-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DP+ENR5OXrOxA8KXc9iqecs9Oy+s8k+Q/+HQoVMLfd/93zWQsNppK8naCspLpNU5 +AMQ1ok7SohXlvhe5x3t9Q== 0000106423-95-000010.txt : 19951002 0000106423-95-000010.hdr.sgml : 19951002 ACCESSION NUMBER: 0000106423-95-000010 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950928 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTLAND DEVELOPMENT CO INC CENTRAL INDEX KEY: 0000106423 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 850165021 STATE OF INCORPORATION: NM FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-07775 FILM NUMBER: 95576765 BUSINESS ADDRESS: STREET 1: 401 COORS BOULEVARD NW CITY: ALBUQUERQUE STATE: NM ZIP: 87121 BUSINESS PHONE: 5058319600 MAIL ADDRESS: STREET 1: 401 COORS BLVD NW CITY: ALBUQUERQUE STATE: NM ZIP: 87121 10KSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended June 30, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission File Number: 0-7775 WESTLAND DEVELOPMENT CO., INC. (Exact name of registrant as specified in its charter) New Mexico 85-0165021 (State or other jurisdiction of (I.R.S. Employer incorporation or other organization Identification No.) 401 Coors Boulevard, N.W., Albuquerque, New Mexico, 87121 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 505-831-9600 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: No Par Value Common Stock (Title of Class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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____. Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year: $3,007,533 State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days: $6,785,366. The number of shares outstanding of each of the Registrant's classes of common stock, as of September 18, 1995, was: No Par Value Common: 716,608 shares. Class A $1.00 Par Value: none. Class B $1.00 Par Value: 76,100 shares. DOCUMENTS INCORPORATED BY REFERENCE The following documents are incorporated by reference herein: Part II - Items 5, 6, 7, - Registrant's Annual Report for the fiscal year ended June 30, 1995. Part III- Items 9, 10, 11, and 12 - Registrant's Definitive Proxy Statement for the Annual Meeting of Shareholders to be held on November 15, 1995. PART I ITEM 1: DESCRIPTION OF BUSINESS General Development of Business. Westland Development Co., Inc., a New Mexico for-profit corporation ("Registrant"), is the successor to a community land grant corporation named Town of Atrisco, Inc., which itself was a successor to a Spanish community land grant named the Atrisco Land Grant. Information concerning the historical background of these predecessor organizations and the conversion in 1967 from a community land grant corporation into a business corporation can be found in the Registrant's Form 10 and its Form 10-K for the fiscal year ended June 30, 1974. The Registrant's executive offices are located in its own building at 401 Coors Boulevard, N.W., Albuquerque, New Mexico, 87121, telephone (505) 831-9600, on land which was originally part of the Atrisco Land Grant. The Registrant is the owner of approximately 59,000 acres of land located on the west side of Albuquerque, New Mexico. More than 99% of its property is held for long term investment and is not currently marketed nor planned for development in the foreseeable future, most of which is devoted to the grazing of cattle. The Registrant derives revenues through commercial and land leases, partnerships formed for various development projects, lot development and sales and land sales. As of September 15, 1995, approximately 280 acres of the Registrant's land located on the west side of the City of Albuquerque, New Mexico have been segregated for development. The Registrant believes that over the next few years it will decrease its reliance on raw land sales and increase its sales of fully developed residential lots ready for construction, enter into joint ventures, land developments, ground leases, limited partnerships and, if warranted by available capital, may begin the construction of industrial and commercial structures for lease or sale. The Registrant's long term business philosophy is to enhance the value of the Registrant's land through careful planning and development, while retaining ownership of a major portion of the land in perpetuity and simultaneously increasing the value of the Registrant's stock and to provide dividends for its shareholders, when consistent with the Registrant's need for a sufficient cash flow to meet current operating expenses. Narrative Description of Business. In addition to the approximately 59,000 acres of land devoted to grazing discussed above, the Registrant previously developed six sector plans for the development of certain of its properties. Each such plan encompassed approximately 600 to 1,000 acres and are identified by the Registrant as Atrisco Urban Center and El Rancho Atrisco, Phases I through V. Portions of Phases I and IV have been developed and sold and development of Phase V sector plan was abandoned due the introduction of the Petroglyph National Monument. A revised sector plan for the area between Unser and Paseo del Volcan was initiated in January of 1994. 1. Land and Grazing Leases. Approximately 56,000 acres of the Registrant's land is not planned for development and is currently leased to others under grazing lease(s) or various other leases. As of June 30, 1995 the Company has leases, all of which were with unaffiliated persons, providing rental income of approximately $152,000. 2. Development Properties. In the last 15 years, the Company has planned and developed four areas which initially covered approximately 1,600 acres, of which, as of June 30, 1995, the Registrant owns approximately 300 acres. A summary of the development areas is as follows: a. Atrisco Urban Center 1) Atrisco Urban Center Development and Sales. The Registrant still owns approximately 72 acres within this Center. It intends to continue to work with end users to develop projects. A senior citizen's center, four manufacturing facilities, a warehouse facility, an office building, a police substation, a 400-unit apartment complex, gas station and car wash are among the projects currently located in the Center. See items number 3 and 4 below for a discussion of current construction projects. 2) Atrisco Urban Center Rental Properties. The Registrant owns a two-story office building in the Atrisco Urban Center. The entire first floor (approximately 5,057 square feet of rentable space) is leased to Sunwest Bank of Albuquerque, N.A. for use as a branch bank for a term ending in October 1999. The Registrant occupies the second floor of this building. 3) Cedar Ridge Estates Subdivision. The Registrant owns a 37 acre tract located within the Atrisco Urban Center zoned for a single family residential subdivision called Cedar Ridge Estates. The Registrant has completed development of the first phase consisting of approximately 11 acres and 57 lots. A Builder executed an option agreement for the purchase of those developed lots for moderate residential subdivisions and as of September 15, 1995, had purchased 13 lots. Houses are selling in the range of $100,000 to $120,000. 4) Assisted Living Development Corporation. The Registrant has entered into a partnership arrangement with Assisted Living Development Corp. of Portland, Oregon for the development and ownership of a housing facility for persons in need of some care but ambulatory. The 40 unit complex is under construction on the Company's property located next to a City of Albuquerque Senior Citizen Center. The facility is expected to be completed in the winter of 1995. b. Sector Plan. 1) The Registrant has made application for a sector development plan covering approximately 6,400 acres to be annexed to the City of Albuquerque. The sector plan is located north of Interstate 40 and south of the area designated for the Petroglyph National Monument for the establishment of a sector plan. c. ERA Phase II; Volcano Business Park. Volcano Business Park consists of approximately 22 acres zoned for industrial park uses of which 11 acres have been platted and developed into 9 lots. The Registrant has entered into a partnership arrangement through which it will supervise construction, manage and own 50% of an 172 unit storage facility on approximately 1.7 acres of this property. d. ERA Phase III Commercial, Industrial and Residential Developments. In 1985, the Registrant completed the planning of Heritage Park and Heritage Plaza in El Rancho Atrisco Phase III. Those plans included construction of a total of 200,000 square feet of office space, approximately 100,000 square feet of retail space, 130 acres for industrial usage (Ladera Industrial Park), and 31 acres of high density housing. During fiscal 1995, the Registrant sold a 6.3 acre tract and also joined a limited liability corporation for the development of an 8.5 acre tract, both of which will be developed for affordable multi-family apartment units. Additionally, the Registrant has entered into a purchase agreement with Diamond Shamrock for the development of a a convenience store-gas station at the corner of Unser and Ladera Drive. Prospects for the sale or development of the office and commercial property may be improving because of the growing demand for such property and the construction of single family homes west of Unser. The Registrant also has entered into a sale agreement for an approximately 16 acre tract with a home builder based in Las Vegas, Nevada. c. Other Properties. 1). Travel Plaza. In March 1990, the Registrant submitted a zone change request to Bernalillo County for 100 acres for a travel center and related commercial uses. In June 1990, the County Commission approved the request for zone change. Anticipated users may include restaurants, motel-hotel facilities, fueling stations, and other travel/tourist related facilities. During 1995, the Registrant sold two acres for approximately $90,000. 2). Sivage Thomas. During fiscal year 1992, the Company signed an Option Agreement with Sivage Thomas Homes, Inc. of Albuquerque, New Mexico to acquire up to 48 acres of land lying west of Unser Boulevard and South of Ladera Boulevard for the construction of approximately 240 homes. As of June 30, 1994 all acreage had been sold. In 1994, the Company agreed to develop approximately 15 acres of land (57 lots) for Sivage Thomas adjacent to the above subdivision. Development of the residential lots is complete and sales effort related to the lots is underway. As of September 15, 1995, 47 lots had been sold. The Registrant is now planning the next phase of development with construction anticipated to begin during the late winter of 1995. 3). Recreation Complex. During fiscal 1994, the Registrant entered into a lease/option arrangement with PG Corporation, a New Mexico corporation, for 100 acres of Registrant's land located north of I-40 on Paseo del Volcan. A portion of the property was subsequently developed as a recreation and softball complex. The Registrant exchanged $100,000 in rental and option payments for a 6% equity position in the Partnership which owns and operates the recreation venture. 4). Tierra Oeste. The Registrant has committed approximately 28 acres of land north of Ladera Dr., west of Unser Blvd, to a limited liability corporation. The Registrant is a shareholder in said corporation. In July, 1995, this limited liability corporation executed a sale agreement with a Las Vegas, Nevada home builder for the purchase of developed lots. Construction of the property is expected to commence in the fall of 1995. 5). Education and Community Projects. Approximately 50 acres of land have been donated to the Technical-Vocational Institute for the construction of a southwest mesa campus. The Company also donated approximately 8 acres to Youth Development, Inc. The properties are located in the Gun Club Rd. area, although they may be traded for sites further to the west along the proposed extension of Rio Bravo Boulevard. In addition, the Registrant has agreed to donate 12 acres to Albuquerque Public Schools and up to 10 acres to the Archdiose of Santa Fe, in the same area. d. Land Sales and Condemnation. 1). Land Sales. The Registrant has, in the last year, completed 10 transactions totaling 71 acres, not including lots sold to Sivage Thomas and Scott Patrick, Inc. 2). Condemnation. During the fiscal year ended June 30, 1990, the City of Albuquerque condemned approximately 30 acres of the Registrant's land for a roadway to its new solid waste disposal facility. The Registrant received $70,809 from the City for this property. The Registrant has been awarded $75,000 by the District Court, and is currently appealing the case. 3). Petroglyph National Monument Properties. On June 27, 1990, the United States Congress established an approximately 7,000 acre national monument (the Petroglyph National Monument) to preserve and protect the volcanic escarpment on Albuquerque's West Mesa area. The Monument's proposed boundaries included approximately 1,964 acres of the Registrant's land. The Company sold 444 acres in fiscal year 1992, 713 acres in fiscal 1993, 118 acres in fiscal 1994, and 24 acres in fiscal 1995, to the National Park Service. Approximately 665 acres have yet to be acquired by the Park Service and the Registrant has been given no assurance when the final purchases of the property may occur. The Registrant's Board of Directors has agreed that, subject to negotiation of acceptable terms of sale, the Registrant will sell to the National Park Service the Registrant's remaining lands included in the Monument. e. Reinvestment Properties. As part of the Registrant's plan to defer as much of the tax burden arising from the sale of its lands to the Park Service for inclusion in the Petroglyph National Monument, during the last fiscal year it reinvested its funds in the properties described below. As a result of these purchases, the Registrant believes that it has deferred approximately $ 3,500,000 of taxes. Development Property. During the fiscal year the Registrant purchased for $ 312,000 a 3.5 acre tract of undeveloped land located at the corner of Coors and Bridge Boulevards in Albuquerque that is zoned for commercial use and is now being studied for commercial development in the near future. Revenue Producing Property. During the last fiscal year, as part of its tax deferral program related to proceeds from the sale of its land included in the Petroglyph Monument, the Registrant purchased land upon which commercial buildings were constructed and leased to others. Those properties are: a) The Registrant acquired a commercial building at Coors Boulevard and Sequoia Road in Albuquerque at a cost of $2,630,000, $1,943,000 of which is subject to a Mortgage upon which the Registrant must pay payments of $17,969.78. This building has been leased to Walgreen Co. for 20 years at a fixed rent of $19,173.37 per month plus additional rent based upon a formula of gross sales up to a maximum rent of $460,161 in any one year. b) The Registrant acquired a commercial building in Albuquerque's Industrial Park at a cost of $1,059,000, $780,000 of which is subject to a Mortgage upon which the Registrant must make monthly payments of $6,893. This building has been leased to Circuit City Stores for 10 years at an escalating rental beginning at $4.25 per square foot the first year and increasing in stages to $5.55 per square foot in the tenth year. The lessee has also been granted the right to extend the lease for two additional 5 year terms at escalating rental rates during each of the years of any extended term. The rent for the first year of the lease is $8,212.77 per month. Current Real Estate Market Conditions. The market conditions for the development and sale of properties in Albuquerque are positive at the present time. The abundance of properties for sale at relatively low prices due to foreclosures, failures, and takeovers which existed for the past several years seems to have been almost all absorbed, including properties held by the Resolution Trust Corporation. Multi family vacancy rates are at a long time low and rents are climbing which has triggered a spurt of new multi family residential development. For the foreseeable future it appears that commercial and industrial will further stabilize and the boom in single family residential construction will level off, but continue to be strong. Competition. The Registrant's industrial parks - The Atrisco Urban Center, Volcano Business Park and Ladera Industrial Park compete with other business and industrial parks in the Albuquerque area, including some that are more established and some that are located nearer the major population centers of Albuquerque. The Registrant believes that a sale to Coca Cola by others within the Business Park will add to the quality of the Park's tenants and will attract other businesses to the Park. Residential subdivisions on the Registrant's land compete with other areas in the Albuquerque housing market (essentially Bernalillo County and portions of Sandoval County and Valencia County), some of which are located in areas that are nearer the population centers of Albuquerque, as well as with other subdivisions on the western side of the City of Albuquerque. A number of large subdivisions to the north of the Registrant's land are not fully sold. These include Rio Rancho (about six miles north of the Registrant's land), Paradise Hills (about five miles north of the Registrant's land), Volcano Cliffs and Taylor Ranch (each about two to three miles north of the Registrant's land). Development of a regional shopping center on Registrant's land has been delayed indefinitely because of the establishment of a regional shopping center located in the northwest portion of the City of Albuquerque (about 5 miles north of the Registrant's land), as well as the development of other large strip centers being constructed by competitors to the north of the Registrant's land, but the Registrant signed a listing agreement with a broker to market Heritage Plaza at the corner of I-40 and Unser to potential users as a neighborhood center. The mandate by the State Legislature for implementation of Impact Fees may result in the Registrant's lands being disadvantaged because the fees that surrounding counties may be permitted to charge may be less than those that will be charged by Bernalillo County. Employees. As of June 30, 1995, the Registrant had ten full-time and six part-time employees. The Registrant's president, who is also a director, is a full time employee. The Registrant also had contractual relationships with five individuals who provided various services to the Company. Government Regulations. The Registrant's ability to undertake an active program of development of its land and management of its rental properties, (whether such development is performed by the Registrant itself or by sale of the Registrant's land to others for development), is dependent on the Registrant's ability to comply with laws and regulations of the State of New Mexico and Bernalillo County, and the City of Albuquerque, applicable to general environmental protection, land-use planning, annexation, zoning and subdivisions. Both County and City regulate the subdivision of land and impose zoning and building permit requirements. The subdivision regulations of both Bernalillo County and the City of Albuquerque require, as a condition of approval of proposed subdivisions, that adequate provision be made by the developer for land use planning, water (both to quantity and quality), liquid waste disposal, solid waste disposal, sufficient and adequate roads and storm drain management. Although the compliance with federal, state, and local provisions relating to the protection of the environment, including laws regulating subdivisions and land-use planning, has had no material effect upon the capital expenditures, earnings and competitive position of the Registrant, no assurance can be given that this situation will continue. Requests relating to flood drainage, traffic flow and similar matters from the City of Albuquerque have occasionally delayed the receipt of necessary building permits and required modification of development proposals. The opening of the Double Eagle II Municipal Airport by the City of Albuquerque to the north of the Registrant's Land on Paseo del Volcan may have an impact on the use of and planning for the Registrant's Land in the vicinity of the airport as will the creation of the Petroglyph National Monument, although Management believes both facilities will favorably impact the Company's Lands. At the Registrant's request, the City of Albuquerque has created Special Assessment Districts affecting the Atrisco Urban Center and the El Rancho Atrisco areas for the financing of water, sewer, paving and other street improvements, and levied assessment liens on them. This has provided a mechanism for financing these improvements. Approximately 3,000 acres of the Registrant's land is designated "Developing Urban" by the current Albuquerque/Bernalillo County Comprehensive Plan. According to the Plan, "Developing Urban" land is land without accepted and approved platting, but which has adequate resource capabilities for urbanization. Certain land use regulations contained in the Comprehensive Plan apply to said land which may inhibit its development to its highest and best use. Availability of Water and Municipal Services. The unavailability of sufficient water has often been a major inhibiting factor in the land development business in the Southwest. The extent of the Registrant's water rights has not been determined. However, lack of ownership of water rights by the Registrant would not be an inhibiting factor to the developing of the Registrant's land if adequate water were to be made available through the City of Albuquerque and/or other water sources or by purchase by the Registrant or a developer that might purchase and develop land. For example, both Tierra West Mobile Home Park and the PG Corporation Complex leased or purchased water rights and drilled wells to meet their water needs. Under present annexation policies of the City of Albuquerque, annexation to the City of Albuquerque of portions of the Registrant's land is a requirement by City before it will extend water and sewer services to those portions within a reasonable period of time after annexation. However, the cost of water distribution and sewer lines would have to be borne by the developer, or by subsequent purchasers of the annexed portions. If the Registrant were given timely assurance by the City that such service would not be furnished and that the City would not pursue annexation of the property, alternative methods of providing water, sewer and other services would have to be developed to assure compliance with subdivision and environmental regulations. Several alternative sources are being investigated. With the exception of the Atrisco Urban Center and the residential subdivisions, most of the Registrant's land lies outside the municipal limits of the City of Albuquerque and are not furnished with City of Albuquerque water or other City of Albuquerque services. The Registrant experienced little difficulty in having the Atrisco Urban Center and the residential subdivisions annexed to the City of Albuquerque and furnished with services, but the same cannot be assumed for other areas of Registrant's land. Water Rights. The Registrant's land lies within a declared underground water basin, meaning that the Registrant's right to use surface or underground waters on the Registrant's land arises exclusively from actual appropriation, if any, of those waters for beneficial use in accordance with state law. In New Mexico, the legal questions surrounding the right to use water are issues which generally must be determined by the State Engineer, who administers the state water laws, and by the courts if a conflict exists between a water user and the State Engineer or between water users. Because such legal questions have not been before a New Mexico court and because the Registrant has received water through the City water system as development of the its land has progressed, it has not to date sought a determination of its water rights. Other Factors Affecting Development of Registrant's Land. Various activist groups, as well as neighborhood organizations occasionally have in the past taken actions which have, to some extent, delayed the Registrant's plans for the development of some of its lands. During the past fiscal year two activist groups filed appeals with the City of Albuquerque related to the Registrant's Sector Plan. However, the Sector Plan was upheld with only minor modifications. ITEM 2: DESCRIPTION OF PROPERTIES The major physical assets owned by the Registrant are its land which is owned in fee simple. The land comprises approximately 59,000 acres of undeveloped land held for long-term investment and approximately 280 acres of land remaining from those which the Registrant has developed to various stages of completion. The Registrant also owns the Atrisco Urban Center office building, comprising approximately 11,097 square feet, which the Registrant uses in its rental operations. This building has mortgages against it aggregating approximately $324,000 as of June 30, 1995. Approximately 5,500 square footage of the building is leased to Sunwest Bank at a monthly rental of $3,160. The Registrant also owns two commercial buildings that are leased to others. See "Item 1. Business - Reinvestment Properties." The population of the Albuquerque metropolitan area has grown significantly over the last 40 years. Physical expansion of the City of Albuquerque has taken place on the north, south and east sides, but the bulk of the most recent growth has been west of the Rio Grande River where the Registrant's land is located. In fact, much of the real property directly west of the City of Albuquerque is the Registrant's land., which was previously considered unmarketable and was, therefore, generally viewed as being unavailable for the expansion of the City of Albuquerque. The Registrant anticipates that growth of the West Side will continue into the foreseeable future. The Registrant's land is bisected by Interstate Highway I-40, the main east-west thoroughfare through Albuquerque. Access to the Registrant's land from Interstate 40 is provided by the Coors Boulevard interchange near the eastern edge of the Registrant's land, by the Unser Boulevard interchange at the western edge of the Atrisco Urban Center, by the 98th Street interchange to the west of the Atrisco Urban Center and by the Paseo del Volcan interchange where I-40, Paseo del Volcan and Central Avenue meet. Running north from the I-40 interchange, Paseo del Volcan transverses about 4 1/2 miles of the Registrant's land to the Double Eagle II Airport. In 1994, the Registrant dedicated approximately 180 acres to Bernalillo County's for the linking of Paseo del Volcan and Rio Bravo. The County has built out Paseo del Volcan south of the I-40 interchange. The County is expected to begin construction on Rio Bravo during the current year. The Registrant and other landowners and developers (the Northwest Loop Association) dedicated land and has paid a portion of the design costs for the Northwest Loop, which has been approved by the New Mexico State Highway Commission. The Northwest Loop will extend for approximately 39 miles and will connect I-40 and New Mexico State Highway 44, traversing the western portion of the Registrant's land. In 1995 the Registrant donated 169 acres for development of the Northwest Loop. Completion of the Northwest Loop is not expected for 15 to 20 years. Most of the Registrant's land is remote and not readily accessible, not serviced by utilities, and Registrant believes that the bulk of its land will not be available for development in the foreseeable future. There is no limitation on the kind of securities into which the Company may exchange real estate. The Company has considered, and would exchange property for partnership units or other securities issued by others for the purpose of developing the Company's land. A large portion of the undeveloped land is leased for agricultural uses (see "Item 1. "Business." The bulk of the Registrant's undeveloped land is held for long term investment. In the opinion of the Company's Management, its property is adequately covered by insurance. ITEM 3: LEGAL PROCEEDINGS Other than ordinary routine litigation incidental to the Company's business, the Company and/or members of its management are currently parties in the following legal proceedings: 1. Westland et al v. Kenny Romero, et al. Since 1989, the Company has reported the above captioned litigation filed by the Company in the District Court for Bernalillo County, New Mexico in which sought damages from the Defendants for abuse of legal process. On August 7, 1995, this action was settled by agreement between the parties, the terms of which are subject to a non-disclosure agreement. 2. Westland's El Campo Santo, Inc. (a wholly owned subsidiary) v. Nick Cordova The Company's wholly owned subsidiary, Westland's El Campo Santo, Inc. ("ECS") which owns a cemetery in Albuquerque that is primarily devoted to the burial of the Company's shareholders, sued Nick Cordova ("Cordova"), an independent grave digger who digs graves for the county, mortuaries and individuals, in an effort to obtain burial information related to the interment by Cordova of indigent persons for Bernalillo County and others. On October 26, 1994, this action was settled by agreement between the parties, the terms of which are subject to a non-disclosure agreement. 3. Anzures vs. Crestview Funeral Home, Inc. and Westland Development Co., Inc. On November 3, 1994, a relative of an unidentified indigent person who was buried at County expense in a cemetery owned by El Campo Santo, Inc., sued the funeral home and the Company claiming that both of the defendants breached their obligation to bury the relative decently by keeping track of the location of the gravesite, and that the breach caused the plaintiff extreme emotional distress and upset. The complaint also alleges that the Company and the funeral home conspired to prevent the Plaintiff from learning the whereabouts of their deceased relative. The funeral home has settled with the plaintiff. The Company does not believe that it is liable to the plaintiff because it had neither a contractual obligation to the deceased or his family or any duty to bury the deceased or locate the deceased's gravesite. To determine the cost of this matter, and to limit its exposure to liability, the Company settled this matter on September 18, 1995, the terms of which are subject to a non-disclosure agreement. 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 June 30, 1995. PART II ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information required by this item is incorporated by reference to the item in the Registrant's Annual Report to Shareholders for the year ended June 30, 1995 entitled "Market Price and Dividends on Westland's Common Equity and Related Stockholder Matters." ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The information required by this item is incorporated by reference to the item in the Registrant's Annual Report to Shareholders for the fiscal year ended June 30, 1995 entitled "Management's Discussion and Analysis of Financial Condition and Results of Operation." ITEM 7: FINANCIAL STATEMENTS The information required by this item is incorporated by reference to the Financial Statements in the Registrant's Annual Report to Shareholders for the fiscal year ended June 30, 1995 which is attached as an exhibit to this report. ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in or disagreements with Accountants of the kind described by Item 304 of Regulation S-B at any time during the Registrant's two (2) most recent fiscal years. PART III ITEM 9: DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS; COM PLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. The information required by this item is incorporated by reference to the items in the Registrant's Definitive Proxy Statement for the November 15, 1995, Annual Meeting of Shareholders entitled "Election of Directors" and "Directors and Executive Officers". All reports required by Section 16(a) of the Exchange Act to be filed during the fiscal year were filed. ITEM 10: EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the item in the Registrant's Definitive Proxy Statement for the November 15, 1995, Annual Meeting of Shareholders entitled "Executive Compensation". ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference to the item in the Registrant's Definitive Proxy Statement for the November 15, 1995, Annual Meeting of Shareholders entitled "Voting Securities and Principal Holders Thereof". ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to the item in the Registrant's Definitive Proxy Statement for the November 15, 1995, Annual Meeting of Shareholders entitled "Voting Securities and Principal Holders Thereof" and "Executive Compensation". ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KSB (a) Exhibits: 1. Financial Statements, incorporated by reference to the Registrant's Annual Report to Shareholders for each of the two years ended June 30, 1995: Report of Independent Certified Public Accountants Balance Sheet Statements of Earnings Statement of Stockholders' Equity Statements of Cash Flows Notes to Financial Statements 2. Exhibits: (3) Articles of Incorporation and Bylaws: (3)(i) Articles of Incorporation filed as an exhibit to the registrant's Registration Statement on Form 10-K on September 28, 1982 and incorporated herein by reference. (3)(ii) Restated Bylaws filed as an exhibit with the registrant's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1993. (10) Material Contracts: (10.1) Consulting Agreement with Sosimo Padilla, dated December 18, 1992, as filed with the Registrant's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1993, and incorporated herein by reference. (10.2) Consulting Agreement with Polecarpio (Lee) Anaya, dated December 18, 1992, as filed with the Registrant's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1993, and incorporated herein by reference. (10.3) Employment Agreement with Barbara Page, dated December 18, 1992, as filed with the Registrant's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1993, and incorporated herein by reference. (10.4) Lease Agreement dated April 25, 1994, between Central Avenue Partn ers and Walgreen Co. (10.5) Assignment of Lease dated April 20, 1995, from Central Avenue Partners to the Registrant. (10.6) Lease Agreement dated March 14, 1995, between George Brunacini and Jeannette Brunacini and Circuit City Stores, Inc. (10.7) Assignment of Lease dated June 28, 1995, from George Brunacini and Jeannette Brunacini to the Registrant. (11) Statement regarding computation of per share earnings is incorporated by reference to Note A(8) to the Financial Statements incorporated herein by reference to Registrant's Annual Report to Shareholders for the Fiscal year ended June 30, 1995. (13) Annual Report to Shareholders for the Fiscal year ended June 30, 1995. (21) Subsidiaries of the Registrant The registrant has two subsidiaries, they being El Campo Santo, Inc., and Westland Community Services, Inc., both New Mexico non-profit corporations. All other exhibits required by Item 601 of Regulation S-B are inapplicable to this Registrant in this filing. (b) Reports on Form 8-KSB: During the last quarter of the period covered by this report, the Registrant filed no reports on Form 8-K: SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WESTLAND DEVELOPMENT CO., INC. By /s/ Barbara Page Barbara Page, President, Principal Executive Officer, Chief Financial Officer and Director Date: September 26, 1995 In accordance with the Exchange Act, this report has been signed below by the following person in behalf of the registrant and in the capacities and on the dates indicated. By /s/ David C. Armijo David C. Armijo, Secretary-Treasurer and Principal Financial Officer Date: September 26, 1995 In accordance with the Exchange Act, this report has been signed below by the following persons in behalf of the registrant and in capacities and on the dates indicated. By /s/ David C. Armijo David C. Armijo, Director Date: September 26, 1995 By /s/ Polecarpio (Lee) Anaya Polecarpio (Lee) Anaya, Director Date: September 26, 1995 By /s/ Sosimo S. Padilla Sosimo S. Padilla, Chairman of the Board of Directors Date: September 26, 1995 By /s/ Josie G. Castillo Josie G. Castillo, Director Date: September 26, 1995 By /s/ Carmel T. Chavez Carmel T. Chavez, Director Date: September 26, 1995 By /s/ Raymundo H. Mares Raymundo H. Mares, Director Date: September 26, 1995 By /s/ Carlos Saavedra Carlos Saavedra, Director Date: September 26, 1995 By /s/ Barbara Page Barbara Page, Director Date: September 26, 1995 EX-27 2
5 12-MOS JUN-30-1995 JUL-01-1994 JUN-30-1995 1917803 0 719938 0 5669344 0 778029 347424 13182499 0 628900 69600 0 0 4898210 13182499 2894867 3007533 528395 558920 1872876 0 125631 718549 330200 0 0 0 0 388349 .50 0
EX-13 3 September 26, 1995 Dear Shareholders: In our 1992 letter to shareholders your board advised you of its intention to bring the company back to financial stability. That has been accomplished. Our goal now is to be more involved in joint ventures, limited partnerships and land leases which will provide and generate long term revenues for the company, while still generating an acceptable level of revenue to pay a reasonable dividend and pay the Company's operating expenses. Projects commenced during fiscal 1994 and 1995 include P.G. Corporation (the baseball fields on Paseo del Volcan), Ladera Sommerville (240 units of multi-family housing), Ladera Terra West (single family lots), Westland's House No. 1 (a 40 bed assisted living unit) and Volcano Mini Self Storage Warehouse with 172 units. It is my hope to ensure that after my tenure your company will continue to have revenues to operate for many years and the next president will not have to come into a company as I did six years ago with $20 million of debt, a little over $10,000 in the bank account with several nearly empty shopping centers and minimal revenues. The other most important goal is to provide you, the shareholders, with dividends. We have mailed four dividends during the past four years. The most recent was mailed out in September 1995 for $.60 per share. A sixty cent dividend on a share valued at $9.50 to $10.00 per share is an excellent dividend. Dividends can only be paid from profits. We hope to continue to to be profitable so we can continue to pay dividends every year. Also, as you are aware the average selling price of stock has risen since November 1990 from around $8.00 to around $10.00, approximately a 25% increase in value. Please review the enclosed financial statements wherein you will see that our balance sheets show an increase of $3.2 million dollars in total assets over last year. Call me if you have questions. Sincerely, Barbara Page President and Chief Executive Officer BUSINESS OF WESTLAND Westland owns a large tract of land consisting of approximately 59,000 acres (the "Land") located on the west side of the City of Albuquerque, New Mexico. Most of the Land is held for long-term investment and is leased to others for grazing purposes while the balance is held for development, sales and leasing activities. Approximately 48,000 acres of this Land was originally part of the Atrisco Land Grant, which was granted to a group of Spanish settlers in 1692. Approximately 700 acres remain within the monument boundary to be purchased by National Park Service for the Petroglyph National Monument. In addition, as of June 30, 1995, Westland owned approximately one-half (0.5) acre of developed commercial real estate not connected to the Land. Westland generates cash internally through its land operations (grazing leases, real estate sales and commercial leases) and externally through long and short-term borrowing. The profitability and resulting cash flows of Westland's land operations depend on numerous factors, such as demand for grazing leases, land leases, supply of competitively priced properties for residential, industrial or commercial uses. Over the long term, Westland expects that residential and industrial growth on Albuquerque's west side will increase demand for Westland's Land, thus increasing Westland's ability to generate revenue from land development and sales. In the short term, however, periodic local economic conditions may decrease the number of land sales and hinder development, such as during the period from 1986 through 1992. Westland's basic business philosophy has been to hold certain areas of the Land in trust for shareholders and to enhance the value of other areas of the Land through careful planning and development to insure perpetual benefit to the Company and its shareholders. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In the past fiscal year, land sales increased over the prior year as the real estate economy of Albuquerque continued its recovery from recession. During this period the Company began sales of improved residential lots to builders and acquired operating properties leased by large national retailers. Increased land revenues are due to not only the recovery of the housing market in the U.S. but also Westland's strategy initiated in fiscal 1994 to generate more revenue by developing infrastructures and selling finished lots to builders rather than raw land sales, as well as investment in long-term, single tenant leased buildings. During the last fiscal year sale of lands to the National Park Service ("NPS") as part of its acquisition of the lands included in the Petroglyph National Monument continued to decline as a major source of the Company's revenue. During 1992, the Company sold approximately 444 acres to NPS for $4,873,000, or about 94% of its total revenue. In 1993, the Company sold approximately 713 acres to NPS for $2,082,500 and approximately 11,000 acres of land that adjoined the northwestern portion of the Company's Land. In 1994, such sales were $1,058,000 or 43% of total revenue and in 1995, $329,000 or 11% of revenue. With the recovery of the real estate market in Albuquerque, Management believes that the Company is no longer dependent on large bulk sales of its Land and that its income will strengthen with the sale of small improved parcels and lots even though the costs associated with such sales will always be a larger percentage of revenue than the expenses associated with large bulk sales. Albuquerque continues to be one of the fastest growing cities in the Southwest and, because of certain geographical and other limitations on its growth, Westland's Lands lie directly in the path of future predictable growth patterns. Sales of improved residential lots in 1995 were approximately $745,000, as the Company's commitment to this program increased and prices have exhibited modest growth in the last year. Westland's future revenues will continue to be largely dependent upon the sale of land. The Company's assets are illiquid, comprising principally undeveloped land. Sales are dependent upon the market conditions in Albuquerque, New Mexico, which now appear to have recovered from the depressed state of several years ago. Westland anticipates making capital commitments for land development projects over the next few years if the economy and opportunities continue to improve to the extent that such expenditures would be warranted. Capital commitments may include assessments for roads, water and sewer lines on its Land. Infrastructure improvements are paid for by assessments which increase the value of Westland's Land and make further development possible. Westland intends to incur capital expenditures when management determines such investments will increase the value of the Land and generate future revenue. Land is Westland's principal capital resource, but because the Land is valued, for financial accounting purposes, at its 1907 value plus the cost of improvements, Westland's balance sheet does not reflect the true value of this asset. The Company has no current appraisals of the Land and, therefore, the actual value of the land is not known. The carrying value of the Land was decreased during the fiscal years ended June 30, 1993 primarily to reflect land sales. The carrying value will be increased or decreased regularly as Westland acquires, sells or develops parcels of land. Management believes the June 30, 1995 carrying value of the Land is substantially less than the current market value of the Land. Westland's balance sheet also shows income-producing properties, which consist of commercial real estate and improvements held for future development. The actual value of Westland's Land varies, depending on national and local market conditions and the amount and proximity of roads, utilities and other amenities to the land under development. As Albuquerque continues to grow, the land value of both developed and undeveloped Land should increase. The Company is continuing to study the feasibility of establishing various agricultural developments for portions of its Land. Such development is contingent on the availability of adequate water. Westland is moving forward on the establishment of its Sector Plan in the area North of Interstate 40 and South of the area designated for the Petroglyph National Monument between Unser and Paseo del Volcan for the development of that portion of its properties. The Sector plan excludes land located in the Monument. Westland has also negotiated a limited partnership agreement for the development of a destination resort on five hundred forty (540) acres of land south of and adjacent to the Monument. Financial Condition: During fiscal 1995, total assets increased to $13,182,000 from $9,936,000, while liabilities increased from $4,645,000 to $8,215,000. This was the result of investment of $3,629,000 in income producing and other properties and the accompanying borrowings on notes and mortgages, which amounted to $2,874,000. This significant net investment along with the increase in deposits of cash for the retirement of bonds outstanding and payment of dividends of $768,000, decreased cash and equivalents by $873,000, even though operations provided $1,015,000. As a result, the Company established a $2,000,000 line of credit, collateralized by certain real property, at a local bank to provide funds necessary for its continued expansion. At June 30, 1995, the line had not been used. During fiscal 1996 the Company will be obligated to pay income tax of approximately $830,000 should certain replacement properties totaling $2,100,000 for lands sold to NPS not be acquired. The Company is presently appraising various opportunities to acquire like-kind properties, the cost of which will offset the taxable gain. Management believes that the uncommitted balance of cash, cash equivalents, investments and its borrowing capacity are sufficient to meet all of the Company's obligations during 1996 without considering additional revenues that may be generated during that period. Results of Operations: In 1995, land revenues increased by $471,000 from $2,366,000 in 1994 to $2,837,000. This caused the cost of land revenues to increase to $528,000, or $415,000 from $113,000 in fiscal 1994. Management expects this trend of increasing cost of sales to continue as more and smaller improved tracts are sold. Rental revenue increased from $48,000 to $113,000 due to the acquisition of large, single tenant properties, and the related costs decreased from $44,000 to $31,000. These increases are expected to continue as the Company expands its activities in these areas. General and Administrative expenses increased to $1,699,000 in 1995, which was $391,000 more than the same expenses incurred in 1994. Legal expenses increased to $172,000 from $163,000 in 1994, primarily because of the settlement of certain litigation. These settlements are expected to decrease such costs in the future. Those costs attributable to the growth of the Company's activities should be expected to continue to rise with revenue. In 1994, the Company sold a warehouse and office property at a gain of $418,000, incurred initial expenses of $174,000 in a partnership development project and experienced a decline in value of some of its investments of $339,000. Such events are essentially non-recurring, while other income, which increased by $115,000,is expected to remain higher than in previous years due to increased sales of soil and cemetery plots. MARKET PRICE OF AND DIVIDENDS ON WESTLAND'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information: No established public trading market exists for Westland's outstanding shares and, to the best of Westland's knowledge, no dealer has made, is making, or is attempting to create such a market from which to determine an aggregate market value of the voting stock of Westland. In 1989, Westland entered into an initial arrangement with an independent stockbroker to broker transactions between shareholders and heirs in Westland's stock. The broker has informed Westland that the price at which Westland's common stock had been bought and sold by Westland's shareholders during the last two fiscal years preceding the date of this Report was seven dollars and fifty cents ($7.50) to eight dollars ($8.00) per share and during the ninety (90) days preceding this report shares have been bought and sold for $9.50 to $10.00 per share. Since 1982, the outstanding shares have been subject to restrictions imposed by a majority of Westland's shareholders which amended Westland's Articles of Incorporation to prohibit (with certain exceptions) transfer of Westland stock to persons other than lineal descendants of the original incorporators of the Town of Atrisco (a New Mexico Community Land Grant Corporation). Holders: The following table sets forth the approximate number of holders of record of each class of Westland's common stock as of September 15, 1995: Number of Title of Class Record Holders No Par Value Common 5,366 Class A, $1.00 Par Value 0 Class B, $1.00 Par Value 16 Dividends: During each of the last two (2) fiscal years ended June 30, 1994 and June 30, 1995, Westland declared and paid cash dividends to shareholders aggregating a total during the two years of $1,151,562. Also, subsequent to June 30, 1995, the Company has paid an additional cash dividend of $0.60 per share for an aggregate of $475,625. ON WRITTEN REQUEST, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30, 1995 TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO) TO ANY RECORD HOLDER OR BENEFICIAL OWNER OF THE COMPANY'S SHARES AS OF THE CLOSE OF BUSINESS ON OCTOBER 2, 1995. ANY EXHIBIT WILL BE PROVIDED ON REQUEST UPON PAYMENT OF THE REASONABLE EXPENSES OF FURNISHING THE EXHIBIT. ANY SUCH WRITTEN REQUEST SHOULD BE ADDRESSED TO DAVID C. ARMIJO, SECRETARY, WESTLAND DEVELOPMENT CO., INC., 401 COORS BOULEVARD, N.W., ALBUQUERQUE, NEW MEXICO 87121. WESTLAND DEVELOPMENT CO., INC. FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS WESTLAND DEVELOPMENT CO., INC. June 30, 1995 and 1994 Report of Independent Certified Public Accountants Stockholders Westland Development Co., Inc. We have audited the accompanying balance sheet of Westland Development Co., Inc., as of June 30, 1995, and the related statements of earnings, stockholders' equity, and cash flows for each of the two years in the period ended June 30, 1995. 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 financial position of Westland Development Co., Inc., as of June 30, 1995, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 1995 in conformity with generally accepted accounting principles. /s/ GRANT THORNTON LLP GRANT THORNTON LLP Oklahoma City, Oklahoma August 4, 1995 WESTLAND DEVELOPMENT CO., INC. BALANCE SHEET June 30, 1995
ASSETS Cash and cash equivalents ....................................................................... $1,917,803 Receivables Real estate contracts (note B) ........................................................... $ 622,775 Less related deferred profit ................................................... 134,181 ------- 488,594 Other accounts receivable ................................................................ 228,967 Accrued interest ......................................................................... 2,377 719,938 ------- Land and improvements held for future development (notes C and E) .......................................................................... 5,669,344 Income-producing properties, net (notes D and E) ................................................ 3,781,805 Property and equipment, net of accumulated depreciation of $347,424 (note E) ........................................................................ 430,605 Investments in partnerships and joint ventures .................................................. 175,682 Other (note E) .................................................................................. 487,322 ---------- $13,182,499 ===========
LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, accrued expenses, and other liabilities ....................................... $ 861,981 Accrued interest payable ........................................................................ 52,839 Deferred income taxes (note F) .................................................................. 3,265,000 Notes, bonds, mortgages, and assessments payable (note E) ....................................... 4,034,869 --------- Total liabilities .............. 8,214,689 Commitments and contingencies (notes E and K) -- Stockholders' equity (notes G and M) Common stock - no par value; authorized, 736,668 shares; issued and outstanding, 716,608 shares ......................................... 8,500 Class A common stock - $1 par value; authorized, 736,668 shares; issued, none -- Class B common stock - $1 par value; authorized, 491,112 shares; issued and outstanding, 61,100 shares .................................. 61,100 Additional paid-in capital ............................................................... 423,777 Retained earnings ........................................................................ 4,474,433 4,967,810 --------- ---------- $13,182,499 =========== The accompanying notes are an integral part of this statement.
WESTLAND DEVELOPMENT CO., INC. STATEMENTS OF EARNINGS Year ended June 30,
1995 1994 ---- ---- Revenues Land ......................................................................... $ 2,836,926 $ 2,365,947 Deferred profit recognized on installment sales .............................. 57,941 22,276 Rentals ...................................................................... 112,666 48,315 --------- --------- 3,007,533 2,436,538 Costs and expenses Cost of land revenues ........................................................ 528,395 113,011 Cost of rentals .............................................................. 30,525 44,457 Other general and administrative ............................................. 1,698,723 1,307,719 Loss on trading securities ................................................... 2,576 339,236 Legal ........................................................................ 171,577 162,934 --------- --------- 2,431,796 1,967,357 --------- --------- Operating income ................................ 575,737 469,181 Other (income) expense Interest income .............................................................. (135,852) (134,169) Gain on sale of property and equipment ....................................... (1,958) (418,522) Other income ................................................................. (130,633) (16,099) Interest expense ............................................................. 125,631 102,398 Equity in loss of partnerships and joint ventures ............................ -- 173,900 -------- -------- (142,812) (292,492) -------- -------- Earnings before income taxes .................... 718,549 761,673 Income tax expense (note F) ......................................................... 330,200 257,235 -------- -------- NET EARNINGS .................................... $ 388,349 $ 504,438 =========== =========== Weighted average common and common equivalent shares outstanding .................... 770,242 767,708 =========== =========== Earnings per common and common equivalent shares .................................... $ .50 $ .66 =========== =========== The accompanying notes are an integral part of these statements.
WESTLAND DEVELOPMENT CO., INC. STATEMENT OF STOCKHOLDERS' EQUITY Years ended June 30, 1995 and 1994
Class A Class B Common stock Common stock Common stock no par value $1 par value $1 par value Additional --------------- --------------- -------------- paid-in Retained Shares Amount Shares Amount Shares Amount capital earnings Total ------ ------ ------ ------ ------ ------ ------- -------- ----- Balances at July 1, 1993 ......... 716,608 $8,500 -- $ -- 51,100 $51,100 $378,677 $ 4,733,208 $ 5,171,485 Net earnings .......... -- -- -- -- -- -- -- 504,438 504,438 Cash dividend paid - $.50 per share ..... -- -- -- -- -- -- -- (383,854) (383,854) ------- ----- ----- ----- ------ ------ ------- --------- --------- Balances at June 30, 1994 ........ 716,608 8,500 -- -- 51,100 51,100 378,677 4,853,792 5,292,069 Net earnings ......... -- -- -- -- -- -- -- 388,349 388,349 Options exercised .... -- -- -- -- 10,000 10,000 45,100 -- 55,100 Cash dividend paid - $1.00 per share .... -- -- -- -- -- -- -- (767,708) (767,708) ------- ----- ----- ----- ------ ------ ------- --------- --------- Balances at June 30, 1995 ........ 716,608 $8,500 -- $ -- 61,100 $61,100 $423,777 $ 4,474,433 $ 4,967,810 ======= ====== ===== ====== ====== ======= ======== =========== =========== The accompanying notes are an integral part of this statement.
WESTLAND DEVELOPMENT CO., INC. STATEMENTS OF CASH FLOWS Year ended June 30,
1995 1994 ---- ---- Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities Cash received from land sales and collections on real estate contracts receivable ....................................................... $ 2,199,392 $ 2,405,651 Development and closing costs paid on land sales ..................................... (1,721,712) (36,474) Cash received from rental operations ................................................. 87,102 23,745 Cash paid for rental operations ...................................................... (23,599) (13,005) Cash paid for property taxes and maintenance ......................................... (126,661) (71,602) Purchase of trading securities ....................................................... (9,001,032) (2,000,017) Proceeds on sale of trading securities ............................................... 10,920,073 1,773,403 Interest received .................................................................... 137,115 138,084 Interest paid ........................................................................ (125,529) (71,110) Income taxes received ................................................................ 49,800 205,865 Legal and other general and administrative costs paid ................................ (1,504,041) (1,465,182) Other ................................................................................ 123,693 16,100 ------------ ----------- Net cash provided by operating activities ...................... 1,014,601 905,458 Cash flows from investing activities Capital expenditures ................................................................. (3,629,023) (77,862) Sinking fund deposit ................................................................. (256,385) (153,219) Proceeds from the sale of income-producing and other properties ...................... -- 677,761 Investments in partnerships and joint ventures ....................................... (30,158) (175,795) ------------ ----------- Net cash provided by (used in) investing activities ............ (3,915,566) 270,885 Cash flows from financing activities Borrowings on notes, mortgages, and assessments payable .............................. 2,873,864 21,049 Repayments of notes, mortgages, and assessments payable .............................. (133,721) (326,855) Proceeds from issuance of bonds ...................................................... -- 252,900 Exercise of stock options ............................................................ 55,100 -- Payment of dividends ................................................................. (767,708) (383,854) ------------ ----------- Net cash provided by (used in) financing activities ............ 2,027,535 (436,760) ------------ ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................................ (873,430) 739,583 Cash and cash equivalents at beginning of year .............................................. 2,791,233 2,051,650 ------------ ----------- Cash and cash equivalents at end of year .................................................... $ 1,917,803 $ 2,791,233 ============ =========== Reconciliation of Net Earnings to Net Cash Provided by Operating Activities Net earnings ................................................................................. $ 388,349 $ 504,438 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation ................................................................ 45,281 24,934 Gain on sale of property and equipment ...................................... (1,958) (418,522) Equity in loss of partnership ............................................... -- 173,900 Sale of land for real estate contract ....................................... (425,827) -- Collections on real estate contracts receivable ............................. 96,387 40,207 Profit recognized on installment sales ...................................... (57,941) (22,779) Deferred income taxes ....................................................... 247,000 438,000 Change in Income taxes receivable/payable ................................ 133,000 25,100 Rents receivable ............................................... (1,836) (24,570) Trading securities ............................................. 1,919,041 115,689 Other accounts receivable ...................................... (190,015) 2,272 Accrued interest receivable .................................... 1,263 848 Land and improvements held for future development .............. (1,417,088) 76,538 Other assets ................................................... 5,056 19,963 Accounts payable, accrued expenses, and other liabilities .................................... 266,259 (81,848) Accrued interest payable ....................................... 7,630 31,288 ------------ ----------- Net cash provided by operating activities ............... $ 1,014,601 $ 905,458 =========== ========= Noncash investing and financing activities: During the year ended June 30, 1995, the Company exchanged an account receivable of $100,000 for a partnership interest and contributed land with a cost of approximately $22,000 to a partnership. In addition, assessments payable of approximately $25,000 were assumed by the purchaser in association with certain land sales. During the year ended June 30, 1994, the Company repossessed 163 acres of land with a cost of approximately $54,000 and contributed three acres of land with a cost of approximately $21,000 to a partnership. The accompanying notes are an integral part of these statements.
