Office Complex during the continuance of the same by closing the
doors or otherwise, for the safety of the tenants or the protection of the
Office Complex and the property therein. Lessor shall in no case be liable for
damages for any error or other action taken with regard to the admission to or
exclusion from the Office Complex of any person.
26. All entrance doors to the Premises shall be locked when the
Premises are not in use. All corridor doors shall also be closed during times
when the air conditioning equipment in the Office Complex is operating so as not
to dissipate the effectiveness of the system or place an overload thereon.
27. Lessor reserves the right at any time and from time to time to
rescind, alter or waive, in whole or in part, any of these Building Rules and
Regulations when it is deemed necessary, desirable or proper, in Lessor's
judgment, for its best interest or for the best interest of the tenants of the
Office Complex.
28. Smoking shall be permitted only in the smoking areas located
outside of the building, as designated and redesignated from time to time by
Lessor, and Lessee and its servants, employees, customers, invitees and guests
shall not smoke anywhere at the Office Complex (other than the smoking areas
designated by Lessor), including without limitation Lessee's Premises and the
sidewalks, entrances, passages, corridors, halls, elevators and stairways of the
Office Complex. Lessor agrees that the designated smoking area shall not be
located immediately adjacent to the main public entrance to the Building.
Exhibit B
(Page 6 of 4)
<PAGE>
Initials:
Lessor_________
Lessee_________
Exhibit B
(Page 7 of 4)
<PAGE>
EXHIBIT C
---------
RIDER TO OFFICE LEASE
---------------------
SCOTTSDALE SPECTRUM/UDC HOMES, INC.
ARTICLE XX. PROHIBITION ON CERTAIN AGREEMENTS: In no event shall Lessee or any
other person having an interest in the possession, use, occupancy or utilization
of the Premises enter into any lease, sublease, license, concession or other
agreement for use, occupancy or utilization of space in the Premises which
provides for rental or other payment for such use, occupancy or utilization
based in whole or in part of the net income or profits derived by any person
from the portion of the Premises leased, used, occupied or utilized (other than
an amount based on a fixed percentage or percentages of receipts or sales), and
any such purported lease, sublease, license, concession or other agreement shall
be absolutely void and ineffective as a conveyance of any right or interest in
the possession, use, occupancy or utilization of any part of the Premises.
ARTICLE XXI. SECURITY DEPOSIT: Lessor shall not initially require a security
deposit from Lessee, and Lessee acknowledges that Lessee has not paid any cash
security deposit to Lessor under this Lease. However, in the event of any
monetary default by Lessee under this Lease which is not cured within the
applicable cure period, which monetary default is followed by a second monetary
default within twelve (12) months of such first monetary default by Lessee under
this Lease which is not cured within the applicable cure period, then, upon
expiration of the cure period with respect to such second monetary default,
Lessee shall immediately become obligated to pay to Lessor in cash the sum of
Forty-Eight Thousand Nine Hundred Fifty-Eight and 33/100ths Dollars
($48,958.33), as and for a security deposit for the full and faithful
performance by Lessee of each and every term, covenant and condition of this
Lease. Such security deposit shall be delivered by Lessee to Lessor upon the
expiration of the cure period for such second default by Lessee. In the event
that Lessee defaults in respect to any of the terms, provisions, covenants and
conditions of this Lease, including, but not limited to, the payment of any
rentals or other charges or items to be paid or provided for by Lessee, Lessor
may use, apply or retain the whole or any part of the security so deposited for
Exhibit C
(Page 1 of 17)
<PAGE>
the payment of any such rentals in default or for any other sum which Lessor may
expend or be required to expend by reason of Lessee's default, including, but
not limited to, any damages or deficiency in the reletting of the Premises,
whether such damages or deficiency may accrue before or after reentry by Lessor.
Lessee shall not be entitled to any interest on the security deposit. It is
expressly understood and agreed that such deposit is not an advance rental
deposit or a measure of Lessor's damages in case of Lessee's default. Upon
application of any part of the deposit by Lessor as provided herein, Lessee
shall pay to Lessor on demand the amount so applied in order to restore the
security deposit to its original amount. Any application of the deposit by
Lessor shall not be deemed to have cured Lessee's default by reason of which the
application is made.
In the event of a bona fide sale of the building of which the Premises
are a part (the "Building"), Lessor shall have the right to transfer the
security deposit to its vendee for the benefit of Lessee and thereafter Lessor
shall be released of all liability for the return of such deposit and Lessee
agrees to look to said vendee for the return of its security deposit. It is
agreed that this provision shall apply to every transfer or assignment made of
the security deposit to any new landlord.
This security deposit shall not be assigned or encumbered by Lessee. It
is expressly understood that the reentry of the Premises by Lessor for any
default on the part of Lessee prior to the expiration of the term of this Lease
shall not be deemed a termination of this Lease so as to entitle Lessee to
recover the security deposit, and the security deposit shall be retained and
remain in the possession of Lessor until the end of the term of this Lease.
Actions by Lessor against Lessee for breach of this Lease shall in no
way be limited or restricted by the amount of the security deposit and resort to
such deposit shall not waive any other rights or constitute an election of
remedies which Lessor may have.
ARTICLE XXII. LOCK BOX: Lessor may from time to time designate a lock box
collection agent for the collection of rents or other charges due Lessor. In
such event, the payment made by Lessee to the lock box shall be the date of
receipt by the lock box collection agent of such payment (or the date of
collection of any such
Exhibit C
(Page 2 of 17)
<PAGE>
sum if payment is made in the form of a negotiable instrument thereafter
dishonored upon presentment); however, for the purpose of this Lease, no such
payment or collection shall be deemed a waiver by Lessor of any breach by Lessee
of any term, covenant or condition of this Lease nor a waiver of any of Lessor's
rights or remedies and any payment of amounts other than that deemed due and
proper by Lessor shall not prejudice Lessor in any manner nor constitute a
waiver and Lessor shall hereby be authorized to retain the proceeds of any
payments by Lessee, whether restrictively endorsed or otherwise, and apply same
to the amounts due and payable from Lessee under this Lease without waiver.
ARTICLE XXIII. PRIOR PROPOSALS: All prior proposals in respect to this Lease are
hereby terminated.
ARTICLE XXIV. USE: Notwithstanding anything to the contrary contained in this
Lease, during the term of this Lease and any extensions or renewals, Lessee
shall not use or permit any portion of the Premises to be used for (i) the
operation of a title company or title agency or for providing services typically
offered by escrow agents in connection with real estate transactions (except
that Lessee may engage in such use to the extent that Lessee first obtains the
written approval to do same from the lessee under that certain Office Lease
dated as of February 12, 1996, by and between Opus Southwest Corporation, a
Minnesota corporation, as Lessor, and First American Title Insurance Company, a
California corporation, as Lessee), or (ii) the discount or retail sale and/or
brokerage of securities and/or commodities, or (iii) the operation of a bank or
the provision of trust services, provided that this clause (iii) shall not
prohibit Lessee from engaging in mortgage lending for new homes constructed by
Lessee (collectively, the "Restricted Uses"). Lessee acknowledges that Lessor
may, in addition to the Restricted Uses, hereafter grant other exclusive or
prohibited uses to or for the benefit of other tenants or occupants of the
Office Complex, and Lessee agrees that neither it nor any successor, assign,
concessionaire, subtenant or assignee shall use the Premises, or any part
thereof, in any way that would violate any such exclusive or prohibited use of
which Lessee has received written notice, so long as such exclusive or
prohibited use does not prohibit the use of the Premises for any permitted
office purpose for which Lessee is then using the Premises. Upon receipt by
Lessee of written notice of any such exclusive or prohibited use hereafter
granted to or for
Exhibit C
(Page 3 of 17)
<PAGE>
the benefit of another tenant or occupant of the Office Complex, such exclusive
or prohibited use shall automatically be deemed to be an additional Restricted
Use, so long as such exclusive or prohibited use does not prohibit the use of
the Premises for any permitted office purpose for which Lessee is then using the
Premises. Lessee agrees that it will not withhold or delay its written
acknowledgement of the addition of any such additional exclusive or prohibited
use to the first sentence of this Article as an additional Restricted Use if
such acknowledgement is requested in writing by Lessor (which acknowledgment may
be in the form of an amendment to this Lease or in any other reasonable form),
and in the event Lessee fails to furnish such written acknowledgement within
fifteen (15) days after Lessee's receipt of Lessor's written request therefor,
Lessee shall be deemed to have given such written acknowledgement as of the
expiration of such 15- day period.
Lessee shall comply with the terms of any encumbrances, covenants,
conditions, restrictions or other matters now of record or hereafter recorded
against the Office Complex.
ARTICLE XXV. RENT ABATEMENT: Notwithstanding anything contained in Article II
("Additional Rent") hereof to the contrary, Lessee's Pro Rata Share of Excess
Real Estate Taxes and Operating Expenses to be paid by Lessee under Article II
during the first twenty-four months of the initial ten-year term of this Lease
shall accrue as obligations of Lessee to Lessor but shall not be payable until
such time as a default by Lessee occurs under this Lease and such default is not
cured within the applicable cure period under this Lease. Upon the occurrence of
a default within the first twenty-four (24) months of the term hereof by Lessee
that is not cured within the applicable cure period, Lessee shall immediately
become obligated to deliver to Lessor all of Lessee's Pro Rata Share of Excess
Real Estate Taxes and Operating Expenses that accrued during the first
twenty-four (24) months of the initial ten-year term of this Lease. If Lessee
complies with all the terms and conditions of this Lease throughout the first
twenty-four (24) months of the term of this Lease, Lessee's obligation to pay
Lessee's Pro Rata Share of Excess Real Estate Taxes and Operating Expenses that
accrued during the first twenty-four (24) months of the initial ten-year term of
this Lease shall automatically terminate upon the
Exhibit C
(Page 4 of 17)
<PAGE>
expiration of the twenty-fourth (24th) month of the term of this Lease and
Lessee shall thereafter be released from such obligation.
ARTICLE XXVI. TENANT IMPROVEMENTS:
A. Lessor shall provide, at no cost to Lessee, the base building
improvements for the Premises, which shall consist of the installation of a 2' x
4' ceiling grid, 2' x 2' acoustical tiles stockpiled on the floor, 2' x 4'
parabolic fluorescent light fixtures stockpiled on the floor (at one (1) fixture
per 80 usable square feet), the installation of the primary distribution of the
HVAC system and the shell building fire protection sprinkler system, and mini
blinds stockpiled on the floor. All of the foregoing items shall be either
stockpiled or installed, as applicable, using Lessor's building standard
improvements. All additional improvements to the base building will be so-called
"Tenant Improvements" to be installed by Lessor but to be selected by Lessee as
hereinafter set forth and paid for by Lessee subject to Lessor providing the
Tenant Improvement Allowance (as hereinafter defined). Lessor shall provide a
tenant improvement allowance (the "Tenant Improvement Allowance") equal to the
product of Nineteen and No/100ths Dollars ($19.00) multiplied by the useable
area of the Premises. Lessor shall, with respect to all major subcontracts,
cause Lessor's general contractor to solicit bids for the Tenant Improvements
from three (3) qualified subcontractors, and shall provide Lessee with the
opportunity to examine said bids upon request by Lessee.
B. If the price of the Tenant Improvements exceeds the Tenant
Improvement Allowance, Lessee shall pay Lessor, in cash, upon substantial
completion of the Tenant Improvements, the amount by which the price of the
Tenant Improvements exceeds the Tenant Improvement Allowance.
C. On or before the date of this Lease, Lessee has provided to Lessor a
space plan of the Tenant Improvements which Lessee desires for Lessor to
construct, which space plan has been approved by Lessor (the "Space Plan").
Lessee shall prepare working drawings for construction of such Tenant
Improvements, which working drawings shall be submitted to Lessor for Lessor's
review and approval. In granting or withholding such approval, Lessor shall not
be arbitrary or capricious, and objections to or
Exhibit C
(Page 5 of 17)
<PAGE>
disapproval of such working drawings shall be limited to those items which are
inconsistent with the Space Plan. Lessee shall be responsible for Lessor's costs
(including lost rent) arising out of delays in completing the Tenant
Improvements caused by Lessee. Lessee also agrees to refrain from ordering long
lead time items which would delay substantial completion of the Tenant
Improvements.
ARTICLE XXVII. PARKING: Lessor shall license vehicle parking spaces to Lessee
and Lessee's business on the following terms and conditions.
Lessor shall provide ten (10) vehicular parking spaces as exclusive
parking spaces ("Reserved Spaces") for Lessee and its employees in the enclosed
parking garage portion of the Office Complex. Such Reserved Spaces are depicted
on Exhibit I attached hereto and incorporated herein (the "Parking Garage
Plan"). This license is for Reserved Spaces in the general parking area to be
designated and redesignated from time to time by Lessor; provided, however,
Lessor may require Lessee to park in a specific location. Lessor shall not be
liable to Lessee for the failure of any of its tenants, invitees, employees,
agents or customers or any third parties to comply with the designation of the
Reserved Spaces.
Lessor shall provide fifty (50) vehicular parking spaces on an
unreserved basis ("Unreserved Spaces") for Lessee and its employees in the
enclosed parking garage portion of the Office Complex. This license is for
Unreserved Spaces in the general parking area to be designated and redesignated
from time to time by Lessor; provided, however, Lessor may require Lessee to
park in a specific location. Lessor shall not be liable to Lessee for the
failure of any of its tenants, invitees, employees, agents or customers or any
third parties to comply with the designation of the Unreserved Spaces.
The parking fees for the Reserved Spaces shall be abated for the first
twelve (12) months of the initial ten-year term hereof; provided, however, that
charges for parking garage access devices and name plates for reserved spaces
shall be paid for by Lessee upon receipt of invoice from Lessor. Thereafter,
Lessee agrees to pay as a monthly fee for such license of parking spaces
Lessor's then current fee for each Reserved Space and Unreserved Space licensed,
payable on or before the first day of each month in
Exhibit C
(Page 6 of 17)
<PAGE>
advance, which monthly fee may be changed by Lessor as of the first day of any
month by giving not less than thirty (30) days written notice thereof to the
Lessee. During the initial sixty (60) month period of the initial ten-year, zero
month term hereof, Lessor's monthly parking fees will be $50.00 per month for
reserved parking spaces and $25.00 per month for covered unreserved parking
spaces. During the second sixty (60) month period of the initial ten-year,
zero-month term hereof, Lessor's monthly parking will be $57.50 per month for
reserved parking spaces and $28.75 per month for unreserved spaces. Thereafter,
provided that Lessee has elected to extend the term of this Lease, Lessee agrees
to pay as a monthly fee for each Reserved Space and each Unreserved Space
referenced in the preceding paragraph an amount equal to the market rate from
time to time for each such Reserved Space and Unserved Space. For purposes of
this Article, "market rate" shall mean the fair market monthly parking fee being
charged from time to time, as reasonably determined by Lessor, by owners of
first-class office complexes similar in quality and size as the Office Complex
and located in Scottsdale, Arizona. As the market rate changes from time to
time, the monthly fee charged by Lessor to Lessee for each of such Reserved
Spaces and Unreserved Spaces shall be adjusted accordingly.
In addition to the Reserved Spaces and the Unreserved Spaces, Lessor
shall provide to Lessee, for the first twelve (12) months of the term hereof
only, up to an additional fifty (50) vehicular parking spaces on an unreserved
basis (the "Additional Unreserved Spaces"), as requested by Lessee in writing on
or before the Commencement Date, for Lessee and its employees in the enclosed
parking garage portion of the Office Complex. This license is for Additional
Unreserved Spaces in the general parking area to be designated and redesignated
from time to time by Lessor; provided, however, Lessor may require Lessee to
park in a specific location. During the first twelve (12) months of the term
hereof, Lessee agrees to pay, as a monthly fee for each Additional Unreserved
Space, the sum of $25.00, payable on or before the first day of each month in
advance. From and after the expiration of the first twelve (12) months of the
term hereof, Lessee agrees to pay for any such Additional Unreserved Spaces
licensed by Lessee (subject to the next succeeding sentence) Lessor's then
current fee for each such Additional Unreserved Space. After the expiration of
the twelfth (12th) month of the initial term of this Lease, and from
Exhibit C
(Page 7 of 17)
<PAGE>
time to time thereafter, Lessor may, in its sole discretion, terminate Lessee's
license of any or all of the Additional Unreserved Spaces by delivering written
notice thereof to Lessee. On the date two (2) days after receipt of such notice,
Lessee shall have no further rights to the Additional Unreserved Spaces
identified therein. Only vehicles designated by Lessee to Lessor may be parked
or stored in Additional Unreserved Spaces; provided, however, that Lessee may
change its automobile designations at any time upon written notice to Lessor or
for temporary use upon notification given to the garage attendant, if any. No
more than one automobile per space licensed hereunder shall be parked or stored
under Lessee's rights hereunder at any one time. Lessor shall cause the parking
garage and surface parking area to be lighted in accordance with applicable
codes, laws and ordinances, and Lessor shall cause the parking garage to be
lighted with security lighting from dusk until dawn, seven days per week.
This license is for self-service storage or parking only and does not
include the rights to any additional services, which services may be made
available by Lessor from time to time at an additional charge.
