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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15[d] OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15[d] OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-19830
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 AVENUE SW RENTON, WA 98055
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(Address of principal executive offices)
(425) 227-5740
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(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
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<S> <C>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock (symbol: "EAGL") The Nasdaq Stock Market
6.25% convertible subordinated
debentures due 2001 (symbol: "EAGLG") The Nasdaq Stock Market
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO _
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. ( )
The aggregate market value of the Common Stock of the Registrant held by
nonaffiliates of the Registrant on April 1, 1998, was $454,715,326. For the
purposes of this response, executive officers and directors are deemed to be the
affiliates of the Registrant and the holding by nonaffiliates was computed as
25,708,287 shares.
The Registrant had 29,072,106 shares of Common Stock, without par value,
outstanding at April 1, 1998.
Total number of pages, including cover page:__ Exhibit Index appears at page __.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Registrant's 1997 Annual Report to Shareholders are
incorporated by reference into Part II; and
(2) Portions of the Registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission in connection with its 1998 Annual
Meeting of Shareholders are incorporated by reference into Part III hereof.
FORWARD-LOOKING STATEMENTS
Some of the information in this Annual Report, including anticipated store
openings, capital requirements and trends in the Company's markets, 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. (See
Item 1 - Business - Risk Factors)
PART I
ITEM 1 - BUSINESS -
GENERAL
Eagle Hardware & Garden, Inc. ("Eagle Hardware" or the "Company") is a
leading operator of customer-friendly home improvement centers in the western
United States. Since opening its first store in Spokane, Washington in
November 1990, the Company has grown to 32 stores with approximately 4.1 million
square feet of selling space. Eagle Hardware stores generated average annual
sales per store of $32.5 million in 1997, the second highest in the industry.
The Company's stores average approximately 128,000 square feet and feature a
product assortment of over 65,000 stock keeping units ("SKUs"), significantly
more than the Company's principal competitors, while maintaining an average
in-stock position of over 98%. Since its inception, the Company has focused on
creating the best home improvement shopping experience for its customers by
combining the selection and value associated with traditional warehouse-format
home centers with the comfortable atmosphere and service orientation of
specialty retailers.
The Company has differentiated its stores from those of other warehouse
home improvement retailers by providing a bright, clean and well-organized
customer-friendly shopping environment and by offering "More of
Everything-Registered Trademark-," with one of the broadest and deepest
selections of brand name home improvement products available in the United
States. Through its highly trained sales associates, including Eagle Experts-TM-
and Eagle Service Specialists-TM-, the Company provides exceptional customer
service to both its target do-it-yourself customers, as well as professional
contractors. The Company believes the successful implementation of its business
strategy has made Eagle Hardware a more appealing destination for home
improvement shoppers, including female customers, who favor the
customer-oriented shopping environment of the Company's stores over the often
confusing atmosphere of traditional warehouse-format home centers.
INDUSTRY OVERVIEW
According to industry publications, the do-it-yourself home improvement
industry in the United States generated aggregate revenues of approximately
$142.5 billion in 1997. Over the last 10 years, the industry has undergone
significant changes, with the warehouse-format home center retailers gaining
significant market share in a
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number of markets in the United States relative to traditional home center,
hardware and lumber yard operators, by offering lower prices and taking
advantage of economies created by larger sales volumes. Although the home
improvement industry remains fragmented, it has experienced increasing
consolidation during recent years, with the sales of the five largest operators
representing over 30% of the estimated overall market in 1997 as compared to 15%
of the overall market in 1991. The Company believes this trend will continue,
and that opportunities exist for service-oriented home improvement retailers to
benefit from this continuing consolidation.
BUSINESS STRATEGY
The Company's goal is to be the premier operator of customer-oriented home
improvement centers in the United States. To achieve this goal, Eagle Hardware
has developed and is implementing a business strategy designed to satisfy the
preferences expressed by its target do-it-yourself customers by combining
selection and value with exceptional customer service and convenience. The key
elements of the Company's strategy are as follows:
CUSTOMER-FRIENDLY STORE ENVIRONMENT The Company strives to create the best
shopping experience by providing a customer-friendly store environment that
is clean, attractive and "easy to shop," with bold signage, wide, brightly
lit aisles and well-marked departments designed to help customers easily
find desired merchandise categories. For ease of access, the Company's
innovative Design Center is typically positioned centrally within the store
and adjacent to 8,000 square feet of fully furnished and accessorized
kitchen and bath displays to allow customers to view products in real-life
settings. A tiled "racetrack" aisle encircles the Design Center and related
departments for easy customer access to the other merchandise departments
within the store. Seventeen to 26 cash registers are positioned at various
places in each store to facilitate rapid check-out. These and other
features provide Eagle Hardware customers with an enjoyable shopping
experience in a specialty-store environment.
"MORE OF EVERYTHING -Registered Trademark-" MERCHANDISING PHILOSOPHY Eagle
Hardware offers one of the broadest and deepest selections of virtually
every category of home improvement merchandise in the United States,
providing one-stop shopping for its target do-it-yourself customers as well
as professional contractors. In addition to serving the major project needs
of its customers, the Company also targets "fix-it" repair and maintenance
customers. The Company's home centers average approximately 128,000 square
feet (excluding storage and exterior garden square footage) of retail floor
space and the product selection of each Eagle Hardware home center consists
of over 65,000 SKUs, considerably more than most hardware and home
improvement stores. The Company's home centers also carry significantly
more SKUs than its principal competitors, while maintaining an average
in-stock position of over 98%.
EXCEPTIONAL SERVICE To further enhance the Eagle Hardware shopping
experience, the Company is committed to providing outstanding customer
service. To best serve the needs of its do-it-yourself and professional
customers, all Eagle Hardware associates are trained to provide the
in-depth product knowledge and high levels of service typically associated
with specialty stores. To support this level of service, the Company has
developed and implemented a comprehensive training program, administered by
each store's training director, which includes weekly training sessions for
all associates focusing on service, selling and product knowledge. Through
independent study and testing on product knowledge, these associates can
achieve Eagle Expert-TM- certification and qualify for higher compensation.
To complement the Company's commitment to customer service, each Eagle
Hardware store has two Eagle Service Specialists-TM- who work directly with
customers to furnish unique and personalized solutions for special orders,
installation, major projects and other requests. In 1998, the Company plans
to introduce the Eagle "PRO" training program. Employees participating in
the "PRO" training will receive additional training in operational skills,
selling skills and product knowledge beyond the basic training that all
store associates receive. In addition, in its effort to be the "Nordstrom"
of the home improvement industry in terms of customer service, the Company
maintains a "no-hassle" return policy to make it easy for customers to
return or exchange products.
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CONVENIENT LOCATIONS Recognizing the importance of convenience in the
customer's decision-making process, the Company places a priority on
developing new stores in locations that maximize convenience and
accessibility. Management's home improvement industry experience in the
western United States has enabled the Company to develop an in-depth
understanding of its existing and targeted new markets, which the Company
believes has allowed it to identify and secure favorable sites for new
stores. The Company typically locates its stores near major freeways or
thoroughfares to provide convenient access and greater visibility.
EVERYDAY LOW PRICES Eagle Hardware has a policy of maintaining everyday
low prices on products carried by other home centers and generally does not
engage in promotional sale pricing. The Company will match prices on
products carried by competing home centers. At the same time, the Company
benefits from higher margins on hard-to-find merchandise and on products
not carried by its competitors.
EXPANSION STRATEGY
The Company's expansion strategy is two-fold. The first element of the
Company's strategy is to cluster multiple home centers in metropolitan areas.
This clustering strategy is designed to saturate larger markets in order to
increase market share and operating leverage. The second element of the
Company's strategy is to operate home centers in single-store markets. This
strategy is designed to establish favorable market positions in small markets in
which the Company believes operating costs are typically lower and competition
is less intense.
CLUSTER STORES IN METROPOLITAN MARKETS To provide more convenient access
to its stores, expand its total market share and achieve economies of
scale, the Company's strategy is to continue clustering stores in its
existing metropolitan markets, such as Seattle, Salt Lake City and Denver,
and enter additional metropolitan markets in the western United States. The
Company believes this strategy has enabled it to achieve the largest market
share in the greater Seattle area. Consistent with this strategy, the
Company currently plans to open additional stores in the greater Seattle
and Denver markets in fiscal 1998. Future markets in which the Company
plans to apply its clustering strategy include the Portland, Oregon market
and several California markets.
OPEN HOME CENTERS IN SINGLE-STORE MARKETS The second element of the
Company's strategy is to open home centers in single-store markets. The
Company believes that these markets typically have less competition from
other home centers, provide lower operating costs, such as rent and
advertising, and represent numerous expansion opportunities. The Company
currently operates home centers in single-store markets such as Kennewick
and Yakima, Washington, Medford, Oregon and Billings, Montana. The Company
believes that there are numerous single-store market opportunities in the
western United States, including certain smaller markets in California. To
augment this expansion strategy in certain single-store markets, the
Company utilizes a store prototype described further under "Store Design."
In choosing specific sites within a market, the Company takes into account
numerous factors, including local demographics and consumer spending patterns,
the average age of the homes in the area, traffic patterns, the location of
competitors and overall retail activity. The following table shows the location,
anticipated opening, size and status of each of the Company's currently planned
store openings for fiscal 1998:
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STORE LOCATION ANTICIPATED OPENING SELLING SQUARE FEET SITE STATUS
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GREATER SEATTLE:
Smokey Point, Washington Third Fiscal Quarter 1998 168,732 (1) Under Contract
GREATER DENVER:
Aurora, Colorado Fourth Fiscal Quarter 1998 125,100 Under Contract
MARKETS IN SOUTHERN CALIFORNIA:
Westminster, California Fourth Fiscal Quarter 1998 113,100 Under Contract
Chino Hills, California Fourth Fiscal Quarter 1998 124,698 Under Contract
SINGLE-STORE MARKETS:
La Quinta, California Opened February 26, 1998 164,755 (2) Open
Sparks, Nevada Third Fiscal Quarter 1998 177,060 (3) Under Contract
Reno, Nevada Fourth Fiscal Quarter 1998 175,120 (1) Under Contract
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(1) Includes an attached drive-through lumber and building materials yard
consisting of 57,350 square feet.
(2) Includes an attached drive-through lumber and building materials yard
consisting of 55,905 square feet.
(3) Includes an attached drive-through lumber and building materials yard
consisting of 60,900 square feet.
STORE DESIGN
Since its inception, the Company has focused on creating the best home
improvement shopping experience for its customers by combining the selection and
value associated with traditional warehouse-format home centers with the
comfortable atmosphere and service orientation of specialty retailers. The
Company's home centers are constructed based on a standardized plan developed
from management's research and extensive industry experience. The focal point of
the Company's home centers is an innovative Design Center, which is intended to
stimulate home improvement ideas by conveying the image of a free home show
every day. The Design Center is typically adjacent to an area of approximately
8,000 square feet featuring kitchen and bath displays in fully accessorized
real-life settings and a wide assortment of countertops, wallpaper, floor
coverings and window treatments. Eagle Hardware's design coordinators work with
customers at the Design Center to conceptualize and plan virtually any home
decorating project.
The Design Center is surrounded by a tiled "racetrack" aisle, providing
convenient access to the store's various departments, which are located in
well-defined areas around the central core. Related departments are located
adjacent to one another and merchandise is displayed in a consistent manner
according to centrally developed plan-o-grams. Each department is designed for
effective product presentation to appeal to specific customer needs. High
warehouse-style racking is blended with attractive displays and wide, brightly
lit aisles.
Most Eagle Hardware stores have an additional entrance and exit, cashier
and loading area conveniently located near the lumber and building materials
department. This separate access enables customers to obtain their lumber and
building supplies quickly and comfortably, without having to carry merchandise
through other departments. Employees are available to help customers load their
vehicles. The Company believes that its customer-friendly store format, with
well-defined departments, provides customers with an attractive shopping
environment, as well as the ability to locate merchandise easily and check out
quickly.
The Company has augmented its expansion strategy by opening some new stores
utilizing a prototype designed for certain single-store markets. This prototype
consists of a main store of approximately 95,000 square feet and includes
certain features intended to cater to the unique needs of do-it-yourself and
professional customers in small markets, including an attached drive-through
lumber and building materials yard of approximately 60,000 square feet. Further,
the prototype offers the professional customer a wider range of products and
services, including a contractor's office with phone and fax ordering
capabilities, in addition to job site delivery. As with the larger Eagle
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Hardware stores, this prototype offers "More of Everything-Registered
Trademark-" with a product assortment of over 65,000 SKUs. The Company has
opened four stores utilizing this prototype.
MERCHANDISING
PRODUCT SELECTION AND DISPLAY Through its broad merchandising selection, Eagle
Hardware seeks to offer "More of Everything-Registered Trademark-" to its
customers and create a one-stop shopping environment where do-it-yourself
customers and professional contractors can purchase all necessary items in a
highly efficient manner. The Company's merchandise selection is broad enough to
allow both do-it-yourself customers and professional contractors to purchase
virtually every item needed to build an entire house, including many items not
generally carried by competitors. The Company believes that its SKU count of
over 65,000 items is broader than its primary warehouse home center competitors.
The Company's home centers also maintain an average in-stock position of over
98%.
The major departments in each Eagle Hardware home center are plumbing,
electrical and lighting; lumber and building materials; paint and decor; tools
and hardware; and lawn and garden supplies. The Company's percentages of net
sales by product categories have been fairly stable over time. The following
table sets forth the Company's percentage of net sales by product categories for
fiscal 1997:
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CATEGORIES PERCENT
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Plumbing, electrical and lighting______________ 24%
Lumber and building materials__________________ 26
Paint and decor________________________________ 18
Tools and hardware_____________________________ 16
Lawn and garden supplies_______________________ 16
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Total net sales___________________________ 100%
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The number of items described below may vary slightly from store to store
based on local market characteristics.
EAGLE HARDWARE'S DESIGN CENTER is the focal point of the central core of
each of the Company's home centers. The central core features different kitchen
and bathroom displays, approximately 27 styles of kitchen cabinets, brand name
appliances such as G.E., Jenn-Air, Kitchen Aid, Maytag, Panasonic and Whirlpool
and a large selection of bathroom fixtures. Many of the kitchen and bath
displays are arranged in fully accessorized real-life settings. A wide
assortment of countertops, wallpaper, floor coverings and window treatments is
also offered. Eagle Hardware's design coordinators, using specially programmed
computers, color coordination boards and a variety of free literature, work with
customers to conceptualize and plan virtually any home decorating project. The
Design Center is supported and complemented by the surrounding departments,
which are designed in part to provide customers with one-stop shopping to
implement projects conceived in the Design Center.
EAGLE HARDWARE'S PAINT AND DECOR DEPARTMENT carries a wide variety of
indoor and outdoor paints and stains. A computerized color matching service
helps customers analyze and select paint and stain colors more easily. The
Company's paint inventory includes competitively priced private label paints as
well as high-quality, brand name products. In addition to its large selection of
paints, stains and accessories, this department also carries a full line of
window coverings, carpet and other floor coverings, ceramic tiles, mirrors and
approximately 600 different wallpaper patterns and borders in stock. There is
also an extensive offering of wallpaper available by special order. The
department also stocks over 600 SKUs of closet and storage materials and
accessories.
EAGLE HARDWARE'S PLUMBING DEPARTMENT carries over 275 brand name faucets,
valves and shower heads, from manufacturers such as Delta, Moen and Price
Pfister, as well as imports from Europe, such as Grohe, which are not generally
carried by other home centers. Hundreds of other models, including those from
Kohler and Chicago Faucet, are available through special order. This department
stocks lines from three major domestic manufacturers of plumbing fixtures,
including Kohler, American Standard and Briggs and offers Jacuzzi bath tubs and
showers. Eagle
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Hardware carries full lines of plastic, galvanized and copper pipe products,
ranging from one eighth-inch to six-inch diameters. This department also stocks
over 1,320 different gaskets, stems and miscellaneous parts for faucets and
valves, and is equipped to custom cut and thread steel pipe for customers, from
one half-inch diameter to four-inch diameter.
EAGLE HARDWARE'S TOOLS AND HARDWARE DEPARTMENT not only carries major
brands of do-it-yourself tools and accessories, but also a wide selection of
commercial tools for contractors. As an example of the breadth of selection in
this department, the Company stocks more than 120 types of hammers, over 2,400
different power tool accessories and more than 120 different circular saw
blades. The Company also carries a wide range of contractors' tools such as
generators, concrete saws, tile and brick saws, table saws, drill presses,
welding equipment, pressure washers, air tools and compressors. The Company
stocks a variety of brand name power tools, including Black & Decker, Delta,
DeWalt, Hitachi, Homelite, MK Diamond, Makita, Milwaukee, Porter Cable, Ryobi,
Senco, Skil, Stanley Bostitch and Wen. Many harder-to-find specialty tools are
also offered. This department features over 3,700 innovative "flip bins" filled
with hardware items that are not typically offered by the Company's competitors,
from plastic tips for chair legs to bumpers, crown corks, corrugated fasteners
and metric fasteners. The fastener selection ranges from common nuts and bolts
to industrial grade 150,000-pound tensile strength fasteners. The Company
carries over 85 varieties of chain, more than 180 types of rope and over 350
types of hinges, as well as hard-to-find items such as horseshoes and industrial
hose sold by the foot.
EAGLE HARDWARE'S ELECTRICAL DEPARTMENT carries 100 different heaters and
fans, more than 260 different telephones and accessories, over 360 different
switch plates and more than 260 different light bulbs, many of which are not
carried by competing home centers. This department stocks virtually every kind
of conduit and circuit breaker commonly used in residential structures in the
western United States and also carries specialized tools for professional
electricians.
EAGLE HARDWARE'S LIGHTING DEPARTMENT displays more lighting fixtures than
any other major home center in the United States of which the Company is aware.
This department features over 1,600 different styles of lighting fixtures,
priced from under $10 to over $2,500, more than 450 kinds of lamp parts, over
120 styles of lamp shades and over 150 types of replacement glass for light
fixtures.
EAGLE HARDWARE'S LAWN AND GARDEN DEPARTMENT carries a broad selection of
hand and power gardening and lawn tools, as well as a wide variety of brand name
fertilizers and other chemicals. The lawn and garden department also carries a
broad range of seasonal nursery plants, shrubs and trees, as well as patio
furniture and barbecues. The Company carries a full line of lawn and garden
supplies and products including such brand names as Ames Tools, Black & Decker,
John Deere, Murray, Ortho, Scotts, Toro and Weedeater. To build the plant
section of the Company's lawn and garden department into a year-round business,
most stores have an indoor plant trellis and display area ranging in size from
approximately 1,200 to 1,500 square feet. In certain markets, covered outdoor
greenhouses have been added to further establish the lawn and garden department
as a year-round business. The Company carries a large inventory of live indoor
plants, supplemented by a full line of silk flowers and greenery.
EAGLE HARDWARE'S LUMBER AND BUILDING MATERIALS DEPARTMENT carries a full
line of windows and doors, including wood, aluminum and vinyl windows and
exterior and interior doors from Bend Door, Doorcraft, Nord Door, Challenge
Steel Doors, Jeld-Wen Corporation and Summit Window. On a special order basis,
Eagle Hardware offers the Pro-Line, Designer and Architectural Series of wood
windows from Pella. This department stocks lumber up to 16 feet in length and
from two to 12 inches in width, 450 types of decorative moldings, a full line of
Armstrong ceiling tile, a wide variety of plywood, particle board, metal fencing
and roofing materials, including roll, three-tab, metal and fiberglass, a large
selection of roof coatings and a complete selection of cement, paver and block
products. The department also stocks over 60 kinds of ladders.
PRICING Eagle Hardware emphasizes its policy of maintaining everyday low prices
on products carried by competitors and does not generally engage in promotional
advertising that emphasizes sale pricing. The Company has a low price guarantee
that it advertises in all of its markets. The Company benefits from higher
margins on hard-to-find merchandise and on products not carried by its
competitors. Although Eagle Hardware's goal is to be perceived as very price
competitive by its customers, the Company believes that enabling customers to
purchase all
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of the items needed for a particular project at one place is more important than
offering the lowest price on any single item.
MARKETING The Company's marketing programs are designed to create an awareness
of Eagle Hardware's comprehensive selection of brand name merchandise, superior
customer service and everyday low prices. The Company's marketing department
develops all aspects of the Company's advertising, marketing and promotional
programs. The Company's primary advertising vehicle in each of its markets
consists of four-color newspaper inserts designed by the Company's in-house
graphics department. The Company also utilizes television and limited radio and
billboard advertising.
A number of Eagle Hardware television advertisements in the Seattle market
area feature local professional athletes such as Randy Johnson, Jay Buhner and
Edgar Martinez of the Seattle Mariners major league baseball team. The Company
also sponsors promotional activities at professional sporting events from time
to time. The Company believes that these marketing programs both enhance
customer awareness of the Eagle Hardware & Garden-Registered Trademark- name and
foster support in the local community.
CUSTOMER SERVICE
Eagle Hardware is committed to providing superior customer service.
Carefully selected Eagle Experts-TM-, many with extensive experience in their
respective fields, are available throughout the store to provide specialized
advice to do-it-yourself customers and professional contractors. Additional
specialized personnel are available in every department, including the Design
Center and the Project Service Center, to help customers conceptualize and plan
virtually any home improvement project. To complement the Company's commitment
to customer service, each Eagle Hardware store has two Eagle Service
Specialists-TM-. These Service Specialists work directly with customers to
furnish unique and personalized solutions for special orders, installation,
major projects and other requests.
In an effort to enhance its shopping environment, Eagle Hardware employees
perform all store restocking after hours in order to keep the aisles clear and
minimize customer disruption during business hours. Each of the Company's stores
has from 17 to 26 cash registers, enabling customers to pay for their
merchandise quickly. Customer questions, problems, returns and exchanges are
handled at a convenient service desk near the main entrance of the store. A
"no-hassle" return policy makes it easy for customers to return or exchange
products.
Most Eagle Hardware stores have a lounge area which contains convenient
seating, telephones and vending machines. The Company offers free electric carts
and wheelchairs for the disabled, three-wheeled baby strollers and a baby
changing area. The Company offers a credit card to qualified contractors,
businesses and retail customers under a program owned and operated by a third
party. Eagle Hardware customers can also pay by Visa, MasterCard, Discover and
American Express. Eagle Hardware home centers are open seven days a week and
most stores operate Monday through Saturday from 7:00 a.m. to 9:00 p.m. and on
Sunday from 9:00 a.m. to 7:00 p.m.
SPECIALIZED SERVICES Eagle Hardware offers a number of specialized services,
many of which are not offered by its competitors. These services include a cut
shop, an on-site locksmith, an Idea Center, a Project Service Center and a
separate lumber and building materials cashier and loading area. In addition,
the Company offers a delivery service and a product installation service.
CUT SHOP Eagle Hardware stores offer a cut shop where customers can have window
screen, fencing, glass, netting, chain, cable, hose, rope and a variety of other
materials custom cut and, in some instances, custom made. Custom cutting is done
free of charge or, on large projects, for a competitive fee. Lumber cutting is
complimentary for up to two pieces of material and is done in the lumber and
building materials department.
LOCKSMITH SERVICE All Eagle Hardware stores have a full-time locksmith
available for on-site consultation and assistance with locks, keys and home and
commercial security systems. The locksmith is also available for field calls.
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IDEA CENTER Each of the Company's home centers features an Idea Center where
do-it-yourself books, plans and video tapes are offered for purchase. Free
product literature and do-it-yourself pamphlets are also available. Eagle
Hardware personnel conduct workshops on a variety of subjects, ranging from
basic electrical wiring to wallpaper hanging and ceramic tile installation.
PROJECT SERVICE CENTER To assist do-it-yourself customers and professional
contractors, Eagle Experts-TM- and other specially trained personnel are
available at the Project Service Center, located in the lumber and building
materials department, to assist in designing and planning projects, and to help
select the appropriate materials. Free estimates for customer projects are
prepared at the Project Service Center.
LUMBER AND BUILDING MATERIALS CASHIER AND LOADING AREA Most Eagle Hardware
stores have an additional entrance and exit, cashier and loading area
conveniently located near the lumber and building materials department. This
separate access enables customers to obtain their lumber and building supplies
quickly and comfortably, without having to carry merchandise through other
departments. In addition, the Company's employees assist customers in loading
their vehicles.
DELIVERY SERVICE The Company offers a low cost delivery service at each of its
stores. Each truck is fully equipped, including a large capacity, rough terrain
forklift.
PRODUCT INSTALLATION SERVICE Most Eagle Hardware stores offer professional
product installation services. The Company has an agreement with a regional
installation company to provide basic installation for a number of the products
that the Company sells. This service is coordinated by Eagle Hardware personnel
to ensure customer satisfaction and a competitive fee structure.
EMPLOYEE TRAINING AND COMPENSATION
Eagle Hardware strives to develop the technical and interpersonal skills of
its store personnel to ensure that customers consistently receive knowledgeable
and courteous assistance. The Company provides extensive training for its entry
level store personnel through a comprehensive in-house training program that
combines on-the-job training with formal seminars and meetings. On an ongoing
basis, store personnel attend frequent in-house training sessions conducted by
the Company's training staff or by manufacturers' representatives, and receive
sales, product and other information in frequent manager meetings. Through
independent study and testing of product knowledge, sales associates can achieve
Eagle Expert-TM- certification and qualify for higher compensation. Starting in
1998, participants in the new Eagle "PRO" training program will receive
additional training in operational skills, selling skills and product knowledge
beyond the basic training that all store associates receive.
Detailed training records are kept on all Eagle Hardware store personnel,
including the date and subject of each training session. To further develop the
professional skills of store personnel, the Company has appointed an on-site
training director for each store. The store training director is responsible for
supervising, organizing and scheduling all store training activities and
customer workshops. Working in conjunction with the store manager, the store
training director ensures that all store personnel attend weekly training
meetings and that training records are kept up to date. Additionally, the store
training director is responsible for instructing store personnel in the
Company's policies and procedures. The Company's training program is supervised
by a Vice President who has over 20 years of experience training home center
employees.
As part of its commitment to exceptional customer service, Eagle Hardware
strives to attract experienced and qualified personnel by paying competitive
wages in each of its markets. The Company expects that certain of its store
managers will receive total compensation of over $125,000 in the current fiscal
year, which the Company believes is more than the compensation received by store
managers for many other home center chains. Most of Eagle Hardware's store
personnel are paid on an hourly basis. Store managers and assistant managers
are paid bonuses based on certain criteria, including customer service, sales,
gross margin, store profitability and inventory
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levels. Corporate buyers are paid bonuses based on the attainment of certain
sales and gross margin goals. Certain other corporate management personnel are
paid bonuses based on total Company pretax income. The Company believes that its
bonus plan is both unique in its industry and highly motivational, in part
because store manager bonuses can equal up to 100% of base compensation.
In addition to competitive wages, Eagle Hardware offers its employees a
comprehensive benefits program. Full-time employees are eligible to participate
in an Employee Stock Ownership Plan ("ESOP") after 24 months of service. Under
the ESOP, an employee may be credited with a maximum annual contribution of 10%
of annual salary up to a maximum contribution of $3,500. Funds credited to
individual accounts in the ESOP will be invested primarily in the Common Stock
of the Company. The Company also maintains a 401(k) retirement savings plan and
is in the process of implementing an Employee Stock Purchase Plan ("ESPP").
Eagle Hardware also offers a stock option plan under which certain
employees are granted options to purchase the Company's Common Stock at its fair
market value on the date of grant. Options generally vest over a five-year
period and are exercisable for a period of 10 years.
Eagle Hardware believes that its total compensation plan and the
opportunities it offers employees for advancement within the Company are key to
employee performance, motivation and retention. Management believes that it has
a lower-than-average employee turnover rate, due, in part, to its comprehensive
compensation benefits plan.
PURCHASING AND DISTRIBUTION
The Company purchases most of its merchandise directly from manufacturers.
Eagle Hardware has a staff of ten buyers, each of whom has responsibility for
specified product categories. The Company is not dependent on any single vendor
and believes that alternative sources are available for virtually all of its
products. The Company operates principally on a purchase order basis and
typically does not maintain long-term purchase contracts with its vendors.
Approximately 80% of the merchandise purchased by the Company is shipped by
the vendors directly to its stores. In order to help maintain a high in-stock
position and to improve inventory management and distribution efficiencies as
the number of its stores increases, the Company operates a 214,000 square foot
warehouse and distribution facility in the Puget Sound area. This facility is
used for stocking and distributing merchandise purchased overseas and from
certain domestic vendors, for cross-docking merchandise transferred between
stores and for the consolidation of freight for the Alaska and Hawaii stores.
The distribution center ships merchandise to most of the Company's stores at
least weekly using a combination of Company-owned equipment and common carriers.
In addition to its primary warehouse and distribution facility, as of January
30, 1998, the Company also leased additional warehouse space totaling
approximately 150,000 square feet. The Company is currently under contract for a
new 600,000 square foot warehouse/distribution center in the Puget Sound area
that is under construction. The Company plans to move into this facility by the
end of fiscal 1998 and consolidate all of its existing warehouse operations in
this facility.
MANAGEMENT INFORMATION SYSTEMS
The primary component of the Company's management information systems is
the JDA Retail Software package, which operates on an IBM AS/400 computer.
Corporate buyers utilize the JDA system to set up new items, order the initial
inventory for new stores and maintain store level prices. Each store is also
networked to the AS/400 for real-time receiving and replenishment. As an
additional component of the management information systems, each store is
equipped with point-of-sale scanning, price lookup and sales polling
capabilities utilizing a network of 17 to 26 registers per store. The Company
maintains its accounting information primarily on the IBM AS/400, utilizing
certain financial modules of the JDA system. In addition, the
warehouse/distribution center utilizes the JDA system in its daily operations.
The Company is currently refining its implementation of the perpetual inventory
reporting module of JDA.
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The Company also continually evaluates the adequacy of its management
information systems, including its inventory control and distribution systems,
and in the future will need to upgrade or reconfigure its management information
systems to support its planned expansion.
COMPETITION
The home improvement, hardware and garden businesses are highly
competitive. The Company competes against traditional hardware, plumbing,
electrical and home supply retailers, as well as warehouse-format and discount
retail stores and catalog companies. Eagle Hardware's two-fold expansion
strategy is to cluster home centers in large metropolitan areas such as Seattle,
Salt Lake City and Denver, and to open single home centers in smaller markets.
Ernst Home Center ("Ernst"), formerly a primary competitor in the greater
Seattle area, Salt Lake City and certain smaller markets, 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.
For a period of time prior to its bankruptcy, the Company operated 21 stores in
markets with Ernst stores. Liquidation of the Ernst stores was completed in the
Company's fourth quarter of fiscal 1996.
Twelve of the Company's 32 existing stores are located in the greater
Seattle metropolitan market. Eagle Hardware's principal competitors in this
market are Home Depot, Fred Meyer and HomeBase. Home Depot, a warehouse-format
home center with over 600 stores in the United States, currently operates eleven
stores in the Seattle metropolitan market. Two of these stores are located next
to existing Eagle Hardware stores. The Company's gross margin and operating
income are generally lower for stores located in markets where Home Depot also
operates stores.
Four of the Company's existing stores are located in the Salt Lake City
metropolitan market. The Company's principal competitors in this market are
Home Depot, Fred Meyer and HomeBase. Home Depot operates three stores in the
Salt Lake City market. Three of the Company's existing stores are located in the
Denver metropolitan market and the Company intends to open additional stores in
this market. The Company's principal competitors in the Denver market are Home
Depot, Builders' Square, HomeBase and Hugh M. Woods (a unit of Payless
Cashways).
Thirteen of the Company's existing stores are located in smaller markets.
Historically, the Company's principal competitors in these markets have included
Fred Meyer and HomeBase, as well as traditional hardware, plumbing, electrical
and home supply retailers. During 1997, Home Depot opened stores in Pueblo,
Colorado and Spokane, Washington. Home Depot is currently constructing a store
in Anchorage, Alaska, next to an existing Eagle Hardware store. This Home Depot
is expected to open in the spring of 1998. According to published reports, Home
Depot is pursuing sites in Billings, Montana, Coeur d'Alene, Idaho and Honolulu,
Hawaii, as well as a second site in Spokane, Washington. The Company's ability
to expand into and operate profitably in new markets, particularly small
markets, may be adversely affected by the existence or entry of competing
warehouse-format home centers.
EMPLOYEES
Each Eagle Hardware home center employs approximately 120 to 250 full- and
part-time personnel, depending on the sales volume of the store and the time of
the year. Store management includes the store manager, a store
manager-in-training, four to five assistant store managers, department managers
and sales supervisors. As of January 30, 1998, the Company employed
approximately 5,600 persons, of whom approximately 210 were in corporate
administration. Of these 5,600 persons, approximately 87% were full-time
employees. Eagle Hardware is not a party to any collective bargaining agreements
and is not aware of any efforts to unionize its employees. The Company considers
its relations with its employees to be good.
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TRADEMARKS AND SERVICE MARKS
The Company holds a federal trademark registration for MORE OF
EVERYTHING-Registered Trademark- (and design) and a concurrent federal service
mark registration for EAGLE HARDWARE & GARDEN-Registered Trademark- (and design)
for the western United States. Eagle Food Centers, Inc., a grocery store chain
in the midwest, holds a concurrent federal registration for "Eagle" for the
eastern United States, and, with certain limited geographic exceptions, the
parties cross-license each other for use of the word "Eagle" in the other
party's geographic markets. The Company does not expect that this arrangement
will impact its ability to use the EAGLE HARDWARE & GARDEN-Registered Trademark-
(and design) mark in any states in which it currently operates or anticipates
opening stores. In addition, the Company claims common law rights to the
foregoing and various other trademarks and service marks.
RISK FACTORS
COMPETITION The home improvement, hardware and garden businesses are all
highly competitive. The Company competes against traditional hardware, plumbing,
electrical and home supply retailers, as well as warehouse-format and discount
retail stores and catalog companies. Twenty-two of the Company's 32 stores
compete in markets where Home Depot, a warehouse-format home center with over
600 stores in the United States, also operates stores. Four of these stores are
located next to existing Eagle Hardware stores. The Company's gross margin and
operating income are generally lower for stores located in markets where Home
Depot also operates stores. The Company also currently competes against a number
of other companies in the western United States, including Fred Meyer, HomeBase,
Builders' Square and Hugh M. Woods (a unit of Payless Cashways). Many of the
Company's competitors have substantially greater resources than the Company. In
addition, there has been increasing consolidation within the home improvement
industry, which may provide certain entities with even stronger competitive
advantages over the Company. Moreover, the Company's ability to expand into and
operate profitably in new markets, particularly small markets, may be adversely
affected by the existence or entry of competing warehouse-format home centers.
Should Home Depot or any of the Company's other competitors reduce prices
in any of Eagle Hardware's markets, the Company may be required to implement
price reductions in order to remain competitive. In addition, although the
Company believes that alternative sources of merchandise are available, some of
the Company's competitors may attempt to negotiate exclusive supply arrangements
with certain of the Company's vendors, which could result in the loss of
individual sources of merchandise. The implementation of price reductions or the
loss of certain key vendors could have a material adverse effect on the
Company's business, financial condition and operating results.
EXPANSION PLANS The Company opened its first store in November 1990 and
currently operates 32 home improvement centers, averaging 128,000 square feet
(excluding storage and exterior garden square footage). The Company's expansion
strategy is to cluster multiple home centers in metropolitan areas such as
Seattle, Salt Lake City and Denver, and to open single home centers in small
markets. In the Company's experience, the opening of additional Eagle Hardware
stores in existing markets tends to negatively impact same store sales at
existing stores. The Company expects this trend, commonly referred to as "sales
cannibalization," to continue as a result of its planned expansion program.
Further, the Company's ability to successfully execute its expansion strategy
will depend, in large part, on its ability to obtain suitable store sites at
acceptable prices, particularly sites meeting the large space requirements of
Eagle Hardware stores. In addition, the Company has encountered, and may
continue to encounter, substantial delays, increased expenses or loss of
potential sites due to the complexities associated with the regulatory and
permitting process in markets in which the Company intends to locate its stores.
There can be no assurance that the Company will be able to open the planned
number of new stores according to its store opening schedule; failure to do so
could have a material adverse effect on the Company's business, financial
condition and operating results.
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The Company augmented its expansion strategy to include a store prototype
designed for selected single-store small markets. This prototype consists of a
main store of approximately 95,000 square feet and includes certain features
intended to cater to the unique needs of do-it-yourself and professional
customers in small markets, including an attached drive-through lumber and
building materials yard of approximately 60,000 square feet. The Company is
utilizing this prototype in Wenatchee, Washington, Pueblo, Colorado, Kahului
(Maui), Hawaii and La Quinta, California. Although the Company has operated
stores in small markets for a number of years, the first Eagle Hardware store
based on this new prototype was opened in August 1996; therefore, the Company's
experience with the new prototype is limited. The Company anticipates that
average annual sales levels achieved by stores located in small markets will be
lower than those obtained by stores operated in large metropolitan markets. In
addition, there can be no assurance that the Company's future stores, including
those based on this new prototype, will achieve anticipated sales and gross
margin levels or that they will prove to be profitable. Should any new store be
unprofitable or should any existing store experience a decline in profitability,
the effect on the Company's results of operations could be more significant than
would be the case with a larger company.
The construction of new store facilities and the conversion of existing
structures into Eagle Hardware stores are also subject to unexpected delays,
which could lead to higher costs. The Company's expansion further depends on its
ability to complete the improvements at its home centers in a timely manner, to
hire and train competent store managers and staff, and to integrate these
employees and new home centers into its overall systems and operations. Because
the Company will be expanding into geographic markets in which it has no
previous operating experience, it may face competitive challenges, delays or
other problems that are different from those encountered to date. There can be
no assurance that the Company will be able to enter new geographic markets
successfully.
The Company has signed agreements to purchase the land or lease the ground
for 13 additional stores scheduled to open during fiscal 1998 or 1999. As a
result, the Company will be required to finance the construction of the new
store buildings on these sites, and will incur significant inventory and capital
expenditures and preopening costs. The Company believes that its current cash
and short-term investments, cash generated from operations, in combination with
anticipated bank borrowings under the existing line of credit and the proceeds
of fixed-term capital asset loans and/or sale-leaseback transactions, will be
sufficient to satisfy its anticipated working capital, capital expenditure,
interest and debt service requirements through fiscal 1998. However, at times in
the past the Company has exceeded its capital expenditure budget substantially
as a result of project delays, construction cost overruns and other factors, and
the Company may be required to seek additional sources of funds for its planned
expansion. There can be no assurance that such funds will be available on
satisfactory terms. Failure to obtain such financing could delay or prevent the
Company's planned expansion, which could adversely affect the Company's
business, financial condition and operating results. In addition, there can be
no assurance that there will not be a decline in the market value of the
Company's properties, which could also have an adverse effect on the Company's
business, financial condition and operating results. (See Item 1 - Business -
Expansion Strategy)
ABILITY TO MANAGE GROWTH; DEPENDENCE ON ACCOUNTING AND MANAGEMENT
INFORMATION SYSTEMS The Company has experienced significant growth in recent
years and intends to continue its growth strategy. This strategy will require
an increase in Company personnel, particularly store managers and sales
associates, who possess the training and experience necessary to operate the
Company's new stores. There can be no assurance that the Company will be able
to continue to attract, develop and retain the personnel necessary to pursue
its growth strategy. In addition, Eagle Hardware's growth places pressure on
its accounting systems and internal controls. The Company has taken a number
of steps over the past several years to improve its accounting systems and
internal controls. However, there can be no assurance that problems
associated with the Company's growth will not occur in the future. Any such
problems could have a material adverse impact on the Company's business,
financial condition and results of operation. The Company will also need to
continually evaluate the adequacy of its management information systems,
including its inventory control and distribution systems, and in the future
will need to upgrade or reconfigure its management information systems to
support its planned expansion. While the Company has taken a number of
precautions against certain events that could disrupt the operation of its
management information systems, including in connection with its planned
systems revisions, there can be no assurance that the Company will not
experience systems failures or interruptions, which could have a material
adverse effect on its
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business, financial condition and operating results. Further, the Company
currently relies on a single outside vendor for the software and support of its
management information systems. Although the Company believes that alternative
information systems vendors are available, in the event it were to change
vendors, the Company could experience systems delays or interruptions, which
could have a material adverse effect on the Company's business, financial
condition and operating results. Moreover, as the Company grows, it will need to
continually analyze the sufficiency of its warehouse and distribution space and
will require additional facilities in order to support such growth.
YEAR 2000 The year 2000 issue is the result of computer programs being
written using two digits rather than four digits to define the applicable year.
Any of the Company's computer programs that have time-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. If not
addressed, the direct result could be a system failure or miscalculations
causing disruption of operations, including, among other things, a temporary
inability to process customer transactions, order merchandise, or engage in
similar normal business activities.
Eagle management has initiated a Company-wide program to prepare its
computer systems and applications for the year 2000 by the middle of fiscal
1999. Although management anticipates that its systems and applications will be
year 2000 compliant on a timely basis, there can be no assurance that the
systems of other companies on which the Company's systems rely will be year 2000
compliant in the same time frame. Any such failure on the part of other
companies with whom the Company transacts business, to be year 2000 compliant on
a timely basis, may have an adverse impact on the operations of the Company.
FLUCTUATIONS IN SAME STORE SALES A variety of factors affect the Company's
same store sales, including, among others, actions of competitors (including the
opening of additional stores in the Company's markets), the retail sales
environment, general economic conditions, weather conditions and the Company's
ability to execute its business strategy effectively. In addition, the Company's
expansion plans include the opening of additional stores in market areas where
the Company has already opened stores. The Company's experience has been that
opening such additional stores in the same market area reduces sales at existing
Company stores located in that area and the Company expects this sales
cannibalization to continue in the future. The Company's quarterly and annual
same store sales have fluctuated significantly in the past and may do so in the
future. The Company's annual same store sales increases (decreases) over the
prior year were 11%, 11% and (7%) in fiscal years 1997, 1996 and 1995,
respectively. New store openings by the Company in existing markets and
significant same store sales increases experienced in 1996 and 1997, combined
with other factors such as competition and economic trends in the Company's
markets, may result in future same store sales increases lower than those
experienced in fiscal 1996 and fiscal 1997. Moreover, there can be no assurance
that same store sales for any particular period will not decrease in the future.
Changes in the Company's same store sales have in the past and could in the
future cause the price of the common stock to fluctuate substantially.
FLUCTUATIONS IN QUARTERLY RESULTS AND SEASONALITY The Company's quarterly
operating results have fluctuated in the past and are expected to fluctuate in
the future as a result of a variety of factors, including the timing of store
openings and related preopening expenses, weather conditions, price increases by
suppliers, actions by competitors, conditions in the home improvement market and
the hardware industry in general, regional and national economic conditions and
other factors. Moreover, the Company expects its business to exhibit some
measure of seasonality, which the Company believes is typical of the retail home
center industry. The Company anticipates 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 proportionately 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 than in any other quarter, due primarily to the effect of winter weather
on home improvement projects and the lack of significant sales of lawn and
garden items during the quarter.
GENERAL ECONOMIC CONDITIONS The success of the Company's operations depends
on a number of economic conditions. In particular, higher mortgage interest
rates and slower housing turnover will generally have an adverse effect on the
Company's sales and earnings. The Company cannot predict with certainty the
effect on its
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future earnings if either the national or regional economies of the United
States face a downturn or encounter periods of high inflation and rising
interest rates.
GEOGRAPHIC CONCENTRATION As its operations are located entirely in the
western United States, the Company is subject to regional risks, such as the
economy, weather conditions, natural disasters and government regulations. If
the region were to suffer an economic downturn or other adverse regional events
occur, there may be an adverse impact on the Company's sales and profitability
and its ability to implement its planned expansion program. Some of the
Company's competitors, including Home Depot, operate stores across the United
States and thus are not as vulnerable as the Company to such regional risks.
DEPENDENCE ON KEY INDIVIDUALS The Company's success depends in large part
on the abilities and continued service of its executive officers and other key
employees, including David J. Heerensperger, the Company's founder and Chairman,
and Richard T. Takata, the Company's President and Chief Executive Officer. Most
of these individuals, including Messrs. Heerensperger and Takata, are not
subject to employment agreements that would prevent them from leaving the
Company. There can be no assurance that the Company will be able to retain the
services of such executive officers and other key employees. The loss of key
personnel could have a material adverse effect on the Company's business,
financial condition and operating results.
VOLATILITY OF STOCK PRICE The market price of the common stock has
fluctuated substantially since the Company's initial public offering in July
1992. There can be no assurance that the market price of the common stock will
not fluctuate significantly from its current level. Future announcements
concerning the Company or its competitors, quarterly variations in operating
results or same store sales, changes in product mix or prices by the Company or
its competitors, weather patterns or economic trends that may be perceived to
affect the demand for the Company's products, changes in earnings estimates by
analysts or changes in accounting policies, among other factors, could cause the
market price of the common stock to continue to fluctuate substantially. In
addition, stock markets have experienced extreme price and volume volatility in
recent years. This volatility has had a substantial effect on the market prices
of securities of many public companies for reasons frequently unrelated to the
operating performance of the specific companies. These broad market fluctuations
may adversely affect the market price of the common stock.
ANTITAKEOVER CONSIDERATIONS Certain provisions of the Company's Restated
Articles of Incorporation and Restated Bylaws, as well as the Washington
Business Corporation Act, could discourage a third party from attempting to
acquire, or make it more difficult for a third party to acquire, control of the
Company without approval of the Company's Board of Directors. Such provisions
could also limit the price that certain investors might be willing to pay in the
future for the Common Stock. Certain of such provisions allow the Board of
Directors to authorize the issuance of preferred stock with rights superior to
those of the Common Stock. Additionally, the Company's Restated Bylaws provide
for staggered terms for the Board of Directors. The Company is also subject to
the provisions of Chapter 23B.19 of the Washington Business Corporation Act,
which generally prohibits any "significant business transactions" within five
years of the date a person acquires 10% or more of the outstanding voting shares
of a Washington corporation unless the transaction or the acquisition is
approved prior to the acquisition date by a majority of a company's then board
of directors. After the five-year period, a "significant business transaction"
may take place as long as it complies with certain "fair price" provisions of
the statute which generally prohibits "interested shareholder transactions"
(such as a merger, sale of assets or liquidation) with a person who beneficially
owns 20% or more of a corporation's outstanding voting securities, unless
approved by a majority vote of disinterested directors or a two-thirds vote of
disinterested shareholders. A corporation may not "opt out" of this statute.
This provision may have the effect of delaying, deferring or preventing a change
in control of the Company.
ITEM 2 - PROPERTIES -
The Company's headquarters consists of approximately 48,000 square feet of
leased office space in Renton, Washington. The Company leases warehouse and
distribution center space of approximately 364,000 square feet in Auburn,
Washington. The Company is currently under contract to lease a new 600,000
square foot
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warehouse/distribution center and plans to move into this new facility by the
end of fiscal 1998. The Company intends to acquire this facility at a future
date.
The Company leases 17 of its 32 existing stores under various lease terms
which, including renewal options, range from 21 to 51 years. The leases
generally provide for minimum annual rental amounts, with additional rental
payments based upon a percentage of gross store sales. These additional payments
range from 1.5% to 3.0% of annual gross sales in excess of a specified amount,
which ranges from $24.0 million to $50.0 million per store. One store lease
provides for additional payments of 0.75% of gross sales, with a specified
minimum dollar amount. In most cases, lease payments do not begin until a store
is operational.
The Company owns 15 of its existing stores and has signed agreements to
purchase sites or lease ground for 13 future stores. In light of current
economic conditions and other strategic factors, the Company has frequently
elected to purchase land for new store sites and finance the construction of new
stores in order to proceed expeditiously with its expansion program.
ITEM 3 - LEGAL PROCEEDINGS -
The Company is involved in various routine legal proceedings incident to
the ordinary course of its business. Management believes that the outcome of all
pending legal proceedings in the aggregate will not have a material adverse
effect on the Company's business, financial condition and operating results.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended January 30, 1998.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS -
The information required by this Item is included in the Company's Annual
Report to Shareholders for the fiscal year ended January 30, 1998 under the
heading "Quarterly Stock Data" and is incorporated herein by this reference.
ITEM 6 - SELECTED FINANCIAL DATA -
The information required by this Item is included in the Company's Annual
Report to Shareholders for the fiscal year ended January 30, 1998 under the
heading "Five Year Summary of Selected Financial Data" and is incorporated
herein by this reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION -
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The information required by this Item is included in the Company's Annual
Report to Shareholders for the fiscal year ended January 30, 1998 under the
heading "Management's Discussion and Analysis of Results of Operations and
Financial Condition" and is incorporated herein by this reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK -
Not applicable.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -
The financial statements and other information required by this Item are
included in the Company's Annual Report to Shareholders for the fiscal year
ended January 30, 1998 at pages 15 through 35 and are incorporated herein by
this reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON AUDITING AND FINANCIAL
DISCLOSURE -
There were no changes in or disagreements with accountants on auditing and
financial disclosure during the fiscal year ended January 30, 1998.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -
The information required by this Item is included in the Company's
definitive Proxy Statement for the Company's 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission, under the
heading "Election of Directors" and is incorporated herein by this reference.
ITEM 11 - EXECUTIVE COMPENSATION -
The information required by this Item is included in the Company's
definitive Proxy Statement for the Company's 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission, under the
heading "Executive Compensation" and is incorporated herein by this reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -
The information required by this Item is included in the Company's
definitive Proxy Statement for the Company's 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission, under the
heading "Voting Securities and Principal Holders" and is incorporated herein by
this reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -
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The information required by this Item is included in the Company's
definitive Proxy Statement for the Company's 1998 Annual Meeting of
Shareholders, to be filed with the Securities and Exchange Commission, under the
heading "Certain Relationships and Related Transactions" and is incorporated
herein by this reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K -
(a) 1. Financial Statements:
The following financial statements and related information filed as part of
this report are included on pages 22 through 35 of the Company's Annual Report
to Shareholders for the fiscal year ended January 30, 1998.
- Consolidated Balance Sheets - January 30, 1998 and January 31,
1997
- Consolidated Statements of Operations - For the fiscal years
ended January 30, 1998, January 31, 1997 and January 26, 1996
- Consolidated Statements of Cash Flows - For the fiscal years
ended January 30, 1998, January 31, 1997 and January 26, 1996
- Consolidated Statements of Shareholders' Equity - For the fiscal
years ended January 30, 1998, January 31, 1997 and January 26,
1996
- Notes to Consolidated Financial Statements - For the fiscal years
ended January 30, 1998, January 31, 1997 and January 26, 1996
- Selected Quarterly Financial Data (Unaudited) - For the fiscal
years ended January 30, 1998 and January 31, 1997 - See Note 12
of Notes to
Consolidated Financial Statements
- Report of Ernst & Young LLP, Independent Auditors
2. Financial Statement Schedules:
All financial statement schedules are omitted because they are not
applicable or because the information is presented in the financial statements
or notes thereto.
3. Exhibits:
Exhibits marked with a footnote designation (#) are hereby incorporated by
reference to exhibits or appendices previously filed by the Registrant as
indicated in the referenced footnote.
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EXHIBIT
NUMBER DESCRIPTION
3.1 Restated Articles of Incorporation. (3)
3.2 Restated Bylaws. (3)
4.1 Form of Debenture (included in Exhibit 4.2B).
4.2B Form of Indenture dated as of March 14, 1994, between Eagle
Hardware & Garden, Inc. and Seattle-First National Bank, as
Trustee. (7)
10.1 Directors' Nonqualified Stock Option Plan. (1)
10.2 1991 Stock Option Plan. (1)
10.3 Eagle Hardware & Garden Profit Sharing/Retirement Savings Plan. (1)
10.3A First Amendment to Eagle Hardware & Garden Profit
Sharing/Retirement Savings Plan. (10)
10.3B Second Amendment to Eagle Hardware & Garden Profit
Sharing/Retirement Savings Plan. (10)
10.3C Third Amendment to Eagle Hardware & Garden Profit
Sharing/Retirement Savings Plan. (12)
10.3D Fourth Amendment to Eagle Hardware & Garden Profit
Sharing/Retirement Savings Plan. (12)
10.4 Description of Corporate Bonus Plan. (1)
10.5 Registration Rights Agreement dated as of June 25, 1991, between
the Company and certain holders of the Company's capital stock.
(1)
10.6 Key Man Life Insurance Policy for David J. Heerensperger by the
Great-West Life Assurance Company. (1)
10.7 Sublease dated September 10, 1990, by and between Payless Drug
Stores Northwest, Inc. and Eagle Hardware & Garden, Inc.,
as amended. (2)
10.10 Lease dated November 30, 1990, by and between Harlan D. Douglass
and Maxine H. Douglass and Eagle Hardware & Garden, Inc. (1)
10.10A First Amendment to Lease dated May 22, 1992, by and between Harlan
D. Douglass and Maxine H. Douglass and Eagle Hardware & Garden,
Inc. (1)
10.11 Lease dated as of April 18, 1991, by and between Mercy Development
Company, M&E Company and Eagle Hardware & Garden, Inc. (2)
10.11A Addendum to Mercy Development/M&E Co. - Eagle Hardware Lease dated
July 11, 1991. (10)
10.11B Second Addendum to Mercy Development/M&E Co. - Eagle Hardware Lease
dated May 1, 1994. (10)
10.15 Lease dated as of August 20, 1991, by and between Vernell's Fine
Candies, Inc. and Eagle Hardware & Garden, Inc. (2)
10.15A Amendment to Lease dated as of May 4, 1992, by and between Keystone
Capital Company, Inc. (formerly known as Vernell's Fine Candies,
Inc.) and Eagle Hardware & Garden, Inc. (2)
10.17 Lease dated November 18, 1991, by and between Hsiao-Tall Real
Estate Company and Eagle Hardware & Garden, Inc. (2)
10.17A Amendment to Lease dated as of June 30, 1992, by and between
Hsiao-Tall Real Estate Company and Eagle Hardware & Garden,
Inc. (4)
10.17B Third Amendment to Lease dated as of September 28, 1992, by and
between Hsiao-Tall Real Estate Company and Eagle Hardware &
Garden, Inc. (3)
10.17C Amendment to Lease Concerning Storm Drainage System dated as of
April 1, 1992, by and between Hsiao-Tall Real Estate Company
and Eagle Hardware & Garden, Inc. (10)
10.19 Space Lease dated as of January 21, 1992, by and between WCC
Associates and Eagle Hardware & Garden, Inc. (2)
10.19A First Amendment to Space Lease dated as of May 29, 1992, by and
between WCC Associates and Eagle Hardware & Garden, Inc. (2)
10.20 Master Equipment Lease dated October 30, 1991, by and between XL
Datacomp, Inc. and Eagle Hardware & Garden, Inc. (1)
10.20C Schedule 1 dated July 1, 1994, to Master Equipment Lease by and
between XL Datacomp, Inc. and Eagle Hardware & Garden, Inc. (10)
10.20D Lease of Equipment dated June 7, 1994, and Schedule 5 to Lease of
Equipment dated November 15, 1995, by and between The Archive
Group, Inc. and Eagle Hardware & Garden, Inc. (11)
19
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
10.20E Lease of Equipment dated November 15, 1995, and Schedule 4 to Lease
of Equipment by and between The Archive Group, Inc. and Eagle
Hardware & Garden, Inc. (11)
10.22 Software License Agreement dated December 9, 1991, by and between
JDA Software Services, Inc. and Eagle Hardware & Garden, Inc. (1)
10.23 Assignment dated as of February 5, 1992, by Harlan D. Douglass and
Maxine H. Douglass to Eagle Hardware & Garden, Inc. (1)
10.24 Assignment dated as of March 13, 1992, by Eagle Hardware & Garden,
Inc. to R&B Development, Inc. (1)
10.25 Assignment dated as of February 5, 1992, by Harlan D. Douglass and
Maxine H. Douglass to Eagle Hardware & Garden, Inc. (1)
10.26 Assignment dated as of April 29, 1992, by Eagle Hardware & Garden,
Inc. to R&B Development, Inc. (1)
10.27 Real Property Transfer Agreement dated April 29, 1992, by and
between Eagle Hardware & Garden, Inc. and R&B Development, Inc.
(1)
10.28 Lease dated as of March 10, 1992, by and between R&B Development,
Inc. and Eagle Hardware & Garden, Inc. (2)
10.29 Lease dated as of March 10, 1992, by and between R&B Development,
Inc. and Eagle Hardware & Garden, Inc. (2)
10.32 Assignment of Contract and Deed dated as of February 24, 1993, by
Eagle Hardware & Garden, Inc. to Harlan D. Douglass and Maxine H.
Douglass. (3)
10.33 Lease dated as of September 29, 1992, by and between F.C.
Investments, Inc. and Eagle Hardware & Garden, Inc. (4)
10.34 Lease dated September 22, 1992, by and between R&B Development,
Inc. and Eagle Hardware & Garden, Inc. (4)
10.34A First Amendment to Lease dated as of June 23, 1994, by and between
R&B Development, Inc. and Eagle Hardware & Garden, Inc. (10)
10.38 Eagle Hardware & Garden, Inc. Employee Stock Ownership Plan
effective January 1, 1992. (3)
10.38A First Amendment to Eagle Hardware & Garden, Inc. Employee Stock
Ownership Plan dated January 15, 1994. (10)
10.38B Second Amendment to Eagle Hardware & Garden, Inc. Employee Stock
Ownership Plan dated June 7, 1994. (10)
10.38C Third Amendment to Eagle Hardware & Garden, Inc. Employee Stock
Ownership Plan dated March 6, 1995. (10)
10.39 Eagle Hardware & Garden, Inc. Employee Stock Ownership Trust
Agreement effective January 1, 1992. (3)
10.39A First Amendment to the Eagle Hardware & Garden, Inc. Employee Stock
Ownership Trust Agreement effective April 1, 1998.
10.46 Agreement effective September 1, 1992, by and between Northwestern
National Life Insurance Company and Eagle Hardware & Garden, Inc.
(3)
10.47 Lease dated March 18, 1993, by and between Harlan D. Douglass and
Maxine H. Douglass and Eagle Hardware & Garden, Inc. (4)
10.47A First Amendment to Lease dated September 1, 1995, by and between
Harlan D. Douglass and Maxine H. Douglass and Eagle Hardware &
Garden, Inc. (11)
10.48 Lease dated March 19, 1993, by and between Harlan D. Douglass and
Maxine H. Douglass and Eagle Hardware & Garden, Inc. (4)
20
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
10.49 Lease dated as of February 28, 1993, by and between West Valley 29
Partners and Eagle Hardware & Garden, Inc. (4)
10.49A Amendment to Lease Agreement dated September 15, 1993, by and
between West Valley 29 Partners and Eagle Hardware & Garden, Inc.
(8)
10.49B Second Amendment to Lease dated February 1, 1997 by and among West
Valley 29 Partners, Eagle Hardware & Garden, Inc. and Eagle
Hardware & Garden Distribution Services, Inc. (14)
10.53 Lease dated as of September 10, 1973, between Elting, Graziadio &
Sampson Development Company and S. S. Kresge Company. (8)
10.53A First Amendment to Lease dated November 14, 1975, between EGSmetro
Construction Corporation and S. S. Kresge Company. (8)
10.53B Second Amendment to Lease dated as of November 15, 1993, by and
between Charles J. Fishback and KMart Corporation. (8)
10.54 Sublease dated as of August 31, 1993, by and between KMart
Corporation and Eagle Hardware & Garden, Inc. (8)
10.54A Amendment to Sublease dated as of November 18, 1993, by and among
KMart Corporation and Eagle Hardware & Garden, Inc. (8)
10.77 Lease dated July 11, 1994, by and between Harlan D. Douglass and
Maxine H. Douglass and Eagle Hardware & Garden, Inc. (10)
10.78 Lease dated January 9, 1995, by and between Harlan D. Douglass and
Maxine H. Douglass and Eagle Hardware & Garden, Inc. (10)
10.78A First Amendment to Lease dated September 1, 1995, by and between
Harlan D. Douglass and Maxine H. Douglass and Eagle Hardware &
Garden, Inc. (11)
10.79 Lease dated September 28, 1994, between The Northwestern Mutual
Life Insurance Company and Eagle Hardware & Garden, Inc. (10)
10.80 Promissory Note dated November 4, 1994, by Eagle Hardware & Garden,
Inc. to The Prudential Insurance Company of America in the
principal amount of $8,000,000. (10)
10.94 Lease dated December 7, 1995, by and between KW, Ltd. and Eagle
Hardware & Garden, Inc. (11)
10.95 Promissory Note dated December 20, 1995, by Eagle Hardware &
Garden, Inc. to PFL Life Insurance Company in the principal amount
of $6,000,000. (11)
10.97 Purchase and Sale Agreement dated January 30, 1996, by and between
Chandelle Development, LLC, and Eagle Hardware & Garden, Inc. (11)
10.98 Contract to Buy and Sell Real Estate dated February 12, 1996, by
and between Alpha West Realty & Investments, Inc. and Eagle
Hardware & Garden, Inc. (11)
10.99 Retail Technology Exchange Agreement dated July 17, 1995, by and
between Fujitsu-ICL Systems, Inc. and Eagle Hardware & Garden,
Inc. (11)
10.99A Supplement No. 101 and Supplement No. 102 under Retail Technology
Exchange Agreement by and between Fujitsu-ICL Systems, Inc. and
Eagle Hardware & Garden, Inc. (11)
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. (13)
10.102 Amended and Restated Credit Agreement dated as of May 28, 1996,
between the Lenders, U.S. Bank of Washington, N.A., as Agent and
Eagle Hardware & Garden, Inc. (12)
10.102A First Amendment to Amended and Restated Credit Agreement dated as
of December 6, 1996, between the Lenders, U.S. Bank of Washington,
N.A., as Agent and Eagle Hardware & Garden, Inc. (14)
10.102B Second Amendment to Amended and Restated Credit Agreement dated as
of October 20, 1997, between the Lenders, U.S. Bank of Washington,
N.A., as Agent and Eagle Hardware & Garden, Inc. (17)
21
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
10.103 Real Estate Purchase and Sale Agreement dated July 2, 1996, by and
between Terrace Point Partnership, Inc. and Eagle Hardware &
Garden, Inc. (12)
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. (13)
10.103B Second Amendment to Real Estate Purchase and Sale Agreement dated
November 3, 1997, by and between Eagle Hardware & Garden, Inc. and
Terrace Point Partnership. (17)
10.104 Promissory Note dated July 18, 1996, by Eagle Hardware & Garden,
Inc. to The Northwestern Mutual Life Insurance Company in the
principal amount of $9,000,000. (12)
10.105 Real Estate Purchase and Sale Agreements dated August 4, 1994 and
amended December 1, 1994, August 30, 1995 and February 23, 1996
between Atlantic Seaboard Realty and the following persons:
Ronald V. and Kathleen A. Gratias; Chlo Elaine Jackson and
Charles L. Betts; and Mary J. McColm. (12)
10.106 Assignment of Rights Under Real Estate Purchase and Sale Agreements
dated August 4, 1994, as amended, by Atlantic Seaboard Realty to
Eagle Hardware & Garden, Inc. (12)
10.107 Real Estate Purchase and Sale Agreement dated March 6, 1996 and
amended March 31, 1996, between Atlantic Seaboard Realty and the
Tacoma Alliance Church. (12)
10.108 Assignment of Rights Under Real Estate Purchase and Sale Agreement
dated March 6, 1996, as amended, by Atlantic Seaboard Realty to
Eagle Hardware & Garden, Inc. (12)
10.109 Real Estate Purchase and Sale Agreement dated April 1, 1996, by and
between Metropolitan Park District of Tacoma and Wahl &
Associates, Inc. (12)
10.110 Assignment of Rights Under Real Estate Purchase and Sale Agreement
dated April 1, 1996, by Wahl & Associates, Inc. to Eagle
Hardware & Garden, Inc. (12)
10.111 Employment and Severance Agreement between Eagle Hardware & Garden,
Inc. and Ronald P. Maccarone. (12)
10.114 Stipulation and Order of Appropriation and Judgment by the Superior
Court of Washington for Snohomish County dated September 24, 1996.
(13)
10.115 Real Estate Purchase and Sale Agreement dated March 12, 1997, by
and between Washington- 111, Ltd. and Eagle Hardware & Garden,
Inc. (14)
10.116 Purchase Agreement dated March 18, 1997, between David J.
Heerensperger and Eagle Hardware & Garden, Inc. (14)
10.117 Promissory Note dated April 2, 1997, by Eagle Hardware & Garden,
Inc. to The Northwestern Mutual Life Insurance Company in the
principal amount of $10,000,000. (15)
10.118 Agreement to Lease dated April 30, 1997, between Tigard-Tualatin
School District 23J and Eagle Hardware & Garden, Inc. (15)
10.118A Extension Agreement dated August 30, 1997 for Agreement to Lease
and Put to Lease, between Tigard-Tualatin School District 23J and
Eagle Hardware & Garden, Inc. (17)
10.119 Put to Lease Property dated April 30, 1997, from Eagle Hardware &
Garden, Inc. to Tigard- Tualatin School District 23J. (15)
10.120 Real Estate Purchase and Sale Agreement dated June 18, 1997,
between Kent Central, L.L.C. and Eagle Hardware & Garden, Inc.
(16)
10.120A Termination Agreement dated January 30, 1998, by and between Kent
Central L.L.C. and Eagle Hardware & Garden Distribution Services,
Inc.
10.121 Real Estate Purchase and Sale Agreement dated June 24, 1997, by and
between Havana Street Partnership and Frank V. Furstenberg and
Eagle Hardware & Garden, Inc. (16)
10.123 Promissory Note dated June 30, 1997, by Eagle Hardware & Garden,
Inc. to The Northwestern Mutual Life Insurance Company in the
principal amount of $10,000,000. (16)
22
<PAGE>
EXHIBIT
NUMBER DESCRIPTION
10.124 Real Estate Purchase and Sale Agreement dated August 4, 1997, by
and between Johnson Properties, Inc. and Eagle Hardware & Garden,
Inc. (16)
10.125 Real Estate Purchase and Sale Agreement dated August 11, 1997, by
and between Alex Madonna and Phyllis Madonna and Eagle Hardware &
Garden, Inc. (16)
10.126 Purchase Agreement and Joint Escrow Instructions dated October 16,
1997, by and between Hilton Hotels Corporation and Eagle Hardware
& Garden, Inc. (17)
10.127 Promissory Note dated October 17, 1997, by Eagle Hardware &
Garden, Inc. to KeyBank National Association in the principal
amount of $11,000,000. (17)
10.127A Amendment to Promissory Note dated November 1, 1997, by Eagle
Hardware & Garden, Inc. to KeyBank National Association. (17)
10.128 Promissory Note dated October 17, 1997, by Eagle Hardware &
Garden, Inc. to KeyBank National Association in the principal
amount of $8,000,000. (17)
10.128A Amendment to Promissory Note dated November 1, 1997, by Eagle
Hardware & Garden, Inc. to KeyBank National Association. (17)
10.129 Promissory Note dated October 17, 1997, by Eagle Hardware &
Garden, Inc. to KeyBank National Association in the principal
amount of $6,000,000. (17)
10.129A Amendment to Promissory Note dated November 1, 1997, by Eagle
Hardware & Garden, Inc. to KeyBank National Association. (17)
10.130 Real Estate Purchase and Sale Agreement dated October 20, 1997 by
and between CFJ Properties and Eagle Hardware & Garden, Inc. (17)
10.131 Real Estate Purchase and Sale Agreement dated November 12, 1997 by
and between Waterman Properties, L.P. and Eagle Hardware & Garden,
Inc. (17)
10.132 Real Estate Purchase and Sale Agreement dated November 14, 1997 by
and between La Caze Development Company and Eagle Hardware &
Garden, Inc. (17)
10.133 Build to Suit Warehouse and Distribution Center Lease dated June
18, 1997 between Kent Central, L.L.C. and Eagle Hardware & Garden
Distribution Services, Inc.
10.133A Amendment No. 1 to Build to Suit Warehouse and Distribution Center
Lease dated February 9, 1998, by and between Kent Central, L.L.C.
and Eagle Hardware & Garden Distribution Services, Inc.
10.134 Lease dated December 5, 1997, by and between Harlan D. Douglass and
Maxine H. Douglass and Eagle Hardware & Garden, Inc.
10.135 Real Estate Purchase and Sale Agreement dated February 12, 1998, by
and between Front Range Limited Partnership and Eagle Hardware &
Garden, Inc.
10.136 Agreement of Purchase and Sale and Joint Escrow Instructions dated
February 26, 1998, by and between Lennar Rolling Ridge, Inc. and
Eagle Hardware & Garden, Inc.
10.137 Ground Lease dated March 5, 1998 by and between FF Properties, L.P.
and Eagle Hardware & Garden, Inc.
10.138 Real Estate Purchase and Sale Agreement dated March 17, 1998 by and
between Hopkins Real Estate Group and Eagle Hardware & Garden,
Inc.
10.139 Eagle Hardware & Garden, Inc. Employee Stock Purchase Plan.
13.1 Portions of Registrant's Annual Report to Shareholders (pages 15
through 35 and inside back cover) for the fiscal year ended
January 30, 1998.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
23
<PAGE>
- --------------------
(1) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Registration Statement No. 33-48593 on
Form S-1.
(2) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Registration Statement No. 33-48593 on Form S-1
with confidential portions omitted and filed separately with the
Commission pursuant to a Request for Confidential Treatment under Rule
406 of the Securities Act of 1933.
(3) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Registration Statement No. 33-60148 on
Form S-1.
(4) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Registration Statement No. 33-60148 on Form S-1
with confidential portions omitted and filed separately with the
Commission pursuant to a Request for Confidential Treatment under Rule
406 of the Securities Act of 1933.
(5) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Amended Registration Statement No. 33-60148 on
Amendment No. 1 to Form S-1.
(6) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Amended Registration Statement No. 33-60148 on
Amendment No. 1 to Form S-1 with confidential portions omitted and filed
separately with the Commission pursuant to a Request for Confidential
Treatment under Rule 406 of the Securities Act of 1933.
(7) Exhibit is incorporated herein by reference to an identically numbered
exhibit to a Current Report on Form 8-K, filed with the Commission on
March 10, 1994.
(8) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Form 10-K filed with the Commission for the
fiscal year ended January 28, 1994.
(9) Exhibit is incorporated herein by reference to an identically numbered
exhibit to a Current Report on Form 8-K/A filed with the Commission on
December 30, 1994.
(10) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Form 10-K filed with the Commission for the
fiscal year ended January 27, 1995.
(11) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Form 10-K filed with the Commission for the
fiscal year ended January 26, 1996.
(12) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Form 10-Q filed with the Commission for the
fiscal quarter ended July 26, 1996.
(13) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Form 10-Q filed with the Commission for the
fiscal quarter ended October 25, 1996.
(14) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Form 10-K filed with the Commission for the
fiscal quarter ended January 31, 1997.
(15) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Form 10-Q filed with the Commission for the
fiscal quarter ended May 2, 1997.
(16) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Form 10-Q filed with the Commission for the
fiscal quarter ended August 1, 1997.
(17) Exhibit is incorporated herein by reference to an identically numbered
exhibit to the Company's Form 10-Q filed with the Commission for the
fiscal quarter ended October 31, 1997.
- --------------------
(b) No reports on Form 8-K were filed in the fourth quarter of fiscal 1997.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Eagle Hardware & Garden, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on April 6,
1998.
EAGLE HARDWARE & GARDEN, INC.
By: /s/ David J. Heerensperger
David J. Heerensperger
CHAIRMAN
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on April 6, 1998, on behalf of
the Registrant and in the capacities indicated.
SIGNATURE TITLE
/s/ David J. Heerensperger Chairman
- -----------------------------------
David J. Heerensperger
/s/ Richard T. Takata President, Chief Executive Officer
- ----------------------------------- (Principal Executive Officer),
Richard T. Takata Chief Operating Officer and Director
/s/ Ronald P. Maccarone Chief Financial Officer
- -----------------------------------
Ronald P. Maccarone
/s/ Ronald D. Crockett Director
- -----------------------------------
Ronald D. Crockett
/s/ Harlan D. Douglass Director
- -----------------------------------
Harlan D. Douglass
/s/ Herman Sarkowsky Director
- -----------------------------------
Herman Sarkowsky
/s/ Theodore M. Wight Director
- -----------------------------------
Theodore M. Wight
25
<PAGE>
<PAGE>
Exhibit 10.120
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT is made and entered into effective the
30th day of January, 1998 by and between KENT CENTRAL, L.L.C., a Washington
limited liability company ("Seller") and EAGLE HARDWARE & GARDEN DISTRIBUTION
SERVICES, INC., a Washington corporation ("Buyer"), successor to Eagle
Hardware & Garden, Inc. ("Eagle").
The Seller and Eagle are the original parties to that certain Real
Estate Purchase and Sale Agreement dated June 18, 1997 (the "Agreement").
Eagle previously assigned its interest in the Agreement to Buyer. Seller and
Buyer desire to terminate the Agreement.
The parties hereto hereby agree that all rights and obligations of
the parties under said Agreement shall be terminated effective as of the date
first set forth above.
This Termination Agreement may be signed in counterpart; provided,
that each such counterpart shall constitute one and the same agreement.
"SELLER" BENAROYA CAPITAL COMPANY, L.L.C.
By: /s/ Larry R. Benaroya
--------------------------
Larry R. Benaroya, Manager
"BUYER" EAGLE HARDWARE & GARDEN DISTRIBUTION SERVICES, INC.
By: /s/ Richard T. Takata
---------------------------
Its: President
<PAGE>
BUILD-TO-SUIT
WAREHOUSE AND DISTRIBUTION CENTER LEASE
LESSOR: KENT CENTRAL, L.L.C.
LESSEE: EAGLE HARDWARE & GARDEN DISTRIBUTION SERVICES, INC.
DATED: As of June 18, 1997
RECITALS
A. LESSOR is the owner of that certain real property described on
Exhibit A attached hereto in Kent, Washington consisting of a parcel of land
containing approximately 1,292,000 square feet +/- of land area.
B. LESSOR desires to lease to LESSEE such real property, and also
the related assets described herein, following completion of construction of
the improvements substantially in accordance with the Site Plan depicted on
Exhibit B and the specifications depicted on Exhibit C and on the schedule
depicted on Exhibit D, and LESSEE desires to lease the same, on the terms and
conditions set forth in this Lease (the "Lease").
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are acknowledged by each of the parties hereto, LESSOR and
LESSEE agree as follows.
SECTION 1: SUBJECT MATTER
The subject matter of this Lease is the following assets (herein
collectively the "Assets"):
(a) The LESSOR's right, title and interest in the real property
described on Exhibit A hereto, together with all such right, title and
interest in and to all abutting roads and appurtenant easements (herein the
"Real Property").
(b) All buildings, structures, fixtures and other improvements to be
built on the Real Property (herein the "Improvements"). The Real Property and
the Improvements are herein sometimes collectively referred to as the
"Premises".
(c) All personal property, (except personal property owned by
construction contractors of the Improvements) of every kind and nature used
by LESSOR in connection with the operation of the Premises (herein the
"Personal Property"). The Personal Property includes, without limitation, all
files, records and plans related to the Assets.
(d) All warranties in favor of LESSOR, and all permits, licenses,
operating agreements, reciprocal easement agreements, service contracts
related to the Premises and/or the Personal Property, (herein collectively
the "Intangible Assets").
(e) The LESSORS's interest as Owner in all construction contracts
and related agreements with respect to the Premises and all guarantees
related thereto.
SECTION 2: AGREEMENT TO LEASE
Subject to the satisfaction of all the conditions contained herein,
LESSOR shall lease to LESSEE and LESSEE shall lease from LESSOR the Assets at
the rental and on the terms and conditions set forth herein. It is understood
and agreed between the parties that this is an absolute "net" lease wherein
LESSEE not only pays rent but is responsible for all costs and expenses of
maintaining and operating the Premises during the term of the Lease
including, but not limited to, the payment of taxes, insurance and all
maintenance, repairs and replacements.
It is understood and agreed that LESSEE shall have the right, at its
own expense, to perform any and all fixturing and other work that LESSEE
deems necessary or desirable for its purposes preparatory to opening for
business, and LESSOR hereby grants permission to LESSEE, at any time or times
subsequent to execution of this Lease and prior to commencement of the term
hereof, to come upon, enter, and have access to the Premises, and such
adjacent areas as may be necessary, to accomplish such purposes, so long as
LESSEE does not interfere with LESSOR's construction, fixturing and other work.
1
<PAGE>
LESSEE may, with LESSOR's written consent, which LESSOR covenants
shall not be unreasonably withheld, enter the Premises prior to the
Commencement Date solely for the purpose of installing LESSEE's Personal
Property and equipment as long as such entry does not interfere with the
orderly construction and completion of the Premises. LESSEE shall notify
LESSOR of its desired time(s) of entry and shall submit for LESSOR's approval
the scope of the work to be performed and the name(s) of the contractor(s)
who will perform such work. LESSEE hereby indemnifies and agrees to protect,
defend and hold LESSOR harmless from and against any and all suits, claims,
actions, losses, costs or expenses (including claims for worker's
compensation) for any nature whatsoever; together with reasonable attorney
fees for counsel of LESSOR's choice, arising out of or in connection with the
installation of LESSEE's Personal Property or equipment (including, but not
limited to, claims for breach of warranty, personal injury or property
damage).
LESSEE shall keep the Premises free from any liens arising out of
any work performed, materials furnished, equipment supplied, or obligations
incurred by or on behalf of LESSEE. No work performed, material furnished,
equipment supplied or obligations incurred by or on behalf of LESSEE shall be
deemed to be for the immediate use and benefit of LESSOR so that no
mechanic's lien or other lien shall be allowed against LESSOR's estate in the
premises. LESSEE shall provide, at LESSEE's own cost, waivers of lien signed
by any party (including the LESSEE) who performs work, furnishes materials or
supplies equipment to the Premises. LESSOR may require, at LESSEE's sole cost
and expense, a lien release and completion bond in an amount equal to either
the actual contract price or one and one-half times the estimated cost of any
improvements, additions or alterations in the Premises which LESSEE desires
to make, to insure LESSOR against any liability for lien and to insure
completion of the work. Nothing contained herein shall preclude LESSEE from
contesting liens from time to time in good faith provided LESSEE posts the
requisite bonds or other security to prevent enforcement of judgment on any
lien.
SECTION 3: TERM
The term of this Lease shall be for twenty (20) years and shall
commence on the Completion Date, as described in Section 6.2 below. LESSEE's
obligation to pay rent shall commence on the Completion Date. LESSEE shall be
entitled to possession of the Premises from and after the Completion Date.
LESSEE is hereby granted an option to extend the term of this Lease
for two (2) separate and successive option periods of five (5) years each
upon the same terms and conditions as are provided for herein, except that
the amount of rent shall be negotiated promptly after the exercise of the
option. Such option shall be executed by LESSEE giving LESSOR written notice
of exercise of the option at least six (6) months prior to the expiration of
the initial term of this Lease or the term of the then existing option
period, as the case may be.
SECTION 4: RENT
SECTION 4.1: INITIAL RENT. The annual rental during the first five
(5) years of this Lease shall be Two Million Four Hundred Dollars
($2,400,000.00) per year to be paid in equal monthly installments of Two
Hundred Thousand Dollars ($200,000.00) per month. All rentals required to be
paid by the terms of this clause shall be paid to the LESSOR on or before the
first of each month, in advance, provided that should this Lease commence or
terminate on a date other than the end of the month then such rent shall be
prorated in proportion to the number of days in that first or last month.
SECTION 4.2: ADJUSTMENT TO RENT. To provide an equitable adjustment
of rent to offset the effects of inflation, the annual rental shall be
adjusted at the end of each five year anniversary of the commencement date of
this Lease, the adjustment to be determined by the Index (as defined below)
published closest, but prior to, the first month of the first year of the
Lease term (the "Base Index") and every fifth year of the term (the
"Subsequent Index") in accordance with changes in the Consumer Price Index
for all Urban Consumers for the Seattle/Tacoma area on the 1982 - 84 = 100
base published by the Bureau of Labor Statistics, U.S. Department of Labor
(the "the Index") using the procedures set forth in Section 4.3 below. If the
Index is discontinued or revised during the term, such other government index
or computation with which it is replaced by the Bureau shall be used in order
to obtain substantially the same result as would be obtained if the Index had
not been discontinued or raised, and if the Index is not so replaced, LESSOR
shall adopt a substitute index or substitute procedure which reasonably
reflects changes in the purchasing power of the U.S. dollar.
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SECTION 4.3: ADJUSTED MINIMUM RENT. During each five year period
following the first five year period of the term, LESSEE shall pay LESSOR
rent equal to the Subsequent Index divided by the Base Index and multiplied
by the rent set forth in Section 4.1 above (the "Adjusted Rent"), computed in
accordance with the following formula:
Subsequent Index x Rent
Adjusted Rent = -----------------------
Base Index
SECTION 4.4: SALES TAX EXEMPTION
This Lease is intended to qualify under the Warehouse and Grain
Elevator Operations Tax Exemption act effective May 20, 1997, enacted by the
State of Washington to encourage and stimulate the construction of large
regional distribution centers in the State of Washington by offering tax
incentives in the form of sales tax exemptions on such projects. LESSOR
hereby agrees to pass all of the economic benefit of such exemptions on to
LESSEE in the form of reduced rent payments. The total amount of the rebates
received by LESSOR shall be applied against rent beginning with the
commencement date of the term of the Lease and continuing thereafter until
the rebates are fully applied. In the event that the State of Washington
rejects or disputes the appropriateness of the rebate at any time after any
rebates has been received by LESSOR and applied as provided hereunder LESSEE
will defend LESSOR and hold LESSOR harmless in connection with such claim. If
LESSOR is required to pay or reimburse the State of Washington any amount in
connection with such rebate, LESSEE will reimburse LESSOR the entire amount
immediately on demand by LESSOR. The terms of this agreement will survive the
termination of this Lease.
SECTION 5: USE OF PREMISES
LESSEE shall use the Premises as a warehouse and distribution center
and for any other lawful purpose and shall comply with all laws, rules and
regulations applicable to said Premises.
SECTION 6: CONDITIONS TO LESSEE'S OBLIGATIONS
The obligation of LESSEE hereunder to lease the Premises is subject
to the satisfaction of each of the following conditions, and all other
conditions contained herein, any or all of which may be waived by LESSEE, in
whole or in part (but only expressly and in writing). LESSOR agrees to use
its reasonable best efforts to satisfy such conditions, and to cooperate with
LESSEE in the satisfaction of the same.
SECTION 6.1: TITLE TO PROPERTY. All the Completion Date, title to
the Premises must be free and clear of all defects, easements, restrictions,
liens, security interests and encumbrances except for those which are deemed
to be Permitted Exceptions as shown on Exhibit E attached hereto.
SECTION 6.2: COMPLETION OF CONSTRUCTION. Prior to commencement of
the term of this Lease, and in no event later than December 31, 1998, LESSOR
shall complete construction of the Improvements substantially in accordance
with the Site Plan and Schematic Design depicted on Exhibit B and the
specifications depicted on Exhibit C and on the schedule depicted on Exhibit
D. This condition shall be deemed satisfied when the City of Kent delivers
its Certificate of Occupancy and the Architect has executed a Certificate of
Substantial Completion. (The "Completion Date"). As used herein, the term
"Substantial Completion" shall mean that the Improvements have been completed
in substantial accordance with the Final Plans subject only to completion of
minor punch list items which do not interfere with the utilization of the
Improvements for the purpose for which they were intended in any material way
and that if a conditional or temporary occupancy permit is customarily issued
for construction of the Improvements before punchlist items are completed,
then such permit has been issued by the appropriate local government
authority. Landscaping and other exterior items shall not prevent the
occurrence of Substantial Completion.
SECTION 6.3: ENVIRONMENTAL CLEANUP. Seller shall have completed the
required environmental cleanup of the property required to obtain the
anticipated Consent Decree prior to the Completion Date.
SECTION 6.4: ZONING AND PERMITS. The Premises may be lawfully used
by LESSEE as a warehouse and distribution center and there are no restrictive
covenants, zoning or other ordinances or regulations which will prevent
LESSEE from conducting such business on or about the Premises. LESSOR
covenants, warrants and represents to LESSEE that possession of the Premises
will be delivered to LESSEE free and clear of all liens and encumbrances
(except permitted Exceptions) and violations of law on or before the
commencement date of this Lease.
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SECTION 7: REPRESENTATIONS AND WARRANTIES OF LESSOR (a "Warranty")
SECTION 7.1: TITLE AND CONVEYANCE. LESSOR owns the Assets free and
clear of any and all liens, claims, encumbrances and adverse interests other
than the Permitted Exceptions; at the Completion Date, title to the Assets
shall be free and clear of all liens, claims, encumbrances and adverse
interests except only that the Permitted Exceptions shall apply to the
Premises. LESSOR has full right, power and authority to lease the Assets in
accordance with this Lease. No approval or consent of any person, firm or
other entity is required to be obtained by LESSOR to permit LESSOR to lease
the Premises to LESSEE.
SECTION 7.2: INFORMATION AND DOCUMENTS. To the best of LESSOR's
actual knowledge, all information and documents delivered by LESSOR in
connection with the transaction contemplated hereby, including all documents
and information to be delivered pursuant to Section 6 above, are and shall be
completed, true and accurate.
SECTION 7.3: EXISTING TENANCIES. To the best of LESSOR's actual
knowledge, there are no leases or tenancies affecting all or any part of the
Premises. There are no written or oral promises, understandings, agreements
or other commitments between LESSOR any tenant or any other person affecting
the Assets which have not been disclosed, in writing, to LESSEE.
SECTION 7.4: HAZARDOUS MATERIALS
(a) Definition. The term "Hazardous waste or materials or
substances" as used in this Lease is used in its very broadest sense and
includes, but is not limited to, materials and substances designated as
hazardous under any federal, state or local act or ordinance.
(b) LESSOR's Representations. LESSOR represents that the subject
site is the former site of Birmingham Steel. This site contains some
materials designated as hazardous by the DOE. LESSOR is in the process of
cleanup necessary to obtain a Consent Decree and Covenant Not To Sue from the
Department of Ecology. The Consent Decree will allow the uses of the site
including warehousing. It is anticipated that the Consent Decree will
prohibit access to the ground water and uses such as residential uses and
schools. The Consent Decree will be assigned to LESSEE at the Completion Date.
SECTION 7.5: CONTRACTS. All contracts which are a part of the Assets
(including, without limitation, all contracts included in the Intangible
Assets), are valid and enforceable obligations of the signatories thereto.
LESSOR has not assigned its interest in or waived any right under any of such
contracts. No consents are necessary for assignment of any contract pursuant
hereto and no such assignment will be a default under any such contract.
There shall not be, at the Completion Date, any contracts affecting the
Assets other than those previously reviewed by LESSEE or entered into by
LESSEE. Each of such contracts will be free from default and no act, event,
occurrence or omission has occurred or exists which, together with notice,
the passage of time, or both, would constitute such a default.
SECTION 8: REPRESENTATIONS AND WARRANTIES OF LESSEE
SECTION 8.1: AUTHORITY. LESSEE has full right, power and authority
to lease the Premises in accordance with this Lease. No approval or consent
of any person, firm, lender or other entity is required to be obtained by
LESSEE to permit LESSEE to lease the Premises from LESSOR.
SECTION 9: INDEMNIFICATION
Except as otherwise specifically provided herein, LESSOR shall be
responsible for and pay, and shall defend, indemnify and hold LESSEE and the
Assets harmless from any and all liens, liabilities, losses, claims and
causes of action (including related attorneys' fees, fines, remediation costs
and all other costs) which are related to the required environmental cleanup
described in Section 6.3, the inaccuracy or alleged inaccuracy of any
Warranty and/or are related to breach of any covenant of LESSOR contained
herein. LESSEE shall hold harmless and defend LESSOR from any action,
liabilities, losses, claims and causes of action (including related
attorney's fees, fines, remediation costs and all other costs), (a) which are
incurred or which arise relating to the Assets after the Completion Date,
and/or (b) are related to the inaccuracy or alleged inaccuracy of any
Warranty and/or are related to breach of any covenant of LESSEE contained
herein.
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SECTION 10: BROKERS
Each party represents to the other party that it has not had
dealings with any real estate broker or finder which has created the
obligation to pay a commission or fee with respect to this transaction other
than Brett Hartzell/Lane Bockman of CB Commercial and Dick Fosness/Chris Corr
of Kidder Mathews and Sogner (the "Brokers"). A commission will be paid by
LESSOR to the Brokers pursuant to a separate agreement. Each party shall
indemnify the other against any claim arising out of the indemnifying party's
conduct with any other brokers or finders.
SECTION 11: MAINTENANCE AND REPAIR
LESSEE agrees to keep and maintain the Premises, including, but not
limited to, roof, ceilings, foundations, insulation, footings, exterior
walls, underground utilities, sprinkler system and air conditioning of the
Premises in a reasonable state of repair during the term of this Lease and
the LESSEE will at all times keep the Premises neat and clean and in a
sanitary condition and will replace any glass of windows and doors that may
become cracked or broken and, except for reasonable wear and tear and damage
by fire and/or other unavoidable casualty, will at all times preserve said
Premises in as good repair as they now are or may hereafter be placed.
SECTION 12: LESSEE'S RIGHT TO MAKE ALTERATIONS
Subject to the qualifications of Paragraph 11, LESSEE may at its own
expense, from time to time during the term hereof, remodel and make such
alterations, additions and changes to the interior and exterior of the
Premises as it finds necessary or convenient for its normal business
purposes, including its own choice of paints, colors, designs, displays and
signs; provided, such work when completed will not impair the structural
integrity or value of the building. LESSEE agrees that all alterations,
additions and changes made by it will be made in a first-class, workmanlike
manner, and shall comply with all local and state laws or ordinances, and
anything in this Lease to the contrary notwithstanding, the LESSOR and LESSEE
agree that the LESSEE shall have neither the right not the obligation at the
end of the term of this Lease or any extension thereof to remove the same or
to change such structure or restore the Premises to the condition in which
they were originally.
SECTION 13: LIENS
LESSEE shall keep the Premises free of and hold LESSOR harmless from
any expense from any liens arising out of any work performed, materials
furnished or obligations incurred by LESSEE, provided, however, that LESSEE
shall have the right to contest any liens from time to time in good faith.
SECTION 14: ASSIGNMENT AND SUBLETTING
LESSEE may not assign, mortgage or encumber this Lease, in whole or
in part, nor sublet all or any part of the Premises without LESSOR's prior
written consent, which consent LESSOR covenants shall not be unreasonably
withheld. However, LESSEE may assign this Lease to its parent company or to
an affiliated company under common control. If this Lease be assigned or if
the Premises or any part thereof be occupied by anybody other than LESSEE,
LESSOR may collect rent from the assignee or occupant, and apply the net
amount collected to the rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a release of LESSEE
from the further performance of the provisions on its part to be observed or
performed herein. Notwithstanding any assignment or sublease, LESSEE shall
remain fully liable and shall not be released from performing any of the
terms of this Lease.
SECTION 15: ACCESS
LESSEE shall allow LESSOR or LESSOR's agents free access at all
times to said Premises for the purpose of inspecting the Premises. The LESSOR
shall have the right to place and maintain reasonable and dignified "For
Rent" signs in a conspicuous place on said Premises for ninety (90) days
prior to the expiration of this Lease.
SECTION 16: DAMAGE OR DESTRUCTION
In the event the Premises are damaged or destroyed by fire or other
casualty against which the Premises are insured, LESSEE shall thereupon cause
such damage to be repaired as soon as reasonably possible and LESSOR agrees
to make the insurance proceeds available to LESSEE to repair or restore the
Premises.
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SECTION 17: TAXES AND UTILITIES
The LESSEE hereby covenants and agrees to pay for all real estate
taxes and assessments levied upon the Premises that become due and payable
during the term of this Lease. In the event that any such taxes cover any
period of time prior to commencement or after the expiration of the term of
this Lease, LESSEE's share of such taxes shall be equitably prorated to cover
only the period of time within the fiscal tax year during which this Lease is
in effect. LESSEE further agrees to pay all charges for heat, light and
water, and for all other public utilities which will be used in or charged
against the Premises during the full term of this Lease. In the event LESSEE
shall desire to contest in good faith any tax, LESSEE may file in the name of
LESSOR all such protests or other instruments and institute and prosecute
proceedings for the purpose of such contest.
SECTION 18: SIGNS
The LESSEE shall have the right to erect and place any and all signs
on the Premises, including the building, as it deems necessary or desirable
in the conduct of its business, but any signs placed on the Premises by the
LESSEE shall be removed by the LESSEE at the termination of this Lease and
LESSEE shall repair any damage or injury to the Premises caused by such
removal, and if not so removed by LESSEE then LESSOR may have the same so
removed at LESSEE's expense.
SECTION 19: DEFAULT AND REENTRY
SECTION 19.1: DEFAULT. The occurrence of any one or more of the
following events shall constitute a default of this Lease by LESSEE.
(a) Failure to Pay Rent. The failure by LESSEE to make any payment
-------------------
of rent reserved hereunder, or any part thereof, as and when due, where such
failure shall continue for a period of five (5) days after LESSEE's receipt
of written notice from the LESSOR of such default.
(b) Failure to Perform. The failure by LESSEE to observe or perform
-------------------
any of the covenants, conditions or provisions of this Lease to be observed
or performed by LESSEE, other than described in Paragraph 19.1(a)
above, where such failure shall continue for a period of thirty (30) days
after LESSEE's receipt of written notice thereof from LESSOR; provided,
however, that if the nature of LESSEE's default is such that more than thirty
(30) days are reasonably required for its cure, then LESSEE shall not be
deemed to be in default if LESSEE commences such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to completion.
SECTION 19.2: REMEDIES FOR DEFAULT. In the event of any such default
by LESSEE, LESSOR may terminate this Lease by giving notice of such
termination to LESSEE, which termination shall be effective as of the
thirtieth (30th) day following the date upon which such notice of termination
is received by LESSEE. If this Lease is terminated under the provisions of
this Paragraph 19.2, LESSOR may reenter the Premises, but notwithstanding
such reentry the liability of the LESSEE for rent herein provided for shall
not be extinguished for the balance of the term of this Lease and LESSEE
covenants and agrees to make good to LESSOR any deficiency from a reentry and
reletting of the Premises at a lesser rental than herein agreed to, provided
the LESSOR makes good faith efforts to relet the Premises at a rental equal
to or greater than that provided for under this Lease. The LESSEE shall pay
any such deficiency each month as the amount thereof is ascertained by LESSOR.
SECTION 20: NONWAIVER OF BREACH
The failure of the LESSOR or LESSEE to insist upon strict
performance of any of the covenants and agreements of this Lease, or to
exercise any right herein conferred in any one or more instances, shall not
be construed to be a waiver or relinquishment of any such, or any other
covenants or agreements, but the same shall be and remain in full force and
effect.
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SECTION 21: INSURANCE INDEMNITY
LESSEE shall during the entire term hereof keep in full force and
effect a policy of public liability insurance having limits of not less than
$1,000,000 per individual, $1,000,000 per accident and $500,000 for damage
to property, and which shall name the LESSOR and LESSEE as insureds. LESSEE
shall, during the entire term hereof, keep in full force and effect an
insurance policy covering the Premises against fire, extended coverage
endorsement, and vandalism and/or malicious mischief endorsement, excluding
earthquake and flood damage, in an amount sufficient to cover the replacement
cost of the leased building Premises, naming the LESSOR as loss payee. The
policies of insurance required under this clause shall require at least ten
(10) days' prior notice to the LESSOR of cancellation and LESSEE agrees to
provide LESSOR with a certificate of insurance for all such policies. It
shall be LESSOR's sole responsibility to inform LESSEE of any necessity to
increase the limits of the fire and property damage policy to insure that
replacement cost coverage is provided. All premiums for insurance provided
for or required under this Lease shall be paid by the LESSEE.
SECTION 22: OFFSET STATEMENTS
Within ten (10) days after receipt of written request either party
shall furnish to the other a statement certifying that this Lease is in full
force and effect (if such be the case) and either that there are no defenses
or offsets thereto or starting those defenses or offsets.
SECTION 23: EMINENT DOMAIN
In the event the entire Premises are appropriated or taken under the
power of eminent domain by any public or quasi-public authority this Lease
shall terminate and expire as of the date of such taking and LESSEE shall
thereupon be released from any further liability hereunder. All of the
eminent domain award shall be paid to LESSOR and LESSEE shall have no claim
therein or thereto except as hereinafter provided.
In the event any material part of the Premises are appropriated or
taken under the power of eminent domain by any public or quasi-public
authority so that LESSEE is unable to continue to conduct its business in a
manner it deems necessary, LESSEE shall have the right to cancel and
terminate this Lease as of the date of such taking upon giving to LESSOR
notice in writing of such election within thirty (30) days after receipt by
LESSEE from LESSOR of written notice that said Premises have been so
appropriated or taken. In the event of such cancellation LESSEE shall
thereupon be released from any further liability under this Lease. LESSOR
agrees immediately after any appropriation or taking to give LESSEE notice in
writing thereof.