WESTLAND DEVELOPMENT CO., INC. NOTES TO FINANCIAL STATEMENTS June 30, 1995 and 1994 NOTE A - SUMMARY OF ACCOUNTING POLICIES 1. History of Company and Beginning Basis of Financial Reporting In 1892, the descendants of the owners of a land grant deeded in 1692 by the Kingdom of Spain became incorporators of a land grant corporation named Town of Atrisco. Ownership of the Town of Atrisco was based on proportionate ownership of the land grant. In 1967, the Town of Atrisco was reorganized and became Westland Development Co., Inc. (the "Company"), with the heirs receiving shares in the Company in proportion to their ancestors' interest in the Town of Atrisco corporation. The net assets of $232,582 at the date of reorganization were assigned as follows: Value of no par common stock as stated in the Articles of Incorporation $ 8,500 Additional paid-in capital 224,082 ------- $232,582 ======== The Company estimated that it owned approximately 49,000 acres of land at the date of incorporation as Westland Development Co., Inc. Such acreage was used as the beginning cost basis for financial reporting purposes and was valued at $127,400 ($2.60 per acre) based on an appraisal in 1973 which determined the approximate value of the land in 1907. This date approximates the date that the Patent of Confirmation covering the land comprising the Atrisco Land Grant was given to the Town of Atrisco by the United States of America. Since the date of the Patent of Confirmation, the Company's acreage has increased in market value, but a full determination of such value has not been made. The Company includes its wholly-owned subsidiary, El Campo Santo, Inc. on a consolidated basis. El Campo Santo, Inc. is a wholly-owned nonprofit corporation created to manage cemeteries set aside on Company land for the stockholders. El Campo Santo, Inc. has no significant assets, liabilities, or operations. All material intercompany accounts and transactions have been eliminated. 2. Nature of Operations The Company develops, sells, or leases its land holdings, all of which are located near Albuquerque, New Mexico. The Company may use joint ventures or participation in limited partnerships to accomplish these activities. Revenue sources for the years ended June 30, 1995 and 1994 consist primarily of proceeds from vacant land sales and rentals from developed properties, such as single-tenant retail stores and office space. Land sales are primarily to commercial developers and others in the Albuquerque area and certain governmental agencies, and the terms of sale include both cash and internal financing by the Company. Such sales are collateralized by the land. The Company has relied primarily upon cash land sales over the past several years due to the collection risk associated with real estate contracts. 3. Cash and Cash Equivalents Cash and cash equivalents are considered to include highly liquid investments with maturities of three months or less and money market funds. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits and in money market funds which are not insured. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. 4. Land and Improvements Held for Future Development Land and improvements held for future development are recorded at cost not to exceed net realizable value. Improvements consist of abstracts, surveys, legal fees, master and sector plans, infrastructure improvements, and other costs related to land held by the Company which are allocated to respective tracts primarily by specific identification of costs. 5. Income-Producing Properties and Property and Equipment Income-producing properties and property and equipment are stated at cost, less accumulated depreciation, computed on a straight-line basis over their estimated useful lives of three to thirty years. The cost of the building in which the Company has its offices, a portion of which is rented to others, has been allocated to property and equipment and income-producing properties based upon square footage. 6. Recognition of Income on Real Estate Transactions The Company recognizes the entire gross profit on sales where the down payment is sufficient to meet the requirements for the full accrual method. Transactions where the down payment is not sufficient to meet the requirements for the full accrual method are recorded using the deposit or installment method. Under the deposit method, cash received is recorded as a deposit on land sale. Under the installment method, the Company records the entire contract price and the related costs at the time the transaction is recognized as a sale. Concurrently, the gross profit on the sale is deferred and is subsequently recognized as revenue in the statements of earnings as payments of principal are received on the related contract receivable. 7. Income Taxes Deferred income tax assets or liabilities are determined based on the difference between financial statement and tax bases of certain assets and liabilities as measured by the enacted tax rates in effect using the liability method. 8. Earnings Per Common Share Earnings per common share are based upon the weighted average number of common and dilutive common equivalent shares outstanding during the year. Common equivalent shares include the number of no par value common shares which may be issued in connection with eliminating fractional shares (which resulted from the determination made by the Court in the heirship case) and the number of no par value common shares for which the Court ruled that no incorporator or heirs existed. 9. Investments in Partnerships and Joint Ventures Investments in partnerships and joint ventures are accounted for on the equity method. 10. Trading Securities Debt and equity securities that are bought and held principally for sale in the near term are reported at fair value, with unrealized gains and losses included in earnings. NOTE B - REAL ESTATE CONTRACTS RECEIVABLE Real estate contracts receivable are summarized as follows at June 30, 1995: Promissory note from developer, due December 31, 1995, bearing interest at 10%; collateralized by land $425,827 Contracts, due in aggregate annual installments of $50,139, with interest rates ranging from 10% to 12%; collateralized by land 196,948 -------- $622,775 ======== Principal collections (based upon stated contract maturities and assuming all delinquent amounts will be collected in 1996) due on the real estate contracts receivable for the years ended June 30 are as follows: 1996 $483,396 1997 29,346 1998 14,357 1999 85,118 2000 2,100 Thereafter 8,458 -------- $622,775 ======== NOTE C - LAND AND IMPROVEMENTS HELD FOR FUTURE DEVELOPMENT The Company estimates that it presently owns in excess of 58,000 acres of land, primarily including land located within the boundaries of the Town of Atrisco Land Grant and land located elsewhere which the Company has acquired since incorporation. Plans for ultimate development of the properties have not been finalized. Land and improvements consist of the following at June 30, 1995: Land ....... $1,061,999 Improvements 4,607,345 --------- $5,669,344 ========== NOTE D - INCOME-PRODUCING PROPERTIES Income-producing properties consist of two single-tenant retail store buildings and one-half of the Company's office building and are summarized as follows at June 30, 1995: Buildings and equipment ......... $2,910,797 Less accumulated depreciation 94,992 --------- 2,815,805 Land ............................ 966,000 --------- $3,781,805 ========== The Company's rentals from income-producing properties are principally obtained from tenants through rental payments as provided for under noncancelable operating leases. The lease terms range from one to twenty years and typically provide for guaranteed minimum rent, percentage rent, and other charges to cover certain operating costs. The Company sold its commercial warehouse during the year ended June 30, 1994 resulting in a gain of approximately $418,000. Minimum future rentals from income-producing properties on noncancelable tenant operating leases as of June 30, 1995 are as follows: Year ended June 30 1996 $ 546,000 1997 555,000 1998 558,000 1999 569,000 2000 554,000 Thereafter 4,285,000 --------- $7,067,000 ========== NOTE E - NOTES, BONDS, MORTGAGES, AND ASSESSMENTS PAYABLE Notes, bonds, mortgages, and assessments payable are summarized as follows at June 30, 1995: Mortgage notes with a bank, due in aggregate monthly installments of $4,650 at June 30, 1995, including interest at 7.5%, due at various dates from August, 1998 through November, 1999; collateralized by income-producing properties and related equipment $ 324,159 Assessments for the installation of water and sewer lines and paving, due in aggregate semiannual installments of $47,802 through January, 2002, plus interest at rates ranging from 7.22% to 10%; collateralized by land and improvements with an approximate equal carrying value 197,696 Promissory note with an insurance company, due in monthly installments of $17,970 through May, 2015, including interest at 9.37%; collateralized by income-producing properties 1,942,721 Real estate contract with a developer, due September 10, 1995, bearing interest at 10%; collateralized by income producing properties 700,000 Bonds payable, due June 30, 1998, with annual interest at 7%; collateralized by partial proceeds of sale of land for national park 628,900 Promissory note with developer, due December 14, 1998, bearing interest at 6%; collateralized by land and improvements held for future development 194,074 Notes payable to a finance company, due in aggregate monthly installments of $1,570, including interest at rates ranging from 9.75% to 11%, due at various dates through July, 1999; collateralized by vehicles 47,319 ---------- $4,034,869 ========== The Company has general obligation bonds outstanding of $628,900 which provide for 7% annual interest payments and mature June 30, 1998. Pursuant to the bond indenture, the Company must deposit with the bond trustee an additional amount not to exceed 20% of the face amount of all such issued and outstanding Series B bonds less the amount of interest accumulated or accrued on funds previously deposited pursuant to the terms of the agreement, or 20% of the Company's net income from the sale of such properties, whichever is less. As of June 30, 1995, all required deposits due July 15, 1994 were on deposit with the bond trustee and are included in other assets in the amount of $393,812. The Company may redeem the bonds prior to maturity by payment of the principal amount plus a premium of 2% of the principal balance, plus accrued interest, through the date of redemption. The bonds are collateralized by 20% of the net income, as defined in the bond indenture, to be received from the sale of approximately 2,000 acres of land to the United States Government for inclusion in the Petroglyph National Monument (Note K). The Company maintains a line of credit with a bank which provides a maximum of $2,000,000 at the bank's prime rate of interest and is collateralized by specific tracts of land. Interest is payable quarterly with the balance payable at maturity, December 1, 1996. At June 30, 1995, the Company has no balances outstanding under the line of credit. At June 30, 1995, the Company had approximately $375,000 of outstanding letters of credit to the City of Albuquerque in connection with subdivision improvements to be done by the Company. Aggregate required principal payments of the notes, bonds, mortgages, and assessments payable as of June 30, 1995 are as follows: Year ended June 30 1996 $1,051,661 1997 150,689 1998 735,843 1999 290,221 2000 73,531 Thereafter 1,732,924 ---------- $4,034,869 ========== NOTE F - INCOME TAXES An analysis of the deferred income tax assets and liabilities as of June 30, 1995 is as follows: Deferred tax assets Tax loss and contribution carryforwards $ 272,355 Accrued expenses ...................... 35,050 Investments ........................... 70,156 Property and equipment ................ 120,269 Other ................................. 65,318 Valuation allowance ................... (308,668) -------- 254,480 Deferred tax liabilities Deferred tax gain on involuntary conversion of land 3,519,480 --------- Net deferred tax liability $3,265,000 ========== Income tax expense (benefit) for continuing operations consists of the following: June 30, -------- 1995 1994 ---- ---- Current Federal $83,200 $(174,765) State -- (6,000) ------ -------- 83,200 (180,765) Deferred Federal 209,950 382,000 State 37,050 56,000 ------- -------- 247,000 438,000 ------- -------- $330,200 $ 257,235 ======== ========= The income tax provision for continuing operations is reconciled to the tax computed at statutory rates as follows: June 30, -------- 1995 1994 ---- ---- Tax expense at statutory rates ...... $ 244,307 $ 258,970 State income taxes at statutory rates 43,113 38,084 Adjustment of estimated income tax liabilities of prior year ......... (49,800) (39,819) Change in valuation allowance ....... 92,786 -- Other ............................... (206) -- --------- --------- Total expense from continuing operations ....................... $ 330,200 $ 257,235 ========= ========= NOTE G - COMMON STOCK AND STOCK OPTIONS Under its Articles of Incorporation, the Company is authorized to issue 1,964,448 shares of common stock classified as follows: (a) 736,668 shares of no par value common stock to represent $8,500 estimated value of land held by the Town of Atrisco; (b) 736,668 shares to be sold for $1.45 a share, designated as Class A, $1 par value common stock. Class A stock is to be sold only to the stockholders of record as of the date of incorporation as follows: At the first sale of such stock, each stockholder shall have the right to purchase up to the number of shares obtained by dividing the total number of stockholders of record on the date of incorporation into 736,668 shares. Any stock remaining unpurchased shall be offered for sale at subsequent sales, and only stockholders who purchased stock at a preceding sale shall have the right to purchase stock at a subsequent sale, each one being entitled to purchase up to the number of shares obtained by dividing the total number of stockholders of record who purchased at the preceding sale into the total number of unpurchased shares remaining after the preceding sale. (c) 491,112 shares to be sold for a price to be determined by the Board of Directors, designated as Class B, $1 par value common stock. Those acquiring no par value common stock and Class A, $1 par value common stock have no preemptive rights to purchase Class B, $1 par value common stock. The following summarizes, at June 30, 1995, the number of shares of common stock which, upon judicial determination, can be distributed (no par) or offered for sale (Class A) to stockholders of record as of the date of incorporation: Price Number ---------------- of Per shares share Total ------ ----- ----- Shares issuable No par value common ........ 5,047 -- $ -- Class A, $1 par value common 736,668 1.45 1,068,169 ------- ---------- 741,715 $1,068,169 ======= ========== There is no established market value for the Company's common stock. At June 30, 1995, 716,608 shares of the Company's no par value common stock were issued and outstanding. Of the 5,047 shares of no par value common stock issuable, 1,872 shares may be issued in connection with eliminating fractional shares which resulted from the determinations made by the Court in the heirship case and 3,175 shares represent shares for which the Court in the heirship case ruled that no incorporator or heirs existed. The Company also has reacquired and canceled 15,013 shares of no par value common stock which have been constructively retired. These shares have not been formally retired and, as such, may be issuable to stockholders of record as of the date of incorporation. During 1985, the stockholders of the Company approved a stock option plan for certain directors and employees. During 1987, the plan was terminated. At the time of termination, options for 48,000 Class B shares had been granted at $5.51 per share. At June 30, 1995 and 1994, options for 38,000 and 18,000 Class B shares, respectively, were exercisable. Options for 10,000 shares were exercised during 1995. These options expire in December, 1996. NOTE H - SEGMENT INFORMATION The Company operates primarily in two industry segments. They are as follows: Land- Operations involve the development and sale of tracts, both residential and commercial. In addition, included are incidental revenues from leasing of grazing rights. Rentals- Operations involve rentals from two single-tenant retail store buildings and one-half of the Company's office building. Financial information for each industry segment is summarized as follows: Land Rentals ---- ------- 1995 Revenues ............ $2,894,867 $ 112,666 Operating profit .... 2,366,472 82,141 Identifiable assets . 6,341,330 3,807,369 Capital expenditures -- 3,688,900 Depreciation ........ -- 16,508 1994 Revenues ........... $2,388,223 $48,315 Operating profit ... 2,275,212 3,858 Identifiable assets 4,522,005 98,101 Capital expenditures 77,862 -- Depreciation ....... -- 11,261 Other corporate assets consist primarily of cash, furniture, equipment, and one-half of an office building, of which the remaining one-half is included in income-producing properties. NOTE I - BENEFIT PLAN The Company has established a Simplified Employee Pension (SEP/IRA) plan under Section 408(k) of the Internal Revenue Code. The Company annually may make a voluntary matching contribution of a maximum of 11% of each eligible employee's compensation. Company contribution expense was approximately $47,000 and $35,000 for 1995 and 1994, respectively. NOTE J - SALES TO MAJOR CUSTOMERS Sales to major customers are summarized as follows: During the year ended June 30, 1995, sales to four customers individually accounted for 26 percent, 16 percent, 15 percent, and 13 percent of total revenues. During the year ended June 30, 1994, sales to two customers individually accounted for 43 percent and 30 percent of total revenues. NOTE K - SALE OF LAND FOR NATIONAL PARK On June 28, 1990, the Petroglyph National Monument ("National Monument") was established by an act of the United States Congress ("Congress"). Under the bill passed by Congress, the National Park Service is authorized to acquire acreage within the National Monument using funds specifically appropriated by Congress each year. The Company owned approximately 2,000 acres within the National Monument boundary. In 1995, approximately 24 acres were transferred to the National Park Service for cash of $329,900. In 1994, approximately 118 acres were transferred to the National Park Service for cash of $1,058,000. The Company's remaining land within the National Monument boundary is expected to be sold in a series of transactions over the next several years. NOTE L - LITIGATION The Company is engaged in various lawsuits either as plaintiff or defendant which have arisen in the conduct of the business of the Company which, in the opinion of management, based upon advice of counsel, would not have a material effect on the Company's financial position. NOTE M - RELATED PARTY TRANSACTIONS The Company purchases its directors' and officers' liability insurance through a corporation controlled by a member of the Board of Directors. Total premiums for this policy paid in 1995 and 1994 were $60,000 and $75,000, respectively. During the year ended June 30, 1995, the Company acquired certain property from an ownership group which included a member of the Board of Directors. Under the sales agreement, the Board member received proceeds in the amount of $74,090. NOTE N - SUBSEQUENT EVENTS On August 11, 1995, the Board of Directors declared a cash dividend of $.60 per common share payable on September 8, 1995 to stockholders of record on August 22, 1995. DIRECTORS AND OFFICERS OF WESTLAND SOSIMO S. PADILLA, Chairman of the Board of Directors and Director. Member of the Executive Committee. Mr. Padilla is retired from the circulation department of the Albuquerque Publishing Company and was owner/operator of Western Securities Transportation Corporation for over thirty years. BARBARA PAGE, President, Chief Executive Officer and Director. Member of the Executive Committee. Ms. Page is employed by Westland Development Co., Inc. as its President and Chief Executive Officer. POLECARPIO (LEE) ANAYA, Vice President, Assistant Secretary/Treasurer and Director. Chairman of the Executive Committee. Mr. Anaya is owner/operator of Lee's Conoco. DAVID C. ARMIJO, Secretary/Treasurer and Director. Member of the Executive Committee. Mr. Armijo is an insurance broker and serves as President and Chairman of the Board of California's All-Risk Insurance Agency, Inc. in Los Angeles. RAYMUNDO MARES, Director. Member of the Executive Committee and Chairman of the Board of Directors of El Campo Santo, Inc. Mr. Mares is a retired employee of the maintenance department of the University of New Mexico. CARMEL CHAVEZ, Director. Alternate member of the Executive Committee and Director of El Campo Santo, Inc. Mr. Chavez is a retired employee of the Albuquerque Public Schools. JOSIE G. CASTILLO, Director. Alternate member of the Executive Committee, Vice Chairman of El Campo Santo, Inc. and member of the Disclaimer Committee. Ms. Castillo retired in 1995 from the Human Services Department of the State of New Mexico. CARLOS SAAVEDRA, Director. Alternate member of the Executive Committee and Chairman of the Disclaimer Committee. Dr. Saavedra is a former director of bilingual education for the Colorado Department of Education and the Oakland Unified School District, Oakland, California. Dr. Saavedra retired from education in 1985. ABELINO HERRERA, Director. Alternate member of the Executive Committee and member of the Disclaimer Committee. Mr. Herrera was employed as a mailman by the Albuquerque Public Schools until 1981, when he retired. EX-10 4 EXHIBIT 10.4 LEASE By this Lease, made in multiple copies the day of , 1994, between CENTRAL AVENUE PARTNERS, a New Mexico general partnership, hereinafter called "Landlord," and WALGREEN CO, an Illinois corporation, hereinafter called "Tenant"; Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord, for the term commencing October 1, 1994, and continuing to and including September 30, 2044, subject to prior termination as hereinafter provided, the premises to include both a building and other improvements and certain real estate located at the northeast corner of Coors Boulevard and Sequoia Road, in the City of Albuquerque, State of New Mexico, the building to be erected and completed by Landlord to include not less than 115 feet of frontage facing Coors Boulevard and not less than 135 feet of depth, being an area containing 15,525 square feet of first floor area (the "Building"), and together with all improvements, appurtenances, easements and privileges belonging thereto, said Building and improvements being all as shown on the plan attached hereto and made a part hereof as Exhibit "A," all as legally described in Exhibit "B" attached hereto and made a part hereof and the Building, real estate and other improvements to be constructed thereon are hereinafter collectively referred to as the "Leased Premises " THE TERMS, COVENANTS AND CONDITIONS OF SAID LETTING ARE AS FOLLOWS: USE 1. Subject to Article 13 of this Lease and so long as Tenant shall operate in the Leased Premises, Tenant shall operate a store similar in nature to a majority of its other stores in the Albuquerque metropolitan area, with the right to sell such merchandise and provide such services, as Tenant may, from time to time, sell and provide in a majority of its other stores in the Albuquerque metropolitan area. Nothing contained herein shall be construed so as to prohibit Tenant from expanding or eliminating any department(s) or from expanding or eliminating any line(s) of merchandise in the Leased Premises, provided, however, the liquor department shall not exceed twenty-five percent (25%) of the gross floor area of the Leased Premises. 2. Tenant shall pay rent for the Leased Premises, as follows: (a) A fixed rent of $19,173.37 per month, commencing on the date provided in Article 6 hereof. Fixed rent shall be payable on the first day of each and every month in advance and shall be properly apportioned for any period less than a full calendar month. (b) If a sum equal to - - 2.0% of the Gross Sales, as hereinbelow defined, except from the sale of food, alcoholic beverages and prescriptions, plus 1.0% of the Gross Sales from the sale of food and alcoholic beverages, plus 0.5% of the Gross Sales from the sale of prescriptions made by Tenant in the operation of Tenant's store in the Leased Premises in any lease year [as defined in Section (c) of Article 3] shall exceed the total fixed rent for such lease year, then and in such event, and within forty-five (45) days after the end of each lease year, Tenant shall pay to Landlord the amount of such excess as additional percentage rent. however, in no event shall the total of fixed rent plus additional percentage rent (if any) payable by Tenant in any lease year exceed $460,161.00 per lease year, which amount shall be proportionately decreased for any lease year that is not comprised of a full twelve (12) months. Within forty--five (45) days after the end of each lease year Tenant shall furnish to Landlord a statement of the total amount of such Gross Sales for such lease year. The aforesaid amount(s) shall be proportionately adjusted in the case of a lease year of more or less than a full twelve (12) calendar months. (c) The term "Gross Sales" as used herein is defined as the total amount of all receipts, whether for cash or on credit (less returns and refunds) from sales of drugs, food, drinks, goods, wares and merchandise of every sort whatsoever, made by Tenant in the operation of Tenant's store on the Leased Premises, or made by any concessionaire on the Leased Premises. The following shall be specifically excluded from Gross Sales: receipts from sales of non-alcoholic beverages (including milk); receipts from sales of tobacco products; receipts from the sale of prescription items pursuant to third party prescription plans, as defined below; receipts and commissions from the operation of public telephones; license fees received from the operation of automatic teller machines to the extent such fees do not exceed five percent (5%) of fixed rent paid in any lease year; credit card processing fees; intercorporate and interstore sales or transfers; sales of government bonds, savings stamps and other government securities; sales of postage stamps and ready stamped postcards and envelopes; sales of government lottery tickets; sales at a discount to employees; sales at a discount to doctors, dentists, hospitals, nurses, drug stores or wholesale drug or supply houses; accounts receivable written off as uncollectible. Tenant shall also have the right to deduct and exclude from Gross Sales a sum equal to any approximate amounts which may be paid by Tenant or which Tenant may add to or include in its selling prices of various articles by reason of any sales taxes, use taxes, retailers' occupation taxes, excise taxes at the retail level and the like, now or hereafter imposed and however entitled, and which are based upon the amounts of sales or the Units of sales. Third party prescription plans shall be deemed to be those health benefit plans wherein all or any portion of the cost of prescription items and pharmaceuticals for any individual patient are paid or reimbursed by an organization such as a governmental agency, an entity created by state or federal law, an insurance carrier, a health maintenance organization, a union, a trust or benefit organization or an employer or employer group pursuant to an agreement between Tenant and such organization. Tenant shall cause to be kept, in accordance with its customary accounting procedure, records of the Gross Sales made by Tenant in the operation of Tenant's store on the Leased Premises. Landlord and Landlord's duly authorized representative, at reasonable times during business hours, shall have access to such records at the place where the same are kept, for the purpose of inspecting and auditing the same, provided that any such inspection and audit be made by Landlord within six (6) months after the expiration of any lease year. If Landlord does not object in writing to any statement above mentioned within said time period, such statement shall be conclusively presumed to be correct, and thereafter Tenant shall not be required to preserve the records from which such statement was compiled. Landlord agrees not to divulge to anyone the information obtained by Landlord and Landlord's representative from such records or from the statements above mentioned, except to any mortgagee or prospective purchaser of the property and except as may be necessary for the enforcement of Landlord's rights under this Lease. Nothing herein contained, however, shall be deemed to confer upon Landlord any interest in the business of Tenant on the Leased Premises. (d) Until further notice by Landlord to Tenant, rent checks shall be payable to and mailed to: Central Avenue Partners c/o Peterson Properties 2325 San Pedro, N.E., Suite 2-A Albuquerque, New Mexico 87110 INITIAL TERM. TERM. LEASE YEAR. OPTIONS 3. (a) The Initial Term of this Lease shall commence on the date that Tenant accepts possession of the Building and shall continue to and include the day immediately preceding the date that the Term of this Lease commences as below provided. Tenant shall have no obligation to pay rents or other charges during the Initial Tern nor shall any of the same accrue; all rents and other charges specified in this Lease shall commence as of the date that the Term commences, unless otherwise expressly provided herein. (b) If the fixed rent shall not have begun to accrue on the date above specified for the commencement of the Teen of this Lease, then the Term shall not commence until the date on which the fixed rent begins to accrue and shall continue for fifty (50) years thereafter; provided, however, that if such commencement date be other than the first day of the calendar month then the Term shall continue to and include the last day of the same calendar month of the fiftieth year thereafter. (c) The first lease year shall commence on the date fixed rent begins to accrue and, if such commencement be on the first day of a calendar month shall end twelve (12) months thereafter, or, if such commencement be other than the first day of the calendar month, shall end on the last day of the same calendar month of the first year thereafter, and each succeeding lease year shall be each succeeding twelve (12) months period. (d) Tenant shall have the right and option, at Tenant's election, to terminate this Lease effective as of the last day of the two hundred fortieth (240th) full calendar month of the Term, effective as of the last day of the three hundredth (300th) full calendar month of the Term, effective as of the last day of the three hundred sixtieth (360th) full calendar month of the Term, effective as of the last day of the four hundred twentieth (420th) full calendar month of the Term, effective as of the last day of the four hundred eightieth (480th) full calendar month of the Term and effective as of the last day of the five hundred fortieth (540th) full calendar month of the Term. If Tenant shall elect to exercise any such option, Tenant Shall