<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: MARCH 31, 1999 Commission File Number: 0-23503
EXCEL LEGACY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0781747
- ------------------------------ -----------------------------------------
(State of incorporation) (IRS Employer Identification Number)
16955 VIA DEL CAMPO, SUITE 240, SAN DIEGO, CALIFORNIA 92127
- --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number: (619) 675-9400
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
Class Outstanding at May 7, 1999
- ------------------------------ ----------------------------
Common Stock, $.01 par value 33,457,804
<PAGE> 2
EXCEL LEGACY CORPORATION
INDEX
FORM 10-Q
----------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Balance Sheets (Unaudited)
March 31, 1999
December 31, 1998...............................................................3
Consolidated Statements of Income (Unaudited)
Three Months Ended March 31, 1999 and 1998......................................4
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
Three Months Ended March 31, 1999 and 1998......................................5
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 1999 and 1998......................................6
Notes to Financial Statements (Unaudited)..........................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...........................................14
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................19
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders...........................20
Item 5. Other Information.............................................................20
Item 6. Exhibits and Reports on Form 8-K..............................................21
</TABLE>
2
<PAGE> 3
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(in thousands, except share amounts)
----------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
ASSETS
Real estate:
Land $ 54,915 $ 54,915
Buildings 137,685 136,118
Leasehold interests 2,351 2,351
Accumulated depreciation (3,503) (2,506)
--------- ---------
Net real estate 191,448 190,878
Cash 1,775 1,387
Accounts receivable, less allowance for bad debts of $104 and
and $14 at March 31, 1999 and December 31, 1998, respectively 169 204
Notes receivable 23,239 23,204
Investment in partnerships 12,829 11,423
Interest receivable 6,187 5,341
Pre-development costs 19,302 13,569
Other assets 9,043 9,087
Deferred tax asset 6,146 6,203
--------- ---------
$ 270,138 $ 261,296
========= ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage and notes payable $ 99,694 $ 90,986
Accounts payable and accrued liabilities 2,151 2,604
Other liabilities 631 220
--------- ---------
Total liabilities 102,476 93,810
--------- ---------
Commitments and contingencies -- --
Minority interests 848 846
--------- ---------
Stockholders' equity:
Series B Preferred stock, $.01 par value, 50,000,000 shares
authorized, 21,281,000 shares issued and outstanding 213 213
Common stock, $.01 par value, 150,000,000 shares authorized,
33,457,804 shares issued and outstanding 335 335
Additional paid-in capital 174,508 174,508
Retained earnings 2,630 2,456
Notes receivable from affiliates for common shares (10,872) (10,872)
--------- ---------
Total stockholders' equity 166,814 166,640
--------- ---------
$ 270,138 $ 261,296
========= =========
</TABLE>
The accompanying notes are an integral part
of the financial statements
3
<PAGE> 4
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
----------
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Revenue:
Rental $3,312 --
Operating income 4,896 --
Interest income 858 --
Partnership income and other revenues 151 --
------ ------
Total revenue 9,217 --
------ ------
Operating expenses:
Interest 2,025 66
Depreciation and amortization 1,196 47
Property operating expenses 482 --
Operating expenses 2,511 --
General and administrative 2,690 3
------ ------
Total operating expenses 8,904 116
------ ------
Income (loss) before income taxes 313 (116)
Provision (benefit) for income taxes 139 (46)
------ ------
Net income (loss) $ 174 (70)
====== ======
Basic net income per share $ 0.01 $ --
====== ======
Diluted net income per share $ 0.00 $ --
====== ======
</TABLE>
The accompanying notes are an integral part
of the financial statements
4
<PAGE> 5
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
----------
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL AFFILIATE TOTAL
------------------- ------------------- PAID-IN RETAINED NOTES STOCKHOLDERS'
NUMBER AMOUNT NUMBER AMOUNT CAPITAL EARNINGS RECEIVABLE EQUITY
---------- ------ ---------- ------ --------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended March 31, 1999:
Balance at January 1, 1999 21,281,000 $213 33,457,804 $335 $ 174,508 $ 2,456 $(10,872) $ 166,640
Net income -- -- -- -- -- 174 -- 174
---------- ---- ---------- ---- --------- ------- -------- ---------
Balance at March 31, 1999 21,281,000 $213 33,457,804 $ 33 5$174,508 $ 2,630 $(10,872) $ 166,814
========== ==== ========== ==== ========= ======= ======== =========
Three Months Ended March 31, 1998:
Balance at January 1, 1998 -- $ -- 100 $ -- $ -- $ -- $ -- $ --
Issuance of preferred stock 21,281,000 213 -- -- 106,192 -- -- 106,405
Issuance of common stock -- -- 32,607,704 326 67,469 -- -- 67,795
Notes receivable from officers
for common shares -- -- -- -- -- -- (10,872) (10,872)
Issuance costs -- -- -- -- (2,697) -- -- (2,697)
Net income -- -- -- -- -- (70) -- (70)
---------- ---- ---------- ---- --------- ------- -------- ---------
Balance at March 31, 1998 21,281,000 $213 32,607,804 $326 $ 170,964 $ (70) $(10,872) $ 160,561
========== ==== ========== ==== ========= ======= ======== =========
</TABLE>
The accompanying notes are an integral part
of the financial statements
5
<PAGE> 6
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(IN THOUSANDS)
----------
<TABLE>
<CAPTION>
1999 1998
------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 174 $ (70)
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 1,196 47
Provision for bad debts 72 --
Minority interest in partnerships 2 --
Changes in accounts receivable and other assets (1,073) --
Changes in accounts payable and other liabilities 15 90
------- ---------
Net provided by operating activities 386 67
------- ---------
Cash flows from investing activities:
Real estate acquired and construction costs paid (973) (18,571)
Investment in partnership (1,406) --
Pre-development costs paid (5,733) --
------- ---------
Net cash used in investing activities (8,112) (18,571)
------- ---------
Cash flows from financing activities:
Proceeds from issuance of preferred stock -- 106,405
Proceeds from issuance of common stock -- 11,104
Issuance costs paid -- (2,697)
Principal payments of mortgage payable (736) --
Borrowings from parent company -- 21,191
Borrowings from notes 8,850 --
------- ---------
Net cash provided by financing activities 8,114 136,003
------- ---------
Net increase in cash 388 117,499
Cash at January 1 1,387 --
------- ---------
Cash at March 31 $ 1,775 $ 117,499
======= =========
</TABLE>
The accompanying notes are an integral part
of the financial statements
6
<PAGE> 7
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statements reflect all adjustments of a recurring nature
which are, in the opinion of management, necessary for a fair presentation
of the financial statements. No adjustments were necessary which were not
of a normal recurring nature. Certain footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to the quarterly
reporting rules of the Securities and Exchange Commission. These financial
statements should be read in conjunction with the consolidated financial
statements and accompanying footnotes included in the Company's July 31,
1998 Form 10-K.
ORGANIZATION
Excel Legacy Corporation (the "Company"), a Delaware corporation was formed
on November 17, 1997. The Company was originally a wholly-owned subsidiary
of Excel Realty Trust, Inc. ("Excel"), a Maryland corporation and a
self-administered, self-managed real estate investment trust ("REIT"), now
known as New Plan Excel Realty Trust, Inc. On March 31, 1998, Excel
effected a spin-off of the Company through a special dividend to the
holders of common stock of Excel of all of the outstanding common stock of
the Company held by Excel (the "Spin-off").
The Company was formed to pursue opportunities available to those investors
that are not restricted by the federal income tax laws governing REITs or
influenced by Excel's investment and leverage guidelines. In connection
with the Spin-off, certain real properties, notes receivable and related
assets and liabilities were transferred to the Company from Excel (Note 2).
Upon completion of the Spin-off, the Company ceased to be a wholly-owned
subsidiary of Excel and began operating as an independent public company.
CHANGE IN FISCAL YEAR
By unanimous consent dated December 11, 1998, the Board of Directors of the
Company adopted a fiscal year-end of December 31, beginning with a short
fiscal year ending on December 31, 1998. The Company's previous fiscal
year-end was July 31.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries and all significantly owned
affiliates. The Company uses the equity method of accounting to account for
its investment in a Nova Scotia Company and the Company uses the cost
method to account for its investment in EnterCitement LLC.
REAL ESTATE
Certain real estate assets were transferred to the Company from Excel and
recorded at Excel's cost. Other real estate assets acquired subsequent to
the Spin-off were recorded at the Company's cost. Depreciation is computed
using the straight-line method over estimated useful lives of 40 years for
buildings. Expenditures for maintenance and repairs are charged to expense
as incurred and significant renovations are capitalized.
7
<PAGE> 8
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
The Company assesses whether there has been a permanent impairment in the
value of its real estate by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include a lessee's
ability to pay rent under the terms of the lease. If a property is leased
at significantly lower rent, the Company may recognize an impairment loss
if the income stream is not sufficient to recover its investment.
PRE-DEVELOPMENT COSTS
Pre-development costs that are directly related to specific construction
projects are capitalized as incurred. The Company expenses these costs to
the extent they are unrecoverable or it is determined that the related
project will not be pursued.
MANAGEMENT CONTRACTS
Management contracts are recorded at cost and amortized over a period of
seven years.
INCOME TAXES
The Company uses the asset and liability method to account for income
taxes. Deferred income tax assets have been recorded to reflect the future
tax benefit of assets acquired from Excel that were recorded at Excel's
cost for book purposes and fair market value for tax purposes.
