-----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, ONLinNem9YGGAmV18+E9MGLjkCShL6iSb/PFZg4uCM3UxzybQzc7Xicwiy6lmCvE e48IgMD5OD6f15YfqqgjaA== 0001008878-99-000029.txt : 19990928 0001008878-99-000029.hdr.sgml : 19990928 ACCESSION NUMBER: 0001008878-99-000029 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990927 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTLAND DEVELOPMENT CO INC CENTRAL INDEX KEY: 0000106423 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 850165021 STATE OF INCORPORATION: NM FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-07775 FILM NUMBER: 99717827 BUSINESS ADDRESS: STREET 1: 401 COORS BOULEVARD S W CITY: ALBUQUERQUE STATE: NM ZIP: 87121 BUSINESS PHONE: 5058319600 MAIL ADDRESS: STREET 1: 401 COORS BLVD S W 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, 1999 [ ] 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 Westland 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) Westland'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 Westland 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 Westland'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. [ ] State issuer's revenues for its most recent fiscal year: $5,517,570. 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. On September 15, 1999, there were 706,814 No Par Value Common shares and 55,400 Class B shares owned by non-affiliates. The stock was sold on September 15, 1999 for $18 per share. Thus the aggregate market value of the voting stock held by non-affiliates was $13,275,252. The number of shares outstanding of each of Westland's classes of common stock, as of September 15, 1999, was: No Par Value Common: 716,608 shares. Class B $1.00 Par Value: 86,100 shares. DOCUMENTS INCORPORATED BY REFERENCE: 1) Proxy statement and Proxy for Annual Meeting of Shareholders for the year ended June 30, 1999. 2) Annual Report to shareholders for the year ended June 30, 1999. PART I ITEM 1: DESCRIPTION OF BUSINESS General Development of Business. Westland Development Co., Inc., a New Mexico for-profit corporation ("Westland"), is the successor to a community land grant corporation named Town of Atrisco, 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 Westland's Form 10 and its Form 10-K for the fiscal year ended June 30, 1974. With limited exceptions, only lineal descendants of the incorporators of the Town of Atrisco may own shares of Westland's Common Stock. The Westland'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. Westland is the owner of approximately 59,000 acres of land located on the west side of Albuquerque, New Mexico. Most of its property is held for long term investment and is leased for cattle grazing. Westland derives revenues through commercial and land leases, partnerships formed for various development projects, lot development sales and sales and bulk land sales to other land developers. In 1998 the City of Albuquerque and the County of Bernalillo finalized the approval of a 6,400 acre master plan for development of the 6,400 acres of Westland's land. For Westland to begin developing or selling land within this planned area, Albuquerque must make available the required utilities. The City and Westland have reached an pre-annexation agreement through which the City will annex the initial 1,732 acres and Westland is to furnish sewer and water utilities to the initial 1,732 acres . The lands within the master plan area have been segregated by Westland for development. As previously stated, for Westland to be able to develop the Master Plan area it must make provision for utilities that do not presently exist on any of the Master Planned lands. Westland has agreed that it will bear the initial cost of the water and sewer extension to the initial 1,732 acres, which are now estimated to be as much as $10,000,000. When completed, Westland will convey the utilities to the City. Although Westland must advance the cost of the utilities, it will recover those costs through a "hook-up" fee that will be charged to each lot sold in the annexed area. Depending upon the growth of development in this area, it may take 15 or more years for Westland to recover these costs. Westland is currently soliciting financing for the construction of the initial phase of the Master Plan infrastructure. Although no commitments have yet been received, Management believes that Westland will obtain the required financing and begin construction of improvements within the next fiscal year. Management is less optimistic about partnerships because of the Company's bad experience with those partnerships that it has joined over the last few years, but continues to believe joint ventures, land developments, ground leases and limited partnerships may be to Westland's benefit. For that reason, Management will continue to review proposals submitted by prospective partners and participants. Management remains committed, if and when warranted by available capital and existing conditions, to begin the construction of residential, industrial and commercial developments for lease or sale. Westland's long term business philosophy is to enhance the value of Westland'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 Westland's stock and to provide dividends for its shareholders, when consistent with Westland's need for a sufficient cash flow to meet current operating expenses. Narrative Description of Business. Over the past 20 years, Westland developed six master plans for the development of certain of its properties and through implementation of those plans, sold all of the acreage included in those. Those master plans are identified as Atrisco Urban Center and El Rancho Atrisco, Phases I through V. These lands, except for the Phase V master plan which was abandoned due the introduction of the Petroglyph National Monument, have now been substantially developed and sold. As discussed above, the new Master Plan encompasses approximately 6,400 acres in an area located north of I-40, between Unser and Paseo del Volcan. Initial utility development of Phase I of the Master Planned area should begin in the next fiscal year, depending upon available funding. Oil and Gas and Grazing Leases. Approximately 57,000 acres of Westland's land is not planned for development and 55,139 acres are leased to non-affiliated people for cattle grazing. The leases provided rental income of approximately $22,000 in fiscal 1999. During the year Westland allowed certain rent abatements because of the temporary limited productive capacity of the land. There was no oil or gas activity on the property during the year and no oil or gas leases currently exist on any part of the property. Westland also owns and leases certain commercial buildings at an aggregate annual rental of $790,000 (See "Revenue Producing Properties). Development Properties. As of June 30, 1999, Westland continued to own approximately 175 acres of developed and unsold land. The effort of Westland and its staff is being devoted to the implementation of the new Master Plan at the earliest possible date. A summary of Westland Master Plan is as follows: Westland Master Plan. Westland's new Master Plan covers approximately 6,400 acres located north of Interstate 40 and south of the area designated for the Petroglyph National Monument, west of Unser Boulevard. Westland and the City of Albuquerque have agreed on the conditions through which the City will annex the first 1,700 acres in the Master Plan area and Westland will begin introducing water and sewer utilities to the portions of land that will be initially developed. As discussed above, Westland has agreed to pay the cost of water and sewer utilities to the land with its costs being recovered over time through hook-up fees. Westland anticipates paying the costs incurred to furnish these utilities through a combination of borrowing and use of portions of its income. In addition, any water rights now owned or subsequently acquired by Westland in the 6,400 acres of the master planned area must be assigned to the City for only that portion of the master planned area to which the City supplies water and sewer service. It is anticipated that there are no insurmountable obstacles remaining, including acquiring the necessary financing, to begin of the implementation of the Master Plan. Management expects that the first sale of lands master planned area will occur in the next one or two fiscal years, barring unforeseen delays. Other Projects. 1. Assisted Living Development As previously reported, Westland was a Limited Partner in a partnership which built and owned a housing facility for persons in need of some care but who are otherwise ambulatory. During fiscal 1997, the bank that financed the construction of the project foreclosed on the building. At the time of the foreclosure sale, Westland reviewed the financial condition of the project and concluded that it was not in Westland's best interest to invest additional resources into the project and did not bid at the foreclosure sale. Westland's investment in this project was written off its books several years ago and no current or future loss on the project will be experienced. 2. Volcano Business Park. Volcano Business Park consists of approximately 22 acres zoned for industrial park uses which were platted and developed into 11 lots. Westland, through a partnership arrangement owns 50% of an 172 unit storage facility on approximately 1.7 acres of this property. As of August 1, 1999, the facility was approximately 75% occupied. Phase II of Volcano Business Park was completed this fiscal year with the completion of a loop service road. Five additional lots were created, with one lot being sold and another lot being under construction for expansion of the storage facility. 3. Travel Plaza Since 1990, Westland has been working to develop about 100 acres of its land for a travel center and related commercial uses. During 1995, a truck sales facility was established on four acres. No additional development of this property occurred during the current fiscal year and, because Management anticipates that all of Westland's energy and funds will be devoted over the next couple of years to developing its Master Plan area, no further development of this area is foreseen in the immediate future. However, Management remains aware of current trends in the area and if those trends should show an increased interest in the Travel Plaza, energy and funds would be devoted to take advantage of such trends. 4. Parkway Subdivision Westland previously reported that from 1994 through 1997, it developed and sold to Sivage Thomas Homes, Inc. certain developments known as Parkway Units 7 and 8. Sivage Thomas completed building out homes on these Units during the past year and an elementary school, constructed on approximately 11 acres purchased from Westland by Albuquerque Public Schools, was opened for classes beginning in 1998. Westland sold Parkway Unit 9 (also known as Parkland View) to Sivage Thomas Homes, Inc. during fiscal 1998 and considers this project completed. 5. Recreation Complex Westland previously reported that in 1994 it entered into a lease/option arrangement related to approximately 100 acres located north of I-40 on Paseo del Volcan. Westland took possession and ownership of the facility in 1997 as a result of default in the terms of the lease/option. The Park contains a fully developed recreation and softball complex. In 1998 Westland held a Matanza for its shareholders at the softball complex and approximately 600 shareholders and heirs attended and enjoyed food and music. In the summer of 1999, Westland held a luncheon for it shareholders at the complex and approximately 800 shareholders and heirs attended. The facility is not now leased and Westland is looking for a lessee or purchaser for the facility. 6. Tierra Oeste As previously reported, Westland committed approximately 24.5 acres of land north of Ladera Dr., west of Unser Blvd, to a limited liability corporation named Tierra Oeste, LLC. All litigation related to the default by the developer was terminated during the fiscal year and all interest claimed by the developer in the project was terminated by the Court. Westland is now considering development lots on this land and/or selling the entire project. 7. Education and Community Projects Westland has a continuing corporate program of donating land or otherwise assisting in projects that its management believes has a long term beneficial effect to the development and furtherance of the educational and health of the community and citizens. As previously reported, Westland has donated lands for the purpose of building schools, churches, and health care facilities. During the fiscal year, Westland donated approximately fifty acres to YES Housing, Inc., a nonprofit corporation, for the purpose of construction of a facility devoted to the housing and employment of mentally ill citizens. Management will continue to review all requests of a similar nature to determine the merits, on a case by case basis, of future requests for similar donations. 8. Land Sales 1). Land Sales Westland has, in the last year, completed 6 transactions totaling approximately 393 acres, not including lots sold to Kaufman & Broad, Inc. for Alvarado Estates (formerly Cedar Ridge Estates Units 2 and 3). 2). 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 Westland's land. The Company sold 444 acres in fiscal year 1992, 713 acres in fiscal 1993, 118 acres in fiscal 1994, 24 acres in fiscal 1995, none in fiscal 1996, 218 acres in fiscal 1997, 85 acres in fiscal 1998. During fiscal 1999 the Park Service purchased the last 362 acres designated for inclusion in the Monument. 10. Reinvestment Properties As part of Westland's plans to defer the tax burden arising from the sale of its lands to the National Park Service under threat of condemnation for inclusion in the Petroglyph National Monument, it reinvested the sale proceeds in the properties discussed below and two vacant land parcels and 4 commercial buildings. As a result of these purchases, Westland believes that it has deferred recognition of taxes on the sales of land to the National Park Service. The Commercial properties are the following: a) A commercial building at Coors Boulevard and Sequoia Road in Albuquerque at a cost of $2,630,000, $1,780,407 of which is subject to a Mortgage upon which Westland must pay monthly payments of $17,970. This building has been leased to Walgreen Co. for 20 years at a fixed rent of $19,173 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) A commercial building in Albuquerque's Midway Industrial Park at a cost of $1,074,000, $714,345 of which is subject to a Mortgage upon which Westland must make monthly payments of $6,893. This building has been leased to Circuit City Stores for a term of 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 current rent is $9,235 per month. c) A commercial building located at Coors Boulevard and Central Avenue at a cost of $3,593,000, which is subject to a mortgage of $2,683,944 requiring payments of $24,682 per month. The building has been leased to Walgreen Co. on a minimum 20 year lease at a fixed rent of $26,122 per month plus a percentage of gross sales, with the maximum annual rent being capped at $626,922. Walgreen Co. may continue the term of the lease for an additional 40 years. d) A commercial building located at the SE corner of Eubank and Spain, N.E., at a cost of approximately $1,300,000, which is subject to a mortgage of $950,000 requiring payments of $9,079 per month. The building has been leased to Marie Callender Pie Shops, Inc., on a minimum 10 year lease at a fixed rent of $11,000, plus a Percentage Rent in the amount of 6% of Annual Gross Sales in excess of $108,333.34. The tenant has the right to renew the lease for as many as three 5 year terms. Current Real Estate Market Conditions The market conditions for the development and sale of properties in Albuquerque are positive at the present time. Westland has been able to sell the residential properties it had available for sale. Management believes that for the foreseeable future commercial and industrial construction will continue at a rapid pace while the demand for single family residential construction will continue at a more moderate pace. Competition Westland'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. Westland believes that a sale made by another party resulting in the introduction of Coca Cola in the Business Park and development of the business center within the Business Park will add to the quality of the Park's tenants and will attract other businesses to the Parks. Residential subdivisions on Westland's land compete with other areas in the Albuquerque housing market (essentially Bernalillo County and portions of Sandoval County and Valencia County), as well as with other subdivisions on the western side of the City of Albuquerque. A number of large subdivisions to the north of Westland's land are not fully sold. These include Rio Rancho (about six miles north of Westland's land), Paradise Hills and Ventana Ranch (about five miles north of Westland's land), Volcano Cliffs and Taylor Ranch (each about two to three miles north of Westland's land). The implementation of certain mandated impact fees may have an as yet undetermined affect on Westland's ability to sell property in competition with developers of land located in neighboring counties. (See "Governmental Regulations") Employees As of June 30, 1999, Westland had ten full-time and seven part-time employees. Westland's president, who is also a director, is a full time employee. Westland also had contractual relationships with other individuals, including two of Westland's officers and directors, who provided various services to the Company. Government Regulations. Westland's ability to undertake an active program of development of its land and management of its rental properties, (whether such development is performed by Westland itself or by sale of Westland's land to others for development), is dependent on Westland'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 and endangered species, has in recent years had no material effect upon the capital expenditures, earnings and competitive position of Westland, no assurance can be given that this situation will continue. Requests relating to drainage, traffic flow and similar matters from the City of Albuquerque have occasionally delayed the receipt of necessary approvals and required modification of development proposals. The opening of the Double Eagle II Municipal Airport by the City of Albuquerque to the north of Westland's Land on Paseo del Volcan may have an impact on the use of and planning for Westland'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 Westland's request, the City of Albuquerque 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, and SAD's may be available for future development of Westland's property. A mandate by the State Legislature for implementation of Impact Fees may result in Westland's lands being disadvantaged because the fees that surrounding counties charge may be less than those that will be charged by Albuquerque and Bernalillo County. Bernalillo County began the assessment of such fees on January 1, 1996, but Albuquerque has not yet implemented the fees. Westland has not been able to determine whether these fees adversely impact its business. 