<PAGE>
REGISTRATION NO. 333-13153
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 26, 1996.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BASIC U.S. REIT, INC.
(Exact name of registrant as specified in governing instruments)
7850 NORTHWEST 146TH STREET
SUITE 308
MIAMI, FLORIDA 33016
(Address of principal executive office)
CARL MAYNARD
PRESIDENT
BASIC U.S. REIT, INC.
7850 NORTHWEST 146TH STREET
SUITE 308
MIAMI, FLORIDA 33016
305-556-7162
(Name and address of agent for service)
------------------------
COPIES OF COMMUNICATIONS TO:
CLINTON A. STUNTEBECK
Schnader Harrison Segal & Lewis
Suite 3600, 1600 Market Street
Philadelphia, PA 19103
215-751-2034
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT HAS BECOME EFFECTIVE.
------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
BASIC U.S. REIT, INC.
CROSS-REFERENCE SHEET SHOWING LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS OF FORM S-11
REGISTRATION STATEMENT
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
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<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus..................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.......................... Outside Front Cover Page; Prospectus Summary; Risk
Factors
4. Determination of Offering Price...................... Plan of Distribution
5. Dilution............................................. **
6. Selling Security Holders............................. Not Applicable
7. Plan of Distribution................................. Outside Front Cover Page; Plan of Distribution
8. Use of Proceeds...................................... Prospectus Summary: Use of Proceeds
9. Selected Financial Data.............................. Pro Forma Selected Financial Information
10. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ Management's Discussion and Analysis of Pro Forma
Results of Operations and Pro Forma Financial
Condition
11. General Information as to Registrant................. Prospectus Summary; Business; Certain Provisions of
Maryland Law and of the Corporation's Amended and
Restated Articles of Incorporation; Additional
Information
12. Policy With Respect to Certain Activities............ Prospectus Summary; Policies With Respect to Certain
Activities; Description of Capital of the
Corporation; Additional Information
13. Investment Policies of Registrant.................... Prospectus Summary; Business; Policies With Respect
to Certain Activities
14. Description of Real Estate........................... Prospectus Summary; The Properties
15. Operating Data....................................... Prospectus Summary; The Properties
16. Tax Treatment of Registrant and Its Security
Holders............................................ Prospectus Summary; U.S. Federal Income Tax
Considerations; Canadian Federal Income Tax
Considerations
17. Market Price of and Dividends on the Registrant's
Common Equity and Related Stockholder Matters...... Prospectus Summary; Risk Factors; Policies With
Respect to Certain Activities; U.S. Federal Income
Tax Considerations; Distribution Policy
</TABLE>
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<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING LOCATION IN PROSPECTUS
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18. Description of Registrant's Securities............... Description of Capital of the Corporation
19. Legal Proceedings.................................... Legal Proceedings
20. Security Ownership of Certain Beneficial Owners and
Management......................................... Security Ownership of Certain Beneficial Owners and
Management
21. Directors and Executive Officers..................... Management
22. Executive Compensation............................... Management
23. Certain Relationships and Related Transactions....... Management
24. Selection, Management and Custody of Registrant's
Investments Management............................. Outside Front Cover Page of Prospectus; Prospectus
Summary; Policies with Respect to Certain
Activities; Management
25. Policies With Respect to Certain Transactions........ Conflicts of Interest; Certain Provisions of Maryland
Law and of the Corporation's Amended and Restated
Articles of Incorporation and Bylaws
26. Limitations of Liability............................. Risk Factors; Certain Provisions of Maryland Law and
of the Corporation's Amended and Restated Articles
of Incorporation and Bylaws
27. Financial Statements and Information................. Pro Forma Selected Financial Information; Financial
Statements
28. Interests of Named Experts and Counsel............... Experts; Legal Matters
29. Disclosure of Commission Position on indemnification
of Securities Act Liabilities...................... Certain Provisions of Maryland Law and of the
Corporation's Amended and Restated Articles of
Incorporation and Bylaws
</TABLE>
<PAGE>
2,740,000 SHARES
BASIC U.S. REIT, INC.
COMMON STOCK
------------------
Basic U.S. REIT, Inc., a Maryland corporation (the "Corporation"), intends
to qualify as a real estate investment trust ("REIT") under United States
federal income tax laws. The Corporation will sell 2,740,000 shares (the
"Offering") of its common stock (the "Common Stock") for $27,400,000. All of the
Common Stock offered in the Offering must be sold for the Offering to be
consummated.
ALL REFERENCES TO DOLLAR AMOUNTS IN THIS PROSPECTUS SHALL BE TO UNITED
STATES DOLLARS UNLESS OTHERWISE INDICATED.
The Corporation has been formed to engage in the business of investing in a
diversified portfolio of income-producing commercial real property throughout
the United States, focusing initially on neighborhood and community shopping
centers with nationally recognized anchor tenants. The Corporation intends to
continue to acquire only shopping centers until the aggregate of the acquisition
prices of all properties owned by the Corporation exceeds $100 million. After
the $100 million threshold is exceeded the Corporation intends to broaden its
investments to include income-producing commercial real property throughout the
United States. Basic Advisors, Inc. (the "Advisor") will provide the day-to-day
management for the Corporation. Basic Acquisitions, Inc., as nominee for the
Corporation, has entered into acquisition agreements to purchase a community
shopping center located in Chico, California and a neighborhood shopping center
located in Dade County, Florida (the "Properties"). Upon closing of the Offering
(the "Closing") and application of the net proceeds therefrom, the Corporation
will own the Properties with an aggregate gross leasable area of approximately
358,000 square feet. The Corporation will acquire these Properties by assuming
the mortgage on one property, and paying the balance of the purchase price on a
cash basis and acquiring the second property by paying the purchase price on a
cash basis. The Corporation intends to hold the Properties for an indefinite
length of time. See "Prospectus Summary."
All of the shares of Common Stock of the Corporation offered hereby are
being offered by the Corporation. Prior to this Offering, there has been no
public trading market for the Common Stock. Subject to the closing of this
Offering and the acquisition of the Properties, the American Stock Exchange has
conditionally approved the listing of the Common Stock. It is a condition to the
closing of the Offering that the Properties be acquired contemporaneously with
the completion of this Offering. The Corporation's Articles of Amendment and
Restatement (the "Amended and Restated Articles of Incorporation") limit the
number of shares of Common Stock that may be owned by any single person or
affiliated group to 9.5% of the lesser of the aggregate number or value of the
outstanding shares of Common Stock. See "Description of Capital of the
Corporation-- Excess Stock--Restrictions on Transfer." The minimum required
purchase of Common Stock is 250 shares ($2,500).
This Offering involves certain risks, including:
- The Corporation has limited diversification.
- The Corporation has no operating history.
- The Advisor will receive fees based upon a fixed percentage of assets of
the Corporation. See "Management--The Advisor." Such compensation will be
payable to the Advisor regardless of Corporation profitability.
- Market risks associated with investments in real estate, including the
potential for a decrease in the value of the Properties and adverse
changes to the financial status of tenants could adversely affect the
price of the Common Stock.
- The Advisor and various entities related to it will be subject to various
conflicts of interest with the Corporation.
- Adverse tax consequences of failure to qualify as a REIT under the U.S.
Internal Revenue Code could adversely affect cash flow available for
distribution to Stockholders.
- Amendment to tax legislation or the Canada-U.S. Income Tax Convention, as
amended by a revised protocol entered into force November 9, 1995 could
have adverse tax consequences to Canadian Stockholders.
- There has been no prior market for the Common Stock.
- An increase in interest rates could adversely affect the market price of
the Common Stock.
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A COMPLETE DISCUSSION OF CERTAIN
MATERIAL FACTORS RELEVANT TO AN INVESTMENT IN THE COMMON STOCK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO THE AGENTS' PROCEEDS TO THE
PUBLIC (1) COMMISSIONS (2) CORPORATION (3)
<S> <C> <C> <C>
Per Share.................................................... $10 $.75 $9.25
Total........................................................ $27,400,000 $2,055,000 $25,345,000
</TABLE>
(1) The price of the Common Stock was determined by negotiation between the
Corporation and the Agents.
(2) The Corporation has agreed to indemnify the Agents against certain
liabilities and has agreed to pay Agents' expenses of not more than $175,000
(CDN) or approximately $130,470 based upon the noon buying rate of exchange
in New York City for cable transfers as certified for customs purposes by
the Federal Reserve Bank of New York, on November 25, 1996. See "Plan of
Distribution".
(3) Before deducting estimated expenses of $440,000 payable by the Corporation,
including the Agents' expense allowance.
------------------------------
The Common Stock is being offered conditionally (all of the Common Stock
offered must be sold for the Offering to close), on a best efforts basis, in the
provinces of Ontario, British Columbia and Alberta, Canada by Porthmeor
Securities Inc., Octagon Capital Canada Corporation and First Marathon
Securities Limited (the "Agents"), as agents of the Corporation subject to prior
sale, when, if and as issued by the Corporation in accordance with the Agency
Agreement referred to under "Plan of Distribution," and subject to approval of
certain legal matters on behalf of the Corporation by Chaiton & Chaiton,
Barristers and Solicitors, Toronto, and Schnader Harrison Segal & Lewis,
Philadelphia, and as to Canadian taxation matters by Smith Lyons, Barristers and
Solicitors, and subject to approval of certain legal matters on behalf of the
Agents by Fogler, Rubinoff, Barristers & Solicitors, Toronto and Skadden, Arps,
Slate, Meagher and Flom (International), New York and Toronto.
Subscriptions will be received subject to rejection or allotment, in whole
or in part and the right is reserved to close the subscription books at any time
without notice. It is expected that the closing of this Offering will occur on
January 3, 1997 or on another date acceptable to the Corporation and the Agents,
but not later than January 31, 1997. The Closing of this Offering of Common
Stock is subject to certain conditions precedent. See "Prospectus Summary."
------------------------------
PORTHMEOR SECURITIES INC. OCTAGON CAPITAL CANADA CORPORATION
FIRST MARATHON SECURITIES LIMITED
The date of this Prospectus is November , 1996.
<PAGE>
INSIDE FRONT COVER OF PROSPECTUS
The inside front cover of the prospectus contains a graphical depiction of the
lease expiration summary for the Properties on an aggregate basis and three
photographical depictions of the Gardens Square shopping center showing the
entrance to the center including its parking lot and two views of the pedestrian
walkways and tenant storefronts.
2
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TABLE OF CONTENTS
<TABLE>
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PAGE
NO.
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<S> <C>
PROSPECTUS SUMMARY........................................................ 6
RISK FACTORS.............................................................. 15
Size/Lack of Diversity of Initial Portfolio............................. 15
Lack of Operating History............................................... 15
Compensation To Affiliates.............................................. 15
Conflicts of Interest................................................... 15
Dependence on Tenants................................................... 16
Reliance on Management.................................................. 16
Possible Changes in Investment Objectives and Policies.................. 16
Foreign Investment...................................................... 17
Operating Risks......................................................... 17
Illiquidity of Real Estate.............................................. 17
Effect of Uninsured Loss on Performance................................. 17
Risks of Acquisition Activities......................................... 17
Competition............................................................. 18
Possible Environmental Liabilities...................................... 18
Americans with Disabilities Act......................................... 19
Investment Company Act of 1940.......................................... 19
Changes to Cross Border Tax Treatment................................... 19
U.S. Federal Income Tax Risks........................................... 19
Risk of Leverage and Default............................................ 20
No Prior Market for Common Stock........................................ 20
Effect of Market Interest Rates on Price of Common Stock................ 21
Potential Borrowings to Make Distributions.............................. 21
Joint Venture Investments--Risks of Conflicting Interests and Impasse... 21
Limitations on Changes in Control....................................... 22
Responsibilities of Directors and Advisor--Possible Inadequacy of
Remedies.............................................................. 22
Advisor May Purchase Shares............................................. 23
Dilution................................................................ 23
Benefits to Insider from the Offering................................... 24
Restrictions on Transfer and Limitation on Ownership of Common Stock.... 24
Shares of Common Stock Available for Future Sale........................ 24
Enforcing Rights Against Foreign Corporation, Directors and Officers.... 24
USE OF PROCEEDS........................................................... 25
CAPITALIZATION............................................................ 26
</TABLE>
3
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<TABLE>
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PAGE
NO.
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PRO FORMA SELECTED FINANCIAL INFORMATION.................................. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE PRO FORMA RESULTS OF
OPERATIONS AND PRO FORMA FINANCIAL CONDITION............................ 36
BUSINESS.................................................................. 39
The Corporation......................................................... 39
Investment Objectives................................................... 39
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES............................... 40
Investment Policies..................................................... 40
Investment Restrictions................................................. 41
Financing Policies...................................................... 42
THE PROPERTIES............................................................ 42
Chico Crossroads Center................................................. 43
Description of Property................................................. 44
Key Factors in Corporation's Decision to Acquire........................ 47
Chico, California....................................................... 47
Gardens Square.......................................................... 48
Description of Property................................................. 49
Key Factors in Corporation's Decision to Acquire........................ 51
Dade County, Florida.................................................... 52
Environmental Matters................................................... 52
MANAGEMENT................................................................ 53
Directors and Executive Officers of the Corporation..................... 53
Compensation............................................................ 55
Stock Option Plan....................................................... 55
The Promoters........................................................... 56
The Advisor............................................................. 57
Term of the Advisory Agreement.......................................... 58
Fees and Expenses....................................................... 58
Other Activities........................................................ 60
Property Management and Other Services.................................. 61
Directors and Executive Officers of the Advisor......................... 61
Interest of Management and Others in Material Transactions.............. 61
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ 62
LEGAL PROCEEDINGS......................................................... 63
DESCRIPTION OF CAPITAL OF THE CORPORATION................................. 63
General................................................................. 63
Common Stock............................................................ 63
</TABLE>
4
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<TABLE>
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PAGE
NO.
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<S> <C>
Preferred Stock......................................................... 64
Power to Issue Additional Common Stock and Preferred Stock.............. 64
Excess Stock--Restrictions on Transfer.................................. 64
Dividend Reinvestment Program........................................... 66
Transfer Agent and Registrar............................................ 67
CERTAIN PROVISIONS OF MARYLAND LAW AND THE CORPORATION'S AMENDED AND
RESTATED ARTICLES OF INCORPORATION AND BYLAWS........................... 67
Number of Directors..................................................... 67
Business Combinations................................................... 67
Control Share Acquisitions.............................................. 68
Amendment to the Amended and Restated Articles of Incorporation......... 68
Dissolution of the Corporation.......................................... 68
Advance Notice of Directors Nominations and New Business................ 68
Meetings of Stockholders................................................ 68
Limitation of Liability and Indemnification............................. 69
SEC Position on Indemnification......................................... 70
Insurance............................................................... 70
U.S. FEDERAL INCOME TAX CONSIDERATIONS.................................... 70
General................................................................. 70
Taxation of the Corporation............................................. 71
Investments Through Partnerships........................................ 75
Taxation of Non-U.S. Stockholders....................................... 75
Taxation of U.S. Stockholders........................................... 79
Other Tax Consequences.................................................. 80
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS................................ 81
Taxation of Dividends................................................... 81
Dispositions............................................................ 81
Qualification for Investment............................................ 82
DISTRIBUTION POLICY....................................................... 82
PLAN OF DISTRIBUTION...................................................... 84
EXPERTS................................................................... 85
LEGAL MATTERS............................................................. 85
ADDITIONAL INFORMATION.................................................... 85
GLOSSARY.................................................................. 87
INDEX TO FINANCIAL STATEMENTS............................................. F-1
</TABLE>
5
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by the more detailed information
appearing elsewhere in this Prospectus. Certain terms used in this Prospectus
are defined in the Glossary. See "Glossary."
ALL REFERENCES TO DOLLAR AMOUNTS IN THIS PROSPECTUS SHALL BE TO UNITED
STATES DOLLARS UNLESS OTHERWISE INDICATED.
<TABLE>
<S> <C>
OFFERING: 2,740,000 shares of Common Stock
PRICE: $10.00 per share of Common Stock
MINIMUM SUBSCRIPTION: $2,500 (250 shares of Common Stock)
</TABLE>
THE CORPORATION: Basic U.S. REIT, Inc. is a corporation incorporated under
the laws of the State of Maryland for the purposes of making equity investments
in income-producing commercial real property in the United States. An objective
of the Corporation is to provide investors with a favorable yield on their
investment in Common Stock. The Corporation intends to qualify as a real estate
investment trust ("REIT") for the purposes of the U.S. Internal Revenue Code of
1986, as amended (the "Code") (see "U.S. Federal Income Tax Considerations").
The executive office of the Corporation is at 7850 Northwest 146th Street, Suite
308, Miami, Florida 33106, telephone number 305-556-7162.
RISK FACTORS: This Offering involves certain risks. See "Risk Factors" for
certain factors relevant to an investment in the Common Stock, including:
- The Corporation has limited diversification. At the conclusion of this
Offering, the Corporation will have only the two Properties in its
portfolio. Consequently, any event which negatively affects either of the
Properties may have a negative impact on the Corporation and may adversely
affect its ability to make distributions to holders of the Common Stock.
- The Corporation has no operating history.
- The Advisor will receive fees based upon a fixed percentage of assets of
the Corporation. See "Management--The Advisor." Such compensation will be
payable to the Advisor regardless of Corporation profitability.
- Market risks associated with investments in real estate, including the
potential for a decrease in the value of the Properties and adverse
changes to the financial status of tenants, could adversely affect the
market price of the Common Stock.
- The Advisor and various entities related to it will be subject to various
conflicts of interest with the Corporation. If a person with
responsibilities both to the Corporation and to an entity contracting with
the Corporation were to resolve a potential conflict of interest in such
dual capacity against the interest of the Corporation, the operation of
the Corporation could be adversely affected.
- Adverse tax consequences of failure to qualify as a REIT under the U.S.
Internal Revenue Code could adversely affect cash flow available for
distributions to stockholders. If in any taxable year the Corporation were
to fail to qualify as a REIT, the Corporation would not be allowed a
deduction for distributions to stockholders in computing its taxable
income and would be subject to U.S. federal income tax (including any
applicable minimum tax) on taxable income at regular corporate rates.
- Amendment to tax legislation or the Canada-U.S. Income Tax Convention, as
amended by a revised protocol entered into force November 9, 1995, could
have adverse tax consequences to Canadian investors.
- There has been no prior market for the Common Stock. Although the American
Stock Exchange has conditionally approved the listing of the Common Stock,
subject to the closing of this Offering
6
<PAGE>
and the acquisition of the Properties, there can be no assurances that an
active trading market will develop.
- An increase in interest rates could adversely affect the market price of
the Common Stock.
- Since substantially all of the Corporation's income will be derived from
rental income from real property, the Corporation's income would be
adversely affected if the Corporation's tenants were unable to meet their
obligations to the Corporation, or if the Corporation were unable to lease
on economically favorable terms a significant amount of space in its
properties.
- Stockholders will not have any active participation in the management of
the Corporation or the investment of the proceeds of this Offering;
rather, they must rely on the management and acquisition expertise
provided by the Board of Directors of the Corporation and by the Advisor.
See "Management--The Advisor."
- Subject to limited restrictions in the Corporation's bylaws, the Amended
and Restated Articles of Incorporation and applicable law, the Board of
Directors has significant discretion to modify the investment objectives
and policies of the Corporation, as stated in this Prospectus. The
exercise of such discretion could result in the Corporation adopting new
investment objectives which differ materially from those described in this
Prospectus.
- An investment in the Common Stock by a Canadian investor will be subject
to the risks associated with carrying on business in a foreign country,
including possible currency exchange rate fluctuations or devaluations.
- The Properties will be subject to operating risks common to shopping
centers, including increases in operating costs due to inflation,
increases in property taxes and increases in casualty insurance premiums,
which increases may not necessarily be offset by increased rents. If
operating expenses increase, the local rental market may limit the extent
to which rents may be increased to meet increased expenses without
decreasing occupancy rates. The Corporation's ability to make
distributions to holders of the Common Stock could be adversely affected.
- The Corporation will carry insurance with respect to its Properties with
policy specifications in insured limits customarily carried for similar
properties. There are certain types of losses which may be either
uninsurable or insurable only at cost which are not economically
justifiable. Should an uninsured loss occur, the Corporation could lose
both its invested capital in and anticipated profit from the Property.
- The Corporation intends to pursue acquisitions of additional shopping
centers. Acquisitions of additional properties entail risks that
investments will fail to perform in accordance with expectations. If any
particular property is not successful, the Corporation's losses could
exceed its investment in the property.
- The Corporation anticipates that future acquisitions will be financed, in
whole or in part, through equity issues and forms of secured or unsecured
debt financing. If financing is not available on acceptable terms for new
acquisitions, further acquisitions might be curtailed.
- The Corporation's Amended and Restated Articles of Incorporation, among
other things, prohibit any holder from owning more than 9.5 percent of the
Corporation's outstanding Common Stock without consent of the Board of
Directors of the Corporation in order to protect the Corporation's status
as a REIT. Such restrictions could discourage a change of control of the
Corporation even when such a change in control could be beneficial to the
Corporation's stockholders.
PROMOTERS: Basic Capital Funds, an Ontario limited partnership, and Maynard
Rich/Abraham Inc., a Florida corporation, have taken the initiative in
structuring this Offering and may therefore be viewed as the promoters. The sole
director and officer of Basic Capital Funds Inc., the general partner of Basic
7
<PAGE>
Capital Funds, is Ronald L. Bernbaum. Maynard Rich/Abraham Inc. is controlled by
Carl Maynard and Richard Schwartz. Messrs. Bernbaum, Maynard and Schwartz are
respectively the Chairman of the Board; the President, Chief Executive Officer
and a Director; and a Vice President of the Corporation.
Basic Capital Funds in its capacity as principal or promotor, identifies,
structures and funds capital projects and start-up companies and has been
responsible for the funding, acquisition and management of over $100 million of
real estate assets and the funding of $150 million of software development and
numerous software companies. Since 1988, Maynard Rich/Abraham, Inc. and its
affiliate companies, Maynard Rich Management Corp., a California corporation,
and Maynard Rich Properties Corp., a Florida corporation (Maynard Rich/Abraham
Inc., Maynard Rich Management Corp. and Maynard Rich Properties Corp. are
collectively hereinafter referred to as "The Maynard Rich Companies"), have
performed various real estate services for foreign and domestic institutional
and individual investors including initiating mortgage debt financing for
shopping centers, office buildings and net leased properties, performing workout
services for both retail and residential properties, representing owners in
bankruptcy proceedings, managing portfolios totaling in excess of $100 million
in value and engaging in real estate brokerage transactions totaling in excess
of $150 million in value. See "Management--The Promoters, the Advisor, Term of
Advisory Agreement and Fees and Expenses."
INVESTMENT OBJECTIVES: The Corporation intends to make equity investments
in income-producing commercial real property. The Corporation's objectives in
acquiring properties are:
a) to own and operate such real property;
b) to generate income for distribution;
c) to preserve and increase the Corporation's equity through appreciation
of the value of its assets; and
d) to increase the Corporation's equity through amortization of mortgage
financing.
The Corporation will initially implement these objectives by purchasing
neighborhood and community shopping centers. The Corporation intends to
continually enhance returns through an ongoing acquisition program designed to
provide economies of scale and to reduce risk through geographic and property
diversification. The Corporation also intends to manage its portfolio to
maintain and over time enhance the value of its properties.
INVESTMENT POLICIES AND RESTRICTIONS: The bylaws of the Corporation contain
certain restrictions on the investments of the Corporation, which may only be
amended with the majority approval of the Board of Directors of the Corporation,
such majority to include a majority of the independent directors, and by the
majority of the votes cast at a meeting of holders of the Common Stock of the
Corporation. The Corporation's initial board of directors will consist of five
members, the majority of whom will be independent. The Corporation considers a
director "independent" if such director is neither an employee of the
Corporation nor is an employee or a director of the Advisor or any of its
affiliates. See "Management."
The Advisory Agreement contains certain general investment policies which
are guidelines for the Advisor in presenting investment prospects for the
Corporation. Such investment policies may be amended from time to time by the
majority approval of the Board of Directors of the Corporation, such majority to
include a majority of independent directors. Initially, the Corporation intends
to acquire income producing shopping centers anchored by national retailers,
dominant regional retailers or other quality creditworthy anchor tenants. The
Corporation currently intends to pursue its growth strategies while maintaining
a capital structure whereby its debt will not exceed 60% of its total debt and
equity (see "Business-- Investment Objectives" and "Policies With Respect to
Certain Activities").
8
<PAGE>
USE OF PROCEEDS: The Corporation will use the net proceeds of this
Offering, after deducting Agents' commissions and expenses of this Offering, to
acquire the Properties on Closing (including the repayment of deposits advanced
by the Promoters or the Advisor and the payment of acquisition costs), to pay
mortgage assumption and financing fees, acquisition fees (in the amount of
$455,438) to the Advisor, and for working capital. The following table sets
forth a summary allocation of the use of net proceeds. The principal amount of
the mortgage and the acquisition expenses are estimated and any increase or
reduction will result in an increase or reduction in the proceeds available for
working capital. Until required, proceeds allocated to working capital will be
invested by the Corporation in Authorized Investments. See "Use of Proceeds" for
a table which sets forth a detailed allocation of the use of net proceeds.
<TABLE>
<CAPTION>
ESTIMATED
ACQUISITION
FEES AND
PROPERTIES PURCHASE PRICE MORTGAGE EXPENSES USE OF PROCEEDS
- --------------------------------------------------- -------------- ---------- --------------- ---------------
<S> <C> <C> <C> <C>
Chico Crossroads Center............................ $ 20,912,500 -- $ 420,000 $ 21,332,500
Gardens Square..................................... 9,450,000 6,710,000 216,000 2,956,000
Estimated Mortgage Assumption and Financing Fees... 68,000
Working Capital.................................... 548,500
---------------
NET PROCEEDS..................................... $ 24,905,000
---------------
---------------
</TABLE>
PROPERTIES: Basic Acquisitions, Inc. (the "Nominee"), a corporation
controlled by the Advisor, as nominee for the Corporation, has entered into
agreements to acquire interests in real property which will be assigned to the
Corporation prior to the Closing for nominal consideration. Upon assignment, the
Corporation shall reimburse the Nominee for all deposits paid under the
acquisition agreement assigned.
a) The Nominee has entered into an agreement with Chico Crossroads Center,
Ltd., a California limited partnership, to acquire the Chico Crossroads
Center, an approximately 267,000 square foot shopping center in northern
California, between Sacramento and Redding for the purchase price of
$20,912,500. The Corporation will pay the purchase price in cash. The
center has five anchor tenants who have signed long term leases which
expire in the years 2008 to 2014, accounting for approximately 85% of the
gross leasable area of the center. These anchors are Home Base, Office
Depot, Food 4 Less, Circuit City and Barnes & Noble. In addition to these
anchor tenants, the center has national tenants who account for an
additional 11.5% of the gross leasable area of the center including
Hometown Buffet, Blockbuster Video, Petco, Nevada Bob's Golf, Play It
Again Sports and Avco Financial. Chico Crossroads Center is approximately
99% leased as of the date of this Prospectus.
b) The Nominee has entered into an agreement with Miami Gardens Associates,
a New Jersey general partnership, to acquire Gardens Square, an
approximately 90,000 square foot shopping center located in Dade County,
Florida, for the purchase price of $9,450,000. The purchase price will be
paid by the assumption of a mortgage in the principal amount of
approximately $6,710,000 with the balance in cash. The mortgage bears
interest at the rate of 7.94% per annum and is due on December 21, 2002
with payments based upon a 25 year amortization. The anchor tenants are
Publix Super Markets, Inc. and Eckerd Drug Store who account for
approximately 57% of the gross leasable area of the center. Gardens
Square is approximately 96% leased as of the date of this Prospectus.
The Properties will be amortized on a straight line basis over their
estimated useful lives of forty years for buildings and twenty years for land
improvements.
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TAX STATUS: The Corporation will elect to be taxed as a real estate
investment trust under Sections 856 through 859 of the Code, commencing with the
taxable year ending December 31, 1997. As a REIT, the Corporation generally will
not be subject to federal income tax at the corporate level to the extent it
annually distributes its net income and capital gains to its stockholders. REITs
are subject to a number of organizational and operational requirements. If the
Corporation fails to qualify as a REIT in any taxable year, the Corporation may
be subject to U.S. Federal income tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates. Even if the
Corporation qualifies for taxation as a REIT, the Corporation may still be
subject to certain state and local taxes on its income and property and federal
income and excise tax on its undistributed income. It is the intention of the
Corporation not to conduct business in any state in which the income tax
treatment of a REIT, does not conform to the U.S. Federal income tax treatment
of a REIT. Once listed on a stock exchange that is a "prescribed stock exchange"
for the purposes of the INCOME TAX ACT (Canada), the Common Stock will be
qualified investments for Registered Retirement Savings Plans, Registered
Retirement Income Funds and Deferred Profit Sharing Plans. However, the Common
Stock will be considered to be foreign property for such plans and for other
taxpayers subject to the foreign property limitations in Part XI of the INCOME
TAX ACT (Canada). The closing of this Offering is conditional upon the
Corporation listing the Common Stock for trading on a United States Stock
Exchange that is a "prescribed stock exchange" for the purposes of the INCOME
TAX ACT (Canada) and which is either registered under the Securities Exchange
Act of 1934 or is listed on an "over-the-counter market" within the meaning of
applicable United States Federal income tax regulations. See "Canadian Federal
Income Tax Considerations," "U.S. Federal Income Tax Considerations" and "Risk
Factors."
DISTRIBUTIONS: The Corporation intends to pay regular quarterly dividends
to its stockholders and more frequently if the Board of Directors of the
Corporation so determines. To qualify as a REIT, the Corporation generally must
distribute at least 95% of its REIT taxable income (as defined in the Code) each
year, even if such amount is in excess of cash flow. Unless the Board of
Directors otherwise decides, the Corporation intends to distribute a minimum of
100% of its taxable income. Based on the initial properties acquired,
approximately 62% of the initial distribution will be return on investors'
capital and approximately 38% will be return of investors' capital. The
Corporation, however, plans to acquire additional properties after the closing
of the Offering. One or more of these properties may be financed with debt. The
next acquisition will be financed by debt and the additional anticipated
amortization related to this acquisition will reduce the taxable portion of
future distributions thereby reducing the percentage return on investors'
capital and increasing the percentage return of investors' capital. There can be
no assurance that future acquisitions will be available or that financing for
such acquisitions will be available. See "Risk Factors--Risks of Acquisition
Activities" and "Policies with Respect to Certain Activities." The Corporation
intends in the future to implement a dividend reinvestment program under which
its stockholders may elect automatically to reinvest their dividends in
additional shares of Common Stock.
ADVISOR: Basic Advisors, Inc., a corporation incorporated under the laws of
the State of Delaware, will be the advisor of the Corporation pursuant to the
Advisory Agreement. The Advisor will act as investment advisor to the
Corporation with respect to real property investments and will provide or
arrange for the provision of research, accounting, transfer agency and
management services. The Advisor is entitled to the following fees under the
Advisory Agreement:
a) an asset management fee:
an annual fee based upon the aggregate of the net proceeds received
by the Corporation for its issued and outstanding shares after the
payment of any commission and direct expenses
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paid by the Corporation for the issuance of such shares ("Share
Capital") payable monthly and calculated at the following rates:
<TABLE>
<CAPTION>
SHARE CAPITAL RATE
- ----------------------------------------------------------------- -----------
<S> <C>
Up to $35 million................................................ 1.50%
On the amount over $35 million and up to $125 million............ 1.25%
On the amount over $125 million and up to $200 million........... 1.00%
On the amount in excess of of $200 million....................... 0.75%
</TABLE>
Each of the foregoing annual rates is applicable to the portion of
the Share Capital which falls within the rate attributable to such
capital. Assuming the Offering closes on or about January 1997, the
annual fee payable under the Advisory Agreement for the year ending
December 31, 1997 will be approximately $374,000 if no other shares
are issued through December 31, 1997;
b) an acquisition fee:
a fee of 1.5% of the cost of any real property payable upon the
purchase of any real property;
c) a disposition fee:
a fee of 0.25% of the sale proceeds from the disposition of any real
property payable upon the disposition of such real property; and
d) a financing fee:
a fee of 0.25% of the principal amount of any financing or
refinancing arranged, renewed, extended or increased in respect of
any real property payable upon completion of such financing or
refinancing.
If and to the extent that the Advisor or any person affiliated with the
Advisor provides services to the Corporation in addition to those
specifically required under the Advisory Agreement, such services will be
compensated separately on the basis of industry standard rates for
comparable services and activities.
The outstanding and issued stock of the Advisor are owned directly or
indirectly 75% by Knightsbridge Financial Services, Ltd. ("Knightsbridge"), an
Ontario corporation and an affiliate of Basic Capital Funds, an Ontario limited
partnership, of which Ronald L. Bernbaum is the sole director and President of
the corporate general partner; 12.5% by Carl Maynard; and 12.5% by Richard
Schwartz. Knightsbridge is an investment holding company with the same
beneficial owners as Basic Capital Funds.
INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS: Various
conflicts of interest exist between the Corporation and the Advisor and its
affiliates. Some of these conflicts arise as a result of the commonality of
directorship and management of these entities. The Advisor is expected to
benefit and profit from the Advisory Agreement described herein. As well,
directors, officers and affiliates of the Corporation and the Advisor are
engaged in a wide range of real estate and other business activities and it is
unlikely that the Corporation will explore investment opportunities beyond those
presented directly or indirectly to the Board of Directors of the Corporation by
the Advisor. However, the Advisor has agreed in the Advisory Agreement that it
will not form or directly or indirectly act as an advisor or manager of a REIT
while it is the advisor to the Corporation without the consent of a majority of
the votes cast at a meeting of the holders of the Common Stock of the
Corporation. Associates or affiliates of the Advisor, including The Maynard Rich
Companies, may receive or have an indirect interest in brokerage commissions or
other fees paid by a vendor of real property purchased by the Corporation and
may receive or have an indirect interest in brokerage commissions paid by the
Corporation if and when the Corporation should determine to sell its real
property. The Advisory Agreement provides that the brokerage fees paid
11
<PAGE>
to the Advisor or its affiliates by a vendor of real property purchased by the
Corporation may only exceed 1% if there is a reduction in the fee payable to the
Advisor for the transaction for the excess, and that a majority of the
Corporation's independent directors must approve every listing broker for the
sale of any real property of the Corporation.
U.S. REIT STATUS: The Code sets out specific organizational, investment,
income and distribution requirements in order for an entity to qualify as a
REIT. In general:
ORGANIZATIONAL
- The REIT must be a corporation, business trust or association which would
otherwise be taxable as a corporation.
- The REIT must be managed by a board of trustees or directors.
- The REIT's shares must be transferable.
- There must be at least 100 beneficial stockholders during at least 335
days of a taxable year of 12 months, or during a proportionate part of a
shorter taxable year.
- Not more than 50% of the shares may be held directly or indirectly by any
group of five or fewer individuals during the last half of the REIT's
taxable year.
- The REIT must have a taxable year which is a calendar year.
INVESTMENT
- The REIT must invest at least 75% of the value of its total assets in real
estate assets (including mortgages and shares in other REITs), cash and
government securities. For purposes of this test, a REIT is treated as
holding directly a proportionate share of any real estate assets of a
partnership in which it holds an interest.
- The REIT must not own more than 10% of the outstanding voting shares of
any one issuer (other than a qualified REIT subsidiary).
- Not more than 25% of the value of the REIT's total assets may be invested
in securities and no more than 5% of the value of its total assets may
consist of securities of one issuer (other than certain government
securities and stock of a qualified REIT subsidiary).
INCOME
- The REIT must derive at least 75% of its gross income from rents from real
property, interest on obligations secured by mortgages on real property,
gains from the sale of real property, dividends or gains from investments
in other qualified REITs, abatements and refunds of property taxes and
mortgage or purchase commitment fees ("The 75% Income Test").
- The REIT must derive at least 95% of its gross income from sources
qualifying under The 75% Income Test, gains from sales of securities,
dividends and interest.
- The REIT must derive less than 30% of its gross income from the sale or
disposition of securities held for less than one year, from the sale of
property in a prohibited transaction, or from the sale of real property
held for less than four years.
DISTRIBUTION
- The REIT must distribute at least 95% of REIT taxable income annually,
excluding net capital gains.
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<PAGE>
The Corporation must file with its U.S. tax return an election to be treated
as a REIT for tax purposes and comply with the foregoing qualification
requirements.
CROSS BORDER TAX TREATMENT: The Corporation has been structured with a view
to minimizing the U.S. and Canadian taxes that will be payable on the income of
the Corporation, distributions made to Canadian holders of Common Stock, and any
gains realized by Canadian holders on the disposition of Common Stock. The use
of a corporation that qualifies as a REIT for U.S. tax purposes should
substantially eliminate U.S. tax at the corporate level. In addition, investors
who are resident in Canada for the purposes of the Canada--U.S. Income Tax
Convention (the "Treaty"), as amended by a revised protocol that entered into
force November 9, 1995 (the "Protocol") may benefit from the reduction or
elimination of U.S. tax on distributions from the Corporation and, in
appropriate circumstances, will not be taxed in the U.S. on gains realized on
the disposition of Common Stock. See "U.S. Federal Income Tax Considerations."
PRO FORMA SELECTED FINANCIAL INFORMATION: The following table sets forth
pro forma selected financial information of the Corporation and should be read
in conjunction with the audited and unaudited statements of Revenue and Certain
Expenses for the year ended December 31, 1995 and the nine months ended
September 30, 1996 and 1995, respectively, for Chico Crossroads Center, Ltd. and
Miami Gardens Associates and the notes thereto, and of the unaudited pro forma
financial information of the Corporation contained herein. The following pro
forma selected financial information is based on the unaudited pro forma
statements of income for the nine months ended September 30, 1996 and for the
year ended December 31, 1995 respectively, and the unaudited pro forma balance
sheet as of September 30, 1996 giving effect to the adjustments referred to in
the notes to the unaudited pro forma statements of income and balance sheet. The
data for the nine months ended September 30, 1996 includes, in the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results for the unaudited interim period.
See "Management's Discussion and Analysis of the Pro Forma Results of Operations
and Pro Forma Financial Condition."
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<PAGE>
The pro forma financial data has been prepared giving effect to the
acquisition of the Properties, the assumption of the mortgage secured by the
Gardens Square property and the issuance of common stock as described elsewhere
in this Prospectus (see Note 1 to the pro forma financial data).
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
PRO FORMA OPERATING DATA
Rental Income (excluding operating expense reimbursement)................ $ 2,227,710 $ 2,928,727
Pro Forma Net Income
U.S. GAAP.............................................................. 733,054 915,764
CDN GAAP............................................................... 1,000,629 1,294,829
Pro Forma Net Income Per Share (2).......................................
U.S. GAAP.............................................................. $.27 $.33
CDN GAAP (1)........................................................... $.37 $.47
PRO FORMA BALANCE SHEET DATA [AS AT SEPTEMBER 30, 1996]
Rental Properties........................................................ $ 30,998,500
Total Debt............................................................... 6,710,000
Stockholders' Equity..................................................... 24,906,000
OTHER DATA
Pro Forma Funds From Operations (3)...................................... 1,218,640 1,563,212
</TABLE>
- ------------------------
(1) Pro Forma Net Income under Cdn. GAAP is calculated using the sinking fund
method of amortizing the buildings using a compound rate of 5% per annum
over the estimated lives of 40 years rather than the straight line basis
used for U.S. GAAP purposes.
(2) The Pro Forma Net Income Per Share calculation assumes that no additional
Common Stock was issued during the periods under the Corporation's intended
dividend reinvestment plan or by the exercise of options to purchase 20,000
shares of Common Stock of the Corporation by Mr. Bernbaum or the exercise of
options to purchase 10,000 shares of Common Stock by each of Messrs.
Maynard, Thrall, Witterick, Peterson, Schwartz, McCrae, Kwinta and
Dickerson. "See Management--Stock Option Plan."
(3) The Corporation considers funds from operations to be one measure of the
performance of an equity REIT. Funds from operations is defined by the
National Association of Real Estate Investment Trusts ("NAREIT") as net
income (computed in accordance with generally accepted accounting
principles) excluding gains (or losses) from debt restructuring and sales of
property plus amortization of real estate assets. Amortization of deferred
financing costs and amortization of non real estate assets are not added
back to net income to arrive at funds from operations. Funds from operations
should not be considered as an alternative to net income as a measure of
profitability nor is it comparable to cash flow provided by operating
activities determined in accordance with generally accepted accounting
principles. Funds from Operations presented herein is not necessarily
comparable to Funds from Operations presented by other real estate companies
due to the fact that not all real estate companies use the same definition.
However, the Corporation's Funds from Operations is comparable to the Funds
from Operations of real estate companies that use the current definition of
NAREIT. See "Management's Discussion and Analysis of the Pro Forma Results
of Operations and Pro Forma Financial Condition" for a detailed calculation.
14
<PAGE>
RISK FACTORS
This Prospectus contains forward looking statements which involve risks and
uncertainties. The Corporation's actual results may differ significantly from
the results discussed in the forward looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed below.
An investment in the Common Stock involves various risks. Prospective investors
should carefully consider the following information before purchasing Common
Stock in the Offering.
SIZE/LACK OF DIVERSITY OF INITIAL PORTFOLIO
[INDIVIDUAL EVENTS MAY ADVERSELY AFFECT STOCKHOLDER DISTRIBUTIONS] At the
conclusion of this Offering, the Corporation will have only the two Properties,
both of which are shopping centers, in its portfolio. 68.8% of the rental
properties of the Corporation after consummation of the Offering and purchase of
the Properties is represented by Chico Crossroads Center and 31.2% by Gardens
Square. Chico Crossroads Center has an anchor tenant which pays 27.1% of the
current annual base rent at that Property and Gardens Square has an anchor
tenant which pays 27.8% of the current annual base rent at that Property.
Consequently, any event which negatively effects either of the Properties, such
as the failure to pay rent by one anchor tenant, may have a negative impact on
the Corporation and may adversely affect its ability to make distributions to
holders of the Common Stock.
LACK OF OPERATING HISTORY
[INVESTORS HAVE NO OPPORTUNITY TO EVALUATE FUTURE INVESTMENTS]. Neither the
Corporation nor the Advisor has any operating history. Except for the properties
the Corporation indicates in this Prospectus it intends to acquire and describes
in this Prospectus or in a supplement to this Prospectus, purchasers of Common
Stock will not have an opportunity to evaluate the terms of any future
transaction or the relevant economic or financial data affecting the future
investments to be acquired by the Corporation. Moreover, the ability of the
Corporation to accomplish its stated objectives and the timing of the receipt by
stockholders of dividends are dependent upon the success and timing of
management's acquisition of investments for the Corporation. There can be no
assurance that the Properties will increase in value, or that income-producing
properties will be available or can be acquired on economically attractive
terms.
COMPENSATION TO AFFILIATES
[PAYMENTS TO AFFILIATES MAY REDUCE RETURN ON STOCKHOLDERS' INVESTMENTS] The
Advisor will receive substantial compensation from the Corporation in exchange
for various services it has agreed to render to the Corporation. (See
"Management--The Advisor--Fees and Expenses"). This compensation has been
established without the benefit of arm's-length negotiation, and the payment of
such compensation from proceeds of the Offering and property revenues will
reduce the amount of proceeds available for investment in properties or the cash
available for dividends, and will therefore reduce the return on stockholders'
investments. In addition, such compensation is generally payable regardless of
Corporation profitability, and is generally payable prior to, and without regard
to whether the Corporation has sufficient cash for, distribution of dividends.
CONFLICTS OF INTEREST
[CONFLICTS OF INTEREST MAY BE RESOLVED AGAINST CORPORATION'S INTERESTS] The
affiliates of the Advisor and the Promoters will be subject to various conflicts
of interest in their dealings with the Corporation. Generally, such conflicts of
interest arise because certain directors and officers of the Corporation (i) are
also principals in other companies which will enter into contracts with the
Corporation (principally for asset management and property management,
acquisition and disposition services); and (ii) are, and will in the future be,
principals in other real estate investment programs which may compete with the
Corporation. Other possible transactions involving conflicts of interest would
include the Corporation's acquisition
15
<PAGE>
of properties from any of the affiliates (or any of their affiliates) and the
Corporation borrowing from any of the affiliates (or any of their affiliates).
Although the Advisory Agreement contains certain policies and procedures
designed to eliminate or ameliorate the effects of potential conflicts of
interest, certain potential conflicts of interest are not easily susceptible to
resolution, and stockholders will bear the risks associated with such potential
conflicts. In general, if a person with responsibilities both to the Corporation
and to an entity contracting with the Corporation, or both to the Corporation
and to a program in competition with the Corporation, were to resolve a
potential conflict of interest in such dual capacity against the interest of the
Corporation, the operation of the Corporation could be adversely affected.
DEPENDENCE ON TENANTS
[BANKRUPTCIES OR DEFAULTS BY LESSEES AFFECT CASH FLOW]. Since substantially
all of the Corporation's income will be derived from rental income from real
property, the Corporation's income would be adversely affected if the
Corporation's tenants were unable to meet their obligations to the Corporation,
or if the Corporation were unable to lease on economically favorable terms a
significant amount of space in its properties. The financial failure of a tenant
could result in the termination of its lease which, in turn, might cause a
reduction of the cash flow of the Corporation and/or decrease the value of the
applicable property. If a tenant defaults on its lease payments, the Corporation
would lose the net cash flow from such tenant, but might be able to use cash
generated from other properties to meet the mortgage payments, if any, on the
applicable property in order to prevent a foreclosure. If a lease is terminated,
there can be no assurance that the Corporation will be able to re-lease the
property (or portion thereof) for the rent previously received or sell the
property without incurring a loss. The Corporation could also experience delays
in enforcing its rights against tenants.
The financial failure of a tenant could cause the tenant to become the
subject of bankruptcy proceedings. Under bankruptcy law, a tenant has the option
of continuing or terminating any unexpired lease. If the tenant terminates the
lease, the Corporation's claim for damages resulting from the termination
(absent collateral securing the claim) would be treated as a general unsecured
claim. The amount of that claim would be capped at the amount owed for unpaid
pre-petition lease payments unrelated to the termination, plus the greater of
one year's lease payments or 15% of the remaining lease payments payable under
the lease (but not to exceed the amount of three year's lease payments).
Four tenants account for approximately 70% of the current base rent for
Chico Crossroads Center and two tenants account for approximately 39% of current
base rent for Gardens Square.
RELIANCE ON MANAGEMENT
[INVESTORS MUST RELY SOLELY ON JUDGEMENT OF MANAGEMENT AND ADVISOR TO MANAGE
THE COMPANY]. Stockholders will not have any active participation in the
management of the Corporation or the investment of the proceeds of this
Offering; rather, they must rely on the management and acquisition expertise
provided by the Board of Directors of the Corporation and by the Advisor. Thus,
no person should purchase any of the Common Stock offered hereby unless he is
willing to entrust all aspects of the management of the Corporation to the Board
of Directors and the Advisor.
POSSIBLE CHANGES IN INVESTMENT OBJECTIVES AND POLICIES
[THE BOARD HAS SIGNIFICANT DISCRETION TO MODIFY INVESTMENT OBJECTIVES AND
POLICIES]. Subject to limited restrictions in the Corporation's bylaws, the
Amended and Restated Articles of Incorporation and applicable law, the Board of
Directors has significant discretion to modify the investment objectives and
policies of the Corporation, as stated in this Prospectus. The exercise of such
discretion could result in the Corporation adopting new investment objectives
and policies which differ materially from those described in this Prospectus.
16
<PAGE>
FOREIGN INVESTMENT
[FOREIGN INVESTORS ARE SUBJECT TO RISKS ASSOCIATED WITH FOREIGN COUNTRY]. An
investment in the Common Stock by a Canadian investor will be subject to the
risks associated with carrying on business in a foreign country, including the
possibility of future changes in foreign control legislation, possible
limitations on the amount of foreign currency that can be taken out of the
country, possible currency exchange rate fluctuations or devaluations, possible
changes in tax and rental laws and regulations, the possible expropriation of
private property, war, riot, insurrection and acts of terrorism.
OPERATING RISKS
[OPERATING FACTORS COULD AFFECT THE CORPORATION'S ABILITY TO MAKE
DISTRIBUTIONS]. The Properties will be subject to all operating risks common to
shopping centers. Such risks include: competition from other shopping centers;
excessive building of comparable properties or increases in unemployment in the
areas in which the properties are located, either of which might adversely
affect occupancy and/or rental rates; failure of tenants leasing significant
amount of space to pay rent; increases in operating costs due to inflation,
increases in property taxes, increases in casualty insurance premiums and other
factors, which increases may not necessarily be offset by increased rents;
inability or unwillingness of lessees to pay rent increases; and future
enactment of laws regulating public places, including present and possible
future laws relating to access by disabled persons. If operating expenses
increase, the local rental market may limit the extent to which rents may be
increased to meet increased expenses without decreasing occupancy rates. If any
of the above occurred, the Corporation's ability to make distributions to
holders of the Common Stock could be adversely affected.
ILLIQUIDITY OF REAL ESTATE
[LACK OF LIQUIDITY MAY ADVERSELY AFFECT RESPONSE TO CHANGING ECONOMY].
Equity real estate investments are relatively illiquid and therefore may tend to
limit the ability of the Corporation to react promptly in response to changes in
economic or other conditions. Further, the Code places limits on a REIT's
ability to sell properties held for fewer than four years, which may affect the
Corporation's ability to sell properties without adversely affecting returns to
holders of the Common Stock. The Corporation intends to hold its properties as
long-term investments and does not have any present intent to sell any of the
Properties.
EFFECT OF UNINSURED LOSS ON PERFORMANCE
[ABSENCE OF INSURANCE MAY AFFECT INVESTMENT CAPITAL]. The Corporation will
carry comprehensive liability, fire, extended coverage and rental loss insurance
with respect to its properties with policy specifications and insured limits
customarily carried for similar properties. There are, however, certain types of
losses (such as from wars, earthquakes, floods or windstorms, including without
limitation, hurricanes) which may be either uninsurable or insurable only at
costs which are not economically justifiable. California, where the Chico
Crossroads Center is located, is susceptible to floods and earthquakes. Florida,
where Gardens Square is located, is susceptible to windstorms and floods. Should
an uninsured loss occur, the Corporation could lose both its invested capital
in, and anticipated profits from, a Property and would continue to be obligated
to repay any recourse mortgage indebtedness on the Property.
RISKS OF ACQUISITION ACTIVITIES
[ACQUISITIONS MAY BE CURTAILED FOR LACK OF FINANCING]. The Corporation
intends to pursue acquisitions of additional shopping centers. Acquisitions of
additional properties and development activities entail risks that investments
will fail to perform in accordance with expectations. In addition, the fact that
the
17
<PAGE>
Corporation must distribute 95% of its REIT taxable income in order to maintain
its qualification as a REIT will limit its ability to rely upon lease income
from the Properties to finance acquisitions.
The Corporation anticipates that future acquisitions will be financed, in
whole or in part, through equity issues and forms of secured or unsecured debt
financing. Such financing may be available only on disadvantageous terms, if at
all. If financing is not available on acceptable terms for new acquisitions,
further acquisitions might be curtailed, cash available for distribution might
be adversely affected and foreclosures on acquired properties could occur.
Further, if any particular property is not successful, the Corporation's losses
could exceed its investment in the property.
COMPETITION
[ACQUISITIONS MAY BE CURTAILED BECAUSE OF SIGNIFICANT COMPETITION] There are
numerous developers and real estate companies that compete with the Corporation
in seeking properties for acquisition and tenants for properties. The
Corporation may be adversely affected by the fact that the availability of high
quality properties for acquisition may diminish within the Corporation's markets
and elsewhere. There can be no assurance that the Corporation will continue to
acquire properties. In connection with the making of investments, the
Corporation may experience significant competition from banks, insurance
companies, savings and loan associations, mortgage bankers, pension funds,
limited partnerships, other REITs and other entities with objectives similar to
those of the Corporation and which may have greater financial resources or
experience. An increase in the availability of funds for real estate investment
may increase competition in the making of investments and may reduce the yields
available to the Corporation.
POSSIBLE ENVIRONMENTAL LIABILITIES
[SIGNIFICANT EXPENSES COULD BE INCURRED IF ENVIRONMENTAL PROBLEMS ARISE]
Under various U.S. Federal, state and local laws, ordinances and regulations
relating to the protection of the environment (collectively, "Environmental
Laws"), a current or previous owner or operator of real property may be liable
for the cost of removal or remediation of certain hazardous or toxic substances
disposed, stored, released, generated, manufactured or discharged from, on, at,
onto, under or in such property. Environmental Laws often impose such liability
without regard to whether the owner or operator knew of, or was responsible for,
the presence or release of such hazardous or toxic substances. In addition, the
presence of any such substances or the failure to properly remediate such
substances when present, released or discharged, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral. The cost of any required remediation and the liability of the
owner or operator therefor as to any property is generally not limited under
such Environmental Laws and could exceed the value of the property and/or the
aggregate assets of the owner or operator. In addition to any action required by
federal, state or local authorities, the presence of hazardous or toxic
substances on any of the properties of the Corporation, or on any properties
acquired hereafter, could result in plaintiffs bringing claims for personal
injury or other causes of action. In connection with the ownership and operation
of the properties of the Corporation, and on any properties acquired hereafter,
the Corporation may be potentially liable for remediation, release or injury.
Further, various Environmental Laws impose on owners or operators the
requirement of on-going compliance with rules and regulations regarding
business-related activities that may affect the environment. Failure to comply
with such requirements could result in difficulty in the lease or sale of any
affected property or the imposition of monetary penalties and fines in addition
to the costs required to attain compliance.
The Properties have been the subject of Phase I Environmental Assessments
("Phase I Assessments"). The Phase I Assessments did not reveal, nor is the
Corporation aware of, any noncompliance with Environmental Laws, environmental
liability or other environmental claim that the Corporation believes would
likely have a material adverse affect on the Corporation's financial condition
or results of operations. No assurance can be given that the Phase I Assessments
revealed all potential environmental liabilities, that no prior owner or
operator created any material adverse environmental condition not
18
<PAGE>
known to the Corporation or that no environmental liabilities have developed
since the Phase I Assessments were prepared. See "Environmental Matters."
AMERICANS WITH DISABILITIES ACT
[SIGNIFICANT EXPENSES CAN BE INCURRED FOR NON-COMPLIANCE OF ACT] The
Properties and any additional acquisitions must comply with Title III of the
Americans with Disabilities Act of 1990, as amended (the "ADA"). Compliance with
ADA requirements could require removal of structural, architectural or
communication barriers to disabled access and utilization in certain public
areas of the Corporation's properties. Noncompliance could result in injunctive
relief, imposition of fines or an award of damages to private litigants. The
Corporation has not been notified by any regulatory authority of any
noncompliance, claim or liability under the ADA or applicable state laws, nor
has the Corporation been notified of any claim by a private litigant in
connection with conditions at the Properties. The Corporation is not aware of
any failure to comply with the ADA or applicable state law with respect to any
of the Properties that management believes would have a material adverse effect
on the Corporation's financial condition or results of operations. If changes
are required to bring any of the Properties into compliance with the ADA, the
Corporation's ability to make expected distributions could be adversely
affected. The Corporation believes that its competitors face similar costs to
comply with the requirements of the ADA.
INVESTMENT COMPANY ACT OF 1940
[CERTAIN INVESTMENT PRACTICES MAY BE UNAVAILABLE]. The Board of Directors
intends to conduct the operations of the Corporation so that it will not be
subject to regulation under the Investment Company Act of 1940, as amended. As a
result, the Corporation may have to forego certain investments which could
produce a more favorable return to the Corporation. If the Corporation fails to
qualify for an exemption from registration as an investment company, it will be
subject to numerous restrictions under the Investment Company Act. A failure to
qualify for an exemption under the Investment Company Act could have a material
adverse affect on the Corporation and its stockholders.
CHANGES TO CROSS BORDER TAX TREATMENT
[CHANGES IN TAX LAWS COULD AFFECT CANADIAN STOCKHOLDERS]--No assurance can
be given that new legislation, regulations, administrative interpretations or
court decisions, including potential amendment to the Canada-U.S. Income Tax
convention as amended by a revised protocol entered into force November 9, 1995,
will not significantly change the rules governing cross border tax treatment.
U.S. FEDERAL INCOME TAX RISKS
FAILURE TO ACHIEVE OR MAINTAIN REIT STATUS. [FAVORABLE PASS-THROUGH
TREATMENT MAY BE ELIMINATED] The Corporation intends to conduct its operations
in a manner that will permit it to qualify as a REIT for U.S. Federal income tax
purposes, commencing with its taxable year ending December 31, 1997. The
Corporation has not requested, and does not expect to request, a ruling from the
IRS that it will qualify as a REIT. Qualification as a REIT involves the
application of technical and complex provisions of the Code for which there are
only limited judicial or administrative interpretations. The determination of
various factual matters and circumstances not entirely within the Corporation's
control may affect its ability to qualify as a REIT, including default by a
lessee under, and a termination of, a lease. In addition, no assurance can be
given that new legislation, regulations, administrative interpretations or court
decisions will not significantly change the rules applicable to the Corporation
with respect to its qualification as a REIT, the U.S. Federal income tax
consequences of such qualification or the treatment of Canadian residents under
the Treaty and Protocol.
The Corporation believes that based upon an opinion of Schnader Harrison
Segal & Lewis it will so qualify. The REIT qualification opinion represents only
the view of counsel to the Corporation based on
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<PAGE>
counsel's review and analysis of existing law, and upon certain assumptions and
representations described in "U.S. Federal Income Tax Considerations," that the
Corporation will qualify as a REIT under the Code commencing with its taxable
year ending December 31, 1997. Investors should be aware, however, that opinions
of counsel are not binding on the IRS or the courts. Both the opinion and the
continued qualification of the Corporation as a REIT will depend on the
Corporation's continuing ability to meet various requirements (some on an annual
and quarterly basis) concerning, among other things, the ownership of its
outstanding shares of Common Stock, the nature of its assets, the sources of its
income and the amount of its distributions to stockholders.
If in any taxable year the Corporation were to fail to qualify as a REIT,
the Corporation would not be allowed a deduction for distributions to
stockholders in computing its taxable income and would be subject to U.S.
Federal income tax (including any applicable minimum tax) on its taxable income
at regular corporate rates. Moreover, unless entitled to relief under certain
Code provisions, the Corporation also would be disqualified from treatment as a
REIT for the four taxable years following the year in which such qualification
was lost, and if the Corporation subsequently requalified as a REIT, it might be
required to pay a full corporate-level tax on any unrealized gain in its assets
as of the date of requalification and to make distributions at the time equal to
any earnings accumulated during the period of non-REIT status. As a result, such
additional taxes would reduce the funds available for distribution to
stockholders for each of the years involved. In addition, during the period in
which the Corporation has lost its REIT status, the Corporation would no longer
be required by the Code to make any distributions to stockholders. Although the
Corporation intends to operate in a manner designed to qualify as a REIT, it is
possible that: (i) future economic, market, legal, tax or other considerations
may cause the Corporation, with the consent of the holders of a majority of the
votes cast at a meeting of the holders of Common Stock of the Corporation, to
revoke the election for the Corporation to be taxed as a REIT; or (ii) the
Corporation will fail to qualify as a REIT and its election to be taxed as a
REIT will be terminated by such failure. See "U.S. Federal Income Tax
Consequences--Taxation of the Corporation--General."
RISK OF LEVERAGE AND DEFAULT
[FUNDS FROM OPERATIONS MAY BE INSUFFICIENT TO PAY PRINCIPAL OF AND INTEREST
ON INDEBTEDNESS] The Corporation will be subject to the risks normally
associated with debt financing, including the risk that the Corporation's funds
from operations will be insufficient to meet required payments of principal and
interest, the risk that the Corporation will not be able to pay or refinance
indebtedness on the Properties or that the terms of a refinancing will not be as
favorable as the terms of existing indebtedness.
If prevailing interest rates or other factors at the time of refinancing
result in higher interest rates on refinancing, the Corporation's interest
expense would increase, which would adversely affect the Corporation's funds
from operations and its ability to make distributions to holders of the Common
Stock. In addition, in the event the Corporation was unable to secure
refinancing of such indebtedness on acceptable terms, the Corporation might be
forced to dispose of properties upon disadvantageous terms, which might result
in losses to the Corporation and might adversely affect the Corporation's funds
from operations. In addition, if a property or properties are mortgaged to
secure payment of indebtedness and the Corporation is unable to meet mortgage
payments, the property could be foreclosed upon by or otherwise transferred to
the mortgagee with a consequent loss of income and asset value to the
Corporation.
NO PRIOR MARKET FOR COMMON STOCK
[AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THE COMMON STOCK] Prior to the
Offering, there has been no public market for the Common Stock. Subject to the
Closing of this Offering and the acquisition of the Properties, the American
Stock Exchange has conditionally approved the listing of the Common Stock.
However, there can be no assurance that an active trading market will develop.
There also can be no assurances that, upon listing on the American Stock
Exchange, the Corporation will continue to meet the criteria for continued
listing of the Common Stock on such Exchange. In addition, the initial public
20
<PAGE>
offering price may not be indicative of the market price for the Common Stock
after the Offering. The initial public offering price of the Common Stock was
determined by negotiation between the Agents and the Corporation.
EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK
[INCREASE IN INTEREST RATES MAY ADVERSELY AFFECT THE MARKET PRICE OF THE
COMMON STOCK] One of the factors that may influence the price of the
Corporation's Common Stock in public markets will be the annual yield on the
price paid for shares from distributions by the Corporation. Thus, an increase
in market interest rates may lead purchasers of Common Stock to demand a higher
annual yield, which could adversely affect the market price of the Common Stock.
POTENTIAL BORROWINGS TO MAKE DISTRIBUTIONS
[DISADVANTAGEOUS INDEBTEDNESS MAY BE INCURRED TO MAKE DISTRIBUTIONS] In
order to qualify as a REIT, the Corporation generally will be required each year
to distribute to its stockholders at least 95% of its net taxable income
(excluding any net capital gain.) In addition, the Corporation shall be subject
to a four percent non-deductible excise tax on the amount, if any, by which
certain distributions paid by it with respect to any calendar year are less than
the sum of (i) 85% of its ordinary income, (ii) 95% of its capital gains net
income for that year and (iii) 100% of its undistributed taxable income from
prior years.
The Corporation intends to make distributions to stockholders to comply with
the distribution provisions of the Code necessary to maintain qualification as a
REIT and to avoid U.S. Federal income taxes and the non-deductible excise tax
and, unless the Board of Directors otherwise decides, the Corporation intends to
distribute a minimum of 100% of its taxable income. Timing fluctuations in the
receipt of income and the payment of expenses and the effect of required debt
amortization payments, if any, may require the Corporation to borrow funds to
meet the distribution requirements necessary to achieve the tax benefits
associated with qualifying as a REIT and the Corporation's current distribution
intentions, even if the Corporation's management believes that then prevailing
market conditions are not generally favorable for such borrowings or that such
borrowings would not be advisable in the absence of such considerations. See
"U.S. Federal Income Tax Considerations" and "Distribution Policy."
JOINT VENTURE INVESTMENTS--RISKS OF CONFLICTING INTERESTS AND IMPASSE
[JOINT VENTURE MAY ACT CONTRARY TO CORPORATION'S INTERESTS] Under certain
circumstances, the Corporation may participate with an entity in jointly
acquiring an investment property. In every instance such joint ventures will be
arm's-length transactions. Any joint venture investment of the Corporation would
be subject to the same conditions, limitations and restrictions applicable to a
Corporation investment not undertaken as a joint venture, and the use of a joint
venture structure would not itself be designed to alter or expand the investment
objectives and policies of the Corporation. However, investment through a joint
venture could, for example, permit the Corporation to invest in a property which
is too large for the Corporation to acquire by itself.
The investment by the Corporation through a joint venture could subject the
Corporation to risks not otherwise present, including: (i) the possibility that
the joint venture participant will have economic interests different from the
Corporation and that the participant might be in a position to take actions
contrary to the instructions of the Corporation and contrary to the interests of
the Corporation; and (ii) special tax risks (see "U.S. Federal Income Tax
Considerations--Investments through Partnerships"). In addition, in joint
venture investments there is a potential risk of impasse on decisions if neither
joint venture partner controls the venture and a potential risk that if the
Corporation has a right of first refusal to purchase the joint venture partner's
interest, it may not have the resources to do so.
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<PAGE>
LIMITATIONS ON CHANGES IN CONTROL
[CORPORATE LIMITATIONS COULD AFFECT MANAGEMENT CHANGES] OWNERSHIP LIMIT--In
order to protect its status as a REIT, the Corporation must satisfy certain
conditions including the condition that no more than 50% in value of the
outstanding Common Stock may be owned, directly or indirectly, by five or fewer
individuals during the last half of a taxable year (other than the first year)
or during a proportionate part of a shorter taxable year (the "Five or Fewer
Test"). The Five or Fewer Test is applied using certain constructive ownership
and attribution rules of the Code. To this end, the Corporation's Amended and
Restated Articles of Incorporation, among other things, prohibit any holder from
owning more than 9.5% of the Corporation's outstanding Common Stock without the
consent of the Board of Directors of the Corporation. This limitation may have
the effect of precluding acquisition of control of the Corporation by a third
party without the consent of the Board of Directors of the Corporation even when
such a change in control could be beneficial to the Corporation's stockholders.
PREFERRED STOCK--The Amended and Restated Articles of Incorporation
authorize the Board of Directors to issue preferred stock and to establish the
preferences and rights of any shares issued. Such shares may be issued by the
Corporation on the authority of the Board of Directors without stockholder
action. The issuance of such shares could result in the dilution of the voting
power of the shares of Common Stock purchased in the Offering. The terms of any
series of preferred stock established by the Corporation in the future could
adversely affect the rights of the holders of the Corporation's Common Stock.
The issuance of preferred stock could have the effect of delaying or preventing
a change of control of the Corporation, even if a change in control were in the
stockholders' interest. No such shares will be issued or outstanding as of the
closing of the Offering.
CONTROL SHARE ACQUISITIONS--Under the Maryland General Corporation Law (the
"MGCL"), "control shares" acquired in a "control share acquisition" have no
voting rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter. The bylaws of the Corporation provide that
the Corporation has elected not to be governed by the control share acquisition
provisions of the MGCL.
MARYLAND BUSINESS COMBINATION STATUTE--Under the MGCL, certain business
combinations between a Maryland corporation and any person or affiliate thereof
who is the beneficial owner of ten percent or more of the voting power of the
Corporation's shares (an "Interested Shareholder") are prohibited for five years
after the most recent date on which the Interested Shareholder became an
Interested Shareholder. Thereafter, the business combination must be approved by
the affirmative vote of at least (i) 80% of the votes entitled to be cast by
holders of outstanding voting shares of the Company and (ii) 66 2/3% of the vote
entitled to be cast by holders of outstanding voting shares held by persons
other than the Interested Shareholder with whom the business combination is to
be effected, subject to certain exceptions. The Amended and Restated Articles of
Incorporation of the Corporation provide that the Maryland Business Combination
provisions of the MGCL do not apply to the Corporation.
RESPONSIBILITIES OF DIRECTORS AND ADVISOR--POSSIBLE INADEQUACY OF REMEDIES
[STOCKHOLDERS' REMEDIES AGAINST MANAGEMENT AND DIRECTORS ARE LIMITED] The
Advisor and the directors of the Corporation are accountable to the Corporation
and its stockholders as fiduciaries and consequently must exercise good faith
and integrity in handling the Corporation's affairs. However, the MGCL and the
Amended and Restated Articles of Incorporation of the Corporation exculpate each
director in certain actions by or in the right of the Corporation from liability
unless the director has (i) breached his duty of loyalty to the Corporation;
(ii) has engaged in an act or omission not in good faith or which involved
intentional misconduct or a knowing violation of law; or (iii) has engaged in
any transaction from which the director derived an improper personal benefit.
Further, the Advisory Agreement exculpates the Advisor from liability unless the
Advisor has engaged in gross negligence or willful misconduct. The Advisory
Agreement also provides that the Corporation will indemnify a present or former
director and the Advisor against expense or liability in an action if the
directors (other than the
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<PAGE>
indemnified party) determine in good faith that the person to be indemnified was
acting in good faith within what he or it reasonably believed to be the scope of
his or its authority and for a purpose which is or reasonably believed to be in
the best interests of the Corporation or its stockholders and that such
liability was not the result of reckless disregard of duties or a violation of
the criminal law on the part of the person to be indemnified.
As a result of the exculpation and indemnification provisions of the
Corporation's Amended and Restated Articles of Incorporation and the Advisory
Agreement, a stockholder may have a more limited right of action than he would
otherwise have had in the absence of such provisions. The exculpation and
indemnification provisions in the Amended and Restated Articles of Incorporation
and the Advisory Agreement have been adopted to help induce the beneficiaries of
such provisions to agree to serve on behalf of the Corporation or the Advisor by
providing a degree of protection from liability for alleged mistakes in making
decisions and taking actions. Such exculpation and indemnification provisions
have been adopted, in part, in response to a perceived increase generally in
stockholders' litigation alleging director misconduct.
The Corporation intends to purchase insurance policies under which
directors, officers and other agents of the Corporation will be insured against
liability or loss arising out of actual or asserted misfeasance or nonfeasance
in the performance of their duties, to the extent such insurance is available at
reasonable rates.
ADVISOR MAY PURCHASE SHARES
[INSIDERS, ADVISOR AND THEIR AFFILIATES ARE NOT GENERALLY LIMITED FROM
ACCUMULATING COMMON STOCK]. The Advisor, the Promoters, their principals and
officers may purchase shares in the Offering, subject to the restrictions on
accumulation of Common Stock contained in the Corporation's Amended and Restated
Articles of Incorporation, which generally prohibit accumulation by any person
or entity of more than 9.5% of all of the Corporation's outstanding Common
Stock.
In addition to the foregoing, the Corporation has adopted a stock option
plan for the benefit of the directors and officers of the Corporation (see
"Management - Stock Option Plan"). The aggregate number of shares of Common
Stock of the Corporation reserved for issuance under the plan is 250,000 shares
of Common Stock.
DILUTION
[MANAGEMENT MAY DILUTE STOCKHOLDER OWNERSHIP WITHOUT STOCKHOLDER APPROVAL]
The Board of Directors is authorized, without stockholder approval, to issue
additional Common Stock of the Corporation or to raise capital through the
issuance of shares, options, warrants and other rights, on such terms and at
such prices as the Board of Directors in its sole discretion may in good faith
determine. Any such issuance could result in dilution of the equity of the
stockholders of the Corporation.
The Corporation has adopted a stock option plan for the benefit of the
directors and officers of the Corporation (see "Management--Stock Option Plan").
The effect of the exercise of such options could be to dilute the value of the
stockholders' investments to the extent of any difference between the exercise
price of an option and the value of the Common Stock purchased at the time of
the exercise of the option.
Further, the Corporation may in the future seek to raise additional capital
to acquire additional properties. Issuance of securities for this purpose may
also result in dilution of the equity of the stockholders.
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<PAGE>
BENEFITS TO INSIDER FROM THE OFFERING
[INSIDER'S SHARES BECOME MORE LIQUID AS RESULT OF THE OFFERING] Ronald L.
Bernbaum will realize a benefit from the formation of the Corporation and the
Offering. He owns 100 shares of Common Stock of the Corporation prior to
completion of the Offering, for which he paid $1,000. After the Offering, the
Common Stock will be listed on the American Stock Exchange where there will be a
public market for the Common Stock. Mr. Bernbaum's shares will therefore become
more liquid.
RESTRICTIONS ON TRANSFER AND LIMITATION ON OWNERSHIP OF COMMON STOCK
[TRANSFER RESTRICTIONS MAY INHIBIT MARKET ACTIVITY] For the Corporation to
qualify as a REIT in any taxable year (other than the first year for which the
Corporation elects to be taxed as a REIT), no more than 50% in value of its
outstanding capital stock may be owned directly, or indirectly by attribution,
by five or fewer stockholders at any time during the second half of the
Corporation's taxable year. As a result of the Revenue Reconciliation Act of
1993 (U.S.), under certain circumstances the owners of U.S. pension funds and
certain other tax exempt entities are deemed to be the stockholders of the REIT
for purposes of this ownership test. In addition (other than the first year for
which the Corporation elects to be treated as a REIT), the outstanding stock
must be owned by 100 or more persons during at least 335 days of a taxable year
of 12 months or during a proportional part of a shorter taxable year.
To help ensure compliance with the share ownership requirements applicable
to REITs, the Corporation's Amended and Restated Articles of Incorporation
contains restrictions on transfer of its Common Stock and certain specific
exceptions to these restrictions. These restrictions require the Board of
Directors to refuse to transfer Common Stock to any person or entity if as a
result of a transfer such person or entity would beneficially own Common Stock
in excess of 9.5% of the lesser of the aggregate number or value of the
outstanding Common Stock ("Excess Stock"), or to hold the Excess Stock in trust
without dividends or voting rights, until the Excess Stock is acquired by an
eligible person for the lesser of the transfer price or the market price. These
provisions may inhibit market activity and the resulting opportunity for holders
of the Common Stock to realize a premium for their Common Stock that might
otherwise exist if a holder of the Common Stock were attempting to assemble a
block of Common Stock in excess of 9.5% of the lesser of the aggregate number or
value of the outstanding Common Stock. Also, there can be no assurance that
these provisions will in fact prevent the Corporation from failing to meet the
share ownership requirements. These provisions would also make the Common Stock
an unsuitable investment for any person or entity seeking to obtain ownership of
more than 9.5% of the lesser of the aggregate number or value of the outstanding
Common Stock.
SHARES OF COMMON STOCK AVAILABLE FOR FUTURE SALE
[MARKET PRICE OF COMMON STOCK MAY BE ADVERSELY AFFECTED BY SALES OF COMMON
STOCK] Sales of substantial amounts of Common Stock of the Corporation
(including shares issued upon the exercise of stock options), or the perception
that sales could occur, could adversely affect the prevailing market price for
the Common Stock. The Corporation and its directors and officers have agreed,
subject to certain limited exceptions, not to offer, sell, contract to sell or
otherwise dispose of any Common Stock for a period of ninety days after the date
of this Prospectus.
ENFORCING RIGHTS AGAINST FOREIGN CORPORATION, DIRECTORS AND OFFICERS
[ENFORCING CIVIL LIABILITY OF U.S. RESIDENT DIRECTORS AND OFFICERS MAY BE
LIMITED] Certain directors and officers of the Corporation and certain other
persons, who may be subject to the civil liability provisions of the Securities
Act (Ontario), the Securities Act (Alberta) and the Securities Act (British
Columbia) for a misrepresentation contained in this Prospectus will be resident
or located outside Canada and it may not be possible to effect service of
process upon such persons in Canada. All or a substantial portion of the assets
of the Corporation and certain of its directors and officers and certain other
persons,
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which parties may be subject to the civil liability provisions of the Securities
Act (Ontario), the Securities Act (Alberta) and the Securities Act (British
Columbia) for a misrepresentation contained in the Prospectus, will be located
outside Canada and there may be difficulties in enforcing against the
Corporation and the said directors and officers and other certain persons the
civil liability provisions of the Securities Act (Ontario), the Securities Act
(Alberta) and the Securities Act (British Columbia) for any misrepresentation
that may be contained in this Prospectus. Ronald Bernbaum has been appointed
agent for the Corporation for service of process in Canada at 2235 Sheppard
Avenue East, Suite 904, Willowdale, Ontario.
USE OF PROCEEDS
The net proceeds to the Corporation from the sale of the 2,740,000 shares
offered hereby are estimated to be $24,905,000 after deduction of the Agents'
commissions ($2,055,000) and estimated expenses of the Offering ($440,000).
The Corporation will use the net proceeds of the Offering, after deducting
Agents' commissions and expenses of the Offering, to acquire the Properties on
Closing (including the repayment of deposits advanced by the Promoters or the
Advisor and the payment of acquisition costs) to pay mortgage assumption and
financing fees, the acquisition fees to the Advisor (in the amount of $455,438),
and for working capital. The following table sets forth an allocation of the use
of net proceeds. The acquisition expenses are estimates and any increase or
reduction will result in an increase or reduction in the proceeds available for
working capital. Until required, proceeds allocated to working capital will be
invested by the Corporation in Authorized Investments.
<TABLE>
<CAPTION>
AMOUNT PERCENT
------------- ----------
<S> <C> <C>
Gross Offering Proceeds................................................................ $ 27,400,000 100.00%
Public Offering Expenses:
Agents' commissions.................................................................. 2,055,000 7.50%
Expenses (1)......................................................................... 440,000 1.61%
------------- ----------
Amount Available for Investment........................................................ $ 24,905,000 90.89%
------------- ----------
------------- ----------
Cash Payment to Acquire:
Chico Crossroads Center.............................................................. $ 20,912,500 76.32%
Gardens Square....................................................................... 2,740,000 10.00%
Acquisition Fees: (2)
Chico Crossroads Center.............................................................. 420,000 1.53%
Gardens Square....................................................................... 216,000 0.79%
Mortgage Assumption and Financing Fees (3)............................................. 68,000 0.25%
Working Capital........................................................................ 548,500 2.00%
------------- ----------
Proceeds Invested...................................................................... 24,905,000 90.89%
Public Offering Expenses............................................................... 2,495,000 9.11%
------------- ----------
Total Application of Proceeds.......................................................... $ 27,400,000 100.00%
------------- ----------
------------- ----------
</TABLE>
- ------------------------
(1) Includes legal, accounting, printing and other expenses of this Offering. To
the extent, if any, that expenses of the Offering exceed this amount, the
excess will be paid by reducing the working capital.
(2) Includes $455,438 of acquisition fees to be paid to the advisor and legal
and other expenses related to the acquisitions.
(3) Includes loan commitment fees, legal and other costs related to the
assumption of the mortgage in the principal amount of $6,710,000 on Gardens
Square.
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<PAGE>
CAPITALIZATION
The pro forma capitalization of the Corporation as at September 30, 1996,
and as adjusted to reflect the purchase of the Properties, the assumption of the
mortgage secured by the Gardens Square property, the issuance and sale of the
Common Stock pursuant to an assumed public offering price of $10.00 per share,
after deducting the estimated Agents' commissions and offering expenses payable
by the Corporation, is as follows:
<TABLE>
<CAPTION>
ACTUAL PRO FORMA
SEPTEMBER 30, 1996 AS ADJUSTED
------------------- -------------
<S> <C> <C>
Mortgage Payable............................................................... $ 6,710,000
-------------
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value per share;
100 million shares authorized; 100 shares issued
and outstanding (immediately prior to the Offering)
2,740,100 shares issued and outstanding as
adjusted (1)................................................................. $ 1 27,401
Excess Stock, $.01 par value per share,
50 million shares authorized, none issued or
outstanding..................................................................
Preferred Stock, $.01 par value per share,
1,500,000 shares authorized, none
issued or outstanding........................................................
Additional paid in capital (2)................................................. 999 24,878,599
------ -------------
TOTAL STOCKHOLDERS' EQUITY 1,000 24,906,000
------ -------------
Total.......................................................................... $ 1,000 $ 31,616,000
------ -------------
------ -------------
</TABLE>
- ------------------------
(1) Excludes 250,000 shares of Common Stock reserved for issuance under the
Corporation's 1996 Stock Option Plan, of which 100,000 shares were subject
to outstanding options as of September 25, 1996 at an exercise price of $10
per share.
(2) Agents' commissions and expenses of the issuance of $2,495,000 have been
deducted from additional paid in capital.
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<PAGE>
PRO FORMA SELECTED FINANCIAL INFORMATION
The following table sets forth pro forma selected financial information of
the Corporation and should be read in conjunction with the audited and unaudited
statements of Revenue and Certain Expenses for the year ended December 31, 1995
and the nine months ended September 30, 1996 and 1995 respectively, for Chico
Crossroads Center, Ltd. and Miami Gardens Associates and the notes thereto, and
of the unaudited pro forma financial information of the Corporation contained
herein. The following pro forma selected financial information is based on the
unaudited pro forma statements of income for the nine months ended September 30,
1996 and for the year ended December 31, 1995 and the unaudited pro forma
balance sheet as of September 30, 1996 giving effect to the adjustments referred
to in the notes to the unaudited pro forma statements of income and balance
sheet. The data for the nine months ended September 30, 1996 includes, in the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for the unaudited
interim period. See "Management's Discussion and Analysis of the Pro Forma
Results of Operations and Pro Forma Financial Condition."
The pro forma financial data has been prepared giving effect to the
acquisition of the Properties, the assumption of the mortgage secured by the
Gardens Square property and the issuance of Common Stock as described elsewhere
in this Prospectus (see note 1 to the pro forma financial data).
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
PRO FORMA OPERATING DATA
Rental Income (excluding operating expense reimbursement)................ $ 2,227,710 $ 2,928,727
Pro Forma Net Income
U.S. GAAP.............................................................. 733,054 915,764
CDN GAAP............................................................... 1,000,629 1,294,829
Pro Forma Net Income Per Share (2)
U.S. GAAP.............................................................. $.27 $.33
CDN GAAP (1)........................................................... $.37 $.47
PRO FORMA BALANCE SHEET DATA [AS AT SEPTEMBER 30, 1996]
Rental Properties........................................................ $ 30,998,500
Total Debt............................................................... 6,710,000
Stockholders' Equity..................................................... 24,906,000
OTHER DATA
Pro Forma Funds From Operations (3)...................................... 1,218,640 1,563,212
</TABLE>
- ------------------------
(1) Pro Forma Net Income under Cdn. GAAP is calculated using the sinking fund
method of amortizing the buildings using a compound rate of 5% per annum
over the estimated lives of 40 years rather than the straight line basis
used for U.S. GAAP purposes.
(2) The Pro Forma Net Income Per Share calculation assumes that no additional
Common Stock was issued during the periods under the Corporation's intended
dividend reinvestment plan or by the exercise of options to purchase 20,000
shares of Common Stock of the Corporation by Mr. Bernbaum or the exercise of
options to purchase 10,000 shares of Common Stock by each of Messrs.
Maynard, Thrall, Witterick, Peterson, Schwartz, McCrae, Kwinta and
Dickerson. "See Management--Stock Option Plan."
(3) The Corporation considers funds from operations to be one measure of the
performance of an equity REIT. Funds from operations is defined by the
National Association of Real Estate Investment Trusts ("NAREIT") as net
income (computed in accordance with generally accepted accounting
principles) excluding gains (or losses) from debt restructuring and sales of
property plus amortization of real
27
<PAGE>
estate assets. Amortization of deferred financing costs and amortization of
non real estate assets are not added back to net income to arrive at funds
from operations. Funds from operations should not be considered as an
alternative to net income as a measure of profitability nor is it comparable
to cash flow provided by operating activities determined in accordance with
generally accepted accounting principles. Funds from Operations presented
herein is not necessarily comparable to Funds from Operations presented by
other real estate companies due to the fact that not all real estate
companies use the same definition. However, the Corporation's Funds from
Operations is comparable to the Funds from Operations of real estate
companies that use the current definition of NAREIT. See "Management's
Discussion and Analysis of the Pro Forma Results of Operations and Pro Forma
Financial Condition" for a detailed calculation.
28
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
BASIC U.S. REIT, INC.
PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
-------------------------- PRO FORMA
CHICO GARDENS PRO FORMA BASIC U.S.
CROSSROADS SQUARE ADJUSTMENTS NOTES REIT, INC.
------------ ------------ ------------ ----- ------------
<S> <C> <C> <C> <C> <C>
Revenue
Rental........................................ $ 2,014,435 $ 904,292 $ 10,000 2(a) $ 2,928,727
Operating expense reimbursement............... 377,749 316,745 54,000 2(b) 748,494
Other......................................... 5,500 10,542 16,042
------------ ------------ ------------ ------------
2,397,684 1,231,579 64,000 3,693,263
------------ ------------ ------------ ------------
Operating Expenses
Rental........................................ 186,136 235,534 21,000 2(c) 442,670
Real estate taxes............................. 248,214 139,711 107,000 2(d) 494,925
Amortization.................................. 647,448 2(e) 647,448
Asset management fees......................... 373,575 2(f) 373,575
General and administration.................... 280,000 2(g) 280,000
------------ ------------ ------------ ------------
434,350 375,245 1,429,023 2,238,618
------------ ------------ ------------ ------------
Excess of revenue over certain expenses......... $ 1,963,334 $ 856,334 1,365,023 1,454,645
------------ ------------
------------ ------------
Interest expense................................ 538,881 2(h) 538,881
------------ ------------
Net Income...................................... $ 1,903,904 $ 915,764
------------ ------------
------------ ------------
Pro forma net income per share.................. 2(i) $ 0.33
------------
------------
Weighted average number of shares............... 2,740,100
------------
------------
</TABLE>
29
<PAGE>
BASIC U.S. REIT, INC.
PRO FORMA STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------------ PRO FORMA
CHICO GARDENS PRO FORMA BASIC U.S.
CROSSROADS SQUARE ADJUSTMENTS NOTES REIT, INC.
------------ ---------- ------------ ----- ------------
<S> <C> <C> <C> <C> <C>
Revenue
Rental.......................................... $ 1,519,640 $ 700,570 $ 7,500 2(a) $ 2,227,710
Operating expense reimbursement................. 313,200 239,100 40,500 2(b) 592,800
Other........................................... 2,480 2,480
------------ ---------- ------------ ------------
1,832,840 942,150 48,000 2,822,990
------------ ---------- ------------ ------------
Operating Expenses
Rental.......................................... 141,000 166,500 15,750 2(c) 323,250
Real estate taxes............................... 207,000 105,000 80,250 2(d) 392,250
Amortization.................................... 485,586 2(e) 485,586
Asset management fees........................... 280,182 2(f) 280,182
General and administration...................... 210,000 2(g) 210,000
------------ ---------- ------------ ------------
348,000 271,500 1,071,768 1,691,268
------------ ---------- ------------ ------------
Excess of revenue over certain expenses........... $ 1,484,840 $ 670,650 1,023,768 1,131,722
------------ ----------
------------ ----------
Interest expense.................................. 398,668 2(h) 398,668
------------ ------------
Net Income........................................ $ 1,422,436 $ 733,054
------------ ------------
------------ ------------
Pro forma net income per share.................... 2(i) $ 0.27
------------
------------
Weighted average number of shares................. 2,740,100
------------
------------
</TABLE>
30
<PAGE>
BASIC U.S. REIT, INC.
PRO FORMA BALANCE SHEET
AS AT SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Cash........................................................................... $ 549,500
Rental properties (Note 3(a)).................................................. 30,998,500
Deferred financing costs (Note 3(b))........................................... 68,000
----------
$31,616,000
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage payable (Note 3(b))................................................... $6,710,000
----------
Stockholders' Equity (Note 3(c))
Preferred Stock $0.01 par value
Authorized 1,500,000
Issued None
Excess Stock $0.01 par value
Authorized 50,000,000
Issued None
Common Stock, $0.01 par value
Authorized 100,000,000
Issued 2,740,100........................................................... 27,401
Additional paid in capital................................................... 24,878,599
----------
24,906,000
----------
$31,616,000
----------
----------
</TABLE>
31
<PAGE>
BASIC U.S. REIT, INC.
NOTES TO PRO FORMA STATEMENTS OF INCOME
AND PRO FORMA BALANCE SHEET
(UNAUDITED)
1. BASIS OF PRESENTATION
The pro forma statements of income have been prepared in U.S. dollars by
management from the separate audited statements of revenue and certain expenses
for the properties to be acquired from Chico Crossroads Center, Ltd. and Miami
Gardens Associates known as Chico Crossroads and Gardens Square, respectively
(the "Properties") for the year ended December 31, 1995 and the unaudited
statements of revenue and certain expenses for the nine months ended September
30, 1996 giving effect to the acquisition of the Properties, the assumption of
the mortgage secured by the Gardens Square property and the issuance of Common
Stock as though these transactions had been completed on January 1, 1995. The
Corporation had no operations during the periods.
The pro forma balance sheet has been prepared in U.S. dollars giving effect
to the acquisition of the Properties, the assumption of the mortgage secured by
the Gardens Square property and the issuance of Common Stock as though these
transactions had been completed on September 30, 1996. The Corporation's cash of
$1,000 and stockholder's equity of $1,000 at September 30, 1996 have also been
included.
The pro forma financial statements are not necessarily indicative of what
the Corporation's financial position or results of operations would have been
assuming the completion of the transactions on such date or at the beginning of
the periods indicated, nor do they purport to project the Corporation's
financial position or results of operations at any future date or for any future
period. These statements should also be read in conjunction with the description
of the transactions and financial statements appearing elsewhere in this
Prospectus.
It is the intention of the Corporation to distribute a minimum of 100% of
its taxable income to stockholders and to qualify as a REIT for U.S. tax
purposes.
2. PRO FORMA STATEMENTS OF INCOME
The pro forma statements of income include the following adjustments:
a) rental revenue has been increased to reflect the calculation of straight
line rents as though the acquisitions were completed on January 1, 1995;
b) operating expense reimbursement has been increased by the portion of the
realty tax increase (resulting from the acquisitions of the Properties by
the Corporation) that can be collected from existing tenants in
accordance with the provisions of existing lease agreements (see note
2(d));
c) rental expense has been increased to reflect increased property
management fees the Corporation will be required to pay as a result of
the acquisition of the Properties by the Corporation;
d) real estate taxes have been increased to reflect the reassessment of the
Properties resulting from the acquisitions of the Properties by the
Corporation;
e) amortization expense includes (i) amortization of the buildings acquired
calculated on a straight line basis over the estimated useful lives of 40
years; and (ii) amortization of land improvements acquired calculated on
a straight line basis over the estimated useful lives of 20 years;
f) asset management fees have been calculated in accordance with the
Advisory Agreement at an annual rate of 1.5% of the net proceeds received
by the Corporation from the Offering;
32
<PAGE>
BASIC U.S. REIT, INC.
NOTES TO PRO FORMA STATEMENTS OF INCOME (CONTINUED)
AND PRO FORMA BALANCE SHEET
(UNAUDITED)
2. PRO FORMA STATEMENTS OF INCOME (CONTINUED)
g) general and administration costs include the costs of operating the
Corporation, including legal, accounting, reporting and directors'
expenses. Management has negotiated commitments from service providers
with respect to these services;
h) interest expense includes interest related to the mortgage financing and
amortization of deferred financing costs referred to in Note 3(b) as
follows:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
<S> <C> <C>
Interest expense related to the mortgage financing of $6,710,000
at a fixed rate of 7.94% annually............................... $ 529,295 $ 391,479
Amortization of deferred financing costs of $68,000 ratably
through December 21, 2002....................................... 9,586 7,189
-------- --------
$ 538,881 $ 398,668
-------- --------
-------- --------
</TABLE>
; and
i) pro forma net income per share has been calculated on the assumption
that additional Common Stock was not issued during the periods. The
issuance of Common Stock under the dividend reinvestment plan or by
exercising options granted to certain individuals to purchase common
stock would not have had a material impact on the calculation of pro
forma net income per share.
3. PRO FORMA BALANCE SHEET
The pro forma balance sheet gives effect to the acquisition of the
Properties, the assumption of the mortgage secured by the Gardens Square
property and the issuance of Common Stock as follows:
a) ACQUISITIONS OF PROPERTIES
The Properties will be purchased at a total cost of $30,998,500
including acquisition fees and expenses of $636,000 of which $455,438 is
payable to Basic Advisors, Inc. in accordance with the Advisory
Agreement. The purchase price will be assigned to land, land
improvements and buildings in the amounts of $6,900,000, $1,800,000 and
$22,298,500, respectively;
b) ASSUMPTION OF MORTGAGE
The Corporation will assume the mortgage payable secured by the Gardens
Square property in the amount of $6,710,000. The mortgage bears interest
at a rate of 7.94% per annum, which is assumed to approximate current
market rates at the Closing of the Offering, and is due on December 21,
2002 with monthly payments in the amount of $52,214, based on a 25 year
amortization. The Corporation will be required to pay a mortgage
assumption fee of approximately $68,000 which will be amortized over the
remaining term of the mortgage; and
33
<PAGE>
BASIC U.S. REIT, INC.
NOTES TO PRO FORMA STATEMENTS OF INCOME (CONTINUED)
AND PRO FORMA BALANCE SHEET
(UNAUDITED)
3. PRO FORMA BALANCE SHEET (CONTINUED)
c) ISSUANCE OF COMMON STOCK
Upon completion of the Offering Stockholders' Equity will consist of the
following:
<TABLE>
<CAPTION>
NUMBER
OF SHARES PROCEEDS
---------- -------------
<S> <C> <C>
At date of incorporation.......................................... 100 $ 1,000
Completion of offering............................................ 2,740,000 27,400,000
Agents' fees and costs of issue................................... (2,495,000)
---------- -------------
2,740,100 $ 24,906,000
---------- -------------
---------- -------------
</TABLE>
4. RECONCILIATION TO CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The pro forma statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") in the United States ("U.S.") which are,
in all material respects, consistent with Canadian GAAP except that amortization
of the buildings over the useful lives of 40 years would be calculated on a
sinking fund basis under Canadian GAAP using a compound rate of 5% per annum.
This difference would have resulted in a reduction of amortization expense and
an increase in pro forma net income in the amount of $379,065 for the year ended
December 31, 1995 ($267,575 for the nine months ended September 30, 1996). Pro
forma net income per share under Canadian GAAP would have been $.47 for the year
ended December 31, 1995 ($.37 for the nine months ended September 30, 1996).
34
<PAGE>
BASIC U.S. REIT, INC.
ESTIMATED TWELVE MONTH PRO FORMA STATEMENT
OF TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE
TWELVE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
The following unaudited statement is a pro forma estimate for a twelve month
period of taxable income and funds available from operation of the Corporation.
This statement does not purport to forecast actual operating results for any
period in the future. This statement is based on the pro forma statements
previously presented and should be read in conjunction with the audited
statements of Revenue and Certain Expenses for the year ended December 31, 1995
and the unaudited statement of Revenue and Certain Expenses for the nine months
ended September 30, 1996, for Chico Crossroads Center, Ltd. and Miami Gardens
Associates and the notes thereto.
<TABLE>
<S> <C>
ESTIMATE OF TAXABLE NET OPERATING INCOME:
Pro forma net income for the twelve months ended September 30, 1996........... $ 961,995
Net adjustment for tax basis rental revenue recognition (Note 1).............. (36,600)
---------
Pro forma taxable income before allocation for dividends deduction............ 925,395
Estimated dividends deduction................................................. (925,395)
---------
Pro forma taxable net operating income........................................ $ 0
---------
---------
ESTIMATE OF OPERATING FUNDS AVAILABLE:
Pro forma taxable income before allocation for dividends deduction............ $ 925,395
Add pro forma amortization of real estate assets and deferred financing
costs....................................................................... 657,034
---------
Estimated pro forma cash from operations available for distribution (Note
2).......................................................................... $1,582,429
---------
---------
</TABLE>
- ------------------------
(1) Represents the net adjustment to reverse the effect of rental revenue
recognition on a straight line basis.
(2) Operating funds available does not represent net income or cash generated
from operating activities in accordance with generally accepted accounting
principles and is not necessarily indicative of cash available to fund cash
needs.
(3) The Corporation is required to distribute a minimum of 95% of taxable income
to maintain its status as a REIT. Based on the taxable income for the twelve
months ended September 30, 1996 the Corporation's minimum annual
distribution requirement is $879,125.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE PRO FORMA RESULTS
OF OPERATIONS AND PRO FORMA FINANCIAL CONDITION
OVERVIEW
The Corporation was incorporated on July 30, 1996 under the laws of the
State of Maryland and intends to qualify as a real estate investment trust under
the United States federal tax laws. The Corporation has been formed to engage in
the business of investing in a diversified portfolio of income producing
commercial real property throughout the United States, focusing initially on
neighborhood and community shopping centers with nationally recognized anchor
tenants. The Corporation has not conducted operations prior to the closing of
the Offering and the acquisition of the Properties and accordingly had no
revenues during the last two fiscal years. See "Business" for a general
discussion of the plan of operation of the Corporation, including without
limitation, discussion of the Properties, acquisition of the Properties and the
Corporation's relationship with the Advisor. Management believes that the
Corporation, after receiving the net proceeds from the Offering, will be able to
satisfy its cash requirements for the next twelve months without having to raise
additional funds.
The following discussions are based on the unaudited Pro Forma Statements of
Income for the nine months ended September 30, 1996 and for the year ended
December 31, 1995 and the unaudited Pro Forma Balance Sheet, as at September 30,
1996 giving effect to the adjustments referred to in the Notes to the unaudited
Pro Forma Statements of Income and Pro Forma Balance Sheet. As at September 30,
1996, Chico Crossroads Center and Gardens Square (the "Properties") on a
combined average basis were 98.3% leased, essentially unchanged from December
31, 1995. Over 83% of the gross leasable area of the Properties is leased to
tenants whose leases expire between the years 2007 and 2015. As of January 1,
1996, minimum future rental payments exclusive of percentage rents, operating
expense reimbursements, Consumer Price Index ("CPI") increases and assuming that
none of the lease renewal options are exercised, are in excess of $36,195,000.
RESULTS OF OPERATIONS
The retail leases for the Properties provide for minimum rents with periodic
increases. The retail tenants at the Properties pay a majority of the on-site
operating expenses. The following is an analysis of operating expenses which
were not recovered at Chico Crossroads Center and Gardens Square during the nine
months ended September 30, 1996 and the year ended December 31, 1995.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1995
------------------ ------------------
<S> <C> <C>
CHICO CROSSROADS CENTER
Management Fees..................................... $ 22,000 $ 36,000
Municipal Assessment................................ 11,600 15,460
Operating expenses related to vacant space.......... 1,200 5,141
------- --------
34,800 56,601
------- --------
GARDENS SQUARE
Management Fees..................................... 4,000 5,400
Expenses absorbed by Landlord....................... 8,000 23,300
Operating expenses related to vacant space.......... 20,400 29,800
------- --------
32,400 58,500
------- --------
$ 67,200 $ 115,101
------- --------
------- --------
</TABLE>
Real estate tax authorities will reassess the Properties as a result of the
acquisition by the Corporation. Management has calculated the impact of a
reassessment based on the purchase price of each property. Over 50% of the
increase will be passed through to the tenants in accordance with their leases.
The
36
<PAGE>
following is a summary of the annual increase in real estate taxes and the
portion which can be recovered as a result of the acquisition of the Properties
by the Corporation:
<TABLE>
<CAPTION>
ANNUAL INCREASE RECOVERABLE
IN REAL ESTATE PORTION OF
TAXES (1) INCREASE
--------------- -----------------
<S> <C> <C>
Chico Crossroads Center.................................. $ 60,000 $ 29,000
Gardens Square........................................... 47,000 25,000
--------------- -------
$ 107,000 $ 54,000
--------------- -------
--------------- -------
</TABLE>
- ------------------------
(1) Pertaining to reassessment resulting from the acquisition by the
Corporation.
The pro forma statements of income have been adjusted to reflect both the
increase in real estate taxes and the recoverable portion of the increase. The
nonrecoverable portion of the increase in real estate taxes at the Chico
Crossroads Center relates to a tenant whose lease specifies that they are not
required to pay any increase in real estate taxes which result from the sale of
the property for the first five years after a sale of the Property. The pro
forma statements of income have also been adjusted for the increased property
management fees the Corporation will be required to pay as a result of the
acquisition of the Properties in the amount of $21,000 per annum. This increase
will not be recoverable from tenants.
Over 39% of the gross leasable area of the Properties is leased to tenants
whose leases contain percentage rent clauses which call for additional rents
based on tenant sales. Chico Crossroads Center has two tenants who have paid
percentage rent for several years. Rental revenue for the nine months ended
September 30, 1996 includes $75,000 of percentage rent and rental income for the
year ended December 31, 1995 includes approximately $134,000 of percentage rent.
Over $112,000 of the percentage rent for the year ended December 31, 1995 was
received from a tenant who benefitted from the closure of a competitor in 1995.
In 1994 this tenant paid $78,000 in percentage rent and its percentage rent for
1996 is expected to decline with the introduction of a new competitor in 1996.
Aside from the two tenants currently paying percentage rent, none of the other
tenants with percentage rent clauses are expected to attain sales sufficient to
generate percentage rent in 1996 or 1997.
Amortization is based on the Corporation's acquisition price calculated as
if the Corporation had purchased the Properties at the beginning of the periods.
Amortization includes (i) amortization of the buildings acquired calculated on a
straight line basis over the estimated useful lives of 40 years, and (ii)
amortization of land improvements calculated on a straight line basis over the
estimated useful lives of 20 years. Interest expense is based on the Mortgage
the Corporation will assume on the acquisition of the Properties. The interest
rate on this mortgage is fixed at 7.94% through to December 21, 2002. Interest
expense includes the amortization of the mortgage assumption fee over the
remaining term of the mortgage. General and administration expense reflects the
general and administration expense of the Corporation based upon fee quotations
obtained from various service providers. Asset management fees are based on the
Advisory Agreement. Pro forma net income per share was $.33 for the year ended
December 31, 1995 and $.27 for the nine months ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation will acquire the Properties with a combination of equity
raised through this Offering and mortgage financing. Upon completion of the
offering, the Corporation expects to have acquired rental properties with a
total cost of approximately $30,998,500, and assumed a mortgage payable in the
amount of $6,710,000. The Corporation's debt immediately following the closing
of the Offering will be approximately 21% of total debt plus stockholders'
equity. The Corporation may increase the level of debt to as high as 60% of
total debt plus equity. The proceeds from any additional debt would be used to
acquire additional properties. In addition, the Corporation may make additional
acquisitions through a combination of equity and mortgage and other debt
financing.
A significant portion of the Corporation's net cash provided by operating
activities will be distributed to stockholders. Accordingly capital outlays for
major repairs, and debt repayments may require funding
37
<PAGE>
from borrowings or equity offerings to the extent that cash reserves are
insufficient. The Corporation is expected to have cash balances of approximately
$549,500 after the closing of the Offering.
The Corporation will assume the mortgage financing on Gardens Square. Under
the terms of the mortgage the Corporation will be required to pay real estate
taxes into an escrow account with the lender. Real estate taxes on Gardens
Square are payable annually in November. Although shop tenants are required to
escrow real estate taxes with the landlord two anchor tenants are not required
to pay their real estate taxes until they receive proof of payment from the
landlord. Gardens Square real estate taxes for 1997 are estimated to be $187,000
and the Corporation will escrow 8.3% of this amount each month. The Corporation
will receive less than 3% of this amount each month from shop tenants.
The Corporation has had engineering studies performed on the Properties as
part of its acquisition due diligence. These studies concluded that the
buildings and sites are in good condition and that any immediate repairs
required are immaterial.
The Corporation recognizes minimum base rents on a straight line basis over
the terms of the leases. Rental income for the nine months ended September 30,
1996 includes approximately $27,000 of rent in excess of amounts currently owed
under the leases. Rental income for the year ended December 31, 1995 includes
approximately $37,000 of such rent.
CALCULATION OF FUNDS FROM OPERATIONS
The Corporation generally considers funds from operations to be one measure
of the performance of an equity REIT. Funds from operations is defined by the
National Association of Real Estate Investment Trusts ("NAREIT") as net income
(computed in accordance with generally accepted accounting principles) excluding
gains (or losses) from debt restructuring and sales of property plus
amortization of real estate assets. Amortization of deferred financing costs and
amortization of non real estate assets are not added back to net income to
arrive at funds from operations. Funds from operations should not be considered
an alternative to net income as a measure of profitability nor is it comparable
to cash flows provided by operating activities determined in accordance with
generally accepted accounting principles. Funds from Operations presented herein
is not necessarily comparable to Funds from Operations presented by other real
estate companies due to the fact that not all real estate companies use the same
definition. However, the Company's Funds from Operations is comparable to the
Funds from Operations of real estate companies that use the current definition
NAREIT. The reconciliation of pro forma net income to pro forma funds from
operations under NAREIT is as follows:
<TABLE>
<S> <C>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996:
Pro forma net income.................................. $ 733,054
Amortization of real estate assets.................... 485,586
---------
Pro forma funds from operations....................... $1,218,640
---------
---------
FOR THE YEAR ENDED DECEMBER 31, 1995:
Pro forma net income.................................. $ 915,764
Amortization of real estate assets.................... 647,448
---------
Pro forma funds from operations....................... $1,563,212
---------
---------
</TABLE>
INFLATION
The Corporation believes that inflation should not have a material adverse
effect on the Corporation. Although increases in the rate of inflation may
increase interest rates which the Corporation may be required to pay on borrowed
funds, the Corporation intends to stagger the maturity of mortgage financing to
limit the impact of such increases in any one year.
38
<PAGE>
BUSINESS
THE CORPORATION
Basic U.S. REIT, Inc. is a corporation incorporated under the laws of the
State of Maryland on July 30, 1996. The Corporation has been incorporated to
invest in a diversified portfolio of income producing commercial real property
in the United States with the objective of maximizing the yield to its
stockholders while providing for long-term stability and growth. The Advisor has
identified the Properties as opportunities for the Corporation and the
Corporation intends to acquire additional properties with a view to enhancing
the income yield of the Corporation to its stockholders. Initially the
Corporation will focus on community and neighborhood shopping centers. During
this phase, the Corporation will look for properties with a significant
percentage of national and regional tenants, with reputation and marketing clout
that will attract significant traffic to the center, providing business for
itself and also to smaller tenants. The Corporation will seek properties with
anchor tenants who are among the leaders in their respective fields or whose
operations are national or regional in scope. The Corporation intends to utilize
as sources for its future acquisitions available working capital, proceeds from
future equity financing and mortgage or debt financing. See "Policies With
Respect To Certain Activities--Financing Policies."
A purpose of the Corporation is to provide investors with a favorable yield
on their investment in the Common Stock through participation in a diversified
portfolio of income producing real property investments in the United States. To
the extent that the funds of the Corporation are not invested by the Corporation
in real property investments from time to time, they will be invested in
Authorized Investments. The Corporation intends to qualify as a REIT for the
purposes of the Code commencing with its taxable year ending December 31, 1997.
A corporation which qualifies as a REIT under the Code will be entitled to
deduct dividends paid in calculating taxable income for U.S. purposes so that
the REIT may be able to reduce or eliminate taxable income and flow through to
investors in the REIT the pre-tax income derived from the underlying investment
assets.
The Corporation has no operating history, has no material net worth, has not
declared dividends on its outstanding shares and has not paid any cash
remuneration to its directors or officers as of the date of this Prospectus. The
Board of Directors is responsible for the general control and direction of the
Corporation, including decisions regarding the acquisition and disposition of
the Corporation's assets (subject to certain restrictions contained in the
Amended and Restated Articles of Incorporation and the bylaws of the
Corporation). See "Management" and "Certain Provisions of Maryland Law and the
Corporation's Amended and Restated Articles of Incorporation and Bylaws." The
Corporation may retain affiliated property managers of the Properties who will
be responsible for the on-site and property specific aspects of the management
of the Corporation's real properties. The Advisor will, on a continuing basis,
present investment opportunities to the Corporation, act as investment advisor
to the Corporation and administer certain of the day-to-day operations of the
Corporation. See "Management--The Advisor."
The executive office of the Corporation is located at 7850 Northwest 146th
Street, Suite 308, Miami, Florida 33016, telephone number 305-556-7162.
INVESTMENT OBJECTIVES
The Corporation has been created to provide investors with the opportunity
to make equity investments in income producing real property in the United
States.
The types of real property which the Corporation intends to acquire have
traditionally been acquired by institutional investors due to the large
financial commitments which are necessary to acquire such properties. The
benefit offered by the Corporation is that it provides the individual investor
with an opportunity to invest in such real estate as a result of the pooling of
investment funds with other investors.
The Corporation will utilize the services of the Advisor. The Board of
Directors and the Advisor are responsible for the supervision of the management
and operation of the Corporation and its properties,
39
<PAGE>
thereby providing a convenience to the investors not normally found in direct
property investments. The Advisor will provide, retain and supervise property
managers who will provide day-to-day management of the properties of the
Corporation.
The Corporation's objectives are:
- to own and operate income producing real property;
- to generate income for distribution;
- to preserve and increase the Corporation's equity through appreciation of
the value of its assets; and
- to increase the Corporation's equity through amortization of mortgage
financing.
The Corporation intends to continually enhance returns through an ongoing
acquisition program designed to provide economies of scale through the decline
of general and administrative expenses and fees as a percentage of assets and
revenues and to reduce risk through geographic and portfolio diversification.
The Corporation believes that the diversification inherent in the pooling of
real estate assets in a REIT should result in significant risk reduction
relevant to direct ownership of specific real estate. The Corporation will seek
additional properties which are expected to have long-term predictability of
income, where credit-worthy tenants with net leases will be a majority of the
occupants. The Corporation's assets are expected to appreciate through scheduled
increases in rental income and the Corporation intends to manage its portfolio
to maintain and enhance the value of its properties.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
INVESTMENT POLICIES
The Corporation intends to acquire controlling interests (possibly with
joint venture partners) in income producing commercial real properties located
in the United States utilizing a combination of funds derived from available
working capital, proceeds from future equity financing and mortgage and other
debt financing if available. These acquisitions are intended to be completed in
phases, with the initial phase consisting of the acquisition of neighborhood and
community shopping centers. The portfolio of properties will offer as much
geographic diversification as practical, given the size of the REIT.
The Advisory Agreement contains certain general investment policies which
are guidelines for the Advisor in presenting investment prospects for the
Corporation. Such investment policies may be amended from time to time by a
majority of the Board of Directors, such majority to include a majority of the
independent directors. The bylaws of the Corporation set forth restrictions on
the Corporation's investments which may only be amended with the approval of a
majority of the Board of Directors of the Corporation, such majority to include
a majority of the independent directors, and by a majority of the votes cast at
a meeting of the holders of the Common Stock of the Corporation. Initially, the
Corporation will focus on neighborhood and community shopping centers. These
properties will offer the advantage of a basic minimum rent, substantially net
of such expenses as maintenance and taxes and potentially the percentage share
of sales volume of the retail outlets.
The Corporation will consider acquiring shopping centers that satisfy a
combination of some or all of the following eight factors in making its initial
property analysis. Priority will be given to centers: (1) with anchor tenants,
such as department stores, supermarkets and national retail chains, to ensure
the quality of retail services offered by the center, the quality of its tenants
and the desired return on sales; (2) which, if combined with the other real
property investments of the Corporation, provide the Corporation with a
diversified tenant base with the anchor tenants, which anchor tenants should be
dominant enough to establish the shopping center as a destination center
accounting for a minimum of sixty percent (60%) of the gross leasable area of
the Corporation's portfolio of shopping centers; (3) where the average anchor
lease extends for a minimum of ten (10) years from the date of acquisition by
the Corporation; (4) in a
40
<PAGE>
strategic location in a strong market area with convenient access and visibility
to a high traffic area; (5) with construction materials which are of
sufficiently high quality to require no more than industry standard levels of
maintenance; (6) with convenient access for both shoppers and tenants; (7) where
rental rates are on average at or lower than comparable market rates in the area
(to reduce the possibility of losing tenants to other sites and to create the
potential to increase rates in the future); and (8) in a location experiencing
above average growth in retail sales, provided that the growth in the retail
sector for that area will not outpace economic growth in the area.
The Corporation will obtain an independent third party appraisal, an
environmental assessment and an engineering report for each center. It may
participate with other entities (not including affiliates) in property
ownership, through joint ventures or other types of ownership. The Corporation
may seek mortgage financing for its real estate investments and other debt
financing which is non-recourse to the Corporation (other than obligations
relating to environmental matters, waste to property, frauds or
misrepresentations, taxes or other assessments, tenant prepayments, condemnation
and insurance proceeds, grossly negligent violations of law and net revenue
obligations and other obligations customarily retained in non-recourse
financing). The Corporation may consider cross-collateralized loans to reduce
borrowing costs and may also take on recourse obligations such as lines of
credit and loans for property expansion. The Corporation intends to continue to
acquire only shopping centers until the aggregate of the acquisition prices of
all properties owned by the Corporation exceeds $100 million.
Although the Corporation will emphasize direct wholly owned investments in
its properties, it may, subject to the restrictions set forth below, in its
discretion invest in joint ventures, mortgages and other real estate securities
or interests, consistent with its qualification as a REIT. The Corporation may
invest in real estate joint ventures if it concludes that by doing so it may
benefit from the participation of coventurers or that the opportunity of the
Corporation to participate in the investment is contingent on the use of a joint
venture structure. The Corporation may not invest in hotels, nursing homes or
similar real estate which includes the operation of a business separate and
distinct from the operation of income-producing property.
In accordance with the foregoing policies and subject to the restrictions
set forth below, the Corporation may (a) issue senior securities; (b) borrow
money; (c) invest in the securities of other issuers to exercise control; (d)
offer its securities in exchange for property; and (e) repurchase or reacquire
its securities. The Corporation does not intend (i) to make loans to other
persons; (ii) underwrite securities of other issuers or (iii) engage in the
turnover of its investments.
The Board of Directors will review the investment policies before any new
acquisition phase is commenced and modify the policy as necessary to maximize
stockholder value. The Board of Directors is authorized to amend the investment
policies to include industrial, office, residential rental and mixed-use
properties. However, any amendment of the investment policies will require the
approval of a majority of the Board of Directors, such majority to include a
majority of the independent directors.
INVESTMENT RESTRICTIONS
In accordance with the objectives of the Corporation and to limit financial
and other risks, the Corporation intends to comply with the following
restrictions which are set out in the bylaws of the Corporation and which may
only be amended, revised or terminated with the majority approval of the Board
of Directors of the Corporation, such majority to include a majority of the
independent directors, and by the majority of the votes cast at a meeting of the
holders of the Common Stock of the Corporation:
- the Corporation will not make any investment that would result in its
ceasing to qualify as a REIT under the Code;
- the Corporation may not incur indebtedness if the aggregate outstanding
principal amount of all indebtedness of the Corporation exceeds sixty
percent (60%) of the greater of the aggregate
41
<PAGE>
acquisition prices or the current fair market value of all properties of
the Corporation. For purposes of the foregoing determination, the fair
market value of all properties of the Corporation is required to be
determined by an independent third party appraisal;
- the Corporation may not engage in construction or development of real
property except to the extent to maintain its properties in good repair,
for expansion of an existing property or to otherwise enhance the
income-producing ability of the properties;
- except as otherwise permitted by the Code for investments from proceeds of
financings, pending investment or reinvestment, cash on hand will be
invested in Authorized Investments;
- the Corporation may not invest in mortgages, unless the underlying
security is income-producing property or is in the process of being
developed as income-producing property, all such mortgages in the
aggregate do not exceed 10% of the aggregate cost of all assets of the
Corporation, the mortgage is a first mortgage and the term of the mortgage
is five (5) years or less and the amortization period is thirty (30) years
or less;
- after the acquisition of the Properties, the Corporation may not acquire
any single investment in real property if the cost to the Corporation of
such acquisition will exceed (1) $25 million until the aggregate
acquisition prices of all properties owned by the Corporation inclusive of
the proposed investment exceeds $100 million and (2) after the aggregate
acquisition prices of all properties owned by the Corporation exceeds $100
million, twenty-five percent (25%) of the aggregate acquisition prices of
all properties inclusive of the proposed investment; and
- the Corporation may not grant or assume a mortgage on any office property
if the aggregate outstanding principal amount of the mortgage and of all
other mortgages granted or assumed by the Corporation secured against its
office properties or any part thereof exceeds fifty percent (50%) of the
aggregate acquisition prices of all office properties of the Corporation.
FINANCING POLICIES
While one of the Corporation's objectives will be the acquisition of
additional shopping centers and other properties, the number of different
properties the Corporation can acquire will be affected by future equity and
forms of mortgage and other debt financing. Such financing may be available only
on disadvantageous terms, if at all. If financing is not available on acceptable
terms for new acquisitions, further acquisitions might be curtailed and cash
available for distribution might be adversely affected. The net proceeds to the
Corporation after application of all Offering expenses and costs and the cash
purchase prices of the Properties will be approximately $549,000. The
Corporation currently intends to employ financing policies in pursuit of its
growth strategies consistent with limitations imposed in the Corporation's
organizational documents. The Corporation currently intends to pursue its growth
strategies while maintaining a capital structure whereby its debt will not
exceed 60% of its total debt and equity. The Corporation may from time to time
reevaluate and modify its current borrowing policies in light of then current
economic conditions, relative costs of debt and equity capital, market values of
properties, growth and acquisition opportunities and other factors and may
decrease its ratio of debt to equity accordingly.
THE PROPERTIES
Basic Acquisitions, Inc. (the "Nominee"), a Delaware corporation controlled
by the Advisor, has entered into agreements to acquire the Properties, which
will be assigned to the Corporation prior to the Closing for nominal
consideration. Upon assignment, the Corporation will reimburse the Nominee for
all
42
<PAGE>
deposits paid under the acquisition agreements assigned. The following table
sets forth aggregate lease and rental information concerning the Properties.
<TABLE>
<CAPTION>
GROSS AVERAGE
LEASABLE ANNUAL BASE RENT PURCHASE
PERCENTAGE AREA ANNUAL BASE PERCENTAGE PER SQ. PRICE PER
CENTER LEASED (1) ("GLA") RENT (2) RENT (3) FT. (4) SQ. FT. (5)
- ------------------------------------------- ----------- --------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Chico Crossroads Center ................... 99.6% 267,496 $ 1,980,559 $ 133,856 $ 7.43 $ 79.75
Chico, California
Gardens Square ............................ 96.5% 90,258 $ 946,883 -- $ 10.87 $ 107.09
Dade County, Florida
Weighted Average........................... $ 8.28 $ 86.65
</TABLE>
- ------------------------
(1) As of September 30, 1996.
(2) Annualized base rent is calculated based on the minimum base rent payable
under the leases in place as of September 1, 1996 and excludes percentage
rents, CPI increases and reimbursement of operating expenses. See
Management's Discussion and Analysis for a discussion of expenses that were
not recovered from the tenants.
(3) For the year ended December 31, 1995.
(4) Calculated on gross leased area.
(5) Purchase price includes acquisition fees and expenses.
CHICO CROSSROADS CENTER
ACQUISITION AGREEMENT
The Nominee has entered into an agreement with Chico Crossroads Center,
Ltd., a California limited partnership, to acquire the Chico Crossroads Center,
an approximately 267,000 square foot community shopping center in northern
California, between Sacramento and Redding for the purchase price of
$20,912,500. The Advisor has paid the deposits under the acquisition agreement
aggregating $500,000 and the balance of the purchase price is payable in cash on
the date of acquisition.
Prior to closing, the Nominee will assign its rights and obligations under
the Chico Acquisition Agreement to the Corporation. On closing, the Corporation
will reimburse the Advisor for the deposits paid.
The Chico Acquisition Agreement provides the purchaser with the right to
inspect the property and to conduct various investigations including the
compliance with zoning requirements, analysis of tenants and environmental
matters prior to closing. The Nominee has given notice to Chico Crossroads
Center, Ltd., that it is satisfied with its investigations and accordingly the
Corporation will be obligated to complete the acquisition upon:
a) receipt of the proper deed, bill of sale, assignment of leases and other
similar documentation;
b) receipt of a title insurance policy with coverage equal to the
acquisition price of $20,912,500 showing title vested in the purchaser
subject to encumbrances or exceptions permitted in the Chico Acquisition
Agreement;
c) the representations and warranties of Chico Crossroads Center, Ltd.
being true as of the date of acquisition; and
d) receipt of estoppel certificates executed by certain of the tenants.
There are various representations and warranties of the seller contained in
the Chico Acquisition Agreement which are usual in a transaction of this nature.
However, it is uncertain whether Chico
43
<PAGE>
Crossroads Center, Ltd., will retain significant assets after the completion of
the transaction to satisfy any action by the Corporation for misrepresentation.
The Corporation has performed an investigation of the property and believes that
any misrepresentation by the seller would not require any material capital
expenditure by the Corporation, but no assurance can be given that such a
capital expenditure will not be necessary.
The total cost of the property (purchase price and acquisition fees and
expenses) will be allocated for Federal tax purposes as follows:
<TABLE>
<CAPTION>
FEDERAL TAX DEPRECIATION FOR TAX
BASIS PURPOSE
---------------- ---------------------------
<S> <C> <C>
Land........................................... $ 4,500,000 Nil
Land improvements.............................. 1,200,000 20 year straight line
Building....................................... 15,632,500 40 year straight line
----------------
$ 21,332,500
----------------
----------------
</TABLE>
The Corporation will elect to use the depreciation methods provided for
earnings and profits purposes for regular tax purposes.
DESCRIPTION OF PROPERTY
VICINITY
Chico Crossroads Center is located in the southeast section of Chico on the
southwest corner of the major interchange of Route 99 and East 20th Street. The
center was built in 1989 on the 20.75 acre site and has parking for
approximately 1,000 vehicles. The center backs onto and is clearly visible from
Route 99 and the center has four entrances off Whitman Avenue which runs
parallel to Route 99. Whitman Avenue is easily accessed from East 20th Street or
Park Avenue, both of which are accessible from Route 99 off ramps. The core of
the retail market in Chico is the Route 99 and East 20th Street interchange.
Most of the nationally recognized retailers operating in Butte County are
represented within a few miles of the interchange thereby attracting consumers
to the area. On the southeast corner of Route 99 and East 20th Street is an
approximately 225,000 square foot strip center anchored by Toys 'R' Us and
Target with a free-standing Wal-Mart store adjacent to it along Route 99. On the
northeast corner of the interchange is the Chico Mall, an enclosed mall of
approximately 435,000 square feet anchored by J.C. Penney, Sears, Gottschalks
and Troutman's. The Chico Mall has a tenant mix including Copeland Sporting
Goods, The Limited, GAP, Payless Shoes, Hallmark and B. Dalton Books. Next to
the Chico Mall is a free-standing Waremart Food Store. On the west side of
Whitman Avenue diagonally across from Chico Crossroads Center is a free-standing
Costco store, with an 8 acre parcel of land zoned industrial. Next to the Chico
Crossroads Center is a 12 acre parcel of vacant land zoned commercial, which has
not been developed. The rent per square foot in the vicinity for community
shopping centers ranges from approximately $7.00 to $15.00 and occupancy rates
for community shopping centers range from 88% to 100%.
44
<PAGE>
OCCUPANCY
The table below sets forth certain information with respect to the occupancy
rate at the Chico Crossroads Center for the time an unaffiliated third party had
owned the property and the annual rent per square foot received for the period.
The information, supplied by the seller of Chico Crossroads Center to the
Corporation, is unaudited.
<TABLE>
<CAPTION>
ANNUAL RENTS RECEIVED PER
YEAR ENDED DECEMBER 31 OCCUPANCY RATE SQUARE FOOT*
- --------------------------------------------------- ------------------ ---------------------------
<S> <C> <C>
1995............................................... 99.2% $ 7.03
1994............................................... 99.6% $ 7.01
1993............................................... 92.2% $ 5.20
1992............................................... 92.0% $ 5.47
1991............................................... 90.7% $ 5.55
</TABLE>
- ------------------------
* Based on minimum base rents payable under the leases and excludes percentage
rents received and reimbursement of operating expenses.
LEASE EXPIRATION SUMMARY
The following lease expiration summary is based on leases in place as of
September 30, 1996.
<TABLE>
<CAPTION>
AVERAGE PERCENT OF PERCENT OF
APPROX. BASE RENT TOTAL BUILDING ANNUAL BASE
GLA OF EXP. ANNUAL BASE PER SQUARE GLA RENT
LEASES RENT OF FOOT UNDER REPRESENTED BY REPRESENTED BY
NUMBER OF (SQUARE EXPIRING EXPIRING EXPIRING EXPIRING
YEAR ENDED DEC. 31 LEASES EXP. FEET) LEASES* LEASES LEASES LEASES
- --------------------------- --------------- ----------- ------------ ----------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1996....................... 0 0 $ 0 $ 0.00 0.00% 0.00%
1997....................... 2 4,800 50,476 10.52 1.79% 2.55%
1998....................... 3 3,600 39,715 11.03 1.35% 2.00%
1999....................... 3 4,200 47,448 11.30 1.57% 2.40%
2000....................... 0 0 0 0 0.00% 0.00%
2001....................... 1 1,200 13,680 11.40 0.45% 0.69%
2002-2005.................. 0 0 0 0 0.00% 0.00%
2006....................... 1 6,681 80,172 12.00 2.50% 4.05%
2007-2010.................. 4 189,743 1,164,178 6.14 70.93% 58.78%
2011-2015.................. 3 56,272 584,890 10.39 21.04% 29.53%
----------- ------------ ----------- ----- ------
Leased..................... 17 266,496 $ 1,980,559 $ 7.43 99.63% 100.00%
----------- ------------ ----------- ----- ------
------------ -----------
Vacant..................... 1,000 0.37%
----------- -----
Total...................... 267,496 100.0%
----------- -----
----------- -----
</TABLE>
- ------------------------
* Annual base rent includes minimum base rents payable under the leases and
excludes percentage rents, CPI increases and operating expense reimbursement
and assumes that none of the renewal options are exercised. See Management's
Discussion and Analysis for a discussion of expenses that were not recovered
from the tenants.
45
<PAGE>
LEASE SUMMARY
The following lease summary is based on base rent payable under the leases
in place as of September 30, 1996.
<TABLE>
<CAPTION>
(SQUARE CURRENT RENT PER LEASE
FEET) ANNUAL SQUARE EXPIRY RENEWAL
TENANTS LEASED BASE RENT FOOT DATE OPTIONS***
- -------------------------------------------------- ------------ ------------ ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
Waban Corp. (operating as Home Base)**............ 103,904 $ 537,210 $ 5.17 11/30/08 4X5
Office Depot Inc.................................. 22,000 141,460 6.43 10/30/09 3X5
Netco Foods Inc. (Food 4 Less).................... 54,239 379,668 7.00 2/28/09 3X5
Circuit City...................................... 23,014 230,131 10.00 10/31/14 5X5
Barnes & Noble Superstore Inc..................... 24,660 239,202 9.70 8/1/11 3X5
Blockbuster Video**............................... 6,681 80,172 12.00 9/1/06 3X5
Hometown Buffet................................... 9,600 105,840 11.03 12/31/08 2X5
Petco............................................. 8,598 115,557 13.44 11/30/14 3X5
Norwest Financial................................. 1,500 15,300 10.20 11/7/99 1X5
Avco Financial.................................... 1,200 12,096 10.08 4/30/98 1X5
Check X Change (Rowan Management Inc.)............ 1,200 14,400 12.00 11/30/98 1X3
Fantastic Sam's................................... 1,200 13,248 11.04 4/1/99 1X5
Nevada Bob's Golf*................................ 2,400 23,904 9.96 9/30/97 1X6
Play It Again Sports*............................. 2,400 26,572 11.07 7/20/97 1X5
Patty Tang Chinese................................ 1,200 13,219 11.02 4/1/98 1X5
Dry Cleaners...................................... 1,500 18,900 12.60 10/1/99 1X5
Vacant............................................ 1,000 0 0
TCBY Yogurt*...................................... 1,200 13,680 11.40 4/28/01 1X5
------------ ------------
TOTAL......................................... 267,496 $ 1,980,559
------------ ------------
------------ ------------
</TABLE>
- ------------------------
* These tenants are franchisees and the franchisor is not a party to the
lease.
** Several of these leases are guaranteed by parent companies as follows: Home
Base is guaranteed by TJX Inc. Blockbuster Video is guaranteed by Viacom
Inc.
*** Number of renewal options times renewal period.
The leases are substantially net leases and tenants pay a majority of the
operating expenses. Real estate taxes are passed through to tenants with the
exception of a portion of the real estate taxes allocated to one of the tenants.
This tenant is not required to pay:
a) real estate tax increases due to reassessment on the sale of the property
for the first five years following the sale. The cost to the Corporation is
expected to be approximately $31,000 for each of the next five years; and
b) a portion of the realty taxes relating to a special assessment for road
expansion. The Corporation is responsible for the portion of this assessment
allocated to this tenant in excess of $20,000. The cost to the Corporation
will be approximately $15,500 annually.
Real estate taxes are currently $275,000 and are expected to increase, as a
result of the anticipated reassessment of the property on acquisition, to
$335,000.
Property management fees are currently set at $39,000 per year. The property
management fees are expected to increase to $60,000 per annum in 1997. Only
$3,000 of the property management fees were recovered from tenants in 1995. The
leases however provide for the recovery of over $10,000 of the property
management fees.
46
<PAGE>
KEY FACTORS IN CORPORATION'S DECISION TO ACQUIRE
The Corporation's decision to acquire Chico Crossroads Center was based on a
variety of factors including the following:
a) STRONG GROWTH IN CHICO RETAIL SALES:
According to the City of Chico, Chico retail sales have grown 130% from
1985 to 1995. Chico is a university town as well as the retail center for
the local agricultural area.
b) TENANT MIX:
Over 96% of the center is occupied by national or regional retailers.
These anchors include Home Base, Office Depot, Food 4 Less, Circuit City,
Barnes and Noble, Blockbuster Video, Petco and Hometown Buffet.
c) LONG TERM LEASES:
Over 90% of the building area is leased to tenants whose leases expire
between the years 2007 - 2015. As at January 1, 1997, future minimum
rental payments excluding CPI increases, percentage rents, operating
expense reimbursement and lease renewals total $25,724,000.
d) LEASE TERMS:
The leases provide for regular increases in base rental payments which
over a 10 year period should result in an increase in base rental
payments of over 17%. In addition, two of the tenants have been paying
percentage rent under percentage rent clauses.
e) LOCATION OF THE CENTER:
The property is located next to the major intersection of Route 99 and
East 20th Street in the middle of the area in the city with the largest
number of nationally and regionally recognized retailers. The proximity
to the Chico Mall and other retailers in the area assists in attracting
traffic to this location.
f) RENTAL RATES:
Lease rental rates for the property vary from approximately $5 per square
foot to over $13 per square foot currently averaging $7.43 per square
foot. These rates are in the low end of the range of $7 to $15 in the
vicinity.
g) LOCAL OCCUPANCY RATES:
Local occupancy rates range from 88% in some centers in the northern part
of the city to closer to 100% in the immediate vicinity.
CHICO, CALIFORNIA
The City of Chico is located in Butte County, which is located in northern
California. Chico is approximately 90 miles north of Sacramento. Chico is a
major commercial center between Sacramento and Redding. Chico has a growing
population which has sparked growth in retail sales. Chico has a population of
approximately 47,000 which increased over 55% between 1985 and 1995. During that
same period retail sales increased over 130% from approximately $300 million to
approximately $700 million. Chico also has become a regional service center for
Butte County which has a population in excess of 200,000. The long-term
demographic trends of Chico indicate continued retail growth as the population
of Chico is becoming more mature. Chico is home to a California State University
campus, with approximately 16,000 students enrolled, and to Butte College, with
approximately 12,000 students enrolled. Manufacturing employers in the Chico
area include 3M Corporation, Aero Union Corporation, Chico Nut Corporation, Dole
Nut Corporation and Quaker Oats.
47
<PAGE>
GARDENS SQUARE
ACQUISITION AGREEMENT
The Nominee has entered into an agreement with Miami Gardens Associates, a
New Jersey general partnership, to acquire Gardens Square, an approximately
90,000 square foot neighborhood shopping center located in Dade County, Florida.
The Advisor has paid deposits of $200,000 towards the purchase price of
$9,450,000. The balance of the purchase price will be paid by the payment of
$2,540,000 on acquisition and the assumption of the first mortgage loan in the
amount of $6,710,000 currently payable to Life Investors Insurance Corporation
of America. The first mortgage loan bears interest at a rate of 7.94% per annum
and requires monthly payments of principal and interest in the amount of
$52,214, based on a twenty-five year amortization. The loan is secured by a
first mortgage on the property and is due on December 21, 2002.
One hundred fifty thousand dollars of the purchase price will be paid into
an interest bearing escrow account. The funds in the escrow account will be
released to the purchaser 90 days after closing if the seller is not successful
in obtaining a five year option and lease agreement for a transmission tower on
the property with Bell South Mobility, Inc. or Majorco, L.P. ("Sprint") for a
minimum net rent of $16,000 per year. If the seller is successful in obtaining
the lease, it will have 455 days from closing of the purchase to obtain all
necessary regulatory approvals. If it is successful in obtaining the regulatory
approvals and Bell South or Sprint exercises the option, the escrowed funds
together with interest thereon will be released to the seller; otherwise the
escrowed funds together with interest thereon will be released to the purchaser.
Prior to closing, the Nominee will assign its rights and obligations under
the Gardens Square Acquisition Agreement to the Corporation. On closing, the
Corporation will reimburse the Advisor for the deposits paid.
The Gardens Square Acquisition Agreement provides the purchaser with the
right to inspect the property and to conduct various investigations including
the compliance with zoning requirements, analysis of tenants and environmental
matters prior to closing. The Nominee has given notice to Miami Gardens
Associates that it is satisfied with its investigations and accordingly the
Corporation will be obligated to complete the acquisition upon:
a) receipt of the proper deed, bill of sale, assignment of leases and other
similar documentation;
b) receipt of a title insurance policy with coverage equal to the
acquisition price of $9,450,000 showing title vested in the purchaser
subject to encumbrances or exceptions permitted in the Gardens Square
Agreement;
c) the representations and warranties of Miami Gardens Associates being
true as of the date of acquisition; and
d) receipt of estoppel certificates executed by certain of the tenants.
There are various representations and warranties of the seller contained in
the Gardens Square Acquisition Agreement which are usual in a transaction of
this nature. However, it is uncertain whether Miami Gardens Associates will
retain significant assets after the completion of the transaction to satisfy any
action by the Corporation for misrepresentation. The Corporation has performed
an investigation of the property and believes that any misrepresentation by the
seller would not require any material capital expenditure by the Corporation,
but no assurance can be given that such a capital expenditure will not be
necessary.
48
<PAGE>
The total cost of the property (purchase price and acquisition fees and
expenses) will be allocated for Federal tax purposes as follows:
<TABLE>
<CAPTION>
FEDERAL TAX DEPRECIATION FOR TAX
BASIS PURPOSE
---------------- --------------------------
<S> <C> <C>
Land............................................ $ 2,400,000 Nil
Land Improvements............................... 600,000 20 year straight line
Building........................................ 6,666,000 40 year straight line
----------------
$ 9,666,000
----------------
----------------
</TABLE>
The Corporation will elect to use the depreciation methods provided for
earnings and profits purposes for regular tax purposes.
DESCRIPTION OF PROPERTY
VICINITY
Gardens Square is a neighborhood shopping center located at the northeast
corner of Miami Gardens Drive and N.W. 87th Avenue, approximately one mile east
of Interstate 75. The neighborhood is bounded on the north by the Florida
Turnpike and the Broward County line, on the south by the Palmetto Expressway
(S.R. 826), to the east by N.W. 57th Avenue and on the west by I-75. The east
portion of the neighborhood is almost fully developed while the western half of
the neighborhood is currently used for agricultural purposes.
The site consists of approximately 8.7 acres and has parking for 423
vehicles. It has approximately 300 feet of frontage along the north side of
Miami Gardens Drive and 436 feet of frontage on N.W. 87th Avenue. The site
includes two parcels which are not being acquired, one on the southwest corner
which is operating as a Chevron station and the other on the southeast corner
which is operating as a McDonald's restaurant. The site is accessible from two
entrances on Miami Gardens Drive and from two entrances on N.W. 87th Avenue. The
intersection of Miami Gardens Drive and N.W. 87th Avenue is signalized and Miami
Gardens Drive is a four lane divided highway.
The neighborhood is experiencing a significant amount of low and medium
density residential development. Two nearby parcels totaling 116 acres are
scheduled for residential development. The neighborhood is predominantly middle
and upper middle income class. The neighborhood has a population of 49,000 which
increased from 43,500 to 49,000 between 1990 and 1995. The median household
income is $47,138.
There are five other neighborhood shopping centers within a five mile radius
of Gardens Square. These centers account for approximately 717,000 square feet
of retail space and are each anchored by a grocery store. There is one community
center located three miles from Gardens Square. That community center consists
of approximately 244,000 square feet and is anchored by K-Mart. The rent per
square foot in the vicinity ranges from $14.00 to $18.00 and occupancy rates for
neighborhood and community shopping centers range from 92% to 96%.
49
<PAGE>
OCCUPANCY
The table below sets forth certain information with respect to the occupancy
rate at the Gardens Square property for the time an unaffiliated third party had
owned the property and the annual rent per square foot received for the period.
The information, supplied by the seller of Miami Gardens Center to the
Corporation, is unaudited.
<TABLE>
<CAPTION>
ANNUAL RENTS RECEIVED PER
YEAR ENDED DECEMBER 31 OCCUPANCY RATE SQUARE FOOT**
- --------------------------------------------------- ----------------- -------------------------
<S> <C> <C>
1995............................................... 95% $ 10.54
1994............................................... 95% $ 10.32
1993............................................... 84% $ 10.12
1992............................................... 84% $ 9.94
1991*.............................................. 77% $ 9.30
</TABLE>
- ------------------------
* Year of completion.
** Based on minimum base rents payable under the leases and excludes percentage
rents and reimbursement of operating expenses.
LEASE EXPIRATION SUMMARY
The following lease expiration is based on leases in place as of September
30, 1996.
<TABLE>
<CAPTION>
AVERAGE
APPROX . BASE RENT PERCENT OF PERCENT OF
GLA OF EXP. ANNUAL PER SQUARE TOTAL BUILDING ANNUAL BASE
LEASES BASE RENT FOOT UNDER GLA REPRESENTED RENT
NUMBER OF (SQUARE EXPIRING EXPIRING BY EXPIRING REPRESENTED BY
YEAR ENDED DEC. 31 LEASES EXP. FEET) LEASES* LEASES LEASES EXPIRING LEASES
- -------------------------------- ------------- ----------- ---------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1996............................ 0 0 $ 0 $ 0 0% 0%
1997............................ 3 4,068 69,890 17.18 4.51% 7.38%
1998............................ 4 7,750 132,141 17.05 8.59% 13.96%
1999............................ 2 2,709 43,236 15.96 3.00% 4.56%
2000............................ 2 5,058 66,945 13.24 5.60% 7.07%
2001............................ 10 13,750 238,427 17.34 15.23% 25.18%
2002-2005....................... 0 0 0 0 0.00% 0.00%
2006............................ 1 1,900 28,500 15.00 2.11% 3.01%
2007-2010....................... 0 0 0 0 0.00% 0.00%
2011-2015....................... 2 51,873 367,744 7.09 57.47% 38.84%
--
----------- ---------- ----------- ------ ------
Leased.......................... 24 87,108 $ 946,883 $ 10.87 96.51% 100.00%
--
--
----------- ---------- ----------- ------ ------
---------- ----------- ------
Vacant.......................... 3,150 3.49%
----------- ------
Total........................... 90,258 100.00%
----------- ------
----------- ------
</TABLE>
- ------------------------
* Annual base rent includes minimum base rents payable under the leases and
excludes percentage rents, CPI increases and operating expense
reimbursements and assumes that none of the renewal options are exercised.
See Management's Discussion and Analysis for a discussion of expenses that
were not recovered from the tenants.
50
<PAGE>
LEASE SUMMARY
The following lease summary is based on base rent payable under the leases
in place as of September 30, 1996.
<TABLE>
<CAPTION>
(SQUARE CURRENT LEASE
FEET) ANNUAL RENT PER EXPIRY RENEWAL
TENANTS LEASED BASE RENT SQUARE FOOT DATE OPTIONS*
- ----------------------------------------------------- ----------- ---------- ----------- --------- --------------
<S> <C> <C> <C> <C> <C>
Publix Super Markets, Inc............................ 42,112 $ 263,200 $ 6.25 8/30/11 4X5
Jack Eckerd Corporation.............................. 9,761 104,544 10.71 7/17/11 4X5
Lakes Preschool...................................... 4,800 82,272 17.14 7/24/98 1X3 & 1X5
Blockbuster Video.................................... 3,850 65,450 17.00 6/30/01 2X5
Lady of America...................................... 3,858 48,225 12.50 11/3/00 1X5
Vacant............................................... 3,150 0 0 -- --
Pak Mail............................................. 1,200 18,720 15.60 3/19/00 1X5
Hair Cuttery......................................... 1,200 20,400 17.00 12/13/01
Dryclean USA......................................... 1,200 21,573 17.98 7/14/01 1X5
Gardens Square Liquors............................... 1,200 23,363 19.47 7/14/01 1X5
Lakes Nutrition, Inc................................. 1,268 21,826 17.21 1/26/97 1X5
Dollar Show Corp..................................... 1,574 25,530 16.22 5/5/99 1X5
Tomlinson Ins. Group/Alls............................ 1,600 25,600 16.00 11/30/97 1X3
Jon B. Gallinatti, DPM/Podiatrist.................... 1,200 22,464 18.72 3/29/97 1X5
Eric Pantaleon MD/Pediatrics......................... 1,135 17,706 15.60 8/11/99 1X5
Gardens Sq. Animal Hospital.......................... 1,900 31,977 16.83 8/28/98
Garden Sq Restaurant Inc............................. 1,900 28,500 15.00 12/31/06
Delux Framing........................................ 1,050 15,750 15.00 4/30/01 1X5
Hair Discovery....................................... 1,050 18,136 17.27 6/24/01 1X5
Country General Insurance............................ 1,050 18,171 17.31 8/22/01
Sunshine Chiropractic................................ 1,050 18,712 17.82 12/11/01
Georgia Hernandez, Dentist........................... 1,050 17,892 17.04 12/31/98 1X3
Enchanted Travel..................................... 1,050 17,814 16.97 9/16/01
Subway Restaurant.................................... 1,050 19,058 18.15 6/2/01 1X5
----------- ----------
TOTAL................................................ 90,258 $ 946,883 -- -- --
----------- ----------
----------- ----------
</TABLE>
- ------------------------
* Number of renewal options times renewal period.
The leases are substantially net leases and the tenants pay a majority of
the operating expenses. Realty taxes are passed through to tenants. The only
exception to this is any realty tax increase attributed to the space leased by
Publix Super Markets resulting from the acquisition of the property. Realty
taxes are currently $140,000 per annum and are expected to increase to $187,000
per annum. The Corporation anticipates it will be required to pay approximately
$22,000 per annum relating to the Publix Super Markets space.
KEY FACTORS IN CORPORATION'S DECISION TO ACQUIRE
The Corporation's decision to acquire Gardens Square was based on a variety
of factors including the following:
a) TENANT MIX
Publix Super Markets is the largest regional grocery chain, Eckerd is a
regionally recognized drug store and Blockbuster Video is a nationally
recognized video and entertainment store. Publix, Eckerd and Blockbuster account
for over 60% of the gross leasable area of the center. The remainder of the
tenants
51
<PAGE>
provide a service center for the neighborhood community. These tenants include a
liquor store, doctors, a dentist, a chiropractor, a nursery, restaurants,
insurance companies and hair salons.
b) LOCAL DEVELOPMENT
The key to a neighborhood center is the status and future development in the
three to five mile radius of the center. The population in the three mile radius
is approximately 49,000 and the Corporation expects that the immediate area will
see strong growth over the next few years as the available residential land
around the center is either presently zoned for or designated in the Dade County
Master Plan for an additional 11,000 residential units.
c) ANCHORS PERFORMANCE
Although anchors do not yet pay percentage rent both anchors report strong
sales which exceed national average sales per square foot for comparable
operations.
d) LONG TERM LEASES
The Publix Super Markets and Eckerd Corporation leases expire in 2011. As at
January 1, 1997 future minimum rental payments excluding CPI increases,
percentage rents, operating expense reimbursements and lease renewals total
$7,647,000. The non-anchor tenants traditionally have shorter term leases which
range from three to ten years. All of the leases of the non-anchor tenants
provide for annual CPI increases or minimum annual increases.
e) FINANCING
The property has an assumable mortgage which bears interest at a rate of
7.94%. The mortgage is due December 21, 2002.
DADE COUNTY, FLORIDA
Dade County is located along the southeastern tip of Florida. The primary
cities in Dade County include Miami, Hialeah, Miami Beach and Coral Gables. Dade
County has a population in excess of two million people and accounts for over
14% of Florida's population.
Dade County's employment base is broad; however, the service sector and
international trade still dominate. Major private employers include American
Airlines, Jackson Memorial Hospital, University of Miami, Southern Bell, Bell
South Telecommunications, Burger King Corporation, Florida Power & Light
Corporation, Business Department Store, Columbia/HCA Healthcare Corp., K-Mart,
Publix Super Markets and Winn Dixie.
ENVIRONMENTAL MATTERS
Under various U.S. Federal, state and local laws, ordinances and regulations
relating to the protection of the environment (collectively, "Environmental
Laws"), a current or previous owner or operator of real property may be liable
for the cost of removal or remediation of certain hazardous or toxic substances
disposed, stored, released, generated, manufactured or discharged from, on, at,
onto, under or in such property. Environmental Laws often impose such liability
without regard to whether the owner or operator knew of, or was responsible for,
the presence or release of such hazardous or toxic substance. In addition, the
presence of any such substances or the failure to properly remediate such
substances when present, released or discharged, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral. The cost of any required remediation and the liability of the
owner or operator therefor as to any property is generally not limited under
such Environmental Laws and could exceed the value of the property and/or the
aggregate assets of the owner or operator. In addition to any action required by
federal, state or local authorities, the presence of hazardous or toxic
substances on any of the properties of the Corporation, or on any properties
acquired hereafter, could result in plaintiffs
52
<PAGE>
bringing claims for personal injury or other causes of action. In connection
with the ownership and operation of the properties of the Corporation, and on
any properties acquired hereafter, the Corporation may be potentially liable for
remediation, release or injury. Further, various Environmental Laws impose on
owners or operators the requirement of ongoing compliance with rules and
regulations regarding business-related activities that may affect the
environment. Failure to comply with such requirements could result in difficulty
in the lease or sale of any affected property or the imposition of monetary
penalties and fines in addition to the costs required to attain compliance.
Phase I Environmental Assessments (the "Phase I Assessments") have been
performed on the Properties by a qualified independent environmental engineer.
The purpose of the Phase I Assessments is to identify potential sources of
contamination for which the Properties may be responsible and to assess the
status of environmental regulatory compliance. The Phase I Assessments include
historical reviews of the Properties, reviews of certain public records,
preliminary investigations of the sites and surrounding properties, screening
for the presence of polychlorinated biphenyls ("PCBs"), underground storage
tanks, and the preparation and issuance of a written report. The Phase I
Assessments do not include invasive procedures, such as soil sampling or ground
water analysis.
The Phase I Assessments did not reveal, nor is the Corporation aware of, any
noncompliance with Environmental Laws, environmental liability or other
environmental claim that the Corporation believes would likely have a material
adverse affect on the Corporation's financial condition or results of
operations. No assurance can be given that the Phase I Assessments revealed all
potential environmental liabilities, that no prior owner or operator created any
material adverse environmental condition not known to the Corporation or that no
environmental liabilities have developed since the Phase I Assessments were
prepared.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION
The initial Board of Directors will consist of five members, the majority of
whom will be independent and will not be affiliated with the Advisor. The
Corporation considers a director "independent" if such director is neither an
employee of the Corporation nor is an employee or a director of the Advisor or
any of its affiliates.
The names and municipalities of residence of the directors and officers of
the Corporation, the offices held by them with the Corporation and their
principal occupations are as follows:
<TABLE>
<CAPTION>
NAME AND MUNICIPALITY AGE OFFICE PRINCIPAL OCCUPATION
- ------------------------------------ --- -------------------------- -----------------------------------------
<S> <C> <C> <C>
Ronald L. Bernbaum ................. 45 Chairman of Board President, Basic Capital Funds
North York, Ontario
Carl Maynard ....................... 61 Director, President and Principal, The Maynard Rich Companies;
Miami, Florida Chief Executive Officer President, Basic Advisors, Inc.
Larry Thrall * ..................... 55 Director Chairman, Monterrey Partners
Los Angeles, California
Robert G. Witterick, Q.C.* ......... 54 Director Partner, Smith Lyons, Toronto
North York, Ontario
Nils Peterson * .................... 60 Director President, Hygate Management
Marblehead, Massachusetts
Richard Schwartz ................... 46 Vice President Principal, The Maynard Rich Companies
Miami, Florida
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
NAME AND MUNICIPALITY AGE OFFICE PRINCIPAL OCCUPATION
- ------------------------------------ --- -------------------------- -----------------------------------------
Terry McCrae ....................... 44 Treasurer, Chief Financial Vice President, Investments Basic Capital
Mississauga, Ontario Officer and Vice Funds; Vice President, Basic Advisors,
President, Finance Inc.
<S> <C> <C> <C>
Aran Kwinta ........................ 38 Secretary Lawyer, Chaiton & Chaiton
Toronto, Ontario
Richard Dickerson .................. 40 Vice President President, Maynard Rich Management Corp.
Pasadena, California
</TABLE>
- ------------------------
* Messrs. Thrall, Witterick and Peterson are neither employees of the
Corporation nor directors or employees of the Advisor and its affiliates.
Each of the directors and officers of the Corporation has held the principal
occupations set out above for the last five years except with respect to the
Corporation (where each director and officer was elected to his respective
postion on July 31, 1996 to serve for one year or until his successor has been
duly elected and qualified) and the Advisor which were organized in 1996 and
except as set forth below:
Ronald L. Bernbaum has been the President of Basic Capital Funds and its
predecessor Medstar Properties Inc. since 1989. Basic Capital Funds provides
funding and management to companies in the real estate and software development
industries. In this capacity he has been responsible for the funding,
acquisition and management of over $100 million of real estate assets and $150
million of software development and the funding of numerous start-up companies.
Mr. Bernbaum is a graduate of Osgoode Hall Law School, North York, Ontario.
Carl Maynard has been a principal of The Maynard Rich Companies since 1988.
The Maynard Rich Companies provide real estate asset management, property
identification and evaluation, and property management services to foreign and
domestic institutional and individual investors. Mr. Maynard has over 34 years
of real estate experience and served as Executive Vice President and Chief
Operating Officer from 1980 to 1984 of HMG Property Investors Corp., a U.S. Real
Estate Investment Trust listed on The American Stock Exchange. Mr. Maynard has a
Bachelor Degree in Electrical Engineering from Union College.
Larry Thrall has been the Chairman of Monterrey Partners, a California real
estate developer, since 1990. Prior to joining Monterrey Partners Mr. Thrall was
President, Chief Executive Officer and a Director of a private real estate
company. Mr. Thrall continues to serve on the Board of this real estate company
and is a member of the Board of Directors of several other private companies.
Mr. Thrall also served as Vice-Chairman of the Board for Hon Fed Savings Bank,
Southern California Savings and Loan, and Western Savings and Loan.
Robert Witterick has been a partner of Smith Lyons, Barristers and
Solicitors, specializing in taxation and corporate/commercial law, with
particular emphasis on the taxation and structuring of real estate syndications.
The Corporation has engaged Smith Lyons to deliver a tax opinion to the
Corporation concerning the principal Canadian federal income tax considerations
generally applicable to the Corporation and its stockholders. Mr. Witterick is
currently a Director of a REIT listed on the Toronto Stock Exchange which
invests primarily in Canadian real estate. Mr. Witterick is a graduate of
Osgoode Hall Law School, North York, Ontario.
Nils Peterson has been the President of Hygate Management, an investment
management company, since 1991. From 1974 to 1990, Mr. Peterson was the Chief
Investment Officer of Harvard Management Corporation, the investment advisor of
the Harvard University endowment fund. Mr. Peterson is currently a Director of
Eastern Bank, Boston Mutual Life Insurance Corporation and Edge Petroleum
Corporation.
54
<PAGE>
Richard Schwartz has been a Principal of The Maynard Rich Companies since
1988. Prior to joining The Maynard Rich Companies, Mr. Schwartz served as Chief
Executive Officer of the Courtrust Companies, a real estate investment firm, and
as Executive Vice President of First Capital Financial Corp., a NASDAQ listed
sponsor of public real estate partnerships with over $400 million of real estate
assets. Mr. Schwartz has a M.B.A. from New York University and has over 18 years
of real estate experience.
