HomeMy WebLinkAboutAbdelmuti Development Company & Pac Pack Inc. dba Prospects One - 2002-08-05I3lW51 `KX4
Council/Agency Meeting Held: OS-05-01,
Deferred/Continued to:
❑ Approved ❑ Conditionally Approved ❑Denied is:1 Cit Jerk's i nature
POO
W %J - � 04 OF 600
Council Meeting Date: August 5, 2002 Department ID Number: ED 02-25
CITY OF HUNTINGTON BEACH
REQUEST FOR REDEVELOPMENT AGENCY ACTION 4
SUBMITTED TO: HONORABLE CHAIRMAN AND REDEVELOPMENT AGENCY -
MEMBERS
Z7
SUBMITTED BY: RAY SILVER, Executive Director X/V T; ;''
PREPARED BY: DAVID C. BIGGS, Deputy Executive Directo
4
O D
SUBJECT: Approval As To Form: Lease Between Abdelmuti Development
Co. and Pac Pack Inc., a California Corporation dba Prospects
One
Statement of Issue, Funding Source, Recommended Action, Alternative Action(s), Analysis, Environmental Status, Attachment(s)
Statement of Issue: The Owner Participation Agreement between the Agency and
Abdelmuti Development Company provides for the Agency to review and "Approve As To
Form" leases within the office space of the Oceanview Promenade building.
Fundinq Source: Redevelopment Tax Increment, budgeted in account 30580101.79125.
Recommended Action: Motion to:
Approve as to fonn the attached 'ease between Abdelfnuti Develepment-GernplElAy ORd Pa-e
. jVo NeW To APB" As To fo1ZM, AS RFrT
NoT cias izP 8Y hbeN cY.
Alternative Action: Do not approve the leases as to form.
Analysis: On May 28, 1991, the Agency entered into an Owner Participation Agreement
(OPA) with the Abdelmuti Development Company for the Oceanview Promenade building
which was amended in November 1991 to establish the "Guaranteed Rental Rate."
The Agency's obligation is based on the rent collected from office space on the second floor
and one-half of the third floor, approximately 20,300 square feet in total. If actual rents are
less than the Guaranteed Rent ($1.95 per square foot), the Agency pays the difference (the
"Rent Differential Payment").
ffrj�� 1
REQUEST MR REDEVELOPMENT AGENW ACTION
MEETING DATE: August 5, 2002 DEPARTMENT ID NUMBER: ED 02-25
The attached lease with Pac Pack, Inc., is for the currently vacant Suite 250, which is 616
square feet. The landlord, Abdelmuti Development Company, has split Suite 240 into three
smaller suites now known as Suite 230 (1,378 sq. ft.), Suite 240 (1,140 sq. ft.), and Suite 250
(616 sq. ft.), which totals 3,134 rentable square feet.
This is a 2-year lease at $2.25 per sq. ft. for year 1 and $2.30 per sq. ft. for year 2. These
lease rates compare favorably to the 2002 appraisal of fair market rent for this space of
$1.95 per square foot. The proposed lease exceeds the recommended rate and, will
therefore decrease the rent subsidy payment made by the Agency.
A copy of the April 17, 2002 Fair Market Rental Appraisal is attached. This appraisal was
performed in order to encourage Mr. Abdelmuti to increase his rents to their market potential.
In the case of the attached lease, the rent exceeds the recommended rate delineated in this
appraisal.
Environmental Status: NIA
Attachments :
1 Crease between Abdelmuti Development Company and Pac
Pack, Inc. a California Corporation dba Prospects One.
I 2. j Fair Market Rental Appraisal April 17, 2002 within Oceanview
f Promenade.
RCA Author: Tom Andrusky x1530
d_Ibocuments and Settingslkuhnkee%Local SettfngslTemporary Internet Fi1es10LK61RCA 02-25.doc -2-
7/24/2002 3:08 PM
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Lease between Abdelmuti Development
Company and Pac Pack, Inc., a California
Corporation dba Prospects One
ATTACHMENT #1
OFFICE SPACE LEASE
between
ABDELMUTI DEVELOPMENT COMPANY,
a California gcneral partnership
AS LANDLORD
and
PAC PACK, INC., a California corporation dba Prospects One
AS TENANT
SUITE 250
OCEANVIEW PROMENADE
HUNTINGTON BEACH, CALIFORNIA
.�.67;V1aR20-0005
3W222.02 a07114'02
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1-1
TABLE. OF CONTENTS
Page
ARTICLE I. PREMISES.................................................................................................... 3
SECTION 1.1 LEASED PREMISES....................................................................... 3
SECTION 1.2 ACCEPTANCE OF PREMISES ........................ ... 3
SECTION 1.3 USE RESERVATIONS.................................................................... 3
SECTION 1.4 BUILDING NAME AND ADDRESS .............................................. 3
ARTICLEII. TERM.......................................................................................................... 4
SECTION2.1 GENERAL........................................................................................ 4
SECTION 2.2 TENDER OF POSSESSION BY LANDLORD ............................... 4
SECTION 2.3 Intentionally Omitted........................................................................ 4
ARTICLE III. RENT AND SECURITY DEPOSIT............................................................. 4
SECTION 3.1 BASIC ANNUAL RENT.................................................................. 4
SECTION 3.2 SECURITY DEPOSIT...................................................................... 5
SECTION 3.3 OPERATING EXPENSES............................................................... 5
ARTICLEIV. USES ............................................... .............................................................. 5
SECTION4.1 USE................................................................................................... 5
SECTION 4.2 PROHIBITION AGAINST SOLICITATION AND
OTHER ACTIVITIES WITHOUT THE PERMISSION OF
LANDLORD..................................................................................... 6
SECTION 4.3 EXCLUSIVE CONTROL OVER COMMON AREA ...................... 6
SECTION 4.4 SIGNS ....................... .........................
ARTICLE V. SERVICES.................................................................................................... 7
SECTION 5.1 UTILITIES AND SERVICES......................................................... 7
SECTION 5.2 OPERATION AND MAINTENANCE OF COMMON
FACILITIES...................................................................................... 8
SECTION 5.3 USE OF COMMON FACILITIES ................................................... 8
SECTION5.4 PARKING......................................................................................... 8
ARTICLE VI. MAINTENANCE OF THE PREMISES....................................................... 9
SECTION 6.1 TENANT'S MAINTENANCE AND REPAIR ................................. 9
SECTION 6.2 LANDLORD'S MAINTENANCE AND REPAIR ......................... 10
SECTION 6.3 ALTERATIONS BY LANDLORD ................................................ 10
SECTION 6.4 TENANT'S ALTERATIONS......................................................... 10
SECTION 6.5 MECHANIC'S LIENS.................................................................... 1
SECTION 6.6 ENTRY AND INSPECTION.......................................................... 12
SECTION 6.7 Intentionally omitted...................................................................... 12
ARTICLE VII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY ................. 12
SECTION 7.1 TAXES ON TENANT'S PROPERTY ............................................ 12
ARTICLE VIII. ASSIGNMENT AND SUBLETTING........................................................ 13
SECTION 8.1 PROHIBITION AND CONSENT .................................................. 13
SECTION 8.2 NO RELEASE OF TENANT........................................................ 14
SECTION 8.3 TRANSFER FEE............................................................................ 14
247l01 a920-000s
300222 02 a071 16:02 ���
Page
ARTICLE IX. INSURANCE AND INDEMNITY.............................................................
15
SECTION 9.1 TENANT'S INSURANCE..............................................................
15
SECTION 9.2 TENANT'S INDEMNITY..............................................................
16
ARTICLE X. DAMAGE OR DESTRUCTION................................................................
17
SECTION 10.1 RESTORATION.............................................................................
17
SECTION 10.2 LANDLORD'S NON -LIABILITY .................................................
18
SECTION 10.3 TENANT'S WAIVER..................................................................... 18
ARTICLE XI. EMINENT DOMAIN................................................................................. 18
ARTICLE XII. SUBORDINATION; ESTOPPEL CERTIFICATE ....................................
19
SECTION 12.1 SUBORDINATION........................................................................
19
SECTION 12.2 ESTOPPEL CERTIFICATE........................................................... 19
ARTICLE XIII. DEFAULTS AND REMEDIES..................................................................20
SECTION 13.1 TENANT'S DEFAULTS................................................................. 20
SECTION 13.2 LANDLORD'S REMEDIES...........................................................
20
SECTION 13.3 INTEREST ON TENANT'S OBLIGATIONS;
LATE
PAYMENTS.................................... ...............................................
22
SECTION 13.4 RIGHT OF LANDLORD TO PERFOIUM......................................
23
SECTION 13.5 DEFAULT BY LANDLORD.........................................................
23
SECTION 13.6 EXPENSES AND LEGAL FEES ................................................... 24
ARTICLE XIV. END OF TERM.......................................................................................... 24
SECTION 14.1 HOLDING OVER...........................................................................
24
SECTION 14.2 SURRENDER OF PREMISES; REMOVAL
OF
PROPERTY....................................................................................
24
SECTION 14.3 AFFIXED PROPERTY...................................................................
25
ARTICLEXV. NOTICES.................................................................................................... 25
ARTICLE XVI. RULES AND REGULATIONS.................................................................. 25
ARTICLE XVII. BROKER'S COMMISSION....................................................................... 26
ARTICLE XVIII. TRANSFER OF LANDLORD'S INTEREST .............................................
26
ARTICLE XIX. INTERPRETATION .......................... ............................................
. ..26
SECTION 19.1 GENDER AND NUMBER.............................................................
26
SECTION 19.2 HEADINGS...................................................................................
26
ARTICLE XX. EXECUTION AND RECORDING............................................................
26
SECTION 20.1 CORPORATE AUTHORITY.........................................................
26
SECTION 20.2 RECORDING..................................................................................
26
SECTION 20.3 AMENDMENTS.............................................................................
26
ARTICLE XXI. MISCELLANEOUS................................................................................... 27
SECTION 21.1 NONDISCLOSURE OF LEASE TERMS ......................................
27
SECTION 21.2 FURNISHING OF FINANCIAL STATEMENTS ......................... 27
SECTION 21.3 CHANGES REQUESTED BY LENDER ......................................
27
SECTION 2I.4 GOVERNMENTAL REQUIREMENTS........................................27
267;0149204IX15
300222.02 a07:1610211
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SECTION 21.5
COVENANTS AND CONDITIONS .......................
SECTION 21.6
WORK LETTER ......................................................
SECTION 21.7
JOINT AND SEVERAL LIABILITY .....................
SECTION 21.8
SUCCESSORS.........................................................
SECTION 21.9
TIME OF ESSENCE ................................................
SECTION 21.10
CONTROLLING LAW ...........................................
SECTION 21.11
SEVERABILITY.....................................................
SECTION 21.12
RELATIONSHIP OF PARTIES ..............................
SECTION 21.13
INABILITY TO PERFORM ....................................
SECTION 21.14
QUIET ENJOYMENT .............................................
SECTION 21.15
HAZARDOUS WASTE AND MATERIALS.........
SECTION 21.16
ENTIRE AGREEMENT .........................................
M 014820.0005
300222 02 a07.16r02 �111�
Page
...... 28
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....................... 28
....................... 28
....................... 28
....................... 28
....................... 28
....................... 29
....................... 29
....................... 29
....................... 30
OFFICE SPACE LEASE
BASIC LEASE PROVISIONS
The foregoing Basic Lease Provisions are presented here and represent the agreement of the
parties hereto, subject to further definition and elaboration in the Additional Lease Provisions and
elsewhere in this Lease. In the event of any conflict between any Basic Lease Provision and the
balance of this Lease, the latter shall control.
1. Tenant's Name: PAC PACK, INC., a California corporation dba Prospects One.
2. Premises, including Floor, Suite No. and Rentable Area:
Second Floor, Suite 250, 616 rentable square feet.
3. Commencement Date: September 1, 2002.
4. Lease Term: Two (2) years ending August 31, 2004.
5. Basic Annual Rent:
Lease Term Basic Annual Rent
September 1, 2002 — August 31, 2003 $16,632.00 payable at S1,386.00 per month
September 1, 2003 — August 31, 2004 $17,004.00 payable at S1,417.00 per month
6. Base Year Operating Expense: NIA
7. Space Plan Approval Date: NIA
8. Security Deposit: $2,834.00; payable on execution of Lease.
9. Prepaid Rent: $1,386.00; payable on execution of Lease.
10. Broker(s): None
11. Address for Payments and Notices:
To Landlord: Abdelmuti Development Company
101 Main Street, Suite 400
Huntington Beach, CA 92648
Attn: Mike Abdelmuti
Tel.: (714) 536-6567
To Tenant: Pac Pack, Inc. dba Prospects One
101 Main Street, Suite 250
Huntington Beach, CA 92648
Tel.: (714)
267:014920.ODDS A P A� VI?M2'�oL
300222 02 a07115/02 By:
DEPUTY CITY ATTORNEY
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12. Minimum Coverage for Comprehensive General Liability Policy: S2,000,000.00 combined
single limit.
13. Addendum: An Addendum consisting of None (if no Addendum is attached, insert the
word none) numbered paragraphs is attached to and forms a part of this Lease.
14. Rentable Area of Building. Approximately 47,000 rentable square feet.
15. Guarantor: SHIN YAMASAKI and ALTSA YAMASAKI (see attached Exhibit "D")
16. Lease Execution: In witness whereof the parties hereto have executed this Lease, consisting
of the foregoing provisions and of the Additional Lease Provisions and Exhibits which
follow, as of July 16, 2002.
THIS LEASE SHALL NOT BECOME EFFEC-
TIVE UNTIL EXECUTED BY LANDLORD
AND DELIVERED TO TENANT AND THE
SUBMISSION OF THIS FORM OF LEASE BY
LANDLORD, OR LANDLORD'S AGENT,
DOES NOT CONSTITUTE AN OFFER TO
LEASE. NO EMPLOYEE OR AGENT OF
LANDLORD OR ANY PERSON WITH WHOM
TENANT MAY HAVE NEGOTIATED THIS
LEASE HAS ANY AUTHORITY TO MODIFY
THE TERMS HEREOF OR TO MAKE. ANY
AGREEMENT-S, REPRESENTATIONS OR
PROMISES UNLESS THE SAME ARE
CONTAINED HEREIN OR ADDED HERETO
IN WRITING_
ABDELMUTI DEVELOPMENT COMPANY,
a California general partnership
I:
General Partner
"Landlord"
PAC PACK, INC., a California corporation
By:
Its:
By:
Its:
"Tenant"
MEMORANDUM OF ACTUAL COMMENCEMENT AND EXPIRATION DATES
Commencement Date: Expiration Date:
1A)�J��FRPI�,7(25NOI4820-0005 By; U�DiiW i O7
300222 02 z07:la:02 -2- DAP TY CITY ATTORNEY ti
ADDITIONAL LEASE PROVISIONS
ARTICLE 1. PREMISES
SECTION IA LEASED PREMISES. Landlord hereby )cases to Tenant and Tenant hereby
hires from Landlord, subject to all the terms and conditions hereinafter set forth, those certain
premises identified in Item 2 of the Basic Lease Provisions and shown in the drawing attached
hereto as Exhibit "A-1" (the "Premises"). The Premises shall also include the Tian -exclusive right to
use the balcony space contiguous to the office suite. The Premises are located on the designated
floor(s) of that certain office and retail structure constructed on the real property legally described in
Exhibit "A-2" attached hereto. Said office and retail structure is hereinafter called the "Building".
Said real property, the Building, and other related improvements and such additional buildings, and
other related improvements as from time to time may be constructed upon said real property are
hereinafter referred to as the "Project".
SECTION 1.2 ACCEPTANCE OF PREMISES. Tenant acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty with respect to the
Premises, the Building and/or the Project, or the suitability or fitness thereof for the conduct of
Tenant's business or for any other purpose, except as set forth in this Lease. The taking of
possession or use of the Premises by Tenant for any purpose other than construction shall
conclusively establish that the Premises, the Building and the Project were at such time in
satisfactory condition and in conformity with the provisions of this Lease in all respects, except as
to any items as to which Tenant shall give Landlord written notice in reasonable detail, which items
shall be limited to any items required to be accomplished by Landlord pursuant to that certain Work
Letter, if any, being executed and delivered by Landlord and Tenant concurrently with this Lease
and attached hereto as Exhibit "B" (the "Work Letter").. Such written notice shall be given within
thirty (30) days after the term of this Lease commences as provided in Article 11 below. Failure to
submit such written notice in the time provided shall constitute a waiver thereof. Landlord shall
promptly take such action as may be reasonably required to remedy any actual defects and/or to
complete any work of which it is notified as provided above.
SECTION 1.3 USE RESERVATIONS. Tenant acknowledges that the exterior demising
walls of the Premises and the area between the finished ceiling of the Premises and the slab of the
Building floor or roof thereabove and between the finished floor of the Premises and the foundation
or finished ceiling of the portion of the Building therebelow have not been leased to Tenant.
Landlord reserves the use thereof, together with the right to locate or relocate (both vertically and
horizontally), install, maintain, use, repair and replace pipes, utility lines, ducts, conduits, flues,
refrigerant lines, drains, sprinkler mains and valves, access panels, wires and appurtenant meters or
equipment, and structural elements leading through, under or above the Premises in locations which
will not materially interfere with Tenant's use of the Premises.
SECTION 1.4 BUILDING NAME AND ADDRESS. Landlord may adopt any name it
may select for the Building and/or the Project, and Landlord reserves the right to change the name
and/or address of the Building and/or the Project at any time. Tenant shall not use the name of the
Building, the Project or such development for any purpose other than as the address of the business
to be conducted by Tenant in the Premises, and Tenant shall not acquire any property right in or to
any name which contains said word combination as a part thereof.
257f0141M2 iMS
30022 Z 07 a07i 1 fr07 -3 -
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ARTICLE II. TERM
SECTION 2.1 GENERAL. The term of this Lease shall be for the period shown in Item 4
of the Basic Lease Provisions, commencing on the commencement date as shown in Item 3 of the
Basic Lease Provisions (the "Commencement Date"). If the Commencement Date is other than the
date as shown in Item 3 of the Basic Lease Provisions, within five (5) days following the
determination of the Commencement Date, the parties shall execute a supplement in the form
attached hereto as Exhibit "A-3", stating the Commencement Date and the expiration date of the
term of this Lease. This Lease is conditioned upon approval by the Redevelopment Agency of the
City of Huntington Beach (the "Agency"). Notwithstanding that Tenant has taken possession or is
in occupancy of Premises, should the Agency not approve this Lease, the Lease shall automatically
become null and void.
SECTION 2.2 TENDER OF POSSESSION BY LANDLORD. If Landlord, for any reason
whatsoever, cannot deliver possession of the Premises to Tenant on or about the Commencement
Date, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or
damage resulting therefrom.
SECTION 2.3 Intentionally Omitted.
ARTICLE III. RENT AND SECURITY DEPOSIT
SECTION 3.1 BASIC ANNUAL RENT.
(a) Tenant shall pay the basic annual rent for the Premises in the total amount,
but payable in the equal monthly installments, shown in Item 5 of the Basic Lease Provisions, due
and payable on the first day of each month in advance, commencing on the Commencement Date
and continuing throughout the term of this Lease, except that if the Commencement Date occurs on
a day other than the first day of a month, then the rent payable hereunder shall be prorated on a
daily basis and the rent for the partial month following the Commencement Date shall be payable
on the first day of the term of this Lease. No demand, notice or invoice shall be required. Tenant
shall receive a credit against the first installment or installments of minimum rental payable under
this Section 3.1 in an amount equal to the prepaid rent specified in Item 9 of the Basic Lease
Provisions. All rents and other sums payable by Tenant to Landlord under this Lease shall be paid
to Landlord, without offset or deduction, in lawful money of the United States of America at the
address for Landlord shown in Item 11 of the Basic Lease Provisions, or to such other person or at
such other place as Landlord may from time to time designate in writing.
(b) As used herein "Lease Year" shall be a period of twelve (12) consecutive
months commencing on the first full calendar month during the lease term; provided that the first
Lease Year shall also include any partial calendar month following the Commencement Date.
(c) Intentionally Omitted.
(d) Intentionally Omitted.
(e) In the event that at any time during the term of this Lease, any governmental
law, rule or regulation prohibits or postpones in whole or in part any increase in the rent or in the
26 101 ab204M5 -4_
300222-u2 avWIN02
payment of other sums payable by Tenant hereunder to be made pursuant to this Lease, then, and in
either of such events, such increase or payment shall be made to the maximum extent permissible
by law at the time provided in this Lease, and/or at any time or times thereafter such increase or
payment, or any portion thereof, may lawfully be made and any such increase in rent, or any portion
thereof, or other sums payable hereunder, or portions thereof, the payment of which has been so
prohibited or postponed, shall thereafter become due and payable to the maximum extent and at the
earliest time or times permitted by law.
SECTION 3.2 SECURITY DEPOSIT. Tenant has deposited with Landlord the sum stated
in Item 8 of the Basic Lease Provisions, to be held by Landlord as security for the full and faithful
performance of every Lease provision to be performed by Tenant. If Tenant defaults with respect to
any provision of this Lease, including, but not limited to, the provisions relating to the payment of
rent, Landlord may (but shall not be required to) use, apply or retain all or any part of this security
deposit for the payment of any rent or other sum in default, or for the payment of any other amount
which Landlord may spend or become obligated to spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by reason of
Tenant's default to the full extent permitted by law. If any portion of said deposit is so used or
applied, Tenant shall, within five (5) days after written demand therefor, deposit cash with Landlord
in an amount sufficient to restore the security deposit to its original amount. Landlord shall not be
required to keep this security deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit. If Tenant shall perform every provision of this Lease to be
performed by it, the security deposit or any balance thereof shall be returned to Tenant (or, at
Landlord's option, to the last assignee of Tenant's interest hereunder) within thirty (30) days after
the expiration of the Lease term, provided that Landlord may retain the security deposit until such
time as any amount due from Tenant in accordance with any provision hereof has been determined
and paid in full.
SECTION 3.3 OPERATING EXPENSES. Tenant is not obligated to pay any additional
sums with respect to common area maintenance expense, building maintenance expense or any
other expense except as may be specifically set forth in this Lease.
ARTICLE IV. USES
SECTION 4.1 USE. Tenant shall use and occupy the Premises for general office purposes
only and for no other use or purpose without the prior written consent of Landlord, which consent
Landlord may withhold in its sole and absolute discretion. Tenant shall not use or occupy the
Premises in violation or in conflict with any "Governmental Requirement" (defined below) but
shall, at Tenant's expense, promptly comply with all present and future laws, ordinances, statutes,
including without limitation the Americans with Disabilities Act, orders, rules, restrictions,
regulations and requirements of all governmental authorities having jurisdiction over the Premises
whether or not the same is substantial, foreseen or unforeseen, ordinary or extraordinary, or whether
the same shall necessitate Tenant making structural changes or improvements to the Premises or
interfere with the use and enjoyment of the Premises (herein collectively, "Governmental
Requirements"). Tenant shall not do or permit anything to be done in or about the Premises which
will in any way obstruct or interfere with the rights of other tenants or occupants of the Project or of
property adjacent to the Project, or injure or annoy them, or use or allow the Premises to be used for
any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
26MI020-0oos
300222.02 a07I16f02 -5-
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permit any nuisance or commit any waste in, on or about the Premises or the Project. Without
limiting the generality of the foregoing, Tenant shall not (1) obstruct or store anything in the
common areas (including service or exit corridors), (ii) place a load upon any floor of the Premises
which exceeds the floor load per square foot which such floor was designed to carry, or (iii) permit
any objectionable sound or odors to carry outside the Premises. In particular, Tenant agrees that
business machines and mechanical equipment used by Tenant which cause vibration or noise that
may be transmitted to any other portion of the Building, to such a degree as to be reasonably
objectionable to Landlord or to any occupant, shall be placed and maintained by Tenant at its
expense in setting of cork, rubber or spring -type vibration isolators sufficient to eliminate such
vibrations or noise. Tenant shall not do or permit to be done anything which will invalidate or
increase the cost of any insurance policy(ies) covering the Building, the Premises, the Project and/or
property located therein and shall comply with all applicable insurance underwriters rules, orders,
regulations and requirements of the Pacific Fire Rating Bureau or other applicable organization
performing a similar function. Tenant shall promptly upon demand reimburse Landlord for any
additional premium charged for such policy(ies) by reason of Tenant's failure to comply with the
provisions of this Section, but such reimbursement shall not be construed as curing Tenant's default
for failing to comply with the provisions of this Section. Tenant shall not, under any circumstances,
allow alcoholic beverages to be served or consumed within any portion of the Premises.
