UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended: September 30, 1996
------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 0-23804
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Simpson Manufacturing Co., Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-3196943
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4637 Chabot Drive, Suite 200, Pleasanton, CA 94588
--------------------------------------------------
(Address of principal executive offices)
(Registrant's telephone number, including area code): (510)460-9912
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares of the Registrant's Common Stock outstanding as of
September 30, 1996: 11,437,567
----------
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
(UNAUDITED)
1996 1995 1995
------------ ------------ ------------
ASSETS
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 22,112,721 $ 4,361,559 $ 6,955,788
Trade accounts receivable, net 28,051,008 25,120,430 20,732,880
Inventories 35,957,784 34,474,299 34,471,250
Deferred income taxes 2,934,672 2,374,455 2,750,455
Other current assets 903,598 689,683 1,986,446
------------ ------------ ------------
Total current assets 89,959,783 67,020,426 66,896,819
Net property, plant and equipment 26,623,211 25,872,222 26,420,004
Investments 1,331,957 455,981 1,357,457
Other noncurrent assets 1,730,205 1,290,896 1,967,779
------------ ------------ ------------
Total assets $119,645,156 $ 94,639,525 $ 96,642,059
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes Payable $ - $ - $ 20,037
Trade accounts payable 10,214,563 6,359,845 7,375,014
Accrued cash profit sharing and commissions 3,963,668 2,850,030 1,289,144
Accrued liabilities 3,893,620 3,343,019 3,386,527
Accrued profit sharing trust contributions 1,913,458 1,677,223 1,999,739
Income taxes payable 1,750,949 1,136,943 -
Accrued workers' compensation 809,272 842,125 842,125
------------ ------------ ------------
Total current liabilities 22,545,530 16,209,185 14,912,586
Deferred income taxes and long-term liabilities 133,333 73,783 176,783
------------ ------------ ------------
Total liabilities 22,678,863 16,282,968 15,089,369
Commitments and contingencies (Notes 5 and 6)
Shareholders' equity
Common stock 31,038,763 30,395,778 30,415,716
Retained earnings 65,965,391 48,049,791 51,142,268
Cumulative translation adjustment (37,861) (89,012) (5,294)
------------ ------------ ------------
Total shareholders' equity 96,966,293 78,356,557 81,552,690
------------ ------------ ------------
Total liabilities and shareholders' equity $119,645,156 $ 94,639,525 $ 96,642,059
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 57,128,574 $ 47,069,601 $152,345,631 $124,706,784
Cost of sales 34,440,638 29,973,774 94,305,621 79,989,977
------------ ------------ ------------ ------------
Gross profit 22,687,936 17,095,827 58,040,010 44,716,807
------------ ------------ ------------ ------------
Operating expenses:
Selling 4,929,448 4,001,779 14,902,126 11,874,332
General and administrative 7,033,766 5,472,251 18,387,692 14,493,020
------------ ------------ ------------ ------------
11,963,214 9,474,030 33,289,818 26,367,352
------------ ------------ ------------ ------------
Income from operations 10,724,722 7,621,797 24,750,192 18,349,455
Interest income, net 175,048 22,573 325,931 75,952
------------ ------------ ------------ ------------
Income before income taxes 10,899,770 7,644,370 25,076,123 18,425,407
Provision for income taxes 4,507,000 2,917,000 10,253,000 7,396,000
------------ ------------ ------------ ------------
Net income $ 6,392,770 $ 4,727,370 $ 14,823,123 $ 11,029,407
============ ============ ============ ============
Net income per common share $ 0.54 $ 0.41 $ 1.26 $ 0.97
============ ============ ============ ============
Weighted average shares outstanding 11,796,062 11,499,336 11,727,496 11,428,424
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 14,823,123 $ 11,029,407
------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of capital equipment (18,054) (856)
Depreciation and amortization 4,413,034 3,635,309
Deferred income taxes and long-term liabilities (227,667) 338,000
Equity in (income) losses of affiliates (33,000) 25,446
Changes in operating assets and liabilities, net of
effects of acquisitions:
Trade accounts receivable (7,325,900) (7,625,925)
Inventories (1,494,307) (2,948,898)
Other current assets 331,014 306,705
Other noncurrent assets (60,083) (198,793)
Trade accounts payable 2,839,549 (307,427)
Accrued liabilities 542,193 379,773
Accrued profit sharing trust contributions (86,281) (43,381)
Accrued workers' compensation (32,853) (55,000)
Accrued cash profit sharing and commissions 2,674,524 1,514,904
Income taxes payable 2,697,696 636,282
------------ ------------
Total adjustments 4,219,865 (4,343,861)
------------ ------------
Net cash provided by operating activities 19,042,988 6,685,546
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (4,291,456) (8,167,620)
Proceeds from sale of equipment 44,041 18,025
Asset acquisitions - (800,398)
Equity Investments (11,637) -
------------ ------------
Net cash used in investing activities (4,259,052) (8,949,993)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes payable (20,037) -
Issuance of Company's common stock 393,034 815,413
------------ ------------
Net cash provided by financing activities 372,997 815,413
------------ ------------
Net increase (decrease) in cash and cash equivalents 15,156,933 (1,449,034)
Cash and cash equivalents at beginning of period 6,955,788 5,810,593
------------ ------------
Cash and cash equivalents at end of period $ 22,112,721 $ 4,361,559
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Interim Period Reporting
The accompanying unaudited interim condensed consolidated financial
statements have been prepared pursuant to the rules and regulations for
reporting on Form 10-Q. Accordingly, certain information and footnotes
required by generally accepted accounting principles have been condensed or
omitted. These interim statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in Simpson
Manufacturing Co., Inc.'s (the "Company's") 1995 Annual Report on Form 10-K
(the "1995 Annual Report").
The unaudited quarterly condensed consolidated financial statements have
been prepared on the same basis as the audited annual consolidated
financial statements, and in the opinion of management, contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial information set forth therein, in accordance
with generally accepted accounting principles. The year-end condensed
consolidated balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally
accepted accounting principles. The Company's quarterly results may be
subject to fluctuations. As a result, the Company believes the results of
operations for the interim periods are not necessarily indicative of the
results to be expected for any future period.
Net Income Per Common Share
Net income per common share is computed based upon the weighted average
number of common shares outstanding. Common equivalent shares, using the
treasury stock method, are included in the per-share calculations for all
periods since the effect of their inclusion is dilutive.
The number of shares used in computing primary and fully diluted net income
per common share did not differ materially for the three and nine months
ended September 30, 1996 and 1995.
2. Trade Accounts Receivable
Trade accounts receivable consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Trade accounts receivable $ 29,434,569 $ 26,321,654 $ 21,832,701
Allowance for doubtful accounts (1,127,853) (1,048,224) (931,321)
Allowance for sales discounts (255,708) (153,000) (168,500)
------------ ------------ ------------
$ 28,051,008 $ 25,120,430 $ 20,732,880
============ ============ ============
</TABLE>
<PAGE>
3. Inventories The components of inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Raw materials $ 12,438,103 $ 13,468,771 $ 13,424,828
In-process products 3,478,087 2,897,300 3,180,416
Finished products 20,041,594 18,108,228 17,866,006
------------ ------------ ------------
$ 35,957,784 $ 34,474,299 $ 34,471,250
============ ============ ============
</TABLE>
Approximately 96% of the Company's inventories are valued using the LIFO
(last-in, first-out) method. Because inventory determination under the LIFO
method is only made at the end of each year based on the inventory levels
and costs at that time, interim LIFO determinations must necessarily be
based on management's estimates of expected year-end inventory levels and
costs. Since future estimates of inventory levels and costs are subject to
change, interim financial results reflect the Company's most recent
estimate of the effect of inflation and are subject to final year-end LIFO
inventory amounts. At September 30, 1996 and 1995, and December 31, 1995,
the replacement value of LIFO inventories exceeded LIFO cost by
approximately $2,602,000, $3,594,000 and $4,178,000, respectively.
4. Net Property, Plant and Equipment
Net property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Land $ 2,065,682 $ 2,065,682 $ 2,065,682
Buildings and site improvements 10,379,901 9,334,095 10,379,901
Leasehold improvements 2,826,392 2,731,412 2,688,430
Machinery and equipment 42,897,745 39,248,586 40,393,578
------------ ------------ ------------
58,169,720 53,379,775 55,527,591
Less accumulated depreciation and amortization (34,260,537) (29,245,846) (30,419,484)
------------ ------------ ------------
23,909,183 24,133,929 25,108,107
Capital projects in progress 2,714,028 1,738,293 1,311,897
------------ ------------ ------------
$ 26,623,211 $ 25,872,222 $ 26,420,004
============ ============ ============
</TABLE>
<PAGE>
5. Debt
As of September 30, 1996, the Company had no outstanding debt. The Company
has available to it credit facilities which consist of the following:
<TABLE>
<CAPTION>
Amount of
Facility
------------
<S> <C>
Revolving line of credit, interest at
bank's reference rate (at September 30,
1996, the bank's reference rate was
8.25%), expires June 1997 $ 11,571,000
Revolving line of credit, interest at
bank's prime rate (at September 30,
1996, the bank's prime rate was
8.25%), expires June 1997 4,000,000
Revolving term commitment, interest at
bank's prime rate (at September 30,
1996, the bank's prime rate was
8.25%), expires June 1997 4,000,000
Revolving lines of credit, interest rate
at the bank's base rate of interest plus
2%, expires June 1997 390,000
Standby letter of credit facilities 1,261,570
------------
Total credit facilities 21,222,570
Standby letters of credit issued and outstanding (1,261,570)
------------
Total credit available $ 19,961,000
============
</TABLE>
The Company has three outstanding standby letters of credit. Two of these
letters of credit, in the aggregate amount of $832,570, are used to support
the Company's self-insured workers' compensation insurance requirements
while the other, in the amount of $429,000, is used to support the working
capital needs of its European operations.
6. Commitments and Contingencies
Note 10 to the consolidated financial statements in the Company's 1995
Annual Report provides information concerning commitments and contingencies
relating to pending or possible claims, legal actions and proceedings
against the Company and its subsidiaries. Management believes that the
final resolution of these matters, individually or in the aggregate, is not
expected to have a material adverse effect on the financial position of the
Company.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following is a discussion and analysis of the consolidated financial
condition and results of operations for the Company for the three and nine
months ended September 30, 1996 and 1995. The following should be read in
conjunction with the interim Condensed Consolidated Financial Statements
and related Notes appearing elsewhere herein.
Results of Operations for the Three Months Ended September 30, 1996,
Compared with the Three Months Ended September 30, 1995
Net sales increased 21.4% from the third quarter of 1995 to the third
quarter of 1996. The increase reflected solid growth throughout the United
States, although, sales in California increased at a rate slower than the
average growth rate. Simpson Strong-Tie's sales increased 23.8% while
Simpson Dura-Vent's sales increased 13.4%. Sales to dealer distributors
were the fastest growing connector sales channel, while contractor
distributor and homecenter sales growth slowed somewhat. The sales growth
rate of engineered wood products and seismic and high wind products led
Simpson Strong-Tie sales with above average increases, while Simpson Dura-
Vent sales of Direct-Vent products, sold both to OEMs and through
distributors, continued to experience strong growth. Third quarter sales
were also positively influenced by sales at the businesses acquired in the
second half of 1995. The acquisitions during the last year accounted for
1.6% of the Company's 1996 third quarter sales.
Income from operations increased 40.7% from $7,621,797 in the third quarter
of 1995 to $10,724,722 in the third quarter of 1996. This increase was
primarily due to higher gross margins, partially offset by higher general
and administrative expenses as a percentage of sales. Selling expenses
increased 23.2% in total from $4,001,779 in the third quarter of 1995 to
$4,929,448 in the third quarter of 1996. General and administrative
expenses increased 28.5% from $5,472,251 in the third quarter of 1995 to
$7,033,766 in the third quarter of 1996. This increase was primarily due to
increased cash profit sharing, as a result of higher operating profit, and
higher personnel and other overhead costs. Interest income increased to
$175,048 in the third quarter of 1996 as a result of the increased cash
balances. The effective tax rate increased from 38.2% in the third quarter
of 1995 to 41.4% in the third quarter of 1996, primarily due to the
recognition of lower effective state tax rates in the third quarter of
1995.
Results of Operations for the Nine Months Ended September 30, 1996,
Compared with the Nine Months Ended September 30, 1995
Net sales increased 22.2% during the first nine months of 1996 as compared
to the first nine months of 1995. The increase reflected solid growth
throughout the United States, although sales in California increased at a
rate slower than the average growth rate. Simpson Strong-Tie's sales
increased 22.7% while Simpson Dura-Vent's sales increased 20.4%. The sales
growth rate of engineered wood products and seismic and high wind products
led Simpson Strong-Tie sales with above average increases, while Simpson
Dura-Vent sales of Direct-Vent products, sold both to OEMs and through
distributors, continued to experience strong growth. Year to date sales
were also positively influenced by sales at the businesses acquired in the
second half of 1995. The acquisitions during the last year accounted for
1.6% of the Company's 1996 year to date sales.
Income from operations increased 34.9% from $18,349,455 in the first nine
months of 1995 to $24,750,192 in the first nine months of 1996. This
increase was primarily due to higher gross margins, partially offset by
higher general and administrative expenses as a percentage of sales as well
as a small relative increase in selling expense. Selling expenses increased
25.5% in total from $11,874,332 in the first nine months of 1995 to
$14,902,126 in the first nine months of 1996. General and administrative
expenses increased 26.9% from $14,493,020 in the first nine months of 1995
to $18,387,692 in the first nine months of 1996. This increase was
primarily due to increased cash profit sharing, as a result of higher
operating profit, and higher personnel and other overhead costs. Interest
income increased to $325,931 in the first nine months of 1996 as a result
of the increased cash balances. The effective tax rate increased from 40.1%
in the first nine months of 1995 to 40.9% in the first nine months of 1996,
primarily due to the recognition of lower effective state tax rates in the
third quarter of 1995.
<PAGE>
In October, Simpson Strong-Tie's quality management system was recommended
for ISO9000 registration by a third party registration organization.
Simpson Strong-Tie is the Company's largest subsidiary and, to the
Company's knowledge, no other U.S. company in the connector industry has
been ISO9000 registered. Management believes that this recommendation
reflects the Company's on-going commitment to quality.
The Company has committed to purchase or has leased additional space to
increase its capacity. Simpson Strong-Tie has expanded its research and
development and marketing support facilities by leasing a 48,000 square
foot building in San Leandro, California, and has moved its Jacksonville,
Florida, warehouse into a new leased facility with approximately twice the
square footage of its old facility. The planned expansion of the company
owned warehouse in McKinney, Texas, has commenced. This expansion will add
approximately 60,000 square feet to the existing structure. In addition,
the Company has agreed to purchase a 30,500 square foot building which it
currently leases from an unrelated party at its facility in Brea,
California.
Liquidity and Sources of Capital
As of September 30, 1996, working capital was $67.4 million as compared to
$50.8 million at September 30, 1995, and $52.0 million at December 31,
1995. The principal components of the increase in working capital from
December 31, 1995, include an increase in trade accounts receivable and
inventories, which increased to support the higher level of sales.
Partially offsetting these increases were increases in trade accounts
payable, accrued cash profit sharing and commissions, and income taxes
payable, as a result of higher operating and taxable income, respectively.
This increase in working capital combined with net income and noncash
expenses, such as depreciation and amortization, resulted in the increase
in cash and cash equivalents of $19.0 million from operating activities. As
of September 30, 1996, the Company had unused credit facilities available
of approximately $20.0 million.
In its investing activities, the Company used $4.3 million in cash to
purchase capital equipment, a rate substantially below that of the first
nine months of 1995. The Company has increased its purchases of capital
equipment in the third quarter of 1996 in order to expand its capacity and
anticipates additional expansion during the last quarter of 1996 and into
1997. These plans include the purchase of the building at its Brea facility
and additional production equipment needed to meet the expected demand.
Financing activities provided an additional $0.4 million in cash primarily
as a result of the issuance of Common Stock upon the exercise of stock
options by current and former employees. There were no borrowings
outstanding on long-term debt as of September 30, 1996.
The Company believes that cash generated by operations and borrowings
available under its existing credit agreements will be sufficient for the
Company's working capital needs and planned capital expenditures through
the remainder 1996 and into 1997. Depending on the Company's future growth,
it may become necessary to secure additional sources of financing.
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in various legal proceedings and other matters
arising in the normal course of business. In the opinion of management,
none of such matters when ultimately resolved will have a material adverse
effect on the Company's financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
On November 12, 1996, the Company's subsidiary, Simpson Strong-tie Company
Inc., signed a nonbinding Letter of Intent to purchase, for cash, the
businesses of Isometric Limited, A.D.B. Heading Limited and Dual Fastening,
Inc. (together the "Isometric Companies") for $8,000,000 (subject to
adjustment in certain circumstances) plus potential earn-out payments of up
to $2,500,000 over four years. This transaction is in the preliminary
stages and its consummation will require the satisfactory completion of due
diligence, a satisfactory audit of the Isometric Companies financial
statements, negotiation of the form of the transaction and a mutually
satisfactory purchase agreement and approval by the Company's Board of
Directors.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
a. Exhibits.
EXHIBIT
NO DESCRIPTION
------- --------------------------------------------------------
<S> <C>
10.1 Lease Agreement dated July 26, 1996, between Simpson
Strong-tie Company Inc. and Richard H. Kulka
10.2 Purchase and Sale Agreement and Escrow Instructions dated
August 16, 1996, between Simpson Manufacturing Co., Inc.
and G.A. Mac Donald Construction Co. Inc.
10.3 Amendment to Letter of Credit, dated May 31, 1996, by and
among Simpson Manufacturing Co., Inc., Simpson Holdings,
Inc. and Wells Fargo Bank, N.A.
10.4 Amendment to Letter of Credit, dated May 23, 1996,
between Simpson Manufacturing Co., Inc. and Union Bank
10.5 Amendment to Credit Facilities, dated June 18, 1996,
between Simpson Strong-Tie International Inc. and
Barclays Bank PLC
11 Statements re computation of earnings per share
27 Financial Date Schedule, which is submitted
electronically to the Securities and Exchange Commission
for information only and not filed.
</TABLE>
b. Reports on Form 8-K
No reports of Form 8-K were filed during the quarter for which this
report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Simpson Manufacturing Co., Inc.
-----------------------------------
(Registrant)
DATE: November 13, 1996 By: /s/ Stephen B. Lamson
----------------- -----------------------
Stephen B. Lamson
Chief Financial Officer
EXHIBIT 10.1
------------
STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE-GROSS
1. Basic Provisions ("Basic Provisions")
1.1 Parties: This Lease ("Lease"), dated for reference purposes only,
July 26, 1996 is made by and between Richard H. Kulka, a married man as
his sole and separate property and Simpson Strong-Tie Company, Inc.
(collectively the "Parties," or individually a "Party").
1.2 Premises: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and
commonly known by the street address of 2955 Merced Street, San Leandro,
located in the county of Alameda, State of California, and generally
described briefly the nature of the property) +/-48,000 square foot
concrete tilt-up warehouse/manufacturing building, APN #77B-853-4, as
more particularly described in Exhibit "A" ("Premises"). (see Paragraph
2 for further provisions.)
1.3 Term: Five (5) years and zero (0) months ("Original Term")
commencing October 1, 1996 or such earlier date as possession is
delivered ("Commencement Date") and ending August 31, 2001(Expiration
Date"). (See Paragraph 3 for further provisions.)
1.4 Early Possession: Upon execution of lease ("Early Possession
Date") (See Paragraphs 3.2 and 3.3 for further provisions.)
1.5 Base Rent: $20,160.00 per month (Base Rent"), payable on the
first (1) day of each month commencing November 1, 1996 (or thirty days
following date possession is delivered to tenant if delivered prior to
October 1, 1996). (See Paragraph 4 for further provisions.)
If this is checked, there are provisions in this Lease for the Base Rent
to be adjusted.
1.6 Base Rent Paid Upon Execution: $20,160.00 as Base Rent for the
period November, 1996.
1.7 Security Deposit: $ None ("Security Deposit"). (See Paragraph 5
for further provisions.)
1.8 Permitted Use: Assembly, warehousing, research and development
and related office functions (See Paragraph 6 for further provisions.)
1.9 Insuring Property: Lessor is the "Insuring Party." $1905/yr is
the "Base Premium." (See Paragraph 8 for further provisions.)
1.10 Real Brokers: The following real estate brokers (collectively,
the "Brokers") and brokerage relationships exist in this transaction and
are consented to by the Parties (check applicable boxes): Joseph Fabian,
BT Commercial Real Estate Group, Inc. represents [X] Lessor exclusively
("Lessor's Broker") both Lessor and Lessee, and Richard Keane, CB
Commercial Real Estate Group, Inc. represents Lessee exclusively
("Lessee's Broker"); both Lessee and Lessor. (See Paragraph 15 for
further provisions.)
1.11 Guarantor. The obligations of the Lessee under this Lease are to
be guaranteed by None. ("Guarantor"). ( See Paragraph 37 for further
provisions.)
<PAGE>
1.12 Addenda, Attached hereto is an Addendum or Addenda consisting of
Paragraphs 49 through 72 and Exhibits all of which constitute a part of
this Lease.
2. Premises.
2.1 Letting. Lessor hereby leases to Lessee hereby from Lessor, the
Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth in this
Lease, or that may have been used in calculating rental, is an
approximation which Lessor and Lessee agree is reasonable and the rental
based thereon is not subject to revision whether or not the actual
square footage is more or less.
2.2 Condition. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, fire sprinkler system, lighting, air conditioning,
heating, and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the
Commencement Date. If a non-compliance with said warranty exists as of
the Commencement Date, Lessor shall, except as otherwise provided in
this Lease, promptly after receipt of written notice from Lessee setting
forth with specificity the nature and extent of such non-compliance,
rectify same at Lessor's expense. If Lessee does not give Lessor written
notice of a non-compliance with this warranty within thirty (30) days
after the Commencement Date, correction of that non-compliance shall be
obligation of Lessee at Lessee's sole cost and expense.
2.3 Compliance with Covenants, Restrictions and Building Code. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building
codes, regulations and ordinances in effect on the Commencement Date.
