<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- - OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED October 25, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- - OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER 0-19830
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Eagle Hardware & Garden, Inc.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Washington 91-1465348
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
981 Powell Ave SW Renton, WA 98055
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(206) 227-5740
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
THE REGISTRANT HAD 28,866,362 SHARES OF COMMON STOCK, WITHOUT PAR VALUE,
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OUTSTANDING AT October 25, 1996.
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EAGLE HARDWARE & GARDEN, INC.
INDEX TO FORM 10-Q
PAGE
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . 3
ITEM 1 - FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets. . . . . . . . . . . . . . . . 10
Consolidated Statements of Operations. . . . . . . . . . . 11
Consolidated Statements of Cash Flows. . . . . . . . . . . 12
Notes to Unaudited Consolidated Financial Statements . . . 13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . 3
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . 8
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . 8
Exhibit 11.1 - Computation of Net Income Per Share . . . . 15
2
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PART I - FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS -
Eagle Hardware & Garden, Inc.'s ("the Company") unaudited consolidated
balance sheet as of October 25, 1996, audited consolidated balance sheet as of
January 26, 1996, unaudited statements of operations for the 13- and 39-week
periods ended October 25, 1996, and October 27, 1995, and unaudited consolidated
statements of cash flows for the 39-week periods then ended are attached. Notes
to the unaudited consolidated financial statements are also attached.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -
It is suggested that this discussion be read in conjunction with the
"Management's Discussion and Analysis" included in the Company's 1995 Annual
Report to Shareholders, which has previously been filed with the Securities and
Exchange Commission.
The results of operations for the 13- and 39-week periods ended October 25,
1996, are not necessarily indicative of the results to be expected for the full
fiscal year. The Company expects that its gross margin percentage will
generally be lower in the second and third quarters of each fiscal year when
sales of lower margin products are greater. The Company also expects that, in
general, individual stores will experience lower net sales and operating income
and that cash flow from operations will be lower in the fourth quarter of the
fiscal year than in any of the other quarters, due primarily to the effect of
winter weather on home improvement projects and the lack of significant sales of
lawn and garden products during this period. In addition, unusual weather
conditions could have a material adverse effect on seasonal sales.
"Store Weeks in Period" represents the aggregate number of full weeks in
which stores were open during the reporting period. There were 321 store weeks
of operations during the third quarter of fiscal 1996, an increase of 6%
compared to the 302 store weeks during the comparable prior year period. For
the 39 weeks ended October 25, 1996, total store weeks increased 15% to 945 from
823 store weeks in 1995.
RESULTS OF OPERATIONS -
(a) COMPARISON OF THE 13 WEEKS ENDED OCTOBER 25, 1996, AND OCTOBER 27,
1995.
NET INCOME. Net income for the third quarter of fiscal 1996 increased 207%
to $7,591,000, or $0.28 per share, fully diluted, from $2,473,000, or $0.11 per
share, during the third quarter of fiscal 1995. The Company's 6.25% convertible
subordinated debentures were dilutive during the third quarter of fiscal 1996
(see Exhibit 11.1). Had the debentures not been dilutive, net income per share
for the quarter ended October 25, 1996 would have been $0.29 (primary net income
per share). The 207% increase in net income was due to the factors discussed
below.
Weighted average common and common equivalent shares outstanding for use in
the primary earnings per share calculation increased 13% from 23,129,000 as of
October 27, 1995, to 26,055,000 as of October 25, 1996. The primary reason for
this increase was the completion of a public stock offering in September 1996
which resulted in the issuance of 5,750,000 shares of Common Stock.
3
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NET SALES. Net sales for the third quarter of fiscal 1996 were
$198,731,000, compared to net sales of $159,764,000 for the comparable prior
year period. This 24% increase in net sales over the prior year period was
due to a 19% increase in same store sales for the quarter (for stores open
one year or more) and a 6% increase in store weeks of operations during the
period. Same store sales increased primarily as a result of a 17% increase
in the number of transactions. The increase of 19% in same store sales
during the quarter compares to a decrease of 11% for the third quarter of
fiscal 1995. Management attributes the increase in same store sales to
several factors, including favorable economic conditions in most of the
Company's markets and the declining performance of a primary competitor,
Ernst Home Center, Inc. (Ernst). Ernst filed for Chapter 11 bankruptcy
protection in July 1996 and subsequently obtained approval from the court in
November 1996 to conduct a Chapter 7 orderly liquidation of assets.
Liquidation of the remaining Ernst stores began on November 23, 1996.
GROSS MARGIN. The Company's gross margin was $54,660,000 for the third
quarter of fiscal 1996. This represents an increase of $11,501,000, or 27%,
over the third quarter of fiscal 1995. As a percentage of net sales, gross
margin was 27.5% in the third quarter of fiscal 1996 versus 27.0% in the
comparable prior year period. Management attributes the improvement in gross
margin as a percentage of net sales to a combination of factors, including
volume-related buying efficiencies, a reduction in realized inventory shrinkage
(attributed primarily to continuing loss prevention programs) and less
promotional pricing by competitors.
OPERATING EXPENSES. Operating expenses as a percentage of net sales
decreased from 22.6% in the third quarter of fiscal 1995 to 22.3% in the third
quarter of 1996, primarily as a result of additional leverage attributable to
the 19% increase in same store sales. The dollar amount of operating expenses
increased by $8,273,000, or 23%, from the comparable prior year period,
primarily as a result of the 19% increase in same store sales and the 6%
increase in store weeks of operations. Third quarter operating expense leverage
would have been greater had it not been for the Company's decision to increase
staffing on the sales floor to support increased levels of customer traffic and
to further its ongoing commitment to providing a high level of customer service.
PREOPENING EXPENSES. Preopening expenses were $504,000, or 0.3% of net
sales, in the third quarter of fiscal 1996, during which the Company opened one
store. In the comparable prior year quarter, when the Company opened two
stores, preopening expenses were $1,266,000, or 0.8% of net sales.
OPERATING INCOME. For the reasons explained above, operating income
increased 68%, from $5,832,000 in the third quarter of fiscal 1995 to $9,822,000
in the third quarter of fiscal 1996. Expressed as a percentage of net sales,
operating income improved from 3.7% in the third quarter of fiscal 1995 to 4.9%
in the third quarter of 1996.
INTEREST EXPENSE. Net interest expense during the third quarter of fiscal
1996 was $1,493,000, compared to $2,044,000 during the comparable prior year
period. The decrease resulted primarily from the completion of the Company's
$125,000,000 Common Stock offering in September 1996. A portion of the proceeds
from this offering was used to pay off credit line borrowings and the remainder
was invested on a short-term basis. Interest on the Company's convertible
subordinated debentures, which represent the primary source of interest expense,
was comparable between the current and prior year periods. During both
quarters, interest incurred was partially offset by interest capitalized on
construction projects.
OTHER INCOME. Other income in the third quarter of fiscal 1996 consisted
primarily of a $2,108,000 capital gain on the sale of surplus land located in
Lynnwood, Washington.
4
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INCOME TAXES. The Company recorded a combined federal and state tax
provision of $2,947,000 for the third quarter of fiscal 1996, compared to a
provision of $1,342,000 during the comparable prior year period. The effective
tax rate for the third quarter of fiscal 1996 was 28.0% versus 35.2% in the
third quarter of fiscal 1995. The effective tax rate in the third quarter of
fiscal 1996 was lower than the combined federal and state statutory rates that
the Company expects to pay under normal circumstances for two reasons. First,
$2,142,000 in capital gains recorded in the quarter was not taxable due to the
utilization of a portion of the Company's capital loss carryforward incurred in
the fourth quarter of fiscal 1994. Second, a portion of the Company's net
proceeds from the stock offering was invested in tax-exempt securities,
resulting in a lower expected effective tax rate for the year. The third
quarter effective rate for 1995 was lower than the combined federal and state
statutory tax rates due primarily to adjustments between the prior year tax
provision and the tax return which was filed during that quarter.
(b) COMPARISON OF THE 39 WEEKS ENDED OCTOBER 25, 1996, AND OCTOBER 27,
1995.
NET INCOME. Net income for the first 39 weeks of fiscal 1996 increased 92%
to $18,620,000, or $0.74 per share, fully diluted, from $9,706,000, or $0.42 per
share, during the first 39 weeks of fiscal 1995. The Company's 6.25%
convertible subordinated debentures were dilutive during the first 39 weeks of
fiscal 1996 (see Exhibit 11.1). Had the debentures not been dilutive, net
income per share for the 39 weeks ended October 25, 1996 would have been $0.77
(primary net income per share). The 92% increase in net income was due to the
factors discussed below.
Weighted average common and common equivalent shares outstanding for use in
the primary earnings per share calculation increased 5% from 23,094,000 as of
October 27, 1995, to 24,217,000 as of October 25, 1996. The primary reason for
this increase was the completion of a public stock offering in September 1996
which resulted in the issuance of 5,750,000 shares of Common Stock.
NET SALES. Net sales for the first 39 weeks of fiscal 1996 were
$568,915,000, compared to net sales of $457,745,000 for the comparable prior
year period. This 24% increase in net sales over the prior year 39-week
period was due primarily to a 15% increase in store weeks of operations and
an 11% increase in same store sales for the period. Same store sales
increased primarily as a result of a 9% increase in the number of
transactions. The increase of 11% in same store sales during the 39-week
period compares to a decrease of 9% for the first 39 weeks of fiscal 1995.
Management attributes the increase in same store sales to several factors,
including strong existing home sales, favorable economic conditions in most
of the Company's markets and the declining performance of a primary
competitor, Ernst Home Center, Inc. Ernst filed for Chapter 11 bankruptcy
protection in July 1996 and subsequently obtained approval from the court in
November 1996 to conduct a Chapter 7 orderly liquidation of assets.
Liquidation of the remaining Ernst stores began on November 23, 1996.
GROSS MARGIN. The Company's gross margin was $158,255,000 for the first 39
weeks of fiscal 1996. This represents an increase of $35,030,000, or 28%, over
the first 39 weeks of fiscal 1995. As a percentage of net sales, gross margin
was 27.8% in the first 39 weeks of fiscal 1996 versus 26.9% in the comparable
prior year period. Management attributes the improvement in gross margin as a
percentage of net sales to a combination of factors, including volume-related
buying efficiencies, a reduction in realized inventory shrinkage (attributed
primarily to continuing loss prevention programs) and less promotional pricing
by competitors. In addition, the prior year gross margin was lower due to the
opening of five new stores during the first 39 weeks of fiscal 1995 (versus one
store opening thus far in fiscal 1996) and related grand opening promotional
pricing.
5
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OPERATING EXPENSES. Operating expenses as a percentage of net sales
decreased from 22.5% in the first 39 weeks of fiscal 1995 to 22.2% in the first
39 weeks of fiscal 1996, primarily as a result of additional leverage
attributable to the 11% increase in same store sales. The dollar amount of
operating expenses increased by $23,161,000, or 23%, from the comparable prior
year period, primarily as a result of the 15% increase in store weeks of
operations and the 11% increase in same store sales. Operating expense leverage
in the first 39 weeks of fiscal 1996 would have been greater had it not been for
the Company's decision to increase staffing on the sales floor to support
increased levels of customer traffic and to further its ongoing commitment to
providing a high level of customer service.
PREOPENING EXPENSES. Preopening expenses were $504,000, or 0.1% of net
sales, in the first 39 weeks of fiscal 1996, during which the Company opened one
store. In the comparable prior year period, when the Company opened five
stores, preopening expenses were $2,934,000, or 0.6% of net sales.
OPERATING INCOME. For the reasons explained above, operating income
increased 82%, from $17,353,000 in the first 39 weeks of fiscal 1995 to
$31,652,000 in the first 39 weeks of fiscal 1996. Expressed as a percentage of
net sales, operating income improved from 3.8% in the first 39 weeks of fiscal
1995 to 5.6% in the comparable current year period.
INTEREST EXPENSE. Net interest expense during the first 39 weeks of fiscal
1996 was $6,108,000, compared to $4,925,000 during the comparable prior year
period. This increase was due primarily to interest on additional long-term
borrowings made during the fourth quarter of fiscal 1995 and the second quarter
of fiscal 1996 and higher average borrowings on the Company's bank line of
credit compared to the prior year. Interest on the Company's convertible
subordinated debentures, which represent the primary source of interest expense,
was comparable between the current and prior year. During both periods,
interest incurred was partially offset by interest capitalized on construction
projects.
OTHER INCOME. Other income for the first 39 weeks of fiscal 1996 consisted
mostly of a $2,108,000 capital gain on the sale of surplus land located in
Lynnwood, Washington. Other income for the first 39 weeks of fiscal 1995
consisted primarily of $1,125,000 related to the settlement of securities
litigation and $818,000 in capital gains recognized on the sale of surplus
property in Utah.
INCOME TAXES. The Company recorded a combined federal and state tax
provision of $9,278,000 for the first 39 weeks of fiscal 1996, compared to a
provision of $4,776,000 during the comparable prior year period. The effective
tax rate for the first 39 weeks of fiscal 1996 was 33.3% versus 33.0% in the
first 39 weeks of fiscal 1995. The 1996 effective tax rate for the first 39
weeks was lower than the combined federal and state statutory tax rates that the
Company expects to pay under normal circumstances for two reasons. First,
$2,189,000 in capital gains recorded during the period was not taxable due to
the utilization of a portion of the Company's capital loss carryforward incurred
in the fourth quarter of fiscal 1994. Second, a portion of the Company's net
proceeds from the stock offering was invested in tax-exempt securities, which
resulted in a lower expected effective tax rate for the year.