It is understood that Lessor and its agents and employees shall not be
liable for loss or damage to any vehicle parked or stored by Lessee or under
Lessee's rights herein and/or to the contents thereof caused by fire, theft,
explosion, freezing of circulation system of any automobile, strikes, riots or
by any other causes and Lessee (1) waives any claim against Lessor for and in
respect thereto, and (2) hereby agrees to indemnify and defend Lessor against
all claims for any loss or damage to any such vehicle or its contents from any
cause whatsoever. It is further expressly understood that the relationship
between Lessor and Lessee with respect to the parking spaces constitutes a
license to use said garage subject to the terms and conditions herein only and
that neither such relationship nor the storage or parking of any automobile
thereunder shall constitute a bailment nor create the relationship of bailor and
bailee.
In the event the garage referenced shall be damaged by fire or other
casualty rendering it unusable by Lessee, the fee provided for herein shall be
abated (pro rata based on the portion of the Lessee's stalls which are unusable)
from the date ten (10) days
Exhibit C
(Page 8 of 17)
<PAGE>
after the date the garage becomes unusable until it again becomes usable.
Further, if all or any part of the garage is taken by eminent domain
proceedings, Lessor shall be entitled to all of the award in the proceedings and
may terminate this parking arrangement in the event of a total taking or reduce
the number of stalls licensed hereunder in proportion to the extent of any
partial taking upon written notice to Lessee. If the garage is damaged by fire
or other casualty, Lessor will cause it to be repaired with due diligence.
Subject to the abatement provided for in the preceding paragraph,
Lessor shall have the right to temporarily close any portion of the garage and
deny access thereto in connection with any repairs or in an emergency, as it may
require, without liability, cost or abatement of fee.
Lessee shall perform, observe and comply with such rules of the Office
Complex as may be reasonably adopted by Lessor in respect to the use and
operation of said garage. Lessor acknowledges that Lessee will from time to time
throughout the term hereof conduct meetings in the Premises which include
Lessee's employees, agents and contractors, and that the parking requirements
may have an adverse impact on the amount of parking available for visitors in
the visitor parking area. Lessee agrees to reasonably cooperate with Lessor in
scheduling said meetings so as to minimize any adverse effect on the ability of
the visitors of other tenants to utilize said visitor parking.
Lessee shall, when using the parking facilities of said garage, observe
and obey all signs regarding fire lanes and no parking zones, and when parking
always park between designated lines. Lessor reserves the right to tow away, or
otherwise impound, at the expense of the owner or operator, any vehicle which is
improperly parked or parked in a no parking zone.
In the event a key or other access device is supplied by Lessor to
Lessee in connection with the rights granted herein, Lessee will surrender such
key or access device to Lessor upon termination of this Lease.
Lessor shall designate the two (2) parking spaces depicted on Exhibit
A-1 as "Reserved - UDC" for the use of Lessee's visitors.
Exhibit C
(Page 9 of 17)
<PAGE>
ARTICLE XXVIII. CONFIDENTIALITY: Lessee agrees to keep this Lease and the terms
hereof in confidence, and not to publish or disclose, in whole or in part, the
same without Lessor's prior written consent, which consent may be withheld in
Lessor's sole discretion; provided, however, the foregoing shall not apply to
disclosures required to be made by Lessee to Lessee's attorneys, accountants,
lenders, prospective lenders, prospective subtenants and assigns, and as may be
required by law or court order.
ARTICLE XXIX. DEFAULT OF LESSOR: In the event of any alleged breach by Lessor of
its covenants contained in this Lease, Lessee shall have available all rights
and remedies provided at law or in equity, subject to the terms and conditions
of this Lease; provided, however, Lessee may not exercise any such right or
remedy unless Lessee has notified Lessor and any party having a recorded
mortgage or bond indenture lien against the property by written notice of such
alleged default, and the notified party or parties have not cured such default
within the thirty (30) day period subsequent to receipt of such notice or, in
the event such alleged default is of such a nature that it cannot reasonably be
cured within such thirty-day period, such notified party or parties have failed
to cure such alleged default with all due diligence.
ARTICLE XXX. FINANCIAL STATEMENTS: Lessee agrees to provide to Lessor upon
Lessee's execution of this Lease and prior to Lessor executing same, and within
thirty (30) days after Lessor's request therefor not more than once annually
during the term of this Lease, complete, accurate up-to-date financial
statements prepared according to generally accepted accounting principles
consistently applied, certified by Lessee's chief financial officer as an
officer of Lessee, that same are a true, complete and correct statement of the
financial condition of Lessee as of the date of such financial statements.
Notwithstanding anything to the contrary herein, Lessor may request such
financial statements in connection with a proposed sale or refinancing of the
Premises or the Office Complex. Lessor agrees to keep such financial statements
in confidence, and not to publish or disclose, in whole or in part, the same
without Lessee's prior written consent, which consent may be withheld in
Lessee's sole discretion; provided, however, that the provisions of this Article
shall not apply to any disclosure required by legal authorities or any
disclosure to Lessor's banks, lenders, consul-
Exhibit C
(Page 10 of 17)
<PAGE>
tants, architects, accountants, attorneys, employees or agents in connection
with such proposed sale or financing transaction.
ARTICLE XXXI. COMMENCEMENT DATE MEMORANDUM; MEASUREMENT OF RENTABLE AREA: Lessee
acknowledges that the Office Complex is not constructed as of the date of this
Lease and that the Base Rent, the square footage of the Premises as determined
in accordance with the provisions of this Article XXXI, Lessee's Pro Rata Share
of Excess Real Estate Taxes and Operating Expenses, the Expense Stop, the Tenant
Improvement Allowance, and certain other items set forth in this Lease will be
calculated based on the useable area of the Premises, the rentable area of the
Premises, and the rentable area of the Office Complex.
Promptly after the commencement of the term of this Lease, a memorandum
(the "Commencement Date Memorandum") shall be prepared by Lessor and executed by
Lessor and Lessee. The Commencement Date Memorandum shall set forth the date on
which the term of this Lease commenced, the expiration date of the initial
ten-year term, the useable area of the Premises, the rentable area of the
Premises, and the rentable area of the Office Complex (all as certified by
Lessor's architect), the Base Rent, the Expense Stop, and the percentage
initially to be used to calculate Lessee's Pro Rata Share of Excess Real Estate
Taxes and Operating Expenses.
Lessor's architect shall compute and certify the "Premises Usable
Area," the "Office Complex Rentable Area" and the "Floor R/U Ratio " in
accordance with ANSI Z65.1-1996, as published by the Building Owners and
Managers Association International (aka "BOMA"). Lessor's architect has reviewed
the Space Plan and determined that, upon construction of the Premises, the Floor
R/U Ratio (as defined in ANSI Z65.1-1996 of the Premises will be 1.088. In no
event shall the Floor R/U ratio exceed 1.088. The Premises Rentable Area shall
be equal to the Floor R/U Ratio (1.088) multiplied by the Premises Useable Area
(which represents a load factor of 8.8%). Upon substantial completion of the
Premises, Lessee shall have the right to verify the Premises Usable Area and the
Floor R/U Ratio, as certified by Lessor's architect.
ARTICLE XXXII. FUTURE DEVELOPMENT: Lessor and Lessee understand and agree that
the Office Complex as initially constructed is the first phase ("Phase I") of a
proposed two-phase integrated commer-
Exhibit C
(Page 11 of 17)
<PAGE>
cial real estate development (the second phase hereinafter referred to as "Phase
II"). Upon substantial completion of Phase II, the Office Complex for purposes
of this Lease may, at Lessor's option, include all of the land within Phase II
and all easement areas appurtenant thereto, and all buildings, improvements and
personal property of Lessor used in connection with the operation or maintenance
thereof located therein and thereon and the appurtenant parking facilities.
Upon substantial completion of Phase II and election of Lessor, the
Property shall thereafter be deemed to mean the land (and all easement areas
appurtenant thereto) on which both Phase I and Phase II are located; and the
Office Complex as that term is used herein shall be deemed to mean all buildings
and improvements and personal property of Lessor used in connection with the
operation or maintenance thereof and appurtenant parking facilities located on
Phase I and Phase II.
If Lessor so elects, upon substantial completion of Phase II and
redefinition of the terms "Property" and "Office Complex" as hereinabove
described, the percentage set forth as "Lessee's Pro Rata Share of Excess Real
Estate Taxes and Operating Expenses" in Article II.F herein, shall be recomputed
on the basis of the rentable area of the Premises compared to the rentable area
of the Office Complex (as expanded) subject to adjustment on the basis of
ninety-five percent (95%) of the total average rentable area of the Office
Complex (as expanded) pursuant to said Article II.F.
In no event shall this Article be deemed to require Lessor to develop
or construct Phase II (nor require Lessor to combine Phase I and Phase II as
hereinabove allowed) or any addition or modification to the Office Complex (as
originally defined herein or otherwise), nor is this intended in any manner to
be a representation or warranty that Phase II will at any time be constructed or
developed by Lessor. Lessor shall retain the right to increase or decrease the
size of Phase I or Phase II and make other changes to the Property and the legal
description of the Office Complex subject to the terms hereof.
ARTICLE XXXIII. FIRST OPTION TO EXTEND: Lessee shall have the right, subject to
the provisions hereinafter provided, to extend the term of this Lease for one
(1) period of five (5) years on the
Exhibit C
(Page 12 of 17)
<PAGE>
terms and provisions of this Article XXXIII. Such five-year renewal period is
sometimes herein referred to as the "First Renewal Term". The conditions of such
First Renewal Term shall be as follows:
(a) That this Lease is in full force and effect and Lessee is not
in default in the performance of any of the terms, covenants
and conditions herein contained, in respect to which notice of
default has been given hereunder which has not been or is not
being remedied in the time limited in this Lease, at the time
of exercise of the right of renewal, but Lessor shall have the
right at its sole dis- cretion to waive the non-default
conditions herein.
(b) That such First Renewal Term shall be on the same terms,
covenants and conditions as in this Lease; provided, however,
(i) the annual Base Rent for such First Renewal Term shall be
an amount equal to ninety-five percent (95%) of the fair
market Base Rent rate for such space (taking into account the
then-current rental concessions (if any), tenant improvement
allowance (if any), and broker's commissions (if any),
applicable to such First Renewal Term) on the date such
renewal term shall commence in relation to comparable (in
quality, location and size) space located in Scottsdale,
Arizona (a "Comparable Building"), and (ii) the "expense stop"
for such First Renewal Term shall be adjusted to a then-
current market rate expense stop for a Comparable Building.
The determination of such fair market Base Rent for the
Premises shall be made no later than the date that is eleven
(11) months prior to commencement of the First Renewal Term.
Provided Lessee has properly elected to renew the term of this
Lease, and if Lessor and Lessee fail to agree at least eleven
(11) months prior to commencement of the First Renewal Term
upon the fair market Base Rent of the Premises, the fair
market Base Rent of the Premises shall be determined by
appraisal in accordance with the provisions of Article XXXV
("Appraisal") hereof. Notwithstanding anything to the contrary
contained in this Article, in no event shall the Base Rent of
the Premises for the First Renewal Term be less than the Base
Rent (exclusive of temporary abate-
Exhibit C
(Page 10 of 17)
<PAGE>
ments) payable by Lessee under the terms of this Lease
immediately prior to commencement of such First Renewal Term.
(c) That Lessee shall exercise its right to the First Renewal Term
provided herein, if at all, by notifying Lessor in writing of
its election to exercise the right to renew the term of this
Lease no later than nine (9) months prior to end of the
initial ten-year, zero-month term. Upon notification with
respect to such renewal, and for a period of thirty (30) days
thereafter, the parties hereto shall make a good faith effort
to agree upon the fair market Base Rent of the Premises for
such First Renewal Term. In the event that Lessor and Lessee
fail to agree within the thirty (30) day time period set forth
in this subparagraph (c), the fair market Base Rent of the
Premises for such First Renewal Term shall be determined by
appraisal in the manner set forth in Article XXXV hereof. Any
determination by appraisal or any agreement reached by the
parties hereto with respect to such fair market Base Rent and
resulting Base Rent of the Premises for such First Renewal
Term shall be expressed in writing and shall be executed by
the parties hereto, and a copy thereof delivered to each of
the parties.
ARTICLE XXXIV. SECOND OPTION TO EXTEND: If and only if Lessee has exercised its
option to extend the term of this Lease for the First Renewal Term and this
Lease is in full force and effect, Lessee shall have the right, subject to the
provisions hereinafter provided, to further extend the term of this Lease for
one (1) period of five (5) years on the terms and provisions of this Article
XXXIV. Such five-year renewal period, which is sometimes hereinafter referred to
as the "Second Renewal Term", shall commence on the day after the expiration of
the First Renewal Term. The conditions of such Second Renewal Term shall be as
follows:
(a) That this Lease is in full force and effect and Lessee is not
in default in the performance of any of the terms, covenants
and conditions herein contained, in respect to which notice of
default has been given hereunder which has not been or is not
being remedied in the time limited in this Lease, at the time
of exercise of the right of
Exhibit C
(Page 14 of 17)
<PAGE>
renewal, but Lessor shall have the right at its sole
discretion to waive the non-default conditions herein.
(b) That such Second Renewal Term shall be on the same terms,
covenants and conditions as in this Lease; provided, how-
ever, the annual Base Rent for such Second Renewal Term shall
be an amount equal to ninety-five percent (95%) of the fair
market Base Rent rate for such space (taking into account
rental concessions (if any), tenant improvement allowance (if
any), and broker's commissions (if any), applicable to such
Second Renewal Term) on the date such renewal term shall
commence in relation to a Comparable Building, and (ii) the
"expense stop" for such Second Renewal Term shall be adjusted
to a then-current market rate expense stop for a Comparable
Building. The determination of such fair market Base Rent for
the Premises shall be made no later than the date that is
eleven (11) months prior to commencement of the Second Renewal
Term. Provided Lessee has properly elected to renew the term
of this Lease, and if Lessor and Lessee fail to agree at least
eleven (11) months prior to commencement of the Second Renewal
Term upon the fair market Base Rent of the Premises, the fair
market Base Rent of the Premises shall be determined by
appraisal in accordance with the provisions of Article XXXV
hereof. Notwithstanding anything to the contrary contained in
this Article, in no event shall the Base Rent of the Premises
for the Second Renewal Term be less than the Base Rent
(exclusive of temporary abatements) payable by Lessee under
the terms of this Lease immediately prior to commencement of
such Second Renewal Term.
(c) That Lessee shall exercise its right to the Second Renew- al
Term provided herein, if at all, by notifying Lessor in
writing of its election to exercise the right to renew the
term of this Lease no later than nine (9) months prior to end
of the First Renewal Term. Upon notification with respect to
such renewal, and for a period of thirty (30) days thereafter,
the parties hereto shall make a good faith effort to agree
upon the fair market Base Rent of the Premises for such Second
Renewal Term. In the event that Lessor and Lessee fail to
agree within
Exhibit C
(Page 15 of 17)
<PAGE>
the thirty (30) day time period set forth in this sub-
paragraph (c), the fair market Base Rent of the Premises for
such Second Renewal Term shall be determined by appraisal in
the manner set forth in Article XXXV hereof. Any determination
by appraisal or any agreement reached by the parties hereto
with respect to such fair market Base Rent and resulting Base
Rent of the Premises for such Second Renewal Term shall be
expressed in writing and shall be executed by the parties
hereto, and a copy thereof delivered to each of the parties.
ARTICLE XXXV. APPRAISAL: Within seven (7) days after the expiration of the
period within which Lessor and Lessee were to reach agreement on the fair market
Base Rent as provided in Article XXXIII or Article XXXIV, Lessor and Lessee
shall mutually appoint an appraiser that has at least five (5) years full-time
commercial appraisal experience and is a member of the American Institute of
Real Estate Appraisers. If Lessor and Lessee are unable to agree upon an
appraiser, either of the parties to this Lease, after giving five (5) days prior
written notice to the other party, may apply to the then president of the
Phoenix Board of Realtors for the selection of an appraiser who meets the
foregoing qualifications, which selection shall be made within fifteen (15)
days. The appraiser selected by the president of the Board of Realtors shall be
a person who has not previously acted in any capacity for either party, its
affiliates or leasing agents and who meets the above experience qualifications.
Lessor and Lessee shall each, within seven (7) days of the appointment (either
by agreement or selection) of the appraiser, submit to the appraiser such
parties' determination of the fair market Base Rent for purposes of Article
XXXIII or Article XXXIV, as the case may be. Within twenty (20) days after the
conclusion of the above-referenced seven-day period, the appraiser shall review
each of the Lessor's and Lessee's sub- mittals and shall review such other
information as such appraiser shall deem necessary (a party may furnish the
appraiser with any information it deems relevant) and shall determine which of
the two submittals is the more reasonable. The appraiser shall immediately
notify the parties of his or her selection, and such selection shall be
multiplied by ninety-five percent (95%) to determine the Base Rent of the
Premises for the First Renewal Term or the Second Renewal Term, as the case may
be; provided, however, that the Base Rent of the Premises for the First Renewal
Term or the Second
Exhibit C
(Page 16 of 17)
<PAGE>
Renewal Term, as the case may be, shall in no event be less than the Base Rent
payable by Lessee under the terms of this Lease immediately prior to the
commencement of the applicable renewal term. If, upon the expiration of the
above-referenced seven-day period, the appraiser shall have received one of the
party's submittals as to the fair market Base Rent, but not both, the appraiser
shall designate the submitted item as the fair market Base Rent to be used to
calculate the Base Rent for the Premises for the First Renewal Term or the
Second Renewal Term in the manner provided in the previous sentence, and the
appraiser shall immediately notify the parties of same. Notwithstanding the
foregoing two sentences, in no event shall the Base Rent of the Premises for the
First Renewal Term or the Second Renewal Term be less than the Base Rent
(exclusive of temporary abatements) payable by Lessee under the terms of this
Lease immediately prior to commencement of the applicable renewal term.