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 Westland's water rights has not been determined, however, Westland has retained the services of a water law specialist to investigate the existence of any Westland water rights and to otherwise consult with Westland on matters involving availability of water. However, lack of ownership of water rights by Westland would not be an inhibiting factor to the developing of Westland's land if adequate water were to be made available through the City of Albuquerque and/or Bernalillo County and/or other water sources or by purchase by Westland or by a developer that might purchase and develop land. For example, Tierra West Mobile Home Park sold by Westland near 9-mile hill and the recreation 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 Westland's land is a requirement by the City before it will extend water and sewer services 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. Westland has pursued alternative methods of providing water, sewer and other services to its lands. In the past, Westland worked closely with Bernalillo County to secure the County's assistance in providing such services to Albuquerque's west side and to lands owned by Westland. The County completed a feasibility study looking toward providing those services. Subsequently Westland and the County entered into a program which outlined the County's providing services, but that program did not go forward. The City and Westland have now reached the agreement discussed above relating to provisions for utility services to the Master Plan lands and annexation by the City. Most of Westland's land lies outside the municipal limits of the City of Albuquerque and are not furnished with City water or other City services. Westland experienced little difficulty in having its other Master Plan area furnished with services, but the same cannot be assumed for other areas of Westland's land. Other Factors Affecting Development of Westland's Land Various activist groups, as well as neighborhood organizations in the past have occasionally taken actions which have, to some extent, delayed Westland's plans for the development of some of its lands. Two activist groups filed appeals with the City of Albuquerque related to Westland's Master Plan. However, the Master Plan was upheld with only minor modifications. ITEM 2: DESCRIPTION OF PROPERTIES The major physical assets owned by Westland are its land which is owned in fee simple. The land is comprised approximately 59,000 acres of undeveloped land held for long-term investment and approximately 175 acres of land remaining from those which Westland has developed to various stages of completion. Approximately 6,400 acres are located in Westland's Master Plan area. Westland also owns the Atrisco Urban Center office building, comprising approximately 11,097 square feet, 4,166 of which is leased to Bank of America at a monthly rental of $2,598, while the remainder is used by Westland for its executive offices. This building is not mortgaged. Westland also owns four commercial buildings that are leased to others and is a 50% owner of a self storage facility. 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 Westland's land is located. In fact, much of the real property directly west of the City of Albuquerque is owned by Westland. Management believes that growth on the West Side, subject to peaks and valleys of development, will continue into the foreseeable future. Westland's land is bisected by Interstate Highway I-40, the main east-west thoroughfare through Albuquerque. Access to Westland's land from Interstate 40 is provided by the Coors Boulevard interchange near the eastern edge of Westland'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 Westland's land to the Double Eagle II Airport. In 1994, Westland dedicated approximately 180 acres to Bernalillo County for the linking of Paseo del Volcan and Rio Bravo. The County has extended Paseo del Volcan south of the I-40 interchange to the point at which it will intersect with the Rio Bravo extension to form an inner loop for the City's southwest quadrant and construction has commenced to link Rio Bravo and Paseo del Volcan. Westland and other landowners and developers (the Northwest Loop Association) dedicated land and have 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 1-25, through New Mexico State Highway 44, traversing the western portion of Westland's land within the Rio Puerco valley. In 1995 Westland donated 169 acres for development of the Northwest Loop. Completion of the Northwest Loop is not expected for 15 to 20 years. Most of Westland's land is remote and not readily accessible, not serviced by utilities, and Westland 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 for real estate. The Company has considered various structures through which it might enhance the value of its properties and would exchange property for partnership units or other securities issued by others for the purpose of developing Westland's land. A large portion of the undeveloped land is leased for agricultural uses (see "Item 1. Business" ). The bulk of Westland'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, neither the Company nor any member of management is the subject of any pending or threatened legal proceedings: 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, 1999. PART II ITEM 5: MARKET FOR WESTLAND'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information required by this item is incorporated by reference to the item in Westland's Annual Report to Shareholders for the year ended June 30, 1999 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 OPERATIONS. The information required by this item is incorporated by reference to the item in Westland's Annual Report to Shareholders for the fiscal year ended June 30, 1999 entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." ITEM 7: FINANCIAL STATEMENTS The information required by this item is incorporated by reference to the Financial Statements in Westland's Annual Report to Shareholders for the fiscal year ended June 30, 1999 which is attached as exhibit 13 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 Westland's two (2) most recent fiscal years. PART III ITEM 9: DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The information required by this item is incorporated by reference to the items in Westland's definitive Proxy Statement for the November 23, 1999, 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 Westland's Definitive Proxy Statement for the November 23, 1999, 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 Westland's Definitive Proxy Statement for the November 23, 1999, 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 Westland's Definitive Proxy Statement for the November 23, 1999, Annual Meeting of Shareholders entitled "Voting Securities and Principal Holders Thereof" and "Executive Compensation". PART IV ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 1. Financial Statements, incorporated by reference to Westland's Annual Report to Shareholders for each of the two years ended June 30, 1998 and 1999: 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: Exhibit (3) Articles of Incorporation and Bylaws: (3)(I) Articles of Incorporation filed as an exhibit to Westland'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 Westland'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 Westland'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 Westland'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 Westland'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 Partners and Walgreen Co., as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998, and incorporated herein by reference. (10.5) Assignment of Lease dated April 20, 1995, from Central Avenue Partners to Westland, as filed with the' Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1995, and incorporated herein by reference. (10.6) Lease Agreement dated March 14, 1995, between George Brunacini and Jeannette Brunacini and Circuit City Stores, Inc., as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1995, and incorporated herein by reference. (10.7) Assignment of Lease dated June 28, 1995, from George Brunacini and Jeannette Brunacini to Westland, as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1995, and incorporated herein by reference. (10.8) Lease Agreement dated March 19, 1996, between C.A.P. II, a New Mexico general partnership, and Walgreen Co., as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996, and incorporated herein by reference. (10.9) Assignment of Lease dated June 21, 1996, from C.A.P. II, a New Mexico general partnership, to Westland, as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996, and incorporated herein by reference. (10.10) Lease Agreement dated June 29, 1999, between Marie Callender Restaurant and Pie Shop, a California corporation. Statement regarding computation of per share earnings is incorporated by reference to Note A(8) to the Financial Statements incorporated herein by reference to Westland's Annual Report to Shareholders for the Fiscal year ended June 30, 1999. Annual Report to Shareholders for the Fiscal year ended June 30, 1999. Subsidiaries of Westland Westland has the following subsidiaries: Name State of Incorporation El Campo Santo, Inc New Mexico - non-profit Westland Community Services, Inc New Mexico - non-profit All other exhibits required by Item 601 of Regulation S-B are inapplicable to this filing. (b) Reports on Form 8-K: During the last quarter of the period covered by this report, Westland filed no reports on Form 8-K: SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, Westland caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WESTLAND DEVELOPMENT CO., INC. By Barbara Bage ------------ Barbara Page, President, Chief Executive Officer, Chief Financial Officer and Director Date: September 23, 1999 In accordance with the Exchange Act, this report has been signed below by the following persons in behalf of Westland and in the capacities and on the dates indicated. By David C. Armijo --------------- David C. Armijo, Secretary-Treasurer and Principal Financial Officer Date: September 23, 1999 In accordance with the Exchange Act, this report has been signed below by the following persons in behalf of Westland and in capacities and on the dates indicated. By David C. Armijo --------------- David C. Armijo, Director Date: September 23, 1999 By Lee Anaya --------- Polecarpio (Lee) Anaya, Executive Vice President and Director Date: September 23, 1999 By Sosimo S. Padilla ----------------- Sosimo S. Padilla, Director and Chairman of the Board Date: September 23, 1999 By Josie G. Castillo ----------------- Josie G. Castillo, Director Date: September 23, 1999 By Carmel T. Chavez ---------------- Carmel T. Chavez, Director Date: September 23, 1999 By Joe S. Chavez ------------- Joe S. Chavez, Director Date: September 23, 1999 By Charles V. Pena --------------- Charles V. Pena, Director Date: September 23, 1999 By Carlos Saavedra --------------- Carlos Saavedra, Director Date: September 23, 1999 By Barbara Page ------------ Barbara Page, Director Date: September 23, 1999 EX-10 2 EXHIBIT 10.10 LEASE By and Between HEREFORD COMPANY LLC, a New Mexico Limited Liability Company, as Landlord and MARIE CALLENDER PIE SHOPS, INC., a California corporation, as Tenant For the Property located at 5220 Eubank Blvd. NE Albuquerque, New Mexico 87111 August 14, 1998 This document shall not have, nor be construed as having, any binding effect on the parties unless fully executed by the Tenant and Landlord and a fully executed copy is delivered to the Landlord. TABLE OF CONTENTS ----------------- SECTION PAGE ------- ---- 1. DESCRIPTION OF PREMISES .............. 1 2. TERM ................................. 1 3. (INTENTIONALLY OMITTED) .............. 1 4. RENTAL ............................... 1 5. USE OF THE PREMISES .................. 3 6. TRADE FIXTURES ....................... 3 7. (INTENTIONALLY OMITTED) .............. 3 8. ALTERATIONS AND REPAIRS .............. 4 9. TAXES ................................ 4 10. MECHANICS'LIENS ...................... 5 11. UTILITIES ............................ 6 12. ASSIGNMENT; SUBLETTING ............... 6 13. INDEMNITY AND INSURANCE .............. 7 14. DAMAGE OR DESTRUCTION ................ 8 15. CONDEMNATION OF PREMISES ............. 9 16. COVENANT OF TITLE AND QUIET ENJOYMENT. 11 17. (INTENTIONALLY OMITTED) .............. 11 18. COMMON AREAS AND APPURTENANT RIGHTS .. 11 19. SUBORDINATION AND NON-DISTURBANCE .... 13 20. WARRANTIES OF LANDLORD ............... 13 21. (INTENTIONALLY OMITTED) .............. 15 22. INSPECTION ........................... 16 23. WRITTEN CONSENT ...................... 16 24. INVESTMENT TAX CREDIT ................ 17 25. OPTION TO RENEW ...................... 17 26. TENANT'S DEFAULT; LANDLORD'S REMEDIES 18 27. LANDLORD'S DEFAULT; TENANT'S REMEDIES 19 28. BROKERAGE COMMISSIONS ................ 20 29. MORTGAGING OF LEASEHOLD ESTATE ....... 20 30. OWNERSHIP OF IMROVEMENTS ............. 21 31. MISCELLANEOUS ........................ 21 EXHIBIT "A" - Legal Description of Premises EXHIBIT "B" - Site Plan EXHIBIT "C" - Intentionally Omitted EXHIBIT "D" - Intentionally Omitted EXHIBIT "E" - Intentionally Omitted EXHIBIT "F" - Memorandum of Lease EXHIBIT "G" - Intentionally Omitted EXHIBIT "H" - Intentionally Omitted EXHIBIT "I" - Non-Disturbance Agreement (Lender) LEASE THIS LEASE ("Lease") is made and entered into this 14th day of August 1998, by and between HEREFORD COMPANY LLC, a New Mexico limited liability company ("Landlord") and CALLENDER PIE SHOPS, INC., a California corporation, ("Tenant"). I . DESCRIPTION OF PREMISES Landlord hereby leases to Tenant, and Tenant hereby hires and takes from Landlord, that certain real property legally described in attached Exhibit "A," incorporated herein by reference, containing approximately 7,500 square feet of floor area, and as shown on the Site Plan attached hereto as Exhibit "B," incorporated herein by reference, ("Property") together with all of the improvements located on the Property, including that certain building containing a restaurant facility ("Building"), and related outbuildings and improvements constructed upon the Property, and the Appurtenant Rights as hereinafter defined in Section 17 (collectively referred to as "Premises"), for the term, at the rental, and upon all of the terms, covenants, and conditions set forth in this Lease. The Premises are part of that certain shopping center known as the Promenade Shopping Center ("Shopping Center"). For all purposes of this Lease, including all time requirements, the "date hereof," or any other reference to the date of this Lease, shall be the date first set forth above and shall be referred to as the effective date ("Effective Date").' 