DEFERRED LEASING AND LOAN ACQUISITION COSTS
Costs incurred in obtaining tenant leases and long-term financing are
amortized to other property expense and interest expense, respectively, on
the straight-line method over the terms of the related leases or debt
agreements.
REVENUE RECOGNITION
Base rental revenue is recognized on the straight-line basis, which
averages annual minimum rents over the terms of the leases. Certain of the
leases provide for additional rental revenue by way of percentage rents to
be paid based upon the level of sales achieved by the lessee.
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 assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
8
<PAGE> 9
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
2. SPIN-OFF:
On March 31, 1998, Excel transferred certain real estate assets to the
Company in exchange for 23,412,580 common shares of the Company, assumption
of mortgage debt by the Company, and issuance of a note payable to Excel
from the Company which was subsequently repaid. The Spin-off took place
through a dividend distribution to Excel's common stockholders of all the
Company's common stock (23,412,580 shares) held by Excel. The distribution
consisted of one share of the Company's common stock for each share of
Excel's common stock held on the record date of March 2, 1998. The fair
market value of the distribution was approximately $55,956,000 or $2.39 per
share. While the Company has recorded the acquisition of assets and
liabilities at fair market value for tax purposes, the Company has recorded
for book purposes, the assets and liabilities at Excel's original book
value. The tax effect of the difference between fair market value and book
value was $6,528,000 and was recorded as a deferred tax asset.
3. MORTGAGES AND NOTES PAYABLE:
The Company had $99,694,000 in mortgage and notes payable outstanding at
March 31, 1999 at 7.37% to 8.75% with an average interest rate of 7.87% and
average maturity of approximately 12 years. The mortgages and notes are due
on various dates through 2018 and monthly payments approximate $945,000.
Except for the unsecured revolving credit facility below, the mortgages and
notes are collateralized by real estate and an assignment of rents.
The Company has a revolving credit facility of $20,000,000 from BankBoston,
N.A. (the "Credit Facility") which carries an interest rate of LIBOR plus
2.5% (7.5% at March 31, 1999). The Credit Facility expires in October 1999.
Through March 31, 1999, approximately $13,300,000 was outstanding under the
Credit Facility.
The principal payments required to be made on mortgages and notes payable
over the next five years are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1999 (remaining nine months) $ 15,559
2000 4,889
2001 4,125
2002 4,461
2003 4,826
Thereafter 65,834
-------
$ 99,694
========
</TABLE>
9
<PAGE> 10
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
4. INCOME TAXES:
At March 31, 1999, the Company had a net deferred tax asset of $6,146,000.
The deferred tax asset primarily relates to the difference between fair
market value and book value of the real estate assets acquired from Excel
in connection with the Spin-off (Note 2) and is non-current. The offsetting
portion of the deferred asset relates to timing differences in recognizing
revenue and expenses for tax purposes through operations of the Company. No
valuation allowance has been provided against the deferred tax asset as the
Company believes future taxable income is more likely than not. The
provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FEDERAL STATE
--------- ---------
<S> <C> <C>
Current payable $ 62,000 $ 20,000
Deferred tax expense 54,000 3,000
-------- --------
Provision for income taxes $ 116,000 $ 23,000
========= =========
</TABLE>
5. CAPITAL STOCK:
SERIES B PREFERRED SHARES
At March 31, 1999, the Company had 21,281,000 shares of Series B Preferred
Stock outstanding (the "Preferred B Shares"). Holders of the Preferred B
Shares are entitled to receive, when, as and if declared by the Board of
Directors, cumulative cash dividends payable in an amount per share equal
to the cash dividends, if any, on the shares of common stock into which the
Preferred B Shares are convertible. Holders of the Preferred B Shares are
also entitled to a liquidation preference of $5.00 per share, plus a
premium of 7% per annum, in the event of any liquidation, dissolution or
other winding up of the affairs of the Company.
The Preferred B Shares are convertible into common stock of the Company at
the election of the holders at any time, on a one-for-one basis, subject to
adjustment in certain circumstances. The Preferred B Shares also are
convertible into common stock by the Company at any time and from time to
time after the earlier to occur of (i) the date which is six months
following the date on which the Company's common stock becomes listed or
admitted for trading on a national securities exchange or (ii) March 31,
2000. The Company's common stock became listed on the American Stock
Exchange on November 17, 1998. As a result, the Preferred B Shares will be
convertible into common stock at the option of the Company any time after
May 17, 1999.
The Preferred B Shares were issued in March 1999 in exchange for all of the
issued and outstanding shares of Series A Preferred Stock of the Company
(the "Preferred A Shares"). Following such exchange, all Preferred A Shares
were retired and restored to the status of authorized and unissued shares
of preferred stock, without designation as to series, and may be reissued
as shares of any series of preferred stock of the Company.
10
<PAGE> 11
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
5. CAPITAL STOCK, CONTINUED:
EARNINGS PER SHARE (EPS)
A reconciliation of the numerator and denominator of basic and diluted EPS
is provided as follows (in thousands, except per share amounts).
Information regarding the three months ended March 31, 1998 is not provided
as the Spin-off did not occur until March 31, 1998. Prior to the Spin-off,
the Company was a wholly-owned subsidiary of Excel.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999
------------------
<S> <C>
Basic EPS
NUMERATOR:
Net income $ 174
=======
DENOMINATOR:
Weighted average of common shares outstanding 33,458
=======
EARNINGS PER SHARE: $ 0.01
=======
Diluted EPS
NUMERATOR:
Net income $ 174
=======
DENOMINATOR:
Weighted average of common shares outstanding 33,458
Effect of diluted securities:
Preferred B Shares 21,281
Options 8
-------
54,747
=======
EARNINGS PER SHARE: $ 0.00
=======
</TABLE>
6. STATEMENT OF CASH FLOWS - SUPPLEMENTAL DISCLOSURE:
The amount paid for interest and income taxes in the three months ended
March 31, 1999 was approximately $2,215,000 and $622,000, respectively.
Additionally, the Company assumed $594,000 in debt related to the
construction of an office building. In the three months ended March 31,
1998, the Company acquired certain assets in conjunction with the Spin-off
(Note 2).
11
<PAGE> 12
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
7. SEGMENT REPORTING:
The Company has a joint venture arrangement with Millennia. As of March 31,
1999, Millennia owned eighteen car wash properties in Arizona and Texas. At
March 31, 1999, the Company held 100% of the ownership interest in
Millennia. Another party manages the daily operations of Millennia and can
earn up to 50% of the ownership interest in Millennia based upon operating
results exceeding a 35% return on the Company's investment. The accounts of
Millennia are consolidated with the Company's financial statements. In
March 1999, Millennia entered into an agreement to sell substantially all
of its assets. The sale is subject to the occurrence of certain events, the
receipt of certain approvals, and other customary closing conditions.
The Company is a partner in a joint venture, Grand Tusayan, LLC ("Grand
Hotel") for the operation of a hotel and dinner theater and retail shop
situated near the south rim entrance to the Grand Canyon National Park in
Tusayan, Arizona. At March 31, 1999, the Company's ownership in the Grand
Hotel was 65% although the Company was entitled to approximately 98% of the
Grand Hotel's net income based upon its equity contributed. The accounts of
the Grand Hotel are consolidated with the Company's financial statements.
. SFAS No. 131 establishes standards for the way that a public enterprise
reports information about operating segments in annual financial
statements, and requires that those enterprises report selected information
about operating segments in interim financial reports to shareholders (Note
1). The following unaudited information has been provided in accordance
with SFAS No. 131 for operations related to Millennia, the Grand Hotel, and
all other real estate related activities as of and for the three months
ended March 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Other
Millennia Grand Hotel Real Estate Total
--------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Total revenues $ 4,274 $ 540 $ 4,403 $ 9,217
-------- -------- -------- --------
Interest 419 -- 1,606 2,025
Depreciation and amortization 334 161 701 1,196
General and administrative 1,909 -- 781 2,690
Operating expenses 1,809 703 481 2,993
-------- -------- -------- --------
Total operating expenses 4,471 864 3,569 8,904
-------- -------- -------- --------
Income (loss) before
income taxes $ (197) $ (324) $ 834 $ 313
======== ======== ======== ========
Real estate, net $ 30,058 $ 13,850 $147,540 $191,448
Other assets 5,617 1,835 71,238 78,690
-------- -------- -------- --------
Total assets $ 35,675 $ 15,685 $218,778 $270,138
======== ======== ======== ========
Mortgages and notes payable $ 15,108 $ -- $ 84,586 $ 99,694
Other liabilities 730 377 1,675 2,782
-------- -------- -------- --------
Total liabilities $ 15,838 $ 377 $ 86,261 $102,476
======== ======== ======== ========
</TABLE>
12
<PAGE> 13
EXCEL LEGACY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
----------
9. RELATED PARTY TRANSACTIONS:
In connection with the sale of common stock to ten of the Company's
officers and employees, the Company issued $10,872,000 of notes receivable
due from certain of these officers. The notes bear interest at 7%, are
recourse obligations of the note holders, and are due in March 2003. The
total interest receivable at March 31, 1999 from these notes totaled
$755,000. The notes have been offset against stockholders' equity on the
Company's accompanying Consolidated Balance Sheet.
Following the Spin-off, the Company shared certain employees with New Plan
Excel Realty Trust, Inc. ("New Plan Excel"), formerly Excel. The shared
employees were paid by New Plan Excel and reimbursed by the Company based
upon an Administrative Services Agreement. In April 1999 the Administrative
Services Agreement was terminated. See "Item 5. Other Information."