send notice thereof to Landlord, at least six (6) months prior to the date this Lease shall so terminate, but no notice shall be required to terminate this Lease upon the expiration of the full term. DELIVERY OF POSSESSION 4. (a) Landlord shall put Tenant into exclusive physical possession of the Leased Premises on October 1, 1994 or as soon as possible thereafter, and in any case not later than October 1, 1995, and at the same time deliver to Tenant a full set of keys to the Building, provided that if Landlord shall so put Tenant into possession between October 1 and December 1, then the Initial Term shall be extended by the period between the date of such possession and December 1. Landlord shall send written notice to Tenant, Attention: Director of Construction, at least forty-five (45) days [but not more than sixty (60) days] before such possession is to be delivered. Such notice shall set forth the date of delivery of possession, which shall be on a Monday (unless such date is a legal holiday, in which case possession shall be delivered the next business day). If possession is not delivered by the latest date above mentioned, Tenant may, in addition to Tenant's remedies at law, equity or under this Lease, cancel this Lease by notice to Landlord. The Leased Premises upon delivery shall be in good condition and repair, free of hazardous and toxic materials and substances, and shall fully comply with all lawful requirements and shall be constructed in accordance with Article 5 hereof. Tenant shall have the right, without being deemed to have accepted possession, to enter upon the Leased Premises as soon thereafter as practical, to take measurements and install its fixtures and exterior signs (including, but not limited to, the installation of permanent and temporary signs), but such entry or the opening for business shall not constitute a waiver as to the condition of the premises or as to any work to be done or changes to be made by Landlord, or as to any other obligations of Landlord hereunder. (b) Landlord represents that other than as disclosed in that certain report dated March 22, 1994, prepared by Western Technologies, Inc. and entitled Phase I Environmental Site Assessment, 1.58 Acre Property located at the northeast corner of Coors Boulevard and Sequoia Road, N.W., Albuquerque, New Mexico (the "Report"), Landlord has no knowledge concerning any current or previous use of the land and/or Building comprising the Leased Premises which would lead a reasonable person to suspect that hazardous wastes or hazardous substances were deposited, stored, disposed of or placed upon, about or under said land and/or buildings. In order to make the foregoing representation, Landlord states that it has made due inquiry or investigation as appropriate. Landlord has provided to Tenant, at Landlord's sole cost and expense, a copy of the Report. In the event tile Report discloses the existence of any toxic or hazardous substances in, on or under the Leased Premises, including, but not limited to, the existence of any underground storage tanks, Landlord, at Landlord's sole cost and expense, prior to the date Landlord delivers possession of the Leased Premises to Tenant, as provided in Article 4, shall properly remove, and dispose of any such underground storage tanks and shall properly remove and dispose of any hazardous and toxic materials and substances. All such disposal and removal shall be conducted in accordance with all federal, state and local laws, ordinances, and rules or regulations, or other binding determinations of any federal, state, local, or other governmental entity exercising executive, legislative, judicial, regulatory, or administrative functions (whether now or hereafter existing) pertaining to hazardous or toxic materials or substances or underground storage tanks. In the event of any such removal and disposal by Landlord hereunder, upon completion of the same the Leased Premises shall again be tested by the environmental engineer and/or contractor and the results delivered to Tenant; Landlord shall also deliver in such event all necessary governmental inspections and approvals with respect to the removal, remediation and disposal work. Tenant shall have no obligation to accept delivery of possession of the Leased Premises until Landlord has complied with the provisions of this Section. (c) It shall be a condition precedent to the delivery of possession of the Leased Premises to Tenant that Landlord shall have first delivered to Tenant satisfactory evidence of Landlord's title together with each instrument, if any, required by Section (b) of Article 18. Tenant's acceptance of possession of the Leased Premises in the absence of full satisfaction of said condition precedent shall in no manner be deemed a waiver thereof or of any of the requirements of Article 18. CONSTRUCTION BY LANDLORD 5. (a) Before delivering possession of the Leased Premises to Tenant, Landlord shall obtain all required zoning and permits for the construction and operation of the Leased Premises and the Building and shall erect and complete the Building, which Building shall be a modern one-story structure. The Building shall be of such exterior and structural design and character as is acceptable to Tenant and as will also meet Tenant's requirements for its permanent exterior signs, which may extend above the Building and shall be at locations visible from the entire Parking Area The Leased Premises and Building shall be erected and completed by Landlord, in accordance with the plans and specifications described below, and shall contain Tenant's specific requirements for the operation of Tenant's business, which requirements will include, among other things, the items and installations listed in the Criteria Specifications for Self-Serve Walgreen Store prepared by Walgreen Co., revised January 1, 1994, and Criteria Plans, including the drawings referenced on Exhibit "C" attached hereto, heretofore delivered to Landlord and incorporated herein by reference and made a part hereof. All such work by Landlord shall be done by contractors selected by Landlord and acceptable to Tenant and shall comply with the requirements of public authorities. All such work shall be done in a firstclass, good, and workmanlike manner, free and clear of all liens and encumbrances for labor and materials furnished to Landlord. Tenant shall reimburse Landlord for any cost increase resulting from constructing the Building in accordance with the drawings referenced in Exhibit "C" instead of the drawings originally sent to Landlord dated July 1, 1993 and referenced in Exhibit "C-1" attached to the Lease (excluding the additional cost of brick veneer). (b) Within one (1 ) month after the execution and delivery of this Lease, Tenant shall furnish to Landlord a fixture plan and base sheets relative to the Building, so that Landlord may be enabled to prepare and furnish to Tenant plans and specifications covering Tenant's specific requirements. The plans (which shall be on mylar or vellum) and specifications (the "Plans") prepared by Landlord shall be furnished to Tenant for Tenant's approval within forty-five (45) days after the execution and delivery of this Lease or the receipt of said fixture plan and base sheets from Tenant, whichever is later. All areas of design and engineering must be certified by and under the direct supervision of architects and engineers licensed and registered in the State of New Mexico. Tenant agrees to approve or reject said Plans, within thirty (30) days, and if not approved or rejected within said period, said Plans shall be deemed approved. In the event Tenant shall reject such Plans within the period provided above, then Tenant shall return said Plans to Landlord indicating the items so rejected. Landlord shall then have thirty (30) days to resubmit the Plans to Tenant, and Tenant shall have thirty (30) days for approval or rejection. If not approved or rejected within said period, said Plans shall be deemed approved; provided, however, that in no event shall the standards of quality of approved Plans, or of those deemed approved, be less than those required by the Criteria Plans and Criteria Specifications above described, which shall control. If said Plans are rejected after being resubmitted to Tenant, and the parties are unable to agree on approved Plans within thirty (30) days thereafter, then either party may cancel this Lease upon thirty (30) days written notice to the other. Any such cancellation notice shall be null and void if the plans are approved during the thirty (30) day notice period. Thereafter, Tenant, at Tenant's sole cost and expense, shall have the right to make changes, substitutions and eliminations in said Plans provided, however, that Tenant shall pay all costs and expenses on account of any such changes, substitutions and eliminations. Landlord and Tenant agree to cooperate with each other and to diligently and in good faith make all reasonable modifications to keep the cost of the Building and improvements as economical as is reasonably practicable. (c) Prior to delivery of possession of the Leased Premises to Tenant, Landlord shall provide to Tenant a mylar sepia of the final Plans prepared by Landlord as above provided. (d) All plans and specifications shall be deemed to be Owned by Tenant regardless of by whom prepared; Landlord shall take all actions as may be appropriate or necessary at any time and from time to time in order to evidence such ownership in Tenant. Such plans and specifications may be used by Tenant in their approved form or as modified by Tenant in connection with any alteration or renovation of the Leased Premises. RENT COMMENCEMENT 6. Tenant shall commence paying fixed rents pursuant to Article 2 hereof as of the date that is the earlier of (a) the date Tenant opens its store for business in the Leased Premises, or (b) the date that is two (2) months after Landlord has completed all construction and has delivered possession as above provided. Such two (2) month time period shall be subject to extension equal to any delays occasioned by strikes, casualties, governmental restrictions, priorities or allocations, inability to obtain materials or labor, denial of licenses to operate a pharmacy and to conduct its business, any cause the fault of Landlord or other causes beyond Tenant's control. Anything to the contrary in this Lease notwithstanding, Tenant shall have no obligation to pay rent or other charges until Landlord has provided all of the information and instruments required by Article 18 of this Lease and after such event, Tenant shall remit to Landlord all monies withheld. Nothing contained in this Lease shall be construed to obligate Tenant to open its store for business nor to obligate Tenant (or its successors or assigns) to continue to operate its store in the Leased Premises. PARKING 7. During the Term of this Lease, Tenant, at Tenant's cost and expense, shall maintain the landscaping at the Leased Premises and maintain and repair the parking areas located within the Leased Premises. However, Tenant shall have no obligation for any replacements of the landscaping, light poles, parking areas or other improvements thereon or any other item which under generally accepted accounting principles are classified as a capital expense (the same to remain Landlord's responsibility to perform). Tenant acknowledges that maintenance of that portion of the Leased Premises situated within "25' Access Road Area" shown on Exhibit "A" is more specifically described in the "Declaration of Restrictions and Cross Easements" (hereinafter "Declaration"), a copy of which is attached hereto as Exhibit "E". It is understood and agreed that (a) Tenant shall comply with the restrictions contained in the Declaration as such restrictions may affect the Leased Premises and (b) Landlord will enforce the covenants contained in the Declaration and will not enter into any agreements modifying the Declaration, or permitting blockage of access areas serving the Leased Premises Without the prior written consent of Tenant. Landlord shall provide Tenant with copies of all notices received by Landlord pursuant to the Declaration within two (2) business days of Landlord's receipt thereof, and at Tenant's request shall pursue all causes of action that Landlord may be entitled to pursue under the Declaration. EXCLUSIVES 8. (a) Landlord covenants and agrees that, during the term of this Lease and any extensions or renewals thereof, no additional property which Landlord, directly or indirectly, may now or hereafter own or control, and which is contiguous to the Leased Premises will be used for any one or combination of the following: (I) the operation of a drug store or a so-called prescription pharmacy or for any other purpose requiring a qualified pharmacist or other person authorized by law to dispense medicinal drugs, directly or indirectly, for a fee or remuneration of any kind; (ii) tile sale of so called health and/or beauty aids and/or drug sundries; (iii) the operation of a business in which alcoholic beverages shall be sold for consumption off the premises, and/or (iv) the operation of a business in which photofinishing services and/or photographic film are offered for sale. In the event that Tenant files suit against any party to enforce the foregoing restrictions, Landlord agrees to cooperate fully with Tenant in the prosecution of any such suit. Notwithstanding the foregoing, if Tenant closes its store to the public for six (6) months or more, then all of the foregoing exclusive use restrictions shall terminate, except in the event that Tenant discontinues business as a result of fire or other casually beyond Tenant's control so long as Tenant reopens its business within sixty (60) days after the Leased Premises have been restored or the cause for such discontinuance has ceased. In no event shall said restrictions terminate in the event that Tenant discontinues business and a permitted assignee or sublessee of Tenant commences business operations in the Leased Premises within six (6) months after taking possession of the Leased Premises, selling any such item or items so restricted as a material part of such assignee's or sublessee's business. (b) In the event that any action, claim or suit is brought by any party against Tenant alleging that Tenant's operations in the Leased Premises are in violation of any use restriction contained in any instrument executed by Landlord and in the event that a court of competent jurisdiction shall hold that Tenant's operations in the Leased Premises are in violation of any use restriction, Tenant, at Tenant's option shall have the right to terminate this Lease upon thirty (30) days written notice thereof to Landlord. UTILITIES 9. Tenant shall pay when due all bills for water, trash removal, sewer rents, sewer charges, heat, gas and electricity and other utilities and services used in or serving the Building or the Leased Premises from the commencement of the Initial Term and until the expiration of the Term. The source of supply and vendor of each such commodity shall be the local public utility company or municipality commonly serving the area. Landlord shall furnish to said Building and to the Leased Premises at all times sufficient gas and water service lines, also sewer lines and sewer connections, all of the capacity initially specified by Tenant, and electric service lines of the voltage and amperage initially specified by Tenant, all connected to an adequate source of supply or disposal. In addition, Landlord shall furnish to said Building conduit for telephone lines of a capacity specified by Tenant. If Tenant shall require additional service line capacity of any of such utilities and if same are available on Landlord's premises, Tenant, at Tenant's expense, shall have the right to the use of the same. REPAIRS. Conformity WITH THE LAW 10. (a) Except as provided below, Tenant shall repair and replace heating and cooling equipment and doors and door equipment serving the Building, and shall make plate glass replacements unless required by fault of Landlord or its agents, and shall make repairs to the interior of the Building. Tenant shall also paint the exterior of the Building and make minor repairs (i.e., patching) to the exterior. Landlord shall maintain and make all repairs to the exterior and structural portions of the Building, roof, and to pipes, ducts, wires and conduits leading to and from the Leased Premises and/or the Building. Landlord shall make all repairs required by the fault of Landlord or its agents, by fire or other insured casualty (as provided in Paragraph 14 below) or the elements. In the event that any hazardous or toxic material or substance or any underground storage tank is discovered at any tinge in, under or about the Leased Premises and/or the Building (unless introduced by Tenant), Landlord shall, at Landlord's expense, remove and dispose of the same in the manner described in and provide all documentation required by Section (b) of Article 4. Landlord hereby indemnifies and saves and holds Tenant harmless from and against any liability, obligation, damage or cost, including, without limitation, attorneys' fees and costs, resulting directly or indirectly from the presence, removal or disposal of any such hazardous or toxic material or substance or any underground storage tank. This indemnification shall survive the termination or expiration of this Lease for any reason. The provisions of this paragraph shall be complied with as required from time to time. (b) If in an emergency situation, a repair to the Leased Premises and/or the Building which Landlord is obligated to perform is required, Tenant shall make all reasonable efforts to contact Landlord or Landlords managing agent by telephone and/ or facsimile to advise Landlord of the need for the repair. If after making reasonable efforts to contact Landlord, either Tenant is unable to contact Landlord or Landlord's managing agent, or Tenant succeeds in contacting Landlord or Landlord's managing agent and Landlord fails to undertake action to correct the emergency situation within one business day, Tenant may perform the repair, in such manner as Tenant deems reasonably necessary, on account of Landlord. Upon completion of the repair, Landlord shall be required to reimburse Tenant for the actual cost of the repair. Landlord's payment shall be due within thirty (30) days after receipt of Tenant's bill accompanied by reasonable evidence that Tenant has paid for the repair In the event Landlord fails to make payment to Tenant for said repair within said thirty (30) days, such failure shall be deemed a default under this Lease and Tenant shall have all remedies set forth in Article 17 and those available at law or in equity, provided however, Tenant shall not have the right to cancel this Lease as a result of Landlord's failure to make such payment as herein provided. For the purpose of this section, an emergency situation means a condition or state of facts which if not corrected would result in further damage to the Leased Premises, the Building or its contents or which would prevent Tenant from conducting its business at the Leased Premises in a reasonable manner. (c) Tenant shall comply with the valid requirements of public authorities regarding the manner of the conduct of Tenant's particular business in the Building and the Leased Premises including all changes or installations so required. Except as required above, Landlord shall make all changes or installations and pay the cost, if any, of all inspections required to comply with valid requirements of public authorities as they apply to the Leased Premises or the Building. SIGNS. TENANT'S FIXTURES 11. (a) Tenant may, at Tenant's cost, install and operate interior and exterior electric and other signs, and in so doing shall comply with all lawful requirements. Subject to governmental regulations, and the provisions of the Declaration, defined and referred to in Article 7 hereof, Tenant shall have the right to install mechanical equipment, including a satellite dish .or other antenna for telecommunications affixed to the roof of the said Building in accordance with the Plans referenced in Article 5 of this Lease, but shall indemnify Landlord from any costs and expenses (including the costs for repairs) relating thereto. Tenant may, at Tenant's option install within the Leased Premises pay telephones, ail commissions, fees and charges for which shall remain the property of Tenant. (b) Tenant shall at all times have the right to remove all fixtures, machinery, equipment, appurtenances and other property furnished or installed by Tenant or by Landlord at Tenant's expense, it being expressly understood and agreed that said property shall not become part of the Building but shall at all times be and remain the personal property of Tenant and shall not be subject to any Landlord's lien. (c) Landlord shall, as soon as is possible after the date hereof, install a sign foundation with conduit at the location shown on Exhibit "A," upon which Tenant may install its readerboard and sign panel. Landlord shall also install sign foundations and conduit for Tenant's directional monument signs. Such pylon sign and directional signs shall be electrified by Landlord as soon as is practical thereafter. Tenant may install the same prior to the date that it accepts possession of the Leased Premises and such installation of said readerboard and sign panel shall be deemed neither acceptance of possession of the Leased Premises nor a waiver of any condition precedent to the delivery of possession of the Leased Premises. ALTERATIONS 12. (a) Tenant, at Tenant's cost and expense, may make alterations and additions to the Building. Tenant shall obtain Landlord's consent, which shall not be unreasonably withheld or delayed, before making any structural changes to the Building. Tenant may, without Landlord's consent, however, make changes to storefronts, partitions, floors, electric, plumbing and heating, ventilating and cooling systems or components thereof. Tenant, at Tenant's sole cost and in compliance with governmental requirements, if any, shall have the right to reconfigure or otherwise modify the parking areas on the Leased Premises (including without limitation, curb cuts, entrances and exits) as Tenant deems necessary or desirable. Landlord shall cooperate in securing necessary permits and authority. Tenant shall not permit any mechanics' or other liens to stand against the property for work or material furnished Tenant and shall indemnify Landlord from any costs or expenses relating to any repairs or alterations completed by Tenant. Notwithstanding the foregoing, Tenant shall not make any changes to the exterior of the Building or the Parking areas on the Leased Premises which violate the provisions of the Declaration. (b) Landlord covenants and agrees that during the continuance of this Lease, Landlord shall not, without Tenant's written consent, make any alterations or additions to the Leased Premises, including, but not limited to, any modifications to the storefront, signboard or fascia of the Building or to the Parking Areas. Landlord shall not permit any mechanics' or other liens to stand against the property for work or material furnished by or on behalf of Landlord and shall indemnify Tenant from any costs or expenses relating to any repairs or alterations completed by Landlord. ASSIGNMENT AND SUBLETTING 13. (a) Tenant's interest under this Lease may, at. any time and from time to time, be assigned and re-assigned, provided that any such assignment or reassignment be only to a corporation which is subsidiary to or affiliated with Tenant, or to a corporation resulting from any consolidation, reorganization or merger to which Tenant, or any of its subsidiaries or affiliates, may be a party. Tenant may also, at any time and from time to time, sublet or license or permit a portion or portions of the Building to be used for concessions, leased or licensed departments and demonstrations in connection with and as part of the operation of Tenant's store, the Gross Sales therefrom to be included in the Gross Sales of Tenant. (b) At any time and from time to time, Tenant may sublet a portion of the Leased Premises and/or Building, to any person, firm or corporation, other than a corporation described in Section (a) hereof, for any lawful purpose. In such case, the Gross Sales of such subtenant (but not the subrentals paid by such subtenant) shall be included in the Gross Sales of Tenant. (c) (I) At any time and from time to time, Tenant may discontinue the operation of its store in the Leased Premises and/or Building. At any time Tenant may assign this Lease or Tenant may sublet all or parts of the Leased Premises and/or Building to any person, firm or corporation, for any lawful purpose. In the event of any subletting, Tenant shall pay to Landlord the rent provided in Article 2 of this Lease. Tenant shall notify Landlord in writing of any proposed sublease or assignment, together with the name, address, phone number, any financial information regarding the proposed sublessee or assignee that Tenant may have in its possession, and the nature of the business of the proposed sublessee or assignee. Within forty-five (45) days after Landlord's receipt of Tenant's notice of a proposed assignee or sublessee, Landlord may terminate this Lease by written notice to Tenant. If Landlord so terminates this Lease, neither party shall have any further or unaccrued obligation or liability to the other. Said termination shall be effective as of the last day of (he calendar month immediately succeeding the month in which Landlord notifies Tenant of the termination of this Lease. If Landlord fails to notify Tenant of termination within said forty-five (45) day period, such termination right shall be deemed waived but only as to such subletting or assignment. Notwithstanding the above, if such sublease or assignment is in connection with Tenant's sublease or assignment of three (3) or more of Tenant's other stores in Albuquerque, New Mexico to a single or related entity, Landlord shall have no such right to terminate. (ii) In the event of a subletting pursuant to Section (c)(i) above, then at any time thereafter, Landlord may, by written notice to Tenant, terminate this Lease provided, however, Landlord shall concurrently with such termination agree to attorn to and be bound by the terms of any such sublease. Upon such termination, neither Landlord nor Tenant shall have any further or unaccrued obligation or liability to the other. Prior to such termination, Landlord shall reimburse Tenant the unamortized cost of any leasehold improvements made by Tenant to the Leased Premises in connection with said subletting, together with all costs and all brokerage fees incurred by Tenant as a result of such subletting. (d) If Tenant shall cease the conduct of business on the Leased Premises for a continuous period in excess of six (6) months (except by reason of strikes, fire, casualty or other causes beyond reasonable control of Tenant, except by reason of repairs or remodeling and except by reason of assignment or subletting as above provided) and the Leased Premises remain continuously vacant during such period, Landlord shall have the right and option to terminate this Lease upon written notice to Tenant, effective on the last day of the next succeeding calendar month following receipt of such notice; provided, however, that if Tenant shall send written notice to Landlord of Tenant's intent to sublet the Leased Premises during such period when Landlord shall have the Option, pursuant to this Section to terminate this Lease, Landlord shall have the right within thirty (30) days after receipt of such notice from Tenant to terminate this Lease upon written notice to Tenant effective on the last day of the next succeeding calendar month following Tenant's receipt of such notice and from and after such date, neither party shall have any liability or further obligation to the other under this Lease. If Landlord shall not so notify Tenant within thirty (30) days of receipt of Tenant's notice that Landlord has exercised its option to cancel this Lease, the termination options contained in this Section shall be void and of no further force and effect. Notwithstanding any assignment of this Lease, Walgreen Co. shall not be released from liability. However, in the event of a default by any such assignee, Landlord shall give Walgreen Co. notice of such default, shall accept cure of such default by Walgreen Co. within thirty (30) days after such notice and shall permit Walgreen Co. to re-enter anal repossess the Leased Premises for the then unelapsed portion of the Term of this Lease upon all of the provisions of this Lease. FIRE 14. (a) If the Building and/or Leased Premises and/or any improvements thereon shall be damaged or destroyed by fire or other casualty, then Landlord, shall repair and restore the Building and/or Leased Premises and/or any improvements thereon to their condition immediately prior to such damage or destruction; but only to the extent possible based upon the insurance proceeds available to Landlord, and the fixed rent and all other charges shall abate proportionately according to the extent of such damage or destruction. Landlord shall commence such restoration as soon as possible after such occurrence [but in no event later than sixty (60) days thereafter] and shall diligently pursue such repair or restoration to completion [which shall be not later than one hundred eighty (180) days after such occurrence]. Subject to the payment of proceeds by Tenant as expressly set forth in Section (b) below, under no circumstances shall Tenant be liable for any loss or damage, (excluding Tenant's property) including but not limited to damage to the Building or Leased Premises resulting from fire or other casualty. (b) If the damage or destruction referred to in Section (a) hereof amounts to at least twenty-five percent (25%) of the Building and occurs during the last three (3) years of the entire.Term of this Lease or during the last three (3) years prior to any of Tenant's options to terminate, then and in such events, Landlord and Tenant shall have the right and option, to terminate this Lease effective as of the date of such happening; and any unearned rents paid in advance shall be refunded. Landlord shall not have the right to exercise the option under this Section during any period which shall be less than thirty-six (36) months and more than twelve (12) months prior to any such optional termination date if Tenant shall, within one (1) month after such happening, advise Landlord that Tenant will not exercise Tenant's option to terminate this Lease as of the next optional termination date thereunder, and further, Landlord shall have the right to exercise the option under this Section during any period which shall be twelve (12) months or less prior to any such optional termination date only if Tenant shall have theretofore exercised Tenant's option to terminate this Lease as of the next optional termination date. Notwithstanding any termination of the Lease by Tenant hereunder, Tenant shall provide Landlord with a sufficient amount of the proceeds of the insurance required to be maintained by Tenant under Article 20 hereof and such other proceeds which may be necessary to enable Landlord to reconstruct or repair the Building and/or improvements on the Leased Premises to their condition immediately prior to damage or destruction. In