ARTICLE XXXVI. FIRST RIGHT OF OFFER: Subject to the terms and conditions set
forth in this Article XXXVI, Lessor hereby grants to Lessee the first right
("First Right") to be offered by Lessor the opportunity to lease the remainder
of the rentable square feet of space located on the first floor of the Building
in which the Premises is located. If, at any time while this First Right is in
effect, Lessor should intend to lease any portion of such space to a third party
tenant, then Lessor shall first offer to lease such space to Lessee. In the
event Lessor offers to Lease such space (or portion thereof) to Lessee pursuant
to this Article XXXVI, Lessee shall notify Lessor in writing within ten (10)
days of its receipt of Lessor's notice whether Lessee desires to offer to lease
such space from Lessor. If Lessee notifies Lessor in writing within such ten-day
period that Lessee does not desire to lease such space, or if Lessee does not
respond in writing to Lessor's notice within such ten-day period, then, in
either of the above instances, Lessor's obligations under this Article XXXVI
shall automatically terminate with respect to the space proposed to be leased
and be of no further force or effect and Lessor shall thereafter be entitled to
lease such space. If Lessee notifies Lessor in writing within such ten-day
period that Lessee desires to lease such space from Lessor, the parties shall
thereafter negotiate for Lessee's lease of the space from Lessor; provided,
however, that if Lessor and Lessee fail to mutually agree upon the terms of
Lessee's lease of such space and to execute a written amendment to this Lease
within
Exhibit C
(Page 17 of 17)
<PAGE>
fifteen (15) days of the date of Lessee's receipt of written notice (which
amendment shall contain the terms mutually agreed to by the parties for Lessee's
lease of such space), then Lessor's obligations under this Article XXXVI shall
automatically terminate with respect to the space proposed to be leased and be
of no further force or effect at the end of such fifteen-day period. If Lessor
becomes entitled to lease such space (or any portion thereof) to a third party
and does not within ninety (90) days thereafter lease such space to a third
party, or if Lessor leases all or any portion of such space to a third party and
the lease between Lessor and such third party thereafter expires and the third
party then has no further rights to such space, Lessee shall once again have the
First Right to lease such space, as set forth in this Article, and Lessor shall
once again be required to comply with the provisions of this Article prior to
leasing such space to another tenant. Notwithstanding anything to the contrary
contained in this Article XXXVI, in the event Lessee's First Right as set forth
in this Article XXXVI is still in effect at the end of the initial ten-year term
of this Lease, such First Right shall automatically terminate on the last day of
the initial ten-year term of this Lease. The purpose of this Article is to
provide notice to Lessee so that Lessee may be in a position to offer to lease
such space on a competitive basis with others, and, notwithstanding anything to
the contrary contained in this Article XXXVI, nothing in this Article XXXVI
shall be deemed to be an option or right of first refusal.
ARTICLE XXXVII. CAP ON INCREASE IN CONTROLLABLE OPERATING EXPENSES:
Notwithstanding anything to the contrary contained in Article II ("Additional
Rent") of this Lease, the portion of Operating Expenses other than insurance
premiums, costs of utilities and taxes used to calculate Lessee's Pro Rata Share
of Excess Real Estate Taxes and Operating Expenses for each Lease Year shall not
increase beyond an amount equal to one hundred five percent (105%), of the
amount of such Operating Expenses during the prior Lease Year. A pro rata
adjustment shall be made for a fractional Lease Year occurring during the term
of this Lease based upon the number of such days of the term of this Lease
during said Lease Year.
ARTICLE XXXVIII. SIGNAGE: Provided Lessee at its cost receives all necessary
governmental and quasi-governmental approvals there- for, Lessor shall allow
Lessee to erect a sign, not to exceed twenty-five (25) square feet in area, on
the exterior of the Office
Exhibit C
(Page 18 of 17)
<PAGE>
Complex, in the location depicted on Exhibit A-1, which sign shall be Lessee's
name, "subordinate" to Lessor's building designation sign and other signs
located on the building as depicted on Exhibit A-1. Lessor shall cause Lessee's
sign to be the only sign on the southern half of the Scottsdale Road frontage of
the Building and to cause only one other tenant's sign to be placed on the
Scottsdale Road frontage of the Building. Lessor shall reasonably cooperate with
Lessee, without cost or expense to Lessor, in obtaining such approvals to the
extent such cooperation is reasonably necessary for obtaining same. Lessee may
install lighting for Lessee's sign as allowed by the City of Scottsdale and
reasonably approved by Lessor. Lessee shall pay all annual and other permit fees
therefor, shall pay all costs of maintenance thereof, shall keep same in good
condition, order and repair at its sole cost and expense, shall remove same
prior to termination of this Lease, and shall repair and restore any damage to
the Office Complex caused by such installation and/or removal. Any such sign,
and the display of Lessee's name thereon, shall be subject to the terms of any
restrictive covenants applicable thereto and all applicable laws, ordinances and
regulations. Unless prohibited by any governmental and quasi-governmental
authority, Lessor shall construct a tenant identification sign in the courtyard
of the Office Complex, the design and location of which shall be determined by
Lessor, in Lessor's sole discretion. Lessee shall be entitled to place a sign
thereon identifying Lessee's business, which sign shall be subject to Lessor's
approval and to all requirements of this Article XXXVIII.
ARTICLE XXXIX. REFURBISHMENT ALLOWANCE: Provided Lessee is not in default under
this Lease on the last day of the sixtieth (60th) full month of the term of this
Lease, Lessor shall provide to Lessee a refurbishment allowance not exceeding
Two and No/100ths Dollars ($2.00) per useable square foot of the Premises (the
"Refurbishment Allowance"). Lessor agrees to pay the Refurbishment Allowance to
Lessee within thirty (30) days after the last day of the sixtieth (60th) full
month of this Lease. Lessee agrees that the Refurbishment Allowance shall be
utilized by Lessee to improve or refurbish the Premises, or to reimburse Lessee
for the cost of improvements or refurbishments of the Premises made by Lessee
prior to its receipt of the Refurbishment Allowance from Lessor.
Exhibit C
(Page 19 of 17)
<PAGE>
ARTICLE XL. EXISTING PROPERTY: Mill & Ellis Office Limited Partnership, an
Arizona limited partnership, and ME II Limited Partnership, an Arizona limited
partnership (collectively, the "Existing Property Owner") are the current fee
title owners of certain real property and the improvements located thereon,
including certain personal property used in connection with the operation
thereof, located at 4812 South Mill Road, Tempe, Arizona, 85282 (the "Existing
Property"). Lessee represents and warrants that Lessee has the requisite power
and authority to cause the Existing Property Owner to sell the Existing
Property. The Existing Property is subject to (i) that certain Real Estate Note
dated June 8, 1988, executed by Mill & Ellis Office Limited Partnership, an
Arizona limited partnership, as maker, in favor of The Arizona Bank, as payee
(the "First Promissory Note"), which First Promissory Note is secured by that
certain Deed of Trust dated June 8, 1988, and executed by Mill & Ellis Office
Limited Partnership, an Arizona limited partnership, as Trustor, in favor of the
Arizona Bank, as Beneficiary, and recorded in the Official Records of Maricopa
County, Arizona, on June 24, 1988, as Instrument No. 88-309625 (the "First Deed
of Trust") and (ii) that certain Real Estate Note dated June 7, 1988, executed
by ME II Limited Partnership, an Arizona limited partnership, as maker, in favor
of The Arizona Bank, as payee (the "Second Promissory Note") (the First
Promissory Note and the Second Promissory Note are collectively hereinafter
referred to as the "Promissory Notes"), which Second Promissory Note is secured
by that certain Deed of Trust dated June 7, 1988, executed by ME II Limited
Partnership, an Arizona limited partnership, as Trustor, in favor of the Arizona
Bank, as Beneficiary, and recorded in the Official Records of Maricopa County,
Arizona, on June 24, 1988, as Instrument No. 88-309623 (the "Second Deed of
Trust") (the First Deed of Trust and the Second Deed of Trust are collectively
hereinafter referred to as the "Deeds of Trust"). The outstanding principal
balance on the First Promissory Note as of ____________, 19___, is
__________________________________ and No/100ths Dollars ($______________). The
outstanding principal balance on the Second Promissory Note as of ____________,
19___, is _____________________ and No/100ths Dollars ($______________).
Concurrently with the full execution of this Lease, Lessor and Lessee shall
cooperate to jointly market the Existing Property for sale by engaging CB
Commercial Real Estate Group, Inc. (Brad Anderson) as listing broker, or in the
event that Lessor and Lessee should thereafter desire to engage an alternative
listing broker, by selecting a mutually ac-
Exhibit C
(Page 20 of 17)
<PAGE>
ceptable listing broker. In the event that Lessee causes the Existing Property
Owner to close the sale of the Existing Property prior to the Commencement Date,
Lessor and Lessee shall divide equally the net proceeds of the sale of the
Existing Property in excess of the amount required to pay in full all
outstanding principal and interest of the Promissory Notes. For purposes hereof,
the term "net proceeds" means the amount by which the gross sale proceeds
derived by the Existing Property Owner in connection with its sale of the
Existing Property exceeds the sum of the amounts required to pay off in full the
Promissory Notes and to cause the release of record of the Deeds of Trust plus
all reasonable closing costs and expenses incurred or paid by or on behalf of
the Existing Property Owner in connection with such sale, including, without
limitation, brokers' commissions, attorneys' fees and other closing costs under
the purchase agreement pursuant to which such closing occurs. If any portion of
the consideration received by the Existing Property Owner in connection with
such closing shall consist of something other than cash, then for purposes of
calculating the gross sale proceeds under the preceding sentence, the fair
market value of any non-cash consideration shall be included. Lessor and Lessee
shall share equally in the cost of obtaining an ALTA Survey ("Survey") of the
Existing Property and a Phase I Environmental Assessment ("Phase I") of the
Existing Property; provided, however, in no event shall Lessee's share of such
costs exceed $4,350.00. Lessor and Lessee agree that, in the event that the
Existing Property Owner should receive an offer to sell the Existing Property in
an amount equal or greater to the amount required to pay in full all outstanding
principal and interest of the Promissory Notes, and on such other terms as are
reasonably acceptable to the Existing Property Owner (an "Acceptable Proposal"),
Lessee shall be obligated to cause the Existing Property Owner to enter into a
purchase agreement encompassing the terms of the Acceptable Proposal. In the
event that Lessee has not closed the sale of the Existing Property as of the
Commencement Date of this Lease, Lessee may, at Lessee's option, within ten (10)
days after the Commencement Date, elect in writing to either (i) allow the
Existing Owner to continue as owner of the Existing Property, in which event the
remainder of this Article XL shall be of no further force or effect, or (ii)
give notice to Lessor that Lessee desires to sell to Lessor the Existing
Property. If Lessee does not give Lessor written notice of such election within
such ten-day period, Lessee shall be deemed to have
Exhibit C
(Page 21 of 17)
<PAGE>
elected the option set forth in clause (i) above. In the event that Lessee
should elect the option contained in clause (ii) above, Lessee shall be
obligated to convey title to the Existing Property, in Lessee's name, to Lessor
or its nominee, and Lessor shall be obligated to purchase (or to cause its
nominee to purchase) the Existing Property pursuant to the terms of a purchase
and sale agreement in the form attached hereto and incorporated herein as
Exhibit H (the "Purchase and Sale Agreement"). Notwithstanding the foregoing,
Lessor shall not be obligated to purchase the Existing Property in the event of
a condemnation of a substantial portion of the Existing Property, a fire or
other casualty damaging a substantial portion of the Existing Property or
another occurrence after the date of this Lease which materially adversely
impairs the title to or value of the Existing Property. In the event that the
escrow established by the Purchase and Sale Agreement should close and Lessor or
its nominee should obtain fee title to the Existing Property, Lessor shall bear,
at Lessor's sole cost and expense, the costs of obtaining the Survey and the
Phase I. In consideration of the acceptance of title to the Existing Property by
Lessor or its nominee and the assumption of the indebtedness evidenced by the
Promissory Notes by Lessor or its nominee, Lessee shall, at Lessee's option,
concurrently with such closing, either (i) pay to Lessor the sum of Three
Hundred Fifty Thousand and No/100ths Dollars ($350,000.00) in cash, or (ii)
execute an amendment to this Lease to increase the Base Rent payable pursuant to
Article I hereof by One and 50/100ths Dollars ($1.50) per rentable square foot
per year for months 1-60 of the initial ten-year term hereof and increase the
Base Rent payable pursuant to Article I hereof by One and 72/100ths Dollars
($1.72) per rentable square foot per year for months 61-120 of the initial
ten-year term hereof. Upon the election by Lessee to sell the Existing Property
to Lessor as herein provided, the rights and obligations of Lessor and Lessee
with respect to the Existing Property shall be governed solely by the terms and
provisions of such Purchase and Sale Agreement.
ARTICLE XLI. WARRANTY FOR TENANT IMPROVEMENTS: Lessor shall cause Opus Southwest
Construction Corporation ("Opus Southwest") to guarantee the Tenant Improvements
against defective workmanship and/or materials for a period of one (1) year from
the date of substantial completion of the Tenant Improvements and Lessor agrees
to cause to be repaired or replaced any defective item in the Tenant
Improvements occasioned by poor workmanship and/or materials during
Exhibit C
(Page 22 of 17)
<PAGE>
said one-year period, and Lessor's obligation to cause Opus Southwest to perform
such one-year guarantee shall be the sole and exclusive obligation of Lessor
with respect to such defective workmanship and/or materials, and Lessee's rights
to enforce such one-year guarantee against Lessor shall be Lessee's sole and
exclusive remedy with respect to such defective workmanship and/or materials in
limitation of any contract, warranty or other rights, whether expressed or
implied, that Lessee may otherwise have under applicable law.
ARTICLE XLII. INDEMNITY BY LESSOR: Lessor agrees to indemnify and save Lessee
harmless against and from any and all claims, loss, damage and expense by or on
behalf of any person or persons, firm or firms, corporation or corporations,
arising from any breach or default on the part of Lessor in the performance of
any covenant or agreement on the part of Lessor to be performed, pursuant to the
terms of this Lease, or arising from any gross negligence or wilful misconduct
on the part of Lessor or arising from any accident, injury or damage to the
extent caused by the gross negligence or wilful misconduct of Lessor to any
person, firm or corporation occurring during the term of this Lease or any
renewal thereof, in or about the Premises and the Office Complex, and from and
against all costs, reasonable counsel fees, expenses and liabilities incurred in
or about any such claim or action or proceeding brought thereon; and in case any
such action or proceeding be brought against Lessee by reason of any such claim,
Lessor, upon notice from Lessee, covenants to resist or defend such action or
proceeding by counsel reasonably satisfactory to Lessee; provided, however, that
notwithstanding anything to the contrary contained in the Article, Lessor shall
not be liable for, and Lessor shall not indemnify Lessee against or from, (a)
any consequential damages of Lessee, which shall include without limitation any
loss of business or loss of profits, or (b) any claim which Lessee has waived
pursuant to Article VI of this Lease, or (c) any claim which exceeds the limits
of Lessor's general public liability insurance policy.
ARTICLE XLIII. NOTICE UPON ENTRY: Anything in this Lease to the contrary
notwithstanding, Lessor shall give Lessee reasonable notice, written or oral, in
the event Lessor intends to enter the Premises for purposes of inspection,
repair, maintenance or alterations of the Office Complex or Premises, but in no
event shall more than twenty-four (24) hours notice be required and no notice
Exhibit C
(Page 23 of 17)
<PAGE>
shall be required in the event of routine janitorial services or an emergency.
ARTICLE XLIV. CONTINUOUS OPERATIONS: Nothing contained in this Lease shall be
construed as an obligation for Lessee to open or operate its business in the
Premises. Lessee shall have the right to remove all of Lessee's personal
property and cease operations in the Premises at any time and at Lessee's sole
discretion. However, the right to cease to operate its business shall not affect
Lessee's obligations to pay all amounts due hereunder and to perform all other
covenants and obligations hereunder. Notwithstanding the foregoing, if Lessee
ceases to operate its business in the Premises for a period in excess of ninety
(90) days and such failure is not due to damage, casualty, or condemnation,
Lessor shall have the right to terminate this Lease and recapture the possession
of the Premises by delivering written notice of same to Lessee. All of Lessee's
obligations under this Lease accruing from and after the date of such
termination shall terminate upon the recapture of the Premises by Lessor under
this Article.