If this Lease is terminated in either manner hereinabove provided,
the rent for the last month of the LESSEE's occupancy shall be prorated and
LESSOR agrees to refund to LESSEE any rent paid in advance.
If this Lease shall not be terminated, as in this article provided,
but shall continue as to that portion of the Premises which shall not have
been appropriated or taken, then in that event LESSOR agrees to make the
condemnation award available to LESSEE and LESSEE agrees to immediately
restore the building and/or parking lot and the land remaining to a complete
unit of similar quality and character as existed prior to such appropriation
or taking, and the rent hereinabove reserved for the Premises in their
original condition shall be adjusted and fixed at an amount equal to the then
fair rental value of the Premises as so restored.
In the event of any such taking or condemnation of said Premises, or
any portion thereof, owned by LESSOR and regardless of whether this Lease
survives, the entire amount awarded for the Premises in any such proceeding
shall belong to and be paid to the LESSOR, and LESSEE agrees to execute and
deliver any assignment or other document necessary to permit LESSOR to
recover any such award. However, any amount that may be awarded as relocation
expenses and/or for damages to any fixtures or equipment owned by LESSEE in
said Premises, so taken or condemned, shall belong to and be paid to LESSEE.
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SECTION 24: ARBITRATION CONCERNING RENT
In the event LESSOR and LESSEE should be unable to agree upon the
amount of rent for any new term of this Lease arising from the options
provided in Paragraph 3 hereof, or in the event LESSOR and LESSEE should be
unable to agree upon an adjustment in rent following a partial taking of the
Premises by eminent domain as provided for in Paragraph 22 hereof, the amount
of rent in such instances shall be determined and fixed by a board of three
(3) arbiters, and a decision by a majority of the arbiters shall be deemed
final and binding on LESSOR and LESSEE. One of such arbiters shall be
appointed by LESSOR, the other by LESSEE, and the third arbiter shall be
selected by the first two so appointed. If either LESSOR or LESSEE elects to
have such arbitration, he shall give the other notice in writing of the name
and address of the arbiter appointed by him, and the party receiving such
notification shall then within fifteen (15) days give written notice to the
other party of the name and address of his appointed arbiter.
SECTION 25: HOLDING OVER
If the LESSEE shall hold over after the expiration of the term of
this Lease, such tenancy shall be for an indefinite period of time on a
month-to-month tenancy, which tenancy may be terminated as provided for by
the laws of the State of Washington then in effect. During such tenancy,
LESSEE agrees to pay to the LESSOR the same monthly rental as set forth
herein, unless a different rate is agreed upon, and be bound by all the
terms, covenants and conditions as herein specified, so far as applicable.
SECTION 26: QUITE ENJOYMENT
Upon payment by the LESSEE of the rents herein provided, and upon
the observance and performance of the covenants, terms and conditions on
LESSEE's part to be observed and performed, LESSOR covenants that LESSEE
shall peaceably and quietly hold and enjoy the Premises for the term hereby
demised without hindrance or interruption by LESSOR or any person or persons
lawfully or equitably claiming by, through or under the LESSOR.
SECTION 27: NO PARTNERSHIP
LESSOR does not in any way or for any purpose become a partner of
LESSEE in the conduct of its business, or otherwise, or joint venture or a
member of a joint enterprise with LESSEE.
SECTION 28: CAPTIONS
The captions appearing in this Lease are inserted only as a matter
of convenience and in no way define, limit, construe or describe the scope or
intent of such sections or in any way affect this Lease.
SECTION 29: REMOVAL OF PROPERTY
In the event of any entry in, or taking possession of, the Premises
as aforesaid, the LESSOR shall have the right, but not the obligation, to
remove from the Premises all personal property located therein, and may store
the same in any place selected by LESSOR, including but not limited to a
public warehouse, at the expense and the risk of the owners thereof, with the
right to sell such stored property after thirty (30) days' notice to LESSEE
and the owner thereof, after it has been stored for a period of one hundred
eighty (180) days or more, the proceeds of such sale to be applied first to
the cost of such sale, second to the payment of the charges for storage, if
any, and third to the payment of any other sums of money which may then be
due from LESSEE to LESSOR under the terms hereof, the balance, if any, to be
paid to the LESSEE.
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SECTION 30: WAIVER OF SUBROGATION
Each party hereto waives any and every claim which arises or may
arise in its favor and against the other party hereto during the term of this
Lease or any renewal or extension thereof for any and all loss of, or damage
to, any improvements or any of its other property located within or upon, or
constituting a part of, the Premises leased to LESSEE hereunder, which loss
or damage is covered by valid and collectible fire, extended coverage
endorsement, and vandalism and/or malicious mischief endorsement insurance
policies, to the extent that such loss or damage is recoverable under said
insurance policies. Said mutual waivers shall be in addition to, and not in
limitation or derogation of, any other waiver or release contained in this
Lease with respect to any loss of, or damage to, property of the parties
hereto. Inasmuch as the above mutual waivers will preclude the assignment of
any aforesaid claim by way of subrogation (or otherwise) to an insurance
company (or any other person), each party hereto hereby agrees immediately to
give to each insurance company which has issued to it policies of fire,
extended coverage endorsement, and vandalism and/or malicious mischief
endorsement, written notice of the terms of said mutual waivers, and to have
said insurance policies properly endorsed, if necessary, to prevent the
invalidation of said insurance coverages by reason of said waivers.
SECTION 31: CONSENT RESPONSES
In any case herein provided in which LESSOR's consent is necessary
before LESSEE may act and in which LESSOR has agreed not to unreasonably
withhold such consent, in the event that LESSOR fails to either give notice
of consent to such act or to give notice of refusal to consent to such act
within fourteen (14) days of receipt by LESSOR of written notice of request
for such consent, LESSOR's failure to so respond shall be deemed to be
consent by LESSOR to the requested act.
SECTION 32: NOTICE
Any notice required or permitted hereunder shall be in writing and
shall be deemed given and received only when personally delivered (by
overnight courier service or facsimile transmission or otherwise) and
actually received by the recipient at the following addresses or facsimile
numbers:
If to the LESSOR:
Benaroya Capital Company, L.L.C.
1001 Fourth Avenue, Suite 4700
Seattle, Washington 98154
Attn: Larry Benaroya, Manager
Fax No. (206) 447-9384
If to the LESSEE:
Eagle Hardware & Garden, Inc.
981 Powell Avenue SW
Renton, Washington 98055
Attn: Richard Takara, President and CEO
Fax No. (425) 204-5169
With a copy to:
William N. Moloney
Attorney for Eagle
5711 N.E. Tolo Road
Bainbridge Island, Washington 98110
Fax No. (206) 842-5340
Either party may change its address above by written notice given as
aforesaid.
SECTION 33: PARTIES BOUND: THIRD PARTIES
This Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. There are no
third party beneficiaries hereof, this Lease being solely for the benefit of
LESSOR, LESSEE and any assignee of LESSEE.
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SECTION 34: TIME OF ESSENCE
Time is of the essence of this Lease.
SECTION 35: RISK OF LOSS
LESSOR shall bear the risk of all loss or damage to the Premises and
the Personal Property from all causes through the Completion Date. If, prior
to the Completion Date, all or part of the Premises or Personal Property is
damaged by fire or by any other insured casualty, or any portion of the
Premises is taken by eminent domain or threatened by such a taking, LESSOR
shall promptly give to LESSEE full written notice of the same and shall keep
LESSEE fully informed as to any insurance matters related thereto. LESSOR
shall use its reasonable best efforts to restore and repair damage and
replace damaged elements of the Premises and the Personal Property utilizing
the insurance proceeds or condemnation award such that the same shall be put,
to the extent possible, into at least as good of a quality and condition as
immediately prior to such damage and shall thereafter proceed to complete
construction of the Improvements as contemplated and within the timeframe
required herein.
SECTION 36: INTERPRETATION
This Lease is the full and final agreement of LESSOR and LESSEE with
respect to the Lease of the Assets and supersedes all prior negotiations,
offers, counter offers and letters of intent. This Lease may only be amended
by a written instrument, executed by LESSOR and LESSEE. No waiver of any
right by LESSEE shall be established absent proof of a written document,
executed by LESSEE, expressly setting forth such waiver. In the event any
provision hereof is unenforceable as written, the parties desire that such
provision be enforced to the fullest extent of the law, and that the balance
of this Lease remain fully enforceable. This Lease shall be governed by and
construed in accordance with the laws of the State of Washington.
SECTION 37: SURVIVAL
All Warranties, and LESSEE's right to enforce or assert a breach of
the same, shall survive any investigation by LESSEE, execution hereof, and
the Completion Date. All indemnity, default and attorneys' fees provisions
hereof, together with all provisions hereof which so contemplate shall
survive termination hereof and/or the Completion Date and shall not be so
merged.
SECTION 38: ATTORNEYS FEES
In the event of litigation between the parties concerning the
Assets, this Lease, or the rights and duties of either in relation thereto,
the prevailing party in such litigation shall be entitled, in addition to
such other relief as may be granted, to receive from the losing party a
reasonable sum as and for its costs and attorneys fees incurred both at and
in preparation for trial and any appeal or review, such sum to be set by the
court(s) before which the matter is heard. The foregoing provision shall
apply to arbitration proceedings, and also to any proceedings of any nature
in bankruptcy court, including proceedings regarding issues unique to
bankruptcy law.
SECTION 39: REPRESENTATION
Each of the parties hereto have been represented by legal counsel of
their choice in respect to this transaction. This Lease shall not be
construed adversely against either party by reason of the attorney for such
party having prepared the same for review by the parties.
SECTION 40: COUNTING OF DAYS
Whenever a time period set forth in this Lease would otherwise
expire on a Saturday, Sunday or banking or federally recognized holiday, such
time period shall be deemed extended to the next following business day.
SECTION 41: EXHIBITS
A. Description of Real Property
B. Site Plan and Schernatic Design
C. Specifications
D. Construction Schedule
E. Permitted Exceptions
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease the
day and year first above written.
LESSEE:
EAGLE HARDWARE & GARDEN DISTRIBUTION SERVICES, INC.
/s/ Richard T. Takata
---------------------------------------------------
By: Richard T. Takata
Its: President
Date 11-17-97
LESSOR:
KENT CENTRAL, L.L.C.
/s/ Larry R. Benaroya
---------------------------------------------------
By: Larry R. Benaroya
Its: Manager
Date 12-01-97
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 17 day of November 1997, before me, a Notary Public in and
for the State of Washington, personally appeared Richard T. Takata,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person who executed this instrument, on oath stated that
he was authorized to execute this instrument, and acknowledged it as the
President of EAGLE HARDWARE & GARDEN DISTRIBUTION SERVICES, INC. to be the
free and voluntary act and deed of said corporation for the uses and purposes
mentioned in this instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
the day and year first above written.
Sibyl Tice
---------------------------------------------------
NOTARY PUBLIC in and for the State of Washington,
residing at Auburn
My appointment expires 2-7-98
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
On this 1 day of December, 1997, before me, a Notary Public in and
for the State of Washington, personally appeared Larry R. Benaroya,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person who executed this instrument, on oath stated that
he was authorized to execute this instrument, and acknowledged it as the
Manager of KENT CENTRAL, L.L.C. to be the free and voluntary act and deed of
said corporation for the uses and purposes mentioned in this instrument.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal
the day and year first above written.
/s/ Debbie B. Jones
---------------------------------------------------
NOTARY PUBLIC in and for the State of Washington,
residing at (illegible)
My appointment expires 7-21-98
11
<PAGE>
AMENDMENT NO. 1 TO
BUILD TO SUIT
WAREHOUSE AND DISTRIBUTION CENTER LEASE
THIS AMENDMENT NO. 1 TO BUILD TO SUIT WAREHOUSE AND DISTRIBUTION
LEASE (this "Amendment") is dated for reference purposes the 9th day of
February, 1998, and is by and between KENT CENTRAL, a Washington limited
liability company ("Lessor") and EAGLE HARDWARE & GARDEN DISTRIBUTION
SERVICES, INC., a Washington corporation ("Lessee").
RECITALS
A. Lessor and Lessee are parties to that certain Build to Suite
Warehouse and Distribution Center Lease dated as of June 18, 1997, (the
"Lease").
B. Because Lessor has made, and will make, at the request of Lessee,
significant improvements to the Premises which are unique to Lessee's use of
the Premises and which improvements would need to be modified or replaced for
any other use of the Premises, Lessor and Lessee have agreed to amend the
Lease to provide for a significant Security Deposit to insure Lessee's
performance under the Lease and to insure Lessor that, in the event of a
default by Lessee under the Lease, Lessor will be compensated for changes
Lessor will be required to make to sell or lease the Premises to another
party.
Now, therefore, the parties agree that the Lease shall be amended to
provide as follows:
1. New Section. A new Section 6A shall be added to the Lease to
-----------
read as follows:
SECTION 6A: SECURITY DEPOSIT
Lessee has deposited with Chicago Title Insurance Company
("CTI") the sum of $3,325,000 (the "Deposit"), which Deposit is held
under CTI's Escrow Account No. 483716-SS in an interest bearing
account with interest accruing for the benefit of the party who
obtains the Deposit. The Deposit shall continue to be held by CTI
for the benefit of Lessor to ensure Lessee's performance under this
Lease and may be used by Lessor to compensate Lessor for any damages
suffered by
12
<PAGE>
Lessor if Lessee defaults under the Lease. Upon Lessor certifying to
CTI that Lessor has suffered damages by reason of the default of
Lessee under the Lease, then CTI shall pay over the Deposit to
Lessor immediately without any further action necessary by either
Lessor or Lessee and Lessee hereby approves of said payment by CTI.
2. Ratification. Except as expressly set forth in this Amendment,
------------
the Lease shall remain in full force and effect and its terms and provisions
are hereby ratified.
In witness whereof, the parties have executed this Amendment as of
the date first written above.
LESSOR:
-------
KENT CENTRAL, L.L.C., a Washington
Limited Liability Company
By: Larry R. Benaroya
------------------------------------------------
Its Manager
LESSEE:
EAGLE HARDWARE & GARDEN DISTRIBUTION
SERVICES, INC., a Washington corporation
By: Richard D. Takata
------------------------------------------------
Its: President
2
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that the person
appearing before me and making this acknowledgment is the person whose true
signature appears on this document.
On this 5th day of March, 1998, before me personally appeared Larry
R. Benaroya, to me known to be a member of KENT CENTRAL, L.L.C., the limited
liability company what executed the within and foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of
said limited liability company, for the uses and purposes therein mentioned,
and on oath stated that he was authorized to execute said instrument.
WITNESS my hand and official seal hereto affixed the day and year
first above written.
/s/ Debbie B. Jones
---------------------------------------------------
Notary Public in and for the State of Washington,
residing at Shoreline
My commission expires: 7-21-98
/s/ Debbit B. Jones
---------------------------------------------------
[Type or Print Notary Name]
(Use This Space for Notarial Seal Stamp)
3
<PAGE>
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that the person
appearing before me and making this acknowledgment is the person whose true
signature appears on this document.
On this 23rd day of February, 1998, before me personally appeared
, to me known to be the of EAGLE HARDWARE & GARDEN
- ---------------- -----------
DISTRIBUTION SERVICES, 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, and on oath stated that he/she was authorized to
execute said instrument and that the seal affixed, if any, is the corporate
seal of said corporation.
WITNESS my hand and official seal hereto affixed the day and year first
above written.
-------------------
Notary Public in and for the State of Washington,
residing at ___________________
My commission expires:______________
-----------------------
[Type or Print Notary Name]
(Use This Space for Notarial Seal Stamp)
4
<PAGE>
Exhibit 10.134
EAGLE HARDWARE & GARDEN, INC.
W. 901 APPLEWAY
COEUR D'ALENE, IDAHO
TABLE OF CONTENTS
<TABLE>
<S> <C>
1.0 PREMISES .......................................... 1
2.0 IMPROVEMENTS TO BE BUILT BY THE PARTIES ........... 1
3.0 TERM .............................................. 2
3.1 Commencement Date .............................. 2
3.2 Lease Year ..................................... 2
3.3 Options to Extend .............................. 2
4.0 RENT .............................................. 2
4.1 Minimum Rent ................................... 2
4.2 Surcharge ...................................... 2
4.3 Adjustments to Minimum Rent .................... 2
4.4 Adjusted to Minimum Rent ....................... 2
4.5 Maximum Adjusted Minimum Rent .................. 3
4.6 Option Period Rental ........................... 3
5.0 PERCENTAGE RENT ................................... 3
5.1 Percentage Rent ................................ 3
5.2 Exclusions ..................................... 3
6.0 ZONING, PERMITS AND TITLES ........................ 3
6.1 Landlord's Warranty - Title/Zoning ............. 4
6.2 Landlord's Permits ............................. 4
6.3 Landlord's Condition of Title .................. 4
7.0 USE OF PREMISES ................................... 4
7.1 Use of Premises ................................ 4
7.2 Compliance With Environmental Laws ............. 4
7.3 Compliance With Other Laws ..................... 4
7.4 Nuisance ....................................... 4
8.0 MAINTENANCE AND REPAIR ............................ 4
8.1 Maintenance - Premises ......................... 5
8.2 Defects - Premises ............................. 5
8.3 Notices ........................................ 5
8.4 Surrender of Premises .......................... 5
8.5 Removal of Property ............................ 5
9.0 TENANT'S RIGHT TO MAKE ALTERATIONS ................ 5
10.0 LIENS ............................................ 5
11.0 ASSIGNMENT AND SUBLETTING ........................ 5
12.0 ACCESS ........................................... 6
13.0 DAMAGE OR DESTRUCTION ............................ 6
13.1 Destruction Due to Risk Covered by Insurance ... 6
13.2 Other Destruction .............................. 7
13.3 Abatement of Rent .............................. 7
14.0 NOTICES .......................................... 7
14.1 To Landlord and Tenant ......................... 7
14.2 Notice To Cure Or Vacate ....................... 8
14.3 Multiple Persons ............................... 8
15.0 TAXES AND UTILITIES .............................. 8
15.1 Taxes .......................................... 8
15.2 Contests ....................................... 8
15.3 Utilities ...................................... 9
16.0 SIGNS ............................................ 9
17.0 DEFAULT BY TENANT ................................ 9
17.1 Termination .................................... 9
17.2 Removal of Property ............................ 10
17.3 Injunctive Relief .............................. 10
17.4 Cumulative ..................................... 10
18.0 DEFAULT BY LANDLORD .............................. 10
18.1 Tenant's Right To Cure ......................... 10
18.2 Limitations on Liability ....................... 10
18.3 Injunctive Relief .............................. 10
18.4 Remedies Cumulative ............................ 10
19.0 COSTS AND ATTORNEY'S FEES ........................ 10
20.0 NONWAIVER OF BREACH .............................. 11
21.0 INSURANCE AND INDEMNITY .......................... 11
21.1 Tenant's Liability Insurance ................... 11
21.2 Landlord's Indemnity ........................... 11
21.3 Property Insurance - Premises .................. 11
21.4 Waiver of Subrogation .......................... 11
21.5 Insurance - Generally .......................... 12
21.6 Indemnification - Concurrent Negligence ........ 12
21.7 Waiver of Worker's Compensation ................ 12
22.0 OFFSET STATEMENTS ................................ 12
23.0 EMINENT DOMAIN ................................... 12
23.1 Total Taking ................................... 12
23.2 Partial Taking ................................. 12
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
23.3 Damage ......................................... 12
23.4 Repairs ........................................ 13
23.5 Proceeds ....................................... 13
23.6 Adjustment To Minimum Rent ..................... 13
23.7 Cumulative Effect .............................. 13
23.8 Conflict Of Provisions ......................... 13
24.0 PAYMENT AND NOTICE TO LANDLORD ................... 13
25.0 HOLD OVER ........................................ 13
26.0 QUIET ENJOYMENT .................................. 13
27.0 FORCE MAJEURE .................................... 13
28.0 MISCELLANEOUS .................................... 13
28.1 Captions ....................................... 14
28.2 Cannon of Construction ......................... 14
28.3 Time ........................................... 14
28.4 Successors ..................................... 14
28.5 Partnership .................................... 14
28.6 Entirety ....................................... 14
28.7 Time For Responses ............................. 14
28.8 Exhibits ....................................... 14
29.0 MEMORANDUM OF LEASE AND NONDISTURBANCE AGREEMENT . 14
30.0 CONDITION TO EFFECTIVENESS ....................... 14
31.0 SIGNATURES AND ACKNOWLEDGMENTS ................... 14
</TABLE>
2
<PAGE>
EAGLE HARDWARE & GARDEN, INC.
W. 901 APPLEWAY AVENUE
COEUR D'ALENE, IDAHO 83814
LEASE
THIS LEASE (this "Lease") is dated December 5, 1997, by and between HARLAN D.
DOUGLASS and MAXINE H. DOUGLASS, husband and wife (collectively the "Landlord"),
and EAGLE HARDWARE & GARDEN, INC., a Washington corporation ("Tenant"). Landlord
is the owner of certain land and improvements located at 901 Appleway Avenue in
the City of Coeur d'Alene, Kootenani County, Idaho. Landlord desires to lease
such real property to Tenant and Tenant desires to lease such real property from
Landlord. To provide for the lease of such real property by Landlord to Tenant,
the parties agree:
Landlord does hereby lease to Tenant and Tenant does hereby lease from Landlord
that certain real property located in Coeur d'Alene, Kootenani County, Idaho,
legally described as setforth in Exhibit "A" attached hereto and incorporated
herein by reference, for the term, at a rental, and upon the covenants and
conditions as hereinbelow set forth.
1.0 PREMISES
The premises shall consist of the land described in Exhibit "A" togetherwith the
following improvements with square footages being approximate; (a) a single
story retail store building without a basement of 112,675 square feet with an
office mezzanine of 3,836 square feet and a storage mezzanine of 9,599 square
feet; (b) a single story retail drive-through building materials building, fully
roofed, without a basement, of 61,125 square feet with a storage mezzanine of
3,230 square feet; (c) an enclosed retail garden sales yard of 14,400 square
feet with 8,800 square feet of open area. The balance of the garden yard shall
be occupied by Tenant supplied and installed 5,600 square feet commercial
greenhouse on a steel support structure by Landlord; and related improvements to
be constructed on the above described real property by Landlord, pursuant to
plans and specifications as hereinafter provided (collectively the "Premises").
The Premises are depicted on the Site Plan number 313 and dated 7/29/97,
attached hereto as Exhibit B and incorporated herein by reference. No changes
shall be made thereto without Tenant's prior written consent except that the
exterior stairs in the rear of the Building have been modified.
Notwithstanding anything in this Lease to the contrary, Landlord is constructing
a building and other improvements on the Premises. Such building and
improvements shall be built substantially in accordance with plans and
specifications prepared by Tenant's architect and approved by Landlord and
Tenant, and such building and improvements (and written change orders thereto)
shall be substantially completed on or before December 1, 1997.
Tenant's General Outline Specifications and Requirements for New Buildings,
dated May 30, 1997, are attached hereto as Exhibit C. With respect to the
improvements existing as of the Commencement Date, Tenant's architect has
incorporated Tenant's interior display and fixture drawings with the final
building drawings in order that all Tenant's interior and exterior work be
included under the primary building permit.
Exhibit C, as amended by the change orders, covers the respective
construction obligations of both Landlord and Tenant, but does not
specifically designate the construction obligations to be performed by each
party. Each party, as its sole cost and expense, has the obligation to
construct their respective portion of the improvements substantially in
accordance with Exhibit C, as amended by the change orders.
2.0 IMPROVEMENTS TO BE BUILT BY THE PARTIES
Landlord, at Landlord's sole expense, applied for and obtained the necessary
construction permits, commenced with the construction and erection of the
improvements to be built by Landlord hereunder and shall proceed with such
construction to substantial completion with reasonable dispatch. The
improvements constructed by Landlord shall be substantially completed at
Landlord's expense in substantial compliance with Exhibit C, as amended by the
change orders on or before December 1, 1997. The improvements shall be
constructed and erected in a good and workmanlike manner, and shall be adequate
and serviceable in all respects for use by Tenant under this Lease.
Notwithstanding anything to the contrary contained in this Lease the Premises
were delivered to Tenant in a substantially complete condition on December 1,
1997.
Tenant, at its sole cost and expense, shall, (i) construct the greenhouse
located in the garden area, (ii) construct and install the display and fixture
improvements, (iii) construct Tenant's work substantially as indicated on
Exhibit C and as amended by the change orders if any. Tenant shall be
responsible for any additional improvements to the building which are necessary
for Tenant's tenancy and occupancy of the Premises pursuant to the provisions of
this Lease. Tenant shall have the right, at its own expense, to perform any and
all fixturing and other work Tenant deems necessary to prepare the store for
opening, and Landlord hereby grants Tenant access to the Premises to accomplish
such construction, so long as Tenant does not interfere with Landlord's
construction.
Landlord warrants that Landlord will obtain a certificate of occupancy from the
appropriate governmental authorities having jurisdiction over the Premises
(which may be a temporary certificate of occupancy, provided such certificate
permits occupancy and does not prohibit the commencement and operation of
Tenant's business).
Landlord hereby assigns to Tenant all rights under warranties and/or bonds
relating to the repair, maintenance and/or condition of the improvements to
be built on the Premises, and Landlord will cooperate with Tenant in order to
obtain for Tenant the benefit of all other warranties and/or bonds.
1
<PAGE>
Each party shall pay for the cost and expense of lien-free completion of
their respective construction obligations on the Premises. Tenant, at its
sole cost and expense, shall pay the architects and engineer's fees for the
preparation of the plans and specifications and for the supervision of the
construction. Tenant shall acquire no equity in the Premises of Landlord by
reason of payments for leasehold improvements or otherwise.
3.0 TERM
3.1 Commencement Date The term of this Lease shall be for 20
years and 2 months commencing on December 1, 1997 (the "Commencement Date").
3.2 Lease Year The first lease year, if the Commencement Date
is the first day of a calendar month, shall be the 12 successive calendar months
that begin on the Commencement Date. If the Commencement Date is not the first
day of a calendar month, the first lease year shall be the 12 successive
calendar months that begin on the first day of the calendar month next
succeeding the Commencement Date. Thereafter, subsequent lease years shall be
the succeeding 12 calendar month periods after the first lease year.
3.3 Options to Extend Tenant shall have 2 consecutive 5 year
options to extend the Lease term, provided that at the time of the exercise of
the option, and at all times after the exercise of the option and prior to the
commencement of such extension, Tenant shall not be in default under the Lease
for a default which it has failed to cure within the applicable cure period.
Tenant shall notify Landlord of the exercise of its options no later than 180
days prior to the expiration of the initial term of the Lease or the expiration
of the first extended term, as the case may be. Minimum Rent for the option
periods shall be as set forth in Sections 4.3, 4.4 and 4.5 below. Percentage
Rent during the option periods shall be computed as set forth in Section 5
below.
4.0 RENT
4.1 Minimum Rent Tenant shall pay to Landlord, without offset,
notice or demand, as fixed minimum rent, the monthly sums set forth below (the
"Minimum Rent"), which shall be paid in advance on or before the first day of
each calendar month of each lease year during the lease term. If the lease term
commences on a day other than the first day of a calendar month, the Minimum
Rent for such month shall be a prorated portion of the monthly Minimum Rent.
The Minimum Rent shall begin on December 3, 1997 (the "Rent Commencement Date").
The Minimum Rent for each of the first 5 years commencing on the Rent
Commencement Date shall be $850,000 per year payable at a rate $70,833.33 per
month.
4.2 Surcharge Tenant acknowledges that late payment by Tenant
to Landlord of the Minimum Rent, and any other sums required to be paid by
Tenant to Landlord hereunder, will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of such costs being extremely
difficult and impracticable to fix. Such costs include, without limitation,
processing and accounting charges, and late charges that may be imposed on
Landlord by the terms of any encumbrance and note secured by any encumbrance
cover the Premises. Therefore, if any installment of Minimum Rent due from
Tenant is not received by Landlord by the 5th day of each and every month, or
any other sum required to be paid by Tenant to Landlord or others as provided
for in this Lease is not received when due, Tenant shall pay to Landlord an
additional sum of 5% of the overdue Minimum Rent as a surcharge. Failure to pay
the Minimum Rent on time shall be construed to mean the failure to mail the
fixed Minimum Rent to Landlord on or before the 5th day of the month with
postmark affixed thereto or to deliver the Minimum Rent to the Landlord by the
5th day of the month.
4.3 Adjustments to Minimum Rent To provide an equitable
adjustment of rent to offset the effects of inflation, the Minimum Rent shall be
adjusted at the end of each 5 year anniversary of the Rent Commencement Date,
the adjustment to be determined by the Index (as defined below) published
closest, but prior to, the first month of the first year of the Lease Term (the
"Base Index") and every fifth year of the Term (the "Subsequent Index") in
accordance with changes in the Consumer Price Index for all Urban Consumers for
the Seattle/Tacoma area on the 1982 - 84 = 100 base published by the Bureau of
Labor Statistics, U.S. Department of Labor (the "Index") using the procedures
set forth in Section 4.4 below. If the Index is discontinued or revised during
the Term, such other government index or computation with which it is replaced
by the Bureau shall be used in order to obtain substantially the same result as
would be obtained if the index had not been discontinued or raised, and if the
Index is not so replaced, Landlord shall adopt a substitute index or substitute
procedure which reasonably reflects changes in the purchasing power of the U.S.
dollar.
4.4 Adjusted Minimum Rent During each 5 year period following
the first 5 year period of the Term, Tenant shall pay Landlord Minimum Rent
equal to the Subsequent Index divided by the Base Index and multiplied by the
Minimum Rent set forth in Section 4.1 above (the "Adjusted Minimum Rent")
provided, however, that under no circumstances shall the Adjusted Minimum Rent
be less than the previous year's minimum rent. In other words, the Adjusted
Minimum Rent shall be computed in accordance with the following formula:
Adjusted Minimum Rent = Subsequent Index x Minimum Rent
----------------
Base Index
4.5 Maximum Adjusted Minimum Rent Notwithstanding the
provisions of Sections 4.3 and 4.4 above, the Adjusted Minimum Rent shall not,
at any time, exceed the Minimum Rent as set forth in Section 4.1 above by more
than 15% for the first 5 year rental adjustment and continuing each 5 year
period thereafter by adding 15% to the previous 5 year period maximum, so that
in year 16 the maximum increase would be 45% and so
2
<PAGE>
that in year 26 the maximum increase would be 75%. The maximum annual Adjusted
Rental for years 6 through 30 would be as follows:
<TABLE>
<CAPTION>
<S> <C>
Base Term Years 6 through 10 not to exceed $977,500.00
Years 11 through 15 not to exceed $1,124,125.00
Years 16 through 20 not to exceed $1,292,743.00
Option Periods Years 21 through 25 not to exceed $1,486,655.00
Years 26 through 30 not to exceed $1,709,653.00
</TABLE>
4.6 Option Period Rental The option period rent ("Option
Period Rent") shall be determined by an adjustment over the last 5 year period
of the Lease Term, or preceding option period, whichever the case may be, by
using the same adjustments to Minimum Rent, as set forth in Sections 4.3 and 4.4
above, but subject to the maximum limitation setforth in Section 4.5 above.
5.0 PERCENTAGE RENT
5.1 Percentage Rent In addition to the Minimum Rent, Tenant
agrees to pay to Landlord as additional rent for each lease year, 2% of the
amount of annual gross sales in excess of $30,000,000.00.
Within 60 days after the end of each lease year, Tenant shall furnish to
Landlord a statement of the gross sales for said lease year and the additional
rent, if any, shall be payable not later than 60 days from and after the close
of the lease year. Such statement shall set forth the gross sales for said lease
year and the amounts deducted therefrom pursuant to Section 5.2 below. Not more
than once with respect to any lease year, and then only after reasonable notice
and during Tenant's office hours, Landlord shall have the right to examine or
cause to be examined Tenant's records for the purpose of verifying the sales as
reported by Tenant and, subject to the provisions below with respect to
confidentiality, Landlord may make copies thereof, at Landlord's sole cost and
expense. Tenant shall be required to preserve its records on which any statement
is based for 3 years and no more. After Landlord's written request, Tenant will
produce such records at Tenant's corporate headquarters, or at such other
location that is mutually acceptable to Landlord and Tenant. If Landlord causes
an analysis to be performed by an independent certified public accountant, and
if such analysis reveals that Tenant has underpaid the percentage rent required
hereunder by more than 3%, then the reasonable out-of-pocket expenses shall be
paid by Tenant. Otherwise, the costs of such analysis shall be paid by Landlord.
If Landlord fails to object in writing to any statement within 36 months after
the statement was rendered, such statement shall be conclusively presumed to be
correct. Landlord agrees to keep all information and records relating to
Tenant's gross sales confidential, except that Landlord may disclose, to an
extent and in a manner that is commercially reasonable, summaries of such
information to prospective purchasers or lenders of Landlord's property,
provided such prospective purchasers and lenders agree in advance in writing to
keep such information confidential, except as required by law and except as
otherwise allowed by a court in any litigation.
5.2 Exclusions It is agreed by the parties hereto that the
term "gross sales" as used in this Lease shall mean the total selling price of
all goods, wares and merchandise sold, in, on or from the Premises determined in
accordance with generally accepted accounting principles consistently applied as
between past and future periods, less the following deductions to the extent
that the same have been included in "gross sales" figures:
a. All credits and refunds made to customers for merchandise
returned or exchanged and any adjustment resulting in a reduction of a service
charge;
b. All inter-store shipments or transfers of merchandise from
the Premises to any of Tenant's other stores made for the convenience of
Tenant's business and not for the purpose of avoiding a sale pursuant to Section
5.1;
c. Amounts received in settlement of claims for loss or damage
to merchandise;
d. The amount of any tax payable by reason of any gross sales
tax law or of any other tax law based upon gross sales, gross volumes or gross
receipts, now in effect or which may be adopted or amended hereafter that are
imposed by governmental authority, added to the sales price, separately stated
and collected separately as a tax from customers;
e. Amounts received from the sale of fixtures or other
property which is not stock in trade or "bulk transfer" of inventory as that
term is defined by the Uniform Commercial Code;
f. Amounts uncollected due to bad checks or insufficient
credit;
Amounts received from the sale of services or contracts for services,
warranties, maintenance, insurance, construction or installation and the like
shall not be included in gross sales, except any portion which is paid to
Tenant.
6.0 ZONING, PERMITS AND TITLES
6.1 Landlord's Warranty - Title/Zoning Landlord covenants,
warrants and represents to Tenant, as of the date of this Lease, that there are
no restrictive covenants or zoning ordinances or regulations which prohibit the
use of the Premises as a home and garden center in the same manner as currently
operated by Tenant in Spokane, Washington.
6.2 Landlord's Permits Landlord will furnish Tenant copies of
permits and approvals obtained for the Premises.
6.3 Landlord's Condition of Title Landlord warrants that
Landlord has, or prior to the Commencement Date will have, title to the
Premises, free and clear of all liens and encumbrances except as set forth in
Exhibit F.
7.0 USE OF PREMISES
3
<PAGE>
7.1 Use of Premises Tenant shall use the Premises for a
home and garden center and related uses, as currently operated by Tenant in
Spokane, Washington, including, but not limited to, the sale of electrical
and plumbing items, building materials, garden and nursery items, home center
items and other related items and services. Tenant may also sell such other
types of items and sell or perform such other types of services as may be
sold or performed in any of Tenant's other stores. Tenant may also use the
Premises for storing or warehousing goods to be sold at other locations.
Tenant shall not use the Premises for any other purpose. Nothing in this
Lease shall be construed as a covenant on the part of Tenant to operate its
business within the Premises for all or any portion of the lease term.
7.2 Compliance With Environmental Laws Tenant and Landlord
shall comply with all environmental laws, as now existing or hereafter enacted
or amended, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., the
Safe Water Drinking Act, 42 U.S.C. Section 300F, the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Section 136 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq., or other statutes enacted
by the U.S. Congress or Idaho Legislature, and any regulations, order and
permits issued thereunder or by any governmental authority with jurisdiction
over environmental matters ("Environmental Laws"). Tenant shall not use or
permit the use of the Premises in any manner, or permit anything to be done in
or about the Premises which may subject the Landlord or any lender under any
financing covering the Premises, this Lease or Tenant's business, to liability
for remediation costs, other damages related to or penalties under any
Environmental Laws (including but not limited to environmental consultant's and
attorney's fees, laboratory testing charges and personal injury claims)
resulting from Tenant's use of or conduct on the Premises, including the
generation, transportation, management, handling, treatment, storage,
manufacture, emission, disposal or deposit of any hazardous wastes, hazardous
substances or fill or other material containing hazardous wastes or hazardous
substances on the Premises. Tenant, at its sole cost and expense, shall also be
responsible for the clean up of any hazardous waste or hazardous substances, as
defined under any Environmental Laws, which may come upon the Premises by
Tenant's actions during the term of this Lease. Landlord and Tenant shall have
the right at all reasonable times upon notice to the other to conduct
environmental investigations, including the taking of samples, for the purpose
of detecting or measuring the presence of hazardous wastes or hazardous
substances on the Premises or any part thereof. Tenant and Landlord, upon
request by the other, shall provide to the requesting party all information
which the requesting party reasonably deems necessary or useful for the purpose
of determining whether the parties are in compliance with all Environmental Laws
and whether the Premises or any part thereof is contaminated by any hazardous
wastes or hazardous substances.
Landlord and Tenant agree to indemnify and hold the other harmless from any
claim, and all loss, cost or expense related to any failure to comply with the
obligations of this Section 7.2. Landlord represents and covenants, to the best
of its knowledge, that, as of the date Tenant takes occupancy of the Premises,
the Premises are free from the presence of any hazardous wastes or hazardous
substances, as defined under any Environmental Laws which may subject Tenant to
liability for remediation costs, other damage related to or penalties under any
Environment Laws. Landlord shall indemnify and hold Tenant harmless from any
claims, and all loss, costs and expenses related to the presence of any
hazardous wastes or hazardous substances, as defined under any Environmental
Laws, which may be present in or about the Premises on or before the
Commencement Date. The representations, covenants and indemnification provisions
set forth in this Section 7.2 shall survive the expiration of termination of
this Lease. Tenant has received copies of the Level One Environmental Site
Assessment Report Project Number X97082 prepared by Budinger & Associates dated
April 18, 1997.
7.3 Compliance With Other Laws Tenant shall not use the
Premises or permit anything to be done in or about the Premises, which will in
any way conflict with any law, zoning restriction or requirement of duly
constituted public authorities now in force or which may hereafter be enacted or
promulgated. Tenant shall, at its sole cost and expense, promptly comply with
all laws or requirements of any board of fire underwriters or other similar body
now or hereafter constituted relating to or affecting the condition, use or
occupancy of the Premises.
7.4 Nuisance Tenant shall not do or permit anything to be done
in or about the Premises which will in any way obstruct or interfere with the
rights of Landlord under this Lease, use or allow the Premises to be used for
any unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. Tenant shall not commit or
suffer to be committed any waste in or upon the Premises.
8.0 MAINTENANCE AND REPAIR
8.1 Maintenance - Premises Except as provided in Sections 13
and 23, where the Lease is terminated by reason of casualty or condemnation,
Tenant, at its sole cost and expense, shall make any and all repairs and
replacements to the Premises and shall maintain the Premises in good order and
condition, ordinary wear and tear excepted, and Landlord shall be under no
obligation or responsibility to make any repairs, maintenance, improvements,
alterations, or replacements whatsoever.
8.2 Defects - Premises Landlord and Tenant shall cooperate in
pursuing warranty remedies to the fullest extent practicable during the warranty
period.
8.3 Notices At all reasonable times Landlord shall have the
right to post and keep posted on the Premises any notices permitted by any law
of the state in which the Premises are located relating to Landlord's
nonresponsibility for mechanics liens or liens of a similar nature.
8.4 Surrender of Premises Tenant shall, at the expiration or
earlier termination of the term hereof, surrender the Premises and any
alterations made thereto, in good condition, ordinary wear and tear and damage
by casualty (if this Lease is terminated) or eminent domain excepted.
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8.5 Removal of Property Tenant shall have the right, but no
obligation, at any time within 10 days after the expiration or earlier
termination of this Lease to remove from the Premises all merchandise, signs,
trade, fixtures, furniture, furnishings, and equipment installed therein and
owned or leased by Tenant, provided, however, that Tenant shall repair any
damage to the Premises caused by any such removal. Any personal property left
at the Premises more than 10 days after the expiration or earlier termination
of this Lease shall be deemed to be abandoned and may be appropriated, sold,
stored, or otherwise disposed of by Landlord; and Tenant will pay Landlord
for all reasonable expenses incurred in connection with such personal
property, including but not limited to, the cost of repairing any damage to
the Premises caused by the removal of such personal property.
9.0 TENANT'S RIGHT TO MAKE ALTERATIONS
Tenant shall have the right at any time to make such non-structural additions,
alterations, changes or improvements in or to the Premises, as well as all
repairs to be made by Tenant hereunder, as Tenant may deem necessary or proper
(including, but not limited to the installation of trade fixtures, equipment,
and the partitions required or used from time to time in connection with
Tenant's business on the Premises); provided, however, that no work done by
Tenant shall lessen the market value of the Premises and Tenant shall pay
promptly for all such work done by it or upon its order. Tenant may install or
permit the installation of automatic teller machines, newspaper racks,
telephones and similar equipment, in on or through the exterior walls of the
building and on the sidewalk areas that are a part of the Premises. Landlord
hereby consents to whatever remodeling and other changes to the interior and
exterior of the building on the Premises, including Tenant's own choice of
paints, colors, designs, displays and signs, that Tenant deems necessary to open
for business. Tenant agrees that all alterations, additions and changes made by
it will be made in a first-class, workmanlike manner, and shall comply with all
local and state laws or ordinances.
Tenant shall not make any structural alterations, additions or improvements to
the building on the Premises or any alterations or improvements on the balance
of the Premises without Landlord's prior written consent, which consent shall
not be unreasonably withheld or delayed.
Any and all alterations, additions and improvements when made to the Premises
shall be deemed to have attached to the freehold and shall remain on and be
surrendered with the Premises on expiration or termination of the Lease term
without compensation to Tenant (excluding trade fixtures, provided that Tenant
promptly removes such fixtures and repairs any damage caused by such removal);
provided, however, if not later than 30 days after the expiration or sooner
termination of this Lease, Landlord so directs by written notice to Tenant,
Tenant shall promptly remove such alterations, additions or improvements which
were made to the Premises without obtaining Landlord's prior written consent and
which are designated in said notice, and Tenant shall repair any damage
occasioned by such removal; and in default thereof, Landlord may effect said
removals and repairs at Tenant's expenses.
10.0 LIENS
Tenant shall keep the Premises free of and hold Landlord harmless from any
expense from any liens arising out of any work performed, materials furnished or
obligations incurred by Tenant.
11.0 ASSIGNMENT AND SUBLETTING Tenant may assign this Lease, and
may sublet all or any part of the Premises, if the Premises, immediately
after such assignment, are continued to be used primarily for a home and
garden center. Tenant shall obtain Landlord's consent for any other
assignment of this Lease, which consent shall not be unreasonably withheld or
delayed. Notwithstanding the immediately preceding sentence, the provisions
of this Lease shall not require Landlord's consent for or preclude any
corporate reorganizations, reincorporations or other actions which do not
result in a substantial and material change in the voting control of Tenant.
Notwithstanding anything to the contrary in this Lease, Tenant shall have the
right to assign this Lease or sublet portions of the Premises to a parent
corporation of Tenant, or any subsidiaries, affiliates, franchisees,
licensees or concessionaires of Tenant (provided that assignments of
subleases to franchisees, licensees or concessionaires are part of or related
to Tenant's business operations). The sale or transfer of Tenant's voting
securities shall not be deemed an assignment of this Lease, including the
sale to a corporation or other third party who acquires control of Tenant.
Tenant may assign or sublease all of a part of the Premises to any
corporation in which or with which Tenant, or its corporate successors or
assigns, is merged or consolidated, so long as (i) the liability of the
corporation participating in any merger or consolidation are assumed by the
corporation surviving such merger or created by such consolidation; and (ii)
upon completion of such merger or consolidation, the successor corporation
has a net worth no less than Tenant's net worth as of the Commencement Date.
Tenant's rights to assign this Lease or sublet the Premises with or without
the consent of Landlord are conditioned upon the following:
(a) Tenant shall not thereby be relieved of any liability
hereunder,
(b) Any assignee shall assume the obligations of Tenant under
the Lease;
(c) Any sublease shall be subject in all respects to the terms
and conditions of this Lease;
(d) Tenant shall not be in default in any material provision
hereunder beyond any applicable notice and grace period at the
time of any such assignment or subletting; and
(e) The obligations of Tenant and its assignee shall be joint
and several.
(f) Tenant shall submit, with any request for consent, an
assignment fee of $1,500.00, and will reimburse Landlord for
all of Landlord's reasonable attorneys fees.
All assignments and subleases shall be in writing by instruments in form
reasonably satisfactory to Landlord (Landlord shall not unreasonably withhold
its approval to the form of such instruments used or prepared by Tenant) and
shall be executed by Tenant
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and its assignee or sublessee; and in the event the transfer is an
assignment, the assignee shall assume and agree to be bound by and perform
all of Tenant's obligations under this Lease.
If this Lease is assigned or if the Premises or any part thereof is occupied by
anybody other than Tenant, then in the event of a monetary default by Tenant and
if the applicable cure period expires and Tenant's default remains uncured,
Landlord may collect rent from the assignee or occupant, and apply the net
amount collected to the rent herein reserved, but no such assignment,
subletting, occupancy or collection shall be deemed a release of Tenant from the
further performance of the provisions on its part to be observed or performed
herein. Notwithstanding any assignment or sublease, Tenant shall remain fully
and primarily liable and shall not be released from performing any of the terms
of this Lease. Tenant may not assign this Lease without Landlord's consent if
Landlord has issued a notice to cure a default, and such default has not been
cured.
In the event of an assignment of this Lease, Tenant shall cause its assignee to
assume the provisions of this Lease and notice of such assignment, as well as a
copy of the effective instrument of transfer, shall be given to Landlord within
15 days after the date of transfer. Any sublease shall be subject to the terms
of this Lease. Landlord shall be entitled to give all notices to Tenant until
Landlord has received the foregoing from Tenant.
Any request by Tenant for Landlord's consent to an assignment or sublet shall
include a written statement summarizing the proposed assignment or sublet,
including the name, address, business, intended use of the Premises, and
financial condition of the prospective assignee or sublessee, a copy of the
proposed assignment agreement or sublease, and any other information reasonably
requested by Landlord.
Landlord may assign or transfer Landlord's interest under this Lease without
Tenant's consent. In the event of an assignment or transfer of this Lease for
other than security purposes, Landlord shall cause its assignee or transferee to
assume the provisions of this Lease and notice of such assignment or transfer,
as well as a copy of the effective instrument of transfer, shall be given to
Tenant within 15 days after the date of transfer. Tenant shall be entitled to
continue to pay rent and give all notices to Landlord until Tenant has received
the foregoing from Landlord. From and after a sale, transfer or assignment of
the Premises, Landlord shall be released from all liability toward Tenant
arising from this Lease because of any act, occurrence or omission of Landlord's
successors occurring after the transfer of Landlord's interest in this Lease,
provided Landlord's purchaser, transferee or assignee expressly assumes
Landlord's duties and covenants under this Lease.
In the event of a separate assignment or subletting by Tenant of the Premises,
not as a part of an assignment or subletting otherwise permitted above, Tenant
acknowledges that Landlord may consider the identity, skill, financial
condition, experience and reputation, and the character of its business and use
of the Premises, of the assignee or sublessee.
12.0 ACCESS
Subject to the provisions of Section 8, Landlord reserves the right for itself
or its duly authorized agents and representatives at all reasonable times after
reasonable notice during Tenant's business hours to enter the Premises for the
purpose of inspecting the same or to show the same to any prospective agents,
purchaser, tenant or lender, and for the purpose of making any necessary repairs
to the Premises.
13.0 DAMAGE OR DESTRUCTION
13.1 Destruction Due to Risk Covered By Insurance If the
Premises should be damaged or destroyed by fire or other casualty of any kind,
Tenant shall give immediate written notice thereof to Landlord.
If, during the term, the Premises are totally or partially destroyed from a
risk covered or required to be covered by the insurance described in Section
21.3, rendering the Premises totally or partially inaccessible or unusable,
Tenant, at its sole cost and expense, shall restore the Premises to
substantially the same condition as they were in immediately before
destruction or pursuant to plans and specifications approved by Landlord and
Tenant, whether or not Tenant has provided the coverage required by Section
21.3, so that the insurance proceeds are sufficient, or should have been
sufficient, and available to cover the actual cost of restoration, so long as
all insurance proceeds are made available to Tenant for the costs of
rebuilding. Landlord shall not be obligated to contribute to the costs of
restoration, except to the extent of insurance proceeds paid to Landlord and
Landlord's lender. Such destruction shall not terminate this Lease.
The insurance proceeds shall be used for restoration of the Premises. Landlord
shall obtain the written agreement of any lender having a deed of trust or other
encumbrance against the Premises that the insurance proceeds may be so used.
Tenant's obligation to repair, rebuild or restore the Premises is expressly
conditioned upon all insurance proceeds being made available and accessible for
the purpose of such repair, rebuilding or restoration.
Anything herein to the contrary notwithstanding, it is understood and agreed
that if such damage or destruction shall take place during the last 2 years of
the Lease term and if the cost of restoration of the building would exceed 15%
of the cost to replace the building in its entirety at the time such damage or
destruction takes place, then Tenant may elect to terminate this Lease within 60
days of such damage or destruction by giving written notice thereof to Landlord,
so long as Tenant has not substantially commenced the restoration of the
Premises, provided Tenant may take whatever steps may be necessary or
appropriate to secure the Premises, remove any debris or damaged property or
comply with any law or safety measures.
In the event the Premises are not covered by insurance as required in this
Lease, Tenant shall pay to Landlord the amount that would be required to restore
the Premises in good working order and condition prior to the early termination
of this Lease.
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In the event this Lease shall so terminate as provided in this Section 13.1,
then Tenant shall not be obligated to rebuild and all the insurance proceeds
covering the Premises (but not Tenant's trade fixtures and personal property)
shall belong to Landlord or Landlord's lender as their interest may appear.
13.2 Other Destruction If the Premises should be damaged or
destroyed by other casualty of any kind, Tenant shall give immediate written
notice thereof to Landlord.
Except as hereinafter provided in this Section 13.2, if, during the term, the
Premises are totally or partially destroyed from a casualty not described in
Section 21.3, then Tenant shall restore the Premises to substantially the same
condition as they were in immediately before destruction or pursuant to plans
and specifications approved by Landlord and Tenant, and such destruction shall
not terminate this Lease.
Notwithstanding the foregoing, if the cost of repairs and/or restoration of the
Premises would exceed 50% of the then replacement cost of the building, then
Tenant can elect to terminate this Lease by giving written notice to Landlord
within 60 days after said damage or destruction and by specifying the
restoration cost and replacement cost of the building in said notice. If Tenant
elects to terminate this Lease as provided in this paragraph, Landlord, within
30 days after receiving Tenant's notice to terminate, can elect in writing to
pay to Tenant within 90 days after the time Landlord notifies Tenant of its
election, the difference between 50% of the replacement cost of the building and
the actual cost of restoration. Upon Landlord making such election, this Lease
shall continue in full force and effect despite such notice of termination by
Tenant and Tenant shall repair, rebuild and restore said permanent improvements
as above provided. However, Tenant's obligation to repair, rebuild and restore,
and the continuance of this Lease, is expressly conditioned upon receipt of
Landlord's contribution. Tenant shall give Landlord satisfactory evidence that
all sums contributed by Landlord as provided in this Section 13.2 have been
expended by Tenant in paying the cost of restoration.
The parties agree to cooperate in obtaining any direct governmental relief, such
as grants or low interest loans, that may be available for their mutual benefit
as a result of any disaster.
If Tenant elects to terminate this Lease and Landlord does not elect to
contribute towards the cost of restoration as provided in this section, this
Lease shall terminate.
13.3 Abatement of Rent In case of damage or destruction, there
shall be no abatement or reduction of rent unless the Lease is terminated as
provided herein.
14.0 NOTICES
14.1 To Landlord and Tenant Any notice required to be served
in accordance with the terms of this Lease shall be in writing and hand
delivered or sent by express mail or certified mail, return receipt requested,
or via overnight courier such as Federal Express, addressed to Landlord or
Tenant, as the case may be, at the following addresses or such other addresses
as the respective parties may from time to time designate by notice given as
provided in this Lease:
To Landlord: Harlan D. Douglass
E. 815 Rosewood Avenue
Spokane, Washington 99208
with a copy of any notice to Landlord sent to Joseph G. Ward, Pinnacle Realty,
Inc., S. 9 Washington, Suite 701, Spokane, Washington 99204.
To Tenant: Eagle Hardware & Garden, Inc.
Attn: Mr. David J. Heerensperger
981 Powell Avenue S.W.
Renton, Washington 98055
with a copy of any notice to Tenant sent to William N. Moloney, 5711 NE Tolo
Road, Bainbridge Island, WA 98110.
All notices shall be effective upon the earlier of (i) the date of receipt by
the party to whom the notice is addressed; (ii) 3 days after the date the notice
is postmarked by the United States Post Office, provided it is properly
addressed, sent prepaid, registered or certified mail, return receipt requested;
or (iii) the date the notice is delivered by a reputable professional courier
service (such as Federal Express, Express Mail, Emery, UPS or similar
operation), provided it is sent prepaid. Refusal to accept delivery of a notice
or the inability to deliver a notice because of an address change which was not
properly communicated shall not defeat or delay the giving of a notice.
14.2 Notice To Cure Or Vacate Any notice served on Tenant
pursuant to any statutory procedure related to forfeiture or eviction
proceedings under the laws of the state in which the Premises are located shall
be served on the President or Chief Executive Officer of Tenant at the address
specified in Section 14.1 above. Wherever there is a conflict between the
provisions of this Section 14.2 and any such statutory procedure, the provisions
of this Section 14.2 shall prevail. Provided, however, if Tenant assigns or
subleases this Lease, any such notice shall not be required to be given to the
President of such assignee or sublessee.
14.3 Multiple Persons If Landlord consists of more than one
person or entity, Tenant may act on notice from any one of such persons or
entities, and in the case of conflicting notices, may recognize any one of them
as valid and disregard the others, but Tenant may treat any notice in any case
as of no effect unless signed by all Landlords, or their attorney of record or
attorney in fact, except that Harlan D. Douglass may sign on behalf of the
ownership provided he maintains an
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ownership interest in the Premises. If Landlord be a partnership or corporation,
Tenant may act on any notice given by any officer or agent of such corporation
or of such partnership, but may treat any notice in such case as of to effect,
unless signed by the President or a Vice-President of the corporation or its
attorney of record or attorney in fact or all of the general partners in the
partnership or their attorney of record or attorney in fact. Any person
representing himself or herself to be a party's attorney of record or attorney
in fact must provide satisfactory evidence of such fact.
15.0 TAXES AND UTILITIES
15.1 Taxes Landlord shall cause the Premises to be a separate
tax parcel during the term of this Lease. Tenant shall, for the term of this
Lease, pay before delinquency the amount of any and all real property taxes,
assessments, surcharges and municipal or governmental charges, general and
special, ordinary and extraordinary ordinary, of every kind and nature
whatsoever ("real property taxes") assessed, levied or imposed on the Premises
for each fiscal tax year or portion thereof excepting assessments for any
on-site or off-site improvements (including without limitation, assessments such
as sewer and street improvements) assessed (i) directly in connection with the
initial development or acquisition of Landlord's property and (ii) prior to the
Commencement Date.
In the event Landlord is usable, despite its best efforts, to obtain a separate
tax parcel from the tax assessor, then Tenant's proportionate share of taxes and
assessments for the Premises shall be the ratio of the real property taxes and
real property assessments that the aggregate number of square feet of land area
of the Premises bears to the aggregate number of square feet of land area in all
of the land initially purchased by Landlord as described in Exhibit F plus all
of the real property taxes and assessments allocated to the improvements on the
Premises.
Tenant shall only be responsible for taxes and assessments that are related to
the period of time beginning on the Commencement Date and ending upon the
expiration or sooner termination of this Lease. If the taxing authority permits
payment to be made in installments, Tenant's obligation to pay for any taxes and
assessments under this Section 15.1 shall be limited to its pro rata share of
such installment payments. Tenant is aware that currently the real property
taxes are assessed in one year and payable the following year. Upon expiration
or sooner termination of the Lease Tenant shall be obligated to pay the current
years real property taxes and assessments, when due notwithstanding the fact
that the Lease has been terminated.
If, at any time during the term, any federal, state, county or city authority
having jurisdiction, or any political subdivision thereof or any improvement or
special assessment district thereof, or any political entity or public or
quasi-public corporation of this State, levies or assesses against Landlord,
and/or the Premises a tax, fee, or excise on (1) rents, (2) the square footage
of the Premises or any part thereof, (3) the act of entering into this Lease,
(4) the occupancy of Tenant, or (5) any other tax, fee or excise related to the
Premises, as a direct substitution in whole or in part for, or in addition to,
any real property taxes, Tenant shall pay before delinquency that tax, fee, or
excise, provided, however, Tenant shall not be required to pay any municipal,
county, state, or federal income, franchise, or business and occupation taxes of
Landlord, or any municipal, county, state, or federal estate, succession,
inheritance or transfer taxes of Landlord.
Any real property taxes or assessments, or other taxes payable hereunder, that
are related to periods before the Commencement Date or after the expiration or
sooner termination of this Lease shall be prorated between Landlord and Tenant.
If one party says for any taxes or assessments for which the other is
responsible, then such party shall send an invoice therefor to the other, along
with a copy of the tax bill and the method used for determining such party's
share of such taxes and assessments, and the other party shall make payment to
such party within 30 days after receipt of such invoice or 30 days prior to
delinquency, whichever is later.
15.2 Contests If Tenant desires to contest the validity of any
such tax or assessments, it may do so on Landlords' behalf, at Tenant's sole
cost and expense; provided that Tenant shall not withhold payment of any real
property taxes or assessments during the course of such contest. If Tenant is
successful in said contest, any refund received shall belong entirely to Tenant.
Tenant may file in the name of Landlord all such protests or other instruments
and institute and prosecute proceedings for the purpose of such contest and
Landlord shall cooperate with Tenant and execute any documents reasonably
requested with respect thereto.
15.3 Utilities Tenant further agrees to pay all charges for
heat, light and water, and for all other utilities which will be used
exclusively in or on the Premises, or are provided to the Premises, during the
full term of this Lease. In addition, Tenant shall pay the costs of such
utilities from and after the earlier date of substantial completion of the
improvements to be completed by Landlord pursuant to Exhibit C or the date
Tenant commences stocking merchandise inventory in the Premises.
16.0 SIGNS
Tenant shall be allowed to install a pylon sign on the Premises. Landlord hereby
grants it approval for the installation of said pylon. Landlord reserves the
right to install a pylon sign on the southeast corner of the Premises for the
use and benefit of Landlord's real property to the north.
The placement, construction and maintenance of any and all approved Tenant signs
shall be at the sole cost and expense of Tenant. Any sign that Tenant has the
right to place, construct and maintain shall comply with all laws, and Tenant
shall obtain any approval required by any regulating governmental authority.
Landlord agrees to cooperate with Tenant with respect to obtaining such
approvals. Landlord makes no representations with respect to Tenant's ability to
obtain such approval. Any signs placed on the Premises by Tenant shall be
removed by Tenant at the termination of this Lease and Tenant shall repair any
damage or injury to the Premises caused by such removal, and if not so removed
by Tenant, then Landlord may have the same so removed at Tenant's expense.
17.0 DEFAULT BY TENANT
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17.1 Termination If any rents above reserved or any other
monies to be paid by Tenant under this Lease, or any part thereof, are not paid
on the due date thereof, and if such failure is not remedied within 10 days
after Tenant's receipt of written notice from Landlord of such failure, Landlord
may, at Landlord's option, cancel this Lease upon written notice to Tenant,
which notice of cancellation may be contained in a statutory notice to pay or
vacate, so long as such notice unambiguously puts Tenant on notice that the
Lease will be terminated on a date certain, and upon such termination, Tenant
shall immediately quit and surrender the Premises to Landlord, but Tenant shall
remain liable as herein-after provided. If Tenant shall default in the
performance of any term, covenant or undertaking on Tenant's part to be
performed, other than the obligation to pay rent or other monies, and fails to
cure such default or fails within 20 days after Tenant's receipt of written
notice thereof from Landlord specifying in detail the nature of such default
such that the remedy therefor is readily apparent (provided if such default
shall reasonably require more than 20 days to cure, Tenant shall not be deemed
to be in default if Tenant commences to cure the default within such 20 day
period and thereafter diligently prosecutes such cure to completion), Landlord
may, at Landlord's option, cancel this Lease and upon such termination Tenant
shall immediately quit and surrender the Premises to Landlord, but Tenant shall
remain liable as hereinafter provided, or if such default shall require more
than 20 days to cure and Tenant commences to cure such default within 20 days
after Landlord's notice but fails to diligently prosecute such cure to
completion, then Landlord may, at Landlord's option, cancel this Lease after
Tenant ceases to be diligently curing such default.
If this Lease shall be terminated as herein provided, Landlord shall have the
following rights: (1) To re-enter the Premises then or at any time thereafter
and remove all persons and property and possess the Premises, without prejudice
to any other remedies Landlord may have by reason of Tenant's default or of such
termination, and Tenant shall have no further claim hereunder, (ii) To recover
all damages incurred by Landlord by reason of the default.
Tenant will remain liable to Landlord for rent and all other payments owed by
Tenant to Landlord and others under the Lease that were earned or assessed and
due but unpaid at the time of termination and for damages equal to the loss of
net rental and other amounts that would have been owing by Tenant for the
balance of the term, had the Lease not been terminated.
Landlord shall apply the proceeds of any reletting first to the payment of such
reasonable expenses as Landlord may have incurred in recovering possession of
the Premises, and removing persons and property therefrom, and in putting the
same into good order and condition or preparing or altering the same for
reletting, all reasonable costs in reletting the Premises, such as brokerage
commissions, advertising costs and restoration and remodeling costs, plus any
other reasonable expense, such as attorney's fees, court costs and accounting
and auditing expenses, necessary to compensate Landlord for all detriment,
approximately caused by Tenant's failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom; and then to Tenant's obligation to pay rental and/or damages for loss
of rental. Any such reletting may be for the remainder of the term of this Lease
or for a longer or shorter period. If, in connection with any reletting, the new
lease term extends beyond the existing term, or the Premises covered by such new
lease includes other space not a part of the Premises, a fair apportionment of
the rent received from such reletting and the expenses incurred in connection
with such reletting as provided herein will be made in determining the net
proceeds from such reletting, and any rent concessions will be equally
apportioned over the term of the new lease. In any case, if the Premises, or any
part thereof, be relet, Tenant shall pay to Landlord the rent and all other
charges required to be paid by Tenant up to the time of such reletting, and
thereafter, Tenant agrees to pay the equivalent of the amount of all rent
reserved herein and all other charges required to be paid by Tenant, less the
net proceeds of reletting, if any. Such damages shall be due and payable by
Tenant monthly as the amount thereof is ascertained by Landlord, and Landlord,
from time to time, may bring an action therefor as such monthly deficiencies
arise.
In the event this Lease is terminated under the provisions of this Section 17,
Landlord, alternatively, at its option, will be entitled to recover from Tenant,
as damages for loss of the bargain and not as penalty, all past due rent, the
expense of reletting the Premises, including the reasonable expense of
renovating and altering the Premises, the worth at the time of award by the
court having jurisdiction thereof of the amount that the unpaid rent called for
herein for the balance of the term after the time of such award exceeds the
amount of all losses that could be reasonably be avoided, and that portion of
any leasing commission actually paid by Landlord applicable to the unexpired
term of this Lease. Landlord hereby covenants and agrees to make reasonable good
faith efforts to relet the Premises at a rental equal to or greater than that
provided for under this Lease. The "worth at the time of the award" shall be
computed by discounting such amounts at the discount rate of 10% per year.
Nothing in this Section 17.1 shall require Landlord to terminate this Lease or
preclude Landlord from exercising any other remedy to periodically recover such
amounts as they become due. Landlord shall have the right, with or without
terminating this Lease, to re-enter the Premises in order to re-lease or sublet
the Premises or any part of them for such term or terms (which may extend beyond
the term of this Lease) and at such rentals and upon such other terms as may be
commercially reasonable.
No re-entry or taking possession of the Premises shall be construed as an
election to terminate this Lease unless such election is affirmatively made by
Landlord or is decreed by a court of competent jurisdiction.
In the event Tenant fails to maintain the Premises in accordance with this
Lease, or should Tenant be in default beyond any period for cure with regard to
the performance of any covenant or agreement herein other than the payment of
rent or other charges as and when the same are required to be paid hereunder,
then if Tenant is not curing such default within the time period set forth in
this Lease after written notice from Landlord specifying in detail the nature of
the default, Landlord may (but shall not be obligated to) cure such default at
Tenant's expense, and Tenant shall, within 30 days of an invoice therefor from
Landlord, reimburse Landlord for the reasonable costs thereof plus interest at
the rate of 12% from the date of expenditure.
17.2 Removal of Property In the event of any default by Tenant
and taking possession of the Premises by Landlord, as aforesaid, Landlord shall
have the right, but not the obligation, to remove from the Premises all personal
property located therein, and may store the same in any place selected by
Landlord, including but not limited to a public warehouse, at the expense and
the risk of the owner(s) thereof, with the right to sell such stored property
after 30 days notice to Tenant. The proceeds of such sale shall be applied first
to the cost of such sale, second to the payment of the charges for storage, if
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any, and third to the payment of any other sums of money which may then be due
from Tenant to Landlord under the terms hereof, and the balance, if any shall be
paid to Tenant.
17.3 Injunctive Relief Upon any default by Tenant, Landlord
may, at its option, restrain by injunction or other equitable means any breach
or anticipatory breach of this Lease.
17.4 Remedies Cumulative Any right or remedy Landlord may have
under this Lease arising out of Tenant's breach of any covenant of this Lease
shall be in addition to any other right or remedy for such breach provided by
law.
18.0 DEFAULT BY LANDLORD
18.1 Tenant's Right To Cure If Landlord fails to pay any
interest, principal, costs or other charges upon any mortgage or deed of trust
or other lien or encumbrance affecting the Premises and to which this Lease may
be subordinate when any of the same become due or in any other respect fails to
perform any obligation under this Lease to be performed by Landlord which
results in a material interference with Tenant's business, then and in any such
event, after the continuance of any such failure or default beyond a reasonable
period of time but not less than 20 days after receipt of notice from Tenant
specifying in detail the nature of such default such that the remedy therefore
is readily apparent (unless Landlord shall, within a reasonable period of time
commences to cure such default and thereafter diligently prosecutes such cure to
completion), Tenant may (but shall not be obligated to) pay such interest,
principal, costs and other charges and cure such defaults on behalf of and at
the expense of Landlord, and do all necessary work and make all necessary
payments in connection therewith including but not limited to the payment of any
fees, costs, and charges of or in connection with any legal action which may
have been brought. Landlord shall pay to Tenant, within 30 days of an invoice
therefor from Tenant, the reasonable amount so paid by Tenant, together with
interest thereon from the date of such expenditure at an annual interest rate of
12%. However, if Landlord desires to contest the validity or correctness of any
lien or encumbrance, it may do so, provided that it shall first furnish Tenant
with such assurance or security reasonably acceptable to Tenant that such lien
or encumbrance shall be paid or discharged and that Tenant will not suffer any
loss, liability or damage on account thereof.
18.2 Limitation on Liability If Tenant recovers a money
judgment against Landlord arising out of this Lease, the judgment shall be
satisfied only out of the proceeds of sale of the Premises on execution of the
judgment, and levy against the right, title and interest of Landlord in the
Premises and out of rent or other income from the Premises receivable by
Landlord or out of the consideration received by Landlord from the sale or other
disposition of all or any part of Landlord's right, title and interest in the
Premises. Landlord, and in case Landlord shall be a joint venture, partnership,
or other form of joint ownership, the members of any such joint venture,
partnership, or other form of joint ownership, shall not be personally liable
for any deficiency; and Tenant shall look solely to the equity of Landlord in
the Premises for the satisfaction of Tenant's claim.
18.3 Injunctive Relief Upon any default by Landlord, Tenant
may, at its option, restrain by injunction or other equitable means any breach
or anticipatory breach of this Lease.
18.4 Remedies Cumulative Any right or remedy Tenant may have
under this Lease arising out of Landlord's breach of any covenant of this Lease
shall be in addition to any other right or remedy for such breach provided by
law.
19.0 COSTS AND ATTORNEYS' FEES
In the event Landlord shall bring suit to recover any rent due hereunder, or
from any breach of any provision of this Lease or to recover possession of the
Premises, or if Tenant shall bring any action or assert any claim or
counterclaim for any relief against Landlord, declaratory or otherwise, arising
out of this Lease, then the prevailing party in any such event shall be paid its
reasonable attorneys' fees and costs and expenses expended or incurred in
connection with such default or action.
20.0 NONWAIVER OF BREACH
The failure of Landlord or Tenant to insist upon strict performance of any of
the covenants and agreements of this Lease, or to exercise any option herein
conferred in any one or more instances, shall not be construed to be a waiver or
relinquishment of such or of any other covenants or agreements, but the same
shall be and remain in full force and effect.
21.0 INSURANCE AND INDEMNITY
21.1 Tenant's Liability Insurance At all times during the term
of this Lease, Tenant shall maintain in force a comprehensive general liability
insurance policy or policies for liability for bodily injury to persons, loss of
life and damage to property occurring on the Premises arising from or related to
the condition, use or occupancy of the Premises or the operation of Tenant's
business. With respect to such claims, such insurance policy or policies shall
be primary and noncontributing with any insurance maintained by Landlord. Said
insurance policy or policies shall also include a blanket contractual liability
endorsement and shall name Landlord and any first mortgagee or beneficiary under
a first deed of trust against the Premises, as Landlord may designate, as an
additional named insured and shall be in an amount of not less than a combined
single limit liability of $2,000,000. Not more frequently than each 2 years, if,
in the reasonable opinion of Landlord or of Landlord's lender, the amount of
public liability and property damage insurance coverage at that time is not
adequate due to inflation, Tenant's activity, substantial increase in recovered
liability claims, increased claims consciousness by the public or any
combination thereof, Tenant shall increase the insurance coverage as reasonably
required by either Landlord or Landlord's lender. Tenant agrees to indemnify and
hold Landlord harmless from any and all losses and liability for bodily injury
to persons, loss of life and damage to property (i) occurring on the Premises
and arising out of Tenant's use and occupancy of the Premises, except if caused
by the act or neglect of Landlord, the Landlord's contractors, agents and
employees, or (ii) caused by the negligence of Tenant, its contractors, agents
and employees, or negligent performance of or failure to perform any of Tenant's
obligations under this Lease.
21.2 Landlord's Indemnity Landlord agrees to indemnify and
hold Tenant harmless from any and all leases and liability for bodily injury to
persons, loss of life and damage to property occurring on the Premises and
caused by the
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negligence of Landlord, its contractors, agents and employees, or the negligent
performance of or failure to perform any of Landlord's obligations under this
Lease.
21.3 Property Insurance - Premises (a) At all times during the
term of this Lease, Tenant shall maintain in force fire insurance with an
extended coverage endorsement in the amount of not less than 100% of the full
replacement cost of the improvements, fixtures and equipment which are a part of
the Premises exclusive of the value of excavations, underground utilities,
foundations and footings and fixtures which Tenant is required to remove at the
expiration or termination of this Lease. Such insurance shall cover loss or
damage from all perils included within the policy classification now known as
"special form", including without limitation, fire and extended coverage,
vandalism, malicious mischief, sprinkler leakage and special extended peril
(all-risk). Tenant shall either carry a policy of earthquake and flood insurance
(or an endorsement to Tenant's fire and property insurance) upon the Premises,
or Tenant may self insure such risk. In the event Tenant elects to self insure
against such risk, any loss which otherwise would be covered under the
earthquake and flood policy or endorsement of Tenant's insurer shall be deemed a
peril required to be insured under this Lease. Tenant shall not be required to
carry earthquake insurance unless required by Landlord's lender. Any and all
proceeds of such insurance shall be made payable to Landlord, Landlord's lender
holding a first mortgage or first deed of trust against the Premises and Tenant,
and shall be deposited with the first mortgagee or holder of a first deed of
trust if either be an institutional lender, or if none, in any bank or trust
company designated by Landlord and agreed to be Tenant, as trustee, to retain
and disburse such proceeds during the repair and restoration of the Premises as
provided by Section 13 above. If by reason of the provisions of any such
mortgage or deed of trust executed by Landlord on the Premises, fire insurance
is required to be made payable to the lien holder and/or the policies of
insurance placed in its custody, Tenant hereby consents thereto, provided that
the lien holder in question shall first agree in writing with Landlord to make
the proceeds of said insurance available for the repair and restoration of the
Premises pursuant to Section 13 above.
(b) Tenant, at its sole cost and expense, shall maintain fire and casualty
insurance with standard extended coverage endorsements, including theft,
vandalism, malicious mischief, and sprinkler damage in an amount equal to the
full replacement value of all furnishings, equipment and inventory from time to
time in the Premises. So long as Tenant has a net worth of at least
$5,000,000.00, Tenant may self insure all or any portion of such insurance.
(c) Tenant, at its sole cost and expense shall maintain and pay for insurance
for loss of rental or business interruption (for a period not exceeding one
year) resulting from damage to the Premises by an insured peril. Notwithstanding
the foregoing, so long as Tenant has a net worth of at least $5,000,000.00,
Tenant may self insure such loss.
(d) Any portion of the risks described in this Section 21.3 for which Tenant is
self insured shall be deemed to be an insured risk under this Lease.
(e) All of Tenant's right to self insure is subject to Landlord's Lender's
consent and is personal only to Eagle Hardware & Garden, Inc. and such right may
not be transferred or assigned.
21.4 Waiver of Subrogation Landlord and Tenant shall each
procure from each of the insurers under all policies of property insurance on
the Premises obtained pursuant to the provisions of Sections 21.3 and 21.8 of
this Lease, a waiver of all rights of subrogation with respect to damage to
property which said insurer might otherwise have, as against the other party
hereto, said waiver to be in writing and for the express benefit of the other.
Landlord and Tenant hereby release each other and waive any claim against the
other relating to losses or liabilities for damage to property on the Premises
for which the releasing party is obligated to obtain property insurance under
the provisions of Sections 21.3 and 21.8 of this Lease or for which the
releasing party is, in fact, insured. For purposes of the preceding sentence,
Landlord and Tenant shall include the directors, officers and employees of each.
21.5 Insurance - Generally Any and all insurance policies
obtained by either Landlord or Tenant pursuant to the provisions of Section 21
of this Lease shall be issued only by a responsible insurer, properly licensed
in the State of Idaho, which insurer has sufficient financial reserves adequate
for the risks of the amount of insurance required by the terms of Section 21 of
this Lease. Each such insurance policy shall include an endorsement obligating
the insurer to give the party hereto not obtaining said insurance policy 30 days
prior written notice of any cancellation or change in scope or amount of
coverage of such insurance policy. Each party hereto shall cause to be issued to
the other party, appropriate certificates of insurance evidencing compliance
with the terms of the provisions of Section 21 of this Lease relating to
insurance.
21.6 Indemnification - Concurrent Negligence In the event of
any concurrent negligence of Tenant, its partners, agents, employees and
contractors on the one hand, and that of Landlord, its partners, agents,
employees or contractors on the other hand, which concurrent negligence results
in injury or damage to persons or property, then Tenant's and Landlord's
obligation to indemnify the other as set forth in this Section 21 shall be
limited to the extent of the indemnifying party's negligence, and that of their
respective partners, agents, employees and contractors, including the
indemnifying party's proportional share of costs, attorney's fees and expenses
incurred in connection with any claim, action or proceeding brought with respect
to such injury or damage.
21.7 Waiver of Worker's Compensation Immunity The
indemnification obligations contained in this Lease shall not be limited by any
worker's compensation, benefit or disability laws, and each indemnitor hereby
waives any immunity that said indemnitor may have under any worker's
compensation, benefit or disability laws. This waiver is for the exclusive
benefit of the party to be indemnified hereunder and is not intended, and shall
not be construed, to be for the benefit of any employee of any indemnitor
hereunder.
22.0 OFFSET STATEMENTS
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Within 20 days after request, either party shall furnish to the other a
statement in recordable form certifying the Commencement and Expiration Dates of
this Lease, the then current Minimum Rent and certifying that this Lease is in
full force and effect (if such be the case) and either, to the best of such
party's knowledge, that there are no defenses or offsets thereto or stating
those defenses and offsets.
23.0 EMINENT DOMAIN
23.1 Total Taking In the event of a "Total Taking", defined as
when the entire Premises are taken or appropriated under the power of eminent
domain, this Lease shall terminate as of the date of the taking of physical
possession of the Premises, and Tenant and Landlord shall be released from any
liability accruing thereafter under this Lease.
23.2 Partial Taking In the event there is a "Partial Taking,"
defined as a taking or appropriation under the power of eminent domain when (i)
any portion of the building, garden service, storage, loading or sales areas of
the Premises are taken under the power of eminent domain, (ii) more than 25% of
the parking is permanently taken under the power of eminent domain, or (iii)
access to the Premises from any public or private street or easement is
permanently and materially interfered with or prohibited under the power of
eminent domain, so that in any of the foregoing events, Tenant, in its
reasonable business judgment, determines that the Premises are no longer as
physically or economically suitable for Tenant's business operation, then Tenant
shall have the right and option (exercisable by written notice delivered to
Landlord at any time before the date of surrendering possession of the property
to the public authority) to terminate this Lease as of the date of such taking.
Except as provided in Section 23.2 of this Lease, such Partial Taking shall not
be a basis to terminate this Lease, notwithstanding any laws of the state in
which the Premises are located to the contrary.
Upon any taking which results in termination of the Lease, Tenant shall pay rent
and other charges up to the date the condemning authority takes possession or up
to the date Tenant vacates the Premises, whichever is the last to occur, with an
appropriate refund by Landlord of such rent or other charges as may have been
paid in advance for a period subsequent to the date of the taking or the date of
Tenant's vacation of the Premises, whichever is the last to occur. The parties
shall continue to remain liable after the date of termination for their
respective obligations under the Lease to the date of termination or the date of
Tenant's vacation of the Premises, whichever is the last to occur.
23.3 Damage All compensation awarded for any taking under the
power of eminent domain, whether for the whole or part of the Premises, shall be
the property of the Landlord, whether such damages shall be awarded as
compensation for the diminution in the value of or loss of the fee or leasehold
interest in the Premises or otherwise, and Tenant hereby assigns to Landlord all
of Tenant's right, title and interest in and to any and all such compensation;
provided that if there is a taking and the Lease is not terminated, Landlord
shall make that portion of the net condemnation award allocable to improvements
and repairs and restoration available to Tenant for the purpose of repair as
provided in Sections 23.4 and 23.5 below, and provided, in any event, that
Landlord shall not be entitled to any award made to Tenant for its relocation
expenses, loss of business, "good will", and loss and removal of fixtures,
furniture, equipment, and inventory, so long as such compensation be separately
awarded or recoverable by Tenant from the condemning authority and not from
Landlord. Tenant shall have the right, together with Landlord and Landlord's
lender, to negotiate and/or contest any condemnation award made by any
condemning authority taking any portion of the Premises to the extent that
Tenant has the obligation to make repairs under Section 23.4 below.
23.4 Repairs In the event that there is a taking and this
Lease is not terminated pursuant to Section 23.1 or 23.2 above, Tenant shall, at
its own cost and expense, after the availability of the award proceeds allocable
to any improvements which are a part of the Premises and/or repairs or
restoration of the Premises, make all repairs to the Premises necessitated by
such taking in order to restore the same to a complete architectural unit (to
the extent possible, taking into consideration the amount of land remaining
after the taking). If the net proceeds of said award allocable to the
improvements and the repair and restoration of the Premises shall be
insufficient for such purposes, Tenant shall provide the amount of any
deficiency. The entire portion of such award shall be deposited in trust for the
purpose of such restoration in accordance with the provisions of this Section
23. In the event that there is a taking and this Lease is not terminated
pursuant to Section 23.1 or 23.2 above, all repair and restoration of the
Premises to be made pursuant to Section 23.4 hereof shall be made in accordance
with plans and specifications approved by Landlord and Tenant. Landlord and
Tenant shall comply, and shall require all its contractors to comply, with all
federal, state and local laws relating to conditions of employment in making
such repairs and restoration.
23.5 Proceeds In the event that there is a taking and this
Lease is not terminated pursuant to Section 23.2 above, any and all proceeds
allocable to improvements and repairs or restoration owing to Landlord resulting
from any eminent domain proceedings based on such taking shall be made payable
to Landlord and Tenant and shall be deposited with the first mortgagee or holder
of a first deed of trust if either be an institutional lender, or if none, in
any bank or trust company designated by Landlord and agreed to by Tenant, as
trustee, to retain and disburse such proceeds during said repair and
restoration. If by reason of the provisions of any such mortgage or deed of
trust executed by Landlord on the Premises, eminent domain proceeds are required
to be made payable to the lien holder, Tenant hereby consents thereto, provided
that the lien holder in question shall first agree in writing with Landlord to
make said proceeds available for the repair and restoration of the Premises
pursuant to this Section 23.5. After the completion of any repair and
restoration, any excess condemnation proceeds deposited in trust shall be
retained by, and belong to, Landlord.
23.6 Adjustment to Minimum Rent In the event that there is a
taking and this Lease is not terminated pursuant to Sections 23.1 or 23.2 above,
no reduction of the annual minimum rent payable under Section 4 hereof shall be
made.
23.7 Cumulative Effect A taking or appropriation, as used
in this Section 23, shall be deemed to include one or more takings or
appropriations, and the cumulative effect of more than one such taking or
appropriation shall be
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construed as one taking or appropriation. Appropriation or taking by eminent
domain as used herein shall also include a conveyance made in lieu of or as a
settlement to an existing or threatened eminent domain proceeding.
23.8 Conflict Of Provisions Where the provisions of this
Section 23 are in conflict with the laws of the state in which the Premises are
located, or with the provisions of Section 8 of this Lease, the provisions of
this Section 23 shall apply.
24.0 PAYMENT AND NOTICE TO LANDLORD
Tenant may make any payment or give any notice to Landlord, despite any
succession or assignments, and be protected in so doing, until it has written
notice to do otherwise from Landlord. All sums payable hereunder by either party
to the other are payable in lawful money of the United States of America.
25.0 HOLDING OVER
If Tenant elects to hold over after the expiration of the term of this Lease and
Landlord thereafter accepts rent from Tenant, such tenancy shall be for an
indefinite period of time on a month-to-month tenancy, which tenancy may be
terminated as provided for by the laws of the State of Idaho then in effect.
During such tenancy, Tenant agrees to pay to Landlord a Minimum Rent equal to
115% of the Minimum Rent payable during the last year of the primary term or
during the last year of the immediately preceding extended term, as the case may
be, unless a different rate is mutually agreed upon, and be bound by all the
terms, covenants and conditions as herein specified, so far as applicable.
26.0 QUIET ENJOYMENT Upon payment by Tenant of the rents herein
provided, and upon the observance and performance of the covenants, terms and
conditions on Tenant's part to be observed and performed, Landlord covenants
that Tenant shall peaceably and quietly hold and enjoy the Premises and all
rights appurtenant thereto for the term hereby demised without hindrance or
interruption by Landlord or any person or persons lawfully or equitably claiming
by, through or under Landlord.
27.0 FORCE MAJEURE In the event that either party hereto shall be
delayed or hindered in or prevented from the performance of any act required by
reason of strikes, lockouts, labor troubles, inability to procure materials,
failure of power, restrictive governmental laws or regulations, riots,
insurrection, war or other reason of a like nature not the fault of the party
delayed in performing work or doing acts required under the terms of this Lease,
then performance of such acts shall be excused for the period of such delay. The
provisions of this Section 27 shall not include the financial inability to
perform by either party, and shall in no event, excuse the payment of Minimum
Rent, real property taxes, assessments, and other similar charges by Tenant and
Landlord.
28.0 MISCELLANEOUS
28.1 Captions The captions appearing in this Lease are
inserted only as a matter of convenience and in no way define, limit, construe
or describe the scope or intent of such sections or in any way affect this
Lease.
28.2 Cannon of Construction This Lease was freely and
voluntarily negotiated between the parties. Although the printed provisions of
this Lease were initially drawn by Tenant, Landlord and Tenant agree that this
circumstance shall not create any presumption, canon of construction, or
implication favoring the position of either Landlord or Tenant. Landlord and
Tenant agree that the interlineation, obliteration, or deletion of language from
this Lease prior to its mutual execution by Landlord and Tenant shall not be
construed to have any particular meaning or to raise any presumption, canon of
construction, or implication, including, without limitation, any implication
that Landlord or Tenant intended to state the converse, obverse or opposite of
the deleted language. This Lease shall be read as if obliterated or deleted
language had never existed and interlineated language had always existed.
28.3 Time Time is of essence hereof.
28.4 Successors All rights and liabilities herein given to, or
imposed upon, the respective parties hereto shall extend to and bind the several
respective heirs, executors, legal representatives, successors, and assigns of
said parties. Subject to Section 18.2, if Landlord or Tenant is more than 1
person or entity, the obligations of Landlord or Tenant, as the case may be,
shall be joint and several.
28.5 No Partnership Landlord does not in any way or for any
purpose become a partner of Tenant in the conduct of its business, or otherwise,
or joint venturer or a member of a joint enterprise with Tenant.
28.6 Entirety This Lease embodies the entire agreement between
the parties and there are no other agreements written or oral which affect this
Lease in any way except that this Lease may be amended from time to time by the
mutual agreement of the parties in writing and as otherwise provided for herein.
28.7 Time For Responses Unless otherwise herein provided,
whenever approval or consent (collectively "approval") is required, such
approval shall not be unreasonably withheld or delayed. Unless provision is made
for a specific time period, a response for any request for approval shall be
given not later than 20 days of the effective date of a notice containing a
request for approval, provided Landlord is not out of town when such approval is
requested, but if he is, the 20 days shall not commence until Landlord receives
actual notice of such request. If a response is not given within the required
time period, the requested party shall be deemed to have given its approval. If
a party shall disapprove, the reasons therefor shall be stated. Except for
approvals given by lapse of time, all approvals and disapprovals shall be in
writing.
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28.8 EXHIBITS. The following documents are attached hereto,
and such documents, as well as all drawings and documents prepared thereto,
shall be deemed to be part hereof:
Exhibit A - Legal Description
Exhibit B - Site Plan
Exhibit C - Tenant's General Outline Specifications and
Requirements for new Building (12 pgs)
Exhibit D - Memorandum of Lease
Exhibit E - Non-Disturbance, Attornment and Subordination
Agreement (2 pgs)
Exhibit F - Copy of Title Insurance Policy
29.0 MEMORANDUM OF LEASE AND NONDISTURBANCE AGREEMENT
This Lease shall not be recorded, but it is agreed that, upon request by either
party, the parties will execute a Memorandum of this Lease in the form attached
as Exhibit D which may be recorded by either party. Conditioned as set forth
below, this Lease shall be subject to and is hereby subordinated to all present
and future first mortgages or first deeds of trust encumbering the Premises.
However, as a condition to Tenant's entering into this Lease, and further, as an
express condition to such subordination, Landlord shall cause any holder or
beneficiary of a prior mortgage or deed of trust to execute a Non-Disturbance,
Attornment and Subordination Agreement in the form attached as Exhibit E.
Landlord and Tenant also agree to execute such Non-Disturbance, Attornment and
Subordination Agreement.
30.0 CONDITION TO EFFECTIVENESS
This Lease shall not become effective until approval of the board of directors
of Tenant after receipt of an analysis prepared by The Norman Company or other
reputable appraiser selected by Tenant of the fairness of the rent to be charged
and other terms of this Lease, provided, however, if Tenant does not obtain such
approval within 60 days of execution of this Lease, Landlord shall have the
right to terminate this Lease.
31.0 SIGNATURES AND ACKNOWLEDGMENTS
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and your first above written.
LANDLORD: TENANT: EAGLE HARDWARE & GARDEN, INC.
/s/ Harlan D. Douglass By: /s/ Richard T. Takata
- ----------------------- ---------------------
Richard T. Takata
Harlan D. Douglass It's President
/s/ Maxine H. Douglass
- ----------------------
Maxine H. Douglass
STATE OF WASHINGTON )
)ss.
COUNTY OF SPOKANE )
On this 23 day of December, 1997, before me, a Notary Public in and
for the State of Washington, duly commissioned and sworn, personally appeared
HARLAN D. DOUGLASS and MAXINE H. DOUGLASS, husband and wife, known to me to be
the individuals named in and who executed the foregoing document, and
acknowledged to me that they signed the same as their free and voluntary act and
deed for the uses and purposes therein mentioned.
WITNESS my hand and official seal the day
and year in this certificate above written.
/s/ Searri Shipman
------------------------------------------------
[SEAL] Notary Public in and for the State of Washington,
residing at Spokane, WA
My commission expires: 5-20-2001
STATE OF WASHINGTON )
)ss.
COUNTY OF SPOKANE )
On this 29th day of December, 1997, before me, 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 named in and which executed the foregoing instrument; and
he acknowledged to me that he signed the same as the free and voluntary act and
deed of said corporation for the uses and purposes therein mentioned, being
authorized so to do, and that the corporate seal affixed thereto is the seal of
said corporation.
WITNESS my hand and official seal the day
and year in this certificate above written.
/s/ Diane G. Wellborn
[SEAL] -------------------------------------------------
Notary Public in and for the State of Washington,
residing at Renton, WA
My commission expires: 10-15-00
14
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EXHIBIT A
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LEGAL DESCRIPTION
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Lots 1 and 2, Block 1, EAGLE ADDITION, according to the Plat recorded in the
office of the County Recorder in Book "I" of Plats at Page 6, records of
Kootenai County, State of Idaho.
1
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EXHIBIT B
(Graphic See Insert 34A)
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EXHIBIT "C"
EAGLE HARDWARE & GARDEN, INC.
General Outline Specifications and Requirements for New Buildings with
Drive-thru Building Materials Yard built-to-suit for Lessee.
Location: Coeur d'Alene, Idaho
The building and site plan specific to the above location, prepared by Lessee,
showing basic floor plan, mezzanines, warehouse areas, storage areas, drive-thru
lumber and building materials yard with metal roof structure, garden sales yard,
greenhouse and covered area, loading dock with stalls and canopy and related
square footages of all the above, along with partition walls, stairways, door
opening locations and sizes, fences, canopies, sidewalks, entrances and exits,
customer and contractor loading lanes and areas and other features required by
Lessee, dated May 30, 1997, and numbered 313, is attached to this Exhibit and
made a part hereof by this reference. This plan is meant to be illustrative of
Lessee's requirements and does not contain all the detailed and specific
architectural, civil, structural, mechanical, electrical, HVAC and finish
requirements for new built-to-suit buildings. Said detailed and specific plans
and specifications shall be prepared by Lessee's Architects and Engineers with
the costs of preparation to be paid by Lessor.
LESSOR PROVIDES:
1. FRAMING AND MINIMUM CONSTRUCTION
A. Exterior walls to be concrete tilt-up, concrete block or smooth
precast panel construction. All pilasters and exterior columns to be
on interior side of wall. Pre-cast, exposed "T" panels are not
acceptable. Choice of structural system subject to Lessee approval.
B. Lessor to construct all partition walls and curtain walls per Lessee's
plans. Four (4) restrooms per code and Lessee requirements per Section
6.C. mezzanine offices, training room and lunchroom complex, two
offices and a handicapped lunchroom on the ground floor, per Lessee's
requirement, storage mezzanine on one or both sides of the store over
a portion of the sales area, dock area and the backroom storage area.
These mezzanines and offices, lunchroom, restrooms, and curtain walls
to be according to Lessee's design which incorporate the location of
all curtain walls enclosing mezzanines, all necessary bearing walls.
All mezzanines live load capacity to be minimum of 125 pounds per
square foot. All framing layout and finishes to meet Lessee's
requirements. All requirements shall meet the minimum standard of the
current adopted U.B.C., local fire codes, and any other applicable
city, county or state codes.
C. Height from finished main floor to bottom of lowest obstruction (i.e.,
sprinkler pipes, ducts, diffusers, etc.) to be 20'0" minimum. Minimum
clearance below all mezzanines to be 6'0" from lowest obstruction
(i.e. pipes, beams, ducts and grid ceiling) to finished floor. Minimum
clearance from lowest roof construction to mezzanine deck to be 8'0".
Minimum mezzanine finished floor to main finished floor to be 12'0".
Roof structure and mezzanine structure to be structural steel truss
joist and beams with corrugated steel decking and rigid insulation
over store and exposed lumber yard with integrated skylights.
Mezzanine to have concrete topping 3-1/2" minimum thickness.
2. ROOFING AND SHEET METAL AND INSULATION
A. One piece (lifetime type with 15 year warranty) J.P. Stevens white
Hypalon roof or Sarnafil white PVC roof. There will be no roof and
insulation substitutions. Roof installer to provide 15 year warranty
on installation. Roof insulation to provide a minimum R factor of 30.
Rigid type roof insulation on top of steel decking to be used with
one-piece type roof. All sheet metal, flashings, gutters, etc., shall
be 24 gauge galvanized. All flashing joints to be mechanically seamed
and soldered. Downspouts to be P.V.C./A.B.S. All downspouts shall be
protected where necessary with steel guards per Lessee's requirements.
B. Pitched roofs (i.e. canopies, covered areas, sheds, lumber rack
covers, etc.) to be metal panels with standing ribs and seams, 26
gauge galvanized metal, factory prefinished. Color choice by Lessee.
All by Lessor per Lessee's plans and specs.
3. STOREFRONT, GLAZING AND VESTIBULES
A. Safety or tempered glass in all doors and relites as required by code.
All doors and glass storefronts to be in bronze anodized aluminum
framing.
Page 1 of 12
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B. Vestibules and storefront glass per Lessee's plans including double
sets (4) of automatic biparting doors in main exit vestibule and
single set (2) of automatic bi-parting doors in main entry and
contractor (or lumberyard) entry/exit vestibules. Vestibule glass and
storefront heights 10'0" and/or 13'0" from finished floor. Maximum
still height in vestibules is 1'6". Panel color below sill by Lessee.
Storefront glass to be 1" insulating type, tinted per Lessee
requirements. All by Lessor per Lessee's plans and specs.
Note: Per Lessee's option, vestibules may not be applicable to Hawaii
stores.
4. HARDWARE
All hardware, fabricated items and mechanical equipment by Lessor. Locksets and
door closures, security bars and panic exit hardware by Lessor per Lessee
requirements and code. Schlage commercial grade hardware shall be required and
approved by Lessee. All hardware must comply with all applicable codes. Locksets
shall be removable core type. Three (3) Simplex Keypad lock hardware shall be
required per Lessee's requirements.
5. DOORS
A. Storefront doors - Two (2) main entry, four (4) main exit, one (1)
garden department doors and two (2) contractor entry - to be pair of
3'6" x 7'0" glass and aluminum electrical biparting doors with
breakaway slider and sidelight feature, location per Lessee's plans.
Besam or Stanley door companies shall be the only accepted door
suppliers. Three (3) pair of 3'6" x 7'0" glass and aluminum swinging
doors in garden yard storefront. One (1) pair 3'0" x 7'0" glass and
aluminum swinging doors in garden side wall if required by Lessee. One
(1) pair 3'0" x 7'0" hollow metal (1 hk) door from Contractor counter
area to drive-thru yard.
B. Perimeter exit doors with jambs - 16 gauge hollow metal, 3'0" x 7'0",
quality and location per Lessee's plan.
C. All other interior doors (unless specified by Lessee or code) to be
standard solid core wood with high pressure laminate finish on both
sides, color and pattern per Lessee, with metal jambs. All other door
sizes also according to Lessee specifications. Doors to be fire rated
as required by code.
D. Overhead sectional and/or roll-up type doors - sizes per Lessee's
plan, electrically operated, (26 gauge metal if sectional), with
mechanical locking devices, by Lessor. Electrically operated roll-up
type doors to be provided at certain locations when specified on
Lessee's plans and specs. Location according to Lessee's plans. High
rise track shall be required on all sectional doors. Insulated doors
will be required as deemed necessary by Lessee. All overhead doors
shall be equipped with bottom safety edge and push-button controls
with key lockout. Fire door #15 manually operated.
E. Any additional doors required by any applicable building or fire codes
to be installed at Lessor's expense.
6. RESTROOM FIXTURES
A. Mirrors (all metal edged) in restrooms installed by Lessor, furnished
by Lessor.