The 1995 effective tax rate for the first 39 weeks was lower than the
combined federal and state statutory tax rates due primarily to the utilization
of a portion of the Company's capital loss carryforward. The capital loss
carryforward was used to offset capital gains realized on the sale of surplus
land in Utah and the recovery of a previously reserved receivable relating to
the sale of land in Canada.
6
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LIQUIDITY AND CAPITAL RESOURCES -
On September 20, 1996, the Company completed a public offering of 5,750,000
shares of Common Stock. All shares were offered by the Company and net proceeds
totaled approximately $125 million. Of the net proceeds, $42.2 million was used
to pay off credit line borrowings and the balance will be used to finance the
Company's ongoing store expansion plans and for general corporate purposes.
Pending such uses, the net proceeds have been invested in highly liquid
investment grade securities.
The Company opened a store in Wenatchee, Washington on August 22. This
store is the first Eagle store built in a new format designed for smaller
population centers. In addition to the Wenatchee store, the Company's fiscal
1996 expansion plans include stores under construction in Pueblo and
Louisville, Colorado, both of which are scheduled to open during the fourth
quarter of fiscal 1996. The Company also has stores under construction in
North Seattle and Tacoma, Washington, and Kahului (Maui), Hawaii. In
addition to these stores, which are currently scheduled to open in early
fiscal 1997, the Company has signed purchase agreements for two sites planned
for opening in fiscal 1997 in the Denver, Colorado market. The Company
continues to review additional sites for future expansion.
The Company's balance sheet at October 25, 1996, reflects a $148.0 million
(40%) increase in total assets since the fiscal year began on January 27. The
principal components of this change are an increase of $70.3 million in cash and
cash equivalents and short-term investments, a $23.1 million increase in
inventories and an increase of $55.2 million in net property and equipment. The
increase in cash and cash equivalents and short-term investments was due
primarily to the recently completed Common Stock offering. The increase in
inventories was due primarily to the higher sales volumes as well as the opening
of an additional store during the first 39 weeks of fiscal 1996. The increase
in net property and equipment was attributable primarily to the Company's
continuing store expansion program. Financing for this expansion was provided
primarily by cash flow from operations and proceeds from the offering.
Additional financing was provided by a $9.0 million mortgage executed during the
second quarter and a sale of surplus land that provided another $7.4 million.
The Company's capital requirements are influenced by its expansion plans
and by factors such as real estate costs in the markets which the Company
enters, whether that real estate will be purchased or leased and the extent
of Company-financed remodeling required when existing buildings are acquired
or leased. The Company presently expects to finance its expansion plans for
the remainder of fiscal 1996 and for fiscal 1997 through a combination of
cash flow from operations, proceeds from the September 1996 Common Stock
offering and mortgages and/or sale-leasebacks of owned properties.
The Company reports on a 52/53-week year. Fiscal 1996 is a 53-week year
and the fourth quarter will consist of 14 weeks. The fiscal year ends on the
last Friday in January.
FORWARD-LOOKING STATEMENTS -
Some of the information in this report constitutes forward-looking
statements. These statements are subject to a number of risks and uncertainties
that might cause actual results to differ materially from stated expectations.
These risks include, among others, the highly competitive environment in the
retail home improvement industry, the effect of general economic conditions and
weather in the Company's markets and the Company's ability to achieve its
expansion plans and successfully manage its growth. These risks are described
in detail in the Company's Annual Report on Form 10-K and other SEC filings.
7
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PART II - OTHER INFORMATION:
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits filed with this Form 10-Q are as follows:
10.99B Supplement No. 103 and Supplement No. 104 under Retail Technology
Exchange Agreement by and between Fujitsu-ICL Systems, Inc. and
Eagle Hardware & Garden, Inc.
10.103A First Amendment to Real Estate Purchase and Sale Agreement dated
August 1996, by and between Terrace Point Partnership, Inc. and
Eagle Hardware & Garden, Inc.
10.112 Agreement for Purchase and Sale of Real Property dated
September 5, 1996, by Northglenn Partners, L.P. and Eagle
Hardware & Garden, Inc.
10.113 Real Estate Purchase and Sale Agreement dated October 6, 1996, by
and between Eagle Hardware & Garden, Inc. and The Good Guys--
California, Inc.
10.114 Stipulation and Order of Appropriation and Judgment by the
Superior Court of Washington for Snohomish County dated
September 24, 1996.
11.1 Statement Regarding Computation of Per Share Earnings.
(b) No reports on Form 8-K were filed during the third quarter of fiscal 1996.
8
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SIGNATURES:
Pursuant to the requirements of the Securities Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
EAGLE HARDWARE & GARDEN, INC.
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Registrant
December 4, 1996 /s/ David J. Heerensperger
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Date David J. Heerensperger
Chairman and Chief Executive Officer
(Principal Executive Officer)
December 4, 1996 /s/ Richard T. Takata
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Date Richard T. Takata
President and Chief Operating Officer
December 4, 1996 /s/ Ronald P. Maccarone
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Date Ronald P. Maccarone
Executive Vice-President-Finance and Chief
Financial Officer (Principal Financial
Officer)
December 4, 1996 /s/ Steven M. Stenberg
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Date Steven M. Stenberg
Controller and Treasurer
9
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EAGLE HARDWARE & GARDEN, INC.
CONSOLIDATED BALANCE SHEETS
[000]
(UNAUDITED)
OCTOBER 25, JANUARY 26,
1996 1996
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $44,900 $6,591
Short-term investments 32,035 0
Trade and other accounts receivable, net 5,230 3,594
Merchandise inventories 166,173 143,094
Prepaid expenses 3,088 2,076
Deferred income taxes 3,473 1,571
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Total current assets 254,899 156,926
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PROPERTY AND EQUIPMENT, at cost:
Land and buildings 139,851 105,725
Furniture, fixtures and equipment 72,882 64,486
Leasehold improvements 45,365 45,035
Construction in progress 24,605 4,743
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282,703 219,989
Less accumulated depreciation and amortization 26,378 18,836
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Net property and equipment 256,325 201,153
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PREOPENING COSTS 547 7
OTHER ASSETS 2,766 8,481
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Total assets $514,537 $366,567
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LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks drawn in excess of bank balances $9,538 $8,859
Accounts payable 52,999 32,226
Note payable to bank 0 34,500
Sales taxes payable 8,526 3,945
Accrued payroll and related expenses 13,103 8,648
Other current liabilities 7,138 7,159
Current portion of long-term debt 2,030 6,198
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Total current liabilities 93,334 101,535
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DEFERRED INCOME TAXES 7,185 5,042
OTHER LONG-TERM LIABILITIES 3,096 2,847
LONG-TERM DEBT 108,967 101,542
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Total liabilities 212,582 210,966
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, without par value; 50,000 shares
authorized; 28,866 and 22,900 shares issued
and outstanding 263,455 135,721
Retained earnings 38,500 19,880
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Total shareholders' equity 301,955 155,601
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Total liabilities & shareholders' equity $514,537 $366,567
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See accompanying notes to consolidated financial statements.
10
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EAGLE HARDWARE & GARDEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
[000, EXCEPT STORE WEEK AND PER SHARE DATA]
[UNAUDITED]
13 WEEKS ENDED 39 WEEKS ENDED
----------------------- -----------------------
OCTOBER 25, OCTOBER 27, OCTOBER 25, OCTOBER 27,
1996 1995 1996 1995
----------- ----------- ----------- -----------
STORE WEEKS IN PERIOD [321] [302] [945] [823]
NET SALES $198,731 $159,764 $568,915 $457,745
COST OF SALES 144,071 116,605 410,660 334,520
----------- ----------- ----------- -----------
Gross margin 54,660 43,159 158,255 123,225
OPERATING EXPENSES 44,334 36,061 126,099 102,938
PREOPENING EXPENSES 504 1,266 504 2,934
----------- ----------- ----------- -----------
Operating income 9,822 5,832 31,652 17,353
OTHER INCOME (EXPENSE):
Net interest (expense) (1,493) (2,044) (6,108) (4,925)
Other income 2,209 27 2,354 2,054
----------- ----------- ----------- -----------
Income before tax 10,538 3,815 27,898 14,482
INCOME TAX PROVISION 2,947 1,342 9,278 4,776
----------- ----------- ----------- -----------
Net income $7,591 $2,473 $18,620 $9,706
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET INCOME PER SHARE (SEE
EXHIBIT 11.1 FOR DETAILED
COMPUTATIONS):
Net income per share,
primary $0.29 $0.11 $0.77 $0.42
Net income per share,
fully diluted $0.28 $0.11 $0.74 $0.42
See accompanying notes to consolidated financial statements.
11
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EAGLE HARDWARE & GARDEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[000]
[UNAUDITED]
39 WEEKS ENDED
------------------------
OCTOBER 25, OCTOBER 27,
1996 1995
----------- -----------
OPERATING ACTIVITIES:
Net income $18,620 $9,706
----------- -----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,382 6,542
Net gain on asset sales (2,189) (736)
Deferred income taxes 241 656
Changes in operating assets and liabilities:
Trade and other accounts receivable (1,636) (410)
Merchandise inventories (23,079) (14,363)
Prepaid expenses (242) (14)
Other assets 693 470
Preopening costs (540) 224
Accounts payable and checks drawn in excess of
bank balances 21,452 5,308
Income taxes payable (1,851) 2,554
Accrued liabilities 10,097 2,819
Other 249 1,419
----------- -----------
11,577 4,469
----------- -----------
Net cash provided by operating activities 30,197 14,175
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures for property and equipment (64,493) (42,350)
Net purchases of short-term investments (32,035) 0
Proceeds on sale of surplus land 7,422 3,718
Other 1,019 0
----------- -----------
Net cash used in investing activities (88,087) (38,632)
----------- -----------
FINANCING ACTIVITIES:
Advances on note payable to bank 292,100 248,800
Payments on note payable to bank (326,600) (220,300)
Net proceeds of stock offering 124,855 0
Net proceeds (payments) on long-term borrowings 3,366 (5,717)
Other 2,478 417
----------- -----------
Net cash provided by financing activities 96,199 23,200
----------- -----------
Increase (decrease) in cash and cash equivalents 38,309 (1,257)
Cash and cash equivalents at beginning of period 6,591 5,440
----------- -----------
Cash and cash equivalents at end of period $44,900 $4,183
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for -
Interest $10,474 $7,844
Income taxes $9,327 $1,271
See accompanying notes to consolidated financial statements.
12
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EAGLE HARDWARE & GARDEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited consolidated financial statements do not
purport to be full presentations, and do not include all information and
disclosures required for fair presentation by generally accepted accounting
principles. However, in the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) considered necessary to present fairly the consolidated
financial position of the Company at October 25, 1996, the consolidated results
of operations for the 13-week and 39-week periods ended October 25, 1996, and
October 27, 1995, and consolidated cash flows for the 39-week periods then
ended. These financial statements should be read in conjunction with the
financial statements included in the Company's Annual Report on Form 10-K for
the fiscal year ended January 26, 1996, filed with the Securities and Exchange
Commission.
2. The results of operations for the 13- and 39-week periods ended
October 25, 1996, are not necessarily indicative of the results to be expected
for the full fiscal year. The Company expects that its gross margin percentage
will generally be lower in the second and third quarters of each fiscal year
when sales of lower margin products are greater. The Company also expects that,
in general, individual stores will experience lower net sales and operating
income and that cash flow from operations will be lower in the fourth quarter of
the fiscal year than in any of the other quarters, due primarily to the effect
of winter weather on home improvement projects and the lack of significant sales
of lawn and garden products during this period. In addition, unusual weather
conditions could have a material adverse effect on seasonal sales.
"Store Weeks in Period" represents the aggregate number of full weeks
in which stores were open during the reporting period.
3. During the quarter, the Company sold a parcel of surplus land located
in Lynnwood, Washington, and recorded a capital gain of $2,108,000. The capital
gain is included in Other Income.
4. The Company recorded an effective tax rate of 28.0% for the quarter,
which is less than the Company's estimated effective tax rate for the year. The
third quarter effective tax rate was lower than the combined federal and state
statutory tax rates due primarily to the utilization of a portion of the
Company's capital loss carryforward incurred in the fourth quarter of fiscal
1994. The capital loss carryforward was used to offset a capital gain realized
on the sale of surplus land in Lynnwood, Washington. The event which resulted
in this capital gain caused a revision to the valuation allowance previously
established against the deferred tax benefit of the capital loss carryforward.
In accordance with Financial Accounting Standard No. 109, the effect of this
event was recognized entirely in the third quarter of fiscal 1996. In addition
to the capital gain, tax-exempt investment income contributed to the decrease in
the Company's effective tax rate.
5. As of December 4, 1996, the Company had completed the purchases of
sites for four future store locations and had signed agreements to purchase
property for two additional sites at a cost of approximately $6,400,000.