2. TERM This Lease shall be effective upon the date of its execution, but its term ("Term") shall commence August 14, 1998 ("Commencement Date"), and shall end on August 13, 2008, unless extended or terminated earlier in accordance with the provisions hereinafter set forth. 3. (INTENTIONALLY OMITTED) 4. RENTAL a. Tenant shall pay as fixed minimum monthly rental ("Minimum Monthly Rent") for the Premises during the Term hereof the sum of Eleven Thousand Dollars ($1 1,000) per month. The Minimum Monthly Rent shall be paid in advance on the first day of each month, partial months being prorated based upon a thirty (30) day month. Except as otherwise provided herein, Minimum Monthly Rent shall commence on the Commencement Date ("Rent Commencement Date"); provided, however, in the event that the Rent Commencement Date is other than the first day of the month, the Minimum Monthly Rent for such fractional month shall be prorated as provided above. b. In addition to Minimum Monthly Rent, Tenant shall pay to Landlord during the Term hereof as percentage rent the amount by which six percent (6%) of Annual Gross Sales (as hereafter defined) exceeds the Minimum Monthly Rent payable for the same period (the "Percentage Rent"). Tenant shall record at the time of sale, in the presence of the customer, all receipts from sales or other transactions, whether cash or credit in accordance with Tenant's point of sales system in use in a majority of Tenant's restaurants in the region of the United States where the Premises is located. Tenant shall keep (a) full and accurate books of account and records in accordance with generally accepted accounting principles consistently applied, including, without limitation, a sales journal, general ledger, and all bank account statements showing deposits of Gross Sales revenue, (b) all points of sales records with regard to the Gross Sales and credits, refunds and other pertinent transactions made from or upon the Premises, and (c) detailed point of sales records of any exclusions or deductions from Gross Sales (including any exclusions or deductions from Gross Sales of any subtenant, licensee or concessionaire). Such books, receipts and records shall be kept for a period of three (3) years after the close of each Lease year and shall be available for inspection and audit by Landlord and its representatives as provided in Section 4(e) below. c. Tenant shall submit to Landlord on or before the sixtieth (60th) day following the end of each Lease Year a complete statement certified by a duly authorized officer of Tenant of the Annual Gross Sales during the immediately preceding Lease Year, the Minimum Monthly Rent and the Percentage Rent for said Lease Year. If the Percentage Rent due for said Lease Year shall exceed the Minimum Monthly Rent theretofore paid in respect of the same Lease Year, the balance due shall be paid by Tenant with the submission of such statement. Each statement required by this Section shall include and reflect all data necessary for an accurate computation of the Percentage Rent due under this Lease. In addition, upon request of Landlord, Tenant agrees to furnish to Landlord a copy of Tenants state and local sales and use tax returns. The receipt by Landlord of any statement or any payment of Percentage Rental for any period shall not bind it as to the correctness of the statement or the payment. d. As used herein, the term "Annual Gross Sales" means: the aggregate of those sales made upon and from the Premises during the subject Lease Year for all items sold to customers in the operation of Tenant's business, such sales to include the entire amount of the price charged, whether wholly or partially in cash or on credit with deduction being allowed for uncollected or uncollectible credit. "Annual Gross Sales" shall not include (i) the amount of any sales, use or gross receipts taxes collected from customers, (ii) receipts from the sale of meals to employees of the restaurant, sold to them in the course of their employment, (iii) any service charges made and collected by Tenant and turned over to Tenant's employees in lieu of such employees receiving tips or gratuities from Tenant's customers, (iv) proceeds from the sale of any of Tenant's trade fixtures or equipment, (v) returned pie tin deposits, (vi) receipts for product made on the Premises and transferred to another Marie Callender outlet, (vii) receipts from pay telephone, cigarette and other vending machines provided such do not occupy more than 50 square feet of floor area within the Building, (viii) refunds or credits made by Tenant for returned merchandise, provided the sale of such merchandise was previously included by Tenant in the Annual Gross Sales, (ix) non-food promotional items sold at no profit by Tenant, (x) credit card service charges, or (xi) the proceeds of the sale of any franchise to operate the business on the Premises, and all fees, charges, or rents charged to or received from any such franchise. e. At its option and expense, Landlord, during reasonable business hours and upon five (5) days' prior written notice to Tenant but not more often than one (1) time in any twelve (12) month period, may cause an audit to be made of Tenant's books and records relating to Annual Gross Sales made upon and from the Premises for the period covered by any statement issued by the Tenant as set forth herein, which audit shall take place at Tenant's corporate headquarters (provided such are maintained within the continental United States; otherwise, the books and records shall be provided by Tenant to Landlord in Albuquerque, New Mexico, for audit and review). Such audit shall be conducted by either Landlord or an agent or representative, including but not limited to a certified public accountant to be designated by Landlord. If it shall be determined as a result of such audit that there has been a deficiency in the payment of Percentage Rental, then such deficiency shall become immediately due and payable with interest at the rate of twelve percent (12.00%) per annum or at the maximum legal interest rate, whichever is less, from the date when said payment should have been made. In addition, if Tenant understates Annual Gross Sales by more than two percent (2%) and if Landlord is entitled to any additional Percentage Rental as a result of said understatement, or if such audit shows that Tenant has failed to maintain the books of account and records required by this Section so that Landlord is unable to verify the accuracy of Tenant's statement, then, notwithstanding anything in this Lease to the contrary, Tenant shall pay to Landlord all reasonable costs and expenses (including reasonable auditor and attorney fees) which may be incurred by Landlord in conducting such audit and collecting such underpayment if any. If Tenant willfully understates Annual Gross Sales by more than six percent (6%) then, in addition to Landlord's aforesaid rights, Landlord may terminate Tenant's rights of possession under this Lease. 5. USE OF THE PREMISES The Premises shall be used for a restaurant business or for any other lawful purpose provided that Tenant first obtains the written consent of Landlord for such other lawful purpose, which consent Landlord shall not unreasonably withhold or delay. 6. TRADE FIXTURES Tenant may place upon the Premises its inventory, trade fixtures, furniture, machinery, and equipment (collectively, the "Equipment"). Any such Equipment installed by Tenant in or upon the Premises, no matter how affixed, during the Term may be removed at any time during the term of this Lease or any extension thereof and for a period of thirty (30) days after the termination of the Lease provided Tenant, as a condition to its right to make such removal, shall restore the Premises to its condition prior to installation of the Equipment, normal wear and tear to the Premises excepted. 7. (INTENTIONALLY OMITTED) 8. ALTERATIONS AND REPAIRS a. From and after the Commencement Date, Tenant shall at its expense, maintain the Premises and the improvements thereon, in the same condition in which they were received, reasonable wear and tear, depreciation, damage and loss from the elements, loss covered by insurance provided that such loss has been, or will be, remedied in a prompt fashion by use of insurance proceeds made available for such use, and other occurrences beyond the reasonable control of Tenant excepted. Tenant shall maintain the Premises in a clean and sanitary condition, in accordance with all applicable state, city, and county health and sanitation laws and ordinances, and as directed by the applicable governmental officials during the Term of this Lease; provided, however, any alteration, repair, or change to the Premises which may be required by law, regulation or rule, or resulting from non-compliance by Landlord with the terms of this Lease shall be the sole responsibility and done at the expense of Landlord. b. Tenant, at its sole cost and expense, with Landlord's consent, which consent shall not be unreasonably withheld or delayed, shall have the right to construct structural and nonstructural upgrades, changes, modifications, remodels or alterations ("Alterations") to the interior and exterior of the Premises, including the Building. However, Tenant shall not make structural Alterations until complying with the following: i. Tenant shall provide Landlord with ten (10) days written notice stating the date of the commencement of the Alterations to enable Landlord to post and record an appropriate notice of non-responsibility. ii. Tenant shall acquire the approval of all appropriate governmental agencies and, where applicable, receipt of all permits and authorizations. c. Except as provided in Sections 14 and 15 hereof, Landlord shall not have any responsibility to maintain the Building. 9. TAXES a. In addition to the Minimum Monthly Rent, Tenant shall pay all of the real and personal property taxes levied or assessed against the Premises and Improvements thereon for tax years, or prorata shares thereof for partial tax years, allocable to the period commencing with the Rent Commencement Date and throughout the balance of the Term of this Lease. Tenant shall also pay the real and personal property taxes levied or assessed against the Premises and Improvements for the tax year 1998 covering the obligations of the prior tenant in the Premises. This Section shall not be deemed or construed to require Tenant to pay or discharge any tax which may be levied by any governmental authority upon the income, profits, or business of Landlord, including rent due Landlord hereunder, or any personal property taxes, franchise, inheritance or estate taxes, or taxes upon rights of succession which may be levied against any, estate or interest of Landlord, even though such taxes shall become a lien against the Premises. b. Landlord agrees that Tenant shall have the right, at Tenant's sole cost and expense, to contest the legality or validity of any of the taxes which are to be paid by Tenant pursuant to the foregoing provisions, and in the event of any such contest, failure on the part of Tenant to pay any such tax, prior to the delinquency date thereof, shall not constitute a default hereunder. Tenant, upon the final determination of such contest, shall immediately pay and discharge any judgment rendered against it, together with all costs and charges incidental thereto. If the Tenant files a protest of the real property taxes which are to be paid by Tenant pursuant to the foregoing provisions and such taxes become delinquent, Tenant shall immediately deposit with the Landlord, or with the court or governmental body hearing the protest, the taxes assessed by the taxing authority, along with any interest and penalties then due, as a condition to continuing the protest. Landlord further agrees at the request of Tenant, to execute, or join in the execution of any instrument or documents necessary in connection with any such contest, but at no expense to Landlord. c. Landlord agrees to either (i) forward to Tenant in a timely fashion the periodic statements for taxes contemplated in Section 9(a), or (ii) join with Tenant in the necessary formalities to insure that such statements are sent directly to Tenant. Failure of Landlord to provide Tenant with the subject tax bill within one hundred eighty (180) days after the delinquency date of any such tax bill shall thereafter relieve Tenant of any responsibility whatsoever for the payment of any interest and penalties due on such taxes. 10. MECHANICS' LIENS a. Tenant agrees to keep the Premises free from the claims of persons who, at the request of Tenant, furnish labor or material to or for the benefit of the Premises. Tenant agrees to indemnify and hold harmless Landlord from and against all loss, liabilities, suits and claims resulting from any and all such liens or encumbrances. Notwithstanding anything in this Section to the contrary, if Tenant in good faith contests the validity of any such lien or encumbrance, it may post a bond to remove the lien from the Premises in lieu of satisfying any such lien. During Tenant's construction or alteration of any improvements, Landlord may post and keep posted on the Premises appropriate notices to protect Landlord against the claims of persons who, at the request of Tenant, furnish labor or materials to or for the benefit of the Premises. b. Landlord shall pay and discharge all bills duly presented for goods and materials delivered and for all services performed in connection with any repairs or improvements to be performed by Landlord on the Premises. In the event Landlord fails to make any such payment and a claim of lien to secure payment therefor is filed against the Premises, Landlord shall, within ten (10) days from the date such claim is filed, (i) pay and discharge such lien, or (ii) notify Tenant that the claim upon which such lien is based has no validity and is being contested in good faith, in which case Landlord may in lieu of payment provide for such payment with an escrow holder in Albuquerque, New Mexico, reasonably satisfactory to Tenant. In the event Landlord fails to make or provide for such payment, Tenant may pay and discharge such lien and withhold sums so paid, plus interest at twelve percent (12%) per annum or at the maximum legal interest rate, whichever is less, from any monies, including rental, due to Landlord under this Lease. 11. UTILITIES Tenant shall pay, prior to the delinquency, all charges for utilities used on the Premises during the term of this Lease. During the term of this Lease, Landlord shall, at Tenant's request, grant to any utility company so requiring such easements and rights of way over the Shopping Center as may be required for the maintenance of the restaurant. 12. ASSIGNMENT; SUBLETTING a. Tenant shall have the right to assign, hypothecate, or mortgage this Lease, or sublet the Premises or any portion thereof, without the prior written consent of Landlord, provided such assignment or sublease is: i. To any corporation with which Tenant may merge or consolidate, which acquires all or substantially all of the shares of stock or assets of Tenant or which is a parent or subsidiary of Tenant, or which is the successor corporation in the event of a corporate reorganization; or ii. To any person, entity, partnership, or corporation which acquires a majority of Tenant's restaurants, or a majority of Tenant's restaurants in the state in which the Premises are located; or iii. To a franchisee of Tenant; or iv. To a nationally or regionally known or publicly traded restaurant chain, including, but not limited to, Applebee's, Denny's, TGI Fridays, Coco's, Carrows, Perkins, Baker's Square, or Chili's. b. Any such assignment or sublease shall not relieve Tenant of liability under this Lease unless expressly approved in writing by Landlord. c. Except as provided above, Tenant shall not assign, let, or sublet this Lease or the Premises or in any way transfer or hypothecate any of its interest in this Lease or the Premises without first obtaining the written consent of Landord, which consent will not be unreasonably withheld, conditioned, or delayed. Landlord's consent shall be conditioned on Landlord's approval of the economic viability of the proposed assignee or sublessee, Landlord's determination that the proposed use of the Premises by the assignee or sublessee is lawful and complies with the terms of this Lease, and such other conditions as Landlord deems reasonably appropriate. d. Any assignment or subletting shall be acknowledged by written agreement executed by Landlord, Tenant and the assignee or sublettee. 