SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995, OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
Commission file number 1-9393
Interstate General Company L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1488756
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Smallwood Village Center
St. Charles, Maryland 20602
----------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(301) 843-8600
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
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 report(s), 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 issuer's classes
of common stock, as of the latest practicable date.
10,256,785 Class A Units
------------------------
<PAGE>2
INTERSTATE GENERAL COMPANY L.P.
FORM 10-Q
INDEX
PART I FINANCIAL INFORMATION Page
Number
Item 1. Consolidated Financial Statements ------
Consolidated Statements of (Loss) Income for
the Nine Months Ended September 30, 1995
and 1994. (Unaudited) 3
Consolidated Statements of (Loss) Income for
the Three Months Ended September 30, 1995
and 1994. (Unaudited) 4
Consolidated Balance Sheets at September 30, 1995
(Unaudited) and December 31, 1994. 5
Consolidated Statements of Changes in
Partners' Capital for the Nine
Months Ended September 30, 1995.
(Unaudited) 8
Consolidated Statements of Cash Flow for the
Nine Months Ended September 30, 1995 and 1994.
(Unaudited) 9
Consolidated Statements of Cash Flow for the
Three Months Ended September 30, 1995 and 1994.
(Unaudited) 10
Notes to Consolidated Financial Statements. 11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Nine
and Three Months Ended September 30, 1995 and 1994. 24
PART II OTHER INFORMATION
Item 1. Legal Proceedings 35
Item 2. Material Modifications of Rights of Registrant's 36
Securities
Item 3. Defaults Upon Senior Securities 36
Item 4. Submission of Matters to a Vote of Security Holders 36
Item 5. Other Information 36
Item 6. Exhibits and Reports on Form 8-K 36
Signatures 38
<PAGE>3
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(In thousands, except per unit amounts)
(Unaudited)
1995 1994
----------- ------------
REVENUES:
Community development - land sales $ 11,598 $ 18,958
Homebuilding - home sales 8,378 15,135
Revenues from investment properties -
Equity in earnings from partnerships
and development fees 1,932 11,564
Apartment rental income 3,463 3,286
Management and other fees, substantially all
from related entities 3,181 2,569
Interest and other income 409 375
---------- ----------
Total revenues 28,961 51,887
---------- ----------
EXPENSES:
Cost of land sales 6,564 12,324
Cost of home sales 7,663 14,012
Selling and marketing 1,059 1,076
General and administrative 8,415 6,902
Rental apartment expense 3,307 3,336
Depreciation and amortization 409 456
Interest expense 1,742 1,512
Write-off deferred project cost -- 1,761
---------- ----------
Total expenses 29,159 41,379
---------- ----------
(LOSS) INCOME BEFORE PROVISION FOR INCOME
TAXES AND MINORITY INTEREST (198) 10,508
---------- ----------
PROVISION FOR INCOME TAXES 813 3,020
---------- ----------
(LOSS) INCOME BEFORE MINORITY INTEREST (1,011) 7,488
Minority interest 96 659
---------- ----------
NET (LOSS) INCOME $ (1,107) $ 6,829
========== ==========
NET (LOSS) INCOME
GENERAL PARTNERS $ (11) $ 68
LIMITED PARTNERS (1,096) 6,761
---------- ----------
$ (1,107) $ 6,829
========== ==========
NET (LOSS) INCOME PER UNIT $ (.11) $ .66
========== ==========
WEIGHTED AVERAGE UNITS OUTSTANDING 10,254 10,105
========== ==========
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>4
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(In thousands, except per unit amounts)
(Unaudited)
1995 1994
----------- ------------
REVENUES:
Community development - land sales $ 1,911 $ 2,239
Homebuilding - home sales 2,532 5,130
Revenues from investment properties -
Equity in earnings from partnerships
and development fees 602 7,309
Apartment rental income 1,149 1,128
Management and other fees, substantially all
from related entities 905 693
Interest and other income 197 188
---------- ----------
Total revenues 7,296 16,687
---------- ----------
EXPENSES:
Cost of land sales 1,539 1,653
Cost of home sales 2,240 4,939
Selling and marketing 326 396
General and administrative 3,523 2,999
Rental apartment expense 1,113 1,163
Depreciation and amortization 144 149
Interest expense 722 419
Write-off deferred project costs -- 1,761
---------- ----------
Total expenses 9,607 13,479
---------- ----------
(LOSS) INCOME BEFORE PROVISION FOR INCOME
TAXES AND MINORITY INTEREST (2,311) 3,208
---------- ----------
PROVISION FOR INCOME TAXES 256 185
---------- ----------
(LOSS) INCOME BEFORE MINORITY INTEREST (2,567) 3,023
Minority interest (69) (42)
---------- ----------
NET (LOSS) INCOME $ (2,498) $ 3,065
========== ==========
NET (LOSS) INCOME
GENERAL PARTNERS $ (25) $ 31
LIMITED PARTNERS (2,473) 3,034
---------- ----------
$ (2,498) $ 3,065
========== ==========
NET (LOSS) INCOME PER UNIT $ (.24) $ .30
========== ==========
WEIGHTED AVERAGE UNITS OUTSTANDING 10,257 10,131
========== ==========
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>5
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
A S S E T S
September 30, December 31,
1995 1994
------------- -----------
(Unaudited) (Audited)
CASH AND SHORT-TERM INVESTMENTS
Cash $ 2,120 $ 1,120
Restricted cash 6,953 5,713
-------- --------
9,073 6,833
-------- --------
ASSETS RELATED TO COMMUNITY DEVELOPMENT
Land and development costs
St. Charles, Maryland 25,080 26,426
Puerto Rico 25,672 26,103
Other United States locations 16,313 16,014
Notes receivable on lot sales, net of
reserves of $334 and $286
as of September 30, 1995 and
December 31, 1994, respectively 3,866 1,256
Other 324 262
-------- --------
71,255 70,061
-------- --------
ASSETS RELATED TO HOMEBUILDING PROJECTS
Homebuilding construction and land 3,217 4,384
Mortgages receivable 188 222
Receivables on home sales 46 271
Other 145 121
-------- --------
3,596 4,998
-------- --------
ASSETS RELATED TO INVESTMENT PROPERTIES
Investment in residential rental
partnerships 10,869 9,976
Investment properties, net of accumulated
depreciation and amortization of
$4,941 and $4,746 as of September 30,
1995 and December 31, 1994, respectively 24,137 24,499
Other receivables, net of reserves of
$505 and $1,071 as of September 30,
1995 and December 31, 1994, respectively 1,677 1,133
-------- --------
36,683 35,608
-------- --------
<PAGE>
<PAGE>6
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
A S S E T S (continued)
September 30, December 31,
1995 1994
------------- -----------
(Unaudited) (Audited)
OTHER ASSETS
Property, plant and equipment, less
accumulated depreciation of $2,173
and $1,948 as of September 30, 1995 and
December 31, 1994, respectively 1,518 1,588
Costs in excess of net assets acquired,
less accumulated amortization of
$850 and $735 as of September 30,
1995 and December 31, 1994, respectively 2,185 2,299
Deferred costs regarding waste technology
and other 2,719 2,126
-------- --------
6,422 6,013
-------- --------
Total assets $127,029 $123,513
======== ========
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>7
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
LIABILITIES AND PARTNERS' CAPITAL
September 30, December 31,
1995 1994
------------- ------------
(Unaudited) (Audited)
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and other accrued
liabilities $ 4,673 $ 3,521
Mortgages and notes payable 298 370
Accrued income tax liability 3,029 4,553
-------- --------
8,000 8,444
-------- --------
LIABILITIES RELATED TO COMMUNITY DEVELOPMENT
Recourse debt 44,242 36,661
Non-recourse debt 2,004 4,268
Accounts payable, accrued liabilities
and deferred income 3,545 2,728
-------- --------
49,791 43,657
-------- --------
LIABILITIES RELATED TO HOMEBUILDING
Recourse debt 1,267 2,398
Accounts payable and accrued liabilities 2,327 2,506
-------- --------
3,594 4,904
-------- --------
LIABILITIES RELATED TO INVESTMENT PROPERTIES
Recourse debt 1,334 1,559
Non-recourse debt 22,681 22,771
Accounts payable and accrued liabilities 1,860 1,473
-------- --------
25,875 25,803
-------- --------
Total liabilities 87,260 82,808
-------- --------
PARTNERS' CAPITAL
General partners' capital 4,311 4,322
Limited partners' capital-10,257 and
10,215 Units issued and outstanding as of
September 30, 1995 and December 31, 1994 35,458 36,383
-------- --------
Total partners' capital 39,769 40,705
-------- --------
$127,029 $123,513
======== ========
The accompanying notes are an integral part
of these consolidated balance sheets.
<PAGE>8
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(In thousands)
(Unaudited)
General Limited
Partners' Partners'
Capital Capital Total
-------- --------- ---------
Balances, December 31, 1994 $ 4,322 $36,383 $40,705
Net income for the six
months ended June 30, 1995 14 1,377 1,391
Employee/Director Unit
options exercised -- 171 171
------- ------- -------
Balances, June 30, 1995 4,336 37,931 42,267
Net (loss) for the three months
ended September 30, 1995 (25) (2,473) (2,498)
------- ------- -------
Balances, September 30, 1995 $ 4,311 $35,458 $39,769
======= ======= =======
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>
<PAGE>9
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(In thousands)
(Unaudited)
1995 1994
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(1,107) $6,829
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization
Corporate 409 456
Investment properties 497 470
Provision for income taxes 813 3,020
Equity in earnings of partnerships (1,204) (1,484)
Increase in sponsor and developer fees
from partnerships (273) (242)
Distribution of note receivable from partnership -- (6,526)
(Increase) decrease in
Receivables (2,576) 515
Homebuilding assets 1,368 1,738
Community development assets 1,417 7,807
Restricted cash (1,240) (5,512)
(Decrease) increase in accounts payable,
accrued liabilities and deferred income (546) 43
------- -------
Net cash (used in) provided by operating activities (2,442) 7,114
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in assets related to
investment properties 201 4,340
Net (acquisitions) dispositions of other assets (819) 318
------- -------
Net cash (used in) provided by investing activities (618) 4,658
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from debt financing 26,701 6,796
Payment of debt (22,812) (19,094)
Employee Unit options exercised 171 436
Cash distributions to partners -- (1,020)
------- -------
Net cash provided by (used in) financing activities 4,060 (12,882)
------- -------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 1,000 (1,110)
CASH AND SHORT-TERM INVESTMENTS, BEGINNING OF YEAR 1,120 2,009
------- -------
CASH AND SHORT-TERM INVESTMENTS, SEPTEMBER 30 $ 2,120 $ 899
======= =======
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>10
INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(In thousands)
(Unaudited)
1995 1994
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $(2,498) $ 3,065
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization
Corporate 144 149
Investment properties 166 157
Provision for income taxes 256 185
Equity in earnings of partnerships (440) (552)
Increase in sponsor and developer fees
from partnerships (91) (80)
Distribution of note receivable from partnership -- (6,526)
Decrease (increase) in
Receivables 293 160
Homebuilding assets (111) 1,246
Community development assets 714 128
Restricted cash (1,434) 393
(Decrease) increase in accounts payable,
accrued liabilities and deferred income (1,414) 882
------- -------
Net cash used in operating activities (4,415) (793)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in assets related to
investment properties 64 (328)
Net (acquisitions) dispositions of other assets (240) 29
------- -------
Net cash used in investing activities (176) (299)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from debt financing 18,750 3,945
Payment of debt (13,311) (3,496)
Employee Unit options exercised -- 367
Cash distributions to partners -- (516)
------- -------
Net cash provided by financing activities 5,439 300
------- -------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS 848 (792)
CASH AND SHORT-TERM INVESTMENTS, JUNE 30 1,272 1,691
------- -------
CASH AND SHORT-TERM INVESTMENTS, SEPTEMBER 30 $ 2,120 $ 899
======= =======
The accompanying notes are an integral part
of these consolidated statements.
<PAGE>11
INTERSTATE GENERAL COMPANY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
(1) BASIS OF PRESENTATION AND PRINCIPLES OF ACCOUNTING
The accompanying consolidated financial statements are unaudited but
include all adjustments (consisting of normal recurring adjustments) which the
Company's management considers necessary for a fair presentation of the results
of operations for the interim periods. Certain account balances in the 1994
financial statements have been reclassified to conform to the 1995
presentation. The operating results for the three and nine month periods ended
September 30, 1995 are not necessarily indicative of the results that may be
expected for the year. Net income per unit is calculated based on weighted
average units outstanding. Outstanding options and warrants to purchase Units
do not have a material dilutive effect on the calculation of earnings per Unit.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial statements
prepared in accordance with Generally Accepted Accounting Principles ("GAAP")
have been condensed or omitted. While the Managing General Partner believes
that the disclosures presented are adequate to make the information not
misleading, it is suggested that these financial statements be read in
conjunction with the financial statements and the notes included in the
Partnership's Annual Report filed on Form 10-K for the year ended December 31,
1994.
(2) FINANCING, LIQUIDITY AND RELATED MATTERS
The Company has historically met its liquidity requirements principally
from cash flow generated by home and land sales, property management fees,
distributions from HDA and residential rental partnerships and from bank
financing providing funds for development and working capital. As discussed in
Note 4, the Company will no longer receive distributions from HDA, as a result
of the Company's distribution of Equus Gaming Company L.P. ("Equus") units
representing a 99% limited partnership interest in Equus, to IGC Unitholders in
February 1995. In addition, under the terms of IGC's loans, most of the cash
generated by U.S. home and lot sales and distributions from partnerships,
including distributions from partnership refinancings, will be used to further
reduce bank loans and meet debt service requirements. Given these factors, the
Company's ability to generate cash for overhead, development and other uses is
limited. In addition, project financings will be necessary to fund the
continued development of land inventory to generate the necessary lot sales to
meet the Company's operating obligations. As further discussed in Note 5,
pending legal proceedings may also adversely affect the Company's liquidity,
including the timing and/or terms of any financings.
In response to the decline in the real estate markets and the decline in
the availability of financing, the Company developed a financial restructuring
plan in June 1992. Since commencing the plan, the Company has successfully
restructured all loans targeted by the plan and has reduced recourse bank debt
by $23.8 million from $69.1 million at the start of the restructuring plan to
$45.3 million at September 30, 1995.
<PAGE>12
NationsBank has agreed to extend the maturity of its loans until May 1998.
Under the agreement, the extension of the maturity beyond November 30, 1995 is
contingent upon a mandatory principal curtailment of $2.2 million which the
Company anticipates will come from the financing of the first phase of Fairway
Village in St. Charles, Maryland. Signet Bank has agreed to extend the
maturity of its loans until September 1996. The balance of the Signet loans as
of September 30, 1995 is $3.6 million. The Company anticipates it will pay off
these loans prior to their maturity with the proceeds from the sale of
residential lots which secure the loan.
A potential source of liquidity in late 1995 includes cash from four
projects in Puerto Rico which applied in March 1993 for economic incentives
under the 1990 Low-Income Housing Preservation and Resident Homeownership Act
("LIHPRHA"). Under LIHPRHA, the partnerships have the option of obtaining
additional HUD insured financing and additional subsidy funds, and distributing
net refinancing proceeds to partners, or selling the projects to non-profit
organizations which would continue the projects in HUD's low income housing
program. Management believes that the economic benefit to the Company and the
partners will be greater from a sale of the projects, in which event the
Company will endeavor to retain the right to manage the properties.
The decision to sell the projects under LIHPRHA is largely dependent on
the outcome of proposed legislation to be considered by Congress in 1995, which
could significantly reduce the proceeds available to the Company. If this
occurs, management will reconsider its decision to sell the projects under the
LIHPRHA program. It is not possible at the present time to predict the outcome
of the proposed changes to the LIHPRHA program. Should management decide not to
sell the projects under the LIHPRHA program, an alternative exit strategy would
be to convert the four projects to condominiums and sell the individual units.
If this alternative is pursued, the conversion and subsequent sale of the units
is expected to take approximately three to five years. The Company's share of
proceeds of any sales of the projects have been assigned to the FDIC and
NationsBank for repayment of debt totalling approximately $12.8 million at
September 30, 1995.
A LIHPRHA application was filed for a fifth project in Puerto Rico in
November 1994. The timetable for completing the LIHPRHA processing is
approximately two years. However, if proposed legislation is enacted,
management may withdraw the application.
(3) INVESTMENT IN RESIDENTIAL RENTAL PARTNERSHIPS
As of September 30, 1995, IGC manages and is a general partner in 29 real
estate partnerships which own 32 apartment projects in Puerto Rico, Maryland,
Virginia and Washington, D.C. IGC is also a limited partner in many of these
partnerships. The apartment projects are financed by non-recourse mortgages.
Of the 6,559 rental units in the various partnerships, the Federal Housing
Administration ("FHA") provides subsidies for low and moderate income tenants
in 5,371 units.
<PAGE>
<PAGE>13
The following table summarizes IGC's investment in residential rental
partnerships:
September 30, December 31,
1995 1994
------------- -----------
(Unaudited) (Audited)
(In thousands)
Long-term receivables, net of deferred
income of $3,505 and $3,778 at
September 30, 1995 and December 31, 1994,
respectively $ 3,374 $ 3,368
Investment in partnerships 7,495 6,608
------- -------
$10,869 $ 9,976
======= =======
The combined condensed statements of income for the three and nine month
periods ended September 30, 1995 and 1994, are shown below for the partnerships
owning residential rental properties:
HOUSING PARTNERSHIPS'
COMBINED CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ---------------------
1995 (1) 1994 (1) 1995 (1) 1994 (1)
-------- -------- -------- --------
(In thousands) (In thousands)
Revenues $10,248 $ 9,920 $30,673 $30,909
------- ------- ------- -------
Operating expenses
Depreciation 1,605 1,626 4,812 4,849
Other 8,133 8,089 25,005 25,070
------- ------- ------- -------
9,738 9,715 29,817 29,919
------- ------- ------- -------
Net income $ 510 $ 205 $ 856 $ 990
======= ======= ======= =======
(1) The income and expenses of Fox Chase Apartments General Partnership
("Fox Chase"), New Forest Apartments General Partnership ("New
Forest") and Lancaster Associates L.P. ("Lancaster") are excluded
from these statements. The operations of these partnerships are
consolidated in the Company's consolidated statements of (loss)
income for the three and nine month periods ended September 30, 1995
and 1994.
The FHA, Puerto Rico Housing Finance Corporation ("PRHFC"), State and
District of Columbia housing agencies and the partnership agreements require
that the accumulation of cash in the partnerships be sufficient to liquidate
all current liabilities before distributions to partners are permitted. Most of
the partnership agreements provide that IGC receive a zero to 5% interest in
profits, losses and cash flow from operations until such time as the limited
partners have received cash distributions equal to their capital contributions.
Thereafter, IGC generally shares in 50% of cash distributions from operations.
<PAGE>14
(4) INVESTMENT IN REAL ESTATE VENTURES RELATING TO HORSE RACING
Housing Development Associates, S.E. ("HDA"), a limited partnership that
owns the only thoroughbred race track in Puerto Rico, was owned 1% by IGC and
82% by Equus Gaming Company L.P. ("Equus") at September 30, 1995 and 68% by IGC
and its consolidated subsidiaries at December 31, 1994.
Equus was initially formed as a general partnership between IGC and IBC to
hold their interests in HDA and to hold all of the stock of ventures related to
horse racing. Through a series of transactions completed in August 1994, Equus
was restructured as a limited partnership between IGC and one of its wholly-
owned subsidiaries, Equus Management Company ("EMC"), for the purpose of
holding all of IGC's ownership interests in real estate assets employed in
thoroughbred racing and related wagering businesses.
A registration statement was filed with the Securities and Exchange
Commission ("SEC") for the distribution of Equus limited partnership units
("Equus Units") representing a 99% limited partnership interest in Equus, and
was declared effective by the SEC on January 10, 1995. The distribution of
Equus Units ("Distribution") took place on February 6, 1995 when IGC
distributed 5,128,372 Equus Units to IGC Unitholders and the Units became
listed on NASDAQ. The Distribution was made on the basis of one Equus Unit for
every two IGC Units outstanding on the record date of January 25, 1995. As a
result of the Distribution, IGC's total revenues for the three and nine months
ended September 30, 1995 were reduced by $164,000 and $749,000, respectively,
and net income was increased by $6,000 and decreased by $13,000, respectively,
for these periods. IGC's equity in earnings of HDA and resultant net income
were also reduced by approximately $453,000 for the nine month period ended
September 30, 1995 and increased by $187,000 for the third quarter 1995 due to
the Distribution of Equus.
IGC, through EMC, continues to manage Equus following the Distribution.
Certain directors and officers of EMC, including EMC's chief executive officer,
also continue to serve as officers and directors of IGC's managing general
partner, IGMC. IGC and EMC together have retained a 1% general partnership
interest in Equus.
For a transitional period following completion of the Distribution, IGC
will provide certain administrative services and support to Equus pursuant to a
Master Support and Services Agreement (the "Support Agreement"). Equus will
reimburse IGC for costs incurred in providing these services. An IGC
subsidiary, Interstate General Properties Limited Partnership S.E., will
continue to provide management services to HDA pursuant to an existing
management agreement.
Prior to the Distribution, during the first quarter of 1995, IGC agreed to
transfer to Equus all but 1% of its remaining capital interest in HDA for no
additional consideration. The transfer is required to take place on February
7, 1996, unless prior to that date HDA dissolves, liquidates or adopts a plan
of liquidation, becomes the subject of a bankruptcy petition which is not
discharged, or sells or enters into a definitive agreement to sell the Race
Track. If any of the foregoing occurs before February 7, 1996, IGC's
obligation to transfer the capital interest will be canceled.
At September 30, 1995, the Company's financial statements reflect the
equity method of accounting for its investment in Equus, including its
investments in HDA and Virginia Jockey Club, Inc. ("VJC"). Because IGC is the
1% general partner of Equus, it has the ability to exercise significant
<PAGE>15
influence over Equus' operating and financial policies and the equity method is
considered appropriate. At December 31, 1994, IGC's investment in Equus was
consolidated in the Company's financial statements, since IGC owned a majority
interest in Equus at this date.
(5) DEBT
The Company's outstanding debt is collateralized primarily by land,
housing and other land improvements, receivables, and investments in
partnerships. The following table summarizes the indebtedness of IGC:
Stated Outstanding Balance at:
Maturity Interest September 30, December 31,
Description by Lender Date Rate 1995 1994
- ------------------------- -------------- -------- ------------- ------------
(In thousands)
Non-recourse debt:
Community Development
Administration (11) 12-29-24 6.85% $ 4,403 $ 4,438
Community Development
Administration (9) 10-01-27 9.575% 6,369 6,390
Community Development
Administration (9) 10-01-28 9.875% 11,909 11,943
Supra & Co. (13) None Prime -- 1,514
+ 2.5%
Supra & Co. (13) 08-02-09 Prime 1,977 2,372
+ 1.5% (2)
Supra & Co. (13) 08-02-09 None (2) 12 382
------- -------
Total non-recourse 24,670 27,039
------- -------
Recourse debt:
Citibank (10) Demand (1) 1,334 1,559
Citibank (7) 05-05-96 (5) 2,325 --
NationsBank (5,7,12) 11-30-95 Prime 608 608
+ 1.5%
NationsBank (5,7,12) 11-30-95 Prime 4,788 5,146
+ 1.5%
NationsBank (5,7,12) 11-30-95 Prime 5,399 7,719
+ 1%
Purchase money Various from 9%-12% 1,742 2,081
mortgages (5) 06-12-96 to
04-01-98
Washington Savings (5,6) 12-27-95 8% 137 1,153
Signet Bank (6,12,15) 09-01-96 Prime 3,623 6,533
+ 2%
Wachovia Bank & Trust 11-30-95 Prime 239 337
(5,7) + .5%
FDIC (5,7,12) 09-30-96 Prime 6,785 8,995
+ 1%
1st National Bank of 12-29-97 Prime 406 460
St. Mary's (6) + 1.5%
1st National Bank of 12-21-95 9% 55 120
St. Mary's (6)
Washington Savings (6) Various from 9.75% 330 --
02-25-96 to to 10%
06-06-96
<PAGE>16
Stated Outstanding Balance at:
Maturity Interest September 30, December 31,
Description by Lender Date Rate 1995 1994
- ------------------------- -------------- -------- ------------- ------------
(In thousands)
1st National Bank of 09-14-96 10.25% 162 --
St. Mary's
Virginia First 11-16-95 Prime 577 484
Savings (6) + 1.5%
FirstBank (5) 12-31-97 Prime 17,425 --
+ 1.5%
Banco Central
Hispano (5,15,16) 12-31-97 (3) -- 3,875
Banco Central 12-31-97 Prime -- 1,300
Hispano (5,15,16) + 1%
Wachovia Bank & Trust Various from 7-1/2% 45 91
(7) 04-26-00 to
10-25-00
Riggs National Bank (5) 06-15-96 Prime 659 --
+ 1%
Various (5,7,8,14) Various from 7.1% 436 527
12-31-95 to to 11%
04-12-97 ------- -------
Total recourse 47,075 40,988
------- -------
Total debt $71,745 $68,027
======= =======
Balance Sheet Classification
- ----------------------------
Mortgages and notes payable - Recourse debt $ 298 $ 370
Related to community development -
Recourse debt 44,176 36,661
Non-recourse debt 1,989 4,268
Related to homebuilding projects - Recourse debt 1,267 2,398
Related to investment properties -
Recourse debt 1,334 1,559
Non-recourse debt 22,681 22,771
------- -------
Total debt $71,745 $68,027
======= =======
(1) The interest rate is not fixed to maturity and is renegotiated on a
periodic basis. The interest rate was 7.96% and 6.70% at September 30,
1995 and December 31, 1994, respectively.
(2) On August 2, 1994, HDA distributed a receivable from Land Development
Associates S.E. ("LDA") to Supra & Co. which included principal and
accrued interest. The accrued interest was distributed as a non-interest
bearing note. The interest bearing note has an interest rate of prime
plus 1.5% with a floor of 6% and a ceiling of 9%. At September 30, 1995
and December 31, 1994 the interest rate was 9.0%.
(3) Interest rate was 936 rate plus 3%, with minimum of 6% and maximum of 9%.
The rate at December 31, 1994 was 8.57%.
(4) Not used.
(5) These facilities are collateralized by land and improvements.
<PAGE>17
(6) These facilities are collateralized by land and housing.
(7) These facilities are collateralized by receivables.
(8) These facilities are collateralized by land and building.
(9) These facilities are mortgages on apartment projects insured by FHA.
(10) This loan is collateralized by a letter of credit.
(11) This facility is a mortgage on an apartment project insured by the
Maryland Housing Fund.
(12) These facilities are collateralized by investments in partnerships.
(13) This entity is a minority partner in LDA.
(14) These facilities are collateralized by vehicles.
(15) This facility was collateralized by the Company's 80% partnership
interest in LDA and by assignment of 70% of net cash distributions from
LDA or any other receivable from LDA to the Company.
(16) These loans were repaid in August 1995 when the Company refinanced the
property which secures the loans with FirstBank.
(6) RELATED PARTY TRANSACTIONS
James J. Wilson, Chief Executive Officer of the Company has an ownership
interest in various entities to which IGC provides management services. These
entities and their relationships to IGC are as follows:
Interstate Business
Corporation ("IBC")
or Affiliate IGC
-------------------- --------------------
Limited Limited
and Limited and Limited
General Liability General Liability
Partner Partner Partner Partner
------- ----------- ------- -----------
Chastleton .99% -- .01% --
Coachman's Landing
("Coachman's") 1% 49% 1% 49%
Santa Maria Associates,
S.E. ("Santa Maria") -- 99% -- 1%
El Monte Properties, S.E.
("El Monte") -- 99% -- 1%
G.L. Limited Partnership
("Rolling Hills") 1% 49% -- --
Village Lake Associates
Limited Partnership
("Village Lake") 99% 1% -- --
Capital Park Associates
("Capital Park") (a) -- -- --
Smallwood Village Associates
Limited Partnership ("SVA") 1% 51% -- --
Smallwood Village Office
Building Associates Limited
Partnership ("SVOBA") 25% -- -- --
Equus Gaming Company L.P. -- 32% 1% --
IBC, General Partner of IGC -- -- -- --
(a) An affiliate of IBC holds notes receivable that are secured by the
existing general partners' interest in the partnership.
<PAGE>18
Transactions between the above entities and IGC are described in the
following tables.
REVENUE FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1995
(In thousands)
---------------------------------------------
Income Earned
-------------------------
Management
Fees Interest Total Reserved Recognized
---------- -------- ----- -------- ----------
Chastleton (a,c) $ 54 $ -- $ 54 $ (53) $ 1
Coachman's (a) 112 178 290 (25) 265
Santa Maria 74 74 74
El Monte 56 56 56
Rolling Hills (b,j) 413 413 413
Village Lake (a) 45 45 45
Capital Park 234 234 234
SVA 44 44 44
SVOBA 5 5 5
IBC 23 25 48 48
------ ---- ------ ----- ------
$1,060 $203 $1,263 $ (78) $1,185
====== ==== ====== ===== ======
REVENUE FOR THE THREE MONTH PERIOD ENDED
SEPTEMBER 30, 1995
(In thousands)
---------------------------------------------
Income Earned
-------------------------
Management
Fees Interest Total Reserved Recognized
---------- -------- ----- -------- ----------
Chastleton (a,c) $ 19 $ -- $ 19 $ (19) $ --
Coachman's (a) 6 6 12 (12) --
Santa Maria 17 17 17
El Monte 26 26 26
Rolling Hills (b,j) 24 24 24
Village Lake (a) 6 6 6
Capital Park 79 79 79
SVA 15 15 15
SVOBA 2 2 2
IBC 8 8 16 16
---- ---- ---- ----- ----
$202 $ 14 $216 $ (31) $185
==== ==== ==== ===== ====
<PAGE>
<PAGE>19
RECEIVABLES AT SEPTEMBER 30, 1995
(In thousands)
--------------------------------------------------------
Outstanding Balance
---------------------------------------
Working
Capital Land/
Management Loans Asset Book
Fees (d) Sales Interest Total Reserved Balance
---------- ------- ----- -------- ----- -------- -------
Chastleton (g,h) $330 $ 33 $ -- $ -- $363 $(330) $ 33
Coachman's (e,i) 13 116 $12 141 (25) 116
Santa Maria 6 6 6
El Monte 15 15 15
Rolling Hills (j) 321 4 325 325
Village Lake 43 -- 43 43
Capital Park 26 16 42 42
SVA (f) 4 1 5 5
SVOBA 1 -- 1 1
IBC (h,i) 3 13 302 25 343 343
---- ---- ---- ---- ------ ----- ----
$762 $183 $302 $37 $1,284 $(355) $929
==== ==== ==== ==== ====== ===== ====
REVENUE FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1994
(In thousands)
---------------------------------------------
Income Earned
-------------------------
Management
Fees Interest Total Reserved Recognized
---------- -------- ----- -------- ----------
Chastleton (a,c) $55 $ -- $55 $(47) $ 8
Coachman's (a) 18 14 32 (32) --
Santa Maria 43 43 43
El Monte 71 71 71
Rolling Hills (b) 71 71 (31) 40
Village Lake (a) 11 11 (11) --
Capital Park 212 212 212
SVA 42 115 157 (119) 38
SVOBA 8 8 8
IBC 21 61 82 (21) 61
---- ---- ---- ---- ----
$552 $190 $742 $(261) $481
==== ==== ==== ==== ====
<PAGE>
<PAGE>20
REVENUE FOR THE THREE MONTH PERIOD ENDED
SEPTEMBER 30, 1994
(In thousands)
---------------------------------------------
Income Earned
-------------------------
Management
Fees Interest Total Reserved Recognized
---------- -------- ----- -------- ----------
Chastleton (a,c) $ 18 $18 $(18) $ --
Coachman's (a) 6 5 11 (11) --
Santa Maria 15 15 15
El Monte 22 22 22
Rolling Hills (b) 24 24 7 31
Village Lake (a) 6 6 (6) --
Capital Park 78 78 -- 78
SVA 13 39 52 (44) 8
SVOBA 3 3 3
IBC 7 19 26 (9) 17
---- ---- ---- ---- ----
$192 $ 63 $255 $(81) $174
==== ==== ==== ==== ====
RECEIVABLES AT DECEMBER 31, 1994
(In thousands)
--------------------------------------------------------
Outstanding Balance
---------------------------------------
Working
Capital Land/
Management Loans Asset Book
Fees (d) Sales Interest Total Reserved Balance
---------- ------- ----- -------- ----- -------- -------
Chastleton (g,h) $277 $ 30 $ -- $ -- $ 307 $ (277) $ 30
Coachman's (e) 93 211 -- 160 464 (315) 149
Santa Maria 4 -- -- -- 4 -- 4
El Monte 13 -- -- -- 13 -- 13
Rolling Hills 352 3 -- -- 355 (352) 3
Village Lake 26 1 -- -- 27 (26) 1
Capital Park 18 7 -- -- 25 -- 25
SVA (f) 3 -- -- -- 3 (3) --
SVOBA 1 -- -- -- 1 -- 1
IBC (h,i) 2 -- 302 -- 304 -- 304
---- ---- ---- ---- ------ ----- ----
$789 $252 $302 $160 $1,503 $(973) $530
==== ==== ==== ==== ====== ===== ====
(a) The management fee was reduced from 5% to 2.5% until the project has
positive cash flow.
(b) The management fee was reduced from 4.5% to 2.5% until the project has
positive operating cash flow.
(c) Management agreed that it would defer all management fees until Chastleton
had sufficient cash flow to fund operations and to subordinate 50% of its
management fee until IBC has recovered its operating advances.
<PAGE>21
(d) Working capital loans include operating advances and reimbursements due
for common expenses.
(e) IBC has the funding obligation for operating deficits. IGC equally shares
the general and limited partnership interest with IBC, since IGC funded
these deficits.
(f) During 1990, in satisfaction of outstanding advances of $1.7 million due
IGC from IBC, IBC transferred to IGC a $3.8 million note receivable due
from SVA. This note was purchased back by IBC on December 30, 1994.
(g) IBC has the funding obligation for operating deficits.
(h) IGC is contingently liable under $4.6 million of letters of credit issued
by NationsBank collateralized by land, which secure additional bonds
issued for Chastleton.
(i) During 1989, IBC purchased 5.01 acres of commercial land. IGC accepted a
note receivable for 80% of the $1,092,000 purchase price. The note is
collateralized by IBC's ownership interest in Santa Maria and Village
Lake. On December 23, 1994, Lakeside, a wholly owned subsidiary of the
Company purchased the remaining 1.23 acres of this land from IBC for the
development of rental units for senior citizens, for its appraised value
of $440,000. Lakeside paid $88,000 to IBC and issued a note payable for
the remaining $352,000. The note is payable upon the earlier of final
closing of permanent financing for the rental project or December 31,
1996. During the first quarter of 1995, IBC assigned the note receivable
due from Lakeside to IGC in satisfaction of past due receivables from
Coachman's. The collection of the majority of the Coachman's receivables
had previously been questionable and $328,000 had been reserved. This
transaction resulted in income recognition of these reserves during the
first nine months of 1995.
(j) The performance of this project has improved and the project is now
producing positive cash flow. During the first quarter of 1995, partial
payments were made of past due management fees owed to the Company. The
collection of the remaining receivable balance is now considered probable
and reserves related to this receivable aggregating $335,000 were
recognized as income during the first nine months of 1995.
IGC and affiliates lease office space from Smallwood Village Associates
Limited Partnership ("SVA"), one of IBC's commercial properties in which IGC's
executive offices are located. A total of 23,400 square feet of office space
was leased by IGC and affiliates at approximately $282,000 per year (subject to
adjustment for inflation). During the three and nine month periods ended
September 30, 1995 and 1994, IGC's rent for its share of the leases was $45,000
and $52,000, respectively, and $140,000 and $148,000, respectively. The lease
was amended reducing the square feet to 15,100 and the annual rate to $181,000.
The lease was also extended to 2005 with a sublease provision requiring IBC to
sublease the premises at IGC's request.
IGC provides management services to HDA pursuant to a management agreement
which has a term ending in December 2004. The management agreement provides
for an annual fee of $250,000, adjusted by the percentage increase in the
Consumer Price Index ("CPI") over the prior year. Management fees earned for
services provided to HDA in the first nine months of 1995 and 1994 were
$198,000 and $193,000, respectively. Management fees for the three month
periods ended September 30, 1995 and 1994 were $64,000 and $64,000,
respectively.
IGC provides administrative support services to Equus Gaming Company L.P.
pursuant to a Master Support and Services Agreement. During the three and nine
months ended September 30, 1995, IGC received $50,000 and $150,000,
respectively, in connection with such services.
<PAGE>22
IGC's Puerto Rico executive office has been located in the Doral Building
since November 1991 under a five-year lease providing for a first-year payment
of rent of approximately $187,000 and certain escalations for increases in the
CPI and pro-rata share of operating expenses in years two through five. The
Doral Building is owned by a 99% owned subsidiary of IBC. Rental expense for
the executive office and certain other property in Puerto Rico leased from
affiliates was $171,000 and $154,000 for the nine months ended September 30,
1995 and 1994, respectively. Rental expense for the three month periods ended
September 30, 1995 and 1994 was $61,000 and $51,000, respectively.
American Family Homes, a wholly owned subsidiary of IGC, leases 3000
square feet of commercial space from IBC which is used for one of its sales
centers. The lease term was modified to reflect a June 1, 1996 expiration
date. Rent expense associated with this lease during the three and nine month
periods ended September 30, 1995 was $10,000 and $29,000, respectively.
James J. Wilson, as a general partner of IGP, is entitled to priority
distributions made by each housing partnership in which IGP is the general
partner. If IGP receives a distribution which represents 1% or less of a
partnership's total distribution, Mr. Wilson receives the entire distribution.
If IGP receives a distribution which represents more than 1% of a partnership's
total distribution, Mr. Wilson receives the first 1% of such total.
On March 31, 1995, IGC sold two parcels in the Parque Escorial development
in Puerto Rico to Compri Caribe Development Corp. ("Compri"), a corporation
wholly owned by Jorge Colon Nevares, a director of the Company's managing
general partner, for use in its operations. The terms of this transaction
provided for a sales price of $3,453,000, of which $693,000 was paid in cash,
and the remainder of which was satisfied by a note in the amount of $2,760,000.