10. MINIMUM FUTURE RENTALS:
The Company leases its operating properties, except the Millennia carwash
properties and the Grand Hotel property, under noncancelable operating
leases generally requiring the tenant to pay a minimum rent. The leases
generally either (i) require the tenant to pay all expenses of operating
the property such as insurance, property taxes, and structural repairs and
maintenance, or (ii) require the tenant to reimburse the Company for the
tenant's share of real estate taxes and other common area maintenance
expenses or for the tenant's share of any increase in expenses over a base
year. Minimum future rental revenue for the next five years for the real
estate owned at March 31, 1999 and subject to noncancelable operating
leases is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
<S> <C>
1999 (remaining nine months) $ 8,562
2000 11,425
2001 11,331
2002 11,125
2003 10,951
Thereafter 136,840
</TABLE>
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NATURE OF BUSINESS
Excel Legacy Corporation (the "Company"), a Delaware Corporation, was formed on
November 17, 1997. The Company was organized to create and realize value by
identifying and making opportunistic real estate and other investments through
the direct acquisition, rehabilitation, development, financing and management of
real properties and/or participation in these activities through the purchase of
debt instruments or equity interests of entities in real estate and other
businesses.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements and the Notes thereto. The Company did not own any significant assets
until March 31, 1998 and did not have any significant operating results in the
three months ended March 31, 1998.
Comparison of the three months ended March 31, 1999 to the three months ended
March 31, 1998
Rental revenue was $3.3 million during the three months ended March 31, 1999.
Twelve single tenant properties owned by the Company accounted for $2.5 million
of rental revenue. Eight of these properties are leased to Wal-Mart Stores, Inc.
("Wal-Mart"), two of these properties are leased to Lowe's Home Centers, Inc.
("Lowe's") and two properties in Colorado are leased to AMC Multi-Cinema, Inc.
("AMC"). Additionally, $0.3 million of rental revenue was attributable to a
shopping mall located in Palm Springs, California and the remaining $0.5 million
of rental revenue was primarily attributable to three properties which were
acquired by the Company in conjunction with a redevelopment project in
Scottsdale, Arizona. There were no rental revenue in the three months ended
March 31, 1998.
Other operating income totaled $4.9 million in the three months ended March 31,
1999. Of this income, $4.3 million related to revenues recognized by Millennia
which is under contract to be sold. The Company also recognized $0.5 million of
other operating income by the Grand Hotel. The majority of revenues from this
project is expected to be generated between the months of May and October.
Finally, TenantFirst Real Estate Services, Inc., which the Company acquired in
May 1998, accounted for $0.1 million of revenues from various management
contracts. There was no other operating income in the three months ended March
31, 1998.
Interest income was $0.9 million in the three months ended March 31, 1999 and
primarily related to interest earned on the Company's outstanding notes
receivable. There was no interest income in the three months ended March 31,
1998.
Partnership income and other revenues totaled $0.2 million for the three months
ended March 31, 1999 and primarily related to the Company's interest in a Nova
Scotia unlimited liability company which owns an office building in Canada.
There was no partnership income in the three months ended March 31, 1998.
Interest expense was $2.0 million in the three months ended March 31, 1999 and
primarily related to the $99.7 million of mortgage and notes payable outstanding
at March 31, 1999. In the three months ended March 31, 1998, interest expense
was $66,000 and related to short-term debt incurred in connection with the
Spin-off of assets to the Company.
Depreciation and amortization expense totaled $1.2 million and primarily related
to the $137.7 million of buildings and the $2.4 million of leasehold interests
held by the Company at March 31, 1999. In the three months ended March 31, 1998,
depreciation and amortization was $47,000 and related to assets acquired with
the Spin-off on March 31, 1998.
Property operating expenses were $0.5 million in the three months ended March
31, 1999 and primarily
14
<PAGE> 15
related to the three properties located in Scottsdale, Arizona and the property
located in Palm Springs, California. The other real estate properties owned by
the Company are subject to triple net leases whereby the Company does not incur
any significant operating expenses. There were no property operating expenses
incurred in the three months ended March 31, 1998.
Other operating expenses were $2.5 million in the three months ended March 31,
1999. Expenses of $1.8 million related to Millennia and $0.7 million related to
the Grand Hotel. Both of these investments were acquired subsequent to March 31,
1998 and as such, there were no other operating expenses in the three months
ended March 31, 1998.
General and administrative expenses were $2.7 million in the three months ended
March 31, 1999. The general and administrative expenses include certain costs
charged to the Company by New Plan Excel pursuant to an administrative services
agreement providing for the sharing of certain facilities and services which was
terminated in April 1999. Additionally, $1.9 million of the expenses related to
Millennia.
Provision for income taxes was $139,000 in the three months ended March 31, 1999
of which $82,000 was current expense and $57,000 was deferred expense primarily
relating to the change in the deferred tax asset.
The Company calculates Earnings Before Depreciation, Amortization and Deferred
Taxes ("EBDADT") as net income, plus depreciation and amortization on real
estate and real estate related assets, amortized leasing commission costs and
certain non-recurring items. EBDADT does not represent cash flows from
operations as defined by generally accepted accounting principles, and may not
be comparable to other similarly titled measures of other companies. The Company
believes, however, that to facilitate a clear understanding of its operating
results, EBDADT should be examined in conjunction with its net income as
reductions for certain items are not meaningful in evaluating income-producing
real estate. The following information is included to show the items included in
the Company's EBDADT for the three months ended March 31, 1999 (in thousands):
<TABLE>
<S> <C>
Net income $ 174
Depreciation and amortization (financial statements) 1,196
Less depreciation of non-real estate assets (22)
Deferred tax expense 57
-------
EBDADT $ 1,405
=======
EBDADT per share - basic $ 0.04
=======
EBDADT per share - diluted $ 0.03
=======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the total mortgage debt and notes payable of the Company
consisted of the following: (i) $24.4 million in mortgages on eight properties
leased to Wal-Mart which have fixed interest rates of 7.9% to 8.5%. These
mortgages are self-amortizing with the rent being paid by Wal-Mart directly to
the mortgage holders. The mortgages will be entirely repaid when the initial
terms of the leases with Wal-Mart expire (2008 to 2009). (ii) $7.5 million in
mortgages on two properties leased to Lowe's which have fixed interest rates of
7.6% and 8.8%. These mortgages are also self-amortizing over the term of the
leases with Lowe's and will be repaid when the leases expire (2003 and 2014).
(iii) A $2.2 million mortgage securing an office building in Scottsdale,
Arizona, monthly payments of which are approximately $25,000 with a balloon
payment in the year 2006. (iv) $36.4 million in mortgages on two properties
leased to AMC. These mortgages amortize over a period of twenty years which is
equivalent to the term of the leases. The mortgages have fixed rates of 7.48%
and 7.52%, respectively and mature in 2018. (v) $15.1 million in notes related
to the Millennia acquisition of certain car wash properties. Of the notes, $14.6
million have fixed interest rates of 8.5% and are due in fifteen years and $0.4
million have fixed interest rates of 8.0% and are due in two years. These notes
will be transferred to the pending buyer for these properties upon closing. (vi)
$0.7 million outstanding on a $11.0 million construction loan related to the
construction of an office
15
<PAGE> 16
building. Interest on the construction loan varies based upon the Eurodollar and
was 7.9% at March 31, 1999. All of the above mortgage debt and notes payable are
non-recourse to the Company.(vii) $13.3 million outstanding on the Company's
unsecured $20.0 million credit facility. The facility bears interest at LIBOR
plus 2.5% (7.5% at March 31, 1999) and expires in October 1999.
At March 31, 1999, the Company had 21,281,000 shares of Series B Preferred Stock
outstanding (the "Preferred B Shares"). Holders of the Preferred B Shares are
entitled to receive, when, as and if declared by the Board of Directors,
cumulative cash dividends payable in an amount per share equal to the cash
dividends, if any, on the shares of common stock into which the Preferred B
Shares are convertible. Holders of the Preferred B Shares are also entitled to a
liquidation preference of $5.00 per share, plus a premium of 7% per annum, in
the event of any liquidation, dissolution or other winding up of the affairs of
the Company.
The Preferred B Shares are convertible into common stock of the Company at the
election of the holders at any time, on a one-for-one basis, subject to
adjustment in certain circumstances. The Preferred B Shares also are convertible
into common stock by the Company at any time and from time to time after the
earlier to occur of (i) the date which is six months following the date on which
the Company's common stock becomes listed or admitted for trading on a national
securities exchange or (ii) March 31, 2000. The Company's common stock became
listed on the American Stock Exchange on November 17, 1998. As a result, the
Preferred B Shares will be convertible into common stock at the option of the
Company any time after May 17, 1999.
The Preferred B Shares were issued in March 1999 in exchange for all of the
issued and outstanding shares of Series A Preferred Stock of the Company (the
"Preferred A Shares"). Following such exchange, all Preferred A Shares were
retired and restored to the status of authorized and unissued shares of
preferred stock, without designation as to series, and may be reissued as shares
of any series of preferred stock of the Company.
Eight of the Company's single tenant properties leased to Wal-Mart do not
generate cash flow as rent payments are directly used to service outstanding
debt obligations. The Company anticipates that existing cash flow from
operations will be adequate to meet the current cash requirements of its
operating properties. The Company expects to meet its long-term liquidity
requirements, such as property acquisitions and development, mortgage debt
maturities, and other investment opportunities, through the most advantageous
sources of capital available to the Company at the time, which may include
operating cash flows, the sale of common stock, preferred stock or debt
securities through public offerings or private placements, entering into joint
venture arrangements with financial partners, the incurrence of indebtedness
through secured or unsecured borrowings and the reinvestment of proceeds from
the disposition of assets.