Purchase of the latter sites will be finalized upon successful resolution of
various contingencies.
13
<PAGE>
6. On September 20, 1996, the Company completed a public offering of
5,750,000 shares of Common Stock at $22 7/8 per share. Net proceeds to the
Company totaled approximately $125 million.
14
<PAGE>
Supplement No. 103 under Retail Technology Exchange Agreement No. EH-101
(the "Agreement")
1. CAPITALIZED TERMS. Capitalized terms used in this Supplement but not
defined herein shall have the definitions set forth in the Agreement.
2. INCORPORATION OF TERMS. Except to the extent, if any, that the same are
modified by this Supplement all terms and conditions of the Agreement are
in full force and effect, affirmed by Lessor and Lessee, and incorporated
in this Supplement by reference as if they had been set forth herein in
full.
3. COMMENCEMENT DATE: January 1, 1996
4. INITIAL TERM: 72 Months
5. RENT AMOUNT: 1 Payment of $252,179.28
72 Payments of $1,229.73
6. DAILY RENT: $0.00
7. PRODUCT LOCATION: See attached Exhibit 1
8. FIRST DAY OF FIRST RENTAL: January 1, 1996
9. TERM. The term of the Agreement as to all Product designated on this
Supplement shall commence on the Commencement Date, and shall continue for
the number of months specified as the Initial Term. Any such termination
shall be effective only on the last day of the Initial Term or of any
renewal period, as applicable. Notwithstanding anything to the contrary
contained herein or in the Agreement, upon expiration of the Initial Term
set forth above, Lessee shall have the right to continue its use and
possession of all Products identified on Invoice # 195109 in Supplement
No. 101, subject to and in accordance with the terms and conditions of the
separate licensing agreement between Lessor and Lessee and Lessee shall
have no obligation to pay any rental for such Products in respect of any
periods subsequent to expiration of the Initial Term nor any obligation to
return the Products to Lessor except as provided in the licensing
agreement.
10. PRODUCT. The items listed on the attached Exhibit 1 and made a part hereof
constitute the Product which is subject to the terms of this Supplement.
11. CASUALTY AMOUNT: 10 % of the Acquisition Cost for the applicable item(s) of
Product set forth on the attached Exhibit 1.
12. COMMENCEMENT AND ACCEPTANCE. a) The Product listed herein has been (i)
delivered to Lessee in good order and condition, (ii) inspected by Lessee
and found to be satisfactory for Lessee's purposes, and (iii) accepted by
Lessee for renting under the Agreement pursuant to the terms of the
Supplement; b) Lessee is obligated to pay the Rent and all other sums
provided for in the Agreement and the Supplement concerning the Product; d)
no Rent with respect to the Product or any period subsequent to the date
hereof not yet due as provided in the Supplement and Agreement has been
prepaid under the Agreement or Supplement, and all remaining Rent is
payable over the balance of the Initial Term and any renewal period as
therein provided.
13. CHATTEL PAPER: This is Counterpart No. 3 of 3 counterparts. Lessee hereby
agrees and acknowledges that delivery to a Lessor's Assignee of a copy of
the Agreement plus executed original of the Schedule designated
"Counterpart No. 1" shall be sufficient to convey to such Lessor's Assignee
the rights of Lessor contained in the Supplement to the extent assigned
thereto. Only Counterpart No. 1 shall be treated as the original hereof
for the purpose of evidencing or perfecting any transfer hereof or security
interest herein, each subsequently numbered counterpart being a duplicate
thereof.
14. FAIR MARKET VALUE PURCHASE OPTION: Provided that no default has occurred
and is continuing, Lessee shall have the option (the "Purchase Option")
upon not less than sixty (60) days prior written notice delivered to Lessor
and to the then Lessor's Assignee, if any, with respect to the Supplement,
to purchase all of the Product described in the Supplement, with the
exception of the Product identified in Invoice # 195109, upon the
expiration of the Initial Term. The exercise price of the Purchase Option
shall be the Fair Market Value of the Equipment on the expiration of the
Initial Term. "Fair Market Value" shall mean and refer to the value, as
reasonably determined by Lessor, which would be obtained in an arms length
transaction between an informed and willing buyer-user under no compulsion
to buy and an informed and willing seller under no compulsion to sell.
<PAGE>
15. NOTICES: All notices under this Agreement shall be addressed to Lessor at
200 Park Avenue, 25th Floor, New York, NY 10166 and to Lessee at 981 Powell
Ave., SW, Renton, WA 98055.
IN WITNESS WHEREOF, and intending to be legally bound hereby, Lessor and Lessee
have caused this Supplement to be executed as of March 1, 1996 and do each
hereby warrant and represent that their respective signatories whose signatures
appear below have been and are on the date of their signing duly authorized by
all necessary and appropriate action to execute this Supplement.
FUJITSU-ICL SYSTEMS INC. EAGLE HARDWARE & GARDEN, INC.
By: By: Rich Takata
----------------------- --------------------------
Name: Name: /s/ Rich Takata
--------------------- ------------------------
Title: Title: President
-------------------- -----------------------
<PAGE>
<TABLE>
<CAPTION>
Eagle Hardware Garden
Exhibit 1 to Supplement No. 103
Invoice Invoice Invoice Net Monthly
Location Number Date Cost Credit Cost Rental
- -------- ------- ------- ------- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
#391 199320 12/27/95 17,957.40 (14,006.94) 3,950.46 68.30
33 East Tudor Road
Anchorage, AK 99501
#323 199095 12/19/95 20,772.87 (16,203.03) 4,569.84 79.01
5405 Washington Bypass
Arvada, CO 80002
#325 199096 12/19/95 20,732.56 (16.171.59) 4,560.97 78.86
9100 Peak View Avenue
Greenwood Village, CO 80111
#381 199319 12/27/95 16,888.40 (13,173.11) 3,715.29 64.24
94-805 Luniana Street
Waipahu, HI 96797
#317 199094 12/19/95 17,869.40 (13,938.30) 3,931.10 67.97
2717 King Avenue West
Billings, MT 59102
#421 199021 12/15/95 17,868.08 (13,937.27) 3,930.81 67.96
3601 Crater Lake Hwy.
Medford, OR 97504
#441 199134 12/20/95 16,805.68 (13,108.59) 3,697.09 63.92
460 West 4500 West
Murray, UT 84123
#447 199135 12/20/95 16,805.68 (13,108.59) 3,697.09 63.92
1055 W. Antelope Drive
Layton, UT 84041
#481 199136 12/20/95 16,805.68 (13,108.59) 3,697.09 63.92
203 West 9000 South
Sandy, UT 84070
#485 199137 12/20/95 16,805.68 (13,108.59) 3,697.09 63.92
140 West 1300 South
Orem, UT 84058
#311 198671 11/29/95 17,888.87 (13,953.48) 3,935.39 68.04
North 6902 Division
Spokane, WA 99208
#315 198705 11/29/95 19,319.98 (15,069.76) 4,250.22 73.49
E. 5204 Sprague Avenue
Spokane, WA 99212
#321 198703 11/29/95 17,171.90 (13,394.24) 3,777.66 65.32
4220 Wheaton Way
Bremerton, WA 98310
#341 198706 11/29/95 19,248.42 (15,013.95) 4,234.47 73.21
2500 Rudkin Road
Union Gap, WA 98903
</TABLE>
Page 1
<PAGE>
<TABLE>
<CAPTION>
Eagle Hardware Garden
Exhibit 1 to Supplement No. 103
Invoice Invoice Invoice Net Monthly
Location Number Date Cost Credit Cost Rental
- -------- ------- ------- ------- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
#401 198701 11/29/95 17,131.23 (13,362.52) 3,768.71 65.16
1717 Freeway Drive
Mount Vernon, WA 98273
#431 198704 11/29/95 16,924.55 (13,201.31) 3,723.24 64.37
2505 Pacific Avenue
Everett, WA 98206
#451 198707 11/29/95 19,302.09 (15,055.81) 4,246.28 73.42
N. 1020 Colorado Street
Kennewick, WA 99336
#461 198702 11/29/95 17,004.45 (13,263.63) 3,740.82 64.68
301 37th Avenue SE
Puyallup, WA 98374
Total Exhibit 1 323,302.92 252,179.28 71,123.64 1,229.73
</TABLE>
Page 2
<PAGE>
Supplement No. 104 under Retail Technology Exchange Agreement No. EH-101
(the "Agreement")
1. CAPITALIZED TERMS. Capitalized terms used in this Supplement but not
defined herein shall have the definitions set forth in the Agreement.
2. INCORPORATION OF TERMS. Except to the extent, if any, that the same are
modified by this Supplement all terms and conditions of the Agreement are
in full force and effect, affirmed by Lessor and Lessee, and incorporated
in this Supplement by reference as if they had been set forth herein in
full.
3. COMMENCEMENT DATE: August 1, 1996
4. INITIAL TERM: 72 Months
5. RENT AMOUNT: 72 Payments of $5,261.75
6. DAILY RENT: $0.00
7. PRODUCT LOCATION: See attached Exhibit 1
8. FIRST DAY OF FIRST RENTAL: August 1, 1996
9. TERM. The term of the Agreement as to all Product designated on this
Supplement shall commence on the Commencement Date, and shall continue
for the number of months specified as the Initial Term. Any such
termination shall be effective only on the last day of the Initial Term
or of any renewal period, as applicable. Notwithstanding anything to the
contrary contained herein or in the Agreement, upon expiration of the
Initial Term set forth above, Lessee shall have the right to continue its
use and possession of all Products identified on Invoice # 195109 in
Supplement No. 101, subject to and in accordance with the terms and
conditions of the separate licensing agreement between Lessor and Lessee
and Lessee shall have no obligation to pay any rental for such Products in
respect of any periods subsequent to expiration of the Initial Term nor any
obligation to return the Products to Lessor except as provided in the
licensing agreement.
10. PRODUCT. The items listed on the attached Exhibit 1 and made a part hereof
constitute the Product which is subject to the terms of this Supplement.
11. CASUALTY AMOUNT: 10 % of the Acquisition Cost for the applicable item(s) of
Product set forth on the attached Exhibit 1.
12. COMMENCEMENT AND ACCEPTANCE. a) The Product listed herein has been
(i) delivered to Lessee in good order and condition, (ii) inspected by
Lessee and found to be satisfactory for Lessee's purposes, and
(iii) accepted by Lessee for renting under the Agreement pursuant to the
terms of the Supplement; b) Lessee is obligated to pay the Rent and all
other sums provided for in the Agreement and the Supplement concerning the
Product; d) no Rent with respect to the Product or any period subsequent to
the date hereof not yet due as provided in the Supplement and Agreement has
been prepaid under the Agreement or Supplement, and all remaining Rent is
payable over the balance of the Initial Term and any renewal period as
therein provided.
13. CHATTEL PAPER: This is Counterpart No. 3 of 3 counterparts. Lessee hereby
agrees and acknowledges that delivery to a Lessor's Assignee of a copy of
the Agreement plus executed original of the Schedule designated
"Counterpart No. 1" shall be sufficient to convey to such Lessor's Assignee
the rights of Lessor contained in the Supplement to the extent assigned
thereto. Only Counterpart No. 1 shall be treated as the original hereof
for the purpose of evidencing or perfecting any transfer hereof or security
interest herein, each subsequently numbered counterpart being a duplicate
thereof.
14. FAIR MARKET VALUE PURCHASE OPTION: Provided that no default has occurred
and is continuing, Lessee shall have the option (the "Purchase Option")
upon not less than sixty (60) days prior written notice delivered to Lessor
and to the then Lessor's Assignee, if any, with respect to the Supplement,
to purchase all of the Product described in the Supplement, with the
exception of the Product identified in Invoice # 195109, upon the
expiration of the Initial Term. The exercise price of the Purchase Option
shall be the Fair Market Value of the Equipment on the expiration of the
Initial Term. "Fair Market Value" shall mean and refer to the value, as
reasonably determined by Lessor, which would be obtained in an arms length
transaction between an informed and willing buyer-user under no compulsion
to buy and an informed and willing seller under no compulsion to sell.
<PAGE>
15. NOTICES: All notices under this Agreement shall be addressed to Lessor
at 200 Park Avenue, 25th Floor, New York, NY 10166 and to Lessee at
981 Powell Ave., SW, Renton, WA 98055
IN WITNESS WHEREOF, and intending to be legally bound hereby, Lessor and
Lessee have caused this Supplement to be executed as of August 19, 1996 and
do each hereby warrant and represent that their respective signatories whose
signatures appear below have been and are on the date of their signing duly
authorized by all necessary and appropriate action to execute this Supplement.
FUJITSU-ICL SYSTEMS INC. EAGLE HARDWARE & GARDEN, INC.