The note is collateralized by the land parcels and bears interest at a rate of
10% per annum commencing at the earlier of infrastructure completion or
December 15, 1995. From April 1, 1995 to December 15, 1995, the non-interest
bearing period, the note was discounted at a rate of 10%. Interest income
recognized in connection with this amortization of the discount from April 1,
1995 to September 30, 1995 totalled $131,311. Monthly payments of principal
and interest totalling $27,000 are due monthly commencing May 1, 1995 with a
balloon payment due at maturity on April 1, 1998.
Concurrent with the transaction described above, the Company executed a
contract of sale with Compri for three other land parcels in the Parque
Escorial development. The terms of the agreement, as amended, provide for a
base purchase price of $3,397,000, subject to monthly escalations of one
percent per month for each month that transpires from the earlier of
infrastructure completion or December 15, 1995. The closing of the transaction
is to take place on or before December 21, 1995. A 20% cash payment is due at
closing, with the remainder to be satisfied by an interest bearing note
collateralized by the land parcels. The note is to bear interest at a fixed
rate of prime plus one percent at the closing date, and is payable in thirty-
five monthly installments of principal and interest of $27,000, with a balloon
payment due at maturity.
On September 8, 1995, the Company executed a Contract of Sale with Twenty
First Century Homes S.E. ("Twenty First Century") for two parcels of land in
the Parque Escorial Development for $3,520,000. Jorge Colon Nevares holds a
50% ownership interest in Twenty First Century. The closing of the transaction
is to take place no later than December 15, 1995.
<PAGE>23
(7) COMMITMENTS AND CONTINGENCIES
In March 1990, the Company received a notice (the "Notice") from the U.S.
Army Corps of Engineers (the "Corps") asserting that unauthorized fill
materials had been placed in portions of an approximately five acre parcel in
Charles County, Maryland (the "Site") owned by the Company and claimed by the
Corps to constitute wetlands subject to regulation pursuant to the Clean Water
Act. Following receipt of the Notice, the Company ceased development of the
Site and remediated a portion of the Site in accordance with instructions
issued by the Corps. The Company also commenced discussions with the Corps
regarding mitigation plans that would preserve some commercial value for the
Site and filed suit against the Corps claiming that a prohibition of
development on the entire Site would constitute a governmental taking for which
the Company would be entitled to compensation.
In November 1993, the Company believed that it had an agreement in
principle with the Corps that would settle the Company's claim and permit
commercial development of a portion of the Site. However, in early 1994, the
Company became aware that this matter had been referred to the U.S. Attorney
for the District of Maryland. After conducting a lengthy investigation of the
Company's wetlands practices in St. Charles, in October 1995 a grand jury
convened by the U.S. Attorney charged that certain of the Company's practices
with respect to four parcels, including the Site, constituted criminal
violations of Section 404 of the Clean Water Act. The indictment charged each
of IGC, its affiliate, St. Charles Associates, L.P., and the Company's
Chairman, James J. Wilson. During the course of the U.S. Attorney's
investigation, the Corps issued additional violation notices relating to
filling portions of other parcels claimed by the Corps to be protected wetlands
and in October 1995 filed a civil action in the U.S. District Court for the
District of Maryland charging the Company and Mr. Wilson with violations of the
Clean Water Act. Of the approximately 4,400 acres developed by the Company in
St. Charles, approximately 70 acres are the subject of the civil and criminal
charges.
Through the nine months ended September 30, 1995 the Company incurred
approximately $700,000 in legal expenses and has taken a provision of
$1,500,000 for anticipated expenses related to defending against the criminal
and civil actions. No provision has been made for any fine or penalty. The
maximum statutory penalty sought under the civil action is $25,000 per day for
each of nine separate violations. Maximum statutory penalties sought against
the Company under the criminal action are $50,000 per day for each of four
felony violations or, alternatively, twice the pecuniary gain realized by the
Company from any illegal action. The U.S. Attorney also seeks to enjoin the
Company from engaging in future illegal wetlands practices.
Management believes the Company and Mr. Wilson have complied with
applicable laws relating to wetlands practices and, accordingly, the Company
and Mr. Wilson will vigorously defend against these charges and expect to
prevail.
<PAGE>
<PAGE>24
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The real estate industry is cyclical, and is especially sensitive to
fluctuations in economic activity and movements in interest rates. Residential
lot sales and sales of new homes are affected by market conditions for rental
properties and by the condition of the resale market for used homes, including
foreclosed homes in certain cities as well as the competitive supply of other
new homes for sale. An oversupply of rental real estate depresses rents and
reduces incentives for renters to purchase homes. An oversupply of resale
units depresses prices and reduces the margins available to builders on sales
of new homes. In addition, the slowing of the economy and its impact on
consumer spending, particularly in over built markets, can adversely impact
both commercial and residential development activity, including the demand for
housing. The Company's community development and homebuilding sales are
greatly influenced by consumer confidence, housing demand, prevailing market
interest rates, movements in such rates and expectations about future rates as
well as the existing supply of commercial and residential properties.
The Company monitors the impact of these external factors and adjusts its
product line and marketing strategy as needed. The effect of these influences
and other circumstances on the Company's operating results are discussed in
further detail below.
Net (loss) income. The Company's net income for the nine and three months
ended September 30, 1995 and 1994 totalled a loss of $1.1 million and $2.5
million and an income of $6.8 million and $3.1 million, respectively. A
summary of these results by operation is as follows:
For the Nine Months For the Three Months
Ended September 30, Ended September 30,
-------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
(In thousands) (In thousands)
Operating (loss) income
Community development $ 4,845 $ 5,889 $ 437 $ 604
Homebuilding (251) 133 (30) (181)
Investment properties and
asset management 5,269 7,099 1,543 1,184
Operations distributed
to unitholders -- 5,223 -- 5,022
Other income and expenses (10,157) (8,495) (4,192) (3,379)
------- ------- ------- -------
Net (loss) income before
provision for income tax (294) 9,849 (2,242) 3,250
Provision for income tax 813 3,020 256 185
------- ------- ------- -------
Net (loss) income $(1,107) $ 6,829 $(2,498) $ 3,065
======= ======= ======= =======
<PAGE>
<PAGE>25
The following table presents selected community development financial data
for the nine months ended September 30, 1995 and 1994.
1995 1994
---- ----
(In thousands, except
Lots Sold: units and percentages)
Commercial and business parks (acres)
St. Charles 14 10
Puerto Rico 5 62
Residential lots (units)
St. Charles
Developed single-family lots 109 83
Montclair
Developed townhome lots -- 19
Semi-developed multi-family lots 21 44
Westbury developed single-family lots -- 21
Undeveloped land (acres)
Westbury -- .06
Puerto Rico -- 19
Average sales price:
Commercial and business parks
St. Charles $269 $ 98
Puerto Rico $666 $194
Residential
St. Charles
Developed single-family lots $ 39 $ 46
Montclair
Developed townhome lots -- $ 38
Semi-developed multi-family lots $ 12 $ 11
Westbury developed single-family lots -- $ 27
Undeveloped land
Westbury -- $517
Puerto Rico -- $ 13
Average Gross Profit Margin:
Commercial and business parks
St. Charles 69% 69%
Puerto Rico 46% 37%
Residential lots
St. Charles
Developed single-family lots 35% 42%
Montclair
Developed townhome lots -- 10%
Semi-developed townhome lots 0% 9%
Westbury developed single-family lots -- 8%
Undeveloped land
Westbury -- 100%
Puerto Rico -- 47%
Sales revenue $11,598 $18,958
Cost of sales 6,564 12,324
------- -------
Gross profit 5,034 43% 6,634 35%
------- -------
Selling and marketing 93 86
Minority interest 96 659
------- -------
Operating profit $ 4,845 $ 5,889
======= =======
<PAGE>26
The following tables present selected community development financial data
for the quarter ended September 30, 1995 and 1994:
1995 1994
---- ----
(In thousands, except
units and percentages)
Lots Sold:
Commercial and business parks (acres)
St. Charles 3 2
Residential lots (units)
St. Charles
Developed single-family lots 38 26
Montclair
Developed townhome lots -- 10
Semi-developed multi-family lots 21 --
Westbury developed single-family lots -- 11
Undeveloped land (acres)
Puerto Rico -- 19
Average sales price:
Commercial and business parks
St. Charles $ 87 $ 92
Residential
St. Charles
Developed single-family lots $ 37 $ 43
Montclair
Developed townhome lots -- $ 37
Semi-developed multi-family lots $ 12 --
Westbury developed single-family lots -- $ 28
Undeveloped land
Puerto Rico -- $ 13
Average Gross Profit Margin:
Commercial and business parks
St. Charles 69% 73%
Residential
St. Charles
Developed single-family lots 29% 38%
Montclair
Developed townhome lots -- 11%
Semi-developed multi-family lots 0% --
Westbury developed single-family lots -- 11%
Undeveloped land
Puerto Rico -- 47%
Sales revenue $ 1,911 $ 2,239
Cost of sales 1,539 1,653
------- -------
Gross profit 372 19% 586 26%
------- -------
Selling and marketing 4 24
Minority interest (69) (42)
------- -------
Operating profit $ 437 $ 604
======= =======
<PAGE>27
The Company generally develops planned communities that contain a balanced
mix of residential, business and commercial property. The Company is currently
developing communities in the Washington, D.C. metropolitan area and San Juan,
Puerto Rico. The Washington, D.C. area is a highly competitive region
represented by national, regional and local developers. Other than the
Company's land inventory, the San Juan area has limited developable land
available. The effect of competition to the Company in this area has been
minimal. Management anticipates land sales to increase in 1996 with the
addition of the Puerto Rico planned community, Parque Escorial, to its
available inventory. This increase should be enhanced by the grand opening of
the third village in St. Charles, a planned community in Maryland
The Company sells fully developed lots, semi-developed lots and on
occasion undeveloped tracts of land. The sales prices and profit margins vary
depending on the size, development status, location and use. The U.S.
commercial parcels typically require limited development and have higher sales
prices resulting in significantly higher profit margins than those achieved by
the smaller finished residential lots. As a result, the Company's profits can
be greatly affected by the sales mix during any one period. The Company's
sales volume, revenues and profits during any one period can also be affected
by sales or lack of sales in developments that are in the final stages.
Typically, the most desirable lots sell first, leaving residual lots for sale
that are less profitable and more difficult to sell. The second village in St.
Charles, Westlake, was substantially sold out prior to 1995. As a result, the
Company's residential lot inventory available for sale in 1995 consisted
largely of these residual lots. In addition, the Company has continued its
sales efforts of the remaining lots in Montclair, Virginia. The basis of the
lots has reached the market value and all additional maintenance, minimal
development and carrying costs have an immediate and direct impact on gross
profits.
Land sales decreased to $12 million for the nine months ended September
30, 1995 from $19 million for this same period in 1994. The decrease in 1995
is primarily attributable to the closing of the sale of a shopping center site
in Puerto Rico during the 1994 period with no comparable sale in 1995. Land
sales decreased 37% to $1.9 million for the three months ended September 30,
1995 from $2.2 million for the same period in 1994. During the third quarter
1995, the single-family lots sold were smaller with lower sales prices than
those sold during the third quarter 1994. The residential lot sales volume has
continued to be unfavorably impacted by the competitive market conditions.
Excess home inventory levels throughout the industry have reduced the need for
homebuilders to purchase additional lots.
Gross profit margins from community development increased to 43% during
the first nine months of 1995 from 35% during the same period in 1994 due
primarily to a change in the sales mix. The benefits of this change in mix was
partially offset by an increase in period costs relative to total sales
revenues during the 1995 period. Gross profits from community development
decreased to 19% during the three months ended September 30, 1995 from 26%
during the third quarter of 1994 due primarily to the change in sales mix. A
greater percent of lots sold during the 1995 period, compared to the same
period in 1994, were small single-family lots. The majority of these lots were
originally financed with a participating mortgage. The Company's profit
margins are reduced by the lender's 50% share of the profit on these lots.
The land profits from the Puerto Rico operations are shared by the Company
and a minority partner, 80% and 20%, respectively. The minority partner earned
$96,000 for the first nine months in 1995 compared to $659,000 earned during
<PAGE>28
the comparable 1994 period. The profits were higher during the 1994 period due
to the sale of the shopping center site.
Homebuilding
The following table presents selected homebuilding financial data for the
nine months ended September 30, 1995 and 1994:
1995 1994
---- ----
(In thousands, except
units and percentages)
Units Sold:
Semi-Custom homebuilding 60 105
Tract homebuilding
St. Charles, MD 19 42
Lexington Park, MD 1 2
Montclair, VA -- 1
---- ----
80 150
==== ====
Backlog:
Semi-Custom homebuilding 84 120
Tract homebuilding
St. Charles, MD 7 8
Lexington Park, MD -- 4
Montclair, VA -- --
---- ----
91 132
==== ====
Average Sales Price:
Semi-Custom homebuilding (excludes lots) $ 91 $ 81
Tract homebuilding
St. Charles, MD $150 $152
Lexington Park, MD $ 80 $ 81
Montclair, VA -- $118
Division $105 $101
Home sales $ 8,378 $15,135
Cost of sales 7,663 14,012
------- -------
Gross profits 715 9% 1,123 7%
------- -------
Selling and marketing 966 990
------- -------
Operating (loss) income $ (251) $ 133
======= =======
<PAGE>
<PAGE>29
The following table presents selected homebuilding financial data for the
three month period ended September 30, 1995 and 1994:
1995 1994
---- ----
(In thousands, except
units and percents)
Units Sold:
Semi-Custom homebuilding 19 33
Tract homebuilding
St. Charles, MD 5 16
Lexington Park, MD -- --
---- ----
24 49
==== ====
Average Sales Price:
Semi-Custom homebuilding (excludes lots) $ 95 $ 79
Tract homebuilding
St. Charles, MD $146 $158
Lexington Park, MD -- --
Division $105 $105
Home sales $ 2,532 $ 5,130
Cost of sales 2,240 4,939
------- -------
Gross profits 292 12% 191 4%
------- -------
Selling and marketing 322 372
------- -------
Operating loss $ (30) $ (181)
======= =======
In spite of the relatively favorable interest rate environment during the
first nine months of 1995, the general market conditions in the areas where
IGC's semi-custom homebuilding division operates softened. In St. Charles, the
Company's recent focus has been on lot sales to other builders due to the more
favorable gross margins provided by such sales. As a result, competition from
other builders has increased resulting in an unfavorable impact on the
Company's homebuilding operations in this market area. Due to increasingly
competitive conditions and cost factors, the Company downsized their
homebuilding operations during the second quarter of 1995. These downsizing
efforts included a reduction of administrative staff levels and the closing of
unprofitable sales centers. This undertaking is expected to permit the Company
to increase its focus on its more profitable land sale operations while
continuing limited homebuilding activities in geographic areas with the
greatest profit potential. The costs incurred in connection with these efforts
were not significant and have been included in the Company's operating results
for the nine month period ended September 30, 1995.
For the first nine months of 1995, unit settlements were 80, a 47%
decrease from 150 in the same period of 1994. Units settled during the third
quarter of 1995 were 24, a 51% decrease from 49 in the third quarter of 1994.
These decreases were due to a softening of the market conditions in the areas
<PAGE>30
where the Company's semi-custom homebuilding division operates. In addition,
the Company has reduced its tract division's staff and operations until the
competition's excess inventory has returned to normal levels.
The average sales price during the nine months ended September 30, 1995
was $105,000, a 4% increase from $101,000 during the comparable 1994 period.
The change in average sales price is due to nominal price increases offset by
the change in sales mix during those periods.
Gross profit margins for the first nine months in 1995 were 9%, a 29%
increase over the 7% margins in the first nine months of 1994. The gross
profit margins during the third quarter of 1995 were 12%, a 200% increase from
the 4% earned during the third quarter of 1994. Even though the Company's
gross profit margins have increased, they have been unfavorably impacted by the
continued competitive market conditions and excess industry inventory levels.
The improvement is attributable to the restructure of the Company's
homebuilding operations. These restructuring activities included a reduction
of administrative staff levels and the elimination of certain unprofitable
sales center locations. As a result of these efforts, overhead costs
associated with the homebuilding division's activities were reduced
significantly. Also, contributing to the lower margins in 1994 was the write-
off during the third quarter of unrealizable capitalized costs.
Selling and marketing expenses during the first nine months in 1995
remained comparable to those during the same period in 1994. Selling and
marketing expenses decreased $50,000 or 13% during the three months ended
September 30, 1995 as compared to this same period in 1994. This decrease was
attributable primarily to the restructuring and downsizing of this division's
activities during the second quarter of 1995.
Investment Properties and Asset Management. Revenues from investment
properties include equity in earnings from partnerships, development fees,
apartment operating income and management fees. The following table presents
selected financial data for the nine months ended September 30, 1995 and 1994:
1995 1994
---- ----
(In thousands)
Apartment rental revenues $ 3,463 $ 3,286
Apartment operating expense (3,307) (3,336)
------- -------
Apartment operating income (loss) 156 (50)
------- -------
Equity in earnings from partnerships
and development fees 1,932 4,580
Management and other fees 3,181 2,569
------- -------
$ 5,269 $ 7,099
======= =======
<PAGE>
<PAGE>31
The following table presents selected financial data for the third quarter
of 1995 and 1994:
1995 1994
---- ----
(In thousands)
Apartment rental revenues $ 1,149 $ 1,128
Apartment operating expense (1,113) (1,163)
------- -------
Apartment operating income (loss) 36 (35)
------- -------
Equity in earnings from partnerships
and development fees 602 526
Management and other fees 905 693
------- -------
$ 1,543 $ 1,184
======= =======
Apartment operating income during the nine and three months ended
September 30, 1995 was $156,000 and $36,000, respectively, compared to losses
of $50,000 and $35,000, respectively, during the same periods in 1994. This
increase was due to increased rental rates and reduced vacancies. Also
contributing to the lower margins in the 1994 periods were certain non-
recurring repair and maintenance expenses.
Equity in earnings from partnerships and development fees during the nine
months ended September 30, 1995 decreased to $1.9 million from $4.6 million for
the same period in 1994. This decrease was due primarily to IGC's receipt and
recognition as revenue of distributions from a Puerto Rico partnership owning
four apartment projects that were refinanced during the first nine months of
1994. No similar distributions were received during the first nine months of
1995.
Equity in earnings from partnerships during the three months ended
September 30, 1995 increased to $.6 million from $.5 million for the same
period in 1994 due to the Company's share of the increased income produced by
the partnerships owning apartment projects. The increased income is a result
of improved occupancy rates, rent increases and reduced repair and maintenance
expenses.
Revenues from management fees increased $612,000 or 24% during the first
nine months of 1995 in comparison with the same period of the prior year. This
was due primarily to the recognition during the first three months of 1995 of
management fees related to prior periods. Prior to 1995, doubt as to the
collectibility of these fees existed and as a result, the fees were reserved.
However, during the first nine months of 1995, the performance of the two
multi-family projects from which the fees were due continued to improve
indicating that collection of the fees is probable and that recognition of the
prior year's fees as revenue is appropriate. In addition, IBC assigned a note
receivable from a wholly owned subsidiary of the Company to IGC in satisfaction
of past-due management fees from a multi-family project for which IBC is
responsible for deficit funding. Also contributing to the increase in
management fee revenue was $150,000 received from Equus during the first nine
months of 1995 for management and administrative support services. As
discussed in Note 4 to the September 30, 1995 consolidated financial
statements, IGC has continued to provide management and administrative support
services to Equus following the distribution of Equus Units to IGC Unitholders.
<PAGE>32
Management and other fees increased $212,000 to $905,000 during the three
months ended September 30, 1995 as compared to $693,000 during this same period
in 1994. This increase was due primarily to the recognition of current
management fees that were deferred during 1994 and the receipt of $50,000 from
Equus during the third quarter of 1995 for management and administrative
support services that commenced in 1995. Also contributing to the lower fees
in 1994 was the reserve of certain incentive management fees when management
determined their collection uncertain.
Equus Operations Distributed to Unitholders. As discussed in Note 4 to
the accompanying financial statements, the Company distributed 99% of its
investment in Equus to its unitholders during the first quarter of 1995.
During the nine months ended September 30, 1994, the Company recognized $7
million of revenues related to distributions from HDA, all of which was
recognized during the third quarter with the exception of $200,000. HDA
qualifies as a Puerto Rico special partnership and, as such, partners are not
liable for losses in excess of their capital investment. Since HDA's partners'
capital accounts were in a deficit at the time of the distribution, the Company
recognized $6.5 million of income from its share of the LDA note receivable
distributed by HDA. Partially offsetting this revenue was the write-off of
$1.8 million of deferred project costs. There were no comparable transactions
during 1995.
Other Income and Expenses. The Company's operations are principally
located in two offices. Costs associated with these offices including the
salaries and wages of executives and office personnel that provide management
and other services for the operating divisions are not included as reductions
to their operating income. These costs, additional general and administrative
expenses, depreciation and amortization, interest expense, interest income,
primarily from land notes receivable, and other income are reported at the
corporate level. The following table presents selected financial data for the
first nine months of 1995 and 1994:
1995 1994
---------- ----------
Interest and other income $ 409 $ 375
General and administrative expense (8,415) (6,902)
Depreciation and amortization (409) (456)
Interest expense (1,742) (1,512)
-------- -------
$(10,157) $(8,495)
======== =======
The following table presents selected financial data for the third quarter
of 1995 and 1994:
1995 1994
---------- ----------
Interest and other income $ 197 $ 188
General and administrative expense (3,523) (2,999)
Depreciation and amortization (144) (149)
Interest expense (722) (419)
------- -------
$(4,192) $(3,379)
======= =======
<PAGE>33
Interest and other income was $409,000 during the nine months ended
September 30, 1995, a 9% increase over this same period in 1994. Interest and
other income was $197,000 during the third quarter of 1995, a 5% increase from
the $188,000 in this same period in 1994. These increases consisted primarily
of interest earned on a larger outstanding balance during 1995 of notes
receivable from land sales.
General and administrative expenses increased $1.5 million or 22% during
the first nine months of 1995 as compared to the first nine months of 1994.
General and administrative expenses increased $524,000 or 17% during the third
quarter of 1995 as compared to the third quarter of 1994. This increase was
attributable primarily to increased legal fees associated with the grand jury
investigation. In addition, during the third quarter of 1995, management
reserved an additional $1.5 million for legal fees to defend the Company and
James J. Wilson against the Clean Water Act violations that were filed against
them as discussed in Note 7 to the accompanying financial statements.
Offsetting this increase in the third quarter of 1995 was an overall reduction
of expenses and the impact of expense recognition during the third quarter of
1994 for incentive rights granted certain officers and employees and the
exercise of unit options previously granted through the Directors and Employees
Unit Option Plans.
Depreciation and amortization expense declined $47,000 or 10% during the
first nine months of 1995 as compared to this same period in 1994. Depreciation
and amortization decreased $5,000 or 3% during the three months ended September
30, 1995 as compared to the three month period ended September 30, 1994. These
decreases were due to certain fixed assets, financing fees and similar assets
becoming fully amortized or depreciated during 1994.
Interest expense increased $230,000 or approximately 15% during the nine
months ended September 30, 1995 versus the comparable period of 1994. Interest
expense increased $303,000 or 72% during the three months ended September 30,
1995 versus this same period in 1994. These increases were attributable
primarily to the write-off of loan fees associated with debt repaid prior to
maturity and interest on increased debt partially collateralized by the Puerto
Rico land not currently under development.
Provision for Income Tax. The provision for Puerto Rico income taxes
during the nine months ended September 30, 1995 decreased to $.8 million
compared to $3 million during the first nine months of 1994 primarily due to
the recognition of taxable income in 1994, resulting from distributions
received from partnerships in Puerto Rico that refinanced their apartment
projects, and from profits on the sale of a shopping center site.
The provision for income taxes during the three months ended September 30,
1995 increased to $256,000 compared to $185,000 for the three months ended
September 30, 1994. This increase is due to the recognition for tax purposes
of intercompany interest income that for book purposes is eliminated against
the intercompany interest expense during consolidation.
FINANCING, LIQUIDITY AND RELATED MATTERS
The Company has historically met its liquidity requirements principally
from cash flow generated by home and land sales, property management fees,
distributions from HDA and residential rental partnerships and from bank
financing providing funds for development and working capital. As discussed in
Note 4, the Company will no longer receive distributions from HDA, as a result
of the Company's distribution of Equus Gaming Company L.P. ("Equus") units
<PAGE>34
representing a 99% limited partnership interest in Equus, to IGC Unitholders in
February 1995. In addition, under the terms of IGC's loans, most of the cash
generated by U.S. home and lot sales and distributions from partnerships,
including distributions from partnership refinancings, will be used to further
reduce bank loans and meet debt service requirements. Given these factors, the
Company's ability to generate cash for overhead, development and other uses is
limited. In addition, project financings will be necessary to fund the
continued development of land inventory to generate the necessary lot sales to
meet the Company's operating obligations. As further discussed in Note 5,
pending legal proceedings may also adversely affect the Company's liquidity,
including the timing and/or terms of any financings.
In response to the decline in the real estate markets and the decline in
the availability of financing, the Company developed a financial restructuring
plan in June 1992. Since commencing the plan, the Company has successfully
restructured all loans targeted by the plan and has reduced recourse bank debt
by $23.8 million from $69.1 million at the start of the restructuring plan to
$45.3 million at September 30, 1995.
NationsBank has agreed to extend the maturity of its loans until May 1998.
Under the agreement, the extension of the maturity beyond November 30, 1995 is
contingent upon a mandatory principal curtailment of $2.2 million which the
Company anticipates will come from the financing of the first phase of Fairway
Village in St. Charles, Maryland. Signet Bank has agreed to extend the
maturity of its loans until September 1996. The balance of the Signet loans as
of September 30, 1995 is $3.6 million. The Company anticipates it will pay off
these loans prior to their maturity with the proceeds from the sale of
residential lots which secure the loan.
A potential source of liquidity in late 1995 includes cash from four
projects in Puerto Rico which applied in March 1993 for economic incentives
under the 1990 Low-Income Housing Preservation and Resident Homeownership Act
("LIHPRHA"). Under LIHPRHA, the partnerships have the option of obtaining
additional HUD insured financing and additional subsidy funds, and distributing
net refinancing proceeds to partners, or selling the projects to non-profit
organizations which would continue the projects in HUD's low income housing
program. Management believes that the economic benefit to the Company and the
partners will be greater from a sale of the projects, in which event the
Company will endeavor to retain the right to manage the properties.
The decision to sell the projects under LIHPRHA is largely dependent on
the outcome of proposed legislation to be considered by Congress in 1995, which
could significantly reduce the proceeds available to the Company. If this
occurs, management will reconsider its decision to sell the projects under the
LIHPRHA program. It is not possible at the present time to predict the outcome
of the proposed changes to the LIHPRHA program. Should management decide not to
sell the projects under the LIHPRHA program, an alternative exit strategy would
be to convert the four projects to condominiums and sell the individual units.
If this alternative is pursued, the conversion and subsequent sale of the units
is expected to take approximately three to five years. The Company's share of
proceeds of any sales of the projects have been assigned to the FDIC and
NationsBank for repayment of debt totalling approximately $12.8 million at
September 30, 1995.
A LIHPRHA application was filed for a fifth project in Puerto Rico in
November 1994. The timetable for completing the LIHPRHA processing is
approximately two years. However, if proposed legislation is enacted,
management may withdraw the application.
<PAGE>35
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 22, 1993, the Company filed suit against the County
Commissioners of Charles County, Maryland in the Circuit Court for Charles
County seeking compensation for a school site that it had deeded to the County
on June 26, 1990. The Company sought a minimum of $3.2 million, equal to the
fair market value of the school site. The action sought to enforce an
agreement settling litigation between the parties that was entered into in
1989. Under the terms of that agreement, the County agreed to credit the
Company for school sites contributed and also agreed to refund to the Company
any excess school impact fees paid. In February 1994, the Circuit Court
granted the County's partial summary judgment motion and directed the Company
to file its suit for compensation in the Maryland Tax Court. The Company
appealed that decision to the Court of Special Appeals of Maryland, which
affirmed the Circuit Court's decision. The Company appealed that decision to
the Court of Appeals of Maryland, which eventually declined to review the case.
In accordance with the Circuit Court's ruling, the Company has filed for
appropriate relief in the Maryland Tax Court.
In a separate proceeding, the Company filed suit in 1990 against the
County Commissioners in the Circuit Court for Charles County to enforce a
provision of the same settlement agreement that required the County to conduct
an appropriate water and sewer connection fee study. On June 22, 1992,
judgment was rendered in favor of the Company. The judgment required the
County to conduct the appropriate water and sewer connection fee study as the
basis on which to set fees for St Charles. The County has appealed the
judgment to the Court of Special Appeals of Maryland, which affirmed the
Circuit Court's decision. The Maryland Court of Appeals declined to review the
case, and the Company is now awaiting the County's completion of the study and
seeking input into the study before it is completed.
In March 1990, the Company received a notice (the "Notice") from the U.S.
Army Corps of Engineers (the "Corps") asserting that unauthorized fill
materials had been placed in portions of an approximately five acre parcel in
Charles County, Maryland (the "Site") owned by the Company and claimed by the
Corps to constitute wetlands subject to regulation pursuant to the Clean Water
Act. Following receipt of the Notice, the Company ceased development of the
Site and remediated a portion of the Site in accordance with instructions
issued by the Corps. The Company also commenced discussions with the Corps
regarding mitigation plans that would preserve some commercial value for the
Site and filed suit against the Corps claiming that a prohibition of
development on the entire Site would constitute a governmental taking for which
the Company would be entitled to compensation.
In November 1993, the Company believed that it had an agreement in
principle with the Corps that would settle the Company's claim and permit
commercial development of a portion of the Site. However, in early 1994, the
Company became aware that this matter had been referred to the U.S. Attorney
for the District of Maryland. After conducting a lengthy investigation of the
Company's wetlands practices in St. Charles, in October 1995 a grand jury
convened by the U.S. Attorney charged that certain of the Company's practices
with respect to four parcels, including the Site, constituted criminal
violations of Section 404 of the Clean Water Act. The indictment charged each
of IGC, its affiliate, St. Charles Associates, L.P., and the Company's
Chairman, James J. Wilson. During the course of the U.S. Attorney's
investigation, the Corps issued additional violation notices relating to
<PAGE>36
filling portions of other parcels claimed by the Corps to be protected wetlands
and in October 1995 filed a civil action in the U.S. District Court for the
District of Maryland charging the Company and Mr. Wilson with violations of the
Clean Water Act. Of the approximately 4,400 acres developed by the Company in
St. Charles, approximately 70 acres are the subject of the civil and criminal
charges.
Through the nine months ended September 30, 1995 the Company incurred
approximately $700,000 in legal expenses and has taken a provision of
$1,500,000 for anticipated expenses related to defending against the criminal
and civil actions. No provision has been made for any fine or penalty. The
maximum statutory penalty sought under the civil action is $25,000 per day for
each of nine separate violations. Maximum statutory penalties sought against
the Company under the criminal action are $50,000 per day for each of four
felony violations or, alternatively, twice the pecuniary gain realized by the
Company from any illegal action. The U.S. Attorney also seeks to enjoin the
Company from engaging in future illegal wetlands practices.
Management believes the Company and Mr. Wilson have complied with
applicable laws relating to wetlands practices and, accordingly, the Company
and Mr. Wilson will vigorously defend against these charges and expect to
prevail.
ITEM 2. MATERIAL MODIFICATIONS OF RIGHTS OF REGISTRANT'S SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Securities and Exchange Commission Section
601 of Regulation S-K.
Exhibit
No. Description of Exhibit Reference
- ------- ----------------------------------------- --------------------------
10(a) Office Lease between Smallwood Village Filed herewith
Associates and Interstate General Company
L.P. for Smallwood Village Center dated
August 25, 1995
10(b) Amendment to Office Lease between Filed herewith
Smallwood Village Associates and
Interstate General Company L.P. for
Smallwood Village Center dated
September 5, 1995
<PAGE>37
10(c) Lease Amendment to Lease for commercial Filed herewith
space between Smallwood Village Associates
and Interstate General Company L.P.
dated October 1, 1991
10(d) Lease Amendment II to Lease for commercial Filed herewith
space between Smallwood Village Associates
and Interstate General Company L.P.
dated September 5, 1995
10(e) Store Lease between Smallwood Village Filed herewith
Associates and Interstate General
Company L.P. dated December 1, 1987
10(f) Lease Amendment to Store Lease between Filed herewith
Smallwood Village Associates and
Interstate General Company L.P. dated
February 1, 1989
10(g) Lease Amendment II to Store Lease Filed herewith
between Smallwood Village Associates
and Interstate General Company L.P.
dated December 1, 1992
10(h) Lease Amendment III to Store Lease Filed herewith
between Smallwood Village Associates
and Interstate General Company L.P.
dated September 30, 1994
10(i) Lease Amendment IV to Store Lease Filed herewith
between Smallwood Village Associates
and Interstate General Company L.P.
dated September 5, 1995
10(j) Agreement of Sale between Land Development Filed herewith
Associates S.E. and Twenty First Century
Homes S.E. dated September 8, 1995
10(k) Option Agreement between Land Development Filed herewith
Associates S.E. and Compri Caribe
Hospitality Corp. dated March 31, 1995
10(l) Amendment to Option Agreement between Filed herewith
Land Development Associates S.E. and
Compri Caribe Hospitality Corp. dated
November 13, 1995.
(b) None.
<PAGE>
<PAGE>38
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERSTATE GENERAL COMPANY L.P.
-------------------------------
(Registrant)
By: Interstate General Management
Corporation
Managing General Partner
Dated: November 14, 1995 By: /s/ James J. Wilson
------------------- -----------------------------
James J. Wilson
Chairman, President and Chief
Executive Officer
Dated: November 14, 1995 By: /s/ John E. Hans
------------------- -----------------------------
John E. Hans
Senior Vice President and
Chief Financial Officer
<PAGE>
<PAGE>39
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
- ------- -------
10(a) Office Lease between Smallwood Village Associates and Interstate
General Company L.P. for Smallwood Village Center dated August
25, 1995
10(b) Amendment to Office Lease between Smallwood Village Associates
and Interstate General Company L.P. for Smallwood Village Center
dated September 5, 1995
10(c) Lease Amendment to Lease for commercial space between Smallwood
Village Associates and Interstate General Company L.P. dated
October 1, 1991
10(d) Lease Amendment II to Lease for commercial space between
Smallwood Village Associates and Interstate General Company L.P.
dated September 5, 1995
10(e) Store Lease between Smallwood Village Associates and Interstate
General Company L.P. dated December 1, 1987
10(f) Lease Amendment to Store Lease between Smallwood Village
Associates and Interstate General Company L.P. dated February 1,
1989
10(g) Lease Amendment II to Store Lease between Smallwood Village
Associates and Interstate General Company L.P. dated December 1,
1992
10(h) Lease Amendment III to Store Lease between Smallwood Village
Associates and Interstate General Company L.P. dated September
30, 1994
10(i) Lease Amendment IV to Store Lease between Smallwood Village
Associates and Interstate General Company L.P. dated September
5, 1995
10(j) Agreement of Sale between Land Development Associates S.E. and
Twenty First Century Homes S.E. dated September 8, 1995
10(k) Option Agreement between Land Development Associates S.E. and
Compri Caribe Hospitality Corp. dated March 31, 1995
10(l) Amendment to Option Agreement between Land Development
Associates S.E. and Compri Caribe Hospitality Corp. dated
November 13, 1995.
<PAGE>1
Exhibit 10(a)
OFFICE
LEASE
SMALLWOOD VILLAGE ASSOCIATES
LANDLORD
AND
INTERSTATE GENERAL CO. LP,
TENANT
FOR
SMALLWOOD VILLAGE CENTER
*This Lease shall supersede the current lease dated May 21, 1981, which
Lease shall become null and void upon signing of this new Lease
dated August 25, 1995.
<PAGE>
<PAGE>2
THIS LEASE is made and entered into this 25th day of August, 1995, by
and between SMALLWOOD VILLAGE ASSOCIATES, a Maryland Limited Partnership, 222
Smallwood Village Center, St. Charles, Maryland 20602, hereinafter designated
"Landlord", and INTERSTATE GENERAL COMPANY LP, hereinafter designated "Tenant".
WITNESSETH, that, for and in consideration of the rent hereinafter
reserved and of the mutual covenants hereinafter contained, Landlord and Tenant
to hereby mutually agree as follows:
1. DEMISED PREMISES. Landlord does hereby lease and demise unto
Tenant, and Tenant does hereby hire, lease and take from Landlord, for the term
and upon the covenants hereinafter set forth, approximately 15,134 gross square
feet of space (the "Demised Premises") on the second floor of Building C (the
"Building") located in that certain shopping center development known as the
Smallwood Village Center, (the "Shopping Center"), located in Smallwood
Village, St. Charles, Maryland 20602, together with the right to use the
parking areas, access roads and drives on a non-exclusive basis. The Demised
Premises are outlined in red on the drawing attached hereto and made a part
hereof as Exhibit "A".
2. LEASE TERM. The term of this lease shall commence on the date
hereof and shall end ten (10) years after the "Rent Commencement Date", as
hereafter defined. The "Rent Commencement Date" shall be the 1st day of
September, 1995.
3. RENT; DEPOSIT. Commencing with the Rent Commencement Date,
Tenant shall pay as annual rent for the premises the sum of One Hundred Eighty
One Thousand Three Hundred Five and 32/100 Dollars ($181,305.32) per annum,
payable in equal monthly installments of Fifteen Thousand One Hundred Eight and
78/100 Dollars ($15,108.78) which includes the Tenant's proportionate share of
the Buildings common area. All monthly installments of rent shall be payable
to Landlord, in advance, without previous notice or demand therefor, with the
first monthly installment to be due and payable no later than the Rent
Commencement Date.
Landlord hereby acknowledges receipt of N/A Dollars ($N/A) which
shall constitute prepayment of the first and last months rent.