the event Tenant shall elect to cancel this Lease hereunder, any proceeds payable by Tenant to Landlord under this Section (b) Shall be exclusive of the cost of improvements made by or on behalf of Tenant to the Leased Premises and/or Building. In the event Tenant shall elect not to cancel this Lease hereunder, Landlord and Tenant shall enter into a construction escrow agreement satisfactory to Landlord and Tenant appointing a third party as escrow agent to disburse such proceeds as Landlord's repair and reconstruction work progresses and to monitor the repair and reconstruction of the Building and improvements by Landlord. (c) If the fire or casualty is not an insurable casualty under Tenant's fire and extended coverage insurance, Landlord or Tenant may cancel this Lease upon notice to the other. Tenant may void Landlord's notice of termination by notifying Landlord within thirty (30) days after receipt of such notice of termination that Tenant shall provide Landlord with a sufficient amount of money necessary for Landlord to reconstruct or repair the Building and/or improvements on the Leased Premises, as required by this Article 14. Landlord may void Tenant's notice of termination by notifying Tenant within thirty (30) days after receipt of such notice of termination that Landlord intends to reconstruct or repair the Building and/or Landlord's improvements of the Leased Premises as required by this Article 14, at Landlord's own cost and expense. LANDLORD'S RIGHT TO INSPECT 15. Landlord may at reasonable times during Tenant's business hours, and after so advising Tenant, enter the Building for the purpose of examining and of making repairs and during the last six (6) months of the Term may place the usual "For Rent" signs in the Leased Premises, but not so as to interfere with Tenant's business. SURRENDER 16. At the expiration or termination of this Lease, Tenant shall surrender immediate possession of the Leased Premises in as good condition as when delivered to Tenant, reasonable wear and tear, changes and alteration, damage by fire, casualty and the elements, and other repairs which are Landlord's obligation excepted. Any holding over by Tenant shall not operate, except by written agreement, to extend or renew this Lease or to imply or create a new lease, but in such case Landlord's rights shall be limited to either the immediate termination of Tenant's occupancy or the treatment of Tenant's occupancy as a month to month tenancy, any custom or law to the contrary notwithstanding. Tenant shall repair damage caused by the removal of Tenant's fixtures and equipment. DEFAULT AND REMEDIES 17. If any rent is due and remains unpaid for ten (10) days after receipt of notice from Landlord, or if Tenant breaches any of the other covenants of this Lease and if such other breach continues for thirty (30) days after receipt of notice from Landlord, Landlord shall (then but not until then, have the right (a) to sue for rent, (b) to repenter without terminating this Lease, provided that Landlord shall use its best efforts to relet the Leased Premises for Tenant's account and otherwise to mitigate its damages [it being expressly understood that Tenant shall remain liable on a monthly basis for the difference between what Tenant's obligations under this Lease are and what Landlord actually collects, and further provided that if Landlord elects to re-enter without terminating this Lease, this Lease shall nonetheless expire as of the next optional termination date as set forth in Article 3(d), or (c) to terminate this Lease and re-enter the Leased Premises; but if Tenant shall pay said rent within said ten (10) days, or in good faith within said thirty (30) days commence to correct such other breach, and diligently proceed therewith, then tenant shall not be considered in default. If Landlord shall from time to time fail to pay any sum or sums due to Tenant and if such failure continues for thirty days after receipt of notice from Tenant, Tenant shall have the right and is hereby irrevocably authorized and directed to deduct such sum or Sails from fixed and percentage rent and other sums due Landlord, together with interest thereon at the so-called prime rate charged from time to time by The First National Bank of Chicago, plus two per cent until fully reimbursed. If Landlord shall from time to time fail to perform any act or acts required of Landlord by this Lease and if such failure continues for thirty (30) days after receipt of notice from Tenant, Tenant shall then have the right, at tenant's option, to perform such act or acts, in such manner as Tenant deems reasonably necessary, and the full amount of the cost and expense so incurred shall immediately be owing by Landlord to Tenant, and Tenant shall have the right and is hereby irrevocably authorized and directed to deduct such amount from fixed and percentage rent and other sums due Landlord, together with interest thereon at the so-called prime rate charged from time to tine by The First National Bank of Chicago, plus two per cent until fully reimbursed. If Landlord shall in good faith within said thirty (30) days commence to correct such breach, and diligently proceed therewith to completion, then Landlord shall not be considered in default. No delay on the part of either party in enforcing any of the provisions of this Lease shall be considered as a waiver thereof. Any consent or approval granted by either party under this Lease must be in writing and shall not be deemed to waive or render unnecessary the obtaining of consent or approval with respect to any subsequent act or omission for which consent is required or sought. TITLE AND POSSESSION 18. (a) Landlord covenants, represents and warrants that Landlord has entered into a contract to acquire legal title to the Leased Premises and has the right to make this Lease, that said entire property is now and shall be as of the date of Tenant's recording of a Memorandum of this Lease, free and clear of all liens, encumbrances and restrictions, except for those items set forth on Exhibit "D" attached hereto and made a part hereof, none of which shall limit, interfere with or prohibit Tenant's use and occupancy of the Leased Premises or interfere with any of Tenant's rights under this Lease, and that upon paying the rents and keeping the agreements of this Lease on its part to be kept and performed, Tenant shall have peaceful and uninterrupted possession during the continuance of this Lease. Upon acquisition of legal title, Landlord shall execute an agreement prepared by Tenant, ratifying and adopting this Lease ("Ratification Agreernent") and Landlord, at Landlord's expense, shall furnish Tenant evidence of Landlord's title and the status thereof as of the date of such acquisition and as of the date of the recordation of such Ratification Agreement.. Such evidence shall be in form and substance reasonably satisfactory to Tenant. (b) . If at the date of this Lease the Leased Prernises, or any part thereof is subject to any mortgage, deed of trust or other encumbrance in the nature of a mortgage, which is prior and superior to this Lease, it is a further express condition hereof that Landlord shall thereupon furnish and deliver to Tenant, in form and substance acceptable to Tenant, an agreement executed by such mortgagee or trustee, either (i) making such mortgages deed of trust or other encumbrance in the nature of a mortgage subject and subordinate to this Lease and to the leasehold estate created hereby and to all of Tenant's rights hereunder, or (ii) obligating such mortgagee or trustee and any successor thereto to be bound by this Lease and by all of Tenant's rights hereunder, provided that Tenant is not then in continued default, after notice, in the payment of rents or otherwise under the terms of this Lease. (c) It is understood and agreed that Tenant shall, in no event, be obligated to accept possession of the Leased Premises until the Landlord has complied with the provisions of this Article. (d) (i) if required by Landlord's institutional lender, Tenant shall subordinate the lien of this Lease to the lien of such mortgage encumbering the Leased Premises, so long as such lender simultaneously with such subordination and as a condition of the same, executes in recordable form a Subordination, Non-Disturbance and Attornment Agreement in form and substance acceptable to Tenant and agrees to be bound by all of the terms and conditions of this Lease. In the event of a conflict between the terms of such mortgage and the terms of this Lease, the terms of this Lease shall prevail. (ii) Landlord and Tenant agree to execute and deliver to the other within twenty (20) days from receipt of either party's written request, estoppel certificates in a form acceptable to the party to whom such request is made, which certificates shall include information as to any modification of this Lease, and to the best of Tenant's or Landlord's knowledge, whether or not the other party is in default of this Lease. REAL ESTATE TAXES 19. (a) Landlord, upon execution of this Lease, shall make a mailing address change on the property tax records so that the tax bill and tax notices for only the Leased Premises will be mailed to Tenant at the following address: Walgreen Co., 300 Wilmot Road, Deerfield, Illinois 60015, Attention: Tax Department. After said property tax records are changed, Tenant prior to delivery, shall send to Landlord copies of all tax bills and tax notices received by Tenant with respect to the Leased Premises if Landlord is obligated to pay for such taxes. Prior to the date that the tax bill is mailed directly to Tenant, Landlord, prior to delinquency, shall send to Tenant a copy of the tax bill for the Leased Premises if Tenant is obligated to pay for such taxes. (b) Upon receipt of the aforesaid tax bills, Tenant shall pay, when due and before delinquency, the general real estate taxes (including all special benefit taxes and special assessments but excluding so-called impact fees) levied and assessed against the Leased Premises, commencing when Tenant is required to commence paying fixed rents under this Lease and continuing for the remainder of the Term. However, the general taxes levied or assessed for the year during which Tenant commences paying fixed rent shall be prorated between Landlord and Tenant so that Tenant shall pay only such part thereof as the period commencing on such date and ending December 31st bears to such entire tax year, and the general taxes levied or assessed for the year during which this Lease expires or is terminated shall be prorated between Landlord and Tenant so that Tenant shall pay only such part thereof as the period commencing on January 1st and ending on the date this Lease expires or is terminated bears to such entire tax year. Within thirty (30) days after payment of any such taxes, or as soon thereafter as receipt bills are available, Tenant shall furnish to Landlord photocopies of bills indicating such payments. If Landlord is required to pay to its lender a monthly escrow for taxes levied and assessed against the Leased Premises, Tenant shall pay to Landlord its pro rata share of such taxes on a monthly basis. At the end of each tax year for which said taxes are levied, Landlord shall furnish to Tenant a statement from its lender and a copy of tile paid tax bill as furnished to Landlord by its lender, and any overage paid by Tenant to Landlord shall be reimbursed to Tenant and any shortage shall be paid to Landlord. (c) Tenant shall have the right; and is hereby irrevocably authorized and directed to deduct and retain amounts payable under the provisions of this Article from additional percentage rents payable under Section (b) of Article 2 for such tax year, or in the alternative, if such taxes for any tax year are payable after percentage rents under Section (b) of Article 2 for such tax year are payable, then Tenant shall have no liability under this Article to the extent of such percentage rents paid for such tax year. In such event, Landlord shall refund to Tenant the amount of such overpayment of percentage rent. (d) All special benefit taxes and special assessments shall be spread over the longest time permitted and Tenant's liability for installments of such special benefit taxes and special assessments not yet due shall cease upon the expiration or termination of this Lease. In no event shall Tenant be obligated to pay any impact fees whether or not billed by the taxing authority as a special benefit tax or a special assessment. (e) (i) Tenant shall have the right to contest the validity or the amount of any tax or assessment levied against the Leased Premises or any improvements thereon, provided that Tenant shall not take any action which will cause or allow the institution of foreclosure proceedings against the Leased Premises. Landlord shall cooperate in the institution of any such proceedings to contest the validity or amount of real estate taxes and will execute any documents required therefor. (ii) Landlord covenants and agrees that if there shall be any refunds or rebates on account of any tax, governmental imposition or levy paid by Tenant under the provisions of this Lease, such refund or rebate shall belong to Tenant. Any such refunds or rebates which shall be received by Landlord shall be trust funds and shall be forthwith paid to Tenant. Landlord shall, on request of Tenant, sign any receipt which may be necessary to secure the payment of any such refund or rebate, and shall pay over to Tenant such refund or rebate as received by Landlord. INSURANCE 20. Tenant may self-insure or shall obtain an all risk fire and extended coverage insurance policy covering the Building and the other improvements constructed by Landlord on the Leased Premises to the extent of not less than one hundred percent (100%) of the full insurable value less foundations, with companies which are authorized to do business in the State of New Mexico and are governed by She regulatory authority which establishes maximum rates in the vicinity. Tenant, upon request of Landlord's lender shall also carry earthquake and/or flood damage insurance to the same extent as may be acceptable to Tenant and as customary for all risk coverage. Tenant shall also procure an continue in effect public liability and property damage insurance with respect to the operation of the Leased Premises. Such public liability insurance shall cover liability for death or bodily injury in any one accident, mishap or casualty in a sum of not less than One Million Dollars ($1,000,000.00), and shall cover liability for property damage in one accident, mishap or casualty in the amount of not less than One Hundred Thousand Dollars ($100,000.00). Tile proceeds from Tenant's insurance shall be paid and applied only as set forth in Article 14 hereof. Any insurance carried or required to be carried by tenant pursuant to this Lease may, at Tenants option, be carried under an insurance policy(ies), self-insurance or pursuant to a master policy of insurance or so-called blanket policy of insurance covering other locations of Tenant or its corporation affiliates, or any combination thereof; provided, however, that in the event Tenant carries any of such insurance under any policy, Tenant shall have the right and is hereby irrevocably authorized and directed to deduct and retain the amounts of said premiums in any lease year from percentage rents payable under Section (b) of Article 2 for such lease year, provided such premiums are at market rates and excludes premiums for Tenant's personal property. From time to time and upon request from Landlord to Tenant's Tax Department, 300 Wilmot Road, Deerfield, Illinois 60015, Tenant shall cause to be issued to Landlord a current Certificate of Insurance naming Landlord as additional insured under Tenant's property insurance policy. Notwithstanding the foregoing, Tenant may self-insure only so long as the consolidated net worth of Walgreen Co. is not less than Three I hundred Million Dollars ($300,000,000.00). Proceeds of self-insurance shall be paid to the same extent as would an all risk fire and extended coverage insurance policy issued by a reputable insurance company authorized to do business in the State of New Mexico and which is governed by the regulatory authority which establishes maximum rates in the vicinity (such as Hartford Casualty insurance Company or such other insurer as Landlord's lender may designate from tine to time by notice to Landlord and Tenant), with such endorsements as Landlord's lender would normally require with respect to such a policy covering property serving as collateral for a loan by Landlord's lender. On Landlord's request, Tenant will deliver to Landlord written confirmation of the coverage in a letter or certificate of Insurance. MUTUAL INDEMNITY 21. Except for loss, cost and expense caused by fire or other casualty, Landlord and Tenant shall each indemnify and hold harmless the other against and from any and all loss, cost and expense resulting from their own respective negligent acts and omissions or the negligent acts and omissions of their respective employees in the course of their employment. CONDEMNATION 22. If the entire Leased Premises shall be taken by reason of condemnation or under eminent domain proceedings, Landlord or Tenant may terminate this Lease as of the date widen possession of the l.eased Premises is taken. If a portion of the Leased Premises shall be taken under eminent domain or by reason of condemnation and if in the opinion of Tenant, reasonably exercised, the remainder of the Leased Premises are no longer suitable for Tenant's business, this Lease, at Tenant's Option, to be exercised by notice to Landlord within sixty (60) days of such taking, shall terminate; any unearned rents paid or credited in advance shall be refunded to Tenant. If this Lease is not so terminated, Landlord forthwith and with due diligence, shall restore tl-se Leased Premises. Until so restored, fixed rent shall abate to the extent that the operation of the Leased Premises. Such public liability insurance shall cover liability for death or bodily injury in any one accident, mishap or casualty in a sum of not less than One Million Dollars ($1,000,000.00), and shall cover liability for property damage in one accident, mishap or casualty in the amount of not less than One Hundred Thousand Dollars ($100,000.00). The proceeds from Tenant's insurance shall be paid and applied only as set forth in Article 14 hereof. Any insurance carried or required to be carried by Tenant pursuant to this Lease may, at Tenants option be carried under an insurance policy(ies), self-insurance or pursuant to a master policy of insurance or so-called blanket policy of insurance covering other locations of Tenant or its corporation affiliates, or any combination thereof; provided, however, that in the event Tenant carries any of such insurance under any policy, Tenant shall have the right and is hereby irrevocably authorized and directed to deduct and retain the amounts of said premiums in any lease year from percentage rents payable under Section (b) of Article 2 for such lease year, provided such premiums are at market rates and excludes premiums for Tenant's personal property. From lime to time and upon request from Landlord to Tenant's Tax Department, 300 Wilmot Road, Deerfield, Illinois 60015, Tenant shall cause to be issued to Landlord a current Certificate of Insurance naming Landlord as additional insured under Tenant's property insurance policy. Notwithstanding the foregoing, Tenant may self-insure only so long as the consolidated net worth of Walgreen Co. is not less than Three I Hundred Million Dollars ($300,000,000.00). Proceeds of self-insurance shall be paid to the same extent as would an all risk fire and extended coverage insurance policy issued by a reputable insurance company authorized to do business in the State of New Mexico and which is governed by the regulatory authority which establishes maximum rates in the vicinity (such as Hartford Casualty Insurance Company or such other insurer as Landlord's lender may designate from time to time by notice to Landlord and Tenant), with such endorsements as Landlord's lender would normally require with respect to such a policy covering property serving as collateral for a loan by Landlord's lender. On Landlord's request, Tenant will deliver to Landlord written confirmation of the coverage in a letter or certificate of insurance. MUTUAL INDEMNITY 21. Except for loss, cost and expense caused by fire or other casualty, Landlord and Tenant shall each indemnify and hold harmless the other against and from any and all loss, cost and expense resulting from their own respective negligent acts and omissions or the negligent acts and omissions of their respective employees in the course of their employment. CONDEMNATION 22. If the entire Leased Premises shall be taken by reason of condemnation or under eminent domain proceedings, Landlord or Tenant may terminate this Lease as of the date when possession of the Leased Premises is taken. If a portion of the Leased Premises shall be taken under eminent domain or by reason of condemnation and if in the opinion of Tenant, reasonably exercised, the remainder of the Leased Premises are no longer suitable for Tenant's business, this Lease, at Tenant's option, to be exercised by notice to Landlord within sixty (60) days of such taking, shall terminate; any unearned rents paid or credited in advance shall be refunded to Tenant. If this Lease is not so terminated, Landlord forthwith and with due diligence, shall restore the Leased Premises. Until so restored, fixed rent shall abate to tile extent that Tenant shall not be able to conduct business, and thereafter fixed rent for the remaining portion of the Term shall be proportionately reduced. Tenant shall be entitled to the award in connection with any condemnation insofar as the same represents compensation for or damage to Tenant's fixtures, equipment, leasehold improvements or other property, moving expenses as well as tile loss of leasehold (i.e. the unexpired balance of the lease term immediately prior to such taking). Landlord shall be entitled to the award insofar as same represents compensation for or damage to the fee remainder. Any mortgagee of Landlord shall be compensated out of Landlord's award For the purposes of this Article, the term "condemnation or under eminent domain proceedings" shall include conveyances and grants made in anticipation of or in lieu of such proceedings. BROKERAGE 23. Landlord and Tenant represent that they have dealt with no broker or agent with respect to this Lease except Retail Development Consultants, Inc., the commission and fee of whom shall be paid by Landlord. Landlord hereby indemnifies and saves and holds Tenant harmless against any claims for brokerage commissions or compensation or other claims of any kind (including reasonable attorney's fees and costs) arising out of the negotiation and execution of this Lease or Tenant's interest or involvement with respect to the Leased Premises. PREVAILING PARTY 24. In the event of litigation between Landlord and Tenant in connection with this Lease, the reasonable attorneys' fees and Court costs incurred by the party prevailing in such litigation shall be borne by the nonprevailing party. NOTICES 25. All notices hereunder shall be in writing and sent by United States certified or registered mail, postage prepaid, or by overnight delivery service providing proof of receipt, addressed if to Landlord, to the place where rent checks are to be mailed, and if to Tenant, to 200 Wilmot Road, Deerfield, Illinois 60015, Attention: Law Department, and a duplicate to the Leased Premises, provided that each party by like notice may designate any future or different addresses to which subsequent notices shall be sent. Notices shall be deemed given upon receipt or upon refusal to accept delivery. RIGHT OF FIRST REFUSAL 26. From and after the date that is Ten (10) years after the date of this Lease, in the event that Landlord shall receive a Bona Fide Offer to purchase the Leased Premises at any time and from time to time during the Term of this Lease or any extensions thereof from any person or entity, Landlord shall so notify Tenant together with a true and correct copy of said Bona Fide Offer. For purposes hereof, a "Bona Fide Offer" shall be deemed to be one made in writing by a person or entity that is not related or affiliated with Landlord in which Landlord intends to accept (subject to this Article). Tenant may, at Tenant's option and within ten (10) working days after receipt of Landlord's notice of said Bona Fide Offer and receipt of a copy thereof, offer to purchase the Leased Premises at the price and upon the terms and conditions as are contained in said Bona Fide Offer, in which event. Landlord shall sell the Leased Premises to Tenant upon said terms and conditions and that said price; furthermore, in such event, Landlord shall convey the Leased Premises to Tenant by warranty deed. Landlord covenants that it shall accept no such Bona Fide Offer or convey the premises Until it has complied with the terms of this Article. Any conveyance of the Leased Premises made in the absence of full satisfaction of this Article shall be void. Tenant may enforce this Article, without limitation, by injunction specific performance or other equitable relief. TRANSFER OF TITLES 27. (a) In the event that Landlord conveys its interest in the Leased Premises to any other person or entity, Tenant shall have no obligation to pay rents or any other charges under this Lease to any such transferee until Tenant has been notified of such conveyance and has received satisfactory evidence of such conveyance together with a written direction from such transferee as to the name and address of the new payee of rents and other charges. It is understood and agreed that Tenant's withholding of rent and other charges until its receipt of such satisfactory evidence shall not be deemed a default under this Lease. (b) In the event Landlord sells its interest in the Leased Premises, Landlord shall be relieved of any and all liability under any of Landlord's covenants and obligations contained in or derived from this Lease arising out of any act, occurrence, or omission occurring thereafter, and the assignee or purchaser at any such sale or any subsequent sale of the Leased Premises or assignment of this Lease, shall be deemed without any further agreement between the parties and any such assignee or purchaser, to have assumed and agreed to carry out any and all of tire covenants and obligations of Landlord under this Lease. RENT TAX 28. In the event that any governmental authority imposes a tax, charge, assessment or other imposition upon tenants in general which is based upon the rents payable under this Lease, Tenant shall pay the same to said governmental authority or to Landlord if Landlord is responsible to collect the same (in which case Landlord shall remit the same in a timely manner and, upon request of Tenant, evidence to Tenant said remittance). Tenant is hereby authorized and directed to deduct the amount of such taxes, charges, assessments or impositions from additional percentage rents payable under Section (b) of Article 2 for such lease year or, in the alternative, in the event that such imposition or a portion thereof is due after percentage rents, payable under Section (b) of Article 2 have been paid, Tenant shall have no liability under this Article to the extent that percentage rents for said lease year have been paid. Nothing contained herein shall be deemed to obligate Tenant with respect to any income, inheritance or successor tax or imposition. LIQUOR LICENSE 29. Notwithstanding any other provisions herein, it is an express condition of this Lease that Tenant shall be able to obtain licenses from appropriate governmental authorities permitting the display and sale on the Leased Premises of alcoholic liquor for consumption off the Leased Premises. Further, until Tenant is able to obtain such licenses, Tenant shall have no obligation to accept delivery of possession of the Leased Premises, and if Tenant shall not secure such licenses on or before the date Tenant is to accept delivery of possession, Tenant shall have the right and option to cancel this Lease. If Tenant shall obtain the necessary licenses, or if Tenant elects to waive this condition, Tenant shall accept delivery of possession promptly thereafter, except that the two month period set forth in Article 6 shall not commence until Tenant so accepts delivery of possession. Tenant shall be required to promptly make proper application, pay the requisite fees, and diligently pursue tire obtaining of the said liquor license. MISCELLANEOUS 30. Captions of the several articles contained in this l ease are for convenience only and do not constitute a part of this Lease and do not limit, affect or construe the contents of such articles. If any provision of this Lease shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby. If more than one person or entity is Landlord, the obligations imposed on Landlord under this Lease shall be joint and several. All provisions of this Lease have been negotiated by both parties at arm's length and neither party shall be deemed the scrivener of this Lease. This Lease shall not be construed for or against either party by reason of the authorship or alleged authorship of any provision hereof. This instrument shall merge all undertakings between the parties hereto with respect to the Leased Premises and shall constitute the entire lease unless otherwise hereafter modified by both parties in writing. Tenant shall have the right to cancel this Lease if satisfactory evidence of Landlord's title shall not be received at 200 Wilmot Road, Deerfield, Illinois 60015, within thirty (30) days after execution and recordation of the Ratification Agreement. This instrument shall also bind and benefit, as the case may require, the heirs, legal representatives, assigns and successors of the respective parties, and all covenants, conditions and agreements herein contained shall be construed as covenants running with the land. This instrument shall not become binding upon the parties until it shall have been executed and delivered by both Landlord and Tenant. IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease, under seal, as of the day and year first above written. WALGREEN CO. Vice President Attest: Witnesses: By: Assistant Secretary CENTRAL AVENUE PARTNERS By: Peterson Properties Real Estate Services, Inc., Managing General Partner James A. Peterson, President By: Retail Development Consultants, Inc., General Partner Steve J.