ARTICLE XLV. SATELLITE DISH: Lessee shall have the right as hereinafter
provided, after obtaining the approval of the City of Scottsdale, to install a
satellite dish on the roof of the Building in a location reasonably acceptable
to Lessor and Lessee. The satellite dish must be screened from view by the
existing parapet. Prior to installation, Lessee shall submit to Lessor for its
review and approval, which approval shall not be unreasonably withheld,
elevations and specifications for the satellite dish and the screening thereof.
Lessee shall install the dish at it own expense and shall be responsible for any
damage caused by the installation of the dish. At the end of the initial term of
the Lease or any extended term, or the earlier termination of this Lease, as
applicable, Lessee shall remove the dish from its location and repair any damage
caused by such removal. Lessee's installation and use of such Satellite
Equipment shall be governed by the remaining provisions of this Article. Lessee
shall install such Satellite Equipment at Lessee's sole cost and expense and
subject to the terms of all restrictive covenants recorded in connection with
the Office Complex and all applicable laws, ordinances and regulations. Lessor
shall not be responsible or liable to Lessee for any loss or damage that may
occur to the Satellite Equipment, whether occasioned by or through the acts or
omissions of Lessor or its agents
Exhibit C
(Page 24 of 17)
<PAGE>
or employees, or of other persons in or present at the Office Complex, and
Lessee agrees to look solely to its own insurance for recovery for such loss or
damage. Lessee shall maintain the area in which the Satellite Equipment is
located in good condition and shall be responsible for repairs required to the
Building made necessary by the acts, omissions or negligence of Lessee, its
agents or employees, in connection with the installation, operation or removal
of the Satellite Equipment. Lessee's installation, operation and removal of the
Satellite Equipment shall not interfere with the safety or operation of the
Building and shall not violate in any respect any provision or requirement of
any bond or guaranty covering the roof or any other portion of the Building.
Lessee warrants that the Satellite Equipment will in no way interfere with any
communications, electronic or other equipment now or hereafter located in or on
the Building, including the operation of radio, television, or AM or FM
broadcasting and two-way radio and microwave transmission in and around the
Building. In the event such interference occurs, Lessor may terminate Lessee's
rights under this Article, in which event Lessee shall immediately discontinue
the use of the Satellite Equipment and remove same as provided herein.
ARTICLE XLVI. STORAGE SPACE: Lessor shall provide to Lessee dur- ing the term of
this Lease approximately eight hundred (800) square feet of storage space in the
parking garage of the Office Complex in approximately the location depicted on
the Parking Garage Plan (the "Storage Space"), for Lessee's exclusive use as
storage for its personal property to be used by or useful to Lessee in the
business currently being conducted by Lessee in the Premises. The location of
the Storage Space shall be designated by Lessor in its sole discretion. Lessee
shall pay Lessor an annual rental rate for such Storage Space equal to Eight and
No/100ths Dollars ($8.00) per square foot of Storage Space, which rental rate
shall be payable monthly, in advance, in equal installments. In the event the
initial ten-year, zero-month term of this Lease is extended, the rental rate for
the Storage Space may be adjusted from time to time by Lessor to Lessor's then
current rate for storage space in the Office Complex. Lessee shall, at its sole
cost and expense, replace and pay for all lighting bulbs, tubes, ballasts and
starters required for the Storage Space and shall provide its own janitorial
services and any other services necessary for Lessee's use of the Storage Space.
Lessee covenants and agrees to maintain the Storage
Exhibit C
(Page 25 of 17)
<PAGE>
Space in good and clean condition during the term of this Lease. This lease of
Storage Space is for self-service storage only (subject to applicable laws,
ordinances and regulations) and does not include the rights to any additional
services, including without limitation the services specified in Article V of
the Lease, which services may be made available by Lessor from time to time at
its discretion at an additional charge. Lessee shall maintain insurance coverage
upon all personal property of Lessee or the personal property of others kept,
stored or maintained within the Storage Space against loss or damage by fire,
windstorm or other casualties or causes for such amount as Lessee may desire,
and Lessee agrees that such policy shall contain a waiver of subrogation clause
as to Lessor. It is expressly understood that neither the relationship of Lessor
and Lessee with respect to the Storage Space nor the storage of any Lessee's
personal property therein shall constitute a bailment or create the relationship
of bailor and bailee. Lessee agrees to accept possession of the Storage Space in
all respects in an "AS IS" condition, without representation, warranty or
covenant of or from Lessor and without any obligation of Lessor to construct any
improvements therein of any kind or character whatsoever. Lessee acknowledges
that Lessor has made no representations or war- ranties, express or implied,
concerning the condition of the Storage Space, and Lessee further acknowledges
that it has had adequate opportunity to inspect and approve, and has adequately
inspected and approved, the condition of the Storage Space. Lessor shall have
the right at any time and from time to time during the term of this Lease, upon
giving Lessee not less than thirty (30) days prior written notice, to move
Lessee from the Storage Space and furnish Lessee with storage space elsewhere in
the Office Complex of approximately the same size as the Storage Space, and to
remove and place Lessee in such space, all upon the effective date stated in the
notice from Lessor to Lessee, and upon such effective date, such substitute
space shall be deemed to constitute the Storage Space instead of and in lieu of
the original space. In such event, Lessor shall, at Lessor's expense, physically
move the personal property of Lessee from the original Storage Space to the
substitute storage space. If Lessor moves Lessee to such substitute storage
space, all of the terms, covenants and conditions of Lessee's lease of the
Storage Space shall remain full force and effect and be deemed applicable to the
new space, and such new space shall thereafter be deemed the Storage Space as
though Lessor and Lessee had entered into an express written amendment of this
Exhibit C
(Page 26 of 17)
<PAGE>
Lease with respect thereto. Anything to the contrary notwithstanding, Lessor
shall not be liable for any loss of profits in connection with any move to such
substitute storage space.
ARTICLE XLVII. EXCLUSIVE: Subsequent to the date of this Lease, so long as
Lessee is not in default hereunder, Lessor agrees, during the time that UDC
Homes, Inc., constitutes the "Lessee" under the terms of this Lease, that all
new leases for space in the building located at 6710 North Scottsdale Road,
Scottsdale, Arizona 85253 shall contain a provision (herein called a "Restricted
Use Clause") which shall prohibit the tenant thereunder from conducting as its
primary business at the Office Complex the functions of a home building
business, and Lessor shall use commercially reasonable efforts to include a
provision in such other tenants' leases declaring Lessee to be a third party
beneficiary of such Restricted Use Clauses. If Lessee discontinues the operation
of a home building business as its primary business at the Office Complex or if
Lessee reduces the size of its Premises to below fifty percent (50%) of the
rentable square footage of the Premises as of the date of this Lease, then
Lessor's obligations under this Article shall automatically terminate and all
Restricted Use Clauses shall be deemed null and void. This agreement of Lessor
shall operate only to the extent Lessor's covenants and agreements contained in
this Article are not contrary to public policy or contrary to law and, in the
event such covenants and agreements are deemed contrary to law, such covenants
and agreements shall become automatically and immediately null and void and
shall be deemed revoked. Anything herein to the contrary notwithstanding, Lessee
agrees to indemnify, defend and hold Lessor harmless from any claim, cost, loss
or damage (including reasonable attorneys' fees) incurred or alleged against
Lessor by any person, firm or corporation whatsoever by reason of Lessor's
compliance, or attempted compliance, with the terms and conditions of this
Article (provided, however, that Lessor shall have no obligation to enforce such
Restricted Use Clauses), and in the event Lessor or its successors or assigns
are made subject to any action, proceeding or penalty with respect to the
provisions of this Article, Lessee agrees to indemnify, defend and hold Lessor
harmless from any cost, loss, claim or expense in respect thereto. This Article
shall not apply to any leases entered into by Lessor prior to the date of this
Lease, nor to any amendments or renewals of such leases. In the event of any
violation of a Restricted Use Clause by another tenant of the Office
Exhibit C
(Page 27 of 17)
<PAGE>
Complex, Lessor shall not be in breach of this Lease, and Lessee's sole and
exclusive remedy with respect to such violation shall be to attempt to cause
such tenant to cease violating the Restricted Use Clause contained in its lease.
ARTICLE XLVIII. SHOWER FACILITIES: On or before the Commencement Date, Lessor
shall cause (a) to be constructed in substantial accordance with the floor plan
attached hereto as Exhibit A a men's shower facility within the men's restroom
on the first floor of the Building and a women's shower facility within the
women's restroom on the first floor of the Building, and (b) each such shower
facility to be operational and in good working order. Each such shower facility
shall be available for the non-exclusive use of Lessee and Lessee's employees in
common with other tenants of the Building, but shall be secured from public
access in a manner reasonably determined by Lessor. Lessor shall cause its
janitorial service to clean the shower facilities at such times as janitorial
service is provided to the Premises pursuant to Article V.A of this Lease. The
costs of cleaning, maintaining and repairing such shower facilities shall be
included in Operating Expenses.
ARTICLE XLIX. BUILDING DIRECTORY: Lessor shall at Lessor's cost place the
Lessee's name and suite number in the building directory located in the lobby of
the Building. In addition, Lessor shall place a name plate identifying Lessee's
business adjacent to the lobby entrance to the Premises.
Initials:
Lessor _____________
Lessee _____________
Exhibit C
(Page 28 of 17)
<PAGE>
EXHIBIT D
---------
When recorded, return to:
STREICH LANG, P.A.
Renaissance One
Two North Central Avenue
Phoenix, Arizona 85004-2391
Attn: Henry A. Perras, Esq.
NON-DISTURBANCE, ATTORNMENT, ESTOPPEL AND
SUBORDINATION AGREEMENT
THIS AGREEMENT is made and entered into this day of____________________
_______19__, by and among BANK ONE, ARIZONA, NA, a national banking association
(the "Beneficiary"), whose address is Post Office Box 29542, Phoenix, Arizona
85038, Attention: Western Region Real Estate, Dept.________________, UDC HOMES,
INC., a Delaware corporation (the "Lessee"), whose address is 4812 South Mill
Road, Tempe, Arizona 85252, and SCOTTSDALE SPECTRUM, L.L.C., an Arizona limited
liability company (the "Lessor"), whose address is 4742 North 24th Street, Suite
100, Phoenix, Arizona 85016-4859.
RECITALS
A. Beneficiary is the owner and holder of that Promissory Note from
Lessor dated__________in the principal sum of_________________________
__________________DOLLARS ($_____________), secured by a Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing (the "Deed of Trust")
recorded prior to or contemporaneously with the recording hereof in the
records_______________ of C o u n t y , Arizona, which Deed of Trust constitutes
a lien or encumbrance on that real property (the "Property") more particularly
described on
Exhibit D
(Page 1 of 6)
<PAGE>
Schedule "A" attached hereto and by this reference incorporated herein.
B. Lessee is the holder of a leasehold estate (the "Leased Premises")
included in the Property pursuant to the terms of that lease (the "Lease")
dated_______________________, executed by Lessee and Lessor.
C. Lessee and Beneficiary desire to confirm their
understanding with respect to the Lease and the Deed of Trust.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree and covenant as follows:
1. So long as Lessee is not in default (beyond any period given Lessee
to cure such default) in the payment of rent or in the performance of any of the
terms, covenants or conditions of the Lease to be performed by Lessee,
Beneficiary shall not disturb or interfere with Lessee's possession and
occupancy of the Leased Premises during the term of the Lease or any extension
thereof duly exercised by Lessee.
2. If the interests of Lessor shall be transferred to and
owned by Beneficiary by judicial foreclosure, private trustee sale
or any other manner, and Beneficiary succeeds to the interest of
Lessor under the Lease, Lessee shall be bound to Beneficiary under all of the
covenants, conditions and provisions of the Lease for the remaining term
thereof, and any extension thereof duly exercised by Lessee, with the same force
and effect as if Beneficiary were the lessor under the Lease. Lessee hereby
attorns to Beneficiary as its lessor, and that attornment shall be
self-operative and shall be effective immediately upon Beneficiary's succeeding
to the interest of Lessor under the Lease without the execution of any further
instruments by any of the parties hereto.
3. If the interests of Lessor shall be transferred to and owned by
Beneficiary by judicial foreclosure, private trustee sale or any other manner,
and Beneficiary succeeds to the interest of Lessor under the Lease, Beneficiary
shall be bound to Lessee under
Exhibit D
(Page 2 of 6)
<PAGE>
all of the terms, covenants and conditions of the Lease except that Beneficiary
shall not be:
(a) Liable for any act or omission of any prior lessor
(including Lessor);
(b) Subject to any offsets or defenses that Lessee might
have against any prior lessor (including Lessor);
(c) Bound by any rent or additional rent or advance rent
that Lessee might have paid for more than the current month to any
prior lessor (including Lessor) and all such rent shall remain due and
owing notwithstanding such advance payment;
(d) Bound by any amendment or modification of the Lease
made without its consent and written approval;
(e) Bound to commence or complete any construction or to
make any contribution toward construction or installation of any
improvements upon the Leased Premises required under the Lease or any
expansion or rehabilitation of existing improvements thereon, or for
restoration of improvements following any casualty not required to be
insured under the Lease or for the costs of any restoration in excess
of any proceeds recovered under any insurance required to be carried
under the Lease;
(f) Bound by any restriction on competition beyond the
Property; or
(g) Personally liable under the Lease. Beneficiary's
liability under the Lease shall be limited to the ownership interest of
Beneficiary in the Leased Premises.
In addition, Beneficiary shall not have any liability or responsibility under or
pursuant to the terms of the Lease or this Agreement after it ceases to own an
interest in or to the Property.
Exhibit D
(Page 3 of 6)
<PAGE>
4. The Lease is now, and shall at all times continue to be, subject and
subordinate in each and every respect to the Deed of Trust and to all
extensions, modifications, renewals, replacements, substitutions and/or
consolidations thereof. Nothing contained herein shall be deemed or construed as
limiting or restricting the enforcement by Beneficiary of any of the covenants,
conditions, provisions or remedies of the Deed of Trust, whether or not
consistent with the Lease.
5. Lessor certifies to Beneficiary that a true and correct copy of the
Lease has been delivered to Beneficiary and Lessor and Lessee certify to
Beneficiary as follows: (a) the Lease is presently in full force and effect and
unmodified or unchanged; (b) the term shall commence or did commence
on____________________________, and full rental will then accrue or is now
accruing thereunder; (c) all conditions required under the Lease to have been
satisfied as of the date hereof have been satisfied; (d) as of the date hereof,
Lessee has not assigned or sublet the Leased Premises; (e) the amount of lease
deposit paid or to be paid under the terms of the Lease is $___________________
; (f) Beneficiary shall have no liability or responsibility for the application
or return of any security deposit of Lessee; (g) no default exists under the
Lease; (h) Lessee, as of the date hereof, has no charge, lien or claim of offset
under the Lease or otherwise, against rents or other charges due or to become
due thereunder; (i) Lessee has not received notice of any assignment, mortgage
or pledge of Lessor's interest in the Lease or any rents or other amounts
payable thereunder; (j) the Lease constitutes the entire rental agreement
between the parties; (k) the only persons, firms or corporations in possession
of the Leased Premises or having any right to the possession or use of the
Leased Premises (other than the record owner or holders of recorded easements)
are those holding under the Lease; and (l) Lessee has no right or interest in or
under any contract, option or agreement involving the sale or transfer of the
Leased Premises.
6. Lessee shall give written notice to Beneficiary of any failure by
Lessor to perform or observe any of the covenants, conditions or provisions of
the Lease, and Beneficiary shall have the right, but not the obligation, to cure
such failure. In the event of any such failure by Lessor, Lessee shall not take
any action with respect to such failure, including without limitation any action
to terminate, rescind or avoid the Lease or to withhold
Exhibit D
(Page 4 of 6)
<PAGE>
any rent thereunder, for a period of thirty (30) days after notice thereof to
Beneficiary; provided, however, that if such failure cannot reasonably be
remedied within that thirty (30) day period, Lessee shall not take any action
with respect to such failure, including without limitation any action to
terminate, rescind or avoid the Lease or to withhold any rent thereunder, so
long as Beneficiary shall commence to remedy the failure within the thirty (30)
day period and thereafter shall diligently prosecute the remedy to completion.
7. All notices required or permitted to be given hereunder shall be in
writing and may be given in person or by United States mail, by delivery service
or by electronic transmission. Any notice directed to a party to this Agreement
shall become effective upon the earliest of the following: (i) actual receipt by
that party; (ii) delivery to the designated address of that party, addressed to
that party; or (iii) if given by certified or registered United States mail,
twenty-four (24) hours after deposit with the United States Postal Service,
postage prepaid, addressed to that party at its designated address. The
designated address of a party shall be the address of that party shown at the
beginning of this Agreement or such other address as that party, from time to
time, may specify by notice to the other parties.
8. The term "Beneficiary" shall be deemed to include BANK ONE, ARIZONA,
NA, a national banking association, and its successors and assigns, including
anyone who shall have succeeded to Lessor's interest by or through judicial
foreclosure private trustee's sale or other proceedings brought pursuant to the
Deed of Trust or deed in lieu of such foreclosure or proceedings.