Said warranty does not apply to the use to which Lessee will put the
Premises or to any Alternations or Utility Installations (as defined in
Paragraph 7.3(a)) made or to be made by Lessee. If the Premises do not
comply with said warranty, Lessor shall, except as otherwise provided in
this Lease, promptly after receipt of written notice from Lessee setting
forth with specificity the nature and extent of such non-compliance,
rectify the same at Lessor's expense. SEE ADDENDUM PARAGRAPH 49
2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that it
has been advised by the Brokers to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical
and fire sprinkler systems, security, environmental aspects, compliance
with Applicable Law, as defined in Paragraph 6.3) and the present and
future suitability of the Premises for Lessee's intended use, (b) that
Lessee has made such investigation as it deems necessary with reference
to such matters and assumes all responsibility therefor as the same
relate to Lessee's occupancy of the Premises and/or the term of this
Lease, and (c) that neither Lessor, nor any of Lessor's agents, has made
any oral or written representations or warranties with respect to the
said matters other than as set forth in this Lease.
<PAGE>
2.5 Lessee Prior Owner/Occupant. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to
the date set forth in Paragraph 1.1 Lessee was the owner or occupant of
the Premises. In such event, Lessee shall, at Lessee's sole cost and
expense, correct any non-compliance of the Premises with said
warranties.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 Early Possession. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent
shall be abated for the period of such early possession. All other terms
of this Lease, however, shall be in effect during such period. Any such
early possession shall not affect nor advance the Expiration Date of the
Original Term.
3.3 Delay In Possession. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early
Possession Date, one is specified, by the Commencement Date, Lessor
shall not be subject to any liability herefor, nor shall such failure
affect the validity of this Lease, or the obligations of Lessee
hereunder, or extend the term hereof, but in such case, Lessee shall
not, except as otherwise provided herein, be obligated to pay rent or
perform any other obligation of Lessee under the terms of this Lease
until Lessor delivers possession of the Premises to Lessee. If
possession of the Premises is not delivered to Lessee within sixty (60)
days after the Commencement Date, Lessee may, at its option, by notice
in writing to Lessor within ten (10) days thereafter, cancel this Lease,
in which event the Parties shall be discharged from all obligations
hereunder; provided, however, that if such written notice by Lessee is
not received by Lessor within said ten (10) day period. Lessee's right
to cancel this Lease shall terminate and be of no furhter force or
effect. Except as may be otherwise provided, and regardless of when the
term actually commences, if possession is not tendered to Lessee when
required by this Lease does not terminate this Lease, as aforesaid, the
period free of the obligation to pay Base Rent, if any, that Lessee
would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would
otherwise have enjoyed under the terms hereof, but minus any days of
delay caused by the acts, changes or omissions of Lessee.
4. Rent
4.1 Base Rent. Lessee shall cause payment of Base Rent and other rent
or charges, as the same may be adjusted from time to time, to be
received by Lessor in lawful money of the United States, without offset
or deduction, on or before the day on which it is due under the terms of
this Lease. Base Rent and all other rent and charges for any period
during the term hereof which is for less than one (1) full calendar
month shall be prorated based upon the actual number of days of the
calendar month involved. Payment of Base Rent and other charges shall be
made to Lessor at its address stated herein or to such other persons or
at such other addresses as Lessor may from time to time designate in
writing to Lessee.
<PAGE>
6. Use.
6.1 Use. Lessee shall use and occupy the Premises only for the
purposes set forth in Paragraph 1.8, or any other use which is
comparable thereto, and for no other purpose. Lessee shall not use or
permit the use of the Premises in a manner that creates waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage
to, neighboring premises or properties. Lessor hereby agrees to not
unreasonably withhold or delay its consent to any written request by
Lessee, Lessees assignees or subtenants, and by prospective assignees
and subtenants of the Lessee, its assignees and subtenants, for a
modification of said permitted purpose for which premises may be used or
occupied, so long as the same will not impair the structural integrity
of the improvements on the Premises, the mechanical or electrical
systems therein, is not significantly more burdensome to the Premises
and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor
shall within five (5) business days give a written notification of same,
which notice shall include an explanation of Lessor's reasonable
objections to the change in use.
6.2 Hazard Substances.
(a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or
effect, either by itself or in combination with other materials expected
to be on the Premises, is either: (I) potentially injurious to the
public health, safety or welfare, the environment or the Premises, (ii)
regulated or monitored by any governmental authority, or (iii) a basis
for liability of Lessor to any governmental agency or third party under
any applicable statute or common law theory. Hazardous Substance shall
include, but not be limited to, hydrocarbons, petroleum, gasoline, crude
oil or any products, by-products or fractions thereof. Lessee shall not
engage in any activity in, on or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without
the express prior written consent of Lessor and compliance in a timely
manner (at Lessee's sole cost and expense) with all Applicable Law (as
defined in Paragraph 6.3). "Reportable Use" shall mean (I) the
installation or use of any above or below ground storage tank, (ii) the
generation, possession, storage, use, transportation, or disposal of a
Hazardous Substance that requires a permit from, or with respect to
which a report, notice, registration or business plan is required to be
filed with, any governmental authority. Reportable Use shall also
include Lessee's being responsible for the presence in, on or about the
Premises of a Hazardous Substance with respect to which any Applicable
Law requires that a notice be given to persons entering or occupying the
Premises or neighboring properties. Notwithstanding the foregoing,
Lessee may, without Lessor's prior consent, but in compliance with all
Applicable Law, use any ordinary and customary materials reasonably
required to be used by Lessee in the normal course of Lessee's business
permitted on the Premises, so long as such use is not a Reportable Use
and does not expose the Premises or neighboring properties to any
meaningful risk of contamination or damage or expose Lessor to any
liability therefor. In addition, Lessor may (but without any obligation
to do so) condition its consent to the use or presence of any Hazardous
Substance, activity or storage tank by Lessee upon Lessee's giving
Lessor such additional assurances as Lessor, in its reasonable
discretion, deems necessary to protect itself, the public, the Premises
and the environment against damage, contamination or injury and/or
liability therefrom or therefor, including, but not limited to, the
installation (and removal on or before lease expiration or earlier
termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an
additional Security Deposit under Paragraph 5 hereof.
<PAGE>
(b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance, or a condition involving or
resulting from same, has come to be located in, on, under or about the
Premises,. other than as previously consented to by Lessor, Lessee shall
immediately give written notice of such fact to Lessor. Lessee shall
also immediately give Lessor a copy of any statement, report, notice,
registration, application, permit, business plan, license, claim, action
or proceeding given to, or received from, any governmental authority or
private party, or persons entering or occupying the Premises, concerning
the presence, spill, release, discharge of, or exposure to, any
Hazardous Substance or contamination in, on, or about the Premises,
including but not limited to all such documents as may be involved in
any Reportable Uses Involving the Premises.
(c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and
the Premises, harmless from and against any and all loss of rents and/or
damages, liabilities, judgments, costs, claims, liens, expenses,
penalties, permits and attorney's and consultant's fees arising out of
or involving any Hazardous Substance or storage tank brought onto the
Premises by or for Lessee or under Lessee's control. Lessee's
obligations under this Paragraph 6 shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultant's and attorney's fees and testing), removal,
remediation, restoration and/or abatement thereof, or of any
contamination therein involved, and shall survive the expiration or
earlier termination of this Lease. No termination, cancellation or
release agreement entered into by Lessor and Lessee shall release Lessee
from its obligations under this Lease with respect to Hazardous
Substances or storage tanks, unless specifically so agreed by Lessor in
writing at the time of such agreement. SEE ADDENDUM PARAGRAPH 50 AND
PARAGRAPH 51.
6.3 Lessee's Compliance with Law. Except as otherwise provided in
this lease, Lessee, shall, at Lessee's sole cost and expense, fully,
diligently and in a timely manner, comply with all "Applicable Law",
which term is used in this Lease to include all laws, rules,
regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of
Lessor's engineers and/or consultants, relating in any manner to the
Premises (including but not limited to matters pertaining to (I)
industrial hygiene, (ii) environmental conditions on, in, under or about
the Premises, including soil and groundwater conditions, and (iii) the
use, generation, manufacture, production, installation, maintenance,
removal, transportation, storage, spill or release of any Hazardous
Substance or storage tank), now in effect or which may hereafter come
into effect, and whether or not reflecting a change in policy from any
previously existing policy. Lessee shall, within five (5) days after
receipt of Lessor's written request, provide Lessor with copies of all
documents and information, including, but not limited to, permits,
registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Law specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing
(with copies of any documents involved) of any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or
involving failure by Lessee or the Premises to comply with any
Applicable Law. SEE ADDENDUM PARAGRAPH 52.
<PAGE>
6.4 Inspection; Compliance. Lessor and Lessor's Lender(s) (as defined
in Paragraph 8.3(a)) shall have the right to enter the Premises at any
time, in the case of an emergency, and otherwise at reasonable times,
for the purpose of inspecting the condition of the Premises and for
verifying compliance by Lessee with this Lease and all Applicable Laws
(as defined in Paragraph 6.3), and to employ experts and/or consultants
in connection therewith and/or to advise Lessor with respect to Lessee's
activities, including but not limited to the installation, operation,
use, monitoring, maintenance, or removal of any Hazardous Substance or
storage tank on or from the Premises. The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a Default
or Breach of this lease, violation of Applicable law, or a
contamination, caused or materially contributed to by Lessee is found to
exist or be imminent, or unless the inspection is requested or ordered
by a governmental authority as the result of any such existing or
imminent violation or contamination. In any such case, Lessee shall upon
request reimburse Lessor or Lessor's Lender, as the case may be, for the
costs and expenses of such Inspections.
7. Maintenance; Repairs; Utility Installations; Trade Fixtures and
Alterations.
7.1 Lessee's Obligations.
(a) Subject to the provisions of Paragraphs 2.2 (Lessor's warranty as
to condition), 2.3 (Lessor's warranty as to compliance with covenants,
etc.), 7.2 (Lessor's obligations to repair), 9 (damage and destruction)
and 14 (Condemnation), Lessee shall, at Lessee's sole cost and expense
and at all times, keep the interior of the building comprising a part of
the Premises clean and in good order, condition and repair. Lessee shall
not cause or permit any Hazardous Substance to be spilled or released
in, on, under or about the Premises (including through the plumbing or
sanitary sewer system) and shall promptly, at Lessee's expense, take all
investigatory and/or remedial action reasonably recommended, whether or
not formally ordered or required, for the cleanup of any contamination
of, and for the maintenance, security and/or monitoring of, the
Premises, the elements surrounding same, or neighboring properties, that
was caused or materially contributed to by Lessee, or pertaining to or
involving any Hazardous Substance and/or storage tank brought onto the
Premises by or for Lessee or under its control. Lessee, in keeping the
interior of Premises clean and in good order, condition and repair,
shall exercise and perform good maintenance practices.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in, the
inspection, maintenance and service of the following equipment and
improvements, if any, located on the Premises: (I) heating, air
conditioning and ventilation equipment, (ii) boiler, fired, or unfired
pressure vessels, (iii) fire sprinkler and/or standpipe and hose or
other automatic fire extinguishing systems, including fire alarm and/or
smoke detection.
<PAGE>
7.2 Lessor's Obligations. Upon receipt of written notice of the need
for such repairs and subject to Paragraph 13.5, Lessor shall, at
Lessor's expense, keep the foundations, exterior roof and structural
aspects of the Premises in good order, condition and repair, Lessor
shall not, however, be obligated to paint the exterior surface of the
exterior walls or to maintain the windows, doors or plate glass or the
interior surface of exterior walls. Lessor shall not, in any event, have
any obligation to make any repairs until Lessor receives written notice
of the need for such repairs. It is the intention of the Parties that
the terms of this Lease govern the respective obligations of the Parties
as to maintenance and repair of the Premises. Lessee and Lessor
expressly waive the benefit of any statute now or hereafter in effect to
the extent it its inconsistent with the terms of this Lease with respect
to, or which affords Lessee the right to make repairs at the expense of
Lessor or to terminate this Lease by reason of, any needed repairs. SEE
ADDENDUM PARAGRAPHS 53, 54, AND 55.
7.3 Utility Installations; Trade Fixtures; Alterations.
(a) Definitions; Consent Required. The term "Utility Installations"
is used in this Lease to refer to all carpeting, window coverings, air
lines, power panels, electrical distribution, security, fire protection
systems, communication systems, lighting fixtures, heating, ventilating,
and air conditioning equipment, plumbing, and fencing in, on or about
the Premises. The term "Trade Fixtures" shall mean Lessee's machinery
and equipment that can be removed without doing material damage to the
Premises. The term "Alterations" shall mean any modification of the
improvements on the Premises from that which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures, whether by addition or deletion. "Lessee Owned Alterations
and/or Utility Installations" are defined as Alterations made by lessee
that are not yet owned by Lessor as defined in Paragraph 7.4(a). Lessee
shall not make any Alterations or Utility Installations in, on, under or
about the Premises without Lessor's prior written consent. Lessee may,
however, make non-structural Utility Installations to the interior of
the Premises (excluding the roof), as long as they are not visible from
the outside, do not involve puncturing, relocating or removing the roof
or any existing walls, and the cumulative cost thereof during the term
of this Lease as extended costs does not exceed $25,000 (and the
individual cost for each non-structural Utility Installation does not
exceed $5,000).
<PAGE>
(b) Consent. Any alterations or Utility Installations that Lessee
shall desire to make require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All
consents given by Lessor, whether by virtue of Paragraph 7.3(a) or by
subsequent specific consent, shall be deemed conditioned upon: (i)
Lessee's acquiring all applicable permits required by governmental
authorities, (ii) the furnishing of copies of such permits together with
a copy of the plans and specifications for the Alteration or Utility
Installation to Lessor prior to commencement of the work there on, and
(iii) the compliance by Lessee with all conditions of said permits in a
prompt and expeditious manner. Any Alterations or Utility Installations
by Lessee during the term of this Lease shall be done in a good and
workmanlike manner, with good and sufficient materials, and in
compliance with all Applicable Law. Lessee shall promptly upon
completion thereof furnish Lessor with as-built plans and specifications
thereof. Lessor may (but without obligation to do so) condition its
consent to any requested Alteration or Utility Installation that costs
$10,000 or more upon Lessee's providing Lessor with a lien and
completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation and/or upon
Lessee's posting an additional Security Deposit with Lessor under
Paragraph 36 hereof.
(c) Indemnification. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for
Lessee at or use on the Premises, which claims are or may be secured by
any mechanics' or materialmen's lien against the Premises or any
interest therein. Lessee shall give Lessor not less than ten (10) days'
notice prior to the commencement of any work in, on or about the
Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee
shall, in good faith, contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before
the enforcement thereof against the Lessor or the Premises. If Lessor
shall require, Lessee shall furnish to Lessor a surely bond satisfactory
to Lessor in an amount equal to one and one-half times the amount of
such contested lien claim or demand, indemnifying Lessor against
liability for the same, as required by law for the holding of the
Premises free from the effect of such lien or claim. In addition, Lessor
may require Lessee to pay Lessor's attorney's fees and costs in
participating in such action if Lessor shall decide it is to its best
interest to do so.
7.4 Ownership; Removal; Surrender; and Restoration.
(a) Ownership. Subject to Lessor's right to require their removal or
become the owner thereof as hereinafter provided in this Paragraph 7.4,
all Alterations and Utility Additions made to the Premises by Lessee
shall be the property of and owned by Lessee, but considered a part of
the Premises. Unless otherwise instructed per subparagraph 7.4(b)
hereof, all Lessee Owned Alterations and Utility Installations shall, at
the expiration or earlier termination of this Lease, become the property
of Lessor and remain upon and be surrendered by Lessee with the
Premises.
<PAGE>
(b) Lessor may require the removal at any time of all or any part of
any Lessee Owned Alterations or Utility Installations made without the
required consent of Lessor. SEE ADDENDUM PARAGRAPH 56.
(c) Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date,
with all of the improvements, parts and surfaces thereof clean and free
of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. "Ordinary wear and Tear" shall not
include any damage or deterioration that would have been prevented by
good maintenance practice or by Lessee performing all of its obligations
under this Lease. Except as otherwise agreed or specified in writing by
Lessor, the Premises, as surrendered, shall include the Utility
Installations. The obligation of Lessee shall include the repair of any
damage occasioned by the installation, maintenance or removal of
Lessee's Trade Fixtures, furnishings, equipment, and Alterations and/or
Utility Installations, as well as the removal of any storage tank
installed by or for Lessee, and the removal, replacement, or remediation
of any soil, material or ground water contaminated by Lessee, all as may
then be required by Applicable Law and/or good service practice.
Lessee's Trade Fixtures shall remain the property of Lessee and shall be
removed by Lessee subject to its obligation to repair and restore the
Premises per this Lease.
8. Insurance; Indemnity.
8.1 Payment of Premium Increases.
(a) Lessee shall pay to Lessor any insurance cost increase
("Insurance Cost Increases") occurring during the term of this Lease.
"Insurance Cost Increase" is defined as any increase in the actual cost
of the insurance required under Paragraphs 8.2(b), 8.3(a), and 8.3(b).
("Required Insurance"), over and above the Base Premium, as hereinafter
defined, calculated on an annual basis. "Insurance Cost Increase" shall
include, but not be limited to, increases resulting from the nature of
Lessee's occupancy, any act or omission of Lessee, requirements of the
holder of a mortgage or deed of trust covering the premises, increased
valuation of the Premises, and/or a premium rate increase. If the
parties insert a dollar amount in Paragraph 1.9, such amount shall be
considered the "Base Premium." In lieu thereof, if the Premises have
been previously occupied, the "Base Premium" shall be the annual premium
applicable of the most recent occupancy. If the Premises have never been
occupied, the "Base Premium" shall be the lowest annual premium
reasonably obtainable for the Required Insurance as of the commencement
of the Original Term, assuming the most nominal use possible of the
Premises. In no event, however, shall Lessee be responsible for any
portion of the premium cost attributable to liability insurance coverage
in excess of $1,000,000 procured under paragraph 8.2(b) (Liability
Insurance Carried By Lessor).
<PAGE>
(b) Lessee shall pay any such Insurance Cost Increase to Lessor
within thirty (30) days after receipt by Lessee of a copy of the premium
statement other reasonable evidence of the amount due. If the insurance
policies maintained hereunder cover other property besides the Premises,
Lessor shall also deliver a statement of the amount of such Insurance
Cost Increase attributable only to the Premises showing in reasonable
detail the manner in which such amount was computed. Premiums for policy
periods commencing prior to, or extending beyond, the term of this Lease
shall be to coincide with the corresponding Commencement or Expiration
of the Lease term.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of
insurance protecting Lessee and Lessor (as an additional insured)
against claims for bodily injury and property damage based upon,
involving or out of the ownership, use, occupancy or maintenance of
the Premises and all areas appurtenant thereto. Such insurance shall be
on an occurrence providing single limit coverage in an amount not less
than $1,000,000 per occurrence with an "Additional Insured-Managers or
Lessors of Premises" Endorsement and contain the "Amendment of the
Pollution Exclusion" for damage caused by heat, smoke, or fumes from a
hostile fire. The policy shall not contain any intra-insured exclusions
as between insured persons or organizations, but shall include coverage
for liability assumed under this Lease as an "insured contract" for the
performance of Lessee's indemnity obligations under this Lease. The
limits of said insurance required by this Lease or as carried by Lessee
shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation hereunder. All insurance to be carried by Lessee shall be
primary to and not contributory with any similar insurance carried by
Lessor, whose insurance shall be considered excess insurance only.
(b) Carried By Lessor. In the event Lessor is the Insuring Party,
Lessor shall also maintain liability insurance described in Paragraph
8.2(a), above, in addition to, and in lieu of, the insurance required to
be maintained by Lessee. Lessee shall not be named as an additional
insured therein.
8.3 Property Insurance-Building, Improvements and Rental Value.
(a) Building and Improvements. The Insuring Party shall obtain and
keep in force during the term of this Lease an "all risk" policy or
policies in the name of Lessor, with loss payable to Lessor and to the
holders of any mortgages, deeds of trust or ground leases on the
Premises ("Lender(s)"), insuring loss or damage to the Premises. The
amount of such insurance shall be equal to the Full replacement cost of
the Premises, as the same shall exist from time to time, or the amount
required by Lenders, but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the
unique nature or age of the improvements involved, such latter amount is
less than full replacement cost. If the coverage is available and
commercially appropriate, such policy or policies shall insure against
all risks of direct physical loss or damage (except the perils of flood
and/or earthquake unless required by a Lender), including coverage for
sprinkler leakage and any additional costs resulting from debris removal
and reasonable amounts of coverage for the enforcement of any ordinance
or law regulating the reconstruction or replacement of any undamaged
sections of the Premises required to be demolished or removed by reason
of the enforcement of any building, zoning, safety or land use laws as
the result of a covered cause of loss, but not including plate glass
insurance. Said policy or policies shall also contain an agreed
valuation provision in lieu of any coinsurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the
annual property insurance coverage amount by a factor of not less than
the adjusted U.S. Department of Labor Consumer Price Index for all Urban
Consumers for the city nearest to where the Premises are located. SEE
ADDENDUM PARAGRAPH 57
<PAGE>
(b) Rental Value. Lessor shall, in addition, obtain and keep in force
during the term of this Lease a policy or policies in the name of
Lessor, with loss payable to Lessor and Lender(s), insulting the loss of
the full rental and other charges payable by Lessee to Lessor under this
Lease for one (1) year (including all real estate taxes, insurance
costs, and any scheduled rental increases.) Said insurance shall
provide that in the event the Lease is terminated by reason of an
insured loss, the period of indemnity for such coverage shall be
extended beyond the date of the completion of repairs or replacement of
the Premises, to provide for one full year's loss of rental revenues
from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected rental
income, property taxes, insurance premium costs and other expenses, if
any, otherwise payable by Lessee, for the next twelve (12) month period.
(c) Adjacent Premises. If the Premises are part of a larger building,
or if the Premises are part of a group of buildings owned by Lessor
which are adjacent to the Premises, the Lessee shall pay for any
increase in the premiums for the property insurance of such building or
buildings if said increase is caused by Lessee's acts, omission's, use
or occupancy of the Premises.
(d) Tenant's Improvements. The Lessor shall not be required to insure
Lessee Owned Alterations and Utility Installations unless the item in
question has become the property of Lessor under the terms of this
Lease.