(Johnson,President Witnesses: . IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease, under seal, as of the day and year first above written. WALGREEN CO. By Attest: Witnesses: Vice President CENTRAL AVENUE PARTNERS By: Peterson Properties Real Estate Services, Inc. Managing General Partner By: Retail Development Consultants, Inc., General Partner By Witnesses: STATE OF ILLINOIS COUNTY OF LAKE ) SS ) On this day of l994, before me appeared Julian A. Dettinger, to me personally known, who, being by me duly sworn, did say that he is the Vice President of WALGREEN CO., an Illinois corporation, and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its board of directors and said Julian Dettinger acknowledged said instrument to be the free act and deed of said corporation. SEAL STATE OF NEW MEXICO COUNTY OF BERNALILLO (Signature) (My commission expires 5-18-96) On this 25th day of As)ril , 1994, before me appeared James A. Peterson, President of PETERSON PROPERTIES REAL ESTATE SERVICES, INC, a New Mexico corporation, and that tide seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its board of directors and said President acknowledged said instrument to be the free act and deed of said corporation. Seal OFFICIAL SEAL COLLEEN R. MCGRATH (Signature) NOTARY PUBLIC - STATE OF NEW MEXICO Notary Bond Filed With Secretary of State My commission expires 10/18/97 NOTARY PUBLIC (Title) (My commission expires 10/18/97) STATE OF ILLINOIS COUNTY OF LAKE On this 25th day of 1994, before me appeared Steven J. Johnson, to me personally known, who, being by me duly sworn, did say that he is the Vice President of WALGREEN CO., an Illinois corporation, and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed on behalf of said corporation by authority of its board of directors and said President acknowledged said instrument to be the free act and deed of said corporation. OFFICIAL SEAL COLLEEN R. MCGRATH (Signature) NOTARY PUBLIC - STATE OF NEW MEXICO Notary Bond Filed With Secretary of State My commission expires 10/18/97 NOTARY PUBLIC (Title) (My commission expires 10/18/97) STATE OF ILLINOIS COUNTY OF LAKE (Signature) (STATE OF NEW MEXICO) COUNTY OF BERNALILLO) SS On this 25th day of April , 1994, before me appeared James A. Peterson, President of PETERSON PROPERTIES REAL ESTATE SERVICES, INC., a New Mexico corporation, and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its board of directors and said President acknowledged said instrument to be the free act and deed of said corporation. (signature) NOTARY PUBLIC (Title) (My commission expires 10/18/97) (STATE OF NEW MEXICO) (COUNTY OF BERNALILLO) SS On this 25th day of April, 1994, before me appeared Steven J. Johnson, to me personally known, whoa being by me duly sworn, did say that he is the President of RETAIL DEVELOPMENT CONSULTANTS, INC, General Partner, and that the seal affixed to said instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its board of directors and said President acknowledged said instrument to be the free act and deed of said corporation. Seal OFFICIAL SEAL COLLEEN R. MCGRATH NOTARY PUBLIC - STATE OF NEW MEXlCO Notary Bond Filed With Secretary of State My commission expires 10/18/97 (Signature) EXHIBIT "B" Legal Description - Leased Premises A tract of land situate within the Town of Atrisco Grant, projected section 2 , Township 10 North, Range 2 East , New Mexico Principal Meridian within the City of Albuquerque, Bernalillo County, New Mexico being a southerly portion of TRACT B-2, NORTHEAST UNIT, TOWN OF ATRISCO GRANT as the same is shown and designated on said plat filed for record in the office of the County Clerk of Bernalillo County, New Mexico on January 19, 1987 in Volume C32, Folio 150 together with a southerly portion of TRACT B-1, LAND OF E. FISH as the same is shown and designated on said plat filed for record in the office of the County Clerk of Bernalillo County, New Mexico on July 26, 1916 in Volume B11, Folio 154 and also being a portion of TRACT B-A, CIRCLE K CORPORATION as the same is shown and designated on said plat filed for record in the office of the County Clerk of Bernalillo County, New Mexico on May 26, 1987 in Volume C33, 152 and being more particularly described as follows: BEGINNING at the southeast corner of the herein described tract, said point being the intersection of the westerly line of a 20 foot Public Alley and the northerly rlght-of-way line of Sequoia Road N.W.; THENCE 8 67 ' 3l ' 11" " , 26. 93 feet to a point of curvature; THENCE 73.29 feet along a curve to the right whose radius is 366.07 feet through a central angle of 11'28'16" and whose long chord bears S 73 15'19" W 73.17 feet to a point of compound curvature; THENCE 64.56 feet along a curve to the right whose radius is 150.00 feet through a central angle of 24'39'37" and whose long chord bears N 88'4O'44" W, 64.06 feet to a point of reverse curvature, THENCE 33.27 feet along a curve to the left whose radius 19 150.00 feet through a central angle of 12'42'31" and whose long chord bears N 82'42'11 W, 33.20 feet to a point of tangency, THENCE N 89'03'27" W. 126.20 feet to a point of curvature; THENCE 75.46 feet along a curve to the right whose radius 50.00 feet through a central angle of 86'28'23" and whose long chord bears N 45 ' 49 ' 15" W. 68.50 feet to a point of tangency; THENCE N 02'35'04" W. 109.94 feet to the northwest corner; THENCE 89'22'04" E, 59.28 feet to a point; THENCE N 76 16' 41" E, 272.05 feet to the northeast corner; THENCE S 13 43'19" E, 205.00 feet to the point. of beginning and containing 1.4907 acres more or less. SEE ATTACHMENT "A" EXHIBIT "B" Legal Description - Leased Premises AT TACHMENT "A" SCALE 1"=100' TRACT B-l NORTHEAST UNIT TOWN OF ARlSCO GRANT TRACT B 2 NORTHEAST UNIT TOWN OF ATRISCO GRANT EXHIBIT "C" INDEX TO DRAWINGS DRAWING NO. DATE D1 January 1, 1994 A0.1 January 1, 1994 A1.1 January 1, 1994 CO.O January 1, 1994 Al.2 January 1, 1994 A2.1 January 1, 1994 A2.2 January 1, 1994 A2.3 January 1, 1994 A3.1 January 1, 1994 A4.1 January 1, 1994 A4.2 J January 1, 1994 A4.3 January 1, 1994 A4.4 January 1, 1994 A5.1 January 1, 1994 A5.2 January 1, 1994 S0.1 January 1, 1994 S0.2 January 1, 1994 MPO.1 January 1, 1994 M1.1 January 1, 1994 M2.1 January 1, 1994 M2.2 January 1, 1994 P1.1 January 1, 1994 P2.1 January 1, 1994 E0.1 January 1, 1994 E1.1 January 1, 1994 E1.2 January 1, 1994 E1.3 January 1, 1994 E1.4 January 1, 1994 E1.5 January 1, 1994 E1.6 January 1, 1994 E2.1 January 1, 1994 E3.1 January 1, 1994 E4.1 January 1, 1994 E4.2 January 1, 1994 E4.3 January 1, 1994 E4.4 January 1, 1994 E4.5 January 1, 1994 E4.6 January 1, 1994 E4.7 January 1, 1994 EXHIBIT "C1 " DRAWING NO DATE AO.1 July 1, 1993 A1.1 July 1, 1993 Al.2 July 1, 1993 A2.1 July 1, 1993 A2.2 July 1, 1993 A2.3 July 1, 1993 A3.1 July 1, 1993 A4.1 July 1, 1993 A4.2 July 1, 1993 A4.3 July 1, 1993 A4.4 July 1, 1993 A5.1 July 1, 1993 A5.2 July 1, 1993 SO.1 July 1, 1993 S0.2 July 1, 1993 MPO.1 July 1, 1993 M1.1 July 1, 1993 M2.1 July 1, 1993 M2.2 July 1, 1993 M1.1 July 1, 1993 M2.1 July 1, 1993 M2.2 July 1, 1993 P1.1 July 1, 1993 P2.1 July 1, 1993 EO.1 July 1, 1993 E1.1 July 1, 1993 E1.2 July 1, 1993 E1 3 July 1, 1993 E1.4 July 1, 1993 E1.5 July 1, 1993 E2.1 July 1, 1993 E3.1 July 1, 1993 E4.1 July 1, 1993 E4.2 July 1, 1993 E4.3 July 1, 1993 E4.4 July 1, 1993 E4 5 July 1, 1993 E4.6 July 1, 1993 E4.7 July 1, 1993 1. Reservations contained in Patent from United States of America filed August 21, 1905, recorded in Book 35, Page 91, Records of Bernalillo County, New Mexico. 2. Covenants, conditions, restrictions and easements as noted on Replat of Tract A-43 of the N.E. Unit & Vacated Portions of Corona Drive & Blanco Place, N.W., Town of Atrisco Grant, recorded December 21, 1984 in Volume C25, Folio ]94, as Document No. 84-97111, Records of Bernalillo County, New Mexico. 3. Access Easement Reserved Across the westerly portion of insured premises and a buffer zone easement reserved across the northwesterly portion of the insured premises, as shown Replat of Tract A-43 of the N.E. Unit & Vacated Portions of Corona Drive & Blanco Place, N.W., Town of Atrisco Grant, recorded December 2l, 1984 in Volume C25, Folio 194, as Document No. 84-97111, Records of Bernalillo County, Mew Mexico. 4. Easement granted to Public Service Company of New Mexico and Mountain States Telephone and Telegraph Company, filed August 28, 1987, recorded in Book Misc. 52gA, Page 579, as Document No. 87-9072S, Records of Bernalillo County, New Mexico. 5. Easement granted to Public Service Company of New Mexico and Mountain States Telephone and Telegraph Company, filed August 28, 1987, recorded in Book Misc. 528R, Page 586, as Document No. 87-97034, Records of Bernalillo County, New Mexico. 6. Covenants, conditions, restrictions and easements contained in Declaration of Restrictions and Cross-Easements by Central Avenue Partners, a New Mexico corporation, and Sequoia-Coors, Incorporated, a New Mexico corporation, dated 1994, filed ~~~~ , 1994, recorded in Book , Page , as Document No. , Records of Bernalillo County, New Mexico. EXHIBIT "D" Title Restrictions 1. Reservations contained in Patent from United States of America filed August 21, 1905, recorded in Book 35, Page 91, Records of Bernalillo County, New Mexico. 2. Covenants, conditions, restrictions and easements as noted on Replat of Tract A-43 of the N.E. Unit & Vacated Portions of Corona Drive & Blanco Place, N.lV., Town of Atrisco Grant, recorded December 21, 1984 in Volume C25, Folio 194, as Document No. 84-97111, Records of Bernalillo County, New Mexico. 3. Access Easement Preserved Across tile westerly portion of insured premises and a buffer zone easement reserved across the northwesterly portion of the insured premises, as shown on Replat of Tract A-43 of the N.E. Unit & Vacated Portions of Corona Drive & Blanco Place, N.W., Town of Atrisco Grant, recorded December 21, 1984 in Volume C25, Folio 194, as Document No. 84-97111, Records of Bernalillo County, New Mexico. 4. Easement granted to Public Service Company of New Mexico and Mountain States Telephone and Telegraph Company, filed August 28, 1987, recorded in Book Misc. 528A, Page 579, as Document No. 87-90728, Records of Bernalillo County, New Mexico. 5. Easement granted to Public Service Company of New Mexico and Mountain States Telephone and Telegraph Company, filed August 28, 1987, recorded in Book Misc. 528A, Page 586, as Document No. 87-97034, Records of Bernalillo County, New Mexico. 6. Covenants, conditions, restrictions and easements contained in Declaration of Restrictions and Cross-Easements by Central Avenue Partners, a New Mexico corporation, and Sequoia-Coors, Incorporated, a New Mexico corporation, dated , 1994, filed , 1994, recorded in Book , Page , as Document No. , Records of Bernalillo County, New Mexico. EXHIBIT "E" Declaration of Restrictions and Cross-Easements This Declaration of Restrictions and Cross-Easements is executed as of the day of , 1 9 , by and between Central Avenue Partners, a New Mexico General partnership (hereinafter "Central") and SequoiaCoors, Incorporated, a New Mexico Corporation (hereinafter "SC Inc."). WHEREAS, Central is, or will become, the fee owner of that certain parcel of real estate described as Parcel A located at the Northeast corner of Coors Boulevard and Sequoia Road, NW in the City of Albuquerque, County of Bernalillo, State of New Mexico, which parcel is more particularly described in Exhibit A and shown on Exhibit "B" attached hereto and by this reference incorporated herein; WHEREAS, SC Inc. is, or will become, the fee owner of that certain parcel of real estate described as Parcel B. adjoining parcel A at the Northeast corner of Coors Boulevard and Sequoia Road, NW in the City of Albuquerque, County of Bernalillo, State of new Mexico, which parcel is more particularly described in Exhibit "A" and shown on Exhibit "B"; WHEREAS, Central and SC Inc. wish to make certain agreements and place certain restrictions as to their respective parcels and to establish cross-easements upon said parcels A and B within the "Common Areas" of each parcel which shall for the purposes herein mean those areas used from time to time for parking, ingress/ egress, pedestrian walkways, service drives and landscaping, for the mutual benefit of Parcel A and Parcel B. NOW, THEREFORE{, in consideration of the above premises and the mutual covenants hereinafter expressed, Central and SC Inc. hereby declare, grant, and establish the following restrictions, easements and covenants for the mutual benefit of Parcel A and Parcel B: 1. Central hereby grants and establishes for the benefit of the owner of Parcel B. their lessees, customers and invitees, mutual non-exclusive cross-easements of ingress, egress and parking over an across the Common Areas of Parcel A as such may exist from time to time. 2. SC Inc. hereby grants and establishes for the benefit of the owners of Parcel A, their lessees, customers and invitees, mutual non-exclusive cross-easements of ingress, egress and parking over and across the Common Areas of Parcel "B" as such may exist from time to time. 3. Central and SC Inc. hereby establish and grant for the benefit of each Parcel and the owners thereof and their successors and assigns, non-exclusive mutual easements across, through and under the Common Areas of each respective Parcel as such are maintained from time to time, for utility services including but not limited to water, storm sewer, drainage, sanitary sewer, gas and electrical distribution systems, currently existing, or to be constructed in the future, in the Common Areas. Any installed utility line or system may, however, be relocated, provided that such relocation shall not interfere with, or increase the cost of, or diminish the other tract's utility services, and may also be used and extended by the other tract. The aforesaid mutual utility easements shall include the right, on prior notice given by one to the other, to construct and to repair the facilities referred to therein to the extent necessary to fully enjoy the benefits of the rights so granted, but nothing contained in this sentence shall in any way modify, limit or lessen the obligations of the respective party, elsewhere in the paragraph. The party exercising any such construction or repair right shall repair any damage to the Common Areas caused by such exercise, and further agrees to indemnify and hold harmless the other party from and against any claims arising from or caused by said construction and repair. The party exercising the aforementioned construction or repair right shall give the other party at least thirty (30) days prior written notice unless the repairs are caused by an "emergency", which shall mean any sudden unexpected happening in which a failure to act immediately by one party would cause appreciable damage to person or property, in which event such repairs may be made as soon as is appropriate, but in a reasonable manner. All construction or repairs shall be done in such a manner so as not to interfere with or obstruct access to the other party's property and shall be done in a careful and workmanlike manner. 4. No barriers shall be constructed along the common property lines in the Common Areas of Parcels A and B. except for curbing, sidewalks, parking and landscaping shown on Exhibit "B" hereto or as such may exist, or be replaced or revised from time to time . No substantial change shall l be made to the grades of each tract. 5. No buildings shall be constructed at any time within the land area of Parcels A or B east of the "Building Setback Line" shown on Exhibit "B" hereto. Canopies, footings or foundations which extend into the common area or "No Building Area", together with any columns or posts supporting same shall not be deemed a violation of any of the provisions of this Agreement and shall not be deemed to be part of the Common Area. 6. Central and SC Inc. hereby declare that those portions of Parcels A and B within the area which is striped and designated "25' Access Road Areas on Exhibit "B" hereto shall be and forever remain a non-exclusive access road and driveway for the benefit of the owners of Parcels A and B. their lessees, customers and invitees for ingress and egress to and from said Parcels A and B. The parties further agree as follows: a) The Access Road Area shall be maintained equally by the owners of Parcel A and Parcel A, provided however, if any damage to the Access Easement is caused by the owner of either Parcel, or its lessees or employees, that party shall be responsible for repairing any such damage at its sole expense. b) Except in the event of any emergency, all decisions related to maintenance and repair of the Access Road Area shall be mutually agreed upon by the owners of Parcel A and Parcel B. in advance. c) If emergency repairs to the Access Easement are undertaken by the owner of one Parcel without the consent of the other, reimbursement by the non-consenting owner shall be limited to reasonable costs under the circumstances. d) If the owner of either Parcel A or Parcel B is entitled to payment from the other pursuant to the terms of this Agreement, the reimbursement shall be made within thirty (30) days aster receipt of written request therefor, or thereafter, interest shall accrue on any unpaid amount at the rate of one and one-half percent (1.5%) per month until paid in full. e) The Access Easement as shown on Exhibit "B" hereto, shall not be changed without the mutual consent of the owners of Parcel A and Parcel B. which consent shall not be unreasonably withheld. f) If a dispute arises regarding the necessity for maintenance and repairs, or the amount of reimbursement, any such dispute shall be settled through binding arbitration in Albuquerque, New Mexico utilizing the Rules of the American Arbitration Association for commercial transactions; all other matters related to this Agreement may be enforced through judicial proceedings. g) In the event any of the parties enforce the provisions hereof through arbitration or judicial proceedings, the prevailing party shall be entitled to reasonable attorney's fees and court costs from the non-prevailing party. 7. All notices required to be given pursuant to the provisions of this Agreement shall be in writing and either delivered by courier or mailed postage prepaid, by certified or registered mail, return receipt requested, addressed to the parties as follows: TO: Sequoia-Coors, Incorporated c/o Mr. Clyn Inman, Secretary-Treasurer 3108 Texas, NE Albuquerque, NM 87110 TO: Central Avenue Partners c/o Peterson Properties Real Estate Services, Inc. 2325 San Pedro, NE, Suite 2-A Albuquerque, NM 87110 or to such address as is thereafter provided by the parties hereto. If any notice is mailed, it shall be deemed received upon the earlier of actual receipt or on the third business day following the date of mailing. If any written notice is hand delivered or delivered by courier, it shall be deemed received upon delivery. 8. The easements and covenants established by this Declaration shall run in perpetuity and are intended to be and shall be construed as covenants running with the land, binding upon, and inuring to the benefit of and enforceable by the undersigned parties, and all subsequent owners of the respective Parcels or any part thereof. The covenants and easements established hereby are not intended and shall not be construed as a dedication of such rights in the Common Area or Access Road Area for public use, and this Declaration shall not be deemed to vest any rights in any customers, invitees or the public at large, but are solely for the benefit of the owners of the respective tracts and their lessees, customers and invitees to the extent heretofore established. 9. These covenants and easements may be modified, amended or cancelled by a writing executed by the fee owner of Parcel A and by the fee owners of a majority of tile land area of Parcel B at the time of such modification, amendment or cancellation. EXECUTED as of the date first above written. CENTRAL AVENUE PARTNERS, a New Mexico general partnership By: PETERSON PROPERTIES REAL ESTATE SERVICES, INC., a New Mexico Corporation, as Managing General Partner By: JAMES A. PETERSON, President By: RETAIL DEVELOPMENT CONSULTANTS, INC., a New Mexico Corporation, as General Partner By: . STEVEN J. JOHNSON, President Sequoia-Coors, Incorporated, a New Mexico Corporation ARTHUR W. BROWN, President EXHIBIT "E" Declaration of Restrictions and Cross-Easements By: STATE OF NEW MEXICO ) ) COUNTY OF BERNALILLO) of CLYN INMAN, Secretary-Treasurer This instrument was acknowledged before me this day , 1994, by James A. Peterson, President of Peterson Properties Real Estate Services, Inc., a New Mexico Corporation, Managing General Partner of Central Avenue Partners, a New Mexico General Partnership, on behalf of said corporation and partnership. My Commission Expires: STATE OF NEW MEXICO ) ) COUNTY OF BERNALILLO) NOTARY PUBLIC This instrument was acknowledged before me this _ day of , 1994, by Steven J. Johnson, President of Retail Development Consultants, Inc., a New Mexico Corporation, General Partner of Central Avenue Partners, a New Mexico General Partnership, on behalf of said corporation and partnership. NOTARY PUBLIC My Commission Expires: STATE OF NEW MEXICO ) ) COUNTY OF BERNALILLO) This instrument was acknowledged before me this day , 1994, by Arthur W. Brown, President of Sequoia-Coors Inc., a New Mexico Corporation, on behalf of said corporation. NOTARY PUBLIC My Commission Expires: STATE OF NEW MEXICO ) ) C OUNTY OF BERNALILLO) This instrument was acknowledged before me this day , 1994, by Clyn Inman, Secretary-Treasurer of Sequoia-Coors Inc., a New Mexico Corporation, on behalf of said corporation. NOTARY PUBLIC Hy Commission Expires: EXHIBIT "E" Declaration of Restrictions and Cross-Easements EXHIBIT "A" LEGAL DESCRIPTION OF PARCELS A & B (to be inserted) FIRST AMENDMENT TO_LEASE AND MEMORANDUM OF LEASE This FIRST AMENDMENT TO LEASE AND MEMORANDUM OF LEASE is made and entered into this l2th day of December, 1994, by and between CENTRAL AVENUE PARTNERS, a New Mexico general partnership, as Landlord, and WALGREEN HASTINGS CO., a Nebraska corporation, as Tenant; WITNESSETH: WHEREAS, by lease dated April 25, 1994 (the "Lease"), recorded by memorandum thereof of even date on October 25, 1994 in Book 94-29, Pages 9456-9464, in the Official Records of Bernalillo County, New Mexico, as Document Number 94128271, Landlord leased to Walgreen Co., an Illinois corporation, Tenant's predecessor in interest, certain premises (the "Leased Premises"), located at the northeast corner of Coors Boulevard and Sequoia Road in the City of Albuquerque, County of Bernalillo, State of New Mexico as legally described in Exhibit"B" attached to the Lease and memorandum thereof, for the term and upon the covenants and conditions therein set forth; and WHEREAS, Landlord acquired legal title to portions of the Leased Premises on October 13, 1994 and October 14, 1994; and WHEREAS, an increased area acquired by Landlord shall be the new Leased Premises; and WHEREAS, Landlord and Tenant hereby desire to modify the Lease and memorandum thereof accordingly as hereinafler provided; NOW, THEREFORE, in consideration of the premises and of the terms and conditions set forth herein, it is agreed by the parties as follows: 1. The legal description attached to the Lease and memorandum thereof as Exhibit"B" is hereby deleted and a new legal description attached hereto as Exhibit"/\" is inserted in lieu thereof. 2. In all other respects, the Lease and memorandum thereof and all of Use applicable terms thereof shall remain unmodified and shall continue in full force and effect. 3. This instrument shall also bind and benefit, as the case may require, the heirs, legal representatives, assigns and successors of the respective parties, and all covenants, conditions and agreements herein contained shall be construed as covenants running with the land. IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment to Lease and Memorandum of Lease as of the day and year first above written. WALGREEN HASTINGS CO. CENTRAL AVENUE PARTNERS By Peterson Properties Real Estate Services, Inc., Managing General Partner By Vice President By James A. Peterson President By Retail Development Consultants, Attest: Assistant Secretary Inc., General Partner By Steven J. Johnson President Witnesses: Witnesses: Print Name:Colleen R. McGrath Print Name: Mae Peterson STATE OF ILLINOIS) ) SS. COUNTY OF LAKE ) The foregoing instrument was acknowledged before me this day of , 1994 by , Vice President of WALGREEN HASTINGS CO., a Nebraska corporation, on behalf of the corporation. He is personally known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged that he executed and delivered the foregoing instrument for the purposes and consideration therein expressed, as the act of said corporation. Notary Public (Seal) STATE OF NEW MEXICO ) ) SS. COUNTY OF BERNALILLO) The foregoing instrument was acknowledged before me this 1 vth day of Decenter , 1994 by James A. Peterson, President of . PETERSON PROPERTIES REAL ESTATE SERVICES, INC., a New Mexico corporation, on behalf of the corporation. He is known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged that he executed and delivered the foregoing instrument for the purposes and consideration therein expressed, and Whereof said corporation. Betty L. Peterson Notary Public (Seal) STATE OF NEW MEXICO ) ) SS. COUNTY OF BERNALILLO) Notary Bond Filed with Secretary of State My Commission Expires 2-16-97 The foregoing instrument was acknowledged before me this 12th day of December , 1994 by Steven J. Johnson, President of RETAIL DEVELOPMENT CONSULTANTS, INC., a New Mexico corporation, on behalf of the corporation. He is known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged that he executed and delivered the foregoing instrument for the purposes and consideration therein expressed, and as the act of said corporation. Betty L. Peterson Notary Public (Seal) OFFICIAL SEAL BETTY L. PETERSON NOTARY PUBLIC NEW MEXICO Notary Bond Filed with Secretary of State My Commission Expires 2-16-97 EXHIBIT "'A" LEGAL DESCRIPTION Tract B-2-B, NORTHEAST UNIT, TOWN Ol: ATRISCO, as the same is shown and designated on the plat thereof filed for record in the office of the County Clerk of Bernalillo County, New Mexico on October 21, 1994, in Volume 94-C, Folio 359, and being more particularly described by metes and bounds as follows: BEGINNING at the southeast corner of the herein described tract, said point being the intersection of the westerly line of a 20 foot Public Alley and the northerly right-of-way line of Sequoia Road N.W.; THENCE S 67 31' 11" W. 26.93 feet to a point of curvature; Thence 73.39 feet along a curve to Use right whose radius is 366.07 feet through a central angle of 11 29' 15" and whose long chord bears S 73O 15' 49" W. 73.27 feet to a point of non-tangency; THENCE N 89 20' 17" W. 130.83 feet to a point; THENCE N 78 14' 22" W. 50.37 feet to a point; THENCE N 88 23' 37" W. 49.91 feet to a point of curvature; THENCE 81.69 feet along a curve to the right whose radius is 50.00 feet through a central angle of 93 36' Z0" and whose long chord bears N 41 35' Z7" W. 72.90 feet to a point of tangency; THENCE N 05 12' 43" E, 59.38 feet to a point of curvature; THENCE 24.90 feet along a curve to the right whose radius is Z5.00 feet through a central angle of 57 03' 49" and whose long chord bears N 33 44' 38" E, 23.88 feet to a point of non-tangency; THENCE N 00 40' 24" E, 35.00 feet to the northwest corner; THENCE S 89 19' 36" E, 72.69 feet to a point; THENCE N 76 16' 41" E, 238.22 feet to the northeast corner; THENCE S 13 43' 19" E, 212.00 feet to the point of beginning and containing 1.5441 acres more or less. STATE OF ILLINOIS COUNTY OF LAKE This instrument was acknowledged before me this 25th day of August, 1994, by Allan M. Resnick, of WALGREEN HASTINGS CO., a Nebraska corporation. Notary Public My commission expires: 5-18-96 . OFFICIAL SEAL ELENA KRAUS NOTARY PUBLIC. STATE OF ILLINOIS MY COMMISSION EXPIRES 5/ lRl9fi STATE OF NEW MEXICO ) ) SS. COUNTY OF BERNALILLO) This instrument was acknowledged before me this 1st day of September , 1994, by James A. Peterson, President of Peterson Properties Real Estate Services, Inc., a New Mexico corporation, Managing Partner of CENTRAL AVENUE PARTNERS, a New Mexicewneral partnership. My commission expires: February 16, 1997 STATE OF NEW MEXICO ) ) SS. COUNTY OF BERNALILLO) This instrument was acknowledged before me this 2d day of September , 1994, by Amar Tesch, Vice President of Retail Development Consultants, Inc., a New Mexico corporation, General Partner of CENTRAL AVENUE PARTNERS, a New Mexico general partnership. Notary Public My commission expires: February 16, 1997 OFFICIAL SEAL BETTY L PETERSON NOTARY PUBLIC NEW MEXICO Notary Bond Filed with Secretary of State My Commission Expires: February 16, 1997 EXHIBIT "A" Legal Description A tract of land situate within the Town of Atrisco Grant , projected Section 2, Township 10 North, Range 2 East, New Mexico Principal Meridian within the city of Albuquerque, Bernalillo County, New Mexico being a southerly portion of TRACT B-2, NORTHEAST UNIT, TOWN OF ATRISCO GRANT as the same is shown and designated on said plat filed for record in the office of the County Clerk of Bernalillo County, New Mexico on January 19 , 1987 in Volume C32. Folio 150 together with a southerly portion of TRACT B-1, LAND OF E. FISH as the same is shown and designated on said plat tiled for record in the office ox the County Clerk of Bernalillo County, New Mexico on July 26, 1976 In Volume B11, Folio 154 and also being a portion of TRACT B-A, CIRCLE R CORPORATION as the same is shown and designated on said plat filed for record in the office of the County Clerk of Bernalillo County, New Mexico on May 26, 1987 in Volume C33, 152 and being more particularly described as follows: BEGINNING at the southeast corner of the herein described tract, said point being the intersects on of the westerly line of a 20 foot Public Alley and the northerly right-of-way line of Sequoia Road N . W . THENCE 8 67'31'11" W. 26.93 feet to a print of curvature; THENCE 73.29 feet along a curve to the right whose radius is 366.07 feet through a central angle of 11'28'16" and whose long chord bears S 73"15'19" W. 73.17 feet to a point of compound curvature THENCE 64.56 feet along a curve to the right whose radius 49 150.00 feet through a central angle of 24g39'37" and whose long chord bears to 88 ' 4o ' 44" W. 64.06 feet to a point of reverse curvature THENCE 33.27 feet along a curve to the left whose radius is 150.00 feet through a central angle of 12f42'31" and whose long chord boars N 82-42'11" W. 33.20 feet to a point of tangency THENCE N 89'03'27" W. 126.20 feet to a point of curvature THENCE 75.46 feet along a curve to the tight whose radius is 50,00 feet through a central angle of 86'28'23" and whose long chord boars N 4S'49'15" W. 68.50 feet to a point of tangency THENCE N 02'35'04" W. 109.94 feet to the northwest corner) THENCE N 89o22'04" E, S9,28 feet to a point; THENCE N 76416'41" E, 272.05 feet to the northeast cornet THENCE S 13'43'19" E, 208.00 feet to the point OF beginning and containing 1.4901 aorta more or leas. , RELEASE OF MEMORANDUM OF LEASE The undersigned, CENTRAL AVENUE PARTNERS, a New Mexico General Partnership, as Landlord, and WALGREEN HASTINGS CO., a Nebraska corporation, successor in interest to Walgreen Co., as Tenant, executed a Memorandum of Lease dated April 25, 1994, recorded on July 26, 1994 in Book 94-22, Page 1891, as Document No. 94093623, in the official records of Bernalillo County, New Mexico ("Memorandum") encumbering the real property located in the County of Bernalillo, State of New Mexico, legally described in Exhibit "A" attached hereto and made a part hereof. The undersigned parties hereby declare that the Memorandum is released from the real estate described above. IN WITNESS WHEREOF, the undersigned have set their hands and seals effective on the 25th day of August, 1994. CENTRAL AVENUE PARTNERS WALGREEN HASTING CO., a a New Mexico general partnership Nebraska Corporation By: Peterson Properties Real Estate Services, Inc., a New Mexico corporation, Its Managing Partner By: Retail Development Consultants, Inc., a New Mexico corporation, General Partner After recording, return to: WESTLAND DEVELOPMENT CO., INC. 401 Coors Blvd., NW Albuquerque, NM 87121 EXHIBIT 10.5 ASSIGNMENT AND ASSUMPTION OF LEASE THIS ASSIGNMENT AND ASSUMPTION OF LEASE is entered into as of _ day of , 1995, by and between CENTRAL AVENUE PARTNERS, a New Mexico general partnership ("Assignor") and WESTLAND DEVELOPMENT CO., INC., a New Mexico corporation ("Assignee"). RECITALS: WHEREAS, pursuant to that certain Deposit Receipt and Real Estate Purchase Contract ("Purchase Agreement"), dated August 22, 1994, between Assignor and Assignee, covering that certain real property more particularly described on Exhibit "A" attached hereto and by this reference incorporated herein ("Real Property"), Assignor is concurrently, with the execution of this Assignment and Assumption, conveying to Assignee all of its right, title and interest in and to said Real Property; WHEREAS, Assignor, as Landlord, and Walgreen Co., Inc., an Illinois corporation, as Tenant, executed that certain Lease dated April 25, 1994 ("Lease"), covering said Real Property; WHEREAS, by Assignment of Lease Agreement dated June 21, 1994, Walgreen Co. assigned all of its right, title and interest under the Lease to Walgreen Hastings Co., a Nebraska corporation, and Walgreen Hastings Co. assumed all of such right, title and interest; and WHEREAS, pursuant to the aforesaid Purchase Agreement and as a part of the conveyance of its interest in said Real Property to Assignee by Assignor, the parties are executing this Assignment and Assumption of Lease. NOW, THEREFORE, in consideration of the above premises, the mutual covenants hereinafter expressed, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Assignor hereby assigns, transfers and conveys to Assignee all of its right, title and interest as Landlord, under, in and to the aforesaid Lease. 