4. Intentionally left blank.
5. RENT ADJUSTMENT. At the expiration of each Lease year (as
hereafter defined), the rent shall be adjusted to reflect any increases in the
"Consumer Price Index" (the "CPI") as hereafter defined). Such adjustment
shall be accomplished by multiplying the rent then in effect by a fraction, the
numerator of which shall be the CPI as of the most recent date prior to the
date of such adjustment and the denominator of which shall be the CPI as of the
date immediately prior to twelve (12) months immediately preceding the
adjustment date. In no event shall any adjustment made pursuant to this
Article 5 result in a reduction of the then-current rent. The "Consumer Price
Index" is hereby defined to be the Index for the D.C., Maryland and Virginia
Area now known as the "United States Bureau of Labor Statistics, Consumer Price
Index for Urban Wage Earners and Clerical Workers (revised) U.S. City Average
and Selected Areas, (1967 = 100) all items"; and if such index shall be
discontinued, then any successor consumer price index of the United States
Bureau of Labor Statistics, or successor agency thereto, for the D.C., Maryland
and Virginia Area shall be used and if there is no successor consumer price
index, the parties hereto shall attempt to agree upon a substitute Index or
formula. In the event Landlord and Tenant shall be unable to agree upon a
<PAGE>3
substitute Index or formula, the matter shall be submitted for arbitration in
the Washington, D.C. Metropolitan Area in accordance with the rules of the
American Arbitration Association then prevailing. Notwithstanding anything to
the contrary contained herein any increase pursuant to the Consumer Price Index
(CPI) shall not exceed 5% for any given lease year or 50% of the CPI, whichever
is lower.
6. TAX ESCALATION. For all purposes of this lease, the term "Lease
Year" shall mean that period of twelve (12) full calendar months commencing
upon the first day of the first calendar month following the Rent Commencement
Date (or if the Rent Commencement Date shall occur on the first day of a
calendar month, then commencing with the Rent Commencement Date). For the
purposes of this article:
(a) The term "Real Estate Taxes" means all taxes, rates and
assessments, general and special, levied or imposed with respect to the land,
buildings and improvements located or built within the Shopping Center,
including all taxes, rates and assessments, general and special, levied or
imposed for school, public betterment, general or local improvements and
operations and taxes imposed in connection with any special taxing district.
If the system of real estate taxation shall be altered or varied and any new
tax or levy shall be levied or imposed on said land, buildings and
improvements, and/or Landlord in substitution for real estate taxes presently
levied or imposed on immovables in the jurisdiction where the property is
located, then any such new tax or levy shall be included within the term "Real
Estate Taxes." Should any governmental taxing authority acting under any
regulation, levy, assess, or impose a tax, excise and/or assessment, however
described (other than an income or franchise tax) upon, against, on account of,
or measured by, in whole or in part, the rent expressly reserved hereunder, or
upon the rent expressly reserved under any other leases or leasehold interests
in the Shopping Center, as a substitute (in whole or in part) or in addition to
any existing Real Estate Taxes on land and buildings and otherwise, such tax or
excise on rents shall be included within the term "Real Estate Taxes."
(b) The term "Base Year" means the first fiscal real estate tax year
in which there has been an assessment of the land and buildings constituting
the Shopping Center as a substantially completed shopping center (irrespective
of completion of, or assessment for, tenant work), or the fiscal real estate
tax year during which the Rent Commencement Date occurs, whichever is later.
For all purposes of this lease hereafter, the term "real estate tax year" means
each successive twelve (12) month period following and corresponding to the
Base Year, 1994 irrespective of the period or periods which may from time to
time in the future be established by competent authority for the purposes of
levying or imposing Real Estate Taxes.
(c) Each real estate tax year after the Base Year, Tenant shall pay
to Landlord within fifteen (15) days after demand in writing therefor
(accompanied by a statement showing the computation of same), as additional
rent and in addition to all other payments provided for herein, Tenant's
Percentage Share (hereafter defined) of the amount by which (A) the Real Estate
Taxes for such tax year, exceed (B) the Real Estate Taxes for the Base Year.
Tenant's Percentage Share is hereby defined to be that percentage representing
the proportion that the total gross rentable square feet contained within the
demised premises bears to the total gross rentable square feet contained within
the Shopping Center. The total square feet in the Center is 185,459 square
feet.
<PAGE>4
(d) Reasonable expenses, consisting of attorneys' fees, expert
witness fees and similar costs, incurred by Landlord in obtaining or attempting
to obtain a reduction of any Real Estate Taxes shall be added to and included
in the amount of any such Real Estate Taxes. Real Estate Taxes which are being
contested by Landlord shall nevertheless be included for purposes of the
computation of the liability of Tenant under the above paragraph, provided,
however, that in the event that Tenant shall have paid any amount of increased
rent pursuant to this Article 6 and the Landlord shall thereafter receive a
refund of any portion of any Real Estate Taxes on which such payment shall have
been based, Landlord shall pay to Tenant the appropriate portion of such
refund. Landlord shall have no obligation to contest, object to or litigate
the levying or imposition of any Real Estate Taxes and may settle, compromise,
consent to, waive or otherwise determine in its discretion to abandon any
contest with respect to the amount of any Real Estate Taxes without consent or
approval of the Tenant.
Nothing contained in this section shall be construed at any time to
reduce the monthly installments of rent payable hereunder below the amount
specified in Article 3 and 5 of this lease.
It is understood and agreed that Tenant shall not be liable to pay
its Percentage Share of any increase in Real Estate Taxes which is occasioned
by an increase in the tax assessment due to an expansion of the Shopping Center
or any part thereof, by Landlord, nor shall Tenant be liable for any addition
to the taxes by reason of Landlord's failure to pay such taxes when due (unless
occasioned by Tenant's failure to pay its share of increases in Real Estate
Taxes when due).
If the termination date of the lease shall not coincide with the end
of a real estate tax year, then in computing the amount payable under this
Article 6 for the period between the commencement of the applicable real estate
tax year in question and the termination date of this lease, the Real Estate
Taxes for the Base year shall be deducted from the Real Estate Taxes for the
applicable real estate tax year and, if there be a difference, Tenant's
Percentage Share of such difference shall be equitably apportioned (on a per
diem basis) so that Tenant shall pay only such portion of such increase as is
attributable to the portion of such real estate tax year occurring during the
term of this lease. Tenant's obligation to pay increased Real Estate Taxes
under this Article 6 for the final period of the lease shall survive the
expiration of the term of this lease.
A tax bill or true copy thereof, together with any explanatory
statement of the area or property covered thereby, submitted by Landlord to
Tenant shall be conclusive evidence of the amount of taxes assessed or levied,
as well as of the items taxed. If any real property tax or assessment levied
against the land, building or improvements covered hereby or the rents reserved
therefrom, shall be evidenced by improvement bonds or other bonds, or in any
other form, which may be paid in annual installments, only the amount paid or
payable in any real estate tax year shall be included as Real Estate Taxes for
that real estate tax year for the purposes of this Article 6.
7. LAWS AND ORDINANCES. Tenant will, at its own cost, promptly
comply with and carry out all orders, requirements or conditions now or
hereafter imposed upon it by the ordinances, laws and/or regulations of the
municipality, county and/or state in which the premises are located, whether
required of Landlord or otherwise, in the conduct of Tenant's business, except
that Landlord shall comply with any orders affecting structural walls and
columns unless due to Tenant's particular business or use of the premises.
<PAGE>5
Tenant will indemnify and save Landlord harmless from all penalties, claims,
and demands resulting from Tenant's failure or negligence in this respect.
8. FURNITURE; FIXTURES; ELECTRICAL EQUIPMENT. (a) Tenant shall not
place a load upon the floor of the Demised Premises exceeding the floor load
per square foot which such floor was designed to carry and which is allowed by
law. Business machines, mechanical equipment and materials belonging to Tenant
which cause vibration, noise, cold, heat or fumes that may be transmitted to
the Building or to any other leased space therein to such a degree as to be
objectionable to Landlord or to any other tenant in the Shopping Center, shall
be placed, maintained, isolated, stored and/or vented by Tenant at its sole
expense, so as to absorb and prevent such vibration, noise, cold, heat or
fumes. Tenant shall not keep within or about the Demised Premises any
dangerous, inflammable, toxic or explosive material. Tenant shall indemnify
and hold Landlord harmless against any and all damage, injury, or claims by
third parties, resulting from the moving of Tenant's equipment, furnishings
and/or materials into or out of the Demised Premises or from the storage or
operation of the same. Any and all damage or injury to the Demised Premises or
the structure in which the Demised Premises are located caused by such moving,
storage or operation shall be repaired by Tenant at Tenant's sole cost.
(b) Tenant shall not install or operate in the premises any
electrically operated equipment or other machinery, other than electric
typewriters or adding machines, and such other electrically operated office
machinery used in modern offices, without first obtaining the prior consent in
writing of Landlord, who may condition such consent upon the payment by Tenant
of additional rent in compensation for such excess consumption of water and/or
electricity or wiring as may be occasioned by the operation of said equipment
or machinery; nor shall Tenant install any other equipment whatsoever which
will or may necessitate any changes, replacements or additions to or require
the use of the water system, plumbing system, heating system, air-conditioning
system or the electrical system of the Demised Premises without the prior
written consent of Landlord.
9. REPAIRS. Tenant agrees to maintain the Demised Premises and the
fixtures therein in good order and condition during the term of this lease at
its sole cost and expense, and will, at the expiration or other termination of
the term hereof, surrender and deliver up the same and all keys, locks and
other fixtures connected therewith (except trade fixtures and other fixtures
belonging to Tenant) in like good order and condition, as the same is now or
shall be at the Rent Commencement Date, ordinary wear and tear and damage by
the elements, fire or other casualty not due to the negligence of Tenant
excepted.
10. ALTERATIONS. Tenant shall make no alterations or changes,
structural or otherwise, to any part of the Demised Premises either exterior or
interior, without Landlord's written consent, which consent shall not be
unreasonably withheld as to any non-structural changes. In the event of any
such approved changes, Tenant shall have all work done at its own expense.
Request for such consent shall be accompanied by plans stating in detail
precisely what is to be done. Tenant shall comply with the building codes,
regulations and laws now or hereafter to be made or enforced in the
municipality, county and/or state in which said premises are located and which
pertain to such work. Any additions, improvements, alterations and/or
installations made by Tenant (except only movable office furniture and
fixtures) shall become and remain a part of the building and be and remain
Landlord's property upon the termination of Tenant's occupancy of said
premises; provided, however, that if Landlord gives written notice to Tenant at
<PAGE>6
the expiration or prior termination of this lease to such effect, it may
require Tenant to restore said Demised Premises to their original condition at
Tenant's sole cost and expense. Tenant shall save Landlord harmless from and
against all expenses, liens, claims or damages to either property or person
which may or might arise by reason of the making of any such additions,
improvements, alterations and/or installations.
11. DAMAGE. If the Demised Premises shall be damaged by fire or
other cause, without the fault or neglect of Tenant, its servants, employees,
agents, visitors or licensees, the damage shall be repaired by and at the
expense of Landlord, and the rent until such repairs shall have been made shall
abate pro rata, so that Tenant shall pay only for the portion (if any) of the
Demised Premises which is suitable for the conduct of Tenant's business. Due
allowance shall be made for reasonable delay which may arise by reason of
adjustment of fire insurance on the part of Landlord and/or Tenant, and for
personal delay on account of "labor troubles" or any other cause beyond
Landlord's control. If, however, the Demised Premises are rendered wholly
untenantable by fire or other cause, and Landlord shall decide not to rebuild
the same, or if the entire Building be so damaged that Landlord shall decide to
demolish it or not to rebuild it, then or in any of such events, Landlord may,
at its option, cancel and terminate this lease by giving Tenant, within thirty
(30) days from the date of such damage, notice in writing of its intention to
cancel this lease, whereupon the term of this lease shall cease and determine
upon the third day after notice is given, and Tenant shall vacate the Demised
Premises and surrender the same to Landlord, but in neither of the certain
contingencies in this paragraph mentioned shall there be any liability on the
part of Landlord to Tenant, its heirs or assigns, covering or in respect of any
period during which the occupation of said Demised Premises by Tenant because
of the matters hereinabove stated, may not be possible.
12. EMINENT DOMAIN. If the Demised Premises or any part thereof
shall be taken by an governmental or quasi-governmental authority pursuant to
the power of eminent domain, or by deed in lieu thereof, Tenant agrees to make
no claim for compensation in the proceedings, and hereby assigns to Landlord
any rights which Tenant may have to any portion of any award made as a result
of such taking, and this lease shall terminate as to the portion of the Demised
Premises taken by the condemning authority and rental shall be adjusted to such
date. The foregoing notwithstanding, Tenant shall be entitled to claim, prove
and receive in the condemnation proceedings such awards as may be allowed for
relocation expenses and for fixtures and other equipment installed by it which
shall not, under the terms of this lease, be or become the property of Landlord
at the termination hereof, but only if such awards shall be made by the
condemnation court in addition to and stated separately from the award made by
it for the land and the Building or part thereof so taken.
If the nature, location or extent of any proposed condemnation
affecting the Shopping Center is such that Landlord elects in good faith to
demolish the Building, then Landlord may terminate this lease by giving at
least sixty (60) days' written notice of termination to Tenant at any time
after such condemnation and this lease shall terminate on the date specified in
such notice.
13. ROOF RIGHTS. Landlord shall have the exclusive right to use all
or any portion of the roof of the Demised Premises for any purposes, and shall
have the right to erect additional stories or other structures over all or any
part of said premises.
<PAGE>7
14. USE OF PREMISES. Tenant covenants to use and occupy the Demised
Premises for executive and general offices for normal office use, and for no
other purpose whatsoever (including specifically, but without limitation, any
retail use), and to permit Landlord to transmit heat, air conditioning, and
electric current through the Demised Premises at all times at the discretion of
Landlord, provided, however, that Landlord shall not exercise this right in
such a way as to unreasonably inconvenience Tenant, or unreasonably interfere
with Tenant's use of the premises.
No nuisances shall be allowed on the Demised Premises nor shall any
use be allowed which is a source of annoyance or embarrassment to Landlord or
other tenants of the Shopping Center, or which is deemed by Landlord as not in
keeping with the character of the neighborhood, nor shall the Demised Premises
be used for any unlawful, immoral, improper or extra-hazardous purpose.
In addition to and not in limitation of, the foregoing subparagraph
of this Article 14, Tenant will comply with and observe all restrictive
covenants of record (as outlined in Exhibit "D" attached hereto and hereby made
a part hereof) which affect or are applicable to the Shopping Center and/or the
demised premises and/or the common areas, provided the same do not prohibit
Tenant's permitted use of the demised premises specified in Section 14 hereof.
15. SIGNS. No sign, advertisement or notice shall be inscribed,
painted, affixed or displayed on the windows or exterior walls of the Demised
Premises or on any public area of the Building, except the directories and the
office doors, and then only in such places, numbers, sizes, color and style as
is approved by Landlord and which conforms to all applicable laws and/or
ordinances. If any such sign, advertisement or notice does not conform to the
aforesaid laws and/or ordinances or is affixed or displayed without Landlord's
express prior written approval, Landlord shall have the right to remove the
same and Tenant shall be liable for any and all expenses incurred by Landlord
for said removal or for repairing any damage caused by same or caused by its
removal. Any such permitted use, including but not limited to, all costs of
obtaining any necessary permits therefore, shall be at the sole expense and
cost of Tenant.
16. PARKING. Tenant agrees that its employees will not park their
cars or other vehicles in the spaces designated by Landlord for public parking
and for use of retail tenants and their employees, agents, customers and
invitees, but will use only such spaces as Landlord shall designate from time
to time as parking spaces for the use of office tenants and their employees;
Landlord may designate spaces provided for public parking and for employee or
tenant parking at specified times. At Landlord's request, Tenant shall supply
Landlord with the names of all employees, along with the license numbers of
their respective automobiles or vehicles. In addition, Tenant agrees to supply
Landlord with the license numbers of all vehicles owned or operated by Tenant.
17. UTILITIES: SERVICES. Landlord shall furnish reasonably
adequate electric current and water services during normal business hours,
without additional cost to Tenant. Landlord further agrees to furnish heat and
air conditioning from 8:00 a.m. to 7:00 p.m. Monday through Friday (exclusive
of Sundays and holidays) and from 9:00 a.m. to 1:00 p.m. on Saturdays, during
such seasons of the year when such services are normally and usually furnished
in modern office buildings in the area in which the Demised Premises is
located, provided, however, that Landlord shall not be liable for failure to
furnish or for suspension or delay in furnishing any of such services caused by
breakdown, maintenance or repair work or strike, riot, civil commotion, or any
cause or reason whatever beyond control of Landlord.
<PAGE>8
18. HOLD HARMLESS; INSURANCE. (a) Tenant agrees that it will
indemnify and save Landlord harmless from any and all liabilities, damages,
causes of action, suits, claims, judgments, costs and expenses of any kind
(including reasonable attorneys' fees) (i) relating to or arising from or in
connection with the possession, use, occupation, management, repair,
maintenance or control of the Demised Premises, or any portion thereof, or (ii)
arising from or in connection with any act or omission of Tenant or Tenant's
agents, employees or invitees, or (iii) resulting from any default, violation
or injury to person or property or loss of life sustained in or about the
Demised Premises. To assure such indemnity, Tenant shall carry and keep in
full force and effect at all times during the term of this lease for the
protection of Landlord and Tenant herein, public liability ($1,000,000.00) for
each accident and Five Hundred Thousand Dollars ($500,000.00) for each separate
injury, and property damage insurance in the amount of Fifty Thousand Dollars
($50,000.00).
(b) Said public liability and property damage insurance policies and
any other insurance policies carried by Tenant with respect to the Demised
Premises, shall (i) be issued in form acceptable to Landlord by good and
solvent insurance companies qualified to do business in the State of Maryland
and reasonably satisfactory to Landlord, (ii) be issued in the names of
Landlord, Tenant and any other parties in interest from time to time designated
in writing by notice from Landlord to Tenant, (iii) be written as primary
policy coverage and not contributing with or in excess of any coverage which
Landlord may carry; and (iv) contain an express waiver of any right of
subrogation by the insurance company against Landlord, if same is available
from the insurance company. Neither the issuance of any insurance policy
required hereunder, nor the minimum limits specified herein with respect to
Tenant's insurance coverage, shall be deemed to limit or restrict in any way
Tenant's liability arising under or out of this lease. On or before the Rent
Commencement Date and before any such insurance policy shall expire, Tenant
shall deliver to Landlord certificates of insurance for, certified copies of,
or duplicate originals of, each such public liability and property damage
policy or renewal thereof, as the case may be, together with evidence of
payment of all applicable premiums. Any insurance required to be carried
hereunder may be carried under a blanket policy covering the Demised Premises
and other locations of Tenant, and if Tenant includes the Demised Premises in
such blanket coverage Tenant shall deliver to Landlord, as aforesaid, a
duplicate original or certified copy of each such insurance policy or a
certificate evidencing such insurance. The public liability and property
damage insurance policies required to be carried hereunder by or on behalf of
Tenant shall provide that, unless Landlord shall first have been given ten (10)
days' prior written notice shall continue in full force and effect, (ii) the
insurance carrier shall not, for any reason whatsoever, fail to renew such
insurance policies, and (iii) no material change may be made in such insurance
policies. In the event that Tenant shall fail promptly to furnish any
insurance coverage herein required to be procured by Tenant, or shall fail to
pay any premium under such policies when due, Landlord, upon three (3) days'
written notice, at its sole option, shall have the right to pay such delinquent
premium on behalf of Tenant, or obtain such required policy and pay the premium
therefor for a period not exceeding one (1) year in each instance, and any
premium so paid by Landlord shall be immediately payable by Tenant to Landlord
as additional rent hereunder.
(c) Landlord shall obtain and maintain in effect during the term of
this lease a policy or policies of insurance (i) covering the improvements
constituting the Shopping Center including the common areas, but excluding
Tenant's leasehold improvements, trade fixtures and other property required to
<PAGE>9
be insured by Tenant) in an amount not less than eighty percent (80%) of the
full replacement cost (exclusive of the cost of excavations, foundations and
footings), providing protection against perils included within the standard
Maryland form of fire and extended coverage insurance policy, together with
such other risks, and with such deductibles, as Landlord may from time to time
determine, and (ii) public liability insurance covering the parking areas and
other common areas in an amount not less than $500,000 for injury to any one
person, $1,000,000 for injuries arising out of one accident, and $50,000 for
property damage coverage. Any such insurance may be effected by a policy or
policies of blanket insurance, covering additional items or locations or
assureds. Tenant shall have no rights in any policy maintained by landlord and
shall not be a named assured thereunder.
19. PROPERTY AT TENANT'S RISK. It is understood and agreed that all
personal property in the Demised Premises, of whatever nature, whether owned by
Tenant or any other person, shall be and remain at Tenant's sole risk and
Landlord shall not assume any liability or be liable for any damage to or loss
of such personal property, arising from the bursting, overflowing, or leaking
of the roof or of water, sewer, or steam pipes, or from heating or plumbing
fixtures or from the handling of electric wires or fixtures or from any other
cause, whatsoever, unless said damages are caused through the negligence of
Landlord, its servants, employees and contractors.
20. INSURANCE RISK. Tenant shall not keep gasoline or other
inflammable material or any other explosive in the building or use the Demised
Premises in any manner which will increase the rate of fire insurance on the
building beyond the ordinary risk established for the type of business
hereinabove provided to be conducted therein, and any such increase in the
insurance rate shall be borne by Tenant. Tenant shall not do any act or thing
upon the Demised Premises or in or about the building which may make void or
voidable any insurance on the same premises or buildings, and the Tenant
expressly agrees to conform to all rules and regulations from time to time
established by the Maryland Insurance Rating Bureau.
21. LANDLORD ACCESS. Landlord and its Agent, from time to time,
shall have access to the Demised Premises at any and all reasonable times for
the purpose of protecting said premises against fire, for the prevention of
damage and injury to the Demised Premises, or for the purpose of inspecting the
same.
22. BANKRUPTCY. In the event Tenant shall be adjudicated a
bankrupt, or if Tenant shall file or acquiesce in a petition in any court in
any bankruptcy, reorganization, composition, extension, arrangement or
insolvency proceedings, or if Tenant shall make an assignment or other
conveyance in trust for the benefit of its creditors, or if Tenant shall suffer
or permit a final judgment or decree for the payment of money to be entered
against it and execution to issue thereon and be levied upon its interest in
this lease, and such execution and levy be not dismissed within ten (10) days
after the date of such execution and levy, or if a receiver shall be appointed
for the property and assets of Tenant and such receivership be not discharged
within twenty (20) days from the date of such appointment, then upon the
happening of any said events, the term hereby demised shall, at the option of
Landlord, cease and determine, it being expressly agreed that the covenant
hereinafter contained against the assignment of this lease shall cover the case
of the assignment of this lease by operation of law as well as the assignment
of this lease by a voluntary act of Tenant.
<PAGE>10
23. REPOSSESSION. If at any time during the term hereof, Tenant
shall:
(i) fail to pay any installment of rent or any other charge required
to be paid by Tenant hereunder, when the same shall become due and payable (it
being specifically understood and agreed that the term rent includes the rent
set forth in Article 3, the increases in any real estate or other taxes and any
charges incurred by Landlord on behalf of Tenant as referred to in this lease
or any other consideration under the lease that is identified as rent in this
lease), and such failure shall continue for five (5) days; or
(ii) fail to perform or observe any other term, provision, covenant,
condition or requirement of this lease on the part of Tenant to be performed or
observed, and such failure shall continue for ten (10) days after written
notice from Landlord;
then, upon the happening of either of the aforementioned "Defaults", this lease
shall, at Landlord's option, cease and determine and shall operate as a Notice
to Quit, any written Notice to Quit being hereby expressly waived. Landlord
may proceed to recover possession of said premises by virtue of any legal
process as may at the time be in operation and force in like cases relative to
proceedings between Landlord and Tenant, and Tenant shall pay for any court
costs relative to such proceedings and attorneys' fees (which must be
reasonable), or Landlord may at its option re-enter and re-rent the Demised
Premises for the account of Tenant, and in such event, Tenant's right of
possession shall thereupon cease and terminate, and Tenant shall remain liable
to Landlord for any and all damage, deficiency or loss of rent which Landlord
may sustain by such re-entry.
24. RELETTING. Should Landlord elect to re-enter, as herein
provided, or should it take possession pursuant to legal proceedings or
pursuant to any notice provided by law, it may either terminate this lease or
it may from time to time without terminating this lease, make such reasonable
alterations and premises, and relet said premises or any part thereof for such
term or terms (which may be for a term extending beyond the term of this lease)
and at such rental or rentals and upon other terms and conditions as Landlord
in its discretion may deem advisable; upon each such reletting all rentals
received by Landlord from such reletting shall be applied first, to the payment
of any indebtedness other than rent due hereunder from Tenant to Landlord;
second, to the payment of any costs and expenses of such reletting, including
brokerage fees and attorneys' fees and costs of such reasonable alterations and
reasonable repairs (which shall not include special alterations and repairs for
unusual specifications of the new tenant); third, to the payment of rent due
and unpaid hereunder; and the residue, if any, shall be held by Landlord and
applied in payment of future rent as the same may become due and payable
hereunder. If such rentals received from such reletting during any month be
less than that to be paid during that month by Tenant hereunder, Tenant shall
pay any such deficiency to Landlord. Such deficiency shall be calculated and
paid monthly. No such re-entry or taking possession of the Demised Premises by
Landlord shall be construed as an election on its part to terminate this lease
unless a written notice of such intention be given to Tenant or unless the
termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, Landlord may at any
time thereafter elect to terminate this lease for any such previous breach.
Should Landlord at any time terminate this lease for any breach, in addition to
any other remedies it may have, it may recover from Tenant damages it may incur
by reason of such breach, including attorneys' fees (which must be reasonable)
and other costs of recovering the Demised Premises.
<PAGE>11
25. HOLD-OVER. If Tenant shall not immediately surrender the
Demised Premises on the day after the end of the term hereby created, then
Tenant shall, by virtue of this agreement, become a tenant by the month at
twice the rental agreed by said Tenant to be paid as aforesaid, commencing said
monthly tenancy with the first day next after the end of the term above
demised; and said Tenant as a monthly tenant, shall be subject to all of the
conditions and covenants of this lease as thought the same had originally been
a monthly tenancy. Each party hereto shall give to the other at least thirty
(30) days' written notice to quit the Demised Premises, except in the event of
non-payment of rent in advance or of the other additional rents provided for
herein when due, or of the breach of any other covenant by the said Tenant, in
which event Tenant shall not be entitled to any notice to quit, the usual
thirty (30) days' notice to quit being expressly waived; provided, however,
that in the event that Tenant shall hold over after the expiration of the term
hereby created, and if Landlord shall desire to regain possession of said
premises promptly at the expiration of the term aforesaid, then at any time
prior to the acceptance of the Landlord, at its election or option, may re-
enter and take by any legal action or process in force in the State of
Maryland.
26. SUBORDINATION. Tenant agrees that this lease shall be subject
and subordinate to the lien of any bona fide mortgages or deeds of trust that
may now or at any time hereafter be placed against the Demised Premises or the
Building by Landlord to secure money borrowed from any insurance company or
recognized financial institution. Tenant agrees, at any time hereafter, on
demand, to execute any instrument, release, or other documents that may be
required by Landlord for the purpose of subjecting and subordinating this lease
to the lien of any mortgage or deed of trust, whether original or substituted.
27. NOTICES. All notices required or desired to be given hereunder
by either party to the other shall be sent, postage prepaid, by certified or
registered mail. Notices to the respective parties shall be addressed as
follows:
If to Landlord: Smallwood Village Associates
222 Smallwood Village Center
St. Charles, Maryland 20602
If to Tenant: Interstate General Company L.P.
Smallwood Village Center
St. Charles, Maryland 20602
28. GENDER; ASSIGNS AND SUCCESSORS. Feminine or neuter pronouns
shall be substituted for those of the masculine form, and the plural may be
substituted for the singular number, in any place or places herein in which the
context may require such substitution or substitutions. The term "Landlord" as
used in this lease, means only the owner for the time being of the Landlord's
interest in this lease; and, in the event of the sale, assignment or transfer
by such owner of the Landlord's interest in this lease, such owner shall
thereupon be released and discharged of all covenants and obligations of
Landlord hereunder thereafter accruing. Except as provided in the preceding
sentence, all of the covenants, agreements, terms, conditions, provisions and
undertakings in this lease shall inure to the benefit of, and shall extend to
and be binding upon, the parties hereto and their respective heirs, executors,
legal representatives, successors and assigns, to the same extent as if they
were in every case named and expressed; and wherever in this lease reference is
made to either of the parties hereto, it shall be held to include (whenever and
wherever applicable) such parties and their respective heirs, executors, legal
<PAGE>12
representatives, successors and assigns, to the same extent as if in each and
every case so expressed.
29. SUBLETTING AND ASSIGNMENT. Tenant will not assign, transfer,
mortgage or encumber this lease or sublet or rent (or permit occupancy or use
of) the Demised Premises, or any part thereof, without obtaining the prior
written consent of Landlord (which shall not be unreasonably withheld); nor
shall any assignment or transfer of this lease be effectuated by operation of
law or otherwise without the prior written consent of Landlord (which shall not
be unreasonably withheld). Landlord may condition its consent to any
assignment or subletting upon Tenant's agreement to pay to Landlord any excess
rent or other payment received by Tenant over Tenant's rental obligation to
Landlord hereunder, it being the intention of the parties that Tenant not
profit from any assignment or subletting. The consent by Landlord to any
assignment or subletting shall not be construed as a waiver or release of
Tenant from the terms of, or Tenant's liability under, any covenant or
obligation under this lease, nor shall the collection or acceptance of rent
from any such assignee, subtenant or occupant constitute a waiver or release of
Tenant or any covenant or obligation contained in this lease, nor shall any
such assignment or subletting be construed to relieve Tenant from obtaining the
consent in writing of Landlord to any further assignment or subletting. In the
event that Tenant defaults hereunder, Tenant hereby assigns to Landlord the
rent due from any subtenant of Tenant and hereby authorizes each such subtenant
to pay said rent directly to Landlord, and Landlord's acceptance of rent from
such subtenant or assignee shall not be deemed to be a waiver of Tenant's
default hereunder or an acceptance of such subtenant or assignee. Any attempt
to assign this lease or to sublet all or any part of the Demised Premises
without the prior written consent of Landlord shall be void and of no force or
effect. IBC agrees, at any time, it will sublease space at IGC's request.
30. Intentionally left blank.
31. ADDITIONAL RENT. If Landlord shall incur any charge or expense
on behalf of Tenant under the terms of this lease, such charge or expense shall
be considered additional rents hereunder; in addition to and not in limitation
of any other rights and remedies which Landlord may have in case of the failure
by Tenant to pay such sums when due, such nonpayment shall entitle Landlord to
the remedies available to it hereunder for non-payment of rent. All such
charges or expenses shall be paid to Landlord at its office in St. Charles,
Maryland, or at such other place and to such other person as Landlord may from
time to time designate in writing.
32. ESTOPPEL CERTIFICATES. Tenant agrees, at any time and from time
to time, upon not less than five (5) days prior written notice by Landlord, to
execute, acknowledge and deliver to Landlord or to such person(s) as may be
designated by Landlord, a statement in writing (i) certifying that Tenant is in
possession of the Demised Premises, has unconditionally accepted the same and
is currently paying the rents reserved hereunder, (ii) certifying that this
lease is unmodified and in full force and effect (of if there have been
modifications, that the lease is in full force and effect as modified and
stating the modifications), (iii) stating the dates to which the rent and other
charges hereunder have been paid by Tenant, (iv) stating whether or not to the
best knowledge of Tenant, Landlord is in default in the performance of any
covenant, agreement or condition contained in this lease, and, if so,
specifying each such default of which notices to Tenant should be sent.
Notwithstanding the foregoing, Tenant need only deliver such an estoppel
certificate where the requirement is imposed by a third party in connection
with the potential sale or refinancing of the Shopping Center. Any such
<PAGE>13
statement delivered pursuant hereto may be relied upon by any owner of the
Shopping Center, any prospective purchaser of the Shopping Center, any
mortgagee or prospective mortgagee of the Shopping Center or of Landlord's
interest, or any prospective assignee of any such mortgagee.
33. QUIET ENJOYMENT. Landlord warrants that it has the right to
make this lease for the term aforesaid; that it will put Tenant into complete
and exclusive possession of the Demised Premises, free from all orders,
restrictions and/or notices of any public or quasi-public authority or from any
individual. Landlord covenants that if Tenant pays the rent and all other
charges provided for herein, performs all of its obligations provided for
hereunder, and observes all of the other provisions hereof, Tenant shall at all
times during the term hereof peaceably and quietly have, hold and enjoy the
Demised Premises, without any interruption or disturbance from Landlord, or
anyone claiming through or under Landlord, subject to the terms hereof.
34. NO WAIVER. No waiver of any breach of any covenant, condition
or agreement herein contained shall operate as a waiver of the covenant,
condition or agreement itself, or of any subsequent breach thereof.
35. OUTPARCEL. Landlord shall the right to remove from the Shopping
Center, sell, or separately develop any out parcels whereupon such out parcels
shall, at the option of the Landlord, be removed from the definition of the
Shopping Center.
36. PARTIAL INVALIDITY. If any term, covenant or condition of this
lease or the application hereof to any person or circumstance shall, to any
extent, be held invalid or unenforceable, the remainder of this lease or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant and condition of this lease shall be
valid and enforced to the fullest extent permitted by law.
37. RULES AND REGULATIONS. Tenant shall at all times comply with
the rules and regulations set forth on Exhibit "C" attached hereto, and with
any additions thereto and modifications thereof adopted from time to time by
Landlord, and each such rule or regulation shall be deemed to be a covenant of
this lease to be performed and observed by Tenant.
38. APPLICABLE LAW. This lease shall be construed under the laws of
the State of Maryland.
39. CAPTIONS AND HEADINGS. Captions and headings are for
convenience and reference only.
40. JOINT AND SEVERAL LIABILITY. If two or more individuals,
corporations, partnerships or other business associations (or any combination
of two or more thereof) shall sign this lease as Tenant, the liability of each
such individual, corporation, partnership, or other business association to pay
rent and perform all other obligations hereunder shall be deemed to be joint
and several. In like manner, if the Tenant named in this lease shall be a
partnership or other business association, the members of which are, by virtue
of statute or general law, subject to personal liability, the liability of each
such member shall be joint and several.
41. MODIFICATION. This writing is intended by the parties as the
final expression of their agreement and as a complete and exclusive statement
of the terms thereof, all negotiations, considerations and representations
<PAGE>14
between the parties having been incorporated herein. No course of prior
dealings between the parties or their affiliates shall be relevant or
admissible to supplement, explain, or vary any of the terms of this lease.
Acceptance of, or acquiescence in, a course of performance rendered under this
or any prior agreement between the parties of their affiliates shall not be
relevant or admissible to determine the meaning of any of the terms of this
lease. No representations, understandings, or agreements have been made or
relied upon in the making of this lease other than those specifically set forth
herein. This lease can only be modified by a writing signed by all of the
parties hereto or their duly authorized agents.
42. NO DISCRIMINATION. It is intended that the Shopping Center be
developed so that all prospective Tenants thereof, and all customers,
employees, licensees and invitees of all Tenants shall have the opportunity to
obtain all the goods, services, accommodations, advantages, facilities and
privileges of the Shopping Center without discrimination because of race,
creed, color, national origin or ancestry. To that end, Tenant will not
discriminate in the conduct and operation of its business in the Demised
Premises against any person or group or persons because of the race, creed,
color, national origin, or ancestry of such person or group of persons.
43. NO OPTION. The submission of this lease for examination does
not constitute a reservation of or option for the Demised Premises, and this
lease becomes effective only upon execution and delivery thereof by Landlord.
44. Intentionally left blank.
45. MASTER LEASE. Tenant acknowledges that it has been informed
(and agrees) that (i) Landlord might not be, now or in the future, the owner of
the fee interest in the Demised Premises or the Shopping Center or the ground
underlying the Demised Premises or the Shopping Center; and (ii) if Landlord is
not now or in the future the owner of such fee interest, Landlord is or may be
the owner of a leasehold interest in the Demised Premises or the Shopping
Center or the ground underlying the Demised Premises or the Shopping Center
(subject to certain encumbrances) pursuant to a Master Lease. Wherever the
terms "Master Lease" or "master lease" or "Leasehold Interest" or "leasehold
interest" are used in this Lease, they shall be deemed to mean and include
respectively the master lease and leasehold interest referred to in this
paragraph and the terms "Master Lessor" or "master lessor" shall be deemed to
mean and include the lessor under such master lease.
46. IBC agrees to install at no cost to Tenant, new carpet, paint,
refurbish bathrooms, install vinyl window blinds, replace lobby floor tile and
various other items that may need attention.
47. IBC agrees to provide a space planner for the demised premises
at no cost to Tenant, for revamping office space and IBC will make the changes
required by the space plan at no cost to the Tenant.
48. WAIVER OF JURY TRIAL. Tenant hereby waives all rights to trial
by jury in any claim, action, proceeding or counterclaim by either Landlord or
Tenant against the other or any matters arising out of or in any way connected
with this lease, the relationship of Landlord and Tenant and/or Tenant's use or
occupancy of the Demised Premises.
<PAGE>15
IN WITNESS WHEREOF, and intending that this lease be a sealed
instrument, Landlord and Tenant have executed this lease under seal on the
dates indicated beneath their respective signatures.
SMALLWOOD VILLAGE ASSOCIATES
(a Maryland Limited Partnership)
INTERSTATE BUSINESS CORPORATION,
GENERAL PARTNER
/s/ Paul Resnik
- ------------------------- By: /s/ J. Michael Wilson
WITNESS ---------------------------------------
Date of Execution
by Landlord: August 28, 1995
------------------------------
INTERSTATE GENERAL COMPANY L.P.
INTERSTATE GENERAL MANAGEMENT
CORPORATION, GENERAL PARTNER
/s/ Martha Haupt
- ------------------------- by Tenant: /s/ John E. Hans
WITNESS ---------------------------------
State of Maryland )
) SS:
County of Charles )
Before me, a Notary Public in and for the jurisdiction aforesaid,
personally appeared this date, John E. Hans, personally well known (or
satisfactorily proven) to me to be the Senior Vice President and Secretary of
Interstate General Management Corporation, a Delaware corporation, who, being
by me first duly sworn, did acknowledge that he/she, as the duly authorized
officer of said Corporation, executed the foregoing and annexed Instrument, in
the name and on behalf of said Corporation, as its free act and deed for the
uses and purposes therein contained.
WITNESS my hand and official seal this 28th day of August, 1995.