Terry McCrae joined Basic Capital Funds as Vice President, Investments in
November, 1995. Prior to joining Basic Capital Funds, Mr. McCrae served from
May, 1994 to November, 1995 as the Chief Financial Officer of Advanced Material
Resources Limited, a Canadian public corporation listed on the Toronto Stock
Exchange with manufacturing plants in China and distribution facilities in the
United States, Japan, and Europe. Mr. McCrae was President of T J McCrae &
Associates Inc., which provided management consulting services, from August,
1993 to May, 1994 and was the Chief Financial Officer and Vice President of
Finance of a private real estate corporation, Martin Atkins Limited, and its
related development, management and investment companies from May, 1987 to
August, 1993. Mr. McCrae is a Canadian Chartered Accountant.
Aran Kwinta is a lawyer with the law firm of Chaiton & Chaiton, Barristers &
Solicitors, practicing primarily corporate and commercial law. Prior to joining
Chaiton & Chaiton in 1996, Mr. Kwinta was a partner with the law firm of Gordon
Traub, Barristers & Solicitors, from February 1, 1990 to August 31, 1996. Mr.
Kwinta is currently a director of Dimensional Media, Inc. Mr. Kwinta is a
graduate of Osgoode Hall Law School, North York, Ontario.
Richard Dickerson has been President of Maynard Rich Management Corporation,
a GNMA and HUD approved property management company since 1994. Prior to that,
Mr. Dickerson was President of Greenfield Management, Inc. from 1992-1994 and
President of T.O.P. Manager, Inc. from 1987-1992. In his capacity as President
of three property management companies, he was responsible for the management of
over 1,300 apartment units, 300,000 square feet of office space and 600,000
square feet of retail space. He also served on the Board of Directors of Century
City Savings and Loan from 1986 to 1989. Prior to 1987, Mr. Dickerson was a
partner in a C.P.A. firm which specialized in real estate syndication and tax
work. He has a B.A. in Accounting from the University of Southern California,
where he also taught as a Lecturer of Accounting for 2 years.
COMPENSATION
The independent directors will receive annual compensation of $7,500. In
addition, they will receive $350 for each board meeting or committee meeting
they attend, together with reasonable travel costs incurred.
The officers of the Corporation are not paid cash compensation by the
Corporation. Such officers are officers of the Advisor, and its affiliates,
which entities are entitled to certain fees for services rendered by them to the
Corporation. See "Management--The Advisor, Terms of the Advisory Agreement, Fees
and Expenses."
STOCK OPTION PLAN
The Corporation has reserved 250,000 shares of common stock of the
Corporation to be granted to officers, directors and employees of the
Corporation and the Advisor for issuance under a stock option plan. Under the
terms of the stock option plan, the maximum number of options granted and
outstanding cannot exceed 10% of the issued and outstanding Common Stock. The
stock option plan allows for the grant of options that are exercisable at fair
market value of the Common Stock at the date of grant as established by the
Board of Directors. The Board of Directors has the authority under the stock
option plan to determine the terms of options granted including, among other
things, the individuals who will receive options, the times when they will
receive them, whether an incentive stock option will be granted, the number of
shares to be subject to each option and the date or dates each option will
become
55
<PAGE>
exercisable. The Board of Directors also has the authority to grant options upon
the condition that the individual agrees to cancel all or a part of a previously
granted option.
The exercise price and term of each option are fixed by the Board of
Directors provided, however, that the exercise price must be at least equal to
the fair market value of the Common Stock on the date of grant and the term
cannot exceed five years. There is no limit on the number of options that may be
granted to any one individual, provided that the grant of the options may not
cause the Corporation to fail to qualify as a REIT for U.S. Federal income tax
purposes. On September 25, 1996, the Corporation granted to Mr. Bernbaum options
to purchase 20,000 shares of Common Stock and to each of Messrs. Maynard,
Thrall, Witterick, Peterson, Schwartz, McCrae, Kwinta and Dickerson, options to
purchase 10,000 shares of Common Stock of the Corporation. Such options will be
exercisable at the initial public offering price and may not be exercised prior
to the sixth month anniversary of the closing of the Offering.
THE PROMOTERS
The promoters of this Offering are Basic Capital Funds, a limited
partnership formed under the laws of the Province of Ontario on December 29,
1993, and Maynard Rich/Abraham Inc., a corporation incorporated under the laws
of the State of Florida in 1995 (collectively, the "Promoters"). Basic Capital
Funds Inc., the general partner of Basic Capital Funds, is a corporation
incorporated under the laws of the Province of Ontario. Basic Capital Funds in
its capacity as principal or promoter, identifies, structures and funds capital
projects and start up companies. In many instances, Basic Capital Funds'
investments include those which attract enhanced tax benefits pursuant to the
Income Tax Act of Canada. For the start up company, Basic Capital Funds provides
"turn-key" assistance from finance to accounting and marketing. It seeks to
bridge the gap between venture capital and hands on management assistance in
operations.
Ronald L. Bernbaum is the sole director and President of the general partner
of Basic Capital Funds. Mr. Bernbaum has been the President of Basic Capital
Funds and its predecessor Medstar Properties Inc. since 1989. In this capacity,
he has been responsible for the funding, acquisition and management of over $100
million of real estate assets and the funding of $150 million of software
development and the funding of numerous software companies. Mr. Bernbaum is a
graduate of Osgoode Hall Law School 1977.
Maynard Rich/Abraham Inc. and its affiliate companies were formed in 1988.
They have performed various real estate services for institutional and
individual investors, both foreign and domestic. They have initiated mortgage
debt financing for shopping centers, office buildings and net leased properties,
performed workout services for both retail and residential (apartment and
townhouse) properties, represented owners in Chapter 11 proceedings, managed
portfolios totaling in excess of $100 million in value and been engaged in real
estate brokerage transactions in excess of $150 million in value involving both
improved and unimproved properties. Maynard Rich/Abraham's primary office is in
South Florida, with other corporate or affiliate offices in Los Angeles, San
Francisco and Boston.
Carl Maynard and Richard Schwartz are directors, officers and controlling
stockholders of Maynard Rich/Abraham Inc. Mr. Maynard, an engineer with a
Bachelors Degree in Electrical Engineering from Union College, has served as
managing partner in the design and development of office and industrial parks
and as chief operating officer of HMG Properties, Inc., an American Stock
Exchange listed REIT with approximately $75 million in assets. Previously Mr.
Maynard was President of Westminster Properties Corp., a subsidiary of
Industrial National Corp. (now Fleet/Norstar). Westminster acted as investment
advisor to Realty Income Trust, a publicly owned REIT. Mr. Maynard also served
as a Real Estate Investment Officer with New England Mutual Life Insurance
Corporation (The New England).
Richard Schwartz has a B.A. in Accounting from Lehigh University where he
graduated Phi Beta Kappa. He also has an M.B.A. in Finance from New York
University. After serving with L.F. Rothschild, a NYSE member firm, as an
arbitrage trader, he entered the real estate securities field. He has served as
Executive Vice President of First Capital Financial, a NASDAQ listed sponsor of
public real estate limited
56
<PAGE>
partnerships. Mr. Schwartz was directly involved with the acquisition of over 65
commercial properties with a total value of $400 million. Mr. Schwartz has also
served as Chief Executive Officer of the Courtrust Companies, a real estate
investment firm.
The Promoters will benefit from the Advisor receiving fees under the
Advisory Agreement. In addition, Maynard Rich/Abraham Inc. and its affiliates
will receive approximately $192,000 in commissions from the sellers of the
Properties that the Corporation will acquire.
THE ADVISOR
Pursuant to the Advisory Agreement, the Advisor, which was incorporated on
March 27, 1996 under the laws of the State of Delaware, will on a continuing
basis present investment opportunities to the Corporation, act as investment and
financial advisor to the Corporation and administer the day-to-day operations of
the Corporation. The day-to-day operations include the purchase and disposition
of real property, the arranging of mortgage financing for such real properties
and the supervision of property management, leasing and operation of the
Corporation's real property investments.
The specific services to be performed by the Advisor are summarized below.
This summary is qualified in its entirety by reference to the copy of the form
of Advisory Agreement filed as an exhibit to the Registration Statement of which
this Prospectus is a part. In performing such services, the Advisor will, at all
times, be subject to the continuing and exclusive authority and direction of the
Board of Directors of the Corporation. The Advisor will:
a) provide or arrange for the provision of research and other data in
connection with the Corporation's investments and investment policies;
b) act as the Corporation's real property investment manager and
consultant, and in so doing make recommendations to the Board of
Directors of the Corporation with respect to the acquisition and
disposition of investments, perform or arrange for the performance of
such inspections and investigations in connection therewith as are deemed
appropriate and, upon request of the Board of Directors of the
Corporation, supervise closings in respect thereof;
c) from time to time arrange for mortgage financing on behalf of the
Corporation for its real property investments, provided the Advisor may
retain mortgage brokers at the expense of the Corporation to assist in
the arrangement of such mortgage financing;
d) obtain and review appraisal reports and title opinions or reports from
counsel in connection with real property investments made or proposed to
be made by the Corporation, review property location, the building and
its physical characteristics, the relevant rental market, financial and
character data relating to the property and the vendor or purchaser,
applicable environmental, zoning and other governmental regulations, the
character of tenant mix and quality of tenants, insurance coverage, the
long term anticipated total return to the Corporation and other factors
in connection with the Corporation's investments;
e) supervise the performance of all property management, maintenance and
other customary services related to the ownership of the Corporation's
real estate investments;
f) manage the Corporation's short-term investments;
g) supervise the performance of the day-to-day administrative functions in
connection with the management of the Corporation;
h) deal with, retain or employ other persons on behalf of the Corporation
in connection with its investments, including solicitors, consultants,
property managers, leasing agents, finders, lenders, brokers, insurers,
banks, builders, developers and other investment participants;
57
<PAGE>
i) arrange for the provision to the Corporation of any information required
in order to report to stockholders;
j) arrange for the preparation of budgets;
k) arrange for the provision to the Corporation of such services by others,
as the Board of Directors may reasonably request in connection with the
activities of the Corporation; and
l) from time to time, report to the Board of Directors with respect to its
performance of the foregoing services.
TERM OF THE ADVISORY AGREEMENT
The Advisory Agreement has an initial term of five years and, subject to
early termination, will be renewed thereafter for further periods of five years
upon the majority approval of the Board of Directors of the Corporation, such
majority to include a majority of the independent directors, and the approval of
a majority of the votes cast at a meeting of the holders of the Common Stock of
the Corporation held prior to the termination date of the applicable term. The
Advisory Agreement is non-assignable except with the consent of both parties
thereto.
The Advisor may be removed as advisor to the Corporation in the event of a
material default by the Advisor in the performance of any of its obligations or
duties under the Advisory Agreement if such default is not rectified within 30
days after the giving of notice thereof to the Advisor. In addition, the Advisor
will cease to be entitled to act as Advisor in the event that it becomes
bankrupt or insolvent, passes a resolution for its winding-up or dissolution or
is ordered dissolved or makes a general assignment for the benefit of its
creditors. If the Advisor is removed by the Corporation for the foregoing
causes, the Advisor will only be entitled to usual fees payable under the
Advisory Agreement to the date of termination. In addition, the Corporation may,
without cause, remove the Advisor at any time upon the payment of all amounts
owing by the Corporation to the Advisor to the date of termination, together
with an amount equal to triple the asset management fees for the last twelve
months prior to termination plus an amount equal to the average annual
acquisition and disposition fees paid by the Corporation during the three year
period prior to termination. Such termination will only be effective upon
approval of such termination and of alternative management arrangements by
two-thirds of the votes cast at a meeting of stockholders called for such
purpose. Upon termination or non-renewal of the Advisory Agreement, the Advisor
will thereupon be released from all further obligations under the Advisory
Agreement (but without prejudice to any liability existing on such date) and the
Corporation will indemnify it against all actions, claims, costs, demands,
losses and expenses with respect to events which occur in relation to the
Corporation after the effective date of such termination or non-renewal . The
Advisor is only liable to the Corporation by reason of acts constituting bad
faith, wilful misconduct, gross negligence or reckless disregard of its duties.
FEES AND EXPENSES
The Advisor will be entitled to the following fees for its services under
the Advisory Agreement:
a) an asset management fee:
an annual fee based up on the aggregate of the net proceeds received
by the Corporation for its issued and outstanding shares after the
payment of any commission and direct expenses
58
<PAGE>
paid by the Corporation for the issuance of such shares ("Share
Capital"), payable monthly and calculated at the following rates:
<TABLE>
<CAPTION>
SHARE CAPITAL RATE
- ----------------------------------------------------------------- -----------
<S> <C>
Up to $35 Million................................................ 1.50%
On the amount over $35 Million and up to $125 Million............ 1.25%
On the amount over $125 Million and up to $200 Million........... 1.00%
On the amount in excess of of $200 Million....................... 0.75%
</TABLE>
Each of the foregoing annual rates is applicable to the portion of the
Share Capital which falls within the rate attributable to such Share
Capital. Assuming the Offering closes on or about January, 1997, the
annual fee payable under the Advisory Agreement for the year ending
December 31, 1997 will be approximately $374,000 if no other shares are
issued through December 31, 1997;
b) an acquisition fee:
a fee of 1.5% of the cost of any real property upon the purchase of
any real property;
c) a disposition fee:
a fee of 0.25% of the sale proceeds from the disposition of any real
property upon the disposition of such real property; and
d) a financing fee:
a fee of 0.25% of the principal amount of any financing or
refinancing arranged, renewed, extended or increased in respect of
any real property upon condition of such financing or refinancing.
The Corporation is required to reimburse the Advisor for the fees and
expenses directly incurred by the Advisor in performing any of the services
required of it under the Advisory Agreement, including all expenses incurred and
fees payable to third parties in connection with the acquisition, disposition,
improvement and management of investments of the Corporation, but excluding the
Advisor's overhead, including without limitation administrative expenses and
salaries.
The following table sets forth a summary presentation, itemizing by category
all of the fees payable by the Corporation to the Advisor pursuant to the
Advisory Agreement. The estimated fees for the year ended December 31, 1996 give
effect to the application of the net proceeds from the Offering and the
acquisition of the Properties as if such transactions occurred on January 1,
1996 and no dispositions or other acquisitions of properties by the Corporation
occurred during such period.
<TABLE>
<CAPTION>
YEAR ENDED
ESTIMATED ADVISORY FEES DECEMBER 31, 1996
- --------------------------------------------------------------------------- -----------------
<S> <C>
Asset Management........................................................... $ 373,575
Acquisition................................................................ 455,438
Disposition................................................................ --
Financing.................................................................. --
--------
TOTAL.................................................................. $ 829,013
--------
--------
</TABLE>
In addition to the fees and expenses payable to the Advisor, the Corporation
is responsible for all of the expenses of the Corporation including the
following:
a) interest and other costs of borrowed money;
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b) taxes and assessments on real property and income, if applicable;
c) fees and expenses of lawyers, accountants, appraisers, property managers
and other agents or consultants employed by or on behalf of the
Corporation;
d) expenses of managing, leasing and maintaining real property;
e) expenses of servicing mortgages;
f) insurance as required;
g) expenses in connection with distributions to the stockholders;
h) expenses in connection with communications to stockholders and other
bookkeeping and clerical work necessary in maintaining relations with
stockholders;
i) expenses of maintaining books and records;
j) registration, custodial, administrative and other fees and expenses in
connection with the securities of the Corporation;
k) all fees and expenses in connection with the acquisition, disposition
and ownership of its investments, including property management fees;
l) all fees and expenses of listing and maintaining the listing of the
securities of the Corporation on any exchange;
m) all fees and expenses of the registrar and transfer agent appointed by
the Corporation for its securities; and
n) all fees and expenses of the Corporation complying with applicable
securities legislation.
If and to the extent that the Advisor or any affiliate of the Advisor
renders services to the Corporation in addition to those specifically required
to be rendered under the Advisory Agreement, the Advisor or such affiliate will
be compensated on the basis of fees no less favorable to the Corporation than
fees competitive with those generally charged for comparable services and
activities. Neither the Advisor nor any of its affiliates will be entitled to
charge the Corporation any fee in connection with real estate purchases, sales
or mortgage financing transactions undertaken by the Corporation other than as
approved unanimously by the Board of Directors. The Advisor or its affiliates
may without such approval receive commissions from vendors in connection with
real estate purchases by the Corporation and any commission in excess of 1% of
the acquisition price to the Corporation will reduce the fee otherwise payable
by the Corporation to the Advisor for the purchase of such real property. The
majority of the Corporation's independent directors must approve every listing
broker for the sale of any real property of the Corporation.
The Advisor is responsible for the employment expenses of its personnel,
rent and other office expenses and miscellaneous administrative expenses
relating to the performance of its functions under the Advisory Agreement.
OTHER ACTIVITIES
The Advisor, its affiliates and associates may engage in real estate
activities for their own account and for the account of others. However they
have agreed in the Advisory Agreement not to form or directly or indirectly act
as advisors or managers of another REIT without the consent of a majority of the
votes cast at a meeting of the holders of the Common Stock of the Corporation.
The Advisor, its affiliates and associates are also obligated to present all
investment opportunities which fall within the Corporation's then applicable
investment policies to the Corporation prior to presenting such opportunities to
others or investing in such property for their own account.
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<PAGE>
PROPERTY MANAGEMENT AND OTHER SERVICES
If approved by the Board of Directors in any particular case, property
management services may be performed by an affiliate of the Advisor, including
without limitation Maynard Rich Management Corp. Subject to the supervision of
the Advisor, the Corporation is responsible for the payment of all fees and
expenses incurred in connection with the ownership of its investments, including
property management fees. Such fees, if paid to the Advisor or its affiliates,
will be set at commercially competitive rates. Property management fees vary
depending on the type, size and location of a property.
DIRECTORS AND EXECUTIVE OFFICERS OF THE ADVISOR
The names and municipalities of residence of the directors and officers of
the Advisor, the offices held by them with the Advisor and their principal
occupations are set forth in the following table. See "Management--Directors and
Executive Officers of the Corporation and the Promoters."
<TABLE>
<CAPTION>
NAME AND MUNICIPALITIES OFFICE PRINCIPAL OCCUPATION
- ------------------------------------- ------------------------------------ -------------------------------------
<S> <C> <C>
Ronald L. Bernbaum .................. Chairman of the Board President, Basic Capital Funds
North York, Ontario
Carl Maynard ........................ Director, President and Chief Principal, The Maynard Rich
Miami, Florida Executive Officer Companies; President, Basic
Advisors, Inc.
Richard Schwartz .................... Director, Vice President Principal, The Maynard Rich Companies
Miami, Florida
Terry McCrae ........................ Director, Chief Financial Officer Vice President, Investments Basic
Mississauga, Ontario and Vice President Finance Capital Funds; Vice President, Basic
Advisors, Inc.
Aran Kwinta ......................... Secretary Lawyer, Chaiton & Chaiton
Toronto, Ontario
Richard Dickerson ................... Vice President President, Maynard Rich Management
Pasadena, California Corp.
</TABLE>
INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
Except for the Advisory Agreement and as described below, there have been no
material transactions within the three (3) years prior to the date hereof and
there are no proposed transactions which in either case have materially affected
or will materially affect the Corporation in which the Advisor or any director
or officer of the Advisor or any director or officer of the Corporation or any
associate or affiliate of any of the foregoing had or has any material interest,
direct or indirect.
Various conflicts of interest exist between the Corporation and the Advisor
and its affiliates. Some of these conflicts arise as a result of the commonality
of directorship and management of these entities. The Advisor is expected to
benefit and profit from the Advisory Agreement described herein. As well,
directors, officers and affiliates of the Corporation and the Advisor are
engaged in a wide range of real estate and other business activities and it is
unlikely that the Corporation will explore investment opportunities beyond those
presented directly or indirectly to the Board of Directors of the Corporation by
the Advisor. However, the Advisor has agreed in the Advisory Agreement that it
will not form or directly or indirectly act as an advisor or manager of a REIT
while it is the advisor to the Corporation without the consent of a majority of
the votes cast at a meeting of the holders of the Common Stock of the
Corporation. Associates or affiliates of the Advisor, including The Maynard Rich
Companies, may receive or have an indirect interest in brokerage commissions or
other fees paid by a vendor of real property purchased by the Corporation and
may receive or have an indirect interest in brokerage commissions paid
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by the Corporation if and when the Corporation should determine to sell its real
property. The Advisory Agreement provides that the brokerage fees paid to the
Advisor or its affiliates by a vendor of real property purchased by the
Corporation may only exceed 1% if there is a reduction in the fee payable to the
Advisor for the transaction for the excess, and that a majority of the
Corporation's independent directors must approve every listing broker for the
sale of any real property of the Corporation.
The Advisor or its associates or affiliates may derive income from the
Corporation for property management services rendered to properties owned by the
Corporation or for other real estate business services not included in the
services provided under the Advisory Agreement.
Maryland corporate law requires directors and officers of the Corporation to
disclose to the Corporation any interest in a material contract or proposed
material contract.
The directors, officers and employees of the Corporation and the Advisor
will devote so much of their time to the Corporation as in their judgment is
reasonably required and they may have conflicts of interest in allocating time,
services and functions among the Corporation and their other activities.
Investment in the Corporation will not carry with it the right for the
Corporation or any stockholder to invest in any other property or venture of the
Promoters or the Advisor or their respective associates or affiliates or to
share in any profit therefrom or any interest therein. See "Management--The
Promoters, The Advisor and Directors and Executive Officers of the Corporation."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of Common
Stock which, according to information supplied to the Corporation, are
beneficially owned by: (i) each person who is the beneficial owner of more than
5% of the Common Stock; (ii) each of the directors, and named executive officers
of the Corporation individually; and (iii) all current directors and executive
officers of the Corporation as a group. Under rules adopted by the Securities
and Exchange Commission, a person is deemed to be a beneficial owner of Common
Stock with respect to which he has or shares voting power (which includes the
power to vote or to direct the voting of the security), or investment power
(which includes the power to dispose of, or to direct the disposition of, the
security). A person is also deemed to be the beneficial owner of shares with
respect to which he could obtain voting or investment power within 60 days of
the date of this Prospectus, such as upon the exercise of options or warrants.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
NAME OF BENEFICIAL OWNER (1) BENEFICIALLY OWNED BENEFICIAL OWNERSHIP
- ------------------------------------------------------------------------- --------------------- -----------------------
<S> <C> <C>
Ronald L. Bernbaum....................................................... 100 100%
All Directors and Executive Officers as a Group.......................... 100 100%
</TABLE>
- ------------------------
(1) The address of Mr. Bernbaum is c/o Basic U.S. REIT, Inc., 7850 Northwest
146th Street, Suite 308, Miami, Florida 33016.
The following table sets forth all options to purchase shares of Common
Stock currently held by the directors and executive officers of the Corporation.
All of the options are exercisable at a price per share
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<PAGE>
equal to the initial public offering price and may not be exercised prior to the
six month anniversary of the closing of the Offering. Such options expire on
September 25, 2001.
<TABLE>
<CAPTION>
NUMBER OF SHARES
DIRECTOR/EXECUTIVE OFFICER UNDERLYING OPTIONS
- ---------------------------------------------------------------- -------------------
<S> <C>
Ronald L. Bernbaum.............................................. 20,000
Carl Maynard.................................................... 10,000
Larry Thrall.................................................... 10,000
Robert G. Witterick............................................. 10,000
Nils Peterson................................................... 10,000
Richard Schwartz................................................ 10,000
Terry McCrae.................................................... 10,000
Aran Kwinta..................................................... 10,000
Richard Dickerson............................................... 10,000
</TABLE>
LEGAL PROCEEDINGS
The Corporation and the Properties are not presently subject to any material
litigation. Nor, to the Corporation's knowledge, is any material litigation
threatened against the Corporation or the Properties, other than routine
litigation arising in the ordinary course of business and which is expected to
be covered by liability insurance.
DESCRIPTION OF CAPITAL OF THE CORPORATION
The following summary of the terms of the Corporation's stock does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Corporation's Amended and Restated Articles of Incorporation
and bylaws. See "Additional Information."
GENERAL
The Amended and Restated Articles of Incorporation provides that the
Corporation may issue up to 100,000,000 shares of common stock, $0.01 par value
per share ("Common Stock"), 1,500,000 shares of preferred stock, $0.01 par value
per share ("Preferred Stock"), and 50,000,000 shares of excess stock, $0.01 par
value per share ("Excess Stock"). As of September 30, 1996, 100 shares of Common
Stock were issued and outstanding to Ronald L. Bernbaum and no Preferred Stock
or Excess Stock was issued and outstanding. Upon completion of this Offering,
2,740,100 shares of Common Stock will be issued and outstanding and there will
be no Preferred Stock or Excess Stock outstanding. Except as otherwise may be
determined by the Board of Directors with respect to any series of Preferred
Stock, no shares will have preference, conversion, exchange, sinking fund,
redemption or preemptive rights.
COMMON STOCK
All Common Stock offered hereby have been duly authorized, and will be fully
paid and non-assessable. Subject to the preferential rights of any other shares
or series of stock and to the provisions of the Amended and Restated Articles of
Incorporation regarding Excess Stock, holders of Common Stock are entitled to
receive dividends on such stock if and when authorized and declared by the Board
of Directors out of assets legally available therefor and to share ratably in
the assets of the Corporation legally available for distribution to its
stockholders in the event of its liquidation, dissolution or winding up after
payment of or adequate provision for all known debts and liabilities of the
Corporation. The Corporation intends to make regular quarterly distributions.
See "Distribution Policy."
Subject to the provisions of the Amended and Restated Articles of
Incorporation regarding Excess Stock, each share of outstanding Common Stock
entitles the holder to one vote on all matters submitted to a vote of
stockholders, including the election of directors, and, except as provided with
respect to any other
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<PAGE>
class or series of stock, the holders of such shares will possess the exclusive
voting power. There is no cumulative voting in the election of directors, which
means that the holders of a majority of outstanding shares of Common Stock can
elect all of the directors then standing for election and the holders of the
remaining shares will not be able to elect any directors. Any nominee for
director must have been selected pursuant to the nominating provisions contained
in the bylaws.
Holders of Common Stock have no preference, conversion, exchange, sinking
fund, redemption or appraisal rights and have no preemptive rights to subscribe
for any securities of the Corporation. Subject to the provisions of the Amended
and Restated Articles of Incorporation regarding Excess Stock, Common Stock will
have equal dividend, liquidation and other rights.
The Amended and Restated Articles of Incorporation provides that the
Corporation may not dissolve, amend its charter, merge, sell all or
substantially all of its assets, engage in a share exchange or engage in similar
transactions outside the ordinary course of business unless approved by the
affirmative vote of stockholders holding at least two-thirds of the shares
entitled to vote on the matter, except in the case of provisions in the Amended
and Restated Articles of Incorporation regarding the nomination and election of
directors, which must be approved by the affirmative vote of stockholders
holding at least 80% of the shares entitled to vote thereon.
PREFERRED STOCK
The Amended and Restated Articles of Incorporation authorizes the Board of
Directors to classify any unissued Preferred Stock and to reclassify any
previously classified but unissued Preferred Stock of any series. Prior to
issuance of shares of each series, the Board is required to designate the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations and restrictions on ownership, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption for each
such series. Accordingly, the Board of Directors could authorize the issuance of
Preferred Stock with terms and conditions which could have the effect of
delaying, deferring or preventing a transaction or a change in control of the
Corporation that might involve a premium price for holders of Common Stock or
otherwise be in their best interest. As of the date hereof, no shares of
Preferred Stock are outstanding and the Corporation has no present plans to
issue any Preferred Stock.
POWER TO ISSUE ADDITIONAL COMMON STOCK AND PREFERRED STOCK
The Corporation believes that the power of the Board of Directors to issue
additional authorized but unissued Common Stock or Preferred Stock and to
reclassify any unissued Common Stock and classify or reclassify any unissued
Preferred Stock and thereafter cause the Corporation to issue such classified or
reclassified shares will provide the Corporation with increased flexibility in
structuring possible future financings and acquisitions and in meeting other
corporate objectives. The additional classes or series, as well as the Common
Stock, will be available for issuance without further action by the
Corporation's stockholders, unless such action is required by applicable law or
the rules of any stock exchange or automated quotation system on which the
Corporation's securities may be listed or traded. Although the Board of
Directors has no intention at the present time of doing so, it could authorize
the Corporation to issue a class or series that could, depending upon the terms
of such class or series, delay, defer or prevent a transaction or a change of
control of the Corporation that might involve a premium price for holders of
Common Stock or otherwise be in their best interests.
EXCESS STOCK--RESTRICTIONS ON TRANSFER
For the Corporation to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals during the last half of a
taxable year (other than the first year) or during a proportionate part of a
shorter taxable year (the "Five or Fewer Test"), and such capital stock must be
beneficially owned by 100 or more
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<PAGE>
persons during at least 335 days of a taxable year of 12 months (other than the
first year) or during a proportionate part of a shorter taxable year. The Five
or Fewer Test is applied using certain constructive ownership and attribution
rules of the Code. In order to protect the Corporation against the risk of
losing its status as a REIT due to concentration of ownership among its
stockholders, the Amended and Restated Articles of Incorporation, subject to
certain exceptions, provide that no stockholder may own, or be deemed to own by
virtue of the attribution provisions of the Code, more than 9.5% (the "Ownership
Limit") of the lesser of the aggregate number or value of the Corporation's
outstanding Common Stock. In the event the Corporation issues Preferred Stock,
it may, in the certificate of designation creating such Preferred Stock,
determine a limit on the ownership of such shares. Any direct or indirect
ownership of shares in excess of the Ownership Limit or that would result in the
disqualification of the Corporation as a REIT, including any transfer that
results in capital stock being owned by fewer than 100 persons or results in the
Corporation being "closely held" within the meaning of Section 856(h) of the
Code, shall be null and void, and the intended transferee will acquire no rights
to the capital stock. The foregoing restrictions on transferability and
ownership will not apply if the Board of Directors determines that it is no
longer in the best interests of the Corporation to attempt to qualify, or to
continue to qualify, as a REIT and a majority of the Corporation's voting
stockholders approve such determination by the Board. The Board of Directors
may, in its sole discretion, waive the Ownership Limit if evidence satisfactory
to the Board of Directors and the Corporation's tax counsel is presented that
the changes in ownership will not then or in the future jeopardize the
Corporation's REIT status and the Board of Directors otherwise decides that such
action is in the best interests of the Corporation.
Any person who acquires or attempts to acquire any capital stock of the
Corporation in violation of the Ownership Limit or which would result in the
disqualification of the Corporation as a REIT, and any person who is or attempts
to become a transferee of capital stock of the Corporation such that Excess
Stock results, must immediately give written notice, or, in the event of a
proposed or attempted transfer, at least 15 days prior written notice, to the
Corporation of such event and must provide the Corporation with such other
information as the Corporation may request in order to determine the effect, if
any, of such acquisition or transfer, whether consummated or attempted, on the
Corporation's status as a REIT.
Shares owned, or deemed to be owned, or transferred to a stockholder in
excess of the Ownership Limit will automatically be converted into Excess Stock
that will be transferred, by operation of law, to the trustee of a trust for the
exclusive benefit of one or more charitable organizations described in Section
170(b)(1)(A), 170(c) and 501(c)(3) of the Code (the "Charitable Beneficiary").
The trustee of the trust will be deemed to own the Excess Stock for the benefit
of the Charitable Beneficiary on the date of the violative transfer to the
original transferee-stockholder. Any dividend or distribution paid to the
original transferee-stockholder of Excess Stock prior to discovery by the
Corporation that shares have been transferred in violation of the provisions of
the Corporation's Amended and Restated Articles of Incorporation shall be repaid
to the trustee upon demand. Any dividend or distribution authorized and declared
but unpaid shall be rescinded as void ab initio with respect to the original
transferee-stockholder and shall instead be paid to the trustee of the trust for
the benefit of the Charitable Beneficiary. Any vote cast by an original
transferee-stockholder of shares constituting Excess Stock prior to the
discovery by the Corporation that shares of capital stock have been transferred
in violation of the provisions of the Corporation's Amended and Restated
Articles of Incorporation shall be void ab initio. While the Excess Stock is
held in trust, the original transferee-stockholder will be deemed to have given
an irrevocable proxy to the trustee to vote the capital stock for the benefit of
the Charitable Beneficiary. The trustee of the trust may transfer the interest
in the trust representing the Excess Stock to any person whose ownership of the
shares converted into such Excess Stock would be permitted under the Ownership
Limit. If such transfer is made, the interest of the Charitable Beneficiary
shall terminate and the proceeds of the sale shall be payable to the original
transferee-stockholder and to the Charitable Beneficiary. The original
transferee-stockholder shall receive the lesser of (i) the price paid by the
original transferee-stockholder for the shares that were converted into Excess
Stock or, if the original transferee-stockholder did not give value for such
shares (e.g., the shares were received through a gift or other transaction), the
average closing price
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<PAGE>
on the principal U.S. or foreign securities exchange on which the class of
shares from which such shares were converted is then listed or admitted to
trading for the ten trading days immediately preceding such sale or gift; and
(ii) the price received by the trustee from the sale or other disposition of the
Excess Stock held in trust. The trustee may reduce the amount payable to the
original transferee-stockholder by the amount of dividends and distributions
relating to the shares of Excess Stock which have been paid to the original
transferee-stockholder and are owed by the original transferee-stockholder to
the trustee. Any proceeds in excess of the amount payable to the original
transferee-stockholder shall be paid by the trustee to the Charitable
Beneficiary. Any liquidation distributions relating to the Excess Stock shall be
distributed in the same manner as proceeds of a sale of Excess Stock. If the
foregoing transfer restrictions are determined to be void or invalid by virtue
of any legal decision, statute, rule or regulation, then the original
transferee-stockholder of any shares of Excess Stock may be deemed, at the
option of the Corporation, to have acted as an agent on behalf of the
Corporation in acquiring the shares of Excess Stock and to hold the shares of
Excess Stock on behalf of the Corporation.
In addition, the Corporation will have the right, for a period of 90 days
during the time any shares of Excess Stock are held in trust, to purchase all or
any portion of the shares of Excess Stock at the lesser of (i) the price
initially paid for such shares by the original transferee-stockholder, or if the
original transferee-stockholder did not give value for such shares (e.g., the
shares were received through a gift or other transaction), the average closing
price for the class of shares from which such shares of Excess Stock were
converted for the ten trading days immediately preceding such sale or gift and
(ii) the average of the last reported closing sales price on the principal U.S.
or foreign securities exchange on or over which the class of capital stock from
which such shares of Excess Stock were converted is listed or admitted to
trading for the ten trading days immediately preceding the date the Corporation
elects to purchase such shares. The Corporation may reduce the amount payable to
the original transferee-stockholder by the amount of dividends and distributions
relating to the shares of Excess Stock which have been paid to the original
transferee-stockholder and are owed by the original transferee-stockholder to
the trustee. The Corporation may pay the amount of such reductions to the
trustee for the benefit of the Charitable Beneficiary. The 90 day period begins
on the later date of which notice is received of the violative transfer if the
original transferee-stockholder gives notice to the Corporation of the transfer
or, if no such notice is given, the date the Board of Directors determines that
a violative transfer has been made.
These restrictions will not preclude settlement of transactions through any
U.S. or foreign securities exchange or quotation system on which the
Corporation's stock is listed or admitted for trading. The fact that settlement
of a transaction may so occur will negate the effect of any of these
transactions and any transferee in such a transaction will be subject to all of
these restrictions.
All certificates representing capital stock will bear a legend referring to
the restrictions described above.
Each stockholder shall upon demand be required to disclose to the
Corporation in writing any information with respect to the direct, indirect and
constructive ownership of capital stock of the Corporation that the Board of
Directors deems necessary to comply with the provisions of the Code applicable
to REITs, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.
The Ownership Limit may have the effect of delaying, deferring or preventing
a change in control of the Corporation unless the Board of Directors determines
that maintenance of REIT status is no longer in the best interest of the
Corporation.
DIVIDEND REINVESTMENT PROGRAM
The Corporation in the future intends to implement a dividend reinvestment
program under which stockholders may elect automatically to reinvest their
dividends in Common Stock. The Corporation may from time to time repurchase
Common Stock in the open market for the purpose of fulfilling its
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obligations under this dividend reinvestment program or may elect to issue
additional Common Stock. The Corporation may reserve 500,000 shares of Common
Stock for issuance under the dividend reinvestment program and may purchase up
to 250,000 shares of Common Stock on the open market in 1997 to issue to
stockholders under the dividend reinvestment program. The Corporation intends to
use a combination of sources obtained from its working capital and proceeds from
future equity financings and debt financings to fund such purchases.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar is American Stock Transfer & Trust Company.
CERTAIN PROVISIONS OF MARYLAND LAW AND THE CORPORATION'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION AND BYLAWS
The following summary of certain provisions of Maryland law and of the
Corporation's Amended and Restated Articles of Incorporation and bylaws does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Corporation's Amended and Restated Articles of Incorporation
and bylaws. See "Additional Information."
NUMBER OF DIRECTORS
The Amended and Restated Articles of Incorporation and bylaws of the
Corporation provide that the number of directors of the Corporation may be no
less than three and no more than ten but may not be fewer than the minimum
number required by Maryland law. The number of directors may be determined by
the affirmative vote of a majority of the Board of Directors or by the
stockholders at the Corporation's annual meeting. Any vacancy will be filled, at
any regular meeting or at any special meeting called for that purpose, by a
majority of the remaining directors, except that a vacancy resulting from an
increase in the number of directors must be filled by a majority of the entire
Board of Directors.
BUSINESS COMBINATIONS
Under the General Corporation Law of the State of Maryland ("MGCL"), certain
"business combinations" (including a merger, consolidation, share exchange or,
in certain circumstances, an asset transfer or issuance or reclassification of
equity securities) between a Maryland corporation and any person who
beneficially owns 10% or more of the voting power of the corporation's shares or
an affiliate of the corporation, who at any time within the two-year period
prior to the date in question, was the beneficial owner of 10% or more of the
voting power of the then-outstanding voting stock of the corporation (an
"Interested Stockholder") or an affiliate thereof are prohibited for five years
after the most recent date on which the Interested Stockholder became an
Interested Stockholder. Thereafter, any such business combination must be
recommended by the board of directors of such corporation and approved by the
affirmative vote of at least (a) 80% of the votes entitled to be cast by holders
of outstanding shares of voting stock of the corporation and (b) two-thirds of
the votes entitled to be cast by holders of voting stock of the corporation
other than shares held by the Interested Stockholder with whom (or with whose
affiliate) the business combination is to be effected, unless, among other
conditions, the corporation's common stockholders receive a minimum price (as
defined in the MGCL) for their shares and the consideration is received in cash
or in the same form as previously paid by the Interested Stockholder for its
shares. These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder.
The Amended and Restated Articles of Incorporation of the Corporation
provide that the Maryland business combination provision of the MGCL do not
apply to the Corporation. As a result, Interested Stockholders and affiliates
thereof may be able to enter into a business combination with the Corporation,
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which may not be in the best interests of the Corporation, without compliance by
the Corporation with the super-majority vote requirements or other provisions of
the MGCL.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror, by officers or by directors who
are employees of the corporation. "Control shares" are voting shares of stock
which, if aggregated with all other such shares of stock previously acquired by
the acquiror, or in respect of which the acquiror is able to exercise or direct
the exercise of voting power (except solely by virtue of a revocable proxy),
would entitle the acquiror to exercise voting power in electing directors within
any one of the following ranges of voting power: (i) one-fifth or more but less
than one-third; (ii) one-third or more but less than a majority; or (iii) a
majority or more of all voting power. Control shares do not include shares the
acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means the direct or
indirect acquisition of ownership of, or power to direct the exercise of voting
power with respect to, control shares, subject to certain exceptions.
The bylaws of the Corporation provide that the Corporation has elected not
to be governed by the control share acquisition provisions of the MGCL. There
can be no assurance that such provision will not be amended or eliminated at any
time in the future.
AMENDMENT TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
The Amended and Restated Articles of Incorporation may be amended only by
the affirmative vote of the holders of not less than two-thirds of all of the
votes entitled to be cast on the matter; provided, however, that certain
provisions of the Amended and Restated Articles of Incorporation, such as those
relating to the nomination and election of the Board of Directors, may be
amended only by the affirmative vote of the holders of not less than 80% of all
votes entitled to be cast on the matter.
DISSOLUTION OF THE CORPORATION
The dissolution of the Corporation must be approved by the affirmative vote
of the holders of not less than two-thirds of all of the votes entitled to be
cast on the matter.
ADVANCE NOTICE OF DIRECTORS NOMINATIONS AND NEW BUSINESS
The bylaws of the Corporation provide that (a) with respect to an annual
meeting of stockholders, nominations of persons for election to the Board of
Directors and proposal of business to be considered by stockholders may be made
only (i) pursuant to the Corporation's notice of the meeting; (ii) by the Board
of Directors; or (iii) by a stockholder who is entitled to vote at the meeting
and has complied with advance notice procedures set forth in the bylaws and (b)
with respect to a special meeting of stockholders, only the business specified
in the Corporation's notice of meeting may be brought before the meeting of
stockholders and nominations of persons for election to the Board of Directors
may be made only (i) pursuant to the Corporation's notice of the meeting; (ii)
by the Board of Directors; or (iii) provided that the Board of Directors has
determined that the directors shall be elected at such meeting, by a stockholder
who is entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the bylaws of the Corporation.
MEETINGS OF STOCKHOLDERS
The bylaws of the Corporation provide that annual meetings of stockholders
shall be held on such date and at such time as the Board of Directors may set.
Special meetings of the stockholders may be called by (i) the President of the
Corporation; or (ii) the Board of Directors. Under the MGCL, the
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Secretary of the Corporation must call a special meeting upon the written
request of the holders of shares entitled to cast not less than 25% of all the
votes entitled to be cast at the meeting.
The Corporation's bylaws provide that any stockholder of record wishing to
nominate a director or have a stockholder proposal considered at an annual
meeting (except for stockholder proposals included in the Corporation's proxy
materials pursuant to Rule 14a-8 under the Securities Exchange Act) must provide
written notice and certain supporting documentation to the Corporation relating
to the nomination or proposal not less than 60 days nor more than 90 days prior
to the anniversary date of the prior year's annual meeting or special meeting in
lieu thereof (the "Anniversary Date"). In the event that the annual meeting is
called for a date more than seven calendar days before or delayed more than 60
days from the Anniversary Date, stockholders generally must provide written
notice within 20 calendar days after the date on which notice of the meeting is
mailed to stockholders.
The purpose of requiring stockholders to give the Corporation advance notice
of nominations and other business is to afford the Board of Directors a
meaningful opportunity to consider the qualifications of the proposed nominee(s)
or the advisability of the other proposed business and, to the extent deemed
necessary or desirable by the Board of Directors, to inform stockholders and
make recommendations about the qualifications or business, as well as to provide
a more orderly procedure for conducting meetings of stockholders. Although the
bylaws of the Corporation do not give the Board of Directors any power to
disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election of
directors or the consideration of stockholder proposals if the proper procedures
are not followed, and of discouraging or deferring a third party from conducting
a solicitation of proxies to elect its own slate of directors or to approve its
own proposal, without regard to whether consideration of the nominees or
proposals might be harmful or beneficial to the Corporation and its
stockholders.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services; or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action adjudicated in the
proceeding. The Amended and Restated Articles of Incorporation contain such a
provision which eliminates such liability to the maximum extent permitted by
Maryland law.
The Amended and Restated Articles of Incorporation authorize the
Corporation, to the maximum extent permitted by Maryland law, to indemnify and
to pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any present or former director or officer or (b) any
individual who, while a director of the Corporation and at the request of the
Corporation, serves or has served as a director, officer, partner or trustee of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, who is or was a party to such a proceeding by reason of
serving in such capacity. The Amended and Restated Articles of Incorporation and
bylaws of the Corporation obligate it, to the maximum extent permitted by
Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director of the
Corporation and at the request of the Corporation, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise as a director, officer, partner or trustee of such corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.
The Amended and Restated Articles of Incorporation and bylaws of the Corporation
also permit the Corporation to indemnify and advance or reimburse expenses to
any person who served a predecessor of the Corporation in any of the capacities
described above and to any employee or agent of the Corporation or a predecessor
of the Corporation.
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The MGCL requires a corporation (unless its charter provides otherwise,
which the Amended and Restated Articles of Incorporation do not) to indemnify a
director or officer who has been successful, on the merits or otherwise, in the
defense of any proceeding to which he is made a party by reason of his service
in that capacity. The MGCL permits a corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (b) the director or officer actually received an
improper personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
the act or omission was unlawful. However, a Maryland corporation may not
indemnify for (a) an adverse judgment in a suit by or in the right of the
corporation or (b) any proceeding charging an improper personal benefit to the
director or officer, whether or not involving action in an official capacity, in
which the director or officer is adjudged liable on the basis that personal
benefit was improperly received. In addition, the MGCL requires the Corporation
to, as a condition to advancing expenses, to obtain (a) a written affirmation by
the director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Corporation as authorized by the
Amended and Restated Articles of Incorporation and bylaws and (b) a written
undertaking by or on his behalf to repay the amount paid or reimbursed by the
Corporation if it shall be ultimately be determined that the standard of conduct
was not met.
Indemnification under the provisions of the MGCL is not deemed exclusive of
any other rights, by indemnification or otherwise, to which a director or
officer may be entitled under the Corporation's Amended and Restated Articles of
Incorporation or bylaws, or under resolutions of stockholders or directors,
contract or otherwise.
SEC POSITION ON INDEMNIFICATION
It is the position of the SEC that indemnification of directors and officers
for liabilities arising under the Securities Act is against public policy and
thus unenforceable pursuant to Section 14 of the Securities Act.
INSURANCE
The Corporation intends to purchase and maintain insurance on behalf of all
of its directors and executive officers against liability asserted against or
incurred by them in their official capacities with the Corporation, whether or
not the Corporation is required or has the power to indemnify them against the
same liability.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following summary presents the material U.S. Federal income tax
consequences to the Corporation and the holders of Common Stock of the treatment
of the Corporation as a REIT under the applicable provisions of the Code, and
under the Canada-U.S. Income Tax Convention (the "Treaty"), as amended by a
revised protocol that entered into force November 9, 1995 (the "Protocol"), but
does not discuss all of the aspects of U.S. Federal income taxation that may be
relevant to a prospective stockholder in light of his or her particular
circumstances or to certain types of stockholders (including insurance
companies, tax-exempt entities, financial institutions or broker-dealers) who
are subject to special treatment under the U.S. Federal income tax laws. The
following discussion, which is not exhaustive of all possible tax
considerations, does not give a detailed discussion of any state, local or
non-U.S. tax considerations. Schnader Harrison Segal & Lewis has rendered an
opinion to the Corporation concerning: (i) the ability of the Corporation to
qualify as a REIT commencing with the Corporation's taxable year
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ending December 31, 1997; and (ii) the presentation of the material tax
consequences to the Corporation and its stockholders under the caption "U.S.
Federal Income Tax Considerations." The opinion is an exhibit to the
Registration Statement in which this Prospectus is part.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP
AND SALE OF SHARES IN AN ENTITY ELECTING TO BE TAXED AS A REIT, INCLUDING THE
U.S. FEDERAL, STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES OF SUCH
PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE
TAX LAWS
TAXATION OF THE CORPORATION
GENERAL--The Corporation will elect to be taxed as a REIT under Sections 856
through 859 of the Code, commencing with its taxable year ending December 31,
1997. The Corporation expects that it will be organized and operated in such a
manner as to qualify for taxation as a REIT under the Code commencing with its
taxable year ending December 31, 1997, and the Corporation intends to continue
to operate in such a manner. No assurance, however, can be given that the
Corporation will be organized and operated in such a manner. Qualification and
taxation as a REIT depends upon the Corporation's ability to meet on a
continuing basis, through actual annual operating results, distribution levels
and diversity of stock ownership, the various qualification tests imposed under
the Code on REITs, some of which are summarized below. While the Corporation
intends to operate so that it qualifies as a REIT, given the highly complex
nature of the rules governing REITs, the ongoing importance of factual
determinations and the possibility of future changes in circumstances of the
Corporation, no assurance can be given that the Corporation satisfies such tests
or will continue to do so. (See "Failure to Qualify" below.) The Corporation
expects to acquire the Properties in January, 1997 and accordingly will not
elect to be taxed as a REIT, or qualify to make such an election, for its
taxable year ending December 31, 1996. The Corporation generally will be subject
to tax on net built-in gains, if any, existing immediately before the REIT
election becomes effective. It is not anticipated, however, that the Corporation
will have any significant amount of net built-in gains immediately before
January 1, 1997, when the Corporation's REIT election is expected to be
effective. In addition, the Corporation generally would not qualify as a REIT
unless it distributed its accumulated earnings and profits for any year in which
it was not a REIT. It is not anticipated, however, that the Corporation will
have any significant amount of earnings and profits accumulated prior to January
1, 1997.
The following is a general summary of the Code provisions that govern the
U.S. Federal income tax treatment of a REIT and its stockholders. These
provisions of the Code are highly technical and complex. This summary is
qualified in its entirety by the applicable Code provisions, Treasury
Regulations and administrative and judicial interpretations thereof.
If the Corporation qualifies for taxation as a REIT, it generally will not
be subject to U.S. Federal corporate income taxes on net income or capital gain
that it currently distributes to stockholders. Such treatment substantially
eliminates the federal "double taxation" on earnings (tax at both the corporate
and the stockholder level) that generally results from investment in a
corporation.
Despite the REIT election, the Corporation may be subject to U.S. Federal
income and excise tax as follows: (i) the Corporation will be taxed at regular
corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains, (ii) under certain circumstances, the
Corporation may be subject to the "alternative minimum tax" on certain of its
items of tax preferences, if any, (iii) if the Corporation has (a) net income
from the sale or other disposition of "foreclosure property" that is held
primarily for sale to customers in the ordinary course of business or (b) other
nonqualifying net income from foreclosure property, it will be subject to tax at
the highest corporate rate on such income, (iv) if the Corporation has net
income from prohibited transactions (which are, in general, certain sales or
other
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dispositions of property held primarily for sale to customers in the ordinary
course of business, other than sales of foreclosure property and sales that
qualify for a statutory safe harbor), such income will be subject to a 100% tax,
(v) if the Corporation should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on the net income attributable to the greater of
the amount by which the Corporation fails the 75% or 95% test, multiplied by a
fraction intended to reflect the Corporation's profitability, and (vi) if the
Corporation should fail to distribute, or fail to be treated as having
distributed, with respect to each calendar year at least the sum of (a) 85% of
its REIT ordinary income for such year, (b) 95% of its REIT capital gain net
income for such year, and (c) any undistributed taxable income from prior
periods, the Corporation would be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed. The
Corporation does not now intend to acquire any appreciated assets from a
corporation generally subject to full corporate-level tax in a transaction in
which any gain on the transfer is not fully recognized. However, in the event of
such an acquisition, the Corporation could, under certain circumstances, be
subject to tax upon disposition of such assets.
REQUIREMENTS FOR QUALIFICATION--The Code defines a REIT as a corporation,
trust or association (1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable stock, or by
transferable certificates of beneficial interest; (3) that would be taxable as a
domestic corporation, but for Sections 856 through 859 of the Code; (4) that is
neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100 or
more persons; (6) that during the last half of each taxable year not more than
50% in value of the outstanding stock of which is owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain
entities); and (7) that meets certain other tests, described below, regarding
the nature of its income and assets. The Code provides that conditions (1)
through (4), inclusive, must be met during the entire taxable year and that
condition (5) must be met during at least 335 days of a taxable year of 12
months, or during a proportionate part of a taxable year of less than 12 months.
The Corporation expects to issue sufficient shares pursuant to this offering
to allow it to ultimately meet the requirements set forth in (5) and (6) above.
Requirements (5) and (6) need not be met in the first taxable year in which an
election to be taxed as a REIT is made. In addition, the Corporation's Amended
and Restated Articles of Incorporation contain restrictions regarding the
transfer of its Common Stock that are intended to assist the Corporation in
continuing to satisfy the share ownership requirements described in (5) and (6)
above. (See "Description of Capital Stock of the Corporation" and "Excess
Stock--Restrictions on Transfer")
In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. The Corporation satisfies this requirement.
INCOME TESTS--In order to qualify as a REIT, the Corporation annually must
satisfy three gross income requirements. First, at least 75% of the
Corporation's gross income (excluding gross income from prohibited transactions)
for each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (as interest on
obligations secured by mortgages on real property, certain "rents from real
property" or as gain on the sale or exchange of such property and certain fees
with respect to agreements to make or acquire mortgage loans) or from certain
types of temporary investments (the "75% Income Test"). Second, at least 95% of
the Corporation's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived from income which satisfies
the 75% Income Test, dividends, interest and gain from the sale or disposition
of stock or securities (or from any combination of the foregoing). Third,
short-term gain from the sale or other disposition of stock or securities, gain
from prohibited transactions and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary conversions and
sales of
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foreclosure property) must represent less than 30% of the Corporation's gross
income (including gross income from prohibited transactions) for each taxable
year.
Rents received by the Corporation will qualify as "rents from real property"
satisfying the gross income requirements described above only if several
conditions are met. First, the amount of rent must not be based in whole or in
part on the income or profits of any person. However, an amount received or
accrued generally will not be excluded from the term "rents from real property"
solely by reason of being based on a fixed percentage or percentages of receipts
or sales. Second, the Code provides that rents received from a tenant will not
qualify as "rents from real property" in satisfying the gross income tests if
the Corporation, or an owner of 10% of more of the Corporation, directly or
constructively owns 10% or more of the tenant or the assets or net profits of
such tenant (a "Related Party Tenant"). Third, if rent attributable to personal
property leased in connection with a lease of real property is greater than 15%
of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents from real
property". Finally, for rents received to qualify as "rents from real property",
the Corporation generally must not operate or manage the property or furnish or
render services to the tenants of such property, other than through an
independent contractor that is adequately compensated from whom the Corporation
derives no revenue; provided, however, the Corporation may directly perform
certain services that are "usually or customarily rendered" in connection with
the rental of space for occupancy only and are not otherwise considered
"rendered to the occupant" of the property. The Corporation will not charge rent
for any property that is based in whole or in part on the income or profits of
any person (except by reason of being based on a fixed percentage or percentages
of receipts or sales, as described above); the Corporation will not rent any
property to a Related Party Tenant; the Corporation will not derive rental
income attributable to personal property (other than personal property leased in
connection with the lease of real property, the amount of which is less than 15%
of the total rent received under the lease); and any activities that the
Corporation believes may not be provided without jeopardizing the qualification
of rent as "rents from real property" will be performed by an independent
contractor.
If the Corporation fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will generally be available if the Corporation's failure
to meet such tests was due to reasonable cause and not due to wilful neglect,
the Corporation attaches a schedule of the sources of its income to its U.S.
Federal income tax return, and any incorrect information on the schedule was not
due to fraud with intent to evade tax. It is not possible, however, to state
whether in all circumstances the Corporation would be entitled to the benefit of
these relief provisions. As discussed above, even if these relief provisions
apply, the Corporation will, however, still be subject to a special tax based
upon the greater of the amount by which it fails either the 75% or 95% gross
income test for that year. See "Federal Income Tax Considerations--Taxation of
the Corporation--General."
ASSET TESTS--The Corporation, at the close of each quarter of its taxable
year, must satisfy two tests relating to the nature of its assets. First, at
least 75% of the value of the Corporation's total assets must be represented by
real estate assets (including (i) assets held by the Corporation's "qualified
REIT subsidiaries" and the Corporation's allocable share of real estate assets
held by partnerships in which the Corporation owns an interest and (ii) stock or
debt instruments held for not more than one year purchased with the proceeds of
a stock offering or long-term (at least five years) public debt offering of the
Corporation), cash, cash items and government securities. Second, not more than
25% of the value of the Corporation's total assets may be represented by
securities other than those in the 75% asset class and (i) the value of any one
issuer's securities owned by the Corporation may not exceed 5% of the value of
the Corporation's total assets and (ii) the Corporation may not own more than
10% of any one issuer's outstanding voting securities.
The Corporation expects to have direct and indirect wholly-owned
subsidiaries. As set forth above, the ownership of more than 10% of the voting
securities of any one issuer by a REIT is prohibited by the asset
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tests. However, if the Corporation's subsidiaries are "qualified REIT
subsidiaries" as defined in the Code, such subsidiaries will not be treated as
separate corporations for U.S. Federal income tax purposes. Thus, the
Corporation's ownership of stock of a "qualified REIT subsidiary" will not cause
the Corporation to fail the asset tests.
After initially meeting the asset tests at the close of any quarter, the
Corporation will not lose its status as a REIT if it fails to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. The Corporation intends to maintain adequate records of the value
of its assets to ensure compliance with the asset tests, and to take such action
within 30 days after the close of any quarter as may be required to cure any
noncompliance but no assurance can be given that such asset tests will be met.
ANNUAL DISTRIBUTION REQUIREMENTS--To qualify as a REIT, the Corporation
generally must distribute annually to its stockholders an amount equal to (A)
the sum of (i) 95% of the Corporation's REIT taxable income (which is defined
generally as the taxable income of the Corporation computed without regard to
the dividends paid deduction and the Corporation's net capital gain) plus (ii)
95% of the net income (after tax), if any, from foreclosure property, minus (B)
the sum of certain items of noncash income. Such distributions must be paid in
the taxable year to which they relate or in the following taxable year if
declared before the Corporation timely files its tax return for such year and if
paid on or before the first regular dividend payment after such declaration. To
the extent that the Corporation does not distribute (or is not treated as having
distributed) all of its net capital gain or distributes (or is treated as having
distributed) at least 95%, but less than 100% of its REIT taxable income, as
adjusted, it will be subject to tax thereon at regular ordinary and capital
gains corporate tax rates, as the case may be. Furthermore, if the Corporation
should fail to distribute during each calendar year at least the sum of (i) 85%
of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net
income for such year, and (iii) any undistributed taxable income from prior
periods, the Corporation would be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed.
The Corporation expects to make timely distributions sufficient to satisfy
the annual distribution requirements. It is possible, however, that the
Corporation, from time to time, may not have sufficient cash or other liquid
assets to meet the distribution requirements. In that event, the Corporation may
arrange for short-term, or possibly long-term, borrowing to permit the payments
of required dividends, or may pay dividends in the form of taxable stock
dividends.
Under certain circumstances, the Corporation may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to stockholders in a later year, which may be included in the
Corporation's deduction for dividends paid for the earlier year. Thus, the
Corporation may be able to avoid being taxed on amounts distributed as
deficiency dividends; however, the Corporation will be required to pay interest
based upon the amount of any deduction taken for deficiency dividends.
FAILURE TO QUALIFY--If the Corporation's election to be taxed as a REIT is
terminated, because the Corporation fails to qualify for taxation as a REIT in
any taxable year, the Corporation will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Unless entitled to relief under specific statutory provisions, the
Corporation also will be disqualified from taxation as a REIT for the four
taxable years following the year during which qualification was lost. It is not
possible to state whether in all circumstances the Corporation would be entitled
to such statutory relief. As noted above, the Corporation expects to acquire the
Properties in January 1997 and will qualify for taxation as a REIT in its
taxable year ending December 31, 1997. (See "Taxation of the Corporation--
General," concerning the Corporation's failure to qualify as a REIT in its
taxable year ending December 31, 1996).
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INVESTMENTS THROUGH PARTNERSHIPS
Certain of the Corporation's investments may be through partnerships, which
may involve special tax risks. Such risks include possible challenge by the IRS
of (a) allocations of income and expense items, which could affect the
computation of income of the Corporation, and (b) the status of the partnerships
as partnerships (as opposed to associations taxable as corporations) for income
tax purposes. If any of the partnerships is treated as an association, it would
be taxable as a corporation. In such a situation, if the Corporation's ownership
in any of the partnerships exceeded 10% of the partnership's voting interest or
the value of such interest exceeded 5% of the value of the Corporation's assets,
the Corporation would cease to qualify as a REIT. Furthermore, in such a
situation, distributions from any of the partnerships to the Corporation would
be treated as dividends, which are not taken into account in satisfying the 75%
gross income test described above and which could therefore make it more
difficult for the Corporation to qualify as a REIT for the taxable year in which
such distribution was received. In addition, in such a situation, the interest
in any of the partnerships held by the Corporation would not qualify as a "real
estate asset", which could make it more difficult for the Corporation to meet
the 75% asset test described above. Finally, in such a situation, the
Corporation would not be able to deduct its share of losses generated by the
partnerships in computing its taxable income. (See "Failure to Qualify" above
for a discussion of the effect of the Corporation's failure to meet such tests
for a taxable year). The Corporation expects that each of the partnerships
through which it invests will be treated for tax purposes as a partnership (and
not as an association taxable as a corporation). However, no assurance can be
given that the IRS may not successfully challenge the tax status of any of the
partnerships.
TAXATION OF NON-U.S. STOCKHOLDERS
The rules governing U.S. Federal income and estate taxation of the ownership
and disposition of shares by persons that are, for purposes of such taxation,
non-resident alien individuals, non-U.S. corporations, non-U.S. partnerships or
non-U.S. estates or trusts (collectively, "Non-U.S. Stockholders") are complex.
The following discussion does not address all aspects of U.S. Federal income tax
and does not address state, local or non-U.S. tax consequences that may be
relevant to a Non-U.S. Stockholder in light of its particular circumstances. In
addition, this discussion is based on current law, which is subject to change,
and assumes that the Corporation qualifies for taxation as a REIT. Prospective
Non-U.S. Stockholders should consult their own tax Advisors to determine the
impact of U.S. Federal, state, local and non-U.S. income tax laws with regard to
an investment in Common Stock, including any reporting requirements.
DISTRIBUTIONS IN GENERAL. Distributions by the Corporation to a Non-U.S.
Stockholder that are neither attributable to gain from sales or exchanges by the
Corporation of United States real property interests nor designated by the
Corporation as capital gains dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Corporation. Such distributions ordinarily will be subject to
withholding of U.S. Federal income tax on a gross basis (that is, without
allowance of deductions) at a 30% rate, or such lower rate as may be specified
by an applicable income tax treaty, unless the dividends are treated as
effectively connected with the conduct by the Non-U.S. Stockholder of a United
States trade or business.
Dividends that are effectively connected with such a trade or business will
be subject to tax on a net basis (that is, after allowance of deductions) at
graduated rates, in the same manner as dividends to domestic stockholders are
taxed. Any such dividends received by a Non-U.S. Stockholder that is a
corporation may also be subject to an additional branch profits tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
The following discussion generally applies to Non-U.S. Stockholders whose
investment in the Corporation is not effectively connected with the conduct by
such Non-U.S. Stockholders of a United States trade or business.
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Pursuant to current Treasury Regulations, dividends paid to an address in a
country outside the United States are generally presumed to be paid to a
resident of such country for purposes of determining the applicability of
withholding discussed above and the applicability of a tax treaty rate. Under
proposed Treasury Regulations published April 22, 1996, however, a Non-U.S.
Stockholder who wished to claim the benefit of an applicable treaty rate would
be required to satisfy certain certification and other requirements including
the requirement to provide a taxpayer identification number unless the stock of
the Corporation is traded on a U.S. established financial market. The proposed
regulations, if they become final in their present form, generally would be
effective for payments made after December 31, 1997. Under certain treaties,
lower withholding rates generally applicable to dividends do not apply to
dividends from a REIT, such as the Corporation. Certain certification and
disclosure requirements must be satisfied to be exempt from withholding under
the effectively connected income exemption discussed above.
Dividends in excess of current or accumulated earnings and profits of the
Corporation will not be taxable to a Non-U.S. Stockholder to the extent that
they do not exceed the adjusted basis of the stockholder's shares, but rather
will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Stockholder's shares, they
will give rise to gain from the sale or exchange of his shares, the tax
treatment of which is described below. For withholding purposes, the Corporation
is required to treat all distributions as if made out of current or accumulated
earnings and profits. However, amounts thus withheld are generally refundable if
it is subsequently determined that such distribution was, in fact, in excess of
current or accumulated earnings and profits of the Corporation. Proposed
Treasury Regulations, published on April 22, 1996, may, if finalized in their
present form, permit the Corporation, at its option to treat only a portion of
the distribution as a dividend if, prior to, and at a time reasonably close to,
the date of payment, the Corporation makes a reasonable estimate of the portion
of the distribution that is not a dividend based upon expected earnings and
profits as relevant facts and circumstances shall indicate. Under U.S.
legislation enacted in August 1996, distributions to Non-U.S. Stockholders, in
excess of the Corporation's current or accumulated earnings and profits, would
generally be subject to withholding under the Foreign Investment in U.S. Real
Property Tax Act ("FIRPTA"). However, pending further guidance concerning this
new legislation from the U.S. taxing authorities, the Corporation intends to
take the position that such withholding is not required, provided that the sale
or exchange of shares of the Corporation would not be subject to taxation under
FIRPTA. See "Sale of Stock" below. Even if amounts are not subject to
withholding under this new legislation, those amounts may be subject to
withholding under the rule, described above, which requires the Corporation to
treat all distributions as if made out of current or accumulated earnings and
profits.
Distributions to a Non-U.S. Stockholder that are attributable to gain from
sales or exchanges by the Corporation of United States real property interests
will cause the Non-U.S. Stockholder to be treated as recognizing such gain as
income effectively connected with a United States trade or business. Non-U.S.
Stockholders would thus generally be taxed at the same rates applicable to
domestic stockholders (subject to a special alternative minimum tax in the case
of nonresident alien individuals). Also, such gain may be subject to a 30%
branch profits tax in the hands of a Non-U.S. Stockholder that is a corporation,
as discussed above. The Corporation is required to withhold 35% of any such
distribution. That amount is creditable against the Non-U.S. Stockholder's U.S.
Federal income tax liability.
Distributions to a Non-U.S. Stockholder that are designated by the
Corporation at the time of distribution as capital gains dividends (other that
those arising from the disposition of a United States real property interest)
generally will not be subject to U.S. Federal income taxation, unless (i)
investment in the stock is effectively connected with the Non-U.S. Stockholder's
United States trade or business, in which case the Non-U.S. Stockholder will be
subject to the same treatment as domestic stockholders with respect to such gain
(except that a stockholder that is a non-U.S. corporation may also be subject to
the 30% branch profits tax, as discussed above), or (ii) the Non-U.S.
Stockholder is a nonresident alien individual who is present in the United
States for 183 days or more during the taxable year and has a "tax home" in
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<PAGE>
the United States, in which case the nonresident alien individual will be
subject to a 30% tax on the individual's capital gains.
DISTRIBUTIONS TO CANADIAN RESIDENTS--Certain distributions to Canadian
residents may be entitled under the Treaty and Protocol to more favorable
treatment than are distributions to Non-U.S. Stockholders in general. U.S. tax
benefits under the Treaty and Protocol are subject, however, to a general "anti-
abuse" rule, under which the U.S. may deny such benefits where it can be
reasonably concluded that to do otherwise would result in an abuse of the
provisions of the Treaty and Protocol.
Individual stockholders of the Corporation who reside in Canada may be
eligible for withholding at a rate less than the generally applicable 30% rate
described above. Under the Treaty and Protocol, dividends paid by a REIT, such
as the Corporation, to an individual resident of Canada are subject to
withholding of U.S. Federal income tax on a gross basis at the rate of 15%, if
such individual holds an interest of less than 10% in such REIT. Where an estate
or testamentary trust acquires its interest in a REIT as a consequence of an
individual's death, dividends paid to such estate or testamentary trust are also
subject to withholding at the rate of 15% for five years after the individual's
death, if such estate or testamentary trust holds an interest of less than 10%
in the REIT. As described under "Distributions in General", proposed Treasury
Regulations would, if adopted, require certain certification and other
requirements to be met if a stockholder claims reduced withholding under the
terms of the Treaty and Protocol.
Under the Treaty and Protocol, a Canadian resident stockholder of the
Corporation is not subject to U.S. tax on dividends from the Corporation if such
stockholder is a trust, corporation, organization or other arrangement that is
generally exempt from income taxation in a taxable year in Canada and is
operated exclusively to administer or provide pension, retirement or employee
benefits ("Exempt Benefits Plan"). The U.S. Treasury Department Technical
Explanation of the Protocol indicates that Canadian registered retirement
savings plans ("RRSPs") and Canadian registered retirement income funds
("RRIFs") are eligible for this exemption from U.S. tax on dividends. Moreover,
the Internal Revenue Service's position, as stated in Notice 96-31, is that
RRSPs and RRIFs qualify for the Treaty benefits relating to dividends.
Notwithstanding the preceding paragraph, income of an Exempt Benefits Plan
may be subject to tax in the U.S. if such income derives from: (1) carrying on a
trade or business; or (2) a "related person" (other than an Exempt Benefits Plan
or other person that is generally exempt from income taxation in Canada).
Dividends from a REIT generally should not be income from carrying on a trade or
business. However, if the Corporation would not have qualified as a REIT but for
the fact that stock held by certain trusts is treated as being held directly by
the beneficiaries of the trusts, then in some circumstances dividends from a
REIT would be considered income from carrying on a trade or business. "Related
person" is not defined by the Treaty and Protocol for present purposes. In
certain contexts, U.S. tax law defines "related persons" to include
organizations, trades, or businesses (whether or not incorporated, whether or
not organized in the U.S., and whether or not affiliated) owned or controlled
directly or indirectly by the same interests. In addition, an Exempt Benefits
Plan may be denied benefits under the Treaty and Protocol, and therefore may be
subject to U.S. tax on distributions from the Corporation, unless such Exempt
Benefits Plan is established for the purpose of providing benefits primarily to
individuals who were residents of Canada within the preceding five years, or
residents or citizens of the U. S.
Dividends paid by a REIT to Canadian stockholders, other than those
stockholders described above as entitled either to withholding at the rate of
15%, or to exemption from U.S tax are generally subject to withholding at the
full U.S. rate of 30%, without any reduction under the Treaty and Protocol.
No benefits under the Treaty and Protocol are available with respect to
distributions attributable to gain from sales or exchanges by the Corporation of
United States real property interests. The benefits under the Treaty and
Protocol discussed above (including the reduction in withholding in the case of
certain individuals, estates and testamentary trusts, and the exemption from
U.S. tax in the case of certain Canadian tax-exempt stockholders) are
inapplicable to such distributions.
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SALE OF STOCK--Gain recognized by a Non-U.S. Stockholder upon the sale or
exchange of shares generally will not be subject to United States taxation
unless the shares constitute a "United States real property interest" within the
meaning of FIRPTA. The Common Stock would not constitute a "United States real
property interest" if the Corporation were a "domestically controlled REIT". A
"domestically controlled REIT" is a REIT in which at all times during a
specified test period less than 50% in value of its stock is held directly or
indirectly by Non-U.S. Stockholders. It is anticipated that the Corporation will
not be a domestically controlled REIT.
Even if, as expected, the Corporation is not a "domestically-controlled
REIT", the sale or exchange by a Non-U.S. Stockholder of Common Stock would not
be subject to United States taxation under FIRPTA as a sale of a "United States
real property interest" provided that (i) the shares are "regularly traded" on
an "established securities market" (both as defined by applicable Treasury
Regulations) and (ii) the selling Non-U.S. Stockholder held 5% or less (applying
certain constructive ownership and attribution rules of the Code) of the
Corporation's outstanding stock at all times during the five year period ending
on the date of disposition.
Under applicable temporary Treasury Regulations, a class of interests that
is traded on an established securities market located in the United States is
considered to be regularly traded for any calendar quarter during which it is
regularly quoted by brokers or dealers making a market in such interests. A
broker or dealer makes a market in a class of interests only if the broker or
dealer holds himself out to buy or sell interests in such class at the quoted
price. Assuming that the stock traded on the applicable stock exchange is
regularly quoted by brokers or dealers making a market in such interests, shares
of the Corporation will be regularly traded. An "established securities market"
is defined by applicable Treasury Regulations to include either a national
securities exchange which is registered under section 6 of the Securities
Exchange Act of 1934 (15 U.S.C. 78f) or an "over-the-counter market". The
Closing of this Offering is conditional upon the Corporation listing the Common
Stock for trading on a stock exchange which has been registered under Section 6
of the Securities Exchange Act of 1934 or an over-the-counter market. Thus, if
the Common Stock of the Corporation are traded on such exchange, they will be
traded on an established securities market. An over-the-counter market is
defined by applicable Treasury Regulations as any market by the existence of an
interdealer quotation system. An interdealer quotation system is any system of
general circulation to brokers and dealers which regularly disseminates
quotations of stocks and securities by identified brokers or dealers, other than
by quotation sheets which are prepared and distributed by a broker or dealer in
the regular course of business and which contain only quotations of such broker
or dealer.
If the Common Stock of the Corporation is regularly traded on an established
securities market, as discussed above, then gain of a Non-U.S. Stockholder on
the sale or exchange of such shares will be subject to taxation under FIRPTA
only if the Non-U.S. Stockholder held more than 5% of the total fair market
value of that class of shares at some time during the five-year period ending
either on the date of disposition or other applicable determination date. In
determining whether a Non-U.S. Stockholder holds more than 5% of the total fair
market value of a class of shares, certain constructive ownership rules apply.
If gain on the sale or exchange of shares were subject to taxation under
FIRPTA, the Non-U.S. Stockholder would be subject to regular United States
income tax with respect to such gain in the same manner as a U.S. Stockholder
(subject to any applicable alternative minimum tax, a special alternative
minimum tax in the case of nonresident alien individuals and the possible
application of the 30% branch profits tax in the case of non-U.S. corporations),
and the purchaser of the shares could be required to withhold and remit to the
IRS 10% of the purchase price.
Notwithstanding the foregoing, gain from the sale or exchange of shares not
otherwise subject to FIRPTA would be taxable to a Non-U.S. Stockholder in two
cases: (i) if the Non-U.S. Stockholder's investment in the stock of the
Corporation is effectively connected with a U.S. trade or business conducted by
such Non-U.S. Stockholder, the Non-U.S. Stockholder will be subject to the same
treatment as a U.S.
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Stockholder with respect to such gain, or (ii) if the Non-U.S. Stockholder is a
nonresident alien individual who is present in the United States for 183 days or
more during the taxable year and has a "tax home" in the United States. In such
case, the nonresident alien individual would be subject to a 30% United States
tax on the amount of such individual's gain.
ESTATE TAX--Shares owned or treated as owned by an individual who is a
Non-U.S. Stockholder at the time of death will be includible in the individual's
gross estate for U.S. Federal estate tax purposes unless an applicable estate
tax treaty provides otherwise.
TAXATION OF U.S. STOCKHOLDERS
For any taxable year for which the Corporation qualifies for taxation as a
REIT, amounts distributed to U.S. Stockholders will generally be taxed as
follows. Distributions to U.S. Stockholders, other than capital gain dividends
discussed below, will be taxable as ordinary income to such holders up to the
amount of the Corporation's current or accumulated earnings and profits. Such
distributions are not eligible for the dividends-received deduction for
corporations. To the extent that the Corporation makes distributions in excess
of its current or accumulated earnings and profits, such distributions will
first be treated as a tax-free return of capital, reducing the tax basis in the
U.S. Stockholders' shares, and distributions in excess of the U.S. Stockholders'
tax basis in their respective shares are taxable as gain realized from the sale
of such shares. Dividends declared by the Corporation in October, November, or
December of any year payable to a stockholder of record on a specified date in
any such month will be treated as both paid by the Corporation and received by
the stockholder on December 31 of such year, provided that the dividend is
actually paid by the Corporation during January of the following calendar year.
For purposes of the alternative minimum tax, the Corporation's U.S. Stockholders
must take into account their share of the Corporation's alternative minimum tax
preference items. Stockholders may not include on their own income tax returns
any tax losses of the Corporation.
The Corporation will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the Corporation up to the greater of its
current or accumulated earnings and profits. As a result, U.S. Stockholders may
be required to treat certain distributions that would otherwise result in a tax-
free return of capital as taxable dividends. Moreover, any "deficiency dividend"
will be treated as a "dividend" (an ordinary dividend or a capital gain
dividend, as the case may be), regardless of the Corporation's earnings and
profits.
Distributions to U.S. Stockholders that are properly designated by the
Corporation as capital gain dividends will be treated as long-term capital gain
(to the extent they do not exceed the Corporation's actual net capital gain for
the taxable year) without regard to the period for which the stockholder has
held his stock. Corporate stockholders, however, may be required to treat a
portion of certain capital gain dividends as ordinary income to reflect certain
Corporation level depreciation recapture. As in the case of ordinary dividends,
capital gain dividends are not eligible for the dividends-received deduction for
corporations.
Distributions from the Corporation and gain from the disposition of the
shares will not ordinarily be treated as passive activity income; however,
distributions from the Corporation (to the extent they do not constitute a
return of capital) and gain from the disposition of shares generally will be
treated as investment income for purposes of the investment interest limitation.
A U.S. Stockholder will recognize gain or loss on the sale or exchange of
shares to the extent of the difference between the amount realized on such sale
or exchange and the holder's tax basis in such shares. Such gain or loss
generally will constitute long-term capital gain or loss if the holder has held
such shares for more than one year. Losses incurred on the sale or exchange of
shares held for six months or less (after applying certain holding period
rules), however, will generally be deemed long-term capital loss to the extent
of any long-term capital gain dividends received by the U.S. Stockholder with
respect to such shares.
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BACKUP WITHHOLDING TAX AND INFORMATION REPORTING--NON-U.S.
STOCKHOLDERS. Backup withholding tax (which generally is a withholding tax
imposed at the rate of 31% on certain payments to persons that fail to furnish
certain information under the United States information reporting requirements)
and information reporting will generally not apply to distributions paid to
Non-U.S. Stockholders outside the United States. As a general matter, backup
withholding and information reporting will not apply to a payment of the
proceeds of a sale of stock by or through a non-U.S. office of a non-U.S.
broker. Information reporting (but not backup withholding) will apply, however,
to a payment of the proceeds of a sale of stock by a non-U.S. office of a broker
that (a) is a United States person, (b) derives 50% or more of its gross income
for certain periods from the conduct of a trade or business in the United States
or (c) is a "controlled foreign corporation" (generally, a non-U.S. corporation
controlled by United States stockholders) for United States tax purposes, unless
the broker has documentary evidence in its records that the holder is a Non-U.S.
Stockholder and certain other conditions are met, or the stockholder otherwise
establishes an exemption. Payment to or through a United States office of a
broker of the proceeds of sale of shares is subject to both backup withholding
and information reporting unless the stockholder certifies under penalties of
perjury that the stockholder is a Non-U.S. Stockholder, or otherwise establishes
an exemption. A Non-U.S. Stockholder may obtain a refund of any amounts withheld
under the backup withholding rules by filing the appropriate claim for refund
with the IRS.
U.S. STOCKHOLDERS. Under certain circumstances, a U.S. Stockholder may be
subject to backup withholding at a rate of 31% on payments made with respect to,
or cash proceeds of a sale or exchange of the Corporation's stock. Backup
withholding will apply only if the holder (i) fails to furnish the person
required to withhold with its Taxpayer Identification Number ("TIN") which, for
an individual, would be his or her Social Security Number, (ii) furnishes an
incorrect TIN, (iii) is notified by the IRS that it has failed properly to
report payments of interest or dividends, or (iv) under certain circumstances,
fails to certify, under penalty of perjury, that it has furnished a correct TIN
and has not been notified by the IRS that the holder is subject to backup
withholding for failure to report interest or dividend payments. Backup
withholding will not apply with respect to payments made to certain exempt
recipients, such as corporations and tax-exempt organizations. A U.S.
Stockholder should consult with a tax advisor regarding qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption. Backup withholding is not an additional tax. Rather, the amount of
any backup withholding with respect to a payment to a U.S. Stockholder will be
allowed as a credit against such U.S. Stockholder's United States federal income
tax liability and may entitle such U.S. Stockholder to a refund, provided that
the required information is furnished to the IRS.
In proposed Treasury Regulations published April 22, 1996, the U.S. Treasury
proposed certain changes to the backup withholding and information reporting
rules. These changes, if they become final in their present form, generally
would be effective for payments made after December 31, 1997.
OTHER TAX CONSEQUENCES
Prospective stockholders should consult their own advisors regarding the
effect of other tax laws on an investment in the Corporation. It is uncertain
whether the Corporation and its stockholders will be subject to state or local
income taxes in jurisdictions where the Corporation transacts business or where
the stockholder resides. A state or locality may generally conform to the
Federal income tax treatment of a REIT but not be bound by all Code provisions
relevant to REITs. Therefore, it is possible for a state or locality to subject
the REIT or its stockholders to income taxes. However, there may be
constitutional and statutory limitations on the power of a state or locality to
do so. It is the intention of the Corporation not to conduct business in any
state in which the income tax treatment of a REIT does not conform to the
Federal income tax treatment of a REIT. In addition, we are not aware of any
withholding tax on REIT distributions to non-U.S. residents that is imposed by
any of the jurisdictions in which the Corporation intends to conduct business.
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CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Smith Lyons, Toronto, the following summary presents
fairly the principal Canadian federal income tax considerations generally
applicable to a person (a "Canadian Holder") who purchases Common Stock pursuant
to this Offering and who, for purposes of the Income Tax Act (Canada) (the
"Canadian Tax Act"), is resident in Canada, holds Common Stock as capital
property, deals at arm's length with the Corporation and who at all times does
not, together with related persons, directly or indirectly hold 10% or more of
the total outstanding shares of any class of the Corporation. Generally, Common
Stock will be considered capital property to a Canadian Holder provided that
such holder does not hold the Common Stock in the course of carrying on a
business and does not acquire the Common Stock in a transaction considered to be
an adventure in nature of trade. Under recently enacted amendments to the
Canadian Tax Act, a financial institution as defined (including a bank, trust
Corporation, credit union, insurance corporation, a corporation the principal
business of which is the lending of money, a partnership or trust more than 50%
of the interests of which are held by such a corporation or a corporation
controlled by such a corporation) is generally precluded from treating most
shares held by it as capital property for the purposes of the Canadian Tax Act
and will be required to recognize annually the change in value of such
properties. This summary does not deal with income tax consideration to a
Canadian Holder that is a partnership or trust.
This summary is based on the current provisions in the Canadian Tax Act, the
regulations thereunder, specific proposals to amend the Canadian Tax Act and the
regulations which have been publicly announced by the Minister of Finance prior
to the date hereof, and the current administrative practices of Revenue Canada
Customs, Excise and Taxation ("Revenue Canada") as published by Revenue Canada.
This summary does not take into account or anticipate any other changes in the
law, whether by legislative, governmental or judicial action, nor does it take
into account any provincial, territorial or foreign tax considerations.
THIS SUMMARY DOES NOT CONSTITUTE, AND SHOULD NOT BE CONSTRUED TO CONSTITUTE,
LEGAL OR TAX ADVICE TO ANY CANADIAN HOLDER. PROSPECTIVE PURCHASERS OF COMMON
STOCK ARE, THEREFORE, ADVISED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THEIR PARTICULAR CIRCUMSTANCES.
TAXATION OF DIVIDENDS
A Canadian Holder who is an individual will be required to include in income
the Canadian dollar equivalent of any dividends paid to the holder of the Common
Stock. Such dividends will not be eligible for the gross-up and dividend tax
credit treatment generally accorded dividends received from taxable Canadian
corporations. A Canadian Holder which is a corporation will be required to
include in income the Canadian dollar equivalent of any dividends paid to it on
the Shares and will generally not be entitled to any deduction in respect
thereof in computing taxable income. A foreign tax credit will be available to a
Canadian Holder for U.S. income taxes paid by, or withheld on behalf of, the
holder on dividends received by the holder to the extent permitted under the
Canadian Tax Act. In the case of a Canadian Holder who is an individual, the
amount of the credit in respect of a dividend received on Common Stock may not
exceed 15% of the dividend. The balance of any U.S. income taxes paid by a
holder who is an individual on such a dividend may be deducted by the holder in
computing his or her income for Canadian income tax purposes.
DISPOSITIONS
A Canadian Holder who disposes of Common Stock or is deemed under the
Canadian Tax Act to have disposed of Common Stock will realize a capital gain
(or capital loss) to the extent that the proceeds of disposition of the Common
Stock, net of any costs of disposition, exceed (or are exceeded by) the adjusted
cost base thereof to the Canadian Holder immediately before the disposition.
Upon an acquisition of Common Stock, the adjusted cost base to a Canadian Holder
of his or her Common Stock will generally be
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determined by averaging the Canadian dollar cost of Common Stock acquired by the
Canadian Holder with the adjusted cost base of any Common Stock held by the
holder at that time.
The portion of capital gains (or capital losses) which is included in
taxable capital gains (or allowable capital losses) is three-quarters. Certain
corporations may be liable to pay an additional refundable tax of 6 2/3% on
their "aggregate investment income" for a year, which will include taxable
capital gains.
A foreign tax credit will be available to a Canadian Holder for U.S. income
taxes paid by the holder on capital gains realized by the holder to the extent
permitted under the Canadian Tax Act.
QUALIFICATION FOR INVESTMENT
Once listed on the American Stock Exchange, the Common Stock will be
qualified investments for Registered Retirement Savings Plans, Registered
Retirement Income Funds and Deferred Profit Sharing Plans. However, Common Stock
will be considered to be foreign property for such plans and for other taxpayers
subject to the foreign property limitations in Part XI of the Canadian Tax Act.
The closing of this Offering is conditional upon the Corporation listing the
Common Stock for trading on the American Stock Exchange.
DISTRIBUTION POLICY
Subsequent to this Offering, the Corporation intends to pay regular
quarterly dividends to its stockholders and more frequently if the Board of
Directors of the Corporation so determines. To qualify as a REIT, the
Corporation generally must distribute at least 95% of its taxable income each
year, even if such amount is in excess of cash flow. Unless the Board of
Directors otherwise decides, the Corporation intends to distribute a minimum of
100% of its taxable income. The Corporation currently estimates an initial
annual dividend at $.60 per share based upon an estimate of the annualized cash
flow from operations that will be available for dividends under current
conditions. The Corporation believes that its estimate of cash flow that will be
available for dividends constitutes a reasonable basis for setting the initial
dividend and the Corporation expects to maintain its initial dividend rate for
1997 unless actual results of operations, economic conditions or other factors
differ from the assumptions made, in which case the dividend may be increased or
decreased by the Board of Directors in its discretion. Based on the initial
public offering price set forth on the cover page of this Prospectus, the
initial distribution yield will be 6% per annum. Future distributions of
dividends will be at the discretion of the Board of Directors and will depend on
the actual cash flow of the Corporation, its financial condition, capital
requirements, the annual distribution requirements under the REIT provisions of
the Code (see "U.S. Federal Income Tax Considerations") and such other factors
as the Board of Directors deems relevant.
The Corporation established its initial distribution rate based on an
estimate of cash flow for the twelve months following the consummation of this
Offering which the Corporation anticipates to be available for distribution,
taking into account rents under existing leases, estimated operating expenses,
capital improvements, interest expense and other factors. The Corporation plans
to make principal payments on mortgage financing (expected to be approximately
$97,300 for the year ended December 31, 1997) out of working capital and
accordingly the principal payments have not been deducted in calculating cash
available for distribution. The Corporation currently expects to distribute
approximately 98.4% of estimated cash available for distribution for that
period. Based on the initial Properties acquired approximately 62% of the
initial distribution will be return on investors' capital and approximately 38%
will be return of investors' capital. The Corporation, however, plans to acquire
additional properties in the future. One or more of these properties may be
financed with debt. The next acquisition will be financed by debt and the
additional anticipated amortization related to these acquisitions will reduce
the taxable portion of future distributions thereby reducing the percentage
return on investors' capital and increasing the percentage return of investors'
capital. There can be no assurance that future acquisitions will be available
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or that financing for such acquisitions will be available. See "Risk
Factors--Risks of Acquisition Activities" and "Policies with Respect to Certain
Activities."
The Corporation believes that its estimate of cash available for
distribution represents a reasonable basis for setting its initial distribution.
The actual return that the Corporation will realize will be affected by a number
of factors, including without limitation the revenue received from rental
properties, the operating expenses of the Corporation, the interest incurred on
borrowings, capital expenditures and additional acquisitions of properties. The
Corporation plans to acquire additional properties in the future. If the
Corporation acquires new properties the actual cash available to the Corporation
will differ (possibly materially so) from the estimated cash available for
distribution set forth in the following table. No assurances can be given that
the Corporation's following estimate of cash available for distribution will
prove accurate.
The following table illustrates the adjustments to the Company's pro forma
cash available for distribution for the 12 months ended September 30, 1996 in
estimating the cash available for distribution for the 12 month period ending
December 31, 1997.
<TABLE>
<CAPTION>
Pro forma net income for the nine months ended September 30, 1996....... $ 733,054
<S> <C>
Pro forma net income for the three months ended December 31, 1995....... 228,941
---------
Pro forma net income for the twelve months ended September 30, 1996..... 961,995
Amortization of real estate assets...................................... 647,448
---------
Pro forma funds from operations (1)..................................... 1,609,443
Adjustments (2)
Straight line rents (3)............................................... (36,600)
Amortization of deferred financing costs.............................. 9,586
Rents from new leases (4)............................................. 299,531
Increases in base rents (5)........................................... 9,165
Reduction for expiring leases (6)..................................... (220,308)
---------
Estimated pro forma cash flow from operating activities for the twelve
month period following this offering (7)............................... 1,670,817
Estimated capital expenditures (8)...................................... 0
Estimated pro forma cash available for distribution..................... $1,670,817
---------
---------
Estimated pro forma cash available for distribution per share........... $ 0.61
---------
---------
Estimated initial annual distribution (9)............................... $1,644,060
---------
---------
Estimated cash available for distribution payout ratio (10)............. 98.40%
---------
---------
</TABLE>
- ------------------------
(1) Funds from operations as defined by the NAREIT represents net income (loss)
(computed in accordance with GAAP), excluding gains (or losses) from debt
restructuring and sales of property, plus amortization of real estate
assets. Amortization of deferred financing costs and amortization of
non-real estate assets are not added back to net income to arrive at funds
from operations. Funds from operations does not represent cash flow from
operations as defined by GAAP, is not necessarily indicative of cash
available to fund cash needs and should not be considered as an alternative
to net income as an indication of the Company's performance or to cash flow
as a measure of liquidity or the ability to pay dividends.
(2) The Corporation's adjustments to pro forma Funds From Operations do not
include any adjustments in operating expenses since the Corporation expects
that substantially all increases in operating
83
<PAGE>
expenses, if any, will be reimbursed by tenants in the form of tenant
recoveries. Adjustments increasing rental revenue for new and/or existing
leases are made only if such leases are executed and the tenant is in
possession of the space as of the date hereof.
(3) Represents the effect of adjusting straight-line rent included in pro forma
net income to reflect rents received under lease agreements in effect during
the 12 months ended September 30, 1996.
(4) Reflects additional contractual revenues during the 12 months period ending
December 31, 1997 from leases commencing subsequent to September 30, 1995.
(5) Represents net increases in contractual rent during the 12 month period
ending December 31, 1997 for existing leases commencing prior to September
30, 1995.
(6) Represents the elimination of rental revenue from leases which expired
between October 1, 1995 and September 30, 1996, reflected in rental revenue
for the 12 months ended September 30, 1996.
(7) The Corporation's estimated pro forma cash flows from operating activities
determined in accordance with GAAP is substantially equivalent to pro forma
funds from operations, adjusted for the items set forth in the table and
excluding certain adjustments for cash provided by (used in) operating
activities due to changes in operating assets and liabilities.
(8) The Corporation does not expect to have any capital expenditures during the
year ended December 31, 1997. The Corporation has significant cash reserves
to support any leasing commissions or tenant improvements which may become
payable if any vacant space is leased.
(9) Based on a distribution of $.60 per share of Common Stock and a total of
2,740,100 shares of Common Stock which will be outstanding after the
consummation of this offering.
(10) Calculated as the estimated initial annual distribution dividend by the
estimated pro forma cash flow available for distribution for the 12 month
period ending December 31, 1997. The payout ratio of estimated pro forma
Funds from Operations for the 12 months period ending December 31, 1997
equals 98.4%. Funds from Operations does not represent cash generated from
operating activities in accordance with GAAP and should not be considered an
alternative to net income as an indication of the Company's performance or
to cash flow as a measure of liquidity or the ability to pay dividends.
(11) Based on the estimated taxable income for the twelve months following the
consummation of this offering the Corporation will be required to distribute
a minimum of $963,093 to maintain its REIT status.
PLAN OF DISTRIBUTION
Under an agreement dated November 26, 1996 (the "Agency Agreement") among
Porthmeor Securities Inc., Octagon Capital Canada Corporation and First Marathon
Securities Limited (collectively, the "Agents") and the Corporation, the
Corporation has agreed to issue and sell, and the Agents have agreed to act as
the Corporation's agents, on a best efforts basis, in connection with this
Offering, subject to compliance with all necessary legal requirements and to the
terms and conditions contained in the Agency Agreement, 2,740,000 shares of
Common Stock at a price of $10.00 per share of Common Stock for an aggregate
price of $27,400,000. The Agency Agreement provides that the Corporation will
pay to the Agents, for the services provided by the Agents, a fee of 7.5% of the
proceeds of this Offering as well as all of the Agents' out of pocket expenses
and fees and disbursements by counsel to the Agents, to a maximum of $175,000
(CDN)(or approximately $130,470, based upon the noon buying rate of exchange in
New York City for cable transfers as certified for customs purposes by the
Federal Reserve Bank of New York, on November 25, 1996).
84
<PAGE>
The Common Stock is being offered principally in the Provinces of Ontario,
British Columbia and Alberta. Any sales in the United States will be made only
through the U.S. broker-dealer affiliates of one of the Agents or through
another registered broker-dealer.
The obligations of the Agents under the Agency Agreement may be terminated
upon the occurrence of certain stated events. In addition, pursuant to the
Agency Agreement, the Company has agreed to indemnify the Agents against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Agents may be required to make in respect thereof.
Pursuant to a rule of the Ontario Securities Commission, the Agents may not,
throughout the period of distribution under this Prospectus, bid for or purchase
any Common Stock. The foregoing restriction is subject to certain exceptions, as
long as the bid or purchase is not engaged in for the purpose of creating actual
or apparent active trading in or raising the price of such securities. These
exceptions include a bid or purchase permitted under the by-laws and rules of
certain stock exchanges relating to market stabilization and passive market
making activities and a bid or purchase made for and on behalf of a customer
where the order was not solicited during the period of distribution. Pursuant to
the first mentioned exception, in connection with this offering the Agents may
over allot or effect transactions which stabilize or maintain the market price
of the Common Stock at levels other than those which otherwise might prevail on
the open market. Such transactions, if commenced, may be discontinued at any
time.
EXPERTS
The statements of revenue and certain expenses for the year ended December
31, 1995 for Chico Crossroads Center, Ltd. and Miami Gardens Associates and the
balance sheet of Basic U.S. REIT, Inc. as of September 30, 1996 included in this
Prospectus have been so included in reliance on the reports of Price Waterhouse
LLP, independent accountants, given on the authority of said firm, as experts in
auditing and accounting.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Corporation by Schnader, Harrison, Segal & Lewis, Philadelphia,
Pennsylvania. In addition, the description of U.S. federal income tax
considerations in the section of the Prospectus entitled "U.S. Federal Income
Tax Considerations" is based upon the opinion of Schnader, Harrison, Segal &
Lewis, Philadelphia, Pennsylvania. The description of Canadian Federal income
tax considerations in the section of the Prospectus entitled "Canadian Federal
Income Tax Considerations" is based upon the opinion of Smith Lyons, Barristers
& Solicitors, Toronto, Ontario, Canada. The Common Stock is being offered
subject to approval of certain legal matters on behalf of the Corporation by
Schnader, Harrison, Segal & Lewis, Philadelphia, Pennsylvania, and Chaiton &
Chaiton, Toronto, Ontario, Canada, and on behalf of the Agents by Fogler,
Rubinoff, Barristers & Solicitors, Toronto, Ontario, Canada, and Skadden, Arps,
Slate, Meagher and Flom (International), New York, New York and Toronto,
Ontario, Canada.
ADDITIONAL INFORMATION
The Corporation has filed with the Securities and Exchange Commission (the
"SEC" or the "Commission") a Registration Statement on Form S-11 under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, with respect to the Common Stock offered by
this Prospectus. This Prospectus, which is part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement
and the exhibits and financial statement schedules thereto. For further
information with respect to the Corporation and the Common Stock, reference is
made to the Registration Statement and such exhibits and financial statement
schedules, copies of which may be examined without charge at, or obtained upon
payment of prescribed fees from, the Public Reference Section of the Commission
at Room 1024, Judiciary Plaza, 450 Fifth
85
<PAGE>
Street, N.W., Washington, D.C. 20549 and which are also available for inspection
and copying at the Regional Offices of the Commission located at 13th Floor, 7
World Trade Center, New York, New York 10048 and at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois, 60661-2511. The Commission also
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants, such as the Corporation,
that file electronically with the Commission. The address of the Commission's
site is http://www.sec.gov. Statements contained in this Prospectus concerning
the provisions or contents of any contract or other document referred to herein
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such reference
and the exhibits and schedules hereto. For further information regarding the
Corporation and the Common Stock being offered hereby, reference is hereby made
to the Registration Statement and such exhibits and schedules.
As of the date of this Prospectus (which is also the date of the
effectiveness of the Corporation's Registration Statement on Form S-11 filed in
connection with this Prospectus), the Corporation will become subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, and
in accordance therewith, will file reports, proxy statements and other
information with the SEC. The Corporation intends to furnish its stockholders
with annual reports containing audited financial statements and such other
periodic reports as the Corporation deems appropriate or as may be required by
law.
86
<PAGE>
GLOSSARY
The following terms appear throughout this Prospectus. Care should be taken
to read each term in the context of the particular provision of the Prospectus
in which such term is used. The following represents a definition only of such
terms:
a) "ADVISOR" means Basic Advisors, Inc., a Delaware corporation which will
serve as the advisor to the Corporation pursuant to the Advisory
Agreement.
b) "ADVISORY AGREEMENT" means the agreement to be entered into on or prior
to the Date of Closing among the Corporation and the Advisor pursuant to
which the Corporation shall appoint the Advisor as the investment advisor
of the Corporation.
c) "AGENCY AGREEMENT" means the agency agreement between the Corporation
and the Agents referred to under the heading "PLAN OF DISTRIBUTION."
d) "AGENTS" means Porthmeor Securities Inc., Octagon Capital Canada
Corporation and First Marathon Securities Limited.
e) "AMENDED AND RESTATED ARTICLES OF INCORPORATION" means the Articles of
Amendment and Restatement of the Corporation, the instrument by which the
Corporation was incorporated under Maryland law, as amended.
f) "ANCHOR TENANT" means a retail tenant who by its size, regional or
national reputation or product lines attracts other merchants to a
shopping center or draws consumers to a shopping center or who can create
the primary image for a shopping center or whose presence is an essential
factor in securing institutional financing.
g) "AUTHORIZED INVESTMENTS" mean certificates of deposit with terms of less
than one year or U.S. government securities with terms of less than one
year (such as treasury obligations).
h) "BOARD OF DIRECTORS" means the board of directors of the Corporation.
i) "CHICO ACQUISITION AGREEMENT" means the Purchase and Sale Agreement and
Escrow Instructions between Basic Acquisitions, Inc. and Chico Crossroads
Center, Ltd. dated May 8, 1996 for the acquisition of the shopping center
known as "CHICO CROSSROADS CENTER" in Chico, California, as amended.
j) "CODE" means the U.S. Internal Revenue Code of 1986, as amended.
k) "CLOSING", "DATE OF CLOSING" or "CLOSING DATE" means the date of the
closing of this Offering.
l) "COMMUNITY SHOPPING CENTER" means a shopping center usually between
125,000 and 500,000 square feet, which typically provides for the sale of
convenience goods, apparel and home furnishings and may include banking,
professional services, recreational facilities and which typically has a
junior department store, variety store or discount department store as
its principal or anchor tenant. Such shopping center may also include
multiple anchor tenants such as superstores, category killers and
off-price stores.
m) "GARDENS SQUARE ACQUISITION AGREEMENT" means the Purchase and Sale
Agreement between Basic Acquisitions, Inc. and Miami Gardens Associates
dated July 24, 1996 for the acquisition of the shopping center known as
"GARDENS SQUARE" in Dade County, Florida, as amended.
n) "IRS" means the U.S. Internal Revenue Service.
o) "NEIGHBORHOOD SHOPPING CENTER" means a shopping center usually between
30,000 and 125,000 square feet, which typically provides for the sale of
daily living needs such as food, drugs, hardware and personal services,
and which typically has a supermarket or superstore as its principal or
anchor tenant.
87
<PAGE>
p) "OFFERING" means the sale of 2,740,000 shares of Common Stock pursuant
to the terms of this Prospectus.
q) "PROPERTIES" means Chico Crossroads Center and Gardens Square, the
initial shopping centers to be acquired by the Corporation.
r) "REIT" means a real estate investment trust as defined in the Code.
s) "SECURITIES ACT" means the U.S. Securities Act of 1933, as amended.
t) "SECURITIES EXCHANGE ACT" means the U.S. Securities Exchange Act of
1934, as amended.
u) "U.S." means the United States of America.
88
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CHICO CROSSROADS CENTER, LTD. STATEMENTS OF REVENUE AND CERTAIN EXPENSES:
<S> <C>
Report of Independent Accountants.................................................. F2
Statements of Revenue and Certain Expenses for the year ended December 31, 1995 and
the nine months ended September 30, 1995 and September 30, 1996.................. F3
Notes of Statements of Revenue and Certain Expenses for the year ended December 31,
1995............................................................................. F4
MIAMI GARDENS ASSOCIATES STATEMENTS OF REVENUE AND CERTAIN EXPENSES:
Report of Independent Accountants.................................................. F6
Statements of Revenue and Certain Expenses for the year ended December 31, 1995 and
the nine months ended September 30, 1995 and September 30, 1996.................. F7
Notes of Statements of Revenue and Certain Expenses for the year ended December 31,
1995............................................................................. F8
BASIC U.S. REIT, INC. BALANCE SHEET:
Report of Independent Accountants.................................................. F10
Balance Sheet as at September 30, 1996............................................. F11
Notes for Balance Sheet at September 30, 1996...................................... F12
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Basic U.S. REIT, Inc.
We have audited the accompanying statement of revenue and certain expenses
of Chico Crossroads Center, Ltd. for the year ended December 31, 1995. This
statement is the responsibility of the property's manager. Our responsibility is
to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by the property
manager, as well as evaluating the overall presentation of the statement. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was prepared on
the basis described in Note 1 for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission (for inclusion in the
registration statement on Form S-11 of Basic U.S. REIT, Inc.) and is not
intended to be a complete presentation of the revenue and expenses of the
property.
In our opinion, the statement of revenue and certain expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses of Chico Crossroads Center, Ltd. on the basis described in Note 1 for
the year ended December 31, 1995 in conformity with generally accepted
accounting principles.
/s/ Price Waterhouse LLP
New York, New York
September 23, 1996
F-2
<PAGE>
CHICO CROSSROADS CENTER, LTD.
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-------------------------------------- FOR THE YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 DECEMBER 31, 1995
------------------ ------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C>
Revenue
Rental (Note 2(a)).................................. $ 1,519,640 $ 1,510,600 $ 2,014,435
Operating expense reimbursement..................... 313,200 283,300 377,749
Other............................................... -- 4,100 5,500
------------------ ------------------ ------------------
1,832,840 1,798,000 2,397,684
------------------ ------------------ ------------------
------------------ ------------------ ------------------
Certain Expenses
Rental.............................................. 141,000 139,600 186,136
Real estate taxes................................... 207,000 186,100 248,214
------------------ ------------------ ------------------
348,000 325,700 434,350
------------------ ------------------ ------------------
Excess of revenue over certain expenses............... $ 1,484,840 $ 1,472,300 $ 1,963,334
------------------ ------------------ ------------------
------------------ ------------------ ------------------
</TABLE>
See accompanying notes to statements of revenue and certain expenses
F-3
<PAGE>
CHICO CROSSROADS CENTER, LTD.
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
1. BASIS OF PRESENTATION
These financial statements were prepared to comply with the rules and
regulations of the Securities and Exchange Commission for inclusion in the
registration statement on Form S-11.
The accompanying statements are not representative of the actual operations
for the periods presented as certain expenses that may not be comparable to the
expenses expected to be incurred by Basic U.S. REIT, Inc. in the future
operations of Chico Crossroads Center have been excluded. Excluded expenses
consist of interest, amortization and certain corporate costs not directly
comparable to the future operations. No provision has been made for income
taxes, the liability for which is the responsibility of the owner.
The statements of revenue and certain expenses have been prepared in U.S.
dollars in accordance with U.S. generally accepted accounting principles, which
are, in this circumstance, in all material respects, consistent with Canadian
generally accepted accounting principles.
The statements of revenue and certain expenses for the nine month periods
ended September 30, 1996 and 1995 are unaudited. In the opinion of management,
such financial statements reflect all adjustments necessary for a fair
presentation of the results of the respective interim periods. All such
adjustments are of a normal, recurring nature.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases. Lease termination revenue is recorded in the period that a
tenant commits to terminate its rights and benefits under the terms of the lease
and vacates the premises. Percentage rents were $133,856 in the year ended
December 31, 1995 ($75,000 and $100,000 for the nine months ended September 30,
1996 and 1995, respectively).
(B) USE OF ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of revenue and expenses during the
reporting periods. Actual results could differ from those estimates.
3. RENTAL PROPERTIES
The future minimum lease payments to be received under existing operating
leases are as follows:
<TABLE>
<CAPTION>
1996............. $1,905,700
<S> <C>
1997............. $1,969,400
1998............. $1,913,800
1999............. $1,889,800
2000............. $1,887,900
thereafter....... $18,063,400
</TABLE>
F-4
<PAGE>
CHICO CROSSROADS CENTER, LTD.
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995
3. RENTAL PROPERTIES (CONTINUED)
The above future minimum lease payments do not include payments for
operating expense reimbursement, percentage rent, or CPI increases.
4. SIGNIFICANT TENANTS
Three tenants each accounted for 10% or more of rental revenue as follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-------------------------------------- YEAR ENDED
SEPTEMBER 30, 1995 DECEMBER 31, 1995
SEPTEMBER 30, 1996 ------------------ -----------------
------------------
(UNAUDITED)
<S> <C> <C> <C>
Waban Corp. (operating as Home Base)................... $ 402,900 $ 402,900 $ 537,210
Netco Foods Inc. (Food 4 Less)......................... 344,700 361,800 482,360
Circuit City........................................... 172,600 172,600 230,130
-------- -------- -----------------
$ 920,200 $ 937,300 $ 1,249,700
-------- -------- -----------------
-------- -------- -----------------
</TABLE>
F-5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Basic U.S. REIT, Inc.
We have audited the accompanying statement of revenue and certain expenses
of Miami Gardens Associates for the year ended December 31, 1995. This statement
is the responsibility of the property's manager. Our responsibility is to
express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement. An audit also includes assessing
the accounting principles used and significant estimates made by the property
manager, as well as evaluating the overall presentation of the statement. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was prepared on
the basis described in Note 1 for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission (for inclusion in the
registration statement on Form S-11 of Basic U.S. REIT, Inc.) and is not
intended to be a complete presentation of the revenue and expenses of the
property.
In our opinion, the statement of revenue and certain expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses of Miami Gardens Associates on the basis described in Note 1 for the
year ended December 31, 1995 in conformity with generally accepted accounting
principles.
/s/ Price Waterhouse LLP
New York, New York
September 23, 1996
F-6
<PAGE>
MIAMI GARDENS ASSOCIATES
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEAR
-------------------------------------- ENDED DECEMBER
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 31, 1995
------------------ ------------------ -----------------
(UNAUDITED)
<S> <C> <C> <C>
Revenue
Rental............................................... $ 700,570 $ 678,200 $ 904,292
Operating expense reimbursement...................... 239,100 237,560 316,745
Other................................................ 2,480 7,500 10,542
-------- -------- -----------------
942,150 923,260 1,231,579
-------- -------- -----------------
Certain Expenses
Rental............................................... 166,500 176,650 235,534
Real estate taxes.................................... 105,000 104,780 139,711
-------- -------- -----------------
271,500 281,430 375,245
-------- -------- -----------------
Excess of revenue over certain expenses................ $ 670,650 $ 641,830 $ 856,334
-------- -------- -----------------
-------- -------- -----------------
</TABLE>
See accompanying notes to statements of revenue and certain expenses.
F-7
<PAGE>
MIAMI GARDENS ASSOCIATES
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
1. BASIS OF PRESENTATION
These financial statements were prepared to comply with the rules and
regulations of the Securities and Exchange Commission for inclusion in the
registration statement on Form S-11.
The accompanying statements are not representative of the actual operations
for the periods presented as certain expenses that may not be comparable to the
expenses expected to be incurred by Basic U.S. REIT, Inc. in the future
operations of Gardens Square have been excluded. Excluded expenses consist of
interest, amortization and certain corporate costs not directly comparable to
the future operations. No provision has been made for income taxes, the
liability for which is the responsibility of the owner.
The statements of revenue and certain expenses have been prepared in U.S.
dollars in accordance with U.S. generally accepted accounting principles, which
are, in this circumstance, in all material respects, consistent with Canadian
generally accepted accounting principles.
The statements of revenue and certain expenses for the nine month periods
ended September 30, 1996 and 1995 are unaudited. In the opinion of management,
such financial statements reflect all adjustments necessary for a fair
presentation of the results of the respective interim periods. All such
adjustments are of a normal, recurring nature.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) REVENUE RECOGNITION
Rental revenue is recognized on a straight-line basis over the terms of the
related leases. Lease termination revenue is recorded in the period that a
tenant commits to terminate its rights and benefits under the terms of the
lease.
(B) USE OF ESTIMATES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of revenue and expenses during the
reporting periods. Actual results could differ from those estimates.
3. RENTAL PROPERTIES
The future minimum lease payments to be received under existing operating
leases are as follows:
<TABLE>
<S> <C>
1996............................................................ $ 918,400
1997............................................................ $ 918,100
1998............................................................ $ 853,100
1999............................................................ $ 748,300
2000............................................................ $ 702,800
thereafter...................................................... $4,424,677
</TABLE>
The above future minimum lease payments do not include payments for
operating expense reimbursement, percentage rent or CPI increases.
F-8
<PAGE>
MIAMI GARDENS ASSOCIATES
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995
4. SIGNIFICANT TENANTS
Two tenants each accounted for ten percent or more of rental income as
follows:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
-------------------------------------- YEAR ENDED
SEPTEMBER 30, 1995 DECEMBER 31, 1995
SEPTEMBER 30, 1996 ------------------ -----------------
------------------
(UNAUDITED)
<S> <C> <C> <C>
Publix Super Markets Inc............................. $ 197,400 $ 197,400 $ 263,200
Jack Eckerd Corporation.............................. 78,410 78,410 104,544
-------- -------- --------
$ 275,810 $ 275,810 $ 367,744
-------- -------- --------
-------- -------- --------
</TABLE>
5. RELATED PARTY TRANSACTION
A portion of the $50,000 in property management fees, included in rental
expense, was paid to an individual related to Miami Gardens Associates.
F-9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Basic U.S. REIT, Inc.
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of Basic U.S. REIT, Inc. at September
30, 1996 in conformity with generally accepted accounting principles. This
financial statement is the responsibility of the Company's management; our
responsibility is to express an opinion of this financial statement based on our
audit. We conducted our audit of this statement in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
New York, New York
November 22, 1996
F-10
<PAGE>
BASIC U.S. REIT, INC.
BALANCE SHEET
AS AT SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash................................................................................ $ 1,000
---------
---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Stockholder's Equity
Preferred Stock $.01 par value
Authorized 1,500,000
Issued None
Excess Stock $.01 par value
Authorized 50,000,000
Issued None
Common Stock $.01 par value
Authorized 100,000,000
Issued 100.................................................................. $ 1
Additional paid in capital........................................................ 999
---------
$ 1,000
---------
---------
Contingencies and commitments (Note 2)
</TABLE>
Approved by Board Ronald Bernbaum
----------------------------
Director
Robert Witterick
----------------------------
Director
See accompanying notes to this balance sheet.
F-11
<PAGE>
BASIC U.S. REIT, INC.
NOTES TO BALANCE SHEET
AS AT SEPTEMBER 30, 1996
1. ORGANIZATION
The Corporation was incorporated in the State of Maryland on July 30, 1996.
The Corporation has issued 100 shares of Common Stock for cash consideration of
$1,000 which as at September 30, 1996 was held by Chaiton & Chaiton in trust for
the Corporation. The Corporation intends to qualify as a Real Estate Investment
Trust under United States tax laws and expects to distribute 100% of its taxable
income annually to stockholders starting in calendar year 1997.
2. SUBSEQUENT EVENTS
The Corporation has agreed to accept the assignment of two purchase and sale
agreements conditional on the Corporation closing its initial public offering.
The Corporation plans to raise $27,400,000 through the issuance of 2,740,000
shares of Common Stock. Net proceeds to the Corporation will be used as follows:
<TABLE>
<S> <C>
Offering............................................................... $27,400,000
Agents' commission and issue costs..................................... 2,495,000
----------
Net Proceeds........................................................... $24,905,000
----------
----------
Proceeds will be used as follows:
Acquisition of Rental Properties....................................... $30,998,500
Payment of Mortgage Assumption Fee..................................... 68,000
Working Capital........................................................ 548,500
----------
Total Assets........................................................... 31,615,000
Less Debt Assumed:
Mortgage Payable....................................................... 6,710,000
----------
Use of Proceeds........................................................ $24,905,000
----------
----------
</TABLE>
Rental properties include an acquisition fee payable to Basic Advisors, Inc.
in the amount of $455,438.
The Corporation has also reserved 250,000 shares of Common Stock to be
granted under a Stock Option Plan. The number of shares granted under the plan
cannot exceed 10% of the issued and outstanding Common Stock of the Corporation
and the options will be exercisable at the fair value of the Common Stock at the
date of grant. The Corporation has issued options to directors and officers of
the Corporation to acquire an aggregate of 100,000 shares of Common Stock at a
price equal to the initial public offering price per share. These options expire
in the year 2001. The Corporation will adopt Statement of Financial Accounting
Standards No. 123 ("SFAS 123") and has not yet decided whether it will adopt
SFAS 123 through the income statement or through disclosure only.
F-12
<PAGE>
INSIDE BACK COVER OF PROSPECTUS
The inside back cover of the prospectus contains six photographical
depictions of the Chico Crossroads Center showing six views of the pedestrian
walkways and tenant storefronts.
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS OR IN SUPPLEMENTS TO THIS PROSPECTUS OR IN LITERATURE ISSUED BY THE
CORPORATION, OR THE AGENTS (WHICH SHALL NOT BE DEEMED TO BE PART OF THIS
PROSPECTUS) IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THE STATEMENTS IN
THIS PROSPECTUS OR IN ANY SUPPLEMENT ARE MADE AS OF THE DATE HEREOF OR THEREOF,
UNLESS ANOTHER TIME IS SPECIFIED, AND NEITHER THE DELIVERY OF THIS PROSPECTUS OR
ANY SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH
HEREIN SINCE THE DATE HEREOF OR THEREOF. HOWEVER, IF ANY MATERIAL CHANGES OCCUR
DURING THE PERIOD WHEN A PROSPECTUS IS REQUIRED TO BE DELIVERED, THIS PROSPECTUS
OR ANY SUPPLEMENT WILL BE AMENDED OR SUPPLEMENTED ACCORDINGLY.
--------------------------
SUMMARY TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 6
Risk Factors................................... 15
Use of Proceeds................................ 25
Capitalization................................. 26
Pro Forma Selected Financial Information....... 27
Management's Discussion and Analysis of the Pro
Forma Results of Operations and Pro Forma
Financial Condition.......................... 36
Business....................................... 39
Policies with Respect to Certain Activities.... 40
The Properties................................. 42
Management..................................... 53
Security Ownership of Certain Beneficial Owners
and Management............................... 62
Legal Proceedings.............................. 63
Description of Capital of the Corporation...... 63
Certain Provisions of Maryland Law and the
Corporation's Amended and Restated Articles
of Incorporation and Bylaws.................. 67
U.S. Federal Income Tax Considerations......... 70
Canadian Federal Income Tax Considerations..... 81
Distribution Policy............................ 82
Plan of Distribution........................... 84
Experts........................................ 85
Legal Matters.................................. 85
Additional Information......................... 85
Glossary....................................... 87
Index to Financial Statements.................. F-1
</TABLE>
--------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2,740,000 SHARES
BASIC U.S. REIT, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
November , 1996
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the issuance and distribution of the securities offered hereby.
The Corporation is responsible for the payment of all expenses in connection
with the Offering.
<TABLE>
<CAPTION>
Registration fee under the Securities Act of 1933......................... $ 9,448
<S> <C>
Exchange filing fee....................................................... 20,000
NASD filing fee........................................................... 3,240
Printing expenses......................................................... 30,000
Legal fees and disbursements.............................................. 250,000
Accounting fees........................................................... 60,000
Fees of transfer agent.................................................... 3,500
Miscellaneous............................................................. 63,812
---------
Total:.................................................................. $ 440,000
---------
---------
</TABLE>
ITEM 31. SALES TO SPECIAL PARTIES.
None
ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.
On July 30, 1996 at the time of the Registrant's initial capitalization, the
Registrant sold to Mr. Bernbaum at a cash purchase price of $10.00 per share,
100 shares of common stock. The Registrant did not pay any underwriting
discounts or commissions with respect to such sales.
Exemption from registration is claimed for the transaction described above
pursuant to Section 4(2) of the Securities Act as a transaction not involving a
public offering.
ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Amended and Restated Articles of Incorporation authorize the
Corporation, to the maximum extent permitted by Maryland law, to obligate itself
to indemnify and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (a) any present or former director or officer or
(b) any individual who, while a director of the Corporation and at the request
of the Corporation, serves or has served another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. The bylaws obligate
it, to the maximum extent permitted by Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former director of officer who is made a party to the
proceeding by reason of his service in that capacity of (b) any individual who,
while a director of the Corporation and at the request of the Corporation,
serves or has served another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise as a director, officer, partner or
trustee of such corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise and who is made a party to the proceeding by reason of
his service in that capacity. The Amended and Restated Articles of Incorporation
and bylaws also permit the Corporation to indemnify and advance expenses to any
person who served a predecessor of the Corporation in any of the capacities
described above and to any employee or agent of the Corporation or a predecessor
of the Corporation.
II-1
<PAGE>
The MGCL requires a corporation (unless its charter provides otherwise,
which the Amended and Restated Articles of Incorporation do not) to indemnify a
director or officer who has been successful, on the merits or otherwise, in the
defense of any proceeding to which he is made a party by reason of his service
in that capacity. The MGCL permits a corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (b) the director or officer actually received an
improper personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
the act or omission was unlawful. However, a Maryland corporation may not
indemnify for (a) an adverse judgment in a suit by or in the right of the
corporation or (b) any proceeding charging an improper personal benefit to the
director or officer, whether or not involving action in an official capacity, in
which the director or officer is adjudged liable on the basis that personal
benefit was improperly received. In addition, the MGCL requires the Corporation
to, as a condition to advancing expenses, to obtain (a) a written affirmation by
the director or officer of his good faith belief that he has met the stand of
conduct necessary for indemnification by the Corporation as authorized by the
bylaws and (b) a written undertaking by or on his behalf to repay the amount
paid or reimbursed by the Corporation if it shall be ultimately determined that
the standard of conduct was not met.
ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not Applicable
ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS. See Index to Financial Statements for the
financial statements which are included in the Prospectus.
(b) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- --------------- ----------------------------------------------------------------------------- ---------------------
<S> <C> <C>
1.1 Agency Agreement between the Registrant and Porthmeor Securities Inc.,
Octagon Capital Canada Corporation and First Marathon Securities Limited.
3.1 *Articles of Amendment and Restatement of the Registrant
3.2 *Bylaws of the Registrant
4.1 Share Certificate
5.1 Opinion of Schnader Harrison Segal & Lewis re: Legality of
Shares (including consent)
8.1 Opinion of Schnader Harrison Segal & Lewis re: U.S. Federal
Income Tax Matters (including consent)
8.2 Opinion of Smith, Lyons re: Canadian Federal Income Tax
Matters (including consent)
10.1 Advisory Agreement between the Registrant and Basic Advisors, Inc.
10.2 Purchase and Sale Agreement between Basic Acquisitions, Inc. and Chico
Crossroads Center, Ltd.
10.3 *First Amendment to Purchase and Sale Agreement between Basic Acquisitions,
Inc. and Chico Crossroads Center.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION SEQUENTIAL PAGE NO.
- --------------- ----------------------------------------------------------------------------- ---------------------
10.4 *Real Estate Purchase and Sale Agreement between Basic Acquisitions, Inc. and
Miami Gardens Associates.
<S> <C> <C>
10.5 *First Amendment to Real Estate Purchase and Sale Agreement between Basic
Acquisitions, Inc. and Miami Gardens Associates.
10.5.1 *Second Amendment to Real Estate Purchase and Sale Agreement between Basic
Acquisitions, Inc. and Miami Gardens Associates.
10.6 *Promissory Note by Miami Gardens Associates to Life Investors Insurance
Company of America.
10.7 *Mortgage by Miami Gardens Associates to Life Investors Insurance Company of
America.
10.8 *Lease between Centrum G.B. II Corporation and Publix Super Markets.
10.9 *Lease between Centrum G.B. II Corporation and Jack Eckerd Corporation.
10.10 Lease between Chico Crossroads Center, Ltd., and Waban, Inc.
10.11 Lease between Chico Crossroads Center, Ltd., and Netco Foods, Inc.
10.12 Lease between Chico Crossroads Center, Ltd., and Circuit City Stores, Inc.
10.13 Lease between Chico Crossroads Center, Ltd., and Barnes & Noble Superstores,
Inc.
10.14 *1996 Stock Option Plan of Registrant
10.15 Assignment Agreement
23.1 Consent of Schnader Harrison Segal & Lewis is contained in the opinions of
Counsel as Exhibits 5.1 and 8.1.
23.2 Consent of Smith Lyons is contained in the opinion of Counsel as Exhibit 8.2.
23.3 Consent of Price Waterhouse LLP, Independent Accountants
</TABLE>
- ------------------------------
* Previously filed.
ITEM 36. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as
required by the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to
Directors, officers and controlling persons of the Registrant, Registrant
has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a Director, officer or
controlling person of Registrant in the successful defense of any action,
suit or proceeding) is asserted against Registrant by such Director,
officer or controlling person, Registrant will, unless in the opinion of
its counsel the matter had been settled by controlling precedent, submit
to a court of
II-3
<PAGE>
appropriate jurisdiction the question of whether such indemnification by
it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes:
(1) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 30A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-11 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Miami, State of Florida on this 26th
day of November, 1996.
BASIC U.S. REIT, INC.
By: /s/ CARL MAYNARD
-----------------------------------------
Carl Maynard,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 1
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ CARL MAYNARD
- ------------------------------ Director, President and November 26, 1996
Carl Maynard Chief Executive Officer
/s/ RONALD L. BERNBAUM
- ------------------------------ Director, Chairman November 26, 1996
Ronald L. Bernbaum
/s/ LARRY THRALL
- ------------------------------ Director November 26, 1996
Larry Thrall
/s/ ROBERT G. WITTERICK, Q.C.
- ------------------------------ Director November 26, 1996
Robert G. Witterick, Q.C.
/s/ NILS PETERSON
- ------------------------------ Director November 26, 1996
Nils Peterson
/s/ TERRY MCCRAE Treasurer, Chief Financial
- ------------------------------ Officer and Vice November 26, 1996
Terry McCrae President-Finance
II-5
<PAGE>
AGENCY AGREEMENT
RELATING TO THE OFFERING OF
SHARES OF COMMON STOCK
BASIC U.S. REIT, INC.
November 26, 1996
<PAGE>
TABLE OF CONTENTS
1. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Nature of Transaction . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Covenants of the Agents . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Representations, Warranties and Covenants of the Company. . . . . . . . 8
5. Conditions to Purchase Obligation . . . . . . . . . . . . . . . . . . . 18
6. Additional Documents Upon Filing of Prospectus. . . . . . . . . . . . . 20
7. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8. Termination of Purchase Obligation. . . . . . . . . . . . . . . . . . . 21
9. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
10. Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12. Survival of Warranties, Representations, Covenants and Agreements . . . 25
13. General Contract Provisions . . . . . . . . . . . . . . . . . . . . . . 26
SCHEDULE "A" Details of the Offering
SCHEDULE "B" Outstanding Convertible Securities
SCHEDULE "C" Opinion of the Company's Canadian Counsel
SCHEDULE "D" Opinion of the Company's U.S. Counsel
<PAGE>
AGENCY AGREEMENT
November 26, 1996
Basic U.S. REIT, Inc.
7850 Northwest 146th Street
Suite 308
Miami, Florida
U.S.A. 33016
ATTENTION: CARL MAYNARD, CHIEF EXECUTIVE OFFICER
Dear Sirs:
Porthmeor Securities Inc., Octagon Capital Canada Corporation and
First Marathon Securities Limited (collectively, the "AGENTS") understand
that Basic U.S. REIT, Inc. (the "COMPANY") desires to issue and sell
securities of the Company having the terms described in Schedule "A" hereto
(the "OFFERED SECURITIES"). The offering of the Offered Securities by the
Company is hereinafter referred to as the "OFFERING". The Agents also
understand that Basic Advisors, Inc. (the "ADVISOR"), a Delaware corporation,
will provide day-to-day management for the Company, including acting as
investment and financial advisor to the Company with respect to real property
investments. The Agents further understand that Basic Capital Funds, an
Ontario limited partnership, and Maynard Rich/Abraham Inc., a Florida
corporation, (collectively, the "PROMOTERS"), have taken the initiative in
organizing the Company and its affairs for the purposes of the Offering.
It is understood that pursuant to a Purchase and Sale Agreement
between Basic Acquisitions, Inc., a Delaware corporation being an affiliate
of the Company, (the "AFFILIATE") and Chico Crossroads Center, Ltd. and a
Purchase and Sale Agreement between the Affiliate and Miami Gardens
Associates, dated May 8, 1996, and July 24, 1996, respectively, as amended,
the Company proposes to acquire two commercial real estate properties (the
"PROPERTIES") contemporaneously with the completion of the Offering.
The Agents hereby agree to act as the agents of the Company to use
their commercially reasonable best efforts to offer for sale and sell the
Offered Securities to Purchasers (as hereafter defined), upon and subject to
the terms and conditions contained herein, and by its acceptance the Company
agrees to the appointment of the Agents, as the Company's exclusive agents
until the Closing Date in respect of the Offering; provided that the Agents
shall be under no obligation to purchase any of the Offered Securities.
<PAGE>
- 2 -
In consideration of the Agents' services to be rendered in
connection with the Offering, including, without limitation, assisting in
preparing documentation relating to the Offered Securities, including the
Preliminary Prospectus and the Final Prospectus (in each case as hereinafter
defined), distributing the Offered Securities directly and through other
investment dealers and brokers, and performing administrative work in
connection with the Offering, the Company agrees to pay the Agency Fee (as
hereinafter defined) to the Agents.
The Company and the Agents acknowledge and agree that if a separate
fee were to have been charged to the Company for the services described
above, which constitute financial services within the meaning of the EXCISE
TAX ACT (Canada), such separate fee would represent more than 50% of the
Agency Fee, and the Company further acknowledges and agrees that the Agents
will rely on the foregoing in not charging GST on the Agency Fee. In the
event that Revenue Canada, Customs, Excise and Taxation determines that GST
is exigible on the Agency Fee, the Company agrees to pay the amount of GST
forthwith upon request of the Agents.
The Company agrees that the Agents will be permitted to appoint, at
the Agents' sole expense, other registered dealers (or other dealers duly
qualified in their respective jurisdictions) as their agents to assist in the
Offering and that the Agents shall pay a fee to such other dealers appointed
by them of six percent (6%) of the gross proceeds of the sale by such other
dealers appointed by them of the Offered Securities.
This agreement is conditional upon and subject to the additional
terms and conditions set forth below.
1. INTERPRETATION
1.1 Unless expressly provided otherwise, where used in this agreement or
any schedule hereto, the following terms shall have the following meanings,
respectively:
"ADVISOR" shall have the meaning ascribed thereto in the first paragraph of
this agreement;
"ADVISORY AGREEMENT" means the agreement dated November 26, 1996 between
the Advisor and the Company whereby the Advisor provides services to the
Company as described in the first paragraph of this agreement;
"AFFILIATE" shall have the meaning ascribed thereto in the second paragraph
of this agreement;
"AGENCY FEE" means the fee payable to the Agents, as specified in Schedule
"A" hereto;
"AGENTS" shall have the meaning ascribed thereto in the first paragraph of
this agreement;
<PAGE>
- 3 -
"APPLICABLE SECURITIES LAWS" means Canadian Securities Laws and U.S.
Securities Laws;
"CANADIAN FINAL PROSPECTUS" means the final prospectus of the Company
qualifying the Offered Securities under Canadian Securities Laws;
"CANADIAN PRELIMINARY PROSPECTUS" means the preliminary prospectus,
prepared in connection with the qualification of the Offered Securities
under Canadian Securities Laws;
"CANADIAN SECURITIES LAWS" means, collectively, the applicable securities
laws of each of the Qualifying Provinces, their respective regulations,
rulings, orders and forms prescribed or made thereunder, the applicable
policy statements issued by the Securities Commissions thereunder and the
securities legislation and policies of each other relevant jurisdiction;
"CLOSING DATE" means the date on which the Offering is to be completed, as
specified in Schedule "A" hereto;
"COMMISSION" means the United States Securities and Exchange Commission;
"COMPANY" shall have the meaning ascribed thereto in the first paragraph of
this agreement;
"COMPANY'S INFORMATION RECORD" means all press releases, material change
reports, financial statements and other documents of the Company which have
been or are publicly disseminated by or as authorized by the Company,
whether or not pursuant to the Applicable Securities Laws;
"EXCHANGE" means a recognized stock exchange in the United States which is
also a "prescribed stock exchange" within the meaning of the INCOME TAX ACT
(Canada);
"EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder;
"FINAL PROSPECTUS" means the Canadian Final Prospectus and the U.S.
Prospectus;
"HAZARDOUS MATERIAL" has the meaning ascribed thereto in subsection 4.1(ao)
hereof;
"INCLUDING" means including without limitation;
"MATERIAL CHANGE" means a material change for the purposes of the
Applicable Securities Laws or any of them or where undefined under the
Applicable Securities Laws means a change in the business, operations or
capital of the Company, that would reasonably
<PAGE>
- 4 -
be expected to have a significant effect on the market price or value of
any of the Company's securities and includes a decision to implement such
a change made by the Company's board of directors or by senior management
of the Company who believe that confirmation of the decision by the board
of directors is probable;
"MATERIAL FACT" means a material fact for the purposes of the Applicable
Securities Laws or any of them or where undefined under the Applicable
Securities Laws means a fact that significantly affects, or would
reasonably be expected to have a significant effect on, the market price or
value of the Company's securities;
"MISREPRESENTATION" means a misrepresentation for the purposes of the
Applicable Securities Laws or any of them or where undefined under the
Applicable Securities Laws means (i) an untrue statement of a material
fact, or (ii) an omission to state a material fact that is required to be
stated or that is necessary to make a statement not misleading in the light
of the circumstances in which it was made;
"NP1" means National Policy Statement No. 1 of the Canadian Securities
Administrators;
"OFFERED SECURITIES" shall have the meaning ascribed thereto in the first
paragraph of this agreement;
"OFFERING" shall have the meaning ascribed thereto in the first paragraph
of this agreement;
"OUTSTANDING CONVERTIBLE SECURITIES" means all options, including without
limitation options granted or agreed to be granted to officers, directors
or employees, and other convertible securities outstanding as at the date
of this agreement, whether issued pursuant to an established plan or
otherwise;
"PERSON" includes any individual, corporation, limited partnership, general
partnership, joint stock company or association, joint venture association,
company, trust, bank, trust company, land trust, investment trust, society
or other entity, organization, syndicate, whether incorporated or not,
trustee, executor or other legal personal representative, and governments
and agencies and political subdivisions thereof;
"PRELIMINARY PROSPECTUS" means the Canadian Preliminary Prospectus and the
U.S. Preliminary Prospectus;
"PROMOTERS" shall have the meaning ascribed thereto in the first paragraph
of this agreement;
"PROPERTIES" shall have the meaning ascribed thereto in the second
paragraph of this agreement;
<PAGE>
- 5 -
"PURCHASERS" means, collectively, each of the purchasers of Offered
Securities arranged by the Agents pursuant to the Offering, including, if
applicable, the Agents;
"QUALIFYING PROVINCES" means each of the provinces of Canada listed in
Schedule "A" hereto;
"REGISTRATION STATEMENT" means the registration statement on Form S-11
(No. 333-13155) with respect to the Offered Securities (which, at the time
it becomes effective, shall include the U.S. Prospectus) filed with the
Commission for the purpose of registering the Offered Securities for sale
in the United States;
"SECURITIES COMMISSIONS" means, collectively, the securities commissions or
similar regulatory authorities in each of the Qualifying Provinces and the
Commission;
"SELLING GROUP" means, collectively, those registered dealers appointed by
the Agents to assist in the Offering as contemplated in the fifth paragraph
of this agreement;
"SUPPLEMENTARY MATERIAL" means, collectively, any amendment to the
Registration Statement, the Final Prospectus, any amended or supplemental
registration statement, prospectus or ancillary material required to be
filed with any of the Securities Commissions in connection with the
distribution of the Offered Securities;
"SURVIVAL LIMITATION DATE" means the later of: (i) eighteen months from the
Closing Date, and (ii) the latest date under the Applicable Securities Laws
relevant to a Purchaser (non-residents of Canada being deemed to be
resident in the Province of Ontario for such purposes) that a Purchaser may
be entitled to commence an action or exercise a right of rescission with
respect to a misrepresentation contained in the Final Prospectus or, if
applicable, any Supplementary Material; and
"TIME OF CLOSING" means the time on the Closing Date at which the Offering
is to be completed, as specified in Schedule "A" hereto.
"U.S. SECURITIES ACT" means the United States Securities Act of 1933, as
amended, and the rules and regulations thereunder;
"U.S. PRELIMINARY PROSPECTUS" means the prospectus included in the
Registration Statement prior to the effectiveness thereof;
"U.S. PROSPECTUS" means the prospectus included in the Registration
Statement at the time it becomes effective and as amended by any prospectus
filed pursuant to Rule 424(b); and
"U.S. SECURITIES LAWS" means, collectively, the applicable United States
federal and state securities laws, the respective regulations, rulings,
orders and forms prescribed
<PAGE>
- 6 -
thereunder, the applicable policy statements issued and the rules
promulgated by the Commission and state Securities Commissions thereunder.
1.2 The division of this agreement into sections, subsections, paragraphs
and other subdivisions and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
agreement. Unless something in the subject matter or context is inconsistent
therewith, references herein to sections, subsections, paragraphs and other
subdivisions are to sections, subsections, paragraphs and other subdivisions of
this agreement.
1.3 This agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the federal laws of Canada applicable
therein and time shall be of the essence hereof.
1.4 Except as otherwise indicated, all amounts expressed herein or to be
determined hereby in terms of money refer to lawful currency of the United
States of America and all payments to be made hereunder shall be made in such
currency.
1.5 The following are the schedules attached to this agreement, which
schedules are deemed to be a part hereof and are hereby incorporated by
reference herein:
Schedule A - Details of the Offering
Schedule B - Details as to Outstanding Convertible Securities
Schedule C - Opinion of the Company's Canadian Counsel
Schedule D - Opinion of the Company's U.S. Counsel
2. NATURE OF TRANSACTION
2.1 Each Canadian Purchaser shall purchase pursuant to the Final
Prospectus. Each other Purchaser shall purchase in accordance with such
procedures as the Company and the Agents may mutually agree, acting reasonably,
in order to fully comply with the Applicable Securities Laws. The Company
hereby agrees to secure compliance with all securities regulatory requirements
of the Qualifying Provinces on a timely basis in connection with the
distribution of the Offered Securities to Canadian Purchasers. The Agents agree
to assist the Company in all reasonable respects to secure compliance with all
regulatory requirements in connection with the Offering.
3. COVENANTS OF THE AGENTS
3.1 The Agents covenant with the Company that they will (and will use
their reasonable efforts to cause the members of the Selling Group to ensure
that they will): (i) conduct activities in connection with arranging for the
sale and distribution of the Offered Securities in compliance with the
Applicable Securities Laws; (ii) not solicit offers to purchase or sell the
Offered Securities so as to require registration thereof or filing of a
prospectus with respect thereto under the laws of any jurisdiction (other than
the Qualifying Provinces or the
<PAGE>
- 7 -
United States) including the United Kingdom, and not solicit offers to
purchase or sell the Offered Securities in any jurisdiction outside of Canada
or the United States where the solicitation or sale of the Offered Securities
would result in any ongoing disclosure requirements in such jurisdiction, any
registration requirements in such jurisdiction except for the filing of a
notice or report of the solicitation or sale (including, without limitation,
forms required to be filed with the United States Securities and Exchange
Commission in connection with private placement sales), or where the Company
may be subject to liability in connection with the sale of the Offered
Securities which is materially more onerous than its liability under
Applicable Securities Laws to which it is subject as at the date of this
agreement;(iii) refrain from making use of any "green sheet" or other
internal marketing document in respect of the Offered Securities without the
approval of the Company and comply with the notice dated July 7, 1989 issued
by the Ontario Securities Commission with respect to the use of "green
sheets" and other marketing material during the waiting period under the
SECURITIES ACT (Ontario); (iv) use all reasonable efforts to complete and to
cause the members of the Selling Group to complete the distribution of the
Offered Securities as soon as practicable and cooperate with the Company in
its efforts to market the Offered Securities, including apprising the
Company on a weekly basis of the level of sales of the Offered Securities;
(v) notify the Company when, in its opinion, the Selling Group has ceased
distribution of the Offered Securities and, if required for regulatory
compliance purposes, provide a breakdown of the number of Offered Securities
distributed (A) in each of the Qualifying Provinces and (B) in any other
jurisdictions; (vi) not make any representations or warranties in respect of
the Company or the Offered Securities other than as set forth in the Final
Prospectus and, if applicable, Supplementary Material; and (vii) forthwith
upon the Company obtaining the necessary receipts therefor from each of the
Securities Commissions, deliver one copy of the Final Prospectus and any
Supplementary Material to the prospective Purchasers.
3.2 The Agents agree with the Company that the Agents will sponsor the
Company in its efforts to have its securities accepted for listing and posted
for trading on the Exchange and in that regard the Agents covenant to use all
commercially reasonable efforts to cause the Company to have at least four
hundred (400) round lot shareholders upon completion of the Offering.
3.3 Porthmeor Securities Inc. represents on its own behalf that it is
registered (to sell the Offered Securities) only under the Canadian Securities
Laws of the Province of Ontario. Octagon Capital Canada Corporation represents
on its own behalf that it is registered (to sell the Offered Securities) only
under the Canadian Securities Laws of the Province of Ontario. First Marathon
Securities Limited represents on its own behalf that it is registered (to sell
the Offered Securities) under the Canadian Securities Laws and that First
Marathon (U.S.A.) Inc. is registered (to sell the Offered Securities) only under
the U.S. Securities Laws of the State of California and Massachusetts. Each of
the Agents severally covenants with the Company that its respective registration
(registrations, in the case of First Marathon Securities Limited) will be in
good standing on the Closing Date.
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4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
4.1 The Company hereby represents, warrants and covenants to and with the
Agents and the Purchasers that:
(a) it will use all reasonable efforts to file the Final Prospectus and to
obtain a final receipt document from the each of the Securities
Commissions by not later than January 31, 1997, and shall have taken
all other steps and proceedings that may be necessary in order to
qualify the Offered Securities for distribution pursuant to the Final
Prospectus in each of the Qualifying Provinces by such date;
(b) the Company has no subsidiaries, whether through direct or indirect
holding of securities,
(c) the Company (i) has been duly incorporated and is and will at the Time
of Closing be validly existing and in good standing under the laws of
Maryland; (ii) has all requisite corporate power and authority to
carry on its business as now conducted and to own, lease and operate
its properties and assets; and (iii) has all required corporate power
and authority to create, issue and sell the Offered Securities, to
enter into this agreement and to carry out the provisions of this
agreement;
(d) all necessary corporate action has been taken or will have been taken
prior to the Time of Closing by the Company so as to validly issue and
sell the Offered Securities to the Purchasers and upon receipt by the
Company of the purchase price as consideration for the issue of the
Offered Securities, such Offered Securities will be validly issued and
outstanding as fully paid and non-assessable shares of common stock;
(e) the Company is in all material respects conducting its business in
compliance with all applicable laws, rules and regulations of each
jurisdiction in which its business is carried on and is duly licensed,
registered or qualified in all jurisdictions in which it owns, leases
or operates its property or carries on business to enable its business
to be carried on as now conducted and its property and assets to be
owned, leased and operated and all such licences, registrations and
qualifications are and will at the Time of Closing be valid,
subsisting and in good standing, except in respect of matters which do
not and will not result in any material adverse change to the business
or affairs (financial or otherwise) of the Company and except for the
failure to be so qualified or the absence of any such license,
registration or qualification which does not and will not have a
material adverse effect on the assets or properties, business, results
of operations or affairs (financial or otherwise) of the Company;
(f) the Company has not received any notice of proceedings relating to the
revocation or modification of any certificate, authority, permit or
licence which, if the
<PAGE>
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subject of an unfavourable decision, ruling or finding, would
materially or adversely affect the conduct of the business,
operations, financial condition or income (current or prospective)
of the Company;
(g) as of the date hereof, the outstanding capital of the Company is as
set forth in the Registration Statement;
(h) attached as Schedule "B" is a complete list of all Outstanding
Convertible Securities of the Company and, except as set forth in this
agreement or in the Canadian Final Prospectus, no person now has any
agreement or option or right or privilege capable of becoming an
agreement for the purchase, subscription or issuance of any issued or
unissued shares, securities or warrants of the Company;
(i) except as set forth in the Canadian Final Prospectus, since its date
of incorporation:
(i) there has not been any material change in the assets,
liabilities or obligations (absolute, accrued, contingent or
otherwise) of the Company that has not been publicly disclosed;
(ii) there has not been any material change in the capital stock or
long-term debt of the Company that has not been publicly
disclosed;
(iii) there has not been any material change in the business or
affairs (financial or otherwise) or results of the
operations of the Company that has not been publicly
disclosed;
(iv) except as has been publicly disclosed, the Company has carried
on its business in the ordinary course;
(j) the notes to the pro forma balance sheet as of September 30, 1996 and
the pro forma statements of income for the year ended December 31,
1995 and for the nine months ended September 30, 1996 of the Company
contained in the Final Prospectus under the heading "PRO FORMA
SELECTED FINANCIAL INFORMATION" are suitably supported and consistent
with the plans of the Company, and such pro forma balance sheet and
statements of income accurately reflect such notes;
(k) the pro forma balance sheet as of September 30, 1996 and the pro forma
statements of income for the year ended December 31, 1995 and for the
nine months ended September 30, 1996 of the Company present fairly the
financial condition and results of operation of the Company on the
basis of presentation summarized in the notes thereto;
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(l) there is no action, proceeding or investigation (whether or not
purportedly by or on behalf of the Company ) pending or, to the
knowledge of the Company or any of its directors and officers,
threatened against or affecting the Company, at law or in equity
(whether in any court, arbitration or similar tribunal) or before or
by any federal, provincial, state, municipal or other governmental
department, commission, board or agency, domestic or foreign, which in
any way materially adversely affects or could materially adversely
affect the Company, or the condition (financial or otherwise) of the
Company or which questions the validity of the Offered Securities or
of the issuance of the Offered Securities (and the issuance as fully
paid and non-assessable shares) or any action taken or to be taken by
the Company pursuant to or in connection with this agreement;
(m) the Company is not in default or in breach in any material respect of,
and the execution and delivery of this agreement by them, the
performance and compliance with the terms of this agreement and the
sale of the Offered Securities by the Company will not result in any
material breach of, or be in conflict with or constitute a material
default under, or create a state of facts which, after notice or lapse
of time, or both, would constitute a default under any term or
provision of the articles, by-laws or resolutions of the Company or
any mortgage, note, indenture, contract, agreement, instrument, lease
or other document to which the Company is a party or by which any of
them is bound or any judgment, decree, order, statute, rule or
regulation applicable to any of them;
(n) the Company will at the Time of Closing be a "reporting issuer" (or
its equivalent), not in default, in each of the Qualifying Provinces
and the Company will use its reasonable best efforts to maintain such
status for a period of at least two years from the Closing Date;
(o) the auditors of the Company who reviewed, as to compilation only, the
pro forma balance sheet and the pro forma statements of income of the
Company and who audited the statements of revenue and certain expenses
of Chico Crossroads Center Ltd. and Miami Gardens Associates, all as
contained in the Final Prospectus, are independent public accountants
as required by the Applicable Securities Laws;
(p) the Company has filed all federal, provincial, state, local and
foreign tax returns that are required to be filed or have requested
extensions thereof and have paid all taxes required to be paid by them
and any other assessment, fine or penalty levied against them, to the
extent that any of the foregoing is due and payable, except for any
such assessment, fine or penalty that is being contested in good faith
and in respect of which particulars have been given to the Agents;
(q) there are no outstanding reassessments which have been issued by any
governmental authority relating to any such tax returns of the
Company;
<PAGE>
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(r) neither the Company nor, to the Company's knowledge, any other party,
is in default in the observance or performance of any term or
obligation to be performed by it under any contract which is material
to it and no event has occurred which with notice or lapse of time or
both would constitute such a default, in any such case which default
or event would have a material adverse effect on the assets or
properties, business, results of operations or affairs (financial or
otherwise) of such entity;
(s) the net proceeds of the Offering will be used in the manner specified
in the Final Prospectus under the heading "USE OF PROCEEDS" and for no
other purpose;
(t) the Company will use its reasonable best efforts to obtain the
necessary regulatory consents from the Exchange for the sale of the
Offered Securities hereunder, on such conditions as are acceptable to
the Agents and the Company, acting reasonably;
(u) the Company will use its reasonable best efforts to arrange for the
listing and posting for trading on the Exchange of the shares
comprised in the Offered Securities as soon as possible following the
issue thereof;
(v) prior to the filing of the Final Prospectus and any Supplementary
Material, the Company and the Advisor will allow the Agents to
participate fully in the preparation of the Final Prospectus and any
such Supplementary Material and shall allow the Agents to conduct all
due diligence which it may reasonably require to conduct in order to
fulfil its obligations and in order to enable the Agents responsibly
to execute the certificate required to be executed by it at the end of
each of the Final Prospectus and any Supplementary Material;
(w) the Company will deliver from time to time without charge to the
Agents as many copies of the Final Prospectus, the Registration
Statement and any Supplementary Material as it may reasonably request
for the purposes contemplated hereunder and contemplated by the
Applicable Securities Laws and such delivery shall constitute the
consent of the Company to the Agents' use of such documents in
connection with the distribution to the public of the Offered
Securities, subject to the provisions of Applicable Securities Laws
and the provisions of this agreement;
(x) all the information and statements to be contained in the Final
Prospectus and any Supplementary Material shall, at the date of
delivery thereof, constitute full, true and plain disclosure of all
material facts relating to each of the Offering, the Company, on a
consolidated basis, the Advisor, the Promoters and the Offered
Securities (provided that this representation is not intended to
extend to information and statements included in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of the Agents specifically for use therein);
<PAGE>
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(y) at the time of the effectiveness of the Registration Statement or the
effectiveness of any post-effective amendment to the Registration
Statement, and at the Closing Date, the Registration Statement and the
U.S. Prospectus and any amendments thereof and supplements thereto
comply or will comply in all material respects with the applicable
provisions of the U.S. Securities Laws and do not or will not contain
an untrue statement of a material fact and does not or will not omit
to state any material fact required to be stated therein or necessary
in order to make the statements therein (A) in the case of the
Registration Statement, not misleading and (B) in the case of the U.S.