YEAR 2000
Some of the Company's information technology ("IT") systems were originally
written using two digits rather than four to define the applicable year. As a
result, those IT systems had time sensitive software that recognizes dates using
"00" as the Year 1900 rather than the Year 2000. The Company has upgraded its
existing computer software and IT systems and believes that they are able to
recognize the Year 2000 and that the Year 2000 issue will not have a material
impact on the Company's operations.
The Year 2000 issue affects the Company's internal systems, including IT and
non-IT systems. The Company is reviewing its utility systems (heat, light,
telephones, etc.) and other non-IT systems for the impact of Year 2000. The
Company has solicited assurances from its contractors, vendors and other third
parties that their systems (including building management and mechanical
systems) are currently Year 2000 compliant or will be made compliant before the
advent of the Year 2000. No assurances can be made that all contractors and
other third parties will comply with their assurances. The Company intends to
take continuous steps to identify Year 2000 problems related to its vendors and
to formulate a system of working with key third parties, including financial
institutions and utility providers, to understand their ability to continue
providing services and products through the change to Year 2000. The failure to
correct a material
16
<PAGE> 17
Year 2000 problem either within the Company or within a vendor or supplier could
result in an interruption in, or a failure of, certain normal business
activities or operations of the Company. Such interruptions or failures could
materially adversely affect the Company's business, operating results and
financial condition.
The Company's Year 2000 project is expected to be complete by mid-1999, which is
prior to any anticipated impact on the Company's IT systems. As of March 31,
1999, the Company had expended less than $50,000 and expects to expend less than
$10,000 in additional costs in connection with its Year 2000 project, including
the cost of identification, assessment, remediation and testing efforts. The
cost of the Company's Year 2000 project, and the target date on which the
Company expects the Year 2000 modifications to be complete are based upon a
variety of assumptions of future events, including the continued availability of
certain resources. No assurance can be made that these estimates will be
achieved and actual results could materially differ from those anticipated.
Specific factors that might cause material differences include, but are not
limited to, the availability and costs of personnel trained in this area, the
ability to locate and correct relevant computer codes and the timing and
compliance by the Company's outside vendors and suppliers.
A contingency plan has not been developed for dealing with the most reasonably
likely worst case scenario, and such scenario has not yet been clearly
identified. Since the Company has adopted a plan to address these Year 2000
issues, it has not developed a comprehensive contingency plan should Year 2000
issues fail to be addressed successfully or in their entirety. However, if the
Company identifies significant risks or is unable to meet its anticipated time
line, the Company will develop contingency plans as deemed necessary at that
time. This discussion contains forward-looking statements and should be read in
conjunction with the Company's disclosures under the heading "Certain Cautionary
Statements" below.
CERTAIN CAUTIONARY STATEMENTS
Certain statements in this Form 10-Q may be deemed to be "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 which provides a "safe harbor" for these types of statements.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results of the Company to be materially
different from historical results or from any results expressed or implied by
such forward-looking statements. Such risks, uncertainties and other factors
include, but are not limited to, the following risks:
Recently Formed Entity; Lack of Independent Operating History. The Company is a
recently-formed entity with no prior operating history. There can be no
assurance that the Company will not encounter financial, managerial or other
difficulties as a result of its lack of operating history or inability to rely
on the financial and other resources of New Plan Excel. Although the Company
expects to be able to access capital markets or to seek other financing, there
can be no assurance that it will be able to do so at all or in amounts or on
terms acceptable to the Company.
Reliance on Major Tenants. As of March 31, 1999, the Company's largest tenants
were AMC, Wal-Mart, and Lowe's which accounted for approximately 14%, 10% and
3%, respectively, of the Company's total revenues in the three months ended
March 31, 1999. The financial position of the Company may be adversely affected
by financial difficulties experienced by any of such tenants, or any other major
tenant of the Company, including a bankruptcy, insolvency or general downturn in
business of any such tenant, or in the event any such tenant does not renew its
leases as they expire.
Control by Directors and Executive Officers. As of March 31, 1999, executive
officers and directors of the Company beneficially owned or had the right to
acquire approximately 30% of the Company's outstanding common stock.
Accordingly, such persons should continue to have substantial influence over the
Company and on the outcome of matters submitted to the Company's stockholders
for approval. In addition, such ownership could have an anti-takeover effect,
thus discouraging the acquisition of the common stock by potential investors and
possibly depressing the trading price of the common stock.
Difficulty of Locating Suitable Investments; Competition. Identifying,
completing and realizing on real estate investments has from time to time been
highly competitive, and involves a high degree of uncertainty. The
17
<PAGE> 18
Company competes for investments with many public and private real estate
companies, including financial institutions (such as mortgage banks, pension
funds and REITs) and other institutional investors, as well as individuals.
There can be no assurance that the Company will be able to locate and complete
investments which will be profitable or that it will be able to fully invest its
available capital. Many of those with whom the Company competes for investments
are far larger than the Company, may have greater financial resources than the
Company and may have management personnel with more experience than the officers
of the Company.
Acquired Properties May Fail to Perform as Expected and Capital Expenditures May
Exceed Estimates. The Company intends to acquire existing properties to the
extent they can be acquired on advantageous terms which meet the Company's
investment criteria. Acquisitions of properties entail general investment risks
associated with any real estate investment, including the risk that investments
will fail to perform as expected, that estimates of the costs of improvements to
bring an acquired property up to standards established for the intended market
position may prove inaccurate and that occupancy rates and rents achieved may be
less than anticipated.
Uncertainty of Cash Flow from Development, Construction and Renovation
Activities. The Company also intends to pursue the selective development,
construction and renovation of properties for its own account or the account of,
or through, entities in which it owns an equity interest as opportunities arise,
including without limitation long-term, higher-risk, mixed-use retail
entertainment projects and hospitality projects. Risks associated with the
Company's development, construction and renovation activities include risks
that: the Company may abandon development opportunities after expending
resources to determine feasibility; construction and renovation costs of a
project may exceed original estimates; occupancy rates and rents at a newly
completed property may not be sufficient to make the property profitable; and
development, construction, renovation and lease-up may not be completed on
schedule (including risks beyond the control of the Company, such as weather or
labor conditions or material shortages) resulting in increased debt service
expense and construction costs. Development, construction and renovation
activities also are subject to risks relating to the inability to obtain, or
delays in obtaining, all necessary zoning, land-use, building, occupancy and
other required governmental permits and authorizations. These risks could result
in substantial unanticipated delays or expenses and, under certain
circumstances, could prevent completion of the project which could adversely
affect the financial condition and results of operations of the Company.
Dependence on Real Estate Conditions. The Company's financial condition and
results of operations may be adversely affected by a number of factors affecting
the real estate market generally, including downturns in the international and
domestic general economic climate and local real estate conditions (including
oversupply of or reduced demand for space and changes in market rental rates);
energy and supply shortages; and increasing operating costs (including real
estate taxes and utilities) which may not be passed through to tenants.
Dependence on Rental Income from Real Property. The Company's cash flow, results
of operations and value of its assets would be adversely affected if a
significant number of tenants were unable to meet their lease obligations or if
the Company or the owner of a property were unable to lease a significant amount
of space in its properties on economically favorable lease terms. There can be
no assurance that any tenant whose lease expires in the future will renew such
lease or that the Company will be able to re-lease space on economically
advantageous terms.
Illiquidity of Real Estate Investments. Equity real estate investments are
relatively illiquid and therefore tend to limit the ability of the Company to
vary its portfolio promptly in response to changes in economic or other
conditions. In addition, mortgage payments and, to the extent the properties are
not subject to triple net leases, certain significant expenditures such as real
estate taxes and maintenance costs, are generally not reduced when circumstances
cause a reduction in income from the investment. Should such events occur, the
Company's results of operations would be adversely affected. A portion of the
Company's properties are mortgaged to secure payment of indebtedness, and if the
Company were unable to meet its mortgage payments, a loss could be sustained as
a result of foreclosure on such properties.
18
<PAGE> 19
Risk of Bankruptcy of Major Tenants. The bankruptcy or insolvency of a major
tenant or a number of smaller tenants may have an adverse impact on the
properties affected and on the income produced by such properties. Under
bankruptcy law, a tenant has the option of assuming (continuing) or rejecting
(terminating) any unexpired lease. If the tenant assumes its lease with the
Company, the tenant must cure all defaults under the lease and provide the
Company with adequate assurance of its future performance under the lease. If
the tenant rejects the lease, the Company's claim for breach of the lease would
(absent collateral securing the claim) be treated as a general unsecured claim.
The amount of the claim would be capped at the amount owed for unpaid
pre-petition lease payments unrelated to the rejection, plus the greater of one
years' lease payments or 15% of the remaining lease payments payable under the
lease (but not to exceed the amount of three years' lease payments).
Potential Environmental Liability Related to the Properties. Under various
federal, state and local laws, ordinances and regulations, the Company may be
considered an owner or operator of real property or may have arranged for the
disposal or treatment of hazardous or toxic substances and, therefore, may
become liable for the costs of removal or remediation of certain hazardous
substances released on or in its property or disposed of by it, as well as
certain other potential costs which could relate to hazardous or toxic
substances (including governmental fines and injuries to persons and property).
Such liability may be imposed whether or not the Company knew of, or was
responsible for, the presence of such hazardous or toxic substances.
Changes in Policies Without Stockholder Approval. The investment, financing,
borrowing and distribution policies of the Company and its policies with respect
to all other activities, growth, debt, capitalization, and operations, are
determined by the Company's Board of Directors. Although it has no present
intention to do so, the Board of Directors may amend or revise these policies at
any time and from time to time at its discretion without a vote of the
stockholders of the Company. A change in these policies could adversely affect
the Company's financial condition and results of operations.