/s/ Joanne R. Jewell
-----------------------------------
NOTARY PUBLIC
My Commission Expires June 10, 1998
<PAGE>
<PAGE>16
RIDER "A"
The foregoing and attached Lease, dated August 25, 1995, between
Smallwood Village Associates, a Maryland Limited Partnership, as Landlord, and
Interstate General Company L.P., as Tenant, is modified, amended, and/or
supplemented as hereinafter set forth, and any language of or provision in said
Lease inconsistent or in conflict with the following, and not herein expressly
referred to, shall be deemed appropriately amended or modified:
Article 2 of the Lease is hereby amended by adding the following
provisions immediately after the last sentence in said Article 2:
Provided that (i) this Lease is in full force and effect,
(ii) Tenant is in possession of the demised premises and
(iii) Tenant is not in default (beyond any grace period
granted in the Lease for curing the same) under any of the
terms, conditions or provisions hereof, Tenant shall have
the right, at its option, to extend the term of this Lease
for two (2) additional periods ("Renewal Periods") of five
(5) years each, by giving written notice thereof to
Landlord at least six (6) months but not more than nine (9)
months prior to the end of the initial term hereof, in the
case of the first renewal option, and at least six (6)
months but not more than nine (9) months prior to the end
of the then current Renewal Period, in the case of each
successive Renewal Period (if any). Unless expressly
provided herein to the contrary, the Renewal Period (or
Renewal Periods, if more than one) shall be upon the same
terms, conditions and provisions, and at the same rental
(subject to the adjustment herein elsewhere provided) as
set forth herein with respect to the initial term hereof.
Initialled for Landlord: Initialled for Tenant:
/s/ JMW /s/ JEH
- ------------------------ ----------------------
<PAGE>
<PAGE>17
SMALLWOOD VILLAGE CENTER - OFFICE LEASE
EXHIBIT "C"
Rules and Regulations
Tenant shall, at all times during the term of the lease:
1. Use, maintain and occupy the Demised Premises in a careful,
safe, proper and lawful manner and keep said premises and its appurtenances in
a clean and safe condition;
2. Keep the Demised Premises in a clean, orderly and sanitary
condition, free of insects, rodents, vermin and other pests;
3. Not permit undue accumulations of garbage, trash, rubbish and
other refuse in the Demised Premises, and keep refuse in closed containers
within the interior of the premises until removed.
4. Not use, permit or suffer the use of any apparatus or
instruments for musical or other sound reproduction or transmission in such
manner that the sound emanating therefrom or caused thereby shall be audible
beyond the interior of the Demised Premises;
5. Keep all mechanical apparatus free of vibration and noise which
may be transmitted beyond the confines of the Demised Premises;
6. Not cause or permit objectional odors to emanate or be dispelled
from the Demised Premises;
7. Not overload the floors or electrical wiring and not install any
additional electrical wiring or plumbing without Landlord's prior written
consent;
8. Keep all glass in the doors and windows of the premises clean
and in good repair;
9. Not solicit business in the common areas of the Shopping Center
or distribute handbills or other advertising materials in the common areas, and
if this provision is violated the Tenant shall pay Landlord the cost of
collecting same from the common areas for trash disposal.
<PAGE>1
Exhibit 10(b)
LEASE AMENDMENT
THIS LEASE AMENDMENT (the "Amendment") is made as of the 5th day of
September, 1995 by and between SMALLWOOD VILLAGE ASSOCIATES ("Landlord") AND
Interstate General Company L.P. ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a lease for certain office
space in Smallwood Village Center, St. Charles, Maryland dated August 25, 1995
(the "Lease"); and
WHEREAS, Landlord and Tenant wish to amend the Lease and revise
paragraph 24 of the Lease Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties agree as follows:
1. The following shall be added to parag. 24 of the Lease Agreement:
In addition, in the event of termination by Landlord as aforesaid, if
Landlord at its sole option so elects, Tenant shall pay to Landlord, on demand,
as liquidated, agreed final damages, the following:
a) The difference between: (i) the rent and all other charges which
would have been payable from the date of such demand to the date when the Lease
would have expired if it had not been terminated as aforesaid, and (ii) the
fair rental value of the demised premises for the same period, with said
difference being discounted at the rate of six percent (6%) per annum to
present worth, and
b) commissions, advertising, cost of repairs and other expenses
incidental to the reletting of the demised premises.
For purposes of the foregoing sentence, the term rent shall include
fixed minimum rental, Percentage Rent, additional rent, and all other charges
and pass-throughs provided herein. For the purpose of computing Percentage Rent
after a Default, the monthly percentage rent shall be deemed to be equal to the
average monthly Percentage Rent paid hereunder for the twenty four (24) months
during the term preceding such termination(or for the entire preceding portion
of the term if less than 24 months).
2. Except as specifically modified by this Amendment, the terms and
provisions of the Lease will continue in full force and effect.
<PAGE>2
IN WITNESS WHEREOF, the undersigned has duly executed this Amendment,
or caused this Amendment to be executed by their duly authorized
representatives:
WITNESS:
/s/ Paul Resnik By: /s/ James Michael Wilson
- ----------------------------- --------------------------------
Smallwood Village Associates
Interstate Business Corporation
General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- ----------------------------- --------------------------------
TENANT - Interstate General
Company L.P.
State of Maryland
SS:
County of Charles
Before me, a Notary Public in and for the jurisdiction aforesaid,
personally appeared this date James Michael Wilson. Personally well known to
me to be the President of Interstate Business Corporation a Delaware
corporation, who being by me first duly sworn, did acknowledge that he, as the
duly authorized officer of said Corporation, executed the foregoing and annexed
instrument, in the name and on behalf of the Corporation, as its free act and
deed for the uses and purposes contained herein.
WITNESS my hand and official seal this 6th day of September, 1995.
/s/ Martha Haupt My Commission Expires: February 2, 1997
- ----------------------------- ------------------
Notary Public
<PAGE>1
Exhibit 10(c)
LEASE AMENDMENT
THIS LEASE AMENDMENT (the "Amendment") is made as of the 1st day of
October, 1991 by and between Smallwood Village Associates ("Landlord") and
Interstate General Corporation, now Interstate General Company LP ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a lease for certain commercial
space in Smallwood Village Shopping Center, St. Charles, Maryland dated June
15, 1981 (the "Lease"); and
WHEREAS, Landlord and Tenant wish to amend the Lease to exercise Option to
Extend lease for five (5) years instead of ten (10) years as shown in Option to
renew.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. Landlord agrees to exercise Option to Extend for five (5) years
beginning October 1, 1991 and terminating September 30, 1996.
2. Landlord agrees to allow Tenant to Renew lease for five (5) years
instead of ten (10) years and grants Tenant an additional five (5)
year Option to Extend.
3. Except as specifically modified by this Amendment, the terms and
provisions of the Lease will continue in full force and effect.
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment, or
caused this Amendment to be executed by their duly authorized representatives:
ATTEST:
/s/ Paul Resnik By: /s/ Charles E. Stuart
- ----------------------- --------------------------------------
Smallwood Village Associates
Interstate Business Corp.
General Partner
/s/ Paul Resnik By: /s/ Charles E. Stuart
- ----------------------- ----------------------------------------
TENANT - Interstate General Company L.P.
<PAGE>2
State of Maryland
SS:
County of Charles
Before me, a Notary Public in and for the jurisdiction aforesaid,
personally appeared this date 10-1-91. Personally well known (or
satisfactorily proven) to me to be the Senior Vice President of Interstate
Business Corporation a Delaware corporation, who being by me first duly sworn,
did acknowledge that he/she, as the duly authorized officer of said
Corporation, executed the foregoing and annexed instrument, in the name and on
behalf of the Corporation, as its free act and deed for the uses and purposes
contained herein.
WITNESS my hand and official seal this 1st day of October, 1991.
/s/ Linda Susan Bland My Commission Expires 8/22/93
- ----------------------------- ------------
Notary Public
<PAGE>1
Exhibit 10(d)
LEASE AMENDMENT II
THIS LEASE AMENDMENT (the "Amendment") is made as of the 5th day of
September, 1995 by and between Smallwood Village Associates ("Landlord") and
Interstate General Company LP ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a lease for certain commercial
space in Smallwood Village Shopping Center, St. Charles, Maryland dated June
15, 1981 (the "Lease"); and
WHEREAS, Lease was amended by Lease Amendment dated October 1, 1991, and
WHEREAS, Tenant requests two additional options to renew for five (5)
years each; and
WHEREAS, Landlord and Tenant wish to further amend the Lease to extend
lease through August 31, 2005.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. Landlord hereby extends lease agreement through August 31, 2005.
2. The following language shall be added to paragraph 39 of the lease
agreement:
"Landlord agrees that at Tenant's request, and so long as Tenant
is not in default under this Lease, Landlord shall assist Tenant
in attempting to locate subtenants for portion of the Demised
Premises."
3. The following language shall be added to paragraph 33 of the lease
agreement:
In addition, in the event of termination by Landlord as
aforesaid, if Landlord at its sole options so elects, Tenant
shall pay to Landlord, on demand, as liquidated, agreed final
damages, the following:
1. The difference between (i) the rent and all other charges
which would have been payable from the date of such demand to
the date when this Lease would have expired if it had not been
terminated as aforesaid, and (ii) the fair rental value of the
demised premises for the same period, with said difference being
discounted at the rate of six percent (6%) per annum to present
worth, and
2. Commissions, advertising, cost of repairs and other
expenses incidental to the reletting of the demised premises.
<PAGE>2
For purposes of the foregoing sentence, the term rent shall
include fixed minimum rental, Percentage Rent, additional rent,
and all other charges and pass-throughs provided herein. For
the purpose of computing Percentage Rent after a Default, the
monthly percentage rent shall be deemed to be equal to the
average monthly Percentage Rent paid hereunder for the twenty-
four (24) months during the term preceding such termination (or
for the entire preceding portion of the term if less than
twenty-four months).
4. Landlord hereby provides Tenant with two additional options to renew
for five (5) years each commencing September 1, 2005.
5. Except as specifically modified by this Amendment, the terms and
provisions of the Lease will continue in full force and effect.
IN WITNESS WHEREOF, the undersigned has duly executed this Amendment, or
caused this Amendment to be executed by their duly authorized representatives:
WITNESS:
/s/ Paul Resnik By: /s/ James Michael Wilson
- ----------------------- --------------------------------------
Smallwood Village Associates
Interstate Business Corporation
General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- ----------------------- ----------------------------------------
TENANT - Interstate General Company L.P.
State of Maryland
SS:
County of Charles
Before me, a Notary Public in and for the jurisdiction aforesaid,
personally appeared this date James Michael Wilson. Personally well known to
me to be the President of Interstate Business Corporation a Delaware
corporation, who being by me first duly sworn, did acknowledge that he/she, as
the duly authorized officer of said Corporation, executed the foregoing and
annexed instrument, in the name and on behalf of the Corporation, as its free
act and deed for the uses and purposes contained herein.
WITNESS my hand and official seal this 6th day of September, 1995.
/s/ Martha Haupt My Commission Expires Feb. 2, 1997
- ----------------------------- --------------
Notary Public
<PAGE>1
Exhibit 10(e)
STORE
LEASE
SMALLWOOD VILLAGE ASSOCIATES,
LANDLORD
and
INTERSTATE GENERAL COMPANY L.P.
TENANT
for
STORE NO. C8 - C9 - C11
SMALLWOOD VILLAGE SHOPPING CENTER
<PAGE>
<PAGE>2
EXHIBITS
and
ATTACHMENTS
1. EXHIBIT A Site Plan
2. EXHIBIT B Tenant Fit-Up Specifications
3. EXHIBIT C Common Area Cost
4. EXHIBIT D Rules and Regulations
5. EXHIBIT E Lease Guaranty
6. EXHIBIT F Architectural Covenants
Declaration of Easements, Covenants, Conditions and Restrictions
<PAGE>
<PAGE>3
INDEX
Article Title Page
1 Demised Premises 1
2 Ingress and Parking 1
3 Tenant Pans 1
4 Lease Term 1
5 Fixed Minimum Rent 1
6 Percentage Rent 2
7 Deposit 3
8 Gross Sales Report 3
9 Audit 3
10 Definition of Gross Sales 4
11 Taxes and Assessments 4
12 Laws and Ordinances 5
13 Furniture and Fixtures 6
14 Repairs 6
15 Alterations 6
16 Damage 6
17 Eminent Domain 7
18 Roof Rights 7
19 Store Purpose 7
20 Signs 8
21 Hours of Lighting 8
22 Parking and Common Use Areas 8
23 Utilities: General 9
24 Utilities: Separate Meter 9
25 Trash 9
26 Keep Clean 9
27 Hold Harmless 9
28 Property at Tenant's Risk 9
29 Insurance Risk 10
30 Landlord Access 10
'31 Bankruptcy 10
32 Repossession 11
33 Reletting 11
34 Hold-Over 12
35 Rental Sign 12
36 Subordination 12
37 Notices 12
38 Assigns and Successors 12
39 Subletting and Assignment 12
40 Not Partners 13
41 Promotional Service 13
42 Continuous Occupancy 14
43 Maintenance and Operation of Common Areas 15
44 Cost of Maintenance and Operation of Common Areas 15
45 Insurance 15
46 Additional Rent 16
47 Quiet Enjoyment 16
48 Transfer of Landlord's Interest 16
49 No Waiver 17
50 Partial Invalidity 17
51 Rules and Regulations 17
52 Applicable Law 17
53 Captions and Headings 17
54 Joint and Several Liability 17
55 Modification 17
56 No Discrimination 17
<PAGE>4
57 Delay 17
58 Store Front 17
59 Estoppel Certificates 17
60 Outparcel 17
61 Waiver of Jury Trial 18
62 No Option 18
63 Security Deposit 18
64 Broker's Commission 18
65 Master Lease/Addenda 18
66 Landlord's Right to Change or Alter Stores
or Shopping Center 18
67 Late Charges 27
<PAGE>
<PAGE>5
LEASE
THIS LEASE, made this 1st day of December, 1987, by and between
SMALLWOOD VILLAGE ASSOCIATES, a Maryland Limited Partnership, 222 Smallwood
Village Center, St. Charles, Maryland 20601, hereinafter designated "Landlord,"
and INTERSTATE GENERAL COMPANY L.P. hereinafter designated "Tenant".
WITNESSETH:
DEMISED PREMISES. 1. In consideration of all Tenant's undertakings
hereinafter set forth, including payment of rent as hereinafter specified.
Landlord hereby leases to Tenant the building area located in a shopping
center development known as Smallwood Village Shopping Center (herein called
the "Shopping Center"), at St. Charles Parkway and Post Office Road, St.
Charles, Maryland containing approximately 3,509 square feet, marked Exhibit
"A" and made a part hereof (herein called the "demised premises").
INGRESS & PARKING 2. Together with the building herein demised. the
Landlord grants to the Tenant a right of ingress and egress and free parking of
vehicles of the Tenant's invitees in the parking areas, and including a right
for ingress and egress to and from the adjoining public streets, highways
and/or service area.
FIT-UP REQUIREMENTS 3. The premises are to be constructed in accordance
with the attached Tenant fit-up specifications, marked Exhibit "B" and made a
part hereof, for which Landlord will provide "as-is" drawings. Any additional
Tenant requirements and costs over and above such Tenant fit-up specifications
set forth in Exhibit "B" will be the responsibility of and at the expense of
the Tenant. If the Landlord agrees to make any additions to or modifications of
Exhibit "B" at Tenant's expense, Tenant agrees to pay the Landlord in full
prior to construction of the additions or modifications. It is agreed that no
later than ten (10) days from date of execution of this Lease, the Tenant will
furnish to Landlord its partition, electric, telephone, and all other additions
or modifications to Tenant fit-up requirements beyond those set forth on
Exhibit "B", in drawings prepared by a certified architect or engineer suitable
to obtain a building permit from Charles County. In the event Tenant fails to
comply with the aforesaid by the date specified, then Tenant shall pay to
Landlord, in addition to the rent commencing as of the Rent Commencement Date,
daily rent for the number of days' delay resulting from Tenant's failure to
comply with the provisions of this Article 3, computed at the rate of one-
thirtieth (1/30th) of the fixed monthly rental per day. The Landlord shall
approve or disapprove the drawings of Tenant's additions or modifications to
the fit-up requirements in writing within five (5) days of Tenant's submission
thereof. Within five (5) days of Landlord's approval of the drawings, Tenant
shall apply for a building permit and diligently pursue obtaining the building
permit from the appropriate authorities of Charles County. In the event Tenant
fails for any reason to obtain a building permit within thirty-five (35) days
of the date of execution of this Lease, the Landlord shall complete the Demised
Premises in accordance with Exhibit "B" and tender to the Tenant for occupancy.
LEASE TERM 4a. The term of this Lease shall commence on the date
hereof. and shall commence on the date hereof, and shall continue 5 years. The
"Rent Commencement Date" shall be the first day of December, 1987, provided the
Landlord has completed the Demised Premises in accordance with its obligations
as same are set forth herein and the Demised Premises are tendered to Tenant
for occupancy On December 1, 1987.
<PAGE>6
FIXED MINIMUM RENT 5. Commencing with the Rent Commencement Date, Tenant
shall pay as fixed minimum annual rental for the premises the sum of Thirty-
Four Thousand Two Hundred Twelve & 75/100 ($34,212.75) per annum, payable in
equal monthly installments of TWO THOUSAND EIGHT HUNDRED FIFTY-ONE & 06/100
Dollars ($2,851.06) each. All such monthly installments of the fixed minimum
rental shall be payable to Landlord, in addition, without previous notice or
demand therefor, and without diminution, counterclaim, deduction or set-off
whatsoever, with the first monthly installment to be due and payable upon
execution hereof, and each subsequent monthly installment to be due and payable
on the first day of each and every month following the Rent Commencement Date
during the term hereof. If the Rent Commencement Date is a date other than the
first day of a month, rent for the period commencing with and including the
Rent Commencement Date until the first day of the following month shall be
prorated at the rate of one-thirtieth (1/30th) of the fixed monthly rental.
PERCENTAGE RENT 6(a). Intentionally left blank.
6(b). Intentionally left blank.
6(c). Intentionally left blank.
6(d). Intentionally left blank.
6(e). The Fixed Minimum Annual Rental herein provided
for shall be adjusted by the Consumer Price Index as defined in Article 6(f).
Any such adjustment shall be accomplished by multiplying the Fixed Minimum
Annual Rental then in effect by a fraction, the numerator of which shall be the
Consumer Price Index as of the most recent date prior to the date of such
adjustment, and the denominator of which shall be the Consumer Price Index as
of the date nearest the beginning of such lease year (but in no event shall the
Fixed Minimum Annual Rent be reduced as a result of any such adjustment below
the Fixed Minimum Annual Rent specified in Article 5 hereof), and the increased
Fixed Minimum Annual Rental thereby established shall continue in effect as the
Fixed Minimum Annual Rental until again adjusted as herein provided. The term
"sufficient percentage rental" as used herein is defined as such Percentage
Rent for any lease year, whether or not actually paid or payable, which, when
added to the Fixed Minimum Annual Rental set forth in Article 5 would equal or
exceed such Fixed Minimum Annual Rental if adjusted to the Consumer Price Index
(applied as aforesaid) at the end of such lease year to reflect changes therein
since the beginning of such lease year. For example, if the Consumer Price
Index increases by 4% in the first lease year, then "sufficient percentage
rental" for that lease year would be an amount equal to or in excess of 4% of
the Fixed Minimum Annual Rental. If the Fixed Minimum Annual Rental set forth
in Article 5, or otherwise in this lease shall provide for different fixed sums
to be paid during certain lease years, or portions thereof (other than as may
result from the application of this Section 6(e) hereof), then in each and
every instance that the Fixed Minimum Annual Rental shall be adjusted pursuant
to this Section 6(e), all other fixed sums payable as Fixed Minimum Annual
Rental at some future time thereafter shall likewise be adjusted in the same
proportion.
6(f). For all purposes of the Lease Agreement, the
"Consumer Price Index" is hereby defined to be the index for the Washington,
D.C.-Maryland-Virginia area, now known as the United States Bureau of Labor
Statistics, Consumer Price Index, for Urban Wage Earners and Clerical Workers
(revised) - U.S. City Average, and selected areas (1977 = 100), all items; and
if the Consumer Price Index shall be discontinued or altered, then any
successor Consumer Price Index of the United States Bureau of Labor Statistics
<PAGE>7
or successor agency thereto, for the Washington, D.C. Metropolitan area, shall
be used, and if there is no such successor Consumer Price Index, Landlord and
Tenant shall attempt to agree upon a substitute index or formula, and if said
parties are not able to agree upon such substitute, the matter shall be
referred to binding arbitration in accordance with the rules of the American
Arbitration Association in the State of Maryland then prevailing.
6(g). No payment by Tenant or receipt by Landlord of a
lesser amount than the monthly installment of rent or other charges herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent or other charges, nor shall any endorsement or statement of any
check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction, and Landlord may accept such check for payment without
prejudice to Landlord's right to recover the balance of such rent or pursue any
other remedy in this lease provided.
6(h). The Tenant also agrees to pay and the Landlord
agrees to accept as additional rental for each lease year of the term the
Tenant's proportionate share of any real estate or other taxes as defined in
Article 11 and the Tenant's proportionate share of the cost of maintenance and
operation of common areas as defined in Article 44.
DEPOSIT 7. Intentionally left blank.
GROSS SALES REPORT 8. Intentionally left blank.
AUDIT 9. Intentionally left blank.
DEFINITION OF GROSS 10. Intentionally left blank.
SALES
TAXES AND ASSESSMENTS 11(a). For the purposes of this paragraph, the term
"Real Estate Taxes" means all taxes, rate and assessments, general and special,
levied or imposed with respect to the land, buildings and improvements located
or built within the Shopping Center, including all taxes, rates and
assessments, general and special levied or imposed for school, pubic
betterment, general or local improvements and operations and taxes imposed in
connection with any special taxing district. If the system of Real Estate
Taxation shall be altered or varied and any new tax or levy shall be levied or
imposed on said land, buildings and improvements, and/or Landlord in
substitution for Real Estate Taxes presently levied or imposed on immovables in
the jurisdiction where the demised premises is located, then any such new tax
or levy shall be included within the term "Real Estate Taxes." Should any
governmental taxing authority acting under any regulation, levy, assess, or
impose a tax, excise and/or assessment, however described (other than an income
or franchise tax) upon, against, on account of, or measured by, in whole or in
part, the rent expressly reserved hereunder, or upon the rent expressly
reserved under any other leases or leasehold interest in the Shopping Center,
as a substitute (in whole or in part) or in addition to any existing Real
Estate Taxes on land and buildings and otherwise, such tax or excise on rents
shall be included within the term "Real Estate Taxes."
<PAGE>8
11(b). The term "Base Year" means the 1987/88 real
estate tax year. The term "Real Estate Tax Year" means each successive twelve
(12) month period following and corresponding to the Base Year, irrespective of
the period or periods which may from time-to-time in the future be established
by competent authority for the purposes of levying or imposing Real Estate
Taxes.
11(c). Each Real Estate Tax Year after the Base Year,
Tenant shall pay to Landlord within ten (10) days after demand in writing
thereof (accompanied by a statement showing the computation of same) as
additional rent and in addition to Fixed Minimum Rental, Percentage Rent and
all other payments provided for herein, Tenant's Percentage Share (hereafter
defined) of the amount by which (i) the Real Estate Taxes for such tax year
exceed (ii) the Real Estate Taxes for the Base Year. The term "Tenant's
Percentage Share," for all purposes of this Lease, is hereby defined to be that
percentage representing the proportion that the total gross rentable square
feet contained within the leased premises bears to the total gross rentable
square feet contained within the Shopping Center.
11(d). Reasonable expenses, consisting of attorneys'
fees, expert witness fees and similar costs, incurred by Landlord in obtaining
or attempting to obtain a reduction of any Real Estate Taxes shall be added to
and included in the amount of any such Real Estate Taxes. Real Estate Taxes
which are being contested by Landlord shall nevertheless be included for
purposes of the computation of the liability of Tenant under the above
paragraph, provided, however, that in the event that Tenant shall have paid any
amount of increased rent pursuant to this Article 11 and the Landlord shall
thereafter receive a refund of any portion of any Real Estate Taxes on which
such payment shall have been based, Landlord shall pay to Tenant the
appropriate portion of such refund. Landlord shall have no obligation to
contest, object or litigate the levying or imposition of any Real Estate Taxes
and may settle, compromise, consent to, waive or otherwise determine in its
discretion to abandon any contest with respect to the amount of any Real Estate
Taxes without consent or approval of the Tenant.
Nothing contained in this section shall be construed
at any time to reduce the monthly installments of rent payable hereunder below
the amount specified in Articles 5 and 6 of this Lease.
If the termination date of this Lease shall not
coincide with the end of a Real Estate Tax fiscal year, then in computing the
amount payable under this Article 11 for the period between the commencement of
the applicable Real Estate Tax fiscal year in question and the termination date
of this Lease, Tenant's Percentage Share of the Real Estate Taxes for the
applicable Real Estate Tax fiscal year shall be equitably apportioned (on a per
diem basis) so that Tenant shall pay only such portion of such Real Estate
Taxes as is attributable to the portion of such Real Estate Tax fiscal year
occurring during the term of this Lease. Tenant's obligation to pay Real Estate
Taxes under this Article 11 for the final period of the Lease shall survive the
expiration of the term of this Lease.
A tax bill or true copy thereof, together with any
explanatory statement of the area or property covered thereby submitted by
Landlord to Tenant shall be conclusive evidence of the amount of taxes assessed
or levied, as well as of the items taxes. If any real property tax or
assessment levied against the land, building or improvements covered hereby or
the rents reserved therefrom, shall be evidenced by improvement bonds or other
<PAGE>9
bonds, or in any other form, which may be paid in annual installments, only the
amount paid or payable in any real estate tax fiscal year shall be included as
Real Estate Taxes for that real estate tax year for the purposes of this
Article 11.
LAWS AND ORDINANCES 12. At the time when Landlord tenders possession, in
accordance with its obligations under this Lease, to Tenant, Landlord shall
certify in writing that said premises and all of the work Landlord has
performed therein is in accordance with all state, county, and municipal
building and safety requirements. From that point forward, Tenant will, at its
own costs, promptly comply with and carry out all orders, requirements or
conditions now or hereafter imposed upon it by the ordinances, laws and/or
regulations of the municipality, county and/or state in which the premises are
located, whether required of the Landlord or otherwise, in the conduct of
Tenant's business, except that Landlord shall comply with any orders affecting
structural walls and columns unless due to Tenant's particular business or use
of the premises. Tenant will indemnify and save Landlord harmless from all
penalties, claims, and demands resulting from Tenant's failure or negligence in
this respect.
FURNITURE AND FIXTURES 13. Tenant shall have the privilege o{ installing,
subject to the written approval of the Landlord which shall not be unreasonably
withheld, any furniture, fixtures and machinery necessary to the conduct of its
business and the same shall remain the property of the Tenant, provided they be
removed by the Tenant before the expiration of its tenancy, and further
provided that in the event any damage is done to said premises in the removal
of said furniture, fixtures or machinery, Tenant will promptly reimburse
Landlord for the cost of such repairs as are necessary to restore said premises
to their original condition. In the event of failure of Tenant to remove said
furniture, fixtures and machinery from said premises before expiration of this
Lease, it is agreed that Tenant is abandoning said furniture, fixtures and
machinery and same shall become the property of Landlord, who shall have the
right to use, remove or dispose of said furniture, fixtures and machinery at
the Tenant's expense.
REPAIRS 14. The Tenant agrees to maintain the premises in
good repair during the term of this Lease, at his own expense, including the
floors, walls, ceiling, inside plumbing, heating, ventilating, air conditioning
and other equipment and fixtures installed by the Landlord. Landlord agrees
within a reasonable time after receipt of written notice from the Tenant to
make all repairs necessary to the structural portion and roof, including
gutters and downspouts of the demised premises. The Tenant also agrees, at his
own expense, to replace all plate glass in the demised premises which shall be
damaged or broken from any cause, except where due to building settlement. The
Tenant also agrees at his own cost and expense to maintain exterior sign face,
sign box and sign lighting. The Tenant also agrees at his own cost and expense
to keep in effect during the term of this Lease and any extension or renewal
thereof a full parts and labor maintenance contract on the heating, ventilating
and air conditioning equipment, servicing the demised premises with a
contractor licensed in this area, approved by the Landlord, which approval
shall not be unreasonably withheld. The Tenant agrees to provide the Landlord
with a copy of this contract upon request.
ALTERATIONS 15. Tenant shall not do any construction work or make
any alterations, modifications or changes to any part of the demised premises
either exterior or interior, without Landlord's written consent which shall not
be unreasonably withheld. Landlord may condition its consent upon Tenant's
delivery to Landlord of a policy or policies of workmen's compensation,
<PAGE>10
liability and property damage insurance, naming Landlord as additional insured,
in limits and with companies acceptable to the Landlord. In the event of any
such approved work or changes, Tenant shall have all work done at its own
expense. Request for such consent shall be accompanied by plans stating in
detail precisely what is to be done. Tenant and Tenant's contractors (who shall
be licensed) shall comply with the building codes, regulations and laws now or
hereafter to be made or enforced in the municipality, county and/or state in
which said premises are located and which pertain to such work. Any additions,
improvements, alterations and/or installations made by Tenant (except only
movable store and office furniture and fixtures) shall become and remain a part
of the building and be and remain Landlord's property upon the termination of
Tenant's occupancy of said premises; provided, however, that if Landlord gives
written notice to Tenant at the expiration or prior termination of this Lease
to such effect, it may require Tenant to restore said premises to their
original condition. Tenant shall save Landlord harmless from and against all
expenses, liens, claims or damages to either property or person which may or
might arise by reason of the making of any such additions, improvements,
alterations and/or installations.
DAMAGE 16. If the demised premises shall be partially or
totally damaged or destroyed by any risk covered by Landlord's insurance as
provided for in Article 45(a) of this Lease, then Landlord shall diligently and
as soon as practicably after such damage occurs (taking into account the time
necessary to effectuate a satisfactory settlement with any insurance company,
and reasonable delay on account of "labor troubles" or any other cause beyond
Landlord's control) repair or rebuild the demised premises, provided, however,
that in no event shall Landlord be obligated to expend in such repair or
rebuilding any sums in excess of the amount of insurance proceeds paid to
Landlord in connection therewith. The foregoing notwithstanding, in no event
shall Landlord be required to repair, restore or rebuild any portions of the
demised premises constituting a part of Tenant's leasehold improvements or
other tenant work, trade fixtures, equipment and personal property. If the
demised premises are rendered wholly or partially untenantable by such damage
or destruction, and such damage and destruction was without the fault or
neglect of the Tenant, his servants, employees, agents, visitors or licensees,
then the rent payable by Tenant under this Lease during the period in which the
demised premises are so untenantable shall be equitably abated. Except as set
forth in this Article, Landlord shall not be liable for any damages (including
without limitation, business interruption) that may be suffered by Tenant by
reason of any casualty to the demised premises and/or Landlord's repairing or
rebuilding thereof and/or the deprivation of Tenant's use and possession of the
demised premises. All of the foregoing provisions of this Article 16
notwithstanding, if the demised premises are rendered wholly untenantable by
fire or other cause, and the Landlord shall decide not to rebuild the same, or
if the Shopping Center be so damaged that the Landlord shall decide to demolish
it or not to rebuild it, then, or in any of such events, the Landlord may, at
its option, cancel and terminate this Lease by giving to the Tenant, within
sixty (60) days from the date of such damage, notice in writing of its
intention to cancel this Lease, whereupon the term of this Lease shall cease
and determine upon the tenth day after such notice is given, and the Tenant
shall vacate the demised premises and surrender the same to the Landlord.
EMINENT DOMAIN 17. If the Shopping Center or any part thereof shall
be taken by any governmental or quasi-governmental authority pursuant to the
power of eminent domain or deed in lieu thereof, Tenant agrees to make no claim
for compensation in the proceedings and hereby assigns to Landlord any rights
which Tenant may have to any portion of any award made as a result of such
taking, and this Lease shall terminate as to the portion of the premises taken
<PAGE>11
by the condemning authority and rental shall be adjusted to such date. The
foregoing notwithstanding, Tenant shall be entitled to claim, prove and receive
in the condemnation proceedings such awards as may be allowed for relocation
expenses and for fixtures and other equipment installed by it which shall not,
under the terms of this Lease, be or become the property of Landlord at the
termination hereof, but only if such awards shall be made by the condemnation
court in addition to and stated separately from the award made by it for the
land and the building or part thereof so taken.
If the nature, location or extent of any proposed condemnation affecting the
Shopping Center is such that the Landlord elects in good faith to demolish all
or substantially all of the buildings in the Shopping Center, then the Landlord
may terminate this Lease by giving at least sixty (60) days' written notice of
termination to the Tenant at any time after such condemnation and this Lease
shall terminate on the date specified in such notice.
ROOF RIGHTS 18. Landlord shall have the exclusive right to use
all or any portion of the roof of the leased premises for any purposes, and
shall have the right to erect additional stories or other structures over all
or any part of said premises.
STORE PURPOSE 19(a). The demised premises shall be used only for the
purpose of Office Use. Tenant shall not use all or any portion of the demised
premises for any other purpose.
19(b). Tenant affirmatively agrees and represents that
it understands and accepts the following as terms of this Lease.
1. The use of the demised premises solely for the
above-mentioned purpose was critical to Landlord's decision to enter into this
Lease. Landlord, in reaching its decision concerning the use of the demised
premises, considered and was influenced by the tenant mix in the Shopping
Center and the socio-economic status of the community in which the demised
premises are located. Such decision by Landlord would not have been made if
Tenant intended to use any portion of the demised premises for any purpose
other than that specified herein.
2. Landlord is acutely aware of its standing and
reputation in the community, and any use of the demised premises reflects on
that standing and reputation. For this reason also, use of the demised premises
was critical to Landlord's decision to enter into this Lease and to Landlord's
continued good standing and reputation in the community.
3. No deviation whatsoever from the use specified
herein shall be allowed for any portion of the demised premises without the
prior written consent of Landlord, which consent may be withheld for any
reason, or without reason, in the sole, absolute, and arbitrary discretion of
Landlord.
4. The terms of this Article 19 including, but not
limited to, any questions concerning the use for which all or any portion of
the demised premises are being employed, shall be strictly enforced and any
questions arising hereunder shall be resolved by Landlord in its sole and
absolute discretion
19(c). In addition to the provisions of Article 19(a)
and (b) above, and in no way in limitation thereof, Tenant agrees not to commit
waste on the demised premises and not to use the demised premises for any
<PAGE>12
unlawful purpose, or in violation of any certificate of occupancy, nor suffer
any dangerous article to be brought on the demised premises unless safeguarded
as required by law. Moreover, no nuisances, public or private, shall be allowed
on the demised premises nor shall any use be allowed which is a source of
annoyance or embarrassment to Landlord or the other Tenants of the Shopping
Center, or which is deemed by Landlord as not in keeping with the character of
the neighborhood, nor shall the demised premises be used for any unlawful,
immoral or improper purpose. Without limiting the generality of the foregoing,
in no event shall all or any portion of the demised premises be used as a so-
called "adult bookstore" selling obscene or pornographic books or magazines, or
for the sale of drug paraphernalia or related items, nor operate in the Demised
Premises or in any part of the Shopping Center any coin or token operated
vending machines or similar device for sale of any merchandise service
(including pay lockers, pay toilets, scales. amusement devices and machines for
the sale of beverages, foods, candy or other commodities) except that one
cigarette vending machine may be installed in the Demised Premises unless
otherwise approved by the Landlord in writing.
19(d) In addition to, and not in limitation of, the
foregoing subparagraphs of this Article 19 comply with and observe all
restrictive covenants of record (as outlined in Exhibit "E" attached hereto and
hereby made a part hereof) which affect or are applicable to the Shopping
Center and/or the Demised Premises and/or the common areas, provided the same
do not prohibit Tenant's permitted use of the Demised Premises specified in
Section 19 hereof.
SIGNS 20. Tenant shall provide one (two in specified
locations) signboard, sign or signs of such size, design and character, and in
such location(s) only, as Landlord shall approve in writing in its sole
discretion. Tenant hereby agrees that such sign shall, unless otherwise
expressly permitted, also comply in all respects with the provisions and
requirements of the sign regulations hereinafter adopted from time to time by
Landlord. Tenant shall obtain and pay for all permits and license's required in
connection with such sign and shall be responsible for the proper installation
thereof. It is further understood that all signs placed by Tenant on the
demised premises shall be erected and maintained in accordance with the County,
State and/or other ordinances in force or effect at the time, and at the sole
cost and expense of Tenant. Tenant agrees to maintain all signs in good
condition and repair at all times to the reasonable satisfaction of Landlord.
Except as expressly permitted by Landlord, no other signs, lights, lettering or
other forms of inscription of advertising of display devices shall be displayed
on the exterior of the demised premises or on or in immediate proximity to the
inner or outer face of the show windows, entrances, doors or transoms nor shall
the same be displayed in any other location within the demised premises from
which said signs, lights, or other forms of inscription or advertising or
display devices may readily be seen from outside the demised premises without
prior written approval of Landlord as to size, material, design and neatness
thereof. It is further agreed that Tenant shall not use sidewalks, parking
areas, and alleys for displays, wares, or signs of any kind. The Landlord shall
determine during what hours the Shopping Center and any signs shall be lit. Any
tenant directory provided by Landlord shall be at the sole cost and expense of
Landlord.
HOURS OF LIGHTING 21. Intentionally left blank.
PARKING AND COMMON
USE AREAS 22. All automobile parking areas, driveways, and
other facilities furnished by Landlord in or near the Shopping Center,
<PAGE>13
including employee parking areas, the truckway or truckways, loading docks,
package pick-up stations, pedestrian sidewalks and ramps, landscaped areas,
exterior stairways, and other areas and improvements provided by Landlord for
the general use, in common, of Tenants, their officers, agents, employees, and
customers, shall at all times be subject to the exclusive control and
management of the Landlord, and Landlord shall have the right from time to time
to establish, modify and enforce reasonable rules and regulations with respect
to all facilities and areas, the right to construct, maintain and operate
lighting facilities on all said areas and improvements, the right to change the
area, level, location and arrangement of parking areas and other facilities
hereinabove referred to, and the right to restrict parking by tenants, their
officers, agents and employees to employee parking areas. Landlord shall not,
however, have any duty to police the traffic in the parking areas. However, if
a parking lot attendant be required as determined by the Landlord or by
ordinance, regulation or law, Landlord shall provide same. and the cost of such
attendant shall be considered part of the cost of maintenance and operation of
common areas as provided for in Article 44. The Landlord is obligated to hard
surface, stripe and light the parking areas.
Tenant further agrees that its employees will not park their cars or other
vehicles on the streets adjacent to the leased premises, or in the space
provided for public use, but will use such space as Landlord shall designate
from time to time as parking space for the use of Tenants and employees.