8.4 Lessee's Property Insurance. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain
insurance coverage on all of Lessee's personal property, in, on, or
about the Premises similar in coverage to that carried by the Insuring
Party under Paragraph 8.3. Such insurance shall be full replacement cost
coverage with a deductible of not to exceed $25,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the
replacement of personal property. Lessee shall be the Insuring Party
with respect to the insurance required by this Paragraph 8.4 and shall
provide Lessor with written evidence that such insurance is in force.
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, or such other rating as may be
required by a Lender having a lien on the Premises, as set forth in the
most current issue of "Best's Insurance Guide." Lessee shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to
Lessor certified copies of, or certificates evidencing the existence and
amounts of, the insurance, and with the additional insureds, required
under Paragraph 8.2(a) and 8.4. No such policy shall be cancelable or
subject to modification except after (30) days prior written notice to
Lessor. Lessee shall at least (30) days prior to the expiration of such
policies, furnish Lessor with evidence of renewal thereof, or Lessor may
order such insurance and charge the cost thereof to Lessee, which amount
shall be payable by Lessee upon demand.
<PAGE>
8.6 Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor ("Waiving Party") each hereby release and
relieve the other, and waive their entire right to recover damages
(whether in contract or in tort) against the other, for loss of or
damage to the Waiving Party's property arising out of incident to t he
perils required to be insured against under Paragraph 8. The effect of
such releases and waivers of the right to recover damages shall not be
limited by the amount of insurance carried or required, or by any
deductibles applicable thereto.
8.7 Indemnity. Except for Lessor's negligence and/or breach of
express warranties, Lessee shall indemnify, protect, defend and hold
harmless the Premises, Lessor and its agents, Lessor's master or ground
lessor, Partners and Lenders, from and against any and all claims, loss
of rents and/or damages, costs, liens, judgments, penalties, permits,
attorney's and consultants fees, expenses and/or liabilities arising out
of, involving, or in dealing with, the occupancy of the Premises by
Lessee, the conduct of Lessee's business, any act omission or neglect of
Lessee, its agents, contractors, employees or invitees, and out of any
Default or Breach by Lessee in the performance in a timely manner of any
obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit
of any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to
judgment, and whether well founded or not. In case any action or
proceeding be brought against Lessor by reason of any of the foregoing
matters, Lessee upon notice from Lessor shall defend the same at
Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first
paid any such claim in order to be so indemnified.
8.8 Exemption of Lessor from Liability. Except to the extent caused
by Lessor's negligence or willful misconduct. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees,
customers, or any other person in or about the Premises, whether such
damage or injury is caused by or results from fire, steam, electricity,
gas, water or rain, or from the breakage, leakage, obstruction or other
defects of pipes, fire sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause, whether the
said injury or damage results from conditions arising upon the Premises
or upon other portions of the building of which the Premises are a part,
or from other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is accessible
or not. Lessor shall not be liable for any damages arising from any act
or neglect of any other tenant of Lessor. Not withstanding Lessor's
negligence or breach of this Lease, Lessor shall under no circumstances
be liable for injury to Lessee's business or for any loss of income or
profit therefrom.
<PAGE>
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, the repair cost of which damage or destruction is
less than 50% of the then Replacement Cost of the Premises immediately
prior to such damage or destruction, excluding from such calculation the
value of the land and Lessee Owned Alterations and Utility
Installations.
(b) "Premises Total Destruction" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility
Installations the repair cost of which damage or destruction is 50% or
more of the then Replacement Cost of the Premises immediately prior to
such damage or destruction, excluding from such calculation the value of
the land and Lessee Owned Alterations and Utility Installations.
(c) "Insured Loss" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility
Installation, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible
amounts or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of occurrence to their
condition existing immediately prior thereto, including demolition,
debris removal and upgrading required by the operation of applicable
building codes, ordinances or laws, and without deduction for
depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination
by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or
under the Premises.
9.2 Partial Damage-Insured Loss. If a Premises Partial Damage that is
an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations
and Utility Installations) as soon as reasonably possible and this Lease
shall continue in full force and effect. Notwithstanding the foregoing,
if the required insurance was not in force or the insurance was not in
force or the insurance proceeds are not sufficient to effect such
repair, the Insuring Party shall promptly contribute the shortage in
proceeds as and when required to complete said repairs. In the event,
however, the shortage in proceeds was due to the fact that, by reason of
the unique nature of the improvements, full replacement cost insurance
coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to
fully restore the unique aspects of the Premises unless Lessee provides
Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such
shortage and request therefor. If Lessor receives said funds or adequate
assurance thereof within said (10) day period, the party responsible
for making the repairs shall complete them as soon as reasonably
<PAGE>
possible and this Lease shall remain in full force and effect. If Lessor
does not receive such funds or assurance within said period, Lessor may
nevertheless elect by Written notice to Lessee within (10) ten days
thereafter to make restoration and repair as is commercially reasonable
with Lessor paying any shortage in proceeds, in which case this Lease
shall remain in full force and effect. If in such case Lessor does not
so elect, then this Lease shall terminate thirty (30) days following the
occurrence of the damage or destruction. Unless otherwise agreed, Lessee
shall in no event have any right to reimbursement from Lessor for any
funds contributed by Lessee to repair any such damage or destruction.
Premises Partial Damage due to flood or earthquake shall be subject to
Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there may
be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.
9.3 Partial Damage-Uninsured Loss. If a Premises Partial Damage that
is not an Insured Loss occurs, unless caused by a negligent or willful
act of Lessee (in which event Lessee shall make the repairs at Lessee's
expense and this Lease shall continue in full force and effect, but
subject to Lessor's rights under Paragraph 13), Lessor may at Lessor's
option, either: (I) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force
and effect, or (ii) give written notice to Lessee within thirty (30)
days after receipt by Lessor of knowledge of the occurrence of such
damage of Lessor's desire to terminate this Lease as of the date sixty
(60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this
Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's
commitment to pay for the repair of such damage totally at Lessee's
expense and without reimbursement from Lessor. Lessee shall provide
Lessor with the required funds or satisfactory assurance thereof within
thirty (30) days following Lessee's said commitment. In such event this
Lease shall continue in full force and effect, and Lessor shall proceed
to make such repairs as soon as reasonably possible and the required
funds are available. If Lessee does not give such notice and provide the
funds or assurance thereof within the times specified above, this Lease
shall terminate as of the date specified in Lessor's notice of
termination.
9.4 Total Destruction. Notwithstanding any other provision hereof, if
a Premises Total Destruction occurs (including any destruction required
by any authorized public authority), this Lease shall terminate thirty
(30) days following the date of such Premises Total Destruction, whether
or not the damage or destruction is an Insured Loss or was caused by
negligent or willful act of Lessee. In the event, however, that the
damage or destruction was caused by Lessee, Lessor shall have the right
to recover Lessor's damages from Lessee except as released and waived in
Paragraph 8.6.
<PAGE>
9.5 Damage Near End of Term. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to
repair exceeds one (1) month's Base Rent, whether or not an Insured
Loss, Lessor may, at Lessor's option, terminate this Lease effective
sixty (60) days following the date of occurrence of such damage by
giving written notice to Lessee of Lessor's election to do so within
thirty (30) days after the date of occurrence of such damage. Provided,
however, if Lessee at that has an exercisable option to extend this
Lease or to purchase the Premises, then Lessee may preserve this Lease
by, within twenty (20) days following the occurrence of the damage, or
before the expiration of the time provided in such option for its
exercise, whichever is earlier ("Exercise Period"), (I) exercising such
option and (ii) providing Lessor with any shortage in insurance proceeds
(or adequate assurance thereof) needed to make the repairs. If Lessee
duly exercises such option during said Exercise Period and provides
Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds. Lessor shall, at Lessor's expense repair such
damage as soon as reasonably possible and this Lease shall continue in
full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during said Exercise Period, then Lessor
may at Lessor's option terminate this Lease as of the expiration of said
sixty (60) day period following the occurrence of such damage by giving
written notice to lessee of Lessor's election to do so within ten (10)
days after the expiration of the Exercise Period, notwithstanding any
term or provision in the grant of option to the contrary.
9.6 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage-Insured), whether or not Lessor or Lessee repairs or restores the
Premises, the Base Rent, Real Property Taxes, insurance premiums, and
other charges, if any, payable by Lessee hereunder for the period during
which such damage, its repair or the restoration continues (not to
exceed the period for which rental value insurance is required under
Paragraph 8.3(b), shall be abated in proportion to the degree to which
Lessee's use of the Premises is impaired. Except for abatement of Base
Rent, Real Property Taxes, insurance premiums, and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be
performed by Lessee, and Lessee shall have no claim against Lessor for
any damage suffered by reason of any such repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commerce, in a
substantial and meaningful way, the repair or restoration of the
Premises within (90) days after such obligation shall accrue, Lessee
may, at any time prior to the commencement of such repair or
restoration, given written notice to Lessor and to any Lenders of which
Lessee has actual notice of Lessee's election to terminate this Lease on
a date not less than sixty (60) days following the giving of such
notice. If Lessee gives such notice to Lessor and such Lenders and such
repair or restoration is not commenced within (30) days after receipt of
such notice, this Lease shall terminate as of the date specified in said
notice. If Lessor or a Lender commences the repair or restoration of the
Premises within (30) days after receipt of such notice, this Lease shall
continue in full force and effect. "Commence" as used in this Paragraph
shall mean either the unconditional authorization of the preparation of
the required plans, or the beginning of the actual work on the Premises,
whichever first occurs. SEE ADDENDUM PARAGRAPH 58
<PAGE>
9.7 Hazardous Substance Conditions. If a Hazardous Substance
Conditions occurs, unless Lessee is legally responsible thereto (in
which case Lessee shall make the investigation and remediation thereof
required by Applicable Law and this Lease shall continue in full force
and effect, but subject to Lessor's rights under Paragraph 13), Lessor
may at Lessor's option either (I) investigate and remediate such
Hazardous Substance Condition, if required, as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue
in full force and effect, or (ii) if the estimated cost to investigate
and remediate such condition exceeds twelve (12) times the then monthly
Base Rent or $100,000, whichever is greater, give written notice to
Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire
to terminate this Lease as of the date sixty (60) days following the
giving of such notice. In the event Lessor elects to give such notice of
Lessor's intention to terminate this Lease, Lessee shall have the right
within ten (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's commitment to pay for the investigation and
remediation of such Hazardous Substance Condition totally at Lessee's
expense and without reimbursement from Lessor except to the extent of an
amount equal to twelve (12) times the then monthly Base Rent or
$100,000, whichever is greater. Lessee shall provide Lessor with the
funds required of Lessee or satisfactory assurance thereof within thirty
(30) days following Lessee's said commitment. In such event this Lease
shall continue in full force and effect, and Lessor shall proceed to
make such investigation and remediation as soon as reasonably possible
and the required funds are available. If Lessee does not give such
notice and provide the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof
within the times specified above, this Lease shall terminate as of the
date specified in Lessor's notice of termination. If a Hazardous
Substance Condition occurs for which Lessee is not legally responsible,
there shall be abatement of Lessee's obligations under this Lease to the
same extent as provided in Paragraph 9.6(a) for a period of not to
exceed twelve (12) months. SEE ADDENDUM PARAGRAPH 59
9.8 Termination-Advance Payments. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by
Lessee to Lessor. Lessor shall, in additon, return to Lessee so much of
Lessee's Security Deposit has not been, or is not then required to be,
used by Lessor under the terms of this Lease.
9.9 Waive Statutes. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the
Premises with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent
inconsistent herewith.
<PAGE>
10. Real Property Taxes.
10.1 (a) Payment of Taxes. Lessor shall pay the Real Property Taxes,
as defined in Paragraph 10.2 applicable to the Premises; provided,
however, that Lessee shall pay, in addition to rent, the amount, if any,
by which Real Property Taxes applicable to the Premises increase over
the fiscal tax year during which the Commencement Date occurs ("Tax ).
Subject to Paragraph 10.1(b), payment of any such Tax Increase shall be
made by Lessee within thirty (30) days after receipt of Lessor's written
statement setting forth the amount due and the computation thereof.
Lessee shall promptly furnish Lessor with satisfactory evidence that
such taxes have been paid. If any such taxes to be paid by Lessee shall
cover any period of time prior to or after the expiration or earlier
termination of the term hereof, Lessee's share of such taxes shall be
equitably prorated to cover only the period of time within the tax
fiscal year his Lease is in effect, and Lessor shall reimburse Lessee
for any overpayment after such proration.
(b) Advance Payment. In order to insure payment when due and before
delinquency of any or all Real Property Taxes, Lessor reserves the
right, at Lessor's option, to estimate the current Real Property Taxes
applicable to the Premises, and to require such current year's Tax
Increase to be paid in advance to Lessor by Lessee, wither (I) in a lump
sum amount equal to the amount due, at least twenty (20) days prior to
the applicable delinquency date, or (ii) monthly in advance with the
payment of the Base Rent. If Lessor elects to require payment monthly in
advance, the monthly payment shall be that equal monthly amount which,
over the number of months remaining before the month in which the
applicable tax installment would become delinquent and without interest
thereon), would provide a fund large enough to fully discharge before
delinquency the estimated Tax Increase to be paid. When the actual
amount of the applicable Tax Increase is known, the amount of such equal
monthly advance payment shall be adjusted as required to provide the
fund needed to pay the applicable Tax Increase before delinquency. If
the amounts paid to Lessor by Lessee under the provisions of this
Paragraph are insufficient to discharge the obligations of Lessee to pay
such Tax Increase as the same becomes due, Lessee shall pay to Lessor,
upon Lessor's demand, such additional sums as are necessary to pay such
obligation. All moneys paid to Lessor under this Paragraph may be
intermingled with other moneys of Lessor and shall not bear interest. In
the event of a Breach by Lessee in the performance of the obligations of
Lessee under this Lease, then any balance of funds paid to Lessor under
the provisions of this Paragraph may, subject to proration as provided
in Paragraph 10.1(a), at the option of Lessor, be treated as an
additional Security Deposit under Paragraph 5.
(c) Additional Improvements. Notwithstanding Paragraph 10.1(a)
hereof, Lessee shall pay to Lessor upon demand therefor the entirety of
any increase in Real Property Taxes assessed by reason of Alterations or
Utility Installations placed upon the Premises by Lessee or at Lessee's
request.
10.2 Definition of "Real Property Taxes" As used herein, the term
"Real Property Taxes" shall include any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any license
fee, commercial rental tax, improvement bond or bonds, levy or tax
(other than inheritance, personal income or estate taxes) imposed upon
the Premises by any authority having the direct or indirect power to
tax, including any city, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement
district thereof, levied against any legal or equitable interest of
Lessor in the Premises or in the real property of which the Premises are
a part, Lessor's right to rent or other income therefrom, and/or
Lessor's business of leasing the Premises. The term "Real Property
Taxes" shall also include any tax, fee, levy, assessment or charge, or
any increase therein, imposed by reason of events occurring, or changes
in applicable law taking effect, during the term of this Lease,
including but not limited to a change of the ownership of the Premises
or in the improvements thereon, the execution of this Lease, or any
modification, amendment or transfer thereof, and whether or not
contemplated by the Parties. SEE ADDENDUM PARAGRAPH 60 AND 61.
<PAGE>
10.3 Joint Assessment. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property
Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor's work sheets or such
other information as may be reasonably available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.
10.4 Personal Property Taxes. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee Owned Alterations,
Utility Installations, Trade Fixtures, furnishings, equipment and all
personal property of Lessee contained in the Premises or elsewhere.
When, possible, Lessee shall cause its Trade Fixtures, furnishings,
equipment and all other personal property to be assessed and billed
separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's with Lessor's real
property, Lessee shall pay Lessor the taxes attributable to Lessee
within ten (10) days after receipt of a written statement setting forth
the taxes applicable to Lessee's property or, at Lessor's option, as
provided in Paragraph 10.1(b).
11. Utilities. Lessee shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services
supplied to the Premises, together with any taxes thereon. If any such
services are not separately metered to Lessee, Lessee shall pay a
reasonable proportion, to be determined by Lessor, of all charges
jointly metered with other premises.
12. Assignment and Subletting
12.1 Lessor's Consent Required
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"assignment") or sublet all or any part of Lessee's interest in this
Lease or in the Premises without Lessor's prior written consent given
under and subject to the terms of Paragraph 36. SEE ADDENDUM PARAGRAPH
62
(b) Lessee's remedy for any breach this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and injunctive relief.
<PAGE>
12.2 Terms and Conditions Applicable to Assignment and Subletting. SEE
ADDENDUM PARAGRAPH 63
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this
Lease, (ii) release Lessee of any obligations hereunder, or (iii) after
the primary liability of Lessee for the payment of Base Rent and other
sums due Lessor hereunder or for the performance of any other
obligations to be performed by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such
assignment nor the acceptance of any rent or performance shall
constitute a waiver or estoppel of Lessor's right to exercise its
remedies for the Default or Breach by Lessee of any of the terms,
convenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by
the sublessee. However, Lessor may consent to subsequent sublettings and
assignments of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else liable on the Lease or sublease
and without obtaining their consent, and such action shall not relieve
such persons from liability under this Lease or sublease.
(d) In the event of any Default or Breach of lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any
Guarantors or any one else responsible for the performance of the
Lessee's obligations under this Lease, including sublessee, without
first exhausting Lessor's remedies against any other person or entity
responsible therefor to Lessor, or any security held by Lessor or
Lessee.
(e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not
limited to the intended use and/or required modification of the
Premises, if any, together with a non-refundable deposit of $1,000 or
ten percent (10%) of the current monthly Base Rent, whichever is
greater, as reasonable consideration for Lessor's considering and
processing the request for consent. Lessee agrees to provide Lessor with
such other or additional information and/or documentation as may be
reasonably requested by Lessor.
(f) Any assignee if, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed,
for the benefit of Lessor, to have assumed and agreed to conform and
comply with each and every term, covenant, condition and obligation
herein to be observed or performed by Lessee during the term of said
assignment or sublease, other than such obligations as are contrary to
or inconsistent with provisions of an assignment or sublease to which
Lessor has specifically consented in writing.
12.3 Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting Lessee of
all or any part of the Premises and shall be deemed included in all
subleases under this Lease whether or not expressly incorporated
therein:
<PAGE>
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a
portion of the Premises heretofore or hereafter made by Lessee, and
Lessor may collect such rent and income and apply same toward Lessee's
obligations under this Lease; provided, however, that until a Breach (as
defined in Paragraph 13.1) shall occur in the performance of Lessee's
obligations under this Lease, Lessee may, except as otherwise provided
in this Lease, receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of
such sublease to Lessor, nor by reason of the collection of the rents
from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such
sublessee under sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a Breach exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor the rents and other charges due and
to become due under the sublease. Sublessee shall rely upon any such
statement and request from Lessor and shall pay such rents and other
charges to Lessor without any obligation or right to inquire as to
whether such Breach exists and notwithstanding any notice from or claim
from Lessee to the contrary. Lessee shall have no right or claim against
said sublessee, or, until the Breach has been cured, against Lessor, for
any such rents and other charges so paid by said sublessee to Lessor.
SEE ADDENDUM PARAGRAPH 64
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any
obligation to so, may require any sublessee to attorn to Lessor, in
which event Lessor shall undertake the obligations of the sublessor
under such sublease from the time of the exercise of said option to the
expiration of such sublease; provided, however, Lessor shall not be
liable for any prepaid rents or security deposit paid by such sublease
to such sublessor or for any other prior Defaults or Breaches of such
sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under
a sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The
sublessee shall have the right of reimbursement and offset from and
against Lessee for any such Defaults cured by the sublessee.
<PAGE>
13. Default; Breach; Remedies.
13.1 Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such
occurrence for legal services and costs in the preparation and service
of a notice of Default, and that Lessor may include the cost services
and costs in said notice as rent due and payable to cure said default. A
"Default" is defined as a failure by the Lessee to observe, comply with
or perform any of the terms, covenants, conditions or rules applicable
to Lessee under this Lease. A "Breach" is defined as the occurrence of
any one or more of the following Defaults, and, where a grace period for
cure after notice is specified herein, the failure by Lessee to cure
such Default prior to the expiration of the applicable grace period,
shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2
and/or 13.3:
(a) The abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure
by Lessee to make any payment of Base Rent or any other monetary payment
required to be made by Lessee thereunder, as and when due, the failure
by Lessee to provide Lessor with reasonable evidence of insurance or
surely bond required under this Lease, or the failure of Lessee to
fulfill any obligation under this Lease which endangers or threatens
life or property, where such failure continues for a period of three (3)
days following written notice thereof by or on behalf of Lessor to
Lessee.
(c) Except as expressly otherwise provided in this Lease, the failure
by Lessee to provide Lessor with reasonable written evidence (in duly
executed original form, if applicable) of (i) compliance with applicable
law per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1(b), (iii) the recission of an
unauthorized assignment or subletting per Paragraph 7.1(b), (iv) a
Tenancy Statement per Paragraphs 16 or 37, (v) the subordination or
non-subordination of this Lease per Paragraph 30, (vi) the guaranty of
the performance of Lessee's obligations under this Lease if required
under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other
documentation or information which Lessor may reasonably require of
lessee under the terms of this Lease, where any such failure continues
for a period of ten (10) days following written notice by or on behalf
of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40
hereof, that are to be observed, complied with or performed by Lessee,
other than those described in subparagraphs (a), (b) or (c), above,
where such Default continues for a period of thirty (30) days are
reasonably required for its cure, then it shall not be deemed to be a
Breach of this Lease by Lessee if Lessee commences such cure within said
thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
(e) The occurrence of any of the following events: (I) The making by
lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S.C.
sec. 101 of any successor statute thereto (unless, in the case of a
petition filed against lessee, the same is dismissed within sixty (60);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where possession is not restored to
Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located
at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in
the event that any provision of this subparagraph (e) is contrary to any
applicable law, such provision shall be of no force or effect, and not
affect the validity of the remaining provisions.
<PAGE>
(f) The discovery by Lessor that any financial statement given to
lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (I) the death of guarantor, (ii) the termination of a
guarantor's liability with respect to this lease other than in
accordance with the terms of such guaranty, (iii) a guarantor's becoming
insolvent or the subject of a bankruptcy filing, (iv) a guarantor's
refusal to honor the guaranty, or (v) a guarantor's breach of its
guaranty obligation on an anticipatory breach basis, and Lessee's
failure, within sixty (60) days following written notice by or on behalf
of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurance or security, which, when coupled with the then
existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the guarantors that existed at the time of
execution of this Lease.