SECTION 4.2 PROHIBITION AGAINST SOLICITATION AND OTHER ACTIVITIES
WITHOUT THE PERMISSION OF LANDLORD. Tenant hereby delegates to Landlord full
power, authority and control to regulate, in accordance with the rules and regulations attached
hereto as Exhibit "C" and/or from time to time adopted pursuant to Article XVI and/or to prohibit
the entrance to the Premises, the Building and/or the Project of all vendors, suppliers, surveyors,
petitioners and others deemed objectionable by Landlord. In the event said persons arc guests or
invitees of Tenant, Tenant shall notify Landlord of this fact. No such person shall be permitted to
enter upon the Project, the Building and/or the Premises unless and until such person shall have
executed Landlord's standard entry permit and Landlord shall have determined, in its sole and
absolute discretion and judgment, that such person's activities will not disturb other tenants, their
customers or invitees or distract from the use of the Building and/or the Premises for their intended
purposes. Tenant agrees that Landlord may prohibit and exclude, in whole or in part, vendors of
sandwiches and other food items from the Building, as Landlord may elect, in Landlord's sole and
absolute discretion.
SECTION 4.3 EXCLUSIVE CONTROL OVER COMMON AREA. It is expressly agreed
and understood that control over all uses of the "Common Facilities" (defined in Section 5.2 below)
shall reside with and be solely exercisable by Landlord in its sole and absolute discretion. Said
areas shall not be available for use by Tenant, except as herein expressly provided, nor by vendors,
surveyors, petitioners and others without the express written consent of Landlord, which Landlord
may withhold in its sole and absolute discretion.
SECTION 4.4 SIGNS. Tenant may not affix a sign to the exterior surface of the suite front
or any other part of the exterior or interior surface of the Building. Except with the prior written
approval of Landlord, which approval may be withheld in Landlord's sole discretion, Tenant shall
not place or allow to be placed, erected or maintained any sign, decal, placard, name, insignia, trade
name, decoration, flashing, moving or hanging lights, lettering, or any other descriptive words or
advertising matter of any kind or description (herein collectively, "sign" or "signs") on any exterior
267;014820-0005
300222.02 s07.'16:02 -6-
door, wall, window, surface or roof of the Premises or of the Building or on the glass of any
window or door of the Building, or in any deck or balcony area included within the Premises or on
any sidewalk or other location outside the Building, or within any entrance to the Premises. If
Tenant places or causes to be placed or maintained any of the foregoing without Landlord's prior
approval, the same may be removed by Landlord at Tenant's expense without notice and without
such removal constituting a breach of this Lease or entitling Tenant to claim damages on account
thereof: If Tenant places or causes to be placed or maintained any of the foregoing with Landlord's
prior approval, Tenant shall maintain the same in good condition and repair at Tenant's sole cost and
expense.
ARTICLE V. SERVICES
SECTION 5.1 UTILITIES AND SERVICES. Subject to the provisions set forth below,
Landlord shall furnish to the Premises electricity and Tenant shall pay for replacement of all
fluorescent fixtures and bulbs as required.
Landlord shall furnish water for drinking, cleaning and lavatory purposes only, but if Tenant
requires, uses or consumes water for any purpose in addition to ordinary drinking, cleaning and
lavatory purposes, of which fact Tenant constitutes Landlord to be the sole judge, Landlord may
install a water meter and thereby measure Tenant's water consumption for all purposes. Tenant
shall pay Landlord for the cost of the meter and the cost of the installation thereof, and for
consumption throughout the duration of Tenant's occupancy. Tenant shall keep said meter and
installed equipment in good working order and repair at Tenant's own cost and expense, in default
of which Landlord may cause such meter to be replaced, repaired and collect the cost thereof from
Tenant.
To the extent any utility service to the Premises is separately metered or billed to Tenant,
Tenant shall pay all charges for such utility service to the Premises. If any such charges are not
paid when due, Landlord may pay the same, and any amount so paid by Landlord shall thereupon
become due to Landlord from Tenant as additional rent. If any utility service is not separately
metered, Landlord may elect either to (a) reasonably allocate the cost for such service among the
tenants covered by such meter, which amount shall be paid by Tenant upon demand from Landlord
as additional rent, or (b) require Tenant and the other tenants covered by such meter to contract
directly with the utility service and reasonably allocate the utility charges amongst themselves and
in such case Landlord shall have no responsibility or liability in connection therewith. If Landlord
shall elect to furnish any utility services to the Premises, Tenant shall purchase its requirements
thereof from Landlord so long as the rates charged therefor by Landlord do not exceed those which
Tenant would be required to pay if such services were furnished it directly by a public utility.
Landlord shall not be liable for any failure to furnish any of the services or utilities
described in this Section 5.1 when such failure is caused by accidents, breakage, repairs, strikes,
lockouts, other labor troubles or disputes, governmental water, energy or other conservation
programs or any other governmental requirements, action or inaction, moratorium or other cause
beyond Landlord's reasonable control. Landlord may take into consideration the availability of
energy resources and prudent energy conservation practices, including participation in any energy
conservation association or other arrangements for voluntary cut -back, load shedding and the like.
No failure to furnish any of such service or utilities shall entitle Tenant to any damages, relieve
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Tenant of the obligation to pay the full rent reserved herein or constitute or be construed as a
constructive or other eviction of Tenant. Tenant shall comply with all rules and regulations which
Landlord may reasonably establish for the proper functioning and protection of the air conditioning,
heating, elevator, plumbing and electrical systems. Landlord shall at all reasonable times have free
access to all mechanical installations of Landlord, including, but not limited to, the air conditioning
equipment and vents, fans, ventilating and machine rooms and electrical closets. If there is any
failure, stoppage or interruption in said utilities and/or services, Landlord shall use reasonable
diligence to correct the same, repairs and/or corrections that are the responsibility of a public or
private utility company, excepted.
SECTION 5.2 OPERATION AND MAINTENANCE OF COMMON FACILITIES.
Landlord shall operate and maintain during the term of this Lease all common facilities within the
Building and the Project. The term "Common Facilities" shall mean all areas within the Project
which are not held, or designated by Landlord to be held, for exclusive use by persons entitled to
occupy space in the Project. The Common Facilities shall include, without limiting the generality
of the foregoing, driveways, truckways, delivery passages, Ioading docks, sidewalks, ramps,
landscaped and planted areas, exterior stairways and balconies, hallways and interior stairwells not
located within the premises of any tenant, common entrances and lobbies, mezzanines, elevators,
bus stops, retaining walls, restrooms not located within the premises of any tenant, lighting fixtures,
Building and/or Project identification signs, irrigation systems and controllers, drains and sewers.
SECTION 5.3 USE OF COMMON FACILITIES. The use and occupancy by Tenant of
the Premises shall include the use of the Common Facilities in common with Landlord and with all
others for whose convenience and use the Common Facilities have been or may hereafter be
provided by Landlord, subject, however, to rules and regulations for the use thereof as prescribed
from time to time by Landlord pursuant to Article XVI below. Landlord shall operate, manage,
equip, light, repair, clean and maintain the Common Facilities in such manner as Landlord may in
its sole discretion determine to be appropriate. Landlord shall at all times during the term of this
Lease have the sole and exclusive control of all Common Facilities, and may at any time and from
time to time during the term hereof restrain any use or occupancy thereof, except as authorized by
such rules and regulations, as may be changed from time to time. Tenant shall keep said Common
Facilities free and clear of any obstructions related to Tenant's operations. If, in the opinion of
Landlord, unauthorized persons are using any of said Common Facilities by reason of the presence
of Tenant in the Building, Tenant, upon demand of Landlord, shall restrain such unauthorized use
by appropriate proceedings. Nothing herein shall affect the right of Landlord at any time to remove
any such unauthorized persons or obstructions. Landlord may temporarily close any Common
Facility for repairs or alterations as provided in Section 6.2 below, to prevent a dedication thereof or
the accrual of prescriptive rights therein, or for any other reason deemed sufficient by Landlord.
SECTION 5.4 PARKING.
(a) Tenant acknowledges that no parking areas are provided at the Project and
that Tenant may use the parking structure provided by the City of Huntington Beach located near
the Project. Tenant acknowledges that the availability of parking and the rates charged for parking
are subject to change and are not within Landlord's control. Not by way of limitation of the
foregoing, Landlord hereby advises Tenant that on June 7, 1999, the Agency and the City of
Huntington Beach (the "City") approved and the Agency entered into a Disposition and
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Development Agreement (the "DDA") with CIM Group, LLC ("CIM"), which provides for the
development of a large mixed -use retail, office, and hotel project within most of the remaining
portions of the two -block area bounded by Pacific Coast Highway, Main Street, Walnut Avenue,
and Sixth Street excluding the Building. According to the information available to Landlord, the
proposed CIM project has not received all of the required City discretionary development approvals
and the exact location, size, configuration, and mix of uses has not been finalized. As currently
planned, however, the CIM project would eliminate virtually all of the surface parking that is
currently available to the public on the proposed CIM project site. The current plan calls for the
development of a subterranean public parking structure to serve both C1M's proposed uses and
other existing and future public uses, but the amount of subterranean parking to be provided has not
been finally determined and may be significantly less than the amount needed to accommodate
CIM's own needs, without taking into account existing uses in the area. Landlord cannot predict if
or when the CIM project will commence construction, but Landlord is aware that the City/Agency
has made statements indicating that construction may commence as early as 2002. If construction
does proceed, in all likelihood the existing surface parking will be eliminated for a substantial
period of time before the subterranean parking is completed and available. Landlord makes no
warranties or representations with regard to the CIM project. Tenant may obtain further
information regarding the CIM project from David Biggs, the City/Agency's Economic
Development Director, at (949) 536-5909, or from other appropriate City/Agency officials and
employees.
(b) In the event that any parking surcharge or regulatory fee, however
designated, should be imposed upon or levied or assessed against the Project, or any portion thereof,
by any governmental agency or authority pursuant to the "Clean Air Act", or any plan implemented
pursuant to such Act or any enactment amendatory or in substitution thereof, or pursuant to any
other governmental act or decree, Landlord may recover such fees as additional rent. The foregoing
parking provisions are subject to any governmental regulations which limit parking or otherwise
seek to encourage the use of carpools, public transit or other alternative transportation forms.
ARTICLE VL MAINTENANCE OF THE PREMISES
SECTION 6.1 TENANT'S MAINTENANCE AND REPAIR.
(a) Tenant at its sole cost and expense shall make all repairs necessary to keep
the Premises in good order and repair and in a safe, clean, sanitary, orderly and attractive condition.
All repairs shall be at least equal in quality to the original work, shall be made only by a licensed,
bonded contractor approved in advance by Landlord and shall be made only at such time or times as
shall be approved by Landlord. Landlord may impose reasonable restrictions and requirements with
respect to such repairs including, without limitation, those applicable to Tenant's alterations as set
forth in Section 6.4.
(b) Tenant, at its sole cost and expense, shall install and maintain fire
extinguishers within the Premises and other fire protective devices as may be required from time to
time by Landlord, by any agency having jurisdiction and/or by the insurance underwriters insuring
the Premises.
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SECTION 6.2 LANDLORD'S MAINTENANCE AND REPAIR.
(a) Landlord shall keep and maintain in good repair the roof (including the
structural integrity thereof), foundations, footings, the exterior surfaces of the exterior walls , the
HVAC system for the Premises and any utility facilities, and the electrical and mechanical systems
in the Building, reasonable wear and tear excepted, except to the extent such repair is Tenant's
responsibility under Section 6.1 above or the responsibility of a public or private utility company
and except that Tenant at its expense shall make any such repairs relating to the act or negligence of
Tenant, its agents, employees, invitees, licensees or contractors. Landlord shall not be liable for any
failure to make any repairs or to perform any maintenance unless such failure shall persist for an
unreasonable time after written notice of the need for such repairs or maintenance is given to
Landlord by Tenant.
(b) Except as provided in Section 10.1 and Article XI below, there shall be no
abatement of rent and no liability of Landlord by reason of any injury to or interference with
Tenant's business arising from the making of any repairs, alterations or improvements in or to any
portion of the Project or the Building, including the Premises, or in or to the fixtures, appurtenances
and equipment therein; provided, however, that in making such repairs, alterations or
improvements, Landlord shall interfere as little as reasonably practicable with the conduct of
Tenant's business in the Premises.
SECTION 6.3 ALTERATIONS BY LANDLORD.
(a) Landlord reserves the right at any time, and from time to time, to make
changes in or to the Building and the fixtures and equipment thereof, to make alterations or
additions to any building within the Project, to construct other buildings (including free standing
buildings) and improvements within the Project, to enlarge or reduce the Project and to make
alterations therein or additions thereto, or to any part thereof, to build additional stories on any
building or buildings within the Project, to construct decks, subterranean or elevated parking
facilities, and to sell or lease any part of the land comprising the Project for the construction
thereon of buildings, which may or may not be part of the Project. Landlord reserves the right at
any time to change the size, configuration, shape, number and extent of the Common Facilities, or
any of them, all as Landlord may deem necessary or desirable in its sole discretion. No such change
described in this Section 6.3(a) shall entitle Tenant to any abatement of rent or other claim against
Landlord; provided, however, such changes or alterations shall not deprive Tenant of reasonable
access to or use of the Premises.
(b) As a material inducement to Landlord's entering into this Lease, Tenant
expressly waives and releases any rights it may have whether granted by statute or otherwise, to
make repairs at Landlord's expense, including, but not limited to, its rights as contained in Sections
1941, 1941.1 and 1942 of the California Civil Code.
SECTION 6.4 TENANT'S ALTERATIONS. Tenant shall not make alterations, additions
or improvements to the Premises nor any repairs, replacements or restorations to the Premises in
excess of TWO THOUSAND FIVE HUNDRED DOLLARS (S2,500.00) without the prior written
consent of Landlord. Landlord may impose, as a condition to such consent, such requirements as
Landlord, in its sole discretion, may deem reasonable or desirable, including, but not limited to, a
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requirement that all work be covered by a surety bond in favor of Landlord, guaranteeing the
completion of such work free and clear of all subcontractors', mechanics' and materialmen's liens
(which bond shall be satisfactory to Landlord) and requirements as to the manner, time and
contractor or contractors as to or by which such work shall be done. Notwithstanding the foregoing,
no improvements may be made that would diminish the value of the Premises and, in addition, no
improvements may be made to any mechanical or utility system, the exterior walls or the roof of the
Premises, nor may any improvements of a structural nature be made without Landlord's approval,
which approval may be withheld in Landlord's sole and absolute discretion. In no event shall
Tenant make or cause to be made any penetration through the roof or the floor of the Premises
without the prior written approval of Landlord, which approval may be withheld in Landlord's sole
and absolute discretion. Any requirements of the Work Letter applicable to any initial construction
work performed by or under Tenant shall also be applicable to any such alterations, additions and/or
improvements. All alterations made by Tenant shall be in accordance with all Governmental
Requirements and to the extent Tenant's alterations trigger alterations or other modifications within
the Building or Project, such alterations or other modifications shall be performed by Landlord at
the expense of Tenant. Any request for Landlord's consent to such work shall be made in writing
and shall contain three (3) sets of architectural plans and specifications (with square footages)
describing such work in detail reasonably satisfactory to Landlord. No such plans and
specifications or any material change thereto shall be submitted for approval to any federal, state,
county or local government or other governmental agency or association prior to Landlord's review
and approval of same. Failure of Landlord to respond to such request within thirty (30) days shall
be deemed a denial of such request. Plans and specifications and governmental applications shall
become the property of Landlord upon the termination or expiration of this Lease and shall be
turned over to Landlord by Tenant upon Landlord's request therefor. Unless Landlord otherwise
agrees in writing, all such alterations, additions or improvements affixed or built into the Premises
(but excluding moveable trade fixtures and furniture) shall become the property of Landlord as
provided in Section 14.3 below, and shall be surrendered with the Premises, as a part thereof, at the
end of the Lease term, except that Landlord may, by written notice to Tenant given at least thirty
(30) days prior to the end of the Lease term, require Tenant to remove all or any portion of any
alterations, decorations, additions, improvements and the like installed by Tenant, and to repair, or
at Landlord's option, to pay all costs relating to any damage to the Premises arising from such
removal.
SECTION 6.5 MECHANIC'S LIENS. Tenant shall keep the Premises free from any liens
arising out of any work performed, materials furnished, or obligations incurred or alleged to have
been incurred by, for or under Tenant. In the event that Tenant shall not, within twenty (20) days
following the imposition of any such lien (but in any event before an action is filed to foreclose
such lien), cause the same to be released of record by payment or posting of a proper bond,
Landlord shall have, in addition to all other remedies provided herein and by law, the right (but not
the obligation) to cause the same to be released by such means as it shall deem proper, including
payment of or defense against the claim giving rise to such lien. All sums paid by Landlord and all
expenses incurred by it in connection therewith shall create automatically an obligation of Tenant to
pay an equivalent amount, together with interest thereon at the rate provided in Section 13.3 below,
from the date paid by Landlord as additional rent, which additional rent shall be payable by Tenant
on Landlord's demand. Tenant shall give Landlord no less than twenty (20) days' prior notice in
writing before commencing the construction of any building, structure or other improvement on the
Premises or of any substantial repairs, alterations, additions, replacements or restorations in and
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about the Premises so that Landlord may post and maintain such notices of non -responsibility or
other notices on the Premises as Landlord deems necessary for protection from such liens.
SECTION 6.6 ENTRY AND INSPECTION. Landlord shall at aII times have the right to
enter the Premises to inspect the same, to post notices of non -responsibility, to alter, improve or
repair the Premises or any other portion of the Building, as otherwise permitted hereunder, all
without being deemed to have evicted Tenant and without abatement of rent and may for that
purpose erect scaffolding and other necessary structures and store materials, supplies and tools
where reasonably required by the character of the work to be performed, provided that the business
of Tenant shall be interfered with as little as is reasonably practicable. If during the last month of
the term hereof, Tenant shall have removed substantially all of Tenant's property and personnel
from the Premises, Landlord may enter the Premises and repair, alter and redecorate the same,
without abatement of rent and without liability to Tenant, and such acts shall have no effect on this
Lease. Tenant hereby waives any claim for damages or abatement of rent for any injury,
inconvenience to or interference with Tenant's business, loss of occupancy or quiet enjoyment of the
Premises, and any other loss occasioned thereby; provided, however, this provision shall not excuse
Landlord for its own gross negligence or willful misconduct. As used in this Lease, the term "gross
negligence" shall mean the failure to perform a manifest duty in reckless disregard of the
consequences as affecting the life or property of another. Landlord shall have the right to use any
and all means which Landlord may deem proper to open said doors in an emergency in order to
obtain entry to the Premises, and any entry to the Premises obtained by Landlord by any of said
means shall not under any circumstances be construed or deemed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or any eviction of Tenant from the Premises or any portion
thereof. During the last one hundred eighty (180) days of the lease term, or when an uncured
default on the part of Tenant exists hereunder, Landlord may, at all reasonable times, enter the
Premises for the purpose of displaying the Premises to prospective tenants.
SECTION 6.7 Intentionally omitted.
ARTICLE VII. TAXES AND
ASSESSMENTS ON TENANT'S PROPERTY
SECTION 7.1 TAXES ON TENANT'S PROPERTY.
(a) Tenant shall be liable for and shall pay at least forty (40) days before
delinquency, all taxes and assessments levied against all fixtures, furnishings, equipment and other
personal property of Tenant located in or about the Premises, and when possible, Tenant shall cause
said fixtures, furnishings, equipment and other personal property to be assessed and billed
separately from the real property of which the Premises form a part. If any such taxes on Tenant's
personal property or trade fixtures are levied against Landlord or Landlord's property and if
Landlord pays the same (which Landlord shall have the right to do regardless of the validity of such
levy), or if the assessed value of Landlord's property is increased by the inclusion therein of a value
placed upon such personal property or trade fixtures of Tenant and if Landlord pays the taxes based
upon such increased assessment, Tenant shall pay to Landlord the taxes so levied against Landlord
or the proportion of such taxes resulting from such increase in the assessment.
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(b) If the tenant improvements in the Premises, whether installed and/or paid for
by Landlord or Tenant and whether or not affixed to the real property so as to become a part
thereof, are assessed for real property tax purposes at a valuation higher than the valuation at which
tenant improvements conforming to Landlord's building standards in other space in the Building are
assessed, then the real property taxes and assessments levied against Landlord or Landlord's
property by reason of such excess assessed valuation may, at Landlord's option, be deemed to be
taxes levied against personal property of Tenant and shall, under such circumstances, be governed
by the Provisions of Section 7.1(a) above.
(c) Upon request, Tenant agrees to provide receipts, cancelled checks or other
documents reasonably requested by Landlord to confirm Tenant's payment of any taxes and/or
assessments payable by Tenant directly to the taxing authority under this Lease.
ARTICLE VIII. ASSIGNMENT AND SUBLETTING
SECTION 8.1 PROHIBITION AND CONSENT.
(a) Tenant shall not, either voluntarily or involuntarily, by operation of law or
otherwise, assign, sublet, sell, encumber, pledge or otherwise transfer all or any part of the Premises
or Tenant's Icasehold estate hereunder, or permit the Premises to be occupied by anyone other than
Tenant or Tenant's employees, without Landlord's prior written consent in each instance. Any
assignment or subletting which is not in compliance with this Article VIII shall be void and, at the
option of Landlord, shall constitute a default by Tenant under this Lease and entitle Landlord to
terminate this Lease. Consent by Landlord to one or more assignments of this Lease or to one or
more sublettings of the Premises shall not operate to waive Landlord's rights under this Article VIII.
The voluntary or involuntary surrender of this Lease by Tenant or a mutual cancellation hereof shall
not work a merger, and shall, at the option of Landlord, terminate all or any existing subleases or
subtenancies or shall operate as an assignment to Landlord of such subleases or subtenancies. If
Tenant is a corporation which, under the then current guidelines published by the Commissioner of
Corporations of the State of California, is not deemed a public corporation, or is an unincorporated
association or partnership, the transfer, assignment or hypothecation of any stock or interest in such
corporation, association or partnership in the aggregate in excess of twenty-five percent (25%) or
such lesser interest as may constitute a controlling interest, shall be deemed an assignment within
the meaning and provisions of this Section.
(b) If Tenant desires at any time to assign this Lease or to sublet the Premises or
any portion thereof, it shall first notify Landlord of its desire to do so and shall submit in writing to
Landlord (1) the name of the proposed subtenant or assignee; (ii) the nature of the proposed
subtenant's or assignee's business to be carried on in the Premises; (iii) the terms and provisions of
the proposed sublease or assignment; (iv) such financial information as Landlord may request
concerning the proposed subtenant or assignee, and (v) such information as Landlord may request
regarding the business experience concerning the proposed subtenant or assignee during the
preceding five (5) years.
(c) At any time within thirty (30) days after Landlord's receipt of the information
specified in subparagraph (b) above, Landlord may, by written notice to Tenant, elect to (i) consent
to the subletting or assignment upon the terms and to the subtenant or assignee proposed, subject to
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0
any conditions deemed appropriate by Landlord, as determined in its reasonable discretion,
including, but not limited to, the condition that Tenant pay to Landlord upon receipt any and all
amounts (a) by which the basic rent and additional rent paid by such subtenant exceeds the sum of
the rent and additional rent to be paid by Tenant to Landlord for such space under this Lease, or (b)
of profit received by Tenant from such assignee; (ii) refuse to give its consent, (iii) sublease the
Premises or the portion thereof so proposed to be subleased by Tenant or take an assignment of
Tenant's leasehold estate hereunder or such part thereof as shall be specified in said notice upon the
same terms (excluding terms relating to purchase of personal property, the use of Tenant's name or
the continuation of Tenant's business) as those offered to the proposed subtenant or assignee, as the
case may be; or (iv) terminate this Lease as to the portion (including all) of the Premises so
proposed to be subleased or assigned with a proportionate abatement in the rent payable hereunder,
effective as of the date of the proposed sublease or assignment. If the Lease is partially terminated
as to the portion of the Premises proposed to be assigned or subleased, a proportionate abatement
will be made in the rent payable hereunder effective upon the last to occur of. (a) the date Tenant
installs a partition wall satisfying Landlord's reasonable requirements, separating such portion of the
Premises from the balance of the Premises, which partition wall shall be completed by Tenant at
Tenant's sole cost and expense within sixty (60) days of such election by Landlord, or (b) the
effective date of the partial termination of this Lease. If Landlord consents to such assignment or
subletting, Tenant may within ninety (90) days after the date of Landlord's consent, enter into a
valid assignment or sublease of the Premises or portion thereof upon the terms and conditions
described in the information required to be furnished by Tenant to Landlord pursuant to Section
8.1(b) above, or upon other terms not more favorable to Tenant; provided, however, that any
material change in such terms shall be subject to Landlord's consent as provided in this Section 8.1.