Dependence on Key Personnel. The Company is dependent on the efforts of its
executive officers and other key personnel. While the Company believes that it
could find replacements for these persons, the loss of their services could have
a temporary adverse effect on the operations of the Company. There can be no
assurance that the Company will be able to retain these persons or to attract
suitable replacements or additional personnel if required. The Company has not
obtained key-man insurance for any of its executive officers or other key
personnel.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to the Company's operations result primarily from changes
in short-term LIBOR interest rates. The Company does not have any derivative
instruments at March 31, 1999 or any other significant market risk.
The Company's exposure to market risk for changes in interest rates relates
primarily to the Credit Facility of which $13.3 million was outstanding at March
31, 1999. The Company has an additional $0.7 million of variable rate debt at
March 31, 1999. The Company continuously evaluates the level of variable rate
debt with respect to total debt and other factors.
19
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Stockholders on January
28, 1999.
(b) See paragraph (c) below.
(c) The matters voted upon at the meeting and the votes cast with
respect thereto were as follows:
Election of Directors
<TABLE>
<CAPTION>
Nominee for Votes Votes Broker
Director Cast For Withheld Abstentions Non-Votes
----------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Gary B. Sabin 26,053,432 28,793 - -
Richard B. Muir 26,052,932 29,293 - -
Kelly D. Burt 26,053,310 28,915 - -
Richard J. Nordlund 26,053,310 28,915 - -
Robert E. Parsons, Jr. 26,053,110 29,115 - -
Robert S. Talbott 26,053,310 28,915 - -
John H. Wilmot 26,053,310 28,915 - -
</TABLE>
ITEM 5. OTHER INFORMATION
On April 21, 1999, the Company entered into a Master Separation
Agreement with New Plan Excel and ERT Development Corporation. Under
the terms of the Master Separation Agreement, the Company and New
Plan Excel agreed, among other things, to modify the terms of certain
of their existing agreements, including the termination of the
Intercompany Agreement, dated as of March 31, 1998 (as amended, the
"Intercompany Agreement"), and the Administrative Services Agreement,
dated as of March 31, 1998 9as amended, the "Administrative Services
Agreement"), in each case except as set forth in the Master
Separation Agreement.
In addition, the Master Separation Agreement provides for certain
interim arrangements between the Company and New Plan Excel as to
certain office facilities in California, as well as an agreement with
respect to the non-solicitation of certain New Plan Excel employees
during the 90-day period following the entering into of the Master
Separation Agreement.
The Master Separation Agreement also provides that each of the
Company and New Plan Excel will, on the terms set forth in the Master
Separation Agreement, refrain from acquiring any interest in the
other or seeking to influence or control the other.
The foregoing description of the Master Separation Agreement is
qualified in its entirety by reference to the Master Separation
Agreement, a copy of which is filed as an exhibit to this Form 10-Q
and is incorporated by reference herein.
Contemporaneously with the Company and New Plan Excel entering into
the Master Separation Agreement, on April 21, 1999, six executives of
the Company, including Gary B. Sabin, Richard B. Muir, Graham R.
Bullick, Mark T. Burton, S. Eric Ottesen and Ronald H. Sabin, entered
into separate Resignation and Release Agreements with New Plan Excel.
The Resignation and Release Agreements provide for the resignation of
the respective executives from New Plan Excel and its subsidiaries
and affiliates, the mutual release by New Plan Excel and the
executive of certain possible claims against the other, and the
payment by New Plan Excel of certain severance benefits.
20
<PAGE> 21
In connection with the foregoing matters, and in addition to the
resignation of Gary B. Sabin and Richard B. Muir from the Board of
Directors of New Plan Excel (as contemplated by their respective
Resignation and Release Agreements), two non-executive directors of
the Company, Robert E. Parsons, Jr. and John H. Wilmot, resigned from
the Board of Directors of New Plan Excel.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Master Separation Agreement, dated as of April 21, 1999,
among Excel Legacy Corporation, ERT Development Corporation
and New Plan Excel Realty Trust, Inc.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXCEL LEGACY CORPORATION
(Registrant)
DATE: May 7, 1999 By: /s/ Gary B. Sabin
--------------------------------------
GARY B. SABIN
President and Chief Executive Officer
DATE: May 7, 1999 By: /s/ James Y. Nakagawa
--------------------------------------
JAMES Y. NAKAGAWA
Principal Financial Officer
21
<PAGE> 1
EXHIBIT 10.1
MASTER SEPARATION AGREEMENT
MASTER SEPARATION AGREEMENT, dated as of April 21, 1999 (this
"Agreement"), by and among New Plan Excel Realty Trust, Inc., a Maryland
corporation ("New Plan"), ERT Development Corporation, a Delaware corporation of
which New Plan owns 100% of the outstanding preferred shares ("EDV"), and Excel
Legacy Corporation, a Delaware corporation ("Legacy"). New Plan, EDV and Legacy
are each referred to herein sometimes as a "Party" and collectively as the
"Parties".
WHEREAS, the Parties have previously entered into that certain
Distribution Agreement, dated as of March 31, 1998 (the "Distribution
Agreement"), providing for, among other things, the terms and conditions
pursuant to which Excel Realty Trust, Inc. (the predecessor to New Plan, "ERT")
distributed the outstanding shares of Legacy to ERT's stockholders as of the
record date for such distribution (the "Spin-off").
WHEREAS, in connection with the Spin-off, ERT and Legacy entered
into the following agreements: (i) Administrative Services Agreement, dated as
of March 31, 1998, as amended by the Amendment to Administrative Services
Agreement, dated as of May 14, 1998 (the "Administrative Services Agreement");
(ii) Tax Sharing Agreement, dated as of March 31, 1998 (the "Tax Sharing
Agreement"); and (iii) Intercompany Agreement, dated as of March 31, 1998, as
amended by the Amendment to Intercompany Agreement, dated as of May 14, 1998
(the "Intercompany Agreement").
WHEREAS, in connection with the execution and delivery of this
Agreement, certain directors of New Plan shall resign (the "Resignations") and
certain executive officers shall resign and enter into respective Resignation
and Release Agreements with New Plan (collectively, the "Resignation and Release
Agreements").
WHEREAS, in connection with the execution and delivery of this
Agreement, NNRA, LLC ("NNRA"), EDV and Excel Interfinancial Corporation
("Interfinancial"), will enter into a Stock Purchase Agreement (the "Stock
Purchase Agreement"), pursuant to which, among other things, NNRA shall purchase
the common stock of EDV owned by Interfinancial.
WHEREAS, the parties desire to amend their existing relationships
as set forth herein.
NOW THEREFORE, in consideration of the above premises and mutual
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
intending to be legally bound, and subject to the terms and conditions stated
herein, the Parties hereby agree as follows:
<PAGE> 2
ARTICLE I
COVENANTS
SECTION 1.1. Intercompany Agreement. The parties hereby agree
that notwithstanding anything in the Intercompany Agreement to the contrary,
but subject to the following proviso, the Intercompany Agreement shall
terminate and be of no further force and effect simultaneously with the
execution and delivery hereof; provided, however, that with respect to all REIT
Opportunities (as defined in the Intercompany Agreement) that have been
presented to a meeting of the New Plan Investment Committee prior to the date
hereof, whether or not the New Plan Investment Committee elected to proceed with
the REIT Opportunity at such time or thereafter (collectively, but excluding the
entity known to New Plan and Legacy as "Nuts", the "New Plan Exclusive REIT
Opportunities"), neither Legacy nor any of its subsidiaries or affiliates, or
any of their respective directors, officers, employees or agents, shall,
directly or indirectly, pursue or enter into negotiations with respect to any
New Plan Exclusive REIT Opportunity or enter into any letter of intent,
agreement in principle, or acquisition or other similar binding agreement to
acquire or participate in all or a portion of such New Plan Exclusive REIT
Opportunity, or otherwise take any action that could result in any of the
foregoing as to any New Plan Exclusive REIT Opportunity. New Plan further agrees
that neither it nor any of its subsidiaries or affiliates, or any of their
respective directors, officers, employees or agents, shall, directly or
indirectly, (i) pursue or enter into negotiations with respect to the
transaction relating to the San Diego Naval Base that has been considered by New
Plan and Legacy, or enter into any letter of intent, agreement in principle, or
acquisition or other similar binding agreement to acquire or participate in all
or a portion of such transaction by New Plan, or otherwise take any action that
could result in any of the foregoing as to such transaction, unless in
partnership or other business relationship with Legacy on an agreed basis, or
(ii) raise any objection to Legacy entering into any letter of intent, agreement
in principle, or acquisition or other similar binding agreement with that entity
known to New Plan and Legacy as "Nuts".
SECTION 1.2. Administrative Services Agreement. The Parties
hereby agree that upon consummation of this Agreement the Administrative
Services Agreement shall terminate and, thereafter shall have no further force
and effect; provided, however, that, notwithstanding anything contained herein
to the contrary, with respect to the Administrative Services Agreement, Legacy
shall promptly, upon receipt of an invoice from New Plan, pay any portion of the
payments and/or other amounts due to New Plan and accrued through the date
hereof, whether for services, salaries or otherwise.