Landlord may designate spaces provided for public parking for employee or
Tenant parking at specific times. At Landlord's request, Tenant shall supply
Landlord with the names of all employees assigned to the demised premises,
along with the license number of their respective automobiles or vehicles. In
addition, Tenant agrees to supply Landlord with the license numbers of all
vehicles owned or operated by Tenant.
The parties agree that damages will accrue from the breach of the covenant
relating to parking, and that the amount of such damage will be difficult to
establish, and that by reason thereof liquidated damages in the amount of
$10.00 per day, per vehicle, parked in violation of said covenant may be
recovered by Landlord from Tenant, following written notification to Tenant
naming the vehicles in violation.
Tenant agrees to prohibit the loading or unloading of delivery vans, trucks,
carts, or vehicles of any sort by, through, into, or from the front door or
doors or the demised premises after 10:00 a.m., during each seven (7) days of
the week; except that retail customers may load or unload into or from the
front door or doors of the demised premises purchases made by said retail
customers.
The parties agree that damages will accrue from the breach of the covenant
relating to loading or unloading of deliveries and that the amount of such
damage will be difficult to establish; that by reason thereof liquidated
damages in the amount $10.00 per day, per vehicle, loaded or unloaded in
violation of said covenant may be recovered by Landlord from Tenant, following
written notification to Tenant naming the supplier violating this covenant.
UTILITIES: GENERAL 23. Tenant shall, at its sole cost and expense, pay
all charges when due for water, sewer, gas, electricity, heat, air-conditioning
and any other utility or energy charges and taxes incurred by Tenant in the use
of the demised premises.
UTILITIES:
SEPARATE METER 24(a). Tenant shall pay to Landlord, within 10 days
<PAGE>14
after rendition of a bill therefor by Landlord of the Charles County Department
of Public Works, or successor, in addition to all other charges provided herein
and as additional rent, a sum equal to the amount (or Tenant's pro rata share,
as reasonably determined by Landlord) of any water or sewer rent or charge, or
any other tax, rent, fee, levy or charge, imposed in connection with Tenant's
use, consumption of supply of water, or Tenant's water system, or Tenant's
sewerage connection or system.
24(b). If Landlord, in its sole discretion, determines
at the inception of or during the term of this Lease that Tenant is a heavy
water user, then Landlord will install at Tenant's expense, a submeter for the
demised premises. Tenant shall keep such meter and any installation equipment
in good order and repair; repay Landlord on receipt of a bill for its'
installation and Tenant shall pay for all water consumed as shown on the meter
together with the concomitant sewer charge within ten (10) days after rendition
of a bill therefor.
24(c). The total charges for all Tenants in the
Shopping Center coming within the purview of Article 24(b) shall be deducted
from the charges pertaining to Tenants referred to in Article 24(a).
25. Tenant will keep the premises in a clean, orderly
and sanitary condition and free of insects, rodents, vermin, other pests, trash
and dirt accumulations and shall furnish adequate and proper receptacles for
trash and garbage in location designated by the Landlord. Landlord shall
maintain and keep in good repair the parking lot, pedestrian walkways and
driveways, keeping them clean, free of snow and ice, orderly, properly lighted
and marked. Landlord will provide garbage and trash collection service for the
demised premises. Tenant shall cooperate with Landlord in the scheduling of
such collection service and Tenant shall not use any other garbage or trash
collection service at the premises. The cost of any such service shall be
included in the Landlord's common area costs or shall be billed monthly to
Tenant, based on the ratio of the floor area of the demised premises to the
aggregate floor area of all tenants to whom Landlord furnishes such service.
Landlord may at any time change such collection methods, and will give
reasonable notice to Tenant.
KEEP CLEAN 26. The Tenant agrees to keep the sidewalks abutting
the demised premises in a clean and orderly fashion, and agrees not to use any
space, other than within the walls of the demised premises, for the sale or
storage of merchandise or for service of any kind.
HOLD HARMLESS 27. Tenant agrees that it will indemnify and save the
Landlord harmless from any and all liabilities, damages, causes of action,
suits, claims, judgements, costs and expenses of any kind (including attorneys'
fees) (i) relating to or arising from or in connection with the possession,
use, occupation, management, repair, maintenance or control of the demised
premises, or any portion thereof, or (ii) arising from or in connection with
any act or omission of Tenant or Tenant's agents, employees or invitees, or
(iii) resulting from any default, violation or nonperformance of this Lease by
Tenant, or (iv) resulting in injury to person or property or loss of life
sustained in or about the demised premises. To assure such indemnity, Tenant
shall carry and keep in full force and effect at all times during the term of
this Lease for the protection of the Landlord and Tenant herein, public
liability insurance with limits of at least One Million Dollars ($1,000,000.00)
for each accident and Five Hundred Thousand Dollars ($500,000.00) for each
separate injury, and property damage insurance In the amount of Fifty Thousand
Dollars ($5O,000.OO), with an approved insurance company and to deliver to
<PAGE>15
Landlord a copy of said policy or a certificate showing the same to be in force
and effect. In the event Tenant shall fail to maintain such policy of insurance
then Landlord may, after three (3) days' written notice to Tenant obtain such
policy and pay the premium thereon and the amount so paid shall be added to the
next installment of rent.
PROPERTY AT
TENANT'S RISK 28. It is understood and agreed that all personal
property, goods, wares and merchandise in said premises shall be and remain at
the Tenant's sole risk and the Landlord shall not be liable for any damage to
or loss of such personal property, goods and merchandise arising from the
bursting, overflowing or leaking of the roof or of water, sewer, or steam
pipes, or from wires or fixtures or from any other cause whatsoever, unless
said damages are caused through the negligence of the Landlord, its servants,
employees and contractors.
INSURANCE RISK 29. The Tenant shall not keep gasoline or other
inflammable material or any other explosive in the demised premises or use the
demised premises in any manner which will increase the rate of fire insurance
on the Shopping Center or any part thereof beyond the ordinary risk established
for the type of business hereinabove provided to be conducted therein, and any
such increase in the insurance rate shall be borne by the Tenant. Tenant shall
not do any act or thing upon the premises or in or about the Shopping Center or
any part thereof which may make void or voidable any insurance on the demised
premises or Shopping Center, and the Tenant expressly agrees to conform to all
rules and regulations from time to time established by the Maryland Insurance
Rating Bureau.
LANDLORD ACCESS 30. The Landlord and its Agent shall have access to
the demised premises at any and all reasonable times for the purpose of
protecting said premises against fire, for the prevention of damage and injury
to the leased premises, or for the purpose of inspecting the same.
31(a). In the event the Tenant shall be adjudicated
bankrupt or adjudged to be insolvent, or if Tenant shall file or acquiesce in a
petition in any court in any bankruptcy, reorganization, composition,
extension, arrangement or insolvency proceedings, or if Tenant shall make an
assignment or other conveyance in trust for the benefit of its creditors, or if
any execution or attachment shall be issued against Tenant or Tenant's property
whereupon the demised premises shall be taken or occupied or attempted to be
taken or occupied by someone other than Tenant and such execution or attachment
shall not be dismissed, vacated, discharged or bonded within sixty (60) days'
after issuance of same, or if a receiver of Trustee shall be appointed for the
property and assets of the Tenant and such receivership be not discharged
within twenty (20) days from the date of such appointment, then upon the
happening of any of said events, the term hereby demised shall, at the option
of the Landlord, cease and determine, it being expressly agreed that the
covenant hereinafter contained against the assignment of this Lease shall cover
the case of the assignment of this Lease by operation of law as well as the
assignment of this Lease by a voluntary act of the Tenant.
31(b). If this Lease shall be so cancelled and
terminated, neither Tenant nor any person claiming through or under Tenant by
virtue of any statute or order of any court shall be entitled to remain in
possession of the demised premises but shall forthwith quit and surrender the
demised premises. In no event, without the written approval of Landlord which
approval may be granted or withheld at its sole discretion, shall this Lease be
or be considered an asset of Tenant's estate in bankruptcy, or insolvency, or
<PAGE>16
receiver or trustee (hereafter referred to as a "Trustee") with respect
thereto.
31(c). To the extent that Landlord's right to cancel
this Lease in accordance with the provisions of subsections (a) and (b) of this
Article 31 is invalid or enforceable under the Bankruptcy Reform Act of 1978
(the "Act") or any other statute or rule of law, then the following provisions
shall apply, to the extent valid and enforceable.
31(c)1. If there has been a Default by Tenant under
any provision of this Lease (other than this Article 31), the Trustee may not
assume this Lease, unless, at the time of assumption of this Lease, the
Trustee:
31(c)1A cures, or provides adequate assurance (to
Landlord's reasonable satisfaction) that the Trustee will promptly cure such
default; and
31(c)1B provides adequate assurance (to Landlord's
reasonable satisfaction) of future performance under the Lease, which shall
include, without limitation, adequate assurance:
31(c)1Bi of the source of rent and other consideration
due under such Lease;
31(c)1Bii that the Percentage Rent will not decline
substantially;
31(c)1Biii that assumption or assignment of such Lease
will not breach substantially any provision, such as a radius, location, use,
or exclusivity provision, In any other lease, financing agreement, or master
agreement relating to the Shopping Center; and
31(c)1Bvi that assumption or assignment of this Lease
will not disrupt substantially any tenant mix or balance in the Shopping
Center.
31 (c)2 If there has been a default by Tenant, the
Trustee may not require the Landlord to provide services or supplies incidental
to this Lease before assumption of this Lease unless the Landlord is
compensated under the terms of this Lease for any services and supplies
provided under this Lease before assumption of this Lease.
31(d) If this Lease is terminated under the provisions
of this Article 31, or by reason of rejection by the Trustee, Landlord shall be
entitled to the recovery of damages, and such other remedies, as are provided
for in Article 33. The foregoing sentence shall not, however, limit or
prejudice the right of Landlord to petition for and obtain as liquidated
damages in any bankruptcy, insolvency, receivership, reorganization, or
arrangement proceeding an amount equal to the maximum allowed by the Act or any
other statute or rule of law governing such proceedings and in effect at the
time when such damages are to be proved, whether or not such amount be greater,
equal to or less than the amount of the excess referred to in the preceding
sentence.
REPOSSESSION 32. This Lease is subject to the limitation that if at
any time either of the following events (herein called a "Default") shall
occur:
<PAGE>17
(i) if Tenant shall fail to pay any installment of rent or any other charge
required to be paid by Tenant hereunder, when the same shall become due and
payable (it being specifically understood and agreed that the term rent
includes the minimum rental, the Percentage Rent, the share of real estate or
other taxes and the share of cost of maintenance and operation of common areas,
as referred to in this Lease or any other consideration under the Lease that is
identified as rent in this Lease), and such failure shall continue for five (5)
days; or
(ii) if Tenant shall fail to perform or observe any other term, provision,
covenant, condition or requirement of this Lease on the part of Tenant to be
performed or observed, and such failure shall continue for ten (10) days after
written notice from Landlord;
then upon the happening of either of the aforementioned defaults, this Lease
shall, at Landlord's option, cease and determine and shall operate as a Notice
to Quit, any written Notice to Quit being hereby expressly waived. Landlord may
proceed to recover possession of said premises by virtue of any legal process
as may at the time be in operation and force in like cases relative to
proceedings between Landlord and Tenant, and Tenant shall pay for any court
costs relative to such proceedings and a reasonable attorneys' fee, or Landlord
may at its option re-enter and re-rent the demised premises for the account of
the Tenant, and in such event, Tenant shall remain liable to Landlord for any
and all deficiencies in the rent under this Lease.
RELETTING 33. Should Landlord elect to re-enter, as herein
provided, or should it take possession pursuant to legal proceedings or
pursuant to any notice provided by law, it may either terminate this Lease or
it may from time to time without terminating this Lease, make such reasonable
alterations and reasonable repairs as may be necessary in order to relet the
premises, and relet said premises or any part thereof for such term or terms
(which may be for a term of less than as extending beyond the term of this
Lease) and at such rental or rentals and upon other terms and conditions as
Landlord in its discretion may deem advisable; upon each such reletting all
rentals received by the Landlord from such reletting shall be applied first, to
the payment of any indebtedness other than rent due hereunder from Tenant to
Landlord; second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorneys' fees and of costs of such reasonable
alterations and reasonable repairs; third, to the payment of rent due and
unpaid hereunder; and the residue, if any, shall be held by Landlord and
applied in payment of future rent as the same may become due and payable
hereunder. If such rentals received from such reletting during any month be
less than that to be paid during that month by Tenant hereunder, Tenant shall
pay any such deficiency to Landlord. Such deficiency shall be calculated and
paid monthly. No such re-entry or taking possession of said premises by
Landlord shall be construed as an election on its part to terminate this Lease
unless a written notice of such intention be given to Tenant or unless the
termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, Landlord may at any
time thereafter elect to terminate this Lease for any such previous breach.
Should Landlord at any time terminate this Lease for any breach, in addition to
any other remedies it may have, it may recover from Tenant damages it may incur
by reason of such breach, including any unpaid rent (or other amounts due under
this Lease) which is due and owing at the time of termination, repairing and
redecorating the premises to a condition sufficient for reletting same. In
addition, in the event of termination by Landlord as aforesaid, if Landlord at
its sole option so elects, Tenant shall pay to Landlord, on demand, as
liquidated, agreed final damages, the following:
<PAGE>18
1. The difference between: (i) the rent and all other charges which would have
been payable from the date of such demand to the date when this Lease would
have expired if it had not been terminated as aforesaid, and (ii) the fair
rental value of the demised premises for the same period, with said difference
being discounted at the rate of six percent (6%) per annum to present worth,
and
2. commissions, advertising, cost of repairs and other expenses incidental to
the reletting of the demised premises
For purposes of the foregoing sentence, the term rent shall include fixed
minimum rental, Percentage Rent, additional rent, and all other charges and
pass-throughs provided herein. For the purpose of computing Percentage Rent
after a Default, the monthly percentage rent shall be deemed to be equal to the
average monthly Percentage Rent paid hereunder for the twenty-four (24) months
during the term preceding such termination the entire preceding portion of the
term if less than twenty-four months).
HOLDOVER 34. If the Tenant shall not immediately surrender said
premises on the day after the end of the term hereby created, then the Tenant
shall, by virtue of this agreement, become Tenant by the month at twice the
rental agreed by the said Tenant to be paid as aforesaid, commencing said
monthly tenancy with the first day next after the end of the term above
demised; and said Tenant as monthly Tenant, shall be subject to all of the
conditions and covenants of this Lease as though the same had originally been a
monthly tenant, and the said Tenant shall give to the Landlord at least thirty
(30) days' written notice to quit said premises, except in the event of non-
payment of minimum rent in advance or of Percentage Rent when due or of the
other additional rents, as provided for in Article 6 hereof, when due, or of
the breach of any other covenant by the said Tenant, in which event the said
Tenant shall not be entitled to any notice to quit, the usual thirty (30) days'
notice to quit being expressly waived; provided, however, that in the event
that the Tenant shall hold over after the expiration of the term hereby
created, and if the said Landlord shall desire to regain possession of said
premises promptly at the expiration of the term aforesaid, then at any time
prior to the acceptance of the minimum rent by the Landlord from the Tenant, as
monthly tenant hereunder, the Landlord, at its election or option, may re-enter
and take possession of said premises forthwith, without process, or by any
legal action or process in force in the State of Maryland.
RENTAL SIGN 35. The Tenant agrees to give Landlord permission to
place a "For Rent" sign in the window sixty (60) days before termination of the
lease term.
SUBORDINATION 36. Tenant agrees that this Lease shall be subject and
subordinate to the lien of any bona fide mortgages or deeds of trust that may
now or at any time hereafter be placed against the demised premises by the
Landlord to secure money borrowed from any insurance company or recognized
financial institution. Tenant agrees, at any time hereafter, on demand, to
execute any instrument, release, or other documents that may be required by
Landlord for the purpose of subjecting and subordinating this Lease to the lien
of any mortgage or deed of trust, whether original or substituted.
NOTICES 37. All notices, demands. requests, approval, consents
or other instruments required or desired to be given hereunder by either party
to the other shall be given by certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
<PAGE>19
If to Landlord. If to Tenant:
Smallwood Village Associates Interstate General Co. L.P.
222 Smallwood Village Center 222 Smallwood Village Center
St Charles, Maryland 20601 St. Charles, Maryland 20601
ASSIGNS AND SUCCESSORS 38. Feminine or neuter pronouns shall be substituted
for those of the masculine form, and the plural may be substituted for the
singular number, in any place or places herein in which the context may require
such substitution or substitutions; and the covenants and agreements herein
contained shall, wherever appropriate, be binding upon the heirs,
administrators, executors, personal representatives, successors and assigns of
the parties hereto.
SUBLETTING
AND ASSIGNMENT 39. Tenant will not sublet demised premises or any
part thereof, or transfer possession or occupancy thereof to any person
(including but not by way of limitation, concessionaires or licensees of
Tenant) firm or corporation or transfer, assign mortgage or encumber this Lease
without the prior written consent of Landlord in each instance, nor shall any
subletting or assignment hereof be effected by merger, liquidation or otherwise
by operation of law or otherwise than by the prior written consent of the
Landlord. Any attempted transfer, assignment, subletting, license or
concession agreement or hypothecation shall be void and confer no rights upon
any third party. If Landlord shall refuse to consent to any request of Tenant
for the proposed assignment, sale, or other transfer of Tenant's interest in
and to this Lease and/or the demised premises, Landlord may, if it so elects,
but only with the consent of Tenant, terminate this Lease as of a mutually
agreeable termination date, in which event (i) this Lease shall expire and come
to an end with the same force and effect as if said date were originally set
forth in this Lease for expiration of the Term, (ii) Tenant agrees Landlord
shall have the absolute right, with no consent required from Tenant, to relet
the demised premises for its own account to Tenant's prospective assignee at
such rentals and upon such other terms and conditions as Landlord shall desire
If, without Landlord's prior written consent, there shall be an attempted
assignment or subletting or if the demised premises shall be occupied by
anybody other than Tenant, whether as a result of act or omission by Tenant, or
by operation of law, or otherwise, Landlord, may. in addition to, and not in
diminution of or substitution for, any other rights and remedies under this
Lease or pursuant to law to which Landlord may be entitled as a result thereof,
collect rent from the proposed assignee, subtenant or occupant and apply the
net amount collected to the rent herein reserved, but no such assignment,
subletting, occupancy or collection shall be deemed a waiver of this covenant
or the acceptance of the assignee, subtenant, or occupant as a tenant, or a
release of Tenant hereunder from the further performance by Tenant of the
covenants on the part of Tenant herein contained.
If Landlord shall consent to any requested transfer, assignment, mortgage,
hypothecation, encumbrance, subletting, license and/or concession, such consent
shall be deemed consent to that particular transaction only and shall not be
deemed consent to any other or future transfer, assignment, mortgage,
hypothecation, encumbrance, subletting, license and/or concession, as the case
may be. Any permitted transfer, assignment, mortgage, hypothecation,
encumbrance, subletting, license and/or concession shall be expressly subject
to each and every term, covenant and condition of this Lease, unless otherwise
specifically provided in writing, and Tenant shall remain fully liable and
obligated under all of such terms, covenants and conditions.
<PAGE>20
If Tenant is a corporation, unincorporated association or partnership, and
Tenant shall, without the prior written consent of Landlord, transfer, assign
or hypothecate any stock or interest in such corporation, association or
partnership so as to result in a change in the control thereof by the person,
persons or entities owning a controlling interest therein as of the date of
this Lease, then Landlord shall have the option to terminate this Lease at any
time after actual notice of such change by giving Tenant at least sixty (60)
days' prior written notice and, on the date fixed in such notice for
termination of this Lease, this Lease shall expire and come to end with the
same effect as if said date were originally set forth in this Lease for
expiration of the term. The mere receipt by Landlord of rent from a party other
than Tenant shall not be deemed actual notice of any change in control or
ownership of Tenant. This provision shall not be applicable to the transfer of
any stock or interest in such corporation, association or partnership to a
member of the immediate family of any person(s) now owning a controlling
interest therein (i.e.. the spouse and direct lineal ancestor or descendent of
such person or such person's spouse).
NOT PARTNERS 40. The parties hereto by this agreement expressly do
not intend as a matter of fact or law to create or constitute a partnership.
PROMOTIONAL SERVICE 41. Intentionally left blank.
CONTINUOUS OCCUPANCY 42(a). On the Rent Commencement Date, Tenant shall
occupy the premises and promptly open for business, at which time the premises
shall be fully fixtured, fully stocked and fully staffed. Tenant acknowledges
that it has been informed that its obligation to open for business promptly on
the Rent Commencement Date has been and will be relied upon by the Landlord in
dealing with other tenants in the Shopping Center, and failure of Tenant to
open for business as above specified shall constitute a Default under this
Lease, and may cause substantial damages to Landlord. Tenant shall defend,
indemnify and save Landlord harmless from any damages which may be claimed
against Landlord and shall indemnify Landlord for any losses suffered because
of Tenant's failure to comply with its obligations under the first sentence of
this Article.
42(b). Throughout the term, Tenant shall continuously
conduct in the premises, with a full stock of merchandise and full staff of
personnel, the business permitted under Article 19 (and no other business.
including specifically any business or use prohibited by the terms of this
Lease) on all business days and during such hours as are kept by a majority of
the tenants in the Shopping Center (excluding the Tenant hereunder) and at
least 66 hours per week (unless fewer hours per week are agreed to by a
majority of the tenants in the Shopping Center (excluding the Tenant
hereunder). Regardless of the minimum number of hours per week Tenant is open
for business, and regardless of which additional hours Tenant is open, Tenant
shall in all events remain open for business during the hours of 10:00 A.M. to
5:30 P.M. Monday through Saturday. Tenant acknowledges that its obligation to
continuously and actively conduct business in the premises in the manner
prescribed in this Article is for the purpose of enhancing the business
activity and public patronage of all stores in the Shopping Center in order to
produce for Landlord the maximum possible percentage rents from all stores in
the Shopping Center as well as from the premises and to enhance the
leaseability of floor space in the Shopping Center, and Tenant acknowledges
that failure on its part to comply with the provisions of this Article shall
constitute a Default under this Lease, and would cause Landlord substantial
damages which might be difficult or insusceptible of exact proof. Accordingly,
the parties have agreed that if Tenant fails to comply with the provisions of
<PAGE>21
this Article, then Landlord shall not be required to prove its actual damages
for breach of this Article, but in lieu thereof Tenant shall pay Landlord as
liquidated damages, and not as a penalty, an additional monthly rent equal to
the monthly minimum rent payable under Article 5 hereof, which liquidated
damage payments shall continue from the date of breach until such breach is
cured or until the end of the then current term of this Lease, whichever is
first. Said liquidated damages shall be paid monthly, concurrently with the
monthly payments of minimum rent reserved under this Lease. Nothing in this
Article shall be construed as a limitation upon Tenants obligations to
continuously conduct business in the manner herein specified or upon Landlord's
remedies under Articles 32 and 33 or upon Landlord's right to recover any other
provable monetary damages. A breach by Tenant of its obligations under
subsection (a) of this Article shall also constitute a breach of this
subsection (b) and entitle Landlord not only to its claims under subsection
(a), but also to liquidated damages under this subsection (b) for so long as
the breach of this subsection continues.
MAINTENANCE AND
OPERATION OF
COMMON AREAS 43. Landlord agrees to keep the parking areas in the
Shopping Center and the other common areas (excepting service areas immediately
adjacent and contiguous to the demised premises, the maintenance of which shall
be Tenant's responsibility) reasonably free of snow, ice and debris and to keep
the same lighted during the business hours of a majority of the tenants in the
Shopping. Landlord further agrees to keep the parking areas in the Shopping
Center and other common ares in good repair and order.
COST OF MAINTENANCE
AND OPERATION OF
COMMON AREAS 44(a). Common area maintenance costs are defined as
costs and expenses incurred by Landlord, or others on Landlord's behalf, in
operating, maintaining, repairing and replacing those areas to the entire
Shopping Center, for the benefit of the entire Shopping Center. These costs
include, but are not limited to, the costs set out in Exhibit "C" attached
hereto. Common areas are defined as all areas, facilities and improvements
provided, from time to time, in the Shopping Center (except those within any
store premises) for the mutual convenience and use of tenants or other
occupants of the Shopping Center, their respective agents, employees, customers
and invitees and shall include, if provided, but not be limited to, parking
areas and facilities, including, without limitation, roadways, entrances,
sidewalks, stairways, service corridors, truckways, ramps, loading docks,
delivery areas, landscaped areas, package pickup stations, public restrooms and
comfort stations, access and interior roads, retaining walls, and lighting
facilities.
44(b). Subject to adjustment as herein provided,
Tenant shall pay Landlord on the Rent Commencement Date and on the first day of
each calendar month during the term hereof the amount set forth in the next
succeeding sentence and estimated by Landlord to be Tenant's monthly Percentage
Share of the common area maintenance costs; and Landlord may adjust said amount
at the end of any calendar month on the basis of Landlord's experience and
reasonably anticipated costs. For the first full calendar year of this Lease,
and for the period between the Rent Commencement Date and such first calendar
year, Tenant's monthly share of common area maintenance costs shall be an
amount equal to Ninety cents (.90) per square foot of floor area in the demised
premises, and for each full calendar year thereafter, Tenant's monthly share
shall be determined on the basis of one-twelfth (1/12th) of Tenant's actual
Percentage Share of common area maintenance costs for the preceding calendar
<PAGE>22
year (or if Tenant was not a tenant in the Shopping Center for the full
preceding calendar year, then 1/12th of what would otherwise have been Tenant's
pro-rata share had Tenant been such a tenant.)
44(c) Within ninety (90) days following the end of
each calendar year, Landlord shall furnish Tenant a statement covering such
calendar year just expired in reasonable detail, prepared in accordance with
generally accepted accounting and/or auditing principles and certified as
correct by a certified public accountant or any authorized representative of
Landlord, showing the common area maintenance costs and the amount of Tenant's
Percentage Share of such costs for such year computed in accordance with
Article 44(a) above, and the payments made by Tenant with respect to such year
as set forth in Article 44(b) above. If Tenant's Percentage Share of such costs
is less than Tenant's payments so made, Tenant shall be entitled to a credit of
the difference, or if such share is greater than Tenant's said payments, Tenant
shall pay Landlord the difference. Tenant and Landlord shall adjust and make
refunds or pay the deficiency, as the case may be, within thirty (30) days
after receipt of such statement. Tenant's Percentage Share of the common area
costs shall be adjusted proportionately for any partial lease year.
INSURANCE 45(a). Landlord shall obtain and maintain in effect
during the term of this Lease a policy or policies of insurance (i) covering
the improvements constituting the Shopping Center (including the common areas,
but excluding Tenant's leasehold improvements, trade fixtures and other
property required to be insured by Tenant) in an amount not less than eighty
percent (80%) of the full replacement cost (exclusive of the cost of
excavations, foundations and footings), providing protection against perils
included within the standard Maryland form of fire and extended coverage
insurance policy, together with such other risks, and with such deductibles, as
Landlord may from time to time determine, and (ii) public liability insurance
covering the parking areas and other common areas in an amount not less than
$500,000 for injury to any one person, $1,000,000 for injuries arising out of
one accident, and $50,000 for property damage coverage. The cost of the
premiums for any such policies shall be included in the Landlord common area
maintenance costs. Any such insurance may be effected by a policy or policies
of blanket insurance, covering additional items or locations or assureds.
Tenant shall have no rights in any policy maintained by Landlord and shall not,
by reason of payment by Tenant, as part of common area maintenance costs, of
its pro rata share of Landlord's premium therefor, be entitled to be a named
assured thereunder.
45(b). Tenant, at Tenant's sole cost and expense,
shall obtain and maintain in effect at all times during the term of this Lease,
policies providing the following coverage:
(i) a comprehensive policy of general liability insurance, covering the
demised premises and Tenant's use thereof against claims for personal injury or
death or property damage occurring upon, in or about the demised premises, in
the limits stipulated in Article 27;
(ii) insurance covering Tenant's leasehold improvements, trade fixtures,
equipment and personal property from time to time in, on or upon the demised
premises, in an amount of not less than eighty percent (80%) of the full
replacement value of said items, providing protection against perils included
within the standard Maryland form of fire and extended coverage insurance
policy, together with insurance against sprinkler damage, vandalism, and
malicious mischief. Any policy proceeds from such insurance, so long as this
Lease shall remain in effect, shall be held in trust by Tenant's insurance
<PAGE>23
company first for the repair, reconstruction, restoration or replacement of the
property damaged or destroyed, and
(iii) plate glass insurance covering all plate glass in the demised premises.
Tenant shall be and remain liable for the repair and restoration of all such
plate glass.
45(c). All insurance policies herein required to be
procured by Tenant (i) shall be issued in form acceptable to Landlord by good
and solvent insurance companies qualified to do business in the State of
Maryland and reasonably satisfactory to Landlord, (ii) shall be issued in the
names of Landlord, Tenant and any other parties in interest from time to time
designated in writing by notice from Landlord to Tenant, (iii) shall be
written as primary policy coverage and not contributing with or in excess of
any coverage which Landlord may carry; and (iv) shall contain an express waiver
of any right of subrogation by the insurance company against Landlord. Neither
the issuance of any insurance policy required hereunder, nor the minimum limits
specified herein with respect to Tenant's insurance coverage, shall be deemed
to limit or restrict in any way Tenant's liability arising under or out of this
Lease. With respect to each and every one of the insurance policies herein
required to be procured by Tenant, on or before the Rent Commencement Date and
before any such insurance policy shall expire, Tenant shall delivery to
Landlord certificates of insurance for, certified copies of, or duplicate
originals of, each such policy or renewal thereof, as the case may be, together
with evidence of payment of all applicable premiums. Any insurance required to
be carried hereunder may be carried under a blanket policy covering the demised
premises and other locations of Tenant, and if Tenant includes the demised
premises in such blanket coverage Tenant shall deliver to Landlord, as
aforesaid, a duplicate original or certified copy of each such insurance policy
or a certificate evidencing such insurance. Each and every insurance policy
required to be carried hereunder by or on behalf of Tenant shall provide that,
unless Landlord shall first have been given ten (10) days' prior written notice
thereof: (i) such insurance policy shall not be cancelled and shall continue in
full force and effect, (ii) the insurance carrier shall not, for any reason
whatsoever, fail to renew such insurance policy, and (iii) no material change
may be made in such insurance policy. In the event that Tenant shall fail
promptly to furnish any insurance coverage herein required to be procured by
Tenant, Landlord, at its sole option, shall have the right to obtain the same
and pay the premium therefor for a period not exceeding one (1) year in each
instance, and the premium so paid by Landlord shall be immediately payable by
Tenant to Landlord as additional rent.
ADDITIONAL RENT 46. If Landlord shall incur any charge or expense on
behalf of Tenant under the terms of this Lease, such charge or expense and all
other monetary payments due under this Lease to Landlord shall be considered
additional rent hereunder; in addition to and not in limitation of any other
rights and remedies which Landlord may have in case of the failure by Tenant to
pay such sums when due, such nonpayment shall entitle Landlord to the remedies
available to it hereunder for non-payment of rent.
All such charges or expenses shall be paid to Landlord at its office in St.
Charles, Maryland.
RENT 47. Landlord covenants that if Tenant pays the rent
and all other charges provided for herein, performs all of its obligations
provided for hereunder, and observes all of the other provisions hereof, Tenant
shall at all times during the term hereof peaceably and quietly have, hold and
<PAGE>24
enjoy the demised premises, without any interruption or disturbance from
Landlord, or anyone claiming through or under Landlord, subject to the terms
hereof.
TRANSFER OF
LANDLORD'S INTEREST 48. Notwithstanding any provision of this Lease to the
contrary, in the event of the sale or other transfer of Landlord's interest in
the demised premises or the Shopping Center, (i) Landlord shall thereupon and
without further act by either party hereto be released and discharged of all
covenants and obligations of Landlord hereunder thereafter accruing, and (ii)
it shall be deemed and construed conclusively, without further agreement
between the parties, that the purchaser or other transferee or assignee has
assumed and agreed to perform the obligations of Landlord thereafter accruing.
NO WAIVER 49. That no waiver of any breach of any covenant,
condition or agreement herein contained shall operate as a waiver of the
covenant, condition or agreement itself, or of any subsequent breach thereof.
PARTIAL INVALIDITY 50. If any term, covenant or condition of this Lease
or the application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, the remainder of this Lease or the application of
such term, covenant or condition to persons or circumstances other than those s
to which it is held invalid or unenforceable, shall not be affected thereby and
each term, covenant and condition of this Lease shall be valid and enforced to
the fullest extent permitted by law.
RULES & REGULATIONS 51. Tenant shall at all times comply with the rules
and regulations set forth on Exhibit "D' attached hereto, and with any
additions thereto and modifications thereof adopted from time to time by
Landlord, and each such rule or regulation shall be deemed as a covenant of
this Lease to be performed and observed by Tenant.
APPLICABLE LAW 52. This Lease shall be construed under the laws of
the State of Maryland.
CAPTIONS AND HEADINGS 53. Captions and headings are for convenience and
reference only.
JOINT AND SEVERAL
LIABILITY 54. If two or more individuals, corporations,
partnerships or other business associations (or any combination of two or more
thereof) shall sign this Lease as Tenant, the liability of each such
individual, corporation, partnership, or other business association to pay rent
and perform all other obligations hereunder shall be deemed to be joint and
several. In like manner, if the Tenant named in this Lease shall be a
partnership or other business association, the members of which are, by virtue
of statute or general law, subject to personal liability, the liability of each
such member shall be joint and several.
NOTIFICATION 55. This writing is intended by the parties as final
expression of their agreement and as a complete and exclusive statement of the
terms thereof, all negotiations, considerations and representations between the
parties having been incorporated herein. No course of prior dealings between
the parties or their affiliates shall be relevant or admissible to supplement,
explain, or vary any of the terms of this Lease. Acceptance of, or acquiescence
in, a course of performance rendered under this or any prior agreement between
the parties or their affiliates shall not be relevant or admissible to
determine the meaning of any of the terms of this Lease. No representations,
<PAGE>25
understandings, or agreements have been made or relied upon in the making of
this Lease other than those specifically set forth herein. This Lease can only
be modified by a writing signed by all of the parties of their duly authorized
agents.
NO DISCRIMINATION 56. It is intended that the Shopping Center be
developed so that all prospective tenants and all customers, employees,
licensees and invitees of all tenants shall have the opportunity to obtain all
the goods, services, accommodations, advantages, facilities and privileges of
the Shopping Center without discrimination because of race, creed, color,
national origin or ancestry. To that end, Tenant will not discriminate in the
conduct and operation of its business in the premises against any person or
group of persons because of the race, creed, color, national origin or ancestry
of such person or group of persons.
DELAY 57. Intentionally left blank.
STORE FRONT 58. The design and construction of the store front for
the demised premises will be subject to the Landlord's approval, which shall
not be unreasonably withheld.
ESTOPPEL CERTIFICATE 59. Tenant agrees, at any time and from time to time,
upon not less than five (5) days prior written notice by Landlord, to execute,
acknowledge and deliver to Landlord or to such person(s) as may be designated
by Landlord, a statement in writing (i) certifying that Tenant is in possession
of the demised premises, has unconditionally accepted the same and is currently
paying the rents reserved hereunder, (ii) certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the Lease is in full force and effect as modified and stating the
modifications), (iii) stating the dates to which the rent and other charges
hereunder have been paid by Tenant, (iv) stating whether or not to the best
knowledge of Tenant, Landlord is in default in the performance of any covenant,
agreement or condition contained in this Lease, and, if so, specifying each
such default of which notices to Tenant should be sent. Any such statement
delivered pursuant thereto may be relied upon by any owner of the Shopping
Center, any prospective purchaser of the Shopping Center, any mortgagee or
prospective mortgagee of the Shopping Center or of Landlord's interest, or any
prospective assignee of any such mortgagee.
OUTPARCEL 60. Landlord shall have the right to remove from the
Shopping Center, sell, or separately develop any outparcels whereupon such
outparcels shall, at the option of the Landlord, be removed from the definition
of the Shopping Center.
WAIVER OF JURY TRIAL 61. Tenant hereby waives all right to trial by jury in
any claim, action, proceeding or counterclaim by either Landlord or Tenant
against the other or any matters arising out of or in any way connected with
this Lease, the relationship of Landlord and Tenant and/or Tenant's use or
occupancy of the demised premises.
NO OPTION 62. The submission of this Lease for examination does
not constitute a reservation of or option for the premises, and this Lease
becomes effective only upon execution and delivery thereof by Landlord.
SECURITY DEPOSIT 63. Intentionally left blank.
BROKER'S PERMISSION 64. Intentionally left blank.
<PAGE>26
LESSOR'S RIGHT TO SELL
OR MORTGAGE FEE 65. Nothing contained in this lease shall limit or
curtail Landlord's right to sell, mortgage, or otherwise deal with its fee
interest in the leased premises, the ground underlying the leased premises, the
shopping center and the ground underlying the shopping center, or affect
Landlord's right to assign the net rent payable under this Lease either as
further collateral security under a fee mortgage or otherwise. Any such
assignment of rent shall be honored by Tenant.
STORES OR SHOPPING
CENTER 66. Landlord may from time to time change or alter the
size, configuration, partitions or store designations of all or any of the
stores in the shopping center and may expand the shopping center by adding
thereto additional land and buildings without the consent of, or notice to,
Tenant.
IN WITNESS WHEREOF, and intending that this Lease be a
sealed instrument, Landlord and Tenant have executed this Lease under seal on
the dates indicated beneath their respective signatures.
SMALLWOOD VILLAGE ASSOCIATES
A Maryland Limited Partnership
INTERSTATE BUSINESS CORPORATION
General Partner
/s/ Joanne Bakin By: /s/ Charles E. Stuart
- ----------------------------- ----------------------------
WITNESS LANDLORD
Date of Execution by Landlord: 12/1/87
--------
/s/ Joanne Bakin /s/ Paul Resnik
- ----------------------------- --------------------------------------
WITNESS TENANT
Date of Execution by Tenant: 12/1/87
----------
State of Maryland
SS:
County of Charles
Before me, a Notary Public in and for the jurisdiction aforesaid, personally
appeared this date, Charles Stuart, personally well known (or satisfactorily
proven) to me to be the Senior Vice President of Interstate Business
Corporation, a Delaware corporation, who, being by me first duly sworn, did
acknowledge that he/she, as the duly authorized officer of said Corporation,
executed the foregoing and annexed Instrument, in the name and on behalf of
said Corporation, as its free act and deed for the uses and purposes therein
contained.