B. Toilet stall partitions to be commercial type, plastic laminated,
color per Lessee. Lessor to supply and install all partitions,
toilets, urinals, lavs and electric refrigerated drinking fountains
and other plumbing fixtures. All plumbing fixtures to be commercial
type and code approved. All fixtures to be white and approved by
Lessee.
1) Customer Restrooms: Minimum fixture requirements for men shall be
four (4) wall hung toils, three (3) wall hung urinals and four (4)
lavs. Minimum fixture requirements for women: four (4) wall hung
toilets and four (4) lavs. All restrooms to meet handicapped code
requirements.
2) Employee Restrooms: For men and women, one (1) wall hunt toilet and
(1) lav.
C. Stainless steel toilet accessories to include double roll paper
holder, seat protection dispensers, sanitary napkin dispensers,
sanitary napkin waste containers, and combination towel holders and
waste units (recessed), soap dispensers; all as per Lessee
specifications.
Page 2 of 12
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7.1 GARDEN YARD AREA
A. Enclosure: Garden yard area perimeter enclosure, as shown on plot plan
exhibit (if applicable) to be 12 foot high, per Lessee's plan, 6"
thick precast concrete panels. 12 foot high, 8" CMU walls to match
building if a CMU structure.
1) In the front and side of the Garden Sales area, use 12' high glass
and aluminum storefront between 8" tube steel columns per Lessee
plans, which require (3) pair of 3'6" x 7'0" glass and aluminum swing
doors at three locations designated by Lessee. (See paragraph 5.A).
B. Concrete Floor: Covered garden yard area and open garden sales yard to
be 5-1/2" thick reinforced concrete with fiber-mesh and treated with a
concrete curing and stealing compound. Light broom finish. Garden area
concrete slab shall be sloped for drainage to trench drains at
locations per Lessee's requirements and plans. Slope to minimum
required for drainage.
C. Covered Area and Garden Lighting:
1) Outside covered area to be high bay type, 175 watt Halophane
brand Metal Halide Integral Ballast Enclosed Fixture with glass
refractor. Bulb to be G.E. (or equal) Metal Halide MXR 175/BU.
Light fixture quantity and layout to be per Lessee's lighting
plans and maximum height (install between trusses) from finished
floor of yard area to bottom of fixture.
2) All garden canopy (low roof) lights in yard area to be
weatherproof low temp fluorescent, 3 tube strip lighting, with
energy saving electronic ballast and tubes, layout per Lessee
Plans. Lessee approval required for alternate lighting.
7.2 DRIVE-THRU LUMBER AND BUILDING MATERIALS YARD AREA
A. Lumber yard concrete slab shall be 6" concrete reinforced with fiber
mesh on 6" minimum crushed rock base. Concrete shall have a light
broom finish. Slab shall have a maximum drainage slope of 1-1/2% to
trench drains per Lessee plans and specs. Sheetflow drainage is not
permitted.
B. Lumber yard perimeter enclosure, entries, exits, canopies, O.H. doors,
gates, automatic barriers, canopy roofs, shed roofs, offices,
check-out booths and island covers shall be by Lessor per Lessee's
plans and specs.
1) Perimeter walls to be a total of 24' high minimum. The lower 12'
in height to be 6" thick precast or tilt-up concrete panels. The
upper 12' in height to be metal siding to match metal shed
roofing. (Total wall height 24'0"). If primary building is CMU
construction then lower wall to be 8" CMU to match building with
12' of metal siding above. If code, zoning or site restrictions
prohibit use of metal siding on perimeter walls, then the walls
shall be 6" concrete or 8" CMU for the full 24' height.
8. FRONT CANOPY AND SIGNING
A. Front canopy design of Lessee per Lessee's standard plans and specs to
coordinate (if applicable) with shopping center architectural design
(as much as possible), but shall retain Lessee's identity design
features and must allow for Lessee signing above storefront area per
Lessee's specifications. Canopy, to project (per Lessee's design) over
sidewalk area with a minimum 12'0" (see Lessee's plans and specs)
soffit height from sidewalk and contain suitable recessed lighting for
sidewalk illumination. Provide two access hatches in underside of
canopy per Lessee's plans.
B. Lessee shall be provided an area for installation of Lessee's standard
pylon sign at the street front location of Lessee's choice. Said pylon
sign shall be governed only local codes and ordinances. Lessee shall
provide said sign and installation. Electrical conduit, number of
circuits and power shall be provided by Lessor to the pylon sign
location. Connection to be by Lessee.
C. Lessee shall be permitted to place any and all signs on all sides of
the building per Lessee's normal and standard practices subject only
to governing codes and ordinances.
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D. Canopy pitched roof area to be metal panels with standing ribs and
seams, 26 gauge galvanized metal, factory prefinished. Color choice by
Lessee. All by Lessor per Lessee's plans and specs.
9. PARKING LOT AND SERVICE AREA
A. PARKING LOT LAYOUT
1) Parking lot layout, location of curb cuts, driveways, entrances
and exits, service areas and location of Lessee's pylon sign
shall be subject to Lessee's approval.
2) All asphalt paving, wheelchair ramps, concrete curbing,
sidewalks, striping (including handicapped stalls, symbols and
signs per ADA code) lot lighting, landscaping (with irrigation)
and street curb cuts all to be provided by Lessor.
3) Lessee requires the International Symbol of accessibility to
identify handicapped disability parking stalls. Location, minimum
number of stalls, signs and symbols shall meet current local,
State, County and Federal (ADA) codes.
4) All parking stalls shall be at 90-degree- angle, minimum stall
width 8'6", minimum stall depth per local code. Compact stalls
(depth only) are acceptable in the amount allowed by local codes.
5) Main drive aisle across front of store shall be a minimum of
30'0" wide. All drive aisles connecting to street accesses shall
be a minimum of 30'0" wide. All street access curb cuts shall be
a minimum of 35'0" wide or wider if required by code.
B. ASPHALT PAVING AND STORE DRAINAGE
1) All asphalt paving to be completed over all main drive aisles,
service areas, truck maneuvering areas, truckwell approaches, on
grade truck zones and street accesses as soon as possible but in
any event not later than the date set for the initial delivery of
Lessee's lumber and pallet racking and/or merchandise fixtures.
2) All main drive aisles and truck access routes (truck routes per
Lessee's requirements) thru parking and service areas to be a
minimum of 3" asphalt of 6" crush rock over sterilized base (weed
killer).
3) Parking lot drainage as required by local codes, minimum slope
shall be 1/4" per foot (2%), maximum slope shall be 3%. Provide
storm drain lines for all roof, canopy and covered area
downspouts, garden yard and drive-thru lumber yard (if
applicable) trench drain lines, truckwell catch basins and all
parking storm drain catch basins. Sheetflow for drainage is not
acceptable.
4) Site drawings showing all existing and/or finish drainage slopes
and facilities must be approved by Lessee prior to proceeding
with site work.
C. TRUCKWELL AND LOADING DOCK.
1) Depressed truckwell(s) and compactor well concrete slab(s) shall
be a minimum length of 65'0" from the face of the dock to end of
concrete apron. The first 10'0" from the face of the dock shall
be flat (sloped only as needed for drainage) with catch basin and
automatic sump pump (and other facilities required to provide
approved drainage) and the remaining 55'0" shall have a maximum
slope of 5% up to the asphalt approach area. All by Lessor.
2) Height of the truckwell dock(s) shall be per Lessee's standard
plans and specs. Dock levelers to be provided by Lessor per
Lessee's plans and specs. Compactor and installation by Lessee.
Power to compactor disconnect by Lessor, connection by Lessee.
D. LANDSCAPING AND IRRIGATION.
1) Landscaping and irrigation shall be installed as required by
local codes.
2) Landscaping shall be designed subject to Lessee's approval to
avoid obscuring Lessee's storefront and street pylon sign with
site screening trees.
Page 4 of 12
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10. EXTERIOR FINISHES
A. All exterior walls shall be sealed or waterproofed and painted.
Concrete block buildings shall be filled with a block filter (roller
applied only), sealed and painted. All by Lessor.
B. Colors of all exterior walls and striping, canopy, trim, metal wall
and roof panels and flashing shall be of Lessee's choice and design.
Materials and labor by Lessor. Source and manufacturer of special
Eagle Hardware & Garden identity colors required shall be designated
by Lessee.
11. INTERIOR
A. Floors:
1.a) Sales area minimum 5-1/2" reinforced smooth troweled concrete
slab with fiber mesh, to be sealed with one (1) coat hardener
sealer and curing compound after concrete placement and two (2)
coats L & M "SEAL HARD" hardener sealer prior to store fixturing.
Floor to be cleaned and scrubbed prior to L&M "SEAL HARD"
application.
1.b) Sales area floor covering per Lessee's plan to be 1/8" commercial
grade V.C.T. with accent strip per Lessee's plans, color and
pattern by Lessee. Tile and accent supplied and installed by
Lessee. Lessor to clean and prep floor prior to tile
installation.
2) Building materials sales area and warehouse area to be smooth
troweled concrete, minimum of 5-1/2" thick reinforced with fiber
mesh and sealed with one (1) coat hardener sealer and curing
compound after concrete placement and two (2) coats L & M "SEAL
HARD" hardener sealer prior to store fixturing. Floor to be
cleaned and scrubbed prior to L& M "SEAL HARD" application.
3) Mezzanine - Corrugated steel decking with light weight concrete,
smooth troweled floor per Lessee's plans and specs. Floor sealer
per Para. 11.A.1.a.
4) Lunchroom - 1/8" commercial grade V.C.T. and 4" vinyl base by
Lessor; base color, tile color and pattern choice by Lessee.
5) Office complex to be commercial grade carpet tiles and 4" vinyl
base by Lessor. Carpet tile and base to be per Lessee's
specifications, pattern and color.
6) All restroom floors to be ceramic tile by Lessor. Design,
pattern, size, color, and manufacturer per Lessee requirements.
7) Drive-thru lumber yard area and garden sales yard to be 5-1/2"
thick reinforced concrete with fiber mesh and treated with a
concrete curing and sealing compound. Garden area includes drains
per Lessee requirements. Light broom finish.
B. Walls
1) Sales area walls per Lessee's plans and specifications will be
gypsum board on wood or metal studding, with joints taped and
sanded, ready for paint, and sealed to provide fire protection
rating per code requirements. All exterior walls to be furred and
insulated to meet Energy Code when required by local codes. All
exposed concrete (concrete blocks) inferior surfaces, filled
and/or patched, sealed, ready for paint. Interior front wall of
store to be furred and sheetrocked, smooth taped (no texture) and
painted per Lessee's plans and specs by Lessor. All interior wall
painting by Lessor.
2) Bulk Storage and Stockroom - 5/8" AC plywood to replace sheetrock
on selected walls. 16 foot high at locations per Lessee's
interior plans. (At fork lift loaded racks).
3) Mezzanine - inside of mezzanine curtain walls, (mezzanine deck to
roof) to be 5/8" gypsum, smooth taped and painted by Lessor.
4) Restrooms - All walls full height ceramic tile, cove base to be
ceramic tile. Color, style, finish, layout pattern, and
manufacturer per Lessee's plans.
5) Lunchroom - sheetrocked, taped, sanded, painted and 4" vinyl
base, all by Lessor. Paint color and finish approved by Lessee.
6) Offices - sheetrocked, taped, and painted by Lessor per Lessee's
specifications. Office windows (to sales Floor) to be one-way
mirror glass by Lessor. Glass to be "stopped" per Lessee detail
plan.
Page 5 of 12
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7) All stairwells walls to offices and/or lunchroom to have Marlite
wainscote by Lessor; color, pattern and type per Lessee. Stair
treads (with nosing) and riser to be Roppe molded rubber; color,
pattern, and type per Lessee. All by Lessor.
C. Ceilings
1) Sales area - Ceiling clear height minimum from 20'0" under lowest
roof structural member from finished floor. Lessor to paint
entire underside of roof structure, including all trusses,
joists, purlins, beams, columns, all piping and conduits. (Color
selection, paint type and manufacturers per Lessee's requirement
by Lessor.)
a) Insulation to be rigid type on top of roof deck. (See
"Roofing, Sheet Metal and Insulation" Section 2.A., page 1.)
All other insulation criteria to remain unchanged.
b) Sales area Halophane brand metal halide lighting to be
chain-hung, 18'0" bottom of fixture to sales area floor.
Sales area fluorescent lighting to be hung at 16'6" above
finished floor.
c) Sales area HVAC exposed ducting to be painted. All HVAC
supply/return grilles (diffusers) shall not be lower than
sales area lighting fixture at any point (unless approved in
writing by Lessee in each instance). All other HVAC criteria
shall remain unchanged.
d) 5 x 6 insulated opaque skylights and smoke vents to be
provided in sales area and storage areas loading dock and
above stock mezzanine (approximately 1 per 1,300 square
feet) layout subject to Lessee's approval. Brand of
skylights and smoke vents subject to Lessee's approval.
2) Covered storage area (if applicable) to be painted per paragraph C.1.
Provide skylights and smoke vents per paragraph C.1 (iv).
3) Mezzanine - within curtain walls (storage areas) over mezzanine deck
area, no finish required, provide skylights and smoke vents per Para.
C.1.b.(iv). Ceiling surface under mezzanine in sales area, painted by
Lessor per Lessee requirements. No ceiling finish in storage areas
under mezzanine required, if permitted by code.
4) Yard Area Canopy
a) 4 x 8 opaque non-insulated skylights to be provided
(approximately 1 per 1,500 square feet). Layout subject to
Lessee's approval. Brand of skylights and smoke vents subject to
Lessee's approval.
b) Paint entire underside of roof structure, including all trusses,
joists, purlins, columns, all piping and conduits per Para.
11.C.1.
5) Store offices, yard offices, receiving office, lunchroom, office
stairwells, janitor room, and sales area under office mezzanine -
suspended "T" bar grid ceiling with 2' x 4' (one-hour rated if
required by code) acoustical tile. Layout direction and tile pattern
per Lessee's choice. Ceiling height to be 8'0". (10'0" in sales area
under mezzanines where required). Restrooms to be painted gypsum at
8'2" above finished floor.
D. Stairs and Railings
All stairways to be steel construction with poured concrete treads.
Number and location per Lessee's requirements. Pipe handrails both
sides of all stairways. All mezzanine railings to be 42" high and meet
all code requirements. All office (no mezzanine) stairways to have
Roppe brand rubber stair treads, nosing, risers, and matching 18"
rubber tiles on landings, all by Lessor. Office mezzanine stairways to
have Marlite walnacote (See Para. 11.B.7.). Manufacturing brand, color
and patterns by Lessee.
E. Painting
All interior painting and staining to be by Lessor, per Lessee's
requirements as to design, paint type, and colors.
Page 6 of 12
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12. HEATING - VENTILATING - AIR CONDITIONING
A. Heating and Air Conditioning System
1) Furnished and installed by the Lessor. Heating system to maintain
72 degrees Fahrenheit temperature in sales area, and 60 degrees
Fahrenheit in storage areas per local design temperatures.
Heating equipment for sales area to be integral with air
conditioning. Storage area heating equipment may be suspended gas
"space heater" type with the location subject to final approval
by Lessee. No space heaters in sales area.
2) Air conditioning tonnage adequate to maintain 15 degrees
Fahrenheit differentiation at all times with outside air
temperature at peak local summer temperature. Engineering for A/C
tonnage determination must be submitted for written Lessee
approval prior to construction.
3) Air conditioning ductwork and diffusers suspended from roof
structure shall maintain a minimum 18'0" clearance from lowest
point of duct and diffusers to sales floor. Subject to Lessee's
approval. All air conditioning units shall be roof mounted and
screened (if required by local ordinance).
4) Lessee approval required on system design which shall use
multiple individual Trane A/C units with direct interior duct
distribution. Lessee approval on type, quantity and location of
all other HVAC equipment. Trane A/C units may be purchased using
Lessee's National Account pricing. Economizer and two speed
motors to be provided on all units. All HVAC units to be roof top
mounted. Screening (if required by local codes) to be Trane
supplied and mounted direct on A/C units. All A/C units must have
duct smoke detectors connected to the fire protection monitoring
systems.
5) Trane Tracer Energy Management System for HVAC and Lighting
controls installed by mechanical contractor. EMS system to be
designed, engineered and control wired by Trane Co. Lessee's
approval required on design, capacity, and function of EMS. HVAC
EMS must integrate with Trane Lighting Controls EMS panels. Trane
Tracer equipment may be purchased under same pricing structure as
A/C units.
6) Lessor to utilize Trane technicians for initial HVAC and EMS
startup. Mechanical contractor to be responsible for coordination
of all HVAC and EMS installation, control wiring and start-up
operations with Trane Co. technicians.
7) Ceiling Fans - (if required per Lessee's option) 1 per 4,000
square feet sales and warehouse areas by Lessor. Lessee to
approve final layout. Lessee retains option to sell ceiling fans
to contractor.
B. Other Mechanical Requirements
1) Fire sprinkler for Lessee's facility to be designed by Tomes,
VanRickley & Associates, Fire Design Group Co. Fire, Building,
Life, Safety, Hazmat Consultants. Contact person is Steve
Goyette, 8265-A Vickers Street, San Diego, CA 92111, (619)
576-6466.
2) All mechanical work and materials shall be approved by the
applicable codes involved.
3) Fire sprinkling shall be designed and installed per all governing
codes and the entities listed below, and rated at:
Fire flow - 3,000 GPM
Sprinkler density - .60 @ 2,000 s.f. (high density)
4) Lessee's insurance company's requirements and local Fire
Marshall, but not less than Lessee's minimum requirements.
5) Sprinkler system to have capacity and capability for expansion to
meet Lessee requirements in regard to additional rack supported
storage mezzanine all permanent displays and for any required "in
rack" sprinkling of high piled storage racking and other
merchandise fixtures and lumber/sheet goods pigeon hole rack.
Provide supply stubs for built-in display locations per Lessee
requirements. Location of main valve, plan and location of all
sprinkler lines and heads prior to final installation subject to
Lessee approval. All sprinkler piping to be cleaned by sprinkler
contractor, suitable for painting by Lessor.
Page 7 of 12
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6) All sprinkler supply piping below mezzanine in sales area
lighting display and in backroom stock area shall not be lower
than bottom of mezzanine structural members (all piping to be
kept up between trusses and beams).
13. PLUMBING
A. Fixtures
Standard vitreous china fixtures with hardware supplied by Lessor,
commercial design, with commercial valves, toilets to be wall hung,
(elongated type). All mirrors and dispensing fixtures and equipment
supplied by Lessor. Brand and type to be approved by Lessee.
B. Hose Bibbs and Hydrants
Freezeless type (except Hawaii), location per Lessee requirements.
C. Other Requirements
1) All plumbing work and materials shall be approved by the
applicable codes involved.
2) gallon water heater serving lunch room, customer restrooms and
janitor's closet at front of store. 20 gallon water heater
serving employees restrooms and handicapped lunch room at rear of
store.
3) Refrigerated drinking fountain, semi-recessed handicapped type,
at customer restrooms, employee restrooms and customer rest area.
4) Interior plant area - Slope floor and provide trench drain per
Lessee's requirements. Supply water rough-in to plant area
trellis and water and drain line to plant service counter per
Lessee requirements.
5) Exterior Garden Sales Area - provide hydrants and trench drains,
with appropriate floor drainage slope, all per Lessee's
requirements.
6) Vendor Closets - Provide rough-in for water supply, sanitary
drain and for 20 gallon hot water heater, all at both front and
back-room vender closets per Lessee's plans and specs.
14. ELECTRICAL POWER AND LIGHTING
A. Electrical Service, Equipment, Devices and Systems
1) Service supplied by a 277/480 volt, 3-phase, 4 wire, 2000 amp
minimum main power supply. Service to be metered through 2,000
amp main breaker to subpanels, and disconnects. Provide separate
200 amp, 42 circuit, panels, quantity and location per Lessee
requirements for Lessee's lighting displays plus additional
panels, J boxes, and power, to supply adequate capacity for
Lessee's other displays and fixtures as per Lessee's
specifications. Location and capacity of each panel per Lessee
requirements. All interior and exterior building lighting, fans,
all other electrically operated equipment and HVAC panels, as
needed, to be in separate panels from the Lessee display panels
described above. All main electrical service panels, switchgear
and all subpanels and disconnects to be Square D brand.
2) Provide necessary junction boxes and sufficient 20 amp circuits
in canopy at Lessee sign location and building exterior for each
Lessee sign. Provide necessary weatherproof junction boxes and
sufficient 20 amp circuits on building exterior at locations of
Lessee's choice for seasonal display lighting. Power provided to
location of Lessee's choice for pylon sign if applicable. Conduit
capacity for pylon, minimum of four (4) 20 amp circuits. All sign
and seasonal display lighting circuits to be controlled by photo
cell "on" and time switch "off". All sign and seasonal display
lighting controlled thru Tracer EMS.
Page 8 of 12
<PAGE>
3) Duplex outlets located per code and Lessee's requirement on
perimeter walls, main partition wall and at storefront areas. One
(1) duplex outlet at each column location at height acceptable to
Lessee. Power and circuiting to be provided to suit Lessee
requirements in floor at all counter locations and special
circuitry required by cash registers at all check stand
locations, counters and manager's office for clean computer
power. Junction boxes and conduit in floor and walls located
according to Lessee requirements containing an adequate number of
circuits to allow for power for Lessee displays and equipment.
Also, conduits above and below slab as needed for telephone,
P.O.S. and AS-400 Computer Systems, video monitoring, and
intercom conduits by Lessor to locations as required by Lessee.
All cabling by Lessee. Three (3) No. 2 walker ducts under all
checkstand locations at front and side of sales area, and under
all service counter locations for power, telephone, computer, and
intercom to be provided by Lessor, location per Lessee
requirements.
4) Size all panels to provide for 20% spare capacity for circuiting.
(After all Lessee fixtures are hooked up.) Maximum panel
utilization to be 80%.
5) Verify all specialty conduit requirements with Lessee prior to
construction as to location, routing, size, and quantity.
Specialty Systems are telephone, P.O.S., AS-400, sound, video
monitoring and security system.
6) Trane Tracer Energy Management System for all lighting controls
by electrical contractor. (See Para. 12.A.5. and 12.A.6.) Lessee
approval required on design, capacity, and function of EMS.
Lighting EMS must integrate with HVAC EMS. All Energy Management
Control wiring by Trane Co. for Lessor.
B. Lighting
1.a) Sales areas, open areas, high over display areas, building
materials areas, and storage areas lighting per Lessee's store
layout plans, will be high bay type Halophane 400 watt metal
halide fixtures #EAGPS40L MHMTY85312 and #EAGPS40L MHMTY 85312-EM
restrike fixtures. Fixtures include prewired 12' cord and plug,
safety chain, hook and Sylvania MP lamp. Halophane fixtures may
be purchased using Lessee's national account pricing. Layout of
metal halide fixtures in sales area to be per Lessee's lighting
plans. Light to be hung 18'0" to bottom of fixture. (Except as
noted otherwise for specific areas designated on Lessee's
lighting plans). All metal halide lighting shall be circuited to
have every other fixture (50/50) (in each row) operate together.
Provide a separate night light circuit per code and Lessee
requirement. Provide battery powered "Emergency Backup Lights" as
required by code and/or Lessee.
1.b) Sales area aisle way lighting in fixture rows to be 3-tube
fluorescent with reflector shade, chain-hung fluorescent strip
lighting with energy saving ballasts (electronic) and tubes or
equal, fluorescent lighting to be hung at 16'0" to bottom of
fixture. (Except as noted otherwise for specific areas designated
on Lessee's lighting plans). Lighting layout to be per Lessee's
fixture plans. All sales area fluorescent lighting shall be
circuited to provide for one (1), two (2), or three (3) tube
operation in each fixture. Provide separate night light circuit
per code and Lessee requirements.
2) Stock areas (above and below mezzanines) - fluorescent two tube
strip lighting with energy saving ballasts and tubes are required
to provide 50' candle minimum. Final fixture placement to
coincide with aisle ways and Lessee's shelving and store
fixtures. Fixtures shall be mounted (individually if necessary)
to provide maximum clearance available from floor.
3) Warehouse areas = refer to Section B.1.a.
4) Parking, security, service areas and exterior of building to be
high pressure sodium, flood lights to provide optimum intensity
lighting, control by photo cell "on" and time switch "off".
5) All placement, quantity and/or row spacing, circuiting and
direction of all lighting fixtures in all areas, interior and
exterior, subject to Lessee approval.
Page 9 of 12
<PAGE>
6) Covered Garden Yard & Covered Drive-Thru Lumber and Building
Materials Yard:
a) Outside high covered yard areas to be high bay type
Halophane 250 watt metal halide fixture #EAGPS250 MHMTY
985312 and #EACPS250 MHMTY 85312-EM restrike fixture.
Fixtures include prewired 12' cord and plug, safety chain,
hook and Sylvania MP lamp. Halophane fixtures may be
purchased using Lessee's national account pricing. Light
fixture to be per Lessee's lighting plans and 18' from
finish floor of yard area to bottom of fixture. (Except as
noted otherwise for specific areas designated on Lessee's
lighting plans).
b) All low covered area lights in garden yard area to be
weatherproof low temp fluorescent, 3 tube strip lighting,
with energy saving ballasts and tubes, layout per Lessee
plans. Circuited to have one (1), two (2), or three (3) tube
operation in each fixture.
C. Other Requirements
1) All electrical work and material shall be as approved by the
applicable codes involved.
2) No aluminum wire allowed anywhere.
3) All materials supplied by the electrical contractor shall meet
the requirements of the National Board of Fire Underwriters for
the class of service for which they are used.
4) All final connections to Lessee furnished fixtures and equipment
shall be by Lessee.
5) Main electrical service - location of main electrical service in
building subject to final approval by Lessee.
6) Electrical contractor to provide panels (except LCC panels which
are purchased from the Trane Co.), conduits, wires and
contractors to facilitate installation of the Trane Tracer Energy
Management System.
7) EMS lighting control will control the sales area, warehouse,
garden yard and covered yard area. Also, control the exterior
security, parking lot lighting, exterior season display lighting
and signing by a photocell on the roof connected to the lighting
control.
15. MISCELLANEOUS
A. All interior and exterior design, decor and structural alterations or
modifications that deviate from Lessee's plans and specifications are
subject to Lessee's prior written approval before initiation. Lessee
reserves the right to require all non-approved installations or
deviations of any type or kind to be removed, replaced or
re-accomplished at Lessor's expense.
B. SIGNS - All signs are to be of Lessee's choice as to location, size,
color, etc., on the property (as applicable) and the building except
as prohibited by local codes, etc. Electrical power to all signs to be
controlled by photocell on, timer "off". Electrical connection by
Lessor. Signs controlled thru Tracer EMS.
C. Upon the execution of a lease and after receipt of preliminary
building plans, the Lessee shall forthwith prepare and deliver to
Lessor a store and fixture layout plans sufficient in detail so that
Lessor may prepare its drawings and specifications for such work set
forth in these general specifications and requirements. Lessee's
interior display, finish drawings and racking plans (if required) to
be incorporated with Lessor's drawings for permit purposes.
D. In addition to the aforementioned items, Lessee will supply all
fixtures and equipment necessary for it to conduct its retail
business.
E. All signs, trade fixtures, warehouse storage fixtures and equipment
and special constructed merchandise displays and other fixtures and
displays installed by Lessee shall remain Lessee's property.
F. Lessee shall have the right to choose colors and graphic design
desired for their store and all of its departments, interior and
exterior. All interior display painting (except for exposed ceiling.
See Section C.1.b.) will be by Lessee.
G. All display carpet tiles will be furnished by Lessee and installed by
Lessee.
Page 10 of 12
<PAGE>
16. APPROVALS
All approvals and option selections required of Lessee shall be furnished
only in writing and signed by the proper duly authorized Lessee personnel.
ACCEPTED and AGREED TO for:
LESSOR:
--------------------------
By
------------------------------
Its
------------------------
By
------------------------------
Its
------------------------
Date:
---------------------------
Submitted as written by:
LESSEE: EAGLE HARDWARE & GARDEN, INC.
By
------------------------------
Its
------------------------
Date:
---------------------------
Page 11 of 12
<PAGE>
EXHIBIT "C" SITE PLAN
[GRAPHIC]
<PAGE>
WHEN RECORDED MAIL TO:
EXHIBIT D
Bill Moloney
5711 N.E. Tolo Road
Bainbridge Island, WA 98110
MEMORANDUM OF LEASE
NOTICE IS HEREBY GIVEN THAT;
By Lease, dated December 5, 1997, Harlan D. Douglass and Maxine H.
Douglass, husband and wife, whose address is E. 815 Rosewood Avenue, Spokane,
Washington 99208 ("Landlord"), leased to Eagle Hardware & Garden, Inc., a
Washington corporation, whose address is 981 Powell Avenue, S.W., Renton,
Washington 98055 ("Tenant"), those premises and improvements situated in Coeur
d'Alene, Idaho, legally described as set forth in Exhibit A attached hereto and
incorporated herein by reference.
The terms and conditions of said Lease are stated therein, which is for
a term of 20 years 2 months, commencing on December 1, 1997 ("Commencement
Date"), and terminating 20 years 2 months after the Commencement Date. The Lease
contains 2 consecutive 5 year options to extend the Lease.
This instrument is merely a memorandum of the aforementioned Lease
and is subject to all the terms, conditions and provisions thereof. All of
the rights and obligations of the parties, as set forth in the Lease and any
addenda thereto, shall benefit and bind the parties' successors-in-interest.
In the event of any inconsistency between the terms of this instrument
and said Lease, the terms of said Lease shall prevail as between the parties.
DATED this ___ day of _________________, 1997
LANDLORD: TENANT:
EAGLE HARDWARE & GARDEN, INC.
a Washington Corporation
By:
- ---------------------------- ----------------------
HARLAN D. DOUGLASS RICHARD T. TAKATA
Its: President
- ---------------------------- -----------------
MAXINE H. DOUGLASS
STATE OF WASHINGTON )
)ss.
COUNTY OF SPOKANE )
On this ______ day of December, 1997, before me, a Notary Public in and
for the State of Washington, duly commissioned and sworn, personally appeared
HARLAN D. DOUGLASS and MAXINE H. DOUGLASS, husband and wife, known to me to be
the individuals named in and who executed the foregoing document, and
acknowledged to me that they signed the same as their free and voluntary act and
deed for the uses and purposes therein mentioned.
WITNESS my hand and official seal the day and year in this
certificate above written.
---------------------------------------
Notary Public in and for the State of Washington, residing at
---------------------------------------
My commission expires:
---------------------------------------
STATE OF WASHINGTON )
)ss.
COUNTY OF KING )
On this _______ day of December, 1997, before me, 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 named in and which executed the foregoing
instrument; and he acknowledged to me that he signed the same as the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, being authorized so to do, and that the corporate seal affixed
thereto is the seal of said corporation.
WITNESS my hand and official seal the day and year in this
certificate above written.
---------------------------------------
Notary Public in and for the State of Washington, residing at
---------------------------------------
My commission expires:
---------------------------------------
<PAGE>
WHEN RECORDED MAIL TO:
EXHIBIT E
Bill Moloney
5711 N.E. Tolo Road
Bainbridge Island, WA 98110
NON-DISTURBANCE ATTORNMENT AND
------------------------------
SUBORDINATION AGREEMENT
-----------------------
EAGLE HARDWARE & GARDEN, INC., a Washington corporation ("Tenant") has
entered into a Lease (the "Lease"), dated December 5, 1997, with Harlan D.
Douglass and Maxine H. Douglass, husband and wife ("Landlord"), for the premises
situate in Coeur d'Alene, Idaho, and legally described as set forth in Exhibit A
attached hereto and incorporated herein by reference (the "Premises"), and
further described in the Lease.
________________________ ("Beneficiary") is the holder of the beneficial
interest under a deed of trust on the Premises, dated ___________________
recorded in the Auditor's Office in the County of Kootenani, State of Idaho,
under the Recording No. ____________ (the "Deed of Trust"). Tenant and
Beneficiary desire to establish certain rights, safeguards, obligations and
priorities with respect to their respective interests by means of the following
non-disturbance, attornment and subordination agreements.
NOW THEREFORE, the parties hereto covenant and agree as follows:
1. Provided the Lease is in full force and effect and there are no
uncured defaults by Tenant thereunder beyond any applicable period for cure,
then:
(a) The right of possession of Tenant to the Premises and
Tenant's rights arising out of the Lease shall not be affected or
disturbed by Beneficiary in the exercise of any of its rights
under the Deed of Trust or the Note secured thereby.
(b) Tenant shall not be named in any foreclosure action related
to the Deed of Trust, unless required by law.
(c) In the event that Beneficiary or any other person acquires
title to the Premises pursuant to the exercise of any remedy
provided for in the Deed of Trust or under the laws of the state
in which the Premises are located, the Lease shall not be
terminated or affected by said foreclosure or sale resulting from
any such proceeding; and Beneficiary hereby covenants that any
sale by it of the Premises pursuant to the exercise of any rights
and remedies under the Deed of Trust or otherwise, shall be made
subject to the Lease and the rights of Tenant thereunder, and
Tenant covenants and agrees to attorn to Beneficiary or such
other person as its new lessor, and the Lease shall continue in
full force and effect as a direct lease between Tenant and
Beneficiary or such other person, as Landlord, upon all the
terms, covenants, conditions and agreement set forth in the Lease
between Tenant and Landlord. However, in no event shall
Beneficiary or such person be:
(i) liable for any act or omission of Landlord;
(ii) bound by any payment of rent made by Tenant for periods
extending beyond the last day of the month in which the date
of said foreclosure or sale occurs.
(iii) bound by any amendment to the Lease made subsequent to
the date of this Agreement without the written consent of
Beneficiary, which consent shall not be unreasonably
withheld or delayed or withheld for the Purpose of
effectuating a change in terms to the Deed of Trust.
Beneficiary hereby consents to any such subsequent amendment
if the primary purpose of such amendment is to provide for
the expansion or remodeling of the Premises or an extension
of the primary term or option periods, so long as there is
no decrease in the minimum rent payable under the Lease; or
(iv) subject to any offsets or defenses which Tenant might
have against Landlord.
The rights and obligations of Tenant and Beneficiary, upon such attornment
shall, to the extent of the remaining balance of the term of the Lease,
including any renewals or extension thereof, be the same as set forth in the
Lease and by this reference the Lease is incorporated herein as part of this
Agreement.
2. The Lease shall be subject and subordinate to the lien of the Deed
of Trust and to all the terms, conditions and provisions thereof, to all
advances made or to be made thereunder, and to any renewals, extensions
modifications or replacements thereof, not inconsistent with Paragraph 1 of this
Agreement. Beneficiary agrees to make any insurance and condemnation proceeds
available for the purposes set forth in the Lease.
1 of 2
<PAGE>
3. Any notices or other communication required or desired to be given
by one party to the other party hereto shall be given in writing by mailing the
same by certified United States mail, return receipt requested, postage prepaid,
addressed as follows:
To Tenant: Eagle Hardware & Garden, Inc.
981 Powell Avenue S.W.
Renton, WA 98055
Attn: David J. Heerensperger
Chairman
With a copy to: Bill Moloney
5711 N.E. Tolo Road
Bainbridge Island, WA 98110
To Beneficiary:
---------------------------------
---------------------------------
---------------------------------
or to such other addresses as the respective parties may, from time to time,
designate by notice given as provided in this Agreement.
4. This Agreement may not be modified other than by an agreement in
writing signed by the parties hereto or by their respective
successors-in-interest.
5. This Agreement shall insure to the benefit of and be binding upon
the parties hereto and their successors and assigns.
6. The foregoing provisions shall be self-operative and effective
without the execution of any further instruments on the part of either party
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of this ________ day of _____________, 1997.
BENEFICIARY: TENANT:
EAGLE HARDWARE & GARDEN, INC.
a Washington corporation
By: By:
------------------ ------------------
RICHARD T. TAKATA
Its____________________ Its President
2 of 2
<PAGE>
WHEN RECORDED MAIL TO:
Bill Moloney
5711 N.E. Tolo Road
Bainbridge Island, WA 98110
MEMORANDUM OF LEASE
-------------------
NOTICE IS HEREBY GIVEN THAT;
By Lease, dated December 5, 1997, Harlan D. Douglass and Maxine H.
Douglass, husband and wife, whose address is E. 815 Rosewood Avenue, Spokane,
Washington 99208 ("Landlord"), leased to Eagle Hardware & Garden, Inc., a
Washington corporation, whose address is 981 Powell Avenue, S.W., Renton,
Washington 98055 ("Tenant"), those premises and improvements situated in Coeur
d'Alene, Idaho, legally described as set forth in Exhibit A attached hereto and
incorporated herein by reference.
The terms and conditions of said Lease are stated therein, which is for
a term of 20 years 2 months, commencing on December 1, 1997 ("Commencement
Date"), and terminating 20 years 2 months after the Commencement Date. The Lease
contains 2 consecutive 5 year options to extend the Lease.
This instrument is merely a memorandum of the aforementioned Lease and
is subject to all the terms, conditions and provisions thereof. All of the
rights and obligations of the parties, as set forth in the Lease and any addenda
thereto, shall benefit and bind the parties' successors-in-interest.
In the event of any inconsistency between the terms of this instrument
and said Lease, the terms of said Lease shall prevail as between the parties.
DATED this ___ day of _________________, 1997
LANDLORD: TENANT:
EAGLE HARDWARE & GARDEN, INC.
a Washington Corporation
____________________________ By:____________________
HARLAN D. DOUGLASS RICHARD T. TAKATA
______________________ Its:President and C.E.O.
MAXINE H. DOUGLASS
STATE OF WASHINGTON )
)ss.
COUNTY OF SPOKANE )
On this ______ day of December, 1997, before me, a Notary Public in and
for the State of Washington, duly commissioned and sworn, personally appeared
HARLAN D. DOUGLASS and MAXINE H. DOUGLASS, husband and wife, known to me to be
the individuals named in and who executed the foregoing document, and
acknowledged to me that they signed the same as their free and voluntary act and
deed for the uses and purposes therein mentioned.
WITNESS my hand and official seal the day and year in this
certificate above written.
---------------------------------------
Notary Public in and for the State of Washington, residing at
---------------------------------------
My commission expires:
---------------------------------------
STATE OF WASHINGTON )
)ss.
COUNTY OF KING )
On this _______ day of December, 1997, before me, 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 named in and which executed the foregoing
instrument; and he acknowledged to me that he signed the same as the free and
voluntary act and deed of said corporation for the uses and purposes therein
mentioned, being authorized so to do, and that the corporate seal affixed
thereto is the seal of said corporation.
WITNESS my hand and official seal the day and year in this
certificate above written.
---------------------------------------
Notary Public in and for the State of Washington, residing at
---------------------------------------
My commission expires:
---------------------------------------
1
<PAGE>
REAL ESTATE PURCHASE AND SALE AGREEMENT
This agreement (the "Agreement") is dated February 12th, 1998 and
entered into by and between FRONT RANGE LIMITED PARTNERSHIP, an Arizona
limited partnership ("Seller") and EAGLE HARDWARE & GARDEN, INC., a
Washington corporation, or assigns ("Buyer") for purchase and sale of certain
real property situate in Larimer County, Colorado, consisting of
approximately 15.22 acres of undeveloped real property located at the
southwest corner of South College Avenue and Skyway Drive in Fort Collins,
Colorado, together with any improvements thereon and all rights appurtenant
thereto (the "Property"). The Property is shown on Buyer's site plan date
December 10, 1997 and numbered X343-A (the "Site Plan") and attached hereto
as Exhibit A. The Property is more particularly described as Lot 1 as shown
on the proposed Plat of Hugh M. Woods P.U.D. attached hereto as Exhibit B.
Following completion of the ALTA/ACSM survey and parcel map described in
Section 3.2 below, the legal description and parcel map of the Property shall
be attached to this Agreement as Exhibit C and made a part hereof.
Seller agrees to sell, and Buyer agrees to buy, the Property upon and
subject to the terms and conditions set forth below:
1. PURCHASE PRICE; PAYMENT. The total purchase price for the Property
shall be four dollars ($4.00) per square foot of land. It is estimated that the
Property contains approximately 662,983 square feet and that the purchase price
will be Two Million Six Hundred Fifty-one Thousand Nine Hundred Thirty-two
Dollars ($2,651,932.00). The area of the Property and the total purchase price
shall be determined by the new ALTA/ACSM survey described below. The purchase
price shall be adjusted to the final certified square footage, which amount,
including the Deposit and interest accrued thereon, shall be paid in cash upon
closing.
2. EARNEST MONEY DEPOSIT. Within ten (10) business days after the
Effective Date, Buyer will deposit earnest money of fifty thousand dollars
($50,000) (the "Deposit") with First American Title Insurance Company at a
location selected by Seller (the "Closing Agent"). The Closing Agent shall place
the Deposit in an interest-bearing account, with interest to accrue to Buyer's
benefit. If this transaction does not close for any reason other than default by
Buyer under this Agreement, the Deposit, and all interest accrued thereon, shall
be returned to Buyer. In the event of Buyer's default under this Agreement,
Seller shall have as its sole remedy the right to terminate this Agreement and
retain the Deposit, together with accrued interest thereon, as liquidated
damages.
3. TITLE INSURANCE AND SURVEY.
3.1 PRELIMINARY TITLE INSURANCE COMMITMENT. Within fifteen (15) days
after the Effective Date, Seller shall provide Buyer with a current preliminary
commitment for owner's title insurance with extended coverage (ALTA Form 1970-B,
as revised in 1984 or if unavailable, Form B-1987) issued by the Closing Agent,
with copies of all documents listed as exceptions set forth therein.
3.2 ALTA/ACSM SURVEY. As soon as possible after the Effective Date,
Buyer shall initiate and pay for a new ALTA/ACSM survey with land area
certification of the Property and a parcel map, but the cost thereof shall be
credited against the purchase price at closing.
1
<PAGE>
3.3 TITLE AND SURVEY APPROVAL PERIODS. Buyer shall have fifteen (15)
days from the later receipt of either the preliminary commitment or the
completed survey (and any amendments, supplements and revisions to either in
which new or revised exceptions or items first appear) to notify Seller of
its disapproval of any exceptions shown in the preliminary commitment or any
items on the survey. If, within twenty (20) days after the receipt of such
notice Seller has not removed or given reasonable written assurances to Buyer
that such disapproved exceptions of items will be removed on or before
closing, Buyer may, at its option, at any time prior to such removal or
receipt of such reasonable written assurances, terminate this Agreement by
giving notice of such termination to Seller. On such termination Closing
Agent shall refund the Deposit and all interest accrued thereon to Buyer and
all rights and obligations of Seller and Buyer under this Agreement shall
terminate and be of no further force or effect.
4. CONTINGENCIES. Buyer's obligation to purchase the Property is
subject to Buyer's satisfaction or waiver, in writing, of the following
conditions precedent, in Buyer's sole and absolute discretion, on or before the
dates described below:
4.1 FEASIBILITY. Buyer's determination that the Property is feasible in
all respects for Buyer's intended use, including but not limited to, the
following; determining that Buyer's selected building configuration plan can be
satisfactorily adapted to the site; Buyer's proposed parking plan, on site
vehicle and pedestrian circulation plan and street access plan for the Property
all meet or exceed Buyer's minimum criteria; and that the local governmental
requirements for landscaping, open area, building to land ratio and set-backs
can be satisfied within Buyer's plans; and that utilities will be available of
adequate capacity to serve Buyer's needs.
4.2 STUDIES. Satisfactory results of all soils, engineering,
environmental, topography, hazardous waste, geotechnical, hydrology, wetlands
and other studies that may be deemed necessary by Buyer or required by any
governmental agency in connection with the Property and Buyer's planned
development and use of the Property. Within ten (10) days from the Effective
Date Seller will deliver to Buyer information contained in Seller's files or
available to Seller with respect to the Property and, more specifically, any
material, data, filings, applications, P.U.D. information, wetlands mitigations
pertaining to the formerly proposed use of the site by Hugh M. Woods including
any topographic surveys, soils tests, environmental assessments, environmental
remediation and other information or data with respect to the Property and the
Hugh M. Woods development plans that Seller has the right to give out which will
assist Buyer in its determination of the suitability of the Property for an
Eagle Hardware & Garden store, If Buyer does not purchase the Property, Buyer
agrees to provide Seller with a list of any and all written studies and reports
which Buyer had prepared in Buyer's review of the Property including, without
limitation, any environmental audits, soil reports and surveys, and, if
requested in writing by Seller, Buyer will provide Seller, at no cost to Seller,
copies of the requested studies and reports. The parties hereby deem the value
of such studies and reports to be the costs paid by the Buyer to the
consultant(s) preparing such studies and reports. Buyer makes no representation
or warranty with respect to the content of, and shall have no liability for any
inaccuracy contained in, any such studies and reports.
4.3 APPROVALS AND PERMITS. Issuance of any and/or all required
governmental approvals including but not limited to P.U.D. (if required) and
plat of the Property by the City or County, subdivision approvals, rezoning
approvals, Colorado Department of Transportation highway access and traffic
signal approvals, City and/or County building permits, wetland mitigation
permits, use permits, sign permits, design review approvals, site plan
approvals, parking variances, and approvals of any kind from any and all
governmental agencies having jurisdiction over the Property, necessary for Buyer
to develop and construct it's store building, garden yard and greenhouse and any
other improvements that Buyer deems necessary in its sole determination to
conduct its selected business operations on the Property. The timing, conditions
and cost of the permits and approvals (including any mitigation fees) must be
acceptable to Buyer.
2
<PAGE>
4.4 TIME PERIODS. Buyer shall have sixty (60) days from the Effective
Date (the "Feasibility Period") to satisfy or waive the contingencies set forth
in Sections 4.1 and 4.2. Buyer shall have two hundred seventy (270) days (the
"Contingency Period") from the end of the Feasibility Period to satisfy or waive
the contingencies set forth in Sections 4.3 and 4.6. If Buyer does not satisfy
or waive the contingencies in writing by the applicable dates, or if Buyer
notifies Seller in writing at any time prior to the end of the Contingency
Period that it has decided not to pursue the project any further and that this
Agreement is terminated, the Deposit, with interest, shall be refunded to Buyer
and the Agreement shall terminate without further action and be of no further
force or effect.
4.5 EXTENSION PERIODS. If Buyer has satisfied or waived the
contingencies set forth in Sections 4.1 and 4.2 and is diligently pursuing the
applicable required approvals and permits set forth in Section 4.3, Buyer shall
be allowed two (2) separate thirty (30) day extensions of the Contingency
Period. Notice of the exercising of each of the extension periods shall be given
at least ten (10) days prior to the end of the Contingency Period or extension
period. Buyer shall deposit into the interest bearing account with the Closing
Agent an additional earnest money deposit of Twenty-five Thousand Dollars
($25,000.00) ("Extension Fee") each time notice is given exercising a separate
thirty (30) day extension of the Contingency Period. In the event that Buyer
closes its purchase of the Property pursuant to this Agreement, all of the
additional deposits and accrued interest shall be credited toward the purchase
price at closing. The additional deposits shall be treated the same as the
Deposit in all respects.
4.6 HAZARDOUS SUBSTANCES. To the best of Seller's knowledge, except as
disclosed in this paragraph 4.6, the Property does not contain a hazardous
substance, whether located upon or beneath the Property, and no debris has been
buried beneath the surface of the Property, and Seller has not discharged and
has no knowledge of any person having discharged and hazardous substances on the
Property. The Property is currently being used as a farm, and there may have
been substances used in farming operations that may be classified as hazardous
substances. Seller hereby discloses to Buyer that rodenticides were used for the
eradication of prairie dogs from the Property. Upon request, Seller shall
provide to Buyer copies of Phase I Environmental Audits performed for the
Property in 1994 and 1995. In the event Buyer wishes to have a Phase II
Environmental Audit performed for the Property, then as soon as possible after
the Effective Date, Buyer shall initiate and pay for a Phase II Environmental
Audit, but the cost thereof, up to $4,000.00, shall be credited against the
purchase price at closing.
5. CLOSING.
5.1 TIME FOR CLOSING; TERMINATION DATE. This sale shall be closed in
the office of the Closing Agent within fifteen (15) days after all of Buyer's
conditions precedent have been satisfied or waived by Buyer on a date
mutually agreeable to Buyer and Seller. Buyer and Seller shall deposit in
escrow with Closing Agent all instruments, documents and monies necessary to
complete the sale in accordance with the Agreement. As used herein, "closing"
or "date of closing" means the date on which all appropriate documents are
recorded and proceeds of sale are available for disbursement to Seller. Funds
held in reserve accounts pursuant to escrow instructions shall be deemed, for
purposes of this definition, as available for disbursement to Seller.
5.2 ACCEPTANCE OF EXCEPTIONS. Neither Seller nor Buyer shall be
required to close, and the Deposit and all interest thereon shall be returned to
Buyer, if any exception or item disapproved by Buyer as herein provided cannot
be removed by the date of closing; provided, however, that Buyer may elect to
waive any disapproved exceptions or items and close on the remaining terms.
Notwithstanding the foregoing, Seller shall remove any defect or encumbrance
attaching by, through or under Seller after the Effective Date of this
Agreement. Exceptions to be discharged by Seller may be paid out of the purchase
price at closing.
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<PAGE>
5.3 PRORATIONS; CLOSING COSTS. Taxes and assessments for the current
year and utilities constituting liens shall be prorated as of the date of
closing. Seller shall pay the premium for the title insurance policy, real
estate excise, transfer and/or conveyance taxes, the cost of conveyance tax
stamps, if any, and one-half of Closing Agent's escrow fee. Buyer shall pay the
cost of recording the statutory warranty deed, and one-half of Closing Agent's
escrow fee and the difference in the cost of the premium between standard
owner's and extended coverage.
5.4 POSSESSION. Buyer shall be entitled to possession upon closing.
6. CONVEYANCE OF TITLE. On closing, Seller shall execute and deliver to
Buyer a statutory warranty deed conveying good and marketable title to the
Property free and clear of any defects or encumbrances except for the lien of
real estate taxes for the current calendar year not yet due and payable, those
defects or encumbrances appearing ton the preliminary commitment for title
insurance that are approved by Buyer (the "Permitted Exceptions"), and other
encumbrances or defects approved by Buyer in writing.
As soon as available after closing, Seller shall provide to Buyer a
policy of title insurance pursuant to the preliminary commitment, dated as of
the closing date and insuring Buyer in the amount of the purchase price against
loss or damage by reason of defect in Buyer's title to the Property subject only
to the printed exclusions and general exceptions appearing in the policy form;
any Permitted Exceptions; the exceptions specified in the preliminary commitment
which Buyer has not disapproved of as provided herein; and 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 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, Buyer may
terminate this Agreement by giving notice of such termination to Seller and
Closing Agent, and such termination shall be effective and the Deposit and
interest thereon shall be refunded ten (10) days thereafter; provided, however,
that such termination shall not be effective if Seller agrees in writing within
such ten (10) day period to restore the Property substantially to its present
condition by the closing date.
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, and upon such termination the Deposit and
accrued 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. 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. In addition to other
representations herein, Seller represents and warrants to Buyer as of the date
of closing that:
8.1 Seller has full power and authority to execute this Agreement and
perform Seller's obligations and duties hereunder;
8.2 The Property is not subject to any leases, tenancies or rights of
persons in possession;
4
<PAGE>
8.3 Neither the Property nor the sale of the Property violates any
applicable statute, ordinance or regulation, nor any order of any court or any
governmental authority or agency, pertaining to the Property or the use
occupancy or condition thereof;
8.4 Seller is unaware of any material defect in the Property;
8.5 All persons and entities supplying labor, materials and equipment
to the Property have been paid and there are no claims or liens;
8.6 There are no currently due and payable assessments for public
improvements against the Property and Seller is not aware of any local
improvement district or other taxing authority having jurisdiction over the
Property in the process of formation;
8.7 The Property has legal access to all streets adjoining the
Property;
8.8 Seller has good and marketable title to the Property;
8.9 Seller is not a "foreign person" for purposes of Section 1445 of
the Internal Revenue Code. Prior to closing, Seller shall execute and deliver to
Closing Agent an affidavit in order to meet the Foreign Investment in Real
Property Tax Act ("FIRPTA") requirements of I.R.C. # 1445; and
8.10 Seller has not received notification of any kind from any agency
suggesting that the Property is or may be targeted for a Superfund or similar
type of cleanup. To the best of Seller's knowledge, neither the Property nor any
portion thereof is or has been used (i) for the storage, disposal or discharge
of oil, solvents, fuel, chemicals or any type of toxic or dangerous or hazardous
waste or substance, (ii) as a landfill or waste disposal site, and (iii) does
not contain any underground storage tanks. Seller agrees to indemnify, defend
and hold Buyer harmless from and against any and all loss, damage, claims,
penalties, liability, suits, costs and expenses (including, without limitation,
reasonable attorneys' fees) and also including without limitation, costs of
remedial action or cleanup, suffered or incurred by Buyer arising out of or
related to any such use of the Property, or portion thereof, occurring prior to
the conveyance to Buyer, about which Seller knew or reasonably should have known
prior to Closing and did not disclose to Buyer.
9. BUYER'S AUTHORITY. Buyer represents and warrants to Seller that at
the date of execution hereof and at the date of closing 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.
10. DEFAULT. If Seller defaults hereunder, Buyer may seek specific
performance of this Agreement, damages or rescission and Buyer shall be entitled
to return of the Deposit with accrued interest, on demand. If Buyer defaults,
the Deposit and accrued interest shall be forfeited to Seller as liquidated
damages and as Seller's sole and exclusive remedy and upon payment thereof to
Seller, Buyer shall have no further obligations or liability hereunder. If any
legal action or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party of parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
If any party makes a written settlement offer which is not accepted by the other
party, then if the amount recovered by such other party is less than the amount
of settlement offer, the party making the settlement offer shall be considered
the prevailing party.
5
<PAGE>
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 other means of personal
service) or sent by United States certified mail, return receipt requested, to
the addressee's mailing address set forth on the signature page:
and, in the case of Buyer, a copy to: William N. Moloney
5711 NE Tolo Rd.
Bainbridge Island, WA 98110
and, in the case of Seller, a copy to: Ramsey D. Myatt
Myatt, Brandes & Gast PC
110 East Oak Street, 2nd Floor
Fort Collins, CO 80524
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.
12. RECIPROCAL ACCESS EASEMENT AGREEMENT. Buyer and Seller agree to
enter into a reciprocal access easement agreement (the "R.E.A.") for ingress and
egress easements over and across the Property and the remainder of adjacent
property owned by Seller. The R.E.A. shall be prepared and executed during the
first sixty (60) days of the Contingency Period and recorded at the closing.
13. NO NEGOTIATIONS WITH THIRD PARTY. Seller shall not negotiate nor
commit to sell, lease or otherwise transfer the Property on any portion thereof
to any other person or party as long as Buyer is proceeding in good faith to
perform its duties under this Agreement. This covenant shall remain in full
force and effect and be legally binding upon Seller until termination of this
Agreement.
14. 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. Any waivers hereunder must be in writing. No waive
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 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 of unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision hereof. If the date for performance or giving notice under this
Agreement is a Saturday, Sunday or banking holiday in Colorado, the date for
performance or notice shall be extended until the next day that is not a
Saturday, Sunday or banking holiday.
15. SURVIVAL OF WARRANTIES. The terms, covenants, representations and
warranties shall not merge in the deed of conveyance, but shall survive closing.
16. COMMISSIONS. Seller has agreed to pay an 8% commission to The
Group, Inc., the listing broker. H. C. Properties, Ltd. (Richard Sapkin) is the
cooperating broker. Said commissions and/or broker's fees shall be shared as
agreed in a separate agreement between The Group, Inc. and H. C. Properties,
Ltd. If no agreement has been reached by the closing, the commissions shall be
paid to and held by the Closing Agent pending resolution of the division of said
commissions and/or broker's fees. Upon such payment, the Seller shall have no
further responsibilities or liabilities for commissions and/or broker's fees.
Buyer shall not be responsible for payment of any real estate commissions and/or
broker's fees.
6
<PAGE>
17. COLLEGE AVENUE SIGN MONUMENTS. Buyer and Seller agree to share
College Avenue sign monuments identifying their respective properties and/or
businesses to the extent permitted by the sign code for the City of Fort
Collins, Colorado. Each party agrees to reserve for the use of the other party
twenty-five (25%) percent of the available sign area for the other party's use,
upon request. Buyer shall have the exclusive use of its signage until receipt of
a notice from Seller exercising its rights hereunder. Initial costs of the
signage shall be borne by the owner of the property upon which the signage is to
be erected. Upon providing notice of intent to exercise the rights hereunder,
the costs of the sign monument, including the initial costs of erecting such
monument, shall be borne pro rata to the actual usage thereof. Each party agrees
to consult with the other party prior to submitting sign details to the City of
Forth Collins for approval.
18. EXHIBITS. Exhibits A, B and C attached hereto are incorporated
herein as if fully set forth.
Exhibit A - Site Plan
Exhibit B - Proposed Plat of Hugh M. Woods P.U.D.
Exhibit C - Legal Description of the Property and Parcel Map
19. EFFECTIVE DATE. The later of the Buyer's signature date and the
Seller's signature date, set forth below, shall be the "Effective Date" of this
Agreement.
BUYER: EAGLE HARDWARE & GARDEN, INC.
By: /s/ Paul B. Morris
---------------------------------
Typed name: Paul B. Morris
February 10, 1998 Its: Vice President
- ----------------------
Buyer's signature date
Address: 981 Powell Avenue S.W.
Renton, WA 98055
SELLER: FRONT RANGE LIMITED PARTNERSHIP
By: MAIA CORP., Its General Partner
February 12, 1998 By: /s/ Jeff Timan
- ----------------------- ----------------------------------
Seller's signature date Typed name: Jeff Timan
Its: Vice President
Address: 5601 N. Hacienda del Sol Rd.
Tucson, AZ 85718
7
<PAGE>
[GRAPHIC]
EXHIBIT "A"
<PAGE>
[GRAPHIC]
EXHIBIT "B"
<PAGE>
EXHIBIT "C"
LEGAL DESCRIPTION of the PROPERTY
(To be provided by Seller upon completion of the ALTA/ACSM Class A survey as set
forth in Section 3-2).
EXHIBIT "C"
9
<PAGE>
EXHIBIT 10.136
AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
<PAGE>
AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Certain Basic Definitions..........................................1
1.1 "Business Day".................................................1
1.2 "Buyer's Address"..............................................2
1.3 "Buyer's Counsel's Address"....................................2
1.4 "Closing Date".................................................2
1.5 "Close of Escrow"..............................................2
1.6 "Contingency Period"...........................................2
1.7 "Deposit"......................................................2
1.8 "Escrow Holder"................................................2
1.9 "Escrow Holder's Address"......................................3
1.10 "Feasibility Period"..........................................3
1.11 "Initial Deposit".............................................3
1.12 "Official Records"............................................3
1.13 "Purchase Price"..............................................3
1.14 "Opening of Escrow"...........................................3
1.15 "Second Deposit"..............................................3
1.16 "Seller's Address"............................................4
1.17 "Seller's Counsel's Address"..................................4
1.18 "Title Company"...............................................4
2. Purchase and Sale..................................................4
3. Payment of Purchase Price..........................................4
4. Escrow ............................................................5
5. Condition of Title ................................................5
6. Title Policy ......................................................6
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
7. Conditions to Close of Escrow .....................................6
8. Deposits by Seller ...............................................17
9. Deposits by Buyer.................................................18
10. Cost and Expenses ................................................18
11. Prorations .......................................................18
12. Disbursements and Other Actions by Escrow Holder..................19
13. Seller's Representations and Warranties...........................20
14. Buyer's Covenants, Representations and Warranties; As-Is
Condition of the Property.........................................20
15. Liquidated Damages ...............................................22
16. Damage or Condemnation Prior to Close of Escrow...................23
17. Notices ..........................................................23
18. Brokers ..........................................................24
19. Legal Fees .......................................................24
20. Assignment .......................................................24
21. Confidentiality ..................................................25
22. Miscellaneous ....................................................25
</TABLE>
<TABLE>
<S> <C>
EXHIBIT "A" LEGAL DESCRIPTION OF EAGLE PARCEL
EXHIBIT "B" SITE PLAN
EXHIBIT "C" GRANT DEED
EXHIBIT "D" SELLER CERTIFICATE
EXHIBIT "E" PARCEL 6 DEVELOPMENT AGREEMENT
EXHIBIT "F" COSTCO REA
EXHIBIT "G" OFF-SITE IMPROVEMENTS SUBJECT TO BUYERS
REIMBURSEMENT
EXHIBIT "G-1" DEPICTION OF OFF-SITE IMPROVEMENTS
EXHIBIT "H" SELLER-APPROVED CONTRACTORS
EXHIBIT "I" ENVIRONMENTAL REPORTS
</TABLE>
ii
<PAGE>
AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
TO: First American Title Insurance Escrow No. N981398G
Company Escrow Officer: Toni Rice-Groetsch
114 East Fifth Street Title Order No. 253830
Santa Ana, CA 92701 Title Officer: Gary R. Chaffin
This AGREEMENT OF PURCHASE AND SALE AND JOINT ESCROW INSTRUCTIONS
("Agreement") is made and entered into as of this 26th day of February, 1998, by
and between LENNAR ROLLING RIDGE, INC., a California corporation ("Seller"), and
EAGLE HARDWARE & GARDEN, INC., a Washington corporation ("Buyer"), with respect
to the following:
RECITALS
A. Seller is the owner of that certain real property consisting of
approximately 11.7 acres of land located in the City of Chino Hills ("City"),
County of San Bernadino, State of California, which is more particularly
described on Exhibit "A" attached hereto, together with all appurtenances
thereto and improvements thereon, if any (the "Eagle Parcel"). The Eagle Parcel
is more particularly shown on the site plan attached hereto as Exhibit "B" (Site
Plan"). The Eagle Parcel, the real property owned by Seller ("Seller Parcel")
and the real property owned by Costco Wholesale Corporation, a Washington
corporation (the "Costco Parcel"), are located in the Crossroads Marketplace at
Chino Hills (the "Shopping Center").
B. Seller desires to sell the Eagle Parcel to Buyer and Buyer desires
to purchase the Eagle Parcel from Seller upon the terms and conditions
hereinafter set forth. NOW THEREFORE, in consideration of the mutual covenants
and agreements herein contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer
hereby agree that the terms and conditions of this Agreement and the
instructions to First American Title Insurance Company ("Escrow Holder") with
regard to the escrow ("Escrow") created pursuant hereto are as follows:
AGREEMENT
1. Certain Basic Definitions. For purposes of this Agreement, the
following terms shall have the following definitions:
1.1 "Business Day" means any day that is not (i) a Saturday or
Sunday, or (ii) a holiday as defined in the California Government Code.
<PAGE>
1.2 "Buyer's Address" means:
Eagle Hardware & Garden, Inc.
981 Powell Avenue SW Renton,
Washington 98055
Attention: Mr. Richard T. Takata
Facsimile No.: (425) 204-5169
Telephone No.: (425) 227-5740
1.3 "Buyer's Counsel's Address" means:
William N. Moloney
5711 N.E. Tolo Road
Bainbridge Island, WA 98110
Facsimile No.: (206) 842-5340
Telephone No.: (206) 842-4044
1.4 "Closing Date" means the date which is ten (10) Business Days after
the removal of contingencies set forth in paragraph 7 below within the time
period set forth in said paragraph; provided if the contingencies have not been
removed or waived (to the extent waivable hereunder) by the party for whose
benefit such conditions are established within the time frames set forth herein,
either shall have the right to terminate this Agreement at any time after one
hundred seventy five (175) days following the Opening of Escrow ("Outside
Closing Date").
1.5 "Close of Escrow" means the date that the Grant Deed is recorded in
the Official Records.
1.6 "Contingency Period" means the period commencing with the
expiration of the Feasibility Period and endings at 5:00 p.m. (California time)
on the date which is one hundred twenty (120) days after the expiration of the
Feasibility Period. The date on which the Contingency Period expires is referred
to as the "Contingency Approval Date".
1.7 The "Deposit" means collectively the "Initial Deposit" and the
"Second Deposit".
1.8 "Escrow Holder" means First American Title Insurance Company.
1.9 "Escrow Holder's Address" means:
First American Title Insurance Company
114 East Fifth Street
Santa Ana, California 92701
Attention: Ms. Toni Rice-Groetsch
Facsimile No.: (714) 285-0329
Telephone No.: (714) 558-3211
2
<PAGE>
1.10 "Feasibility Period" means the period commencing with the Opening
of Escrow and ending at 5:00 p.m. (California time) on the date which is
forty-five (45) days after the Opening of Escrow. The date on which the
Feasibility Period expires is called the "Feasibility Approval Date".
1.11 "Initial Deposit" means the amount of Fifty Thousand and No/100
Dollars ($50,000.00) payable upon the Opening of Escrow.
1.12 "Official Records" means the office of the County Recorder of the
County and State in which the Eagle Parcel is located.
1.13 "Purchase Price" shall mean Three Million Two Hundred Thousand and
No/100 Dollars ($3,200,000.00) or Six and 28/100 Dollars ($6.28) per square foot
of land within the Eagle Parcel; provided, however, Seller and Buyer acknowledge
and agree that the Purchase Price is based upon the parties' belief and
understanding that the Eagle Parcel contains 509,652 gross square feet of land.
The civil engineer retained to prepare the ALTA Survey of the Eagle Parcel shall
determine and certify to Buyer and Seller prior to the Close of Escrow the
actual total square footage of the Eagle Parcel based upon the final ALTA/ACSM
Survey provided to Buyer and Seller by such civil engineer. The Purchase Price
shall then be adjusted, if necessary, to equal the product obtained by
multiplying the actual number of square feet contained in the Eagle Parcel as
certified by such civil engineer by Six and 28/100 Dollars ($6.28).
1.14 "Opening of Escrow" shall have the meaning set forth in paragraph
4(a) below.
1.15 "Second Deposit" means the amount of Fifty Thousand and No/100
Dollars ($50,000.00) payable upon the Feasibility Approval Date.
1.16 "Seller's Address" means:
Lennar Rolling Ridge, Inc.
18401 Von Karman Ave., Suite 540
Irvine, California 92612
Attention: R. Lang Cottrell
Facsimile No.: (714) 442-4131
Telephone No.: (714) 442-6100
1.17 "Seller's Counsel's Address" means:
Allen, Matkins, Leck, Gamble & Mallory LLP
18400 Von Karman Avenue
4th Floor
Irvine, California 92612
Attention: Monica E. Olson, Esq.
Facsimile No.: (714) 553-8354
Telephone No.: (714) 553-1313
3
<PAGE>
1.18 "Title Company" means First American Title Insurance Company.
2. Purchase and Sale. Seller agrees to sell the Eagle Parcel to Buyer, and
Buyer agrees to purchase the Eagle Parcel from Seller, for the Purchase Price
and upon the terms and conditions herein set forth.
3. Payment of Purchase Price. The Purchase Price for the Eagle Parcel shall
be paid by Buyer as follows:
(a) Initial Deposit. Concurrently with the Opening of Escrow, Buyer
shall deposit, or cause to be deposited with Escrow Holder, in cash, by bank
cashier's check made payable to Escrow Holder, or by a confirmed wire transfer
of funds (hereinafter referred to as "Immediately Available Funds"), the Initial
Deposit. The Initial Deposit and the interest accrued thereon shall be
applicable to the Purchase Price upon the Close of Escrow. Escrow Holder shall
place the Initial Deposit in an interest bearing account. Such account shall
have no penalty for early withdrawal and Buyer shall accept all risks with
regard to the account. The Initial Deposit and any interest accrued thereon,
shall be refundable to Buyer if Buyer or Seller terminates the Agreement on or
prior to the dates designated within and in accordance with the provisions of
paragraphs 7 or 16. Otherwise, the Initial Deposit shall be held and distributed
as provided herein.
(b) Second Deposit On the Feasibility Approval Date, Buyer shall
deposit or cause to be deposited with Escrow Holder in Immediately Available
Funds the Second Deposit. Escrow Holder shall place the Second Deposit in the
interest-bearing account as described in Paragraph 3(a) above. The Second
Deposit and the interest accrued therein shall be applicable to the Purchase
Price upon the Close of Escrow. If Buyer or Seller terminates this Agreement on
or prior to the dates designated within, and in accordance with the provisions
of, paragraphs 7 or 16, the Deposit (or so much thereof that is then held by
Escrow Holder), plus accrued interest thereon, shall be refunded to Buyer.
Unless this Agreement has been terminated in accordance with the preceding
sentence, the Deposit (or so much thereof that is then held by Escrow Holder)
shall be non-refundable to Buyer unless Seller fails to convey the Eagle Parcel
to Buyer as provided herein and such failure constitutes a default by Seller
hereunder. Except as otherwise set forth herein, the Deposit (or so much thereof
that is then held by Escrow Holder) shall be retained by Seller pursuant to
paragraph 15 hereof if this Agreement is terminated by Buyer after the
expiration of the Feasibility Period or the Contingency Period, as applicable,
or if the Close of Escrow does not occur by the Closing Date for any reason
other than (i) Buyer's termination of this Agreement in accordance with
paragraph 16, or (ii) Seller's failure to convey the Eagle Parcel to Buyer as
provided herein and where such failure constitutes a default by Seller
hereunder.
(c) Closing Funds. At least one (1) business day prior to the Close of
Escrow, Buyer shall deposit or cause to be deposited with Escrow Holder, in
Immediately Available Funds, the balance of the Purchase Price plus Escrow
Holder's estimate of Buyer's share of closing costs, prorations and charges
payable pursuant to this Agreement.
4
<PAGE>
4. Escrow
(a) Opening of Escrow. For purposes of this Agreement, the Escrow shall
be deemed opened on the date Escrow Holder shall have received the Initial
Deposit from Buyer and a fully executed original of this Agreement from Seller
and Buyer (the "Opening of Escrow"), and Escrow Holder shall notify Buyer and
Seller, in writing, of the date Escrow is opened. Buyer and Seller agree to
execute, deliver and be bound by any reasonable customary supplemental escrow
instructions of Escrow Holder or other instruments as may reasonably be required
by Escrow holder in order to consummate the transaction contemplated by this
Agreement. Any such customary supplemental instructions shall not conflict with,
amend or supersede any portions of the Agreement unless expressly consented or
agreed to in writing by Buyer and Seller.
(b) Close of Escrow. The Escrow shall close on or before the Closing
Date, provided that Buyer and Seller may, but shall not be obligated to, close
the Escrow upon such other earlier or late date as Buyer and Seller mutually
agree to in writing.
5. Condition of Title. It shall be a condition to the Close of Escrow for
Buyer's benefit that title to the Eagle Parcel shall be conveyed to Buyer by the
Grant Deed subject to the following conditions of title ("Approved Condition of
Title"):
(a) a lien to secure payment of general and special real property
taxes, bonds and assessments, not delinquent;
(b) the lien of supplemental taxes assessed pursuant to Chapter 3.5
commencing with Section 75 of the California Revenue and Taxation Code;
(c) matters affecting the Condition of Title created by or with the
written consent of Buyer,
(d) all exceptions which are disclosed by the "Title Report" described
in paragraph 7(a)(ii) below, which are approved by Buyer as provided
herein;
(e) all applicable laws, ordinances, rules and governmental regulations
(including, but not limited to, those relative to building, zoning and land
use) affecting the development, use, occupancy or enjoyment of the Eagle
Parcel;
(f) the "Costco REA" (defined in paragraph 7(c) below) and the
Development agreement by and between the City and Seller for Parcel 6 of
Tentative Parcel Map No. 14996 dated March 11, 1997 and recorded May 7,
1997 as Instrument No. 19970162947 (the "Parcel 6 Development Agreement"),
attached hereto as Exhibit "E";
6. Title Policy. Title shall be insured at the Close of Escrow by the
Title Company issuing its ALTA Extended Coverage Owner's Form Policy of Title
Insurance ("Title Policy") in the amount of the Purchase Price showing title to
the Eagle Parcel vested in Buyer and the issuance of said Title Policy shall be
a condition to the Close of Escrow. The Title Company
5
<PAGE>
is directed to issue the Title Policy at the Close of Escrow in favor of Buyer,
insuring fee title to the Eagle Parcel to Buyer in the amount of the Purchase
Price subject only to the Approved Condition of Title.
7. Conditions to Close of Escrow
(a) Conditions to Buyer's Obligations. Buyer's obligation to consummate
the transaction contemplated by this Agreement is subject to the
satisfaction of the following condition for Buyer's benefit (or Buyer's
waiver thereof, it being agreed that Buyer may waive any or all of such
conditions) on or prior to the dates designated below for the satisfaction
of such conditions. In the event Buyer timely terminates this Agreement and
the Escrow in writing (on or before the dates designated below) due to the
failure of any such conditions, then Buyer shall be entitled to the return
of the Deposit (or so much thereof that may then be held by Escrow Holder)
and all interest accrued thereon and both Seller and Buyer shall be
relieved of all further obligations and liabilities under this Agreement
(except for the indemnity and insurance obligations of Buyer set forth in
paragraphs 7(a)(i)(B) and (D) below, the legal fees in paragraph 19 below,
and the covenants of Buyer set forth in paragraph 21 below, which shall
survive any such termination).
(i) Inspection and Studies. Buyer's approval of the physical and
environmental condition of the Eagle Parcel, and any engineering,
soils, geotechnical, environmental, topography, hydrology, wetlands,
use, development, development cost, signage or other feasibility
studies that Buyer chooses to perform or is obligated to perform by
any governmental agency in connection with Buyer's intended
development of the Property, at Buyer's sole cost and expense, prior
to the expiration of the Feasibility Period.
(A) Buyer shall have the right to commence Buyer's physical
inspection of the Eagle Parcel and to undertake any engineering,
environmental, soils or other studies of the Eagle Parcel
immediately after the Opening of Escrow, provided that Buyer gives
Seller not less than twenty-four (24) hours prior notice of its
intended inspection(s) which notice shall be accomplished through
telephone contact with R. Lang Cottrell, at (714) 442-6100. If
Buyer conducts environmental testing beyond a so-called "Phase I
Report" Buyer shall first obtain Seller's approval ( not to be
unreasonably withheld) of (i) the identity of the environmental
firm conducting such tests; (ii) information concerning the
insurance policy and license carried by such environmental firm,
and (iii) the scope of such testing. Buyer's physical inspection
of and/or testing on the Eagle Parcel shall be conducted during
normal business hours. Seller shall have the right to be present
during any environmental investigations or inspection of the Eagle
Parcel. Promptly following completion of the environmental work
performed in accordance with this paragraph, Buyer shall, at its
sole cost and expense, remove from the Eagle Parcel any and all
wastes or drill cuttings generated from its activities and restore
the Eagle
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Parcel to its condition as it existed immediately prior to Buyer's
entry to the Eagle Parcel. A draft copy of the environmental
report prepared by or on behalf of Buyer which describes the
results of the environmental work performed in accordance with
this paragraph shall be delivered to Seller for review and comment
at least three (3) Business Days prior to the report being
finalized. Buyer shall use care and consideration in connection
with its inspections or tests and Seller shall have the right to
be present during any inspection of the Eagle Parcel by Buyer or
its agents. Buyer shall restore the Eagle Parcel to its original
condition immediately after any and all tests and/or
investigations.
(B) Buyer shall protect, indemnify, defend (with counsel
reasonably acceptable to Seller) and hold the Eagle Parcel, Seller
and Seller's officers, directors, shareholders, participants,
partners, affiliates, employees, representatives, invites, agents
and contractors free and harmless from and against any and all
claims, damages, liens, stop notices, liabilities, losses, costs
and expenses, including reasonable attorneys' fees and court
costs, resulting from Buyer's inspection and testing of the Eagle
Parcel, including, without limitation, repairing any and all
damages to any portion of the Eagle Parcel, arising out of or
related (directly or indirectly) to Buyer's conducting such
inspections, surveys, tests, and studies. However, the preceding
sentence is not intended to apply to the mere discovery of
Hazardous Materials on or under the Eagle Parcel or any
consequences or actions taken by third parties other than Buyer's
employees, agents, contractors, subcontractors, and/or consultants
as a result of such discovery. The Buyer's indemnification
obligations set forth herein shall survive the Close of Escrow and
shall not be merged with the Grant Deed, and shall survive the
termination of this Agreement and Escrow prior to the Close of
Escrow.
(C) Within ten (10) Business Days from the Opening of Escrow,
Seller shall provide Buyer with all material documents and files
in Seller's possession and control pertaining to the physical
and/or environmental condition of the Eagle Parcel, including any
topographic surveys, soils tests, environmental assessments,
environmental remediation documents and other material documents
relating to the Eagle Parcel in Seller's possession and control
(if any such documents exist) (except for appraisals and financial
analyses generated by or made on behalf of Seller and those
documents which are protected by the attorney-client and/or
attorney work product privileges). Such documents and files shall
be for Buyer's sole use and Buyer agrees that it will not make
such copies available to any parties other than Nelson Wheeler,
David Heerensperger, Richard Takata, Pete Gallina and Buyer's
architects, engineers, consultants and counsel (collectively,
"Buyer's Agents"). Buyer acknowledges that the right to receive
such files and/or documents from Seller is a courtesy to Buyer and
that Seller does not warrant the accuracy or content of any
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document provided to Buyer and that such files and documents shall
not be deemed to be representations by Seller. Buyer hereby agrees
to treat all such files and documents as strictly confidential,
not to disclose any information gained by review of such files and
documents to any parties other than Buyer's Agents, to use such
information only in connection with its proposed purchase of the
Eagle Parcel hereunder, and to take all measures necessary to
safeguard such information in order to preserve its
confidentiality. Buyer shall rely solely upon its own independent
investigation concerning matters contained in such files and/or
documents. Without limiting the provisions of this paragraph or
paragraph 14 below, Buyer acknowledges and agrees that Seller does
not make any representation or warranty, express or implied, as to
the accuracy or completeness of any information contained in
Seller's files or in the documents produced by Seller, including,
without limitation, any environmental audit or report (if any).
Buyer acknowledges further that Seller and Seller's affiliates
and agents shall have no responsibility for the contents and
accuracy of such disclosures, and Buyer agrees that the
obligations of Seller in connection with the purchase of the Eagle
Parcel shall be governed by this Agreement irrespective of the
contents of any such disclosures or the timing or delivery
thereof.
Prior to any entry upon the Eagle Parcel by Buyer or Buyer's
agents, contractors, subcontractors or employees, Buyer shall
deliver to Seller a certificate of insurance for Buyer's
commercial general liability insurance policy which evidences that
Buyer is carrying a commercial general liability insurance policy
with a financially responsible insurance company acceptable to
Seller, covering (1) the activities of Buyer, and Buyer's agents,
contractors, subcontractors and employees on or upon the Eagle
Parcel, and (2) Buyer's indemnity obligation contained in
paragraph 7(a)(i)(B). Such certificate shall evidence that such
insurance policy shall have a per occurrence limit of at least One
Million Dollars ($1,000,000) and an aggregate limit of at least
Two Million Dollars ($2,000,000), shall name Seller as an
additional insured, shall be primary and non-contributing with any
other insurance available to Seller and shall contain a full
waiver of subrogation clause.
(E) Buyer may, at its sole cost and expense, cause to be
undertaken and completed, on or before the Feasibility Approval
Date, a Phase I environmental assessment for the Eagle Parcel. A
draft copy of the environmental report prepared by or on behalf of
Buyer which describes the results of the Phase I assessment shall
be delivered to Seller for review and comment at least three (3)
Business Days prior to the report being finalized. The report
shall expressly run to the benefit of Buyer and Seller. Upon
Seller's request, Buyer shall make available the consultant
preparing such report for the purpose of discussing Seller's
comments and recommendations concerning the report. Buyer may
provide to Buyer's
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Agents the draft and final report and all environmental due
diligence information acquired by Buyer, provided that Buyer's
Agents shall keep such information confidential and shall not
deliver or disclose any of the information to any governmental
agency or other party without the prior written consent of Seller
or unless otherwise required by law. In the event (i) such report
indicates that the Eagle Parcel contains any Hazardous
Material(s) (as defined in paragraph 14(c) below), or (ii) Seller
is notified by the Environmental Protection Agency, or any other
federal, state or local governmental or quasi-governmental entity
(collectively, "Environmental Agency") prior to the Close of
Escrow that the Eagle Parcel contains or may contain any Hazardous
Materials(s), Buyer or Seller may elect to terminate this
Agreement by delivering written notice to the other party and
Escrow Holder of such election to terminate within ten (10)
calendar days of such party's receipt of the environmental
consultant's report or notice from any Environmental Agency, and
thereafter neither Buyer nor Seller shall have any further
liability hereunder (except for the indemnity and insurance
obligations of Buyer set forth in paragraph 7(a)(i)(B) and (D)
above, the legal fees in paragraph 19 below, and the covenants of
Buyer set forth in paragraph 21 below), except that Buyer shall be
entitled to the prompt return of the Deposit (or so much thereof
as is currently held by Escrow Holder) less Buyer's share of any
cancellation fees and costs and title company charges, all of
which Buyer and Seller hereby each agree to pay their respective
shares. Notwithstanding the foregoing, Buyer's right to terminate
this Agreement as specified above shall be exercised on or before
the expiration of the Feasibility Period except in the case where
Seller has received, prior to the Close of Escrow, notice from an
Environmental Agency that the Eagle Parcel contains or may contain
Hazardous Material(s). Seller shall be under no obligation to
Buyer to clean up or remove an Hazardous Material(s) discovered on
the Eagle Parcel.
In the event Seller does not elect to terminate this
Agreement pursuant to this paragraph 7(a)(i)(E), and Buyer
approves the physical condition of the Eagle Parcel, then whether
or not an environmental study has been made of the Eagle Parcel,
Buyer shall be deemed to have agreed to accept title AS-IS to the
Eagle Parcel in accordance with the provisions of paragraph 14(c)
hereof.
(F) Buyer shall be satisfied with the Eagle Parcel and
Buyer's intended use thereof including that (1) Buyer's building
configuration will be satisfactory adapted to the Eagle Parcel,
(2) the proposed parking plan, on-site vehicle and pedestrian
circulation plan and street access plan for the Eagle Parcel meet
or exceed Buyer's minimum criteria, (3) the local governmental
requirements for landscaping, open space, building to land ratios
and set-backs can be satisfied within Buyer's plans, (4) utilities
of adequate capacity will be available to meet Buyer's
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needs in connection with Buyer's proposed development of the Eagle
Parcel, and (5) the Eagle Parcel is otherwise feasible for Buyer's
intended use.
(G) Buyer shall, at its own cost and expense, be satisfied
with any and all impact fees, mitigation fees, permit costs,
approval fees and other costs ("Development Costs") which Buyer
will be obligated to pay in connection with its proposed
development of the Eagle Parcel. Upon the expiration of the
Feasibility Period, Buyer shall not be entitled to terminate this
Agreement due to its dissatisfaction of the Development Costs.
(H) Buyer has submitted and Seller has approved a signage
plan for the Eagle Parcel which was submitted to the City on
January 27, 1998 ("Signage Plan"). The Signage Plan shall comply
with all applicable government codes, rules and regulations and
the terms and provisions of the Costco REA. Buyer shall be
responsible for its prorata share of construction and maintenance
costs for any Shared Sign(s) (as defined in the Costco REA)
pursuant to the terms of the Costco REA, and any pylon signs
constructed along the 71 Freeway as allowed by the Chino Hills
sign code and as conforming to the Signage Plan.
(I) Buyer shall be satisfied with the status of the payment
of the "Facility Benefit Assessment Fees" and the "Facilities
Development Fees" (as such terms are defined in the Parcel 6
Development Agreement) (the "Fees") by Seller.
If, during the Feasibility Period, Buyer determines that it is
dissatisfied, in Buyer's sole and absolute discretion, with any aspects
of the Eagle Parcel, with its condition or suitability for Buyer's
intended use or development, and/or any other contingencies set forth
in this paragraph 7(a)(i), then Buyer may terminate this Agreement and
the Escrow created pursuant hereto by delivering written notice to
Seller and Escrow Holder on or before the expiration of the Feasibility
Period of Buyer's election to terminate. If Buyer fails to deliver any
such written termination notice to Seller and Escrow Holder on or
before the expiration of the Feasibility Period, then Buyer shall be
conclusively deemed to be dissatisfied with the contingencies set forth
in this paragraph 7(a)(i) and with all aspects of the Eagle Parcel,
including, without limitation, the condition and suitability of the
Eagle Parcel for Buyer's intended use, this Agreement and the Escrow
created hereunder shall terminate and Buyer shall be entitled to the
return of the Initial Deposit and all interest accrued thereon and both
Seller Buyer shall be relieved of all further obligations and
liabilities under this Agreement (except for the indemnity and
insurance obligations of Buyer set forth in paragraphs 7(a)(i)(B) and
(D) below, the legal fees in paragraph 19 below, and the covenants of
Buyer set forth in paragraph 21 below, which shall survive any such
termination. If Buyer waives said contingencies by delivering written
notice to
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Seller prior to the expiration of the Feasibility Period, the Initial
Deposit shall become non-refundable to Buyer except as otherwise set
forth herein.
(ii) Buyer's Review of Title. Within a reasonable period of time
following the Opening of Escrow (but in no event later than fifteen
(15) days after the Opening of Escrow), Seller shall deliver, or cause
to be delivered, to Buyer a standard preliminary report from the Title
Company with respect to the Eagle Parcel, together with the underlying
documents relating to the Schedule Buyer exceptions set forth in such
report (collectively, the "Title Report"). Within ten (10) days after
the Opening of Escrow, Seller shall deliver to Buyer a current
ALTA/ACSM qualifying survey of the Eagle Parcel ("Survey"). Buyer shall
have until that date which is ten (10) Business Days after Buyer's
receipt of the later of the Survey and the Title Report (the "Title
Review Period") to give Seller and Escrow Holder written notice
("Buyer's Title Notice") of Buyer's disapproval or conditional approval
of any matters shown in the Title Report or the Survey. The failure of
Buyer to give Buyer's Title Notice on or before the end of the Title
Review Period shall be conclusively deemed to constitute Buyer's
disapproval of the condition of title to the Eagle Parcel. If Buyer
disapproves or conditionally approves in writing any matter of title
shown in the Title Report or on the Survey, then Seller may, but shall
have no obligation to, within (5) Business Days after its receipt of
Buyer's Title Notice ("Seller's Election Period"), elect to eliminate
or ameliorate to Buyer's satisfaction the disapproved or conditionally
approved title matters by giving Buyer written notice ("Seller's Title
Notice") of those disapproved or conditionally approved title matters,
if any, which Seller agrees to so eliminate or ameliorate by the
Closing Date, provided, that, Seller shall have no obligation to pay
any consideration or incur any liability in order to eliminate or
ameliorate such disapproved title matters. If Seller does not elect to
eliminate or ameliorate any disapproved or conditionally approved title
matters, or if Buyer disapproves Seller's Title Notice, or if Seller
fails to timely deliver Seller's Title Notice, then Buyer shall have
the right, upon delivery to Seller and Escrow Holder (on or before
three (3) Business Days following the expiration of Seller's Election
Period) of a written notice, to either: (A) waive its prior
disapproval, in which event said disapproved matters shall be deemed
unconditionally approved; or (B) terminate this Agreement and the
Escrow created pursuant hereto. Failure to take either one of the
actions described in (A) and (B) above shall be deemed to be Buyer's
election to take the action described in (B) above. If, in Seller's
Title Notice, Seller has agreed to either eliminate or ameliorate to
Buyer's satisfaction by the Closing Date certain disapproved or
conditionally approved title matters described in Buyer's Title Notice,
but Seller is unable to do so, then Buyer shall have the right (which
shall be Buyer's sole and exclusive right or remedy for such failure),
upon delivery to Seller and Escrow Holder (on or before one (1)
Business Day prior to the Closing Date) of a written notice to either:
(x) waives its prior disapproval, in which event said disapproved
matters shall be deemed approved; or (y) terminate this Agreement and
the Escrow created pursuant hereto, in which event Buyer shall be
entitled to the return of the Deposit (or so much thereof as
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may then be held by Escrow Holder), together with all interest accrued
thereon while in Escrow. Failure to take either one of the actions
described in (x) and (y) above shall be deemed to be Buyer's election
to take the action described in (y) above. In the event this Agreement
is terminated by Buyer pursuant to the provisions of this paragraph
7(a)(ii), neither party shall have any further rights or obligations
hereunder (except that the indemnity and insurance obligations of Buyer
set forth in paragraphs 7(a)(i)(B) and (D) above, the legal fees in
paragraph 19 below, and the covenants of Buyer set forth in paragraph
21 below shall survive any such termination).
(iii) Buyer's Approval of Entitlements. Prior to the Contingency
Approval Date, Buyer shall have satisfied itself with respect to all
governmental codes and regulations and laws affecting the Eagle Parcel
and its proposed development and shall have obtained, at its sole cost
and expense, (or shall be satisfied of its ability to obtain at its
sole cost and expense) all governmental approvals and permits necessary
for Buyer's proposed development of the Eagle Parcel as a 135,418
square foot hardware store with a 30,800 square foot garden center
("Eagle Store") in accordance with the Site Plan. Such approvals and
permits shall include, without limitation, to the extent required by
governmental bodies with jurisdiction, use permits, site plan
approvals, signage approvals design review approvals, approvals of
ingress, egress, access and curb cuts to the Eagle Parcel, parking
variances and other similar approvals and building permits and similar
permits for Buyer's proposed construction on the Eagle Parcel. The
approvals described above are collectively herein called "Approvals".
Notwithstanding anything to the contrary contained herein, no
Approvals shall be binding upon Seller or upon the Eagle Parcel until
Close of Escrow without Seller's prior written consent, which shall be
in Seller's sole and absolute discretion. During the term of the
Escrow, Buyer shall use its commercially reasonable efforts, at its
sole cost and expense except as otherwise set forth herein, to pursue
the Approvals, and Seller agrees that it shall use good faith efforts
to assist Buyer in obtaining the Approvals, at no expense or liability
to Seller.
If, during the Contingency Period, Buyer determines that it is
dissatisfied, in Buyer's sole and absolute discretion, with the status
of the Approvals, then Buyer may terminate this Agreement and the
Escrow created pursuant hereto by delivering written notice to Seller
and Escrow Holder on or before the expiration of the Contingency Period
of Buyer's election to terminate. If Buyer fails to deliver any such
written termination notice to Seller and Escrow Holder on or before the
expiration of the Contingency Period, then Buyer shall be conclusively
deemed to be dissatisfied with the status of the Approvals, this
Agreement and the Escrow created hereunder shall terminate and Buyer
shall be entitled to a return of the Deposit or so much thereof that is
currently held by Escrow Holder, and all interest accrued thereon and
both Seller and Buyer shall be relieved of all further obligations and
liabilities under this Agreement (except for the indemnity and
insurance obligations of Buyer set forth in paragraphs 7(a)(i)(B) and
(D) above, the legal fees in paragraph 19 below, and the covenants of
Buyer
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set forth in paragraph 21 below, which shall survive any such
termination. If Buyer waives said contingencies by delivering notice to
Seller prior to the expiration of the Contingency Period, the Deposit
(or so much thereof as is currently held by Escrow Holder), shall
become non-refundable to Buyer except as otherwise set forth herein.
(iv) Financial Assistance Agreement. Prior to the Contingency
Approval Date, Buyer shall use commercially reasonable efforts to
negotiate a financial assistance agreement ("Financial Assistance
Agreement") with the City The Financial Assistance Agreement shall
provide that the City will provide Buyer with financial assistance in
the amount of One Million and No/100 Dollars ($1,000,000) plus interest
(the "Assistance Amount") and shall provide that Buyer will realize a
net present value upon payment in full of the Assistance Amount to be
paid in mutually agreeable installment amounts on an annual basis as a
rebate against sales and other taxes payable to the City. The Financial
Assistance Agreement shall provide that Seller is not bound by its
terms or subject to any liability thereunder.
If, during the Contingency Period, Buyer determines that it is
dissatisfied, in Buyer's sole and absolute discretion, with the status
of the Financial Assistance Agreement, then Buyer may terminate this
Agreement and the Escrow created pursuant hereto by delivering written
notice to Seller and Escrow Holder on or before the expiration of the
Contingency Period of Buyer's election to terminate. If Buyer fails to
deliver any such written termination notice to Seller and Escrow Holder
on or before the expiration of the Contingency Period, then Buyer shall
be conclusively deemed to be dissatisfied with the status of the
Financial Assistance Agreement, this Agreement and the Escrow created
hereunder shall terminate and Buyer shall be entitled to a return of
the Deposit (or so much thereof that is currently held by Escrow
Holder), and all interest accrued thereon and both Seller and Buyer
shall be relieved of all further obligations and liabilities under this
Agreement (except for the indemnity and insurance obligations of Buyer
set forth in paragraphs 7(a)(i)(B) and (D) above, the legal fees in
paragraph 19 below, and the covenants of Buyer set forth in paragraph
21 below, which shall survive any such termination. If Buyer waives
said contingencies by delivering notice to Seller prior to the
expiration of the Contingency Period, the Deposit (or so much thereof
as is currently held by Escrow Holder), shall become non-refundable to
Buyer except as otherwise set forth herein.
(v) Seller's Obligations. As of the Close of Escrow, Seller shall
have performed all of the obligations required to be performed by
Seller under this Agreement as of such date.
(b) Conditions to Seller's Obligations. For the benefit of Seller,
the Close of Escrow shall be conditioned upon the occurrence or
satisfaction by Buyer of all obligations required to be performed by Buyer
under this Agreement for Seller's benefit as of such date (or Seller's
waiver thereof, it being agreed that Seller may waive such
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condition). If the Close of Escrow does not occur, for any reason,
Buyer shall promptly deliver to Seller (not later than five (5) working
days after the termination of this Agreement) at no cost or expense to
Seller, all of the site engineering and other studies, reports, surveys,
entitlements (including but not limited to subdivision and zoning
applications and information, if any), and similar materials prepared by
or on behalf of Buyers with respect to the Eagle Parcel (but not any
sensitive or proprietary materials pertaining to Buyer's proposed use or
development of the Eagle Parcel), and shall, at Seller's request, assign
to Seller all of Buyer's right, title and interest in and to said rights
and matters.
(c) Conditions to Buyer's and Seller's Obligations. Prior to the
expiration of the Feasibility Period, Buyer and Seller shall exercise good
faith in negotiating an amendment pursuant to paragraph 11.24 of that
certain Construction, Operation and Reciprocal Easement Agreement by and
between Seller and Costco Wholesale Corporation, a Washington corporation
("Costco"), recorded July 2, 1997 as Instrument No. 97-234748 (the "Costco
REA"), a copy of which is attached as Exhibit "F" and the parties shall
attempt to obtain the requisite approvals as required under the Costco REA
for purposes of annexing the Eagle Parcel to the Shopping Center (the
"Annexation Amendment"). The Annexation Amendment shall be in recordable
form and shall include a site plan designating the Building Area and Common
Area (as such terms are defined in the Costo REA) on the Eagle Parcel,
which site plan shall be approved in accordance with the terms and
provisions of paragraph 11.24 of the Costco REA. If the parties are unable
to agree upon the terms of the Annexation Amendment or are unable to obtain
the approvals required therefor prior to the expiration of the Feasibility
Period, either party may terminate this Agreement and the Escrow created
hereunder by delivering written notice to the other party and Escrow Holder
prior to the expiration of the Feasibility Period whereupon (i) Buyer shall
be entitled to the return of the Initial Deposit and all interest accrued
thereon (less Buyer's share of escrow cancellation charges) and (ii) both
Seller and Buyer shall be relieved of all further obligations and
liabilities under this Agreement (except for the indemnity and insurance
obligations of Buyer set forth in paragraph 7(a)(i)(B) and (D) above, the
legal fees in paragraph 19 below, and the covenants of Buyer set forth in
paragraph 21 below). Pursuant to the Annexation Amendment, (1) the Eagle
Parcel and Buyer shall acquire a non-exclusive easement in, to, over and
across the common areas in the Shopping Center for vehicular and pedestrian
access and (2) Buyer shall be obligated to pay its Pro Rata Share (as
defined in the Costco REA) of the cost of maintaining the Common Utility
Lines and the Lettered Parcels of the Shopping Center (as defined in Costco
REA), the cost of maintaining casualty and liability insurance for the
Common Area of the Shopping Center and a ten percent (10%) administration
fee for the Common Area of the Shopping Center (excluding all capitalized
expenditures and management fees or other costs associated with management
in the Shopping Center). Pursuant to the Annexation Amendment, Buyer shall
be obligated to pay all real estate taxes and assessments for the Eagle
Parcel and all casualty and liability insurance for the Eagle Parcel. In no
event shall Seller be required to commence litigation, pursue legal action
or initiate any claims against Costco nor shall Seller be
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required to expend any sums to obtain the consent of Costco in connection
with the negotiation of or approval to the Annexation Amendment.