Failure of Landlord to exercise any option set forth in clauses (i) through (v) above within the thirty
(30) day period for Landlord's notice shall be deemed refusal of Landlord to consent to the proposed
subletting or assignment.
SECTION 8.2 NO RELEASE OF TENANT. No subletting or assignment, even with the
consent of Landlord, shall relieve Tenant of its obligation to pay the rent and to perform all of the
other obligations to be performed by Tenant hereunder. Each assignee or transferee, other than
Landlord, shall assume, as provided above, all obligations of Tenant under this Lease and shall be
and remain liable jointly and severally with Tenant for the payment of the rent, and for the due
performance of all the terms, covenants, conditions and agreements herein contained on Tenant's
part to be performed for the term of this Lease. No assignment shall be binding on Landlord unless
such assignee or Tenant shall deliver to Landlord a counterpart of such assignment which contains a
covenant of assumption by the assignee satisfactory in substance and form to Landlord, consistent
with the requirements of this Article VIII, but the failure or refusal of the assignee to execute such
instrument of assumption shall not release or discharge the assignee from its liability as set forth
above. The acceptance of any payment due hereunder by Landlord from any other person shall not
be deemed to be a waiver by Landlord of any provision of this Lease or to be a consent to any
assignment or subletting.
SECTION 8.3 TRANSFER FEE. If Landlord consents to an assignment, sublease or any
other transfer by Tenant of all or a portion of Tenant's interest under this Lease, Tenant shall pay, or
cause to be paid, in each case a transfer fee of SEVEN HUNDRED FIFTY DOLLARS ($750.00) in
connection with the processing, documentation and other administrative costs thereof, along with
Landlord's reasonable attorneys' fees incurred in connection therewith.
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ARTICLE IX. INSURANCE AND INDEMNITY
SECTION 9.1 TENANT'S INSURANCE.
(a) Tenant hereby agrees to maintain in full force and effect at all times during
the term of this Lease, at its own expense, for the protection of Tenant, Landlord and such other
parties as Landlord may from time to time designate, as their interests may appear, policies of
insurance issued by a carrier rated as A+10, or better, in the latest edition of Best's Insurance Guide
(or a comparable rating in a comparable guide selected by Landlord, if Best's Insurance Guide is no
longer published) which afford the following coverages:
(1) Worker's Compensation (including broad form all states): Statutory
(ii) Comprehensive General Liability Insurance, including Blanket
Contractual Liability, Broad Form Property Damage, Personal Injury, Completed
Operations, Products Liability, Fire, Legal Liability: Not less than amount stated in
Item 12 of Basic Lease Provisions.
(iii) So-called "All -Risk Insurance" including without limitation Fire and
Extended Coverage, Vandalism and Malicious Mischief, and Sprinkler Leakage
Insurance, in an amount sufficient to cover the full cost of replacement of all
improvements and betterments to the Premises made by or on behalf of Tenant
(except to the extent installed by Landlord, at Landlord's expense, pursuant to the
Work Letter) and all of Tenant's fixtures and other personal property.
(b) Tenant shall deliver to Landlord and to such other named insureds designated
by Landlord at least thirty (30) days prior to the time such insurance is first required to be carried by
Tenant, and thereafter at least twenty (20) days prior to expiration of such policy, certificates of
insurance evidencing the above coverage with limits not less than those specified above. Such
certificates, with the exception of Worker's Compensation, shall name Landlord and such other
parties as Landlord may designate as additional insureds and shall expressly provide that the interest
of same therein shall not be affected by any breach by Tenant of any policy provision for which
such certificates evidence coverage. Further, all certificates shall expressly provide that 1) no less
than thirty (30) days prior written notice shall be given Landlord and such other named insureds in
the event of material alteration to or cancellation of the coverages evidenced by such certificates
and 2) such coverage evidenced by the certificate is primary and that any coverage carried by
Landlord and such other named insureds shall be excess and non-contributory with respect to any
policies carried by Tenant.
(c) Upon demand, Tenant shall provide Landlord, at Tenant's expense, with such
increased amount of existing insurance, and such other insurance in such limits, as Landlord may
reasonably require and such other hazard insurance as the nature and condition of the Premises may
require in the sole reasonable judgment of Landlord, to afford Landlord and additional insureds
designated by Landlord adequate protection for said risks.
(d) Landlord makes no representation that the limits of I -lability specified to be
camcd by Tenant under this Article IX, are adequate to protect Tenant against Tenant's undertaking
under this Lease, and in the event Tenant believes that any such insurance coverage called for under
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this Lease is insufficient, Tenant shall provide at its own expense, such additional insurance as
Tenant deems adequate.
(e) Landlord and Tenant hereby release the other from any and all liability from
or to the other party of every kind and nature which may result from the perils of fire, lightning or
extended coverage perils which cause damage on or to the Premises, the Building and/or property
within the Building owned by it, such waiver to include situations where the negligence of one of
the parties hereto or his agent, servant or representative causes or contributes to the occurrence or
the result of damage.
(f) Insurance carried by Tenant against loss or damage by fire or other casualty
shall contain a clause whereby the insurer waives its right of subrogation against Landlord. Tenant
shall also obtain and furnish evidence to Landlord of the waiver by Tenant's worker's compensation
carrier of any right of subrogation against Landlord.
(g) The policy of insurance required to be maintained by Tenant pursuant to
Section 9.1(a)(ii) shall include coverage of Tenant's indemnity in favor of Landlord as provided in
Section 9.2 below.
SECTION 9.2 TENANT'S INDEMNITY. Tenant shall defend, indemnify and hold
harmless Landlord, its agents, and any and all affiliates of Landlord, including, without limitation,
any corporation or other entities controlling, controlled by or under common control with Landlord,
from and against any and all claims -or liabilities arising from Tenant's use or occupancy of the
Premises, the Building, the Project or the Common Facilities or the conduct of its business or from
any activity, work, or thing done, permitted or suffered by Tenant in or about the Premises, the
Building, the Project and the Common Areas, and shall further defend, indemnify and hold harmless
Landlord, its agents and affiliates against and from any and all claims or liabilities arising from any
breach or default in the performance of any obligation on Tenant's part to be performed hereunder,
or arising from any act or negligence of Tenant, or of its agents, employees, visitors, patrons,
guests, invitees or licensees, including vendors, servicing Tenant at its request, and from and against
all costs, attorneys' fees, expenses and liabilities incurred in or about any such claims or liabilities or
any actions or proceedings brought thereon. Notwithstanding the foregoing, Tenant shall not be
liable for damage or injury occasioned by the gross negligence or willful misconduct of Landlord or
its designated agents, servants or employees, unless covered by insurance Tenant is required to
provide. This obligation to indemnify shall include Tenant's payment of reasonable attorneys' fees
and investigation costs and all other reasonable costs, expenses and liabilities incurred or suffered
by Landlord from Landlord's receipt of the first notice that any claim or demand is to be made or
may be made. Landlord may, at its option, require Tenant to assume Landlord's defense in any
action covered by this Section 9.2 through counsel satisfactory to Landlord. As used in this Lease,
the term "gross negligence" shall mean the failure to perform a manifest duty in reckless disregard
of the consequences as affecting the life or property of another.
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ARTICLE X. DAMAGE OR DESTRUCTION
SECTION 10.1 RESTORATION.
(a) In the event the Building is damaged by fire or other perils covered by
extended coverage insurance to an extent not exceeding twenty-five percent (25%) of the full
insurable value thereof and if the damage thereto is such that the Building may be repaired,
reconstructed or restored within a period of ninety (90) days from the date of the happening of such
casualty and Landlord will receive insurance proceeds sufficient to cover the cost of such repairs,
Landlord shall commence and proceed diligently with the work of repair, reconstruction and
restoration and the Lease shall continue in full force and effect. If such work of repair,
reconstruction and restoration is such as to require a period longer than ninety (90) days or exceeds
twenty-five percent (25%) of the full insurable value thereof or if said insurance proceeds will not
be sufficient to cover the cost of such repairs, Landlord may either elect to so repair, reconstruct or
restore and this Lease shall continue in full force and effect, or Landlord may elect not to repair,
reconstruct or restore and the Lease shall in such event terminate. Under any of said conditions,
Landlord shall give written notice to Tenant of its intention within ninety (90) days of the
occurrence of such damage. In the event Landlord elects not to restore the Building, this Lease
shall terminate on the date thirty (30) days following the date Tenant receives Landlord's written
notice indicating Landlord's election to terminate.
(b) In the event the Premises or the Building is damaged or destroyed to the
extent of more than ten percent (10%) of its replacement cost by a casualty not covered by a
standard fire and extended coverage policy of fire insurance, Landlord may elect to terminate this
Lease on the date thirty (30) days following Tenant's receipt of Landlord's written notice of
Landlord's election to terminate this Lease. If such damage or destruction is not to such extent, or if
Landlord does not elect to terminate this Lease following such damage, Landlord shall commence
and proceed diligently with the work of repair, reconstruction and restoration and this Lease shall
continue in full force and effect.
(c) In the event of any casualty damage, the rental provided to be paid under this
Lease shall be abated proportionately in the ratio which the Premises are rendered unusable from
the date of destruction through the period of such repair, reconstruction or restoration unless (i) the
Premises were unusable for a period of three (3) business days or less, or (ii) the damage is due to
the fault or neglect of Tenant, its agents or employees. Tenant shall not be released from any of its
obligations under this Lease except to the extent and upon the conditions expressly stated in this
Section 10.1.
(d) If the then existing laws do not permit the restoration described in this
Section 10.1, Landlord may terminate this Lease by giving written notice to Tenant, in which event
this Lease shall terminate thirty (30) days following Tenant's receipt of such notice.
(e) Notwithstanding anything to the contrary contained in this Article, Landlord
shall not have any obligation whatsoever to repair, reconstruct or restore the Premises or any
portion of the Building when the damage occurs during the last twenty-four (24) months of the term
of this Lease or any extension thereof.
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(f) No damages, compensation or claim shall be payable by Landlord by reason
of any injury to or interference with Tenant's business or property arising from any damage or
destruction or the making of any repairs, alterations or improvements in or to any portion of the
Building or the Premises or in or to fixtures, appurtenances and equipment therein.
(g) Landlord's obligation to repair, reconstruct or restore Tenant's leasehold
improvements in the Premises shall be limited to those leasehold improvements originally installed
at Landlord's expense; the repair and restoration of any other leasehold improvements shall be
promptly performed by Tenant, at Tenant's sole cost and expense, subject to the requirements of
Section 6.4 applicable to Tenant's alterations to the Premises.
SECTION 10.2 LANDLORD'S NON -LIABILITY. Landlord shall not be liable to Tenant,
and Tenant hereby waives all claims against Landlord for any injury or damage to any person or
property in or about the Premises, the Building or the Project from any cause whatsoever, except to
the extent caused by the gross negligence or willful misconduct by Landlord, its agents or
employees. Specifically, Landlord or its agents or employees shall not be liable for any damage to
property entrusted to Landlord's employees in the Building, nor for loss of or damage to any
property by theft or otherwise, nor for any injury or damage to persons or property by loss or
interruption of business or loss of income resulting from the following causes, except to the extent
caused by the gross negligence or willful misconduct of Landlord, its agents, servants or employees;
fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak or flow from or
into any part of the Premises or from the breakage, leakage, obstruction or other defects of the
pipes, sprinklers, wires, appliances or plumbing or air-conditioning or electrical works therein,
whether such damage or injury results from conditions arising in the Premises or in other portions
of the Building, or from other sources. Neither Landlord nor its agents shall be liable for
interference with the light or other incorporeal hereditaments, nor shall Landlord be liable for
damages from any latent defect in the Premises, the Building or the Project. Tenant shall give
prompt notice to Landlord in case of fire or accidents in the Premises or in the Building and of
defects therein or in the fixtures or equipment.
Tenant understands that Landlord will not carry insurance of any kind on Tenant's furniture
or furnishings, fixtures or equipment, and that Landlord shall not be obligated to repair any damage
thereto or replace the same.
SECTION 10.3 TENANT'S WAIVER. With respect to any damage which Landlord is
obligated to repair or elects to repair, Tenant, as a material inducement to Landlord entering into
this Lease, irrevocably waives and releases its rights under the provisions of Section 1932(2) and
1933(4) of the California Civil Code and all comparable statutes or rules of law now or hereafter in
effect.
ARTICLE XI. EMINENT DOMAIN
If the whole of the Premises or so much thereof as to render the balance unusable by Tenant
shall be taken under power of eminent domain or if so much of the Building or of the Common
Facilities is/are taken under power of eminent domain as, in Landlord's reasonable judgment,
prevents or substantially impairs the use of the Building for the uses and purposes then being made
or proposed to be made by Landlord of the Building, this Lease shall automatically terminate as of
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the date of such condemnation, or as of the date possession is taken by the condemning authority,
whichever is earlier. No award for any partial or entire taking shall be apportioned, and Tenant
hereby assigns to Landlord any award which may be made in any taking or condemnation affecting
the Premises or any portion of the Project, together with any and all rights of Tenant now or
hereafter arising in or to the same or any part thereof, provided, however, that nothing contained
herein shall be deemed to give Landlord any interest in or to require Tenant to assign to Landlord
any award made to Tenant for the taking of personal property and trade fixtures belonging to Tenant
and/or for the interruption of or damage to Tenant's business.
In the event of a partial taking of any portion of the Premises which does not result in a
termination of this Lease, the basic annual rent shall be reduced in proportion to the part of the
Premises taken, taking into account any restoration and repair by Landlord.
No temporary taking of the Premises and/or of Tenant's rights therein or under this Lease
shall terminate this Lease or give Tenant any right to any abatement of rent hereunder. Any award
made by reason of any such temporary taking shall belong entirely to Landlord and shall be applied
by Landlord against the rent and the other obligations of Tenant hereunder when such rent and other
obligations first accrue.
Except as provided above, any award or damages payable in connection with a taking of the
Building and/or the Project, or any portion thereof, under the power of eminent domain shall belong
entirely to Landlord and Tenant shall have no right or interest therein.
ARTICLE XII. SUBORDINATION; ESTOPPEL CERTIFICATE
SECTION 12.1 SUBORDINATION. On request of Landlord, Tenant will in writing
subordinate its rights hereunder to the lien of any first mortgage or first deed of trust now or
hereafter in force against the Premises and to all advances made or hereafter to be made upon the
security thereof, in the form required by the holder of such mortgage or deed of trust. In the event
any proceedings are brought for foreclosure, or in the event of the exercise of any power of sale
under any mortgage or deed of trust made by Landlord covering the Premises, Tenant shall attom to
the purchaser upon any such foreclosure or sale and recognize such purchaser as the Landlord under
this Lease.
SECTION 12.2 ESTOPPEL CERTIFICATE. Tenant shall, at any time and from time to
time, within ten (10) days' after notice from Landlord, execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so
modified, is in full force and effect) and the dates to which basic annual rental, additional rent and
other charges have been paid in advance, if any, (ii) acknowledging that, to Tenant's knowledge,
there are no uncured defaults on the part of Landlord hereunder, or specifying such defaults if any
are claimed, (iii) certifying that Tenant has no existing offsets and no right of offset against
Landlord, and (iv) certifying that Tenant has accepted possession of the Premises. Any such
statement may be relied upon by any prospective purchaser or encumbrancer of all or any portion of
the Premises, Building and/or Project.
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ARTICLE XIII. DEFAULTS AND REMEDIES
SECTION 13.1 TENANT'S DEFAULTS. The occurrence of any one or more of the
following events shall constitute a default hereunder by Tenant:
(a) The abandonment or vacation of the Premises by Tenant.
(b) The failure by Tenant to make any payment of basic annual rent or additional
rent required to be made by Tenant hereunder, as and when due, where such failure shall continue
for a period of three (3) days after written notice thereof from Landlord to Tenant; provided,
however, that any such notice shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure Section 1161 et seq. For purposes of these default and remedies
provisions, the term "additional rent" shall be deemed to include all amounts of any type whatsoever
other than basic annual rent to be paid by Tenant pursuant to the terms of this Lease.
(c) Use of the Premises for any purpose other than as authorized in this Lease.
(d) Assignment or sublease of this Lease or of any interest therein by Tenant,
either voluntarily or by operation of law (including transfer by testacy or intestacy), whether by
judgment, execution, or other means, without the prior written consent of Landlord.
(e) The failure or inability by Tenant as may be determined by Landlord to
observe or perform any of the express or implied covenants or provisions of this Lease to be
observed or performed by Tenant, other than those specified in (a) through (d) above, where such
failure shall continue for a period of fifteen (15) days after written notice thereof from Landlord to
Tenant; provided, however, that any such notice shall be in lieu of, and not in addition to, any notice
required under California Code of Civil Procedure Section 1161 et seq.
(f) (i) The making by Tenant of any general assignment for the benefit of
creditors; (ii) a case is commenced by or against Tenant under Chapters 7, 11 or 13 of the
Bankruptcy Code, Title 11 of the United States Code as now in force or hereafter amended and if so
commenced against Tenant, the same is not dismissed within sixty (60) days; (iii) the appointment
of a trustee or receiver to take possession of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where possession is not restored to Tenant within
thirty (30) days; (iv) the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such seizure is not
discharged within thirty (30) days; or (v) Tenant's convening of a meeting of its creditors or any
class thereof for the purpose of effecting a moratorium upon or composition of its debts.
SECTION 13.2 LANDLORD'S REMEDIES.
(a) In the event of any default by Tenant, then, in addition to any other remedies
available to Landlord at law or in equity, Landlord may exercise the following remedies:
(1) Landlord may terminate this Lease and all rights of Tenant hereunder
by giving written notice of such termination to Tenant. In the event that Landlord
shall so elect to terminate the Lease, then Landlord may recover from Tenant:
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The worth at the time of award of the unpaid rent, charges, and additional
rent which had been earned as of the date of the termination hereof,
The worth at the time of award of the amount by which the unpaid rent and
additional rent which would have been earned after the date of the termination hereof
until the time of award exceeds the amount of such rental loss that Tenant proves
could have been reasonably avoided;
The worth at the time of award of the amount by which the unpaid rent,
charges, and additional rent for the balance of the term hereof after the time of award
exceeds the amount of such rental loss that Tenant proves could be reasonably
avoided;
Any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform its obligations under this Lease or
which in the ordinary course of things would be likely to result therefrom, including,
but not limited to, the cost of recovering possession of the Premises, expenses of
reletting, including brokerage commissions, necessary repair, renovation and
alteration of the Premises, reasonable attorneys' fees, expert witness costs, and any
other reasonable costs; and
Any other amount which Landlord may by law hereafter be permitted to
recover from Tenant to compensate Landlord for the detriment caused by Tenant's
default. As used in subparagraphs (1) and (ii) above, the "worth at the time of award"
shall be computed by allowing interest at the maximum rate permitted by law.
As used in subparagraph (iii) above, the "worth at the time of award" 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 (M), but not in excess of ten percent (10%) per annum.
(ii) Pursue the remedy described in California Civil Code Section 1951.4
and continue this Lease in effect without terminating Tenant's right to possession
even though Tenant has breached this Lease and abandoned the Premises and to
enforce all of Landlord's rights and remedies under this Lease, at law or in equity,
including the right to recover the rent as it becomes due under this Lease; provided,
however, that Landlord may at any time thereafter elect to terminate this Lease for
such previous breach by notifying Tenant in writing that Tenant's right to possession
of the Premises has been terminated.
(iii) Nothing in this Article XIII shall be deemed to affect Tenant's
indemnity of Landlord, for liability or liabilities based upon occurrences prior to the
termination of this Lease for personal injuries or property damage under the
indemnification clause or clauses contained in this Lease. Such covenants of
indemnification shall survive the termination of this Lease.
(iv) In the event of default by reason of any of the events stated in
subparagraph (f) of Section 13.1 above, this Lease or any interest in and to the
Premises shall not become an asset in any of such proceedings and, in any such event
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•
•
and in addition to any and all rights or remedies of the Landlord hereunder or by law
provided, it shall be lawful for the Landlord to declare the term hereof ended and to
re-enter the Premises and take possession thereof and remove all persons therefrom,
and Tenant and its creditors (other than Landlord) shall have no further claim thereon
or hereunder.
(b) Landlord shall be under no obligation to observe or perform any covenant of
this Lease on its part to be observed or performed which accrues after the date of any default by
Tenant hereunder. In any action for unlawful detainer commenced by Landlord against Tenant by
reason of any default hereunder, the reasonable rental value of the Premises for the period of the
unlawful detainer shall be deemed to be the amount of the basic annual rent and additional rent
reserved in this Lease for such period, unless Landlord or Tenant shall prove to the contrary by
competent evidence. The various rights, powers and remedies reserved to Landlord herein, and
those rights, powers and remedies of Landlord under any other agreement now or hereafter in force
between Landlord and Tenant, including those not specifically described herein, shall be
cumulative, and, except as otherwise provided by California statutory law in effect at the time,
Landlord may pursue any or all of such rights and remedies, at the same time, or otherwise.
(c) No delay or omission of Landlord to exercise any right or remedy shall be
construed as a waiver of any such right or remedy or of any default by Tenant hereunder. The
acceptance by Landlord of rent or any additional rent hereunder shall not be (i) a waiver of any
preceding breach or default by Tenant of any provision thereof, other than the failure of Tenant to
pay the particular rent or any additional rent accepted, regardless of Landlord's knowledge of such
preceding breach or default at the time of acceptance of such rent or additional rent, or (ii) a waiver
of Landlord's right to exercise any remedy available to Landlord by virtue of such breach or default.
No payment by Tenant or receipt by Landlord of a lesser amount than the rent herein stipulated
shall be deemed to be other than on account of the earliest due stipulated rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or payment as rent be
deemed an accord and satisfaction, and Landlord shall accept such check or payment without
prejudice to Landlord's right to recover the balance of such rent or pursue any other remedy in this
Lease provided. Tenant hereby waives any right of redemption or relief from forfeiture under
California Code of Civil Procedure Sections 1174 or 1179, or under any other present or future law,
in the event Tenant is evicted or Landlord takes possession of the Premises by reason of any default
by Tenant hereunder. No act or thing done by Landlord or Landlord's agents during the term of this
Lease shall be deemed an acceptance of a surrender of the Premises, and no agreement to accept a
surrender shall be valid unless in writing and signed by Landlord. No employee of Landlord or of
Landlord's agents shall have any power to accept the keys to the Premises prior to the termination of
this Lease, and the delivery of the keys to any such employee shall not operate a termination of this
Lease or a surrender of the Premises.
SECTION 13.3 INTEREST ON TENANT'S OBLIGATIONS, LATE PAYMENTS.
(a) Any installment of rent due under this Lease or any other sum not paid to
Landlord when due (other than interest) shall bear interest at the maximum rate allowed by law
from the date such payment is due until paid, providcd, however, that the payment of such interest
shall not excuse or cure the default.
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•
(b) Tenant hereby acknowledges that the late payment by Tenant to Landlord of
rent and other sums due hereunder will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain. Such costs may include,
but are not limited to, administrative, processing and accounting charges, and late charges which
may be imposed on Landlord by the terms of any mortgage or trust deed covering the premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall not be received by
Landlord or Landlord's designee within five (5) days after the date due, then Tenant shall pay to
Landlord, in addition to the interest provided above, a late charge in the amount of five percent
(5%) of the delinquent installment of rent. The parties agree that such late charge represents a fair
and reasonable estimate of the cost Landlord will incur by reason of late payment by Tenant.
Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant's default
with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights
and remedies granted hereunder.
(c) Following each second consecutive late payment of rent, Landlord shall have
the option (i) to require that beginning with the first payment of rent next due, rent shall no longer
be paid in monthly installments but shall be payable quarterly three (3) months in advance and/or
(ii) to require that Tenant increase the amount, if any, of the security deposit required under Section
3.2 as listed in Item 9 of the Basic Lease Provisions by one hundred percent (100%), which
additional security deposit shall be retained by Landlord, and may be applied by Landlord, in the
manner provided in Section 3.2.