WITNESS my hand and official seal this 1st day of December, 1987.
/s/ Linda Susan Bland
-----------------------------------
NOTARY PUBLIC
My Commission Expires: 8/22/90
-------------
<PAGE>27
EXHIBIT B
TENANT FIT UP SPECIFICATIONS
Smallwood Village Center
St. Charles, Maryland
Shell building and commercial finish specifications to be provided by and at
the expense of the Landlord included with the stated basic rental will be as
follows:
FLOOR:
4" thick concrete slab on grade with wire mesh reinforcement, suitable for
resilient flooring and/or carpeting. Tenant is to furnish and install floor
finish.
DEMISED PARTITIONS:
(Tenant divider partitions): 2-1/2" metal studs with 1/2" thick sound
insulation full height. Drywall to be taped, spackled, sanded, and ready
for paint.
EXTERIOR BUILDING WALLS:
Store front, back, and/or fire rated partitions at the rear of building B &
C.
PLUMBING:
Rough-in for one toilet. One 5 gallon hot water heater.
TOILET UNIT - One Each:
a. Partitions: 2-1/2" metal studs 24" o.c. with layer of 1/2" gypsum
board each side, taped, spackled, sanded and ready for paint.
b. Door and Frame: 2'8" x 6'8" x 1-3/8" thick hollow' wood door in a
wood frame with hinges and privacy latchset.
c. Water Closet:
d. Lavatory:
e. Floor Finish: Vinyl asbestos tile.
f. Base: 4" vinyl base.
g. Ceiling Finish: Same as shop except ceiling height shall be 8'0".
h. Exhaust Fan Standard.
i. Lighting Fixture: 1-100 watt incandescent.
j. Toilet Paper Holder: With mirror - Standard.
ACOUSTICAL CEILINGS:
2' x 4' x 5/8" thick Class A lay-in acoustical panels in an exposed metal
grid suspension system. Fire rated where required.
<PAGE>28
HEATING AND AiR CONDITIONING:
Heat Pump. Packaged system with auxiliary electric resistance, heater,
fresh air duct, power and control wiring, thermostat, air distribution
system included grilles and registers per standard drawing. Heat pump
systems shall be single or multiple units depending on size and layout of
the individual shops.
Unit Sizes: 2, 3, 3-1/2, 4, 5, 7-1/2 Tons, as indicated on plans.
ELECTRICAL:
a. Lighting: Standard 2' x 4' recessed 4 tube flourescent lay-in
fixtures, in accordance with typical lighting layout on electrical
drawings. (1 fix/85 sq. ft).
b. Receptacles: As per typical layout (1 outlet every 20').
c. Exit Lights: Exit and emergency white lights as per electrical
drawings two (2) per space. Sheet A-22.
d. Electric power: Each store to be individually metered.
e. Electrical panels:
Lighting, etc: 120/208V/3 phase 150 amp with space for single pole 20 amp
circuit breakers for lighting, hot water heater, toilet exhaust fan and
future receptacle circuits (by tenant),
Sprinklers: Owner will provide sprinklers throughout building with
typical layout. Tenant partioning requiring additional heads or the
relocation of existing heads will be at tenant expense.
DESIGN SERVICES:
Tenant to pay for required design and consultation service with
Landlord's Architect/Engineer to coordinate tenant requirements with
building standards. Tenant to apply and obtain certificate of occupancy
and other permits relating to its store area and use. Landlord's
architect to approve tenant layout and signs and plans.<PAGE>
<PAGE>29
EXHIBIT C
COMMON AREA COSTS
Smallwood Village Center
St. Charles, Maryland
Common area maintenance costs shall mean, for the purpose of this Lease,
all costs and expenses incurred by Landlord or others on Landlord's behalf, in
operating, maintaining, repairing and replacing those areas common to the
entire Shopping Center, for the benefit of the entire Shopping Center. Such
common area maintenance costs shall include all costs and expenses of every
kind and nature as may be paid or incurred by Landlord in operating, policing,
protecting, managing, equipping, lighting. repairing, replacing and maintaining
the common areas including but not limited to, the cost and expenses of:
1. operating, maintaining, repairing, replacing, lighting, cleaning,
sweeping, painting and resurfacing of the common areas and common area
facilities, including but not limited to: paving, vehicle area lighting
facilities, lighting and sound facilities, storm and sanitary drainage systems
and other utility conduits, systems, ducts, and similar items, fire protection
systems, sprinkler systems, utility sprinkler and security alarm systems,
Shopping Center signs on and off the Shopping Center site, Shopping Center
signs and wiring, retaining walls, curbs, gutters, fences, sidewalks, canopies,
steps, and ramps in the common areas, exclusive of casualty loss replacements
covered by insurance, and exclusive of the cost for a replacement of an asset
(or part) for which a depreciation allowance is included hereunder if such
replacement cost may not be treated as an expense deduction under Internal
Revenue Service Regulations;
2. Gardening, landscaping, and maintenance of grass, trees, and
shrubbery:
3. All premiums for all insurance maintained by Landlord in connection
with the Shopping Center, including without limitation: liability for bodily
injury, death and property damage; insurance on the Shopping Center (including
the common areas) against fire, extended coverage, theft or other casualties;
workman's compensation; plate glass insurance for glass exclusively serving the
common areas; sign insurance; and loss of rent insurance for up to a 12-month
period;
4. Security.
5. Personal property taxes on equipment and systems in, pertaining to,
or used in maintaining and operating the common areas and outdoor areas;
6. Utility charges and other costs of lighting the common areas, the
vehicle areas, Center signs, and other like facilities;
7. Vehicle area line painting, and removal of snow and ice;
8. Collection and removal of trash from all outdoor areas in the Center.
9. Depreciation of all machinery and equipment used in maintaining and
operating the common areas (including cleaning and snow removal equipment) and
of Center signs, fixtures and furnishings, traffic signals, which depreciation
shall be calculated on a straight line basis and on lives based upon the
Internal Revenue Service guidelines from time to time extant;
<PAGE>30
10. Power and fuel for operating common area equipment and systems and
for operating vehicles and equipment used for cleaning, maintenance and snow
removal; and
11. Salaries of personnel directly engaged in operating cleaning and
maintaining the common areas (including security personnel and parking
attendants), and all related payroll charges, benefits and taxes.
<PAGE>
<PAGE>31
EXHIBIT D
RULES AND REGULATIONS
Smallwood Village Center
St. Charles, Maryland
Tenant shall, at all times during the term of the Lease;
1. Use, maintain and occupy the premises in a careful, safe, proper and
lawful manner, keep the premises and its appurtenances in a clean and safe
condition;
2. Keep all glass in the doors and windows of the premises clean and in
good repair;
3. Not place, maintain or sell any merchandise in any vestibule or entry
to the premises, on the sidewalks adjacent to the premises, or elsewhere on the
outside of the premises without the prior written consent of Landlord;
4. Keep the premises in a clean, orderly and sanitary condition, free of
insects, rodents, vermin and other pests;
5. Not permit undue accumulations of garbage, trash, rubbish and other
refuse in the premises, and keep refuse in closed containers within the
interior of the premises until removed.
6. Not use, permit or suffer the use of any apparatus or instruments for
musical or other sound reproduction or transmission in such manner that the
sound emanating therefrom or caused thereby shall be audible beyond the
interior of the premises;
7. Not deliver or suffer or permit delivery of merchandise to the
premises after 10:00 a.m. on any day;
8. Light the show windows and exterior signs of the premises to the
extent required in the Lease;
9. Keep all mechanical apparatus free of vibration and noise which may
be transmitted beyond the confines of the premises;
10. Not cause or permit objectional odors to emanate or be dispelled from
the premises;
11. Not overload the floors or electrical wiring and not install any
additional electrical wiring or plumbing without Landlord's prior written
consent;
12. Not use show windows in the premises for any purpose other than
display of merchandise for sale in a neat and attractive manner;
13. Not conduct, permit or suffer any public or private auction sale to
be conducted on or from the premises; and
14. Not solicit business in the common areas of the Shopping Center or
distribute handbills or other advertising materials in the common areas, and if
this provision is violated the Tenant shall pay Landlord the cost of collecting
same from the common areas for trash disposal.
<PAGE>32
15. Maintain an attractive display in the show windows; and
16. Discourage congregations of people in the common areas and outside
the store.
<PAGE>
<PAGE>33
LEASE RENEWAL CLAUSE
The following additional provisions are hereby added to the Lease:
(a) Option to Extend
Subject to the satisfaction of the conditions precedent set forth in Paragraph
(b) below, Tenant shall have the right, at its option, to extend the term of
this Lease for two additional periods (the "Extension Period") of five (5)
years. Such extension option shall be exercisable by Tenant giving written
notice to Landlord of the exercise of such option only during the three-month
period that is at least six (6) months, but not more than nine (9) months,
prior to the expiration of the then current term of this Lease; and, upon the
exercise of such extension option, the termination date of this Lease shall
automatically be extended for five (5) years. Such Extension Period shall be
upon the same terms, covenants, and conditions as set forth in this Lease with
respect to the initial term, but subject to the rental adjustment provisions of
Paragraph (c) below. With respect to such extension option, and in the event
that (i) Tenant shall fail to exercise the same strictly within the time period
and in the manner set forth above, and/or (ii) at the time hereinabove
specified for the exercise of such option, all of the conditions precedent set
forth in Paragraph (b) below shall not have been satisfied, then such extension
option shall automatically expire and be absolutely void and of no force or
effect.
(b) Conditions Precendent.
The extension option granted to Tenant in Paragraph (a) above, shall be void
and of no force and effect unless, at the time above specified for exercising
such option, each and every one of the following conditions precedent shall
have been fully satisfied:
1. This Lease shall be in full force and effect;
2. Tenant shall be in possession of the demised premises and shall be
regularly conducting its normal business operation therein; and
3. Tenant shall not be in default (beyond any grace period granted in
this Lease for curing the same) in the performance or observance of
any of the terms, provisions, covenants and conditions of this Lease.
(c) Rent Adjustment.
Notwithstanding any other provision of this Lease, in the event the term of
this Lease is extended pursuant to the exercise by Tenant of the extension
option hereinabove granted in Paragraph (a) above, then, with respect to such
Extension Period, the rents, other charges and other economic benefits to be
derived by Landlord under this Lease shall be the same as then prevails in the
Shopping Center for new leases executed at that time. The foregoing sentence
notwithstanding, in no event shall the fixed minimum annual rental (and the
monthly installments thereof) payable hereunder during and for the Extension
Period be less than the greater of (i) the fixed minimum annual rental in
effect immediately prior to the Extension Period or (ii) the fixed minimum
annual rental during the Initial term adjusted to the Consumer Price Index (as
set forth in the following sentence). Such adjustment shall be accomplished by
multiplying the average fixed minimum annual rental in effect during the
initial term of this Lease by a fraction, the numerator of which shall be the
Consumer Price Index as of the most recent date prior to the beginning of the
<PAGE>34
Extension Period, and the denominator of which shall be the Consumer Price
Index as of the most recent date prior to the Rent Commencement Date. If the
fixed minimum annual rental is established by the aforesaid adjustment pursuant
to the preceding sentence, said fixed minimum annual rental shall be effective
as of the beginning of the Extension Period and shall thereafter continue in
effect as the fixed minimum annual rental required to be paid under this Lease
during the entire Extension Period subject to adjustment as described in
Article 6E of this Lease
(d) Consumer Price Index.
For all purposes of the Lease Agreement, the Consumer Price Index is hereby
defined to be the "United States Bureau of Labor Statistics, Consumer Price
Index, for Urban Wage Earners and Clerical Workers (CPl-W)", all items for
Washington, D. C. SMSA (1967 = 100); and if the Consumer Price Index shall be
discontinued or altered, Landlord and Tenant shall attempt to agree upon a
substitute index or formula, and if said parties are not able to agree upon
such substitute, the matter shall be referred to binding arbitration in
accordance with the rules of the American Arbitration Association in the State
of Maryland then prevailing.
LATE PAYMENT CHARGES
In the event that any installment or payment of minimum rent, percentage rent,
additional rent or any other sum required hereunder to be paid by Tenant to
Landlord is not received by Landlord on or before the fifth (5th) calendar day
after the same is due and payable, then, for each and every such late payment,
in addition to the payment then in arrears, Tenant shall immediately pay to
Landlord as additional rent, a service charge equal to whichever is the greater
of (i) Twenty Dollars ($20.00); or (ii) one half of one percent (.5%) of such
unpaid sum per day for each calendar day after the due date of such payment
that such payment has not been received by Landlord. The provisions herein for
late payment service charges shall not be construed to extend the date for
payment of any sums required to be paid by Tenant hereunder or to relieve
Tenant of its obligations to pay all such sums at the time or times herein
stipulated. Notwithstanding the imposition of such service charges pursuant
to this subsection (b), Tenant shall be in default under this Lease if any or
all payments required to be made by Tenant are not made at the time herein
stipulated, and neither the demand for, nor collection by, Landlord of such
late payment service charges shall be construed as a cure of such default on
the part of Tenant.
<PAGE>1
Exhibit 10(f)
LEASE AMENDMENT
THIS LEASE AMENDMENT (the "Amendment") is made as of the 1st day of
February, 1989 by and between SMALLWOOD VILLAGE ASSOCIATES ("Landlord") and
INTERSTATE GENERAL COMPANY L.P. ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a lease for certain space
in Smallwood Village Center, St. Charles, Maryland dated December 1, 1987 (the
"Lease"); and
WHEREAS, Tenant wishes to amend the Lease by expanding the square
footage of the premises and renting Space C-7.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, the parties agree as follows:
1. In Article 1 of Lease, the number "3,509" square feet is hereby
amended to read "4,734" square feet.
2. Space C-7 is hereby added to Lease and the new minimum rent
beginning February 1, 1989 shall be $4,201.43. The Common Area Maintenance
amount shall be an additional $91.88 per month, bringing the total monthly
rental payments to $4,293.31.
3. Except as specifically modified by this Amendment, the terms and
provisions of the Lease will continue in full force and effect.
IN WITNESS WHEREOF, the undersigned has duly executed this Amendment,
or caused this Amendment to be executed by their duly authorized
representatives.
Witness: LANDLORD
/s/ Cynthia L. Hedrick By: /s/ James J. Wilson
- ----------------------------- -------------------------------
Smallwood Village Associates
Interstate Business Corporation
General Partner
TENANT
/s/ Cynthia L. Hedrick
- ----------------------------- By: /s/ Edwin L. Kelly
-------------------------------
Interstate General Company L.P.
<PAGE>1
Exhibit 10(g)
LEASE AMENDMENT II
THIS LEASE AMENDMENT (the "Amendment") is made as of the 1st day of
December, 1992 by and between Smallwood Village Associates ("Landlord") and
Interstate General Company L.P. ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a lease for certain commercial
space in Smallwood Village Shopping Center, St. Charles, Maryland dated
December 1, 1987 (the "Lease"); and
WHEREAS, Lease was amended by Lease Amendment dated February 1, 1989, and
WHEREAS, Landlord and Tenant wish to amend the Lease to exercise option to
renew.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. Landlord agrees to exercise option to renew for five (5) years
beginning December 1, 1992 and terminating November 30, 1997.
2. Except as specifically modified by this Amendment, the terms and
provisions of the Lease will continue in full force and effect.
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment, or
caused this Amendment to be executed by their duly authorized representatives:
ATTEST: By: /s/ Charles E. Stuart
--------------------------------
/s/ Joanne Bakin Smallwood Village Associates
- ----------------------------- Interstate Business Corporation
General Partner
/s/ Joanne Bakin By: /s/ Paul Resnik, V.P.
- ----------------------------- --------------------------------
TENANT--Interstate General
Company L.P.
State of Maryland
SS:
County of Charles
Before me, a Notary Public in and for the jurisdiction aforesaid,
personally appeared this date Charles Stuart. Personally well known (or
satisfactorily proven) to me to be the Senior Vice President of Interstate
Business Corporation a Delaware corporation, who, being by me first duly sworn,
did acknowledge that he/she, as the duly authorized officer of said
Corporation, executed the foregoing and annexed instrument, in the name and on
behalf of the Corporation, as its free act and deed for the uses and purpose
contained herein.
WITNESS my hand and official seal this 1st day of December, 1992.
/s/ Linda Susan Bland My Commission Expires 8/22/93
- ----------------------------- ------------
Notary Public
<PAGE>1
Exhibit 10(h)
LEASE AMENDMENT III
THIS LEASE AMENDMENT (the "Amendment") is made as of the 30th day of
September, 1994 by and between Smallwood Village Associates ("Landlord") and
Interstate General Company L.P. ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a lease for certain commercial
space in Smallwood Village Shopping Center, St. Charles, Maryland dated
December 1, 1987 (the "Lease"); and
WHEREAS, Lease was amended by Lease Amendment dated February 1, 1989, and
WHEREAS, Lease was further amended by Lease Amendment II dated December 1,
1992, and
WHEREAS, Tenant wishes to further amend the Lease by expanding the square
footage of the premises and renting Space C-12.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. In Article 1 of Lease, the number "3,509" square feet which was
amended to read "4,734" square feet is now further amended to read
"6,120" square feet.
2. Space C-12 (Exhibit attached) is hereby added to Lease at $9.45 per
square foot bringing new minimum rental amount to $4,819.18 per month
beginning November 1, 1994.
3. The Common Area maintenance amount shall be $103.95 per month.
4. Except as specifically modified by this Amendment, the terms and
provisions of the Lease will continue in full force and effect.
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment, or
caused this Amendment to be executed by their duly authorized representatives.
ATTEST: By: /s/ James Michael Wilson
--------------------------------
/s/ Linda Horty Smallwood Village Associates
- ----------------------------- Interstate Business Corporation
General Partner
/s/ Linda Horty By: /s/ Paul Resnik
- ----------------------------- --------------------------------
TENANT--Interstate General
Company L.P.
<PAGE>2
State of Maryland
SS:
County of Charles
Before me, a Notary Public in and for the jurisdiction aforesaid,
personally appeared this date 10-20-94. Personally well known (or
satisfactorily proven) to me to be the President of Interstate Business
Corporation a Delaware corporation, who, being by me first duly sworn, did
acknowledge that he/she, as the duly authorized officer of said Corporation,
executed the foregoing and annexed instrument, in the name and on behalf of the
Corporation, as its free act and deed for the uses and purpose contained
herein.
WITNESS my hand and official seal this 20th day of October, 1994.
/s/ Linda Susan Bland My Commission Expires 8/22/97
- ----------------------------- ------------
Notary Public
<PAGE>1
Exhibit 10(i)
LEASE AMENDMENT IV
THIS LEASE AMENDMENT (the "Amendment") is made as of the 5th day of
September, 1995 by and between Smallwood Village Associates ("Landlord") and
Interstate General Company L.P. ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into a lease for certain commercial
space in Smallwood Village Shopping Center, St. Charles, Maryland dated
December 1, 1987 (the "Lease"); and
WHEREAS, Lease was amended by Lease Amendment dated February 1, 1989, and
WHEREAS, Tenant requests two additional options to renew for five (5)
years each; and
WHEREAS, Lease was amended by Lease Amendment II dated December 1, 1992,
and
WHEREAS, Lease was further amended by Lease Amendment III dated September
30, 1994, and
WHEREAS, Tenant wishes to extend lease to August 31, 2005.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties agree as follows:
1. The following shall be added to Paragraph 39 of the lease agreement:
"Landlord agrees that at Tenant's request, and so long as Tenant is
not in default under this Lease, Landlord shall assist Tenant in
attempting to locate subtenants for portion of the Demised Premises."
2. Landlord hereby extends Lease Agreement through August 31, 2005.
3. Landlord hereby provides Tenant with two additional options to renew
for five (5) years each commencing September 1, 2005.
4. Except as specifically modified by this Amendment, the terms and
provisions of the Lease will continue in full force and effect.
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment, or
caused this Amendment to be executed by their duly authorized representatives.
WITNESS: By: /s/ James Michael Wilson
--------------------------------
/s/ Paul Resnik Smallwood Village Associates
- ----------------------------- Interstate Business Corporation
General Partner
/s/ Paul Resnik By: /s/ John E. Hans
- ----------------------------- --------------------------------
TENANT--Interstate General
Company L.P.
<PAGE>2
State of Maryland
SS:
County of Charles
Before me, a Notary Public in and for the jurisdiction aforesaid,
personally appeared this date James Michael Wilson. Personally well known to
me to be the President of Interstate Business Corporation a Delaware
corporation, who, being by me first duly sworn, did acknowledge that he/she, as
the duly authorized officer of said Corporation, executed the foregoing and
annexed instrument, in the name and on behalf of the Corporation, as its free
act and deed for the uses and purpose contained herein.
WITNESS my hand and official seal this 6th day of September, 1995.
/s/ Martha Haupt My Commission Expires 2/2/97
- ----------------------------- ------------
Notary Public
<PAGE>1
Exhibit 10(j)
AGREEMENT OF SALE
THIS AGREEMENT, made and entered into this 8th day of September, 1995 made
by and between LAND DEVELOPMENT ASSOCIATES S.E., a Puerto Rico limited
partnership, having an office at the Doral Building, Suite 700, 650 Munoz
Rivera Avenue, Hato Rey, Puerto Rico (hereinafter referred to as the "Seller",)
and Twenty First Century Homes S.E., a Puerto Rico special partnership, having
an office at Central Mercantil Internacional, Catao, Puerto Rico (hereinafter
referred to as the Buyer).
PRELIMINARY STATEMENT
WHEREAS Seller owns two (2) parcels of land of approximately 13,577.87
square meters (3.45 cuerdas) and 13,728.45 square meters (3.49 cuerdas) in the
San Anton Ward of Carolina, Puerto Rico, which parcels of land are identified
as Parcel II-1 and Parcel II-2, respectively, in surveys prepared by Engineer
Luis F. Franqui on May 25, 1995, copies of which are attached hereto as
Exhibit A (hereinafter collectively referred to as the ("Parcels").
WHEREAS the Parcels are an integral and important part of Parque Escorial,
a master planned residential and commercial community (hereinafter referred to
as "Parque Escorial") being developed by Seller in a parcel of land of
approximately 439 cuerdas located in the municipalities of San Juan and
Carolina, Puerto Rico (hereinafter referred to as "Main Farm"), best described
in the attached copy of the Parque Escorial master plan (the "Master Plan"),
which is made Exhibit B hereto, and as such, the Parcel shall, at the Time of
Settlement, as said term is defined in Paragraph 4 hereof, be subject to (i)
certain restrictive covenants pursuant to a Deed of Declaration of Covenants,
Conditions and Restrictions and Establishment of Parque Escorial Homeowners
Association (hereinafter referred to as the "Restrictive Covenants), a draft of
which is attached hereto as Exhibit C, (ii) the design standards for Parque
Escorial (hereinafter referred to as the "Design Standards"), attached hereto
as Exhibit D, (iii) certain use restrictions best described in Paragraph 2
(xiii) of this Agreement (hereinafter referred to as the Wal-Mart Use
Restrictions) and (iv) other use restrictions best described in Paragraph 2 (i)
(hereinafter referred to as the "Use Restrictions").
WHEREAS, the Parcels are two of approximately ten (10) parcels of land of
various sizes comprising Phase II, as said term is defined in the Master Plan
and the Design Standards, (hereinafter referred to as "Phase II"), on which
approximately one thousand ninety five (1,095) residential units are planned to
be constructed in accordance with the provisions of the Restrictive Covenants,
the Design Standards, and any other restriction specified in this Agreement,
and subject to the approval of Seller and the Architectural Review Committee,
as said term is defined in the Restrictive Covenants (hereinafter referred to
as the "Architectural Review Committee").
WHEREAS, Parcel II is one of several phases in which Seller plans to
develop the areas designated for residential use in the Master Plan,
(hereinafter referred to as the "Residential Zone").
WHEREAS, pursuant to the Master Plan and unless otherwise approved by
Seller, the Parcels can only be used for the development of one (1) or two (2)
<PAGE>2
residential projects totalling not more than one hundred and sixty (160) three
bedroom units, or its equivalency in units with less or more bedrooms as
determined by Seller in accordance with the standards of the Planning Board of
Puerto Rico, to be designed and built in accordance with the Restrictive
Covenants, the Design Standards and subject to the approval of the
Architectural Review Committee, (hereinafter referred to as the "Project").
WHEREAS, Seller has agreed to sell and Buyer agrees to purchase the
Parcels under the terms and conditions hereinafter set forth, together with all
rights, titles, improvements and any and all things appertaining thereto and or
forming part thereof.
WHEREAS, subject to the provisions hereof, this agreement shall without
further action of Seller and Buyer be a binding Agreement of Sale (hereinafter
referred to as the "Agreement"), enforceable at law or in equity for the sale
by Seller and purchase by Buyer of the Parcels at the Purchase Price provided
in Paragraph 1 hereof, upon the terms and conditions contained herein.
WHEREAS, it is the expressed intention of the parties that this Agreement
is solely for the benefit of the parties hereto and shall give rise to no
rights to any other party, and under no circumstances shall Buyer transfer or
assign this Agreement to another party except with the written consent of the
Seller, provided, however, that if such transfer or assignment shall be to a
party related to Buyer through common ownership and that reasonable evidence
of such relationship is provided by Buyer to Seller to the effect that such
transfer or assignment in no way alters the intent, terms, conditions and
guarantees of this Agreement, Seller shall not unduly withhold its consent to
the assignment. Any such assignment or transfer will not release Buyer from
the obligations and responsibilities assumed under the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth below,
the parties agree as follows:
1. Purchase Price; Reimbursement of Impact Fees. Subject to the
provisions of Paragraphs 4 thru 11 hereof, the Purchase Price of the Parcels
shall be equal to the amount obtained from multiplying Twenty Two Thousand
Dollars ($22,000) times the number of three (3) bedroom units, or its
equivalency in units with less or more bedrooms, comprising the Project at any
time, but in no event shall the Purchase Price be less than Three Million Five
Hundred Twenty Thousand Dollars ($3,520,000) and shall be payable as follows:
(i) One Hundred Thousand Dollars ($100,000) as earnest money (hereinafter
referred to as the "Earnest Money"), upon the execution of this Agreement,
the receipt and adequacy of which is hereby acknowledged;
(ii) A certified or bank manager's check from a banking institution to be
delivered to Seller at the Time of Settlement in the amount by which the
Purchase Price, as determined pursuant to the provisions of this
Paragraph, exceeds the Earnest Money.
The obligation of Buyer to pay Seller Twenty Two Thousand Dollars
($22,000) for each three (3) bedroom unit, or its equivalency in units
with more or less bedrooms, built on the Parcels shall survive the Time of
Settlement, it being understood that in order to calculate the Purchase
Price any unit which is deemed to be convertible to a unit with additional
bedrooms shall be considered as a unit having the maximum number of
bedrooms that it could be converted into.
<PAGE>3
In addition to the Purchase Price, at the Time of Settlement Buyer
shall pay Seller at any time prior to the issuance of the Use Permit of
the Project, an amount equal to Five Hundred andTwenty Dollars ($520.00)
multiplied by the number of units in the Project as a reimbursement of
advances made by Seller on the $1,000 per unit impact fee charged by the
Puerto Rico Aqueduct and Sewer Authority ("PRASA") pursuant to an
agreement entered into by Seller and PRASA on May 27, 1994, whereby PRASA
endorsed Parque Escorial and the obligations of each developer of land in
Parque Escorial towards PRASA are established including but not limited to
the payment of tap-in fees for the connection of the water and sewer
systems and an impact fee of $1,000 per unit, a copy of which is attached
hereto as Exhibit E.
2. Warranties and Representations of Seller. Seller warrants and
represents to Buyer the following:
(i) That Seller is, and on the Time of Settlement will be, the
lawful owner of the Parcels to be sold and delivered by it
hereunder and has full right and authority to sell and deliver
the same in accordance with this Agreement. Upon the delivery
of the Parcels to Buyer pursuant to the provisions of this
Agreement, Seller will convey and transfer to Buyer by Public
Deed a valid, fee simple (pleno dominio), insurable and
recordable title to the Parcels, free and clear of all mortgage
liens and of any encumbrances and other charges or restrictions
which presently affect the Parcels, subject only to those
matters set forth herein including but not limited to the (a)
the Restrictive Covenants; (b) the Design Standards; (c) the
Wal-Mart Use Restrictions; (d) the requirements of PRASA as
defined in Exhibit E hereto; (e) the requirements of the Highway
Authority of Puerto Rico, as defined in Exhibit F hereto; (f) a
covenant in the deed of sale providing that the Parcels can only
be developed for residential purposes and that unless otherwise
approved by Seller, the density of development on the Parcels
may not exceed one hundred and sixty (160) three bedroom units,
and that the design and construction of the Project have to be
in conformity with the Restrictive Covenants, the Design
Standards, as determined by the Architectural Review Committee,
(herein referred to as the "Use Restrictions"); and (g) to those
normal and ordinary liens, encumbrances and easements required
by governmental authorities for public services and which a
search at the Registry of the Property would reveal hereto;
(ii) That Seller shall not take any action during the term of this
Agreement which would impair title to the Parcels or further
encumber the Parcels, except for (a) the mortgage liens securing
financing arrangements required by Seller for the development of
Parque Escorial, from which the Parcels will be released upon
its acquisition by Buyer, (b) encumbrances and easements
required by the governmental authorities for the furnishing of
public services, (c) the Restrictive Covenants (d) the Design
Standards (e) the Wal-Mart Use Restrictions and (f) the Use
Restrictions.
(iii) That Seller shall not willfully take any action which would
impair the physical condition of the Parcels during the term of
this Agreement;
<PAGE>4
(iv) That Seller has not made and does not make any representations
or warranties whatsoever concerning the physical condition of
the Parcels, accesses, zoning, soil or subsoil condition,
availability of utilities, construction or use permits, or any
other permits issued by the government agencies affecting or
related to or necessary for the development or use of the
Parcels or any other matter or thing affecting or related to the
Parcels or the Project, other than those specifically referred
to in (a) this Agreement, (b) the Master Plan, (c) the "Consulta
de Ubicacion" for Parque Escorial issued by the Planning Board
of Puerto Rico dated October 27, 1992, as amended on December
23, 1994, copies of which are attached hereto as Exhibits G and
H (hereinafter referred to as the "Consulta de Ubicacion") and
(d) the "Desarrollo Preliminar" of Parque Escorial approved by
the Administracion de Reglamentos y Permisos of Puerto Rico
("ARPE") on , 1995, a copy of which is attached hereto as
Exhibit I, (hereinafter referred to as the "Desarrollo
Preliminar") (e) an agreement between Seller and PRASA, a copy
of which is attached hereto as Exhibit E, (f) the agreement
entered into by Seller and the Puerto Rico Highway Authority
dated November 22, 1991, as ratified on August 22, 1994, which
states among other things, that each developer of residential
units in Parque Escorial has to pay a $1,000 impact fee to the
Highway Authority for each residential unit to be developed,
including those to be developed in the Parcels, a copy of which
is attached hereto as Exhibit F, (g) the Wal-Mart Use
Restrictions, (h) the Use Restrictions and (i) the warranties
and representations made herein by Seller regarding the
Infrastructure Improvements, as said term is defined in
Paragraph 2 (vi) hereof, the Phase II Infrastructure
Improvements, as said term is defined in Paragraph 2 (vii), and
that the Parcels are presently approved for "high medium
density" residential use under the parameters of a R-3 zoning.
(iv) That Seller shall provide Buyer at least fifteen (15) calendar
days before the Time of Settlement with (i) a written report
prepared by a qualified geotechnical engineer to the effect that
the compaction of the fill material placed on the Parcels by
Seller is in accordance with ASTM-D 2922 standard test methods
for density of soil and soil aggregate in place by nuclear
methods (shallow depth) to no less than ninety five percent
(95%) of the maximum dry density as defined in ASTM-D698
standard test methods for moisture density relations of soils
and soil aggregate mixtures using 5.5 pound rammer and 12 inch
drop ("standard proctor tests"); (ii) a certification by a
licensed civil engineer or surveyor to the effect that the rough
grading, as said term is known in the land development industry,
of the Parcels at the Time of Settlement is the one specified in
the grading plan of the Parcels that is part of Exhibit N
hereof, a copy of which Buyer hereby acknowledges having
received prior to the execution of this Agreement; and (iii) a
certification from Seller to the effect that the Parcels,
including the access to the Parcels to be provided by Seller for
the transportation of materials and construction equipment to be
used in the construction of the Project, shall be in such
physical condition at the Time of Settlement that Buyer shall be
able to commence the development of the Project immediately
thereafter.
<PAGE>5
The above conditions are hereinafter referred to as the
"Conditions Precedent".
(vi) That prior to (i) the date in which the Project has been issued
a Use Permit by the regulatory governmental agencies or (ii) the
date in which such Use Permit could been reasonably expected to
have been issued had the work specified hereinafter had been
completed on a timely and satisfactory manner, absent any acts
of God or force majeure, Seller shall have substantially
completed (a) all the improvements to the 65th Infantry Avenue
described in the plans and specifications prepared by Engineer
Luis F. Franqui, dated February 11, 1994, as amended from time
to time, made an exhibit hereto by reference only (hereinafter
referred to as "Exhibit J") which plans and specifications
constitute the object of a construction contract awarded to
Rexach Construction Company on October 21, 1994 made an exhibit
hereto by reference only (hereinafter referred to as Exhibit K),
(b) all the improvements to the infrastructure of Parque
Escorial described in the plans and specifications prepared by
Engineer Luis F. Franqui, dated March 1, 1994, as amended from
time to time, made an exhibit hereto by reference only
(hereinafter referred to as "Exhibit L"), which plans and
specifications constitute the object of a construction contract
awarded to Rexach Construction Company on October 21, 1994, made
Exhibit M hereto by reference only. The
improvements to the 65th Infantry Avenue described in Exhibit J
hereto and the improvements to the infrastructure of Parque
Escorial described in Exhibit L hereto shall be collectively
referred to herein as the "Infrastructure Improvements".
(vii) That prior to the date in which the Project has been issued a
Use Permit by the pertinent regulatory governmental agencies or
the date in which such Use Permit could had been reasonably
expected to have been issued had the work described hereinafter
been completed on a timely and satisfactory manner, absent any
act of God or force majeure, Seller shall have completed (a)
those improvements to Phase II shown in the plans and
specifications prepared by Engineer Luis F. Franqui, dated May
24, 1995, as amended from time to time, a copy of which Buyer
acknowledges having received prior to the execution of this
Agreement, made Exhibit N hereto by reference only, which are
the object of a construction contract awarded to Constructora
Santiago, Inc., on August 24, 1995, made an exhibit hereto by
reference only (hereinafter referred to as Exhibit O), and (b)
the improvements described hereinafter, none of which is part of
the work contemplated under Exhibits J, L, N and O:
1) Cyclone wire fence along the exterior perimeter of Phase II
and a concrete fence along the North perimeter of the
Residential Zone, including the North boundary of Parcel II-1.
2) Gate and guard house at the East entrance of Boulevard Media
Luna, as said road is identified in the Master Plan.
3) Extension of Avenida Sur, as said road is identified in the
Master Plan, from the East entrance of the Residential Zone to
the site of the Carolina Regional College of the University of
Puerto Rico.
<PAGE>6
4) Landscaping of Avenida Este, as said road is identified in
the Master Plan.
5) Off site electrical work required to
service Phase II.
6) Concrete fence along the north boundary of the Residential
Zone to be built in stages. The first stage will consist of the
north boundary of Parcel II-10, Parcel II-1 and the east section
of the Great Lawn Park, as said area is identified in the Master
Plan.
Those improvements described in Exhibit N, which are part
of the construction contract referred to herein as Exhibit O and
the improvements listed herein under Paragraph 2 (vii) (b)
hereof are referred to herein as the "Phase II Infrastructure
Improvements".
(viii) That Seller shall have available for inspection by Buyer at all
times at its offices copies of Exhibits J, K, L, M and O.
(ix) That this Agreement and the documents to be executed by Seller
pursuant to the terms thereof constitute the legal, valid and
binding obligation of Seller enforceable in accordance with its
terms.
(x) That all necessary actions have been taken by the Board of
Directors of Seller to authorize the execution and delivery of
this Agreement and the consummation of all transactions
contemplated hereunder.
(xi) That all information owned or available to Seller as of the date
of this document or at any time, prior, during or after the
construction of the Project such as plans, studies and
government agencies' approvals of any kind pertaining to the
development of the Parcels or Parque Escorial shall be made
available at no cost to Buyer for the purpose of designing the
Project and seeking the necessary approvals from governmental
agencies for the proposed development of the Project or for any
other reasonable use.
(xii) That other than (a) the Restrictive Covenants (b) the Design
Standards, (c) the Wal-Mart Use Restrictions, (d) the Use
Restrictions and (e) those restrictions or conditions imposed by
the government agencies as described in Exhibits E thru I or
other restrictions or requirements typical of the development of
a master planned community, there are no other restrictions
regarding the use of the Parcels as the site of the Project to
be developed as intended in the Master Plan.
(xiii) That upon the sale of a parcel of land of 63 cuerdas to Wal-Mart
Puerto Rico, Inc. ("Wal-Mart") on March 27, 1991, certain
restrictions were imposed on the Main Farm but excluding the
parcel acquired by Wal-Mart (herein referred to as the "Wal-Mart
Use Restrictions") which restrictions, as a result of subsequent
amendments, are now as follows:
<PAGE>7
(a) Unless otherwise waived by Wal-Mart, no portion of Parque
Escorial, including but not limited to the Parcels, shall be
used for, nor shall there be permitted upon Parque Escorial the
operation of: (i) any type of department store, wholesale club
or supermarket store; or (ii) any other type of single retail
store containing more than twenty five thousand (25,000) square
feet of gross floor area.
(xiv) That Wal-Mart has secured zoning approval from the Planning
Board of Puerto Rico for a 480,000 sq. ft. shopping center to be
built on the parcel of 63 cuerdas in Parque Escorial sold to
Wal-Mart, which approval is evidenced in Exhibits G and H
hereto, of which a first phase of approximately 260,000 sq. ft.
is presently under construction and expected to be opened to the
public in 1995, and that Wal-Mart intends to solicit
approximately 120,000 sq. ft. more of commercial space at a
later date for a total square footage of approximately 600,000
sq.ft. Seller approved the construction of said shopping center
subject to the terms and conditions contained in an agreement
entered into by Seller and Wal-Mart on March 27, 1991, as
subsequently amended, a copy of which is available for review by
Buyer at the offices of Seller.