SECTION 1.3. Airplane Interest. (a) New Plan hereby sells,
assigns, conveys, transfers, delivers and confirms to Legacy all of its rights,
title and interest in and to that certain 1/16th fractional interest in an
airplane, acquired and governed by that certain agreement dated as of March 6,
1998, between Executive Jet Sales, Inc. and Excel Realty Trust, Inc. (the
"Airplane Interest"), in exchange for Legacy's agreement to pay to New Plan the
fair market value of the Airplane Interest (up to $250,000, and provided that if
Legacy shall at any time hereafter sell, assign or transfer the Airplane
Interest to any third party for
-2-
<PAGE> 3
consideration in excess of the amount paid to New Plan pursuant to this
paragraph, Legacy shall promptly pay over to New Plan an amount equal to such
excess), together with the amount of any prepayments, deposits or security
previously paid in respect of the Airplane Interest (the "Airplane Interest
Value"), all of which shall be due and payable on or before the date that is 30
days from the date hereof.
(b) Legacy hereby purchases and acquires the Airplane Interest,
and assumes all of the obligations and liabilities arising from or relating to
the Airplane Interest, on and after the date hereof, and Legacy shall indemnify,
hold harmless and defend New Plan from and against any and all liabilities,
obligations, claims or expenses of whatever kind resulting from or relating to
the Airplane Interest.
SECTION 1.4. Deliveries. (a) At or prior to the execution of this
Agreement, Legacy shall deliver, or shall cause to be delivered, to New Plan the
following:
(i) The Stock Purchase Agreement, executed by
Interfinancial and EDV;
(ii) The Resignation and Release Agreements, signed by each
of the executive officers set forth on Schedule 1.4;
(iii) The Resignations, in the form of Exhibit A hereto, of
each of the directors set forth on Schedule 1.4, signed by such persons;
and
(iv) The Assignment Agreement (as defined in Section 4.2),
signed by Legacy.
(b) At or prior to the execution of this Agreement, New Plan
shall deliver, or shall cause to be delivered, to Legacy the following:
(i) The Stock Purchase Agreement, executed by NNRA;
(ii) The Resignation and Release Agreements, signed by New
Plan; and
(iii) The Assignment Agreement, signed by New Plan.
SECTION 1.5. Public Announcements. The Parties shall not make, or
cause to be made, any press releases or public announcements in respect of this
Agreement or the transactions contemplated hereby without prior notification of
the other, and the parties shall cooperate as to the timing and content of any
such announcement.
ARTICLE II
STANDSTILL AGREEMENT
-3-
<PAGE> 4
SECTION 2.1. Legacy Standstill. (a) Legacy (including its
affiliates and any "group" (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act")) in which it or any of its
affiliates is a member) shall not directly or indirectly acquire beneficial
ownership or control of any equity securities of New Plan, nor shall Legacy or
any of its affiliates or any group in which it or any of its affiliates is a
member directly or indirectly acquire beneficial ownership or control of any
equity securities of any affiliate of New Plan.
(b) Legacy and its affiliates will not, directly or indirectly,
acting alone or in concert with others, unless specifically requested in writing
in advance by the Board of Directors of New Plan: (a) in any manner acquire or
agree, attempt, seek or propose to acquire (or make any request for permission
with respect thereto), by purchase, merger, through the acquisition of control
of another person, by joining a partnership, limited partnership, syndicate or
other group, or otherwise, ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Exchange Act) of any of the assets
or businesses of New Plan or any securities issued by New Plan, or any rights or
options to acquire such ownership (including from a third party), (b) make, or
in any way cause or participate in, any "solicitation" of "proxies" to vote (as
such terms are defined in Regulation 14A under the Exchange Act), or communicate
with, seek to advise, encourage or influence any person or entity, in any
manner, with respect to the voting of, any voting securities of New Plan, or
become a "participant" in any "election contest" (as such terms are defined or
used in Rule 14a-11 promulgated under the Exchange Act) with respect to New
Plan, or execute any written consent with respect to New Plan, (c) make or cause
to be made any proposal for the acquisition of New Plan or any assets or
securities thereof or for any extraordinary transaction involving New Plan,
including any merger, or other business combination, restructuring,
recapitalization, liquidation or similar transaction, (d) initiate, propose or
otherwise solicit stockholders for the approval of one or more stockholder
proposals with respect to New Plan or induce or attempt to induce any other
person to initiate any stockholder proposal, or seek election to or seek to
place a representative on the Board of Directors of New Plan or seek the removal
of any member of the Board of Directors of New Plan, (e) form, join or in any
way participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to any voting securities of New Plan, (f) otherwise
act, alone or in concert with others, to seek to control or influence the
management, the Board of Directors or the policies of New Plan, (g) disclose any
intention, plan or arrangement, or make any public announcement inconsistent
with the foregoing, (h) advise, assist or encourage or finance (or assist or
arrange financing to or for) any other person in connection with any of the
foregoing, (i) enter into any discussions, negotiations, arrangements or
understandings with any other person in connection with any of the foregoing, or
(j) request a waiver of any of the foregoing.
SECTION 2.2. New Plan Standstill. (a) New Plan (including its
affiliates and any group in which it or any of its affiliates is a member) shall
not directly or indirectly acquire beneficial ownership or control of any equity
securities of Legacy, nor shall New Plan or any of its affiliates or any group
in which it or any of its affiliates is a member directly or
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<PAGE> 5
indirectly acquire beneficial ownership or control of any equity securities of
any affiliate of Legacy.
(b) New Plan and its affiliates will not, directly or indirectly,
acting alone or in concert with others, unless specifically requested in writing
in advance by the Board of Directors of Legacy: (a) in any manner acquire or
agree, attempt, seek or propose to acquire (or make any request for permission
with respect thereto), by purchase, merger, through the acquisition of control
of another person, by joining a partnership, limited partnership, syndicate or
other group, or otherwise, ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Exchange Act) of any of the assets
or businesses of Legacy or any securities issued by Legacy, or any rights or
options to acquire such ownership (including from a third party), (b) make, or
in any way cause or participate in, any "solicitation" of "proxies" to vote (as
such terms are defined in Regulation 14A under the Exchange Act), or communicate
with, seek to advise, encourage or influence any person or entity, in any
manner, with respect to the voting of, any voting securities of Legacy, or
become a "participant" in any "election contest" (as such terms are defined or
used in Rule 14a-11 promulgated under the Exchange Act) with respect to Legacy,
or execute any written consent with respect to Legacy, (c) make or cause to be
made any proposal for the acquisition of Legacy or any assets or securities
thereof or for any extraordinary transaction involving Legacy, including any
merger, or other business combination, restructuring, recapitalization,
liquidation or similar transaction, (d) initiate, propose or otherwise solicit
stockholders for the approval of one or more stockholder proposals with respect
to Legacy or induce or attempt to induce any other person to initiate any
stockholder proposal, or seek election to or seek to place a representative on
the Board of Directors of Legacy or seek the removal of any member of the Board
of Directors of Legacy, (e) form, join or in any way participate in a group
(within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any
voting securities of Legacy, (f) otherwise act, alone or in concert with others,
to seek to control or influence the management, the Board of Directors or the
policies of Legacy, (g) disclose any intention, plan or arrangement, or make
any public announcement inconsistent with the foregoing, (h) advise, assist or
encourage or finance (or assist or arrange financing to or for) any other person
in connection with any of the foregoing, (i) enter into any discussions,
negotiations, arrangements or understandings with any other person in
connection with any of the foregoing, or (j) request a waiver of any of the
foregoing.
ARTICLE III
DISPARAGING COMMENTS
SECTION 3.1. Disparaging Comments. From and after the date of
this Agreement, except as may be required by a court or governmental body, each
of New Plan and Legacy shall, and shall cause each of its subsidiaries and
affliates, and use its reasonable efforts to cause each of its directors,
officers and employees, to, refrain from taking actions or making statements,
written or oral, which disparage or defame the goodwill or reputation of
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<PAGE> 6
the other Party and its subsidiaries, affiliates, security holders, partners,
agents and former and current directors, officers and employees or which are
intended to, or may be reasonably expected to, adversely affect the morale of
the employees of such Party, its subsidiaries or its affiliates. Each of New
Plan and Legacy shall, and shall cause their respective subsidiaries and
affiliates to, take reason-able steps to advise actively employed executive
officers of such Party and its subsidiaries and affiliates, and members of their
respective boards of directors, not to disparage or defame the reputation of
such other Party.
ARTICLE IV
REAL PROPERTY MATTERS
SECTION 4.1. Rancho Bernardo. (a) New Plan, as landlord, and
Legacy, as tenant, hereby covenant and agree that certain of the space in the
building owned by New Plan and located at 16955 Via Del Campo, Rancho Bernardo,
California (the "Building"), which space shall be mutually agreed upon by New
Plan and Legacy (the "Demised Premises"), shall be leased by New Plan to Legacy
in accordance with the terms and conditions set forth on Exhibit B hereto.
(b) The existing space lease between New Plan and Legacy, dated
as of June 24, 1998, with respect to approximately 892 rentable square feet in
the Building shall remain in full force and effect in accordance with its terms.
SECTION 4.2. Excel Properties Ltd. (a) Pursuant to the Assignment
and Assumption Agreement attached hereto as Exhibit C (the "Assignment
Agreement"), New Plan shall, as of the date hereof, assign all of its right,
title and interest as a general partner of Excel Properties, Ltd., a California
limited partnership (the "Partnership Interest"), to Legacy or its designee, and
Legacy (or such designee) shall assume all of New Plan's obligations and
liabilities with respect to the Partnership Interest.