13. INDEMNITY AND INSURANCE a. During the Term of this Lease and any extensions thereof, Tenant agrees to indemnify and save Landlord harmless from and against any and all claims arising from any act or omission attributable to the negligence of Tenant or its contractors, licensees, agents, servants, or employees arising from any accident, injury, or damage whatsoever caused to any person or property occurring in or on the Premises, or any part of it, and from and against all costs, expenses, and liabilities incurred in or in connection with any such claim or proceeding brought thereon except that Landlord shall be liable to Tenant and shall indenmnify and hold Tenant harmless from and against any and all claims arising from any act or omission attributable to the negligence of Landlord or it contractors, licensees agents, servants or employees arising from any accident, injury or damage whatsoever caused to any person or property occurring in or on the Premises, or any part of it, and from and against all costs, expenses, and liabilities incurred in or in connection with any such claim or proceeding brought thereon. Tenant shall maintain in full force during the Term of this Lease a policy or policies of comprehensive general liability insurance, including property damage, covering the Premises and its use and occupation by Tenant, insuring against liability for injuries to persons and property and for death of any person or persons occurring in or about the Premises. The liability under such insurance shall be not less than Five Million Dollars ($5,000,000.00) [including any coverage provided under an umbrella policy] for any one occurrence, and in the aggregate. Tenant agrees to name Landlord and Landlord's mortgagee as an additional insured and shall furnish Landlord with a certificate of insurance. c. During the Term, Tenant shall, at its own expense, maintain in full force a policy or policies of full standard fire, extended coverage, and vandalism insurance under Tenant's blanket insurance policy covering the insurable value of the Building. Tenant agrees to name Landlord and Landlord's mortgagee as an additional insured as their interests may appear and shall furnish Landlord with a certificate of insurance. d. Tenant and Landlord each hereby waives any and all rights to recover against the other, or against the officers, employees, agents, and representatives of the other, for loss of or damage to such waiving party or its property or the property of others under its control, where such loss or damage is insured against under any insurance policy in force at the time of such loss or damage. The foregoing waiver shall not be applicable should it result in the loss of insurance available to restore or repair any loss to the Premises. Each party shall cause each insurance policy obtained by it hereunder to provide that the insurance company waives all of its rights of recovery by way of subrogation against either party in connection with any damage covered by such policy. 14. DAMAGE OR DESTRUCTION a. If, during the Term, the Building shall be partially or totally destroyed from a risk covered by the insurance described in Section 13, rendering the Building totally or partially inaccessible or untenable, the Building shall be restored by Tenant to substantially the same condition it was in immediately prior to the destruction, except to the extent Tenant's current plans for its restaurant differ, and Tenant shall restore the Building in accordance with the then current construction plans and specifications provided such does not materially diminish the value or usability of the Building. b. Tenant shall utilize the insurance proceeds paid or to be paid to physically restore the Building. Tenant agrees that the restoration shall be performed in a prompt, diligent, and good and workmanlike manner. Except as otherwise provided below, such destruction shall not terminate this Lease. Landlord shall bear the cost of restoration which exceeds the amount of the insurance proceeds, Tenant's deductible and any co-insurance provided by Tenant. If the existing laws governing building or zoning at the time of restoration do not permit restoration, either party may terminate this Lease immediately by giving notice to the other party effective as of the date of such damage or destruction. c. If, during the Term, thirty percent (30%) or less of the replacement value of the Premises is totally or partially destroyed from a risk not covered by the insurance described in Section 13, Tenant shall physically restore the Premises to substantially the same condition as it was in immediately prior to the destruction, except to the extent Tenant's current plans for its restaurant differ and Tenant shall restore the Building in accordance with the then current construction plans and specifications provided such does not materially diminish the value or usability of the Building. Such destruction shall not terminate this Lease. Landlord and Tenant shall bear the cost of restoration equally by each depositing one-half of the portion of the restoration costs with an independent escrow holder located in Albuquerque, New Mexico, with said funds held in trust. Tenant shall be reimbursed for such restoration by a voucher type system administered by the escrow holder. If the existing laws do not permit the restoration, either party may terminate this Lease immediately by giving notice to the other party. d. If the cost of the restoration exceeds thirty percent (30%) of the replacement value of the Premises destroyed by a risk not covered by insurance, Tenant may elect to terminate the Lease by providing a (30) day written notice to Landlord which shall be effective as of the date of the damage or destruction; provided, however, that if Landlord elects to promptly repair, restore, or reconstruct the Premises to substantially its previous condition, at Landlord's sole cost and expense, then this Lease shall not be terminable by Tenant, but rents called for hereunder shall be abated until such repairs, restoration, or reconstruction is completed. Should Tenant elect not to terminate this Lease, then Tenant shall physically restore the Premises and proceed in accordance with Section 14.c. with Landlord and Tenant bearing the cost of such restoration equally. e. In the event the Premises shall be partially or totally destroyed from a risk covered or not covered by the insurance described in Section 13 within the last two (2) years in the original Term of the Lease or during any option period, Tenant may, at its election, by giving thirty (30) days written notice following the partial or total destruction of the Premises, terminate the Lease effective as of the date of the damage or destruction. f. In the event the Premises is damaged to the extent that it is no longer reasonably suitable for the normal conduct of Tenant's business as carried on prior to said damage, unless Tenant has the right under the terms of this Lease to terminate the Lease as a result of the damage or destruction to the Premises, Tenant shall continue to pay Landlord the Minimum Monthly Rental due under this Lease; provided, however, that, during the period of repair, the Minimum Monthly Rental shall be (i) totally abated if Tenant must close down its business completely at the Premises, or (ii) equitably reduced, in the event Tenant remain open for business the Premises, in proportion to the interference with Tenant's normal conduct of business. If Tenant has the right to terminate this Lease as a result of damage or destruction to the Premises, Tenant shall continue to pay Landlord the Minimum Monthly Rental due under this Lease through the effective date of such termination, which date shall be the date of the damage or destruction. g. In the event that the restoration as provided under this Section 14 is not capable of being completed within a period of nine (9) months from the date of damage or destruction, then Tenant, at its option, may terminate this Lease upon the giving of ten (10) days written notice to Landlord of its intention to do so effective as of the date of such damage or destruction, provided that Tenant releases to Landlord any claim to insurance proceeds provided for in Section 13 herein. 15. CONDEMNATION OF PREMISES a. Should any public or quasi-public authority or private corporation or individual having the power of condemnation ("Condemnor") exercise any governmental power, whether by legal proceedings or otherwise or by a voluntary sale or transfer by Landlord to any Condemnor under threat of condemnation or other legal proceedings for condemnation ("Condemnation") against the Premises during the Term, the rights and obligations of the parties shall be determined pursuant to this Section 15. If the Premises is totally taken by Condemnation, the Lease shall terminate on the date the Condemnor has the right to possession of the Premises ("Date of Taking"). Should a phased condemnation occur, Tenant may terminate at the point Tenant's business is substantially prevented or impaired. b. Tenant shall have the right to elect to terminate this Lease should a Condemnor by Condemnation acquire any of the following: i. Any portion of the Building; ii. In excess of ten percent (1O%) of the parking spaces within the Premises; iii. Any part of the Shopping Center, provided the Premises is located within a Shopping Center, such as would result in a substantial impairment of ingress or egress from or to the Shopping Center or the Premises as a consequence; iv. In excess of twenty-five percent (25%) of the gross leasable area of the Shopping Center other than the Premises; or v. Any taking of the Premises, Common Area, or adjacent streets, highways or properties that would reasonably be anticipated to substantially diminish Tenant's business or any taking as a result of which Tenant would not thereafter be in conformance with governmental ordinances. c. If Tenant elects to terminate this Lease, Tenant must exercise its right to terminate pursuant to this Section by giving notice to Landlord within ninety (90) days after the nature and extent of the taking has been ascertained. The effective date of the termination shall be the Date of Taking. d. If the Lease is terminated, the Minimum Monthly Rent and all other obligations of Tenant shall be prorated to the Date of Taking and Landlord shall pay to Tenant the Minimum Monthly Rent and any other payments made by Tenant for any period beyond the Date of Taking. e. If any portion of the Premises is taken by Condemnation and this Lease remains in full force and effect, then on the Date of Taking the following shall occur: i. The Minimum Monthly Rent, Percentage Rent (and break point for such Rent) and other obligations of Tenant hereunder shall be reduced for the remainder of the Term in the same proportion that the number of square feet of the Premises so taken bears to the original number of square feet in the Premises. ii. Landlord shall promptly restore the Premises to a condition substantially similar to that which existed prior to the Condemnation. The restoration shall be subject to and shall be performed in accordance with the provisions of Section 14. iii. Tenant shall be entitled to a reasonable abatement or diminution of the Minimum Monthly Rent and any other monetary obligation to be paid under this Lease during the time required by Landlord to restore the Premises, taking into consideration the time and extent of interference with Tenant's business. f. All the compensation, sums or anything of Value awarded, paid, or received for Premises on a total or partial Condemnation ("Award") shall belong to and be paid to Landlord, except that Tenant shall receive from the Award the value of Tenant's leasehold interest in the Premises and the value of Tenant's trade fixtures to the extent taken in the Condemnation. Tenant shall also be entitled to compensation for the cost of removal of and relocation of Tenant's furniture, trade fixtures and equipment and Tenant's loss of goodwill. It is agreed, with respect to this Section, that the 'tenant' fixtures installed in or at the Premises prior to the date of this Lease by the previous landlord are the property of Landlord and Landlord shall be entitled to any Award made with respect thereto. g. Should the Premises be subject to Condemnation for a period of less than one (1) year, then this shall constitute a Temporary Condemnation, during which time all the provisions of this Lease shall remain in full force and effect, except that all Rental obligations and all other monetary obligations shall be abated or reduced to the extent to which the Condemnation interferes with Tenant's use of the Premises. Landlord shall be entitled to damages against the Condemnor for loss of Rent hereunder and such other relief as provided by law as a result of any such temporary Condemnation, and Tenant shall be entitled to damages against the Condemnor for the interruption of Tenant's business and such other relief as provided by law as a result of any such temporary Condemnation. h. Each party waives the provisions of any law allowing either party to petition a court to terminate this Lease in the event of a partial taking of the Premises, except as otherwise provided herein. 16. COVENANT OF TITLE AND QUIET ENJOYMENT Landlord covenants that Landlord is well seized of and has good title to the Premises, does warrant and will defend the title thereto, and, except as otherwise provided in this Lease, will indemnify Tenant against any damage and expense which Tenant may suffer by reason of any lien, encumbrance, restriction or defect in the title or description herein of the Premises. If, at any time, Landlord's title or right to receive rent hereunder is disputed, or there is a change of ownership of Landlord's estate by act of the parties or operation of law, Tenant may deposit the rent accrued and accruing by interpleader in a court of competent jurisdiction in Albuquerque, New Mexico, until a determination has been made by such court as to the party entitled thereto. So long as Tenant is not in default under the terms of this Lease, Tenant shall have quiet enjoyment of the Premises during the entire term of the Lease and any extension thereof. 17. (INTENTIONALLY OMITTED) 18. COMMON AREAS AND APPURTENANT RIGHTS a. Tenant and its employees and invitees shall have free and unimpaired access to the Premises and to the common area (as hereinafter defined) within the "Promenade Shopping Center" (the "Shopping Center") as permitted by the terms of the Easements with Covenants and Restrictions Affecting Land dated March 24, 1986, and recorded in the office of the County Clerk for Bernalillo County, New Mexico, in Book Misc. 334-A, Page 507-528, as amended by First Amendment to Easements with Covenants and Restrictions Affecting Land dated June 11, 1986, and recorded in the office of the County Clerk for Bernalillo County, New Mexico, in Book MS. 363-A, Page 377380 (collectively, the "ECR"). b. The term "Common Area" shall be deemed to mean all areas, improvements, space, equipment and special services in or at the Shopping Center provided by Landlord for the common or joint use and benefit of the tenants of the Shopping Center, their officers, employees, agents, servants, customers and other invitees, including without limitation, all parking areas, parking area lighting, service areas, access roads, sidewalks, curbs, driveways, entrances and exits, retaining walls, planting and landscaped areas, truck serviceways or tunnels, loading docks, pedestrian malls, courts, stairs, ramps, exterior stairs, comfort and first aid stations, washrooms, parcel pick-up stations, maintenance buildings, and on-site and off-site signs identifying or advertising the Shopping Center. c. To the extent permitted by the ECR, Landlord, for itself, its heirs, assigns, axid legal representatives, hereby grants to Tenant for the benefit of Tenant, its employees, invitees, customers, subtenants, licensees, and the employees, customers and invitees of its subtenants and licensees, an irrevocable non-exclusive license during the Term of this Lease, and any extension thereof, for the use of the Common Area for the parking of vehicles and for the ingress and egress of both pedestrians and vehicles to and from the Premises, and to and from the streets adjacent to the Shopping Center, and over and upon the parldng areas (collectively referred to as the "Appurtenant Rights"). Except as provided in Section 18.g, no rental other than that for the Premises will be charged Tenant on account of the Common Area. No charge will be made for the use of the Common Area by persons acting under this grant of license without Tenant's written consent d. Tenant, at its cost, shall have the right to specifically enforce the obligations of the "Developer," or its successors or assigns, under the ECR to ensure the appropriate maintenance and repair of the Common Areas and the appropriate maintenance of general liability insurance with respect thereto should such party not be in compliance therewith. e. Tenant agrees to pay its proportionate share of expenses ("Common Area Costs") as provided in the ECR. Such expenses shall be equitably prorated for the partial years beginning with the Rent Commencement Date and ending with termination of this Lease. Tenant shall pay to such to Landlord or, if directed by Landlord, to the party charged under the terms of the ECR with supervision, maintenance and repair of the Common Areas. Tenant shall be entitled to any and all information available to Landlord under the terms of the ECR with respect to the Common Area Costs, and shall be entitled, as a licensee of the Common Area, to such rights as Landlord may have under the ECR to audit and, if reasonably appropriate, contest such Costs. Upon reasonable request from Landlord, Tenant shall provide any information provided to it directly from the party charged under the terms of the ECR with supervision, maintenance and repair of the Common Areas, and shall join Landlord in any protest over, or negotiation of, the Common Area Costs if requested by Landlord. 