(xv) That Seller shall dedicate, in accordance with the various
stages of development of Parque Escorial and as required by the
pertinent governmental agencies, to the proper governmental
agencies the main avenues, recreational areas and community
facilities that will be built by Seller in Parque Escorial,
including Phase II, pursuant to the requirements of the Planning
Board of Puerto Rico, as specified in the "Consulta de
Ubicacion" and the "Desarrollo Preliminar".
(xvi) That Seller shall construct, in phases and as required in the
sole opinion of Seller, during the various stages of development
of Parque Escorial, the central recreational area of Parque
Escorial, identified in the Master Plan as the "Great Lawn
Park", and the community facilities identified as such in the
Master Plan, required under the "Consulta de Ubicacion" and the
"Desarrollo Preliminar" for Phase II.
(xvii) That Seller shall provide an adequate area within Parque
Escorial for the construction by Buyer, subject to the approval
of the Architectural Review Committee, of a temporary structure
to be used as the sales office for the Project, the construction
and operating costs of which shall be for the sole account of
Buyer. Said temporary structure shall be removed immediately
after it has served the purpose for what it was erected.
(xviii) That Seller shall preserve and promote the concept of Parque
Escorial as a master planned community as envisioned in the
Master Plan.
(xix) That unless otherwise permitted hereunder, Seller shall release
Buyer from any responsibility for the construction by Seller of
the Infrastructure Improvements, and Phase II Infrastructure
Improvements.
<PAGE>8
(xx) That Seller shall not sell parcels of land within Phase II in
excess of those that on a cumulative basis would entitled their
owners to commence construction before the 1st day of December
1996 of more than five hundred and forty three (543) three
bedroom units. Notwithstanding the above, upon the occurrence of
any of the events listed hereinafter Seller shall be entitled to
sell other parcels of land within Phase II and permit the
commencement of construction of residential units thereon as
long as the total number of units so approved by Seller to
commence construction prior to the 1st day of December 1996 on
any such parcel(s) shall not exceed the same number of units
previously approved for any parcel(s) whose buyer(s) fail(s) to
comply with the following conditions:
(a) A buyer of any of the parcels of land within Phase II on
which Seller has initially agreed to the commencement of
construction of the first five hundred and forty three (543)
residential units fails, for reasons not attributable to Seller,
to acquire any such parcels of land within the term provided
under their respective agreements of sale, including this
Agreement;
(b) After acquiring any of such parcel(s) of land II the
buyer(s) fail(s), for reasons not attributable to Seller, to
commence the construction of the units to be erected upon any
such parcel before the 30th day of June 1996, or
(c) After commencing construction of the residential units to
be erected on any such parels of land, construction work is
stopped for a period of more than four (4) months for reasons
not attributable to Seller or acts of God or force majeure.
Furthermore, Seller shall be entitled to sell at any time
additional parcels of land within the Residential Zone,
including Phase II, that upon their development would exceed
five hundred forty three (543) residential units, provided that
the respective agreements of sale and the deeds of sale shall
specifically restrict the commencement of construction of the
residential units to be erected thereon to a date which will not
be in violation of the warranties and representations made by
Seller herein.
(xxi) The Seller shall protect, indemnify and save harmless the Buyer
from and against all liabilities, obligations, damages,
penalties, claims, causes of action, costs, charges and expenses
(including without limiting the generality of the foregoing,
court costs, attorneys' and consultants' fees, environmental
cleanup costs, natural resources damages, fines, penalties and
damages to persons, personal property, real property and
business enterprises, including any and all past, present and
future claims and liability arising out of or relating to the
environmental condition of the Parcels as of the Time of
Settlement, existence of any environmentl hazard on the Parcels
as of the Time of Settlement and any release or threat of
release of any Hazardous Substance (as hereinafter defined) of
any kind in, on, under or from the Parcels at any time resulting
from a condition existing as of the Time of Settlement which may
be imposed upon or incurred by or asserted against the Buyer by
<PAGE>9
reason of (i) any accident, injury or damage to any person or
property occurring on or about the Parcels or any part thereof,
(ii) any use, non-use or condition of the Parcels or any part
thereof, or (iv) any necessity to defend any of the rights,
title or interest conveyed to Buyer by virtue of the Deed of
Sale. Any amounts payable to the Buyer under this paragraph
which are not paid within thirty (30) days after written demand
therefor by the Buyer shall bear interest from the date of such
demand until full payment thereof at a fluctuating annual rate
computed on the basis of a three-hundred-sixty-day (360-day)
year and the actual number of days elapsed) equal to the "prime
rate" publicly announced by Citibank, N.A. in New York, New
York, as its reference, base or prime rate (herein the "prime
rate") such fluctuating rate to change simultaneously with the
changes in the prime rate. In no event shall the interest rate
to be charged hereunder exceed the maximum permissible legal
rate. In case any action, suit or proceeding is brought against
the Buyer by reason of any such occurrence, the Seller, upon
request by the Buyer, will at the Seller's expenses resist and
defend such action, suit or proceeding or cause the same to be
resisted or defended, either by counsel designated by the Seller
and approved by the Buyer or, where such occurrence is covered
by liability insurance, by counsel designated by the insurer.
Notwithstanding anything to the contrary in this Agreement, the
provisions of this indemnity and all other representations,
warranties and covenants contained in this Agreement shall
survive the Time of Settlement. As used in this Agreement the
term Hazardous Substance has the following meaning; (i) any
"hazardous substance", "pollutant" or "contaminant" as said
terms are defined in clauses fourteen (14) and thirty-three (33)
of Section one hundred one (101) of the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA)
[Title Forty-Two (42) United States Code (U.S.C.) Section nine
thousand six hundred one (9,601), clauses fourteen (14) and
thirty-three (33)], or Title Forty (40) Code of Federal
Regulations (C.F.R.) Part three hundred two (302), as said act
and regulation may be amended prior to the Time of Settlement;
(ii) any "hazardous waste" as said term is defined as of the
Time of Settlement in the Puerto Rico Environmental Quality
Board Regulation for the Control of Hazardous and Non-Hazardous
Solid Wastes; (iii) any toxic or hazardous substance, material
or waste (whether solid, liquid or gaseous); (iv) any substance
containing "petroleum", as that term is defined as of the Time
of Settlement, in Section nine thousand one (9001), clause eight
(8) of the Resource Conservation and Recovery Act (RCRA),
[Title Forty-Two (42) U.S.C. Section six thousand nine hundred
ninety-one (6,991), clause eight (8)], or Title Forty (40)
C.F.R. Part two hundred eighty point one (280.1); or (v) any
other substance for which any governmental entity shall be
entitled, pursuant to all presently existing rules, regulations
and laws, require special handling in its collection, storage,
treatment or disposal.
3. Warranties and Representations of Buyer. Buyer warrants and
represents to Seller the following:
(i) That Buyer hereby expressly acknowledges and accepts that no
other such representations or warranties have been made or
<PAGE>10
implied and agrees that other than the (a) Infrastructure
Improvements, as they relate to the Parcels, to be completed by
Seller, (b) the Phase II Infrastructure Improvements to be
completed by Seller, and (c) the representations and warranties
made herein by Seller, the Parcels will be acquired by Buyer on
an "as is where is" condition. It shall be Buyer's sole
responsibility to satisfy itself, at its sole cost, expense and
risk, as to all aspects regarding the physical condition of the
Parcels and, accordingly, does herein specifically renounce and
waive any and all rights, claims and/or causes of action against
Seller as to the Parcels, forever releasing, relieving and
holding harmless Seller from any and all liability or legal
responsibility in connection therewith. Notwithstanding
anything to the contrary herein, Seller shall not be released
from its liability or legal responsibility for any
representations made by Seller herein.
(ii) That Buyer shall bear all the costs, expenses and risks related
to any request filed by Buyer with any government agency
for the approval of the Project provided that all the warranties
and representations made herein by Seller remain valid.
(iii) That Buyer shall not seek during the term of this Agreement or
at any time after its acquisition of the Parcels any changes to
the presently permitted uses or zoning of the Parcels. This
restriction shall also apply to all the succesors of Buyer in
the ownership of the Parcels.
(iv) That the Parcels constitute an integral and important part of
Parque Escorial and as such the Parcels shall always remain
subject to and the Project shall be constructed pursuant to (a)
the Restrictive Covenants, as amended from time to time by the
governing body of the Parque Escorial Residential Owners
Association, a non profit corporation to be organized under the
laws of Puerto Rico by Seller as an association of all the
owners of real property in the residential area of Parque
Escorial in order to insure the orderly development of the
Residential Zone and to provide for the efficient preservation
of the facilities and amenities to be constructed in the
Residential Zone (hereinafter referred to as the "Association"),
(b) the Design Standards, as amended from time to time by Seller
or the Architectural Review Committee, (c) the Wal-Mart
Restrictions and (d) the Use Restrictions.
(v) That the plans for the development of the Parcels and
construction of the Project, as well as any changes made
thereafter which may modify the character, layout, elevations or
density of the Project, shall be submitted by Buyer to the
Architectural Review Committee for its approval prior to
submitting them to the pertinent government agencies.
(vi) That the sales price of the three (3) bedroom units comprising
the Project shall not be less than One Hundred Thousand Dollars
($100,000).
(vii) That Buyer agrees that its employees, agents, contractors and
sub-contractors will only utilize the access to the Parcels to
be provided by Seller for the transportation of construction
<PAGE>11
equipment, supplies and construction materials and that Buyer
will reimburse Seller for any damages caused by those parties
from the unauthorized use of roads or other improvements within
Parque Escorial.
(viii) That Buyer shall impose upon the Parcels its own restrictive
covenants to be administered by a homeowner association composed
of all the owners of units in the Project which shall be
responsible, among other things, for the collection of the fees
to be paid to the Association, as provided in the Restrictive
Covenants, for the services rendered by the Association to the
Residential Zone, including but not limited to the maintenance
of the recreational areas, the fences, the green areas, and the
roads, the security of the Residential Zone and any other
services that the Association deems fit to render pursuant to
provisions of its Certificate of Incorporation and By-Laws.
(ix) That Buyer shall pay (i) for fifty percent (50%) of the cost of
the fence to be built at the boundary line of Parcel II-2 with
Parcel II-3 and (ii) one hundred percent (100%) of the cost of
the fence to be built on the boundary line of the Parcels with
Boulevard Media Luna, as said road is identified in the Master
Plan.
(x) That Buyer shall hold Seller safe and harmless from any claim
from third parties resulting from the construction by Buyer and
its agents of the improvements and residential units comprising
the Project including but not limited to those claims arising
from accidents or damages caused by Buyer or its agents outside
of the Parcels.
(xi) That Buyer shall hold Seller safe and harmless from any claim by
third parties arising out of any breach by Buyer of the (a) the
Design Standards, (b) Restrictive Covenants, (c) the Use
Restrictions, (d) any other restriction or condition to which
the Parcels are subject pursuant to the terms and conditions of
this Agreement or, (e) any misrepresentations made by Buyer to
any party.
(xii) That Buyer shall submit to Seller, for Seller's approval, a copy
of the form of option agreement or agreement of sale to be
executed between Seller and the buyers of units within the
Project and shall not enter into any such option agreement or
agreement of sale with any such buyers until such time as Seller
has issued its approval, which approval Seller shall not
unreasonably deny.
(xiii) That Buyer acknowledges and accepts that Seller, as the master
developer of Parque Escorial, holds the exclusive right to seek
and make amendments to the Master Plan in the interest of the
overall development of Parque Escorial, as provided that any
such amendments shall not be in violation of the representations
made by Seller herein.
(xiv) That Buyer acknowledges and agrees that other than the soil
compaction tests referred to in Paragraph 2 (iv) hereof and
those representations and warranties made by Seller as to
environmental matters and Hazardous Substances, as stated in
<PAGE>12
Paragraph 2 sub-paragraph (xxi) hereof, it shall be the sole
responsibility of Buyer to conduct its own soil and sub-soil
studies prior to the execution of this Agreement or at any time
during the term of this Agreement and Buyer hereby releases
Seller from any condition regarding the soil or sub-soil of the
Parcels that might surface prior to the execution of this
Agreement, during the term of the Agreement, or after the Time
of Settlement. Notwithstanding the above, Seller shall make
available to Buyer, at Buyer's request, any other soil or sub-
soil tests that Seller may have conducted on the Parcel; it
being understood that the submittal by Seller of said reports to
Buyer shall not impose any obligation or liability upon Seller
and shall not amend or modify the obligations of Buyer
hereunder.
(xv) That Buyer acknowledges and agrees that the timely and orderly
construction of the Project as an integral part of Phase II is
of utmost importance to the successful development of Parque
Escorial as a master planned community; therefore, Buyer or any
of its successors in the ownership of the Parcel shall have
until the later of (i) the 31st day of December 1996 or (ii)
twelve (12) months after the Time of Settlement should the Time
of Settlement take place after the 15th day of December 1995 for
reasons attributable to Seller, (hereinafter referred to as the
"Commencement of Construction Date"), to, in accordance with the
Design Standards, commence construction of the Project on the
Parcel. In the event that the Commencement of Construction Date
does not occur within the term specified hereinbefore in this
Paragraph, for reasons not attributable to Seller or acts of God
or force majeure. Seller shall have, upon the expiration of
said term and without the need of executing any other document,
a valid and binding first option to repurchase the Parcels at
the Purchase Price, as defined hereinbefore; said option to be
exercised by Seller within one hundred and twenty (120) days
from the date of expiration of such term. Failure by Seller to
exercise said option as provided hereinbefore shall render said
option null and void whereby Buyer shall have no further
obligation to sell the Parcels to Seller. For the purpose of
this Paragraph, the Commencement of Construction Date shall
refer to such date on which the Buyer has complied with all of
the following:
(i) the Construction Permit for the Project, as previously
approved by the Architectural Review Committee, has been
obtained;
(ii) a bonafide construction contract has been executed for
the construction of the Project;
(iii) a financing agreement for the construction of the
Project has been executed;
(iv) earth movement over the Parcels has commenced.
(xvi) The Buyer shall protect, indemnify and save harmless the Seller
from and against all liabilities, obligations, damages,
penalties, claims, causes of action, costs, charges and expenses
(including without limiting the generality of the foregoing,
<PAGE>13
court costs, attorneys' and consultants' fees, environmental
cleanup costs, natural resources damages, fines, penalties and
damages to persons, personal property, real property and
business enterprises, including any and all past, present and
future claims and liability arising out of or relating to the
existence of any environmental condition on the Parcels
resulting from acts attributable to Buyer and any release or
threat of release of any Hazardous Substance (as said term is
defined in Paragraph 2 sub paragraph (xxi) hereof) of any kind
in, on, under or from the Parcels at any time after the Time of
Settlement resulting from acts attributable of Buyer which may
be imposed upon or incurred by or asserted against the Seller by
reason of (i) any accident, injury or damage to any person or
property occurring on or about the Parcels or any part thereof
or, (ii) any use, non-use or condition of the Parcels or any
part thereof. Any amounts payable to the Seller under this
paragraph which are not paid within thirty (30) days after
written demand therefor by the Seller shall bear interest from
the date of such demand until full payment thereof at a
fluctuating annual rate computed on the basis of a three-
hundred-sixty-day (360-day) year and the actual number of days
elapsed) equal to the "prime rate" publicly announced by
Citibank, N.A. in New York, New York, as its reference, base or
prime rate (herein the "prime rate") such fluctuating rate to
change simultaneously with the changes in the prime rate. In no
event shall the interest rate to be charged hereunder exceed the
maximum permissible legal rate. In case any action, suit or
proceeding is brought against the Seller by reason of any such
occurrence, the Buyer upon request by the Seller, will at the
Buyer's expense resist and defend such action, suit or
proceeding or cause the same to be resisted or defended, either
by counsel designated by the Seller and approved by the Buyer
or, where such occurrence is covered by liability insurance, by
counsel designated by the insurer.
Notwithstanding anything to the contrary in this Agreement, the
provisions of this indemnity and all other representations,
warranties and covenants contained in this Agreement shall
survive the Time of Settlement.
(xvii) That this Agreement and the documents to be executed by Buyer
pursuant to the terms thereof constitute the legal, valid and
binding obligations of Buyer enforceable in accordance with its
terms; and
(xviii) That all necessary actions have been taken by the Board of
Directors of Buyer to authorize the execution and delivery of
this Agreement and the consummation of all transactions
contemplated hereunder.
4. Time for Settlement. Unless otherwise provided in Paragraph 8 hereof,
the closing under the terms of this Agreement for sale by Seller and purchase
by Buyer of the Parcels shall be made not later than fifteen (15) calendar days
after Seller has given written notice to Buyer that the Conditions Precedent,
as said term is defined in Paragraph 2 (v), have been satisfied but in no event
sooner than the 30th day of November 1995 or later than the 15th day of
December 1995 (herein referred to as the "Time of Settlement"). The settlement
shall be at a place designated by Seller.
<PAGE>14
At the Time for Settlement, title to the Parcels shall be conveyed to
Buyer by a public deed pursuant to the terms and conditions contained herein.
The payment by Buyer of the Purchase Price and any other amounts of money owed
to Seller by Buyer under this Agreement shall be made at the Time of
Settlement, in exchange for the delivery by the Seller to Buyer of the deed
referred to in Paragraph 7 hereof (hereinafter referred to as the "Deed of
Sale"), in (i) cash or cashier's check drawn on a banking institution doing
business in Puerto Rico in favor of Seller in the amount by which the Purchase
Price and any such other amounts owed to Seller by Buyer under this Agreement
exceeds the Earnest Money.
5. Allocation of Certain Costs and Charges. Seller shall pay the
notarial fees of the Deed of Sale and those incurred by Seller in the
preparation of the Agreement and the Restrictive Covenants, and the internal
revenue stamps of the original of the Deed of Sale. Buyer shall pay for the
internal revenue stamps corresponding to the certified copies of the Deed of
Sale and the stamps to be cancelled in the registration of said certified
copies. Buyer shall be responsible for all costs of a title insurance policy
solicited by Buyer. Seller shall be responsible for all the unpaid property
taxes on the Parcels up to the time of execution of the Deed of Sale and Buyer
shall be responsible thereafter. Buyer will reimburse Seller at the Time of
Settlement for any portion of the property taxes for the Parcel paid in advance
by Seller.
Buyer warrants and represents that no broker has participated in the
transaction contemplated under this Agreement or is interested hereby, through
or on account of Buyer. Should any claim for commissions be made by any broker
on account of any acts of Buyer, Buyer will indemnify and hold Seller free and
harmless from any and all liabilities and expenses in connection therewith,
including but not limited to, all legal expenses incurred by Seller as a
consequence thereof.
6. Delivery of Possession. Actual possession of the Parcels shall be
delivered by Seller to Buyer at the Time of Settlement.
7. Deed to be Delivered by Seller at Settlement. The conveyance of the
Parcels under this Agreement shall be by deed (herein referred to as the "Deed
of Sale"). Such deed shall be prepared by Notary Public selected by Seller and
approved by Buyer as to form and substance.
8. Title Defects; Breach by Seller. In the event that (i) the Conditions
Precedent have not been satisfied or (ii) that Seller cannot transfer title to
the Parcels to Buyer as represented in this Agreement on the dates provided in
Paragraph 4 hereof for reasons attributable to Seller or on account of acts of
God or force majeure, but excluding those acts to be performed by Buyer, the
term of this Agreement shall be automatically extended until such time as the
Conditions Precedent have been satisfied and title to the Parcels can be
transferred to Buyer as represented in the Agreement but in no event shall the
Time of Settlement occur later than the 30th day of June 1996.
In the event that as of the 30th day of June 1996 Seller has not satisfied
the Conditions Precedent or if it is still unable to transfer title to the
Parcels to Buyer as represented in this Agreement for reasons attributable or
not to Seller, but excluding those acts to be performed by Buyer, Buyer shall
have the right to demand from Seller the immediate return of the Earnest Money
to Buyer together with a check in the amount of the costs incurred by Buyer
with third parties, as determined through bonafide evidence made available to
Seller by Buyer, in the preparation of the plans and geological investigations
<PAGE>15
for the Project in which case all the rights to such plans and geological
investigations shall be acquired by Seller but in no event shall any such
reimbursement of costs be greater than FOUR HUNDRED THOUSAND DOLLARS
($400,000.00) (hereinafter referred to as the "Reimbursement of Actual Costs")
whereby this Agreement shall be terminated and Seller and Buyer shall not have
any further rights, claims, causes of action or obligations under this
Agreement.
In the event that Buyer does not exercise any such right, the term of this
Agreement shall be further extended to the 30th day of September 1996 and if as
such date, the Conditions Precedent have not been satisfied for any reason not
attributable to Buyer or if Seller is unable to transfer title to the Parcels
to Buyer as represented herein, Seller shall immediately return the Earnest
Money to Buyer together with a check in the amount of the Reimbursement of
Actual Costs whereby this Agreement shall be terminated and Seller and Buyer
shall not have any other rights, claims, causes, actions or obligations under
this Agreement.
9. Default by Buyer. Thirty (30) days after notice thereof has been
given to Buyer, the Seller, at its sole option, may terminate all of its
obligations under this Agreement, without liability in the event of any of the
following events:
1) With respect to the Buyer or any assignee of the Agreement duly
approved by Seller (hereinafter referred to as the "Assignee"), (i)
the filing by or against it or any case or other proceedings for any
relief pursuant to the bankruptcy or insolvency laws of the United
States, of any State, of the United States Virgin Islands, or of the
Commonwealth of Puerto Rico; (ii) the filing of an answer admitting
insolvency or inability to pay debts as they became due; (iii) a
material adverse change in the financial condition of Buyer or any of
the assumptions and representations under which Seller was induced to
enter into this Agreement;
2) The attachment, seizure, levy upon, or taking possession by any
receiver, custodian or assignee for the benefit of creditors of a
substantial part of any property of the Buyer or the Assignee.
3) If Buyer assigns this Agreement to another party without the
expressed written consent of Seller.
4) If Buyer or the Assignee shall default in the performance of any
of the obligations and agreements on its part to be performed under
this Agreement.
Notwithstanding the above, failure by Seller to pay the Purchase
Price and all other amounts owed to Seller hereunder in the manner
and at the time provided in this Agreement shall not require thirty
(30) days notice from Seller to become an event of default under this
Agreement. Upon the occurrence of such event of default, Seller
shall be entitled to exercise its rights under this Agreement
immediately.
In the event that Seller decides, at its sole option, to
terminate its obligations under this Agreement, upon the happening of
any of the events of default described above, then the Earnest Money
shall be retained by Seller as additional consideration and
liquidated damages for such breach, whereupon Buyer and Seller, and
<PAGE>16
the Assignee, if any, shall be released and relieved from all
liability towards each other and this Agreement, shall become null
and void; it being understood that if Seller chooses to terminate its
obligations under this Agreement on account of any of the defaults
listed hereinbefore, the right to retain the Earnest Money, as
compensation and liquidated damages, shall be the sole remedy
available to Seller.
In the event that Seller chooses not to terminate its obligations
under this Agreement upon the occurrence of any of the events of
default listed hereinbefore, Seller shall retain its right to demand
specific performance under this Agreement and to seek legal and
monetary remedies from Buyer and the Assignee, if any, in an amount
equal to the sum of the Purchase Price and any monetary damages
suffered by Seller, including but not limited to legal costs incurred
by Seller.
10. Survival of Agreement. Notwithstanding any presumption to the
contrary, all agreements contained in this Agreement which by their nature
impliedly or expressly involve performance at any particular time after the
Time of Settlement shall survive the Time of Settlement.
11. Seller not Bound. The Seller is not liable in any manner by any oral
or written statements, representations, or other information pertaining to the
Parcel by any broker, agent, employee, servant, account, or any other person,
whether or not associated with or employed by Seller, unless the same are
specifically set forth herein.
12. Right of Access. During the term of this Agreement, Buyer and his
authorized representatives shall be entitled to enter the Parcels for the
purpose of inspecting the same, making appraisals and conducting engineering
investigations. Buyer agrees to hold Seller safe and harmless from any claim
or liability arising out of any injury to Buyer, or to any of his officers,
agents or employees while in the Parcels, and shall indemnify and hold Seller
harmless from any and all damages, losses, expenses, claims suits, judgments
and liabilities (including claims and suits by and judgment and liabilities to
Buyer's employees) resulting in any way from the acts to Buyer, his agents, or
employees as herein provided. During all times that Buyer enters upon and/or
conducts any surveys, studies, tests, etc. on the Parcels, Buyer shall have and
maintain, at Buyer's cost, public liability and property damage insurance in
form and substance acceptable to Seller with a minimum, single, combined
liability limit of $1,000,000.00 insuring Buyer and Buyer's authorized
representatives, agents, employees, etc., against all liability arising out of
or in connection with Buyer's use or occupancy of the Parcels. The insurance
required herein shall (i) be issued by an insurance company authorized to do
business in Puerto Rico with a financial rating of at least +3 status as
reported in the most recent edition of Best's Report; (ii) be issued as a
primary policy; and (iii) contain endorsements naming Seller as additional
insuree and requiring thirty days written notice from the insurance company to
Seller and Buyer before cancellation or changing coverage, scope or amounts.
Each policy or a certificate of insurance, together with evidence of payment of
premiums, shall be delivered to Seller prior to entry upon the Parcels.
Likewise, Seller and its authorized representatives shall be entitled to
enter the Parcels after its acquisition by Buyer for the purpose of conducting
engineering investigations and completing the improvements to the Parcels or
the Phase II Infrastructure Improvements that Seller is obligated to do
pursuant to the terms and conditions of this Agreement. Seller agrees to hold
<PAGE>17
Buyer safe and harmless from any claim or liability arising out of any injury
to Seller, or to any of his officers, agents or employees while in the Parcels,
and shall indemnify and hold Buyer harmless from any and all damages, losses,
expenses, claims suits, judgments and liabilities (including claims and suits
by and judgment and liabilities to Seller's employees) resulting in any way
from the acts to Seller, his agents, or employees as herein provided. During
all times that Seller enters upon and/or conducts any surveys, studies, tests,
etc. on the Parcels, Seller shall have and maintain, at his cost, public
liability and property damage insurance in form and substance acceptable to
Buyer with a minimum, single, combined liability limit of $1,000,000.00
insuring Seller and Seller's authorized representatives, agents, employees,
etc., against all liability arising out of or in connection with Seller's use
or occupancy of the Parcels. The insurance required herein shall (i) be issued
by an insurance company authorized to do business in Puerto Rico with a
financial rating of at least +3 status as reported in the most recent edition
of Best's Report; (ii) be issued as a primary policy; and (iii) contain
endorsements naming Buyer as additional insuree and requiring thirty days
written notice from the insurance company to Buyer and Seller before
cancellation or changing coverage, scope or amounts. Each policy or a
certificate of insurance, together with evidence of payment of premiums, shall
be delivered to Buyer prior to entry upon the Parcels.
13. Time to be of Essence. It is distinctly understood and agreed that
time wherever specified in this Agreement is made and declared to be of the
essence thereof.
14. Notices. Any notice required or permitted to be given under this
Agreement must be in writing and sent by certified or registered mail, return
receipt requested, to the respective addresses of the parties stated at the
outset of this Agreement or to such other single address as either party may
designate from time to time with the terms of this Paragraph. In the case of
Seller, all notices shall be addressed to Mr. Francisco Arrivi, Senior Vice
President, Interstate General Properties Limited Partnership S.E. - 650 Munoz
Rivera Avenue, Doral Building, Suite 700, Hato Rey, P. R. 00918 with a copy to
Mr. Donald G. Blakeman, Executive Vice President at the same address. In case
of Buyer, all notices shall be addressed to Mr. , President.
15. Construction. This Agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of Puerto Rico and Seller and
Buyer and their assignees hereby submit themselves to the exclusive
jurisdiction of the San Juan Section of the Superior Court of Puerto Rico for
any and all controversies that may arise thereunder.
16. Miscellaneous. Each of the parties acknowledges that it has not
relied on any agreements or commitments by the other party or any of their
affiliates with respect to the subject matter hereof except the agreements and
commitments specifically set forth herein. This Agreement supersedes and
nullifies all prior agrements and sets forth the entire understanding of the
parties with respect to the Parcel. The provisions of this Agreement may not
be waived, extended or modified by subsequent conduct, correspondence or
otherwise. Each of the parties agrees that it or he shall not obtain, seek to
obtain, or rely on any waiver extension, modification, or approval unless the
waiver, extension, modification or approval is evidenced in writing, and (b) is
specifically approved in writing by the Seller or by Buyer. No delay or
failure of the Seller in exercising any right or privilege hereunder shall
affect such right or privilege; nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such right or
privilege preclude any further exercise thereof or of any other right or
<PAGE>18
privilege. Any waiver, extension, modification or approval related to this
Agreement shall be effective only to the extentand subject to the terms and
conditions in writing evidencing the same. Any waiver, extension, modification
or approval may be made subject to additional terms and conditions from time to
time after it is given or agreed to by the party giving or agreeing to it,
whether or not such waiver, extension, modification or approval has been relied
on in the meantime by the other party. Approval by Seller on any matter for
which approval is required shall not be unreasonably withheld. Whenever any
reference is made in this Agreement to an event of default, other than the
event of default caused by Buyer's failure to pay the Purchase Price and any
other amounts of money owed to Seller hereunder in the manner provided in this
Agreement, it shall be understood that no such event of default has occurred
until thirty (30) days have lapsed since notice thereof has been given to Buyer
provided therein.
IN WITNESS WHEREOF, the parties have executed this agreement by their
respective duly authorized officers on the day and year first above written.
SELLER: BUYER:
LAND DEVELOPMENT ASSOCIATES S.E., TWENTY FIRST CENTURY HOMES
a Puerto Rico special partnership S.E.
By: NEVARES & VILLAVICENCIO
By: INTERSTATE GENERAL PROPERTIES CORP.
LIMITED PARTNERSHIP, S.E., a
Maryland limited partnership, By : /s/ Eduardo Nevares
----------------------
its managing partner Eduardo Nevares
Title: President
By: INTERSTATE GENERAL COMPANY,
L.P., a Delaware limited
partnership, a general By : SECOND BAYAMON
partner PREMISES, INC.
By: INTERSTATE GENERAL MANAGEMENT By: : /s/ Jorge Colon Gerena
CORPORATION, a Delaware cor- ----------------------
poration, its managing general Jorge Colon Gerena
partner Title: President
By : /s/ Francisco Arrivi Cros
----------------------------
Francisco Arrivi Cros
Title: Senior Vice President
<PAGE>1
Exhibit 10(k)
OPTION AGREEMENT
AGREEMENT, dated this 31st day of March 1995 made by and between LAND
DEVELOPMENT ASSOCIATES S.E., a Puerto Rico limited partnership, having an
office at the Doral Building, Suite 700, 650 Munoz Rivera Avenue, Hato Rey,
Puerto Rico (hereinafter referred to as the "Seller",) and COMPRI CARIBE
HOSPITALITY CORP., a Puerto Rico corporation having an office at Catano, Puerto
Rico 00962 (hereinafter referred to as the Buyer).
PRELIMINARY STATEMENT
WHEREAS Seller owns two (2) parcels of land of 5,317.10 and 7,395.77
square meters in the San Anton Ward of Carolina, Puerto Rico, which parcels of
land are identified as Parcels I-IE and I-2E in surveys prepared by Engineer
Raul Franqui on February 27, 1995 and March 8, 1995, copies of which are
attached hereto as Exhibits A and B (hereinafter referred to as the "First
Phase Parcels").
WHEREAS Seller also owns another parcel of land of 17,343.03 square
meters in the San Anton Ward of Carolina, Puerto Rico, which parcel of land is
identified as Parcels I-3E, 1-4E and I-5E in a plot plan dated March 23, 1995
attached hereto as Exhibit C (hereinafter referred to as the "Second Phase
Parcels"). The First Phase Parcels and the Second Phase Parcels shall be
hereinafter referred to as the "Parcels".
WHEREAS, the Parcels are an integral and important part of Parque
Escorial, a master planned residential and commercial community (hereinafter
referred to as "Parque Escorial") being developed by Seller in a parcel of land
of approximately 439 cuerdas located in the municipalities of San Juan and
Carolina, Puerto Rico (hereinafter referred to as "Main Farm"), best identified
in the attached copy of the Parque Escorial master plan, which is made Exhibit
D hereto, and as such, the Parcels are subject to certain restrictive covenants
(hereinafter referred to as the "Restrictive Covenants), a draft of which is
attached hereto as Exhibit E, including architectural standards (hereinafter
referred to as the "Parque Escorial Architectural Standards"), attached hereto
as Exhibit F and certain use restrictions best described in Paragraph 4 (xii)
of this Option (hereinafter referred to as the Wal-Mart Use Restrictions.)
WHEREAS, Seller has agreed that the Buyer shall have a non
transferable option to purchase the Parcels from Seller upon the terms and
conditions hereinafter set forth (hereinafter referred as to "Option").
WHEREAS, it is the expressed intention of the parties that the option
is granted exclusively to Buyer, and under no circumstances shall the Option be
transferred or assigned to another party except with the written consent of the
Seller, provided, however, that if, such transfer or assignment shall be to a
party related to Buyer through common ownership and that reasonable evidence of
such relationship is provided by Buyer to Seller and that such transfer or
assignment in no way alters the intent, terms, conditions and guarantees of
this Option, Seller shall not unduly withhold its consent to the assignment.
Any such assignment or transfer will not release Buyer from the obligations and
responsibilities assumed under the terms and conditions of this Option.
<PAGE>2
NOW, THEREFORE, in consideration of the mutual covenants set forth
below, the parties agree as follows:
1. Grant of Option, and Option Price. Subject to the provisions of
Paragraph 6 hereof, Seller for and in consideration of the sum of One Dollar
($1.00) of lawful money of the United States of America to be paid by Buyer at
or before the execution and delivery hereof (hereinafter referred to as the
"Option Money") hereby gives and grants to Buyer the irrevocable right and
option to purchase the parcels during the Option Period, as said term is
hereinafter defined, for a purchase price of Six Million Eight Hundred Fifty
Thousand Dollars ($6,850,000) of lawful money of the United States of America,
as increased from time to time in the manner provided for hereinafter,
(hereinafter referred to as the "Purchase Price") of which One Million Six
Hundred Sixteen Thousand Dollars ($1,616,000) is the portion of the Purchase
Price allocated to Parcel I-1E (hereinafter referred to as "Parcel I-1E
Purchase Price") and One Million Eight Hundred and Thirty Seven Thousand
Dollars ($1,837,000) is the portion of the Purchase Price allocated to Parcel
I-2E (hereinafter referred to as "Parcel I-2E Purchase Price) (the Parcel I-1E
Purchase Price and the Parcel I-2E Purchase Price are hereinafter collectively
referred to as the "First Phase Purchase Price") and Three Million Three
Hundred Ninety Seven Thousand Dollars ($3,397,000) is the portion of the
Purchase Price allocated to the Second Phase Parcels (hereinafter referred to
as the "Second Phase Base Purchase Price").
Notwithstanding the above, the second Phase Base Purchase Price shall
be increased on the earlier of (i) the first day of the month in which the
Infrastructure Improvements, as said term is defined hereinafter, and the
Avenida Sur Improvements, as said term is defined hereinafter, have been
accepted by the government agencies involved or (ii) December 15, 1995,
hereinafter referred to as the "Commencement Date) by an amount equal to one
percent (1%) of the Second Phase Base Purchase Price for each calendar month
that transpires between the commencement Date and the settlement under the
contract of sale, as said term is defined in Paragraph 6 a. hereof, pursuant to
the terms and conditions of the Contract of Sale but in no event the sum of the
monthly increments to the Second Phase Base Purchase Price shall be more than
Four Hundred Seven Thousand Six Hundred Twenty Eight Dollars ($407,628). The
Second Phase Base Purchase Price, as increased from time to time in the manner
stated in this paragraph, shall hereinafter be referred to as the "Second Phase
Purchase Price".
2. Option Period. The option period (herein referred to as the
"Option Period") shall be the tern from the date hereof to 11:59 P.M. (A.S.T.)
of the 31st day of March 1995.
3. Exercise of Option. The option herein granted may be exercised
by personal delivery to Seller on or before March 30, 1995 of Buyer's written
notice of exercise, at the address stated at the outset of this option.
4. Warranties and Representations of Seller. Seller warrants and
represents to Buyer the following:
(i) Seller is, and on the Time of Settlement will be, as said term is
defined hereinafter, the lawful owner of the Parcels to be sold
and delivered by it hereunder and has full right and authority to
sell and deliver the same in accordance with this option subject
only to obtaining the approval of Banco Central Hispano Puerto
Rico, (hereinafter referred to as the "Bank") to the terms and
<PAGE>3
conditions of the Option as holders of a first mortgage on the
Main Farm in the amount of Eight Million Dollars ($8,000,000)
(hereinafter referred to as the "Mortgage"), which approval is
best defined in Paragraph 5 (vi) hereof. Upon the delivery of
said Parcels to Buyer pursuant to the provisions of this Option,
Seller will convey and transfer to Buyer by Public Deed a valid,
fee simple (pleno dominio), insurable and recordable title to the
Parcels, free and clear of all mortgage liens and of any
encumbrances and other charges or restrictions which presently
affect the Parcels, subject only to those matters set forth
herein including but not limited to the (a) the Restrictive
Covenants (b) the Parque Escorial Architectural Standards, (c)
the Wal-Mart Use Restrictions, (d) the requirements of the Water
and Sewer Authority of Puerto Rico as defined in Exhibit M
hereto, and (e) to those normal and ordinary liens, encumbrances
and easements required by governmental authorities for public
services and which a search at the Registry of the Property would
reveal hereto;
(ii) Seller shall not take any action during the Option Period or
during the term of the Contract of Sale, which would impair title
to the Parcels or further encumber the parcels, except for the
mortgage liens required for the development of Parque Escorial,
from which the Parcels will be released upon their acquisition by
Buyer, encumbrances and easements required by the governmental
authorities for the furnishing of public services and the
(Restrictive Covenants and the Parque Escorial Architectural
standards.
(iii) Seller shall not willfully take any action which would impair the
physical condition of the Parcels during the term of this Option
or the contract of Sale;
(iv) Seller shall complete within the period of time allocated under
the construction contracts identified hereinafter, as extended
for reasons beyond the control of Seller including but not
limited to reasons of force majeure, at Seller's sole cost, all
the improvements to the 65th Infantry Avenue described in the
Plans and specifications prepared by Engineer Luis F. Franqui and
dated February 11, 1994, as amended from time to time, made an
exhibit hereto by reference only (hereinafter referred to as
"Exhibit G") which plans and specifications constitute the object
of a construction contract awarded to Rexach Construction Company
on October 21, 1994, a copy of which is attached hereto as
Exhibit H.