By: By: Rich Takata
--------------------------- ---------------------------
Name: Name: /s/ Rich Takata
--------------------------- ---------------------------
Title: Title: President
--------------------------- ---------------------------
<PAGE>
<TABLE>
<CAPTION>
Eagle Hardware & Garden
Exhibit 1 to Supplement No. 104
Invoice Invoice Invoice Monthly
Location Number Date Cost Rent
- -------- ------ ------- -------- -------
<S> <C> <C> <C> <C>
#381 201481 04/11/96 988.25
94-805 Luniana Street 202037 05/07/96 1,979.48
Waipahu, HI 96797 --------
2,967.73 51.32
#331 201679 04/19/96 40,232.99 695.67
101 Andover Park East
Tukwila, WA 98188
#351 199865 01/25/96 16,987.27 293.73
11959 Northrup Way
Bellevue, WA 98005
#461 199763 01/22/96 1,131.02 19.56
301 37th Avenue SE
Puyallup, WA 98374
981 Powell Avenue SW 200592 02/29/96 17,147.34
Renton, WA 98055 202112 05/10/96 43,003.07
---------
60,150.41 1,040.06
1200 Walla Walla Avenue 204700 07/19-96 171,627.87
Wenatchee, WA 98801 205290 07/31/96 2,420.23
204629 07/17/96 8,787.93
----------
182,836.03 3,161.42
Total Exhibit 1 304,305.45 5,261.75
</TABLE>
Page 1
<PAGE>
FIRST AMENDMENT TO
REAL ESTATE PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO REAL ESTATE PURCHASE AND SALE AGREEMENT (this
"Amendment") is entered into as of the Effective Date of August, 1996, between
EAGLE HARDWARE & GARDEN, INC., a Washington corporation ("Buyer") and TERRACE
POINT PARTNERSHIP, a Colorado general partnership ("Seller").
Buyer and Seller agree and hereby amend the Purchase and Sale Agreement dated
July 2, 1996 as follows:
SECTION 6. TITLE INSURANCE.
1. DELIVERY OF TITLE COMMITMENT - Within thirty (30) days after the Effective
Date, Seller shall provide Buyer with a preliminary commitment for owner's
title insurance with extended coverage issued by Chicago Title Insurance
Company, with copies of all exceptions set forth therein.
2. DELIVERY OF ALTA SURVEY - Within sixty (60) days after the Effective Date,
Buyer shall cause an ALTA survey of the Property to be completed. In the
event of closing, Seller shall credit Buyer in the amount of $3,000.00.
SECTION 3. CONTINGENCIES.
1. FEASIBILITY PERIOD - Buyer shall have ninety (90) days from the Effective
Date ("the Feasibility Period") to satisfy or waive the contingencies set
forth in Sections 3.1 and 3.2 of the Purchase and Sale Agreement.
2. CONTINGENCY PERIOD - Buyer shall have two hundred ten days ("the
Contingency Period") from the end of the Feasibility Period to satisfy or
waive the contingencies set forth in Section 3.3 of the Purchase and Sale
Agreement.
Miscellaneous:
(a) Except as modified herein, the Purchase and Sale Agreement remains in
full force and effect and is hereby ratified by Buyer and Seller.
(b) The later of the Buyer's signature date and the Seller's signature
date, set forth below, shall be the "Effective Date" of this Amendment.
BUYER: EAGLE HARDWARE & GARDEN, a Washington corporation
By: /s/ David J. Heerensperger
---------------------------------------
David J. Heerensperger
Its: Chairman of the Board
Date: August 26, 1996
---------------------------------------
SELLER: TERRACE POINT PARTNERSHIP, a Colorado general partnership
By: /s/ Daryll Propp
---------------------------------------
Daryll Propp
Its: General Partner
Date: 8-27-96
---------------------------------------
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY
THIS AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY ("Agreement") is
entered into by NORTHGLENN PARTNERS, L.P., a California limited partnership
("Seller"), and EAGLE HARDWARE & GARDEN, INC., a Washington corporation
("Buyer").
RECITALS:
A. Seller owns certain real property, located in the City of Northglenn,
County of Adams, Colorado, which is described on Exhibit A and as shown
outlined in red on Exhibit B consisting of nine and two tenths (9.2) acres.
Exhibit A and Exhibit B are attached hereto and made a part hereof, and which
together with all water and water rights, ditch and ditch rights, all coal,
oil, gas, and other minerals thereon or thereunder, and all easements,
rights-of-way, and other rights appurtenant thereto and the improvements
located thereon is hereinafter referred to as the "Property."
B. The Property is a part of a commercial development commonly known as
the "Mall of the Rockies" (the "Mall").
C. Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, the Property on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. PURCHASE AND SALE. Seller does hereby agree to sell, convey, transfer
and assign to Buyer, and Buyer does hereby agree to purchase from Seller, for
the consideration and subject to the terms and conditions hereinafter provided,
the Property, free and clear of all deeds of trust, mortgages, taxes and
special assessments whether assessed or not, security interests, encumbrances,
easements, restrictions, covenants, other rights, liability, and obligations
whatsoever except as hereinafter specifically identified.
2. PURCHASE PRICE. The purchase price for the Property shall be
$3,700,000, which is based on $9.23 per square foot of land. The purchase
price shall be adjusted at closing based on the actual square footage as
determined by the ALTA Survey and shall be payable as follows:
(a) $100,000.00 as an earnest money deposit (the "Earnest Money"), in
the form of a corporate check or wire transfer of funds which shall be
deposited with Chicago Title of Colorado, Inc. (the "Title Company"), as
escrow agent, no later than ten (10) days following the date when the last
party executes this Agreement (the "Effective Date"). The Earnest Money
shall be deposited by the Title Company in an interest bearing account. All
references herein to the Earnest Money shall include all interest earned
thereon; and
<PAGE>
(b) $3,600,000.00 or an amount based on the adjustment of the
purchase price as set forth in Paragraph 2, in cash or wire transfer of funds
to be paid by Buyer at the time and place of closing (of which the Earnest
Money shall be a part).
3. DELIVERY OF DOCUMENTS AND INFORMATION BY SELLER. On or before
twenty-one (21) days following the Effective Date, Seller shall deliver the
following documents and information to Buyer:
(a) a current commitment for issuance of an ALTA Owner's Policy of
Title Insurance with extended coverage for the Property together with copies of
all documents listed as exceptions therein (the "Commitment"), issued by the
Title Company in the amount of the purchase price. Buyer shall pay at closing
the difference in cost between standard and extended coverage;
(b) a current boundary and improvements survey of the Property
complying with the standards for an ALTA/ACSM Class A survey and certified to
Seller and Buyer and the Title Company (the "Survey") which shall certify the
square footage of the property; and,
(c) existing Soils Tests and/or Phase I Environmental Assessments of
the Property in Seller's possession, if any.
4. BUYERS OBLIGATION TO PURCHASE.
(a) By accepting this Agreement, Seller agrees that Buyer's
obligations herein are conditional upon Buyer's review and approval, in its
sole discretion, of the documents and instruments to be delivered to Buyer
pursuant to paragraph 3, and such other inspections and evaluations as Buyer
may deem necessary or advisable on or before the expiration of ninety (90)
days following the Effective Date (the "Contingency Period"). Seller agrees
that Buyer and its agents shall have access to the Property at all reasonable
times that this Agreement is in effect for the purposes of conducting
inspections, testing and/or planning activities; provided, that Buyer shall
not have the right to conduct any drilling, sampling, or other invasive
environmental tests without Seller's prior written consent. Buyer agrees to
pay all expenses incurred in connection with such activities and inspections
and to indemnify and hold Seller harmless from any and all liabilities,
claims, damages, costs and expenses, including attorney's fees, incurred by
or asserted against Seller with respect thereto other than claims arising
from the mere discovery of hazardous substances or toxic waste in, on or
under the Property. The foregoing indemnification obligation shall expressly
survive the termination or expiration of this Agreement.
2
<PAGE>
(b) Seller further agrees that Buyer's obligations herein are
conditional upon issuance of any and all required governmental approvals
commonly associated with the operation of a typical Eagle Hardware & Garden
home improvement center including but not limited to PUD and replat of the
Property by City of Northglenn, subdivision approvals, rezoning approvals,
Colorado Department of Transportation highway access and traffic signal
approvals, building permits, use permits, site plan approvals, and approvals
of any kind from any and all governmental agencies having jurisdiction over
the Property, necessary for Buyer to develop, construct its building and site
improvements and operate its business on the Property. Buyer shall use its
best efforts to obtain all permits and approvals. The timing, conditions and
cost of the permits and approvals (including any mitigation fees) must be
satisfactory to Buyer on or before one hundred eighty (180) days following
the Effective Date (the "Approval Period").
(c) The conditions set forth in paragraph 4, and the obligations of
Seller hereunder, are for the sole benefit of Buyer. Buyer may, in its sole
discretion, waive the same without affecting its rights hereunder. If any of
the conditions identified in paragraph 4 are not satisfied prior to the
expiration of the Contingency Period or the Approval Period, whichever is
applicable, Buyer may, by written notice to Seller, terminate this Agreement.
Buyer's failure to deliver notification prior to the expiration of the
Contingency Period or the Approval Period, whichever is applicable, shall
constitute waiver of the conditions, and this Agreement shall remain in full
force and effect. Notwithstanding the foregoing, Buyer shall not have the
right to terminate this Agreement for the failure to obtain any permits or
approvals unless Buyer has given Seller not less than thirty (30) days
written notice so that Seller may assist Buyer in obtaining such permits or
approvals. In the event that this Agreement is terminated, the parties shall
be released of all obligations hereunder, and the Earnest Money made shall be
promptly returned to buyer.
5. SELLER'S OBLIGATION TO SELL.
(a) By accepting this Agreement, Buyer agrees that Seller's
obligations herein are conditional upon Seller having (i) obtained possession
and title to the Property pursuant to the NURA Condemnation (as defined below)
on terms and conditions acceptable to Seller, in its sole discretion, and (ii)
received full and final approval from all governmental authorities having
jurisdiction over the Mall for the redevelopment and replatting of the Mall as
may be necessary or appropriate, in Seller's sole discretion.
(b) The conditions set forth in subparagraph 5(a), and the
obligations of Buyer hereunder, are for the sole benefit of Seller. Seller
may, in its sole discretion, waive the same without affecting its rights
hereunder. If any of the conditions identified in subparagraph 5(a) are not
satisfied within eighty-five (85) days following the Effective Date, Seller
may, by written notice to Buyer, terminate this Agreement or extend for up to
an additional sixty-five (65) days, the timeframe within which to satisfy
such conditions. If Seller elects to extend the timeframe to satisfy the
conditions in subparagraph 5(a), such extension shall extend the Contingency
Period by an equal amount, without the requirement for Buyer to make the
Earnest Money non-refundable or deposit additional sums hereunder as
otherwise required by paragraph 4 above.
3
<PAGE>
Seller's failure to deliver notification within the prescribed period shall
constitute waiver of the conditions, and this Agreement shall remain in full
force and effect. In the event that this Agreement is terminated, the parties
shall be released of all obligations hereunder, and all the Earnest Money shall
be promptly returned to Buyer.
6. GRADING PLAN AND PERMITS. Within thirty (30) days following the
Effective Date, Seller shall provide Buyer with a grading and drainage plan
sufficient for and acceptable to Buyer to begin its construction drawings
("CDs"). Buyer agrees to submit its CDs and application for building permit to
the City of Northglenn within sixty (60) days following receipt of a sufficient
and acceptable grading and drainage plan from Seller. If the transaction
contemplated hereunder does not close due to Buyer's default, Buyer shall
reimburse Seller for the cost of said grading and drainage plan, to the extent
that it specifically applies to the Property.
7. CLOSING. The closing and the transfer of the possession of the
Property shall occur on or before fifteen (15) days following the issuance of
any and all necessary permits and approvals as set forth in Paragraph 4b, but
in no event later than two hundred and ten (210) days following the Effective
Date, or such earlier date mutually agreeable to the parties, at a time and
place agreed to by Seller and Buyer.
8. TITLE INSURANCE AND SURVEY. Buyer shall have thirty (30) days
following receipt of the latter of the Commitment and the Survey in which to
notify Seller in writing of any objections to any exceptions, items or
matters identified in the Commitment or the Survey, and Seller shall have
until thirty (30) days after the receipt of such objections to correct such
objections. The same thirty (30) days timeframes shall apply to any
supplements, amendments or revisions to the Commitment or the Survey that
introduce new exceptions, items or matters or modify previously identified
exceptions, items or matters. Seller shall not be under any obligation to
cure any objections of Buyer. In the event that Seller fails to cure any
objections, this Agreement shall, at the option of Buyer, become null and
void if Buyer elects to terminate this Agreement prior to the expiration of
the Contingency Period. Buyer shall also have the right to terminate this
Agreement after expiration of the Contingency Period as to any new or
modified exceptions, items or matters, provided Buyer gives Seller notice of
termination no later than twenty (20) days after Seller fails to cure any
such objection. At closing, Seller shall pay the premium of and deliver to
Buyer an ALTA Form 1970-B, as revised in 1984 (or if unavailable, the Form
B-1987) of Owner's Policy of Title Insurance in an amount equal to the
purchase price, issued by the Title Company, and Buyer shall be solely
responsible for the cost of any endorsements requested by Buyer.
9. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer as of the date of this Agreement and on the date of closing,
the following shall be true and correct:
(a) SELLER'S AUTHORITY. The execution, delivery and performance of this
Agreement by Seller has been duly authorized by all requisite action on the
part of Seller and will not conflict with or result in any breach of the
terms of any instrument or agreement to which Seller is a party.