19. SUBORDINATION AND NON-DISTURBANCE a. Tenant hereby agrees that this Lease shall be subject and subordinate to the lien of any mortgage or deed of trust which Landlord has already or may place upon the Premises and to all terms, conditions, and provisions thereof, to all advances made, and to any renewals, extensions, modifications, or replacements thereof Provided, however, that Tenant will agree to such subordination only so long as the lender executes a non-disturbance agreement in a form reasonably acceptable to Tenant providing that if the Lease is in full force and effect, there are no defaults thereunder on the part of Tenant, and the Tenant does not prepay rent more than thirty (30) days in advance, the right of possession of Tenant to the Premises and Tenant's rights arising out of this Lease shall not be affected or disturbed by the mortgagee, trustee, or beneficiary in the exercise of any of its rights under the mortgage, deed of trust or the note secured thereby, nor shall Tenant be named as a party defendant to any foreclosure of the lien of mortgage, or deed of trust nor in any other way be deprived of its rights under this Lease. In the event that the mortgagee, beneficiary, or any other person, acquires title to the Premises pursuant to the exercise of any remedy provided for in the mortgage or deed of trust, this Lease shall not be terminated or affected by said foreclosure or sale, or any such proceeding, and the mortgagee or beneficiary shall agree that any sale of the Premises pursuant to the exercise of any rights and remedies under the mortgage, deed of trust or otherwise, shall be made subject to this Lease and the rights of the Tenant hereunder. Tenant agrees to attorn to the mortgagee, beneficiary or such other person as its new landlord, and the Lease shall continue in full force and effect as a direct Lease between Tenant and mortgagee, beneficiary or such other person, upon all the terms, covenants, and agreements set forth in this Lease. The parties hereto agree to execute or obtain execution of such reasonable documents as may be necessary to effectuate such subordination, non-disturbance, and attornment. b. In the event that Landlord has already placed a mortgage or deed of trust on the Premises prior to the commencement of the term of this Lease, Landlord shall obtain, as an express condition to the effectiveness of this Lease, a Non-Disturbance Agreement in a form acceptable to Tenant from any such mortgagee or beneficiary, which agreement shall be executed substantially in the form attached to this Lease as Exhibit "I" prior to the Commencement Date. 20. WARRANTIES OF LANDLORD Landlord represents and warrants to and agrees with Tenant as conditions of this Lease that during the term of this. Lease and any extensions hereof. a. The Shopping Center is zoned for use as a restaurant, and there are no easements, covenants, conditions, restrictions, rights of way of record or otherwise, governmental rules, statutes, ordinances, policies or plans, which would prohibit or materially interfere with the operation of a restaurant in the Shopping Center; and b. Public water, telephone, electric power and natural gas services and sewers sufficient to handle the requirements of a self-sufficient retail restaurant exist or are available at not less than five (5) feet within the boundary lines of the Premises; and c. All taxes on the Premises, except current taxes not delinquent, have been paid in full, prior to the commencement of the term of this Lease; and d. Landlord is able to and will place Tenant in the peaceful and undisturbed possession of the Premises on or before commencement of the Term hereof, and e. Landlord is not in default under the terms and provisions of any ground lease, mortgage, or deed of trust placed upon or affecting the Premises; and f. To the knowledge of Landlord, but having undertaker no independent inquiry, that no "Hazardous Materials," which shall include, but not be limited to, substances which are flammable, explosive, corrosive, radioactive, toxic, petroleum and petroleum products and any substances defined as hazardous substances, hazardous materials, toxic substances, or hazardous wastes in the federal Comprehensive Environmental Response Compensation and Liability Act of 1980, the Federal Hazardous Materials Transportation Act, the Resource Conservation and Recovery Act, all amendments to these laws and regulations adopted or publications promulgated pursuant to these laws, and shall also include those asbestos-containing materials defined and described in Environmental Protection Agency Report No. 56/5-85-024 (June, 1985) or any related or successor report, or other applicable governmental regulations defining or describing such materials, are presently located in, on or under the Premises including, without limitation, the subsurface soils and groundwater, have migrated to the Premises from another source, have been installed, used, generated, manufactured, stored, released or disposed of on, under or about the Premises by Landlord or any third person, nor has Landlord received any notice or communication regarding any alleged Hazardous Materials on or about the Premises and that the Premises is in compliance with all laws,, ordinances, rules and regulations relating to any such Hazardous Materials. Should any Hazardous Materials for which Landlord is responsible (as determined by applicable law) be found on the Premises during the Term or any extension thereof, Landlord shall bear all costs for the removal and remediation of the Hazardous Materials and shall restore the Premises to substantially the same condition as it was in immediately prior to the removal and remediation work. Landlord shall immediately notify Tenant in writing of (i) any enforcement, clean-up, removal or other governmental or regulatory action instituted, completed or threatened pursuant to any Hazardous Materials Laws; (ii) any claim made or threatened by any person against the Landlord or the Premises relating to damage, contribution, cost recovery compensation, loss or injury resulting from or claimed to result from any Hazardous Materials; and (iii) any reports made to any environmental agency arising out of or in connection with any Hazardous Materials in or removed from the Premises including any complaints, notices, warnings or asserted violations in connection therewith. Landlord shall also supply to Tenant as promptly as possibly, and in no event later than five (5) business days after Landlord first receives or sends the same, with copies of all claims, reports, complaints, notices, warnings or asserted violations relating in any way to the Premises. g. That as of the date of execution of this Lease, it has no knowledge of any proposed Condemnation of all or any part of the Premises. Should any or a portion of the Premises be subject to a Condemnation action by a Condemnor, which occurs prior to the Commencement Date of the Lease, then Tenant shall be under no obligation to commence or continue performing under the Lease, and all Rental and other obligations shall be abated until such time that Tenant can determine that the Premises shall not be affected by such Condemnation action. h. That as of the date of execution of this Lease, that the contemplated use of the Premises as a Marie Callender's restaurant will not conflict with the covenants, conditions or restrictions contained in the ECR. i. Landlord agrees to indemnify, defend, and hold Tenant harmless from and against all claims, demands, losses, damages, clean-up costs, liabilities or judgments imposed against Tenant, including all interest, penalties, fines and other sanctions, any costs or expenses in connection therewith, including reasonable attorneys' fees and expenses arising out of or in connection with the breach or misrepresentation of the representations and warranties of Landlord set forth herein or the failure by Landlord to perform its warranties and representations set forth herein and for which suit is brought or claims asserted against Tenant. 21. RIGHT OF FIRST REFUSAL a. It is agreed that should Landlord, or Landlord's heirs, executors, grantees, successors or assigns, at any time during the Term of this Lease or any extension thereof, receive an offer to purchase the Premises, or any part thereof, and Landlord desires to accept such offer; or should Landlord during any such time make an offer to sell the Premises, or any part thereof, Landlord shall give Tenant thirty (30) days notice in writing of such offer setting forth the name and address of the proposed purchaser, the amount of the proposed purchase price, and all other terms and conditions of such offer, and Tenant shall have the first option to purchase the Premises which is the subject of the offer by giving written notice to Landlord of its intention to purchase within said thirty (30) day period at the same price and on the same terms of any such offer, it being understood that in the event Tenant does not give notice of its intention to exercise such option to purchase within such period, this Lease and all of its terms and conditions shall nevertheless remain in full force and effect and Landlord and any purchaser or purchasers of the Premises shall be bound thereby. In the event that the Premises set forth in the offer is not sold for any reason, Tenant shall have, upon the same conditions and notice, the continuing right of first refusal to purchase the Premises or any put thereof upon the terms of any subsequent offer or offers to purchase. b. In the event the foregoing option is exercised, Landlord shall convey to Tenant a merchantable title in fee simple the Premises including all Appurtenant Rights thereto by good and sufficient warranty deed, with release of rights of spouses, if any, and free from all liens and encumbrances whatsoever. c. In addition, in the event of the exercise of such option, all monies shall be placed with an escrow agent of Tenant's designation and the settlement of the purchase price and the conveyance to Tenant shall take place in escrow. d. Within thirty (30) days of the date of exercise of such option, Landlord will furnish to Tenant at Landlord's expense an ALTA title insurance policy from a company acceptable to Tenant, in its usual form, brought down to such date of exercise, guaranteeing Tenant against loss or damage to the extent of the purchase price by reason of defects in or liens upon Landlord's title, subject only to the usual exceptions contained in guaranty title policies of the issuing company. Settlement of the purchase price and conveyance to the Tenant shall be made within ninety (90) days from such date of exercise. Taxes, utilities, rents and other current expenses shall be adjusted as of the date of closing. e. In the event there are any conflicts between the terms of this Lease concerning the exercise of the aforementioned option involving the right of first refusal, and the terms contained in the offer which Tenant must accept if Tenant desires to purchase the Premises, then the terms of this Lease shall control and supersede those contained in such offer. 22. INSPECTION Landlord may enter upon the Premises at any reasonable time (i.e., nonpeak business hours) and upon at least 48 hours prior notification to Tenant for the purpose of inspecting the Premises except in cases of emergency such as fire, in which case Landlord may enter the Premises upon reasonable notice given the emergency. Landlord shall be permitted to place upon the Premises any usual "For Lease" or "For Sale" signs within one hundred and twenty (120) days prior to expiration of the Lease; provided, that Tenant has notified Landlord of its intent to terminate the Lease prior to such expiration date. 23. WRITTEN CONSENT Whenever the "prior written consent" of either Landlord or Tenant is referred to in this Lease, it is understood and agreed that such consent shall not be unreasonably withheld or delayed by Landlord or Tenant, unless otherwise expressly stated. In the event the requested prior written consent is not received by the'requesting party within @ (30) days (or such shorter specified time frame) of receipt of said notice by the nonrequesting party, such consent shall be deemed to have been given. 24. INVESTMENT TAX CREDIT Landlord expressly waives and relinquishes in favor of Tenant any rights to claim the benefit of or to use any federal or state investment tax credits that are currently or may become available during the Term of this Lease as a result of any installation of any equipment, furniture or fixtures installed by Tenant in or on the Premises, whether or not such items become a part of the realty, and agrees to execute and deliver to Tenant any election form required to evidence Tenant's right to claim investment tax credits. 25. OPTION TO RENEW As part of the consideration for the execution of this Lease, Landlord hereby grants to Tenant options to extend and renew this Lease for three (3) consecutive five (5) year terms upon the same terms and conditions hereof provided: (a) Tenant shall notify Landlord of its intent to exercise any such option not less than six (6) months but no more than twelve (12) months prior to the expiration date of the Lease or any renewal thereof, and (b) Tenant shall pay Minimum Monthly Rent for its use of the Premises during the Option Term determined by the following formulae: The Minimum Monthly Rental to be paid by Tenant during the First Extended Term of the Lease, if exercised by Tenant, shall be the same as the Minimum Monthly Rental charged during the Term of the Lease. The Minimum Monthly Rental to be paid by Tenant during the Second Extended Term, if exercised by Tenant, shall be at the then Fair Market Value of the Premises considering the best use of the Premises as a family style restaurant (the 'FMV Rental"). Landlord and Tenant shall have thirty (30) days from the date Landlord receives the option notice from Tenant exercising the option for the Second Extended Term in which to agree to the FMV Rental during the Second Extended Term. If the parties are unable to agree on the FMV Rental for the Second Extended Term within such thirty (30) day period, then within ten (10) days after the expiration of that period, each party, at its cost and by giving notice to the other party, shall appoint an MAI real estate appraiser with at least five (5) years full-time commercial appraisal experience in the area in which the Premises is located to appraise and set the FMV Rental. If a party does not appoint an appraiser within ten (10) days after the other party has given notice of the name of its appraiser, the single appraiser appointed shall be the sole appraiser and shall set the FMV Rental. If the two (2) appraisers are appointed by the parties as stated in this paragraph, they shall meet promptly and attempt to set the FMV Rental. If they are unable to agree within thirty (30) days after the second appraiser has been appointed, they shall attempt to select a third (3rd) appraiser meeting the qualifications stated in this paragraph within ten (10) days after the last day the two (2) appraisers are given to set the FMV Rental. If they are unable to agree on the third appraiser, either of the parties to this Lease, by giving ten (10) days' notice to the other party, can apply to the then president of the Albuquerque Board of Realtors or to a presiding judge of the Second Judicial District Court for the County of Bernalillo for the selection of a third (3rd) appraiser who meets the qualifications stated in this paragraph. Each of the parties shall bear one-half (1/2) of the cost of appointing the third (3rd) appraiser and of paying the third (3rd) appraiser's fee. The third (3rd) appraiser, however selected, shall be a person who has not previously acted in any capacity for either party. Within thirty (30) days. after the selection of a third (3rd) appraiser, a majority of the appraisers shall set the FMV Rental. If a majority of the appraisers are unable to set the FMV Rental within the stipulated period of time, the three (3) appraisals shall be added together and their total divided by three (3); the resulting quotient shall be the FMV Rental. If, however, the low appraisal and/or the high appraisal are/is more than twenty percent (20%) lower and/or higher than the middle appraisal, as the case may be, the low appraisal and/or