(v) Seller shall also complete within the period of time allocated
under the construction contract identified hereinafter, as
extended for reasons beyond the control of Seller, including but
not limited to reasons of force majeure, at Seller's sole cost,
all the improvements to the infrastructure of Parque Escorial
described in the plans and specifications prepared by Engineer
Luis F. Franqui and dated March 1, 1994, as amended from time to
time, made an exhibit hereto by reference only (hereinafter
referred to as "Exhibit I"), which plans and specifications
constitute the object of a construction contract awarded to
Rexach Construction Company on October 21, 1994, a copy of which
is attached hereto as Exhibit J.
<PAGE>4
The improvements to the 65th Infantry Avenue described in Exhibit
G hereto and the improvements to the infrastructure of Parque
Escorial described in Exhibit I hereto shall be collectively
referred to hereinafter as the "Infrastructure Improvements".
(vi) As to the Second Phase Parcels, Seller shall also construct, at
Seller's sole cost, all of those improvements to the
infrastructure of Parque Escorial that will provide the Second
Phase Parcels with all the utilities and direct access to Avenida
Sur, as said road is identified in Exhibit D hereto, along the
entire length of the Second Phase parcels' frontage to Avenida
Sur (hereinafter referred to as the "Avenida Sur Improvements").
(vii) Seller shall have available for inspection by Buyer at all tines
at its offices copies of Exhibits G and I.
(viii) This Option and the documents to be executed by Seller pursuant
to the terms thereof constitute the legal, valid and binding
obligation of Seller enforceable in accordance with its terms;
(ix) All necessary actions have been taken by the Board of Directors
of Seller to authorize the execution and delivery of this Option
and the consummation of all transactions contemplated hereunder.
(x) Seller has not made and does not make any representations or
warranties whatsoever concerning the physical condition of the
Parcels, accesses, zoning, soil or subsoil condition, area,
availability of utilities, construction or use permits, or any
other permits issued by the government agencies affecting or
related to or necessary for the development or use of the Parcels
or any other matter or thing affecting or related to the Parcels,
other than those specifically referred to in (a) this Agreement,
(b) the "Consulta de Ubicacion" issued by the Planning Board of
Puerto Rico dated October 27, 1992, as amended on December 23,
1994, copies of which are attached hereto as Exhibits K and K-1,
(c) the "Desarrollo Preliminar" of Parque Escorial approved by
the Administracion de Reglamentos y Permisos of Puerto Rico on
June 18, 1993, as amended on August 25, 1993, copies of which are
attached hereto as Exhibits L and L-1, (d) a letter from the
Water and Sewer Authority of Puerto Rico dated March 24, 1995 in
which it restates the obligations of each developer of commercial
land within Parque Escorial, including but not limited the
payment of fees for the connection of the water and sewer systems
and certain impact fees, a copy of which is attached hereto as
Exhibit M, (e) the Wal-Mart Use Restrictions and (f) the
warranties and representations made by Seller that the Parcels
have adequate street frontage, level topography, adequate
drainage and that all typical urban infrastructure will be
readily available, and that the Parcels are presently zoned C-2
("Commercial 2"). Buyer hereby expressly acknowledges and accepts
that no other such representations or warranties have been made
or implied and agrees that other than the Infrastructure
Improvements and the Avenida Sur Improvements, as the latter
relates to the Second Phase Parcels, to be completed by Seller
and the representations and warranties made herein the Parcels
will be acquired by Buyer on an "as is where is" condition. It
shall be the Buyer's sole responsibility to satisfy himself, at
its sole cost, expense and risk, as to the status of the Parcels
<PAGE>5
and, accordingly, does herein specifically renounce and waive any
and all rights, claims and/or causes of action against Seller as
to the Parcels, forever releasing, relieving and holding harmless
Seller from any and all liability or legal responsibility in
connection therewith. Notwithstanding anything to the contrary
herein, Seller shall not be released from any liability or legal
responsibility for any representations made by Seller herein.
(xi) That Seller warrants and represents to Buyer that all information
owned or available to Seller as of the date of this document
regarding plans, studies and approvals of any kind pertaining to
the development of the Parcels, including but not limited to
Exhibit C thru N hereto, shall be made available at no cost to
Buyer for the purpose only of seeking the necessary approvals
from governmental agencies for the proposed development on the
parcels. Any cost or responsibility related to the amendment,
change or alteration of any of those mentioned documents or any
additional documents requested by Buyer shall be for the sole
account of Buyer.
(xii) That Seller warrants and represents that other than (a) the
Restrictive covenants, (b) the Wal-Mart Use Restrictions, imposed
upon the Main Farm, including the Parcels, upon the sale of a
parcel of land within Parque Escorial on March 27, 1991 to Wal
Mart Puerto Rico, Inc. (hereinafter referred to as "Wal-Mart"),
which restrictions Seller warrants and represents to be as
described in Paragraph 4 (xiii) hereof and (c) those restrictions
imposed by the regulatory agencies as described in Exhibits K
through M, there are no other restrictions regarding the use of
the Parcels for the purpose intended in the Master Plan of Parque
Escorial, best defined in page MP-3 of Exhibit D hereto.
(xiii) That Seller warrants and represents that Wal-Mart Use
Restrictions are as follows:
(a) Unless otherwise waived by Wal-Mart, no portion of Parque
Escorial, including but not limited to the Parcels, shall be used
for, nor shall there be permitted upon Parque Escorial the
operation of
1. Any type of department store, wholesale club or supermarket
store; or
2. Any other type of single retail store containing more than
twenty five thousand (25,000) square feet of gross floor area; or
(xiv) That seller further warrants and represents that nothing
contained in the Wal-Mart Agreement or in Deed number Five (5) of
Segregation, Purchase and Sale and Constitution of Easements
executed by Wal-Mart and Seller on March 27, 1991 before Notary
Public Salvador Casellas Toro, a copy of which is attached hereto
as Exhibit O, as amended by Deed No. 4 dated March 30, 1995
before notary public Juan Carlos Galanes, attached hereto as
Exhibit O-1, and as further contemplated to be amended pursuant
to a letter agreement dated March 21, 1995, a copy of which is
attached hereto as Exhibit O-2, precludes or prohibits Buyer from
applying to the regulatory agencies at its sole cost and
responsibility, for commercial uses in the Parcels which does not
violate the restrictions defined in Paragraph 4 (xiii) (a)
<PAGE>6
hereof. Buyer hereby expressly acknowledges and accepts that no
other such representations or warrants have been made or implied
regarding the uses to be given to the Parcels and agrees to
acquire the Parcels subject to the use restrictions defined
herein.
(xv) That Seller warrants and represents that the right granted by the
Water and Sewer Authority to Seller on March 24, 1995 to connect
an additional 100,000 square feet of commercial space in Parque
Escorial to the existing sewer system as evidenced in Exhibit M
hereto shall be transferred to Buyer to serve the needs of the
Parcels, subject to all the terms and conditions contained in
said letter.
(xvi) That Seller warrants and represents that Wal-Mart has secured
zoning from the Planning Board of Puerto Rico for a 450,000
shopping center to be built on Parque Escorial, as evidenced in
Exhibit K-I hereto.
5. Warranties and Representations of Buyer. Buyer warrants and
represents to Seller the following:
(i) That Buyer shall bear all the costs, expenses and risks related
to any request filed by Buyer with any government agency for the
approval of the Parcels as the site of any development
alternative proposed by Buyer provided that all the warranties
and representations made herein by Seller remain valid.
(ii) That Buyer shall only seek during the term of this Option or the
Contract of Sale, as it relates to the second Phase Parcels those
changes to the zoning of the Parcels which shall have been
previously approved in writing by seller.
(iii) That the Parcels constitute an integral and important part of
Parque Escorial and as such they shall always remain subject to
the Restrictive Covenants, as amended from time to time by the
governing body of the Parque Escorial commercial Owners
Association (hereinafter referred to as the "Association"), and
the Parque Escorial Architectural Standards, as amended from time
to time by the Parque Escorial Architectural Review Committee or
the Association.
(iv) That Buyer acknowledges that pursuant to the terms of the
Mortgage, as said term is defined in Paragraph 4 hereof, the Bank
is entitled to receive, in cash, certain amounts of money in
consideration for the release of the Parcels from the Mortgage,
and that should the Bank decline to approve a modification to the
land release provisions of the Mortgage requested by Seller as a
result of the fact that the sale of the First Phase Parcels to
Buyer under the terms of this Option entails financing by Seller
of up to eighty percent (80%) of the Purchase Price, the Option
shall be rendered null and void. Notwithstanding the above, Buyer
shall be entitled to acquire the Parcels within the term of the
Option by paying the full amount of the Purchase Price, in cash,
to Seller on or before the expiration of the Option Period.
<PAGE>7
Upon the termination of the Option or the Agreement of Sale, as
said term is defined in Paragraph 6. hereof, or the Contract of
Sale, as applicable, for any reason whatsoever, Seller shall
return the Option Money, if any, and the Deposit, as said term is
defined in Paragraph 6a. hereof, if any, to Buyer, and Seller and
Buyer shall not have any further rights, claims, causes of
action, or obligations under the Option, the Agreement of Sale or
the Contract of Sale, as applicable; it being understood that
under no circumstances shall Seller be bound to reimburse Buyer
for any expenses, of any nature whatsoever, incurred by Buyer for
any reason whatsoever.
(v) That Buyer further acknowledges that upon the termination of the
Option or the Agreement of Sale, or the Contract of Sale as
applicable, for any reason whatsoever, Seller shall become free
to negotiate the sale or lease of the Parcels, or the Second
Phase Parcels only if Buyer has already acquired the First Phase
Parcels, individually or collectively, with any interested party
including but not limited to those parties with whom Buyer might
have previously discussed or negotiated the sale of any of the
Parcels and Buyer shall not be entitled to any compensation
whatsoever if any of said parties were to acquire or lease real
property within Parque Escorial including but not limited to the
Parcels.
(vi) That Buyer further warrants and represents to Seller that any
agreement entered into by Buyer and any other party interested in
acquiring or leasing all or any of the Parcels shall in no manner
or form be binding on Seller.
(vii) That Buyer acknowledges the use of the Parcels is subject to the
Wal-Mart Use Restrictions and any intended use of the Parcels
which would be in conflict with the Wal-Mart Use Restrictions
shall be previously discussed and agreed to with Wal-Mart and
Seller.
(viii) This Option and the documents to be executed by Buyer pursuant to
the terms thereof constitute the legal, valid and binding
obligations of Buyer enforceable in accordance with its terms;
(ix) All necessary actions have been taken by the Board of Directors
of Buyer to authorize the execution and delivery of this option
and the consummation of all transactions contemplated hereunder.
6. Terms of Agreement of Sale. Subject to Paragraph 1 hereof and
the approval of the Bank of the terms and conditions of the Option as it refers
to the First Phase Parcels, and upon the exercise of the Option herein given
and granted to purchase the Parcels in the manner provided in Paragraph 3
hereof, the option shall without further action of Seller be a binding
agreement of sale (herein referred to as the "Agreement of Sale"), enforceable
at law or in equity for the sale by Seller and purchase by Buyer of the Parcels
at the Purchase Price provided in Paragraph 1 hereof, upon the terms and
conditions of the option and upon the following terms and conditions.
a. Time for Settlement. Execution under the terms of the Agreement
of Sale for sale by Seller and purchase by Buyer of the First
Phase Parcels shall be made no later than the 31st day of March
1995 (herein referred to as the "Time of Settlement of the First
<PAGE>8
Phase"). The settlement shall be at a place designated by
Seller.
At the Time for Settlement of the First Phase Parcels, title to
the First Phase Parcels shall be conveyed to Buyer by a deed
pursuant to the terms and conditions contained herein.
Concurrently, Buyer shall deposit with Seller the amount of Ten
Thousand Dollars ($10,000), non refundable unless otherwise
provided herein (referred to as the "Deposit") and Seller and
Buyer shall enter into a contract of sale binding to both
parties, (herein referred to as the "Contract of Sale") for the
sale by Seller and the purchase by Buyer of the Second Phase
Parcels pursuant to the terms and conditions contained in the
Contract of Sale, which terms and conditions shall be the same as
those contained in this Option.
Execution under the terms of the Contract of Sale for sale by
Seller and purchase by Buyer of the second Phase Parcels shall be
made no later than thirty (30) days after Seller gives written
notice to Buyer that the Conditions Precedent, as said term is
defined in Paragraph 6 f, have been satisfied but in no event
shall the settlement under the Contract of Sale shall occur prior
to June 15, 1995 or later than March 31, 1996 unless otherwise
provided for herein (herein referred to as the "Time of
Settlement of the Second Phase"). The settlement shall be at a
place designated by Seller.
b. The payment of the First Phase Purchase Price by Buyer shall be
made at the Time of Settlement for the First Phase, in exchange
for the delivery by the Seller to Buyer of the deed hereinafter
referred to Paragraph 6.e hereof in (i) cash or cashiers check
drawn on a banking institution doing business in Puerto Rico
acceptable to Seller in favor of Seller in the amount by which
Six Hundred Ninety Three Thousand Dollars ($693,000) exceeds the
Option Money, plus the costs that Seller has agreed to pay as
provided in Paragraph 6.c hereof and (ii) the delivery of an
interest bearing promissory note in the amount of Two Million
Seven Hundred Sixty Thousand Dollars ($2,760,000) (hereinafter
referred to as the "First Phase Note") secured by a first
mortgage on Parcel I-IE in the amount of One Million Two Hundred
Ninety One Thousand Seven Hundred Dollars ($1,291,700) and a
first mortgage on Parcel I-2E in the amount of One Million Four
Hundred Sixty Eight Thousand Three Hundred Dollars ($1,468,300).
Unless otherwise paid sooner, the First Phase Note shall be paid
through (i) thirty five (35) monthly payments of Twenty Seven
Thousand Dollars ($27,000) commencing on May 1, 1995 and ending
on March 1, 1998, and (ii) one (1) final payment in the amount of
principal and interest outstanding on April 1, 1998 together with
all amounts then owed to Seller. The monthly payments shall be
applied to the repayment of principal owed under the First Phase
Note until the date in which Buyer becomes obligated to start
paying interest under the First Phase Note at which time the
monthly payments will be applied first to the payment of interest
accrued under the First Phase Note and the balance to the payment
of principal. Forty six point two percent (46.2%) of any such
principal payments shall be allocated to the deferred portion of
the purchase price of Parcel I-IE and fifty three point eight
<PAGE>9
percent (53.8%) of any such payments shall be allocated to the
deferred portion of the purchase price of parcel I-2E. Upon the
payment in full of the deferred portion of the purchase price of
either of the Parcels, the monthly payments shall be reduced by
the percentage attributable to the parcel on which the deferred
portion of the purchase price has been paid.
The First Phase Note shall bear interest at a fixed rate equal to
the sum of (i) one percent (1%) and (ii) Citibank NA'S prime
rate, as said term is commonly defined, prevailing at the Time of
Settlement of the First Phase, commencing on the earlier of (i)
the date in which the Infrastructure improvements identified in
Exhibits G thru J have been accepted by the government agencies
concerned or (ii) December 15, 1995; and ending on the date that
all amounts owed under the First Phase Note are paid to seller.
In the event that Buyer prepays the First Phase Note, or any
portion thereof, before the date in which interest begins to
accrue on the First Phase Note, Seller shall reimburse Buyer an
amount equal to ten percent (10%) on the prepaid amount from the
date in which the prepayment is effected to the earlier of (i)
the date in which the Infrastructure improvements have been
accepted by the government agencies concerned or (ii) December
15, 1995. The reimbursement will be made no later than 15 days
after the date that the amount of the reimbursement can be
determined. The payment of the Second Phase Purchase Price shall
be made at the Time of Settlement of the Second Phase in exchange
for the delivery by Seller of a deed in the manner provided in
Paragraph 6.e, in (i) cash or a cashier's check drawn on a
banking institution doing business in Puerto Rico in favor of
Seller in an amount equal to the sum of (a) twenty percent (20%)
of the Second Phase Purchase Price (hereinafter referred to as
the "Down Payment") and (b) the costs that Buyer has agreed to
pay as provided in Paragraph 6.c and (ii) an interest bearing
note in the amount of the Second Phase Purchase Price less the
Down Payment and the Deposit (hereinafter referred to as the
"Second Phase Note") secured by a first mortgage on the Second
Phase Parcel in the same amount of the Second Phase Note.
Unless otherwise paid sooner, the Second Phase Note shall be paid
through (i) thirty five (35) monthly payments of Twenty Seven
Thousand Dollars ($27,000) commencing the first day of the month
following the Time of Settlement of the Second Phase and (ii) one
(1) final payment in the amount of principal and interest
outstanding on the first day of the thirty sixth (36th) month
following the Time of Settlement of the Second Phase together
with all amounts then owed to Seller. The monthly payments of
Twenty Seven Thousand Dollars ($27,000) each shall be applied to
the reduction of principal owed under the Second Phase Note until
the date in which Buyer becomes obligated to start paying
interest under the Second Phase Note at which time they will be
applied first to the payment of interest accrued under the Second
Phase Note and then to the payment of principal. If the monthly
payments of Twenty Seven Thousand Dollars ($27,000) would be less
than the amount required to amortize the Second Phase Note based
on an amortization schedule of a twenty (20) year loan bearing
interest at the rate of ten percent (10%) per annum, the amount
of said monthly payments shall then be increased to such required
amount, rounded up to the next One Thousand Dollars ($1,000).
<PAGE>10
The Second Phase Note shall bear interest at a fixed rate equal
to the sum of (i) one percent (1%) and (ii) Citibank N.A.'s prime
rate prevailing at the Time of Settlement of the Second Phase,
and shall be paid on the first day of each month commencing on
the first day of the month that follows (i) the Time of
Settlement of the Second Phase if all the Infrastructure
improvements and the Avenida Sur improvements have been accepted
by the government agencies concerned, or (ii) the date in which
the Infrastructure Improvements and the Avenida Sur improvements
have been accepted by the government agencies concerned.
Upon the sale or lease by Buyer of any portion of the Parcels
encumbered by the mortgages securing the First Phase Note or the
Second Phase Note, or to otherwise release the parcels from said
mortgages, Buyer shall pay to Seller, in cash or a cashier's
check issued by a banking institution doing business in Puerto
Rico, the amount set forth herein to release the parcels from
said mortgages.
FIRST PHASE:
Parcel I-1E shall be released from the Note for the amount of One
Million Two Hundred Ninety One Thousand Seven Hundred Dollars
($1,291,7OO) and Parcel I-2E shall be released from the Note for
the amount of One Million Four Hundred Sixty Eight Thousand Three
Hundred Dollars ($1,468,300), less principal payments allocable
to the Parcels which were made prior to their release from the
mortgages, as applicable, plus unpaid interest applicable to the
Parcels so released.
SECOND PHASE:
Parcel I-4E -- $180.00 per sq. mt.
Parcel I-5E -- $150.00 " " "
Parcel I-6E -- $150.00 " " "
The price for which Seller has agreed to release each of the
parcels of land comprising the Second Phase Parcels (hereinafter
referred to as the "Release Price") as stated herein, shall be
increased on the first day of each month commencing on May 1,
1595 by an amount equal to one percent (1%) of the Release Price
specified hereinbefore for each one of said parcels and reduced
by the amounts of principal payments made prior to their release
that are allocated to each of the parcels I-4E, I-5E and I-6E.
Notwithstanding the above, Seller shall not be obligated to
release any portion of the parcels from the First Phase Note if
Buyer is in default under the First Phase Note or to release any
portion of the Second Phase Parcels in the event that Buyer is in
default under the Second Phase Note.
c. Allocation of Certain Costs and Charges. Seller shall pay all
notarial fees including those related to the preparation of the
Contract of Sale and the internal revenue stamps of the original
of the Deeds of Sale and Buyer shall pay for the internal revenue
stamps corresponding to the certified copies of the Deeds of Sale
<PAGE>11
and the stamps to be cancelled in the registration of said
certified copies. Seller shall be responsible for the premium to
be paid on a title insurance policy insuring Seller as the
Mortgagee under the Deeds of Mortgage. The Deeds of Sale and the
Deeds of Mortgage securing the First Phase Note and the Second
Phase Note will be prepared by the Notary selected by Seller and
will be approved by Buyer as to form and substance. Buyer shall
be responsible for the notarial fees and the internal revenue
stamps of the original and certified copies of the Deeds of
Mortgage and the stamps to be cancelled in the registration of
said certified copies. Seller shall be responsible for all the
unpaid property taxes up to the time of execution of the Deeds of
Sale and Buyer shall be responsible thereafter. Buyer will
reimburse Seller for any portion of the property taxes paid in
advance by Seller for the parcels at the Time of Settlement of
the First Phase or Time of Settlement of the Second Phase.
Buyer warrants and represents that no broker has participated in
the transaction contemplated under this Option or is interested
hereby, through or on account of Buyer. Should any claim for
commissions be made by any broker on account of any acts of
Buyer, Buyer will indemnify and hold Seller free and harmless
from any and all liabilities and expenses in connection
therewith, including any and all legal expenses, incurred by
Seller as a consequence thereof.
d. Delivery of Possession. Actual possession of the Parcels shall
be delivered by Seller to Buyer at the Time of Settlement of the
First Phase or the Time of Settlement of the Second Phase, as
applicable.
e. Deed to be Delivered by Seller at Settlement. The conveyance of
the Parcels under the Agreement of Sale or the Contract of Sale
shall be by deed. Such deeds and the Contract of Sale shall be
prepared by Seller and approved by Buyer as to form and
substance.
f. Title Defects; Breach by Seller. In the event Seller, for
reasons beyond its control including but not limited to the
Bank's failure to approve the terms and conditions of this option
or the Contract of Sale, as applicable, but excluding those acts
to be performed by Buyer, is unable to transfer title to the
First Phase Parcels to Buyer on or before March 31, 1995 or as to
the Second Phase Parcels, on the date in which Buyer comes
obligated to purchase the Second Phase Parcels as represented in
this document, then Seller shall have the alternative, at its
option, to pay from the Purchase Price any outstanding liens or
encumbrances upon the title of the parcels, in which case Buyer
shall be bound to acquire the parcels.
In the event Seller is unable or does not wish to discharge said
liens and encumbrances for whatever valid reasons, then Seller
shall have the right to terminate the Option, the Agreement of
Sale and the Contract of Sale, as applicable, and Seller shall
promptly repay Buyer the Option Money and the Deposit, if any, as
applicable, in which event the Option, the Agreement of Sale and
the Contract of Sale, as applicable, shall be terminated and
Buyer shall not have any further rights, claims, causes of action
<PAGE>12
or obligations under this Option, the Agreement of Sale or the
Contract of Sale, as applicable.
In the event that Seller has been unable to obtain within the
term of the Option period any approval or endorsement required
from government agencies which seller is obligated to obtain
pursuant to the terms of this Option, and having Seller exercised
this option pursuant to Paragraph 3 hereof, the Option Period
shall be automatically extended for a period no longer than
thirty (30) business days from the date any such approval or
endorsements are finally obtained but in no event shall the
Option Period be extended beyond April 30, 1995.
In the event that Seller is unable to obtain any approval or
endorsement required on or before April 30, 1995, Seller shall
return the Option Money to Buyer and the Option and the Agreement
of Sale shall be terminated and Buyer shall not have any further
rights, claims, causes of action or obligations under this Option
or the Agreement of Sale; it being understood that under no
circumstances Seller shall be bound to reimburse Buyer for any
expenses, of any nature whatsoever, that could have been incurred
by Buyer for any reason whatsoever.
As to the Second Phase Parcels, if seller is unable to obtain
within the terms of the Contract of Sale, (i) the permit required
to segregate the second phase parcels from the Main Farm
(hereinafter referred to as the Second Phase Segregation Permit;
(ii) an agreement with the University of Puerto Rico (hereinafter
referred to as the "University") whereby the University agrees to
dedicate to the Municipality of Carolina a parcel of land of
approximately 1.36 cuerdas within their Carolina Campus for the
construction of a section of Avenida Sur, which will provide the
Second Phase Parcel with all the utilities and direct access to
Avenida Sur along the entire length of its frontage to Avenida
Sur; or (iii) any other approval or endorsement from government
agencies which Seller is obligated to obtain pursuant to the
terms of this Option (all of the above conditions are hereinafter
referred to collectively as the "Conditions Precedent"), the term
of the Contract of Sale shall not be extended.
In the event that Seller is unable to satisfy the conditions
Precedent, Seller shall return the Deposit to Buyer and the
Contract of Sale shall be terminated and Buyer shall have no
further rights, claims, causes of action or obligations under
this Option or the Contract of Sale; it being understood that
under no circumstances Seller shall be bound to reimburse Buyer
for any expenses, of any nature whatsoever, that could have been
incurred by Buyer for any reason whatsoever.
Notwithstanding the above, Buyer shall be entitled to purchase
the Second Phase Parcels for the Second Phase Purchase Price, at
a price determined pursuant to an appraisal report prepared by R.
McCloskey & Associates, MAI, which takes into account any
difference in the area of the Second Phase Parcels resulting from
the refusal by the University to dedicate a parcel of land within
their Carolina Campus for the construction of Avenida Sur, within
sixty (60) days from the date in which the University advises
Seller of its refusal to dedicate such parcel of land for the
<PAGE>13
construction of a section of Avenida Sur but in no event later
than March 31, 1996.
g. Default by Buyer. Thirty (30) days after notice thereof has been
given to Buyer, the Seller, at its sole option, may cancel all of
its obligations under the Option, the Agreement of Sale or the
Contract of Sale, as applicable, without liability in the event
of any of the following events:
1) With respect to the Buyer or any assignee of the Option duly
approved by Seller (hereinafter referred to as the "Assignee"),
(i) the filing by or against it or any case or other proceedings
for any relief pursuant to the bankruptcy or insolvency laws of
the United states, of any State, of the United States Virgin
Islands, or of the Commonwealth of Puerto Rico; (ii) the filing
of an answer admitting insolvency or inability to pay debts as
they became due; (iii) a material adverse change in the financial
condition of Buyer or any of the assumptions and representations
under which the Option, the First Phase Note or the Contract of
Sale were entered into;
2) The attachment, seizure, levy upon, or taking possession by
any receiver, custodian or assignee for the benefit of creditors
of a substantial part of any property of the Buyer or the
Assignee.
3) If Buyer or the Assignee shall default in the performance of
any of the obligations and agreements on its part to be performed
under the Option or the Agreement of Sale or the First Phase
Note.
In the event that Seller decides to cancel its obligations under
the Option or the Agreement of Sale or the Contract of Sale, as
applicable, upon the happening of any of the events of default
described above, then the Option Money and the Deposit, if any,
shall be retained by Seller as additional consideration and
liquidated damages for Such breach, whereupon Buyer, Seller and
the Assignee, if any, shall be released and relieved from all
liability towards each other and the Option, the Agreement of
Sale and the Contract of Sale, as applicable, shall become null
and void; it being understood that the right to retain the Option
Money and the Deposit, if any, as compensation and liquidated
damages shall be the sole remedy available to Seller in the event
of such default except that Seller shall retain its right to seek
legal and monetary remedies from Buyer and the Assignee in an
amount in excess of the OptIon Money and the Deposit in the event
an action or lack of action by Buyer or the Assignee results in
damages to Seller; it being understood that failure by Buyer or
the Assignee to exercise the Option as provided in Paragraph 3
hereof shall not be deemed a lack of action by Buyer or the
Assignee.
h. Cross Default Provisions. A default by Buyer under the
provisions of the First Phase Note prior to its purchase of the
Second Phase Parcels shall constitute a default under the
Contract of Sale whereby Seller shall be entitled to terminate
the Contract of Sale in which case Seller shall retain the
Deposit as additional consideration and liquidated damages for
<PAGE>14
such breach whereupon Seller, Buyer and the assignee, if any,
shall be released and relieved from any liabilities towards each
other.
i. Survival of Agreement. Notwithstanding any presumption to the
contrary, all agreements contained in this Option and in the
Contract of Sale which by their nature impliedly or expressly
involve performance at any particular time after closing shall
survive the closing.
j. Seller not Bound. The Seller is not liable in any manner by any
oral or written statements, representations, or other information
pertaining to the parcels by any broker, agent, employee,
servant, account, or any other person, whether or not associated
with or employed by Seller, unless the same are specifically set
forth herein.
7. Right of Access. During the term of this Option or the Contract
of Sale, as applicable, Buyer and his authorized representatives shall be
entitled to enter the Parcels for the purpose of inspecting the same, making
appraisals and conducting engineering investigations. Buyer agrees to hold
Seller safe and harmless from any claim or liability arising out of any injury
to Buyer, or to any of his officers, agents or employees while in the Parcels,
and shall indemnify and hold Seller harmless from any and all damages, losses,
expenses, claims suits, judgments and liabilities (including claims and suits
by and judgment and liabilities to Buyer's employees) resulting in any way from
the acts to Buyer, his agents, or employees as herein provided. During all
times that Buyer enters upon and/or conducts any surveys, studies, tests, etc.
on the Parcels, Buyer shall have and maintain, at his cost, public liability
and property damage insurance in form and substance acceptable to Seller with a
minimum, single, combined liability limit of $500,000.00 insuring Buyer and
Buyer's authorized representatives, agents, employees, etc., against all
liability arising out of or in connection with Buyer's use or occupancy of the
Parcels. The insurance required herein shall (i) be issued by an insurance
company authorized to do business in Puerto Rico with a financing rating of at
least plus 3 status as reported in the most recent edition of Best's Report;
(ii) be issued as a primary policy; and (iii) contain endorsements naming
Seller as additional insured and requiring thirty days written notice from the
insurance company to Seller and Buyer before cancellation or changing coverage,
scope or amounts. Each policy or a certificate of insurance, together with
evidence of payment of premiums, shall be delivered to Seller prior to entry
upon the Parcels.
Likewise, Seller and its authorized representatives shall be entitled
to enter the Parcels after their acquisition by Buyer or its Assignee for the
purpose of conducting engineering investigations and completing the
improvements to the Parcels, Parque Escorial and Avenida Sur that Seller is
committed to do pursuant to the terms and conditions of this Option and the
Contract of Sale. Seller agrees to hold Buyer safe and harmless from any claim
or liability arising out of any injury to Seller, or to any of his officers,
agents or employees while in the Parcels, and shall indemnify and hold Buyer
harmless from any and all damages, losses, expenses, claims suits, judgments
and liabilities (including claims and suits by and judgment and liabilities to
Seller's employees) resulting in any way from the acts to Seller, his agents,
or employees as herein provided. During all times that Seller enters upon
and/or conducts any surveys, studies, tests, etc. on the Property, Seller shall
have and maintain, at his cost, public liability and property damage insurance
in form and substance acceptable to Buyer with a minimum, single, combined
<PAGE>15
liability limit of $500,O00.00 insuring Seller and Seller's authorized
representatives, agents, employees, etc., against all liability arising out of
or in connection with Seller's use or occupancy of the Parcels. The insurance
required herein shall (i) be issued by an insurance company authorized to do
business in Puerto Rico with a financing rating of at least plus 3 status as
reported in the most recent edition of Best's Report; (ii) be issued as a
primary policy; and (iii) contain endorsements naming Buyer as additional
insured and requiring thirty days written notice from the insurance company to
Buyer and Seller before cancellation or changing coverage, scope or amounts.
Each policy or a certificate of insurance, together with evidence of payment of
premiums, shall be delivered to Buyer prior to entry upon the Parcels.
8. Title to be of Essence. It is distinctly understood and agreed
that time wherever specified in this Option and in the Contract of Sale is made
and declared to be of the essence hereof. Buyer acknowledges that the terms and
conditions contained herein including but not limited to, the Purchase Price,
shall only be available if the settlement under this Option and the Contract of
Sale, as applicable, is effected within the time periods available to Buyer as
specified therein.
9. Notices. Any notice required or permitted to be given under this
Option and the Contract of Sale must be in writing and sent by certified or
registered mail, return receipt requested, to the respective addresses of the
parties stated at the outset of this Option and the Contract of Sale, or to
such other single address as either party may designate from time to time with
the terms of this Paragraph. In the case of Seller, all notices shall be
addressed to Mr. Francisco Arrivi, Senior Vice President, 650 Munoz Rivera
Avenue, Doral Building, Suite 700, Hato Rey, P. R. 00918 with a copy to Mr.
Donald C. Blakeman, Executive Vice President at the same address. In case of
Buyer, all notices shall be addressed to Mr. Jorge Colon Nevares, President,
Compri Caribe Hospitality Corp., P.O. Box 11662, Caparra Heights Station, San
Juan, P.R. 00922 with a copy to Mr. Herman Cestero, Esq., P.O. Box 364251, San
Juan, P.R. 00936-4251.
10. Construction. This Option shall be construed in accordance with
and governed by the laws of the Commonwealth of Puerto Rico and Seller and
Buyer and their assignees hereby submit themselves to the exclusive
jurisdiction of the San Juan Section of the Superior Court of Puerto Rico for
any and all controversies that may arise thereunder.
11. Miscellaneous. Each of the parties acknowledges that it has not
relied on any agreements or commitments by the other party or any of their
affiliates with respect to the subject matter hereof except the agreements and
commitments specifically set forth herein. This Option supersedes and
nullifies all prior agreements and sets forth the entire understanding of the
parties with respect to the Parcels. The provisions of this Option may not be
waived, extended or modified by subsequent conduct, correspondence or
otherwise. Each of the parties agrees that it or he shall not obtain, seek to
obtain, or rely on any waiver extension, modification, or approval unless the
waiver, extension, modification or approval is evidenced in writing, and (b) is
specifically approved in writing by the Seller or by Buyer. No delay or
failure of the Seller in exercising any right or privilege hereunder shall
affect such right or privilege; nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such right or
privilege preclude any further exercise thereof or of any other right or
privilege. Any waiver, extension, modification or approval related to this
Option shall be effective only to the extent and subject to the terms and
<PAGE>16
conditions in writing evidencing the same. Any waiver, extension, modification
or approval may be made subject to additional terms and conditions from time to
time after it is given or agreed to by the party giving or agreeing to it,
whether or not such waiver, extension, modification or approval has been relied
on in the meantime by the other party. Approval by Seller on any matter for
which approval is required shall not be unreasonably withheld. Whenever any
reference is made in this Option to an event of default, it shall be understood
that no such event of default has occurred until thirty (30) days have lapsed
since notice thereof has been given to Buyer as provided herein.
IN WITNESS WHEREOF, the parties have executed this agreement by their
respective duly authorized officers on the day and year first above written.
SELLER: BUYER:
LAND DEVELOPMENT ASSOCIATES S.E., COMPRI CARIBE HOSPITALITY
a Puerto Rico special partnership CORP.
By: INTERSTATE GENERAL PROPERTIES By: /s/ Jorge Colon Nevares
LIMITED PARTNERSHIP, S.E., a -------------------------
Maryland limited partnership, Jorge Colon Nevares
its managing partner Title: President
By: INTERSTATE GENERAL COMPANY
L.P., a Delaware limited
partnership, a general partner
By: INTERSTATE GENERAL MANAGEMENT
CORPORATION, a Delaware corporation,
its managing general partner
By: /s/ Francisco Arrivi Cros
------------------------------------
Francisco Arrivi Cros
Title: Senior Vice President
AFFIDAVIT NO. 3566
Acknowledged and subscribed to before me by Francisco Arrivi Cros, of
legal age, married, executive and resident of San Juan, Puerto Rico, in his
capacity as Senior Vice President of Interstate General Management Corporation,
Managing General Partner of Interstate General Company, L.P., Managing Partner
of Interstate General Properties Limited Partnership, S.E., Managing Partner of
Land Development Associates; and by Jorge Colon Nevares, of legal age, married,
executive and resident of Guaynabo, Puerto Rico, in his capacity as President
of Compri Caribe Hospitality Corp., both to me personally known in San Juan,
Puerto Rico, this thirty-first (31st) day of March, 1995.
/s/ Jose A. Ledruma Vivaldi
---------------------------------
NOTARY PUBLIC
<PAGE>1
Exhibit 10(l)
November 13, 1995
Compri Caribe Hospitality Corp.
P.O. Box 11662
Caparra Heights Station
San Juan, Puerto Rico 00922
Gentlemen:
Reference is made to the Option Agreement dated March 31, 1995 (the
"Agreement") by and between Land Development Associates S.E. ("Seller") and
Compri Caribe Hospitality Corp. ("Buyer") related to land in the Seller's
Parque Escorial project, including parcels of land containing 17,343.03 square
meters referred to as the Second Phase Parcels.
Buyer and Seller agree and acknowledge that the conditions in the Agreement for
closing of the sale of the Second Phase Parcels were met on October 6, 1995 and
consequently the scheduled closing date ("Time of Settlement") for these
parcels was to be on or before November 6, 1995. Seller and buyer hereby agree
to extend the Time of Settlement to December 21, 1995 upon consideration of
$8,700 to be paid by Buyer to Seller ("Extension Fee") upon execution by Buyer
of this letter agreement in the space provided below. The Extension Fee is
paid as additional consideration to Seller over and above the Second Phase
Purchase Price set forth in the Agreement.
The other terms and conditions of the Agreement remain unchanged.
Very truly yours,
LAND DEVELOPMENT ASSOCIATES S.E.
By: Interstate General Properties Limited
Partnership, managing partner
By: Interstate General Company L.P.,
general partner
By: Interstate General Management
Corporation, managing general partner
By: /s/ Donald G. Blakeman
--------------------------------
Donald G. Blakeman
Executive Vice President
ACCEPTED: COMPRI CARIBE HOSPITALITY CORP.
By: /s/ Jorge Colon Nevares
--------------------------
Jorge Colon Nevares
President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 9,074<F1>
<SECURITIES> 0
<RECEIVABLES> 6,605
<ALLOWANCES> 875
<INVENTORY> 70,282
<CURRENT-ASSETS> 0
<PP&E> 3,691
<DEPRECIATION> 2,173
<TOTAL-ASSETS> 127,029
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 39,769
<TOTAL-LIABILITY-AND-EQUITY> 127,029
<SALES> 19,976
<TOTAL-REVENUES> 28,961
<CGS> 14,227
<TOTAL-COSTS> 18,593
<OTHER-EXPENSES> 8,824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,742
<INCOME-PRETAX> (198)
<INCOME-TAX> 813
<INCOME-CONTINUING> (1,107)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,107)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
<FN>
<F1>Balance includes $6,953 of restricted cash.
</FN>
</TABLE>