Prospectus, in light of the circumstances under which they were made,
not misleading;
(z) neither the Final Prospectus nor any Supplementary Material will
contain a misrepresentation (provided that this representation is not
intended to extend to information and statements included in reliance
upon and in conformity with written information furnished to the
Company by or on behalf of the Agents specifically for use therein);
(aa) the Final Prospectus and any Supplementary Material shall contain the
disclosure required by and conform, in all material respects, to all
requirements of Applicable Securities Laws;
(ab) this agreement and all other contracts required in connection with the
issue and distribution of the Offered Securities shall be, at or prior
to the Time of Closing, duly authorized, executed and delivered by the
Company and shall be valid and binding obligations of it enforceable
in accordance with their respective terms subject to:
(i) bankruptcy, insolvency and other similar laws affecting the
rights of creditors generally;
(ii) the qualification that equitable remedies, including without
limitation, specific performance and injunction, may be granted
only in the discretion of a court of competent jurisdiction; and
(iii) rights of indemnity, contribution and waiver of contribution
being limited under applicable law;
(ac) the attributes of the Offered Securities will conform in all material
respects with the description thereof described or to be described in
the Final Prospectus;
(ad) the forms of the certificates representing the Offered Securities have
been, or will at or prior to the Time of Closing be, duly approved by
the Company and comply with the provisions of the laws of its
jurisdiction of incorporation and the regulations of the Exchange;
<PAGE>
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(ae) during and prior to primary distribution, the Company and the Advisor
will take or use their reasonable efforts to cause to be taken all
steps and proceedings (including the filing of, and obtaining the
issuance of receipts for, the Final Prospectus) that may be requisite
under the Applicable Securities Laws to qualify the Offered Securities
for sale to the public in the Qualifying Provinces through registrants
registered under the Applicable Securities Laws of the Qualifying
Provinces who have complied with the relevant provisions thereof;
(af) at all times until the primary distribution of the Offered Securities
has been completed, but in any event not later than thirty days
following the Closing Date, the Company will, to the reasonable
satisfaction of counsel to the Agents, promptly take or cause to be
taken all additional steps and proceedings that may be requisite from
time to time under the Applicable Securities Laws of the Qualifying
Provinces to continue to so qualify the Offered Securities in the
Qualifying Provinces or, in the event that the Offered Securities
have, for any reason, ceased to so qualify in the Qualifying
Provinces, to again so qualify the Offered Securities;
(ag) other than as disclosed in the Canadian Final Prospectus and other
than the Agents pursuant to this agreement, there is no person acting
or purporting to act at the request of the Company or the Advisor, who
is entitled to any brokerage, agency or other fiscal advisory or
similar fee in connection with the Offering or the other transactions
contemplated herein;
(ah) the Company will promptly notify the Agents in writing if, prior to
termination of the distribution of the Offered Securities, there shall
occur any material change or change in a material fact (in either
case, whether actual, anticipated, contemplated or threatened and
other than a change or change in fact relating solely to the Agents)
or any event or development involving a prospective material change or
a change in a material fact or any other material change in any or all
of the business, affairs, operations, assets (including information or
data relating to the estimated value or book value of assets),
liabilities (contingent or otherwise), capital, ownership, control or
management of the Company, on a consolidated basis, or any other
change which is of such a nature as to result in, or could result in a
misrepresentation in the Preliminary Prospectus, Final Prospectus,
Registration Statement or any Supplementary Material or could render
any of the foregoing not in compliance with any of the Applicable
Securities Laws;
(ai) the Company will promptly notify the Agents in writing with full
particulars of any such actual, anticipated, contemplated, threatened
or prospective change referred to in the preceding paragraph and
shall, to the reasonable satisfaction of the Agents, file promptly
and, in any event, within all applicable time limitation periods with
the Securities Commissions a new or amended Preliminary Prospectus,
Final Prospectus, Registration Statement or Supplementary Material,
<PAGE>
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as the case may be, or material change report as may be required under
the Applicable Securities Laws and shall comply with all other
applicable filing and other requirements under the Applicable
Securities Laws including any requirements necessary to qualify the
issuance and distribution of the Offered Securities and shall deliver
to the Agents as soon as practicable thereafter its reasonable
requirements of conformed or commercial copies of any such new or
amended Preliminary Prospectus, Final Prospectus, Registration
Statement or Supplementary Material. The Company will not file any
such new or amended disclosure documentation or material change report
without first obtaining the written approval of the form and content
thereof by the Agents, which approval shall not be unreasonably
withheld or delayed;
(aj) the Company will in good faith discuss with the Agents as promptly as
possible any circumstance or event which is of such a nature that
there is or ought to be consideration given as to whether there may be
a material change or change in a material fact or other change
described in the preceding two paragraphs;
(ak) the Final Prospectus will accurately and completely set forth all
arrangements, financial or otherwise, between the Company and the
Advisor and between the Company and the Promoters;
(al) except as will be disclosed in the Final Prospectus, there are and
will be no contracts, agreements, or arrangements to which the Company
is a party with any of the shareholders or any director, officer,
former director, officer or shareholder of the Advisor or any of its
associated or affiliated companies or with any other person with which
it does not deal at arm's length (as that term is used for the
purposes of the INCOME TAX ACT (Canada));
(am) the Company will and will cause certain of the directors and officers
to use its best efforts to assist in the marketing and presentation of
the Company to prospective purchasers of Offered Securities, and to
cause its officers and employees to devote the necessary time and
effort in this regard;
(an) all of the real properties of the Company and the buildings
constructed thereon will be at the Time of Closing insured against
such loss from damage by hazards or risks normally insured against,
with reasonable deductibles; such buildings were constructed in
accordance with building permits properly issued therefor, if
required, and in compliance in all material respects with all
applicable building and zoning by-laws; and there are no material
defects in such buildings; there are no outstanding work orders or
deficiency notices relating to such buildings from or required by any
police or fire department, sanitation, health authorities or from any
other federal, state, provincial or municipal authority and there is
no matter under discussion with any such departments or authorities
relating to work orders; such buildings and all chattels required for
the effective operation of such
<PAGE>
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buildings are in good operating condition and are in a state of
good repair and maintenance reasonable wear and tear excepted;
(ao) all of the real properties of the Company and the buildings
constructed and operations thereon comply in all material respects
with applicable federal, state, provincial and municipal
environmental, health and safety statutes, regulations and permits;
none of such properties, buildings or operations is subject to any
judicial or administrative proceeding alleging any material violation
of any federal, state, provincial or municipal environmental, health
or safety statute or regulation or is subject to any investigation, by
or on behalf of the Company, evaluating whether any remedial action
is needed to respond to a release of any Hazardous Material (as
hereinafter defined) into the environment; neither the Company nor, to
the best of the Company's knowledge, any tenant in any property in
which the Company has a direct or indirect interest, has filed any
notice under any federal, state, provincial or municipal law
indicating past or present treatment, storage or disposal of a
Hazardous Material or reporting a spill or release of an Hazardous
Material into the environment involving any of the real properties of
the Company other than those which have been remediated; none of the
real properties of the Company has at any time been used as a waste
storage site or waste disposal site or has been used to operate a
waste management business during the time the Company has owned such
properties, and no such use was made of any of the properties prior to
the purchase of such properties by the Company; the Company does not
have a contingent liability of which it has knowledge or reasonably
should have knowledge in connection with any release of any Hazardous
Material on or into the environment from any of the real properties of
the Company or the buildings or operations thereon; neither the
Company nor any tenant in any property in which the Company has a
direct or indirect interest, generates, transports, treats, stores or
disposes of any waste, subject waste, hazardous waste, deleterious
substance, industrial waste (as defined in applicable federal, state,
provincial or municipal legislation) on any of the real properties of
the Company in contravention of applicable federal, state, provincial
or municipal laws or regulations enacted for the protection of the
natural environment or human health; no underground storage tanks or
surface impoundments containing a petroleum product or Hazardous
Material are located on any of the real properties of the Company in
contravention of applicable federal, state, provincial or municipal
laws or regulations enacted for the protection of the natural
environment or human health; and for the purposes of this subsection
4.1(ao), "HAZARDOUS MATERIAL" means any contaminant, pollutant, waste,
subject waste, hazardous waste, deleterious substance, industrial
waste, toxic matter or any other substance that when released into the
natural environment is likely to cause, at some immediate or future
time, material harm or degradation to the natural environment or
material risk to human health and, without restricting the generality
of the foregoing, includes any contaminant, pollutant, waste, subject
waste, deleterious substance, industrial waste, toxic matter,
hazardous waste or dangerous goods as defined by applicable federal,
<PAGE>
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state, provincial or municipal laws or regulations enacted for the
protection of the natural environment or human health;
(ap) American Stock Transfer and Trust Company has been duly appointed the
registrar and transfer agent for the Offered Securities at its
principal transfer office;
(aq) the minute books of the Company, provided to counsel to the Agents
contain copies of the articles and by-laws of the Company and all
resolutions of the directors and shareholders of the Company;
(ar) during the period commencing on the date hereof and ending on the 90th
day following the Closing Date, without the prior written consent of
the Agents which shall not be unreasonably withheld, the Company will
not issue or announce the issuance of any shares of common stock or
any other securities which are convertible into or exchangeable for
shares of common stock; provided, however, that this covenant shall
not apply to the Offered Securities to be distributed by or through
the Agents as contemplated herein and shall not apply to the issuance
of shares of common stock pursuant to stock options granted under the
stock option plan referred to under "MANAGEMENT - Stock Option Plan"
in the Final Prospectus and the dividend reinvestment plan referred to
under "Dividend Reinvestment Program" in the Final Prospectus;
(as) the Company has prepared and filed with the Commission, in conformity
with the requirements of U.S. Securities Laws, a registration
statement on Form S-11 (No. 333-13155), including the U.S. Preliminary
Prospectus. The Company has also prepared and proposes to file with
the Commission, in conformity with the requirements of the U.S.
Securities Laws, an amendment to the registration statement, including
the U.S. Prospectus;
(at) there is no document or contract of a character required to be
described in the Registration Statement or to be filed with any
Securities Commission as an exhibit to the Registration Statement or
the Final Prospectus pursuant to Applicable Securities Laws which is
not described or filed as required;
(au) the Company is not, and upon consummation of the transactions
contemplated in this agreement will not be, an "investment company" as
such term is defined in the United States Investment Company Act of
1940, as amended;
(av) the Company shall use all reasonable efforts to cause the Registration
Statement to become effective;
(aw) the Company will make generally available (within the meaning of Rule
158 under the U.S. Securities Act) to its shareholders as soon as
reasonably practicable, but not later than 60 days after the end of
its fiscal quarter (140 days
<PAGE>
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if such quarter coincides with the Company's fiscal year end) in
which the first anniversary date of the effective date of the
Registration Statement occurs, an earnings statement covering a
period of at least twelve consecutive months after the effective
date of the Registration Statement which shall satisfy the
provisions of Section 11(a) of the 1933 Act;
(ax) if at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make
every reasonable effort to obtain the withdrawal or lifting of such
order at the earliest possible time;
(ay) the Company shall furnish to the Agents, without charge, one signed
copy of the Registration Statement as first filed with the Commission
and of each amendment to it, including all exhibits, and shall furnish
to the Agents and each agent designated by the Agents such number of
conformed copies of the Registration Statement as so filed and of each
amendment to it, without exhibits, as you may reasonably request;
(az) the Company will not file any amendment or supplement to the
Registration Statement, whether before or after the time upon which it
becomes effective, or make any amendment or supplement to the
Prospectus of which the Agents shall not previously have been advised
or to which the Agents shall reasonably object; and agrees to prepare
and file with the Commission promptly upon your reasonable request,
any amendment to the Registration Statement or supplement to the
Prospectus which may be required under Applicable Securities Laws in
connection with the distribution of the Offered Securities by you, and
to use its best efforts to cause the same to become properly
effective.
(ba) as of the Closing Date, the Company will have obtained an Owner's
Policy of Title Insurance (or an irrevocable commitment to issue
such a policy) on each of the Properties, in an amount not less
that the cost of acquisition of such Properties, and such title
insurance is or will be in full force and effect subject to
customary exceptions;
(bb) as of the Closing Date, and after giving effect to the
transaction described in the Registration Statement, the Company
will be organized and intends to operate in a manner so as to
qualify as a real estate investment trust ("REIT") under Sections
856 through 859 of the Code, and the Company will elect to be
taxed as a REIT under the Code effective for the fiscal year
ended December 31, 1997;
(bc) the Company will file with the Commission such reports on Form SR
as may be required pursuant to Rule 463 of the U.S. Securities
Act; and
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(bd) except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be
disclosed therein by Item 404 of Regulation S-K of the
Commission.
5. CONDITIONS TO PURCHASE OBLIGATION
5.1 The following are conditions of the Agents' and Purchasers'
obligations to close the purchase of the Offered Securities from the Company as
contemplated hereby (in respect of which the Agents shall act in good faith in
determining whether such conditions have been fulfilled), which conditions the
Company covenants to exercise its best efforts to have fulfilled at or prior to
the Time of Closing, which conditions may be waived in writing in whole or in
part by the Agents:
(a) the Company will have made and/or obtained the necessary filings,
approvals, consents and acceptances to or from, as the case may be,
the Securities Commissions and the Exchange required to be made or
obtained by the Company in connection with the Offering, on terms
which are acceptable to the Company and the Agents, acting reasonably,
prior to the Closing Date, it being understood that the Agents will do
all that is reasonably required to assist the Company to fulfil this
condition;
(b) the shares comprised in the Offered Securities will have been accepted
for listing by the Exchange, subject to the usual conditions, and
will, as soon as possible following their issue, be posted for trading
on the Exchange;
(c) the Company's and the Advisor's boards of directors will have
authorized and approved this agreement and such other agreements
pursuant to which the Offered Securities are to be issued, the sale
and issuance of the Offered Securities and all matters relating to the
foregoing;
(d) the Company will deliver a certificate under its corporate seal and
signed on behalf of each of them by the respective chief executive
officer and the chief financial officer or such other senior officers
as may be acceptable to the Agents, acting reasonably, addressed to
the Agents and dated the Closing Date, in form and content
satisfactory to the Agents' counsel, acting reasonably, certifying
that:
(i) no order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof has been
issued, no order ceasing or suspending trading in any securities
of the Company or prohibiting the sale of the Offered Securities
or any of the Company's issued securities has been issued and no
proceedings for such purpose are pending or, to the knowledge of
such officers, threatened;
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(ii) to the knowledge of such officers, there has been no adverse
material change (actual, proposed or prospective, whether
financial or otherwise) in the business, affairs, operations,
assets, liabilities (contingent or otherwise) or capital of the
Company since the date hereof which has not been generally
disclosed;
(iii) since the date hereof, no material change relating to the
Company, except for the Offering, has occurred;
(iv) the pro forma balance sheet as of September 30, 1996 and the pro
forma statements of income for the year ended December 31, 1995
and for the nine months ended September 30, 1996 of the Company
present fairly the financial condition and results of operation
of the Company, on the basis of presentation summarized in the
notes thereto;
(v) the representations and warranties of the Company contained in
this agreement are true and correct at the Time of Closing, with
the same force and effect as if made by the Company as at the
Time of Closing after giving effect to the transactions
contemplated hereby; and
(vi) the Company has complied with all the covenants and satisfied all
the terms and conditions of this agreement on its part to be
complied with or satisfied at or prior to the Time of Closing;
(e) the Company will have caused a favourable legal opinion to be
delivered by its Canadian and U.S. counsel, addressed to the Agents
and the Agents' counsel with respect to such matters as the Agents may
reasonably request relating to this transaction, acceptable in all
reasonable respects to the Agents' counsel, including substantially
those matters identified in Schedule "C" (Canadian counsel) and
Schedule "D" (U.S. counsel) hereto. In giving such opinions, counsel
to the Company shall be entitled to rely, to the extent appropriate in
the circumstances, upon local counsel and shall be entitled as to
matters of fact not within their knowledge to rely upon a certificate
of fact from responsible persons in a position to have knowledge of
such facts and their accuracy and such opinions shall be subject to
the customary assumptions, qualifications and exceptions;
(f) the Company will deliver a certificate of its registrar and transfer
agent as to the issued and outstanding shares of common stock of the
Company; and
(g) the Offered Securities shall be listed on a United States stock
exchange which is a "prescribed stock exchange" for the purposes of
the INCOME TAX ACT (Canada), and shall be either registered under
the SECURITIES EXCHANGE ACT OF 1934, as amended or listed on an
"over-the-counter market" within the meaning of applicable United
States federal income tax regulations, and the Properties shall be
acquired contemporaneously with the completion of the Offering.
<PAGE>
- 20 -
6. ADDITIONAL DOCUMENTS UPON FILING OF PROSPECTUS
6.1 The Company shall cause to be delivered to the Agents concurrently
with the filing of the Final Prospectus and any Supplementary Material executed
by the Agents a comfort letter dated the date thereof from the auditors of the
Company and addressed to the Agents and to the directors of the Company, in form
and substance satisfactory to the Agents, relating to the verification of the
financial information and accounting data and other numerical data of a
financial nature contained therein and matters involving changes or developments
since the respective dates as of which specified financial information is given
therein, to a date not more than two business days prior to the date of such
letter.
7. CLOSING
7.1 The Offering will be completed at the offices of the Company's counsel
at the Time of Closing or such other place, date or time as may be mutually
agreed to; provided that if the Company has not been able to comply with any of
the covenants or conditions set out herein required to be complied with by the
Time of Closing or such other date and time as may be mutually agreed to and
such covenant or condition has not been waived, the respective obligations of
the parties will terminate without further liability or obligation except for
payment of expenses, indemnity and contribution provided for in this agreement.
7.2 At the Time of Closing, the following shall be delivered to the
Agents:
(a) certificates duly registered as the Agents may direct representing the
Offered Securities;
(b) the requisite legal opinions and certificates as contemplated in
Section 5.1; and
(c) such further documentation as may be contemplated herein or as counsel
to the Agents or the applicable regulatory authorities may reasonably
require,
against payment of the purchase price for the Offered Securities (net of the
Agency fee) by certified cheque or bank draft or wire transfer on an immediately
available basis (as selected by the Company) payable to the Company or as it may
direct. Subject to Section 11, the Company will, at the Time of Closing and
upon such payment of the purchase price, reimburse the Agents for their
estimated expenses as contemplated herein incurred up to the Closing Date upon
the delivery by them to the Company of one or more invoices therefor, subject to
any adjustment when such actual expenses are finally determined in accordance
with Section 11.
The Company understands that, in order for the Agents to obtain
payment from certain of the Purchasers, certificates for certain of the Offered
Securities must be available on the Closing Date in the cities of Vancouver,
Calgary and Toronto. Accordingly, the Company will make all necessary
arrangements to ensure that any such certificates are available to the Agents in
such cities as at the Time of Closing.
<PAGE>
- 21 -
7.3 All terms and conditions of this agreement shall be construed as
conditions and any material breach or failure to comply with any such terms and
conditions shall entitle the Agents to terminate their obligations to purchase
the Offered Securities by written notice to that effect given to the Company
prior to the Time of Closing. It is understood that the Agents may waive in
whole or in part, or extend the time for compliance with, any of such terms and
conditions without prejudice to their rights in respect of any such terms and
conditions or any other subsequent breach or non-compliance, provided that to be
binding on the Agents, any such waiver or extension must be in writing.
8. TERMINATION OF PURCHASE OBLIGATION
8.1 Without limiting any of the foregoing provisions of this agreement,
and in addition to any other remedies which may be available to it, the Agents,
on their own behalf and on behalf of the Purchasers, will be entitled, at their
option, to terminate and cancel, without any liability on their part or on the
part of the Purchasers, their obligations and the obligations of the Purchasers
under this agreement or otherwise, to purchase the Offered Securities, by giving
written notice to the Company at any time through to the Time of Closing if:
(a) there is, in the sole opinion of the Agents, a material change or
change in material fact or new material fact or an undisclosed
material fact or material change which might be expected to have an
adverse effect on the business, affairs, profitability, or prospects
of the Company or on the market price or value of the Offered
Securities or other securities of the Company;
(b) the state of the financial markets is such that in the sole opinion of
the Agents it would be unprofitable to offer or continue to offer the
Offered Securities;
(c) there should develop, occur, or come into effect an event of any
nature, including accident, governmental law or regulation, which in
the sole opinion of the Agents adversely affects or may adversely
affect the financial markets or the business, affairs or profitability
or prospects of the Company on a consolidated basis or the market
price of the Offered Securities or any other securities of the
Company;
(d) there is any inquiry, action, suit, proceeding or investigation
(whether formal or informal, and whether instituted, announced or
threatened) in relation to the Company, the Advisor, either of the
Promoters or any of their respective directors, officers or principal
shareholders;
(e) any order to cease trading in the securities of the Company is made by
a Securities Commission; or
(f) the Company is in material breach of any term, condition or covenant
of this agreement or any representation or warranty given by the
Company in this agreement is or becomes false,
<PAGE>
- 22 -
it being understood and agreed upon that the existence or non-existence of any
such occurrence, situation, event or circumstance is to be determined solely by
the Agents, whose determination shall be final and binding for all parties in
interest.
The Agents shall make reasonable efforts to give notice to the Company
(in writing or by other means) of the occurrence of any of the events referred
to in this section, provided that neither the giving nor the failure to give
such notice shall in any way affect the Agents' entitlement to exercise this
right at any time through to the Time of Closing.
The Agents' rights of termination contained in this section are in
addition to any other rights or remedies it may have in respect of any default,
act or failure to act or non-compliance by the Company in respect of any of the
matters contemplated by this agreement.
8.2 If the obligations of the Agents and the Purchasers are terminated
under this agreement pursuant to the termination rights provided for in
Section 8.1, the Company's liabilities to the Agents shall be limited to the
Company's obligations under the indemnity, contribution and expense provisions
of this agreement.
9. INDEMNITY
9.1 The Company (the "INDEMNIFYING PARTY") covenants and agrees to
indemnify the Agents and their shareholders, directors, officers, employees and
agents (each being hereinafter referred to as an "INDEMNIFIED PARTY") except in
the case of their wilful misconduct, bad faith or gross negligence, against all
losses (other than a loss of profits or other costs of its personnel), claims,
damages, liabilities, costs or expenses caused or incurred by reason of:
(a) any statement, other than a statement relating to the Agents,
contained in the Preliminary Prospectus, the Final Prospectus, the
Registration Statement or in any Supplementary Material (collectively,
the "OFFERING DOCUMENTS") which constitutes or is alleged to
constitute a misrepresentation;
(b) any statement, other than a statement relating to the Agents,
contained in the Company's Information Record which at the time and in
the light of the circumstances under which it was made, contained or
is alleged to have contained a misrepresentation;
(c) the omission or alleged omission to state in any of the Offering
Documents, in the Company's Information Record or in any certificate
delivered hereunder or pursuant hereto any material fact (other than a
material fact omitted in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Agents)
required to be stated therein or necessary to make any statement
therein (i) in the case of the Registration Statement, not misleading,
and (ii) in the case of the Preliminary Prospectus or the Final
Prospectus not misleading in light of the circumstances under which it
was made;
<PAGE>
- 23 -
(d) any order made or inquiry, investigation or proceeding commenced or
threatened by any Securities Commission or other competent authority
based upon any misrepresentation or alleged misrepresentation in any
of the Offering Documents or in the Company's Information Record
(other than a statement included in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
the Agents) which prevents or restricts the trading in the Offered
Securities or the distribution to the public of the Offered
Securities;
(e) the Company not complying with any requirement of any Applicable
Securities Laws in the Qualifying Provinces or regulatory requirements
in Canada or not complying with the requirements under U.S. Securities
Laws; or
(f) any material breach of any representation or warranty of the Company
contained herein or the failure of any of them to comply with any of
its obligations hereunder;
and will reimburse each Indemnified Party promptly upon demand for any legal or
other expenses reasonably incurred in connection with investigating or defending
any such losses, claims, damages, liabilities or actions in respect thereof, as
incurred.
9.2 The Indemnifying Party waives its right to recover contribution from
the Agents or any other Indemnified Party with respect to any of their
liabilities solely by reason of or arising out of any misrepresentation, other
than a misrepresentation included in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Agents
specifically for use therein, contained in any of the Offering Documents or in
the Company's Information Record.
9.3 If any action or claim shall be asserted against an Indemnified Party
in respect of which indemnity may be sought from the Indemnifying Party pursuant
to the provisions of Section 9.1 or if any potential claim contemplated hereby
shall come to the knowledge of an Indemnified Party, the Indemnified Party shall
promptly notify the Company in writing; but the omission to notify the Company
will not relieve the Indemnifying Party from any liability it may otherwise have
to the Indemnified Party pursuant to Section 9.1. The Indemnifying Party shall
be entitled but not obligated to participate in or assume the defence thereof;
provided, however, that the defence shall be through legal counsel acceptable to
the Indemnified Party, acting reasonably. In addition, the Indemnified Party
shall also have the right to employ separate counsel in any such action and
participate in the defence thereof, and the fees and expenses of such counsel
shall be borne by the Indemnified Party unless:
(a) the employment thereof has been specifically authorized in writing by
the Company;
(b) the Indemnified Party has been advised by counsel that representation
of the Indemnifying Party and the Indemnified Party by the same
counsel would be inappropriate due to actual or potential differing
interests between them; or
<PAGE>
- 24 -
(c) the Indemnifying Party has failed within a reasonable time after
receipt of such written notice to assume the defence of such action or
claim;
provided that the Indemnifying Party shall not be required to assume the fees
and expenses of more than one counsel for the Indemnified Party. No party shall
effect any settlement of any such action or claim or make any admission of
liability without the written consent of the other parties, such consent to be
promptly considered and not to be unreasonably withheld or delayed. The
indemnity hereby provided for shall remain in full force and effect and shall
not be limited to or affected by any other indemnity in respect of any matters
specified herein obtained by the Indemnified Party from any other person.
9.4 The rights of indemnity contained in Section 9.1 shall not accrue to
the benefit of any Indemnified Party if (i) the Agents were provided with a copy
of any amendment or supplement to the Final Prospectus or Registration Statement
which corrects any misrepresentation which is the basis of a claim by a party
against such Indemnified Party and (ii) the person asserting the claim was not
provided with a copy of such amendment or supplement by the Agents.
9.5 To the extent that any Indemnified Party is not a party to this
agreement, the Agents shall obtain and hold the right and benefit of the
indemnity provisions of Section 9.1 in trust for and on behalf of such
Indemnified Party.
10. CONTRIBUTION
10.1 In the event that the indemnity provided for above is, for any reason,
illegal or unenforceable as being contrary to public policy or for any other
reason, the Agents and the Indemnifying Party shall contribute to the aggregate
of all losses, claims, costs, damages, expenses or liabilities (including any
legal or other expenses reasonably incurred by an Indemnified Party in
connection with investigating or defending any action or claim which is the
subject of this section but excluding loss of profits or consequential damages)
of the nature provided for above such that the Agents will be responsible for
that portion represented by the percentage that the portion of the Agency Fee
bears to the gross proceeds realized from the sale of the Offered Securities,
and the Indemnifying Party will be responsible for the balance, provided that,
in no event, will an Agent be responsible for any amount in excess of the amount
of the Agency Fee actually received by it. In the event that the Indemnifying
Party may be held to be entitled to contribution from the Agents under the
provisions of any statute or law, the Indemnifying Party shall be limited to
contribution in an amount not exceeding the lesser of: (i) the portion of the
full amount of losses, claims, costs, damages, expenses and liabilities, giving
rise to such contribution for which the Agents are responsible, as determined
above, and (ii) the amount of the Agency Fee actually received. Notwithstanding
the foregoing, a party guilty of gross negligence, dishonesty, fraud or
fraudulent misrepresentation shall not be entitled to contribution from the
other party. Any party entitled to contribution will, promptly after receiving
notice of commencement of any claim, action, suit or proceeding against such
party in respect of which a claim for contribution may be made against the other
party under this section, notify such party from whom contribution may be
sought. In no case shall such party
<PAGE>
- 25 -
from whom contribution may be sought be liable under this agreement unless
such notice has been provided, but the omission to so notify such party shall
not relieve the party from whom contribution may be sought from any other
obligation it may have otherwise than under this section. The right to
contribution provided in this section shall be in addition and not in
derogation of any other right to contribution which the Agents may have by
statute or otherwise by law.
11. EXPENSES
11.1 All expenses incurred from time to time in connection with the
Offering including, without limitation, the fees and disbursements of the
Agents' Canadian and U.S. counsel (subject to the limits in the following
paragraph), the Agents' out-of-pocket expenses (including those incurred in
connection with due diligence) (subject to the limits in the following
paragraph), of or incidental to the sale, issue, distribution and qualification
for distribution of the Offered Securities, the costs of printing the
Preliminary Prospectus, the Final Prospectus and the costs of all other
marketing materials and to all matters in connection with the transactions
herein set forth shall be borne by the Company. The Company covenants and
agrees to fully reimburse the Agents from time to time for all such expenses
immediately upon the receipt of one or more invoices (subject to the limits in
the following paragraph).
Notwithstanding anything to the contrary contained herein, the Company
shall only be responsible for the Agents' out-of-pocket expenses (including
those incurred in connection with their due diligence) and fees and
disbursements of the Agents' Canadian and U.S. counsel, the aggregate of such
expenses and fees and disbursements to be limited to a maximum of $175,000 Cdn.,
exclusive of GST exigible thereon.
11.2 If the Company determines not to proceed with the Offering for any
reason whatsoever, the Company agrees that forthwith after such determination is
made, it shall pay to the Agents, by way of certified cheque or bank draft, the
sum of all of their out of pocket expenses incurred in accordance with
subsection 11.1, which amount the parties hereby agree constitutes reimbursement
of the costs of the Agents' due diligence review and related expenses incurred
by the Agents.
11.3 The Agents acknowledge receipt from Basic Capital Funds, on behalf of
the Company, of a non-refundable advance of $30,000 Cdn. paid to it in
connection with the Offering, and acknowledge that such advance shall be
credited against fees otherwise payable to the Agents in accordance with
Sections 11.1 and 11.2.
12. SURVIVAL OF WARRANTIES, REPRESENTATIONS, COVENANTS AND AGREEMENTS
12.1 All warranties, representations, covenants and agreements of the
Company herein contained or contained in documents submitted or required to be
submitted pursuant to this agreement shall survive the purchase by the Agents
for a period ending on the Survival Limitation Date and shall continue in full
force and effect for the benefit of the Agents regardless of the closing of the
sale of the Offered Securities and regardless of any investigation
<PAGE>
- 26 -
which may be carried on by the Agents or on their behalf. For greater
certainty, and without limiting the generality of the foregoing, the
provisions contained in this agreement in any way related to the
indemnification of each Indemnified Party by the Indemnifying Parties, or the
contribution obligations of the Agents or those of the Indemnifying Parties,
shall survive and continue in full force and effect for a period ending on
the Survival Limitation Date.
13. GENERAL CONTRACT PROVISIONS
13.1 Any notice or other communication to be given hereunder shall be in
writing and shall be given by delivery or by telecopier, as follows:
if to the Company:
2235 Sheppard Avenue East
Atria II, Suite 904
Willowdale, Ontario
M2J 5B5
Attention: Ronald Bernbaum
Telecopier Number: (416) 499-4624
with a copy to:
Chaiton + Chaiton
185 Sheppard Avenue West
North York, Ontario
M2N 1M9
Attention: Aran Kwinta
Telecopier Number: (416) 222-8402
if to the Agents:
Porthmeor Securities Inc.
Aetna Tower, Suite 1207
Toronto-Dominion Centre
Toronto, Ontario
M5K 1H6
Attention: Paul K. Bates
Telecopier Number: (416) 361-1099
<PAGE>
- 27 -
Octagon Capital Canada Corporation
181 University Avenue
Suite 406
Toronto, Ontario
M5H 3M7
Attention: Paul Davis
Telecopier Number: (416) 368-3811
First Marathon Securities Limited
The Exchange Tower
2 First Canadian Place
Suite 3200, P.O. Box 21
Toronto, Ontario
M5X 1J9
Attention: Jeffrey Hertz
Telecopier Number: (416) 869-8013
with a copy to:
Messrs. Fogler, Rubinoff
Suite 4400, P. O. Box 95
Royal Trust Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1G8
Attention: Lawrence P. Haber
Telecopier Number: (416) 941-8852
and if so given, shall be deemed to have been given and received upon receipt by
the addressee or a responsible officer of the addressee if delivered, or four
hours after being telecopied and receipt confirmed during normal business hours,
as the case may be. Any party may, at any time, give notice in writing to the
others in the manner provided for above of any change of address or telecopier
number.
13.2 This agreement and the other documents herein referred to constitute
the entire agreement between the Agents, the Company and Basic Capital Funds
relating to the subject matter hereof and supersede all prior agreements between
the parties with respect to their respective rights and obligations in respect
of the Offering, including the engagement letter between the Agents and the
Company dated May 13, 1996.
<PAGE>
- 28 -
13.3 This agreement may be executed by telecopier and in one or more
counterparts which, together, shall constitute an original copy hereof as of the
date first noted above.
If this agreement accurately reflects the terms of the transaction
which we are to enter into and if such terms are agreed to by the Company,
please communicate your acceptance by executing where indicated below and
returning by courier one originally executed copy to the Agents.
Yours very truly,
PORTHMEOR SECURITIES INC. OCTAGON CAPITAL CANADA
CORPORATION
Per: Per:
------------------------------ ------------------------------
Authorized Signing Officer Authorized Signing Officer
FIRST MARATHON SECURITIES LIMITED
Per:
------------------------------
Authorized Signing Officer
-----------------------------------------
The foregoing accurately reflects the terms of the transaction which
we are to enter into and such terms are agreed to with effect as of the date
provided at the top of the first page of this agreement.
BASIC U.S. REIT, INC.
Per:
------------------------------
Authorized Signing Officer
<PAGE>
SCHEDULE "A"
DETAILS OF THE OFFERING
OFFERING: 2,740,000 shares of common stock (the
"SHARES") of the Company at a price of $10.00
per Share (the "OFFERED SECURITIES").
AGENCY FEE: Subject to closing, the Agents shall be
entitled to an aggregate fee equal to 7.5% of
the gross proceeds of the Offering, payable
at the Time of Closing. The fees payable to
sub-agents shall be for the account of the
Agents.
CLOSING DATE: The Closing Date shall be January 3, 1997
subject to postponement to a date not later
than January 31, 1997 and any subsequent
closings prior to January 31, 1997 which may
be agreed to between the Company and the
Agents.
TIME OF CLOSING: The Time of Closing shall be 8:30 a.m.
(Toronto time) on the Closing Date.
QUALIFYING PROVINCES: The Provinces of Ontario, British Columbia
and Alberta and such other provinces as may
be agreed to by the Company and the Agents.
<PAGE>
SCHEDULE "B"
OUTSTANDING CONVERTIBLE SECURITIES
OTHER THAN AS DISCLOSED IN THE FINAL PROSPECTUS, THERE ARE NO OUTSTANDING
CONVERTIBLE SECURITIES.
<PAGE>
SCHEDULE "C"
OPINION OF THE COMPANY'S CANADIAN COUNSEL
The opinion of the Company's Canadian counsel shall, subject to the usual
qualifications, and assumptions in opinions of this nature, state that:
(a) this agreement has been duly authorized, executed and delivered by the
Company and is a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except
that the enforcement thereof may be subject to:
(i) bankruptcy, insolvency and other similar laws affecting the
rights of creditors generally;
(ii) the qualification that equitable remedies, including without
limitation, specific performance and injunction, may be granted
only in the discretion of a court of competent jurisdiction; and
(iii) rights of indemnity, contribution and waiver of contribution
being limited under applicable law;
(b) subject to the qualifications set out therein, the statements in the
Final Prospectus under the heading "CANADIAN FEDERAL INCOME TAX
CONSIDERATIONS" (or its equivalent) constitute an accurate summary of
the Canadian income tax considerations regarding an investment in, and
the qualified investment status of, the Offered Securities;
(c) the entering into by the Company of this agreement and other
agreements pursuant to which the Offered Securities are to be issued
which are entered into under the laws of Canada and the performance of
its obligations contemplated hereby and thereby do not result in the
violation of any of the terms or provisions of the constating
documents, or by-laws or resolutions of the Company; and
(d) all necessary documents have been filed and all requisite proceedings
have been taken and all other legal requirements have been fulfilled
by the Company as required under the Applicable Securities Laws in
each of the Qualifying Provinces to qualify the Offered Securities for
distribution or distribution to the public, as the case may be, and to
permit the offering and sale of the Offered Securities in each such
province through persons registered in a category permitting them to
distribute or distribute to the public, as the case may be, the
Offered Securities under the Applicable Securities Laws of such
provinces who have complied with any restrictions on such
registration.
<PAGE>
SCHEDULE "D"
OPINION OF THE COMPANY'S U.S. COUNSEL
THIS IS SCHEDULE "D" TO THE AGENCY AGREEMENT BETWEEN BASIC U.S.
REIT, INC. AND PORTHMEOR SECURITIES, INC. AND OCTAGON CAPITAL CANADA
CORPORATION AND FIRST MARATHON SECURITIES LIMITED DATED AS OF November 26,
1996.
The opinion of the Company's U.S. Counsel shall substantially state
that:
1. The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Maryland, has the
corporate power and authority to conduct its business as described in the
Registration Statement and Prospectus and is qualified to do business in each
jurisdiction in which the conduct of its business requires such
qualification, except where the failure to be so qualified, considering all
such cases in the aggregate, does not involve a material adverse effect on
the condition (financial), business, properties or results of operations of
the Company.
2. All necessary corporate action has been taken by the Company to
validly issue the Offered Securities and, upon payment therefor in accordance
with the terms of the Agency Agreement, the Offered Securities will be
validly issued and outstanding and will be fully paid and non-assessable.
3. The Registration Statement has become effective under the U.S.
Securities Act and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been issued
and no proceeding for that purpose has been instituted or is pending or
threatened by the Commission.
4. The Registration Statement, when it became effective, and the
Prospectus and any amendment or supplement thereto, on the date of filing
thereof with the Commission and at the Closing date, complied as to form in all
material respects with the requirements of the U.S. Securities Act, it being
understood that no opinion need be expressed as to the financial statements,
schedules, pro forma or other financial or statistical data included therein or
omitted therefrom.
5. The descriptions in the Registration Statement and Prospectus
under the captions "U.S. Federal Income Tax Considerations" and "Certain
Provisions of Maryland Law -- Business Combinations, -- Control Share
Acquisitions" are accurate in all material respects and fairly present the
information required to be shown.
6. To counsel's knowledge, there are no contracts, agreements,
documents or instruments to which the Company is a party or by which the Company
is bound required to be filed as exhibits to the Registration Statement or
described in the Registration Statement that are
<PAGE>
not so filed or described as required. Insofar as any statements in the
Registration Statement constitute summaries of any such contract, agreement,
document or instrument to which the Company is a party, such statements
fairly summarize in all material respects the information required to be
disclosed by the U.S. Securities Act and the rules promulgated thereunder
with respect to such matters.
7. The Company has all corporate power and authority to enter into
the Agency Agreement, and the Agency Agreement has been duly authorized, and
assuming the due execution and delivery of the Agency Agreement under the
laws of the province of Ontario, to the extent that execution and delivery
are matters of Maryland law, the Agency Agreement has been duly executed and
delivered by the Company, and is a valid and binding agreement of the Company.
8. The execution and delivery of the Agency Agreement and the
consummation of the transactions contemplated therein do not and will not
conflict with or result in a violation of or default under the Articles of
Incorporation or Bylaws of the Company, or under any statute, rule or regulation
applicable to the Company or any permit, order, judgment or decree known to
counsel, or any lease, contract, indenture, mortgage, loan agreement or other
agreement or instrument filed as an exhibit to the Registration Statement the
violation of or default under which would have a material adverse effect upon
the business, condition (financial or otherwise), results of operations or
stockholders' equity of the Company, except such agreements, instruments or
obligations with respect to which valid consents or waivers have been obtained
by the Company.
9. No consent, approval, authorization or order of, or filing with,
any federal or state governmental agency or body is required for the
consummation of the transactions contemplated by the Agency Agreement, or the
issuance and sale of the Offered Shares by the Company, except such as have been
obtained and such as may be required under state securities laws (as to which we
express no opinion), or the rules of the NASD.
10. The Company qualifies to be taxed as a "real estate investment
trust" pursuant to Sections 856 through 860 of the Code, and the Company's
planned method of operation as described in the Registration Statement will
enable it to meet the requirements for qualification and taxation as a "real
estate investment trust" under the Code.
11. Assuming the Company conducts its business and uses the proceeds
from the sale of the Offered Shares as set forth in the Registration Statement,
the Company is not, and upon consummation of the transactions contemplated in
the Agency Agreement will not be required to register as an "investment company"
as such term is defined in the United States Investment Company Act of 1940, as
amended.
12. Such counsel has been advised by the American Stock Exchange
that the common shares of the Company, including the Offered Shares, have been
duly authorized for listing by the American Stock Exchange upon official
notice of issuance.
-2-
<PAGE>
13. The information in the Prospectus under the heading "Federal
Income Tax Considerations," to the extent that it constitutes matters of law or
legal conclusions, has been reviewed by such counsel and presents fairly
in all material respects the information required to be disclosed therein
under the U.S. Securities Act.
14. The offer, issuance and sale of shares of Common Stock of the
Company to Ronald Bernbaum prior to the Closing Date as described in the
Prospectus are exempt from the registration requirements of the U.S.
Securities Act and applicable state securities and Blue Sky laws.
15. To counsel's knowledge, there are no legal or governmental
proceedings, pending or threatened, before any court or administrative body or
regulatory agency, to which the Company is a party or to which any of the
properties of the Company is subject that are required to be described in the
Registration Statement that are not so described.
16. [Effect of choice of law provision under Maryland law.]
17. [Enforceability of foreign country judgment under Maryland law.]
-3-
<PAGE>
[FACE OF CERTIFICATE]
BASIC U.S. REIT, INC.
Number Shares
B
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
THIS CERTIFICATE IS TRANSFERABLE ONLY IN NEW YORK, NEW YORK
CUSIP 069908 10 1
SEE REVERSE FOR
CERTAIN DEFINITIONS
AND RESTRICTIONS
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
BASIC U.S. REIT, INC. TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER
HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON SURRENDER OF THIS
CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE AND THE SHARES REPRESENTED
HEREBY ARE ISSUED AND SHALL BE SUBJECT TO ALL OF THE PROVISIONS OF THE AMENDED
AND RESTATED ARTICLES OF INCORPORATION AND BYLAWS OF THE CORPORATION, EACH AS
FROM TIME TO TIME AMENDED (COPIES OF WHICH ARE ON FILE WITH THE TRANSFER AGENT),
TO ALL OF WHICH THE HOLDER BY ACCEPTANCE HEREOF ASSENTS. THIS CERTIFICATE IS NOT
VALID UNTIL COUNTERSIGNED AND REGISTERED BY THE TRANSFER AGENT AND REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE SIGNATURES
OF ITS DULY AUTHORIZED OFFICERS.
DATED:
/s/ Aran Kwinta BASIC U.S. REIT, INC. /s/ Carl Maynard
SECRETARY CORPORATE PRESIDENT
SEAL AND CHIEF EXECUTIVE OFFICER
1996
MARYLAND
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NEW YORK)
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
[REVERSE OF CERTIFICATE]
BASIC U.S. REIT, INC.
IMPORTANT NOTICE
The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the information required by Section 2-211(b) of the
Maryland General Corporation Law with respect to the designations and any
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, and terms
and conditions of redemption of the stock of each class which the Corporation
has authority to issue and, if the Corporation is authorized to issue any
preferred or special class in series, (i) the differences in the relative rights
and preferences between the shares of each series to the extent set, and (ii)
the authority of the Board of Directors to act such rights and preferences of
subsequent series. The foregoing summary does not purport to be complete and is
subject to and qualified in its entirety by reference to the Amended and
Restated Articles of Incorporation of the Corporation, as amended from time to
time, a copy of which will be furnished without charge to the registered holder
of this certificate upon request to the Secretary of the Corporation at its
principal office or to the Transfer Agent.
The shares of Common Stock represented by this certificate are subject to
certain restrictions on transferability and ownership in order to comply with
provisions of the U.S. Internal Revenue Code of 1986, as amended, relating to
real estate investment trusts. The terms and conditions of these restrictions
are set forth in the Amended and Restated Articles of Incorporation of the
Corporation, a copy of which will be furnished without charge to the registered
holder of this certificate upon request to the Secretary of the Corporation at
its principal office or to the Transfer Agent.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ............. Custodian .............
(Cust) (Minor)
under Uniform Gifts to Minors
Act ............................................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, hereby sell, assign and transfer unto
----------------
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
| |
| |
| |
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- ----------------------------------------------------------------------
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
------------------------
NOTICE:
---------------------------------------
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT, OR ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
--------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
November 26, 1996
[Letterhead]
Schnader Harrison Segal & Lewis
Basic U.S. REIT, Inc.
7850 Northwest 146th Street
Suite 308
Miami, Florida 33016
Re: Registration Statement on Form S-11
-----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Basic U.S. REIT, Inc., a Maryland
corporation (the "Corporation"), in connection with the preparation and filing
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "1933 Act"), of a Registration Statement on Form S-11, as amended
(the "Registration Statement"), relating to the offer and sale of 2,740,000
shares of common stock, par value $0.01 per share, of the Corporation (the
"Common Stock") pursuant to such Registration Statement.
As counsel for the Corporation and as a basis for the opinion
hereinafter set forth, we have made such legal and factual examinations and
inquiries, including an examination of originals, or copies certified or
otherwise identified to our satisfaction, of corporate records and other
documents of the Corporation, as we have deemed necessary or appropriate for
the purposes of this opinion. On the basis of such examination, we are of the
opinion that the Common Stock being offered and sold pursuant to the
Registration Statement, when issued and sold pursuant to the duly executed
Agency Agreement (in substantially the form attached as an exhibit to the
Registration Statement) and in the manner contemplated by the Registration
Statement, will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our Firm under the caption "Legal
Matters" in the Registration Statement and the Prospectus constituting a part
thereof.
Very truly yours,
/s/ Schnader, Harrison, Segal & Lewis
SCHNADER HARRISON SEGAL & LEWIS
<PAGE>
November 26, 1996
[Letterhead]
Schnader Harrison Segal & Lewis
Basic U.S. REIT, Inc.
7850 Northwest 146th Street
Suite 308
Miami, Florida 33016
Re: BASIC U.S. REIT, INC
--------------------
Ladies and Gentlemen:
You have requested our opinion concerning: (a) the ability of Basic
U.S. REIT, Inc. (the "Corporation") to qualify as a real estate investment
trust ("REIT") under Sections 856 through 859 of the Internal Revenue Code of
1986, as amended (the "Code"), and (b) the presentation of the material tax
consequences to the Corporation and its stockholders of the tax discussion in
the Registration Statement on Form S-11 (File No. 333-13153), which the
Corporation filed on October 1, 1996 with the Securities and Exchange
Commission, including Amendment No. 1 to the Registration Statement filed on
the date hereof (the "Registration Statement"). Capitalized terms used but
not defined herein have the meanings specified in the Registration Statement.
We have examined the Registration Statement, the Corporation's
Amended and Restated Articles of Incorporation, and such other documents as
we considered necessary or appropriate for purposes of issuing our opinions.
We also received certain representations from officers of the Company,
including the representations set forth in a representation letter, dated the
date hereof executed by a duly approved officer of the Corporation (the
"Representation Letter"). In rendering the opinions set forth below, we have
relied upon such documents and representations without undertaking any
independent verification of the accuracy or completeness of those matters.
In our review, we have assumed that each representation and all other
information that we reviewed is true and correct in all material respects and
will remain true and correct, that all obligations imposed by any documents and
the parties have been or will be performed, that the Registration Statement and
other information fairly describes the past and expected future actions of the
parties, and that the Corporation has been and will be operated in a fashion
consistent with the expectations described in the Registration Statement and in
<PAGE>
Basic U.S. REIT, Inc.
November 26, 1996
Page 2
the Representation Letter. We have not made an independent verification of
the accuracy or completeness of those matters.
Based on the documents, representations, and assumptions set forth
above, and the discussion in the Registration Statement under the caption "U.S.
Federal Income Tax Considerations" (which is incorporated herein by reference),
we are of the opinion that:
(a) Commencing with the Corporation's taxable year ending December
31, 1997, the Corporation will qualify to be taxed as a REIT pursuant to
sections 856 through 859 of the Code, and the Corporation's proposed method of
operation will enable it to meet the requirements for qualification and taxation
as a REIT under the Code. No assurance can be given that the Corporation will
qualify as a REIT for any particular period, however, because that determination
involves factual determinations as to whether the Corporation actually complies
with the various requirements of the Code necessary for the Corporation to
qualify as a REIT.
(b) The descriptions of the law and the legal conclusions contained
in the Registration Statement under the caption "U.S. Federal Income Tax
Considerations" are fairly presented in all material respects, and the
discussion thereunder fairly summarizes the material U.S. Federal income tax
matters and consequences to the stockholders.
We will not review on a continuing basis the Company's compliance with
the documents or the assumptions set forth above, or the representations set
forth in the Representation Letter. Accordingly, no assurance can be given that
the actual results of the Company's operations for any given taxable year will
satisfy the requirements for qualification and taxation as a REIT.
The foregoing opinions are based on current provisions of the Code,
the Canada-U.S. Income Tax Convention (the "Treaty"), as amended by a revised
protocol that entered into force November 9, 1995 (the "Protocol"), U.S.
Treasury Regulations, published administrative interpretations, and published
court decisions. The Internal Revenue Service has not issued Regulations or
administrative interpretations with respect to various provisions of the Code
relating to REIT qualification. No assurance can be given that the law will not
change in a way that will prevent the Corporation from qualifying as a REIT.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to the reference to Schnader Harrison
Segal & Lewis under the caption "U.S. Federal Income Tax Considerations" in the
Registration Statement.
<PAGE>
Basic U.S. REIT, Inc.
November 26, 1996
Page 3
The foregoing opinions are limited to the U.S. Federal income tax
matters addressed herein, and no other opinions are rendered with respect to
other Federal tax matters or to any issues arising under the tax laws of any
other country, or any state or locality. We undertake no obligation to update
the opinions expressed herein after the date of this letter. This opinion letter
is solely for the information and use of the addressees, and it may not be
distributed, relied upon for any purpose by any other person, quoted in whole or
in part or otherwise reproduced in any document, or filed with any governmental
agency without our express written consent.
Very truly yours,
/s/ Schnader, Harrison, Segal & Lewis
SCHNADER HARRISON SEGAL & LEWIS
<PAGE>
Exhibit 8.2
SMITH LYONS
[LETTERHEAD]
November 26, 1996
Basic U.S. REIT, Inc.
7350 Northwest 146th Street
Suite 308
Miami, Florida 33016
U.S.A
Ladies and Gentlemen:
Re: Basic U.S. REIT, Inc.
You have requested our opinion concerning the presentation of the
principal Canadian federal income tax considerations generally applicable to
purchasers of stock of Basic U.S. REIT, Inc. (the "Corporation") who are
resident in Canada in the Registration Statement on Form S-11 (File
No. 333-13153), which the Corporation filed on October 1, 1996 with the
Securities and Exchange Commission, including Amendment No. 1 to the
Registration Statement filed on November 26, 1996 (the "Registration
Statement"). Capitalized terms used but not defined herein have the meanings
specified in the Registration Statement.
We have examined the Registration Statement and such other
documents as we considered necessary or appropriate for purposes of issuing
our opinion. We also received certain representations from officers of the
Company. In rendering the opinions set forth below, we have relied upon such
documents and representations and on the descriptions of the Corporation
contained in the Registration Statement without undertaking any independent
verification of the accuracy or completeness of those matters.
<PAGE>
SMITH LYONS Page 2
In our review, we have assumed that each representation and all
other information that we reviewed is true and correct in all material
respects and will remain true and correct, that all obligations imposed by
any documents and the parties have been or will be performed, that the
Registration Statement and other information fairly describes the past and
expected future actions of the parties, and that the Corporation has been and
will be operated in a fashion consistent with the expectations described in
the Registration Statement. We have not made any independent verification of
the accuracy or completeness of those matters.
Based on the documents, representations, and assumptions set forth
above, and the discussion in the Registration Statement under the caption
"Canadian Federal Income Tax Considerations" (which is incorporated herein by
reference), we are of the opinion that the descriptions of the law and the
legal conclusions contained in the Registration Statement under the caption
"Canadian Federal Income Tax Considerations" are correct in all material
respects, and the discussion thereunder fairly summarizes the principal
Canadian federal income tax matters and consequences to stockholders who are
resident in Canada.
The foregoing opinion is based on current provisions of the INCOME
TAX ACT (Canada), the Canada-U.S. Income Tax Convention (the "Treaty") as
amended by a revised protocol that entered into force November 9, 1995 (the
"Protocol"), the Income Tax Regulations, published administrative
interpretations of Revenue Canada, and published court decisions.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement. We also consent to the reference to Smith Lyons
under the caption "Canadian Federal Income Tax Considerations" in the
Registration Statement.
The foregoing opinion is limited to the Canadian federal income tax
matters addressed herein, and no other opinions are rendered with respect to
other Canadian tax matters or to any issues arising under the tax laws of any
other country, or any province or locality. We undertake no obligation to
update the opinion expressed herein after the date of this letter. This
opinion letter is solely for the information and use of the addressee, and it
may not be distributed, relied upon for any purpose by any
<PAGE>
SMITH LYONS Page 3
other person, quoted in whole or in part or otherwise reproduced in any
document, or filed with any governmental agency without our express written
consent.
Yours very truly,
/s/ Smith Lyons
TSW:ml
<PAGE>
Page
MEMORANDUM OF AGREEMENT made as of the 26th day of November, 1996.
B E T W E E N:
BASIC U.S. REIT, INC.,
a corporation incorporated under the laws of Maryland,
(hereinafter referred to as the "Company")
OF THE FIRST PART;
- and -
BASIC ADVISORS, INC.,
a corporation incorporated under the laws of Delaware,
(hereinafter referred to as the "Advisor")
OF THE SECOND PART.
WHEREAS shares of common stock in the Company are to be offered to
the public pursuant to a prospectus (the "Prospectus") dated the date hereof;
AND WHEREAS the Company will require investment advice with respect
to the investment of its assets in permitted real property investments and
the management thereof;
AND WHEREAS the Advisor has agreed to provide such investment and
management advice to the Company;
NOW THEREFORE THIS INDENTURE WITNESSETH THAT in consideration of the
respective covenants and agreements herein contained, the parties hereby
agree as follows:
ARTICLE 1
APPOINTMENT OF ADVISOR
1.01 The Advisor is hereby appointed to provide investment
management, administrative, bookkeeping, reporting, accounting and clerical
services and advice to the Company. The Advisor accepts such appointment and
acknowledges that it is familiar with the terms and provisions of the
Prospectus and the constating documents and by-laws of the Company and agrees
to act in accordance therewith and in accordance with the terms of this
Agreement in a competent, honest, fair, diligent and efficient manner, in
good faith and to the best of its ability in the best interests of the
Company. Furthermore, the Advisor agrees that it shall devote such time and
attention as may be required to fulfil its obligations hereunder.
ARTICLE 2
DUTIES OF THE ADVISOR
2.01 Subject to the exclusive and overriding authority of the
directors of the Company to manage the business and affairs of the Company,
the Advisor hereby agrees that it shall:
a) provide or arrange for the provision of research and other data
in connection with the Company's investments and investment
policies;
<PAGE>
b) act as the Company's real property investment manager and
consultant, and in so doing make recommendations to the board of
directors of the Company with respect to the acquisition and
disposition of investments, perform or arrange for the
performance of such inspections and investigations in connection
therewith as are deemed appropriate and, upon request of the
board of directors of the Company, supervise closings in respect
thereof;
c) from time to time arrange for mortgage financing on behalf of the
Company for its real property investments provided the Advisor
may retain mortgage brokers at the expense of the Company and
with the consent of the board of directors of the Company to
assist in the arrangement of such mortgage financing.
d) obtain and review appraisal reports and title opinions or reports
from counsel in connection with real property investments made or
proposed to be made by the Company, review property location, the
building and its physical characteristics, the relevant rental
market, financial and character data relating to the property and
the vendor or purchaser, applicable environmental, zoning and
other governmental regulations, the character of tenant mix and
quality of tenants, insurance coverage, the long term anticipated
total return to the Company and other factors in connection with
the Company's investments;
e) supervise the performance of all property management, maintenance
and other customary services related to the ownership of the
Company's real estate investments;
f) manage the Company's short-term investments;
g) supervise the performance of the day-to-day administrative
functions in connection with the management of the Company;
h) deal with, retain or employ other persons on behalf of the
Company in connection with its investments, including solicitors,
consultants, property managers, leasing agents, finders, lenders,
brokers, insurers, banks, builders, developers and other
investment participants;
i) arrange for the provision to the Company of any information
required in order to report to shareholders;
j) arrange for the preparation of budgets;
k) arrange for the provision to the Company of such services by
others, as the board of directors may reasonably request in
connection with the activities of the Company; and
l) from time to time, report to the board of directors with respect
to its performance of the foregoing services.
ARTICLE 3
FEES AND EXPENSES
3.01 The Company shall pay to the Advisor an annual fee based upon
a percentage of Share Capital (as hereinafter defined) determined as follows:
SHARE CAPITAL RATE
------------- ----
On the first $35 Million 1.5%
On the amount over $35 Million
and up to $125 Million 1.25%
<PAGE>
On the amount over $125 Million
and up to $200 Million 1.00%
On the amount in excess
of $200 Million 0.75%
The fee payable pursuant to this Section 3.01, shall be calculated and paid in
monthly instalments in arrears, at one-twelfth (1/12) of the annual fee on the
fifteenth (15th) day of each month based upon the Share Capital on the last day
of the previous month. For the purposes hereof, Share Capital shall be the
aggregate of the proceeds received by the Company for all issued and outstanding
shares in the capital of the Company from time to time after deducting any
direct costs or expenses paid by the Company for the issuance of such shares
(including any agency commissions).
3.02 On the date of the closing of the disposition by the Company
or any subsidiary of the Company, of any real property or any interest in
real property, the Company shall pay to the Advisor a disposition fee equal
to one-quarter percent (0.25%) of the sale proceeds from the disposition of
such real property, all subject to the following rules:
a) in determining sale proceeds of any property, any mortgage
assumed or taken back on sale shall be included in the sale
proceeds on the basis of the actual indebtedness owing thereunder
as of the date of the closing of the sale;
b) in determining sale proceeds of any property, there shall be no
deduction from the sales proceeds for, any out of pocket costs
incurred by the Company in connection with the relevant
disposition including, without limitation, legal fees and
disbursements, registration and filing fees, sales taxes, real
estate commissions or other disposition fees;
c) for the purposes of this Section 3.02, sale proceeds shall
include the receipt of compensation for the expropriation of any
real property of the Company or any subsidiary of the Company or
any part thereof or interest therein, and the recovery of damage
awards or insurance proceeds not required to repair or
reconstruct the damaged assets (other than business or rental
interruption insurance proceeds) in respect thereof; and
d) except as provided herein, if any uncertainty or difference
between the Company and the Advisor arises in determining any
amount payable under this Section, advice (which shall not be
binding) shall be sought from the auditors of the Company.
3.03 On the date of the closing of the purchase by the Company or
any subsidiary of the Company, of any real property or any interest in real
property, the Company shall pay to the Advisor, an acquisition fee equal to
one and one-half percent (1.5%) of the cost of such real property to the
Company or its subsidiary all subject to the following rules:
a) the cost of any property shall be comprised of the purchase price
to the Company on the date of closing of the purchase without
including ancillary expenses such as legal fees and
disbursements, registration and filing fees, sales taxes, or
other acquisition fees;
b) in determining the cost of any property, any mortgage assumed on
purchase or given back on purchase or granted on purchase shall
be included in the cost on the basis of the actual indebtedness
owing thereunder as of the date of the closing of the purchase;
and
c) except as provided herein, if any uncertainty or difference
between the Company and the Advisor arises in determining any
amount payable
<PAGE>
under this Section, advice (which shall not be binding) shall be
sought from the auditors of the Company.
3.04 On the date of the completion of any financing or
refinancing by the Company or any subsidiary of the Company of any real property
or any interest in real property, the Company shall pay to the Advisor a
financing fee equal to one-
quarter percent (0.25%) of the principal amount of the financing or refinancing
arranged, renewed, extended or increased in respect of any real property of the
Company or any subsidiary of the Company, whether the financing is secured by a
mortgage or mortgages on the real property, a debenture or debentures on the
real property, personalty or otherwise.
3.05 The Advisor shall be responsible for the employment expenses
of its personnel, rent and other office expenses and miscellaneous
administrative expenses relating to the performance of its functions under
this Agreement.
3.06 The Company shall be responsible for all of the expenses of
the Company and any subsidiary of the Company and all expenses incurred by
the Advisor in the performance of its duties in accordance herewith (other
than expenses to be paid by the Advisor pursuant to Section 3.05), including
without limiting the generality of the foregoing, the following:
a) interest and other costs of borrowed money;
b) taxes and assessments on real property and income, if applicable;
c) fees and expenses of lawyers, accountants, appraisers, property
managers and other agents or consultants employed by or on behalf
of the Company;
d) fees and expenses of the directors and officers of the Company;
e) expenses of managing, leasing and maintaining real property;
f) expenses of servicing mortgages;
g) insurance as required, including liability insurance for
directors and officers of the Company;
h) expenses in connection with distributions to shareholders of the
Company;
i) expenses of maintaining the books and records of the Company;
j) expenses in connection with communications to shareholders of the
Company and other bookkeeping and clerical work necessary in
maintaining relations with shareholders;
k) registration, custodial, administrative and other fees and
expenses in connection with the securities of the Company;
l) all fees and expenses in connection with the acquisition,
disposition and ownership of its investments, including property
management fees;
m) all fees and expenses of listing and maintaining the listing of
the securities of the Company on any exchange;
n) all fees and expenses of the registrar and transfer agent
appointed by the Company for the shares of the Company;
o) all fees and expenses of the Company complying with applicable
securities legislation;
p) all fees and expenses incurred by the Advisor in performing any
of the services required of it hereunder other than those set out
in Section 3.05; and
<PAGE>
q) all other expenses not specifically assumed by the Advisor
hereunder.
3.07 Except for property management services, where any of the
services to which the expenses referred to in Section 3.06 relate are
performed by the Advisor or its affiliates, the Advisor or such affiliates
shall only be compensated for its or their reasonable expenses directly
incurred in performing such services (other than expenses to be paid by the
Advisor pursuant to Section 3.05). If and to the extent that the Advisor or
any person affiliated with the Advisor shall render services to the Company
at the request of the Company in addition to those specifically required to
be rendered under this Agreement, such services will be compensated
separately on the basis of fees at least as favourable to the Company as
those then generally charged for comparable services and activities.
3.08 Any proposed change in the amount or basis or calculation of
fees and other expenses provided hereunder which would or could result in an
increase in charges to the Company may only be made if approved by the
Advisor, the board of directors of the Company and, if required by law, a
majority of the votes cast at a meeting of the shareholders.
3.09 The Company shall forthwith reimburse the Advisor for all
costs, charges and expenses properly incurred by the Advisor on behalf of the
Company or any of its subsidiaries in the ordinary course of the business of
the Company and its subsidiaries and not specifically agreed to be borne by
the Advisor hereunder.
ARTICLE 4
TERM OF AGREEMENT
4.01 This Agreement shall continue in full force and effect for a
period of five (5) years from the date of completion of the acquisition by
the Company of its first investment in real property; provided, however,
notwithstanding the foregoing, upon the expiry of the original term, this
Agreement shall, subject to Section 4.05, be renewed thereafter for further
periods of five (5) years upon the approval of a majority of the directors of
the Company, including a majority of the independent directors of the
Company, and a majority of the votes cast at a meeting of shareholders of the
Company held prior to the expiration of the initial term or renewal term (as
the case may be).
4.02 If and whenever:
a) the Advisor shall commit a material breach of any of the material
terms, covenants or conditions of this Agreement and within
thirty (30) days after written notice of such breach is given by
the Company to the Advisor, such breach shall not be cured or the
Advisor fails to commence to cure any such breach and fails to
continue to use its reasonable best efforts to cure such breach
thereafter;
b) a decree or order by a court having jurisdiction in the matter
shall have been entered for relief in respect of an involuntary
bankruptcy, or adjudging the Advisor bankrupt or insolvent, or
approving as properly filed, a petition seeking reorganization
under applicable bankruptcy law, and such decree shall have
continued, undischarged, undismissed or unstayed for a period of
ninety (90) consecutive days; or a decree or order of a court
having jurisdiction in the matter for the appointment of a
receiver, liquidator or trustee or assignee or custodian, or
sequestrator (or similar official) in bankruptcy or insolvency of
the Advisor or for any substantial part of the Advisor's
property, or for the winding up or liquidation of the Advisor's
affairs shall have been entered and such decree or order shall
have remained in force, undischarged, undismissed or unstayed for
a period of ninety (90) consecutive days;
c) the Advisor shall institute proceedings to be adjudicated a
voluntary
<PAGE>
bankrupt or insolvent or shall consent to the filing of a
bankruptcy or insolvency proceeding against it, or shall file a
petition or answer or consent seeking relief, or shall commence a
voluntary case under applicable bankruptcy law or shall consent
to the filing of any such petition or to the entry of any such
order for relief in an involuntary case under any such bankruptcy
law, or shall consent to the appointment of or taking possession
by a receiver or liquidator or trustee or assignee or custodian
or sequestrator (or similar official) in bankruptcy or insolvency
of the Advisor or of any substantial part of the Advisor's
property, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its
debts generally as they become due and its willingness to be
adjudicated a bankrupt;
d) the Advisor passes a resolution for its winding up or dissolution
or is ordered dissolved by a court having jurisdiction and such
order shall have remained in force undischarged, undismissed or
unstayed for a period of ninety (90) consecutive days;
then the Company shall have the right to terminate this Agreement forthwith by
notice in writing to the Advisor. The Advisor shall be entitled to the fees
described in Section 3.01 pro rated to the date of termination and shall be
entitled to reimbursement for the expenses described in Section 3.06 if such
expenses were incurred prior to the date of termination.
4.03 In addition to Section 4.02, this Agreement may be terminated
by the Company during its term after the first twelve (12) months of the term
hereof upon giving the Advisor not less than sixty (60) days' written notice
after:
a) approval of the termination by two-thirds of the votes cast at a
meeting of shareholders called for such purpose;
b) approval of other advisory arrangements by two-thirds of the
votes cast at a meeting of shareholders called for such purpose;
c) the payment to the Advisor of all amounts owing by the Company to
the Advisor to the date of termination; and
d) the payment to the Advisor of an amount equal to three (3) times
the fees paid to the Advisor by the Company pursuant to Section
3.01 during the twelve (12) month period immediately prior to the
date of termination of this Agreement plus an amount equal to the
average of the aggregate annual acquisition and disposition fee
paid by the Company to the Advisor pursuant to Sections 3.02 and
3.03 during the three (3) year period immediately prior to the
date of termination of this Agreement.
4.04 If and whenever the Company shall commit a material breach of
any of the material terms, covenants or conditions of this Agreement and
within thirty (30) days after written notice of such breach is given by the
Advisor to the Company, such breach shall not be cured or (except for a
monetary default) the Company fails to commence to cure any such breach and
continues to use its reasonable best efforts to cure such breach thereafter,
the Advisor shall have the right to terminate this Agreement forthwith by
notice in writing to the Company. It is expressly understood that the
failure by the Company to pay any fees or expenses to the Advisor due and
payable hereunder shall be deemed a material breach of this Agreement for the
purposes of Section 4.04.
4.05 The Advisor may not terminate this Agreement during its term
other than in accordance with Section 4.04 hereof and shall give the Company
not less than six (6) months notice in writing of its intention not to renew
this Agreement.
4.06 The Advisor shall within thirty (30) days after termination or
non-renewal deliver to the Company:
<PAGE>
a) all records, documents and books of account; and
b) all materials and supplies for which the Advisor has been paid by
the Company, which are in the possession or control of the
Advisor and relate directly or indirectly to the performance by
the Advisor of its obligations under this Agreement, provided,
however, that the Advisor may retain notarial or other copies of
such records, documents and books of account and the Company
shall produce at its head office the originals of such records,
documents and books of account whenever reasonably required to do
so by the Advisor for the purpose of legal proceedings or
dealings with any governmental authorities.
4.07 Within thirty (30) days following the termination or
non-renewal of this Agreement there shall be an accounting between the
parties with respect to the monies due by the Company to the Advisor under
the terms of this Agreement or any other agreement or instrument entered into
in furtherance of this Agreement. The Company shall forthwith pay to the
Advisor all monies which shall be owing pursuant to such accounting.
4.08 Upon termination or non-renewal of this Agreement, the Advisor
shall be released from all further obligations hereunder (but without
prejudice to any liability existing on such date). The Company shall fully
indemnify, save and hold the Advisor harmless from and against any and all
claims, demands, actions, suits, losses, costs, charges, damages,
liabilities and expenses whatsoever incurred, sustained or suffered by the
Advisor, its directors, officers, shareholders, employees and agents with
respect to events which occur in relation to the Company after the effective
date of such termination or non-renewal.
ARTICLE 5
INVESTMENTS
5.01 The Advisor hereby agrees that all investments of the Company
shall at all times conform to and be in accordance with the requirements
imposed by law and by the provisions of the constating documents of the
Company and, subject to the control of the directors of the Company, with the
policies set out in Section 5.02.
5.02 The Advisor acknowledges that it is the policy of the Company
that, subject to the provisions of Section 5.03, the Company will invest its
assets in investments which meet the following objectives and criteria:
a) to achieve stable cashflow for distribution to its shareholders
and to maximize share value through the ongoing active management
of its assets and through the future acquisition of additional
properties. The Company will seek to manage its assets with an
emphasis on maintaining stable cashflow through long term leases
to creditworthy tenants;
b) initially, the Company will focus on neighbourhood and community
shopping centres. The Company will consider acquiring shopping
centres that satisfy a combination of some or all of the
following factors set out in this paragraph b). Priority will be
given to centres:
i) with anchor tenants, such as department stores, supermarkets
and national retail chains, to ensure the quality of retail
services offered by the centre, the quality of its tenants and
the desired return on sales;
ii) which, if combined with the other real property investments of the
Company, provide the Company with a diversified tenant base with
the anchor tenants accounting for a minimu of sixty percent
(60%) of the gross leasable area of the Company's shopping centre
portfolio. The anchor tenants should be dominant enough to
establish the shopping centre as a destination centre;
iii) where the average anchor lease extends for a minimum of ten (10)
years from the date of acquisition by the Company;
iv) in a strategic location, in a strong market area with convenient
access and visibility to a high traffic area;
<PAGE>
v) with construction materials which are of sufficiently high
quality to require no more than industry standard levels of
maintenance;
vi) with convenient access for both shoppers and tenants;
vii) where rental rates are on average at or lower than comparable
market rates in the area. This is intended to reduce the
possibility of losing tenants to other sites and to create the
potential to increase rates in the future;
viii) in a location experiencing above average growth in retail
sales, provided that the growth in the retail sector for that
area will not outpace economic growth in the area;
c) potential real property investments should receive favourable
environmental and engineering reports;
d) the Company may participate with other entities in property
ownership, through joint ventures or other types of ownership;
e) the Company will not enter into a joint venture or partnership
to make an investment that would not otherwise meet its
investment policies;
f) the Company will seek mortgage financing for its real estate
investments which is non-recourse to the Company (other than
for issues relating to environmental matters, waste to
property, frauds or misrepresentations, taxes or other similar
assessments, tenant prepayments, condemnation and insurance
proceeds, grossly negligent violations of the law and net
revenue obligations and other obligations customarily retained
in non-recourse financing);
g) the Company may consider cross-collateralized loans to reduce
borrowing costs;
h) the Company may take on recourse obligations such as lines of
credit and loans for property expansion;
i) the Company will continue to acquire only shopping centres
until the aggregate of the acquisition prices of all
properties owned by the Company exceeds One Hundred Million
Dollars ($100,000,000);
j) after the initial investment of One Hundred Million Dollars
($100,000,000) in neighbourhood and community shopping
centres, the following types of real property investments will
also be considered for acquisition by the Company:
i) the Company will seek to acquire office buildings in urban
centres based on location, credit rating of tenants, terms
of existing leases and the potential for income growth
through the management of leases and for capital
appreciation;
ii) mixed-used commercial properties may be selected for their
complementary tenant mix and for their income and capital
appreciation potential;
iii) the Company will seek to acquire multi-tenant investment
buildings and major business parks where credit worthy
tenants with net leases will be the occupants;
iv) shopping centres which do not necessarily meet the
criteria contained in paragraphs a) through i) will also
be considered; and
k) the Company will not invest in hotels or nursing homes or
similar real estate which includes the operation of a business
separate and
<PAGE>
distinct from the operation of income producing property.
5.03 In accordance with the objectives of the Company and to limit
financial and other risks, the Company intends to comply with the following
restrictions:
a) the Company may not make any investment that would result in its
ceasing to qualify as a Real Estate Investment Trust (as defined
in the U.S. Internal Revenue Code of 1986, as amended);
b) the Company may not incur indebtedness if the aggregate
outstanding principal amount all indebtedness the Company secured
against properties of the Company or against any part thereof
exceeds sixty percent (60%) of the greater of:
i) aggregate acquisition prices of all properties of the Company;
and
ii) the aggregate current fair market value of all properties of
the Company. For the purposes hereof, fair market value is
to be determined by an independent third party appraisal;
c) the Company may not engage in construction or development of real
property except to the extent to maintain its properties in good
repair, for expansion of an existing property or to otherwise
enhance the income producing ability of the properties;
d) pending investment or reinvestment, cash on hand will be invested
in certificates of deposit with terms of less than one (1) year
or U.S. government securities (i.e. treasury obligations);
e) the Company may not invest in mortgages, unless the underlying
security is income-producing property or is in the process of
being developed as income-producing property, all such mortgages
do not exceed ten percent (10%) of the aggregate cost of all
assets of the Company, the mortgage is a first mortgage and the
term of the mortgage is five (5) years or less and the
amortization period is thirty (30) years or less;
f) the Company may not invest in any real properties without
obtaining an independent third party appraisal, an environmental
assessment and an engineering report for each centre;
g) after the acquisition of the first two (2) properties, the
Company may not acquire any single investment in real property if
the cost to the Company of such acquisition will exceed (i) after
the aggregate acquisition prices of all properties owned by the
Company exceeds One Hundred Million Dollars ($100,000,000),
twenty-five percent (25%) of the aggregate acquisition prices of
all properties inclusive of the proposed investment, and (ii)
Twenty-Five Million Dollars ($25,000,000) until the aggregate
acquisition prices of all properties owned by the Company
inclusive of the proposed investment exceeds One Hundred Million
Dollars ($100,000,000);
h) the Company may not grant or assume a mortgage on any office
property if the aggregate outstanding principal amount of the
mortgage and of all other mortgages granted or assumed by the
Company secured against its office properties or any part
thereof exceeds fifty percent (50%) of the aggregate
acquisition prices of all office properties of the Company.
5.04 The board of directors shall determine whether any property
meets the policies set out in Section 5.02 and the restrictions set out in
Section 5.02 may be amended by a majority of the board of directors of the
Company, such majority to include a majority of those directors of the
Company which are independent of the Advisor. The restrictions set out in
Section 5.03 may only be amended by a majority of votes cast at a meeting of
shareholders of the Company called for such purposes and approval by a
majority of the board of directors of the Company, such majority to include a
majority of those directors of the Company which are independent of the
Advisor.
<PAGE>
ARTICLE 6
POTENTIAL CONFLICTS OF INTEREST
6.01 The Advisor and its affiliates shall be under no liability to
the Company or its subsidiaries, the directors, officers and shareholders of
the Company or its subsidiaries, for or as a result of their continuing
engagement in the business of investing in and managing real estate in Canada
or the United States or for the manner in which they resolve any conflicts of
interest deriving therefrom:
a) if, in any case in which the Advisor or its affiliates have a
material interest other than as an advisor, the Advisor has acted
in accordance with the procedures outlined in this Agreement and
the Prospectus; or
b) in any case where the Advisor or its affiliates have no material
interest other than as an advisor, unless the Advisor or its
affiliates have acted in a manner which is dishonest or wilfully
or grossly negligent.
6.02 If the Advisor or any of its affiliates is a party to or has
any material interest, including as mortgagee, in connection with any
proposed transaction with the Company, disclosure of such interest will be
made to the board of directors of the Company.
6.03 The Advisor and its affiliates shall not directly or
indirectly act as advisors or managers of another real estate investment
trust without the approval of a majority of the votes cast at a meeting of
shareholders of the Company.
6.04 If the Advisor or any director or officer of the Advisor
desires to acquire any real property investment which falls within the
Company's then applicable investment policies, the Advisor shall advise the
Company in writing with all relevant details thereof and make available to
the Company the opportunity to participate in such acquisition on the same
terms. The Company shall notify the Advisor in writing within thirty (30)
days of first being advised by the Advisor of such acquisition if it wishes
to invest in such opportunity, failing which, the Advisor or its directors or
officers (as the case may be) shall be entitled to acquire such investment on
their own behalf or as intended.
6.05 Any services to be provided by the Advisor or any of its
affiliates to the Company other than specifically provided herein and any
fees relating thereto shall require the unanimous approval of the board of
directors of the Company. Notwithstanding anything to the contrary contained
herein, the Advisor or its affiliates may, without the approval of the
Company receive commissions from vendors in connection with real property
purchased by the Company and any commission received by the Advisor or its
affiliates in excess of one percent (1%) of the acquisition price to the
Company shall reduce the fee payable by the Company to the Advisor pursuant
to Section 3.03 for the purchase of such real property.
ARTICLE 7
INDEMNITIES
7.01 The Company shall fully indemnify, save and hold the Advisor
harmless from and against any and all claims, demands, actions, suits,
losses, costs, charges, damages, liabilities and expenses whatsoever
incurred, sustained or suffered by the Advisor, its directors, officers,
shareholders, employees and agents arising out of the Advisor's actions
pursuant to this Agreement including, without limitation, legal costs on a
solicitor and his own client basis, other than liability and expense arising
out of the reckless disregard of its duties, bad faith, gross negligence or
wilful misconduct of the Advisor or its directors, its agents or its
employees.
<PAGE>
7.02 The Advisor shall full indemnify, save and hold harmless the
Company from and against any and all claims, demands, actions, suits, losses,
costs, charges, damages, liabilities or expenses whatsoever including,
without limitation, legal costs on a solicitor and his own client basis,
incurred, sustained or suffered by the Company, its directors, officers,
shareholders, employees and agents arising out of the bad faith, gross
negligence or wilful misconduct of the Advisor or its agents or employees.
ARTICLE 8
DELEGATION BY THE ADVISOR
8.01 The Company hereby authorizes the Advisor to delegate its
duties and powers by entering into any agreement which the Advisor considers
necessary or appropriate in the circumstances with third parties for the
purpose of carrying out the Advisor's duties and obligations under this
Agreement.
8.02 The Advisor agrees and acknowledges that any agreement entered
into with any party for the purposes set forth in Section 8.01 of this
Article shall not in any manner abridge or vary the obligations of the
Advisor to the Company pursuant to this Agreement.
ARTICLE 9
ADVISOR'S RELIANCE
9.01 The Advisor may consult with and rely upon counsel in any case
where it appears to the Advisor to be necessary or desirable with respect to
its authority and obligations hereunder.
9.02 The Advisor may rely and act upon any certificates or other
instruments or paper believed in good faith by the Advisor to be genuine and
to have been signed by any person thereunto duly authorized.
ARTICLE 10
GENERAL
10.01 Any notice required or permitted to be given shall be in
writing and shall be validly given if delivered personally addressed as
follows:
TO THE COMPANY AT:
7850 Northwest 146 Street
Suite 308
Miami Lakes, Florida
TO THE ADVISOR AT:
7850 Northwest 146 Street
Suite 308
Miami Lakes, Florida
or to such other address as either party shall have communicated in writing as
aforesaid to the other.
10.02 This Agreement shall be subject to and construed in
accordance with the laws of the State of Delaware and each of the parties
hereby irrevocably attorns to the jurisdictions of the courts thereof.
10.03 Nothing in this Agreement shall be deemed in any way or for
any purpose to constitute any party a partner of the other party to this
Agreement in the conduct of any business or otherwise or a member of a joint
venture or joint enterprise with the other party to this Agreement. The
Advisor shall for all purposes be an independent contractor and not an agent
or employee of the Company.
<PAGE>
10.04 Subject to Section 5.04, this Agreement may be amended or
altered and any such changes shall only become effective when reduced to
writing and signed by both of the parties.
10.05 Time shall be of the essence of this Agreement.
10.06 This Agreement shall not be assignable by either party
without the written consent of the other party.
10.07 This Agreement shall enure to the benefit of and be binding
upon the parties and their successors and permitted assigns.
10.08 Terms which are used herein but not defined herein and which
are defined in the Prospectus have the respective meanings ascribed thereto
in the Prospectus.
IN WITNESS WHEREOF the parties have signed, sealed and delivered this
Agreement on the date first above written.
BASIC U.S. REIT, INC.
Per:
---------------------------------
Per:
---------------------------------
BASIC ADVISORS, INC.
Per:
---------------------------------
Per:
---------------------------------
SCHEDULE "A"
PROPERTY MANAGEMENT SERVICES
1. The furnishing of management services for the economic and
efficient operation of each real property of the Company.
2. The taking of such steps, so far as is possible, in order to
comply with all restrictions and obligations, statutory, municipal or otherwise,
with respect to each real property of the Company and impose upon the Company or
for which the Company may be liable by law.
3. The planning of the time of moving into and out of each real
property of the Company by all tenants, and supervising such activities so that
there will be a minimum of disturbance to the operation of each such property
and to other tenants in occupancy.
4. From the date of occupancy of each tenant, the establishment and
maintenance on behalf of the Company of any and all necessary liaison with each
tenant.
5. The giving of all notices and statements required to be sent to
tenants under all leases affecting each real property and the giving of all
other notices necessary to good management of each real property.
<PAGE>
6. The taking of such steps as are reasonable and proper in the
circumstances to cause all rent and additional charges to be regularly received
at the earliest possible date in accordance with the terms of the respective
tenants' leases and the receiving, for the account of the Company, of all such
rents and other amounts payable by tenants pursuant to their leases or other
contractual obligations.
7. The obtaining, in accordance with the provisions of leases of
each real property, of tenants' sales figures and calculating percentage rentals
to be derived therefrom and, where necessary, the causing of inspection of
tenants' books to be made, and at the expense of the Company, the causing of
audits of the tenants' books to be made where necessary to collect rents or any
other charges from the tenants which may be in arrears; the instituting and
prosecuting of actions, the evicting of tenants, the recovering of possession of
premises occupied by evicted tenants, or which may be abandoned by tenants, the
suing for, in the name of the Company, and the recovering of, rents and other
sums due and, when expedient, the settling, compromising and releasing of such
actions or suits or the reinstating of such tenancies.
8. The doing or causing to be done, at the expense of the Company.,
of all such things as are reasonably necessary to enable compliance with all the
terms and conditions of the tenants' leases.
9. The arranging for, supervising and being responsible for all
common area maintenance and supervisions within each real property, and all
property repairs, maintenance and upkeep, all at the expense of the Company.
10. The hiring, directing and supervising of, in the name of the
property manager as employer, all on-site personnel as may, in the opinion of
the property manager, be reasonably required for the proper management and
promotion of each real property.
11. At the Company's expense, the paying of all debt service,
carrying charges and other expenses relating to the operation of each real
property including, without limitation, realty taxes, mortgage instalments,
water rates, light and power rates, merchants' association dues, wages and fuel
costs.
12. The receiving and collecting on behalf of the Company for the
account of the Company, of all gross rentals from the real properties and, until
disbursed to the Company, the holding of such moneys in trust for the Company.
<PAGE>
PURCHASE AND SALE AGREEMENT
AND ESCROW INSTRUCTIONS
BETWEEN
CHICO CROSSROADS CENTER, LTD.
A CALIFORNIA LIMITED PARTNERSHIP
"SELLER"
- AND -
BASIC ACQUISITION, INC.
A DELAWARE CORPORATION
"BUYER"
Chicago Title
16969 Von Karman
Irvine, California 92714
Attn: Karen Price
Escrow # 6026054-M19
<PAGE>
TABLE OF CONTENTS
PAGE
1. ESCROW..................................................................1
2. THE PROPERTY............................................................1
3. PURCHASE PRICE..........................................................1
4. PAYMENT OF PURCHASE PRICE...............................................1
a. Initial Deposit .................................................1
b. Second Deposit...................................................1
c. Assumption of Existing Loan......................................2
d. Cash Balance.....................................................2
e. Interest.........................................................2
5. INVESTIGATION AND APPROVAL OF PROPERTY..................................2
a. Right to Inspect Property........................................2
b. Approval of Condition of Property................................3
c. Prior Investigations.............................................3
d. Title Review.....................................................3
e. New Loan Approval................................................3
6. CLOSING; CLOSE OF ESCROW................................................4
a. Closing..........................................................4
b. Close of Escrow..................................................4
c. Closing Costs....................................................4
7. CLOSING - SELLER'S ITEMS................................................5
8. CLOSING - BUYER'S ITEMS.................................................6
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.....................6
10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE....................7
11. CANCELLATION FEES AND EXPENSES..........................................8
12. WITHHOLDING.............................................................8
13. POSSESSION..............................................................8
14. REPRESENTATIONS AND WARRANTIES..........................................8
a. By Buyer.........................................................8
b. By Seller........................................................8
15. PRORATIONS.............................................................10
a. General.........................................................10
b. Rentals.........................................................10
c. Delinquent Rentals..............................................10
d. Operating Cost Pass Throughs, Etc...............................11
e. Prepaid Rentals.................................................11
f. Taxes and Assessments...........................................11
g. Tenant Deposits.................................................11
h. Service Contracts...............................................11
i. Prepaid Expenses................................................12
16. BROKERS................................................................12
17. DEFAULT AND REMEDIES...................................................12
a. Default and Remedies............................................12
b. Liquidated Damages..............................................12
18. CONDEMNATION...........................................................13
19. ATTORNEYS' FEES........................................................13
20. Notices................................................................13
21. Governing Law..........................................................14
22. Integration: Modification; Waiver......................................14
23. COUNTERPART EXECUTION..................................................14
24. HEADINGS; CONSTRUCTIONS................................................14
25. TIME OF THE ESSENCE....................................................14
26. Opening Of Escrow......................................................15
27. Invalid Provisions.....................................................15
28. Binding Effect.........................................................15
29. Further Acts...........................................................15
30. Exhibits...............................................................15
31. SURVIVAL...............................................................15
32. ASSIGNMENT.............................................................15
<PAGE>
TABLE OF EXHIBITS
Exhibit A - Legal Description of Property
Exhibit B - Property Documents
Exhibit C - Grant Deed
Exhibit D - Bill of Sale
Exhibit E - Tenant Lease Agreement
Exhibit F - IRC Affidavit
Exhibit G - Tenant Leases
Exhibit H - Assignment of Service Contracts
Exhibit I - Assignment of Contract Rights
Exhibit J - Tenant Estoppel Certificate
Exhibit K - Landlord Estoppel Certificate
Exhibit L - Guaranty
Exhibit M - Commission Allocation Schedule
<PAGE>
PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS
THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (this
"Agreement") is made as of May 8, 1996, (the "Effective Date") between BASIC
ACQUISITION INC., a Delaware corporation ("Buyer") and CHICO CROSSROADS
CENTER, a California limited partnership ("Seller") with reference to the
following facts:
A. Seller is the owner of the improved real property located in the
City of Chico, State of California, more particularly described in EXHIBIT "A"
attached hereto and incorporated herein by this reference (the "Property").
B. The term "Property" when used herein shall be deemed to include
all buildings, fixtures, structures, parking areas, landscaping and other
improvements and located thereon.
C. Seller desires to sell and convey to Buyer, and Buyer desires to
purchase and accept from Seller, the Property in accordance with and subject to
the terms and conditions set forth below.
NOW THEREFORE, Seller and Buyer agree as follows:
1. ESCROW. The transaction herein contemplated shall be effected
through an escrow ("Escrow") with Chicago Title Insurance Company ("Escrow
Agent"), as established by this Agreement and any additional written escrow
instructions required by Escrow Agent and approved by Seller and Buyer as
evidenced by their respective signatures thereon. In the event of any conflict,
uncertainty or ambiguity between or in respect of any additional written escrow
instructions and this Agreement, the provisions of this Agreement shall govern
and control. This Agreement constitutes joint escrow instructions to Escrow
Agent to complete the transaction contemplated herein. Escrow shall confirm to
each party the date of opening of Escrow ("Opening of Escrow").
2. THE PROPERTY. Seller shall sell and convey to Buyer, and Buyer
shall purchase and accept from Seller the Property.
3. PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Property shall be Twenty One Million Seventy Five Thousand Dollars
($21,075,000.00).
4. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid as
follows:
(a) INITIAL DEPOSIT. Buyer shall concurrently with the opening
of Escrow, deliver to Escrow Agent the sum of One Hundred Thousand Dollars
($100,000.00) ("Initial Deposit"). At Close of Escrow, Buyer shall receive a
credit toward the Purchase Price in an amount equal to the Initial Deposit.
(b) SECOND DEPOSIT. Within one (1) day following the Approval
Date (as defined herein) Buyer shall deposit into Escrow the sum of One Hundred
Fifty Thousand Dollars ($150,000.00) ("Second Deposit"). At Close of Escrow the
Second Deposit shall be applicable to the Purchase Price. The Initial Deposit
and the Second Deposit together with interest thereon, are sometimes
collectively referred to herein as the "Deposit".
(c) ASSUMPTION OF EXISTING FINANCING. Seller currently has a
loan from First Interstate Bank ("Lender") secured by, among other things, a
deed of trust encumbering the Property (the "Existing Loan"). In addition,
Seller and Buyer anticipate that Seller will enter into negotiations with one or
more lenders other than Lender to attempt to obtain during the Approval Period a
new loan for the purpose of refinancing the Existing Loan (the "New Loan"). The
New Loan and the Existing Loan, are sometimes referred to herein collectively as
the "Loans". In no event shall Buyer have any obligation to assume the Existing
Loan or the New Loan. At Close of Escrow, if Buyer assumes either of the Loans
pursuant to Paragraph 5(e), Buyer shall receive a credit against the Purchase
Price in an amount equal to the outstanding principal balance of the assumed
loan as of the Close of Escrow, and Seller shall pay to Lender any assumption
fee in connection with the assumption of the Existing Loan by Buyer. Buyer
shall pay any assumption fee and cost associated with any assumption of the New
Loan.
(d) CASH BALANCE. On or before the date which is one (1)
business day prior to the Closing Date, Buyer shall deposit into Escrow in cash
or other immediately available funds, or by federal wire of immediately
available funds, the balance of the Purchase Price, together with Buyer's share
of prorations and expenses, less the amount of the Extension Payment, if any
(collectively, the "Closing Funds").
(e) INTEREST. Escrow Agent shall keep the Deposit invested in
an interest bearing money market account with a financial institution reasonably
acceptable to Buyer and Seller at such yield as shall be available. Buyer shall
pay taxes upon the interest component of the Deposit. Escrow Agent shall bear
no liability for any loss occasioned by investment of the Deposit as herein
provided, by any delays in investing the Deposit or by any failure to achieve
the maximum possible from the Deposit.
5. INVESTIGATION AND APPROVAL OF PROPERTY.
(a) RIGHT TO INSPECT PROPERTY. Seller has caused to be
delivered to Buyer the documents identified in Exhibit "B" hereto ("Property
Documents"). Within the period commencing on the Opening of Escrow and ending
sixty (60) days thereafter ("Approval Period"), Buyer shall have the right
following at least 24 hour prior notice to Seller, to inspect the Property at
any reasonable time to conduct at its sole cost and expense, such customary
surveys, studies and investigations of all matters pertaining to the Property
including but not limited to, the soil, compaction, drainage, seismic
environmental or other geologic and topographical matters, the presence or
absence of any toxic or hazardous waste material or substance, the Property's
compliance with existing laws, ordinances, regulations and codes, the condition
of all streets, sewer, storm drains and utilities or availability of all of the
foregoing and other services to the Property, all matters pertaining to
surrounding properties and the use thereof, analysis of all tenants of the
Property ("Tenants"), zoning, use and other restrictions affecting the Property,
all other governmental and quasi governmental regulations concerning the use,
condition and improvement of the Property or any portion thereof, the Property's
fitness and economic feasibility for Buyer's intended use and development, and
any other matters relating in any manner to the Property or any portion thereof
or interest therein (collectively "Investigations") as Buyer deems necessary
concerning the Property. Prior to performing any of the Investigations, Buyer
shall obtain all permits and authorizations and shall pay all applicable fees
required by any public body or agency in connection therewith; Buyer shall
indemnify, defend (through legal counsel reasonably acceptable to Seller), and
hold Seller, and the Property, harmless from all damage, loss or liability,
including without limitation attorneys' fees and costs of court, mechanics'
liens or claims, or claims or assertions thereof arising out of or in connection
with the entry onto or occupation of the Property by Buyer, its agents,
employees and contractors and sub-contractors. If required by Seller, Buyer
shall have caused any of its contractors or subcontractors conducting such
inspections and/or investigation to deliver to Seller, as a condition to such
access to the Property, a certificate of insurance (naming Seller as an
additional insured) evidencing public liability insurance (from an insurance
company having a rating of at least "A" by A.M. Best) with limits of at least
One Million Dollars ($1,000,000.00) for bodily or personal injury or death, and
property damage insurance in the amount of at least Two Hundred Fifty Thousand
Dollars $250,000.00). After each such inspection or investigation of the
Property, Buyer agrees to immediately restore the Property or cause the Property
to be restored to its condition before each such inspection or investigation
look place, at Buyer's sole expense.
(b) APPROVAL OF CONDITION OF PROPERTY. Buyer shall approve or
disapprove the Property, the Property Documents and the results of any
investigation or inspection on or before the expiration of the Approval Period.
Buyer must deliver to Seller written notice ("Property Approval Notice")
approving the Property, the Property Documents and the results of any
investigation or inspection Documents on or before the expiration of the
Approval Period. If the Property Approval Notice is not received by Seller on
or before three (3) business days following the expiration of the Approval
Period, the Property, the Property Documents and the results of any
investigation or inspection will be deemed disapproved by Buyer. If Buyer
disapproves the Property, the Property Documents, or the results of any
investigation or inspection Buyer shall provide written notice of same to
Seller. If Buyer fails to give notice of termination set forth herein, the
Property, the Property Documents or the results of any investigations or
inspection will be deemed disapproved by Buyer, and the Parties shall proceed in
accordance with Paragraph 11. If Buyer disapproves the Property Documents or
the results of any investigation or inspection as set forth herein, Seller shall
within five (5) days of such disapproval refund the Deposit to Buyer.
(c) PRIOR INVESTIGATIONS. Buyer agrees that it is a
sophisticated real estate investor and is relying upon its own inspections,
examinations, studies and inquiries to determine the condition of the Property,
including without limitation the construction of the improvements, soil and
subsoil condition, and that (subject to the provisions for termination of this
Agreement set forth in Paragraph 5(b) hereof and the representations and
warranties set forth herein) Buyer is purchasing the Property on as "AS IS"
basis, and no patent or latent condition affecting the Property in any way,
whether or not known or discoverable or hereafter discovered, shall affect
Buyer's obligation to purchase the Property or any of Buyer's other obligations
contained in this Agreement, nor shall any such condition give rise to any right
of damages, rescission of otherwise against Seller. Buyer acknowledges that
except for the representations and warranties set forth herein, neither Seller
nor any officer, employee or agent of Seller has made, is making or shall make
any representations or warranties whatsoever with respect to the Property, its
condition, its suitability for any use, its accessibility or any other matter,
except as may expressly be set forth herein. Furthermore, Buyer agrees that,
except for the representations and warranties set forth herein, it will satisfy
itself fully with respect to all laws, statutes, regulations and requirements of
all governmental bodies and agencies concerning the sale and/or construction of
the Property.
(d) TITLE REVIEW. Following Opening of Escrow, Seller shall
cause Chicago Title Insurance Company to deliver to Buyer a current preliminary
title report (the "PTR") for the Property together with legible copies of all
exceptions to title identified therein. Buyer shall have thirty (30) days
following its receipt of the PTR to give Seller its written notice of its
disapproval of any item on the PTR. ("Title Notice"). Following Seller's
receipt of the Title Notice, Seller shall have thirty (30) days to give written
notice to Buyer of Seller's election either to (a) cure such title defects prior
to Close of Escrow or (b) cancel escrow and terminate this Agreement in
accordance with the provisions of Paragraph 11 hereto and shall not be deemed a
default of Buyer or Seller.
(e) APPROVAL OF FINANCING. During the Approval Period, Buyer
shall approve or disapprove the financing for its purchase of the Property.
In the event the New Loan is finalized, and the documents evidencing and/or
securing the New Loan (e.g. promissory note, deed of trust, indemnity, etc.)
(collectively the "New Loan Documents") are delivered to Buyer at least 15
days prior to the end of the Approval Period, then Buyer shall approve or
disapprove the New Loan in accordance with this Paragraph 5(e). If the New
Loan is finalized, Seller shall pay all fees and costs associated with the
origination of the New Loan, but not any fees or costs associated with the
assumption of the New Loan by Buyer. If the New Loan is not finalized, and
the New Loan Documents are not delivered to Buyer at least 15 days prior to
the end of the Approval Period, then Seller shall not enter into the New Loan
without the prior written consent of Buyer, which consent may be granted or
withheld in Buyer's sole discretion, In that regard, Seller agrees to
provide Buyer, promptly after obtaining the same, copies of any documentation
proposed to evidence the New Loan. While Buyer shall not be obligated to do
so, Buyer may (i) approve and agree to assume the Existing Loan; (ii) approve
and agree to assume the New Loan, or (iii) elect to pay cash for the Property
and acquire the Property free and clear of any liens and encumbrances (and if
Buyer so elects, Seller covenants to convey the Property free and clear of
all liens and encumbrances securing the Existing Loan), and in the event that
Buyer elects any of the alternatives set forth in clauses (i), (ii) or (iii);
Buyer shall be deemed to have approved the financing for its purchase of the
Property. If Buyer elects alternative (iii) above, Buyer will receive a
credit against the Purchase Price at Close of Escrow equal to One Hundred and
Fifty Thousand Dollars ($150,000.00). Alternatively, Buyer may by notice to
Seller, prior to the end of the Approval Period, disapprove the financing for
its purchase of the Property, in which case Escrow shall be terminated in
accordance with the provisions of Paragraph 11 hereof, and such termination
shall not be deemed to have occurred by reason of default of Seller or Buyer.
6. CLOSING; CLOSE OF ESCROW.
(a) CLOSING. Provided that all of the conditions of this
Agreement shall have been satisfied or waived on or before the date(s) set forth
in Paragraph 9 and 10, the closing ("Closing") of this transaction shall take
place at the offices of Escrow Agent ninety (90) days following the expiration
of the Approval Period.
Buyer shall have the option to extend the Closing for an
additional ninety (90) days (the "Extension Period") by delivering written
notice of such election to Seller and Escrow Holder at least two (2) days
prior to the date scheduled for Closing and (ii) concurrently delivering into
Escrow by cashier's check the sum of Two Hundred and Fifty Thousand Dollars
($250,000.00) ("Extension Payment"). Provided Seller has delivered to Escrow
Holder the Grant Deed (as defined herein) and the Tenant Estoppel
Certificates (as defined herein), immediately following its receipt of the
Extension Payment, Escrow Holder shall release to Seller the Deposit and the
Extension Payment. Buyer may not terminate this Agreement, and shall remain
obligated to purchase the Property in the event that Buyer elects to extend
the closing regardless of any casualty, loss or other change in the Property.
Concurrently with the release of the Deposit to Seller, Seller shall assign
to Buyer all rights to recover under any such insurance required to be
carried under this Agreement and will cooperate with Buyer in adjusting the
claim against such insurance policy. The Extension Payment shall be deemed
earned when paid and shall not be refundable under any condition or
circumstance except for a default by Seller under this Agreement; provided,
however, that in the event that the transaction contemplated by this
Agreement closes, then the Extension Payment shall be applied against the
Purchase Price.
(b) CLOSE OF ESCROW. As used herein, the term "Close of
Escrow" shall mean the date on which the Grant Deed is recorded in Official
Records of Butte County, California.
(c) CLOSING COSTS.
(i) Seller shall pay:
(a) One-half (1/2) of the Escrow fees:
(b) The cost of documentary transfer taxes;
(c) The cost of issuing Buyer's Title Policy in
CLTA Standard form; and
(d) The cost of any other obligations of Seller
hereunder.
(ii) Buyer shall pay:
(a) One-half (1/2) of the Escrow fees;
(b) The cost to record the Grant Deed;
(c) Any additional premium charged for issuance
of an ALTA Extended form of Buyer's Title
Policy;
(d) The cost of any other obligations of Buyer
hereunder; and
(e) All costs associated with Buyer's assumption
of the New Loan.
7. CLOSING - SELLER'S ITEMS. Seller shall deliver or cause to be
delivered to Escrow Agent at least three (3) days before the Closing Date, the
following documents:
(a) A GRANT DEED. ("Grant Deed"), duly executed and
acknowledged by Seller in the form of and upon the terms and conditions
contained in Exhibit "C" attached hereto
(b) A BILL OF SALE. ("Bill of Sale") duly executed by Seller in
favor of Buyer in the form of, and upon the terms and conditions contained in
Exhibit "D" attached hereto.
(c) AN ASSIGNMENT OF LEASES. ("Tenant Lease Assignment") duly
executed and acknowledged in recordable form by Seller, in the form of and upon
the terms and conditions contained in Exhibit "E" attached hereto.
(d) IRC AFFIDAVIT. An affidavit under Section 1445 of the
United States Internal Revenue Code ("IRC Affidavit"), duly authorized and
executed by Seller in the form of Exhibit "F" attached hereto.
(e) TENANT LEASES. Originals of all of the Tenant Leases
indicated or designated as "original" on the List of Tenant Leases attached
hereto as
Exhibit "F".
(f) SERVICE CONTRACTS. Originals, if possessed by Seller,
otherwise copies of all service, maintenance, supply, security, and management
contracts ("Service Contracts") indicated on the List of Service Contracts
attached hereto as Exhibit "H".
(g) KEYS. All keys to entrance doors to the Improvements and
Keys to all Personal Property located on the Real Property and/or the
Improvements which are in Seller's possession.
(h) LICENSES AND PERMITS. Originals, or the best copies in the
possession of Seller of all licenses and permits affecting the Property.
(i) TENANT NOTIFICATIONS. Letters addressed to each of the
Tenants, notifying them of the sale of the Property to Buyer and directing them
to make all future payments of rent and deliver any future notices to the order
of Buyer.
(j) OTHER DOCUMENTS. Originals, or the best copies in Seller's
possession, of all other documents and instruments relating to the Property.
Escrow Agent shall deliver a conformed copy of the Grant
Deed and the original IRC Affidavit and each of the other documents and
instruments delivered into Escrow by Seller as set forth above to Buyer at the
Closing. The Grant Deed shall provide that it is to be returned to Escrow Agent
following recordation. When the original Grant Deed is returned to Escrow
Agent, Escrow Agent shall deliver the original Grant Deed to Buyer, with a copy
showing all recording information to Seller at the address noted in Paragraph 20
below.
8. CLOSING - BUYER'S ITEMS. Buyer shall deliver or cause to be
delivered to Escrow Agent on or before the date which is one (1) business day
prior to the Closing Date:
(a) the Closing Funds as required under subparagraph 4(d) and
(b) the Tenant Lease Assignment duly executed and
acknowledged in recordable form, in counterpart.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE. Buyer's
obligation to consummate the transaction contemplated hereunder is subject to
the satisfaction or waiver of the conditions set forth below at or before the
dates specified below. Escrow Agent shall proceed as though all conditions have
been satisfied or waived unless Escrow Agent receives a written notice from
Buyer terminating this Agreement and stating that any one or more of the
conditions for the benefit of Buyer is not satisfied before the dates specified
below. The following conditions are for the benefit of the Buyer and can only
be waived by Buyer prior to the Closing Date:
(a) Seller has timely delivered into Escrow all of the Seller's
items described in Paragraph 7 above;
(b) The Title Company has committed to issue to Buyer its
standard form California Land Title Association ("CLTA Standard") Standard
owner's policy of title insurance with coverage equal to the Purchase Price (the
"Title Policy") prior to the Closing Date. Buyer may order an American Land
Title Association extended owners' policy of title insurance ("ALTA Extended
Policy") with coverage equal to the Purchase Price, provided that Buyer pays for
all additional premiums, survey costs, and any other fees or costs attributable
thereto and Close of Escrow is not delayed thereby. The Title Policy shall show
title vested in Buyer SUBJECT ONLY TO:
(i) The printed exceptions contained in the Title
Company's standard owner's policy of title insurance
(CLTA Standard, or ALTA Extended if so requested by
Buyer);
(ii) General and special taxes and assessments not then
delinquent;
(iii) The exceptions set forth and approved in the
Preliminary Title Report;
(iv) Any matters created by or with the consent of Buyer;
and
(c) Buyer's approval of the condition of the Property in
accordance with Paragraph 5 on or before the expiration of the Approval Period.
(d) Seller's representation and warranties are true as of the
Closing Date.
(e) Buyer shall have received estoppel certificates ("Tenant
Estoppel Certificates") duly executed by Home Base, Office Depot, Food for Less,
Circuit City, Barnes & Noble, Hometown Buffet and Petco and Tenants occupying at
least ninety-five percent (95%), in the aggregate, of the gross leasable square
footage of the improvements currently leased, to be dated not more than forty-
five (45) days prior to the Closing Date. The Tenant Estoppel Certificates
shall be in the form of, and in all material aspects, upon the terms attached to
their respective leases, and if not attached to a tenant lease, in the form of,
and in all material aspects, upon the terms contained in, Exhibit "J" attached
hereto. If Buyer desires a different form of estoppel certificates, Seller
shall use its reasonable efforts to obtain such certificate from the tenants of
the Property, however, the failure to obtain such form of estoppel from any
Tenant shall not be a condition to Close of Escrow. Seller shall deliver the
Tenant Estoppel Certificates to Buyer no later than ten (10) days prior to the
Closing Date. In the event Seller is unable to obtain a Tenant Estoppel
Certificate from any Tenant, Seller shall provide to Buyer an estoppel
certificate executed by Seller ("Landlord Estoppel"), in the form of Exhibit "K"
attached hereto, subject to such facts and circumstances which are disclosed on
such statement. The Tenant Estoppel Certificates and the Landlord Estoppel
shall be subject to Buyer's reasonable approval. Buyer's failure to disapprove
any Tenant Estoppel Certificate or Landlord Estoppel in writing five (5) days of
receipt thereof by Buyer shall be deemed to constitute Buyer's approval thereof.
If Buyer reasonably disapproves any Tenant Estoppel Certificates or Landlord
Estoppel within such five (5) day period, Escrow shall be terminated in
accordance with the provisions of Paragraph 11 hereof.
(f) Satisfaction or waiver of all contingencies to the leases
with Barnes and Noble and Blockbuster Video.
(g) Seller's timely performance of its obligation hereunder.
(h) In the event that the Closing has not been extended
pursuant to Paragraph 6, there shall have been no material change in the
condition or operations of the Property. In the event that the Closing has been
extended pursuant to Paragraph 6, there shall have been no material change in
the condition or operations of the Property caused by any act or omission of
Seller.
If any of the above conditions are not satisfied at or prior to
the Closing, for a reason other than a default by Buyer under this Agreement,
Buyer may terminate this Agreement by written notice to Seller and Escrow Agent,
whereupon, Escrow shall be cancelled, Escrow Agent shall release the Deposit to
Buyer and any and all documents deposited into Escrow shall be returned to the
party entitled thereto, and the parties shall have no further rights or
obligations hereunder.
10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE. Seller's
obligation to consummate the transaction contemplated hereunder is subject to
the satisfaction or waiver of the conditions set forth below before the dates
specified below. Escrow Agent shall proceed as though all conditions have been
satisfied or waived unless Escrow Agent receives a written notice from Seller
terminating this Agreement and stating that any one or more of the conditions
for the benefit of Seller is not satisfied before the dates specified below.
The following conditions are for the benefit of Seller and can only be waived by
Seller:
(a) Buyer has timely delivered into Escrow the Closing funds;
(b) Buyer has timely delivered into Escrow the Buyer's items
described in Paragraph 8 above; and
(c) Buyer's representations and warranties are true and correct
as of the Close of Escrow.
(d) Buyer has timely delivered into Escrow the fully executed
Guaranty in the form attached hereto as Exhibit "L".
If any of the above conditions are not satisfied at or
prior to the date called for in this Agreement, for a reason other than a
default by Seller under this Agreement, Seller may terminate this Agreement by
written notice to Buyer and Escrow Agent, whereupon, Escrow shall be cancelled,
Escrow Agent shall release to Seller all funds deposited by Buyer into Escrow
which remain in Escrow as of the date Escrow Agent receives Seller's written
notice of termination, and any and all documents deposited into Escrow shall be
returned to the party entitled thereto, and the parties shall have no further
rights or obligations hereunder.
11. CANCELLATION FEES AND EXPENSES. If Escrow terminates because of
the non-satisfaction of any condition for a reason other than the default of
Buyer or Seller under this Agreement, Buyer and Seller shall pay one-half of any
escrow cancellation charges and the Deposit shall be returned to Buyer.
However, if Escrow terminates because of the default of either Buyer or Seller
under this Agreement, the escrow cancellation charges shall be borne solely by
the defaulting party and, (i) if Seller is the defaulting party, the Deposit
shall be returned to Buyer, and (ii) if Buyer is the defaulting party, the
Deposit shall be retained by Seller. "Escrow cancellation charges" means all
fees, charges and expenses incurred by Escrow Agent as well as all expenses
related to the services of the Title Company in connection with issuance of the
Title Report and other title matters.
12. WITHHOLDING. Pursuant to Section 1445 of the Internal Revenue
Code of 1986, as amended ("Code"), Buyer is required to withhold ten percent
(10%) of the "amount realized" in accordance with the Code, unless Seller
delivers to Buyer the IRC Affidavit.
13. POSSESSION. Possession of the Property shall be delivered to
Buyer at the Closing.
14. REPRESENTATIONS AND WARRANTIES.
(a) BY BUYER. Buyer represents, warrants and covenants to and
with Seller, that Buyer has the right, power, legal capacity and authority to
execute, deliver and perform this Agreement. This Agreement constitutes the
legal, valid and binding obligation of Buyer.
(b) BY SELLER. Seller represents, warrants and covenants to
and with Buyer, that (i) except for the assignment of the New Loan or the
assumption of the Existing Loan, Seller has the right, power, legal capacity
and authority to execute, deliver and perform this Agreement and any consent
required as a condition to Seller's authority to execute, deliver and perform
this Agreement will be obtained prior to the Close of Escrow, (ii) the
individuals who have executed this Agreement on behalf of Seller have the
right, power, legal capacity and authority to execute, deliver and perform
this Agreement on behalf of Seller; (iii) this Agreement constitutes the
legal, valid and binding obligation of Seller; (iv) to Seller's knowledge,
Seller has not received notice of any pending or threatened condemnation of
all or of any portion of the Property, or notice of any violation of zoning
restrictions in respect of the Property from the governmental authority or
agency; (v) attached hereto as EXHIBIT"H" is a list of all of the Service
Contracts affecting the Property in effect on the date hereof (the "Service
Contracts), and except as set forth on EXHIBIT"H" (i) to Seller's actual
knowledge,the Service Contracts have not been further modified or amended and
are in force and effect, or are terminable with thirty (30) days notice, (ii)
Seller has, or will have, during the Approval Period delivered to Purchaser
true and complete copies of the Service Contracts, and (iii) to the best
actual knowledge of Seller, there are no defaults of Seller or any other
party thereto under the Service Contracts which would materially adversely
affect the operations of the Property or which would materially increase the
cost of operating the Property; (vi) attached hereto as Exhibit "I" is a list
of all licenses and permits from governmental authorities in the possession
of Seller in connection with its ownership of the Property (collectively, the
"Licenses and Permits") and Seller has, or will have, during the Approval
Period delivered to Purchaser true and complete copies of the Licenses and
Permits; (vii) Seller has not received written notice of any litigation,
governmental or administrative proceedings or arbitrations presently pending
or threatened in writing with respect to any of the Property, except for
actions which do not in any way affect the current use or operation of any of
the Property; (viii) to Seller's actual knowledge, there are no unrecorded
rights of first offer to purchase, rights of first refusal to purchase,
purchase options or similar rights or contractually required consents to
transfer pertaining to the Property which would be breached by this Agreement
or the consummation of the transactions provided for herein; (ix) Seller is
not a "foreign person" within the meaning of Paragraph 1445(f)(3) of the
Internal Revenue Code; (x) Seller has not filed or been the subject of any
filing of a petition under the Federal Bankruptcy Law or any insolvency laws,
or any laws for composition of indebtedness or for the reorganization of
debtors; (xi) to Seller's knowledge, the Seller has not received from any
insurance company which carries insurance on the Property, or any Board of
Fire Underwriters, any notice of any defect or inadequacy in connection with
the Property or its operation which has not been cured; (xii) except as
disclosed to Buyer in writing prior to the expiration of the Approval Period,
Seller has performed or will perform prior to the closing of the transactions
contemplated by this Agreement of all of Seller's obligations under any
leases of the Property that are or will be required to be performed prior to
the Closing and no brokerage commissions or other compensation is or will be
due or payable to any persons, firm, corporation or other entity with respect
to or on account of any of the leases, or any renewal thereof that could be a
lien against the Property or claim against Buyer and (xiii) except as
disclosed to Buyer in writing, to Seller's best actual knowledge, without any
duty to investigate, as of the Effective Date there are no hazardous
materials in existence on or below the surface of the Property or in any
building located upon the Property, including, without limitation,
contamination of the soils subsoil or ground water, which constitutes a
violation of any law, rule or regulation of any governmental entity having
jurisdiction thereof.
Seller hereby agrees, through and including the Closing and at
Seller's sole cost and expense to (a) keep all existing insurance policies
(including any renewals or equivalents) affecting the Property in full force
and effect (except that Seller shall be credited at Close of Escrow with an
amount equal to the amount expended by it during the Extension Period in good
faith in arms-length transactions and pursuant to the exercise of its
reasonable business judgment to repair the Property following a casualty to
the extent each sums expended are for uninsured casualties, unreimbursable
deductibles and unreimbursable capital expenses, casualties, unreimbursable
deductibles and unreimbursable capital expenses. If any such costs or
expenses are not emergency related and exceed Ten Thousand Dollars
($10,000.00), (i) Seller shall reasonably consult with Buyer prior to
incurring such expense (ii) competitively bid such expense to at least three
responsible bidders and (iii) contract with the lowest responsible bidder):
(b) use due diligence and its reasonable efforts to keep in full force and
effect all required licenses and permits; and (c) provide all services and
continue to operate, manage and maintain the Property in substantially the
same manner as it previously had. Following ten (10) days before expiration
of the Approval Period ("Lease Cut-off Date"). Seller hereby agrees that
Seller will not terminate or modify, extend of otherwise change any of the
terms, covenants or conditions of any tenant lease, or enter into new leases
or any other obligations or agreements affecting the Property without the
prior consent of Buyer, which consent may be withheld in Buyer's reasonable
discretion. Prior to the Lease Cut-Off Date, Seller shall have the right, in
its sole and absolute discretion, to enter into any such new lease provided
Seller deliver to Buyer a fully executed copy of such lease before the Lease
Cut-Off Date. Except as provided above, prior to the Closing Date, Seller
shall not convey title or any interest in the Property or the personal
property to any person or entity. Seller shall not subject the Property to
any additional liens, encumbrances, covenants, conditions, restrictions,
easements or similar matters after the date of this Agreement which will not
be eliminated prior to the Closing Date, or otherwise amend, modify, extend
or change the terms, covenants or conditions of any such matters after the
date of this Agreement. For a period of one (1) year after the Closing Date,
Seller shall cooperate with Buyer and Buyer's accountants and attorneys in
answering questions concerning the operation and management of the Property,
amounts owed by Tenants under their leases, the calculation of operation
expense or common area maintenance charge, and similar matters.
(c) Each Party's representations and warranties made herein are
material to the other Party's decision to enter into this Agreement and are
being relied upon by the other Party in undertaking its obligations hereunder.
Except to the extent set forth in writing prior to the Close of Escrow the
representations of each Party made herein shall be deemed made again as of the
Close of Escrow for the Property, or any portion thereof without the necessity
of further documentation. The representation and warranties of Seller set forth
above shall survive the Closing and the delivery of the Grant Deed for a period
of two (2) years.
15. PRORATIONS.
(a) GENERAL. For purposes of this Paragraph 15, the "Proration
Date" shall be deemed to be 11:59 p.m. on the day immediately proceeding the
Closing Date so that Buyer shall be deemed to be in title to the Property and
therefore entitled to the income and responsible for the expenses for the entire
day upon which the Closing Date occurs. Any apportionments and prorations which
are not expressly provided for below shall be made in accordance with customary
practice in Butte County. Buyer and Seller agree to prepare or cause their
respective representatives or accountants to prepare a schedule of tentative
adjustments prior to the Proration Date. Such adjustments, if and to the extent
known and/or estimated and agreed upon as of the Close of Escrow, shall be paid
by Buyer to Seller (if the prorations result in a net credit to the Seller) or
by Seller to Buyer (if the prorations result in a net credit to the Buyer), by
increasing or reducing the cash to be paid by Buyer at the Close of Escrow. Any
such adjustments not determined or not agreed upon as of the Close of Escrow
shall be paid by Buyer to Seller, or by Seller to Buyer, as the case may be, in
cash as soon as practicable following the determination of the information
necessary to make such adjustments, For a period of three (3) years following
the Close of Escrow, Buyer and Buyer's successors and assigns shall make
available to Seller and Seller shall make available to Buyer and Buyer's
successors and assigns and their respective employees, agents and
representatives all books and records maintained for the Property which relate
to any of the items to be prorated or allocated under this Agreement, which
books and records shall be made available for inspection and copying by Seller
and Seller's employees, agents and representatives during ordinary business
hours. Any such inspection shall be at reasonable intervals and at the
inspecting party's sole cost and expense. The provisions of this Paragraph 15
shall survive the Close of Escrow indefinitely.
(b) RENTALS. Subject to the provisions of Paragraphs 15(c) and
15(d), fixed monthly rentals ("Rentals") which have been collected shall be
prorated as of the Proration Date. Notwithstanding the provisions of the Tenant
Leases to the contrary, the base amount of rental provided in the Tenant Leases
shall be allocated equally on a monthly basis for the year in which the Close of
Escrow occurs. With respect to percentage rent, following Close of Escrow
Buyer shall collect all such percentage rent and shall pay to Seller the portion
of such percentage rent attributable to the period before Close of Escrow. Such
payment shall be made to Seller within ten (10) days following Buyer's receipt
of such percentage rent. If payment to Seller is not timely made, the
delinquent amount shall bear interest at 10% per annum.
(c) DELINQUENT RENTALS. Rentals for Tenant Leases that are
not more than thirty (30) days delinquent as of the Proration Date shall be
prorated between Seller and Buyer as if they were timely paid to Seller, and
Seller shall be credited with the amount of such Rental. Delinquent Rentals
shall be prorated between Buyer and Seller as of the Proration Date but not
paid by Seller until they are actually collected by Buyer, Rentals are
"Delinquent" when payment thereof has been due on or before the Proration
Date and is at least thirty (30) days past due as of the Proration Date.
Buyer shall use Buyer's good faith efforts to collect any Delinquent Rentals.
Buyer shall not, however, be required to institute legal proceedings and
Buyer shall not be required to expend more than nominal cost and expense in
collecting Delinquent Rentals. After the Close of Escrow, Seller shall not
institute any legal proceedings against a Tenant (or other occupant or user
of the Project) owing Delinquent Rentals unless Buyer has failed to institute
such legal proceedings within thirty (30) days after receipt of Seller's
written request that Buyer do so. Subject to the first sentence of this
subparagraph (c) rentals collected by the Buyer shall be applied first
against any amount currently due, to their respective due dates, and then
against any amount past due. Buyer agrees that any payments due to Seller as
a result of collected Delinquent Rentals shall be payable to Seller (less
reasonable out-of-pocket costs of collection actually incurred by Buyer) not
less often than monthly. Seller agrees that any amounts collected by Seller
after the Close of Escrow but which are due to Buyer hereunder shall be
payable to Buyer (less reasonable out-of-pocket costs of collection actually
incurred by Seller) not less often than monthly.
(d) OPERATING COST PASS-THROUGH, ETC.. Operating cost pass-
throughs, expense reimbursements, utility charges, common area maintenance
charges, any administrative charges, tenant or property association dues,
additional rentals and other retroactive rentals escalations, sums or charges
payable by Tenants which accrue as of the Proration Date but are not yet due and
payable, shall be prorated as of the Proration Date and Seller shall receive a
credit for such amounts at Close of Escrow. Seller agrees that any amounts
collected by Seller after the Close of Escrow but which are due to Buyer
hereunder shall be payable to Buyer promptly upon receipt thereof, but not less
often than monthly (less reasonable out-of-pocket costs of collection actually
incurred by Seller ). Promptly upon completion of the applicable payment
periods therefore which include the Close of Escrow, Buyer and Seller agree to
determine the amount of reimbursements received from Tenants with respect to
estimated tax, insurance and operating expense pass-throughs. To the extent
Seller has received from Tenants reimbursements for expenses in excess of those
reimbursable expenses actually paid by Seller for the period prior to the Close
of Escrow, Buyer shall be credited for such amount. Conversely, to the extent
Seller has received from Tenants less than the reimbursements required by their
Tenant Leases for such expenses, Seller shall be credited for such amounts at
Close of Escrow.
(e) PREPAID RENTALS. Rentals already received by Seller
attributable to periods after the Proration Date and the amount of any other
credits due Tenants applicable to any period or periods after the Closing Date
shall be credited to Buyer at the Close of Escrow.
(f) TAXES AND ASSESSMENTS. Any delinquent real estate taxes
and any delinquent installments of assessments (including penalties and charges)
on the Property shall be paid at the Close of Escrow from funds accruing to
Seller. All real estate taxes on the Property for the fiscal tax year in which
the Proration Date occurs shall be estimated based upon the most recently
available real estate tax bill and prorated as hereinafter described at the
Close of Escrow based upon such estimate. Buyer and Seller shall re-prorate the
real estate taxes following the Close of Escrow upon receipt of the actual real
estate tax bill for the fiscal year in which the Proration Date occurs. Buyer
shall be credited with an amount equal to all real estate taxes which have
accrued prior to the Proration Date but only to the extent such real estate
taxes are not paid or payable by Tenants. Buyer shall also be credited with an
amount equal to all real estate taxes already collected or received by Seller
from Tenants and attributable to periods prior to the Proration Date, so long as
such amounts have not previously been used to pay real estate taxes already due,
If, after the Proration Date, any additional real estate taxes are assessed
against the Property by reason of back assessments, corrections to previous tax
bills and similar reasons relating to the period prior to the Proration Date,
Seller shall pay all such additional real estate taxes, except to the extent the
same are collected from Tenants or which would then be currently due from
Tenants pursuant to the terms of their respective Tenants Leases, to the extent
such Tenant Leases are then currently in effect. If, after the Close of Escrow,
any real estate tax or assessment savings or refunds are made with respect to
the Property by reason of successful tax contest proceedings or appeals,
corrections to tax bills or similar reasons relating to the period prior to the
Proration Date, if funds remain after required payments to Tenants, then Seller
shall be promptly reimbursed for all amounts of such refund(s) or saving(s)
attributable to the period prior to the Proration Date, less Seller's reasonable
out-of-pocket costs of collection, and Buyer shall be entitled to all amounts of
such refund(s) or saving(s) attributed to the periods after the Proration Date.
(g) TENANT DEPOSITS. Buyer shall be credited at the Close of
Escrow with an amount equal to all Tenant security deposits remaining after any
permitted deduction or charge.
(h) SERVICE CONTRACTS. Amounts payable under the Service
Contracts and all utility charges shall be prorated on an accrual basis. All
amounts payable under the Service Contracts accruing prior to the Proration
Date shall be the obligation of Seller, but Seller shall at Close of Escrow pay
or credit Buyer therefor only to the extent such amounts are not paid or payable
by Tenants. Should Buyer not elect to terminate any service contracts as of
the Closing Date, Buyer shall be responsible for all amounts payable under such
Service Contracts accruing after the Proration Date.
(i) PREPAID EXPENSES. Seller shall be credited with an amount
equal to all prepaid costs, expenses, charges and fees attributable to the
period after to the Close of Escrow and described in writing to Buyer at least
thirty (30) days prior the Close of Escrow.
16. BROKERS. Buyer and Seller each represent to the other that except
for Alan W. Viera and Associates, and Third Street Associates and Maynard/Rich
Companies whose collective 1.50% commission shall be paid by Escrow Agent from
Seller's Proceeds at Close of Escrow in accordance with Exhibit "M" Seller
pursuant to a separate written agreement, they have not dealt with any other
real estate broker, agent or person who may be entitled to a commission or fee
on account of this Agreement, and Buyer and Seller each indemnifies and agrees
to defend and hold the other harmless from and against any loss, cost, liability
and expense, including reasonable attorneys' fees, which may be incurred in the
event its representations herein prove incorrect. Seller acknowledges that
Buyer is a licensed real estate Broker acting as a principal in this
transaction.
17. DEFAULT AND REMEDIES.
(a) DEFAULT AND REMEDIES. In the event of a default by Seller
or Buyer the non-defaulting party may, at its option, do any or all of the
following (subject to subparagraph (b) hereinbelow):
(i) terminate this Agreement by written notice delivered
to the other party at or prior to the Closing; and,
(ii) pursue any legal remedy, including an action for
monetary damages.
(b) LIQUIDATED DAMAGES. PRIOR TO ENTERING INTO THIS
TRANSACTION, BUYER AND SELLER HAVE BEEN CONCERNED WITH THE FACT THAT SUBSTANTIAL
DAMAGES WILL BE SUFFERED BY SELLER IN THE EVENT BUYER SHALL FAIL TO PERFORM ITS
OBLIGATIONS UNDER THIS AGREEMENT TO PURCHASE THE PROPERTY. WITH THE FLUCTUATION
IN LAND VALUES, THE UNPREDICTABLE STATE OF THE ECONOMY AND OF GOVERNMENTAL
REGULATIONS, THE FLUCTUATING MONEY MARKET FOR REAL ESTATE LOANS OF ALL TYPES,
AND OTHER FACTORS WHICH DIRECTLY AFFECT THE VALUE AND MARKETABILITY OF THE
PROPERTY, THE PARTIES BELIEVE THAT IT WOULD BE EXTREMELY DIFFICULT AND
IMPRACTICABLE, IF NOT IMPOSSIBLE, TO ASCERTAIN WITH ANY DEGREE OF CERTAINTY THE
AMOUNT OF DAMAGES WHICH WOULD BE SUFFERED BY SELLER IN THE EVENT OF BUYER'S
NONPERFORMANCE OF ITS OBLIGATION UNDER THIS AGREEMENT TO PURCHASE THE PROPERTY
AND CLOSE THE ESCROW. THE PARTIES, HAVING MADE DILIGENT BUT UNSUCCESSFUL
ATTEMPTS TO ASCERTAIN THE ACTUAL COMPENSATORY DAMAGES SELLER WOULD SUFFER IN THE
EVENT OF BUYER'S NONPERFORMANCE OF ITS OBLIGATION TO PURCHASE THE PROPERTY,
HEREBY AGREE THAT THE REASONABLE ESTIMATE OF SAID DAMAGES IS THE AMOUNT OF THE
DEPOSITS ACTUALLY DELIVERED TO ESCROW HOLDER, AND IN THE EVENT OF BUYER'S
FAILURE TO PERFORM ITS OBLIGATION UNDER THIS AGREEMENT TO PURCHASE THE PROPERTY
AND CLOSE THE ESCROW, SO LONG AS SUCH FAILURE IS NOT CAUSED BY SELLER, SELLER
SHALL, AS ITS SOLE REMEDY, BE ENTITLED TO THE AMOUNT OF THE DEPOSITS ACTUALLY
DELIVERED TO ESCROW HOLDER AS LIQUIDATED DAMAGES. SAID AMOUNT HAS BEEN
DETERMINED WITH REFERENCE BY THE PARTIES TO THE ABOVE CONSIDERATIONS IN
ESTABLISHING A REASONABLE SUM AS LIQUIDATED DAMAGES. THE RIGHT TO RECEIVE SUCH
LIQUIDATED DAMAGES SHALL BE SELLER'S SOLE REMEDY IN THE EVENT OF BUYER'S FAILURE
TO PURCHASE THE PROPERTY AND CLOSE ESCROW.
INITIALS: ______ _______
BUYER SELLER
18. CONDEMNATION. If all or any portion of the Property, or any
interest therein, is taken prior to the Closing of Escrow as a result of
condemnation (including the filing of any notice of intended condemnation or
proceedings in the nature of eminent domain), by any entity or government
agency, which is valued at Twenty Five Thousand Dollars ($25,000.00) or more,
then Buyer may, upon written notice to Seller and Escrow Agent, terminate this
Agreement, in which event the parties shall have no further rights or
obligations hereunder. If Buyer does not elect to terminate this Agreement, or
if that portion of the property that is taken as a result of condemnation is
valued at less than Twenty Five Thousand Dollars ($25,000.00), then, Seller
shall assign and turn over, and Buyer shall be entitled to receive and keep, all
awards for the taking of the Property by eminent domain which accrue to Seller
and the parties shall proceed to the Closing pursuant to the terms and
conditions hereof, without modification of the terms of this Agreement and
without any reduction in the Purchase Price.
19. ATTORNEYS' FEES. If it shall be necessary for either Buyer or
Seller to employ an attorney to enforce or defend its rights under this
Agreement, the non-prevailing party shall reimburse the prevailing party for its
actual attorneys' fees and costs of suit.
20. NOTICES. All notices, demands, requests and other communications
required or permitted hereunder shall be in writing and shall be deemed to be
delivered upon actual receipt if personally delivered, one (1) business day
following the transmission of such writing by facsimile with the original sent
by certified or registered mail or the expiration of three (3) days following
its deposit in a regularly maintained receptacle for the United States mail,
registered or certified, return receipt requested, postage fully prepaid,
addressed to the addressee at its address set forth below or at such other
address as such party may have specified theretofore by written notice delivered
in accordance with this Paragraph:
If to Buyer:
Basic Acquisition, Inc.
c/o Richard Dickerson
575 Prospect Blvd.
Pasadena, California 91103
with copies to:
Basic Acquisition, Inc.
2235 Sheppard Avenue East
Atria II, Suite 904
Willowdale, Ontario M2J 5B5
Canada
Steefel, Levitt & Weiss
One Embarcadero Center, 30th Fl.
San Francisco, California 94111
Attn: Clayton B. Gantz, Esq.
If to Seller:
CHICO CROSSROADS CENTER
15 Corporate Plaza, Suite 130
Newport Beach, California 92660
Attn: Robert Flaxman
with a copy to:
Mr. Jamie Sohacheski
8665 Wilshire Blvd., Ste. 200
Beverly Hills, California 90211
with a copy to:
Rodarti, Feld & Gelfer
4675 MacArthur Court, Suite 930
Newport Beach, California 92660
Attn: Richard G. Feld, Esq.
If to Escrow Agent:
Chicago Title
16969 Von Karman
Irvine, California 92714
Attn: Karen Price
Escrow # 6026054-M19
21. GOVERNING LAW. The laws of the State of California shall govern
the validity, enforcement, and interpretation of this Agreement.
22. INTEGRATION; MODIFICATION; WAIVER. This Agreement constitutes the
complete and final expression of the Agreement of the parties relating to the
Property and supersedes all previous contracts, agreements, and understandings
of the Parties, either oral or written, relating to the Property. This
Agreement cannot be modified, or any of the terms hereof waived, except by an
instrument in writing (referring specifically to this Agreement) executed by the
party against whom enforcement of the modification or waiver is sought.
23. COUNTERPART EXECUTION. This Agreement may be executed in several
counterparts, each of which shall be fully effective as an original and all of
which together shall constitute one and the same instrument.
24. HEADINGS; CONSTRUCTIONS. The headings which have been used
throughout this Agreement have been inserted for convenience of reference only
and do not constitute matter to be construed in interpreting this Agreement.
Words of any gender used in this Agreement shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, and vice versa, unless the context requires otherwise. The
words "herein," "hereof," "hereunder" and other similar compounds of the word
"here" when used in this Agreement shall refer to the entire Agreement and not
to any particular provision or section. If the last day of any time period
stated herein shall fall on a Saturday, Sunday or legal holiday, then the
duration of such time period shall be extended so that it shall end on the next
succeeding day which is not a Saturday, Sunday or legal holiday. Unless
otherwise specified, the word "day" shall mean a calendar day.
25. TIME OF THE ESSENCE. Time is of the essence of this Agreement and
of the obligations of the parties to purchase and sell the Property, it being
acknowledged and agreed by and between the parties that any delay in effecting a
Closing pursuant to this Agreement may result in loss or damage to the party in
full compliance with its obligations hereunder. Notwithstanding any period for
performance of any party's obligation as contained in the General Provisions,
the rights of the parties hereunder shall be governed by the dates and times set
forth in this Agreement.
26. OPENING OF ESCROW. Escrow Agent is instructed to notify Buyer and
Seller in writing that it has opened escrow and the date of such notice shall be
the date of opening of Escrow.
27. INVALID PROVISIONS. If any one or more of the provisions of this
Agreement, or the applicability of any such provision to a specific situation,
shall be held invalid or unenforceable, such provision shall be modified to the
minimum extent necessary to make it or its application valid and enforceable,
and the validity and enforceability of all other provisions of this Agreement
and all other applications of any such provision shall not be affected
thereby.
28. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of Seller and Buyer, and their respective successors and assigns.
29. FURTHER ACTS. In addition to the acts recited in this Agreement
to be performed by Seller and Buyer, Seller and Buyer agree to perform or cause
to be performed at the Closing or after the Closing any and all such further
acts as may be reasonably necessary to consummate the transactions contemplated
hereby.
30. EXHIBITS. All attached Exhibits and all items delivered into
Escrow are incorporated herein.
31. SURVIVAL. Except as otherwise provided herein, all covenants
contained herein shall survive the closing of the purchase and sale and shall
not be deemed merged in the Grant Deed, but shall remain in full force and
effect.
32. ASSIGNMENT. Buyer may not assign or transfer any of its rights,
benefits, or privileges hereunder without the prior written consent of Seller,
except that Buyer may assign its right, benefits and privileges hereunder to a
real estate investment trust or similar vehicle advised by Buyer or its
affiliates without the prior consent of Seller provided that any such assignee
assumes in writing all of the Buyer's obligations hereunder. Any such
assignment shall not constitute a novation of Buyer's obligations hereunder.
IN WITNESS WHEREOF, the parties have executed the foregoing Agreement as
of the date and year first-above written.
BUYER:
BASIC ACQUISITION, INC.
a Delaware corporation
By: /c/ RICHARD DICKERSON
-------------------------------------
Its: VICE PRESIDENT
-----------------------------
CHICO CROSSROADS CENTER
a California limited partnership
By: JMLB, INC.,
a California corporation
By: /c/ ILLEGIBLE
------------------------------
Its: PRES
------------------------------
<PAGE>
HOMEBASE
<PAGE>
[LETTERHEAD]
April 29, 1994
CHICO CROSSROADS CENTER
c/o Commercial Management and Development
Chippendale Drive, Suite 307
Sacramento, California 95841
RE: LEASE DATED APRIL 19, 1988, HEREINAFTER REFERRED TO AS THE "LEASE", BY AND
BETWEEN HOMECLUB, INC., AS TENANT, AND DOUGLAS W. BRADFORD, AS LANDLORD,
FOR PREMISES LOCATED AT 2101 WHITMAN AVENUE, CHICO, CALIFORNIA HEREINAFTER
REFERRED TO AS THE "DEMISED PREMISES".
Dear Sir or Madam:
Reference is hereby made to the above-referenced Lease, as same has been amended
by that First Amendment to HomeClub, Inc. Shopping Center Lease dated July 1,
1991, and that Second Amendment to Shopping Center Lease dated January 31, 1994.
Waban Inc. is the successor in interest to the Tenant's interest in the Lease,
and Chico Crossroads Center is the successor in interest to the Landlord's
interest in the Lease.
Landlord has requested that Tenant waive certain restrictions contained in the
Lease and approve a minor site plan modification to allow the development of an
Office Depot within the shopping center of which the Demised Premises forms a
part.
Tenant, therefore, agrees as follows so long as an Office Depot is constructed
within the space shown as Buildings "F" and "G" on the site plan attached hereto
as Exhibit A:
1. The restriction contained in Paragraph 9 of Schedule B of Lease,
which prohibits any canopy or parapet of a store to exceed 30 feet in
height, is waived with respect to Office Depot. Office Depot shall
be allowed to build its store front with a maximum height of 32 feet
in accordance with Exhibit B attached hereto.
<PAGE>
Chico Crossroads Center
April 29, 1994
Page 2 of 2
2. Landlord may, within the area shown upon Exhibit A and labeled
"Parking To Be Modified", modify the site plan. The modification
consists of the elimination of two (2) parking stalls, and the
relocation of a planter in accordance with the detail drawing
attached hereto as Exhibit C.
Except as expressly stated herein the Lease remains unmodified and in full
force.
Sincerely,
/s/ Herbert J. Zarkin
Herbert J. Zarkin
President
HJZ:jg
cc: Mr. Thomas H. Cozzolino
Mr. Robert Flaxman
Sarah Gallivan, Esq.
<PAGE>
SECOND AMENDMENT TO HOMECLUB, INC.
SHOPPING CENTER LEASE
This Second Amendment to Homeclub, Inc. Shopping Center Lease ("Second
Amendment") is dated January 31, 1994, and is between CHICO CROSSROADS CENTER, a
California limited partnership (hereinafter referred to as "CCC"), as Landlord,
and WABAN INC., a Delaware corporation ("Waban"), a successor-in-interest to
Homeclub, Inc., a Delaware corporation (hereinafter referred to as "HC"), as
Tenant. CCC and Waban are hereinafter collectively referred to as the
"Parties".
RECITALS
A. HC has heretofore entered into a Lease titled Homeclub, Inc. Shopping
Center Lease, dated June 6, 1988 (the "Lease"), wherein HC leased from
Douglas W. Bradford, certain premises more particularly described within
said Lease. Said premises are further described within the Short Form
Lease recorded June 10, 1988 in Butte County, California, under Recorder
Serial Number 88-18605.
B. Douglas W. Bradford, is designated as Landlord under the Lease, and did
assign Landlord's interest under the Lease to Pacific Quadrant Development
Co., a California general partnership, by Assignment and Assumption
Agreement dated June 2, 1988 recorded June 10, 1988 in Butte County,
California under Recorder Serial Number 88-018600 Pacific Quadrant
Development Corporation assigned the Landlord's interest under the Lease
to Pacifice Quadrant Chico, a California general partnership ("PQ-C"), by
an Assignment and Assumption Agreement dated January 1, 1989 recorded
January 10, 1989 in Butte County, California under Recorder Serial
Number 88-00933.
C. Thereafter, PQ-C did assign Landlord's interest under the Lease to First
Interstate Bank of California ("FICAL"), and FICAL did assign Landlord's
interest under the Lease to CCC.
D. Waban, as successor in interest to HC and Landlord, have heretofore
entered into the First Amendment to Homeclub, Inc. Shopping Center Lease
dated July 2, 1991 ("First Amendment").
E. CCC as present Landlord under the Lease and Waban as successor to HC as
the Tenant under the Lease desire to amend the Lease as set forth herein
below.
<PAGE>
Second Amendment
Page 2
NOW, THEREFORE, CCC as Landlord under the Lease and Waban as successor to
HC as Tenant under the Lease do agree as follows:
1. REVISION OF LEASE PLAN:
Landlord has entered into or will soon enter into leases with Circuit
City Stores, Inc. ("Circuit City Lease") and Petco Animal Supplies, Inc. ("Petco
Lease") which provide among other things for the construction of stores of
approximately 23,014 square feet for Circuit City Stores, Inc. ("Circuit City
Store") and 8,500 square feet for Petco Animal Supplies, Inc. ("Petco Store").
To accomplish the construction of the Circuit City Store, Landlord will (i)
demolish the buildings shown as Building "C" and Building Pad "3" on Lease Plan
Revision 1 to the First Amendment and (ii) pave over and stripe for parking the
areas shown as Building Pad 3 and Pad 2 on Lease Plan Revision 1. Attached
hereto as Exhibit "A" is a new site plan for the Shopping Center (the "New Site
Plan") which reflects the modifications to Lease Plan Revision 1. Landlord and
Tenant hereby approve the New Site Plan as the "Lease Plan" for all purposes of
the Lease. In each instance wherein the Lease, the First Amendment or the
Second Amendment makes reference to the Lease Plan, such reference shall be
deemed to refer to the New Site Plan attached hereto as Exhibit "A".
2. LIMITED WAIVER OF RESTRICTION OF PARAGRAPH 9 OF SCHEDULE B:
Landlord and Tenant agree to waive the application of Paragraph 9 of
Schedule B to the Lease as follows:
(a) The restriction on parapet height and signage as set forth in
clauses (A), (B), (C) and (D) of Paragraph 9 of Schedule B shall not be
applicable to a Circuit City Store or Petco Store initially constructed within
the building envelopes as shown on Exhibit "A" attached hereto, provided said
store(s) initially conform(s) to the elevations attached hereto as Exhibit "B"
and incorporated herein by this reference.
(b) The restriction on store size in clause (G) of Paragraph 9 of
Schedule B shall not be applicable to floor area constructed within the building
envelopes designated as the Circuit City Store on Exhibits "A". The restriction
on store size set forth in clause (H) of Paragraph 9 of Schedule B shall not be
applicable to the floor area constructed within the building envelope designated
as the Petco Store on Exhibit "A" attached hereto.
(c) The parties hereto expressly acknowledge that a condition to the
effectiveness of the waivers contained in this Paragraph 2 will be the
elimination of the building envelope designated as Pad Building 2 on Lease Plan
Rev. 1 and the demolition of Pad Building 3 shown on Lease Plan Rev. 1 and the
replacement thereon with parking as shown on Exhibit "A" attached hereto. The
parties acknowledge that the building envelopes for Building Pad 3 and Pad 2 as
shown on Lease Plan Revision 1 shall be completely eliminated effective upon the
completion of construction of the Circuit City Store.
<PAGE>
Second Amendment
Page 3
3. SECOND AMENDMENT TO SHORT FORM LEASE:
The parties hereto agree to execute a Second Amendment to Short Form
of Lease for recordation indicating the Commencement Date of the Lease, the date
for Commencement of Rent under the Lease and for the further purpose of
providing notice of this Second Amendment.
4. CONDITION.
This Second Amendment shall not become effective until the Consent by
Guarantor set forth below is executed by the TJX Companies, Inc. (formerly known
as Zayre Corp.), a Delaware corporation. This condition may be waived, however,
by the Landlord under the Lease by giving written notice of such waiver to the
Tenant within sixty (60) days of the date of this Second Amendment, in which
event this Second Amendment shall become effective without the consent of The
TJX Companies, Inc.
5. CONFIRMATION OF LEASE AS AMENDED:
Except as expressly modified/supplemented herein, the Lease as
amended by the First Amendment shall continue in full force and effect. In the
event of a conflict between this Second Amendment and the Lease as amended by
the First Amendment, this Second Amendment shall prevail.
(SIGNATURES ON THE FOLLOWING PAGE)
<PAGE>
Second Amendment
Page 4
The Parties hereby confirm the Lease as amended by the Second
Amendment.
CHICO CROSSROADS CENTER, a
California limited partnership
By: JMLB, Inc., a California
corporation
By: /s/ Jaime Sohacheski
----------------------
Jaime Sohacheski,
President
WABAN INC., A Delaware
corporation
By: /s/ Edward J. Weisberger
-----------------------------
Its: Vice President-Finance
-----------------------
By: /s/ Dale N. Garth
-----------------------------
Its: Senior Vice President
-----------------------
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On the 21st day of MARCH, 1994, before me, the undersigned a Notary Public,
in and for said State and County, personally appeared JAIME SOHACHESKI,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the President, and - , know to me (or proved to me on the basis of
satisfactory evidence) to the President of JMLB, INC., a California corporation,
known to me to be the persons who executed the within instrument on behalf of
said corporation, said corporation being known to me to be a general partner of
CHICO CROSSROADS CENTER, a California limited partnership, and acknowledged to
me that said corporation executed the same as such partner pursuant to its
bylaws or a resolution of its board of directors and that such limited
partnership executed the same.
WITNESS my hand and official seal.
[seal] /s/ Diane L. Croskey
---------------------
Notary Public
<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss.
COUNTY OF MIDDLESEX )
On the 11th day of March, 1994, before me, the undersigned a Notary Public,
in and for said State and County, personally appeared Dale N. Garth and Edward
J. Weisberger, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the persons who executed the within instrument as
the Senior Vice President and Vice President-Finance, on behalf of WABAN Inc. a
Delaware corporation, the corporation therein named, and acknowledged to me that
such corporation executed the within instrument pursuant to its bylaws or a
resolution of its board of directors.
WITNESS my hand and official seal.
/s/ Mary T. Slattery
-----------------------
Notary Public
MARY T. SLATTERY, Notary Public
My Commission expires February 17, 2000
<PAGE>
FIRST AMENDMENT TO HOMECLUB, INC. SHOPPING CENTER LEASE
This First Amendment to Homeclub, Inc. Shopping Center Lease ("First Amendment")
is dated _________________ 1991, and is between PACIFIC QUADRANT - CHICO, a
California general partnership (hereinafter referred to as "PQ-C") as Landlord,
and WABAN, INC., a Delaware corporation, a successor in interest to Homeclub,
Inc., a Delaware corporation, (hereinafter referred to as "HC") as Tenant. PQ-C
and HC are hereinafter collectively referred to as the "Parties".
RECITALS
A. HC has heretofore entered into a Lease titled Homeclub, Inc. Shopping
Center Lease, dated June 6, 1988 ( the "Lease"), wherein HC leases from Douglas
W. Bradford, certain premises more particularly described within said Lease.
Said premises are further described within the Short Form Lease recorded
June 10, 1988 in Butte County, California under Recorder Serial Number 88-18605.
B. Douglas W. Bradford, is designated as Landlord under the Lease, and did
assign Landlord's interest under the Lease to Pacific Quadrant Development Co.,
a California general partnership, by Assignment and Assumption Agreement dated
June 2, 1988 recorded June 10, 1988 in Butte County, California, under Recorder
Serial
1
<PAGE>
Number 88-018600. PQ-C did acquire the Landlord's interest under the Lease
pursuant to an Assignment and Assumption Agreement dated January 1, 1989
recorded January 10, 1989 in Butte County, California under Recorder Serial
Number 89-00933.
C. PQ-C as the present Landlord under the Lease and HC as the Tenant under the
Lease desire to amend the Lease.
NOW THEREFORE, PQ-C as Landlord under the Lease and HC as Tenant under the Lease
do agree as follows:
1. COMMENCEMENT DATE:
The Parties agree and confirm that the Commencement Date as defined within
Article IV of the Lease is November 17, 1988.
2. REVISION OF LEASE PLAN:
Attached hereto and incorporated by reference is Lease Plan (Rev. 1). In
each instance wherein the Lease or this First Amendment makes reference to the
"Lease Plan" such reference shall be deemed to refer to the Lease Plan (Rev. 1).
2
<PAGE>
3. SHOPPING CENTER PARKING AREAS:
The last two sentences of Paragraph 2 of Schedule B to the Lease are amended
in their entirety to read as follows:
"Landlord agrees that the Parking Areas within the Shopping Center will
always contain at least (3.50) parking spaces, and driveways and footways
incidental thereto, for each one thousand (1,000) square feet of floor area in
the Shopping Center and, in any event, not less than 924 such spaces or such
greater number of spaces as may be required by an applicable governmental
regulation, code, special use or other zoning permit. Landlord specifically
agrees that the Parking Areas shown on the Lease Plan as Phase 1 will always
contain 427 parking spaces (at least 366 in front of the building, including at
least 320 spaces for so-called standard-size American automobiles, and no more
than forty-six (46) spaces for so-called compact size automobiles) and driveways
and footways incidental thereto, or such greater number of spaces as may be
required by any applicable governmental regulation code, special use or other
zoning permit.
4. SHOPPING CENTER PYLON SIGNS
Paragraph 3 of Schedule B to the Lease is amended in its entirety to read
as follows:
"Landlord's Construction Work" as defined in Section 3.1 shall
3
<PAGE>
include without limitation the construction by Landlord of two Shopping Center
identification pylon signs, including without limitation, the base, utilities
service therefor and all other appurtenances thereto, all collectively referred
to as the "Pylon Signs". The location of the Pylon Signs will be as set forth
upon the Lease Plan. That Pylon Sign at location indicated upon the Lease Plan
adjacent to on-ramp to Highway 99 is hereinafter referred to as the "Freeway
Pylon Sign" and the Pylon sign indicated at location adjacent to 20th Street
near the intersection of 20th Street and Whitman Avenue is hereinafter referred
to as the "20th Street Pylon Sign". Each Pylon sign shall be limited to the
identification of not more than three (3) occupants conducting business within
the Shopping Center. Tenant shall have the right to install, and thereafter
maintain, its identification panel, and all appurtenances thereto, upon the 20th
street Pylon Sign. Tenant's location and so-called "billing" thereon shall be
superior to all other persons. Landlord shall cooperate with Tenant in
obtaining all permits as shall be required by law and all consents required by
any other persons for the installation of Tenant's identification panel upon the
20th Street Pylon Sign. Landlord shall be entitled to offer the second position
located below that of Tenant herein for identification of the Market occupying
Building D as shown upon the Lease Plan. The remaining Tenant identification
locations upon the 20th Street Pylon Sign including the second location should
the market decline such space, and the
4
<PAGE>
Freeway Pylon Sign may be utilized as designated by Landlord for the
Identification of Tenants and/or owner-occupants conducting business within the
Shopping Center subject to the before referenced limitation of not more than
three (3) identified businesses per Pylon Sign".
In the event that Tenant assigns or sublets all or any portion of the
Demised Premises to any other party, including any affiliate of Tenant, then
Tenant, or its assignee or sublessee, shall also, upon 60 days" written notice
to Landlord, have the right to install, and thereafter maintain, its
identification panel and all appurtenances thereto, upon the Freeway Pylon Sign
and Tenant's (or its assignee's or sublessee's) location and so-called "billing"
thereon shall be superior to all other persons. Landlord shall cooperate with
Tenant in obtaining all permits as shall be required by laws and all consents
required by any other persons for the installation of Tenant's identification
panel on the Freeway Pylon Sign.
5. FIRST AMENDMENT TO SHORT FORM LEASE
The parties hereto agree to execute a First Amendment to Short Form of
Lease for recordation indicating the Commencement Date of the Lease and for the
further purpose of providing notice of this First Amendment.
5
<PAGE>
6. CONFIRMATION OF LEASE AS AMENDED
The Parties hereby confirm the Lease as amended by the First Amendment.
PACIFIC QUADRANT - CHICO
a California general partnership
BY: THE QUADRANT CORPORATION
a Washington Corporation, General Partner
By: ___________________________________________
Its: ___________________________________________
WABAN, INC.
a Delaware corporation
By: _________________________________________________
Its: ____________________________________________
By: _________________________________________________
Its: ____________________________________________
6
<PAGE>
[MAP]
<PAGE>
88-018601 Rec Fee 11.00
Total 11.00
Recorded
RECORDING REQUESTED BY Official Records
AND WHEN RECORDED, MAIL TO: County of
Butte
Candace J. Grubbs
Pacific Quadrant Development Co. Recorder
1646 N. California Blvd., Ste. 65 3:36pm 10-Jun-88 JJ 4
Walnut Creek, CA 94596
Attention: Harold B. Hembree )
)
)
___________________________________ )
NOTICE OF ASSIGNMENT AND ASSUMPTION
THIS NOTICE, dated as of June 8, 1988, is to advise all persons and
entities that PACIFIC QUADRANT DEVELOPMENT COMPANY, a California general
partnership ("Landlord"), has become the Landlord under the three (3) leases
described below, which relate to that certain real property located in Chico,
California, more particularly described in Exhibit "A," which is attached
hereto and incorporated herein. Landlord acquired its right, title and
interest in the following leases and assumed the obligations set forth
therein, by means of an Assignment and Assumption Agreement from Douglas W.
Bradford ("Assignor") dated as of June 8, 1988.
The three (3) leases include:
1. The Shopping Center Lease between Assignor and HomeClub, Inc., dated
as of June 6, 1988;
2. The Build and Lease Agreement between Assignor and Netco Foods,
Inc., dated as of May 25, 1988; and
3. The Lease Agreement between Assignor and Pay Less Drug Stores
Northwest, Inc., dated as of May 23, 1988.
The complete terms, covenants and conditions of said leases assigned to
Landlord and assumed by Landlord are set forth in said leases. Furthermore, a
Memorandum of Lease has been recorded for each of said leases under the name
of Assignor.
1.
<PAGE>
IN WITNESS WHEREOF, Landlord has caused this Notice of Assignment and
Assumption to be executed as of the date first set forth above.
PACIFIC QUADRANT DEVELOPMENT COMPANY
a California general partnership
By: Pacific RIM Development
Corporation, a California
corporation, Managing General
Partner
By: /s/ Harold B. Hembree
-------------------------------
Harold B. Hembree,
Senior Vice President-
Operations
2.
<PAGE>
EXHIBIT "A"
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF CALIFORNIA, COUNTY
OF BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
LOT 4, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL SUBDIVISION,"
WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF BUTTE,
STATE OF CALIFORNIA, ON JULY 6, 1965, IN BOOK 34 OF MAPS, AT PAGE(S) 7, 8 AND
9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF CALIFORNIA, BY DEED
RECORDED SEPTEMBER 27, 1974, IN BOOK 1941, PAGE 219, OFFICIAL RECORDS.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES BELOW
A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS BELOW A DEPTH OF 250 FEET OF
SAID REAL PROPERTY WITHOUT THE RIGHT OF SURFACE ENTRY.
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF CALIFORNIA, COUNTY OF
BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
LOT 9, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL SUBDIVISION,"
WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF BUTTE,
STATE OF CALIFORNIA, ON JULY 6, 1965, IN BOOK 34 OF MAPS, AT PAGE(S) 7, 8 AND
9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF CALIFORNIA, BY DEED
RECORDED SEPTEMBER 27, 1974, IN BOOK 1941, PAGE 219, OFFICIAL RECORDS.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES BELOW
A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS BELOW A DEPTH OF 250 FEET OF
SAID REAL PROPERTY WITHOUT THE RIGHT OF SURFACE ENTRY.
ALSO EXCEPTING THEREFROM THOSE PORTIONS DEEDED TO THE CITY OF CHICO, BY DEEDS
RECORDED APRIL 28, 1980, IN BOOK 2510, PAGE 195, OFFICIAL RECORDS, AND
RECORDED MAY 15, 1980, IN BOOK 2515, PAGE 276, OFFICIAL RECORDS.
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF CONTRA COSTA )
On this 10th day of June, 1988, before me, a Notary Public in and for
said State, duly commissioned and sworn, personally appeared HAROLD B.
HEMBREE, known to me (or proved to me on the basis of satisfactory evidence)
to be the Senior Vice President-Operations of Pacific RIM Development
Corporation, a California corporation, Managing General Partner of Pacific
Quadrant Development Company, a California general partnership, and the
officer executing the within instrument who acknowledged to me that such
corporation executed the within instrument pursuant to its by-laws or a
resolution of its board of directors and that the partnership executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date in this certificate first above written.