(d) Mutual Agreement on the Form of Development Agreement. During
the Feasibility Period, Buyer and Seller shall exercise good faith in
negotiating the terms and condition of a Development Agreement
("Development Agreement") which contains a memorandum of agreement
suitable for recordation ("Memorandum of Development Agreement"). If the
parties are unable to agree upon the form of Development Agreement prior
to the Feasibility Approval Date, either party may terminate this
Agreement and the Escrow created hereunder by delivering written notice
to the other party and Escrow Holder prior to the expiration of the
Feasibility Period whereupon (i) Buyer shall be entitled to the return
of the Initial Deposit and all interest accrued thereon (less Buyer's
share of escrow cancellation charges) and (ii) both Seller and Buyer
shall be relieved of all further obligations and liabilities under this
Agreement (except for the indemnity and insurance obligations of Buyer
set forth in paragraph 7(a)(i)(B) and (D) above, the legal fees in
paragraph 19 below, and the covenants of Buyer set forth in paragraph 21
below). the Development Agreement will provide for (1) the construction,
at Buyer's sole cost and expense, of a standard Eagle Hardware & Garden
Store ("Eagle Store") and any other on-site improvements in accordance
with the Site Plan and the schedule of performance ("Schedule") mutually
approved by Buyer and Seller, (2) Buyer's agreement to fixturize, stock
and open the Eagle Store under the trade name "Eagle Hardware & Garden"
in accordance with the Schedule; (3) the operation of the Eagle Store in
a manner similar to other first-class stores operating under the trade
name "Eagle Hardware & Garden"; (4) the right of Seller to approve any
material changes to the Site Plan (except for changes required as a
condition of approval by the City), which approval will not be
unreasonably withheld; for purposes of this subpart "material changes"
include, without limitation changes and to the location or enlargement
of the building; (5) the construction and installation, at Seller's sole
cost and expense, of all water (fire protection and domestic), power,
communication conduits, sewer and surface water drainage lines
(including downspout collector lines), which shall be stubbed to the
Eagle Parcel property line in the size and capacities listed as follows:
electrical service-quantity and site of conduit is required by
electrical utility company to supply Buyer's minimum electrical
requirement of a 2000 amp, 480 volt, 3 phase, 4 wire primary service,
from exterior (surface or underground) transformer, domestic water
service adequate for 1" line, separate line for Eagle parcel irrigation,
fire sprinkler line-8" (detector check and PIV by Purchaser),
telephone-(2) 4" conduits and sewer service-6" line; (6) Buyer's
reimbursement to Seller of Buyer's prorata share of the cost of off-site
improvements constructed and required to be installed by Seller as more
particularly set forth in Exhibit "G" attached hereto, which prorata
share shall be based upon a fraction the numerator of which is the
square footage of the Eagle Parcel and the denominator of which is the
square footage of the Shopping Center, (7) Buyer's payment of all fees
for the development of the Eagle Parcel (excluding the Facility Benefit
Assessment Fees and the Facilities Development Fees under the Parcel 6
Development Agreement which are Seller's responsibility and which Seller
hereby either covenants to pay when due on or before Close of Escrow or
to indemnify Buyer against the nonpayment thereof), including, but
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not limited to signage permit fees, sewer connection fees; water meter
installation fees, school fees, building permit fees and development
application trust deposit fees at the times required by the City or
other governmental entity; (8) Buyer's use of a Seller-approved
contractor for Buyer's construction on the Eagle Parcel, which
Seller-approved contractors are listed in Exhibit "H" attached hereto;
(9) Seller's right of first refusal to develop the Eagle Parcel on
behalf of Buyer is Buyer chooses to do a build-to-suit lease and
Seller's right of First Refusal to purchase the Eagle parcel (at Buyer's
desired price or any lower price ultimately acceptable to Buyer) if
Buyer offers the Eagle Parcel for sale to any third party except in
connection with a merger or sale of Buyer or an acquisition of
substantially all of the assets of Buyer; (10) Buyer's assignment of the
Development Agreement to only an "Affiliate" (as defined in paragraph
20) of Buyer prior to the completion of the Eagle Store and opening same
for business (provided that any such assignment shall not relieve, alter
or release Buyer of its obligations under the Development Agreement
unless Seller expressly releases Buyer of such obligations in writing);
and (11) Buyer's assignment of the Development Agreement after the
completion of the Eagle Store and opening same for business shall not
relieve, alter or release Buyer of any of its post-closing obligations
set forth in the Development Agreement unless Seller expressly releases
Buyer of such obligations in writing.
(e) Parcel 6 Development Agreement Approvals. During the term of
this Escrow, Seller shall provide the City with written notice of the
transaction contemplated by this Agreement pursuant to the Parcel 6
Development Agreement and shall attempt to obtain any City approvals
required thereunder. The Close of Escrow shall be conditioned upon Seller's
receipt of a written release (the "Release") in form satisfactory to
Seller, whereby the City releases Seller from all of Seller's liability and
obligations to the City under the parcel 6 Development Agreement, except
the Fees. Buyer shall use commercially reasonable efforts to cooperate with
Seller to obtain any City approvals required under the Parcel 6 Development
Agreement, including, but not limited to, executing (1) the Grant Deed for
purposes of acknowledging that Buyer expressly and unconditionally accepts
the Eagle Parcel subject to the Parcel 6 Development Agreement and the
duties and obligations set forth therein, except the Fees; (2) any
documentation necessary to provide the City with security equivalent to any
security provided by Seller, if any, to secure performance of the
obligations in the Parcel 6 Development Agreement; (3) the Assumption
Agreement in the form attached to the Parcel 6 Development Agreement as
Exhibit "E"; and (4) any other documents that may be required by the City
or Seller to demonstrate that Buyer assumes the rights, duties and
obligations of Developer arising under or from the parcel 6 Development
Agreement, except the Fees (the "Parcel 6 Assignment Documents"). If Seller
has not obtained the City approvals required under the Parcel 6 Development
Agreement or is not satisfied, in Seller's sole and absolute discretion,
with the form of Release or its ability to obtain the Release prior to the
expiration of the Contingency period, then Seller may terminate this
Agreement and the Escrow created hereunder, whereupon, (i) Buyer shall be
entitled to the return of the Deposit (or so much thereof that is currently
held by Escrow Holder) and all interest accrued thereon (less Buyer's share
of escrow cancellation charges) and (ii) both Seller and Buyer shall be
relieved of all further obligations and liabilities under this
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Agreement (except for the indemnity and insurance obligations of Buyer set
forth in paragraph 7(a)(i)(B) and (D) above, the legal fees in paragraph 19
below, and the covenants of Buyer set forth in paragraph 21 below).
(f) Limitation of Buyer's Remedies. Notwithstanding anything to the
contrary contained herein, Buyer's sole remedy against Seller as a result
of the failure of one or more of the conditions set forth herein shall be
the termination of this Agreement as described in this Agreement.
8. Deposits by Seller. At least one (1) business day prior to the Close
of Escrow, Seller shall deposit or cause to be deposited with Escrow Holder the
following documents and instruments:
(a) Grant Deed. The Grant Deed, in the form attached hereto as
Exhibit "C", duly executed by Seller and acknowledged.
(b) Memorandum of Development Agreement. The Memorandum of
Development Agreement, in the form agreed to pursuant to paragraph 7(d)
above.
(c) Seller's Certificate of Non-Foreign Status. A certificate of
non-foreign status ("Firpta Certificate"), duly executed by Seller, in the
form attached hereto as Exhibit "D" and a California Form 590 pursuant to
which Seller certifies that Seller is exempt from withholding under
California law.
(d) Annexation Amendment. The Annexation Amendment, in the form
approved in accordance with paragraph 7(c) above.
(e) Parcel 6 Assignment Documents. The Parcel 6 Assignment Documents
as provided in paragraph 7(e).
(f) Other Instruments. Such other instruments and documents as are
required under paragraph 22(b) hereof.
9. Deposits by Buyer. Buyer shall deposit or cause to be deposited with
Escrow Holder the Initial Deposit and the Second Deposit, which are to be
applied towards the payment of the Purchase Price, and the balance of the
Purchase Price in the amounts and at the times set forth in paragraph 3 above.
In addition, Buyer shall deposit with Escrow Holder prior to the Close of
Escrow, the Grant Deed (whereby Buyer shall acknowledge that Buyer expressly and
unconditionally accepts the Eagle Parcel subject to the Parcel 6 Development
Agreement and assumes all the rights, duties and obligations of Developer
thereunder), the Parcel 6 Assignment Documents, the Annexation Amendment and the
Memorandum of Development Agreement, in the forms agreed to pursuant to
paragraph 7 above and such other fees, documents and instruments as are required
under paragraph 10.
10. Costs and Expenses. The cost of the CLTA portion of the Title
Policy and the cost of the Survey shall be paid by Seller, and the premium and
any additional costs for the ALTA extended coverage above the premium for CLTA
coverage, if any, and the cost of any
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endorsements to the Title Policy, if any, shall be paid by Buyer. The escrow fee
of Escrow Holder shall be shared equally by Seller and Buyer. Seller shall pay
all documentary transfer taxes and recording fees payable in connection with the
recordation of the Grant Deed and other documents recorded through Escrow. Buyer
and Seller shall pay, respectively, the Escrow Holder's customary charges to
buyers and sellers for miscellaneous charges. If, as a result of no fault of
Buyer or Seller, Escrow fails to close, Buyer and Seller shall share equally all
of Escrow Holder's fees and charges.
11. Prorations. The following prorations shall be made between Seller
and Buyer on the Close of Escrow, computed as of the Close of Escrow:
(a) Taxes and Assessments. Real property taxes and assessments on
the Eagle parcel shall be prorated on the basis that Seller is responsible
for (i) all such taxes for the fiscal year of the applicable taxing
authorities occurring prior to the "Current Tax Period" (as hereinafter
defined) and (ii) that portion of such taxes for the Current Tax Period
determined on the basis of the number of days which have elapsed from the
first day of the Current Tax Period to the Close of Escrow, inclusive,
whether or not the same shall be payable prior to the Close of Escrow. The
phrase "Current Tax Period" refers to the fiscal year of the applicable
taxing authority in which the Close of Escrow occurs. In the event that as
of the Close of Escrow the actual tax bills for the year or years in
question are not available and the amount of taxes to be prorated as
aforesaid cannot be ascertained, then rates and assessed valuation of the
previous year, with known changes, shall be used, and when the actual
amount of taxes and assessments for the year or years in question shall be
determinable, then such taxes and assessments will be re-prorated between
the parties outside Escrow to reflect the actual amount of such taxes and
assessments. If the Eagle Parcel is not a separate tax parcel, the real
property taxes and assessments allocated to the Eagle Parcel shall be based
on the approximate square footage of the Eagle Parcel as to the gross
square footage of the tax parcel(s) in which the Eagle Parcel is located.
(b) Escrow Statement. At least one (1) business day prior to the
Close of Escrow the parties hereto shall agree upon all of the prorations
to be made and submit a statement of the Escrow Holder (or sign a statement
prepared by Escrow Holder) setting forth the same. In the event that any
prorations, apportionments or computations made under this paragraph shall
require final adjustment, then the parties hereto shall make the
appropriate adjustments promptly when accurate information becomes
available and either party hereto shall be entitled to an adjustment to
correct the same. Any corrected adjustment or proration will be paid in
cash to the party entitled thereto outside Escrow.
12. Disbursements and Other Actions by Escrow Holder. Upon the Close of
Escrow, Escrow Holder shall promptly undertake all of the following in the
manner indicated:
(a) Prorations. Prorate all matters referenced in paragraph 11 based
upon the statement delivered into Escrow signed by the parties.
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(b) Recording. Cause the Grant Deed, the Annexation Amendment, the
Memorandum of Development Agreement and any other documents which the
parties hereto may mutually direct, to be recorded in the Official Records.
(c) Funds. Disburse from funds deposited by Buyer with Escrow Holder
towards payment of all items chargeable to the accounts of Buyer pursuant
hereto in payment of such costs, including, without limitation, the payment
of the Purchase Price to Seller, and disburse the balance of such funds, if
any, to Buyer.
(d) Title Policy. Direct the Title Company to issue the Title Policy
to Buyer.
(e) Documents to Seller. Deliver to Seller any documents to be
delivered to Seller hereunder.
(f) Documents to Buyer. Deliver to Buyer the Firpta Certificate and
any other documents to be delivered to Buyer hereunder.
13. Seller's Representations and Warranties. Seller hereby makes the
following representations and warranties to Buyer as of the date of this
Agreement, each of which is material and being relied upon by Buyer:
(a) Authority. Seller has the legal right, power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby, and the execution, delivery and performance of this Agreement have
been duly authorized and no other action by Seller is requisite to the
valid and binding execution, delivery and performance of this Agreement,
except as otherwise expressly set forth herein.
(b) Foreign Person Affidavit. Seller is not a foreign person as
defined in Section 1445 of the Internal Revenue Code.
(c) Actions. Seller has no actual knowledge of and has received no
written notice of any pending or threatened actions, suits, claims or
proceedings affecting the Eagle Parcel, including, any judicial proceedings
in eminent domain.
(d) Hazardous Materials. To Seller's actual knowledge, except as
disclosed in the Environmental Reports (as defined in paragraph 14(b)),
there are no Hazardous Materials (as defined in Paragraph 14(c)) on the
Eagle Parcel in violation of applicable laws in existence as of the date of
this Agreement.
The term "actual knowledge of Seller" or similar phrases, as
used in this Agreement shall refer to the actual, present knowledge of R. Lang
Cottrell, Michael Bruckner, David Team and Phil Bowman as the date of this
Agreement without any duty of investigation or inquiry of any kind or nature
whatsoever, and "written notice" shall mean written notice actually received in
the Seller's Irvine, California Office.
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(e) Further Negotiations. During the term of the Escrow, Seller
covenants and agrees that is shall not enter into negotiations nor commit
to sell lease or otherwise transfer the Eagle Parcel or any portion thereof
to any other party, so long as Buyer is proceeding in good faith to comply
with its obligations and responsibilities under the terms of this
Agreement.
14. Buyer's Covenants, Representations and Warranties: As-Is Condition
of the Property. In consideration of Seller entering into this Agreement and as
an inducement to Seller to sell the Eagle Parcel to Buyer, Buyer makes the
following covenants, representations and warranties to Seller, each of which is
material and being relied upon by Seller:
(a) Authority. Buyer has the legal right, power and authority to
enter into this Agreement and consummate the transactions contemplated
hereby, and the execution, delivery and performance of this Agreement have
been duly authorized and no other action by Buyer is requisite to the valid
and binding execution, delivery and performance of this Agreement, except
as otherwise expressly set forth herein.
(b) Seller's Environmental Inquiry. Buyer acknowledges and agrees
that Seller has advised Buyer that the sole inquiry and investigation
Seller has conducted in connection with the environmental condition of the
Eagle Parcel is to obtain the environmental report(s) described in Exhibit
"I" attached hereto (the "Environmental Reports"), and that, for purposes
of California Health and Safety Code Section 25359.7, Seller has acted
reasonably in relying upon said inquiry and investigation and the delivery
of such Reports constitutes written notice to Buyer under said code
section.
(c) AS-IS Clause. Buyer acknowledges and agrees that it is
purchasing the Eagle Parcel based solely upon Buyer's inspection and
investigation of the Eagle Parcel and all documents related thereto, or its
opportunity to do so, and Buyer is purchasing the Eagle Parcel in an "AS
IS, WHERE IS" condition, without relying upon any representations or
warranties, express, implied or statutory, of any kind, except as expressly
set forth in paragraph 13. Without limiting the above, Buyer acknowledges
that neither Seller, except as expressly set forth in paragraph 13, nor any
other party has made any representations or warranties, express or implied,
on which Buyer is relying as to any matters, directly or indirectly,
concerning the Eagle Parcel including, but not limited to, the land, the
square footage of the Eagle Parcel, improvements and infrastructure, if
any, development rights and exactions, expenses associated with the Eagle
Parcel, taxes, assessments, bonds, permissible uses, title exceptions,
water or water rights, topography, utilities, zoning of the Eagle Parcel,
soil, subsoil, the purposes for which the Eagle parcel is to be used,
drainage, environmental or building laws, rules or regulations, toxic waste
or Hazardous Materials or any other matters affecting or relating to the
Eagle parcel. Buyer hereby expressly acknowledges that no such
representations have been made. The closing of the purchase of the Eagle
Parcel by Buyer hereunder shall be conclusive evidence that (1) Buyer has
inspected or has caused to be inspected the Eagle Parcel, and (2) Buyer
accepts the Eagle Parcel as being in apparently good and satisfactory
condition and suitable for Buyer's purposes.
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Buyer shall perform and rely solely upon its own investigation
concerning its intended use of the Eagle Parcel, the Eagle Parcel's fitness
therefor, and the availability of such intended use under applicable statutes,
ordinances, and regulations, Buyer further acknowledges and agrees that Seller's
cooperation with Buyer in connection with Buyer's due diligence review of the
Eagle Parcel, whether by providing the Title Report, the Environmental Reports
and other documents, or permitting inspection of the Eagle parcel, shall not be
construed as any warranty or representation, express or implied, of any kind
with respect to the Eagle parcel, or with respect to the accuracy, completeness,
or relevancy of any such documents.
(d) Limitation on Seller's Liability. Buyer represents and covenants
that Seller shall not have any liability, obligation or responsibility
of any kind with respect to the following:
(i) The content or accuracy of any report, study, opinion or
conclusion of any soils, toxic, environmental or other engineer or
other person or entity who has examined the Eagle Parcel or any
aspect thereof;
(ii) The content or accuracy of any information released to
Buyer by an engineer or planner in connection with the development
of the Eagle Parcel;
(iii) The availability of building or other permits or
approvals for the Eagle Parcel by any state or local governmental
bodies with jurisdiction over the Eagle Parcel;
(iv) Any of the items delivered to Buyer pursuant to Buyer's
review of the condition of the Eagle Parcel; and
(v) The content or accuracy of any other development or
construction cost, projection, financial or marketing analysis or
other information given to Buyer by Seller or reviewed by Buyer
with respect to the Eagle Parcel.
(e) Further Negotiations. During the term of this Escrow, Buyer
covenants and agrees that is shall not negotiate with nor respond to
solicitations from any other party (either verbally or in writing) to
purchase any real property within three (3) miles of the exterior
boundaries of the Eagle Parcel for purposes of developing the property
in the manner contemplated by the terms of this Agreement, so long as
Seller is proceeding in good faith to comply with its obligations and
responsibilities under the terms of this Agreement.
15. LIQUIDATED DAMAGES. IF BUYER COMMITS A DEFAULT UNDER THIS
AGREEMENT, THEN IN ANY SUCH EVENT, THE ESCROW HOLDER MAY BE INSTRUCTED BY SELLER
TO CANCEL THE ESCROW AND SELLER SHALL THEREUPON BE RELEASED FROM ITS OBLIGATIONS
HEREUNDER. BUYER AND SELLER AGREE THAT BASED UPON THE CIRCUMSTANCES NOW
EXISTING,
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KNOWN AND UNKNOWN, IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO ESTABLISH
SELLER'S DAMAGE BY REASON OF BUYER'S DEFAULT UNDER THIS AGREEMENT. ACCORDINGLY,
BUYER AND SELLER AGREE THAT IN THE EVENT OF DEFAULT BY BUYER UNDER THIS
AGREEMENT OCCURRING PRIOR TO THE EXPIRATION OF THE FEASIBILITY PERIOD, IT WOULD
BE REASONABLE AT SUCH TIME TO AWARD SELLER, AS SELLER'S SOLE AND EXCLUSIVE
REMEDY AT LAW AND IN EQUITY, "LIQUIDATED DAMAGES" EQUAL TO THE AMOUNT
REPRESENTED BY THE DEPOSIT PLUS ANY AND ALL ACCRUED INTEREST THEREON; AND BUYER
AND SELLER AGREE THAT IN THE EVENT OF A DEFAULT BY BUYER UNDER THIS AGREEMENT
OCCURRING AFTER THE FEASIBILITY APPROVAL DATE, IT WOULD BE REASONABLE AT SUCH
TIME TO AWARD SELLER AS SELLER'S SOLE AND EXCLUSIVE REMEDY AT LAW AND IN EQUITY,
"LIQUIDATED DAMAGES" EQUAL TO THE AMOUNT REPRESENTED BY THE INITIAL DEPOSIT PLUS
THE SECOND DEPOSIT PLUS ANY AND ALL ACCRUED INTEREST THEREON. THEREFORE, IF
BUYER COMMITS A DEFAULT UNDER THIS AGREEMENT, SELLER MAY INSTRUCT THE ESCROW
HOLDER TO CANCEL THE ESCROW WHEREUPON ESCROW HOLDER SHALL IMMEDIATELY PAY OVER
TO SELLER THE DEPOSIT, IF HELD BY ESCROW HOLDER, TOGETHER WITH ALL INTEREST
ACCRUED THEREON, AND SELLER SHALL BE RELIEVED FROM ALL OBLIGATIONS AND
LIABILITIES HEREUNDER, AND PROMPTLY FOLLOWING ESCROW HOLDER'S RECEIPT OF SUCH
INSTRUCTION, ESCROW HOLDER SHALL CANCEL THE ESCROW.
NOTHING CONTAINED IN THIS PARAGRAPH SHALL SERVE TO WAIVE OR OTHERWISE
LIMIT SELLER'S REMEDIES OR DAMAGES FOR CLAIMS OF SELLER AGAINST BUYER UNDER
PARAGRAPHS 7(a)(i)(B) AND/OR 21 HEREOF OR WAIVE OR OTHERWISE LIMIT SELLER'S
RIGHTS TO OBTAIN FROM BUYER ALL COSTS AND EXPENSES OF ENFORCING THIS LIQUIDATED
DAMAGE PROVISION, INCLUDING REASONABLE ATTORNEYS' FEES AND EXPERT COSTS AND
FEES, PURSUANT TO PARAGRAPH 19.
SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE
PROVISIONS OF THIS PARAGRAPH 15 AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO
BE BOUND BY ITS TERMS.
/s/ Illegeble /s/ Illegeble
----------------- ------------------
Seller's Initials Buyer's Initials
16. Damage or Condemnation Prior to Close of Escrow. Seller shall
promptly notify Buyer of any casualty to the Eagle Parcel or any condemnation
proceeding commenced prior to the Close of Escrow. If any such damage or
proceeding relates to or may result in the loss of any material portion (in
excess of 5% of the Eagle Parcel) of the Eagle Parcel, Seller or Buyer may,
at their option, elect either to: (i) terminate this Agreement, in which
event all funds deposited into Escrow by Buyer shall be returned to Buyer and
neither party shall have any further rights or obligations hereunder, or (ii)
continue the Agreement in effect, in which event
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upon the Close of Escrow, Buyer shall be entitled to any compensation, awards,
or other payments or relief resulting from such casualty or condemnation
proceeding relating to the Eagle Parcel and there shall be no adjustment to the
Purchase Price.
17. Notices. All notices, approvals, demands, or other communications
required or permitted hereunder shall be in writing and shall be personally
delivered or sent by a nationally recognized overnight courier or sent by
registered or certified mail, postage prepaid, return receipt requested, and
shall be deemed received upon the earlier of (i) if personally delivered or sent
by overnight courier, the date of delivery to the address of the person to
receive such notice, (ii) if mailed, upon actual receipt or refusal to accept
delivery. All notices to Seller shall be sent to Seller's Address with a copy to
Seller's Counsel's address. All notices to Buyer shall be sent to Buyer's
Address with a copy to Buyer's Counsel's address. All notices to Escrow Holder
shall be sent to Escrow Holder's Address. If the date on which any notice to be
given hereunder falls on a Saturday, Sunday or legal holiday, then such date
shall automatically be extended to the next Business Day immediately following
such Saturday, Sunday, or legal holiday. Notice of change of address shall be
given by written notice in the manner detailed in this paragraph. Rejection or
other refusal to accept or the inability to deliver because of changed address
of which no notice was given shall be deemed to constitute receipt of the
notice, demand, request or communication sent.
18. Brokers. Upon the Close of Escrow, Seller shall pay a real estate
brokerage commission to Nelson Wheeler and Majestic Realty with respect to this
transaction in accordance with Seller's separate agreement with said brokers and
Seller hereby agrees to indemnify and hold Buyer free and harmless from such
commission obligations. If any additional claims for brokers' or finders' fees
for the consummation of this Agreement arise, then Buyer hereby agrees to
indemnify, save harmless and defend Seller from and against such claims if they
shall be based upon any statement or representation or agreement by Buyer, and
Seller hereby agrees to indemnify, save harmless and defend Buyer if such claims
shall be based upon any statement, representation or agreement made by Seller.
The obligations of Buyer and Seller set forth in this paragraph 18 shall survive
the Close of Escrow and shall not be deemed merged into the Grant Deed upon
recordation.
19. Legal Fees. In the event of the bringing of any action or suit by a
party hereto against another party hereunder by reason of any breach of any of
the covenants or agreements or any inaccuracies in any of the representations
and warranties on the part of the other party arising out of this Agreement or
any other dispute between the parties concerning this Agreement or the Eagle
Parcel, then in that event, the prevailing party in such action or dispute shall
be entitled to have and recover of and from the other party actual costs and
expenses of suit, and reasonable attorneys' fees as part of its judgment. Any
judgment or order entered in any final judgment shall contain a specific
provision providing for the recovery of all costs and expenses of suit,
including reasonable attorneys' fees (collectively "Costs") incurred in
enforcing, perfecting and executing such judgment. For the purposes of this
paragraph, Costs shall include, without limitation, attorneys' and experts'
fees, costs and expenses incurred in the following: (i) post judgment motions;
(ii) contempt proceeding; (iii) garnishment, levy, and debtor and third party
examination; (iv) discovery; and (v) bankruptcy litigation. This paragraph shall
survive any
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termination of this Agreement prior to the Closing and shall also survive the
Closing and shall not be deemed merged into the Grant Deed upon recordation.
20. Assignment. Buyer shall not assign, transfer or convey its rights
and/or obligations under this Agreement and/or with respect to the Eagle Parcel
without the prior written consent of Seller, which consent Seller may withhold
in its sole, absolute and subjective discretion, provided, that, Buyer is not
required to obtain Seller's consent to a proposed assignment of this Agreement
(a) to an affiliate ("Affiliate") of Buyer so long as Buyer (i) is in control of
the management of such affiliate, and (ii) owns at least a fifty percent (50%)
interest therein or (b) to a partnership so long as Buyer, or an affiliate of
Buyer (which meets the above requirements), is the general partner of such
partnership or (c) to a limited liability company so long a Buyer, or an
affiliate of Buyer (which meets the above requirements), is the managing member
of such limited liability company and Buyer owns at least a twenty-five percent
(25%) interest in such limited liability company. Buyer agrees to deliver to
Seller such documentation and other evidence Seller may request to substantiate
that an assignment by Buyer to an affiliate satisfies the above parameters.
Except as specifically set forth above, any attempted assignment without the
prior written consent of Seller shall be void and Buyer shall be deemed in
default hereunder. Any permitted assignments shall not relieve, alter or release
the assigning party from its primary liability under this Agreement.
21. Confidentiality. Except as specifically provided herein, Buyer and
Seller shall not disclose any of the terms or provisions of this Agreement prior
to the Close of Escrow to any person or entity not a party to this Agreement
(other than Buyer's Agents and Seller's Agents), and without Seller's prior
written approval, Buyer shall not issue any press release or make any public
statements relating to this Agreement or Buyer's intended use of the Eagle
Parcel (except as required under securities laws), and Buyer shall keep all
materials provided to Buyer by Seller, and all materials generated by Buyer in
the course of conducting its inspections, review of books and records, and other
due diligence activities relating to the Eagle Parcel (including, without
limitation, matters relating to the environmental condition of the Eagle
Parcel), whether obtained through documents, oral or written communications, or
otherwise (collectively, the "Information"), in strict confidence; provided,
however, Buyer may make necessary disclosures to Buyer's Agents. Seller may make
necessary disclosures to R. Lang Cottrell, Phil Bowman, David Team, and Seller's
counsel ("Seller's Agents"). Under no circumstances shall any of the Information
be used for any purpose other than the investigation of the Eagle Parcel in
connection with its purchase by Buyer as contemplated under this Agreement. Upon
the conclusion of Buyer's examination, Buyer shall return to Seller all original
materials, together with any copies made by Buyer, and all copies of any reports
or compilations of data generated from materials or other Information provided
to Buyer, and Buyer will cause Buyer's Agents acting on behalf of Buyer to
deliver to Seller all such materials in their possession.
22. Miscellaneous.
(a) Survival of Covenants. The covenants, representations and
warranties of Buyer and Seller set forth in this Agreement shall
survive the recordation of the Grant Deed and the Close of Escrow and
shall not be deemed merged into the Grant Deed.
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(b) Required Actions of Buyer and Seller. Buyer and Seller agree to
execute such instruments and documents and to diligently undertake such
actions as may be required in order to consummate the purchase and sale
herein contemplated and shall use good faith efforts to accomplish the
Close of Escrow in accordance with the provisions hereof.
(c) Time of Essence. Time is of the essence of each and every term,
condition, obligation and provision hereof. All references herein to a
particular time of day shall be deemed to refer to Los Angeles,
California time.
(d) Captions. Any captions to, or headings of, the paragraphs or
subparagraphs of this Agreement are solely for the convenience of the
parties hereto, are not a part of this Agreement, and shall not be used
for the interpretation or determination of the validity of this
Agreement or any provision hereof.
(e) No Obligations to Third Parties. Except as otherwise expressly
provided herein, the execution and delivery of this Agreement shall not
be deemed to confer any rights upon, nor obligate any of the parties
thereto, to any person or entity other than the parties hereto.
(f) Exhibits. The Exhibits attached hereto are hereby incorporated
herein by this reference for all purposes.
(g) Amendment to this Agreement. The terms of this Agreement may not
be modified or amended except by an instrument in writing executed by
each of the parties hereto.
(h) Waiver. The waiver or failure to enforce any provision of this
Agreement shall not operate as a waiver of any future breach of any
such provision or any other provision hereof.
(i) Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
California.
(j) Fees and Other Expenses. Except as otherwise provided herein,
each of the parties shall pay its own fees and expenses in connection
with this Agreement.
(k) Entire Agreement. This Agreement supersedes any prior
agreements, negotiations and communications, oral or written, including
any letter of intent or letter of understanding previously executed by
such parties, if any, and contains the entire agreement between Buyer
and Seller as to the subject matter hereof. No subsequent agreement,
representation, or promise made by either party hereto, or by or to an
employee, officer, agent or representative of either party shall be of
any effect unless it is in writing and executed by the party to be
bound thereby.
(l) Partial Invalidity. If any portion of this Agreement as applied
to either party or to any circumstances shall be adjudged by a court to
be void or
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unenforceable, such portion shall be deemed severed from this Agreement
and shall in no way effect the validity or enforceability of the
remaining portions of this Agreement.
(m) Successors and Assigns. Subject to the provisions of paragraph
20 hereof, this Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties hereto.
(n) Business Days. In the event any date described in this Agreement
relative to the performance of actions hereunder by Buyer, Seller
and/or Escrow Holder falls on a Saturday, Sunday or legal holiday, such
date shall be deemed postponed until the next Business Day thereafter.
(o) Independent Counsel. Buyer and Seller each acknowledge that:
(i) they have been represented by independent counsel in connection
with this Agreement; (ii) they have executed this Agreement with the
advice of such counsel; and (iii) this Agreement is the result of
negotiations between the parties hereto and the advice and assistance
of their respective counsel. The fact that this Agreement was prepared
by Seller's counsel as a matter of convenience shall have no import or
significance. Any uncertainty or ambiguity in this Agreement shall not
be construed against Seller because Seller's counsel prepared this
Agreement in its final form.
(p) No Recorded Memorandum. Buyer shall not record this Agreement or
any short form memorandum of this Agreement.
(q) Exchange. Buyer acknowledges that Seller may desire to engage in
a tax-deferred exchange ("Exchange") pursuant to Section 1031 of the
Internal Revenue Code. To effect such Exchange, Seller may assign its
rights in, and delegate its duties under, this Agreement, as well as
the transfer of its interests in the Eagle Parcel, to an exchange
accommodator selected by Seller. As an accommodation to Seller, Buyer
agrees to cooperate with Seller in connection with its Exchange,
including the execution of documents, therefor, provided the following
terms and conditions are satisfied:
(i) Buyer shall in no way be obligated to pay any escrow
costs, brokerage commissions, title charges, survey costs,
recording costs or other charges incurred with respect to any
exchange property;
(ii) In no way shall the Close of Escrow be contingent or
otherwise subject to the consummation of the Exchange, and the
Close of Escrow shall timely close in accordance with the terms
of this Agreement notwithstanding any failure, for any reason, of
the parties to an Exchange to effect same;
(iii) If, for any reason, the Close of Escrow does not occur,
Buyer shall have no responsibility or liability to any third
party involved in the Exchange;
26
<PAGE>
(iv) Buyer will not be required to make any representations
or warranties nor assume any obligations, nor spend any sum or
incur any personal liability whatsoever in connection with the
Exchange;
(v) All representations, warranties, covenants and
indemnification obligations of Seller set forth in this Agreement
shall not be affected or limited by Seller's use of an exchange
accommodator,
(VI) Seller agrees to indemnify, protect, defend and hold
Buyer harmless from and against any and all causes of action,
claims, demands, liabilities, costs and expenses, including
actual attorneys' fees and costs, incurred by Buyer in connection
with and third party claims which may arise as a result of or in
connection with the Exchange.
(r) This Instrument. Seller's delivery of unsigned copies of this
Agreement (and unsigned copies of documents referred to in this
Agreement) is solely for the purpose of review by the party to whom
delivered, and neither the delivery nor any prior communications
between the parties, whether oral or written, shall in any way be
construed as an offer by Seller, nor in any way imply that Seller is
under any obligation to enter the transaction which is the subject of
this Agreement. This instrument, once it has been signed by Seller and
Buyer and a duplicate original thereof delivered by Seller and Buyer,
shall contain the entire and only agreement between the parties, and no
oral statements, representations, or prior written matter not contained
in this instrument shall have any force or effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
"Buyer" EAGLE HARDWARE & GARDEN, INC.,
a Washington corporation
By: /s/ Richard T. Takata
------------------------------
Name: Richard T. Takata
Title: President & CEO
By:
-----------------------------
Name:
-----------------------
Title:
----------------------
"Seller" LENNAR ROLLING RIDGE, INC.,
a California corporation
By: /s/ David O. Team
------------------------------
Name: David O. Team
Title: President
27
<PAGE>
ACCEPTANCE BY ESCROW HOLDER:
First American Title Insurance Company hereby acknowledges that it has received
originally executed counterparts or a fully executed original of the foregoing
Agreement of Purchase and Sale and Joint Escrow Instructions and agrees to act
as Escrow Holder thereunder and to be bound by and perform the terms thereof as
such terms apply to Escrow Holder.
Dated: March 4, 1998 FIRST AMERICAN TITLE INSURANCE
COMPANY
By: /s/ Toni Rice Groetsch
--------------------------------
Name: Toni Rice Groetsch
Its: Authorized Agent
28
<PAGE>
EXHIBIT "A"
PARCEL NO. 6 OF PARCEL MAP NO. 14996, IN THE CITY OF CHINO HILLS, COUNTY OF SAN
BERNARDINO, STATE OF CALIFORNIA. AS PER PLAT RECORDED IN BOOK 182 OF PARCEL
MAPS, PAGE(S) 100 THROUGH 104, INCLUSIVE, RECORDS OF SAID COUNTY.
EXCEPTING THEREFROM ONE-HALF OF ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS',
NATURAL GAS, NATURAL GAS RIGHTS AND OTHER HYDROCARBON SUBSTANCES BY WHATEVER
NAME KNOWN THAT MAY BE WITHIN OR UNDER SAID LAND. LYING A UNIFORM DEPTH OF 500
FEET BELOW THE SURFACE OF SAID LAND; WITHOUT, HOWEVER, ANY RIGHT TO USE FOR ANY
OF THE PURPOSES HEREINBEFORE MENTIONED ANY PORTION OF THE SURFACE OF SAID LAND
OR OF THE UPPER 5OO FEET TO A UNIFORM DEPTH OF THE SUBSURFACE OF SAID LAND, AS
RESERVED BY J. ROBERT MESERVE, AS TRUSTEE, IN DEED RECORDED AUGUST 14, 1961, IN
BOOK 5508, PAGE 448, OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM ALL OF THE OIL, GAS AND OTHER MINERAL AND HYDROCARBON
SUBSTANCES, AND ALL MINERAL RIGHTS AND INTERESTS IN SUCH PROPERTY, BELOW A DEPTH
OF 500 FEET BELOW THE SURFACE AND WITH THE RIGHT OF SURFACE ENTRY FOR THE
EXTRACTION OR EXPLOITATION THEREOF. AS RESERVED IN THE DEED FROM WAYNE F. MULLIN
ET AL RECORDED JUNE 27, 1978, IN BOOK 9462, PAGE 151, OFFICIAL RECORDS.
<PAGE>
(GRAPHIC OMITTED)
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL
THIS GRANT DEED AND ALL
TAX STATEMENTS TO:
Mr. Richard T. Takata
Eagle Hardware & Garden, Inc.
981 Powell Avenue SW
Renton, WA 98055
- --------------------------------------------------------------------------------
(Above Space for Recorder's Use Only)
GRANT DEED
Documentary Transfer Tax not shown
pursuant to Section 11932 of the Revenue
and Taxation Code, as amended.
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
LENNAR ROLLING RIDGE INC., a California corporation ("Grantor"), hereby GRANTS
to EAGLE HARDWARE & GARDEN, INC., a Washington Corporation ("Grantee"), the
following described real property (the "Property") located in the City of Chino
Hills, County of San Bernardino, State of California:
SEE EXHIBIT "1" ATTACHED HERETO AND INCORPORATED
HEREIN BY THIS REFERENCE
IN WITNESS WHEREOF, Grantor has caused this Grant Deed to be executed
as of the ___ day of ___________________, 1998.
LENNAR ROLLING RIDGE, INC.,
a California corporation
By:
-------------------------------------
Name:
---------------------------------
Title:
--------------------------------
Grantee acknowledges and agrees by its signature below that Grantee expressly
and unconditionally accepts the Property subject to that certain Development
Agreement by and between the City of Chino Hills and Grantor for Parcel 6 of
Tentative Parcel Map No. 14996 dated March 11, 1997 and recorded May 7, 1997 as
Instrument No. 19970162947 (the "Parcel 6
<PAGE>
Development Agreement") and agrees to assume and be bound by the rights, duties
and obligations of Developer arising under or from the Parcel 6 Development
Agreement.
EAGLE HARDWARE & GARDEN, INC.,
a Washington corporation
By:
-------------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-------------------------------------
Name:
---------------------------------
Title:
--------------------------------
C-2
<PAGE>
STATE OF ________________________)
) ss.
COUNTY OF _______________________)
On ______________________, before me, _______________________, a
Notary Public in and for said state, personally appeared ___________________,
personally known to me (or proved to me on the bases of satisfactory
evidence) to be the person whose name is subscribed to the within instrument
and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument, the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
------------------------------------
Notary Public in and for said State
STATE OF ___)
ss.
COUNTY OF ___)
On ______________________, before me, _______________________, a
Notary Public in and for said state, personally appeared ___________________,
personally known to me (or proved to me on the bases of satisfactory
evidence) to be the person whose name is subscribed to the within instrument
and acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument, the person, or the
entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
------------------------------------
Notary Public in and for said State
C-3
<PAGE>
STATEMENT OF TAX DUE AND REQUEST THAT TAX DECLARATION
NOT BE MADE A PART OF THE PERMANENT RECORD
IN THE OFFICE OF THE COUNTY RECORDER
(PURSUANT TO SECTION 11932 REVENUE AND TAXATION CODE)
TO: Recorder
County of San Bernardino
Request is hereby made in accordance with the provisions of the
Documentary Transfer Tax Act that the amount of the tax due not be shown on the
original document which names:
Grantor: Lennar Rolling Ridge, Inc., a California corporation
Grantee: Eagle Hardware & Garden, Inc., a Washington corporation
The property described in the accompanying document is located in the
City of Chino Hills.
The amount of tax due on the accompanying document is $___
X Computed on full value of property conveyed.
- --------
Computed on full value, less liens and encumbrances remaining at
- -------- the time of sale.
LENNAR ROLLING RIDGE, INC., a California corporation
By:
------------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
NOTE: After the permanent record is made, this form will be affixed to the
conveying document and returned with it.
C-4
<PAGE>
EXHIBIT "A"
PARCEL NO. 6 OF PARCEL MAP NO. 14996, IN THE CITY OF CHINO HILLS, COUNTY OF SAN
BERNARDINO, STATE OF CALIFORNIA. AS PER PLAT RECORDED IN BOOK 182 OF PARCEL
MAPS, PAGE(S) 100 THROUGH 104, INCLUSIVE, RECORDS OF SAID COUNTY.
EXCEPTING THEREFROM ONE-HALF OF ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS,
NATURAL GAS, NATURAL GAS RIGHTS AND OTHER HYDROCARBON SUBSTANCES BY WHATEVER
NAME KNOWN THAT MAY BE WITHIN OR UNDER SAID LAND. LYING A UNIFORM DEPTH OF 500
FEET BELOW THE SURFACE OF SAID LAND; WITHOUT, HOWEVER, ANY RIGHT TO USE FOR ANY
OF THE PURPOSES HEREINBEFORE MENTIONED ANY PORTION OF THE SURFACE OF SAID LAND
OR OF THE UPPER 500 FEET TO A UNIFORM DEPTH OF THE SUBSURFACE OF SAID LAND, AS
RESERVED BY J. ROBERT MESERVE, AS TRUSTEE, IN DEED RECORDED AUGUST 14, 1961, IN
BOOK 5508, PAGE 448, OFFICIAL RECORDS.
ALSO EXCEPTING THEREFROM ALL OF THE OIL, GAS AND OTHER MINERAL AND
HYDROCARBON SUBSTANCES, AND ALL MINERAL RIGHTS AND INTERESTS IN SUCH
PROPERTY, BELOW A DEPTH OF 500 FEET THE SURFACE AND WITHOUT THE RIGHT OF
SURFACE ENTRY FOR THE EXTRACTION OR EXPLOITATION THEREOF. AS RESERVED IN THE
DEED FROM WAYNE F. MULLIN ET AL RECORDED JUNE 27, 1978, IN BOOK 9462,
PAGE 151, OFFICIAL RECORDS.
<PAGE>
SELLER'S CERTIFICATE
A. FEDERAL FIRPTA CERTIFICATE
To inform EAGLE HARDWARE & GARDEN, INC., a Washington corporation (the
"Transferee") that withholding of tax under Section 1445 of the Internal Revenue
Code of 1986, as amended ("Code") will not be required by LENNAR ROLLING RIDGE,
INC., a California corporation (the "Transferor") upon the transfer of certain
real property by the Transferor to the Transferee, the undersigned hereby
certifies the following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership,
foreign trust, foreign estate or foreign person (as those terms are defined in
the Code and the Income Tax Regulations promulgated thereunder); and
2. The Transferor's U.S. employer or tax (social security)
identification number is ___
The Transferor understands that this Certification may be disclosed to
the Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
B. STATE OF CALIFORNIA - CALIFORNIA
RESIDENT/NON-RESIDENT AFFIDAVIT
Section 18662 of the Revenue and Taxation Code provides that a buyer
may be required to withhold 3-1/3% of the sales price of the California real
property sold by a non-resident Seller, unless the sales price of the property
is less than $100,000.00.
Transferor hereby certifies that Transferor is a corporation qualified
to do business in the State of California.
Transferor understands that this certificate may be disclosed to the
Franchise Tax Board of California by Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalty of perjury, the undersigned declare that they have
examined this Certification and to the best of their knowledge and belief, it is
true, correct and complete, and they further declare that they have authority to
sign this document on behalf of the Transferor.
"Transferor" LENNAR ROLLING RIDGE, INC.,
a California corporation
By:
------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
DEVELOPMENT AGREEMENT
BY AND BETWEEN
THE CITY OF CHINO HILLS
AND LENNAR ROLLING RIDGE, INC.
FOR PARCEL 6 OF
TENTATIVE PARCEL MAP NO. 14996
This Development Agreement ("Agreement") is made this 11th day of
March, 1997, by and between the CITY OF CHINO HILLS, a general law city in
the State of California ("City"), and LENNAR ROLLING RIDGE, INC., a
California corporation (the "Developer") (collectively, City and Developer
are referred to herein as "Parties"). In consideration of the mutual
covenants and agreements contained in this Agreement, the City and Developer
agree as follows:
1. Recitals. This Agreement is made with respect to the following facts
and for the following purposes, each of which is acknowledged as true and
correct by the parties:
A. The city is authorized pursuant to Government Code Sections 65864
through 65869.5 to enter into binding agreements with persons or entities having
legal or equitable interests in real property for the development of such
property in order to establish certainty in the development process.
B. The Developer is the owner of certain real property generally
located near the interchange of the Pomona Freeway (SR-60) and the Chino Valley
Freeway (SR-71) within the City of Chino Hills (the "Development Site"), a
portion of which is the subject of this Agreement (the "Site"). The Site is more
specifically described by the legal description shown on Exhibit "A" attached
hereto.
C. The Parties desire to enter into this Agreement in conformance
with the Government Code in order to achieve the development of the Site as
expressly provided under the terms of this Agreement and provide public services
and urban infrastructure, all in the promotion of the health, safety, and
general welfare of the residents of the City of Chino Hills.
D. The development of the Development Site, as proposed by
Developer, will consist of the construction of a commercial development more
specifically described by the Preliminary Development Plan and the Project
Approvals as hereinafter defined. The development of the Site will consist of
that certain 11.68 acres of commercial development described in Exhibit "A"
pursuant to the Preliminary Development Plan (the "Project") and shall be
subject to those conditions of the Project Approvals as set forth in Exhibit "B"
that are applicable to the Site as provided in Exhibit "C."
1
<PAGE>
E. The Developer has applied for the following entitlements with
respect to the Site (collectively referred to as the "Project Approvals"):
(1) Tentative Parcel Map No. 14996.
(2) PD Amendment No. 96-01.
F. On February 20, 1997 (continued from February 10, 1997), the
Planning Commission of the City of Chino Hills held a duly noticed public
hearing on the Developer's application for this Agreement, Tentative Parcel Map
No. 14996, PDP Amendment No. 96-01, and by Resolution Nos. 97-05 and 97-03
approved or recommended the approval of this Agreement and said entitlements.
G. On March 3, 1997 (continued from February 25, 1997), the City
Council held a duly noticed public hearing on the Developer's application for
this Agreement, Tentative Parcel Map No. 14996, PDP Amendment No. 96-01,
approved the Project Approvals by Resolution Nos. 97R-16 and 97R-14,
respectively and introduced for first reading Ordinance No. 90 approving this
Agreement.
H. On March 11, 1997, the City Council of the City adopted Ordinance
No. 90 approving this Agreement with the Developer.
I. The City desires to obtain the binding agreement of the Developer
for the development of the Site in accordance with the provisions of this
Agreement and the Project Approvals.
J. The Developer desires to obtain the binding agreement of the City
to permit the Developer to develop the Project and Site in accordance with the
"Applicable Rules" (as hereinafter defined), including any modifications
permitted by this Agreement.
K. Developer has applied to the City in accordance with applicable
procedures for approval of this mutually binding Agreement. The Planning
Commission and City Council of the City have given notice of intention to
consider this Agreement, have conducted public hearings thereon pursuant to the
Government Code, and have found that the provisions of this Agreement are
consistent with the City's adopted plans and policies, the Chino Hills Municipal
Code (including the Chino Hills Development Code) and the Chino Hills General
Plan.
L. This Agreement is consistent with the present public health,
safety, and welfare needs of the residents of the City of Chino Hills and the
surrounding region. The City has specifically considered and approved the impact
and benefits of this Project upon the welfare of the region.
2
<PAGE>
M. This Agreement will bind the City to the terms and obligations
specified in this Agreement and will limit, to the degree specified in this
Agreement and under State law, the future exercise of the City's ability to
delay, postpone, preclude or regulate development of the Project on the Site
except as provided for herein.
N. An environmental review including appropriate studies, analyses,
reports and documents, has been conducted and prepared in conjunction with the
Agreement and the above referenced Project Approvals in accordance with the
California Environmental Quality Act, Public Resources Code Section 21000 et
seq. ("CEQA"), State CEQA Guidelines, 14 Cal. Admin. Code Sections 15000-15387,
("State CEQA Guidelines") and the local CEQA Guidelines adopted by the City of
Chino Hills by Resolution No. 96-06 ("Local CEQA Guidelines"). In accordance
with CEQA, the appropriate environment review documents were considered by the
Planning Commission and the City Council. The Planning Commission adopted and
recommended, by Resolution No. PC97-02 adopted on February 20, 1997, and the
City Council, after making appropriate findings, adopted, by Resolution No.
97R-13 adopted on March 3, 1997, an Initial Study/Addendum ("Initial
Study/Addendum") to that certain Rolling Ridge Estates PUD Environmental Impact
Report certified on October 20, 1981 by the Board of Supervisors of the County
of San Bernardino prior to the incorporation of the City of Chino Hills for the
Rolling Ridge Estates PUD (the "EIR") and the other environmental documentation
referenced in the Initial Study/Addendum provided appropriate environmental
review and found that a subsequent EIR could not be required. The EIR as updated
by the Initial Study/Addendum was adequate, that is satisfied the requirements
of CEQA, the State CEQA Guidelines the Local CEQA Guidelines and applicable City
rules, regulations, and policies, and that it fully and adequately described the
Project.
O. This Agreement eliminates uncertainty in planning and provides
for the orderly development of the Site.
P. Further, this Agreement eliminates uncertainty about the validity
of exactions imposed by the City, allows installation of necessary improvements,
provides for public services appropriate to the development of the Site, and
generally serves the public interest within the City of Chino Hills and the
surrounding region.
Q. The Project is phased with the completion of the Route 71
improvements. The California Department of Transportation is scheduled to
complete construction of Route 71 in August of 1997, which is before the first
commercial use on the Development Site is scheduled to open for business in
November of 1997.
2. Definitions. In this Agreement, unless the context otherwise
requires:
(a) "Applicable Rules" means the ordinances, rules, regulations, and
official polices of the City, including any board, commission, or
department of the City and any officer or employee of the City, in
force as of the
3
<PAGE>
"Effective Date" (as hereinafter defined) governing zoning,
development, density, permitted uses, growth management,
environmental consideration, building codes, grading requirements,
improvement and construction standards and specifications and design
criteria applicable to development of the Project and the Site as
modified by Section 6(b) of this Agreement. The Applicable Rules
shall be kept on file at the City Clerk's office.
(b) "Discretionary Actions: Discretionary Approvals" are actions
which require the exercise of judgment or a decision, and which
contemplate and authorize the imposition of revisions or conditions,
by the City, including any board, commission, or department of the
City and any officer or employee of the City, in the process of
approving or disapproving a particular activity, as distinguished
from an activity which merely requires the City, including any
board, commission, or department of the City and any officer or
employee of the City, to determine whether there has been compliance
with applicable statutes, ordinances, regulations, or conditions of
approval.
(c) "Effective Date" is the effective date of this Agreement and
shall be the date the ordinance approving this Agreement, as signed
by the parties, is effective under Government Code Section 36937.
(d) "Facility Benefit Assessment Fees" or "FBA" shall mean the fees
imposed by the City pursuant to Ordinance No. 65.
(e) "Facilities Development Fees" or "FDF" shall mean the fees
imposed by the City pursuant to Ordinance No. 64.
(f) "Final Parcel Map" is the final approved map for the project.
(g) "Public Improvements" mean those public improvements set forth
in Section 7 herein that the Developer agrees to construct and
dedicate to the City, according to the terms of this Agreement,
other agreements as indicated in Section 7 and the Project
Approvals.
(h) "Subsequent Applicable Rules" means the ordinances, rules,
regulations, and official policies of the City including any board,
commission or department of the City and any officer or employee of
the City, as they may be adopted, operative after the Effective Date
of this Agreement which, other than as provided for in this
Agreement, would govern the zoning, development, building codes,
grading requirements, improvement and construction standards,
density, permitted uses, growth management, environmental
considerations, and design criteria applicable to the Project and
Site, except that the most recent editions of the Uniform Housing
Code, Uniform Building Code, Uniform Plumbing Code, Uniform
Mechanical Code, National Electrical Code, Uniform Fire Code and the
"Greenbook" Standard
4
<PAGE>
Specifications for Public Works Construction in the forms adopted by
the City subsequent to the Effective Date of this Agreement shall
not be considered Subsequent Applicable Rules subject to Section
8(a) of this Agreement. The parties intend the development of the
Project and the site to be subject to Subsequent Applicable Rules
only to the extent permitted in Section 8(a) of this Agreement.
3. Interest of Developer. The Developer represents to the City that, as
of the Effective Date, it owns the Site in fee, subject to encumbrances,
easements, covenants, conditions, restrictions, and other matters of record.
4. Binding Effect. This Agreement, and all of the terms and conditions
of this Agreement, shall run with the land comprising the Site and shall be
binding upon and inure to the benefit of the Parties and their respective
successors in interest.
5. Negation of Agency. The Parties acknowledge that, in entering into
and performing under this Agreement, each is acting as an independent entity and
not as an agent of the other in any respect. Nothing contained herein or in any
other document executed in connection herewith shall be construed as making the
City and Developer joint venturers, partners or employer/employee.
6. Development of the Site. The following specific restrictions shall
govern the use and development of the Project and the Site:
(a) "Permitted Uses." The Site may only be used for development of
the Project.
(b) "Development Standards." All design and development standards
applicable to the development of the Site shall be in accordance
with the Applicable Rules, the Project Approvals, the Project
Conditions (as hereinafter defined) as amended or modified in the
future by mutual consent, and any Subsequent Applicable Rules to the
extent permitted in Section 8(a) of this Agreement. If there is a
conflict between any of the Applicable Rules and Subsequent
Applicable Rules to be applied, the City Council in its reasonable
discretion, shall determine which shall apply.
(c) "Applicable Project Conditions." The Applicable Project
Conditions are those Project Conditions applicable to the Site that
are set forth on Exhibit "C."
7. Acknowledgments, Agreements and Assurances on the Part of the
Developer. The Developer acknowledges and agrees that the exchanged
consideration hereunder is fair, just and reasonable. Developer further
acknowledges that the consideration is reasonably related to the type and extent
of the impacts of the Project on the community and the Site,
5
<PAGE>
and further acknowledges that said consideration is necessary to mitigate the
direct and indirect impacts caused by the development of the Project.
In consideration of the foregoing and the City's assurances set out in
Section 8 below, Developer hereby agrees as follows:
(a) Development of the Site. Developer will use its best and
reasonable efforts, in accordance with customary and reasonable
business judgment taking into consideration market conditions and
other economic factors, to develop the Project on the Site in
accordance with the terms and conditions of this Agreement, the
Project Conditions, the Applicable Rules and any Subsequent
Applicable Rules as hereinafter defined. Developer shall not be
obligated to build any structures or otherwise develop the Site.
Developer shall not be required to initiate or complete development
of the Site within any specified period of time. However, the
Developer agrees to provide the City with the right in its sole
discretion, to approve or disapprove the retail uses located on
fifty percent (50%) of the square footage of the floor area of
buildings on the approved Site as shown on the approved Final
Development Plan. In order to implement this section, the Developer
shall submit each of the proposed retail uses to the City for its
review and approval prior to entering into a lease or other legally
binding agreement for the occupancy of a structure on the Site. If
the City does not either accept or reject such submitted use within
thirty (30) days, then such use will be deemed approved. When the
City has approved uses for fifty percent (50%) of the total floor
area of square footage of the structures planned on the Site, and
such uses have been stocked and opened for business for at least one
retail transaction consistent with the use approved by the City and
subject to sales tax by the State of California has occurred, then
this requirement shall be met and shall be deemed terminated.
Nothing herein contained shall prevent Developer from leasing up to
fifty percent (50%) of the floor area of buildings for uses not
approved by City under this Section 7.
(b) Easements. The Final Parcel Map shall describe and depict all
easements including, but not limited to, public utilities, as are
necessary to facilitate the construction or installation of the
infrastructure itemized in Section 7(c) below and, by the
recordation of such map, convey said easement to the City.
(c) Project Conditions. Developer agrees to comply with and perform
the Applicable Project Conditions subject to the Applicable Rules as
modified to the extent noted in Section 8(a) of this Agreement.
8. Acknowledgments, Agreements and Assurances on the Part of the City
Regarding Vesting. The City acknowledges and agrees that Developer's faithful
performance
6
<PAGE>
in developing the Project and the Site and in constructing and installing public
improvements, making payments and complying with Applicable Rules will fulfill
substantial public needs. The City acknowledges and agrees that there is good
and valuable consideration to the City resulting from Developer's assurances and
faithful performance thereof and the same is in balance with the benefits
conferred by the City on the Project and the Developer by this Agreement. In
order to effectuate the provisions of this Agreement, and in consideration for
the Developer's obligation to carry out the covenants and conditions set forth
in the preceding Section 7 of this Agreement, the City hereby agrees and assumes
Developer that Developer will be permitted to carry out and complete the
development of the Project within the Site, subject to the terms and conditions
of this Agreement, the Applicable Project Conditions and the Applicable Rules.
The City further agrees that:
(a) Entitlement to Develop. The Developer is hereby granted the
vested right to develop the Project on the Site to the extent and in
the manner provided in this Agreement, subject to the Applicable
Project Conditions, the Applicable Rules and, should the City make
the findings set forth below in this Section 8(a), any Subsequent
Applicable Rules. Subsequent Applicable Rules can bee applied to the
Site by the City if and only if, after 10-day prior written notice
is provided to the Developer and provided to the public pursuant to
Government Code Section 65090, and after public hearing held by the
City Council: (1) the City Council determines that the failure of
the City to apply a Subsequent Applicable Rule will place residents
of the City in a condition substantially dangerous to their health
or safety, which condition cannot otherwise be mitigated in a
reasonable manner and (2) such Subsequent Applicable Rule is applied
consistently and evenly to all commercial developments in the City.
Subsequent Applicable Rules with regard to FDF, FBA and
administrative fees calculated solely to recover City administrative
costs including, but not limited to, building permit fees and
inspection fees imposed by the City and not otherwise restricted by
the terms of this Agreement, may, notwithstanding the above, be
imposed on Developer without the public hearing and the findings
being made as set forth in this Section 8(a) as long as applied
consistently and evenly to all commercial development in the City.
Nothing in this Section or this Development Agreement is intended to
prevent the City from adopting and amending certain Uniform Codes
which are based on recommendations of a multi-state professional
organization and which become applicable throughout the City -
including the Project and Site subject to this Development Agreement
and certain "Greenbook" Standard Specifications for Public Works
Construction. Such Uniform Codes include, but are not limited to,
the Uniform Housing Code, Uniform Building Code, Uniform Plumbing
Code, Uniform Mechanical Code, National Electrical Code, and Uniform
Fire Code.
Finally, notwithstanding the above, the City shall not be permitted
to increase the Facility Development Fees, Sewer Utility Connection
Fees, Facility Benefit
7
<PAGE>
Assessment Fees, Water Capital Connection Fees and Building Permit
Fees (collectively, "Fees") until twenty-four (24) months after the
Effective Date of this Agreement. This twenty-four (24) month period
shall be extended if litigation challenging the validity of this
Agreement or any of the Project Approvals is brought by a third
party not a party to this Agreement for the period from the
commencement of such litigation until it is dismissed or final
judgment is entered. In addition, this period shall be extended an
additional six (six) months if four (4) of the six (6) large retail
businesses designated as "major" or the Final Development Plan are
constructed as established by the issuance of certificates of
occupancy. Finally, in addition to the extensions already provided
in this section, the City may extend this provision restricting Fee
increases for up to four (4) years in its dole discretion.
(b) Consistency With Applicable Rules. The following Applicable
Rules are modified as set forth below for the development of the
Project on the Site.
(1) The Community Development Director shall have the
discretion to approve PD Revisions in order to implement
subsequent Discretionary Actions described in Section 8(c)
below. However, this provision shall not be construed to
prevent the Community Development Director from referring PD
Revisions to the Planning Commission or City Council at his
sole discretion.
All other Applicable Rules shall remain in full force and effect.
(c) Subsequent Discretionary Actions. With respect to any
Discretionary Action or Discretionary Approval that is or may be
required subsequent to the execution of this Agreement including,
without limitation, final development plans, conditional use
permits, lot line adjustments and parcel maps, the City agrees that
it will not unreasonably withhold from Developer or unreasonably
condition or delay any such Discretionary Action or Discretionary
Approval which must be issued by the City in order for the
development of the Project to proceed as long as such requested
approval is substantially consistent with the Applicable Rules,
Project Approvals and this Agreement.
9. [Intentionally left blank.]
10. Liens and Credits.
A. Reassessment District of 1994 Lien. Concurrently with or
following the conveyance of a portion of the Development Site
pursuant to a purchase and sale agreement between The Price Company
and Lennar Rolling Ridge, Inc. ("Price Acquisition") whereby The
Price Company purchases the property identified as the Site ("Price
Parcel") in that certain Development Agreement
8
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between the City and Lennar Rolling Ridge, Inc. entered into
concurrently herewith ("Price Agreement"), and in consideration for
the Developer's obligation to carry out the covenants and conditions
set forth in Section 7 of this agreement, and only in connection
with the actual conveyance of the Site to an assignee whose
assignment was made in compliance with the terms and conditions of
Section 32 of this Agreement, the City shall cause to be satisfied
and discharged through escrow, on behalf of the Developer, from
funds allocated for that purpose from the FDF Program, any remaining
Reassessment District of 1994 lien on the Site, which is currently
estimated to be $352,001.21. This amount may change based upon the
future annual assessments paid by Developer on the Site, if any.
B. FDF and FBA Credits. The Developer is entitled to credits against
the FDF and the FBA in an amount equal to the prior years' principal
and interest payments for Assessment Districts 86-1 and 87-1 and for
principal payments only for Reassessment District 1994 and as
provided in that certain Reimbursement Agreement Enclave 4 between
the County of San Bernardino and Rolling Ridge Estates Partners
dated August 3, 1987, as amended by the City and Developer as the
Successors to the County of San Bernardino and Rolling Ridge Estates
Partners. This amount may change based on future annual assessments
paid by the Developer, if any. The City agrees that Six Hundred
Eighty-Seven Thousand Eight Hundred Thirty-Five Dollars and Twenty
Cents ($687,835.20) of credits will be applied against FDF and FBA
for the Site; such amount will be calculated for a total of 11.68
acres.
11. Cooperation and Implementation. The City agrees that it will
cooperate with Developer to the fullest extent reasonable and feasible to
implement this Agreement. Developer shall, in a timely manner, provide the City
with all documents, plans, and other information necessary for the City to carry
out its obligations under this Agreement.
12. Review of Compliance.
(a) Periodic Review. The City Manager of City shall review this
Agreement annually, on or before the anniversary of the Effective
Date, in accordance with the procedure and standards set forth in
this Agreement in order to ascertain compliance by the Developer
with the terms of this Agreement.
(b) Special Review. The City Council or the City Manager of the City
may order a special review of compliance with this Agreement at any
time. The City Manager shall conduct such special reviews.
(c) Procedure. During either a periodic review or a special review,
the Developer shall be required to demonstrate good faith compliance
with the
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terms of this Agreement. The burden of proof on this issue shall be
on the Developer. The parties acknowledge that failure by the
Developer to demonstrate good faith compliance shall constitute
grounds for termination or modification of this Agreement pursuant
to Section 13 of this Agreement in accordance with Government
Code Section 65865.1.
(d) Notice of Default. If, on the basis of review of this Agreement,
the City Manager concludes that the Developer has not complied in
good faith with the terms of this Agreement, then the City Manager
may issue a written "Notice of Non-Compliance" specifying the
grounds therefor and all facts demonstrating such non-compliance.
The Developer's failure to cure the alleged non-compliance within
thirty (30) days after said notice is effective as determined by
Section 18 below, or, if the nature of the default is such that it
cannot be cured within thirty (30) days, failure to commence cure of
default and diligently proceed to complete such cure with thirty
(30) days of the effective date of said notice, shall constitute a
default under this Agreement, subject to possible modification or
termination of this Agreement as provided in Section 13 below.
13. Proceedings Upon Modification or Termination. If the City
determines to proceed with modification or termination of this Agreement
following compliance with Section 12 above, the City shall give thirty (30)
days prior written notice to the Developer of its intention to modify or
terminate this Agreement and comply with the notice and public hearing
requirements of Government Code Sections 65867 and 65868. Said notice to
Developer shall set forth the noncompliance with terms and/or conditions of
this Agreement then alleged and shall include a copy of any staff report
explaining such alleged noncompliance. At the time and place set for the
hearing on termination, the Developer shall be given an opportunity to be
heard. If the City Council finds, based upon substantial evidence, that the
Developer has not reasonably complied in good faith with the terms or
conditions of this Agreement, the City Council may modify or terminate this
Agreement.
14. Modification, Amendment, or Cancellation. Subject to the notice and
hearing requirements of Section 65867 of the Government Code, this Agreement may
be modified or amended or canceled, in whole or in part, from time to time by
mutual consent of the Parties in interest in accordance with the provisions of
Section 65868 of the Government Code.
15. Term of Agreement.
(a) This Agreement shall commence upon the Effective Date. This
Agreement shall remain in effect for a term of fifteen (15) years
from the Effective Date, unless said term is terminated, canceled,
modified, or extended by circumstance set forth in this Agreement or
by mutual consent of the parties hereto.
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(b) Following the expiration of the term of this Agreement, this
Agreement shall be deemed terminated and of no further force and
effect; provided, such termination shall not automatically affect
any right of the City or Developer arising from Project Approvals on
the Site prior to the expiration of the term of this Agreement and
arising from the duties of the Parties as prescribed in this
Agreement.
16. Remedies for Default. It is acknowledged by the Parties that the
City would not have entered into this Agreement if it were to have unlimited
liability and damages under this Agreement, or with respect to this Agreement,
or the application thereof. The Parties agree and recognize that, as a practical
matter, it will not be possible physically, financially, and as a matter of land
use planning, to restore the Site to its prior state once the construction is
commenced. Moreover, Developer has invested a considerable amount of time and
financial resources in planning the location, intensity of use, improvements and
structures for the development of the Site.
For these reasons, the Parties agree that it will not be possible to
determine an amount of monetary damages which would adequately compensate either
of the Parties. Therefore, the Parties agree that monetary damages will not be
an adequate remedy for either Party should the other fail to perform its duties
under this Agreement. The Developer's remedies under this Agreement shall be
limited to the right to specifically enforce the terms of this Agreement and to
be awarded attorney's fees as provided for in Section 25. The City's remedies
under this Agreement shall also be limited to the right to specifically enforce
the terms of this Agreement and to be awarded attorney's fees as provided for in
Section 25. If the Developer fails to make any payment or complete any other act
or performance specified in this Agreement and to be awarded attorney's fees as
provided for in Section 25. If the Developer fails to make any payment or
complete any other act or performance specified in this Agreement in a
reasonable manner, the Developer shall have no further right or entitlement to
any building permits or certificates of occupancy for any portion of the site
until the default has been cured. The Parties recognize that this section may
result in the limitation or cessation of the rights otherwise conferred by this
Agreement upon the Developer, including any of the Developer's successors in
interest or assigns.
17. Administration of Agreement and Resolution of Disputes. All
decisions by the City Staff concerning the interpretation and administration of
this Agreement and the Project which are the subject hereof are appealable to
the City Council and all such decisions by the City Council shall be final.
However, such decisions of the City Council and all such decisions by the City
Council shall be final. However, such decisions of the City Council shall also
be subject to judicial review pursuant to Code of Civil Procedure Section
1094.5, so long as such action is filed in a court of competent jurisdiction not
later than 90 days following the date on which the City's decision becomes final
pursuant to Code of Civil Procedure Section 1094.6(b).
18. Notices. All notices under this Agreement shall be in writing and
shall be effective when personally delivered or upon the third day after deposit
in the United States mail as registered or certified mail, postage prepaid,
return receipt requested, to the following representatives of the Parties at the
addresses indicated below:
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If to City: City of Chino Hills
Attention: City Clerk
2001 Grand Avenue
Chino Hills, CA 91709
Telecopier No. (909) 590-5646
With a Copy to: Mark D. Hensley, Esq.
Burke, Williams & Sorensen
611 West Sixth Street
25th Floor
Los Angeles, CA 90017
Telecopier No. (213) 236-2844
If to Developer: Lennar Rolling Ridge, Inc.
23333 Avenida La Caza
Coto de Caza, California 92679
Attention: Emile Haddad
President, California Land Division
Telecopier No. (714) 858-2799
With a Copy to: Samuels & Steel, LLP
18881 Von Karman Avenue
Suite 1400
Irvine, California 92612
Attention: Herbert N. Samuels, Esq.
Telecopier No. (714) 224-0141
Delivery of any notice shall be deemed made on the date of actual delivery
thereof to the address of the addressee, if personally delivered, and on the
date indicated in the return receipt or courier's records as the date of
delivery or first attempted delivery to the address of the addressee, if sent by
mail or courier. Notice may also be given by telecopier to any party having a
telecopier machine compatible with the telecopier machine of the party sending
the notice. Any notice given by telecopier shall be deemed delivered when
received by the telecopier machine of the receiving party if received before
5:00 p.m. (Pacific Time) on the business day received, or if received after 5:00
p.m. (Pacific Time) or on a day other than a business day (i.e., a Saturday,
Sunday, or legal holiday), then such notice shall be deemed delivered on the
next following business day. The transmittal confirmation receipt produced by
the telecopier machine of the sending party shall be prima facie evidence of
such receipt. Any party may change its address or telecopier number for notice
purposes by giving notice to the other party.
19. Severability. If any provision of this Agreement is determined by a
court of competent jurisdiction to be invalid or unenforceable, or if any
provision of this Agreement is superseded or rendered unenforceable according to
any law which becomes effective after
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the Effective Date, the remainder of this Agreement shall be effective to the
extent the remaining provisions are not rendered impractical to perform, taking
into consideration the purposes of this Agreement.
20. Time of Essence. Time is of the essence for each provision of this
Agreement of which time is an element.
21. Force Majeure. In the event of unavoidable delays due to changes in
local, state or federal laws or regulations, floods, strikes, inability to
obtain materials, civil commotion, fire, acts of God, litigation challenging the
validity of this Agreement or any of the Project Approvals brought by a third
party not a party to this Agreement, or other circumstances which substantially
interfere with carrying out the Project as approved by the City in its sole
discretion, which are not due to actions of Developer and are beyond its
reasonable control, all time requirements in this Agreement shall be extended by
the time of such delay.
22. Waiver. No waiver of any provision of this Agreement shall be
effective unless in writing and signed by a duly authorized representative of
the Party against whom enforcement of a waiver is sought.
23. Constructive Notice and Acceptance. Every person, who, now or
hereafter, owns or acquires any right, title or interest in or to any portion of
the Site is, and shall be, conclusively deemed to have consented and agreed to
every provision contained herein, whether or not any reference to this Agreement
is contained in the instrument by which such person acquired an interest in the
Site.
24. No Third Party Beneficiaries. This Agreement is made and entered
into for the sole protection and benefit of the Parties and their successors in
interest and assigns. No other person shall have any right of action based upon
any provision of this Agreement.
25. Attorney's Fees. If either Party commences any action for the
interpretation, enforcement, termination, cancellation, or rescission of this
Agreement, or for specific performance for the breach hereof, the prevailing
party shall be entitled to its reasonable attorney's fees, litigation expenses
and costs.
26. Mortgage Protection. Whenever City delivers any notice to Developer
with respect to any default by Developer, City shall at the same time deliver to
each holder of record of any deed of trust on the Property (the "Financier") a
copy of such notice, provided that the Financier has given prior written notice
of its name and address to City and the notice makes specific reference to this
Section.
Each Financier that has given prior notice to City pursuant to this
section shall have the right, at its option and insofar as the rights of City
are concerned, to cure any such default within fifteen (15) days after the
receipt of the notice from City. If such default
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<PAGE>
cannot be cured within such time period, the Financier shall have such
additional period as may be reasonably required to cure the same, provided that
the Financier delivers written notice to City of its intention to cure and
commences the cure within fifteen (15) days after receipt of the notice from
City and thereafter diligently prosecutes the same to completion. The City shall
not terminate this Agreement by reason of Developer's default without allowing
the Financier to cure the same as specified herein.
Notwithstanding any cure by Financier, this Agreement shall be binding
and effective against the Financier and any owner of the Site, or any part
thereof, whose title thereto is acquired by foreclosure, trustee sale or
otherwise.
27. Estoppel Certificate. Either Developer or City may, at any time
and from time to time, deliver written notice to the other Party requesting
that such Party certify in writing that, to the knowledge of the certifying
party, (i) this Agreement is in full force and effect and a binding
obligation of the Parties, (ii) this Agreement has not been amended, or if
amended, the identify of each amendment, and (iii) the requesting Party is
not in default under this Agreement, or if in default, a description of each
such default. The Party receiving a request hereunder shall execute and
return such certificate within thirty (30) days following receipt thereof.
City acknowledges that a certificate hereunder may be relied upon by
successors in interest to Developer and holders of record of deeds of trust
on the Property.
28. Certificate of Completion
(a) The City shall furnish the Developer with a Certificate of
Completion for all or a portion of the completed items of the construction and
development of the Site and for any Applicable Project Conditions upon written
request therefor by the Developer. The City shall not unreasonably withhold a
Certificate of Completion. Such Certificate of Completion shall be a conclusive
determination of satisfactory completion of the construction required by this
Agreement upon the Site or any Applicable Project Conditions and the Certificate
of Completion shall so state. The Certificate of Completion shall be in such
form as to permit it to be recorded in the Recorder's Office of San Bernardino
County. After recordation of the Certificate of Completion, any party then
owning or thereafter purchasing, leasing or otherwise acquiring any interest
therein shall not (because of such ownership, purchase, lease or acquisition),
incur any obligation pursuant to this Agreement for the initial construction of
the improvements.
(b) If the City refuses or fails to furnish the Certificate of
Completion, after written request from the Developer, the City shall, within
fifteen (15) days of written request therefor, provide the Developer with a
written statement of the reasons the City refused or failed to furnish a
Certificate of Completion. The statement shall also contain City's opinion of
the actions the Developer must take to obtain a Certificate of Completion.
The statement shall also contain City's opinion of the actions the Developer
must take to obtain a Certificate of Completion. If the reason for such
refusal is confined to the immediate availability of specific items of
materials for construction or landscaping, the City shall issue its
Certificate of Completion upon the
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<PAGE>
posting of a bond by the Developer with the City in an amount representing the
fair value of the work not yet completed. If the City shall have failed to
provide such written statement within said fifteen (15) day period, the
Developer shall be deemed entitled to the Certificate of Completion.
(c) Such Certificate of Completion shall not constitute evidence of
compliance with or satisfaction of any obligation of the Developer to any holder
of any deed of trust securing money loaned to finance the improvements, or any
part thereof. Such Certificate of Completion is not a notice of completion as
referred to in the California Civil Code, Section 3093.
29. Incorporation of Exhibits. The following Exhibits are part of this
Agreement and each of which is incorporated herein by this reference:
Exhibit No. A Legal Description of Site
Exhibit No. B Project Conditions
Exhibit No. C Applicable Project Conditions
Exhibit No. D [Intentionally left blank]
Exhibit No. E Assumption Agreement Form
30. Entire Agreement: Conflicts. This Agreement represents the entire
agreement of the parties. Should any or all of the provisions of this Agreement
be found to be in conflict with any other provisions found in the Project
Approvals, Applicable Rules, or Subsequent Applicable Rules, then the
provision(s) of this Agreement shall prevail.
31. Indemnity. Developer shall indemnify, protect, defend, and hold
harmless, the City, and any agency or instrumentality thereof, and its elected
and appointed officials, officers, employees and agents from and against, any
and all liabilities, claims, actions, causes of action, proceedings, suits,
damages, judgments, liens, levies, costs and expenses of whatever nature,
including reasonable attorneys' fees and disbursements (collectively, "Claims")
arising out of or in any way relating to this Agreement, the Project, any
Discretionary Actions related to the development of the Site (including the
Project Approvals) or the environmental review conducted under CEQA, the Site
CEQA Guidelines or the Local CEQA Guidelines for the Project (excepting any
Claims arising out of City's default under this Agreement). If any legal or
equitable action or other proceedings is brought by any third party, including
any governmental entity or official, challenging the validity of any provision
of this Agreement or any action taken or decision made hereunder, the Parties
shall cooperate in defending such action or proceeding. If City fails to
cooperate in the defense, Developer shall not thereafter be responsible to
defend, indemnify, protect,
15
<PAGE>
defend, or hold harmless City. City may in its discretion participate in the
defense of any such claim, action, or proceeding.
32. Right to Assign. Developer shall have the right to sell or transfer
the Property (provided that no such partial transfer shall violate the
Subdivision Map Act, Government Code Section 66410 et seq.) to any person,
partnership, joint venture, firm, or corporation at any time during the term of
this Development Agreement; provided, however, that any such sale, transfer, or
assignment shall include the assignment and assumption of the rights, duties,
and obligations arising under or from this Development Agreement and be made in
strict compliance with the following conditions precedent:
(a) No sale, transfer, or assignment of any right or interest under
this Development Agreement shall be made unless made together with
the sale, transfer, or assignment of all or a part of the Property.
Developer agrees to provide specific notice of this Agreement in any
grant deed or other document purporting to transfer the title or an
interest in the Property during the term of this Agreement or any
extension thereof.
(b) The Developer shall notify City, in writing, of such sale,
transfer, or assignment and shall provide City with an executed
agreement by the purchaser, transferee, or assignee and providing
therein that the purchaser, transferee, or assignee expressly and
unconditionally accepts the Property subject to this Development
Agreement.
Any sale, transfer, or assignment not made in strict compliance with the
foregoing conditions shall constitute a default by the Developer under this
Agreement. Notwithstanding the failure of any purchaser, transferee, or assignee
to execute the agreement required by Section 32(b), the burdens of this
Agreement shall be binding upon such purchaser, transferee, or assignee, but the
benefits of this Agreement shall not inure to such purchaser, transferee, or
assignee until and unless such agreement is executed.
33. Release of Transferring Developer. Notwithstanding any sale,
transfer, or assignment, a transferring Developer shall continue to be obligated
under this Agreement unless such Transferring Developer is given a release in
writing by City, which release shall be provided by City upon the full
satisfaction by such transferring Developer of ALL of the following conditions
(a) The Developer no longer has a legal interest in all or any part
of the Site except as a beneficiary under a deed of trust.
(b) The Developer is not then in default under this Agreement.
(c) The Developer or purchaser has provided City with the notice and
executed agreement required under Section 32 above.
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<PAGE>
(d) The purchaser, transferee, or assignee provides City with
security equivalent to any security previously provided by Developer
to secure performance of its obligations hereunder.
(e) The Developer has reimbursed City for any and all City costs
associated with Developer's transfer of all or a portion of the
Site.
(f) The Developer shall provide City with an executed agreement, in
a form attached hereto as Exhibit "E" and incorporated herein by
this reference in which the purchaser, transferee or assignee
assumes all the duties and obligations of the Developer under this
Agreement.
34. Subsequent Assignment. Any subsequent sale, transfer, or assignment
after an initial sale, transfer, or assignment shall be made only in accordance
with and subject to the terms and conditions of Section 32.
IN WITNESS WHEREOF, the Parties have each executed this Agreement of
the date first written above.
CITY OF CHINO HILLS
By: /s/ James S. Thalman
---------------------------
James S. Thalman
Mayor
ATTEST:
/s/ Linda D. Ruth
------------------------------
Linda D. Ruth
City Clerk
APPROVED AS TO FORM:
/s/ Mark D. Hensley
------------------------------
Mark D. Hensley
City Attorney
17
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LENNAR ROLLING RIDGE, INC.
By: /s/ Emile Haddad
----------------------------
Emile Haddad
Vice President
By: /s/ Theresa Pointon
----------------------------
Theresa Pointon
Asst. Secretary
18
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ALL-PURPOSE ACKNOWLEDGMENT
State of California )
County of Orange )
On March 15, 1997, before me, Dee Baker Notary Public, personally appeared
Emile K. Haddad & Theresa Pointon
[X] personally know to me -OR-
[ ] proved to me on the basis of satisfactory evidence to be the persons
whose names are subscribed to the within instrument and acknowledged
to me that they executed the same in their authorized capacities, and
that by their signatures on the instrument the persons, or the entity
upon behalf of which the persons acted, executed the instrument.
Witness my hand and official seal.
[SEAL]
Dee Baker
----------------------------------
SIGNATURE OF NOTARY
CAPACITY CLAIMED
BY SIGNER
[ ] INDIVIDUAL(S)
[ ] OFFICERS(S) TITLE(S):
Vice President & Asst. Secretary
--------------------------------
[ ] PARTNER(S)
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] SUBSCRIBING WITNESS
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER: ____________________
___ Chairperson _______________
_________________________________
SIGNER IS REPRESENTING:
Name of person(s) or entity(ies):
_________________________________
_________________________________
19
<PAGE>
ALL-PURPOSE ACKNOWLEDGMENT
State of California )
County of San Bernardino)
On April 22, 1997, before me, Marisa Somenzi, personally appeared James S.
Thalman & Linda D. Ruth
[X] personally know to me -OR-
[ ] proved to me on the basis of satisfactory evidence to be the persons
whose names are subscribed to the within instrument and acknowledged
to me that they executed the same in their authorized capacities, and
that by their signatures on the instrument the persons, or the entity
upon behalf of which the persons acted, executed the instrument.
Witness my hand and official seal.
/s/ Marisa Somenzi
-------------------------------
SIGNATURE OF NOTARY
[seal]
CAPACITY CLAIMED
BY SIGNER
[ ] INDIVIDUAL(S)
[X] OFFICERS(S) TITLE(S):
Mayor & City Clerk
-------------------------
[ ] PARTNER(S)
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] SUBSCRIBING WITNESS
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER: ___________________
___ Chairperson ______________
_________________________________
SIGNER IS REPRESENTING:
Name of person(s) or entity(ies):
_________________________________
_________________________________
20
<PAGE>
ALL-PURPOSE ACKNOWLEDGMENT
State of California )
County of _______________ )
On _________________, 1997, before me,___________________________, personally
appeared ___________________
[ ] personally know to me -OR-
[ ] proved to me on the basis of satisfactory evidence to be the person(s)
whose name(s) are subscribed to the within instrument and acknowledged
to me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument
the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.
Witness my hand and official seal.
______________________________
SIGNATURE OF NOTARY
CAPACITY CLAIMED
BY SIGNER
[ ] INDIVIDUAL(S)
[ ] OFFICERS(S) TITLE(S):
[ ] PARTNER(S)
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] SUBSCRIBING WITNESS
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER: ___________________
___ Chairperson ______________
_________________________________
SIGNER IS REPRESENTING:
Name of person(s) or entity(ies):
_________________________________
_________________________________
21
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF SITE
22
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PARCEL #6
THAT PORTION OF PARCEL 4 OF PARCEL MAP 10048 IN THE CITY OF CHINO HILLS, COUNTY
OF SAN BERNARDINO, STATE OF CALIFORNIA AS PER MAP RECORDED IN PARCEL MAP BOOK
120, PAGES 5-7 INCLUSIVE, IN THE OFFICE OF THE COUNTY RECORDER OF SAN BERNARDINO
COUNTY, DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT ON THE SOUTHEASTERLY LINE OF SAID PARCEL 4, SAID POINT
BEING THE EASTERLY TERMINUS OF A CURVE CONCAVE NORTHERLY HAVING A RADIUS OF
1100.00 FEET, A RADIAL TO SAID POINT BEARS SOUTH 40DEG.29'50" EAST; THENCE
WESTERLY, ALONG SAID CURVE, AND ALONG SAID SOUTHEASTERLY LINE THROUGH A
CENTRAL ANGLE OF 39DEG.33'47" AN ARC DISTANCE OF 759.56 FEET; THENCE NORTH
25DEG.45'50" WEST 286.10 FEET; THENCE NORTH 52DEG.26'01" EAST 1011.31 FEET;
THENCE SOUTH 45DEG.36'20" EAST 160.10 FEET; THENCE SOUTH 56DEG.29'32" EAST
353.32 FEET; THENCE SOUTH 50DEG.17'22" WEST 269.59 FEET TO THE BEGINNING OF A
NONTANGENT 1500.00 FOOT RADIUS CURVE CONCAVE NORTHWESTERLY, A RADIAL TO SAID
CURVE BEARS SOUTH 40DEG.02'05" EAST, THENCE SOUTHWESTERLY ALONG SAID CURVE
THROUGH A CENTRAL ANGLE OF 8DEG.28'49" AN ARC DISTANCE OF 222.01 FEET TO A
BEGINNING OF A REVERSE 20.00 FOOT RADIUS CURVE CONCAVE SOUTHEASTERLY ALSO
BEING A POINT ON SAID SOUTHEASTERLY LINE OF PARCEL 4, A RADIAL TO SAID POINT
BEARS NORTH 31DEG.33' 16" WEST, THENCE SOUTHWESTERLY ALONG SAID CURVE THROUGH
A CENTRAL ANGLE OF 8DEG.56'34" AN ARC DISTANCE OF 3.12 FEET TO THE POINT OF
BEGINNING.
Sheet 1 of 2
<PAGE>
[EXHIBIT TO ACCOMPANY LEGAL DESCRIPTION OVER PARCEL 6 OF
TENTATIVE PARCEL MAP NO. 14996 CITY OF CHINO HILLS]
<PAGE>
EXHIBIT B
PROJECT CONDITIONS
The conditions of approval attached to the Project Approvals and the conditions
to the proposed Final Development Plan approved in concept by the City Council
on March 3, 1997 relating to the Site are hereby incorporated into this Exhibit
B and this Agreement by this Reference. Such Project Conditions are the Project
Conditions to which Exhibit "C" of this Agreement makes reference when
specifying which of such Project Conditions are the "Applicable Project
Conditions."
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EXHIBIT "C"
APPLICABLE PROJECT CONDITIONS
(Option Parcel)
These portions of all of the Conditions of Approval that are
"Applicable Project Conditions" are:
I. Preliminary Development Plan Amendment No. 96-01 to the Rolling Ridge
Estates Planned Unit Development (PD17-127)
Conditions No. 23, 24, 25, 33, 34, 37, 38, 40, 53, 54, 58, 61, 62,
63, 66, 72, 74, 77, 78, 79, 81-84, 90, 96, 97, 101, 102, G2, G3, G5,
G6, G8, G10, H3, A1, A3, B3, N6, V2, V3, E1, E3, E4-E13.
II. Final Development Plan
Conditions No. 1, 2, 3, 4, 5-11, 13-18, 20-35, 37, 38, 41, 42.
III. Tentative Parcel Map No. 14995
Conditions No. 2, 3, 4, 6, 7, 10-13, 24-29, 31, 35-43, 45-50.
24
<PAGE>
EXHIBIT D
[INTENTIONALLY LEFT BLANK]
25
<PAGE>
EXHIBIT E
[Recording Information]
[FORM]
ASSUMPTION AGREEMENT
BY AND BETWEEN THE CITY OF CHINO HILLS
AND [DEVELOPER]
This Assumption Agreement ("Agreement") is made this ___ day of ______,
1997 by and between the City of Chino Hills, a general law city in the State of
California ("City") and [Transferee, Purchaser or Assignee], a _________ (the
"Transferee"). In consideration of the mutual covenants and agreements contained
in this Agreement, the City and Transferee agree as follows:
1. Recitals
This Agreement is made with respect to the following facts and for the
following purposes, each of which is acknowledged as true and correct by the
parties:
A. The City and Lennar Rolling Redge, Inc. ("Developer") entered into
Development Agreement, adopted by Ordinance No.___ on ______ ("Development
Agreement") with respect to the Site as that term is legally described in
Exhibit A attached hereto and incorporated herein by this reference.
B. Developer no longer has a legal interest in all or any part of the
Site if applicable: [except as a beneficiary under a deed of trust].
C. The Developer is not in default of the Development Agreement.
D. The City has been provided a notice and an executed agreement
required under Section 32 of the Development Agreement.
[If applicable: E. The Transferee has provided the City with security
previously provided by Developer to secure performance of its obligations under
the Development Agreement.]
F. The Developer has reimbursed City for any and all City costs
associated with Developer's transfer of all or a portion of the Site.
2. The Transferee hereby agrees to assume all of the duties and
obligations of the Developer under the Development Agreement.
26
<PAGE>
3. The Developer is released from its duties and obligations under the
Development Agreement pursuant to Section 33 of the Development Agreement.
IN WITNESS WHEREOF, the parties have each executed this Agreement on
the date first written above.
CITY OF CHINO HILLS
By
----------------------------------------
Mayor
ATTEST:
------------------------------------------
City Clerk
APPROVED AS TO FORM:
------------------------------------------
City Attorney
[TRANSFEREE]
By
----------------------------------------
President
By
----------------------------------------
Secretary
[Acknowledgments Executed and Attached]
27
<PAGE>
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Costco Companies, Inc. [STAMP]
999 Lake Drive
Issaquah, Washington 98027
Attn: Corporate Counsel
- --------------------------------------------------------------------------------
Space Above for Recorder's Use Only
CONSTRUCTION, OPERATION AND RECIPROCAL
EASEMENT AGREEMENT
By and Between
LENNAR ROLLING RIDGE, INC.,
a California corporation
and
Costco Wholesale Corporation
a Washington corporation
Location of Property
Chino Hills, California
<PAGE>
CONSTRUCTION, OPERATION AND RECIPROCAL
EASEMENT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page(s)
<S> <C> <C> <C>
ARTICLE I DEFINITIONS............................................... 2
1.1. DEFINITIONS............................................... 2
ARTICLE II CONSTRUCTION OBLIGATIONS.................................. 9
2.1. Developer Construction.................................... 9
2.2. Costco Construction....................................... 10
2.3. Developer Plans and Specifications........................ 10
2.4. Costco Plans and Specifications........................... 11
2.5. Interference by Construction.............................. 12
2.6. Construction Indemnities.................................. 13
2.7. Cost of Construction...................................... 13
2.8. Signs..................................................... 13
2.9. Staging and Storage Areas................................. 15
ARTICLE III EASEMENTS................................................. 16
3.1. Easements................................................. 16
3.2. Unimpeded Access Between Parcels.......................... 21
3.3. Use by Permittees......................................... 21
3.4. Unauthorized Use and Closure of Common Area............... 22
3.5. Prohibition Against Granting Easements.................... 22
3.6. Present Easements to Future Development Parcel............ 22
ARTICLE IV PROJECT DEVELOPMENT RESTRICTIONS.......................... 23
4.1. Building Area............................................. 23
4.2. Common Area............................................... 23
4.3. Separate Operation........................................ 23
4.4. Parking Ratio and Standards............................... 23
4.5. Building Height Limitations............................... 25
4.6. Certain Setbacks.......................................... 25
4.7. Drive-Up Stacking......................................... 26
ARTICLE V. USE RESTRICTIONS.......................................... 26
5.1. Use in General............................................ 26
5.2. Prohibited Uses........................................... 26
5.3. Non-Interference with Common Area......................... 30
5.4. Exclusive Use............................................. 31
ARTICLE VI MAINTENANCE OF IMPROVEMENTS............................... 32
6.1. Maintenance of Buildings.................................. 32
6.2. Maintenance of Common Area................................ 32
6.3. Certain Maintenance Responsibilities...................... 32
6.4. Common Utility Lines and Lettered Parcels................. 33
ARTICLE VII DAMAGE TO IMPROVEMENTS.................................... 34
7.1. Restoration of Common Area................................ 34
7.2. Restoration of Buildings.................................. 35
7.3. Clearing of Premises...................................... 35
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
ARTICLE VIII EMINENT DOMAIN............................................ 36
ARTICLE IX GENERAL PROVISIONS........................................ 36
9.1. Realty Taxes and Assessments.............................. 36
9.2. Indemnification........................................... 36
9.3. Liability Insurance....................................... 37
9.4. Blanket Insurance......................................... 37
9.5. Release and Waiver of Subrogation......................... 37
9.6. Ownership of Lettered Parcels............................. 37
ARTICLE X REMEDIES.................................................. 38
10.1. Legal Action Generally.................................... 38
10.2. Injunctive and Declaratory Relief......................... 38
10.3. Owner's Right to Cure or Abate............................ 38
10.4. Lien...................................................... 39
10.5. Personal Obligation....................................... 40
10.6. Remedies Cumulative....................................... 40
ARTICLE XI MISCELLANEOUS............................................. 40
11.1. Notices................................................... 40
11.2. Binding Effect............................................ 41
11.3. Attorneys' Fees........................................... 41
11.4. Breach Shall Not Permit Termination....................... 41
11.5. Breach-Effect on Mortgagee and Right to Cure.............. 42
11.6. Effect on Third Parties................................... 42
11.7. No Partnership............................................ 42
11.8. Modification.............................................. 42
11.9. Severability.............................................. 43
11.10. Governing Law............................................. 43
11.11. Terminology............................................... 43
11.12. Counterparts.............................................. 43
11.13. Captions.................................................. 43
11.14. Consent................................................... 43
11.15. Estoppel Certificate...................................... 43
11.16. Not A Public Dedication................................... 44
11.17. Release................................................... 44
11.18. Time of Essence........................................... 44
11.19. Entire Agreement.......................................... 44
11.20. Excuse for Non-Performance................................ 45
11.21. Mechanics' Liens.......................................... 45
11.22. Duration.................................................. 45
11.23. Waiver of Default......................................... 45
11.24. Future Annexation......................................... 46
11.25. Exhibits.................................................. 47
Page of First Reference
Exhibit "A" = Parcel Map................................................ 1
Exhibit "B" = Site Plan................................................. 7
Exhibit "C" = Permanent Access and Utility Easements.................... 16
</TABLE>
<PAGE>
CONSTRUCTION, OPERATION AND RECIPROCAL
EASEMENT AGREEMENT
By and Between
LENNAR ROLLING RIDGE, INC.,
a California corporation
and
Costco Wholesale Corporation
a Washington corporation
Location of Property
Chino Hills, California
CONSTRUCTION, OPERATION AND RECIPROCAL
EASEMENT AGREEMENT
TABLE OF CONTENTS
<PAGE>
CONSTRUCTION, OPERATION AND RECIPROCAL EASEMENT AGREEMENT
(Chino Hills, California)
This Construction, Operation and Reciprocal Easement Agreement is
made and entered into as of this 2nd day of July, 1997, by and between Lennar
Rolling Ridge, Inc., a California corporation ("Developer"), and Costco
Wholesale Corporation, a Washington corporation ("Costco").
RECITALS;
A. Developer is the owner of that certain real property, referred to
herein as the "Developer Parcels", located in the City of Chino Hills, County
of San Bernardino, State of California. The Developer Parcels are designated
as Parcels 1, 4 and 5, according to Parcel Map No. 14996 (the "Parcel Map"),
on file in the Official Records of San Bernardino County, State of California
(the "Recorder's Office"), a copy of which is attached hereto as Exhibit "A"
and is incorporated herein by this reference. Developer is also the Owner of
Parcel 6 of the Parcel Map (the "Future Development Parcel") which may be
annexed to the Shopping Center for all purposes in the future as further
provided below and which will, in any event; be benefitted and burdened by
certain specified rights and obligations hereunder whether or not said Future
Development Parcel is annexed to the Shopping Center for all purposes.
B. Costco is the owner of that certain real property located in the
City of Chino Hills, County of San Bernardino, State of California,
designated as Parcels 2 and 3 of the Parcel Map and collectively referred to
herein as the "Costco Parcel".
C. Developer intends to construct certain buildings on the Developer
Parcels and to construct certain "Common Area" improvements on the Developer
Parcels, all in accordance with the provisions and limitations contained
herein.
D. Costco intends to construct certain buildings on the Costco
Parcel and to construct certain Common Area improvements on the Costco
Parcel, all in accordance with the provisions and limitations contained
herein.
E. Costco is also the owner of Parcel B under the Parcel Map and
Developer is the owner of Parcels A, C and D of the Parcel Map, which parcels
(the "Lettered Parcels") comprise non-buildable slope areas. As further
provided below, the
<PAGE>
parties desire to share the cost of maintaining said lettered parcels among
parcels 1, 2, 3, 4, 5 and 6 of the Parcel Map.
F. The parties hereto recognize that for the optimum development and
operation of the "Project" it is necessary that they agree to certain
matters, including, but not limited to, matters relating to the construction
and maintenance of facilities on, and the use and restrictions on the use of,
their respective Parcels, and that in the absence of such agreements neither
party hereto would be willing to undertake the development or operation of
their respective Parcels, and the parties desire that all Persons who acquire
portions of the Project shall take subject to this Agreement in order that
the development and operation of the Project will be in conformity herewith.
Accordingly, Developer and Costco intend to establish certain reciprocal
easements, covenants and conditions with respect to their Parcels.
ARTICLE I
DEFINITIONS
1.1. Definitions.
(a) "Agreement" or "REA" shall mean this Construction, Operation and
Reciprocal Easement Agreement, as may from time to time be amended.
(b) "Building" or "Buildings" or "Store" or "Stores" shall mean the
building(s) on each Parcel.