SECTION 13.4 RIGHT OF LANDLORD TO PERFORM. All covenants and agreements
to be performed by Tenant under any of the terms of this Lease shall be performed by Tenant at
Tenant's sole cost and expense and without any abatement of rent. If Tenant shall fail to pay any
sum of money, other than rent, required to be paid by it hereunder or shall fail to perform any other
act on its part to be performed hereunder, or to provide any insurance or evidence of insurance to be
provided by Tenant, and such failure shall continue beyond any applicable grace period set forth in
Section 13.1, then in addition to any other remedies provided herein, Landlord may, but shall not be
obligated so to do, and without waiving or releasing Tenant from any obligations of Tenant, make
any such payment or perform any such act on Tenant's part to be made or performed as provided in
this Lease or to provide such insurance. Any payment or performance of any act or the provision of
any such insurance by Landlord on Tenant's behalf shall not give rise to any responsibility of
Landlord to continue making the same or similar payments or performing the same or similar acts.
All costs, expenses and other sums incurred or paid by Landlord in connection therewith, together
with interest at the maximum rate permitted by law from the date incurred or paid by Landlord shall
be deemed to be additional rent hereunder and shall be paid by Tenant with and at the same time as
the next monthly installment of basic annual rent hereunder, and any default therein shall constitute
a breach of the covenants and conditions of this Lease.
SECTION 13.5 DEFAULT BY LANDLORD. Landlord shall not be deemed to be in
default in the performance of any obligation required to be performed by it under this Lease unless
and until it has failed to perform such obligation within thirty (30) days after written notice by
Tenant to Landlord, and to any mortgagee or beneficiary of a deed of trust with an interest in any
encumbrance affecting Landlord's interest in the Premises, specifying in reasonable detail the
nature and extent of any such failure; provided, however, that if the nature of Landlord's obligation
is such that more than thirty (30) days arc required for its performance, then Landlord shall not be
26710148204W5 -23-
300222 02 a07; ] 6r02
deemed to be in default if it commences such performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion. If, after notice to Landlord of default,
Landlord fails to cure such default as provided herein, then Tenant shall have the right to cure such
default at Landlord's expense. Tenant shall not have the right to terminate this Lease or to withhold,
reduce or offset any amount against any payments of basic annual rent or any other charges due and
payable hereunder, and Tenant's remedy shall be limited to damages and/or an injunction. It is
expressly understood and agreed to that any money judgment resulting from any default or other
claim arising under this Lease shall be satisfied only out of the rents, issues, profits or other income
("Income") actually received from the operation of the Building and no other real, personal or
mixed property of Landlord (the term "Landlord" for purposes of this Section only shall mean any
and all partners, both general and/or limited, if any, which comprise Landlord), wherever situated,
shall be subject to levy on any such judgment obtained against Landlord and whether or not such
Income is sufficient for the payment of such judgment, Tenant will not institute any further action,
suit, claim or demand, in law or in equity, against Landlord for or on the account of such deficiency.
Tenant hereby waives, to the extent waivablc under law, any right to satisfy said money judgment
against Landlord except from Income received by Landlord for the operation of the Building.
SECTION 13.6 EXPENSES AND LEGAL FEES. If Tenant or Landlord shall bring any
action for any relief against the other, declaratory or otherwise, arising out of or under this Lease,
including any suit by Landlord for the recovery of rent or possession of the Premises, the prevailing
party shall be entitled to recover its attorney's fees and costs, including without limitation, expert
witness fees, photocopying, facsimile, messenger and postage costs, in connection with such suit,
and such attorney's fees and costs shall be deemed to have accrued on the commencement of such
action and shall be paid whether or not such action is prosecuted to judgment.
ARTICLE XIV. END OF TERM
SECTION 14.1 HOLDING OVER. This Lease shall terminate and become null and void
without further notice upon the expiration of the term herein specified, and any holding over by
Tenant after such expiration shall not constitute a renewal or extension hereof or give Tenant any
rights under this Lease, except when in writing signed by both parties hereto or as otherwise herein
provided. If Tenant shall hold over for any period after the expiration of the Lease term, Landlord
may, at its option, treat Tenant as a tenant at sufferance only commencing on the first (1st) day
following the expiration of this Lease and subject to all of the terms and conditions herein
contained, except that the basic annual rent, and monthly installments thereof, shall be one hundred
fifty percent (150%) of that payable at the date of expiration.
SECTION 14.2 SURRENDER OF PREMISES; REMOVAL OF PROPERTY. Upon the
expiration of the term of this Lease, or upon any earlier termination of this Lease, Tenant shall quit
and surrender possession of the Premises to Landlord in as good order, condition and repair as when
received or as hereafter may be improved by Landlord or Tenant, reasonable wear and tear and
repairs which are Landlord's obligation excepted, and shall, without expense to Landlord, remove or
cause to be removed from the Premises all debris and rubbish, all furniture, equipment, and trade
fixtures, free-standing cabinet work and other articles of any other persons claiming under Tenant
unless Landlord exercises its option to have any subleases or subtenancies assigned to it. Tenant
shall repair all damage to the Premises resulting from such removal, which repair shall include the
patching and filling of holes and repair of structural damage. In the event that Tenant shall fail to
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comply with the provisions of this Section 14.2, Landlord may make such repairs and the cost
thereof shall be additional rent payable by Tenant upon demand. if requested by Landlord, Tenant
shall execute, acknowledge and deliver to Landlord an instrument in writing releasing and
quitclaiming to Landlord all right, title and interest of Tenant in and to the Premises by reason of
this Lease or otherwise.
SECTION 14.3 AFFIXED PROPERTY. All fixtures, equipment, alterations, additions,
improvements and/or appurtenances attached to or built into the Premises prior to or during the term
hereof, whether by Landlord at its expense or at the expense of Tenant or both, shall be and remain
part of the Premises and shall belong to Landlord unless otherwise expressly provided for in this
Lease or unless such removal is required by Landlord pursuant to the provisions of Section 6.4
hereof. Such fixtures, equipment, alterations, additions, improvements and/or appurtenances shall
include, without limitation, floor coverings, drapes, paneling, molding, built-in cabinets, doors,
vaults, (exclusive of vault doors), plumbing, electrical communications and lighting systems,
silencing equipment, all fixtures and outlets for the systems mentioned above and for all telephone,
radio, telegraph and television purposes, and any special flooring or ceiling installations.
ARTICLE XV. NOTICES
Any notice, election, demand, consent, approval or other communication to be given or
other document to be delivered by either party to the other hereunder may be delivered in person to
an officer or duly authorized representative of the other party, or may be deposited in the United
States mail, duly registered or certified, postage prepaid, return receipt requested, and addressed to
the other party at the address set forth in Item 11 of the Basic Lease Provisions hereof, or if to
Tenant, at such address or, from and after the Commencement Date, at the Premises (whether or not
Tenant has departed from, abandoned or vacated the Premises). Either party may from time to time,
by written notice to the other, served in the manner herein provided, designate a different address.
If any notice or other documents is sent by mail as aforesaid, the same shall be deemed served or
delivered twenty-four (24) hours after the mailing thereof. If more than one Tenant is named under
this Lease, service of any notice upon any one of said Tenants shall be deemed as service upon all
of them.
ARTICLE XVI. RULES AND REGULATIONS
The Rules and Regulations attached hereto as Exhibit "C" by this reference are hereby
incorporated herein and made a part hereof. Tenant agrees to observe faithfully and comply strictly
with such Rules and Regulations, and any reasonable amendments, modifications and/or additions
thereto as may hereafter be adopted and published by written notice to tenants by Landlord for the
safety, care, security (including restrictions on hours and manner of access to the Building) good
order, cleanliness of the Premises, Building and/or the Project, or portions thereof. Landlord shall
not be liable to Tenant for any violation of such Rules and Regulations or the breach of any
covenant or condition in any lease by any other tenant. One or more waivers by Landlord of any
breach of such Rules and Regulations by Tenant or by any other tenant(s) shall not be a waiver of
any subsequent breach of that rule or any other. In the case of any conflict between such Rules and
Regulations and this Lease, this Lease shall control.
2e71014920-0005 25-
300222.02 an7/l6/02
ARTICLE XVI1. BROKER'S COMMISSION
The parties recognize as the broker(s) who procured this Lease the firm(s), if any, stated in
Item 10 of the Basic Lease Provisions, and agree that Landlord shall be solely responsible for the
payment of a brokerage commission, if any, to said broker, and that Tenant shall have no
responsibility therefor unless otherwise provided in this Lease. Tenant warrants that it has had no
dealings with any other real estate broker or agent in connection with the negotiation of this Lease,
and agrees to indemnify, defend and hold Landlord harmless from any cost, expense or liability
(including reasonable attorneys' fees in connection therewith) for any compensation, commissions
or charges claimed by any other real estate broker or agent employed or claiming to represent or to
have been employed by Tenant in connection with the negotiation of this Lease. The foregoing
agreement shall survive the termination of this Lease.
ARTICLE XVIII. TRANSFER OF LANDLORD'S INTEREST
In the event of any transfer or transfers of Landlord's interest in the Premises, including a so-
called sale -leaseback, the transferor shall be automatically relieved of any and all obligations on the
part of Landlord accruing under this Lease from and after the date of such transfer. It is intended
hereby that the covenants and obligations contained in this Lease on the part of Landlord shall,
subject to the foregoing, be binding on Landlord, its successors and assigns, only during and in
respect of their respective periods of ownership.
ARTICLE XIX. INTERPRETATION
SECTION 19.1 GENDER AND NUMBER. Whenever the context of this Lease requires,
the words "Landlord" and "Tenant", as used herein, shall include the plural as well as the singular
and words used in neuter, masculine or feminine genders shall include the others.
SECTION 19.2 HEADINGS. The captions, headings, titles, numbering and indexing of
the Articles and Sections of this Lease are for convenience only, are not a part of this Lease and
shall have no effect upon the construction or interpretation of any part hereof.
ARTICLE XX. EXECUTION AND RECORDING
SECTION 20.1 CORPORATE AUTHORITY. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that he is duly authorized
to execute and deliver this Lease on behalf of said corporation in accordance with said corporation's
by-laws or a duly adopted resolution of its board of directors, and that this Lease is binding upon
said corporation in accordance with its terms. Tenant shall, at Landlord's request, deliver a certified
copy of its board of directors' resolution authorizing or ratifying such execution.
SECTION 20.2 RECORDING. Tenant shall not record this Lease without the prior written
consent of Landlord. Tenant, upon the request of Landlord, shall execute and acknowledge a "short
form" memorandum of this Lease for recording purposes.
SECTION 20.3 AMENDMENTS. No amendment, addition, revocation or ratification of
this Lease shall be effective unless in writing signed by the parties hereto. No actions, policies, oral
267M I a820.00u5
300222 02 a0 7/ 16%02 -26 -
or informal arrangements, business dealings or other course of conduct by or between the parties
shall be deemed to amend this Lease or revise this Lease in any respect.
ARTICLE XXI. MISCELLANEOUS
SECTION 21.1 NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and
agrees that the terms of this Lease are confidential and constitute proprietary information of
Landlord. Disclosure of the terms hereof could adversely affect the ability of Landlord to negotiate
other leases with respect to the Project. Tenant agrees that it, and its partners, officers, directors,
employees and attorneys shall not disclose the terms and conditions of this Lease to any other
person without the prior written consent of Landlord, provided, however, that Tenant may disclose
the terms hereof to (a) its accountants, (b) its attorneys, (c) its lenders, or (d) to other third parties,
so long as such disclosure pursuant to subelause (d) does not adversely affect the ability of Landlord
to negotiate other leases with respect to the Project. It is understood and agreed that damages would
be an inadequate remedy for the breach of this provision by Tenant, and Landlord shall have the
right to specific performance of this provision and to injunctive relief to prevent its breach or
continued breach.
SECTION 21.2 FURNISHING OF FINANCIAL STATEMENTS. Landlord has reviewed
financial statements and tax returns if so requested of the Tenant and has relied upon the truth and
accuracy thereof with Tenant's knowledge and representations of the truth and accuracy of same and
that said statements accurately and fairly depict the financial condition of Tenant. Said statements
are an inducing factor and consideration for the Tenant. Tenant and/or guarantors shall promptly
furnish Landlord, upon request, with annual financial statements reflecting the then current financial
condition of Tenant throughout the term of this Lease.
SECTION 21.3 CHANGES REQUESTED BY LENDER. If, in connection with obtaining
financing for the Building, any lender shall request reasonable modifications in this Lease as a
condition to such financing, Tenant will not unreasonably withhold, delay or defer its consent
thereto, provided that such modifications do not materially increase the obligations of Tenant
hereunder or materially and adversely affect the leasehold interest hereby created.
SECTION 21.4 GOVERNMENTAL REQUIREMENTS. Tenant covenants at all times
during the term of this Lease to comply with the requirements of the Occupational Safety and
Health Act of 1970, 29 U.S.C., Section 651 et seq., and any analogous legislation in California
(collectively, the "Act"), to the extent that the Act applies to the Premises and any activities therein,
and to comply with all other Governmental Requirements, including, but not limited to, all laws
prohibiting discrimination against any person or group of persons on account of race, color, creed,
sex, national origin or ancestry and all laws described in Section 4.1 above. Without limiting the
generality of the foregoing, Tenant covenants to maintain all working areas, all machinery,
equipment, appliances, structures, electrical facilities and the like upon the Premises in a condition
that full complies with the requirements of the Act, including such requirements as would be
applicable with respect to agents, employees or contractors of Landlord who may from time to time
be present upon the Premises.
2r,7.01 a820-0005
3002 22-02 aU N I O 02 -2 7 -
SECTION 21.5 COVENANTS AND CONDITIONS. All of the provisions of this Lease
shall be construed to be "conditions" as well as "covenants" as though the words specifically
expressing or imparting covenants and conditions were used in each separate provision.
SECTION 21.6 WORK LETTER. Landlord and Tenant each agree to fully perform their
obligations under the Work Letter, if any. Any default by either party in the performance of its
obligations under the Work Letter shall constitute a default by such party under this Lease.
SECTION 21.7 JOINT AND SEVERAL LIABILITY. If there be more than one Tenant,
the obligations hereunder imposed upon Tenant shall be joint and several and the act of or notice
from, or notice or refund to, or the signature of, any one or more of such persons, with respect to the
tenancy of this Lease, shall be binding upon each and all of the persons executing this Lease as
Tenant with the same force and effect as if each and all of them had so acted or so given or received
such notice or refund or so signed.
SECTION 21.8 SUCCESSORS. Subject to Articles VIII and XVIII above, all rights and
liabilities herein given to, or imposed upon, the respective parties hereto shall extend to and bind the
several respective heirs, executors, administrators, successors, and assigns of the parties. Nothing
contained herein is intended, or shall be construed, to confer upon or grant to any person other than
Landlord and Tenant any rights or remedies under this Lease.
SECTION 21.9 TIME OF ESSENCE. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a factor.
SECTION 21.10 CONTROLLING LAW. This Lease shall be governed by and interpreted
in accordance with the laws of the State of California.
SECTION 21.11 SEVER -ABILITY. If any term or provision of this Lease shall be held
invalid or unenforceable to any extent, the remainder of this Lease shall not be affected thereby and
each term and provision of this Lease shall be valid and enforceable to the fullest extent permitted
by law.
SECTION 21.12 RELATIONSHIP OF PARTIES. Nothing contained herein shall be
deemed or construed by the parties hereto, or by any third party, as creating the relationship of
principal and agent or of partnership or joint venture between the parties hereto, it being understood
and agreed that neither the method of computation of rent, nor any other provision contained herein,
nor any acts of the parties herein, shall be deemed to create any relationship between the parties
hereto other than the relationship of Tenant and Landlord.
26N014820-0005
300222 02 a07116l02 -28-
SECTION 21.13 INABILITY TO PERFORM. In the event that Landlord shall be delayed
or hindered in or prevented from the performance of any work or in performing any act required
hereunder by reason of. strikes; lockouts; labor troubles; inability to procure materials, labor or
energy; failure of power; disruption, reduction, interruption, curtailment or failure of utility, solid
waste disposal or other services; restrictive Governmental Requirements; voluntary or involuntary
participation, at the request of a governmental agency or otherwise, in any plan or program
involving allocations, priorities, limitations or restraints regarding water, fuel or other energy, or
otherwise; other governmental action or inaction; riots, insurrection; war, fires; floods; earthquakes;
storms; droughts, other Acts of God; or any other reason of a similar or dissimilar nature not the
fault of Landlord in performing work or doing acts required under the terms of this Lease, then the
performance of such work or the doing of such act shall be excused for the period of the delay, and
the period for the performance of any work or the doing of such act shall be extended for a period
equivalent to the period of such delay. The occurrence of any event constituting a cause for
excusable delay shall not relieve Tenant from any obligations, including payment of rent, under this
Lease.
SECTION 21.14 QUIET ENJOYMENT. Upon payment by Tenant of the basic annual
rent, additional rent and all the charges herein provided, and upon the observance and performance
of all the covenants, terms and conditions of this Lease on Tenant's part to be observed and
performed, Tenant shall peaceably and quietly hold and enjoy the Premises for the term hereby
demised without hindrance or interruption by Landlord or any other person or persons lawfully or
equitably claiming by, through or under Landlord.
SECTION 21.15 HAZARDOUS WASTE AND MATERIALS. Tenant shall not engage in
any activity on or about the Premises or the Project that violates any Environmental Law, and shall
promptly, at Tenant's sole cost and expense, take all investigatory and/or remedial action required or
ordered by any governmental agency or Environmental Law for clean-up and removal of any
contamination involving any Hazardous Material created or caused directly or indirectly by Tenant.
The term "Environmental Law" shall mean any federal, state or local law, statute, ordinance or
regulation pertaining to health, industrial hygiene or the environmental conditions on, under or
about the Premises, including, without limitation, (i) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Sections 9601 et seq.; (ii) the
Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Sections 6901 et seq.; (iii)
California Health and Safety Code Sections 25100 et seq.; (iv) the Safe Drinking Water and Toxic
Enforcement Act of 1986, California Health and Safety Code Section 25249.5 et seq.; (v) the
Federal Water Pollution Control Act, 33 U.S.C. Sections 1317 et seq.; (vi) California Water Code
Section 1300 et seq.; and (vii) California Civil Code Section 3479 et seq., as such laws are amended
and the regulations and administrative codes applicable thereto. The term "Hazardous Material"
includes, without limitation, any material or substance which is (1) defined or listed as a "hazardous
waste", "extremely hazardous waste", "restrictive hazardous waste" or "hazardous substance" or
considered a waste, condition of pollution or nuisance under the Environmental Laws; (ii)
petroleum or a petroleum product or fraction thereof, (iii) asbestos; and/or (iv) substances known by
the State of California to cause cancer and/or reproductive toxicity. It is the intent of the parties
hereto to construe the term "Hazardous Materials" and "Environmental Laws" in its broadest sense.
Tenant shall provide all notices required pursuant to the Safe Drinking Water and Toxic
Enforcement Act of 1986, California Health and Safety Code Section 25249.5 et seq. Tenant shall
provide prompt written notice to Landlord of the existence of Hazardous Substances on the
267N]14920-"5
300222 02 a07 1G102 '29-
Premises and all notices of violation of the Environmental Laws received by Tenant. Tenant's
obligations pursuant to this Section 21.15 shall be referred to in this Lease as "Environmental
Compliance".
SECTION 21.16 ENTIRE AGREEMENT. This Lease and the Exhibits and other
attachments hereto cover in full each and every agreement of every kind or nature whatsoever
between the parties hereto concerning the Premises and the Building or Project, and all preliminary
negotiations, oral agreements, understandings and/or practices of whatsoever kind with respect to
the Premises or the Building or Project, except those contained herein or therein, are superseded and
of no further force or effect; no person, firm or corporation has at any time had an authority from
Landlord to make any representations or promises on behalf of Landlord, and Tenant agrees that if
any such representations or promises have been made by Landlord or others, Tenant hereby waives
all right to rely thereon. No verbal agreement or implied covenant shall be held to vary the
provisions hereof, any statute, law, or custom to the contrary notwithstanding.
2671014920-"5
300222 02 a07116!02 -30-
•
L_J
EXHIBIT "A-1"
Prior to the execution of the Lease to which this Exhibit A-1 is attached, attach a Boor
plan(s) of the Building designating the location of the Premises.
EXH1B[T "A-1"
TO OFFICE
267101 a826-onus
300222.02a07,-[6:02 SPACE LEASE
•
0
EXHIBIT "A-2"
LEGAI. DESCRIPTION OF THE PROJECT
That certain real property located in the City of Huntington Beach, County of Orange, State
of California, more particularly described as follows:
Lots 1-6, 11, 13 and 15 in Block 104 of Iuntington Beach in the City of Huntington
Beach, County of Orange, State of California as shown on a map recorded in Book 3,
Page 36 of Miscellaneous Maps, Records of Orange County, California.
EXHIBIT "A-2-
TO OFFICE
167r0 k a8 20.0005
30622202aOV1G:02 SPACE LEASE
•
•
EXHIBIT "A-3"
CONFIRMATION OF TERM
The undersigned as the Landlord and Tenant under that certain Office Space Lease dated
, for space within the , Huntington Beach,
California, hereby confirm that the term of said Lease has commenced , and
that the expiration date of the term of said Lease is
ABDELMUTI DEVELOPMENT COMPANY, a California
general partnership
general partner
"Landlord"
PAC PACK, INC., a California corporation
By:
Its:
By:
Its:
"Tenant"
EXHIBIT "A-3"
26W030022 aS2(0711 TO OFFICE SPACE LEASE
300222 02 �o71�fi702
EXHIBIT "B"
THE. WORK LETTER
Tenant acknowledges and agrees that Landlord shall not be required to perform any work in
the Premises and Tenant accepts the Premises in its then existing "AS -IS" condition.
EXHIBIT "B"
26W01 a820.0005
3002220207/16102 TO OFFICE SPACE LEASE
•
•
EXHIBIT "C"
RULES AND REGULATIONS ATTACHED TO AND WHICH
CONSTITUTE A PART OF OFFICE SPACE LEASE
The following Rules and Regulations shall be in effect at the Project. Landlord reserves the
right to adopt reasonable modifications and additions hereto.
(1) The sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors
or halls of the Building shall not be obstructed by any tenant or used for any purpose other than
ingress and egress from the respective premises. The halls, passages, entrances, elevators,
stairways, balconies and roof are not for the use of the general public, and Landlord shall in all
cases retain the right to control and prevent access thereto of all persons whose presence in the
judgment of Landlord shall be prejudicial to the safety, character, reputation and interests of the
Building and its tenants, provided that nothing herein contained shall be construed to prevent such
access to persons with whom Tenant normally deals only for the purpose of conducting its business
on the Premises (such as clients, customers, office suppliers and equipment vendors, and the like)
unless such persons are engaged in illegal activities. No tenant and no employees of any tenant
shall go upon the roof of the Building without the written consent of Landlord.
(2) No awnings or other projection shall be attached to the outside walls of the Building
or to balconies without the prior written consent of Landlord. No hanging planters, television sets
or other objects shall be attached to or suspended from ceilings without the prior written consent of
Landlord. No curtains, blinds, shades or screens shall be attached to or hung in, or used in
connection with, any window or door of the Premises without the prior written consent of Landlord.
All electrical ceiling fixtures hung in offices or spaces along the perimeter of the Building must be
fluorescent and/or of a quality, type, design and bulb color approved by Landlord. No awnings,
furniture, trees or plants or other personal property shall be placed upon any balcony or patio,
without Landlord's prior written approval.
(3) No sign, advertisement or notice shall be exhibited, painted or affixed by any tenant
on any part of, or so as to be seen from the outside of, the Premises or the Building without the prior
written consent of Landlord. In the event of the violation of the foregoing by any tenant, Landlord
may remove such sign, advertisement or notice without any liability and may charge the expense
incurred in such removal to the tenant violating this rule. Interior signs on doors and director tablet
shall be inscribed, painted or affixed for each tenant by Landlord at the expense of such tenant, and
shall be of a size, color and style acceptable to Landlord.
(4) The sashes, sash doors, skylights, windows and doors that reflect or admit light and
air into the halls, passageways or other public places in the Building shall not be covered or
obstructed by any tenant, nor shall any bottles, parcels or other articles be placed on the
windowsills, balcony or patio railings.