/s/ Ruth Cooper
(SEAL) --------------------------------------
NOTARY PUBLIC
3.
<PAGE>
88-01960 | Rec Fee 15.00
| Total 15.00
RECORDING REQUESTED BY Recorded |
AND WHEN RECORDED, MAIL TO: Official Records |
County of | Pacific Quad.
Pacific Quadrant Development Co. Butte |
1646 N. California Blvd., Ste 650 Candace J. Grubbs |
Walnut Creek, CA 94596 3:35pm 10-Jun-88 | JJ 6
Attention: Harold B. Hembree
)
)
Order No. 96705 )
------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS AGREEMENT, dated as of JUNE 2, 1988, is made by and between DOUGLAS
W. BRADFORD ("Assignor") and PACIFIC QUADRANT DEVELOPMENT COMPANY, a
California general partnership ("Assignee").
RECITALS:
A. Assignor has entered into an Agreement of Purchase and Sale and
Joint Escrow Instructions with Park Springfield, Ltd., a California limited
partnership, dated March 25, 1988, and three (3) amendments thereto, for the
purchase of 11.231 acres of land in Chico, California, more particularly
described in said Agreement. In addition, Assignor has entered into an
Option Agreement with Park Springfield, Ltd., dated March 25, 1988, for the
purchase of 9.68 acres of land in Chico, California, more particularly
described in said Option Agreement. These agreements are collectively
referred to as the "Purchase Agreement."
B. Assignor and Assignee, in contemplation of acquiring the Property,
have jointly prepared a Development Plan. In furtherance of said plan,
Assignor has: (i) entered into contracts with, and obtained work product of,
engineers, architects, surveyors, contractors and consultants; and (ii)
obtained, or applied for, governmental permits, licenses, approvals and
variances ((i) and (ii) are referred to herein collectively as the
"Development Materials" and are listed in their entirety in Exhibit "A"
hereto). Assignor has also entered into lease negotiations with The Home
Club, Food 4 Less Markets and Payless Drugstores (collectively the "Major
Tenant Leases"). The Purchase Agreement, Development Plan, Development
Materials, Major Tenant Leases, and any and all other rights relating to the
acquisition, development, construction and leasing of the Project in
accordance with the Development Plan (except as set forth in the Assignment,
Assumption and Option Agreement of even date herewith and in the Project
Management Agreement of even date
1.
<PAGE>
herewith) are collectively referred to herein as the "Assignment Property."
C. Assignee desires to acquire all of Assignor's right, title and
interest in the Assignment Property.
NOW, THEREFORE, for valuable consideration, the receipt of which is
hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. RECITALS. The foregoing recitals are true and correct.
2. ASSIGNMENT AND ASSUMPTION. Assignor hereby grants, assigns,
transfers and delivers to Assignee all of his right, title and interest in
and to the Assignment Property. Assignee hereby accepts said assignment from
Assignor, assumes all obligations set forth in the Assignment Property listed
in Exhibit A, and agrees to be bound by all of the terms and conditions set
forth in the Assignment Property listed in Exhibit A from and after the
effective date of this Agreement. Assignee acknowledges that Assignor shall
have no further obligations, liabilities or responsibilities with respect to
the Assignment Property after the effective date of this Agreement, except as
set forth in the Project Management Agreement and/or the Assignment,
Assumption and Option Agreement and except for contracts not set forth in
Exhibit A which would individually or in the aggregate impose additional
obligations upon Pacific Quadrant of more than Twenty-Five Thousand Dollars
($25,000).
3. REIMBURSABLE EXPENSES. Assignee hereby assumes Assignor's
obligations to pay the unpaid expenses relating to the acquisition or
preparation of the Assignment Property, as set forth in and limited by
Section 3.1 of the Assignment, Assumption and Option Agreement (collectively
the "Reimbursable Expenses"). Assignee hereby agrees to pay all Reimbursable
Expenses on or before their due dates.
4. MUTUAL INDEMNIFICATIONS. Assignor hereby agrees to indemnify
Assignee, hold it harmless, defend and protect it from and against any and
all claims, demands, damages, losses, liabilities, liens, lawsuits and other
proceedings, together with all costs and expenses thereof (including, without
limitation, reasonable attorneys fees and court costs) arising from or
connected with any act or omission with respect to the Assignment Property
occurring prior to the effective date of this Agreement, except for items not
listed in Exhibit A and except as set forth in Section 3 above. Assignee
hereby agrees to indemnify Assignor, hold his harmless, defend and protect
him from and against any and all claims, demands, damages, losses,
liabilities, liens, lawsuits and other proceedings, together with all costs
and expenses thereof (including, without limitation, reasonable attorneys
fees and court costs) arising from or connected with any act or omission with
respect to the Assignment Property occurring on or after the effective date
of this Agreement, including,
2.
<PAGE>
without limitation, payment of the Reimbursable Expenses on or before their due
date.
5. GENERAL PROVISIONS. All Exhibits attached to this Agreement are
incorporated herein by reference. This Agreement shall be governed by and
construed in accordance with the laws of the State of California. It shall
be binding upon and shall inure to the benefit of the parties hereto and
their respective heirs, personal representatives, successors and assigns. In
the event that any lawsuit is initiated to interpret or enforce the terms of
this Agreement, the prevailing party shall be entitled to an award of
reasonable attorneys' fees and court costs.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Agreement
as of the date first written above.
PACIFIC QUADRANT DEVELOPMENT COMPANY
a California general partnership
By: Pacific RIM Development
Corporation, a California
corporation, Managing General
Partner
By: /s/ Harold B. Hembree
----------------------
Harold B. Hembree,
Senior Vice President-
Operations
/s/ Douglas W. Bradford
-------------------------------
DOUGLAS W. BRADFORD
By: /s/ Edward T. Marshall
/s/ His Attorney-In-Fact
Edward T. Marshall, Attorney in fact
3.
<PAGE>
STATE OF CALIFORNIA )
)ss.
COUNTY OF CONTRA COSTA )
On this 10 day of June, 1988, before me, a Notary Public in and for said
State, duly commissioned and sworn, personally appeared HAROLD B. HEMBREE,
known to me (or proved to me on the basis of satisfactory evidence) to be the
Senior Vice President-Operations of Pacific RIM Development Corporation, a
California corporation, Managing General Partner of Pacific Quadrant
Development Company, a California general partnership, and the officer
executing the within instrument who acknowledged to me that such corporation
executed the within instrument pursuant to its by-laws or a resolution of its
board of directors and that the partnership executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date in this certificate first above written.
[SEAL] /s/Ruth Cooper
-------------------
NOTARY PUBLIC
STATE OF CALIFORNIA )
)ss.
COUNTY OF CONTRA COSTA )
On this 10 day of June, 1988, before me, a Notary Public in and for
said State, duly commissioned and sworn, personally appeared EDWARD T.
MARSHALL, known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument as the
attorney-in-fact of DOUGLAS W. BRADFORD, and acknowledged to me that he
subscribed the name of DOUGLAS W. BRADFORD thereto as principal, and his own
name as attorney-in-fact.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date in this certificate first above written.
[SEAL] /s/Ruth Cooper
-------------------
NOTARY PUBLIC
4.
<PAGE>
|
88-018605 | Rec Fee 19.00
RECORDING REQUESTED BY: Recorded | Total 19.00
AND WHEN RECORDED MAIL TO: OFFICIAL RECORDS |
County of |
Butte | Pacific Quad.
D. William Wagner, Esq. Candace J. Grubbs |
Sidley & Austin Recorder |
2049 Century Park East 3:39pM 10-Jun-88 | JJ 8
Suite 3400
Los Angeles, California 90067 TRANSFER
TAX PAID X
Order No. 96705
AP# 005-56-0-008-0
005-55-0-014-0
SHORT FORM OF LEASE
THIS SHORT FORM OF LEASE executed this 6th day of June, 1988, by and
between DOUGLAS W. BRADFORD (hereinafter referred to as "Landlord"), whose
address is 2694 Bishop Drive, Suite 202, San Ramon, CA 94583, and HOMECLUB,
INC., a Delaware corporation (hereinafter referred to as "Tenant"), whose
address is 140 Orangefair Mall, Suite 100, Fullerton, California 92632;
WITNESSETH:
That for and in consideration of the covenants and agreements contained
in that certain Lease dated June 6th, 1988 (the "Lease"), Landlord does
hereby demise and lease unto Tenant, and Tenant does hereby lease from
Landlord that certain real property in the City of Chico, County of Butte,
State of California, within the shopping center (the "Shopping Center")
situated at the intersection of Whitman Avenue and 20th Street, more
particularly described on Exhibit "A" attached hereto and by this reference
incorporated herein (the "Demised Premises").
TO HAVE AND TO HOLD the Demised Premises effective from the Commencement
Date as defined in the Lease for a period of twenty (20) years, and
containing four (4) five (5) year options to renew the Lease, upon the terms
and conditions contained in the Lease.
IT IS UNDERSTOOD AND AGREED that this Short Form of Lease is executed
solely for the purpose of giving notice to the public of the existence of the
Lease against the Demised Premises, the terms and conditions of which are
expressly incorporated herein by reference for all purposes as though fully
set forth herein. Should there be
1
<PAGE>
any inconsistency between the terms of this instrument and the Lease
incorporated herein, the terms of said incorporated Lease shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed this Short Form of
Lease as of the day and year first above written.
LANDLORD:
DOUGLAS W. BRADFORD,
an individual
/s/ Douglas W. Bradford
-------------------------
/Douglas W. Bradford
TENANT:
HOMECLUB, INC., a Delaware
corporation
By: /s/ Herb Zarkin
------------------
HERB ZARKiN
Its: /s/ President
--------------
President
By: /s/ George Freeman
-------------------
George Freeman
Its: /s/ Vice President
----------------------
Vice President
2
<PAGE>
[GRAPH]
<PAGE>
[GRAPH]
<PAGE>
[MAP]
<PAGE>
88-18605
EXHIBIT "B"
DESCRIPTION
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF CALIFORNIA, COUNTY OF
BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
PARCEL A:
LOT 4, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL SUBDIVISION",
WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF BUTTE,
STATE OF CALIFORNIA, ON JULY 6, 1965, IN BOOK 34 OF MAPS, AT PAGE(S) 7, 8
AND 9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF CALIFORNIA, BY DEED
RECORDED SEPTEMBER 27, 1974, IN BOOK 1941, PAGE 219, OFFICIAL RECORDS.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES BELOW
A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS BELOW A DEPTH OF 250 FEET OF
SAID REAL PROPERTY WITHOUT THE RIGHT OF SURFACE ENTRY.
CONTINUED ON NEXT PAGE
<PAGE>
88-18605
EXHIBIT "B" CONTINUED
PARCEL B:
LOT 9, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL SUBDIVISION",
WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF BUTTE,
STATE OF CALIFORNIA, ON JULY 6, 1965, IN BOOK 34 OF MAPS, AT PAGE(S) 7, 8
AND 9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF CALIFORNIA, BY DEED
RECORDED SEPTEMBER 27, 1974, IN BOOK 1941, PAGE 219, OFFICIAL RECORDS.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES BELOW
A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS BELOW A DEPTH OF 250 FEET OF
SAID REAL PROPERTY WITHOUT THE RIGHT OF SURFACE ENTRY.
ALSO EXCEPTING THEREFROM THOSE PORTIONS DEEDED TO THE CITY OF CHICO, BY DEEDS
RECORDED APRIL 28, 1980, IN BOOK 2510, PAGE 195, OFFICIAL RECORDS, AND
RECORDED MAY 15, 1980, IN BOOK 2515, PAGE 276, OFFICIAL RECORDS.
<PAGE>
88-18605
STATE OF CALIFORNIA *
COUNTY OF ORANGE *
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared Herb Zarkin, known to me to
be the President of HOMECLUB, INC., a Delaware corporation, known to me to be
the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and
consideration therein expressed, in the capacity therein stated, and as the
act and deed of said Corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE on this 13th day of May, 1988.
[SEAL] /s/ Barbara Lundquist
----------------------
NOTARY PUBLIC FOR THE STATE
OF CALIFORNIA
/s/ Barbara Lundquist
- -------------------------
Notary's Printed Name
My Commission Expires: 3/31/89
COMMONWEALTH OF MASSACHUSETTS*
COUNTY OF MIDDLESEX *
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared Geore Freeman, known to me
to be the Vice-President of HOMECLUB, INC., a Delaware corporation, known to
me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and
consideration therein expressed, in the capacity therein stated, and as the
act and deed of said Corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE on this 7th day of June, 1988.
/s/ Michael Holiday
-----------------------------------
NOTARY PUBLIC FOR THE COMMONWEALTH
OF MASSACHUSETTS
/s/ Michael Holiday
- ---------------------- [SEAL]
Notary's Printed Name
My Commission Expires: 6-12-92
<PAGE>
88-18605
State of California ) On this 25th day of April 1988, before me,
) ss. /s/ Ruth Cooper
County of Contra Costa) -----------------------------------------
the undersigned Notary Public personally
appeared
/s/ Douglas W. Bradford
-----------------------------------------
/x/ personally known to me
/ / proved to me on the basis of
satisfactory evidence to be the
[SEAL] person(s) whose name(s) he subscribed
to the within instrument, and
acknowledged that he executed it.
WITNESS my hand and official seal.
/s/ Ruth Cooper
------------------------------------------
Notary's Signature
<PAGE>
88-18605
(Home Club Exhibit)
EXHIBIT "A"
FOR DESCRIPTION OF ENTIRE SHOPPING CENTER, SEE EXHIBIT "B" ATTACHED HERETO
AND MADE A PART HEREOF.
The Demised Premises shall consist of a one-story building (the "Building"),
to be constructed by Landlord as provided in said lease, containing one
hundred three thousand nine hundred and nine (103,909) square feet of floor
area having a depth and width of two hundred eighty-one point four feet by
three hundred sixty-nine point four feet (281.4 x 369.4) and other dimensions
as shown upon the plan attached hereto ("the Lease Plan"), plus an exterior
nursery area containing nine thousand eight hundred and eighty (8,880) square
feet of floor area, all as shown on the Lease Plan. Said Lease Plan being
attached hereto and shown as Exhibit "C"
<PAGE>
[MAP]
<PAGE>
RECORDING REQUESTED BY:
AND WHEN RECORDED MAIL TO:
D. William Wagner, Esq.
Sidley & Austin
2049 Century Park East
Suite 3400
Los Angeles, California 90067
SHORT FORM OF LEASE
THIS SHORT FORM OF LEASE executed this __ day of __________________,
198_, by and between DOUGLAS W. BRADFORD (hereinafter referred to as
"Landlord"), whose address is 2694 Bishop Drive, Suite 202, San Ramon, CA
94583, and HOMECLUB, INC., a Delaware corporation (hereinafter referred to as
"Tenant"), whose address is 140 Orangefair Mall, Suite 100, Fullerton,
California 92632;
WITNESSETH:
That for and in consideration of the covenants and agreements contained
in that certain Lease dated ____________, 198_ (the "Lease"), Landlord does
hereby demise and lease unto Tenant and Tenant does hereby lease from
Landlord that certain real property in the city of Chico, County of Butte,
State of California, within the shopping center (the "Shopping
Center") situated at the intersection of Whitman Avenue and 20th Street, more
particularly described on Exhibit "A" attached hereto and by this reference
incorporated herein (the "Demised Premises").
TO HAVE AND TO HOLD the Demised Premises effective from the Commencement
Date as defined in the Lease for a period of twenty (20) years, and
containing four (4) five (5) year options to renew the Lease, upon the terms
and conditions contained in the Lease.
IT IS UNDERSTOOD AND AGREED that this Short Form of Lease is executed
solely for the purpose of giving notice to the public of the existence of
the Lease against the Demised Premises, the terms and conditions of which are
expressly incorporated herein by reference for all purposes as though fully
set forth herein. Should there be
1
<PAGE>
any inconsistency between the terms of this instrument and the Lease
incorporated herein, the terms of said incorporated Lease shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed this Short Form of
Lease as of the day and year first above written.
LANDLORD:
DOUGLAS W. BRADFORD,
an individual
/s/ Douglas W. Bradford
------------------------
TENANT:
HOMECLUB, INC., a Delaware
corporation
By: /s/ [illegible]
---------------------------
Its: President
----------------------
By: /s/ [illegible]
---------------------------
Its: Vice President
----------------------
2
<PAGE>
(Home Club Exhibit)
EXHIBIT "A"
FOR DESCRIPTION OF ENTIRE SHOPPING CENTER, SEE EXHIBIT "B" ATTACHED HERETO AND
MADE A PART HEREOF.
The Demised Premises shall consist of a one-story building (the "Building"),
to be constructed by Landlord as provided in said lease, containing one
hundred three thousand nine hundred and nine (103,909) square feet of floor
area having a depth and width of two hundred eighty-one point four feet by
three hundred sixty-nine point four feet (281.4 x 369.4) and other
dimensions as shown upon the plan attached hereto ("the Lease Plan"), plus an
exterior nursery area containing nine thousand eight hundred and eight
(9,880) square feet of floor area, all as shown on the Lease Plan. Said Lease
Plan being attached hereto and shown as Exhibit "C"
<PAGE>
Exhibit "B"
DESCRIPTION
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF CALIFORNIA, COUNTY OF
BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
LOT 4, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL SUBDIVISION",
WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF BUTTE,
STATE OF CALIFORNIA, ON JULY 6, 1965, IN BOOK 34 OF MAPS, AT PAGE(S) 7, 8 AND
9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF CALIFORNIA, DESCRIBED
AS FOLLOWS:
BEGINNING AT A POINT WHICH IS THE INTERSECTION OF THE EAST LINE OF LOT 2, AS
SHOWN ON SAID MAP, WITH THE WESTERLY LINE OF STATE HIGHWAY ROUTE 99, SAID
POINT BEING DISTANT 90.00 FEET SOUTHWESTERLY MEASURED AT A RIGHT ANGLE FROM
THE BASE LINE AT ENGINEER'S STATION (C-1) 488+87.54 OF THE DEPARTMENT OF
PUBLIC WORKS SURVEY ON ROAD 03-BUT-99 FROM POST MILE 30.0 TO 37.3; THENCE
FROM SAID POINT OF BEGINNING NORTH 32 DEG. 24' 21" WEST, 718.93 FEET; THENCE
ALONG A TANGENT CURVE TO THE LEFT, HAVING A RADIUS OF 2940.00 FEET, THROUGH
AN ANGLE OF 2 DEG. 25' 14", AN ARC DISTANCE OF 124.21 FEET TO A POINT OF
COMPOUND CURVE; THENCE ON A CURVE TO THE LEFT, WITH A RADIUS OF 815.00 FEET,
THROUGH AN ANGLE OF 25 DEG. 39' 46", AN ARC DISTANCE OF 365.04 FEET; THENCE
NORTH 60 DEG. 29' 31" WEST, 603.28 FEET; THENCE NORTH 85 DEG. 37' 47" WEST,
152.81 FEET; THENCE SOUTH 80 DEG. 00' 30" WEST, 188.24 FEET TO A POINT ON THE
SOUTH LINE OF 20TH STREET, AS SHOWN ON SAID MAP OF "CHICO INDUSTRIAL PARK";
THENCE ALONG SAID SOUTH LINE OF 20TH STREET ON A CURVE TO THE LEFT, TANGENT
TO A LINE BEARING NORTH 79 DEG. 40' 52" EAST, HAVING A RADIUS OF 642.00 FEET,
THROUGH AN ANGLE OF 15 DEG. 22' 20", AN ARC DISTANCE OF 172.25 FEET; THENCE
CONTINUING ALONG SOUTH LINE OF 20TH STREET, SOUTH 30 DEG. 29' 31" EAST, 2.33
FEET; THENCE NORTH 68 DEG. 31' 52" EAST, 114.77 FEET; THENCE NORTH 64 DEG.
28' 40" EAST, 461.74 FEET TO THE INTERSECTION OF THE SOUTHERLY LINE OF SAID
20TH STREET WITH THE WESTERLY LINE OF STATE HIGHWAY ROUTE 99; THENCE ALONG
SAID WESTERLY LINE SOUTH 30 DEG. 29' 31" EAST, 1766.67 FEET TO THE POINT OF
BEGINNING.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES BELOW
A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS BELOW A DEPTH OF 250 FEET OF
SAID REAL PROPERTY WITHOUT THE RIGHT OF SURFACE ENTRY.
ALSO EXCEPTING THEREFROM THOSE PORTIONS DEEDED TO THE CITY OF CHICO, BY DEEDS
RECORDED APRIL 26, 1980, IN BOOK 2510, PAGE 195, OFFICIAL RECORDS, AND
RECORDED MAY 15, 1980, IN BOOK 1515, PAGE 276, OFFICIAL RECORDS.
Exhibit A
- page 1 of 2 -
<PAGE>
DESCRIPTION
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF CALIFORNIA, COUNTY OF
BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
LOT 9, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL SUBDIVISION"
WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF BUTTE,
STATE OF CALIFORNIA, ON JULY 6, 1965, IN BOOK 34 OF MAPS, AT PAGE(S) 7, 8 AND
9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF CALIFORNIA, DESCRIBED
AS FOLLOWS:
BEGINNING AT A POINT WHICH IS THE INTERSECTION OF THE EAST LINE OF LOT 2, AS
SHOWN ON SAID MAP, WITH THE WESTERLY LINE OF STATE HIGHWAY ROUTE 99, SAID
POINT BEING DISTANT 90.00 FEET SOUTHWESTERLY MEASURED AT A RIGHT ANGLE FROM
THE BASE LINE AT ENGINEER'S STATION (C-1) 488+87.54 OF THE DEPARTMENT OF
PUBLIC WORKS SURVEY ON ROAD 03-BUT-99 FROM POST MILE 30.0 TO 37.3; THENCE
FROM SAID POINT OF BEGINNING NORTH 32 DEG. 24' 21" WEST, 718.93 FEET; THENCE
ALONG A TANGENT CURVE TO THE LEFT, HAVING A RADIUS OF 2940.00 FEET, THROUGH
AN ANGLE OF 2 DEG. 25' 14", AN ARC DISTANCE OF 124.21 FEET TO A POINT OF
COMPOUND CURVE; THENCE ON A CURVE TO THE LEFT, WITH A RADIUS OF 815.00 FEET,
THROUGH AN ANGLE OF 25 DEG. 39' 46", AN ARC DISTANCE OF 365.04 FEET; THENCE
NORTH 60 DEG. 29' 31" WEST, 603.28 FEET; THENCE NORTH 85 DEG. 37' 47" WEST,
152.81 FEET; THENCE SOUTH 80 DEG. 00' 30" WEST, 188.24 FEET TO A POINT ON THE
SOUTH LINE OF 20TH STREET, AS SHOWN ON SAID MAP OF "CHICO INDUSTRIAL PARK";
THENCE ALONG SAID SOUTH LINE OF 20TH STREET ON A CURVE TO THE LEFT, TANGENT
TO A LINE BEARING NORTH 79 DEG. 40' 52" EAST, HAVING A RADIUS OF 642.00 FEET,
THROUGH AN ANGLE OF 15 DEG. 22' 20", AN ARC DISTANCE OF 172.25 FEET; THENCE
CONTINUING ALONG SOUTH LINE OF 20TH STREET, SOUTH 30 DEG. 29' 31" EAST, 2.33
FEET; THENCE NORTH 68 DEG. 31' 52" EAST, 114.77 FEET; THENCE NORTH 64 DEG.
28' 40" EAST, 461.74 FEET TO THE INTERSECTION OF THE SOUTHERLY LINE OF SAID
20TH STREET WITH THE WESTERLY LINE OF STATE HIGHWAY ROUTE 99; THENCE ALONG
SAID WESTERLY LINE SOUTH 30 DEG. 29' 31" EAST, 1766.67 FEET TO THE POINT OF
BEGINNING.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES BELOW A
DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS BELOW A DEPTH OF 250 FEET OF SAID
REAL PROPERTY WITHOUT THE RIGHT OF SURFACE ENTRY.
ALSO EXCEPTING THEREFROM THOSE PORTIONS DEEDED TO THE CITY OF CHICO, BY DEEDS
RECORDED APRIL 28, 1980, IN BOOK 2510, PAGE 195, OFFICIAL RECORDS, AND
RECORDED MAY 15, 1980, IN BOOK 1515, PAGE 276, OFFICIAL RECORDS.
Exhibit A
- page 2 of 2 -
<PAGE>
STATE OF CALIFORNIA *
COUNTY OF ORANGE *
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared [illegible], known to
me to be the President of HOMECLUB, INC., a Delaware corporation, known to me
to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and
consideration therein expressed, in the capacity therein stated, and as the
act and deed of said Corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE on this 13th day of May, 1988.
[illegible]
[OFFICIAL NOTARY SEAL] --------------------------------------
NOTARY PUBLIC FOR THE STATE
OF CALIFORNIA
[illegible]
- -------------------------
Notary's Printed Name
My Commission Expires: [illegible]
COUNTY OF ORANGE*
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared [illegible], known to me to
be the Vice President of HOMECLUB, INC., a Delaware corporation, known to me
to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed the same for the purposes and
consideration therein expressed, in the capacity therein stated, and as the
act and deed of said Corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE on this 7th day of June, 1988.
[illegible]
[OFFICIAL NOTARY SEAL] --------------------------------------
NOTARY PUBLIC FOR THE COMMONWEALTH
OF [illegible]
[illegible]
- -------------------------
Notary's Printed Name
My Commission Expires: [illegible]
<PAGE>
GENERAL ACKNOWLEDGMENT
[OFFICIAL NOTARY SEAL]
<PAGE>
SECRETARY'S CERTIFICATE
June 6, 1988
I, Ann McCauley, an Assistant Secretary of HomeClub, Inc., a Delaware
corporation, hereby certify that at a meeting of the Board of Directors of
said corporation duly held on June 2, 1987, at which meeting a quorum of the
Directors was present, upon motion duly made and seconded, it was unanimously
RESOLVED: That both (i) any one of John Levy, Herbert Zarkin, Maurice Segall
and Sumner Feldberg ("Group A Officers") and (ii) any one
of Arthur F. Loewy, George Freeman, Jay H. Meltzer and Maurice
Segall ("Group B Officers") may sign, seal with the corporate seal,
acknowledge and/or deliver, in the name of and on behalf of this
corporation, any and all deeds, or other instruments of conveyance
or transfer granting, conveying or transferring real estate, any
and all mortgages or pledges of real property, any and all notes
secured by such mortgages or pledges of real property, any and all
assignments, extensions, discharges or partial releases of
mortgages or pledges of real property held by this corporation, any
and all agreements or instruments relating to the acquisition of
real estate, any and all leases, notices of lease, assignments,
surrenders, terminations, extensions or renewals of leases of real
estate, whether this corporaton be named as landlord or as tenant,
and any and all other agreements or instruments relating to real
estate and all amendments of any of the foregoing except only that
Maurice Segall shall not sign any document as both a Group A Officer
and a Group B Officer; that the expression "real estate" as used
herein includes any and all interests in real property; and that
the act of both any one Group A Officer and any one Group B Officer
in so signing, sealing with the corporate seal, acknowledging and/or
delivering any of the aforesaid agreements or instruments may be
relied upon by persons dealing with this corporation as conclusive
evidence of the authority of said person so acting.
I also certify that said vote has not been repealed or modified in any
way and is still in full force and effect.
ATTEST:
/s/ Ann McCauley
---------------------------------------
Assistant Secretary
<PAGE>
SECRETARY'S CERTIFICATE
June 6, 1988
I, Ann McCauley, an Assistant Secretary of Zayre Corp., a Delaware
corporation, hereby certify that at a meeting of the Board of Directors of
said corporation duly held on June 2, 1987, at at which meeting a quorum of
the Directors was present, upon motion duly made and seconded, it was
unanimously
RESOLVED: That both (i) any one of Maurice Segall, Summer Feldberg and Arthur
F. Loewy ("Group A Officers") and (ii) any one of Malcolm J.
Sherman, George Freeman, Jay H. Meltzer and Edward J. Weisberger
("Group B Officers") may sign, seal with the corporate seal,
acknowledge and/or deliver, in the name of and on behalf of this
Corporation, any and all guarantees by this Corporation of (a) any
obligations of any majority-owned subsidiaries of this Corporation,
or (b) any obligations of any majority-owned subsidiaries of
majority-owned subsidiaries of this Corporation and that the act of
both any one Group A Officer and any one Group B Officer in so
signing, sealing with the corporate seal acknowledging and/or
delivering any such guarantees may be relied upon by persons dealing
with this Corporation as conclusive evidence of the authority of said
person so acting.
I also certify that said vote has not been repealed or modified in any
way and is still in full force and effect.
ATTEST:
/s/ Ann McCauley
---------------------------------------
Assistant Secretary
<PAGE>
GUARANTEE
Reference is made to a Shopping Center Lease (the "Lease") dated
____________, 1988, between DOUGLAS W. BRADFORD (hereinafter referred to as
"Landlord"), and HOMECLUB, INC., a Delaware corporation (hereinafter referred
to as "Tenant"), of certain premises within the shopping center in Chico,
California, located at the intersection of Whitman Avenue and 20th Street.
In consideration of Landlord's having executed said Lease at the request
of Zayre Corp., a Delaware corporation ("Zayre" or "Guarantor"), and in
further consideration of One Dollar and other valuable consideration paid,
the receipt of which is hereby acknowledged, Zayre hereby unconditionally
guarantees to Landlord and his heirs, personal representatives, successors
and assigns the payment of the rent provided for in said Lease and the
performance and observance of all agreements and conditions contained in said
Lease on the part of Tenant to be performed or observed. At Landlord's
election, Zayre may be brought into any action or proceeding commenced by
Landlord against Tenant in connection with and based upon said Lease, or any
provision thereof, prior to obtaining a judgment against Tenant therein.
Notwithstanding anything contained herein to the contrary, Zayre shall have
all defenses and rights of Tenant and its successors and assigns (except
their financial disability) with respect to the performance and payments
under the Lease and the obligations of Zayre hereunder shall be measured by
and shall in no event be greater that the obligations of Tenant. Zayre hereby
agrees that it shall in no way be released from it obligtions under this
Guarantee by any of the following actions: any assignment of said Lease or
any subletting of the demised premises by Tenant, any Leasehold Lender, or
any subtenant, successor, or assignee of Tenant, any new Lease with
Leaseholder Lender or party designated by such Lender as provided in Section
18.6 of the Lease, any waiver of default or any extension of time or other
favor or indulgence granted by Landlord to Tenant, any failure to receive
notice of any of said actions, the expiration or termination of the Lease
(except as provided below), or any extension of the terms of the Lease in
accordance with the provisions of the Lease. Zayre hereby waives notice of
non-payment or any other default in the performance or observance of any
agreement or condition contained in said Lease on the part of Tenant to be
performed or observed.
Anything to the contrary herein notwithstanding: (A) if said Lease shall
be terminated pursuant to the provisions of Article 12 of said Lease at a time
when the tenant in
<PAGE>
progression shall not be Zayre, or a subsidiary of Zayre, then Zayre shall
not be liable for the payment of any rent or for the performance or
observance of any agreements or conditions to be paid, performed or observed
which become due or arise after the date of such termination, unless at the
time of such termination Landlord shall have offered to Zayre in writing a
Lease for the balance of the Lease Term (as defined in the Lease) upon the
provisions in said Lease contained; Zayre shall have a period of sixty (60)
days after receipt of such offer to accept such offer. If Zayre accepts
Landlord's offer, then such Lease shall be deemed to mitigate Landlord's
damages.
(B) If Tenant is adjudicated bankrupt, or if any bankruptcy action
involving Tenant is commenced or filed, or if a petition or reorganization,
arrangement, or similar relief is filed against Tenant, then subject to the
foregoing at such time as the trustee or administrator rejects the Lease,
Zayre shall pay to Landlord all accrued, unpaid rent upon the condition that
within thirty (30) days following notice to Landlord of such rejection
Landlord shall have offered to Zayre in writing a Lease for the balance of the
Lease Term upon the provisions of the Lease, including payment of the rental
obligations as provided above, which offer must remain open for not less than
sixty (60) days after receipt of such written offer. If Zayre accepts
Landlord's offer, then such Lease shall be deemed to mitigate Landlord's
damages.
In the event that any legal action or other proceeding is commenced with
respect to this Guarantee, the unsuccessful party shall reimburse the
prevailing party for all reasonable attorney's fees and costs incurred in
connection therewith, including, without limitation all such fees or costs
incurred on any appeal from such action or proceeding.
This Guarantee shall bind the successors and assigns of Guarantor, and
it shall inure to benefit of the heirs, personal representations, successors
and assigns of Landlord. Guarantor further agrees that Landlord may, without
approval, assign its rights under this Guarantee, in whole or in part, to any
person or entity obtaining an ownership interest or security interest of any
nature in the Lease, provided that, unless Tenant is a wholly-owned
subsidiary of Guarantor at the time, Landlord shall give notice of such
assignment within thirty (30) days thereof to Guarantor.
This Guarantee shall be governed by, and construed in accordance with,
the laws of the State of California.
<PAGE>
No provisions of this Guarantee or right of Landlord hereunder can be
waived in whole or in part, nor can Zayre be released from Zayre's
obligations hereunder, except either by a) a writing duly executed by
Landlord and an authorized officer of Landlord's lender, if any, holding a
lien upon the Demised Premises as defined in the Lease, b) operation of law,
or c) operation of the Lease.
Zayre represents that HomeClub is a wholly-owned subsidiary of Zayre.
Zayre has caused this Guarantee to be executed and its corporate seal to
be hereto affixed by Maurice Segall, its President, and George Freeman, its
Vice President hereunto duly authorized all as of the ____ day of
____________, 1988.
ZAYRE CORP.
By:
----------------------------------------
Maurice Segall, President
By:
----------------------------------------
George Freeman, Vice President
<PAGE>
EXHIBIT "A"
ASSIGNMENT PROPERTY
-------------------
The "Assignment Property" assigned by Assignor and assumed by
Assignee pursuant to Section 2 of the Assignment and Assumption Agreement
between them dated as of June 8, 1988, includes the following:
1. The Agreement of Purchase and Sale and Joint Escrow Instructions
between Assignor and Park Springfield, Ltd., a California limited
partnership, dated as of March 25, 1988, and subsequently amended
as of April 15, 1988, May 1, 1988, and May 13, 1988, for the
acquisition of 11.231 acres of land in Chico, California;
2. The Agreement of Purchase and Sale and Joint Escrow Instructions
executed by Assignor and Park Springfield, Ltd., to exercise the
Option Agreement between them dated as of March 25, 1988, and to
consummate the acquisition of 9.68 acres of land in Chico, California;
3. The Assessment District and Cost-Sharing Agreement between
Assignor and Park Springfield, Ltd., dated as of June 8, 1988;
4. The Shopping Center Lease between Assignor and HomeClub, Inc.;
5. The Build and Lease Agreement between Assignor and Netco
Foods, Inc.;
6. The Lease Agreement between Assignor and Pay Less Drug Stores
Northwest, Inc.;
7. The Development Plan prepared by Assignor and Assignee;
8. All "Development Materials," as defined in Recital B of this
Assignment and Assumption Agreement and as specified in the following
page of this Exhibit "A," which is attached hereto and incorporated
herein; and
9. Any and all other rights not expressly specified herein relating to
the acquisition, development, construction and leasing of the 20th &
Whitman Shopping Center Project in accordance with the Development
Plan (except as set forth in the Assignment, Assumption and Option
Agreement and/or in the Project Management Agreement between Assignor
and Assignee.)
<PAGE>
EXHIBIT "A" (Continued)
DEVELOPMENT MATERIALS
VENDOR/CONTRACTOR DESCRIPTION OF WORK
- ----------------- -------------------
Orrland Co. Site Plans and Elevations
Musil Perkowitz & Ruth Construction Drawings
Carl Rottschalk & Assoc. Landscape Plans (Preliminary Phase I,
Phase II, State Right of Way
Rolls Anderson & Rolls Civil Engineering, Phase I & II &
Whitman Avenue Assmt. Dist., Owners
Participation Agt.
TJKM Engineers Traffic Signal Design
JTS Engineering ALTA Survey
Laver Roper & Assoc. Soils Testing, Environmental
Assessment
Kleinfelder Groundwater & Toxic Testing
JOS. J. Blake, AIA Appraisal
WM. Dolan, AIA Easement Appraisal
City of Chico All permits and approvals received
from the City of Chico subject to
all conditions and extractions
thereto.
<PAGE>
RECORDING REQUESTED BY )
AND WHEN RECORDED, MAIL TO: )
)
Pacific Quadrant Development Co. )
c/o Pacific RIM Development Corp. )
1646 N. California Blvd., Ste. 650 )
Walnut Creek, CA 94596 )
Attn: Robert Claflin )
- ----------------------------------- -------------------------------------------
ASSIGNMENT AND ASSUMPTION OF GUARANTEE
THIS AGREEMENT, dated as of _____________________________________, 1988,
is made by and between DOUGLAS W. BRADFORD ("Assignor") and PACIFIC QUADRANT
DEVELOPMENT COMPANY, a California general partnership ("Assignee").
R E C I T A L S :
-----------------
A. By means of an Assignment and Assumption Agreement of even
date herewith, Assignor has assigned to Assignee all of his right, title and
interest in and to that certain Shopping Center Lease between Assignor and
HomeClub, Inc., dated as of June 6, 1988 (the "Lease"), and Assignee has
assumed all obligations thereunder and agreed to be bound thereby.
B. Tenant's obligations to pay rent and to perform and observe all
agreements and conditions contained in the Lease are guaranteed by that
certain Guarantee from the Zayre Corporation, dated as of June 6, 1988 (the
"Guarantee"). A copy of the Guarantee is attached hereto as Exhibit "A" and
incorporated herein.
C. Assignee desires to acquire all of Assignor's right, title and
interest in the Guarantee, and Assignor is willing to assign the same to
Assignee on the terms, covenants and conditions set forth herein.
NOW, THEREFORE, for valuable consideration, the receipt of which is
hereby acknowledged, Assignor and Assignee hereby agree as follows:
1. RECITALS. The foregoing recitals are true and correct.
2. ASSIGNMENT AND ASSUMPTION. Assignor hereby grants, assigns, transfers
and delivers to Assignee all of his right, title and interest in and to the
Guarantee. Assignee hereby accepts said assignment from Assignor, assumes
all obligations of Landlord set forth in the Guarantee, and agrees to be
bound by all of the terms,
<PAGE>
covenants and conditions set forth therein from and after the effective date
of this Agreement.
3. MUTUAL INDEMNIFICATIONS. Assignor hereby agrees to indemnify
Assignee, hold it harmless, defend and protect it from and against any and
all claims, demands, damages, losses, liabilities, liens, lawsuits and other
proceedings, together with all costs and expenses thereof (including, without
limitation, reasonable attorneys fees and court costs) arising from or
connected with any act or omission with respect to the Guarantee occurring
prior to the effective date of this Agreement. Assignee hereby agrees to
indemnify Assignor, hold him harmless, defend and protect him from and
against any and all claims, demands, damages, losses, liabilities, liens,
lawsuits and other proceedings, together with all costs and expenses thereof
(including, without limitation, reasonable attorney's fees and court costs)
arising from or connected with any act or omission with respect to the
Guarantee occurring after the effective date of this Agreement.
4. GENERAL PROVISIONS. This Agreement shall be governed by and
construed in accordance with the laws of the State of California. It shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns. In the
event that any lawsuit is initiated to interpret or enforce the terms of this
Agreement, the prevailing party shall be entitled to an award of reasonable
attorneys' fees and court costs.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Agreement as
of the date first written above.
PACIFIC QUADRANT DEVELOPMENT COMPANY
a California general partnership
By: Pacific RIM Development
Corporation, a California
corporation, Managing General
Partner
By: /s/ Harold B. Hembree
------------------------------
Harold B. Hembree,
Senior Vice President-
Operations
/s/ Douglas W. Bradford
----------------------------------------
DOUGLAS W. BRADFORD
<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF CONTRA COSTA )
On this 10 day of June, 1988, before me, a Notary Public in and for
said State, duly commissioned and sworn, personally appeared HAROLD B.
HEMBREE, known to me (or proved to me on the basis of satisfactory evidence)
to be the Senior Vice President-Operations of Pacific RIM Development
Corporation, a California corporation, Managing General Partner of Pacific
Quadrant Development Company, a California general partnership, and the
officer executing the within instrument who acknowledged to me that such
corporation executed the within instrument pursuant to its by-laws or a
resolution of its board of directors and that the partnership executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date in this certificate first above written.
/s/ Ruth Cooper
[ S E A L ] ----------------------------------------
NOTARY PUBLIC
STATE OF CALIFORNIA )
) ss.
COUNTY OF CONTRA COSTA )
On this 10 day of June, 1988, before me, a Notary Public in and for said
State, duly commissioned and sworn, personally appeared DOUGLAS W. BRADFORD,
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument, and acknowledged
that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on the date in this certificate first above written.
/s/ Ruth Cooper
[ S E A L ] ----------------------------------------
NOTARY PUBLIC
<PAGE>
EXHIBIT "A"
GUARANTEE
Reference is made to a Shopping Center Lease (the "Lease") dated June 6,
1988, between DOUGLAS W. BRADFORD (hereinafter referred to as "Landlord"),
and HOMECLUB, INC., a Delaware corporation (hereinafter referred to as
"Tenant"), of certain premises within the shopping center in Chico,
California, located at the intersection of Whitman Avenue and 20th Street.
In consideration of Landlord's having executed said Lease at the request
of Zayre Corp., a Delaware corporation ("Zayre" or "Guarantor"), and in
further consideration of One Dollar and other valuable consideration paid,
the receipt of which is hereby acknowledged, Zayre hereby unconditionally
guarantees to Landlord and his heirs, personal representatives, successors
and assigns the payment of the rent provided for in said Lease and the
performance and observance of all agreements and conditions contained in said
Lease on the part of Tenant to be performed or observed. At Landlord's
election, Zayre may be brought into any action or proceeding commenced by
Landlord against Tenant in connection with and based upon said Lease, or any
provision thereof, prior to obtaining a judgment against Tenant therein.
Notwithstanding anything contained herein to the contrary, Zayre shall have
all defenses and rights of Tenant and its successors and assigns (except
their financial disability) with respect to the performance and payments
under the Lease and the obligations of Zayre hereunder shall be measured by
and shall in no event be greater than the obligations of Tenant. Zayre hereby
agrees that it shall in no way be released from its obligations under this
Guarantee by any of the following actions: any assignment of said Lease or
any subletting of the demised premises by Tenant, any Leasehold Lender, or
any subtenant, successor, or assignee of Tenant, any new Lease with Leasehold
Lender or party designated by such Lender as provided in Section 18.6 of the
Lease, any waiver of default or any extension of time or other favor or
indulgence granted by Landlord to Tenant, any failure to receive notice of
any of said actions, the expiration or termination of the Lease (except as
provided below), or any extension of the terms of the Lease in accordance
with the provisions of the Lease. Zayre hereby waives notice of non-payment
or any other default in the performance or observance of any agreement or
condition contained in said Lease on the part of Tenant to be performed or
observed.
Anything to the contrary herein notwithstanding: (A) if said Lease shall
be terminated pursuant to the provisions of Article 12 of said Lease at a
time when the tenant in
<PAGE>
possession shall not be Zayre, or a subsidiary of Zayre, then Zayre shall not
be liable for the payment of any rent or for the performance or observance of
any agreements or conditions to be paid, performed or observed which become
due or arise after the date of such termination, unless at the time of such
termination Landlord shall have offered to Zayre in writing a Lease for the
balance of the Lease Term (as defined in the Lease) upon the provisions in
said Lease contained; Zayre shall have a period of sixty (60) days after
receipt of such offer to accept such offer. If Zayre accepts Landlord's
offer, then such Lease shall be deemed to mitigate Landlord's damages.
(B) If Tenant is adjudicated bankrupt, or if any bankruptcy action
involving Tenant is commenced or filed, or if a petition or reorganization,
arrangement, or similar relief is filed against Tenant, then subject to the
foregoing at such time as the trustee or administrator rejects the Lease,
Zayre shall pay to Landlord all accrued, unpaid rent upon the condition that
within thirty (30) days following notice to Landlord of such rejection
Landlord shall have offered to Zayre in writing a Lease for the balance of
the Lease Term upon the provisions of the Lease, including payment of the
rental obligations as provided above, which offer must remain open for not
less than sixty (60) days after receipt of such written offer. If Zayre
accepts Landlord's offer, then such Lease shall be deemed to mitigate
Landlord's damages.
In the event that any legal action or other proceeding is commenced with
respect to this Guarantee, the unsuccessful party shall reimburse the
prevailing party for all reasonable attorney's fees and costs incurred in
connection therewith, including, without limitation all such fees or costs
incurred on any appeal from such action or proceeding.
This Guarantee shall bind the successors and assigns of Guarantor, and
it shall inure to the benefit of the heirs, personal representations,
successors and assigns of Landlord. Guarantor further agrees that Landlord
may, without approval, assign its rights under this Guarantee, in whole or in
part, to any person or entity obtaining an ownership interest or security
interest of any nature in the Lease, provided that, unless Tenant is a
wholly-owned subsidiary of Guarantor at the time, Landlord shall give notice
of such assignment within thirty (30) days thereof to Guarantor.
This Guarantee shall be governed by, and construed in accordance with,
the laws of the State of California.
<PAGE>
No provisions of this Guarantee or right of Landlord hereunder can be
waived in whole or in part, nor can Zayre be released from Zayre's
obligations hereunder, except either by a) a writing duly executed by
Landlord and an authorized officer of Landlord's lender, if any, holding a
lien upon the Demised Premises as defined in the Lease, b) operation of law,
or c) operation of the Lease.
Zayre represents that HomeClub is a wholly-owned subsidiary of Zayre.
Zayre has caused this Guarantee to be executed and its corporate seal to
be hereto affixed by Maurice Segall, its President, and George Freeman, its
Vice President hereunto duly authorized all as of the 6th day of June, 1988.
ZAYRE CORP.
By: /s/ Maurice Segall
----------------------------------
Maurice Segall, President
By: /s/ George Freeman
----------------------------------
George Freeman, Vice President
<PAGE>
SHOPPING CENTER LEASE
CHICO, CALIFORNIA
Between
HOMECLUB, INC.
as Tenant
and
DOUGLAS W. BRADFORD
as Landlord
<PAGE>
HOMECLUB, INC. SHOPPING CENTER LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I PREMISES 1
ARTICLE II TITLE AND OTHER OBLIGATIONS 1
ARTICLE III CONSTRUCTION AND PRE-TERM OCCUPANCY 3
ARTICLE IV LEASE TERM 4
ARTICLE V RENT 8
ARTICLE VI REAL ESTATE TAXES 10
ARTICLE VII REPAIRS AND UTILITIES 13
ARTICLE VIII ALTERATIONS 16
ARTICLE IX FIRE AND OTHER CASUALTY 18
ARTICLE X EMINENT DOMAIN 22
ARTICLE XI INDEMNIFICATION 24
ARTICLE XII DEFAULT 25
ARTICLE XIII SELF-HELP 27
ARTICLE XIV WAIVER OF SUBROGATION 28
ARTICLE XV MORTGAGE SUBORDINATION 29
ARTICLE XVI ASSIGNMENT 30
ARTICLE XVII [intentionally omitted] 31
ARTICLE XVIII LEASEHOLD MORTGAGES 31
ARTICLE XIX GENERAL 33
ARTICLE XX SALE OF DEMISED PREMISES BY LANDLORD 39
SCHEDULE A DESCRIPTION OF DEMISED PREMISES
SCHEDULE B LANDLORD'S OBLIGATIONS
SCHEDULE C LANDLORD'S CONSTRUCTION WORK
SCHEDULE D SUBORDINATION, RECOGNITION AND ATTORNMENT AGREEMENT
SCHEDULE E ZAYRE GUARANTEE
SCHEDULE F SHORT FORM LEASE
</TABLE>
<PAGE>
HOMECLUB, INC. SHOPPING CENTER LEASE
Lease dated June 6, 1988, between DOUGLAS W. BRADFORD, as Landlord
(hereinafter referred to as "Landlord"), and HOMECLUB, INC., a Delaware
corporation, as Tenant (hereinafter referred to as "Tenant").
ARTICLE I
PREMISES
1.1 In consideration of the rents, agreements and conditions herein
reserved and contained on the part of Tenant to be paid, performed and
observed, Landlord does hereby demise and lease to Tenant, for the term
hereinafter set forth, the premises described in Schedule A attached hereto
as the Demised Premises (the "Demised Premises") consisting of 103,909 square
feet of building space plus 9,880 square feet of an exterior nursery area
within the shopping center described in Schedule A as the Shopping Center
(the "Shopping Center").
1.2 Landlord warrants to Tenant that Tenant while operating a retail
and/or wholesale home improvement store together with an exterior garden shop
and lumber area will not be in violation of any exclusives or other
agreements which Landlord may have with other tenants, lenders, governmental
entities or any other parties, and Landlord further warrants: (i) that the
Demised Premises are zoned to permit use of the Demised Premises as a retail
and wholesale general merchandiser, including without limitation, the sale of
home improvement merchandise including lumber sales and a garden shop,
(ii) the real property described in Schedule A (excluding groundwater, except
that Landlord represents that it has no information regarding onsite
groundwater contamination or, to the extent caused by onsite contamination,
any offsite contamination) is free from contamination by any hazardous or
toxic substances, waste, or constituents, including any hydrocarbonic
substances, and (iii) as of the Commencement Date no building, health,
safety, or environmental laws, ordinances or regulations of public
authorities having jurisdiction materially restrict in any way the conduct of
a retail and/or wholesale home improvement store throughout the Demised
Premises or the sale therein of any and all merchandise and services
connected therewith. Landlord hereby indemnifies Tenant against any claims or
damages suffered or claimed to be suffered as a result of any breach of the
foregoing warranties pertaining to Tenant's use of the Demised Premises.
ARTICLE II
TITLE AND OTHER OBLIGATIONS
2.1 Landlord has furnished Tenant with two preliminary title reports
covering the Demised Premises and the Shopping Center issued
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by First American Title Insurance Company (the "Title Company") as Order No.
BU-96705 (dated as of February 10, 1988; hereafter "Title Report Lot 9"), and
Order No. BU-96705-A (dated as of February 10, 1988; "Title Report Lot 4")
(collectively, the "Title Report"), together with copies of all the documents
referred to therein and a survey prepared in accordance with ALTA standards
(collectively the "Title Evidence"). Tenant will permit as exceptions to
title, exception numbers 1, 2, 3 and 6 as shown on Title Report Lot 4, and 1,
2, 3 and 6, as shown on Title Report Lot 9 (the "Permitted Exceptions"). If
any exceptions which are not Permitted Exceptions (the "Unpermitted
Exceptions") exist, Landlord shall have fifteen (15) days after the execution
of this lease to provide evidence to Tenant that it has caused or will cause
such Unpermitted Exceptions to be removed of record or agree to provide an
endorsement to the Leasehold Title Policy (as hereinafter defined) over such
Unpermitted Exceptions, which endorsement shall be in form and substance
acceptable to Tenant. If Landlord shall fail in said fifteen (15) days to
either cause the removal of such Unpermitted Exceptions or to agree to
provide an endorsement over such Unpermitted Exceptions, then Tenant shall
have the right to terminate this lease by giving Landlord written notice
within ten (10) days after the end of said fifteen (15) day period. If Tenant
shall fail within said ten (10) days to give such notice of termination to
Landlord, then thereafter the Unpermitted Exceptions shall be deemed
Permitted Exceptions. Landlord shall promptly cause the Title Company to
issue its ALTA Leasehold Owner's Title Insurance Policy including extended
coverage to Tenant, subject only to the Permitted Exceptions, insuring
Tenant's leasehold estate in the Demised Premises, with liability in the
amount of Three Million Dollars ($3,000,000.00) (the "Leasehold Title
Policy"). If Landlord fails to provide Tenant with the Leasehold Title Policy
as required herein, Tenant may terminate this lease, and neither Landlord nor
Tenant shall have any claims against the other in connection with this lease.
Subject to Tenant's approval, Landlord may cause a plat of subdivision to be
prepared and recorded which shows the Demised Premises as a separate legally
subdivided lot or parcel. Thereafter, Landlord shall promptly (i) prepare a
revised short form lease reflecting the revised legal description of the
Demised Premises, and (ii) cause an endorsement to be issued to the Leasehold
Title Policy to reflect the legal description of the Demised Premises as
subdivided.
2.2 Simultaneously with the execution of this lease Landlord and Tenant
shall execute an instrument, substantially in the form attached hereto as
Schedule F, recordable in form, setting forth the parties, a description of
the Demised Premises and the Shopping Center, the Lease Term and such other
provisions of this lease as may be reasonably requested by either party to
constitute a "short form lease" or other instrument adequate, in the opinion
of Tenant, for recording purposes. Without expense to Tenant, Landlord shall
cause said short form lease or other instrument to be recorded in the
appropriate land records upon, and only upon, request by Tenant that same be
recorded. After the Commencement Date shall be fixed, upon the written
request of either Landlord or Tenant, Landlord and Tenant will enter into an
amended "short form lease" or other such instrument to fix the Commencement
Date of record which amended short form of
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lease shall be recorded by Landlord upon, and only upon, Tenant's request for
recording thereof.
2.3 Tenant shall cause Zayre Corp., a Delaware corporation,
("Guarantor") to execute a lease guaranty in the form as that attached
hereto as Schedule E and deliver such guaranty to Landlord within ten (10)
business days from the date of lease execution by Tenant.
2.4 It is a condition of Tenant's obligations under this lease that
Food 4 Less Market or a substitute market of like quality and size with ten
(10) or more stores in operation in California (the "Inducement Tenant")
shall sign a lease with Landlord for 40,000 or more square feet of floor
space within the Shopping Center by June 15, 1988 or at which time Landlord
purchases the property described in Schedule A as the Shopping Center,
whichever date is earlier (the "Inducement Condition"). If the Inducement
Tenant has not opened for business prior to March 1, 1989, Tenant may have
the "Minimum Rent" (defined hereinafter) reduced as provided in Section
5.1(E) herein.
ARTICLE III
CONSTRUCTION AND PRE-TERM OCCUPANCY
3.1 CONSTRUCTION. Landlord agrees that the work described in Schedule
C attached hereto as "Landlord's Construction Work" will be commenced
promptly after the approval of the detailed plans and specifications provided
for in Schedule C, and that Landlord's Construction Work will be prosecuted
to completion with due diligence and shall be done at Landlord's own cost and
expense.
3.2 PRE-TERM OCCUPANCY. Tenant shall have the right, without payment
of rent or other charge, after the execution of this lease and prior to the
"Commencement Date" (hereinafter defined), upon timely notice given to
Landlord, to enter the Demised Premises to inspect the same and to make such
improvements thereto as it shall have the right to make and install therein
fixtures, supplies, merchandise and other property. Tenant agrees that any
such entry and the making of any such improvements and any such installation
shall be done without unreasonably hampering Landlord's construction of the
Demised Premises and without creating additional cost for the Landlord. No
such entry by Tenant shall be deemed an acceptance of the Demised Premises.
Until the Commencement Date, Landlord shall pay the cost of water, sewer,
electricity, gas, heat, air conditioning and other utilities available upon
the Demised Premises; and until such time Tenant shall have the right to use,
without charge, water, sewer, electricity, gas, heat, air conditioning and
other utilities available upon the Demised Premises. Prior to the
Commencement Date while Tenant may be making improvements to the Demised
Premises or installing in the Demised Premises fixtures, supplies,
merchandise and other property, as hereinabove provided, Tenant shall be in
the Demised Premises at its own risk and shall save Landlord harmless from,
and defend and indemnify Landlord against, any and all injury to person or
property caused by or resulting from any act, omission or negligence of
Tenant or any agent or employee of Tenant. It is a condition of this save
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harmless and indemnification that Tenant shall receive notice of any such
claim against Landlord.
ARTICLE IV
LEASE TERM
4.1 ORIGINAL TERM. The original term of this lease (the "Original
Term") shall be a period of twenty (20) years and a fraction of a month
commencing on the "Commencement Date" (hereinafter defined), and terminating
on the last day of the month in which the twentieth anniversary of the
Commencement Date occurs, except, however, that if the Commencement Date
shall be a first day of a calendar month, then the Original Term shall be the
period of twenty (20) years commencing on the Commencement Date and
terminating on the twentieth (20th) anniversary thereof.
4.2 OPTIONS. Tenant shall have the right, at its election, to extend
the Original Term, an extension period of five (5) years commencing upon the
expiration of the Original Term (sometimes herein referred to as an
"Extension Period" or the "First Extension Period"), provided that Tenant
shall give Landlord notice of the exercise of its election at least six (6)
months prior to the expiration of the Original Term. If Tenant exercises its
right to extend the Original Term for the First Extension Period, Tenant
shall have the right, as its election, to further extend the Lease Term (as
hereinafter defined) an additional extension period of five (5) years
commencing upon the expiration of the First Extension Period (sometimes
herein referred hereto as an "Extension Period" or the "Second Extension
Period"), provided that Tenant shall give Landlord notice of the exercise of
its election at least six (6) months prior to the expiration of the First
Extension Period. If Tenant exercises its right to extend the Lease Term for
the Second Extension Period, Tenant shall have the right, at its election, to
further extend the Lease Term an additional extension period of five (5) years
commencing upon the expiration of the Second Extension Period (sometimes
herein referred to as an "Extension Period" or the "Third Extension Period"),
provided that Tenant shall give Landlord notice of the exercise of its
election at least six (6) months prior to the expiration of the Second
Extension Period. If Tenant exercises its right to extend the Lease Term for
the Third Extension Period, Tenant shall have the right, at its election, to
further extend the Lease Term an additional extension period of five (5)
years commencing upon the expiration of the Third Extension Period (sometimes
herein referred to as an "Extension Period" or the "Fourth Extension Period")
provided that Tenant shall give Landlord notice of the exercise of its
election at least six (6) months prior to the expiration of the Third
Extension Period. In addition to the foregoing option rights, at the end of
the original term, if no extension has been elected, or at the end of any
Extension Period, if no further extension has been elected, Tenant shall have
the option to extend the Lease Term until January 31st next following (the
"Extra Period"), provided that Tenant shall give Landlord notice of the
exercise of its election at least six (6) months prior to the expiration of
the Original Term or
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last elected Extension Period. Prior to the exercise by Tenant of any of said
elections under this Section 4.2 to extend the Original Term, the expression
"Lease Term" shall mean the Original Term; after the exercise by Tenant of
any of said elections, the expression "Lease Term" shall mean the Original
Term as it may have been then extended. Except as expressly otherwise
provided in this lease, all the covenants, terms and conditions in this lease
contained shall apply to the period or periods to which the Original Term
shall be extended, as aforesaid. If Tenant shall give notice of the exercise
of an election under this Section 4.2 in the manner and within the time
provided aforesaid, the Lease Term shall be extended upon the giving of such
notice without the requirement of any action on the part of Landlord.
4.3 COMMENCEMENT. An "Opening Day" shall be any Monday through Friday
(except legal holidays) between March 1 and the following September 30. The
"Commencement Date" shall be the first Opening Day after the later to occur
of the following dates:
(1) the thirtieth (30th) day after both the completion of
Landlord's Construction Work, and the receipt by Tenant of notice thereof
from Landlord;
(2) the one hundred and fifteenth (115th) day after Landlord shall
have delivered to Tenant all of the fully executed and acknowledged
instruments referred to in Paragraph 11 of Schedule B, or September 30, 1988
(or such later date as determined pursuant to Section 4.10), if said delivery
is made on or before June 24, 1988, and within 5 days after Landlord's
acquisition of the property for the Demised Premises;
(3) the forty-fifth (45th) day after the "fixture day" (as
hereinafter defined);
(4) the fifty-fifth (55th) day after Tenant shall receive from
Landlord a ten-day notice of the arrival of the fixture day;
(5) the tenth (10th) day after Landlord shall deliver to Tenant a
final certificate of occupancy (or its equivalent), if the same shall be
issuable in accordance with local law or custom;
except that if the Demised Premises shall be formally opened for business
with customers prior to the Commencement Date determined as above provided,
then such date of formal opening shall be the Commencement Date. The "fixture
day" shall be the day upon which Landlord's Construction Work shall have
progressed to such a point that the floor in the Demised Premises shall have
been completed, all lighting and wiring shall have been completed and shall
be operating, and the heating, ventilating and air conditioning systems
(sometimes herein referred to as the "HVAC") shall have been installed and
shall be operating automatically, all toilets shall be operating, all work
requiring scaffolding shall have been completed, complete security shall have
been established throughout the Demised Premises, the Demised Premises shall
be in broom clean condition, the sprinkler system shall have been installed
and shall be operating automatically and a paved
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area shall have been provided which shall be adequate for access by Tenant's
delivery vehicles from Whitman Avenue and E. 20th Street and for parking
thereof adjacent to the front or rear of the Demised Premises. If Landlord
cannot provide Tenant with reasonable assurances that Landlord's Construction
Work as defined in Schedule C will be completed within forty-five (45) days
after the fixture date, or the date Tenant would have been able to open
otherwise, whichever date is later, then Tenant shall have the right, at its
election, and upon giving notice thereof to Landlord, to complete so much of
Landlord's Construction Work, according to the plans and specifications and
in a good and workmanlike manner, for the account of Landlord as Tenant shall
elect to complete, and if Landlord shall fail to reimburse Tenant upon demand
for any amount (including, without limitation, overtime charges for labor)
paid for such completion, said amount may be deducted from any payments of
rent due under this lease. For the purposes of this Article IV and Article V,
Landlord's Construction Work shall be deemed completed notwithstanding that
the correction of certain minor punch list items in the nature of "touchups"
or "adjustments" may be required for full completion provided that (i)
neither the failure of completion nor the act of completion shall interfere
with Tenant's use or enjoyment of the Demised Premises or any rights of
Tenant under this lease, and (ii) Landlord shall diligently complete any such
touchup or adjustment upon receiving notice of the need therefor.
4.4 [Intentionally omitted.]
4.5 Landlord agrees that upon the Commencement Date, the Demised
Premises and all rights of Tenant under this lease will be free and clear of
all title matters, except as set forth in this lease (including Schedule B),
and that construction of the Demised Premises and the Shopping Center and the
use of the Shopping Center, including the Demised Premises, for retail and
wholesale operations, and parking areas will be in full compliance with all
laws, ordinances and regulations of any public authorities and insurance
rating bureaus having jurisdiction (including without limitation zoning and
building codes), and all necessary governmental permits and certificates of
occupancy shall have been issued. Landlord agrees that if at any time or
times any public authorities or insurance rating bureaus having jurisdiction
shall complain that the Demised Premises or the Shopping Center shall not
have been constructed in compliance with any law, ordinance, or regulation,
in existence at the time of construction, of any public authority or
insurance rating bureau having jurisdiction and shall request compliance, and
if failure to comply shall in any way affect the use of the Demised Premises
by Tenant or affect any other rights of Tenant, then Landlord shall upon
receipt of notice of such complaint cause such repairs, alterations, or other
work to be done so as to bring about the compliance requested. If by reason
of such failure of compliance or by reason of such repairs, alterations or
other work done by Landlord, Tenant shall be deprived of the use or enjoyment
of the whole or any part of the Demised Premises or the "Common Areas"
(defined in Schedule B), Minimum Rent shall abate on a per diem basis in
proportion to said deprivation. If at any time during the Lease Term, any
person having a prior right to Tenant not set forth in
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Paragraph 12 of Schedule B shall cause an injunction to be entered against
Tenant restricting Tenant's use or enjoyment of the Demised Premises or any
rights of Tenant under this lease, then Tenant's rent shall be abated in
proportion to the injury to Tenant's business until such injunction is
removed. If such injunction shall not be dismissed within ninety (90) days
after Tenant shall give Landlord notice thereof, then Tenant, at Tenant's
option, without waiving any other rights Tenant may have against Landlord on
account thereof may terminate this lease by giving Landlord notice
thereof or may elect to continue with rent abatement. Should Tenant elect to
continue with rent abatement, Landlord may terminate this lease upon thirty
(30) days written notice to Tenant, unless Tenant agrees to waive the rent
abatement and pay full rent.
4.6 If Landlord's Construction Work has not been commenced by June 16,
1988, then at any time thereafter, but prior to the commencement of
Landlord's Construction Work, Tenant shall have the right at its election to
terminate this lease by giving Landlord notice thereof.
4.7 If Landlord's Construction Work has not been completed, and if
possession of the Demised Premises shall not be delivered to Tenant by
February 15, 1989, then at any time thereafter, but prior to completion of
Landlord's Construction Work and delivery of possession of the Demised
Premises to Tenant, Tenant shall have the right, at its election, to
terminate this lease by giving Landlord notice thereof.
4.8 Tenant agrees that, on or before the ninetieth (90th) day after the
Commencement Date, Tenant shall open for business in the Demised Premises
substantially fully fixtured and stocked. Nothing in the immediately
preceding sentence or any other provision of this lease shall thereafter
obligate Tenant to keep the Demised Premises open for business at any time
or times.
4.9 In the event that the Demised Premises shall, at any time during the
Lease Term, be closed for business to customers for any period of three
hundred sixty five (365) consecutive days or more, other than as the result
of a cause or event referred to in Articles IX or X or Section 19.3 hereof
(the "Dark Period"), then, at any time thereafter but prior to any date on
which Tenant shall give notice to Landlord that Tenant shall thereafter
reopen the Demised Premises for business to customers ("Tenants Notice"),
Landlord may, at its election, (i) request information from Tenant regarding
the cost to Tenant and the nature of leasehold improvements installed in, or
made to, the Demised Premises and the date(s) of the installation and/or
making thereof, and (ii) terminate the Lease Term by giving Tenant notice
thereof and the Lease Term shall terminate on the thirtieth (30th) day after
the giving of such notice by Landlord to the same extent as if said date were
the date originally set forth in Sections 4.1 and 4.2 for the expiration of
the Lease Term. If Landlord shall request information pursuant to clause (i)
of the immediately preceding sentence, Tenant shall furnish such information
in reasonable detail to Landlord within twenty-one (21) days after Tenant
receives such request therefor. In the event that Landlord shall terminate
this lease pursuant to this Section 4.9, then simultaneously with the sending
of notice thereof
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to Tenant, Landlord shall pay to Tenant (i) an amount equal to the product
of the cost to Tenant of leasehold improvements installed in, or made to, the
Demised Premised by Tenant from time to time (exclusive of merchandise racks)
multiplied by a fraction the denominator of which shall be one hundred twenty
(120) and the numerator of which shall be one hundred twenty (120) minus the
number of months between the date of the making of such improvements, in each
case, and the date of such termination of the Lease Term, and (ii) the
unreimbursed amounts, if any, recoverable by Tenant pursuant to Section 9.4
herein. If Tenant shall give Tenant's Notice as aforesaid, Tenant shall open
the Demised Premises for business, substantially fully fixtured and stocked,
on or before the ninetieth (90th) day after the date of Tenant's Notice. If
Tenant shall fail to open as provided in the immediately preceding sentence,
then, at any time after said ninetieth (90th) day but prior to any date on
which Tenant shall so open, Landlord may terminate the lease as provided
hereinabove. Notwithstanding the foregoing, if prior to said 90th day Tenant
has commenced and diligently pursued the work to reopen, then after said 90th
day, Landlord may terminate the Lease prior to any date on which Tenant shall
so open, but only after the earlier of the date 60 days after said 90th day,
or the date Tenant ceases diligent efforts to reopen.
4.10 Notwithstanding any other provisions of this lease, if Landlord is
otherwise able to close escrow under the terms of the Purchase Agreement for
the acquisition of the Demised Premises property on or before May 16, 1988,
then the following dates:
-September 30 date in Section 4.3,
-June 16, 1988 date in Section 4.6,
-February 15, 1989 date in Section 4.7, and
-Both July 15, 1988 dates and the September 30 date
in Section 5.1 (D),
shall be extended on a day per day basis for each date that Landlord must
wait after May 6, 1988 for Tenant to deliver to it a fully executed original
of this lease and the attached Guarantee; provided, however, that the length
of the preceding extension shall be reduced on a day per day basis (but not
less than 0) if Landlord is actually able to close escrow on its acquisition
of the Demised Premises property in less than fourteen (14) days after its
receipt of the Lease from Tenant.
ARTICLE V
RENT
5.1 Minimum Rent. (A) From the Commencement Date until the fifth (5th)
anniversary thereof, Tenant shall pay Landlord minimum rent at the rate of
Four Hundred Eighty-Eight Thousand Three Hundred Seventy-Two and 30/100
Dollars ($488,372.30) per year (the "Minimum Rent").
<PAGE>
(B) On the fifth (5th), tenth (10th), and fifteenth (15th)
anniversaries of the Commencement Date, as well as on the twentieth (20th),
twenty-fifth (25th), thirtieth (30th), and thirty-fifth (35th) anniversaries
of the Commencement Date in the event the Lease Term is extended pursuant to
Section 4.2 hereof, the Minimum Rent shall be adjusted for the 5-year period
commencing on each such anniversary date ("CPI Adjustment") by multiplying
the original Minimum Rent by a fraction, which fraction shall have as a
numerator the Index (as hereinafter defined) for the month in which the CPI
Adjustment is to occur and which fraction shall have as its denominator the
Index for the month in which the Commencement Date occured. "Index" shall
mean the seasonal Consumer Price Index for all Urban Wage Earners and
Clerical Workers for the United States, published by the United States
Department of Labor, Bureau of Labor Statistics, in which the 1982-1984
average of 100 points is the base. If the 1982-1984 average of 100 points
ceases to be used as the base, the Index shall be converted, in accordance
with the conversion factor published by the Department of Labor, Bureau of
Labor Statistics, to the 1982-1984 base. If the Index is discontinued or if a
substantial change is made in the terms or number of items used to compile
the Index, then any similar index which most closely comprehends the impact
of cost-of-living increases on commercial real property rental published by
any branch or department of the U.S. Government shall be used, and if none is
so published, then another nonpartisan index evaluating the information
theretofore used in compiling the Index, and generally recognized as
authoritative on the impact of cost-of-living increases on commercial real
property rentals shall be used. Notwithstanding anything contained in this
lease to the contrary, under no circumstances shall the Minimum Rent be
adjusted to exceed ten percent (10%) over the Minimum Rent for the
immediatley preceding sixty (60) month period. In no event shall such
adjustment result in a reduction below the Minimum Rent in effect to the
immediatley preceding sixty (60) month period. When the adjusted Minimum Rent
is determined, Landlord shall give Tenant written notice to that effect
indicating how the adjusted Minimum Rent was computed. Pending receipt of
such notice from Landlord as to the new Minimum Rent, Tenant shall continue
to pay the Minimum Rent in effect during the preceding sixty (60) month
period; provided, however, that Landlord shall have one hundred twenty (120)
days to provide Tenant with a notice of its increased Minimum Rent and Tenant
shall then make up the difference in the Minimum Rent for the preceding
period, except that in no event shall Landlord be entitled to collect such
difference for a period in excess of one hundred twenty (120) days.
(C) All Minimum Rent shall be payable (without notice, demand or
set-off or abatement of any nature, except as provided expressly in this
lease) in monthly installments of one-twelfth the annual rate thereof then in
effect, in advance, upon the first day of each calendar month included within
the Lease Term. All rent and other payments to be made by Tenant shall be
sent to Landlord at the place to which notices to Landlord are required to be
sent, unless Landlord shall direct otherwise by notice to Tenant. Rent for
any fraction of a month at the commencement or expiration of the Lease
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Term, or in which the rate thereof changes pursuant hereto, shall be prorated
on a per diem basis.
(D) If the fixture day shall not occur by July 15, 1988, then,
notwithstanding anything else in this Section 5.1 to the contrary, no Minimum
Rent shall be payable by Tenant for the period commencing upon the
Commencement Date and containing that number of consecutive days thereafter
which shall equal the number of days between July 15, 1988 and the fixture
day, but not including any days between September 30 and the following March
1.
(E) Notwithstanding anything contained in this Section 5.1 to the
contrary, if the Inducement Tenant shall not open for business prior to March
1, 1989, then between March 1, 1989 and the date the Inducement Tenant opens
for business, the Minimum Rent payable by Tenant under Section 5.1(A) shall
be reduced by Two Hundred Eight Nine Dollars ($289.00) per day.
ARTICLE VI
REAL ESTATE TAXES
6.1 Tenant shall pay the real estate taxes allocable to the Demised
Premises (determined as hereinafter provided) for each tax year included
within the Lease Term and a pro rata portion thereof for the tax years
partially included in the Lease Term at the commencement and expiration
thereof. The real estate taxes allocable to the Demised Premises for any tax
year shall be the sum of (A) the real estate taxes upon the Demised Premises
for said tax year (excluding the land beneath the same) and (B) the product
of Tenant's Fraction (hereinafter defined) and the real estate taxes for said
tax year upon the land of the Shopping Center (including land under
buildings) and all improvements upon the Common Areas. Tenant's Fraction is
that fraction the numerator of which shall be the number of square feet of
floor area in the Demised Premises (exclusive of the nursery area) and the
denominator of which shall be the number of square feet of floor area in all
the buildings in the Shopping Center, but in no event shall Tenant's Fraction
exceed 47%. (Floor area of mezzanines not open to customers and incidental to
ground floor retail operations shall not be counted; other mezzanine floor
area, basement floor area and uppen story floor area shall be counted at half
actual floor area). If the Demised Premises (excluding the land beneath the
same) shall not be separately assessed, and are instead assessed jointly with
other improvements, an allocation shall be made to determine the real estate
taxes upon the Demised Premises (excluding the land beneath the same). Such
allocation of taxes shall be made according to the assessors records or
written assessors' certifications, or in the absense thereof, by the decision
of a majority of three appraisers, one designated by Landlord, one by Tenant,
and the third by the two so designated, the expenses of such appraisers being
borne equally by Landlord and Tenant. If the Demised Premises and the Common
Areas are at any time separate tax parcels, then in lieu of the foregoing
computations, the real estate taxes allocable to the Demised Premises
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for any tax year shall be the sum of (A) the real estate taxes upon the tax
parcel constituting the Demised Premises for said tax year and (B) the
product of Tenant's Fraction and the real estate taxes upon the tax
parcels(s) constituting the Common Areas for said tax year. If the real
estate taxes of the Demised Premises for any year which commences after the
Commencement Date shall be increased on account of a re-valuation of the
Demised Premises because of any "change in ownership" by Landlord, Tenant
shall not pay or be charged with any increase in the real estate taxes
attributabale to or arising from such change during the first five years
after such change. Real estate taxes as used herein shall include all ad
valorem taxes and betterment assessments imposed or assessed upon or against
real estate by any federal, state, county, or municipal public authority
having jurisdiction except only that: (A) if Landlord shall at any time have
had the right to elect to pay any betterment assessments in installments, the
real estate taxes for any year shall include only the lowest such installment
of such betterment assessments as Landlord shall have had the election to
have allocated or accrued by law as a result of the exercise, in fact, of
Landlord's election so to pay in installments, and (B) if for a tax year
included within the Lease Term a betterment assessment is assessed on the
Shopping Center for an improvement such as a street or sewer, made prior to
the time the Demised Premises opened for business or in connection with the
construction of premises in the Shopping Center, such assessment shall not be
included in the real estate taxes upon the Shopping Center for such tax year
except as set forth in Section 6.6 below. Notwithstanding anything in this
lease to the contrary, real estate taxes shall not include any income, excess
profits, estate inheritance, succession, transfer, franchise, capital or
other tax or assessment upon Landlord or upon the rentals payable under this
lease, all of which shall be the obligation of Landlord. Taxes upon equipment
of occupants used in the conduct of their business (as distinguished from
equipment used in the operation of the building, such as heating and air
conditioning equipment) shall not be included in real estate taxes for the
purposes of applying said apportionment formula. Tenant shall pay all ad
valorem taxes allocable to such improvements in the Demised Premises, signs
of Tenant, goods and other personal property owned by Tenant or other
occupants, and such business equipment in the Demised Premises.
6.2 The real estate taxes for any lease year shall be the real estate
taxes for the tax year terminating during said lease year. If any lease year
shall be greater than or less than twelve (12) months or if the real estate
tax year shall be changed, an appropriate adjustment shall be made to carry
out the intent of the parties. If there shall be more than one taxing
authority, the real estate taxes for any period shall be the sum of the real
estate taxes for such period attributable to each taxing authority. If the
number of square feet of floor area of any building shall change during any
tax year, the condition existing upon the day as of which the real estate
taxes are assessed for such tax year shall control.
6.3 The real estate taxes for any tax year shall mean such amounts as
shall be finally determined to be the real estate taxes payable during such
tax year less any abatements, refunds or rebates
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made thereof (except that Landlord shall be solely entitled to any proceeds
from that certain Owner's Participation Agreement for the installation of
facilities which benefit property in Chico in addition to the Shopping
Center). For the purpose of determining payments due from Tenant to Landlord
in accordance with the provisions of this Article VI, (A) the real estate
taxes for any tax year shall be deemed to be the real estate taxes payable
during such tax year until such time as the same may be reduced by abatement,
refund or rebate, and (B) if any abatement, refund or rebate shall be made
for such tax year, the real estate taxes for such tax year shall be deemed
to be such real estate taxes as so reduced plus the expenses of obtaining the
reduction, with an appropriate adjustment to be made in the amount payable
from Tenant to Landlord on account of real estate taxes to be paid in that
tax year or any other tax year following the determination of the amount of
any such abatement, refund or rebate.
6.4 Tenant shall have such rights to contest the validity or amount of
any real estate taxes as permitted by law, either in its own name or in the
name of Landlord. Landlord shall cooperate with Tenant in any such contest
and, in conneciton therewith, shall make available to Tenant such information
in its files as Tenant may reasonably request. If any abatement, refund or
rebate shall be obtained, whether for the Demised Premises or the Shopping
Center as a whole, the expenses of obtaining the same shall be a first charge
thereon, and the balance shall be allocated as provided in this Article VI.
6.5 Landlord shall submit to Tenant copies of the real estate tax bills
for each tax year. Landlord shall bill Tenant for any amount that may be
payable by Tenant pursuant to the provisions of this Article VI. Said bill
shall be accompanied by a computation of the amount payable. The amount
payable by Tenant hereunder for any tax year shall be payable not later than
the time that Landlord shall be required to pay real estate taxes to the
taxing authority for said tax year, but, if Tenant shall not have received a
bill therefor together with such evidence of the cost and computation thereof
as Tenant may request, at least fourteen (14) days prior to said time for
payment by Landlord, then Tenant shall not be required to make such payment
until fourteen (14) days after the receipt of such bill and evidence. At any
time before or after the making of such payments, Tenant shall have the right
to audit or cause to be audited Landlord's computations and if such audit
fails to substantiate the amount of taxes imposed or to be imposed by
Landlord nor Tenant, then Tenant shall be entitled to a reduction or refund.
At Tenant's election, any such refund shall be paid in cash to Tenant or
credited by Tenant against its future obligations under this Article VI. (If
real estate taxes are payable to any taxing authority for any tax year in
installments, the amount payable by Tenant hereunder shall be payable in
similar installments. If real estate taxes are payable to different taxing
authorities for any tax year at different times, an appropriate apportionment
shall be made of the amount payable by Tenant for said tax year and the
apportioned amounts shall be payable at such times.) Landlord agrees that
real estate taxes upon the Shopping Center shall be paid by Landlord prior to
the last day that the same may be paid without penalty or interest, or if a
discount shall be available for early
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payment, prior to the last day that such discount shall be available. Without
cost to Tenant, Landlord shall bear all interest, penalties, late charges and
lost discount amounts incurred as a result of Landlord's failure to timely
pay any installment of real estate taxes, except to the extent such interest,
penalties, late charges and lost discount amounts are due to Tenant's failure
to comply with its obligations under this Section 6.5.
6.6 The Demised Premises are already or shall be subject to two
certain betterment assessments not to exceed a total of $230,000, one of
which is more particularly described in exception number 3 in Title Report
Lot 4 ("Village Park Refunding Assessment") and the other is an assessment to
be created in connection with the construction of Whitman Avenue and
infrastructure thereunder ("Future Whitman Avenue Assessment," hereinafter
the Village Park Refunding Assessment and the Future Whitman Avenue
Assessment shall be at times referred to as the "Approved Assessments").
Landlord shall pay all charges due and payable for the Village Park Refunding
Assessment during the first five (5) years of the Lease Term, and for the
Future Whitman Avenue Assessment during the first five (5) years after
charges therefor are first due and payable. Thereafter, during the next ten
years after each of the aforementioned 5 year periods, Tenant shall pay all
charges for the respective Approved Assessment, except that in no event shall
Tenant pay more than $20,000 for said Approved Assessments in any one year,
or a total of more than $200,000 for such assessments.
ARTICLE VII
REPAIRS AND UTILITIES
7.1 TENANT'S REPAIRS. Except as provided in Sections 7.2 and 7.3
herein, Tenant shall make all repairs and alterations to the property which
Tenant is required to maintain, as hereinafter set forth, which may be
necessary to maintain the same in as good repair and condition as the same
are on the Commencement Date or which may be required by any laws, ordinances
or regulations of any public authorities having jurisdiction, including any
applicable subsequent amendments or modifications thereto, reasonable wear
and tear and damage excepted and subject to Articles VIII, IX and X. Upon the
expiration or other termination of the Lease Term, Tenant shall remove its
goods and effects and those of all persons claiming under it and shall yield
up peaceably to Landlord the Demised Premises with so much of the same as
Tenant is obligated to maintain pursuant to the provisions of this
Section 7.1 in as good repair and condition as the same were in on the
Commencement Date, reasonable wear and tear excepted and subject to
Articles VIII, IX and X. However, notwithstanding anything in this lease
contained to the contrary, Landlord shall reimburse Tenant for the reasonable
cost of making all repairs and alterations to the property which Tenant is
required to maintain which may be required as the result of repairs,
alterations, other improvements or installations made by Landlord or
Landlord's agents or employees, unless done by Landlord pursuant to
Section 13.1. The property which Tenant is required to maintain is the
interior of the Demised
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Premises, including, without limitation, all glass and all utilities,
conduits, fixturew and equipment within the Demised Premises serving the
Demised Premises exclusively, but excluding all property which Landlord is
required to maintain below provided. If at any time during the Lease Term
Tenant shall make any repairs or replacements to the heating-ventilating air
conditioning system serving the Demised Premises ("HVAC") that are not
customarily included in a regular service and maintenance contract, then
Tenant shall be reimbursed by Landlord, upon demand, for an amount equal to
the product of the cost to Tenant thereof multiplied by a fraction the
denominator of which is 120 and the numerator of which is 120 minus the
number of months between the date of the making of such repairs and/or
replacements, in each case, and the date of the termination of the Lease
Term. Said reimbursement may be effected by Tenant's deducting the
amount thereof from the final payments of Minimum Rent due and
payable hereunder. (If the Lease Term shall be extended subsequent to the
making of any such repairs "the termination of the term" shall be deemed to
be the termination of the Lease Term as so extended, and Tenant shall
thereupon reimburse Landlord for any excess reimbursement paid by Landlord in
accordance with the preceding sentence.)
7.2 LANDLORD REPAIRS. Landlord shall make all repairs and alterations
to the property which Landlord is required to maintain, as hereinafter set
forth, which may be necessary to maintain the same in good repair and
condition or which may be required by any laws, ordinances or regulations of
any public authorities having jurisdiction, including any applicable
subsequent amendments or modifications thereto, subject to Articles IX and X.
However, notwithstanding anything in this lease contained to the contrary,
Tenant shall reimburse Landlord for the reasonable cost of making all
repairs and alterations to the property which Landlord is required to
maintain which may be required as the result of repairs, alterations, other
improvements or installations made by Tenant or any subtenant or
concessionaire of Tenant or the agents or employees of any of them, unless
done by Tenant pursuant to Section 13.2. The property which Landlord is
required to maintain is the foundation, the roof, the exterior walls, the
roof drainage system, the canopy, the structural parts of the Demised
Premises, including, without limitation, slab-floors, (but excluding all
glass), and, to the extent located within the walls, ceiling or floors of
the Demised Premises and not readily accessible by means of removable panels,
access doors or the like, all wiring, plumbing, pipes, conduits and other
utilities, plus all Common Areas and Common Facilities of the Shopping
Center, and, to the extent not included in the foregoing, all utilities,
conduits, fixtures and equipment serving the Demised Premises which also
serve other premises or are located within the Shopping Center but outside
the Demised Premises. The costs for the above described maintenance to the
Common Areas and Common Facilities shall be included within Landlord's Common
Area Costs described in Schedule B, Paragraph 8. In addition, Landlord shall
make any repairs to the property Tenant is required to maintain which are
required as a result of a defect in, or failure of repair of, the property
Landlord is required to maintain.
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7.3 SPECIAL REPAIRS. Notwithstanding anything herein contained to the
contrary, it shall be the obligation of Landlord to make all repairs and
alterations (other than those required as the result of repairs, alterations,
other improvements or installations made by Tenant or any subtenant or
concessionaire of Tenant or the agents or employees of any of them) to the
property which Tenant is otherwise required to maintain which may become
necessary during the first twelve months of the Lease Term (or to the extent
of the applicable construction contract warranty, if longer than twelve
months), or which may be required during the Lease Term by any laws,
ordinances or regulations of any public authorities having jurisdiction other
than as a result of Tenant's particular use of the Premises. Notwithstanding
anything in Section 7.1 contained to the contrary, Landlord agrees that in
addition to making any repairs or alterations as required by the provisions
of Section 7.2 hereinabove, Landlord shall make any repairs and alterations
that shall be required at any time during the Lease Term as a result of
(i) movement of the "Building" (as defined in Schedule A hereof) due to causes
other than earthquake, such as settling, or as the result of settling of the
Common Areas, provided that a certified engineer selected jointly by Landlord
and Tenant states that such alteration or repair should be made, and provided
further that if Landlord and Tenant are unable to select such engineer
jointly, then Landlord and Tenant shall each select an engineer, such
engineers shall then jointly select a third engineer, and a majority vote of
said engineers shall determine whether the alteration or repair should be
made, (ii) defective materials or workmanship in the construction thereof, or
(iii) Landlord's failure to construct the Demised Premises or the Common
Areas as required by the provisions of Schedule C herein. Landlord agrees
that Landlord shall give to Tenant the benefit of all guaranties Landlord may
have from its contractors or materialmen or is required by Schedule C to have
therefrom and that Tenant may enforce such guaranties either in Tenant's name
or in Landlord's name.
7.4 UTILITIES. Landlord agrees that during the Lease Term the Demised
Premises shall be connected to the electric and gas lines serving the
municipality wherein the Demised Premises are located and to the water and
sewer systems of such municipality. Landlord agrees that during the Lease
Term (i) all such water, electricity, and gas shall be in such amounts per
unit of time as shall be required by the provisions of Schedule C (including,
without limitation, sufficient water for air conditioning) and (ii) all such
sewerage disposal facilities shall be of such capacity as shall be required
by the provisions of Schedule C. If for any reason the Demised Premises
cannot be connected to such municipality's water and/or sewer systems on the
Commencement Date, Landlord shall then provide water and/or sewer systems
which (i) shall be of such capacity as shall be required by the provisions of
Schedule C, (ii) shall be subject to the prior written approval of Tenant and
(iii) shall meet the requirements of all public authorities having
jurisdiction with respect thereto. Except as necessary to make required
repairs or alterations, Landlord shall not take, or permit any occupant of
the Shopping Center or any person claiming under Landlord or any such
occupant to take, any action which shall interrupt, or interfere with, any
electric, gas, water, sewerage or telephone
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service to the Demised Premises. Landlord shall provide Tenant with
reasonable written notice (not less than 3 days in advance) of any action
which is likely to interfere with or interrupt such services to the Demised
Premises, including action reasonably necessary to make required repairs or
alterations, and Landlord shall not take, or give permission to any occupant
of the Shopping Center or any person claiming under Landlord or any such
occupant, to take any such action without Tenant's consent, which shall not
be unreasonably withheld or delayed. Notwithstanding such notice, in the
event that Landlord causes or permits any such interruption or interference
to occur and continue for longer than one (1) day, Tenant's Minimum Rent
shall be abated for each additional day that such interruption or
interference continues in proportion to the interruption or interference.
7.5 UTILITIES EASEMENTS. Tenant shall have the right, license and
easement within the Building and Shopping Center to install, replace,
maintain and use utilities conduits serving the Demised Premises provided
such conduits shall be located only in areas subject to the reasonable
approval of the Landlord and Tenant shall do the same in such manner as shall
keep to a reasonable minimum any interference with the business of the
Shopping Center. To the extent meters, controls and conduits for the
utilities systems serving the Demised Premises are situated outside the
Demised Premises in other premises within the Shopping Center, Tenant shall
have access thereto, at all times, in common with Landlord and other lessees
in the Shopping Center.
ARTICLE VIII
ALTERATIONS
8.1 Tenant agrees that any repairs, alterations, other improvements or
installations made by Tenant to or upon the Demised Premises shall be done in
a good workmanlike manner and in conformity with all laws, ordinances and
regulations of all public authorities having jurisdiction, that new
materials of good quality shall be employed therein, that the structure of
the Demised Premises shall not be endangered or impaired thereby, that the
Demised Premises shall not be diminished in value thereby, and that, except
for signs, antennae, and heating and air conditioning and utilities equipment
Tenant is permitted to erect and maintain pursuant to the provisions of this
lease, neither the perimeter of the Demised Premises nor the height of the
Demised Premises shall be increased without the written consent of Landlord.
Tenant agrees that Tenant shall not make any alterations to the foundation,
roof, exterior walls, gutters, downspouts, canopy or any structural parts of
the Demised Premises without first submitting plans and specifications
thereof to Landlord. Landlord shall have the right to disapprove of the same
if, and only if, the same violate any of the preceding provisions of this
Section 8.1. Failure of Landlord to give notice of approval or disapproval of
said plans and specifications within thirty (30) days after Tenant's
submission thereof to Landlord shall be deemed approval. In addition, Tenant
shall give Landlord prior notice of all alterations costing more than $75,000
(as increased
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each year by the CPI Index as defined in Section 5.1(B)) so that Landlord has
a reasonable opportunity to post a notice of non-responsibility, except that
Tenant shall not be in breach of this obligation unless it fails to give
prior notice, a mechanic's lien is recorded against Landlord's fee interest
in the Demised Premises, and Tenant fails to cause such lien to be discharged
of record as provided in Section 8.5 hereof. All salvage in connection with
any work done by Tenant pursuant to the provisions of this Article may be
disposed of by Tenant. It is agreed and understood that Landlord will accept
the Demised Premises as altered pursuant to the provisions hereof without any
obligation upon Tenant to restore the Demised Premises to their former
condition.
8.2 Landlord agrees that Tenant may erect and maintain its usual
signs, from time to time, and provided such signs are in compliance with
local codes, upon the exterior of the Demised Premises and the usual signs,
from time to time, of any subtenants of Tenant. Landlord further agrees that
Tenant may erect and maintain upon the roof of the Demised Premises antennae
for electronic receivers and transmitters in the Demised Premises and that
Tenant may erect and maintain upon the roof and on the adjacent ground
utilities equipment serving the Demised Premises. Tenant shall be
responsible for such signs, antennae and equipment, and for obtaining all
government approvals with respect thereto.
8.3 All repairs, alterations, other improvements or installations
made to or upon the Demised Premises which are so attached to the realty that
same will be by law deemed to be a part of the realty shall (subject,
however, to the provisions of Section 8.1 and the provisions of the following
sentence) be the property of Landlord and remain upon and be surrendered with
the Demised Premises as a part thereof upon the termination of this lease.
Notwithstanding the foregoing, all trade fixtures, (including without
limitation, compressors, generators and hydraulic equipment), lighting
fixtures, heat and air conditioning equipment (other than ducts), and signs,
whether by law deemed to be a part of the realty or not, installed at any
time by Tenant or anyone claiming under Tenant (at Tenant's sole cost and
expense without any contribution from or reimbursement by Landlord and which
are not replacements of property installed by Landlord) shall remain the
property of Tenant or persons claiming under Tenant and may be removed by
Tenant or any person claiming under Tenant at any time or times during the
Lease Term or any occupancy by Tenant thereafter, Tenant agreeing to repair
any and all damage to the Demised Premises occasioned by the removal by
Tenant or any person claiming under Tenant of any property from the Demised
Premises.
8.4 Tenant shall procure all necessary governmental permits before
making any repairs, alterations, other improvements or installations to or
upon the Demised Premises. Landlord shall cooperate with Tenant in obtaining
such permits. Tenant agrees to save harmless and indemnify Landlord from any
and all injury, loss, claims or damage to any person or property occasioned
by or arising out of the doing of any such work by Tenant.
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8.5 Tenant shall permit no mechanic's, materialman's or other lien
against the Demised Premises or property of which the Demised Premises are a
part in connection with any materials, labor or equipment furnished, or
claimed to have been furnished, to or for Tenant, and if any such lien shall
be filed against the Demised Premises or property of which the Demised
Premises are a part Tenant shall provide Landlord with written notice
thereof and shall cause said lien to be discharged, provided, however, that
if Tenant desires to contest any such lien it may do so as long as the
enforcement thereof is stayed, but in any event, Tenant shall either cause
any such lien to be discharged of record within twenty-one (21) days of any
written request of Landlord (if Tenant is not longer contesting such lien) or
any written request based on any requirements of any mortgagee or prospective
mortgagee or buyer or prospective buyer in escrow for the Demised Premises or
property including the Demised Premises, (whether or not Tenant is still
contesting such lien), or in lieu thereof, if and while contesting the same
lien as aforesaid, deposit with the buyer's escrow, or the mortgagee or
prospective mortgagee, pending such contest, a sum or bond sufficient to
cover the amount of said lien and all interest, penalties or costs that would
be payable to discharge such lien if such lien were valid provided such
mortgagee or buyer may use such sum or bond to cause the discharge of said
lien if its foreclosure is imminent.
8.6 Landlord shall permit no mechanic's, materialman's or other
lien against the Demised Premises or property of which the Demised
Premises are a part in connection with any materials, labor or equip-
ment furnished, or claimed to have been furnished, to or for Landlord
or any other occupant of premises in the Shopping Center, and if any
such lien shall be filed against the Demised Premises or property of
which the Demised Premises are a part Landlord shall cause the same
to be discharged, provided, however, that if Landlord desires to
contest any such lien it may do so as long as the enforcement thereof
is stayed.
ARTICLE IX
FIRE AND OTHER CASUALTY
9.1 (A) If, at any time from and after the Commencement Date, the
Demised Premises or any part thereof shall be damaged or destroyed by fire,
the elements or other casualty for which insurance is required to be carried
by Tenant as hereinafter provided, then, except as provided in Section 9.2
hereof, Tenant shall, promptly thereafter, repair or restore the Demised
Premises to substantially the same condition they were in immediately prior
to such casualty, and Tenant shall not be entitled to any rent abatement with
respect thereto. All insurance proceeds or damages recovered on account of
any damage or destruction by fire, the elements or other casualty shall be
made available for the payment of the cost of the aforesaid repair or
restoration. If the amount of said insurance proceeds shall be less than Two
Hundred Fifty Thousand Dollars ($250,000), said insurance proceeds shall be
paid over to Tenant. If the amount of said
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insurance proceeds shall be greater than Two Hundred Fifty Thousand Dollars
($250,000), said insurance proceeds shall be deposited in escrow with
instructions to the escrow holder that the escrow holder shall disburse the
same to Tenant as the work of repair or restoration progresses upon
certificates of the architect or engineer supervising the repair or
restoration that the disbursements then requested, plus all previous
disbursements made from said insurance proceeds, plus the amount of such
"deductible", do not exceed the cost of the repair or restoration already
completed and paid for, and the balance in the escrow fund is sufficient to
pay for the estimated cost of completing the repair and restoration. The
escrow holder shall be the institutional lender holding a first mortgage upon
the Demised Premises or the property of which the Demised Premises are a part
if there shall be an institutional lender holding such first mortgage and if
such institutional lender shall be willing to accept said escrow; otherwise
the escrow holder shall be any bank mutually agreeable to Landlord and
Tenant. If the insurance proceeds shall be less than the cost of repair or
restoration, Tenant shall pay the excess cost and Tenant shall be responsible
for the amount of any deductibles. If the insurance proceeds shall be greater
than the cost of repair or restoration, the excess shall belong to the Tenant.
(B) If the Common Areas or any part thereof, shall be damaged or
destroyed by fire, the elements, the act of any public authority or other
casualty or if the Demised Premises shall be damaged or destroyed by any
casualty for which insurance is not then required to be carried by Tenant
(collectively "Landlord's Damages"), then Landlord shall, promptly thereafter,
repair or restore Landlord's Damages to substantially the same condition they
were in immediately prior to such casualty, except as hereinafter otherwise
provided and except that Tenant shall be liable for any damage or destruction
to the Demised Premises to the extent caused by Tenant's negligence, unless
such damage or destruction is insured by Landlord. If Landlord's Damages shall
render the whole or any part of the Common Areas or Demised Premises unsuitable
for the use for which they were intended, a just proportion of the rent and all
other amounts payable by Tenant pursuant to this lease, according to the nature
and extent of the injury to Tenant's business, shall be suspended or abated
until the fifteenth (15th) day after the completion of the repairs or restor-
ations to the substantially the same condition they were in immediately prior
to such casualty; rent and any such other amounts paid in advance for a period
beyond the date on which the same were so rendered unsuitable for the use for
which the same were intended shall be apportioned and adjusted. Whenever in
this lease it is provided that rent and any such other amounts shall be
suspended or abated for any period according to the nature and extent of the
injury to Tenant's business, Tenant's sales figures for comparable periods shall
be considered, together with all other evidence. All insurance proceeds or
damages recovered on account of Landlord's Damages shall be made available
for the payment of the cost of the aforesaid repair and restoration. Tenant
shall provide Landlord written notice of any of Landlord's Damages which
Tenant intends to repair or restore. Unless within ten (10) days of said
notice Landlord notifies Tenant that Landlord shall make such repairs or
restorations, and thereafter diligently commences
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and completes such work, Tenant may elect to undertake or complete any repair
or restoration of Landlord's Damages at reasonable cost and in a good and
workmanlike fashion and if Tenant makes such an election, Tenant shall be
entitled to use any insurance proceeds and any damages collected from third
parties and shall be entitled to immediate reimbursement from Landlord for
any funds expended in excess of any such insurance proceeds and damages
collected from third parties and may also elect to recapture any unreimbursed
amounts (the "Recapture Deficit") as provided in Section 9.4 herein.
(C) If more than sixty percent (60%) of the ground floor area, in the
aggregate, of all buildings in the Shopping Center (excluding the Demised
Premises from the computation thereof) shall, for any period, be closed for
business as a result of damage or destruction, and if Landlord shall fail to
complete the repair and restoration of all such damage within one (1) year
after the occurrence thereof then, and prior to the completion thereof,
Tenant may terminate this lease at its election, by giving Landlord notice
thereof and the term of this lease shall then terminate on the date specified
therefor in such notice.
9.2 It is agreed and understood that with respect to any damage or
destruction to the Demised Premises as provided in Section 9.1.(A) or 9.1(B),
(1) if during the fourth semi-annual period preceding the expiration of the
Lease Term, the Demised Premises shall be so damaged or destroyed to the
extent of twenty percent (20%) or more of their insurable value, or (2) if
during the third semi-annual period preceding the expiration of the Lease
Term, the Demised Premises shall be so damaged or destroyed to the extent of
fifteen percent (15%) or more of their insurable value, or (3) if during the
second semi-annual period preceding the expiration of the Lease Term, the
Demised Premises shall be so damaged or destroyed to the extent of ten
percent (10%) or more of their insurable value, or (4) if during the
semi-annual period immediately preceding the expiration of the Lease Term,
the Demised Premises shall be so damaged or destroyed to the extent of five
percent (5%) or more of their insurable value, either Landlord or Tenant may,
if either shall so elect, terminate the Lease Term by notice to the other
within twenty (20) days after such damage or destruction. If Landlord shall
give such notice of termination at a time when Tenant shall have the right to
exercise an election to extend the Lease Term an extension period of at least
five (5) years, and if within fifteen (15) days after Tenant shall receive
such notice of termination from Landlord, Tenant shall exercise such
election, then such termination shall become void and of no force or effect.
In the event of any termination of the Lease Term pursuant to the provisions
of this Section 9.2, the termination shall become effective on the twentieth
(20th) day after the giving of the notice of termination, neither Landlord
nor Tenant shall be obligated to repair or restore any damage or destruction
caused by the fire or other casualty, and said insurance proceeds, if any,
shall belong to Landlord.
9.3 Tenant shall maintain at all times during the Lease Term with
respect to the Demised Premises insurance against loss or damage by fire, the
so-called extended coverage casualties, vandalism and malicious mischief and
sprinkler leakage (if there shall be a sprinkler
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system). Tenant may, at its election, maintain insurance with respect to
additional casualties and events. Said insurance shall be in an amount not
less than eighty percent (80%) of the full insurable value of the Demised
Premises, and said insurance may be written with a so-called eighty percent
(80%) co-insurance clause, and in such event sufficient insurance shall be
carried so that the insured shall not be a co-insurer. Said insurance may be
written with a so-called "deductible" which is Tenant's usual deductible
from time to time. Insurance against any or all of such risks may be
maintained under a blanket policy covering the Demised Premises and other real
estate of Tenant and/or its affiliated business organizations.
Notwithstanding the foregoing, unless both Tenant and Guarantor have a net
worth of less than Seventy-Five Million Dollars ($75,000,000), Tenant may
self-insure with respect to any insurance obligations which it is otherwise
required to maintain under this lease. Nothing herein contained, however,
shall affect the obligation of Tenant set forth in Section 9.1(A) to repair
or restore the Demised Premises. The policies of such insurance shall name
Landlord and Tenant as insureds, as their interests may appear, and, subject
to the provisions of said Section 9.1 shall be payable in case of loss to any
holders of any mortgages which secure loans made to Landlord or its
predecessors upon the property of which the Demised Premises are a part, as
their interest may appear. Such policies of insurance shall provide that no
act or omission of any person named as insured thereunder shall invalidate
the interest of, or be a defense against, any other person named as insured
thereunder. Tenant shall have the right to adjust with the insurance
carriers the amount of the loss upon such policies. Said insurance shall be
written by responsible insurance companies authorized to do business in the
state wherein the Demised Premises are located. Upon request of Landlord,
Tenant agrees that not less than ten (10) days prior to the Commencement Date
and not less than ten (10) days prior to the expiration of each policy of
such insurance, Tenant shall deliver to Landlord certificates of such
insurance, or the renewals thereof, as the case may be.
9.4 If at any time during the Lease Term there is a Recapture Deficit,
then Tenant shall have the right to reimburse itself for such amount out of
the monthly payments of Minimum Rent thereafter due and payable. In
addition, if there is a Recapture Deficit at the expiration of the Lease
Term, Tenant shall have the right to continue in use and occupancy of the
Demised Premises without payment of Minimum Rent for a number of days which
number when multiplied by the per diem Minimum Rent (at the rate prevailing at
the expiration of the Lease Term) shall equal the Recapture Deficit.
9.5 If Tenant may not self-insure and is obligated to purchase casualty
insurance under Section 9.3, all such insurance policies shall be issued by
financially responsible insurance companies qualified to do business in the
State of California. Furthermore, such policies shall not contain a
deductible amount greater than Tenant's usual deductible from time to time.
All such policies shall name as additional insureds Landlord and any
mortgagee or lender of Landlord having a security interest in the Demised
Premises. Tenant shall cause executed copies of such policies or
certificates thereof to be delivered to Landlord
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within ten (10) days after Tenant's receipt of such policies and thereafter
renewal policies or certificates within ten (10) days prior to the expiration
of such policies. All such policies shall contain a provision that the
insurance company will provide Landlord, with at least ten (10) days prior
written notice of any cancellation or lapse in the policy, any reduction in
the amounts thereof, or any material change in the terms of coverage. In
addition, all such policies shall be written as primary policies, not
contributing and not in excess of coverage which Landlord may carry.
ARTICLE X
EMINENT DOMAIN
10.1 If after the execution of this lease and prior to the expiration of
the Lease Term the whole of the Demised Premises shall be appropriated by
right of eminent domain (which, for the purposes of this Article X, includes
any conveyance made to the condemning authority under the threat of
condemnation), then the Lease Term shall cease as of the time the fee simple
interest shall be vested in the taking authority, and rent and all other
payment under this lease shall be apportioned and adjusted as of the time of
termination. Tenant shall have the right at its election to continue to
occupy the Demised Premises, to the extent permitted by law, for all, or such
part, as Tenant may elect, of the period between the time of such
appropriation and the time when physical possession of the Demised Premises
shall be taken, subject to the provisions of this lease insofar as the same
may be made applicable to such occupancy by Tenant, but the amount, if any,
charged to Tenant by taking authority or its assigns for rent or use and
occupancy shall be deductible from the rent paid or payable by Tenant
hereunder.
10.2 If by right of eminent domain or any other action of any public
authority:
(i) a part of the Demised Premises shall be appropriated
and if as a result thereof (and all previous takings) the
ground floor area of the Demised Premises shall be reduced to
less than ninety percent (90%) of the ground floor area set
forth in Schedule A of this lease, or
(ii) a part of the Common Areas shall be appropriated and if
as a result thereof (and all previous takings) the Common Areas
(defined in Paragraph 2 of Schedule B to this lease) shall be
reduced in size by twenty percent (20%) or more, or
(iii) the Parking Areas shall cease to be satisfactory
access for pedestrians and motor vehicles to and from Whitman
Avenue, and E. 20th Street, or
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(iv) there shall cease to be satisfactory access for
pedestrians between the Parking Areas and the Demised Premises,
or
(v) there shall cease to be satisfactory access for trucks
to and from the service door(s) of the Demised Premises, or
(vi) the lease of the Inducement Tenant shall be terminated,
or
(vii) any part of the Demised Premises shall be appropriated
during the last year of the Lease Term,
then Tenant may, if Tenant shall so elect, terminate the Lease Term by giving
Landlord notice of the exercise of such an election within twenty (20) days
after the receipt by Tenant from Landlord of notice of such appropriation.
If by right of eminent domain any part of the Demised Premises shall be
appropriated during the last year of the Lease Term, then Landlord may, if
Landlord shall so elect, terminate the Lease Term by giving Tenant notice to
the exercise of such election within twenty (20) days after the receipt by
Landlord of notice of such appropriation. If Landlord shall give such notice
of termination at a time when Tenant shall have the right to exercise an
election to extend the Lease Term an extension period of at least five (5)
years, and if within fifteen (15) days after Tenant shall receive such notice
of termination from Landlord, Tenant shall exercise said election, then such
notice of termination shall become void and of no force or effect. In the
event of a termination under the provisions of this Section, the termination
shall be effective as of the time that physical possession of the premises so
appropriated shall be taken, and rent and all other payments pursuant to the
lease shall be apportioned and adjusted as of the time of termination, but
the amount charged by the taking authority or its assigns for rent or use and
occupancy between the time of appropriation and the time of termination,
shall be deductible from rent paid or payable hereunder. If there shall be
an appropriation by right of eminent domain and if the Lease Term shall not be
terminated as aforesaid, then the Lease Term shall continue in full force and
effect and Landlord shall, within a reasonable time after physical possession
is taken of the premises appropriated, restore what may remain of the Demised
Premises and of the Common Areas and Common Facilities to substantially the same
condition they, respectively, were in prior thereto, subject to reduction in
size thereof. A just proportion of the rent and all other amounts payable by
Tenant pursuant to this lease, according to the nature and extent of the
injury to Tenant's business, shall be suspended or abated until the
forty-fifth (45th) day after what may remain of the Demised Premises and the
Common Areas and Common Facilities shall be restored, as aforesaid, and
thereafter a just proportion of the rent and such other amounts, according to
the nature and extent of the part of the Demised Premises and the Common
Areas so appropriated, shall be suspended or abated for the balance of the
Lease Term, for the purpose of which rent shall be deemed allocable fifty
percent (50%) to the Demised Premises and fifty percent (50%) to the Common
Areas and Common Facilities.
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10.3 Landlord reserves to itself, and Tenant assigns to Landlord, all
rights to damages accruing on account of any appropriation by eminent domain
or by reason of any act of any public authority for which damages are
payable. Tenant agrees to execute such instruments of assignments as may be
reasonably requested by Landlord in any petition for the recovery of such
damages if requested by Landlord, and to turn over to Landlord any damages
that may be recovered in any such proceeding. It is agreed and understood,
however, that Landlord does not reserve to itself and Tenant does not assign
to Landlord: (i) the cost of trade fixtures installed by Tenant or any
person claiming under Tenant at the sole cost and expense of Tenant or such
other person, (ii) the unamortized cost to Tenant of any improvements made by
Tenant to the realty which shall not remain or be restored in the part of the
Demised Premises not taken including any unreimbursed amounts subject to
recapture as provided in Section 9.4, (iii) moving and relocation costs, and
(iv) the loss of tenant's leasehold interest (bargain value of the lease)
(collectively "Tenant's Damages"). If any appropriation by right of eminent
domain shall result in the termination of the Lease Term as above provided,
Landlord shall pay to Tenant from the amount awarded to it as damages
therefore an amount equal to Tenant's Damages except to the extent that
Tenant receives a separate award from the condemning authority to cover such
losses; provided that any payment to Tenant for Tenants Damages (excluding
any unreimbursed amounts subject to recapture as provided in Section 9.4)
shall not reduce any award to Landlord below the amount awarded for or
allocable to the sum of the then present value of the income stream to the
Landlord under this lease plus the then present value of the Landlord's
remainder interest in the fee title to the Demised Premises upon the
termination of the lease. The unamortized cost to Tenant of any improvement
made by Tenant to the realty shall be determined in accordance with the
straight-line method of amortization and the life expectancy of such
improvement used by Tenant for federal income tax purposes. As used
hereinbefore, "the cost to Tenant" of any improvement shall mean the actual
cost to Tenant of making such improvement less any contribution thereto, or
reimbursement thereof, made by Landlord to Tenant, including, without
limitation, reimbursement effected by deductions from rent.
ARTICLE XI
INDEMNIFICATION
11.1 Tenant shall save Landlord harmless from, and defend and indemnify
Landlord against, any and all injury, loss or damage or claims for injury,
loss or damage, of whatever nature, to any person or property caused by or
resulting from any act, omission or negligence of Tenant or any subtenant or
concessionaire of Tenant or any agent or employee of Tenant or any subtenant
or concessionaire of Tenant. It is a condition of this save harmless and
indemnification that Tenant shall receive prompt notice of any such claim
against Landlord.
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11.2 Landlord shall save Tenant harmless from, and defend and indemnify
Tenant against, any and all injury, loss or damage or claims for injury, loss
or damage, of whatever nature, to any person or property caused by or
resulting from any act, omission or negligence of Landlord or its agents or
employees. It is a condition of this save harmless and indemnification that
Landlord shall receive prompt notice of any such claim against Tenant.
11.3 The provisions of this Article XI shall be subject to the
provisions of Section 14.1 below.
11.4 If and when Tenant shall elect to maintain a policy of
comprehensive general liability insurance with respect to the Demised
Premises, and if Landlord shall be named as an additional insured thereunder,
then in such event Tenant shall, upon request (a) deliver certificates of
such insurance to Landlord and give Landlord not less than ten (10) days
notice of cancellation or expiration thereof, and (b) pay the amount of any
so-called deductible applicable to any claim under such policy involving
Landlord and/or Tenant. If and when Tenant shall elect not to maintain such a
policy of insurance or not to name Landlord as additional insured thereunder,
then in such event (in addition to any other insurance which Landlord may
carry at its own expense) Landlord may, at its election, maintain a policy of
comprehensive general liability insurance with respect to the Demised
Premises, naming only Landlord as insured ("Landlord's Insurance Policy") and
if Landlord shall so elect then (i) Landlord shall give notice thereof to
Tenant and (ii) so long as Tenant shall so elect not to maintain such a
policy, and if the net worth of Tenant and Guarantor (as determined by
generally accepted accounting principles) are both then less than
$75,000,000.00, Tenant shall reimburse Landlord for the reasonable cost to
Landlord of the premiums upon Landlord's Insurance Policy, but Tenant's
liability under this clause shall not exceed the cost of insurance coverage
for Landlord having limits which do not exceed $2,000,000 for injury in any
one occurrence. All public liability and property damage policies shall
contain a provision that Landlord, although named as an insured, shall
nevertheless be entitled to recovery under said policies for any loss
occasioned by Landlord, its employees or agents.
ARTICLE XII
DEFAULT
12.1 The failure by Tenant to make, when due, any payment of rent or
other sum required to be made by Tenant hereunder, where such failure shall
continue for a period of fifteen (15) days after written notice from Landlord
of Tenant's failure to make such payments shall constitute a default ("Event
of Default") hereunder by Tenant.
12.2 Upon the occurrence of an Event of Default under Section 12.1,
Landlord may terminate this lease upon written notice to Tenant. Should
Landlord exercise its rights hereunder, Tenant shall be given sixty (60) days
in which to remove its personal property. Landlord
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may dispose of any such property remaining in the Demised Premises thereafter
in the manner provided by law.
12.3 In the event Landlord terminates the lease as provided in Section
12.2, Tenant shall remain liable for the Minimum Rent and all other payments
reserved herein plus the reasonable cost of obtaining possession of and
re-letting the Demised Premises, including, without limitation, any
reasonable repairs and alterations necessary to prepare the Demised Premises
for re-letting, less the rents received from such re-letting. Any amounts so
owing by Tenant shall be paid monthly on the date herein provided for the
payment of Minimum Rent.
12.4 After any assignment of Tenant's interest in this lease, Landlord
shall not exercise any rights or remedies under this Article XII on account
of any default in payment of any rent or other sum of money unless Landlord
shall give notice to the Tenant named herein, as well as the tenant in
possession, of such default and the opportunity to cure each such default
within the period of time after such notice provided in Section 12.1 of this
lease. After such notice, if the Lease Term shall be terminated pursuant to
the provisions of this Article XII, then the tenant named herein shall not be
liable for the payment of any rent or for the performance or observance of
any agreements or conditions to be performed or observed which become due or
arise after the date of such termination or with respect to periods following
such termination unless at or about the time of such termination Landlord
shall have offered to the tenant named herein a lease for the balance of the
Lease Term upon the provisions of this lease contained to be thereafter
performed by the parties hereunder; the tenant named herein shall have a
period of thirty (30) days after receipt of such offer to accept such offer.
If the tenant named herein shall accept Landlord's offer for such a lease
within said thirty (30) days, then such lease shall be deemed to mitigate
Landlord's damages
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and Landlord waives all its claims under Section 12.2(b) and (c) hereinabove
with respect to the aforesaid termination.
12.5 Landlord shall not have any lien, for the performance of any
obligations of Tenant, upon any fixtures, machinery, equipment, or goods,
wares or merchandise or other personal property, and Landlord hereby
expressly waives the provisions of any law giving to Landlord such a lien.
12.6 If any person to whom Tenant shall not then be paying rent under
this lease shall demand payment of rent from Tenant, or any other amount
payable to Tenant under this lease, alleging his or its right to receive such
rent or other amount as a result of a transfer of Landlord's interest in this
lease or otherwise, Tenant shall not be obligated to honor such demand unless
Tenant shall receive written instructions to do so from the person to whom
Tenant shall then be paying rent or shall otherwise receive evidence
satisfactory to Tenant of the right of the person making the demand. The
withholding of rent, or any other amount payable by Tenant under this Lease,
by Tenant pending the determination of the right of the party making the
demand shall not be deemed to be a default on the part of Tenant.
ARTICLE XIII
SELF-HELP
13.1 Upon the failure by Tenant to observe or perform any of the
covenants or provisions of this lease to be observed or performed by Tenant,
where such failure shall continue for a period of thirty (30) days after
written notice from Landlord to Tenant of such failure (except if the nature
of Tenant's default is such that more than thirty (30) days are reasonably
required for its cure and Tenant commences such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to completion),
Landlord may, at its option, without waiving any claim for damages for breach
of agreement, at any time thereafter cure such default for the account of
Tenant, and any amount paid or any contractual liability incurred by Landlord
in so doing shall be deemed paid or incurred for the account of Tenant, and
Tenant agrees to reimburse Landlord therefor; provided that Landlord may cure
any such default as aforesaid prior to the expiration of said thirty-day
period but after notice to Tenant, if the curing of such default prior to the
expiration of said thirty-day period is reasonably necessary to protect the
real estate or Landlord's interest therein, or to prevent injury or damage to
persons or property. If Tenant shall fail to reimburse Landlord upon demand
for any amount paid for the account of Tenant hereunder, said amount shall be
added to and become due as part of the next payment of rent due hereunder.
Except as specifically provided in Article XII, Landlord specifically waives
its rights under paragraph 3 of Section 1161 of the California Code of Civil
Procedure. To the extent Tenant's failure to perform under this lease cannot
reasonably be cured by Landlord as provided in this Section 13.1, Tenant
acknowledges that all legal and equitable remedies shall be available to
Landlord including without limitation
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injunctions and specific performance except as termination rights are limited
as provided in Article XII.
13.2 If Landlord shall default in the performance or observance of any
agreement or condition in this lease, or shall default in the payment of any
tax or other charge which shall be a lien upon the Demised Premises or in the
payment of any installment of principal or interest upon any mortgage which
shall be prior in lien to the lien of this lease, and if Landlord shall not
cure such default within thirty (30) days after notice from Tenant specifying
the default, (or if such default cannot reasonably be cured within such
thirty-day period, then shall not within said thirty-day period commence to
cure such default and thereafter prosecute the curing of such default to
completion with due diligence), Tenant may, at its option, without waiving
any claim for damages for breach of agreement, at any time thereafter cure
such default for the account of Landlord, and any amount paid or any
contractual liability incurred by Tenant in so doing shall be deemed paid or
incurred for the account of Landlord and Landlord agrees to reimburse Tenant
therefore or save Tenant harmless therefrom; provided that Tenant may cure
any such default as aforesaid prior to the expiration of said thirty-day
period, but after said notice to Landlord, if the curing of such default
prior to the expiration of said thirty-day period is reasonably necessary to
protect the Demised Premises or Tenant's interest therein or to prevent
injury or damage to persons or property or to permit Tenant to conduct its
usual business operations in the Demised Premises. If Landlord shall fail to
reimburse Tenant upon demand for any amount paid for the account of Landlord
hereunder, said amount may be deducted by Tenant from the next or any
succeeding payments of rent due hereunder or any other amounts due from
Tenant to Landlord until Tenant is thereby reimbursed therefor in full.
ARTICLE XIV
WAIVER OF SUBROGATION
14.1 Each of Landlord and Tenant hereby releases the other to the
extent of its insurance coverage, from any and all liability for any loss or
damage caused by fire or any of the extended coverage casualties or any other
casualty insured against and from any and all liability for any personal
injury or property damage, even if such fire or other casualty, injury or
damage shall be brought about by the fault or negligence of the other party,
or any persons claiming under such other party, provided, however, this
release shall be in force and effect only with respect to loss or damage
occurring during such time as the releasor's policies of fire and extended
coverage insurance and liability insurance shall contain a clause to the
effect that this release shall not affect such policies or the right of the
releasor to recover thereunder. Each of Landlord and Tenant agrees that its
fire and extended coverage insurance policies shall include such a clause to
long as the same is obtainable and is includible without extra cost, or if
such extra cost is chargeable therefor, so long as the other party pays such
extra cost. If extra cost is chargeable therefor, each party will advise the
other thereof and of the amount thereof, and the other
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party, at its election, may pay the same but shall not be obligated to do so.
14.2 Except as provided in Section 14.1, neither Section 19.9 of this
lease nor anything else in this lease contained shall be deemed to release
either party hereto from liability for damages resulting from the fault or
negligence of said party or its agents or employees or from responsibility
for repairs necessitated thereby or by any default thereof hereunder.
ARTICLE XV
MORTGAGE SUBORDINATION
15.1 Tenant shall, upon the request of Landlord, in writing subordinate
this lease and the lien hereof from time to time to the lien of any future
first mortgage to a bank, insurance company or similar financial institution,
irrespective of the time of execution or time of recording of such mortgage
or mortgages, provided the holder of such mortgage shall first enter into an
agreement with Tenant, in recordable form, and substantially in the form of
Schedule D, that in the event of foreclosure or other right asserted under
the mortgage by the holder or any assignee thereof, this lease and the rights
of Tenant hereunder shall continue in full force and effect and shall not be
terminated or disturbed except in accordance with the provisions of this
lease. Tenant shall, if requested by the holder of any such mortgage, be a
party to said agreement, provided such agreement does not alter the terms of
this lease, and shall agree in substance that if the mortgagee or any person
claiming under such mortgagee shall succeed to the interest of Landlord in
this lease, Tenant shall recognize such mortgagee or person as its Landlord
under the terms of this lease. Tenant agrees that Tenant shall, upon the
request of Landlord, execute, acknowledge and deliver any and all instruments
necessary to effectuate, or to give notice of, such subordination, provided
such instruments do not alter the terms of this lease and provided Landlord
shall reimburse Tenant for any costs (including attorneys' fees) incurred by
Tenant in connection with its review and or execution of any such
instruments. The word "mortgage" as used herein includes mortgages, deeds of
trust and similar instruments and modifications, consolidations, extensions,
renewals, replacements or substitutes thereof.
15.2 Landlord agrees that neither the Shopping Center, nor the
construction thereof, nor any expansion thereof, shall be financed by, or
subject to, any so-called economic development or industrial revenue bonds or
similar debt instruments, or any security interest given in connection
therewith, which shall, pursuant to any governmental laws, ordinance or
regulations require or impose (i) any restriction, condition or limitation
whatsoever upon or with respect to any expenditures which may be made by
Tenant and/or any business organization affiliated with Tenant or (ii) any
obligation to file any reports or returns with respect thereto.
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15.3 Upon thirty (30) days prior written notice from Landlord or
Tenant, the requested party shall from time to time execute and deliver to
the requesting party, or any person designated by the requesting party, a
written estoppel statement certifying that: (i) this Lease represents the
entire agreement between Landlord and Tenant and is unmodified and in full
force and effect (or, if modified, stating the nature of such modification
and certifying that this Lease, as so modified, is in full force and effect);
(ii) the dates to which the rental and/or other charges are paid in advance,
if any; (iii) the commencement and termination dates of the lease term;
(iv) there has been no assignment or other transfer of this Lease or any
interest herein by Tenant or Landlord; (v) to the best of the requested party's
knowledge, there are no uncured defaults on the part of the requesting party
under this Lease and the requested party has no right of rent abatement or
damages based thereon (or if a default exists, the nature and amount
thereof); and (vi) such other facts as reasonably may be requested with
respect to the material provisions of this Lease by the requesting party or
any present or prospective purchaser, lender or assignee of this Lease. Any
such certificate may be relied upon by any such party in their transactions
with Landlord or Tenant.
15.4 Upon the occurrence of any default by Landlord hereunder, written
notice to that effect shall be sent by Tenant to each lender of Landlord with
a lien against the property including the Demised Premises provided Landlord
has sent Tenant written notice advising of the existence of such Lender and
the address to be used for its notice ("Landlord Lender"). Tenant shall make
such notice(s) to Landlord Lender(s) at the same time notice of such notice
of default is sent to Landlord, and each Landlord Lender shall have the same
opportunity to cure the default as Landlord has.
15.5 No Landlord Lender shall become personally liable for the
performance or observance of any covenants or conditions to be performed or
observed by Landlord unless and until such Landlord Lender becomes the owner
of Landlord's interest hereunder. Thereafter such Landlord Lender shall be
liable for the performance and observance of such covenants and conditions as
a "Landlord" as provided in Section 19.19 hereof, and subject to the
limitations provided therein.
ARTICLE XVI
ASSIGNMENT
Tenant shall have the right at any time and from time to time to sublet
all or any part of the Demised Premises or assign this lease; provided,
however, that notwithstanding any assignment of Tenant's interest in this
lease or any subletting of the whole or any part of the Demised Premises,
Tenant and Guarantor shall remain primarily liable for the performance of all
agreements of Tenant hereunder, except as expressly otherwise provided in
Section 12.5.
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ARTICLE XVII
(Intentionally omitted]
ARTICLE XVIII
LEASEHOLD MORTGAGES
18.1 Tenant may execute and deliver one or more mortgages, deeds of trust
or other leasehold security agreements ("Leasehold Indentures") without the
consent of Landlord. If either Tenant or the mortgagee, grantee or corporate
trustee under any such Leasehold Indenture sends Landlord a notice advising
of the existence of such Leasehold Indenture and the address of the
mortgagee, grantee or corporate trustee thereunder for the service of
notices, such mortgagee, grantee or corporate trustee shall be deemed to be
a "Leasehold Lender." Landlord shall be under no obligation under this
Article XVIII to any mortgagee, grantee or corporate trustee under a
Leasehold Indenture who is not a Leasehold Lender.
18.2 Upon the occurrence of any Event of Default hereunder by Tenant,
written notice to that effect shall be sent by Landlord to each Leasehold
Lender at the same time notice of such Event of Default is sent to Tenant,
and each Leasehold Lender shall have the same opportunity to cure the
default as Tenant has as provided in Section 12.1 herein.
18.3 If any Leasehold Lender or a person designated by a Leasehold
Lender shall either become the owner of the interest of Tenant hereunder upon
the exercise of any remedy provided for in the Leasehold Indenture or shall
enter into a new lease with Landlord as provided in Section 18.4, such
Leasehold Lender or such person shall have the right to assign to any person
such interest or such new lease upon notice to Landlord without obtaining the
consent or approval of Landlord, except that, if neither Tenant nor Guarantor
has a net worth of Seventy-Five Million Dollars ($75,000,000) or more, then
Landlord's reasonable consent to such assignment is required.
18.4 If this lease is terminated for any reason or is rejected or
disaffirmed pursuant to bankruptcy law or other law affecting creditors'
rights, any Leasehoid Lender, or a person designated by any Leasehold Lender,
shall have the right, exercisable by notice to Landlord within ten (10) days
after the effective date of termination, rejection or disaffirmance to enter
into a new lease of the Demised Premises with Landlord. The term of the new
lease shall begin on the date of the termination of this lease and shall
continue for the remainder of the Lease Term. Such new lease shall
otherwise contain the same terms and conditions as those set forth herein,
except for requirements which are no longer applicable or have already been
performed, provided that all defaults which are susceptible of being
remedied by the payment of money shall have been cured, and provided further
that such new lease shall require the tenant thereunder promptly to commence
and expeditiously continue to remedy all other
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defaults on the part of Tenant hereunder to the extent reasonably possible.
It is the intention of the parties hereto that such new lease shall
have the same priority relative to other rights or interests to or in the
fee estate in the land covered by this lease and Landlord covenants to use
commercially reasonable efforts to cause to be subordinated to such new lease
any lien or encumbrance which is subject to this lease. The provisions of
this Article XVIII shall survive the termination of this lease and shall
continue in full force and effect thereafter to the same extent as if this
Section 18.4 were a separate and independent contract by and among Landlord,
Tenant and each Leasehold Lender. From the date on which any Leasehold
Lender shall serve upon Landlord the aforesaid notice of the exercise of its
rights to enter into a new lease, such Leasehold Lender may use and enjoy the
Demised Premises without hindrance or interference by Landlord.
18.5 No Leasehold Lender shall become personally liable for the
performance or observance of any covenants or conditions to be performed or
observed by Tenant unless and until such Leasehold Lender becomes the owner
of Tenant's interest hereunder upon the exercise of any remedy provided for
in any Leasehold Indenture or enters into a new lease with Landlord as herein
provided. Thereafter such Leasehold Lender shall be liable for the
performance and observance of such covenants and conditions only so long as
such Leasehold Lender owns such interest or is tenant under such new lease.
18.6 Landlord agrees that the exercise of its rights under this lease in
case of an Event of Default shall not, if the Leasehold Lender accepts a new
lease pursuant to this Article XVIII, result in the merger of the estate of
the sublandlord under any sublease with the estate of the subtenant
thereunder. The exercise of any rights of a Leasehold Lender under this
Article XVIII shall not relieve Zayre Corp. of its obligations under the
lease guarantee and Landlord's obligations hereunder shall be conditioned
upon receipt of a written approval or consent by Zayre Corp., within 21 days
after the Leasehold Lender provides a notice of its election, acknowledging
that the performance of such obligations shall not relieve Zayre Corp. of its
obligations under the lease guarantee. If Landlord does not receive such
written approval or consent, Landlord may terminate its obligations by
delivering a notice of termination to the Leasehold Lender. Failure by Zayre
to deliver such approval or consent shall not relieve it of any prior
liability under its guarantee or of any subsequent liability if Landlord does
not terminate Leasehold Lender's new lease.
18.7 Without the prior written consent of each Leasehold Lender, Landlord
will not accept a voluntary surrender of this lease or the estate created
hereby and will not consent to any amendment of this lease.
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ARTICLE XIX
GENERAL
19.1 INTERPRETATION. It is the intention of the parties hereto that if
any provision of this lease is capable of two constructions, one of which
would render the provision void and the other of which would render the
provision valid, the provision shall have the meaning which renders it valid.
19.2 SUCCESSORS AND ASSIGNS. The words "Landlord" and "Tenant" and the
pronouns referring thereto, as used in this lease, shall mean, where the
context requires or admits, the persons named herein as Landlord and as
Tenant, respectively, and their respective heirs, legal representatives,
successors and assigns, irrespective of whether singular or plural,
masculine, feminine or neuter. The agreements and conditions in this lease
contained on the part of Landlord to be performed and observe shall be
binding upon Landlord and its heirs, legal representatives, successors and
assigns and shall inure to the benefit of Tenant and its successors and
assigns, and the agreements and conditions on the part of Tenant to be
performed and observed shall be binding upon Tenant and its successors and
assigns and shall inure to the benefit of Landlord and its heirs, legal
representatives, successors and assigns. If Landlord shall be more than one
person, the obligations of Landlord hereunder shall be joint and several.
19.3 DELAYS. In any case where either party hereto is required to do any
act (other than make a payment of money) delays caused by or resulting from
Act of God, war, civil commotion, fire or other casualty, labor difficulties,
general shortages of labor, materials or equipment, government regulations or
other causes beyond such party's reasonable control shall not be counted in
determining the time when the performance of such act must be completed,
whether such time be designated by a fixed time, a fixed period of time or "a
reasonable time". In any case where work is to be paid for out of
insurance proceeds or condemnation awards, due allowance shall be made, both
to the party required to perform such work and to the party required to make
such payment, for delays in the collection of such proceeds and awards. The
provisions of this Section shall not apply to the dates set forth in Articles
IV and V.
19.4 HOLDING OVER. If Tenant or any person claiming under Tenant shall
remain in possession of the Demised Premises or any part thereof after the
expiration of the Lease Term without any agreement in writing between
Landlord and Tenant with respect thereto, prior to acceptance of rent by
Landlord the person remaining in possession shall be deemed a tenant at
sufferance and after acceptance of rent by Landlord the person remaining in
possession shall be deemed a tenant from month to month, subject to the
provisions of this lease insofar as the same may be made applicable to a
tenancy from month to month. The monthly rent for such person shall be equal
to 125% of the rent for the immediately preceding one month period.
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<PAGE>
19.5 WAIVERS. Failure of either party to complain of any act or omission
on the part of the other party, no matter how long the same may continue,
shall not be deemed to be a waiver by said party of any of its rights
hereunder. No waiver by either party at any time, express or implied, or any
breach of any provision of this lease shall be deemed a waiver of a breach of
any other provision of this lease or a consent to any subsequent breach of
the same or any other provision. If any action by either party shall
require the consent or approval of the other party, the other party's consent
to or approval of such action on any one occasion shall not be deemed a
consent to or approval of said action on any subsequent occasion or a consent
to or approval of any other action on the same or any subsequent occasion.
Any and all rights and remedies which either party may have under this lease
or by operation of law, either at law or in equity, upon any breach, shall be
distinct, separate and cumulative and shall not be deemed inconsistent with
each other; and no one of them, whether exercised by said party or not, shall
be deemed to be in exclusion of any other; and any two or more or all of such
rights and remedies may be exercised at the same time. Without limiting the
generality of the foregoing, if any restriction contained in this lease for
the benefit of either party shall be violated, such party, without waiving
any claim for breach of agreement against the other party, may bring such
proceedings as it may deem necessary, either at law or in equity, in its own
name or in the name of the other party, against the person violating said
restriction.
19.6 DISPUTES. It is agreed that if at any time a dispute shall arise as
to any amount or sum of money to be paid by one party to the other party
under the provisions hereof, the party against whom the obligation to pay the
money is asserted shall have the right to make payment "under protest", such
payment not being regarded as a voluntary payment and there shall survive the
right on the part of said party to institute suit for recovery of such sum
and if it shall be adjudged that there was no legal obligation on the part of
said party to pay such sum or any part thereof, said party shall be entitled
to recover such sum or so much thereof as it was not legally required to pay
under the provisions of this lease; and if any time a dispute shall arise
between the parties hereto as to any work to be performed by either of them
under the provisions hereof, the party against whom the obligation to perform
the work is asserted may perform such work and pay the cost thereof "under
protest" and the performance of such work shall in no event be regarded as a
voluntary performance, and there shall survive the right on the part of said
party to institute suit for the recovery of the cost of such work, and if it
shall be adjudged that there was no legal obligation on the part of said
party to perform the same or any part thereof, said party shall be entitled
to recover the cost of such work or the cost of so much thereof as said party
was not legally required to perform under the provisions of this lease.
19.7 QUIET ENJOYMENT. Landlord agrees that upon Tenant's paying the rent
and performing and observing the agreements and conditions on its part to be
performed and observed, Tenant shall and may peaceably and quietly have, hold
and enjoy the Demised Premises
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<PAGE>
and all rights of Tenant hereunder during the Lease Term without any manner
of hindrance or molestation.
19.8 NOTICES. Any and all notices, demands or other communications
required or desired to be given hereunder by any party shall be in writing
and shall be validly given or made to another party by either serving
personally or by mailing in the United States mail, certified or registered,
postage prepaid, return receipt requested, or by Federal Express, Purolator
Courier, Emery Air Freight, U.S. Post Office Express Mail, or similar
overnight courier which delivers only upon signed receipt of addressee. If
such notice, demand or other communication be served personally, service
shall be conclusively deemed made at the time of such personal service. If
such notice, demand or other communication be given by mail, such shall be
conclusively deemed given forty-eight (48) hours after deposit thereof in
the United States mail or twenty-four (24) hours after deposit thereof with
such overnight courier, provided the same is addressed to the party to whom
such notice, demand or other communication is to be given as hereinafter set
forth:
To Landlord: Douglas W. Bradford
2694 Bishop Drive, Suite 202
San Ramon, CA 94583
With a Copy to: Edward T. Marshall
c/o Wilson, Sher, Marshall & Peterson
One Kaiser Plaza, Suite 1350
Oakland, CA 94612
To Landlord Lender,
if any, if notice
is required under
Section 15.4: (address to be supplied in
writing by Landlord to Tenant)
To Tenant: HomeClub, Inc.
140 Orangefair Mail
Suite 100
Fullerton, California 92632
Attention: V.P. Real Estate
With a copy to: Zayre Corp.
Framingham, Mass. 01701
Attention: Corporate Counsel
To Leasehold
Lender, if any,
if notice is
required under
Section 18.2: (address to be supplied in
writing by Tenant to Landlord)
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<PAGE>
19.9 COSTS. Wherever in this lease provision is made for the
doing of any act by any person it is understood and agreed that such
act shall be done by such person at its own cost and expense unless a
contrary intent is expressed.
19.10 THIS INSTRUMENT. This lease is transmitted for examination
only and does not constitute an offer to lease, and this lease shall
become effective only upon execution thereof by the parties thereto.
This instrument contains the entire and only agreement between the
parties, and no oral statements, representations matter not contained in
this instrument shall have any force or effect. This lease shall not be
modified in any way except by a writing subscribed by both parties.
19.11 HEADINGS. The headings for the various provisions of this
lease are used only as a matter of convenience for reference, and are
not to be considered a part of this lease or used in determining the
intent of the parties to this lease.
19.12 BROKERS. Each of Landlord and Tenant warrants and
represents to the other that it has dealt with no broker in connection
with this lease. Each party shall defend, indemnify and hold harmless
the other party from and against all commissions, fees and expenses,
and all claims therefor, in connection with this lease of, or by, any
broker alleging he, she or it has dealt with the indemnitor party,
including without limitation, reasonable attorneys' fees.
19.13 CHOICE OF LAW. This lease shall be governed by and
construed pursuant to the laws of the State of California.
19.14 SEVERABILITY. Should any provision of this lease be or
become invalid, void, illegal or unenforceable, it shall be considered
separate and severable from this lease and the remaining provisions
shall remain in force and be binding upon the parties hereto as though
such provision had not been included.
19.15 INTEREST ON RENT. If Tenant tenders rent payments after
their due dates three or more times in any given twelve month period,
and if Landlord gave Tenant notice of such delinquency each time, and
if Tenant also fails to pay the third such payment within fifteen days
of Landlord's notice of such delinquency ("Late Payment ") then such
Late Payment and each Late Payment (which Tenant fails to pay within
15 days of Landlord's notice of such delinquency) thereafter in the
same twelve month period, shall bear interest commencing on its due
date, until paid, at the rate of twelve percent per annum, provided
that a payment shall not be deemed a Late Payment unless Landlord
gave Tenant a notice of delinquency and Tenant failed to tender the
rent payment within 15 days after such notice. Said amount shall
become payable as additional rent, and Tenant shall pay Landlord such
amount without notice or demand with the next month's payment of
rent.
19.16 SCHEDULES INCORPORATED. Schedules A, B, C, D, E and F
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<PAGE>
attached hereto are hereby made a part hereof and incorporated herein
to the same extent as if fully set forth herein.
19.17 ATTORNEY FEES. In the event that either Landlord or
Tenant shall institute any action or proceeding against the other
relating to the provisions of this lease, then the unsuccessful party
shall reimburse the prevailing party for all reasonable attorney's fees
and costs incurred in connection therewith, including, without limita-
tion, all such fees or costs incurred on any appeal from such action or
proceeding.
19.18 PURCHASE OF LAND FOR SHOPPING CENTER. HomeClub acknowledges that
Landlord does not own the land for the Shopping Center as of the execution of
this lease. Landlord represents that as of the execution of this lease by
Landlord it is in escrow to purchase the land for the Shopping Center. This
lease is conditioned upon Landlord's purchase of said land. If Landlord
breaches its agreement to purchase said land, such breach shall also
constitute a breach of this lease, except that, if Landlord fails to purchase
said land because it failed to satisfy a condition of said purchase agreement
notwithstanding Landlord's best efforts, said failure of the condition shall
not constitute a breach of this Lease. If Landlord fails to purchase said
land for any reason other than its breach, this lease shall become null and
void and neither Landlord nor Tenant shall have any rights or remedies
against the other in connection with this lease.
19.19 The liability of Landlord to Tenant for any default by
Landlord under this Lease shall be limited to the interest of Landlord
in the Demised Premises and Landlord's interest, if any, in the
Shopping Center, and/or the proceeds from any sale or other transfer
of the Demised Premises and/or Landlord's interest, if any, in the
Shopping Center. Tenant agrees to look solely to such interests
and/or such proceeds for the recovery of any judgment against
Landlord, and Landlord shall not be personally liable for any such
judgment or deficiency after Tenant's execution upon such interests
and/or such proceeds. The limitation on liability contained in this
Section shall inure to the benefit of Landlord's heirs, personal
representatives, successors and assigns and their respective partners,
shareholders, officers, directors, trustees, beneficiaries, agents and
employees. Under no circumstances shall any such person have any
personal liability for the performance of Landlord's obligations under
this Lease. The word "Landlord", as used herein, means only the
owner for the time being of Landlord's interest in this lease, that is,
in the event of any transfer of landlord's interest in this lease, the
transferor shall cease to be liable, and shall be released from all
liability for the performance or observance of any agreements or con-
ditions on the part of Landlord to be performed or observed subse-
quent to the time of said transfer, provided that from and after said
transfer the transferee shall have agreed with Tenant, in writing in
recordable form, that such transferee shall have assumed and have
agreed to perform the obligations of Landlord under this lease occur-
ring subsequent to the time of said transfer.
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<PAGE>
19.20 Upon reasonable notice to Tenant (but not less than 3
days in advance), and only if Tenant is given an opportunity and
permitted to accompany, Landlord, its agents and employees shall have
the right to enter the Demised Premises at all times during normal
business hours to examine the same, to show them to prospective
purchasers or lenders, to make such repairs as Landlord is obligated
to make pursuant to this Lease, and to exercise such rights of
self-help as Landlord is entitled to exercise pursuant to this Lease.
In addition, during the six month period prior to the expiration of the
Lease term or any renewal term, unless Tenant has exercised its
option to extend the Lease term, Landlord may exhibit the Demised
Premises to prospective Tenants, upon reasonable notice to Tenant
(but not less than 3 days in advance), and only if Tenant is given an
opportunity and permitted to accompany.
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<PAGE>
ARTICLE XX
SALE OF DEMISED PREMISES BY LANDLORD
20.1 In the event of any sale, exchange or other transfer of the
Demised Premises by Landlord and an assignment by Landlord of this
Lease, Landlord shall be entirely relieved of all liability under the
terms, covenants and conditions set forth in this Lease arising out of
any act or omission occurring after the assignment of this Lease,
provided that the assignee assumes Landlord's covenants and obliga-
tions arising after the date of such assignment. Tenant shall attorn to
such new Landlord as of the date of the assignment. Upon ten (10)
days prior written notice from Landlord, Tenant shall from time to time
execute and deliver to Landlord or any person designated by Landlord
an estoppel certificate stating the current status of the material provi-
sions of this Lease, as specified in Section 15.5 above. Any such
statement may be relied upon by any purchaser or other transferee of
the Demised Premises.
IN WITNESS WHEREOF, the parties hereto have caused this lease
to be executed under seal as of the day and year first above written.
LANDLORD:
DOUGLAS W. BRADFORD, an
individual
/s/ Douglas W. Bradford
----------------------------------------
TENANT:
HOMECLUB, INC., a Delaware
corporation
By: /s/ illegible
------------------------------------
Its: President
-------------------------------
By: /s/ illegible
------------------------------------
Its: Vice President
-------------------------------
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<PAGE>
SCHEDULE A
The Demised Premises shall consist of a one-story building (the
"Building"), to be constructed by Landlord as herein provided, con-
taining one hundred three thousand nine hundred and nine (103,909)
square feet of floor area having a depth and width of two hundred
eighty-one point four feet by three hundred sixty-nine point four feet
(281.4 x 369.4) and other dimensions as shown upon the plan attached
hereto ("the Lease Plan"), plus an exterior nursery area containing
nine thousand eight hundred and eighty (9,880) square feet of floor
area, all as shown on the Lease Plan. In addition, Tenant shall have
the exclusive right to use certain service areas adjacent to the De-
mised Premises which contain an exterior loading dock and compactor
pad as shown on the Lease Plan. It is expressly understood and
agreed that said service areas and the exterior nursery area shall not
be included in computing Tenant's Fraction (defined in Section 6.1) for
purposes of Article VI and Paragraph 8 of Schedule B. If after
completion of Landlord's Construction Work the Building shall contain
less than the floor area required above then, in addition to all other
remedies of Tenant, as a result thereof, the Minimum Rent payable by
Tenant pursuant to Section 5.1 shall be reduced proportionately.
Landlord agrees that the name of the Shopping Center shall not con-
tain the tradename of any business operated in the Shopping Center.
The Demised Premises are situated within the shopping center to
be constructed by Landlord, as herein provided, at the intersection of
Whitman Avenue and 20th Street. The "Shopping Center" (as defined
herein) is the land, together with the buildings and other structures
from time to time thereon, shown on the Lease Plan, and is more
particularly described on the legal descriptions attached hereto on
pages A-2 and A-3.
A-1
<PAGE>
DESCRIPTION
(1) ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF CALIFORNIA,
COUNTY OF BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
LOT 4, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL
SUBDIVISION", WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER
OF THE COUNTY OF BUTTE, STATE OF CALIFORNIA, ON JULY 6, 1965, IN
BOOK 34 OF MAPS, AT PAGE(S) 7, 8 AND 9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF CALIFORNIA,
DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT WHICH IS THE INTERSECTION OF THE EAST LINE OF
LOT 2, AS SHOWN ON SAID MAP, WITH THE WESTERLY LINE OF STATE
HIGHWAY ROUTE 99, SAID POINT BEING DISTANT 90.00 FEET SOUTHWESTERLY
MEASURED AT A RIGHT ANGLE FROM THE BASE LINE AT ENGINEER'S STATION
(C-1) 488+87.54 OF THE DEPARTMENT OF PUBLIC WORKS SURVEY ON ROAD
03-BUT-99 FROM POST MILE 30.0 TO 37.3; THENCE FROM SAID POINT OF
BEGINNING NORTH 32 DEG. 24' 21" WEST, 718.93 FEET; THENCE ALONG A
TANGENT CURVE TO THE LEFT, HAVING A RADIUS OF 2940.00 FEET,
THROUGH AN ANGLE OF 2 DEG. 25' 14", AN ARC DISTANCE OF 124.21 FEET
TO A POINT OF COMPOUND CURVE; THENCE ON A CURVE TO THE LEFT, WITH A
RADIUS OF 815.00 FEET, THROUGH AN ANGLE OF 25 DEG. 39' 46", AN ARC
DISTANCE OF 365.04 FEET; THENCE NORTH 60 DEG. 29' 31" WEST, 603.28
FEET; THENCE NORTH 85 DEG. 37' 47" WEST, 152.81 FEET; THENCE SOUTH
80 DEG. 00' 30" WEST, 188.24 FEET TO A POINT ON THE SOUTH LINE OF
20TH STREET, AS SHOWN ON SAID MAP OF "CHICO INDUSTRIAL PARK";
THENCE ALONG SAID SOUTH LINE OF 20TH STREET ON A CURVE TO THE LEFT,
TANGENT TO A LINE BEARING NORTH 79 DEG. 40' 52" EAST, HAVING A
RADIUS OF 642.00 FEET, THROUGH AN ANGLE OF 15 DEG. 22' 20", AN ARC
DISTANCE OF 172.25 FEET; THENCE CONTINUING ALONG SOUTH LINE OF 20TH
STREET, SOUTH 30 DEG. 29' 31" EAST, 2.33 FEET; THENCE NORTH 68
DEG. 31' 52" EAST, 114.77 FEET; THENCE NORTH 64 DEG. 28' 40" EAST,
461.74 FEET TO THE INTERSECTION OF THE SOUTHERLY LINE OF SAID 20TH
STREET WITH THE WESTERLY LINE OF STATE HIGHWAY ROUTE 99; THENCE
ALONG SAID WESTERLY LINE SOUTH 30 DEG. 29' 31" EAST, 1766.67 FEET
TO THE POINT OF BEGINNING.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES BELOW A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS
BELOW A DEPTH OF 250 FEET OF SAID REAL PROPERTY WITHOUT THE RIGHT
OF SURFACE ENTRY.
ALSO EXCEPTING THEREFROM THOSE PORTIONS DEEDED TO THE CITY OF
CHICO, BY DEEDS RECORDED APRIL 28, 1980, IN BOOK 2510, PAGE 195,
OFFICIAL RECORDS, AND RECORDED MAY 15, 1980, IN BOOK 1515, PAGE 276,
OFFICIAL RECORDS.
A-2
<PAGE>
DESCRIPTION
and (2) ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF CALIFORNIA,
COUNTY OF BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
LOT 9, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL
SUBDIVISION", WHICH MAP WAS RECORDED IN THE OFFICE OF THE RECORDER
OF THE COUNTY OF BUTTE, STATE OF CALIFORNIA, ON JULY 6, 1965, IN
BOOK 34 OF MAPS, AT PAGE(S) 7, 8 AND 9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF CALIFORNIA,
DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT WHICH IS THE INTERSECTION OF THE EAST LINE OF
LOT 2, AS SHOWN ON SAID MAP, WITH THE WESTERLY LINE OF STATE
HIGHWAY ROUTE 99, SAID POINT BEING DISTANT 90.00 FEET SOUTHWESTERLY
MEASURED AT A RIGHT ANGLE FROM THE BASE LINE AT ENGINEER'S STATION
(C-1) 488+87.54 OF THE DEPARTMENT OF PUBLIC WORKS SURVEY ON ROAD
03-BUT-99 FROM POST MILE 30.0 TO 37.3; THENCE FROM SAID POINT OF
BEGINNING NORTH 32 DEG. 24' 21" WEST, 718.93 FEET; THENCE ALONG A
TANGENT CURVE TO THE LEFT, HAVING A RADIUS OF 2940.00 FEET, THROUGH
AN ANGLE OF 2 DEG. 25' 14", AN ARC DISTANCE OF 124.21 FEET TO A
POINT OF COMPOUND CURVE; THENCE ON A CURVE TO THE LEFT, WITH A
RADIUS OF 815.00 FEET, THROUGH AN ANGLE OF 25 DEG. 39' 46", AN ARC
DISTANCE OF 365.04 FEET; THENCE NORTH 60 DEG. 29' 31" WEST, 603.28
FEET; THENCE NORTH 85 DEG. 37' 47" WEST, 152.81 FEET; THENCE SOUTH
80 DEG. 00' 30" WEST, 188.24 FEET TO A POINT ON THE SOUTH LINE OF
20TH STREET, AS SHOWN ON SAID MAP OF "CHICO INDUSTRIAL PARK";
THENCE ALONG SAID SOUTH LINE OF 20TH STREET ON A CURVE TO THE LEFT,
TANGENT TO A LINE BEARING NORTH 79 DEG. 40' 52" EAST, HAVING A
RADIUS OF 642.00 FEET, THROUGH AN ANGLE OF 15 DEG. 22' 20" , AN ARC
DISTANCE OF 172.25 FEET; THENCE CONTINUING ALONG SOUTH LINE OF 20TH
STREET, SOUTH 30 DEG. 29' 31" EAST, 2.33 FEET; THENCE NORTH 68 DEG.
31' 52" EAST, 114.77 FEET; THENCE NORTH 64 DEG. 28' 40" EAST,
461.74 FEET TO THE INTERSECTION OF THE SOUTHERLY LINE OF SAID 20TH
STREET WITH THE WESTERLY LINE OF STATE HIGHWAY ROUTE 99; THENCE
ALONG SAID WESTERLY LINE SOUTH 30 DEG. 29' 31" EAST, 1766.67 FEET
TO THE POINT OF BEGINNING.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES BELOW A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS BELOW
A DEPTH OF 250 FEET OF SAID REAL PROPERTY WITHOUT THE RIGHT OF
SURFACE ENTRY.
ALSO EXCEPTING THEREFROM THOSE PORTIONS DEEDED TO THE CITY OF
CHICO, BE DEEDS RECORDED APRIL 28, 1980, IN BOOK 2510, PAGE 195,
OFFICIAL RECORDS, AND RECORDED MAY 15, 1980, IN BOOK 1515, PAGE
276, OFFICIAL RECORDS.
A-3
<PAGE>
least ten (10) stores under the same trade name in three or more states.
10. Landlord shall maintain with respect to the Common Facilities
throughout the Lease Term a policy or policies of public liability insurance
in amounts of not less than One Million Dollars ($1,000,000.00) with respect
to injuries to any one person and not less than Two Million Dollars
($2,000,000.00) with respect to injuries suffered in any one accident and not
less than One Hundred Thousand Dollars ($100,000.00) with respect to damage
to property, such policies of insurance to name Tenant as an additional
insured thereunder and be issued for periods of not less than one (1) year by
responsible insurance companies well rated by national rating organizations
and authorized to do business in the state in which the Shopping Center is
located. Provided however, not more than once every five years Tenant may
require that the amount of coverage be increased on the ground that such
coverage is inadequate to properly protect the parties in accordance with
generally accepted insurance standards for Shopping Centers of this kind and
size. Landlord shall deliver such policies to Tenant at least fifteen (15)
days prior to the Commencement Date, and each renewal policy at least ten
(10) days prior to the expiration of the policy it renews. In lieu of
delivering any policy of insurance to Tenant, Landlord may deliver to Tenant
a Certificate of the company issuing such policy. All such insurance policies
shall provide that such policies shall not be cancelled without at least ten
(10) days prior written notice to Tenant.