13.2 Remedies. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after
written notice to Lessee (or in case of an emergency, without notice),
Lessor may at its option (but without obligation to do so), perform such
duty or obligation on Lessee's behalf, including but not limited to the
obtaining of reasonably required bonds, Insurance policies, or
governmental licenses, permits or approvals. The cost and expenses of
any such performance by Lessor shall be due and payable by Lessee to
Lessor upon invoice therefor. If any check given to Lessor by Lessee
shall not be honored by the bank upon which it is drawn, Lessor, at its
option, may require all future payments to be made under this Lease by
Lessee to be made only by cashier's check. In the event of a Breach of
this Lease by Lessee, as defined in Paragraph 13.1, with or without
further notice or demand, and without limiting Lessor in the exercise of
any right or remedy which Lessor may have by reason of such Breach,
Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of the
Premises to Lessor. In such event Lessor shall be entitled to recover
from Lessee: (I) the worth at the time of the award of the unpaid rent
which had been earned at the time of the award of the unpaid rent which
had been earned at the time of termination; (ii) the worth at the time
of award of the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of
such rental loss that the Lessee proves could have been reasonably
avoided; (iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds
the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate
Lessor for all the detriment proximately caused by the Lessee's failure
to perform its obligations under this Lease or which in the ordinary
course of things would be likely to result therefrom, including but not
limited to the cost of recovering possession of the Premises, expenses
of reletting, including necessary renovation and alteration of the
Premises, reasonable attorney's fees, and that portion of the leasing
commission paid by Lessor applicable to the unexpired term of this
Lease. The worth at the time of award of the amount referred to in
<PAGE>
provision (iii) of the prior sentence shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%). Efforts by Lessor
to mitigate damages caused by Lessee's Default or Breach of this Lease
shall not waive Lessor's right to recover damages under this Paragraph.
If termination of this Lease is obtained through the provisional remedy
of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or
Lessor may reserve therein the right to recover all or any part thereof
in a separate suit for such rent and/or damages. If a notice and grace
period required under subparagraphs 13.1(b), (c) or (d) was not
previously given, a notice to pay rent or quit, or to perform or quit,
as the case may be, given to Lessee under any statute authorizing the
forfeiture of leases for unlawful detainer shall also constitute the
applicable notice for grace period purposes required by subparagraphs
13.1(b), (c) or (d). In such case, the applicable grace period under
subparagraphs 13.1 (b), (c), or (d) and under the unlawful detainer
statute shall run concurrently after the one such statutory notice, and
the failure of Lessee to cure the Default within the greater of the two
such grace periods shall constitute both an unlawful detainer and a
Breach of this Lease entitling Lessor to the remedies provided for in
this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's
Breach and abandonment and recover the rent as it becomes due, provided
Lessee has the right to sublet or assign, subject only to reasonable
limitations. See paragraphs 12 and 36 for the limitations on assignment
and subletting which limitations Lessee and Lessor agree are reasonable.
Acts of maintenance or preservation, efforts to relate the Premises, or
the appointment of a receiver to protect the Lessor's interest under the
Lease, shall not constitute a termination of the Lessee's right to
possession.
(c) Pursue any other remedy now or hereafter available to a lessor
under the laws or judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee
from liability under any indemnity provisions of this Lease as to
matters occurring or accruing during the term hereof or by reason of
Lessee's occupancy of the Premises.
<PAGE>
13.3 Inducement Recapture in Event of Breach. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or
for the giving or paying by Lessor to or for Lessee of any cash or other
bonus, inducement or consideration for Lessee's entering into this
Lease, all of which concessions are hereinafter referred to as
"Inducement Provisions," shall be deemed conditioned upon Lessee's full
and faithful performance of all of the terms, covenants and conditions
of this Lease to be performed or observed by Lessee during the initial
twelve (12) months of the Lease Term. Upon the occurrence of a Breach of
this Lease by Lease by Lessee, as defined in Paragraph 13.1, any such
inducement Provision shall automatically be deemed deleted from this
Lease and of no further force or effect, and any rent, other charge,
bonus, inducement or consideration theretofore abated, given or paid by
Lessor under such an Inducement Provision shall be immediately due and
payable by Lessee to Lessor, and recoverable by Lessor as additional
rent due under this Lease, notwithstanding any subsequent cure of said
Breach by Lessee. the acceptance by Lessor of rent of the cure of the
Breach which initiated the operation of this Paragraph shall not be
deemed a waiver by Lessor of the provisions of this Paragraph unless
specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor or rent and other sums due hereunder will cause Lessor
to incur costs not contemplated by this Lease, the exact amount of which
will be extremely difficult to ascertain. Such costs include, but are
not limited to, processing and accounting charges, and late charges
which may be imposed upon Lessor by the terms of any ground lease,
mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or any other sum due from Lessee shall not be
received by Lessor or Lessor's designee within five (5) days after such
amount shall be due, then, without any requirement for notice to Lessee,
Lessee shall pay to Lessor a late charge equal to six percent (6%) of
such overdue amount. the parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur
by reason of late payment by Lessee. Acceptance of such late charge by
Lessor shall in no event constitute a waiver of Lessee's Default or
Breach with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder. In
the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to
the contrary, Base Rent shall, at Lessor's option, become due and
payable quarterly in advance.
13.5 Breach By Lessor. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an
obligation required to be performed by Lessor. For purposes of this
Paragraph 13.5, a reasonable time shall in no event be less than thirty
(30) days after receipt by Lessor, and by the holders of any ground
Lease, mortgage or deed of trust covering the Premises whose name and
address shall have been furnished Lessee in writing for such purpose, of
written notice specifying wherein such obligation of Lessor has not been
performed; provided, however, that if the nature of Lessor's obligation
is such that more than thirty (30) days after such notice are reasonably
required for its performance, then Lessor shall not be in breach of this
Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
<PAGE>
14. Condemnation. If the Premises or any portion thereof are taken
under the power of eminent domain or sold under the threat of the
exercise of said power (all of which are herein called "Condemnation"),
this Lease shall terminate as to the part so taken as of the date the
condemning authority takes title or possession, whichever first occurs.
If more than ten percent (10%) of the floor area of the Premises, or
more than twenty-five percent (25%) of the land area not occupied by any
building, is taken by condemnation, Lessee may, at Lessee's option, to
be exercised in writing within ten (10) days after Lessor shall have
given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease
in accordance with the foregoing, this Lease shall remain in full force
and effect as to the portion of the Premises remaining, except that the
Base Rent shall be reduced in the same proportion as the rentable floor
area of the Premises taken bears to the total rentable floor area of the
building located on the Premises. No reduction of Base Rent shall occur
if the only portion of the Premises taken is land on which there is no
building. Any award for the taking of all or any part of the Premises
under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Lessor, whether such
award shall be made as compensation for diminution in value of the
leasehold or for the taking of the fee, or as severance damages;
provided, however, that Lessee shall be entitled to any compensation
separately awarded to Lessee for Lessee's relocation expenses and/or
loss of Lessee's Trade Fixtures. In the event that this Lease is not
terminated by reason of such condemnation, Lessor shall to the extent
of its net severance damages received, over and above the legal and
other expenses incurred by Lessor in the condemnation matter, repair any
damage to the Premises caused by such condemnation, except to the extent
that Lessee has been reimbursed therefor by the condemning authority.
Lessee shall be responsible for the payment of any amount in excess of
such net severance damages required to complete such repair.
15. Broker's Fee
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease.
15.5 Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than
the Brokers, if any named in Paragraph 1.10) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity
other than said named Brokers is entitled to any commission or finder's
fee in connection with said transaction. Lessee and Lessor do each
hereby agree to Indemnify, protect, defend and hold the other harmless
from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the indemnifying Party, including
any costs, expenses, attorneys' fees reasonably incurred with respect
thereto.
<PAGE>
16. Tenancy Statement.
16.1 Each Party (as "Responding Party") shall within ten (10) days
after written notice from the other Party (the "Requesting Party")
execute, acknowledge and deliver to the Requesting Party a statement in
writing in form similar to the then most current "Tenancy Statement"
form published by the American Industrial Real Estate Association, plus
such additional information, confirmation and/or statements as may be
reasonably requested by the Requesting Party.
16.2 If Lessor desires to finance, refinance, or sell the Premises,
any part thereof, or the building of which the Premises are a part,
Lessee and all Guarantors of Lessee's performance hereunder shall
deliver to any potential lender or purchaser designated by Lessor such
financial statements of Lessee and such Guarantors as may be reasonably
required by such tender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such
financial statements shall be received by Lessor and such lender or
purchaser in confidence and shall be used only for the purposes herein
set forth. SEE ADDENDUM PARAGRAPH 65.
17. Lessor's Liability. The term "Lessor" as used herein shall mean
the owner or owners at the time in question of the fee title to the
Premises, or, if this is a sublease, of the Lessee's interest in the
prior lease. In the event of a transfer of Lessor's title or interest in
the Premises or in this Lease, Lessor shall deliver to the transferee or
assignee (in cash or by credit) any unused Security Deposit held by
Lessor, at the time of such transfer or assignment. Except as provided
in Paragraph 15, upon such transfer or assignment and delivery of the
Security Deposit, as aforesaid, the prior Lessor shall be relieved of
all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the
foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as
hereinabove defined.
18. Severability. The invalidity of any provision of the Lease, as
determined by a court of competent jurisdiction, shall in no way affect
the validity of any other provision hereof.
19. Interest on Past-Due Obligation. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty
(30) days following the date on which it was due, shall bear interest
from the thirty-first (31st) day after it was due at the rate of 12% per
annum, but not exceeding the maximum rate allowed by law, in addition to
the late charge provided for in Paragraph 13.4.
20. Time of Essence. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the
Parties under this Lease.
21. Rent Defined. All monetary obligations of Lessee to Lessor under
the terms of this Lease are deemed to be rent.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease
contains all agreements between the Parties with respect to any matter
mentioned herein, and no other prior or contemporaneous agreement or
understanding shall be effective.
<PAGE>
23. Notices.
23.1 All notices required or permitted by this Lease shall be in
writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered mail
or U.S. Postal Service Express Mail, with postage prepaid, or by
facsimile transmission, and shall be deemed sufficiently given if served
in a manner specified in this Paragraph 23. The addresses noted adjacent
to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notice purposes. Either Party may by written
notice to the other specify a different address for notice purposes,
except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for the purpose of mailing or
delivering notices to Lessee. A copy of all notices required or
permitted to be given to Lessor hereunder shall be concurrently
transmitted to such party or parties at such addresses as Lessor may
from time to time hereafter designate by written notice to Lessee.
23.2 Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the
receipt card, or if no delivery date is shown, the postmark thereon. If
sent by regular mail the notice shall be deemed given forty-eight (48)
hours after the same is addressed as required herein and mailed with
postage prepaid. Notices delivered by United States Express Mail or
overnight courier that guarantees next day delivery shall be deemed
given twenty-four (24) hours after delivery of the same to the United
states Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served
or delivered upon telephone confirmation of receipt of the transmission
thereof, provided a copy is also delivered via delivery or mail. If
notice is received on a Sunday or legal holiday, it shall be deemed
received on the next business day.
24. Waivers. No waiver by Lessor of the Default or Breach of any
term, covenant or condition hereof by Lessee, shall be deemed a waiver
of any other term, covenant or condition hereof, or of any subsequent
Default or Breach by Lessee of the same or of any other term, covenant
or condition hereof. Lessor's consent to, or approval of, any act shall
not be deemed to render unnecessary the obtaining of Lessor's consent
to, or approval of, any subsequent or similar act by Lessee, or be
construed as the basis of an estoppel to enforce the provision or
provisions of the Lease requiring such consent. Regardless of Lessor's
knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any preceding
Default or Breach by Lessee of any provision hereof, other than the
failure of Lessee to pay the particular rent so accepted. Any payment
given Lessor by Lessee may be accepted by Lessor on account of moneys or
damages due Lessor, notwithstanding any qualifying statements or
conditions made by Lessee in connection therewith, which such statements
and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to in writing by Lessor at or before the time of
deposit of such payment.
<PAGE>
25. Recording. Either Lessor or Lessee shall, upon request of the
other, execute, acknowledge and deliver to the other a short form
memorandum of this Lease and option to purchase the Premises for
recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto SEE
ADDENDUM PARAGRAPH 66.
26. No Right to Holdover. Except as provided in Paragraph 71 of the
Addendum to this Lease, Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier
termination of this Lease. SEE ADDENDUM PARAGRAPH 67.
27. Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all
other remedies at law or in equity.
28. Covenants and Conditions. All provisions of the Lease to be
observed or performed by Lessee are both covenants and conditions.
29. Binding Effect; Choice of Law. This Lease shall be binding upon
the parties, their personal representatives, successors and assigns and
be governed by the laws of the State in which the Premises are located.
Any litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "Security
Device"), now or hereafter placed by Lessor upon the real property of
which the Premises are a part, to any and all advances made on the
security thereof, and to all renewals, modifications, consolidations,
replacements, and extensions thereof. Lessee agrees that the Lenders
holding any such Security Device shall have no duty, liability or
obligation to perform any of the obligations of Lessor under this Lease,
but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default
and allow such Lender thirty (30) days following receipt of such notice
for the cure of said default before invoking any remedies Lessee may
have by reason thereof. If any Lender shall elect to have this Lease
and/or any Option granted hereby superior to the lien of its Security
Device and shall give written notice thereof to Lessee, this Lease and
such Options shall be deemed prior to such Security Device,
notwithstanding the relative dates of the documentation or recordation
thereof.
30.2 Attornment. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party
who acquires ownership of the Premises by reason of a foreclosure of a
Security Device, and that in the event of such foreclosure, such new
owner shall not: (I) be liable for any act or omission of any prior
lessor or with respect to events occurring prior to acquisition of
ownership, (ii) be subject to any offsets or defenses which Lessee might
have against any prior lessor, or (iii) be bound by prepayment of more
than one (1) month's rent.
<PAGE>
30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving assurance (a "non-disturbance
agreement") from the Lender that Lessee's possession and this Lease,
including any options to extend the term hereof, will not be disturbed
so long as Lessee is not in Breach hereof and attorns to the record
owner of the Premises.
30.4 Self-Executing. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents;
provided, however, that, upon written request from Lessor or a Lender in
connection with a sale, financing or refinancing of the Premises, Lessee
and Lessor shall execute such further writings as may be reasonably
required to separately document any such subordination or
non-subordination, attornment and/or non-disturbance agreement as is
provided for herein.
31. Attorney's Fees. If any Party brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing
Party (as hereafter defined) in any such proceeding, action, or appeal
thereon, shall be entitled to reasonable attorney's fees. Such fees may
be awarded in the same suit or recovered in a separate suit, whether or
not such action or proceeding is pursued to decision or judgment. The
term, "Prevailing Party" shall include, without limitation, a Party who
substantially obtains or defeats the relief sought, as the case may be,
whether by compromise, settlement, judgment, or the abandonment by the
other Party of its claim or defense. The attorney's fee award shall not
be computed in accordance with any court fee schedule, but shall be such
as to fully reimburse all attorney's fees reasonably incurred. Lessor
shall be entitled to attorney's fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently
commenced in connection with such Default or resulting Breach.
32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's
agents shall have the right to enter the Premises at any time, in the
case of emergency, and otherwise at reasonable times and with prior
notice (except if an emergency exists) for the purpose of showing the
same to prospective purchasers, lenders, (or lessees, during the last
six months of the Lease Term), and making such alterations, repairs,
improvements or additions to the Premises or to the building of which
they are a part, as Lessor may reasonable deem necessary. Lessor may at
any time place on or about the Premises or building any ordinary "For
Sale" signs and Lessor may at any time during the last one hundred
twenty (120) days of the term hereof place on or about the Premises any
ordinary "For Lease" signs. SEE ADDENDUM PARAGRAPH 54.
<PAGE>
33. Auctions. Lessee shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Premises
without first having obtained Lessor's prior written consent.
Notwithstanding anything to the contrary in this Lease, Lessor shall not
be obligated to exercise any standard of reasonableness in determining
whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the Premises, except
that Lessee may, with Lessor's prior written consent, install (but not
on the roof) such signs as are reasonably required to advertise Lessee's
own business. The installation of any sign on the Premises by or for
Lessee shall be subject to the provisions of Paragraph 7 (Maintenance,
Repairs, Utility Installations. Trade Fixtures and Alterations). Unless
otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof and the right to install, and all revenues from the
installation of, such advertising signs on the Premises, including the
roof, as do not unreasonably interfere with the conduct of Lessee's
business.
35. Termination; Merger. Unless specifically stated otherwise in
writing by Lessor, the voluntary or other surrender of this Lease by
Lessee, the mutual termination or cancellation hereof, or a termination
hereof by lessor for Breach by Lessee, shall automatically terminate any
sublease or lesser estate in the Premises; provided, however, Lessor
shall, in the event of any such surrender, termination or cancellation,
have the option to continue any one or all of any existing subtenancies.
Lessor's failure within ten (10) days following any such event to make a
written election to the contrary by written notice to the holder of any
such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. Consents.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is
required to an act by or for the other Party, such consent shall not be
unreasonably withheld or delayed. Lessor's actual reasonable costs and
expenses (including but not limited to architects', attorneys',
engineers' or other consultants' fees) incurred in the consideration of,
or response to, a request by Lessee for any Lessor consent pertaining to
this Lease or the Premises, including but not limited to consents to an
assignment, a subletting or the presence or use of a Hazardous
Substance, practice or storage tank, shall be paid by Lessee to Lessor
upon receipt of an invoice and supporting documentation therefor.
Subject to Paragraph 12.2(e) (applicable to assignment or subletting),
lessor may, as a condition to considering any such request by Lessee,
require that Lessee deposit with Lessor an amount of money (in addition
to the Security Deposit held under Paragraph 5) reasonably calculated by
Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Except as otherwise provided, any unused
portion of said deposit shall be refunded to Lessee without interest.
Lessor's consent to any act, assignment of this Lease or subletting of
the Premises by Lessee shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent
be deemed a waiver of any then existing Default or Breach, except as may
be otherwise specifically stated in writing by Lessor at the time of
such consent.
<PAGE>
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify
herein any particular condition to Lessor's consent shall not preclude
the imposition by Lessor at the time of consent of such further or other
conditions as are then reasonable with reference to the particular
matter for which consent is being given.
37. Guarantor.
37.1 If there are to be any Guarantors of this Lease per Paragraph
1.11, the form of the guaranty to be executed by each such Guarantor
shall be in the form most recently published by the American Industrial
Real Estate Association, and each said Guarantor shall have the same
obligations as Lessee under this Lease, including but not limited to the
obligation to provide the Tenancy Statement and information called for
by Paragraph 16.
37.2 It shall constitute a Default of the Lessee under this Lease if
any such Guarantor fails or refuses, upon reasonable request by Lessor
to give: (a) evidence of the due execution of the guaranty called for by
this lease, including the authority of the Guarantor (and of the party
signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and including in the case of a corporate Guarantor, a
certified copy of a resolution of its board of directors authorizing the
making of such guaranty, together with a certificate of incumbency
showing the signature of the persons authorized to sign on its behalf,
(b) current financial statements of Guarantor as may from time to time
be requested by Lessor, (c) a Tenancy Statement, or (d) written
confirmation that the guaranty is still in effect.
38. Quiet Possession. Upon payment by Lessee of the rent for the
Premises and the observance and performance of all of the covenants,
conditions and provisions on Lessee's part to be observed and performed
under this Lease, Lessee shall have quiet possession of the Premises for
the entire term hereof subject to all of the provisions of this Lease.
39. Options.
39.1 Definition. As used in this Paragraph 39 the word "Option" has
the following meaning: (a) the right to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (b) the right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right
of first refusal to lease other property of Lessor or the right of first
offer to lease other property of Lessor; (c) the right to purchase the
Premises, or the right of first refusal to purchase the Premises, or the
right of first offer to purchase the Premises, or the right to purchase
other property of Lessor, or the right of first refusal to purchase
other property of Lessor, or the right of first offer to purchase other
property of Lessor.
<PAGE>
39.2 Options Personal To Original Lessee. Each Option granted to
Lessee in this Lease is personal to the original Lessee named in
Paragraph 1.1 hereof, and cannot be voluntarily or involuntarily
assigned or exercised by any person or entity other than said original
Lessee while the original Lessee
is in full and actual possession of the Premises and without the
intention of thereafter assigning or subletting. The Options, if any,
herein granted to Lessee are not assignable, either as a part of an
assignment of this Lease or separately or apart therefrom, and no Option
may be separated from this Lease in any manner, by reservation or
otherwise. SEE ADDENDUM PARAGRAPH 68
39.3 Multiple Options. In the event that Lessee has any Multiple
Options to extend or renew this Lease, a later Option cannot be
exercised unless the prior Options to extend or renew this lease have
been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision in the grant of Option to the contrary: (I) during the
period commencing with the giving of any notice of Default under
Paragraph 13.1 and continuing until the notice Default is cured or (ii)
during the time Lessee is in Breach of this Lease, or (iii) in the event
that Lessor has given to Lessee three(3) or more notices of Default
under Paragraph 13.1, whether or not the Defaults are cured, during the
twelve (12) month period immediately preceding the exercise of the
Option.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise
an Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and
during the term of this Lease, (I) Lessee fails to pay to Lessor a
monetary obligation of Lessee for a period of thirty (30) days after
such obligation becomes due (without any necessity of Lessor to give
notice thereof to Lessee), or (ii) Lessor gives to Lessee three (3) or
more notices of Default under Paragraph 13.1 during any twelve (12)
month period, whether or not the Defaults are cures, or (iii) if Lessee
commits a Breach of this Lease.
40. Multiple Buildings. If the Premises are part of a group of
buildings controlled by Lessor, Lessee agrees that it will abide by,
keep and observe all reasonable rules and regulations which Lessor may
make from time to time for the management, safety, care, and cleanliness
of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other
occupants or tenants of such other buildings and their invitees, and
that Lessee will pay its fair share of common expenses incurred in
connection therewith.
41. Security Measures. lessee hereby acknowledges that the rental
payable to Lessor hereunder does not include the cost of guard service
or other security measures, and that Lessor shall have no obligation
whatsoever to provide same. Lessee assumes all responsibility for the
protection of the Premises, Lessee, its agents and invitees and their
property from the acts of third parties.