(c) "Building Area" shall (subject to the limitations referenced in
this subsection) mean the limited portions of the Project ("Envelope Areas")
designated by "building limit lines" on the "Site Plan" (as defined below).
The Owners acknowledge that the Site Plan depicts the particular building
footprints approved by the City under the current "Final Development Plan"
and that the construction of any buildings outside of those footprints may
require approval of the City. Subject to any required City approvals,
however, and compliance with the other terms and conditions of this
Agreement, the Envelope Areas shall define, among the Owners, the allowable
locations for buildings (rather than such current Final Development Plan
footprints). Building Area shall include, without limitation, the area
designated "Gas Station Area" on the Costco Parcel. An Owner of a Parcel
shall be permitted to construct on such "Envelope Areas", or cause to be
constructed on such "Envelope Areas", such buildings, structures or outdoor
sales areas, in the locations and exterior configuration as such Owner
selects, and such buildings, structures or outdoor sales areas shall be
Building Area within the meaning of the foregoing definition, so long as
2
<PAGE>
the same (i) do not fail to conform to any provision of this Agreement
including, without limitation Article IV and (ii) are built in accordance
with all set backs, zoning and other ordinances of any governmental entity
having jurisdiction. Without limitation upon the foregoing, an Owner may
construct more than one Building within a particular Envelope Area provided
that all of the Buildings within a particular Envelope Area do, when
considered in the aggregate, comply with all of the requirements with respect
thereto under the terms of this Agreement including, without limitation, the
satisfaction of the parking ratios for any multiple Buildings within a
particular Envelope Area within the legal lot on which such Envelope Area is
located. Similarly, any references herein to a particular "Pad" or "Major"
numbers (e.g., "Pad 1") will be deemed to refer to all of the Buildings which
may exist from time to time within the Envelope Area which contains the
proposed Building footprint designated on the Site Plan by such "Pad" or
"Major" number on the Site Plan.
(d) "City" shall mean the city of Chino Hills, California.
(e) "Common Area" shall be the portion of the Project intended for
the nonexclusive use by the Owners and their tenants, subtenants, employees,
concessionaires, licensees, customers, and business invitees, in common with
other users as permitted by this Agreement.
Common Area shall include, but not be limited to, Parking Area,
access roads, driveways, walkways, sidewalks, and landscaping. The Common
Area shall include all items of Common Area shown on the Site Plan.
Common Area shall not include any Floor Area and truck and/or
loading docks or the concrete apron or ramp leading to such areas but will
include any asphalt paved areas immediately adjacent to and adjoining such
concrete apron or ramp area.
Common Area shall not include any drive-through areas adjacent to
any drive-through customer service window(s), drive-through customer service
machines (such as bank "ATMs") or any drive-through or apron areas adjacent
to any gasoline pumps or gasoline service station areas.
(f) "Costco Building" shall mean the building or buildings now or
hereafter located on the Costco Parcel.
(g) "Costco Building Entrance" means the primary entrance to the
Costco Building as the same is depicted on the Site Plan attached hereto. For
the purposes of any restrictions relating to distances from the Costco
Building Entrance, the
3
<PAGE>
distance shall be calculated from the center of the primary entrance to the
Costco Building as shown on the Site Plan attached hereto to that portion of
the other subject building or outdoor sales area which is closest to the
Costco Building Entrance (rather than to the Entrance to the other subject
building or outdoor sales area).
(h) "Costco Common Area" shall mean the Common Area within the
Costco Parcel.
(i) "Costco Parcel" shall mean that certain real property located in
the City designated as Parcels 2 and 3 of the Parcel Map. If the Costco
Parcel initially comprises or is later subdivided into more than one legal
lot, then the term Costco Parcel shall collectively refer to all of such
legal lots.
(j) "Default Interest Rate" shall mean the lesser of: (i) five
percent (5%) per annum in excess of the "Prime Rate," and (ii) the highest
lawful rate. The "Prime Rate" shall be the rate announced as such from time
to time by Bank of America or its successor. If there shall be no such
announced rate of such bank or its successor, then the "Prime Rate" shall be
such equivalent rate as is charged from time to time by major money-center
banks.
(k) "Developer" and "Costco" as used in this Agreement respectively
refer to such Owners and their respective successors and assigns, and shall,
so far as the terms, convenants, provisions and conditions of this Agreement
to be kept, performed, observed and enforced by them are concerned, refer
only to the Person who at the time in question is the Owner which respect to
the respective Developer Parcel or Costco Parcel, as the case may be
appropriate, it being agreed and understood that such terms, covenants and
conditions shall be binding upon, enforceable against, and enforceable by
each Owner only with respect to the respective successive periods in which
each is an Owner and with respect to obligations which accrue during their
respective period of ownership. Except as otherwise provided below, if Parcel
1 is subdivided, the term "Developer" shall refer to the entity which is the
original "Developer" hereunder so long as such entity or an individual
successor or assignee so designated in a recorded instrument is the owner of
not less than five (5) acres of land within the Project and thereafter the
term "Developer" shall be deemed to refer to a Majority-in-Interest of the
Owners of the Developer Parcels.
(l) "Developer Common Area" shall mean all Common Area within the
Project, other than the Costco Common Area.
(m) "Developer Common Area Plans" shall mean those architectural
plans for the construction of the Developer Common Area which conform to the
Site Plan and the City's approved
4
<PAGE>
design standards and which are approved pursuant to Section 2.3 below.
(n) "Developer Parcels" shall mean that certain real property,
located in the City designated as Parcels 1, 4 and 5 of the Parcel Map. If
the Developer Parcels are subdivided into additional legal lots, then the
term "Developer Parcels" shall collectively refer to all of such legal lots.
(o) "Floor Area" shall mean the aggregate number of square feet of
floor space in the Project, from time to time, of all floors in any
structure, whether roofed or not, whether or not actually occupied, including
basement space and subterranean areas, and balcony and mezzanine space,
measured from the exterior faces or the exterior lines of the exterior walls
(including basement walls) and the actual number of square feet of any
outdoor area appropriated for use to display and/or sell merchandise as
permitted hereunder. Notwithstanding the foregoing, the term "Floor Area"
shall not include any of the following:
(i) one temporary outside sales area on the Costco Parcel of up to
fifteen thousand (15,000) square feet in size;
(ii) any structures on the Costco Parcel used primarily for the sale
of petroleum products such as diesel fuel, gasoline and motor oil in
conjunction with a gasoline sale or service station ("Costco Gas Station");
(iii) One temporary outdoor sales area on a Developer Parcel of up
to fifteen thousand (15,000) square feet in size provided such temporary
outdoor sales area is utilized solely by a tenant or owner occupying not less
than fifty thousand (50,000) square feet of Floor Area and said temporary
outdoor sales area on the Developer Parcels (of which there may only be one
for all of the Development Parcels) is not less than four hundred feet (400')
from the Costco Building Entrance;
(iv) any balcony, mezzanine, basement space or subterranean area
which (a) is not considered to be building area by the City for the purposes
of determining the required parking for the Project, (b) is not used for the
display or sale of food or merchandise, (c) is utilized solely as an
ancillary use to the primary use on such Parcel such as storage, store office
or employee break rooms, and (d) such ancillary use does not aggregate more
than 15% of the size of the ground floor space on such Parcel;
(v) the upper levels of any multi-deck stock areas created for
convenience to increase the usability of space for stock purposes;
5
<PAGE>
(vi) all truck loading areas, truck tunnels, and truck parking, turn
around and dock areas and ramps;
(vii) drive-through areas adjacent to any drive-through customer
service window(s), drive-through customer service machines (such as bank
"ATMs") or any drive-through or apron areas adjacent to any gasoline pumps or
service areas;
(viii) any outdoor area which comprises a part of a day care center;
and
(ix) all Common Area.
(p) "Future Development Parcel" or "Future Annexation Parcel" means
Parcel 6 of the Parcel Map.
(q) "Lettered Parcels" or "Lettered Lots" means the parcels
designated "Parcels A, B, C and D" on the Parcel Map.
(r) "Majority of the Developer Parcel Owners" shall mean those
Owners collectively owning not less than 50.1% of the gross land area within
the Developer Parcels. For example, if there are 30 acres in the Developer
Parcels, then a Majority of the Developer Parcel Owners would be those Owners
owning not less than an aggregate of 15.1 acres.
(s) "Mortgage" shall mean any first or second mortgage, indenture of
first or second mortgage, or first or second deed of trust on the interest,
whether fee or leasehold, of an Owner in a Parcel and, to the extent
applicable, a "Sale and Leaseback" or "Assignment and Subleaseback"
transaction as herein contemplated.
(t) "Mortgagee" shall mean a mortgagee, or trustee and beneficiary
under a deed of trust and to the extent applicable, a fee owner or lessor or
sublessor of any Parcel which is the subject of a lease under which any Owner
becomes a lessee in a so-called "Sale and Leaseback" or "Assignment and
Subleaseback" transaction.
(u) "Owner" and "Owners" as used in this Agreement shall mean the
Persons executing this Agreement, or their successors in interest as
hereinafter provided, as shown by the Official Records of the Recorder's
Office, as of the date of the exercise of powers or rights or the performance
by such Owners of obligations created by this Agreement. Such reference shall
include any Person designated in writing by any of the Owners to act in the
manner and at the time provided herein with complete authority and in the
place of such Owner in the matter for which action is taken, powers exercised
or performance required, provided such written authority shall be recorded in
the Recorder's Office, and provided further that:
6
<PAGE>
(i) Sale. In the event of the assignment, transfer or conveyance of
the whole of the interest of any of the Owners in and to the Parcel in which
such Owner presently has an interest, without retaining any beneficial
interest other than under the terms of a deed of trust or mortgage or without
simultaneously acquiring a new interest by way of leasehold, life estate or
other possessory interest, then the powers conferred upon such Owner shall be
deemed assigned, transferred or conveyed and the obligations assumed with its
interest in such Parcel;
(ii) Sale Leaseback or Financing. In the event the whole of the
interest of such Owner in and to the Parcel in which it has a present
interest is assigned, transferred or conveyed but a new interest is created
in such Owner simultaneously with such assignment, transfer or conveyance by
way of leasehold or similar possessory arrangement, or in the event such
Owner shall convey its interest in said Parcel or any part thereof by deed of
trust or other security instrument as security for indebtedness, then the
following shall apply: (A) said fee owner and party in possessions may
designate (in the manner described in subsection (iv) (below) that either
(but not both) of them shall have the powers and obligations of the Owner
with respect to such Parcel, (B) in the absence of such a designation all of
said powers and obligations shall remain with the party retaining the
possessory interest, and (C) the interest of both such fee owner and holder
of such possessory interest shall remain subject to all of the terms and
conditions hereof. In the event the interest of such Owner referred to in
this subsection shall cease and terminate, then upon such termination the
powers and/or obligations of such Owner shall vest in accordance with
subsections (i), (iii) or (iv) hereof, whichever is applicable;
(iii) Subdivision. In the event a Parcel is divided into one or more
separate legal lots, each of such separate legal lots shall thereafter be
considered to be a "Parcel" and the owners of each such legal lot shall be an
"Owner"; provided, however, that there may be no more than twelve (12)
Developer Parcels (including the existing Developer Parcels and any separate
legal parcels which may be created out of them) and no Parcel may be
subdivided into condominium units. Any Parcel or Parcels subdivided as a
aforesaid shall remain subject to all terms and conditions of this Agreement,
including without limitation, the requirement that a revised Site Plan must
be approved by Costco and a Majority of the Developer Parcel Owners prior to
the construction of any buildings in any location other than within the
Building Area (including permissible Envelope Areas pursuant to Section
1.1(c) above) designated on the Site Plan attached hereto as Exhibit "B".
(iv) Fractional Interests. In the event any of the Owners shall
transfer its present interest in a Parcel or a
7
<PAGE>
portion of such interest in such manner as to vest its present interest in
such Parcel in more than one Person other than by creation of a separate
legal lot (e.g., by the creation of a tenancy-in-common, joint tenancy or the
like), then not less than fifty-one percent (51%) in interest of such
transferees shall designate one of their number to act on behalf of all of
such transferees in the exercise of the powers granted to such Owner under
this Agreement. So long as such designation remains in effect, such designee
shall be an Owner hereunder and shall have the power to bind such Parcel and
such transferees, and such transferees shall not be deemed to be Owners. Any
such designation must be in writing and served upon the other Owners hereto
by registered or certified mail, and must be recorded in the Recorder's
Office. In the absence of such written designation, the acts of the Owner
whose interest is so divided with respect to the exercise of the powers
vested by this instrument shall be binding upon all Persons having an
interest in such Parcel until such time as written notice of such designation
is given and recorded in the Recorder's Office; and
(v) Release. Whenever the rights, powers and obligations conferred
upon any of the Owners are vested in another Owner or owners pursuant to the
provisions of subsections (i), (ii), (iii) or (iv) above, the transferor
shall, subject to this Article I, be released or discharged from the
obligations thereafter accruing under the terms of this Agreement, and the
transferee(s) of such interest shall be bound by the covenants and
restrictions herein contained.
(v) "Parcel" or "Parcels" shall mean the Developer Parcels and/or
the Costco Parcel, as the context may require. "Parcel 1", "Parcel 2",
"Parcel 3", "Parcel 4", "Parcel 5", "Parcel 6" and "Parcel 7" shall mean the
legal parcels which are so designated on the Parcel Map.
(w) "Parcel Map" shall mean that Parcel Map No. 14996 on file in the
Official Records of San Bernardino County, a copy of which is attached hereto
as Exhibit "A" and is incorporated herein by this reference. Any references
herein to Lots or Parcels by number or letter shall be deemed to refer to the
lot bearing the corresponding number or letter on the Parcel Map.
(x) "Parking Area" shall mean those portions of the Common Area used
for the parking of motor vehicles, including incidental and interior
roadways, pedestrian stairways, walkways, curbs and landscaping within or
adjacent to areas used for parking of motor vehicles, together with all
improvements to the Common Area which at any time are erected thereon. Such
areas shall not include truck ramps and loading and delivery areas or
drive-through area adjacent to any customer service window(s), drive-through
area adjacent to any customer service machines, or
8
<PAGE>
any drive-through or apron areas adjacent to any gasoline pumps or service
areas.
(y) "Permittees" shall mean the Owners, all Persons from time to
time entitled to the use and occupancy of Floor Area in the Project under any
lease, deed or other arrangement whereunder such Person has acquired a right
to the use and occupancy of any floor Area, and their respective officers,
directors, employees, agents, contractors, customers, visitors, invitees,
licensees and concessionaires.
(z) "Person" or "Persons" shall mean and include individuals,
partnerships, firms, associations, joint ventures, corporations, or any other
form of business entity.
(aa) "Project" or "Shopping Center" shall mean the property
consisting of the Developer Parcels and the Costco Parcel.
(bb) "Separate Signs" means monument signs which: (i) are adjacent
to Peyton Drive or Chino Avenue, (ii) extend above the grade of said adjacent
public streets by no more than six feet (6'), (iii) are permitted by the
applicable governmental requirements, (iv) identify individual occupants of
the Project, and (v) do not limit the size or location of the Shared Sign(s).
(cc) "Shared Sign(s)" shall mean the free-standing sign(s) for the
Project, other than the "Separate Signs" (as defined above). the conditions
for the use of the Shared Sign(s) are provided for in Section 2.7.
(dd) "Site Plan" shall mean that certain plan attached as Exhibit
"B" and made a part hereof by this reference. Any revisions, modifications or
other changes to the Site Plan requested by an Owner shall require the prior
approval of Costco and a Majority of the Owners of the Developer Parcels,
which approval may be granted or withheld in the sole, absolute and
unrestricted discretion of such parties.
ARTICLE II
CONSTRUCTION OBLIGATIONS
2.1. Developer Construction. Prior to Developer's use or occupancy
of each Building on the Developer Parcels, Developer shall construct, or
cause to be constructed: (a) a sufficient portion of the Developer Common
Area located on the Developer Parcel upon which a Building has opened for use
or occupancy adequate to satisfy the parking ratio requirements hereunder and
located in reasonable proximity to such Building; plus (b) any other Common
Area on the Developer Parcels which the City
9
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requires as a condition to the occupancy of such Building or as a condition
to the use or occupancy of any other Building(s) which has then been
completed within the Project; plus (c) any other Common Area on the Developer
Parcels which is reasonably necessary to the operation of the Project.
2.2. Costco Construction. Prior to Costco's use or occupancy of the
building on the Costco Parcel, Costco shall construct, or cause to be
constructed, the Common Area on the Costco Parcel. In addition, Costco shall
have the right to enter upon the Developer Parcels to construct such
driveways within the Permanent Access Easement or such other Common Area as
is reasonably necessary to the operation of the buildings on the Costco
Parcel.
2.3. Developer Plans and Specifications. Prior to commencing
construction or modification of any portion of the Developer Common Area,
Developer shall deliver to Costco three (3) copies of the proposed Developer
Common Area Plans, in accordance with Section 11.1 below and shall include a
letter specifically referring to this provision, the deemed approved
procedure and the time periods hereunder. Each such submission shall
specifically identify any deviations from the requirements of this Agreement.
Within fifteen (15) days following delivery of the Developer Common Area
Plans, Costco shall approve the Developer Common Area Plans or request
reasonable revisions. If following the expiration of such fifteen (15)-day
period Costco has failed to respond as aforesaid, then Developer may send
Costco a notice in accordance with Section 11.1 below specifically referring
to this provision, to the deemed approval procedure and to the time periods
hereunder ("Default Notice"). If Costco fails to approve such plans or to
request reasonable revisions within fifteen (15) days of Costco's receipt of
said Default Notice, Costco shall be deemed to have approved said Developer
Common Area Plans. Costco shall give reasons for any request for revision of
the Developer Common Area Plans. Costco and Developer shall act in good faith
and use reasonable efforts to agree on the final form of the Developer Common
Area Plans incorporating any revisions requested by Costco. It shall not be
considered unreasonable for Costco to require the Developer Common Area Plans
to fully comply with the terms and conditions of this Agreement and nothing
contained herein shall limit Costco's discretion in approving or disapproving
any proposed deviations. On reaching agreement on such plans, Costco and
Developer shall sign such plans as approved and Developer shall promptly
submit such plans for approval by the City. If any such plans are proposed to
be changed, other than insubstantial changes required during construction in
response top field conditions, such changes shall be submitted for
re-approval in accordance with this Section. If the Developer Parcels are
owned by more than one entity, then the term "Developer" as used in
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Section 2.3. shall be deemed to refer to each Owner of a Developer Parcel.
Notwithstanding anything herein which may appear to be to the
contrary, Developer shall not be required to seek the consent of Costco or
any other Owner to any modification to the Common Area shown on the "original
plans" of the Developer Common Area which have previously been approved by
Costco, which do not substantially alter the circulation patterns within the
Project from such "original plans" for the Developer Common Area and which do
not result in any deviations from the parking ratio, Building Area locations
or other requirements of this Agreement. For example, and without limitation
upon the foregoing, changes in the location of cart corrals, the re-striping
of parking spaces to different sizes (subject to Section 4.4(a) below) and
the alteration of the angles of parking spaces relative to drive aisles
(e.g., from ninety degrees to sixty degrees) made after the approval of the
"original plans" for the Developer Common Area shall not require such consent
if the Developer Parcels remains in compliance with the requirements of this
Agreement. As used herein, the term "original plans" for the Developer Common
Area shall refer to those Developer Common Area Plans approved by Costco
after Developer has determined the initial location of
the Buildings to be located within the Envelope Areas on the Developer
Parcels and the corresponding location of the drive aisles and parking rows
adjacent to such Buildings.
2.4. Costco Plans and Specifications. Prior to the modification of
any portion of the Costco Common Area, Costco shall deliver to Developer
three (3) copies of the proposed Costco Common Area Plans, in accordance with
Section 11.1 below and shall include a letter specifically referring to this
provision, the deemed approved procedure and the time periods hereunder. Each
such submission shall specifically identify any deviations from the
requirements of this Agreement. Within fifteen (15) days following delivery
of the Costco Common Area Plans, Developer shall approve the Costco Common
Area Plans or request reasonable revisions. If following the expiration of
such fifteen (15) day period Developer has failed to respond as aforesaid,
then Costco may send Developer a notice in accordance with Section 11.1 below
specifically referring to this provision, to the deemed approval procedure and
to the time periods hereunder ("Default Notice"). If
Developer fails to approve such plans or to request reasonable revisions
within fifteen (15) days of Developer's receipt of said Default Notice,
Developer shall be deemed to have approved said Costco Common Area Plans.
Developer shall give reasons for any request for revision of the Costco
Common Area Plans. Costco and Developer shall act in good faith and use
reasonable efforts to agree on the final form of the Costco Common Area Plans
incorporating any revisions requested by Developer. It shall not be
considered unreasonable for Developer to require the Costco Common Area Plans
to fully comply with the
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terms and conditions of this Agreement and nothing contained herein shall
limit Developer's discretion in approving or disapproving any proposed
deviations. On reaching agreement on such plans, Costco and Developer shall
sign such plans as approved and Costco shall promptly submit such plans for
approval by the City. If any such plans are proposed to be changed, other
than insubstantial changes required during construction in response to field
conditions, such changes shall be submitted for re-approval in accordance
with this Section. The term "Developer" as used in this Section 2.4 shall
have the meaning specified therefor in Article 1 above.
Notwithstanding anything herein which may appear to be to the
contrary, Costco shall not be required to seek the consent of Developer or
any other Owner to any modification to the Common Area shown on the original
plans of the Costco Common Area (as depicted in the Site Plan) which do not
substantially alter the circulation patterns within the Project and which do
not result in any deviations from the parking ratio, Building Area locations
or other requirements of this Agreement. For example, and without limitation
upon the foregoing, changes in the location of cart corrals, the re-striping
of parking spaces to different sizes and the alteration of the angles of
parking spaces relative to drive aisles (e.g., from sixty degrees to ninety
degrees) shall not require such consent if the Costco Parcel remains in
compliance with the requirements of this Agreement.
2.5 Interference by Construction. Each Owner agrees that any
construction work to be undertaken by it shall be performed (a) so as not to
cause any increase in the cost of constructing the remainder of the Project
or any part thereof, (b) so as not to unreasonably interfere with any
construction work being performed on the remainder of the Project, or any
part thereof, and (c) so as not to unreasonably interfere with and minimize
disruptions of the access to, use, occupancy or enjoyment of the remainder of
the Project or any part thereof by the other Owner and the Permittees of the
other Owner. Except to the extent limited by Section 2.6, any damage
occurring to any portion of the Project as a result of such construction work
shall be the responsibility of the Owner performing such construction work or
causing such construction work to be performed and shall be repaired by such
Owner, at such owner's sole cost and expense, to the same condition as
existed immediately prior to such work promptly upon the completion of such
construction work. Any construction work on the Developer Parcels which (i)
would limit or impair the use of the shared driveways adjacent to any side of
the Costco Parcel or the two primary driveways from the Costco Parcel to
Peyton Drive and (ii) is proposed to be accomplished during the period from
October 15 to January 1 of any year, shall be subject to Costco's prior
approval, which approval shall not be unreasonably withheld but may be
conditioned upon reasonable
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measures to minimize interference with the business operations on the Costco
Parcel.
2.6. Construction Indemnities. Each Owner covenants and agrees to
indemnity, defend, and hold harmless the other Owner from and against all
claims and all costs, losses, damages, expenses and liabilities (including
reasonable attorneys' fees) incurred in connection with all claims, including
any action or proceedings brought thereon, arising from or as a result of any
mechanic's liens, stop notices, or other claims regarding materials supplied
or work performed, or the death of, or any accident, injury, loss or damage
whatsoever caused to any natural person, or to the property of any Person, as
shall occur by reason of the performance of any construction, or of any
Utility Use as defined in Section 3.1(e) below, by or at the request of the
indemnitor, except to the extent of claims caused by the negligence,
recklessness or willful misconduct of the indemnitee, its licensees,
concessionaires, agents, servants or employees, or any agents, servants or
employees of such licensees or concessionaires where the same may occur.
The indemnitee shall give the indemnitor notice of any suit or
proceeding entitling the indemnitee to indemnification pursuant to this
Section 2.6 and the indemnitor shall defend the indemnitee in such suit or
proceeding with counsel approved by the indemnitee.
2.7. Cost of Construction. Except as otherwise set forth in this
Agreement or in any separate agreement between Owners, each Owner shall be
responsible for the cost and expense of all improvements to be constructed on
its Parcel.
2.8. Signs.
(a) Each Owner may place such sign or signs on the exterior of
the Building on its Parcel as shall be permitted by applicable governmental
requirements.
(b) Subject to the terms of this Agreement, each Owner may
place such freestanding signs on its Parcel as satisfy the definition of a
"Separate Sign."
(c) The following shall apply to the primary free-standing sign
for the Project (the "Shared Sign"):
(i) the location(s) thereof shall be at the northern
corner of the Developer Parcels near to the top of the slopes to Riverside
Drive and Highway 71.
(ii) the Owner of the Costco Parcel and each Owner of a
store designated "Major" on the Site Plan shall have the right to place a
panel on the Shared Sign(s), each such panell
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shall be equal in size; provided, however, that the panel for the building on
the Costco Parcel and the panel for any other Major Building which is
occupied by a business utilizing more than eighty thousand (80,000) square
feet of Floor Area shall be fifteen percent (15%) larger than the other
panels; provided further, however, that if there is no longer a business on
the Costco Parcel which occupies more than eighty thousand (80,000) square
feet of Floor Area, then the panels for the other Major parcels may be
increased to be equal in size to the panel for the Costco Parcel.
(iii) the Owner of the Costco Parcel shall be entitled to have "top
billing" on the Shared Sign(s).
(iv) If any Owner elects to construct such Shared Sign(s),
it shall give notice of such intention to the other Owner(s), and if the
other Owner(s) notifies such constructing Owner within sixty (60) days of its
receipt of such notice that it elects to be included on the Shared Sign, then
the Owners shall cooperate in good faith to design the Shared Sign and each
Owner shall pay the cost of its panel and a portion of the other costs of
such Shared Sign(s) equal to the relative portion of the panel areas thereon
which it elects to utilize.
(v) If an Owner constructs the Shared Sign(s) and Costco
does not initially elect to have panel(s) included thereon, Costco may elect
to make the same contribution Costco would have been required to make toward
costs of the Shared Sign (exclusive of the cost of Costco's panel which is
not then being installed) if it had elected to be included on such Shared
Signs. In such event, the constructing owner shall submit each Shared Sign
plan to the city for approval with a place thereon for Costco's panel and the
constructing owner shall design and build each Shared Sign in a manner such
that Costco's panel can be added at a later time. If Costco elects to make
the initial contribution under this clause (v), Costco shall have the right
to later elect to have its panel included on the Shared Sign(s) and, upon
Costco's making such election, the constructing owner shall cause Costco's
panel (of the size and position described in "clause (ii)" above to be
included on the Shared Sign(s) and Costco shall reimburse constructing owner
for any cost of moving or replacing the then existing panels to accommodate
Costco's panel.
(vi) If an Owner constructs the Shared Sign(s) and Costco
does not initially elect to either have its panel included thereon under
clause (iv) above, then Costco may nevertheless elect to have a panel (of the
size and position described in "clause (iii)" above) included thereon at a
later date, but the following shall apply: (A) Costco shall be solely
responsible for obtaining and bearing the cost of any necessary
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governmental approvals to modify and/or rebuild the Shared Sign(s), (B)
Costco shall be responsible for reconstructing the Shared Sign(s) at its sole
cost and expense including, without limitation, the cost of any structural
work and the cost of moving or replacing any other panels, and (C) Costco
shall coordinate the foregoing with the other Owners utilizing the Shared
Sign(s) to minimize any disturbance to their use of the Shared Sign(s) during
the course of such construction activity.
(vii) The cost of maintaining the Shared Sign shall be
allocated among the Owners whose panels are then included on the Shared Sign
in proportion to their respective Panel Area, except that each party shall
pay the cost of repairing or replacing its own panel.
(d) The Costco Monument Sign. The Owner of the Parcel upon
which the described "Costco Monument Sign" is located hereby grants and
conveys to the Owner of the Costco Parcel, for the benefit of the owner of
the Costco Parcel and the Costco Parcel, an exclusive easement over such
portion of the granting Owner's Parcel to construct a Separate Sign in the
location designated "Costco Monument Sign" on the Site Plan.
2.9. Staging and Storage Areas.
(a) Staging Area. In connection with any construction,
reconstruction, repair or maintenance on its Parcel, each Owner reserves the
right to create a temporary staging and/or storage area in the Common Area on
its Parcel ("Staging Area"), but on no other Parcel, at such location as will
not unreasonably interfere with access between such Owner's parcel and the
other areas of the Project. Without the prior written consent of the other
Owner, no Owner shall be permitted to establish a Staging Area within two
hundred feet (200') of the primary entrance to any Building which comprises
more than forty thousand (40,000) square feet of Floor Area which would be
open for business during the use of the Staging Area (the "Prohibited Area").
It shall be reasonable for the relevant Owner to withhold such consent if the
Staging Area would be established or would remain in place during the period
from October 15 to January 1, if the Owner withholding its consent has, or
intends to have, an operating business on its Parcel during any portion of
such period. Prior to the commencement of any work which requires the
establishment of a Staging Area in the Common Area on an Owner's Parcel, the
constructing Owner shall give the other Owner at least thirty (30) days prior
notice of the proposed location of its Staging Area, except in the event of
an emergency or other circumstances requiring immediate action. All parking
of construction vehicles, including vehicles of workers, shall occur only on
the constructing Owner's Parcel and shall not occur on the Prohibited Area
unless such parking has been approved in
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the same manner as the approval of a Staging Area pursuant to this provision.
Upon completion of such work, the constructing Owner shall restore the
affected Common Area to a condition equal to or better than that existing
prior to commencement of such work.
(b) Temporary License. Each Owner hereby grants to each other
Owner and its respective contractors, materialmen and laborers a temporary
license for access and passage over and across the Common Area of the
grantor's Parcel as shall be reasonably necessary for the grantee to
construct and/or maintain improvements upon the grantee's Parcel; provided,
however, that such license shall be in effect only during periods when actual
construction and/or maintenance is being performed, and provided further that
the use of such license shall not unreasonably interfere with the use and
operation of the Common Area by others. Prior to exercising the rights
granted herein, the grantee shall first provide the grantor with a written
statement describing the need for such license, and shall furnish a
certificate of insurance showing that its contractor has obtained the same
liability insurance as each Owner is required to carry pursuant to Section
9.3 of this Agreement. Any Owner availing itself of the temporary license
shall promptly pay all costs and expenses associated with such work, shall
diligently complete such work as quickly as possible, and shall promptly
clean the area and restore the affected portion of the Common Area to a
condition which is equal to or better than the condition which existed prior
to the commencement of such work. Notwithstanding the foregoing, the event a
dispute exists between the contractors, laborers, suppliers and/or others
connected with construction activities, each Owner shall have the right to
prohibit the contractors, laborers, suppliers and/or others working for
another Owner from using the Common Area on its Parcel.
ARTICLE III
EASEMENTS
3.1. Easements. Each Owner hereby grants and conveys to each of the
other Owners, for the benefit of the other Owners and their respective
Parcels, the following easements in, to, over, and across each other Owner's
Parcel:
(a) parking Easements. Each Parcel and Owner shall have a
nonexclusive easement in, to, over and across the Common Area on the other
Owners' parcels, each such easement for the purpose of parking vehicles of
Permittees thereon, limited, however, to purposes connected with or
incidental to use of such parking for Project purposes.
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(b) Access Easement. Each Parcel and Owner shall have nonexclusive
easements in, to, over and across the Common Area on each other Owners'
Parcel, including driveways, for vehicular (including service vehicles) and
pedestrian ingress and egress, and access and the right of access between the
public streets adjacent to the Project and each owner's Parcel.
(c) Common Utility Lines. Each Parcel and owner shall have
non-exclusive perpetual easements in, to, over, under, along and across those
portions of the Common Area located on each other Parcel designated "Common
Utility Lines" on Exhibit "C" hereto as for the installation, operation,
flow, passage, use, maintenance, connection, repair, relocation, and removal
of shared utility facilities ("Common Utility Lines") serving the grantee
Owner(s)' Parcel, including but not limited to, sanitary sewers, storm
drains, water (fire and domestic), gas, electrical, cable television,
telephone and communication lines. The easement area shall be no wider than
necessary to reasonably satisfy the requirements of a private or public
utility, or five feet (5') on each side of the centerline if the easement is
not granted to a public or private Utility Owner. Upon request, the grantee
Owner shall provide to the grantor Owner a copy of an as-built survey showing
the location of such Utility Line.
(d) Construction: Modifications and Maintenance of Common Utility
Lines. The following shall apply with respect to work on the Common Utility
Lines.
(i) all such repair, maintenance and replacement work shall be
performed and shared pursuant to Section 6.4 below, except for work which is
performed to provide initial or additional services to a particular parcel
which shall, unless otherwise agreed to by the affected Owners, be borne by
the Owner performing such work;
(ii) Developer shall use reasonable efforts to cause the Common
Utility Lines located within the Costco Parcel and any driveways adjacent to
the Costco Parcel or from the Costco Parcel to Peyton Drive to be initially
constructed to accommodate the foreseeable needs of the Buildings to be built
on the Developer parcels and Future Development Parcel so that alterations or
other work to the Common Utility Lines which might affect the use of the
surface of the Common Areas or the continuous provision of utility service
through the Common Utility Lines will not be necessary. To the extent
practicable, any unforeseen needs of the Developer Parcels shall be
accommodated through Separate Utility Lines which do not impact the Costco
Parcel or any driveway adjacent to the Costco Parcel or from the Costco
Parcel to Peyton Drive, except that unforeseen needs of the Future
Development Parcel may be accommodated through Separate Utility Lines in such
location as Costco may approve pursuant to Section 3.1(e) below;
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(iii) at least thirty (30) days prior to performing any work
within the easement areas granted for Common Utility Lines under clause (c)
above (other than emergencies), the Owner performing such work shall first
provide the other Owners with a written statement describing the need for
such work, the nature of the work to be performed, the anticipated
commencement and completion dates for the work and shall furnish a
certificate of insurance showing that its contractor has obtained the minimum
insurance coverage required by Article 9 hereof;
(iv) the Owner performing such work pursuant to the provisions
of this subsection shall cause all work in connection therewith (including
general clean-up and proper surface and/or subsurface restoration) to be
completed as quickly as practicable and in a manner so as to minimize
interference with the use of the Common Area;
(v) the Owner performing such work agrees to defend, protect,
indemnify, and hold harmless the other Owners from and against all claims or
demands, including any action or proceeding brought thereon, and all costs,
losses, expenses and liabilities of any kind related thereto (including
reasonable attorneys fees and court costs) arising out of or resulting from
the exercise of the right to install, maintain and operate the Common Utility
Line as herein provided;
(vi) if such work would take place on the Costco Parcel or on
any driveway adjacent to the Costco Parcel or from the Costco Parcel to
Peyton Drive, such work shall not (except for emergencies) be conducted
during the months of November, December or January without the prior written
consent of the Owner of the Costco Parcel and each other owner affected
thereby;
(vii) such work shall not interfere with or diminish the
utility service to any Owner during business hours; and if an electrical
line/computer line is being relocated, then the Owner performing such work
and the other Owners affected thereby Owner shall coordinate any interruption
at any time to eliminate any detrimental effects;
(viii) such work shall not reduce or unreasonably impair the
usefulness or function of such Common Utility Line;
(ix) such work shall be completed using materials and design
standards which equal or exceed those originally used; and
(x) such work shall have been approved by the provider of such
service and the appropriate governmental or quasi-governmental agencies
having jurisdiction over such work.
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(e) Separate Utility Lines; Developer Parcels. Each Parcel and Owner
shall have non-exclusive perpetual easements in, to, over, under, along and
across those portions of the Common Area located on each other Parcel
necessary for the installation, operation, flow, passage, use, maintenance,
connection, repair, relocation, and removal of utility facilities ("Separate
Utility Lines") serving and grantee Owner(s)' Parcel, including but not
limited to, sanitary sewers, storm drains, water (fire and domestic), gas,
electrical, cable television, telephone and communication lines. The initial
location of any separate utility Line and schedule for its installation shall
be subject to the prior written approval of the Owner whose Common Area is to
be burdened thereby, such approval not to be unreasonably withheld or
delayed. It shall not be unreasonable for the Owner of a Parcel containing an
operating business to disapprove construction on its Parcel during November,
December and January. The easement area shall be no wider than necessary to
reasonably satisfy the requirements of a private or public utility, or five
feet (5') on each side of the centerline if the easement is not granted to a
private or public utility Owner. Upon request, the grantee Owner shall
provide to the grantor Owner a copy of an as-built survey showing the
location of such Separate Utility Line. Notwithstanding the foregoing, there
shall be no easements for Separate Utility Lines encumbering the Costco
Parcel except for the benefit of the Future Development Parcel.
At least thirty (30) days prior to exercising the right granted
under this clause (d) (other than emergencies), the grantee Owner shall first
provide the grantor Owner with a written statement describing the need for
such easement, shall identify the proposed location of the Separate Utility
Line, the nature of the service to be provided, the anticipated commencement
and completion dates for the work and shall furnish a certificate of
insurance showing that its contractor has obtained the minimum insurance
coverage required by Article 9 hereof. Except as otherwise agreed to by the
grantor Owner and the grantee Owner, any Owner installing Separate Utility
Lines pursuant to the provisions of this subsection shall pay all costs and
expenses with respect thereto and shall cause all work in connection
therewith (including general clean-up and proper surface and/or subsurface
restoration) to be completed as quickly as practicable and in a manner so as
to minimize interference with the use of the Common Area. In addition, the
grantee Owner of any Separate Utility Line agrees to defend, protect,
indemnify, and hold harmless the other Owners from and against all claims or
demands, including any action or proceeding brought thereon, and all costs,
losses, expenses and liabilities of any kind related thereto (including
reasonable attorneys fees and court costs) arising out of or resulting from
the exercise of the right to install, maintain and operate the Separate
Utility Line as herein provided.
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(f) Underground Utilities. All utility lines shall be underground
except:
(i) ground mounted electrical transformers;
(ii) as may be necessary during periods of construction,
reconstruction, repair, or temporary service;
(iii) as may be required by governmental agencies having
jurisdiction;
(iv) as may be required by the provider of such service;
(v) fire hydrants; and
(vi) irrigation and lighting pedestals required to operate
Common Area improvements.
(g) Relocation of Common Utilities. Each Owner of a Parcel upon
which a Common Utility Line is located shall have the right to relocate the
Common Utility Lines located on its parcel (but not on any other Parcel) at
its sole cost and expense upon compliance with each of the conditions set
forth in Section 3.1 (d) hereof; provided, however, that no Owner may
relocate any Common Utility Line located in any driveway adjacent to the
Costco Parcel or from the Costco Parcel to Peyton Drive without the prior
written consent of the Owner of the Costco Parcel, which consent may be
granted or withheld in the sole, absolute and unrestricted discretion of the
Owner of the Costco Parcel.
(h) Relocation of Separate Utility Lines. the grantor Owner shall
have the right to relocate a Separate Utility Line upon thirty (30) days'
prior written notice (except that such prior written notice shall not be
required for emergencies), provided that such relocation:
(i) if such work would take place on any driveway adjacent to
the Costco Parcel or from the Costco Parcel to Peyton Drive, such work shall
not be commenced (except for emergencies) during the months of November,
December or January without the prior written consent of the Owner of the
Costco Parcel and each other Owner affected thereby;
(ii) shall not interfere with or diminish the utility service
to any Owner during business hours; and if an electrical line/Computer line
is being relocated, then the grantor Owner and grantee Owner shall coordinate
any interruption at any time to eliminate any detrimental effects;
(iii) shall not reduce or unreasonably impair the usefulness or
function of such Separate Utility Line;
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(iv) shall be performed without cost or expense to grantee Owner;
(v) shall be completed using materials and design standards
which equal or exceed those originally used; and
(vi) shall have been approved by the provider of such service
and the appropriate governmental or quasi-governmental agencies having
jurisdiction over such work.
Documentation of the relocated easement area, including the furnishing of an
"as-built" survey, shall be the grantor Owner's expense and shall be
accomplished as soon as possible following completion of such relocation.
(i) Drainage. Each Parcel and Owner shall have the perpetual right
and easement to discharge surface storm drainage and/or runoff from each
Owner's Parcel over, upon and across the Common Area of each other Owner's
Parcel, upon the following conditions and terms:
(i) The Common Area grades and the surface water
drainage/retention system for the Shopping Center shall be initially
constructed in strict conformance with the details approved by the Owners as
part of the Common Area Plans; and
(ii) No Party shall alter or permit to be altered the surface
of the Common Area or the drainage/retention system constructed on its parcel
if such alteration would impair such Parcel's acceptance of storm waters as
contemplated by the Common Area Plans or would materially increase the flow
of surface water onto an adjacent Parcel either in the aggregate or by
directing the flow of surface water to a limited area.
3.2. Unimpeded Access Between Parcels. The Owners covenant that at
all times free access between each Parcel and the remainder of the Project
will not be impeded and will maintained. Except as specifically depicted on
the Site Plan or as may be approved in writing by Costco and a Majority of
the Owners of the Developer Parcels, no fence, division, partition, rail, or
obstruction of any type or kind shall ever be placed, kept, permitted, or
maintained between the legal lots comprising the Project or between any
subsequent division thereof or upon or along any of the common property lines
of any portion thereof, except within the confines of the Building Area, and
except as may be required at any time and from time to time in connection
with the construction, maintenance, and repair of Common Area.
3.3. Use by Permittees. The use of all easements provided for in
this Article; and the use of the entire Common Area will, in each instance,
be nonexclusive, and for the use and benefit of all Permittees.
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3.4. Unauthorized Use and Closure of Common Area. Each Owner hereby
reserves the right to eject or cause the ejection from the Common Area on its
Parcel of any Person or Persons not authorized, empowered or privileged to
use the Common Area pursuant to this Agreement. Each Owner also reserves the
right to close off the Common Area on its Parcel for such reasonable period
or periods of time as may be legally necessary to prevent the acquisition of
prescriptive rights by anyone; provided, however, that prior to closing off
any portion of the Common Area, as herein provided, such Owner shall give
written notice to the other Owners of its intention to do so, and shall
coordinate such closing with the other Owners so that no unreasonable
interference with the operation of the Project shall occur.
3.5. Prohibition Against Granting Easements. Except as provided in
Section 3.6 below, no Owner, nor any Person not an Owner, shall grant an
easement or easements of the type set forth in this Article III for the
benefit of any property not within the Project at the time of such grant
(i.e., not originally a part or annexed pursuant to Section 11.24 below);
provided, however, that the foregoing shall not prohibit an Owner from
granting or dedicating easements on its Parcel of the type described in this
Article III to governmental or quasi-governmental authorities or to public
utilities.
3.6. Present Easements to Future Development Parcel. Each Owner
hereby grants to the Owner of the Future Development Parcel: (a)
non-exclusive underground utility easements in the locations designated on
Exhibit "C" hereto on the same terms as the grant of the easement over the
Common Utility Line to the Owners and (b) a shared driveway easement from
Peyton Drive to the Future Development Parcel across the approximately three
hundred and seventy five foot (375') long driveway closest to the Future
Development Parcel as depicted on Exhibit "C" hereto; provided, however, the
Owner of the Future Development Parcel may not exercise the aforesaid
driveway easement unless: (i) the Future Development Parcel has theretofore
been annexed to the Shopping Center pursuant to Section 11.24 below or (ii)
it has constructed a continuous concrete block wall of at least six (6) feet
in height on the Future Development Parcel contiguous to the border of the
Costco Parcel. If the Future Annexation Panel is not annexed to the Shopping
Center, the Owner of such parcel shall make an equitable contribution toward
the cost of maintaining the Common Utility Lines and driveway which it
utilizes in proportion to its use of the same.
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ARTICLE IV
PROJECT DEVELOPMENT RESTRICTIONS
4.1. Building Area. No Owner shall suffer or permit any buildings,
structures or outdoor sales areas to be built or maintained other than in the
"Building Area" on their respective Parcels (as defined above). Without
limitation upon the foregoing, all appurtenant canopies, above-ground supports,
loading docks, truck ramps and other outward extensions of buildings shall be
built or maintained only in such Building Area.
4.2. Common Area. Except as provided in Section 5.3(c) below, no
improvements may be built or maintained in the Common Area other than parking
lots, driveways, lights, signs, landscaping, underground utilities and
improvements normally found in a parking lot. Except as provided in Section
5.3(c) below, no portion of the Common Area may be used for any purpose other
than the parking of vehicles and vehicular and pedestrian ingress and egress.
Without limitation upon the foregoing, but subject to Section 5.3(c) below, no
portion of the Common Area may be used for Christmas tree sales, shows,
carnivals, sales by merchants using vehicles or booths, fireworks sales, kiosks
or any other purpose which would limit or impair ingress or egress or the use of
any parking spaces.
4.3. Separate Operation. There shall be differences in grade or
barriers (except for emergency vehicles access points) between the Project and
any contiguous property so that the parking areas on the Project shall not be
readily available to the users of any other property. Each Owner shall post such
signs and implement such rules and regulations and enforcement means as shall be
reasonably necessary in order to restrict the Project, and the Owners shall
cooperate with each other in enforcing such exclusive area.
4.4. Parking Ratio and Standards
(a) In addition to the applicable requirements of any government agency
having jurisdiction over the Project, the Owners covenant that the widths of
parking spaces, parking lanes and parking bays shall be at least equal to the
widths shown on the Site Plan; provided, however, that each Owner shall have the
right, in its sole, absolute and unrestricted discretion, to reduce the size of
any parking stalls on its Parcel to such minimum size as is permitted by the
applicable governmental requirements; and provided further, however, that the
size of any parking spaces on any Developer Parcel within four hundred fifty
feet (450') of the Costco Building Entrance may not be reduced except to the
same extent that the Owner of the Costco Parcel has
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heretofore reduced the size of the spaces on the Costco Parcel which are within
four hundred fifty feet (450') of the Costco Building Entrance.
(b) The Permittees shall not be prohibited or prevented from parking in
the Common Area so long as space is available in such parking area; provided,
however, that the employees of each occupant of the Developer Parcels shall be
required to park on the Developer Parcels and the employees of each occupant of
the Costco Parcel shall be required to park on the Costa Parcel. Each Owner with
respect to the Developer Parcels shall use all reasonable efforts to cause the
employees of all occupants of its Parcel to comply with the foregoing employee
parking requirements. There shall be no fees or charges imposed upon users of
the parking areas of the Common Area unless the same have been approved by both
the Owner of the Costco Parcel and a Majority-in-Interest of the Owners of the
Developer Parcels, each in their sole, absolute and unrestricted discretion.
(c) There shall be maintained at all times on the Common Area on each
Parcel a number of parking spaces at least equal to the number of spaces which
would be legally required for the building sizes and uses on such Parcel if such
Parcel were not benefitted by any parking rights over any other parcels.
(d) Without limitation upon the preceding subsection, there shall be
maintained at all times on each Parcel not less than the following number of
parking spaces for each one thousand (1,000) square feet of Floor Area utilized
for the following uses on such Parcel:
(i) retail uses: 5:1;
(ii) restaurants and fast food which do not have Floor Area
(including, without limitation, patio areas so used) utilized as a bar, as a
dance floor, as a pool room or as a similar areas dedicated primarily to
alcoholic beverage sales or entertainment rather than to food service: 10:1;
(iii) restaurants and fast food which contain Floor Area
(including, without limitation, patio areas so used) utilized as a bar, as a
dance floor, as a pool room or as a similar area dedicated primarily to
alcoholic beverage sales or entertainment [other than incidental entertainment
uses as provided in Section 5.2.2(b)] rather than to food service: 12:1;
(iv) Theatres: one parking space per two (2) seats;
(v) Entertainment Uses and Health Clubs: 15:1;
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(vi) all uses other than the foregoing uses (including,
without limitation, other commercial or industrial uses): 5:1;
(vii) the Costco Gas Station: such parking spaces (if any)
required by the City;
(viii) Hotel lodging rooms: one space per lodging room.
Notwithstanding the foregoing, any restaurant or fast food operation
located within the Store of any business comprising not less than twenty
thousand (20,000) square feet which is incidental to the primary business
conducted within such Store will only be required to maintain a parking ratio of
5 stalls per one thousand (1,000) square feet of Floor Area. Such restaurant or
fast food use shall be considered "incidental" to the extent the same does not
exceed fifteen percent (15%) of the aggregate size of the Store, and any excess
over such fifteen percent (15%) shall be required to meet the parking ratio
requirements applicable to restaurants and fast food operations. In addition,
and notwithstanding the generally higher applicable parking ratios for
restaurants and fast food operations, "Snack Shops" shall be subject to a
parking ratio equal to the greater of (a) 8:1000 or (b) the legally required
parking ratio with respect thereto. The term "Snack Shops" shall mean any fast
food operation which (a) comprises less than one thousand two hundred (1,200)
square feet of Floor Area each and (b) contains less than fifty percent (50%)
seating and counter area such as a cookie, ice cream or sandwich shop. Any
"Snack Shops" in excess of an aggregate of six thousand (6,000) square feet on
all of the Developer Parcels shall be required to meet the 10:1000 ratio
generally applicable to other fast food operations.
4.5. Building Height Limitations. The height of the buildings on the
Building Areas designated "Pads" on the Site Plan shall not exceed twenty-five
feet (25') or contain more than one story; provided, however, that architectural
elements comprising less than twenty five percent (25%) of a Building's frontage
may be up to twenty-eight (28') in height.
4.6. Certain Setbacks. No Building shall be constructed on any
Developer Parcel which is within thirty feet (30') of the Building(s) or
Building Area on the Costco Parcel. In connection with the foregoing limitation,
Developer acknowledges that Costco proposes to construct on the Costco Parcel
its typical facility which is classified as an "unlimited area" building under
certain applicable building codes (i.e., a building of the type designed II-N or
V-N under the Uniform Building Code). If required by any governmental authority,
Developer shall join in a recordable declaration which confirms the existence of
a thirty foot (30') clear or "no-build" area adjacent to the Costco Parcel.
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4.7. Drive-Up Stacking. Without limitation upon the Site Plan approval
or other provisions of this Agreement, if a business use contains a drive-up
service window or machine (such as a remote banking teller, automated teller
machine or food ordering/dispensing facility), then there shall be created space
for stacking not less that five (5) automobiles for each drive-up unit without
impairment of any parking spaces or driveways.
ARTICLE V
USE RESTRICTIONS
5.1. Use in General. No part of the Project may be used for other than
retail and/or wholesale sales and services, restaurants, offices to the extent
permitted pursuant to Section 5.2.1(r) and 5.2.1(s) and for industrial uses to
the extent permitted pursuant to Section 5.2.1(s).
5.2. Prohibited Uses.
5.2.1 Generally Prohibited Uses. No use or operation will be made,
conducted or permitted on or with respect to all or any part of the Project,
which use or operation is obnoxious to, or out of harmony with, the development
or operation of retail or wholesale facilities, including but not limited to,
the following:
(a) any public or private nuisance;
(b) any noise or sound that is objectionable due to
intermittence, beat, frequency, shrillness or loudness;
(c) any obnoxious odor;
(d) any excessive quantity of dust, dirt, or fly ash;
provided however, this prohibition shall not preclude the sale of soils,
fertilizers, or other garden materials or building materials in containers;
(e) any fire, explosion or other damaging or dangerous
hazard, including the storage, display or sale of explosives or fireworks but
the foregoing shall not prohibit the operation of a gas station in accordance
with applicable laws;
(f) any distillation, other than so-called micro-brewing of
beer, refining, smelting, agriculture or mining operations;
(g) any mobile home or trailer court, labor camp, junk yard,
stock yard or animal raising. Notwithstanding the foregoing, pet shops shall be
permitted within the Project;
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(h) any drilling for and/or removal of subsurface substances;
(i) any dumping of garbage or refuse, other than in enclosed
receptacles intended for such purposes; and
(j) any cemetery, mortuary or similar service
establishment; any automobile, truck, trailer or recreational vehicle sales,
leasing or display which is not entirely conducted inside of a Building,
except as provided in Section 5.3(c)(vi);
(k) any teenage discotheque, discotheque, dance hall,
nightclub, music hall, pool room other than as an integral part of a restaurant,
massage parlor, off-track betting facility, casino, card club, bingo parlor,
facility containing gaming equipment, or bar or tavern which is not an integral
part of a restaurant;
(l) any fire sale, flea market, bankruptcy sale (unless
pursuant to a court order) or auction operation;
(m) any bar, tavern, restaurant or other establishment which
has more than 30% of its Floor Area (including, without limitation, patio areas
so used) utilized as a bar, as a dance floor, as a pool room or as a similar
area dedicated primarily to alcoholic beverage sales or entertainment rather
than to food service;
(n) any school, training or educational facility, including
but not limited to: beauty schools, barber colleges, nursery schools, reading
rooms, places of instruction or other operations catering primarily to students
or trainees rather than to customers; provided however, this prohibition shall
not be applicable to on-site employee training by an occupant incidental to the
conduct of its business at the Project and the foregoing shall not prohibit the
operation of a day care center whose indoor and outdoor areas are located wholly
within a permissible Building Area;
(o) any apartment, home or other residential use;
(p) any automobile body and fender repair work;
(q) any church, synagogue, mosque or other place of worship;
(r) except as permitted by Section 5.2.1(s) below, any office
use other than (i) an office incidental to a retail operation or (ii) so-called
"retail offices" such as an insurance agency, medical office, real estate
broker, travel agency, retail
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income tax office, private employment agency, or retail bank; provided that no
such retail office shall exceed three thousand (3,000) square feet in size and
no governmental offices shall be permitted) and no medical offices in excess of
one thousand square (1,000) feet of Floor Area may be located within eight
hundred fifty feet (850') of the Costco Building Entrance; and
(s) any industrial or office use (other than "retail offices"
which are governed by the preceding subsection) so long as the Costco Parcel is
used primarily for retail and/or wholesale sales; provided, however, that the
Costco Parcel may be used for industrial and/or office use (and the other uses
allowed in such event under Section 5.2.2(h) below), and in such event, the
Developer Parcels may be used for industrial and/or office use, subject,
however, to the other terms of this Agreement, including, but not limited to,
parking ratio requirements and the other prohibitions in Section 5.2.1 and
5.2.2. If the Costco Parcel shall be used for office or industrial use (other
than the aforesaid retail offices) and the retail offices) and the retail or
wholesale use shall later be resumed on the Costco Parcel, the prohibition
against office and industrial use shall not resume against the Developer
Parcels.
5.2.2 Uses Limited As To Location. Except to the extent permitted under
Section 5.2.2(h) below, the following uses shall be prohibited on the Developer
Parcels:
(a) any car washing establishment other than (i) a single
vehicle automated car wash which is incidental to a gas station operation, (ii)
a car wash located on Pads 1, 2, 3, or 4, (iii) a car wash located on Pad 10, or
the Future Development Parcel; provided, if Costco shall have approved the
configuration and layout thereof in Costco's reasonable discretion if the car
wash is to be located on Pad 10 or (if annexed) on the Future Development
Parcel;
(b) any entertainment, recreation or amusement use, whether
directed to children or adults other than a retail store which sells or rents
video or musical recordings for off-premises use ("Entertainment Uses") located
within seven hundred and fifty feet (750') of the Costco Building Entrance. Such
"Entertainment Uses" shall include, without limitation, any one or more of the
following: skating rink, bowling alley, bowling alley, planned play environment,
arcade games, amusement gallery, rides, video or redemption games, play for fun
casino games, golf simulations, rodeo simulations, other sport simulations and
carnival activities. Notwithstanding the foregoing, however, Entertainment Uses
shall be allowed anywhere on the Developer Parcels as an incidental use which is
included within a retail store or restaurant provided such incidental use does
not exceed the lesser of twenty-five percent (25%) of the Floor Area of the
primary use facility or two thousand (2,000) square feet per
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primary use facility (such Entertainment Use shall be treated as part of the
Floor Area of the primary use for parking ratio and all other purposes, and a
restaurant or fast food facility which is not licensed to serve any alcoholic
beverages shall be subject to 10:1000 parking ratio provided any Entertainment
Use included within such facility qualifies as an incidental use under the
foregoing standards);
(c) health spas, health clubs, gyms, exercise studios, dance
studios, yoga or martial arts schools or similar facilities ("Health Club")
located within seven hundred fifty feet (750') of the Costco Building Entrance;
(d) any theater, playhouse, cinema or movie theater
("Theatres") located within seven hundred and fifty feet (750') of the Costco
Building Entrance;
(e) any restaurant, fast food facility, bar, tavern or other
establishment serving prepared food or drink which is licensed to serve any
alcoholic beverages (i.e., including beer and wine) except as follows: (i) Pad
1, Pad 2, Pad 3 or Pad 4 may (subject to the 30% limitation under Section
5.2.1(m) be utilized for such purposes, (ii) that portion of the "Majors" which
is located more than seven hundred and fifty feet (750') from the Costco
Building Entrance may (subject to the 30% limitation under Section 5.2.1(m)) be
used for such purposes and (iii) Pads 5 and 10 may be utilized for such purposes
provided that the facility thereon has no more than 20% of its Floor Area
(including, without limitation, patio areas so used) utilized as a bar, as a
dance floor or as a similar area dedicated primarily to alcoholic beverage sales
or entertainment rather than to food service;
(f) Any restaurant, or other establishment serving prepared
food or drink for on-premises or immediate off-premises consumption on Pads 6, 7
or 9 or on that portion of the Major Buildings located within seven hundred
fifth feet (750') of the Costco Building Entrance; provided, however, this
limitation shall not be applicable to: (i) any establishments which are an
"incidental" use to a Store comprising at least twenty thousand (20,000) square
feet of Floor Area as the term "incidental" is used in Section 4.4 above, or
(ii) any so-called fast-food facilities on Pads 6, 7 or 9 which are not licensed
to serve alcoholic beverages and do not offer waiter or waitress service;
(g) Any hotel, motel or other lodging facility ("Hotel");
(h) The Costco Parcel may be used for any of the uses limited
under this Section 5.2.2. If the Costco Parcel is utilized for an Entertainment
Use (other than an incidental use), as a Health Club, as a Theatre, as a Hotel
or as an industrial or
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office use (other than an incidental use), then in such event and only in such
event, any portion of the Developer Parcels may be used as an Entertainment Use,
as a Health Club, as a Theatre, as a Hotel or as a restaurant (subject to the
30% limitation under Section 5.2.1(m)). All of such uses, whether on the Costco
Parcel or on the Developer Parcel shall be subject to the other terms of this
REA, including but not limited to, parking ratio requirements. Any Hotel use on
the Developer Parcels shall be permitted only under the conditions set forth in
this subsection, shall be located more than seven hundred and fifty (750') from
the Costco Building Entrance, and shall be required to satisfy the applicable
parking ratio requirement for each type of use within such facility as if each
use were a separate business. Any banquet rooms shall be treated as an
Entertainment Use and be subject to a 15 per 1000 parking ratio requirement.
Notwithstanding the foregoing, the aforesaid seven hundred and fifty foot (750')
limitation on Hotel uses on the Developer Parcels shall not be applicable if the
Costco Parcel is utilized as a Hotel.
The Building Envelope Area containing Pad 4 shall be permitted to be
used for the uses under Sections 5.2.2(b), (c) and (d) as if it were entirely
located more than 750' from the Costco Building Entrance notwithstanding the
fact that a portion of said Envelope Area is located closer than 750' to the
Costco Building Entrance.
5.2.3 Building to Land Ratio. Without limitation upon any other
provision hereof, the Building Floor Area to land square footage ratio for each
legal parcel upon which a "Pad" Building is located shall be no greater than
twenty-five percent (25%). Developer shall not materially alter the size or
configuration of Parcel 4 or Parcel 5.
5.3 Non-Interference with Common Area. In order to provide for the
orderly development and operation of the Project:
(a) Except as provided in Section 5.3(c) below, no Owner
shall permit any display or sale of merchandise, or any storage or placement of
merchandise, portable signs or other objects belonging to an occupant of said
Owner's Parcel outside the defined exterior walls, roof and permanent doorways
of any Building; provided, however, that this restriction shall not apply to any
outdoor sales area located within a Building Area.
(b) No Owner shall permit any occupant of said Owner's Parcel
to carry any merchandise or substance or to perform any activity in relation to
the use of such Owner's Parcel which would (i) cause or threaten the
cancellation of any insurance covering any portion of the Project or (ii)
increase the insurance rates applicable to the Common Area or the Buildings on
the other Owner's Parcel over the rates which would otherwise
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apply unless such occupant shall pay the increased insurance cost on demand.
(c) The restrictions under Section 4.2, Section 5.2,
Section 5.3(a) or elsewhere within this Agreement shall not be deemed to
prohibit (i) the use by Costco of the sidewalk area on its Parcel adjacent to
its Building for food sales by vendors from movable carts or kiosks (such as
hot dog cart and cooler or the like), as an outdoor dining area, or for the
sale of bulk items, (ii) the use by Costco of the sidewalks on its Parcel for
the storage of shopping carts, (iii) the use by Costco of the Common Areas of
its Parcel for the storage of shopping carts, or any other use consistent
with Costco's business purposes, so long as such cart storage or other use
does not reduce the number of parking spaces on such Parcel below the minimum
parking radio requirements under Section 4.4 above; (iv) the use by Costco of
one temporary outdoor sales area of up to fifteen thousand (15,000) square
feet in size within the Common Area on the Costco Parcel; (v) the use by the
Owner of the Developer Parcels of one temporary outdoor sales area of up to
(15,000) square feet in size within the Common Area on the Developer Parcels
to be located not less than four hundred feet (400') from the Costco Building
Entrance; or (vi) the display for sale by Costco within the Common Area on
the Costco Parcel of up to five (5) cars for sale or (viii) the operation of
a gas station on the Costco Parcel.
5.4. Exclusive Use. No portion of the Shopping Center other than the
Costco Parcel shall be used or operated as a wholesale or retail general
merchandise facility which has a merchandising concept based upon a relatively
limited number of stock keeping units in a large number of product categories or
as a wholesale grocer; provided, however, that this use restriction shall lapse
if the Costco Parcel ceases to be operated for such use by anyone and such
non-use continues for a period of one (1) year plus any period of repair,
remodeling, reconstruction or casualty restoration. The foregoing prohibition
includes, but shall not be limited to: (i) any business which operates as a
membership warehouse club, (ii) any business operated under the following trade
names of Sam's or BJ's, and (iii) any businesses similar to those operated under
the following trade names: Costco, Price Club, Sam's, BJ's, Jetro or Smart and
Final. The foregoing prohibition shall not prohibit any wholesale or retail
merchandise facility (other than a wholesale grocer which is prohibited) which
specializes in a particular type of merchandise including, without limitation,
home improvement store (e.g., HomeBase, Home Depot, Orchard Supply), a toy
and/or children's store (e.g., Toys R Us, Kids R Us, Babies R Us), a pet store
(e.g., Petco, PetsMart), an office supply store (e.g., Staples, Office Max,
Tri-Max or Office Depot) or apparel (e.g., Ross, Marshalls, The Gap, Old Navy).
Also, the foregoing shall not prohibit a general merchandise store which carries
a large number
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of stock keeping units in a large number of categories including, without
limitation, a conventional discount department store (e.g., Target, WalMart,
K-Mart) or a modern supermarket and/or drug store (e.g., Lucky, Sav-On, Longs or
Albertsons).
ARTICLE VI
MAINTENANCE OF IMPROVEMENTS
6.1. Maintenance of Buildings. Each Owner shall at all times during the
term of this Agreement, at its sole cost and expense, maintain, or cause to be
maintained, the exterior of buildings from time to time located on such Owner's
Parcel, in good repair, clean condition and free of trash and debris, reasonable
wear and tear excepted, subject to Article VII.
6.2. Maintenance of Common Area. Each Owner shall at all times during
the term of this Agreement, at its sole cost and expense, maintain and repair
the Common Area located on such Owner's Parcel and keep it in good condition and
repair, clean, free of rubbish and other hazards to persons using such area,
properly lighted and landscaped (in accordance with City approved landscaping
plans). Any unimproved Common Area shall be kept dust and litter-free. The
minimum standard of maintenance for the improved Common Area shall be comparable
to the standard of maintenance followed in other first class developments of
comparable size in the State of California and in compliance with all applicable
governmental laws, rules, regulations orders and ordinances, and the provisions
of this Agreement. All Common Area improvements shall be repaired or replaced
with materials at least equal to the quality of the materials being replaced or
replaced so as to maintain the architectural and aesthetic harmony of the
Project as a whole.
6.3. Certain maintenance Responsibilities. The maintenance and repair
obligations of each Owner hereunder with respect to its Parcel(s) shall include,
but shall not be limited to, the following:
(a) Drive and Parking Areas. Maintaining, cleaning and
replacing all paved surfaces and curbs in a smooth and evenly covered condition,
such work shall include, without limitation, sweeping, restriping, resealing and
resurfacing.
(b) Debris and Refuse. Periodic removal of all papers,
debris, filth, refuse, ice and snow, including sweeping to the extent necessary
to keep the Common Area in a first-class, clean and orderly condition. All
sweeping shall be at appropriate intervals during such times as shall not
interfere with the conduct of business or use of the Common Area by persons
intending to conduct business with occupants of the Project.
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(c) Sign and Markers. Placing, cleaning, keeping in repair,
replacing and repainting any appropriate directional signs or markers, including
any handicapped parking signs.
(d) Lighting. Maintaining, cleaning and replacing Common Area
lighting facilities, including lamps, ballasts and lenses. Each Owner shall
cause the lighting on its Parcel to remain illuminated until the later to occur
of 10:00 p.m. or two (2) hours after the last business located on such Parcel
shall have closed for business on that day.
(e) Obstructions. Keeping the Common Area free from any
obstructions including those caused by the sale or display of merchandise,
unless such obstruction is permitted under the provisions of this Agreement.
(f) Sidewalks. Maintaining, cleaning and replacing of all
sidewalks, including those adjacent and contiguous to buildings located within
the Project. Sidewalks shall be cleaned and swept at appropriate intervals
during such time as shall not interfere with the conduct of business or use of
the Common Area.
6.4. Common Utility lines and Lettered Parcels.
(a) Cost Allocation. The cost of the maintenance and repair
of the Common Utility Lines and the Lettered Lots shall be borne as follows:
each Parcel Owner (which shall include the Owner of the Future Development
Parcel for the purposes of this Section 6.4 and the corresponding remedies
provisions under Section 10 below) shall be responsible for a share ("Pro Rata
Share") of the applicable work determined as follows:
(i) as to the Common Utility Lines, each Owner's share
shall be equal to a fraction the numerator of which is the number of square feet
of land area within the subject Parcel and the denominator of which is the
number of square feet of land within Parcels 1 through 6 of the Parcel Map.
(ii) as to the Lettered Parcels, each Owner's share
shall be equal to a fraction the numerator of which is the number of square feet
of land within the subject parcel (except that the Future Development Parcel
shall be deemed to contain a number of square feet equal to the sum of the
number of square feet in both Parcels 6 and 7 of the Parcel Map) and the
denominator of which is the number of square feet of land within Parcels 1
through 7 of the Parcel Map.
(iii) the foregoing allocation of the cost of
maintaining the Lettered Parcels shall apply among the Owners notwithstanding
the fact that each Owner of a parcel within the Parcel Map may have a different
or greater obligation to the City with respect to the maintenance of the
Lettered Parcels under a
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recorded covenant, whether such covenant is recorded on, before or after the
date hereof.
(b) Performance of Maintenance; Reimbursement. Unless the
Owner of the Costco Parcel and the Owner of a Majority-in-Interest of the
Developer Parcels shall otherwise agree in a writing which has been recorded in
the Official Records of the County in which the Shopping Center is located, the
Owner of the largest number of square feet of land within the Developer Parcels
shall be responsible to accomplish the maintenance and repair of (i) the Common
Utility Lines, and (ii) the Lettered Parcels. The Owner responsible for
performing any work under this Section 6.4(b) shall be entitled to reimbursement
from each other Owner for each other Owner's Pro Rata Share of the cost of the
work which it has performed pursuant to this Section 6.4(b) and said
reimbursement shall be due within thirty (30) days of a request therefor
accompanied by reasonable supporting documentation. The rights and remedies
provided under Section 10.4 below shall be applicable hereto including, without
limitation, the right of another Owner to cure or abate under Section 10.3 below
if an Owner fails to perform its maintenance responsibilities under this Section
6.4(b) and the right of a "Creditor Owner" who has not been paid the
reimbursement due it under this Section to file a Claim of Lien pursuant to
Section 10.4 below.
(c) The maintenance of the Lettered Parcels pursuant to
Section 6.4(b) above includes irrigating, fertilizing, pruning and replacing as
appropriate the landscaping and/or landscape irrigation on the Lettered Parcels.
(d) Nothing contained in Section 6.4, however, shall limit or
impair the obligations of any Owner who initially installed any improvements
under a separate agreement for the failure to initially install the same in
accordance with such agreement or to permit any Owner to recover any costs
relating to the Common Utility Lines or Lettered Parcels reimbursed under an
applicable warranty.
ARTICLE VII
DAMAGE TO IMPROVEMENTS
7.1. Restoration of Common Area. In the event of any damage or
destruction to the Common Area on any Parcel, whether insured or uninsured, the
Owner with respect to such Parcel shall restore, repair or rebuild such Common
Area with all due diligence as nearly as possible to at least as good a
condition as it was in immediately prior to such damage or destruction.
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7.2. Restoration of Buildings. In the event of damage to or destruction
of the Building(s) on an Owner's Parcel, such Owner may, but shall not be
obligated to, restore and reconstruct such Building(s) within such Owner's
Building Area. In the event an Owner so elects, such Owner shall restore and
reconstruct such Building(s) to at least as good a condition as it or they were
in immediately prior to such damage or destruction. All such restoration and
reconstruction shall be performed in accordance with the following requirements,
as the same are applicable thereto.
(a) No such work shall be commenced which would alter the
Common Area from the plans originally approved therefor unless the Owner
desiring to perform the same has in each instance complied with the appropriate
provisions of Article II with respect to plan approval. (b) All work shall be
performed in a good and workmanlike manner and shall conform to and comply with:
(i) the plans and specifications prepared therefor as
aforesaid;
(ii) all applicable requirements of laws, codes,
regulations and rules; and
(iii) all applicable requirements of this Agreement.
(c) All such work shall be completed with due diligence, and
at the sole cost and expense of the Owner performing the same.
7.3. Clearing the Premises. Whenever an Owner elects not to restore,
repair or rebuild its Building(s) that has or have been damaged or destroyed,
such Owner, at its sole cost and expense, shall raze such Building(s) or such
part thereof as has or have been damaged or destroyed, clear the premises of all
debris, and all areas not restored to their original use shall, at the expense
of such Owner, be leveled, cleared and improved with, at the option of the Owner
of such Parcel, either landscaping or parking area, of like standard and design
as the Common Area of the Project.
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ARTICLE VIII
EMINENT DOMAIN
In the event any part of the Project, including the Common Area,
shall be taken by eminent domain or any other similar authority of law, the
entire award for value of the land and improvements so taken shall belong to
the Owner whose property was so taken or its tenants, as their leases may
provide, and the other Owner (or Owners, as the case may be) shall not claim
any portion of such award by virtue of any interests created by this
Agreement. However, the other Owner (or Owners, as the case may be) may file
a claim with the condemning authority over and above the value of the
property so taken to the extent of any damage suffered by such Owner (or
Owners, as the case may be) resulting from the severance of such area taken.
The Owner whose property was so condemned shall promptly repair and restore
in accordance with this Agreement the remaining portion of its Parcel as
nearly as practicable to the condition existing just prior to such
condemnation without contribution from the other Owner.
ARTICLE IX
GENERAL PROVISIONS
9.1. Realty Taxes and Assessments. Each Owner shall, at its sole
cost and expense, pay when due, all real estate taxes and assessments which
may be levied, assessed, or charged by any public authority against such
Owner's Parcel, the improvements thereon or any other part thereof including,
without limitation, the Common Area on its Parcel. In the event an Owner
shall deem any real estate tax or assessment (including the rate thereof or
the assessed valuation of the property) to be excessive or illegal, such
Owner shall have the right, at its own cost and expense, to contest the same
by appropriate proceedings, and nothing contained in this section shall
require such Owner to pay any such real estate tax or assessment as long as
(a) no other Owner's Parcel would be immediately affected by such failure to
pay (or bond); and (b) the amount or validity thereof shall be contested in
good faith. If the failure to pay (or bond) such tax would affect the other
Owner's Parcel, such other Owner shall have the right to pay such tax and
shall have a lien on the nonpaying Owner's Parcel for the amount so paid
until reimbursed for such payment. Any such lien shall be subject to and
junior to, and shall in no way impair or defeat the lien or charge of any
Mortgagee.
9.2. Indemnification. Each Owner shall indemnify, defend, and save
the other Owner harmless from and against any and all demands, liabilities,
damages, expenses, causes of action, suits, claims, and judgments, including
reasonable attorneys' fees,
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arising from injury or death to person or damage to property that occurs on
the indemnifying Owner's Parcel. An Owner shall not be entitled to such
indemnification for any damage caused to such Owner by reason of its
negligence, recklessness or willful misconduct.
9.3. Liability Insurance. Each Owner (and contractors as required
pursuant to Section 2.8 (b) above, and in such event the provisions in this
Section 9.3 shall apply fully to such contractors) shall severally, at all
times during the term of this Agreement, maintain or cause to be maintained
in full force and effect a comprehensive general public liability insurance
policy covering its Parcel, with a financially responsible insurance company
or companies, including coverage for any accident resulting in bodily injury
to or death of any person and consequential damages arising therefrom, and a
comprehensive property damage insurance, each in an amount not less than
$5,000,000, as such amount is adjusted to pursuant hereto, per occurrence and
including coverage of the contractual liability contained in Section 9.2
above. Each Owner's public liability policy with respect to the Common Area
on its Parcel shall name the other Owner as an additional insured. Each Owner
shall furnish to each other Owner requesting the same in writing, evidence
that the insurance referred to in this Section 9.3 is in full force and
effect and that the premiums for such policy have been paid. Such insurance
shall provide that the same may not be canceled, reduced below the required
minimum or materially amended without at least thirty (30) days prior written
notice being given by the insurer to all other Owners. The aforesaid
$5,000,000 coverage limit shall be adjusted on each fifth year anniversary of
December 31, 1997 by the change in the Consumer Price Index (or comparable
successor index) for the area in which the Shopping Center is located.
9.4. Blanket Insurance. Any insurance required to be carried
pursuant to this Article IX may be carried under a policy or policies
covering other liabilities and locations of an Owner; provided, however, that
such policy or policies apply to the Parcels required to be insured by this
Article IX in an amount not less than the amount of insurance required to be
carried by such Owner with respect thereto, pursuant to this Article IX.
9.5. Release and Waiver of Subrogation. Although the Owners are not
obligated to carry casualty insurance hereunder, if an Owner elects to carry
casualty insurance, it shall use reasonable efforts to obtain a waiver of
subrogation from its carrier for the benefit of the other Owners.
9.6. Ownership of Lettered Parcels. Neither Costco nor Developer
shall transfer, sell or in any manner alienate the Lettered Parcels or any
part thereof without the consent of the Community Development Director of the
City, except that each of
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Lettered Parcels A and B may be sold or encumbered together with the sale
or encumbrance of an adjacent buildable parcel in the Shopping Center of not
less than five (5) acres in land area, and Lettered Parcels C and D may be
sold or encumbered together with the sale or encumbrance of the Future
Development Parcel.
ARTICLE X
REMEDIES
10.1. Legal Action Generally. If any of the Owners breaches any
provision of this Agreement, then any other Owner may institute legal action
against the defaulting Owner for specific performance, injunction,
declaratory relief, damages, or any other remedy provided by law. All
remedies herein or at law shall be cumulative and not inclusive. As used
herein, any reference to rights or remedies "at law" or "under applicable
law" shall also include any rights or remedies "in equity".
10.2. Injunctive and Declaratory Relief. In the event of any
violation or threatened violation by any owner, tenant, or occupant of the
Project (or any portion thereof) of any of the terms, covenants, conditions,
and restrictions herein contained, in addition to any other remedies provided
for in this Agreement, any Owner shall have the right to enjoin such
violation or threatened violation and to bring an action for declaratory
relief in a court of competent jurisdiction.
10.3. Owner's Right to Cure or Abate. If any Owner (a "Defaulting
Owner") violates any covenant, condition or restriction contained in this
Agreement, or permits or suffers any occupant of its Parcel or Building Area
to violate any covenant, condition or restriction of this Agreement, then in
addition to any other remedy provided for in this Agreement, any Owner (the
"Creditor Owner") may demand by written notice (the "Default Notice") that
the violation be cured. Except for utility service interruptions or similar
emergencies which shall not require advance notice or cure periods hereunder,
if the Defaulting Owner does not cure the violation within thirty (30) days
after receipt of the Default Notice, or if such default is of a kind which
cannot reasonably be cured within thirty (30) days, and the Defaulting Owner
does not with such thirty (30) day period commence to cure such default and
diligently thereafter prosecute such cure to completion, then Creditor Owner
(and its agents and employees) shall have the right to (i) pay any sum owed
by the Defaulting Owner to the Person entitled thereto, (ii) enter upon the
Parcel or Building Area of the Defaulting Owner (or any portion of the Common
Area owned by the Defaulting Owner) and summarily abate, remove or otherwise
remedy any improvement, thing or condition which violates the terms of this
Agreement, and (iii) enter upon the Parcel or Building Area
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of the Defaulting Owner (or any portion of the Common Area owned by the
Defaulting Owner) and perform any obligation of the Defaulting Owner to be
performed thereon. The Defaulting Owner shall, within ten (10) days of
written demand by the other Owner, accompanied by appropriate supporting
documentation, reimburse the Creditor Owner for all costs and expenses
incurred by the Creditor Owner in undertaking any of the actions permitted by
clauses (i) through (iii) in the preceding sentence, including without
limitation, wages, benefits and overhead allocable to the time expended by
any employee of the Creditor Owner in taking such actions, together with
interest thereon at the rate equal to the Default Interest Rate, from the
date such costs and expenses were advanced or incurred by the Creditor Owner.
10.4. Lien. Any Creditor Owner shall be entitled to a lien against
the Parcel of the Defaulting Owner, which lien shall be created and
foreclosed in accordance with this Section 10.4.
(a) Creation. A lien authorized by this Section 10.4 shall
be created by recording a written instrument (the "Claim of Lien") in the
Official Records of San Bernardino County, California, which (i) references
this Agreement by recording number, (ii) alleges a specific breach of this
Agreement, (iii) states the amount owed by the Defaulting Owner through the
recording date of the Claim of Lien, (iv) contains a legal description of the
Parcel or Building Area of the Defaulting Owner, and (v) is executed and
acknowledged by the Creditor Owner.
(b) Amount. A lien created pursuant to this Section 10.4
shall include (i) the amount stated in the Claim of Lien, (ii) all costs and
expenses incurred in creating and foreclosing such lien (including attorneys'
fees), (iii) all amounts which become due from the Defaulting Owner (or its
successors or assigns) to the Creditor Owner after the date the Claim of Lien
is recorded, Whether such amounts arise from a continuation of the default
alleged in the Claim of Lien or from some other default under this Agreement,
and (iv) interest on all of the foregoing at the Default Interest Rate.
(c) Priority. The priority of a lien created pursuant to
this Section 10.4 shall be established solely by reference to the date the
Claim of Lien is recorded, and, accordingly, the same shall be junior to any
deed of trust or similar security instrument recorded after the date of this
Reciprocal Easement Agreement and prior to the recordation of any such Claim
of Lien.
(d) Extinguishment. If the Defaulting Owner cures its
default, and pays all amounts secured by a lien created pursuant to this
Section 10.4, the Creditor Owner shall record an instrument sufficient in
form and content to clear title to the
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Parcel or Building Area of the Defaulting Owner from the Creditor Owner's
lien.
(e) Foreclosure. A lien created pursuant to this Section
10.4 shall be foreclosed judicially, in the same manner as provided for
foreclosure of a mortgage of real property in the State of California.
10.5. Personal Obligation. Each Owner and Permittee, by acceptance
of the deed to, lease of or other conveyance of all or a portion of a Parcel
or Building Area or interest therein, shall be deemed to covenant and agree
to be personally bound by this Agreement. Any sum not paid, or other
obligation not performed when due, together with interest payable hereunder,
and all costs and attorneys' fees incurred in connection with collection,
shall be the personal obligation of the Person or Persons who were the Owners
and/or Permittees of the Parcel at the time the payment or obligation became
due. The personal obligation shall not be released by any transfer of the
parcel subsequent to the date such payment or obligation became due, but such
obligation shall run with the land and shall be binding upon any successor
Owner. Said successor Owner shall not be personally obligated for any such
payments or obligations which became due prior to its period of ownership,
and accordingly the other Owners may seek to enforce such prior payments and
obligations solely against the prior Owner and against the new Owner's
interest in the Shopping Center.
10.6. Remedies Cumulative. The remedies provided in this Article 10
are in addition to any remedies available elsewhere in this Agreement or
under applicable law. Exercise of one remedy shall not be deemed to preclude
exercise of other remedies for the same default, and all remedies available
to an Owner may be exercised cumulatively.
ARTICLE XI
MISCELLANEOUS
11.1. Notices. Any notice, payment, demand, offer, or communication
required or permitted to be given by any provision of this Agreement shall be
deemed to have been sufficiently given or served for all purposes if sent by
registered or certified mail (return receipt requested), postage and charges
prepaid, or by Federal Express or other reputable overnight delivery service
requiring a signature upon receipt, addressed as follows:
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To Developer: Lennar Rolling Ridge Inc.
23333 Avenida la Caza
Coto de Caza, CA 92679
Attn: President Land Division
and Lennar Partners
2049 Century Park East
Suite 920
Los Angeles, CA 90067
Attn: David Team
with a copy to: Samuels & Steel, LLP
18881 Von Karman, Suite 1400
Irvine, CA 92612
Attn: Herbert N. Samuels, Esq.
To Costco: Costco Companies, Inc.
999 Lake Drive
Issaquah, Washington 98027
Attn: Corporate Counsel
with a copy to: Greenberg Glusker Fields
Claman & Machtinger, LLP
1900 Avenue of the Stars, Suite 2200
Los Angeles, CA 90067
Attn: Henry D. Finkelstein, Esq.
Any such notice shall be deemed to be given on the date on which it is
received or receipt thereof is refused.
11.2. Binding Effect. All of the limitations, covenants, conditions,
easements, and restrictions contained herein shall attach to and run with the
Developer Parcels and the Costco Parcel, and shall, except as otherwise set
forth herein, benefit or be binding upon the successors and assigns of the
respective Owners. This Agreement and all the terms, covenants and conditions
herein contained shall be enforceable as equitable servitudes in favor of
said Parcels and any portion thereof.
11.3. Attorneys' Fees. In the event of any action between the Owners
hereto for breach of or to enforce any provision or right hereunder, the
unsuccessful Owner in such action shall pay to the successful Owner all costs
and expenses expressly including but not limited to, reasonable attorneys'
fees incurred by the successful Owner in connection with such action.
11.4. Breach Shall Not Permit Termination. It is expressly agreed
that no breach of this Agreement shall entitle any Owner to cancel, rescind,
or otherwise terminate this Agreement, and such limitations shall not affect
in any manner any of the rights or
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remedies which the Owners may have by reason of any breach of this Agreement.
11.5. Breach - Effect on Mortgagee and Right to Cure. Breach of any
of the covenants or restrictions contained in this Agreement shall not defeat
or render invalid the lien of any Mortgage made in good faith, but all of the
foregoing provisions, restrictions, and covenants shall be binding and
effective against any owner of any portion of the Project, or any part
thereof, who acquires title by foreclosure or trustee's sale or by deed in
lieu of foreclosure or trustee's sale.
Notwithstanding any other provision in this agreement for notices of default,
the Mortgagee of any Owner in default hereunder shall be entitled to notice
of said default, in the same manner that other notices are required to be
given under this Agreement; provided, however, that said Mortgagee shall
have, prior to the time of the default, notified the Owner hereto giving said
notice of default of the Mortgagee's mailing address. In the event that any
notice shall be given of the default of an Owner and such Defaulting Owner
has failed to cure or commence to cure such default as provided in this
Agreement then and in that event the Owner giving such notice of default
covenants to give such Mortgagee (which has previously given the above stated
notice to such Owner) under any Mortgage affecting the Parcel of the
Defaulting Owner an additional notice given in the manner provided above,
that the Defaulting Owner has failed to cure such default and such Mortgagee
shall have thirty (30) days after said additional notice to cure any such
default, or, if such default cannot be cured within thirty (30) days,
diligently to commence curing within such time and diligently pursue such
cure to completion within a reasonable time thereafter. Giving of any notice
of default or the failure to deliver a copy to any Mortgagee shall in no
event create any liability on the part of the Owner so declaring a default.
11.6. Effect on Third Parties. Except for Section 11.5 which is for
the benefit of a Mortgagee and Sections 9.6 and 11.8 which are for the
benefit of the City, the rights, privileges, or immunities conferred
hereunder are for the benefit of the Owners and not for any third party.
11.7. No Partnership. Neither this Agreement nor any acts of the
Owners hereto shall be deemed or construed by the parties hereto, or any of
them, or by any third person, to create the relationship of principal and
agent, or of partnership, or of joint venture, or of any association between
any of the Owners to this Agreement.
11.8. Modification. No modification, waiver, amendment, discharge,
or change of this Agreement shall be valid unless the same is in writing and
signed by Costco and a Majority of the
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Developer Parcel Owners. Any change, modification, amendment or rescission
which is made without the written consent of Costco and a Majority of the
Developer Parcel Owners shall be null and void and of no effect. No consent
or approval of any Owner other than the Costco and a Majority of the
Developer Parcel Owners shall be required in order to modify or amend any
provisions of this Agreement. This Agreement shall not be amended in any
manner which affects the extent, use of maintenance of the Lettered Parcels
without the prior written consent of the Community Developer Director of the
City. Neither the Lettered Parcels, nor any portion thereof, shall be
deannexed from the Shopping Center.
11.9. Severability. In the event any term, covenant, condition,
provision, or agreement contained herein is held to be invalid, void, or
otherwise unenforceable, by any court of competent jurisdiction, such holding
shall in no way affect the validity of enforceability of any other term,
covenant, condition, provision, or agreement contained herein.
11.10. Governing Law. This Agreement and the obligations of the
Owners hereunder shall be interpreted, construed, and enforced in accordance
with the laws of the State of California.
11.11. Terminology. All personal pronouns used in this Agreement,
whether used in the masculine, feminine, or neuter gender, shall include all
other genders; the singular shall include the plural and vice versa.
11.12. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original agreement, and
all of which shall constitute one agreement.
11.13. Captions. Article and section titles or captions contained
herein are inserted as a matter of convenience and for reference, and in no
way define, limit, extend, or describe the scope of this agreement or any
provisions hereof.
11.14. Consent. In any instance in which any Owner shall be
requested to consent to or approve of any matter with respect to which such
Owner's consent or approval is required by any of the provisions of this
Agreement, such consent or approval or disapproval shall be given in writing,
and shall not be unreasonably withheld or delayed, unless the provisions of
this Agreement with respect to a particular consent or approval shall
expressly provide otherwise.
11.15. Estoppel Certificate. Each Owner hereby severally covenants
that within thirty (30) days of the written request of the other Owner it
will issue to such other Owner or to any prospective Mortgagee, or purchaser
of such Owner's Parcel an estoppel certificate stating: (a) whether the Owner
to whom the
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request has been directed knows of any default under this Agreement and if
there are known defaults specifying the nature thereof; (b) whether to its
knowledge this Agreement has been assigned, modified or amended in any way
(and if it has, then stating the nature thereof); and (c) whether to the
Owner's knowledge this Agreement as of that date is in full force and effect.
11.16. Not A Public Dedication. Nothing herein contained shall be
deemed to be a gift or dedication of any portion of the Project to the
general public or for the general public or for any public purpose
whatsoever, it being the intention of the Owners hereto that this agreement
shall be strictly limited to and for the purposes herein expressed.
11.17. Release. If an Owner shall sell, transfer or assign its
entire Parcel or its interest therein, it shall, except as provided otherwise
in this Agreement be released from its unaccrued obligations hereunder from
and after the date of such sale, transfer or assignment. It shall be a
condition precedent to the release and discharge of any grantor or assignor
Owner that the following conditions are satisfied: (a) such grantor or
assignor shall give notice to the other Owner of any such sale, transfer,
conveyance or assignment promptly following the filing for record of the
instrument effecting the same, and (b) the transferee shall execute and
deliver to the other Owner a written statement in which: (i) the name and
address of the transferee shall be disclosed; and (ii) the transferee shall
acknowledge its obligation hereunder and agree to be bound by this Agreement.
Failure to deliver any such written statement shall not affect the running of
any covenants herein with the land, nor shall such failure negate, modify or
otherwise affect the liability of any transferee pursuant to the provisions
of this Agreement, but such failure shall constitute a default by the
transferee hereunder.
Anything in this Section to the contrary notwithstanding, it is
expressly understood and agreed that no such sale, transfer or assignment
shall effectuate a release pursuant to this Section until such successor in
interest to the transferor Owner has expressly undertaken to be fully bound
under the provisions of this Agreement in the place and stead of the
transferor Owner.
11.18. Time of Essence. Time is of the essence with respect to the
performance of each of the covenants and agreements contained in this
Agreement.
11.19. Entire Agreement. This Agreement and the exhibits hereto
contain all the representations and the entire agreement between the Owners
with respect to the subject matter hereof. Any prior correspondence,
memoranda or agreements are superseded in total by this Agreement and
Exhibits hereto. The provisions of this Agreement shall be construed as a
whole according to their common meaning and not strictly for or against any
Owner. This
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Agreement is not, however, intended to supersede the provision of any lease
as between an Owner and its tenant.
11.20. Excuse for Non-Performance. Each Owner shall be excused from
performing any obligation or undertaking provided in this Agreement, except
any obligation to pay any sums of money under the applicable provisions
hereof (unless such payment is conditioned upon performance of any obligation
or undertaking excused by this Section), in the event and so long as the
performance of any such obligation is prevented or delayed, retarded or
hindered by act of God, fire, earthquake, floods, explosion, actions of the
elements, war, invasion, insurrection, riot, mob violence, sabotage;
inability to procure or general shortage of labor, equipment, facilities,
materials or supplies in the ordinary course on the open market; failure of
normal transportation; strikes, lockouts, action of labor unions;
condemnation, requisition; laws, orders of governmental approvals or permits
despite the exercise of due diligence and best efforts by an Owner or any
other cause, whether similar or dissimilar to the foregoing, not within the
reasonable control of such Owner, other than the lack of or inability to
obtain funds.
11.21. Mechanics' Liens. In the event any mechanics' liens are filed
against the Parcel of any Owner, the Owner permitting or causing such line to
be filed hereby covenants either to pay the same and have it discharged of
record, promptly, or to take such action as may be required to reasonably and
legally object to such lien, or to have the lien removed from such Parcel,
and in all events agrees to have such lien discharged prior to the entry of
judgment for foreclosure of such lien. Upon request of the other Owner, the
Owner permitting or causing such lien to be filed against the other Owner's
Parcel agrees to furnish such security or indemnity conforming to this
Agreement as may be required, to and for the benefit of such other Owner, to
permit a title endorsement to such Owner's title policy to be issued relating
to such Owner's Parcel without showing thereon the effect of such lien.
11.22. Duration. This Agreement and each term, easement, covenant,
restriction and undertaking of this Agreement will remain in effect for a
term of ninety nine (99) years from the recordation date hereto and shall be
renewed for successive ten (10) year periods if Costco and a
Majority-in-Interest of the Developer Parcel Owners elect by written notice
to the other Owners to so renew. The easements under Sections 3.1(c)
(captioned "Utilities") and 3.1(e) (captioned "Drainage") and the
restrictions under Section 4.6 (captioned "Certain Setbacks") shall survive
the termination of this Agreement. In addition, those access easements shown
on Exhibit "D" hereto shall survive the termination of this Agreement.
11.23. Waiver of Default. No waiver of any default by any Owner to
this Agreement shall be implied from any omission by any other Owner to take
any action in respect of such default if such default continues or is
repeated. No express written waiver of any
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default shall affect any default or cover any period of time other than the
default and period of time specified in such express waiver. One or more
written waivers of any default in the performance of any term, provision or
covenant contained in this Agreement shall not be deemed to be a waiver of
any subsequent default in the performance of the same term, provision or
covenant or any other term, provision or covenant contained in this
Agreement. The consent or approval by any Owner to or of any act or request
by any other Owner requiring consent or approval shall not be deemed to waive
or render unnecessary the consent to or approval of any subsequent similar
acts or requests. The rights and remedies given to any Owner by this
Agreement shall be deemed to be cumulative and no one of such rights and
remedies shall be exclusive of any of the others, or if any other right or
remedy at law or in equity which any such Owner might otherwise have by
virtue of a default under this Agreement, and the exercise of one such right
or remedy by any such Owner shall not impair such Owner's standing to
exercise any other right or remedy.
11.24. Future Annexation.
(a) Future Development Parcel. The Owner of the property
shown on Exhibit "D" as "Future Development Parcel" or "Parcel 6" (the
"Future Development Parcel") may elect to cause the same to be included
within the Project upon the same terms and conditions (including, without
limitation, parking ratio requirements and Building Area limitations) as are
applicable to the original Project. Such annexation shall be effective upon
the recordation of an amendment to this Agreement executed by the Owners of a
Majority-in-Interest of the Developer Parcels, by the Owner of the Costco
Parcel and by the Owner of the Future Development Parcel, which amendment
shall include a site plan ("Revised Site Plan") designating the Building Area
and Common Areas on the Future Development Parcel as provided in Section
11.24(b) below.
(b) Designation of Future Development Parcel Building Area.
This Section 11.24(b) shall only be applicable if the Future Development
Parcel is annexed to the Project. At such time as Developer has determined
the improvements which it wishes to construct on the Future Development
Parcel, Developer shall prepare and submit to Costco and any other then
Owners for their approval the Revised Site Plan, showing the proposed
location of the Building Area and Common Area on the Future Development
Parcel and its integration with the original Project. Upon approval of the
Revised Site Plan by the Owners of a Majority-in-Interest of the Developer
Parcels, by the Owner of the Costco Parcel and by the Owner of the Future
Development Parcel, such Owners shall enter into an amendment to this
Agreement in recordable form substituting the Revised Site Plan for the Site
Plan attached hereto as Exhibit "B", and upon the execution of such amendment
and recordation thereof in the Recorder's Office, the terms "Building Area"
and "Common Area" shall be deemed to refer to those areas so designated on
the Revised Site Plan. Costco and each of the Owners
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of the Developer Parcels agree not to unreasonably withhold or delay its
consent to a proposed Revised Site Plan so long as (a) the location of the
Building Areas on the Future Development Parcel do not materially impair the
ingress to or egress from any Parcel, (b) the Building Area and Common Area
on the Future Development Parcels shall be configured so that the Common Area
on each Parcel will support its own parking needs, (c) the relative size of
the Building Area and Common Area shall be in conformity with the parking
ratio and other requirements of this Agreement, and (d) the location of the
Building Area on the Future Development Parcel 6 is no closer to Peyton Drive
than the Building on the Costco Parcel.
(c) Separation if Not Annexed. If the Future Development
Parcel is to be developed and not annexed to the Project, the Owner of the
Future Development Parcel shall be obligated to construct and maintain, at
its sole cost and expense, a six foot (6') high block wall on the Future
Development Parcel contiguous with its common lot line with the Costco
Parcel. Said wall shall be completed no later than the opening for business
of any facility on the Future Development Parcel. If the Future Development
Parcel is not annexed to the Project, then the restrictions contained in this
agreement shall not be applicable to the Future Development Parcel, but the
Future Development Parcel and its owner shall remain benefitted and burdened
(and its owner shall be deemed to be an "Owner") under Section 3.6 above
(captioned "Present Easement to Future Development Parcel"), under Section
6.4 (captioned "Common Utility Lines and Lettered Parcels"), under Section 10
(captioned "Remedies") and under this Section 11.24.
11.25. Exhibits. The following are attached to this Agreement.
Exhibit "A" - Parcel Map
Exhibit "B" - Site Plan
Exhibit "C" - Common Utility Lines and Permanent
Access Easements
Executed as of the date first above written.
"Developer" LENNAR ROLLING RIDGE, INC.,
a California corporation
By: /s/ Illegible
-------------------------------
Its: V.P.