(5) The water and wash closets and other plumbing fixtures shall not be used for any
purpose other than those for which they were constructed, and no foreign substance of any kind
EXHIBIT "C"
26W030022 02 jQ71:1 TO OFFICE SPACE LEASE
�oozzz oz �07; i a:oz
shall be thrown herein. All damages resulting from any misuse of the fixtures shall be borne by the
tenant who, or whose servants, employees, agents, visitors or licensees shall have caused the same.
(6) No tenant shall mark, paint, drill into, or in any way deface any part of the Premises
or the Building. No boring, stringing of wires or laying of linoleum or other floor coverings shall
be permitted, except with the prior written consent of Landlord, and as Landlord may direct. Any
tenant permitted by Landlord to lay linoleum or other similar floor covering shall not affix the same
to the floor of the Premises in any manner except by a paste, or other material which may easily be
removed with water, the use of cement or other similar adhesive materials being expressly
prohibited. The method of affixing any such linoleum or other similar floor covering to the floor, as
well as the method of affixing carpets or rugs to the Premises, shall be subject to approval by
Landlord. The expense of repairing any damage resulting from a violation of this rule shall be
borne by the tenant by whom, or by those agents, clerks, employees or visitors, the damage shall
have been caused.
(7) If Tenant desires telephone or telegraph connections, Landlord will direct
electricians as to where and how the wires are to be introduced.
(8) No vehicles (other than bicycles stored in the Premises) or animals of any kind shall
be brought into or kept in or about the Premises, and no cooking shall be done or permitted by any
tenant in the Premises, except that the preparation of coffee, tea, hot chocolate and similar items for
tenants, their employees and visitors shall be permitted. No tenant shall cause or permit any
unusual or objectionable odors to be produced in or permeate from or throughout the Premises.
(9) No portion of the Building shall be used for manufacturing or for the storage of
merchandise except as such storage may be incidental to the use of the Premises for general office
purposes without Landlord's prior written approval. No tenant shall, without the prior written
consent of the Landlord, occupy or permit any portion of his premises to be occupied or used for the
manufacture or sale of liquor, narcotics, or tobacco in any form, as a medical office, chiropractor's
office, as a barber or manicure shop, or as an employment bureau or any business other than that
specifically provided for in the Lease. No tenant shall engage or pay any employees on its premises
except those actually working for such tenant on its premises nor advertise for laborers giving an
address at its premises. The Building shall not be used for lodging or sleeping or for any immoral
or illegal purposes.
(10) Except with the prior written consent of the Landlord, no tenant shall sell, or permit
the sale at retail, of newspapers, magazines, periodicals, or theater tickets, in or from the Building,
nor shall any tenant carry on, or permit or allow any employee or other person to carry on, the
business of stenography, typewriting or any similar business in or from the Building for the service
or accommodation of occupants of any other portion of the Building.
(11) Landlord reserves the right to prohibit personal goods and services vendors (as such
term is defined below) from access to the Building. To the extent that Landlord permits such
vendors access to the Building, such access shall be upon such reasonable terms and conditions,
including but not limited to the payment of a reasonable fee and provision for insurance coverage,
as are related to the safety, care and cleanliness of the Building, the preservation of good order
EXHIBIT `C"
TO OFFICE SPACE LEASE
267r01 a820-0005
300222.02 a07116102 Page -2-
thereon, and the relief of any financial or other burden on Landlord occasioned by the presence of
such vendors or the sale by them of personal goods or services (as such term is defined below) to a
tenant or its employees. If reasonably necessary for the accomplishment of the aforementioned
purposes, Landlord may exclude a particular vendor entirely or limit the number of vendors who
may be present at any one time in the Building. The term "personal goods or services vendors"
means persons who periodically enter the Building for the purpose of selling goods or services to a
tenant, other than goods or services which are used by a tenant only for the purpose of conducting
its business on its premises. "Personal goods or services" include, but are not limited to, drinking
water and other beverages, food, barbering services, and shoe shining services.
(12) No tenant shall make, or permit to be made, any unseemly or disturbing noises or
disturb or interfere with occupants of this or neighboring buildings or premises or those having
business with them by the use of any musical instrument, radio, phonograph or unusual noise, or in
any other way.
(13) No tenant shall throw anything out of doors, windows or skylights or down the
passageways.
(14) No tenant, nor any of a tenant' servants, employees, agents, visitors or licensees,
shall at any time bring, keep or use on the Building any kerosene, gasoline, or inflammable,
combustible, explosive, or corrosive fluid, or any other illuminating material, or use any method of
heating other than that supplied by Landlord.
(15) No tenant shall sweep or throw or permit to be swept or thrown from the Premises
any dirt or other substance into any of the corridors or halls or elevators, or out of the doors,
windows, stairways, patios or balconies of the Building, and Tenant shall not use, keep or permit to
be used or kept any foul or noxious gas or substance in the Premises, or permit or suffer the
Premises to be occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors anchor vibrations, or interfere in any way with
other tenants or those having business therein, nor shall any animals or birds be kept in or about the
Building. Smoking or carrying lighted cigars, cigarettes, pipes, or other lighted smoking materials,
in the elevators and all other common and/or public areas of the Building is prohibited.
(16) No additional locks or bolts or any kind shall be placed upon any of the doors or
windows by any tenant, nor shall any changes be made in existing locks or the mechanisms thereof
unless Landlord is first notified thereof and gives written approval. Each tenant must, upon
termination of his tenancy, give to Landlord all keys of stores, offices, or toilets and toilet rooms,
either furnished to, or otherwise procured by, such tenant, and in the event of the loss of any keys so
furnished, such tenant shall pay Landlord the cost of replacing the same or of changing the lock or
locks opened by such lost key if Landlord shall deem it necessary to make such change.
(17) All removals, or the carrying in or out of any safes, freight, furniture, or bulky matter
of any description must take place during the hours which Landlord may determine from time to
time. The moving of safes or other fixtures or bulky matter of any kind must be made upon
previous notice to the manager of the Building and under his/her supervision, and the persons
employed by any tenant for such work must be acceptable to Landlord. Landlord reserves the right
EXHIBIT "C"
TO OFFICE SPACE LEASE
2 67I0I4B 20-"5
300222.02 30716.102 Page -3-
to inspect all safes, freight or other bulky articles to be brought into the Building and to exclude
from the Building and all such bulky articles which violate any of the Rules and Regulations or the
Lease of which these Rules and Regulations arc a part. Landlord reserves the right to prescribe the
weight and position of all safes, which must be placed upon supports approved by Landlord to
distribute the weight.
(18) No tenant shall purchase janitorial, maintenance or other services from any company
or persons not approved by Landlord. Any person employed by any tenant to do janitorial work
shall, while in the Building and outside of the Premises, be subject to and under the control and
direction of the office or management of the Building (but not as an agent or servant of Landlord,
and the tenant shall be responsible for all acts of such persons). Except with Landlord's prior
written approval, no tenant shall permit janitorial services to be performed during the hours of 7:00
a.m. to 6:00 p.m, Monday through Friday.
(19) Landlord shall have the right to prohibit any advertising by any tenant which, in
Landlord's opinion, tends to impair the reputation of the Building or its desirability as an
office/retail building and upon written notice from Landlord any tenant shall refrain from and
discontinue such advertising.
(20) On Saturdays from 12:00 p.m. to 8:00 a.m., Sundays, those legal holidays designated
by Landlord, and on other days between the hours of 6:00 p.m. and 7:00 a.m., access to the Building
or to the halls, corridors, elevators or stairways in the Building, or to the Premises may be refused
unless the person seeking access is known to the building watchman, if any, in charge and has a
pass or is properly identified. Landlord shall in no case be liable for damages for the admission to
or exclusion from the Building of any person whom Landlord has the right to exclude. Each tenant
shall be responsible for all persons for whom he requests after hours access and shall be liable to
Landlord for all acts of such persons. In case of invasion, mob, riot, public excitement, or other
commotion, Landlord reserves the right but shall not be obligated to prevent access to the Building
during the continuance of the same by closing the doors or otherwise, for the safety of the tenants
and protection of property in the Building.
(21) All doors opening into public corridors shall be kept closed, except when in use for
ingress and egress. Tenants shall see that the windows, transoms and doors of their premises are
closed and securely locked before leaving the Building.
(22) The requirements of tenants will be attended to only upon application to the manager
of the Building.
(23) Canvassing, soliciting and peddling in the Building arc prohibited and each tenant
shall cooperate to prevent the same.
(24) There shall not be used in any space, or in the public halls of the Building, either by
any tenant or others, any hand trucks except those equipped with rubber tires and side guards.
(25) No vending or coin operated machines shall be placed by any tenant within his
premises without the prior written consent of Landlord.
EXHIBIT "C"
TO OFFICE SPACE LEASE
26710I aA 20-0005
300222 02 a07/i6,,02 Page -4-
EXHIBIT "D"
GUARANTY OF LEASE
This Guaranty of Lease ("Guaranty") is dated as of July , 2002 by SHIN
YAMASAKI and ALISA YAMASAKI (collectively, "Guarantor"), whose address for notices is
5592 Castle Drive, Huntington Beach, CA 92649, in favor of ABDELMUTI DEVELOPMENT
COMPANY, a California general partnership ("Landlord"), whose address for notices is 101
Main Street, Suite 400, Huntington Beach, CA 92648, Attention: Mike Abdelmuti. Guarantor
covenants and agrees as follows:
1. Recitals. This Guaranty is made with reference to the following recitals of facts
which constitute a material part of this Guaranty:
1.1. Landlord, as landlord, and PAC PACK, INC., a California corporation dba
Prospects One (""Tenant"), as tenant, are concurrently herewith entering into an Office Space
Lease (the "Lease") with respect to certain premises commonly known as 101 Main Street, Suite
250, Huntington Beach, CA, which is located in that certain project commonly known as
Oceanview Promenade.
1.2. Guarantor maintains a financial interest in Tenant but are entity separate
and distinct from Tenant. In addition, Guarantor is receiving consideration from Tenant for
executing this Guaranty.
1.3. Landlord would not have entered into the Lease with Tenant without
having received this Guaranty executed by Guarantor as an inducement.
1.4. By this Guaranty, Guarantor intends to unconditionally guarantee the full,
timely, and complete performance of all of Tenant's covenants and obligations set forth in or
arising out of the Lease (collectively, the "Guaranteed Obligations").
2. Guaranty. For valuable consideration, Guarantor jointly and severally, absolutely
and unconditionally guarantees, upon demand, to and for the benefit of Landlord, the full, timely,
and complete payment and performance of all of the Guaranteed Obligations. This Guaranty
constitutes an absolute, direct, immediate, and unconditional guarantee of timely payment and
performance, and not merely of collectability, and shall include, without limitation, all primary,
secondary, direct, indirect, fixed, and contingent obligations of Tenant to pay rent, additional
rent, late charges, common area charges, insurance, taxes, indemnifications, and other fees,
charges, sums, costs, and expenses which may be owing by Tenant at any time in connection
with the Guaranteed Obligations, as such may be modified, amended, extended, or renewed from
time to time. If a specific amount outstanding and owing by Tenant under the Lease or the
Guaranteed Obligations is determined by a Court of competent jurisdiction, that determination
shall be conclusive and binding on Guarantor, regardless of whether or not Guarantor was a party
to the proceeding in which such determination was made. If Tenant defaults in the payment of
any amount when due under the Lease, Guarantor shall, in lawful money of the United States,
pay to Landlord or order, on demand, all sums due and owing under the lease. Additionally,
267!014820-"5
300216.01 a07117102
Guarantor shall assume responsibility for and shall fully perform all of the other Guaranteed
Obligations promptly upon receiving written notice from Landlord that Tenant has failed to
perform any of such obligations in accordance with the Lease. No delay by Landlord in
providing notice of a default by Tenant or making demand hereunder will affect Guarantor's
obligations under this Guaranty. The obligations of Guarantor under this Guaranty are
independent of the obligations of Tenant or any other guarantor. The obligations of Guarantor
under this Guaranty shall be continuing and irrevocable until all of the Guaranteed Obligations
have been fully satisfied (or waived by Landlord in a writing specifically for the benefit of
Guarantor, at which time this Guaranty shall terminate and he of no further force or effect,
except as otherwise set forth herein). if at any time all or any part of any payment received by
Landlord from Tenant, Guarantor, or any other person tinder or with respect to the Lease or this
Guaranty is refunded or rescinded pursuant to any court order (including without limitation any
court order arising out of the insolvency, bankruptcy, or reorganization of Tenant, Guarantor or
any other guarantor), then the Guarantor's obligations under this Guaranty shall, to the extent of
the payment refunded or rescinded, be deemed to have continued in existence, notwithstanding
previous receipt of payment by Landlord, regardless of any contrary action by Landlord, as
though such previous payment to Landlord had never occurred (and such contrary action had not
been taken). This Guaranty shall not be affected or limited in any manner if recovery against
Tenant upon the Guaranteed Obligations (or any portion of the Guaranteed Obligations) may be
(or becomes) barred by any statute of limitations or may be (or becomes) otherwise
unenforceable (unless the Lease is unenforceable due to the Landlord's fraud, misrepresentation,
or breach of the Lease), or if the Guaranteed Obligations (or any portion of the Guaranteed
Obligations) arise(s) from transactions which may be voidable as the result of bankruptcy,
insolvency, fraudulent conveyance, receivership, or offsets not arising out of the Lease. This
Guaranty shall not be affected or limited in any manner by whether the Guaranteed Obligations
arc (1) now or hereafter made, incurred, or created, (10 voluntary or involuntary, (16) absolute or
contingent, (iv) liquidated or unliquidated, attd/or (v) determined or undetermined. This
Guaranty shall not be affected or limited in any manner by whether Tenant may be liable, with
respect to the Guaranteed Obligations individually, jointly with others, primarily, or secondarily.
3. Amendment or Assignment. This Guaranty shall not be affected or limited in any
manner by (a) any assignment of, or any modification or amendment (by agreement, course of
conduct, or otherwise) to, all or any portion of any lease, agreement, instrument, and/or
document with respect to or that evidences the Guaranteed Obligations, or (b) the renewal,
extension, and/or modification, at any time, of any of the Guaranteed Obligations. By this
Guaranty, Guarantor hereby guarantees Tenant's performance of the Guaranteed Obligations as
so amended, assigned, renewed, extended, or modified whether or not such amendment,
assignment, renewal, extension, or modification is with the consent of or notice to Guarantor,
provided, however, Guarantor's obligations under this Guaranty may not be increased as a result
of any such amendment, renewal, extension, or modification which increases the obligations of
the Tenant beyond those which were in existence prior to such amendment, renewal, extension,
or modification, unless such amendment, renewal, extension, or modification is done with
Guarantor's consent.
4. Remedies. If Tenant defaults with respect to any of the Guaranteed Obligations,
and if Guarantor does not satisfy Tenant's obligations immediately upon its receipt of written
notice of such default from Landlord, Landlord may, at its election, proceed immediately against
2671014920-000s
30021601 a07117;02 -2-
the Guarantor (as if such default arose from the direct and primary obligation of Guarantor), any
other guarantor, or Tenant, or any combination of Tenant, Guarantor, and/or any other guarantor.
Guarantor's obligations hereunder are joint and several. If any portion of the Guaranteed
Obligations terminates and Landlord continues to have any rights it may enforce against Tenant
under the Guaranteed Obligations after such termination, then Landlord may, at its election,
enforce such rights against the Guarantor. In the event of any default under this Guaranty, an
action or actions may be brought and prosecuted against the Guarantor, whether or not Tenant or
any other guarantor is joined in such action(s) or a separate action or actions are brought against
Tenant or any other guarantor. Landlord may maintain successive actions for separate defaults.
Unless and until Elie Guaranteed Obligations have been fully satisfied or waived in writing by
Landlord, the Guarantor shall not be released from its obligations under this Guaranty
irrespective of (i) the exercise by Landlord of any of Landlord's rights or remedies (including,
without limitation, compromise or adjustment of the Guaranteed Obligations or any part thereof),
(ii) any release by Landlord of Tenant or any other guarantor, (iii) any such action or any number
of successive actions, or (iv) the satisfaction by Guarantor of any liability under this Guaranty
incident to a particular default. Landlord may, at its sole discretion, perform any or all of
Guarantor's obligations hereunder, in which case, Guarantor shall reimburse Landlord
immediately upon demand for all costs and expenses, including all reasonable attorneys' fees,
that Landlord incurs in performing such obligations, together with interest on those sums from
and after the date(s) they are incurred at the rate of fifteen percent (15%) per annum; provided,
however, such interest factor will supersede any default rate interest concurrently accruing under
the Lease.
5. Waivers. Guarantor hereby represents and warrants (which representation and
warranty is being relied upon by Landlord in entering into the Lease and accepting this
Guaranty) that each of the waivers set forth in this Guaranty is made with Guarantor's full
knowledge of its significance and consequences after discussion with Guarantor's own competent
legal counsel, which counsel has made Guarantor aware of the relevant circumstances and likely
consequences of each such waiver and has explained to Guarantor the true legal effect of each
such waiver including Guarantor's rights which Guarantor would have if it were not making such
waivers. Based on the foregoing, Guarantor acknowledges that, under the circumstances, such
waivers are reasonable and not contrary to public policy or law, and Guarantor hereby waives the
following:
5.1. Guarantor waives all rights it would other -wise have to require Landlord,
as a condition to Landlord's exercise of any of its rights tinder this Guaranty, to (1) proceed
against Tenant or any other guarantor, (ii) perfect, retain, protect, proceed against, or exhaust any
security that Landlord holds or may hold from Tenant, or (iii) pursue any other remedy in
Landlord's power. The foregoing waiver includes, without limitation, a waiver of all of
Guarantor's rights under California Civil Code Sections 2845 and 2849 or similar laws;
5.2. Guarantor waives the benefit of all statutes of limitations affecting
Guarantor's liability under this Guaranty to the extent permitted by law;
5.3. Guarantor waives all defenses which Guarantor might otherwise have to
its obligations under this Guaranty by reason of any disabilily of Tenant or any other person(s),
including, without limitation, the incapacity, lack of authority, death, or disability of Tenant or
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30021601 a07117102 -3-
any other person(s) or the failure of Landlord to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of Tenant or any other person(s). The
foregoing waiver includes, without limitation, a waiver of all of Guarantor's rights under
California Civil Code Section 2810 and similar laws;
5.4. Guarantor waives all defenses and rights which Guarantor might otherwise
have to exoneration under this Guaranty, including, without limitation, all rights tinder California
Civil Code Section 28t9 and similar laws, based upon any alteration, modification, compromise,
renewal, extension, or assignment of the Lease or any of the Guaranteed Obligations, whether
done with or without the knowledge and/or consent of Guarantor and Guarantor hereby grants
Landlord the right to take any such action relative to the Guaranteed Obligations without the
knowledge or consent of Guarantor without in any manner affecting the liability of Guarantor
under this Guaranty.
5.5. Guarantor waives the right to claim or assert any defense of Tenant to the
Guaranteed Obligations including, without limitation, any defense based upon failure of
consideration, accord and satisfaction, impossibility of performance, or mistake (but excluding
any defenses based on Landlord's fraud, misrepresentation, or breach of the Lease);
5.6. Guarantor waives all other defenses based on the tennination of Tenant's
liability from any cause or the impairment of any other collateral or security for the Guaranteed
Obligations (other than arising out of Landlord's fraud. misrepresentation. or breach of the
Lease);
5.7. Guarantor waives all defenses it may otherwise have against Landlord
based upon an election of remedies by Landlord;
5.8. Regardless of whether or not Guarantor makes payments to Landlord,
until the Lease has terminated and Landlord has been paid in full thereunder for a period of one
year and one day, Guarantor waives all of its rights of subrogation, contribution, and
reimbursement which it would otherwise have against Tenant in the event Guarantor suffers any
liability under this Guaranty, including, without limitation, any rights under California Civil
Code Sections 2847, 2848, and 2849 or similar laws;
5.9. Guarantor waives all its rights to detennine how, when, and what
application of payments and credits shall be made on the Guaranteed Obligations; however,
Guarantor shall be entitled to notice of how such payments and credits are applied;
5.10. Guarantor subordinates to Landlord all of Guarantors rights to participate
in any security now or later held by Landlord;
5.11. Guarantor waives all its rights to receive notice of any default by Tenant;
5.12. Guarantor waives all rights of recourse against Landlord by reason of any
action Landlord may take or omit to take under the provisions of this Guaranty;
5.13. Guarantor waives all presentments, demands for performance, notices of
non-performance, protests, notices of protest, notices of dishonor, notices of non-payment, and
26U 14420-0005
300216-01 a07l17102 -4-
all other notices of any kind, including without limitation all notices of the existence, creation, or
incurring of new or additional obligations (subject to Paragraph 3, above) and any notice of
acceptance of this Guaranty, which, upon execution by Guarantor, shall immediately be binding
upon Guarantor,
5.14. Guarantor waives all duties Landlord may have to investigate the authority
of any representative, or purported representative, of "Tenant to incur any obligation or enter into
any agreement on behalf of -Tenant-,
5.15. Guarantor waives all rights it may otherwise attain by reason of Landlord's
failure to enforce, or delay in enforcing, any of Landlord's rights with respect to the Guaranteed
Obligations; and
5.16. Guarantor waives all duties Landlord may have to disclose to the
Guarantor any facts Landlord may now or in the future know about Tenant, regardless of
whether Landlord has reason to believe that any such facts materially increase the risk beyond
that which the Guarantor intends to assume or has reason to believe that such facts are unknown
to the Guarantor or has a reasonable opportunity to communicate such facts to the Guarantor.
Without limiting the foregoing, Guarantor hereby expressly waives any and all benefits
Guarantor may otherwise maintain under California Civil Code Sections 2809, 2810, 2814, 2819,
2845, 2847, 2848, 2849, and 2950 and similar laws. Guarantor acknowledges that the waiver of
the benefits of the above cited statutory provisions has the effect of eliminating certain rights and
protections which Guarantor would otherwise have including, without limitation, certain rights to
require Landlord to act in a particular manner as a condition to enforcing its rights against
Guarantor under this Guaranty, certain rights to exoneration upon a modification of the
Guaranteed Obligations, and certain rights to require the Landlord to pursue other remedies
available to it prior to pursuing Guarantor.
G. Rights Cumulative. All rights, powers and remedies of Landlord under this
Guaranty shall he cumulative and not alternative and such rights, powers and remedies shall be
in addition to all rights, powers and remedies given to Landlord by law. This Guaranty is in
addition to and exclusive of the guaranty of any other guarantor of the Guaranteed Obligations.
7. Representations and Warranties. Guarantor hereby represents and warrants that
the following are true and accurate as of the date of this Guaranty and shall be true at all times in
the future while this Guaranty is outstanding: (i) this Guaranty is executed at Tenant's request
and not at the request of Landlord; (ii) Guarantor has sufficient net worth and sufficient liquidity
of assets to enable Guarantor to promptly perform all of the Guaranteed Obligations as and when
they are due; (iii) Landlord has made no representation to Guarantor as to the creditworthiness or
financial condition of Tenant; and (iv) Guarantor has carefully read and negotiated all provisions
of this Guaranty and has consulted with competent legal counsel in connection therewith.
8. Covenant of Diligence. Guarantor covenants that it is intimately aware of
Tenant's business and financial condition and that it has conducted a thorough investigation of all
material factors regarding the making of the Lease and this Guaranty. Furthermore, Guarantor
represents that it has the resources, access, and opportunity to remain informed at all times of the
267,014e20-"S
300216-01 A07l17%02 -5-
financial status of Tenant and of all other material information relative to the Lease and
Guarantor's obligations under this Guaranty. and Guarantor covenants to remain informed
relative to all such matters as long as this Guaranty remains in effect. On the basis of the
foregoing, Guarantor hereby waives any obligation which Landlord might otherwise have as a
condition to enforcing Guarantor's obligations tinder this Guaranty, to keep Guarantor informed
relative to any information regarding the Lease, the Tenant, any security for the Lease, or any
other factors affecting the obligations of Tenant or Guarantor.