11. Landlord shall, within five days after the close of escrow for
landlord's acquisition of the land for the Shopping Center, deliver to Tenant
a recognition agreement from any mortgagee whose mortgage shall be prior in
lien to the lien of this lease and, if Landlord shall hold a leasehold estate
in all or part of the Shopping Center rather than a fee interest, a
recognition agreement from the fee owner. Each such recognition agreement
shall be in recordable form and shall provide that this lease and all rights
of Tenant hereunder shall not be disturbed except for a cause which would
permit Landlord to disturb the same hereunder. Each such recognition
agreement from a mortgagee or fee owner, as the case may be, shall also be
substantially in the form of Schedule D. Tenant shall have the right to
terminate this lease at any time within 120 days after Tenant learns that
Landlord is not in compliance with the preceding provisions of this Paragraph
11, provided that Tenant must give Landlord 30 days advance notice of such
intent to terminate and Landlord may cure such non-compliance and negate said
termination at any time during said 30 day period.
12. The Demised Premises are demised to Tenant with the benefit of all
of the rights contained in this lease and all of the rights appurtenant to
this lease and to the Demised Premises by operation of law, and are demised
subject to, and with the benefit of, the following:
(A) General real estate taxes not yet due and payable.
(B) The Mortgage, if any, referred to in Schedule D.
B-7
<PAGE>
(C) The Permitted Exceptions as defined in Section 2.1 above.
(D) The REA referred to in Paragraph 13 below.
(E) Easements for utilities serving the Shopping Center.
13. Landlord shall enter into a Reciprocal Easement Agreement ("REA")
acceptable to HomeClub, with respect to the balance of the Shopping Center
(herein referred to as "Phase II"). HomeClub shall not unreasonably
withhold or delay its approval of the REA, provided it shall be reasonable to
withhold its consent unless the REA shall protect fully Tenant's rights under
this lease, shall give Tenant the right to enforce the provisions of the REA
in the event Landlord fails to do so diligently, and shall not impose any
additional obligations or costs on Tenant. Landlord upon entering into the
REA will grant and demise to Tenant the benefit of all easements, licenses,
rights-of-way, and privileges which the parties therein referred to did
thereby give and grant one to the other and to all persons claiming
thereunder. Landlord shall not, without the prior consent of Tenant, execute,
or otherwise agree to, any modification of the REA, nor waive any of its
rights, nor exercise any right, nor give any consent or approval, nor grant
or permit any indulgences by act or omission, nor give any consent,
thereunder. Landlord shall enforce all provisions of the REA.
14. Tenant may at any time give notice to Landlord that Tenant elects
to perform the obligations of Landlord under Paragraphs 7 and 10 and, upon
the thirtieth (30th) day after such notice, Tenant shall commence to, and
thereafter shall, perform such obligations, and no further obligations shall
thereafter accrue under Paragraphs 8 and 10 hereof except as otherwise
determined pursuant to the penultimate sentence of this Paragraph 14. In such
event, Landlord shall pay to Tenant, for each year or portion thereof
thereafter included within the Lease Term, as partial reimbursement to Tenant
of the cost to Tenant of performing such obligations, an amount equal to the
product of "Landlord's Fraction" (hereinafter defined) and the cost of
performing such obligations during said year. Said amount shall be payable
periodically, but not more frequently than monthly, upon Landlord's receipt
of bills from Tenant. Tenant shall submit to Landlord evidence of such cost
to Tenant in such detail as Landlord may reasonably require. Landlord's
Fraction is that fraction the numerator of which shall be the number of
square feet of floor area in all the buildings in the Shopping Center except
the Demised Premises and the denominator of which shall be the denominator of
Tenant's Fraction (defined in Section 6.1), but in no event shall Landlord's
Fraction be less than 53%, except if the size of the Demised Premises is
increased, in which case Landlord's Fraction shall be adjusted accordingly.
Subject to the prior sentence, as the number of square feet of floor area may
change during any year, Landlord's Fraction may change during said year and
the amount payable by Landlord for said year pursuant to the provisions of
this Paragraph 14 shall reflect such changes in floor area. At any time after
the giving of notice by Tenant pursuant to the first sentence of this
Paragraph 14, Tenant may give notice to Landlord
B-8
<PAGE>
that Tenant elects to have Landlord again perform such obligations of
Landlord under said Paragraphs 7 and 10 and upon the thirtieth (30th) day
after such notice from Tenant Landlord shall commence to, and thereafter
shall, perform such obligations and the provisions of Paragraphs 7 and 10
shall again be operative and the provisions of this Paragraph 14 shall be
subject to the provisions of Section 8.3 and nothing in this Paragraph 14
shall obligate Tenant to make any alterations, repairs or replacements to the
common areas that are required during the first twenty-four (24) months of
the Lease Term.
15. Landlord and Tenant will maintain the Shopping Center and conduct
their business thereon in compliance with all federal, state or local laws
and regulations relating to pollution control, hazardous or toxic wastes,
substances and constituents, including hydrocarbonic substances, and other
environmental and ecological matters, including but not limited to the
Federal Water Pollution Control Act (33 U.S.C. Sect. 1251 et seq.), Resource
Conservation & Recovery Act (42 U.S.C. Sect. 6901 et seq.), Safe Drinking
Water Act (42 U.S.C. Sect. 3000f et seq.), Toxic Substances Control Act (15
U.S.C. Sect. 2601 et seq.), the Clean Air Act (42 U.S.C. Sect. 7401 et seq.),
Comprehensive Environmental Response of Compensation and Liability Act (42
U.S.C. Sect. 9601, et seq.), California Health & Safety Code (25100 et seq.,
39000 et seq.), California Water Code (13000 et seq.), and other comparable
state laws. If Landlord or Tenant shall receive: (a) any notice of any
violation or administrative or judicial complaint or order having been filed
or about to be filed against Landlord, Tenant, the Shopping Center or the
Demised Premises alleging violations of any federal, state or local
environmental law or regulation or requiring Landlord or Tenant to take any
action in connection with the release of any toxic or hazardous substance,
waste or constituent, including any hydrocarbonic substance, into the
environment, or (b) any notice from a federal, state or local governmental
agency or private party alleging that Landlord or Tenant may be liable or
responsible for costs associated with a response or cleanup of a release of a
toxic or hazardous substance, waste or constituent, including any
hydrocarbonic substance, into the environment or any damages caused by that
release, Landlord or Tenant shall, within fifteen (15) days of receipt
thereof, provide the other party with a copy of such notice and thereafter
shall diligently proceed to take all actions necessary to correct such
violation. Landlord and Tenant agree to indemnify and hold each other
harmless from and against all causes, claims, demands, losses, damages,
liens, liabilities, lawsuits and other proceedings, costs and expenses
(including without limitation attorneys' fees) incurred, directly or
indirectly, by the indemnitee as a result of or in connection with
indemnitor's failure to comply with any of the provisions of this
Paragraph 15.
B-9
<PAGE>
SCHEDULE C
LANDLORD'S CONSTRUCTION WORK
Below are Tenant's Requirements. Landlord agrees that within thirty (30)
days after the date of this lease Landlord shall submit to Tenant, for
Tenant's approval, detailed plans and detailed specifications ("the
Details"), which shall be in conformity with Tenant's Requirements. The
Details shall be submitted in duplicate, including working drawings and
design analysis. If, within fifteen (15) days after Tenant shall have
received a complete set of the Details, Tenant shall not give notice of any
comments thereon, then such complete set of the Details shall be deemed
approved by Tenant. If, within fifteen (15) days after Tenant shall have
received such complete set of Details, Tenant shall give Landlord notice of
comments thereon, Landlord shall forthwith revise the Details in accordance
with said comments to the extent that said comments shall be in conformity
with Tenant's requirements and resubmit the Details, as so revised, to Tenant
for approval within fifteen (15) days after receipt of Tenant's notice of
comments, and the procedure for approval and/or comments by Tenant above set
forth shall be repeated until the Details shall be finally approved except
that the time limit for approval and revision shall be fifteen (15) days.
Provided, however, if Tenant fails to give Landlord any of the above-
mentioned notices within five (5) days from receipt of each set of Details,
then the dates referred to in Section 4.6, 4.7, and 5.1(D) shall be extended
on a day for day basis for each additional day Tenant fails to respond up to
a total of ten days for each approval period.
At any time after the Details, as the same may be revised as aforesaid,
shall be approved by Tenant, as aforesaid, and prior to completion of
construction thereunder, Tenant may give notice to Landlord of changes it
desires in the Details as the same may have been revised, as aforesaid.
Changes which do not affect the structure and do not delay the completion of
construction work shall not require the approval of Landlord; changes which
do affect the structure or which do delay the completion of construction work
shall require the approval of Landlord, which approval Landlord agrees it
will not unreasonably delay or withhold, and the dates referred to in
Sections 4.6, 4.7, and 5.1(D) shall be extended on a day for day basis for
each day construction is delayed. The Details, as the same may be revised and
changed as aforesaid, shall be known as "Landlord's Construction Work".
If Tenant shall give notice to Landlord that extensive changes have been
involved, Landlord will furnish "as built" drawings. Upon completion of
construction Landlord shall furnish photographs and operating instructions as
provided in said document entitled Outline Specifications for a HomeClub
Store (hereinafter referred to).
Prior to the commencement of Landlord's Construction Work, Landlord
shall submit to Tenant for its approval a critical path construction
schedule, and about the first day of each month during
C-1
<PAGE>
Landlord's Construction Work Landlord shall submit to Tenant for its approval
a revised critical path construction schedule.
Notwithstanding anything contained in Section 3.1 of this lease, any net
increase in the cost of Landlord's Construction Work, including, without
limitation, the cost to Landlord of its interest payment on the construction
loan for the Demised Premises, caused by changes made by Tenant, as
aforesaid, after the Details have been approved by Tenant shall be paid by
Tenant to Landlord upon demand, at the time when Landlord shall be required
to pay the same to Landlord's contractors or other parties, provided that
Landlord shall, prior to the commencement of construction of such changes,
have notified Tenant of such increase and Tenant shall have approved of the
cost of such increase.
No agent or employee of Tenant other than an officer of Tenant or an
agent or employee of Tenant designated in writing for the purpose by an
officer of Tenant has any authority to approve any plans or specifications or
approve any changes in plans or specifications, and any approval by an officer
or such agent or employee shall not be binding upon Tenant unless such
approval shall be in writing.
Unless Tenant shall expressly agree in writing that any requirement of
Tenant's Requirements shall be waived or altered, every requirement of
Tenant's Requirements shall be complied with by Landlord, except to the
extent Tenant's Requirements shall have been waived or altered by Tenant's
approval of the Details or change orders, as provided above. Such waiver or
alteration can be accomplished only by a writing signed by an officer of
Tenant or an agent or employee of Tenant, which writing sufficiently
identifies said requirement and states that the same is waived or altered.
Notwithstanding any approval hereunder by Tenant, Landlord shall be solely
responsible in all cases for proper design and coordination of architectural,
structural, plumbing, electrical, heating, ventilating, air conditioning and
site elements of the Demised Premises.
Tenant's Requirements are such work (labor, materials and equipment) as
shall be required to construct a HomeClub store building and Common
Facilities which when completed will be equal in all detail to the HomeClub
store building and Common Facilities provided for in (a) the Store Plans
(hereinafter referred to), and (b) Prototype Specifications for a HomeClub
Store. Also, if site conditions, local codes or other requirements of local
authorities require differences in construction, Store Plans and Prototype
Specifications shall be further modified and supplemented to reflect such
differences but no modifications thereof prepared in accordance with the
provisions of this sentence or the sentence immediately preceding shall be
permitted because of local codes or other requirements of local authorities,
unless without such modifications said Store Plans and Prototype
Specifications would violate local codes or other requirements of local
authorities. The Store Plans consist of the following drawings prepared by
Griffin & Banks Architects, Inc. as job number 86-29:
C-2
<PAGE>
Sheet Most Recently
Number Title Revised Date
Title Sheet 10/12/87
A1.1 Site Plan 03/19/87
A2.1 Floor Plan 10/12/87
A3.1 Exterior Elevations 10/12/87
A4.1 Reflected Ceiling Plan 10/12/87
A5.1 Racking Floor Plan 10/12/87
A6.1 Communications Floor Plan 10/12/87
A7.1 Computer Floor Plan 10/12/87
A8.1 Interior Electrical 08/04/87
A9.1 Count, Vault & Training 08/04/87
A10.1 PBX, Computer & Receiving 07/30/87
A11.1 Cust. Service & Cash Registers 10/19/87
A12.1 Mgr. Offices & Lounge 08/05/87
A13.1 Special Order Table 08/06/87
A14.1 Receiving Docks 08/11/87
A15.1 Electrical Signing 08/25/87
A16.1 Plumbing 10/28/87
C-3
<PAGE>
SCHEDULE D
SUBORDINATION, RECOGNITION AND ATTORNMENT AGREEMENT
1. Reference is made to Mortgage from DOUGLAS W. BRADFORD ("Landlord")
to ___________________ ("Mortgagee") dated _________________ and recorded in
Volume _______________ at Page ________ of the ____________________________.
2. Reference is made to Lease dated ________________, 198_, between
Landlord, and HomeClub, Inc. a Delaware corporation, ("Tenant"), as Tenant,
of certain premises situated within the premises covered by said Mortgage.
3. Notwithstanding anything to the contrary set forth in the Lease, the
Lease and the leasehold estate created thereby shall be and shall at all times
remain subject, subordinate and inferior to the Mortgage and the lien
thereof, and to any and all renewals, modifications, consolidations,
replacements, and extensions thereof.
4. In consideration of the agreements of Mortgagee contained herein,
Tenant agrees that if the holder of said Mortgage, or any person claiming
under said holder, shall succeed to the interest of Landlord in said Lease,
Tenant will recognize, and attorn to, said holder, or such other person
claiming under said holder, as its landlord under the terms of said Lease.
5. In consideration of the agreements of Tenant contained herein,
Mortgagee consents to said Lease and agrees that, in the event of foreclosure
or other right asserted under said Mortgage by the holder thereof, said Lease
and the rights of Tenant thereunder shall continue in full force and effect
and shall not be terminated or disturbed, except in accordance with the
provisions of said Lease.
6. The benefits and burdens of this agreement shall enure to and bind
the successors and assigns of the respective parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed, both as of ________________, 198_.
HOMECLUB, INC.
By:
-----------------------------
---------------------------------
By:
-----------------------------
D-1
<PAGE>
SCHEDULE E
GUARANTEE
Reference is made to a Shopping Center Lease (the "Lease") dated June 6,
1988, between DOUGLAS W. BRADFORD (hereinafter referred to as "Landlord"),
and HOMECLUB, INC., a Delaware corporation (hereinafter referred to as
"Tenant"), of certain premises within the shopping center in Chico,
California, located at the intersection of Whitman Avenue and 20th Street.
In consideration of Landlord's having executed said Lease at the request
of Zayre Corp., a Delaware corporation ("Zayre" or "Guarantor"), and in
further consideration of One Dollar and other valuable consideration paid,
the receipt of which is hereby acknowledged, Zayre hereby unconditionally
guarantees to Landlord and his heirs, personal representatives, successors
and assigns the payment of the rent provided for in said Lease and the
performance and observance of all agreements and conditions contained in said
Lease on the part of Tenant to be performed or observed. At Landlord's
election, Zayre may be brought into any action or proceeding commenced by
Landlord against Tenant in connection with and based upon said Lease, or any
provision thereof, prior to obtaining a judgment against Tenant therein.
Notwithstanding anything contained herein to the contrary, Zayre shall have
all defenses and rights of Tenant and its successors and assigns (except
their financial disability) with respect to the performance and payments
under the Lease and the obligations of Zayre hereunder shall be measured by
and shall in no event be greater than the obligations of Tenant. Zayre hereby
agrees that it shall in no way be released from its obligations under this
Guarantee by any of the following actions: any assignment of said Lease or
any subletting of the demised premises by Tenant, any Leasehold Lender, or
any subtenant, successor, or assignee of Tenant, any new Lease with Leasehold
Lender or party designated by such Lender as provided in Section 18.6 of the
Lease, any waiver of default or any extension of time or other favor or
indulgence granted by Landlord to Tenant, any failure to receive notice of
any of said actions, the expiration or termination of the Lease (except as
provided below), or any extension of the terms of the Lease in accordance
with the provisions of the Lease. Zayre hereby waives notice of non-payment
of any other default in the performance or observance of any agreement or
condition contained in said Lease on the part of Tenant to be performed or
observed.
Anything to the contrary herein notwithstanding: (A) if said Lease shall
be terminated pursuant to the provisions of Article 12 of said Lease at a
time when the tenant in
<PAGE>
possession shall not be Zayre, or a subsidiary of Zayre, then Zayre shall not
be liable for the payment of any rent or for the performance or observance of
any agreements or conditions to be paid, performed or observed which become
due or arise after the date of such termination, unless at the time of such
termination Landlord shall have offered to Zayre in writing a Lease for the
balance of the Lease Term (as defined in the Lease) upon the provisions in
said Lease contained; Zayre shall have a period of sixty (60) days after
receipt of such offer to accept such offer. If Zayre accepts Landlord's
offer, then such Lease shall be deemed to mitigate Landlord's damages.
(B) If Tenant is adjudicated bankrupt, or if any bankruptcy action
involving Tenant is commenced or filed, or if a petition or reorganization,
arrangement, or similar relief is filed against Tenant, then subject to the
foregoing at such time as the trustee or administrator rejects the Lease,
Zayre shall pay to Landlord all accrued, unpaid rent upon the condition that
within thirty (30) days following notice to Landlord of such rejection
Landlord shall have offered to Zayre in writing a Lease for the balance of
the Lease Term upon the provisions of the Lease, including payment of the
rental obligations as provided above, which offer must remain open for not
less than sixty (60) days after receipt of such written offer. If Zayre
accepts Landlord's offer, then such Lease shall be deemed to mitigate
Landlord's damages
In the event that any legal action or other proceeding is commenced
with respect to this Guarantee, the unsuccessful party shall reimburse the
prevailing party for all reasonable attorney's fees and costs incurred in
connection therewith, including, without limitation all such fees or costs
incurred on any appeal from such action or proceeding.
This Guarantee shall bind the successors and assigns of Guarantor, and
it shall inure to the benefit of the heirs, personal representations,
successors and assigns of Landlord. Guarantor further agrees that Landlord
may, without approval, assign its rights under this Guarantee, in whole or
in part, to any person or entity obtaining an ownership interest or security
interest of any nature in the Lease, provided that, unless Tenant is a
wholly-owned subsidiary of Guarantor at the time, Landlord shall give notice
of such assignment within thirty (30) days thereof to Guarantor.
This Guarantee shall be governed by, and construed in accordance with,
the laws of the State of California.
<PAGE>
No provisions of this Guarantee or right of Landlord hereunder can be
waived in whole or in part, nor can Zayre be released from Zayre's
obligations hereunder, except either by a) a writing duly executed by
Landlord and an authorized officer of Landlord's lender, if any, holding a
lien upon the Demised Premises as defined in the Lease, b) operation of law,
or c) operation of the Lease.
Zayre represents that HomeClub is a wholly-owned subsidiary of Zayre.
Zayre has caused this Guarantee to be executed and its corporate seal to
be hereto affixed by Maurice Segall, its President, and George Freeman, its
Vice President hereunto duly authorized all as of the 6th day of June, 1988.
ZAYRE CORP.
By: /s/ Maurice Segall
--------------------------
Maurice Segall, President
By: /s/ George Freeman
--------------------------
George Freeman, Vice
President
<PAGE>
SCHEDULE F
RECORDING REQUESTED BY:
AND WHEN RECORDED MAIL TO:
D. William Wagner, Esq.
Sidley & Austin
2049 Century Park East
Suite 3400
Los Angeles, California 90067
SHORT FORM OF LEASE
THIS SHORT FORM OF LEASE executed this _____ day of _____________, 198_,
by and between DOUGLAS W. BRADFORD (hereinafter referred to as "Landlord"),
whose address is 2694 Bishop Drive, Suite 202, San Ramon, CA 94583, and
HOMECLUB, INC., a Delaware corporation (hereinafter referred to as "Tenant"),
whose address is 140 Orangefair Mall, Suite 100, Fullerton, California 92632;
WITNESSETH:
That for and in consideration of the covenants and agreements contained
in that certain Lease dated _______________, 198_ (the "Lease"), Landlord
does hereby demise and lease unto Tenant, and Tenant does hereby lease from
Landlord that certain real property in the City of Chico, County of Butte,
State of California, within the shopping center (the "Shopping Center")
situated at the intersection of Whitman Avenue and 20th Street, more
particularly described on Exhibit "A" attached hereto and by this reference
incorporated herein (the "Demised Premises").
TO HAVE AND TO HOLD the Demised Premises effective from the Commencement
Date as defined in the Lease for a period of twenty (20) years, and
containing four (4) five (5) year options to renew the Lease, upon the terms
and conditions contained in the Lease.
IT IS UNDERSTOOD AND AGREED that this Short Form of Lease is executed
solely for the purpose of giving notice to the public of the existence of the
Lease against the Demised Premises, the terms and conditions of which are
expressly incorporated herein by reference for all purposes as though fully
set forth herein. Should there be
F-1
<PAGE>
any inconsistency between the terms of this instrument and the Lease
incorporated herein, the terms of said incorporated Lease shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed this Short Form of
Lease as of the date and year first above written.
LANDLORD:
DOUGLAS W. BRADFORD,
an individual
----------------------------------------
TENANT:
HOMECLUB, INC. a Delaware corporation
By:
------------------------------------
Its:
-------------------------------
By:
------------------------------------
Its:
-------------------------------
F-2
<PAGE>
FOOD FOR LESS
<PAGE>
THIRD AMENDMENT TO BUILD AND LEASE AGREEMENT
This THIRD AMENDMENT TO BUILD AND LEASE AGREEMENT ("Third Amendment") is made an
entered into as of the 8th day of March, 1994, by and between CHICO CROSSROADS
CENTER, a California limited partnership ("Lessor"), and NETCO FOODS, INC.
("Lessee).
RECITALS
A. Douglas W. Bradford, a predecessor in interest of Lessor, and Lessee have
heretofore entered into that certain Build and Lease Agreement dated as of
May 25, 1988 (the "Lease Agreement"). The Lease Agreement was amended by a
letter agreement dated August 2, 1988 ("First Amendment") and a "Second
Amendment" dated June 16, 1992. The Lease Agreement as amended by the
First Amendment and Second Amendment is referred to hereinafter as the
Lease. The Lease demises a store building in a shopping center in the City
of Chico, County of Butte, State of California ("Shopping Center").
B. Landlord has entered into or will soon enter into leases with Circuit City
Stores, Inc. ("Circuit City Lease") and Petco Animal Supplies, Inc. ("Petco
Lease") which provide among other things for the construction of stores of
approximately 23,014 square feet for Circuit City Stores, Inc. ("Circuit
City Store") and 8,500 square feet for Petco animal Supplies, Inc. ("Petco
Store"). To accomplish the construction of the Circuit City Store,
Landlord will (i) demolish the buildings shown as Building "C" and
Building Pad "3" on Exhibit "A" to the Lease Agreement and (ii) pave over
and strip for parking the areas shown as Building Pad 3 and Pad 2 on
Exhibit "A" to the Lease Agreement and Exhibit "1" to the Second Amendment.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. The plot plan(s) attached as Exhibit "A" to the Lease Agreement and Exhibit
"1" to the Second Amendment shall be replaced by the plot plan attached
hereto as Exhibit "1". In each instance wherein the Lease Agreement refers
to the plot plan or Exhibit "A" attached thereto, or the First Amendment
refers to the plot plan or Exhibit "1" attached thereto, such reference(s)
shall be deemed to refer to Exhibit "1" attached hereto. Landlord and
Tenant hereby approve the plot plan attached hereto as Exhibit "1" for
all purposes of the Lease.
2. Each party, upon request of the other, agrees to confirm in writing that
Exhibit "1" attached to this Third Amendment reflects the agreed
replacement plot plan attached both to the Lease as Exhibit "A" and to the
First Amendment as Exhibit "1".
3. The following provisions shall be effective with respect to this Third
Amendment:
A. Landlord shall not permit any portion of the common area within the
Shopping
<PAGE>
Center to be used as a staging area or for the storage of construction
materials or vehicles except as set forth in Exhibit "1" hereto,
without the prior written approval of Tenant.
B. Landlord agrees that Tenant shall not be responsible and shall not
bear any costs for any site work, drainage, grading or any other work
in, on or around the Premises demised by the Lease or the common areas
as a result of the construction contemplated herein.
4. Except as expressly modified/supplemented by Paragraphs 1, 2 and 3 hereof,
the Lease shall remain unmodified and shall continue in full force an
effect. Landlord and Tenant acknowledge and agree that to the extent of a
conflict between the provisions of this Third Amendment and the Lease, the
Third Amendment shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to
Lease Agreement as of the date first written above.
CHICO CROSSROADS CENTER,
a California limited partnership
By: JMLB, INC.,
California corporation
Its Sole General Partner
By: /s/ Jaime Sohacheski Date: 3-16-94
------------------------ --------------------
Jaime Sohacheski
President
"LESSOR"
NETCO FOODS, INC.
By: /s/ Steve G. Nettleton Date: 3-8-94
---------------------------- --------------------
Its: PRESIDENT
"LESSEE"
<PAGE>
EXHIBIT A
[MAP]
<PAGE>
CONSENT OF GUARANTORS
Steve G. Nettleton and Kathleen P. Nettleton, as Guarantors of the "Lease",
as defined in Recital A to the Third Amendment To Build And Lease Agreement,
attached hereto as Exhibit "A", under Guarantee dated May 25, 1988, consents to
the Third Amendment To Build And Lease Agreement and agrees that its Guarantee
dated May 25, 1988, shall apply to said "Lease", as amended by the Third
Amendment To Build And Lease Agreement.
Dated: March 8, 1994
By: /s/ Steve G. Nettleton
-------------------------------
Steve G. Nettleton
By: /s/ Kathleen P. Nettleton
-------------------------------
Kathleen P. Nettleton
<PAGE>
SECOND AMENDMENT TO BUILD AND LEASE AGREEMENT
This SECOND AMENDMENT TO BUILD AND LEASE AGREEMENT ("Second Amendment") is
made and entered into as of the 16th day of JUNE, 1992, by and between CHICO
CROSSROADS CENTER, a California limited partnership ("Lessor"), and NETCO FOODS,
INC. ("Lessee").
R E C I T A L S:
A. Douglas W. Bradford, a predecessor in interest of Lessor, and Lessee have
heretofore entered into that certain Build and Lease Agreement dated as of
May 25, 1988 (the "Lease"). The Lease was amended by a letter agreement
dated August 2, 1988 ("First Amendment") . The Lease as amended by the
First Amendment is referred to as the Lease. The Lease demises a store
building in a shopping center in the City of Chico, County of Butte, State
of California ("Shopping Center").
B. Landlord contemplates entering into a lease of certain building space (the
"Pad A Building") to be constructed by Lessor in the Shopping Center with
HomeTown Buffet, Inc., a Delaware corporation ("Hometown"), for the
operation of a restaurant. Landlord and Tenant desire to amend the Lease
in order (i) to permit the construction of said building space (the "Pad A
Building"), (ii) to provide for the future construction of building spaces
on vacant pads ("Pad 1 and Pad 2") and (iii) to provide for certain "Right
of Way" dedications and the relocation of a driveway to accommodate the
widening of Whitman Avenue.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. A true and correct copy of the plot plan attached as Exhibit "A" to the
Lease is attached hereto as Exhibit "2". Exhibit "A" to the Lease shall
be supplemented and modified as set forth in Exhibit "1" attached hereto.
Exhibit "1" attached hereto reflects without limitation the proposed (i)
"Right of Way" dedication for widening Whitman Avenue, (ii) alternate
driveway location for the northern most driveway of the Shopping Center,
(iii) location and building envelopes for Pad A Building, Pad 1 and Pad 2,
and (iv) proposed site improvements around Pad A Building including without
limitation parking stalls, curbs and trash enclosures.
A. Except as set forth in Exhibit "1", Exhibit "A" remains unmodified.
B. Exhibit "A" to the Lease as modified by Exhibit "1" hereto of this
Second Amendment shall be deemed to be in compliance with all of the
terms and conditions of the Lease.
<PAGE>
SECOND AMENDMENT TO BUILD AND LEASE AGREEMENT
Page 2
2. Each party, upon request of the other, agrees to confirm in writing that
Exhibit "1" attached to this Agreement reflects the agreed to
modification of Exhibit "A" attached to the Lease, if such be the case.
3. Lessor agrees that Lessee shall not be responsible and shall not bear any
costs for any site work, drainage, grading or any other work to the
Shopping Center Common Facilities or otherwise, as a result of any
construction relating to the proposed improvements set forth on Exhibit
"1" including, but not limited to any work related to adjusted curb
lines, driveways or the proposed right away dedication along Whitman Avenue
to the City of Chico.
4. Except as expressly modified/supplemented by Paragraphs 1, 2 and 3 hereof,
the Lease shall remain unmodified and shall continue in full force and
effect. Landlord and Tenant acknowledge and agree that to the extent of a
conflict between the provisions of this Second Amendment and the Lease, the
Second Amendment shall prevail.
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to
Lease Agreement as of the date first written above.
CHICO CROSSROADS CENTER,
a California limited partnership
By: JMLB, INC.,
a California corporation
Its Sole General Partner
By: /s/ Jamie Sohacheski Date: 6-16-92
------------------------ ---------------
Jamie Sohacheski
President
"LESSOR"
NETCO FOODS, INC.
By: /s/ Steve G. Nettleton Date: 5-31-92
------------------------ ---------------
Its: President
"LESSEE"
<PAGE>
[MAP]
SITE PLAN
------------------
------------------
CHICO CROSSROADS
SHOPPING CENTER
------------------
------------------
CHICO, CA
<PAGE>
[MAP]
EXHIBIT 1
-----------
-----------
<PAGE>
EXHIBIT "2"
(EXHIBIT "A" TO LEASE)
[MAP]
<PAGE>
CONSENT OF GUARANTORS
Steve G. Nettleton and Kathleen P. Nettleton, as Guarantors of the "Lease",
as defined in Recital A to the Second Amendment To Build And Lease Agreement,
attached hereto as Exhibit "A", under Guarantee dated May 25, 1988, consents to
the Second Amendment to Build and Lease Agreement and agrees that its Guarantee
dated May 25, 1988, shall apply to said "Lease", as amended by the Second
Amendment to Build and Lease Agreement.
DATED MAY 31, 1992
BY: /s/ Steve G. Nettleton
-----------------------------
Steve G. Nettleton
By: /s/ Kathleen P. Nettleton
-----------------------------
Kathleen P. Nettleton
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[LOGO]
FLEMING
COMPANIES, INC.
STANDARD
SPECIFICATIONS
FOR
STORE
DEVELOPMENT
BUILDINGS
FOOD 4 LESS
EXHIBIT B
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FLEM1NG COMPANIES, INC.
CALIFORNIA STORE DEVELOPMENT
FOOD 4 LESS STANDARD SPECIFICATIONS
Revision Date: 9/87 Division: ______________________________
Date: ______________________________
Job Location: ______________________________
INDEX
REQUIREMENT Page No.
1. General Conditions. . . . . . . . . . . . . . . . . . . . . 1 - 4
2. Site Work . . . . . . . . . . . . . . . . . . . . . . . . . 4 - 6
3. Foundations . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Wall Construction . . . . . . . . . . . . . . . . . . . . . 6 - 7
5. Floor Construction. . . . . . . . . . . . . . . . . . . . . 7 - 8
6. Ceiling Construction. . . . . . . . . . . . . . . . . . . . 8
7. Roof Construction . . . . . . . . . . . . . . . . . . . . . 9
8. Doors, Windows, Hardware. . . . . . . . . . . . . . . . . . 10
9. Interior and Exterior Finishes. . . . . . . . . . . . . . . 10 - 11
10. Equipment. . . . . . . . . . . . . . . . . . . . . . . . . 11
11. Automatic Sprinkler System . . . . . . . . . . . . . . . . 11 - 13
12. Plumbing . . . . . . . . . . . . . . . . . . . . . . . . . 13 - 15
13. Heating and Air Conditioning . . . . . . . . . . . . . . . 15 - 18
14. Electrical and Lighting. . . . . . . . . . . . . . . . . . 18 - 20
15. Lessor Work to Lessee Equipment. . . . . . . . . . . . . . 20
" E X H I B I T B "
LESSOR'S
SIGNATURE:_________________________
DATE:______________________________
FLEMING
SIGNATURE:_________________________
DATE:______________________________
NOTE: These outline specifications are to be used only in the State of
California.
<PAGE>
SPECIFICATIONS
Specifications and requirements for a building of approximately ____________
square feet measuring ___________ feet by ___________ feet, parking lot, curbs,
docks, driveways, and walks (collectively referred to herein as "building").
1. GENERAL CONDITIONS:
1.1 INTENT OF PLANS AND SPECIFICATIONS
1.1.1 These outline lease specifications and construction layouts
contain the same minimum requirements of the Lessee and are for a complete
structure, including heating, ventilating and air conditioning, electrical
wiring, plumbing, fire protection work, hardwares, and interior finishes.
1.1.2 The building is to be constructed in compliance with all local,
city, state or federal government building codes and Health Department
requirements. In addition, all covenants, codes, and restrictions (CCR) must be
complied with relative to construction and building locations. In all instances
where no apparent codes prevail, same shall be constructed in compliance with
Title 24, ACI, AICS, ASHRAE, ASTM, AWSC, BOCA, NEC, NFPA, UPC and OSHA.
1.1.3 Dimensions and locations of property lines on any drawings
furnished by Lessee are approximate only, and it is the Lessor's responsibility
to ascertain the actual dimensions and locations.
1.1.4 No substitutions, changes, or deviations from the
specifications or drawings shall be made without the written approval of the
Lessee.
1.1.5 If there is any conflict or disagreement between the
specifications or drawings, the Lessee is to be consulted as to which will
prevail. Should anything be mentioned in these specifications and not shown in
the drawings, or vice versa, the same shall be followed as if set forth in both,
as it is the intent of these specifications and accompanying drawings to
correspond and embody every item and part necessary for the completion of the
building, ready for a supermarket operation.
1.1.6 Lessor shall deliver to Lessee "as-built" drawings showing all
addenda revisions, changes necessitated by field conditions and other
deviations. "As-built" drawings shall be one set sepia reproducibles.
1.1.7 Lessee reserves the right to review building plans and such
review must be secured before construction of the building is started.
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1.2 MATERIALS AND LABOR
1.2.1 All materials shall be new and first-grade. All labor in
connection with this work, including trucking, handling, installation, etc.
shall be done by skilled craftsmen normally employed in the various construction
trades.
1.2.2 The building is to be substantially sound in all respects; all
facilities and utilities serving the building structure are to be suitable and
adequate for the purpose.
1.2.3 All structural portions of the building, including footings,
foundations, walls, floor, ceiling, roof joists, roof decking, roof joists,
posts, supports, joints and connections shall follow AISC and ACI codes of
standard practices in determining size, strength, type, number, construction and
installation.
1.2.4 Lessor and joint contractors shall guarantee equipment,
materials and workmanship for one (1) year unless stated otherwise, from
acceptance date of completed building. Guarantees shall in turn bind each
subcontractor, supplier or vendor to make good deficiencies arising from
inferior materials or installations.
1.3 CLEANUP
1.3.1 The Lessor shall leave the premises, including the floors,
walls, windows, hardware, etc. clean of all marks, stains, and broken glass, and
ready for Lessee store operations. All areas within metes and bounds shall be
free of all debris and excess construction materials, making site ready for
Lessee store operation.
1.4 PERMITS AND APPROVALS
1.4.1 Permits and licenses necessary for the prosecution of the work
shall be secured and paid for by the Lessor. The Lessor shall give all notices
and comply with all laws, ordinances, rules and regulations bearing on the
conduct of the work. The Lessor will coordinate location of all emergency exits
with Lessee.
1.4.2 The Lessor will be responsible for obtaining a Certificate
of Occupancy for the building premises from the appropriate controlling
jurisdiction, to include all local, county, state and federal agencies.
1.5 CLAIMS FOR EXTRA WORK
1.5.1 Claims for extra work shall be honored. Such changes
requested by Lessee shall be in writing. In such a case, both Lessee and Lessor
must agree to the scope of the work involved in the change and total cost before
any work is done, using a Fleming standard change order form.
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1.6 SUPERVISION
1.6.1 The General Contractor shall employ a competent, full-time
superintendent and necessary assistants for this project during the entire
construction period.
1.7 BUILDING SCHEDULE
1.7.1 Prior to the start of construction, the Lessor shall prepare
and submit to the Lessee a construction progress schedule showing the time
required for each trade with the starting date and completion date for each
trade. It is expressly understood that the Lessor shall be completely finished
with all his interior work at time of substantial completion before fixture
installation begins so that his men will not interfere with Lessee's workmen
assembling fixtures.
1.7.2 Lessor shall notify Lessee in writing of changes in the
construction progress schedule.
1.8 AVAILABILITY OF UTILITIES
1.8.1 Lessor shall provide adequate utility services, including gas,
electric power, water service, sanitary sewer, storm water drainage and
telephone service, to satisfy the needs of Lessee and Lessee's insurance
carrier.
1.8.2 Utility meter billing changeover from the Lessor to the Lessee
(gas and/or electric) to occur when refrigeration display units are started up
if the building is substantially complete and secure with all mechanical,
electrical and HVAC work done. If the building is not substantially complete,
the meter billing changeover will occur at the time of building completion.
1.9 SOIL CONDITIONS
1.9.1 Lessor shall include the cost of, and be responsible for,
certifications of sub soil conditions under footings, floors, paving, etc.
1.10 DOCUMENTS
1.10.1 Lessor shall furnish as his proposal to Lessee the following
drawings prepared by a licensed architect and related engineers, duly licensed
by the State in which the building will be constructed:
1. Site and parking lot plan
2. Structural drawings showing --
(a) Concrete footings and foundations
(b) Roof framing
(c) Front elevation
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3. Site drawings showing --
(a) Utilities
(b) Storm drainage
(c) Location of building
(d) Parking lot lighting, including external building lighting.
4. Mechanical and electrical drawings
5. Special architectural details or any other drawings, details or
specifications outlining an alternate method of construction.
6. Shopping center pylon sign drawing (if sign is required by
lease).
1.10.2 The following documents shall be furnished to the Lessor by
Lessee:
1. Store criteria or location drawings, including:
(a) Fixture layout
(b) Reflected ceiling layout
(c) Electrical layout
(d) Plumbing layout
(e) Underfloor trench and pit layout
1.10.3 Lessor shall provide an allowance of $10,000 and shall
reimburse Lessee for criteria plans provided. Payment to Lessee is to be made
upon completion of poured concrete floor.
2. SITE WORK
2.1 GENERAL INSTRUCTIONS
2.1.1 The term "Site," as used in these specifications, shall mean
area within property lines shown on drawings. Include curb and gutter where
such is to be relative to the building.
2.1.2 Furnish the Lessee a copy of the proposed site, grade, storm
water drainage and paving plan for their review before starting work. Water
retention areas (if required) must be shown on this plan.
2.1.3 Special drives shall be provided to be used during building
construction stage for heavy equipment to get to and from location. This will
eliminate any possible damage to permanent parking lot.
2.1.4 Lessor shall furnish and install lighting equipment and
fixtures for the parking lot that will maintain a one and one-half (1 1/2) foot
candle lighting level at the surface or meet Title 24 requirements, whichever is
greater.
2.1.5 Lessor, shall provide electrical provisions for pylon sign in
the parking lot.
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2.1.6 Lessor shall provide (lighted) "In" and "Out' signs for
customer ingress and egress.
2.1.7 Parking lot to be striped with two (2) coats traffic yellow
paint, single 4" wide lines. See typical striping layout (SHEET A).
2.1.8 Lessor shall install a 10'W x 40'L x 6"D concrete slab,
adjacent to grocery receiving doors, as indicated on plan.
2.1.9 Parking lot design shall be such that clogging of catch basins
will not result in flooding of store.
2.1.10 Lessor shall install two (2) truck-height concrete loading
dock(s). Elevation of dock shall be the same as floor elevation inside the
store. Lessor shall furnish two (2) dock levelers, Blue Giant #A646M or
approved equal with two (2) #DB13 bumpers per leveler. See typical details for
dock (SHEET B). See typical detail for sump pumps, if required (SHEET C).
2.1.11 Lessor shall provide all required trenches for refrigeration
lines, HVAC, duct(s), electrical and plumbing. Trenches shall be backfilled
with sand.
2.2 WALKS, DRIVES AND PAVING
2.2.1 Concrete paving shall comply with applicable "Standard
Specifications for Highway Construction." Provide expansion joints at 20'-O"
o.c. intervals each way. Provide rolled compacted earth sub-base, depending
on soil base geological analysis, by the testing engineer.
2.2.2 Unless shown otherwise, concrete walks shall be 4" thick with
6x6-10/10 mesh reinforcing; concrete paving shall be 6" thick with 6x6-6/6 mesh
reinforcing.
2.2.3 Provide all asphalt paving shown on drawings meeting the
applicable "Standard Specifications for Construction of Highways." Provide
minimum of 2" hot asphalt paving over 6" of rolled, compacted crushed rock base
depending on geological soil base analysis. All deleterious material shall be
removed from paved areas. All driveways and thoroughfares used for delivery
trucks must have a minimum of 3" asphalt over minimum of 8" base.
2.2.4 Lessor shall warrant paving against disintegration of
surfacing and forming of sink holes for a period of two (2) years after final
acceptance. Any repairs required during warranty period shall be the
responsibility of the Lessor.
2.2.5 Driveway and parking areas shall be graded to drain adequately
away from the building so that there will be no water standing in these areas at
any time. Maximum grade for 200
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feet in front of door shall be 2%. Minimum, grade throughout Lessee parking
area shall be 1%.
2.2.6 See typical details for ramping (SHEET D).
2.2.7 Lessor shall provide Lessee with a copy of the landscaping
layout prior to submitting it to the City.
2.3 SITE UTILITIES
2.3.1 Sanitary system for entire shopping center shall provide for
unusual conditions caused by chemical detergents, grease etc.
2.3.2 Storm drain system shall be designed for a minimum rainfall
concentration of 4" per hour.
3. FOUNDATIONS
3.1 The footings and foundations shall be of sufficient depth, height,
width and construction to structurally support walls as required following all
applicable structural codes.
3.2 Unless otherwise required, all foundations, walls and footings shall
be poured reinforced concrete with concrete meeting 3000 psi test in 28 days.
4. WALL CONSTRUCTION
4.1 EXTERIOR WALLS
4.1.1 Walls shall be of an approved structural design meeting all
code requirements and an approved height to thickness ratio.
4.1.2 Control joints shall be spaced at critical points so as not to
impede structural building movement. See detail (SHEET E).
4.1.3 Common walls adjacent to building with subsequent openings and
parapets shall be constructed following applicable fire code requirements.
4.1.4 Where pilasters are used, they shall protrude on the exterior
and not on the interior.
4.1.5 Glazing and corresponding supports shall be sized following
applicable safety and wind load requirements.
4.1.6 The method of insulating the exterior walls must meet Title 24
requirements.
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4.2 ENTRANCE CANOPY
4.2.1 A canopy, properly anchored to the building, shall be
constructed and located across the front and that portion of the entrance side
wall of the building as shown on the drawings and reviewed by Lessee. The
canopy will be lighted to the sidewalk to a minimum of 60 foot candle at eye
level. See detail (SHEET G).
4.2.2 The structure of the canopy will provide for the attachment of
an illuminated sign. Sign to be provided by Lessee shall conform to Fleming's
standard illuminated "Entrance" and "Exit" sign mounted perpendicular to front
doors, supplied and Installed by Lessee.
4.3 INTERIOR PARTITIONS
4.3.1 Interior partitions shall be as indicated on the plans, but
primarily shall be metal and/or wood studs with gypsum board wall covering.
Minimum construction shall be 2" x 4" or 2" x 6" blocking on 16" centers. Wood
studs used in non-sprinklered areas (above finished ceiling) are not permissible
unless concealed area is sprinklered.
4.3.3 All restrooms and employees' lounges are to be constructed
using concrete block or a hard surfaced material from floor to ceiling. All
restrooms are to meet city and county codes. Provide toilet partitions and
urinal screens in the dimension and arrangements shown on drawings. Lessor to
furnish and install equipment and fixtures in restrooms, per plans. See detail
(SHEET H).
4.3.5 Install metal edges, tape and sand all gypsum board joints,
following manufacturer's recommendations.
4.3.6 Return air duct in grocery storage area to be protected with
suitable framing and 1/2" plywood around all exposed ductwork from floor to a
height of 8'-0". Provide access doors.
4.3.7 The produce prep area walls are to receive glasbord or
Health Department-approved finish, from floor to a height of 8'-0" as indicated
on Lessee's plans.
S. FLOOR CONSTRUCTION
5.1 DESIGN
5.1.1 The main and basement floors shall be 3000 pound poured
concrete, at least four inches (4") thick, and adequately reinforced with 6x6-
10/10 reinforcing mesh or approved equal. All floor surfaces shall properly
align with no variation in height unless approved. Concrete shall contain a
hydrocide waterproofing additive as a vapor barrier.
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5.1.2 Floor for walk-in frozen food and ice cream freezer(s) should
be insulated with curbs and poured as required. See detail (SHEETS I and J)
5.1.3 See (SHEETS K, L, L-1 AND M) for typical underfloor work.
5.1.4 Lessor shall provide 6" x 8" concrete curbs at all
refrigerated walk-in box locations per plans supplied by Lessee. See (SHEET I
AND J).
5.1.5 See SHEET N for floor finish.
5.2 MATERIALS
5.2.1 The P.O.S. room, employee lounge and all offices as indicated
on the floor plan drawings shall be covered with 1/8" vinyl composition tile or
an approved equal, in a pattern and colors to be selected by Lessee.
5.2.2 Meat preparation room and bakery preparation room as indicated
on the floor plan shall be covered with nonskid epoxy floor, manufactured by
Deco-Rez, #115, 1/4" thick, unsealed, installed by Terra-Nova, in a color to be
selected by Lessee.
5.2.3 Toilet rooms shall be finished concrete. See 5.2.4.
5.2.4 Other floors not covered in paragraphs above shall be
concrete, smooth troweled, vacuumed, and seal-coated with two coats of 21-22%
methyl acrylate sealer called "Clear Crete," applied with a low pressure (40-60
lbs.) airless spray apparatus. "Clear Crete" is manufactured by AMREP. The
first coats of "Clear Crete" will be applied the day after the concrete is
poured. The second coat will be applied the following day. NO traffic of any
kind should be allowed on the sealed surface for four hours after the second
coat has been applied. Mopping or troweling is not acceptable for "Clear Crete"
application.
5.2.5 It is the responsibility of the Lessor to deliver a concrete
floor in the sales area that is free of stains, spills, tire tracks and
other marks caused by construction. THE CONCRETE FLOOR IS THE FINISHED FLOOR.
6. CEILING CONSTRUCTION
6.1 INTERIOR CEILINGS
6.1.1 The bakery prep, deli prep, restrooms, lounge, P.O.S. room and
office(s) finished interior ceilings shall be 2' x 4' lay-in panels, supported
with galvanized wire ties to the structure above. Panels shall have washable
factory-white face, along with factory-white T-bars.
6.1.2 The distance between the finished floor and the finished
ceilings in these areas shall be as indicated on the Lessee's criteria drawings
and room finish schedule. See (SHEET O).
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7. ROOF CONSTRUCTION
7.1 DESIGN
7.1.1 Roof shall be sloped in some manner to provide positive
drainage. DEAD LEVEL roofs ARE NOT acceptable. Roof slope shall be a minimum
of 1/10 inch per foot or as approved.
7.1.2 Use only manufacturer's roofing and flashing materials.
7.1.3 Roof drains or gutters and downspouts shall be as required.
Perform roofing and insulation work compatible with roof drain and gutter
installation. Downspouts are not to terminate in truckwells, receiving areas,
customer ingress or egress, or other sensitive areas.
7.1.4 Completed roof shall be left free of low spots that will
accumulate water.
7.1.5 Any openings larger than 8" x 8" shall have security bars at
6" on center both ways.
7.1.6 Roof design and installation should have a U.L. flame spread
of 25 or less. Roof should have a U.L. Class "A" roof covering. Roof design
and installation should meet a U.L. Class "90" for wind uplift.
7.1.7 The underside of the roof structure shall be exposed or open.
All steel and bar joists should be ordered in a light gray or white shop grade
primer. Any exposed insulation will be white or light gray in color. Exposed
roof deck should also be light gray.
7.2 MATERIALS
7.2.1 Roofing Subcontractor shall install equivalent 20 year
bondable roof and be responsible for proper attachment of specified work to any
roofing metal, or related work that is embedded in or in contact with, and
becomes an integral part of, specified roofing or flashing system, even when
such roofing metal or related work is provided under other sections of
specifications.
7.2.2 Lessor and Roofing Subcontractor shall jointly agree to
maintain built-up roofing system and related roof metal work in a weathertight
and watertight condition for a period of two (2) years starting from date of
Lessee's acceptance, damage caused by hail, lightning, hurricane or abuse
excepted.
7.2.3 Insulation over metal deck shall have "R" factor of 19 or meet
Title 24 criteria, whichever is greater.
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8. DOORS, WINDOWS AND HARDWARE
8.1 CUSTOMER DOORS
8.1.1 Automatic entrance and exit doors shall be of the size and
type as shown on the Lessee's fixture layout and door schedules. Specifications
for automatic doors and operators are to be approved by the Lessee prior to the
beginning of construction (SHEET P).
8.1.2 Service doors are to be steel doors and jambs with burglar-
proof lock bars, equipped with Russell Irwin, Yale, Schlage or equal heavy-duty
beveled dead locks. All openings shall be properly caulked and weatherstripped.
No handles locks or keyways to outside will be permitted for service doors.
8.1.3 Install all glass with butyl or neoprene glazing material.
8.1.4 All door jambs (interior building) to be metal-encased with
exception of restrooms and office.
8.1.5 See door schedule (SHEET P).
8.2 WINDOWS
8.2.1 Windows shall be standard 1 3/4" x 4" aluminum tube store
front material or as approved.
8.3 HARDWARE
8.3.1 Emergency exit doors shall be installed, complete with
hardware and alarms to comply with local codes.
8.3.2 Cylinder locks shall be changed and keys furnished just prior
to the time of building acceptance.
9. INTERIOR AND EXTERIOR FINISHES (SEE ROOM FINISH SCHEDULE SHEET 0)
9.1 PAINT - INTERIOR
9.1.1 All wall surfaces requiring paint shall be primed one (1) coat
and painted two (2) coats of Latex flat-finish paint applied in accordance with
the manufacturer's specifications.
9.1.2 In the sales area, the walls are to be finished down to a
minimum of three (3) inches below the top of Lessee's refrigerated cases at the
wall immediately behind that equipment. Color for sales area walls will be
Pantone 109C Yellow.
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9.1.3 All metal or wood surfaces to be painted shall be properly
prepared, primed and finished with two (2) coats of enamel or acrylic paint in a
satin to semi-gloss finish. The paint shall be applied in accordance with the
manufacturer's specifications and in the colors selected by the Lessee.
9.1.4 The backroom storage and produce preparation area walls are to
receive one (1) coat of white paint, compatible with the surface to which it is
being applied. Spray-painting is permissible, at the contractor's option.
9.2 PAINT - EXTERIOR
9.2.1 Same as in 9.1.1, except that the paint materials used shall
be specifically for exterior applications.
9.2.2 All exposed concrete block surfaces shall receive a minimum of
one (1) coat of block filler and two (2) finish coats of masonry paint applied
in accordance with manufacturer's specifications. Colors to be approved by
Lessee.
10. EQUIPMENT
10.1 Baler and/or Compactor(s) will be provided by Lessee.
10.1.1 Lessor shall furnish electrical disconnect switches and final
hookup for the baler and trash compactor(s).
10.1.2 Lessor shall provide all necessary curbing around compactors
as required by the Health Department to satisfy wash-down area.
10.1.3 Lessor shall provide hot and cold water and adequate drain at
compactor(s) site as required by code.
10.1.4 Compactor(s) opening to be furnished by Lessor and fitted with
lockable bottom hinge, metal door per plans. (Lessee will furnish and install
the door(s).)
10.1.5 Natural gas emergency generator will be provided by Lessee.
Lessor shall furnish gas and electrical hookup and ventilation for generator.
11 AUTOMATIC SPRINKLER SYSTEM
11.1 DESCRIPTION OF WORK
11.1.1 The entire building, including all exterior canopies,
mezzanines, basements, corridors, storage areas, inside or outside refrigerated
coolers and freezers are to be fully sprinklered with a wet-type system
concealed above the ceiling in all finished areas.
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11.2 DESIGN CRITERIA
11.2.1 The sprinkler contractor shall conform to the National Fire
Protection Association's Fire Code #13, latest edition. Special attention
shall be given to Article 1-9, "Working Plans." It shall be the sprinkler
company's responsibility to determine if any deficiency or deviations, such
as inadequate water supply, area to be sprinklered considered other than a
fire division, or any other item which would materially affect the
acceptability of the system does exist. It shall be his responsibility to
coordinate the sprinkler system with other mechanical work.
11.2.2 The sprinkler system shall be an independent system. All
piping, valves, etc. for the Lessee's systems shall be located in the
Lessee's premises.
11.2.3 It is to be noted that the working plans shall be submitted
for approval to the authority having jurisdiction; this authority shall
include the Fire Insurance Rating Organization (Insurance Services
Organization in all states except Texas; in Texas, use the State Board of
Insurance). Any recommendations made by this Organization will be forwarded
to the Lessee, prior to acceptance.
11.2.4 Final acceptance will be determined not only as outlined in
Article 1-10 of NFPA #13, but also shall require the sprinkler contractor to
forward a copy of recommendations made by this authority (and the Fire
Insurance Rating Bureau) to the Lessee.
11.2.5 All deficiencies shall be the responsibility of the
sprinkler contractor and Lessor, and any deviations from the requirements in
NFPA #13 and/or the approved plans shall require special permission from the
Lessee.
11.3 SPRINKLER HEADS
11.3.1 All sprinkler heads shall be standard approved type.
11.3.2 Ordinary rated heads shall be 135-170 degrees F.
11.3.3 Sprinkler heads in finished ceilings shall be chromium
pendant type with chromium escutscheon plates; other areas, including the
open ceiling in the sales area may be bronze. The sprinkler piping will not
be painted.
11.3.4 Maximum coverage for each sprinkler head shall not exceed
120 feet except in corridors and storage area where sprinkler head coverage
shall not exceed 100 feet.
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11.3.5 A uniform rectangular pattern of sprinkler heads shall be
maintained in the sales area and shall be coordinated with the light fixtures
so that the requirements of NFPA #13 will be met.
11.3.6 Install a sprinkler alarm system if required by code.
12. PLUMBING
12.1 CODES
12.1.1 All plumbing work shall be in compliance with state and local
plumbing codes.
12.1.2 Lessor to furnish and install a complete plumbing and draining
system as specified by the Lessee criteria layout, the outline specifications
and good engineering practices.
12.1.3 All plumbing plans shall be submitted to Health Department or
with regulating authority with proper jurisdiction prior to construction for
approval of hand sinks, grease trap locations, drain locations, clean-outs and
hot water locations for cleaning purposes.
12.2 PIPE MATERIAL
12.2.1 Hot and cold water pipe shall be copper tube with no soldered
joints under slab. No pipe shall trap water which cannot be drained. Tubing
above grade shall be type L and below grade type K.
12.2.2 Soil and waste pipe above grade shall be cast iron soil pipe,
galvanized steel pipe with drainage type fittings or plastic pipe approved for
the service by the applicable codes.
12.2.3 Soil and waste pipe below grade shall be cast iron soil pipe.
Schedule 40 PVC may be used if codes permit.
12.3 CLEANOUTS
12.3.1 Cleanouts shall be located as required by applicable codes.
Each cleanout shall be readily accessible and shall be installed with
adequate clearance for effective use, and will not be placed in high-traffic
or work station areas.
12.3.2 Lessor to provide grease trap(s) as required by code. Traps
must be installed below floor and the locations are to be approved by Lessee.
12.4 PLUMBING FIXTURES
12.4.1 Fixtures shall be provided as shown on plans. Fixtures
shall be American-Standard as listed or equivalent fixtures by Eljer, Kohler
or Crane.
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12.4.1.1 Flush valve toilets: American Standard 2221.018
vitreous china, siphon jet, floor mounted. Church 5334.056 solid plastic
seat, open front with cover, white.
12.4.1.2 Urinal: "Allbrook" 6540.017 vitreous china,
siphon jet, 1-1/4" top spud, Sloan Royal 180 FYV flush valve with vacuum
breaker, Wade chair carrier.
12.4.1.3 Wall Hung Lavatory: "Lucerne" 0351.023 vitreous
china, integral backsplash, 2121.267 4" centerset with pop-up drain.
12.4.1.4 Counter Top Lavatory: "Aqualyn" 0476.028 vitreous
china, self-rimming, 2121.267 4" centerset with pop-up drain.
12.4.1.5 Janitor Sink: "Lakewell" 7692.031 acid resisting
cast iron, 22" x 18", 3" trap standard, 8340.242 rough chrome plated mixing
faucet with hose end spout and vacuum breaker.
12.4.1.6 Water Fountain: Wall mount -- electrically
operated.
12.5 STAINLESS STEEL SINKS (See Floor Plan)
12.5.1 Lessee to furnish all stainless steel sinks (meat, produce,
and bakery), and Lessor to make final hookup.
12.5.2 Lessee to furnish all stainless steel hand sinks, as
required by code. Lessor to advise Lessee of code requirements. Lessor to
make final hookup of hand sinks.
12.6 HOT WATER HEATER
12.6.1 Lessee to furnish heat reclaim water heater. Lessor to
furnish piping from reclaim heater to 12..6.2 auxiliary heater.
12.6.2 Provide additional hot water heater for meat and bakery
departments using Rudd GL-76-75 with glass-lined tank, magnesium anode,
fiberglass insulation, steel jacket, thermostat, high-limit gas shut-off,
temperature and pressure relief valve, AGA certified. Provide type B gas
vent through roof with vent cap and with flashing and counter-flashing at
roof. NSF seal of approval.
12.6.3 Provide hot and cold water connection at water heaters for
heat exchange unit. Lessee to provide and install heat exchanger.
14
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12.7 DRAINAGE AND VENT PIPING
12.7.1 Provide building sewer connected to public sewer, building
drain, waste and vent piping connected to all fixtures and drains, vent pipes
through roof and cleanouts. If no public sewer is available, drainage plan
shall be approved by Lessee.
12.7.2 The Lessor shall furnish and install floor sinks, floor
drains and trench drains as indicated on plans.
12.8 LESSEE EQUIPMENT
12.8.1 All plumbing, drains and connection stubs for Lessee's
fixtures shall be located, installed and made as indicated on the Lessee's
criteria drawing. Trenches, pits and conduits shall be of size and material
indicated and located as required by plan.
12.9 HOSE BIBBS
12.9.1 Install two (2) hose bibbs on the front exterior walls where
indicated on the drawings. Install one (1) hose bibb in rear of store for
compactor washdown. Hose bibbs shall be Woodford Mfg. Co. Model 14 series,
or equal, frost-proof, stainless steel seat, 3/4" hose thread, loose key
handle.
12.9.2 Lessor to provide hose bibbs at all multi-tub sinks.
Additional bibbs to be located under sinks.
12.10 DISPOSAL UNIT
12.10.1 None required.
12.11 GAS SERVICE
12.11.1 Furnish and install gas service, including metering and
piping, to all gas appliances, including unit heaters, gas burners, hot water
heaters, emergency generator, and deli cooking equipment, bakery ranges,
ovens and equipment as required to insure complete installation.
12.12 PITS AND TRENCHES
12.12.1 See details of pits, trenches and floor drains on SHEETS S
and S-1.
13. HEATING AND AIR CONDITIONING
13.1 GENERAL
13.1.1 Lessor, shall furnish and install a complete summer and
winter air conditioning system for the entire building. The system is to be
designed for both heating and cooling from the same duct system, using a
central system. All equipment is to be supported from the roof structure in
locations approved by Lessee.
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System shall provide for reclaim of heat rejected by refrigeration
compressors and for recovery of cold air from open display cases. Minimum
clearance from floor to bottom of lowest duct in sales area will be 15'-0".
Allow a minimum of 3'-0" for duct work.
13.2 DESIGN REQUIREMENTS
13.2.1 System capacity shall be adequate to maintain design
conditions when outdoor conditions are as listed in Chapter 33, Table 1 of
the ASHRAE Handbook of Fundamentals, 1972 edition. Winter design shall be
for median of annual extremes and summer design shall be for 2 1/2% design
dry bulb and wet bulb. If store is not in a location listed in the above
table, use nearest listed location or locations to determine design values.
System shall maintain seventy-five (75) degrees F. and 50% or lower relative
humidity for cooling and seventy (70) degrees F. for heating. Indoor
temperature shall have a tolerance of plus or minus two (2) degrees F.
throughout the building at 42" above floor. Cooling load shall be adjusted
to allow for open refrigerated display cases. Provide for one person for
each 100 sq. ft. of sales area.
13.3 PLAN APPROVAL
13.3.1 Plans and specifications for the air conditioning system
must be submitted to the Lessee for review before installation.
13.4 AIR HANDLING UNIT
13.4.1 Air handling unit shall be a central drawthrough unit with
direct expansion cooling coil, outside air return air mixing damper,
throwaway filters and belt-driven centrifugal fans with adjustable fan speed.
Unit shall be suspended from structure with vibration isolators in supports.
Unit shall include space for a heat reclaim coil which will be provided
under refrigeration equipment contract. See detail (SHEET U).
13.5 CONDENSING UNIT
13.5.1 Condensing units shall be suitably designed for roof
mounting, vertical air discharge, copper condensing coils with aluminum fans
for operation down to 35 degrees F. ambient. Units with 10-ton or greater
capacity shall have multiple compressors with independent circuits.
13.5.2 No cooling towers or evaporative condensers will be accepted.
13.6 DUCT FURNACE
13.6.1 Duct furnace shall be Reznor Series X with AGA approval for
installation downstream from cooling coils. Unit shall include pressure
regulator, automatic electric gas valve, limit control, control transformer,
100% shut-off and manual main and pilot gas valves, stainless steel heat
exchangers.
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13.7 UNIT HEATER
13.7.1 Unit heaters shall be Reznor Series XA propeller type with
automatic electric gas valve, fan control, limit control, safety pilot, gas
pressure regulator, control transformer, 100% shut-off, and manual main and
pilot gas valves, stainless steel heat exchanger.
13.7.2 At Lessee's option, provide space heaters using heat
rejected from refrigeration compressors. Lessor to provide, hang, and wire
space heater; Lessee to install hot discharge gas lines.
13.8 FUEL
13.8.1 System shall be designed for natural gas when available.
13.8.2 If natural gas is not available, an economic analysis shall
be made too determine fuel to be used. Fuel selection must be submitted to
Lessee for approval before system design.
13.9 EXHAUST
13.9.1 Lessor shall provide an exhaust fan in each toilet room to
meet local codes and/or provide one (1) complete air change every 15 minutes.
Wire fan to light switch.
13.10 DUCT SYSTEM
13.10.1 Duct system shall be designed in compliance with "Duct
Manual and Sheet Metal Construction for Ventilating and Air Conditioning
Systems - Low Velocity Systems" of the Sheet Metal and Air Conditioning
Contractors National Association, Inc.
13.10.2 Insulation shall not be less than 1" thick glass fiber with
factory-applied vapor barrier jacket. Duct lining may be used with duct size
adjusted.
13.10.3 Room air distribution shall be designed to avoid disturbing
air in open refrigerated display cases.
13.10.4 Return air ducts must be provided in the sales area with
ducts to the air handling unit. See detail (SHEET V).
13.10.5 Overhead supply duct will not be painted.
13.11 CONTROL - THERMOSTAT WIRING
13.11.1 All low-voltage thermostat and control wiring to be
furnished and installed by Lessor.
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13.12 GUARANTEE
13.12.1 All air conditioning equipment is to be
guaranteed for a period of one (1) year by the installing
contractor. Compressor section of the air conditioning equipment
is to be guaranteed by factory for an additional four (4) years.
13.12.2 Warranty certificates are to be furnished to
Lessee when job is completed and before acceptance by Lessee.
13.12.3 Upon completion of installation, mechanical
contractor and manufacturer's district engineer will complete a
thorough test procedure of equipment and certify that these tests
are correct and that system is capable of performance specified.
13.13 EQUIPMENT ROOM
13.13.1 See typical equipment room layout (SHEET U).
13.13.2 Lessor shall provide exhaust fans and air intake
louvers for equipment room as noted on plans. See (SHEET U).
14. ELECTRICAL AND LIGHTING
14.1 SERVICE
14.1.1 Lessor shall provide electric service of
adequate capacity to service. building with all electric loads
furnished by Lessee as indicated on Lessee's floor plan. Service
shall provide 277 volt, 3-phase for lighting and 480 volt, 3-phase
for power. PROVIDE 25% EXTRA CAPACITY FOR FUTURE EXPANSION.
14.2 CODE
14.2.1 All work shall be in compliance with local,
state and NFPA #70, National Electrical Code.
14.2.2 All fixtures and devices shall bear the
Underwriter's Label.
14.2.3 An emergency generator is to be supplied by
Lessee. Lessor to install and connect emergency panel which will
supply electric cash registers, processor(s) and minimum of thirty
(30) fixtures to be wired directly to emergency panel. Locations
to be provided by Lessee. Battery pack emergency lighting to be
used in addition to the 30 fixtures if required by code.
14.3 PANELS AND SWITCHES
14.3.1 Main distribution panel shall be of the breaker
type, General Electric Type CCB, Square D Type 1 Line, or equal.
Bus structure shall accommodate bolted branch switches, and short
circuit bracing shall be 50,000 amps RMS symmetrical. Provide
circuits for all connected loads plus a minimum of 20% spare
circuits for future loads.
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14.3.2 Other power panels and lighting panels shall be
circuit breaker-type, General Electric Type NLTZ, Square D Type
NQO, or equal. Load center-type panels will not be accepted.
Provide branch circuit breakers for all connected loads, plus a
minimum of 30% spare for future loads. A clean power panel will
be provided for front end computer operation as shown on plans.
14.3.3 Safety switches shall be heavy-duty and the same
brand as that of the electrical panels. General-duty disconnect
switches will not be accepted.
14.3.4 Fuse breaker for main service shall be High
Peak-type as manufactured by Bussman, or equal, with interruption
capacity of 200,000 amperes RMS asymmetrical. Fuses for motor
loads shall be dual-element type.
14.3.5 Provide curb or steel poles for protection of
electrical panels.
14.3.6 Electrical panels should be located on outside
walls where possible.
14.3.7 Lighting switches and receptacles shall be
specification grade.
14.3.8 Dedicated circuit to be provided to emergency
panel, in P.O.S. office, all upstairs offices, all checkstand
locations, by grocery receiving door, and in meat department as
located on plans.
14.4 LIGHTING FIXTURES
14.4.1 Lessor shall furnish and install complete
lighting system, including fixtures, lamps and all required wiring
and switches. Fixtures shall be of the type indicated on drawing
furnished by Lessee. Lighting fixture installation shall be
coordinated with sprinkler system to permit sprinkler system to be
installed in compliance with NFPA #13. Provide tube guards as
required by Health Department.
14.4.2 Fluorescent fixture ballasts shall be CBM
certified, ETL rated, Class P, high power factor. Sound level
shall be not greater than General Electric sound rating "A".
14.4.3 The fluorescent fixtures in the general sales
area shall be 2-tube 96" long on 8'-0" centers as noted on plans.
Fixtures will be mounted 15'-0" A.F.F. Use Metalux SS 296, or
equal, with F96Tl2/SP35/WM lamps.
14.4.4 All fixtures' lenses shall be glass or acrylic.
14.5 TELEPHONE
14.5.1 Provide telephone outlets where indicated on
Lessee's drawings. Wall telephone outlet shall be standard switch
box with one-hole bushed plate, with conduit and pull wire to
ceiling.
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14.6 INSTALLATION
14.6.1 All equipment shall be so installed as to
provide proper clearance for service or removal of parts. Panels,
disconnect switches, starters, push-button stations and control
devices shall be accessible for operation, adjustment or repair.
14.6.2 Each panel shall have a circuit direction with
typewritten identification of loads on each circuit.
14.7 LESSEE EQUIPMENT
14.7.1 Lessor shall provide circuits and final
connections for all trade fixtures, equipment and motors to be
furnished by Lessee as shown on floor plan. Connections to
equipment in meat preparation area and produce preparation area
must be watertight.
14.8 DUCT AND CONDUIT LAYOUT
14.8.1 See details of ducts and conduits for front end
scanning (SHEET K).
14.8.2 All wire will be copper.
14.9 EMERGENCY LIGHTING
Provide emergency lighting to meet all applicable codes.
15. LESSOR WORK TO LESSEE EQUIPMENT
15.1 Lessor to make all final hookups (gas/electric) on
emergency generator, oven and proofer as required.
15.2 Lessor to furnish and install flashing around all walk-
in boxes and their surfaces which are adjacent to the main
building.
15.3 Lessor to make all final electrical hook-ups to
refrigeration/HVAC equipment per plans supplied by Lessee's
refrigeration and HVAC contractors.
20
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[GRAPHIC]
<PAGE>
37. CAPTIONS . . . . . . . . . . . . . . . . . . . . 70
38. ADVANCE POSSESSION FOR FIXTURE INSTALLATION 7O
39. SUBORDINATION. . . . . . . . . . . . . . . . . . 71
40. BINDING EFFECT . . . . . . . . . . . . . . . . . 72
41. MERGER . . . . . . . . . . . . . . . . . . . . . 72
42. TIME . . . . . . . . . . . . . . . . . . . . . . 72
43. CHOICE OF LAWS . . . . . . . . . . . . . . . . . 72
44. EXCLUSION FROM GROSS SALES . . . . . . . . . . . 73
45. SUBDIVISION OF SHOPPING CENTER . . . . . . . . . 73
46. RECIPROCAL EASEMENT AGREEMENT. . . . . . . . . . 74
47. SALE OF PREMISES BY LESSOR . . . . . . . . . . . 75
SIGNATURE PAGE . . . . . . . . . . . . . . . . . 75
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<PAGE>
MNMCI
BUILD AND LEASE AGREEMENT
LESSOR
DOUGLAS W. BRADFORD
LESSEE
NETCO FOODS, INC.
A California Corporation
20th Street & Whitman Avenue
Chico, California
<PAGE>
INDEX
Page
----
1. OWNERSHIP . . . . . . . . . . . . . . . . . . . . 1
IMPINGEMENT . . . . . . . . . . . . . . . . . . . 3
2. COMMON AREAS. . . . . . . . . . . . . . . . . . . 4
COMMON AREA MAINTENANCE
REIMBURSEMENT. . . . . . . . . . . . . . . . . . 5
EXTENDED HOUR LIGHTING. . . . . . . . . . . . . . 8
3. CONSTRUCTION. . . . . . . . . . . . . . . . . . . 10
4. TERM. . . . . . . . . . . . . . . . . . . . . . . 15
5. OPTION. . . . . . . . . . . . . . . . . . . . . . 16
6. RENT. . . . . . . . . . . . . . . . . . . . . . . 17
LEASE YEAR DEFINED. . . . . . . . . . . . . . . . 24
PERCENTAGE RENT TIME OF PAYMENT . . . . . . . . . 24
7. MORTGAGES . . . . . . . . . . . . . . . . . . . . 24
8. TAXES AND ASSESSMENTS . . . . . . . . . . . . . . 25
ASSESSMENTS MADE DURING LEASE TERM. . . . . . . . 27
9. LESSEE HOLD HARMLESS. . . . . . . . . . . . . . . 30
PUBLIC LIABILITY INSURANCE
OF PREMISES. . . . . . . . . . . . . . . . . . . 30
PUBLIC LIABILITY INSURANCE
OF COMMON AREA . . . . . . . . . . . . . . . . . 31
REIMBURSEMENT FOR PUBLIC LIABILITY
INSURANCE OF COMMON AREA . . . . . . . . . . . . 31
LESSOR HOLD HARMLESS. . . . . . . . . . . . . . . 33
10. WAIVER OF LIABILITY . . . . . . . . . . . . . . . 33
11. REMOVAL . . . . . . . . . . . . . . . . . . . . . 35
12. LESSOR ENTRY. . . . . . . . . . . . . . . . . . . 35
13. MAINTENANCE AND REPAIR. . . . . . . . . . . . . . 35
14. WASTE . . . . . . . . . . . . . . . . . . . . . . 37
15. SIGNS . . . . . . . . . . . . . . . . . . . . . . 38
16. FIRE AND EXTENDED COVERAGE INSURANCE. . . . . . . 39
BLANKET INSURANCE . . . . . . . . . . . . . . . . 39
REIMBURSEMENT OF PREMIUMS . . . . . . . . . . . . 39
SUBSEQUENT CHANGE OF STANDARDS. . . . . . . . . . 41
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17. DAMAGE AND DESTRUCTION (INSURED RISK) . . . . . . 42
DAMAGE AND DESTRUCTION (UNINSURED RISK) . . . . . 43
EXTENT OF LESSOR'S OBLIGATION TO RESTORE. . . . . 44
ABATEMENT OF RENT . . . . . . . . . . . . . . . . 45
DESTRUCTION DURING LAST PART OF TERM. . . . . . . 45
WAIVER OF CIVIL CODE SECTIONS . . . . . . . . . . 45
DAMAGE AND DESTRUCTION - OTHER BUILDINGS. . . . . 46
RESTORATION . . . . . . . . . . . . . . . . . . . 46
17.1 CONDEMNATION FOR REPAIRS. . . . . . . . . . . . . 47
18. CONDEMNATION. . . . . . . . . . . . . . . . . . . 48
19. HOLDING OVER. . . . . . . . . . . . . . . . . . . 51
20. SHOWING BY LESSOR . . . . . . . . . . . . . . . . 51
21. RELATIONSHIP. . . . . . . . . . . . . . . . . . . 52
22. PARKING AREA. . . . . . . . . . . . . . . . . . . 52
23. UTILITIES . . . . . . . . . . . . . . . . . . . . 52
24. LESSEE DEFAULT. . . . . . . . . . . . . . . . . . 53
25. LESSOR DEFAULT. . . . . . . . . . . . . . . . . . 57
26. LEASE APPLIES ONLY TO
BUSINESS ON PREMISES . . . . . . . . . . . . . . 60
27. INSURANCE MAY BE PROVIDED BY
SUBLESSEE OR ASSIGNEE. . . . . . . . . . . . . . 60
28. EXCLUSIVE . . . . . . . . . . . . . . . . . . . . 61
29. ALTERATIONS OR ADDITIONS. . . . . . . . . . . . . 61
30. THIS PARAGRAPH INTENTIONALLY DELETED. . . . . . . 62
31. THIS PARAGRAPH INTENTIONALLY DELETED. . . . . . . 62
32. RESTRICTIONS ON USE . . . . . . . . . . . . . . . 62
33. INITIAL USE AND RIGHT TO CLOSE STORE. . . . . . . 64
34. SUBLET OR ASSIGN. . . . . . . . . . . . . . . . . 67
35. LESSOR'S WAIVER . . . . . . . . . . . . . . . . . 69
36. NOTICES AND DELIVERY OF
ITEMS SENT BY MAIL . . . . . . . . . . . . . . . 70
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<PAGE>
BUILD AND LEASE AGREEMENT
This agreement is made and entered into this 25th day of May 1988, by
and between DOUGLAS W. BRADFORD, hereinafter called the "LESSOR", and NETCO
FOODS, INC., a California corporation, hereinafter called the "LESSEE".
WITNESSETH:
WHEREAS, the LESSOR desires to cause to be constructed a building
(hereinafter called "the premises", containing approximately 54,239 square
feet and constituting a part of the shopping center (hereinafter called the
"Shopping Center") which Shopping Center is, or will be, located upon the
real estate described on Exhibit "D", attached hereto and made a part hereof,
and the LESSEE desires to lease the premises upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the rents to be paid and the mutual
covenants to be performed, the parties hereto agree as follows:
1. OWNERSHIP. LESSOR, pursuant to contract with the fee owners of the
real property which will comprise the Shopping Center, has a contractual
right to acquire title thereto and it is the expectation of LESSOR, subject
to certain contingencies, that an assignee of LESSOR'S rights under this
Lease will purchase and acquire title to such real estate on or before 15
June 1988, which acquisition of title shall be a contingency to the
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<PAGE>
continuation of this Lease, as more particularly hereinafter set forth. If
this Lease is not terminated pursuant to such contingency, then on or prior
to the commencement of construction of the building which will comprise the
premises, the then lessor under this Lease shall have acquired such fee title
and assumed the obligations of LESSOR hereunder, and, by that act, shall be
deemed to have made the covenants attributed to LESSOR hereunder. LESSOR
covenants that LESSEE, upon paying the rentals herein reserved and observing,
performing and keeping all and singular the covenants and agreements herein
specified to be kept and performed by LESSEE, shall, and may lawfully,
peacefully, and quietly have, hold, use, occupy, possess and enjoy the
premises hereby leased for and during the term hereof, without any hindrance,
eviction, molestation, or interruption of or by the LESSOR, or any person or
persons claiming by or through LESSOR. LESSOR covenants that as of the date
of execution of this Lease, no zoning or other ordinance, law, regulation, or
restrictive covenants prevent use of the leased premises for the purpose of
operation of a supermarket.
It is a condition of this Lease that prior to 15 June 1988, LESSOR or an
assignee of LESSOR'S interest, as successor lessor under this Lease, shall
own the real estate described in Exhibit "D". If this condition is not
satisfied, then either LESSOR or LESSEE may elect to terminate this Lease
upon ten (10) days notice to the other; PROVIDED that if, within such ten
(10) day notice period, or prior to any notice being given by LESSOR to
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<PAGE>
LESSEE or by LESSEE to LESSOR of election to terminate, LESSOR or the
successor lessor so acquires such title, this condition shall be deemed
satisfied and of no further force or effect.
IMPINGEMENT. Except as herein provided for, LESSOR warrants and
guarantees that there are no prior documents of record, nor unrecorded
documents within the knowledge of LESSOR, which will permit third parties to
impinge upon the rights of LESSEE under this Lease by use or occupancy of
adjacent property, or of the premises, the parking area, or the other common
use areas as shown on the plot plan attached to and made a part of this
Lease, as Exhibit "A". LESSOR shall not make any deviations or variations in
the construction or use of the plotted area from that shown on said plot plan
without the prior written consent of LESSEE.
LESSEE acknowledges that it understands that LESSOR is making the
foregoing representation and warranties in reliance upon the title insurance
it will obtain at the time it purchases the Shopping Center.
LESSOR shall have furnished to LESSEE, prior to execution of this Lease,
at LESSOR'S expense, a preliminary title report which contains a statement as
to the exceptions to title affecting the real property of which the demised
premises is a part. LESSOR shall, at LESSOR'S expense, cause LESSEE to be
named as the insured under a policy of title insurance which shall be issued
to LESSEE, and shall be purchased by LESSOR in connection with LESSOR'S
acquisition of title to the Shopping Center. Such
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<PAGE>
policy of title insurance shall insure LESSEE with respect to LESSEE'S
leasehold interest hereunder, shall be in a liability amount of Two Million
Dollars ($2,000,000.00) and shall insure LESSEE'S leasehold interest as being
subject to no exceptions other than those reflected in the preliminary title
report hereinabove referred to, the deed of trust securing LESSOR'S purchase
money and/or construction financing, assessments or liens, if any, as
referenced within paragraph 8, and such use restrictions and cross-easements
as may be created either under a reciprocal easement agreement approved by
LESSEE or result from the provisions of a lease between LESSOR and another
tenant of the Shopping Center; provided, however, LESSOR warrants that any
such use restriction and/or cross-easement shall be consistent with the rights
of LESSEE as provided for within this Lease. LESSOR, at LESSOR'S expense,
shall furnish LESSEE, on or before the date of commencement of construction
of the Shopping Center with a copy of the survey of the Shopping Center which
LESSOR shall cause to be prepared.
2. COMMON AREAS. The premises are to be located as approved by the
parties as shown on the plot plan marked Exhibit "A", attached hereto and
incorporated herein. LESSOR agrees that the use and occupancy by the LESSEE
of the premises shall include the use, nonexclusive and in common with others
entitled thereto in said Shopping Center including its customers, suppliers,
visitors and invitees, of the common areas, employees' parking areas, service
roads, loading facilities, (except truck loading
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<PAGE>
and unloading areas which are for the exclusive use of the particular tenant
for which they are provided), sidewalks, and customers' parking areas, all as
shown on Exhibit "A", and all future facilities and common areas designed for
common use, all of such areas and facilities being hereinafter collectively
termed "common areas", subject, however, to the terms and conditions
hereinafter set forth. The LESSOR covenants and agrees that it shall
maintain the common areas of the Shopping Center in good operating condition
and repair (hereinafter called "common area maintenance"), adequately drained
and reasonably free from rubbish and debris, any grass mowed, properly
landscaped and the LESSOR shall promptly stockpile or remove all snow and ice
from the sidewalks, parking and driveway areas and cause all remaining
surface ice to be treated with sand, salt or similar abrasive. The LESSOR
shall resurface the sidewalk, parking and driveway areas when the same shall
be reasonably necessary together with the restriping of the parking areas.
The LESSOR shall keep the common areas of the Shopping Center well lighted
during such hours of darkness as LESSEE shall remain open for business and
for a period of one (1) hour thereafter.
COMMON AREA MAINTENANCE REIMBURSEMENT. LESSEE agrees to pay as additional
rent, pursuant to paragraph 6F hereof, Twenty-Four Thousand Dollars and No
Cents ($24,000.00) as LESSEE'S estimated annual pro rata share (determined by
the proportion which the number of square feet of floor space in the premises
bears to the number of square feet of floor space in all buildings in the
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<PAGE>
proposed Shopping Center as depicted on Exhibit "A" hereof; provided however,
that until such time as buildings are erected on the pads designated as Shop
A, Store F, Shop G, Pad 1, Pad 2, and Pad 4 on Exhibit "A" hereto
["EXCLUSION PADS"], LESSEE'S pro rata share shall be determined by excluding
from the "number of square feet of floor space in all buildings in the
proposed Shopping Center as depicted on Exhibit "A" hereof" the number of
square feet of floor space in the building area designated for such of the
EXCLUSION PADS as have not been subjected to construction of buildings;
PROVIDED, that any of the EXCLUSION PADS on which no construction of
buildings has commenced shall be graded and maintained in a neat, clean, and
orderly condition) of the expense of common area maintenance of the Shopping
Center shown on Exhibit "A" attached, including, within the meaning of the
phrase "expense of common area maintenance", costs of resurfacing, repainting
and restriping, cleaning, sweeping, and other janitorial services, policing,
planting and relandscaping, real property taxes and assessments levied and
assessed against the common areas (as provided in paragraph 8 hereof),
premiums on public liability and property damage insurance covering the
common areas (as provided in paragraph 9 hereof), the cost of maintaining and
operating the signs referred to in paragraph 3 hereof, and an administrative
fee which shall not exceed five percent (5%) of the annual common area
maintenance expense (exclusive of said administrative fee and exclusive of
real property taxes and insurance premiums pertaining to the common
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<PAGE>
area), for the first year of the lease term. LESSEE'S pro rata share shall
be payable monthly in the amount of Two Thousand and No/100 Dollars
($2,000.00).
On or about the conclusion of the first year of the Lease term,
representatives of LESSOR and LESSEE shall meet and review the actual costs
applicable to such first year of the Lease term. If the actual costs exceed
that paid by LESSEE, the difference shall be paid within thirty (30) days
following the determination of such actual costs. If such costs are less
than such sum paid, LESSEE shall receive a credit against the next rent due
pursuant to this Lease, for the difference. For the remainder of the
calendar year following the expiration of the first year of the Lease term,
an amount shall be paid which is the estimated amount of maintenance charges
determined as set forth in the following paragraph.
During succeeding years of the lease term and renewal terms, the
above-described additional rental shall be calculated as hereinafter set
forth. Within thirty (30) days after the end of each calendar year, during
the original term or any renewal term of this Lease, LESSOR agrees to furnish
to LESSEE a statement itemized in reasonable detail, setting forth the total
expenses for such common area maintenance charges for such calendar year.
LESSOR and LESSEE shall meet and review said itemized statement; determine
LESSEE'S pro rata share thereof (as hereinabove defined) and make
adjustments for underpayment of LESSEE'S pro rata share which underpayment
LESSEE shall pay with LESSEE'S
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<PAGE>
next monthly payment of said expenses, and for overpayment of LESSEE'S pro
rata share, which overpayment shall be credited against LESSEE'S next monthly
payment of said expenses. At such meeting LESSOR shall prepare and present
an estimate of LESSEE'S pro rata share of the expenses of maintaining the
common area maintenance for the succeeding calendar year, which estimate
shall be subject to the approval of LESSEE. Upon such approval (which shall
not be unreasonably withheld) LESSEE'S monthly payment of said pro rata share
shall be adjusted accordingly.
EXTENDED HOUR LIGHTING. In the event LESSEE in its sole discretion
desires to remain open for business after 11:59 p.m., then as additional
rental LESSEE agrees to pay an amount which is the sum computed by
multiplying the number of hours (not exceeding eight [8] hours daily) LESSEE
remains open after 11:59 p.m. times the wattage of common area parking lot
lighting and sign identifying the Shopping Center times the actual utility
rate applicable; provided, that should other tenants in the Shopping Center
remain open after 11:59 p.m., then LESSEE shall pay only a pro rata amount
arrived at by taking into consideration the number of hours such other
tenant(s) remain open for business and the square footage of such other
tenants' leased premises. Such additional extended hour lighting charges
shall be billed by the LESSOR to the LESSEE being properly documented
together with a statement showing the LESSOR'S calculations of the amount due
and payable and the LESSEE agrees to pay such extended hour charges on
demand. The LESSOR, at its own cost and expense, agrees to
-8-
<PAGE>
properly cause the installation of a separate meter for the purposes of
ascertaining such additional extended hour lighting charges.
Notwithstanding anything provided in this paragraph to the contrary, it is
agreed and understood that the LESSEE'S pro rata share of the repair and
maintenance costs attributable to common area maintenance of the Shopping
Center shall not include any of the following:
(a) charges related to any item which was actually constructed but which
was not included in the plans and specifications approved by LESSEE
pursuant to paragraph 3 hereof;
(b) charges related to any item which was included in the plans and
specifications approved by LESSEE pursuant to paragraph 3 hereof,
which was not actually constructed;
(c) charges in excess of One Thousand Dollars ($1,000.00) per lease year
for (i) equipment purchased by LESSOR for use in maintenance of the
common area of the Shopping Center (provided no charge shall be
made unless the purchase of such equipment is cost-justified by
resulting decreases in overall repair and maintenance costs) and/or
(ii) capital improvements which are for replacement of improvements
which were a part of the common areas in accordance with the
initial development of the Shopping Center, such replacements being
reasonably required to maintain the common areas of the Shopping
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<PAGE>
Center in a first-class condition and are improvements made five
(5) or more years after the commencement of the term of this Lease.
The term "capital improvements", as used herein, shall mean a
valuable addition made to the premises or common areas in excess of
ordinary repairs and maintenance that is properly chargeable to
capital expense or capital improvements under recognized and
accepted accounting principles and standards. PROVIDED, however,
that the replacement of paving in the parking area of the Shopping
Center shall be deemed to be repair and maintenance (rather than a
capital improvement) unless such replacement is required due to
LESSOR'S failure to maintain and repair such pavement, or unless
such replacement is required due to defective initial installation
of such pavement; or
(d) any charge for LESSOR'S overhead and profit, other than the five
percent (5%) administrative fee referred to in this paragraph 2
under the heading "COMMON AREA MAINTENANCE REIMBURSEMENT".
3. CONSTRUCTION. The LESSOR agrees to cause construction of the
premises and other improvements in accordance with the plot plan, Exhibit "A"
attached, and the specifications marked Exhibit "B", attached hereto and
incorporated herein. This Lease shall not be effective until such
specifications, Exhibit "B", and the plot plan, Exhibit "A", have been so
attached and have been initialed by both parties. The LESSOR shall provide
all
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<PAGE>
facilities necessary to provide water, sewer, gas, electrical and other
utilities to the premises. LESSEE shall have the right to review the final
floor plan and elevation drawings.
Should LESSEE require changes in plans after final approval in
accordance with the specifications marked as Exhibit "B", any increased costs
to implement changes required by LESSEE shall be paid to LESSOR as a
condition to LESSOR'S obligation to permit the modification.
Further, if the modification is of a nature which will cause an
extension in the time period for construction, rental shall be commenced on
the date when rental would have commenced had LESSEE not required a change in
the plans adopted pursuant to Exhibit "B".
The LESSOR agrees that, at the option of the LESSEE, this Lease shall
become null and void if construction of the Shopping Center, including the
premises, is not commenced on or before 1 August 1988 and completed and ready
for occupancy on or before 1 May 1989, causes or conditions beyond the
control of LESSOR only, excepted; provided, however, that if the premises are
not ready for occupancy on or before 1 September 1989, irrespective of cause,
and irrespective or whether such cause is beyond the control of LESSOR,
LESSEE, in its sole discretion is hereby granted the option to cancel and
terminate this Lease. Provided further that if LESSEE, by reason of the
preceding sentence, had the option to cancel and terminate this Lease but has
not exercised said option by 1 January 1990, then LESSOR is granted the
NETCO/052388 -11-
<PAGE>
option to cancel and terminate this Lease by giving written notice of such
election to LESSEE, provided such notice is given prior to the commencement
of the term of this Lease and, in any event, prior to 1 February 1990.
Notwithstanding the foregoing, if construction has not commenced by
1 August 1988, and construction is about to commence after such date, LESSEE,
within ten (10) days of written request from LESSOR shall either elect to
terminate this Lease or waive the failure of LESSOR to have commenced by
1 August 1988 as a basis for later termination by LESSEE, it being
specifically understood and agreed between LESSOR and LESSEE that LESSOR'S
construction lender will desire assurance prior to permitting the
commencement of construction of the building to comprise the premises that
LESSEE is then committed to accepting the premises upon construction having
been completed in accordance with the provisions of this Lease.
Construction of the premises shall not be considered complete until it
and the buildings and improvements which are within the cross-hatched area on
Exhibit "A" hereto are substantially completed in every respect, and
certified by the project architect (substantially completed in every respect
shall mean complete except those items listed on LESSEE'S punch list, as
hereinafter defined, which can be and will be corrected and completed within
thirty [30] days by LESSOR in accordance with the specifications, Exhibit "B"
hereof, none of which items would materially interfere with or impair the
LESSEE'S use of the premises and to an
NETCO/052388 -12-
<PAGE>
extent permissible with respect to necessary work to be performed by LESSEE in
installing its trade fixtures and equipment) including, but not limited to
toilet facilities, office space, vinyl floor covering, automatic doors, light
fixtures, including tubes and globes, heating, refrigerated air conditioning,
enclosed machine rooms, curtain walls and partitions, and electrical and
plumbing requirements complete to the point of connection of fixtures,
equipment, checkstands and signs; interior and exterior decoration completed,
parking areas completely surfaced, with adequate lighting and initial traffic
control, service roads, sidewalks, loading facilities, all to be in
accordance with specifications (Exhibit "B") which specifications are to be
supplied by LESSEE. With respect to that part of the foregoing requirements
for completion which pertain to buildings other than the leased premises, the
parking areas, service roads, sidewalks, and loading facilities, such
requirements shall be deemed satisfied if such requirement have been met with
respect to that portion of said area which is cross-hatched on Exhibit "A"
attached hereto and made a part hereof; PROVIDED, however, that in such event
LESSOR shall not, in the he further construction of the Shopping Center, permit
construction work, staging for construction work, or any other inhibition of
free access to occur with respect to or within the cross-hatched area shown
on said Exhibit "A". LESSOR shall also construct and maintain during the term
of this Lease a sign, to be approved by the LESSEE, identifying the Shopping
Center, as well as a sign, to be
NETCO/052388 -13-
<PAGE>
approved by LESSEE, and subject to local governmental approval, identifying
some or all of the tenants of the Shopping Center. LESSEE shall have the
right, at LESSEE'S cost, to place on such latter sign its sign, which shall
be of at least the same size and advertising effect as any sign placed on
such sign by any other tenant in the Shopping Center, with the possible
exception of Homeclub, Inc. Pursuant to lease entered into with Homeclub,
Inc., the tenant under this Lease is entitled to space upon the pylon sign
together with one (1) other tenant in addition to Homeclub, Inc. Homeclub,
Inc. is entitled to locate its panel in the top position. LESSOR will
exercise its best efforts to obtain consent from Homeclub, Inc. to permit the
identification size of LESSEE'S sign to be equal in size to that of Homeclub,
Inc. If LESSOR permits any other tenant to place its sign on the sign
identifying the Shopping Center, LESSEE shall be permitted to do so also,
with a sign which is at least as large as the largest sign permitted to any
other tenant, with the exception of Homeclub, Inc. LESSOR covenants and
agrees that neither it nor any other tenant in the Shopping Center shall
construct a sign so as to impair the visibility of or access to the premises.
LESSEE agrees to accept the premises in the condition existing on the
date of the commencement of the term, subject to LESSEE'S list of defective
items (hereinafter called "punch list") being completed. In the event of
LESSOR'S failure to complete said punch list items within thirty (30) days
after receipt of LESSEE'S notification to LESSOR, then at LESSEE'S sole
NETCO/052388 -14-
<PAGE>
option, LESSEE may either complete such punch list items and deduct the cost
thereof from rent, the costs of which are hereby agreed in advance by the
parties hereto to be reasonable and proper deductions, or require LESSOR'S
specific performance of the same, or seek any other legal remedies available
to LESSEE. LESSOR covenants that the premises to be constructed shall, at the
commencement of the term hereof and subject to LESSEE'S punch list being
completed, be structurally sound and in good tenantable condition and that
there shall be no latent defects therein. Latent defects as used herein is a
defect which is a departure from plans and specifications not apparent upon
an ordinary and reasonable inspection by a professional engineer qualified to
make such inspection, normal wear and tear excepted. LESSOR further covenants
that if any latent defects in the premises become apparent at any time during
this Lease, and it shall appear that such latent defects existed at the
beginning of the term hereof, or resulted from faulty design, workmanship or
materials (the proof of which facts shall be the burden of LESSEE), then
LESSOR shall cause the same after receiving written notice from LESSEE, to be
repaired and corrected with all reasonable speed. LESSEE shall
have the benefit of all warranties accruing to the LESSOR by reason of
construction of the premises and any installation of equipment thereon.
4. TERM. The LESSOR agrees to, and does hereby, lease the premises to
the LESSEE for an original term of twenty (20) years, commencing on the
earlier of the first day the premises are
NETCO/052388 -15-
<PAGE>
opened for business or forty-five (45) days following the earlier of LESSOR'S
notification to LESSEE or LESSEE'S notification to LESSOR that the
construction of the premises is completed in accordance with the terms of
this Lease and the premises are ready for occupancy by LESSEE, except for
punch list items which can and will be completed with thirty (30) days, as
aforesaid, and LESSOR notifies LESSEE of the foregoing, whichever is
earlier. The commencement date of the term shall be endorsed at the end
hereof, and the lease term shall terminate at 11:59 p.m. on the last day of
the twenty (20) year term thereafter.
It is agreed that if at the end of the original term of this Lease, or
any option period hereof, LESSEE, in its sole discretion, shall deem it
necessary to remain in occupancy of said premises beyond the termination date
of the Lease, LESSEE may do so for a period of time up to one hundred twenty
(120) days. For any such extension period, the rent will be one and one-half
(1.5) times the then current minimum monthly rent. LESSEE shall give LESSOR
one hundred twenty (120) days' notice should such extension be necessary. It
is agreed that the LESSEE shall not be obligated to open the premises for
business nor shall the rent for the premises commence, [subject to the
provisions of paragraph 6.A(1) hereof] until all streets, highways and
parking areas, shown as cross-hatched on Exhibit "A" attached hereto, have
been fully paved and are open for use.
5. OPTION. It is further agreed that, at the expiration of the
original term, the LESSEE shall have the right, exercisable
NETCO/052388 -16-
<PAGE>
at its sole option, to extend this Lease for three (3) additional,
consecutive terms of five (5) years each, upon the same terms and conditions.
The LESSOR shall be notified of the LESSEE'S intent to exercise such option
at least six (6) months prior to the end of the then current term. It is
further agreed that LESSEE shall have the right, at its sole option, to
extend this Lease for an additional term not to exceed seven (7) years if
necessary, to permit reconstruction and repair of the premises after its
damage or destruction, in accordance with the provisions of paragraph 17
hereof. PROVIDED, however, that if, on the date of commencement of any of
the extended terms, LESSEE is in default (as that term is used in paragraph
24.A. hereof) then the extended term shall not commence, and this Lease shall
expire at the end of the initial term of the then expiring extended term.
6. RENT. As rent for the premises, LESSEE shall pay to LESSOR in lawful
money of the United States, at the address to which notices to LESSOR are to
be given hereunder:
A. MINIMUM ANNUAL RENT, payable in equal monthly installments, in
advance, on the first day of each month:
(1) in the annual sum of Three Hundred Seventy-Nine Thousand Six
Hundred Seventy-Three Dollars ($379,673.00), for the period
commencing on the first (1st) day of the calendar month following
the expiration of one hundred twenty (120) days from the
commencement of the term of this Lease (determined under
paragraph 4 hereof), which date is
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sometimes referred to herein as the "Rent Commencement Date", and
terminating on the expiration of original twenty (20) year term
of this Lease; PROVIDED, however, that on the Rent Commencement
Date LESSEE shall also pay an amount equal to 1/365 of said
minimum annual rent as and for each day elapsing after the
expiration of said one hundred twenty (120) day period and prior
to the Rent Commencement Date;
(2) in an annual sum, during the five (5) year option periods
described in paragraph 5 hereof, and, unless subparagraph (3)
below is, by its terms, applicable, during the seven (7) year
option period described in paragraph 5 hereof, equal to ninety
percent (90%) of the average percentage rent (calculated without
reduction for minimum rent paid) payable by LESSEE pursuant to
paragraph 6.B. hereof, for the three (3) lease years next
preceding the commencement of the option period in question;
PROVIDED, however, that such minimum annual rental, as so
determined, shall not be less than the greatest amount of minimum
annual rent which was in effect during the original twenty (20)
year term of this Lease or during any previous five (5) year
option period;
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<PAGE>
(3) [if this subparagraph (3) is, by its terms, applicable] in an
annual sum, during the seven (7) year option period described in
paragraph 5 hereof, which shall be determined in the following
manner:
During the period commencing on the date LESSEE exercises its
option to extend the term of this Lease for said seven (7) year
period and continuing until one (1) month prior to the expiration of
the then current term of this Lease, LESSOR and LESSEE shall attempt
to agree upon the basic rental, rental escalations, rental terms and
concessions and other economic factors relevant to establishing the
fair market rental value for the extended term. If the parties are
unable to agree upon the fair market rental value, such rental value
shall be established by local appraiser(s) (whose qualifications
shall include membership in the American Institute of Real Estate
Appraisers, and/or the Society of the Real Estate Appraisers, and
active practice of the profession of real estate appraisal for not
less then ten [10] years). LESSOR and LESSEE shall have ten (10) days
to appoint a mutually acceptable appraiser. If they are unable to
agree upon a single individual, within the next ten (10) days, LESSOR
shall appoint one (1) appraiser and LESSEE shall appoint one (1)
appraiser. Failure by LESSOR or LESSEE to appoint an appraiser within
the ten (10) day period shall consti-
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<PAGE>
tute a waiver of the right to appoint such an appraiser and an
agreement to be bound by the appraisal performed by the other appraiser.
Within the next fifteen (15) day period the two (2) appraisers shall
agree upon and appoint a third (3rd) appraiser. When all three (3)
appraisers have been appointed, they shall appraise the premises and
determine the minimum rental, percentage rental, rental terms and
concessions and other economic factors relevant to establishing the fair
market rental value of the premises during the extended term. The
appraisal(s) shall be completed no later than thirty (30) days following
the commencement of the extension term, with each appraiser preparing an
indpendent written report setting forth his appraisal. The appraisers
shall thereafter review each of the separate reports and shall meet
to discuss and resolve any differences. A decision by two (2) of the
three (3) appraisers shall be binding upon LESSOR and LESSEE. If no
two (2) appraisers can agree upon the fair market rental value within
thirty (30) days following the commencement of the extension term,
the fair market rental value shall be determined by averaging the
three (3) appraisals. Each party shall pay the costs and expenses of
the appraiser appointed by it as well as one-half (1/2) of the costs
and expenses of the third appraiser, or the sole appraiser as the
case may be. The parties
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shall execute a written addendum to this Lease setting forth the
rental provisions for the seven (7) year option period as soon as
such rental has been determined; such rental shall establish both the
minimum annual rental and the percentage rental, if any, to be paid
during said seven (7) year option period if this subparagraph (3) is,
by its terms, applicable.
This subparagraph (3) shall be applicable only if, pursuant to
the provisions of paragraphs 5 and 16 hereof, the damage or
destruction which enabled LESSEE to extend the term of this Lease for
such seven (7) year period, was caused by a risk not covered by the
insurance required to be kept in effect by LESSOR pursuant to
paragraph 16 hereof.
B. As additional rent, percentage rent in an amount equal to the
percentage specified below, of LESSEE'S annual "gross sales", as
hereinafter defined, made during each lease year during the original
twenty (20) year term and during each of the five (5) year option
periods and during the seven (7) year option period referred to in
paragraph 5 hereof. Notwithstanding the foregoing, no percentage rent
shall be payable with respect to any sales made prior to the Rent
Commencement Date, nor shall this subparagraph apply during the seven
(7) year option period if subparagraph 6.A.(3) is, by its terms,
applicable.
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The percentage referred to above shall be:
1.25% with respect to that portion of LESSEE'S annual gross sales which
do not exceed $33,748,711.00 for the lease year in question; 1.125%
with respect to that portion of LESSEE'S annual gross sales which exceed
$33,748,711.00 but do not exceed $37,967,300.00 for the lease year in
question; 1.0% with respect to that portion of LESSEE'S annual gross
sales which exceed $37,967,300.00 for the lease year in question.
LESSEE shall be entitled to a credit, against such percentage
rent, for the amount of minimum rent paid by LESSEE with respect to
the lease year in question.
C. As additional rent, public liability and property damage insurance
annual premiums insuring the common areas as set forth in paragraph 9
hereof.
D. As additional rent, fire and extended coverage insurance annual
premiums as set forth in paragraph 16 hereof.
E. As additional rent, repairs and maintenance of the premises as set
forth in paragraph 13 hereof.
F. As additional rent, LESSEE'S proportionate share of common area
maintenance cost, including administrative fee, as defined and payable
as set forth in paragraph 2 hereof.
G. As additional rent, taxes and assessments levied and assessed against
the premises and LESSEE'S proportionate share of taxes and
assessments levied and assessed
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against the parking and common areas of the Shopping
Center, as set forth in paragraph 8 hereof.
The term "gross sales", as used herein, shall include all sales of
merchandise from, through, or off the premises, including the performance of
any service for any customer or patron for compensation by the LESSEE or
employee, and shall include all sales by every department thereof, for cash
or on a charge basis, and including all business in which orders come by
mail, telephone, or telegraph, less credit for returned merchandise,
merchandise trade-ins, and credits of a similar nature. "Gross sales" shall
not include sales, luxury, excise or other taxes collected by LESSEE from
customers and charged separately, merchandise transferred from one of the
LESSEE'S or SUBLESSEE'S stores to another, return of merchandise to a
supplier, wholesale bakery or wholesale delicatessen sales, or sales of money
orders or vending machine receipts except to the extent to royalties actually
received by LESSEE. As used in this paragraph, the terms "wholesale bakery
sales" and "wholesale delicatessen sales" shall refer to sales made in the
bakery or delicatessen departments of the premises, which sales are for the
purpose of resale.
LESSOR shall have the right, at any time, but no more than once per
year, and from time to time, at LESSOR'S expense, to have audits made of the
records of sales which occur on the premises. LESSOR'S right to examine the
books and records pertaining to the operation of a business on the premises,
or to make an audit thereof in respect to any lease year, shall be limited to
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the then current lease year, plus the year immediately preceding. LESSEE"S
statements for other prior lease periods shall be deemed to have been
accepted by LESSOR and be incontestible.
LEASE YEAR DEFINED. The term "lease year", as used in this Lease, means
the following:
1. With reference to the first lease year, the period from the
commencement date of the term of this Lease through the last
day of the twelfth (12th) full calendar month thereafter.
2. With reference to any succeeding lease year (with the exception
of the last lease year), twelve (12) full consecutive calendar
months commencing on the first day of the calendar month next
succeeding the last day of the preceding lease year.
3. With reference to the last lease year, the period commencing
on the first day of the calendar month next succeeding the last
day of the preceding lease years and terminating on the last
day of the lease term.
PERCENTAGE RENT TIME OF PAYMENT. Payment of any additional rental, as
outlined in paragraph 6B herein, shall be paid on or before the twentieth
(20th) day of the month following the ending of each annual period.
7. MORTGAGES. All mortgage payments or other charges required to
discharge any lien or encumbrance that may affect the premises, and for which
the LESSOR is solely responsible, and which is superior and prior to the
terms of this Lease and the
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rights of LESSEE hereunder, shall be paid by the LESSOR as the same shall
become due.
Notwithstanding any provision in this Lease to the contrary, LESSEE
agrees that with regard to any such mortgage or encumbrance which is superior
or prior to the terms of this Lease and the rights of LESSEE hereunder,
LESSEE shall not declare a default under this Lease in the event of any
default of a payment under such mortgage or other encumbrance, provided that
the holder of such encumbrance has agreed, in the event of a default
thereunder, and provided LESSEE is not in default under the terms of this
Lease, that no foreclosure of, deed given in lieu of foreclosure of, or sale
under the encumbrance, and no stops or procedures taken under the encumbrance
shall affect LESSEE'S rights under this Lease. In such event LESSEE shall
attorn to any purchaser at any foreclosure sale, or to any grantee or
transferee designated in any deed given in lieu of foreclosure, and this
Lease shall continue in full force and effect.
8. TAXES AND ASSESSMENTS. As additional rental, the LESSEE agrees to
pay the amount of all taxes and assessments levied and assessed against the
premises and LESSEE'S proportionate share (as hereinafter set forth) of all
taxes and assessments levied and assessed against the parking and common
areas of the Shopping Center which shall become due and payable during the
original or any exercised renewed term hereof. LESSEE shall have the right to
pay such items directly to the taxing authority prior to delinquency or to
pay the same directly to LESSOR, not later than
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fifteen (15) days prior to the delinquency date. In the latter event, LESSOR
shall, as soon as practicable after LESSOR'S payment of said items, provide
LESSEE with evidence of such payment. If the Shopping Center is taxed as a
unit, the LESSEE shall be liable for only such proportion of such taxes and
assessments as the number of square feet of floor space in the premises bears
to the proposed total number of square feet of floor space in the Shopping
Center as depicted on Exhibit "A".
Notwithstanding the foregoing, either LESSOR or LESSEE, by notice to the
other, may request, in lieu of an apportionment of real estate taxes based
upon floor space, that real estate taxes are allocated in an alternative
manner to the various components of the Shopping Center in a manner which is
fair and reasonable and is based upon information as used by the tax assessor
(including assessor's worksheets or such other information as may reasonably
be available to LESSOR establishing the amount of such real estate taxes). If
this alternative calculation is used, LESSEE shall pay one hundred percent
(100%) of all real estate taxes fairly allocable to the land immediately
beneath the building and all areas LESSEE has the exclusive right to use,
and LESSEE'S proportionate share of real estate taxes fairly allocable to
land and improvements that are within the common area, that are not devoted
to the exclusive use of any other tenant of the Shopping Center. In the event
that LESSOR and LESSEE are unable to agree as to the appropriate allocation,
either party may request that such be submitted to arbitration to be conducted
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in like manner as arbitration is provided for within paragraph 18.
Such taxes and assessments must be billed by LESSOR and LESSEE no later
than ninety (90) days after receipt of the final tax billing from the local
taxing authority to LESSOR. If such notice is not received by LESSEE within
ninety (90) days, LESSEE'S obligation to pay such taxes and assessments shall
be unaffected, unless LESSEE has, after the expiration of such ninety (90)
day period, assigned this lease or sublet the premises and is no longer in
possession of the premises except through an assignee or sublessee. In that
event, NETCO FOODS, INC. shall have no liability with respect to the payment
of such taxes and assessments, but the payment thereof shall be enforceable
against such assignee or sublessee only. In such event, and for such purpose,
LESSEE hereby assigns to LESSOR, the right of LESSEE (as SUBLESSOR) to
demand, receiver, and collect from any sublessee of LESSEE, such taxes and
assessments to the extent provided for in any sublease of the premises
entered into by LESSEE (as SUBLESSOR). Provided, however, that for any
partial tax year occurring during the original or any renewed term hereof, the
LESSEE shall be liable for only that portion of such taxes and assessments as
the number of days in such partial tax year bears to three hundred sixty-five
(365).
ASSESSMENTS MADE DURING LEASE TERM. In the event during the term of
this Lease or any extension thereof, an assessment is placed upon the
premises or the Shopping Center by any taxing
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authority of competent jurisdiction, and if such assessment is payable or may
be paid in installments, then and in that event such assessment shall be paid
by installments and LESSEE shall be liable to pay said assessment only to the
extent of making timely payment of those installments falling due during the
term of this Lease or any extension thereof. Further, if any assessment be
proposed by any competent taxing authority during the term of this Lease or
any extension thereof, then upon the request of LESSEE, LESSOR shall use its
best efforts to obtain an assessment which is payable or may be paid in
installments.
In the event during the term of this Lease or any extension thereof, an
assessment is placed upon the premises or the Shopping Center by any taxing
authority of component jurisdiction and such assessment be payable only in
lump sum, then and in that event, LESSEE shall be liable only for payment of
a proportionate share of such assessment in the proportion that the number of
years remaining in the original term and/or any renewal options then
remaining available to LESSEE hereunder bears to the useful life of the
improvements against which the assessment is made; said useful life being
determined by agreement of the parties or in absence of agreement, by
arbitration under the procedures set forth in paragraph 18 hereof.
The Shopping Center real property including the premises is, at the time
of entry into this Lease, subject to assessment titles "Village Park
Refunding Assessment", and a further assessment is in the process of being
created which may not appear of
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record as of the time of execution of this Lease, which relates to the
construction of Whitman Avenue infrastructure thereunder. Each such
assessment shall be deemed an assessment made during the Lease term, the
installments of which are subject to apportionment between tenants of the
Shopping Center, as previously set forth herein.
Any taxes and assessments levied and assessed against the premises that
shall become due and payable during the term hereof and which LESSEE has
paid, may be contested by LESSEE by appropriate proceedings. LESSOR shall
not be required to join in any such proceeding or contest brought by LESSEE
unless the provisions of any law require that the proceeding or contest be
brought by or in the name of LESSOR or any owner of the premises. In that
case LESSOR shall join in the proceeding or contest or permit it to be
brought in LESSOR'S name as long as LESSOR is not required to bear any cost.
Whether or not LESSOR is required to join in such proceeding, LESSOR shall
cooperate with LESSEE, will provide any information requested by LESSEE, and
will execute any document which may be necessary and proper for such
proceedings. Any refund shall be the property of LESSEE to the extent it is
based upon the payment of any assessments made by LESSEE.
If the leased premises are part of a shopping center or constitute part
of a tract which is assessed as a whole, then LESSEE may at its option
contest any such tax assessment, and any refunds shall be the property of
LESSEE to the extent it is based
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upon the payment of a prorata share of an assessments paid by LESSEE.
The LESSEE shall also pay all taxes levied and assessed upon personal
property located upon the premises which is not owned by LESSOR.
9. LESSEE HOLD HARMLESS. Except as provided in paragraph 10 hereof,
LESSEE agrees to protect and save the LESSOR harmless from any and all claims
of others for injuries to persons or property occurring in or upon the
premises as defined on page one (1) hereof except such claim for injuries
which are caused in any proportion by the negligent, intentional or willful
acts of the LESSOR.
PUBLIC LIABILITY INSURANCE OF PREMISES. LESSEE agrees to maintain, at
its own expense, during the full term of this Lease, a policy of public
liability and property damage insurance in a reputable company authorized to
do business in the State of California in which policy LESSOR, LESSEE and
any mortgagee shall be named as additional insureds, and to furnish current
certificates evidencing the existence of such insurance providing that such
insurance shall not be canceled except after thirty (30) days' written notice
to LESSOR. Such policy shall provide primary coverage for the benefit of
LESSOR and LESSEE in an amount not less than $2,000,000.00 single limit
combined bodily injury and property damage each occurrence, to cover all
situations where any other person or persons claim bodily injury, death, or
property damage in or upon the premises.
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PUBLIC LIABILITY INSURANCE OF COMMON AREA. LESSOR covenants and agrees
to maintain, at its own expense, during the full term of this Lease, a policy
of public liability and property damage insurance in a reputable company
authorized to do business in the State of California, in which policy LESSOR,
LESSEE and any mortgagee shall be named as additional insureds insuring
against any liability (including all situations where any other person or
persons claim bodily injury or property damage) arising on or about the
common areas of said Shopping Center as defined in paragraph two (2) hereof,
including, but not limited to all common use and parking areas of said
Shopping Center and to furnish current certificates evidencing the existence
of such insurance providing that such insurance shall not be canceled except
after thirty (30) days' written notice to LESSEE. Such policy shall provide
primary coverage for the benefit of LESSEE and LESSOR in an amount not less
than $2,000,000.00 single limit combined bodily injury and property damage
each occurrence to cover all situations where any person or persons claim
personal injury, death, or property damage on or about said common areas.
LESSOR and LESSEE agree to periodically review and, if necessary,
increase the liability limits of such insurance in order that the mutual
interests of LESSOR and LESSEE will be adequately protected by such insurance.
REIMBURSEMENT FOR PUBLIC LIABILITY INSURANCE OF COMMON AREA. LESSEE
agrees to remit to LESSOR, on an annual basis within thirty (30) days after
being billed therefor, the pro rata
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share of the annual premium for insurance covering the common areas of the
Shopping Center for said policy(s) as hereinabove provided, subject to
LESSEE'S right to obtain similar insurance coverage policy(s) from insurance
carriers with ratings equal to LESSOR'S insurance carrier covering the common
areas of the Shopping Center. Should LESSEE be able to secure such policy(s)
at a lower rate for like coverage, then in such event, LESSEE shall within
thirty (30) days prior to the expiration of the current term of such policy
[which term shall not exceed one (1) year] provide to LESSOR reasonable data
supporting the availability of such like insurance policy(s) at a lower
rate; whereupon receipt of such data, LESSOR shall have the option,
exercisable in its sole discretion and within thirty (30) days after receipt
of such data, to cancel its insurance policy(s) covering the common areas of
the Shopping Center at the expiration of the current term of such policy
[which term shall not exceed one (1) year] and obtain LESSEE'S policy(s).
Should LESSOR elect not to cancel its insurance policy(s) and obtain LESSEE'S
policy(s) as aforesaid, LESSOR agrees to deduct, from amounts due from LESSEE
in payment of LESSOR'S insurance policy(s) covering the premises and within
said thirty (30) days, the difference between the premium paid or charged by
LESSOR for its insurance policy(s) covering the premises and that which would
have been paid by LESSEE for LESSEE'S policy(s) covering the common areas of
the Shopping Center.
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LESSOR HOLD HARMLESS. Except as provided in paragraph 10 hereof,
LESSOR agrees to protect and save the LESSEE harmless from any and all claims
of others for injuries to persons or property occurring on or about common
areas and arising out of the use or operation of said common areas including
reasonable attorney's fees, except such claims for injuries which are caused,
in any proportion by the negligent, intentional, or willful acts of the
LESSEE, its agents or employees.
10. WAIVER OF LIABILITY. To the extent that any loss or damage
described in this paragraph is actually compensated for by insurance
provided for in this Lease, but only to that extent, LESSOR and LESSEE each
hereby releases the other and its respective employees, agents, and every
person claiming by, through, or under either of them, and LESSEE hereby
releases each other tenant in the Shopping Center of which the premises are a
part, and the employees and agents thereof, from any and all liability or
responsibility (to the other or anyone claiming by, through, or under them by
way of subrogation or otherwise), for any loss or damage to any property
(real or personal) owned by or belonging to LESSOR, LESSEE, their respective
employees, agents and every person claiming by, through, or under either of
them (whether by subrogation or otherwise) caused by fire or any other
insured peril covered by any insurance policy(s) for the benefit of any
party, even if such loss or damage shall have been caused by the fault or
negligence of another party, its employees or agents. LESSOR and LESSEE
further agree that in the event of a
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sale of the Shopping Center by LESSOR, the hereinabove waiver of subrogation
shall continue in favor of the original LESSOR hereinunder and likewise as
to any subsequent lessor, as well as in favor of that lessor which, at the
time the casualty occurs, may be the lessor under this Lease, so long as the
respective insurance policies of LESSOR and LESSEE so permit. LESSOR and
LESSEE agree, upon request of the other party, to furnish evidence of such
waiver of liability to such other party. All policies of insurance written
to insure all buildings, parking and common areas, service and delivery
areas, improvements, contents, and all other such property (real or personal)
shall contain a proper provision, by endorsement or otherwise, whereby the
insurance carriers issuing the same shall acknowledge that the insured has so
waived and released its right of recovery against the other party or parties
hereto and such other tenants and shall waive the right of subrogation which
such carrier might otherwise have had against such other party or parties and
such other tenants, all without impairment or invalidation of such insurance.
The provisions of this paragraph shall be equally binding upon and inure to
the benefit of any permitted assignee or sublessee of LESSEE.
LESSOR and LESSEE agree that the foregoing waiver of subrogation shall
continue in effect so long as insurance is obtainable and includable with
permission to grant such waiver of subrogation without extra cost, or, if
such extra cost is chargeable therefor, so long as the other party pays such
extra cost. If an
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extra cost is chargable therefor, each party will advise the other thereof
and of the amount thereof. The other party, at its election, may pay the same
but shall not be obligated to do so. If the other party elects not to pay
such extra cost, the first party shall not be obligated to waive such
subrogation rights.
11. REMOVAL. LESSEE shall have the right to remove any and all
furniture, fixtures, and equipment it may have installed on or in the
premises provided the LESSEE shall restore any structural or other damage to
the building resulting from such removal, usual wear and tear excepted.
12. LESSOR ENTRY. The LESSOR shall have the right to enter the
premises at any reasonable time for the purpose of inspecting the same, or
for the purpose of doing anything that may be required under this Lease, or
for the purpose of doing anything LESSEE may be required to do and shall fail
to do. In the event it is reasonably necessary to the LESSOR to make any
repairs to the premises that the LESSEE is responsible for, but which the
LESSEE has failed to make, LESSEE shall reimburse the LESSOR for the cost
thereof on demand, and the LESSOR shall not be responsible to the LESSEE for
any loss or damage that the LESSEE may suffer from such repairs, provided
that such loss or damage is reasonable under the circumstances.
13. MAINTENANCE AND REPAIR. Except for the LESSOR'S obligations with
respect to latent defects as set forth in paragraph 3 and with the
obligations to maintain in good condition the structural portions of the
building including foundations, slabs,
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<PAGE>
walls, and electrical and plumbing services to the building, LESSEE agrees at
its expense to maintain all other portions of the premises and to make all
ordinary repairs in and about the premises necessary to preserve them in good
order and condition, including the air conditioning and heating equipment,
after expiration of the warranty period stated in Exhibit "B". The LESSOR
shall have no obligation with respect to such repairs and maintenance.
As used in this paragraph, the obligation to maintain and repair is
primarily intended to include amounts to be paid or incurred for incidental
repairs and maintenance of property, and, except as noted below with regard
to the roof of the leased premises and LESSOR'S obligations, is not intended
to include any obligation to make "capital expenditures". The term "capital
expenditures" is, for this purpose, defined as:
"Any amount paid or incurred:
A. to add to the value, or substantially prolong the useful life,
of the leased premises; or
B. to adapt the leased premises to a new or different use; or
C. for new buildings or for permanent improvements or betterments
made to increase the value of the leased premises; or
D. for purposes within the meaning of 'capital expenditure' as
that term is used in Section 263(a) of
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<PAGE>
the Internal Revenue Code of 1954, as in effect at the date
of execution of this Lease."
PROVIDED, however, that notwithstanding the foregoing, LESSEE shall
maintain, repair, and replace, as necessary to keep the same in good
condition and repair, the roof of the leased premises, provided LESSOR has
fulfilled its obligations with respect to the roof, as required by Exhibit
"B" hereof. PROVIDED FURTHER, that LESSOR and LESSEE acknowledge and agree
that LESSOR'S obligation with respect to latent defects as set forth in
paragraph 3 hereof, structural portions of the building, including
foundations, slabs, walls, and electrical and plumbing services to the
building includes duties of maintenance and repair as well as replacement,
even though such replacement is within the meaning of 'capital expenditures'.
If, in the event of an emergency, it shall become necessary to make any
repairs hereby required to be made by LESSOR, LESSEE shall attempt to notify
LESSOR, who shall at all times during this Lease, provide LESSEE with a
current telephone number. If LESSEE is unable to contact LESSOR, or if LESSOR
fails to cause such emergency repairs to be made within a period of time
which is reasonable under the circumstances, LESSEE may cause such emergency
repairs to be made and pay the reasonable cost thereof, and LESSOR shall
reimburse LESSEE for such cost on demand made by LESSEE.
14. WASTE. The LESSEE shall not commit waste or permit waste to be
committed in or upon the leased premises. At the
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<PAGE>
termination of this Lease, LESSEE shall surrender and deliver the premises to
the LESSOR in as good condition as the same were at the commencement of the
term excepting 1) usual wear and tear 2) acts of God and unavoidable
casualties, 3) repair of latent defects for which LESSOR is responsible
hereunder, 4) damage or loss for which LESSOR has waived recovery under
paragraph 10 hereof, and 5) other non-insured causes beyond the control of
LESSEE. It is the intent of the parties hereto that the provisions of the
second sentence of this paragraph 14 shall not be interpreted to add to, nor
detract from, LESSEE'S obligations for repair of the premises, as set forth
elsewhere in this Lease.
15. SIGNS. LESSOR shall have the sole right to approve the design and
placement of any and all signs of any nature upon the exterior of the
premises; provided, however, that such approval shall not be unreasonably
withheld and, further that the size and advertising effect of any sign to be
used by the LESSEE shall be substantially equal to any sign permitted to be
used by other tenants in the Shopping Center; provided, LESSOR shall not be
deemed obligated to consent to a sign which would violate sign criteria
contained in LESSOR'S lease with Homeclub, Inc., in the event LESSOR believes
that the sign criteria contained within the Homeclub, Inc. lease will permit
signing satisfactory to LESSEE. Should any sign be proposed by LESSEE which
would be violative of such provision, LESSOR will cooperate with LESSEE in
making application for a waiver by Homeclub, Inc., in favor of LESSEE if such
sign is otherwise consistent with esthetics for
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<PAGE>
the Shopping Center. Any such sign shall comply with local governmental
requirements.
16. FIRE AND EXTENDED COVERAGE INSURANCE. The LESSOR agrees to keep in
effect, at its expense, and during the original or any renewed term of this
Lease, a policy of fire, extended coverage, vandalism and malicious mischief
insurance (but excluding losses by flood or earthquake) to cover damage to
the building or the premises, written by a responsible insurance company
authorized to do business within the state where the premises are located, in
an amount equal to not less than ninety percent (90%) of the replacement cost
of the premises, and to furnish the LESSEE proof thereof. Such policy of
insurance shall provide protection against the losses so insured against for
the benefit of the LESSOR and any mortgagee as their interests may appear
under the terms of this Lease and any mortgage agreement, providing that such
insurance shall not be canceled except after thirty (30) days' notice to
LESSEE and any mortgagee and shall contain the provision of endorsement
required by paragraph 10 hereof.
BLANKET INSURANCE. The insurance to be provided by LESSOR may be
provided pursuant to a blanket policy covering the premises and other
locations of LESSOR provided, however, in no event shall the protection
afforded by such blanket insurance policy be less than that required
hereunder.
REIMBURSEMENT OF PREMIUMS. LESSEE agrees to remit to LESSOR, on an
annual basis within thirty (30) days after being billed therefor, the annual
premium for insurance covering the premises
NETCO/052388 -39-
<PAGE>
for said policy(s) as hereinabove provided, subject to LESSEE'S right to
obtain a like insurance coverage policy(s) covering the premises should
LESSEE be able to secure such policy(s) on the premises at all lower rate for
like coverage. In the event LESSEE is able to obtain like insurance policy(s)
covering the premises at a lower rate, LESSEE shall within thirty (30) days
prior to the expiration of the current term of such policy
[which term shall not exceed one (1) year] provide to LESSOR reasonable data
supporting the availability of such like insurance policy(s) at a lower rate;
whereupon receipt of such data, LESSOR shall have the option, exercisable in
its sole discretion and within thirty (30) days after receipt of such data,
to cancel its insurance policy(s) covering the premises at the expiration of
the current term of such policy [which term shall not exceed one (1) year]
and obtain LESSEE'S policy(s). Should LESSOR elect not to cancel its
insurance policy(s) and obtain LESSEE'S policy(s), as aforesaid, LESSOR
agrees to deduct, from amounts due from LESSEE in payment of LESSOR'S
insurance policy(s) covering the premises and within said thirty (30) days,
the difference between the premium paid or charged by LESSOR for its
insurance policy(s) covering the premises and that which would have been paid
by LESSEE for LESSEE'S policy(s) covering the premises.
The premises to be constructed by LESSOR under this Lease is to be
equipped with an automatic sprinkler system which is more fully described in
Exhibit "B". LESSEE shall carry fire and extended coverage insurance covering
all of its merchandise,
NETCO/052388 -40-
<PAGE>
furniture, fixtures and equipment located in and upon the premises. Should
the building covered by this Lease be rated deficient by Insurance Service
Organization or any other rating bureau having jurisdiction (hereinafter
"Rating Bureau"), then LESSOR shall pay for any differential amount between
the premium paid and that which would have been paid had the building not
been rated deficient, and LESSOR agrees to reimburse LESSEE and/or its
SUBLESSEE for any differential amount it may incur. Said differential amount
shall be computed and paid annually using the then published insurance rates
until the defects are cured by LESSOR. Upon LESSOR'S receipt of notice of
any deficiencies from Rating Bureau or any insurance company, LESSOR agrees
to immediately notify LESSEE in writing of said deficiencies.
SUBSEQUENT CHANGE OF STANDARDS. LESSOR shall not be liable for any
reimbursement of such differential if LESSOR has complied fully with the
agreed plans and specifications of the premises and has complied with all of
the Rating Bureau's recommendations, and requirements, made after its review
of the architectural plans and related engineering drawings and
specifications of the premises. Nor shall the LESSOR be liable for any
reimbursement of any such differential if such differential results from a
change in the standards or requirements of the Rating Bureau for full
sprinkler credit, which pertain to construction of the premises, which change
was effective subsequent to the completion of construction of the item
affected by such change. LESSOR agrees that other buildings to be
constructed in the Shopping
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Center will be constructed in such a manner that LESSEE will not be penalized
and denied full sprinkler credit, unless agreed to in writing by the LESSEE.
LESSEE agrees it shall not keep anything within the premises or use the
premises for any purpose which will cause an increase in the insurance
premium cost or invalidate any insurance policy(s) carried on the premises or
other parts of the Shopping Center. LESSOR agrees it shall not, nor shall it
allow any other tenant(s) in the Shopping Center, to keep anything within
their leased premises or on the Shopping Center or use their leased premises
or the Shopping Center for any purpose which will cause an increase in the
insurance premium cost or invalidate any insurance policy(s) carried on the
premises of LESSEE, such other tenant(s), or other parts of the Shopping
Center. In the event of the storing, maintaining or use of anything on the
premises which causes an increase in the insurance premium cost, LESSOR
agrees it shall look solely to the respective responsible tenant (or to
itself should it be in violation) in the Shopping Center which causes or
results in a premium increase or insurance invalidation, and LESSEE shall
have no obligation to pay any part of such premium increase except to the
extent the same was caused by the act or omission of LESSEE.
17. DAMAGE AND DESTRUCTION (INSURED RISK).
A. If, during the term, the premises are totally or partially
destroyed from a risk covered by the insurance described in paragraph 16,
rendering the premises totally or partially
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inaccessible or unusable, LESSOR shall restore the premises. Such destruction
shall not terminate this Lease. If the existing laws do not permit the
restoration, either party can terminate this Lease immediately by giving
notice to the other party.
If the cost of the restoration exceeds the amount of proceeds received
from the insurance required under paragraph 16, LESSOR can elect to terminate
this Lease by giving notice to LESSEE within fifteen (15) days after
determining that the restoration cost will exceed the insurance proceeds. In
the case of destruction to the premises only, if LESSOR elects to terminate
this Lease, LESSEE, within fifteen (15) days after receiving LESSOR'S notice
to terminate, can elect to pay to LESSOR, at the time LESSEE notifies LESSOR
of its election, the difference between the amount of insurance proceeds and
the cost of restoration, in which case LESSOR shall restore the premises.
LESSOR shall give LESSEE satisfactory evidence that all sums contributed by
LESSEE as provided in this paragraph have been expended by LESSOR in paying
the cost of restoration.
If LESSOR elects to terminate this Lease and LESSEE does not
elect to contribute toward the cost of restoration as provided in
this paragraph, this Lease shall terminate.
DAMAGE AND DESTRUCTION (UNINSURED RISK)
B. If, during the term, the premises are totally or partially
destroyed from a risk not covered by the insurance described in paragraph 16,
rendering the premises totally or partially inaccessible or unusable, LESSOR
shall restore the
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premises to substantially the same condition as they were in immediately
before destruction. Such destruction shall not terminate this Lease. If the
existing laws do not permit the restoration, either party can terminate this
Lease immediately by giving notice to the other party.
Notwithstanding the foregoing, if the cost of restoration exceeds five
(5%) of the then replacement value of the premises that are destroyed, LESSOR
can elect to terminate this Lease by giving notice to LESSEE within fifteen
(15) days after determining the restoration cost and replacement value.
If LESSOR elects to terminate this Lease LESSEE, within fifteen (15)
days after receiving LESSOR'S notice to terminate, can elect to pay to
LESSOR, at the time LESSEE notifies LESSOR of its election, the difference
between five (5%) of the then replacement value of the premises and the
actual cost of restoration, in which case LESSOR shall restore the premises.
LESSOR shall give LESSEE satisfactory evidence that all sums contributed by
LESSEE as provided in this paragraph have been expended by LESSOR in paying
the cost of restoration.
If LESSOR elects to terminate this Lease and LESSEE does not elect to
contribute toward the cost of restoration as provided in this paragraph, this
Lease shall terminate.
C. EXTENT OF LESSOR'S OBLIGATION TO RESTORE. If LESSOR is required or
elects to restore the premises as provided in this paragraph 17, LESSOR shall
not be required to restore alterations made by LESSEE, LESSEE'S improvements,
LESSEE'S trade fixtures,
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and LESSEE'S personal property, such excluded items being the sole
responsibility of LESSEE to restore.
D. ABATEMENT OF RENT. In case of destruction, whether insured or
uninsured, there shall be an abatement or reduction of rent, except any
percentage rent, between the date of destruction and the date of completion
of restoration, based on the extent to which the destruction interferes with
LESSEE'S use of the premises.
E. DESTRUCTION DURING LAST PART OF TERM. If destruction to the
premises, whether insured or uninsured, occurs during the last seven (7)
years of the term, or during any of the five (5) year option periods referred
to in paragraph 5 hereof, LESSOR can elect not to restore the premises as
required hereunder, by giving notice to LESSEE not more than fifteen (15)
days after the destruction.
Except that, if the destruction occurs during the last seven (7) years
of the term or during any of said five (5) year option periods, and if within
fifteen (15) days after receiving LESSOR'S notice to terminate, LESSEE
exercises the option to extend the term for at least seven (7) additional
years as provided in paragraph 5, LESSOR shall restore the premises as
provided in this paragraph 17.
F. WAIVER OF CIVIL CODE SECTIONS. LESSEE waives the provisions of
Civil Code Section 1932(2) and Civil Code Section 1933(4) with respect to any
destruction of the premises.
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G. DAMAGE AND DESTRUCTION - OTHER BUILDINGS. LESSOR agrees
that in the event any building or buildings in the Shopping
Center other than the building containing the demised premises,
shall be destroyed or damaged by fire or other hazard, during the
term of this Lease, or any renewal thereof, LESSOR shall either
(i) promptly rebuild and repair said building as closely as
possible to such building or buildings shown on Exhibit "A"
attached hereto (provided that if LESSEE consents to the altera-
tion of the building designs and configurations shown on Exhibit
"A" attached hereto, which consent shall not, in the event of
such damage or construction, be unreasonably withheld, than the
rebuilding and repair may be in conformance with such alteration
rather than as shown on Exhibit "A"); or (ii) repair as necessary
to render such building attractive and remove any appearance of
damage or destruction; or (iii) remove the same and, as to any
area vacated by removal, construct and thereafter maintain
thereon a parking area and/or landscaping.
H. RESTORATION. Whenever, under the foregoing provisions
of this paragraph 17, LESSOR shall have the obligation to rebuild
and repair all or any portion of the premises, other building or
buildings and so to continue this Lease in full force and effect,
the same shall be commenced upon the earlier of 1) sixty (60)
days after LESSOR'S obligation so to do becomes fixed by the pro-
visions of this paragraph 17; or 2) the date when any applicable
insurance proceeds become available to LESSOR. LESSOR shall
prosecute such rebuilding and repairing diligently and to the end
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that the premises, other building or buildings will be restored
to substantially the same condition as before the occurrence of
such damage. If, for any reason whatsoever, rebuilding and
repairing is not completed within six (6) months after receipt of
the applicable notices, unless LESSOR be prevented from complet-
ing such rebuilding and repairing by causes or conditions beyond
its control, then, and in either such events, LESSEE may, at its
sole option, terminate this Lease by written notice to LESSOR of
its intention to do so, upon the happening of which, rental shall
be adjusted as of the date of termination, and LESSEE shall have
no further rights hereunder.
17.1 CONDEMNATION FOR REPAIRS.
A. The LESSOR agrees that if any authority condemns the
Shopping Center or any part thereof, other than the premises, as
being unsafe, or not in conformity with the applicable laws or
regulations, the LESSOR, at its own cost and expense, will
promptly make (or cause any other tenant who may be responsible
therefor to make) such changes, alterations or repairs (struc-
tural or non-structural) as may be necessary to comply with such
laws and regulations, or with the requirements of the author-
ity. If, during the time such changes, alterations or repairs
are being performed under this subparagraph A., the premises are
rendered unsuitable for occupancy and use by the LESSEE, the rent
shall abate, and if only a portion of the premises is rendered
unsuitable for such occupancy and use, then the rent shall abate
proportionately.
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B. In the event the premises or any part thereof are con-
demned as being unsafe or not in conformity with the applicable
laws and regulations due to the LESSEE'S particular and specific
use of the premises, (which condemnation would not have occurred
under another, general use of the premises) or due to the defec-
tive condition or use of supplies, materials, and/or equipment
owned or used by LESSEE, or due to a defective condition of such
common facilities or of any part of the premises LESSEE is
required to maintain as herein provided, or due to any alteration
or modification of the premises which has been made by LESSEE,
then, and in that event, LESSEE, at its own cost and expense
agrees to make such changes, alterations and repairs (structural
or non-structural) in the building and equipment or the use of
the same as may be necessary to comply with such laws and regula-
tions, or with the requirements of the authority, but LESSEE
shall be entitled to any condemnation award made to LESSEE in
respect thereto. If, during the time such changes, alterations,
and/or repairs are being performed (under this subparagraph B.)
to the Shopping Center or to the premises, the premises are
rendered untenantable for occupancy and use by LESSEE, the rent
shall not abate.
18. CONDEMNATION. Upon LESSOR'S receipt of notice from any
condemning authority of a proposed condemnation, LESSOR shall
immediately notify LESSEE in writing. If all of the premises
shall be taken under the right of eminent domain by any authority
having the right of condemnation, or if a portion of the Shopping
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Center is so condemned as will prevent the practical use of the
premises for LESSEE'S purposes, this Lease, and all obligations
hereunder, shall terminate on the date title vests pursuant to
such proceedings. In the event the proper judicial authority
does not divide the award to compensate the separate loss of each
party, the total award made in such proceedings shall be equit-
ably distributed between the LESSOR and LESSEE, and if applic-
able, other tenants occupying space in the Shopping Center;
provided that if the parties cannot agree upon an equitable dis-
tribution of such award, either party may petition a court of
competent jurisdiction in the state where the premises are
located for equitable distribution of such award, and in the
event no such court has jurisdiction to determine an equitable
distribution of such awards then either party may request arbi-
tration under the terms hereinafter set forth. If such taking
does not prevent the practical use of the premises for the pur-
poses of the LESSEE, then this Lease shall continue in full force
and effect, but the rent shall abate proportionately, and such
other adjustments shall be made as shall be just and equitable.
In any instance in this Agreement in which it is provided
that a question is agreed to be determined by arbitration, the
following procedure shall govern.
The party desiring arbitration ("First Party") shall give
written notice to that effect to the other party ("Second
Party"), specifying in said notice the name and address of the
person designated to act as arbitrator on its behalf. Within
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fifteen (15) days after the service of such notice, the Second
Party shall give written notice to the First Party specifying the
name and address of the person designated to act as arbitrator on
its behalf. If the Second Party fails to notify the First Party
of the appointment of its arbitrator, as aforesaid, within or by
the time above specified, then the appointment of the second
arbitrator shall be made in the same manner as is hereinafter
provided for the appointment of a third arbitrator in a case
where the two arbitrators are appointed hereunder and the parties
are unable to agree upon such third appointment. The arbitrators
so chosen shall meet within ten (10) days after the second arbi-
trator is appointed, and if, within thirty (30) days after the
second arbitrator is appointed, the said two arbitrators shall
not agree upon the question in dispute, they shall themselves
appoint a third arbitrator who shall be a competent and impartial
person; and in the event of their being unable to agree upon such
appointment within ten (10) days after the time aforesaid, the
third arbitrator shall be selected by the parties themselves if
they can agree thereon within a further period of fifteen (15)
days. If the parties do not so agree, then either party, on
behalf of both, may request such appointment by the presiding
Judge of the Superior Court of Butte County. In the event of the
failure, refusal, or inability of any arbitrator to act, a new
arbitrator shall be appointed in its stead, which appointment
shall be made in the same manner as hereinbefore provided for the
appointment of such arbitrator so failing, refusing or unable to
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act. The decision of the arbitrators so chosen shall be given
within a period of thirty (30) days after the appointment of such
third arbitrator. The decision in which any two arbitrators so
appointed and acting hereunder concur shall in all cases be bind-
ing and conclusive upon the parties. Each party shall pay the
fees and expenses of one of the two original arbitrators
appointed by such party, or in whose stead as above provided,
such arbitrator was appointed, and the fees and expenses of the
third arbitrator and all other expenses, if any, shall be borne
equally by both parties.
19. HOLDING OVER. Except as provided in paragraph 4, if
LESSEE remains in possession of the premises after the expiration
of this Lease, and without the execution of a new lease, it shall
be deemed to be occupying the premises as a tenant from month-to-
month, subject to all the conditions, provisions, and obligations
of this Lease insofar as the same are applicable to a month-to-
month tenancy.
20. SHOWING BY LESSOR. LESSOR may, at any time within six
(6) months before the expiration of this Lease, enter the prem-
ises at all reasonable hours for the purpose of offering the
premises for rent, subject to LESSEE'S rights, as set out in
paragraph 5.
LESSOR may show the premises at any time during the term of
this Lease, on reasonable advance notice to LESSEE, during busi-
ness hours, to prospective purchasers or lenders.
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21. RELATIONSHIP. Nothing contained herein shall be deemed or construed by
the parties hereto, or by any third party, as creating the relation of
principal and agent or of partnership or of joint venture between the parties
hereto. It is understood and agreed that neither method of computation of
rent, nor any other provision contained herein, nor any acts of the parties
hereto creates a relationship other than the relationship of LESSOR and
LESSEE.
22. PARKING AREA. LESSOR agrees that at no time during the term of this
Lease, will LESSOR modify in any manner the customer parking area, entrances
and exits and service areas adjoining the premises without the consent of
LESSEE, unless such modification is necessary by reason of government action.
Any violation of this provision which shall continue for more than thirty
(30) days following written notice of violation to LESSOR shall entitle
LESSEE either to treat such violation as a default with an option to cancel
this Lease or to require proportionate reduction of rent, at LESSEE'S option.
If a mortgagee (or beneficiary under deed of trust) has requested notice of
default of LESSOR pursuant to the provisions of paragraph 25, notice shall
also concurrently be furnished to such mortgagee.
23. UTILITIES. LESSEE agrees to pay all electric current, water, gas, and
other utility bills, as determined by separate meters for LESSEE'S space and
use, provided however, that LESSEE shall be required to pay only its
proportionate share of any such utility costs which are included within the
common area mainte-
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nance expense for which reimbursement is required under paragraph 2 hereof.
LESSOR, at its sole expense, will provide any and all utility meters, utility
hook-up or connection fees or charges for all utilities to the premises.
24. LESSEE DEFAULT.
A. The occurrence of any of the following shall constitute a default by
LESSEE:
1) Failure to pay rent or additional rent when due, if the failure
continues for ten (10) days after notice has been given to LESSEE.
2) Failure to perform any other provision of this Lease if the failure
to perform is not cured within thirty (30) days after notice has
been given to LESSEE. If the default cannot reasonably be cured
within thirty (30) days, LESSEE shall not be in default of this
Lease if LESSEE commences to cure the default within said thirty
(30) day period and diligently and in good faith continues to cure
the default.
Notices given under this paragraph shall specify the alleged default and
the applicable lease provisions, and shall demand that LESSEE perform the
provisions of this Lease or pay the rent that is in arrears, as the case may
be, within the applicable period of time, or quit the premises. No such
notice shall be deemed a forfeiture or a termination of this Lease unless
LESSOR so elects in the notice.
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The purpose of the notice requirements set forth in this paragraph is to
extend the notice requirements of the unlawful detainer statutes of
California; and the notice requirements of this paragraph and the notice
requirements of said unlawful detainer statutes may be satisfied by the
giving of one (1) notice which satisfies the longer of the two (2) notice
requirements.
B. LESSOR'S remedies:
1) In addition to all rights and remedies available to LESSOR at law
or in equity, including but not limited to the remedies available
to LESSOR pursuant to Sections 1951.2 and 1951.4 of the California
Civil Code, LESSOR shall have the following remedies if LESSEE
commits a default. These remedies are not exclusive; they are
cumulative in addition to any remedies now or later allowed by law;
2) LESSOR can continue this Lease in full force and effect, and the
Lease will continue in effect as long as LESSOR does not terminate
LESSEE'S right to possession, and LESSOR shall have the right to
collect rent when due. During the period LESSEE is in default,
LESSOR can enter the premises and relet them, or any part of them,
to third parties for LESSEE'S account. Reletting can be for a
period shorter or longer than the remaining term of this
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Lease, provided, however, that LESSEE'S liability shall not exceed
that which arises under this Lease. LESSEE shall pay to LESSOR the
rent due under this Lease on the dates the rent is due, less the
rent LESSOR receives from any reletting. No act by LESSOR allowed
by this paragraph shall terminate this Lease unless LESSOR
notifies LESSEE that LESSOR elects to terminate this Lease. After
LESSEE'S default and for as long as LESSOR does not terminate
LESSEE'S right to possession of the premises, if LESSEE obtains
LESSOR'S consent, LESSEE shall have the right to assign or sublet
its interest in this Lease; but LESSEE shall not be released from
liability. LESSOR'S consent to a proposed assignment or subletting
shall not be unreasonably withheld.
If LESSOR elects to relet the premises as provided in this paragraph,
rent that LESSOR receives from reletting shall be applied to the payment of:
a) any indebtedness from LESSEE to LESSOR other than rent due
from LESSEE;
b) rent due and unpaid under this Lease. After deducting the
payments referred to in this paragraph, any sum remaining
from the rent LESSOR receives from reletting shall be held
by LESSOR and applied in payment of future
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rent as rent becomes due under this Lease. In no event shall
LESSEE be entitled to any excess rent received by LESSOR. If,
on the date rent is due under this Lease, the rent received
from the reletting is less than the rent due on that date,
LESSEE shall pay to LESSOR the remaining rent due.
3) LESSOR can terminate LESSEE'S right to possession of the premises
at any time. No act by LESSOR other than giving notice to LESSEE
shall terminate this Lease. Acts of maintenance, efforts to relet
the premises, or the appointment of a receiver on LESSOR'S
initiative to protect LESSOR'S interest under this Lease shall not
constitute a termination of LESSEE'S right to possession. On
termination, LESSOR has the right to recover from LESSEE:
a) The worth, at the time of the award, of the unpaid rent that
had been earned at the time of termination of this Lease;
b) The worth, at the time of the award, of the amount by which
the unpaid rent that would have been earned after the date of
termination of this Lease until the time of award exceeds that
amount of the loss of rent that LESSEE proves could have been
reasonably avoided;
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c) the worth, at the time of the award, of the amount by which
the unpaid rent for the balance of the term after the time of
award exceeds the amount of the loss of rent that LESSEE
proves could have been reasonably avoided; and
d) Any other amount, and court costs, necessary to compensate
LESSOR for all detriment proximately caused by LESSEE'S
default. The worth, at the time of the award, as used in a) and
b) of this paragraph is to be computed by allowing interest
at the maximum rate an individual is permitted by law to
charge. The worth, at the time of the award, as referred to in
c) of this paragraph, is to be computed by discounting the
amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus one percent (1%).
25. LESSOR DEFAULT. The LESSOR further covenants with the LESSEE that if
LESSOR shall fail to perform any provision of this Lease which requires the
payment of money, and such failure shall continue for ten (10) days after
notice has been given to LESSOR; or if LESSOR fails to perform any other
provision of this Lease and such failure to perform is not cured within
thirty (30) days after notice has been given to LESSOR (or if such default
cannot reasonably be cured within thirty [30] days, if LESSOR fails
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either to commence to cure the default within said thirty [30] day period or
to diligently and in good faith continue to cure said default) then, and in
addition to the other remedies or courses of action now or hereafter provided
by law, LESSEE may, at its option, among other things, cancel and annul this
Lease, or remedy the condition or need referred to in such notice, or make
the payment which LESSOR has not made, but should have made, or remedy the
condition or need referred to in such notice and deduct LESSEE'S actual cost
or the amount of the payment thereof from subsequent installments of rent.
In the event of any dispute between the parties as to the right of LESSEE to
such deduction, LESSOR further covenants and agrees that it will not give
LESSEE any notice of default or termination of this Lease unless LESSEE shall
fail to pay to LESSOR the amount of any such deduction within ten (10) days
after receipt of notice by LESSEE of a final and unappealable judgment with
respect thereto in favor of LESSOR. If LESSEE elects, as permitted herein,
to make an expenditure and deduct the same from subsequent installments of
rent, LESSEE shall be required to deposit an amount equal to each such
deduction in an interest-bearing account at a bank or savings and loan
institution; such account shall require the signatures of LESSOR and LESSEE
for any withdrawal. Interest earned on such account shall accrue for the
benefit of the party (LESSOR or LESSEE) who ultimately prevails on the issue
of whether such deduction was proper. If it is ultimately determined that
any part of such deduction was proper (because such
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part of the expenditure for which such deduction was made was an obligation
of LESSOR under this Lease), then LESSEE shall be entitled to receive, from
the deposit account, the principal and interest attributable to said portion
of such expenditure, and LESSOR shall pay to LESSEE the difference between:
1) the interest actually earned in such interest-bearing account with respect
to said portion of such expenditure; and 2) the maximum amount of interest
which an individual is permitted to charge under California law, for the
period commencing with the date of such expenditure by LESSEE and terminating
when such payment is made by LESSOR, based upon the principal amount of that
part of such expenditure which has been so determined to be LESSOR'S
obligation. If it is ultimately determined that any part of such deduction
was improper (because such part of the expenditure for which such deduction
was made was not an obligation of LESSOR under this Lease), then LESSOR shall
be entitled to receive from the deposit account the principal and interest
attributable to said portion of such expenditure, and LESSEE shall pay to
LESSOR the difference between: i) the interest actually earned in such
interest-bearing account with respect to said portion of such expenditure;
and ii) the maximum amount of interest which an individual is permitted to
charge under California law, for the period commencing with the date of such
deduction by LESSEE and terminating when such payment is made by LESSEE,
based upon the principal amount of that part of such expenditure which has
been so determined not to have been LESSOR'S obligation.
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In the event that a mortgagee (or beneficiary under a deed of trust)
holding a security interest in the premises shall have furnished written
request to LESSEE, LESSEE, concurrent with furnishing any notice to LESSOR of
an event which is alleged by LESSEE to constitute a default by LESSOR, or
will constitute a default by LESSOR if not cured within a stated period of
time, shall be furnished in duplicate to the address as requested by such
secured lender. The mortgagee (or beneficiary under deed of trust) will be
permitted to tender a cure in like manner as LESSOR is permitted hereunder
provided such lender shall be granted additional time, not to exceed thirty
(30) days, to complete such cure.
26. LEASE APPLIES ONLY TO BUSINESS ON PREMISES. It is understood
that LESSEE is presently involved in numerous other activities at other
locations. In this respect, it is not intended that the gross sales and
other provisions of this Lease shall apply to the business activities of
LESSEE or of any assignee or sublessee of LESSEE at other locations, but
shall apply only to the business conducted on the premises, whether conducted
thereon by LESSEE or by an assignee or sublessee of LESSEE, it being fully
understood that the foregoing provisions are not intended to modify in any
manner the responsibilities or obligations of LESSEE pursuant to paragraph 34
of this Lease.
27. INSURANCE MAY BE PROVIDED BY SUBLESSEE OR ASSIGNEE. It is
further understood that LESSEE at all times shall maintain insurance coverage
it is required to carry hereunder for the
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benefit of LESSOR with a provision in such insurance that there will be no
cancellation without at least thirty (30) days' written notice to LESSOR.
Provided, however, that LESSEE may satisfy this insurance requirement through
the maintenance of such insurance coverage for the benefit of LESSOR, as
required in paragraph 9 above, by LESSEE or by an assignee or sublessee of
LESSEE.
28. EXCLUSIVE. LESSOR covenants that it will not permit any person
other than the LESSEE to operate a retail grocery, meat, or produce store of
any nature in the Shopping Center of which the premises are a part without
first obtaining the LESSEE'S prior written consent, so long as there shall be
the operation of a food supermarket containing not less than 40,000 square
feet within the premises, provided, however, nothing herein shall result in
the termination of such exclusive due to a temporary closing for a reasonable
period of time, including such a closing as may occur for refurbishing,
alterations, repairs in the event of casualty, or transfer of ownership of
the supermarket. Notwithstanding the foregoing, LESSEE consents, in advance,
to the following uses:
A. a specialty bake shop;
B. a delicatessen.
29. ALTERATIONS OR ADDITIONS. The LESSEE shall have the right to make
alterations or additions to the premises, provided such alterations or
additions are at its sole cost and expense, and that such alterations or
additions shall be of good workman-
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ship and material at least equal to that of the original construction, and
that such alterations or additions neither shall reduce the size and strength
of the existing building, nor adversely affect the market value of the
premises; provided, however, that no alteration to any part of the premises
which, under the terms of this Lease, LESSOR is required to maintain or
repair, and no addition to the premises which, under the terms of this Lease,
LESSOR would be required to maintain or repair, and no alterations or
additions to the premises which shall cost more than Fifty Thousand Dollars
($50,000.00) shall be made by the LESSEE without the written consent of the
LESSOR which consent shall not be unreasonably withheld. The LESSEE shall
not be required to remove any alterations or additions as to which LESSEE has
procured LESSOR'S written consent (which consent shall not be unreasonably
withheld) or to restore the building to its original condition at the
termination of this Lease. LESSEE shall, if requested to do so by LESSOR,
remove any alterations or additions made to the premises by LESSEE without
having procured LESSOR'S written consent, and in such event, LESSEE shall
repair any damage to the premises caused by such removal.