<PAGE>
42. Reservations. Lessor reserves to itself the right, from time to
time, to grant, without the consent or joinder of Lessee, such
easements, rights and dedications that Lessor deems necessary, and to
cause the recordation of parcel maps and restrictions, so long as such
easements, rights, dedications, maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee
agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. Performance Under Protest. If at any time a dispute shall arise
as to any amount or sum of money to be paid by one Party to the other
under the provisions hereof, the Party against whom the obligation to
pay the money is asserted shall have the right to make payment "under
protest" and such payment shall not be regarded as a voluntary payment
and there shall survive the right on the part of said Party to institute
suit for recovery of such sum. If it shall be adjudged that there was no
legal obligation on the part of said Party to pay such sum or any part
thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of
this Lease.
44. Authority. If either Party hereto is a corporation, trust, or
general or limited partnership, each individual executing this Lease on
behalf of such entity represents and warrants that he or she is duly
authorized to execute and deliver this Lease on its behalf. If Lessee is
a corporation, trust or partnership, Lessee shall, within thirty (30)
days after request by Lessor, deliver to Lessor evidence satisfactory to
Lessor of such authority.
45. Conflict. Any conflict between the printed provisions of this
Lease and the typewritten or handwritten provisions shall be controlled
by the typewritten or handwritten provisions.
46. Offer. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to
Lessee. This Lease is not intended to be binding until executed by all
Parties hereto. SEE ADDENDUM PARAGRAPH 69
47. Amendments. This Lease may be modified only in writing, signed by
the parties in interest at the time of the modification. The parties
shall amend this Lease from time to time to reflect any adjustments that
are made to the Base Rent or other rent payable under this Lease. As
long as they do not materially change Lessee's obligations hereunder,
Lessee agrees to make such reasonable non-monetary modifications to this
Lease as may be reasonable required by an institutional, insurance
company, or pension plan Lender in connection with the obtaining of
normal financing or refinancing of the property of which the Premises
are a part.
<PAGE>
48. Multiple Parties. Except as otherwise expressly provided herein,
if more than one person or entity is named herein as either Lessor or
Lessee, the obligations of such Multiple Parties shall be the joint and
several responsibility of all persons or entities named herein as such
Lessor or Lessee.
SEE ADDENDUM PARAGRAPH 70, 71 AND 72.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH
TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE
SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO, THE PARTIES HEREBY
AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE
ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF
LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL, FURTHER, EXPERTS SHOULD BE CONSULTED TO
EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF
ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR
RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR EMPLOYEES
AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS
LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY
SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX
CONSEQUENCES OF THIS LEASE, IF THE SUBJECT PROPERTY IS LOCATED IN A
STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE
PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place on the dates
specified above to their respective signatures.
Executed at Walnut Creek, CA Executed at Pleasanton, CA
on August 29, 1996 on August 23, 1996
by LESSOR: Richard H. Kulka by LESSEE: Simpson Strong-tie
Company, Inc.
By /s/Richard H. Kulka By /s/Steve Lamson
---------------------------- ----------------------------
Name Printed: Richard H. Kulka Name Printed: Steve Lamson
Title: Owner/Lessor Title: CFO
By By
Name Printed: Name Printed:
Title: Title:
Address: Address:
Tel No. (510)933-2232 Tel No. (510)916-7901
Fax No. (510)933-2950 Fax No.
<PAGE>
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE-GROSS
This is an addendum ("Addendum") to that certain Standard
Industrial/Commercial Single-Tenant Lease-Gross dated July 26, 1996 by
and between Richard H. Kulka, as Lessor, and Simpson Strong Tie Company,
Inc., as Lessee, and is hereby made a part of such aforementioned Lease.
49. The following provision is hereby added to Paragraph 2.3 of
the Lease:
The preceding terms of this Paragraph 2.3 to the contrary
notwithstanding, Lessor shall be under no obligation to remedy or cure
any such non-compliance unless the applicable governmental agency or
agencies having jurisdiction over such compliance requires Lessor to
remedy the same or such non-compliance threatens the health or safety of
the occupants of the Building as reasonably determined by Lessor and
Lessee.
50. The following provisions are hereby added to Paragraph 6.2(c)
of the Lease:
Lessee acknowledges that Lessor has delivered to Lessee a Phase I
Environmental Site Assessment prepared by Aegis (Project No. 94-029),
dated March 4, 1994, and Phase II data prepared by California Laboratory
Services (Client I.D. No. N1159; Job No. 791159, Project No. 24330.1)
(collectively, the "Environmental Reports"), which discloses that there
are certain Hazardous Substances that exist on, in or under the
Premises. Lessee agrees to accept the Premises notwithstanding the
possible existence of such Hazardous Substances as disclosed in the
aforesaid Environmental Reports. Lessor shall indemnify, protect,
defend and hold Lessee, its agents and employees harmless from and
against any and all losses and/or damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substances
(or storage tank) brought onto the Premises by Lessor. Lessor's
obligations under this Paragraph 6.2 shall include, but not be limited
to, the effects of any contamination or injury to person, property or
the environment created or suffered by Lessee (or any prior tenant or
occupant of the Premises), and the cost of investigation (including
reasonable consultants' and attorneys' fees and testing), removal,
remediation, restoration and/or abatement thereof, or any contamination
therein involved, arising out of or related to any Hazardous Substances
(or storage tank) brought onto the Premises by Lessor. In addition,
Lessor shall indemnify, protect, defend and hold Lessee, its agents and
employees harmless from and against any and all costs of cleaning up or
remediating any of the Hazardous Substances that are expressly referred
to in the Environmental Reports referred to above and which may exist as
of the Commencement Date of this Lease. The obligations of Lessor under
this paragraph shall survive the expiration or earlier termination of
this Lease. No termination, cancellation or release agreement entered
into by Lessor and Lessee shall release Lessor from its obligations
under this Lease with respect to the Hazardous Substances (or storage
tank) referred to in this paragraph unless specifically so agreed by
Lessee in writing at the time of such agreement.
<PAGE>
51. The following provisions are hereby added as Paragraph 6.2(d):
(d) Lessee Caused Contamination. Anything in this Lease to
the contrary notwithstanding, Lessee shall not be liable under this
Lease for the cleanup or remediation of any Hazardous Substances that
are caused by persons or entities other than Lessee or its agents,
employees, contractors or representatives.
52. The provisions of Paragraph 6.3 to the contrary
notwithstanding, Lessee shall make any alteration, addition or change of
any sort to the Premises that is required by any Applicable Law because
of: (i) Lessee's particular use or change of use of the Premises; (ii)
Lessee's application for any permit or governmental approval; (iii)
Lessee's construction or installation of any alterations, additions,
improvements or trade fixtures or (iv) any Hazardous Substance caused
on, in or under the Premises by Lessee or its agents, employees,
contractors or representatives. Any other alteration, addition or
change required by Applicable Laws which are not the responsibility of
Lessee pursuant to the immediately preceding sentence shall be made by
Lessor (subject to Lessor's right to reimbursement from Lessee as
specified below).
In the event any capital improvements are required to be
constructed in order to comply with Applicable Law (excluding any
Hazardous Substances law) not in effect or applicable to the Premises as
of the Commencement Date, Lessee shall pay to Lessor, as additional
rent, the amortized cost of such capital improvement to be determined as
follows:
(a) All costs paid by Lessor to construct such capital
improvements required by Applicable Law as described above (and which
are the responsibility of Lessor to construct as provided above) shall
be amortized over the use of the life of such improvement (as reasonably
determined by Lessor in accordance with generally accepted principles)
with interest on the unamortized balance at the then prevailing rate
Lessor would pay if it borrowed funds to construction such improvements
from an institutional lender (but in no event to exceed the maximum
legal rate), and Lessor shall inform Lessee of the monthly amortization
payment required to so amortize such costs and shall also provide Lessee
with the information upon which such determination is made.
(b) As additional rent, Lessee shall pay at the same time
that monthly Base Rent is due an amount equal to such monthly
amortization payment for each month after such improvements are
completed until the first to occur of (i) the expiration of the Lease
Term (as it may be extended) or (ii) the end of the term over which such
costs were amortized.
<PAGE>
53. Subject to the provisions of Paragraph 9 (Damage and
Destruction) and Paragraph 14 (Condemnation), Lessor shall repair and
maintain in good order and condition the roof covering, the exterior of
the building, all equipment or facilities serving the Premises
(excepting therefrom the HVAC system which is to be maintained pursuant
to the terms of Paragraph 17.1(b)), the parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems,
exterior lighting facilities and fences and gates located in, on, about
or adjacent to the Premises. All costs and expenses incurred by Lessee
in connection with performing its maintenance and repair obligations
described in the immediately preceding sentence shall constitute an
"Operating Expense". A reasonable management fee not to exceed four
percent (4%) of the gross revenues payable by Lessee to Lessor under
this Lease shall also be included as an Operating Expense.
For purposes of this Lease, the term "Operating Expense Base Year"
shall mean the calendar year 1997 and the term "Comparison Year" shall
mean each calendar year, or portion thereof, following the Operating
Expense Base Year. As additional rent hereunder, Lessee shall pay to
Lessor the amount by which the Operating Expenses incurred by Lessor in
the administration, operation, maintenance and repair of the Premises as
described above for each Comparison Year during the Lease Term exceeds
the total Operating Expenses payable by Lessor for the Operating Expense
Base Year ("Excess Expenses"). Lessee's Excess Expenses shall be
payable during the Lease Term in monthly installments on the first day
of each month in advance, without deduction, offset, prior notice or
demand, and shall be payable concurrently with monthly installments of
Base Rent. Lessee's Excess Expenses shall be based upon an estimate of
the Excess Expenses for such calendar year. As close as reasonably
possible to the end of each calendar year, Lessor shall notify Lessee of
Lessor's estimate of the Excess Expenses for the following calendar
year. An amount equal to one-twelfth (1/12) of such Excess Expenses
shall be payable monthly by Lessee commencing on the first day of the
calendar year for which such estimate is given and continuing throughout
the remainder of said calendar year. Until notice of the Excess
Expenses for any subsequent calendar year is delivered to Lessee, Lessee
shall continue to pay on the basis of the prior estimate. Lessor may
from time to time during the Lease Term, but not more than twice each
calendar year, adjust the current estimate of Excess Expenses to reflect
current expenditures. Following written notice to Lessee of such
revised estimate, any subsequent payments by Lessee of Excess Expenses
shall be based upon such revised estimate. Within 90 days after the end
of each calendar year, or such later date after Lessor reviews the
annual statement of Operating Expenses, Lessor shall provide Lessee with
a reasonably detailed statement showing the actual Operating Expenses
for the applicable Comparison Year in excess of the Base Year Operating
Expenses. If Lessee's payments of Excess Expenses for any subsequent
calendar year are less than or exceed the amount shown in such annual
statement as the Excess Expenses (as prorated to reflect any partial
year during the Lease Term), then Lessee's account shall be adjusted
accordingly. Lessee shall pay any deficiency upon receipt of Lessor's
invoice, and all credits will be applied by Lessor to the payment(s)
next due for Excess Expenses (or reimbursed in cash if such credit
<PAGE>
arises at the end of the Lease Term). Within 60 days of after the date
of Lessee's receipt of the statement of actual Operating Expenses for
any Comparison Year, Lessee may give Lessor written notice of its intent
to review the books and records relating to the Operating Expenses for
such Comparison Year. Lessee shall provide Lessor with at least 10 days
prior written notice of the date upon which it intends to review such
books and records. The review shall be performed during normal business
hours at Lessee's principal place of business or such other location as
may be designated by Lessor, and shall be performed at Lessee's sole
cost and expense. Promptly following the completion of Lessee's review
of such books and records, Lessee shall provide Lessor with a copy of
the results of such review and Lessee's conclusions regarding any
overstatement or understatement by Lessor of actual Operating Expenses
for such Comparison Year. In the event Lessee's review shows an
underpayment or overpayment of Excess Expenses by Lessee for such
Comparison Year, then, subject to Lessor's confirmation by its own
review of said records, the parties shall promptly meet to resolve any
discrepancy. In the event Lessee fails to provide Lessor with written
notice of its intent to review such books and records within said 60 day
period, Lessee shall be deemed to have approved the statement of actual
Operating Expenses for the applicable Comparison Year.
The preceding to the contrary notwithstanding, if Lessor elects to paint
the exterior of the Premises during Lease Term, Lessee shall pay to
Lessor, within 30 days following a receipt of a written invoice, a
portion of the cost of such paint job in the ratio that the balance of
the Lease Term bears to the "useful life" of the paint job.
54. In the event the Premises (or any portion thereof) is rendered
unusable during and as a consequence of any repair work undertaken by or
on behalf of Lessor, pursuant to the terms of Paragraph 7.2 or 32 of the
Lease or Paragraph 53 of this Addendum, then the Base Rent shall be
abated in such proportion that the Lessee's business is interfered with
as a result of not being able to use the applicable portion of the
Premises and such abatement shall continue for each day that the
Premises (or a portion thereof) is rendered unusable.
55. In the event of an emergency that threatens the health or
safety of Lessee or its employees, agents or invitees or threatens risk
of damage to Tenant's property, if Lessor is unable to perform any of
its maintenance obligations in time to prevent injury or damage to
person or property (after Lessee has exercised reasonable efforts to
contact Lessor) then, Lessee may perform Lessor's maintenance or repair
obligations to the extent necessary to protect Lessee's property and/or
the health and safety of individuals within the Premises. The costs
reasonably incurred by Lessee in performing Lessor's maintenance
obligations in an emergency situation described above may be offset
against such Lessee's Base Rent (but in no event may Lessee offset more
than one months' Base Rent).
<PAGE>
56. If Lessor requires Lessee to remove any Lessee Owned
Alterations and/or Utility Installations, Lessee shall so remove the
same prior to the expiration or sooner termination of the Lease Term and
Lessee shall repair any and all damage, if any, caused by such removal.
Notwithstanding the foregoing, Lessee shall not be obligated to remove
any Lessee Owed Alterations and/or Utility Installations with respect to
which the following is true: (i) Lessee was required, or elected, to
obtain the approval of Lessor to the installation of the Lessee Owed
Alteration and/or Utility Installation in question; (ii) at the time
Lessee requested Lessor's approval, Lessee requested of Lessor in
writing that Lessor inform Lessee of whether or not Lessor would require
Lessee to remove such Lessee Owned Alteration and/or Utility
Installation at the expiration of the Lease Term; and (iii) at the time
Lessor granted its approval, it did not inform Lessee that it would
require Lessee to remove such Lessee Owned Alteration and/or Utility
Installation at the expiration of the Lease Term.
57. The "All Risk" policy of property insurance to be maintained
by the Insuring Party shall not be required to cover any Lessee Owned
Alterations or Utility Installations; it being understood and agreed
that in the event any such Lessee Owned Alterations or Utility
Installations should be damaged or destroyed, Lessor shall be under no
obligation to repair, restore or rebuild the same. The parties hereby
acknowledge and agree that Lessee shall not be required to insure any
Lessee Owned Alterations or Utility Installations.
58. If the Premises are damaged by any peril and Lessor does not
elect to terminate this Lease or is not entitled to terminate this Lease
pursuant to the terms of Paragraph 9, then as soon as reasonably
practicable, Lessor shall furnish Lessee with the written opinion of
Lessor's architect or construction consultant as to when the restoration
work required of Lessor may be completed. Lessee shall have the right
to terminate this Lease in the event the Premises are damaged by any
peril and, in the reasonable opinion of Lessor's architect or
construction consultant, the restoration of the Premises cannot be
substantially completed within one hundred eighty (180) days after the
date of such damage. Such right of Lessee to terminate the Lease may be
exercised only by delivery to Lessor of a written notice of election to
terminate within ten (10) days after Lessee receives from Lessor the
estimate of the time needed to complete such restoration.
Notwithstanding the foregoing, if the estimated time to substantially
complete such restoration is within one hundred eighty (180) days after
the date of damage to the Premises and Lessor undertakes such repairs
but does not substantially complete the same within one hundred eighty
(180) days after the date of such damage, Lessee shall not be entitled
to terminate this Lease so long as Lessor is diligently pursuing such
restoration to completion.
59. If a Hazardous Substance Condition occurs for which Lessee is
not legally responsible, and such Hazardous Substance Condition or the
investigation or remediation thereof would render a substantial portion
of the Premises unusable and substantially interfere with the operation
of Lessee's business for a period of not less than one hundred eighty
(180) consecutive days, then Lessee may terminate this Lease by written
notice to Lessor given not later than ten (10) days following the
expiration of such one hundred eighty (180) day period.
<PAGE>
60. The term "Real Property Taxes" shall not include any penalty,
fees, interest or late charges imposed on Lessor or non-payment or late
payment of Real Property Taxes unless such penalty fees, interest or
late charges are imposed because Lessee did not pay the Tax Increase in
a timely manner as required by the Lease (and then Lessee shall only be
responsible or liable for the penalty fees, interest or late charges
that are attributable to the amount of the Tax Increase that was not
paid in a timely manner).
61. Subject to any limitations or restrictions imposed by any
deeds of trust or mortgages now or hereafter covering or affecting the
Premises, Lessee shall have the right to contest or review the amount or
validity of any Real Property Tax by appropriate legal proceedings (but
which is not to be deemed or construed in any way as relieving,
modifying or extending Lessee's covenant to pay any Tax Increase at the
time and in the manner as provided in Paragraph 10 of the Lease).
However, as a condition of Lessee's right to contest, if such contested
Real Property Tax is not paid before such contest and if the legal
proceedings shall not operate to prevent or stay the collection of the
Real Property Tax so contested, Lessee shall before instituting any such
proceeding, protect the Premises and the interest of Lessor and of the
beneficiary of a deed of trust or the mortgagee of a mortgage affecting
the Premises against any lien upon the Premises by a surety bond, issued
by an insurance company acceptable to Lessor, and in an amount equal to
the greater of one and one-half (1 1/2) times the amount contested and
the interest and penalties in connection therewith. Any contest as to
the validity or amount of any Real Property Tax, whether such contest is
made before or after payment, shall be made by Lessee in Lessee's own
name, or, if required by law, in the name of Lessor or both Lessor and
Lessee. Lessee shall defend, indemnify and hold harmless Lessor from
and against any and all costs or expenses, including attorney fees, in
connection with any such proceedings brought by Lessee, whether in its
own name or not. Lessee shall be entitled to retain any refund of any
such contested Real Property Tax and penalties or interest thereon which
have been paid by Lessee. Nothing contained herein shall be construed
as affecting or limiting Lessor's right to contest any Real Property Tax
at Lessor's expense.
62. If Lessee is a corporation, the following shall be deemed a
voluntary assignment of Lessee's interest in this Lease: (i) any
dissolution, merger, consolidation or other reorganization of or
affecting Lessee, whether or not Lessee is the surviving corporation;
and (ii) if the capital stock of Lessee is not publicly traded, the sale
or transfer to one person or entity (or to any group of related persons
or entities) of stock possessing more than thirty-three and one-third
percent (33-(%) of the total combined voting power of all classes of
Lessee's capital stock issued, outstanding and entitled to vote for the
election of directors. If Lessee is a partnership, any withdrawal or
substitution (whether voluntary, involuntary or by operation of law, and
whether occurring at any time or over a period of time) of any partner
owning twenty-five percent (25%) or more (cumulatively) of any interest
in the capital or profits of the partnership, or the dissolution of the
partnership, shall be deemed a voluntary assignment of Lessee's interest
in this Lease.
<PAGE>
63. Notwithstanding anything contained in Paragraph 12.1, so long
as Lessee otherwise complies with the provisions of Paragraph 12, Lessee
may enter into any of the following transfers (a "Permitted Transfer")
without Lessor's prior written consent, and Lessor shall not be entitled
to receive any part of any Subrent (as defined below) resulting
therefrom that would otherwise be due it pursuant to the terms below:
(i) Lessee may sublease all or part of the Premises or
assign its interest in this Lease to any corporation which controls, is
controlled by or is under common control with the original Lessee to
this Lease by means of an ownership interest of more than fifty percent
(50%);
(ii) Lessee may assign its interest in this Lease to a
corporation which results from a merger, consolidation or other
reorganization in which Lessee is not the surviving corporation, so long
as the surviving corporation has a net worth at the time of such
assignment that is equal to or greater than the net worth of Lessee
immediately prior to such transaction; and
(iii) Lessee may assign this Lease to a corporation
which purchases or otherwise acquires all or substantially all of the
assets of Lessee, so long as such acquiring corporation has a net worth
at the time of such assignment that is equal to or greater than the net
worth of Lessee immediately prior to such transaction.
In the event of any Permitted Transfer as described above, Lessee
shall not be released of its liability for the performance of any or all
of its obligations under the Lease.
64. If Lessee assigns its interest in this Lease, then Lessee
shall pay to Lessor fifty percent (50%) of all Subrent (as defined
below) received by Lessee over and above (i) the assignee's agreement to
assume the obligations of Lessee under this Lease; and (ii) all
Permitted Transfer Costs (as defined below) related to such assignment.
In the case of an assignment, the amount of Subrent owed to Lessor shall
be paid to Lessor on the same basis, whether periodic or in lump sum,
that such Subrent is paid to Lessee by the assignee. If Lessee sublets
any part of the Premises, then with respect to the space so subleased,
Lessee shall pay to Lessor fifty percent (50%) of the positive
difference, if any, between (i) all Subrent paid by the subtenant to
Lessee, less (ii) the sum of all monthly Base Rent and additional rent
allocable to the space sublet and all Permitted Transfer Costs related
to such sublease. Such amount shall be paid to Lessor on the same
basis, whether periodic or in lump sum, that such Subrent is paid to
Lessee by its subtenant. In calculating Lessor's share of any periodic
payments, all Permitted Transfer Costs shall be first recovered by
Lessee. As used above, the term "Subrent" shall mean any consideration
<PAGE>
of any kind received, or to be received, by Lessee as a result of the
assignment, transfer or subletting, if such sums are related to Lessee's
interest in this Lease or in the Premises, including payments from or on
behalf of the transferee (in excess of the book value thereof) for
Lessee's assets, fixtures, leasehold improvements, inventory, good will,
equipment, furniture and general intangibles. As used above, the term
"Permitted Transfer Costs" shall mean all reasonably leasing commissions
paid to third parties not affiliated with Lessee in order to obtain the
assignment or subletting in question, and all tenant improvement costs
reasonably incurred by Lessee in order to obtain the assignment or
subletting in question.