4
<PAGE>
(b) TITLE TO PROPERTY. At Closing, Seller will have good and
marketable title to the Property subject to no mortgage, pledge, lien,
encumbrance, encroachment, security interest or other charge, which will not be
released at or prior to the closing.
(c) LABOR AND MATERIALS. All bills for work done or materials
furnished with respect to the Property have been paid in full or will be paid
in full and discharged by the date and time of closing.
(d) LITIGATION. There is no litigation or other proceeding pending
or, to the knowledge of Seller, threatened against or relating to the
Property. There are no pending proceedings for condemnation of the Property,
except for the NURA Condemnation, defined below. The NURA Condemnation will
not diminish the size of the Property (except de minimus) nor have any effect
whatsoever upon Buyer's intended use of and plans for the Property.
(e) TAXES AND ASSESSMENTS. All general taxes payable with respect to
calendar years prior to the year of closing shall have been paid on or prior to
closing. All assessments due prior to closing shall have been paid on or prior
to closing.
(f) NO VIOLATIONS OF LAWS. Seller has not received any written
notice from any governmental agency claiming that the Property is in violation
of any laws or regulations.
BUYER ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY NEGATES AND DISCLAIMS ANY
REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF
ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR
WRITTEN, OF, AS TO, CONCERNING, OR WITH RESPECT TO (i) THE VALUE, NATURE,
QUALITY OR CONDITION OF THE PROPERTY INCLUDING, WITHOUT LIMITATION, THE
WATER, SOIL AND GEOLOGY, (ii) THE SUITABILITY OF THE PROPERTY FOR ANY AND ALL
ACTIVITIES AND USES WHICH MAY BE CONDUCTED THEREON, (iii) THE COMPLIANCE OF
OR BY THE PROPERTY WITH ANY LAWS, RULES, ORDINANCES OR REGULATIONS OF ANY
APPLICABLE GOVERNMENTAL AUTHORITY OR BODY, (iv) THE HABITABILITY,
MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OF THE PROPERTY OR (v) ANY OTHER MATTER WITH RESPECT TO THE PROPERTY,
AND SPECIFICALLY, THAT SELLER HAS NOT MADE, DOES NOT MAKE AND SPECIFICALLY
NEGATES AND DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES REGARDING COMPLIANCE
OF THE PROPERTY WITH ANY ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE
LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS, OR THE DISPOSAL OR
EXISTENCE, IN OR ON THE PROPERTY, OF ANY HAZARDOUS SUBSTANCES AS DEFINED BY
THE COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND LIABILITY ACT OF
1980, AS AMENDED, AND THE REGULATIONS PROMULGATED THEREUNDER. BUYER SHALL
RELY SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY INCLUDING ANY
INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER. SELLER SHALL NOT BE LIABLE
OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN
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STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY OR THE
OPERATION THEREOF, FURNISHED BY ANY PARTY PURPORTING TO ACT ON BEHALF OF SELLER
UNLESS EXPRESSLY AUTHORIZED TO DO SO BY SELLER.
10. SELLER'S CONSTRUCTION OBLIGATIONS. Seller shall complete the
following improvements as described in Exhibit C attached hereto and made a
part hereof ("Seller's Construction") upon or related to the Property.
(a) the Property shall consist of a graded to plus or minus 1/10th of
an inch to the elevation shown on Buyer's grading plan for the building pad,
graded to 90% compaction;
(b) the utilities listed on Exhibit C shall be stubbed within five
feet (5') of the building footprint at the locations shown on Buyer's plans for
each specific utility;
(c) the off-site improvements identified on Exhibit C; and
(d) all on-site improvements identified on Exhibit C.
The Seller's Construction of items 10.(a).and 10.(b) shall be completed at
Seller's sole cost and expense on or before one hundred fifty (150) days
following the Closing. Seller's construction of items 10.(c) and 10.(d)
shall be completed at Seller's sole cost and expense on or before one hundred
twenty (120) days following closing. Seller's affirmative covenant to
provide such Seller Construction shall survive Closing. If Seller does not
substantially complete Seller's Construction within the applicable time
periods following Closing, Buyer shall have the right, upon thirty (30) days
written notice to Seller, to enter upon the Property and take all steps
reasonably necessary to complete Seller's Construction unless within said
thirty (30) day period Seller has substantially completed Seller's
Construction. Costs incurred by Buyer in completing Seller's Construction
shall be payable by Seller within ten (10) days following written demand
therefor, when accompanied by documentation evidencing such costs and the
full and final payment by Buyer (as evidenced by appropriate lien waivers) of
all. such amounts. At closing, Seller shall obtain, at its sole cost and
expense, a payment and performance bond equal to 125% of the cost to complete
Seller's Construction (as mutually determined by Buyer and Seller) which will
enable Buyer to make a claim thereunder if the Seller's Construction has not
been substantially completed by Seller within the thirty (30) day notice and
cure period set forth above.
11. RISK OF LOSS - CASUALTY AND CONDEMNATION.
(a) The risk of loss or damage to the Property as a result of
casualty shall be retained by Seller, provided, that if casualty delays or
interferes with the completion of Seller's Construction, Seller shall have a
reasonable extension of time to account for such delay or interference. In the
event a casualty affecting the Property materially delays or interferes with
Buyer's ability to construct its own improvements on the Property, Buyer may
terminate this Agreement by written notice to Seller within thirty (30) days
after Buyer is notified in writing of the nature and extent of the
casualty.
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(b) If any eminent domain or condemnation proceeding pertaining to
all or any portion of the Property is threatened or commenced prior to
closing, except for the pending condemnation initiated by the Northglenn
Urban Renewal Authority (the "NURA Condemnation"), there shall be no
disposition or settlement thereof by Seller without the prior written consent
of Buyer such consent not to be unreasonably withheld or delayed, and Buyer
at its sole option may: (i) terminate this Agreement by written notice to
Seller within 30 days of Buyer's receipt of notice of such condemnation or
eminent domain proceeding, in which case all monies received hereunder shall
be returned to Buyer and the parties shall have no further rights against
each other; or (ii) proceed to closing and apply the proceeds received from
such condemnation or eminent domain proceeding against the purchase price of
the Property. If such proceeding has not been concluded as of the closing,
and no money has been paid to Seller by the condemning authority, Buyer shall
pay Seller the entire purchase price and all amounts thereafter awarded
relating to the Property shall belong to Buyer, and Seller shall assign all
of its rights therein to Buyer at closing.
(c) Buyer acknowledges and agrees that it shall have no right to
participate in the NURA Condemnation, shall have no right to any proceeds or
compensation related thereto, and the NURA Condemnation shall have no effect
upon the transaction contemplated by this Agreement, except as represented in
paragraph 9(d) above.
12. TERMINATION OF AGREEMENT AND REMEDIES.
(a) BUYER'S DEFAULT. In the event Buyer shall fail to perform
Buyer's obligations hereunder, Seller shall have the option to waive such
default or to terminate this Agreement by written notice to Buyer, and on
such termination Seller, as its sole and exclusive remedy, shall be entitled
to retain the earnest money deposit as liquidated damages. On such
termination, the parties shall be discharged from any further obligations and
liabilities hereunder. It is the intent of the parties notwithstanding the
use of the words "Agreement," "Buyer," and "Seller," that in the event of
default by Buyer, Seller's remedy, if any, shall be limited to retention of
the earnest money deposit as liquidated damages. The parties have agreed
that Sellers actual damages, in the event of default by Buyer, would be
extremely difficult or impracticable to determine. Therefore, the parties
acknowledge that the Earnest Money has been agreed upon, after negotiation,
as the parties' reasonable estimate of Seller's damages if Buyer defaults.
(b) AFTER EXPIRATION OF THE CONTINGENCY PERIOD. Buyer acknowledges that
following the expiration of the Contingency Period, Seller shall undertake
significant redevelopment efforts associated with the Mall. Accordingly, if
Buyer willfully fails to perform its obligations hereunder at any time
following the expiration of the Contingency Period (as opposed to
inadvertence or a condition not being satisfied, in particular the conditions
set forth in paragraph 4), Seller shall have the right to retain the Earnest
Money, and in addition, shall have the right to seek recovery of its actual
damages in excess of the amount of the Earnest Money, up to a maximum of
$250,000.00 in the aggregate, including the Earnest Money.
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(c) SELLER'S DEFAULT. In the event that Seller shall fail to perform
Seller's obligations hereunder, Buyer shall have the option to waive such
default in writing, or terminate this Agreement by written notice to Seller.
In the event of termination of this Agreement due to Seller's default, the
Earnest Money shall be remitted to Buyer Upon such termination and the return
of the Earnest Money, the parties shall be discharged from any further
obligations and liabilities hereunder, except that Buyer may seek recovery of
actual damages (but not specific performance) in an amount not to exceed the
Earnest Money.
(d) Neither Seller nor Buyer shall be deemed in default hereunder
unless written notice of the alleged default has been sent pursuant to paragraph
14 hereof, and ten (10) days has elapsed without the default having been cured;
provided, however, that in no event shall the time to cure any default extend
beyond the outside closing date set forth in paragraph 7 above.
13. TRANSACTIONS AT CLOSING. The following transactions shall occur at
closing:
(a) DEED TO PROPERTY. A special warranty deed in form satisfactory
to counsel for Buyer shall be executed and delivered to Buyer by Seller. The
special warranty deed shall convey title to the Property free and clear of all
taxes and assessments, except the general taxes for the year of closing, and
free and clear of all liens and encumbrances, except those set forth in the
Commitment as approved by Buyer in accordance with paragraph 8.
(b) BILL OF SALE. Seller shall execute and deliver to Buyer a bill
of sale covering all personal property owned by Seller and located at the
Property, if any, and Buyer shall pay any sales or use tax in conjunction with
transfer of such personal property to Buyer. The personal property shall be
conveyed "as-is" without any warranties of any kind.
(c) CASH. There shall be paid to Seller by Buyer the sum of
$3,600,000.00 as adjusted as set forth in Paragraph 2, in cash or wire transfer
of funds (subject to closing adjustments and prorations), which shall include
the Earnest Money.
(d) DOCUMENTARY STAMPS. Buyer shall pay all sums necessary for the
purchase of documentary or tax stamps required to be affixed to the warranty
deed under the laws of the State of Colorado.
(e) PRORATIONS. The following items shall be prorated to the date of
closing:
(i) All general taxes (including without limitation, real and
personal property taxes), special assessments, utilities, interest,
insurance, service and maintenance contracts and other similar items accruing
or assessed with respect to the Property or personal property located
thereon. Seller shall cause all utility meters to be read as of the closing
date, and Seller agrees to pay at closing all utility bills and charges
accruing up to and including the date of closing; and,
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(ii) General taxes not assessed for the year of closing
shall be prorated on the basis of the taxes levied and assessed with respect
to the calendar year prior to the year of closing, unless the valuation or
mill levy for the present year is available, in which event the amounts for
the year of closing shall be used. Upon reassessment, the tax prorations
shall be readjusted through the date of closing. Any additional amounts
owing by Buyer or Seller as a result thereof shall be paid upon demand by the
other.
(f) TRANSFER TAXES. Seller shall pay any excise, transfer or
conveyance taxes imposed on the sale of the Property.
14. NOTICES. All notices required herein shall be in writing and shall be
sufficient if delivered personally, sent by a nationally recognized overnight
courier, with proof of receipt or if sent by registered or certified United
States mail, return receipt requested, postage prepaid, addressed as
described below or to such other address as the party concerned amy
substitute by written notice to the other as provided herein. Buyer and
Seller, and their respective counsel, hereby agree that notices may be given
hereunder by the parties' respective counsel, and that if any communication
is to be given hereunder by Buyer's or Seller's counsel, such counsel may
communicate directly with all principals, as required to comply with the
foregoing provisions.
To Seller: Northglenn Partners, L.P.
10777 West Westheimer
Suite 800
Houston, Texas 77042
Attention: Mark Kurtz, Executive Vice President
with a copy to: Brownstein Hyatt Farber & Strickland
410 17th Street, 22nd Floor
Denver, Colorado 80202
Attention: Bruce A. James
To Buyer: Eagle Hardware & Garden, Inc.
981 Powell Avenue S.W.
Renton, WA 98055
Attention: Richard T. Takata, President
with a copy to: William N. Moloney
5711 NE Tolo Road
Bainbridge Island, WA 98110
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15. OPERATION OF THE PROPERTY FOLLOWING CLOSING.
(a) buyer covenants that its present good faith intent is to open an
Eagle Hardware & Garden retail store of not less than 125,000 square feet
(the "Eagle Store") no later than one hundred eighty (180) days following the
receipt of all approvals and permits required under section 4 above and the
substantial completion of Seller's construction, whichever shall occur the
later, and to operate the Eagle Store continuously (except for any
circumstances beyond Buyer's control which prevent such continuous
operations), with a full line of inventory and adequate staffing, for not
less than ten (10) years following the Closing. Notwithstanding the
foregoing, Buyer agrees that it shall, without regard to intent, continuously
operate the Eagle Store for the first five (5) years after the opening
thereof; provided that Buyer shall have the right to sell or lease the
Property to another national retailer of similar reputation and financial
condition for the primary purpose of the operation of a hardware, garden or
home improvement center.