-------------------------
"Costco" COSTCO WHOLESALE CORPORATION,
a Washington corporation
By: /s/ Richard J. Olin
-------------------------------
Its: Assistant Secretary
-------------------------
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STATE OF WASHINGTON )
) SS:
COUNTY OF KING )
On July 1, 1997, before me, V.A. Hilkemeir, a Notary Public,
personally appeared Richard J. Olin, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the
instrument the person(s) or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
Signature ___________________
(Seal)
STATE OF CALIFORNIA )
) SS:
COUNTY OF )
On ________________, 1997, before me, _____________, a Notary
Public, personally appeared _____________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person (s) or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________
(Seal)
48
<PAGE>
EXHIBIT A
PARCEL MAP NO. 14996
<PAGE>
EXHIBIT A
PARCEL MAP NO. 14996
<PAGE>
EXHIBIT A
PARCEL MAP NO. 14996
<PAGE>
EXHIBIT B
<PAGE>
EXHIBIT B
<PAGE>
PARCEL MAP NO. 14996
<PAGE>
PARCEL MAP NO. 14996
<PAGE>
STATE OF )
) SS:
COUNTY OF )
On _____________, 1997, before me, _____________, a Notary Public,
personally appeared _____________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s) or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________
(Seal)
STATE OF CALIFORNIA )
) SS:
COUNTY OF )
On ________________, 1997, before me, _____________, a Notary
Public, personally appeared _____________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me
that he/she/they executed the same in his/her/their authorized capacity(ies),
and that by his/her/their signature(s) on the instrument the person (s) or
the entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature ___________________
(Seal)
49
<PAGE>
OFF-SITE IMPROVEMENTS
SUBJECT TO BUYER'S REIMBURSEMENT
1. Installation of landscaping along Peyton Drive.
2. Installation of landscaping and irrigation along slopes ("Lettered Lots" as
defined in the Parcel 6 Development Agreement) as shown on Exhibit G-1.
3. Installation of road, curb, gutters and landscaping within the internal
access road from Rock Springs South to the Eagle Parcel substantially as
shown on Exhibit G-1.
<PAGE>
CROSSROADS MARKETPLACE
at CHINO HILLS
<PAGE>
SELLER-APPROVED CONTRACTORS
[To be Provided as Approved by Seller]
<PAGE>
ENVIRONMENTAL REPORTS
[To be Provided]
<PAGE>
Exhibit 10.137
WESTMINSTER GATEWAY SHOPPING CENTER
GROUND LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Title Page
- ------- ----- ----
<S> <C> <C>
SUMMARY......................................................... i
1 PREMISES, COMMON AREAS, PARKING................................. 1
2 TERM............................................................ 2
3 FIXED RENT...................................................... 3
4 ADDITIONAL RENT................................................. 4
5 INTENTIONALLY OMITTED........................................... 7
6 SECURITY DEPOSIT................................................ 7
7 UTILITIES AND SECURITY SERVICES................................. 7
8 USE OF PREMISES, COMPLIANCE WITH LAW............................ 8
9 ACCEPTANCE OF PREMISES.......................................... 9
10 ALTERATIONS..................................................... 10
11 LIENS AND ENCUMBRANCES.......................................... 11
12 TAXES ON THE PREMISES AND TENANTS PROPERTY...................... 12
13 MAINTENANCE AND REPAIR.......................................... 13
14 ENTRY AND INSPECTION............................................ 14
15 WAIVER AND INDEMNIFICATION...................................... 14
16 INSURANCE....................................................... 15
17 ASSIGNMENT AND SUBLETTING....................................... 17
18 TRANSFER OF LANDLORD'S INTEREST................................. 18
19 DAMAGE OR DESTRUCTION........................................... 19
20 EMINENT DOMAIN.................................................. 20
21 SIGNS AND AUCTIONS.............................................. 20
22 DEFAULTS AND REMEDIES........................................... 21
23 SURRENDER OF PREMISES; REMOVAL OF PROPERTY...................... 23
24 ATTORNEYS' FEES................................................. 24
25 WAIVER.......................................................... 24
26 HOLDING OVER.................................................... 25
27 SUBORDINATION AND ATTORNMENT.................................... 25
28 DEFINITIONS..................................................... 25
29 HEIRS AND ASSIGNS/TIME OF ESSENCE............................... 26
30 INTERPRETATION.................................................. 26
31 RIGHT OF LANDLORD TO PERFORM.................................... 27
32 NOTICES......................................................... 27
33 QUIET ENJOYMENT................................................. 27
34 ESTOPPEL CERTIFICATE............................................ 27
35 AUTHORITY....................................................... 27
36 BROKERS......................................................... 28
37 ACCORD AND SATISFACTION......................................... 28
38 LANDLORD RESERVATIONS........................................... 28
39 LENDER'S APPROVAL............................................... 28
40 HAZARDOUS OR INFECTIOUS SUBSTANCES.............................. 29
41 UTILITY RATIONING............................................... 31
42 TITLE........................................................... 32
43 MEMORANDUM OF LEASE............................................. 32
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE OF EXHIBITS
<S> <C>
Exhibit "A" Site Plan of Shopping Center
Exhibit "A-1" Tract Map
Exhibit "A-2" Site Plan (With "Common Areas" identified)
Exhibit "A-3" Exterior Design Plan
Exhibit "B" Rules and Regulations
Exhibit "C" Construction Exhibit
Exhibit "D" Plot Plan of Premises (with "Pad" identified;
MCG Architects version 01/28/98)
Exhibit "D-1" Site Plan (with construction areas, material
storage areas, and construction vehicle access
routes identified.)
Exhibit "E" Intentionally Omitted
Exhibit "F" Supplemental Agreement
Exhibit "G" Intentionally Omitted
Exhibit "H" Form Amendment to Declaration
</TABLE>
<PAGE>
WESTMINSTER GATEWAY
GROUND LEASE
THIS GROUND LEASE ("Lease"), dated for reference purposes only as of
the 5th day of March, 1998 (the "Execution Date"), is made by and between FF
PROPERTIES, L.P. a California limited partnership ("Landlord"), and EAGLE
HARDWARE & GARDEN, INC., a Washington corporation ("Tenant").
LEASE SUMMARY
The following summary (the "Lease Summary") sets forth the
definitions and meanings of the following terms for all purposes of this
Lease, unless otherwise specifically provided or modified herein.
1. Intentionally Omitted.
2. Shopping Center: That certain complex of retail stores commonly known as the
"Westminster Gateway" located at 7901 Trask Avenue, in the City of Westminster,
California, together with the Tenant "Building(s)" and all "Common Areas" (as
that term is hereinafter defined) and the land underlying the Buildings and
Common Areas (collectively, the "Shopping Center"). The Shopping Center is
comprised of Lots 1 through 7, inclusive, as more particularly set forth on that
certain Tract Map No. 15514 recorded on December 17, 1997 as Instrument No.
97-0651234 in Book 760, Pages 24-29, inclusive, of maps in the Office of the
County Recorder of Orange County, California (the "Map"), a copy of which is
attached as Exhibit "A-1". Exhibit "A", which depicts the general layout of the
Shopping Center, shall not be deemed a warranty, representation or agreement on
the part of Landlord that the Shopping Center will be (or has been) constructed
exactly as indicated on said site plan, or that it will continue in the future
to be exactly as indicated thereon.
3. Premises: That certain real property within the Shopping Center as depicted
on Exhibit "D" attached hereto and referred to as Lots 2, 3, 4 & 5 on Exhibit
"A-1", containing approximately five hundred thousand (500,000) square feet (the
"Premises"), upon which a building will be constructed containing approximately
one hundred thirteen thousand one hundred square feet (113,100) square feet with
a garden yard containing approximately twenty-four thousand four hundred and
fifty (24,450) square feet (collectively, the "Building"). The land on which the
Building is situated is referred to as the "Pad" and is shown on Exhibit "D,"
and consists of approximately one hundred thirty-seven thousand five hundred and
fifty (137,550) square feet. The Exhibit "D" Plot plan is the one Tenant will
submit for its "Governmental Approvals" under Paragraph 9.3.
4. Fixed Rent: Seven Hundred Fifty Thousand Dollars ($750,000) per year, subject
to periodic increases as provided in Article 3.
5. Intentionally Omitted.
6. Term: Twenty-five (25) years, with one ten-year option, followed by two
five-year options, as provided in Article 2.
7. Commencement Date: See Article 2.
8. Security Deposit: See Article 6.
9. Tenant's Proportionate Share of Common Areas Operating Costs: Eighty-eight
and 14/100 percent (88.14%), as adjusted from time to time as provided in
Paragraph 4.2. (Art. 4)
10. Use of Premises: For the retail sale of home improvement and gardening
products and other items customarily carried in Eagle Hardware and Garden stores
from time to time and for no other use or purpose, including without limitation
the prohibited uses set forth in the "Declaration" (defined in Paragraph 1.6).
(Art. 8)
11. Addresses:
(a) Landlord For Notices:
FF Properties, L.P.
Attn: Real Estate Department
120 N. Robertson Boulevard, Third Floor
Los Angeles, California 90048
Attention: Property Management
Fax: (310) 652-8538
Telephone: (310) 855-8453
(b) Landlord for Payments:
FF Properties, L.P.
120 N. Robertson Boulevard, Third Floor
Los Angeles, California 90048
Attention: Real Estate Accounting
<PAGE>
(c) Tenant For Notices:
Eagle Hardware & Garden
981 Powell Avenue S.W.
Renton, Washington 98055
Attention: Richard T. Takata
Fax: (452) 204-5169
(Art. 32)
12. Broker(s): Pacific Retail Partners, on behalf of Landlord, and Majestic
Realty, on behalf of Tenant. (Art. 36)
<PAGE>
WESTMINSTER GATEWAY
GROUND LEASE
In addition to each of the provisions contained in the Lease Summary,
all of the provisions, covenants and conditions set forth in the succeeding
Articles, Addenda, if any, and Exhibits attached hereto are incorporated in this
Lease and by this reference made a part hereof. Landlord and Tenant hereby agree
that this Lease shall be deemed binding and in full force and effect upon the
Execution Date, and further covenant and agree as follows:
ARTICLE 1
PREMISES, COMMON AREAS, PARKING
1.1 Premises. In consideration of and subject to each and all of the
covenants, terms and conditions herein set forth, Landlord hereby leases to
Tenant and Tenant hereby hires from Landlord the Premises located in the
Shopping Center.
1.2 Common Areas. Tenant and its employees, customers and invitees
shall have the non-exclusive license to use that portion of the Shopping Center
designated by Landlord for the common use of tenants of the Shopping Center and
any other persons permitted by Landlord to use same (the "Common Areas"), which
Common Areas include a portion of the Premises. The Common Areas, including the
Common Areas on the Premises, are designated on Exhibit "A-2" and shall be
subject to the terms and conditions of the Declaration and reasonable
non-discriminatory rules and regulations governing use as promulgated from time
to time by Landlord and uniformly applied (the "Rules and Regulations"),
including the designation of specific areas within the Shopping Center for
specific purposes or common uses. A copy of the current Rules and Regulations
are attached hereto as Exhibit "B."
1.3 Parking. During the term hereof, Landlord hereby grants Tenant and
its employees, customers, and invitees, subject to availability, the
non-exclusive license to use that portion of the Common Areas designated on
Exhibit "A-2" by Landlord for parking, subject to the Declaration and the Rules
and Regulations (which may include the designation of specific areas in which
vehicles owned by Tenant, its employees, subtenants and invitees shall be
parked). Tenant agrees to furnish to Landlord a complete list of its motor
vehicles and license numbers and the names of Tenant's employees at the Premises
who have automobiles and of their respective license numbers.
1.4 Ground Lease. The interest of Landlord in the Shopping Center is
that of a ground lessee pursuant to that certain lease dated as of July 1,
1994 by and between California Drive-In Theaters, Inc. as ground lessor
("Master Landlord") and Landlord, as ground lessee, as amended by that
certain First Addendum to Lease dated October 1, 1995 between Master Landlord
and Landlord (the "Master Lease"), a memorandum of which has been recorded.
Under the Master Lease, Landlord ground leases Lots 1 through 7, inclusive,
of the Map (each may be sometimes referred to singularly in a general manner
as a "Lot," or specifically as an Lot with a numerical designation;
collectively, they are referred to as the "Lots") shown on Exhibit "A-1."
This Lease is and at all times shall be subordinate to the Master Lease. No
later than ten (10) business days after the Execution Date, Landlord shall
provide Tenant with nondisturbance agreements in favor of and acceptable to
Tenant from the Master Landlord (and from any holders of any mortgages or
deeds of trust which now affect the Premises or the Shopping Center),
pursuant to which Master Landlord (or such holders of any mortgages or deeds
of trust, as the case may be) shall agree, in the event of termination of the
Master Lease, that Tenant's quiet enjoyment of the Premises will not be
disturbed so long as Tenant pays Rent, attorns to Master Landlord (or such
holder), and observes and performs all of the obligations under this Lease to
be observed and performed by Tenant. Failure to provide Tenant with all such
nondisturbance agreements by such date shall entitle Tenant to terminate this
Lease by giving Landlord written notice of Tenant's intention to terminate
this Lease within twenty (20) days after the date the nondisturbance
agreements were due and, if Landlord fails to deliver all such nondisturbance
agreements within ten (10) days after receipt of such notice from Tenant,
this Lease shall terminate. Upon such termination, all rights and obligations
of the parties, except those that expressly survive termination, shall
terminate and be of no further force or effect. Except as otherwise
specifically set forth in this Lease, as to the Premises all of the terms,
provisions, covenants, and conditions set forth in the Master Lease (but not
including Sections 2 and 3 (except to the extent of Tenant's rental
obligations under this Lease), 11, subclause (a) of Section 14 (except as to
the leasehold estate created hereby), Section 18.3 (but without limiting
Tenant's obligations under Paragraph 16.2 of this Lease), and Section 38(c)
thereof) shall constitute the terms, provisions, covenants, and conditions of
this Lease; provided, however, that unless the context unambiguously
otherwise requires, whatever the word "lessor" is used in the Master Lease,
it shall be deemed to refer to Landlord hereunder, and wherever the word
"lessee" is used in the Master Lease, it shall be deemed to refer to Tenant
hereunder. Except as otherwise specifically limited, modified, or
supplemented by this Lease, and specifically limited to the Premises only,
all of the covenants, agreements, obligations, and benefits of the
"tenant/lessee" under the Master Lease shall
<PAGE>
constitute the covenants, agreements, obligations, and benefits of the Tenant
hereunder, and all of the covenants, agreements, obligations, and benefits of
the "landlord/lessor" under the Master Lease shall
constitute the rights and benefits of the Landlord hereunder, except that Tenant
shall not be responsible for any obligations or duties that were required to be
paid or performed by the Landlord as lessee under the Master Lease prior to the
term of this Lease.
1.5 Intentionally Omitted.
1.6 The Declaration. This Lease is subordinate to the Restated and
Amended Declaration of Covenants, Conditions, Restrictions and Reciprocal
Easements dated August 1, 1997, by and between the Wal-Mart Stores, Inc., a
Delaware corporation ("Wal-Mart"), and Landlord recorded in the office of the
Recorder of Orange County on August 12, 1997, as Instrument No. 19970385376
(the "Declaration"). The Declaration contains protective and beneficial
provisions in order to implement a uniform, general and common plan designed
to preserve, protect and enhance the value, desirability and attractiveness
of the Shopping Center, and each Lot located therein, for the benefit of the
Landlord, and each lessee of Lots or retail space within the Shopping Center.
The Declaration contains: restrictions on use, development, design and
construction; maintenance obligations; grants of easements; requirements for
payment of taxes and liens; insurance requirements; indemnity obligations;
assessment and lien rights to enforce the Declaration; and other terms and
conditions, with which Tenant agrees to comply. Landlord shall use all
reasonable efforts to have the amendment to the Declaration attached hereto
as Exhibit "H" (the "Declaration Amendment") signed within forty-five (45)
days after the Execution Date and shall promptly notify Tenant of such
signing. If Landlord is unable to get the Declaration Amendment signed within
such 45-day period for any reason, Tenant shall have the right by written
notice to the Landlord and in its sole and absolute discretion to terminate
this Lease, in which case the parties' rights and obligations hereunder
(except for those that expressly survive termination) shall terminate and be
of no further force or effect. Tenant shall give notice of its election to
terminate this Lease under this Paragraph 1.6 within ten (10) business days
after the expiration of such 45-day period. Upon the satisfaction or waiver
of all of the Tenant's conditions to this Lease (and provided Landlord has
been able to get the Declaration Amendment signed), Landlord shall cause such
Declaration Amendment to be recorded in the Official Records of Orange
County, California, and Tenant hereby consents to such recordation. Upon
recordation of the Declaration, all references in this Lease to the
declaration shall mean to the Declaration as amended by the Declaration
Amendment. Landlord agrees not to further amend the Declaration in a way that
would materially and adversely affect Tenant's operations from the Premises
or Tenant's benefits under this Lease without obtaining Tenant's prior
written consent, which consent shall not be unreasonably withheld or delayed.
ARTICLE 2
TERM
2.1 Term. Unless sooner terminated or extended as provided herein, the
term of this Lease shall be for the period specified in Paragraph 6 of the Lease
Summary and shall commence on the Commencement Date referred to in Paragraph 7
of the Lease Summary. Should no date be specified as the Commencement Date in
Paragraph 7 of the Lease Summary, the Commencement Date shall be the date of the
first to occur of either of the following two events:
(a) The later to occur of (I) one hundred and eighty (180) days
after Landlord (or Landlord's supervising architect or other authorized
agent) tenders possession of the Pad to Tenant pursuant to Paragraph 4 of
Exhibit "C" -Construction Exhibit, or (II) one hundred and eighty (180) days
after permits are available for Tenant to start the Tenant its construction
of the "Tenant Improvements" (as defined in Exhibit "C"); or
(b) Upon the date Tenant actually commences to do business in, upon or
from the Premises.
Landlord shall deliver possession of the Pad to Tenant when all of the
conditions to Landlord's performance under this Lease have been satisfied or
waived. If Landlord is delayed in the delivery of possession of the Pad to
Tenant for any reason other than Tenant-caused delays (in which event there
shall be no change in the Commencement Date), the "Commencement Date" shall be
adjusted, accordingly. Notwithstanding anything in this Lease expressed or
implied to the contrary, the Construction Exhibit attached as Exhibit "C" to
this Lease shall be in full force and effect as of the Execution Date of this
Lease.
2.2 Supplemental Agreement. When the Commencement Date is not specified
in Paragraph 7 of the Lease Summary and, as a consequence, has been determined
as hereinabove set forth, then, within five (5) days after Tenant's receipt of
Landlord's written request therefor, Tenant agrees to execute a Supplemental
Agreement in the form attached hereto as Exhibit "F," to become a part hereof,
setting forth the Commencement Date and the expiration date and the date by
which Tenant must give Landlord notice of intent to exercise an extension
option.
2.3 Improvement Work. Landlord shall at its sole cost and expense,
promptly and diligently perform and complete all site preparation and Site
Improvements duties that are Landlord's responsibilities
2
<PAGE>
under and in accordance with Exhibit "C" and shall deliver possession of the Pad
to Tenant substantially in accordance with the terms of Paragraphs 2.1(a) and
Exhibit "C". Any construction and/or installation of Tenant's Improvements,
fixturization or other work on the Premises that is to be performed by Tenant
shall be the sole responsibility of Tenant.
2.4 Landlord's Failure to Complete. Notwithstanding anything to the
contrary herein, should Landlord fail to deliver possession of the Pad
substantially in accordance with the terms of Exhibit "C" by June 1, 1998, this
Lease shall then be voidable, at the option of Tenant, upon ten (10) days
written notice to Landlord, provided that Tenant gives such notice by June 11,
1998. If the work required to be performed by Landlord pursuant to Exhibit "C,"
if any, in order to deliver possession of the Pad to Tenant, depends in whole or
in part upon work to be performed in connection therewith by Tenant, then the
Pad shall be deemed to have been delivered to Tenant on the date that the Pad
would have been delivered if Tenant had performed the work required of Tenant in
a diligent and timely manner and in accordance with the schedule for the
performance of said work established by Landlord's project architect. The
reasonable determination by Landlord's project architect as to the date
possession of the Pad is delivered to Tenant in accordance with the terms of
Paragraph 2.1(a), taking into consideration delays, if any, caused by Tenant, as
aforesaid, shall be conclusive upon the parties hereto. If through no fault of
Landlord, Landlord fails to deliver possession of the Pad within one (1) year
after the Execution Date (and Tenant has not otherwise canceled this Lease as
provided in this Paragraph 2.4), either Landlord or Tenant may cancel this
Lease. In the event of any such termination, neither party shall have any
liability or obligation whatsoever to the other, except for any obligations
hereunder that expressly survive termination and that any deposit by Tenant
shall promptly be refunded, without interest, by Landlord.
2.5 Opening of Tenant's Premises. Promptly after delivery of possession
of the Pad, Tenant agrees to, at its sole cost and expense, (i) perform all of
Tenant's work set forth in Exhibit "C"; (ii) equip the Building with new trade
fixtures and all new personal property necessary or proper for the operation of
Tenant's business; and (iii) open for business as an Eagle Hardware store. If
Tenant fails to comply with its obligations under this Paragraph 2.5, Landlord
may, in addition to and without limiting any other remedies available at law or
in equity, terminate this lease.
2.6 Lease Year. The term "Lease Year" shall refer to each successive
twelve (12) month period following the Commencement Date.
2.7 Options To Extend Term. Landlord hereby grants to Tenant the
right to extend the term of this Lease (the "Extension Option") for one (1)
additional term of ten (10) years followed by two (2) additional success
terms of five (5) years each by giving Landlord written notice of its
intention to do so in each instance at least one (1) year (but not more than
two years) prior to the expiration of the then-current term. The term as so
extended shall be upon the same terms and conditions as set forth in this
Lease, except that the Fixed Rent during the extended term shall be
determined in the manner provided in Paragraph 3.2, below. Should Tenant in
any instance fail to give timely written notice of its intention to exercise
its option to extend the term, Tenant shall be deemed to have elected not to
exercise its said right to extend the term, and this Lease shall expire in
accordance with its terms. Time is of the essence with respect to the
requirement that Tenant give timely notice of its election to exercise its
right to extend the term, and Tenant's failure timely to exercise any option
shall constitute a material, irredeemable and incurable failure to satisfy a
condition precedent to the vesting of such right, and Tenant hereby expressly
waives any right to claim relief from forfeiture, or any other equitable
relief, from the consequences of any untimely exercise of its right to extend
the term of this Lease. The implied covenant of good faith and fair dealing
under this Lease shall not be construed to impose upon Landlord any
obligation to notify Tenant in advance of the impending deadline for the
exercise of any option, nor shall it obligate Landlord to excuse the tardy
exercise of any option, however slight. Notwithstanding anything to the
contrary set forth above, Tenant shall not have the right to exercise any
option to extend the term of this Lease (i) during the time commencing from
the date Landlord gives Tenant a written notice that Tenant is in default
under any material provision of this Lease and continuing until the default
described in said notice is cured, (ii) during the period of time commencing
on the day after a monetary obligation to Landlord is due from Tenant and
unpaid and continuing until the obligation is paid, or (iii) as to the second
and third Extension Options, if the prior options were not timely exercised.
The period of time within which any option may be exercised shall not be
extended or enlarged by reason of tenant's inability to exercise such option
prior to satisfaction of the foregoing conditions precedent. The Extension
Option may not be exercised or assigned involuntarily by or to any person or
entity other than Tenant except as provided in Article 17, nor shall the
Extension Option be assignable apart from this Lease.
ARTICLE 3
FIXED RENT
3.1 Payment. From and after the Commencement Date during the Term of
this Lease, Tenant shall pay to Landlord, at the address in the Lease Summary
or such other address as Landlord designates in writing, the fixed rent, as
set out in Paragraph 4 of the Lease Summary and adjusted pursuant to
Paragraph 3.2, below (the "Fixed Rent"), on the first day of each month, in
advance. If the Commencement Date occurs on a day other than the first day of
a month, then the Fixed Rent for the fraction of the month starting with the
3
<PAGE>
Commencement Date shall be paid on the Commencement Date, prorated on the
basis of the actual number of days in such month. If the term hereof ends on
a day other than the last day of a month, then the Fixed Rent for the month
during which the expiration occurs shall be prorated on the basis of the
actual number of days in such month. In addition to the Fixed Rent, Tenant
agrees to pay "Common Areas Operating Costs" (as described in Paragraph 4.1,
below). The Fixed Rent, Common Areas Operating Costs, Landlord's Taxes and
any other monetary obligations due Landlord under the Lease are hereinafter
referred to collectively as the "Rent." The Rent shall be payable to
Landlord, in lawful money of the United States of America, in currently
available funds at the address for Landlord set forth in the Lease Summary
(or to such other person or at such other place as Landlord may from time to
time designate writing), without notice, demand, offset, deduction or
setoff. In no event shall the Rent be reduced by any other provision of this
Lease for sums payable by Landlord. "Force Majeure" (as defined in Exhibit
"C") shall be deemed to impact the Commencement Date under this Lease.
3.2 Cost of Living Adjustment. The Fixed Rent payable for each Lease
Year, including during the Extension Options, shall be increased every five (5)
years during the term of this Lease, including the option terms, by the product
of (a) 2.50, multiplied by (b) the percentage increases, if any, in the Consumer
Price Index-All Urban Consumers (Los Angeles-Anaheim-Riverside Area; Base:
1982-84=100) (the "Index") as published by the United States Department of
Labor, Bureau of Labor Statistics (the "Bureau"). Notwithstanding the foregoing,
with respect to each five (5) year period of this Lease term, including the
Extension Options, in no event shall the percentage increase in the Fixed Rent
exceed a cumulative increase of ten percent (10%) from the prior five (5) year
period. For example, the Fixed Rent for the second five (5) years shall not
exceed $825,000 per year. The Index for the calendar month preceding the first
calendar month of each Lease Year in which an adjustment in the Fixed Rent is
required, as aforesaid, shall be compared with the Index for the calendar month
sixty (60) months earlier, and Fixed Rent shall be increased in accordance with
the percentage increase, if any, between such two (2) monthly indexes. In no
event shall Fixed Rent be decreased. Landlord shall calculate and give Tenant
written notice of any such increase in Fixed Rent, and the same shall be due and
payable by Tenant, retroactively, as of the first day of the Lease Year in which
the adjustment went into effect. Pending the calculation of the increase of
Fixed Rent as provided herein, Tenant shall continue to pay the same Fixed Rent
which it had been paying during the immediately preceding period and shall
promptly pay the deficiencies, if any, upon demand therefor by Landlord. No
delay or failure by Landlord to enforce this provision or any part thereof as to
Tenant, or to enforce similar or dissimilar provisions in other leases in use as
to any other tenants in the Shopping Center, shall be deemed to be a waiver
hereof, or prevent any subsequent or other enforcement hereof. If the Bureau
shall change the base reference period from 1982-84=100 or otherwise changes its
method of computing the Index, the successor Index so published shall be used by
applying an appropriate conversion formula or table as may be supplied by the
Bureau. If the region covered by the Index is changed, the renamed local Index
covering the region in which the Shopping Center is located shall be used. If
the publication frequency is changed, so that a monthly Index is not available
to make a cost of living adjustment in the Fixed Rent as specified herein, the
increase shall be based on the percentage difference between the Index for the
closest preceding calendar month prior to the Commencement Date for which a
monthly Index figure was available. Should the Bureau discontinue the
publication of the Index, or publish the same less frequently, or alter the same
in some other manner, Landlord, in its reasonable discretion, shall adopt a
substitute Index or procedure which reflects and monitors consumer prices.
Tenant shall promptly pay the deficiencies, if any, upon demand therefor by
Landlord.
ARTICLE 4
ADDITIONAL RENT
4.1 Common Areas Operating Costs; Definitions.
(a) The term "Common Areas Operating Costs" shall mean the sum of all
expenses paid or incurred by Landlord in connection with the operation,
maintenance, repair, alteration and periodic replacement of any part or portion
of the improvements maintained by Landlord in the Common Areas (that are not
paid directly by, or separately metered or otherwise chargeable to, individual
tenants) during the twelve-month period (currently July 1 through June 30)
utilized by Landlord as the fiscal year for the Shopping Center ("Fiscal Year"),
less the fixed contributions to such costs, if any, made by or on behalf of
particular tenants or occupants of the Shopping Center. Without limiting the
generality of the foregoing, the Common Areas Operating Costs shall include:
(i) electricity, water, gas, sewers, refuse collection and all other
utilities and utility services;
(ii) all utility taxes, charges, or similar impositions;
(iii) programs instituted to comply with governmental transportation
management requirements, and all repairs, improvements and alterations required
by any Federal, State and/or
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local law, regulation or ordinance, or necessary to ensure that the Common Areas
remain in compliance with all laws and regulations applicable thereto;
(iv) all periodic replacements of capital improvements in the Common
Areas required as a result of wear and tear or to improve efficiency of
operation, amortized on a straight line basis over their useful life as
determined in the reasonable judgment of Landlord (or over the period of cost
recovery or depreciation permitted by the U.S. Internal Revenue Code, if
shorter), with interest thereon at the rate being paid by Landlord, from time to
time, in connection with the financing of the improvements in question;
(v) period replacements and/or installation of personal property used
in connection with the Common Areas (the "Associated Personal Property"),
amortized over a period of five (5) years on a straight line basis with interest
thereon at the rate currently being paid by Landlord in connection with the
financing of such Associated Personal Property;
(vi) rental paid for leased machinery, tools, equipment, and motor
vehicles used in connection therewith;
(vii) maintenance and repair of electrical services and resurfacing and
repainting of parking lots, restriping, repairs to parking lots, sidewalks and
pedestrian passageways, cleaning, sweeping and janitorial services, landscaping,
light fixture and bulb replacement, trash and refuse receptacles, directional
signs and markers, and car stops. Tenant shall not be responsible for its
Proportionate Share for replacements of the parking lot asphalt more than once
every ten (10) years (unless more frequent replacements of such asphalt are
required to meet the standards set forth in the Declaration, in which case
Tenant shall be responsible for its full Proportionate Share);
(viii) insurance premiums and deductibles (for the Common Areas
policies referred to in Paragraph 16.3 herein), and alterations or replacements
of capital improvements in the Common Areas required by Landlord's insurance
carriers, or any of them, as a condition to the issuance or continuance of such
insurance;
(ix) the services of independent contractors including, without
limitation, the services of any person, firm or corporation selected by Landlord
to maintain the Common Areas or to provide security, on such terms and
conditions and for such duration as Landlord shall, in its sole judgment, deem
reasonable and appropriate;
(x) compensation (including, without limitation, employment taxes,
workers' compensation premiums, and fringe benefits) of all persons, whether or
not directly employed by Landlord, to the extent they perform duties in
connection with the operation, maintenance, repair and periodic replacement of
any part of portion of the improvements and/or Associated Personal Property in
the Common Areas;
(xi) legal and accounting services engaged by Landlord for the Common
Areas;
(xii) "Landlord's Taxes" (as hereinafter defined);
(xiii) costs to construct, install, operate, and maintain tenant
signage; Tenant and each tenant included on the freeway Shopping Center pylon
sign shall pay its proportionate share of the costs;
(xiv) any other expenses or charges of whatsoever kind, whether or not
hereinabove described, which, in accordance with generally accepted accounting
or management principles, would be considered an expense of operating,
maintaining, repairing and periodically replacing any part or portion of the
Common Areas and/or Associated Personal Property located or used in the Common
Areas, plus ten percent (10%) of all of said costs to cover Landlord's
administrative and overhead costs, and to compensate Landlord for supervision of
the operation, maintenance, and repair and periodic replacement of any part or
portion of the Common Areas. Said ten percent (10%) of costs shall be reduced by
amounts paid by Landlord to a management company performing some or all of the
management of the Common Areas. The ten percent (10%) shall not be applied to
Common Areas insurance premiums, Common Areas real property taxes, Common Areas
capital expenditures, or any third party management fees or other costs
associated with third party management of the Shopping Center.
(b) Common Areas Operating Costs shall not include:
(i) the costs of special services rendered to tenants (including
Tenant) for which a special charge is made to such tenants;
(ii) any costs borne directly by Tenant under this Lease;
(iii) Landlord's ground rent, if any;
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(iv) interest or amortization paid by Landlord in connection with any
loan or loans secured by the real property of which the Premises or Common Areas
are a part, unless said loans are made to finance costs expressly included above
in the definition of Common Areas Operating Costs; and
(v) expenses associated with the initial construction of the Center,
the Common Areas or any Common Areas improvements, including expenses of
correcting any defects in initial design or construction;
(c) The term "Estimated Common Areas Operating Costs" shall mean the
monthly estimates of Tenant's Proportionate Share of Common Areas Operating
Costs for each Lease Year to be given by Landlord to Tenant pursuant to the
terms hereof.
(d) The term "Landlord's Taxes" shall mean and include all real and
personal property taxes, charges and assessments, water and sewer rents and
taxes on parking of any description, which are levied, assessed upon or imposed
by any governmental authority of every kind and nature whatsoever, general and
special, during any Fiscal Year with respect to the Common Areas and all
improvements thereon, fixtures and equipment and all other property of Landlord,
real or personal, located in the Shopping Center and used in connection with the
operation, maintenance, repair and periodic replacement of any part or portion
of the Common Areas (computed as if paid in permitted installments regardless of
whether actually so paid), and any tax which shall be levied or assessed to or
in lieu of such real or personal property taxes (including without limitation,
any value added tax or municipal income tax), and any license fees, commercial
rental tax or other tax upon rents, the entering into of leases, or Landlord's
business of leasing or operating the Shopping Center, including all costs and
fees (including reasonable attorneys' fees) incurred by Landlord in contesting
taxes, assessments and/or negotiating with the public authorities as to same;
provided, however, that the term "Landlord's Taxes" shall not include any
federal, state, or local income tax, or any franchise, estate or inheritance
taxes. The term "Landlord's Taxes" shall also include any tax, fee, levy,
assessment or charge (i) in substitution, partially or totally, of any tax
previously included within the definition of Landlord's Taxes, or (ii) which is
imposed for a service or right not charged prior to June 1, 1978, or, if
previously charged, has been increased since June 1, 1978, or (iii) which is
imposed as a result of a transfer, either partial or total, of Landlord's
interest in the Shopping Center or any part thereof or which is added to a tax
or charge hereinbefore included within the definition of Landlord's Taxes by
reason of such transfer (provided that this subclause (iii) is mean to apply to
increases in property taxes resulting from any such transfer, but not to the
imposition of any documentary transfer tax which may be assessed upon such
transfer), or (iv) which is imposed by reason of this transaction, any
modifications or changes hereto, any transfer hereof, or any Modification of the
Common Areas or any portion thereof.
4.2 Payment of Tenant's Proportionate Share. Tenant shall pay Tenant's
Proportionate Share of the Common Areas Operating Costs as set forth in
Paragraph 9 of the Lease Summary. Tenant shall pay to Landlord, in advance, on
the first day of each calendar month commencing on the Commencement Date, an
amount estimated by Landlord, from time to time, as being one-twelfth (1/12) of
Tenant's Proportionate Share for such Fiscal Year. Thereafter, within sixty (60)
days after the end of each Fiscal Year, Landlord shall deliver to Tenant a
written statement setting forth the amount of Tenant's Proportionate Share of
the actual Common Areas Operating Costs for such Fiscal Year. If the aggregate
payments made by Tenant for any such Fiscal Year exceed the amount of Tenant's
Proportionate Share for such Fiscal Year, such excess shall be applied as a
credit against future payments to be made by Tenant under this Paragraph. If the
aggregate payments made by Tenant for any such Fiscal Year are less than the
amount of Tenant's Proportionate Share for such Fiscal Year, Tenant shall,
immediately upon demand therefor, pay Landlord the amount of any such
deficiency. Notwithstanding the foregoing, subsequent adjustments may be made by
Landlord as a result of information not available or expenses not determined or
determinable at the time any particular adjustment is made. In the event that
the Commencement Date is other than the first day of a full calendar month, the
first monthly payment shall be a pro rata amount of a full monthly contribution.
In the event that this Lease should end on any date other than the last day of a
Fiscal Year, Tenant's Proportionate Share shall be adjusted on the basis of the
ratio which the number of days which have elapsed from the commencement of the
said Fiscal Year to the later of the date on which this Lease terminates or
Tenant otherwise surrenders possession of the Premises bears to 365. Tenant's
obligation to pay Tenant's Proportionate share shall survive termination or
earlier expiration of this Lease. The term "Tenant's Proportionate Share" is
subject to adjustment from time to time, and Landlord expressly reserves the
right to adjust Tenant's Proportionate Share as is necessary to conform as-built
square footage, to reflect changes in the size of the Shopping Center subject to
Common Areas Operating Costs, or to reasonably operate the Shopping Center.
Tenant's Proportionate Share is the ratio, stated as a percentage, which the
number of square feet in Tenant's "Pad" (as defined in Paragraph 3 of the Lease
Summary and shown on Exhibit D and as may be adjusted by verification subsequent
to the completion of construction), bears to the total number of square feet of
building pads subject to Common Areas Operating Costs. Should the gross leasable
area of the Shopping Center ever vary from what it is as of the Commencement
Date, Tenant's Proportionate Share shall be adjusted so it is the ratio, stated
as a percentage, which the number of square feet in the Tenant's Pad bears to
the total number of square feet in all building pads in the Shopping Center then
subject to Common Areas Operating Costs.
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4.3 Landlord's Records. Landlord shall keep and maintain customary
records of all expenses incurred in connection with the operation, maintenance,
repair and periodic replacement of any part or portion of the improvements in
the Common Areas, and the same shall, upon at least ten (10) day's written
notice, be made available for inspection by Tenant at Tenant's expense during
regular business hours at the offices of Landlord, provided that such inspection
shall not occur more than once during any twelve (12) month period. If Tenant
does not dispute the same in writing within one (1) year of receiving the annual
written statement setting forth the amount of Tenant's Proportionate Share of
the actual Common Areas Operating Costs for such Fiscal Year, Tenant shall have
irrevocably waived its right to dispute such determination or calculation.
ARTICLE 5
INTENTIONALLY OMITTED
ARTICLE 6
SECURITY DEPOSIT
Tenant shall deposit with Landlord one (1) month's rent (the
"Deposit") as security for the full and faithful performance of each and
every obligation of Tenant pursuant to the provisions of this Lease to be
performed by Tenant, and any renewals or extensions of this Lease, if any. In
each instance when the Fixed Rent increases during the Lease Term, Tenant
shall, within five (5) business days after written demand therefor, deposit
with Landlord an additional sum so that the amount of the Deposit held by
Landlord shall at all times be the equivalent of one month's rent. If Tenant
defaults with respect to any provision of this Lease, including, without
limitation, the provisions relating to the payment of Rent, the reimbursement
of all costs incurred by Landlord in the enforcement of its remedies under
this Lease, including, without limitation, attorneys' fees and expenses, the
repair of damage to the Premises or the Common Areas and/or the cleaning of
the Premises upon termination of this Lease, Landlord may, to the full extent
permitted by law, use, apply or retain all or any portion of the Deposit for
payment of any Rent or other sum in default, for reimbursement of such costs
and expenses, the repair of such damage, the cost of such cleaning or the
payment of any other amount which Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default or to compensate Landlord
for any other loss or damage which Landlord may suffer by reason of Tenant's
default or to compensate Landlord for any other loss or damage which Landlord
may suffer by reason of Tenant's default. If any portion of the Deposit is so
used or applied, Tenant shall, within five (5) business days after written
demand therefor, deposit cash with Landlord in an amount sufficient to
restore the Deposit to its original amount, and Tenant's failure to do so
shall constitute a material breach of this Lease. Landlord's obligations with
respect to the Deposit are those of a debtor and not a trustee. Landlord
shall not be required to keep the Deposit separate from its general funds,
and Tenant shall not be entitled to interest on the Deposit. If Tenant shall
fully and faithfully perform each and every provision of this Lease to be
performed by it, the Deposit or any balance thereof shall be returned to
Tenant (or, at Landlord's option, to the last assignee of Tenant's interest
hereunder) within a reasonable period following the expiration of the Lease
term. The Deposit shall not constitute advance rent or liquidated damages,
nor shall Landlord's application of the Deposit in any way limit or restrict
the remedies which would otherwise be available to Landlord. Notwithstanding
anything to the contrary contained herein, so long as Tenant is the original
tenant named herein, Tenant shall not be required to deposit the Deposit.
ARTICLE 7
UTILITIES AND SECURITY SERVICES
7.1 Installation. Tenant shall install and use the utilities (including
water, gas, electricity, sewers and telephone supplied to or serving the
Premises) in accordance with the criteria set forth in Exhibit "C" hereof, and
Landlord's reasonable rules and regulations and the rules and regulations of the
public utility company or the governmental agency supplying the same. Landlord
shall not be responsible for providing any meters or other devices for the
measurement of utilities supplied to the Premises. Tenant shall make application
for and arrange for the installation of all meters or other devices.
7.2 Utilities. Tenant, at Tenant's sole cost and expense, shall pay
directly, prior to delinquency, all charges, duties and rates of every
description for water, gas, telephone and trash removal services, and all other
services and utilities supplied to the Premises together with any taxes or
surcharges thereon during the entire term of this Lease. Landlord shall not be
liable for, and Tenant shall not be entitled to, any abatement or reduction of
Rent by reason of any interruption or reduction in the amount or level of any of
the foregoing when such failure or reduction is caused or mandated by accident,
breakage, repairs, strikes, lockouts or other labor disturbances or labor
disputes of any character, or any law, regulation, rule, ordinance or court
order limiting or restricting the availability, use or consumption of utility
items, or by any other cause, similar or dissimilar. Landlord shall not be
liable under any circumstances for any loss of or damage or injury (including
death) to the person, property, or business of Tenant, any "Tenant Agent" (as
that term is defined in Paragraph 28(h)) or any other person, however occurring,
through or in connection with or incidental to the interruption or
discontinuance of any of the utilities or services described in this Article 7.
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7.3 Security Services. Landlord may, but shall be under no obligation
to, provide one or more security guards or a security service for the Shopping
Center; provided, however, that in no event shall Landlord be liable or
responsible for any loss of or damage or injury (including death) to the person,
property or business of Tenant, any Tenant Agent or any other person suffered by
reason of the absence of such security service or of any negligence, failure,
act or omission on the part of any security guard or service so provided. The
costs of any such security guard(s), or service(s) shall be included in Common
Areas Operating Costs.
7.4 Utility Services by Landlord. Should Landlord elect or be required
by any governmental authority to supply any utility services used or consumed in
the Premises, Tenant agrees to purchase and pay Landlord, as Additional Rent for
the same, at a cost not to exceed that which the utility company would have
charged Tenant for furnishing such utilities directly to Tenant. Tenant shall
pay such utilities costs to Landlord upon demand. If Landlord, as an
accommodation to Tenant, furnishes Tenant any utility hereunder, Landlord may,
at any time, at Landlord's sole option and upon not less than thirty (30) days
prior notice to Tenant, discontinue such service to the Premises, and Tenant
shall arrange for such service as provided in Paragraph 7.1, above. In the event
any of Tenant's utility charges are not separately metered, Tenant shall pay its
share of such charges based upon Tenant's use as determined by Landlord, in its
best judgment, as Additional Rent, upon written notice thereof from Landlord to
Tenant.
ARTICLE 8
USE OF PREMISES, COMPLIANCE WITH LAW
8.1 Use. Tenant shall use and occupy the Premises, as set forth in
Paragraph 8.2 herein, for the use specified in Paragraph 10 of the Lease
Summary, and Tenant shall not use or occupy the Premises for any other purpose
whatsoever (and including, without limitation, any of the restricted or
prohibited uses included in the Declaration), it being understood and agreed
that the restrictions on Tenant's use hereunder are to and for the benefit
solely of Landlord and are part of the consideration for Landlord's execution of
this Lease. Without limiting the above, Tenant shall not use or occupy the
Premises or the Common Areas in violation of law, and shall immediately
discontinue any use of the Premises or the Common Areas which is declared by any
governmental authority having jurisdiction to be a violation of law or
regulation. Landlord's failure to object to such use shall not constitute a
consent to a use which constitutes such a violation. Tenant, at its sole cost
and expense, shall comply, promptly, with any directive of any governmental
authority having jurisdiction which shall impose any duty upon Tenant or
Landlord with respect to the Premises, or the use or occupation thereof.
8.2 Obligation to Open or Operate. Tenant shall construct the Tenant's
Improvements and shall open for business as a fully-stocked, fully-staffed Eagle
Hardware and Garden store in accordance with the terms and conditions of this
Lease, and (except for reasonable periods of continuous and diligent remodeling
or repairs, or "events of delay" beyond the reasonable control of Tenant
described in Paragraph 28(i)) shall during the term of this Lease keep the
Premises open for business on such days and during such hours as are reasonable
and customary for Tenant's operations from time to time.
8.3 Increased Risk. Tenant agrees that Tenant will not do anything in
or upon the Premises which may be prohibited by any insurance policy in force
carried by Landlord or Tenant, from time to time, covering the Shopping Center
or any portion thereof. In the event Tenant's occupancy or conduct of business
in or upon the Premises (whether or not Landlord has consented to the same)
results in any increase in premiums for (or cancellation of) the insurance
carried from time to time by Landlord with respect to the Shopping Center,
Tenant shall, at Landlord's option, either cease such use or conduct,
immediately, or pay any resulting increase in premium upon demand therefor from
Landlord. In determining whether increased premiums or cancellation are a result
of Tenant's occupancy of the Premises, the written determination of the insurer
shall be conclusive. Tenant shall promptly comply with all reasonable
requirements of the insurance authority or of any insurer now or hereafter in
effect relating to the use and/or maintenance of the Premises.
8.4 Landlord's Recapture Rights. Landlord shall have the option to
terminate this Lease and recapture the Premises by giving Tenant written notice
thereof following the date of one of the following events:
(a) The failure of Tenant to keep the Premises open for business for
any sixty (60) consecutive-day period, excluding any closures for continuous and
diligent rebuilding, restoration, additions, remodeling, or repairs, or events
of delay as described in Section 28(i) below; or
(b) One hundred eighty (180) days following commencement of demolition
of the Premises and failure to diligently and continuously rebuild, replace or
use the Premises for commercial purposes.
In the event Landlord elects to terminate the Lease, such termination
shall be effective on the date thirty (30) days from the date of Tenant's
receipt of Landlord's notice of termination, unless within such
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thirty (30) days, Tenant informs Landlord in writing that Tenant intends to
rebuild or reopen the Premises for business, and diligently commences to
rebuild and does in fact reopen, the Premises for business. Upon Tenant's
surrender of the Premises, Landlord shall pay Tenant an amount equal to its
unamortized cost of the improvements to the Premises less all costs incurred
by Landlord to lease the Premises, including without limitation, costs of
removal and/or demolition of improvements, alterations to the Premises, and
marketing costs and brokers' commissions. Upon termination, this Lease
(except for any obligations occurring prior to such termination or that
expressly survive termination or, if requested by Landlord, Tenant's
obligations to remove improvements, and restore the Premises) will be of no
further force or effect, and Landlord and Tenant shall be released from all
future obligations under this Lease.
8.5 Restrictive Covenant. Landlord shall not lease or sell any portion
of the Shopping Center, other than the Wal-Mart parcel (Lot 1), (a) to an entity
operating more than 10,000 square feet from the Shopping Center and that carries
more than 25% of its on-site inventory in any home improvement, garden, nursery,
and building materials products typically provided by Tenant, or (b) to an
entity operating less than 10,000 square feet from the Shopping Center and that
carries more than 40% of its on-site inventory in any home improvement, garden,
nursery, and building materials products typically provided by Tenant.
ARTICLE 9
ACCEPTANCE OF PREMISES
9.1 As-Is-Acceptance. Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation or warranty with respect to the
Premises and the Shopping Center or any portion or aspect thereof, or with
respect to the suitability or fitness thereof for the conduct of Tenant's
business or for any other purpose. There have been no representations or
warranties made by or on behalf of Landlord in connection with this Lease or as
to any matters concerning the Shopping Center, including but not limited to the
condition, acreage, topography, climate, water, water rights, utilities, present
or future zoning, soil, subsoil, any "Hazardous Substance" (as defined in
Article 40), the purposes for which the Shopping Center is suited, drainage,
access to public roads, or proposed routes of roads or extensions thereof. The
Premises and Pad are being leased to Tenant "as is," "where is," and "with all
faults." Tenant represents to Landlord that Tenant is relying solely on its own
independent investigation of the Shopping Center and has had sufficient time and
opportunity to make such independent investigations, inquiries, and evaluations
as Tenant deems necessary or appropriate to decide for itself the degree and
scope of risk which exists in connection with this Lease. Notwithstanding the
above, Landlord will deliver Tenant a certification executed by Landlord's
engineer with respect to the compaction of the buildable Pad area. There shall
be a conclusive presumption that the Premises and the Shopping Center were in
good and satisfactory condition on the date Landlord delivered possession of the
Pad to Tenant.
9.2 Other Shopping Center Tenants. Tenant hereby acknowledges that the
Shopping Center is subject to certain use restrictions as set forth in the
Declaration. Tenant further acknowledges that it has read the Declaration and
agrees to be bound by all of the terms and conditions set forth therein, and
Tenant is hereby prohibited from using the Premises in any manner whatsoever
which could in any way be deemed to be in violation of any of the use
restrictions contained in the Declaration. It is expressly understood and agreed
by the parties hereto that except as otherwise herein set forth and in the
Declaration, nothing contained in this Lease, or in any manner expressed or
implied, is to be construed as in any way prohibiting, restricting or limiting
Landlord's right to use, rent or lease any portion, or all, of the Shopping
Center, or of any other property owned, managed or leased by Landlord or any
affiliate, partner, director or employee thereof, for any purpose, or use,
whether or not such purpose or use be in competition, direct or otherwise, with
the use for which the Premises herein are to be operated by Tenant, and that the
Declaration may be modified from time to time as may be permitted thereunder.
Landlord makes no warranties or representations as to the present occupants or
occupancy level of the Shopping Center, or of future occupancy commitments.
Landlord shall have the right to add or to remove major stores or kiosks, from
time to time, from the Shopping Center. Tenant waives any duty or obligation,
expressed or implied, on the part of Landlord, to keep the Shopping Center
leased or occupied, or partially leased or occupied, or to lease (or to not
lease) portions of the Shopping Center for major stores or for any other
specific purpose, use or type of use. Moreover, except as otherwise set forth in
Paragraph 8.5 or in the Declaration, Tenant acknowledges that nothing contained
in this Lease, or in any manner expressed or implied, is to be construed as
imposing any duty or obligation on the part of Landlord to prohibit or
discourage the conduct of other tenants in the Shopping Center, or that of any
other third parties, that may result in a loss or reduction of gross sales or
profitability by Tenant.
9.3 Governmental Approval Period. Commencing on the Execution Date,
Tenant shall have one hundred and eighty (180) days within which at its sole
cost, expense or risk, to obtain any and all necessary governmental approvals
and permits, including but not limited to those relating to planning, zoning,
development, building, fire protection, roads, signage and utilities, as may
be required by those governmental authorities having jurisdiction in order
for Tenant to use the Premises for the construction and operation of Tenant's
proposed Building ("Governmental Approvals"). Such 180-day period, which may
be extended by Landlord in its discretion for an additional ninety (90) days,
is hereinafter referred to as the "Approval Period"; the last day of the
Approval Period is referred to as the "Approval Termination Date". During the
Approval Period, all Governmental Approvals desired by Tenant to construct
its Building and operate its business shall
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be obtained, issued, transferred and delivered to Tenant. Landlord shall obtain
all approvals for development of the Shopping Center (other than approval of
Tenant's specific site plan) on or before the date Tenant submits its
application for its building permit to the appropriate governmental agency.
(a) Tenant shall, in good faith, diligently and expeditiously pursue
obtaining of the Governmental Approvals and shall keep Landlord informed of
Tenant's efforts in connection therewith.
(b) In the event that any governmental agency having jurisdiction
thereof shall fail to approve the "Plans and Specifications" defined in Exhibit
"C" or shall fail to issue any Governmental Approvals which shall be required in
connection with the construction and/or occupancy of the Premises within the
Approval Period, either party shall have the right, within five (5) business
days after the Approval Termination Date, to terminate this lease by giving
written notice thereof to the other party, in which event this Lease shall
terminate and the parties shall have no further obligations to each other with
respect to the Premises or this Lease (except those that expressly survive
termination). In the event that either party shall fail to terminate this Lease
within the time and manner provided for herein, the Lease shall remain in full
force and effect. Notwithstanding anything to the contrary contained in this
Lease, if any governmental agency, as a condition to granting any Governmental
Approval, requires any change in the Plans and Specifications or to the Exhibit
"D" Plot Plan which Landlord or Tenant determines, in its reasonable discretion,
is material and unacceptable or which violate the Declaration, Tenant or
Landlord shall have the right to terminate this Lease by giving written notice
thereof to the other party promptly upon receipt of such information from said
governmental agency, and this Lease shall immediately terminate and be of no
further force or effect, in which event, the parties shall have no further
obligations to each other with regard to this Lease and/or the Premises (except
those that expressly survive termination). Notwithstanding the above requirement
of prompt notice, Landlord and Tenant shall each have a reasonable period of
time (not to exceed thirty (30) days) after receipt of any such information from
such governmental agency to negotiate with such agency over any such required
change before having to give notice of termination to the other party.
(c) The failure of Tenant to timely deliver notice of termination to
Landlord on or before the Approval Termination Date shall be deemed to
constitute Tenant's satisfaction or waiver of this contingency and a waiver of
Tenant's right to terminate this Lease prior to the Commencement Date.
9.4 Landlord Representations. Landlord represents and warrants that,
except as otherwise disclosed to Tenant in writing, as of the date of this
Lease:
(a) Landlord has full and lawful right and authority to execute this
Lease and to deliver it to Tenant;
(b) To Landlord's actual knowledge (limited to the actual knowledge of
the corporate officers of the general partner of Landlord and with no duty to
inquire), there are no pending or threatened actions, suits, arbitrations,
claims, or proceedings, at law or in equity, affecting the Premises;
(c) To Landlord's actual knowledge (limited to the actual knowledge of
the corporate officers of Landlord and with no duty to inquire), the Premises is
in compliance with all applicable laws, codes, and ordinances; and
(d) Landlord is not in default under the Master Lease.
ARTICLE 10
ALTERATIONS
10.1 Alterations. Except as provided for in Exhibit "C," Tenant shall
make no other alterations, additions or improvements ("Tenant Changes") to the
Premises affecting the outside appearance of the Premises or any other part of
the Shopping Center, structural alterations of any kind, and/or alterations
affecting basic plumbing, air conditioning, electrical or life safety systems
shared with the Common Areas or other tenants' premises, if any, without
Landlord's prior written consent which shall not unreasonably be withheld or
delayed. Whenever Landlord's consent is required for Tenant Changes,
accompanying Tenant's written request for same, Tenant shall provide to Landlord
all plans and specifications related to such alterations. Whether or not
Landlord's consent is required, upon completion of any Tenant Changes, Tenant
shall provide to Landlord a copy of the as-built plans and specifications.
Tenant acknowledges that Landlord's review of the plans is for the sole benefit
of Landlord, and Landlord's approval does not constitute any representation by
Landlord as to the compliance of such plans with any law or fitness of such
alterations for a particular purpose or use. Tenant Changes (including, without
limitation, any air conditioning equipment or devices installed in or upon the
Premises) shall become the property of Landlord and shall be surrendered with
the Premises, as a part thereof, at the end of the term or earlier termination
hereof; except that Landlord may, by written notice to Tenant prior to the
termination hereof or within sixty (60) days after termination for default,
require Tenant to remove all Tenant Changes or such portion thereof as Landlord
may designate, and to repair any damage from such removal, all at Tenant's sole
expense. Landlord may impose such restrictions
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and conditions it deems appropriate on the construction of Tenant Changes
including, without limitation, the types and amounts of insurance required to be
carried by Tenant's general contractor for the benefit of Landlord and Tenant;
and requiring Tenant to use contractors that are licensed and bondable;
provided, however, that Tenant's selection of a general contractor shall not
otherwise require Landlord's approval. Without limiting the generality of the
foregoing. Tenant hereby covenants that, before commencing any Tenant Changes
and regardless of whether or not Landlord's consent is first required, Tenant
shall (i) give Landlord at least fifteen (15) business days' written notice of
the proposed commencement of such work (to afford Landlord and/or Master
Landlord an opportunity to post appropriate notices of nonresponsibility); (ii)
secure, at Tenant's sole cost and expense, a completion and lien indemnity bond,
in an amount equal to the cost of such Tenant Changes, and in all other respects
satisfactory to Landlord for such work, and (iii) furnish Landlord with properly
executed certificates of insurance in accordance with Paragraph 16.2 evidencing
the types and amounts of insurance coverage required to be carried by Tenant's
general contractor for the benefit of the Landlord and Tenant. Tenant covenants
and agrees that all alterations done by or pursuant to the direction of Tenant
shall be performed expeditiously, in a good and workmanlike manner, strictly in
accordance with any plans and specifications related to such alterations that
were approved by Landlord, in full compliance with all laws, rules, orders,
ordinances, directions, regulations and requirements of all governmental
agencies, offices, departments, bureaus and boards having jurisdiction, in full
compliance with the rules, orders, directions, regulations, and requirements of
the Insurance Service Office or any similar body, and in a manner so as to
minimize interference with pedestrian and vehicular traffic and other businesses
in the Shopping Center. Tenant shall procure and maintain in full force and
effect during the course of such work, at Tenant's sole cost and expense,
builder's risk, insurance in an amount reasonably satisfactory to Landlord. The
provisions of this Lease are intended fully to govern the rights and obligations
of Landlord and Tenant as they relate to the need for repairs to the Premises.
Accordingly, Tenant waives and releases any rights it may have to make repairs
at Landlord's expense or to quit the Premises under Sections 941, 1942(a), and
1932(l) of the California Civil Code or under any similar law, ordinance or
regulation which may now exist or hereafter be enacted or enforced which confers
upon Tenant the right to make any repairs to the Premises of the type allocated
to Landlord by this paragraph, whether or not for the account of Landlord, or to
terminate this Lease because of Landlord's failure to keep the Premises or the
Shopping Center in good order, condition and repair.
10.2 Other Tenant Changes. If any alteration, addition, replacement or
change shall be required by law or the requirements of any insurance company (as
a condition to the issuance or continuation of insurance coverage without
increase in Premium) to be made to the Premises for any reason including,
without limitation, (i) Tenant's failure to maintain the Premises in the manner
required hereby, (ii) Tenant's use of the Premises, a change in the manner or
mode of Tenant's use of the Premises, or the location of partitions, trade
fixtures, merchandise or other contents of the Premises, or (iii) any
requirement of law or ordinance or other requirement of any government or other
authority, then, such alterations, additions, replacements or changes shall be
promptly made and paid for solely by Tenant in accordance with Paragraph 10.1,
above.
ARTICLE 11
LIENS AND ENCUMBRANCES
11.1 Tenant's Covenants. Tenant covenants and agrees to keep the
Premises, the Shopping Center, and Tenant's leasehold interest therein, free
from any mechanics' liens or other encumbrances, and that any such liens or
encumbrances for any obligation or for work claimed to have been furnished, done
for, obligations incurred for or materials claimed to have been furnished to
Tenant or any other party, will be discharged by Tenant, by bond or otherwise,
within ten (10) days after Tenant learns of the filing thereof, at the cost and
expense of Tenant, and Tenant further agrees to defend, indemnify and hold
harmless Landlord from and against any such liens or claims or actions thereon,
together with costs of suit and attorneys' fees incurred by Landlord in
connection with any such claims or actions. If any such liens are filed and
Tenant fails to discharge such liens, by bond or otherwise, within such ten (10)
days after Tenant learns of the filing thereof, Landlord may, without waiving
its rights and remedies based on such breach of Tenant and without releasing
Tenant from any of its obligations, cause such liens to be released by any means
it shall deem proper, including payment in satisfaction of the claims giving
rise to such liens. Tenant shall reimburse Landlord, within ten (10) days after
demand therefor, for any sum paid or incurred by Landlord to remove such liens.
Tenant shall have the right to contest any such liens or claims and not be in
violation of this Article 11, and Landlord shall cooperate with Tenant in the
prosecution of such contest (at no cost or expense to Landlord); provided,
however, that Tenant must first pay, bond over, or otherwise discharge any such
liens as a condition to initiating and pursuing such contest.
11.2 Landlord's Covenants. Tenant has acknowledged that, pursuant to
the terms of that certain Development Agreement dated October 31, 1996, as
modified by First Amendment thereto dated June 23, 1997 between Landlord and
Wal-Mart for the Shopping Center (a memorandum of which was recorded on August
12, 1997 as Instrument No. 19970385377 in the Official Records of Orange County,
California), Wal-Mart has the right to place a lien against the Premises in the
event Landlord fails to comply with certain site development obligations.
Landlord shall, prior to the Commencement Date, discharge (by payment, bond, or
otherwise) any such lien from the Premises. Landlord further agrees to defend,
indemnify and hold harmless Tenant from and against any such lien or claims or
actions thereon, together with costs of suit and attorneys'
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fees incurred by Tenant in connection with any such claims or actions. Landlord
shall have the right to contest any such liens or claims and not be in violation
of this Article 11, and Tenant shall cooperate with Landlord in the prosecution
of such contest (at no cost or expense to Tenant); provided, that Landlord must
first pay, bond over, or otherwise discharge any such liens as a condition to
initiating and pursuing such contest.
ARTICLE 12
TAXES ON THE PREMISES AND TENANT'S PROPERTY
12.1 Personal Property Taxes. Tenant shall be liable for, and shall pay
not later than ten (10) days before delinquency, all taxes levied against
Tenant's Property (as that term is defined below) and any other personal
property of whatsoever kind and to whomsoever belonging, located or installed in
or about the Premises commencing on the date Tenant's Property or such other
personal property is placed in or about the Premises (and, upon demand by
Landlord, Tenant shall furnish Landlord with evidence to Landlord's satisfaction
of payment thereof). The term "Tenant's Property" shall mean all interior signs,
trade fixtures, furniture and equipment and other moveable items installed or
placed on the Premises by or at the direction or with the consent of Tenant,
regardless of ownership, exclusive of fixtures paid for by Landlord, if any,
pursuant to Exhibit "C." If any such taxes on Tenant's Property or other
personal property are levied against Landlord or Landlord's property and if
Landlord pays the same (which Landlord shall have the right to do regardless of
the validity of such levy, but only under proper protest if requested in writing
by Tenant), or if the assessed value of Landlord's property is increased by the
inclusion therein of a value placed upon Tenant's Property or such other
personal property, and if Landlord pays the taxes based upon such increased
assessment (which Landlord shall have the right to do regardless of the validity
thereof, but only under proper protest in writing if requested by Tenant),
Tenant shall repay to Landlord, within ten (10) days after demand therefor, the
taxes so paid by Landlord and any expenses incurred by Landlord in connection
therewith, together with interest thereon at the Lease Rate (as defined in
Paragraph 22.11). In any such event Tenant shall have the right, in the name of
Landlord and with Landlord's full cooperation, but at no cost to Landlord, to
bring suit in any court of competent jurisdiction to recover the amount of any
such taxes so paid under protest, any amount so recovered belonging to Tenant.
12.2 Real Property Taxes. From and after the Execution Date, Tenant
shall pay the real property taxes, as defined below, applicable to the Premises
through the entire term of this Lease, including all option terms. All such
payments shall be made at least five (5) business days prior to the delinquency
date. Tenant shall promptly furnish Landlord with satisfactory evidence that
such taxes have been paid. If any such taxes paid by Tenant covers any period of
time after the expiration of the term hereof, Tenant's share of such taxes shall
be equitably prorated to cover only the period of time within the tax fiscal
year during which this Lease shall be in effect, and Landlord shall reimburse
Tenant to the extent required. If Tenant shall fail to pay any such taxes,
Landlord shall have the right to pay the same, in which case Tenant shall repay
such amount to Landlord with Tenant's monthly installment of Fixed Rent together
with interest on such amounts at the Lease Rate (as defined in Paragraph 22.11,
below). If the Premises are not separately assessed, Landlord shall pay all real
property taxes on the Premises, and Tenant shall pay the Landlord, within thirty
(30) days after request therefor, Tenant's Proportionate Share of the real
property taxes imposed upon the entire Shopping Center and all of the buildings
and structures located on the Shopping Center. Tenant shall pay to Landlord as
Additional Rent, together with the payment of Fixed Rent, or other payments
required hereunder which are subject to any excise tax on gross income derived
by Landlord under this Lease, regardless of how designated, excluding federal
and state income taxes, imposed by any governmental body having jurisdiction, an
amount which, when first added to such Fixed Rent, or other payments shall, then
yield to Landlord, after deduction of such taxes payable by Landlord with
respect to all such payments, a net amount equal to that which Landlord would
have received from such payments had no such tax been imposed. As used herein,
the term "real property taxes" shall include any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed on the Premises by any
authority having the direct or indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, hospital, fire,
street, drainage or other improvement district thereof, as against any legal or
equitable interest of Landlord in the Premises or in the real property of which
the Premises are a part, as against Landlord's right to rent or other income
therefrom, and as against Landlord's business of leasing the Premises. The term
"real property taxes" shall also include any tax, fee, levy, assessment or
charge, in substitution, partially or totally, of any tax, fee, levy, assessment
or charge hereinabove included within the definition of "real property taxes".
The term "real property taxes" shall also include any and all assessments for
services generally provided without charge to owners and/or occupants of real
property prior to the adoption of Proposition 13 by the voters of the State of
California in the June 1978 election. Without limiting the generality of the
foregoing, Tenant shall be responsible for, and the term "real property taxes"
shall include, any increase in real property taxes which is caused due to (I)
any "change in ownership" of the Premises or any portion of the real property of
which the Premises constitute a part (as defined in Sections 60-69 of the
California Revenue and Taxation Code, the regulations promulgated thereunder and
any amendments or successor statutes or regulations thereto) or (ii) any
construction or work of improvement in the Premises or the Shopping Center. All
assessments (excluding those relating specifically to the Tenant Improvements on
the Premises) shall be paid in full by Landlord on or before the Commencement
Date (or, if any such assessments may be paid in installments without penalty
and
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without additional cost to Tenant, Landlord may pay them as and when they become
due). Landlord shall take no action to convert the off-site improvement costs
incurred for the Shopping Center (or any such future costs) to assessments.
ARTICLE 13
MAINTENANCE AND REPAIR
13.1 Obligations of Landlord. Subject to Article 4 hereof and except as
set forth as a Tenant obligation under Paragraph 13.2, below, Landlord agrees to
maintain the Common Areas in good order, condition and repair, except those
portions of the Common Areas which the Tenant is obligated to maintain pursuant
to Paragraph 13.2 hereof. Landlord shall not be responsible for any maintenance,
repairs, replacements or improvements of any kind to the Premises, except as may
be expressly set out elsewhere in the Lease. If the Common Areas or any other
portion of the Shopping Center is damaged or destroyed, either partially or
totally, Tenant shall continue the operation of its business in the Premises to
the extent practicable from the standpoint of good business and, in the event
Landlord is required or elects to make any repairs, reconstruction or
restoration of any damage or destruction to the Common Areas, Tenant shall not
be entitled to any damages by reason of any inconvenience or loss sustained by
Tenant as a result thereof, nor shall the Rent and other charges due hereunder
be abated. Damaged or destruction to the Shopping Center (whether or not
affecting the Premises) shall not entitle Tenant to terminate its Lease, under
any circumstances unless as a consequence of such damage and destruction the
parking required for Tenant's customers and/or the access to the Shopping Center
for pedestrian and vehicular traffic (necessary for the operation of Tenant's
business) has been materially and adversely impaired, and Landlord has failed to
cure or remedy such deficiencies substantially within one (1) year after written
notice from Tenant of its intent to cancel this Lease.
13.2 Tenants Obligation to Maintain and Repair Premises. Tenant shall
keep in good order, condition and repair, the building and all of the other
improvements constituting the Premises, structural and non-structural (whether
or not such portion of the Premises requiring repair, or the means of repairing
the same, are reasonably or readily accessible to Tenant, and whether or not the
need for such repairs occurs as a result of Tenant's use, any prior use, the
elements or the age of such portion of the Premises) including, without limiting
the generality of the foregoing, all plumbing, heating, air conditioning,
ventilating, electrical, lighting, facilities and equipment within the Premises,
fixtures, walls (both interior and exterior), foundations, ceiling, roofs (both
interior and exterior), floors, windows, doors, plate glass and skylights
located within or upon the Premises, and all landscaping, driveways, parking
lots, fences, and signs, if any, located on the Premises and on the sidewalks
and parkways immediately adjacent to the same. Tenant waives and releases any
right it may have to make repairs at Landlord's expense or to quit the Premises
under Sections 1941, 1942(a) and 1932(l) of the California Civil Code. If Tenant
fails to perform Tenant's maintenance and repair obligations as set forth above
or under any other paragraph of this Lease, Landlord may at its option (but
shall not be required to) enter upon the Premises after fifteen (15) days' prior
written notice to Tenant (except in the case of an emergency, in which case no
notice shall be required) perform such obligations on Tenant's behalf and put
the same in good order, condition and repair, and the cost thereof together with
interest at the Lease Rate (as defined in Paragraph 22.11, below) shall become
due and payable as Additional Rent to Landlord together with the Tenant's next
installment of Fixed Rent. It is clearly intended by the parties hereto that
Landlord have no obligation, in any manner whatsoever, to repair or maintain the
Premises or the equipment therein, whether structural or non-structural; all of
which obligations are intended to be assumed and performed solely by Tenant and
at Tenant's sole cost and expense. Tenant expressly waives the benefit of any
statute now or hereafter in effect which would otherwise afford Tenant the right
to make repairs at Landlord's expense or to terminate this lease because of
Landlord's failure to keep the Premises in good order, condition and repair.
13.3 Tenant's Obligation to Pay for Maintenance and Repairs to Areas
other than the Premises. Tenant, in all cases, shall also have the obligation
hereunder for the cost of maintenance and the cost of repairing any damage
caused by Tenant, its employees, agents, invitees, contractors, and customers to
those portions of the Shopping Center other than the Premises, such costs to be
paid as part of Additional Rent, except to the extent that the cost of
restoration is recovered from the proceeds of the property insurance carried by
Landlord pursuant to Paragraph 16.3.
13.4 Common Areas. Tenant acknowledges that the Premises and each Lot
in the Shopping Center contain portions of the Common Areas, as shown on Exhibit
"A-2," which Common Areas shall be maintained by Landlord in accordance with
Paragraph 13.1. Tenant is prohibited from making any alterations, additions, or
improvements to any Common Areas, including the landscaping, located on its Lot.
Landlord's costs to maintain the Common Areas located on each Lot shall
constitute Common Areas Operating Costs of which Tenant will pay its
Proportionate Share in accordance with Paragraph 4.2.
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ARTICLE 14
ENTRY AND INSPECTION
Tenant will permit Landlord, its employees, partners, directors, officers,
representatives, agents and affiliates, at all reasonable times during normal
business hours and at any time in case of emergency, (i) to enter into and upon
the Premises for the purpose of inspecting the same, or for the purpose of
protecting the interest therein of Landlord and Master Landlord, or to post
notices of nonresponsibility; and (ii) to take all required materials and
equipment into the premises, and perform all required work therein, including
the erection of scaffolding, props or other mechanical devices, for the purpose
of making alterations, repairs or additions to the Premises (after the failure
or refusal of Tenant to cure a default) or to any portion of the Common Areas or
for maintaining any service provided by Landlord to Tenant hereunder, without
any payment, rebate or abatement of Rent to Tenant (although Landlord is under
no obligation to make such alterations, repairs or additions to the Premises or
to maintain or provide any services to the Premises, except to the extent
provided elsewhere in this Lease). Tenant shall also permit Landlord and Master
Landlord and their respective employees, partners, directors, officers,
representatives, agents and affiliates, upon request, to enter and/or pass
through the Premises or any part thereof, at reasonable times during normal
business hours, to show the Premises to prospective purchasers, mortgagees or
master or ground lessors of the Shopping Center or any portion thereof.
Landlord, Master Landlord, and their respective employees, partners, directors,
officers, representatives, agents and affiliates shall have no liability to
Tenant for any disturbance to Tenant (and Tenant shall have no right to abate
Rent) as a consequence of Landlord's exercise of its rights hereunder.
ARTICLE 15
WAIVER AND INDEMNIFICATION
15.1 Waiver. From and after the Commencement Date or the date Landlord
gives Tenant possession of the Premises, whichever first occurs, Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to Tenant's property or injury to Tenant's employees, agents, visitors,
invitees and licensees anywhere in the Shopping Center, including the Premises,
and Tenant hereby waives all claims in respect thereof from any cause whatsoever
against Landlord, its agents or employees, except claims for personal injury or
property damage not covered by the insurance required to be carried by Tenant
pursuant to Paragraph 16.1 (and only to the extent covered by the liability
insurance carried by Landlord pursuant to Paragraph 16.3) which are caused by
the failure of Landlord to observe any of the terms and conditions of this Lease
(and such failure persists for an unreasonable period of time after written
notice of such failure) or which arise from any neglect, fault or omission of
Landlord, or of its agents or employees. Landlord shall not be liable to Tenant
for any unauthorized or criminal entry of third parties into the Premises or the
Shopping Center, or for any damage to persons or property, or loss of property
in or about the premises or the Shopping Center, the parking lot and the
approaches, loading docks, entrances, streets, sidewalks or corridors thereto,
by or from any unauthorized or criminal acts of third parties, regardless of any
breakdown, malfunction or insufficiency of any security measures, practices or
equipment that may be provided by Landlord. Tenant shall immediately notify
Landlord in writing of any breakdown or malfunction of any security measures,
practices or equipment provided by Landlord as to which Tenant has or should
have knowledge. Landlord shall not be liable to Tenant for interference with
light or incorporeal hereditaments or for damage therefrom to Tenant or Tenant's
Agents or to Tenant's property from any cause beyond Landlord's reasonable
control. Tenant hereby agrees that in no event shall Landlord be liable for
consequential damages, including injury to Tenant's business or any loss of
income therefrom, nor shall Landlord be liable to Tenant for any damages caused
by the act or neglect of any other tenant or their invitees in the Shopping
Center.
15.2 Indemnifications.
(a) Tenant's Indemnification of Landlord. From and after the
Commencement Date or the date Landlord gives Tenant possession of the premises,
whichever first occurs, Tenant hereby agrees to indemnify, defend and hold
Landlord harmless against and from any and all claims for damages or injury
occurring on the premises, or in connection with the conduct of its business on
the premises, or from any activity, work, or other thing permitted or suffered
by Tenant on the Premises, and shall further indemnify, defend and hold Landlord
harmless against and from any and all claims arising from any breach or default
in the performance of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any act, neglect, fault, or omission of
Tenant, or of its agents, employees, visitors, invitees, and licensees occurring
on the Premises or any part or portion of the Shopping Center, and from and
against all reasonable costs, attorneys' fees, expenses, and liabilities
incurred in connection with any such claims or any actions or proceedings
brought thereon; and in case any action or proceeding be brought against
Landlord by reason of such claim, Tenant, upon notice from Landlord, shall
defend the same at Tenant's expense by counsel reasonably satisfactory to
Landlord. When the claim is caused by the joint negligence or willful misconduct
of Landlord and Tenant or Tenant and a third party unrelated to Tenant (except
Tenant's agents or employees), Tenant's duty to indemnify and save harmless
Landlord shall be in proportion to Tenant's allocable share of the joint
negligence or willful misconduct.
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(b) Landlord's Indemnification of Tenant. From and after the
Commencement Date or the date Landlord gives Tenant possession of the Premises,
whichever first occurs, Landlord shall indemnify and save harmless Tenant from
and against any and all suits, liabilities, obligations, damages, penalties,
claims, costs, charges, and expenses, including reasonable attorneys' fees, from
third parties which may be imposed upon or incurred by or asserted against
Tenant (i) as a result of or arising out of Landlord's failure to perform any
covenant or agreement required to be performed by Landlord under this Lease,
(ii) caused by the negligence or willful misconduct of Landlord, its agents and
employees, or (iii) in connection with the Landlord's performance of its Site
preparation work and Site Improvements work under Exhibit "C" hereto. When the
claim is caused by the joint negligence or willful misconduct of Landlord and
Tenant or Landlord and a third party unrelated to Landlord (except Landlord's
agents or employees), Landlord's duty to indemnify and save harmless Tenant
shall be in proportion to Landlord's allocable share of the joint negligence or
willful misconduct.
15.3 Survival. The provisions of this Article 15 shall survive the
expiration or sooner termination of this Lease.
ARTICLE 16
INSURANCE
16.1 Insurance to be Provided by Tenant. From and after the
Commencement Date or the date Landlord gives Tenant possession of the Premises,
whichever first occurs, and continuing thereafter until the expiration or sooner
termination of the term hereof (or the date on which Tenant has completely
vacated the Premises, if that occurs subsequent to the expiration or termination
of the term), Tenant shall carry and maintain, at its sole cost and expense, the
following types of insurance (affording primary coverage) in the amounts
specified and in the form hereinafter provided for:
(a) Property damage insurance covering (i) the Premises, including
all improvements as may be made by Tenant pursuant to Exhibit "C" and Article 10
hereof, and (ii) Tenant's Property, including all trade fixtures, inventory,
merchandise and other personal property from time to time in the Premises, both
in amounts not less than one hundred percent (100%) of their replacement cost
valuation from time to time during the term of this Lease (with a value
endorsement deleting any coinsurance provisions), providing "all risk coverage"
(also known as "special causes of loss"), including sprinkler leakage and plate
glass coverage and coverage for flood and earthquake. Unless this Lease is
terminated pursuant to Paragraph 19.2, the proceeds of such insurance shall be
used for the repair or replacement of the property so insured, and any
deficiency (whether due to inadequacy of coverage, a deductible, or otherwise)
shall be paid for by Tenant. Following a casualty (and regardless of whether or
not this Lease is terminated pursuant to Paragraph 19.2), the proceeds under (i)
above shall be paid to Landlord and Landlord's lenders, as their respective
interests may appear, and the proceeds under (ii) above shall be paid to Tenant.
Except in the event this Lease is terminated under Paragraph 19.2, the proceeds
so paid to Landlord (or Landlord's lenders) shall be made available to Tenant
for payment of the costs and expenses of repair incurred by Tenant; provided,
however, that such proceeds shall be allocated to Tenant subject to reasonable
conditions including, but not limited to, an architect's certification of costs,
retention of a percentage of such proceeds pending recordation of a notice of
completion, and other customary builder's disbursement controls, all at the sole
expense of Tenant. In the event that the insurance proceeds are insufficient to
cover the cost of repair, then any amounts required over the amount of the
insurance proceeds received necessary to complete said repair shall be paid by
Tenant prior to the release of any insurance proceeds.
(b) Business automobile liability insurance, or equivalent form,
with a combined single limit of not less than Five Million Dollars ($5,000,000)
per occurrence. Such insurance shall include coverage for owned, non-owned and
hired automobiles.
(c) Commercial or comprehensive general liability insurance
(including bodily injury and property damage) in an amount of not less than a
combined single limit of Five Million Dollars ($5,000,000), insuring against any
and all liability of the insured with respect to the Premises and the Shopping
Center arising out of the use or occupancy thereof (including the construction
of improvements on the Premises or any portion thereof), and under which the
insurer agrees to cover and protect Tenant and all additional insured parties
from and against all costs, expenses and/or liability arising out of or based
upon Tenant's indemnification obligations pursuant to Paragraph 15.2 of this
Lease.
(d) Liquor liability; if this Lease covers premises in which
alcoholic beverages are sold and/or consumed, Tenant's liability insurance shall
not exclude liability for violation of any governmental statute, ordinance,
regulation or rule pertaining to the sale, gift, distribution or use of any
alcoholic beverages, or liability by reason of the selling, serving, or giving
of any alcoholic beverages to a minor or to a person under the influence of
alcohol, or which causes or contributes to the intoxication of any persons.
Accordingly, the indemnification obligations of Tenant under Paragraph 15.2
shall extend, as well, to damage occurring elsewhere than in, on or upon the
Premises, resulting from risks insurable by so-called dram shop liability
insurance.
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(e) Workers' compensation as required by law and employer's
liability insurance for at least One Million Dollars ($1,000,000) in coverage.
(f) Business interruption insurance covering loss of income and
extra expense in such amounts as will reimburse Tenant for direct or indirect
loss of earnings, income and extra expense for at least one (1) year
attributable to all perils commonly insured against by prudent tenants, or
attributable to the inaccessibility of or to the Premises or the Shopping Center
as a result of such perils, or otherwise, preferably by the same insurance
carrier that issues Tenant's property insurance.
(g) Intentionally Omitted.
(h) Any other form of insurance for risks and/or perils against
which a prudent tenant would customarily protect itself (and/or increases in the
amounts of coverage under any or all of the liability insurance policies
hereinabove required to be carried by Tenant) in such form and amounts as
Landlord or Landlord's lender may reasonably require from time to time.
Tenant's insurance coverage under this Paragraph 16.1 may be subject to
a commercially reasonable deductible (which deductible shall not exceed $50,000
without Tenant's having first obtained Landlord's prior written consent).
16.2 Evidence of Insurance. Tenant shall furnish properly executed
policies or certificates of insurance to Landlord prior to Tenant's occupancy.
Such policies or certificates shall clearly evidence all coverage required of
Tenant, shall have commercially reasonable deductibles, and shall provide that
such insurance shall not be materially changed, terminated or allowed to expire
except after thirty (30) days prior written notice to Landlord. All policies
required hereunder (except as described in Subparagraph 16.1(e), above) shall
name Landlord, Landlord's lenders, and the Master Landlord as additional
insureds and the certificate thereof shall evidence such coverage. Certificates
of insurance shall be replaced with new binders or certificates prior to the
termination of any policy of insurance required of Tenant. In Landlord's
discretion, Landlord may request complete copies of Tenant insurance policies in
lieu of such certificates. Tenant shall have the right to provide such insurance
coverage pursuant to blanket policies obtained by Tenant; provided such blanket
policies expressly afford coverage to the Premises and to Tenant as, in
Landlord's opinion, is required by this Lease. All policies required by this
Paragraph 16 shall be issued by insurers qualified to do business in the State
of California, whose financial strength is reasonably acceptable to Landlord,
and in form satisfactory to Landlord, from time to time.
16.3 Landlord's Insurance. During the term of this lease, Landlord
shall maintain in effect such policies of insurance as are at least in such
amounts (and are subject to no larger deductibles) as are customarily carried by
landlords in similar shopping centers in the State of California; the premiums
and deductibles for commercial or comprehensive general liability insurance
covering the Common Areas shall be included in Common Areas Operating Costs.
16.4 Maintenance of Insurance. If Landlord, for any reason, fails to
maintain insurance coverage which is required pursuant to this Lease, the same
shall be deemed a material default and breach of this lease. Landlord, at its
sole option, may immediately terminate this Lease and obtain damages from Tenant
resulting from said breach. Election by Landlord not to terminate this Lease
shall not be deemed a waiver by Landlord of Tenant's breach, nor of any of
Landlord's rights and remedies pursuant to the terms of this Lease. Landlord may
(but is under no obligation to do so) at any time and from time to time, and
without notice, procure such insurance and pay the premiums therefor, in which
event Tenant shall, within ten (10) days after demand therefor, reimburse
Landlord for all amounts paid and costs and expenses incurred by Landlord to
procure and pay for such insurance, plus interest on such amounts at the Lease
Rate (as defined in Paragraph 22.11). Tenant shall not stock, use or sell any
article of merchandise that would increase insurance rates and premiums on the
Shopping Center, or on any of the individual improvements in the Shopping Center
other than the Premises.
16.5 Waiver of Subrogation. Any policy or policies of property
insurance which either party obtains in connection with the Premises, shall
include a clause or endorsement denying the insurer any rights of subrogation
against the other party to the extent rights have been waived by the insured
prior to the occurrence of injury or loss. Landlord and Tenant waive any rights
against the other for injury or loss due to hazards covered by such insurance,
whether or not containing such a waiver of subrogation clause or endorsement, to
the extent of the loss covered thereby, or if either party does not, for any
reason, have valid enforceable insurance, then, this waiver shall apply to the
extent of all property insurance which was required to be carried hereunder.
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ARTICLE 17
ASSIGNMENT AND SUBLETTING
17.1 General Limitations. Except as expressly provided in Paragraphs
17.3 and 17.4 of this Article, without Landlord's written consent first had and
obtained, Tenant (including without limitation any subsequent assignee or
subtenant) shall not either voluntarily or by operation of law, assign,
mortgage, hypothecate or encumber this Lease, or any interest in this lease,
permit the use of the Premises by any person or persons, franchises, affiliated
companies, licensees or concessionaires, other than Tenant, or sublet the
Premises or any part of the Premises. Any transfer of this Lease form Tenant by
merger, reorganization, liquidation, or the sale, conveyance, transfer by
bequest or inheritance, or other transfer of a controlling interest in Tenant
(whether by transfer of stock, partnership interest or otherwise) shall
constitute an assignment for the purposes of this lease. Notwithstanding the
foregoing, if Tenant is a corporation whose stock is regularly traded on a
national stock exchange, or is regularly traded in the over-the-counter market
and quoted on NASDAQ, the transfer of stock, regardless of quantity, shall not
constitute an assignment for the purposes of this lease. A consent to one
assignment, subletting, occupation or use shall not constitute a waiver of the
necessity of such consent to a subsequent assignment or subletting, whether by
Tenant or any subsequent assignee or subtenant. Tenant shall not be released
from liability for the full performance of all the terms, conditions and
covenants of this Lease on Tenant's part to be performed, whether occurring
before or after such consent, assignment or subletting. Any requests for consent
to a sublease or assignment hereunder shall be accompanied by a check payable to
Landlord in the sum of Two Hundred Fifty Dollars ($250) as a charge for the
processing of such documents. In addition, Tenant shall reimburse Landlord its
actual costs and expenses for attorneys' fees incurred in connection with any
proposed sublease or assignment. If so requested by Landlord, Tenant shall
deposit with Landlord the Landlord's estimate of such legal fees prior to the
commencement by Landlord of any review of the proposed request for consent.
17.2 No Unreasonable Withholding of Consent. Landlord shall not
unreasonably withhold its consent to an assignment or subletting for the same
use as provided in Paragraph 10 of the Lease Summary, notwithstanding anything
in this Article 17 to the contrary. The foregoing is not intended to imply any
waiver of Landlord's reservation of the absolute right to (a) disapprove
assignments or subleases for uses that differ in any material respect from the
use expressly permitted in Paragraph 10 of the Lease Summary or that violate the
standards set forth in Paragraph 8.1, or (b) terminate this Lease in accordance
with Paragraph 8.4. In determining whether or not to consent to the proposed
assignment or subleasing, Landlord may consider, among other factors, the
experience of the proposed sublessee or assignee in operating a business in a
shopping center for the use set forth in Paragraph 10 of the Lease Summary,
whether or not any exclusives granted by Landlord will be impacted, and whether
the proposed sublessee or assignee is financially sound and has a net worth that
is adequate in the circumstances. Landlord shall be deemed to be reasonable in
refusing consent if such refusal is based upon a violation of any exclusive
granted by Landlord. If Tenant does assign or sublease all or any portion of the
Premises on a basis such that the value of the consideration for same to be
received by Tenant will exceed the Rent or prorated portion thereof, as the case
may be, for such space reserved in this Lease, Tenant shall pay to Landlord when
received, as Additional Rent, at the same time as the monthly installments of
Rent are due hereunder, fifty percent (50%) of the excess of the Rent and all
other consideration paid in connection with or pursuant to the assignment or
sublease, over the Rent as reserved in this Lease applicable to the assigned or
subleased space. Notwithstanding the foregoing, Landlord's right to share in
"all other consideration" shall not, when added to Landlord's share of the
excess Rent, exceed fifty percent (50%) of the difference between the then fair
market rental for the Premises (or a prorated portion thereof) and the Rent for
such space reserved in this Lease. The acceptance of Rent by Landlord from any
other person shall not be construed as a waiver by Landlord of any provision of
this Lease, or as a waiver of the requirement of Landlord's consent to any
assignment, subletting or other transfer, or to be a release of Tenant from any
obligation under this Lease. Each assignee or subtenant shall jointly assume all
obligations of the Tenant under this Lease, and shall be and remain liable
jointly and severally with Tenant for the payment of Rent, and for the due
performance of all the terms, covenants and conditions and agreements herein
contained on Tenant's part to be performed during the Lease term; provided,
however, that a subtenant shall be liable to Landlord for Rent only in the
amount set forth in the sublease. Whether or not Landlord's consent is required,
no assignment shall be effective or binding on Landlord unless such assignee or
sublessee shall deliver to Landlord a counterpart of such assignment or sublease
(and any related collateral agreements) and an instrument in recordable form
which contains a covenant of assumption by the assignee or sublessee
satisfactory in substance and form to Landlord, consistent with the above
requirements. The failure or refusal of the assignee or sublessee to execute
such an instrument of assumption shall not waive, release or discharge the
assignee or sublessee from its liability.
17.3 Reorganizations and Mergers. Tenant shall be entitled to assign
and transfer this Lease to the surviving corporation in the event of a merger or
a sale of assets transaction to which Tenant shall be a party; provided,
however, that such subsidiary, affiliated firm or surviving corporation shall in
writing expressly assume all of the provisions, covenants and conditions of this
Lease on the part of Tenant to be kept and performed; and provided, further
(unless Tenant shall thereafter cease to exist) that no such assignment or
transfer shall act as a release of Tenant from any of the provisions, covenants
and conditions of this Lease on
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the part of Tenant to be kept and performed. This Paragraph 17.3 shall not apply
in the event of a sale of less than substantially all (meaning, for purposes of
this Paragraph 17.3, less than 75%) of the assets of Tenant.
17.4 Assignment as a Result of Tenant's Bankruptcy.
(a) In the event this Lease is assigned to any person or entity
pursuant to provisions of the United States Bankruptcy Code, 11 U.S.C. Section
101 et seq. (the "Bankruptcy Code"), any and all monies or other consideration
payable or otherwise to be delivered in connection with such assignment shall be
paid or delivered to Landlord, shall remain the exclusive property of Landlord,
and shall not constitute property of Tenant or of the estate of Tenant within
the meaning of the Bankruptcy Code. Any and all monies or other consideration
constituting Landlord's property under the preceding sentence not paid or
delivered to Landlord shall be held in trust for the benefit of Landlord and be
promptly paid to or turned over to Landlord.
(b) If Tenant, pursuant to this Lease, proposes to assign the same
pursuant to the provisions of the Bankruptcy Code, to any person or entity who
shall have made a bona fide offer to accept an assignment of this Lease on terms
acceptable to Tenant, then, notice of the proposed assignment setting forth (i)
the name and address of such person, (ii) all of the terms and conditions of
such offer, and (iii) the assurances referred to in Section 365(b)(3) of the
Bankruptcy Code, shall be given to the Landlord by the Tenant no later than
twenty (20) days after receipt of such offer by the Tenant, but in any event no
later than ten (10) days prior to the date that Tenant shall make application to
a court of competent jurisdiction for authority and approval to enter into such
assignment and assumption, and Landlord shall thereupon have the prior right and
option, to be exercised by notice to the Tenant given at any time prior to the
effective date of such proposed assignment, to accept an assignment of this
Lease upon the same terms and conditions and for the same consideration, if any,
as the bona fide offer made by such person, less any brokerage commissions which
may be payable out of the consideration to be paid such person for the
assignment of this Lease.
(c) Any person or entity to which this Lease is assigned pursuant to
the provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease on or after
the date of such assignment. Any such assignee shall, upon demand, execute and
deliver to Landlord an instrument confirming such assumption.
(d) The following factors may be considered by the Landlord as
necessary in order to determine whether or not the proposed assignee has
furnished Landlord with adequate assurances of its ability to perform the
obligations of this Lease:
1. The adequacy of a security deposit.
2. Net worth and other financial elements of the proposed assignee;
and
3. Demonstration that assumption or assignment will not disrupt
substantially the tenant mix or balance in the Shopping Center.
(e) It is hereby acknowledged that this is a "shopping center lease"
within the meaning of Section 365(b)(3) of the Bankruptcy Code.
(f) In the event Landlord rejects the proposed assignee, the rights
and obligations of the parties hereto shall continue to be governed by the terms
of this Lease, and Tenant shall have all the rights of Tenant under applicable
California law.
17.5 Effect of Violation. Except as may be expressly permitted without
Landlord's consent elsewhere in this Lease, any assignment, mortgage, pledge,
hypothecation, encumbrance, subletting or license of this Lease, the leasehold
estate hereby created, or the Premises or any portion thereof, either
voluntarily or involuntarily, whether by operation of law or otherwise, or any
other action by Tenant in violation of the restrictions set forth in this
Article 17, without the prior written consent of Landlord first had and obtained
therefor, shall be null and void and shall, at the option of Tenant, constitute
a material default under this Lease.
17.6 No Release. Tenant is not and shall not be released from liability
for the full and complete performance of the terms, conditions, and covenants of
this Lease upon any assignment, sublease, or other transfer, regardless of
whether or not Landlord's consent was first required.
ARTICLE 18
TRANSFER OF LANDLORD'S INTEREST
In the event of any transfer or transfers of Landlord's interest in the
Premises or in the Shopping Center, other than a transfer for security purposes
only, the transferor shall automatically be relieved of, and Tenant shall
release such transferor from, any and all obligations and liabilities on the
part of Landlord
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accruing from and after the date of such transfer, including without limitation
the obligation of Landlord under Article 6 hereof to return the Deposit as
provided therein; provided, with respect to security deposits, that the
transferor transfers to or appropriately credits the transferee for the Deposit.
ARTICLE 19
DAMAGE OR DESTRUCTION
19.1 Obligation to Rebuild. Should any or all of the improvements on
the Premises be damaged or destroyed, partially or totally, from any cause
covered (or required to be covered) by any insurance required to be maintained
under Paragraph 16.1 hereof, or if the Premises are damaged from a cause not
required to be covered by insurance under Paragraph 16.1 and the cost of repair
or restoration is less than twenty-five percent (25%) of the then-replacement
value, then Tenant shall repair, restore and rebuild said improvements on the
Premises to at least the condition existing immediately prior to such damage or
destruction, and this Lease shall remain in full force and effect. Such repair,
restoration and rebuilding (all of which are herein called "repair") shall be
commenced promptly after such damage or destruction has occurred and shall be
diligently pursued to completion. Without limiting Landlord's other available
remedies, Tenant's failure to rebuild, replace or use the Premises for
commercial purposes shall give Landlord a right to recapture the Lease as
provided in Paragraph 8.4.
19.2 Last Two Years. If the Premises are damaged or destroyed, either
partially or totally, during the last two (2) years of the term of this Lease,
Landlord and Tenant shall each have the right to cancel and terminate this Lease
as of the date of occurrence of such damage by giving written notice to the
other of its election to do so within thirty (30) days after the date on which
such damage occurred. Notwithstanding the foregoing, should Tenant have the
right to extend the term pursuant to Paragraph 2.7, above, Tenant shall have the
right to exercise its next option right for a period of ten (10) days after
receipt of Landlord's written notice to cancel and terminate this Lease as a
consequence of such damage or destruction near the end of the term. If Tenant so
exercises its option to extend the term, Landlord's purported cancellation and
termination of this Lease shall be deemed null and void; provided, however, that
Tenant shall promptly proceed with the repair, restoration and rebuilding of the
Premises in accordance with Paragraph 19.1 at Tenant's expense, whereupon this
Lease shall continue in full force and effect. If Tenant fails to exercise its
said option during said ten (10) day period, then this Lease shall be deemed
canceled and terminated in accordance with Landlord's said notice.
19.3 Effect of Termination. In the event this Lease is terminated under
the provisions of Paragraph 19.2, such termination shall become effective at the
time and in accordance with the respective provisions herein contained for the
termination of this Lease; provided, however, that all Rent and other charges on
the part of Tenant to be paid hereunder shall be prorated and paid either as of
the date of such damage or destruction, or as of the date Tenant ceases doing
business in, upon or from the Premises, whichever last occurs. Tenant shall have
no claim to the proceeds of property damage insurance, except to the extent of
any unamortized construction costs of the Building which were paid by Tenant at
its own expense pursuant to Exhibit "C."
19.4 Uninsured Casualty. Should any or all of the improvements on the
Premises be damaged or destroyed from any cause not covered (or required to be
covered) by insurance required to be maintained under Paragraph 16.1 hereof in
excess of twenty-five percent (25%) of its then-replacement value, then Tenant
shall have the option to either
(a) repair, restore and rebuild said improvements on the Premises to
at least the condition existing immediately prior to such damage or destruction
per the terms and conditions of Paragraph 19.1, above, or
(b) demolish and remove the improvements and hydroseed the pad so
that it is visually harmonious with the remainder of the Shopping Center.
In the event of such an uninsured casualty so that Tenant has the
option under Subparagraphs 19.4(a) and (b), above, following its exercise of
such option Tenant may assign or sublet the Premises in accordance with
Paragraph 17.2, above, and unless and until Tenant re-opens under the use set
forth in Paragraph 10 of the Lease Summary, Tenant may assign or sublet the
Premises under Paragraph 17.2 without being limited to the use set forth in
Paragraph 10 of the Lease Summary (notwithstanding anything to the contrary in
Paragraph 17.2); provided, however, that such other use may not be in conflict
with the Declaration, any then-existing uses at the Shopping Center, or with any
exclusives granted for the Shopping Center.