65. The provisions of Paragraph 16.2 of the Lease to the contrary
notwithstanding, the parties hereto acknowledge and agree that Lessee
shall not be obligated to deliver financial statements of Lessee to
Lessor or its lender but shall, upon reasonable request, deliver to
Lessor or its lender (or prospective lender) consolidated financial
statements of Simpson Manufacturing, Inc. The foregoing
notwithstanding, if at any time during the Lease Term, Tenant is no
longer a wholly owned subsidiary of Simpson Manufacturing, Inc., then
Tenant shall, upon reasonable request by Lessor or its lender (or
prospective lender), furnish to such requesting party separate financial
statements for Lessee.
66. In the event Lessee requests that Lessor execute, acknowledge
and deliver to Lessee a Short Form Memorandum of Lease and/or Option to
Purchase the Premises, Lessee shall concurrently therewith deliver to
Lessor a quitclaim deed, quitclaiming or releasing to Lessor all of
Lessee's right, title and interest under this Lease or the Option to
Purchase the Premises, as the case may be (or a termination agreement
with respect to the option to purchase the Premises evidencing the
termination or expiration of such option), in recordable form, and
Lessor agrees not to record such quitclaim deed or termination of option
prior to the date the Lease terminates or the option lapses or expires,
as the case may be.
67. Any holding over by Lessee beyond the expiration of the Lease
Term (or earlier termination of this Lease) shall not constitute a
renewal or extension of the Lease or give Lessee any rights in or to the
Premises except as expressly provided in this Lease. Any holding over
after such expiration or earlier termination of this Lease with the
written consent of Lessor shall be construed to be a tenancy from month-
to-month on the same terms and conditions herein specified insofar as
applicable except that the monthly Base Rent shall be increased to an
amount equal to one hundred fifty percent (150%) of the monthly Base
Rent payable during the last full calendar month of the Lease Term.
Lessee shall indemnify, defend and hold harmless Lessor from and against
any and all damages, losses, liabilities, claims, actions, causes of
action, costs and expenses (including, without limitation, reasonable
attorneys' fees and court costs) arising from or related to any holding
over by Lessee without Lessor's written consent.
<PAGE>
68. The provisions of Paragraph 39.2 to the contrary
notwithstanding, Lessee may assign the option to purchase the Premises
or the right of first refusal to purchase the Premises as described in
Paragraphs 71 and 72 below, respectively, to an entity controlled by,
under common control with, or that controls Lessee.
69. The provisions of Paragraph 46 of the Lease to the contrary
notwithstanding, the rights and obligations of Lessor and Lessee under
the Lease and this Addendum attached thereto shall be conditioned upon
the termination of Lessor's existing leases with Cellular One and Full
Cycle Global, Inc., and the vacating of such leased premises by such
existing tenants not later than September 30, 1996. In the event such
existing tenants have not terminated their leases and vacated their
leased premises on or before September 30, 1996, this Lease and the
Addendum thereto shall be terminated and be of no force or effect, and
Lessor shall return to Lessee any advanced rental payments paid by
Lessee pursuant to the terms of the Lease.
70. Prior to the Commencement Date, Lessor will furnish to the
Premises the following improvements:
(a) Store front to be installed on southerly side of building
where drive-in door is located.
(b) A twelve foot (12") wall-up door to be installed in
demising wall separating both spaces.
In addition to the foregoing, Lessor shall deliver the Premises to
Lessee in broom-swept condition with all doors, lights and HVAC operable
and in good working condition.
71. Option to Purchase the Premises. Lessor hereby grants Lessee
an option to purchase the Premises on the following terms and
conditions:
(a) The term of such option shall commence as of the
Commencement Date and shall expire on the date twelve (12) months
following the Commencement Date of the Lease.
(b) The option shall be exercised, if at all, by Lessee
giving written notice of exercise of the option to Lessor during the
Option Term. The notice shall specify the date on which Lessee desires
to close the purchase ("Closing Date") and shall designate a title
insurance company to consummate the close ("Title Company"). The
Closing Date designated by Lessee shall be not less than ten (10) days
nor more than thirty (30) days after the giving of the exercise notice
(but in no event shall the Closing Date occur later than 12 months
following the Commencement Date of the Lease). Time is of the essence
with respect to the exercise of the Option to Purchase and the Closing
Date.
<PAGE>
(c) The purchase price for the Premises shall be paid in all
cash at the close of escrow on the Closing Date. The purchase price for
the Premises ("Purchase Price") shall be determined as follows:
(i) If the close of escrow occurs during the first six
(6) months of the term of the Lease, the Purchase Price shall be equal
to the sum of (A) One Million Nine Hundred Twenty-five Thousand Dollars
($1,925,000), plus (B) the amount of any and all capital expenditures
incurred by Lessor with respect to the Premises or improvements
constructed thereon during the period following the execution of this
Lease and the Closing Date.
(ii) If the Closing Date occurs during the second six
(6) months of the term of the Lease, the Purchase Price shall be equal
to the sum of (A) One Million Nine Hundred Seventy-five Thousand Dollars
($1,975,000), plus (B) the amount of any and all capital expenditures
incurred by Lessor with respect to the Premises or improvements
constructed thereon during the period following the execution of this
Lease and the Closing Date.
(d) On or before the Closing Date, Lessee shall pay and
deliver to the Title Company in escrow, by cashier's check, certified
check or wire transfer, the Purchase Price for the Premises. Lessee
shall instruct the Title Company to deliver the Purchase Price to Lessor
at such time as the Title Company is prepared to record the grant deed
conveying the Premises to Lessee and is prepared to issue a CLTA
Standard Owner's Policy of title insurance to Lessee as provided below.
(e) Following Lessee's timely exercise of the option to
purchase, Lessee's obligation to purchase the Premises shall be
conditioned upon the Title Company being prepared and willing to issue
to Lessee a CLTA Standard Owner's Policy of title insurance in the
amount of the Purchase Price subject only to non-delinquent real
property taxes and assessments and such other title matters as encumber
the Premises as of the date of execution of this Lease and any other
title matters created by Lessee's acts. In the event Lessee closes
escrow on the purchase of the Premises pursuant to the terms of this
Paragraph 71, Lessor shall cause any deed of trust then encumbering the
Premises to be reconveyed.
(f) Lessor represents, warrants and covenants that Lessor has
not granted to any third party a right to purchase the Premises or any
interest therein which is superior to the rights of Lessee under this
Paragraph 71.
(g) On the Closing Date, Lessor shall convey title to the
Premises pursuant to a grant deed. Title to the Premises shall be
delivered free and clear of all deeds of trust, and subject only to non-
delinquent real property taxes and assessments and title matters
affecting the Premises as of the date this Lease is executed. The cost
of the title insurance policy shall be borne by Lessee.
<PAGE>
(h) Real property taxes and assessments and rents shall be
prorated as of the close of escrow. All escrow fees, documentary
transfer taxes, city conveyance taxes, if any, and title insurance
premiums shall be borne by Lessee. Each party shall be responsible for
its own attorneys' fees incurred in connection with the purchase and
sale of the Premises.
(i) Time is of the essence with respect to the option to
purchase. If the option to purchase is not exercised in the manner
provided herein, or if the close of escrow does not occur within twelve
(12) months following the Commencement Date of the Lease, Lessee shall
have no right to purchase the Premises and this option may not be
revived by any subsequent payment or further action by Lessee.
(j) Lessor and Lessee each represent and warrant to the other
that it has had no dealings with any real estate broker or agent in
connection with the purchase option described above other than the
brokers identified in Paragraph 1.10. Each party agrees to indemnify,
defend and hold the other party harmless from and against any and all
liabilities, obligations, actions, suits, proceedings, costs and
expenses (including, without limitation, reasonable attorneys' fees and
court costs) in connection with any compensation, commission or charge
claimed by any other broker, agent or the like who alleges that it is
owed compensation, commission or charge by reason of contact with such
party with respect to the purchase of the Premises pursuant to the terms
of this Paragraph 71.
72. Right of First Refusal. If, at any time after the first
twelve (12) months of the Lease Term and prior to the expiration or
earlier termination of the Lease Term, Lessor receives a bona fide offer
to purchase the Premises from a third party unrelated to Lessor, which
offer Lessor determines to be acceptable to it, Lessor shall deliver to
Lessee the terms of such third party offer setting forth the proposed
purchase price and all other material terms of the sale of the Premises.
Delivery of such third party offer to Lessee shall constitute an offer
to sell the Premises to Lessee on the same terms and conditions as set
forth in the third party offer. Lessee shall have twenty (20) days
following receipt of such third party offer to deliver to Lessor written
notice of its acceptance of the terms of the third party offer and to
execute a purchase and sale agreement incorporating the terms of such
third party offer. If Lessee fails to notify Lessor of its election to
purchase the Premises or fails to execute an agreement for purchase and
sale therefor within the aforementioned twenty (20) day period, then
Lessee's right of first refusal shall terminate with respect to the
Premises and Lessor may sell the Premises to a third party, free and
clear of any rights of Lessee under this Paragraph 72, provided that
Lessor enters into an agreement for purchase and sale of the Premises
with a third party on terms no less favorable to Lessor (except that the
purchase price to be paid by the third party may be not less than
ninety-five (95%) of the purchase price set forth in the third party
offer delivered to Lessee) within six (6) months from the date of
delivery of the third party offer. If Lessor fails to enter into such
third party sale agreement within such six (6) month period, then the
terms of this Paragraph 72 shall again apply to the Premises.
<PAGE>
If Lessee is in default under the Lease at the time Lessee would
otherwise be entitled to exercise its right of first refusal hereunder,
then Lessee shall have no right of first refusal with respect to the
Premises, and Lessor may sell the Premises to a third party, free and
clear of any rights of Lessee under this Paragraph 72.
If Lessee acquires the Premises pursuant to this Paragraph 72,
Lessor agrees to pay to the Brokers identified in Paragraph 1.10 of the
Lease a real estate brokerage commission pursuant to a separate written
agreement; provided, however, that no such commission shall have been
earned by the brokers identified in Paragraph 1.10 of the Lease or be
otherwise due and payable to such brokers if escrow fails to close for
any reason whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this Addendum
as of this 29th day of August, 1996.
LESSOR:
/s/Richard H. Kulka
- ------------------------------
RICHARD H. KULKA
LESSEE:
SIMPSON STRONG TIE COMPANY, INC., a California corporation
By: /s/Steve Lamson
------------------------------
Its: CFO
------------------------------
EXHIBIT 10.2
------------
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
TO: Commerce Escrow Company
1545 Wilshire Boulevard
Suite 600
Los Angeles, CA 90017
Re: Escrow No. 96-24820
Gentlemen:
1. Establishment of Escrow. G.A. MAC DONALD CONSTRUCTION
CO. INC., a California corporation (hereinafter referred to as "Mac
Donald Construction") and JEAN A. MAC DONALD and SCOTT A. MAC DONALD, as
Trustees Under the Will of Gordon A. Mac Donald, Deceased (hereinafter
referred to as the "Trust") (and Mac Donald Construction and the Trust
herein collectively referred to as "Seller"), as the seller herein, and
SIMPSON MANUFACTURING CO., INC., a California corporation (hereinafter
referred to as "Buyer"), as the buyer herein, hereby establish the
above-referenced escrow (hereinafter, the "Escrow"). You are hereby
instructed to hold in the Escrow the documents and funds to be delivered
to you under these Escrow Instructions, and to deliver said documents
and funds from the Escrow, in the manner and at the time hereinafter
indicated, pursuant to your standard escrow service. However,
notwithstanding the preceding provisions of this paragraph, the Escrow
shall be deemed established, and this Purchase and Sale Agreement and
Escrow Instructions (hereinafter referred to as "these Escrow
Instructions"), including the contract of purchase and sale between the
parties embodied herein, as described in Paragraph 2, shall become
effective, upon, and only upon, the delivery to you of these Escrow
Instructions, in the form of a single fully- executed original hereof,
or counterparts hereof, executed by the respective parties. The date
upon which these Escrow Instructions, in the condition described in the
preceding sentence, are delivered to you, or delivery thereof to you is
completed, is hereinafter referred to as "the Escrow Opening Date."
Upon the occurrence of the Escrow Opening Date, you shall promptly
notify the parties in writing thereof. In the event that these Escrow
Instructions are delivered to you in counterparts and the Escrow Opening
Date does not occur within three (3) business days after either party
first delivers to you such party's executed counterpart hereof, then you
shall immediately notify the parties thereof and, upon written demand
made in writing to you before the occurrence of the Escrow Opening Date
by any party who shall theretofore have delivered to you such party's
executed counterpart hereof, you shall deliver such party's executed
counterpart hereof back to such party and this transaction shall
thereupon be deemed terminated, with no further liability to either
party.
<PAGE>
2. Contract of Purchase and Sale Embodied Herein. As matters
with which you shall not be concerned, the parties hereto hereby agree
that (a) these Escrow Instructions shall also constitute a legally
binding contract of purchase and sale between Seller and Buyer with
respect to the property and other matters covered hereby, and (b) these
Escrow Instructions shall be read and construed as an integration of the
parties' entire agreement and understanding with respect to the subject
matter hereof, all prior and contemporaneous oral agreements,
understandings and representations and prior written agreements,
understandings and representations between the parties and/or their
respective representatives relating to such subject matter being hereby
declared to be superseded and of no further force or effect.
3. Property to be Sold and Purchased. Seller hereby agrees
to sell to Buyer, and Buyer hereby agrees to purchase from Seller, upon
the terms and conditions set forth herein, all of that certain real
property located at 1545 Moonstone, Brea, California, and more
particularly described in Exhibit A attached hereto, together with all
improvements, fixtures and appurtenances thereon or constituting a part
thereof. The aforesaid real property, improvements, fixtures and
appurtenances are hereinafter referred to collectively as "the Subject
Property".
4. Amount and Form of Purchase Price. The purchase price
for the Subject Property (hereinafter, "the Purchase Price") shall be
One Million Eight Hundred Twenty-Five Thousand Dollars ($1,825,000.00).
The Purchase Price shall be paid as follows:
(a) Deposit. A deposit toward the Purchase Price in the
amount of Ten Thousand Dollars ($10,000.00) (hereinafter, "the Deposit")
shall be delivered to Escrow by Buyer in the form of a personal check
simultaneously with Buyer's delivery to you of an original or
counterpart of these Escrow Instructions signed by Buyer.
Notwithstanding anything else herein, in the event that, for any reason,
said check is not honored when presented for payment, then (provided
that these Escrow Instructions shall first have become effective
pursuant to the provisions of Paragraph 1) Buyer shall be deemed in
default hereunder, and Seller, without limitation of any other rights or
remedies Seller may have hereunder or under law by reason of such
default, shall have the right, at Seller's election, by written notice
to Buyer and you, to forthwith terminate the Escrow and the contract of
purchase and sale embodied in these Escrow Instructions.
(b) Balance of Purchase Price. On or before the Closing
Date, as hereinafter defined, Buyer shall deliver into Escrow Buyer's
cash funds in the amount of One Million Eight Hundred Fifteen Thousand
Dollars ($1,815,000.00). Buyer shall also deliver into Escrow on or
before the Closing Date, such additional cash funds as may be necessary
to pay Buyer's share of the closing costs and escrow prorations provided
for herein.
<PAGE>
5. Deposit of Deed; Condition of Title. On or before the
Closing Date, Seller shall deposit into the Escrow Seller's properly
executed and acknowledged grant deed or grant deeds (hereinafter in
either case, "the Grant Deed") conveying the Subject Property in fee
simple to Buyer (or to Buyer's nominee, if Buyer shall designate such a
nominee to Seller and you in writing prior to the close of Escrow).
IT IS THE INTENT OF THE PARTIES THAT, NOTWITHSTANDING SELLER'S USE OF A
GRANT DEED TO CONVEY THE SUBJECT PROPERTY TO BUYER HEREUNDER, SELLER
SHALL MAKE NO REPRESENTATIONS OR WARRANTIES TO BUYER WITH RESPECT TO THE
CONDITION OF TITLE TO THE SUBJECT PROPERTY, IT BEING AGREED THAT THE
BUYER SHALL RELY SOLELY UPON THE POLICY OF TITLE INSURANCE PROVIDED FOR
BELOW AS TO ANY TITLE ASSURANCES BUYER MAY REQUIRE.
6. Preliminary Title Report.
(a) Delivery of Title Report to Buyer. As soon as
practicable after the Escrow Opening Date, you shall cause Chicago Title
Company (the "Title Company") to issue and deliver to Buyer and Seller a
current preliminary title report covering the Subject Property, together
with copies of all instruments and documents of record that are listed
as exceptions therein, said preliminary title report and the copies of
said instruments and documents being hereinafter referred to
collectively as "the Title Report".
(b) Buyer's Right to Approve Title Report: Buyer shall
have ten (10) calendar days from receipt of the Title Report to review
and approve the same. If Buyer disapproves of any item disclosed in the
Title Report, Buyer must notify you and Seller in writing of that item
and the nature of Buyer's objection within said 10-day period. If Buyer
fails to give you and Seller such written notice of disapproval within
said 10-day period, Buyer shall be deemed to have disapproved the Title
Report and every item disclosed therein. Notwithstanding any of the
foregoing, Buyer shall not have the right to disapprove any exception to
title set forth in the Title Report to the extent that such exception
constitutes a lien for applicable current, non-delinquent property taxes
and assessments.
(c) Seller's Right to Cure Objections. If Buyer shall
disapprove of any item disclosed in the Title Report, in the manner and
within the time provided for in the preceding subparagraph (b), then,
for a period of ten (10) days after Buyer gives you and Seller notice of
such disapproval, Seller shall have the right to elect to cure such
disapproved item prior to the close of Escrow, or to elect not to cure
such disapproved item. Notice of Seller's election in this regard shall
be given to you and Buyer in writing within the aforesaid 10-day period.
Failure of Seller to give such notice within said period shall
constitute an election not to cure. If Seller shall elect to cure a
disapproved item as aforesaid, then Seller shall be obligated to cure
the same prior to the close of Escrow, and the Closing Date shall be
extended for such period of time, not exceeding thirty (30) business
days, as Seller may reasonably require in order to effect such cure. If
Seller shall elect not to cure a disapproved item, then, for a period of
ten (10) days after Seller's written notice to Buyer of Seller's
election not to cure (or the expiration of Seller's election period, if
Seller fails to give such notice), Buyer shall have the right to either
<PAGE>
waive Buyer's objection or terminate this transaction. Notice of
Buyer's election in this regard shall be given to you and Seller in
writing within said 10-day period. Failure of Buyer to give such notice
within said period shall constitute an election by Buyer to terminate
this transaction. If Buyer elects to terminate this transaction, the
Escrow shall terminate without further liability on the part of either
party (except that Buyer's obligations under Paragraph 8(c) shall
survive such termination), all documents and moneys deposited therein by
either party shall be returned to such party, and Buyer and Seller shall
pay equally any escrow cancellation charges for escrow work done to the
date of termination.
(d) Approved Title Report. As hereinafter used, the
term, "Approved Title Report" shall be deemed to mean the Title Report,
as approved by Buyer pursuant to subparagraph (b) of this paragraph, or,
if Buyer shall disapprove of any item disclosed in the Title Report
pursuant to the provisions of subparagraph (b) of this paragraph and
Seller shall elect to cure such disapproved item pursuant to the
provisions of subparagraph (c) of this paragraph, then the term
"Approved Title Report" shall be deemed to refer to the Title Report
after amendment of same to reflect Seller's curing of such disapproved
item.
7. Title Insurance Policy. In connection with the closing
of Escrow, you shall cause the Title Company to issue and furnish to the
grantee(s) under the Grant Deed a CLTA standard coverage form policy of
title insurance, with liability in the amount of the Purchase Price,
insuring said grantee(s)' fee title to the Subject Property, subject
only to:
(a) All exceptions disclosed in the Approved Title
Report;
(b) The lien for applicable property taxes and
assessments that are current and non-delinquent as of the Closing Date;
(c) Any matters arising of record after the date of the
Title Report by reason of any act or omission of Buyer or any agent,
employee, contractor or other representative of Buyer, which matters are
still of record as of the Closing Date; and
(d) Such printed exceptions and exclusions from coverage
as are usually contained in the aforesaid form policy of title
insurance.
<PAGE>
Notwithstanding the foregoing, Buyer, at Buyer's election, may require
that the policy of title insurance to be issued pursuant to this
paragraph be an ALTA extended coverage policy and/or contain such
endorsements as Buyer may deem necessary or desirable, provided that
Buyer shall pay for and furnish any survey of the Subject Property that
may be required in order for such ALTA policy or such endorsements to be
issued, and provided further that Buyer's requirement of such ALTA
policy and/or such endorsements shall be deemed waived to the extent
that such requirement would prevent or delay the timely closing of this
transaction as otherwise provided for herein and Buyer would otherwise
be required to proceed with the closing of this transaction were it not
for such requirement. Except as otherwise provided for below, your
agreement to cause the Title Company to issue the policy of title
insurance required hereby subject only to the exceptions referenced
above in this paragraph shall be a condition precedent to Buyer's
obligation to proceed with the closing of this transaction. Subject to
the provisions of Paragraphs 5 and 6, each party hereto hereby agrees to
deliver to you, in timely fashion, any funds and/or recordable documents
and other instruments needed by you from such party in order to enable
the Title Company to issue the aforesaid policy of title insurance,
subject only to the exceptions referenced above in this paragraph, and
you are authorized to pay, from your own funds and/or any funds
deposited with you hereunder, any unpaid taxes, assessments, costs,
charges, liens and other items necessary to be paid in order to enable
the Title Company to issue such policy of title insurance. The amount
of any item so paid by you should be debited or credited, as may be
appropriate, to the escrow accounts of the appropriate parties. In the
event that, as of the Closing Date (as determined without regard to this
paragraph), the Title Company is unable to furnish the policy of title
insurance provided for above, then, unless Buyer, in Buyer's sole
discretion, shall waive the requirement of such policy of title
insurance in writing, Seller may, at Seller's sole option, elect, by so
notifying you and Buyer on or before the Closing Date (as determined
without regard to this paragraph), to either (w) attempt to take such
steps, if any, as may be required to enable the Title Company to issue
said policy of title insurance, or as may be required to procure said
policy of title insurance from another reputable title insurance company
qualified to issue title insurance in California, or (x) propose to
terminate this transaction without further liability to either party.