(b) At closing, Seller and Buyer shall enter into a reciprocal
easement agreement (the "REA") for the Property and the balance of the real
property comprising the Mall. The REA shall be prepared by Seller and
delivered in draft form to Buyer no later than sixty (60) days following the
Effective Date. The REA shall provide, among other things, for (i) the
common area maintenance of the Mall, which shall be assessed against Buyer
based upon Buyer's land area as a percentage of the total land area of the
Mall, and (ii) reciprocal ingress, egress, construction, utility and parking
easements, and appropriate provisions to provide for specific "Protected
Areas" of parking fronting the full length of the South, West and North sides
of Buyer's store building and in the areas of Buyer's designated truck well,
on grade unloading areas and customer loading area. The form of the REA
shall be subject to Buyer's reasonable approval and any objections thereto
shall be delivered by Buyer to Seller no later than fifteen (15) days after
Buyer's receipt of the REA.
16. BROKER'S FEE. Seller agrees to pay a brokerage fee at closing to HC
Properties, Ltd. and Mile High Properties, LLC ("Mile High"). The brokerage fee
payable to HC Properties, Ltd. shall be payable only if the closing occurs
hereunder, and shall be in the amount $150,000. The fee payable to Mile High
shall be as set forth in a separate agreement between Seller and Mile High.
Each party represents that no other broker's, finder's or similar fee or
commission is due in connection with the transaction contemplated herein and
hereby agrees to indemnify and hold harmless each other from any claim,
expense or cost (including attorney's fees whether suit be brought or not)
resulting from any claim for such fee or commission.
17. MISCELLANEOUS
(a) ATTORNEY'S FEES. In the event of any litigation between Buyer or
Seller concerning this transaction, the prevailing party shall be entitled to
court costs and reasonable attorney's fees.
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(b) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Seller as made herein shall survive the closing for a period
of one (1) year thereafter.
(c) ASSIGNMENT. Buyer shall have the right to assign this Agreement
to an affiliated entity under common control with Buyer or to an unrelated
entity for the purpose of engaging in a sale-leaseback or other financing
arrangement provided Buyer remains secondarily liable hereunder and Buyer
continues to comply with the covenants in paragraph 15(a) above.
(d) ENTIRE AGREEMENT. This Agreement embodies all of the
representations, warranties and agreements of the parties, and it may not be
altered or modified, except by an instrument in writing signed by both parties.
(e) BENEFIT OF AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective heirs, successors and
assigns.
(f) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Colorado applicable to contracts
made and performed entirely therein.
(g) TIME OF THE ESSENCE. Time shall be of the essence with respect
to performance by the parties of their respective obligations hereunder.
(h) CAPTIONS. The captions of the paragraphs of this Agreement are
inserted only as a matter of convenience and for reference, and in no way
define, limit, or describe the scope of this Agreement, or the intent of any
provision thereof.
(i) SEVERABILITY. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal, or unenforceable provision had
never been contained herein.
(j) CONSIDERATION. Each party agrees that the covenants and promises
contained herein are good and sufficient consideration for the respective
obligations required hereunder.
(k) PROVISIONS NEGOTIATED AND INDEPENDENT. Each and every provision
of this Agreement has been independently, separately and freely negotiated by
the parties as if this Agreement were drafted by all parties hereto. The
parties, therefore, waive any statutory or common law presumption which would
serve to have this document construed in favor of, or against, either party.
18. ACCEPTANCE. Upon execution of this Agreement by Buyer and Seller this
Agreement shall become a binding contract and shall inure to the benefit of the
parties and their heirs, executors or assigns. The Effective Date (the
"Effective Date") of this Agreement shall be the later of Buyer's or Seller's
execution date shown below.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
specified below.
SELLER: BUYER:
NORTHGLENN PARTNERS, L.P. EAGLE HARDWARE & GARDEN, INC.
a California limited partnership a Washington corporation
By: HRBF NORTHGLENN NO. 3, L.P., By: /s/ Paul B. Morris
a California limited partnership, -----------------------
its General Partner PAUL B. MORRIS
Title: Vice President
---------------------
By: Northglenn-LRP, Inc., Date: September 3, 1996
a California corporation, ---------------------
its General Partner
By: /s/ Illegible
----------------------------
Its: Vice President
----------------------------
Date: September 5, 1996
-------------------------------
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EXHIBIT A
LEGAL DESCRIPTION of the PROPERTY
(To be provided by seller upon completion of the ALTA/ACSM Class A survey as set
forth in paragraph 3(b).
EXHIBIT "A"
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EXHIBIT "B"
MALL OF THE
ROCKIES
AT NORTHGLENN
DENVER COLORADO
SUMMIT COMMERCIAL
A Highridge Partners Company
DEVELOPMENT SYNOPSIS
CRITERIA #34
[SITE PLAN]
EXHIBIT "B"
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<PAGE>
EXHIBIT C
SELLER'S CONSTRUCTION OBLIGATIONS
The Obligations of Seller as set forth in paragraph 10, 10(a), 10(b), 10(c) and
10(d) shall be described herein in detail.
(To be prepared by Seller, subject to Buyer's review and acceptance by
initialing, prior to attachment. Exhibit C shall be completed and approved on
or before thirty (30) days following the Effective Date).
EXHIBIT "C"
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REAL ESTATE PURCHASE AND SALE AGREEMENT
This Real Estate Purchase and Sale Agreement (the "Agreement") is made
as of the effective date of Oct. 6, 1996 (the "Effective Date"), by and
between EAGLE HARDWARE & GARDEN, INC., a Washington corporation ("Seller") and
THE GOOD GUYS--CALIFORNIA, INC., a California Corporation ("Buyer") for purchase
and sale of a 67,500 square foot parcel of land located at the southeast corner
of that certain real property situated in King County, Washington, and described
in EXHIBIT A attached hereto and all rights appurtenant thereto (the
"Property"). The Property is located in the lower left-hand corner of the site
plan attached hereto as EXHIBIT B.
1. PURCHASE PRICE; PAYMENT. The total purchase price for the
Property is One Million Eight Hundred Ninety Thousand Dollars (US $1,890,000.00)
(the "Purchase Price"), which amount, including the Deposit, shall be paid in
cash upon closing.
2. EARNEST MONEY DEPOSIT. Within seven (7) business days after the
Effective Date, Buyer shall deposit with the Closing Agent Fifty Thousand
Dollars ($50,000.00) as an earnest money deposit (the "Deposit") to be held in
escrow in an interest bearing account approved by Buyer and applied or disposed
of by Closing Agent as provided herein.
3. CONDITIONS.
A. DUE DILIGENCE CONDITIONS. Buyer shall have a period of
ninety (90) days from the Effective Date (the "Due Diligence Period") to conduct
a full due diligence investigation of the Property. The Due Diligence Period
will start at the Effective Date of this Agreement. Seller shall within fifteen
(15) days after the Effective Date deliver to Buyer all reports, studies,
surveys, books and records relating to the Property for such purpose, and shall
afford Buyer full access to the Property for conducting such physical
inspections, surveys, environmental investigations and other examinations as
Buyer shall deem appropriate, in its discretion. Buyer agrees to indemnify and
hold Seller from any damage, loss or expense, including but not limited to
attorneys fees, that Seller may suffer or incur as a result of any activities of
Buyer on the Property.
B. OTHER CONDITIONS.
1. PARKING LOT PLANS. Within thirty (30) days after the
Effective Date, Seller shall provide Buyer with complete plans and
specifications related to the parking lot improvements to be located on the
Property, including without limitation, information reasonably required by Buyer
related to the
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asphalt, striping, curbing, landscaping, irrigation and the like located on the
Property as shown on Exhibit B (the "Parking Lot Plans"). In the event such
Parking Lot Plans are approved by Buyer, Seller shall cause the improvements
specified therein to be constructed prior to the Closing. In the event the
Agreement is not terminated pursuant to Section 3C below, Buyer shall pay to
Seller at the Closing the actual out of pocket costs attendant to the work
performed pursuant to the Parking Lot Plans; such costs shall be calculated by
the actual cost (not to exceed Two Dollars ($2.00 per square foot) of the
improvements constructed by Seller outside of the diagonal-lined area (145' by
245') and within the area of the parcel (250' by 270'), as shown on Exhibit B,
provided that Buyer's share of such costs shall in no event exceed Sixty-Three
Thousand Nine Hundred Fifty Dollars ($63,950.00). All work inside the diagonal-
lined area shown on Exhibit B shall be Buyer's sole obligation and cost.
2. RECIPROCAL EASEMENT AGREEMENT. Within thirty (30) days
after the end of the Due Diligence Period (provided Buyer has not terminated
pursuant to Section 3C below), Seller will submit to Buyer a proposed form of
reciprocal easement and parking agreement covering reciprocal ingress and egress
and appropriate provisions to provide for specific "Protected Areas" of
parking for the benefit of the Property and the remainder of the real property
described in EXHIBIT A, together with cost sharing of maintenance and repair of
the easement (the "REA"). Buyer shall have twenty (20) days from receipt
thereof within which to review and approve, disapprove or submit requested
changes to the REA. If final agreement cannot be reached prior to the Closing,
Buyer shall be entitled to cancel and terminate this Agreement and receive a
complete refund of all deposits made by Buyer pursuant hereto.
3. SEPARATE PARCEL. This Agreement is expressly
conditioned upon receipt by Seller and delivery to Buyer on or before the end of
the Due Diligence Period of the following: (a) an approved separate legal parcel
encompassing only the Property in the configuration shown on Exhibit B; (b) all
of the attendant documentation, including an ALTA survey of the Property. If a
final parcel map and the ALTA survey are not delivered by the date of Closing,
Buyer shall be entitled to cancel and terminate this Agreement and receive a
complete refund of all deposits made by Buyer pursuant hereto.
C. EXTENSION AND/OR TERMINATION. Buyer shall also have, at its
sole option, the right to extend the Due Diligence Period for one additional
period of thirty (30) days to conduct further due diligence pursuant to Section
2A above upon payment to Seller of an additional deposit of Fifteen Thousand
Dollars ($15,000) for the thirty (30) day period, which sum will be
nonrefundable except as set forth in Section 3B, but applicable to the Purchase
Price.
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The Agreement will be terminable by Buyer at or prior to the
expiration of the Due Diligence Period in the event Buyer is not satisfied with
any aspect of the Property. If the Agreement is terminated, the Deposit and all
accrued interest thereon will be refunded to Buyer within ten (10) days of
receipt of notice of termination from Buyer. If Buyer does not terminate the
Agreement at the end of the Due Diligence Period, Buyer shall deposit an
additional Fifty Thousand Dollars ($50,000.00) with the Closing Agent, to be
applied or disposed of in the same manner as the Deposit.
4. CLOSING.
4.1 TIME FOR CLOSING; TERMINATION DATE. This sale shall be
closed in the office of Translation Title Insurance Company in Seattle,
Washington ("Closing Agent") within thirty (30) days after issuance of a
building permit to Buyer, but in any event, not later than June, 1, 1997, which
shall be the termination date. Buyer agrees to apply for a building permit
prior to the last to occur of: (i) Seller opening for business, or
(ii) February 6, 1997. Buyer and Seller shall deposit in escrow with Closing
Agent all instruments, documents and monies necessary to complete the sale in
accordance with this Agreement. As used herein, "Closing" or "Closing Date"
means the date on which all appropriate documents are recorded, proceeds of sale
are available for disbursement to Seller.
4.2 PRORATIONS; CLOSING COSTS. Taxes and assessments for the
current year, prepaid premiums for insurance to be assigned to Buyer, if any,
and utilities constituting liens shall be prorated as of the Closing Date.
Seller shall pay the premium for the title insurance policy in the amount
allocable to standard coverage, real estate excise taxes, and one-half (1/2) of
Closing Agent's escrow and closing fees. Buyer shall pay the cost of recording
the statutory warranty deed, the portion, if any, of the premium for the title
insurance policy allocable to extended coverage and additional endorsements
required pursuant to Section 6 hereof, and one-half of Closing Agent's escrow
and closing fees.
4.3 POSSESSION. Buyer shall be entitled to possession upon
closing.
5. CONVEYANCE OF TITLE. On Closing, Seller shall execute and
deliver to Buyer a statutory warranty deed conveying good and marketable title
to the Property, subject to the lien of real estate taxes and assessments for
the current calendar year not yet due and payable, those easements and other
exceptions identified on the preliminary commitment for title insurance or in
the following sentence (the "Permitted Exceptions"), and other encumbrances or
defects approved by Buyer. Rights reserved in federal patents or state deeds,
building or use restrictions
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general to the district, existing easements not inconsistent with the Buyer's
proposed use of the Property, and building, zoning, or environmental regulations
will be Permitted Exceptions, not subject to disapproval by Buyer.
6. TITLE INSURANCE. As soon as reasonably possible after the
date of this Agreement, Seller will provide Buyer with a preliminary
commitment for title insurance with standard coverage issued by Transnation
Title Insurance Company, with copies of all exceptions set forth therein.
Buyer shall notify Seller of (i) its disapproval of any exception shown in
the preliminary commitment (other than Permitted Exceptions) within fifteen
(15) days after Buyer's receipt of the preliminary commitment or Buyer shall
be deemed to have waived its right to disapprove such exceptions, and (ii)
any required endorsements to the title policy to be issued pursuant hereto.