the high appraisal shall be disregarded. If only one (1) appraisal is disregarded, the remaining two appraisals shall be added together and their total divided by two (2); the resulting quotient shall be the FMV Rental. If both the low appraisal and high appraisal are disregarded as stated in this paragraph, the middle appraisal shall be the FMV Rental. After the FMV Rental for the Second Extended Term has been set, the appraiser shall immediately notify Landlord and Tenant. If Tenant objects to the FMV Rental that has been set, Tenant shall have the right to have this Lease expire at the end of the Second Extended Term. Tenant's election to allow this Lease to expire after the end of the Second Extended Term must be exercised within thirty (30) days after receipt of notice from the appraisers of the FMV Rental for the Second Extended Term. If Tenant does not exercise its election within such thirty (30) day period, the term of this Lease shall be extended as provided for in this paragraph. The Minimum Monthly Rental for the Third Extended Term, if exercised by Tenant, will be calculated in the same manner as the Second Extended Term, including Tenant's election to allow the Lease to expire at the end of the Second Extended Term if Tenant objects to the FMV Rental that has been set. 26. TENANT'S DEFAULT; LANDLORD'S REMEDIES The occurrence of any of the following shall constitute a default by Tenant: a. Failure to pay rent when due if the failure continues for ten (10) days after written notice has been received by Tenant; b. Failure to perform any other provision of this Lease if the failure to perform is not cured within thirty (30) days after written notice has been received by Tenant. If the default cannot reasonably be cured within thirty (30) days, Tenant shall not be in default of this Lease if Tenant commences to cure the default within said thirty (30) day period and thereafter diligently and in good faith continues to cure the default. The purpose of the notice requirements set forth in Sections a. and b. above is to extend the notice requirements of the unlawful detainer statutes of the State of New Mexico or statutes of similar import. c. In the event of any such default by Tenant, Landlord may pursue any remedy at law or in equity available to it for Tenant's default. d. If Rent due hereunder is not received by the Landlord within seven (7) days of the due date therefor, then, in addition to any other charges due hereunder, the Landlord shall be entitled to collect from the Tenant, in addition to such rent and without demand to the Tenant, a late charge equal to five percent (5.00%) of the Rent past due. e. If a check tendered by the Tenant is returned due to insufficient funds or closed account the Landlord shall also be allowed to collect from Tenant in addition to the rent and late charge, if any, due, a charge equal to $100 for its handling the returned check plus the charge assessed to it by its bank for return of such check. 27. LANDLORDS'S DEFAULT; TENANT'S REMEDIES a. Landlord shall be in default of this Lease if it fails or refuses to perform any provision of this Lease that it is obligated to perform if the failure to perform is not cured within thirty (30) days after notice of the default has been given by Tenant to Landlord. If the default cannot reasonably be cured within (30) days, Landlord shall not be in default of this Lease if Landlord commences to cure the default within the thirty (30) day period and diligently and in good faith continues to cure the default. b. Tenant, at any time after Landlord commits a default, may cure the default at Landlord's cost. If Tenant at any time, by reason of Landlord's default, pays any sum or does any act that requires the payment of any sum, the sum paid by Tenant shall be due immediately from Landlord to Tenant at the time the sum is paid, and, if paid at a later date, shall bear interest at the maximwn rate permitted by law to charge from the date the sum is paid by Tenant until Tenant is reimbursed by Landlord. If Landlord fails to reimburse Tenant as required by this paragraph, Tenant shall have the right to sue Landlord for the amounts advanced by Tenant for Landlord, plus interest as provided for herein, plus its reasonable attorney's fees and costs incurred in such action provided that it prevails in such action. Tenant shall not have right to withhold from future Rent due the sum Tenant has paid provided Landlord is paying the Rent to a bona fide holder of a mortgage encumbering the Premises. 28. BROKERAGE COMMISSIONS Landlord and Tenant each warrants and represents to the other that there are no brokers' or finders' fees or any real estate commissions due to any broker, agent or other party in connection with the negotiation or execution of this Lease, or on behalf of either of them. Each party shall indemnify the other with respect to compensation, commissions, fees or other sums claimed to be due or owing with respect to the representations made by Landlord or Tenant, as applicable. 29. MORTGAGING OF LEASEHOLD ESTATE In the event that Tenant shall pledge its leasehold estate as security for an indebtedness in any form whatsoever (this pledge hereinafter referred to as a "mortgage"), and if the holder of the indebtedness secured by the leasehold estate (hereinafter "Mortgagee") notifies Landlord of the execution of such mortgage and the name and place and method for service of notices upon such Mortgagee, then and in such event, Landlord hereby agrees for the benefit of Tenant and such Mortgagee as follows: a. That Landlord will give to any such Mortgagee simultaneously with service on Tenant a duplicate of any and all notices or demands given by Landlord to Tenant and no such notice to Tenant shall be effective unless a copy is so served upon the Mortgagee. b. In the event of any default by Tenant hereunder, or under the terms of the mortgage, such Mortgagee shall have the privilege of performing any of Tenant's covenants or of curing any defaults by Tenant or of exercising any election, option or privilege conferred upon Tenant by the terms of this Lease and Landlord shall accept performance by or at the instance of such Mortgagee as if the same had been made by Tenant. c. Landlord shall not terminate this Lease or Tenant's right to possession for any default of Tenant if, within a period of thirty (30) days after the expiration of the period of time within which Tenant might cure such default such default is cured or caused to be cured by such Mortgagee, or if within a period of thirty (30) days after the expiration of the period of time within which Tenant might commence to eliminate the cause of such default, such Mortgagee commences to eliminate the cause of such default and proceeds therewith diligently and with reasonable dispatch. d. No union of the interests of Landlord and Tenant herein shall result in a merger of this Lease in the fee interest. e. No liability for the payment of Rental or the performance of any of Tenant's covenants and agreements hereunder shall attach to or be imposed upon any Mortgagee, while not in possession of the Premises, all such liability being hereby expressly waived by Landlord. f. The execution and delivery of a leasehold mortgage or deed of trust and a conditional assignment of this Lease as collateral security therefor shall not be deemed a lease assignment for any other purpose. g. In the event of any termination of this Lease prior to the expiration of the Term, except by eminent domain, Landlord shall serve upon the Mortgagee, in the manner provided in Section 29.a, written notice of the termination together with a statement of any and all sums which would at that time be due under this Lease but for such termination, and of all other defaults, if any, under this Lease then known to Landlord. The Mortgagee shall then have an option to obtain a new lease upon the same terms and conditions set forth in this Lease. This option must be exercised by written notice to Landlord given within forty-five (45) days from the date the Mortgagee receives the Landlord's notice and statement. The new lease shall require the Mortgagee to cure all defaults of Tenant under this Lease which are reasonably susceptible of being cured by the Mortgagee, and any default of Tenant which is not reasonably susceptible of being cured by the Mortgagee shall be waived by Landlord. 30. OWNERSHIP OF IMPROVEMENTS, SIGNS, FIXTURES, OR EQUIPMENT OF TENANT OR ANY SUBLESSEE All removable improvements placed upon or attached to the Premises by Tenant, trade fixtures attached to the Premises by Tenant, equipment installed on or at the Premises by Tenant, and signs affixed to the Premises by Tenant, shall be the property of and belong solely to Tenant no matter how affixed to be used, altered, and disposed of as Tenant so wishes. All real estate fixtures and improvements attached or made to the Premises by Tenant shall, at the end of the Term of this Lease, or upon earlier termination as provided herein, become the property of Landlord. Tenant or any sublessee is hereby given the right at any time during the Term of this Lease or any extension thereof and for a period of thirty (30) days after the termination of this Lease, or any extension thereof, by lapse of time or otherwise to enter upon and remove from the Premises any such improvements, signs, fixtures, or equipment of Tenant or any sublessee, but shall not be obligated to do so, provided such party complies with the obligations of restoration in Section 6. If Tenant or any sublessee fails to remove the improvements, signs, fixtures, or equipment of Tenant or any sublessee within thirty (30) days after termination of the Lease, such improvements, signs, fixtures, or equipment shall be deemed abandoned and the right, title and interest of the Tenant or an sublessee therein waived. 31. MISCELLANEOUS a. Binding on Successors The provisions of this Lease shall be binding upon and shall inure to the benefit of the heirs, successors, assigns, and legal representatives of the parties hereto. b. Captions The captions and headings herein are for convenience and reference only and in no way define or limit the scope or content of this Lease or in any way affect its provisions. c. Gender Whenever the sense of this Lease so requires, the use of (1) the singular number shall be deemed to include the plural, (2) the masculine gender shall be deemed to include the feminine or neuter gender, and (3) the neuter gender shall be deemed to include the masculine or feminine gender. d. Qualification Each party represents that it is authorized to do business in the state in which the Premises are located and will remain so during the Term hereof, and in all respects is duly authorized to enter into and perform this Lease. e. Entire Agreement This Lease embodies the entire agreement and understanding between the parties and supersedes all prior negotiations, agreements and understanding between them, oral or written, and any provision of this Lease may be modified, waived or discharged only by an instrunent in writing signed by both parties hereto. f Time of Essence Time is of the essence in this Lease. g. Notices All notices required or permitted under this Lease shall be in writing and shall be served on the parties at their respective addresses stated below. Any notice shall be either (a) sent by certified mail, return receipt requested, in which case notice shall be deemed delivered three (3) business days after deposit, postage prepaid in the U.S. mail, or (b) sent by a nationally recognized overnight courier, in which case notice shall be deemed delivered one (1) business day after deposit with the courier. The addresses of the parties as set forth below may be changed by written notice to the other party; provided, however, that no notice of a change of address shall be effective until actual receipt of the notice. The notice addresses for the parties are: IF TO LANDLORD: Hereford Company LLC Care of John Black Westwood Realty 2600 American Road SE Rio Rancho, New Mexico 87124 Taxpayer Identification Number: IF TO TENANT: Marie Callender Pie Shops, Inc. ATTN: Vice President, Real Estate 1100 Town and Country, Suite 1300 Orange, California 92668 h. Force Majeure In the event that either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lock-outs, labor troubles, inability to procure materials, failure of power, restrictive governmental laws or regulations, riots, insurrection, was, military or usurped power, sabotage, terrorism, unusually severe weather, acts of God, fire or other casualty or other reason (but excluding financial inability) of a like nature beyond the reasonable control of the party delayed in performing work or doing acts required under the terms of this Lease, then performance of such act shall be excused for the period of the delay, and the period for the performance of any such act shall be extended for a period equivalent to the period of the delay. i. Legal Expenses In the event of the bringing of any action by either party hereto against the other hereon or hereunder, or by reason of the breach of any term, covenant or condition on the part of the other party, or arising out of this Lease, the party in whose favor final judgment shall be entered shall be entitled to have and recover from the other party costs and reasonable attorneys' fees to be fixed by the court which shall have rendered such judgment. j. Waiver The waiver by either party hereto of any term, covenant or condition of this Lease to be performed by the other shall not be deemed to be a waiver of any subsequent breach thereof. k. Holding Over In the event Tenant shall continue to occupy the Premises after the expiration of the Term hereof, such holding over shall be deemed to have created a tenancy at sufferance subject to all the terms and conditions of this Lease. 1. Applicable Law The invalidity or unenforceability of any provision of this Lease shall not affect or impair any other provision. If any provision of this Lease is capable of two constructions, one of which would render the provision invalid and the other of which would make the provision valid, then the provision shall have the meaning which renders it valid. The laws of the State in which the Premises is located shall govern the validity, performance, and enforcement of this Lease. The submission of this document for examination does not constitute an offer to lease and becomes effective only upon execution and delivery thereof by Landlord and Tenant. m. Memorandum of Lease Landlord and Tenant agree to execute a Memorandum of this Lease for the purpose of recording in the form attached hereto as Exhibit "F" and by this reference incorporated herein. Such Memorandum shall include but not be limited to Term, option periods, use restrictions, all rights that Tenant may have over any property owned or controlled by Landlord (e.g., common area rights), and Tenant's right of first refusal to purchase. n. Estoppel Certificate Landlord and Tenant shall at any time and without charge or expense to the other party upon not less than fifteen (15) days prior written notice from the requesting party or mortgagee, execute, acknowledge, and deliver a statement in writing (i) certifying that this Lease, is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which the Rental and other charges are paid in advance, if any, and (ii) acknowledging that there are not any uncured defaults of which the acknowledging party has knowledge, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective assignee, sublessee or encumbrancer of the Premises. IN WITNESS WHEREOF, the parties have executed, or if a corporation, caused its duly authorized officers to execute this Lease as of the day and year first above written. LANDLORD: TENANT: HEREFORD COMPANY LLC, MARIE CALLENDER PIE SHOPS, INC. A New Mexico limited liability company, a California corporation By: ---------------- Its: VP, CFO By: John Black ----------- John Black, Manager EX-13 3 September, 1999 Dear Shareholders: Greetings! On behalf of your Board of Directors, I am pleased to report that fiscal year 1999 was another good year for the Company. Total revenue increased by 3% from the previous year and assets grew to $19,900,219. During this past fiscal year, Westland developed the third phase of Cedar Ridge Estates, and laid the groundwork for three new subdivisions, two of which should be introduced during fiscal year 2000. The Company was also active on the acquisition side of our business. In June, we added the Marie Callender's restaurant located at Spain and Eubank to our portfolio of income properties. Overall, it was a strong year. Looking forward to the year 2000 and beyond, the Company has made significant strides in implementing a major development program. I have reported to you many times on Westland's master plan, the 6,400 acre project located north of I-40 and west of Unser Blvd. Westland continues to gain support for its master plan, despite the sentiments of certain groups who hope to limit Albuquerque's growth. The master plan has been approved by both Bernalillo County and the City of Albuquerque and, at this writing, annexation approval of the first 1,732 acres to the city is imminent. Our focus now is on the introduction of major public infrastructure. The Company has entered into an arrangement with the City that provides for Westland to pay for new water and sewer utilities and transfer the systems to the City. Repayment will be made to Westland for its cost of construction as users tie into the systems. The costs involved in this endeavor will significantly impact the Company's financial statements in future years. Currently, we are investigating prospective capital sources. The development of the master plan area is the top priority for the Company. I would like to invite each of you to visit the Company owned cemeteries. We have fenced all three and planted over one hundred trees. In essence, we are beautifying these sacred places. I hope you find our efforts satisfying. I look forward to seeing each of you at our Annual Shareholder Meeting. Until then, please remember to take advantage of our open door policy. I am happy to meet with you to address any concern you may have. God Bless you all! Sincerely, Barbara Page President and CEO 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 were originally part of the Atrisco Land Grant, which was granted to a group of Spanish settlers in 1692. 