If Seller fails to elect either of the aforesaid options by so notifying
you and Buyer as aforesaid, Seller shall be deemed to have elected
option (x). If Seller elects option (w), the Escrow shall be extended
for such period of time, not exceeding fifteen (15) business days, as
Seller may require to pursue such option. If Seller elects option (w),
but is unsuccessful in causing the aforesaid policy of title insurance
to be issued within the aforesaid 15-business-day period, or if Seller
elects option (x), then, in either such case, for a period of ten (10)
business days after Seller's written notice to Buyer of Seller's
election (or the expiration of Seller's election period, if Seller fails
to give such notice), Buyer may, at Buyer's sole option, elect, by so
notifying you and Seller, to either (y) attempt to take such steps, if
any, as Buyer may be able to take to enable the Title Company to issue
said policy of title insurance, or as may be required to procure said
policy of title insurance from another title insurance company, or (z)
<PAGE>
accept Seller's proposal to terminate this transaction without further
liability to either party. Notice of Buyer's election in this regard
shall be given to you and Seller in writing within said 10-business-day
period. Failure of Buyer to give such notice within said period shall
constitute an election by Buyer to accept Seller's proposal to terminate
this transaction. If Buyer elects option (y), the Escrow shall be
extended for such period of time, not exceeding fifteen (15) business
days beyond the date on which Buyer shall have elected option (y), as
Buyer may require to pursue such option. If Buyer elects option (y),
but is unsuccessful in causing the aforesaid policy of title insurance
to be issued within the aforesaid 15-business-day period, or if Buyer
elects option (z), then, in either such event, the Escrow shall
terminate without further liability on the part of either party (except
that Buyer's obligations under Paragraph 8(c) shall survive such
termination), all documents and moneys deposited therein by either party
shall be returned to such party, and Buyer and Seller shall pay equally
any escrow cancellation charges for escrow work done to the date of
termination.
8. Contingent Matters
(a) Contingency Period. Buyer shall have the right to
perform and/or cause qualified professionals to perform such soils
studies, environmental studies, surveys, structural inspections,
engineering analyses, and other inspections, analyses and studies
(collectively, "inspections") regarding the Subject Property as Buyer
may deem necessary or desirable. If Buyer deems the results of the
inspections unacceptable to Buyer, in Buyer's reasonable judgment, Buyer
shall have the right to terminate the Escrow at any time prior to
expiration of the Contingency Period without further liability on the
part of either party (except that Buyer's obligations under paragraph
8(c) shall survive such termination), all documents and moneys deposited
therein by either party shall be returned to such party, and Buyer shall
pay any escrow cancellation charges for escrow work done to the date of
termination. The period (the "Contingency Period") to conduct such
inspections shall expire thirty (30) days after the Escrow Opening Date.
After expiration of the Contingency Period Buyer shall not have the
right to terminate this Escrow for any reason other than a material
default by Seller (except as otherwise provided in Paragraphs 6 and 7
hereof).
(b) Plans and Survey. Not more than five (5) days after
the Escrow Opening Date, Seller shall furnish to Buyer a copy of "as
built" plans (the "Plans") for the building located on the Subject
Property if any such plans are in the possession or under the control of
Seller. Additionally, Buyer, at Buyer's sole cost and expense, may
obtain a survey (the "Survey") of the Subject Property from a licensed
engineer or surveyor. If Buyer deems the Plans and/or the Survey
unacceptable to Buyer, in Buyer's reasonable judgment, Buyer shall have
the right to terminate the Escrow prior to the expiration of the
Contingency Period as provided in the foregoing subparagraph (a).
<PAGE>
(c) Access to Property. Seller, upon reasonable advance
notice from Buyer, shall make the Subject Property available for
inspection pursuant to subparagraph (a) hereof; provided, however, that,
prior to any entry onto the Subject Property for purposes of any such
inspection by Buyer or any agent, employee, contractor, subcontractor or
other representative of Buyer which involves physical testing of the
Subject Property (e.g., soil borings, concrete corings, etc.), Buyer
shall furnish Seller with evidence satisfactory to Seller that Buyer (or
a contractor or subcontractor of Buyer) has in effect, and will have in
effect at all relevant times, with a reputable insurance company
licensed to do business in State of California, a policy of public
liability insurance, with a combined single limit of liability of not
less than $1,000,000 that names Seller as an additional insured
thereunder and provides coverage to Seller with respect to any claims
that may be asserted against Seller by reason of any bodily injury or
property damage that may occur in connection with any act or omission of
Buyer or any agent, employee, contractor, subcontractor or other
representative Buyer on or about the Subject Property in the course or
as a result of any such physical testing of the Subject Property by
Buyer or any agent, employee, contractor, subcontractor or other
representative of Buyer or in the course or as a result of any activity
in connection therewith or any condition created thereby. In addition,
and apart from such insurance, Buyer shall indemnify, defend (with
counsel reasonably satisfactory to Seller) and hold Seller harmless
against any loss or damage to, or claim of lien upon, the Subject
Property or any liability to any party for personal injury or property
damage that may result from any inspection or any act or omission of
Buyer or any agent, employee, contractor, subcontractor or other
representative of Buyer in connection therewith.
9. Closing Date. Except as otherwise provided herein, and
unless you are otherwise instructed jointly by the parties in writing,
the sale and purchase of the Subject Property shall be consummated
through the Escrow (a) ninety (90) days after the Escrow Opening Date or
(b) such later date, if any, as may be required in order to give effect
to the provisions of Paragraph 6 (pertaining to the Title Report), or
Paragraph 7 (pertaining to the issuance of a policy of title insurance).
Notwithstanding the foregoing, Seller shall have the right to extend the
Escrow for an additional period of sixty (60) days upon prior written
notice to Buyer and to you given not less than five (5) days prior to
the previously scheduled Closing Date. The day on which the sale and
purchase of the Subject Property hereunder shall be consummated is
herein referred to as "the Closing Date."
10. Closing of Escrow. Provided you have received the funds
and documents that are to be delivered to you hereunder and are able to
procure the policy of title insurance provided for in Paragraph 7, you
are authorized and instructed to close the Escrow on the Closing Date by
simultaneously doing the following:
(a) Inserting into the appropriate spaces in the Grant
Deed (to the extent not already inserted when the Grant Deed is
delivered to you) the name of Buyer or any nominee named by Buyer
pursuant to Paragraph 5;
<PAGE>
(b) Recording the Grant Deed and causing the same to be
delivered to the grantee(s) thereunder;
(c) Delivering to Seller your check (or wire-
transferring funds as directed by Seller, if so requested by Seller,
with any necessary information required in connection therewith being
furnished to you by Seller) in an amount equal to (i) the Purchase
Price, plus (ii) the amount of any other credits to the escrow account
of Seller which are provided for herein or otherwise made by you
hereunder, less only (iii) the amount of any charges to the escrow
account of Seller which are expressly provided for herein. You are
hereby instructed to issue and deliver separate checks to Mac Donald
Construction and the Trust. The net proceeds of Escrow shall be
allocated between Mac Donald Construction and the Trust in proportion to
their respective percentage interests in the Subject Property. However,
all funds needed to pay the balance (principal and interest) owed to IBG
Palm Associates under its note secured by deed of trust covering the
Subject Property shall be charged solely against that portion of the
proceeds due Mac Donald Construction and the Trust shall bear none of
the cost of such note;
(d) Returning to Buyer funds equal to the amount of any
unapplied credit remaining in Buyer's escrow account hereunder; and
(e) Delivering to Buyer the original of the policy of
title insurance provided for herein (after the same shall have been
issued).
11. Escrow Prorations. Under the terms of its existing lease
covering the Subject Property, Buyer has the obligation to pay all
property taxes. Accordingly, property taxes do not have to be prorated.
You are instructed to prorate between Seller and Buyer, as of the
Closing Date, any insurance of Seller assumed by Buyer and the rent due
on the existing lease to Buyer. Prior to the Closing Date, Seller shall
deliver to Escrow and to Buyer a statement of rent showing the date to
which rent has been paid. Buyer agrees to make all rent and other
payments due under its existing lease until the Close of Escrow.
12. Payment of Closing Costs. You are instructed to charge
the premium for the policy of title insurance that is to be issued in
connection with this transaction (a) to Seller to the extent of the cost
of CLTA owner's coverage with liability in the amount of the Purchase
Price, and (b) to Buyer to the extent of any excess cost attributable to
ALTA coverage and/or any endorsements requested by Buyer. You are
instructed to charge Seller for the documentary transfer tax payable
upon recordation of the Grant Deed and for one-half of your escrow fee.
You are instructed to charge Buyer for the recording charges to record
the Grant Deed and for one-half of your escrow fee. All other closing
costs shall be allocated as is customary in Orange County.
<PAGE>
13. Incorporation of General Escrow Provisions. The general
escrow provisions set forth in your printed standard-form escrow
instructions, a copy of which provisions is attached hereto as Exhibit
B, are hereby incorporated herein. In the event of any conflict between
the provisions set forth herein and said general escrow provisions in
your printed standard-form escrow instructions, the provisions set forth
herein shall govern and take precedence.
14. Representations and Warranties.
(a) Seller. (i) Mac Donald Construction is a
corporation duly organized and validly existing under the laws of the
State of California and has all necessary power to execute and deliver
these Escrow Instructions and perform all of its obligations hereunder.
The execution, delivery and performance of these Escrow Instructions
have been duly authorized by all requisite action on the part of Mac
Donald Construction and these Escrow Instructions constitute the legal,
valid and binding obligation of Mac Donald Construction enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency
and similar laws affecting creditors' rights generally. Neither the
execution and delivery of these Escrow Instructions by Mac Donald
Construction nor the performance of its obligations hereunder will
conflict with, result in the violation of, or constitute a default
under, any provision of Mac Donald Construction's articles of
incorporation or by-laws as amended to date, any order or decree of any
court or governmental entity relating to Mac Donald Construction, any
indenture, mortgage or other agreement or instrument to which Mac Donald
Construction is a party or by which Mac Donald Construction may be
bound, or, to the best of Mac Donald Construction's knowledge, any law,
ordinance or regulation.
(ii) The Trust is a testamentary trust created under the
laws of the State of California and the Trustees thereof have all
necessary power to execute and deliver these Escrow Instructions and
perform all of their obligations hereunder. These Escrow Instructions
constitute the legal, valid and binding obligation of the Trust
enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally. Neither the execution and delivery of these Escrow
Instructions by the Trustees of the Trust nor the performance of their
obligations hereunder will conflict with, result in the violation of, or
constitute a default under, the trust instrument or court order creating
the Trust, any order or decree of any court or governmental entity
relating to the Trust, any indenture, mortgage or other agreement or
instrument to which the Trustees are a party or by which the Trustees
may be bound, or, to the best of Trustees' knowledge, any law, ordinance
or regulation.
(iii) There are no pending or, to the best of Seller's
knowledge, any contemplated actions, suits, arbitrations, claims or
proceedings, at law or in equity, affecting all or any portion of the
Subject Property or in which Seller is or will be a party by reason of
Seller's ownership of the Subject Property, including, but not limited
to, judicial, municipal, or administrative proceedings in eminent domain
or alleged building code, health and safety or zoning violations,
alleged to have occurred on the Subject Property or by reason of the
condition or use of the Subject Property.
<PAGE>
(iv) Seller has not received any written notice of any
eminent domain, environmental, zoning or other land use regulation
proceedings adversely affecting the Subject Property or any part
thereof. Seller has not received any written notice of any special
assessment proceedings affecting the Subject Property.
(v) There are no leases, contracts or agreements
affecting the Subject Property that have been entered into by Seller
other than the current lease to Buyer.
(b) Buyer. Buyer is a corporation duly organized and
validly existing under the laws of the State of California and has all
necessary power to execute and deliver these Escrow Instructions and
perform all of its obligations hereunder. The execution, delivery and
performance of these Escrow Instructions have been duly authorized by
all requisite action on the part of Buyer and these Escrow Instructions
constitute the legal, valid and binding obligation of Buyer enforceable
in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally.
Neither the execution and delivery of these Escrow Instructions by Buyer
nor the performance of its obligations hereunder will conflict with,
result in the violation of, or constitute a default under, any provision
of Buyer's articles of incorporation or by-laws as amended to date, any
order or decree of any court or governmental entity relating to Buyer,
any indenture, mortgage or other agreement or instrument to which Buyer
is a party or by which Buyer may be bound, or, to the best of Buyer's
knowledge, any law, ordinance or regulation.
15. Incorporation of Exhibits. All exhibits referenced herein
as being attached hereto are hereby incorporated herein and made a part
hereof as though set forth herein verbatim.
16. Condemnation of Subject Property. If, at any time prior
to the close of Escrow, title to all or a material part of the Subject
Property is taken by eminent domain, or proceedings for such taking are
formally commenced (by means, specifically, of the obtaining of a court
order for immediate possession, the adoption of an official resolution
of condemnation or the making of a statutory offer of compensation based
on an appraisal) by any governmental authority having the power of
eminent domain, or all or a material part of the Subject Property is
destroyed by any cause whatsoever, then Buyer shall have the option to
terminate this transaction by giving written notice to you and Seller of
an election to do so within fifteen (15) days after the occurrence of
such taking by eminent domain, or such formal commencement of
proceedings for such a taking or the occurrence of such destruction. If
Buyer exercises an option (if applicable) to terminate this transaction
pursuant to the first sentence of this paragraph, then the Escrow shall
terminate without further liability on the part of either party (except
that Buyer's obligations under Paragraph 8(c) shall survive such
termination), all documents and moneys deposited therein by either party
shall be returned to such party, and Buyer and Seller shall pay equally
any escrow cancellation charges for escrow work done to the date of
<PAGE>
termination. If there is a taking by eminent domain or the formal
commencement of proceedings for such a taking or destruction of the
Subject Property, as contemplated above, and, in any case, Buyer does
not exercise the option to terminate this transaction pursuant to the
first sentence of this paragraph, then the Escrow shall close on the
Closing Date, in accordance with the terms hereof, without any reduction
of the Purchase Price hereunder, and any applicable eminent domain
compensation or insurance proceeds, if any, shall be released (or
assigned if not yet collected) to Buyer through the Escrow. In the
event that, prior to the close of Escrow, title to a part of the Subject
Property that is less than all or a material part thereof is taken by
eminent domain, or proceedings for such a taking are formally commenced,
or less than all or a material part of the Subject Property is
destroyed, this transaction shall proceed in accordance with its terms,
and the Escrow shall be closed on the Closing Date in accordance with
the terms hereof, without any reduction of the Purchase Price hereunder,
provided only that any applicable eminent domain compensation or
insurance proceeds, shall be released (or assigned if not yet collected)
to Buyer through the Escrow. The provisions of this paragraph are not
intended to release the parties from their respective obligations
regarding condemnation or destruction of the Subject Property set forth
in the existing lease.
17. Additional Covenants and Agreements. The following
provisions deal with matters of agreement between Seller and Buyer with
respect to which you shall have no responsibility and with which you
need not be concerned:
(a) SELLER'S DISCLAIMER OF WARRANTIES. EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH HEREIN, IT IS AGREED THAT THE SUBJECT
PROPERTY SHALL BE CONVEYED BY SELLER AND ACCEPTED BY BUYER AS IS AND
WITH ALL FAULTS AND THAT SELLER IS MAKING NO REPRESENTATIONS OR
WARRANTIES REGARDING THE CONDITION OF TITLE TO THE SUBJECT PROPERTY, NOR
REGARDING THE DEVELOPMENT POTENTIAL OF THE SUBJECT PROPERTY OR ITS
SUITABILITY FOR ANY PARTICULAR USE OR PURPOSE, NOR REGARDING COMPLIANCE
OF THE SUBJECT PROPERTY OR THE USE THEREOF WITH ANY APPLICABLE ZONING,
ENVIRONMENTAL, HAZARDOUS WASTE OR OTHER LAWS OR ORDINANCES, NOR
REGARDING THE PHYSICAL CONDITION OF THE SUBJECT PROPERTY, INCLUDING
SOILS AND GEOLOGY, OR OF ANY STRUCTURES OR OTHER IMPROVEMENTS
CONSTITUTING A PART THEREOF, NOR REGARDING THE SIZE OR DIMENSIONS OF THE
SUBJECT PROPERTY, NOR REGARDING ANY LICENSES OR PERMITS THAT BUYER MAY
NEED TO OBTAIN IN ORDER TO OWN, LEASE OR USE THE SUBJECT PROPERTY IN
ACCORDANCE WITH ITS EXISTING OR ANY CONTEMPLATED USES, NOR REGARDING
WHETHER THE SUBJECT PROPERTY MAY BE SITUATED IN AN EARTHQUAKE FAULT ZONE
AS DESIGNATED UNDER SECTIONS 2621-2625, INCLUSIVE, OF THE CALIFORNIA
PUBLIC RESOURCES CODE, NOR REGARDING WHETHER THE SUBJECT PROPERTY MAY BE
SITUATED IN A FLOOD HAZARD ZONE AS DESIGNATED ON ANY SPECIAL FLOOD ZONE
AREA MAP OF THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, NOR
REGARDING ANY OTHER MATTER OR THING WHATSOEVER, IT BEING UNDERSTOOD THAT
BUYER HAS OBTAINED OR WILL OBTAIN ITS OWN INDEPENDENT ASSURANCES AS TO
ALL SUCH MATTERS TO SUCH EXTENT AS BUYER, IN ITS DISCRETION, HAS DEEMED
NECESSARY OR APPROPRIATE. BUYER ACKNOWLEDGES THAT IT IS ENTERING INTO
<PAGE>
THIS PURCHASE ON THE BASIS OF BUYER'S OWN INVESTIGATION OF THE CONDITION
OF THE SUBJECT PROPERTY, AND BUYER ASSUMES THE RISK THAT ADVERSE
CONDITIONS MAY NOT HAVE BEEN REVEALED BY ITS OWN INVESTIGATION. EXCEPT
AS OTHERWISE EXPRESSLY SET FORTH HEREIN, BUYER FURTHER ACKNOWLEDGES THAT
SELLER, SELLER'S AGENTS AND OTHER PERSONS ACTING ON BEHALF OF SELLER,
HAVE MADE NO REPRESENTATION OR WARRANTY OF ANY KIND IN CONNECTION WITH
ANY MATTER RELATING TO THE CONDITION, VALUE, FITNESS OR USE OF THE
SUBJECT PROPERTY UPON WHICH BUYER HAS RELIED DIRECTLY OR INDIRECTLY FOR
ANY PURPOSE. BUYER HEREBY WAIVES, RELEASES, REMISES, ACQUITS AND
FOREVER DISCHARGES SELLER, AND SELLER'S AGENTS OR ANY OTHER PERSON
ACTING ON BEHALF OF SELLER, OF AND FROM ANY CLAIMS, ACTIONS, CAUSES OF
ACTION, DEMANDS, RIGHTS, DAMAGES, LIABILITIES, COSTS, EXPENSES OR
COMPENSATION WHATSOEVER, DIRECT OR INDIRECT, KNOWN OR UNKNOWN, FORESEEN
OR UNFORESEEN, WHICH BUYER NOW HAS OR WHICH MAY ARISE IN THE FUTURE ON
ACCOUNT OF OR IN ANY WAY CONNECTED WITH THE CONDITION OF THE SUBJECT
PROPERTY OR ANY LAW OR REGULATION APPLICABLE THERETO. IN CONNECTION
WITH THE FOREGOING RELEASE, BUYER HEREBY WAIVES THE BENEFITS OF SECTION
1542 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA WHICH PROVIDES AS
FOLLOWS: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
(b) Survival of Representations, Warranties and
Covenants. All covenants made by each party hereunder, that, by their
terms, are to be wholly or partly performed after the Closing Date, and
all representations and warranties and disclaimers thereof made by each
party hereunder, shall survive the consummation of the sale and purchase
of the Subject Property hereunder and shall continue thereafter to be
fully effective and binding in accordance with their terms.
(c) Attorneys' Fees. In the event either party
commences an action to determine or enforce such party's legal rights
arising hereunder or in connection herewith, the prevailing party in
such action (as determined by the court) shall be entitled to recover
therein such reasonable attorneys' fees and costs as the prevailing
party may incur in connection therewith.
(d) Time of the Essence. Time is of the essence in the
performance of all obligations and the satisfaction of all conditions
set forth herein.
(e) Construction. Neither these Escrow Instructions nor
any provision thereof shall be construed or interpreted against any
party on the basis that such party or such party's attorney drafted the
Escrow Instructions or provisions.
(f) Joint and Several Liability. In the event that any
party hereto comprises more than one person or entity, all such persons
and entities shall be jointly and severally liable for the performance
of all obligations of such party hereunder.
<PAGE>
(g) Amendments. These Escrow Instructions and the
contract of purchase and sale between the parties embodied herein may be
amended only by means of a writing signed by both parties hereto.
(h) Successors and Assigns. These Escrow Instructions
shall be binding on and inure to the benefit of the parties hereto and
their respective successors and assigns.
(i) Governing Law. These Escrow Instructions and the
rights of the parties hereunder shall be governed by the laws of the
State of California.
18. Exchange. Buyer agrees to accommodate Seller (or either
of them) in effecting a tax deferred exchange, including but not limited
to a non-simultaneous exchange, under Internal Revenue Code Section 1031
so long as such exchange shall be at no cost or expense to Buyer.
Seller (or either of them) shall have the right, expressly reserved
here, to elect this tax-deferred exchange at any time before the
Closing; however, Seller and Buyer agree that consummation of this
transaction is not conditioned on the exchange. If Seller (or either of
them) elects to effect a tax-deferred exchange, Buyer agrees, subject to
its reasonable approval, to execute additional escrow instructions,
documents, agreements or instruments to effect the exchange. In no
event, however, shall Buyer be required to make a total cash payment for
the exchange property, including all costs and expenses of that
purchase, in excess of the cash payment that would otherwise have been
made to the Seller had Buyer completed the purchase of the Subject
Property from Seller without participating in an exchange, nor shall
Buyer be required to assume any obligation, promissory note or other
evidence of indebtedness in connection with the acquisition of exchange
property which would impose any personal liability on Buyer for its
payment. Seller agrees to indemnify, defend (with counsel reasonably
satisfactory to Buyer) and hold Buyer harmless from any liability,
damages or costs of whatsoever kind or nature that may arise from
Buyer's participation in the exchange.