30. THIS PARAGRAPH INTENTIONALLY DELETED.
31. THIS PARAGRAPH INTENTIONALLY DELETED.
32. RESTRICTIONS ON USE. LESSOR and LESSEE each agree that the
following uses shall not be permitted within the Shopping Center; including
the demised premises:
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A) For entertainment purposes, such as: cinema, theater,
skating rink, bowling alley, bar, tavern, discotheque, dance
hall, amusement gallery, pool hall, health club, gym, massage
parlor, or off-track betting facility;
B) For the renting, leasing, sale of any motor vehicle including
but not limited to: operation of any dealership relating to
motorcycles, automobiles, trucks, and recreational vehicles,
including trailers;
C) For any non-retail purpose (the following are specifically
recognized as not being non-retail: barber shops, insurance
agencies, travel agencies, medical, veterinary, dental, or
optometric facilities, beauty salons, banks, small loan offices,
real estate offices and gasoline service stations, and the
following, if incidental to retailing: other offices, storage,
repairs, and alteration facilities).
LESSOR agrees that, with respect to the real property which comprises
the Shopping Center as depicted in Exhibit "A", the following additional
restrictions will further apply:
A) No restaurant shall be located within 200 feet from the front
entrance of the premises;
B) No office other than a travel agency or real estate firm,
neither being larger than 2,000 square feet, shall be located
within 250 feet of the front entrance;
C) No training or educational facility shall be located within
200 feet of the front entrance to the premises.
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LESSEE agrees that, with respect to the demised premises, in addition
to the uses restricted throughout the Shopper Center as before set forth,
LESSEE will not utilize the premises for a restaurant, bar-restaurant, train-
ing, or educational facility, offices, sporting goods store, for a business
whose primary use is a yogurt shop, indoor ice cream shop, or for a pharmacy
(apothecary or drug store or super drug store) or for the purpose of operating
a home improvement center or for engaging in the sale of home improvement items
including, but not limited to, lumber, building materials, indoor garden
supplies, except that this restriction against the sale of home improvement
items shall not apply to the premises to the extent that sales of such items
are an incidental part of the business conducted within the premises. For the
purposes of this paragraph such sales shall be deemed "incidental" if they do
not exceed fifteen percent (15%) of the sales made from the store located
within the premises.
33. INITIAL USE AND RIGHT TO CLOSE STORE. LESSEE agrees that the initial
use of the premises shall be for the operation of a supermarket. LESSOR agrees
that nothing in this Lease shall be construed as compelling LESSEE to operate
any particular type of business or to keep the store in or upon the premises
open for business, and LESSEE shall have the privilege of closing said store at
any time, provided LESSEE shall continue to pay the minimum monthly rental,
additional rent, and other monetary obligations as set forth in this Lease.
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In the event that LESSEE permanently closes the store, LESSEE agrees to
notify LESSOR in writing ninety (90) days in advance of such closing of its
intent. LESSOR shall have one (1) year from its receipt of such notice in
which to notify LESSEE of its intent to terminate the Lease. If LESSOR elects
to terminate this Lease, then such termination shall be effective as of the
date of LESSOR'S mailing to LESSEE of its notice of termination. If LESSOR
does not terminate this Lease, or if LESSOR fails to notify LESSEE of its
intention to terminate this Lease, within the above-described period, then,
notwithstanding any contrary provision in paragraph 34 hereof, LESSEE may
sublet the premises without the consent of LESSOR, for any lawful purpose
other than for a purpose restricted as a use of the demised premises under
the provisions of paragraph 32. After said one (1) year period, LESSOR shall
have the continuing right to sublet the premises, so long as LESSEE has not
entered into a prior sublease agreement.
At any time that LESSOR subleases the premises pursuant to the provisions
of this paragraph, this Lease shall immediately terminate and neither LESSOR
nor LESSEE shall have any further rights or obligations hereunder.
LESSOR may not terminate this Lease if LESSEE has temporarily closed the
store, as defined hereinafter, provided LESSEE shall continue to pay the mini-
mum monthly rental, additional rental, and comply with all other covenants of
the Lease. Temporary
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closing of the store shall mean any closing for the following
purposes or reasons:
A. the discontinuance of business at the store by any sublessee or
assignee of LESSEE, provided, however, LESSEE is with due diligence
attempting to secure another sublessee or assignee; provided, however,
that such discontinuance shall constitute a temporary (as opposed to
a permanent closing) only for a period of six (6) months; such a dis-
continuance shall, commencing with the seventh (7th) month, constitute
a permanent closing, entitling LESSOR to terminate this Lease within
the following one (1) year period, as hereinabove provided;
B. damage or destruction pursuant to Article 17 of the Lease;
C. condemnation pursuant to Article 17.1 of the Lease;
D. refixturing of the premises, provided same be undertaken with due
diligence;
E. alterations to the premises pursuant to paragraph 29 of the Lease,
provided same be undertaken with due diligence;
F. the widening or improvement of any roadway adjoining the Shopping
Center to the extent same is permitted pursuant to the Lease;
G. closing of the common and delivery areas to prevent a dedication by
LESSOR of same to any governmental unit; and
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H. any bankruptcy action pursuant to the Federal Bankruptcy Act, as same
may be changed from time to time, filed by or against any sublessee
or assignee.
Any other closing of the store for a period in excess of thirty (30) days
shall be deemed to be a permanent closing of the store.
34. SUBLET OR ASSIGN. The LESSEE shall have the right, during the term
of this Lease, to sublet all or a portion of the premises, or to assign this
Lease, either in whole or in part, but no such subletting or assignment shall
release the LESSEE from any of the obligations under the terms of this Lease,
and the LESSOR shall, at all times, have the right to look to the LESSEE for
the performance of all of the covenants to be performed on the part of the
LESSEE. Provided, however, that:
1) if the assignment or sublease is for retail grocery store purposes,
then, effective the first day of the first month of the effective date
of such subletting or assignment, the minimum annual rent, payable
under paragraph 6.A. hereof, shall be adjusted to an amount equal
to ninety percent (90%) of the average annual total of minimum rent
plus percentage rent payable by LESSEE pursuant to paragraphs 6.A. and
6.B. hereof for the three (3) years next preceding the effective date
of such subletting or assignment; and
2) any assignment or subletting for any use of the premises other than
that of a retail grocery store shall be sub-
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ject to LESSOR'S approval, which shall not be unreasonably withheld.
Provided, further, that in such latter event, the following rules shall
apply:
A. any such proposed assignment or sublease shall be reduced to
writing, signed by the proposed assignee or sublessee and by
LESSEE;
B. such written instrument shall expressly state that it is entered
into subject to the rights of LESSOR, as set forth in this para-
graph, and that if LESSOR elects to cancel this Lease, the parties
thereto recognize and agree that neither LESSEE nor said proposed
assignee or sublessee shall have any further rights or duties under
said written agreement, which shall terminate upon the termination
of this Lease;
C. LESSEE shall furnish a copy of said instrument to LESSOR;
D. LESSOR shall have the option, exerciseable by LESSOR furnishing
written notice of exercise thereof to LESSEE within sixty (60) days
after LESSOR'S receipt of a copy of such instrument, to terminate
this Lease. If LESSOR so elects to terminate this Lease, neither
LESSOR nor LESSEE shall have any further rights or duties here-
under;
E. if LESSOR fails to exercise such option within said sixty (60) day
period, then the agreement between
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LESSEE and said proposed assignee or sublessee shall be effective
in accordance with the terms and provisions set forth in such
instrument. If LESSEE and such proposed assignee or sublessee
do not enter into an agreement on the same terms as were contained
in the instrument furnished to LESSOR, then LESSOR'S sixty (60) day
option rights shall begin anew with respect to any different terms
proposed to be entered into between LESSEE and said (or any new)
proposed assignee or sublessee;
F. if LESSOR exercises the option to terminate this Lease, as herein
provided, then LESSOR shall be free to negotiate or contract (or
refrain from negotiating or contracting) with such proposed
assignee or sublessee, as LESSOR deems appropriate.
35. LESSOR'S WAIVER. LESSOR agrees that none of the property, including
food, supplies, merchandise, inventory, furniture, fixtures, machinery, equip-
ment, cash or any proceeds therefrom that are placed upon or permitted to be
upon the premises by LESSEE, or any of LESSEE'S sub-tenants, assigns, or succe-
ssors, during the term of this Lease or any renewal thereof, shall be subject
to or liable for levy or distress or any legal process whatsoever for the
collection of rent for the premises. In the event there is a mortgage on the
premises, the LESSOR shall obtain the same waiver from the mortgagee.
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36. NOTICES AND DELIVERY OF ITEMS SENT BY MAIL. Any notice required or
desired to be given to either party shall be in writing and be sent by
first-class mail, postage prepaid. Any such notice to the LESSOR shall be
addressed to it as follows:
DOUGLAS W. BRADFORD
2694 BISHOP DRIVE
SUITE 202
SAN RAMON, CALIFORNIA 94583
Any such notice to the LESSEE shall be addressed to it at 1231 Colusa
Avenue, Yuba City, California 95991. The address of either party may be
changed by written notice thereof to the other party.
With respect to all notices and all other items, including rental, which
may be or are required to be sent by mail, registered or otherwise, the
placing of any such item in the United States mail, being properly addressed,
postage prepaid by the sender, shall constitute delivery to the other party
unless other provisions of this Lease specifically state to the contrary as
to what constitutes delivery of said item.
37. CAPTIONS. Any headings preceding the text of the several
paragraphs and subparagraphs hereof are inserted solely for convenience of
reference and shall not constitute a part of this Lease, nor shall they
affect its meaning, construction or effect.
38. ADVANCE POSSESSION FOR FIXTURE INSTALLATION. Provided LESSEE shall
have taken out and is then maintaining, in full force and effect, all
insurance required to be provided by LESSEE hereunder, LESSEE shall have the
privilege rent free of entering
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<PAGE>
the premises for the purpose of installing its store and trade fixtures,
storing its first items of equipment and otherwise preparing the premises for
LESSEE'S occupancy prior to the rent commencement date.
When the performance of the LESSOR'S work has proceeded to the point
where LESSEE can commence any portion of its work and the installation of
LESSEE'S trade fixtures, furniture and equipment in the premises, in
accordance with good construction practice together with adequate security of
the premises, be commenced, LESSOR shall notify LESSEE to that effect.
LESSEE agrees to install its trade fixtures and equipment in the premises in
a prompt and expeditious manner so as not to delay LESSOR in readying the
premises for occupancy at the earliest possible date referred to hereinabove.
LESSEE further agrees not to engage any persons in the
installation of such fixtures and equipment which would result in
a work stoppage by employees of the general contractor or any
subcontractor engaged readying the premises for occupancy.
39. SUBORDINATION. LESSEE agrees that this Lease shall be subordinate
to any mortgage that may hereafter be placed upon the premises and to all
renewals and extensions thereof provided that a) the mortgagee named in such
mortgage shall agree to recognize this Lease in the event of foreclosure if
the LESSEE is not then in default, b) in the event the premises are damaged
or destroyed at a time when neither LESSOR nor LESSEE are in default under
the terms of this Lease, and LESSOR is not in default under the terms
-71-
<PAGE>
of any such mortgage, any insurance proceeds that are available under the
insurance policy(s) hereinabove required to be maintained under paragraph 16
are first applied to repair, replace or rebuild the premises so damaged or
destroyed, if LESSOR and/or LESSEE under the terms of paragraph 17 above,
either are required to elect to repair, replace or rebuild the premises, and
c) any proceeds from condemnation awarded to LESSEE and/or its sublessee
under paragraph 17.1 and paragraph 18 above shall be the sole property of
LESSEE and/or its sublessee. If requested by LESSOR to do so, LESSEE shall
execute and deliver to any prospective lender of LESSOR, an Estoppel
Certificate which shall, to the extent applicable at the time of such
request, be in the form of Exhibit "C" attached hereto and made a part hereof.
40. BINDING EFFECT. This agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and assigns.
41. MERGER. This agreement contains the entire agreement of the
parties hereto, both written and oral, and shall not be amended, altered or
otherwise modified except in writing signed by the parties.
42. TIME. Time is of the essence in the performance of all obligations
of LESSOR and LESSEE hereunder for which a time of performance is specified.
43. CHOICE OF LAWS. This agreement shall be construed under
and in accordance with the laws of the State of California, and
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<PAGE>
all obligations of the parties created hereunder are performable
in Butte County, California.
44. EXCLUSION FROM GROSS SALES. Notwithstanding any contrary provision
in this lease, for the purpose of calculating the percentage rent payable
hereunder, no portion of the retail price of tickets or shares sold at the
leased premises pursuant to the California State Lottery Act in connection
with any Lottery Game authorized by the California State Lottery Commission
shall be included in the determination of the amount of sales made at said
premises. PROVIDED, however, that if the portion of the retail price of such
tickets or shares which LESSEE is entitled to retain ("LESSEE'S COMMISSION")
is increased to a portion in excess of five percent (5%) of the retail price
thereof, then LESSOR may, at its expense, perform an investigation to
determine whether, after consideration of LESSEE'S costs of administering the
sale of such lottery tickets or shares, LESSEE enjoys a net profit on such
sales. LESSEE shall be entitled to participate in such investigation. If it
is determined that such a profit is being achieved, the portion of LESSEE'S
COMMISSION which results in such profit shall be included in gross sales,
commencing on the first day of the first month after such determination is
made, for the purpose of calculating the percentage rent payable hereunder.
45. SUBDIVISION OF SHOPPING CENTER. LESSEE agrees that LESSEE will
cooperate with LESSOR should LESSOR determine to cause to be recorded a
subdivision or parcel map for the Shopping
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<PAGE>
Center; the expense of such subdivision or parcel map to be that of LESSOR
and subject to approval of LESSEE, which approval shall not be unreasonably
withheld if documentation is presented to LESSEE including a reciprocal
easement agreement which provides terms such that there is provided provision
for common management of the Shopping Center, mutual easements between the
parties as required for the operation of the Shopping Center, and
restrictions consistent with the terms of this Lease. provided, however,
that no such reciprocal easement agreement shall have the effect of relieving
LESSOR of its duties hereunder, except that performance of such duties by any
other person shall, to that extent, constitute performance by LESSOR of such
duties.
46. RECIPROCAL EASEMENT AGREEMENT. LESSEE agrees to review and not
unreasonably withhold execution of a reciprocal easement agreement ("REA")
suitable for placing, of record, provision for mutual easements for use of
the common area, provisions for management should ownership of portions of
the Shopping Center be separated, and provisions for restrictions upon use
consistent with the provisions of this Lease. The obligation of LESSEE to
approve and join in the execution of any such REA is further subject to the
requirement that the terms and provisions thereof are such as to fully
protect LESSEE'S rights under this Lease, and not to impose any additional
obligations or costs on LESSEE. Such REA shall further provide that LESSEE
shall be a required party to any subsequent modification or termination of
such REA.
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<PAGE>
47. SALE OF PREMISES BY LESSOR. In the event of any sale, exchange,
or other transfer of the premises by LESSOR of this Lease, LESSOR shall be
entirely relieved of all liability under the terms, covenants and conditions
set forth in this Lease arising out of any act or omission occurring after
assignment of this Lease provided that the assignee assumes, in a writing
delivered to LESSEE, LESSOR'S covenants and obligations arising after the
date of such assignment. LESSEE shall attorn to such new LESSOR. Upon ten
(10) days prior written notice from LESSOR, LESSEE shall, from time to time,
execute and deliver to LESSOR or any person designated by LESSOR, an estoppel
certificate stating the current status of the material provisions of this
Lease. Any such statement may be relied upon by any purchaser or other
transferee of the premises.
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as
of the date and year first above written.
LESSOR
/s/ Douglas W. Bradford
__________________________________
Douglas W. Bradford
LESSEE
NETCO FOODS, INC.,
a California corporation
/s/ Steve G. Nettleton
By________________________________
Steve G. Nettleton, President
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<PAGE>
The commencement date of this Lease, as provided in paragraph ______,
page ____ hereof, is agreed to be the ___ day of _______________, 198_.
LESSOR
__________________________________
Douglas W. Bradford
LESSEE
NETCO FOODS, INC.,
a California corporation
By________________________________
Steve G. Nettleton, President
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<PAGE>
STATE OF CALIFORNIA )
) ss.
COUNTY OF ___________)
On this the _____ day of _______________19__, before me,
the undersigned Notary Public in and for said State, personally
appeared DOUGLAS W. BRADFORD, personally known to me or proved to
me on the basis of satisfactory evidence, to be be the person who
executed the within instrument and acknowledged to me that he
executed the same.
WITNESS my hand and official seal.
____________________________
NOTARY PUBLIC
STATE OF CALIFORNIA )
) ss.
COUNTY OF____________)
On this the _____ day of _______________, 198_, before me,
the undersigned Notary Public in and for said State, personally
appeared STEVE G. NETTLETON, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person who
executed the within instrument as President of NETCO FOODS, INC.,
on behalf of said corporation, and acknowledged to me that the
corporation executed the same.
WITNESS my hand and official seal.
____________________________
NOTARY PUBLIC
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DOOR SCHEDULE
AUTOMATIC ENTRANCE - Stanley automatic doors, Dura Glide
DOORS 2000. Bi-part package with transom and
fixed sidelight door package #2272.
STORAGE - Openings 5'0" or wider: to be 2
double-acting alum. doors with vision
panels and jam guards.
- Openings 4'0" wide: to be 2 double-
acting alum. doors with vision panels.
- Openings 3'0" and narrower: to be
single double-acting door with vision
panel.
RESTROOMS - Solid-core wood doors. If restrooms
are handicap restrooms, doors must meet
code.
OFFICES - Solid-core wood doors.
MEAT PROCESSING - N.I.C.
EMPLOYEES' LOUNGE - If door is indicated on plan, use
double alum. door with vision panels.
SINGLE DOOR RECEIVING - 1 3/4" thick 16 Ga. steel door with
lock bar.
INCIN. FEED ROOM - 1 3/4" thick 2 Hr. rated steel fire
door with fuse link.
REAR RECEIVING - 20 Ga. roll-up slat door or 1 3/4"
thick 16 Ga. steel doors with lock bars.
BUILDING OPENINGS FOR - 8'0" wide x 10'0" high masonry
OUTSIDE COOLER AND openings.
FREEZER
BAKE-OFF - 2 double-acting alum. doors with vision
panels.
MECH. ROOM - 1 3/4" thick 16 Ga. steel doors with
lock bars.
NOTE: 1. Sizes of doors as indicated on Lessee's fixture layout.
2. Steel receiving doors to the outside swinging in or out
should be provided with adjustable sweeps. No thresholds
are to be installed on these doors.
3. Building opening dimensions are for 14'0" coolers with
6' x 9' doors. Smaller coolers with smaller doors will
need smaller openings.
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ESTOPPEL CERTIFICATE
REAL PROPERTY: SEE LEGAL DESCRIPTION (attached hereto as Exhibit "l" and
made a part hereof)
LEASE: BUILD AND LEASE AGREEMENT dated ______________ (attached
hereto as Exhibit "2" and made a part hereof)
PARTIES: LESSOR: ______________________________________
LESSEE: NETCO FOODS, INC., a California corporation
The undersigned, as LESSEE, hereby confirms the following:
1. ____________________________________ ("MORTGAGEE") has advised
LESSEE that it proposes to make a mortgage loan to _______________________,
a California Limited Partnership ("LESSOR"), to be secured by a Mortgage or
Deed of Trust covering the aforesaid tract of land and all of LESSOR'S
improvements thereon and a security interest in all of the LESSOR'S personal
property thereon or used in connection therewith and to be further secured by
assignment of said Lease Agreement. MORTGAGEE has further advised LESSEE that
LESSOR has entered into a written agreement pursuant to which it will assign
all of its
-1-
EXHIBIT "C"
<PAGE>
rights, title, and interest in said Lease Agreement and the said REAL
PROPERTY of which the leasehold is a part, to MORTGAGEE. LESSEE hereby
consents to the aforementioned assignment of said Lease Agreement, by the
LESSOR to MORTGAGEE as security for the mortgage loan, to be made with the
understanding that the personal property of the LESSEE or of its sublessee
shall not be subject to or liable to levy or distress or any legal process
whatsoever for the collection of any amount becoming payable to MORTGAGEE in
connection with said mortgage loan.
2. LESSEE has entered into a certain Lease Agreement with respect to
the above described real estate.
3. The improvements and space required to be furnished according to
the terms of said Lease Agreement have yet to be constructed and furnished in
accordance with said Lease Agreement, and upon completion of said
improvements and space, LESSEE shall furnish to MORTGAGEE, LESSEE'S punch
list, to be marked Exhibit "3" and to be attached hereto and to be
incorporated herein at that time.
4. Said Lease Agreement has not been modified, altered or amended or
assigned except as hereinabove referenced.
5. There are no off-sets or credits against rental as of this date,
except as may be set forth in Exhibit "4" attached hereto and incorporated
herein, nor have rentals been prepaid except as provided by the terms of said
Lease Agreement.
6. Rentals commence to accrue on the Commencement Date endorsed at the
end of said Lease Agreement unless a Rent Com-
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<PAGE>
mencement Date appears at paragraph 6.A.(1) of said Lease Agreement.
The primary lease term expires twenty (20) years from the Commencement Date
set forth in paragraph 4 of said Lease Agreement. Minimum monthly
installments of rent (excluding additional rent provided in Paragraph 6B) of
said Lease Agreement are as set forth in said Lease Agreement.
7. LESSEE has no notice of a prior assignment, hypothecation or
pledge of rents or said Lease Agreement, except as herein referenced.
8. LESSEE agrees that in the event of a default by said LESSOR in the
performance of any obligation to be performed by said LESSOR under said Lease
Agreement, LESSEE will, prior to terminating said Lease Agreement, or
exercising any other remedies available to it thereunder, provide MORTGAGEE a
copy of any and all notices of default sent to LESSOR, wherein MORTGAGEES shall
have the same rights and privileges, but not the obligation, of LESSOR to
cure said defaults of LESSOR under the terms of said Lease Agreement.
9. LESSEE agrees that upon proper written notification from MORTGAGEE
of a default by LESSOR in the payment of LESSOR'S indebtedness to MORTGAGEE,
and upon LESSEE'S receipt of a presently effective assignment of said lease
(or the rents becoming due thereunder) to MORTGAGEE, executed by LESSOR,
that LESSEE will thereafter pay all subsequent installments of rent
thereinafter coming due under said Lease Agreement, to MORTGAGEE, as the
holder of the indebtedness, so long as (a) MORTGAGEE, as holder,
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<PAGE>
together with LESSOR, agree to hold LESSEE and its sublessee harmless from
any liability and for all costs, including reasonable attorney's fees, that
may be incurred on the part of LESSEE or its sublessee to protect its
leasehold interest rights under said Lease Agreement arising and due to any
dispute between MORTGAGEE, as holder, and LESSOR on any contestment as to the
rents or on any foreclosure proceedings and (b) MORTGAGEE has provided such
reasonable legal documentation as LESSEE may request from MORTGAGEE.
10. Said Lease Agreement shall be subject and subordinate to the
lien of MORTGAGEE'S mortgage referred to above to the full extent of the
principal sum secured thereby and interest thereon, and to all renewals,
modifications, consolidations, replacements and extensions thereof so long as
MORTGAGEE first provides to LESSEE a written agreement that provides as
follows:
(i) As long as LESSEE performs its obligations under the Lease
Agreement, no foreclosure of, deed given in lieu of foreclosure of, or
sale under MORTGAGEE'S mortgage, and no steps or procedures taken under
said mortgage shall affect LESSEE'S rights under the Lease Agreement.
(ii) The provisions of said Lease Agreement concerning repair,
replacements, rebuilding, due to damage or destruction, of the premises
(and any other building or buildings or other improvements in the shopping
center, if any, of which the demised premises is a part) shall prevail over
any conflicting provisions in the mortgage, and the proceeds of any
-4-
<PAGE>
insurance carried by LESSOR which cover such damage or destruction shall
be available for such repair, replacement, or rebuilding notwithstanding
any contrary provisions in said mortgage; provided, however that MORTGAGEE
shall have the right to hold and disburse any such insurance proceeds for
the purpose of accomplishing such repair, replacement, or rebuilding, to
the extent provided for in the mortgage.
(iii) The provisions of said Lease Agreement and this Estoppel
Certificate concerning the disposition of any condemnation award shall
prevail over any conflicting provisions in the mortgage.
(iv) MORTGAGEE agrees that LESSEE shall not be bound by any renewal,
modification, consolidation, or replacement of said mortgage unless and
until LESSEE has received written notice and a copy thereof.
11. In the event MORTGAGEE succeeds to the interest of LESSOR under
said Lease Agreement, during the original or any renewed term of said Lease
Agreement, LESSEE agrees to attorn to MORTGAGEE, or any party lawfully
representing its interest or acting for its benefit (so long as LESSEE has
received prior written notice of the fact that any such party is representing
MORTGAGEE'S interest or acting for MORTGAGEE'S benefit) and that such party
has agreed to be bound by and to accept the responsibilities and obligations
of said Lease Agreement, and to be bound by, and perform all of the
obligations and conditions imposed upon LESSOR by said Lease Agreement.
-5-
<PAGE>
12. In the event MORTGAGEE succeeds to the interest of LESSOR under
said Lease Agreement, as a result of any foreclosure on said mortgage by
MORTGAGEE, LESSEE agrees that MORTGAGEE shall not be bound by any rent which
LESSEE might have paid for more than the current month to LESSOR or any other
lessor prior to MORTGAGEE, which payments were made subsequent to LESSEE'S
receipt of written notice of the date on which MORTGAGEE succeeded to
LESSOR'S interest under said Lease Agreement.
13. Except for the amendments, modifications, and assignment stated
above, if any, LESSEE agrees that MORTGAGEE shall not be bound by any other
amendment, modification, or assignment of said Lease Agreement, made without
its consent, unless such consent is unreasonably withheld in which case this
Paragraph 13 shall be null and void.
14. This Estoppel Certificate shall not be effective and binding upon
LESSEE until such time as LESSEE receives written notification from MORTGAGEE
that MORTGAGEE has made said mortgage loan to LESSOR and the date on which
said mortgage loan was made. The subordination provisions of Paragraph 10
hereof shall not be effective unless and until LESSEE receives the written
agreement of MORTGAGEE which is described in Paragraph 10 hereof.
15. This Estoppel Certificate shall not be binding upon LESSEE as
regards any subsequent successors or assigns of MORTGAGEE unless LESSEE is
first notified in writing and consents to be bound.
-6-
<PAGE>
16. Except as hereinabove set forth, LESSEE does not waive, alter,
amend, or otherwise modify any rights or remedies it has under said Lease
Agreement.
17. The representations and agreements herein contained shall be
binding upon the LESSEE and LESSEE'S respective successors and assigns and
shall inure to the benefit of MORTGAGEE, as holder of the indebtedness
secured by assignment of said Lease Agreement.
Dated this 25th day of May 1988.
NETCO FOODS, INC.,
a California corporation
By /s/ Steve G. Nettleton
---------------------------------------
Steve G. Nettletton, President
-7-
<PAGE>
DESCRIPTION
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF
CALIFORNIA, COUNTY OF BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
LOT 4, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL
SUBDIVISION", WHICH MAP WAS RECORDED IN THE OFFICE OF THE
RECORDER OF THE COUNTY OF BUTTE, STATE OF CALIFORNIA, ON JULY 6,
1965, IN BOOK 34 OF MAPS, AT PAGE(S) 7, 8 AND 9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF
CALIFORNIA, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT WHICH IS THE INTERSECTION OF THE EAST LINE
OF LOT 2, AS SHOWN ON SAID MAP, WITH THE WESTERLY LINE OF STATE
HIGHWAY ROUTE 99, SAID POINT BEING DISTANT 90.00 FEET
SOUTHWESTERLY MEASURED AT A RIGHT ANGLE FROM THE BASE LINE AT
ENGINEER'S STATION (C-1) 488+87.54 OF THE DEPARTMENT OF PUBLIC
WORKS SURVEY ON ROAD 03-BUT-99 FROM POST MILE 30.0 TO 37.3;
THENCE FROM SAID POINT OF BEGINNING NORTH 32 DEG. 24' 21" WEST,
718.93 FEET; THENCE ALONG A TANGENT CURVE TO THE LEFT, HAVING A
RADIUS OF 2940.00 FEET, THROUGH AN ANGLE OF 2 DEG. 25' 14", AN
ARC DISTANCE OF 124.21 FEET TO A POINT OF COMPOUND CURVE; THENCE
ON A CURVE TO THE LEFT, WITH A RADIUS OF 815.00 FEET, THROUGH AN
ANGLE OF 25 DEG. 39' 46", AN ARC DISTANCE OF 365.04 FEET; THENCE
NORTH 60 DEG. 29' 31" WEST, 603.28 FEET; THENCE NORTH 85 DEG. 37'
47" WEST, 152.81 FEET; THENCE SOUTH 80 DEG. 00' 30" WEST, 188.24
FEET TO A POINT ON THE SOUTH LINE OF 20TH STREET, AS SHOWN ON
SAID MAP OF "CHICO INDUSTRIAL PARK"; THENCE ALONG SAID SOUTH LINE
OF 20TH STREET ON A CURVE TO THE LEFT, TANGENT TO A LINE BEARING
NORTH 79 DEG. 40' 52" EAST, HAVING A RADIUS OF 642.00 FEET,
THROUGH AN ANGLE OF 15 DEG. 22' 20", AN ARC DISTANCE OF 172.25
FEET; THENCE CONTINUING ALONG SOUTH LINE OF 20TH STREET, SOUTH 30
DEG. 29' 31" EAST, 2.33 FEET; THENCE NORTH 68 DEG. 31' 52" EAST,
114.77 FEET; THENCE NORTH 64 DEG. 28' 40" EAST, 461.74 FEET TO
THE INTERSECTION OF THE SOUTHERLY LINE OF SAID 20TH STREET WITH
THE WESTERLY LINE OF STATE HIGHWAY ROUTE 99; THENCE ALONG SAID
WESTERLY LIKE SOUTH 30 DEG. 29' 31" EAST, 1766.67 FEET TO THE
POINT OF BEGINNING.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES BELOW A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS
BELOW A DEPTH OF 250 FEET OF SAID REAL PROPERTY WITHOUT THE RIGHT
OF SURFACE ENTRY.
ALSO EXCEPTING THEREFROM THOSE PORTIONS DEEDED TO THE CITY OF
CHICO, BY DEEDS RECORDED APRIL 28, 1980, IN BOOK 2510, PAGE 195,
OFFICIAL RECORDS, AND RECORDED MAY 15, 1980, IN BOOK 1515 PAGE
276, OFFICIAL RECORDS.
<PAGE>
DESCRIPTION
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF
CALIFORNIA, COUNTY OF BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
L0T 9, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL
SUBDIVISION", WHICH MAP WAS RECORDED IN THE OFFICE OF THE
RECORDER OF THE COUNTY OF BUTTE, STATE OF CALIFORNIA, ON JULY 6,
1965, IN BOOK 34 OF MAPS, AT PAGE(S) 7, 8 AND 9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF
CALIFORNIA, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT WHICH IS THE INTERSECTION OF THE EAST LINE
OF LOT 2, AS SHOWN ON SAID MAP, WITH THE WESTERLY LINE OF STATE
HIGHWAY ROUTE 99, SAID POINT BEING DISTANT 90.00 FEET
SOUTHWESTERLY MEASURED AT A RIGHT ANGLE FROM THE BASE LINE AT
ENGINEER'S STATION (C-1) 488+87.54 OF THE DEPARTMENT OF PUBLIC
WORKS SURVEY ON ROAD 03-BUT-99 FROM POST MILE 30.0 TO 37.3;
THENCE FROM SAID POINT OF BEGINNING NORTH 32 DEG. 24' 21" WEST,
718-93 FEET; THENCE ALONG A TANGENT CURVE TO THE LEFT, HAVING A
RADIUS OF 2940.00 FEET, THROUGH AN ANGLE OF 2 DEG. 25' 14", AN
ARC DISTANCE OF 124.21 FEET TO A POINT OF COMPOUND CURVE; THENCE
ON A CURVE TO THE LEFT, WITH A RADIUS OF 815.00 FEET, THROUGH AN
ANGLE OF 25 DEG. 39' 46", AN ARC DISTANCE OF 365.04 FEET; THENCE
NORTH 60 DEG. 29' 31" WEST, 603.28 FEET; THENCE NORTH 85 DEG. 37'
47" WEST, 152.81 FEET; THENCE SOUTH 80 DEG. 00' 30" WEST, 188.24
FEET TO A POINT ON THE SOUTH LINE OF 20TH STREET, AS SHOWN ON
SAID MAP OF "CHICO INDUSTRIAL PARK"; THENCE ALONG SAID SOUTH LINE
OF 20TH STREET ON A CURVE TO THE LEFT, TANGENT TO A LINE BEARING
NORTH 79 DEG. 40' 52" EAST, HAVING A RADIUS OF 642.00 FEET,
THROUGH AN ANGLE OF 15 DEG. 22' 20", AN ARC DISTANCE OF 172.25
FEET; THENCE CONTINUING ALONG SOUTH LINE OF 20TH STREET, SOUTH 30
DEG. 29' 31" EAST, 2.33 FEET; THENCE NORTH 68 DEG. 31' 52" EAST,
114.77 FEET; THENCE NORTH 64 DEG. 28' 40" EAST, 461.74 FEET TO
THE INTERSECTION OF THE SOUTHERLY LINE OF SAID 20TH STREET WITH
THE WESTERLY LINE OF STATE HIGHWAY ROUTE 99; THENCE ALONG SAID
WESTERLY LINE SOUTH 30 DEG. 29' 31" EAST, 1766.67 FEET TO THE
POINT OF BEGINNING.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES BELOW A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS
BELOW A DEPTH OF 250 FEET OF SAID REAL PROPERTY WITHOUT THE RIGHT
OF SURFACE ENTRY.
ALSO EXCEPTING THEREFROM THOSE PORTIONS DEEDED TO THE CITY OF
CHICO, BY DEEDS RECORDED APRIL 28, 1980, IN BOOK 2510, PAGE 195,
OFFICIAL RECORDS, AND RECORDED MAY 15, 1980, IN BOOK 1515, PAGE
276, OFFICIAL RECORDS.
<PAGE>
DESCRIPTION
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF
CALIFORNIA, COUNTY OF BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
L0T 9, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL
SUBDIVISION", WHICH MAP WAS RECORDED IN THE OFFICE OF THE
RECORDER OF THE COUNTY OF BUTTE, STATE OF CALIFORNIA, ON JULY 6,
1965, IN BOOK 34 OF MAPS, AT PAGE(S) 7, 8 AND 9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF
CALIFORNIA, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT WHICH IS THE INTERSECTION OF THE EAST LINE
OF LOT 2, AS SHOWN ON SAID MAP, WITH THE WESTERLY LINE OF STATE
HIGHWAY ROUTE 99, SAID POINT BEING DISTANT 90.00 FEET
SOUTHWESTERLY MEASURED AT A RIGHT ANGLE FROM THE BASE LINE AT
ENGINEER'S STATION (C-1) 488+87.54 OF THE DEPARTMENT OF PUBLIC
WORKS SURVEY ON ROAD 03-BUT-99 FROM POST MILE 30.0 TO 37.3;
THENCE FROM SAID POINT OF BEGINNING NORTH 32 DEG. 24' 21" WEST,
718.93 FEET; THENCE ALONG A TANGENT CURVE TO THE LEFT, HAVING A
RADIUS OF 2940.00 FEET, THROUGH AN ANGLE OF 2 DEG. 25' 14", AN
ARC DISTANCE OF 124.21 FEET TO A POINT OF COMPOUND CURVE; THENCE
ON A CURVE TO THE LEFT, WITH A RADIUS OF 815.00 FEET, THROUGH AN
ANGLE OF 25 DEG. 39' 46", AN ARC DISTANCE OF 365.04 FEET; THENCE
NORTH 60 DEG. 29' 31" WEST, 603.28 FEET: THENCE NORTH 85 DEG. 37'
47" WEST, 152.81 FEET; THENCE SOUTH 80 DEG. 00' 30" WEST, 188.24
FEET TO A POINT ON THE SOUTH LINE OF 20TH STREET, AS SHOWN ON
SAID MAP OF "CHICO INDUSTRIAL PARK"; THENCE ALONG SAID SOUTH LINE
OF 20TH STREET ON A CURVE TO THE LEFT, TANGENT TO A LINE BEARING
NORTH 79 DEG. 40' 52" EAST, HAVING A RADIUS OF 642.00 FEET,
THROUGH AN ANGLE OF 15 DEG. 22' 20", AN ARC DISTANCE OF 172.25
FEET; THENCE CONTINUING ALONG SOUTH LINE 0F 20TH STREET, SOUTH 30
DEG. 29' 31" EAST, 2.33 FEET; THENCE NORTH 68 DEG. 31' 52" EAST,
114.77 FEET; THENCE NORTH 64 DEG. 28' 40" EAST, 461.74 FEET TO
THE INTERSECTION OF THE SOUTHERLY LINE OF SAID 20TH STREET WITH
THE WESTERLY LINE OF STATE HIGHWAY ROUTE 99; THENCE ALONG SAID
WESTERLY LINE SOUTH 30 DEG. 29' 31" EAST, 1766.67 FEET TO THE
POINT OF BEGINNING.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES BELOW A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS
BELOW A DEPTH OF 250 FEET OF SAID REAL PROPERTY WITHOUT THE RIGHT
OF SURFACE ENTRY.
ALSO EXCEPTING THEREFROM THOSE PORTIONS DEEDED TO THE CITY OF
CHICO, BY DEEDS RECORDED APRIL 28, 1980, IN BOOK 2510, PAGE 195,
OFFICIAL RECORDS, AND RECORDED MAY 15, 1980, IN BOOK 1515, PAGE
276, OFFICIAL RECORDS.
<PAGE>
DESCRIPTION
ALL THAT CERTAIN REAL PROPERTY SITUATE IN THE STATE OF
CALIFORNIA, COUNTY OF BUTTE, CITY OF CHICO, DESCRIBED AS FOLLOWS:
LOT 4, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "CHICO INDUSTRIAL
SUBDIVISION", WHICH MAP WAS RECORDED IN THE OFFICE OF THE
RECORDER OF THE COUNTY OF BUTTE, STATE OF CALIFORNIA, ON JULY 6,
1965, IN BOOK 34 OF MAPS, AT PAGE(S) 7, 8 AND 9.
EXCEPTING THEREFROM THAT PORTION DEEDED TO THE STATE OF
CALIFORNIA, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT WHICH IS THE INTERSECTION OF THE EAST LINE
OF LOT 2, AS SHOWN ON SAID MAP, WITH THE WESTERLY LINE OF STATE
HIGHWAY ROUTE 99, SAID POINT BEING DISTANT 90.00 FEET
SOUTHWESTERLY MEASURED AT A RIGHT ANGLE FROM THE BASE LINE AT
ENGINEER'S STATION (C-1) 488+87.54 OF THE DEPARTMENT OF PUBLIC
WORKS SURVEY ON ROAD 03-BUT-99 FROM POST MILE 30.0 TO 37.3;
THENCE FROM SAID POINT OF BEGINNING NORTH 32 DEG. 24' 21" WEST,
718.93 FEET; THENCE ALONG A TANGENT CURVE TO THE LEFT, HAVING A
RADIUS OF 2940.00 FEET, THROUGH AN ANGLE OF 2 DEG. 25' 14", AN
ARC DISTANCE OF 124.21 FEET TO A POINT OF COMPOUND CURVE; THENCE
ON A CURVE TO THE LEFT, WITH A RADIUS OF 815.00 FEET, THROUGH AN
ANGLE OF 25 DEG. 39' 46", AN ARC DISTANCE OF 365.04 FEET; THENCE
NORTH 60 DEG. 29' 31" WEST, 603.28 FEET; THENCE NORTH 85 DEG. 37'
47" WEST, 152.81 FEET; THENCE SOUTH 80 DEG. 00' 30" WEST, 188.24
FEET TO A POINT ON THE SOUTH LINE OF 20TH STREET, AS SHOWN ON
SAID MAP OF "CHICO INDUSTRIAL PARK"; THENCE ALONG SAID SOUTH LINE
OF 20TH STREET ON A CURVE TO THE LEFT, TANGENT TO A LINE BEARING
NORTH 79 DEG. 40' 52" EAST, HAVING A RADIUS OF 642.00 FEET,
THROUGH AN ANGLE OF 15 DEG. 22' 20", AN ARC DISTANCE OF 172.25
FEET; THENCE CONTINUING ALONG SOUTH LINE OF 20TH STREET, SOUTH 30
DEG. 29' 31" EAST, 2.33 FEET; THENCE NORTH 68 DEG. 31' 52" EAST,
114.77 FEET; THENCE NORTH 64 DEG. 28' 40" EAST, 461.74 FEET TO
THE INTERSECTION OF THE SOUTHERLY LINE OF SAID 20TH STREET WITH
THE WESTERLY LINE OF STATE HIGHWAY ROUTE 99; THENCE ALONG SAID
WESTERLY LINE SOUTH 30 DEG. 29' 31" EAST, 1766.67 FEET TO THE
POINT OF BEGINNING.
ALSO EXCEPTING ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES BELOW A DEPTH OF 500 FEET AND ALL GEOTHERMAL RIGHTS
BELOW A DEPTH OF 250 FEET OF SAID REAL PROPERTY WITHOUT THE RIGHT
OF SURFACE ENTRY.
ALSO EXCEPTING THEREFROM THOSE PORTIONS DEEDED TO THE CITY OF
CHICO, BY DEEDS RECORDED APRIL 28, 1980, IN BOOK 2510, PAGE 195,
OFFICIAL RECORDS, AND RECORDED MAY 15, 1980, IN BOOK 1515, PAGE
276, OFFICIAL RECORDS.
<PAGE>
RECORDING REQUESTED BY:
William R. Foley, Esq.
File No. 4396.01
WHEN RECORDED, RETURN TO:
William R. Foley, Esq.
FOLEY, MC INTOSH & FOLEY
Professional Corporation
P. 0. Box 6247
Albany, CA 94706
MEMORANDUM OF LEASE
This memorandum of lease is made this 25th day of May,
1988 between DOUGLAS W. BRADFORD ("LESSOR") and NETCO FOODS,
INC., a California corporation ("LESSEE"), who agree as follows:
1. TERM AND PREMISES
LESSOR leases to LESSEE and LESSEE leases from LESSOR a
building to be constructed, to contain approximately 54,239
square feet, which building will be situated upon and constitut-
ing a part of, the shopping center which is or will be located
upon the real property situated in the County of Butte, Califor-
shopping center
nia, which/is more particularly described on Exhibit "A" attached
hereto and made a part hereof, for an initial term of twenty (20)
years, commencing on the earlier of the first day the premises
are opened for business or forty-five (45) days following notice
of completion of construction of the premises, as is more fully
set forth in paragraph 4 of the lease. The lease term is subject
to extension by LESSEE in accordance with the terms of the lease
-1-
Exhibit E
<PAGE>
between the parties, which lease is entitled "BUILD AND LEASE
AGREEMENT" and is dated ________________. Each and all of the
provisions of the said lease are incorporated into this memo-
random of lease by this reference.
2. PURPOSE OF MEMORANDUM
The purpose of this memorandum of lease is for recordation
and the notice thereby imparted. This memorandum of lease does
not, in any way, modify the provisions of the lease referred to
above.
LESSOR
----------------------------------------
Douglas W. Bradford
LESSEE
NETCO FOODS, INC.,
a California corporation
By /s/ STEVEN G. NETTLETON
--------------------------------------
Steve G. Nettleton6n, President
-2-
<PAGE>
STATE OF CALIFORNIA |
| SS.
COUNTY OF ______________ |
On this the ___ day of ____________________ 19__ before me,
the undersigned Notary Public in and for said State, personally
appeared DOUGLAS W. BRADFORD, personally known to me or proved to
me on the basis of satisfactory evidence, to be the person who
executed the within instrument and acknowledged to me that he
executed the same.
WITNESS my hand and official seal.
---------------------------------
NOTARY PUBLIC
STATE OF CALIFORNIA |
| SS.
COUNTY OF Sutter |
On this the 24th day of May 1988, before me,
the undersigned Notary Public in and for said State, personally
appeared STEVE G. NETTLETON, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person who
executed the within instrument as President of NETCO FOODS, INC.,
on behalf of said corporation, and acknowledged to me that the
corporation executed the same.
WITNESS my hand and official seal.
---------------------------------
NOTARY PUBLIC
OFFICIAL SEAL
-3-
<PAGE>
CIRCUIT CITY
<PAGE>
Chico Crossroads Shopping Center, Chico, CA
LEASE
between
CIRCUIT CITY STORES, INC.,
as Tenant
and
CHICO CROSSROADS CENTER, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP,
as Landlord
dated February 15, 1994
CHICO CROSSROADS SHOPPING CENTER
<PAGE>
TABLE OF CONTENTS
Page
----
1. Leased Property...........................................................1
2. Construction of Building and Improvements.................................2
3. Lease Term................................................................2
4. Rent......................................................................4
5. Development of Shopping Center by Landlord................................5
6. Easements.................................................................6
7. Common Areas and Common Area Maintenance..................................8
8. Signs and Communications Equipment.......................................13
9. Taxes....................................................................13
10. Maintenance, Repairs and Replacements....................................16
11. Payment of Utility Bills.................................................17
12. Alterations..............................................................18
13. Mechanics' Liens.........................................................18
14. Insurance................................................................19
15. Damages by Fire or Other Casualty........................................24
16. Condemnation.............................................................28
17. Assignment and Subletting................................................30
18. Use......................................................................31
19. Warranties and Representations...........................................32
20. Estoppel Certificates....................................................39
21. Subordination, Non-Disturbance and Attornment............................39
22. Change of Landlord.......................................................40
23. Tenant's Financing.......................................................41
-i-
<PAGE>
Page
----
24. Tenant's Property and Waiver of Landlord's Lien..........................41
25. Memorandum of Lease; Commencement Date Agreement.........................41
26. Expiration of Term and Holding Over......................................42
27. "For Rent" Signs.........................................................43
28. Force Majeure............................................................43
29. Events of Tenant's Default...............................................43
30. Landlord's Remedies......................................................44
31. Events of Landlord's Default; Tenant's Remedies..........................46
32. Waiver...................................................................47
33. Compliance with Applicable Laws..........................................47
34. Notices................................................................. 47
35. Brokers..................................................................48
36. Miscellaneous............................................................49
37. Effectiveness of Lease; Tenant's Right to Terminate......................52
38. Confidentiality..........................................................55
-ii-
<PAGE>
Page
----
EXHIBITS
"A" Site Plan
"A-1" Shopping Center Legal Description
"B" Index of Definitions
"C" Construction Provisions
"D" Removable Trade Fixtures
"E" Sign Plans and Criteria
"F" Permitted Encumbrances
"F-1" Permitted Title Encumbrances
"G" Subordination, Non-Disturbance and Attornment Agreement
"H" Memorandum of Lease
"I" Commencement Date Agreement
"J" Supplemental Site Plan Showing Portion of the Shopping Center As
Constructed As Well As The Land And Construction Area
"K" Prior Leases
"L" Tenant Improvement Allowance Reimbursement Criteria
"M" Tentative Vesting Parcel Map
"N" Disclosed Environmental Reports
-iii-
<PAGE>
[Chico Crossroads Shopping Center
Chico, California]
LEASE
This LEASE is made as of the 15 day of February, 1994, by and between CHICO
CROSSROADS CENTER, LTD., a California Limited Partnership ("Landlord"), and
CIRCUIT CITY STORES, INC., a Virginia corporation having an address at 9950
Mayland Drive, Richmond, Virginia 23233 ("Tenant").
WITNESETH:
That for and in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. LEASED PROPERTY. Landlord demises and leases to Tenant and Tenant
leases and takes from Landlord all those certain "Premises" consisting of the
"Building" and "Other Improvements" (both as defined in paragraph 2), as and
when same are constructed, together with exclusive rights in the four (4)
parking spaces labelled "Customer Pick-Up" adjacent to the Building as shown on
the Supplemental Site Plan (provided such spaces are approved by the City's
Architectural Review Board) and with the easements described in paragraph 6
below, all located in the "Shopping Center" (herein so called), which consists
of that certain real property with buildings and improvements constructed or to
be constructed thereon, located at the southeast corner of Whitman Avenue and
20th Street, lying and being in the City of Chico (the "City"), County of Butte,
State of California (the "State"), and more particularly shown on EXHIBIT "A"
hereto (the "Site Plan") and described by metes and bounds or platted lot legal
description on EXHIBIT "A-1" attached hereto and made a part hereof for all
purposes. The Building and Other Improvements will be located on an
approximately 23,014 square foot parcel (the "Land") to be delivered by
Landlord, as more particularly shown (approximately) outlined in red on the
Supplemental Site Plan. All of the Shopping Center exclusive of the Premises is
"Landlord's Premises". The description of the Premises may be adjusted in
accordance with Tenant's final bid set of Plans and Specifications as described
in EXHIBIT "C" attached hereto. Tenant's exclusive right to the "Customer
Pick-Up" spaces shall be subject to the rights of tenants under leases of space
in the Shopping Center executed and delivered prior to the date of this Lease,
as said leases may be from time to time be extended and/or renewed (the "Prior
Leases"). A list of the Prior Leases is
1
<PAGE>
attached hereto as EXHIBIT "K". If the tenant under any such Prior Lease has
the right to prohibit such exclusive use and objects to the use of said
Customer Pick-Up spaces, Tenant shall immediately cease displaying signage
indicating that such spaces are for Tenant's customers only. In all events,
Landlord shall use its best efforts to obtain consents from the tenants under
the Prior Leases to the extent required.
2. CONSTRUCTION OF BUILDING AND IMPROVEMENTS. Commencing immediately
upon "delivery of the Land" (as defined in the Construction Provisions (herein
so called) attached hereto as EXHIBIT "C" and incorporated herein by reference
for all purposes), Tenant shall have the right and obligation as provided in the
Construction Provisions to construct within the Shopping Center a one-story
retail building, containing approximately 23,014 square feet of ground-floor
gross leasable area, with provisions for customer pickup, delivery and car
stereo installation facilities, initially for use as a Circuit City Store (the
"Building"), together with loading ramps, detector check valves and vaults,
sidewalks, trash compactor, transformer pad and other such appurtenances and
improvements (collectively, the "Other Improvements"), as more particularly set
forth in the Construction Provisions. Said Building shall be equipped with an
automatic fire sprinkler system. The Building and Other Improvements are
sometimes collectively referred to herein as the "Improvements". The
Improvements shall be constructed in accordance with the "Plans and
Specifications" to be prepared by Tenant and approved by Landlord as specified
in the Construction Provisions. Except as otherwise provided herein, title to
the Improvements shall be transferred to Landlord upon full payment of the
"Tenant Improvement Allowance", as defined in the Construction Provisions.
3. LEASE TERM. Subject to the conditions to the effectiveness of this
Lease set forth in paragraph 37, the construction term (the "Construction
Term") of this Lease shall commence on the date of Landlord's delivery of the
Land to Tenant in accordance with, and in the condition specified in, the
Construction Provisions, and shall end on the "Commencement Date" (as defined
below). The main term (the "Main Term") of the Lease shall commence on the
earlier of (i) 210 days following "delivery of the Land," which shall occur
no earlier than March 1, 1994 and, subject to force majeure, no later than
June 15, 1994, provided Tenant has obtained the approval of the Architectural
Review Board of the City of Chico as well as Landlord's approval of Tenant's
Plans and Specifications necessary for the construction of the Improvements
or (ii) Tenant's opening for business (the "Commencement Date") and shall end
on the last day of January following the twentieth (20th) anniversary of the
Commencement Date; provided, however, the Commencement Date is subject to
adjustment as described in EXHIBIT "C". If Tenant, after exercising its best
efforts, without economic concern, is unable to obtain
2
<PAGE>
the necessary permits for the construction of the Improvements and/or
Tenant's occupancy therein, Landlord shall, at Tenant's election, join
Tenant, both financially and in name, in pursuing a claim against the City of
Chico and/or subdivision thereof, as the case may be, for its failure to
provide Tenant the necessary permit(s). In all events, if Tenant is unable
to obtain the requisite authorization within one (1) year following its
submittal of the approved Plans and Specifications, Tenant shall have the
right to terminate this Lease within sixty (60) days following the
expiration of said one (1) year period. In the event Tenant terminates the
Lease, Tenant shall reimburse Landlord for all out-of-pocket costs incurred
by Landlord in the "delivery of the Land," supported by adequate back-up
documentation, including, but not limited to, the relocation and buy-out
costs of tenants necessary to facilitate the "delivery of the Land" to
Tenant, as well as lost rents from such tenants which were bought out, which
costs shall in no event exceed Four Hundred Twenty-Five Thousand and NO/100
Dollars ($425,000.00).
In addition to the Main Term, Tenant shall have the option (a "Renewal
Option") to renew and extend the Lease for five (5) consecutive five (5) year
periods (the "Option Periods") immediately following the Main Term, at the
rent specified below. Tenant shall give Landlord written notice of its
election to exercise any Renewal Option at least one hundred eighty (180)
days prior to the expiration of the Main Term or any then-current Option
Period, as applicable; provided, however, that in order to avoid any
forfeiture or inadvertent lapse of such Renewal Option, if Tenant shall fail
to give any such notice within the one hundred eighty (180) day time limit
and shall not have given Landlord prior written notice of its intent not to
exercise its Renewal Option, then and as often as the same shall occur,
Tenant's right to exercise such Renewal Option shall nevertheless continue,
as shall its tenancy hereunder (under the same terms and conditions as
theretofore in effect and notwithstanding that the Main Term or then-current
Option Period shall have expired), until ten (10) business days after
Landlord shall have given Tenant a written notice of Landlord's election to
terminate the Renewal Option, during which period Tenant may exercise its
Renewal Option at any time prior to the expiration of such ten (10) business
day period. Upon the giving of notice of renewal and extension in accordance
with the foregoing provisions, the Term (defined below) of this Lease shall
thereupon be renewed and extended in accordance with such notice without
further act by Landlord or Tenant, the same as if such notice had been timely
given hereunder. Notwithstanding the foregoing, it shall be a condition
precedent to Tenant's right to exercise a renewal option that no "Event of
Default" occurring prior to such exercise remains uncured; provided, however,
if the "Event of Default" is of a non-monetary nature, Tenant may exercise
the Renewal Option if litigation has
3
<PAGE>
commenced regarding said defaults. In the event the above-referenced litigation
results in a decision adverse to Tenant, Tenant's exercise of the Renewal Option
shall be deemed void unless Tenant has promptly commenced to cure such default
following the decision and pays to Landlord the amount of award, if any, plus
attorney's fees and costs to the extent required hereunder.
The Construction Term, Main Term and Option Periods are, collectively,
the "Term". The term "Lease Year" shall mean each successive period of
twelve (12) consecutive calendar months, commencing on the first day of each
February during the Term, except that the first Lease Year shall commence on
the Commencement Date and shall end on the last day of January following the
first anniversary of the Commencement Date.
4. RENT.
(a) BASE RENT. During the Construction Term, Tenant shall have no
rental obligations nor shall Tenant be responsible for any Real Estate Taxes (as
defined in paragraph 9) or CAM Charges (as defined in paragraph 7) or any
similar costs, fees, rentals or expenses. Tenant agrees to pay base rent ("Base
Rent") for the Premises in the amounts and in the manner specified hereunder,
commencing (subject to the provisions of paragraphs 3 and 4 of the Construction
Provisions) on the Commencement Date.
Tenant shall pay Base Rent in equal monthly installments, without offset or
deduction, except as specifically permitted by this Lease, in advance on the
first day of each succeeding calendar month throughout the Term, with
appropriate proration for any partial calendar month or Lease Year, to the
address given for Landlord in paragraph 34 hereof, unless Landlord shall give
Tenant written notice of a change of address or of the party to whom such rents
shall be payable along with written documentation reasonably satisfactory to
Tenant of such party's right to receive payment hereunder. Unless adjusted as
provided in paragraph 3 of the Construction Provisions, Base Rent shall be paid
pursuant to the following schedule:
(i) FIRST FIVE YEARS. During the first sixty (60) full calendar
months of the Main Term, Tenant shall pay annual Base Rent in the amount of
$10.00 times the ground-floor gross leasable square footage contained in
the Building (as measured from the exterior boundary of exterior building
walls) (the "Initial Base Rent"), payable in equal monthly installments.
In determining the ground-floor gross leasable square footage of the
Building, the parties agree that the figure shall be as set forth in
Tenant's approved Plans and Specifications. If any Lease Year is other
than twelve (12) months in length, annual Base Rent during such Lease Year
shall be the product of the applicable monthly Base Rent
4
<PAGE>
times the number of months in such Lease Year, with appropriate proration
for any partial calendar month therein.
(ii) INCREASES IN BASE RENT. Annual Base Rent shall increase on
the first day of the sixty-first (61st) full calendar month of the Main
Term, over the Initial Base Rent charged hereunder by the lesser of ten
percent (10%) or one and one-half (1-1/2) times the percentage increase in
the "CPI-U" (as defined below) during the sixty (60) month period ending on
the first three (3) months preceding said adjustment date. As used herein,
the CPI-U shall be the United States Department of Labor, Bureau of Labor
Statistics Consumer Price Index for All Urban Consumers, U.S. City Average.
If at any time during the Term the CPI-U shall be discontinued, Landlord
and Tenant shall mutually and reasonably agree to substitute an existing
official index published by the Bureau of Labor Statistics or its successor
or another, similar governmental agency, which index is most nearly
equivalent to the CPI-U. Furthermore, Annual Base Rent shall increase on
the first day of the one hundred twenty-first (121st) full calendar month
of the Main Term and each five (5) years thereafter throughout the Term
(each such date of Base Rent adjustment being hereinafter referred to as an
"Adjustment Date"), over the Initial Base Rent by the lesser of twelve
percent (12%) or one and one-half (1-1/2) times the percentage increase
in the CPI-U.
5. DEVELOPMENT OF SHOPPING CENTER BY LANDLORD. Landlord covenants that
the location of buildings and other tenant space therein will only be within the
"Permissible Building Areas" as shown on the Site Plan, and the parking ratio
for the Shopping Center shall be at least as shown thereon, but in no event
shall said ratio be less than the greater of (i) three and one-half (3-1/2)
spaces per 1,000 square feet of gross leasable area (excluding mezzanine space
and outside sales area) or (ii) that required by applicable zoning requirements.
All such parking shall be at ground level. Following the commencement of the
Construction Term, Landlord shall not permit construction traffic over the
Premises, and Landlord shall refrain from interfering with the conduct of
Tenant's construction and business. Landlord shall keep and maintain or cause
the improvements and the "Common Areas" (as defined in paragraph 7(a)) in the
Shopping Center to be kept and maintained in good condition and repair, ordinary
wear and tear excepted, and shall not operate, or permit to be operated, in the
Shopping Center any activity which constitutes a nuisance, overburdens the
available utilities, or violates any of the "Site Covenants" contained in
subparagraph 19(a)(ix) or the prohibited activities set forth in subparagraph
19(a)(viii).
5
<PAGE>
6. EASEMENTS. In addition to and simultaneously with the lease of the
Premises, Landlord grants to Tenant certain nonexclusive leasehold easements
over or upon certain areas of Landlord's Premises, as set forth below, which
easements shall run as covenants with Landlord's Premises and the Premises
during the Term and shall expire or terminate simultaneously with this Lease,
except as provided below.
(a) CONSTRUCTION EASEMENTS. For the period of Tenant's construction
of the Improvements, and any renovation or reconstruction thereof, Landlord
grants to Tenant a nonexclusive easement over the hatched portion of the Common
Area (as defined in paragraph 7(a) below) shown on the Site Plan for the purpose
of construction access to the Premises. In addition, Landlord grants to Tenant
for the period in which Tenant is engaged in the initial construction of the
Improvements as well as any reconstruction pursuant to paragraph 15 hereof, an
exclusive easement for a construction staging area (the "Staging Area") within
the area designated "Staging Area" on the Supplemental Site Plan for Tenant's
use in constructing the Improvements. Tenant's use of the construction
easements under this paragraph 6(a) shall be subject to the requirements of
paragraph 2(a) of the Construction Provisions.
(b) FOOTING AND FOUNDATION EASEMENTS. Landlord grants to Tenant, and
Tenant grants to Landlord, easements and rights in Landlord's Premises and the
Premises, as appropriate (i) for the construction and maintenance of
foundations, footings, supports and demising walls; (ii) to allow their
respective buildings to abut and connect (but not to bear structurally upon each
other unless and except as otherwise provided herein); (iii) for roof
projections, allowing the grantee to tie its building into the adjoining
building by flashing and reglets; and (iv) for unintentional encroachments not
to exceed three (3) feet beyond that indicated in Tenant's approved Plans and
Specifications which reasonably occur in the construction of the building
components set forth in subparagraphs (i) through (iii) above. No such
attachment or connection shall be made, however, unless detailed plans therefor
shall have been timely submitted to and approved by the party to whose building
the attachment is to be made, which approval shall not be unreasonably withheld.
No such attachment or connection shall impede Landlord's ability to separately
insure the building designated "C" on the Site Plan from the improvements within
the Shopping Center.
(c) UTILITY EASEMENTS. During the Term, upon prior reasonable
request of Tenant (following the initial "Landlord Work" as set forth in the
Construction Provisions), Landlord agrees to obtain, if required for the
construction of the Improvements, such underground, public or private utility
easements as Tenant reasonably deems necessary, without unreasonably interfering
with the use by Landlord
6
<PAGE>
of the Common Areas, for the benefit of the Premises. For the purpose of
exercising the rights granted in this subparagraph 6(c), Tenant and/or the
utility provider shall have the right to enter upon and use the Common Areas to
install the utility systems, to such extent and so long as reasonably necessary
to accomplish such purpose, subject to restoration of the Common Areas following
such installation and any other reasonable conditions and requirements imposed
by Landlord.
(d) COMMON AREA EASEMENT. During the Term, Landlord grants to
Tenant, for the benefit of the Premises, the nonexclusive right, privilege and
easement (the "Common Area Easement") to use the Common Areas for their intended
purposes and to permit Tenant and its employees, agents, subtenants, assignees,
licensees, suppliers, customers and invitees to use the same, in common with
Landlord, its successors, assigns, employees, agents, lessees, licensees,
suppliers, customers and invitees and all other persons claiming by or through
them, for the purposes (without limitation) of parking and pedestrian, service
and vehicular access, ingress and egress to, from and between the Premises and
the Landlord's Premises and the streets and highways abutting and adjacent to
the Shopping Center, in accordance with the Site Covenants, without payment of
any fee or other charge therefor, except pursuant to paragraph 7(b) below. It
is specifically agreed that with respect to the parking spaces designated on the
Site Plan as Tenant's "Customer Pick-Up", notwithstanding the fact the same are
in, and constitute a part of, the "Common Areas", such parking spaces shall be
used exclusively by Tenant's customers, invitees and patrons, subject to
paragraph 1 above. In addition, Tenant shall have the right, subject to
obtaining any required approvals from tenants of Prior Leases to use such
sidewalks as are immediately adjacent to Tenant's Improvements and within
Tenant's Parking Lot Sales Area as shown on the Supplemental Site Plan for
"sidewalk sales", seasonal and promotional sales and other sales customary to
Tenant's business operations. Landlord represents that the only approvals
required under Prior Leases for sidewalk sales on the sidewalks immediately
adjacent to the Improvements are approvals of the tenants of the building spaces
designated "B", "D" and "H" on the attached Site Plan, provided that such
activities do not unreasonably interfere with the use of said sidewalks or
pedestrian traffic. Seasonal and promotional sales and other sales from
Tenant's Parking Lot Sales Area shall not exceed fourteen (14) days per Lease
Year, in the aggregate. Tenant shall be responsible for cleaning such sales
area during and following such use and for the repair of any damages, ordinary
wear and tear excepted, resulting from such use.
(e) NON-DEDICATION. None of the easements granted by the parties to
this Lease is intended, nor shall any of them be construed, as a dedication of
any portion
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of the Shopping Center for public use, and the parties will refrain from taking
any action which would cause such a dedication and will take whatever steps may
be necessary to avoid any such dedication, except as may be agreed upon in
writing by the parties hereto or their respective successors or assigns.
(f) RULES AND REGULATIONS. Tenant's use of the above easements shall
be subject to such reasonable, non-discriminatory rules and regulations
governing use which Landlord may from time to time prescribe in writing,
including the designation of specific areas within the Shopping Center in which
automobiles owned by Shopping Center tenants and their employees, subtenants,
licensees and concessionaires shall be parked, which shall include a reasonable
number of parking spaces in reasonable proximity to the Tenant's Improvements
for use by Tenant and Tenant's employees, subtenants, licensees and
concessionaires; provided, however, Landlord's designation of the parking for
Tenant's employees shall be subject to the prior approval of Tenant, which
approval shall not be unreasonably withheld, and in no event shall the employee
parking of any other tenant in the Shopping Center be located within Tenant's
Preferred Area. Such rules and regulations may include without limitation the
restriction of designated areas for drive-thru-bank, savings, restaurant and
other drive-thru facilities and for seasonal or promotional sales activities
outside of Tenant's Preferred Area and for sidewalk sales and the designation of
certain parking spaces immediately adjacent to a store for the exclusive use of
the patrons of such store. Landlord shall not be responsible for the failure of
any other Shopping Center occupant to comply with said rules and regulations.
Tenant acknowledges that Landlord does not have the right to require the
occupants of the building areas designated "B" and "D" on the Site Plan to
comply with employee parking rules and regulations and that the occupant of the
building are designated "H" on the Site Plan has the reasonable right of
approval over the location of designated employee parking spaces. Certain
tenants under Prior Leases have similar approval rights as to employee parking
spaces established nearby their stores. Landlord reserves the right to
construct low-rise monument signs within landscaped areas or adjacent to
buildings for use by other occupants selected by Landlord, whether or not shown
on the Site Plan; however, without the prior written consent of Tenant, such
signs may not be placed in Tenant's Preferred Area.
7. COMMON AREAS AND COMMON AREA MAINTENANCE.
(a) DEFINITION OF COMMON AREAS. The term "Common Areas" shall be
defined to include the parking areas, lanes, drives, entrances, truck
passageways, sidewalks, elevators, escalators, ramps, stairways, landscaped and
other unpaved areas, parking lot lighting facilities and equipment, Landlord's
pylon sign(s), directional, traffic
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and monument sign structure(s) and shared utility facilities located in the
Shopping Center (including any such areas and facilities contained within
outparcels and adjacent tracts but reserved to the benefit of the Shopping
Center occupants) and intended and available (subject, however, to the rules and
regulations authorized in paragraph 6(f) above) for the common use of all of the
tenants within the Shopping Center (including any outparcel and other adjacent
occupants which contribute toward "CAM Charges" (as defined below) and which are
not responsible for separate maintenance of such outparcels or tracts), their
subtenants, licensees, and business invitees. Landlord shall be responsible
for operating, maintaining and repairing the Common Areas in a first-class
manner, including cleaning, maintenance of Landlord's pylon (exclusive of
Tenant's sign panels) and other sign structure(s), snow removal and ice treat-
ment, removal of Common Area trash and garbage, lighting, repairing, repaving
and restriping the parking area, and maintaining, replanting and replacing
landscaping, all such work to be referred to collectively as "Common Area
Maintenance".
(b) CAM CHARGES. For the purpose of this paragraph 7, the cost of
Common Area Maintenance (the "CAM Charges") shall include (i) Landlord's
reasonable and proper direct costs and expenses of operating and maintaining the
Common Areas, (ii) Landlord's overhead expenses for administering same (or in
lieu thereof a management fee) in an amount not to exceed eight percent (8%) of
the total of such costs (specifically excluding from such total the amounts paid
by Landlord and Tenant for insurance, capital expenditures and real estate
taxes) and (iii) liability and casualty insurance premiums for insuring the
Common Areas. Notwithstanding the foregoing, the following shall not be
included in the CAM Charges:
(1) real estate taxes paid, and maintenance performed, on outparcels
or other adjacent tracts not reserved to the benefit of the Shopping Center
occupants;
(2) any dues or charges for a merchants' or other association of the
tenants in the Shopping Center;
(3) maintenance, repairs or replacements to the Common Areas (but no
other portions of the Shopping Center), necessitated by the negligent or
wrongful act of the Landlord or made to correct any construction defect
(including, without limitation, repairs necessitated by a change in a code,
law or regulation, when such repair is not attributable to a specific use
of Tenant or Tenant's assignee or sublessee), to any interior mall space or
to any buildings (including exterior walls thereof) or utility systems not
part of the Common Areas;
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(4) repairs or replacements necessitated by any governmental entity
or by the negligence or the wrongful action of Landlord (including failure
to construct any portion of the Shopping Center in accordance with plans or
specifications therefor) or any other tenant or made to correct any initial
construction defect in existence prior to the Commencement Date of this
Lease or to correct damage caused by subsidence or adverse or substandard
soil conditions;
(5) amounts paid to entities related to Landlord in excess of the
cost of such services from any competitive source;
(6) amounts reimbursable from insurance proceeds, under warranty or
by Tenant, any other tenant in the Shopping Center or any other third party
other than pursuant to a Common Area expense provision similar to this
paragraph 7;
(7) premiums for Common Area liability insurance for coverage in
excess of the limits established in paragraph 14(e) below;
(8) replacements of a capital nature, unless the costs of same are
amortized over the entire useful life of such replacements and provided
that replacements are not the direct result of initial defects in materials
or workmanship (such amortization shall be on a straight-line basis, as
determined under generally accepted accounting principles in effect when
said costs are paid, together with interest at the then current "prime
rate" published by the San Francisco branch of Bank of America, N.T. &
S.A., plus one percent (1%) per annum, such interest to be adjusted
annually in advance based on the published prime rate of interest on
January 1 of each calendar year); provided, however, in no event shall
Tenant's share of capital costs for any one CAM Year be in excess of
$15,000.00;
(9) improvements, repairs or replacements (other than patching and
similar minor periodic maintenance) to the parking lot or other paved areas
during the first thirty-six (36) full calendar months following the
Commencement Date;
(10) reserves for anticipated future expenses;
(11) interest, late charges or penalties incurred as a result of
Landlord's failure to pay bills in a timely manner;
(12) Landlord's personnel, overhead, home office or administrative
expenses except as set forth in subparagraph (b)(ii) above;
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(13) amounts incurred to remediate any Hazardous Substances (as
defined in the Construction Provisions); or
(14) any charges attributable to maintenance, repairs or replacements
of the pylon sign so long as Tenant is unable to maintain a "face panel" on
such sign; provided, however, any such charges attributable to a pylon sign
on which Tenant maintains a "face panel" shall be allocated in equal
proportion to Tenant and the other occupants maintaining face panels on
such sign.
CAM Charges shall be in an amount consistent with the costs incurred
by other landlords of similar shopping centers in the City (but not greater than
as described in this paragraph 7(b)), and in all events such charges shall be
obtained at competitive rates.
(c) TENANT PAYMENTS. Commencing on the Commencement Date and
continuing until the expiration of the first Lease Year, Tenant shall pay to
Landlord a fee (which Landlord estimates, without warranty, to be $1.66 per
square foot of ground-floor gross leasable area in the Building per annum),
payable in equal monthly installments, as its share of CAM Charges. Thereafter,
the annual charge shall be computed on the basis of periods of twelve (12)
consecutive calendar months, as designated by Landlord (each such period is a
"CAM Year"), and shall be paid by Tenant in equal monthly installments, in
advance, on the first day of each month during such CAM Year. For any period
within the Term which is less than a full CAM Year, the annual charge shall be
appropriately prorated. Within sixty (60) days after the end of the first CAM
Year and each CAM Year thereafter, Landlord will furnish to Tenant a statement
showing in detail (with such substantiating documentation as Tenant may
reasonably request) the amount of the CAM Charges for the preceding CAM Year and
the then-current number of square feet of ground-floor gross leasable area in
the Shopping Center. Any necessary adjustment with respect to amounts owed by
either party for such preceding CAM Year shall thereupon be made; and the
monthly payments to be made by Tenant for the ensuing year shall be estimated
according to the Common Area maintenance budget prepared by Landlord and
delivered to Tenant. Subject to adjustments as herein contemplated, Tenant's
share of CAM Charges shall always be the product of the CAM Charges multiplied
by a fraction (such fraction being referred to herein as "Tenant's Pro Rata
Share"), the numerator of which is the number of square feet of the ground-floor
gross leasable area in the Building and the denominator of which is the number
of square feet of the ground-floor gross leasable area (excluding the area of
any outside sales area exclusive to a single occupant, except to the extent said
sales area is included in the calculation of such occupant's pro rata share of
CAM Charges) in the Shopping Center.
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Notwithstanding the foregoing, as of the date hereof, Tenant acknowledges that
Landlord is obligated, for purposes of calculating "proportionate share"
hereunder, to use 103,904 square feet as the gross leasable area for
Building "H", should Landlord be able to modify the lease pertaining to said
Building "H" or otherwise collect rent based upon the actual square footage of
said building (e.g., 112,904 square feet), then the calculations hereunder shall
be amended to reflect such square footage. In determining the ground-floor
gross leasable area of any building in the Shopping Center (including the
Building), measurement shall be made from the centerline of any common walls and
from the outside of any exterior walls. The gross leasable area of any outside
sales area, if and when included in the calculation of Tenant's Pro Rata Share
pursuant to this paragraph 7(c), shall be measured from the outside of the
exterior wall of any adjacent building to the actual exterior perimeters of
such outside sales area, including any aisles, fences or walls included therein.
Changes in applicable floor areas shall result in corresponding adjustments of
Tenant's Pro Rata Share, but in no event shall the denominator of the fraction
by which Tenant's Pro Rata Share is determined be less than eighty-five percent
(provided said percentage shall be increased to ninety-five percent when
building improvements have been constructed upon the building area designated
"F" and "G" on the Site Plan or when the tenant or occupant thereof commences
paying rent thereon) of the gross leasable area of the Shopping Center as shown
on the Site Plan, except to the extent reduced as a result of a Taking, as
defined in paragraph 16 hereof, or damage until restored (except to the extent
the occupant of such damaged Premises continues to pay CAM Charges during such
period of restoration). Notwithstanding anything to the contrary, in no event
shall Tenant's Pro Rata Share be in excess of twelve percent (12 %) of CAM
Charges. The remainder of CAM Charges shall be borne by Landlord and/or other
tenants.
(d) EXAMINATION OF LANDLORD'S RECORDS. Tenant shall have the right,
from time to time, but not more often than once as to any CAM Year and no later
than two (2) years after the end of such CAM Year, to examine and make copies of
the records pertaining to CAM Charges for such CAM Year. Tenant's right of
examination shall be exercised during reasonable business hours at Landlord's
principal records office on reasonable prior notice to Landlord. If such
examination shall disclose any over-charge by Landlord, Landlord shall promptly
reimburse Tenant for any overpayment of Tenant's Pro Rata Share of CAM Charges;
and if such overpayment by Tenant is in excess of three percent (3%) of the
actual Tenant's Pro Rata Share of CAM Charges, Landlord shall reimburse Tenant
for the reasonable cost of such examination or audit,
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not to exceed $3,000.00 in any one CAM Year. Tenant shall promptly reimburse
Landlord for any underpayment disclosed by such examination.
8. SIGNS AND COMMUNICATIONS EQUIPMENT.
(a) SIGNS. If at any time during the Term, space shall become
available on either of the two (2) pylon signs currently existing in the
Shopping Center as shown on the Site Plan or should Landlord construct an
additional pylon sign, Tenant shall have the first right to place its "face
panels" on any such pylon sign at a location specified by Landlord (which
location shall be the best Landlord shall then be able to provide, subject to
any limitations set forth in the Prior Leases) to identify Tenant's store.
Tenant shall exercise such first right, if at all, by written notice to Landlord
given within thirty (30) days of Tenant's receipt of written notice from
Landlord that space for Tenant's face panel has become available. If Tenant
fails to exercise such right, said first right shall terminate. Tenant's first
right shall also be subject to Landlord's agreement, in pending negotiations, to
provide space on the bottom location on the pylon sign on U.S. Highway 99 to the
tenant of "Pad 1" as shown on the Site Plan. Tenant's face panel on any such
pylon sign may not be larger than the largest face panel or panels on such sign.
Attached as a portion of EXHIBIT "E" are plans and specifications for Tenant's
current prototypical face panels and for Tenant's building signage, which
Landlord hereby approves upon its execution of this Lease. Notwithstanding the
foregoing, Tenant shall be entitled without Landlord's consent, but subject to
governmental requirements, as aforesaid, to replace any and all of its signs
with signage consistent with Tenants's then-current prototypical sign plans. In
the event of an assignment or subletting as a result of which Tenant is no
longer occupying any portion of the Premises, Tenant's signs may be replaced by
signs identifying the appropriate assignee or subtenant, provided that the
specific design of such signage shall be subject to Landlord's consent, which
consent shall not be unreasonably withheld, conditioned or delayed. None of
Tenant's signs visible from the exterior of the Building shall have any bulbs or
other forms of lighting that go on and off intermittently.
(b) COMMUNICATIONS EQUIPMENT. Tenant may, from time to time,
install, maintain and/or replace any satellite dishes or antennas on the roof
of the Building as Tenant deems necessary or desirable, provided same shall
not adversely and materially affect the roof or the structural elements
thereof. Upon removal by Tenant of any satellite dishes or antennas, Tenant
shall repair any damage done in connection with such removal. Tenant shall be
responsible for obtaining all governmental permits and approvals required for
any such use.
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9. TAXES.
(a) TAXES CONTEMPLATED HEREUNDER. The term "Real Estate Taxes" shall
mean all general real estate taxes and assessments and other ad valorem
taxes, rates and levies paid upon or with respect to the Shopping Center,
including the Premises, for a calendar year or a portion thereof to any
governmental agency or authority and all charges specifically imposed in lieu
of any such taxes. Nothing contained in this Lease shall require Tenant to
pay any local, county, municipal, state or federal income, franchise,
corporate, estate, inheritance, gift, succession, capital levy, business or
transfer tax of Landlord, or any local, county, municipal, state or federal
income, profits, gross receipts, sales or renewal tax. Moreover, if under the
laws of the State of California or any political subdivision with
jurisdiction over the Shopping Center, the methods of taxation shall be
altered so as to impose in lieu of current methods for the assessment and
taxation of real property, in whole or in part, taxes based on other
standards, or in lieu of any increase therein, such tax shall be
deemed to be a Real Estate Tax for the purposes of this Lease.
(b) PAYMENT OF REAL ESTATE TAXES. Landlord agrees to use reasonable
efforts to obtain either a single, separate tax bill or an assessor's "pro
rate" showing the Real Estate Taxes attributable to the Land and the
Improvements and a proportionate share of the Common Areas. In the event the
Land and the Improvements are not segregated for tax purposes to permit a
single, separate tax bill for the same, then at such intervals as Landlord is
required to pay the Real Estate Taxes, Tenant shall pay Tenant's Pro Rata
Share of Real Estate Taxes (calculated in the same manner as Tenant's Pro
Rata Share of CAM Charges in paragraph 7(c) without, however, a percentage
maximum on Real Estate Taxes levied on improvements) levied against the tax
parcel or parcels comprising the Shopping Center (the "Tax Parcel"). In no
event shall the denominator used to determine Tenant's Pro Rata Share be less
than the gross leasable area upon which the assessment of Real Estate Taxes
is based; in the event adjustments are made during any year, appropriate
prorations shall be made. Landlord has heretofore obtained approval of
vesting Parcel Map No. 95, a copy of which is attached hereto as EXHIBIT "M".
Landlord may modify the boundaries of the parcels shown on said map such that
Parcel 5 will contain no building improvements other than the Improvements
and such that Parcel 6 will contain no building improvements. In such event,
if Tenant has elected to pay Real Estate Taxes based on a separate assessment
as opposed to pursuant to a Pro Rata Share calculation, Landlord may require
Tenant to pay the Real Estate Taxes levied or assessed against said Parcels 5
and 6, provided that the total land area within said Parcels 5 and 6 does not
exceed 80,549 square feet, in satisfaction of Tenant's obligation
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to pay Real Estate Taxes under this paragraph 9(b). Tenant's Pro Rata Share
of Real Estate Taxes shall be net of any early-payment discounts available
at the time Tenant's payment is due if made by Tenant when due. Tenant shall
pay Tenant's Pro Rata Share of Real Estate Taxes within thirty (30) days
after Tenant's receipt of Landlord's statement therefor, accompanied by the
tax bill on the basis of which such statement is rendered. Landlord shall
pay, or cause the payment of, all Real Estate Taxes before any fine, penalty,
interest or cost may be added thereto, become due or be imposed by operation
of law for the nonpayment or late payment thereof. In no event shall Tenant
be liable for any discount forfeited or penalty incurred as a result of late
payment by another tenant or by Landlord. Taxes shall be prorated as of the
Commencement Date and the expiration or earlier termination of this Lease,
and Landlord shall promptly return to Tenant any overpayment made by Tenant
not attributable to the period of Tenant's possession of the Premises. Only
installments coming due during the Main Term and Option Periods, if so
exercised, shall be included in Real Estate Taxes for the calculation of
Tenant's Pro Rata Share. Landlord shall remain primarily responsible for such
payment notwithstanding the fact that such payment may be made by a tenant of
Landlord's Premises or other third party pursuant to an agreement to which
Tenant is not a party. In addition, should Landlord fail to pay such Real
Estate Taxes before same become delinquent, Tenant shall have the right, at
its election, to cure such failure by payment of delinquent Real Estate Taxes
and any interest and penalties due thereon and in such event Tenant may
deduct the cost thereof, plus interest at the lesser of fifteen percent (15%)
per annum or the highest rate permitted by State law (the "Default Rate"),
from the next installment(s) of Base Rent and other charges due hereunder.
(c) CONTEST OF REAL ESTATE TAXES AND/OR ASSESSED VALUATION OF
PROPERTY. Tenant shall have the right, at Tenant's sole expense, to contest
the amount or validity, or otherwise seek an exemption or abatement, of any
Real Estate Taxes or to seek a reduction in the valuation of the Premises
assessed for Real Estate Tax purposes, by appropriate proceedings diligently
conducted in good faith, provided that Tenant shall first have notified
Landlord of its intent to do so and Landlord shall have failed to notify
Tenant in writing, within five (5) days of receipt of Tenant's notice, that
Landlord intends to contest such Real Estate Taxes or seek such a reduction.
In any instance where any such action or proceeding is being undertaken by
Tenant, Landlord shall cooperate with Tenant, execute any and all documents
required in connection therewith and, if required by any law, rule or
regulation of the taxing authority, shall join with Tenant in the prosecution
thereof; no such action or proceeding shall excuse Landlord's or Tenant's
payment of Real Estate Taxes prior to delinquency. Tenant shall
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be entitled to a refund of any overpayment of Real Estate Taxes relating or
allocable to the Premises, as well as a reimbursement of all costs, fees and
expenses it incurs in such protest or reassessment.
10. MAINTENANCE, REPAIRS AND REPLACEMENTS. Except (i) for costs
covered by the Landlord's insurance required to be maintained hereunder, (ii)
for condemnation proceeds to be received by Tenant, (iii) for obligations
arising from the negligent acts or omissions or willful misconduct of
Landlord (or its agents or employees), or (iv) as otherwise set forth in this
Lease, Tenant shall be solely responsible for maintenance of the exterior and
interior non-structural elements of the Building, including, but not limited
to, repairs and/or replacements to plate glass, Tenant's store front and
doors, plumbing, heating, electrical and air conditioning systems which serve
only the Premises and for the maintenance and repairs and/or replacements
required by reason of construction and/or design defects in the Improvements.
Landlord shall maintain all structural elements of the Premises (whether or
not same serve only the Premises), including, without limitation, the roof,
roof structure, floor slab, foundation, load bearing walls and exterior
structural walls (unless required by reason of construction or design defects
in the Improvements), but shall have no other responsibility for maintenance,
repair or replacements to the Premises or any part thereof except to the
extent maintenance, repair or replacements are required due to the negligent
acts or omissions or willful misconduct of Landlord (or its agents or
employees); provided, however, this provision is in no way intended to limit
Landlord's obligation to maintain, repair and replace any and all elements,
both structural and non-structural, of the Common Areas pursuant to the terms
of this Lease. In connection with Landlord's maintenance obligations
pertaining to the roof, Tenant shall deliver to Landlord a "Bonded Roof
Guaranty" warranting said roof for a minimum of ten (10) years; during the
period of said guaranty Landlord's maintenance on the roof shall be at no
cost to Tenant, except to the extent of a construction or design defect not
covered by the guaranty. Following the expiration of the guaranty, Landlord
shall continue to maintain the roof, provided Tenant shall reimburse Landlord
within thirty (30) days of demand and receipt of reasonable supportive
evidence of the amount and payment of the costs to be reimbursed. All
maintenance of a capital nature must be amortized according to generally
accepted accounting principles. In addition to the Landlord's maintenance and
repair obligations set forth herein and otherwise set forth in this Lease,
Landlord agrees to maintain the Other Improvements immediately surrounding
the Building, including sidewalks and landscaping, except to the extent such
maintenance is required due to a design or construction defect in the Other
Improvements. If Tenant is required during the last five
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(5) years of the Term of the Lease (without consideration to the exercise of
any additional Renewal Options) to expend any sum in satisfaction of its
obligations hereunder pertaining to the HVAC system in the Building, and if
the resulting replacement cannot be fully amortized in accordance with
generally accepted accounting principles, or the Internal Revenue Code and
Regulations, over the remainder of the Term (without consideration to the
exercise of any additional Renewal Options), then Tenant shall be reimbursed
by Landlord upon Tenant's surrender of the Premises, for the unamortized
portion of the cost associated with such repairs, construction or alteration
for the period beyond the remainder of the Term (without consideration to the
exercise of any additional Renewal Options), not to exceed $50,000.00 (so
long as same is not the result of a change in Tenant's use, sublease,
assignment or alteration to the Premises). Should either party fail to
perform its obligations under this paragraph 10, the other party may, at its
option, effect such maintenance, replacements or repairs, provided that such
curing party shall have given the nonperforming party thirty (30) days' prior
written notice, except in the case of emergencies (in which event only such
notice as may be reasonable under the circumstances shall be required); but
further provided that such thirty (30) day period (or reasonable period in
event of emergencies) shall be extended in respect of any cure that cannot
with reasonable diligence be accomplished within such period so long as the
party required to effect such cure has commenced such cure within such thirty
(30) day period (or reasonable period in event of emergencies) and thereafter
diligently prosecutes such cure to completion. The nonperforming party shall
reimburse the other party on demand for the reasonable and actual amount so
expended (as evidenced by detailed invoice), plus interest at the Default
Rate from the date incurred. However, in the event of emergency repairs, no
interest shall accrue if reimbursed within thirty (30) days of request
(including detailed invoice) for reimbursement. All maintenance, repairs or
replacements shall be done by Tenant or Landlord lien-free and in a good and
workmanlike manner consistent with the quality of labor and materials used in
originally constructing the Improvements and in accordance with all
applicable law. In order for Landlord and Tenant to effectively perform their
maintenance, repair and replacement obligations hereunder, Tenant and
Landlord, as applicable, shall assign to the other party any and all
manufacturers' and contractors' warranties relating to such work performed on
behalf of the other party to the party who is required to maintain same under
the Lease.
11. PAYMENT OF UTILITY BILLS. Tenant will pay directly to the
appropriate utility company or governmental agency, when due, all bills for
gas, water, sanitary sewer, electricity, telephone and other public or
private utilities used by Tenant with regard to
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the Improvements. Landlord shall pay when due all utility charges incurred in
the operation of the Common Areas.
12. ALTERATIONS. During the Term, Tenant shall have the right, at its
discretion and its sole cost, without Landlord's consent, to make (i) any
alterations or modifications to the interior of the Building necessary or
desirable in order to bring the Premises into conformity with Tenant's
then-current prototype for similarly sized stores (provided same complies
with the regulations of the City of Chico and does not affect the structural
integrity of the Building) and (ii) any interior non-structural alterations
or modifications it may desire. With Landlord's consent, which shall not be
unreasonably withheld, conditioned or delayed, Tenant shall have the right,
at its sole cost, to alter, modify or reconstruct the exterior and/or
structure of the Building or Other Improvements. Landlord's withholding of
consent as to any exterior and/or structural alteration or modification shall
be deemed reasonable only if same is materially inconsistent with the
then-existing architecture of the Shopping Center or if such alteration or
modification would increase the ground floor gross leasable square footage of
the Building, add an additional story to the Building, result in the Building
extending higher than thirty (30) feet above the ground, adversely affect the
structural integrity of the Building or if Landlord's Mortgagee's consent is
required to the alteration and if such Mortgagee fails or refuses to grant
such approval. Tenant shall cause all such alterations to be lien-free (in
accordance with paragraph 13) and made and completed at Tenant's cost in a
workmanlike manner and in compliance with all applicable law. Should
Landlord's consent be required, conceptual plans and specifications for such
work shall be provided to Landlord prior to commencement of any such work.
Landlord shall be deemed to have consented to such work if written notice of
disapproval, with reasons specified, is not received by Tenant within fifteen
(15) business days following Tenant's delivery of such plans and
specifications to Landlord. Without cost or expense to Landlord, Landlord
shall cooperate with Tenant in the obtaining of any and all licenses,
building permits, certificates of occupancy or other governmental approvals
which may be required in with any such modifications or alterations,
and Landlord shall execute, acknowledge and deliver any documents reasonably
required in furtherance of such purposes.
13. MECHANICS' LIENS. Landlord and Tenant covenant to each other that
they will not permit any lien to be filed against the Premises or the
Shopping Center as a result of nonpayment for, or disputes with respect to,
labor or materials furnished to the Premises or the Shopping Center as a
result of nonpayment for, or disputes with respect to, labor or materials
furnished to the Premises or the Shopping Center for or on behalf of Tenant,
Landlord or any party claiming by, through, or under Tenant or Landlord, nor
shall either party permit any
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judgment, lien or attachment to lie, as applicable, against the Premises or
the Shopping Center. Should any lien of any nature, including but not limited
to the foregoing, be filed against the Premises or Shopping Center, the party
on account of whose actions such lien has been filed shall, within thirty
(30) days after receipt of written notice of such lien, cause said lien to be
removed, or otherwise protected against execution during good faith contest
by (i) posting a bond therefor, (ii) escrowing adequate funds to cover the
claim and related transaction costs or (iii) taking such other action as may
be permissible under applicable title insurance regulations and reasonably
acceptable to the other party hereto. Furthermore, to the extent Landlord or
Tenant is unable to obtain owner's or leasehold title insurance, as the case
may be, or an endorsement thereto, without mechanic's liens shown on "Schedule
B" therein, due to a mechanic's lien attributable to work of Landlord or
Tenant, such party shall provide the necessary indemnity to the title company
to allow the party seeking the insurance to obtain such insurance without the
mechanic's liens listed as an exception to title. Notwithstanding the
foregoing, Landlord's obligations under the preceding two sentences shall
only apply to liens filed that have a priority of record to this Lease.
Furthermore, Landlord and Tenant shall indemnify, defend (with counsel
reasonably acceptable to the party being defended) and hold harmless, the
other party hereto against all claims, costs, liability, or expense resulting
from the breach by such indemnifying party of its obligations under this
paragraph 13.
14. INSURANCE.
(a) PROPERTY DAMAGE. During the Construction Term, Tenant shall keep or
require its general contractor to keep, in full force and effect, a policy of
builder's risk insurance covering loss or damage to the Improvements for the
full replacement value of all such construction. During the Main Term and all
Option Periods, Tenant shall keep in full force and effect a policy of fire
and extended coverage insurance covering loss or damage to the Premises in
the amount of full replacement value of the Building, exclusive of
excavation, footings and foundations (which initial amount shall be not less
than the Tenant Improvement Allowance), with a commercially reasonable
deductible, for which Tenant shall be fully responsible provided that Tenant
satisfies the requirements for self-insurance contained in paragraph 14(d)
below. Landlord and Landlord's first "Mortgagee" (as defined in paragraph 21
below), shall be named in such policy or policies as additional insureds as
their respective interests may appear, and said policy or policies shall be
endorsed with standard mortgagee's loss payable endorsements for the benefit
of Landlord's Mortgagee. Said insurance shall include a twelve (12) month
business interruption endorsement covering the Base Rent,
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Real Estate Taxes and CAM Charges payable by Tenant for the benefit of
Landlord and Landlord's Mortgagee, notwithstanding any abatement provision in
Paragraph 15 hereof. Landlord shall not construct, or permit to be
constructed, any improvement in the Shopping Center, nor conduct any
activity, or permit the conduct of any activity, in the Shopping Center which
will prevent Tenant from being able to obtain insurance coverage at
commercially reasonable rates, including, without limitation, a
fully-sprinklered fire insurance rate. Should Landlord cause or permit any
insurance rate increase to occur, Landlord will reimburse Tenant for the
additional premium required, subject to Tenant's right to self-insure (in
which event Landlord will contribute to Tenant's self insurance fund to cover
increased actuarial risks). Tenant agrees not to keep, use or sell any
article on or from the Premises, in order to conduct any activity therefrom,
which may be prohibited by the standard form of fire insurance policy. In
the event that any conduct or activity by or under Tenant on or from the
Premises results in the rates of fire insurance premiums upon other
improvements within the Shopping Center being increased, Tenant agrees to pay
to Landlord, upon demand, the amount of increase in such fire insurance
premiums attributable thereto.
(b) LIABILITY INSURANCE. During the Term, Tenant shall keep in full
force a policy of commercial general liability insurance with bodily injury and
property damage coverage with respect to the Premises and business operated
by Tenant, which shall name Landlord and Landlord's first Mortgagee as
additional insureds as their respective interests may appear. The limits of
such commercial general liability policy shall be not less than $3,000,000.00
combined single limit for bodily injury and property damage, with a
commercially reasonable deductible. All such insurance shall be written as
primary insurance not contributing with and not in excess of coverage which
Landlord may carry.
(c) WORKERS' COMPENSATION INSURANCE. To the extent
required by law, Landlord and Tenant shall maintain workers' compensation
insurance covering their respective employees in statutory limits, or
maintain such alternate coverages or arrangements as legally permissible.
(d) SELF-INSURANCE. Notwithstanding anything to the contrary contained
herein, Tenant shall have the right to self-insure against any of the risks
or portions thereof set forth in subparagraphs (a) and (b) (and to the extent
then permitted by law, (c)) above, provided Tenant is then occupying the
Premises and has a reported net worth, as of the end of Tenant's most recent
quarterly reporting period, of not less than Fifty Million Dollars
($50,000,000), as computed in accordance with generally accepted accounting
principles, consistently applied, as determinable from Tenant's public
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disclosures and/or regularly maintained corporate balance sheets which are
generally available to shareholders (no right of Landlord to audit or conduct
independent investigations being implied by this provision).
(e) COMMON AREA, ADDITIONAL AREA AND THIRD PARTY TENANT INSURANCE AND
INSURANCE DURING LANDLORD'S CONSTRUCTION. During the Term, Landlord shall
keep in full force and effect, in form reasonably acceptable to Tenant,
policies of commercial general liability insurance, with bodily injury and
property damage insurance, and fire and extended coverage insurance, with
respect to the Common Areas and with respect to all other areas of the
Shopping Center over which Landlord from time to time has present possessory
rights (or has the right under any lease to provide insurance coverage
because of a tenant's failure to maintain such required coverage) but which
do not constitute a portion of the Common Areas (such areas here sometimes
collectively referred to as the "Additional Areas"). The Additional Areas
shall include, without limitation: (i) as yet unconstructed portions of the
Shopping Center intended for tenant occupancy, (ii) constructed but
unoccupied portions of the Shopping Center, (iii) vacated or otherwise
uninsured tenant space, whether by reason of lease expiration, default or
otherwise, and (iv) constructed and occupied portions of the Shopping Center.
In the case of fire and extended coverage insurance for the Additional
Areas, such insurance need not cover interior leasehold improvements, trade
fixtures, equipment and/or other personal property of tenants and/or other
occupants, and such insurance, as to buildings leased by other tenants, may
be provided through self-insurance carried by or under the applicable tenant,
provided that such tenant has a net worth of not less than Fifty Million
Dollars ($50,000,000.00) and the provision of such self-insurance has been
approved by Landlord's Mortgagee, except for tenants of Prior Leases which
shall be bound by the terms of their respective leases. Said liability
policies shall name Tenant, and any lender, investor or other stakeholder
which is designated by Tenant from time to time, as an additional insured
to the fullest extent Tenant and such stakeholder have insurable
interests. The limit of the fire and extended coverage insurance policy
shall be the same as that set forth in subparagraph (a) above (exclusive of
footings, foundations and excavations); the limits of the commercial general
liability insurance shall not be less than $1,000,000.00 combined single
limit for bodily injury and property damage, with a commercially reasonable
deductible. The cost of the premiums for coverages relating to Common Areas
shall be an element of CAM Charges, provided that Tenant shall not be liable
for its pro rata share of any premium for coverage in excess of that coverage
which is customary among owners of like shopping centers in the City or the
minimum coverage required by this law, whichever is greater. With the
exception of the Prior
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Leases, Landlord shall assure (through parallel lease provisions or
otherwise) that all areas of the Shopping Center, including the Additional
Areas and areas leased to third party tenants or sold to third party
occupants, are insured with substantially similar coverages to those required
for the Premises and the Common Areas. During any period in which Landlord is
conducting construction activities at the Shopping Center, Landlord or its
general contractor shall keep in full force and effect with regard to the
Shopping Center, in form reasonably acceptable to Tenant, at least the
minimum insurance coverages set forth below:
1) Workers' Compensation - statutory limits;
2) Employers Liability - $500,000; and
3) Comprehensive General and Comprehensive Auto Liability as follows:
a) Bodily Injury - $1,000,000 per occurrence;
b) Property Damage - $1,000,000 per occurrence;
c) Independent Contractors Liability or Owner's Protective
Liability; same coverage as set forth in subparagraphs (a)
and (b) above;
d) Products/Completed Operations coverage which shall be kept in
effect for two (2) years after completion of work with a limit
of $1,000,000;
e) "XCU" Hazard Endorsement, if applicable;
f) "Broad Form" Property Damage Endorsement;
g) "Personal Injury' Endorsement; and
h) "Blanket Contractual Liability" Endorsement.
Additionally, Landlord shall keep or require its general contractor to keep
in full force and effect a policy of builder's risk insurance covering loss
or damage to such construction for the full replacement value of all such
construction. To the fullest extent Tenant has an insurable interest, such
liability policy shall name Tenant an additional insured.
(f) POLICY PROVISIONS. All policies of insurance (other than
self-insurance) enumerated above shall be provided by insurance carriers with
a Best rating of not less than B+X. Any insurance coverage enumerated above
may be effected by a blanket policy or policies of insurance or under
so-called "all risk" or "multi-peril" insurance policies, provided that the
total amount of insurance available with respect to the Premises and Tenant's
or Landlord's liability hereunder shall be at least the equivalent of
separate policies in the amounts herein required, and provided further that
in other respects any such policy or policies shall comply with the
provisions of this paragraph 14. Landlord shall not be entitled to
self-insure against any of the risks recited herein, except the amount of any
commercially reasonable deductible shall be deemed to be self-insurance. An
increased coverage or "umbrella" policy may be provided and utilized by
either party to increase the coverage provided by individual or blanket
policies in lower
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amounts, and the aggregate coverage provided by all such policies with
respect to the Premises and Tenant's or Landlord's liability hereunder shall
be satisfactory provided that such policies otherwise comply with the
provisions of this paragraph 14.
(g) WAIVER OF RIGHT OF RECOVERY AND SUBROGATION. To the extent that
insurance proceeds are actually received in satisfaction of a loss which is
required to be covered by insurance or is self-insured hereunder (with the
deductible under any policy being deemed to be self-insured), Landlord and
Tenant hereby waive any and all rights of recovery against each other for any
loss or damage to the Premises or the contents contained therein, for loss of
income on account of fire or other casualty, or for injury sustained on the
Premises or the Common Areas; and each party's aforesaid policies of
insurance shall contain appropriate provisions recognizing this mutual
release and waiving all rights of subrogation by the respective insurance
carriers. Notwithstanding the foregoing, Tenant acknowledges that the
tenants of the buildings within the building areas designated "B" and "H" on
the Site Plan carry the fire and extended coverage insurance for their
buildings pursuant to their Prior Leases and that Landlord does not have the
right to require said tenants to obtain a waiver of subrogation in favor of
Tenant in the insurance policies for these buildings or to conform their
policy provisions to paragraph (f) above. This provision and the provisions
of paragraph (f) above, therefore, shall not apply to either of said
buildings, while said Prior Leases continue in effect (the "Excluded Leases").
(h) EVIDENCE OF INSURANCE. Subject to Tenant's right to self-insure
hereunder, upon (i) commencement of the Main Term (as to casualty insurance),
(ii) upon delivery of the Land (as to liability insurance) and (iii) no less
than annually thereafter, Tenant and Landlord shall cause to be issued to
each other in lieu of the original policy, a duplicate of such policy or
appropriate certificates of insurance reasonably acceptable to the other
party and evidencing compliance with the applicable covenants of this
paragraph 14. Each such certificate shall provide that no expiration,
cancellation or material change in the insurance evidenced thereby shall be
effective unless thirty (30) days' unconditional notice of such expiration,
cancellation or material change shall have been given to the
certificate-holder (and Landlord's first Mortgagee, if applicable). This
provision shall not apply to the fire and extended coverage insurance
provided by the tenants under the Excluded Leases, provided that Landlord
agrees to provide proof of such insurance to Tenant upon request, in the form
of certificates evidencing such insurance provided to Landlord by the tenants
under the Excluded Leases.
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(i) INDEMNITIES. Except if arising from the negligent or willful acts
of Landlord or its agents or employees (to the extent that paragraph 14(g) is
inapplicable thereto), Tenant hereby agrees to indemnify, defend and hold
Landlord harmless from all claims, costs, liability, damage (exclusive of
consequential damages) or expense, including attorneys' fees, for any death,
damage or injury to persons or property occurring on the Premises or
resulting from the use thereof as well as the Common Areas by Tenant, its
agents or employees.
Except if arising from the negligent or willful acts of Tenant or its
agents or employees (to the extent that paragraph 14(g) is inapplicable
thereto), Landlord agrees to indemnify, defend and hold Tenant harmless from
any and all claims, costs, liability, damage (exclusive of consequential
damages) or expense, including attorneys' fees, for any death, damage or
injury to persons or property occurring in, on or around the Common Areas and
other areas within the Shopping Center with respect to which Landlord is
obligated to carry insurance or resulting from the use thereof by Landlord,
its agents or employees.
15. DAMAGES BY FIRE OR OTHER CASUALTY.
(a) INSURED CASUALTY. In the event of a casualty, causing destruction
or damage to the Improvements, Common Areas and/or Additional Areas, as
applicable, which casualty is covered by the standard form of fire and
extended coverage insurance required under this Lease or which is actually
covered by insurance carried by or for the benefit of either Landlord or
Tenant (exclusive of self-insurance carried beyond the insurance required
hereunder), this Lease shall not terminate except as expressly set forth
herein. Notwithstanding anything to the contrary, in the event Tenant
reasonably estimates, after due investigation, restoration shall take more
than three hundred sixty (360) days from the date of such determination,
Tenant shall have the right upon thirty (30) days written notice to terminate
this Lease. If this Lease is not terminated, within a reasonable time after
such casualty, subject to force majeure, applicable building codes, the
procurement of building permits and the receipt of insurance proceeds (unless
self-insured) to the extent of the damage to the Premises, or the Common
Areas or Additional Areas, as applicable, Tenant shall complete
reconstruction of the Building and Other Improvements, and Landlord shall
complete reconstruction of the Common Areas and sufficient Additional Areas
such that one hundred fifty thousand (150,000) square feet of ground floor
gross leasable area (inclusive of the Building) are free from casualty damage
(including, in the case of the Premises, substantially equivalent value in
equipment, furniture, and fixtures), to that condition existing immediately
prior to such casualty, in the reconstructing party's reasonable discretion,
with, in event of any Tenant
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reconstruction, such alterations as may be permitted under paragraph 12
hereof and with, in the event of any Landlord reconstruction, such
alterations as Landlord may reasonably determine to be appropriate, subject to
the limitations set forth herein, or which any tenant under a Prior Lease has
the right to make. From the date of the casualty until Tenant resumes
operations in the Premises to the same level as before such casualty, Base
Rent and other charges shall abate or, in the case where Tenant is still
operating in the Premises, be reduced to the extent such casualty has
interfered with Tenant's use of the Premises, for a period not to exceed
twelve (12) full calendar months. In the event, subject to force majeure,
the Premises, Common Areas and/or Additional Areas, as applicable, are not
substantially repaired and reconstructed, and equipment, furniture and
fixtures restored or replaced as required above, by the party with repair and
restoration obligations within two hundred forty (240) days after receipt of
any required governmental permits, for which permits the party with repair
obligations shall make prompt application following such destruction or
damage, and insurance proceeds (if not self-insured), then the other party,
at its option, by giving written notice to the party with repair obligations,
within thirty (30) days after the expiration of said period, may undertake
completion of such reconstruction (subject to the prior rights of any tenant
under a Prior Lease to complete such construction), in which event the party
with repair obligations shall make available to the notifying party all
applicable insurance proceeds for such reconstruction (including any
applicable deductible) or, if self-insured, the amount necessary for such
reconstruction.
(i) APPLICATION OF FUNDS. All insurance
(or self-insurance) proceeds received on account of such damage or
destruction to be repaired and restored under the preceding provisions of
this paragraph 15(a), less the cost, if any, of such recovery, shall be
applied pursuant to the terms of this Lease to the payment of the cost of
such restoration, repair, replacement, rebuilding, or alteration (the
"Work"), including expenditures made for temporary repairs or for the
protection of property pending the completion of permanent restoration,
repair, replacement, rebuilding, or alteration, and, if required by
Landlord's first Mortgagee, shall be held by a mutually agreeable
third-party escrow agent (which is, for these purposes, the "Escrow
Agent"), in an interest-bearing account in a federally insured financial
institution or institutions such that all funds are deposit insured (or
otherwise assured in a manner acceptable to the parties), to be paid out,
as provided below, from time to time (but no more often than once
monthly), as the Work progresses, upon Tenant's written request in event
of work by Tenant, or Landlord's written request in event of work by
Landlord, accompanied
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by a certificate of the architect or engineer in charge of the Work (the
"Certificate"), dated not more that seven (7) days prior to such request,
stating that the sum then requested either has been paid by Tenant or
Landlord, as applicable, or is justly due to the named contractors,
subcontractors, materialmen, engineers, architects, or other persons
(whose addresses shall also be stated) who have rendered services or
furnished materials for certain portions of the Work. Landlord's
Mortgagee, if a bank, savings and loan association or other institutional
lender, may act as the Escrow Agent. The Certificate shall give a brief
description of such services and materials, shall list the several
amounts so paid or owing to each of such persons, shall state the cost of
the Work at the date of the requisition, and shall state that no part of
such expenditures has been or is being made the basis for any other
request for payment. The Certificate shall state also that, except for
the amounts listed therein, there is no outstanding indebtedness known to
such architect or engineer, after due inquiry, for labor, wages,
materials, supplies, or services in connection with the Work which, if
unpaid, might become the basis of a vendor's, mechanic's, laborer's,
materialman's, or similar lien upon the Work or upon the Premises or any
part thereof.
(ii) DISBURSEMENT. Upon compliance with the foregoing
provisions of paragraph 15(a)(i), the Escrow Agent shall pay, out of the
escrowed funds, to the persons named in the Certificate the respective
amounts stated to be due to them or shall pay to Tenant, in the event of
Tenant work, or Landlord, in the event of Landlord work, the amount
stated to have been paid by Tenant or Landlord, as applicable; provided,
however, that such payments shall not exceed in amount the cost of the
relevant Work as stated in the Certificate. If the insurance proceeds or
reconstruction funds paid by Tenant or Landlord, as applicable, to the
Escrow Agent exceed the amount required to pay the total cost of the
Work, the party paying such amount to the Escrow Agent, as applicable,
after payment of all costs of the Work, shall be entitled to receive or
retain, as applicable, such excess.
(b) UNINSURED CASUALTY. In the event of any uninsured fire, earthquake
or other casualty, causing destruction or damage to the Improvements, Common
Areas and/or Additional Areas, which has a repair and reconstruction cost of
twenty-five percent (25%) or more of the then-total reconstruction cost of
any of said areas (which percentage shall be reduced to ten percent (10%)
during the last five (5) years of the Main Term or during an Option Period),
Tenant shall have the option of terminating this
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Lease; provided that Landlord may prevent the termination of this Lease by
notifying Tenant in writing within thirty (30) calendar days following
Tenant's election to terminate, of its agreement to pay Tenant's repair and
reconstruction costs in excess of twenty-five percent (25%) (or ten percent
(10%), as the case may be), of the total reconstruction cost (the "Excess
Cost"), and delivering to Tenant or the Escrow Holder, as the case may be,
funds sufficient to pay the Excess Cost within sixty (60) days of Landlord's
election or prior to the commencement of Tenant's construction, whichever is
sooner. Tenant shall notify Landlord of its exercise of such option within
sixty (60) days following the occurrence of casualty and unless Landlord
prevents such termination from becoming effective, shall thereupon make
available to Landlord all insurance proceeds or reconstruction costs as set
forth in subparagraph (a) above. In the event Tenant does not elect to
terminate this Lease as set forth above, or in the event that Landlord
prevents Tenant's termination from becoming effective as set forth
immediately above, then, subject to force majeure, within two hundred forty
(240) days after receipt by Tenant of the required governmental permits for
restoration, for which permits Tenant shall make prompt application following
such destruction or damage, Tenant shall complete reconstruction of the
Improvements to their condition existing immediately prior to such damage, in
Tenant's reasonable discretion, with such alterations as may be permitted
under paragraph 12, and shall restore the Premises (including equipment,
furniture and fixtures). From the date of the casualty until Tenant resumes
operations in the Premises to the same level as before such casualty, Base
Rent and other charges shall abate (for a period not to exceed twelve (12)
consecutive calendar months) or, in the case where Tenant is still operating
in the Premises, be reduced to the extent such casualty has interfered with
Tenant's use of the Premises (for a period not to exceed twelve (12)
consecutive calendar months). Should Tenant elect to maintain this Lease in
full force and effect, Landlord shall reconstruct Common Areas sufficient to
enable Tenant and the remaining occupants to operate their business at the
same level as prior to such casualty, but in all events, Landlord shall
reconstruct Tenant's Preferred Area. Additionally, except as to the Prior
Leases, Landlord shall assure (through parallel lease provisions or
otherwise) that all areas of the Shopping Center leased to third party
tenants or sold to third party occupants are subject to substantially similar
reconstruction obligations to those of the Premises, Common Areas and
Additional Areas.
(c) LAST TWO (2) YEARS OF MAIN TERM OR OPTION PERIOD.
Notwithstanding the foregoing, if any such damage or destruction occurs
within the last two (2) years of the Main Term or of any Option Period and
the cost to repair said damage is estimated to be equal to or in excess of
fifty percent (50%) of the aggregate
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Base Rent due for the remainder of the Main Term or Option Period, as the
case may be, or if the restoration is reasonably estimated by Tenant to take
in excess of forty-five (45) days from the date of the damage or destruction,
Tenant shall be under no obligation to restore the Improvements, in which
case this Lease shall terminate at Tenant's option, such option to be
exercised by Tenant giving not less than thirty (30) days' prior written
notice to Landlord within sixty (60) days following the date of such
casualty, and Landlord shall receive the proceeds of any insurance (together
with any applicable deductible) which may be payable with regard to such
destruction or damage or, in the event Tenant self-insures, the amount
necessary for reconstruction of the Improvements.
16. CONDEMNATION.
(a) DEFINITION OF TAKING AND SUBSTANTIAL TAKING. For the purpose
of this Lease, a "Taking" shall mean any condemnation or exercise of the
power of eminent domain by any authority vested with such power or any other
taking for public use, including a private purchase in lieu of condemnation
by an authority vested with the power of eminent domain; the "Date of
Taking" shall mean the earlier of the date upon which title to the Premises,
the Shopping Center or any portion thereof so taken is vested in the
condemning authority or the date upon which possession of the Premises, the
Shopping Center, or any portion thereof is taken by the condemning authority;
and "Substantially All of the Premises" shall mean (i) so much of the
Improvements and/or Shopping Center and Common Areas as, when taken, leaves
the untaken portion unsuitable, in Tenant's reasonable opinion, for the
continued feasible and economic operation of the Premises by Tenant for the
same purposes as immediately prior to such Taking or as contemplated herein,
(ii) so many of the parking spaces within the Shopping Center as reduces the
parking ratio below the greater of three and one-half (3-1/2) spaces (with no
more than twenty percent (20%) for compact spaces) per 1000 square feet of
ground-floor gross leasable area or that ratio which is required by the
zoning ordinance applicable to the Shopping Center, and Landlord's failure to
provide substantially equivalent alternative parking reasonably acceptable to
Tenant within sixty (60) days after such Taking, or (iii) so much of the
Common Area Easement described in paragraph 6(d) above that access to the
Premises is materially impeded so as to adversely affect Tenant's business.
(b) TENANT'S RIGHTS UPON TAKING OR SUBSTANTIAL TAKING. In the event
of a Taking of Substantially All of the Premises, Tenant, at its option upon
thirty (30) days' written notice to Landlord, which shall be given no later
than sixty (60) days following the Taking, shall have the right to terminate
this Lease. All Base Rent and other sums payable by Tenant hereunder shall be
apportioned and paid through and
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including the Date of Taking, and neither Landlord nor Tenant shall have any
rights in any compensation or damages payable to the other in connection with
such Taking, subject, however, to paragraph 16(g) below.
(c) TENANT'S RIGHTS UPON LESS THAN SUBSTANTIAL TAKING. In the event
of a Taking of less than Substantially All of the Premises, Base Rent and other
charges shall be reduced fairly and equitably in accordance with the portion
condemned or taken, effective as of the Date of Taking, and Tenant shall make
all necessary restorations to the Improvements so that the portions of the
Improvements not taken constitute a complete architectural unit, provided
that the cost thereof to Tenant shall not exceed the proceeds of Tenant's
condemnation award (to the extent that such relates to the Improvements and
not to Tenant's personal property, intangibles or out-of-pocket expenses
unrelated thereto) and the portion of Landlord's award allocable to the
Premises, which Landlord shall make available to Tenant for such restoration.
If required by Landlord's first Mortgagee, such awards shall be escrowed and
disbursed in accordance with the procedure set forth in paragraph 15(a)
above. If the Taking occurs within the last two (2) years of the Main Term or
of any Option Period and has a material impact on Tenant's ability to conduct
business as reasonably determined by Tenant, this Lease shall terminate at
Tenant's option, such option to be exercised by Tenant giving not less than
thirty (30) days' prior written notice to Landlord within sixty (60) days of
the date of such Taking. In the event that this Lease is not terminated as a
result of the Taking, this Lease shall terminate as to the portion or
portions of the Premises taken.
(d) LANDLORD'S OBLIGATIONS UPON ANY TAKING. In the event of any
Taking following which the Lease continues in effect, Landlord shall make all
necessary restorations to all portions of the Common Areas and Additional
Areas remaining following such Taking such that the Common Areas and these
Additional Areas are acceptable for continued use and occupancy for shopping
center purposes and such that they each constitute a complete architectural
unit and serve the function originally intended. Additionally, except as to
the Prior Leases, Landlord shall assure (through parallel lease provisions or
otherwise) that all areas of the Shopping Center leased to third party
tenants or sold to third party occupants are subject to substantially similar
reconstruction obligations to those of the Premises and Common Areas.
(e) RIGHTS UPON TEMPORARY TAKING. In the event of a Taking of the
Premises, the Common Areas and/or any other area within the Shopping Center,
or any portion thereof, for temporary use (specifically one not exceeding 60
days in duration), without the taking of the fee simple title thereto, this
Lease shall remain in full force and
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effect. All awards, damages, compensation and proceeds payable by the
condemnor by reason of such Taking relating to the Premises, or relating to
the Common Areas but reasonably attributable to the Premises, for periods
prior to the expiration of the Lease shall be payable to Tenant. All such
awards, damages, compensation and proceeds for periods after the expiration
of the Lease shall be payable to Landlord. Anything contained herein to the
contrary notwithstanding, a temporary Taking for any period in excess of
ninety (90) days may, at Tenant's option, be deemed a permanent Taking and
shall be governed by subparagraph (b) or (c) above, as applicable.
(f) TAKING OF THE PYLON SIGN(S). In the event of a taking, whether
permanent or temporary, of any pylon or monument sign (as contemplated by
paragraph 8) on which Tenant has installed identification panels, Landlord
shall use reasonable efforts to provide a substitute site (reasonably
acceptable to Tenant) therefor, with adequate electrical power, located so as
to be visible to vehicular traffic or roadways adjacent to the Shopping
Center and/or at entrances to the Shopping Center, and Landlord shall replace
and/or rebuild any of such signage so taken at its sole cost; provided,
however, Tenant's rights with respect to the replacement signs are subject to
the same restrictions as imposed with respect to the original signs.
(g) TENANT'S RIGHT UPON CONDEMNATION. In the event of a Taking
described in subparagraph (b) or (c) above, Tenant shall be entitled to claim
compensation from the condemning authority for the value of its leasehold
interest in the Premises, its unamortized leasehold improvements paid for by
Tenant, relocation expenses and any other items to which Tenant is entitled
under applicable law; provided that in no event shall any such compensation
paid to Tenant reduce the award or damages payable to Landlord based on the
fair market value of the real property and the buildings and other
improvements in the Shopping Center owned by Landlord.
17. ASSIGNMENT AND SUBLETTING. Tenant shall have the right to sublet,
assign, transfer, reassign and grant concessions or licenses ( a "Transfer")
in all or any part of the Premises and any of Tenant's rights and obligations
under this Lease during the Term, without Landlord's prior consent, provided
any change in use, if any, resulting from such Transfer is not in violation
of the terms of this Lease. In the event of such a Transfer, Tenant shall
remain liable for all of Tenant's obligations to Landlord's arising hereunder
so long as this Lease is not changed, modified or amended in any respect by
Landlord and any transferee. Sales, assignments, mergers and acquisitions
involving all or "substantially all" the beneficial ownership interests in
the Tenant shall not be deemed a Transfer hereunder and same may be effected
without Landlord's knowledge or consent. For purposes of this Lease if
Tenant's interest in the Premises is transferred
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with a beneficial ownership interest in Tenant, the term "substantially all"
shall mean at least so much of the interest in Tenant so that the tenant
ultimately responsible hereunder has a net worth equal to or in excess of
Fifty Million and NO/100 Dollars ($50,000,000.00).
Any assignment or subletting of this Lease by Tenant shall be executed
by Tenant and the assignee or sublessee. Each assignee or sublessee, for the
benefit of Landlord, shall agree to assume, be bound by, and perform all
terms, covenants, and conditions of this Lease to be kept and performed by
Tenant. After execution of the assignment or sublease, Tenant will forward a
completed copy thereof to Landlord.
18. USE.
(a) Tenant shall initially maintain, use and operate the Premises
as a retail store for (i) the sale of consumer, office and automotive
electronics products (which include, but shall not be limited to,
televisions, stereos, speakers and video recorders and players), computer
hardware and software, entertainment software and entertainment media (which
include, but shall not be limited to, records, game cartridges, video tapes,
cassettes and compact discs), cellular telephones, household appliances
(which include, but shall not be limited to, refrigerators, freezers, stoves,
microwave ovens, vacuum cleaners and dishwashers) and related goods and the
sale and installation of motor vehicle audio, stereo and telephone systems
(all of such items being herein collectively referred to as the "Products"),
and (ii) renting, servicing, repairing and warehousing of the Products
(collectively herein, the "Initial Use").
(b) Thereafter, Tenant shall have the right to use the Premises
for any lawful retail use; provided, however, that the Premises shall not be
used (i) for any illegal purpose, (ii) for any use prohibited under paragraph
19(a)(viii) below, (iii) in violation of any exclusive use restriction granted
a tenant or other occupant of the Shopping Center pursuant to a Prior Lease
or any restrictive covenant in a Prior Lease shown on EXHIBIT "F", or (iv) in
violation of any other applicable provision of the "Permitted Title
Encumbrances" contained in EXHIBIT "F-1".
(c) Nothing contained in this Lease shall be construed to require
Tenant to operate the Premises continuously either for the use first stated
or for any other use. However, should Tenant fail to open and engage in the
Initial Use for at least one (1) business day within one (1) full year
following the Commencement Date, subject to force majeure (financial
inability excepted), Landlord shall have the right upon thirty (30) days'
prior written notice to Tenant to terminate the Lease and thereafter Tenant
shall be relieved of all obligations hereunder. If this Lease is so
terminated pursuant to this paragraph 18(c), the Improvements shall become
the property of Landlord, and Landlord
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shall not be required to deliver the Tenant Improvement Allowance as required
by Exhibit "C". Notwithstanding anything to the contrary, Tenant may
eliminate Landlord's termination right if within the thirty (30) day period
following Tenant's receipt of Landlord's termination notice, Tenant opens for
business in the Premises.
19. WARRANTIES AND REPRESENTATIONS.
(a) Landlord represents, warrants and/or covenants to Tenant that:
(i) QUIET AND PEACEFUL ENJOYMENT. Landlord and those persons
executing this Lease on its behalf have the right and lawful authority to
enter into this Lease and perform Landlord's obligations hereunder, and
Landlord warrants, represents and covenants that, so long as Tenant is not in
default hereunder beyond any applicable cure period, Tenant shall have quiet
and peaceful use, enjoyment and occupancy of the Premises free from
interference by those lawfully claiming by, through or under Landlord.
(ii) TITLE. Landlord's fee simple interest in the Shopping
Center is free and clear of any mortgages, deeds, encumbrances, declarations,
easements, agreements, leases, tenancies or restrictions, except those
matters set forth on EXHIBIT "F-1" attached hereto and entitled "Permitted
Title Encumbrances", or any other encumbrances which would restrict Tenant's
use of the Premises for the Initial Use or would restrict in any respect the
right of Tenant, its employees, customers and invitees to use the Common
Areas in accordance with the terms of this Lease. Nothing contained in this
Lease, including the Permitted Title Encumbrances and those matters disclosed
on EXHIBIT "F", shall restrict Tenant's right to engage in the Initial Use
in the Premises. Landlord specifically covenants and warrants that no third
party, including but not limited to any other occupant of the Shopping
Center, has the right to object to Tenant's tenancy hereunder, prohibit the
selling, renting, servicing, repairing or warehousing of the Products, or the
right to consent to any feature of the Improvements or Tenant's signage as
permitted by this Lease. This representation and warranty is a material
inducement to the Tenant's execution of this Lease and is made to Landlord's
best actual knowledge as of the date of this Lease (defined as the actual
knowledge of Jamie Sohacheski and Robert Flaxman, excluding imputed or
constructive knowledge).
(iii) CERTIFICATE OF AUTHORITY. Landlord covenants that it is
a duly constituted limited partnership under the laws of the State of
California, and that its general partner who is acting as its signatory in
this Lease is duly authorized and empowered to act for and on behalf of
Landlord. Landlord has
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furnished Tenant prior hereto with evidence of (a) the existence of the
limited partnership, and (b) the authority of the general partner to bind
Landlord as contemplated herein.
(iv) NO LITIGATION. There are no judicial, quasi-judicial,
administrative or other orders, injunctions, moratoria or pending proceedings
against Landlord or the Shopping Center which preclude or interfere with, or
would preclude or interfere with, the construction contemplated in paragraph
2 hereof or the occupancy and use of the Premises for the purposes herein
contemplated.
(v) HAZARDOUS OR TOXIC MATERIALS. Landlord, to Landlord's
best actual knowledge, as of the date of this Lease, (which knowledge
Landlord represents is based solely upon the contents of the Environmental
Reports listed on EXHIBIT "N" attached hereto) has not used, discharged,
dumped, spilled or stored (other than use or storage in compliance with all
applicable laws) any Hazardous Substances (as defined in the Construction
Provisions) on or about the Shopping Center, whether accidentally or
intentionally, and has received no notice and has no knowledge that any such
condition exists at the Shopping Center. If any claim is ever made against
Tenant relating to Hazardous Substances present at or around the Shopping
Center, whether or not such substances are present as of the date hereof, or
any such Hazardous Substances are hereafter discovered at the Shopping Center
(unless introduced by Tenant, its agents, invitees or employees), all costs
of removal incurred by, all liability imposed upon, or damages suffered by,
Tenant because of the same shall be borne by Landlord, and Landlord hereby
indemnifies and agrees to defend and hold Tenant harmless from and against all
such costs, losses, liabilities and damages, including, without limitation,
all third-party claims (including sums paid in settlement thereof, with or
without legal proceedings) for personal injury or property damage and other
claims, actions, administrative proceedings, judgments, compensatory and
punitive damages, lost profits, penalties, fines, costs, losses, attorneys'
fees and expenses (through all levels of proceedings), consultants or experts
fees and all costs incurred in enforcing this indemnity. The representation,
warranty and indemnity of Landlord described in this paragraph 19(a)(v) shall
survive the termination or expiration of this Lease. Notwithstanding the
foregoing, Landlord shall not be required to remove or to remediate Hazardous
Substances unless such Hazardous Substances materially interfere with the
conduct and operation of Tenant's business from the Shopping Center or unless
Tenant or Landlord is
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required to remove same pursuant to a governmental or court order or judgment
or is required by applicable law, code, regulation or the like.
(vi) TENANT'S EXCLUSIVE USE. So long as the Premises are used
for the initial uses set forth in paragraph 18, no other tenant or occupant
of the Shopping Center shall be entitled to sell or rent (or rent to own) any
of the Products, subject only to rights granted any such tenants under the
Prior Leases.
(vii) ZONING AND SUBDIVISION. The Premises and the Shopping
Center are presently properly subdivided, in conformity with all applicable
laws and zoned so as to permit (A) the development and operation of the
Premises and the Shopping Center in accordance with the provisions of this
Lease; and (B) the Initial Use described in paragraph 18 of this Lease,
subject to obtaining any plan approvals, conditional use permits or similar
authorization that may be required. Provided, however, Tenant's failure to
obtain the necessary permits for the construction of the Improvements once
Landlord or Tenant has received the approval of the Architectural Review
Board for the City of Chico, shall not be deemed a violation of this
representation.
(viii) PROHIBITED ACTIVITIES. Subject to the rights of
tenants under the Prior Leases, Landlord shall not operate or lease (or
permit to be operated or leased) any building or tenant space in the Shopping
Center for use as:
(A) a bar, pub, nightclub, music hall or disco in which less than fifty
percent (50%) of its space or revenue is devoted to and derived from food
service;
(B) a bowling alley;
(C) a billiard or bingo parlor;
(D) a flea market;
(E) a massage parlor;
(F) a funeral home;
(G) a facility for the sale of paraphernalia for use with illicit drugs;
(H) a facility for the sale or display of pornographic material (as
determined by community standards for the area in which the Shopping Center
is located);
(I) an off-track betting parlor;
(J) a carnival, amusement park or circus;
(K) a gas station, car wash or auto repair or body shop, other than
within the building area designated as "Pad 1" on the Site Plan (the
parties specifically acknowledging that Tenant's car stereo installation
facility is not included in this prohibition (K));
(L) a facility for the sale of new or used motor vehicles, trailers or
mobile homes;
(M) a facility for any use which is illegal or dangerous, constitutes a
nuisance or is inconsistent with an integrated, community-oriented retail and
commercial shopping center;
(N) a skating rink;
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(0) an arcade, pinball or computer gameroom (provided that retail
facilities in the Shopping Center, exclusive of the Premises, may operate no
more than four (4) such electronic games incidentally to their primary
operations);
(P) service-oriented offices (such as, by way of example, medical or
employment offices, travel agencies, real estate agencies or dry cleaning
establishments) or other nonretail uses within 250 feet of the Premises,
except for offices and storage facilities incidental to a primary retail
operation;
(Q) a banquet hall, auditorium or other place of public assembly;
(R) a training or educational facility (including, without limitation,
a beauty school, barber college, reading room, school or other facility
catering primarily to students or trainees rather than customers);
(S) a theater of any kind; or
(T) a gymnasium, sport or health club or spa.
In addition to the foregoing, Landlord shall not operate, lease or
permit to be operated or leased any restaurant within any building on
Landlord's Premises, which is located within three hundred (300) feet of the
front entrance to the Building, subject, however, to the rights of tenants
under the Prior Leases. In addition, no auction, fire, or
going-out-of-business sale shall be conducted in the Shopping Center,
subject, however, to the rights of tenants under the Prior Leases.
(ix) SITE COVENANTS. With regard to the development of the
Shopping Center and the uses and operations of the Common Areas, Landlord
makes the following representations and warranties (the "Site Covenants"):
(A) BUILDING HEIGHT AND LOCATION. With the exception of
buildings in existence as of the date of this Lease, no building adjacent to
the Premises, including any parapet thereon, shall exceed thirty (30) feet in
height above finished grade (but may include a mezzanine), nor shall it be
positioned so as to project beyond the portion of the front wall of the
Building, except as shown on the Site Plan attached hereto. Except for the
kiosk shown on the Supplemental Site Plan, no outparcels, barriers,
buildings, kiosks or other structures, either temporary or permanent, shall
be located within Tenant's Preferred Area, and no building located on an
outparcel elsewhere in the Shopping Center shall exceed one story,
twenty-five (25) feet in height, including parapet, and shall be subject to
all size restrictions set forth on the attached Site Plan.
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No development shall occur within the Tenant's Preferred Area except as shown
on the Site Plan.
(B) CONSTRUCTION AND ALTERATIONS. Following the end of
the first Lease Year, subject to the rights of tenants under the Prior
Leases, no construction shall be permitted in the Shopping Center (except on
Pads "F," "G," "1" and "2" as shown on the Site Plan) during the
months of October, November and December within 250 feet of the Premises,
except for interior alterations not affecting the operations of any other
occupant of the Shopping Center and except for emergency repairs. In the
event of any substantial construction within the Shopping Center, Landlord
shall designate a construction access route, staging and parking areas
located so as to minimize interference with customers or the operations of
other occupants of the Shopping Center and shall require erection of safety
barriers as necessary and an opaque wall around the site of such construction
of a size necessary to screen such construction from ground level view,
subject to the rights of tenants under Prior Leases. With regard to any
construction on Landlord's Premises, Landlord shall be solely responsible for
any governmentally imposed impact fees, hook-up, connection, installation or
tap-in fees and other, similar construction-related charges. Except as shown
on the Site Plan, Landlord shall make no changes in the Common Areas located
in Tenant's Preferred Area (including, without limitation, changes in the
location of curbcuts, drive aisles, roadways, sidewalks or parking spaces or
reduction of the parking ratio specified in paragraph 5) without Tenant's
express written consent, which Tenant may, in its sole discretion, withhold.
With respect to changes in the Common Areas in the rest of the Shopping
Center, Tenant's prior written consent shall be required with respect to
changes which would reduce the parking ratio below that required by paragraph
5 above, which consent may be withheld in Tenant's sole discretion.
(C) PROHIBITED USES IN COMMON AREAS. Landlord covenants
that it shall not, without Tenant's express written consent, permit the
following uses or activities to occur in the Common Areas: (1) advertisements
or signs except for the pylon signs described in paragraph 8, the "for
rent" signs described in paragraph 27, traffic control signs and low rise
monument signs not in excess of six (6) feet in height within landscaped
areas or adjacent to buildings; (2) display or sale of
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merchandise except as permitted under paragraph 6 above; (3) operation of
loudspeakers or other sound electronically amplified so as to be heard in the
Common Areas; or (4) imposition of a charge for parking. Parking by employees
of Tenant, Landlord and other occupants of the Shopping Center shall be in
designated "employee parking" areas, the location of which shall be
designed by Landlord, subject, however, to the provisions of paragraph 6
above. Tenant's approval shall be required to the designation of employee
parking within Tenant's Preferred Area. The provisions of this paragraph (C)
shall be subject to the rights of tenants under the Prior Leases.
(D) EASEMENTS. Landlord shall not subdivide, parcel or
otherwise divide the Shopping Center or create any easements in the Common
Areas without Tenant's prior written consent, which consent shall not be
unreasonably withheld or delayed; provided, however, it shall not be
unreasonable for Tenant to withheld its consent if such act on the part of
Landlord would adversely affect Tenant's rights or increase Tenant's
obligations under this Lease. Tenant hereby approves Tentative Parcel Map No.
95 attached hereto as EXHIBIT "M".
(E) TRUCK ACCESS. Landlord covenants that it will not
at any time during the Term, alter the truck access to the Premises within
Tenant's Preferred Area.
(x) INTERFERENCE WITH TENANT'S RECEPTION/TRANSMISSION.
Landlord shall not install or permit to be installed by Landlord, any other
tenant or other person anywhere in the Shopping Center, any radio or other
transmitting equipment which would cause any interference with satellite,
radio or television reception or transmission in or from the Building. The
provisions of this paragraph (X) are subject to the rights of tenants under
the Prior Leases; provided, however, to the extent of any interference caused
by the tenants of said Prior Leases, Landlord agrees to exercise reasonable
efforts under its powers pursuant to the Prior Leases to eliminate such
interference.
(xi) NOTICES AFFECTING THE PREMISES. Landlord shall promptly
forward to Tenant any notice or other communication affecting the Premises
and/or the rights of Tenant hereunder received by Landlord from any owner of
property adjoining, adjacent or nearby to the Premises or the Shopping Center
or from any municipal or governmental authority, in connection with any
hearing or
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other administrative procedure relating to the use or occupancy of the
Premises and/or the rights of Tenant hereunder.
(xii) CONSTRUCTIVE TRUST. Landlord covenants that all sums
paid by Tenant to Landlord and intended for payment by Landlord to a third
party (such as, by way of example, taxes and certain elements of CAM Charges)
are given to Landlord in trust and shall be applied only for such third-party
payments, as and when due or to reimburse Landlord for payment of same.
(xiii) UTILITY LINES/EASEMENTS. Landlord represents and
warrants that upon the delivery of the Land, all utility lines and easements
located above or below the Land will have been relocated to enable Tenant to
construct the Improvements on the location shown on the Site Plan without
encroaching on said lines and/or easements. Landlord further represents and
warrants that as of such date there shall be no third party utility lines
under the Premises.
(b) Tenant represents, warrants and covenants to Landlord that:
(i) TENANT'S AUTHORITY. Tenant is a duly constituted
corporation organized under the laws of the Commonwealth of Virginia; it has
the power to enter into this Lease and perform Tenant's obligations
hereunder; and the Vice President executing this Lease on Tenant's behalf has
the right and lawful authority to do so.
(ii) TENANT'S WARRANTY AS TO HAZARDOUS OR TOXIC MATERIALS. As
to Tenant's use and occupancy of the Premises and use of the Common Areas,
Tenant will not introduce, discharge, dump, spill or store within the
Premises or the Shopping Center any Hazardous Substances; and Tenant
indemnifies and agrees to hold Landlord harmless from and against all costs,
liability and damages as a result thereof, to the same extent that Landlord
indemnifies and holds Tenant harmless in subparagraph (a)(v) above. The
warranty and indemnity of Tenant described in this paragraph 19(b)(ii) shall
survive the termination of this Lease.
(c) In the event there is a condition at variance with the
foregoing representations, warranties and/or covenants of Landlord with
respect to the Premises or the Shopping Center which prevents or in any
material way inhibits the use of the Premises or any part thereof or the
Common Areas for their intended purposes by Tenant or Tenant's employees,
licensees, agents, suppliers, customers or invitees, or if Landlord shall
default in the observance or performance of any of the foregoing
representations and warranties, then, in addition to such other remedies as
may be accorded Tenant at law, in equity or under the terms of this Lease,
Tenant may, in addition to its other remedies under this Lease, after thirty
(30) days' notice to Landlord, obtain an injunction
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or writ of specific performance to enforce such term or covenant, the parties
hereby acknowledging the inadequacy of Tenant's legal remedy and the irreparable
harm which would be caused to Tenant by any such variance or default. In
addition, in the event that any of the representations, warranties and covenants
set forth in this paragraph 19 are untrue or incorrect, or in the event that
Tenant suffers any loss, cost, liability or damage as a result of the breach of
any of such covenants, representations and warranties, Landlord shall defend,
indemnify and hold Tenant harmless from any of such loss, costs, liability or
damage incurred as a result of Landlord's breach hereunder.
20. ESTOPPEL CERTIFICATES. Without charge, at any time and from time to
time hereafter, within ten (10) days after receipt of written request by either
party, the other party shall certify, by written and duly executed instrument,
to any other entity ("Person") specified in such request: (a) as to whether this
Lease has been supplemented or amended, and, if so, the substance and manner of
such supplement or amendment; (b) as to the validity, force and effect of this
Lease; (c) as to the existence of any default hereunder, to the certifying
party's best knowledge; (d) as to the existence of any offsets, counterclaims,
or defenses hereto on the part of such other party, to the certifying party's
best knowledge; (e) as to the commencement and expiration dates of the Term; and
(f) as to any other matters which may reasonably be so requested. Any such
certificate may be relied upon by the party requesting it and any Person to whom
the same may be exhibited or delivered, and the contents of such certificate
shall be binding on the party executing same.
21. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT.
(a) Within forty-five (45) days following the execution hereof,
Landlord shall deliver to Tenant with regard to and any and all Ground Leases
(as defined below) and any and all Mortgages (as defined below) encumbering the
Premises and placed thereon by Landlord, a non-disturbance and attornment
agreement in the form OF EXHIBIT "G" hereto attached, executed by the Landlord
under any such Ground Lease ("Ground Lessor") or the holder of such Mortgage
("Mortgagee"), as applicable. In addition, throughout the term, Landlord shall
deliver to Tenant a non-disturbance and attornment agreement in the form of
EXHIBIT "G" executed by Ground Lessor or Mortgagee (as applicable) with regard
to all future Ground Leases and Mortgages and with regard to all renewals,
modifications, replacements and extensions of such Ground Leases or Mortgages if
the same have priority to this Lease or if Landlord desires that Tenant
subordinate this Lease to the same. Upon Tenant's receipt of the non-
disturbance and attornment agreement Tenant shall if acceptable to Tenant
(provided Tenant may not object if such agreement is in the form of EXHIBIT "G"
attached hereto) execute same, in
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recordable form, and, this Lease shall be subordinate to the corresponding
Ground Lease or Mortgage.
In the event of a foreclosure of any Mortgagee, Tenant shall attorn to
a Mortgagee or any purchaser at a foreclosure sale (any such foreclosure, or
deed in lieu thereof, shall be referred to as a "Foreclosure") of a Mortgage if
Tenant and such Mortgagee have entered into a non-disturbance and attornment
agreement and, if they have not, Tenant shall so attorn only if such Mortgagee
or purchaser executes a writing in favor of Tenant which states the following
(provided Tenant is not in uncured default beyond the expiration of any
applicable grace periods): (i) this Lease shall not terminate by reason of such
Foreclosure, (ii) Tenant's possession of the Premises shall not be disturbed,
(iii) the Mortgagee or purchaser upon such Foreclosure shall recognize Tenant
and all its rights hereunder and shall be obligated to fully and completely
perform Landlord's duties and obligations under the Lease arising from and after
the date of such Foreclosure, including but not limited to an obligation to make
all payments to Tenant and satisfy all construction obligations set forth in
this Lease (subject, however, to the exceptions to the liability of a Mortgagee
or any purchaser at a foreclosure sale set forth in section 5 of the attached
EXHIBIT "G"), (iv) Tenant shall not be named as a party in any action for
foreclosure, and (v) the Mortgagee, whether or not the Mortgage is foreclosed,
shall make all proceeds arising from a casualty or condemnation loss to the
Premises available to Tenant for restoration of the Improvements in accordance
with the terms hereof. In the event of termination of the Ground Lease, Tenant
shall attorn to any Ground Lessor from whom Tenant has received a non-
disturbance agreement in accordance with this paragraph 21.
Landlord shall cause any present or future Mortgagee to deliver a
non-disturbance and attornment agreement in accordance with this paragraph
21, as set forth in paragraph 37(b) below. As used in this paragraph 21, the
term "Mortgage" shall mean any mortgage, deed to secure debt, deed of trust,
trust deed or other collateral conveyance of, or lien or encumbrance against,
the Premises, and the term "Ground Lease" shall mean any ground lease or
master lease affecting the Premises.
(b) If requested by any Mortgagee, from time to time during the Term,
Tenant agrees to execute such subordination, non-disturbance and attornment
agreement, which shall include agreements as may be satisfactory to Tenant and
as are typically found in subordination, non-disturbance and attornment
agreements with institutional lenders.
22. CHANGE OF LANDLORD. Subject to paragraph 21 above, in the event
Landlord's interest in the Premises passes to a successor (the "Successor") by
sale, lease,
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Foreclosure or in any other manner, Tenant shall be bound to the Successor
under all of the terms of this Lease for the balance of the Term with the
same force and effect as if the Successor were the landlord under the Lease,
and Tenant hereby agrees to attorn to the Successor as its Landlord, such
attornment to be effective upon written notice thereof given by Landlord to
Tenant. In the event that Landlord's interest in the Premises passes to a
Successor and such Successor is bound unto Tenant as set forth above,
Landlord shall be released from all obligations to Tenant hereunder arising
after the date Landlord's interest so passes, except that Landlord agrees to
indemnify, defend and hold Tenant harmless from and against all costs,
claims, loss, liability or damage suffered by Tenant as a result of
Landlord's transfer of its interests hereunder and/or Landlord's failure to
provide Tenant with notice of such Successor.
23. TENANT'S FINANCING. Notwithstanding any other provisions of this
Lease, Tenant may, without Landlord's consent, from time to time, secure
financing or general credit lines and grant the lenders thereof, as security
therefor, (i) a security interest in Tenant's fixtures, personalty, inventory
and equipment (collectively, "Personalty"), (ii) the right to enter the
Premises to realize upon any Personalty so pledged, and/or (iii) a collateral
assignment of Tenant's leasehold interest in the Premises, with rights of
reassignment; provided, however, such collateral assignment may be made
solely for the purpose of securing Tenant's indebtedness. Upon Tenant
providing notice of such financing to Landlord (which notice shall identify
Tenant's lender and provide an initial address to which notices to such
lender may be given by Landlord pending written notification of a change of
address), Landlord agrees to evidence its consent in writing to such security
interest and agreement and to give such lenders the same notice and
opportunity to cure any default of Tenant as is provided Tenant hereunder.
24. TENANT'S PROPERTY AND WAIVER OF LANDLORD'S LIEN. All of the
Personalty shall be and remain the personal property of Tenant. Landlord
expressly waives its statutory or common law landlord's liens (as same may be
enacted or may exist from time to time) and any and all rights granted under
any present or future laws to levy or distrain for rent (whether in arrears
or in advance) against the aforesaid property of Tenant on the Premises and
further agrees to execute any reasonable instruments evidencing such waiver,
at any time or times hereafter upon Tenant's request; provided that the
beneficiary of such instrument and/or waiver agrees in writing that its right
to remove any Personality from the Premises will expire no later than thirty
(30) days following its receipt of written notification of the termination or
expiration of this Lease and that such beneficiary agrees to repair any
damages to the Building resulting from such removal.
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25. MEMORANDUM OF LEASE: COMMENCEMENT DATE AGREEMENT. Landlord and Tenant
agree, at the other's request and at the sole expense of the requesting party,
to execute a Memorandum of Lease in recordable form, substantially similar to
that attached hereto as EXHIBIT "H", setting forth such provisions hereof as may
be required by State law. In addition, Landlord and Tenant shall execute a
Commencement Date Agreement in the form attached hereto as EXHIBIT "I", once the
Commencement Date has been established. Recording costs for either or both
documents shall be borne by Tenant. The provisions of this Lease shall control,
however, with regard to any omissions from, or provisions hereof which may be in
conflict with, the Memorandum of Lease or Commencement Date Agreement.
26. EXPIRATION OF TERM AND HOLDING OVER. All of the Personalty shall be
removable by Tenant any time prior to, or within thirty (30) days after, the
expiration or earlier termination of this Lease and shall be so removed by
Tenant at the request of Landlord within thirty (30) days after the expiration
or termination of this Lease. In the event Tenant fails to remove any or all of
its Personalty within the said thirty (30) day period, Landlord may remove such
Personalty, or the balance thereof, cause such Personalty to be placed into
storage and thereafter charge Tenant the cost of such removal and storage,
together with interest thereon at the Default Rate. Those improvements that are
integrated into the physical structure of the Building, except any of Tenant's
trade fixtures, shall not be removed and shall become the property of Landlord.
(A nonexclusive list of Tenant's removable trade fixtures is attached hereto as
EXHIBIT "D".) Tenant agrees promptly to repair any damage to the Premises
occasioned by the removal of Tenant's trade fixtures, furnishings and equipment
(except for small holes caused by nails, fasteners and the like) and to
surrender the Premises broom clean, in as good condition as on the date of
Tenant's opening for business therein, ordinary wear and tear and casualty that
Tenant is not required to repair or restore and condemnation excepted and free
and clear of liens and/or encumbrances arising out of or resulting from Tenant's
use and/or occupancy of the Premises not previously approved by Landlord in
writing. Tenant agrees that at the expiration of this Lease, it will deliver to
Landlord peaceable possession of the Premises. No holding over by Tenant nor
acceptance of Base Rent or other charges by Landlord shall operate as a renewal
or extension of the Lease without the written consent of Landlord and Tenant.
Should Tenant hold over without the consent of Landlord, this Lease shall
continue in force from month to month, subject to all of the provisions hereof
and at the monthly Base Rent Tenant had been paying during the preceding Lease
Year increased by fifty percent (50%).
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27. "FOR RENT" SIGNS. Tenant hereby permits Landlord during the last one
hundred twenty (120) days of the Main Term or of any Option Period, as the case
may be (provided that no applicable Renewal Option has been exercised or deemed
exercised), to place one (1) "For Rent" or "For Sale" sign, not exceeding four
(4) feet by four (4) feet in size, on the parking lot of the Shopping Center.
Tenant will also allow Landlord or its agents, upon prior written notice and
accompanied by a representative of Tenant designated by Tenant, to show the
Premises, exterior and interior, to prospective purchasers or mortgagees and,
during the last one hundred twenty (120) days of the Term to prospective
tenants, during reasonable business hours by prior appointment, provided same
does not interfere with the conduct of Tenant's business.
28. FORCE MAJEURE. Except as otherwise specifically contemplated in this
Lease or in paragraph 4 of the Construction Provisions, in the event that
Landlord or Tenant shall be delayed or hindered in, or prevented from, the
performance of any act required hereunder by reason of strikes, lockouts, labor
troubles, inability to procure materials, delay by the other party, failure of
power or unavailability of utilities, riots, insurrection, war or other reason
of a like nature not the fault of such party or not within its control,
financial inability excepted, then performance of such act shall be excused for
the period of delay, and the period for the performance of any such act shall be
extended for a period equivalent to the period of such delay; provided, however,
that in connection with the construction of the Improvements, the consequences
of delays by the other party shall be governed by paragraph 4 of the
Construction Provisions.
29. EVENTS OF TENANT'S DEFAULT. Any of the following occurrences,
conditions or acts by Tenant shall constitute an "Event of Default" under this
Lease:
(a) FAILURE TO PAY RENT; BREACH. (i) Tenant's failure to make any
payment of money required by this Lease (including without limitation Base Rent,
CAM Charges or Real Estate Taxes) (subject to Tenant's right to pay same under
protest), within ten (10) days after the receipt of written notice from Landlord
to Tenant that same is overdue; or (ii) Tenant's failure to observe or perform
any other material provision of this Lease within thirty (30) days after
receipt of written notice from Landlord to Tenant specifying such default and
demanding that the same be cured; provided that, if such default cannot with due
diligence be wholly cured within such thirty (30) day period, Tenant shall have
such longer period as is reasonably necessary to cure the default, so long as
Tenant proceeds promptly to commence the cure of same within such thirty (30)
day period and diligently prosecutes the cure to completion and provided further
that in the case of an emergency, Landlord shall be required to give only such
notice as is reasonable under the circumstances.
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(b) BANKRUPTCY. Tenant's adjudication as bankrupt or insolvent, or
the appointment of a receiver, trustee in involuntary bankruptcy or other,
similar officer to take charge of any substantial part of Tenant's property,
which proceeding is not dismissed within one hundred twenty (120) days after it
is begun of if Tenant shall file or petition to have Tenant adjudged a bankrupt
or a petition for reorganization.
30. LANDLORD'S REMEDIES. After the occurrence of an Event of Default by
Tenant, Landlord shall have the right to exercise the following remedies:
(a) CONTINUE LEASE. Landlord may, at its option, continue this Lease
in full force and effect, without terminating Tenant's right to possession of
the Premises, in which event Landlord shall have the right to collect Base Rent
and other charges when due, including any sums due for any Option Period for
which a Renewal Option has been exercised. In the alternative, Landlord shall
have the right to peaceably re-enter the Premises on the terms set forth in
subparagraph (b) below, without such re-entry being deemed a termination of the
Lease or an acceptance by Landlord of a surrender thereof. Landlord shall also
have the right, at its option, from time to time, without terminating this
Lease, to relet the Premises, or any part thereof, with or without legal
process, as the agent, and for the account, of Tenant upon commercially
reasonable terms and conditions, in which event the rents received on such
reletting shall be applied (i) first to the reasonable and actual expenses of
such reletting and collection, including without limitation necessary renovation
of the Premises, reasonable and actual attorneys' fees and any reasonable and
actual real estate commissions paid, and (ii) thereafter toward payment of all
sums due or to become due Landlord hereunder. If a sufficient amount to pay
such expenses and sums shall not be realized or secured, in Landlord's exercise
of reasonable efforts to mitigate its damages (which Landlord hereby agrees to
make), then Tenant shall pay Landlord any such deficiency monthly, and Landlord
may bring an action therefor as such monthly deficiency shall arise. Landlord
shall not, in any event, be required to pay Tenant any sums received by Landlord
on a reletting of the Premises in excess of the rent provided in this Lease, but
such excess shall reduce any accrued present or future obligations of Tenant
hereunder. Landlord's re-entry and reletting of the Premises without
termination of this Lease shall not preclude Landlord from subsequently
terminating this Lease as set forth below. It is the intent of this paragraph
that Landlord have the remedy provided in California Civil Code Section 1951.4
(Landlord may continue lease in effect after Tenant's breach and abandonment and
recover rent as it becomes due, if Tenant has the right to sublet or assign
subject only to reasonable limitations).
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(b) TERMINATE LEASE. Landlord may terminate this Lease by written
notice to Tenant specifying a date therefor, which shall be no sooner than
thirty (30) days following receipt of such notice by Tenant, and this Lease
shall then terminate on the date so specified as if such date had been
originally fixed as the expiration date of the Term. In the event of such
termination, Landlord shall be entitled to recover from Tenant all of the
following:
(i) The "worth at the time of the award" (defined below) of any
obligation which has accrued prior to the date of termination;
(ii) The "worth at the time of the award" of the amount by which
the unpaid Base Rent and all other charges which would have accrued
after termination until the time of award exceeds the amount of any sums
which Landlord has (or Tenant proves that Landlord could have) received
in mitigation; and
(iii) The "worth at the time of the award" of the amount by which the
unpaid Base Rent and other charges for the balance of the Term after the
time of award exceeds the amount of any sums which Landlord has (or
Tenant proves that Landlord could have) received in mitigation.