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, developed or undeveloped, 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 and national 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 assure perpetual benefit to the Company and its shareholders. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION OPERATIONS In the past fiscal year, land sales were greater than the prior year as the Company experienced increased sales of improved residential lots and sales to the National Park Service, even though large parcel sales decreased. During the last fiscal year there were $2,605,000 of sales of lands to the National Park Service ("NPS") as part of its acquisition of the lands included in the Petroglyph National Monument. This was the final acquisition of land to be purchased from the Company by NPS. The sales to NPS amounted to approximately 54% of the Company's land revenue for 1999, while such sales during fiscal 1998 amounted to $1,507,000, or 33% of land revenue. During 1999, Albuquerque continued 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 1999 were approximately $1,221,000, compared to sales of approximately $224,000 in fiscal 1998. 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. Westland anticipates making capital commitments for land development projects over the next few years as the economy and opportunities dictate that such expenditures would be warranted. Capital commitments may include special assessment districts for roads and water and sewer lines on its land. In some cases 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, and is valued, for financial accounting purposes, at its 1907 value plus the cost of improvements. Westland's balance sheet does not reflect the actual current 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 increased during the fiscal year ended June 30, 1999, primarily reflecting increased investment. The carrying value will be increased or decreased regularly as Westland acquires, sells or develops parcels of land. Management believes the June 30, 1999 carrying value of the land is substantially less than its current market value. Westland's balance sheet also segregates income-producing properties which consist of commercial real estate and improvements. 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. After some delay, Westland has received approval of its Master Plan by both the City of Albuquerque and Bernalillo County. The Master Planned land includes the area north of Interstate 40 and south of the area designated for the Petroglyph National Monument between Unser Boulevard and Paseo del Volcan Road. The Master Plan area encompasses approximately 6,400 acres, but does not include any land located within the Monument and will have no adverse impact on the Monument. Management anticipates that development and sale of the initial parcels of land within the Master Planned area will occur in the year 2000, however, unforeseeable delays in getting utilities to the lands may cause this period to be extended beyond that anticipated date. Financial Condition: During fiscal 1999, total assets increased to $19,900,219 from $17,557,093, while liabilities increased from $11,350,853 to $13,208,119. During fiscal 1999 the Company invested $3,978,514 in income producing and other properties and increased net borrowing on notes and mortgages by $1,180,072. Including these uses of cash and payment of cash dividends of $802,708, cash equivalents and short-term investments decreased by $1,909,711, as operations provided $1,691,439. In fiscal 1999, the Company maintained lines of credit with local banks aggregating approximately $3,000,000, collateralized by certain real property. The purpose of these lines is to provide funds necessary for its continued expansion. At June 30, 1999, the lines had outstanding balances totaling $656,669. During fiscal 2000, the Company will be obligated to pay income tax of approximately $600,000 should replacement properties totaling $1,510,000 for lands sold to the National Park not be acquired. Management diligently seeks income producing properties for acquisition as replacement properties and fully expects to off-set this tax obligation. 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 2000 without considering additional revenues that may be generated during that period. Results of Operations: In fiscal 1999, land revenues increased by $154,676 from $4,630,523 in 1998 to $4,785,199. The related cost of land revenues increased to $838,032, or $388,241 from $449,791 in fiscal 1998. Rental revenue increased from $697,385 to $702,065 and the related costs increased from $169,907 to $173,800. These increases are expected to continue as the Company expands its activities in these areas. Year 2000 Issues: Management has assessed the Year 2000 issues and determined that their consequences would not have a material effect on the Company's business, results of operations or financial condition. The total cost of compliance in both information and non-information technology systems is expected to be approximately $30,000. Since a substantial portion of this cost is third party hardware and software, the effect on net earnings will be immaterial. Changes in internal systems are substantially complete and any remaining costs will be insignificant. Determination of level of risk in the Company's material relationships with third parties is incomplete, but is expected to be finished by year end, and is considered negligible. Therefore, contingency plans have not been formulated at this time. MARKET PRICE OF AND DIVIDENDS ON WESTLAND'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Because ownership of Westland's stock is restricted in the manner discussed below, 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 any of Westland's stock. In 1989, Westland entered into an arrangement with an independent stockbroker to broker transactions in Westland's stock between shareholders. 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 ninety (90) days preceding this date of this report has been $20.00 per share. Since 1982, the outstanding shares have been subject to restrictions imposed by a majority of Westland's shareholders who amended Westland's Articles of Incorporation. Those Articles prohibit (with certain limited 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). The following table sets forth the approximate number of holders of record of each class of Westland's common stock as of October 8, 1999: Number of Title of Class Record Holders No Par Value Common 5622 $1.00 Par Value Common Class A 0 $1.00 Par Value Common Class B 22 Dividends: During each of the last two (2) fiscal years ended June 30, 1998 and June 30, 1999, Westland paid cash dividends to shareholders, aggregating a total during those two years of $1,404,739. Subsequent to June 30, 1999, the Company has paid an additional cash dividend of $1.00 per share for an aggregate dividend payment to the shareholders of $802,708. ON WRITTEN REQUEST, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORMS 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30, 1999, 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 8, 1999. 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. FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS WESTLAND DEVELOPMENT CO., INC. June 30, 1999 and 1998 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, 1999, and the related statements of earnings, stockholders' equity, and cash flows for each of the two years in the period ended June 30, 1999. These financial statements are the responsibility of the Company's manage-ment. 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, 1999, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 1999 in conformity with generally accepted accounting principles. Oklahoma City, Oklahoma August 19, 1999 (except for Note P, as to which the date is August 26, 1999) Westland Development Company, Inc. BALANCE SHEET June 30, 1999 ASSETS Cash and cash equivalents .......................... $ 1,300,182 Short-term investments ............................. 2,578,019 Receivables Real estate contract (note B) .................... $ 24,291 Note receivable - related party (note M) ......... 59,808 Other receivables ................................ 39,331 123,430 ----------- Land and improvements held for future development (notes C and E) ...................... 6,897,415 Income-producing properties, net (notes D and E) ... 8,221,092 Property and equipment, net of accumulated depreciation of $477,340 (note E) ................ 391,133 Investments in partnerships and joint ventures ..... 231,901 Income taxes receivable ............................ 5,000 Other assets ....................................... 152,047 ----------- $19,900,219 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, accrued expenses, and other liabilities ........................... $ 519,468 Deferred income taxes (note F) ..................... 5,312,000 Notes, mortgages, and assessments payable (note E) . 7,376,651 ----------- Total liabilities .................... 13,208,119 Commitments and contingencies (notes E and L) ...... -- Stockholders' equity (note G) Common stock - no par value; authorized, 736,668 shares; issued and outstanding, 716,608 shares ................................ $ 8,500 Class B common stock - $1 par value; authorized, 491,112 shares; issued and outstanding, 86,100 shares ....................... 86,100 Additional paid-in capital ......................... 581,527 Retained earnings .................................. 6,015,973 6,692,100 ----------- ----------- $19,900,219 =========== The accompanying notes are an integral part of this statement. Westland Development Company, Inc. STATEMENTS OF EARNINGS Year ended June 30, 1999 1998 ----------- ----------- Revenues Land ........................................... $ 4,785,199 $ 4,630,523 Deferred profit recognized on installment sales 30,306 20,701 Rentals ........................................ 702,065 697,385 ----------- ----------- 5,517,570 5,348,609 Costs and expenses Cost of land revenues .......................... 838,032 449,791 Cost of rentals ................................ 173,800 169,907 Other general, administrative, and operating ... 1,991,667 2,106,395 ----------- ----------- 3,003,499 2,726,093 ----------- ----------- Operating income ................... 2,514,071 2,622,516 Other (income) expense Interest income ................................ (136,611) (99,672) Gain on sale or disposition of property and equipment (note O) ...................... (747,560) (779) Other, net (note O) ............................ 789,158 11,451 Interest expense ............................... 540,516 631,356 ----------- ----------- 445,503 542,356 ----------- ----------- Earnings before income taxes ....... 2,068,568 2,080,160 Income tax expense (note F) ...................... 780,000 826,000 ----------- ----------- NET EARNINGS ....................... $ 1,288,568 $ 1,254,160 =========== =========== Weighted average common shares outstanding ....... 807,775 807,755 =========== =========== Earnings per common share ........................ $ 1.60 $ 1.55 =========== =========== The accompanying notes are an integral part of these statements. Westland Development Company, Inc. STATEMENT OF STOCKHOLDERS' EQUITY Years ended June 30, 1999 and 1998
Class B Common stock Common stock Additional no par value $1 par value paid-in Retained Shares Amount Shares Amount capital earnings Total Balances at July 1, 1997 716,608 $ 8,500 86,100 $ 86,100 $ 581,527 $ 4,275,953 $ 4,952,080 Net earnings ............ -- -- -- -- -- 1,254,160 1,254,160 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balances at June 30, 1998 716,608 8,500 86,100 86,100 581,527 5,530,113 6,206,240 Net earnings ............ -- -- -- -- -- 1,288,568 1,288,568 Cash dividends paid - $1 per share ........ -- -- -- -- -- (802,708) (802,708) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balances at June 30, 1999 716,608 $ 8,500 86,100 $ 86,100 $ 581,527 $ 6,015,973 $ 6,692,100 =========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of this statement. Westland Development Company, Inc. STATEMENTS OF CASH FLOWS Year ended June 30, 1999 1998 ----------- ----------- Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities Cash received from land sales and collections on real estate contracts receivable .......... $ 4,822,132 $ 4,647,316 Development and closing costs paid ............. (1,277,974) (874,634) Cash received from rental operations ........... 680,780 732,254 Cash paid for rental operations ................ (5,321) (816) Cash paid for property taxes ................... (78,409) (58,150) Interest received .............................. 136,735 100,866 Interest paid .................................. (538,845) (667,609) Income taxes (paid) refunded, net .............. (171,162) 18,274 Other general and administrative costs paid .... (1,983,301) (1,536,439) Other .......................................... 106,804 21,839 ----------- ----------- Net cash provided by operating activities .. 1,691,439 2,382,901 Cash flows from investing activities Capital expenditures ........................... (1,404,295) (60,958) (Investments in) distributions from partnerships and joint ventures ............. (1,993) 8,588 Change in short-term investments ............... (2,578,019) -- Proceeds from sale of assets ................... -- 3,150 Proceeds from note receivable - related party .. 5,793 2,402 ----------- ----------- Net cash used in investing activities ...... (3,978,514) (46,818) Cash flows from financing activities Borrowings on notes, mortgages, and assessments payable .......................... 2,498,309 132,063 Repayments of notes, mortgages, and assessments payable .......................... (1,318,237) (987,372) Payment of dividends ........................... (802,708) (602,031) ----------- ----------- Net cash provided by (used in) financing activities ..................... 377,364 (1,457,340) ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................... (1,909,711) 878,743 Cash and cash equivalents at beginning of year ... 3,209,893 2,331,150 ----------- ----------- Cash and cash equivalents at end of year ......... $ 1,300,182 $ 3,209,893 =========== =========== Reconciliation of Net Earnings to Net Cash Provided by Operating Activities Net earnings ..................................... $ 1,288,568 $ 1,254,160 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation ................................. 227,955 221,879 Loss on partnerships and joint ventures ..... -- 33,289 (Gain) loss on sale of property and equipment ............................. 2,440 (779) Collections on real estate contracts receivable ................................. 35,483 9,259 Profit recognized on installment sales ...... (30,306) (20,701) Deferred income taxes ........................ 785,000 517,000 Change in Income taxes recoverable/payable .......... (177,273) 327,274 Other receivables ......................... 4,749 105,163 Land and improvements held for future development ...................... (439,942) (424,843) Other assets .............................. (69,702) 130,632 Accounts payable, accrued expenses, and other liabilities ................... 62,796 266,821 Accrued interest payable .................. 1,671 (36,253) ----------- ----------- Net cash provided by operating activities ........................ $ 1,691,439 $ 2,382,901 =========== =========== The accompanying notes are an integral part of these statements. Westland Development Company, Inc. NOTES TO FINANCIAL STATEMENTS June 30, 1999 and 1998 NOTE A - NATURE OF OPERATIONS AND 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' interests 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. 