19. Commissions. Buyer and Seller each represent and warrant
to each other that they have not retained a real estate broker or finder
in connection with this transaction. Each party hereto hereby agrees
that any obligations undertaken by such party to pay any brokers'
commissions, finders' fee or similar compensation in connection with
this transaction shall be the obligation and responsibility of such
party alone, and such party hereby agrees to defend and indemnify the
other party hereto and the other party's successors and assigns against
any such obligation and responsibility and against any loss, liability,
damage or expense (including reasonable attorneys' fees and expenses)
that may result from any assertion thereof or claim therefor.
20. Notices. Any notice or other communication (hereinafter,
"notice") that either party hereto may desire or be required to give to
the other party, or to you, as escrow holder of the Escrow, hereunder or
in connection herewith shall be in writing and may be delivered by means
of a messenger service, a national courier service or mail.
<PAGE>
Any notice delivered by means of a messenger service shall be
delivered in hand to the party to be notified or to any receptionist or
other person of suitable age and discretion that may be found at the
principal business office of such party or at the address for giving
national-courier-service notices to such party hereunder and shall be
deemed given when so delivered, or when the party to be notified or a
receptionist or other person of suitable age and discretion found at the
principal business office of such party or at the address for giving
national-courier-service notices to such party hereunder refuses
delivery thereof during business hours on a business day.
Any notice delivered by means of a national courier service
shall be sent by means of the "next-day" or "next-business-day" delivery
service of such courier service and shall be deemed given on the first
business day on which it would normally be expected to be in the hands
of the addressee pursuant to such service.
Any notice delivered by mail shall be sent by certified or
registered mail, return receipt requested, and shall be deemed given on
the third day following the date of deposit of such notice in the U. S.
mails, with all postage and fees prepaid, (or, if such third day is not
a business day on which mails are delivered by the Postal Service, then
on the next business day thereafter on which mails are so delivered).
Any notice delivered by courier service or mail shall be
addressed as follows:
If to Seller:
G.A. Mac Donald Construction Co. Inc.
3429 Ocean View Boulevard
Glendale, California 91208
With a simultaneous copy being sent in the
same manner to:
Carlo Sima, Esq.
Parker, Milliken, Clark, O'Hara & Samuelian
333 South Hope Street, Suite 2700
Los Angeles, California 90071
If to Buyer:
Simpson Manufacturing Co. Inc.
4637 Chabot Drive
Suite 200
P.O. Box 10789
Pleasanton, California 94588-0789
Attn: Steve Lamson
With a simultaneous copy being sent in the
same manner to:
Adam K. Elsesser, Esq.
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, California 94111
<PAGE>
If to you, as escrow holder of the Escrow, to your address set
forth on the first page hereof.
Any address for notice to a party may be changed at any time
by written notice given to the other party and to you in the manner
provided for above. For purposes hereof, the term, "business day" shall
mean any Monday through Friday, except for legal holidays observed in
the locality of the addressee of a notice, and the term, "business
hours" shall mean the hours of 9:00 a.m. to 5:00 p.m., local time of the
addressee of a notice.
21. Counterparts. Subject to the provisions of Paragraph 1
regarding conditions precedent to the effectiveness of these Escrow
Instructions, these Escrow Instructions may be executed in counterparts,
each of which shall be deemed an original hereof, binding upon the party
whose signature appears thereon, and all of which together shall
constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have caused these Escrow
Instructions to be executed as of the 16th day of
August, 1996.
G.A. MAC DONALD CONSTRUCTION CO. INC.
By
--------------------------------------
Its
--------------------------------------
--------------------------------------
JEAN A. MAC DONALD, Trustee Under The
Will of Gordon A. Mac Donald, Deceased
--------------------------------------
SCOTT A. MAC DONALD, Trustee Under The
Will of Gordon A. Mac Donald, Deceased
"Seller"
SIMPSON MANUFACTURING CO., INC.
By /s/Steve Lamson
-----------------------------------
Its CFO
--------------------------------
"Buyer"
<PAGE>
PARCEL 2, IN THE CITY OF BREA, COUNTY OF ORANGE, STATE OF CALIFORNIA, AS
SHOWN ON A MAP FILED IN BOOK 241, PAGES 34, 35 AND 36 OF PARCEL MAPS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM A FIFTY (50) PERCENT OF ALL OIL, GAS AND HYDROCARBON
SUBSTANCES IN AND UNDER SAID PROPERTY, AS GRANTED TO MRS. L. E. WELLER,
IN DEED RECORDED MAY 23, 1958 IN BOOK 4294, PAGE 486, OFFICIAL RECORDS,
BUT WITHOUT THE RIGHT OF SURFACE ENTRY TO A DEPTH OF 500 FEET, AS
RELEASED BY DEED DATED JUNE 19, 1963 AND RECORDED JULY, 1963 IN BOOK
6613, PAGE 540, OFFICIAL RECORDS.
<PAGE>
Standard Escrow Provisions
(To Be Attached)
EXHIBIT 10.3
------------
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
into as of February 16, 1996, by and among SIMPSON MANUFACTURING CO.,
INC., a California corporation ("Borrower"), SIMPSON HOLDINGS, INC., a
California corporation ("Holdings"), and WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Bank").
RECITALS
--------
WHEREAS, Borrower is currently indebted to Bank pursuant to the
terms and conditions of that certain Credit Agreement between Borrower
and Bank dated as of May 31, 1995, as amended from time to time ("Credit
Agreement").
WHEREAS, Bank and Borrower have agreed to certain changes in the
terms and conditions set forth in the Credit Agreement and have agreed
to amend the Credit Agreement to reflect said changes.
WHEREAS, Holdings is a wholly-owned subsidiary of Borrower and the
substituted account party on the Letter of Credit issued to the Self
Insurance Plans of California pursuant to Section 1.4(a) of the Credit
Agreement.
WHEREAS, the stated principal amount of this Letter of Credit
issued to the Self Insurance Plans of California pursuant to Section
1.4(a) of the Credit Agreement has been increased to $416,285.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree
that the Credit Agreement shall be amended as follows:
1. Section 1.4 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(a) LETTER OF CREDIT. Bank has issued a letter of Credit for
the account of Simpson Holdings, Inc. ("Holdings") and in favor of Self
Insurance Plans of California to support Borrower's workers'
compensation insurance requirements (the "Letter of Credit") in the
amended principal amount of Four Hundred Sixteen Thousand Two Hundred
Eighty-Five Dollars ($416,285.00). The Letter of Credit has an
expiration date of June 1, 1997, and is subject to the additional terms
of the Application and Agreement for Standby Letter of Credit required
by Bank in connection with the issuance thereof, as amended from time to
time (the "Letter of Credit Agreement"). Subject to the terms and
conditions of this Agreement, Bank hereby confirms that the Letter of
Credit remains in full force and effect.
<PAGE>
"(b) REPAYMENT OF DRAFTS. Each draft paid by Bank under the
Letter of Credit shall be repaid by Borrower or Holdings in accordance
with the provisions of the Letter of Credit Agreement. The obligations
of Borrower and Holdings under this Section 1.4 are joint and several."
2. Holdings jointly and severally assumes and will pay when due all
sums at any time due or owing under Section 1.4 of the Credit Agreement
or under the Letter of Credit Agreement, and Holdings will hereafter
faithfully perform and be bound by all of the terms and conditions of
the Credit Agreement, insofar as the Credit Agreement relates to the
Letter of Credit, and the Letter of Credit Agreement, the terms of which
are incorporated herein by this reference.
3. Borrower shall not be released from any of its obligations under the
Credit Agreement or the Letter of Credit Agreement as a result of
Holdings' assumption of the obligations described in Section 2, above,
and Borrower hereby reaffirms such liability. Borrower agrees that its
liability and that of Holdings for the obligations described in Section
2, above, shall be joint and several.
4. Borrower and Holdings agree and acknowledge that there are no
claims, defenses (legal or equitable), counterclaims, set-offs and/or
other rights or remedies whatsoever which any of them now has, claim or
assert against Bank which would in any way alter, reduce or extinguish
any of their liabilities to Bank. Holdings hereby waives and agrees not
to assert against Bank or Borrower any rights which a guarantor or
surety could exercise, including without limitation, the rights, if any,
of subrogation, or of requiring Bank to proceed to foreclose upon
collateral, or of requiring Bank to marshal collateral.
5. Except as specifically provided herein, all terms and conditions of
the Credit Agreement and the Letter of Credit Agreement remain in full
force and effect, without waiver or modification. All terms defined in
the Credit Agreement shall have the same meaning when used in this
Amendment. This Amendment and the Credit Agreement shall be read
together, as one document.
<PAGE>
6. Borrower hereby remakes all representations and warranties contained
in the Credit Agreement and reaffirms all covenants set forth therein.
Borrower further certifies that as of the date of this Amendment there
exists no Event of Default as defined in the Credit Agreement, nor any
condition, act or event which, with the giving of notice or the passage
of time or both, would constitute any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed as of the day and year first written above.
WELLS FARGO BANK
SIMPSON MANUFACTURING CO., INC. NATIONAL ASSOCIATION
By: /s/Steve Lamson By: /s/Steve Bojkovic
------------------- ------------------
Title: CFO Title: Vice President
------------------- ------------------
By: /s/Thomas J Fitzmyers
---------------------
Title: President
---------------------
SIMPSON HOLDINGS, INC.
By: /s/Steve Lamson
-------------------
Title: CFO
-------------------
By: /s/Thomas J Fitzmyers
---------------------
Title: President
---------------------
<PAGE>
WELLS FARGO BANK CORPORATE BORROWING RESOLUTION
TO WELLS FARGO BANK, NATIONAL ASSOCIATION
RESOLVED: That any of the following officers: Chairman of the Board,
President/C.E.O. or Secretary/C.F.O. and Treasurer together with any one
of the following officers: None of this corporation Simpson Holdings,
Inc. be and they are hereby authorized and empowered for and on behalf
of and in the name of this corporation and as its corporate act and
deed:
(1) To borrow money from Wells Fargo Bank, National Association
("Bank") and to assume any liabilities of any other person or entity to
Bank, in such form and on such terms and conditions as shall be agreed
upon by those authorized above and Bank, and to sign and deliver such
promissory notes and other evidences of indebtedness for money borrowed
or advanced and/or for indebtedness assumed as Bank shall require; such
promissory notes or other evidences of indebtedness may provide that
advances be requested by telephone communication and by any officer,
employee or agent of this corporation so long as the advances are
deposited into any deposit account of this corporation with Bank; this
corporation shall be bound to Bank by, and Bank may rely upon, any
communication or act, including telephone communications, purporting to
be done by any office, employee or agent of this corporation provided
that Bank believes, in good faith, that the same is done by such person.
(2) To contract for the issuance by Bank of letters of credit, to
discount with Bank notes, acceptances and evidences of indebtedness
payable to or due this corporation and to endorse the same and execute
such contracts and instruments for repayment thereof to Bank as Bank
shall require, and to enter into foreign exchange transactions with or
through Bank.
(3) To mortgage, encumber, pledge, convey, grant, assign or otherwise
transfer all or any part of this corporation's real or personal property
for the purpose of securing the payment of any of the promissory notes,
contracts, instruments and other evidences of indebtedness authorized
hereby, and to execute and deliver to Bank such deeds of trust,
mortgages, pledge agreements and/or other security agreements as Bank
shall require.
(4) To perform all acts and to execute and deliver all documents
described above and all other contracts and instruments which Bank deems
necessary or convenient to accomplish the purposes of this resolution
and/or to perform or continue the rights, remedies and security
interests to be given to Bank hereunder, including without limitation,
any modifications, renewals and/or extensions of any of this
corporation's obligations to Bank, however evidenced; provided that the
aggregate principal amount of all sums borrowed and credits established
pursuant to this resolution shall not at any time exceed the sum of
$416,285.00 outstanding and unpaid.
Loans made pursuant to a special resolution and loans made by
offices or Bank other than the office to which this resolution is
delivered shall be in addition to the foregoing limitation.
The authority hereby conferred shall be deemed retroactive, and any
and all acts authorized herein which were performed prior to the passage
of this resolution hereby approved and ratified. The authority hereby
conferred is in addition to that conferred by any other resolution
heretofore or hereafter delivered to Bank and shall continue in full
force and effect until Bank shall have received notice in writing,
certified by the Secretary of this corporation, of the revocation hereof
by a resolution duly adopted by the Board of Directors of this
corporation, and such revocation shall be effective only as to credit
which was not extended or committed to this corporation by Bank prior to
Bank's receipt of such notice.
<PAGE>
CERTIFICATION
I, Secretary of Simpson Holdings, Inc., a corporation created and
existing under the laws of the State of California, do hereby certify
and declare that the foregoing is a full, true and correct copy of the
resolutions duly passed and adopted by the Board of Directors of said
corporation, by written consent of all Directors of said corporation or
at a meeting of said Board duly and regularly called, noticed and held
on _______________, at which meeting a quorum of the Board of Directors
was present and voted in favor of said resolutions; that said
resolutions are now in full force and effect; that there is no provision
in the Articles of Incorporation or Bylaws of said corporation, or any
shareholder agreement, limiting the power of the Board of Directors of
said corporation to pass the foregoing resolutions and that such
resolutions are in conformity with the provisions of such Articles of
Incorporation and Bylaws; and that no approval by the shareholders of,
or any of the outstanding shares of, said corporation is required with
respect to the matters which are the subject of the foregoing
resolutions.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed the
corporate seal of said corporation as of August 16, 1996.
(SEAL)
/s/Steve Lamson, Secretary of
----------------------
Simpson Holdings, Inc., a corporation
----------------------
<PAGE>
CERTIFICATE OF INCUMBENCY
To: WELLS FARGO BANK, NATIONAL ASSOCIATION
The undersigned, Steve Lamson, Secretary of Simpson Holdings, Inc.,
a corporation created and existing under the laws of the State of
California, hereby certificates to Wells Fargo Bank, National
Association ("Bank") that the following named persons are those duly
elected officers of this corporation specified in the Corporate
Resolution attached hereto and that the signatures opposite their names
are their true signatures:
Title Name Signature
------------- ---------------------- ----------------------
Chairman of
the Board Barclay Simpson /s/Barclay Simpson
President/CEO Thomas Fitzmyers /s/Thomas J Fitzmyers
Secretary/CFO
and Treasurer Steve Lamson /s/Steve Lamson
The undersigned further certifies that should any of the above-
named officers change, or should the signature requirements of said
Corporate Resolution change, this corporation shall provide Bank
immediately with a new Certificate of Incumbency. Bank is hereby
authorized to rely on this Certificate until a new Certificate certified
by the Secretary of this corporation is received by Bank.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal of this corporation as of August 16, 1996.
Steve Lamson, Secretary of
Simpson Holdings, Inc., a corporation
EXHIBIT 10.4
------------
May 23, 1996
Mr. Steve Lamson, CFO
Simpson Manufacturing, Inc.
4637 Chabot Drive, Suite 200
Pleasanton, CA 94588
Dear Steve:
In reference to the Agreement between Union Bank ("Bank") and Simpson
Manufacturing, Inc. ("Borrower") date July 15, 1995, the Bank and
Borrower desire to amend the Agreement. This amendment shall be called
the Fourth Amendment to the Agreement. Initially capitalized terms used
herein which are not otherwise defined shall have the meaning assigned
thereto in the Agreement.
Amendment to the Agreement
(a) Section 1.1.3 Standby L/C (B). The section is amended in its
entirety as follows:
"Bank has issued for Simpson Holdings, Inc. an irrevocable,
standby letter of credit, an "L/C" in the amount of Four
Hundred Sixteen Thousand Two Hundred Eighty Four Dollars and
Fifty Cents ($416,284.50) maturing June 1, 1997."
This Loan Amendment shall become effective when the Bank shall have
received the acknowledgment copy of this Loan Amendment executed by the
Borrower and the following executed documents, all of which the Bank
must receive before May 31, 1996.
Except as specifically amended hereby, the Agreement shall remain in
full force and effect and is hereby ratified and confirmed. This Loan
Amendment shall not be a waiver of any existing default or breach of a
condition to covenant unless specified herein.
Very truly yours,
Union Bank
A Division of Union Bank of California, N.A.
/s/Carol A. Garrett, VP /s/Michael K. Devery, VP
- -------------------------------- --------------------------------
Carol A. Garrett, Vice President Michael K. Devery, AVP
Agreed and Accepted to this 24th day of May 1996.
Simpson Manufacturing, Inc.
/s/Thomas Fitzmyers /s/Steve Lamson
- -------------------------------- --------------------------------
Thomas Fitzmyers, President Steve Lamson, Chief Financial
Officer
EXHIBIT 10.5
------------
BARCLAYS BANK PLC
Colmore Row Business Centre
P.O. Box No. 34, 15 Colmore Row, Birmingham B3 2BY
Telephone: (0121) 236 9876 Facsimile: (0121) 236 2390
Private & Confidential
The Directors Your Ref:
Simpson Strong-Tie International Inc. Our Ref: DJH/CBU/HMC
Phoenix Road Ext. No:
Hawks Green
CANNOCK
WS11 2LR 18 June 1996
Dear Sirs
SIMPSON STRONG-TIE INTERNATIONAL INC.
We are writing to confirm that we have agreed facilities for the above
company as described below. The facilities are repayable upon demand at
any time, but subject to this overriding condition, the limits have been
marked forward for review by 30th June 1997.
FACILITIES
Simpson Strong-Tie
Overdraft GBP250,000 (two hundred and fifty
thousand pounds
HM Customs & Excise
Guarantee GBP10,000 (2 x GBP5,000)
Company Barclaycard GBP15,000
BACs GBP70,000
Payflow GBP10,000
Purpose To assist with the working capital
requirements of the company
Interest/Commission/Fees Interest will charged at a rate of 2%
above Barclays Bank's Base Rate current
from time to time.
No amounts may be drawn in excess of the
agreed facility but if exceptionally the
Bank pays amounts which are not agreed
in advance, and which create an excess
position, then a borrowing margin of 15%
will apply to the unauthorised amounts
calculated daily.
Interest will be charged quarterly in
arrears in March, June, September and
December, or at such other intervals as
the Bank my notify to you.
Base Rate is currently 5.75% and
variations in Base Rate are published in
the press.
Commission will be charged in line with
the Bank tariff current from time to
time, a copy of which is in your
possession. The tariff is usually
reviewed annually in May.
Additionally, the non-transactional
costs incurred reviewing, controlling
and monitoring the account will be
recovered by way of an account management
time charge.
The commission and management time
charge will be debited quarterly in
arrears in March, June, September and
December.
A renewal fee of GBP500 will be charged
on acceptance of this letter.
Security The facility will be secured/guaranteed
by:
(1) Standby Letter of Credit in the sum
of GBP275,000 from the Union Bank re the
Simpson Strong-Tie overdraft
(2) and any other security which is now
held or hereinafter may be held by the
Bank, all of which security is to be
available as cover for all liabilities
of the Borrower whether actual or
contingent to the Bank at any time.
Condition Precedent The facility is conditional upon both
Standby Letters of Credit being renewed
at their expiry dates.
Information The Borrower will provide the Bank with:
Copies of its audited, trading and
consolidated profit and loss account and
balance sheet as soon as they are
available, and not later than 180 days
from the end of each accounting
reference period.
Acceptance This offer will be available for
acceptance until 18th July 1996 after
which date the offer will lapse unless
extended in writing by the Bank.
Acceptance will be signified by signing
and returning the attached copy letter
Yours faithfully,
/s/S C Brettell
- ----------------------
S C BRETTELL
CORPORATE MANAGER
<TABLE>
<CAPTION>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
EXHIBIT 11
--------------
Primary Earnings per Share
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 11,436,426 11,344,757 11,418,249 11,302,983
Shares issuable pursuant to employee stock
option plans, less shares assumed
repurchased at the average fair value
during the period 355,661 153,177 305,885 124,729
Shares issuable pursuant to the independent
director stock option plan, less shares
assumed repurchased at the average fair
value during the period 3,975 1,402 3,362 712
------------ ------------ ------------ ------------
Number of shares for computation of primary
net income per share 11,796,062 11,499,336 11,727,496 11,428,424
============ ============ ============ ============
Net income $ 6,392,770 $ 4,727,370 $ 14,823,123 $ 11,029,407
============ ============ ============ ============
Primary net income per share $ 0.54 $ 0.41 $ 1.26 $ 0.97
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIMPSON MANUFACTURING CO., INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
EXHIBIT 11 (continued)
--------------------------
Fully Diluted Earnings per Share
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding 11,436,426 11,344,757 11,418,249 11,302,983
Shares issuable pursuant to employee stock
option plans, less shares assumed
repurchased at the end of period fair value 358,029 153,177 366,483 157,642
Shares issuable pursuant to the independent
director stock option plan, less shares
assumed repurchased at the end of period
fair value 4,000 1,402 4,000 1,176
------------ ------------ ------------ ------------
Number of shares for computation of fully
diluted net income per share 11,798,455 11,499,336 11,788,732 11,461,801
============ ============ ============ ============
Net income $ 6,392,770 $ 4,727,370 $ 14,823,123 $ 11,029,407
============ ============ ============ ============
Fully diluted net income per share $ 0.54 $ 0.41 $ 1.26 $ 0.96
============ ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at September 30, 1996, (Unaudited)
and the Condensed Consolidated Statement of Operations for the nine
months ended September 30, 1996, (Unaudited) and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 22,112,721
<SECURITIES> 0
<RECEIVABLES> 29,434,569
<ALLOWANCES> 1,383,561
<INVENTORY> 35,957,784
<CURRENT-ASSETS> 89,959,783
<PP&E> 60,883,748
<DEPRECIATION> 34,260,537
<TOTAL-ASSETS> 119,645,156
<CURRENT-LIABILITIES> 22,545,530
<BONDS> 0
0
0
<COMMON> 31,038,763
<OTHER-SE> 65,927,530
<TOTAL-LIABILITY-AND-EQUITY> 119,645,156
<SALES> 152,345,631
<TOTAL-REVENUES> 152,345,631
<CGS> 94,305,621
<TOTAL-COSTS> 94,305,621
<OTHER-EXPENSES> 33,289,818
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0<F1>
<INCOME-PRETAX> 25,076,123
<INCOME-TAX> 10,253,000
<INCOME-CONTINUING> 14,823,123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,823,123
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
<FN>
<F1>Interest income for the nine months ended September 30, 1996,
was $325,931.
</FN>
</TABLE>