19.5 No Abatement of Rent. Notwithstanding the partial or total
destruction of the Premises or any part thereof, and notwithstanding whether or
not the casualty is insured, there shall be no abatement of Rent or any other
obligation of Tenant hereunder by reason of such damage or destruction (unless
Landlord recaptures the Premises as permitted under Paragraph 19.1).
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ARTICLE 20
EMINENT DOMAIN
20.1 Termination. If the whole of the Premises shall be taken under
power of eminent domain (or by deed in lieu of condemnation), this Lease shall
automatically terminate. If any portion of the total square footage of the
Premises is so taken under the power of eminent domain (or by deed in lieu of
condemnation), and such partial taking reasonably may be construed to render the
remainder of the Premises unsuitable for Tenant's business, this Lease may be
terminated by Tenant by written notice given within thirty (30) days after such
taking, in either case such termination to be effective as of the date
possession is taken by the condemning authority. No award for any partial or
entire taking shall be apportioned, and Tenant hereby assigns to Landlord any
award which may be made in such taking or condemnation, together with any and
all rights of Tenant now or hereafter arising in or to the same or any part
thereof, except to the extent of any unamortized construction costs of the
Building which were paid by Tenant at its own expense pursuant to Exhibit "C";
provided, however, that nothing contained herein shall be deemed to give
Landlord any interest in or to require Tenant to assign to Landlord any award
specifically made to Tenant for goodwill and relocation benefits. Any liability
of Tenant to Landlord having already accrued under this Lease shall survive its
early termination, as aforesaid.
20.2 Partial Taking. In the event of a partial taking of the Premises
under the power of eminent domain (or by deed in lieu of condemnation) which
does not result in a termination of this Lease, if such taking materially and
adversely impacts access to or from or visibility of the Premises, the Fixed
Rent shall be equitably adjusted to reflect any diminution in business revenue
incurred by Tenant as a direct result of the partial taking. Landlord and Tenant
hereby waive the provisions of Code of Civil Procedure Section 1265.130 allowing
either party to petition the Superior Court, or any right either may have, to
terminate this Lease in the event of a partial taking of the Premises.
20.3 Temporary Taking. No temporary taking of the Premises and/or of
Tenant's rights therein or under this Lease shall terminate this Lease or give
Tenant any right to any abatement of Rent hereunder. Any award made to Tenant by
reason of any such temporary taking shall belong entirely to Tenant, and
Landlord shall not be entitled to share therein.
20.4 Taking of Common Areas.
(a) If any part of the Common Areas is taken by condemnation, this
Lease shall remain in full force and effect, except that if twenty-five percent
(25%) or more of the parking in the Common Areas required for Tenant's customers
is taken by condemnation, either party shall have the right to terminate this
Lease pursuant to this paragraph. If a party elects to terminate this Lease, it
must terminate pursuant to this paragraph by giving notice to the other party
within thirty (30) days after the nature and the extent of the taking have been
finally determined. The party terminating this Lease also shall notify the other
party of the date of termination, which date shall not be earlier than thirty
(30) days or later than ninety (90) days after the terminating party has
notified the other party of its election to terminate; except that this lease
shall terminate on the date of taking if the date of taking falls on a date
before the date of termination designated in the notice from the terminating
party. Any liability of Tenant to Landlord having already accrued under this
Lease shall survive its early termination, as aforesaid. If this Lease is not
terminated within the thirty-day period, it shall continue in full force and
effect.
(b) Except as provided in Paragraph 20.2, unless this Lease is
terminated pursuant to the terms hereof, there shall be no abatement of Rent as
a result of any taking under the power of eminent domain.
ARTICLE 21
SIGNS AND AUCTIONS
21.1 Signage. Provided Tenant complies with the City of Westminster's
conditions of approval, the Declaration and the Lease, Tenant may have its sign
"can" placed on each side of the pylon sign for the Shopping Center. Tenant's
position on the pylon shall be immediately below the panel for the tenant
occupying "Major A" on the Site Plan and Tenant's sign "can" shall be of a size
based upon the relative square footage of the Premises compared to the square
footage of the "Major A" tenant's premises. As provided in Article 4, Tenant
shall pay its proportionate share of the cost of construction, installation,
operation, maintenance and repair of the pylon sign; Tenant's proportionate
share is the ratio, stated as a percentage, which the number of square feet in
Tenant's panel bears to the total number of square feet of all panel area in the
pylon sign, and is subject to adjustment. Except as set forth in Tenant's plans
and specifications for the Building approved by Landlord pursuant to Exhibit
"C," Tenant shall not place or suffer to be placed on the exterior of the
Premises or any exterior door or wall or the exterior or interior of any window
of the Premises any sign, awning, canopy, grates or other security devices,
marquee, advertising matter, decoration, lettering or other thing of any kind
without the prior written consent of Landlord, which consent shall not
unreasonably be withheld or delayed. Any exterior signage so approved by
Landlord shall be in accordance with the Declaration and sign criteria as set
forth in Exhibit "C" hereto, and shall be installed, maintained and repaired
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at Tenant's sole cost and expense. Landlord hereby reserves the exclusive right
to the use of the roofs and the exterior of the walls of the rest of the
Shopping Center. Except as otherwise herein provided, Tenant shall have the
right, at its sole cost and expense, to erect and maintain within the interior
of the Premises all signs and advertising matter customary or appropriate in the
conduct of Tenant's business which cannot be seen from the exterior of the
Premises. In this connection, Tenant acknowledges that the Premises are a part
of a shopping center, and agrees that control of all signs and exterior
appearance by Landlord is essential to the maintenance of anesthetic and
commercial values in or pertaining to the Shopping Center. Tenant shall at all
times during the term of this Lease, at its sole cost and expense, keep its
window displays, signs and advertising devices adequately illuminated
continuously during such days and hours as Tenant is required to be open for
business herein and during such additional hours as Landlord may request, from
time to time. Upon expiration or earlier termination of this Lease, all signage
affixed to the exterior of the Premises or on any portion of the Shopping Center
shall be surrendered in good condition and repair unless Landlord requires
Tenant to remove same, at Tenant's expense, upon surrender of the Premises, and
Tenant shall repair at Tenant's cost any damage occasioned by such removal.
21.2 Auction or Sale. Tenant shall not conduct or permit to be
conducted any sale by auction in, upon or about the Premises or the Common
Areas, whether said auction be voluntary, involuntary or pursuant to any
assignment for the benefit of creditors, or pursuant to any bankruptcy or
other insolvency proceeding.
ARTICLE 22
DEFAULTS AND REMEDIES
22.1 Default Defined. The occurrence of any of the following shall
constitute a material default and breach of this Lease by Tenant:
(a) The failure by Tenant to pay any Rent or make any other payment
required to be made by Tenant hereunder within three (3) days after Tenant's
receipt of written notice from Landlord that any such payment is past due;
provided, however, that notwithstanding the notice prerequisite for a default
under this Subparagraph 22.1(a), Landlord shall be entitled to receive, as more
particularly set forth in Paragraph 22.11, below, a late charge and interest at
the Lease Rate on any payments not paid as and when due;
(b) The abandonment (which is deemed to include absence from the
Premises for more than ten (10) days while in default of any material provision
of this Lease) or vacation (except to facilitate an assignment or subletting
permitted pursuant to Article 17) of all or any portion of the Premises by
Tenant;
(c) Tenant's failure to adequately bond or cause to be released any
mechanics' liens filed against the Premises within ten (10) days after the date
same shall have been filed (unless Tenant contests such liens in accordance with
Article 11);
(d) The failure by Tenant to observe or perform any other provision
of this Lease (including the Rules and Regulations attached hereto as Exhibit
"B" and made a part hereof) to be observed or performed by Tenant, other than
those described in Subparagraphs (a), (b) and (c) above, where such failure
continues for thirty (30) days after written notice thereof by Landlord to
Tenant; provided, however, that if the nature of such default is such that the
same cannot reasonably be cured within such thirty (30) day period, Tenant shall
not be deemed to be in default if Tenant shall within such period commence such
cure and thereafter diligently pursues the completion of same. Such thirty-day
notice shall be in lieu of and not in addition to any notice required under
Section 1161 of the California Code of Civil Procedure;
(e) The making by Tenant or Tenant's guarantor, if any, of a general
assignment for the benefit, of creditors; the filing by or against Tenant, or
Tenant's guarantor of a petition to have Tenant or Tenant's guarantor adjudged a
bankrupt or of a petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against Tenant,
the same is dismissed within sixty (60) days); the appointment of a trustee or
receiver to take possession of substantially all of Tenant's assets located at
the Premises or of Tenant's interest in this lease, where possession is not
restored to Tenant within thirty (30) days; the attachment, execution, or other
judicial seizure of substantially all of Tenant's assets located at the Premises
or of Tenant's interest in this Lease, where such seizure is not discharged
within thirty (30) days; or the failure or admission by Tenant or Tenant's
guarantor of its inability, generally, to pay its debts as they become due;
(f) Any attempted transfer, conveyance, assignment, hypothecation or
subletting of this Lease, or any part thereof, otherwise than as expressly
permitted hereunder; or
(g) The failure of Tenant to timely complete and deliver to Landlord
the Estoppel Certificate required in Article 34 hereof, the Subordination and
Attornment Agreement required in Article 27 hereof, or any other documentation
required hereunder.
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22.2 Remedies; Termination. In the event of any default by Tenant
hereunder as set forth in Paragraph 22.1 hereof, and in addition to any other
remedies available to Landlord at law, in equity or elsewhere under this Lease,
all of which rights and remedies shall be cumulative, with the exercise of one
or more rights or remedies not to impair Landlord's right to exercise any other
right or remedy (and which may be exercised with or without legal process as
then may be provided or permitted by the laws of the State of California),
Landlord shall have the immediate option to terminate this Lease and all rights
of Tenant hereunder by giving Tenant written notice of such election to
terminate. In the event that Landlord shall elect to so terminate this Lease,
then Landlord may recover from Tenant:
(a) the worth at the time of award of any unpaid Rent or other
charges which had been earned at the time of such termination; plus
(b) the worth at the time of award of the amount by which the unpaid
Rent and other charges which would have been earned after termination until the
time of award exceeds the amount of such rental loss Tenant proves could have
been reasonably avoided; plus
(c) the worth at the time of award of the amount by which the unpaid
Rent and other charges for the balance of the term after the time of award
exceeds the amount of such rental loss that Tenant proves could reasonably be
avoided; plus
(d) any other amount necessary to compensate, Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligation under
this Lease, or which in the ordinary course of things would be likely to result
therefrom, including attorneys fees and costs; and
(e) at Landlord's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by applicable law.
As used in Subparagraphs (a) and (b) above, the "worth at the time of award" is
computed by allowing interest at the Lease Rate (as defined in Paragraph 22.11,
below). As used in Subparagraph (c) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%). The amount
recoverable by Landlord pursuant to Subparagraph (d) above shall include, but is
not limited to, any costs or expenses incurred by Landlord in maintaining or
preserving the Premises after such default, preparing said Premises for
reletting to a new tenant, accomplishing any repairs or alterations to the
Premises for the purpose of such reletting, rectifying any damage thereto
occasioned by the act or omission of Tenant, and any other costs reasonably
necessary or appropriate to relet the Premises.
22.3 Remedies; Re-entry. In the event of any such default by Tenant and
termination of this Lease by Landlord, Landlord shall also have the right to
re-enter the Premises and remove all persons and property from the Premises as
provided in Paragraph 23.3. Tenant hereby waives all claims for damages that may
be caused by Landlord's re-entering and taking possession of the Premises or
removing and storing the property of Tenant as provided in Paragraph 23.3.
22.4 Remedies; Non-termination and Collection of Rent. In the event
Landlord elects not to terminate this Lease as provided in Paragraph 22.2
hereof, this Lease shall continue in full force and effect. In that event,
Landlord may enforce all of its rights and remedies hereunder and at law,
including the right to recover Rent and other charges as they come due. However,
Tenant shall continue to have the right to possession of the Premises, and
Tenant shall have the right to sublet the same with Landlord's written consent,
which consent (for the purposes of this Paragraph 22.4) shall not unreasonably
be withheld. Likewise for the abandonment by Tenant, no re-entry or taking
possession of the Premises by Landlord shall be construed as an election to
terminate this Lease, nor shall it cause a forfeiture of Rent or other charges
remaining to be paid during the balance of the term herein, unless a written
notice of such intention to terminate be given to Tenant by Landlord.
22.5 Intentionally Omitted.
22.6 No Effect on Indemnification Obligation. Nothing in this Article
22 shall be deemed to affect or waive Landlord's rights to indemnification for
liability or liabilities rising prior to termination of this Lease for personal
injury or property damage under Paragraph 15.2 or any other indemnification
provision contained in this Lease.
22.7 Intentionally Omitted.
22.8 Landlord's Default. Landlord shall not be deemed in default
hereunder unless Tenant shall have given Landlord written notice of such default
specifying such default with particularity, and Landlord shall thereupon have
thirty (30) days in which to cure any default unless such default cannot
reasonably be
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cured within such period, in which case Landlord shall not be in default if it
commences to cure the default within the thirty (30) day period and diligently
pursues the completion of same.
22.9 Limitation on Recourse. If Landlord is in default of this Lease
and, as a consequence, Tenant recovers a money judgment against Landlord, the
judgment shall be satisfied only out of the proceeds of sale received on
execution of the judgment and levy against the right, title and interest of
Landlord in the Shopping Center, other improvements and land of which the
Premises are part, and out of rent or other income from the Shopping Center
receivable by Landlord, or out of the consideration received by Landlord from
the sale or other disposition of all or any part of Landlord's right, title and
interest in the Shopping Center.
22.10 Notice to Mortgagees and Others. Should Landlord fail to observe
or perform any of the covenants or conditions contained in this Lease and,
before taking any action asserting the right to terminate this Lease (whether or
not Tenant actually has such a right under this Lease), Tenant shall give
written notice to all ground lessors, mortgagees and/or beneficiaries of deeds
of trust (collectively "lenders") under instruments recorded against the
Shopping Center or any part thereof and/or of which Tenant has received written
notice, setting forth the nature of Landlord's default. Such lenders shall have
a reasonable period of time to cure the default and perform any act which may be
necessary to prevent the forfeiture of this Lease. All payments made, and all
acts performed by such lenders in order to cure, shall be effected to prevent a
forfeiture of the rights of Landlord under this Lease and a termination of this
Lease, as if the payments and acts were performed by Landlord instead of by the
lenders. If the lenders cannot reasonably take the action required to cure
Landlord's default without terminating or foreclosing Landlord's interest and
acquiring possession of the Shopping Center, the time within which the default
must be cured to avoid a termination or forfeiture of the Lease shall be
extended to include the period of time reasonably required for such lenders to
obtain possession and to effect a cure with due diligence, provided such lenders
give Tenant a written undertaking to cure the default. In the absence of the
lenders' express written consent, such an undertaking by the lenders shall not
be considered an assumption by the lenders of Landlord's other obligations under
the Lease, and Landlord shall remain solely liable for the performance of all
terms, covenants and conditions of the Lease both prior and subsequent to the
lenders' exercise of any right to cure or related remedy. A lender's exercise of
any right to cure or related remedy shall not in any way constitute a cure or
waiver of a breach or default under a ground lease, note, mortgage, deed of
trust, or any other instrument given as security.
22.11 Remedies; Interest and Late Charges. Any payment not made when
due shall bear interest at that fluctuating rate (the "Lease Rate") equal to the
discount rate announced from time to time by the Federal Reserve Bank of San
Francisco plus 500 basic points, or the maximum amount allowed by law, whichever
is less. Any payment of Rent not paid when due shall be subject to a late charge
of Two Hundred Fifty Dollars ($250) or five percent (5%) of the rent then due
and payable, whichever is more, to reimburse Landlord for its administrative
costs and expenses in notating and processing such late payment. Such late
charge will not limit Landlord's right to recover its actual costs of collection
or the exercise of its remedies under this Lease, at law or in equity, in the
event of a default, which costs Tenant agrees to pay upon demand. The provisions
of this Paragraph 22.11 shall apply regardless of whether or not the Landlord
has declared a default by Tenant under this Lease.
ARTICLE 23
SURRENDER OF PREMISES; REMOVAL OF PROPERTY
23.1 No merger. The voluntary or other surrender of this Lease by
Tenant to Landlord, or a mutual termination thereof, shall not work a merger,
and shall at the option of Landlord operate as an assignment to it of any or all
subleases or subtenancies affecting the Premises. Furthermore, no termination of
any ground lease or master lease shall work a merger and shall, at the option of
the ground lessor or master lessor, operate as an assignment of any subleases or
subtenancies.
23.2 Condition Upon Surrender. Upon the expiration or earlier
termination of this Lease, Tenant shall quit and surrender possession of the
Premises to Landlord in broom-clean condition, free of all refuse, trash and
garbage, and in as good order and condition as the same were in at the
Commencement Date or as the same thereafter may be improved by Landlord or 3,
reasonable wear and tear excepted. Tenant shall, without expense to Landlord,
prior to expiration (or earlier termination not due to a Tenant default), remove
or cause to be removed from the Premises all Tenant's Property (as that term is
defined in Paragraph 12.1) and all similar articles of any other persons
claiming under Tenant (unless Landlord exercises its option to have any
subleases or subtenancies assigned to it), and Tenant shall fully repair all
damage to the Premises resulting from such removal. In the event of termination
prior to the expiration of the term hereof, Tenant shall nevertheless remove
Tenant's Property from the Premises in the manner aforesaid within sixty (60)
days after receipt of written direction to do so form Landlord, provided that
Tenant shall remain liable for Rent for the Premises until the completion of
such removal. Notwithstanding the foregoing, Tenant may remove the heating,
ventilation, and air conditioning units, plumbing fixtures and the floor
coverings in the Premises only if directed in writing to do so by Landlord, in
which event Tenant shall do so and shall repair all damage to the Premises
resulting from such removal. In the event Tenant shall fail to remove any of
Tenant's Property as
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provided herein, Landlord may, but is not obligated, at Tenant's expense, to
remove all of Tenant's Property as provided in Paragraph 23.3. Tenant shall not
be entitled to remove any items paid for by Landlord.
23.3 Removal of Property Upon Re-entry. Whenever Landlord shall
re-enter the Premises as provided in this lease, any Tenant's Property and any
other personal property belonging to Tenant (or any person claiming through or
under Tenant) and not removed by Tenant (or such person claiming through or
under Tenant) upon the expiration of the term of this Lease (or upon a judicial
determination that the Tenant's right to possession of the Premises is
terminated by reason of Tenant's default) shall be considered abandoned
(provided, however, that Tenant may have up to sixty days to remove such
property if Tenant pays to Landlord, upon such judicial termination, Rent for
such time period). Landlord shall give Tenant whatever notice may legally be
required of its right to reclaim any abandoned property (currently, California
Civil Code Section 1980 et seq.) and may thereafter remove any or all of such
items and dispose of the same in any manner or store the same in a public
warehouse or elsewhere for the account and at the expense and risk of Tenant. If
Tenant shall fail to pay the cost of storing any such property after it has been
stored for a period of ninety (90) days or more, Landlord may sell any or all of
such property at public or private sale, in such manner and at such times and
places as Landlord, in its sole discretion, may deem proper, without notice to
or demand upon Tenant, for the payment of all or any part of such charges or the
removal of any such property, and shall apply the proceeds of such sale: first,
to the cost and expenses of such sale, including attorneys' fees and costs
actually incurred; second, to the payment of the cost or charges for storing any
such property; third, to the payment of any such sums of money which may then or
thereafter be due to Landlord from Tenant under any of the terms hereof plus
interest at the Lease Rate; and fourth, the balance, if any, to Tenant.
23.4 Tenant's Right to Remove Property. All of Tenant's Property (as
defined in Paragraph 12.1) shall remain the property of Tenant and, subject to
the provisions of Paragraph 23.2, may be removed by Tenant at any time during
the term, provided Tenant is not in default hereunder, and provided further that
Tenant shall repair any damage caused by such removal.
ARTICLE 24
ATTORNEYS' FEES
24.1 Litigation Between the Parties. In the even suit is brought to
enforce or interpret any part of this Lease, the prevailing party shall be
entitled to recover, as an element of its costs of suit, and not as damages,
reasonable attorneys' fees and costs incurred therein, and in any appeal in
connection therewith, to be fixed by the court. The "prevailing party" shall be
entitled to recover its costs of suit (whether or not allowable under California
Code of Civil Procedure Section 1033.5) whether or not the suit proceeds to
final judgment. No sum for attorneys' fees and costs shall be counted in
calculating the amount of a judgment for purposes of determining whether a party
is entitled to recover its costs or attorneys' fees and costs. The prevailing
party shall further be entitled to recover all costs and fees incurred in
connection with the enforcement of any judgment or order issued in connection
with such litigation (including without limitation attorneys' fees, Marshall
fees, garnishment, third party examination, levy fees and costs,
bankruptcy-related fees and costs, and post-judgment motions), and this
provision shall not merge with such judgment and shall survive the entry
thereof. Any judgment entered in such action shall contain a specific provision
providing for the recovery of such fees and costs incurred in enforcing such
judgment.
24.2 Litigation with Third Parties. Should Landlord, for any reason
other than its exclusive gross negligence or willful misconduct, be made a party
to any litigation instituted by Tenant or by any third party against Tenant, or
by or against any person holding under or using the Premises by license,
assignment or sublease of Tenant, or for the foreclosure of any lien for labor
or material furnished to or for Tenant or any such other person or otherwise
arising out of or resulting from any act, omission or transaction of Tenant or
of any such other person, Tenant covenants, at Landlord's election and upon
written tender of defense, to defend (with legal counsel of Landlord's choosing)
and to save and hold Landlord harmless from any liability and any judgment
rendered against Landlord or the Premises or the Shopping Center or any part
thereof, including, without limitation, all costs and expenses (including
attorneys' fees and costs), incurred by Landlord in connection with such
litigation, plus interest at the Lease Rate.
ARTICLE 25
WAIVER
The waiver by Landlord or Tenant of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition as to any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance or payment of
Rent hereunder by Landlord or Tenant, as the case may be, shall not be deemed to
be a waiver of any preceding breach by the other of any term, covenant or
condition of this Lease (other than the failure of Tenant to pay the particular
Rent so accepted) regardless of Landlord's or Tenant's knowledge of such
preceding breach at the time of acceptance or payment of such Rent.
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ARTICLE 26
HOLDING OVER
If Tenant holds over after the expiration of the term (as defined in Article
28), with or without the express or implied consent of Landlord, such tenancy
shall be from month to month only, and not a renewal hereof or an extension for
any further term, and in such case Rent shall be payable in an amount equal to
twice the amount payable by Tenant during the last month of the term hereof
pursuant to and at the times specified in Articles 3, 4 and 5 herein, and such
month to month tenancy shall be subject to every other term, covenant and
agreement contained herein. Nothing contained in this Article 26 shall be
construed as a consent by Landlord to any holding over by Tenant, or as
relieving Tenant from liability for any damages which such holding over may
cause Landlord, and Landlord expressly reserves the right to require Tenant to
surrender possession of the Premises to Landlord as provided in Article 23
herein forthwith upon the expiration or other termination of the term of this
Lease.
ARTICLE 27
SUBORDINATION, ATTORNMENT AND NONDISTURBANCE
This Lease is subject and subordinate to all ground or master leases,
mortgages, and deeds of trust which now affect the Premises and the Shopping
Center, and to all renewals, modifications, consolidations, replacements, and
extensions thereof. If the lessor under any such lease or the holder or holders
of any such mortgage or deed of trust shall advise Landlord that they desire or
require this Lease to be prior and superior thereto, upon written request of
Landlord to Tenant, Tenant agrees promptly to execute, acknowledge, and deliver
any and all documents or instruments which Landlord or such lessor, holder, or
holders deem necessary or desirable for purposes thereof. Landlord shall have
the right to cause this Lease to be and become and remain subject and
subordinate to any and all ground or master leases, mortgages or deeds of trust
which may hereafter be executed covering the Premises and/or the Shopping
Center, or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances,
together with interest thereon and subject to all the terms and provisions
thereof. Tenant agrees, within ten (10) business days after Landlord's written
request therefor to execute, acknowledge, and deliver any and all documents or
instruments requested by Landlord that do not materially diminish or impair
Tenant's rights or materially increase Tenant's obligations or duties under this
Lease and that are necessary or proper to assure the subordination of this Lease
to any such mortgages, deeds of trust, or leasehold estates; provided, however,
the foregoing provisions with respect to such election of subordination by
Landlord shall not be effective unless and until after the owner or holder of
any such mortgage, deed of trust, or the lessor under any such leasehold estate
shall execute with Tenant a nondisturbance agreement reasonably acceptable to
Tenant under which such owner, holder, or lessor shall agree, in the event of
termination of such leasehold estate or upon the foreclosure of any such
mortgage or deed of trust, that Tenant's quiet enjoyment of the Premises will
not be disturbed so long as Tenant pays Rent and observes and performs all of
the obligations under this Lease to be observed and performed by Tenant.
Tenant's failure to deliver such a document or instrument of subordination
within such ten (10) business day period, if required, shall at the option of
Landlord constitute a material breach or default under this lease; provided,
however, that Tenant shall have such additional time to respond following such
10-business day period as may be reasonably necessary under the circumstances to
negotiate the specific terms of any such subordination, non-disturbance and
attornment agreement). Notwithstanding anything to the contrary set forth in
this Article 27, Tenant hereby attorns and agrees to attorn to any Person (as
that term is defined in Article 28) purchasing or otherwise acquiring the
Shopping Center or the Premises at any sale or other proceeding or pursuant to
the exercise of any other rights, powers, or remedies under such mortgages, or
deeds of trust, or ground or underlying leases, at their option, as if such
Person had been named as Landlord herein; provided, however, that the owner or
holder of any such mortgage or deed of trust or the lessor under any such
leasehold estate shall have executed with Tenant a non-disturbance agreement
under which such owner, holder or lessor has agreed, in the event of termination
of such leasehold estate or upon the foreclosure of any such mortgage or deed of
trust, that Tenant's quiet enjoyment of the Premises will not be disturbed so
long as Tenant pays Rent and observes and performs all the obligations under
this Lease to be observed and performed by Tenant, it being intended hereby that
if this Lease is terminated, cut-off or otherwise defeated by reason of any act
or actions by the owner or holder of any such mortgage or deed of trust or the
lessor under any such leasehold estate, then, subject to the execution and
delivery of said non-disturbance agreement, this Lease shall continue in full
force and effect.
ARTICLE 28
DEFINITIONS
The following words and phrases shall have the following meanings:
(a) The words "Landlord" and "Tenant," as used herein, shall include
the plural as well as the singular. Words used in neuter gender include the
masculine and feminine and words in the masculine or feminine gender include the
neuter. If more than one person executes this Lease as Tenant, (i) each of them
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is jointly and severally liable for the keeping, observing and performing of
each and all of the obligations hereunder imposed upon Tenant and (ii) the act
or notice from, or notice or refund to, or the signature of, any one or more of
them with respect to the tenancy of this Lease shall be binding upon each and
all of the persons executing this Lease as Tenant with the same force and effect
as if each and all of them had so acted or so given or received such notice or
refund or so signed.
(b) Unless otherwise specified: whenever the term "day(s),"
"month(s)" or "year(s)" is used herein, it shall refer to calendar day(s),
month(s) or year(s) (as the case may be).
(c) Whenever the words "term," "lease term" or "term of this
Lease" are used herein, it shall refer to the term of this Lease and any
prior exercised extensions and renewals thereof.
(d) "Consent" shall mean the prior written consent of a party,
which may not be unreasonably withheld or delayed unless expressly indicated
to the contrary.
(e) "Landlord's Agent" means any officer, director, servant or
employee of Landlord or of any affiliate (as such term is defined in Rule
12b-2 promulgated under the Securities Exchange Act of 1934, as amended) of
Landlord.
(f) "Parent" shall mean any Person who owns more than 50% of the
equity or beneficial interest of any other Person.
(g) "Person" shall mean any one or more human beings, or legal
entities or other artificial persons, including, without limitation,
partnerships, corporations, limited liability companies, trusts, estates,
associations, joint ventures, and any other combination of human beings and/or
legal entities.
(h) "Tenant Agent" shall mean any officer, director, servant,
employee, agent, contractor, licensee, assignee, invitee or guest of Tenant, and
"tenant agent" shall have the same meaning but with respect to any other tenant
in the Shopping Center.
(i) "Events of delay" shall mean strikes, lockouts, labor disputes,
power outages, riots, restrictive governmental laws and other events beyond the
control of Landlord or Tenant.
ARTICLE 29
HEIRS AND ASSIGNS/TIME OF ESSENCE
Subject to the provisions of Article 17 above, this Lease is
intended to and does bind and accrue to the benefit of the heirs, executors,
administrators, successors, and assigns of any and all of the parties hereto.
Time is of the essence of this Lease.
ARTICLE 30
INTERPRETATION
30.1 Severability. If any term or provision of this Lease, the deletion
of which would not adversely affect the receipt of any material benefit by
either party hereunder, shall be held invalid or unenforceable to any extent,
the remainder of this Lease shall not be affected thereby and each term and
provision of this Lease shall be valid and enforceable to the fullest extent
permitted by law.
30.2 Integration. This Lease along with any exhibits and attachments or
other documents affixed hereto or referred to herein constitutes the entire and
exclusive agreement between Landlord and Tenant relative to the Premises herein
described. Landlord and Tenant hereby agree that all prior or contemporaneous
oral agreements and understandings relative to the leasing of the Premises are
superseded by this Lease.
30.3 Amendment. This Lease may be altered, amended or revoked only by
an instrument in writing signed by both Landlord and Tenant and making specific
reference to this Lease.
30.4 Section Headings. The headings included in this lease re for
convenience only, and shall not be used to interpret this Lease.
30.5 Intentionally Omitted.
30.6 Lease Draftsman. This Lease was negotiated between the parties and
their respective counsel and professional advisors, and the parties agree that
such provisions shall be interpreted without reference to the draftsman of the
lease or any portion thereof, because this Lease is a product of all their
efforts.
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ARTICLE 31
RIGHT OF LANDLORD TO PERFORM
All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any abatement of Rent. If Tenant shall fail to pay
any sum of money, other than Rent, required to be paid by it hereunder, or
shall fail to perform any other act on its part to be performed hereunder,
and such failure shall continue beyond any applicable grace period set forth
in Article 22 above, Landlord may, but shall not be obligated so to do, and
without waiving or releasing Tenant from any obligations of Tenant, make any
such payment or perform any such other act on Tenant's part to be made or
performed as in this Lease provided. All sums so paid by Landlord and all
necessary incidental costs, together with interest thereon at the Lease Rate
form the date of such payment by Landlord until the date paid in full by
Tenant, shall be payable to Landlord within ten (10) days of demand. Tenant
covenants to pay any such sums, and Landlord shall have (in addition to any
other right or remedy of Landlord) the same rights and remedies in the event
of the nonpayment thereof by Tenant as in the case of default by Tenant in
the payment of Rent.
ARTICLE 32
NOTICES
Unless otherwise specified, all notices which Landlord or Tenant may be
required or may desire to be served on the other shall be in writing and may be
served, as an alternative to personal service, by mailing the same by registered
or certified mail, return receipt requested, postage prepaid, or by "Federal
Express" or other overnight air courier service, free prepaid, addressed to
Landlord at the address for Landlord set forth in the Lease Summary, and to
Tenant at the address for Tenant set forth in the Lease Summary, or addressed to
such other address or addresses as either Landlord or Tenant may from time to
time designate to the other in writing. Any such notice shall only be deemed to
have been given for purposes of this Lease at the time such writing is
personally delivered or, in the case of certified or registered mailing thereof,
upon actual receipt or the date of refusal to accept such mailing, or on the
first business day after deposit with an overnight air courier service.
ARTICLE 33
QUIET ENJOYMENT
Landlord covenants and agrees that Tenant, upon paying the Rent and all
other charges herein provided for and observing and keeping the covenants,
agreements and conditions of this Lease on its part to be observed and kept,
shall lawfully and quietly hold, occupy and enjoy the Premises during the term
of this Lease without hindrance or molestation of anyone lawfully claiming by,
through or under Landlord, subject, however, to the matters set forth in this
Lease. Landlord shall not be liable for any acts of other tenants, their
employees, invitees or customers or any other third party.
ARTICLE 34
ESTOPPEL CERTIFICATE
Tenant agrees at any time and from time to time upon not less than ten
(10) business days' prior notice by Landlord, to execute, acknowledge and
deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect (or if there have been modifications,
that the same are in full force and effect as modified and stating the
modifications), the dates to which the Fixed Rent, Additional Rent, and other
charges have been paid in advance, if any, stating whether or not to the best
knowledge of the signer of any such certificate, Landlord is in default in
performance of any covenant, agreement or condition contained in this Lease and,
if so, specifying each such default of which the signer may have knowledge, and
setting forth such other information as Landlord may reasonably request; it
being intended that any such statement delivered pursuant hereto may be relied
upon by any prospective purchaser of the Premises or any interest of Landlord
therein, or any prospective mortgagee thereof or any prospective assignee of any
mortgagee thereof or any prospective master or ground lessor. In the event that
Tenant fails to return such estoppel certificate in accordance with the above,
then Tenant shall be in default hereunder pursuant to Article 22; and at
Landlord's option, the copy of the estoppel certificate as delivered to Tenant
for execution shall be deemed to be correct and may be relied upon.
ARTICLE 35
AUTHORITY
If Tenant is a corporation, each individual executing this Lease on
behalf of said corporation represents and warrants that he or she is duly
authorized to execute and deliver this Lease on behalf of such corporation in
accordance with a duly adopted resolution of the Board of Directors of such
corporation or in accordance with the bylaws of such corporation, and that this
Lease is binding upon such corporation in accordance with its terms. If Tenant
is a partnership or joint venture, each individual executing this Lease on
behalf of said partnership or joint venture represents and warrants that he or
she is duly authorized to executive
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and deliver this Lease on behalf of such partnership or joint venture in
accordance wit the partnership or joint venture agreement of such partnership or
joint venture, and that this Lease is binding upon such partnership or joint
venture in accordance with its terms. If Landlord is a limited liability
company, each individual executing this Lease on behalf of such entity
represents that he or she is duly authorized to execute and deliver this Lease
on behalf of such entity in accordance with the articles of organization and the
operating agreement of such entity and that this Lease is binding on such entity
in accordance with their terms.
ARTICLE 36
BROKERS
Landlord and Tenant each hereby represent and warrant to the other
that it has had no dealings with any real estate broker, agent or finder in
connection with this lease other than as specified in Paragraph 12 of the
Lease Summary, and knows of no real estate broker, agent or finder who is
entitled to a commission or finder's fee in connection with this Lease other
than as specified in Paragraph 12 of the Lease Summary. Landlord and Tenant
shall each bear the cost of their respective brokers. Landlord and Tenant
hereby each indemnify, hold harmless, and shall defend the other against
either's breach of its representation and warranty.
ARTICLE 37
ACCORD AND SATISFACTION
37.1 Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than the Rent herein stipulated shall be deemed to
be other than on account of the earliest stipulated Rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such Rent or pursue any other remedy in the Lease provided.
37.2 Application of Payments. In the event Tenant submits a payment of
less than the total combined amount of all payments required under this Lease,
then Landlord shall have the option to credit said payment towards any of said
items it so desires, notwithstanding any specification of Tenant.
ARTICLE 38
LANDLORD RESERVATIONS
Landlord reserves the right from time to time in Landlord's sole and
absolute discretion:
(a) to make changes to the structure, location, size and
configuration of the Common Areas, and to grant exclusive licenses and/or leases
with respect to the use of and/or occupancy of any portions of the Common Areas.
(b) To close temporarily any of the Common Areas for maintenance
purposes or to construct additional improvements or to demolish existing
improvements, so long as reasonable access to the premises remains available in
the Common Areas;
(c) To expand or contract the Shopping Center by adding buildings
and improvements or demolishing buildings and improvements, even though such
additions or deletions may vary the availability of parking spaces within the
Common Areas or to change street entrances to the Shopping Center.
(d) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to buildings in the Shopping Center, or any
portion thereof;
(e) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and the Shopping Center as Landlord
may, in its sole discretion, deem to be desirable and appropriate;
(f) To establish, promulgate and enforce rules and regulations
concerning the Shopping Center, in addition to those already adopted and
attached as Exhibit "B" hereto, for the proper and efficient management,
operation, maintenance and use thereof, or in order to comply with new or
superseding governmental laws, rules or regulations. Such Rules and Regulations
may be canceled, changed, modified and/or supplemented from time to time by
Landlord. Upon dissemination of the same to Tenant, such Rules and Regulations
shall be deemed fully incorporated herein, and a breach of the same by Tenant
shall constitute a default hereunder. Landlord agrees to enforce the Rules and
Regulations without discrimination and impartially among all tenants similarly
affected. However, in the event of any disagreement or inconsistency between the
Rules and Regulations and this Lease as interpreted without such incorporation,
the Lease as so interpreted shall control;
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(g) To use portions of the Common Areas for carnival-type shows,
rides and entertainment, outdoor shows, displays, automobiles and other product
shows, the leasing of kiosks and other uses which, in Landlord's sole judgment,
tend to attract the public or benefit the Shopping Center in any way;
(h) To use the Common Areas for advertising purposes and (subject to
Article 21) to move or remove any signage at any time; and
(i) To change the name of the Shopping Center.
ARTICLE 39
LENDER'S APPROVAL
The Lease is subject to the approval of all mortgagees and master on
ground lessors having such approval rights, and if any such entity disapproves
of this Lease within twenty (20) days after the execution hereof, Landlord shall
have the right to cancel this Lease, without any liability whatsoever, by
written notice of cancellation given to Tenant within ten (10) days after the
execution of this Lease, this Lease shall continue in full force and effect. The
delivery of a recognition and non-disturbance agreement signed by the Master
Landlord and mortgagee, if any, may serve as evidence of their respective
approvals of this Lease.
ARTICLE 40
HAZARDOUS OR INFECTIOUS SUBSTANCES
40.1 Covenants of Tenant Regarding Hazardous or Infectious Substances.
Tenant represents, warrants and covenants as follows:
(a) No "Hazardous Substance" (as defined hereinbelow) will be
brought upon, used kept or stored in, on, about or under the Premises or
anywhere else in the Shopping Center by Tenant, its agents, representatives,
employees, contractors or invitees, without the prior written consent of
Landlord satisfaction that such Hazardous Substance is necessary or useful to
Tenant's business and will be brought upon, used, kept and stored in a manner
which complies with all "Environmental, Health and Safety Requirements" (as
defined hereinbelow) regulating such Hazardous substance, and with the highest
standards prevailing in the industry for such Hazardous Substance).
Notwithstanding this restriction, Tenant may bring, use, keep, and store in the
Premises merchandise and supplies customarily used and found in other Eagle
Hardware and Garden stores that would otherwise fall within the description of
Hazardous Substances, provided that any such items that would be classified as a
Hazardous Substance may be brought upon the Premises, and used, kept, and stored
only in a manner which complies with all Environmental, Health and Safety
Requirements and with the highest standards prevailing in the industry for such
Hazardous Substance.
(b) If any Hazardous Substance is brought upon, used, kept or stored
in, on, about or under the Premises or Shopping Center by Tenant, then Tenant
shall do so in a manner which complies with all Environmental, Health and Safety
Requirements regulating such Hazardous Substance and with the highest standards
prevailing in the industry for such Hazardous Substance. Without limiting any of
the other obligations of Tenant set forth in this Lease, Tenant shall, at its
own cost and expense, procure, maintain in effect and comply with all conditions
and requirements of any and all permits, licenses and other governmental and
regulatory approvals or authorizations required under any Environmental, Health
or Safety Requirement in connection with the bringing, use, keeping and storage
of such Hazardous Substance in, on, about or under the Premises or Shopping
Center. Tenant shall submit to Landlord copies of all such permits, licenses, or
other governmental or regulatory approvals or authorizations within five (5)
business days of its receipt thereof.
(c) Upon written demand by Landlord in any instance in which the
presence of any Hazardous Substance on the Premises or in the Shopping Center
was caused or permitted by Tenant without Landlord's prior written consent,
Tenant shall promptly remove and dispose of the same at Tenant's sole cost and
expense and in compliance with all applicable Environmental, Health and Safety
Requirements. If the presence of any Hazardous Substance in, on, about or under
the Premises or Shopping Center caused or permitted by Tenant results in an
contamination of the Premises or Shopping Center or the surrounding environment,
Tenant shall promptly take all actions at its sole cost and expense as are
necessary to return the Premises or Shopping Center or the surrounding
environment to the condition existing prior to such contamination (the
"Remediation"); provided, however, that Tenant shall not undertake any
Remediation without first providing Landlord with written notice thereof and
obtaining Landlord's approval therefor. Tenant shall carry out any remediation
in a manner which will minimize the impact on the businesses conducted by other
tenants in the Shopping Center and in a manner which complies with all
Environmental, Health and Safety Requirements. Further, Tenant shall not
undertake any Remediation, nor enter into any settlement agreement, consent
decree or other compromise with respect to any claims relating to any Hazardous
Substance in any way connected with the Premises or Shopping Center without
first notifying
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Landlord of Tenant's intention to do so and affording Landlord ample opportunity
to appear, intervene or otherwise appropriately assert and protect Landlord's
interest with respect thereto.
(d) Upon the expiration or early termination of the term of this
Lease, Tenant shall cause to be removed from the Premises or Shopping Center, as
appropriate, all Hazardous Substances brought upon, used, kept or stored in, on,
about or under the Premises or Shopping Center by Tenant, as well as all
receptacles or containers therefor, and shall cause such Hazardous Substances
and such receptacles or containers to be stored, treated, transported and/or
disposed of in compliance with all applicable Environmental, Health and Safety
Requirements. Any Hazardous Substances or receptacles or container therefor
which Tenant causes to be removed from the Premises or Shopping Center shall be
removed solely by duly licensed haulers and transported to and disposed of at
duly licensed facilities for the final disposal of such Hazardous Substances and
receptacles or containers therefor. Tenant shall deliver to Landlord copies of
any and all manifests and other documentation relating to the removal, storage,
treatment, transportation and/or disposal of any Hazardous Substances or
receptacles or containers therefor reflecting the legal and proper removal,
storage, treatment, transportation and/or disposal thereof. Tenant shall, at its
sole cost and expense, repair any damage to the Premises or Shopping Center
resulting from Tenant's removal of such Hazardous Substances and receptacles or
containers thereof. Tenant's obligation to pay Fixed Rent and all other charges
shall continue until such removal by Tenant has been completed to Landlord's
satisfaction, notwithstanding the expiration or early termination of the term of
this Lease.
(e) Tenant shall, from time to time, execute such affidavits,
certificates or other documents as may be requested by Landlord concerning
Tenant's best knowledge and belief regarding the presence of Hazardous
Substances in, on, about or under the Premises or Shopping Center. Further, each
year throughout the term of this Lease, on the anniversary date hereof, Tenant
shall deliver to Landlord a letter stating that during the preceding year Tenant
has complied with the provisions of this Article 40 or, if Tenant has not so
complied, a letter setting forth the details concerning its noncompliance.
(f) Tenant shall notify Landlord in writing immediately upon
becoming aware of: (i) any enforcement, cleanup, remediation or other action
threatened, instituted or completed by any governmental or regulatory agency or
private person with respect to the Premises or Shopping Center relating to
Hazardous Substances; (ii) any claim threatened or made by any person against
Tenant or the Premises or Shopping Center for personal injury, property damage,
other losses, contribution, cost recovery, compensation or any other matter with
respect to the Premises or the Shopping Center relating to Hazardous Substances;
(iii) any reports made by or to any governmental or regulatory agency with
respect to the Premises or Shopping Center relating to Hazardous Substances,
including without limitation any complaints, notices or asserted violations in
connection therewith; and (iv) any other information with respect to the
Premises or Shopping Center relating to Hazardous Substances. Further, Tenant
shall also supply to Landlord as promptly as possible, and in any event within
five (5) business days after Tenant first receives or sends the same, copies of
all claims, reports, complaints, notices, warnings, asserted violations or other
documents relating in any way to the foregoing.
(g) Landlord and its agents and representatives shall have the right
to communicate, verbally or in writing, with any governmental or regulatory
agency or any environmental consultant on any matter with respect to the
Premises or Shopping Center relating to Hazardous Substances. Landlord shall be
entitled to copies of any and all notices, inspection reports or other documents
issued by or to any such governmental or regulatory agency or consultant with
respect to the Premises or Shopping Center relating to Hazardous Substances.
40.2 Indemnification. If Tenant breaches any of its covenants or
obligations in this Article 40, or if the presence of Hazardous Substances on
the Premises or Shopping Center caused or permitted by Tenant results in
contamination of the Premises or Shopping Center, or if contamination of the
Premises or Shopping Center by hazardous Substances otherwise occurs for which
Tenant is legally liable to Landlord for damage resulting therefrom, or if any
lender or governmental agency requires an investigation to determine whether
there has been any contamination of the Premises or Shopping Center, then,
Tenant shall indemnify, defend and hold harmless Landlord, any subsidiary or
other affiliate of Landlord, and any director, officer, shareholder, employee,
agent, attorney or partner of any of the foregoing, from any and all claims,
damages, penalties, fines, costs, liabilities and losses (including, without
limitation, diminution in value of the Premises or Shopping Center, damages for
the loss or restriction on use of rental or useable space or of any other
amenity of the Premises or Shopping Center, damages arising from any adverse
impact on marketing of space in the Premises or Shopping center, other
consequential damages and sums paid in settlement of clams, attorneys' fees,
consultants' fees and experts' fees) which arise during or after the term of
this lease as a result of such contamination. This indemnification of Landlord
by Tenant includes, without limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any governmental or regulatory agency or any
private person due to the presence of Hazardous Substances at the Premises or
Shopping Center or in the soil or groundwater in, on, about or under the
Premises or Shopping Center.
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40.3 Inspection. If Tenant breaches its covenants or obligations in
this Article 40, or if the presence of Hazardous Substances on the Premises or
Shopping Center caused or permitted by Tenant results in contamination of the
Premises or Shopping Center, or if contamination of the Premises or Shopping
Center by Hazardous Substances otherwise occurs for which Tenant is legally
liable to Landlord for damage resulting therefrom, or if Landlord, any lender or
governmental agency requires an investigation to determine whether there has
been any violation of this Article 40, then, Landlord and its agents and
representatives shall have the right, at any reasonable time and form time to
time during the term of this Lease, to enter upon the Premises to perform
monitoring, testing or other analyses, and to review any and all applicable
documents, notices, correspondence or other materials which may be in the
possession of Tenant. Further, Tenant shall be obligated to provide Landlord,
within five (5) business days of Landlord's request therefor, with copies of all
such applicable documents which may be in Tenant's possession but are not at the
Premises. All costs and expenses reasonably incurred by Landlord in connection
therewith shall become due and payable by Tenant upon Landlord's presentation to
Tenant of an invoice therefor.
40.4 Definition of Hazardous Substance. As used herein, the term
"Hazardous Substance" shall mean any substance, material, waste, contaminant or
pollutant determined by any local, regional, state or federal governmental
agency, court, judicial or quasi-judicial body or legislative or
quasi-legislative body pursuant to any Environmental, Health and Safety
Requirement to be hazardous, toxic, infectious, radioactive, ignitable or
flammable, corrosive, persistent or bioaccumulative, explosive, reactive or
otherwise dangerous, including but not limited to crude oil and its fractions,
including petroleum and petroleum products, gasoline and waste oil.
40.5 Definition of Environmental, Health and Safety Requirement. As
used herein, the term "Environmental, Health and Safety Requirement" shall mean
any law, statute, ordinance, rule, regulation, order, judgment or decree
promulgated by any local, regional, state or federal governmental agency, court,
judicial or quasi-judicial body or legislative or quasi-legislative body which
relates to matters of the environment, health, industrial hygiene or safety.
40.6 ANY AND ALL LIABILITIES ARISING FROM THE MANUFACTURING,
GENERATION, HANDLING, USE, STORAGE, TREATMENT, TRANSPORTATION OR DISPOSAL OF
HAZARDOUS SUBSTANCES PERFORMED OR CAUSED TO BE PERFORMED BY TENANT, OR ITS
AGENTS, REPRESENTATIVES, EMPLOYEES, CONTRACTORS OR INVITEES, SHALL AT ALL TIMES
REMAIN THE SOLE RESPONSIBILITY OF TENANT AND TENANT SHALL RETAIN ANY AND ALL
LIABILITIES ARISING THEREFROM. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET
FORTH IN THIS ARTICLE 40, ANY ACT BY LANDLORD OR ITS AGENTS OR REPRESENTATIVES
HEREUNDER SHALL NOT CONSTITUTE AN ASSUMPTION BY LANDLORD OF ANY OBLIGATIONS,
DUTIES, RESPONSIBILITIES OR LIABILITIES OF TENANT HEREUNDER, INCLUDING WITHOUT
LIMITATION TENANT'S COMPLIANCE WITH ANY ENVIRONMENTAL, HEALTH OR SAFETY
REQUIREMENT, WHICH TENANT SHALL RETAIN UNDER ALL CIRCUMSTANCES AND SHALL
INDEMNIFY, DEFEND AND HOLD HARMLESS LANDLORD AS PROVIDED HEREIN. FURTHER,
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS ARTICLE 40, EVEN
THOUGH HAZARDOUS SUBSTANCES REMOVED, TRANSPORTED AND DISPOSED OF BY TENANT MAY
ORIGINATE FROM THE PREMISES OR SHOPPING CENTER, TENANT SHALL REMAIN FULLY LIABLE
FOR THEIR REMOVAL, TRANSPORTATION AND DISPOSAL AND SHALL INDEMNIFY, DEFEND AND
HOLD HARMLESS LANDLORD AS PROVIDED HEREIN.
40.7 Tenant's Liability. The representations, warranties, covenants,
agreements and indemnities of Tenant set forth in this Article 40 shall survive
the expiration or earlier termination of this Lease and shall not be affected by
any investigation, or information obtained as a result of any investigation, by
or on behalf of Landlord or any prospective lessee.
ARTICLE 41
UTILITY RATIONING
Tenant acknowledges that the Premises may become subject to the
rationing of utility services, or restrictions on use. Notwithstanding any such
rationing or restrictions on use of any such utility services, Tenant
acknowledges and agrees that its tenancy and occupancy hereunder shall be
subject to such rationing restrictions as are now or which may hereafter be
imposed upon Landlord, Tenant, the Premises or the Shopping Center, and Tenant
shall in no event be excused or relieved from any covenant or obligation to be
kept or performed by Tenant by reason of any such rationing or restrictions.
Tenant further agrees to pay and discharge, prior to delinquency, any amount,
tax, charge, surcharge, assessment, or imposition levied or assessed or imposed
upon the Premises, or Tenant's use and occupancy thereof, or the utility
services therein, or the delivery or use thereof, or as a result, whether
directly or indirectly, of any such rationing or restrictions.
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ARTICLE 42
TITLE
Landlord is aware of no claims, rights, easements, or restrictions
governing the Premises except for those listed on the Preliminary Title Report
No. 8300033-MO7 issued by Chicago Title Insurance Company dated as of January 9,
1998 (the "Title Report"), a copy of which has been provided to Tenant. Landlord
shall have no obligation to change, remove, alter, or add any items to record
title to the premises (except for a short form memorandum of lease as provide in
Article 43, below). Landlord and Tenant acknowledge and agree that the
Declaration is in the process of being amended to provide for, among other
things, Tenant's use of the Premises under this Lease. Such amendment shall be
superior to the lien and charge of this Lease. Landlord shall be responsible for
the cost of a CLTA leasehold policy of title insurance insuring title in the
policy amount of $5,000,000, which policy shall be subject to all items
reflected on the Title Report, the amendment to the Declaration, and any other
such items caused to be of record by or on behalf of Tenant. If Tenant desires
an ALTA policy, Tenant shall be responsible for the incremental premium cost and
the cost of any additional survey (or supplement to Landlord's existing survey).
ARTICLE 43
MEMORANDUM OF LEASE
Landlord agrees to execute and deliver to Landlord a short form
memorandum of this Lease which Tenant may record at Tenant's sole cost and
expense. Upon recordation, Tenant shall deliver a recorder-stamped copy of such
memorandum to Landlord. Upon the expiration or earlier termination of this
Lease, Tenant shall record at Tenant's sole cost and expense a termination or
cancellation of such memorandum or such other documents reasonably required by
Landlord to remove such Short Form Memorandum from record title.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the Execution Date.
LANDLORD:
FF PROPERTIES, L.P.,
a California limited partnership
By: Carnoustie, Inc.,
a California corporation,
General partner
By: [Illegible]
-----------------------------
Name: /s/ James D. Vandever
---------------------------
Title: vice president
--------------------------
By:
-----------------------------
Name:
----------------------------
Title:
--------------------------
TENANT:
EAGLE HARDWARE & GARDEN, INC.,
a Washington corporation
By: /s/ Richard T. Takata
-----------------------------
Name: RICHARD T. TAKATA
---------------------------
Title: PRESIDENT & CEO
--------------------------
By: /s/ Ronald P. Maccarone
-----------------------------
Name: Ronald P. Maccarone
---------------------------
Title: EVP/C.F.O.
--------------------------
<PAGE>
EXHIBIT "A"
WESTMINSTER GATEWAY SHOPPING CENTER
SITE PLAN OF SHOPPING CENTER
<PAGE>
EXHIBIT "A"
[GRAPHIC]
<PAGE>
EXHIBIT "A-1"
WESTMINSTER GATEWAY SHOPPING CENTER
TRACT MAP
<PAGE>
EXHIBIT "A-1"
[GRAPHIC]
<PAGE>
EXHIBIT "A-2"
WESTMINSTER GATEWAY SITE PLAN (COMMON AREAS IDENTIFIED)
<PAGE>
EXHIBIT A-2
SITE PLAN
[GRAPHIC]
<PAGE>
EXHIBIT "B"
WESTMINSTER GATEWAY SHOPPING CENTER
RULES AND REGULATIONS
1. Neither Tenant nor its employees shall use any roadway, walkway, or
parking area except as a means of egress from or ingress to store areas or
parking areas within the Shopping Center. Such use shall be in an orderly
manner in accordance with directional or other signs or guides. Roadways
shall not be used for parking or stopping, except as posted for the immediate
loading or unloading of passengers.
2. The employees of Tenant shall not use any parking area, except for the
parking of motor vehicles during the period of time they are in fact
employees of Tenant. All motor vehicles shall be parked in an orderly manner
within the painted lines defining the individual parking places.
3. In connection with any use of the Common Areas, unless the Lease
expressly provides otherwise, Tenant shall not, without the express prior
written consent of Landlord (which may be withheld in Landlord's sole
discretion): (a) vend, peddle, display, place or solicit orders for sale or
distribution of any merchandise, device, service, periodical, book, pamphlet
or other matter whatsoever (except for sidewalk sales adjacent to Tenant's
Premises); (b) exhibit any sign, placard, barrier, notice or other written
material; (c) distribute any circular, booklet, handbill, placard or other
material; (d) solicit membership in any organization except for membership in
Tenant's business), group or association or contribution for any purpose; (e)
parade, patrol, demonstrate or engage in any conduct that might tend to
interfere with or impede the use (except as allowed herein) of the Common
Areas by Landlord or any tenant or any employee or invitee of any tenant, or
create a disturbance, attract attention or harass, annoy, or disparage
business establishments within the Shopping Center; (f) deface, damage or
demolish any sign, light standard or fixture, landscaping material or other
improvement or property situated within the Shopping Center; or (g) permit
any portion of the Shopping Center to be utilized for lodging or care taking
purposes.
4. Each Lot in the Shopping Center contains portions of the Common Areas,
as shown on Exhibit "A-2," which Common Areas shall be maintained by Landlord
in accordance with this Lease. All tenants in the Shopping Center (excluding
the occupant of Lot 1 of the Shopping Center, currently Wal-Mart Stores,
Inc.) are prohibited from making any alterations, additions, or improvements
to any Common Areas, including the landscaping, located on their respective
lots without the prior written consent of Landlord which may be withheld in
Landlord's commercially reasonable judgment.
<PAGE>
EXHIBIT "C"
WESTMINSTER GATEWAY SHOPPING CENTER
CONSTRUCTION EXHIBIT
1. General. The building which is a part of the Premises ("Building") shall
be constructed by Tenant in accordance with this Exhibit "C". The
Building shall have an area of approximately one hundred thirteen
thousand one hundred (113,100) square feet and shall be located within
an area of real property consisting of approximately five hundred
thousand (500,000) square feet (the "Premises"). The buildable "Pad",
consisting of one hundred thirty-seven thousand five hundred and fifty
(137,550) square feet, shall be deemed to include the area of the
Premises containing the Building, a garden yard containing approximately
twenty-four thousand four hundred and fifty (24,450) square feet, and
sidewalks and landscaping at the perimeter of the Building. The Pad
shall be located as outlined by the heavy-dashed line, which is also the
approximate "Building Limit Line")as hereinafter defined), on Exhibit
"D" Plot Plan attached to the Lease to which this Exhibit "C" is
attached ("Lease"), subject to modification as provided for by the
Lease. The following improvements are collectively referred to as the
"Tenant Improvements" and to be constructed on the Pad by Tenant at its
expense: the Building, garden yard, signage, trash enclosures, adjacent
sidewalks, and landscaping (within the Building Limit Line), plus all
improvements such as furniture, fixtures, equipment, trade fixtures, and
other improvements necessary for Tenant's operations. For purposes
hereof, the term "Building Limit Line" means the area outlined by the
outside curb face of any building perimeter sidewalk; five (5) feet from
all exterior walls, garden yard enclosures and truck wells (in the
absence of a perimeter sidewalk); five (5) feet outside the vertical
"drip" line of all canopies, roof overhangs and covered area roof lines;
and the distance customarily allowed by standard industry practices and
applicable building codes where any exterior walls are abutted by an
adjoining building.
2. Exterior Design Approval. Landlord shall have the right to approve an
exterior building design plan for the Tenant Improvements ("Exterior
Design Plan"). Within seven (7) working days after the date of execution
of the Lease, Tenant, at Tenant's sole cost and expense, shall cause to
be prepared and delivered to Landlord for Landlord's approval three 93)
copies of an Exterior Design Plan. The Exterior Design Plan and Tenant's
Site Plan (MCG Architects, Eagle Hardware Site Study 2, version dated
01/12/98) are attached to the Lease as Exhibits "A-3" and "D"
respectively. Landlord shall review the Exterior Design Plan within five
(5) days after receipt from Tenant. Landlord's review shall be based
upon, among other things, Landlord's determination, in Landlord's
reasonable discretion, of the aesthetic compatibility of the Exterior
Design Plan with the remainder of the Shopping Center. Tenant's exterior
(internally illuminated) sign design (logo) and colors and other
exterior building signs used typically by Tenant on a chain-wide basis
shall be excluded from Landlord's Exterior Design Plan approval process
(but shall nonetheless comply with all applicable governmental
regulations and the Declaration). Should the Exterior Design Plan be
disapproved by Landlord, Tenant, at its sole cost, shall make such
changes Tenant is willing to make and resubmit the corrected Exterior
Design Plan, to Landlord within five (5) working days following
Landlord's notice of disapproval. If, following the same review process,
Landlord fails to then approve the revised Exterior Design Plan, Tenant
may at its option cancel the Lease or the foregoing process shall be
repeated until the Landlord approves the Exterior Design Plan (or until
Tenant cancels the Lease). The Exterior Design Plan, once approved,
shall be referred to as the Final Exterior Design Plan.
3. Plans and Specifications. Tenant, at Tenant's sole cost and expense,
shall cause to be prepared and delivered to Landlord for Landlord's
review three (3) sets of complete working drawings and specifications
for the Tenant Improvements in the form of reproducible prints. Such
working drawings and specifications shall be in conformance with the
Final Exterior Design Plan, and shall also be in conformance with the
overall design and concept criteria established by the Landlord with
respect to the Shopping Center. Such working drawings and specifications
shall be prepared by a licensed architect and/or engineer and shall
include drawings and specifications of such scope as to completely
delineate the nature and extent of the Tenant Improvements. Technical
specifications shall be prepared in accordance with A.I.A. and/or C.S.I.
standard format(s). The working drawings and specifications shall also
include final plans for all Pad landscaping and hardscaping per the
design theme already approved by the City of Westminster. The following
must be shown on the working drawings and specifications for the
Building:
a. Concrete Slab
i. Locate any floor drains, restroom or other plumbing connections.
ii. Locate any grease traps, floor safe, etc. requiring canouts in
slab.
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iii. Indicate any particular finish to slab, e.g., smooth trowel
finish, etc.
iv. Indicate any slab depressions required for ceramic tiles, brick
pavers, etc.
v. Indicate column pads, if any, and interior bearing footings.
vi. Show any exterior wall footing. Show if any cold joints are
required.
vii. Locate electrical floor outlets.
viii. Indicate underslab sleeves and raceways, for special or future
uses.
b. Electrical
i. Show total connected load. Indicate size of panels to be required
including sub-panel arrangements.
ii. Show any floor outlets and underground conduit.
iii. Provide interior circuitry diagrams showing location of ceiling
outlets and wall switches.
iv. Locate light fixtures.
v. Indicate any motors or special circuits affecting the sub-panel
or meter panel.
vi. EMT or rigid conduit must be employed. Romex is not permitted.
vii. Indicate safety switches if required.
viii. Location of all electrical items on plans.
c. Plumbing
i. Indicate any hot water equipment; show whether electric or gas,
and indicate venting.
ii. Indicate any gas operated equipment, size of piping and vents.
iii. Note on plans any Health Department requirements.
iv. Locate sewer connection and cleanout, if required.
v. Gas piping shall be located at roof height; indicate water lines
underground or overhead.
d. Ceiling
i. Indicate ceiling material, i.e., drywall, exposed wood,
acoustical, etc.
ii. Indicate exposed or concealed grid, finish on exposed grid.
iii. Show direction of panels.
iv. Show fire clips.
v. Name, brand and pattern of inlay tiles.
vi. Indicate ceiling height above finish floor.
vii. Show any track lights or requirement for special treatment of
tiles.
e. Fire Sprinklers
Indicate that sprinklers shall be per code.
f. Insulation
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Provide R-19 at ceiling line, R-11 in all perimeter walls or insulation
so as to meet minimum code requirements, whichever is the higher
R-value.
g. Air Conditioning
Provide complete plans showing name, weight, and size of equipment as
well as complete layout for distribution system.
h. Painting
i. Indicate special surface preparation.
ii. Provide color schedule per approved Final Exterior Design Plan.
i. Finish Carpentry
Indicate any special treatment, pattern and milling number (if
applicable).
j. Glass and Glazing
i. Specify if tempered, thickness, color, heat resistant, etc.
ii. If metal extrusions, show pattern number, finish.
iii. If wood, name material, detail the stops and other trim.
k. Floor Covering
i. Hard Floor-specify material and base.
ii. Carpet-specify carpet and pad (if applicable).
l. Ceramic Tile
Name material, pattern, mastic or mud-set. If a Health Department
requirement, show approval
m. Light Fixtures
i. Show any special requirements for installation.
ii. Indicate specific manufacture and brand name.
n. Utilities
i. Indicate utilities within pad and coordinate locations with
respective utilities for ultimate offsite utility services.
o. Signage
Indicate locations and specifications of signage.
Landlord shall notify Tenant within ten (10) days of Landlord's receipt of
such drawings and specifications of the respects, if any, in which such
drawings and specifications fail to conform to the Final Exterior Design Plan
or the overall design and concept criteria established by the Landlord with
respect to the Shopping Center, and Tenant shall, at Tenant's cost and
expense, within fifteen (15) days after receipt of such notification, make
such revisions as Tenant is willing to make so that the Final Exterior Design
Plan or the drawings and specifications conform to such concept criteria. The
foregoing procedure shall be repeated until the drawings and specifications
are reasonably in conformance satisfactory to Landlord; provided, however,
that if Landlord disapproves Tenant's improvement plans more than once and
Tenant thereafter declines to make the changes requested by Landlord, Tenant
shall so notify Landlord in writing and Landlord shall have the option,
exerciseable by written notice to Tenant within five (5) days after the date
that Tenant informs Landlord that it will not further revise the drawings and
specifications, to either withdraw its disapproval and allow Tenant to
proceed, or to terminate the Lease by delivering a thirty (30) day written
notice to Tenant. If Landlord fails to exercise its option, Landlord will be
deemed to have withdrawn its disapproval and
Page 3 of 7
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Tenant may proceed. Landlord shall initial and date one (1) set of the
approved working drawings and specifications and return them to Tenant.
The working drawings and specifications as approved by Landlord shall be
referred to as "the Working Drawings and Specifications" or, in the
alternative, shall be referred to as "Plans and Specifications". Tenant
shall send to Landlord, at Landlord's cost and expense, one (1)
reproducible set of the Working Drawings and Specifications.
4. Site Preparation by Landlord. Landlord shall tender possession to Tenant
of the buildable Pad with all utilities required per the Plans and
Specifications stubbed to the Building Limit Line at the locations
identified on the Plans and Specifications. Landlord shall also be
responsible for the construction of on-site improvements outside of the
Building Limit Line (including site drainage to handle Tenant's surface
water (roof and ground) drainage) and for all site fees related thereto
(subject to Tenant's pro rata reimbursement in accordance with Section
4(c), below). Landlord shall have no further obligation to Tenant as to
the condition of the Pad. Without limiting the generality of the
foregoing, Tenant agrees that Landlord shall have no obligation to
perform any further grading, demolition, compaction, or other site
preparations other than is set forth in the Lease and this Exhibit "C",
nor shall landlord have any further obligation with regard to the
installation of any utilities or for the payment of any assessments,
connection fees, usage fees or hook-up fees. Except as expressly set
forth in this Lease, Landlord makes no representation or warranty of any
kind, whether at the present time or at any time in the future, with
regard to the condition of the Pad, the fitness or acceptability of the
Pad for any particular purpose, the condition of the soil, the
suitability of the Tenant Improvements to be placed upon the Pad, or the
ability of the Pad to support the Tenant Improvements, all such
representations and warranties, express or implied, whether by operation
of law or otherwise, being hereby expressly disclaimed by Landlord, and
Tenant assumes all risk, cost and expense with regard thereto. Without
in any way limiting the generality of the foregoing, Tenant shall, upon
commencing construction on the Pad, be deemed conclusively to have
inspected and investigated the Pad and to have accepted the Pad in an
"as is" condition.
a. Landlord's Site Improvements Necessary for Tenant to Commence
Construction of the Tenant Improvements.
(i) Access shall be provided to Tenant's Pad for construction
purposes, but strictly in accordance with the routes identified on
Exhibit "D-1" for construction traffic;
(ii) Utilities shall be installed by Landlord to a point at the
Building Limit Line for each utility as identified on the Plans and
Specifications;
(iii) Utility locations shall be staked and identified on the Pad,
and shall be illustrated by Landlord on a copy of the Site Plan provided
to Tenant; and
(iv) Deliver the Pad to Tenant graded to within two-tenths (2/10) of
one foot (1') of the finished grade elevation per Landlord's grading
plan (which grading has already been completed) and at ninety percent
(90%) compaction of the Pad in accordance with the soils report and the
soils engineer of record, which report has been approved by the City of
Westminster. To confirm such grading and compaction, and before Landlord
may deliver the Pad to Tenant, Landlord must first provide Tenant with a
Pad grading certification and as oils compaction certification and five
(5) business days to reasonably approve or disapprove such
certifications in writing. During such five (5) business days, and
provided Tenant has first provided Landlord with its requisite insurance
certificate as required by Paragraph 6b, below. Tenant may have access
to the Pad to do such testing and inspections reasonably necessary to
confirm the information in such certifications. If Tenant fails to give
Landlord notice of approval or disapproval, Tenant shall be deemed to
have approved the certifications and Lord may deliver the Pad to Tenant.
If Tenant reasonably disapproves the certifications, Tenant shall state
with specificity in its written notice of disapproval the condition that
does not match the certification and Landlord shall promptly take all
reasonable steps to correct the non-complying condition.
b. Landlord's Site Improvements Necessary for Tenant to Open the
Premises for Business. Substantial completion of all Common Areas or
Site Improvements in and around the Premises, in accordance with the
Site Plan as shown on Exhibit "A-2" and Exhibit "D" to the Lease, and
applicable conditions to governmental approval of the Site Plan. Common
Areas Improvements are all curbs, gutters, paving, striping, landscaping
and irrigation systems, storm drainage, retaining walls, driveways,
walkways, driveway aprons, and lighting facilities, Shopping Center
driveway and landscaping. In no event shall Common Areas Improvements or
Site Improvements include any curb face of sidewalks around the
perimeter of Tenant's Building or any improvements within five (5) feet
of all wall, yard enclosure, or canopy or roof overhang "drip" line of
Tenant's Building, all of which shall be Tenant's sole responsibility.
Upon Tenant's commencement of Tenant's Building construction, Tenant
shall notify Landlord of Tenant's projected opening date so as to allow
Landlord
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to schedule and timely complete Landlord's Site Improvements. Landlord
shall use reasonable efforts to ensure that paved delivery truck access
is available to the Premises at lease ninety (90) days before Tenant's
projected opening and that the remainder of the Common Areas and Site
Improvements are completed at lease thirty (30) days before Tenant's
projected opening.
c. Tenant Contribution to Site Improvements and Common Areas
Improvements. Tenant shall pay to Landlord's Tenant's pro rata share of
the cost of Site Improvements and Common Areas Improvements on the
Premises in an amount equal to $4.00 per square foot of the Premises.
Tenant shall pay Landlord its pro rata share within five (5) working
days after receipt of written notice from the Landlord's confirming that
the first permit for Tenant's construction of the Tenant Building is
available to be issued.
5. Pre-Construction Obligations of Tenant.
a. Site Certification. Within seven (7) days after the last to occur
of the date of the delivery of the possession of the Pad to the Tenant
pursuant to Paragraph 4 hereof or the date of the approval of the
Working Drawings and Specifications, Tenant shall cause, at its sole
cost and expense, the corners of the Tenant Improvements to be set on
the Pad by a licensed land surveyor. Tenant shall notify Landlord when
the corners are set. Landlord shall confirm Landlord's acceptance of the
corner staking in writing to Tenant. Notwithstanding anything to the
contrary contained herein, Landlord shall not be liable to Tenant for
any errors or omissions made in the setting of corners.
b. Governmental Approvals of Plans and Specifications. Tenant shall,
at its sole cost and expense, comply with all applicable laws,
ordinances, governmental rules, regulations and permits pertaining to
governmental approvals of the Working Drawings and Specifications.
Tenant shall, within fifteen (15) days thereafter, cause the Working
Drawings and Specifications to be revised to make such change and shall
submit two (2) sets of such drawings and specifications, as revised, to
Landlord. Landlord shall initial and date one (1) set of such Working
Drawings and Specifications containing the revisions required by any
governmental agency and return one set to Tenant. Within forty-five (45)
days after receipt of all governmental approvals for Tenant's intended
project, Tenant shall submit and apply for all requisite permits for
Tenant's Improvements and diligently pursue the issuance of all such
permits.
6. Construction Contract and Commencement of Construction.
a. Construction Contract.
(i) Tenant shall enter into a construction contract with a duly
licensed contractor reasonably acceptable to Landlord for completion of
Tenant's Improvements on the Premises. Landlord may require that any
contractor is bondable with a surety satisfactory to Landlord in an
amount sufficient to insure complete and timely construction of the
Tenant Improvements and prompt payment of all labor and materials. No
bond, however, shall be required.
(ii) Tenant shall coordinate its construction on the Pad with
other construction work being performed or to be performed by the
Landlord on the Premises or elsewhere in the Shopping Center. Tenants
shall ensure that its contractor will agree to cooperate with Landlord
in coordinating all construction on the Premises and the Shopping
Center. Tenant acknowledges that the Shopping Center will be in
operation at the time of Tenant's construction and that Tenant may not
interfere with the operation of the Shopping Center or of any of its
tenants. Tenant's construction areas bordering the east, west, and north
sides of the Pad and as delineated on Exhibit "D-1" to the Lease (the
"Primary Construction Areas") shall be fenced in and Tenant shall
endeavor to the greatest extent possible to minimize the impact of its
construction on the operation of the Shopping Center. Tenant agrees to
comply with the Primary Construction Areas made available to Tenant for
the staging, storage, parking of construction vehicles, and the routes
of access for all construction traffic, as well as for location of any
field office or other facilities for contractor's personnel, all as
delineated on Exhibit "D-1" to the Lease. Exhibit "D-1" also identifies
certain additional parking areas outside of the Primary Construction
Areas at the northern end of the Shopping Center and to the east of the
Pad (which additional areas are collectively referred to as the
"Tentative Additional Construction Areas") which, subject to Landlord's
approval not to be unreasonably withheld or delayed, may also be used by
Tenant on a limited, "as-needed" basis if the Primary Construction Areas
prove to be insufficient for Tenant's staging and storing of
construction materials, provided that such additional areas are, like
the Primary Construction Areas, kept fenced and used so as to minimize
the impact of its construction on the operation of the Shopping Center.
Any areas which Tenant desires to use outside of the
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Primary Construction Areas and the Tentative Additional Construction
Areas are subject to Landlord's prior written approval, which may be
withheld in Landlord's sole and absolute discretion.
(iii) Tenant's contractor and all subcontractors shall be licensed
by the State of California and the County of Los Angeles for the work to
be performed by such contractor or subcontractors and shall be required
to perform all work in a thoroughly first class and workerlike manner in
strict conformance with the Working Drawings and Specifications.
Tenant's contractor and all subcontractors shall be required to obtain
approval (as set forth in Paragraph 6a(ii), above) from Landlord for any
space outside of the fenced Primary Construction Areas but in the
Shopping Center generally, which is needed for storage, handling and
moving of materials and equipment, as well as for location of any field
office or other facilities for contractor's personnel (which approval,
except as set forth in Paragraph 6a(ii) as to the staging, storage, and
access routes delineated on Exhibit "D-1" to the Lease, may be withheld
in Landlord's sole discretion). Parking of construction vehicles within
the Shopping Center other than within the Primary Construction Areas
shall be strictly prohibited, and access of such vehicles over the
Shopping Center to and from the Primary Construction Areas shall be as
directed by Landlord on Exhibit "D-1". Tenant's contractor or
subcontractors shall be required to make appropriate arrangements with
Landlord for temporary utility connections as may be available within
the Shopping Center generally, and shall pay the cost of such
connections, including the cost of maintenance and removal thereof, and
shall pay all utility charges incurred. The construction contract shall
also provide that the contractor and all subcontractors shall work in a
cooperative spirit with Landlord's site work superintendent.
(iv) Tenant's contractor and all subcontractors shall carry
Workers Compensation Insurance covering all of their respective
employees, as well as Commercial Liability Insurance, including
replacement coverage property damage, and Comprehensive Automobile
Liability Insurance. Tenant's contractor shall also carry Builder's All
Risk Insurance. All such liability insurance shall provide single limit
coverage of at least Two Million Dollars ($2,000,000) for Tenant's
contractor (except for Worker's Compensation, which shall have limits as
provided by law), and shall be in a form, and carried by companies,
approved by Landlord. All insurance shall contain provisions prohibiting
cancellation or reduction in coverage prior to the giving of at least
thirty (30) days prior written notice to Landlord. All insurance shall
name Tenant as the named insured and shall also name Landlord, Master
Landlord, and Landlord's Lender (if any) as an additional insureds.
b. Commencement of Construction. Prior to the commencement of any
construction, Tenant shall provide Landlord with certificates of
insurance evidencing insurance coverage required to be carried by Tenant
under the terms of the Lease, and by Tenant and the contractor under the
terms of this Exhibit "C". Thereupon, Tenant shall promptly commence
construction of the Tenant Improvements pursuant to the provisions of
the construction contract. Notwithstanding the fact that Landlord has
completed the site preparation work described in Paragraph 4 hereof
prior to the execution of the construction contract and the delivery of
such insurance certificates, only after the delivery of such insurance
certificates shall Tenant be entitled to have possession of the Pad and
cause the construction of the Tenant Improvements to be located on the
pad to be commended and completed by the contractor pursuant to the
provisions of the construction contract.
7. Completion of Construction. Tenant shall diligently prosecute
construction of the Tenant Improvements until completion. Within one
hundred eighty (180) days after the commencement of construction of the
Tenant Improvements (subject to delays caused by "force majeure" as
defined below), Tenant shall cause the construction to be completed in
strict accordance with the Plans and Specifications. Landlord shall have
no obligation to Tenant with regard to the design, quality of
construction, utility, or otherwise, of the Plans and Specifications, or
any modifications thereto or deviations therefrom, nor shall Landlord
have any obligation to construct the Tenant Improvements, or any portion
thereof.
8. Damage During Construction. Tenant acknowledges that the time Tenant
commences its construction of the Tenant's Improvements, portions of the
Shopping Center will already be complete and in use, including without
limitation driveways and other hardscape and landscaping. Tenant agrees
to use all reasonable efforts to ensure that no damage is caused to any
portion of the Shopping Center by virtue of the performance of the
Tenant's Improvements. Tenant shall be responsible for the cost of
repair or replacement of any items at the Shopping Center damaged or
destroyed provided such damage or destruction is attributable to Tenant
or Tenant's agents, employees, contractors, or subcontractors during or
in connection with the performance of the Tenant's work hereunder.
9. Requirements for Contractors or Subcontractors.
a. Construction of the Tenant Improvements shall be performed in a
thoroughly first class and workerlike manner and in strict conformity
with the approved Working Drawings and Specifications, and shall be in
good and useable condition and repair at the date of completion.
Landlord's on-site
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representative shall be provided at all times with a current schedule of
Tenant's construction work and shall be invited to attend all job site
meetings (and provide with adequate notice of same).
b. Tenant's contractor shall be required to pay for all necessary
permits and/or fees with respect to the Tenant's Improvements.
c. The contractor, and all subcontractors, shall be required to move
and dispose of, at lease once a week and more frequently as Landlord may
direct, all debris and rubbish caused by or resulting from construction,
and upon completion of the Tenant Improvements, shall remove all
temporary structures, surplus materials, debris and rubbish of whatever
kind remaining in or on the Premises, the Building, the Pad, or within
the Shopping Center generally, which had been brought in as an adjunct
of, or created in the performance of, the construction of the Tenant
Improvements. Should Tenant or Tenant's contractor have an excess of
dirt on the site once Tenant has finished all of its fine grading,
Tenant shall, at its sole cost and expense, cause such excess dirt to be
removed. If after the completion of all of Tenant's Improvements, as
determined solely by Tenant, the contractor or any subcontractor shall
neglect, refuse, or fail to remove any such debris, rubbish, surplus
materials, or temporary structures within two (2) days after notice to
Tenant from Landlord, Landlord may cause the same to be removed by
contract or otherwise as Landlord may determine expedient, and charge
the cost thereof to Tenant, which amount shall be reimbursed by Tenant
to Landlord, as additional rent, upon demand therefor by Landlord.
d. Landlord shall have no responsibility for any loss or damage to any
of Tenant's property or any property of the contractor, and all
subcontractors, installed or left in or on the Premises, the Building,
the Pad or the Shopping Center, and Tenant shall indemnify, defend, and
hold Landlord harmless from any and all claims, demands, debts,
liabilities, causes of action, costs or expenses, including without
limitation attorney's fees, which Landlord may sustain (or which may be
alleged against Landlord) in connection with the construction activities
for the Tenant Improvements.
10. Utilities. Landlord shall obtain all approvals with respect to any and
all electrical, gas, water, telephone and other utility work as may be
required by the utility company supplying utilities to Tenant's Pad.
Tenant shall install all requisite connections to such utilities and
shall obtain utility service, including meters, from the utility company
supplying service.
11. Force Majeure. If the date for the completion of an obligation of either
Landlord or Tenant hereunder is delayed at any time by labor disputes,
fire, unusual delays in transportation or materials, adverse weather
conditions which could not be reasonably anticipated, unavoidable
casualties, delays caused by governmental authorities or the inability
to obtain required governmental approvals or other causes beyond the
control of such party or by any other unavoidable causes (other than
lack of funds), then the date of completion for such obligation shall be
extended (but not excused) by the period of time taken by any such delay.
12. Intentionally Omitted.
13 . Intentionally Omitted.
14. Ownership of Tenant Improvements. Notwithstanding any other provision of
the Lease, title to all of the Tenant Improvements, whether under
construction or completed, and all alterations, improvements and
additions thereto, excluding "Tenant's Property" (as defined in
Paragraph 12.1), shall vest in Landlord upon expiration or termination
of the Lease, and Tenant shall have no rights thereto or interest
therein (except for Tenant's leasehold interest under this Lease).
15. Signing and Fixturization. Either at such time prior to completion of
the Tenant Improvements as may be convenient, or promptly upon
completion of the Tenant Improvements, Tenant shall, at Tenant's cost
and expense, and without any reimbursement therefor, or payment or
contribution on account thereof by Landlord, place or install, or cause
to be placed or installed, in and upon the Premises, such equipment,
partitions, furniture and fixtures as Tenant, in Tenant's sole
discretion, shall deem necessary or appropriate for the purpose of
carrying on Tenant's business on the Premises; provided, however, that
in any event such equipment, furniture, partitions and fixtures shall be
sufficient to make the Premises suitable for the purposes intended, and
shall be such so as to enable Tenant to obtain a Certificate of
Occupancy covering the Premises. All exterior signs will be subject to
compliance with applicable local ordinances and the Declaration and
shall otherwise be subject to the terms of the Lease (including, without
limitation, the exclusion contained in Section 2 of this Exhibit "C").
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EXHIBIT "D"
WESTMINSTER GATEWAY SHOPPING CENTER
PLOT PLAN OF PREMISES
EXHIBIT "D"
<PAGE>
EXHIBIT D
PARTIAL PLOT PLAN
[GRAPHIC]
<PAGE>
EXHIBIT "E"
[INTENTIONALLY OMITTED]
EXHIBIT "E"
<PAGE>
EXHIBIT "F"
WESTMINSTER GATEWAY SHOPPING CENTER
SUPPLEMENTAL AGREEMENT
THIS SUPPLEMENTAL AGREEMENT, made and agreed, as of the __________
day of __________, 19__, by and between FF PROPERTIES, L.P., a California
limited partnership, hereinafter referred to as "Landlord", and EAGLE
HARDWARE & GARDEN, INC., a Washington corporation, hereinafter referred to as
"Tenant";
WITNESSETH:
The Landlord and Tenant entered into a certain lease dated as of
March 5, 1998, covering certain Premises which are a portion of the Shopping
Center, located in Westminster, California, as more particularly described in
said Lease.
NOW, THEREFORE, in consideration of the foregoing, the parties
hereto hereby mutually agree as follows:
1. For the purpose of confirming the establishment of the
Commencement Date, as required by the provisions of Article 2, "Term", of
said Lease, Landlord and Tenant hereby agree that:
a. The date of __________, 19__, is hereby established as the
"Commencement Date" referred to in said lease, and
b. The date of __________, 19__, is hereby established as the
"Expiration Date" of the term of said Lease.
2. Tenant hereby confirms the following:
a. That it has accepted possession of the Premises pursuant to
the terms of said Lease;
b. That the improvements required to be furnished by Landlord
in accordance with Exhibit "C" to said lease have been completed;
c. That Landlord has fulfilled all of its duties of an
inducement nature;
d. That said Lease has not been modified, altered or amended
except as follows:
- ------------------------------------------------------------------------------;
e. That there are no off-sets or credits against rentals; nor
has any security deposit been paid except as provided by the Lease terms;
f. That said rentals commence to accrue on the ______ day of
__________, 19__;
g. That Tenant has no notice of a prior assignment,
hypothecation or pledge of rents or said Lease;
h. That said Lease is in full force and effect; and
i. The dates by which Tenant must, if at all, exercise its
options to extend the term of the Lease are as follows:
First Option: (i) _______________________________;
Second Option: (ii) _______________________________; and
Third Option: _______________________________.
j. That Tenant's Proportionate Share of Common Areas Operating
Costs is __________ percent (____%), subject to adjustment as provided in
Paragraph 4.2 of the Lease.
EXHIBIT "F"
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3. This Supplemental Agreement, and each and all of the provisions
hereof shall inure to the benefit, or bind, as the case may require, the
parties hereto and their respective heirs, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this instrument
as of the day and year first above written.
"LANDLORD"; FF PROPERTIES, L.P.
a California limited partnership
By: Carnoustie, Inc.
a California corporation,
General Partner
By: __________________________________
Name: ____________________________
Title: ___________________________
"TENANT"; EAGLE HARDWARE & GARDEN, INC.
a Washington corporation
By: __________________________________
Name: ____________________________
Title: ___________________________
By: __________________________________
Name: ____________________________
Title: ___________________________
EXHIBIT "F"
Page 2 of 2
<PAGE>
EXHIBIT "G"
INTENTIONALLY OMITTED
EXHIBIT "G"
<PAGE>
EXHIBIT "H"
FORM AMENDMENT TO DECLARATION
EXHIBIT "H"
<PAGE>
Recorded at the request of:
Chicago Title Company
When recorded mail to:
FF Properties, L.P.
120 North Robertson Boulevard
Los Angeles, California 90048
Attention: J.G. Gillett, Esq.
- --------------------------------------------------------------------------------
WESTMINSTER, CALIFORNIA
FIRST AMENDMENT TO AMENDED AND RESTATED
DECLARATION OF COVENANTS, CONDITIONS, RESTRICTIONS
AND RECIPROCAL EASEMENTS
THIS FIRST AMENDMENT TO THE AMENDED AND RESTATED DECLARATION OF
COVENANTS, CONDITIONS, RESTRICTIONS AND RECIPROCAL, EASEMENTS ("Amendment")
is executed this day of , 1998, by WAL-MART STORES, INC., a Delaware
corporation, of 702 Southwest 8th Street, Bentonville, Arkansas 72716
("Wal-Mart"), and FF PROPERTIES, L.P., a California limited partnership, of
120 North Robertson Boulevard, Los Angeles, California 90048-3102 (the
"Developer")
WITNESSETH:
WHEREAS, pursuant to that certain Amended and Restated Declaration of
Covenants, Conditions, Restrictions and Reciprocal Easements recorded August 12,
1997, as Instrument No. 19970385376 in the Office of the Clerk/Recorder of the
County of Orange, California ("Declaration"), Wal-Mart and Developer desire to
amend the Declaration in the particulars set forth below to facilitate the
development and leasing of the real property commonly know as Westminster
Gateway Shopping Center, the legal description of which is Lots 1 through 7 of
Tract Map No. 15514 in the City of Westminster, County of Orange, State of
California ("Project").
NOW THEREFORE, for and in consideration of the covenants, conditions,
and restrictions contained herein, the sufficiency of which is hereby
acknowledged, Wal-Mart and Developer do hereby amend the Declaration for the
benefit of the Project and each Tract, Outparcel and Lot (as defined in the
Declaration) located therein for the benefit of the Developer, Wal-Mart, their
successors and assigns, and all subsequent owners of Tracts, Outparcels and Lots
within the Project and their respective heirs, successors, representatives and
assigns.
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<PAGE>
IN CONSIDERATION OF THE FOREGOING, Developer and Wal-Mart hereby
covenant and agree as follows:
1. All capitalized words in this Amendment shall have the same meaning
as those words defined in the Declaration, unless specifically modified herein.
2. The Site Plan of the Project which is attached to the Declaration as
"Exhibit A" is hereby superseded in its entirety and the Site Plan attached
hereto and incorporated herein by this reference as "Exhibit A" shall be
substituted in lieu thereof. The parties hereof agree that all references in the
Declaration and Amendment to "Exhibit A" shall hereinafter be deemed to refer to
"Exhibit A" attached to this Amendment. "Exhibit A" has been revised to depict
the reconfiguration of Tract 2 and the Outparcels described in Paragraph 3
below, and to adjust the lot lines of Lots 1 and 4 of Tract 15514. The square
footage of Lot 1 of Tract 15514 shall remain unchanged.
3. Tract Map No. 15514 referred to in Paragraph 1e. of the Declaration
was recorded on December 17, 1997, as Instrument No. 970651234, in Book 760,
Pages 24-29, in the Office of the Clerk/Recorder of the County of Orange,
California. If Tract 2 is developed in accordance with Exhibit A, the fourth,
fifth and sixth grammatical sentences of Paragraph 1e. of the Declaration are
deleted in their entirety and the following sentences inserted therein:
"For informational purposes only, the property identified herein as
Tract 1 shall become Lot 1 of Tract 15514; the property identified
herein as Tract 2 shall become Lots 2, 3, 4 and 5 of Tract 15514; the
references herein to Outparcels A and B shall be deleted; the property
identified herein as Outparcel C shall become Lot 6 of Tract 15514; and
the property identified herein as Outparcel D shall become Lot 7 of
Tract 15514. The term "Tracts" shall mean and collectively refer to Lot
1, and Lots 2, 3, 4, and 5 of Tracts 15514. The term "Outparcels" shall
mean and collectively refer to Lots 6 and 7 of Tract 15514."
4. The Site Plan of the Project which is attached to the Declaration as
"Exhibit A-1" is hereby superseded in its entirety and the Site Plan attached
hereto and incorporated herein by this reference as "Exhibit A-1" shall be
substituted in lieu thereof. The parties hereto agree that all references in the
Declaration and Amendment to "Exhibit A-1" shall hereinafter be deemed to refer
to "Exhibit A-1" attached to this Amendment. In the event the Project is
developed in accordance with Exhibit A-1, the fourth, fifth, and sixth
grammatical sentences of Paragraph 1e. of the Declaration are deleted in their
entirety and the following sentences inserted therein:
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"The property identified herein as Tract 1 is Lot 1 of Tract 15514; the
property identified herein as Tract 2 is Lot 2 and Lot 3 of Tract
15514; the property identified herein as Outparcel A is Lot 4 of Tract
15514; the property identified herein as Outparcel B is Lot 5 of Tract
15514; the property identified herein as Outparcel C is Lot 6 of Tract
15514; and the property identified herein Outparcel D is Lot 7 of Tract
15514. The term "Tracts" shall mean and collectively refer to Lot 1,
and Lots 2 and 3 of Tract 15514. The term "Outparcels" shall mean and
collectively refer to Lots 4, 5, 6 and 7 of Tract 15514."
5. The fourth grammatical sentence of Paragraph 3(b) of the Declaration
is hereby deleted in its entirety and the following sentences is inserted
therein:
"In the event that a building for any use other than a theater or
cinema is constructed upon Tract 2, and such building shall contain
more than Ten Thousand (10,000) square feet, no main entrance or other
customer entrance for such building, store or business located on Tract
2 shall be located within less than ninety (90) feet of the northern
boundary of the Building Area of Tract 1."
6. In the first grammatical sentence of Paragraph 5a(ll) of the
Declaration, the words ". . . five and one-half (5.5) car spaces for each one
thousand (1,000) square feet of Building Area on such Tract . . ." are hereby
deleted in their intirety and the following words are inserted therein: " . . .
five and thirteen-hundredths (5.13) car spaces for each one thousand (1,000)
square feet of Building Area on such Tract . . . "
7. The introductory paragraph of Paragraph 7.b. of the Declaration is
hereby deleted in its entirety and the following paragraph is inserted therein:
"b. Insurance. Subject to the terms and conditions hereinafter set
forth in this Section 7, each Party shall procure and maintain, or cause to be
procured and maintained, in full force and effect throughout the term of this
Declaration the following types of insurance: . . . "
8. Paragraph 7.b.(i) of the Declaration is deleted in its entirety and
the following paragraph is inserted therein:
"(I) Commercial general liability insurance with coverage limits not
less than Five Million Dollars ($5,000,000.00) combined single limit
bodily injury, personal injury, death and property damage liability per
occurrence, with a commercially reasonable deductible amount per
occurrence as determined by Wal-Mart and Developer, insuring against
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<PAGE>
any and all scheduled liability of the insureds with respect to its
Tract (or portion thereof owned or leased by said Party) or Outparcel,
as the case may be, or arising out of the maintenance, use or occupancy
of said Party's Tract or Outparcel and all areas appurtenant thereto,
or related to the exercise of any rights of a Party pursuant to this
Declaration. The coverage limits of the commercial general liability
insurance and the deductible amounts referenced above shall be subject
to increases in amount as Wal-Mart and Developer may mutually and
reasonably require from time to time. As of the date of this Amendment,
a deductible amount of not more than Fifty Thousand Dollars
($50,000.00) shall be deemed to be commercially reasonable. All such
commercial liability insurance shall specifically insure the
performance by a Party of the indemnity agreement as to liability for
injury to or death of persons and injury or damage to property as set
forth in Section 7.a. above. Further, all commercial liability
insurance shall include, but not be limited to, personal injury, cross
liability and severability of interest clauses, products/completed
operations, broad form property damage, independent contractors, owned,
non-owned and hired vehicles and, if alcoholic beverages are served,
sold, consumed or obtained in the Tract or Outparcel, as applicable,
liquor liability."
9. Paragraph 7.c. of the Declaration is hereby deleted in its entirety
and the following paragraph is inserted therein:
"c. Additional Insured. All policies of insurance required to be
maintained by each Party under Section 7.b.(i) shall name Developer, Wal-Mart,
Eagle Hardware & Garden, Inc. ("Eagle"), and Ground Lessor as additional
insureds. All policies of insurance must also contain a provision that the
company writing the policy will give to Developer thirty (30) days notice in
writing in advance of any cancellation or lapse of the effective date or any
reduction in the amounts of insurance. Upon written request, each Party shall
provide to the requesting Party certificates of insurance evidencing that all of
the insurance required by this Section 7 has been obtained and is in full force
and effect. All certificates shall have cancellation language on the face
thereof in accordance with this Section 7.c."
10. Paragraph 15 of the Declaration is deleted in its entirety and the
following paragraph is inserted therein:
"15. Document Execution, Modification and Cancellation. This
Declaration (including exhibits) may be amended or canceled only by the
mutual agreement of (a) Wal-Mart as long as it or its affiliate has any
interest as either owner, lessee subleases of Tract 1, (b) Developer as
long as it has any interest as either owner or lessee of Tract 2 or the
Outparcels, and (c) Eagle as long as it has any interest as owner or
lessee of Tract 2. If Wal-Mart or its affiliate no longer has any
interest in
4
<PAGE>
Tract 1, such amendment or cancellation may only be made by the then
owner of Tract 1, Eagle, and Developer or their respective successors
as described in Section 14."
11. Except as hereby expressly modified, all other terms and conditions
of the Declaration remain unchanged.
IN WITNESS WHEREOF, we have hereunto set our hand and seal on the date
and year first above written.
DEVELOPER:
FF PROPERTIES, L.P. a California limited
partnership
By: Carnoustie, Inc., General Partner
By:
---------------------------------
By: Ira S. Levin, Vice President
By:
---------------------------------
By: James D. Vandever, Vice President
WAL-MART STORES, INC., a Delaware corporation
By:
----------------------------------
Its::
----------------------------------
5
<PAGE>
The Ground Lessor hereby executes this First Amendment to the
Declaration solely for the purpose of evidencing its consent to the terms and
conditions hereof as provided in Paragraph 31 of the Declaration.
CALIFORNIA DRIVE-IN THEATRES, INC., a California corporation
By:
--------------------------
Bradley J. Neel, Secretary
By:
--------------------------
Title:
--------------------------
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
On _________ , 1998, before me, the undersigned, a Notary Public in and for
said State, personally appeared _______________, personally known to me or
proved to me on the basis of satisfactory evidence to be the person who
executed the within instrument as the _______________ on behalf of the
corporation therein named, and acknowledged to me that such corporation
executed the within instrument pursuant to its by-laws or a resolution of its
board of directors.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
6
<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
On ___________, 1998, before me, the undersigned, a Notary Public in
and for said State, personally appeared ___________, personally known to me
or proved to me on the basis of satisfactory evidence to be the person who
executed the within instrument as the ___________ on behalf of the
corporation therein named, and acknowledged to me that such corporation
executed the within instrument pursuant to its by-laws or a resolution of its
board of directors.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
STATE OF ARKANSAS )
) SS.
COUNTY OF )
On ___________ , 1998, before me, the undersigned, a Notary Public
in and for said State, personally appeared ___________, personally known to
me or proved to me on the basis of satisfactory evidence to be the person who
executed the within instrument as the _____________ on behalf of the
corporation therein named, and acknowledged to me that such corporation
executed the within instrument pursuant to its by-laws or a resolution of its
board of directors.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said state
7
<PAGE>
STATE OF ARKANSAS )
) SS.
COUNTY OF __________ )
On _________, 1998, before me , the undersigned, a Notary Public in
and for said State, personally appeared ____________, personally known to me
or proved to me on the basis of satisfactory evidence to be the person who
executed the within instrument as the _____________on behalf of the
corporation therein named, and acknowledged to me that such corporation
executed the within instrument pursuant to its by-laws or a resolution of its
board of directors.
WITNESS my hand and official seal.