If, within ten (10) days after the receipt of such notice Seller has not
removed or given reasonable written assurances to Buyer that such disapproved
exception(s) will be removed on or before closing, Buyer may, within ten (10)
days thereafter, elect to terminate this Agreement by giving notice of such
termination to Seller, but if no such notice is given, Buyer shall be deemed
to have waived such defects and shall purchase the Property on the remaining
terms hereof. The time period for approval of exceptions to title shall be
extended by any period of delay in delivering an ALTA survey of the Property
pursuant to which Buyer will be able to locate any easements or encroachments
onto the Property. If Buyer terminates this Agreement pursuant to this
paragraph, Seller or Closing Agent shall refund the Deposit and accrued
interest and all rights and obligations of Seller and Buyer under this
Agreement shall terminate and be of no further force or effect.
Notwithstanding the foregoing, if Seller cannot remove any disapproved
exception by the termination date, or if removal would require payment of
more than the cash proceeds available to Seller from, this sale at Closing,
this Agreement shall terminate and be of no further force or effect, and the
Deposit and interest shall be refunded to Buyer; provided, however, that
Buyer may elect to waive such disapproved exception(s) , which shall
thereupon become Permitted Exceptions, and close on the remaining terms.
Encumbrances to be discharged by Seller may be paid out of the
Purchase Price at Closing.
As soon as available after Closing, Seller will provide to Buyer a
policy of title insurance with the endorsements required by Buyer, pursuant to
the preliminary commitment, dated as of the Closing Date and insuring Buyer in
the amount of the Purchase Price against lost or damage by reason of defect in
Buyer's title to the Property, subject only to (i) the printed exclusions and
general exceptions appearing in the policy form, (ii) any Permitted Exceptions,
(iii) the exceptions specified in the preliminary title
-4-
<PAGE>
report that Buyer has not disapproved of as provided herein, and (iv) real
property taxes and assessments that are not delinquent.
7. RISK OF LOSS; CONDEMNATION. Risk of loss of or damage to the
Property shall be borne by the Seller until the date of closing. Thereafter,
Buyer shall bear the risk of loss. In the event of material loss of or damage
to the Property prior to the date upon which Buyer assumes the risk, Seller
shall restore the Property, provided that in the event such restoration is not
complete by the -Closing Date, Buyer may terminate this Agreement by giving
notice of such termination to Seller and Closing Agent, and the Deposits and
interest shall be refunded ten (10) days thereafter.
If the Property is or becomes the subject of a condemnation proceeding
prior to closing, Buyer may, at its option, terminate this Agreement by giving
notice of such termination to Seller on or before the termination date, and upon
such termination the Deposits and interest shall be returned to Buyer and this
Agreement shall be of no further force or effect; provided, however, that Buyer
may elect to purchase the Property, in which case the total purchase price shall
be reduced by the total of any condemnation award received by Seller at or prior
to closing, and on closing, Seller shall assign to Buyer all of Seller's rights
in and to any future condemnation awards or other proceeds payable or to become
payable by reason of any taking. Seller agrees to notify Buyer of eminent
domain proceedings within five (5) days after Seller learns thereof.
8. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents and
warrants to Buyer as of the date of closing that:
8.1 Seller, and the person signing on behalf of Seller, has full
power and authority to execute this Agreement and perform Seller's obligations
hereunder, and all necessary corporate action to authorize this transaction has
been taken; and
8.2 The Property is not subject to any leases, tenancies or
rights of persons in possession.
9. BUYER'S AUTHORITY. Buyer represents and warrants to Seller that
at the date of execution hereof and at the Closing Date Buyer, and the person
signing on behalf of Buyer, has full power and authority to execute this
Agreement and to perform Buyer's obligations hereunder, and all necessary
corporate action to authorize this transaction has been taken.
10. DEFAULT. Time is of the essence of this Agreement. If Buyer
defaults, the Deposit and accrued interest may, at Seller's election, either be
forfeited on demand by Seller and paid to Seller as liquidated damages, or held
by Closing Agent pending
-5-
<PAGE>
the outcome of any suit or action brought by Seller. If Seller elects to
forfeit the Deposit as liquidated damages for Buyer's default, this Agreement
shall terminate and Buyer shall have no further obligations or liability
hereunder, and Buyer hereby consents to the transfer of the Deposit to Seller by
Closing Agent in such event. If Seller defaults, Buyer's damages, if any, shall
be limited to an amount equal to the deposit. In any suit, action or appeal
therefrom to enforce this Agreement or any term or provision hereof or to
interpret this Agreement, the prevailing party shall be entitled to recover its
costs incurred therein, including reasonable attorneys' fees.
11. NOTICES. All notices, waivers, elections, approvals and
demands required or permitted to be given hereunder shall be in writing and
shall be personally delivered (by overnight courier service or otherwise) or
sent by United States certified mail, return receipt requested to the
addressee's mailing address set forth below. Either party hereto may, by
proper notice to the other, designate any other address for the giving of
notice. Any notice shall be effective when personally delivered or, if
mailed as provided herein, on the date of actual receipt. Copies of any
notices shall be sent as follows:
To Seller:
Eagle Hardware & Garden, Inc.
981 Powell Avenue S.W.
Renton, WA 98055
Attn: Richard T. Takata, President
with a copy to:
William N. Moloney
5711 N.E. Tolo Road
Bainbridge Island, WA 98110
and to Buyer:
The Good Guys--California, Inc.
7000 Marina Boulevard
Brisbane, CA 94005
Attn: Vice President Real Estate
with a copy to:
Phillip H. Stoermer
Miller, Starr & Regalia
1331 N. California Boulevard, Suite 700
Walnut Creek, CA 94596
-6-
<PAGE>
12. ASSIGNMENT. Buyer's rights under this Agreement are fully
assignable to a parent, subsidiary or affiliate of Buyer or to an entity
acceptable to Buyer with whom Buyer engages in a sale/leaseback transaction or
other similar financial arrangement. Additionally, this Agreement may be
assigned to a reputable retailer reasonably acceptable to Seller whose business
is not in competition with any of the merchandise sold or services provided by
Seller on the property described in Exhibit A.
13. GENERAL. This is the entire agreement of Buyer and Seller with
respect to the matters covered hereby and supersedes all prior agreements
between them, written or oral. This Agreement may be modified only in writing,
signed by Buyer and Seller. Except as otherwise provided herein any waivers
hereunder must be in writing. No waiver of any right or remedy in the event of
default hereunder shall constitute a waiver of such right or remedy in the event
of any subsequent default. This Agreement shall be governed by the laws of the
state of Washington. This Agreement is for the benefit only of the parties
hereto and shall inure to the benefit of and bind the heirs, personal
representatives, successors and assigns of the parties hereto. The invalidity
or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision hereof.
14. COMMISSIONS. Buyer and Seller acknowledge that Terranomics
Retail Services, Inc. has acted as broker for Seller and Buyer in this
transaction. Each party represents and warrants to the other party that it has
engaged no other broker in connection with the negotiations leading to this
Agreement, and each party shall indemnify the other party against and hold the
other party harmless from any and all loss, damage, liability, cost or expense,
including attorney's fees, suffered or incurred by the other party arising out
of or relating to any claims for real estate commission made by any real estate
agent or broker engaged by Buyer or Seller, as the case may be. Seller agrees
to pay Terranomics Retail Services, Inc. a commission of four percent (4%) of
the Purchase Price to be paid only if the transaction closes and at Closing from
available funds.
15. DISCLAIMER. SELLER MAKES NO REPRESENTATIONS OR WARRANTIES AND
SHALL NOT IN ANY WAY BE LIABLE FOR OR WITH RESPECT TO: (I) THE ENVIRONMENTAL OR
OTHER CONDITION OF THE PROPERTY OR ANY BUILDINGS, STRUCTURES OR IMPROVEMENTS
THEREON OR THE SUITABILITY OF THE PROPERTY FOR HABITATION OR FOR BUYER'S
INTENDED USE OR FOR ANY USE WHATSOEVER; (II) ANY APPLICABLE ENVIRONMENTAL,
BUILDING, ZONING OR FIRE LAWS OR REGULATIONS, OR WITH RESPECT TO COMPLIANCE
THEREWITH, OR WITH RESPECT TO THE EXISTENCE OF OR COMPLIANCE WITH ANY REQUIRED
PERMITS OR APPROVALS, IF ANY, OF ANY GOVERNMENTAL AGENCY; (III) THE AVAILABILITY
OR EXISTENCE OF ANY WATER, SEWER OR UTILITY RIGHTS; (IV) THE AVAILABILITY OF
WATER,
-7-
<PAGE>
SEWER OR OTHER UTILITIES; OR (V) ANY WATER, SEWER OR OTHER UTILITY DISTRICT.
BUYER ASSUMES THE RESPONSIBILITY AND RISKS OF ALL DEFECTS AND CONDITIONS,
INCLUDING SUCH DEFECTS AND CONDITIONS, IF ANY, THAT CANNOT BE OBSERVED BY
CASUAL INSPECTION. BUYER ACKNOWLEDGES THAT BUYER IS PURCHASING THE PROPERTY
"AS IS" AND WILL HAVE THE OPPORTUNITY TO INSPECT THE PROPERTY AND WILL BE
RELYING ENTIRELY THEREON AND ON ANY CONSULTANTS BUYER MAY RETAIN.
16. EXHIBITS. Exhibits A and B attached hereto are incorporated
herein as if fully set forth.
17. EFFECTIVE DATE. The Effective Date of this Agreement shall be
Oct. 6, 1996.
Date of Execution: BUYER:
Sept. 26, 1996 THE GOOD GUYS--CALIFORNIA, INC.
- -------------------------
BY: /s/ Gregg Steele
-------------------------------------
Gregg Steele
Its: Vice President Real Estate
Address:
7000 Marina Boulevard
Brisbane, CA 94005
Date of Execution: SELLER:
September 24, 1996 EAGLE HARDWARE & GARDEN, INC.
- -------------------------
BY: /s/ Richard T. Takata
-------------------------------------
RICHARD T. TAKATA
Its: President
-----------------------------------
Address:
981 Powell Avenue S.W.
Renton, WA 98055
-8-
<PAGE>
STATE OF CALIFORNIA )
---------- )
)
COUNTY OF SAN MATEO )
---------- )
THIS IS TO CERTIFY that on this 26 day of Sept, 1996 before me, the
undersigned, a notary public in and for the State of California duly
commissioned and sworn, personally appeared Gregg Steele to me known to be
the VP Real Estate of THE GOOD GUYS!, the corporation that executed the
within and foregoing instrument, and acknowledged the said instrument to be
the free and voluntary act and deed of said corporation for the uses and
purposes therein mentioned.
/s/ Helen Sue Carmichael
------------------------------------------------
[SEAL] Notary Public in and for the state of
Residing at San Mateo Co.
------------------------------------
My Commission Expires 2/3/99
---------------------------
STATE OF WASHINGTON )
)
COUNTY OF KING )
I THIS IS TO CERTIFY that on this 24TH day of SEPTEMBER 1996, before
me, the undersigned, a notary public in and for the STATE of WASHINGTON duly
commissioned and sworn, personally appeared RICHARD T. TAKATA to me known to be
the PRESIDENT of EAGLE HARDWARE & GARDEN, INC., the corporation that executed
the within and foregoing instrument, and acknowledged the said instrument to be
the free and voluntary act and deed of said corporation for the uses and
purposes therein mentioned.
/s/ Jean Kavalick
------------------------------------------------
Notary Public in and for the state of WASHINGTON
Residing at Tacoma, WA
------------------------------------
My Commission Expires 3/15/97
---------------------------
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION:
A PARCEL OF LAND WITH DIMENSIONS OF 250.00 FEET ALONG THE WEST LINE OF AURORA
AVENUE (STATE HIGHWAY NO. 1) AND 270.00 FEET ALONG THE NORTH LINE OF NORTH 125TH
STREET. SAID PARCEL IS LOCATED IN THE SOUTHEAST CORNER OF THE FOLLOWING
DESCRIBED REAL PROPERTY;
THAT PORTION OF THE SOUTH 1/2 OF THE SOUTHEAST 1/4 OF THE SOUTHWEST 1/4 OF
SECTION 19, TOWNSHIP 26 NORTH, RANGE 4 EAST W.M.;
BEGINNING AT THE INTERSECTION OF THE NORTH LINE OF NORTH 125TH STREET AS
CONDEMNED IN KING COUNTY SUPERIOR COURT CAUSE NO. 96395 WITH THE WEST LINE OF
AURORA AVENUE (STATE HIGHWAY NO. 1) AS CONVEYED UNDER RECORDING NO. 2167721;
THENCE, ALONG SAID WEST LINE, NORTH 00 DEGREES 21'45" WEST 448.60 FEET; THENCE
NORTH 89 DEGREES 42'52" WEST, PARALLEL TO THE NORTH LINE OF SAID NORTH 125TH
STREET, 309.17 FEET;
THENCE SOUTH 00 DEGREES 02'52" WEST 225.90 FEET;
THENCE SOUTH 81 DEGREES 34'30" WEST 77.52 FEET; THENCE SOUTH 01 DEGREES
08'08" WEST 10.96 FEET TO A POINT WHICH BEARS NORTH 01 DEGREES 08'08" EAST
200.00 FEET FROM THE NORTH LINE OF SAID NORTH 125TH STREET, SAID POINT
HEREINAFTER BEING REFERRED TO AS POINT "A";
THENCE SOUTH 01 DEGREES 08'08" WEST 200.00 FEET TO THE NORTH LINE OF SAID
NORTH 125TH STREET;
THENCE SOUTH 89 DEGREES 42'52" EAST, ALONG SAID NORTH LINE, 393.07 FEET TO
THE POINT OF BEGINNING;
SITUATE IN THE CITY OF SEATTLE, COUNTY OF KING, STATE OF WASHINGTON.