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, 1999 and 1998 consist primarily of proceeds from 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. At June 30, 1999 and 1998, United States Treasury bills of approximately $899,000 and $2,248,000, respectively, are included in cash and cash equivalents. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits and in certain other funds which are not federally 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. Short-Term Investments ---------------------- Short-term investments include certificates of deposit and U.S. Treasury bills carried at cost, which approximates fair value. Such investments generally have maturities of more than three months and less than one year. 5. 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. 6. 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 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. 7. 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. 8. 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. 9. Earnings Per Common Share ------------------------- Earnings per common share are based upon the weighted average number of common shares outstanding during the year, including 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. The Company has no potential common stock items. 10. Investments in Partnerships and Joint Ventures ---------------------------------------------- Investments in partnerships and joint ventures are accounted for on the equity method. 11. Use of Estimates ---------------- In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect certain reported amounts and disclosures; accordingly, actual results could differ from those estimates. 12. Long-Lived Assets ----------------- Long-lived assets to be held and used are reviewed for impairment, generally on a property-by-property basis, whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses are recognized based upon the estimated fair value of the asset. NOTE B - REAL ESTATE CONTRACT RECEIVABLE Real estate contract receivable at June 30, 1999 consists of one contract, due in monthly installments with an interest rate of 9.5%, and is collateralized by land. Principal collections due on the real estate contract receivable for the years ending June 30 are as follows: 2000 $ 4,393 2001 4,829 2002 5,308 2003 9,761 ------- $24,291 ======= NOTE C - LAND AND IMPROVEMENTS HELD FOR FUTURE DEVELOPMENT The Company estimates that it presently owns in excess of 59,000 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, 1999: Land $1,059,122 Improvements 5,838,293 ---------- $6,897,415 ========== NOTE D - INCOME-PRODUCING PROPERTIES Income-producing properties consist of four single-tenant retail store buildings and a portion of the Company's office building and are summarized as follows at June 30, 1999: Buildings and equipment $5,713,813 Less accumulated depreciation 691,754 ---------- 5,022,059 Land 3,199,033 ---------- $8,221,092 ========== 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. Minimum future rentals from income-producing properties on noncancelable tenant operating leases as of June 30, 1999 are as follows: Year ending June 30 2000 $ 827,906 2001 798,783 2002 801,196 2003 805,018 2004 808,001 Thereafter 7,119,116 ----------- $11,160,020 =========== NOTE E - NOTES, MORTGAGES, AND ASSESSMENTS PAYABLE Notes, mortgages, and assessments payable are summarized as follows at June 30, 1999: Promissory note, due in monthly installments of $17,970 through May 2015, including interest at 9.37%; collateralized by income-producing properties $1,780,407 Promissory note, due in monthly installments of $9,079 through July 2014, including interest at 8.00%; collateralized by income-producing properties 950,000 Note payable, due in monthly installments of $6,893 through September 2015, including interest at 8.75%; collateralized by income-producing properties 714,395 Note payable to bank; due on demand, but if no demand is made, then on October 30, 1999, with interest at 9.25%; collateralized primarily by real estate 577,665 Revolving line of credit due to bank, due June 29, 2000, interest payable quarterly at an effective rate of 8.75%; collateralized by specific tracts of land 639,632 Mortgage note, due in monthly installments of $24,682, including interest at 8.52%, due November 1, 2016; collateralized by income-producing properties 2,683,944 Line of credit due to bank in monthly installments of $6,701 with any unpaid amounts due March 15, 2000, interest at 9.25%; collateralized primarily by real estate 17,037 Other 13,571 --------- $7,376,651 ========== The Company's revolving line of credit with a bank provides for borrowings up to $2,000,000 at the bank's prime rate of interest. At June 30, 1999, $639,632 was outstanding on this line of credit. The Company's line of credit with a bank provides for borrowings up to approximately $1,005,000 at the bank's prime rate of interest. At June 30, 1999, $17,037 was outstanding on this line of credit. Aggregate required principal payments on the notes, mortgages, and assessments payable as of June 30, 1999 are as follows: Year ending June 30 2000 $1,409,500 2001 190,155 2002 204,455 2003 220,325 2004 240,625 Thereafter 5,111,591 ---------- $7,376,651 ========== Also, at June 30, 1999, the Company had approximately $13,500 of outstanding letters of credit to the City of Albuquerque in connection with subdivision improvements done for the Company. NOTE F - INCOME TAXES An analysis of the deferred income tax assets and liabilities as of June 30, 1999 is as follows: Deferred tax assets Contribution carryforwards $ 316,000 Property, equipment, and land 342,000 Investments 31,000 Other 72,000 Valuation allowance (316,000) ---------- 445,000 Deferred tax liabilities Deferred tax gain on involuntary conversion of land 5,757,000 ---------- Net deferred tax liability $5,312,000 ========== Income tax expense (benefit) consists of the following: Year ended June 30, 1999 1998 --------- --------- Current Federal .................... $ (5,000) $ 289,242 State ...................... -- 19,758 --------- --------- (5,000) 309,000 Deferred Federal .................... 667,000 439,000 State ...................... 118,000 78,000 --------- --------- 785,000 517,000 --------- --------- $ 780,000 $ 826,000 ========= ========= The income tax provision is reconciled to the tax computed at statutory rates as follows: June 30, 1999 1998 --------- --------- Tax expense at statutory rates .............. $ 703,000 $ 707,000 State income taxes at statutory rates ....... 104,000 97,000 Change in valuation allowance ............... 227,000 (151,000) Change in effective state tax rate .......... (159,000) -- Nontaxable gain ............................. (255,000) -- Nondeductible expenses ...................... 27,000 23,000 Expiration of contribution carryforwards .... 73,000 104,000 Other ....................................... 60,000 46,000 --------- --------- Total expense ......................... $ 780,000 $ 826,000 ========= ========= A valuation allowance of approximately $316,000 has been recognized at June 30, 1999 based on estimates of tax assets which are not likely to be realized in the future. Significant changes in assumptions concerning future taxable income and deductions may cause changes in the valuation allowance. NOTE G - COMMON STOCK Under its original Articles of Incorporation (the "Articles"), the Company was authorized to issue 1,964,448 shares of common stock. During 1999, the Articles were amended to eliminate the authority to issue 736,668 shares of Class A common stock for $1.45 a share. The remaining authorized stock is 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) 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. The holders of no par value common stock have no preemptive rights to purchase Class B stock. At June 30, 1999, the 5,047 shares of no par value common stock, upon judicial determination, can be distributed to stockholders of record as of the date of incorporation. There is no established market value for the Company's common stock. At June 30, 1999, 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 the year ended June 30, 1999, the Board of Directors approved protection against takeover measures whereby a threat of change of three or more directors in any one year would result in directors threatened with replacement being granted an immediate Class B stock bonus of 5,000 shares if in office as a director ten years or more, and 2,500 shares of Class B stock if in office as a director for less than ten years. The maximum number of shares which could be issued under this agreement at June 30, 1999 is 40,000 shares. NOTE H - SEGMENT INFORMATION The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures about Segments of a Business Enterprise and Related Information. Pursuant to SFAS No. 131, prior period data have been restated to conform to the new requirements. 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 four single-tenant retail store buildings and a portion of the Company's office building. Financial information for each industry segment is summarized as follows: General Land Rentals corporate Total ---------- ---------- ------------ ----------- 1999 Revenues $4,815,505 $ 702,065 $ -- $ 5,517,570 Operating income (loss) 3,341,526 445,421 (1,272,876) 2,514,071 Interest income -- -- 136,611 136,611 Interest expense -- -- (540,516) (540,516) Income tax expense -- -- (829,000) (829,000) Identifiable assets 6,981,514 8,442,383 4,476,322 19,900,219 Capital expenditures -- 1,330,931 73,364 1,404,295 Depreciation -- 168,479 59,476 227,955 Noncash gain on disposition of land -- -- 750,000 750,000 1998 Revenues $4,651,224 $ 697,385 $ -- $ 5,348,609 Operating income (loss) 3,547,773 433,945 (1,359,202) 2,622,516 Interest income -- -- 99,672 99,672 Interest expense -- -- (631,356) (631,356) Income tax (expense) benefit -- -- (826,000) (826,000) Identifiable assets 6,552,542 7,277,962 3,726,589 17,557,093 Capital expenditures -- 972 59,986 60,958 Depreciation -- 169,091 52,788 221,879 General corporate assets consist primarily of cash, furniture, equipment, and a portion of an office building, of which the remaining one-half is included in income-producing properties. NOTE I - BENEFIT PLANS The Company has certain defined benefit employee retirement plans that provide for employee and employer contributions. The Company's contribution expense for these plans was $121,000 and $89,000 for 1999 and 1998, respectively. NOTE J - SALES TO MAJOR CUSTOMERS Sales to major customers are summarized as follows: During the year ended June 30, 1999, sales to two customers individually accounted for 52% and 21% of total revenues. During the year ended June 30, 1998, sales to two customers individually accounted for 28% and 13% 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. In 1999 and 1998, approximately 362 and 85 acres, respectively, were transferred to the National Park Service for cash of $2,600,000 and $1,500,000, respectively. The Company has no remaining land set aside for sale to the National Park Service at this time. NOTE L - LITIGATION The Company is engaged in various lawsuits either as plaintiff or defendant which have arisen in the conduct of its business 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 During the year ended June 30, 1999, the Company sold land to a member of the Board of Directors. Under the sales agreement, the Board member paid approximately $52,000 for three lots. The Company purchases its directors' and officers' liability insurance through a corporation controlled by a member of the Board of Directors. Total premiums for these policies paid in 1999 and 1998 were $50,000 each year. The note receivable - related party is from a joint venture partner, is payable in monthly installments of $758 including interest at 10%, and is collateralized by developed property. The note matures April 2006. During the year ended June 30, 1998, the Company acquired land from an ownership group which included a member of the Board of Directors and a member of the director's immediate family. Under the sales agreement, the Board member received approximately $81,000 and the family member received approximately $49,000. NOTE N - FINANCIAL INSTRUMENTS The following table includes various estimated fair value information as required by SFAS No. 107, Disclosures about Fair Value of Financial Instruments. Such information, which pertains to the Company's financial instruments, is based on the requirements set forth in SFAS No. 107 and does not purport to represent the aggregate net fair value of the Company. The carrying amounts in the table are the amounts at which the financial instruments are reported in the financial statements. All of the Company's financial instruments are held for purposes other than trading. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: 1. Cash and Cash Equivalents ------------------------- The carrying amount approximates fair value because either the Company has the contractual right to receive immediate payment or because of short maturities. 2. Short-Term Investments ---------------------- The carrying amount approximates fair value due to the short maturities of the investments. 3. Real Estate Contracts Receivable -------------------------------- These notes receivable are generally collateralized by real estate and accrue interest at 9.5%. Because the ultimate collectibility of these notes is not reasonably assured, it is not practicable to estimate fair value. 4. Note Receivable - Related Party ------------------------------- Note receivable - related party is valued at the present value of future cash flows based on the current rates at which similar loans would be made to borrowers with similar credit ratings. 5. Notes, Mortgages, and Assessments Payable ----------------------------------------- The discounted amount of future cash flows using the Company's current incremental rate of borrowing for similar liabilities is used to estimate fair value. The carrying amounts and estimated fair values of the Company's financial instruments at June 30, 1999 are as follows: Carrying Estimated amount fair value ---------- ---------- Financial assets Cash and cash equivalents ............... $1,300,182 $1,300,182 Short-term investments .................. 2,578,019 2,578,019 Real estate contract receivable (not practicable to estimate fair value) ........................... 24,291 -- Note receivable - related party ......... 59,808 59,808 Financial liabilities Notes, mortgages, and assessments payable 7,376,691 7,587,000 NOTE O - CONTRIBUTION OF LAND In keeping with the Company's long-standing commitment to the furtherance of community projects which benefit the education and welfare of its less fortunate citizens, during 1999 the Company donated approximately fifty acres of land to a nonprofit organization to develop a residential and work facility for seriously disabled/mentally ill persons. The contributed land had a fair value of approximately $790,000 which was recorded as an other expense and a pretax gain of approximately $750,000 was recorded on the donation. NOTE P - SUBSEQUENT EVENT On August 26, 1999, the Company declared a dividend of $1 per share for stockholders of record as of August 27, 1999. The dividend is payable on September 10, 1999. DIRECTORS 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. Secretary of the Executive Committee. Ms. Page is employed by Westland Development Co., Inc. as its President. POLECARPIO (LEE) ANAYA, Executive Vice President, Assistant Secretary/Treasurer and Director. Mr. Anaya is also Chairman of the Executive Committee. Mr. Anaya was owner/operator of Lee's Conoco. DAVID C. ARMIJO, Secretary/Treasurer and Director. 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, California. CARMEL CHAVEZ, Director. Member of the Executive Committee and the Disclaimer Committee and Vice Chairman of El Campo Santo, Inc. Mr. Chavez is a retired employee of the Albuquerque Public Schools. JOSIE G. CASTILLO, Director. Member of the Executive Committee, Chairman of El Campo Santo, Inc. and member of the Disclaimer Committee. Ms. Castillo is retired from the Human Services Department of the State of New Mexico. CARLOS SAAVEDRA, Director. Alternate member of the Executive Committee, Alternate Member of El Campo Santo, Inc. 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. JOE S. CHAVEZ, Director. Member of the Disclaimer Committee. Mr. Chavez is employed at Galles Chevrolet in Albuquerque, New Mexico. CHARLES V. PENA, Director. Member of El Campo Santo, Inc., and the Disclaimer Committee. Mr. Pena owns and operates CJ's New Mexican Food Restaurant. EX-27 4
5 YEAR JUN-30-1999 JUN-30-1999 1300182 2578019 123430 0 0 0 868473 477340 19900219 0 7376651 0 0 94600 6597500 19900219 4785199 5517570 838032 1011832 2437170 0 540516 2068568 780000 1288568 0 0 0 1288568 1.60 1.60
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