9. Subordination. In the event of Tenant's insolvency or the disposition of the assets
of Tenant, through bankruptcy, by an assignment for the benefit of creditors, by voluntary
liquidation, or otherwise, the assets of Tenant applicable to the payment of all claims of Landlord
and/or the Guarantor shall be paid to Landlord and shall be first applied by Landlord to the
Guaranteed Obligations. The Guarantor hereby assigns to Landlord all claims which the
Guarantor may have or acquire against Tenant or any assignee or trustee in bankruptcy of
Tenant; provided, that such assignment shall be effective only for the purpose of assuring to
Landlord full payment and performance of all of the Guaranteed Obligations. All promissory
notes now or hereafter evidencing any indebtedness of Tenant to Guarantor shall be marked with
a legend that such indebtedness shall be subordinate to the Guaranteed Obligations and, if
Landlord so requests, shall be delivered to Landlord. Guarantor hereby authorizes Landlord to,
from time to time, execute and file, on Guarantor's behalf, financing statements and continuation
statements and to execute such other documents and to take such other action as Landlord deems
necessary or appropriate to perfect, preserve and enforce Landlord's rights under this Guaranty.
Guarantor shall not cause or permit any person with funds invested in Tenant or any affiliate of
Tenant or Guarantor with funds loaned to Tenant to withdraw, demand or accept any repayment
of such funds from Tenant without the prior written approval of Landlord which approval shall
not unreasonably be withheld. Each such payment by Tenant in violation of this Guaranty shall
be received by the person to whom paid in trust for Landlord, and the Guarantor shall cause such
funds to be paid to Landlord immediately to be applied toward the Guaranteed Obligations. No
such payment shall reduce or affect in any manner the liability of the Guarantor under this
Guaranty; however, any such payment shall reduce the amount of the Guaranteed Obligations.
10. Governing Law -and Venue. This Guaranty shall be governed by and construed in
accordance with the laws of the State of California. For purposes of venue and jurisdiction, this
Guaranty shall be deemed made and to be performed in the City of Huntington Beach,
California. Each party authorizes and accepts service of process sufficient for personal
jurisdiction in any action against it as contemplated by this Guaranty by registered or certified
mail, return receipt requested, postage prepaid, to its address for the giving of notices set forth in
this Guarantv.
10.1. Further Assurances. Each party to this Guaranty shall execute all
instruments and documents and take all actions as may be reasonably required to effectuate this
Guaranty.
11. Further Assurances. Each party to this Guaranty shall execute and deliver all
instruments and documents and take all actions as may be reasonably required or appropriate to
carry out the purposes of this Guaranty.
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300216' 01 a07117102 -6-
12. Attorneys Fees. The prevailing party in any bankruptcy, insolvency or other
proceeding ("Proceeding") relating to the enforcement or interpretation of this Guaranty may
recover from the unsuccessful party all costs, expenses, and actual attorney's fees (including
expert witness and other consultants' fees and costs) relating to or arising out of (a) the
Proceeding (whether or not the Proceeding proceeds to judgment), acid (b) any post judgment or
post -award proceeding including, without limitation, one to enforce or collect any judgment or
award resulting from the Proceeding. All such judgments quid awards shall contain a specific
provision for the recovery of all such subsequently incurred costs, expenses, and actual attorney's
fees.
13. Modification. This Guaranty may be modified only by a contract in writing
executed by both Landlord and Guarantor.
14. Headings. The paragraph headings in this Guaranty: (a) are included only for
convenience, (b) do not in any manner modify or limit any of the provisions of this Guaranty,
and (c) may not be used in the interpretation of this Guaranty.
15. Prior Understanding . This Guaranty and all documents specifically referred to
and executed in connection with this Guaranty: (a) contain the entire and final Guaranty of the
parties to this Guaranty with respect to the subject matter of this Guaranty, and (b) supersede all
negotiations, stipulations, understandings, agreements, representations and warranties, if any,
with respect to such subject matter, which precede or accompany the execution of this Guaranty.
16. Interoretation. Whenever the context so requires in this Guaranty, all words used
in the singular may include the plural (and vice versa) and the word "person" includes a natural
person, a corporation, a firm, a partnership, a joint venture, a trust, an estate or any other entity.
The terms "includes" and "including" do not imply any limitation. For purposes of this
Guaranty, the tern "day" means any calendar day and the term "business day" means any
calendar day other than a Saturday, Sunday or any other day designated as a holiday under
California Goverment Code Sections 6700-6701. Any act permitted or required to be
performed under this Guaranty upon a particular day which is not a business day may be
performed on the next business day with the same effect as if it had been performed upon the day
appointed. No remedy or election under this Guaranty is exclusive, but rather, to the extent
permitted by applicable law, each such remedy and election is cumulative with all other remedies
at law or in equity.
17. Joint and Several Liability of Guarantor. The tern "Guarantor" as used herein
shall mean all of the undersigned and any one or more of them. The liability of each Guarantor
under this Guaranty is joint and several. Landlord may in its sole and absolute discretion
proceed against any one Guarantor without any obligation to proceed against both Guarantors.
18. Partial Invalidity. Each provision of this Guaranty is valid and enforceable to the
fullest extent permitted by law. If any provision of this Guaranty (or the application of such
provision to any person or circumstance) is or becomes invalid or unenforceable, the remainder
of this Guaranty, and the application of such provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, are not affected by such invalidity or
267i014820-0005
300216.01 a07117102 -7-
unenforceability (unless such provision or the application of such provision is essential to this
Guaranty).
19. Binding Effect. This Guaranty shall inure to the benefit of and be binding on the
successors and assigns of Landlord and Guarantor, and their heirs, personal representatives,
grantees, tenants, successors, and assigns.
20. Notices. Each notice and other communication required or permitted to be given
under this Guaranty ("Notice") must be in writing. Notice is duly given to another party upon:
(i) hand delivery to the other party, (ii) receipt by the other party when sent by facsimile to the
address and number for such party set forth on the first page of this Guaranty (provided,
however, that the Notice is not effective unless a duplicate copy of the facsimile Notice is
promptly given by one of the other methods permitted under this Paragraph), (iii) three business
days after the Notice has been deposited with the United States postal service as first class
certified mail, return receipt requested, postage prepaid, and addressed to the party as set forth on
the first page of this Guaranty, or (iv) the next business day after the Notice has been deposited
with a reputable overnight delivery service, postage prepaid, addressed to the party as set forth
above, with next -business -day delivery guaranteed, provided that the sending party receives a
confirmation of delivery from the delivery -service -provider. Each party shall make a reasonable,
good faith effort to ensure that it will accept or receive Notices to it that are given in accordance
with this Paragraph. A party may change its address for purposes of this Paragraph by giving the
other party(ics) written notice of a new address in the niamier set forth above.
21. Waiver. Any waiver of a default or provision under this Guaranty must be in
writing. No such waiver constitutes a waiver of any other default or provision concerning the
same or any other provision of this Guaranty. No delay or omission by a party in the exercise of
any of its rights or remedies constitutes a waiver of (or otherwise impairs) such right or remedy.
A consent to or approval of an act does not waive or render unnecessary the consent to or
approval of any other or subsequent act.
22. Time is of the Essence. Time is of the essence with respect to each provision of
this Guaranty.
23. Drafting Ambiguities. Each party to this Guaranty and its legal counsel have
reviewed and revised this Guaranty. The rule of construction that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation of this Guaranty or
of any amendments or exhibits to this Guaranty.
GUARANTOR:
SHIN YAMASAKI
ALISA YAMASAKI
267r014820.0005
30021b.01 a07r17i02 -�-
EXHIBIT "D"
GUARANTY OF LEASE
This Guaranty of Lease ("Guaranty") is dated as of July �, 2002 by SHIN
YAMASAKI and ALiSA YAMASAKi (collectively, "Guarantor"), whose address for notices is
5592 Castle Drive, Huntington Beach, CA 92649, in favor of ABDELWTI DEVELOPMENT
COMPANY, a California general partnership ("Landlord"), whose address for notices is 101
Main Street, Suite 400, Huntington Beach, CA 92648, Attention: Mike Abdelmuti. Guarantor
covenants and agrees as follows:
I. Recitals. This Guaranty is made with reference to the following recitals of facts
which constitute a material part of this Guaranty-
1.1. Landlord, as landlord, and PAC PACK, INC., a California corporation dba
Prospects One ("Tcnant"), as tenant, are concurrently herewith entering into an Office Space
Lease (the "Lease") with respect to certain premises commonly known as 101 Main Street, Suite
250, Huntington Beach, CA, which is located in that certain project commonly known as
Occanview Promenade.
1.2. Guarantor maintains a financial interest in Tenant but are entity separate
and distinct from Tenant. In addition, Guarantor is receiving consideration from "Tenant for
executing this Guaranty
1.3. Landlord would not have entered into the Lease with Tenant without
having received this Guaranty executed by Guarantor as an inducement.
1.4. By this Guaranty, Guarantor intends to unconditionally guarantee the full,
timely, and complete performance of all of Tenant's covenants and obligations set forth in or
arising out of the Lease (collectively, the "Guaranteed Obligations").
2. Guaranty. For valuable consideration, Guarantor jointly and severally, absolutely
and unconditionally guarantees, upon demand, to and for the benefit of Landlord, the full, timely,
and complete payment and performance of all of the Guaranteed Obligations. This Guaranty
constitutes an absolute, direct, immediate, and unconditional guarantee of timely payment and
performance, and not merely of collectability, and shall include, without limitation, all primary,
secondary, direct, indirect, fixed, and contingent obligations of Tenant to pay rent, additional
rent, late charges, common area charges, insurance, taxes, indemnifications, and other fees,
charges, sums, costs, and expenses which may be owing by Tenant at any time in connection
with the Guaranteed Obligations, as such may be modified, amended, extended, or renewed from
time to time. If a specific amount outstanding and owing by Tenant under the Lease or the
Guaranteed Obligations is determined by a Court of competent jurisdiction, that determination
shall be conclusive and binding on Guarantor, regardless of whether or not Guarantor was a party
to the proceeding in which such determination was made. If Tenant defaults in the payment of
any amount when due under the Lease, Guarantor shall, in lawful money of the United States,
pay to Landlord or order, on demand, all sums due and owing under the Lease. Additionally,
2671014820-0005
300216.01 a07l17!02
Guarantor shall assume responsibility for and shall fully perform all of the other Guaranteed
Obligations promptly upon receiving written notice from Landlord that Tenant has failed to
perform any of such obligations in accordance with the Lease_ No delay by Landlord in
providing notice of a default by Tenant or making demand hereunder will affect Guarantor's
obligations under this Guaranty. The obligations of Guarantor under this Guaranty are
independent of the obligations of Tenant or any other guarantor. The obligations of Guarantor
under this Guaranty shall be continuing and irrevocable until all of the Guaranteed Obligations
have been fully satisfied (or waived by Landlord in a writing specifically for the benefit of
Guarantor, at which time this Guaranty shall terminate and be of no further force or effect,
except as otherwise set forth herein). If at any time all or any part of any payment received by
Landlord from Tenant, Guarantor, or any other person under or with respect to the Lease or this
Guaranty is refunded or rescinded pursuant to any court order (including without limitation any
court order arising out of the insolvency, bankruptcy, or reorganization of Tenant, Guarantor or
any other guarantor), then the Guarantor's obligations tinder this Guaranty shall, to the extent of
the payment refunded or rescinded, be deemed to have continued in existence, notwithstanding
previous receipt of payment by Landlord, regardless of any contrary action by Landlord, as
though such previous payment to Landlord had never occurred (and such contrary action had not
been taken). This Guaranty shall not be affected or limited in any manner if recovery against
Tenant upon the Guaranteed Obligations (or any portion of the Guaranteed Obligations) may be
(or becomes) barred by any statute of limitations or may be (or becomes) otherwise
unenforceable (unless the Lease is unenforceable due to the Landlord's fraud. misrepresentation,
or breach of the Lease), or if the Guaranteed Obligations (or any portion of the Guaranteed
Obligations) arise(s) from transactions which may be voidable as the result of bankruptcy,
insolvency, fraudulent conveyance, receivership, or offsets not arising out of the Lease. Tills
Guaranty shall not be affected or limited in any manner by whether the Guaranteed Obligations
are (i) now or hereafter made, incurred, or created, (ii) voluntary or involuntary, (iii) absolute or
contingent, (iv) liquidated or unliquidated, and/or (v) determined or undetermined. This
Guaranty shall not be affected or limited in arty manner by whether Tenant may be liable, with
respect to the Guaranteed Obligations individually, jointly with others, primarily, or secondarily.
3. Amendment or Assignment. This Guaranty shall not be affected or limited in any
manner by (a) any assignment of, or any modification or amendment (by agreement, course of
conduct, or otherwise) to, all or any portion of any lease, agreement, instrument, and/or
document with respect to or that evidences the Guaranteed Obligations, or (b) the renewal,
extension, and/or modification, at any time, of any of the Guaranteed Obligations. By this
Guaranty, Guarantor hereby guarantees Tenant's performance of the Guaranteed Obligations as
so amended, assigned, renewed, extended, or modified whether or not such amendment,
assignment, renewal, extension, or modification is with the consent of or notice to Guarantor;
provided, however. Guarantor's obligations under this Guaranty may not be increased as a result
of any such amendment, renewal, extension, or modification which increases the obligations of'
the Tenant beyond those which were in existence prior to such amendment, renewal, extension,
or modification, unless such amendment, renewal, extension, or modification is done with
Guarantor's consent.
4. Remedies. If Tenant defaults with respect to any of the Guaranteed Obligations,
and if Guarantor does not satisfy Tenant's obligations immediately upon its receipt of written
notice of such default from Landlord, Landlord may, at its election, proceed immediately against
2671014820-00p5
300216.01 a07/17/02 -2-
the Guarantor (as if such default arose from the direct and primary obligation of Guarantor), any
other gruarantor, or Tenant, or any combination of Tenant, Guarantor, and/or any other guarantor.
Guarantor's obligations hereunder are joint and several. if any portion of the Guaranteed
Obligations terminates and Landlord continues to have any rights it may enforce against Tenant
under the Guaranteed Obligations after such termination, then Landlord may, at its election,
enforce such rights against the Guarantor. In the event of any default under this Guaranty, an
action or actions may be brought and prosecuted against the Guarantor, whether or not Tenant or
any other guarantor is joined in such action(s) or a separate action or actions are brought against
Tenant or any other guarantor. Landlord may maintain successive actions for separate defaults.
Unless and until the Guaranteed Obligations have been fully satisfied or waived in writing by
Landlord, the Guarantor shall not be released from its obligations under this Guaranty
irrespective of (i) the exercise by Landlord of any of Landlord's rights or remedies (including,
without limitation, compromise or adjustment of the Guaranteed Obligations or any part thereof),
(ii) any release by Landlord of Tenant or any other guarantor, (Ili) any such action or any number
of successive actions, or (iv) the satisfaction by Guarantor of any liability under this Guaranty
incident to a particular default. Landlord may, at its sole discretion, perform any or all of
Guarantor's obligations hereunder, in which case, Guarantor shall reimburse Landlord
immediately upon demand for all costs and expenses, including all reasonable attorneys' fees,
that Landlord incurs in performing such obligations, together with interest on those sums from
and after the date(s) they are incurred at the rate of fifteen percent (15%) per annum; provided,
however, such interest factor will supersede any default rate interest concurrently accruing under
the Lease.
5. Waivers. Guarantor hereby represents and warrants (which representation and
warranty is being relied upon by Landlord in entering into the Lease and accepting this
Guaranty) that each of the waivers set forth in this Guaranty is made with Guarantor's full
knowledge of its significance and consequences after discussion w th Guarantor's Own competent
legal counsel, which counsel has made Guarantor aware of the relevant circumstances and likely
consequences of each such waiver and has explained to Guarantor the true legal effect of each
such waiver including Guarantor's rights which Guarantor would have if it were not making such
waivers. Based on the foregoing, Guarantor acknowledges that, under the circumstances, such
waivers are reasonable and not contrary to public policy or law, and Guarantor hereby waives the
following.
5.1. Guarantor waives all rights it would otherwise have to require Landlord,
as a condition to Landlord's exercise of any of its rights under this Guaranty, to (i) proceed
against Tenant or any other guarantor, (ii) perfect, retain, protect, proceed against, or exhaust any
security that Landlord holds or may hold from Tenant, or (-Ili) pursue any other remedy in
Landlord's power. The foregoing waiver includes, without limitation, a waiver of all of
Guarantor's rights under California Civil Code Sections 2845 and 2849 or similar laws;
5.2. Guarantor waives the benefit of all statutes of limitations affecting
Guarantor's liability under this Guaranty to the extent permitted by law;
5.3. Guarantor waives all defenses which Guarantor might otherwise have to
its obligations under this Guaranty by reason of any disability of Tenant or any other person(s),
including, without limitation, the incapacity, lack of authority, death, or disability of Tenant or
26M 14820.0005
30021601 07l17102 -3-
any other person(s) or the failure of Landlord to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of Tenant or any other person(s). The
foregoing waiver includes, without limitation, a waiver of all of Guarantor's rights under
California Civil Code Section 2810 and similar laws;
5.4. Guarantor waives all defenses and rights which Guarantor might otherwise
have to exoneration under this Guaranty, including, without limitation, all rights under Califomia
Civil Code Section 2819 and similar laws, based upon any alteration, modification, compromise,
renewal, extension, or assignment of the Lease or any of the Guaranteed Obligations, whether
done with or without the knowledge and/or consent of Guarantor and Guarantor hereby grants
Landlord the right to take any such action relative to the Guaranteed Obligations without the
knowledge or consent of Guarantor without in any manner affecting the liability of Guarantor
under this Guaranty.
5.5. Guarantor waives the right to claim or assert any defense of Tenant to the
Guaranteed Obligations including, without limitation, any defense based upon failure of
consideration, accord and satisfaction, impossibility of performance, or mistake (but excluding
any defenses based on Landlord's fraud, misrepresentation, or breach of the Lease);
5.6. Guarantor waives all other defenses based on the tennination of "Tenant's
liability from any cause or the impairment of any other collateral or security for the Guaranteed
Obligations (other thaii arising out of Landlord's fraud. misrepresentation, or breach of' the
Lease);
5.7. Guarantor waives all defenses it may otherwise have against Landlord
based upon an election of remedies by Landlord;
5.8. Regardless of whether or not Guarantor makes payments to Landlord,
until the Lease has terminated and Landlord has been paid in full thereunder for a period of one
year and one day, Guarantor waives all of its rights of subrogation, contribution, and
reimbursement which it would otherwise have against Tenant in the event Guarantor suffers any
liability under this Guaranty, including, without limitation, any rights under California Civil
Code Sections 2847, 2848, and 2849 or similar laws;
5.9. Guarantor waives all its rights to detennine how, when, and what
application of payments and credits shall be made on the Guaranteed Obligations; however,
Guarantor shall be entitled to notice of how such payments and credits are applied;
5.10. Guarantor subordinates to Landlord all of Guarantor's rights to participate
in any security now or later held by Landlord,
5.11. Guarantor waives all its rights to receive notice of any default by "Tenant;
5.12. Guarantor waives all rights of' recourse against Landlord by reason of any
action Landlord may take or omit to take under the provisions of this Guaranty;
5.13. Guarantor waives all presentments, demands for performance, notices of
non-performance, protests, notices of protest, notices of dishonor, notices of non-payment, and
267i014820-0005
30021601 AG7117/02 -4-
all other notices of any kind, including without limitation all notices of the existence, creation, or
incurring of new or additional obligations (subject to Paragraph 3, above) and any notice of
acceptance of this Guaranty, which, upon execution by Guarantor, shall immediately be binding
upon Guarantor;
5.14. Guarantor waives all duties Landlord may have to investigate the authority
of any representative, or purported representative, of Tenant to incur any obligation or enter into
any agreement on behalf of Tenant;
5.15. Guarantor waives all rights it may otherwise attain by reason of Landlord's
failure to enforce, or delay in enforcing, any of Landlord's rights with respect to the Guaranteed
Obligations; and
5.16. Guarantor waives all duties Landlord may have to disclose to the
Guarantor any facts Landlord may now or in the future know about "Tenant, regardless of
whether Landlord has reason to believe that any such facts materially increase the risk beyond
that which the Guarantor intends to assume or has reason to believe that such facts are unknown
to the Guarantor or has a reasonable opportunity to communicate such facts to the Guarantor.
Without limiting the foregoing, Guarantor hereby expressly waives any and all benefits
Guarantor may otherwise maintain under California Civil Code Sections 2809, 2810, 2814, 2819,
2845, 2847, 2848, 2849, and 2950 and similar laws. Guarantor acknowledges that the waiver of
the benefits of the above cited statutory provisions has the effect of eliminating certain rights and
protections which Guarantor would otherwise have including, without limitation, certain rights to
require Landlord to act in a particular manner as a condition to enforcing its rights against
Guarantor under this Guaranty, certain rights to exoneration upon a modification of the
Guaranteed Obligations, and certain rights to require the Landlord to pursue other remedies
available to it prior to pursuing Guarantor.
6. Rights Cumulative. All rights, powers and remedies of Landlord under this
Guaranty shall be cumulative and not alternative and such rights, powers and remedies shall be
in addition to all rights, powers and remedies given to Landlord by law. This Guaranty is in
addition to and exclusive of the guaranty of any other guarantor of the Guaranteed Obligations.
7. Representations and Warranties. Guarantor hereby represents and warrants that
the following are true and accurate as of the date of this Guaranty and shall be true at all times in
the future while this Guaranty is outstanding: (1) this Guaranty is executed at Tenant's request
and not at the request of Landlord; (ii) Guarantor has sufficient net worth and sufficient liquidity
of assets to enable Guarantor to promptly perform all of the Guaranteed Obligations as and when
they are due; (iii) Landlord has made no representation to Guarantor as to the creditworthiness or
financial condition of Tenant; and (iv) Guarantor has carefully read and negotiated all provisions
of this Guaranty and has consulted with competent legal counsel in connection therewith.
8. Covenant of Diligence. Guarantor covenants that it is intimately aware of
Tenant's business and financial condition and that it has conducted a thorough investigation of all
material factors regarding the making of the Lease and this Guaranty. Furthermore, Guarantor
represents that it has the resources, access, and opportunity to remain informed at all times of the
2 67'0149?0-OOos
soot 16.01 .07-, W02 -5-
financial status of Tenant and of all other material information relative to the Lease and
Guarantor's obligations under this Guaranty; and Guarantor covenants to remain informer]
relative to all such matters as long as this Guaranty remains in effect. On the basis of the
foregoing, Guarantor hereby waives any obligation which Landlord might otherwise have as a
condition to enforcing Guarantor's obligations under this Guaranty, to keep Guarantor informed
relative to any information regarding the Lease, the Tenant, any security for the Lease, or any
other factors affecting the obligations of Tenant or Guarantor.
9. Subordination. In the event of Tenant's insolvency or the disposition of the assets
of Tenant, through bankruptcy, by an assignment for the benefit of creditors, by voluntary
liquidation, or otherwise, the assets of Teriant applicable to the payment of all claims of Landlord
and ."or the Guarantor shall be paid to landlord and shall be first applied by Landlord to the
Guaranteed Obligations. Tlie Guarantor hereby assigns to landlord all claims which the
Guarantor may have or acquire against Tenant or any assignee or intstee in hankniptcy of
Tenant; provided, that such assignment shall be effective only for the purpose of assuring to
Landlord full payment and performance of all of the Guaranteed Obligations. All promissory
notes now or herea(fer evidencing any ind0tedness of Tenant to Guarantor shall be marked with
a legend that such indebtedness small be subordinate to the Guaranteed Obligations and, if
Landlord so requests, shall be delivered to Landlord. Guarantor licreby authorizes Landlord to,
from time to time, execute and file, on Guarantor's behalf; financing statements and continuation
statements and to execute such other documents and to take such other action as Landlord deems
necessary or appropriate to perfect, preserve and enforce Landlord's rights under this Guaranty.
Guarantor shall not cause or permit any person with funds invested in Tenant or any affiliate of
Tenant or Guarantor with funds loaned to Tenant to withdraw, demand or accept any repayment
Of such funds from "Tenant without the prior written approval of Landlord which approval shall
not unreasonabiy be withheld_ Each such payinent by "tenant in violation of this Guaranty shall
he received by the person to whom paid in trust for landlord, and the Guarantor shall cause such
fluids to be paid to Landlord immediately to be applied toward the Guaranteed Obligations. No
such payment shall reduce or affect in any manner the liability of the Guarantor under this
Guaranty; however, any such payment shall reduce the amount of the Guaranteed Obligations.