(b) To the extent the assignment contemplated in Section 4.2(a)
shall require the consent or waiver of any other party, neither this Agreement
nor the Assignment Agreement shall constitute an agreement to assign such
Partnership Interest without such consent or waiver. If any such required
consent or waiver is not obtained, Legacy and New Plan shall, at Legacy's
expense, cooperate in any reasonable arrangement requested by Legacy or New Plan
and designed to provide Legacy with the benefit of the Partnership Interest
(and all associated obligations or liabilities), including New Plan acting as
Legacy's agent in order to obtain for Legacy the benefits therefor.
Notwithstanding any such consents or assignment, Legacy agrees to indemnify,
hold harmless and defend New Plan from and against any and all liabilities,
obligations, claims or expenses of whatever kind resulting from or related to
the Partnership Interest and the assignment and arrangements contemplated by
this Section and the Assignment Agreement.
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<PAGE> 7
SECTION 4.3. New Legacy Building. (a) Legacy agrees to sublease,
as subtenant, from New Plan, as sublandlord, on identical terms to those set
forth in the New Building Lease (as hereinafter defined), all of the space at
those certain premises at the building owned (or to be constructed) by Legacy
and located at Bernardo Center Drive, San Diego, California (the "New Legacy
Building") and which New Plan, as tenant, has agreed to lease from Legacy, as
landlord, pursuant to a lease, license or other occupancy agreement between them
as tenant and landlord (the "New Building Lease"). Legacy, as the lessor under
the New Building Lease, further agrees (i) to waive any and all defaults, events
of default or breaches under such New Building Lease, as such may arise, from
time to time, thereunder, and (ii) to indemnify, hold harmless and defend New
Plan from and against any and all liabilities, obligations, claims or expenses
of whatever kind resulting from or related to the New Building Lease. Promptly
after the date hereof, the parties shall enter into a sublease reflecting the
provisions of this Section 4.3.
(b) Legacy and New Plan agree that, at such time as the
termination of the New Building Lease would not result in a breach or default
under the construction financing for the New Legacy Building, the New Building
Lease and the sublease entered into in paragraph (a) above shall then terminate
and be null, void and of no further force or effect. In addition, Legacy further
agrees that it shall not include, make reference to, rely on or cause any other
party to rely on the existence or continuation of the New Building Lease in
connection with Legacy's procurement of financing for the New Legacy Building
(other than the construction financing existing as of the date hereof).
ARTICLE V
EMPLOYEE MATTERS
SECTION 5.1. Former Excel Employees. Each individual who is
employed as of the date of this Agreement by New Plan at its Rancho Bernardo or
Salt Lake City locations and who agrees to remain employed by New Plan following
the transactions contemplated hereby (each such individual, a "Covered
Employee") but who is terminated by New Plan within 180 days after the date of
this Agreement other than for cause shall be entitled to severance pay (the
"Severance Pay") equal to one week's base pay for each full Year of Service (as
defined below) completed by such individual; provided that this obligation shall
not apply to any of the employees listed on Schedule 5.1, none of whom shall be
Covered Employees, nor to any Covered Employee who subsequently becomes an
employee of Legacy or any of its affiliates or subsidiaries. For purposes of
this Section 5.1, the term "Year of Service" means a period of 12 months of
continuous employment with New Plan and/or any predecessor entities.
SECTION 5.2. Non-Solicitation of Employees. (a) For a period
commencing on the date hereof and continuing through the 90-day period
thereafter, Legacy may offer em-
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<PAGE> 8
ployment only to any of the New Plan employees listed on Schedule 5.1, and,
during such period, neither Legacy nor any of its subsidiaries or affiliates,
nor any of their respective directors, officers, employees or agents, shall,
directly or indirectly, solicit or induce any other person who is an employee of
New Plan as of the date hereof to become an employee or consultant of Legacy or
any of its affiliates or subsidiaries or to leave the employ of New Plan.
(b) For purposes of this Section 5.2, the term "employment" shall
include rendering services in any capacity, and the term "employee" shall
include any individual who is rendering services, in each case whether as an
employee, officer, director, agent, consultant or independent contractor or
otherwise.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Notices. Any notice or other communication required
or permitted hereunder shall be in writing and shall be delivered personally,
or sent by facsimile transmission or sent by certified, registered or express
mail, postage prepaid. any such notice shall be deemed given when so delivered
personally, or sent by facsimile transmission or, if mailed, three (3) business
days after the date of deposit in the United States mail, by certified mail
return receipt requested (if also sent by facsimile if available at the office
of the recipient), as follows:
If to Legacy, to:
Excel Legacy Corporation
16955 Via Del Campo, Suite 100
San Diego, California 92127
Attention: S. Eric Ottesen
Telecopier: (619) 485-8530
With a copy to:
Latham & Watkins
701 B Street
Suite 2100
San Diego, California 92101-8197
Attention: Scott N. Wolfe, Esq.
Telecopier: (619) 696-7419
If to New Plan or EDV, to:
New Plan Excel Realty Trust, Inc.
1120 Avenue of the Americas
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<PAGE> 9
New York, New York 10036
Attention: Steven F. Siegel, Esq.
Telecopier: (212) 302-4776
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019-6150
Attention: Adam O. Emmerich, Esq.
Telecopier: (212) 403-2000
Any Party, by notice given in accordance with this Section 6.1 to
the other Parties, may designate another address or person for receipt of
notices hereunder.
SECTION 6.2. Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived only by a written
instrument signed by the Parties or in the case of a waiver, by the Party
waiving compliance. No delay on the part of any Party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof except as
expressly provided herein. No waiver on the part of any Party of any right,
power or privilege, nor any single or partial exercise of any such right, power
or privilege, shall preclude any further exercise thereof or the exercise of any
other such right, power or privilege. The rights and remedies herein provided
are cumulative and are not exclusive of any rights or remedies that any party
may otherwise have at law or in equity.
SECTION 6.3. Governing Law; Enforcement. (a) This Agreement shall
be governed by and construed in accordance with the substantive and procedural
laws of the State of New York applicable to agreements made and to be performed
entirely within such State (without giving effect to any conflict of laws
principles which might require application of the law of a different
jurisdiction).
(b) Each of the Parties hereto (i) consents to submit itself to
the personal jurisdiction of any federal court located in the State of New York
or any New York State court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (ii) agrees
that it shall not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (iii) agrees that it shall
not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court sitting
in the State of New York or a New York State court.
SECTION 6.4. Further Assurances. In addition to the covenants and
agreements provided for in this Agreement, after the date hereof, each Party
shall, and shall cause its affiliates to, from time to time, at the request of
any other Party and without further cost or expense to such requesting Party,
execute and deliver such other documents,
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<PAGE> 10
instruments or agreements as are necessary or advisable to carry out the
transactions contemplated by this Agreement.
SECTION 6.5. Binding Effect; No Assignment; No Third Party
Beneficiaries. Except as expressly provided herein, neither this Agreement, nor
any right hereunder, may be assigned by any Party without the written consent of
the other Parties. Any assignment or attempted assignment in violation of the
foregoing shall be void. This Agreement shall be binding upon and inure solely
to the benefit of the Parties hereto and their permitted successors and assigns
and nothing in this Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 6.6. Counterparts. This Agreement may be executed by the
Parties in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the Parties.
SECTION 6.7. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 6.8. Severability. If any term or other provision of this
Agreement shall be deemed invalid, illegal or unenforceable, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
Party. Upon a determination that any term or other provision is invalid, illegal
or unenforceable, the Parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the maximum extent possible.
SECTION 6.9. Survival. All representations, warranties, covenants
and agreements of the parties shall survive the consummation of the
transactions contemplated by this Agreement.
SECTION 6.10. Entire Agreement. This Agreement, the Stock
Purchase Agreement, the Termination and Release Agreements, the Resignations and
the other instruments or agreements entered into in connection with this
Agreement or the transactions contemplated hereby constitute the entire
agreement between the Parties hereto and supersede all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matter hereof; provided, however, that nothing herein shall relieve any
Party hereto of any obligation or liability to any other Party hereto, or
otherwise modify, amend or vary any such obligation or liability, other than as
expressly provided herein.
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<PAGE> 11
SECTION 6.11. Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
(a) "Affiliate" or "affiliates", as applied to any Person, shall
mean any other Person directly or indirectly controlling, controlled by, or
under common control with that Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that person, whether through the
ownership of voting securities or by contract or otherwise.
(b) "Beneficially own" and "beneficial ownership" have the
meanings given to these terms in Rule 13d-3 of the Rules and Regulations of the
Securities and Exchange Commission under the Exchange Act, as in effect on the
date hereof.
(c) "Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
SECTION 6.12. Interpretation; Absence of Presumption. As used in
this Agreement, the following terms shall have the meanings set forth below:
(a) For the purposes hereof, (i) words in the singular shall be
held to include the plural and vice versa and words of one gender shall be held
to include the other genders as the context requires, (ii) the terms "hereof",
"herein", and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including all of the
Schedules and Exhibits hereto) and not to any particular provision of this
Agreement, and Article, Section, paragraph, Exhibit and Schedule references are
to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement
unless otherwise specified, (iii) the word "including" and words of similar
import when used in this Agreement shall mean "including, without limitation,"
unless the context otherwise requires or unless otherwise specified, (iv) the
word "or" shall not be exclusive, and (v) provisions shall apply, when
appropriate,to successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
SECTION 6.13. Expenses. Unless otherwise indicated in this
Agreement, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby, including fees and disbursements of
counsel, financial advisors and accountants, shall be paid by the party
incurring such costs and expenses.
SECTION 6.14. Specific Enforcement. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement
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<PAGE> 12
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that, subject to Section 6.3, the Parties
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any State having jurisdiction, this being in
addition to any remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be duly executed on the date first above written.