9. Each covenant, condition and provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law but
if any covenant, condition or provision of this Agreement shall be held to be
void or invalid, the same shall not affect the remainder hereof which shall be
effective as though the void or invalid covenant, condition or provision had not
been contained herein.
10. This Agreement may not be modified orally or in any other manner
than by an agreement in writing signed by the parties hereto or their respective
successors in interest. This Agreement shall
Exhibit D
(Page 5 of 6)
<PAGE>
inure to the benefit of and be binding upon the parties hereto, their successors
and assigns.
11. This Agreement shall be governed by and construed according to the
laws of the State of Arizona.
12. This Agreement may be executed in any number of counterparts, and
each counterpart executed by any of the undersigned, together with all other
counterparts so executed, shall constitute a single instrument and agreement of
the parties.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
BANK ONE, ARIZONA, NA, a
national banking association
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
BENEFICIARY
UDC HOMES, INC., a Delaware
corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
LESSEE
SCOTTSDALE SPECTRUM, L.L.C., an
Arizona limited liability
company
Exhibit D
(Page 6 of 6)
<PAGE>
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
LESSOR
Exhibit D
(Page 7 of 6)
<PAGE>
STATE OF ARIZONA )
) ss.
County of________________)
The foregoing instrument was acknowledged before me this___________day
of__________, 1996, by ______________________________, the
_________________________of BANK ONE, ARIZONA, NA, a national banking
association, on behalf of that association.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
----------------------------------------
Notary Public
My commission expires:
- -------------------
STATE OF ARIZONA )
) ss.
County of ______________)
The foregoing instrument was acknowledged before me this _____ day of
_____________, 1996, by ________________________________, the
___________________________ of UDC HOMES, INC., a Delaware corporation, on
behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
----------------------------------------
Notary Public
My commission expires:
- ---------------------
Exhibit D
(Page 8 of 6)
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____
day of ______________, 1996, by Thomas W. Roberts, the President of Opus
Southwest Corporation, a Minnesota corporation, on behalf of the corporation,
the Managing Member of SCOTTSDALE SPECTRUM, L.L.C., an Arizona limited liability
company, on behalf of the limited liability company.
----------------------------------------
Notary Public
My Commission Expires:
- ---------------------
Exhibit D
(Page 9 of 6)
<PAGE>
SCHEDULE "A"
All that real property situate in the County of _________________, State of
Arizona, more particularly described as follows:
Initials:
Lessor _____________
Lessee _____________
Exhibit D
(Page 10 of 6)
<PAGE>
EXHIBIT E
---------
SUBORDINATION OF LIEN RIGHTS
----------------------------
WHEN RECORDED, RETURN TO:
- ------------------------------
- ------------------------------
- ------------------------------
SUBORDINATION OF LIEN RIGHTS
----------------------------
The undersigned ("Owner") is the owner of the realty situated in
Maricopa County, Arizona, known as _________________________ and more
particularly described in that certain Lease dated _________, ____, between
Owner, as landlord, and UDC HOMES, INC., a Delaware corporation ("Debtor") as
tenant (the "Lease").
In consideration of ______________________________ (hereinafter the
"Lender") extending credit and/or other financial benefits to Debtor, by the
terms of which Lender has been or will be granted a security interest in that
portion of the following- described property that is now or hereafter owned by
Debtor and located within that portion of the Real Property described as the
premises in the Lease ("Premises"): (a) the accounts, contract rights, general
intangibles, raw materials, work in process, supplies, machinery, equipment,
furniture, inventory, goods and trade fixtures; and (b) all accessions,
replacements, additions, substitutions, increases, products and proceeds
therefrom (hereinafter the "Collateral"), all as more specifically described in
a certain Security Agreement between Lender and Debtor, the undersigned agrees
as follows:
1. The undersigned hereby subordinates to the Lender's security
interest in the Collateral all the undersigned's claims and demands of every
kind against the Collateral.
Exhibit E
(Page 1 of 3)
<PAGE>
2. The Collateral shall at all times be considered personal property,
shall not be deemed to constitute part of the Real Property and shall not be
subject to any claim of the undersigned which shall impair or interfere with the
security interest of Lender.
3. Lender is hereby granted permission to enter the Premises with 48
hours advance written notice to Owner and to remove the Collateral, and provided
Lender shall be responsible for, and shall indemnify Owner against and hold
Owner harmless from, any and all damages arising in connection with such entry
or removal, including, without limitation, the cost of repair of any physical
injury thereby caused by Lender or its employees, agents or representatives to
the Real Property or any improvements located thereon and any damages or
expenses arising from injury to person.
4. Owner shall notify Lender in writing of the expiration or the
earlier termination of Debtor's interest in the Real Property pursuant to the
Lease, and Lender may, at its sole cost and expense, enter the Premises and
remove the Collateral therefrom within thirty (30) days following the date of
said notice, and any Collateral not removed within said period shall be removed
by Owner and stored at a location to be determined by Owner (the "Storage
Space"), all at the sole cost and expense of Lender (which cost and expense
shall not exceed, on a pro-rated daily basis, the Annual Minimum Rent and
Additional Rent (as defined in the Lease) then payable by Edroh pursuant to the
Lease). If Lender fails to remove the Collateral from the Storage Space within
thirty (30) days of the date of removal thereof from the Premises by Owner, the
Collateral shall be deemed abandoned. In connection with such removal, Lender
shall be responsible for, and shall indemnify Owner against and hold Owner
harmless from, any and all damages arising in connection with such entry or
removal, including, without limitation, the cost of repair of any physical
injury thereby caused to the Real Property or any improvements located thereon
and any damages or expenses arising from injury to person, provided such
damages, expenses or injury are caused by Lender or its employees, agents, or
representatives.
5. The undersigned agrees to notify any purchaser or subsequent lien
holder or claimant of Real Property of the existence of this Subordination which
shall be binding upon the
Exhibit E
(Page 2 of 3)
<PAGE>
personal representatives, successors, assigns and transferees of the undersigned
and of the Debtor and of the Lender and shall inure to the benefit of the Lender
and the Owner and their respective successors and assigns.
6. This Agreement shall be in full force and effect so long as any debt
remains owing from Debtor to Lender, and Lender shall notify Owner, or its
successor or assigns, in writing at such time as such debt is discharged.
IN WITNESS WHEREOF the undersigned has executed this Subordination
Agreement this day of _________, 1996.
OWNER:
SCOTTSDALE SPECTRUM, L.L.C., an
Arizona limited liability company
By: Opus Southwest Corporation, a
Minnesota corporation
Its Managing Member
By____________________________
Its_________________________
Exhibit E
(Page 3 of 3)
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____
day of ______________, 1996, by Thomas W. Roberts, the President of Opus
Southwest Corporation, a Minnesota corporation, on behalf of the corporation,
the Managing Member of SCOTTSDALE SPECTRUM, L.L.C., an Arizona limited liability
company, on behalf of the limited liability company.
----------------------------------------
Notary Public
My Commission Expires:
- ---------------------
Initials:
Lessor _____________
Exhibit E
(Page 4 of 3)
<PAGE>
Lessee _____________
Exhibit E
(Page 5 of 3)
<PAGE>
EXHIBIT F
---------
MEMORANDUM OF LEASE
-------------------
WHEN RECORDED, RETURN TO:
- -------------------------
- -------------------------
- -------------------------
MEMORANDUM OF LEASE
-------------------
THIS MEMORANDUM OF LEASE is made and entered into this ____ day of
__________, 19__, by and between SCOTTSDALE SPECTRUM, L.L.C., an Arizona limited
liability company ("Lessor"), and UDC HOMES, INC., a Delaware corporation
("Lessee").
Notice is hereby given that Lessor and Lessee have entered into that
certain Office Lease dated as of ____________, 19__ (the "Lease"), for certain
premises located on the _____________ floor of the building located at
____________________________________, Phoenix, Arizona _______, which building
is located within a portion of the Scottsdale Spectrum office project. The land
upon which such building is located is legally described on Exhibit A attached
hereto.
The commencement date of the Lease is ________________, 19__, and the
expiration date of the initial ten-year term of the Lease is __________________,
19__.
The purpose of this Memorandum of Lease is to give record notice of the
Lease to third parties.
IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease
as of the day and year first above written.
Exhibit F
(Page 1 of 2)
<PAGE>
LESSOR:
SCOTTSDALE SPECTRUM, L.L.C., an
Arizona limited liability company
By OPUS SOUTHWEST CORPORATION, a
Minnesota corporation
Its Managing Member
By [NOT FOR SIGNATURE]
------------------------
Thomas W. Roberts
Its President
LESSEE:
UDC HOMES, INC., a Delaware
corporation
By [NOT FOR SIGNATURE - EXHIBIT]
---------------------------------
Its______________________________
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____
day of ______________, 1996, by Thomas W. Roberts, the President of Opus
Southwest Corporation, a Minnesota corporation, on behalf of the corporation,
the Managing Member of SCOTTSDALE SPECTRUM, L.L.C., an Arizona limited liability
company, on behalf of the limited liability company.
------------------------------
Exhibit F
(Page 2 of 2)
<PAGE>
Notary Public
My Commission Expires:
- ---------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____
day of ______________, 1996, by ______________________, the _____________ of UDC
HOMES, INC., a Delaware corporation, on behalf of the corporation.
------------------------------
Notary Public
My Commission Expires:
- ---------------------
Initials:
Lessor _____________
Lessee _____________
Exhibit F
(Page 3 of 2)
<PAGE>
EXHIBIT G
---------
SCHEDULE OF JANITORIAL SERVICES
-------------------------------
The janitorial services are summarized as follows:
OFFICE AREAS:
- -------------
(Daily)
1. Empty wastebaskets and other trash containers.
2. Dust desks, tables, credenzas, counters, file tops and other horizontal
surfaces, provided they are clear of papers and other materials. The
janitorial staff should not move any materials left on desks and table
tops.
3. Vacuum all carpeted areas with an upright vacuum cleaner.
4. Spot clean small stains in carpeting as they appear.
5. Dust plastic chair mats.
6. Dust mop tile floors and damp mop stains.
The following items are to be done on various frequencies depending on the
particular needs of an individual space.
1. Spot clean interior partition and door glass as needed.
2. Vacuum inaccessible areas under desks, between furniture and
walls, along edges of carpet/walls, etc. on a monthly basis.
3. Spot wash glass doors and door frames as needed.
4. Spray buff resilient floor tile as needed.
5. Strip and refinish resilient floor tiles as needed.
6. Dust wall paneling as needed.
Exhibit G
(Page 1 of 2)
<PAGE>
7. Dust venetian blinds quarterly.
8. Wash interior windows annually.
9. Wash exterior windows quarterly.
COMMON AREAS:
(Daily: restroom, corridors, lobbies, entryways, etc.)
1. Vacuum carpeted areas with an upright vacuum cleaner.
2. Vacuum and edge all elevator carpet and dust interior hard finished
surfaces with a treated dust cloth. Spot clean all fingerprints and
smudges from and around call button panels.
3. Wipe down hallway side of elevator doors and frames with a
treated dust cloth. Vacuum out track of elevator door thres-
hold plates.
4. Clean drinking fountains.
5. Empty all exterior ash tray receptacles. Damp wipe all ash
receptacle tops.
6. Dust mop all hard surface floors. Damp mop to remove any
stains.
7. Spot clean all entrance door glass and partition glass.
8. Clean and sanitize all restroom sinks, toilets and urinals.
9. Clean and polish all chrome, faucets, flush valves, soap dis-
pensers, etc.
10. Refill all soap, tissue and towel dispensers from customer
stock.
11. Spot clean mirrors, walls and toilet partitions.
12. Wet mop and sanitize all restroom floors.
Exhibit G
(Page 2 of 2)
<PAGE>
13. Keep all janitorial closets and storage areas in a clean and
orderly condition.
14. Sweep and clean grounds daily.
15. Sweep stairwells as needed.
ADDITIONAL SERVICES AVAILABLE:
The following is a list of services which are not included in your regular
monthly service but for which an extra charge will be made to you through
Lessor's property manager:
1. Carpet shampooing.
2. Destaticizing of carpet.
3. Wash inside surface of exterior building wall windows.
4. Vacuum and/or shampoo cleaning of upholstered furniture.
5. High dusting (areas more than "head high").
6. Washing of office furniture, wastebaskets, chair mats, chalk-
boards, lunchroom tables, etc.)
7. Wall or ceiling washing in tenant common areas.
8. Minor carpet repairs.
9. Request cleaning at any time of the day.
Initials:
Lessor _____________
Lessee _____________
Exhibit G
(Page 3 of 2)
<PAGE>
EXHIBIT H
---------
PURCHASE AND SALE AGREEMENT
---------------------------
PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS
------------------------------------------
THIS PURCHASE AGREEMENT AND ESCROW INSTRUCTIONS ("Agreement"), dated as
of _____________, 19__, by and between UDC HOMES, INC., a Delaware corporation
("Seller"), and SCOTTSDALE SPECTRUM, L.L.C., an Arizona limited liability
company ("Buyer"), is entered into with reference to the recitals set forth in
Article 1 below, and constitutes (i) a contract of purchase and sale between the
parties and (ii) escrow instructions to_________________________________________
_______________________________________("Escrow Agent"), the consent of which
appears at the end hereof.
Article 1 - Recitals
--------------------
1.1 Property. Seller agrees to sell to Buyer and Buyer agrees to buy
from Seller, the following property (collectively, the "Subject Property"):
(a) Real Property. Fee simple interest in that certain real
estate legally described on Exhibit "A" attached hereto ("Land"), together with
(i) all buildings, structures, improvements and fixtures owned by Seller located
on the Land ("Improvements"), and (ii) all rights, privileges, servitudes and
appurtenances thereunto belonging or appertaining (collectively, "Real
Property").
(b) Contracts. All right, title and interest of Seller in and
to all service and maintenance contracts, equipment leases and other contracts
relating to the Real Property, to the extent such items are assignable
("Contracts").
(c) Permits. Seller's interest in the licenses, permits,
certificates of occupancy and franchises relating to the Real Property, to the
extent such items are assignable ("Permits").
Exhibit H
(Page 1 of 29)
<PAGE>
(d) Warranties. Seller's interest in all warranties and
guaranties given to, assigned to or benefiting the Real Property regarding the
acquisition, construction, design, use, operation, management or maintenance of
the Real Property ("Warranties").
(e) Plans. Seller's interest in and to all final plans
and specifications (excluding shop drawings) relating to the con-
struction of the Improvements ("Plans").
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as set forth below.
Article 2 - Defined Terms
-------------------------
2.1 Agreement. The term "Agreement" shall mean and refer to this
Purchase Agreement and Escrow Instructions between Seller and Buyer.
2.2 ALTA Extended Title Policy. The term "ALTA Extended Title Policy"
shall mean the ALTA owner's extended coverage policy of title insurance, Form B,
to be obtained in accordance with the provisions of Section 5.1.1 of this
Agreement.
2.3 Business Day. The term "Business Day" shall mean and refer to any
day other than a Saturday or Sunday or legal holiday in the State of Arizona.
2.4 Buyer. The term "Buyer" shall mean and refer to Scotts- dale
Spectrum, L.L.C., an Arizona limited liability company.
2.5 Close of Escrow. The term "Close of Escrow" shall mean and refer to
the consummation of the purchase of the Subject Property by Buyer from Seller
and the recordation of Seller's Deed in accordance with the terms and provisions
of this Agreement.
2.6 Closing Date. The term "Closing Date" shall mean and refer to the
date on which the closing will be held, as described in Section 4.3 of this
Agreement.
Exhibit H (Page 2 of 29)
<PAGE>
2.7 County. The term "County" shall mean the County of Maricopa, State
of Arizona.
2.8 Effective Date. The term "Effective Date" shall mean and refer to
the last date on which (a) this Agreement has been executed by Buyer and Seller
and (b) Escrow Agent has executed this Agreement on the last page hereof and has
established Escrow hereunder. The Effective Date shall be that date set forth on
the last page hereof by the Escrow Agent.
2.9 Escrow. The term "Escrow" shall mean the escrow opened by Escrow
Agent pursuant to the terms of this Agreement.
2.10 Escrow Agent. The term "Escrow Agent" shall mean and refer to
______________________________________.
2.11 Hazardous Materials. The term "Hazardous Materials" shall mean any
hazardous, toxic or contaminated substance, material or waste which is or
becomes regulated by any local governmental authority, the State of Arizona or
the United States Government, including, without limitation, (a) substances
defined as "hazardous substances", "hazardous materials" or "toxic substances"
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (42 USC Section 9601, et. seq.) and/or the Hazardous Materials
Transportation Act (49 USC Section 1801, et. seq.), and (b) those substances
defined as any of the foregoing in the regulations adopted and publications
promulgated pursuant to the aforesaid law.
2.12 Opening of Escrow. The term "Opening of Escrow" shall mean the
date Escrow Agent executes the Consent of Escrow Agent attached hereto, which
consent shall be executed by Escrow Agent upon delivery of this Agreement to
Escrow Agent.
2.13 Preliminary Report. The term "Preliminary Report" shall refer to
the Commitment for Title Insurance issued by the Title Company.