10. Governing Lave and. Venue. This Guaranty shall be governed by and construed in
accordance with the laws of the State of California. For purposes of venue and jurisdiction, this
Guaranty shall be deemed made and to be performed in the City of Huntington Beach,
California. Each party authorizes and accepts service of process sufficient for personal
jurisdiction in any action against it as contemplated by this Guaranty by registered or certified
mail, return receipt requested, postage prepaid, to its address for the giving of notices set forth in
this Guaranty.
10.1. Further Assurances. Each party to this Guaranty shall execute all
instruments and documents and take all actions as may be reasonably required to effectuate this
Guaranty.
11. Further Assurances. Each party to this Guaranty shall execute and deliver all
instruments and documents acid take all actions as may be reasonably required or appropriate to
carry out the purposes of this Guaranty.
267r0148.`,0-CKW -6-
12. Attorney's Fees. The prevailing party in any bankruptcy, insolvency or other
proceeding ("Proceeding") relating to the enforcement or interpretation of this Guaranty may
recover from the unsuccessful party all costs, expenses, and actual attorney's fees (including
expert witness and other consultants' fees and costs) relating to or arising out of (a) the
Proceeding (whether or not the Proceeding proceeds to judgment), and (b) any post judgment or
post -award proceeding including, without limitation, one to enfbrce or collect any judgment or
award resulting from the Proceeding. All such judgments and awards shall contain a specific
provision for the recovery of all such subsequently incurred costs, expenses, and actual attorney's
fees.
13. Modification. This Guaranty may be modified only by a contract in writing
executed by both Landlord and Guarantor.
14. Heading . The paragraph headings in this Guaranty: (a) are included only for
convenience, (b) do not in any manner modify or limit any of the provisions of this Guaranty,
and (c) may not be used in the interpretation of this Guaranty.
15. Prior Understandins;s. This Guaranty and all documents specifically referred to
and executed in connection with this Guaranty: (a) contain the entire and final Guaranty of the
parties to this Guaranty with respect to the subject matter of this Guaranty, and (b) supersede all
negotiations, stipulations, understandings, agreements, representations and warranties, if any,
with respect to such subject matter, which precede or accompany the execution of this Guaranty.
16. Interpretation. Whenever the context so requires in this Guaranty, all words used
in the singular may include the plural (and vice versa) and the word "person" includes a natural
person, a corporation, a firm, a partnership, a joint venture, a trust, an estate or any other entity.
The terms "includes" and "including" do not imply any limitation. For purposes of this
Guaranty, the term "day" means any calendar day and the term "business day" means any
calendar day other than a Saturday, Sunday or any other day designated as a holiday under
California Government Code Sections 6760-6701. Any act permitted or required to be
performed under this Guaranty upon a particular day which is not a business day may be
performed on the next business day with the same effect as if it had been performed upon the day
appointed. No remedy or election under this Guaranty is exclusive, but rather, to the extent
permitted by applicable law, each such remedy and election is cumulative with all other remedies
at law or in equity.
17. Joint and Several Liability of Guarantor_ The tern "Guarantor' as used herein
shall mean all of the undersigned and any one or more of them. "rhe liability of each Guarantor
under this Guaranty is joint and several. Landlord may in its sole and absolute discretion
proceed against any one Guarantor without any obligation to proceed against both Guarantors.
18. Partial Invalidity. Each provision of this Guaranty is valid and enforceable to the
fullest extent permitted by law. If any provision of this Guaranty (or the application of such
provision to any person or circumstance) is or becomes invalid or unenforceable, the remainder
of this Guaranty, and the application of such provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, are not affected by such invalidity or
267/014920-0005
300216.01 a0711 NO2 -7-
unenforceability (unless such provision or the application of such provision is essential to this
Guaranty).
19. Binding Effect. This Guaranty shall inure to the benefit of and be binding on the
successors and assigns of Landlord and Guarantor, and their heirs, personal representatives,
grantees, tenants, successors, and assigns.
20. Notices. Each notice and other communication required or permitted to be given
under this Guaranty ("Notice") must be in w iting. Notice is duly given to another party upon:
(i) hand delivery to the other party, (ii) receipt by the other party when sent by facsimile to the
address and number for such party set forth on the first page of this Guaranty (provided,
however, that the Notice is not effective unless a duplicate copy of the facsimile Notice is
promptly given by one of the other methods permitted under this Paragraph), (iii) three business
days after the Notice has been deposited with the United States postal service as first class
certified mail, return receipt requested, postage prepaid, and addressed to the party as set forth on
the first page of this Guaranty, or (iv) the next business day after the Notice has been deposited
with a reputable overnight delivery service, postage prepaid, addressed to the party as set torth
above, with next -business -day delivery guaranteed, provided that the sending party receives a
confirmation of delivery from the delivery -service -provider. Each party shall make a reasonable,
good faith effort to ensure that it will accept or receive Notices to it that are given in accordance
with this Paragraph. A party may change its address for purposes of this Paragraph by giving the
other party(ies) written notice of a new address in the manner set forth above.
21. Waiver. Any waiver of a default or provision under this Guaranty must be in
writing. No such waiver constitutes a waiver of any other default or provision conceming the
same or any other provision of this Guaranty. No delay or omission by a party in the exercise of
any of its rights or remedies constitutes a waiver of (or otherwise impairs) such right or remedy.
A consent to or approval of an act does not waive or render unnecessary the consent to or
approval of any other or subsequent act.
22. Time is of the Essence. "rime is of the essence with respect to each provision of
this Guaranty.
23. Drafting Ambiguities. teach party to this Guaranty and its legal counsel have
reviewed and revised this Guaranty. The vile of construction that any ambiguities are to be
resolved against the drafting party sliall not be employed in the interpretation of this Guaranty or
of any amendments or exhibits to this Guaranty.
GUARANTOR:
SHIN YAMASAKI
ALISA YAMASAKI
117:014820-0005
3W216.01 a0?r17:02 -8-
Fair Market Rental Appraisal, April 17, 2002
Office Space within Oceanview Promenade
101 Main Street, Huntington Beach, CA 92648
ATTACHMENT #2
•
•
Lit+S (:RUUP • LOS ANGFLFS
LOCAL EXPERTISE... NATIONALLY
FAIR MARKET RENTAL APPRAISAL
Office Space within Oceanview Promenade
101 Main Street
Huntington Beach, California 92648
PREPARED FOR:
Mr. Tom Andrusky
Assistant Project Manager
Department of Economic Development
City of Huntington Beach
2000 Main Street
Huntington Beach, California 92648
EFFECTIVE DATE OF THE APPRAISAL:
April 17, 2002
INTEGRA ELLIS GROUP
,SOB NUMBER: 02029
•
NTEGRARealty Resources
Mr- Tom Andrusky
Assistant Project Manager
Department of Economic Development
City of Huntington Beach
2000 Main Street
Huntington Beach. California 92648
Dear Mr. Andrusky:
f�J
Apn1 24, 2002
Re: Fair Market Rental Appraisal:
Office Space within Oceanview Promenade
101 Main Street
Huntington Beach, California
Job No. 02029
In accordance with your request, this writing represents our fair market rental appraisal of
office space within the above referenced mixed -use complex.
It is the purpose of this report to provide our opinion of the fair market rent of the
individual office suites within this property as of the date of this report. Our opinions of
fair market rent are to be compared with the actual rent being collected within the subject
premises.
Fair market rent is defined as:
"The rental income that a property would most probably command in an open
market; it is indicated by current rents paid and asked for comparable space as of
the date of the appraisal." (The Dictionary of the Real Estate Appraisal, Page
221, "Third Edition, 1993. Appraisal Institute.)
The Redevelopment Agency of the City of Huntington Beach has provided a guarantee of
the minimum rent level on a portion of the subject office space. It is the function of this
appraisal to assist the City and Agency in evaluating the reasonableness of the rental
subsidy which is currently being paid to the subject owner for the space in question.
The following paragraphs concerning the background of the subject project, and the
formula for calculating the rental subsidy, arc based primarily on written material
provided to us by the City of Huntington Beach.
BACKGROUND
In 1991, the Redevelopment Agency entered into an Owner Participation Agreement
(OI'A) with the Abdelmuti Development Company (the Company). The agreement
established the criteria under which Abdc:lmutl would develop a mixed -use (retail and
office) complex on a site owned by the Company, located at 101 Main Street at the
northwest corner of Main Street and Pacific Coast Highway- It was agreed that the
IOCAL EXPERTISE... NATIONAL IY
20720 Ventura Boulevard • Suite 2.10 • Woodland Hills. CA 91364-6264
Phone: 818-593-7200 • Fax- 818 593 7201 • Website: www-irr corn
0- 0
Mr. Tom Andrusky
April 24. 2002
Page 2
building would encompass 48,000 square feet in four stories, with retail on the ground
floor and office on the three upper stories (16,000 sq. ft. retail, 32,000 sq. ft. office). The
office space offers spectacular views of the beach and pier, but lacks a readily identifiable
entry. Parking is available in adjacent surface lots.
At the outset of the negotiations, the Company wished to rebuild residential rental units
above the retail. The Agency opposed this because of' long experience with transient
occupancy uses in the downtown area, and offered its support for either office or
restaurant uses in the upper floors. The owner's religious convictions forbade the sale of
alcohol on the premises and, since no restaurant would accept this exclusion, the
negotiations focused on office uses.
The Agency recognized that providing office space at this location would pioneer the use
in the downtown area, and recognized the increased financial risk of an unproven office
market. However, Agency staff felt strongly that there existed a small, specialized market
for first class office use in the area, and that office uses would help support the retail and
service uses developing in the area. "To mitigate the additional risk, the Agency agreed (in
the third amendment to the OPA) to guarantee the minimum rent level on a portion of the
office space.
THE CITY AND NEIGHBORHOOD
Founded in the late 1880s, Huntington Beach was incorporated on February 17, 1909.
w Through a series of annexations, Huntin+ton Beach has grown to 28± square miles. The
population has grown from 11,000 in 1960 to more than 187,000 in 1997, as the city has
become one of the leading commercial, industrial, and recreational centers of Orange
County. Approximately 669: of the city's land is put to residential use; 72,736 housing
units are found within the city. More than 90%u of the dwellings are less than 25 years
old, and almost 60% are owner occupied.
Approximately 7% of the city's land is designated as commercial use, while 9%r• is
industrial. The Boeing Company is by far the citv_'s largest employer, with 7,000 people
employed within Huntington Beach.
Huntington Beach is well known for its recreational facilities, especially its beach, which
attract over 11,400,000 visitors annually.'
The subject property is located just across Pacific Coast Highway from the city's beach,
pier, and Pier Plaza. Other neighboring property uses include the Pierside Pavilion, just
to the south of the subject, across Main Street. This is a four-story mixed -use
development which includes ground floor retail, second floor restaurants, and two levels
'IIuntinitron fiecreh (:hamher of Commercc Cuninrunity O%'cr%iew, 2001_
C
•
Mr. Tom Andrusky
April 24. 2002
Pare 3
of offices fronting both Main Street and Pacific Coast Highway. The rear portion of the
project contains a multi -screen Edwards Cinema.
Northwest of the subject property, along Pacific Coast Highway, are some older mixed
use properties with ground floor commercial uses (including a T-shirt shop and a liquor
store) with apartment units above. The block immediately northwest of the subject,
bounded by Pacific Coast Highway, Fifth and Sixth streets, and Walnut Avenue, is the
site of a proposed mixed -use development by CIM Group. This proposed development
would include 95,000-115,000 sf of retail restaurant space, 7,000-15,000 sf of office
space, and a 140+ room Residence Inn by Marriot. To the northeast of the subject, along
Main Street, restaurants and small retail shops are the dominant use. A few of the
buildings in this area have second boor office space.
To the west, across Pacific Coast Highway, is the Huntington Beach Pier, which has two
newly -built restaurants at its foot, and another restaurant at its seaward end. The
intersection of Main Street and Pacific Coast Highway is a focus of pedestrian activity for
the commercial uses in this area, as well as for the beach -oriented recreational activities
that occur nearby.
To the northeast of the subject property is a city -owned parking tot with spaces available
for tenants and visitors to the area.
SUBJECT PROPERTY
The subject office space is within the Oceanview Promenade project, a mixed -use
development located at the northerly corner of Pacific Coast Highway and Main Street.
The site is identified as assessor's parcel no. 024-153-023.
Prior to 1991, the subject site was improved with a two-story brick masonry structure
which housed Jack's Surfboards (and other retail uses) on the ground floor, and contained
second floor apartment units. In December 1990, the building was designated as "unsafe
to occupy;" it was vacated and closed at that time.
In or around 1991, the city and the property owner reached an agreement concerning the
uses and design of a new structure to be built on -site. The now existing structure is a
four-story development with a Mediterranean architectural style, containing ground floor
retail and office uses on floors two through four. There is approximately 16,000 sf of
ground floor retail space.
Access to the office levels is available only by an elevator and staircase located at the rear
of the building. There is no lobby or easily identified entry to the office space from either
Main Street or Pacific Coast Highway.
The exterior of the building features painted stucco wall finish and a hip -style roof
mansard of Spanish tile. There is extensive use of tinted glass windows in anodized
.7
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Mr. "Cum Andrusky
April 24. 2002
Page 4
metal frames, with minimal view obstructions on both the exterior and interior of the
building. Many of the office tenancies also enjoy private patios.
Common areas of the office space include one elevator serving all four levels of the
building, as well as a stairway in the same portion of the building. Common area
corridors include commercial grade carpeting, painted drywall walls, and drop acoustic
the ceilings with recessed incandescent lighting. The second and third floors each have
two restrooms, one each for men and women. Interior finishes of the restrooms are
ceramic tile for the fluor and walls, painted drywall ceiling, and a sufficient number of
plumbing fixtures, including those which appear to comply with ADA requirements. An
additional restroom on the second floor is also equipped with showers.
Typical interior finishes of the suites include single or double -width hardwood veneer
entry doors, nine foot interior ceiling height, drop acoustic tile ceiling with good quality
recessed fluorescent lighting fixtures, painted drywall walls, low-cut commercial grade
carpeting, and extensive use of interior glass partitions.
The building is fully sprinklered.
The project was developed with a complete lack of on -site parking. An asphalt -paved
surface lot is located immediately to the north of the subject property, primarily for short
term and visitor parking use. An additional city -owned lot is found in the next block to
the northwest. Permits for parking in this, and other nearby city -owned lots and
structures may be purchased from the city at an annual rate of $125.
A summarized description of the individual subject tenancies is presented on the
following page.
The rentable areas of the tenancies were obtained from the subject rent roll and leases. It
is our understanding that, based on local convention, the rentable areas set forth below
include all interior space of the suite, 50% of the area of private balconies, and a load
factor to account for the proportionate share of hallways and restrooms.
•
•
Mr. "Dorn Andrusky
April 24, 2002
Page 5
Suite Rentable
No- Tenant Area
200 Core Holdings 2,064
220 Norman Weaver 2,669
240 Vacant 3,130
260 CMTL 1,670
290 Investment Builders 1,273
255, CMTL 2,460
275 &
285
290 Vesta Capital 1,141
300 Rangelica, Inc. 3,580
330 DoveBid 2,070
360 Martin & Assoc. 1,156
380 Congressman 1,670
Rohrahacher
355, Paige Communications 3,545
375 &
385
Comments; View Rating
Although suite has direct ocean view, it is
provided through two windows and does not
benefit entire suite. View No, 1.
Excellent ocean view. Access to corner deck
shared with Suite 240_ View No. 1.
Access to two separate decks, one deck shared
with Suite 220 and one deck shared with
Suites 260 and 280. View No. 2.
Traditional office build -out. Access to deck
shared with Suites 240 and 280. View No. 2.
l`(,-W C-aqr i"g. Access w deek shal- d with
Suites 240 and 260. View No. 2.
Industrial build -out with extensive exposed
ducts. Vinyl tile flooring. Located over the
parking lot. View No. 3.
No deck. View across Main Street, limited
ocean view. View No. 2.
Excellent ocean view. Private deck. Large
open work area, private offices with glass
partitions. View No. 1.
Excellent ocean view. Access to corner deck.
View No. 1.
Vice+° across Main Street, limited ocean view.
View No. 2.
Access to deck with view across Main Street
and limited ocean view. View No. 2.
Located over the parking lot. View across
Fifth Street_ View No. 3.
Vie", sung- I) full frontal view ioward twach and pier; 2) Southern vie.- across Main Street; 3) Northern
ieu•_
Mr. Tom Andrusky
April 24, 2002
PaL,e 6
VALUATION
Our valuation analysis has been completed using lease data gathered from other office
buildings in the subject's immediate vicinity, and also considering the general office
market conditions throughout Huntington Beach.
The comparable data which serves as our primary basis for this study is presented on
Exhibit 1, with the locations of these properties shown on the Market Data Map, which is
Exhibit 2. Our objective in this analysis is to express an opinion of fair market rent on a
per square foot (psf) basis, assuming lease terms which would be fused on lease terms
observed to be most common in this market: a full service gross type of lease. That is,
the lessor would be responsible for the payment of property taxes, insurance, utilities,
maintenance, and janitorial. Our analysis will lead to opinions for the individual spaces
within the subject premises.
A rental analysis of the subject premises relies on consideration of two basic categories of
information and assumptions:
1. Having an understanding of the subject premises, in terms of physical characteristics
of the space, the availability of' on -site and neighborhood amenities, and having a
clear concept of the contract lease terms to be used as the framework for the analysis.
2. Obtaining and analyzing, data from other office buildings concerning recent lease
rates, contract terms, amenities, and other physical attributes.
In completing our analysis, we have reviewed a recent rent roll for the subject tenancies,
and have reviewed one of the ]eases for office space within the building. The subject
lease references the tenants' obligations to pay their respective charges for electrical
usage, and further indicate that the electrical usage for each suite is separately metered
and billed directly to the tenant. The leases also specify that each tenant is responsible to
keep the respective premises "in good order and repair and in a safe, clean, sanitary,
orderly and attractive condition."
In the local market, it is most common for the landlord to accept responsibility for all
utility charges, maintenance. and janitorial services.
As we begin our valuation analysis, we start with the assumption that the subject
premises are occupied under the terms of a Full Service Gross (FSG) lease which would
require that the landlord provide the building utilities and services described above at no
additional cost to the tenant (alcove contract rent). We will express our opinion of the fair
market rent on a FSG basis, and then show adjustments which would be appropriate for
the vanous utilities and services which are the tenants' responsibilities in the subject
property.
The subject property manager informed us that the landlord is currently providing
apprommale Iv 40 parking spaces to the building's tenants at no cost to the tenants. The
0- 0
Mr. Tom Andrusky
April 24.2002
Paec 7
property manager explained that the landlord plans to discontinue this service in the near
future, at which point the tenants will need to purchase parking passes to the nearby city -
owned parking lots directly from the City of Huntington Beach. We will express our
opinion of fair market rent based on the assumption that the landlord will not provide
parking, to the tenants.
As we complete our comparison analysis with the data Summarized on Exhibit 1, we
initially focus our attention on the vacant space of Suite 240 within the subject premises.
This is dune for the purpose of identifying a sample space within the subject which can be
used as a basis for comparison. After we have completed our analysis of Suite 240, we
will examine factors for other tenancies in the building which may warrant an adjustment
to the basic rental rate derived for Suite 240.
ANALYSIS OF COMPARABLE DATA
The nine data items presented on Exhibit 1 provide a cross-section of various office
submarkets within Huntington Beach, and include a focus of directly comparable office
space in the subject's immediate vicinity. Our discussion will begin with an overview of
the office submarkets throughout the city, and will then turn to a direct comparison
analysis, focusing on the three buildings which are most similar to, and most competitive
with, the subject property.
Item No. 4 is the Peter's landing project at the western extremity of the City of
Huntington Beach, in the Huntington Harbor area. The project is oriented to maximize
the views of the harbor. Ample free parking is available on a surface lot which surrounds
the commercial structures. This property is in a relatively isolated location from a
business opportunity standpoint. This property is, therefore, inferior to the subject in
terms of neighborhood location.
Item No. 5 is the Huntington Pacifica, a three-story Beach Boulevard office building
located in an area of mixed commercial and auto service uses_ The property is inferior to
the subject in terms of age, quality, condition, and mix of surrounding land uses. This
building is clearly inferior to the subject property in terms of rent potential.
Item No_ 6 is the Plaza at Huntington Beach, a high-rise building at the southwest corner
of Beach Boulevard and Warner Avenue, an appealing business location. It does not have
the view amenity which is available to the subject. The neighborhood location of this
property appeals to a different type of tenancy. Given the subject's orientation to the
ocean views and surroundings, we believe it can achieve rents which are relatively
comparable to the asking rates at this property.
Item No. 7 is Hrintin�ztun F.xecutive Park, a thnc-story garden style office complex built
around a man-made pond. The building quality is infenor to the subject, as is the location
and overall huildinL, design. Althouih this building provides ample free parking on a
•
Mr. Tom Andrusky
April 24, 2002
Page 8
surrounding open lot, the overall appeal of the project indicates rent levels which are
inferior to those which could be achieved by the subject.
Item No. 8 is the Seacliff Office Park, located just north of the Huntington Beach City
Hall. This property consists of five two-story garden -style office buildings surrounding a
man-made pond. The asking rent at this property reflects rental rates which are inferior to
those achievable at the subject.
Item No. 9 is the One Pacific Plaza, located in the premier business park location in
Huntington Beach. This project has immediate freeway access, several Class A mid -rise
and high-nse office structures, and benefits from a complementary mix of restaurant and
other nearby retail uses. Given the locational aspects, as well as the building quality, it is
our opinion that the indicated rent psf is superior to that which the subject could achieve.
The analysis of the peripheral data items presented above indicates that the appropriate
range of rents is clearly above $1.95 FSG, but below $2.40 FSG. We now turn to the
three office projects in the subject's immediate vicinity for the purpose of refining our
estimate of market rent.
Item no. 1 is the Pierside Pavillion situated immediately across the street from the
subject, at the easterly corner of Pacific Coast Highway and Main Street. This building
forms the easterly gateway entrance to the city at Main Street. This project contains
14,462f sf of office space on the third and fourth floors, with a variety of retail and
restaurant uses located on floors one and two.
Leases in the past 21 months have generally been in the $2.00 to $2.25 psf range.3
Because of the ample availability of parking within the project, two parking spaces per
800 sf office space are provided at no additional charge. The leasing practice at this
building calls for rentable area to be determined by calculating the usable area of the
suite, adding a 10% load factor for common areas, and adding 33% of the area of
adjoining private balconies.
"This building is regarded as Superior to the subject because of the condition and quality of
the office space, and because of the availability of on -site parking, some of which is
provided free of charge. Design features of the two buildings are judged to be roughly
offsetting. The subject property enjoys a superior design of windows and balconies for
maximizing the available view of the coastline, while the Pierside Pavillion has a superior
entrance for the office portion of the project. In an overall sense, we regard the Pierside
Pavillion as being slightly superior to the subject, and believe that the recent and
y We note that Suite 118 in the Pierside Pavilion will lease for $1_08 psf, commencing May 1, 2002- The
reason for the Iouv rent in this suite is Ihat the space has no exterior windows The space has one window
which faces the hallway.
•
is
Mr. Tom Andrusky
April 24, 2002
Pave 9
anticipated rents (in the $2.00 to $2.25 psf range) are slightly superior to the rents which
are achievable at the subject.
Item No. 2 is the Team Building, at the westerly corner of Main Street and Olive Avenue.
This is less than two blocks north of the subject. The building is predominantly retail, but
also includes 7,000 sf of office space. There have been four lease transactions in the last
nine months. These were leases of very small spaces between 220 and 343 sf, which
were ]eased at rental rates between S2.3r) and $2.50. The tenant in Suite N, a space of
730 sf, signed a two-year lease in May 2000 at $1.58 psf. This tenant will sign a new
lease for the same space in May 2002 at $2.18 psf. Lease terms here are normally one to
two years. Lease rates in this building include all services except janitorial. The location
of this property is deemed to be slightly inferior, since it is almost two blocks inland from
the beach and does not enjoy the same view benefits as the subject. It is slightly superior
in terms of quality and condition. Although this property does not provide janitorial
service, lease rates are higher here on a psf basis than would be achievable at the subject
property, due to the fact that the suites are significantly smaller.
Item No. 3 is the Plaza Almeria, located at the northerly corner of Main Street and Olive
Avenue. Construction of this building is was completed in the Fall of 1999. Asking rates
in 1999 were quoted at $2.25 psf, FSG, while the actual leases were identified as $2.00
psf, FSG. A 1,400 sf space was ]eased in March 2001 at $2.35 psf, FSG. Janitorial
service is provided three days a week at no charge. Parking is available within the
building in a subterranean garage at $50 per month for unreserved space. This property's
location and view amenity are regarded as inferior to the subject. This newer building
features attractive common area corridors and interior office finishes, as well as a
superior entrance to the office portion of the project. Overall, this property is slightly
superior to subject property.