-----------------------------------
Notary Public in and for said State
8
<PAGE>
[MAP]
<PAGE>
REAL ESTATE PURCHASE AND SALE AGREEMENT
This agreement (the "Agreement") is dated March 17 1998 and entered into by
and between HOPKINS REAL ESTATE GROUP, a California corporation ("Seller") and
EAGLE HARDWARE & GARDEN, INC., a Washington corporation, or assigns ("Buyer")
for purchase and sale of certain real property consisting of approximately 15.19
acres located at the northeast corner of the Santa Ana Freeway (Interstate 5)
and Carmenita Road in Norwalk, Los Angeles County, California, together with any
improvements thereon and all rights appurtenant thereto (the "Property"). The
Property is shown on Buyer's site plan dated February 2, 1998 and numbered
X473-B (the "Site Plan") and attached hereto as Exhibit A. A legal description
of the Property is attached to this Agreement as Exhibit B and made a part
hereof.
Seller agrees to sell, and Buyer agrees to buy, the Property upon and
subject to the terms and conditions set forth below:
1. PURCHASE PRICE; PAYMENT. The total purchase price for the Property
shall be eleven dollars and fifty cents ($11.50) per square foot of land. It is
estimated that the Property contains approximately 661,676 square feet and that
the purchase price will be seven million six hundred nine thousand two hundred
seventy-four dollars ($7,609,274.00). The area of the Property and the total
purchase price shall be determined by the new ALTA/ACSM, survey described below.
The purchase price shall be adjusted to the final certified square footage,
which amount, including the Deposit and interest accrued thereon, shall be paid
in cash upon closing.
2. EARNEST MONEY DEPOSIT. Buyer has opened an escrow account and
deposited earnest money of one hundred fifty thousand dollars ($150,000) (the
"Deposit") with Fidelity National Title Insurance Company (the "Closing Agent").
The Closing Agent shall place the Deposit in an interest-bearing account, with
interest to accrue to Buyer's benefit. The Deposit shall become non-refundable
after Buyer's satisfaction of waiver of the contingencies set forth in Section 3
below, but shall be applied against the purchase price. If this transaction does
not close due to failure to satisfy all of Buyer's contingencies or default by
Seller under this Agreement, the Deposit, and all interest accrued thereon,
shall be returned to Buyer. In the event of Buyer's default under this
Agreement, Seller shall have as its sole remedy the right to terminate this
Agreement and retain the Deposit, together with accrued interest thereon, as
liquidated damages.
3. CONTINGENCIES. Buyer's obligation to purchase the Property is subject
to Buyer's satisfaction or waiver, in writing, of the following conditions
precedent, in Buyer's sole and absolute discretion, on or before the dates
described below:
3.1 PRELIMINARY TITLE INSURANCE COMMITMENT. By no later than March 20,
1998, Seller shall provide Buyer with a current preliminary commitment for
owner's title insurance with extended coverage (ALTA Form 1970-B, as revised in
1984 or if unavailable, Form B-1987) issued by the Closing Agent, with copies
of all documents listed as exceptions set forth therein
3.2 ALTA/ACSM Survey. As soon as possible but no later than March 20,
1998, Seller, at its sole expense, shall deliver to Buyer a new ALTA/ACSM survey
with land area certification of the Property and a parcel map.
<PAGE>
3.3 TITLE AND SURVEY APPROVAL PERIODS. Buyer shall have five (5) days
from the later receipt of either the preliminary commitment or the final (not
preliminary) survey (and any amendments, supplements and revisions to either in
which new or revised exceptions or items first appear) to notify Seller of its
disapproval of or questions about any exceptions shown in the preliminary
commitment or any items on the survey. If, within two (2) days after the
receipt of such notice Seller has not removed or given reasonable written
assurances to Buyer that such disapproved exceptions or items will be removed on
or before closing, Buyer may, at its option, at any time prior to such removal
or receipt of such reasonable written assurances, terminate this Agreement by
giving notice of such termination to Seller. On such termination Closing Agent
shall refund the Deposit and all interest accrued thereon to Buyer and all
rights and obligations of Seller and Buyer under this Agreement shall terminate
and be of no further force or effect.
3.4 SITE SUITABILITY. Buyer's determination that the Property is
feasible in all respects for Buyer's intended use, including but not limited to,
the following; determining that Buyer's selected building configuration plan can
be satisfactorily adapted to the site; Buyer's proposed parking plan, on site
vehicle and pedestrian circulation plan and street access plan for the Property
all meet or exceed Buyer's minimum criteria; and that the local governmental
requirements for landscaping, open area, building to land ratio and set-backs
can be satisfied as shown on Exhibit A; and that utilities will be available of
adequate capacity to serve Buyer's needs.
3.5 STUDIES. Satisfactory results of all soils, engineering,
environmental, topography, hazardous waste, geotechnical, hydrology, wetlands
and other studies that may be deemed necessary by Buyer or required by any
governmental agency in connection with the Property and Buyer's planned
development and use of the Property. Seller represents that it has delivered to
Buyer all information regarding the Property contained in Seller's files or
available to Seller from the current owners of the Property or otherwise and,
more specifically, any material, data, filings, applications, P.U.D.
information, wetlands mitigations, topographic surveys, soils tests,
environmental assessments, environmental remediation and other information or
data with respect to the Property which will assist Buyer in its determination
of the suitability of the Property for an Eagle Hardware & Garden store.
3.6 APPROVALS AND PERMITS. Issuance of any and all governmental
approvals and permits including but not limited to; (i) a replat and/or parcel
consolidation consolidating all the parcels into one parcel as required for
issuance of the building permit and for recording at Closing; (ii) lot line
adjustment of the Property as described in Section 4 below; (iii) California
Department of Transportation highway access and traffic signal approvals; (iv)
City and/or County building permits, use permits, sign permits, design review
approvals, site plan approvals, parking variances and approvals of any kind from
any and all governmental agencies having jurisdiction over the Property,
necessary for Buyer to develop and construct it's store building, garden yard
and greenhouse and any other improvements that Buyer deems necessary in its sole
determination to conduct its selected business operations on the Property in the
configuration as shown on Exhibit A. The timing, conditions and cost of the
permits and approvals (including any mitigation fees) must be acceptable to
Buyer.
3.7 ENVIRONMENTAL DECLARATION. Seller represents that it has provided
to Buyer all available environmental materials including but not limited to
Phase I and Phase II reports. Buyers shall approve or disapprove the
environmental materials during the Contingency Period, however, Seller shall
make no representations or warranties in regards to the environmental materials
provided to Buyer.
2
<PAGE>
3.8 TIME PERIODS. Buyer shall have until March 30, 1998 (the,
"Contingency Period") to satisfy or waive the contingencies set forth in
Sections 3.4, 3.5, 3.6 and 3.7. If Buyer does not satisfy or waive the
contingencies in writing by such date, or if Buyer notifies Seller in writing at
any time prior to the end of the Contingency Period that it has decided not to
pursue the project any further and that this Agreement is terminated, the
Deposit, with interest, shall be refunded to Buyer and the Agreement shall
terminate without further action and be of no further force or effect.
4. GAS STATION PARCEL.
4.1 LOT LINE ADJUSTMENT. The current owner of the gas station land
located on Carmenita Avenue, consisting of approximately 0.7 acres (the "Gas
Station Parcel") shall retain title thereto. Seller acknowledges and agrees that
Seller shall, at Seller's sole cost and expense, process a lot line adjustment
and/or parcel map, if required ("Lot Line Adjustment"), to adjust the property
line of the Gas Station Parcel in accordance with all applicable subdivision
laws so that the Gas Station Parcel shall be configured approximately as shown
on Exhibit A and so that the Gas Station Parcel, as so reconfigured, shall
contain approximately 50,000 square feet of gross land area, or 1.15 acres.
4.2 TEMPORARY EASEMENT. In the event the Lot Line Adjustment is not in
a position to record concurrently with the Closing, then Seller shall retain an
exclusive easement on terms and conditions satisfactory to Seller and Buyer over
that portion of the Property which will be the subject of the Lot Line
Adjustment, which such easement shall be appurtenant to the Gas Station Parcel.
Buyer shall grant to Seller concurrently with the Closing an option to purchase
the easement area for the sum of $10.00 at such time as the Lot Line Adjustment
has been approved and may be recorded. The option to purchase shall be evidenced
by a memorandum of such option which shall be recorded concurrently with the
Closing. Seller shall continue to process such Lot Line Adjustment, following
the close of escrow, at its sole cost and expense, and if Seller shall fail to
do so, Buyer may process such parcel Lot Line Adjustment for and on the account
of Seller and Seller shall reimburse Buyer for all losses, costs and expenses
incurred by Buyer in so doing. Buyer covenants and agrees to execute all
documents required in connection therewith.
5. CLOSING.
5.1 TIME FOR CLOSING; TERMINATION DATE. This sale shall be closed in
the office of the Closing Agent on April 1, 1998 provided that all of Buyer's
conditions precedent have been satisfied or waived by Buyer. 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 "date of closing" means the date on which all appropriate
documents are recorded and proceeds of sale are available for disbursement to
Seller. Funds held in reserve accounts pursuant to escrow instructions shall be
deemed, for purposes of this definition, as available for disbursement to
Seller.
5.2 ACCEPTANCE OF EXCEPTIONS. Neither Seller nor Buyer shall be
required to close, and the Deposit and all interest thereon shall be returned
to Buyer, if any exception or item disapproved by Buyer as herein provided
cannot be removed by the date of closing; provided, however, that Buyer may
elect to waive any disapproved exceptions or items and close on the remaining
terms. Notwithstanding the foregoing, Seller shall remove any defect or
encumbrance attaching by, through or under Seller after the Effective Date of
this Agreement. Exceptions to be discharged by Seller may be paid out of the
purchase price at closing.
3
<PAGE>
5.3 PRORATIONS; CLOSING COSTS. Taxes and assessments for the current
year and utilities constituting liens shall be prorated as of the, date of
closing. Seller shall pay the standard portion of the premium for the title
insurance policy, real estate excise, transfer and/or conveyance taxes, the cost
of conveyance tax stamps, if any, and one-half of Closing Agent's escrow fee.
Buyer shall pay the cost of recording the deed, one-half of Closing Agent's
escrow fee, and the difference in the cost of the premium between standard
owner's and extended coverage
5.4 POSSESSION. Buyer shall be entitled to possession upon closing.
6. CONVEYANCE OF TITLE.
6.1 Deed. On closing, Seller shall execute and deliver to Buyer a
grant deed conveying good and marketable title to the Property free and clear of
any defects or encumbrances except for the lien of real estate taxes for the
current calendar year not yet due and payable, those defects or encumbrances
appearing on the preliminary commitment for title insurance that are approved by
Buyer (the "Permitted Exceptions"), and other encumbrances or defects approved
by Buyer in writing.
6.2 TITLE INSURANCE. As soon as available after closing,, Seller shall
provide to Buyer a policy of title insurance pursuant to the preliminary
commitment, dated as of the closing date and insuring Buyer in the amount of the
purchase price against loss or damage by reason of defect in Buyer's title to
the Property subject only to the printed exclusions and general exceptions
appearing in the policy form; any Permitted Exceptions; the exceptions specified
in the preliminary commitment which Buyer has not disapproved of as provided
herein; and real property taxes and assessments that are not delinquent.
7. RISK OF LOSS AND CONDEMNATION.
7.1 RISK OF LOSS. Risk of loss of or damage to the Property shall be
borne by 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, Buyer may terminate this Agreement by
giving notice, of such termination to Seller and Closing Agent, and such
termination shall be effective and the Deposit and interest thereon shall be
refunded ten (10) days thereafter; provided, however, that such termination
shall not be effective if Seller agrees in writing within such ten (10) day
period to restore the Property substantially to its present condition by the
closing date.
7.2 CONDEMNATION. 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, and upon such
termination the Deposit and accrued 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. 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. Buyer acknowledges that
Seller does not presently hold title and has no operating history on the
Property. Notwithstanding, in addition to other representations herein, Seller
represents and warrants to Buyer as of the date of closing that:
8.1 Seller has full power and authority to execute this Agreement and
perform Seller's obligations and duties hereunder;
4
<PAGE>
8.2 To the best of Seller's knowledge, the Property is not subject to
any leases, tenancies or rights of persons in possession;
8.3 To the best of Seller's knowledge, neither the Property nor the
sale, of the Property violates any applicable statute, ordinance or regulation,
nor any order of any court or any governmental authority or agency, pertaining
to the Property or the use occupancy or condition thereof;
8.4 Seller is unaware of any material defect in the Property;
8.5 To the best of Seller's knowledge, all persons and entities
supplying labor, materials and equipment to the Property have been paid and
there are no claims or liens;
8.6 To the best of Seller's knowledge, there are no currently due and
payable assessments for public improvements against the Property and Seller is
not aware of any local improvement district or other taxing authority having
jurisdiction over the Property in the process of formation;
8.7 To the best of Seller's knowledge, the Property has legal access
to all streets adjoining the Property;
8.8 Seller will have good and marketable title to the Property at
Closing;
8.9 Seller is not a "foreign person" for purposes of Section 1445 of
the Internal Revenue Code. Prior to closing, Seller shall execute and deliver to
Closing Agent an affidavit in order to meet the Foreign Investment in Real
Property Tax Act ("FIRPTA") requirements of I.R.C. # 1445; and
8.10 Seller has not received notification of any kind from any agency
suggesting that the Property is or may be targeted for a Superfund or similar
type of cleanup. To the best of Seller's knowledge, neither the Property nor any
portion thereof is or has been used (i) for the storage, disposal or discharge
of oil, solvents, fuel, chemicals or any type of toxic or dangerous or hazardous
waste or substance, (ii) as a landfill or waste disposal site, and (iii) does
not contain any underground storage tanks, except as disclosed in a Phase I
Environmental Assessment Report dated October 3, 1997, and the Site Assessment
Report dated February 4, 1998, both prepared by Tait Environmental Management,
Inc. Seller agrees to indemnify, defend and hold Buyer harmless from and against
any and all loss, damage, claims, penalties, liability, suits, costs and
expenses (including, without limitation, reasonable attorneys' fees) and also
including without limitation, costs of remedial action or cleanup, suffered or
incurred by Buyer arising out of or related to any such use of the Property, or
portion thereof, occurring prior to the conveyance to Buyer, about which Seller
knew or reasonably should have known prior to Closing and did not disclose to
Buyer.
8.11 At Closing, Buyer shall be entitled to the benefit of any and all
representations, warranties, guarantees and other assurances made or given to
Seller by the current owners of the Property and any other third parties
including, but not limited to, surveyors, engineers and environmental
consultants.
9. BUYER'S AUTHORITY. Buyer represents and warrants to Seller that at the
date of execution hereof and at the date of closing 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.
5
<PAGE>
10. DEFAULT. If Seller defaults hereunder, Buyer may seek specific
performance of this Agreement, damages or rescission and Buyer shall be
entitled to return of the Deposit with accrued interest, on demand. If Buyer
defaults, the Deposit and accrued interest shall be forfeited to Seller as
liquidated damages and as Seller's sole and exclusive remedy and upon payment
thereof to Seller, Buyer shall have no further obligations or liability
hereunder. If any legal action or other proceeding is brought for the
enforcement of this Agreement, or because of an alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled. If any party makes a written settlement offer which is not accepted
by the other party, then if the amount recovered by such other party is less
than the amount of the settlement offer, the party making the settlement
offer shall be considered the prevailing party.
11. NOTICES. All notices, waivers, elections, approvals and demands
required of permitted to be given hereunder shall be in writing and shall be
personally delivered (by overnight courier service or other means of personal
service) or sent by United States certified mail, return receipt requested, to
the addressee's mailing address set forth on the signature page:
and, in the case of Buyer, a copy to: William N. Moloney
5711 NE Tolo Rd.
Bainbridge Island, WA 98110
and, in the case of Seller, a copy to:
----------------------------
----------------------------
----------------------------
----------------------------
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.
12. CONFIDENTIALITY. Except for communications with the current
owners of the Property, the City of Norwalk, experts, partners and lenders,
Seller agrees not to directly or indirectly, through agents or otherwise,
provide any information about the Property and/or the sale of the Property or to
discuss any of the terms of this Agreement and the timing of the project or any
other items regarding the transaction with any other person or entity unless and
until Buyer notifies Seller in writing that the transaction cannot be
consummated
13. NO NEGOTIATIONS WITH THIRD PARTY. Seller shall not negotiate nor
commit to sell, lease or otherwise transfer the Property on any portion thereof
to any other person or party as long as Buyer is proceeding in good faith to
perform its duties under this Agreement. This covenant shall remain in full
force and effect and be legally binding upon Seller until termination of this
Agreement.
14. 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. Any waivers hereunder must be in writing. No waive
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 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. If the date for performance or giving notice under this
Agreement is a Saturday, Sunday or banking holiday in California, the date for
performance or notice shall be extended until the next day that is not a
Saturday, Sunday or banking holiday.
6
<PAGE>
15. SURVIVAL OF WARRANTIES. The terms, covenants, representations and
warranties shall not merge in the deed of conveyance, but shall survive closing.
16. COMMISSIONS. All real Estate commissions and/or broker's fees
shall be, payable by Seller at Closing to Majestic Realty (the "Broker"). Said
commission and/or broker's fee shall be as agreed upon in a separate agreement
between Seller and the Broker. Said agreement shall hold Buyer harmless from any
obligation for payment of any real estate commissions and/or broker's fees and
shall survive closing.
17. EXHIBITS. Exhibits A and B attached hereto are incorporated herein
as if fully set forth
Exhibit A - SIRE PLAN
Exhibit B - Legal Description of the Property
18. EFFECTIVE DATE. The later of the Buyer's signature date and the
Seller's signature date, set forth below, shall be the "Effective Date" of this
Agreement.
BUYER: EAGLE HARDWARE & GARDEN, INC.
By: /s/ Richard T. Takata
---------------------------
Typed name: Richard T. Takata
March 16 ,1998 Its: President and C.E.O.
----------------------
Buyer's signature date
Address: 981 Powell Avenue S.W.
Renton, WA 98055
SELLER: HOPKINS REAL ESTATE GROUP
March 17 ,1998 By: /s/ Stephen C. Hopkins
----------------------- ---------------------------
Seller's signature date Typed name Stephen C. Hopkins
------------------
Its: President
------------------
Address: #13 Corporate Plaza
Suite 200
Newport Beach, CA 92660
7
<PAGE>
EXHIBIT "A"
[MAP]
<PAGE>
EXHIBIT "B"
LEGAL DESCRIPTION OF THE PROPERTY
EXHIBIT "B"
<PAGE>
EAGLE HARDWARE & GARDEN, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. DEFINITIONS
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means common stock, no par value, of the Company.
"Company" means Eagle Hardware & Garden, Inc., a Washington corporation and
any Participating Subsidiaries.
"Compensation" means regular straight time earnings plus compensation for
overtime, incentive bonuses and other additional compensation, except to
the extent that any such item is specifically excluded by the Plan
Administrator.
"ESPP" means this Eagle Hardware & Garden, Inc. Employee Stock Purchase
Plan.
"Fair Market Value" of the Common Stock as of any day means the closing
price (rounded to the next highest cent in the case of fractions of a cent)
of the Common Stock as reported on such day or, if such day is not a
trading day of the Nasdaq Stock Market, the next trading day as reported by
the Nasdaq Stock Market. If the Common Stock of the Company is not
admitted to trading on any of the aforesaid dates for which closing prices
of the stock are to be determined, then reference shall be made to the fair
market value of the stock on that date, as determined on such basis as
shall be established or specified for the purpose by the Plan
Administrator.
"Participant" means an employee of the Company or a Participating
Subsidiary who is regularly scheduled to work a minimum of fifteen (15)
hours per week, who has met the eligibility requirements in Section 7 and
has filed an Enrollment Agreement and such other documents as are required
under Section 8.
"Participating Subsidiary" means any corporation which is a "subsidiary
corporation" of the Company within the meaning of Code Section 424(e) and
is designated as a participant in the Plan by the Plan Administrator.
"Plan Administrator" means the Board of Directors of the Company, or any
committee established pursuant to Section 4 to administer the ESPP.
"Purchase Period" means a six-month period commencing on January 1 or July
1.
"Purchase Date" means the last business day of a Purchase Period.
-1-
<PAGE>
2. PURPOSE
The purpose of this ESPP is to enable Participants to acquire a larger
personal proprietary interest in the Company, and to encourage Participants to
remain in the employ of the Company and have a personal interest in the success
of the Company. This ESPP is intended to constitute an "employee stock purchase
plan" as defined in Code Section 423, and shall be interpreted and administered
to further that intent.
This ESPP is intended to provide Common Stock for investment and not for
resale. The Company does not, however, intend to restrict or influence the
conduct of any Participant's affairs. A Participant, therefore, may sell Common
Stock that is purchased under this ESPP at any time, subject to compliance with
any applicable federal or state tax and securities laws. THE EMPLOYEE ASSUMES
THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE SHARES.
3. GOVERNMENTAL REGULATIONS
The Company's obligation to sell and deliver shares of Common Stock under
the ESPP is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
4. ADMINISTRATION
Primary authority for administration of the Plan is held by the Board of
Directors, but the Board of Directors, in its discretion, may establish a
committee composed of members of the Board of Directors or employees of the
Company to administer the Plan which shall have such of the power and authority
vested in the Board of Directors under the Plan as the Board of Directors may
delegate to it, including the power and authority to interpret any provision of
the Plan. The Board of Directors or any committee established pursuant to this
Section 4 is referred to herein as the "Plan Administrator." It is the
intention of the Company that the ESPP and the administration hereof comply in
all respects with Section 16(b) of the Securities Exchange Act of 1934 and
Section 423(b) of the Code.
5. STOCK SUBJECT TO THE ESPP
There are reserved for issuance under the ESPP 1,200,000 shares of Common
Stock which may be purchased by Participants pursuant to the ESPP, subject to
adjustment as provided in Section 17.
-2-
<PAGE>
6. PURCHASE PERIODS
This ESPP will be administered based on semiannual Purchase Periods
commencing January 1 or July 1. The first Purchase Period will begin on July 1,
1998 and end on December 31, 1998.
7. ELIGIBILITY
Any employee who has completed ninety (90) days employment and who is
employed on the date his or her participation is to begin shall be eligible to
participate in Purchase Periods beginning after such ninety (90) day period.
For purposes of participation in the ESPP, a person on leave of absence
shall be deemed to be an employee for the first ninety (90) days of such leave
of absence and such person's employment shall be deemed to have terminated at
the close of business on the 90th day of such leave of absence unless such
person shall have returned to regular full-time or part-time employment (as the
case may be) prior to the close of business on such 90th day. Termination by
the Company of a person's leave of absence, other than termination of such leave
of absence on return to full time or part time employment, shall terminate a
person's employment for all purposes of the ESPP and shall terminate such
person's participation in the ESPP and right to purchase shares of stock
pursuant to the ESPP.
8. PARTICIPATION
An eligible employee may become a Participant by completing, signing and
filing an Enrollment Agreement authorizing payroll deductions and any other
necessary papers with the Company at least ten (10) days prior to the
commencement of the particular Purchase Period in which he or she wishes to
participate. Participation in one Purchase Period under the Plan shall neither
limit, nor require, participation in any other Purchase Period.
9. PAYROLL DEDUCTIONS
At the time a Participant files his or her Enrollment Agreement, he or she
may elect to have from 1% to 15% (in whole percentage points) of his or her
Compensation deducted and applied to the purchase of shares of Common Stock
pursuant to this ESPP. An amount equal to the elected percentage of the
Participant's Compensation will be deducted on each regular pay day falling
within the Purchase Period. All amounts will be deducted from a Participant's
Compensation on an after-tax basis. No interest will be paid on payroll
deductions accumulated under the ESPP. A Participant may discontinue
participation or withdraw from the ESPP as provided in Section 12, but may not
alter the amount of his or her payroll deductions or make any other changes
during a Purchase Period.
If a Participant goes on a leave of absence, such Participant shall have
the right, subject to the provisions of Section 7, to elect: (a) to withdraw
his or her accumulated payroll deductions
-3-
<PAGE>
pursuant to Section 12; (b) to discontinue payroll deductions but remain a
Participant in the ESPP during such leave of absence, or (c) remain a
Participant in the ESPP during such leave of absence, authorizing deductions to
be made from payments by the Company to the Participant during such leave of
absence and undertaking to make cash payments to the Company at the end of each
payroll period to the extent that amounts payable by the Company to such
Participant are insufficient to meet such Participant's authorized Plan
deductions.
10. PURCHASE OF COMMON STOCK
On the Purchase Date, a Participant's accumulated payroll deductions will,
subject to the limitations in Section 11 and the termination provisions of
Section 16, be applied toward the purchase of shares of Common Stock at a
purchase price equal to the lesser of:
(a) 85% of the Fair Market Value of the Common Stock on the first business
day of the Purchase Period; or
(b) 85% of the Fair Market Value of the Common Stock on the Purchase Date,
in either event rounded to the nearest whole cent.
Shares of Common Stock may be purchased under the ESPP only with a
Participant's accumulated payroll deductions. Fractional shares cannot be
purchased. The Company will return to the Participant any portion of a
Participant's accumulated payroll deductions not used for the purchase of Common
Stock at the end of a Purchase Period unless the Participant has advised the
Company otherwise by reexecuting an Enrollment Agreement before the commencement
of the succeeding Purchase Period to have the balance carried over to be applied
to the purchase of Common Stock in such Purchase Period; provided the
Participant is participating in the ESPP during that Purchase Period.
11. LIMITATIONS ON SHARE PURCHASES
During any Purchase Period the maximum number of shares of Common Stock
that may be purchased by a Participant may not exceed 1,000 shares. During any
calendar year, the maximum value of the Common Stock that may be purchased by a
Participant under the ESPP is $25,000, said value to be determined on the basis
of the Fair Market Value of the Common Stock on the first business day of the
Purchase Period and in accordance with the requirements of Code
Section 423(b)(8). The foregoing limitation is intended to and shall be
interpreted in such a manner as will comply with Code Section 423(b)(8). In
addition, no Participant shall be permitted to subscribe for any shares under
the ESPP if such Participant, immediately after such subscription, owns shares
that account for (including all shares that may be purchased under outstanding
subscriptions under the ESPP and any other outstanding options to purchase
shares of Common Stock) five percent (5%) or more of the total combined voting
power or value of all classes of shares of the Company or its subsidiaries,
taking into account the stock ownership rules in Code Section 424(d).
-4-
<PAGE>
12. WITHDRAWAL AND DISCONTINUANCE
A Participant may withdraw from the ESPP, in whole but not in part, at any
time prior to the last business day of each offering by completing the
"discontinue and withdraw" section of an ESPP Change Notice and delivering the
ESPP Change Notice to the Company, in which event the Company will refund the
entire balance of his accumulated payroll deductions as soon as practicable
thereafter.
To re-enter the ESPP, a Participant who has previously withdrawn must file
a new Enrollment Agreement in accordance with Section 8. His re-entry into the
ESPP cannot, however, become effective before the beginning of the next Purchase
Period following his withdrawal.
A Participant may elect to discontinue his payroll deductions during the
course of a particular Purchase Period, at any time prior to the last business
day preceding the final pay day during such Purchase Period, by completing the
"discontinue" section of an ESPP Change Notice and delivering the ESPP Change
Notice to the Company, and such election will not constitute a withdrawal for
purpose of this Section 12. In the event that a Participant elects to
discontinue his payroll deductions pursuant to this Section 12, the Participant
will continue to participate in such Purchase Period and will be entitled to
purchase from the Company such number of full shares of Common Stock as set
forth in and in accordance with Section 10.
13. ISSUANCE OF COMMON STOCK TO CUSTODIAL ACCOUNTS
The shares of Common Stock purchased by a Participant will be issued
electronically by the Company's transfer agent to the Participant's custodial
account as soon as practicable after each Purchase Date. Common Stock purchased
under the ESPP will be issued only in the name of the Participant (or, if his
authorization so designates, in the name of the Participant and another person
of legal age as joint tenants with rights of survivorship). The custodial
account of Participants shall be maintained by a bank, broker-dealer or similar
custodian appointed by the Plan Administrator that has agreed to hold such
shares for the accounts of the respective Participants. Fees and expenses of
the bank, broker-dealer or similar custodian shall be paid by the Company or
allocated among the respective Participants in such manner as the Plan
Administrator determines. A Participant or his legal representative may sell
Common Stock from his custodial account at any time; however, any sale within
two (2) years of the first day of the Purchase Period and one (1) year of the
Purchase Date will be treated by the Company as a disqualifying disposition
under the Code and be reported on the Participant's tax Form W-2.
14. WITHHOLDING TAXES
In connection with the purchase of shares of Common Stock under the ESPP,
the Company (a) shall not issue a certificate for such shares until it has
received payment from the Participant of any required withholding tax in cash or
by the retention or acceptance upon delivery thereof by the Participant of
shares of Common Stock sufficient in Fair Market Value to
-5-
<PAGE>
cover the amount of such withholding tax and (b) shall have the right to retain
or sell without notice, or to demand surrender of, shares of Common Stock in
value sufficient to cover any withholding tax. The Company shall have the right
to withhold from any payroll deductions made by the Participant under the ESPP
an amount equal to any required withholding tax. In either case, the Company
shall make payment (or reimburse itself for payment made) to the appropriate
taxing authority of an amount in cash equal to the amount of such withholding
tax, remitting any balance to the Participant. For purposes of this Section 14,
the value of shares of Common Stock so retained or surrendered shall be equal to
the Fair Market Value of such shares on the date that the amount of the
withholding tax is to be determined (the "Tax Date"), and the value of shares of
Common Stock so sold shall be the actual net sale price per share (after
deduction of commissions) received by the Company. Notwithstanding the
foregoing, the Participant may elect, subject to approval by the Plan
Administrator, to satisfy the obligation to pay any withholding tax, in whole or
in part, by providing the Company with funds sufficient to enable the Company to
pay such withholding tax or by having the Company retain or accept upon delivery
thereof by the Participant shares of Common Stock sufficient in Fair Market
Value to cover the amount of such withholding tax. Each election by a
Participant to have shares retained or to deliver shares for this purpose must
be in writing and made on or prior to the Tax Date.
15. TRANSFERABILITY
A Participant's rights under the ESPP, including rights to accumulated
payroll deductions, may not be pledged, assigned, encumbered or otherwise
transferred for any reason other than by will or the laws of descent and
distribution. Any such attempt will be treated as an election by the
Participant to withdraw from the ESPP.
16. TERMINATING EVENTS
Upon (a) the dissolution or liquidation of the Company, (b) a merger or
other reorganization of the Company with one or more corporations as a result of
which the Company will not be a surviving corporation, (c) the sale of all or
substantially all of the assets of the Company or a material division of the
Company, (d) a sale or other transfer, pursuant to a tender offer or otherwise,
of more than fifty percent (50%) of the then outstanding shares of Common Stock
of the Company, (e) an acquisition by the Company resulting in an extraordinary
expansion of the Company's business or the addition of a material new line of
business, or (f) any exchange that is subject to this Section 16 (any of such
events is herein referred to as a "Terminating Event"), the Plan Administrator
may but shall not be required to:
(a) make provision for the continuation of the Participants' rights
under the ESPP on such terms and conditions as the Plan Administrator
determines to be appropriate and equitable, including where applicable, but
not limited to, an arrangement for the substitution on an equitable basis,
for each share of Common Stock that could otherwise be purchased at the end
of the Purchase Period in progress at the time of the
-6-
<PAGE>
Terminating Event, of any consideration payable with respect to each then
outstanding share of Common Stock in connection with the Terminating Event;
or
(b) terminate all rights of Participants under the ESPP for such
Purchase Period and --
(i) return to the Participants all of their payroll deductions
for such Purchase Period; and
(ii) for each share of Common Stock, if any, that could otherwise
be purchased under the ESPP by a Participant at the end of
such Purchase Period (determined by assuming that payroll
deductions at the rate elected by the Participant were
continued to the end of the Purchase Period and used to
purchase shares based on the Fair Market Value of the Common
Stock on the first day of the Purchase Period) and with
respect to which (A) the purchase price at which such share
could be purchased (determined with reference only to the
Fair Market Value of the Common Stock on the first day of
the Purchase Period) is exceeded by (B) the Fair Market
Value on the date of the Terminating Event of a share of
Common Stock, as determined by the Plan Administrator, pay
to the Participant an amount equal to such excess.
The Plan Administrator shall make all determinations necessary or advisable
in connection with Terminating Events, and its determinations shall, in the
absence of fraud or patent mistake, be conclusive and binding on all persons
with any interest in the ESPP.
17. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of any changes in the outstanding stock of the Company by
reason of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, split-ups, split-offs,
spin-offs, liquidations or other similar changes in capitalization, or any
distribution to stockholders other than cash dividends, the Plan Administrator
shall make such adjustments, if any, in light of the change or distribution as
the Plan Administrator in its sole discretion shall determine to be appropriate
in the number and class of shares and the purchase prices of the Common Stock
which may be purchased by Participants during the current Purchase Period. In
the event of any such change in the outstanding Common Stock of the Company, the
aggregate number and class of shares available under the ESPP and the maximum
number of shares which may be purchased and their purchase price shall be
appropriately adjusted by the Plan Administrator.
Upon the happening of an event specified in this Section 17, the class and
aggregate number of shares available under the ESPP, as set forth in Section 5
shall be appropriately adjusted to reflect the event. Notwithstanding the
foregoing, such adjustments shall be made only to the extent that the Plan
Administrator, based on advice of counsel for the Company,
-7-
<PAGE>
determines that such adjustments will not constitute a change requiring
shareholder approval under Code Section 423(b)(2).
18. TERMINATION OF EMPLOYEE'S RIGHTS
Subject to the provisions of Section 20, a Participant's rights under the
ESPP will terminate if he or she for any reason (including death, disability or
voluntary or involuntary termination of employment) ceases to be an employee of
the Company. To the extent that the rights of a Participant terminate in
accordance with this Section 18, any of the Participant's accumulated payroll
deductions will be promptly returned to the Participant or in the case of the
Participant's death, to his or her beneficiary as provided in Section 19 below.
The ESPP does not, directly or indirectly, create any right for the benefit of
any employee or class of employees to preferentially purchase any Common Stock
under the ESPP, or create in any employee or class of employees any right with
respect to continuation of employment by the Company, and it shall not be deemed
to interfere in any way with the Company's right to terminate, or otherwise
modify, an employee's employment at any time.
19. DESIGNATION OF BENEFICIARY
A Participant may designate a beneficiary who is to receive any accumulated
payroll deductions upon the Participant's death. Such designation may be
changed by the Participant at any time by completing the "beneficiary
designation" section of an ESPP Change Notice and delivering the ESPP Change
Notice to the Plan Administrator. Upon the death of a Participant and upon
receipt by the Company of proof of identity, the Company shall deliver such
accumulated payroll deductions to such beneficiary. In the event of the death
of a Participant and in the absence of a beneficiary validly designated under
the Plan who is living at the time of such Participant's death, the Company
shall deliver such accumulated payroll deductions to the executor or personal
representative of the Participant's estate or if no executor or personal
representative has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such accumulated payroll deductions to
the spouse or to any one or more dependents of the Participant as the Company
may designate. No beneficiary shall, prior to the death of the Participant by
whom he or she has been designated, acquire any interest in the Participant's
accumulated payroll deductions.
20. TERMINATION AND AMENDMENTS TO ESPP
The ESPP may be terminated at any time by the Plan Administrator but,
except as provided in Section 16, such termination shall not affect the rights
of Participants under the ESPP for the Purchase Period in progress at the time
of termination. The ESPP will terminate in
-8-
<PAGE>
any case when all or substantially all of the unissued shares of Common Stock
reserved for the purposes of the ESPP have been purchased. If at any time
shares of Common Stock reserved for the purpose of the ESPP remain available for
purchase but not in sufficient number to satisfy all then unfilled purchase
requirements, the available shares shall be apportioned among Participants in
proportion to the respective amounts of their accumulated payroll deductions,
and the ESPP shall terminate. Upon such termination or any other termination of
the ESPP, all accumulated payroll deductions not used to purchase shares of
Common Stock will be refunded to the Participants entitled thereto. The ESPP
may be terminated, modified or amended by the shareholders of the Company. The
Board of Directors of the Company may also terminate this ESPP, or modify or
amend the ESPP in such respects as it shall deem advisable in order to conform
to any change in any law or regulation applicable thereto, or in other respects;
however, to the extent required by applicable law or regulation, shareholder
approval will be required for any amendment which will (a) increase the total
number of shares which may be issued under the ESPP, (b) change the class of
persons eligible to purchase Common Stock under the ESPP, (c) materially
increase the benefits accruing to Participants under the ESPP, or (d) otherwise
require shareholder approval under any applicable law or regulation.
21. INFORMATION TO PARTICIPANTS
A Participant in the ESPP shall not have any rights as a shareholder of the
Company on account of shares of Common Stock that may be purchased under the
ESPP prior to the time such shares are actually purchased by and issued to the
Participant. Notwithstanding the foregoing, the Company shall deliver to each
Participant under the ESPP who does not otherwise receive such materials (a) a
copy of the Company's annual financial statements, together with management's
discussion and analysis of financial condition and results of operations for the
fiscal year, and (b) a copy of all reports, proxy statements and other
communications distributed to the Company's security holders generally.
22. APPROVAL OF SHAREHOLDERS
The ESPP will become effective July 1, 1998; subject to approval by the
holders of a majority of the shares of the Company present or represented by
proxy at an annual meeting of the shareholders of the Company held after the
date on which the ESPP is adopted by the Board of Directors of the Company and
on or before July 1, 1999. The ESPP shall also be subject to approval by the
shareholders of the Company in a manner that complies with Section 423(b)(2) of
the Code. If the ESPP is not so approved, it shall not become effective, and
all payroll deductions of Participants accumulated under the ESPP will be
promptly returned to the Participants.
Date Approved by Board of Directors: ___________, ____.
Date Approved by Shareholders: ___________, ____.
-9-
<PAGE>
FIRST AMENDMENT TO THE
EAGLE HARDWARE & GARDEN, INC.
EMPLOYEE STOCK OWNERSHIP TRUST AGREEMENT
This Amendment, effective as of April 1, 1998, by and between EAGLE
HARDWARE & GARDEN, INC., a corporation duly organized and existing under the
laws of Washington (hereinafter the "Company") and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company (hereinafter the "Trustee").
WITNESSETH:
WHEREAS, the Company has previously entered into a trust agreement (the
"Trust Agreement") with U.S. Bank of Washington, N.A. (the "Prior Trustee") to
serve as trustee of the Eagle Hardware & Garden, Inc. Employee Stock Ownership
Plan (hereinafter the "Plan"); and
WHEREAS, the Company desires to remove the Prior Trustee and appoint the
Trustee as a successor trustee under the Trust Agreement and the Trustee desires
to accept such appointment; and
WHEREAS, the parties wish to use all of the provisions of the Trust
Agreement with the Prior Trustee, unless specifically changed by this Amendment;
NOW THEREFORE, the parties hereto hereby amend the Trust Agreement as
follows:
1. All references in the Trust Agreement to the Trustee shall be read to
mean State Street Bank and Trust Company, as the successor trustee to the
Prior Trustee.
2. Article IX. Section B. shall be deleted and replaced with the following:
"This Trust Agreement shall be construed and governed in all respects in
accordance with applicable federal law, and, to the extent not preempted by
such federal law, in accordance with the laws of the Commonwealth of
Massachusetts."
<PAGE>
IN WITNESS WHEREOF, the Company and the Trustee have caused this Amendment
to be executed as of the day and year first written above.
EAGLE HARDWARE & GARDEN, INC.
By: [Illegible]
----------------------------
Its: E.V.P. Admin. EVP/CFO
---------------------------
STATE STREET BANK AND TRUST COMPANY
By: Paul Schaetzl
-----------------------------
Its: Vice President
<PAGE>
FIVE YEAR SUMMARY OF
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
52 Weeks 53 Weeks 52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended Ended
January 30 January 31 January 26 January 27 January 28
1998 1997 1996 1995 1994
RESULTS OF OPERATIONS DATA
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales $ 971,488 $ 760,963 $ 615,674 $ 518,755 $ 322,938
Cost of sales 698,136 549,383 449,865 379,473 228,998
- ---------------------------------------------------------------------------------------------------------------
Gross margin 273,352 211,580 165,809 139,282 93,940
Operating expenses 217,829 172,746 140,279 117,159 72,686
Preopening expenses 2,667 1,880 2,934 4,539 5,225
Loss on sale of Canadian subsidiary 0 0 0 12,715 0
- ---------------------------------------------------------------------------------------------------------------
Operating income 52,856 36,954 22,596 4,869 16,029
Other income (expense):
Interest income 2,552 1,091 23 610 560
Interest expense (8,600) (7,747) (7,421) (5,262) (90)
Other income 277 2,471 1,860 309 264
- ---------------------------------------------------------------------------------------------------------------
Income before tax 47,085 32,769 17,058 526 16,763
Income taxes 17,169 11,032 5,723 6,810 6,004
- ---------------------------------------------------------------------------------------------------------------
Net income (loss) $ 29,916 $ 21,737 $ 11,335 $ (6,284) $ 10,759
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Net income (loss) per share, basic(1) $ 1.03 $ 0.87 $ 0.50 $ (0.28) $ 0.51
Net income (loss) per share, diluted(1) $ 0.98 $ 0.84 $ 0.50 $ (0.28) $ 0.51
Weighted average common
shares outstanding 28,996 25,065 22,863 22,812 21,186
BALANCE SHEET DATA
(in thousands)
Working capital $ 172,605 $ 143,351 $ 55,391 $ 79,031 $ 56,160
Total assets $ 601,655 $ 519,385 $ 366,567 $ 321,865 $ 211,860
Note payable to bank $ 0 $ 0 $ 34,500 $ 6,000 $ 9,500
Long-term debt $ 145,836 $ 108,416 $ 101,542 $ 103,807 $ 4,915
Shareholders' equity $ 336,537 $ 304,843 $ 155,601 $ 143,849 $ 149,309
Capital expenditures $ 53,454 $ 88,846 $ 45,934 $ 100,837 $ 58,250
SELECTED OPERATING DATA
Number of employees 5,566 5,093 3,859 3,082 2,400
Number of stores open at end of period 31 27 24 19 13
Selling square footage at end
of period (in thousands)(2) 3,930 3,348 2,861 2,248 1,520
Annual sales per square foot(2) $ 257 $ 248 $ 237 $ 268 $ 292
Store weeks in period(3) 1,553 1,301 1,135 850 492
Average weekly net sales
per store (in thousands) $ 626 $ 585 $ 542 $ 610 $ 656
Average daily transactions per store 2,277 2,171 2,065 2,287 2,352
Average net sale per transaction $ 39.65 $ 38.88 $ 37.92 $ 38.44 $ 40.21
Inventory turnover 3.5x 3.6x 3.2x 3.0x 3.2x
Same store sales increase/(decrease) 11% 11% (7%) (2%) 12%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) The earnings per share amounts prior to fiscal 1997 have been restated as
required to comply with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share." For further discussion of earnings per share and the
impact of Statement No. 128, see Note 11 of Notes to Consolidated Financial
Statements. (2) The calculation of selling square footage was adjusted in
fiscal 1995 to exclude exterior lawn and garden (including covered greenhouses).
Annual sales per square foot was adjusted accordingly. (3) "Store weeks in
period" represents the aggregate number of full weeks in which stores were open
during the reporting period.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
GENERAL
Eagle Hardware & Garden (the "Company" or "Eagle Hardware") was incorporated in
November 1989 and opened its first home improvement center in Spokane,
Washington in November 1990. The Company currently operates 32 stores in the
western United States, including 17 stores in the state of Washington. The
Company's merchandising strategy is to provide its target do-it-yourself
customers as well as professional contractors with a broad selection of home
improvement items. The Company focuses on creating the best home improvement
shopping experience for its customers by combining the selection and value
associated with traditional warehouse-format home centers with the comfortable
atmosphere and service orientation of specialty retailers. The Company's
product categories include plumbing, garden, lumber, tools, electrical,
hardware, paint and decor.
A significant element of the Company's overall expansion strategy is to
provide more convenient access to its stores, expand its total market share and
achieve economies of scale by clustering stores in metropolitan markets. In
general, the opening of additional stores by the Company in existing markets
results in sales cannibalization. Consistent with this strategy, the Company
currently plans to open additional stores in the greater Seattle and Denver
markets in fiscal 1998. Metropolitan markets targeted for future expansion
include Portland, Oregon and several California markets.
The Company's same store sales increases (decreases) over the prior year were
11%, 11% and (7%) in fiscal years 1997, 1996 and 1995, respectively. New store
openings by the Company in existing markets and significant same store sales
increases in 1996 and 1997, combined with other factors such as competition and
economic trends in the Company's markets, may result in future same store sales
increases lower than those experienced in fiscal 1996 and fiscal 1997.
Moreover, there can be no assurance that same store sales for any particular
period will not decrease in the future.
Quarterly results of operations may fluctuate materially depending on a
number of factors, including seasonality and the timing of new store openings
and related preopening expenses. The Company expects that its business will
exhibit some measure of seasonality, which the Company believes is typical of
the retail home center industry. 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 proportionately 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 items during the
period.
RESULTS OF OPERATIONS
The following table sets forth the Company's results of operations for the
fiscal years ended January 26, 1996, January 31, 1997, and January 30, 1998,
and for each of the quarters in the fiscal year ended January 30, 1998,
expressed as percentages of net sales. Percentage amounts may not accumulate
to 100% as a result of rounding. The fiscal year ended January 31, 1997 was
a 53-week year.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
52 Weeks 53 Weeks 1997 Fiscal Quarters Ended 52 Weeks
Ended Ended Ended
January 26 January 31 May 2 August 1 October 31 January 30 January 30
RESULTS OF OPERATIONS 1996 1997 1997 1997 1997 1998 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales 73.1 72.2 71.7 71.9 71.7 72.2 71.9
- ------------------------------------------------------------------------------------------------------------------------------------
Gross margin 26.9 27.8 28.3 28.1 28.3 27.8 28.1
Operating expenses 22.8 22.7 23.5 20.3 22.1 24.4 22.4
Preopening expenses 0.5 0.2 0.9 0.0 0.0 0.3 0.3
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 3.7 4.9 3.9 7.9 6.1 3.2 5.4
Other income (expense)
<PAGE>
Net interest (expense) (1.2) (0.9) (0.6) (0.6) (0.6) (0.7) (0.6)
Other income 0.3 0.3 0.0 0.0 0.0 0.0 0.0
- ------------------------------------------------------------------------------------------------------------------------------------
Income before tax 2.8 4.3 3.3 7.3 5.6 2.5 4.8
Income taxes 0.9 1.4 1.2 2.7 2.0 0.9 1.8
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 1.8% 2.9% 2.1% 4.7% 3.5% 1.6% 3.1%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FISCAL 1997 VS FISCAL 1996
NET INCOME Net income for fiscal 1997 was $29.9 million, or $0.98 per share,
diluted, compared to $21.7 million or $0.84 per share, diluted, for fiscal 1996.
The Company's 6.25% convertible subordinated debentures were dilutive during
both fiscal 1997 and fiscal 1996. Had the debentures not been dilutive, net
income per share for fiscal 1997 and fiscal 1996 would have been $1.03 and
$0.87, respectively (basic earnings per share). The 38% increase in net income
was due to the factors discussed below.
Weighted average common shares outstanding for use in the basic earnings
per share calculation increased 16% from 25.1 million as of January 31, 1997 to
29.0 million as of January 30, 1998. This increase was primarily attributable
to the issuance of an additional 5.75 million shares of common stock in the
Company's September 1996 stock offering.
NET SALES Net sales during fiscal 1997 increased 28% over fiscal 1996. This
increase in net sales over fiscal 1996 was due primarily to two factors. First,
there were 1,553 store weeks of operations during the year versus 1,301 store
weeks during the prior year. Second, same store sales for the year (for stores
open one year or more) increased 11% primarily as a result of a 10% increase in
customer transactions. The increase in customer transactions was due to several
factors, including favorable economic conditions in most of the Company's
markets and the benefits from the liquidation and subsequent closure of one of
the Company's competitors, Ernst Home Center, Inc., during the second half of
fiscal 1996.
GROSS MARGIN The Company's fiscal 1997 gross margin, in dollars, increased 29%
over the prior year. As a percentage of net sales, gross margin was 28.1%
during fiscal 1997 compared to 27.8% in the prior year. The improvement in
gross margin as a percentage of sales was due to a combination of factors,
including continued buying efficiencies.
OPERATING EXPENSES Operating expenses as a percentage of net sales decreased
from 22.7% in fiscal 1996 to 22.4% in fiscal 1997. This reduction was primarily
due to the additional leverage attributable to the 11% increase in same store
sales. Expenses that decreased as a percentage of sales included advertising,
rent, insurance and corporate overhead. Store wages and benefits were
consistent as a percentage of sales between years.
PREOPENING EXPENSES Preopening expenses were 0.3% of net sales during fiscal
1997, when the Company opened four stores, compared to 0.2% of net sales during
fiscal 1996, when the Company opened three stores. Average preopening expense
per store increased 6% from $627,000 in fiscal 1996 to $667,000 in fiscal 1997.
Preopening expenses vary directly with the number of stores opened during a
particular period and the location of the stores. Such costs are normally
expensed in the period when the related store opens.
OPERATING INCOME For the reasons explained above, operating income increased 43%
compared to the prior year. Expressed as a percentage of net sales, operating
income increased from 4.9% during fiscal 1996 to 5.4% during fiscal 1997.
INTEREST INCOME Interest income increased from $1.1 million in fiscal 1996 to
$2.6 million in fiscal 1997. The primary source of cash for investment was the
proceeds from the Company's September 1996 stock offering.
INTEREST EXPENSE Interest expense increased to $8.6 million in fiscal 1997 from
$7.7 million in fiscal 1996. Despite decreased interest expense attributable to
lower borrowings on the Company's bank line of credit, interest expense for the
year increased due primarily to $45.0 million in new mortgages and lower
interest capitalization. Interest capitalized decreased because there were
fewer owned stores under construction during the year compared to the prior
year. Interest on the Company's convertible subordinated debentures, which
represents the primary source of interest expense, was comparable between the
current and prior year.
INCOME TAXES The Company's effective tax rate for fiscal 1997 was 36.5%,
compared to 33.7% for fiscal 1996. The effective tax rate for fiscal 1997 was
slightly less than the rate that the Company expects to pay under normal
circumstances because of investments in tax-exempt securities. The 1996
effective tax rate was lower than normal due to the utilization of a portion of
the Company's capital loss carryforward to offset $2.3 million in capital gains
and investments in tax-exempt securities.
FISCAL 1996 VS FISCAL 1995
<PAGE>
NET INCOME Net income for fiscal 1996 increased 92% to $21.7 million or $0.84
per share, diluted, from $11.3 million, or $0.50 per share, in fiscal 1995.
This increase was due to the factors discussed below. The Company's 6.25%
convertible subordinated debentures were dilutive during fiscal 1996. Had the
debentures not been dilutive, net income per share for fiscal 1996 would have
been $0.87 (basic earnings per share). Basic earnings per share was $0.50 in
fiscal 1995.
Weighted average common shares outstanding for use in the basic earnings
per share calculation increased 12% from 22.9 million as of January 26, 1996 to
25.1 million as of January 31, 1997. This increase was primarily attributable
to the issuance of an additional 5.75 million shares of common stock in the
Company's September 1996 stock offering.
NET SALES Net sales during fiscal 1996 increased by 24% over fiscal 1995. The
24% increase in net sales over fiscal 1995 was due primarily to two factors.
First, there were 1,301 store weeks of operations during the year versus 1,135
store weeks during the prior year. Second, same store sales for the year (for
stores open one year or more) increased 11% primarily as a result of an 8%
increase in customer transactions. The increase in customer transactions was
due to several factors, including strong existing home sales, favorable economic
conditions in most of the Company's markets and the declining performance and
subsequent liquidation of a primary competitor, Ernst Home Center, Inc.
GROSS MARGIN The Company's fiscal 1996 gross margin increased 28% over the prior
year. As a percentage of net sales, gross margin was 27.8% during fiscal 1996
compared to 26.9% in the prior year. The improvement in gross margin as a
percentage of sales was due 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 22.8% in fiscal 1995 to 22.7% in fiscal 1996. This slight reduction was
primarily due to the additional leverage attributable to the 11% increase in
same store sales. Operating expense leverage in 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
commitment to providing a high level of customer service.
PREOPENING EXPENSES Preopening expenses were 0.2% of net sales during fiscal
1996, when the Company opened three stores, compared to 0.5% of net sales during
fiscal 1995, when the Company opened five stores. Average preopening expense
per store increased 7% from $587,000 in fiscal 1995 to $627,000 in fiscal 1996.
Preopening expenses vary directly with the number of stores opened during a
particular period and the location of the stores. Such costs are normally
expensed in the period when the related store opens.
OPERATING INCOME For the reasons explained above, operating income increased 64%
compared to the prior year. Expressed as a percentage of net sales, operating
income increased from 3.7% during fiscal 1995 to 4.9% during fiscal 1996.
INTEREST INCOME Interest income increased from $22,000 in fiscal 1995 to $1.1
million in fiscal 1996 due to investment of proceeds from the Company's
September 1996 stock offering.
INTEREST EXPENSE Interest expense increased to $7.7 million in fiscal 1996 from
$7.4 million in fiscal 1995. This increase was due primarily to new mortgages
and increased borrowings on the Company's bank line of credit. Interest on the
Company's convertible subordinated debentures, which represents the primary
source of interest expense, was comparable between the current and prior year.
During both years, interest expense was reduced by interest capitalized on
construction projects.
OTHER INCOME Other income during fiscal 1996 was $2.5 million compared to $1.9
million during fiscal 1995. Other income in fiscal 1996 consisted primarily of
a $2.1 million capital gain on the sale of surplus property in Lynnwood,
Washington.
INCOME TAXES The Company's effective tax rate for fiscal 1996 was 33.7%,
compared to 33.6% for fiscal 1995. The 1996 effective tax rate was lower than
the rate that the Company expects to pay under normal circumstances for two
reasons. First, the Company utilized a portion of its capital loss
carryforward, incurred in the fourth quarter of fiscal 1994, to offset capital
gains of $2.3 million. Second, a portion of the Company's net proceeds from the
public stock offering was invested in tax-exempt securities. For 1995, refer to
the reconciliation between the U.S. statutory income tax rate and the effective
tax rate in Note 5 of Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
<PAGE>
Historically, the Company's principal sources of funds to finance its expansion
plans, working capital, interest and debt service requirements have been cash
flow from operations, bank credit lines, mortgages on owned stores and equity
and debt offerings. The Company used cash of $53.5 million and $88.8 million
during fiscal 1997 and fiscal 1996, respectively, to fund its capital
expenditure program. Fiscal 1997 expenditures related primarily to the four
stores opened in fiscal 1997 and one store opened in early fiscal 1998.
During fiscal 1997, operating activities provided $21.6 million to fund the
Company's continued expansion. Net income adjusted for noncash items provided
$47.7 million which was used in part to finance an increase of $28.5 million in
inventory levels during the period. Additional cash was provided by a $2.0
million increase in accounts payable and outstanding checks under the Company's
integrated cash management program and a $4.2 million net increase in accrued
liabilities and income taxes payable. Financing activities during fiscal 1997
included $45.0 million in proceeds from mortgages on five owned stores.
The Company has available a $75 million unsecured revolving working capital
line of credit provided by a group of banks, including U.S. Bank of Washington,
N.A. ("USBW") as the agent bank. The line expires June 30, 1999. Borrowings
against this line incur interest at USBW's prime rate or, at the Company's
option, at a daily bid rate or the Inter-Bank Offered Rate ("IBOR") plus a
factor based on the Company's capital ratio and/or senior debt ratings. This
factor can range from 0.55% to 1.25%. If the sum of borrowings and outstanding
letters of credit exceeds $50 million, an additional 0.25% is added to the IBOR
rate. The line imposes certain requirements on the Company in terms of working
capital, capital ratio, tangible net worth and debt service coverage ratio. The
line also restricts payment of dividends and requires approval of annual capital
expenditure plans. There were no borrowings outstanding as of January 30, 1998.
The Company currently owns 15 of its 32 stores in operation. As of January
30, 1998, the Company was obligated in the amount of approximately $63 million
on mortgages for eight of its owned stores. The mortgage notes require monthly
payments of principal and interest. In March 1998, the Company received an
additional $32 million for mortgages on four owned stores. The other three
owned stores are available for financing through either fixed-term capital asset
loans and/or sale-leaseback transactions.
In addition to the mortgage notes, the Company's primary long-term
commitments are its store operating leases and $86.1 million in 6.25%
convertible subordinated debentures. The debentures, which mature in March
2001, require semi-annual interest payments.
FUTURE CASH FLOW PLANS AND EXPECTATIONS
The Company's future cash requirements and cash flow expectations are closely
related to its expansion plans. The Company currently plans to open seven
stores during fiscal 1998 (including one store already opened) and eight to ten
stores in fiscal 1999. All of the stores currently scheduled to open during
fiscal 1998 will be owned by the Company. The Company also plans to replace its
current warehouse/distribution center with a new larger facility by the end of
fiscal 1998. The Company is currently under contract to lease this facility but
intends to acquire the facility at a future date. In light of current economic
conditions and other strategic factors, the Company has frequently elected to
purchase land for new store sites and finance the construction of new store
buildings in order to proceed expeditiously with its expansion program. In such
cases, the Company will typically use its bank credit line or cash to fund the
store development and may secure permanent financing from either fixed-term
capital asset loans and/or sale-leaseback transactions after the store is
opened.
Historically, capital expenditures have averaged approximately $15 million
for owned stores and $4 million for leased stores. Future capital expenditures
will vary significantly, depending on such factors as store location; whether
the store will be owned or leased; local permitting and regulatory requirements;
whether the project involves new construction or remodeling of an existing
structure; and if remodeling is involved, the extent of that work. The Company
currently expects fiscal 1998 capital expenditures to be in the range of $110
million to $140 million for the purpose of acquiring and constructing stores
planned for opening in fiscal 1998, acquiring sites for planned future stores,
updating certain existing stores and potentially purchasing the new
warehouse/distribution facility.
The Company expects to maintain store level inventories during fiscal 1998
of approximately $5.0 million to $8.1 million per store and to incur preopening
expenses of approximately $600,000 to $700,000 per store. When the Company
opens a new store, it expects that its vendors will finance approximately 60% of
the opening merchandise inventory cost, and that on an ongoing basis, vendor
credit terms will finance approximately 20% to 30% of the inventory cost. In
addition, under the terms of its bank line of credit, the Company may finance
the cost of merchandise inventory by borrowing against its working capital line
of credit. Although the Company believes it can finance a significant portion
of its merchandise inventory cost through vendor and bank financing as
described, there can be no assurance that this level of financing will be
available in the future on terms acceptable to the Company.
As of January 30, 1998, the Company's cash and cash equivalents totaled
$63.6 million. The Company believes that its current cash and cash equivalents,
cash generated from operations, bank borrowings under the existing line of
credit and
<PAGE>
the proceeds of fixed-term capital asset loans and/or sale-leaseback
transactions will be sufficient to satisfy its anticipated working capital,
capital expenditure, interest and debt service requirements through fiscal 1998.
YEAR 2000
The year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. If not addressed,
the direct result could be a system failure or miscalculations causing
disruption of operations, including, among other things, a temporary inability
to process customer transactions, order merchandise, or engage in similar normal
business activities.
Eagle management has initiated a Company-wide program to prepare its
computer systems and applications for the year 2000 by the middle of fiscal
1999. Management currently estimates the total cost of this program to be in
the range of $1.5 million to $3.0 million, including internal staff costs and
the cost to write off any unamortized existing hardware and software that may
need to be replaced. Costs associated with preparing computer systems and
applications for the year 2000 will be expensed as incurred. The amount
expensed in fiscal 1997 was immaterial.
Although management anticipates that its systems and applications will be
year 2000 compliant on a timely basis, there can be no assurance that the
systems of other companies on which the Company's systems rely will be year 2000
compliant in the same time frame. Any such failure on the part of other
companies with whom the Company transacts business, to be year 2000 compliant on
a timely basis, may have an adverse impact on the operations of the Company.
IMPACT OF INFLATION AND CHANGING PRICES
Although the Company can not accurately anticipate the effect of inflation, it
does not believe inflation has had or is likely to have a material effect on its
results of operations.
ADOPTION OF ACCOUNTING STANDARDS
Effective in the fourth quarter of fiscal 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." Statement 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of stock options. Basic
earnings per share is computed based on weighted average shares outstanding.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. Potential common shares in the diluted earnings per
share calculation include outstanding stock options and the Company's 6.25%
convertible subordinated debentures. All earnings per share amounts for all
periods have been presented, and where appropriate, restated to conform to the
Statement 128 requirements.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," and Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information." The aforementioned standards may require additional
financial statement disclosure for all periods presented, but will not impact
the Company's reported financial position or results of operations. The new
standards will be adopted in fiscal 1998.
FORWARD-LOOKING STATEMENTS
Some of the information in this Annual Report, including anticipated store
openings, capital requirements and trends in the Company's markets, constitute
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.
CONSOLIDATED
BALANCE SHEETS
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
January 30 January 31
in thousands 1998 1997
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 63,557 $ 20,738
Short-term investments 0 31,330
Trade and other accounts receivable
(less allowance for doubtful
accounts of $2,435 and $1,891) 4,463 4,213
Merchandise inventories 202,833 174,299
Prepaid expenses 4,479 4,930
Deferred income taxes 2,312 2,559
- ----------------------------------------------------------------------
Total current assets 277,644 238,069
- ----------------------------------------------------------------------
Property and equipment, at cost:
Land and buildings 184,340 140,434
Furniture, fixtures and equipment 107,916 75,823
Leasehold improvements 48,925 45,730
Construction in progress 16,495 44,960
- ----------------------------------------------------------------------
357,676 306,947
Less accumulated depreciation 41,543 29,454
- ----------------------------------------------------------------------
Net property and equipment 316,133 277,493
- ----------------------------------------------------------------------
Preopening costs 1,055 1,468
Other assets 6,823 2,355
- ----------------------------------------------------------------------
Total assets $ 601,655 $ 519,385
- ----------------------------------------------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Outstanding checks, not cleared by
the bank $ 11,008 $ 8,762
Accounts payable 55,097 55,295
Sales taxes payable 5,799 6,029
Accrued payroll and related expenses 16,492 13,951
Other current liabilities 10,425 8,572
Current portion of long-term debt 6,218 2,109
- ----------------------------------------------------------------------
Total current liabilities 105,039 94,718
Deferred income taxes 11,084 8,314
Other long-term liabilities 3,159 3,094
Long-term debt 145,836 108,416
- ----------------------------------------------------------------------
Total liabilities 265,118 214,542
- ----------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Common stock, without par value;
50,000 shares authorized;
29,071 and 28,890 shares issued
and outstanding 265,004 263,226
Retained earnings 71,533 41,617
- ----------------------------------------------------------------------
Total shareholders' equity 336,537 304,843
- ----------------------------------------------------------------------
Total liabilities &
shareholders' equity $ 601,655 $ 519,385
- ----------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
in thousands, January 30 January 31 January 26
except per share data 1998 1997 1996
<S> <C> <C> <C>
Net sales $ 971,488 $ 760,963 $ 615,674
Cost of sales 698,136 549,383 449,865
- ------------------------------------------------------------------------------
Gross margin 273,352 211,580 165,809
Operating expenses 217,829 172,746 140,279
Preopening expenses 2,667 1,880 2,934
- ------------------------------------------------------------------------------
Operating income 52,856 36,954 22,596
Other income (expense):
Interest income 2,552 1,091 23
Interest expense (8,600) (7,747) (7,421)
Other income 277 2,471 1,860
- ------------------------------------------------------------------------------
Income before tax 47,085 32,769 17,058
Income taxes 17,169 11,032 5,723
- ------------------------------------------------------------------------------
Net income $ 29,916 $ 21,737 $ 11,335
- ------------------------------------------------------------------------------
Net income per share:
Basic $ 1.03 $ 0.87 $ 0.50
Diluted $ 0.98 $ 0.84 $ 0.50
Weighted average common and
common equivalent shares for
net income per share computations:
Basic 28,996 25,065 22,863
Diluted 34,177 30,296 22,863
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
January 30 January 31 January 26
in thousands 1998 1997 1996
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 29,916 $ 21,737 $ 11,335
- ------------------------------------------------------------------------------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 14,814 11,497 9,270
Net gain on sale of assets 0 (2,255) (493)
Deferred income taxes 3,017 2,284 670
<PAGE>
Changes in operating assets and
liabilities:
Trade and other accounts
receivable (250) (619) (51)
Merchandise inventories (28,534) (31,205) (7,521)
Prepaid expenses 433 (1,032) (884)
Other assets (4,468) 810 822
Preopening costs 413 (1,461) 224
Accounts payable and outstanding
checks 2,048 22,971 (4,629)
Income taxes payable 18 (2,903) 2,136
Accrued liabilities 4,164 9,883 2,101
Other 65 247 1,432
- ------------------------------------------------------------------------------
(8,280) 8,217 3,077
- ------------------------------------------------------------------------------
Net cash provided by operating
activities 21,636 29,954 14,412
- ------------------------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures for property and
equipment (53,454) (88,846) (45,934)
Sales of short-term investments 31,330 724 0
Purchases of short-term investments 0 (32,054) 0
Proceeds from sale of surplus property 0 7,422 3,718
Other 0 1,028 0
- ------------------------------------------------------------------------------
Net cash used in investing activities (22,124) (111,726) (42,216)
- ------------------------------------------------------------------------------
FINANCING ACTIVITIES
Advances on note payable to bank 6,700 304,000 325,000
Payments on note payable to bank (6,700) (338,500) (296,500)
Net proceeds from sale of stock 0 124,737 0
Proceeds from long-term borrowings 45,000 9,000 6,000
Payments on long-term borrowings and
capital leases (3,471) (6,099) (5,962)
Other 1,778 2,781 417
- ------------------------------------------------------------------------------
Net cash provided by financing
activities 43,307 95,919 28,955
- ------------------------------------------------------------------------------
Increase in cash and cash equivalents 42,819 14,147 1,151
Cash and cash equivalents at beginning
of year 20,738 6,591 5,440
- ------------------------------------------------------------------------------
Cash and cash equivalents at end
of year $ 63,557 $ 20,738 $ 6,591
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 9,204 $ 9,510 $ 8,847
Cash paid for income taxes $ 13,476 $ 10,000 $ 2,828
SUPPLEMENTAL INVESTING AND FINANCING
INFORMATION
Capital lease obligations incurred $ 0 $ 381 $ 3,295
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Total
in thousands, Common Stock Retained Shareholders'
except per share data Shares Amount Earnings Equity
<S> <C> <C> <C> <C>
Balance, January 27, 1995 22,840 $ 135,304 $ 8,545 $ 143,849
Issuance of common upon exercise
of stock options, including payment
of stock subscription receivable from
officer of $18 60 365 - 365
Tax benefit on exercise of stock options - 52 - 52
Net income - - 11,335 11,335
- ----------------------------------------------------------------------------------------------------------------
Balance, January 26, 1996 22,900 135,721 19,880 155,601
Sale of common in September 1996
at $22.875 per share, net of offering costs
of $6,794 5,750 124,737 - 124,737
Issuance of common upon exercise of
stock options 234 1,074 - 1,074
Tax benefit on exercise of stock options - 1,578 - 1,578
Issuance of common upon conversion
of debentures 6 116 - 116
Net income - - 21,737 21,737
- ----------------------------------------------------------------------------------------------------------------
Balance, January 31, 1997 28,890 263,226 41,617 304,843
Issuance of common upon exercise of
stock options 181 993 - 993
Tax benefit on exercise of stock options - 785 - 785
Net income - - 29,916 29,916
- ----------------------------------------------------------------------------------------------------------------
Balance, January 30, 1998 29,071 $ 265,004 $ 71,533 $ 336,537
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY Eagle Hardware & Garden, Inc. (the "Company") was incorporated in
the state of Washington on November 20, 1989, and operated 31 warehouse home
improvement centers in Washington, Utah, Colorado, Hawaii, Alaska, Idaho,
Montana and Oregon as of January 30, 1998. As of that date, 17 of the Company's
stores were located in the state of Washington. The Company's merchandising
strategy is to provide a wide range of do-it-yourself customers and professional
contractors with a broad selection of home improvement items. The Company's
product categories include plumbing, garden, lumber, tools, electrical,
hardware, paint and decor.
BASIS OF PRESENTATION The consolidated statements include the accounts of the
Company and its wholly owned subsidiary. All significant intercompany
transactions have been eliminated in consolidation.
FISCAL YEAR The Company's 52/53-week fiscal year ends on the last Friday in
January. Fiscal years 1995 and 1997 were 52-week years and fiscal 1996 was a
53-week year.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Excess cash balances are invested in
financial instruments which have maturities of up to one year. The Company
considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents. The Company's cash equivalents are
carried at fair market value. Investments with a maturity of between three
months and one year, as well as less liquid investments with maturities of less
than three months, are classified as short-term investments. Interest reset
periods on variable rate securities are considered to be
<PAGE>
equivalent to maturity for purposes of this policy. The investments are
considered available-for-sale and are carried at fair market value. Realized
and unrealized gains and losses are included in shareholders' equity and are not
material.
MERCHANDISE INVENTORIES Merchandise inventories are stated at the lower of
weighted average cost or market and include certain buying and occupancy costs
related to the acquisition and warehousing of merchandise. The Company
estimates inventory shrinkage during interim periods between physical
inventories.
STORE PREOPENING COSTS Expenses associated with the opening of a new store are
ordinarily deferred until the period in which the store opens. In situations
involving unusual regulatory delays in store openings, however, preopening costs
in excess of historical levels are expensed as incurred after the extent of the
delay becomes clearly apparent.
PROPERTY AND EQUIPMENT The Company's property and equipment, including assets
recorded under capital leases, are depreciated using the straight-line method
over the estimated useful lives of the assets. Improvements to leased premises
are amortized on the straight-line method over the life of the lease (including
renewal periods in some cases) or the useful life of the improvement, whichever
is shorter. The Company's property and equipment are depreciated and amortized
using the following estimated useful lives:
<TABLE>
<CAPTION>
Asset Category Life
-----------------------------------------------------------------
<S> <C>
Furniture, fixtures and equipment 3-20 years
Leasehold improvements 20-30 years
Buildings 35 years
-----------------------------------------------------------------
</TABLE>
Expenditures for major renewals and improvements that extend the useful lives of
property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to operations as incurred. When property and equipment are
retired or otherwise disposed of, the cost and related accumulated depreciation
are removed from the accounts and the resulting gain or loss is recognized.
DERIVATIVE FINANCIAL INSTRUMENT The Company is using an interest rate swap
agreement to manage the interest rate characteristics of certain mortgages to a
more desirable fixed rate basis and to limit the Company's exposure to rising
interest rates.
ADVERTISING The Company expenses advertising costs at the time the advertising
first takes place. Net advertising expense was $8.1 million, $7.6 million and
$7.3 million for fiscal years 1997, 1996 and 1995, respectively.
STOCK-BASED COMPENSATION The Company has adopted the disclosure-only provisions
of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation." Accordingly, because the Company grants all options
to employees and directors at fair market value, no compensation cost has been
recognized for options issued under the Company's stock option plans.
EARNINGS PER SHARE Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," was adopted by the
Company in the fourth quarter of fiscal 1997. Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of stock options. Basic earnings per
share is computed based on weighted average shares outstanding. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. Potential common shares in the diluted earnings per share
calculation include outstanding stock options and the Company's 6.25%
convertible subordinated debentures. All earnings per share amounts for all
periods have been presented, and where appropriate, restated to conform to the
Statement 128 requirements.
RECENT ACCOUNTING STANDARDS In June 1997, the FASB issued Statement No. 130,
"Reporting Comprehensive Income," and Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The aforementioned
standards may require additional financial statement disclosure for all periods
presented, but will not impact the Company's reported financial position or
results of operations. The new standards will be adopted in fiscal 1998.
2.
SHORT-TERM INVESTMENTS
<PAGE>
The Company's short-term investments are summarized as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
January 30,1998 January 31,1997
- -------------------------------------------------------------------------------------------
Amortized Fair Market Amortized Fair Market
in thousands Cost Value Cost Value
<S> <C> <C> <C> <C>
Short-term investments:
Municipal bonds $ 0 $ 0 $ 25,528 $ 25,512
Federal agency securities 0 0 5,825 5,818
- -------------------------------------------------------------------------------------------
Total short-term investments $ 0 $ 0 $ 31,353 $ 31,330
- -------------------------------------------------------------------------------------------
</TABLE>
3.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Activity in the allowance for doubtful accounts is summarized as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
January 30 January 31 January 26
in thousands 1998 1997 1996
<S> <C> <C> <C>
Beginning balance $ 1,891 $ 1,559 $ 1,026
Additions charged to expense 1,166 1,752 1,386
Write-offs, net (622) (1,420) (853)
- -------------------------------------------------------------------------------------------
Ending balance $ 2,435 $ 1,891 $ 1,559
- -------------------------------------------------------------------------------------------
</TABLE>
4.
DEBT
The Company has available a $75 million unsecured revolving working capital line
of credit provided by a group of banks, including U.S. Bank of Washington, N.A.
("USBW") as the agent bank. The line expires June 30, 1999. Borrowings against
this line incur interest at USBW's prime rate or, at the Company's option, at a
daily bid rate or the Inter-Bank Offered Rate ("IBOR") plus a factor based on
the Company's capital ratio and/or senior debt ratings. This factor can range
from 0.55% to 1.25%. If the sum of borrowings and outstanding letters of credit
exceeds $50 million, an additional 0.25% is added to the IBOR rate. There were
no short-term borrowings outstanding as of January 30, 1998 or January 31, 1997.
The line imposes certain requirements on the Company in terms of working
capital, capital ratio, tangible net worth and debt service coverage ratio. The
line also restricts payment of dividends and requires approval of annual capital
expenditure plans.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
January 30 January 31
in thousands 1998 1997
<S> <C> <C>
6.25% convertible subordinated debentures, maturing March 2001 $ 86,134 $ 86,134
Various mortgage notes, with interest rates ranging from 7.94% to 9.25%
maturing between 2005 and 2007 63,483 21,393
Other long-term debt 2,437 2,998
- -----------------------------------------------------------------------------------------------------
Total long-term debt 152,054 110,525
Less current portion of long-term debt 6,218 2,109
- -----------------------------------------------------------------------------------------------------
Long-term debt, excluding current portion $145,836 $108,416
- -----------------------------------------------------------------------------------------------------
</TABLE>
The Company's convertible subordinated debentures (the "Debentures") mature on
March 15, 2001, and are convertible into the Company's common stock at any time
prior to maturity or redemption at a conversion price of $18 per share, subject
to adjustment under certain conditions. The Debentures are also redeemable, in
whole or in part, at the
<PAGE>
Company's option at specified conversion prices plus accrued interest at any
date on or after March 16, 1997, and prior to maturity, except that, until March
16, 1999, the Debentures cannot be redeemed at the option of the Company unless
the closing price of the Company's common stock equals or exceeds 150% of the
then effective conversion price per share (currently $18) for at least 20 of 30
consecutive trading days. The Debentures are subordinated to all existing and
future senior indebtedness of the Company. The indenture governing the
Debentures does not restrict the ability of the Company to incur additional
senior indebtedness or other indebtedness. Interest on the Debentures is
payable semiannually on March 15 and September 15; no sinking fund is provided.
The fair value of the Debentures as of January 30, 1998 and January 31, 1997,
based on the closing market price on the last day of the fiscal year, was $102.6
million and $101.6 million, respectively.
The mortgage notes are due in monthly installments and are secured by real
property with a total net book value of $114.8 million as of January 30, 1998.
Based on discounted cash flows of future payment streams, assuming rates
equivalent to the Company's current incremental borrowing rate on similar
liabilities, the estimated fair value of the mortgage notes and other long-term
debt as of January 30, 1998 and January 31, 1997 was $65.9 million and $24.8
million, respectively.
The Company has an interest rate swap agreement which effectively establishes
a fixed rate of 7.94% until the year 2007 on $25 million of mortgage notes.
Aggregate principal payments required on long-term debt, including $2.4
million pertaining to capital leases for equipment, through the next five fiscal
years and thereafter are as follows (in thousands): 1998 - $6,218; 1999 -
$6,532; 2000 - $6,863; 2001 - $93,097; 2002 - $6,864; thereafter - $32,480.
Interest expense incurred and capitalized was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Fiscal Fiscal Fiscal
in thousands 1997 1996 1995
<S> <C> <C> <C>
Interest incurred $9,354 $9,429 $8,972
Interest capitalized 754 1,682 1,551
- -------------------------------------------------------------------------------------------
Interest expense, net $8,600 $7,747 $7,421
- -------------------------------------------------------------------------------------------
</TABLE>
5.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This Statement
requires the establishment of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on differences between the financial statement
carrying amounts and the tax basis of assets and liabilities using currently
enacted tax rates.
Significant components of the Company's deferred income tax assets and
liabilities were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
January 30 January 31
in thousands 1998 1997
<S> <C> <C>
DEFERRED INCOME TAX ASSETS AND (LIABILITIES), CURRENT
Reserve for self-insurance $ 1,764 $ 1,517
Accrued vacation 906 711
Allowance for doubtful accounts 196 233
Inventory adjustments (466) 372
Deferred preopening (385) (536)
Other 297 262
- ------------------------------------------------------------------------------------------------
Deferred income tax assets, current, net $ 2,312 $ 2,559
- ------------------------------------------------------------------------------------------------
DEFERRED INCOME TAX (ASSETS) AND LIABILITIES, NON-CURRENT
Accelerated depreciation $ 12,105 $ 9,204
Deferred rent (1,021) (890)
<PAGE>
Capital loss carryforward (4,673) (4,678)
Less valuation reserve 4,673 4,678
- ------------------------------------------------------------------------------------------------
Deferred income tax liabilities, non-current, net $ 11,084 $ 8,314
- ------------------------------------------------------------------------------------------------
</TABLE>
The significant components of the deferred tax provision are consistent with
the components of deferred tax assets and liabilities.
The provision for income taxes was as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Fiscal Fiscal Fiscal
in thousands 1997 1996 1995
<S> <S> <C> <C>
CURRENT TAXES ON INCOME
Federal $ 13,566 $ 8,399 $ 4,809
State 586 349 244
----------------------------------------
Total current taxes on income 14,152 8,748 5,053
DEFERRED TAXES ON INCOME
Federal 2,894 2,190 638
State 123 94 32
- -------------------------------------------------------------------------------------------
Total deferred taxes on income 3,017 2,284 670
- -------------------------------------------------------------------------------------------
Total income taxes $ 17,169 $ 11,032 $ 5,723
- -------------------------------------------------------------------------------------------
</TABLE>
The Company incurred a $16.1 million capital loss for tax purposes on the sale
of its Canadian subsidiary during fiscal 1994. This loss, which could not be
recognized for tax purposes, can only be used to offset future capital gains and
a valuation allowance for the related capital loss carryforward, which will
expire at the end of fiscal 1999, was recorded. The Company utilized a portion
of the capital loss carryforward to offset $13,000 and $2.3 million of capital
gains in fiscal years 1997 and 1996, respectively, and accordingly, reduced the
deferred tax valuation allowance.
A reconciliation between the U.S. statutory income tax rate and the effective
rate follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Fiscal 1997 Fiscal 1996 Fiscal 1995
- -----------------------------------------------------------------------------------------------------------------------------------
in thousands Amount Rate Amount Rate Amount Rate
<S> <C> <C> <C> <C> <C> <C>
Tax at U.S. statutory rate $16,480 35.0% $11,469 35.0% $ 5,971 35.0%
State income taxes, net of federal benefit 706 1.5 492 1.5 299 1.8
Utilization of capital loss carryforward (5) (0.0) (838) (2.6) (303) (1.8)
Increase in valuation allowance 0 0.0 0 0.0 938 5.5
Foreign related tax losses 0 0.0 0 0.0 (1,092) (6.4)
Other, net (12) (0.0) (91) (0.2) (90) (0.5)
- -----------------------------------------------------------------------------------------------------------------------------------
Income taxes at effective rate $17,169 36.5% $11,032 33.7% $ 5,723 33.6%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6.
SHAREHOLDERS' EQUITY
In September 1996, the Company completed a public offering of 5.75 million
shares of its common stock at a price of $22 7/8 per share.
7.
STOCK OPTION PLANS
The Company has two stock option plans: the 1991 Stock Option Plan (the "1991
Plan") and the Directors' Nonqualified Stock Option Plan (the "Directors'
Plan"). Both plans provide for the granting of stock options at the fair market
value of the Company's common stock on the date of grant. 2.2 million shares of
common stock have been authorized for grants of options under the plans.
Options granted under the 1991 Plan generally vest over five years at the rate
of 20% each year
<PAGE>
and expire 10 years from the date of grant. Options granted under the
Directors' Plan vest over three years at the rate of 33.3% each year and expire
10 years from the date of grant.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," defines a fair value-based method of accounting for
stock options and other equity instruments. This method measures compensation
costs based on the estimated fair value of the award and recognizes that cost
over the service period. The Company has adopted the disclosure-only provisions
of Statement No. 123. Accordingly, because options are granted at fair market
value, no compensation cost has been recognized for options issued under the
Company's stock option plans. Had compensation cost been recognized based on
the fair value at the date of grant for options awarded under the Plan, pro
forma amounts of the Company's net income and net income per share would have
been as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Fiscal Fiscal Fiscal
in thousands, except per share data 1997 1996 1995
<S> <C> <C> <C>
Net income - as reported $ 29,916 $ 21,737 $ 11,335
Net income - pro forma 28,761 21,008 11,015
Net income per share, basic - as reported $ 1.03 $ 0.87 $ 0.50
Net income per share, basic - pro forma 0.99 0.84 0.49
Net income per share, diluted - as reported $ 0.98 $ 0.84 $ 0.50
Net income per share, diluted - pro forma 0.95 0.82 0.48
- ------------------------------------------------------------------------------------------------
</TABLE>
The fair value of each option grant was estimated using the Black-Scholes
option-pricing model with the following weighted average assumptions: risk-free
interest rates of 5.37% to 7.86%; expected option life of seven years for
officers and directors and six years for all other employees; expected
volatility of 53% for fiscal 1997 and 56% for fiscal years 1996 and 1995; and no
expected dividends. The weighted average fair value of options granted during
fiscal years 1997, 1996 and 1995 was $10.95, $10.87 and $4.49, respectively,
including the fair value of 353,200 options repriced to $8.00 per share on
January 30, 1995. Excluding the fair value of repriced options, the weighted
average fair value of options granted during fiscal 1995 was $4.52. The effect
of applying Statement No. 123 for providing pro forma disclosures for the fiscal
years presented is not likely to be representative of the effects in future
years because options vest over several years and additional awards generally
are made each year.
Stock option transactions relating to the 1991 Plan and the Directors' Plan are
summarized as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Weighted
Average
Exercise
share data in thousands Shares Option Price Range Price
<S> <C> <C> <C> <C> <C>
FISCAL 1995
Balance, January 27, 1995 1,053 $ 1.83 - $ 25.50 $ 5.24
Granted 311 $ 6.63 - $ 8.38 $ 7.36
Exercised (60) $ 1.83 - $ 8.00 $ 5.79
Forfeited (113) $ 1.83 - $ 8.00 $ 6.66
- ----------------------------------------------------------------------------------------------------------
Balance, January 26, 1996 1,191 $ 1.83 - $ 16.50 $ 5.63
- ----------------------------------------------------------------------------------------------------------
Options exercisable 590 $ 1.83 - $ 16.50 $ 4.10
FISCAL 1996
Granted 399 $ 8.88 - $ 29.25 $ 17.47
Exercised (234) $ 1.83 - $ 8.00 $ 4.60
Forfeited (46) $ 1.83 - $ 14.63 $ 6.61
- ----------------------------------------------------------------------------------------------------------
Balance, January 31, 1997 1,310 $ 1.83 - $ 29.25 $ 9.39
- ----------------------------------------------------------------------------------------------------------
Options exercisable 561 $ 1.83 - $ 16.50 $ 4.75
FISCAL 1997
Granted 184 $ 16.25 - $ 24.88 $ 18.43
Exercised (181) $ 1.83 - $ 17.25 $ 5.49
Forfeited (20) $ 6.63 - $ 28.88 $ 14.28
- ----------------------------------------------------------------------------------------------------------
<PAGE>
Balance, January 30, 1998 1,293 $ 1.83 - $ 29.25 $ 11.14
- ----------------------------------------------------------------------------------------------------------
Options exercisable 613 $ 1.83 - $ 29.25 $ 7.12
Shares available for future grant 124
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about fixed-price options outstanding
at January 30, 1998:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
share data in thousands Outstanding Exercisable
- ------------------------------------------------------------------------------------------------------------------------------
Wtd. Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
Range of Exercise Prices Options Life Price Options Price
<S> <C> <C> <C> <C> <C>
$ 1.83 - $ 6.99 316 3.7 $ 2.67 304 $ 2.51
$ 7.00 - $ 9.99 379 7.0 $ 7.74 178 $ 7.78
$ 10.00 - $ 14.99 26 8.3 $ 11.85 8 $ 11.54
$ 15.00 - $ 19.99 509 8.6 $ 17.34 115 $ 16.75
$ 20.00 - $ 29.25 63 9.0 $ 23.78 8 $ 25.12
- ------------------------------------------------------------------------------------------------------------------------------
1,293 7.0 $ 11.14 613 $ 7.12
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8.
EMPLOYEE BENEFIT PLANS
Employees of the Company are eligible to participate in the Company's 401(k)
Plan after six months of employment, and in the Company's Employee Stock
Ownership Plan (the "ESOP") after 24 months. Eligible employees may contribute
between 2% and 15% of their compensation to the 401(k) Plan, subject to
limitations imposed by federal income tax regulations. Each employee controls
the investment of funds credited to his 401(k) account. Each year, the Company
may, at its discretion, contribute an amount determined by the Board of
Directors to the ESOP on the employees' behalf. The aggregate ESOP contribution
may not exceed 15% of the Company's pretax earnings or the maximum amount
allowed as a deduction under federal income tax regulations. Funds credited to
individual ESOP accounts are invested primarily in the common stock of the
Company as directed by the ESOP's administrative committee. During fiscal years
1997, 1996 and 1995, the Company's ESOP contributions totaled $4.4 million, $3.2
million and $1.9 million, respectively.
9.
LEASES
As of January 30, 1998, the Company leased 17 of its 31 operational retail
stores, its warehouse/distribution center and its corporate office facility.
Future minimum lease commitments for all noncancelable leases (including one for
a future warehouse/distribution center) at that date are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Fiscal Year Amount
<S> <C>
1998 $21,252
1999 $22,511
2000 $21,739
2001 $21,524
2002 $20,931
Thereafter $298,460
- --------------------------------------------------------------------------------
</TABLE>
The total rental payments for the future warehouse/distribution center are
approximately $48 million over 20 years. Management intends to enter into an
agreement at a future date to purchase this facility at an estimated price of
$27 million.
Total rent expense for fiscal years 1997, 1996 and 1995 was $22.1 million,
$19.7 million and $18.8 million, respectively. The noncancelable operating
leases for the Company's existing stores include provisions for contingent rents
based upon sales performance. Contingent rental expense under these leases was
approximately $2.1 million, $1.4 million
<PAGE>
and $1.1 million for fiscal years 1997, 1996 and 1995, respectively. Some
leases provide for periodic rental increases based on the Consumer Price Index,
and the leases generally include options for renewal periods of up to 10 years.
The Company leases nine of its operational stores and its
warehouse/distribution center from members of the Board of Directors (the
"Board"). The lease agreements for these facilities were approved by
disinterested members of the Board following receipt of independent fairness
opinions. Rental expense incurred for these leases was $10.1 million, $9.5
million and $9.1 million for fiscal years 1997, 1996 and 1995, respectively.
Minimum related-party lease commitments of $182.6 million over the remaining
lease terms are included in the lease commitment schedule above.
10.
COMMITMENTS AND CONTINGENCIES
As of January 30, 1998, the Company had signed agreements to purchase property
for eight additional store sites at a cost of approximately $41.2 million.
Subsequent to its fiscal year-end, the Company signed four additional agreements
for future store sites at a cost of approximately $21.9 million. Purchase of
these sites will be finalized upon successful resolution of various
contingencies.
As of January 30, 1998, the Company was liable for issued and outstanding
letters of credit totaling $3.1 million, related to store construction and
merchandise imports.
The Company is party to routine litigation incident to its business. The
Company's management believes the ultimate resolution of these matters will not
have a material adverse impact on the Company's future financial position and
results of operations.
11.
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
January 30 January 31 January 26
1998 1997 1996
<S> <C> <C> <C>
Net income as reported and used for basic computation $29,916 $21,737 $11,335
Add (where dilutive):
Tax effected interest and amortization of debt expense
on convertible debt 3,675 3,686 0
- ------------------------------------------------------------------------------------------------------
Net income used for diluted computation $33,591 $25,423 $11,335
- ------------------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding used for basic computation 28,996 25,065 22,863
Add (where dilutive):
Shares applicable to stock options 396 441 0
Assumed exercise of convertible debt 4,785 4,790 0
- ------------------------------------------------------------------------------------------------------
Adjusted shares outstanding used for diluted computation 34,177 30,296 22,863
- ------------------------------------------------------------------------------------------------------
Net income per share, basic $1.03 $0.87 $0.50
Net income per share, diluted $0.98 $0.84 $0.50
- ------------------------------------------------------------------------------------------------------
</TABLE>
For additional disclosures regarding the convertible debentures and the
employee stock options, see Notes 4 and 7, respectively.
Options to purchase 140,800 shares of common stock at an average price of
$21.02 per share were outstanding during fiscal 1997 but were not included in
the computation of diluted earnings per share because the exercise prices were
greater than the average market price of the common shares and, therefore, the
effect would be antidilutive.
12.
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the Company's unaudited quarterly results of
operations for the past two fiscal years (in thousands, except per share data):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Weighted
Average Net Net
Common Income Income
Net Gross Net Shares Per Share, Per Share,
Sales Margin Income Outstanding Basic(1) Diluted(1)
<S> <C> <C> <C> <C> <C> <C>
FISCAL 1997
Fourth quarter $222,453 $61,870 $ 3,489 29,057 $0.12 $0.12
Third quarter(2) $249,690 $70,640 $ 8,856 29,045 $0.30 $0.29
Second quarter(2) $278,238 $78,272 $ 12,983 28,987 $0.45 $0.41
First quarter(2) $221,107 $62,570 $ 4,588 28,896 $0.16 $0.16
FISCAL 1996(2)
Fourth quarter(3) $192,048 $53,325 $ 3,117 28,877 $0.11 $0.11
Third quarter(4) $198,731 $54,660 $ 7,591 25,538 $0.30 $0.28
Second quarter $209,078 $58,339 $ 8,065 22,942 $0.35 $0.32
First quarter $161,106 $45,256 $ 2,964 22,903 $0.13 $0.13
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1) Interim per share amounts may not accumulate to annual per share amounts due
to rounding. 2) The fiscal 1996 and first three quarters of fiscal 1997
earnings per share amounts have been restated to comply with Statement of
Accounting Standards No. 128, "Earnings Per Share." 3) The fourth quarter of
fiscal 1996 was a 14-week quarter. All other quarters presented were 13-week
quarters. 4) Includes $2.1 million capital gain from sale of surplus
property.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
Eagle Hardware & Garden, Inc.
We have audited the accompanying consolidated balance sheets of Eagle Hardware &
Garden, Inc. as of January 30, 1998 and January 31, 1997, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended January 30, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Eagle Hardware
& Garden, Inc. at January 30, 1998 and January 31, 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended January 30, 1998, in conformity with generally accepted accounting
principles.
Seattle, Washington
February 27, 1998
CORPORATE
<PAGE>
INFORMATION
DIRECTORS
David J. Heerensperger
Chairman
Eagle Hardware & Garden, Inc.
Richard T. Takata
President and
Chief Executive Officer,
Eagle Hardware & Garden, Inc.
Ronald D. Crockett
President,
Emerald Downs
Harlan D. Douglass
Real Estate Developer
Herman Sarkowsky
President,
Sarkowsky Investment Corp.
Theodore M. Wight
General Partner of the
General Partner, Pacific
Northwest Partners, SBIC, L.P.
EXECUTIVE
OFFICERS
David J. Heerensperger
Chairman
Richard T. Takata
President and
Chief Executive Officer
Ronald P. Maccarone
Executive Vice President
and Chief Financial Officer
John P. Foucrier
Executive Vice President -
Administration
Dale W. Craker
Executive Vice President -
Stores
Larry E. Elliott
Executive Vice President -
Merchandising
Robert M. Cleveland
Vice President -
<PAGE>
Marketing
Calvin E. Karbowski
Vice President -
Distribution
George E. Smith
Vice President -
Training
CORPORATE
INFORMATION
Stock Transfer Agent
and Registrar
ChaseMellon
Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
Legal Counsel
Summit Law Group
1505 Westlake Avenue
Suite 300
Seattle, WA 98109
Bond Trustee
and Registrar
First Trust National Association
Two Union Square
601 Union Street
Suite 2120
Seattle, WA 98101
Independent Auditors
Ernst & Young LLP
Suite 3500
999 Third Avenue
Seattle, WA 98104
Corporate Headquarters
Eagle Hardware & Garden, Inc.
981 Powell Avenue SW
Renton, WA 98055
(425) 227-5740
Web Site
www.eaglehardware.com
SHAREHOLDER
INFORMATION
Annual Meeting
The Annual Meeting of Shareholders will be Thursday, May 28, 1998, at 9:00 AM at
the Sea-Tac Airport Marriott Hotel
3201 South 176th Street
SeaTac, WA 98188
FORM 10-K
<PAGE>
The Company files an Annual Report with the Securities and Exchange Commission
on Form 10-K. Copies are available from the Company without charge upon written
request. Requests should be sent to the attention of the Investor Relations
department at the corporate headquarters.
24-HOUR INVESTOR RELATIONS MESSAGE SYSTEM
The Company's 24-hour direct line investor relations message system may be
accessed by dialing (425) 204-5150. Available information includes: current
stock activity, date of next earnings release, text of most recent earnings
release, text of other recent news releases, list of analysts who follow the
Company's performance and list of available Company reports. You may also leave
messages and requests.
QUARTERLY
STOCK DATA
The Company's common stock is traded on The Nasdaq Stock Market under the symbol
"EAGL." The following table sets forth the high and low closing sale prices of
the Company's common stock for the fiscal quarters indicated.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
QUARTER HIGH LOW
<S> <C> <C>
FISCAL 1997
First quarter $23 $16 1/8
Second quarter $25 3/8 $18 3/4
Third quarter $22 1/2 $17
Fourth quarter $19 15/16 $16
- --------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
QUARTER HIGH LOW
<S> <C> <C>
FISCAL 1996
First quarter $11 5/8 $ 8 3/8
Second quarter $18 1/2 $ 9 3/8
Third quarter $29 1/2 $17
Fourth quarter $29 1/2 $17 1/2
- --------------------------------------------------------------------------------
</TABLE>
As of February 27, 1998 there were 1,052 holders of record of the Company's
common stock. The Company has not paid cash dividends since its inception. The
Company currently intends to retain all earnings, if any, for use in the
expansion of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future. Additionally, the Company's bank line of
credit prohibits the payment of cash dividends to holders of common stock
without the lender's consent.
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form
10-K) of Eagle Hardware & Garden, Inc. of our report dated February 27, 1998,
included in the 1997 Annual Report to Shareholders of Eagle Hardware &
Garden, Inc.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-50938) pertaining to the 1991 Stock Option Plan
and the Directors' Nonqualified Stock Option Plan of Eagle Hardware & Garden,
Inc. of our report dated February 27, 1998, with respect to the consolidated
financial statements incorporated herein by reference in this Annual Report
(Form 10-K) of Eagle Hardware & Garden, Inc.
April 2, 1998 ERNST & YOUNG LLP
Seattle, Washington
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-30-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-30-1998
<CASH> 63,557
<SECURITIES> 0
<RECEIVABLES> 6,898
<ALLOWANCES> 2,435
<INVENTORY> 202,833
<CURRENT-ASSETS> 277,644
<PP&E> 357,676
<DEPRECIATION> 41,543
<TOTAL-ASSETS> 601,655
<CURRENT-LIABILITIES> 105,039
<BONDS> 152,054
0
0
<COMMON> 265,004
<OTHER-SE> 71,533
<TOTAL-LIABILITY-AND-EQUITY> 601,655
<SALES> 971,488
<TOTAL-REVENUES> 971,488
<CGS> 698,136
<TOTAL-COSTS> 698,136
<OTHER-EXPENSES> 220,496
<LOSS-PROVISION> 1,931
<INTEREST-EXPENSE> 8,600
<INCOME-PRETAX> 47,085
<INCOME-TAX> 17,169
<INCOME-CONTINUING> 29,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,916
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 0.98
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
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0
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0
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0
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0 0 0
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