2.14 Purchase Price. The term "Purchase Price" shall mean and refer to
the purchase price to be paid by Buyer to Seller for the purchase of the Subject
Property as specified in Article 3 of this Agreement.
Exhibit H (Page 3 of 29)
<PAGE>
2.15 Permitted Exceptions. The term "Permitted Exceptions" shall mean
the exceptions listed on Exhibit "H", and any other title exceptions approved by
Buyer after the date hereof.
2.16 Seller. The term "Seller" shall mean and refer to UDC Homes, Inc.,
a Delaware corporation.
2.17 Title Company. The term "Title Company" shall mean and refer to
_____________________________________ or such other title company as may be
reasonably selected by Buyer.
Article 3 - Agreement of Sale
-----------------------------
3.1 Purchase Price. In consideration of the covenants herein contained,
Seller hereby agrees to sell, and Buyer hereby agrees to purchase, the Subject
Property. The "Purchase Price" shall consist of (a) Buyer taking title to the
Property subject to all outstanding indebtedness evidenced by the Promissory
Notes (as hereinafter defined), less (b) the payment by Seller to Buyer of the
consideration referred to below. For purposes of this Agreement, the "Promissory
Notes" shall consist of (a) that certain Real Estate Note dated June 8, 1988,
executed by Mill & Ellis Office Limited Partnership, an Arizona limited
partnership, as maker, in favor of The Arizona Bank ("Lender"), the outstanding
principal balance of which is $_________ as of the date hereof, which note is
secured by that certain Deed of Trust dated June 8, 1988, recorded June 24,
1988, in Instrument No. 88-309625, Official Records of Maricopa County, Arizona
(the "First Deed of Trust"), and (b) that certain Real Estate Note dated June 7,
1988, executed by Mill & Ellis II Limited Partnership, an Arizona limited
partnership, as maker, in favor of The Arizona Bank ("Lender"), the outstanding
principal balance of which is $_________ as of the date hereof, which note is
secured by that certain Deed of Trust dated June 7, 1988, recorded June 24,
1988, in Instrument No. 88-30923, Official Records of Maricopa County, Arizona
(the "Second Deed of Trust"). As consideration for Buyer's assumption of the
indebtedness evidenced by the Promissory Notes, Seller shall, at Seller's
option, either (i) pay to Buyer the sum of Three Hundred Fifty Thousand and
No/100ths Dollars ($350,000.00) in cash or funds immediately available in
Phoenix, Arizona on or before the Close of Escrow, or (ii) execute an Amendment
to that certain Office Lease dated as of October ___, 1996 between Buyer and
Seller (the "Office Lease") increasing the
Exhibit H
(Page 4 of 29)
<PAGE>
Base Rent payable pursuant to Article I of the Office Lease by One and 50/100ths
Dollars ($1.50) per rentable square foot for months 1-60 of the term of the
Office Lease and increasing the Base Rent payable pursuant to Article I of the
Lease by One and 72/100ths Dollars ($1.72) per rentable square foot for months
61-120 of the term of the Office Lease.
Article 4 - Opening of Escrow and Buyer's
-----------------------------------------
and Seller's Deliveries to Escrow Agent
---------------------------------------
4.1 Opening of Escrow. Upon the Effective Date, Buyer and Seller shall
open Escrow by depositing with Escrow Agent a fully executed original of this
Agreement for use as escrow instructions, and Escrow Agent shall execute the
Consent of Escrow Agent which appears at the end of this Agreement and deliver a
fully executed consent to Buyer and Seller. To the extent not inconsistent with
this Agreement, Buyer and Seller hereby incorporate by reference thereto the
standard provisions of the escrow agreement commonly used by Escrow Agent;
provided, however, that Buyer and Seller do not grant Escrow Agent a lien on the
Subject Property nor do they indemnify Escrow Agent for any negligent or
intentional acts or omissions of Escrow Agent; and, provided further, Escrow
Agent agrees, by signing below, that it shall not charge an escrow cancellation
fee if this Agreement is terminated without Buyer acquiring the Subject
Property. If Escrow Agent requires additional instructions, the parties agree to
make any deletions, substitutions and additions as the parties shall mutually
approve and which do not alter the terms of this Agreement but merely offer
protection for Escrow Agent. The standard "13-day" notice and grace period
contained in any standard escrow instructions of Escrow Agent shall be deleted,
the parties acknowledging that the terms and provisions of this Agreement shall
govern and control with respect to any notice and grace period.
4.2 Delivery of Documents to Escrow. In connection with the conveyance
of the Subject Property to Buyer, the following closing documents shall be
executed by the parties in accordance with the provisions set forth below:
4.2.1 Seller's Closing Documents. On or before the Closing Date, Seller
shall execute and deposit into Escrow with the
Exhibit H
(Page 5 of 29)
<PAGE>
Escrow Agent the following (collectively, "Seller's Closing Docu- ments"):
4.2.1.1 Deed and Affidavit of Property Value. A Special Warranty Deed
("Deed") in the form of Exhibit "C" attached hereto conveying the Real Property
to Buyer and an Affidavit of Property Value pursuant to Arizona Revised Statutes
ss. 42-1612.
4.2.1.2 Assignment of Contracts, Permits and Warran- ties. An
Assignment of Contracts, Permits and Warranties in the form of Exhibit "C"
attached hereto assigning Seller's interest in the Contracts, the Permits and
the Warranties to Buyer.
4.2.1.3 FIRPTA Affidavit. An Affidavit of Non-Foreign Status in the
form of Exhibit "D" attached hereto.
4.2.1.4 Office Lease Amendment. An amendment to the Office Lease
increasing the Base Rent thereunder in accordance with the provisions of Article
3 hereof, if clause (ii) of the last sentence of said Article 3 is elected by
Seller.
4.2.1.5 Original Documents. Original copies of the Contracts, the
Permits, the Warranties and the Plans, to the extent in Seller's possession.
4.2.1.6 Consent and Estoppel of Lender. A consent of the current
holders of each of the Promissory Notes to the transaction contemplated hereby
and an estoppel certificate from such holders in form reasonably acceptable to
such holders and Buyer, regarding the outstanding indebtedness on the Promissory
Notes, together with the agreement of each of such holders that there will be no
exercise of any "due-on-sale" or "due-on-transfer" clauses under the Promissory
Notes as a result of the sale of the subject property by Seller to Buyer.
4.2.2 Buyer's Closing Documents. On or before the Closing Date, Buyer
shall execute and deposit into Escrow with the Escrow Agent the following
(collectively, "Buyer's Closing Documents"):
4.2.2.1 Affidavit of Property Value. An Affidavit of Property Value
pursuant to Arizona Revised Statutes ss. 42-1612.
Exhibit H
(Page 6 of 29)
<PAGE>
4.2.2.2 Assignment of Contracts, Permits and Warran- ties. An
Assignment of Contracts, Permits and Warranties in the form of Exhibit "D"
attached hereto.
4.2.2.3 Office Lease Amendment. An amendment to the Office Lease
increasing the Base Rent thereunder in accordance with the provisions of Article
3 hereof, if clause (ii) of the last sentence of said Article 3 is elected by
Seller.
4.2.2.4 Title Documents. Such affidavits of Buyer, certificates of
value or other documents as may be reasonably required by the Escrow Agent or
the Title Company in order to record the Seller's Closing Documents and issue
the Title Policy.
4.3 Close of Escrow. Unless the parties mutually agree upon an earlier
closing date, Escrow shall close on the date thirty (30) days following the date
of the commencement of the term of that certain Office Lease between Seller and
Buyer dated as of October ___, 1996 (the "Closing Date").
4.4 Failure to Deliver. The failure of Seller or Buyer to make any
delivery required of such party to Escrow Agent within the time set forth above
shall constitute a material breach hereof by Seller or Buyer, respectively.
Article 5 - Conditions Precedent to Close of Escrow
---------------------------------------------------
5.1 Subject to Satisfaction or Waiver. In addition to the items set
forth in Article 4 of this Agreement, the closing of the Escrow is subject to
the satisfaction or waiver of the conditions precedent set forth below, in
writing, on or before the Closing Date.
5.1.1 Title Insurance. The Title Company shall be unconditionally
committed to issue, immediately following the recording of Seller's Deed, the
ALTA Extended Title Policy, with liability in the amount of the Purchase Price,
insuring that the fee title to the Subject Property vests in Buyer subject only
to (i) non-delin- quent property taxes, (ii) the matters described in the
printed form portion of the policy of title insurance, (iii) the Permitted
Exceptions, and (iv) any lien voluntarily imposed by Buyer at the Close of
Escrow. The Title Company shall also be unconditionally
Exhibit H
(Page 7 of 29)
<PAGE>
committed to issue the following endorsements to Buyer: survey, access,
comprehensive, patent, contiguity and water rights.
5.1.2 Deposit of Documents. Seller shall have delivered the documents
required of it under Section 4.2.1 of this Agreement and Seller shall not be in
default under this Agreement.
5.1.3 Condemnation or Casualty. There shall have been no condemnation
of any substantial portion of the Subject Property, nor any fire or other
casualty damaging any substantial portion of the Subject Property, nor any other
occurrence after the date of the Office Lease which, as of the Closing Date,
materially adversely affects or impairs the title to or the value of the Subject
Property.
5.2 Failure of Conditions Precedent. The conditions precedent set forth
in this Article 5 are for Buyer's benefit and can only be waived by Buyer. In
the event any of the foregoing conditions precedent are neither satisfied nor
waived by Buyer by the Closing Date, Buyer may terminate the Escrow and this
Agreement by giving a written notice of termination to Seller and Escrow Agent,
in which case this Agreement shall terminate, any deposits in Escrow made by
Buyer and all interest accrued thereon shall be returned to Buyer, and Buyer
shall have no further obligations or liabilities hereunder.
Article 6 - Obligations and Covenants
-------------------------------------
6.1 No Concern. Escrow Agent shall have no concern with, or liability
or responsibility for, this Article.
6.2 Indemnity by Seller. Seller hereby agrees to indemnify, protect,
defend (with legal counsel reasonably acceptable to Buyer) and hold harmless
Buyer from, and upon demand shall pay or reimburse Buyer for, any and all
claims, actions, costs, fees, expenses, damages, environmental response costs,
environmental investigation costs, obligations, penalties, fines and liabilities
(including, without limitation, reasonable attorneys' fees and costs) arising
out of or relating to a breach of the covenants of Seller with respect to the
representations and warranties of Seller contained in Section 11.2 hereof. The
covenants contained in this
Exhibit H
(Page 8 of 29)
<PAGE>
Section 6.2 shall survive the Close of Escrow for a period of two (2) years.
6.3 Contracts. All contracts relating to the Subject Property entered
into by Seller from and after the date of the Office Lease but prior to the
Closing Date shall be subject to Buyer's prior written approval, which approval
shall not be unreasonably withheld or delayed. All costs of tenant improvements,
leasing commissions and reasonable attorneys' fees with respect to any new
leases or any amendments or renewals thereof entered into after the date of the
Office Lease, and approved by Buyer, shall be paid by Buyer.
6.4 Cooperation. Buyer and Seller acknowledge that it may be necessary
to execute documents other than those specifically referred to herein in order
to complete the acquisition of the Subject Property as provided herein. Both
Buyer and Seller hereby agree to cooperate with each other by executing such
other documents or taking such other action as may be reasonably necessary to
complete this transaction in accordance with the intent of the parties as
evidenced in this Agreement.
6.5 Possession. Possession of the Subject Property shall be transferred
to Buyer upon the Close of Escrow.
6.6 Entry Upon Subject Property. At any time prior to the Close of
Escrow, Buyer and its designated agents and independent contractors shall have
the right to survey and enter upon the Subject Property to conduct any other
surveys, soils and environmental tests, investigations and studies Buyer may
desire, subject to the rights of all tenants therein. Seller and Seller's agents
shall cooperate with Buyer provided that such investigations and studies shall
be at the sole cost and expense of Buyer. Buyer agrees to repair any damage
caused by Buyer or its agents or independent contractors to the Subject Property
and further agrees to indemnify and hold harmless Seller from and against any
costs, expenses, losses, attorneys' fees and liabilities (including but not
limited to claims of mechanics' liens) incurred or sustained by Seller as a
result of the conduct of Buyer or its agents or independent contractors on the
Subject Property.
Exhibit H
(Page 9 of 29)
<PAGE>
6.7 Operation of the Subject Property. Prior to the Close of Escrow,
Seller shall continue to operate and maintain the Subject Property in the same
condition as such property has been maintained prior to the Effective Date and
shall comply with all governmental statutes, rules and regulations affecting or
relating to the Subject Property, and shall not voluntarily cause or permit any
additional liens or encumbrances to be recorded against title to the Subject
Property.
Article 7 - The Closing
-----------------------
7.1 Close of Escrow. Escrow Agent shall close the Escrow on or before
the Closing Date by (i) filing for record the Seller's Deed and Affidavit of
Property Value and such other documents as may be necessary to procure the Title
Policy, and (ii) delivering funds and documents as set forth in Article 9
(entitled "Recorda- tion and Distribution of Funds and Documents") WHEN AND ONLY
WHEN each of the following conditions has been satisfied:
7.1.1 Funds and Instruments. All funds and instruments required
pursuant to Articles 4 and 5 have been delivered to Escrow Agent.
7.1.2 Satisfaction of Conditions Precedent. Each of the conditions
precedent set forth in Article 5 have been, or upon such closing shall be,
approved, satisfied or waived as provided for in Article 5.
7.2 Earlier Closing. If all the conditions set forth in Sections 7.1.1
and 7.1.2 become satisfied at a date earlier than the Closing Date, Escrow Agent
shall Close the Escrow at such earlier date provided Escrow Agent obtains the
written consent of Buyer and Seller to do so.
7.3 Termination Based on Failure to Close by the Latest Closing Date.
Time is of the essence of each and every provision and each obligation of this
Agreement. If Escrow fails to close by the scheduled Closing Date for any reason
other than Buyer's or Seller's default, then the respective rights, duties and
obligations of Buyer and Seller under this Agreement shall forthwith terminate
without further liability. The parties shall immediately thereafter sign such
instructions and other instruments as may be
Exhibit H
(Page 10 of 29)
<PAGE>
necessary to effect the cancellation of this Escrow, and each party shall pay
its respective share (if any) of Escrow cancellation charges as provided in
Section 8.5. Upon such cancellation, Escrow Agent shall immediately return to
Buyer any deposits in Escrow made by Buyer and all interest accrued thereon,
less applicable Escrow cancellation charges, and Escrow Agent shall return all
documents to the parties that furnished them.
Article 8 - Prorations, Fees and Costs
--------------------------------------
8.1 Adjustments and Prorations. Seller, Buyer and the Escrow Agent
shall make all adjustments and apportion all expenses with respect to the
Subject Property, including, without limitation, the following:
(a) Real Estate Taxes and Special Assessments. All real estate
taxes and installments of special assessments and personal property taxes, if
any, shall be prorated based on the year in which installments thereof are
payable. General real estate taxes and installments of special assessments and
personal property taxes payable in all years prior to the year of Closing will
be paid by Seller. General real estate taxes and installments of special
assessments and personal property taxes payable in the year in which the Closing
occurs shall be prorated between Seller and Buyer as of the Closing based upon a
calendar fiscal year.
(b) Title Insurance. Seller shall pay that portion of the cost
of the ALTA Extended Title Policy equivalent to the charges for a standard
owner's policy of title insurance, and Buyer shall pay the remaining cost of the
ALTA Extended Title Policy, including the costs attributable to all endorsements
requested by Buyer.
(c) Escrow Fee. Seller and Buyer will each pay one-half of any
reasonable and customary Escrow fee imposed by the Escrow Agent.
(d) Recording Costs. Seller will pay the cost of recording the
Deed and Buyer will pay the cost of recording all other documents.
Exhibit H
(Page 11 of 29)
<PAGE>
(e) Operating Expenses. All other operating costs of the
Subject Property will be allocated between Seller and Buyer as of the Closing,
so that Seller pays that part of such other operating costs payable before the
Closing, and Buyer pays that part of such operating costs payable from and after
the Closing.
(f) Attorneys' Fees. Each of the parties will pay its own
attorneys' fees, except that a party defaulting under this Agreement or any
closing document will pay the reasonable attor- neys' fees and court costs
incurred by the non-defaulting party to enforce its rights regarding such
default.
(g) Other Costs. All other costs shall be allocated in
accordance with the customs prevailing in similar transactions in the Phoenix,
Arizona area.
8.2 Thirty Day Month. All prorations and/or adjustments called for in
this Agreement are to be made on the basis of a thirty (30) day month, unless
otherwise specifically instructed by Seller and Buyer in writing.
Article 9 - Recordation and Distribution
----------------------------------------
of Funds and Documents
----------------------
9.1 Deposit of Funds. All cash, if any, received hereunder by Escrow
Agent shall be, until the Close of Escrow, kept on deposit in an
interest-bearing account as directed by Buyer and reasonably acceptable to
Seller.
9.2 Recorded Documents. Escrow Agent will cause the County Recorder of
Maricopa County to mail to Buyer Seller's Deed (and each other document which is
herein expressed to be, or by general usage is, recorded) after recordation.