NEW PLAN EXCEL REALTY TRUST, INC.
By: /s/ Arnold Laubich
----------------------------------------
Name: Arnold Laubich
Title: Chief Executive Officer
ERT DEVELOPMENT CORPORATION
By: /s/ Richard B. Muir
----------------------------------------
Name: Richard B. Muir
Title: Executive Vice President
EXCEL LEGACY CORPORATION
By: /s/ Gary B. Sabin
----------------------------------------
Name: Gary B. Sabin
Title: Chairman, President and Chief
Executive Officer
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<PAGE> 13
EXHIBIT A TO MASTER SEPARATION AGREEMENT
[FORM OF RESIGNATION]
April 21, 1999
Board of Directors
New Plan Excel Realty Trust, Inc.
1120 Avenue of the Americas
New York, New York 10036
Gentlemen:
I hereby resign as a Director of New Plan Excel Realty Trust, Inc. ("New Plan")
and from any other office or position I may hold as a Director or otherwise with
New Plan, New Plan Realty Trust, or any of their respective subsidiaries or
affiliates, effective upon acceptance hereof by the Board of Directors, and
after the execution and delivery of the Master Separation Agreement, dated as of
the date hereof, among New Plan, ERT Development Corporation ("EDV") and Excel
Legacy Corporation (the "Master Separation Agreement") and the consummation of
the Closing, as defined in the Stock Purchase Agreement, dated as of the date
hereof, among NNRA, LLC, EDV and Excel Interfinancial Corporation.
---------------------------------------
Name:
<PAGE> 14
EXHIBIT B TO MASTER SEPARATION AGREEMENT
TERMS AND CONDITIONS OF SPACE LEASE
1. The term of this Lease shall commence on the date hereof and
shall continue month-to-month at the option of Legacy (based upon calendar
months), but in no event shall the term of this Lease extend beyond May 31,
2000.
2. The rent payable under this Lease shall be $1.75 per rentable
square foot per month. Rent is to be paid by Legacy monthly in advance on the
first day of each calendar month during the term hereof, at the main office of
New Plan or as may be otherwise directed by New Plan in writing. In addition,
Legacy agrees to pay as invoiced any operating expenses and real estate taxes
for the Building on a pro rata basis, based on the relative square footage of
the Demised Premises to the Building.
3. Legacy shall use the Demised Premises for office purposes
only.
4. This Lease includes all equipment and furniture located in the
Demised Premises as of the date hereof, and Legacy shall have the option, at the
expiration of this Lease, to acquire, at a price to be mutually agreed between
New Plan and Legacy, all equipment and furniture located in the Demised Premises
and not required by New Plan for the conduct of its business.
5. Legacy shall not sublet the Demised Premises or any portion
thereof, nor shall this Lease be assigned by Legacy, without the prior written
consent of New Plan (which consent may be unreasonably withheld).
6. Legacy has examined the Demised Premises, and accepts them in
their present "as is" condition. Legacy shall keep the Demised Premises in good
repair and condition. Legacy shall quit and surrender the Demised Premises at
the end of the term in as good condition as the reasonable use thereof will
permit. Legacy shall not make any alterations, additions, or improvements to the
Demised Premises without the prior written consent of New Plan. All alterations,
additions, improvements and personal property, whether temporary or permanent in
character, which may be made upon the Demised Premises either by New Plan or
Legacy, except furniture, equipment or moveable trade fixtures installed at the
expense of Legacy, shall be the property of New Plan and shall remain upon and
be surrendered with the Demised Premises as a part thereof at the termination of
this Lease, without compensation to Legacy (but subject to the purchase option
described in Section 4 above).
7. New Plan shall provide utilities and services to the Demised
Premises for the benefit of Legacy in a quality and manner consistent with New
Plan's prior practice with respect to the Demised Premises.
<PAGE> 15
8. Legacy agrees to observe and comply with all laws, ordinances,
rules and regulations of any federal, state, county and municipal authorities
applicable to the business to be conducted by Legacy in the Demised Premises.
9. In case of a breach or violation by Legacy of any of the
covenants, agreements and conditions of this Lease, or of the rules and
regulations now or hereafter to be reasonably established by New Plan, and upon
failure to cure such breach or violation within ten days after written notice
thereof given to Legacy, in addition to any other rights or remedies available
to New Plan at law or in equity, this Lease shall thenceforth, at the option of
New Plan, become null and void, and New Plan may reenter the Demised Premises
without further notice or demand.
10. This Lease is subject and is hereby subordinated to all
present and future mortgages, deeds of trust and other encumbrances affecting
the Demised Premises or the property of which said premises are a part.
11. New Plan covenants that Legacy, subject to paying the rental
and performing the covenants and conditions contained in this Lease contained,
shall and may peaceably and quietly have, hold and enjoy the Demised Premises
for the term set forth herein.
B-2
<PAGE> 16
EXHIBIT C TO MASTER SEPARATION AGREEMENT
[FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT]
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, made as of April 21,1999
(this "Assignment Agreement"), between New Plan Excel Realty Trust, Inc., a
Maryland corporation ("New Plan"), and Excel Legacy Corporation, a Delaware
corporation ("Legacy"), is delivered pursuant to that certain Master Separation
Agreement (the "Agreement"), dated as of April 21, 1999, among New Plan, Legacy
and ERT Development Corporation. Capitalized terms used but not defined herein
shall have their respective meanings as set forth in the Agreement.
WITNESSETH
WHEREAS, pursuant to the terms of the Agreement, New Plan has
agreed to assign, transfer and dispose of, and Legacy has agreed to acquire and
accept, all of New Plan's right, title and interest as a general partner of
Excel Properties, Ltd., a California limited partnership (the "Partnership
Interest"); and
WHEREAS, pursuant to the Agreement, Legacy has agreed to assume all
of New Plan's liabilities and obligations arising on or after the date hereof
arising from or relating to the Partnership Interest.
WHEREAS, the execution and delivery of this Assignment Agreement by
the Parties is a condition to the obligation of the Parties to consummate the
transactions contemplated by the Agreement.
NOW, THEREFORE, in consideration of the premises set forth in this
Assignment Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, intending to be legally
bound, and subject to the terms and conditions stated herein, the Parties
hereby agree as follows:
I. Assignment. New Plan hereby assigns to Legacy all of New
Plan's right, title and interest, on and after the date hereof, in and to the
Partnership Interest. To the extent the assignment contemplated hereby shall
require the consent or waiver of any other party, neither this Assignment
Agreement nor the Agreement shall constitute an agreement to assign the
Partnership Interest without such consent or waiver. If any such required
consent or waiver is not obtained, Legacy and New Plan shall, at Legacy's
expense, cooperate in any reasonable arrangement requested by Legacy or New
Plan and designed to provide Legacy with the benefit of the Partnership Interest
(and all associated obligations or liabilities), including New Plan acting as
Legacy's agent in order to obtain for Legacy the benefits therefor.
Notwithstanding any such consents or assignment, Legacy agrees to indemnify,
hold harmless and defend New Plan from and against any and all liabilities,
obligations, claims or expenses of whatever kind resulting from or related to
the Partnership Interest and the assignment and arrangements contemplated by the
Agreement and this Assignment Agreement.
<PAGE> 17
II. Assumption. Legacy hereby assumes all of the liabilities and
obligations arising on or after the date hereof arising from or relating to the
Partnership Interest, and Legacy shall indemnify, hold harmless and defend New
Plan from and against any and all liabilities, obligations, claims or expenses
of whatever kind resulting from or relating to the Partnership Interest.
III. Remedies. Nothing in this Assignment Agreement, express or
implied, is intended or shall be construed to confer upon, or give to, any
person, firm or corporation other than New Plan and Legacy and their respective
successors and assigns, any remedy or claim under or by reason of this
Assignment Agreement or any terms, covenants or condition hereof, and all the
terms, covenants and conditions, promises and agreements contained in this
Assignment Agreement shall be for the sole and exclusive benefit of New Plan and
Legacy and their respective successors and assigns.
IV. Miscellaneous. The agreements, covenants and terms contained
herein shall be binding upon and inure to the benefit of New Plan and Legacy and
their respective successors and assigns, and shall be construed and enforced
according to the laws of the State of New York (without giving effect to choice
of law principles thereof). Neither of the parties hereto may assign this
Assignment Agreement to any party (other than an Affiliate) without the prior
written consent of the other party. This Assignment Agreement may be executed in
one or more counterparts each of which shall be deemed to be an original, and
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Assignment
Agreement as of the date first above written.
NEW PLAN EXCEL REALTY TRUST, INC.
By:_____________________________________
Name:
Title:
EXCEL LEGACY CORPORATION
By:_____________________________________
Name:
Title:
C-2
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,175,000
<SECURITIES> 0
<RECEIVABLES> 273,000
<ALLOWANCES> (104,000)
<INVENTORY> 0
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<PP&E> 194,951,000
<DEPRECIATION> (3,503,000)
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<CURRENT-LIABILITIES> 0
<BONDS> 102,476,000
0
213
<COMMON> 335
<OTHER-SE> 166,266,000
<TOTAL-LIABILITY-AND-EQUITY> 270,138,000
<SALES> 0
<TOTAL-REVENUES> 9,217,000
<CGS> 0
<TOTAL-COSTS> 8,904,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 72,000
<INTEREST-EXPENSE> 2,025,000
<INCOME-PRETAX> 313,000
<INCOME-TAX> 139,000
<INCOME-CONTINUING> 174,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174,000
<EPS-PRIMARY> $0.01
<EPS-DILUTED> $0.00
</TABLE>