As used in this paragraph 30(b), the term, "worth at the time of the
award", shall be computed by allowing simple interest at an accrual equal to
the Default Rate for past due obligations, and a discount rate to net
present value equal to the discount rate of the Federal Reserve Bank of San
Francisco at the time of award, plus one percent (1%) on anticipated future
obligations, on the amount of the obligations payable on the date of such
calculation. In the event this Lease shall be terminated as provided above,
by summary proceedings or otherwise, Landlord, its agents, servants or
representatives may immediately or at any time thereafter peaceably re-enter
and resume possession of the Premises and remove all persons and property
therefrom, by summary dispossession proceedings. Landlord shall never be
entitled to dispossess the Tenant of the Premises pursuant to any "lock-out"
or other nonjudicial remedy.
(c) REMEDIES ARE CUMULATIVE. The various rights and remedies reserved
to Landlord herein, are cumulative, and Landlord may pursue any and all such
rights and remedies (but no others), whether at the same time or otherwise
(to the extent not inconsistent with specific provisions of this Lease).
Notwithstanding anything herein to the contrary, Landlord expressly waives its
right to forcibly dispossess Tenant from the Premises, whether peaceably or
otherwise, without judicial process, such that Landlord shall not be entitled
to any "commercial lockout" or any other provisions of
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applicable law which permit landlords to dispossess tenants from commercial
properties without the benefit of judicial review.
31. EVENTS OF LANDLORD'S DEFAULT; TENANT'S REMEDIES. Any of the
following occurrences, conditions or acts by Landlord shall constitute an
"Event of Default": (a) Landlord's failure to make any payments of money due
Tenant hereunder within ten (10) days after the receipt of written notice from
Tenant that same is overdue (in which event the delinquent amount shall
accrue interest at the Default Rate); or (b) Landlord's failure to perform
any nonmonetary obligation of Landlord hereunder within thirty (30) days
after receipt of written notice from Tenant to Landlord specifying such
default and demanding that the same be cured; provided that, if such default
cannot with due diligence be wholly cured within such thirty (30) day period,
Landlord shall have such longer period as may be reasonably necessary to cure
the default, so long as Landlord proceeds promptly to commence the cure of
same within such thirty (30) day period and diligently prosecutes the cure to
completion and provided further that in the case of an emergency, Tenant
shall be required to give only such notice as is reasonable under the
circumstances. Notwithstanding the foregoing, upon Landlord providing notice
of any Mortgagee to Tenant (which notice shall identify the Mortgagee and
provide an address to which notices to said Mortgagee may be given by Tenant
pending written notice of a change of address from such Mortgagee), Tenant
agrees to give such Mortgagee the same notice and opportunity to cure any
default of Landlord as is provided Landlord hereunder.
Upon the occurrence of an Event of Default by Landlord, at Tenant's
option, in addition to any and all other remedies which it may have at law
and/or in equity, and without its actions being deemed an election of
remedies or a cure of Landlord's default, Tenant may do all or any of the
following: (i) pay or perform such obligations and offset Tenant's reasonable
and actual cost of performance, including any and all transaction costs and
attorneys' fees, plus interest at the Default Rate, against the Base Rent,
CAM Charges and any and all other amounts and charges due Landlord hereunder
or (ii) in the event such Event of Default by Landlord materially interferes
with the conduct and operation of Tenant's business from the Premises and has
not been cured by Landlord's Mortgagee within the time permitted for cure by
such Mortgagee under this paragraph 31, terminate this Lease and sue for
damages, including interest, transaction costs and attorneys' fees as
specified in subsection (i) above. If Landlord fails to pay Tenant the
Tenant Improvement Allowance in a timely manner, Tenant shall be entitled to
the rights and remedies set forth in the Construction Provisions. As to a
breach of the warranties and representations contained in paragraph 19, Tenant
shall be entitled to the remedies
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provided therein, in addition to those remedies provided herein. The various
rights and remedies reserved to Tenant herein are cumulative, and Tenant may
pursue any and all rights and remedies, whether at the same time or otherwise.
32. WAIVER. If either Landlord or Tenant fails to insist on the strict
observance by the other of any provisions of this Lease, neither shall
thereby be precluded from enforcing nor be held to have waived any of the
obligations, past, present or future, of this Lease. Either party may accept
late payment or performance by the other without waiving any Event of Default
which may then have accrued. Landlord's acceptance of Base Rent or other
payments from Tenant while Tenant is in default under this Lease shall not be
construed as a waiver of such default.
33. COMPLIANCE WITH APPLICABLE LAWS. During the Term, Landlord and
Tenant shall comply with all lawful requirements of the local, county and
state health boards, police and fire departments, municipal and state
authorities and any other governmental authorities with jurisdiction over the
Shopping Center, and of the board of fire underwriters, respecting Tenant's
use and occupancy of the Improvements or Landlord's operation of the Shopping
Center, as applicable. In the event that Tenant, within thirty (30) prior
days' written notice (except in the case of an emergency, in which event only
such notice as is reasonable under the circumstances shall be required) from
Landlord or any such authority ordering performance of any such work which
Tenant is required to perform in order for Tenant and/or the Improvements to
remain in, or come into, compliance with any such requirement, fails to
perform or diligently commence performance of same with reasonable
promptness, Landlord may perform said work and collect the reasonable cost
theref plus interest at the Default Rate from Tenant with the next istallment
or installments of Base Rent. In the event that Landlord, within thirty (30)
prior days' written notice (except in the case of an emergency, in which
event only such notice as is reasonable under the circumstances shall be
required) from Tenant or any such authority ordering performance of any such
work which Landlord is required to perform in order for Landlord and/or
Landlord's Premises to remain in, or come into, compliance with any such
requirement, fails to perform or diligently commence performance of same with
reasonable promptness, Tenant may perform said work and deduct the reasonable
cost thereof plus interest at the Default Rate from Landlord with the next
installment or installments of Base Rent.
34. NOTICES. Any notice permitted or required to be given pursuant to
this Lease shall be deemed to have been given three (3) business days after
mailing a written notice by certified mail, postage prepaid, return receipt
requested, or one (1) business
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day after sending by Federal Express or other comparable overnight express
courier service (with proof of receipt available), addressed to the parties
as follows:
If to Tenant: CIRCUIT CITY STORES, INC.
9950 Mayland Drive
Richmond, Virginia 23233
Attention: Corporate Secretary
with a copy to: CIRCUIT CITY STORES, INC.
9950 Mayland Drive
Richlmond, Virginia 23233
Attention: Vice President of Real Estate
If to Landlord: Chico Crossroads Center, Ltd.,
c/o Commercial Management and Development
4811 Chippendale Drive, Suite 307
Sacramento, California 95841
with a copy to: Mr. Jaime Sohacheski
8665 Wilshire Boulevard, Suite 200
Beverly Hills, California 92011
and
Mr. Robert A. Flaxman
2402 Michelson Avenue, #265
Irvine, California 92715
or to such other addressees as any party hereto shall from time to time give
notice to the other party in accordance with this paragraph.
35. BROKERS. Landlord and Tenant each covenant that they have not
dealt with any real estate broker or finder with respect to this Lease,
except for The Equity Group, Inc. which represented Tenant and Lowen Real
Estate which represented Landlord (collectively, the "Brokers"). Lowen Real
Estate shall be paid a commission by Landlord pursuant to a separate written
agreement between Lowen Real Estate and Landlord. Lowen Real Estate shall
pay fifty percent (50%) of said commission to The Equity Group, Inc.,
pursuant to separate agreement between Lowen Real Estate and The Equity
Group, Inc. The Equity Group, Inc. shall be paid one-half of its share of
the commission within fifteen (15) days following the satisfaction or waiver
by Landlord and Tenant, as applicable, of the contingencies set forth in
paragraph 37 hereof, and the remainder shall be paid within fifteen (15) days
following the earlier of (i) Tenant's opening for business or (ii) the
Commencement Date. Should any portion of the commission due The Equity
Group, Inc. not be delivered within fifteen (15) days following written
notice to Landlord, the same shall constitute a Landlord Event of
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Default hereunder (provided, however, Tenant may not terminate this Lease due
to such default) and said amount shall accrue interest at the Default Rate
until delivered in full to The Equity Group, Inc. Except for the foregoing,
each party shall hold the other party harmless from all damages, claims,
liabilities or expenses, including reasonable and actual attorneys' fees
(through all levels of proceedings), resulting from any claims that may
asserted against the other party by any real estate broker or finder with
whom the indemnifying party either has or is purported to have dealt.
36. MISCELLANEOUS.
(a) HEADINGS AND GENDER. All paragraph headings, titles or
captions contained in this Lease are for convenience only and shall not be
deemed a part of this Lease and shall not in any way limit or amplify the
terms and provisions of this Lease. The masculine, feminine or neuter gender
and the singular or plural number shall be deemed to include the others
whenever the context so requires or indicates.
(b) CONSTRUCTION. The parties hereto agree that all the
provisions hereof are to be construed as covenants and agreements as
though the words importing such covenants and agreements were used in each
separate paragraph hereof.
(c) WAIVER OF JURY TRIAL. In the event of any court action
arising out of this Lease, each party hereby expressly waives its right to
trial by jury.
(d) RELATIONSHIP OF LANDLORD-TENANT. Nothing contained in this
Lease shall be deemed or construed by the parties hereto or by any third
person to create the relationship of principal and agent, partnership, joint
venture, or any other association between Landlord and Tenant other than the
landlord-tenant relationship described herein.
(e) ENTIRE AGREEMENT; MERGER. This Lease, including all exhibits
hereto (which are hereby incorporated herein by reference for all purposes),
contains the full and final agreement of every kind and nature whatsoever
between the parties hereto concerning the subject matter of this Lease, and
all preliminary negotiations and agreements of whatsoever kind or nature
between Landlord and Tenant are merged herein. This Lease cannot be changed
or modified in any manner other than by a written amendment or modification
executed by Landlord and Tenant.
(f) ATTORNEYS' FEES. In the event either party shall be required
to commence or defend any action or proceeding against any other party by
reason of any breach or claimed breach of any provision of this Lease, to
commence or defend any action or proceeding in any way connected with this
Lease or to seek a judicial declaration of rights under this Lease, the party
prevailing in such action or proceeding shall be entitled to recover from or
to be reimbursed by the other party for the prevailing party's reasonable and
actual attorneys' fees and costs through all levels of proceedings.
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(g) PARTIAL INVALIDITY. If any provision of this Lease or the
application thereof to any person or circumstance shall be deemed invalid or
unenforceable, the remainder of this Lease and its application to other
persons or circumstances shall not be affected by such partial invalidity but
shall be enforced to the fullest extent permitted by law as though such
invalid or unenforceable provision was never a part hereof.
(h) CONSENTS. Any consent or approval granted by either party
hereunder shall be deemed a consent only as to the matter on which such consent
was requested and shall not waive the consenting party's right to give or
withhold consent to any subsequent matter.
(i) HOLIDAYS. If the day on which rent or any other payment due
hereunder is payable falls on a Sunday or on a legal holiday on which the
United States mails are not delivered, it shall be payable on the following
business day.
(j) APPLICABLE LAW. This Lease shall be construed in accordance
with the laws of the State, and the parties agree that jurisdiction for all
actions hereunder shall lie therein.
(k) SUCCESSORS AND ASSIGNS. All rights, obligations and
liabilities herein given to or imposed upon any party hereto shall extend to
the permitted successors and assigns of such party.
(l) COUNTERPARTS. This Lease may be executed in one or more
identical counterparts, and as so executed by all parties hereto shall
constitute a single instrument for purposes of the effectiveness of this Lease.
(m) TRADEMARKS AND TRADE NAMES. All trademarks, trade names,
service marks, signs and all other marks of identification used by Tenant in
its business shall at all times remain the exclusive property of Tenant, and
Landlord shall have no right, interest in, or title to any of Tenant's
trademarks, trade names, service marks, signs or other marks of identification
unless and to the extent Tenant fails to remove same within thirty (30) days of
the expiration or termination of this Lease, in which case Landlord shall have
the right to remove said items and store or destroy same at Tenant's sole cost
and expense, provided Landlord first notifies Tenant of its intent to exercise
such right.
(n) LATE FEE. If Tenant shall fail to pay, within ten (10) days
of when due and payable, any rent or any additional rent, then Tenant shall pay
to Landlord as a late charge and in consideration of the additional costs
incurred by Landlord and the additional record keeping required to be performed
by Landlord, a minimum sum of Two Hundred Fifty Dollars ($250.00), or a sum
equal to one percent (1%) of the amount due, whichever is greater; provided,
however, during the first twelve (12) months following
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the Commencement Date, no late charge shall be due by Tenant until the second
said violation in such twelve month period. In addition, any amount due
Landlord that is not paid within ten (10) days of when due, other than
interest, shall bear interest from the date such amount becomes due until it
is paid to Landlord at a rate of interest equal to the Default Rate.
(o) LIABILITY OF LANDLORD. Tenant agrees that, except to the extent
of the negligence or willful misconduct of Landlord or its agents or employees,
Landlord shall not be liable for injury or damage which may be sustained by
the person, goods, wares, merchandise or property of Tenant, its employees,
invitees or customers, or by any other person in or about the Premises caused
by or resulting from fire, steam, electricity, gas, 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, plumbing, air conditioning or lighting fixtures of the same,
whether the said damage or injury results from conditions arising upon the
Premises or from other sources. The parties acknowledge and agree that
Landlord shall not be liable for any damages arising from any act or neglect
of any other tenant of the Shopping Center.
(p) NO PERSONAL LIABILITY. The obligations of Landlord under this
Lease do not constitute personal obligations of Landlord, and Tenant shall
look solely to the real estate described on EXHIBIT "A-1" and to the rent,
profits and other income generated therefrom (exclusive of any rent, profits
or other income collected by Landlord prior to the entry of the judgment
against Landlord) and to no other assets of Landlord for satisfaction of any
liability in respect of this Lease and will not seek recourse against Landlord
or the individual general partners of a general partnership which is Landlord
herein, nor against any of their personal assets for such satisfaction.
(q) LANDLORD'S SELF-HELP. Should Tenant fail to pay and discharge
(or post satisfactory bond), when due and payable, any tax or assessment,
payable by Tenant under this Lease, or any lien or claim for labor or materials
employed or used in, or any claim for damages arising out of the repair,
alteration, maintenance and use of the Premises, or should Tenant fail to
procure and maintain or to evidence the procurement and maintenance of any
insurance to be procured and maintained by Tenant under this Lease (self-
insurance excepted), or should Tenant fail to fully perform any covenant or
agreement to be performed by Tenant, as provided for in this Lease, after
thirty (30) days' written notice from Landlord, or commence to cause within
said thirty (30) day period and be diligently pursuing a cure of such default,
then Landlord may, at its option and without waiving or releasing Tenant from
any of Tenant's obligations hereunder pay
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any such tax, assessment, lien, claim, or charge, or settlement or discharge
any action therefor or satisfy any judgment thereon or obtain any such
insurance. Sums incurred or paid by Landlord in connection therewith,
together with interest at the Default Rate on such costs, expenses and sums
from the date incurred or paid by Landlord, shall be deemed to be additional
rental hereunder and shall be paid by Tenant with and at the same time as the
next installment of rent hereunder, and any default therein shall constitute
a breach of the covenants and conditions of this Lease.
(r) DESIGNATION OF USE/TENANCY. The designation of any type of use
or tenancy with respect to any building site or the designation of any building
site on the attached Site Plan is not intended as a covenant or representation
that such building sites shall be construed or devoted to such a use or
tenancy.
(s) PROHIBITIONS ON RENT INCREASES. In the event that at any
time any governmental law, rule or regulation prohibits or postpones, in whole
or in part, any increase in the Base Rent or other sums payable by Tenant
hereunder, then, and in either of such events, such increase 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 any portion thereof,
may lawfully be made and any such increase, the payment of which has been
prohibited or postponed, shall thereafter become due and payable to the maximum
extent at the earliest time or times permitted by law.
(t) SUBORDINATION TO DECLARATION. Tenant agrees to subordinate this
Lease of record to any Declaration of Covenants, Conditions and Restrictions
and Grant of Easements ("Declaration"), or Common Area Maintenance Agreement
("CAMA") recorded by Landlord encumbering the Shopping Center, provided that
the said Declaration and/or CAMA, as the case may be, is consistent with this
Lease and does not adversely affect Tenant's rights or increase Tenant's
obligations under this Lease.
(u) PARCEL MAP. Tenant acknowledges that Landlord may attempt to
record a parcel or final map subdividing the Shopping Center into lots or
parcels and agrees to join in executing any certificates or other documents
required in connection therewith, so long as said map does not adversely affect
Tenant's rights or increase Tenant's obligations under this Lease; provided
that this subparagraph (h) shall not be construed as obligating Tenant to incur
any expense or to agree to incur any expense in connection therewith other than
costs incurred in reviewing same.
37. EFFECTIVENESS OF LEASE; TENANT'S RIGHT TO TERMINATE. Notwithstanding
the execution of this Lease or any provision hereof to the contrary, the
parties hereto agree that the effectiveness of this Lease is expressly
conditioned upon the complete satisfaction (or waiver) of each and all of the
following conditions:
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(a) Landlord's delivery of subordination, non-disturbance and
attornment agreements, executed by any and all existing mortgagees in a form
satisfactory to Tenant, within forty-five (45) days of execution hereof.
Tenant hereby approves such an agreement in the form attached hereto as
EXHIBIT "G".
(b) Landlord's delivery of the Land by the date and in the
condition specified in the Construction Provisions.
(c) Tenant's obtaining the approval of the Architectural Review
Board of the City of Chico for Tenant's Improvements; provided, however, if
the approval is subject to certain conditions, the requirement of this
paragraph 37(c) shall only be satisfied if the conditions are acceptable to
Tenant. Tenant shall notify Landlord within five (5) business days following
Tenant's receipt of the conditional approval whether such conditions are
acceptable to Tenant. Tenant's failure to respond within said five day
period shall conclusively be deemed an acknowledgment of Tenant's disapproval
of such condition(s).
(d) Landlord's representations, warranties and covenants,
including but not limited to those set forth in paragraph 19 herein, being true
and accurate in all material respects as of the date of delivery of the Land
(as defined in the Construction Provisions).
(e) Tenant's obtaining satisfactory assurances within forty-five
(45) days of the date of execution hereof that all necessary approvals and
consents from other tenants in the Shopping Center may be obtained. Landlord's
written certification that this condition has been satisfied shall constitute
satisfactory assurances. Landlord agrees to use reasonable efforts to obtain
such approvals or consents promptly following the execution of this Lease.
(f) Tenant's obtaining satisfactory written assurances that Landlord
has obtained financing adequate to fund the Tenant Improvement Allowance within
forty-five (45) days of the date of execution hereof.
(g) No later than thirty (30) days prior to delivery of the Land
to Tenant, Landlord delivering to Tenant a draft Development Schedule prepared
by Landlord; provided, however, Landlord's failure to timely deliver such
Schedule shall not provide Tenant with a right to terminate the Lease or delay
its opening for business.
(h) Landlord's delivery to Tenant within forty-five (45) days
from Tenant's execution of this Lease of all termination, relocation and/or
other agreements necessary to accommodate Tenant's construction and occupancy
as described herein. However, should Landlord, after exercising commercially
reasonable efforts to enforce all remedies available at law and in equity, be
unable to enforce the terms of any
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aforesaid agreement, the same shall constitute a force majeure event, and
Tenant shall have the right to terminate this Lease as provided in paragraph
4(a) of EXHIBIT "C", in which event Landlord shall have no liability to
Tenant resulting from Landlord's inability to deliver the Land as required
hereunder, including any reimbursement of Tenant's costs.
The existence of the foregoing conditions is solely for the
benefit of Tenant, and Tenant may waive any such condition at its sole
discretion by delivering to Landlord a written notice signed by Tenant which
specifically states the condition(s) being waived by Tenant.
Notwithstanding any other provision in this Lease to the contrary,
in the event any of the foregoing conditions shall not be met, satisfied or
waived upon the latest date set forth herein for said condition, the parties
hereto expressly agree that Tenant shall have the right to terminate this
Lease in its sole and absolute discretion at anytime prior to the
satisfaction or waiver of any such condition by delivering to Landlord a
written notice signed by Tenant which states that Tenant is terminating
this Lease on account of the failure of one or more of the foregoing
conditions. In the event of any such termination, the rights and obligations
of the parties shall be of no further force and effect and the parties shall
have no further liability one to the other (except that the indemnifications
set forth in paragraphs 14(i), 19(a)(v) and 19(b)(ii) hereof shall survive
such termination) upon Tenant's delivery of said notice to Landlord.
Notwithstanding the execution of this Lease or any provision hereof
to the contrary, the parties hereto agree that the effectiveness of this Lease
is expressly conditioned upon the complete satisfaction (or waiver by Landlord)
of each and all of the following conditions:
(a) The satisfaction (as opposed to waiver by Tenant) of the
conditions in subparagraphs (a), (c), (e) and (h) above in this paragraph 37
within the time provided above for the satisfaction of each such condition;
provided Landlord agrees to use reasonable efforts to satisfy said conditions.
(b) That the Construction Term of this Lease commence by May 6,
1995, subject, however, to extension by Tenant by reason of any failure by
Landlord to perform Landlord's obligations under this Lease.
The existence of the foregoing conditions is solely for the
benefit of Landlord, and Landlord may waive any such condition in its sole
discretion by delivering to Tenant a written notice signed by Landlord which
specifically states that the condition(s) is being waived by Landlord.
Notwithstanding any other provision of this Lease to the contrary, in the
event any of the foregoing conditions shall not be met,
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satisfied or waived, the parties hereto expressly agree that Landlord shall
have the right to terminate this Lease in its sole and absolute discretion at
any time prior to the satisfaction or waiver of any such condition by
delivering to Tenant thirty (30) days' prior written notice signed by
Landlord which states that Landlord is terminating this Lease on account of
the failure of one or more of the foregoing conditions. In the event of any
such termination, the rights and obligations of the parties shall be the same
as in the event of a termination by Tenant pursuant to the foregoing
provisions of this paragraph 37.
38. CONFIDENTIALITY. The parties hereto, including, but not limited
to, their heirs, successors, assigns and legal representatives, agree that this
Lease may not be recorded and that all such parties hereby agree to use their
best reasonable efforts to preserve the confidentiality of this transaction.
This confidentiality agreement extends to any developers, bankers, lawyers,
accountants, employees, agents or any other persons acting on behalf of the
parties hereto and to prospective lenders and transferees of the parties. The
parties hereto agree to use their best reasonable efforts to avoid discussing
with, or disclosing to, any third parties (except those parties listed above)
any of the terms, conditions or particulars in connection with this
transaction. It is specifically agreed by way of illustration, but not by
limitation, that the covenant of confidentiality set forth herein shall not be
breached if such information is disclosed in connection with or due to any
governmental law or ordinance, but this covenant of confidentiality shall be
breached if Landlord, or any of Landlord's developers, bankers, accountants,
agents, lenders, lawyers or other similar parties, discloses the content of, or
delivers a copy of this Lease to, any third party without the express written
consent of all parties to this Lease. Any breach of this confidentiality
agreement shall constitute an Event of Default
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under the terms and provisions of this Lease but shall not permit termination
of this Lease.
WITNESS the following signatures and seals:
LANDLORD
--------
CHICO CROSSROADS CENTER, LTD.,
a California limited partnership
ATTEST (WITNESS):
By: JMLB, Inc.,
a California corporation
/s/ [illegible]
- -------------------------
/s/ [illegible] By: /s/ Jamie Sohacheski
- ------------------------- -------------------------------
Jamie Sohacheski
Its: President
TENANT
------
CIRCUIT CITY STORES, INC.,
a Virginia corporation
ATTEST:
/s/ [illegible] By: /s/ Benjamin B. Cummings, Jr.
- -------------------------- ---------------------------------------
Its: Assistant Secretary Name: Benjamin B. Cummings, Jr.
-------------------------------------
Title: V.P.
------------------------------------
56
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EXHIBIT "A"
SITE PLAN
(See Attached)
1
<PAGE>
[SITE PLAN MAP]
<PAGE>
EXHIBIT "A-1"
LEGAL DESCRIPTION
Lots 4 and 9 as shown on that certain map entitled, "CHICO INDUSTRIAL
SUBDIVISION", which map was filed in the office of the Recorder of the County
of Butte, State of California, on July 6, 1965 in Book 34 of Maps, at Pages
7, 8 and 9.
EXCEPTING THEREFROM that portion deeded to the State of California, by Deed
recorded September 27, 1974 in Book 1941 of Official Records, at Page 219,
records of Butte County, California.
ALSO EXCEPTING all minerals, oil, gas and other hydrocarbon substances below
a depth of 500 feet and all geothermal rights below a depth of 250 feet of
said real property without the right of surface entry, as reserved in Deed
recorded April 16, 1980 in Book 2506 of Official Records, Page 661, records
of Butte County, California.
ALSO EXCEPTING THEREFROM those portions deeded to the City of Chico, by deed
recorded April 28, 1980 in Book 2510 of Official Records, at Page 195, and
recorded May 15, 1980 in Book 2515 of Official Records, at Page 276; and
recorded October 27, 1988, under Recorder's Serial No. 88-36683, records of
Butte County, California.
The above described lots comprise one legal parcel as disclosed by
Certificate of Merger No. 36, recorded August 22, 1988, under Recorder's
Serial No. 88-27710, records of Butte County, California.
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EXHIBIT "B"
INDEX OF DEFINITIONS
TERM PARAGRAPH WHERE DEFINED
Assessment(s) Exh. "C", para. 1(a)
Base Rent 4(a)
Building 2
CAM Charges 7(b)
CAM Year 7(c)
Certificate 15(a)(i)
City 1
Commencement Date 4
Common Area Easement 6(d)
Common Area Maintenance 7(a)
Common Areas 7(a)
Concept Plans Exh. "C", para. 2(b)
Construction Term 3
CPI-U 4(a)(ii)
Date of Taking 16(a)
Default Rate 9(b)
Delivery of the Land Exh. "C", para. 1(b)
Escrow Agent 15(a)(i)
Event of Default (Landlord) 31
Event of Default (Tenant) 29
Foreclosure 21(a)
Grading Plans Exh. "C", para. 1(b)
Ground Lessor 21(a)
Hazardous Substances Exh. "C", para. 1(a)
Improvements 2
Land 1
Landlord Introduction
Landlord's Premises 1
Landlord Work Exh. "C", para. 1(d)
Lease Year 3
Main Term 3
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TERM PARAGRAPH WHERE DEFINED
Modified Proctor Exh. "C", para. 2(a)
Mortgage 21(a)
Mortgagee 21(a)
Option Periods 3
Other Improvements 2
Permissible Building Areas Exhibit "A"
Permitted Encumbrances Exhibit "F"
Person 20
Personalty 23
Plans and Specifications Exh. "C", para. 2(b)
Premises 1
Real Estate Taxes 9(a)
Renewal Option 3
Shopping Center 1
Site Covenants 19(a)(ix)
Site Work Exh. "C", para. 1(b)
Site Plan 1
Staging Area 6(a)
State 1
Substantial Completion Exh. "C", para. 2(e)
Substantially All of the Premises 16(a)
Successor 22
Taking 16(a)
Tax Parcel 9(b)
Tenant Introduction
Tenant Improvement Allowance Exh. "C", para. 3
Tenant's Preferred Area Exhibit "A"
Tenant's Pro Rata Share 7(c)
Term 3
Transfer Exh. "C", para. 3
Work 15(a)(i)
Worth at the time of the award 30(b)
2
<PAGE>
[Chico Crossroads Shopping Center
Chico, CA]
EXHIBIT "C"
CONSTRUCTION PROVISIONS
THESE CONSTRUCTION PROVISIONS (herein so called) are, hereby made a
part of the Lease between Landlord and Tenant to which these Construction
Provisions are attached as EXHIBIT "C". All defined terms shall have the
meanings attributed to them in the Lease unless otherwise specifically
defined in these Construction Provisions.
1. LANDLORD'S DELIVERY OF THE LAND;OTHER LANDLORD WORK.
All of the work set forth in subparagraphs (a), (b) and (c) below is,
collectively, the "Landlord Work":
(a) HAZARDOUS SUBSTANCES. Landlord shall deliver the
Land to Tenant free of any pollution or contamination from toxic or hazardous
substances, asbestos or any other chemicals or substances in amounts which
exceed standards for public health or welfare as established and regulated by
any local governmental authority, the State or the United States Government
(herein collectively referred to as "Hazardous Substances"). Landlord hereby
grants Tenant and its agent access to the Premises and Shopping Center to
enable Tenant to conduct such soil and environmental tests as its deems
necessary. If Tenant's tests disclose any such pollution or contamination to
be removed by Landlord, Tenant must notify Landlord of such disclosed
contamination as soon as possible following any necessary confirmation of
said discovery, and Landlord may terminate this Lease within thirty (30) days
following notice of such results if the costs of such removal will exceed
$25,000 or if the reasonable time required to complete such removal will
exceed sixty (60) days.
Landlord has heretofore provided Tenant with copies of Landlord's
environmental site assessment(s) (the "Assessment(s)") of the Premises; a
list of the Assessments provided to Tenant is attached hereto as EXHIBIT "N".
(b) SITE WORK. Landlord, at its sole cost and expense,
shall: (i) cause the Land to be free and clear of any known or unknown
(which, but for Landlord's failure to discover same, should be removed prior
to delivery of the Land to Tenant) obstructions, foundations, footings,
utilities, easements, improvements and tenancies; (ii) complete grading of
the Land and the "Construction Area," as defined below, in accordance with
the "Standards for Grading Work" attached hereto as ATTACHMENT "1", and with
the final plans prepared by Mike Byrd of Rolls, Anderson and Rolls (the
"Grading Plans"), which Grading Plans are subject to Tenant's written
approval, which
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approval shall be given or denied within ten (10) business days following
Tenant's receipt of such Grading Plans (any disapproval shall be in writing
and in sufficient detail to allow Landlord to make appropriate changes);
(iii) completion of Tenant's building pad strictly in accordance with
Tenant's geotechnical report; (iv) use reasonable efforts to obtain approvals
for all on and off-site permits required for any work to be performed by
Landlord which are a prerequisite for issuance of Tenant's building permit;
(v) complete the Staging Area in accordance with the Grading Plans; and (vi)
use reasonable efforts to obtain Architectural Review Board approval (which
includes approval of the Site Plan and Tenant's elevations) from governmental
authorities having jurisdiction over the Shopping Center, permitting Tenant's
construction of the Premises (subject to issuance of Tenant's building
permit). All of the work described in (i) through (vi) above is,
collectively, the "Site Work". No changes shall be made to any of the Site
Work, including but not limited to any plans and specifications therefor,
without Tenant's prior written consent. The Site Work shall be performed in
accordance with the construction schedule attached hereto as ATTACHMENT "3"
(sometimes referred to herein as the "Construction Schedule"). Landlord
specifically covenants and agrees that any problems or delays it encounters
in grading the Premises in satisfaction of the Site Work requirements set
forth above in connection with the condition of the soils, including
environmental or hazardous waste issues, subsidence sinking, surface waters,
subsurface waters, unforeseen site conditions or the like shall be its sole
responsibility, shall cause a force majeure delay unless Jaime Sohocheski or
Robert A. Flaxman have actual knowledge of such condition as of the execution
hereof, and in no event shall the cost associated with such problems or
conditions be passed on to Tenant in any manner.
The term "Construction Area" means the Land, the Staging Area and the
portion of the area between the face of curb for the Building as shown on the
Supplemental Site Plan and the truck access driveway (at least twenty-five
(25) feet in width) at the rear of the Shopping Center. The Construction
Area is depicted on the "Supplemental Site Plan" attached hereto as EXHIBIT
"J". As a portion of the Site Work that will be completed prior to the
delivery of the Land, Landlord shall demolish the existing building
designated "C" on the Site Plan between the buildings indicated as "B" and
"D", demolish pad building "3" on the Site Plan, and complete the concrete
work for the parking spaces and landscape areas along the southeast wall of
the building indicated as "B" on the Supplemental Site Plan and remove the
paving from the Construction Area.
If the items of Site Work to be performed on the Land are completed earlier
than forty-five (45) days prior to Tenant's scheduled commencement of
construction of the
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Improvements (as provided below), the Land shall be overbuilt and sloped to
drain and, within such forty-five (45) day period, shall be regraded and
recompacted.
Subject to force majeure, Landlord covenants and agrees to complete, at
its sole cost and expense, each item of the Site Work and to assure that
temporary utilities are available (at no cost to Tenant other than any
deposits and use charges) within five (5) feet of the building pad as
designated on the Supplemental Site Plan attached as EXHIBIT "J" and
temporary telephone service to the Premises and the Staging Area, in
accordance with the dates established therefor in ATTACHMENT "3", to the end
that promptly upon completion of such requirements (collectively "delivery of
the Land"), Tenant shall be able, subject to issuance of its building permit
and matters within Tenant's control, to commence construction of the
Improvements.
Landlord acknowledges that Tenant's ability to obtain a building permit
for its construction may be delayed due to the failure by Landlord to obtain
necessary approvals or permits or to pay necessary fees for its construction
and development of the Shopping Center. Landlord agrees that delivery of the
Land shall not be deemed to have occurred until all Landlord's approvals and
permits for the "Landlord Work," as defined below, shall have been obtained
and all such fees, including but not limited to impact fees and assessments,
(excluding assessment bonds of record not yet due and payable as well as fees
associated with the issuance of a building permit for the Improvements for
which Tenant is specifically responsible hereunder) shall have been paid, if
and to the extent that such approvals, permits and fees for Landlord's Work
shall be prerequisites to the issuance of Tenant's building permit. Landlord
agrees to keep Tenant advised in writing on a monthly basis as to Landlord's
progress in completing the Site Work. Landlord represents that to the best of
its knowledge, all of the requirements for paving, curbing, stripping,
lighting, landscaping, sidewalks, fire hydrants, and gutters for adequate
drainage as well as any other work required by the City of Chico and any
other duly constituted public authority have been satisfied as the same
relate to the existing Shopping Center as improved. Furthermore, to the
extent additional Site Work, including any required utility relocations, is
required as a condition of Tenant obtaining any or all of the required
approvals from the City of Chico, Landlord shall perform such Work at
Landlord's sole cost and expense, provided the cost thereof does not exceed
$100,000, exclusive of site development fees to be paid by Landlord. Upon
the delivery of the Land, Landlord shall certify to Tenant that all elements
of the Site Work have been completed in the form of the Site Work Certificate
attached hereto as ATTACHMENT "4". In the event any permit fees to be paid
by Landlord cover any portion of the construction and/or use of the
Improvements, the cost of such fees, shall be equitably
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allocated between Landlord and Tenant based on the construction costs for the
work to be performed by each party covered by such fees. In such event,
Tenant shall reimburse Landlord its proportionate share of any such fees
prior to commencing the construction of the Improvements, provided that
Tenant has received a written request from Landlord for such reimbursement,
together with reasonable supportive evidence of the amount and payment of
such fees and of the allocation of such fees to Tenant.
Should the Site Work require minor adjustments in order to be in
accordance with ATTACHMENTS "1" and/or "2", Tenant may direct its contractor
to make such adjustments, the total cost of which shall be reimbursed by
Landlord to Tenant upon demand in a sum not to exceed Five Thousand Dollars
($5,000.00). Such required adjustments shall not be construed as delaying the
"delivery of the Land" provided that Tenant directs its contractor to make
such adjustments or Landlord makes such adjustments promptly following
receipt of written request from Tenant to make such adjustments and in all
events such adjustments do not interfere with Tenant's construction of the
Improvements. Tenant agrees to notify Landlord in writing of any defects or
required adjustments in the Site Work reasonably discoverable from an
inspection of the Construction Area within ten (10) days of Tenant's receipt
of the Site Work Certificate and within ten (10) days of the discovery of any
other defects and/or required adjustments in the Site Work.
(c) PAVING, LIGHTING, UTILITIES, LANDSCAPING AND DRAINAGE.
Landlord, at its sole cost and expense, and in accordance with ATTACHMENT
"3", shall cause a contractor licensed in the State to (i) assure the
availability (at no cost to Tenant, except deposits and use charges) of the
temporary utilities, as described in the "Utilities Specifications" attached
hereto as ATTACHMENT "5" (ii) complete the construction and installation
within five (5) feet of the Building, of permanent telephone service and
permanent utilities service, including but not limited to gas, electric
(provided, however, Landlord shall only be required to provide conduit and
pull rope from Landlord's main transformer to Tenant's designated service
point as shown on the Supplemental Site Plan), domestic water and fire water
(in the capacities set forth in ATTACHMENT "5"), each at Tenant's required
entry points shown on the Supplemental Site Plan; (iii) complete the
integration of the Site Work and the Improvements into the existing Shopping
Center storm water drainage system at Tenant's required location shown on the
Supplemental Site Plan; and (iv) complete the construction and installation
of paving and curbing for parking areas (including sidewalk curb in front of
the Building), vehicular access and service roads, and driveways within the
Construction Area, in accordance with the "Paving Specifications" attached
hereto as ATTACHMENT "7" (provided that Tenant shall be responsible for
concrete work where its Building and/or the sidewalk in front of its
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Building connect with existing Common Area curbs, which work shall include
the installation of concrete landscaping planters and associated
landscaping). In connection therewith, upon thirty (30) days notice Tenant,
Landlord shall commence to pave, according to the paving specifications
attached to the Lease, all area within the Construction Area and adjacent
thereto, up to the footprint of Tenant's Improvements, to the extent not
already improved with curbs, sidewalks or landscaping. Such paving shall be
completed, at Landlord's sole cost and expense, within fifteen (15) business
days following said thirty (30) day notice period. Landlord represents that
to the best of its knowledge, subject to any required increases to meet
Tenant's standards set forth in ATTACHMENT "5", all utilities, sewer and
water required for the Premises are in place serving the building partially
located upon the Land that will be demolished in part by Landlord.
(d) LANDLORD WORK. All of the work described to be performed by
Landlord in this paragraph 1 is collectively referred to as the "Landlord
Work". All Landlord Work shall be performed in accordance with all applicable
laws and this Lease, in a good and workmanlike manner, as appropriate by
engineers, surveyors, architects and consultants, who are bondable, licensed
in the State and of good reputation. Landlord's general contractor shall be
experienced in shopping center development and in coordinating construction
schedules with major anchors and national retailers. In the event that
Landlord defaults at any time in completion of any component of the Landlord
Work and fails to correct such default such that an Event of Default occurs,
Tenant shall have the right, but not the obligation, to perform at Landlord's
sole cost and expense, all or any part of Landlord's Work. Tenant shall
exercise this right by providing Landlord with written notice thereof, which
notice shall reasonably detail those portions of the Landlord Work which
Tenant elects to complete. Tenant may exercise the rights set forth in this
paragraph 1(d) from time to time so long as Tenant provides Landlord notice
specified herein (i) within a reasonable amount of time prior to the date
upon which Landlord would otherwise commence that portion of the Landlord
Work, or (ii) at such other time where it is feasible for Tenant to take over
that portion of the Landlord Work from Landlord. In the event and to the
extent that Tenant exercises its right hereunder, Landlord agrees to
cooperate in good faith and provide Tenant with reasonable assistance so that
Tenant can complete said portions of the Landlord Work. Landlord agrees to
reimburse Tenant for any and all costs incurred by Tenant in connection with
any portion of the Landlord Work which Tenant is in the process of completing
within fifteen (15) days after receipt of written request from Tenant, which
request shall be reasonably supported by invoices and/or written description
of the
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Landlord Work performed. In the event that the Landlord does not timely
reimburse Tenant as hereinabove contemplated, Tenant shall be entitled to
deduct the costs of such Landlord Work from rentals and other payments due
under the Lease, together with interest at the Default Rate from the date of
expenditure by Tenant until paid or otherwise deducted in full.
2. TENANT IMPROVEMENTS.
(a) BUILDING CONSTRUCTION. Upon completion of all requirements
therefor, Landlord shall give Tenant written notice (which shall include any
required certifications, including but not limited to those required by
ATTACHMENT "1") of delivery of the Land in the form of ATTACHMENT "4". Tenant
shall promptly notify Landlord within ten (10) days of Tenant's receipt of
such written notice from Landlord if any such requirement has not been met to
Tenant's reasonable satisfaction. Upon completion of any such previously
unmet requirements (excluding minor corrections and/or additions the
completion of which by Landlord will not interfere with Tenant's
construction, which work shall be promptly completed by Landlord upon notice
from Tenant to complete such work), Tenant shall promptly commence and pursue
to completion with due diligence the construction of the Improvements. The
construction work on the Improvements shall be performed by a duly licensed
contractor chosen by Tenant with a bonding capacity sufficient for Tenant's
work and approved by Landlord's Mortgagee (Landlord shall be responsible for
obtaining such approval, which approval shall not be unreasonably withheld or
delayed), shall be done in a good and workmanlike manner, in compliance with
all applicable laws and in substantial accordance with the "Plans and
Specifications" (defined below). Furthermore, when constructing the
Improvements, Tenant shall (i) provide fencing and security around the
Construction Area; (ii) conduct its work (including the delivery of
construction materials) so as to minimize the interference with the business
of other occupants of the Shopping Center; (iii) require its workers and
other agents to park in the Construction Area or those areas designated on
the Supplemental Site Plan, as discussed below; (iv) store all tools,
materials and construction vehicles within the Construction Area; and (v)
keep the Construction Area reasonably neat and clean (based on reasonable
construction standards) and the area outside the Construction Area as neat
and clean as the remainder of the Shopping Center. In the event Tenant's
construction personnel, delivery vehicles or construction vehicles are parked
within the Shopping Center in an area not designated for such parking,
Landlord may arrange for such vehicles to be towed at its owner's expense. In
connection herewith, Landlord has designated for Tenant's exclusive use
during the entire Construction Term certain parking spaces as shown on the
Supplemental Site Plan; said
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spaces shall be labeled "Circuit City Construction Personnel Parking Only,
Violators Will Be Towed At Owner's Expense." To the extent of any violation
with respect to Tenant's exclusive parking during the Construction Term,
Landlord shall, at the request of Tenant, make immediate arrangement for the
towing of cars. Provided that the Land is delivered on or before the date
set forth on ATTACHMENT "3", Tenant covenants and agrees to use reasonable
efforts and due diligence to achieve "Substantial Completion" (as defined
below) on or before the date which is seven (7) months thereafter.
(b) PLANS AND SPECIFICATIONS. Tenant shall prepare and furnish to
Landlord for its approval, not to be unreasonably withheld, conditioned or
delayed, complete architectural drawings and specifications and building
elevations (the "Plans and Specifications") for the construction of the
Building and Other Improvements, incorporating therein the items specified
and shown in the "Concept Plans" attached hereto as ATTACHMENT "9" within
thirty (30) days following the approval of same by the Architectural Review
Board of the City of Chico. Landlord agrees that it will approve the Plans
and Specifications, so long as they are materially consistent with the
Concept Plans and the requirements of this Lease and delivered to Landlord's
architect concurrently therewith, within ten (10) business days after receipt
thereof. Furthermore, provided Tenant's Plans and Specifications are approved
by the City of Chico, Landlord shall not require Tenant to alter its building
elevations, standard entrance tower, customer pickup area or the use of
Alucobond and red trim on the front exterior of the Building. If the Plans
and Specifications are not disapproved by Landlord within fifteen (15) days
of delivery thereof to Landlord, same shall constitute a Landlord Delay and
extended the Commencement Date, day for day based on the Landlord Delay. The
Plans and Specifications shall not be substantially changed by Tenant without
the prior written consent of the Landlord, which consent shall not be
unreasonably withheld, conditioned or delayed. Any such changes, however,
shall comply with the restrictions in this Lease, the Concept Plans and with
applicable building codes and other governmental requirements.
Notwithstanding anything contained in this Lease to the contrary, in no
event, may the Plans and Specifications, as originally prepared or as
modified, provide for a building containing greater or less than
twenty-three thousand fourteen (23,014) square feet (provided, however Tenant
shall be provided a differential of [plus or minus] one percent (1%)), to the
nearest square foot, nor for a building with a canopy or facia extending
higher than twenty (20) feet above the ground or deeper than twelve (12) feet
from the storefront line nor for a building parapet extending higher than
thirty-four (34) feet above the ground. In the event that any such change in
the Plans and Specifications requested by Tenant requires modifications to
the Landlord Work, Tenant shall reimburse Landlord
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for all additional costs incurred by Landlord as a result of such change
including, without limitation, architect's and engineer's fees, within
fifteen (15) days of a receipt of a request for such reimbursement, together
with reasonably supportive evidence of the amount and payment of such
additional costs and shall extend the required completion dates for Landlord
Work as set forth in the Construction Schedule to the extent necessary to
account for any such requested modifications.
(c) PERMITS. Tenant, at its sole cost and expense, shall obtain or
cause to be obtained those certain building permits, licenses, other
governmental approvals and temporary and permanent certificates of occupancy
which may be required for the lawful construction and occupancy of the
Premises as a retail shopping facility in accordance with the Plans and
Specifications. Landlord agrees to assist and cooperate fully with Tenant in
obtaining such permits, licenses, approvals and certificates. Landlord shall
be responsible for any other permits, licenses, approvals and certificates.
Landlord shall be responsible for any other permits necessary for the
development of the Shopping Center.
(d) LANDLORD INSPECTIONS. During the course of construction of the
Improvements, Landlord may, at its own risk and in cooperation with Tenant's
contractor, enter upon the Land for purposes of inspecting the work, provided
that such inspections shall not interfere with Tenant's construction.
(e) SUBSTANTIAL COMPLETION. Substantial completion of the
Improvements ("Substantial Completion") shall be deemed to occur when a
certificate of occupancy, whether temporary and subject to minor items to be
completed, or permanent, as the case may be, has been issued by the
applicable governmental authority, and Tenant has opened its store facility
for business with the public for the Initial Use. The foregoing shall not be
deemed to relieve Tenant of its responsibility to complete the Improvements
in accordance with the Plans and Specifications and to obtain a permanent
certificate of occupancy.
3. COSTS. Within thirty (30) days following Substantial Completion and
Tenant's furnishing to Landlord (i) the certificates of insurance required
under paragraph 14 of the Lease, (ii) those items set forth on EXHIBIT "L"
attached hereto (iii) a bill of sale conveying title to the Improvements to
Landlord, and (iv) evidence of the expiration of all mechanic's lien periods
applicable to the construction of the Improvements, other than the lien
period of Tenant's general contractor (provided, however, in lieu of waiting
for the expiration of the lien period, Tenant may provide, Landlord's
Mortgagee with an endorsement from Preferred Land Title & Escrow Company (or
another title insurance company) insuring priority of the lien of the
Mortgagee's deed of trust against mechanic's liens attributable to Tenant's
construction of the Improvements), Landlord shall pay to Tenant a "Tenant
Improvement Allowance" in an amount equal to One
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Million Four Hundred Thousand and No/100 Dollars ($1,430,000.00), payable by
wire transfer of funds by Landlord or Landlord's Mortgagee to Tenant's
account ("Payment Date"). From the Commencement Date until the Payment Date
Tenant shall pay in lieu of the Base Rent set forth in paragraph 4(a) of the
Lease, a ground rent in the amount of $7,262.00 per month (hereinafter
"Interim Ground Rent"). Furthermore, should Tenant fail to deliver items (i)
through (iv) set forth in this paragraph 3, which items are the prerequisite
to Landlord's obligation to wire Tenant the Tenant Improvement Allowance,
within one (1) year following Substantial Completion, Tenant shall pay in
lieu of the Base Rent set forth in paragraph 4(a) of the Lease, a ground rent
of $87,140.00 per year for the remainder of the Lease. If the ground floor
gross leasable area of the Building is increased (not to exceed 23,244 square
feet) pursuant to a change in Tenant's Plans and Specifications, which Plans
and Specifications currently show the ground floor gross leasable area of the
Building as 23,014 square feet, the Tenant Improvement Allowance shall
likewise be proportionately increased, yet in not event shall the Tenant
Improvement Allowance be decreased. If Landlord fails to pay the Tenant
Improvement Allowance in full on or before the Payment Date, Landlord shall
be in default hereunder, no Base Rent, Interim Ground Rent, Taxes or CAM
Charges shall be due or owing to Landlord until the same is paid to Tenant,
and interest shall accrue on the unpaid Tenant Improvement Allowance at the
Default Rate commencing on the date following the Payment Date until the date
of payment of the Tenant Improvement Allowance; provided, however, that if
Landlord has not tendered payment of the Tenant Improvement Allowance by that
date which is one (1) year from the Payment Date (the "Payment Date
Anniversary"), then (i) such date shall become the Commencement Date; (ii)
Base Rent shall be reduced to ground rent equal to Seventy-Five Thousand and
No/100 Dollars ($75,000.00) per annum during the first year following the
Payment Date Anniversary and Fifty Thousand and No/100 Dollars ($50,000.00)
per annum thereafter during the Term of the Lease; and (iii) this Lease shall
be converted to a ground lease, with ownership of the Improvements remaining
with Tenant, and Landlord's and any Mortgagees' names being removed as
additional insured or mortgagees on any casualty insurance described in
paragraph 14(a) of the Lease. Ownership of the Improvements, however, shall
rest in Landlord upon the expiration of earlier termination of this Lease.
Notwithstanding anything to the contrary, in the event Landlord delivers to
Tenant the entire Tenant Improvement Allowance, inclusive of interest
thereon, within six (6) months following the Payment Date, Tenant shall, for
the period from the Payment Date until the date such payment is actually
received, pay to Landlord rent of $4,878.33 per month, subject to proration
for any partial month, plus Tenant's share of CAM Charges
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and Real Estate Taxes as determined pursuant to the Lease. Such payment shall
be due with Tenant's first payment of Base Rent, provided Landlord has
provided Tenant notice of Tenant's Share of CAM Charges and Real Estate
Taxes. In the event Landlord fails to provide Tenant notice of Tenant's Share
of CAM Charges and Real Estate Taxes at such time, within thirty (30) days
following the delivery of such notice Tenant shall pay such charges, so long
as such notice is provided within one hundred twenty (120) days of the date
the Tenant Improvement Allowance payment is made.
4. CONSTRUCTION DELAYS.
(a) DELAYS BY LANDLORD. In the event, subject to force majeure,
Landlord shall fail to complete the Site Work and accomplish delivery of the
Land in the condition specified by the date set forth on ATTACHMENT "3"
hereto, Landlord agrees that it shall reimburse Tenant for its fixed and
ascertainable costs incurred as a result thereof in the exercise of all
reasonable efforts to open for business by the date which is seven (7) months
following the date Landlord should have delivered the Land and completed the
Site Work. Such costs shall be limited to Tenant's out-of-pocket expenses of
construction overtime, acceleration charges and bonuses paid to Tenant's
contractors or subcontractors, charges for the scheduling of construction
crews on days on which work cannot be performed due to the delays by Landlord
and construction period interest charges actually incurred to the extent that
such charges exceed those which would have accrued without such delay.
In the event, subject to force majeure, Landlord shall fail to
accomplish delivery of the Land by the date which is forty-five (45) days
following the date Landlord should have delivered the Land, or to complete
any element of the Landlord Work by the completion date established therefor
in ATTACHMENT "3", Tenant, at its option and upon five (5) days' prior
written notice to Landlord, which notice may be given prior to or at any time
after the applicable date for performance, may in addition to any other
rights and remedies set forth herein, enter the Shopping Center and perform
any task required for delivery of the Land or, as applicable, any element of
the Landlord Work which has not been timely completed, and Landlord shall
reimburse Tenant for its reasonable and actual costs thereof, including
interest on such costs at the Default Rate. If such costs are not reimbursed
to Tenant prior to the Commencement Date, Tenant may offset such amounts
against Base Rent and CAM Charges otherwise due until such costs and accrued
interest are reimbursed or offset in full.
If by reason of default and regardless of force majeure, Landlord shall
fail to complete delivery of the Land to Tenant by the date which is one
hundred twenty (120) days from the date set forth on ATTACHMENT "3", Tenant
shall be entitled to terminate this
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Lease at any time prior to such delivery and receive from Landlord promptly
thereafter a sum equal to the actual out-of-pocket and substantiated
third-party legal, architectural and engineering costs incurred by Tenant to
the date of termination, not to exceed One Hundred Thousand and No/100
Dollars ($100,000.00). In addition to any other rights and remedies set forth
herein, if the Landlord fails to timely deliver the Land or complete any
element of the Site Work as required herein regardless of force majeure and
as a result thereof Tenant would be opening for business in the Premises
during the period of November 15 through February 28 of any year, Tenant may
elect to delay opening of its store facility until after such period, during
which time Tenant shall pay no Base Rent, Interim Base Rent, Taxes or CAM
Charges. In such event, Landlord shall deliver the Land and complete the Site
Work on the date required by Tenant, and Landlord shall pay to Tenant on
demand an amount equal to all additional, direct out-of-pocket costs incurred
by Tenant in the development of its store facility, including, but not
limited to, costs of materials and all engineering, architectural and legal
fees, which were a direct result of Landlord's delays hereunder, not to
exceed One Hundred Thousand and No/100 Dollars ($100,000.00).
(b) TENANT'S INABILITY TO OBTAIN PERMITS. Notwithstanding
anything to the contrary, Tenant, if after exercising its best efforts to
obtain the permits necessary for the construction of the Improvements is
unable to do so within forty-five (45) days following the "delivery of the
Land," Tenant shall, as of the Commencement Date (which may be delayed until
the next March 1 following delivery of the Land as provided in paragraph 4(a)
above), pay in lieu of the Base Rent required under paragraph 4(a) of the
Lease a rent of $7,262.00 per month; provided, however, once Tenant
ultimately obtains the required permits, the Base Rent set forth in paragraph
4(a) of the Lease shall be applicable upon the earlier of (i) 180 days
following Tenant's receipt of the permits, subject to extension to the next
March 1 following delivery of the Land or (ii) Tenant's opening for business
in the Premises.
(c) MISCELLANEOUS. Notwithstanding the foregoing, a delay by
any party in exercising its cure rights or other remedies hereunder shall not
be deemed an event of force majeure for purposes of extending the date(s)
established for performance by the party whose actions or omissions gave rise
to such cure rights or remedies. All sums owing to Tenant under paragraph 1
hereof and/or subparagraph (a) above shall, to the extent applicable, be
added to the Tenant Improvement Allowance and paid simultaneously therewith;
and, if not so paid, Tenant shall be entitled to offset all such costs, plus
interest at the Default Rate, against Base Rent and CAM Charges otherwise due
hereunder. All sums owing to Landlord by Tenant under this Lease shall, to the
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extent applicable and except for Base Rent and CAM Charges, be deducted from
the Tenant Improvement Allowance.
Notwithstanding anything contained herein to the contrary, Landlord
covenants that it shall complete its construction and delivery obligations in
accordance with the "Completion Dates" set forth in the Construction
Schedule. In the event that the Landlord fails to complete its construction
and delivery obligations in accordance with such Completion Dates, subject to
force majeure unless specifically indicated otherwise, Tenant may, at its
sole election, exercise such remedies as are set forth in this EXHIBIT "C"
and the Lease.
5. ATTACHMENTS.
"1" Standards for Grading Work
"2" Intentionally Omitted
"3" Construction Schedule
"4" Site Work Certification
"5" Utilities Specifications
"6" Intentionally Omitted
"7" Paving Specifications
"8" Shopping Center Lighting Specifications
"9" Concept Plans
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<PAGE>
ATTACHMENT "1"
Standards for Grading Work
1. The Land and the Construction Area shall be graded in accordance
with the following:
(a) The Grading Plan shall show spot elevations in accordance
with standard engineering practice and these spot elevations shall be shown
with the existing (shown as a dashed line) and final (shown as a solid line)
elevations. Whether existing or proposed, all buildings, improvements, roads
and highways adjacent to or within 100 feet of the Construction Area, shall
be shown in their true locations.
(b) The Building will be accessible by grade level parking only.
Steps and stairs are not permitted.
(c) Asphalt paving areas will be graded to avoid ponding water
with slopes no less than 1.5% and no more than 4.0%
(d) Surface drainage swales will not be allowed without prior
approval of Tenant. Such swales must have a grade of not less than 0.5% and
no more than 3.5% and shall be constructed of concrete.
(e) The cut and fill on the Construction Area should be
balanced, if practical. All fill material must meet the recommendations set
forth in that certain Geotechnical Investigation Report prepared by LRA
Engineering dated December 17, 1993 ("Geotechnical Report") and sources for
acquisition of fill material, as well as locations for cut material, must be
identified.
(f) No retaining walls or embankments causing breaks in grade
shall be permitted unless specifically approved by Tenant.
2. "Tenant's Pad Area" shall be defined as the area extending five
(5) feet beyond the Building walls and truck dock and ramp area, or to the
back of curbing around the Building, whichever is further. The Site Work
shall comply with the following additional requirements:
(a) Landlord shall be responsible for preparing the Tenant's Pad
Area subgrades to within plus or minus one-tenth of a foot as set by Tenant's
architect, which information shall be provided to Landlord on or before
February 15, 1994. Tenant's subgrades are typically 8"-10" below finish floor
elevation. Landlord will complete compaction in accordance with the
Geotechnical Report and appropriate engineering standards and building code
requirements, so as to enable Tenant to perform construction work necessary
to provide completed Improvements in accordance with the "Plans and
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[MAP OF CIRCUIT CITY SITE PLAN]
<PAGE>
Specifications" (defined in the Construction Provisions), with standard
footings and without the necessity of pilings or spread footings or other
extraordinary foundation work. Tenant's minimum slab thickness and under slab
fill will be established in accordance with the Geotechnical Report. All
compacted areas of the site shall be verified by an independent professional
soils engineering test laboratory and a certificate from such independent
laboratory indicating compliance with the Geotechnical Report shall be
furnished to Tenant upon completion of the Site Work.
(b) Tenant's Pad Area soil shall have a minimum bearing capacity
of 2,500 pounds per square foot. Earth stabilization and/or replacement shall
be performed by Landlord as necessary to meet this minimum requirement.
(c) During the preparation of Tenant's Pad Area, Landlord shall
at its expense have an independent professional soils engineering test
laboratory monitor and certify the preparation of Tenant's Pad Area in
accordance with the Geotechnical Report. The greater of three in-place
compaction tests per work day or one in-place compaction test per 5,000
square feet of pad area must be completed.
(d) On or before the delivery of the Land, Landlord shall
provide Tenant with:
(i) An independent soils engineer's written certification
that all pad work was completed in accordance with the Grading Plans. This
report shall include the results of all compaction and other tests performed
during the pad preparation phase and any tests performed prior to the date of
such certification.
(ii) A surveyor's written elevation certification stating
that Tenant's Pad Area is at the prescribed elevation within the stated
tolerance of plus or minus one-tenth of a foot. This certification shall be
based on elevation shots taken on a 50-foot-grid minimum including pad
perimeter and corners.
(e) Landscaping slopes and berms shall be set by Landlord to
preserve the integrity of the slopes as determined by an independent soils
engineer. However, in no case may the slope of a landscaping berm exceed 3 to
1 in turf areas, or 2 to 1 in ground cover and shrub areas.
(f) All material, including native and fill shall comply with
the standards established in the Geotechnical Report.
(g) The Grading Plans shall not be materially changed by
Landlord without the prior consent of Tenant, which consent shall not be
unreasonably withheld or delayed.
(h) All outlots or future building areas shall be rough graded
and maintained in a clean and aesthetically acceptable condition.
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ATTACHMENT "2"
(Intentionally Omitted)
1
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ATTACHMENT "3"
Construction Schedule
<TABLE>
<CAPTION>
LANDLORD'S TASK COMPLETION DATE
--------------- ---------------
<S> <C>
1. Construction of the Staging Area. 5/6/94 (yet in no event
later than 6/15/94)
2. Completion of Site Work 5/6/94 (yet in no event
later than 6/15/94)
3. Installation of temporary utilities. 5/6/94 (yet in no event
later than 6/15/94)
4. Landlord's delivery of the Land to Tenant. 5/6/94 (yet in no event
later than 6/15/94)
5. Architectural Review Board Approval. 3/15/94
6. Construction and installation of permanent 7/15/94
utilities including permanent telephone
service.
7. Integration of Improvements with Shopping 7/15/94
Center storm water drainage system.
8. Construction and installation of paving 15 business days following
(including heavy-duty paving) and curbing. notice from Tenant
</TABLE>
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Attachment "4"
--------------
Site Work Certification
To: Circuit City Stores
9950 Mayland Drive
Richmond, Virginia 23233
Attention: Vice President-Real Estate
Re: Circuit City Store/[Location]-Lease Agreement dated January __, 1994
Ladies and Gentlemen:
The undersigned, as Landlord under the Lease has caused "delivery of the
Land" to occur, and accordingly, completion of the Site Work, all in
accordance with the terms of the Lease. Specifically the undersigned hereby
certifies that: (i) the grading of the Land and the Construction Area has
occurred in accordance with the Standards for Grading Work, attached as
ATTACHMENT "1" to the Lease, and Tenant's building pad has been prepared in
accordance with that certain Geotechnical Investigation Report prepared by
LRA Engineering dated December 17, 1993; (ii) the Staging Area has been
completed and (iii) an all-weather construction access road to the Land no
less than 24 feet width has been prepared and is ready for your use.
All conditions precedent to issuance of your building permit which are
part of Landlord's Work have been satisfied by the Landlord, and we certify
that all elements of the Site Work and delivery of the Land have been
satisfied in accordance with the Lease.
[LANDLORD]
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Attachment "5"
--------------
Utilities Specifications
Landlord will assure that the following temporary utilities shall be
available at no cost to Tenant (except any deposits or use charges) to within
five (5) feet of the Premises no later than the date for completion of such
temporary utilities set forth in the Construction Schedule:
water (2" line, with sufficient pressure that pumping is not
necessary) and electric power (200 amps, 1-phase, 4-wire,
120 volts, with weatherproof and rainproof fused disconnect
switch) for use by Tenant in its construction of the Improvements.
Landlord will provide the following permanent utilities, at the heights
specified below, to within five (5) feet of the Premises at Tenant's entry
points identified on the Supplemental Site Plan no later than the date for
completion of such permanent utilities set forth in the Construction Schedule:
gas (if available), telephone service, permanent electricity
(adequate for 600-amp panel, 3-phase, 277/480 volt) (service
only - conduti and pull rope), sanitary sewer (4" line), domestic
water (2" line), fire protection water (8" line, 50 pounds per
square inch residual pressure, 2000 gallons per minute or at least
sufficient capacity to service Tenant's sprinkler system without
the need for any water pump, as approved by Tenant's fire
protection consultant).
1
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Attachment "6"
--------------
[Intentionally Omitted]
1
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Attachment "7"
--------------
Paving Specifications
1. With respect to the Construction Area.
(a) Pavement design shall be based on the Geotechnical Report.
(b) All pavement design shall be subject to review and approval by
Tenant, and shall conform to the recommendations of the Geotechnical Report.
(c) Consideration must be given to heavier use in main drives and
service area.
2. With respect to sidewalks and curbs:
(a) Landlord shall provide and install all curbs and sidewalks
including perimeter curbs and sidewalks, with the exception of the sidewalk
within the face of curb and around the perimeter of Tenant's Building.
(b) All sidewalks and curbs to be constructed by Landlord shall be
a minimum of four (4) inches thick, with a rough non-skid texture (as
approved by the Landlord's architect with respect to the Common Area), over a
suitable granular base. Salt finish is not acceptable.
3. With respect to reconstruction or new construction:
(a) Entrance and access roads and other areas as required for
suitable drainage, shall have six (6) inch curbs with 18-inch gutters;
however, next to sidewalks and buildings when drainage is not a factor a
straight curb six (6) inches (without gutters) above the finished paving
shall be permitted. Parking lot islands and landscape enclosures shall be
vertical barrier-type curbs and all integral-type curbs and gutters and
vertical barrier-type curbs shall be concrete. Extruded asphalt or concrete
curbing may only be used where appropriate outside the Construction Area.
(b) Curbs at all non-parking areas shall be painted red with an
exterior flat red latex paint, receive a trowel finish and be designated "No
Parking" by a contrasting paint color.
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Attachment "8"
--------------
Shopping Center Lighting Specifications
Minimum design standards for lighting of the Shopping Center to be
completed as part of Landlord's Work are as follows:
1. The Developer shall prepare and submit plans showing the location
and height of all light poles, fixtures, type of fixture shielding
(if any), circuiting and details of the complete lighting
arrangement and equipment.
2. Illumination as measured (in foot candles) at pavement shall be
equal to the greater of (i) that required under applicable code or
(ii) that which exists in the Shopping Center as of the execution of
the Lease.
3. Twenty-five percent (25%) of the overall lighting shall be
designated as security lighting (i.e., remains on from dusk to
dawn). The security lighting layout and pattern shall be subject to
Tenant's approval.
4. Selection of fixture types shall be subject to Tenant's review and
approval prior to design and circuiting.
5. Landlord shall install a seven-day time switch to control all
parking area lighting wired to a common house panel. All Security
lighting shall be placed on photo-cell switching.
6. The control of parking area lights shall be accessible to Tenant's
local store management due to late-night and holiday sales.
7. Where possible, lighting shall be provided by building mounted
fixtures.
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Attachment "9"
--------------
CONCEPT PLANS
[See Attached]
1
<PAGE>
[GRAPHIC]
<PAGE>
[GRAPHIC]
<PAGE>
[GRAPHIC]
<PAGE>
EXHIBIT "D"
-----------
NON-EXCLUSIVE LIST OF REMOVABLE TRADE FIXTURES
STORE FIXTURES
ALL STORAGE RACKING
ALL SECURITY SYSTEM ITEMS
TELEPHONES AND PAGING SYSTEMS
COMPUTER SYSTEM
OFFICE FURNITURE AND TRASH RECEPTACLES
BATTERY CHARGER
TRASH COMPACTOR
SIGNS (INTERIOR/EXTERIOR)
ANTENNA SYSTEM
ELECTRONIC SWITCHING
AIR COMPRESSOR (ROADSHOP)
SAFE
CONVEYOR
MEDECO CYLINDER LOCKS (5)
REFRIGERATOR AND MICROWAVE USED BY EMPLOYEES
TACK BOARDS
WATER COOLER
FIRE EXTINGUISHERS
AUDIO ROOM FIXTURES AND SWITCHGEAR
PICTURES
WAREHOUSE AND MATERIAL HANDLING EQUIPMENT (MOVABLE LADDERS,
DOLLIES, ETC.)
TRACK LIGHTS (CANS ONLY, NOT TRACKS)
1
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EXHIBIT "E"
-----------
SIGN PLANS AND CRITERIA
(See Attached)
1
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[GRAPHIC]
<PAGE>
[GRAPHIC]
<PAGE>
[GRAPHIC]
<PAGE>
[GRAPHIC]
<PAGE>
[GRAPHIC]
<PAGE>
[GRAPHIC]
<PAGE>
EXHIBIT "F"
-----------
PERMITTED ENCUMBRANCES
A. Other Shopping Center occupants' exclusive uses and restrictive covenants
in Prior Leases prohibit the following uses of the Premises:
1. Any non-retail purpose (the following shall not be deemed non-retail:
barber shops, insurance agencies, travel agencies, medical, dental or
optometric facilities, beauty salons, banks, small loan offices, real estate
offices and gasoline service stations, and the following if incidental to
retailing: other offices, storage, storage, repairs and alteration
facilities).
2. A business selling home improvement items including, not but limited
to, lumber, building materials and/or garden supplies, except that other
stores may sell such items as an incidental part of their business. For the
purposes of this paragraph, such sales shall be "incidental" if they do not
exceed fifteen percent (15%) of the sales in such business.
3. A retail grocery, meat or produce store of any nature, provided that
this restriction shall not prohibit a specialty bake shop or a delicatessen.
4. Entertainment purposes, such as: cinema, theater, skating rink,
bowling alley, bar, tavern, discotheque, dance hall, amusement gallery, pool
hall, health club, gym, massage parlor or off-track betting facility.
5. For the renting, leasing, sale of any motor vehicle including, but
not limited to: operation of any dealership relating to motorcycles,
automobiles, trucks and recreational vehicles, including trailers.
6. A restaurant (fast-food or sit-down) within two hundred (200) feet
of any wall of the building designated "B" on the Site Plan, provided that
this provision shall not apply to an ice cream store, yogurt store or donut
shop. In addition, no restaurant shall be located within two hundred (200)
feet from the front entrance of the store on the building area designated "D"
on the Site Plan, nor shall any office, other than a travel agency or real
estate firm, neither being larger than two thousand (2,000) square feet, be
located within two hundred fifty (250) feet of said front entrance. In
addition, no training or educational facilities shall be located within two
hundred (200) feet of said front entrance.
7. A business, trade or profession which requires or has a license or
permit to conduct a pharmacy, or which employs or is required to employ a
registered or licensed pharmacist or the conduct of any store, business,
trade or profession which is called, labeled, named or is commonly known or
referred to as a "drug store," "pharmacy," or "apothecary."
8. A sit-down family-oriented buffet style restaurant.
9. A restaurant.
10. So long as an office supply store has not ceased to be operating on
the premises currently designated as Building F and G on the Site Plan for a
continuous period in excess of six (6) months (excepting any periods during
which remodeling or
1
<PAGE>
restoration work is being conducted with due diligence) the Premises may not
be operated as a store having as its primary business the sale of office
supplies, office equipment, office furniture and/or other office products and
related goods. This restriction, however, shall not be deemed to prohibit
Tenant, its subtenants, transferees, successors or assigns from using the
Premises in whole or in part, for the operation of a standard Circuit City
store or other similar store for the sale of consumer electronics, automotive
electronic products, household appliances and related goods, the warehousing
and servicing of same and/or sale and installation of car stereo, audio and
telephone systems and similar electronics equipment.
11. A theater, auditorium, meeting hall or other place of assemble; any
sports or entertainment facility within four hundred (400) feet of the
building designated "F" and "G" on the Site Plan; automobile sales or
repairs; bowling alley, pool hall or skating rink, bar serving alcoholic
beverages (except as an incident to a full kitchen restaurant operation);
funeral parlor; massage parlor; any type of karate, gymnasium, health club or
physical fitness facility within four hundred (400) feet of the building
designated "F" and "G" on the Site Plan; car wash; off-track betting
establishment; amusement or game room within two hundred (200) feet of the
building designated "F" and "G" on the Site Plan (excluding electronic games
incidental to the operation of a restaurant); a so-called "flea market" or
other operation for the sale of used goods (excluding antique stores), night
club, discotheque or dance hall; hotel or other lodging facilities; offices
(except incidental to a retail operation); school (including, without
limitation, trade school or class sessions of any nature whatsoever) within
two hundred (200) feet of said building designated "F" and "G"; gun range;
any business or use which emits offensive odors, fumes, dust or vapor, or
constitutes a public or private nuisance, or emits loud noise or sounds which
are objectionable, or creates a fire, explosive or other hazard;
manufacturing facility; warehousing (except incidental to a retail
operation) adult book store or similar store selling or exhibiting
pornographic materials as a substantial part of its business and which
prohibits the admission of minors; or a restaurant within two hundred (200)
feet of said building designated "F" and "G".
12. Any use other than a retail use.
13. Office use except (i) offices incidental to retail uses and (ii)
offices providing services to the general public and customarily found in
similar shopping centers, e.g., banking, finance services, real estate or
securities brokerage services, financial or tax-planning services,
accounting, insurance or legal services, optical, medical or dental services
or travel agencies.
B. The following uses of the Premises shall be prohibited throughout the
Lease Term:
1. The uses prohibited under the Prior Leases and set forth in
Paragraphs 1-13 of Section A above, notwithstanding the expiration or
termination or amendment of any Prior Lease.
2. The sale of pet food, supplies, fish, birds and small animals and
grooming and veterinary services and related goods and services.
3. As an auditorium, meeting hall, school or other place of public
assembly, gymnasium or dance hall; for bingo or similar games of chance, or
as a massage parlor, video game arcade, bowling alley, skating rink, car wash
or car repair or car rental
2
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agency, night club or adult book or adult video store which prohibits the
admission of minors to the store.
C. Permitted Title Exceptions.
1. The exceptions set forth in the Preliminary Title Report for the
Shopping Center attached hereto as EXHIBIT "F-1".
NOTWITHSTANDING ANYTHING CONTAINED IN THIS EXHIBIT "F" TO THE CONTRARY,
NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO PROHIBIT THE EXERCISE OF THE
RIGHTS AND PRIVILEGES GRANTED TO THE TENANT UNDER THE LEASE, INCLUDING BUT
NOT LIMITED TO THE TENANT'S EXCLUSIVE USE RIGHTS SET FORTH IN PARAGRAPH
19(a)(vi) OF THE LEASE.
3
<PAGE>
EXHIBIT "F-1"
-------------
PERMITTED TITLE ENCUMBRANCES
(See Attached)
4
<PAGE>
ORDER NO. C-57287 - TO
Page 2
S C H E D U L E B
At the date hereof, exceptions to coverage in addition to the printed
exceptions and exclusions in said policy form would be:
1. General and special taxes for the fiscal year 1993-94
a. First Install : $26,066.90, paid
Second Install : $20,066.90, Due February 1, 1994, Delinquent
April 11, 1994
Code Area : 002-275
Land : $1,009,188.00
Improvements : $3,089,988.00
Exemption : $0.00
Parcel No. : 005-560-014
b. First Install : $17,389.47, paid
Second Install : $17,389.47, Due February 1, 1994, Delinquent
April 11, 1994
Code Area : 002-275
Land : $567,018.00
Improvements : $2,731,050.00
Exemption : $0.00
Parcel No. : 005-560-016
c. First Install : $10,093.57, paid
Second Install : $10,093.57, Due February 1, 1994, Delinquent
April 11, 1994
Code Area : 002-275
Land : $396,392.00
Improvements : $1,517,944.00
Exemption : $0.00
Parcel No. : 005-560-017
d. First Install : $70,793.21, paid
Second Install : $70,793.21, Due February 1, 1994, Delinquent
April 11, 1994
Code Area : 002-275
Land : $3,666,370.00
Improvements : $1,663,334.00
Exemption : $0.00
Parcel No. : 005-560-019
2. According to our Records, a Supplemental Tax has generated on this
property by reason of an issuance of a permit, Assessment No.
995-055-010, Butte County Tax Collectors Office cannot furnish us
amounts at this time.
(Continued)
<PAGE>
Order No: C-57287 Schedule B- Continued
Page 3
3. The lien of supplemental taxes, assessed as a result of transfer of
interest and/or new construction, said supplemental taxes being
assessed pursuant to Chapter 3.5 commencing with Section 75 of the
California Revenue and Taxation Code.
NOTE: All Supplemental Taxes which may have been or will be assessed
pursuant to the above are the sole responsibility of the Vestee(s)
herein and this company assumes no liability regarding the same UNLESS
specifically instructed to do so.
4. Assessments and/or charges which may be levied against the premises by
Entity : Whitman Avenue Assessment District (collected with
taxes)
5. Assessments and/or charges which may be levied against the premises by
Entity : Village Park Assessment District (collected with
taxes)
6. Assessments and/or charges which may be levied against the premises by
Entity : Southeast Chico Redevelopment Area
7. Dedications of easements and other purposes as disclosed by the
following map
Map : Book 34, of Maps, at Page(s) 7, 8 & 9
For : Sewer easement
Affects : 7.5 feet in the Southerly portion of Lot 4
For : Drainage
Affects : 45 feet in the South Easterly portion of Lot 4
8. Relinquishment of abutter's rights and waiver of damages in and to the
adjacent freeway as disclosed by the following deed to the State of
California
Recorded on : January 9, 1964
Recorded in : Book 1290, Official Records, Page 81
9. Quitclaim Deed and Authorization to pump, take or otherwise extract
water from beneath the surface, as granted to the California Water
Service Company, a California corporation, recorded September 8, 1965
in Book 1389 of Official Records, at page 468, records, of Butte
County, California. Affects lot 9.
(Continued)
<PAGE>
Order No: C-57287 Schedule B- Continued
Page 4
10. Easement and/or right of way for the purpose stated herein and
incidental purposes
Granted to : City of Chico
For : Drainage
Recorded on : October 30, 1973
Recorded in : Book 1871, Official Records, Page 489
Affects : Lot 4
11. Relinquishment of abutter's rights and waiver of damages in and to
the adjacent freeway as disclosed by the following deed to the State
of California
Recorded on : September 27, 1974
Recorded in : Book 1941, Official Records, Page 219
12. Release and relinquishment of any and all abutter's rights of access
to the City of Chico, contained in instrument recorded April 28, 1980
in Book 2510 Official Records, Page 195, records of Butte County,
California.
13. Easement and/or right of way for the purpose stated herein and
incidental purposes
Granted to : City of Chico
For : Storm drain easement and appurtenances
Recorded on : November 7, 1980
Recorded in : Book 2567, Official Records, Page 233
Affects : Lot 9
14. TERMS, CONDITIONS AND PROVISIONS of an Agreement
Relating to : Assignment and Assumption of Option Agreement
Executed by : Douglas W. Bradford, etal
Recorded on : June 10, 1988
Recorded in : Butte County Recorder's Serial No. 88-18600
Said Agreement was Assigned on June 10, 1988 in Butte County
Recorder's Serial No. 88-18601
15. A Lease, affecting the premises herein, executed by and between the
parties named herein, subject to the covenants and conditions therein
Dated : June 6, 1988
Lessor : Douglas W. Bradford
Lessee : Homeclub, Inc., a Delaware corporation (now
Homebase)
Term: : Twenty years
Recorded on : June 10, 1988
Recorded in : Butte County Recorder's Serial No. 88-018605
Rerecorded on : September 2, 1988
Rerecorded in : Butte County Recorder's Serial No. 88-30024
(Continued)
<PAGE>
Order No: C-57287 Schedule B- Continued
Page 5
A notice of Lease Restrictions recorded June 13, 1988 in Butte County
Recorder's Serial No. 88-18847
Assignment of Leases recorded June 28, 1991 under Butte County
Recorder's Serial No. 91-026315.
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
16. A Lease, affecting the premises herein, executed by and between the
parties named herein, subject to the covenants and conditions therein
Dated : May 25, 1988
Lessor : Douglas W. Bradford
Lessee : Netco Foods, Inc., a California corporation
Term : Twenty years
Recorded on : June 10, 1988
Recorded in : Butte County Recorder's Serial No. 88-018606
Rerecorded on : September 2, 1988
Rerecorded in : Butte County Recorder's Serial No. 88-30025
A notice of Lease Restrictions recorded June 13, 1988, in Butte County
Recorder's Serial No. 88-18847.
Assignment of Leases recorded June 28, 1991 under Butte County
Recorder's Serial No. 91-026315.
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
17. A Lease, affecting the premises herein, executed by and between the
parties named herein, subject to the covenants and conditions therein
Dated : May 23, 1988
Lessor : Douglas W. Bradford
Lessee : Pay Less Drug Stores Northwest, Inc.
Term : Twenty-five years
Recorded on : June 10, 1988
Recorded in : Butte County Recorder's Serial No. 88-018607
Rerecorded on : September 2, 1988
Rerecorded in : Butte County Recorder's Serial No. 88-30026
A notice of Lease Restrictions recorded June 13, 1988 in Butte County
Recorder's Serial No. 88-18847.
Assignment of Leases recorded June 28, 1991 under Butte County
Recorder's Serial No. 91-026315.
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
(Continued)
<PAGE>
Order No: C-57287 Schedule B- Continued
Page 6
18. TERMS, CONDITIONS AND PROVISIONS of an Agreement
Relating to : Assessment and Cost Sharing
Executed By : Park Springfield, etal
Recorded on : June 10, 1988
Recorded in : Butte County Recorder's Serial No. 88-018608
19. TERMS, CONDITIONS AND PROVISIONS of an Agreement
Relating to : Assessment and Cost Sharing
Executed By : Park Springfield, Ltd., etal
Disclosed by : Notice of Non-Responsibility
Recorded on : June 10, 1988
Recorded in : Butte County Recorder's Serial No. 88-018609
20. Easement and/or right of way for the purpose stated herein and
incidental purposes
Granted to : City of Chico,
For : Public Utility purposes and appurtenances
Recorded on : October 27, 1988
Recorded in : Butte County Recorder's Serial No. 88-36684
21. Easement and/or right of way for the purpose stated herein and
incidental purposes
Granted to : Pacific Gas and Electric Company
For : Pipeline and appurtenances
Recorded on : October 28, 1988
Recorded in : Butte County Recorder's Serial No. 88-36901
A Notice of Final Description recorded July 14, 1989, under Butte
County Recorder's Serial No. 89-26398.
22. Easement and/or right of way for the purpose stated herein and
incidental purposes
Granted to : California Water Service Company, a Corporation
For : Pipeline and appurtenances
Recorded on : December 23, 1988
Recorded in : Butte County Recorder's Serial No. 88-43512
23. TERMS, CONDITIONS AND PROVISIONS of an Agreement
Relating to : Assignment and Assumption
Executed By : Pacific Quadrant Development Company, etal
Recorded on : January 10, 1989
Recorded in : Butte County Recorder's Serial No. 89-000933
(Continued)
<PAGE>
Order No: C-57287 Schedule B - Continued
Page 7
24. Easement and/or right of way for the purpose stated herein and
incidental purposes
Granted to : Pacific Bell
For : Underground Communication facilities and
appurtenances
Recorded on : February 22, 1989
Recorded in : Butte County Recorder's Serial No. 89-5677
25. Consent to removal of personal property affixed to real property
In Favor of : Bank of America NT & SA
Executed by : Pacific Quadrant Chico
Recorded on : March 3, 1989
Recorded in : Butte County Recorder's Serial No. 89-006958
26. A covenant running with the land which recorded March 15, 1989 in
Butte County Recorder's Serial No. 89-9229.
27. An unrecorded lease, affecting the premises herein, executed by and
between the parties named herein, subject to the covenants and
conditions therein
Lessor : Pacific Quadrant - Chico
Lessee : George & Nancy Kirby, Husband & Wife
Disclosed by : Notice of Non-Responsibility
Recorded on : January 3, 1990
Recorded in : Butte County Recorder's Serial No. 90-000295
Assignment of Leases recorded June 28, 1991 under Butte County
Recorder's Serial No. 91-026315
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
28. An unrecorded lease, affecting the premises herein, executed by and
between the parties named herein, subject to the covenants and
conditions therein
Lessor : Pacific Quadrant - Chico
Lessee : Joseph and Linda Hilliard, Husband and Wife (The
Dirty Dog)
Disclosed by : Notice of Non-Responsibility
Recorded on : April 6, 1989
Recorded in : Butte County Recorder's Serial No. 90-013782
Assignment of Leases recorded June 28, 1991 under Butte County
Recorder's Serial No. 91-026315
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
(Continued)
<PAGE>
Order No: C-57287 Schedule B- Continued
Page 8
29. An unrecorded lease, affecting the premises herein, executed by and
between the parties named herein, subject to the covenants and
conditions therein
Lessor : Pacific Quadrant - Chico
Lessee : Randy J. & Carole Gish (Husband & Wife) - The
Postal Shoppe
Disclosed by : Notice of Non-Responsibility
Recorded on : July 10, 1990
Recorded in : Butte County Recorder's Serial No. 90-028926
Assignment of Leases recorded June 28, 1991 under Butte County
Recorder's Serial No. 91-026315.
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
30. An unrecorded lease, affecting the premises herein, executed by and
between the parties named herein, subject to the covenants and
conditions therein
Lessor : Pacific Quadrant - Chico
Lessee : Richard F. & Eva M. Casey (Husband & Wife)-
Check-X-Change
Disclosed by : Notice of Non-Responsibility
Recorded on : July 13, 1990
Recorded in : Butte County Recorder's Serial No. 90-029620
Assignment of Leases recorded June 28, 1991 under Butte County
Recorder's Serial No. 91-026315.
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
31. An unrecorded lease, affecting the premises herein, executed by and
between the parties named herein, subject to the covenants and
conditions therein
Lessor : Pacific Quadrant - Chico
Lessee : Marge & Ted Crane, Husband & Wife
Disclosed by : Notice of Non-Responsibility
Recorded on : October 15, 1990
Recorded in : Butte County Recorder's Serial No. 90-044257
Assignment of Leases recorded June 28, 1991 under Butte County
Recorder's Serial No. 91-026315.
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
(Continued)
<PAGE>
Order No: C-57287 Schedule B- Continued
Page 9
32. An unrecorded lease, affecting the premises herein, executed by and
between the parties named herein, subject to the covenants and
conditions therein
Lessor : Pacific Quadrant - Chico
Lessee : Wayne & JoAnn Murphy (Husband & Wife)
Disclosed by : Notice of Non-Responsibility
Recorded on : October 29, 1990
Recorded in : Butte County Recorder's Serial No. 90-046330
Assignment of Leases recorded June 28, 1991 under Butte County
Recorder's Serial No. 91-026315.
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
33. A Deed of Trust to secure an indebtedness of the amount stated herein
and any other amounts payable under the terms thereof
Dated : June 27, 1991
Trustor(s) : CHICO CROSSROADS CENTER, A CALIFORNIA LIMITED
PARTNERSHIP
Trustee : First Interstate Bank of California
Beneficiary(s) : First Interstate Bank of California
Amount : $8,250,000.00
Recorded on : June 28, 1991
Recorded in : Butte County Recorder's Serial No. 91-026316
34. Assignment of Lessors Interest in a California Limited Partnership to
First Interstate Bank of California, a California Corporation Recorded
June 28, 1991 under Butte County Recorder's Serial No. 91-026317.
35. A Deed of Trust to secure an indebtedness of the amount stated herein
and any other amounts payable under the terms thereof
Dated : June 4, 1992
Trustor(s) : Chico Crossroads Center, a California Limited
Partnership
Trustee : First Interstate Bank of California
Beneficiary(s) : First Interstate Bank of California
Amount : $2,150,000.00
Recorded on : July 29, 1992
Recorded in : Butte County Recorder's Serial No. 92-033929
36. A Financing Statement
Debtor : Chico Crossroads Center, a California Limited
Partnership
Secured Party : First Interstate Bank of California
Recorded on : July 29, 1992
Recorded in : Butte County Recorder's Serial No. 92-033931
(Continued)
<PAGE>
Order No: C-57287 Schedule B- Continued
Page 10
37. An unrecorded lease, affecting the premises herein, executed by and
between the parties named herein, subject to the covenants and
conditions therein
Disclosed by : Notice of Non-Responsibility
Recorded on : December 24, 1992
Recorded in : Butte County Recorder's Serial No. 92-059003
38.
39. Easement and/or right of way for the purpose stated herein and
incidental purposes
Granted to : City of Chico
For : Public right of way
Recorded on : May 12, 1993
Recorded in : Butte County Recorder's Serial No. 93-018761
Affects : Lot 9
40.
41. An unrecorded lease, affecting the premises herein, executed by and
between the parties named herein, subject to the covenants and
conditions therein
Lessee : David Kalbach
Disclosed by : Personal Property Tax Bill 985-000-909-000-92
Assignment of Leases recorded July 29, 1992 under Butte County Recorder's
Serial No. 92-033930.
(Continued)
<PAGE>
ORDER NO. C-57287 -TO
Page 11
Schedule B (continued)
42. An unrecorded lease, affecting the premises herein, executed by
and between the parties named herein, subject to the covenants and
conditions therein
Lessee : Randy and Carole Gish, dba The Postal Shoppe
Disclosed by : Personal Property Tax Bill 850-025-641-000
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
43. An unrecorded lease, affecting the premises herein, executed by
and between the parties named herein, subject to the covenants and
conditions therein
Lessee : Fleming Technology Leasing Co., Inc., dba
Fleming Technology Leasing Co. Inc.
c/o AVTAX Inc.
Assignment of Leases recorded July 29, 1992 under Butte County
Recorder's Serial No. 92-033930.
44. Any and all unrecorded leases of the following as evidenced by a
physical inspection thereof
1. Hometown Buffet
2. Payless Drug
3. Chubby's
4. Miracle Ear
5. Fantastic Sam's
6. Computer Warehouse
7. O'Bears Yogurt
8. Check X Change
9. AVCO Financial Services
10. Food 4 Less
11. Dirty Dog
12. Home Base
13. Nevada Bob's
(Continued)
<PAGE>
Order No: C-57287 Schedule B- Continued
Page 12
14. Play It Again Sports
15. Din Ho Chinese Fast Food
45. A Notice of Non-Responsibility
Executed by : Chico Crossroads Center
Recorded on : October 12, 1993
Recorded in : Butte County Recorder's Serial No. 93-044685
46. A Notice of Non-Responsibility
Executed by : Chico Crossroads Center
Recorded on : October 12, 1993
Recorded in : Butte County Recorder's Serial No. 93-044685
NOTES:
1. Conveyances within the last six months are as follows
NONE
2. As of January 1, 1990, Chapter 598, California Statutes of 1989 (AB
512; Ins. Code Sec 12413.1) becomes effective. The law requires that
all funds be deposited and available for withdrawal by the title
entity's escrow or subescrow account prior to disbursement of any
funds. ONLY CASH OR WIRED FUNDS CAN BE GIVEN IMMEDIATE AVAILABILITY
UPON DEPOSIT. Cashier's checks, Tellers checks and Certified checks
may be available one business day after deposit. All other funds such
as personal, corporate or partnership checks and drafts may cause
material delays in disbursement of funds on this order. In order to
avoid delays, all funding should be by wire transfer. Outgoing wire
transfers will not be authorized until confirmation of the respective
incoming wire transfer or availability of deposited checks.
<PAGE>
EXHIBIT "G"
-----------
SUBORDINATION, NON-DISTURBANCE AND
----------------------------------
ATTORNMENT AGREEMENT
--------------------
THIS AGREEMENT, dated the ____ day of ______________, 199__, between
_______________________, a _______________________________ ("Mortgagee"), and
CIRCUIT CITY STORES, INC., a Virginia corporation ("Tenant").
W I T N E S E T H :
(a) Tenant has entered into a certain lease (the "Lease") dated
________, _______ with ______________________________________________
("Landlord"), covering premises located within that certain property known as
___________________ Shopping Center, located in the City of __________________
___________________ County, ___________ , and more particularly described in
SCHEDULE A hereto; and
(b) Mortgagee has made a loan to Landlord as evidenced and secured by a
Deed of Trust recorded ________________, 199___ in the land records of
_____________ County, _____________________, in Book __________ at page _____
(the "Mortgage"), encumbering the property described in SCHEDULE A; and the
parties hereto desire to set forth their agreement with regard to the priority
of the Mortgage and the effect thereof on Tenant and its leasehold interest in
the aforesaid premises, as set forth below.
NOW, THEREFORE, in consideration of the premises and of the sum of One
Dollar ($1.00) by each party in hand paid to the other, the receipt of which
is hereby acknowledged, the parties hereby agree as follows:
1. The Lease is and shall be subject and subordinate to the lien of the
Mortgage insofar as it affects the real property of which the
premises form a part, and to all renewals, modifications,
consolidations, replacements and extensions thereof, to the full
extent of the principal sum secured thereby and interest thereon.
2. Tenant agrees that it will attorn to and recognize any purchaser at a
foreclosure sale under the Mortgage, any transferee who acquires the
premises by deed in lieu of foreclosure, the successors and assigns
of such purchasers, as its Landlord for the unexpired balance (and
any extensions, if exercised) of the term of the Lease upon the same
terms and conditions set forth in the Lease.
1
<PAGE>
3. In the event that it should become necessary to foreclose the
Mortgage, Mortgagee thereunder will not terminate the Lease nor join
Tenant in summary or foreclosure proceedings so long as Tenant is not
in default under any of the material terms, covenants, or conditions
of the Lease, beyond any applicable cure period provided in the Lease.
4. Mortgagee consents to the application of casualty and condemnation
proceeds in accordance with paragraphs 15 and 16 of the Lease between
Landlord and Tenant, whether or not the Mortgage is then foreclosed.
5. In the event that Mortgagee shall succeed to the interest of
Landlord under the Lease, Mortgagee shall not be:
(a) liable for any act or omission of any prior lessor (including
Landlord); or
(b) liable for the return of any security deposits unless delivered
to Mortgagee; or
(c) bound by any rent or other periodic payments which Tenant might
have paid for more than the current month to any prior lessor
(including Landlord); or
(d) bound by any material amendment or modification of the Lease made
without its consent, which consent shall not be unreasonably
withheld or delayed.
6. Notwithstanding anything contained herein to the contrary, it is
expressly understood and agreed that in the event that Landlord
defaults in the payment of the Tenant Improvement Allowance, as
defined in the Lease, and Mortgagee acquires title to the Shopping
Center by foreclosure or otherwise, Mortgagee shall become liable
for payment of the Tenant Improvement Allowance to Tenant, and
Tenant shall otherwise be entitled to effect a Transfer all in
accordance with the terms of the Lease.
2
<PAGE>
7. This Agrement shall be binding upon and shall inure to the benefit
of the parties hereto, and their successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed these presents the
day and year first above written.
ATTEST: CIRCUIT CITY STORES, INC.,
a Virginia corporation
By:
- -------------------------------------- -----------------------------------
- -------------------------------------- -----------------------------------
ATTEST: COMPANY NAME
By:
- -------------------------------------- -----------------------------------
- -------------------------------------- -----------------------------------
Note: Attach appropriate notary blocks for the State.
3
<PAGE>
EXHIBIT "H"
MEMORANDUM OF LEASE
This Memorandum of Lease is made this ____day of January, 1994, between
CHICO CROSSROADS CENTER, LTD., a California limited partnership (hereinafter
referred to as "Landlord"), and CIRCUIT CITY STORES, INC., a Virginia
corporation (hereinafter referred to as "Tenant").
W I T N E S E T H:
Landlord and Tenant have entered into a Lease (the "Lease") dated
January __, 1994, whereby Landlord has leased to Tenant all those certain
"Premises" consisting of the "Building" and "Other Improvements," as and when
the same are constructed, together with exclusive rights in the four (4)
parking spaces labelled "Customer Pick-Up" adjacent to the Building as shown
on the Site Plan (provided such spaces are approved by the City's
Architectural Review Board, all located in the "Shopping Center," lying and
being in the City of Chico, County of Butte, State of California, the legal
description of which is set forth on EXHIBIT "A-1" attached hereto (the
"Property"). The Lease contains provisions and rights appurtenant to the
Property, some of which are as follows:
I. TERM. The term of the Lease shall commence on the
Commencement Date (as established in the Lease) and
end on the last day of January following the twentieth
(20th) anniversary of the Commencement Date. Thereafter,
Tenant has the right under the Lease to renew and extend
the term of the Lease for five (5) successive periods of
five (5) years each.
1
<PAGE>
II. EXCLUSIVE USE RIGHTS. The Lease provides, subject to certain conditions,
that Tenant shall enjoy the sole and exclusive privilege in the Shopping
Center located on the Property, subject to the rights of tenants under the
Prior Leases, for (i) the sale of consumer, office and automotive
electronics products (which include, but shall not be limited to,
televisions, stereos, speakers and video recorders and players), computer
hardware and software, entertainment software and entertainment media
(which include, but shall not be limited to, records, game cartridges,
video tapes, cassettes and compact discs), cellular telephones, household
appliances (which include, but shall not be limited to, refrigerators,
freezers, stoves, microwave ovens, vacuum cleaners and dishwashers) and
related goods, and the sale and installation of motor vehicle audio,
stereo and telephone systems (all of such items being herein collectively
referred to as the "Products"), and (ii) renting, servicing, repairing and
warehousing of the Products.
III. SUCCESSORS. The covenants, conditions and agreements made and
entered into by the parties hereto shall be binding upon and
inure to the benefits of their respective heirs, administrators,
executors, representatives, successors and assigns.
IV. INCORPORATION OF LEASE. All terms and conditions of the Lease
are hereby incorporated herein by reference as if fully set
forth herein.
2
<PAGE>
V. CONFLICTS WITH LEASE. This Memorandum of Lease is soley for
notice and recording purposes and shall not be construed to alter
modify, expand, diminish or supplement the provisions of the Lease.
In the event of any inconsistency between the provisions of this
Memorandum of Lease and the provisions of the Lease, the provisions
of the Lease shall govern.
IN WITNESS WHEREOF, this Memorandum of Lease has been duly executed
by the parties hereto as of the day and year first above written.
Chico Crossroads Center, Ltd.,
a California limited partnership
By: JMLB, Inc.,
a California corporation
By:________________________________
Jamie Sohacheski
Its: President
___________________________________
__________________________________
CIRCUIT CITY STORES, INC.,
a Virginia corporation
By:
___________________________________
Name:
___________________________________
Title:
___________________________________
Note: Attach appropriate notary blocks for the State.
3
<PAGE>
OD No. 917
Chico, California
LEASE TERM COMMENCEMENT DATE ACKNOWLEDGEMENT
Landlord and Tenant (identified below) acknowledge and agree that the term of
the Lease between Landlord and Tenant dated December 15, 1993 commenced on
October 31, 1994 and that the initial term expires on October 31, 2009.
LANDLORD:
CHICO CROSSROADS CENTER
a California limited partnership
By: JMLB, INC.
BY: J. Sohacheski
-------------------------------
ITS: President
-------------------------------
DATE:5-1-95
-------------------------------
TENANT:
OFFICE DEPOT, INC.,
a Delaware corporation
BY: /s/ Karen L. illegible
-------------------------------
ITS: Lease Administrator
DATE: 11/2/94
-------------------------------
<PAGE>
EXHIBIT "I"
COMMENCEMENT DATE AGREEMENT
THIS AGREEMENT, made as of this 21 day of November, 1994, between CHICO
CROSSROADS CENTER, LTD., a California limited partnership (herein called
"Landlord"), and CIRCUIT CITY STORES, INC. (herein called "Tenant").
W I T N E S E T H:
WHEREAS, Landlord is the owner of certain premises situated in CHICO,
BUTTE County, CALIFORNIA (herein called the "Premises"); and
WHEREAS, by that certain lease dated February 15, 1994 (herein called
the "Lease"), Landlord leased the Premises to Tenant; and
WHEREAS, a memorandum or short form lease in respect of the Lease was
recorded in the office of the Clerk of BUTTE County, CHICO, on the 31 day of
MAY, 1994, in Book SERIAL #94-022936 at Page___; and
WHEREAS, Tenant is in possession of the Premises and the term of the
Lease has commenced; and
1
<PAGE>
WHEREAS, under Paragraph 25 of the Lease, Landlord and Tenant agreed to
enter into an agreement setting forth certain information in respect of the
Premises and the Lease;
NOW, THEREFORE, Landlord and Tenant agree as follows:
1. The term of the Lease commenced on, and the Commencement Date (as
such term is defined in the Lease) was, NOVEMBER 12, 1994. The term of the
Lease shall expire on January 31, 2014 unless Tenant exercises any option to
extend the term of the Lease or unless the Lease terminates earlier as
provided in the Lease.
2. The date of commencement of the first "Option Period" (as such term
is defined in the Lease) shall be February 1, 2015 if Tenant effectively
exercises its option in respect thereof, and if Tenant does so, the term of
the Lease shall expire on January 31, 2020 unless Tenant exercises any option
to further extend the term of the Lease or the Lease terminates earlier as
provided in the Lease.
3. The date of commencement of the second Option Period shall be
February 1, 2020 if Tenant effectively exercises its option in respect
thereof, and if Tenant does so, the term of the Lease shall expire on
January 31, 2025 unless Tenant exercises any option to further extend the
term of the Lease or the Lease terminates earlier as provided in the Lease.
4. The date of commencement of the third Option Period shall be
February 1, 2025 if Tenant effectively exercises its option in respect
thereof, and if Tenant does so, the term of the Lease shall expire on
January 31, 2030 unless Tenant exercises any
2
<PAGE>
option to further extend the term of the Lease or the Lease terminates
earlier as provided in the Lease.
5. The date of commencement of the fourth Option Period shall be
February 1, 2030 if Tenant effectively exercises its option in respect
thereof, and if Tenant does so, the term of the Lease shall expire on
January 31, 2035 unless Tenant exercises any option to further extend the
term of the Lease or the Lease terminates earlier as provided in the Lease.
6. The date of commencement of the fifth Option Period shall be
February 1, 2035 if Tenant effectively exercises its option in respect
thereof, and if Tenant does so, the term of the Lease shall expire
January 31, 2040 unless the Lease terminates earlier as provided in the Lease.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
Attest or Witness: Chico Crossroads Center, Ltd.,
a California limited partnership
_____________________________ By: JMLB Inc.
-------------------------------
a California corporation
By:
----------------------------
Jamie Sohacheski
Its: President
Attest: CIRCUIT CITY STORES, INC.
/s/ Joseph illegible By /s/ Benjamin B. Cummings, Jr.
- ----------------------------- --------------------------------
Assistant Secretary Vice President
3
<PAGE>
Location #3322
2041 Whitman Ave.
Chico, CA
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE ("Assignment") is made as of
May 1, 1994, by and between CIRCUIT CITY STORES, INC., a Virginia corporation
("Assignor"); and CIRCUIT CITY STORES WEST COAST, INC., a California
corporation ("Assignee"). RECITALS:
A. Assignor is the lessee under that certain lease or sublease
described in Exhibit A attached hereto (as now or hereafter amended, "the
Lease") for the premises described in the Lease (the "Leased Premises").
B. Assignee is a wholly-owned subsidiary of Assignor.
C. Assignor desires to assign its right, title and interest in the
Lease to Assignee, and Assignee desires to accept such assignment and assume
the performance of all of Assignor's obligations under the Lease on the terms
set forth herein.
AGREEMENTS:
NOW, THEREFORE, it is mutually agreed among the parties as follows:
1. As of the date hereof, Assignor assigns, transfers, sells and
conveys to Assignee (a) all of Assignor's right, title, interest and estate
in and to the Lease and (b) all of Assignor's other rights, title and
interest with respect to the Leased
<PAGE>
Premises, including without limitation, all licenses, rights, permits,
warranties and entitlements applicable to the Leased Premises.
2. As of the date hereof, Assignee accepts said assignment and
expressly assumes the payment and performance of all of Assignor's
obligations under the Lease arising from and after the date hereof.
3. Notwithstanding anything to the contrary contained herein, Assignor
shall not be released from the performance of the lessee's obligations under
the Lease, and Assignor shall remain primarily liable for said performance,
including without limitation, the payment of all rent and the performance of
all of the lessee's other obligations throughout the remainder of the term of
the Lease.
4. Assignor warrants that it has good and marketable leasehold title
to, and lawful possession of, the Leased Premises pursuant to the Lease.
Assignor shall indemnify, defend and hold harmless Assignee from and against
any loss, damage, claim, cost or expense (including reasonable attorneys'
fees and litigation expenses) incurred or suffered by, or asserted against,
Assignee as a result of a breach by Assignor of the foregoing warranty of
title contained herein.
5. This Assignment shall be binding upon and inure to the benefit of the
parties hereto, their respective successors and assigns.
2
<PAGE>
WITNESS the following signatures.
ASSIGNOR:
CIRCUIT CITY STORES, INC.
By: /s/ P Dunn
---------------------------------
Title: Treasurer
ASSIGNEE:
CIRCUIT CITY STORES WEST COAST, INC.
By: /s/ P Dunn
---------------------------------
Title: Treasurer & CFO
3
<PAGE>
EXHIBIT "J"
-----------
SUPPLEMENTAL SITE PLAN
(See Attached)
<PAGE>
[ M A P ]
<PAGE>
EXHIBIT "K"
-----------
LIST OF PRIOR LEASES
1) Homeclub, Inc. Shopping Center Lease, dated June 6, 1988, as amended
2) HomeTown Buffet, Inc. Lease, dated May 15, 1992, as amended
3) Payless Drug Stores Northwest, Inc., dated May 23, 1988, as amended
4) Netco Food, Inc. Lease, dated May 25, 1988, as amended
5) Office Depot, Inc. Lease, dated December 15, 1993
1
<PAGE>
EXHIBIT "L"
-----------
TENANT IMPROVEMENT ALLOWANCE REIMBURSEMENT CRITERIA
1. An application for payment signed by Tenant's Vice President of
Construction certifying that the Improvements have been completed in
compliance with Tenant's Plans and Specifications with only such
modifications as are permitted by this law.
2. A Certificate of Completion of the Improvements duly executed by
Tenant's Vice President of Construction addressed to Landlord.
3. "Record Drawings" in a form reasonably satisfactory to Landlord
showing any modifications to Tenant's Plans and Specifications.
4. Any bond or bonds required to release any stop notices received by
Landlord or by Landlord's lender (currently, First Interstate Bank) with
respect to Tenant's construction of the Improvements.
5. Any other items reasonably required by Landlord's lender
(currently, First Interstate Bank), as a condition to said lender's
disbursement of any portion of the Tenant Improvement Allowance, including
any lien waivers or affidavits unconditionally waiving lien rights (provided,
however, said requirement may be alternatively satisfied by Tenant providing
an indemnity which enables a title company to insure the priority of the lien
of said lender's deed of trust against any mechanic's liens attributable to
work performed by or at the request of Tenant, for which Tenant is
financially responsible).
1
<PAGE>
EXHIBIT "M"
-----------
TENTATIVE VESTING PARCEL MAP
(See Attached)
1
<PAGE>
[ M A P ]
<PAGE>
[LETTERHEAD]
June 30, 1994
Dear Landlord,
Enclosed is your copy of the Assignment and Assumption of Lease made May 1,
1994, by and between Circuit City Stores, Inc. and Circuit City Stores West
Coast, Inc.
If you have any questions, please call Jeff Fender at (804) 527-4000,
extension 4492.
Sincerely,
/s/ Philip J. Dunn
- ------------------
Philip J. Dunn
Treasurer
PJD/kc
<PAGE>
[LETTERHEAD]
May 26, 1995
Circuit City Stores
9950 Mayland Drive
V.P.R.E.
Richmond, VA 23233
RE: Circuit City Store #3322
Dear Sir:
Enclosed please find the fully executed Lease Commencement for the above
referenced store.
Should you have any questions, please call.
Sincerely,
/s/ Ann Weatherford
- --------------------
Ann Weatherford
Property Manager
<PAGE>
[LETTERHEAD]
Location #3322
2041 Whitman Ave.
Chico, CA
April 20, 1994
Chico Crossroads Center, Ltd.
c/o Commercial Management and Development
4811 Chippendale Drive, Suite 307
Sacramento, CA 95841
NOTIFICATION OF ASSIGNMENT OF LEASE
Dear Landlord:
Circuit City Stores, Inc., a Virginia corporation ("Circuit City
Stores"), is the tenant under a lease (the "Lease") for the Circuit City store
referred to above.
Circuit City Stores has now decided to assign its rights under the
Lease to its wholly owned subsidiary, Circuit City Stores West Coast, Inc., a
California corporation. The assignment will occur on May 1, 1994, or soon
thereafter. A copy of the form of Assignment and Assumption Agreement that
will be used in this transaction (the "Assignment") is attached. Upon
completion of the transaction, a fully executed copy of the assignment
agreement will be sent to you.
The Lease will remain in full force and effect and Circuit City Stores
will remain fully liable under the Lease.
Very truly yours,
CIRCUIT CITY STORES, INC.
By: /s/ Benjamin B. Cummings
------------------------------------
Its: V.P.
------------------------------------
<PAGE>
BARNES & NOBLE
<PAGE>
GUARANTY OF LEASE
THIS GUARANTY OF LEASE is made as of January 5, 1996, by BARNES & NOBLE,
INC., a Delaware corporation ("GUARANTOR"), for the benefit of Chico Crossroads
Center, a California limited partnership ("LANDLORD").
RECITALS:
A. Barnes & Noble Superstores, Inc., a Delaware corporation, is the
Tenant under that certain lease (the "LEASE") with Landlord dated _____, 1996,
respecting certain premises (the "PREMISES") located at Chico Crossroads
Shopping Center, City of Chico, County of Butte, State of California, as more
particularly described in the Lease.
B. As a condition to entering into the Lease, Landlord requires that
Guarantor guarantee the full performance of the obligations of Tenant under the
Lease.
NOW, THEREFORE, in consideration of the execution of the Lease by Landlord
and other valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Guarantor covenants and agrees as follows:
AGREEMENT
1. GUARANTEE. Guarantor hereby absolutely, irrevocably and
unconditionally guarantees to Landlord the full and faithful performance of all
of the covenants, conditions, agreements and undertakings of Tenant to be kept
and performed by Tenant, its successors and assigns under the Lease including,
but not limited to, the payment when due of all rent, additional rent, property
taxes, insurance, and other sums payable by Tenant, its successors and assigns
to Landlord under the Lease (collectively the "OBLIGATIONS") if such Obligations
are not paid or performed, as the case may be, after any notice and/or cure
period provided for in the Lease. Guarantor understands and agrees that this
Guaranty is unconditional and continuing and is a guaranty of payment and
performance and not of collection.
2. INDEPENDENT OBLIGATION. The liability of Guarantor hereunder is
independent of the obligation of Tenant or any other person or entity and a
separate action or separate actions may be brought and prosecuted against
Guarantor whether or not any action is brought or prosecuted against Tenant or
whether Tenant is joined in any such action or actions.
<PAGE>
3. MODIFICATIONS TO LEASE. Guarantor's obligations under this Guaranty
of Lease shall not be extinguished, discharged, diminished or reduced in any way
by any modification or amendment of the Lease including, but not limited to, any
modification of payment dates or amounts, or any subsequent sublease or
assignment of the Lease made with or without the consent of Landlord. Guarantor
hereby waives any right to approve any modification or amendment of the Lease
and agrees that its obligations hereunder shall be modified to the same extent
and with the same force and effect as any modification or amendment of the
Lease.
4. NO WAIVER. No failure on the part of Landlord to pursue any remedy
under this Guaranty of Lease or under the Lease shall constitute a waiver on the
part of Landlord of its right to pursue such remedy on the basis of the same or
a subsequent default.
5. WAIVER OF EXONERATION. Guarantor waives any right to require Landlord
to (a) proceed against Tenant, (b) pursue any other right or remedy available to
Landlord, or (c) have the property of Tenant first applied to the discharge of
the Obligations. Guarantor further waives any defense it may acquire by reason
of Landlord's election of any remedy against Guarantor or Tenant, or both.
6. WAIVER OF SUBROGATION. Until the obligations of Tenant under the
Lease have been performed in full, Guarantor shall have no right of subrogation
against Tenant, and Guarantor hereby expressly waives any right to enforce any
remedy which Landlord now has or may hereafter acquire against Tenant.
Guarantor hereby waives the benefit of, and any right to participate in, any
security now or hereafter held by Landlord for the performance of any
obligations of Tenant under the Lease.
7. WAIVER OF PRESENTMENTS. Guarantor waives any presentments, demands
for performance, notices of nonperformance, protests, notices of protest,
notices of dishonor, and notices of acceptance of this Guaranty and waives all
notices of the existence, creation, or incurring of new or additional
Obligations.
8. OTHER GUARANTOR WAIVERS. Without limiting the generality of the
preceding paragraphs, Guarantor hereby waives all rights and defenses to:
(a) All defenses by reason of any lack of authority of Tenant
respecting Obligations accruing under the Lease or this Guaranty;
-2-
<PAGE>
(b) Any and all rights it may have now or in the future to require or
demand that Landlord pursue any right or remedy Landlord may have against Tenant
or any other third party;
(c) Any defense as a surety, it being understood and agreed that, at
its option, Landlord may treat this instrument as either a guaranty or a
suretyship;
(d) Any duty or obligation of Landlord to disclose to Guarantor any
facts Landlord may know or hereafter know about Tenant, regardless of whether
Landlord has reason to believe that any such facts materially increase the risk
beyond that which Guarantor intends to assume or has reason to believe that such
facts are unknown to Guarantor or has a reasonable opportunity to communicate
such facts to Guarantor, it being understood and agreed that Guarantor is fully
responsible for being and keeping informed of the financial condition of Tenant
and of any and all circumstances bearing on the risk of nonperformance of any
Obligation;
(e) Any defense based upon an election of remedies by Landlord,
including any election which destroys or impairs any right of subrogation,
reimbursement or contribution which Guarantor may have, or any rights or
benefits under any provisions of applicable law in any way qualifying,
conditioning or limiting the obligations of Guarantor based on any steps or
procedures that landlords should take before proceeding against Guarantor; and
(f) Any defense by reason of any invalidity, irregularity or
unenforceability of all or any part of the Obligations.
9. BANKRUPTCY. This Guaranty will continue unchanged by any bankruptcy,
reorganization or insolvency of Tenant, or any successor or assignee thereof, or
by any disaffirmance or abandonment by a trustee of Tenant. Notwithstanding any
modification, discharge or extension of the indebtedness or any amendment,
modification, stay or cure of Landlord's rights which may occur in any
bankruptcy or reorganization case or proceeding concerning Tenant whether
permanent or temporary, and whether assented to by Landlord, Guarantor hereby
agrees that it shall be obligated hereunder to pay and perform the Obligations
in accordance with the terms of the Lease and the terms of this Guaranty.
Guarantor understands and acknowledges that by virtue of this Guaranty,
Guarantor has specifically assumed any and all risks of a bankruptcy or
reorganization case or proceeding with respect to Tenant.
10. GOVERNING LAW. This Guaranty of Lease shall be construed and
interpreted in accordance with the laws of the State of California.
-3-
<PAGE>
11. CAPTIONS. The captions and paragraph numbers appearing in this
Guaranty of Lease are inserted only as a matter of convenience and are not to be
used to interpret this Guaranty of Lease.
12. EXAMINATION OF LEASE. Guarantor acknowledges that it has (a) received
a copy of the Lease, (b) read and understood the terms and provisions of the
Lease including, but not limited to, the covenants, conditions, agreements and
undertakings of Tenant to be kept and performed by Tenant under the Lease, (c)
read and understood the provisions of this Guaranty of Lease, and (d) understood
the obligations of Guarantor under this Guaranty of Lease, including the legal
effect of such obligations and has been advised by legal counsel respecting such
obligations.
13. RELEASE OF GUARANTY. Notwithstanding anything to the contrary
contained herein, at such time as Tenant is released from liability under the
Lease in accordance with the terms thereof, this Guaranty shall be null and void
and of no further force or effect.
14. ATTORNEYS' FEES. Guarantor agrees that if Landlord shall employ an
attorney to present, enforce or defend Landlord's rights or remedies hereunder,
Guarantor shall pay any and all reasonable attorneys' fees, related
disbursements and court costs incurred by Landlord in connection therewith.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty of Lease as of the
date first hereinabove set forth.
"GUARANTOR"
BARNES & NOBLE, INC.,
a Delaware Corporation
By: /s/ Mitchell S. Klipper
-----------------------
Mitchell S. Klipper
Executive Vice President
-4-
<PAGE>
BARNES & NOBLE BOOKSTORE
LEASE AGREEMENT
DATED: January 16 , 1995
LANDLORD: Chico Crossroads Center,
a California limited partnership
TENANT: BARNES & NOBLE SUPERSTORES, INC.,
A DELAWARE CORPORATION
PREMISES: Chico Crossroads Shopping Center
Chico, California
<PAGE>
TABLE OF CONTENTS
1. DEMISE AND PREMISES. . . . . . . . . . . . . . . . . . . . . . . . -1-
2. TERM OF LEASE, HOLDOVER AND OPTIONS. . . . . . . . . . . . . . . . -1-
3. RENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
4. CONSTRUCTION OF THE PREMISES . . . . . . . . . . . . . . . . . . . -4-
5. DELIVERY AND ACCEPTANCE OF THE PREMISES. . . . . . . . . . . . . . -7-
6. COVENANT OF TITLE AND QUIET ENJOYMENT. . . . . . . . . . . . . . . -8-
7. USE OF PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . . -8-
8. REAL ESTATE TAXES. . . . . . . . . . . . . . . . . . . . . . . . . -11-
9. COMMON AREA. . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
10. MAINTENANCE BY LANDLORD. . . . . . . . . . . . . . . . . . . . . . -15-
11. MAINTENANCE BY TENANT. . . . . . . . . . . . . . . . . . . . . . . -15-
12. ALTERATIONS, ADDITIONS AND IMPROVEMENTS. . . . . . . . . . . . . . -16-
13. SIGNS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
14. LANDLORD'S RIGHT OF ENTRY. . . . . . . . . . . . . . . . . . . . . -17-
15. UTILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
16. PARKING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
17. [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . . . . . . . . -18-
18. [INTENTIONALLY DELETED). . . . . . . . . . . . . . . . . . . . . . -18-
19. NO BUILD AREA, VISIBILITY AND ACCESS . . . . . . . . . . . . . . . -18-
20. ASSIGNMENT AND SUBLEASING. . . . . . . . . . . . . . . . . . . . . -19-
21. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
22. INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
23. RELEASE AND WAIVER OF SUBROGATION. . . . . . . . . . . . . . . . . -21-
24. FIRE AND CASUALTY DAMAGE . . . . . . . . . . . . . . . . . . . . . -21-
25. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
26. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
27. HAZARDOUS MATERIALS. . . . . . . . . . . . . . . . . . . . . . . . -26-
28. SUBORDINATION AND NON-DISTURBANCE. . . . . . . . . . . . . . . . . -28-
29. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
30. MEMORANDUM OF LEASE. . . . . . . . . . . . . . . . . . . . . . . . -29-
31. LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
32. TENANT'S ENTRY PRIOR TO COMMENCEMENT DATE. . . . . . . . . . . . . -29-
33. FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
34. BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
35. LANDLORD'S SUBORDINATION . . . . . . . . . . . . . . . . . . . . . -30-
36. ESTOPPEL CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . -30-
37. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
38. EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
EXHIBIT A - Legal Description
EXHIBIT B - Shopping Center Site Plan
EXHIBIT C - Notice of Lease
EXHIBIT D - Landlord's Work
EXHIBIT E - Intentionally Deleted
EXHIBIT F - Use Provisions
EXHIBIT G - Tenant's Prototype Signage and Elevation Designs
EXHIBIT H - Subordination, Non-Disturbance and Attornment Agreement
EXHIBIT I - Memorandum of Lease
-2-
<PAGE>
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between CHICO CROSSROADS
CENTER, a California limited partnership ("LANDLORD"), whose address is:
1510 Arden Way, Suite 205
Sacramento, California 95815
and whose Federal taxpayer identification number is 95-4328335, and BARNES &
NOBLE SUPERSTORES, INC., a Delaware corporation, d/b/a Barnes & Noble
Bookstore ("TENANT"). The Effective Date of the Lease is the date of last
execution (as defined in Paragraph 37.6 below) and is hereby established as
January 16, 1996.
1. DEMISE AND PREMISES
1.1 Landlord, in consideration of the rents hereinafter reserved and
agreed to be paid by Tenant, hereby leases to Tenant and Tenant hereby leases
from Landlord the following described premises (the "PREMISES") situated within
the City of Chico, County of Butte, California, being part of a shopping center
commonly known as Chico Crossroads Shopping Center (the "SHOPPING CENTER"), and
comprised of a portion of a building (the "BUILDING"), which portion contains
Leasable Square Footage (as defined in Paragraph 3.1) of approximately 24,660
square feet (with a width of approximately 128 feet and a depth of
approximately 154 feet, irregularly shaped), together with the nonexclusive use
and benefit of all of Landlord's appurtenant rights, privileges and easements.
The Premises has a mailing address recognized by the United States Postal
Service of:
2031 Whitman Avenue
Suite B
Chico, California 95926
1.2 For the purposes of this Lease, "TENANT'S PROPORTIONATE SHARE"
shall equal a fraction, the numerator of which is the Leasable Square Footage of
the Premises as determined by the Square Footage Certificate (defined below),
and the denominator of which is the total Leasable Square Footage of all
buildings in the Shopping Center, including the Premises, shown on EXHIBIT B,
whether those buildings are constructed or occupied, and all buildings
constructed that are not shown on EXHIBIT B, whether occupied or not. Currently
Landlord estimates the denominator of the fraction to be 267,533 Leasable Square
Feet as of the Effective Date hereof, resulting in an estimated Tenant's
Proportionate Share of 9.22%, but in the event additional buildings not shown on
EXHIBIT B are at any time constructed within the Shopping Center, whether owned
by Landlord or others, Tenant's Proportionate Share shall be appropriately
adjusted as of the day said additional buildings are completed, whether such
buildings are occupied or not.
1.3 A legal description of the Shopping Center is set forth in
EXHIBIT A, and the Premises are outlined on the site plan of the Shopping Center
attached as EXHIBIT B. Landlord covenants that the Shopping Center is or will be
substantially as shown on Exhibit B and contains at least 265,000 Leasable
Square Feet.
2. TERM OF LEASE, HOLDOVER AND OPTIONS
2.1 The term of this Lease (the "TERM") shall commence on the date
of Landlord's delivery and Tenant's acceptance of the Premises as provided in
Article 5 below ("COMMENCEMENT DATE") and shall end on the last day of the
fifteenth (15th) Lease Year (as defined in Paragraph 3.4), plus, if applicable,
the number of additional days required such that the expiration of the Term,
including any extensions thereof, shall not occur during the months of September
through and including January.
<PAGE>
The Term may be extended as provided in Paragraph 2.4 below and, in such event,
"Term" shall include any and all of such extensions.
2.2 Landlord and Tenant agree to sign within thirty (30) days
following the Rent Commencement Date (as defined in Paragraph 3.3) a Notice of
Lease in the form set forth in EXHIBIT C, reciting the Commencement Date, the
Rent Commencement Date and the expiration date of the primary Term.
2.3 Should Tenant continue to occupy the Premises, or any part
thereof, after the expiration of the Term, unless otherwise agreed in writing,
such occupancy shall constitute and be construed as a tenancy from month to
month, and either Landlord or Tenant may terminate such tenancy upon thirty (30)
days written notice to the other. Such month-to-month tenancy shall otherwise
be on and subject to all of the other terms and provisions set forth in this
Lease, except that "Fixed Rent" during such month-to-month tenancy shall be paid
at the rate of 125% of the Fixed Rent in effect immediately prior to the
expiration of the Term.
2.4 Provided Tenant shall not then be in default (beyond any
applicable cure period) under this Lease, Tenant shall have the right, privilege
and option to extend the Term for three (3) successive periods of five (5) years
each under the same terms and conditions of this Lease then in effect, except
that the rental paid for any option period shall be the amount indicated in
Paragraph 3.2 below. If Tenant elects to exercise any option, it shall do so by
giving Landlord written notice at least one hundred eighty (180) days prior to
the expiration of the then existing Term.
3. RENT
3.1 Tenant agrees and covenants to pay Landlord an annual fixed rent
in the sum equal to the product of the dollar amount set forth in Paragraph 3.2
below multiplied by the Leasable Square Footage of the Premises ("FIXED RENT").
Fixed Rent shall be payable in advance, without demand, on the first day of each
calendar month in equal monthly installments and shall not be increased, abated
or diminished except as set forth herein. For purposes of this Lease, "LEASABLE
SQUARE FOOTAGE" shall mean the amount of space in the Premises as measured from
the middle of common walls and the exterior of outside walls and such
measurement shall exclude adjacent corridors, elevator shafts, stairwells,
heating and ventilation facilities and telephone and electric rooms not
exclusively serving the Premises, and any part of the Common Area (defined
below); provided, however, that the parties agree that Tenant's Building
Proportionate Share (as defined in Paragraph 9.10) of the square footage of the
telephone and electrical room serving the Premises and the adjoining premises
shall be deemed to be included within the Leasable Square Footage of the
Premises. The Leasable Square Footage of the Premises shall be determined and
certified in writing (the "SQUARE FOOTAGE CERTIFICATE") by an architect or other
individual selected by Landlord and Tenant. In no event shall the Leasable
Square Footage of the Premises for the purposes of this Lease exceed one hundred
two percent (102%) of the square footage set forth in Paragraph 1.1 above.
3.2 Fixed Rent shall be determined as follows:
(a) Fixed Rent for the first (1st) through tenth (1Oth) Lease
Years shall equal Nine and 70/100 Dollars ($9.70) per annum per square foot of
Leasable Square Footage as established by the Square Footage Certificate.
(b) Fixed Rent for the eleventh (11th) through fifteenth (15th)
Lease Years shall equal Ten and 93/100 Dollars ($10.93) per annum per square
foot of Leasable Square Footage as established by the Square Footage
Certificate.
(c) Fixed Rent for the sixteenth (16th) through twentieth (20th)
Lease Years (I.E., the "FIRST RENEWAL TERM") shall equal Twelve and 56/100
Dollars ($12.56) per annum per square foot of Leasable Square Footage as
established by the Square Footage Certificate.
-2-
<PAGE>
(d) Fixed Rent for the twenty-first (21st) through twenty-fifth
(25th) Lease Years (I.E., the "SECOND RENEWAL TERM") shall equal Fourteen and
45/100 Dollars ($14.45) per annum per square foot of Leasable Square Footage as
established by the Square Footage Certificate.
(e) Fixed Rent for the twenty-sixth (26th) through thirtieth
(30th) Lease Years (I.E., the "THIRD RENEWAL TERM") shall equal Sixteen and
62/100 Dollars ($16.62) per annum per square foot of Leasable Square Footage as
established by the Square Footage Certificate.
3.3 Tenant's obligation to pay Fixed Rent and Additional Rent (as
defined in Paragraph 3.5) shall commence on the "RENT COMMENCEMENT DATE" which
is defined as the earlier of (i) one hundred fifty (150) days after Landlord
delivers and Tenant accepts the Premises in accordance with Article 5 below, or
(ii) the date Tenant first opens for business in the Premises. In the event,
however, Tenant accepts the Premises even though one or more of the conditions
set forth in Paragraph 5.1 have not been satisfied, the Rent Commencement Date
shall not occur until either (i) Landlord has satisfied all of such conditions
(including the Post-Commencement Date Work, as defined in Paragraph 5.1,
permitted to be performed after the Commencement Date pursuant to Paragraph 5.1)
or (ii) Tenant opens for business to the public. In the event the Post-
Commencement Date Work is not completed within ninety (90) days after the
Commencement Date, Tenant shall deduct as liquidated damages from its first and,
if necessary, subsequent payments of Fixed Rent one day's rent (calculated at
the daily rate based on a thirty day month) for each day such completion of the
Post-Commencement Date Work is delayed beyond such ninety day period after the
Commencement Date. Notwithstanding any provision in this Lease to the contrary,
if the Rent Commencement Date under this Paragraph 3.3 would otherwise occur on
or after the first Monday preceding Thanksgiving Day (or such date plus the
number of days beyond fourteen (14) days, if any, which the June 13th date in
clause (ii) of Paragraph 5.4 herein has been delayed pursuant thereto) through
and including the following January 31, then the Rent Commencement Date shall
not occur until the following February 1, or such earlier date Tenant opens for
business. If the Rent Commencement Date is not the first day of a calendar
month, the first month's Fixed Rent shall be prorated, and shall be payable with
the first full monthly installment of Fixed Rent due hereunder.
3.4 A "LEASE YEAR" is defined as the twelve (12) full calendar
months following the Rent Commencement Date plus any partial calendar month in
which the Rent Commencement Date occurs, and each period of twelve (12) full
calendar months thereafter.
3.5 Tenant shall pay as additional rent ("ADDITIONAL RENT") any and
all charges to be paid under this Lease in addition to Fixed Rent, including but
not limited to Tenant's Proportionate share of Real Property Taxes and
Assessments, Percentage Rent, insurance, and CAM Expenses, whether or not the
same may be designated as Additional Rent. Fixed Rent and Additional Rent are
hereinafter collectively called "RENT".
3.6 (a) In addition to Fixed Rent, Tenant agrees to pay to
Landlord, as annual "PERCENTAGE RENT," a sum equal to (i) four and one-half
percent (4.5%) times (ii) the positive difference, if any, between (a) Tenant's
Gross Sales (hereinafter defined) in any fiscal year during the Term, less (b)
the Breakpoint (as hereinafter defined) for such fiscal year. For purposes of
this Lease, the Breakpoint shall mean $4,750,000, which sum shall be increased
by fifteen percent (15%) after each of the tenth (1Oth), fifteenth (15th),
twentieth (20th) and twenty-fifth (25th) full fiscal years. Tenant shall owe no
Percentage Rent for any fiscal year unless Tenant's Gross Sales during such
period exceeds the then Breakpoint. Tenant shall submit to Landlord, within
sixty (60) days following the end of each fiscal year during the Term, a written
statement signed by Tenant and certified by an officer of Tenant to be true and
correct, showing in reasonably accurate detail the amount of Tenant's Gross
Sales for the preceding fiscal year, together with remittance of any Percentage
Rent due.
(b) For the purposes of this Lease, the term
"Gross Sales" shall mean all sales from all business conducted by Tenant or any
subtenant, assignee, licensee or concessionaire upon or from the Premises,
except: (i) the amount of any sales tax, use tax, gross receipts tax, successor
tax or similar tax by whatever name called, imposed by a federal, state,
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municipal or governmental authority directly on sales and collected from
customers; (ii) reimbursement for third party delivery charges; (iii)
proceeds of claims for damage to or loss of merchandise; (iv) sales other
than to retail customers of damaged or aged merchandise; (v) sales of gift
certificates, provided that if gift certificates are sold from the Premises
or elsewhere are redeemed at the Premises, such redemption shall constitute a
sale; (vi) license fees and rents paid to Tenant by subtenants and licensees;
(vii) credit card charges paid by Tenant to credit card companies such as
Visa and Mastercard, not to exceed five percent (5%) of Tenant's Gross Sales
in any year; (viii) forfeited deposits or installments on customers' special
order purchases or merchandise provided such merchandise is not resold; (ix)
income from telephone or vending machines; (x) sums raised for and donated to
charitable organizations; (xi) the exchange of merchandise between the stores
of Tenant where such exchange is made solely for the convenient operation of
the business of Tenant and not for the purpose of depriving Landlord of the
benefit of a sale which otherwise would be made from the Premises; (xii) the
amount of returns to shippers and manufacturers; (xiii) proceeds from the
sale of trade fixtures, machinery and equipment; (xiv) the amount of any cash
or credit refund made upon any sale from the Premises previously included in
Gross Sales; and (xv) sales of merchandise discounted to employees, not to
exceed three percent (3%) of Tenant's Gross Sales in any year.
(c) Tenant hereby agrees at all times during
the Term to keep true, full and accurate books of account containing a complete
statement of Tenant's Gross Sales. Tenant hereby grants to Landlord and its
agents and accountants the right, during Tenant's normal business hours and upon
reasonable notice, to inspect the books of account and the checks, bills,
vouchers, statements and records kept in connection with the business done or
transacted in or upon the Premises by Tenant, at Tenant's home office in
Westbury, New York (or such other location as may be chosen by Tenant), for the
purpose of verifying Tenant's Gross Sales. Landlord, for itself and for its
agents, lenders, prospective buyers, legal advisors, financial advisors and
accountants, agrees to keep confidential all sales figures, audits and reports
furnished by or obtained from Tenant.
(d) Landlord may retain an independent
Certified Public Accountant of Landlord's own selection to perform an audit of
Tenant's Gross Sales, provided such audit shall not unreasonably interfere with
the operation of Tenant's business. If any statement of Tenant's Gross Sales
previously furnished by Tenant shall reflect less than ninety-seven percent
(97%) of the amount of Tenant's Gross Sales as shown by such audit and
additional Percentage Rent is payable by Tenant as a result of such
understatement, Tenant shall immediately pay the reasonable cost of such audit
for the understated period. In any event, Tenant shall promptly pay to Landlord
all additional Percentage Rent shown by any audit to be payable hereunder.
(e) The term "fiscal year" as used herein
shall mean, for the first fiscal year, the date Tenant's store opens for
business through the last Saturday of the following January and, for each fiscal
year thereafter, the last Sunday of January through the last Saturday of the
following January, with the exception of the last fiscal year of the Lease term,
for which the fiscal year shall end at midnight of the last day of the Term.
Tenant shall have the right to change its fiscal year and, in such event, Tenant
shall notify Landlord in writing of such change and Tenant shall pay Percentage
Rent for any short fiscal year brought about by such change. For purposes of
computing Percentage Rent for the first and last partial fiscal years, Gross
Sales for such partial year shall be added to the Gross Sales for the next
succeeding or prior months during the Lease term, as the case may be, so that
Percentage Rent is computed based on a 12-month period (such 12-month period
herein referred to as the "EXTENDED PERIOD"). If Percentage Rent is payable for
such Extended Period, then to calculate the Percentage Rent for the first and
last fiscal years, such amount shall be prorated based on the ratio that the
number of days in the first or last fiscal year, as the case may be, bears to
the days in the Extended Period.
4. CONSTRUCTION OF THE PREMISES
4.1 Landlord shall, at Landlord's sole expense and in compliance
with all applicable codes, laws, regulations and ordinances, perform the work
set forth on EXHIBIT D annexed hereto ("LANDLORD'S WORK"). Within forty-five
(45) days after the Effective Date, Tenant shall complete the preparation of
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plans and specifications for Tenant's finish-out work and all other work
(including any work which is not the responsibility of Landlord as set forth
in EXHIBIT D) necessary to prepare the Premises for Tenant's occupancy and
deliver same to Landlord and Landlord's architect. Landlord shall, within
five (5) business days after receipt of such plans and specifications, either
approve or disapprove such plans and specifications. If Landlord disapproves
same, Landlord's objections shall be stated with sufficient particularity to
permit Tenant to revise said plans. The above procedure shall continue until
Tenant's plans and specifications are approved by Landlord (such plans and
specifications, as approved by Landlord, hereinafter referred to as "TENANT'S
PLANS" and the work shown thereon hereinafter referred to as "TENANT'S
WORK"). If Landlord fails to approve or disapprove Tenant's plans and
specifications within the aforesaid five (5) business day period, such plans
and specifications shall be deemed approved by Landlord. Landlord shall not
unreasonably withhold its consent to Tenant's plans and specifications.
Within the earlier to occur of (i) sixty (60) days after Landlord has
approved Tenant's Plans or (ii) March 15, 1996 (the "PERMIT PERIOD"),
Tenant shall use reasonably diligent efforts to obtain a building permit for
Tenant's Work (including all signage) and shall deliver Landlord notice upon
its receipt thereof ("TENANT'S PERMIT NOTICE"). If Tenant fails to obtain a
building permit for Tenant's Work within the Permit Period, Tenant may,
without liability or further obligation, terminate this Lease upon written
notice to Landlord delivered within five (5) days after the expiration of the
Permit Period, and this Lease shall have no further force or effect. If
Tenant fails to terminate the Lease as aforesaid within five (5) days after
expiration of the Permit Period, Tenant shall be deemed to have received a
building permit and Tenant's right to terminate this Lease under this
Paragraph shall cease. Notwithstanding the foregoing, if Tenant fails to
obtain a building permit for Tenant's Work prior to the expiration of the
Permit Period, Landlord shall be entitled to extend the Permit Period by not
more than thirty (30) days by notice to Tenant and obtain such permits on
Tenant's behalf (Tenant being responsible for any municipal fees to obtain
said permits) making only those changes to Tenant's Plans as are approved by
Tenant and which are necessary to comply with applicable governmental codes
and regulations. If Landlord obtains the permits necessary to complete
Tenant's Work within sixty (60) days of expiration of the Permit Period,
Tenant's option to terminate this Lease as provided in this paragraph 4.1
shall cease.
4.2 Provided Landlord has delivered the Contingency Satisfaction
Notice to Tenant or such Contingency Satisfaction Notice is deemed delivered
pursuant to Paragraph 37.14, Landlord shall obtain all necessary approvals,
licensing and building permits for Landlord's Work and shall commence
construction of Landlord's Work (collectively, "LANDLORD'S PRELIMINARY WORK")
on or prior to the date ("LANDLORD'S WORK COMMENCEMENT DATE") which is ten
(10) days from the earlier of (i) the date Landlord receives Tenant's Permit
Notice or (ii) the date Landlord receives a written notice from Tenant that
Tenant has waived its right under Paragraph 4.1 to terminate this Lease
because of failure to obtain a building permit (the "PERMIT WAIVER NOTICE")
(such notices referred to in clauses (i) and (ii) to be delivered no earlier
than sixty (60) days after Lease execution). If Landlord fails to perform
Landlord's Preliminary Work on or prior to Landlord's Work Commencement Date,
Tenant may, without liability or further obligation, terminate this Lease
upon ten (10) days written notice to Landlord, in which event this Lease shall
terminate and shall have no further force or effect upon the expiration of
such ten (10) day period, unless all necessary approvals, licensing and
building permits for Landlord's Work have been obtained and Landlord's Work
has commenced prior to the expiration of such ten (10) day period.
4.3 In the event Landlord fails to complete construction of the
Landlord's Work and deliver the Premises to Tenant in accordance with Article
5 below within eighty (80) days from Landlord's Work Commencement Date (which
date shall not be subject to delays permitted under Article 33) (the "OUTSIDE
DATE"), Tenant may, without liability or further obligation,
terminate this Lease upon thirty (30) days written notice to Landlord, in
which event this Lease shall terminate and shall have no further force or
effect upon the expiration of such thirty (30) day period, unless Landlord's
Work has been completed prior to the expiration of such thirty (30) day
period.
4.4 If Landlord fails to complete the construction of Landlord's Work
and deliver the Premises to Tenant in accordance with Article 5 below on or
before the Outside Date and Tenant does not elect to terminate this Lease in
accordance with the provisions of Paragraph 4.3, Tenant shall deduct as
liquidated damages from its first and, if necessary, subsequent payments of
Fixed Rent one-
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half (1/2) day's rent (calculated at a one-half of the daily rate based on a
thirty day month) for each day such completion and delivery is delayed beyond
the Outside Date. It is hereby agreed that the liquidated damages to which
Tenant is entitled hereunder is a reasonable estimate of the damages to
Tenant that would be caused by Landlord's delay in completing Landlord's Work
and delivering the Premises.
4.5 Landlord hereby agrees to pay to Tenant a construction payment (the
"CONSTRUCTION PAYMENT") in an amount equal to One Hundred Sixty-five
Thousand and 00/100 Dollars ($165,000.00), which Construction Payment is
made not as an inducement to Tenant to enter into this Lease but to defray
the cost of Tenant's Work. Landlord shall pay the Construction Payment
within thirty (30) days after Tenant's Work has been completed, Tenant has
obtained a certificate of occupancy for the Premises, Tenant has opened for
business and Tenant has delivered lien waivers for all work performed or
material supplied (except no lien waivers shall be required for any
subcontractor whose work or materials does not exceed $3,000). Provided
Tenant has complied with the above requirements, if Landlord fails to pay the
Construction Payment within thirty (30) days after notice from Tenant that
same is past due, Tenant shall have the right, in addition to any other
rights or remedies available to Tenant hereunder, at law or in equity, to
offset the amount owing from future installments of Fixed Rent and any
additional charges payable by Tenant under the Lease until Tenant is
reimbursed said Construction Payment in full, with interest on the remaining
balance from the date such Construction Payment was due until so reimbursed
to Tenant at the rate of ten percent (10%) per annum.
4.6 Attached hereto as EXHIBIT G are the design elevations and store
fronts to be constructed by Tenant as part of Tenant's Work (the "ELEVATION
DESIGNS"). Within sixty (60) days after the Effective Date, Landlord shall
process and obtain the necessary discretionary approvals from the City of
Chico (including the Architectural Review Board) for construction of said
Elevation Designs (excluding building permits). Tenant shall give Landlord
prior notice of any changes in the Elevation Designs and any material changes
thereto shall not be made without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed; provided,
however, Landlord may withhold its consent if any such material change
(i) requires additional approvals from the City of Chico or delay the
processing of Landlord's application for said approvals, (ii) requires
structural modifications to the building of which the Premises are a part, or
(iii) affects the design or dimensions of the Blockbuster Video elevations or
storefront. Notwithstanding the foregoing provisions of Paragraph 4.5 and
this Paragraph 4.6, within thirty (30) days of the Effective Date, Landlord
shall prepare construction drawings for the construction of additional wall
openings on the west and south elevations of the Premises, as indicated on
EXHIBIT G annexed hereto, including any structural modifications necessary to
ensure the structural integrity of the building (whether or not such
modifications are located within the Premises) and Tenant shall approve or
disapprove such drawings within five (5) days of submission by Landlord and
shall cooperate with Landlord to finally approve such drawings within five
(5) days after the expiration of such fifteen (15) day preparation period.
On or before the latest to occur of (i) ten (10) business days after
Tenant's final approval of such drawings or (ii) March 1, 1996, Landlord shall
obtain bid submissions for such additional wall openings, from at least three
(3) contractors, one (1) of which, at Tenant's option, shall be a contractor
designated by Tenant (prior to the date Landlord submits its drawings for
bids) and reasonably acceptable to Landlord. Landlord shall immediately
thereafter deliver to Tenant copies of the bid packages received by Landlord
from all of the bidders, together with an itemized budget showing a detailed
breakdown by trade and contractor, unit costs and those additional costs
associated with the modifications not located within the Premises but
required as a result of the requested wall openings. Within five (5)
business days from receipt of the bids by Tenant, Tenant shall direct
Landlord whether to accept or reject any of the bids. In the event Tenant
directs Landlord to accept any of the bids, Landlord shall arrange for the
performance of such work, the Construction Payment shall be reduced by the
amount of the lowest bid, together with Landlord's actual out-of-pocket cost
to prepare the construction drawings (in an amount not to exceed $4,600), and
the construction of such additional wall openings (including, without
limitation, any required structural modifications located within or outside
the Premises) shall be deemed to be part of Landlord's Work for all purposes
of this Lease. In the event Landlord does not perform such work as
aforesaid, the Construction Payment shall nevertheless be reduced by
Landlord's actual out-of-pocket cost to prepare the construction drawings, in
an amount not to exceed $4,600.
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5. DELIVERY AND ACCEPTANCE OF THE PREMISES
5.1 Landlord shall have completed Landlord's Work and delivered the
Premises to Tenant, and Tenant shall be required to accept the Premises, only
after all of the following conditions are satisfied, provided, however, that
items (e) and (f) below (collectively, the "POST-COMMENCEMENT DATE WORK")
shall not be required to be completed until forty-five (45) days after the
Commencement Date, provided Landlord has commenced such work as of the
Commencement Date, and, in the reasonable judgment of Landlord's architects,
Landlord is able to complete such work within such forty-five (45) day
period, and Tenant shall accept the Premises subject to completion of such
items (e) and (f):
(a) Landlord's Work has been substantially completed as verified by
mutual inspection by Landlord and Tenant pursuant to Paragraph 5.2 below.
(b) Landlord has provided Tenant with a certificate of occupancy
or local equivalent issued by the appropriate authority, certifying that the
base building complies with all applicable laws, provided, however, that if
such a certificate of occupancy is customarily issued only once Tenant's Work
is completed, then the condition of obtaining a certificate of occupancy for
the shell of the building shall be waived by Tenant.
(c) Landlord has approved Tenant's Plans.
(d) Landlord has delivered to Tenant the Square Footage Certificate.
(e) Landlord has delivered to Tenant all of the written warranties
required under Paragraph 11.2 below.
(f) Landlord has completed the building facade (exclusive of such
tenant's signage and canopy) for the other tenant in the building in which
the Premises is located.
(g) Landlord has performed any improvements to the Common Areas
(as defined in Paragraph 9.1) which are required as a condition to
obtaining required approvals from the City of Chico for Landlord's Work
including, without limitation, any required utility relocations, at a cost
not to exceeds $100,000.00. If the cost of such improvements exceed
$100,000.00 Landlord may terminate this Lease upon ten (10) days written notice
to Tenant together with evidence of such costs and, unless Tenant notifies
Landlord within such ten (10) day period that Tenant elects to reimburse
Landlord for such costs in excess of $100,000, this Lease shall terminate and
have no further force or effect, provided, however, that Landlord shall
reimburse Tenant for any actual out-of-pocket architectural fees, not to
exceed $50,000, incurred by Tenant to prepare Tenant's plans and
specifications within ten (10) days of Tenant's submission of a bill
therefor.
5.2 When Landlord considers Landlord's Work to be substantially
complete, it shall notify Tenant of same in writing, together with a request
that Tenant notify Landlord of any item which shall materially interfere with
or prevent the commencement of Tenant's Work. Within ten (10) days of
receipt of Landlord's notice, Tenant and Landlord shall make an inspection to
determine whether Landlord's Work is substantially complete. If Tenant's
inspection discloses any item which, in Tenant's reasonable judgment, shall
materially interfere with or prevent the commencement of Tenant's Work,
Tenant shall provide Landlord with written notice thereof within said ten (10)
day period and Landlord shall correct such items before Landlord's Work shall
be deemed substantially complete. Within three (3) business days after
Tenant's acceptance of the Premises, Landlord shall change into Tenant's name
all utilities exclusively serving the Premises.
5.3 In the event Tenant accepts the Premises notwithstanding Landlord's
obligation to correct or complete any items under Paragraph 5.1 (a) of which
Landlord received written notice within the period required under Paragraph
5.2, Landlord shall complete said items within thirty (30) days after
Tenant's inspection under Paragraph 5.2 above. Tenant's acceptance of the
Premises shall not in any
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way diminish or otherwise affect Landlord's warranty, maintenance or repair
obligations set forth elsewhere in this Lease. In addition, Landlord shall
correct all defects in the construction of Landlord's Work, provided Tenant
gives Landlord written notice of such defects on or before the expiration of
the first (1st) Lease Year.
5.4. Notwithstanding any provision of this Lease to the contrary, at
Tenant's option, Tenant shall not be required to accept the Premises (and
Landlord shall be deemed not to have delivered the Premises) between June 13th
and the next succeeding September 30th; provided, however, that (i) if
Tenant does not timely deliver its plans and specifications to Landlord as
required under Paragraph 4.1, such June 13th date shall be delayed one day
for each day Tenant has delayed delivering its plans to Landlord and (ii) if
(x) Tenant does not deliver to Landlord Tenant's Permit Notice or Permit
Waiver Notice on or before March 15, 1996, and (y) Landlord has previously
delivered to Tenant a Contingency Satisfaction Notice, then such June 13th
date shall be delayed one day for each day after March 15, 1996 until Tenant
delivers to Landlord Tenant's Permit Notice or Tenant's Permit Waiver Notice,
provided that unless Landlord delivers to Tenant a written reminder notice
within the five (5) day period prior to March 15, 1996 stating that Landlord
has not yet received the Permit Notice or Permit Waiver Notice, such day for
day delay in the June 13th date shall not commence until Landlord has
delivered to Tenant such a reminder notice. In the event Tenant delays its
acceptance and Landlord's delivery of the Premises pursuant to this Paragraph
5.4, the Commencement Date and the Rent Commencement Date shall be delayed
correspondingly.
6. COVENANT OF TITLE AND QUIET ENJOYMENT
Landlord represents and warrants to Tenant that Landlord is solely
vested with fee simple title to the Premises and the Shopping Center and has
full right and lawful authority to lease the Premises to Tenant pursuant to
the terms hereof, subject, however, to the satisfaction of the Contingencies
set forth in subparagraphs 37.14(a) and (b). Landlord covenants with Tenant
to keep Tenant in quiet enjoyment and possession of the Premises during the
Term, provided Tenant is not in default under this Lease beyond any
applicable cure period. Landlord further represents and warrants to Tenant
that, as of the Commencement Date: (i) no zoning or similar ordinance,
restrictive covenant or other encumbrance or restriction prevents the
performance of Tenant's Work (subject, however, to Tenant's obligation to
obtain building permits for Tenant's Work) or the use of or Tenant opening
for business within the Premises for the specific purposes set forth in
Paragraph 7.1, or otherwise conflicts or is inconsistent with the terms of
this Lease; (ii) upon delivery of the Contingency Satisfaction Notice, no
joinder or approval of any other person or entity (including any lender or
mortgagee) is required with respect to Landlord's right and authority to
enter into this Lease; and (iii) as of the Commencement Date, there is no
underlying or superior lease affecting the Premises.
7. USE OF PREMISES
7.1 Tenant may use the Premises for the purpose of the display and
retail sale of (i) books, books on tape and books on other media, magazines,
periodicals, recorded music, video tapes and disks, video games, computer
software and computer games and various media and merchandise incidental
thereto (collectively with the Cafe, as defined below, the "INITIAL USE"),
and (ii) subject to those exclusive use and prohibited use provisions contained
in existing leases with other tenants or occupants of the Shopping Center, as
more particularly set forth on Exhibit F, and exclusive of those uses
described in Paragraph 7.4, (x) other merchandise typically sold in a
majority of Tenant's other stores in California and (y) any other lawful
retail use; provided, however, Tenant may not devote more than two thousand
(2,000) square feet of floor area to the display and retail sale of each of
the following: (i) video tapes and disks and video games or products which
are a technological evolution thereof (for sale only as opposed to rental),
(ii) recorded music, including CD's, tapes, record or products which are a
technological evolution thereof, and (iii) computer software or computer
games and various media and merchandise incidental thereto, including CD-I
and CD-ROM, and any product which is a technological evolution thereof and
home entertainment software. Furthermore, for so long
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as the existing leases for buildings "C" and "F" are in full force and
effect, Tenant may not use the Premises for the sale, rental or display of
office equipment, business or office supplies, office furniture, appliances
or electronic equipment (I.E., computers, video recorders, televisions,
stereo equipment, cellular phones, household appliances or items which are a
technological evolution of the foregoing) or to provide business services
such as photocopying and printing; provided, however, the sale of electronic
accessories which are related to the sale of other merchandise sold by Tenant
(EG., computer boards or accessories sold with computer software) shall be
permitted, provided the sale of said merchandise does not exceed five hundred
(500) square feet. Landlord represents that there are no other exclusive use
provisions contained in existing leases in the Shopping Center other than as
set forth on EXHIBIT F and upon receipt of the Contingency Satisfaction
Notice, no such exclusives shall affect or in any way limit Tenant's right to
use the Premises for the Initial Use except as expressly set forth in this
Article 7. Tenant may also operate within the Premises or grant a concession
or sublease for a "coffee bar" or "coffee shop" or similar operation (the
"CAFE") providing its customers with coffee, tea, and other beverages,
pastries, sandwiches, snacks and other pre-prepared or packaged food or
non-alcoholic beverage items, as well as merchandise incidental thereto,
provided that such Cafe does not exceed 2,500 square feet (plus any outdoor
seating). Notwithstanding the foregoing provisions of this Paragraph 7.1,
but subject to the provisions of Paragraph 7.5, Tenant shall not use the
Premises or allow the Premises to be used in violation of any exclusive use
restriction of which Landlord has given Tenant written notice and which is
hereafter granted to a new tenant or occupant of the Shopping Center after
the expiration or termination of any existing lease affecting buildings A,
the "Blockbuster premises", C, D, F, H or Pad 1 (as indicated on the site
plan annexed hereto as EXHIBIT B), provided such tenant or occupant M is a
first class national or regional retail chain store with at least twenty (20)
stores in California and the use of its premises is substantially similar to
its use in the majority of its stores in California, (ii) such tenant or
occupant occupies an entire building (or the entire Blockbuster premises) or
more than 20,000 square feet of leasable area, (iii) shall not have as its
primary use the rental or sale of computer software or computer games (EG.,
Egghead Software) although such tenant or occupant may sell or rent such
products as part of its overall business (EG., Best Buy), (iv) no such
exclusive use restriction shall prevent Tenant from utilizing the Premises
for the Initial Use or for the display, rental or sale of products for which,
at the time Tenant receives written notice of such exclusive, Tenant has
allocated at least 1,000 square feet of leasable area of retail floor space
(such future use restrictions hereafter granted to a tenant or occupant which
are permitted as aforesaid, "PERMITTED FUTURE EXCLUSIVES" and each such
tenant or occupant satisfying the foregoing conditions, a "MAJOR REPLACEMENT
TENANT").