EXHIBIT "A"
<PAGE>
EXHIBIT "B"
[MAP]
EXHIBIT "B"
<PAGE>
FILED
SEP 24 SEP 1996
PAM L. DANIELS
SNOHOMISH COUNTY CLERK
EX - OFFICIO CLERK OF COURT
SUPERIOR COURT OF WASHINGTON FOR SNOHOMISH COUNTY
CITY OF LYNNWOOD, a Municipal
corporation, NO. 96 - 2 - 00939 - 1
Petitioner, STIPULATION
vs. DOCKETED
Thomas P. Knorr and Theda M. Knorr, Trustees
for the Thomas P. Knorr and Theda M. Knorr
Family Trust, et. al.,
Respondents.
- --------------------------------------------------------------------------------
COMES NOW the City of Lynnwood (hereafter "CITY"), by and through its
attorney, John P. Watts, and the Respondent, Eagle Hardware & Garden, Inc.
(hereafter "EAGLE"), by and through its attorney, Kimberly W. Osenbaugh, BOGLE &
GATES, and stipulate and agree as follows:
1. The sum of Seven Million Four Hundred Twenty-one Thousand Six Hundred
Three Dollars ($7,421,603), together with and subject to the additional terms
and conditions of this Stipulation, shall be just compensation, inclusive of all
costs, fees, interest claims, and demands that arise from or that could have
been asserted in this action, to be paid by the CITY for the taking of the
property and property rights of EAGLE shown on the map attached as Exhibit A and
described in Exhibit B to this Stipulation ("Property").
2. The Property involved in this Stipulation and the Order and
Appropriation and Judgment includes additional property, which is included in
the Property described in Exhibit B, and which is not included in the Petition
filed in this action. The CITY has determined the additional property is in the
best interest of the CITY to acquire, and EAGLE does not object to the inclusion
of this additional property in the Order of Appropriation and Judgment.
3. Upon (1) the filing of the Order of
STIPULATION - 1
<PAGE>
Appropriation and Judgment; and (2) confirmation by the CITY that the CITY will
have good, marketable, and insurable title, free and clear of all liens and
mortgages arising by or through EAGLE; the CITY shall pay the balance of just
compensation in the amount of Two Million Nine Hundred Ninety-six Five Hundred
Ninety-eight Dollars ($2,996,598) to EAGLE, by wire transfer according to
EAGLE's instruction. Upon payment to EAGLE, EAGLE agrees to execute the
satisfaction of judgment in the form attached as Exhibit C.
4. Pursuant to the EAGLE Special Use Permit ("SUP") with the CITY,
City of Lynnwood File No. 94-SUP-0001, EAGLE is required to construct certain
walkways on Poplar Way, in connection with plans approved by the CITY, with
contribution from the CITY as follows: fifty percent (50%) for design and the
CITY pays for the final construction cost of construction of east side
walkways. The City will assume the responsibility for the walkway project,
with EAGLE reimbursing the city for fifty percent (50%) share of the cost of
design, and EAGLE reimbursing the CITY for the final construction cost of the
west side walkways. The accounting for this obligation will be consistent
with existing practices of the CITY and EAGLE regarding various mitigation
measures for EAGLE's SUP.
5. Upon presentation of evidence of authority to collect this sum on
behalf of WSDOT, EAGLE agrees to pay to the CITY a payment denominated WSDOT
Mitigation Payment in the amount of Two Hundred Ninety Thousand Dollars
($290,000). Said payment shall be paid to the CITY within five (5) days of
EAGLE's receipt of evidence of authority. The CITY will upon receipt of EAGLE's
payment promptly issue a letter signed by WSDOT stating that EAGLE has fulfilled
its obligation pertaining to freeway interchange costs for the EAGLE site; and
otherwise sufficient to release EAGLE's letter of credit.
6. The Terms of this Stipulation are specifically enforceable, and in the
event of any dispute or breach of the terms of this Stipulation, either party
may apply to the Court in this action for appropriate relief.
7. The CITY shall acquire the property "AS-IS." The CITY assumes all
liability for any
STIPULATION - 2
<PAGE>
defective condition of the Property, whether known or unknown, and regardless of
whether such liability is based on a claim in tort, contract, or under any
statute, ordinance, or regulation (including without limitation any laws
regulating hazardous or toxic materials, asbestos, lead paint, petroleum
byproducts, or other chemicals). The CITY hereby releases, waives, and
renounces any claim against EAGLE related to any and all such matters, and
agrees to indemnify and hold EAGLE harmless from any costs (including reasonable
attorney fees) arising from any claim or cause of action whatsoever relating
thereto.
The foregoing assumption, waiver, and indemnity includes only
contamination and other liability arising from: above-ground and below-ground
storage tanks; septic systems; car parts and other machinery sitting above
ground, and substances contained therein; trash; oil, gasoline, and other
chemicals used by occupants of the Property other than EAGLE and disposed of
on the surface of the Property; and materials in or on existing structures
and other improvements on the Property.
DATED this 24th day of September 1996.
RIACH, GESE, SEATHER & WATTS BOGLE & GATES
By:/s/ John P. Watts By:/s/ Kimberly W. Osenbaugh
----------------------------- --------------------------
JOHN P. WATTS, WSBA #1259 KIMBERLY W. OSENBAUGH, WSBA #5307
Lynnwood City Attorney Attorney for Respondents
Eagle Hardware and Garden
STIPULATION - 3
<PAGE>
[MAP]
<PAGE>
SUPERIOR COURT OF WASHINGTON FOR SNOHOMISH COUNTY
CITY OF LYNNWOOD, a Municipal
corporation, NO. 96 - 2 - 00939 - 1
Petitioner, ORDER OF APPROPRIATION
AND JUDGMENT
vs.
CLERK'S ACTION REQUIRED
Thomas P. Knorr and Theda M. Knorr, Trustees
for the Thomas P. Knorr and Theda M. Knorr
Family Trust, et. al., DOCKETED
Respondents.
- --------------------------------------------------------------------------------
CLERKS ACTION
ENTER THE JUDGMENT AS FOLLOWS:
JUDGMENT SUMMARY
1. Judgment Creditor: Eagle Hardware & Garden, Inc.
2. Judgment Debtor: City of Lynnwood
3. Judgment Principal $2,996,598
4. Attorney for Judgment Creditor: Kimberly W. Osenbaugh
5. Attorney for Judgment Debtor: John P. Watts
1. STIPULATION
IT IS STIPULATED by the Petitioner, City of Lynnwood, and the Respondent,
Eagle Hardware and Garden, Inc., that the following Order be entered.
2. ORDER
THIS MATTER coming on regularly for hearing this day before the above-
entitled Court for an Order of Appropriation and Judgment, the Petitioner, CITY
OF LYNNWOOD, appearing by John
ORDER OF APPROPRIATION AND
JUDGMENT-1
<PAGE>
P. Watts, City Attorney, and the Respondents, EAGLE HARDWARE & GARDEN, INC.,
appearing by and through Kimberly W. Osenbaugh of BOGLE & GATES, as to just
compensation to be paid by the City of Lynnwood for the taking of the property
and property rights hereinafter described, and the Court being fully advised in
the premises, now, therefore it is hereby ORDERED, ADJUDGED, AND DECREED that
2.1 The City of Lynnwood shall pay as and for just compensation for the
acquisition of the Eagle Hardware and Garden Inc., property and property rights,
shown on the map attached as Exhibit A and denominated "Eagle Hardware
Property," comprising 508,329 square feet, more or less, to wit:
SEE ATTACHED EXHIBIT "B"
the sum of Seven Million Four Hundred Twenty-one Thousand Six Hundred Three
Dollars ($7,421,603);
2.2 The City of Lynnwood is entitled to credit of Three Million Six
Hundred Eighty-four Thousand Three Hundred Eighty-eight Dollars ($3,684,388)
heretofore paid into the registry of the court on March 12, 1996, pursuant to an
order of immediate use and possession; and the City is further entitled to
credit of Seven Hundred Forty Thousand Six Hundred Seventeen Dollars ($740,617)
heretofore paid directly to Eagle Hardware & Garden, Inc., on August 23, 1996;
2.3 The Respondents have a judgment against the Petitioner, City of
Lynnwood, in the amount of Two Million Nine Hundred Ninety-six Five Hundred
Ninety-eight Dollars ($2,996,598) [$3,684,388 + $740,617 = $4,425,005;
$7,421,603 - $4,425,005 = $2,996,598] per the following:
JUDGMENT SUMMARY
1. Judgment Creditor: Eagle Hardware & Garden, Inc.
2. Judgment Debtor: City of Lynnwood
3. Judgment Principal $2,996,598
4. Attorney for Judgment Creditor: Kimberly W. Osenbaugh
5. Attorney for Judgment Debtor: John P. Watts
2.4 The City of Lynnwood shall pay the sum of Two Million Nine Hundred
Ninety-six Thousand Five Hundred Ninety-eight Dollars ($2,996,598) directly to
Eagle Hardware & Garden, Inc., care of their attorney, Kimberly W. Osenbaugh;
ORDER OF APPROPRIATION AND
JUDGMENT-2
<PAGE>
2.5 Upon entry of this Order the City of Lynnwood shall become the
owner of the property and property rights and title to the property shall be
vested in the City in fee simple as to that property described in Exhibit
"B," subject to the judgment in favor of Eagle.
DONE AND DATED this 24 day of Sept. , 1996.
/s/ (illegible)
-------------------------------------
COURT COMMISSIONER
Presented by:
RIACH, GESE, SEATHER & WATTS
By: /s/ John P. Watts
------------------------
JOHN P. WATTS, WSBA #1259
Lynnwood City Attorney
Approved for Entry;
Notice of Presentation Waived:
BOGLE & GATES
By: /s/ Kimberly W. Osenbaugh
--------------------------
KIMBERLY W. OSENBAUGH, WSBA #5307
Attorneys for Respondents
Eagle Hardware & Garden
ORDER OF APPROPRIATION AND
JUDGMENT-3
<PAGE>
EAGLE HARDWARE & GARDEN, INC.
COMPUTATION OF NET INCOME PER SHARE - EXHIBIT 11.1
[000, EXCEPT PER SHARE DATA]
<TABLE>
<CAPTION>
[UNAUDITED] [UNAUDITED]
13 WEEKS ENDED 39 WEEKS ENDED
------------------------- -------------------------
OCTOBER 25, OCTOBER 27, OCTOBER 25, OCTOBER 27,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income as reported $7,591 $2,473 $18,620 $9,706
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income used for primary
computation $7,591 $2,473 $18,620 $9,706
Add (where dilutive):
Tax effected interest and amortization
of debt expense on convertible debt 921 922 2,765 2,766
------------ ------------ ------------ ------------
Net income used for fully
diluted computation $8,512 $3,395 $21,385 $12,472
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average number of
common shares outstanding 25,538 22,868 23,794 22,851
Add (where dilutive):
Assumed exercise of those
options that are common stock
equivalents net of treasury
shares deemed to have been
repurchased 517 261 423 243
------------ ------------ ------------ ------------
Weighted average number of
common and common equivalent
shares outstanding, used for
primary computation 26,055 23,129 24,217 23,094
Add (where dilutive):
Shares applicable to stock options
in addition to those used in primary
computation due to the use of
period-end market price when
higher than average price 61 1 41 4
Assumed exercise of
convertible debt 4,790 4,792 4,791 4,792
------------ ------------ ------------ ------------
Adjusted shares outstanding used
for fully diluted computation 30,906 27,922 29,049 27,890
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
15
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-26-1997
<PERIOD-START> JAN-27-1996
<PERIOD-END> OCT-25-1996
<CASH> 44,900
<SECURITIES> 32,035
<RECEIVABLES> 7,834
<ALLOWANCES> 2,604
<INVENTORY> 166,173
<CURRENT-ASSETS> 254,899
<PP&E> 282,703
<DEPRECIATION> 26,378
<TOTAL-ASSETS> 514,537
<CURRENT-LIABILITIES> 93,334
<BONDS> 108,967
0
0
<COMMON> 263,455
<OTHER-SE> 38,500
<TOTAL-LIABILITY-AND-EQUITY> 514,537
<SALES> 568,915
<TOTAL-REVENUES> 568,915
<CGS> 410,660
<TOTAL-COSTS> 410,660
<OTHER-EXPENSES> 126,603
<LOSS-PROVISION> 1,323
<INTEREST-EXPENSE> 6,108
<INCOME-PRETAX> 27,898
<INCOME-TAX> 9,278
<INCOME-CONTINUING> 18,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,620
<EPS-PRIMARY> .77
<EPS-DILUTED> .74
</TABLE>