9.3 Unrecorded Documents. Escrow Agent will, at the Close of Escrow,
deliver by certified mail or overnight courier (or will hold for personal
pickup, if requested) (a) one copy each of all other agreements executed by
Seller or Buyer and deposited into Escrow to Seller and one copy of each of said
documents to Buyer, and (b) each other non-recorded document received hereunder
by Escrow Agent to the person (i) acquiring rights under said document
Exhibit H
(Page 12 of 29)
<PAGE>
or (ii) for whose benefit said document was acquired, with copies to the other
party.
9.4 Payment of Funds at Close of Escrow. Escrow Agent will, at the
Close of Escrow, deliver by wire transfer, in accordance with Buyer's
instructions (or will hold for personal pickup, if requested) (i) to Buyer, or
order, the Purchase Price plus any prorations or other credits to which Buyer
will be entitled, less any appropriate prorations or other charges, and (ii) to
Seller, or order, any excess funds theretofore delivered to Escrow Agent by
Seller.
Article 10 - Assignment
-----------------------
10.1 Assignment by Buyer. Buyer may assign its rights under this
Agreement without the prior consent of Seller, but such assignment shall not
relieve Buyer of any obligations hereunder unless Seller consents thereto or
unless Escrow closes hereunder prior to such assignment.
10.2 Assignment by Seller. Seller may not assign or transfer its rights
and obligations under this Agreement without the prior written consent of Buyer,
which consent may be withheld in Buyer's sole discretion.
Article 11 - Representations, Warranties and Covenants
------------------------------------------------------
11.1 No Concern of Escrow Agent. Escrow Agent shall have no concern
with, or liability or responsibility for, this Article.
11.2 Seller's Representations, Warranties and Covenants. In addition to
any other express agreements of Seller contained here- in, the matters set forth
in this Section 11.2 constitute represen- tations, warranties and covenants by
Seller which shall be true and correct as of the date hereof and the date of
Close of Escrow (re- gardless of any investigations Buyer shall have made with
respect thereto prior to the Close of Escrow) and which shall survive the Close
of Escrow for a period of two (2) years. In the event that, during the period
between the Effective Date and the Close of Escrow, Seller learns, or has a
reason to believe, that any of the following representations and warranties may
cease to be true, Seller hereby covenants to give written notice thereof to
Buyer
Exhibit H
(Page 13 of 29)
<PAGE>
within three days, and Seller shall, promptly after giving such written notice,
make reasonable efforts, without incurring out-of- pocket expenses, to cure such
inaccuracy and, in the event such cure has not been effected on or before the
Closing Date, Seller shall notify Buyer in writing of such failure to cure, and
in such event, if such failure to cure materially adversely affects or impairs
the title to or the value of the Subject Property, then Buyer shall have the
right, exercisable within five (5) days of receiving such written notice from
Seller, to cancel this Agreement and receive the return of any deposits in
Escrow made by Buyer, together with any interest accrued thereon. If Buyer
proceeds to Closing, without exercising such right of cancellation, the
applicable representation or warranty of Seller shall be deemed amended to
conform with such knowledge and Seller shall have no liability whatsoever for
such previously inaccurate representation or warranty. Seller hereby represents,
warrants and covenants (with the understanding that Buyer is relying on said
representations, warranties and covenants) as to each of the matters set forth
below.
11.2.1 Leases. As of the Closing Date, there are no leases, licenses or
other agreements giving any party a possessory right to the Property.
11.2.2 Lease Commissions. There are no brokerage or leasing commissions
or other finders' or agents' fees payable in connection with any leasing of any
portion of the Building, or the Tenants, Leases, or any amendments or renewals
thereof or increases or other changes in space with respect thereto. Seller
shall pay all such fees and commissions, except for fees or commissions payable
in connection with any new lease or tenancy agreement entered into by Seller
subsequent to the date hereof at the request of and upon approval by Buyer of
all of the terms and conditions (including, without limitation, the amount of
such fees or commissions) of such leases or tenancy agreements.
11.2.3 Contracts. There are no service, maintenance, utility or other
contracts or agreements ("Contracts") affecting the Subject Property, oral or
written, except as set forth on Exhibit "C" annexed hereto and made a part
hereof. All Contracts are in full force and effect in accordance with their
respective terms, are assignable without the necessity of consent of any third
party
Exhibit H
(Page 14 of 29)
<PAGE>
and, except as set forth on Exhibit "C", all such Contracts are cancelable,
without cost or expense to the party cancelling such Contracts, on not more than
thirty (30) days notice; all obligations of Seller and, to Seller's actual
knowledge, each other party under the Contracts have been performed; no party to
any Contract has given Seller written notice of any claim of default or offset
against Seller with respect thereto and no event has occurred or failed to
occur, the occurrence or non-occurrence of which would in any way affect the
validity or enforceability of any Contract; and the copies of the Contracts
delivered to Buyer on __________, are true, correct and complete copies thereof.
11.2.4 No Default. Seller shall not suffer or permit any default to
exist or occur under the terms of the Leases or the Contracts or modify, extend
or otherwise amend any of the Leases or the Contracts. Prior to the Closing
Date, Seller shall enforce the provisions of the Leases and the Contracts but
shall take no action against any party thereto based upon a default thereunder
without first obtaining the approval of Buyer; Seller shall not terminate or
cancel any Lease or Contract or accept surrender of any Lease between the date
hereof and the Closing Date, or enter into any new lease, tenancy or contract
affecting the Subject Property without the prior written consent of Buyer, or as
specifically provided for herein, and in such case any agreement with respect to
which such consent is requested shall be in form and substance reasonably
satisfactory to Buyer.
11.2.5 Seller Performance. Between the date hereof and the Closing
Date, Seller shall fulfill all of its obligations under, and do nothing
violative of any term, covenant or provision of, the Leases or Contracts. Seller
shall maintain all services in connection with the Subject Property as presently
maintained and as required pursuant to the Leases until the Closing Date. From
and after the date hereof and until the Close of Escrow or earlier
termination of this Agreement, Seller shall keep and maintain the Subject
Property in the manner in which it is currently being maintained and shall not
cause or permit any waste or nuisance to or against the Subject Property. In
connection therewith, Seller shall make all necessary repairs and replacements
until the Closing Date so that the Subject Property shall be of the same quality
and condition on the Closing Date as on the date hereof. Seller knows of no
malfunction or inadequacy of all or any portion of the
Exhibit H
(Page 15 of 29)
<PAGE>
sprinkler, plumbing, heating, air-conditioning, ventilating, incinerating,
mechanical or other systems in the Improvements, except as set forth in this
Agreement. Seller shall not remove from the Improvements or the Real Property
any article included in the Personal Property.
11.2.6 Legal Compliance. To Seller's actual knowledge, the Subject
Property is now, and on the Closing Date shall be, in full compliance with all
laws and regulations of applicable federal, state, city and other governmental
authorities having jurisdiction over or concerning the use of the Subject
Property including, without limitation, all zoning ordinances and restrictions
and all laws and regulations with respect to fire and health codes,
environmental protection and sanitation and pollution control (all of the
foregoing, collectively referred to as "Zoning and Building Restrictions"), and
Seller has received no notice of, and has no knowledge of, any condition which
may give rise to any violation of any law, rule, regulation, order or ordinance
applicable to the Subject Property. Seller shall not knowingly violate or breach
any Zoning or Building Restriction between the date hereof and the Closing Date.
11.2.7 Certificate of Occupancy. There is now in full force and effect
a duly issued certificate of occupancy, a true copy of which is annexed hereto
as Exhibit "E", permitting the Improvements as the same is now used to be so
used and occupied legally; the Real Property and the Improvements shall be used
only in accordance with said certificate of occupancy between the date hereof
and the Closing Date.
11.2.8 Permits. The schedule annexed hereto as Exhibit "F" is a true,
correct and complete statement of all permits and licenses (collectively,
"Permits") issued by the Departments of Housing and Buildings, Fire, Health or
other State or City departments, or any other entity, having jurisdiction over
the Subject Property and the use thereof, including without limitation, the
certificate of occupancy for the Improvements. To Seller's actual knowledge, no
other permits or licenses are required in connection with the ownership or
operation of the Real Property or the Improvements.
Exhibit H
(Page 16 of 29)
<PAGE>
11.2.9 Insurance Compliance. Seller has not received and has no
knowledge of any notice or request from any insurance company or board of fire
underwriters requesting the performance of any work or alteration with respect
to the Subject Property. The only insurance policies (collectively, "Insurance
Policies") maintained by Seller with respect to the Subject Property are shown
on Exhibit "G" annexed hereto and made a part hereof. All of the Insurance
Policies are in full force and effect as of the date hereof and Seller has paid
all premiums due thereunder. There has been no claim made to date under any of
the Insurance Policies or any policy previously affecting the Subject Property,
except as may be specifically noted on Exhibit "G". Seller shall maintain the
Insurance Policies from the date hereof through the Closing Date or earlier
termination of this Agreement. Seller has not received any notice of
cancellation of any of the Insurance Policies.
11.2.10 Mechanic's Liens. All payments required to be made to
contractors, subcontractors, mechanics, materialmen and all other persons in
connection with work done or services performed with respect to the Real
Property or the Improvements have been made and there is no basis for the filing
of any lien against the Real Property or the Improvements.
11.2.11 Operating Statements. The operating statement of Seller,
regarding the operation of the Subject Property for the period ending
________________, a copy of which has been submitted to Buyer, is true, correct
and complete in all material respects and was prepared in accordance with
generally accepted accounting principles consistently applied and there are no
facts known to Seller as of the date hereof which would alter the information
contained thereon in any way whatsoever. There has been no material adverse
change in the condition of the Subject Property or the operation thereof since
___________.
11.2.12 Title. As of the Closing Date, Seller will have good,
marketable and insurable title to the Subject Property, and Seller's title to
the Subject Property on the Closing Date shall be conveyed to Buyer subject only
to the following matters, being herein collectively referred to as the
"Permitted Encumbrances":
Exhibit H
(Page 17 of 29)
<PAGE>
11.2.12.1 real property taxes, water charges and sewer rents which are
a lien on the Real Property and Improvements on the Closing Date, subject to
adjustments herein provided; and
11.2.12.2 the liens and encumbrances and such other matters set forth
on Exhibit "H" attached hereto.
11.2.13 No Actions. There are no (i) claims, actions, suits,
condemnation actions or other proceedings pending or, to the actual knowledge of
Seller, threatened by any entity (against Seller or the Subject Property), (ii)
approvals, permits, easements, rights-of-way, zoning changes, uses or rights
that have been denied, or to the actual knowledge of Seller may be denied, by
any governmental department or agency, or (iii) to Seller's actual knowledge,
violations of any law, statute, government regulation or requirement that in any
manner or to any extent may materially affect the value of the Subject Property
or the likely eventual use of the Subject Property or Buyer's right, title or
interest in and to the Subject Property.
11.2.14 No Transfers. Seller shall not sell, convey, assign, lease or
otherwise transfer all or any part of the Subject Property, or cause or permit
any new liability, encumbrance or obligation to be placed or imposed upon all or
any part of the Subject Property, from the Effective Date until Closing and
recordation of the Deed. Additionally, without the prior written approval of
Buyer, Seller shall not agree to lease all or any portion of the Subject
Property from the Effective Date of the Agreement until the Closing and
recordation of the Deed.
11.2.15 No Adverse Claims. To Seller's actual knowledge, there exist no
adverse claims by any person or persons (including but not limited to adjoining
property owners) and no encroachments with respect to the Subject Property, and
all fences and walls located in whole or in part on the Subject Property are
entirely within the Subject Property boundaries.
11.2.16 Due Diligence Materials. All written information, schedules and
documents delivered by Seller to Buyer, and all such items attached hereto as
exhibits (the "Due Diligence Materials"), are complete, true and accurate.
Seller has not withheld any part of the Due Diligence Materials or any other
material information
Exhibit H
(Page 18 of 29)
<PAGE>
pertaining to the Subject Property. There exist no agreements of sale, leases,
occupancy agreements, rights of first refusal, options to purchase, maintenance
agreements or similar documents in any manner pertaining to the Subject Property
except as are described herein or on the various exhibits attached hereto.
11.2.17 Hazardous Materials. To Seller's actual knowledge, there has
been no and there currently is no generation, location, transportation, storage,
treatment, discharge, disposal or release upon, in or under the Subject Property
of any Hazardous Materials or any "pollutant" (as that term is defined in
applicable Arizona law) subject to regulation under the Resource Conservation
and Recovery Act (as amended by the Hazardous and Solid Waste Amendments of
1984), the Comprehensive Environmental Response, Compensation and Liability Act
(as amended by the Superfund Amendments and Reauthorization Act of 1986), or any
other applicable State or Federal environmental protection law or regulation,
except as may be disclosed in that certain Phase I Environmental Site Assessment
dated as of September 16, 1996, prepared by Geotechnical and Environmental
Consultants, Inc.
11.2.18 No Flood Hazards. No portion of the Subject Property is located
in an area identified by the Secretary of Housing and Urban Development as an
area having special flood hazards. Seller further represents, to Seller's actual
knowledge, that (i) no areas within the Subject Property must be set aside for
retention of off-site storm water, "green belt", open space or drainage, or for
a park, school or other use required by any governmental entity, and (ii) no
portion of the Subject Property is included in or subject to any existing or
proposed improvement district.
11.2.19 No Tax Protest. Seller shall not withdraw or compromise any
petition or protest pertaining to taxes or other charges relating to the Subject
Property from the Effective Date until Close of Escrow, without the prior
written consent of Buyer.
11.2.20 Ownership of Subject Property. As of the Close of Escrow,
Seller will be the owner of the Subject Property and will have full power and
authority to enter into and perform this Escrow and this Agreement in accordance
with its terms and there will be
Exhibit H
(Page 19 of 29)
<PAGE>
no other person or entity who has an ownership interest in the Subject Property.
11.2.21 Authority to Bind. The individual executing this Agreement on
behalf of Seller is authorized to do so and, upon executing this Agreement, this
Agreement shall be binding and enforceable upon Seller in accordance with its
terms.
11.2.22 Taxes. All transaction privilege taxes, sales taxes, personal
property taxes and similar taxes owed by Seller in connection with the Subject
Property and currently due and payable, if any, have been paid. To the actual
knowledge of Seller, (i) the real property taxes paid and payable with respect
to the Subject Property are or shall be as set out in the Title Report, and (ii)
there are no tax abatements or exemptions affecting the Subject Property.
11.2.23 Compliance with Governmental Regulations. To Seller's actual
knowledge, the Subject Property is being operated in conformity with all
applicable licenses, permits, laws and regulations (including, but not limited
to, zoning regulations and building and fire codes).
For purposes hereof, "Seller's actual knowledge", "Seller knows" and
"Seller is aware of" and words of similar import are limited to the actual,
present knowledge of Jim Grogan, Garth Wieger and Mark Upton.
11.3 Buyer's Authority. Buyer warrants and represents that it is a duly
organized and validly existing limited liability company formed under the laws
of the State of Arizona and authorized to transact business in the State of
Arizona. The entry by Buyer into the transaction contemplated by this Agreement
and the performance by Buyer of all of its obligations in connection herewith
have been duly and validly authorized by all necessary action(s), are in
accordance with applicable law and are not in violation of Buyer's Limited
Liability Company Agreement. This Agreement and all additional documents
delivered in connection with this Agreement have been duly and validly executed
and delivered by Buyer and constitute the legal, valid and binding obligations
of Buyer.
Exhibit H
(Page 20 of 29)
<PAGE>
11.4 Commissions. The parties mutually warrant and covenant that
____________________________________ (_________________) and
____________________________________ (_________________) (collectively, the
"Brokers") have acted as brokers for this transaction, and that no brokerage
commission shall be due or payable on account of this transaction other than the
brokerage commission payable to the Brokers, and each party shall hold the other
harmless from any claims for commissions (other than the commissions payable to
the Brokers) arising out of the actions of the indemnifying party. Seller shall
pay all commissions owed to the Brokers with respect to the transaction set
forth in this Agreement pursuant to a separate agreement.
11.5 Indemnity. Each of the parties shall indemnify, protect, defend
and hold harmless the other from and against any and all claims, costs, damages
and liabilities (including attorneys' fees and costs) arising from any breach by
such party of any of the warranties contained herein.
Article 12 - Defaults and Remedies
----------------------------------
In the event of a failure in the performance of this Agreement by
Seller, Buyer shall notify Seller in writing (copy to Escrow Agent) and if
Seller has not cured such failure within thirteen days after such notice, then
Seller shall be in default and, at its option, Buyer may: (i) by written notice
to Seller and Escrow Agent cancel this Agreement, whereupon any deposits in
Escrow made by Buyer plus accrued interest thereon shall be paid immediately by
Escrow Agent to Buyer, notwithstanding any provisions of this Agreement to the
contrary; and/or (ii) seek specific performance; and/or (iii) seek legal damages
against Seller or take any other remedy as may be provided in equity or at law.
In the event of a failure in the performance of this Agreement by
Buyer, Seller shall notify Buyer in writing (copy to Escrow Agent) and if Buyer
has not cured such failure within thirteen days after such notice, then Buyer
shall be in default and Seller may seek specific performance.