7.2 Tenant covenants to initially open and operate for at least one (1)
day as a Barnes & Noble Superstore, fully stocked and staffed as consistent
with the operations of Tenant's other Barnes & Noble Superstores in
California. In the event that the Premises shall, at any time after the Rent
Commencement Date, be closed for business for a period of thirty (30)
consecutive days or more, other than as a result of a remodeling (for a
period of not more than nine months) or a cause or event referred to in
Articles 24, 25 or 33 herein, or due to Tenant's impending subletting of the
Premises or assigning of its interest in the Lease which shall be completed
within six (6) months of said closure, then at any time thereafter, Landlord
may terminate this Lease by giving Tenant written notice thereof and this
Lease shall terminate on the forty-fifth (45th) day after the giving of such
written notice by Landlord, whereupon neither Landlord nor Tenant shall have
any further liability hereunder (except any Rent then due and unpaid), except
Tenant shall have the right to nullify Landlord's termination notice by
delivering notice to Landlord that Tenant shall reopen for business and
Tenant in fact does reopen for business prior to the expiration of such
45-day period. Nothing in this Lease or otherwise shall at any time require
Tenant to keep the Premises open for business.
7.3 Landlord hereby represents and warrants that, upon Landlord's
delivery of the Premises pursuant to Article 5 above, the Premises and the
Shopping Center and all parts thereof shall be in full compliance with all
applicable laws, ordinances and regulations of all federal, state, county and
municipal authorities ("LEGAL REGUIREMENTS"), including Title III of the
Americans With Disabilities Act of 1990, any regulations promulgated
thereunder and any similar state or local laws or regulations. Landlord shall
comply with all Legal Requirements, including any changes thereto, relating
to the physical condition of all parts of the Premises and the Shopping
Center, except Tenant shall comply
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with Legal Requirements including any changes thereto to the extent such
Legal Requirements apply to Tenant's specific use or alteration of the
Premises and not to real estate generally.
7.4 Except with respect to the premises under leases with Homebase,
Food 4 Less, Circuit City, Office Depot and Hometown Buffet to the extent
permitted thereby under those permitted use provisions of such tenants set
forth on EXHIBIT F annexed hereto, Landlord shall not lease or permit the use
of space in the Shopping Center for the following: (i) any bowling alley;
(ii) any arcade; (iii) any tavern or bar within five hundred (500) feet of the
Premises, except to the extent incidental to a restaurant operated primarily
for on-premises consumption; (iv) any health club, spa or gymnasium; (v) any
night club or discotheque; (vi) any second hand or surplus store within five
hundred (500) feet of the Premises; (vii) any mobile home park or trailer
court; (viii) any dumping, disposing, incineration or reduction of garbage
(exclusive of appropriately screened dumpsters located in the rear of any
building); (ix) any fire sale, bankruptcy sale (unless pursuant to a court
order) or auction house operation, (x) any central laundry or dry cleaning
plant or laundromat within five hundred (500) feet of the Premises (except
that this prohibition shall not be applicable to on-site service provided
solely for pickup and delivery by the ultimate consumer, including nominal
supporting facilities); (xi) any automobile, truck, trailer or recreational
vehicle sales, leasing, display or repair; (xii) any skating rink; (xiii) any
living quarters, sleeping apartments or lodging rooms; (xiv) any veterinary
hospital, animal raising facilities or pet shop (except that this prohibition
only prohibits a pet shop if it is adjacent to the Premises and excludes the
existing pet store at the Shopping Center and replacements thereof provided
such replacement is a national or regional pet retail chain similar to Petco
or Petsmart); (xv) any mortuary; (xvi) any establishment selling or
exhibiting pornographic materials; (xvii) except for Building A indicated on
the site plan annexed hereto as EXHIBIT B, any restaurant within three
hundred feet (300') of the Premises; (xviii) any movie theater within three
hundred feet (300') of the Premises; (xix) any separately demised newsstand;
or (xx) any use which is a public or private nuisance.
7.5 Except as may be permitted by those permitted use provisions of
certain leases set forth on EXHIBIT F, including, without limitation,
Blockbuster Video (provided that to the extent Landlord's consent may be
withheld as provided in said leases, Landlord shall not modify the use
provisions of such leases with respect to the Exclusive Uses (hereinafter
defined) granted to Tenant hereunder in any manner which would diminish the
exclusive rights granted to Tenant herein) and except as may be permitted by
future leases to Major Replacement Tenants, to the extent such leases contain
Permitted Future Exclusives, Landlord, and its successors and assigns, shall
not operate or permit under any circumstances to be operated within the
Shopping Center any other store selling or displaying for sale or rental
books, books on tape and books on other media, magazines, periodicals,
computer software or computer games (collectively, "EXCLUSIVE USES"), or any
other coffee bar or coffee shop in which coffee, similar beverages and
products incidental thereto are the primary items offered for sale (e.g.
Starbucks). The foregoing restrictions with respect to any of the Exclusive
Uses shall be void and of no further force and effect with respect to such
use in the event Tenant (including any permitted successor or assignee) no
longer uses the Premises for such use for more than a one year period
provided, however, that ceasing all business operations in the Premises shall
not be deemed to be a cessation of a particular use for the purposes hereof
unless such cessation continues for more than five (5) years. The Incidental
Sale of such items in connection with the overall business of another
operator or tenant shall not be deemed a violation of this Paragraph 7.5. As
used herein, "INCIDENTAL SALE" shall mean less than fifty (50) square feet of
floor area of such operator's or tenant's display area is devoted, in the
aggregate, to the sale and/or display of the aforesaid items; provided,
however, that with respect to a Major Replacement Tenant, "INCIDENTAL SALE"
shall mean less than ten percent (10%) of floor area is devoted, in the
aggregate, to the sale and/or display of the aforesaid items, but in no event
greater than one thousand (1,000) square feet (except with respect to a Major
Replacement Tenant which sells or rents computer software or computer games
as part of its overall business, EG., Best Buy, but not as its primary use,
EG. Egghead Software, for which no square foot limitation shall apply with
respect to the display area for computer software or computer games). In the
event Landlord breaches its covenants contained in this Paragraph 7.5 with
respect to Tenant's exclusive, and such breach is a result of Landlord's
entering into a lease or consenting to an assignment or sublease permitting
or failing, in each instance, to prohibit such tenant, assignee or sublessee
from using its premises fcr Tenant's Exclusive Uses, and such breach is not
cured witnin thirty (30) days after written notice to
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Landlord, in lieu of any other remedy, Fixed Rent shall be automatically
reduced to one-half (1/2) of stated Fixed Rent under Paragraph 3.2 above
until such use terminates, and Tenant shall have, in addition to all other
remedies available to Tenant, the right to terminate this Lease effective
sixty (60) days after giving Landlord written notice of such termination,
unless Landlord cures such breach within thirty (30) days after such notice,
and, upon such termination, Landlord shall pay Tenant the unamortized value
of Tenant's Work upon the reasonable documentation of such value, which value
has been amortized over the Lease term. In the event Tenant does not elect
to terminate the Lease within two (2) years after the breach of the covenants
contained in this Paragraph 7.5, Fixed Rent shall be automatically restored
to the Fixed Rent under Paragraph 3.2 above. In the event the covenants
contained in this Paragraph 7.5 are breached solely by tenants or other
operators in the Shopping Center and not by reason of Landlord's entering
into a lease or consenting (when Landlord has the right to withhold its
consent) to an assignment or sublease permitting or failing to prohibit such
tenant, assignee or sublessee from using its premises for Tenant's Exclusive
Uses, then, in lieu of the remedy provided in the preceding sentence,
Landlord, at Landlord's cost, shall use its best efforts to take all action
necessary (including, without limitation, the commencement of legal action)
to cause such other tenant or operation to cease operating in violation of
the provisions of this Paragraph 7.5.
8. REAL ESTATE TAXES
8.1 Landlord represents and warrants that Real Property Taxes and
Assessments relating to the Premises and the Shopping Center, except current
taxes and assessments not delinquent, have been paid in full. Landlord shall
pay promptly when they are due all Real Property Taxes and Assessments
relating to the Premises and the Shopping Center, except as provided in
Paragraph 8.3 below.
8.2 For purposes of this Article 8, "REAL PROPERTY TAXES AND
ASSESSMENTS" shall mean only the taxes and assessments imposed by municipal,
county, state and district governmental authorities (as distinguished from
federal governmental authorities) against the owners of real property, which
are measured by the value or gross revenues of the subject property separate
from any other property owned by Landlord. Landlord estimates the Real
Property Taxes and Assessments relating to the Premises for the first (1st)
Lease Year (excluding any reassessment resulting from Tenant's Work) will be
approximately $26,500, based upon the 1995-1996 real estate tax bill for the
tax lot affecting the Premises which Tenant acknowledges it has received and
reviewed. Real Property Taxes and Assessments shall be prorated, if
necessary, based on a three hundred sixty-five (365) day year to take into
account any partial tax year in which the Rent Commencement Date and the
expiration of the lease Term occur. The term Real Property Taxes and
Assessments shall also include any tax or excise on rent or other taxes
payable by Landlord on account of or measured by the rentals and/or other
charges payable under this Lease. If under the laws of the State of
California, or any political subdivision thereof, at any time during the term
of the Lease, the methods of taxation shall be altered so as to impose in
lieu of current methods for the assessment and taxation of real property, in
whole or in part, taxes based on other standards, or in lieu of any increase
therein, such tax shall be included within the Real Property Taxes and
Assessments to be paid by Tenant for the purposes of this Lease. Nothing
contained in this Lease, however, shall be deemed or construed to include
within Real Property Taxes and Assessments: (i) any transfer, documentary or
stamp tax; (ii) any tax upon the income, profits or business of Landlord
(except to the extent same are in lieu of Real Property Taxes and
Assessments); or (iii) any personal property taxes, payroll taxes, capital
levy, or franchise taxes or inheritance or estate taxes, even though such
taxes may become a lien against the Premises, the Shopping Center or Landlord.
8.3 If the Premises together with a proportionate share of the Common
Areas in the Shopping Center constitutes a separate tax lot which has been
approved by Landlord and Tenant for the purpose of prorating Real Property
Taxes and Assessments, Tenant shall pay, as additional rent, any and all Real
Property Taxes and Assessments relating to the Premises and said
proportionate share of the Common Areas. Tenant shall make any such payment
on or before the later of (i) the due date thereof or (ii) thirty (30) days
after Landlord provides Tenant with a copy of the tax bill therefor (if not
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sent directly to Tenant by the taxing authority). Landlord shall be
responsible for any interest or penalties which are due by reason of
Landlord's failure to deliver any tax bill to Tenant at least thirty
(30) days prior to the date on which such interest and/or penalty is
assessed.
8.4 If the Premises and a proportionate share of the Common Areas are
not separately assessed by a separate tax lot approved by Landlord and Tenant
for proration purposes, Tenant shall reimburse Landlord for its Proportionate
Share of Real Property Taxes and Assessments on or before the later of (i)
thirty (30) days prior to the due date thereof or (ii) thirty (30) days after
Landlord has furnished Tenant with a copy of the tax bill and a copy of
Landlord's computations establishing the amounts payable by Tenant. Within
ten (10) days after receipt of Tenant's written request therefor, Landlord
shall furnish Tenant with such additional substantiating evidence in support
of Landlord's tax computation as Tenant may reasonably require. Tenant's
Proportionate Share of Real Property Taxes and Assessments shall be based
upon the ratio between the total Leasable Square Footage within the Premises
to the total Leasable Square Footage upon the separate tax lot in which the
Premises are situated (legally defined as Parcel 3 of Vesting Parcel Map No.
95 recorded September 22, 1994, in Book 34 at Page 7 of Parcel Maps, Butte
County Records and hereinafter referred to as "TENANT'S TAX LOT") ; provided
that Landlord shall equitably adjust the Real Property Taxes and Assessments
allocable to land, excluding improvements, and to Common Area improvements,
to be prorated to and paid by Tenant, in the event that Tenant's Tax Lot does
not contain a proportionate share of the Common Areas within the Shopping
Center, based on the ratio between the Leasable Square Footage in Tenant's
Tax Lot to the Leasable Square Footage within the Shopping Center.
8.5 If any general or special assessment is assessed against the
Shopping Center, Landlord shall elect to pay the assessment in installments
over the longest period of time allowed by applicable law, and only those
installments (or partial installments) attributable to the Term shall be
considered in determining Tenant's tax liability for such assessment.
Notwithstanding any provision of this Lease to the contrary, except as set
forth in the following sentence, Landlord (and not Tenant) shall be obligated
to pay any assessment for special improvements heretofore installed or
hereafter installed in connection with the initial development of the
Shopping Center or the Premises, such as, by way of illustration only, the
widening of the exterior roads and the installation and/or hook up to sewer
and sewer lines, sanitary and storm drainage systems and other utility lines
and systems (whether public or private). Tenant shall pay its Proportionate
Share of the assessments presently imposed against the Shopping Center
pursuant to a certain agreement establishing the Whitman Avenue Assessment
District (the "WHITMAN ASSESSMENTS"). Landlord represents that the Whitman
Assessments allocable to the tax lot affecting the Premises during the term
hereof shall in no event exceed $10,000 per annum.
8.6 Tenant shall receive its Proportionate Share of any refunds or
rebates of Real Property Taxes and Assessments paid to Landlord and
attributable to the Term.
8.7 Landlord shall provide Tenant with a copy of any increased tax
assessment within fifteen (15) days of its receipt. Tenant shall have the
right to contest any assessment or the validity of any tax. Tenant agrees to
indemnify Landlord and hold Landlord harmless from all out of pocket costs
and expenses arising out of any contest made by Tenant.
8.8 Tenant shall pay prior to delinquency all taxes and assessments
levied upon and assessed against Tenant's Personal Property (as defined in
Paragraph 12.2) in the Premises.
9. COMMON AREA
9.1 The Common Areas of the Shopping Center shall consist of all
portions of the Shopping Center which shall not be occupied by buildings
leased or held for lease, as more specifically depicted on EXHIBIT B. The
general term "COMMON AREAS" includes all parking areas, landscape areas,
aisles, driveways, entrances, exits, walkways, corridors, elevators and
elevator shafts, stairwells, sidewalks, roadways, loading areas or
appurtenances (unless the operation, repair and maintenance of a particular
loading area or appurtenances is the responsibility of the tenant or tenants
who have the use of same),
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service roads, lighting facilities (if used to illuminate the Common Areas),
common heating, utility and ventilation facilities and utility, mechanical,
telephone and electric rooms, drainage facilities, traffic control signs and
fences.
9.2 Landlord hereby gives and grants to Tenant during the Term, for the
benefit of Tenant and Tenant's subtenants, licensees and concessionaires, and
their respective employees, contractors, customers, invitees and deliverymen,
the right to use all of the Common Areas, in common with Landlord and all
other tenants and occupants of the Shopping Center and their respective
employees, contractors, agents, assigns, customers, invitees and deliverymen.
The rights hereby granted with respect to the Common Areas shall run with
and bind the Shopping Center and the land on which it is located, shall be
binding upon Landlord and Landlord's successors in title to all or any part
of the Shopping Center, and shall constitute an irrevocable, nonexclusive
easement appurtenant to the Premises for the benefit of, and shall be
enforceable by, Tenant and its successors and assigns throughout the Term.
9.3 Unless required by law, Landlord shall not alter the size or
location of curb cuts or private drives that provide access to the Shopping
Center without providing reasonably equivalent access nor reduce parking
ratios within the Shopping Center below that required by Article 16, without
the prior written consent of Tenant. Landlord may designate portions of the
Common Areas as parking spaces for employees of occupants of the Shopping
Center, subject to the prior written approval of Tenant, which consent shall
not be withheld if such employee parking located within the No Build Area is
located in the row of parking bordering Whitman Avenue.
9.4 Landlord shall not provide for or knowingly permit the use of the
Common Areas by any person or legal entity other than as set forth in
Paragraph 9.2.
9.5 Tenant shall not be required to pay its Proportionate Share of any
expenses (including Real Property Taxes and Assessments, CAM Expenses or
costs of insurance) relating to any land added to the Shopping Center until
such land is improved with a building or buildings and such land directly
benefits the Shopping Center.
9.6 Landlord shall keep and maintain the Common Areas in good condition
and repair in a manner consistent with first class shopping centers of a
similar size and nature. Such maintenance shall include repairing and
replacing paving; keeping the Common Areas properly drained, free of snow,
ice, water, rubbish and other obstructions, and in neat, clean, orderly and
sanitary condition; keeping the Common Areas and such other areas suitably
lighted during, and for appropriate periods before and after, Tenant's
business hours; maintaining signs, markers, painted lines and other means and
methods of pedestrian and vehicular traffic control; maintaining adequate
roadways, entrances and exits; and maintaining any plantings and landscaped
areas.
9.7 Tenant agrees to reimburse Landlord for Tenant's Proportionate Share
of all reasonable expenses incurred directly in connection with the
maintenance, repair and operation of the Common Areas ("CAM EXPENSES"). CAM
Expenses shall be limited by the terms of Paragraphs 9.8 and 9.9 and the
other provisions hereunder. CAM Expenses may include an administrative fee
equal to ten (10%) percent of the total of all other expenses included within
CAM Expenses hereunder (excluding, however, any and all insurance, taxes and
capital expenditures included therein). CAM Expenses invoiced to the Tenant
shall identify the nature of each CAM Expense and Tenant's Proportionate
Share of such CAM Expense. Tenant shall reimburse Landlord its Proportionate
Share of the CAM Expenses within thirty (30) days of its receipt of
Landlord's invoice. Alternatively, Landlord may, prior to the Rent
Commencement Date or the beginning of any subsequent calendar year, provide
Tenant a written estimate of the CAM Expenses for the calendar year and
Tenant shall pay one-twelfth (1/12th) of such estimate as Additional Rent
with each payment of Fixed Rent during such calendar year. Within sixty (60)
days after the end of each calendar year, Landlord shall furnish to Tenant a
detailed statement showing the total CAM Expenses, Tenant's Proportionate
Share of such CAM Expenses (prorated for any partial calendar year) and the
total of the monthly payments made by Tenant to Landlord during such calendar
year. Such statement shall be certified by Landlord as being correct.
Landlord shall pay
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to Tenant any overpayment concurrently with the delivery of such-statement,
and Tenant shall pay to Landlord any underpayment for such year with Tenant's
next succeeding CAM Expense payment. Landlord shall keep good and accurate
books and records for a period of three (3) years in accordance with
generally accepted accounting principles concerning the operation,
maintenance and repair of the Common Areas, and Tenant and its agents shall
have the right, upon ten (10) days' notice, not more often than once per
year, to audit, inspect and copy such books and records at Landlord's
principal place of business. If any statement of CAM Expenses previously
furnished to Tenant shall be greater than one hundred three percent (103%) of
the actual CAM Expenses shown by such audit, Landlord shall immediately pay
Tenant's reasonable out-of-pocket costs of such audit for the period audited.
In any event, Landlord shall promptly pay Tenant all CAM Expenses shown by
such audit to be overpaid by Tenant and Tenant shall promptly pay Landlord
all CAM Expenses shown by such audit to be underpaid by Tenant.
9.8 CAM Expenses shall exclude expenses due to: (i) capital improvements;
(ii) repairs and replacements, which under sound accounting principles and
practices should be classified as capital expenditures; (iii) painting,
redecorating or other work that Landlord performs for any other tenant or
prospective tenant of the Shopping Center (as compared to periodic repainting
of the Building not to exceed once every five (5) years for the benefit of
the Premises which may be included within CAM Expenses); (iv) repairs or
other work (including rebuilding) occasioned by fire, windstorm or other
casualty or by condemnation; (v) any costs that are separately charged to and
payable by tenants or for which Landlord is compensated by insurance proceeds
or warranties; (vi) leasing commissions and expenses of procuring tenants,
including lease concessions and lease take-over obligations; (vii)
depreciation, except depreciation of equipment used exclusively for the
maintenance of the Shopping Center; (viii) interest on and amortization of
debt; (ix) taxes of any nature, including Real Estate Taxes and Assessments
(payment of which is specifically addressed in Article 8 above) and interest
and penalties for late payment of taxes (unless caused by Tenant's late
payment of its Proportionate Share of taxes); (x) rent payable under any
lease to which this Lease is subject; (xi) off-premises supervisory personnel
or property managers; (xii) costs and expenses of enforcing leases against
tenants, including legal fees; (xiii) managing agents' commissions or fees,
however characterized; (xiv) expenses resulting from any violation by
Landlord of the terms of any lease of space in the Shopping Center or of any
ground or underlying lease or any mortgage; (xv) the repair of any part of
the Common Areas that was inadequately designed or defectively constructed;
(xvi) Landlord's maintenance or repair description as required pursuant to
Article 10; (xvii) insurance (payment of which is specifically addressed in
Article 21); (xviii) expenses for vacant or vacated space, including utility,
security and renovating costs for such space; (xix) all costs and expenses
associated with Environmental Clean-up Work (hereinafter defined) except if
caused or permitted by Tenant, its employees, agents, contractors or
invitees; and (xx) any costs and expenses associated with Landlord's
compliance with Legal Requirements pursuant to Paragraph 7.3 above; and (xxi)
parking lot resurfacing and restriping during the first three (3) Lease
Years; provided, however, that CAM Expenses may include the annual amortized
cost to replace the parking lot within the Shopping Center if replaced after
the initial term of the Lease, such amortization to be based upon the useful
life of the parking lot (based on generally accepted accounting principles).
9.9 Notwithstanding the foregoing, Tenant's Proportionate Share of CAM
Expenses for the first full calendar year during the Term shall not exceed
$7,500. After such first full calendar year and through and including the
fifth (5th) full calendar year during the term, Tenant's Proportionate Share
of CAM Expenses shall not exceed one hundred five percent (105%) of the CAM
Expenses paid by Tenant for the preceding calendar year.
9.10 Tenant's Proportionate Share for the purposes of calculating
Tenant's share of CAM Expenses which relate only to the Building and solely
benefit the tenants within the Building shall equal a fraction, the numerator
of which is the Leasable Square Footage of the Premises as determined by the
Square Footage Certificate, and the denominator of which is the total
Leasable Square Footage of the Building ("TENANT'S BUILDING PROPORTIONATE
SHARE"). Currently Landlord estimates the denominator of the fraction to be
31,341 Leasable Square Feet as of the Effective Date hereof, resulting in
Tenant's Building Proportionate Share to be 79.6%. To the extent Tenant pays
such Building Proportionate Share for certain CAM Expenses relating only to
the Building (EG., Building repainting, exterior Building
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lighting and maintenance and repair of fire protection systems within the
Building), comparable CAM Expenses which relate to the remainder of the
Shopping Center and not to the Building shall be excluded in the calculation
of Tenant's Proportionate Share of CAM Expenses (EG., Building repainting,
exterior Building lighting and maintenance and repair of fire protection
systems within the Building).
10. MAINTENANCE BY LANDLORD
10.1 Except for any repairs necessitated by Tenant's (or Tenant's
employees, contractors, agents or invitees) negligence or intentionally
wrongful acts (for which Tenant shall be responsible at its sole cost),
Landlord shall, at its sole expense, (except to the extent includible in CAM
Expenses as provided hereinabove) make all structural repairs to the Premises
and the Shopping Center, including but not limited to all repairs to the
slab, foundation, load bearing walls, roof and any other structural members.
In addition, Landlord shall, at its expense (unless herein expressly set
forth as Tenant's expense): (i) keep the roof of the Premises free of leaks;
(ii) maintain the underground and otherwise concealed utilities located
within the Common Areas and the exterior surface of the outside walls of the
Premises and the Shopping Center, excluding window glass, plate glass and
doors (unless damage to such glass or doors is caused by a structural shift);
(iii) keep in good order, condition and repair the down spouts and gutters of
the Premises and the Building of which the Premises is a part; and (iv)
maintain all fire protection systems in the Common Areas. Notwithstanding
any provision of this Lease to the contrary, (a) in the event of an emergency
or (b) in the event Landlord fails to commence any maintenance or repair of
the Premises required under this Paragraph 10.1 within ten (10) business
days after written notice from Tenant or fails to complete such maintenance
and repair within thirty (30) days after such notice, (but if such repair
reasonably requires longer than 30 days, then Landlord shall have such
additional period of time provided Landlord's repair is being diligently and
continuously prosecuted), then in either of such events Tenant shall have the
right (but not the obligation) to perform Landlord's maintenance and repair
obligations under this Paragraph 10.1 , and Landlord shall reimburse Tenant
for the reasonable out-of-pocket costs incurred by Tenant within thirty (30)
days after Tenant submits a written invoice therefor. Notwithstanding the
foregoing, Tenant shall reimburse Landlord Tenant's Building Proportionate
Share of the cost to (i) repair and maintain the roof of the Building after
the tenth (1Oth) Lease Year, excluding the gutters and down spouts, and (ii)
the annual amortized cost of any roof replacements to the Building after the
fifteenth (15th) Lease Year, such amortization to be based upon the useful
life of the roof (based on generally accepted accounting principles).
10.2 The terms and conditions of Articles 24 and 25 shall control with
respect to repairs or maintenance required due to casualty or condemnation,
respectively.
11. MAINTENANCE BY TENANT
11.1 Subject to Paragraph 5.3 and Articles 10, 24 and 25, Tenant shall
maintain in good repair and condition, at its sole cost and expense (i) the
interior plumbing (provided same was not part of Landlord's Work) and other
mechanical systems which are located within or on the Building and
exclusively serve the Premises; (ii) window glass, plate glass and doors
(unless damage to such glass or doors is caused by a structural shift); (iii)
heating, air conditioning and electrical systems serving exclusively the
Premises; and (iv) the interior, non-structural surfaces of the Premises.
Tenant's obligations under this paragraph shall not include repairs which are
covered by Landlord's insurance as required herein.
11.2 As of the Commencement Date and to the extent of Landlord's Work,
the heating and air conditioning system serving the Premises (the "SYSTEM")
and the plumbing and electrical systems serving the Premises shall be in good
operating condition. On the Commencement Date, Landlord shall furnish Tenant
with a five (5) year minimum repair or replacement written warranty for the
major components of the System (I.E., pumps, condensers and motors) and a one
(1) year parts and labor written warranty for the System and shall assign any
and all existing warranties for systems serving
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the Premises, which shall include payments for all labor, but such warranties
shall not relieve Landlord of any obligations set forth in this Lease.
11.3 Tenant shall use reasonable care and diligence to keep and maintain
the Premises free from waste or nuisance and shall deliver the Premises to
Landlord broom clean at the expiration of this Lease, reasonable wear and
tear and casualty excepted.
12. ALTERATIONS, ADDITIONS AND IMPROVEMENTS
12.1 Tenant shall not create any openings in the roof or exterior walls,
nor make any structural alterations, additions or improvements to the
Premises, without the prior written consent of Landlord, which consent shall
not be unreasonably withheld. Tenant shall have the right at all times to
erect or install cabinets, shelves, electrical outlets, machinery, air
conditioning or heating equipment and trade fixtures and other equipment,
provided Tenant complies with all Legal Requirements in connection therewith.
12.2 All alterations, additions or improvements made by Tenant which are
permanently attached to and made part of the Premises shall become the
property of the Landlord at the expiration of the Lease term, except for
signs, trade fixtures, furnishings, machinery and equipment used in Tenant's
business and furnished by Tenant (collectively, "PERSONAL PROPERTY"), which
Personal Property shall be removed by Tenant at the expiration or earlier
termination of this Lease and Tenant shall repair any damages caused by such
removal. For Federal income tax purposes, Tenant's signs, trade fixtures and
furnishings are defined herein as equipment. Except as set forth above and
provided Tenant has obtained Landlord's consent to perform alterations, if
consent is required under the terms of this Lease, Tenant shall have no
obligation to remove any other alterations or improvements or to restore the
Premises at the expiration or earlier termination of this Lease.
12.3 Tenant shall have the right to make interior alterations to the
Premises of a non-structural nature without Landlord's consent provided
Tenant shall comply with all Legal Requirements in connection therewith.
12.4 At Tenant's sole cost and expense, Tenant shall be permitted to
construct an antenna or satellite dish on the roof of the Premises, provided
that (i) Tenant secures any permits required by governmental authority for
installation, (ii) such antenna or dish it does not impair the structural
integrity of the roof and (iii) Tenant coordinates such installation with
Landlord's roofing contractor to avoid violations of any roofing warranties.
12.5 Notwithstanding the ownership of the alterations, additions or
improvements to the Premises, Tenant retains the right to depreciation
deductions of all such alterations, additions or improvements made at
Tenant's expense.
13. SIGNS
13.1 Subject to approvals required by the City of Chico, Landlord
warrants and represents that to the best of its actual knowledge as of the
date hereof, there are no signage restrictions which bind the Shopping Center
either by a restrictive covenant or uniform sign plan filed with the local
governing authority that would prevent Tenant from erecting its prototype
signage as shown on Exhibit G. Provided Tenant's proposed signage complies
with all applicable laws and is substantially similar to Tenant's
prototypical signage used in Tenant's other stores in California, Landlord's
consent shall not be required with respect to Tenant's exterior signage.
13.2 During the term hereof Tenant shall not be required to remove its
signs unless required to do so by local codes enacted subsequent to the
date hereof. Tenant may at any time remodel or replace the sign facia to
conform with Tenant's then standard signage so long as such signage does
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not materially exceed the initial total sign area or violate applicable deed
or master lease restrictions or sign ordinances, provided that Tenant may
repair or replace any damaged or worn signs to their pre-existing condition
notwithstanding any changes in deed or master lease restrictions made
subsequent to the Effective Date or, to the extent legally allowed, sign
ordinances enacted or amended subsequent to the Effective Date. To the extent
permitted under governmental regulations, Tenant shall have the right to
affix window appliques, interior signs and other treatments commonly used at
Tenant's other locations. Tenant shall remove all signs and appliques at the
expiration or earlier termination of this Lease, and shall repair any damage
caused by such removal. Landlord shall not allow any signage other than
Tenant's to be erected on the Premises.
13.3 Landlord agrees that Tenant may, at its expense, erect and maintain
its standard pylon sign panel in the location previously reserved for Payless
Drugs on the Freeway Pylon sign located where noted on EXHIBIT B. If a new
pylon or monument sign is constructed in the Shopping Center, Tenant shall
have the right to erect its standard sign panel thereon of a size and at a
location priority consistent with the Tenant's relative Proportionate Share
among other occupants of the Shopping Center that are given signage on such
pylon or monument sign, provided, however, that Tenant pays such
proportionate share of the cost of constructing said sign. Landlord agrees
that Tenant shall have the right to install its sign panel on the Shopping
Center's freeway pylon in the location currently occupied by Payless Drugs.
13.4 Prior to the Commencement Date Tenant shall have the right to erect
on the Premises a temporary "Coming Soon" sign or signs announcing Tenant's
anticipated opening.
14. LANDLORD'S RIGHT OF ENTRY
14.1 Landlord and its authorized agents may enter the Premises, after
prior written notice and during Tenant's normal business hours (except in the
case of an emergency posing imminent threat of injury to persons or damage to
property), for the following purposes: (i) to inspect the general conditions
and state of repair of the Premises; (ii) to make repairs required of
Landlord; and (iii) to show the Premises to any prospective purchaser or
mortgagee. If requested by Tenant, such entry by Landlord shall be under the
supervision of Tenant. Landlord shall not interfere with or create a hazard
to Tenant's normal business operations during such entry.
14.2 Within one hundred eighty (180) days prior to the expiration of the
Term, Landlord may enter the Premises during Tenant's normal business hours
to show the Premises to prospective tenants. During the final sixty (60)
days of the Term, Landlord and its authorized agents may erect on, or about,
the Premises its customary sign advertising the property for lease, provided
such sign does not interfere with or create a hazard to Tenant's normal
business operation.
15. UTILITIES
15.1 Tenant shall pay before delinquency all charges for gas, water,
electricity and any other utility services used solely on the Premises during
the Term hereof by Tenant.
15.2 Landlord, at its expense, shall cause the Premises to be
individually metered for each utility service and provide the service
connections at points mutually acceptable to Landlord and Tenant. If a
utility does not allow or provide for separate metering or sub-metering,
Tenant will pay its share of the consumption charges based upon the ratio of
the Leasable Square Footage of the Premises to the total Leasable Square
Footage of all buildings covered by the utility bill. Notwithstanding the
preceding, utility charges for restaurants, hair salons, laundromats, health
clubs and other utility intensive uses shall not be included within the
calculation of Tenant's share of commonly metered consumption charges.
Notwithstanding the foregoing, Landlord may keep the domestic water service
for the Building on its account and place a submeter or submeters in the
Building to separately meter usage in the Premises and the adjacent premises.
In such event, Tenant shall reimburse Landlord for
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the actual cost of water usage for the Premises as opposed to a reimbursement
based upon a proportionate share of floor area.
15.3 In the event of an interruption in any utility service, Landlord
shall diligently pursue the resumption of service. If any such interruption
is causes by the negligence of or breach of this Lease by Landlord and, as a
result, Tenant is not able to conduct its customary level of sales for
similar periods, then Fixed Rent, Additional Rent and other charges hereunder
shall be equitably adjusted during the period of such interruption.
16. PARKING
Landlord shall provide Tenant and its employees, customers and other
invitees with the non-exclusive use of parking spaces within the No Build
Area (defined below) equal to the greater of: (i) 525 parking spaces, as
shown on the site plan annexed hereto as EXHIBIT A or (ii) the number of
parking spaces imposed by any local code requirements. In addition, Landlord
shall provide for the non-exclusive use of all tenants or other occupants of
the Shopping Center (excluding Petco's exclusive parking and employee
designated parking and Circuit City's pickup area, all as designated on
EXHIBIT A), and their respective employees, customers and other invitees, the
greater of: (a) three and one-half (3.5) parking spaces per one thousand
(1,000) square feet of Leasable Square Footage within the Shopping Center; or
(b) the number of parking spaces imposed by any local code requirements.
17. [INTENTIONALLY DELETED]
18. [INTENTIONALLY DELETED]
19. NO BUILD AREA, VISIBILITY AND ACCESS
19.1 Landlord agrees that, during the Term, it will not construct or
permit to be constructed any building, sign, tower or other structure or
improvement, or, unless required by law, plant any tree or other growing
plant (except replacements of existing trees or plants, provided same will
not exceed nor is reasonable anticipated to exceed four feet in height), or
make any other change whatsoever in the area depicted as the No Build Area on
EXHIBIT B (the "NO BUILD AREA"). Notwithstanding anything contained in this
Lease to the contrary, but subject to Paragraph 9.3 and Article 16 herein,
Landlord may modify the layout and/or design of the Common Areas and/or
building areas outside of the No Build Area and/or within building limit
lines shown within the No Build Area on the attached EXHIBIT B without
Tenant's prior written approval. In the event that Landlord violates the
terms of this Paragraph 19.1, which violation materially impairs access to
the Premises, parking availability or visibility of Tenant's signage or
windows, and such violation is not cured within twenty (20) days after
written notice from Tenant, in addition to all other available rights and
remedies at law in or in equity, Tenant, at its option, may terminate this
Lease upon written notice to the Landlord. Notwithstanding the foregoing, in
the event that such material impairment results from a violation of the terms
of this Paragraph 19.1 by a person or entity other than Landlord and in the
further event that Landlord has the legal right to prohibit any such person
or entity from violating the provisions of this Paragraph 19.1, Landlord
shall not be deemed to be in default under the provisions of this Paragraph
19.1 and Tenant shall not have the right to terminate this Lease if Landlord,
within sixty (60) days of receipt of written notice from Tenant of such
violation, commences a legal action to cause such person or entity to cease
such violation and thereafter diligently prosecute such legal action to
completion.
19.2 In the event access to the Premises or visibility of Tenant's
signage and/or windows is materially impaired for a continuous period of
greater than ten (10) days following Landlord's receipt of written notice of
such material impairment from Tenant due to Landlord's negligence or any
other act or omission by or within the control of Landlord, then Fixed Rent,
Additional Rent and all other charges payable by Tenant under this Lease
shall be equitable adjusted or, if Tenant is unable to
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continue operating, abated for the period commencing on the expiration of
said ten (10) day period and continuing during the term of such material
impairment.
20. ASSIGNMENT AND SUBLEASING
20.1 Except as otherwise provided in this Article 20 or in Paragraph 7.1
above (regarding a sublease for a coffee shop), Tenant may not assign this
Lease or sublease the Premises, in whole or in part, without the express
written consent of Landlord, which consent shall not be unreasonably
withheld. Landlord shall consent or withhold such consent by written notice
to Tenant within fifteen (15) business days of Tenant's written request for
Landlord's consent, together with (i) the name and legal composition of the
proposed assignee, subtenant or other transferee, (ii) the nature of the
business proposed to be carried on in the Premises, (iii) the major terms and
provisions of the proposed assignment, sublease or other transfer, and (iv)
such reasonable financial and other information concerning the proposed
transferee as Landlord may request. If Landlord fails to respond to Tenant's
request within such fifteen (15) business day period, Landlord shall be
deemed to have consented to such assignment or subletting. It shall be
unreasonable for Landlord to withhold its consent to an assignment or a
subletting if (i) the proposed assignee or subtenant is of such financial
standing and operational responsibility as to give reasonable assurance of
the payment of all rental and other amounts reserved in this Lease and
compliance with all of the terms, covenants, provisions and conditions of
this Lease, (ii) the use of the Premises or the subleased premises is
consistent with those uses generally found in first class shopping centers,
(iii) the primary use of the Premises or subpremises does not directly
compete with the primary business of a then-existing tenant or subtenant in
the Shopping Center, (iv) the use is not a prohibited use under Paragraph 7.4
hereof, (v) the use of the Premises or subpremises does not violate any
exclusive provisions or restrictions contained in other then-existing leases
in the Shopping Center or any recorded instrument affecting the Shopping
Center, (vi) the assignee or sublessee operates at least three (3) other
stores substantially similar to the operation proposed at the Premises, and
(vii) the net worth of the assignee or sublessee is at least $5,000,000
(collectively, the "ASSIGNMENT/SUBLETTING CONDITIONS").
20.2 Any provision of this Lease to the contrary notwithstanding, Tenant
may assign this Lease or sublease the Premises, in whole or in part, without
the express written consent of Landlord, to: (i) any corporation into which
or with which Tenant has merged or consolidated; (ii) any parent, subsidiary,
successor, or affiliated corporation of Tenant; (iii) any person or entity
that acquires all or substantially all of the assets or operations of Tenant
within the state in which the Premises are located; or (iv) any partnership
of which more than twenty-five percent (25%) of the partnership interest shall
be owned by Tenant or the parent corporation of Tenant, provided Tenant or
such parent corporation is a general partner; provided that, in all of the
foregoing events, Tenant's use restrictions in Paragraph 7.1 shall remain
applicable.
20.3 No assignment shall operate to release Tenant of its liabilities and
obligations hereunder. Tenant's assignee shall agree in writing to assume
and perform all of the terms and conditions of this Lease on Tenant's part to
be performed from and after the effective date of such assignment.
Notwithstanding any provision of this Lease (except for Paragraph 20.2), no
assignee or sublessee of Tenant shall be subject to any use restrictions
contained in Paragraph 7.1 hereof, so long as such assignee's or sublessee's
use of the Premises does not violate any deed or master lease restrictions
and the Assignment/Subletting Conditions are satisfied. The sale or
conveyance of the capital stock of or other equity interest in Tenant shall
not constitute an assignment of this Lease.
20.4 Provided any assignee of Landlord assumes in writing all of
Landlord's's obligations under this Lease accruing and to be performed from and
after the date of such assignment and so notifies Tenant, Landlord may assign
its interest in this Lease during the term hereof, and Landlord shall
thereupon be released from all future obligations under this Lease with
respect to events occurring or other matters arising after Tenant receives
notice of such assignment and assumption; provided, however, Tenant shall
make all payments required under this Lease to Landlord, or its successors in
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interest, unless and until Tenant is notified of such assignment and
assumption, and Tenant shall in no way be liable to any assignee for any
amounts due hereunder until Tenant is so notified.
21. INSURANCE
21.1 Tenant shall during the Lease term, at its sole expense, maintain in
full force general liability insurance issued by one or more insurance
carriers, insuring against liability for injury to or death of persons and
loss of or damage to property occurring in and on the Premises. Such
liability insurance shall name Landlord as an additional insured. The
coverage limits for such liability insurance shall be at least Three Million
Dollars ($3,000,000.00) combined single limits for bodily injury and property
damage per occurrence. Such policy shall be written as a primary policy not
contributory with or in excess of any policy which Landlord may carry. Any
such policy shall provide that any loss payable to Landlord shall be payable
notwithstanding any act or negligence of Tenant which may otherwise result in
a forfeiture of said insurance. Such insurance shall be written an
"occurrence basis."
21.2 Landlord shall during the Lease term maintain in full force the
following insurance: (i) general liability insurance issued by one or more
insurance carriers, insuring against liability for injury to or death of
persons and loss of or damage to property occurring in and on the Common
Areas and in and on the entire Shopping Center, with coverage limits of at
least Three Million Dollars ($3,000,000.00) combined single limits for bodily
injury and property damage per occurrence; and (ii) all risk property damage
insurance and a standard extended coverage endorsement issued by one or more
insurance carriers covering the Premises and all of the other buildings and
improvements in the Shopping Center to the extent of their full replacement
value exclusive of foundation and excavation costs. Landlord shall name
Tenant, together with others having insurable interests, as additional
insureds on all insurance policies required under this Paragraph 21.1 that
cover and insure the Premises. Within thirty (30) days of demand and
presentation of paid invoices, Tenant shall reimburse Landlord for Tenant's
Proportionate Share of Landlord's cost of insurance carried by Landlord
pursuant to the provisions of this Paragraph 21.2. Landlord estimates that
Tenant's Proportionate Share of Landlord's cost of insurance for the first
(1st) Lease Year will be twenty-five cents ($.25) per square foot of Leasable
Square Footage of the Premises. The casualty policies to be provided by
Landlord may included a one (1) year rental loss endorsement and such other
endorsements and coverages as Landlord, in its reasonable discretion from
time to time may elect to obtain or which may be required by Landlord's first
trust deed lender on the Shopping Center. Said policies may also be endorsed
with standard mortgagee's loss payable endorsements in favor or, and in a
form satisfactory to, any encumbrancers of Landlord, provided that all such
encumbrancers shall have agreed to make the proceeds of such casualty
insurance reasonable available for restoration and repair to the extent
required by this lease. The requirement under this Paragraph that Landlord
provide casualty insurance on other building improvements in the Shopping
Center shall not be construed to require that such insurance be provided for
leasehold improvements constructed by tenants and/or other occupants and/or
their trade fixtures and other personal property or for plate glass.
Landlord may permit the above-required insurance relative to the other
building improvements to be carried by the tenants and/or occupants of such
buildings, either with third-party insurance companies or by self-insurance
and with reasonable deductibles, provided that such self-insurance and
deductibles is/are acceptable to the holder of the first trust deed loan
encumbering the Shopping Center.
21.3 Landlord and Tenant may comply with their insurance obligations
hereunder by endorsement to any blanket policy of insurance provided,
however, the coverage afforded the other party and any other additional
insureds above shall not be reduced or diminished by reason of the use of
such blanket policy of insurance and shall be no less than that which would
have been afforded under a separate policy or policies. Landlord and Tenant
shall deliver to each other certificates issued by the insurance carrier or
carriers for each policy of insurance that they are required to maintain
pursuant to the terms of this Lease within ten (10) days after request
therefor. Any insurance required by this Article to be procured by one party
for the benefit of another party shall contain a provision that the insurance
cannot be terminated without thirty (30) days prior written notice to the
other party. All
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insurance required of a party under this Article 21 shall be maintained with
insurance companies qualified to do business in the state in which the
Premises are located and otherwise reasonable acceptable to the other party.
21.4 Tenant shall not knowingly conduct any operation in the Premises
which would cause suspension or cancellation of the all risk property damage
insurance carried by Landlord or by any other occupant of the Shopping
Center. If Tenant should change its use of the Premises and thereby cause an
increase above normal rates in the premium for the all risk property damage
insurance carried by Landlord, the amount of such increase shall be
reimbursed to Landlord by Tenant upon demand and presentation by Landlord of
written evidence of such increase and paid invoices therefor. Tenant shall
not be responsible for any portion of the cost of any insurance above normal
rates caused by another tenant's activities within the Shopping Center.
22. INDEMNITY
Tenant and Landlord (each an "INDEMNITOR") will indemnify the other (each
an "INDEMNITEE") against, and hold Indemnitee harmless from, all claims,
liabilities, demands or causes of action, including all reasonable expenses
of the Indemnitee incidental thereto, for injury to or death of any person
and subject to Article 23 below, damage to any property arising within or on
the Shopping Center, including the Premises, and caused by Indemnitor's
negligent act or omission or the negligent act or omission of any employee
or agent of Indemnitor and, in the case of Tenant, any use or occupancy of or
state or condition of the Premises the repair or correction of which is not
the responsibility of Landlord under this Lease. The liability of Indemnitor
to indemnify Indemnitee as hereinabove set forth shall not extend to any
matter against which Indemnitee shall be effectively protected by insurance,
provided that, if any such liability shall exceed the amount of the effective
and collectible insurance in question, the liability of Indemnitor shall
apply to such excess.
23. RELEASE AND WAIVER OF SUBROGATION
Landlord and Tenant hereby waive and release each other of and from any
and all rights of recovery, claim, action or cause of action against each
other, their agents, officers, directors, partners and employees, for any
loss or damage that may occur to the Premises or any other improvements in
the Shopping Center, or Personal Property, including building contents owned
by the releasing party, within the Premises and/or the Shopping Center, by
reason of fire or the elements of nature or other events normally covered by
extended all risk property damage insurance coverage, regardless of cause or
origin including negligence of Landlord or Tenant and their agents, officers,
directors, partners and employees. Landlord and Tenant shall immediately give
written notice of the terms of the mutual waivers contained in this Article
23 to each of their respective insurance companies which have issued policies
of insurance covering all risk property damage, and shall have the insurance
policies properly endorsed to reflect the insurance company's acknowledgment
of such waiver and the absence of any subrogation rights. Each party shall
provide to the other, annually within ten (10) days after request therefor,
evidence that its all risk property damage insurance policies have been so
endorsed.
24. FIRE AND CASUALTY DAMAGE
24.1 If the Premises should be damaged by fire or other casualty such
that rebuilding or repairs cannot be completed within one hundred eighty
(180) days from the date of such damage, Tenant may, within thirty (30) days
of the determination of the number of days necessary to restore the Premises,
terminate this Lease on written notice to Landlord and, in such event, Fixed
Rent, Additional Rent and all other charges payable by Tenant hereunder shall
be prorated, taking into account any abatement under Paragraph 24.6 below, to
and from the date of such termination.
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24.2 If the Premises should be damaged by fire or other casualty during the
last eighteen (18) months of the Term such that the cost of rebuilding or
repairs exceeds twenty percent (20%) of the replacement cost of the Premises,
then, unless Tenant exercises any right it may have to extend the Term,
Landlord may, within thirty (30) days after the determination of the cost of
such rebuilding and repairs, terminate this Lease on written notice to Tenant
and, in such event, Fixed Rent, Additional Rent and all other charges payable
by Tenant hereunder shall be prorated, taking into account any abatement
under Paragraph 24.6 below, to and from the date of such termination.
24.3 If the Premises should be damaged and this Lease cannot be or is not
terminated by Landlord or Tenant pursuant to Paragraphs 24.1 or 24.2 above,
then Landlord shall, at its sole cost and risk, proceed forthwith to rebuild
or repair the Premises (to the extent of Landlord's Work only) in compliance
with all Legal Requirements and otherwise to substantially the condition
which existed prior to such damage, except that Tenant shall have the right
to require Landlord to make changes to the Premises in the course or such
restoration, subject to Landlord's approval of such changes to the extent
required under Article 12 above. Although Landlord shall cooperate
reasonable with Tenant in incorporating approved changes into Landlord's
Work, Landlord shall not be required to make any change that would delay the
commencement or completion of Landlord's Work, unless Tenant agrees that any
rental abatement provided for under Paragraph 24.6 below will end on the date
such abatement would have ended but for such delay. If the cost and expense
of restoration of the Premises is increased by any change or changes made by
Tenant then Tenant shall pay Landlord, within thirty (30) days after demand
therefor, the amount or amounts by which the cost or expense of restoration
of the Premises was thereby increased.
24.4 In the event Landlord is required to rebuild and repair the Premises
under Paragraph 24.3 above and Landlord does not commence such rebuilding and
repair within ninety (90) days after the damage or destruction or,
thereafter, fails to pursue diligently such rebuilding and repair to
completion, then, in addition to all other rights or remedies available to
Tenant under this Lease or at law or in equity, Tenant may terminate this
Lease effective upon giving written notice thereof to Landlord, unless
Landlord cures such default within thirty (30) days of receipt or written
notice of such default from Tenant.
24.5 The cost of rebuilding and repair of the Premises and the Shopping
Center and the number of days within which the Premises can be rebuilt or
repaired shall be determined by Landlord's general contractor, subject to
verification thereof by an independent contractor mutually acceptable to both
Landlord and Tenant. If Tenant desires verification by an independent
contractor, the one hundred eighty (180) day period in Paragraph 24.1 above
and the ninety (90) day period in Paragraph 24.4 above shall be extended for
any period of time required to verify such number of days.
24.6 If so much of the Premises or Common Areas shall be damaged so that
Tenant is unable to conduct its normal business operations from the Premises,
in Tenant's reasonable judgment, then all Fixed Rent, Additional Rent and all
other charges payable by Tenant hereunder to Landlord shall abate commencing
upon the happening of such damage. If only a portion of the Premises is
damaged, Fixed Rent shall abate proportionately. Such abatement and tolling
of the term shall end on the earlier to occur of: (i) one hundred twenty
(120) days after completion of rebuilding or repair of damage or (ii) the
date on which Tenant's conduct of its business from the Premises shall be
resumed. The date on which rebuilding or repairs are deemed to be complete
shall be the date on which a permanent or temporary certificate of occupancy
(or local equivalent thereof) is issued with respect to such rebuilding or
repair, provided that the only condition to any such temporary certificate
shall be the installation of Tenant's fixtures and any leasehold improvement
work to be performed by Tenant.
24.7 If this Lease cannot be or is not terminated by Landlord or Tenant
pursuant to Paragraph 24.1 or 24.2 above, then all insurance proceeds payable
with respect to any damage or destruction of the Premises shall be applied
solely to the cost of the rebuilding or repair of the damage or destruction.
In the event the insurance proceeds are insufficient to cover the costs of
the rebuilding or repairs, the excess costs shall be borne by the Landlord.
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24.8 If (i) more than twenty percent (20%) of the Leasable Square
Footage of the buildings of the Shopping Center is damaged or destroyed or
(ii) any part of the No Build Area or (iii) more than 20% of the balance of
the Common Areas is damaged or destroyed, irrespective in either event of
whether the Premises is damaged or destroyed, and if after the happening of
either of such events Landlord does not commence within ninety (90) days
after such damage or destruction and diligently continue thereafter to
restore the same, Tenant shall have the right to terminate this Lease by
giving written notice of such termination to Landlord, effective upon the
expiration of sixty (60) days following the giving of such notice, unless
Landlord commences such work within sixty (60) days of Landlord's receipt of
such notice.
24.9 Notwithstanding the foregoing provisions of this Article 24, (a)
in the event of any casualty which is not covered by Landlord's insurance
(provided that Landlord shall have complied with its obligations under
Articles 21 and 23 hereof regarding the maintenance of Landlord's insurance),
the result of which is that the cost of restoration shall exceed twenty-five
percent (25%) of the replacement cost of the Premises, Landlord shall have
the right to terminate this Lease by written notice to Tenant given not later
than thirty (30) days after the date on which the projected cost of
restoration is determined.
25. CONDEMNATION
25.1 In the event any part of the Premises or a "Substantial Portion
of the Shopping Center" (as defined in Paragraph 25.3) is taken or condemned
by any competent authority or is conveyed by deed in lieu of condemnation (a
"TAKING"), Tenant shall have the right: (a) to terminate this Lease as of the
first day following the earlier of the date of title transfer or the date of
the taking of possession by the condemning authority, or (b) to continue the
Lease in full force and effect with a reduced Fixed Rent commensurate with
the fair rental value of the Premises (such reduction to be in proportion to
the reduction in the fair rental value of the Premises before the taking or
condemnation as compared to the fair rental value of the Premises following
the taking or condemnation and the completion of any restoration and repair
to be performed by Landlord), in lieu of the amount of Fixed Rent otherwise
provided herein, which reduction in Fixed Rent shall be effective the earlier
of the date of title transfer or the date the taking of possession by the
condemning authority. Tenant shall give notice to Landlord of its election
within sixty (60) days after the date Landlord notifies Tenant of the
impending Taking.
25.2 If Tenant does not elect to terminate this Lease as set forth
herein, then Landlord shall commence and diligently continue thereafter to
restore any portion of the Premises, the Common Areas and the other buildings
in the Shopping Center remaining after the Taking to substantially the same
condition and tenantability as existed immediately preceding the Taking or
demolish and remove the remaining portions of building that are not
reasonably susceptible to restoration.
25.3 For the purposes of Paragraph 25.1, a "Substantial Portion of the
Shopping Center" is defined to mean any of the following: (i) ten percent
(10%) or more of the parking areas of the Shopping Center; (ii) twenty percent
(20%) or more of the Leasable Square Footage of the buildings within the
Shopping Center; (iii) loss through the Taking of direct access from the
Premises to any adjacent street or highway (unless comparable access is or
will promptly be available); or (iv) more than ten percent (10%) of the No
Build Area.
25.4 Termination of this Lease because of Taking shall be without
prejudice to the rights of either Landlord or Tenant to recover from the
condemning authority compensation and damages for the injury or loss
sustained by them as a result of the taking. Without limiting the foregoing,
Tenant shall have the right to make a claim against the condemning authority
for the value of its trade fixtures, furniture and personal property, damages
for interruption or relocation of business in the Premises, loss of good
will, moving and remodeling expenses and value of any leasehold improvements
made by Tenant on or to the Premises; provided, however, that Tenant shall
not be permitted to make any claim for any "positive value" or "bonus value"
of its leasehold estate.
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26. DEFAULT
26.1 Tenant shall be in default under this Lease if and only if one of
the following events shall occur:
(a) Tenant shall fail to pay Fixed Rent or Additional Rent
payable hereunder when due, and such failure shall continue for ten (10) days
after Landlord gives Tenant written notice of its failure to pay; or
(b) Tenant shall fail to perform any of its other obligations
under this Lease and such failure shall continue for more than thirty (30)
days after Landlord gives Tenant written notice of its failure to perform,
provided that, if such failure cannot reasonably be cured by Tenant within
such 30-day period, Tenant shall not be in default if Tenant commences to cure
the failure within such 30-day period and diligently thereafter pursues the
cure to completion; or
(c) Tenant or any guarantor of Tenant's obligations under this
Lease makes a transfer in fraud of creditors or makes an assignment for the
benefit of creditors; or
(d) Tenant or any guarantor of Tenant's obligations under this
Lease files a petition under federal bankruptcy statutes or under any similar
law or statute of the United States or any state, or if Tenant or such
guarantor is adjudged bankrupt or insolvent in proceedings filed against
Tenant or such guarantor; or
(e) Tenant fails, within ninety (90) days after an appointment
pursuant to any state or federal bankruptcy or other statute, law or
regulation, of a receiver or trustee for the Premises or for all or
substantially all of the assets of Tenant or any guarantor of Tenant's
obligations under this Lease, to have such appointment vacated.
26.2 If Tenant shall be in default under this Lease, Landlord may, in
addition to all other remedies available at law or in equity, elect one of
the following:
(a) Cure the default for the account and at the expense of
Tenant, and Tenant shall reimburse Landlord upon demand for the reasonable
cost of curing Tenant's default, together with interest at the rate specified
in Paragraph 26.5 below from the date incurred or paid by Landlord until such
costs are paid to Landlord, and such costs and interest shall be deemed to be
additional rental hereunder.
(b) Immediately terminate this Lease and Tenant's right to
possession of the Premises, and repossess the same by summary proceedings or
other appropriate action, and Landlord shall thereupon be entitled to receive
from Tenant (subject to the defenses and limitations provided Tenant under
California Civil Code Section 1951.2) all damages specified in California
Civil Code Section 1951.2(a), including the following: (i) the worth at the
time of award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount
by which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Tenant proves could be
reasonably avoided; and (iv) such other amounts in addition to or in lieu of
the foregoing as may be permitted from time to time by applicable law. As
used in clauses (i) and (ii) above, the "worth at the time of award" shall be
computed by allowing interest at the rate set forth in Paragraph 26.5 hereof.
As used in clause (iii) above, the "worth at the time of award" shall be
computed by discounting such amount at the discount rate of the Federal
Reserve Board of San Francisco at the time of the award plus one percent (1%),
but not in excess of ten percent (10%) per annum.
(c) 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
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Landlord's rights and remedies under this Lease, 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. The parties intend that
Landlord have (subject to the defenses and limitations provided Tenant under
California Civil Code Section 1951.2) the remedy described in California
Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's
breach and abandonment and recover rent as it becomes due, if lessee has
right to sublet or assign, subject only to reasonable limitations).
(d) Pursue any other remedy now or hereafter available to
Landlord under the laws or judicial decisions of the State of California.
Landlord's failure to act on any default or breach of covenant on the part of
Tenant shall not be or be construed to be a waiver thereof, nor shall any
custom or practice which may grow up between the parties in the course of
administering this Lease be construed to waive or to lessen the right to
Landlord to insist upon the performance by Tenant of any term, covenant or
condition hereof, or to exercise any rights given Landlord on account of any
such default. A waiver of a particular breach, or default, shall not be
deemed to be a waiver of the same or any subsequent breach or default.
Landlord's acceptance of rent or the performance hereunder shall not be, or
be construed to be, a waiver of any term, covenant or condition of this Lease
or breach or default thereof by Tenant, whether or not such breach or default
is then known to Landlord. The voluntary or other surrender of this Lease by
Tenant or a mutual cancellation of this Lease shall, at Landlord's option,
either not result in a merger and shall operate as an assignment to Landlord
of any and all subleases made by Tenant to the extent permitted under such
subleases, or shall terminate all such existing subleases.
26.3 In the event this Lease is assigned or the Premises is sublet by
Tenant pursuant to Article 20 above and a default occurs thereafter requiring
notice as provided in Paragraph 26.1 above, Landlord agrees that it will
furnish Tenant with a copy of the notice at the same time it is sent to the
assignee or subiessee to the address set forth on page one hereof or the last
address for notices provided to Landlord by Tenant in writing. In the event
that the default is not cured by the assignee or sublessee during the
specified time periods, Tenant shall have, for an additional period of ten
(10) days, the option (but not the obligation) to cure the default.
26.4 In addition to all other remedies available to Tenant under this
Lease or at law or in equity, if Landlord fails to perform any of its
obligations under the Lease and such failure continues thirty (30) days after
Tenant first gives Landlord written notice of such failure or, if the
performance of such obligation cannot be reasonably completed within such
30-day period, in the event Landlord fails to commence within such 30-day
period and thereafter diligently pursue to completion the performance of such
obligation, then Tenant may (but shall not be obligated to) perform the
obligation of Landlord and the reasonable cost thereof shall be payable from
Landlord to Tenant upon demand. If Landlord fails to reimburse Tenant on
demand for the reasonable cost of performing Landlord's obligation, or if
Landlord fails to timely pay to Tenant any other amount due to Tenant under
this Lease within fifteen (15) days after Tenant gives Landlord written
notice of such past due amount, then Tenant may in either of such events
deduct any such amounts owing from Landlord, plus interest thereon as
provided in Paragraph 26.5 below, from Fixed Rent, Additional Rent or other
charges due or to become due Landlord under this Lease. If Tenant has not
received or received credit for all such amounts and interest thereon at the
expiration of the Term, Tenant may, at its option, extend the Term on the
same terms and conditions then in effect until all such amounts and interest
thereon are fully paid by application of all Fixed Rent, Additional Rent and
other charges accruing during such extended term. Notwithstanding anything
to the contrary in this Lease, Landlord shall not be in default under any
provision of this Lease which would give rise to the right of Tenant to
terminate or offset any amount due Landlord under the Lease unless written
notice specifying such default is mailed to Landlord and to all mortgagees
and/or trust deed holders and/or assignees of which Tenant has, prior to such
notice, been notified in writing ("SECURED PARTIES"), and such specified
default is not cured within thirty (30) days after such notice has been
mailed to Landlord and to the Secured Parties, or within any period not to
exceed one hundred twenty (120) days that Landlord or any of the Secured
Parties is proceeding to cure such default with due diligence, including, in
the case of the Secured Parties, any period that any
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of the Secured Parties is taking steps with due diligence to obtain the legal
right to cure such default on behalf of Landlord, provided such Secured Party
has given Tenant notice of its intention to cure such default within thirty
(30) days after such notice has been mailed. Tenant hereby grants to any
Secured Party the right to cure defaults under this Lease on the part of
Landlord and agrees to provide each Secured Party reasonable access to the
Premises for the purpose of curing such defaults.
26.5 In the event either party hereto fails to pay any sum due under
this Lease within ten (10) days from the due date specified in this Lease,
such past due amount shall accrue, and the failing party shall be liable for,
interest from the original due date until paid at an annual rate equal to the
lesser of (i) the prime rate then published in the WALL STREET JOURNAL plus
three percent (3%) or (ii) the maximum rate permitted by law.
27. HAZARDOUS MATERIALS
27.1 The following terms shall have the meanings ascribed to them under
this Paragraph 27.1:
(a) "Hazardous Materials" shall mean any chemical, substance,
material or combination thereof which is or may be hazardous to human health
or safety or to the environment due to its radioactivity, ignitability,
infectiousness or other harmful or potentially harmful properties or effects,
including petroleum and petroleum products, asbestos, radon, polychlorinated
biphenyls ("PCBs") and all of those chemicals, substances, materials or
combinations thereof that are listed, defined or regulated in any manner by
any Environmental Law (defined below).
(b) "Environmental Cleanup Work" shall mean any cleanup,
remediation, removal, construction, alteration, demolition, renovation or
installation that is required in connection with Hazardous Materials
installed, used, stored, handled or located on the Subject Property (defined
below) or disposed of from the Subject Property in order to
comply with any Environmental Law.
(c) "Environmental Law" shall mean any federal, state or local
environmental, health and/or safety-related law, and any related decision of
the courts, ordinance, rule, regulation, code, order, directive, guideline,
permit or permit condition.
(d) "Subject Property" shall mean the Premises, the Shopping
Center and any adjacent property owned or leased by or otherwise under
Landlord's control, including the improvements thereon and the subsurface
soils and groundwater therein and thereunder.
27.2 Landlord hereby represents and warrants, to its actual knowledge,
the following to Tenant:
(a) During Landlord's period of ownership, the Subject Property
has not been used for the disposal of refuse or waste, or for the generation,
processing, manufacture, storage, handling, treatment, release, discharge or
disposal of any Hazardous Materials, except as typically as part of the
operation of a retail shopping center and in compliance with all
Environmental Laws.
(b) The Subject Property is in compliance with all Environmental
Laws, or will be prior to the Commencement Date.
(c) During Landlord's period of ownership, no (i) asbestos-
containing materials, (ii) machinery, equipment or fixtures containing
polychlorinated biphenyls, (iii) storage tanks for gasoline or any other
substance or (iv) urea formaldehyde foam insulation has been installed, used,
stored, handled or located on the Subject Property.
27.3 Landlord shall comply with, and shall pay all costs incurred in
complying with, any Environmental Law then in effect and the environmental
state, condition and quality of the Subject
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Property, including the performance of and payment for any Environmental
Cleanup Work and the preparation of any closure or other required plans,
excluding, however, any compliance and/or costs related to Hazardous
Materials on the Shopping Center to the extent established to have been
caused by Tenant's (or Tenant's employees, agents or contractors) use and/or
occupancy of the Premises or of the Shopping Center.
27.4 Notwithstanding any other provision of this Lease, Landlord shall
and hereby does agree to indemnify, protect, defend and hold harmless Tenant
and its partners, directors, officers, employees, shareholders, agents,
contractors and each of their respective successors and assigns from and
against any and all claims, judgments, damages, penalties, fines, taxes,
costs, liabilities, losses and expenses arising at any time during or after
the Term as a result of or in connection with: (i) Landlord's breach of any
representation, warranty or covenant contained in this Article 27; or (ii) the
presence of Hazardous Materials on, under or about the Subject Property,
except to the extent same are the result of Tenant's (or its employees,
agents or contractors) activities on or in the Premises or the Shopping
Center.
27.5 In the event of Landlord's breach of any representation, warranty
or covenant contained in this Article 27 which adversely affects Tenant's
ability to carry on its business at the Premises and provided that Landlord
shall have failed to cure any such breach within thirty (30) after Tenant
first gives Landlord written notice of such breach (or such longer period not
to exceed ninety (90) days as may be reasonably necessary if such cure cannot
be reasonably completed within such thirty (30) day period and if Landlord
has commenced such cure within thirty (30) days if its receipt of such notice
and is diligently pursuing the completion of same), Tenant shall have the
right, in addition to all other remedies provided herein, to (i) terminate
this Lease by written notice to Landlord if the existence of Hazardous
Materials which are not caused by the acts or omissions of Tenant has caused
Tenant to cease operations at the Premises, such termination to be effective
as of the date set forth in such notice, or (ii) cease operations within the
Premises in whole or in part and have the Fixed Rent, Additional Rent and any
other charges payable by Tenant hereunder equitably abated based upon the
extent of interference with the conduct of Tenant's business from such
condition until Landlord has cured such breach.
27.6 Tenant agrees not to store any Hazardous Materials on the
Premises and agrees not to release or discard any Hazardous Materials on the
Premises or the Shopping Center; provided, however, Tenant may store, handle
and use the following chemicals, substances or materials if they are used,
stored, handled and disposed of in material compliance with Environmental
Laws then in effect: (i) chemicals, substances or materials routinely used in
office areas; (ii) janitorial supplies, cleaning fluids or other chemicals,
substances or materials reasonably necessary for the day-to-day operation or
maintenance of the Premises by Tenant, and (iii) chemicals, substances or
materials, reasonably necessary for the construction or repair of
improvements on the Premises.
27.7 Notwithstanding any other provision of this Lease, Tenant shall
and hereby does agree to indemnify, protect, defend and hold harmless
Landlord and its partners, directors, officers, employees, shareholders,
agents, contractors and each of their respective successors and assigns from
and against any and all costs (including, without limitation, costs of
Environmental Cleanup Work), claims, judgments, damages, penalties, fines,
taxes, costs, liabilities, losses and expenses arising at any time during or
after the Term as a result of or in connection with (i) the presence of any
Hazardous Materials on the Premises or the Shopping Center as the result of
activities on or in the Premises or the Shopping Center by or under Tenant or
(ii) Tenant's failure to comply with its obligations under this Article 27.
Tenant shall provide prompt written notice to Landlord of the existence of
Hazardous Materials on the Premises and/or any adjoining property within the
Shopping Center of which Tenant has actual knowledge and with copies of all
notices of violation of Environmental Laws received by Tenant.
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28. SUBORDINATION AND NON-DISTURBANCE
28.1 If Tenant does not deliver to Landlord a Contingency Termination
Notice (as defined in Paragraph 37.14) notwithstanding the failure of
Landlord to deliver a Subordination, Non-Disturbance and Attornment Agree-
ment as required in Paragraph 37.14(c), then Tenant shall have no obligation
to pay Fixed Rent, Additional Rent or other charges otherwise payable under
this Lease until Landlord obtains for Tenant such Subordination, Non-Disturbance
and Attornment Agreement. In any event, Tenant shall have the option to
terminate this Lease if such Subordination, Non-Disturbance and Attornment
Agreement is not obtained with one hundred eighty (180) days after the
Commencement Date. Landlord further agrees that, before it shall have the
right to subject and subordinate this Lease to the lien of any mortgages or
deeds of trust hereafter placed upon Landlord's interest in the Shopping Center,
Landlord shall have first secured for Tenant's benefit a written Subordination,
Non-Disturbance and Attornment Agreement substantially in the form set forth in
Exhibit H, subject only to the addition of terms and provisions required by the
mortgagee or trust deed beneficiary as are customarily found in such agreements
between nationally recognized tenants and institutional lenders on the security
of first-class shopping center developments in the Northern California area.
28.2 If Landlord defaults in making payment under any mortgage or deed of
trust encumbering all or any part of the Shopping Center the foreclosure of
which will terminate Tenant's right to possession of the Premises, or if Land-
lord is in breach or in default of any such mortgage or deed of trust in any
respect, Tenant shall have the right but not the duty to make all payments of
Fixed Rent and other charges thereafter becoming due under this Lease to the
mortgagee or beneficiary thereunder in lieu of Landlord, and payments so made
shall discharge the obligation of Tenant hereunder with respect to such
payments.
29. NOTICES
29.1 Any notice required to be given under the terms of this Lease shall
be in writing and shall be effective upon the earlier of: (i) receipt,
(ii) refusal to accept delivery or (iii) three (3) days after being deposited
in the U.S. mail, postage prepaid, via registered or certified mail return
receipt requested, or one (1) day after being deposited with a nationally
recognized overnight courier, if to Landlord at the address set forth on page 1
hereof, and if to Tenant to the following addresses:
Barnes & Noble Superstores, Inc.
122 Fifth Avenue
New York, New York 10011
Attention: Vice President of Real Estate
with a copy to the same addresses, Attention: Lease Administration. For
invoices or statements, an additional copy shall be sent to Tenant at the
following address:
Accounts Payable Department
1400 Old County Road
Westbury, New York 11590
Attention: Property Accounting
29.2 Payments of Fixed Rent and other changes shall be forwarded to Land-
lord at the address set forth on page 1 hereof via first class mail. If at any
time, or from time to time, there shall be more than one Landlord, the Land-
lords shall designate a party to receive all notices and rent payments, and
service upon or payment to the designated party shall constitute service upon
or payment to all. Tenant shall not be required to issue multiple checks for
any single payment of Fixed Rent or other charges hereunder.
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29.3 Either party may designate a new address for notice hereunder and/or
for the payment of Fixed Rent and other charges upon ten (10) days' advance
written notice to the other party in the manner set forth in Paragraph 29.1
above.
30. MEMORANDUM OF LEASE
Landlord agrees, upon Tenant's request, to execute a Memorandum of Lease
in the form of EXHIBIT 1. Either party may record the Memorandum of Lease at
its expense following the Effective Date hereof. The provisions of this Lease
shall control, however, in regard to any omissions from the Memorandum of Lease
or any provisions hereof which may be in conflict with the Memorandum of Lease.
31. LIENS
If because of any act or omission of Tenant a mechanic's or other lien
shall be filed against the Premises or the Shopping Center, Tenant shall, at
Tenant's own cost and expense, within thirty (30) days after notice of the
filing thereof, cause the same to be cancelled and discharged of record, or
shall furnish Landlord with a surety bond issued by a surety company protecting
Landlord from any loss because of non-payment of such lien claim. In the event
Tenant posts a surety bond, Tenant shall be entitled to contest any such lien
claims by appropriate judicial proceedings. Landlord shall at all times have
the right to post and to keep posted on the Premises such notices as are
provided for under or by virtue of the laws of the State of California for
the protection of Landlord's interest in and to the Premises from mechanics
liens or liens of a similar nature. At least twenty (20) days prior to
Tenant's commencement of any labor or work or construction (except for Tenant's
Work expressly contemplated herein) having a projected cost in excess of Fifty
Thousand Dollars ($50,000.00), Tenant shall deliver to Landlord notification
thereof specifying the nature and location of the intended work and the expected
date of commencement and completion thereof, and thereupon Landlord shall have
the right to post notices of non-responsibility on or about the Premises.
32. TENANT'S ENTRY PRIOR TO COMMENCEMENT DATE
Landlord grants Tenant, its employees and agents, a license to enter the
Premises for purpose of inspecting Landlord's construction of Landlord's Work
prior to the Commencement Date. In exercising such license, neither Tenant nor
its employees or agents shall interfere with the workmen, mechanics or
contractors of Landlord. Tenant's storage or installation within the Premises
of any of its fixtures, inventory or other items of Personal Property prior
to the Commencement Date shall not be deemed an acceptance of the Premises by
Tenant.
33. FORCE MAJEURE
Landlord and Tenant shall be excused for the period of any delay in
performance of any obligations hereunder when prevented from doing so by the
wrongful or negligent acts or omissions of the other party or by causes beyond
either party's control, which shall include all labor strikes, civil distur-
bance, war, war-like operations, invasions, rebellion, hostilities, military
or usurped power, sabotage, governmental regulations or controls, fires or
other casualty, inability to obtain any material or service or acts of God.
Notwithstanding the foregoing: (i) nothing contained in this Article 33 shall
excuse Tenant from paying in a timely fashion any payments due under the terms
of this Lease from and after the Rent Commencement Date; and (ii) with respect
to Landlord's construction obligations under Article 4 above, (x) no delay
under this Article 33 shall be effective unless Landlord shall have notified
Tenant of the delay within three (3) business days of Landlord's obtaining
actual knowledge of the event giving rise to such delay; and (y) no delay
under this Article 33 shall be permitted in connection with delays caused by
the failure of the Premises or the Shopping Center to comply with
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local governmental ordinances, codes or regulations in effect on the Effective
Date of this Lease or the implementation of same.
34. BROKERS
Tenant and Landlord represent and warrant to each other that such party
has not had any dealings with any realtor, broker or agent in connection with
this Lease or the negotiation hereof, other than CB Commercial Real Estate
Group, Inc. and Lowen Real Estate ("BROKERS"), and each party agrees to defend,
indemnify and hold the other party harmless from any cost, expense or liability,
including reasonable attorney's fees, for any breach of this representation.
Landlord shall be responsible for all fees and commissions payable to Brokers
in connection with this Lease. Tenant represents to Landlord that it has not
agreed to pay any such fee or commission to the Brokers, or either of them.
35. LANDLORD'S SUBORDINATION
Within fifteen (15) days after request from Tenant, Landlord shall execute
a subordination agreement in favor of Tenant's lender with respect to any liens
arising in favor of Landlord against Tenant's fixtures and personal property.
Such subordination agreement shall be in a form reasonably acceptable to Land-
lord, Tenant and Tenant's lender. Any restriction on Landlord's right to remove
Tenant's fixtures and/or other personal property upon the termination or
expiration of this Lease in any such agreement shall expire no later than thirty
(30) days following such expiration or termination and notice by Landlord to
such lender mailed to the last address provided to Landlord for such purpose by
such lender. Said agreement shall obligate Tenant's lender, for Landlord's
benefit, to repair any damages to the Premises resulting from any removal of
Tenant's trade fixtures and personal property by or under such lender.
36. ESTOPPEL CERTIFICATES
Within fifteen (15) days after written request from a party hereto,
the other party shall execute, acknowledge and deliver to the requesting party
an estoppel certificate certifying: (i) that this Lease is unmodified and in
full force and effect (or, if there have been modifications, that this Lease is
in full force and effect, as modified, and stating the date and nature of each
modification); (ii) the date to which rental and other sums payable hereunder
have been paid; (iii) that no notice has been received by such other party of
any default which has not been cured, except as to defaults specified in the
estoppel certificate; and (iv) such other matters as may reasonably be
requested by the other party, its lender, assignee or purchaser (or proposed
lender, assignee or purchaser). Any such estoppel certificate may be relied
upon by any such purchaser, lender or assignee for estoppel purposes only, and
no party executing such estoppel certificate shall be liable for damages or
other losses as a result of inaccuracy in the information contained in such
estoppel certificate absent bad faith or gross negligence.
37. MISCELLANEOUS
37.1 The failure of Landlord or Tenant to insist upon prompt and strict
performance of any of the terms, conditions or undertakings of this Lease, or
to exercise any right herein conferred, in any one or more instances, shall not
be construed as a waiver of the same or any other term, condition, undertaking,
right or option.
37.2 The terms, covenants, agreements, conditions and undertakings
contained herein shall be binding upon and shall inure to the benefit of the
heirs, successors in interest and assigns of the parties hereto. Where
more than one party shall be the Landlord under this Lease, the word
"Landlord" whenever used in this Lease shall include all Landlords jointly
and severally.
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37.3 This Lease contains the entire agreement between the parties hereto
and no representations, inducements, promises or agreements, oral or otherwise,
entered into prior to the execution of this Lease, will alter the covenants,
agreements and undertakings herein set forth. This Lease shall not be
modified in any manner, except by an instrument in writing executed by all
parties.
37.4 If any term or provision of this Lease or the application thereof to
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law. The terms and provisions of this Lease shall not be construed against
or in favor of a party hereto merely because such party or its counsel is the
draftsman of this Lease.
37.5 All of the terms and words used in this Lease, regardless of the
number and gender in which they were used, shall be deemed and construed to
include any other number (singular and plural), and any other gender
(masculine, feminine or neuter), as the context or sense of this Lease or any
paragraph or clause hereof may require, the same as if the words had been fully
and properly written in the number and gender.
37.6 Any reference contained in this Lease to the "Effective Date" or
similar terms shall mean the last date on which any party required to execute
or initial this Lease does so, and such date shall be set forth in the first
paragraph of this Lease where indicated.
37.7 Tenant and Landlord each warrant and represent that the party signing
this Lease on behalf of each has authority to enter into this Lease and to bind
Tenant and Landlord, respectively, to the terms, covenants and conditions
contained herein. Each party shall deliver to the other, upon request, all
documents reasonably requested by the other evidencing such authority, including
a copy of all corporate resolutions, consents or minutes reflecting the
authority of persons or parties to enter into agreements on behalf of such
party.
37.8 Article or Paragraph headings or captions contained herein are
provided for convenience purposes only and shall not be considered in any way
in connection with the construction of the substantive terms and provisions of
this Lease.
37.9 This Lease shall be governed by and construed and enforced in
accordance with the laws of tne state in which the Premises is located.
37.10 In the event either party hereto initiates litigation or hires legal
counsel to enforce or protect its rights under this Lease, the prevailing party
shall be entitled to recover from the unsuccessful party, in addition to any
other damages or relief awarded or obtained, all court costs and reasonable
attorneys' fees incurred in connection with such litigation or action by legal
counsel.
37.11 Nothing contained in this Lease shall be construed to create a
partnership, joint venture or relationship of principal and agent between Land-
lord and Tenant. No provision of this Lease shall be construed to confer any
rights or remedies upon any party other than Landlord and Tenant.
37.12 When used herein, the terms "including" and "includes" and similar
words or phrases shall be deemed to be terms of illustration only and not
limitation.
37.13 Any dispute between Landlord and Tenant with respect to any issue
arising out of this Lease which is, pursuant to the specific provisions of this
Lease, either expressly made subject to resolution by arbitration or involves a
sum of money (other than a dispute regarding the payment and/or amount of Fixed
Rent) which is less than $100,000 (as the case may be, an "ARBITRABLE DISPUTE")
shall be determined by arbitration in Butte County, in accordance with the rules
of the American Arbitration Association ("AAA"). The arbitrator(s) shall act as
promptly as possible to determine and conclude the issue. Any arbitrator must
have at least ten (110) years experience in operating or managing commercial
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real estate in the City of Chico and shall not be related to nor have worked
for either Landlord or Tenant. The determination of the arbitration shall be
conclusive upon the parties and judgment upon the same may be entered in any
court having jurisdiction over the parties and the subject matter of the
dispute. Landlord or Tenant shall have the right to submit an Arbitrable
Dispute (and only such dispute) to binding arbitration under the Expedited
Procedures provisions (Rules 53 through 57 in the January 1, 1990 edition)
("EXPEDITED ARBITRATION") of the Commercial Arbitration Rules of the AAA.
In cases where the parties utilize such Expedited Arbitration: (i) the parties
will have no right to object if the arbitrator so appointed was on the list
submitted by the AAA and was not objected to in accordance with Rule 54
(provided such arbitrator meets the criteria contained for appointment as an
arbitrator), (ii) the first hearing shall be held within seven (7) business days
after the appointment of the arbitrator, and (iii) the losing party in such
arbitration shall pay the arbitration costs charged by AAA and/or the
arbitrator.
37.14 This Lease and the obligations of Landlord and Tenant hereunder are
expressly made contingent upon the satisfaction of the following contingencies
and conditions (collectively, the "CONTINGENCIES"), which Contingencies
Landlord agrees to use its best efforts to satisfy:
(a) Landlord shall deliver to Tenant a termination agreement signed by
Payless Drugs (the "PAYLESS TERMINATION AGREEMENT") pursuant to which Payless
Drugs agrees to terminate its lease and vacate their premises in the
Shopping Center upon not more than thirty (30) days advance written notice from
Landlord;
(b) Landlord shall deliver to Tenant an agreement with Circuit City and
Office Depot permitting Tenant to operate its business in the Premises for those
purposes set forth in Paragraph 7.1 hereof without restriction or limitation in
conflict with Tenant's rights under this Lease;
(c) Landlord shall obtain from the current holder of any mortgage or
deed of trust encumbering all or any part of the Shopping Center, a Subordin-
ation, Non-Disturbance and Attornment Agreement in the form substantially as
set forth in EXHIBIT H, or, at Landlord's request, such other commercially
reasonable form mutually acceptable to such holder and Tenant;
(d) Landlord shall deliver to Tenant evidence reasonably satisfactory
to Tenant that the lease with Blockbuster Video has been fully executed and
delivered;
(e) Landlord has obtained approval from the Architectural Review Board
of the City of Chico of the Elevation Designs annexed hereto as EXHIBIT G.
If any of the Contingencies set forth in clauses (a), (b) and (c) are
not satisfied within thirty (30) days after the Effective Date or any of the
Contingencies set forth in clauses (d) and (e) are not satisfied within sixty
(60) days after the Effective Date, Tenant (if any of (a) through (e) are not
satisfied) or Landlord (if any of (a), (b), (d) or (e) are not satisfied) may
terminate this Lease upon written notice to the other (the "CONTINGENCY
TERMINATION NOTICE"), whereupon this Lease shall be null and void as if the
parties had not entered into same and neither party shall have any rights or
liabilities hereunder. Notwithstanding the foregoing, if Landlord seeks to
terminate this Lease because the condition specified in clause (d) is not
satisfied, Tenant may, within ten (10) days after receipt of Landlord's
Contingency Termination Notice, nullify Landlord's termination notice by sending
Landlord a notice whereby Tenant agrees to lease the Blockbuster premises upon
all of the same terms and conditions as this Lease and the parties shall
promptly proceed to enter into such a lease and this Lease shall remain in full
force and effect. Upon satisfaction by Landlord of the Contingencies, Landlord
shall deliver a notice thereof to Tenant certifying that the Contingencies have
been satisfied and Landlord's option to terminate this Lease as provided in this
Paragraph 37.14 shall thereafter be null and void (the "CONTINGENCY
SATISFACTION NOTICE"), which Contingency Satisfaction Notice shall be deemed
given if Landlord has not delivered the Contingency Termination Notice within
ninety (90) days after the Effective Date.
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37.15 After the Commencement Date and upon obtaining all required permits
for the construction of Tenant's Work, Tenant shall promptly commence
construction of Tenant's Work and shall thereafter diligently prosecute such
construction to completion in accordance with the approved Tenant's Plans and
in a good and workmanlike manner and in compliance with all applicable laws,
rules and regulations. During construction, the Premises shall be enclosed by
a construction barricade approved by Landlord, separating the Premises from
the balance of the Shopping Center. The construction barricade shall be
painted and decorated in form reasonably satisfactory to Landlord. Tenant's
contractor shall be responsible for the repair, replacement or cleanup of any
damage done by Tenant or its general contractor to other contractors work
and/or the Premises or adjacent properties. Tenant's contractor shall
contain its storage of materials and his operations within the Premises and
that certain staging area for Tenant's nonexclusive use designated as the
"Staging Area" on the attached EXHIBIT B. All trash and surplus construction
materials shall be stored within the Premises and shall be promptly removed
from the Shopping Center. Tenant's contractor or subcontractors shall not
post signs on any part of the Shopping Center other than within the
construction barricade or on the fence or barricade. Tenant's Work shall be
coordinated under Landlord's direction so that Tenant's Work will not
unreasonably interfere with or delay the completion of any other construction
work in the Shopping Center or the quiet enjoyment of other occupants of the
Shopping Center (including keeping all access and drive aisles reasonably
free from debris and vehicles) and Tenant shall cause its contractors to
reasonably coordinate Tenant's Work with any such other work with Landlord
or, at Landlord's direction, with other contractors or Landlord's architect.
37.16 Notwithstanding anything contained in this Lease to the contrary,
Landlord shall not be responsible for the correction or repair of construction
defects in any of the Landlord's Work to be maintained and repaired by Tenant
except for patent defects in such work of which Landlord receives written notice
from Tenant within sixty (60) days of the Rent Commencement Date and except for
latent defects in such work of which Landlord receives written notice from
Tenant within twelve (12) months of the Rent Commencement Date.
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<PAGE>
38. EXHIBITS
All Exhibits referred to herein shall be considered a part hereof for all
purposes with the same force and effect as if copied at full length herein. The
Exhibits attached hereto are listed as follows:
EXHIBIT A - Legal Description
EXHIBIT B - Shopping Center Site Plan
EXHIBIT C - Notice of Lease
EXHIBIT D - Landlord's Work
EXHIBIT E - Intentionally Deleted
EXHIBIT F - Use Provisions
EXHIBIT G - Tenant's Prototype Signage and Proposed
Elevation Designs
EXHIBIT H - Subordination, Non-Disturbance and Attornment
Agreement
EXHIBIT I - Memorandum of Lease
EXECUTED by Landlord and Tenant on the respective dates set forth below,
but effective as of the Effective Date.
LANDLORD:
CHICO CROSSROADS CENTER, a California
Limited Partnership
By: JMLB, Inc. its general partner
Date executed by Landlord: By: /s/ Illegible
--------------------------------
Name:
January 16, 1996 Title: President
- -----------------------------
TENANT:
BARNES & NOBLE SUPERSTORES, INC.
Date executed by Tenant: By /s/ Mitchell S. Klipper
-----------------------------------
Name: Mitchell S. Klipper
January 5, 1996 Title: Executive Vice President
-34-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
All that certain real property situate in the County of Butte, City of Chico,
State of California, described as follows:
Lots 1 through 9, as shown on that certain Parcel Map entitled, "Vesting Parcel
Map No. 95", which map was filed in the office of the Recorder of the County of
Butte, State of California, September 22, 1994, in Book 134 of Maps, at Pages 84
and 85.
A-1
<PAGE>
EXHIBIT B
SHOPPING CENTER SITE PLAN
B-1
<PAGE>
EXHIBIT C
NOTICE OF LEASE
As required under the Lease Agreement (the "Lease') dated _________. 19__,
between the undersigned parties and covering approximately _______ square
feet of space located in the Chico Crossroads Shopping Center, Chico,
California, the undersigned hereby establish and agree that: (i) the term of
the Lease commenced on _________________, 19__, and shall expire on
____________, 20__, subject to Tenant's extension options under the Lease; (ii)
the Fixed Rent for the first full calendar month of the Lease term is $_________
and (iii) the Rent Commencement Date is ______________________, 19__.
LANDLORD:
CHICO CROSSROADS CENTER
By: _____________________________
Name:
Title:
TENANT:
BARNES & NOBLE SUPERSTORES, INC.
By: ___________________________
Name: Mitchell S. Klipper
Title: Executive Vice President
C-1
<PAGE>
EXHIBIT "D"
LANDLORD'S WORK
Landlord agrees to demise a portion of the existing building ("Building")
for Tenant as outlined on Exhibit "B" and specifically in the area
crosshatched and designated as the Premises on Exhibit "G". Landlord shall
prepare at its sole cost and expense plans and specifications (the "Plans")
for Landlord's Work (as hereinafter defined). Landlord's Work shall be
completed substantially in accordance with the Plans and applicable governing
codes, in a good and workmanlike manner, utilizing both new materials and
existing components.
To the extent that certain portions of Landlord's Work are existing or have
already been completed, Landlord's obligations shall be deemed satisfied,
provided:
1. All improvements are in good working condition and in compliance with all
applicable building code requirements.
2. All existing electrical and mechanical systems shall be in good working
order at the time of "Delivery" and Landlord warrants same for a period of
one (1) year from the Delivery Date (and a five (5) year warranty on
major components of the HVAC System (i.e. pumps, motors, condensers)).
LANDLORD'S WORK: Landlord's Work is defined for purposes of this Exhibit "D"
as items A through I.
All of the following work shall be set forth in the Plans and shall be
provided to meet all applicable governing codes and regulations. The term
"provide" as used herein means to furnish and install.
A. BUILDING SHELL:
The Building and Demised Premises shall include:
1. Complete roofing system, including roofing membrane, roof deck,
and structure. Provided Tenant's store front (to be provided as
part of Tenant's Work) is glass store front system with shading
coefficient of 5.7 or less, Landlord's work shall include
insuring that the building "shell" complies with the current
Title 24 energy requirements. To the extent Tenant's Work (as
hereinafter defined) including store fronts and ceiling system,
are required to meet energy code requirements, Landlord shall not
be required to make said improvements.
2. Complete structural system; columns, beams, and/or rafters
(exposed construction).
3. Building and site shall be free of all hazardous materials
(including but not limited to asbestos, underground storage tanks,
etc.) to the extent required by the applicable governmental
authorities. Hazardous materials shall be properly handled
(i.e., encapsulated) as required by governing codes and
regulations.
4. Exterior wall surfaces of the structure shall be painted
masonry block. No additional insulation shall be provided.
5. Secondary access/exit door(s) with frame and all required
hardware. Landlord and Tenant shall coordinate door locations,
sizes and hardware.
6. The Building "shell" shall be designed and constructed to
conform with all
Exhibit "D", Page 1
<PAGE>
applicable governing codes and regulations including ADA
criteria.
7. All existing interior improvements, including floor covering,
demising walls (except electrical room), restrooms, dropped
ceiling, lighting and fixtures shall be demolished and removed.
The premises will be delivered in broom clean condition.
8. New demising wall shall include 1/2" CDX plywood on the Barnes
& Noble side under the dry wall, fastened with dry wall screws
pursuant to local code. New demising dry wall shall be taped,
sanded and paint ready.
B. UTILITIES:
Shall be provided to the Building Shell and located as shown on the
Plans.
1. Domestic water service: Per local code requirements, 1 1/2"
minimum. Landlord may supply the entire building with an
internal metering system for billing.
2. Sewer service: Existing 4" minimum sewer line.
3. Natural gas service: 1 1/2" natural gas line suitable to supply
the required BTU/hr for the HVAC system. A 1 1/2" stubbed gas
service, capped in place, will be provided in the attic space
for future service.
4. Telephone service: Existing telephone service located in the
electrical room shall be left in place.
C. FLOOR SLAB:
A smooth concrete floor slab ready for Tenant floor coverings.
Floor slab shall support not less than 125 p.s.f and all blemishes,
spalls and cracks shall be repaired as required to accept new floor
covering.
D. ELECTRICAL:
1. Provide separate electrical service and meter for the Demised
Premises.
2. Provide one (1) 277/480 volt-3 phase, 4 wire 800 AMP main painel
with remote meter, Panel shall be placed on finish grade, 3/4"
plywood backing boards at the location shown on the Plans. All
existing electrical runs for lighting and other services will be
disconnected and removed. In slab electrical conduit will be
disconnected and left in place. Any existing recessed
electrical receptacles will be left in place with service
disconnected. Abandoned electrical circuit boxes shall be
removed and patched.
E. AIR CONDITIONING & HEATING:
1. Landlord shall utilize existing heating and cooling units
wherever possible.
2. Total system shall supply a minimum of 1.0 ton per 350 square
feet contained in the Demised Premises, fully functional and
capable of maintaining 78 degrees Fahrenheit in cooling mode
(summer) and 72 degrees Fahrenheit in heating mode (winter).
3. Units will be set and curb mounted with the return and supply
stubbed to bottom of truss joist.
Exhibit "D", Page 2
<PAGE>
4. HVAC system to include disconnect, weather disconnect to HVAC
units, conduit, power wiring, thermostat and gas piping (where
required).
5. AU HVAC equipment to comply with Clean Air Act requirements.
F. STORE FRONT:
Landlord shall demolish all exterior facade and other architectural
features on the store front; including removal of all existing
store fronts, glass and doors, leaving any bulkheads in place.
G. FIRE SPRINKLER SYSTEMS & CENTRAL STATION REPORTING SYSTEMS:
Provide monitoring for the existing fire sprinkler system per the
Plans and according to applicable code. Any system monitoring,
alarms, specialty items or alarm fees for a "shell" condition as
required by applicable code shall be included within Landlord's
scope of work. Existing system shall be modified for the proposed
demising; existing drops will be left in place. All other work to
modify the system to conform to Tenant's Work shall be completed by
Tenant.
H. SITE DEVELOPMENT:
1. Parking areas shall be hard-surfaced with concrete, asphalt or
other material and properly striped.
2. All ADA requirements and all other governing codes must be
adhered to in total site and building development.
3. Walks shall be surfaced with concrete, stone, brick paver or
other hard surfaced materials as specified by Landlord.
I. OTHER:
1. Any permits, fees, licenses, Architectural drawings,
Engineering consulting services or anything of the sort
necessary for the Landlord's Work shall be provided by
Landlord at sole cost and expense.
2. Landlord shall, at its sole cost and expense, secure from City
or local governing body a Temporary Certificate of Occupancy
or other suitable permit granted to the Tenant and providing
for Tenant's right to complete its improvements (subject to
Tenant obtaining its building permit), or if not available, a
letter from Landlord's architect certifying that Landlord's
Work has been substantially completed.
3. To the extent any portion of the above described Landlord's
work is not sufficient to meet applicable governing standards,
the foregoing shall be modified with Tenant's consent to meet
such applicable governmental standards at Landlord's sole cost
and expense. These changes shall not serve to extend the time
frames as provided in the Lease.
4. Any work not specifically set forth herein above, including
the completion of store fronts and architectural features
necessary to operate the Demised Premises as a typical Barnes
& Noble store shall be completed by Tenant ("Tenant's Work").
Exhibit "D", Page 3
<PAGE>
EXHIBIT E
INTENTIONALLY DELETED
E- 1
<PAGE>
EXHIBIT F
USE PROVISIONS
F - 1
<PAGE>
PETCO
8. USE
(a) Tenant shall have the right to use and occupy the Premises for the
operation of a retail pet supply store, which may include the sale of pet
food and supplies, live fish, bird and small animal, daytime grooming,
incidental veterinary services, and related goods and services, and for no
other use or purpose, without Landlord's prior written approval. Such
approval by Landlord shall not unreasonable be withheld, provided that
Landlord may withhold such approval to any such use that would (i) violate
any covenant, condition or restriction then in effect regarding the Shopping
Center, or any portion thereof, of which Tenant receives written notice from
Landlord within ten (10) days of a request by Tenant for a list of such
covenants, conditions or restrictions, or (ii) any exclusive use or
prohibited use set forth in the attached EXHIBIT "D-1 ". Landlord may also
withhold its approval to the use of the Premises for any non-retail use or
for use as an auditorium, meeting hall, school or other place of public
assembly, gymnasium or dance hall; for bingo or similar games of chance, or
as a massage parlor, video gam arcade, bowling alley, skating rink, car wash,
car repair or car rental agency, nightclub or adult book or adult video store
or as a restaurant or for medical or other office uses (other than an office
incidental to the operation of a retail business otherwise approved by
Landlord).
(b) Tenant covenants that it will not use the Premises for or permit upon
the Premises anything unlawful or otherwise against public policy.
<PAGE>
HOMETOWN BUFFET
14. PERMITTED USE. The Premises shall be used as a sit-down family
oriented buffet style restaurant which may, at the option of Tenant and
subject to applicable laws and governmental regulation, serve alcohol and for
no other use or purpose without Landlord's consent, which consent shall not
unreasonably be withheld. Landlord may refuse to grant such consent, in its
sole and absolute discretion, however, to a change in use if the proposed new
use would (i) duplicate the primary use of any other occupant of the Shopping
Center at the time Landlord is requested to approve of such new use, or (ii)
violate any exclusive use granted to any other tenant or occupant within the
Shopping Center, prior to tenant's requesting Landlord to approve the
proposed new use, or (iii) require a greater number of parking spaces under
applicable governmental codes and/or ordinances than the parking required for
the Premises when used as a sit-down family oriented buffet style restaurant;
provided that this provision shall not be construed so as to prohibit the
operation of the Premises as a sit-down family oriented buffet style
restaurant serving alcoholic beverages. Landlord may also refuse to grant
its consent to a proposed new use, in Landlord's sole and absolute
discretion, if the request for such consent is received by Landlord during
the Initial Term. So long as Tenant is not in default under this Lease, no
other portion of the Shopping Center will be leased, subleased, operated or
otherwise used for the operation of a sit-down family oriented buffet style
restaurant; provided that this restriction shall not apply to the building
areas designated
1
<PAGE>
"B", "D" or "H" on the attached EXHIBIT "A-1", while any such building area
is leased by the existing lease for the building space on such area (I.E.,
the existing leases with Home Base Inc., Pay Less Drugs and Food-4-Less), as
said leases may from time to time be modified and/or amended, extended or
renewed. The permitted uses under all leases subsequently entered into by
Landlord covering any portion of the Shopping Center will require compliance
with applicable use restrictions resulting from "exclusive use" commitments
to tenants of the Shopping Center (including the restriction set forth
above). Tenant and Landlord will have the mutual non-exclusive right to
enforce the restriction supporting the exclusive use commitment to Tenant
under this Lease as set forth above. Said restriction shall terminate and be
of no further force and effect if (i) at any time following Tenant's opening
of the Premises for business with the public, the operations of such business
shall cease for a continuous period of twelve (12) months, or (ii) for a
twelve (12) month period following the substantial completion of the
Landlord's Work and the Tenant's Work, Tenant does not initially open and
operate from the Premises as a sit-down family oriented buffet style
restaurant, unless such failure to initially open or operate said business is
the result of strikes, lockouts, riots, insurrection, fire or other casualty,
Acts of God, or other causes beyond Tenant's reasonable control (other than
financial). Nothing contained in this paragraph shall be construed as
releasing Tenant from its obligation to initially open the Premises for
business and to thereafter continuously operate the Premises as required by
this Lease. If requested by Tenant, Landlord shall provide for the recording
of a memorandum of this Lease which will include the exclusive right to
operate a sit-down family oriented buffet style restaurant as granted by this
Section. Tenant shall not do or permit anything to be done on, in or about
the Premises or Shopping Center which in any way will obstruct or interfere
with the rights of any other tenant or subtenant of the Shopping Center;
provided, however, that Tenant shall not be in violation of the provision so
long as it is using the Premises consistently with the above-stated use
clause. Tenant shall not commit waste upon or make any use thereof which may
make void or voidable any insurance on the Premises or Shopping Center and in
the event any act upon the Premises or Shopping Center by Tenant or any use
thereof by Tenant, including any unauthorized vacancy thereof, results in an
increase or extra premium payable for insurance on the Premises or Shopping
Center, said increase or extra premium payable for insurance on the Premises
or Shopping Center, said increase or extra premium shall be paid by Tenant
upon, demand by Landlord. Tenant shall conduct its business from the
Premises under its trade name, "HomeTown Buffet," or any other name used by a
majority of Tenant's restaurants in the State of California, or under any
other trade name approved by Landlord, which approval shall not unreasonably
be withheld.
2
<PAGE>
Notwithstanding the foregoing or any other provision in this Lease to the
contrary, in no event may Tenant use the demised premises:
(a) For entertainment purposes such as: cinema, theatre, skating rink,
bowling alley, bar, tavern, discotheque, dance hall, amusement gallery,
poolroom, pool hall, health club, gym, massage parlor or off-track betting
facility.
(b) For the renting, leasing or sale of any motor vehicle including but
not limited to: operation of a dealership relating to motorcycles,
automobiles, trucks and/or recreational vehicles, including trailers.
(c) For any nonretail purpose, provided that this shall not be construed
to prohibit office, storage, repair and/or alteration facilities incidental
to retailing.
(d) For the operation of a hardware store or home improvement center or
for the purpose of selling home improvement items, including but not limited
to, lumber, building materials and/or garden supplies.
(e) For any business, trade or profession which requires or has a license
or permit to conduct a pharmacy, or which employs or is required to employ a
registered or licensed pharmacist, or for the conduct of any store,
business, trade or profession which is called, labelled, named or is
commonly known or is referred to as a "drug store," "pharmacy" or
"apothecary."
(f) As a retail grocery, meat or produce store of any nature; PROVIDED,
that this provision shall not prohibit the use of the demised Premises, with
Landlord's approval as required above, as a specialty bake shop or as a
delicatessen so long as the Gross Sales from such specialty bake stop or
delicatessen operation does not exceed one percent (1%) of the overall Gross
Sale from the Premises in any Lease Year.
(g) As a mortuary; church; bookstore or other establishment which
prohibits the admission of minors or those below a specified age such as
eighteen (18) years, because of merchandise and/or activities explicitly
dealing with or depicting human sexuality; so called head shops; video
stores; off-track betting parlors; pawn shops; junk yards; flea markets;
recycling facilities; massage parlors; car wash facilities; nightclubs;
dance halls; secondhand stores (other than "antique" stores); dry cleaning
or laundry plants.
3
<PAGE>
(h) For any use or purpose not customarily found in first-class retail
shopping centers, similar to the Shopping Center, in the Northern California
area.
(i) As a fast-food restaurant specializing in the sale of hamburgers or
specialty sandwiches.
(j) A store primarily used for the sale and/or display of consumer
electronics, recorded music (records, compact discs, cassette tapes or
otherwise) and/or office supplies.
Tenant agrees that all of Tenant's operations and activities on or from
the Premises and the Shopping Center shall be conducted in compliance with
all applicable statutes, ordinances, orders, laws, governmental rules and
regulations, and the requirements of all federal, state and municipal
governments and appropriate departments, commissions, boards and offices
thereof, which may be applicable to the Premises and/or the Shopping Center.
Landlord will promptly notify Tenant if Landlord's insurance carrier or
underwriter claims an increase in premiums attributable to Tenant's use or
that Tenant's activities may invalidate Landlord's coverage(s), and will
cooperate with Tenant, at Tenant's sole cost and expense, in efforts to
resolve any dispute over any change in premium or effect on Landlord's
coverages.
The use restrictions in this Section 14 will not restrict Tenant's right
to maintain up to four coin-operated amusement devices on the Premises
(without the need for further consent from Landlord).
Landlord warrants that Tenant's intended use does not conflict with any
existing lease or any existing use restriction affecting the Shopping Center
or any other recorded document binding upon the parties or the Premises,
EXCEPT as otherwise described herein.
4
<PAGE>
CIRCUIT CITY
18. USE.
(a) Tenant shall initially maintain, use and operate the Premises as a
retail store for (i) the sale of consumer, office and automotive electronics
products (which include, but shall not be limited to, televisions, stereos,
speakers and video recorders and players), computer hardware and software,
entertainment software and entertainment media (which include, but shall not
be limited to, records, game cartridges, video tapes, cassettes and compact
discs), cellular telephones, household appliances (which include, but shall
not be limited to, refrigerators, freezers, stoves, microwave ovens, vacuum
cleaners and dishwashers) and related goods and the sale and installation of
motor vehicle audio, stereo and telephone systems (all of such items being
herein collectively referred to as the "Products"), and (ii) renting,
servicing, repairing and warehousing of the Products (collectively herein,
the "Initial Use").
(b) Thereafter, Tenant shall have the right to use the Premises for any
lawful retail use; provided, however, that the Premises shall not be used
(i) for any illegal purpose, (ii) for any use prohibited under paragraph
19(a)(viii) below, (iii) in violation of any exclusive use restriction
granted a tenant or other occupant of the Shopping Center pursuant to a Prior
Lease or any restrictive covenant in a Prior Lease shown on EXHIBIT "F", or
(iv) in violation of any other applicable provision of the "Permitted Title
Encumbrances" contained in EXHIBIT 7-1.
(c) Nothing contained in this Lease shall be construed to require Tenant
to operate the Premises continuously for the use first stated or for
any other use. However, should Tenant fail to open and engage in the Initial
Use for at least one (1) business day within one (1) full year following the
Commencement Date, subject to force majeure (financial inability excepted),
Landlord shall have the right upon thirty (30) days' prior written notice to
Tenant to terminate the Lease and thereafter Tenant shall be relieved of all
obligations hereunder. If this Lease is so terminated pursuant to this
paragraph 18(c), the Improvements shall become the property of Landlord, and
Landlord shall not be required to deliver the Tenant Improvement Allowance as
required by Exhibit "C". Notwithstanding anything to the contrary, Tenant
may eliminate Landlord's termination right if within the thirty (30) day
period following Tenant's receipt of Landlord's termination notice, Tenant
opens for business in the Premises.
<PAGE>
19.
(vi) TENANT'S EXCLUSIVE USE. So long as the Premises are used for the
initial uses set forth in paragraph 18, no other tenant or occupant of the
Shopping Center shall be entitled to sell or rent (or rent to own) any of the
Products, subject only to rights granted any such tenants under the Prior
Leases.
(viii) PROHIBITED ACTIVITIES. Subject to the rights of tenants under the
Prior Leases, Landlord shall not operate or lease (or permit to be operated
or leased) any building or tenant space in the Shopping Center for use as:
(A) a bar, pub, nightclub, music hall or disco in which less than fifty
percent (50%) of its space or revenue is devoted to and derived from food
service;
(B) a bowling alley;
(C) a billiard or bingo parlor;
(D) a flea market;
(E) a massage parlor;
(F) a funeral home;
(G) a facility for the sale of paraphernalia for use with illicit drugs;
(H) a facility for the sale or display of pornographic material (as
determined by community standards for the area in which the Shopping Center is
located);
(I) an off-track betting parlor;
(J) a carnival, amusement park or circus;
(K) a gas station, car wash or auto repair or body shop, other than within
the building area designated as "Pad 1" on the Site Plan (the parties
specifically acknowledging that Tenant's car stereo installation facility is
not included in this prohibition (K));
(L) a facility for the sale of new or used motor vehicles, trailers or
mobile homes;
(M) a facility for any use which is illegal or dangerous, constitutes a
nuisance or is inconsistent with an integrated, community-oriented retail
and commercial shopping center;
(N) a skating rink;
<PAGE>
(0) an arcade, pinball or computer gameroom (provided that retail
facilities in the Shopping Center, exclusive of the Premises, may operate
no more than four (4) such electronic games incidentally to their primary
operations);
(P) service-oriented offices (such as, by way of example, medical
or employment offices, travel agencies, real estate agencies or dry
cleaning establishments) or other nonretail uses within 250 feet of the
Premises, except for offices and storage facilities incidental to a primary
retail operation;
(Q) a banquet hall, auditorium or other place of public assembly;
(R) a training or educational facility (including, without limitation,
a beauty school, barber college, reading room, school or other facility
catering primarily to students or trainees rather than customers);
(S) a theater of any kind; or
(T) a gymnasium, sport or health club or spa.
In addition to the foregoing, Landlord shall not operate, lease or
permit to be operated or leased any restaurant within any building on
Landlord's Premises, which is located within three hundred (300) feet of the
front entrance to the Building, subject, however, to the rights of tenants
under the Prior Leases. In addition, no auction, fire or
going-out-of-business sale shall be conducted in the Shopping Center,
subject, however, to the rights of tenants under the Prior Leases.
<PAGE>
EXHIBIT "F"
PERMITTED ENCUMBRANCES
A. Other Shopping Center occupants' exclusive uses and restrictive covenants
in Prior Leases prohibit the following uses of the Premises:
1. Any non-retail purpose (the following shall not be deemed non-retail:
barber shops, insurance agencies, travel agencies, medical, dental or
optometric facilities, beauty salons, banks, small loan offices, real estate
offices and gasoline service stations, and the following if incidental to
retailing: other offices, storage, repairs and alteration facilities).
2. A business selling home improvement items including, but not limited
to, lumber, building materials and/or garden supplies, except that other
stores may sell such items as an incidental part of their business. For the
purposes of this paragraph, such sales shall be "incidental" if they do not
exceed fifteen percent (15%) of the sales in such business.
3. A retail grocery, meat or produce store of any nature, provided that
this restriction shall not prohibit a specialty bake shop or a delicatessen.
4. Entertainment purposes, such as: cinema, theater, skating rink,
bowling alley, bar, tavern, discotheque, dance hall, amusement gallery, pool
hall, health club, gym, massage parlor or off-track betting facility.
5. For the renting, leasing, sale of any motor vehicle including, but
not limited to: operation of any dealership relating to motorcycles,
automobiles, trucks and recreational vehicles, including trailers.
6. A restaurant (fast-food or sit-down) within two hundred (200) feet
of any wall of the building designated "B" on the Site Plan, provided that
this provision shall not apply to an ice cream store, yogurt store or donut
shop. In addition, no restaurant shall be located within two hundred (200)
feet from the front entrance of the store on the building area designated "D"
on the Site Plan, nor shall any office, other than a travel agency or real
estate firm, neither being larger than two thousand (2,000) square feet, be
located within two hundred fifty (250) feet of said front entrance. In
addition, no training or educational facilities shall be located within two
hundred (200) feet of said front entrance.
7. A business, trade or profession which requires or has a license or
permit to conduct a pharmacy, or which employs or is required to employ a
registered or licensed pharmacist or the conduct of any store, business,
trade or profession which is called, labeled, named or is commonly known or
referred to as a "drug store," "pharmacy," or "apothecary."
8. A sit-down family-oriented buffet style restaurant.
9. A restaurant.
10. So long as an office supply store has not ceased to be operating on
the premises currently designated as Building F and G on the Site Plan for a
continuous period in excess of six (6) months (excepting any periods during
which remodeling or
1
<PAGE>
restoration work is being conducted with due diligence) the Premises may not
be operated as a store having as its primary business the sale of office
supplies, office equipment, office furniture and/or other office products and
related goods. This restriction, however, shall not be deemed to prohibit
Tenant, its subtenants, transferees, successors or assigns from using the
Premises in whole or in part, for the operation of a standard Circuit City
store or other similar store for the sale of consumer electronics, automotive
electronic products, household appliances and related goods, the
warehousing and servicing of same and/or sale and installation of car stereo,
audio and telephone systems and similar electronics equipment.
11. A theater, auditorium, meeting hall or other place of assemble; any
sports or entertainment facility within four hundred (400) feet of the
building designated "F" and "G" on the Site Plan; automobile sales or
repairs; bowling alley, pool hall or skating rink, bar serving alcoholic
beverages (except as an incident to a full kitchen restaurant operation);
funeral parlor; massage parlor, any type of karate, gymnasium, health club
or physical fitness facility within four hundred (400) feet of the building
designated "F" and "G" on the Site Plan; car wash; off-track betting
establishment; amusement or game room within two hundred (200) feet of the
building designated "F" and "G" on the Site Plan (excluding electronic games
incidental to the operation of a restaurant); a so-called "flea market" or
other operation for the sale of used goods (excluding antique stores), night
club, discotheque or dance hall; hotel or other lodging facilities; offices
(except incidental to a retail operation); school (including, without
limitation, trade school or class sessions of any nature whatsoever) within
two hundred (200) feet of said building designated "F" and "G"; gun range;
any business or use which emits offensive odors, fumes, dust or vapor, or
constitutes a public or private nuisance, or emits loud noise or sounds which
are objectionable, or creates a fire, explosive or other hazard;
manufacturing facility; warehousing (except incidental to a retail operation)
adult book store or similar store selling or exhibiting pornographic
materials as a substantial part of its business and which prohibits the
admission of minors; or a restaurant within two hundred (200) feet of said
building designated "F" and "G".
12. Any use other than a retail use.
13. Office use except (i) offices incidental to retail uses and (ii)
offices providing services to the general public and customarily found in
similar shopping centers, e.g., banking, finance services, real estate or
securities brokerage services, financial or tax-planning services,
accounting, insurance or legal services, optical, medical or dental services
or travel agencies.
B. The following uses of the Premises shall be prohibited throughout the
Lease Term:
1. The uses prohibited under the Prior Leases and set forth in Paragraphs
1-13 of Section A above, notwithstanding the expiration or termination or
amendment of any Prior Lease.
2. The sale of pet food, supplies, fish, birds and small animals and
grooming and veterinary services and related goods and services.
3. As an auditorium, meeting hall, school or other place of public
assembly, gymnasium or dance hall; for bingo or similar games of chance, or
as a massage parlor, video game arcade, bowling alley, skating rink, car
wash or car repair or car rental
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agency, night club or adult book or adult video store which prohibits the
admission of minors to the store.
C. Permitted Title Exceptions.
1. The exceptions set forth in the Preliminary Title Report for the
Shopping Center attached hereto as EXHIBIT "F-1".
NOTWITHSTANDING ANYTHING CONTAINED IN THIS EXHIBIT "F" TO THE CONTRARY,
NOTHING CONTAINED HEREIN SHALL BE CONSTRUED TO PROHIBIT THE EXERCISE OF THE
RIGHTS AND PRIVILEGES GRANTED TO THE TENANT UNDER THE LEASE, INCLUDING BUT
NOT LIMITED TO THE TENANT'S EXCLUSIVE USE RIGHTS SET FORTH IN PARAGRAPH
19(A)(VI) OF THE LEASE.
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FOOD 4 LESS
28. EXCLUSIVE. LESSOR covenants that it will not permit any
person other than the LESSEE to operate a retail grocery, meat,
or produce store of any nature in the Shopping Center of which
the premises are a part without first obtaining the LESSEE'S
prior written consent, so long as there shall be the operation of
a food supermarket containing not less than 40,000 square feet
within the premises, provided, however, nothing herein shall
result in the termination of such exclusive due to a temporary
closing for a reasonable period of time, including such a closing
as may occur for refurbishing, alterations, repairs in the event
of casualty, or transfer of ownership of the supermarket. Not-
withstanding the foregoing, LESSEE consents, in advance, to the
following uses:
A. a specialty bake shop;
B. a delicatessen.
<PAGE>
32. RESTRICTION ON USE. LESSOR and LESSEE each agree that
the following uses shall not be permitted within the Shopping
Center; including the demised premises:
A) For entertainment purposes, such as: cinema, theater,
skating rink, bowling alley, bar, tavern, discotheque,
dance hall, amusement gallery, pool hall, health club,
gym, massage parlor, or off-track betting facility;
B) For the renting, leasing, sale of any motor vehicle
including but not limited to: operation of any dealer-
ship relating to motorcycles, automobiles, trucks, and
recreational vehicles, including trailers;
C) For any non-retail purpose (the following are specifi-
cally recognized as not being non-retail: barber shops,
insurance agencies, travel agencies, medical, veteri-
nary, dental or optometric facilities, beauty salons,
banks, small loan offices, real estate offices and gaso-
line service stations, and the following, if incidental
to retailing: other offices, storage, repairs and
alteration facilities).
LESSOR agrees that, with respect to the real property which
comprises the Shopping Center as depicted in Exhibit "A", the
following additional restrictions will further apply:
A) No restaurant shall be located within 200 feet from the
front entrance of the premises;
B) No office other than a travel agency or real estate
firm, neither being larger than 2,000 square feet, shall
be located within 250 feet of the front entrance;
C) No training or educational facility shall be located
within 200 feet of the front entrance to the premises.
<PAGE>
LESSEE agrees that, with respect to the demised premises, in addition to
the uses restricted throughout the Shopper Center as before set forth, LESSEE
will not utilize the premises for a restaurant, bar-restaurant, training, or
educational facility, offices, sporting goods store, for a business whose
primary use is a yogurt shop, indoor ice cream shop, or for a pharmacy
(apothecary or drug store or super drug store) or for the purpose or
operating a home improvement center or for engaging in the sale of home
improvement items including, but not limited to, lumber, building materials,
indoor garden supplies, except that this restriction against the sale of home
improvement items shall not apply to the premises to the extent that sales of
such items are an incidental part of the business conducted within the
premises. For the purposes of this paragraph such sales shall be deemed
"incidental" if they do not exceed fifteen percent (15%) of the sales made
from the store located within the premises.
33. INITIAL USE AND RIGHT TO CLOSE STORE. LESSEE agrees that the
initial use of the premises shall be for the operation of a supermarket.
LESSOR agrees that nothing in this Lease shall be construed on compelling
LESSEE to operate any particular type of business or to keep the store in or
upon the premises open for business, and LESSEE shall have the privilege of
closing said store at any time, provided LESSEE shall continue to pay the
minimum monthly rental, additional rent, and other monetary obligations as set
forth in this Lease.
<PAGE>
OFFICE DEPOT
1.1.19 PERMITTED USES; NATURE OF TENANT'S BUSINESS: Tenant's
initial use of the Premises (the "Initial Use") shall be the operation of an
office supply and products store for any of the following sales and services:
office supplies, furniture, machines, and other office related equipment;
computer hardware, software and related equipment; art, architectural and
engineering supplies; photocopy, facsimile, printing and related services.
The Initial Use, together with any other lawful retail purposes (subject to
the Restricted Uses set forth on EXHIBIT E), shall hereinafter be referred to
as the "Permitted Uses". Once Tenant has opened for business in the Premises
for the Initial Use, it may thereafter use the Premises for any of the
Permitted Uses.
<PAGE>
EXHIBIT E
RESTRICTED USES AND PROHIBITED USES
A. RESTRICTED USES (restrictions upon the use of the Premises):
(1) OTHER TENANT EXCLUSIVES (restrictions for so long as the
corresponding exclusive (as set forth herein) contained in the respective
existing lease remains in effect):
(a) SEE THE ATTACHED EXHIBIT E-1
(b) CIRCUIT CITY EXCLUSIVE. So long as a consumer electronics
and/or household appliance store, once it has opened for
business, has not ceased to be operating on the premises
currently designated as Building "C" on the Site Plan for the
Shopping Center for a continuous period in excess of six (6)
months (excepting any periods during which remodeling or
restoration work is being conducted with due diligence), no
portion of the Premises may be used for a store having as
its primary business the sale of consumer electronics and
automotive electronics products, household appliances and
related goods, the warehousing and servicing of same,
and/or for the installation into motor vehicles of car
stereo, audio and telephone systems, and similar electronics,
equipment. The foregoing shall not be deemed to prohibit
Tenant, its subtenants, transferees, successors or assigns
from using the Premises, in whole or in part, for the
operation of a standard Office Depot retail facility or
other, similar store for the sale of office products
(inclusive of office electronics).
(2) RESTRICTIONS THROUGHOUT THE LEASE TERM: (a) all those prohibited
uses set forth in paragraphs B.2 and B.3 hereinbelow and in the attached Exhibit
E-2.
B. PROHIBITED USES (restrictions upon the use of the rest of the
Shopping Center):
1. So long as an office supply store has not ceased to be operating
in the Premises for a continuous period in excess of six (6) months
(excepting any periods during which remodeling or restoration work is being
conducted with due diligence), Landlord shall not permit any Occupants of the
Shopping Center, other than Tenant, to: (i) use more than one thousand
(1,000) square feet of floor area (in the aggregate) for the sale, leasing,
distribution or display of office supplies, including office furniture,
office fixtures, office machines and equipment, computers, computer hardware,
software and accessories, art supplies, architectural supplies, engineering
supplies, or (ii) be primarily engaged in the sale, leasing, distribution or
display or any of the items set forth in (i) above and/or photocopying
services, facsimile services or instant print shop services; provided that
nothing contained in this Paragraph B.1 shall be construed as prohibiting any
grocery supermarket occupying thirty-five thousand (35,000) square feet of
Leasable Area, or more; or any drug store occupying twenty-five thousand
(25,000) square feet of Leasable Area, or more; or any home improvement
center occupying ninety
E-1
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thousand (90,000) square feet of Leasable Area, or more, from selling,
leasing and/or displaying any of such types of goods and/or services from its
premises within the Shopping Center if the same are sold, leased and/or
displayed by such Occupant in a majority of its other similar stores in the
Northern California area. The foregoing restrictions in this Paragraph B.1
also shall not be applicable to (i) the sale, leasing and/or display of
computers, computer hardware, software and accessories for as long as
Computer Warehouse is operating in the Shopping Center a store containing
three thousand nine hundred (3,900) square feet of Leasable Areas or less,
together with up to fifteen hundred (1500) square feet of area used
exclusively for classroom purposes; (ii) a Postal Annex store with
photocopying services and facsimile services operating in the Shopping
Center; or (iii) the sale, leasing or display of art supplies and/or a store
primarily engaged in the sale of art/craft items, occupying one thousand five
hundred (1,500) square feet of Leasable Area, or less. In addition, the
foregoing shall not apply to Circuit City Stores, Inc., its subtenants,
transferees, successors and assigns ("Circuit City"), as to which the
provisions of Paragraph B.1.(a) shall apply.
(a) So long as an office supply store, once it has opened for
business, has not ceased to be operating on the Premises
for a continuous period in excess of six (6) months
(excepting any periods during which remodeling or restoration
work is being conducted with due diligence), no portion of the
parcel occupied by Circuit City, i.e., the parcel currently
designated as Building C on the Site Plan, may be used for a
store having as its primary business the sale of office
supplies, office equipment, office furniture and/or other
office products and related goods. The foregoing shall not be
deemed to prohibit Circuit City, its subtenants, transferees,
successors or assigns from using its premises in whole or in
part, for the operation of a standard Circuit City store or
other similar store for the sale of consumer electronics,
household appliances and/or car stereo systems, as described
in Subparagraph A.(1)(b) above.
2. Landlord shall not sell, lease or otherwise permit any portion of
the Shopping Center to be used or occupied for any of the following purposes:
a theater; auditorium, meeting hall or other place of assembly; any sports or
entertainment facility within four hundred feet (400') of the Premises;
automobile sales or repairs; bowling alley, pool hall or skating rink; bar
serving alcoholic beverages (except as an incident to a full kitchen
restaurant operation); funeral parlor; massage parlor; any type of karate,
gymnasium, health club or physical fitness facility within four hundred feet
(400') of the Premises; car wash; off track betting establishment; amusement
or game room with two hundred feet (200') of the Premises (excluding
electronic games incidental to the operation of a restaurant); a so called
"flea market" or other operation for the sale of used goods (excluding
antique stores); night club, discotheque or dance hall; hotel or other
lodging facilities; offices (except incidental to a retail operation); school
(including without limitation trade school or class sessions of any nature
whatsoever) within two hundred feet (200') of the Premises; gun range; any
business or use which omits offensive odors, fumes, dust or vapor, or
constitutes a public or private nuisance, or emits loud noice or sounds which
are objectionable, or creates a fire, explosive or other hazard; manufacturing
facility; warehousing (except incidental to a retail operation); adult book
store or similar store selling or exhibiting pornographic materials as a
substantial part of its business and which prohibits the admission of minors.
E-2
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3. Landlord shall not sell, lease, rent or permit any other premises
in the Shopping Center to be used or occupied for other than retail uses
customarily found in similar shopping centers in the state and county where
the Shopping Center is located.
4. Landlord covenants and agrees that there shall be no restaurants
within two hundred (200) feet of the Premises.
5. Landlord covenants and agrees that no portion of the Shopping
Center shall be used for offices excepting (i) offices incidental to retail
uses, and (ii) offices providing services to the general public and
customarily found in similar shopping centers (e.g. banking for finance
services, real estate or securities brokerage services, financial or tax
planning services, accounting, insurance or legal services, optical, medical
or dental services or travel agencies).
6. The Prohibited Uses set forth above shall be subject to the
existing leases of the present (as of the date of this Lease) Occupants of
the Shopping Center, as the same, from time to time, may be amended and/or
extended or renewed, but no such amendment shall change the definition of
"Prohibited Uses" as used in this Lease.
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EXHIBIT E-1
(i) The following restrictions in Landlord's Lease with Netco Foods,
Inc., a California corporation, dated May 25, 1988, for the premises
designated "D" on the Site Plan:
1. No restaurant shall be located within two hundred feet form
the entrance of the Premises;
2. No office other than a travel agency or real estate firm,
neither being larger than two thousand (2,000) square feet, shall
be located within two hundred fifty (250) feet of the front entrance;
3. No training or educational facility shall be located within
two hundred (200) feet of the front entrance to the Premises.
(ii) The following restrictions in Landlord's Lease with Home Club,
Inc., a Delaware corporation, dated June 6, 1988, as amended, for the
premises designated "H" on the Site Plan:
The building envelopes designated "Shops F" and "Shops G" on the
Lease Plan (Rev. 1) may not exceed a total of twenty-two thousand
(22,000) square feet of floor area and may not be used, in whole or
in part, for restaurant and/or bar or office purposes, other than
office use incidental to the operation of a retail business other-
wise permitted by the Lease.
"Shops F" and "Shops G" are defined in the subject Home Club, Inc.,
Lease as the Premises leased to Tenant by this Lease.
(iii) The following restriction in Landlord's Lease with HomeTown Buffet,
Inc., a Delaware corporation, dated May 15, 1992, for the premises designated
"A" on the Site Plan:
A restriction against the operation of a sit-down family-oriented
buffet style restaurant.
References to the above respective existing leases shall include any such
lease as amended, extended and/or renewed.
E-1
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EXHIBIT E-2
1. The following prohibited uses:
(a) For entertainment purposes such as: cinema, theater, skating
rink, bowling alley, bar, tavern, discotheque, dance hall, amusement
gallery, poolroom, pool hall, health club, gym, massage parlor or off-track
betting facility.
(b) For the repair, servicing, renting, leasing or sale of any motor
vehicle including, but not limited to: operation of a dealership relating
to motorcycles, automobiles, trucks and/or recreational vehicles, including
trailers.
(c) For any non-retail purpose, provided that this shall not be
construed to prohibit office, storage, repair and/or alteration facilities
incidental to retailing.
(d) For the operation of a hardware store or home improvement center
or for the purpose of selling home improvement items including, but not
limited to, lumber, building materials and/or garden supplies, unless such
sales are incidental to a permitted retail operation. For the purposes of
this paragraph (d), such sales shall be "incidental" if they do not exceed
fifteen percent (15%) of the sales in such store.
(e) For any business, trade or profession which requires or has a
license or permit to conduct a pharmacy, or which employs or is required to
employ a registered or licensed pharmacist, or for the conduct of any
store, business, trade or profession which is called, labelled, named or is
commonly known is referred to as a "drug store," "pharmacy" or "apothecary."
(f) As a retail grocery, meat or produce store of any nature or the
sale of fresh or frozen meat, produce, vegetables or dairy products.
(g) As a mortuary, church, book store or other establishment which
prohibits the admission of minors or those below a specified age such as
eighteen (18) years because of merchandise and/or activities explicitly
dealing with or depicting human sexuality, so-called head shops, video
stores, off-track betting parlors, pawn shops, junkyards, flea markets,
recycling facilities, massage parlors, car wash facilities, nightclubs,
dance halls, secondhand stores (other than "antique" stores), dry-cleaning
or laundry plants.
(h) For any use or purpose not customarily found in first-class
retail shopping centers, similar to the Shopping Center, in the Northern
California area.
(i) As a restaurant or food service use including, without
limitation, fast-food restaurants or for professional office or other
office uses, other than an office incidental to the operation of another
permitted use.
E-2-1
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(j) As a pet store or any other store whose primary business consists
of (i) providing animal grooming services, veterinary or veterinary
wellness clinic, (ii) selling pets, pet supplies or pet-related accessories
and/or (iii) providing any other service or product customarily available
at a veterinary wellness clinic, pet or supply store. For the purposes of
this paragraph, "primary business" shall mean a business which utilizes
more than twenty percent (20%) of its floor area for such uses or which
comprises more than twenty percent (20%) of its sales.
(k) For so long as a consumer electronics and/or household appliances
store has not ceased to be operating in the Shopping Center for a
continuous period in excess of six (6) months (excepting any periods during
which remodeling or any restoration work is being conducted with due
diligence), for the operation of a store (i) having as its primary
business the sale of consumer electronics and automotive electronics
products, household appliances and related goods; the warehousing and
servicing of the same and/or the installation into motor vehicles of car
stereo, audio and telephone systems and similar electronic equipment or
(ii) offering installation into motor vehicles of car stereo systems.
E-2-2
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HOME CLUB
4. (A) The Demised Premises may be used for any retail and/or
wholesale use and any other related uses permitted by any applicable laws,
provided that any use must be open for sales to the public.
(B) No premises in the Shopping Center, including the Demised
Premises, shall be used for any non-retail purposes (the following shall
not be deemed non-retail: barber shops, insurance agencies, travel
agencies, medical, dental or optometric facilities, beauty salons, banks,
small loan offices, real estate offices and gasoline service stations, and
the following, if incidental to retailing: other offices, storage, repairs
and alteration facilities).
(C) As long as any retail sales activity is conducted in the
Shopping Center no premises in the Shopping Center, including the Demised
Premises, shall be used for any entertainment purposes such as a cinema,
theater, skating rink, bowling alley, bar, discotheque, dance hall, amuse-
ment gallery, poolroom, health club, massage parlor, or off-track betting
facility, or for automobile, truck or recreational vehicle dealerships.
(D) Landlord agrees that so long as the Demised Premises are used
as a wholesale and/or retail home improvement store (or have ceased to be so
used within the past 12 months, or such longer period as may be reasonable
in the event of a casualty loss which requires additional time for
reconstruction), no other premises in the Shopping Center (except the Drug
Store, as defined and discussed below) shall be used for the purpose of
selling home improvement items, including, but not limited to, lumber,
building materials and/or garden supplies, except that other stores may
sell such items as an incidental part of their business. For the purposes
of this Paragraph 4(D), such sales shall be "incidental" if they do not
exceed 15% of the sales in such store. If a super drug store executes a
lease to operate in the Shopping Center ("Drug Store"), then such Drug
Store shall not use its premises for the purpose of operating a hardware or
home improvement store, so long as the Demised Premises are used as a
wholesale and/or retail home improvement store (or have ceased to be so
used within the past 12 months, or such longer period as may be reasonable
in the event of a casualty loss which requires additional time for
reconstruction). If Landlord shall grant any exclusive uses to other
tenants in the Shopping Center, then, except as provided in Paragraph 4(E)
below, such grants shall not be binding upon the Demised Premises and
Landlord shall expressly exempt the Demised Premises from such restrict-
ions.
(E) Notwithstanding the foregoing, the Demised Premises may not
be used for: (a) a food supermarket so long as a food supermarket containing
not less than 40,000 square feet is operating in the Shopping Center; or
(b) a drug store with a pharmacy which is required to employ a registered
or licensed pharmacist, so long as a drug store with a pharmacist contain-
ing not less than 20,000 square feet is operating in the Shopping Center
(or has ceased to operate within the past 12 months, or such longer
period as may be reasonable in the event of a casualty loss which
requires additional time for reconstruction).
<PAGE>
EXHIBIT G
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TENANT'S PROTOTYPE SIGNAGE AND PROPOSED ELEVATION DESIGNS
G-1
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[SOUTH EXTERIOR ELEVATION MAP]
<PAGE>
[EAST/NORTH EXTERIOR ELEVATION MAP]
<PAGE>
[FLOOR PLAN]
<PAGE>
EXHIBIT H
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT is entered into as of the_______day of___________, 19__,
between ___________________, a ______________________, with a place of
business at _____________________, _______________________,
_____________________("Mortgagee"), and Barnes & Noble Superstores, Inc., a
Delaware corporation, having an office at 122 Fifth Avenue, New York, New
York 10011 ("Tenant").
RECITALS
A. Mortgagee has made a loan to____________________________("Landlord")
in the original principal amount of $____________________ (the "Loan").
B. Mortgagee is the holder of a mortgage or deed of trust securing the
Loan (the "Mortgage") covering that certain parcel of land owned by Landlord
and described on Exhibit A attached hereto and made a part hereof, together
with the improvements erected thereon, commonly known as "___________________"
(the "Shopping Center").
C. By a certain Lease entered into between Landlord and Tenant, dated
as of___________________, 19__ (the "Lease"), Landlord leased to Tenant
certain premises within the Shopping Center, as outlined on Exhibit B
attached hereto and made a part hereof (the "Premises").
D. A copy of the Lease has been delivered to Mortgagee, the receipt of
which is hereby acknowledged.
E. The parties hereto desire to effect the subordination of the Lease to
the Mortgage and to provide for the non-disturbance of Tenant by the holder
of the Mortgage or any purchaser under a foreclosure or deed in lieu thereof.
AGREEMENT
In consideration of the premises and the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Mortgagee hereby consents to and approves the Lease and all of the
terms and conditions thereof.
2. Tenant covenants and agrees with Mortgagee that the Lease is hereby
made and shall continue hereafter to be subject and subordinate to the lien
of the Mortgage, and to all modifications and extensions thereof, with the
same force and effect as if the Mortgage had been executed and delivered
prior to the execution and delivery of the Lease and without regard to the
order of priority of recording the Mortgage, subject, however, to the
provisions of this Agreement.
3. Tenant certifies that the Lease is presently in full force and
effect and unmodified and Tenant as of this date has no knowledge of any
default, charge, lien or claim of offset under the Lease.
4. Mortgagee agrees that, so long as Tenant is not in default under the
Lease beyond any applicable cure period provided for in the Lease:
(a) Tenant shall not be named or joined as a party or otherwise in
any suit, action or proceeding for foreclosure by the Mortgagee or to
enforce; any rights under the Mortgage or the Loan
H-1
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(unless Tenant must be named or joined as a party in order for Mortgagee to
pursue such suit, action or proceeding, in which event Mortgagee and Tenant
shall enter into a new lease upon the same terms and conditions as were
contained in the Lease).
(b) The possession by Tenant of the Premises and Tenant's rights
under the Lease shall not be disturbed, affected or impaired by (i) any suit,
action or proceeding under the Mortgage or the Loan or for foreclosure under
the Mortgage, or any other enforcement of any rights under the Mortgage or
any other documents pertaining to the Loan, (ii) any judicial or non-judicial
foreclosure, sale or execution of the Premises or the Shopping Center, or any
deed given in lieu of foreclosure, or (iii) any default under the Mortgage or
the Loan.
(c) All condemnation awards and insurance proceeds paid or payable
with respect to the Premises or any other part of the Shopping Center and
received by Mortgagee shall be applied and paid in the manner set forth in
the Lease.
(d) Neither the Mortgage nor any other security instrument executed
in connection with the Loan shall cover or be construed as subjecting in any
manner to the lien thereof any trade fixtures, signs or other personal
property at any time furnished or installed by or for Tenant in or on the
Premises, except to the extent of any interest of Landlord in and to same.
5. If Mortgagee or any future holder of the Mortgage or any other
transferee under the Mortgage shall become the owner of the Shopping Center
or any part thereof by reason of foreclosure of the Mortgage, or if
the Shopping Center or any part thereof shall be sold as a result of any
action or proceeding to foreclose the Mortgage, or by transfer of ownership
by deed given in lieu of foreclosure, the Lease shall continue in full force
and effect, without necessity for executing any new lease, as a direct lease
between Tenant and the then owner of the Shopping Center as "Landlord" under
the Lease, upon all of the same terms, covenants and provisions contained in
the Lease, and in such event:
(a) Tenant shall be bound to such new owner under all of the terms,
covenants and provisions of the Lease for the remainder of the term thereof
(including also any extension periods, if Tenant elects or has elected to
exercise its option to extend the term) and Tenant hereby agrees to attorn to
such new owner and to recognize such new owner as "Landlord" under the Lease;
and
(b) Such new owner shall be bound to Tenant under and hereby
assumes all of the terms, covenants and provisions of the Lease for the
remainder of the term thereof (including also any extension periods,
if Tenant elects or has elected to exercise its option to extend the term),
and Tenant shall, from and after the date such new owner succeeds to the
interest of "Landlord" under the Lease, have the same remedies against such
new owner for the breach of any covenant contained in the Lease; provided,
however, that such new owner shall not (i) be bound by any rent or additional
rent which Tenant might have paid for more than one month in advance to any
prior landlord (including Landlord), or (ii) be personally liable for any
breach of the Lease by or other act or omission of any prior landlord
(including Landlord) or (iii) be bound by any amendment or modification of
the Lease made without Mortgagee's consent which would reduce fixed annual
rent or any other monetary obligation of Tenant under the Lease or (iv) be
subject to any offsets or defenses which Tenant might have against any prior
landlord (including Landlord), except for any offsets against rents or other
charges payable by Tenant under the Lease specifically permitted under the
Lease based upon a default by Landlord (provided that Tenant shall have
provided the notice and opportunity to cure to Mortgagee provided for in
Paragraph 26.4 of the Lease).
6. Tenant agrees to provide Mortgagee, and the successors and assigns
of Mortgagee of which Tenant has received written notice, with notice of any
breach or default by Landlord which would give rise to the right of Tenant to
terminate or offset any amounts due Landlord under the Lease (it being
understood that a right of offset expressly set forth in the Lease shall not
be affected by the aforesaid notice requirement except as provided in 5(b)(iv)
above), and, thereafter, the opportunity to cure such breach or default by
Landlord as provided in Paragraph 26.4 of the Lease. Mortgagee shall
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<PAGE>
have no obligation to cure (and shall have no liability or obligation for not
curing) any breach or default by Landlord, except (i) to the extent that
Mortgagee agrees or undertakes otherwise in writing or (ii) if such breach or
default continues into the period during which Mortgagee or such new owner
has possession or control of the Premises.
7. Any notices or communications given under this Agreement shall be in
writing and shall be deemed given on the earlier of actual receipt or three
(3) days after deposit in the U.S. Mail, by registered or certified mail,
return receipt requested, postage prepaid, at the respective addresses set
forth above, or at such other address as the party entitled to notice may
designate by written notice as provided herein.
8. This Agreement shall bind and inure to the benefit the parties
hereto and their respective successors and assigns.
9. This Agreement contains the entire agreement between the parties and
cannot be changed, modified, waived or cancelled except by an agreement in
writing executed by the parties against whom enforcement of such
modification, change, waiver or cancellation is sought.
10. This Agreement and the covenants contained herein shall run with and
shall bind the land on which the Shopping Center is located.
11. The term "Mortgagee," as used herein, shall include any person or
entity succeeding to Landlord's interests in and to the Premises by reason of
any power of sale or judicial foreclosure proceedings under the Mortgage or
by deed of lieu of foreclosure under the Mortgage. The term "Mortgage," as
used herein, shall mean the Mortgage, as the same may from time to time be
amended and/or modified.
12. To the extent that the Lease shall entitle Tenant to notice of the
existence of any mortgage or deed of trust, this Agreement shall constitute
such notice to Tenant with respect to the Mortgage.
13. Tenant shall not permit Tenant's leasehold estate under the Lease to
become subordinate to the lien of any deed of trust or other security
instrument made or created by Landlord, other than the Mortgage, unless the
holder of such deed of trust or other security instrument
H-3
<PAGE>
delivers a non-disturbance agreement to Tenant in commercially reasonable
form (subject, with respect to Landlord, to the terms and conditions of the
Mortgage and/or any other loan document executed by Landlord in connection
with the loan secured by the Mortgage).
EXECUTED as of the date first written above.
MORTGAGEE:
___________________________________
By:________________________________
Name:______________________________
Title:_____________________________
TENANT:
BARNES & NOBLE SUPERSTORES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
H-4
<PAGE>
THE STATE OF Section
COUNTY OF ________________ Section
On_______________________________ before me,
Date Name and Title of Officer
personally appeared
Name of Signer(s)
[ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory
evidence to be the person(s) whose
name(s) is/are subscribed to the
within instrument and acknowledged
to me that he/she/they executed
same in his/her/their authorized
capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s), or the
entity upon behalf of which the
person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
Signature of Notary Public
H-5
<PAGE>
THE STATE OF Section
COUNTY OF ________________ Section
On_______________________________ before me,
Date Name and Title of Officer
personally appeared
Name of Signer(s)
[ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory
evidence to be the person(s) whose
name(s) is/are subscribed to the
within instrument and acknowledged
to me that he/she/they executed
same in his/her/their authorized
capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s), or the
entity upon behalf of which the
person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
Signature of Notary Public
H-6
<PAGE>
EXHIBIT I
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE is entered into as of the day of
, 1996, by and between Chico Crossroads Center, a
California limited partnership ("Landlord"), and Barnes & Noble Superstores,
Inc., a Delaware corporation ("Tenant").
1. Pursuant to a Lease Agreement (the "Lease") executed by Landlord and
Tenant, dated , 1996, Landlord has leased to Tenant certain Premises which
are part of a Shopping Center constructed or to be constructed on the property
described in Exhibit A attached hereto, together with all of Landlord's
appurtenant rights, privileges and easements.
2. The term of the Lease shall commence on the Commencement Date set
forth in the Lease and shall expire upon the expiration of the fifteenth
(15th) Lease Year as determined by the provisions of the Lease.
3. Tenant has an option to extend the term of the Lease for three (3)
periods of five (5) years each, on the same terms and conditions as stated in
the Lease.
4. This Memorandum of Lease is subject to all of the terms, conditions
and understandings set forth in the Lease, which are incorporated herein by
reference and made a part hereof, as though copied verbatim herein. In the
event of a conflict between the terms and conditions of this Memorandum of
Lease and the terms and conditions of the Lease, the terms and conditions of
the Lease shall prevail.
5. Landlord agrees that, during the term of the Lease, it will not
construct or permit to be constructed any building, sign, tower or other
structure or improvement, or, unless required by law, plant any tree or other
growing plant (except replacements of existing trees or plants, provided same
will not exceed nor is reasonably anticipated to exceed four feet in height),
or make any other change whatsoever in the area depicted as the No Build Area
on Exhibit B of the Lease except as expressly permitted under the Lease.
6. Except with respect to the premises under leases with Homebase, Food
4 Less, Circuit City Office Depot and Hometown Buffet to the extent permitted
thereby, Landlord shall not lease or permit the use of space in the Shopping
Center for the following: (i) any bowling alley; (ii) any arcade; (iii) any
tavern or bar within five hundred (500) feet of the Premises, except to the
extent incidental to a restaurant operated primarily for on-premises
consumption; (iv) any health club, spa or gymnasium; (v) any night club or
discotheque; (vi) any second hand or surplus store; (vii) any mobile home
park or trailer court; (viii) any dumping, disposing, incineration or
reduction of garbage (exclusive of appropriately screened dumpsters located
in the rear of any building); (ix) any fire sale, bankruptcy sale (unless
pursuant to a court order) or auction house operation, (x) any central
laundry or dry cleaning plant or laundromat within five hundred (500) feet of
the Premises (except that this prohibition shall not be applicable to on-site
service provided solely for pickup and delivery by the ultimate consumer,
including nominal supporting facilities); (xi) any automobile, truck, trailer
or R.V. sales, leasing, display or repair; (xii) any skating rink; (xiii) any
living quarters, sleeping apartments or lodging rooms; (xiv) any veterinary
hospital, animal raising facilities or pet shop (except that this prohibition
only prohibits a pet shop if it is adjacent to the Premises and excludes the
existing pet store at the Shopping Center and certain replacements thereof);
(xv) any mortuary; (xvi) any establishment selling or exhibiting pornographic
materials; (xvii) except for Building A indicated on the site plan annexed to
the Lease, any restaurant within three hundred feet (300') of the Premises;
(xviii) any movie theater within three hundred feet (300') of the Premises;
(xix) any separately demised newsstand; or (xx) any use which is a public or
private nuisance.
7. Except as may be permitted by certain existing leases set forth in
the Lease and except as may be permitted by certain future leases to Major
Replacement Tenants, to the extent such leases contain Permitted Future
Exclusives (as such terms are defined in the Lease), Landlord, and its
successors and
I-1
<PAGE>
assigns, shall not operate or permit under any circumstances to be operated
within the Shopping Center any other store selling or displaying for sale
books, books on tape and books on other media, magazines, periodicals,
computer software or computer games, or any other coffee bar of coffee shop
in which coffee, similar beverages and products incidental thereto are the
primary items offered for sale. The incidental sale of such items in
connection with the overall business of another operator or tenant shall not
be deemed a violation of this Paragraph 7. As used herein, "incidental sale"
shall mean less than fifty (50) linear feet of shelf space of such operator's
or tenant's sales area is devoted, in the aggregate, to the sale and/or
display of the aforesaid items, except with respect to Major Replacement
Tenants for which incidental sale shall mean less than ten percent of floor
area, but in no event greater than one thousand (1,000) square feet (subject
to an exclusion on limitations on computer software and computer games for
Major Replacement Tenants for which the sale or rental of computer software
and computer games is not their primary use).
8. Landlord hereby gives and grants to Tenant during the term of the
Lease, for the benefit of Tenant and Tenant's subtenants, licensees and
concessionaires, and their respective employees, contractors, customers,
invitees and deliverymen, the right to use all of the Common Areas (as
defined in the Lease), in common with Landlord and all other tenants and
occupants of the Shopping Center and their respective employees, contractors,
assigns, customers, invitees and deliverymen. The rights hereby granted with
respect to the Common Areas shall run with and bind the Shopping Center and
the land on which it is located, shall be binding upon the Landlord and
Landlord's successors in title to all or any part of the Shopping Center, and
shall constitute an irrevocable, nonexclusive easement appurtenant to the
Premises for the benefit of, and shall be enforceable by, Tenant and its
successors and assigns throughout the term of the Lease.
EXECUTED as of the date first written above.
LANDLORD:
CHICO CROSSROADS CENTER
By:______________________________
Name:
Title:
TENANT:
BARNES & NOBLE SUPERSTORES, INC.
By:______________________________
Name: Mitchell S. Klipper
Title: Executive Vice President
I-2
<PAGE>
THE STATE OF CALIFORNIA Section
COUNTY OF__________________Section
On_______________________________ before me,
Date Name and Title of Officer
personally appeared
Name of Signer(s)
[ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory
evidence to be the person(s) whose
name(s) is/are subscribed to the
within instrument and acknowledged
to me that he/she/they executed
same in his/her/their authorized
capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s), or the
entity upon behalf of which the
person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
Signature of Notary Public
I-3
<PAGE>
THE STATE OF NEW YORK Section
COUNTY OF__________________Section
On_______________________________ before me,
Date Name and Title of Officer
personally appeared
Name of Signer(s)
[ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory
evidence to be the person(s) whose
name(s) is/are subscribed to the
within instrument and acknowledged
to me that he/she/they executed
same in his/her/their authorized
capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s), or the
entity upon behalf of which the
person(s) acted, executed the
instrument.
WITNESS my hand and official seal.
Signature of Notary Public
I-4
<PAGE>
ASSIGNMENT AGREEMENT
THIS AGREEMENT made as of the day of January, 1997.
B E T W E E N:
BASIC ACQUISITIONS, INC.,
a corporation incorporated under the laws of the State of Delaware,
(hereinafter called the "ASSIGNOR")
OF THE FIRST PART;
- and -
BASIC U.S. REIT, INC.,
a corporation incorporation under the laws of the State of Maryland,
(hereinafter called the "ASSIGNEE")
OF THE SECOND PART.
WHEREAS pursuant to a purchase and sale agreement made as of the 8th day of
May, 1996, between the Assignor and Chico Crossroads Center Ltd., as amended
July 9, 1996 and further amended October 3, 1996, the Assignor agreed to acquire
the shopping center known as "CHICO CROSSROADS CENTER" in Chico California, more
particularly described on Exhibit "A" attached hereto and incorporated herein;
AND WHEREAS effective the date hereof (the "EFFECTIVE DATE"), the Assignor
agreed to grant, assign, transfer and set over to the Assignee all of its right,
title and interest in, to and under the Agreement;
AND WHEREAS Chico Crossroads Center, Ltd. has consented to such assignment;
AND WHEREAS the parties hereto wish to execute this agreement to evidence
such assignment;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
Two Dollars ($2) now paid by the Assignee to the Assignor and other good and
valuable consideration (the receipt and sufficiency of which is hereby
acknowledged) the parties hereto agree as follows:
1. The Assignor, as of the Effective Date, hereby assigns, transfers and sets
over to the Assignee, all of its right, title and interest in, to and under
the Agreement, together with the benefit of each and every of the rights,
covenants and other provisions (the "RIGHTS") therein contained, in each
case, without representation, warranty or recourse of any kind, to have and
to hold the same and all right, title and interest of the Assignor therein
and thereto unto and to the use of the Assignee, its successors and
permitted assigns, with full power to the Assignee to take all such
measures for the enjoyment of the Rights as the Assignor might itself take.
<PAGE>
2. The Assignor covenants and agrees with the Assignee, its successors and
permitted assigns and at the Assignee's sole cost and expense, that it will
from time to time and at all times hereafter, upon every reasonable request
of the Assignee, its successors and permitted assigns or any of them, make,
do and execute and cause to be made, done and executed all such further
acts, deeds or assurances, including all documents reasonably necessary to
allow the Assignee to perform the Agreement, as may be reasonable required
by the Assignee, its successors and permitted assigns, whether for
effectually and completely vesting in the Assignee, its successors and
permitted assigns the Agreement and the Rights or otherwise.
3. The Assignee hereby assumes and agrees to perform all of the obligations of
the Assignor arising under the Agreement and shall indemnify and save
harmless the Assignor from and against any claims, charges, expenses,
costs, demands and liabilities whatsoever arising out of or in connection
with the performance of the Agreement.
4. This agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement on the date first above written.
BASIC ACQUISITIONS, INC.
By: Carl Maynard
Its:
---------------------
BASIC U.S. REIT, INC.
By: Ronald L. Bernbaum
Its: Chairman
By: Aran Kwinta
Its: Secretary
2
<PAGE>
ASSIGNMENT AGREEMENT
THIS AGREEMENT made as of the day of January, 1997.
B E T W E E N:
BASIC ACQUISITIONS, INC.,
a corporation incorporated under the laws of the State of Delaware,
(hereinafter called the "ASSIGNOR")
OF THE FIRST PART;
- and -
BASIC U.S. REIT, INC.,
a corporation incorporation under the laws of the State of Maryland,
(hereinafter called the "ASSIGNEE")
OF THE SECOND PART.
WHEREAS pursuant to a purchase and sale agreement made as of the 24th day
of July, 1996, between the Assignor and Miami Gardens Associates, as amended
September 5, 1996 and September 9, 1996, the Assignor agreed to acquire the
shopping center known as "GARDENS SQUARE" in Dade County, Florida;
AND WHEREAS effective the date hereof (the "EFFECTIVE DATE"), the Assignor
agreed to grant, assign, transfer and set over to the Assignee all of its right,
title and interest in, to and under the Agreement;
AND WHEREAS Miami Gardens Associates has consented to such assignment;
AND WHEREAS the parties hereto wish to execute this agreement to evidence
such assignment;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
Two Dollars ($2) now paid by the Assignee to the Assignor and other good and
valuable consideration (the receipt and sufficiency of which is hereby
acknowledged) the parties hereto agree as follows:
1. The Assignor as of the Effective Date, hereby assigns, transfers and sets
over to the Assignee, all of its right, title and interest in, to and under
the Agreement, together with the benefit of each and every of the rights,
covenants and other provisions (the "RIGHTS") therein contained, in each
case, without representation, warranty or recourse of any kind, to have and
to hold the same and all right, title and interest of the Assignor therein
and thereto unto and to the use of the Assignee, its successors and
permitted assigns, with full power to the Assignee to take all such
measures for the enjoyment of the Rights as the Assignor might itself take.
<PAGE>
2. The Assignor covenants and agrees with the Assignee, its successors and
permitted assigns, that it will from time to time and at all times
hereafter, upon every reasonable request of the Assignee, its successors
and permitted assigns or any of them, make, do and execute and cause to be
made, done and executed all such further acts, deeds or assurances,
including all documents reasonably necessary to allow the Assignee to
perform the Agreement, as may be reasonable required by the Assignee, its
successors and permitted assigns, whether for effectually and completely
vesting in the Assignee, its successors and permitted assigns the Agreement
and the Rights or otherwise.
3. The Assignee hereby assumes and agrees to perform all of the obligations of
the Assignor arising under the Agreement and shall indemnify and save
harmless the Assignor from and against any claims, charges, expenses,
costs, demands and liabilities whatsoever arising out of or in connection
with the performance of the Agreement.
4. This agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement on
the date first above written.
BASIC ACQUISITIONS, INC.
By: Carl Maynard
Its:
---------------------
BASIC U.S. REIT, INC.
By: Ronald L. Bernbaum
Its: Chairman
By: Aran Kwinta
Its: Secretary
2
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
amendment to the Registration Statement on Form S-11 of our reports dated
September 23, 1996 relating to the statements of revenue and certain expenses
of Chico Crossroads Center Ltd. and Miami Gardens Associates, and our report
dated November 22, 1996 relating to the balance sheet of Basic U.S. REIT, Inc.,
which appear in such prospectus. We also consent to the reference to us
under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
New York, New York
November 22, 1996