There is one other similar mixed -use property located in close proximity to the subject at
200 Main Street. Construction of this building, which features ground floor retail and
restaurant space and second floor office space, was completed in 1991. When the
landlord began leasing out office space in 1991, the rent was $1.50, FSG. No janitorial
service is provided at this building. In an apparent effort to retain his tenants, the
landlord has maintained the rental rate of S1.50 through the present time. It is our
opinion that 51.50 represents below market rent for this property and for the subject.
Based on our analysis of these nearby comparables, as well as consideration of the other
items referenced, we have reached the opinion that the vacant space of Suite 240 at the
subject property has a fair market rent of 2 25 psf, FSG. This rate would assume the
following lease terms:
• Tenant improvement allowance for an incoming tenant for only new paint and
wallcoverinas. estimated to he less than $2.00 psf.
• Length of lease term to be between three years and five years_
Mr. Tom Andrusky
Apri 124, 2002
Page 10
• Full service calculations based on base year expenses, with tenant responsible for
expense increases above base year level.
Considering this conclusion for Suite 240, we have considered the differences for other
spaces within the subject building and have reached the conclusions summarized on
Exhibit 3, which identifies our opinion of fair market rent for other spaces within the
building.
The conclusions developed on Exhibit 3 are presented as a comparison to contract lease
rates. This comparison is summarized on Exhibit 4.
In reviewing the results of our analysis and the presentation of our conclusion, the
following points should be specifically recognized:
• Source documents concerning the actual occupancy and income levels at the subject
property included the owner's rent roll of April 2002 and a copy of the Core Holdings
lease for Suite 200.
• Information provided to us concerning the owner's participation agreement (OPA)
was silent on the issue of whether or not the office tenancies should be configured for
individual electrical metering, thereby allowing the owner to require that tenants pay
for their own electrical usage. The final comparison of summary (Exhibit 4) reflects
our opinion of market rent on the assumption that tenants continue to pay for their
own electrical usage. We express no opinion about whether this practice is consistent
with, or permissible under, the terms of the OPA.
• The lease reviewed requires the tenants to provide for their own janitorial and
cleaning services. Comments provided above concerning electrical charges would
also apply to the issue of janitorial services.
• We requested building plans from both the client and the tenant. However, we did
not receive any building plans with dimensions. Therefore, the square footage figures
utilized in our analysis are based on the assumption that the rent roll is accurate in this
regard. Our conclusions are subject to review upon receipt of building plans, which
would allow us to independently calculate the rentable areas of the spaces.
• The subject property manager informed us that the landlord is currently providing
approximately 40 parking spaces to the building's tenants at no cost to the tenants.
The property manager explained that the landlord plans to discontinue this service in
the near future, at which point the tenants will need to purchase parking passes to the
nearby city -owned parking lots directly from the City of Huntington Beach. Our
conclusions of fair market rent are based on the assumption that the landlord will not
provide parking to the tenants.
To make the adjustment for the electrical and janitorial expense categories, we
interviewed the owners of other local office buildings, and reviewed the published results
Mr. "Tom Andruskv
April 24, 2002
Page 11
of expense studies conducted by the Building, Owners and Managers Association
(BOMA), as well as the Institute of Real Estate Management (IREM). Based on the data
gathered, it is our opinion that an appropriate adjustment for the requirement of the tenant
paying for his own electrical usage, is to reduce the face rate of the rental obligation by
$0.20 psf per month. The adjustment for the requiring the tenant to pity for janitorial
services is estimated at $0.10 psf per month.
This report was prepared under the guidelines of the Uniform Standards of Professional
Appraisal Practice. Since it considered only the fair market rental value of the subject
property, it is considered to be a limited appraisal analysis. This document has been
prepared as a summary appraisal report, with references made to the attached appraisal
certification at the end of this document.
We appreciate the opportunity to be of service to the City of Huntington Beach. If you
have any questions or comments concerning this report or any related subject matter,
please feel free to call.
Respectfully submitted,
INTEGRA ELLIS GROUP
John G. Ellis, MAI
State Certification No. AGO07279
JGE-bj
Distribution: Addressee — Iltree. Copies
/J� 141-4 r�
Aaron Z. Aftergut
Exhibit 1
Summary of Office Lease Comparables
Cite Of Huntington Reach
Coaip.No
Area
Lease
lease
Unll
Effective
Parkingnnsite Tyre Parting
Rrnurks
51;ip Page Burkiing 11)rAddress/AP`
Year Built
(: sf)
Stones
Occupancy
Date
Type
Sim (R A.)
Ixase Term
RenVSq 171
Ratio
Fee charge
I
F'icnide Pesilrna
19%
14.462
4
100%
5102
FSG
935 sf
2 years
$1 68
Yes.
Scbierr2nean,
2,668 sf nn I" floor availabk fa soblease
300 r,ciric f rr,,a I lu r
of nffi;e
7411
FSG
R(Ifl sf
? )cart
$? 00
Ample
2 per RM sf free at S I M per %f
I lur nglnn Reach
76 6W
40
FSG
1.012 sf
3 years
$2 15
024.154.017
total
9M
FSG
800 sf
2 }cars
$2 25
7r00
FSG
795 sf
2 years
f2 2S
Team Building
I991
7.000
2
100%.
902
FSG
730 sf
2 years
$2.18
No.
.'Norse
landlord does rsos prnvuk janitorial
221 .N,nn Streti
of office
2R12
FSG
343 sf
1 year
S2 19
Across street
service or parking
Hnaergtn•i Brach
2r02
FSG
220 tf
I rear
$2 50
C24.147.019
I Ml
I S(i
230 sf
I ye.ir
$2 i9
_
7101
FSG
260 sf
I year
S2.40
3
I'lara Aloxna
10"
10.900:
4
100%
1RI1
17SG
1.400 sf
4 years
S2 35
Yes.
Stnicrure.
Janitniial service included. 3 days lxr
301.1IainStreet
of office
Arnple
S501munlh
week
1lumingrnn Reach
0 24. l 44 -U)1
4
Pcle: S lanl:nF
1979
40.w):
2
777E
4102
FSG
1.738 sf
I )car
SI 7.5
Yea
Open
Asking $I 95 fa hnih nnnna waxer view
:640 Pacific Cwxl l lwv
Avail
FSG
1.134
$I 95
4 per 1,000 sf
No charge
socks and parking lot virw sutcs
ilunwigion Be`c's
Avail.
FSG
2.370
$1,95
178.4-11-012
Avail.
FSf;
1.590
$195
Avail.
FSG
1,021
$1,95
Avail.
FSG
575
$1,95
5
Flunimg;un Pm,Sca
1992
41.950
3
87%
W2
FSC;
759 sf
3 yeas
SI 69
Yes
Open
Inicnof site located between service and
IU7" [kna, Rlsd
Avail
MW Sf
SI 65
4 per I.00fhf
No(hargr
sernrxlar) commercial uses
Ile.^,rnprnnlle.0i
Avml
1.640sf
11,65
159-031-013
Avail
759sf
$165
6
The Plata at Ilunwsgron licach
1981
210.000
12
80%
Avail
FS<;
Varies
Vanes S2 00-52 25
Yes
Suucnirc
ASksng S2 M for I" noor office space
17011 Beach Rlvd
3 4 per ISM
No charge
Asking $2 fb for all other floors
Iluniingion Reach
7
IEnnlington Ftiecw sc f'ark
1974
110.01A1
2
92%
Mud.
1'SG
Varies
1.3 years $1 65-S1 75
4 rxr 1.000
Opcn
Asking SI 75 for suite% with pna:l sic%,
:6052.16169 Re_eh RI%'d
NO c11.1rge
Asking Sl 65 fa Suitcs withriul rxind view
Hunlingto:i Bcach
Typical suites are 400 - 2.0(r1 sf
[07-782-004.007
8 SeaChff Office Park 1979 136,41IR 2 95% Avail FSG Vanes Varies SI 55 A per 1.000 Orxn No preit%iurn for runes with pond view
2120-2132 Nail St Nn charge
Iluntington Reach
02?-[JU1 -U IU (pixtion)
9 Une Pacific Plata I98') 189,609 12 100% FSG Varies Varies 52 40 4 per I,O0I Siniciure Space on I I and 12 flours nughi
7755 Center Ave S251mo unres bccume avalUble, asking rent would
Ifurtington Reach 540/ nso res be S2 40
142.342-017
Sourcc Integra Ellis Grmtp. April 2IN12
..... 1. i . .
Suite
No.
200
220
240
260
280
255,
275 &
285
290
300
330
360
380
355,
375 &
385
Exhibit 3
Oceanview Promenade
Conclusions of Fair Market Kent
Adjusonews (PSF) for
Rent PSF
Cvntrne►ats
Rent_PSF, FSG Electricity,
Janitorial
LAdlusted)!
View No_ 1
$2.30 $.20
5.10
$2.00
View No. 1
$2.30 $ 20
$A()
$2.00
View No. 2
$2.25 $.20
$-10
$1.95
View No. 2
$2.25 5.20
$-10
$1.95
View No. 2
$2.25 5.20
$-10
$1.95
View No. 3
$2.15 5.20
$AO
$1.85
View No. 2
$2.25
$.20
SAO
$1.95
View No. 1
$2.30
$.20
SAO
$2.00
View No. 1
$2.30
$.20
SAO
$2.00
View No. 2
$2.25
$.20
$.10
$1.95
View No- 2
$2.25
5.20
$.10
S I.95
View No. 3
$2.15
5.20
$.10
$1.85
Adjus[cd ter atsunre [cnan[ pay., for individual cict[nca] and jar3i[onal
Scrum: Inlegra P:Ili% Group, Conclumovs ellective April 17, 2002
Exhibit 4
Oceanview Promenade
101 Main Street
Huntington Reach, California
Comparison of Current and Fair Market Rents
Current !..case Rrrte!
Opinion of Fair Market Rent
.Suite
Lease
Rentable
Noy.
Tenont
Expiration!
Area js t
PSF
Total
PSF
Total
200
Core Holdings
06/30/04
2,064
$1.85
$3,818.(X)
S2.00
S4,128.00
220
Norman Weaver
01/31/05
2,669
$1.95
$5,205.(H)
S2.00
S5,338.00
240
Vacant
N/A
3,130
S0.00
$0.00
S 1 95
SG,103.50 •
260
C%1'1*I_
06/30/03
1,670
$1.80
$3,(H)6.(X)
$1.95
S3,256.50
280
Investment Builders
03/21/05
1,273
$1.85
$2,355.05
$1.95
$2,482.35
255.
CMTl-
06/30/03
2,460
$1.70
$4,182.(X)
$1.85
$4,551.00
275
285
290
Vesta Capital
03/31/04
1,141
$1 85
S2,1 1 1 00
$1.95
$2,224 95
YN)
Frangclica, Inc
03/31/04
3,580
$1.90
$6,802 00
S2.00
S7,160.00
330
Dovel3id
03/31/04
2,070
$1.90
$3,933 00
$2.00
$4,140.00
360
Martin & Assoc.
12/31/02
1,156
S 1.80
$2,080 00
$1.95
S2,254.20
380
C noressman Rohrahacher
12/31/02
1,670
S1.80
$3,006 00
$1.95
S3,256.50
355.
Paige Communications
00/30/05
3,545
$1.73
$6,128.00
$1.85
$6,558.25
375 &-
•
385
bared on capvncr's rent roll dated April 2002
Source: Integra I-Ilis Group; Conclusions effective April 17. 2002.
Oceanview Promenade
101 Main Street
Front of subject property
Photo taken on April 17, 2002.
Pacific Coast Highway at Main Street, facing
northwest, subject at right
Photo taken on April 17, 2002.
Main Street at Pacific Coast Highway, facing
northeast, subject at left
Photo taken on April 17, 2002.
-ach, California
Rear of subject property
Photo taken on April 17, 2002.
Pacific Coast Highway at Main Street, facing
southeast, subject at left
Photo taken on April 17, 2002.
Main Street, facing southwest, subject in background
at right
Photo taken on April 17, 2002.
Oceanview Promenade
101 Main Street
Huntington Beach, California
Suite 200
Photo taken on April 17, 2002.
Suite 240
Photo taken on April 17, 2002.
View from deck shared by Suites 240, 260 and 280
Photo taken on April 17, 2002.
View from Suite 200
Photo taken on April 17, 2002.
View from deck shared by Suites 240 and 220
View from Suite 355, 375 and 385
Photo taken on April 17, 2002.
Oceanview Promenade
Suite 300
Photo taken on April 17, 2002.
View from deck of Suite 300
Photo taken on April 17, 2002.
101 Main Street
each, California
Suite 300
View from deck of Suite 330
Photo taken on April 17, 2002.
Comparable Rental Item No. I
Comparable Rental Item No. 2
Comparable Rental Item No. 3 Comparable Rental Item No. 4
HUBCAPS
pew c� s
Comparable Rental Item No. 5
Comparable Rental Item No. 6
?'
,�� ,��_ � IHi; U1F,1!m
I
APPRAISAL CERTIFICATION
We certify that, to the hest of our knowledge and belief:
• The statements of fact contained in this report are true and correct.
• The reported analyses, opinions, and conclusions are limited only by the reported assumptions
and limiting conditions, and are our personal, unbiased professional analyses, opinions, and
conclusions.
• We have no present or prospective interest in the property that is the subject of this report, and
we have no personal interest or bias with respect to the parties involved
+ Our compensation is not contingent upon the reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value estimate, the attainment of a
stipulated result, or the occurrence of a subsequent event.
• The appraisal assignment was not based on a requested minimum valuation, a specific valuation
or the approval of a loan.
• Our analyses, opinions, and conclusions were developed, and this report has been prepared, in
conformity with the requirements of the Uniform Standards of Professional Appraisal Practice;
and the Standards of Professional Practice of the Appraisal Institute.
• No one provided significant professional assistance to the persons signing this report.
• The use of this report is subject to the requirements of the Appraisal Institute relating to review
by its duly authorized representatives_
• As of the date of this report, John G. Ellis, MAI, has completed the requirements of the
continuing education program of the Appraisal Institute.
• As of the date of this report, John G. Ellis, MAI (State Certification No. AG007279) has
satisfied the requirements as a Certified General Real Estate Appraiser, licensed by the State of
California.
+ We have personally inspected the property which is the subject of this report.
ohn G. Ellis, MAI Aaron Z. Aftereut
State Certification (\o_ AG0072179
JOHN G. ELLIS, MAI
EXPFRIE NCE:
Mr. Ellis has provided real estate appraisal services in Southern California continuously since
1980. He has completed a wide range of specialized studies including value diminution (from
both internal and external influences), market demand, feasibility, severance damages and special
henefits, investment analysis, assessment allocation, reuse analysis, and the valuation of partial
interests including leasehold, leased fee, possessory interests, and minority interests. In addition,
he is an active instructor in the presentation of appraisal courses and seminars, and served as the
President of the Southern California Chapter of the Appraisal Institute for the year 2000. Mr. Ellis
has given expert testimony in Federal and Superior Courts on more than two dozen occasions. He
also provides appraisal reviews and consultation services when needed, and is an experienced
arbitrator. Mr. Ellis serves a client base which includes lending institutions. public agencies,
corporate and individual property owners, and the legal profession.
Selected property types which Mr. Ellis has appraised include office buildings, shopping centers,
industrial buildings, apartment and condominium complexes, mobile home parks, hotels, motels,
restaurants, N)wlina alleys, gas stations, motion picture and performing arts theaters, cold storage
and food processing facilities, parking structures, industrial and residential subdivision acreage,
agricultural property, waterfront property, shipping terminals, and residential estates.
INTEGRA fiLI_IS GROUP, 1996 to Present. President of Ellis Group, Inc. from 1996 to 1999;
company merged into Integra Ellis Group in 1999. Mr. Ellis is now the Los Angeles Managing
Director with responsibility for appraisals, related professional services, and firm management.
Lea Associates, Inc.. 1980 to 1996. Partner and Senior Vice President responsible for a full range
of real estate analyses, appraisals, expert testimony, and staff management.
EXPERT TESTIMONY AND Coum, APPOINTi4IFNTS
Qualified as an expert witness in real estate matters and has testified before:
Superior Courts:
Los Angeles County
Orange County
Riverside County
San Bernardino County
Third Judicial Disttict, Alaska
United States District Court
United States Bankruptcy Courts:
Central District of California
Southern District of California
Arbitration Hearings:
Los Angeles County
Orange County
San Diego County
Rent Control Boards:
City of Santa Monica
City of West Hollywood
City of Carson (MRRB)
Tax Appeal Boards:
Los Angeles County
Orange County
Court -appointed appraiser. I_,os Angeles County Superior Court
•
•
JOHN (;<. ELLIS, MAI
EmCATION
Successful completion of the following Appraisal
InstitutclAmencan Institute of Real Estate Appraisers'
courses, teview standards, and examinations:
Comprehensive Examination
Income Property lXinonstration Report
Standards of Professional Practice
Real F-state Investment Analysis
Valuation Analysis and Report Writing
Case Studies in Real rstaic Valuation
Capitalization "theory and Techniques. Parts I. 11. III
Real Estate Appraisal Principles
Basic Valuation Pnxedures
Recently attended seminars, workshops and other courses.
Appraiser's Role in Redevelopment
Impact of Drtnmental Conditions
Analysis of Retail Properties
Appraisal of Residential Subdivisions
Economic Forecast workshops
California Real Estate Law
Valuation of Minorrry Interests
Financing for Real Estate Projects
The New Home Market in Southern California
Litigation Seminar
I -and Valuation in Southern California
Construction Cost Analysis
University of California, Los Angeles, Bachelor of Arts Degree in Business/Economics (1981)
COURSE AND SENUNAR INSTRUCTOR
Income Property Appraisal Course; U.C.L.A. Extension
Capitalization "Theory and Techniques, Part A, Course; Appraisal Institute
Various seminars written for and presented to the Appraisal Institute, the International Right of Way
Association, the International Association of Assessing Officers, U.C.L.A., and California State
University at Northridge
ASSOCIATIONS
Member, Appraisal Institute, MAI designation No. 7337; active involvement in the Board of Directors
and on various committees for the Southern California Chapter.
Certified General Real Estate Appraiser, Office of Real Estate Appraisers, State of California.
Certificate No. AG007279
Licensed Real Estate Broker, State of California, Identification No. 01213329
Member, International Right of Way Association
•
.101-IN G. I:LLIS, MA1
CLIENTS (Partial List)
Public Agencie.
Cities and Redevelopment Agencies-
Arcadia l.ynwcwd
Buena Park Montclair
Carson Ontario
Cudahy Palmdale
El Monte Pasadena
Glendale Riverside
lawthorne Rosemead
Huntington Beach Santa Monica
Inglewood Seal Beady
La Habra Stanton
La Vcme Temecula
Long Beach Upland
I.os Angeles West H0llyw0cx1
School Distncts
Anaheim City Long Beach Unified
Castaic Union Paramount Unified
Fountain Valley San Gabriel Unified
Las Virgencs Unified Simi Valley Unified
County of Los Angeles, Community Development Commission
I,os Angeles County Metropolitan "Transportation Authority
Los Angeles County Office of Education
Metropolitan Water District
Change County Transportation Authority
Port of Long Beach
Regents of the University of California
Santa Monica Mountains Conservancy
Staic of Califomia, Department of Transponanon
Trust for Public Land
U S Depanmen[ of the Army, Corps of Engineers
U S. Dcpanmem of Energy
ii_S Department of Justice
U-S General Services Administration
Carrmratioris
Alamo Rent-A-Car
Amwest Surety Insurance Company
ARCO
B P (Arco)
Catellus Development
Chevron U S_A_, Inc.
Coca Cola Bottling Company. Los Angcle�
Dames & Moore
Deutsch Company
Exxon Company. U S A
Fidelity National Title Insurance Company
Heller Financial
llowwd Hughes Properties
Jackson National Life Insurance Co.
I-atwat Company
Marketplace Properties
Occidental Petroleum/Ciiies Service
Pacific Pipeline System, Inc.
Parsons Engineering
Paslia Group
'T'rcor Titic Insurance Compan)
Trammel Crow Company
"Transamerica Title Insurance Company
Attorney%
Anderson, MCPharlin & Conners. LLP, Los Angeles
Avila & Putnam. Los Angeles
Bacalski, Byrne & Koska, San Diego
Berman, Berman & Berman, LLP, I os Angcics
Bottum & Feliton, Los Angeles
Bryan Cave, LLP, Los Angeles
Carlsrnith. Ball, Las Angeles
Cox. Castle & Nicholson. LLP, Los Angeles
Demetriou, Del Guercio, Springer & Moyer, LLP. Los Angeles
Folger, Levin & Kahn. LLP, Los Angcics
Ford, Walker, Ilaggerty & Behar, long Beach
Fox & SOliagi. LI: P, Los Angeles
Frandzel. Robins, Bloom & Csato. Law Corp, Los Angeles
Fulbnght & Jaworski. LLP, Ws Angeles
Ilaighi, Brown & Bonesiecl, I.1-P, Santa Monica/Sania Aria
Harding, Iarmore, Kutcher & Kocal. Santa Monica
[tell & Manclla. LLP, Los Angelcs/Ncwport Beach
Kaplan, Kenegos & Kadin, Beverly Hills
Knopfler & Robertson, Woodland Hills
Norby & Brodeur, Torrance
O'Melveny & Myers, LI.P, I.os Angeles
Parilla, Miliizok & Shedden, LLP, Irvine
Parsekian & Gnder, Newport Beach
Pillsbury Winthrop. Los Angeles/Costa Mcsa
Poindexter & Doutre, Inc., Los Angeles
Pries, Postel & Parma. Santa Barbara
Richards, Watson & Gershon, Los Angeles/Brea
Rodi, Pollock, Peaker. Galbraith & Cahill. Los Angeles
Rutter, Hobbs & Davidoff, Inc_, I os Angcics
Senn, Palumbo, Meulcmans, 1-I.11. San Francisco
Sidlcy, Austin, Brown & Wood, Los Angeles
Sulmeyer, Kupetz, Baumann & Rothman, Los Angcles
Weston, Benshoof, Rochcfort, Rubalcava & hlacCutsh,
Los Angeles
Wilner, Klein & Siegel. Beverly Hills
Wolf, Rifkin & Shapiro, LI,P, Los Angeles
Financial Institutions and Investment Fiduciaries
AEGON USA Realty Advisors
American Savings & Loan
Bank of America
City National Bank
Clarion Partners
Community Bank
Federal Deposit Insurance Corporation
General Bank
General Mortgage Acceptance Corporation
Home Savings of America
Imperial Savings and Loan
J.P. Morgan Investment Management
Metiobank
Mitsubishi Bank
Price waterhouse Coopers
Southern California Savings
Union Bank
Universal Bank
Welk, Fargo Bank
0 0
RCA ROUTING SHEET
INITIATING DEPARTMENT: Economic Development
SUBJECT: Approval As To Form: Lease Between Abdelmuti
Development Co. and Pac Pack Inc., a California
Corporation dba Prospects One
COUNCIL MEETING DATE: August 5, 2002
RCA ATTACHMENTS
STATUS
Ordinance (w/exhibits & legislative draft if applicable)
Not Applicable
Resolution (w/exhibits & legislative draft if applicable)
Not Applicable
Tract Map, Location Map and/or other Exhibits
Not Applicable
Contract/Agreement (w/exhibits if applicable)
(Signed in full by the City Attome
Not Applicable
Subleases, Third Party Agreements, etc.
(Approved as to form by City Attome
Attached
Certificates of Insurance (Approved by the City Attome)
Not Applicable
Financial Impact Statement (Unbud et, over $5,000)
Not Applicable
Bonds (If applicable)
Not Applicable
Staff Report If applicable)
Not Applicable
Commission, Board or Committee Report (If applicable)
Not Applicable
Findings/Conditions for Approval and/or Denial
Not Applicable
EXPLANATION FOR MISSING ATTACHMENTS
REVIEWED
RETURNED
FORWARDED
Administrative Staff
Assistant City Administrator Initial
City Administrator Initial
City Clerk
)
EXPLANATION FOR RETURN OF ITEM:
RCA Author: Tom Andrusky x1530