Article 13 - Notices
--------------------
Exhibit H
(Page 21 of 29)
<PAGE>
13.1 Notices. Unless otherwise specifically provided herein, all
notices, demands or other communications given hereunder shall be in writing and
shall be deemed to have been duly delivered upon personal delivery or upon
facsimile transmission as of the second business day after mailing by United
States mail, postage prepaid, return receipt requested, or upon the next
business day if delivered by Federal Express or similar overnight delivery
system, addressed as follows:
If to Seller, to:
UDC Homes, Inc.
4812 South Mill Road
Tempe, Arizona 85282
Attn: Mr. James J. Grogan
If to Buyer, to:
Scottsdale Spectrum, L.L.C.
4742 North 24th Street
Suite 100
Phoenix, Arizona 85016
Attn: Mr. Thomas W. Roberts
With a copy to:
Mr. Brad J. Osmundson
Opus U.S. Corporation
Suite 700, Opus Center
9900 Bren Road East
Minnetonka, Minnesota 55343
And a copy to:
Gallagher & Kennedy, P.A.
2600 North Central Avenue
Phoenix, Arizona 85004-3020
Attn: Mr. Gregory L. Mast
If to Escrow Agent, to:
------------------------------
Exhibit H
(Page 22 of 29)
<PAGE>
------------------------------
------------------------------
Attn: _______________________
or to such other address or to such other person as any party shall designate to
the others for such purpose in the manner hereinabove set forth.
Article 14 - Risk of Loss
-------------------------
14.1 Damage. If, prior to the Closing Date, all or any part of the
Subject Property is substantially damaged by fire, casualty, the elements or any
other cause, Seller shall immediately give notice to Buyer of such fact and, at
Buyer's option (to be exercised within ten days after Seller's notice), this
Agreement shall terminate, in which event neither party will have any further
obligations under this Agreement and any deposits in Escrow made by Buyer,
together with any interest accrued thereon, shall be refunded to Buyer. If Buyer
fails to elect to terminate despite such damage, or if the Subject Property is
damaged but not substantially, then there shall be no reduction in the purchase
price and Seller shall assign to Buyer the proceeds of all insurance related to
such damage; provided, however, Seller shall have the option to repair such
damage or destruction at Seller's expense and receive the proceeds of all
insurance related to such damage. If Seller makes such election but such damage
is not completely repaired prior to the Closing Date but Seller is diligently
proceeding to repair, then Seller shall complete the repair after the Closing
Date and shall be entitled to receive the proceeds of all insurance related to
such damage after repair is completed; provided, however, Buyer shall have the
right to delay the Closing Date until repair is completed. For purposes of this
Section, the words "substantially damaged" mean damage that would cost $250,000
or more to repair.
14.2 Condemnation. If, prior to the Closing Date, eminent domain
proceedings are commenced against all or any material part of the Subject
Property, Seller shall immediately give notice to Buyer of such fact and, at
Buyer's option (to be exercised within ten days after Seller's notice), this
Agreement shall terminate, in which event neither party will have further
obligations under this Agreement and any deposits in Escrow made by Buyer,
together with
Exhibit H
(Page 23 of 29)
<PAGE>
any interest accrued thereon, shall be refunded to Buyer. If Buyer shall fail to
give such notice, then there shall be no reduction in the purchase price, and
Seller shall assign to Buyer at the Closing Date all of Seller's right, title
and interest in and to any award made or to be made in the condemnation
proceedings. Prior to the Closing Date, Seller shall not designate counsel,
appear in, or otherwise act with respect to the condemnation proceedings without
Buyer's prior written consent.
Article 15 - General Provisions
-------------------------------
15.1 Gender and Number. The use herein of (i) the neuter gender
includes the masculine and the feminine, and (ii) the singular number includes
the plural, whenever the context so requires.
15.2 Captions. Captions in this Agreement are inserted for convenience
of reference only and do not define, describe or limit the scope or the intent
of this Agreement or any of the terms hereof.
15.3 Exhibits. All exhibits and schedules referred to herein and
attached hereto are hereby made a part hereof and are incorporated herein by
this reference.
15.4 Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the transaction contemplated hereby, and all
prior or contemporaneous agreements, understandings, representations and
statements, oral or written, are merged herein.
15.5 Modification. No modification, waiver, amendment, discharge or
change of this Agreement shall be valid unless the same is in writing and signed
by the party against which the enforcement of such modification, waiver,
amendment, discharge or change is or may be sought.
15.6 Periods of Time. All periods of time referred to in this Agreement
shall include all Saturdays, Sundays and state or national holidays, unless the
period of time specifies Business Days, provided that if the date or last date
to perform any act or give any notice with respect to this Agreement shall fall
on a Saturday, Sunday or state or national holiday, such act or notice
Exhibit H
(Page 24 of 29)
<PAGE>
may be timely performed or given on the next succeeding day which is not a
Saturday, Sunday or state or national holiday.
15.7 Counterparts. This Agreement may be executed in counterparts, all
of which when taken together shall be deemed fully executed originals.
15.8 Attorneys' Fees. In the event either party commences litigation
for the judicial interpretation, enforcement, termination, cancellation or
rescission hereof, or for damages (including liquidated damages) for the breach
hereof, then, in addition to any or all other relief awarded in such litigation,
the prevailing party therein shall be entitled to a judgment against the other
for an amount equal to reasonable attorneys' fees and court and other costs
incurred.
15.9 No Partnership or Joint Venture. Seller or Buyer shall not, by
virtue of this Agreement, in any way or for any reason be deemed to have become
a partner of the other in the conduct of its business or otherwise, or a joint
venturer. In addition, by virtue of this Agreement there shall not be deemed to
have occurred a merger of any joint enterprise between Buyer and Seller.
15.10 Joint and Several Liability. If any party consists of more than
one person or entity, the liability of each such person or entity signing this
Agreement shall be joint and several.
15.11 Choice of Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Arizona. This Agreement shall be deemed
made and entered into in Maricopa County.
15.12 Time. Time is of the essence to this Agreement.
15.13 Agreement Survives Close of Escrow. All obligations referred to
herein to be performed at a time or times after the Close of Escrow and all
warranties and representations contained herein shall survive the Close of
Escrow and delivery of the Deed.
15.14 Severability. In the event any term, covenant, condition,
provision or agreement herein contained is held to be invalid, void or otherwise
unenforceable by any court of competent jurisdiction, the fact that such term,
covenant, condition, provi-
Exhibit H
(Page 25 of 29)
<PAGE>
sion or agreement is invalid, void or otherwise unenforceable shall in no way
affect the validity or enforceability of any other term, covenant, condition,
provision or agreement herein contained.
15.15 Binding Agreement. Subject to any limitation on assignment
elsewhere set forth herein, all terms of this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the parties hereto and their
respective legal representatives, successors and assigns.
IN WITNESS WHEREOF, this Agreement has been executed as of the
date set forth at the beginning hereof.
SELLER: BUYER:
UDC HOMES, INC., a Delaware SCOTTSDALE SPECTRUM, L.L.C., an
corporation Arizona limited liability
company
By Opus Southwest Corporation,
By____________________________ a Minnesota corporation
Its_________________________ Its Managing Member
By_________________________
Thomas W. Roberts
Its President
Exhibit H
(Page 26 of 29)
<PAGE>
CONSENT OF ESCROW AGENT
The undersigned hereby agrees to act as Escrow Agent pursuant
to the foregoing Purchase Agreement and Escrow Instructions. Escrow Agent has
established Escrow No. pursuant to the terms hereof. The "Effective Date" under
this Agreement shall be the latter of the date on which Escrow Agent has signed
below or has established the above-referenced Escrow, and such "Effective Date"
is , 19__.
------------------------------
By____________________________
Its_________________________
Exhibit H
(Page 27 of 29)
<PAGE>
List of Exhibits
----------------
Exhibit "A" - Legal Description
Exhibit "B" - Special Warranty Deed
Exhibit "C" - Assignment of Contracts, Permits and Warranties
Exhibit "D" - Affidavit of Non-Foreign Status
Exhibit "E" - Certificate of Occupancy
Exhibit "F" - Schedule of Permits and Licenses
Exhibit "G" - Insurance Policies
Exhibit "H" - None.
Exhibit "I" - Permitted Exceptions
Exhibit H
(Page 28 of 29)
<PAGE>
EXHIBIT "A"
-----------
LEGAL DESCRIPTION
-----------------
Exhibit H
(Page 29 of 29)
<PAGE>
EXHIBIT "B"
-----------
SPECIAL WARRANTY DEED
---------------------
When Recorded, Return To:
- -------------------------
UDC Homes, Inc.
4812 South Mill Road
Tempe, Arizona 85282
Attn: Mr. James J. Grogan
SPECIAL WARRANTY DEED
---------------------
For the consideration of Ten Dollars and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the undersigned UDC HOMES, INC., a Delaware corporation (the
"Grantor"), does hereby grant and convey to SCOTTSDALE SPECTRUM, L.L.C., an
Arizona limited liability company (the "Grantee"), that certain real property
situated in Maricopa County, Arizona, together with all rights and privileges
appurte- nant thereto, described as follows:
See Exhibit "A" attached hereto and incorporated herein by
this reference.
The above-described property is conveyed subject to those
matters set forth on Schedule "1" attached hereto and incorporated herein.
The Grantor hereby binds itself and its successors to warrant
and defend the title as against all acts of the Grantor herein and no other,
subject to the matters above set forth.
DATED this ____ day of ___________, 19__.
UDC HOMES, INC., a Delaware
corporation
Exhibit H
(Page 30 of 29)
<PAGE>
By____________________________
Its_________________________
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this ____
day of _____________, 19__, by ___________________________, the
___________________ of UDC HOMES, INC., a Delaware corporation, on behalf of the
corporation.
IN WITNESS WHEREOF, I hereunto have set my hand and official
seal.
----------------------------------------
Notary Public
My Commission Expires:
- ---------------------
Exhibit H
(Page 31 of 29)
<PAGE>
EXHIBIT "C"
-----------
ASSIGNMENT OF CONTRACTS, PERMITS AND WARRANTIES
-----------------------------------------------
THIS ASSIGNMENT OF CONTRACTS, PERMITS AND WARRANTIES (the
"Assignment") is made this ____ day of ______________, 19__, by and between UDC
HOMES, INC., a Delaware corporation ("Assignor"), and SCOTTSDALE SPECTRUM,
L.L.C., an Arizona limited liability company ("Assignee"), with reference to the
facts set forth below.
WHEREAS, Assignee has of even date herewith acquired title to
that certain real property and any improvements situated thereon more
particularly described in Exhibit "A" attached hereto and incorporated herein by
this reference (the "Property");
WHEREAS, in connection with the conveyance of the Property
from Assignor to Assignee, Assignor and Assignee intend and agree that all
agreements, contracts, permits, warranties, approvals, plans, specifications,
certificates, surveys and reports, including, without limitation, any hazardous
materials reports, improvement plans, utility plans, engineering and soils
reports and any ALTA surveys, if any, in the possession of Assignor, relating
exclusively to the Property listed on Exhibit "B" attached hereto and
incorporated herein (collectively, the "Property Project Documents"), shall
inure to the benefit of and be assigned and transferred to Assignee.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Assignor and Assignee agree as follows:
1. Assignor hereby assigns and transfers to Assignee, without
warranty, to the extent assignable without the consent of a third party the
Property Project Documents together with any rights relating thereto. Assignor
indemnifies and holds harmless Assignee from any and all liabilities, claims,
damages, costs or expenses (including reasonable attorneys' fees) arising from
or relating to the Property Project Documents prior to the date hereof.
Exhibit H
(Page 32 of 29)
<PAGE>
2. Assignee hereby accepts the assignment of the Property
Project Documents and assumes and agrees to keep, perform and fulfill all of the
duties, covenants, provisions, conditions and obligations relating to the
Property Project Documents from and after the date hereof. Assignee indemnifies
and holds harmless Assignor from any and all liabilities, claims, damages, costs
or expenses (including reasonable attorneys' fees) arising from or relating to
the Property Project Documents from and after the date hereof.
3. Assignor represents and warrants to Assignee that (a)
Assignor owns title to the Property Project Documents free and clear of any
liens, claims, rights or unfulfilled obligations to or of any third party, (b)
Assignor has not previously assigned, conveyed or transferred any interest
whatsoever in the Property Project Documents, and (c) Assignor has not performed
any acts or executed any instruments which might prevent Assignee from owning
the Property Project Documents or otherwise enjoying title thereto.
4. This Assignment shall be binding upon and inure to
the benefit of the parties hereto and their successors and assigns.
5. Each of the parties signing this Assignment hereby warrants
and represents that it has the full legal power, authority and right to execute,
deliver and perform the obligations under this Assignment, that this Assignment
has been duly authorized by all requisite actions on the part of such warranting
party, and that no remaining action or third party action is required to make
this Assignment binding upon such party.
6. This Assignment shall be construed and enforced in
accordance with the laws of the State of Arizona.
7. This Assignment may be executed in any number of
counterparts, each of which, when so executed and when delivered, shall be an
original, but such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Assignment of Contracts, Permits and Warranties as of the day and year first set
forth above.
Exhibit H
(Page 33 of 29)
<PAGE>
ASSIGNOR:
UDC HOMES, INC., a Delaware corpo-
ration
By_________________________________
Its______________________________
ASSIGNEE:
SCOTTSDALE SPECTRUM, L.L.C., an
Arizona limited liability company
By Opus Southwest Corporation, a
Minnesota corporation
Its Managing Member
By______________________________
Thomas W. Roberts
Its President
Exhibit H
(Page 34 of 29)
<PAGE>
EXHIBIT "D"
-----------
AFFIDAVIT OF NON-FOREIGN STATUS
-------------------------------
Section 1445 of the Internal Revenue Code provides that a
transferee of a U.S. real property interest must withhold tax if the transferor
is a foreign person. To inform the transferee that withholding of tax is not
required upon the disposition of a U.S. real property interest by UDC Homes,
Inc., a Delaware corporation, to Scottsdale Spectrum, L.L.C., an Arizona limited
liability company ("Transferee"), the undersigned hereby certifies the following
on behalf of UDC Homes, Inc.:
1. UDC Homes, Inc. is not a foreign corporation,
foreign partnership, foreign trust or foreign
estate (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);
2. The U.S. employer identification number of UDC
Homes, Inc. is _______________; and
3. The office address of UDC Homes, Inc. is 6710 North
Scottsdale Road, Scottsdale, Arizona 85253, Attn:
Mr. James J. Grogan.
UDC Homes, Inc. understands that this certification may be
disclosed to the Internal Revenue Service by Transferee and that any false
statement contained herein could be punished by fine, imprisonment, or both.
Under penalties of perjury, the undersigned declares that he
has examined this certification and to the best of his knowledge and belief it
is true, correct and complete, and he further declares that he has authority to
sign this document on behalf of UDC Homes, Inc.
DATED as of this ____ day of ________________, 19__.
UDC HOMES, INC., a Delaware
corporation
Exhibit H
(Page 35 of 29)
<PAGE>
By______________________________________
Its___________________________________
Exhibit H
(Page 36 of 29)
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was SUBSCRIBED AND SWORN TO before me
this ____ day of _______________, 19__, by
, the ___________________ of UDC HOMES, INC.,
a Delaware corporation, on behalf of the corporation.
IN WITNESS WHEREOF, I hereunto have set my hand and official
seal.
----------------------------------------
Notary Public
My Commission Expires:
- ---------------------
Exhibit H
(Page 37 of 29)
<PAGE>
Initials:
Lessor _____________
Lessee _____________
Exhibit H
(Page 38 of 29)
<PAGE>
EXHIBIT "E"
-----------
CERTIFICATE OF OCCUPANCY
------------------------
Exhibit H
(Page 39 of 29)
<PAGE>
EXHIBIT "F"
-----------
SCHEDULE OF PERMITS AND LICENSES
--------------------------------
Exhibit H
(Page 40 of 29)
<PAGE>
EXHIBIT "G"
-----------
INSURANCE POLICIES
------------------
Exhibit H
(Page 41 of 29)
<PAGE>
EXHIBIT "H"
-----------
PERMITTED EXCEPTIONS
--------------------
Exhibit H
(Page 42 of 29)
<PAGE>
Initials:
Lessor _____________
Lessee _____________
Exhibit H
(Page 44 of 29)
<PAGE>
EXHIBIT "I"
-----------
PARKING GARAGE PLAN
-------------------
Exhibit I
(Page 1 of 1)
<PAGE>
Initials:
Lessor _____________
Lessee _____________
Exhibit I
(Page 2 of 1)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 616
<SECURITIES> 0
<RECEIVABLES> 939
<ALLOWANCES> 0
<INVENTORY> 264,929
<CURRENT-ASSETS> 0
<PP&E> 14,597
<DEPRECIATION> 0
<TOTAL-ASSETS> 295,232
<CURRENT-LIABILITIES> 0
<BONDS> 206,575
0
0
<COMMON> 0
<OTHER-SE> 22,223
<TOTAL-LIABILITY-AND-EQUITY> 295,232
<SALES> 80,647
<TOTAL-REVENUES> 82,317
<CGS> 69,086
<TOTAL-COSTS> 85,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,665
<INCOME-PRETAX> (3,560)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,560)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,560)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