2. Assignor hereby represents and warrants that as of the date hereof: a. The Lease is in full force and effect; b. default by the c. default from d. To the best of Assignor's actual knowledge, no circumstance or condition exists which with the giving of notice or the passage of time, or both, would constitute a default by the Landlord under the Lease; e. To the best of Assignor's actual knowledge, no default by the Tenant under the Lease exists as of the date hereof; and f. To the best of Assignor's actual knowledge, no circumstance or condition exists which with the giving of notice or the passage of time, or both, would constitute a default by the Tenant under the Lease. 3. Assignee hereby agrees to and hereby accepts the foregoing assignment, and, in addition, expressly assumes and agrees to keep, perform and fulfill all of the terms, covenants, obligations and conditions required to be kept, performed and fulfilled from and after the date hereof by the Landlord under or with respect to the aforesaid Lease, and Assignee further agrees to indemnify, defend and hold harmless Assignor from and against any and all liability, loss, cost, damage or expense (including, without limitation, attorney's fees and costs) directly or indirectly arising out of or related to its obligations arising from and after the date hereof as Assignee of the Lease. 4. Assignor agrees to indemnify, defend, and hold harmless Assignee from and against any and all liability, loss, cost, damage, or expenses (including without limitation, attorneys' fees and costs) directly or indirectly arising out of or related to the failure of Assignor to perform the obligations of the Landlord under the Lease prior to the date hereof. 5. This Assignment and Assumption of Lease shall be binding upon and inure to the benefit of the parties, their respective heirs, personal representatives, successors and assigns. 6. This Assignment and Assumption of Lease may be executed in a number of identical counterparts. If so executed, each such counterpart is to be deemed an original for all purposes, and all such counterparts shall collectively constitute one agreement, but for the purpose of proving the existence of this Assignment and Assumption of Lease it shall not be necessary to produce or account for more than one such counterpart except for the purpose of demonstrating that any party is a signatory thereto. IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption of Lease to be executed as of the date first above written. ASSIGNOR: CENTRAL AVENUE PARTNERS, a New Mexico general partnership By: Peterson Properties Real Estate Services, Inc., a New Mexico corporation, as Managing General Partner By: James A. Peterson, President By: Retail Development Consultants, Inc., a New Mexico corporation, as General Partner By: Steven J. Johnson, President ASSIGNEE: WESTLAND DEVELOPMENT CO., INC., a New Mexico corporation By: Barbara Page, President/CEO ACKNOWLEDGMENTS STATE OF NEW MEXICO ) )SS. COUNTY OF BERNALILLO) The foregoing instrument was acknowledged before me this day of , 1995, by James A. Peterson, President of Peterson Properties Real Estate Services, Inc., Managing General Partner of Central Avenue Partners, a New Mexico general partnership, on behalf of said partnership. STATE OF NEW MEXICO ) )SS. COUNTY OF BERNALILLO) The foregoing instrument was acknowledged before me this day of , 1995, by Steven J. Johnson, President of Retail Development Consultants, Inc., General Partner of Central Avenue Partners, a New Mexico general partnership, on behalf of said partnership. My commission expires: STATE OF NEW MEXICO ) )SS. COUNTY OF BERNALILLO) The foregoing instrument was acknowledged before me this day of , 1995, by Barbara Page, President/CEO of Westland Development Co., Inc., a New Mexico corporation, on behalf of said corporation. Notary Public for the purpose of proving the existence of this Assignment and Assumption of Lease it shall not be necessary to produce or account for more than one such counterpart except for the purpose of demonstrating that any party is a signatory thereto. IN WITNESS WHEREOF, the parties have caused this Assignment and Assumption of Lease to be executed as of the date first above written. ASSIGNOR: CENTRAL AVENUE PARTNERS, a New Mexico general partnership By: Peterson Properties Real Estate Services, Inc., a New Mexico corporation, as Managing General Partner By: James A. Peterson, President By: Retail Development Consultants, Inc., a New Mexico corporation, as General Partner By: Steven a. Johnson, President ASSIGNEE: WESTLAND DEVELOPMENT CO., INC., a New Mexico corporation By: Barbara Page, President/CEO ACKNOWLEDGMENTS STATE OF NEW MEXICO ) )SS. COUNTY OF BERNALILLO) The foregoing instrument was acknowledged before me this 29th day of March, 1995, by James A. Peterson, President of Peterson Properties Real Estate Services, Inc., Managing General Partner of Central Avenue Partners, a New Mexico general partnership, on behalf of said partnership. My commission expires: Februarv 16. 1997 STATE OF NEW MEXICO ) )SS. COUNTY OF BERNALILLO) The foregoing instrument was acknowledged before me this 29th day of March , 1995, by Steven J. Johnson, President of Retail Development Consultants, Inc., General Partner of Central Avenue Partners, a New Mexico general Partnership, on, behalf of said partnership. My commission expires: February 16. 1997 STATE OF NEW MEXICO ) )SS. COUNTY OF BERNALILLO) The foregoing instrument was acknowledged before me this _ day of , 1995, by Barbara Page, President/CEO of Westland Development Co., Inc., a New Mexico corporation, on behalf of said corporation. Notary Public My commission expires: LEGAL DESCRIPTION OF THE REAL PROPERTY Tract B-2-B of Plat of Tracts B-2-A and B-2-B, Northeast Unit, Town of Atrisco, within the town of Atrisco Grant, Projected Section 2, Township 10 North, Range 2 East, N.M.P.M., City of Albuquerque, New Mexico, as the same is shown and designated on the Plat of said Addition, filed in the Office of the County Clerk of Bernalillo County, New Mexico, on October 21, 1994 in Volume 94C, Folio 359. ASSIGNMENT OF LEASE AGREEMENT THIS AGREEMENT, made as of the day of June, 1994, by and between WALGREEN CO., an Illinois corporation, as Assignor and WALGREEN HASTINGS CO., a Nebraska corporation, as Assignee. RECITALS: WHEREAS, Assignor and Central Avenue Partners., a New Mexico general partnership, ("Landlord") entered into a lease agreement dated April 25, 1994 ("Lease Agreement"), whereby Assignor leased from Landlord the premises located in Albuquerque, New Mexico at the northeast corner of Coors Boulevard and Sequoia Road; and WHEREAS, Assignor desires to assign to Assignee all of assignor's right, title and interest under the Lease Agreement and Assignee desires to assume all of such right, title and interest. NOW, THEREFORE, in consideration of the payment of Ten (10) Dollars from Assignee to Assignor and other valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Assignor hereby assigns to assignee all of Assignor's right , title and interest in and under the Lease Agreement, to have and to hold unto assignee, its successors and assigns. 2. Assignee hereby accepts the assignment of the Lease Agreement and assumes all of Assignor's obligation thereunder. 3. The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their legal representatives, successors and assigns. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. ASSIGNOR WALGREEN CO. By: Vice President ASSIGNEE WALGREEN HASTINGS CO. By: Vice President EX-10 5 EXHIBIT 10.6 LEASE AGREEMENT of Lease made this day of 1995, by and between GEORGE BRUNACINI and JEANNETTE BRUNACINI, husband and wife ("Landlord") and CIRCUIT CITY STORES, INC., a Virginia corporation ("Tenant"), WITNESSETH: 1. DEMISE - DEMISED PREMISES - Landlord, for and in consideration of the covenants and conditions hereinafter contained on the part of the Tenant to be performed, and in consideration of the rental hereinafter reserved, does hereby grant, lease, demise and let unto Tenant and Tenant does hereby rent and take from Landlord those premises described as: Legal Description: Lot C-4B1, Albuquerque Industrial Park. as more fully described or shown on Exhibit "A", attached hereto and made a part hereof ("Land"), together with the buildings and improvements more fully described on Exhibit "B", attached hereto and made a part hereof ("Leasehold Improvements"), to be constructed thereon by Landlord, all rights and easements appurtenant thereto, and all of the fixtures, apparatus, equipment and improvements to be provided by Landlord and located therein or thereon, all of which are hereinafter called the "Demised Premises". 2. USE-WARRANTIES AND REPRESENTATIONS BY LANDLORD Landlord agrees that Tenant, and those holding by, through and under Tenant, may use the Demised Premises for any lawful purpose, except as otherwise expressly provided herein. It is the intention of Tenant to use the Demised Premises for the purpose of testing, repair, assembly, storage and distribution electronic equipment and appliances, and activities related thereto. 3 TERM-OPTION - (a) This Lease shall be effective from the date first above set forth ("Effective Date"); the term of this Lease shall commence on substantial completion of the Leasehold Improvements and actual delivery of the Demised Premises to Tenant, which date shall be no later than three ( 3) months from the Effective Date or June 1, 1995, whichever occurs later, said date is hereinafter called the "Commencement Date" of this Lease, and the original term shall extend and continue for a period of ten (10) years from and after the Commencement Date. Landlord and Tenant shall execute a statement acknowledging the Commencement Date which shall be attached hereto as Exhibit "C" and incorporated herein by reference. (b) Tenant is hereby granted two (2) five (5) year options to renew and extend the term of this Lease following the expiration of the initial term of this Lease ("Option Term(s)"). The options shall only be exercised by written notice to Landlord given at least six (6) months prior to the date on which the initial Lease term expires, if exercising the initial option, and thereafter six (6) months prior to the date on which the first Option Term expires and provided further that Tenant is not in default under the current Lease obligations. However, in the event the first option is not exercised, the remaining option shall immediately expire. The Lease provisions for any Option Term shall be the same as are in effect for the initial term, excepting rent which shall be as set forth in Paragraph 4 hereinafter. 4. RENT - Rent shall accrue from and after the Commencement Date and shall be payable by Tenant in lawful money of the United States of America, in advance on or before they first day of each calendar month, prorated if the first or last month is not a full calendar month, as follows: First year, $4.25 per square foot of GLA (as hereinafter defined) per year for a monthly rent of $8,212.77; Second year, $4.38 per square foot per year for a monthly rent of $8,463.99; Third year, $4.51 per square foot per year for a monthly rent of $8,715.20; Fourth year, $4.64 per square foot per year for a monthly rent of $8,966.41; Fifth year, $4.78 per square foot per year for a monthly rent of $9,236.95; Sixth year, $4.93 per square foot per year for a monthly rent of $9,526.81; Seventh year, $5.07 per square foot per year for a monthly rent of $9,797.35; Eighth year, $5.23 per square foot per year for a monthly rent of $10,106.54; Ninth year, $5.38 per square foot per year for a monthly rent of $10,396.40; Tenth year, $5.55 per square foot per year for a monthly rent of $10,724.91. In the event the Commencement Date is not the first day of a month, the Lease term shall end, unless sooner terminated, on the last day of the month in which the tenth anniversary occurs, or the month in which the fifth anniversary of an Option Term occurs, with rent being prorated for the last month. Coincident with the execution of this Lease, Tenant is paying Landlord the first month's rent in the amount of $8,212.77. In the event the option to renew for one or both of the Option Term(s) is exercised by Tenant, the rent shall be increased each year of the Option Term(s) by the lesser of (i) two (2) times the increase in the CPI-U for the Albuquerque metropolitan area for the prior year, or (ii) 3k above the rent for the prior year. The parties agree that the gross leasable area of the building on the Demised Premises is 23,189 square feet ("GLA"). 5. ASSIGNMENT - SUBLETTING - Tenant and its assignees may assign this Lease or sublet a portion or portions or all of the Demises Premises, with Landlord's written consent, which consent shall not be unreasonably delayed or withheld. Each assignee or subtenant shall hold subject to all provisions of this Lease, and no assignment or subletting shall release Tenant from the obligations of this Lease. Notwithstanding the provisions of this Paragraph, Tenant shall have the right to assign this Lease or sublet the Demised Premises to a parent, subsidiary or affiliate company without Landlord's written consent. 6. REQUIREMENTS OF LAW - Tenant shall promptly comply with all statutes, ordinances, rules, orders, regulations, and requirements of the Federal, State and Municipal governments and of any and all of their Departments and Bureaus, including without limitation Environmental Requirements (as such term is defined in Paragraph 31 below) (collectively called "governmental requirements") which are applicable to the use by Tenant of the Demised Premises, or Tenant's business and operations on the Demised Premises during the term or any renewal thereof. Landlord shall, at its sole expense, comply with any applicable laws enacted after the Commencement Date requiring alteration of any portion of the Demised Premises required to be maintained by Landlord pursuant to this Lease, unless such alterations are required solely because of the nature of Tenant's business and activities on the Demised Premises, rather than by virtue of ownership of the Demised Premises. Tenant shall, at its sole expense, comply with any such laws which require (i) alterations of any portion of the Demised Premises required to be maintained by Tenant hereunder and (ii) alterations of any portion of the Demised Premises required to be maintained by Landlord which are required solely because of the nature of Tenant's business and activities thereon; provided however, if such repairs by Tenant have a depreciable life in excess of the balance of the Lease term (including the renewal term) pursuant to Internal Revenue Service depreciation schedules in effect at the time of such repairs, or other nationally recognized depreciation schedules, Landlord shall reimburse Tenant upon demand for the portion of the cost of such repairs attributable to the period of time after the Lease term (including renewal term) expires. Either party may elect, by notifying the other party of such election, to terminate this Lease in the event the cost of any repairs required to be made by the electing party pursuant to applicable laws enacted after the commencement date exceeds 25k of the rent paid by Tenant for the immediately prior Lease year. This Lease shall terminate upon the date of such election unless the nonelecting party notifies the electing party within thirty (30) days of such election, of its intent to make the required repairs on behalf of the electing party, whereupon the termination election shall be null and void, this Lease shall remain in full force and effect, and the non-electing party shall complete the required alterations at its sole expense within the time limits and in the manner required by the applicable law. Prior to the commencement date, Landlord shall, at Landlord's expense, obtain any requisite subdivision approvals rendered necessary by making of this Lease. In case either party, after the time required to remedy defaults under this Lease, shall fail or neglect to comply with the governmental requirements set forth in this Paragraph 6, or any of them, and required to be complied with by the party, then the other party or its agents may, by entry if required, comply with any and all of the governmental requirements at the risk and expense of the defaulting party, and recover such expense from the defaulting party; any sums owing by Tenant to be added to the next monthly installment of rent and to be collectible as rent, and any sum owing by Landlord to be deductible from rents or other sums otherwise payable by Tenant to Landlord. 7. REPAIRS - (a) Except as provided elsewhere in this Lease, Tenant shall, at Tenant's expense, maintain and repair the Leasehold Improvements, including but not limited to heating, air conditioning, pavement, plumbing and electrical fixtures. Tenant shall also maintain and repair any additions to the Demised Premises made by Tenant and shall replace glass broken during the term of the Lease. Tenant shall not clog any plumbing, sewers, waste pipes, drains or water closets used by Tenant. Tenant shall also, at Tenant's expense, repair all damage to the walls, ceilings, doors and door frames caused by Tenant's use. All landscaping shall be maintained by Tenant at its expense. If, within fifteen (15) days after written notice by Landlord, Tenant fails to provide any maintenance or repairs required of Tenant and to complete the same with reasonable diligence, then Landlord may provide such repairs or maintenance for the account of Tenant and the cost thereof shall be added to the next monthly installment of rent payable hereunder and shall be collectible as rent. (b) During all terms of this Lease Landlord shall maintain and repair the foundation, roof, roof structure, gutters and downspouts, and structural walls and structural elements of the Leasehold Improvements, and damage due to fire or casualty, to the extent this Lease requires Landlord to insure against such fire or casualty. All repairs and maintenance to be made by Landlord shall be at Landlord's risk and expense. 8. ALTERATIONS BY TENANT - Tenant may, at Tenant's option and Tenant's risk and expense, make such alterations, additions, and improvements to the Demised Premises as Tenant may deem necessary for the conduct of Tenant's business therein; provided, however, that the written approval of Landlord shall be first obtained, which approval shall not be unreasonably delayed or withheld. Tenant shall have the right to install a sign on the exterior of the building portion of the Demised Premises and/or a free standing sign on the Demised Premises pursuant to all applicable governmental ordinances and subject to the prior written approval of Landlord. Landlord hereby approves the alterations, additions and improvements to be constructed on the Demised Premises which are itemized on Exhibit "D", attached hereto and made a part hereof. Tenant shall also have the right to make non-structural alterations, additions and improvements to the Demised Premises without Landlord's written consent provided said alterations, additions and improvements do not affect any electrical, plumbing, HVAC, mechanical or other building systems of the Demised Premises, and the cost therefor does not exceed $50,000.00. Upon the expiration of this Lease, or earlier termination thereof, Tenant shall be under no obligation to restore the Demised Premises to their original condition, but all alterations, additions, or improvements made to or put upon the Demised Premises shall become the property of the Landlord and shall remain upon and be surrendered with the Demised Premises as a part thereof. Notwithstanding anything aforesaid, Tenant shall have the right to install and remove from time to time and at the termination of this Lease (provided Tenant is not in default under the Lease), whether the same be attached to the building on the Demised Premises or be free-standing, Tenant's signs, trade fixtures and equipment, and business fixtures and equipment, to include, without limitation, moveable office partitions, and furniture, as well as any building machinery and building equipment belonging to Tenant, including, without limitation, oil burners and stokers, free standing heating and electrical fixtures, but excluding HVAC duct work, attached HVAC, electrical and plumbing fixtures, and permanent walls and partitions. Tenant shall promptly repair any damage to the Demised Premises caused by the removal by Tenant of any of Tenant's property therefrom and this covenant shall survive the expiration or termination of this Lease. 9. LANDLORD'S RIGHT OF ACCESS - Landlord, its agents, servants and employees shall have the right to enter the Demised Premises during business hours, with reasonable frequency, for the purpose of inspecting the same to ascertain whether Tenant is performing the covenants of this Lease, and during business hours or otherwise in the event of need, under special arrangements with Tenant, for the purpose of making required repairs, alterations, improvements or additions, and Landlord shall be allowed to take all material into and upon the Demised Premises that may be required therefor without the same constituting an eviction of Tenant in whole or in part, and, except as otherwise provided, the rent reserved shall in nowise abate while said repairs are being made by reason of loss or interruption of the business of Tenant because of the prosecution of any such work. Landlord agrees to cause as little inconvenience as reasonably possible to Tenant in connection therewith. During the one hundred eighty (180) days preceding the expiration of this Lease, Tenant shall permit Landlord or Landlord's agents to show the Demised Premises to prospective tenants with reasonable frequency during business hours and to place and keep in one or more conspicuous places upon the exterior of the Demised Premises, not interfering with Tenant's use of the Demised Premises, a notice in the usual form "To Let", and a notice in the usual form "For Sale", which notices Tenant shall permit to remain thereon without molestation. Landlord and/or their agents, servants and employees and governmental authorities shall have the right to enter the Demised Premises during business hours for the purpose of conducting the remediation pursuant to the Plan, as it may be modified from time to time, and for inspections related thereto. LANDLORD'S LIMITATION OF LIABILITY- TENANT'S INDEMNITY (a) Landlord shall not be liable for any damage or injury to the person, business (or any loss of income therefrom), goods, wares, merchandise or other property of Tenant, Tenant's employees, invitees, customers or any other person in or about the Demised Premises, whether such damage or injury is caused by or results from: (i) Fire, steam, electricity, water, gas or rain; (ii) The breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures or any other causes; (iii) Conditions arising in or about the Demised Premises or upon other portions of the building of which the Demised Premises are a part, or from other sources or places, not caused by or resulting from Landlord's breach of the Lease; or (iv) Any act or omission of any other tenant of any portion of the building of which the Demised Premises are a part. (b) Tenant shall defend, indemnify and save harmless Landlord and its agents and employees against and from all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including reasonable attorneys' fees, which may be imposed upon or incurred by or asserted against Landlord and/or its agents by reason of any of the following occurring during the term of the Lease or during any period of time prior to the Commencement Date that Tenant may have been given access to or possession of all or any part of the Demised Premises: (i) any work or thing done in, on or about the Demised Premises or any part thereof by or at the instance of Tenant, its agents, contractors, subcontractors, servants, employees, licensees or invitees; (ii) any negligence or otherwise wrong act or omission on the part of Tenant or any of its agents, contractors, subcontractors, servants, employees, subtenants, licensees or invitees; (iii) any accident, injury or damage to any person or property occurring in, on or about the Demised Premises or any part thereof; (iv) any failure on the part of Tenant to perform or comply with any of the covenants, agreements, terms provisions, conditions or limitations contained in this its part to be performed or complied with. In case any action or proceeding is brought against Landlord by reason of any such claim, Tenant, upon written notice from Landlord, shall, at Tenant's expense, resist or defend such action or proceeding by counsel approved by Landlord in writing, which approval Landlord shall not unreasonably withhold. Lease on The indemnification of this Paragraph 10(b) shall survive the expiration or termination of this Lease. Notwithstanding the provisions of this Paragraph 10(b), Tenant shall not defend, indemnify nor save harmless, the Landlord for the negligence or willful misconduct of Landlord or Landlord's agents and employees. 11. DESTRUCTION BY FIRE OR OTHER CAUSES - Landlord shall, at Landlord's expense, provide and maintain adequate insurance on the Demised Premises (being not less than eighty per cent (80k) of actual replacement value and sufficient to meet co-insurance requirements) against loss or damage by fire, with extended coverage endorsement. Tenant shall reimburse and pay Landlord during the term, as they become payable, the premiums for such fire insurance (fairly apportioned if lease periods and premium periods do not coincide). Payment of such premiums shall constitute additional rent payable by Tenant to Landlord on the first rent payment date not less than thirty (30) days after presentation to Tenant of a receipted bill for such premiums; and in default by Tenant, Landlord may collect the same as rent. In the event of such a loss, Landlord shall receive and apply all the proceeds thereof to repair the damages. Landlord will undertake immediately the repair and reconstruction of the Demised Premises at Landlord's expense and will complete such work with due and reasonable diligence. During the period commencing with the date the damage occurred and ending with the completion of the requisite repairs or restoration, the rent payable hereunder shall abate and the obligation of Tenant to pay the same shall cease to the extent and in proportion to the area rendered untenantable by the damage or by the work or restoration and repair. All policies shall contain a clause providing Tenant shall not be liable to the Landlord or Landlord's assignees for damages by fire or other casualty within the coverage of insurance described in the standard fire insurance policy with extended coverage available to Landlord even if the damage be caused by the negligence or default of Tenant, Tenant's employees, agents or invitees; provided, however, that if any insurance carrier does not permit such waiver of the right of subrogation, Tenant shall be named as an insured under Landlord's policy, at no cost to Tenant. LIABILITY INSURANCE - WAIVER OF SUBROGATION (a) Tenant shall at all times during the term of this Lease carry public liability insurance covering the Demised Premises which insurance shall insure against liability for personal injury or death and property damage in an amount not less than Three Million Dollars ($3,000,000.00). Landlord shall be named as an additional insured on any such policy and the coverage shall require the insurance company to provide thirty (30) days prior written notice to Landlord of its intent to cancel the policy. In the event Tenant fails to maintain the coverage required by this paragraph, Landlord shall have the right to provide coverage and Tenant shall reimburse Landlord for said expenditure at the time of the next rent payment. The insurance company used by Tenant for the public liability insurance required by this paragraph shall be approved by Landlord, which consent shall not be unreasonably delayed or withheld. A copy of the policy or certificate of insurance shall be delivered to Landlord by Tenant prior to the Commencement Date and prior to the expiration of any such policy during the term of the Lease. (b) All insurance which is carried by either party with respect to the Demised Premises, whether or not required, shall include provisions which either designate the other party as one of the insureds or deny to the insurer acquisition by subrogation of rights of recovery against the other party to the extent such rights have been waived by the insured party prior to occurrence of loss or injury, insofar as, and to the extent that such provisions may be effective without making it impossible to obtain insurance coverage from responsible companies qualified to do business in the state in which the Demised Premises are located (even though extra premium may result therefrom). Each party shall be entitled to have duplicates or certificates of any policies containing such provisions. Each party hereby waives all rights of recovery against the other for loss or injury against which the waiving party is or may be protected by insurance containing said provisions. 13. HEAT. LIGHT. TAXES - (a) Tenant shall pay all charges for gas, steam, electricity, water and other utilities and services, and including trash removal and sewage charges used in connection with the Demised Premises during the term of this Lease. Landlord covenants and agrees that all such utilities (including both storm, if available, and sanitary sewers) shall be available to the Demised Premises and shall be in good working order at the commencement date. Tenant acknowledges and agrees that it is accepting any interior fixtures related to the utilities in "as is" condition. (b) Landlord shall bear the cost of and pay when due and in time to take advantage of all discount allowances if any, otherwise before any of the same shall be in default or carry interest or penalties for late payment, all real estate taxes and Middle Rio Grande Conservancy District fees (hereinafter collectively "real estate taxes") assessed against the Demised Premises and the Leasehold Improvements and against any entire premises of which the Demised Premises may be a part. During all terms of this Lease, Tenant shall annually pay Landlord for all real estate taxes assessed against the Demised Premises, within thirty (30) days after receipt by Tenant of the paid tax bill. Such amount shall constitute additional rent under this Lease. Landlord shall bear the cost of and pay when due all assessments against the Demised Premises for municipal or public improvements and service facilities. In consideration of Tenant's undertaking to reimburse Landlord for the real estate taxes on the Demised Premises, Landlord agrees as follows with Tenant with respect to such real estate taxes: (i) Tenant shall have the right, in good faith, by appropriate proceedings, to contest any assessment or reassessment, or the real estate taxes, or the validity of either, or of any increase in the assessment, or the rate and, provided this may lawfully be done, and if Tenant provides Landlord with appropriate security, Landlord shall withhold payment of the real estate taxes as directed by Tenant in writing in any case where Tenant shall have notified Landlord of Tenant's intention to make a contest as aforesaid. (ii) Landlord shall, within five (5) days after learning of any increase or change in the assessment, the rate or the real estate taxes, advise Tenant in writing thereof and Tenant shall, within ten (10) days of the receipt of said notice from Landlord/ advise Landlord in writing in the event Tenant elects to make a contest. (iii) In the contest, Tenant is authorized to act in its own name and in the name of Landlord, if legally necessary or desirable to use Landlord's name, and Landlord agrees that it will, at Tenant's request, provided it is not put to any expense thereby, cooperate with Tenant in any way Tenant may reasonably require in connection with such contest. (iv) Any contest conducted by Tenant hereunder shall be at Tenant's expense and in the event any penalties, interest or late charges become payable with respect to the real estate taxes as the result of such contest, Tenant shall reimburse Landlord for the same. (v) If Tenant shall have given Landlord notice of Tenant's intent to make such a contest and in the further event that it becomes proper and appropriate for Landlord to pay the real estate taxes as to which the contest relates, Landlord shall nevertheless make the payment under protest and Tenant shall reimburse Landlord within thirty (30) days for said payment. 14. EMINENT DOMAIN - If the whole or any part of the Demised Premises shall be taken by lawful authority for any public or a quasi-public use or purpose this Lease shall, as to the part so taken, terminate on the date title shall be acquired, and the rent reserved shall abate fairly and in proportion to the part so taken and shall entirely abate if the entire Demised Premises is taken. In all cases of a partial taking of the Demised Premises (except for a minor street widening not injurious to the use of the Demised Premises by Tenant) Tenant may, at its election, by delivering written notice to the effect to Landlord, terminate this Lease and vacate the Demised Premises, and in that event, the liability of Tenant for performance of the Lease shall terminate and come to an end and all rents shall abate. Any award or compensation given in connection with the taking of the land or building shall be allocated between Landlord and Tenant fairly and equitably and without giving preference to either party, taking into consideration the respective interests of the parties in the real property comprising the Demised Premises and the Leasehold Improvements, the portion or portions of the property taken, the utility of any remaining premises and the income of the parties therefrom, the extent of abatement of the rent, the period Tenant may continue in possession after the taking and the terms and circumstances of such occupancy, the extent Landlord is deprived of income, the remainder of the term of the Lease, the value of Landlord's reversionary interest, the value or Tenant's leasehold interest, the value of the land taken, the depreciated cost of the Leasehold Improvements and all other relevant matters; which determination shall be made, if the parties cannot agree, by and in accordance with the procedures of the American Arbitration Association upon application by either party. Any amount due upon any mortgage on the property shall be charged against and paid out of the share of Landlord in the award. Notwithstanding the aforesaid, any award for the taking of the personal property and fixtures of Tenant and any award for the cost of moving and moving expenses, shall belong to and be paid exclusively to Tenant. 15. TENANT'S RIGHT TO PERFORM - In the event Landlord violates or fails to perform any material provision or agreement of the Lease to be performed or complied with by Landlord and fails to undertake to cure any violation or failure to perform within fifteen (15) days after written notice thereof to Landlord, and to complete the same with reasonable diligence, Tenant may, in addition to all remedies available to it, be entitled to perform on behalf of Landlord and deduct from the rent any expenses thereby incurred, or if Tenant elected to do so Tenant shall have the right to cancel and terminate this Lease at any time after expiration of said fifteen (15) day period while the violation or failure continues, provided Landlord is not exercising reasonable diligence to cure the violation or failure. Tenant may also pay any installments of any mortgage debt against or including the Demised Premises if Landlord is in default and deduct all such payments from the rent. 16. SUBORDINATION - This Lease and all the rights of Tenant hereunder are and shall be subject and subordinate at all times to the lien or liens of any and all mortgages in any amount or amounts whatsoever placed on the Demises Premises or larger premises of which the Demised Premises form a part, either prior or subsequent to the date hereof, provided that the mortgagee agrees with Tenant by writing delivered to Tenant, that Tenant shall not be disturbed in possession and this Lease shall remain in full effect as long as Tenant performs its obligation hereunder. It shall not be necessary for Tenant to execute any further instrument or act to effectuate such subordination, but Tenant shall execute and deliver upon demand such further instrument or instruments evidencing such subordination of this Lease as may be desired by any mortgagee or proposed mortgagee, or necessary to effectuate the provisions of this Paragraph 16, which also contains the above-mentioned non-disturbance provision. 17. NON-WAIVER OF LANDLORD'S OR TENANT'S RIGHTS - The failure of either Landlord or Tenant to insist upon strict performance of any of the covenants or conditions of this Lease or to exercise any right herein conferred in any one or more instances, shall not be construed as a waiver or relinquishment for the future of any such covenants, conditions or rights, but the same shall be and remain in full force and effect. 18. QUIET ENJOYMENT - Landlord covenants that Tenant on paying the rent and performing the covenants aforesaid shall and may peaceably and quietly have, hold and enjoy the said Demised Premises for all terms aforesaid. l9. SURRENDER - Tenant shall quit and surrender the Demised Premises at the expiration of the term, broom clean and in good order and condition, ordinary wear and use, damage by fire or other casualty and repair and replacement obligations of Landlord excepted. 20. NOTICES - Any notice given pursuant to this Lease shall be valid only if given in writing by registered or certified mail, return receipt requested, with sufficient postage attached. Notices to Landlord shall be addressed to: George Brunacini P.O. Box 6992 Albuquerque, NM 87197 with copy to: Hunt, Reecer & Davis, P.C. Attn: Kenneth A. Hunt, Esq. P.O. Box 30088 Albuquerque, NM 87190-0088 Notices to Tenant shall be addressed to: Circuit City Stores, Inc. 9950 Mayland Drive Richmond, VA 23233 Attention: Corporate Secretary and Circuit City Stores, Inc. 9950 Mayland Drive Richmond, VA 23233 Attention: Vice President - Real Estate The date of any notice provided for in this Lease shall be the date received by the addressee. The person and place to which notice may be given may be changed from time to time by Landlord or Tenant respectively upon written notice to the other, effective five (5) days after delivery of such notice. 21. SUCCESSORS AND ASSIGNS - ENTIRE AGREEMENT - The terms, agreements, covenants and conditions contained in the Lease are binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. This Lease constitutes the entire understanding between the parties hereto and the parties shall not be bound by any agreements, understandings or conditions respecting the subject matter hereof other than those expressly set forth in this Lease. 22. ALTERATIONS BY LANDLORD - (a) Landlord shall, at Landlord's sole cost, construct on the Land in compliance with all applicable laws and governmental requirements, the Leasehold Improvements. (b) The Leasehold Improvements shall be completed by Landlord and possession of the entire Demised Premises, together with a Certificate of Occupancy, if required, shall be tendered by Landlord to Tenant on the Commencement Date. For each week or portion of a week Landlord does not deliver possession of the Demised Premises in accordance with this Paragraph 22, Tenant shall receive one (1) month's free rent. (c) Landlord shall and does hereby warrant, for the period of one (1) year following the Commencement Date or date of delivery of the Demised Premises to Tenant, if after the Commencement Date ("Warranty Date"), the materials, equipment and workmanship of the Leasehold Improvements required of Landlord under this Lease and Landlord shall repair or replace all materials, equipment and workmanship related thereto found to be defective within one (1) year following the Warranty Date. (d) Tenant may, without payment of rent, enter the Demised Premises prior to the Commencement Date solely for the purpose of preparing the Demised Premises for use by Tenant, but Tenant shall not interfere with the work being performed by Landlord, and provided Tenant has liability insurance as required by Paragraph 12 hereinabove in place. No such occupancy shall be deemed an acceptance of the Demised Premises nor a waiver of any failure by Landlord to complete any of the Leasehold Improvements required by this Lease. (e) Upon completion of the Leasehold Improvements, delivery of a Certificate of Occupancy, if required, and acceptance of possession, Landlord and Tenant shall execute Exhibit "C" specifying the Commencement Date of this Lease. 23. CONDITION OF DEMISED PREMISES - Tenant's acceptance of possession of the Demised Premises shall constitute Tenant's acknowledgement that the Demised Premises meet the requirements of Exhibit "B" and Paragraph 22, subject to the warranty of Landlord provided for in Paragraph 22(c). 24. HOLDOVER - In the event Tenant holds over after expiration or other termination of this Lease, rent shall increase to one and one-half (1 1/2) times the then current monthly rent and additional rent. Further, Tenant's occupancy shall be on a month-to-month basis for the period of the actual holdover, and any resulting holdover may be terminated by either party at any time on thirty (30) days written notice. 25. TIME TO R D Y DEFAULT-LATE PAYMENT PENALTY - Landlord shall have no right to exercise any remedy for default by Tenant under this Lease, and Tenant shall not be, or be deemed to be, in default unless and until Landlord shall give to Tenant the prescribed notice by mail, addressed to Tenant at the place of notices to be given as herein provided, specifying the default and (a) if the default is in payment of money, unless Tenant fails to remedy the default within ten (10) days after receipt of such notice, or (b) if the default is other than in payment of money, unless Tenant fails to begin to cure the default within fifteen (15) days after receipt of the notice and to proceed expeditiously to cure the default. A late payment penalty of 5k of any overdue amount required to be paid by Tenant pursuant to this Lease, shall be assessed on any payment that is not received by Landlord within five (5) days of its due date. 26. REMEDIES OF LANDLORD FOR DEFAULT - On the occurrence of any material default by Tenant, Landlord may at any time thereafter, after appropriate notice as provided for herein, exercise any right or remedy which Landlord may have, including: (a) Terminate Tenant's right to possession of the Demised Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Demised Premises to Landlord. In such event, Landlord shall be entitled to recover from Tenant all damages incurred by Landlord by reason of Tenant's default, including (i) the worth at the time of the award of the unpaid rent and other charges which have been earned at the time of the termination; (ii) the worth at the time of the award of the amount by which the unpaid rent and other charges which would have been earned after termination until the time of the award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided, provided however, this remedy shall only be available to Landlord if Tenant fails, within ten (10) days after written notice to Tenant, to pay any rent deficit on a monthly basis for the remainder of the Lease term; (iii) the worth at the time of the award of the amount by which the unpaid rent and other charges which would have been paid for the balance of the term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; and (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under the terms of this Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, any costs or expenses incurred by Landlord in maintaining or preserving the Demised Premises after such default, the costs of recovering possession of the Demised Premises, expenses of reletting, including necessary renovations or alterations of the Demised Premises, Landlord's reasonable attorneys' fees incurred in connection therewith, and any real estate commission paid or payable. As used in sub-parts (i) and (ii) above, the "worth at the time of the award" is computed by allowing interest on the unpaid amounts at the rate of 15% per annum, or such lesser amount as may then be the maximum lawful rate. As used in sub-part (iii) above, the "worth at the time of the award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of Kansas City at the time of the award, plus A. If Tenant shall have abandoned the Demised Premises, Landlord shall have the option of (i) retaking the possession of the Demised Premises and recovering from Tenant the amounts specified in this paragraph or (ii) proceeding under paragraph (b) hereinafter; (b) Maintain Tenant's right to possession, in which case this Lease shall continue in effect whether or not Tenant shall have abandoned the Demised Premises. In such event, Landlord shall be entitled to enforce all of Landlord's rights and remedies under this Lease, including the right to recover the rent as it becomes due hereunder; (c) pursue any other remedy now or hereafter available to Landlord under the laws or judicial decisions of the State of New Mexico. 27. ATTORNEY'S FEES - The non-prevailing party in any judicial proceedings to enforce the provisions of the Lease shall pay the reasonable attorney's fees and court costs of the prevailing party. 28. SEVERABILITY - A determination by a court of competent jurisdiction that any provision of this Lease or any part hereof, is illegal or unenforceable, shall not cancel or invalidate the remainder of such provision or this Lease, which shall remain in full force and effect. 29. CHOICE OF LAW - The laws of the State of New Mexico shall govern this Lease. 30. FORCE MAJEURE - I f Landlord or Tenant cannot perform any of their respective obligations under the terms of this Lease due to event(s) beyond their control, the time provided for performance of such obligations shall be extended by a period of time equal to the duration of such event(s). If either party to the Lease desires to invoke the provisions of this subparagraph, it shall provide written notice to the other party of the reasons for the delay and the invoking party shall use best reasonable efforts to mitigate the effects of such occurrence. Event(s) beyond Landlord's or Tenant's control include, but are not limited to, acts of God, war, civil commotion, labor disputes, strikes, fire, flood, or other casualty, shortages of labor and materials, government regulation or restriction and weather conditions, but shall in no event include defaults due to Landlord's or Tenant's failure to meet their respective monetary obligations hereunder. 31. ENVIRONMENTAL COMPLIANCE (a) As used in this Lease, the following terms shall have the meaning indicated below: (i) "Hazardous Material" means any substance: (1) the presence of which requires investigation or remediation under any federal, state or local statute, regulation, ordinance, order, action, policy or common law; or (2) which is or becomes defined as a "hazardous waste", "hazardous substance", pollutant or contaminate under any federal, state or local statute, regulation, rule or ordinance or amendments thereto including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et sea.); or (3) which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous and is or becomes regulated by any governmental authority, agency, department, commission, board, agency or instrumentality of the United States, the State of New Mexico or any political subdivision thereof; or (4) the presence of which on the Demised Premises causes or threatens to cause a nuisance upon the Demised Premises or to adjacent properties or poses or threatens to pose a hazard to the health or safety of persons on or about the Demised Premises; or (5) the presence of which on adjacent properties could constitute a trespass; or (6) without limitation which contains gasoline, diesel fuel or other petroleum hydrocarbons; or (7) without limitation which contains polychlorinated bipheynols (PCBs), asbestos or urea formaldehyde foam insulation. (ii) "Environmental Requirements" means all applicable present and future statutes, regulations, rules, ordinances, codes, licenses, permits, orders, approvals, plans, authorizations, concessions, franchises, and similar items, of all governmental agencies, departments, commissions, boards, bureaus, or instrumentalities of the United States, states, tribes and political subdivision thereof and all applicable judicial, administrative, and regulatory decrees, judgments, and orders relating to the protection of human health or the environment, including, without limitation: (A) All requirements, including but not limited to those pertaining to reporting, licensing, permitting, investigation, and remediation of emissions, discharges, releases, or threatened releases of "Hazardous Material", chemical substances, pollutants, contaminants, or hazardous or toxic substances, materials or wastes whether solid, liquid, or gaseous in nature, into the air, surface water, groundwater, or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of chemical substances, pollutants, contaminants, or hazardous or toxic substances, materials, or wastes, whether solid, liquid, or gaseous in nature including without limitation any such requirements arising under the following, and all regulations promulgated thereunder or in connection therewith: Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. 9601 et seq. ("CERCLA") Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901 et seq. .. Clean Air Act, 42 U-.S.C. 7401-7626 Water Pollution Control Act (commonly referred to as the Clean Water Act), 33 U.S.C. 1251 et seq. Federal Insecticide, Fungicide, and Rodenticide Act, as amended by the Federal Environmental Pesticide Control Act of 1972 and by the Federal Pesticide Act of 1978, 7 U.S.C. 136 et sea. Toxic Substance Control Act, 15 U.S.C. 2601 et seq. Safe Drinking Water Act, 42 U.S.C. 300(f) et seq. Water Quality Act, 74-6-1 et sea., NMSA 1978 Air Quality Control Act, 74-2-1 et seq., NMSA 1978 Radiation Protection Act, 74-3-1 et seq., NMSA 1978 Pesticide Control Act, 76-4-1 et seq., NMSA 1978 Solid Waste Act, 74-9-1 et seq., NMSA 1978 Hazardous Waste Act, 74-1-1 et seq., NMSA 1978 Ground Water Protection Act, 74-6B-1 et seq., NMSA 1978 Radioactive and Hazardous Materials Act, 74-4A-2 et sea., NMSA 1978; and (B) All requirements pertaining to the protection of the health and safety of employees or the public, including; (iii) "Environmental Damages" means all claims, judgments, damages, losses, penalties, fines, liabilities (including strict liability), encumbrances, liens, costs, and expenses of investigation and defense of any claim, whether or not such claim is ultimately defeated, and of any good faith settlement, of whatever kind or nature, contingent or otherwise, matured or unmatured, foreseeable or unforeseeable, including without limitation reasonable attorney's fees and disbursements and consultant's fees, any of which are incurred at any time as a result of the existence of "Hazardous Material" upon, about, or beneath the Demised Premises or the property of which the Demised Premises are a part (collectively, the "Property") or migrating or threatening to migrate to or from the Property, or the existence of a violation of "Environmental Requirements" pertaining to the Property, including without limitation: (1) Damages for personal injury, or injury to property or natural resources occurring upon or off of the Demises Premises or the Property, foreseeable or unforeseeable, including, without limitation, lost profits, consequential damages, the cost of demolition and rebuilding of any improvements on real property, interest and penalties; (2) Fees incurred for the services of attorneys, consultants, contractors, experts, laboratories and all other costs incurred in connection with the investigation or remediation of such "Hazardous Material" or violation of "Environmental Requirements", including, but not limited, to the preparation of any feasibility studies or reports or the performance of any cleanup, remediation, removal, response, abatement, containment, closure, restoration or monitoring work required by any federal, state, tribal or local governmental agency or political subdivision, or reasonably necessary to make full economic use of the Demised Premises or the Property or any other property or otherwise expended in connection with such conditions, and including without limitation any attorney's fees, costs and expenses incurred in enforcing this Lease or collecting any sums due hereunder; (3) Liability to any third person or governmental agency to indemnify such person or agency for costs expended in connection with the items referenced in subparagraph (ii) herein; and (4) Diminution of the value of the Demised Premises or the Property, and damages for the loss of business and restriction on the use of or adverse impact on the marketing of the Property. (b) Tenant, its successors, assigns and guarantors, agree to indemnify, defend, reimburse and hold harmless: (i) Landlord; and (ii) the directors, officers, shareholders, employees, partners, agents, contractors, subcontractors, experts, licensees, affiliates, lessees, mortgagees, trustees, heirs, devisees, successors, assigns and invitees (collectively "Affiliates") of Landlord, from and against (1) any and all "Environmental Damages" arising from the presence of "Hazardous Material" upon, about or beneath the Demised Premises or the Property or migrating to or from the Property, or arising in any manner whatsoever out of the violation of any "Environmental Requirements" pertaining to the Property and the activities thereon, either of which conditions arise following Tenant's execution of this Lease, but only to the extent such "Environmental Damages" arise as a result of the activities of Tenant or its Affiliates, or any assignee or subtenant of Tenant or the Affiliates of any such assignee or subtenant, and (2) the breach of any warranty or covenant or the inaccuracy of any representation of Tenant contained in this Lease. Tenant's indemnification obligation shall include, but not be limited to, the burden and expense of defending all claims, suits and administrative proceedings (with counsel reasonably approved by the indemnified parties), even if such claims, suits, or proceedings are groundless, false or fraudulent, and conducting all negotiations of any description, and paying and discharging, when as the become due, any and all judgments, penalties or other sums due against such indemnified persons. The obligations of Tenant in this Paragraph 31(b) shall survive the expiration or termination of this Lease. The obligations of Tenant under this Paragraph 31(b) shall not be affected by any investigation by or on behalf of Landlord, or by any information which Landlord may have or obtain with respect thereto. (c) Except as otherwise modified by this Lease, Landlord, its successors, assigns and guarantors, agree to indemnify, defend, reimburse and hold harmless: (i) Tenant; and (ii) the directors, officers, shareholders, employees, partners, agents, contractors, subcontractors, experts, licensees, affiliates, lessees, mortgagees, trustees, heirs, devisees, successors, assigns and invitees (collectively "Affiliates") of Landlord, from and against (1) any and all "Environmental Damages" arising from the presence of "Hazardous Material" upon, about or beneath the Demised Premises or the Property or migrating to or from the Property, or arising in any manner whatsoever out of the violation of any "Environmental Requirements" pertaining to the Property and the activities thereon, either of which conditions arise following Landlord's execution of this Lease, but only to the extent such "Environmental Damages" arise as a result of the activities of Landlord or its Affiliates, or any assignee or subtenant of Landlord or the Affiliates of any such assignee or subtenant; and (2) the breach of any warranty or covenant or the inaccuracy of any representation of Landlord contained in this Lease; (3) any and all "Environmental Damages" arising from the presence of "Hazardous Materials upon, about or beneath the Demised Premises or the Property or migrating to or from the Property, or arising in any manner whatsoever out of the violation of any "Environmental Requirements" pertaining to the Property and the activities thereon prior to the Commencement Date. Landlord's indemnification obligation shall include, but not be limited to, the burden and expense of defending all claims, suits and administrative proceedings (with counsel reasonably approved by the indemnified parties), even if such claims, suits, or proceedings are groundless, false or fraudulent, and conducting all negotiations of any description, and paying and discharging, when as the become due, any and all judgments, penalties or other sums due against such indemnified persons. The obligations of Landlord in this Paragraph 31(c) shall survive the expiration or termination of this Lease. The obligations of Landlord under this Paragraph 31(c) shall not be affected by any investigation by or on behalf of Tenant, or by any information which Tenant may have or obtain with respect thereto. IN WITNESS WHEREOF, the parties hereto have caused these presents to be duly executed and their respective seals to be hereunto affixed as to she day and year first above written. TENANT: CIRCUIT CITY STORES, INC., a Virginia corporation By: Its: Vice President STATE OF NEW MEXICO ) ) COUNTY OF BERNALILLO) This instrument was acknowledged before me this 14th day of March, 1995, by GEORGE BRUNACINI and JEANNETTE BRUNACINI, Husband and wife. MY COMMISSION EXPIRES: STATE OF VIRGINIA) ) COUNTY OF HENRICO) This instrument was acknowleged before me this 18TH day of March, 1995, by Benjamin B. Cummings, Jr., Vice President of CIRCUIT CITY STORES, INC., a Virginia corporation. MY COMMISSION EXPIRES: 5/31/95 JOYCE C. WOODSEN NOTARY PUBLIC EXHIBIT "A" Legal Description Lot C-4B1, Albuquerque Industrial Park Site, Albuquerque, New Mexico as the same is shown and designated on the Plat of Lots C-4B1 and C-4B2 filed in the office of the County Clerk of Bernalillo County, New Mexico on December 29, 1989, Plat Book C40, folio 80. EXHIBIT "B" Leasehold Improvements ATTACHED HERETO EXHIBIT "C" Commencement Date Statement TO BE ATTACHED EXHIBIT "D" Tenant Improvements TO BE ATTACHED ADDENDUM TO LEASE THIS ADDENDUM is entered into effective April 3 9 , 1995, by and between GEORGE BRUNACINI and JEANNETTE BRUNACINI, husband and wife ("Landlord'), and CIRCUIT CITY STORES, INC., a Virginia corporation (" Tenant"). WHEREAS, Landlord and Tenant entered into a lease dated March 14, 1995 ("Lease") involving the Premises described as Lot C-4B1, Albuquerque Industrial Park; and WHEREAS, the parties desire to amend certain terms and conditions of the Lease. NOW, THEREFORE, in consideration of the above and other good and valuable consideration, the receipt of which is hereby acknowledged, it is agreed as follows: A new paragraph 32. shall be added to the Lease which will read as follows: 32. MANAGEMENT FEES - Tenant shall pay to Landlord, or such other management company as Landlord shall designate, a management fee not to exceed three percent (3a) of the rent designated in Paragraph 4 of the Lease, which shall be payable monthly at the time the rent is due and payable. 2. Except as herein modified and amended, the remaining terms and conditions of the Lease shall remain in full force and effect. IN WITNESS WHEREOF, the undersigned have executed this document the effective date set forth hereinabove. LANDLORD: GEORGE BRUNACINI JEANNETTE BRUNACINI TENANT: CIRCUIT CITY STORES, INC., a Virginia corporation By: Benjamin B. Cummings, Jr. Its: Vice President EXHIBIT 10.7 ASSIGNMENT OF LEASE COMES NOW, George Brunacini and wife, Jeannette Brunacini, as "Assignor", of the certain Lease by and between George George Brunacini and wife, Jeannette Brunacini, as Lessor and Circuit City Stores, Inc., a Virginia corporation as Lessee dated March 14, 1995,(the "Lease") and hereby assigns its interest in said Lease to Westland Development Co., Inc., a New Mexico corporation, as Assignee, which assignment is subject to all the terms, conditions, obligations and addendums thereto as set forth in said Lease, a copy of which is attached hereto as Exhibit 1. In Witness Whereof the undersigned has set its hand as of this day of June, 1995. George Brunacini Jeannette Brunacini STATE OF NEW MEXICO ) )SS. COUNTY OF BERNALILLO) The foregoing instrument was acknowledged, sworn to and subscribed before me this 28th day of June 1995, by the aforesaid George Brunacini and Jeannette Brunacini. Maxine M. Brunacini Notary Public My Commission Expires July 18, 1995 -----END PRIVACY-ENHANCED MESSAGE-----